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934618-26841 | GURFEIN, Circuit Judge:
This appeal involves an interplay between the Federal Supplemental Security Income Law (“SSI”) — the national cash assistance plan for needy persons who are also disabled, blind, or aged, 42 U.S.C. §§ 1381 et seq. (Title XVI of the Social Security Act) —and the statute providing for Aid to Families with Dependent Children (“AFDC”) as administered by the State of New York, 42 U.S.C. §§ 601 et seq. (Title IV of the Social Security Act); New York Social Services Law §§ 131 et seq. When a person who is part of a family which has been receiving AFDC aid becomes eligible for SSI cash benefits, his entitlement to SSI benefits begins with the month of his application, 42 U.S.C. § 1382(c)(2). Hence, when the disabled applicant is ultimately found eligible for SSI, he is entitled to claim retroactive benefits from the date of his application. A claimant found eligible for SSI who received AFDC aid during the SSI determination period, is entitled to the relevant SSI payment level ¡ess certain income received, which includes the amount of AFDC received by the claimant during the period, 42 U.S.C. § 1382(b).
The statute does not specify how much of the amount paid to a family unit under AFDC during the period while the application is being considered by SSA is to be deemed to have been received by the newly eligible SSI recipient during the retroactive period. In the case of New York State residents, to determine what portion of the family unit AFDC benefit was attributable to the new SSI beneficiary, the Secretary of Health, Education and Welfare takes the number of persons in the family unit, and simply subtracts for SSI purposes, the share which the new SSI recipient purportedly received on a “per capita basis.” He ignores the fact that the difference between the AFDC benefits received during the retroactive period and what the family unit actually gets after the family member goes on the SSI rolls is not a per capita difference. The plaintiffs contend that an “incremental”, rather than per capita method, must be used in calculating retroactive benefits; they argue that the actual difference between what the family unit received under AFDC before one member became eligible for SSI, and what the family unit received thereafter is the proper amount to be attributed to the particular claimant.
This action for declaratory and injunctive relief arising under subehapter XVI of the Social Security Act, 42 U.S.C. § 1381 et seq. and 28 U.S.C. § 2201 was begun in the Southern District of New York. Jurisdiction was alleged under 42 U.S.C. § 1383(c)(3) and 28 U.S.C. § 1361. Plaintiffs Veronica and Robert Jones sued on behalf of themselves and all similarly situated recipients of and applicants for SSI benefits who have, or will, receive deficient SSI payments by virtue of defendant’s use of an illegal method for computing retroac tive SSI benefits. The defendants are the Secretary of HEW, the Director of Region II, and the Commissioner of the Social Security Administration, New York Region. New York State officials are not parties to this action.
The plaintiffs moved for class certification and for summary judgment on December 10, 1976. The defendants moved to dismiss the complaint. The District Court (Hon. Kevin Duffy, Judge) found that the plaintiffs’ substantive claim was “meritorious” and “not disputed” but that he was constrained by “the state of the law” to hold that the Court was without jurisdiction to entertain the claim.
Judge Duffy held that the plaintiffs’ failure to exhaust available administrative remedies, as required by 42 U.S.C. § 405(g) would bar them from proceeding under either 42 U.S.C. § 1383(c)(3), which applies § 405(g) to Title XVI, or the mandamus statute, 42 U.S.C. § 1381. The District Court emphasized that the utility of the exhaustion requirement was particularly apparent in this action since other SSI claimants had received the relief sought here through individual pursuit of their administrative remedies. The District Court denied plaintiffs’ motions for summary judgment and class certification and entered judgment dismissing the complaint on June 8, 1977. The court did, however, retain jurisdiction until September 6, 1977 to allow the Secretary to give Mrs. Jones an administrative hearing, in default of which the court would entertain a motion to vacate the dismissal of the complaint. On July 26, after a hearing, an Administrative Law Judge rendered a decision which favored Mrs. Jones’ method of computation and awarded her retroactive benefits. Notice of appeal to this court had already been filed on July 17, 1977.
The conclusion of the District Court that the plaintiffs’ claim was “meritorious” is, we think, correct. Appellant Veronica Jones is a disabled recipient of SSI who received AFDC benefits from January to June 1976, the period during which SSA was determining her eligibility for SSI. In June, the Social Security Administration (“SSA”) determined that she was eligible for SSI benefits, retroactive to January, the month of her application. During this SSI determination period, Mrs. Jones and her two children received $348.50 per month in AFDC payments. When Mrs. Jones began receiving SSI, she was removed from the AFDC grant as required by law, 42 U.S.C. § 602(a)(24), infra; New York Social Services Law, 18 Code of Regs. § 352.30(b). This resulted in a monthly decrease of $57.50 monthly in the AFDC grant, from $348.50 to $291.00, a decrease of only 16.5% rather than of 331/3% (the per capita percentage). Accordingly, if she actually had been receiving SSI benefits from January, the month of her application, the AFDC payment to the remaining family unit would have been reduced by only $57.50. Yet, in computing her retroactive benefits from January to June, SSA determined that one-third of the $348.50 monthly grant, or $116.00 rather than the $57.50 was attributable to her as income from the AFDC payments, and was deductible from her SSI entitlement. This was avowedly done in accordance with a purported per capita method of determining AFDC attribution based on an expressed belief that New York State uses the per capita method in its AFDC program. The Joneses requested reconsideration from SSA, contending that only $57.50 monthly of the family AFDC income was legally attributable to Veronica. SSA reconsidered but adhered to its challenged per capita method.
Appellants’ proposed class is composed of two sub-classes: (a) SSI recipients who have received reduced retroactive SSI benefits because of the use of the per capita method; and (b) AFDC recipients who have applied for SSI benefits, are waiting SSA determination of eligibility and who, if eligible, will receive reduced retroactive benefits because SSA uses the per capita method with respect to New York State residents.
The statute, 42 U.S.C. § 602(a)(24), provides:
“a) A State plan for aid and services to needy families with children must—
“24) [provide that] if an individual is receiving benefits under subchapter XVI of this chapter [SSI], then, for the period for which such benefits are received, such individual shall not be regarded as a member of a family for purposes of determining the amount of the benefits of the family under this subchapter [AFDC] and his income and resources shall not be counted as income and resources of a family under this subchapter.”
There is no explanation of how much of the total AFDC family grant is to be attributed to a family member for the interval pending determination of his SSI eligibility.
The Secretary’s policy has been to request from the State agency administering the AFDC program the information needed to determine what share of an AFDC grant should be attributed to the SSI beneficiary, Supplemental Security Income Claims Manual, Dep’t of HEW § 12840.1. When a State defines the attributable amount as the difference between the AFDC grant before and after the exclusion of the SSI recipient, the incremental method of computation is used. When the State declines to give the information requested, or, like New York State, declares an alleged “policy” that the individual needs of each family member are considered equal, the Secretary assumes that all members have shared. equally in the AFDC grant, and he then employs the per capita method. The “policy” letter of the New York Department of Social Services on which the Secretary relies is set out in the margin. The letter in the margin is both general and misleading. We take it to mean simply that New York does not allocate differing amounts of benefits based on an individual’s position in the household. That general interpretation is consistent with the author’s own subsequent construction of his letter: “It does not contain any reference to SSI, to AFDC transferees into the SSI program, or to any formula or method to be used by SSA in computing SSI benefits or deductions therefrom.” Affidavit of John W. Hickey filed in Sutton v. Califano, 77 Civ. 4223 (S.D.N. Y.), called to our attention by the United States Attorney.
The Appeals Council of the SSA on three separate occasions has held that the per capita method is invalid and that the proper means for attributing income is the incremental method, which reflects the actual difference between the amount of AFDC benefit granted to a family unit including the SSI beneficiary, and the amount of the benefit to the family unit after the beneficiary’s withdrawal therefrom. The first of these decisions, In re Irma R., came down more than two years ago, on February 18, 1976; the second, In re Gonzalez, was rendered on March 29, 1976; and the third, In re Sutton, was handed down on December 13, 1977, after this appeal was argued.
If we add Mrs. Jones’ own success before the Administrative Law Judge noted above, the quasi-judicial branch of the SSA has, on four occasions, disagreed with the Secretary; yet the Secretary has not altered the method by which retroactive benefits are calculated. We thus face the rather novel question of whether judicial relief is available where all eligible SSI claimants, who are by definition needy, are required to exhaust their administrative remedies on an individual basis in order to receive benefits which the SSA’s own Appeals Council has consistently ruled must be given them. The issue is whether a federal court is powerless to prevent the Secretary from insisting upon the sterile gesture of individual exhaustion when the result appears to be a foregone conclusion.
On the merits, we agree with the unanimous administrative determinations. When the SSI member finally leaves the family unit, the family gets a reduced sum which takes into account his withdrawal. That reduced sum is the measure of what was attributable to his share of the family benefit; it reflects his “incremental” contribution to the family grant. If that sum is a correct determination of prospective benefits, there is no reason why a different method should be used in calculating retroactive benefits for the period while eligibility was being determined.
In defense of his position, the Secretary reasons syllogistically that (1) because New York “uses” the per capita method in its administration of AFDC, (2) “the breadth of the state’s discretion” must be recognized, and cites Dandridge v. Williams, 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491 (1970), as support. Yet as we have seen, the major premise is wrong. New York State does not itself use the per capita method to diminish the family’s AFDC grant when one member of the family unit dies or becomes eligible for SSI benefits.
Having determined that the Secretary’s method is wrong, we face the issue of whether the District Court had jurisdiction to review his action. There is no federal-question jurisdiction in an action which seeks to recover claimed benefits under Title II of the Social Security Act because of 42 U.S.C. § 405(h). Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975).
For purposes of this appeal, we consider the only avenue for judicial review to be 42 U.S.C. § 405(g) which requires, as a jurisdictional prerequisite, exhaustion of the administrative remedies provided under the Act. Mathews v. Eldridge, 424 U.S. 319, 327, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976).
Section 405(g) in part provides:
“Any individual, after any final decision of the Secretary made after a hearing to which he was a party, irrespective of the amount in controversy, may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision or within such further time as the Secretary may allow.”
Section 405(g) assumes as a condition for judicial review that the determination by the Secretary after a § 405(b) hearing will be adverse to the claimant of benefits. It makes no provision for judicial review of a determination favorable to the complainant. That is normally to be expected, but it fails to take into account a situation in which the Appeals Council consistently rules in favor of claimants and the Secretary refuses to implement the method of benefit calculation adopted by his Appeals Council. Such a situation leads to unequal justice. Those who request a hearing will get their full benefits; those who fail to request a hearing will not.
The Supreme Court has interpreted the “final decision” requirement of § 405(g) as encompassing two elements: (1) a requirement, not waivable by the Secretary, that a claim for benefits has been presented; and (2) a requirement that the administrative review procedures prescribed by the Secretary be exhausted, waivable either by action of the Secretary or through a court-imposed waiver. Mathews v. Eldridge, supra, 424 U.S. at 328, 96 S.Ct. 893; Weinberger v. Salfi, supra. It is undisputed that appellants, by filing claims with the SSA, have satisfied the non-waivable requirement. With respect to the waivable requirement, the District Court concluded upon careful consideration of Weinberger v. Salfi, supra, and Mathews v. Eldridge, supra, that appellants had not raised a constitutional claim that would justify implying waiver of the exhaustion requirement. Unlike plaintiffs in Salfi they had not alleged that a statute or rule was unconstitutional on its face, nor had they challenged an agency-wide policy as violative of a specific constitutional standard as in Eldridge. The District Court viewed appellants’ complaint as an attack based on the Supremacy Clause which “though nominally constitutional is well within the agency’s expertise.” We appreciate the careful consideration given by Judge Duffy, but we view the problem in a somewhat different way.
As the Supreme Court in Eldridge observed,
“[i]t is unrealistic to expect that the Secretary would consider substantial changes in the current administrative review system at the behest of a single aid recipient raising a constitutional challenge in an adjudicatory context. The Secretary would not be required even to consider such a challenge.” 424 U.S. at 330, 96 S.Ct. at 900.
We think that the rationale of Eldridge supports the conclusion in this case, as well, that “a claimant’s interest in having a particular issue resolved promptly is so great that deference to the agency’s judgment is inappropriate.” Mathews v. Eldridge, supra, 424 U.S. at 330, 96 S.Ct. at 900.
We recognize that the Supreme Court has explained Salfi and Eldridge as cases where the claimants challenged the Secretary’s decisions on constitutional grounds. See Califano v. Sanders, 430 U.S. 99, 108-09, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). Here as well we believe that reliance by the Secretary on an alleged state “policy” which is inconsistent with the federal statute concerning a purely federal benefit program raises a “colorable constitutional claim” under the Supremacy Clause, 430 U.S. at 109, 97 S.Ct. 980. Moreover, in view of the particular circumstances of this case, the Secretary’s refusal to follow the rulings of his own Appeals Council raises colorable questions of equal protection and due process.
The Secretary apparently believes that federalism justifies his reliance on state policy in executing the SSI statute. But New York applies no such policy, nor does it have any interest in the SSI program which is administered exclusively as a federal program and to which the state contributes nothing. The reliance on Dandridge v. Williams, supra, and the application of federalism to the issue is, in our view, misguided. It improperly subjects claimants for federal benefits to a state policy which does not, as a practical matter exist. The SSA does not look to see what each state actually deducts from AFDC benefits when the SSI eligible is excluded. As a result of present policy, SSI eligibles who were formerly part of an AFDC program are capriciously treated in different ways in a purely federal program depending on what policy the state they come from appears to declare. The measure of SSI benefits is purely a question of federal law, and Dandridge v. Williams is irrelevant to that question.
We note also that the Secretary has had ample opportunity since the decision below to modify his position to conform to the Appeals Council rulings. Instead, during the pendency of this appeal, he has distributed new forms to the New York State agencies which state explicitly that the per capita method is to be used. We agree with the Third Circuit that a “final position” by the Secretary may, in some circumstances, amount to a “final decision.” Liberty Alliance of the Blind v. Califano, 568 F.2d 333 p. 346 (3d Cir. 1977). We find that under the circumstances here there is subject-matter jurisdiction in the District Court.
By declining to alter his regulations in spite of successive decisions by the Appeals Council, the Secretary is forcing claimants to proceed by the tedious method of adjudicating their claims on an individual basis, even though eligibility is conceded. There is no provision for class relief in the administrative process under SSI-Title XVI. Thus, if we were to hold that the District Court lacks jurisdiction, the Secretary would be permitted to require each individual separately to exhaust his administrative remedies. Assuming that the Appeals Council continues to rule in favor of claimants, judicial review could be foreclosed entirely. The SSA could operate indefinitely, as it does now, with two standards of benefit calculation, one for claimants who seek review by the Appeals Council, and one for claimants who do not. By doing nothing the Secretary could effectively evade judicial review for the many claimants who fail to contest the per capita method.
Such a result would scarcely comport with the “basic human claim that the law should provide like treatment under like circumstances.” Friendly, Federal Administrative Agencies, 19 (1962). Although agencies are not inflexibly bound by the rule of stare decisis, cf. N. L. R. B. v. Wyman-Gordon Co., 394 U.S. 759, 765-66, 89 S.Ct. 1426, 22 L.Ed.2d 709 (1969), neither is their discretion unlimited. Thus, courts have imposed a “duty of consistency toward similarly situated taxpayers”, Sirbo Holdings, Inc. v. C. I. R., 476 F.2d 981, 987 (2d Cir. 1973), and have held that agencies may not “treat similar situations in dissimilar ways,” Garrett v. F. C. C., 168 U.S.App.D.C. 266, 270, 513 F.2d 1056, 1060 (1975), quoting Burinskas v. N. L. R. B., 123 U.S.App.D.C. 143, 148, 357 F.2d 822, 827 (1966). See Davis, Administrative Law Treatise, § 1707 — 4 pp. 413-16 and cases cited (Supp. 1976).
A fundamental of justice is equality of treatment. We need not debate whether this is a product of natural law or simply a pragmatic gloss on the meaning of democratic institutions. We know that in a unitary court system it is not stare decisis alone that binds the structure, but also a recognition that like treatment is the touchstone. When the administrative process becomes bifurcated, as when independent administrative judges interpret statutes in adjudicated cases that may not technically bind the Secretary, care must be taken lest certain needy beneficiaries, because of the limitations of poverty or ignorance, fail to receive the full amount of benefits to which they- are entitled. Thus, we find it appropriate to imply a waiver of the exhaustion requirement when, as in this case, there is a stalemate defying judicial review.
The situation here is reminiscent of that which confronted the Supreme Court in another administrative context in Southern Pacific Terminal Co. v. I. C. C., 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911), where consideration of the orders of the ICC “ought not to be, as they might be, defeated, by short term[s] orders, capable of repetition, yet evading review . . . .” Though the issue in Southern Pacific was whether there was a “case or controversy,” the policy ground for assuming jurisdiction was, as it is here, that a strict interpretation would entirely frustrate judicial review. Here it is contended that there is no subject-matter jurisdiction because the Secretary has not made a “final decision”— which is within his power to withhold in case after case, thus “evading review.”
We may find analogy in other cases in which claims of mootness were rejected, such as Nebraska Press Association v. Stuart, 427 U.S. 539, 546-47, 96 S.Ct. 2791, 49 L.Ed.2d 683 (1976) (short-lived restraining orders capable of repetition); Roe v. Wade, 410 U.S. 113, 125, 93 S.Ct. 705, 35 L.Ed.2d 147 (1973) (termination of pregnancy); accord, Doe v. Bolton, 410 U.S. 179, 187, 93 S.Ct. 739, 35 L.Ed.2d 201 (1973); Moore v. Ogilvie, 394 U.S. 814, 89 S.Ct. 1493, 23 L.Ed.2d 1 (1969) (burden on future elections); Carroll v. President and Commissioners of Princess Anne, 393 U.S. 175, 179, 89 S.Ct. 347, 350, 21 L.Ed.2d 325 (1968) (“the continuing activities and program of petitioners”). See Goldberg v. Kelly, 397 U.S. 254, 256-57, n.2, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). The rationale of all these .cases is that judicial review cannot be entirely foreclosed by the fortuity of a termination of the individual grievance. The test is whether petitioners are adversely affected by government “without a chance of redress.” Southern Pacific Terminal Co. v. I. C. C., supra, 219 U.S. at 515, 31 S.Ct. 279. See Super Tire Engineering Co. v. McCorkle, 416 U.S. 115, 121-27, 94 S.Ct. 1694, 40 L.Ed.2d 1 (1974) (declaratory judgment available though economic labor dispute had ended); Frost v. Weinberger, 515 F.2d 57, 62-65 (2d Cir. 1975).
For poor and disabled people, time is a precious commodity even when the amounts involved are small. To require each claimant to pursue his individual administrative remedy is to vindicate no legitimate agency interest when the only disputed issue is one of statutory construction. In this unusual case where a statutory interpretation can be universally applied to all eligible claimants, an exception to case-by-case exhaustion is appropriate.
We, accordingly, assimilate the posture of claimants Jones here to the posture of claimant Eldridge. We hold that the exhaustion requirement of § 405(g) has been constructively waived by the position taken by the Secretary, and that therefore the District Court has subject-matter jurisdiction. We limit our holding to the combination of circumstances here present: the erroneous reliance on the purported computation by the State; the evasion of review; the unwarranted reliance on federalism which implicates the Supremacy Clause; and the at least colorable constitutional violations of due process and equal protection of the laws. We go no further in limiting the scope of § 405(g).
We consider next whether the granting of full relief to the named plaintiffs moots the claim of the class. Sub-class A consists of persons formerly part of a family unit which obtained benefits under AFDC, who have filed claims with SSA, who have been determined to be eligible, but who have been paid a deficient retroactive grant. Sub-class B consists of AFDC recipients who have filed claims but whose eligibility has not yet been determined. By filing claims, plaintiffs in both classes have satisfied the nonwaivable requirement of § 405(g). Judge Duffy found it unnecessary to certify either class because he was dismissing the complaint. On the remand, he should consider whether to certify subclass A. As for plaintiffs in sub-class B, whose eligibility has not yet been determined in conformance with § 405(h), class certification would be inappropriate. Plaintiffs in sub-class A, however, had been deemed eligible, for benefits already; the only issue remaining is one of statutory interpretation — -by which method of AFDC attribution should retroactive SSI benefits be calculated.
Our holding on this point is consistent with decisions of two circuits which have addressed the question of class relief under § 405(g). In Jimenez v. Weinberger, 523 F.2d 689 (7th Cir. 1975), cert. denied, 427 U.S. 912, 96 S.Ct. 3200, 49 L.Ed.2d 1204 (1976), the Seventh Circuit held that since § 405(g) conferred jurisdiction on the District Court to hear timely claims by each member of the class, Rule 23 would afford a procedure by which such jurisdiction could be exercised in a single proceeding and that unnamed as well as named plaintiffs could be deemed “applicants before the court” in a proper class action. With reference to a passage in Weinberger v. Salfi, supra, 422 U.S. at 763, 95 S.Ct. at 2466, where the Court specified “a final decision of the Secretary made after a hearing” as a prerequisite for judicial review, then Judge (now Justice) Stevens noted:
“Salfi makes it clear that the ‘made after a hearing’ language may be disregarded if the Secretary’s decision rested on a legal ground that did not necessitate any hearing.”
Jimenez v. Weinberger, supra, 523 F.2d at 695, n.10. In this case, the sole controvert ed issue for sub-class A claimants concerns a legal ground that does not necessitate individualized hearings. And as the Third Circuit has recently held,
“the need for [individual] calculations is no reason for barring class relief with respect to the common legal issue which will determine the formula under which these calculations will be made.”
Liberty Alliance of the Blind, supra, 568 F.2d at pp. 346-347. We agree also with Judge Gibbons’ formulation in Liberty Alliance of the rule to be applied in § 405(g) actions:
“The issues which the Court should have focused on are (1) whether an identifiable class of claimants had filed with the Secretary claims which presented a common legal issue on which the administrative agency had taken a final position and (2) whether the party seeking judicial review is an adequate representative for that class of [blind] claimants.” 568 F.2d p. 347.
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9412395-16232 | MEMORANDUM OPINION ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
JACK B. SCHMETTERER, Bankruptcy Judge.
Debtor-Defendant Consolidated Medical Transport, Inc. (“Comed”), filed a voluntary Chapter 11 Bankruptcy Petition on July 20, 2000. Prior to that filing, Comed provided emergency medical transport services in Chicago and Northwest Indiana. On December 5, 2000, it sold substantially all of its assets at auction within the bankruptcy case under 11 U.S.C. § 363. Plaintiff-Bennett Three Leasing, Inc. and its nominee Daleyco, Inc. (collectively “Bennett”) made the highest bid at auction, and an order approving that sale was entered December 12th.
Bennett filed the instant Adversary proceeding on May 15, 2001, charging Comed in Counts I, II, IV and V with breaching agreements related to that sale. Comed’s former President, John Daley Jr., was also charged with unjust enrichment (Count III), but that charge was voluntarily dismissed on October 30, 2001. Defendant Comed moved to dismiss Counts I, II, and IV of this case under Fed.R.Civ.P. 12(b)(6), but that motion was denied pursuant to Memorandum Opinion and by separate order entered February 27, 2002, Comed then filed its pending Motion for Summary Judgment as to all counts arguing that Bennett is precluded from pursuing this Adversary Complaint by res judi-cata and collateral estoppel asserted to result from the settlement of certain issues in a separate suit filed against it by Bennett.
For reasons discussed below, Comed’s Motion must be denied and the case will be set for trial.
JURISDICTION
Breach of contract actions arising out of a post-petition contract approved in bankruptcy are core matters that can be heard and decided by a bankruptcy judge pursuant to 28 U.S.C. § 157(b)(2)(A). In re Ben Cooper Inc., 896 F.2d 1394, 1400 (2nd Cir.1990); In re Arnold Print Works, Inc., 815 F.2d 165, 168 (1st Cir.1987). Thus, core jurisdiction lies here over the present dispute under 28 U.S.C. §§ 1334(a) and 157(b)(2)(A) and the standing referral order under District Court Internal Operating Procedure 15(a). Venue lies here under 28 U.S.C. § 1409(a).
BACKGROUND
Local Rule 102
Pursuant to Local Rules 402 M and N, the parties have exchanged materials and briefs. Corned filed its Memorandum of Law in support of the Motion along with a Statement of Material Facts under Local Bankr.R. 402 M. Plaintiff responded by fifing its response to the Comed statement of facts and its Memorandum of Law in opposition to the motion, as well as its own Statement of Additional Facts to oppose the Motion under Local Bankr.R. 402 N. Comed has not controverted those Additional Facts, and therefore under Local Rule 403 N(3)(b) they are deemed to be admitted.
Undisputed Facts
The following undisputed facts were derived from the aforementioned submissions by the parties:
1. Bennett purchased substantially all of Comed’s assets at auction on December 5,2000. The assets were divided into two “Lots.” The parties executed separate purchase agreements for each Lot. Comed’s 402 M at ¶ 4.
2. The Purchase Agreement as to Lot I included a list of executory contracts and leases which were to be assigned to Bennett. One of the contracts listed was a “month-to-month lease” for a dispatch center located at 1234 Sibley Blvd., Dolton, Illinois. Comed’s 402 M at ¶ 5; Bennett’s 402 N(3)(b) at ¶ 2.
3. Bennett purchased Comed’s rights under the “Emergency Ambulances Service Agreement between the Town of Munster, Indiana and Comed.” This is the so-called “Munster Contract.” Bennett’s 402 N(3)(b) at ¶ 3.
4. Comed filed its own separate four-count lawsuit against Bennett on May 11, 2001, by Adversary Complaint, No. 01 A 00440. That Adversary Complaint alleged that Bennett breached the Purchase Agreements by failing to make payments owed to former Comed employees (Count I), that it allowed Comed’s property to be damaged while in its care (Count II), that Defendant owed rent for occupancy of the premises at 1234 Sibley Boulevard (Count III), and that it failed to turn over certain accounts receivables collected on behalf of Comed (Count IV). Comed’s 402 M at ¶ 8; Bennett’s 402 N(3)(b) at ¶ 4.
5. Bennett filed this Adversary Complaint against Comed a few days later on May 15, 2001. Count I alleges that Comed breached the Lot 2 Purchase Agreement relating to certain medicare accounts receivables by causing Medicare to have a “claim” against those accounts receivables, which rendered them uncollectible. Count II alleges breach of contract based on Bennett’s purchase of a purported “month-to-month lease” on the dispatch center at 1234 Sibley Boulevard which had already expired, according to Bennett. Bennett also charges in Count III that John Daley Jr. was unjustly enriched as a result of payments made to obtain the purported “month-to-month lease.” Count IV alleges breach of contract for failure to turnover property that was purportedly assigned as part of the purchase of the Munster Contract, and Count V pleads breach of contract based on Comed’s alleged failure to credit certain 401(k) payments withheld from the paychecks of former Corned employees. Bennett’s 402 N(3)(b) at ¶ 5.
6. Bennett answered Comed’s Complaint in Adversary No. 01 A 00440 on June 11, 2001. Bennett incorporated the allegations from its Complaint against Comed in this case as an affirmative defense. Comed’s 402 M at ¶ 9; Bennett’s 402 N(3)(b) at ¶ 6.
7. Pursuant to a Limited Settlement Agreement between the parties in Case No. 01 A 00440, the court approved a settlement of Count I of Comed’s Complaint in that Adversary proceeding on October 17, 2001. Comed’s 402 M at ¶ 11. That settlement agreement contained the following provision: “WHEREAS, the Debtor and the Purchaser have reached agreement as to the resolution of all of the Assumed Liabilities, but not Counts II, III, or IV of the Comed Adversary Proceeding or defenses thereto or the Bennett Adversary Proceeding or defenses thereto.” Bennett agreed to pay $186, 062 to settle Count I of Comed’s Complaint in that case. Bennett’s 402 N(3)(b) at ¶ 8.
8. Count I of the Corned suit in Adversary No. 01 A 00440 was dismissed with prejudice pursuant to the foregoing settlement on October 30, 2001. The order dismissing that Count provided that the Limited Settlement Agreement “in no way affects any additional claims or defenses that the Debtor or Bennett Three, Daleyco or Superior have against each other in this and/or any other litigation.” Bennett’s 402 N(3)(b) at ¶ 10.
9. On October 25, 2001, the parties settled Counts II, III, and IV of Comed’s Complaint in Adversary No. 01 A 00440 with Bennett agreeing pursuant to an Offer of Judgment under Rule 7068 Fed. R.Bankr.P. [Rule 68 Fed.R.Civ.P.] to entry of judgment in the amount of $45,305.63. The Offer of Judgment was the result of joint drafting by the parties who exchanged three drafts of the Offer before concluding an agreement on the final draft. Bennett’s 402 N(3)(b) at ¶ 11.
10. Pursuant to the negotiated Offer of Judgment, the court entered a Final Judgment as to Counts II, III, and IV of Comed’s Complaint in Adversary Case No. 01 A 00440 on November 4, 2001. That Judgment provided that “the settlement of Count I shall remain in full force and effect after the entry of this Judgment Order.” Bennett’s 402 N(3)(b) at ¶ 12.
Standards for Summary Judgment
Movant on a motion for summary judgment must show that there are no genuine issues of fact which need to be resolved at trial and that it is entitled to judgment as a matter of law. Fed.R.Bankr.P. 7056(c). This burden is met by identifying those portions of the “pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits if any” which show that no reasonable fact finder could find for the non-moving party. Id.; Buscaglia v. United States, 25 F.3d 530, 534 (7th Cir.1994) (a genuine issue exists where reasonable jury could find for non-moving party). In deciding whether there is a triable dispute, the court must construe all reasonable inferences that can be drawn from the facts in favor of the non-moving party. Bartman v. Allis-Chalmers Corp., 799 F.2d 311, 312 (7th Cir.1986).
Comed’s Res Judicata Argument
Judicial economy is the basis of the doctrine of res judicata. Durhan v. Neapolitan, 875 F.2d 91, 93-94 (7th Cir.1989). Once a case has been litigated it cannot be re-litigated by the same parties. Therefore, if the parties are the same, the issues are the same, and there has been a final adjudication of the claim, the parties are precluded from further litigation in federal court. Golden v. Barenborg, 53 F.3d 866, 869 (7th Cir.1995). The doctrine of res judicata has a broader application than the related concept of collateral estoppel which bars re-litigation of issues already decided in a previous lawsuit. Williams v. Lehigh County Dept. of Corrections, et al., 19 F.Supp.2d 409, 411 (E.D.Pa.1998). Under the doctrine of res judicata, the parties are not only precluded from raising issues that were previously raised, they are precluded from litigating any matters that could have been raised in the prior suit. Crop-Maker Soil Services, Inc. v. Fairmount State Bank, 881 F.2d 436, 439 (7th Cir.1989) (citation omitted).
The first element of the claim preclusion test is satisfied here. The parties to the instant action are the same as named parties in the other suit. The next step is to determine if the subject matter of claims pleaded here are the same as those settled in the other suit. Corned argues that the present Adversary arises from the same transaction or occurrence as its prior suit and that Bennett is therefore precluded from litigating this Adversary Complaint because it involves claims that were already adjudicated or could have been. Bennett responds that the various purchase agreements involved constitute multiple contracts and that the alleged breaches arising from those contracts do not have the same factual underpinnings. Hence, it argues there is no identity between the instant action and the other suit.
Determinations of whether factual groupings pleaded in suit arise from the same transaction are generally based on pragmatic considerations of whether the facts are related in time, space, origin, motivation, or whether they form a convenient trial unit. Restatement (Second) of Judgments § 24(2) (1980 Main Vol.). Bennett cites authority in this Circuit which has interpreted this rule as requiring two claims to be based on the same, or nearly the same, factual allegations before they are deemed to be a single transaction for purposes of res judicata. See Colonial Penn Life Insurance Co. v. Hallmark Insurance Administrators, Inc., 31 F.3d 445 (7th Cir.1994); Herrmann v. Cencom Cable Assoc., Inc., 999 F.2d 223 (7th Cir.1993). Drawing upon those cases, Bennett argues that the instant case does not arise from the same transaction as pleaded in the other case.
But here, unlike in Herrmann or Colonial Penn there is considerable overlap between some of the factual allegations in the two lawsuits.
For example, Count V of this Bennett Adversary alleges that Corned failed to make certain payments to employees 401 (k) plans even though Bennett had made the payments to Comed on behalf of those employees. Count I of the Corned suit alleged that Bennett failed to pay the same employees, as it was required to do under the Purchase Agreement. Obviously, both claims centered on whether Bennett made the requisite payments. Likewise, there is similarity between the factual allegations in Count III (failure to pay rent for occupancy of dispatch center) of Corned’s Adversary and Count IV (breach of the agreement for a month to month lease on dispatch center) of Bennett’s present case. The allegation that Bennett did not pay rent on the dispatch center springs from then same core facts as those relating to the month to month lease which Bennett says it paid for but did not receive. In fact, the only place where there is clearly no overlap is Count II of the Comed Adversary (destruction of Comed’s property).
Bennett wishes to treat the contracts as divisible agreements from which multiple causes of action have arisen. Under this reasoning, as long as the factual allegations are not exactly the same in each cause of action, the transactions are not the same under the doctrine of res judica-ta. However, taken to its extreme, this would return federal practice to old formulations of a transaction which were eschewed by the adoption of new standards. See Restatement (Second) Judgments § 24 reporter’s notes (1980) (noting the first Restatement applied transactional approach but required that evidence in a second action must have been able to sustain the first action for there to be a single transaction); Also See Durhan v. Neapolitan, 875 F.2d 91, 94 (7th Cir.1989) (most federal courts have adopted the broader preclusive affect of the transactional approach as opposed to the proof or evidence approach).
However, having concluded that Comed cannot satisfy the third element of the test for claim preclusion, it need not be decided at this point whether claims in this case arose from the same transaction.
Comed concedes that the Limited Settlement Agreement, disposing of Count I of its suit, preserved the present Adversary. However, it contends that the Offer of Judgment was a final adjudication of not only Counts II, III, and IV of its Complaint, but also extinguished all litigation issues that had been preserved by the Limited Settlement Agreement. But that assertion is contradicted by the express language of the argued and negotiated Offer of Judgment that “the settlement of Count I shall remain in full force and effect after the entry of this Judgment Order.” Therefore, the unambiguous language of the contract entered into pursuant to the Offer of Judgment shows that Bennett preserved claims in this case that had been preserved under the Limited Settlement Agreement. Indeed, that reservation was specifically reaffirmed in the Offer of Judgment. Comed invites the court to turn away from the clear language of the agreement between the parties and to engage in what it terms a “dicey” interpretation of the facts to conclude that the Offer of Judgment extinguished the present suit, even though the agreement itself plainly shows that was not the intent of the parties. Such an approach would turn the standard for summary judgment upside down, since the court must interpret the facts in the light most favorable to the non-movant, Bartman, 799 F.2d at 312 (court must construe facts in light most favorable to non-moving party), and the motion cannot prevail when that is done here.
Comed also contends that the settlement agreement should be construed against Bennett because it drafted the agreement. But this principle only apples where the contract is ambiguous. That is not the case here. In fact, even if the contract were ambiguous, the result would be the same for Comed because disputes involving the intent of the parties to a contract are inappropriate matters for summary judgment. Fitzsimmons v. Jersey State Bank, 528 F.2d 692, 694 (7th Cir.1976). Further, the uncontroverted facts show that the Offer of Judgment was the result of a joint effort between counsel for both sides. Therefore, Comed’s assertion of a legal principle dependent on the agreement being drafted only by Bennett is unsupported. For the foregoing reasons, res judicata does not preclude Bennett from bringing the present claim.
Collateral Estoppel
Issue preclusion or collateral estoppel bars the re-litigation of issues that have already been litigated between the parties. Four conditions must be met to invoke the doctrine of collateral estoppel: (1) the issue sought to be precluded is the same as that involved in a prior action; (2) the issue was actually litigated; (3) the determination of the issue was essential to the final judgment; and (4) the party against whom estoppel is invoked was represented in the prior action. Adair v. Sherman, 230 F.3d 890, 893 (7th Cir.2000). Because issue preclusion is an affirmative defense, the party seeking to invoke the doctrine has the burden of satisfying each of these elements. Id. at 894.
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12520339-13940 | GRASZ, Circuit Judge.
Kimberly Mensie sued the City of Little Rock (the "City") after it denied her applications for rezoning to open a beauty salon in a residential neighborhood. Mensie alleges the City discriminated against her on the basis of race and treated her differently from other salon operators in violation of the U.S. Constitution. The district court granted summary judgment to the City, and we affirm.
I. Background
In 2007, Mensie purchased a house at 310 North Van Buren Street in Little Rock, Arkansas, intending to live there and also operate a beauty salon from the premises. At the time, Mensie did not realize the property was designated only for "Single Family" use under the City's Land Use Plan and zoning ordinance. The house was located on the middle of the block between B Street to the south and C Street to the north. Under the City's Land Use Plan, everything along North Van Buren Street from B to G Streets was designated for Single Family use. There was an area zoned for Single Family and Suburban Office just south of B Street and an area zoned for Commercial and Office uses about two blocks south of Mensie's house at the intersection of North Van Buren and West Markham Streets. However, Mensie's house was surrounded by single-family homes.
The City's Planning Commission ("Commission") and Board of Directors ("Board") subsequently denied Mensie's applications to rezone her house for use as a salon. Mensie, who is African American, brought this lawsuit under 42 U.S.C. § 1983, alleging the City denied her applications in violation of the Equal Protection Clause and Due Process Clause by singling her out as a "class of one," discriminating on the basis of race, and acting "based on capricious and arbitrary conditions."
Mensie first sued the City in Arkansas state court in 2008. The case was dismissed without prejudice in May 2015 for failure to prosecute. Mensie filed her current suit in the same state court in November 2015, and the City removed it to federal district court.
After discovery, the district court granted the City's motion for summary judgment, concluding Mensie failed to show the City either treated her less favorably than other similarly situated salon operators or denied her applications based on race. Mensie appeals.
II. Standard of Review
This court reviews a grant of summary judgment de novo, viewing the evidence in the light most favorable to the nonmoving party. Barstad v. Murray Cty. , 420 F.3d 880, 883 (8th Cir. 2005). "Summary judgment is appropriate only if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." Id . ; Fed. R. Civ. P. 56(a). "The movant 'bears the initial responsibility of informing the district court of the basis for its motion,' and must identify 'those portions of [the record] ... which it believes demonstrate the absence of a genuine issue of material fact.' " Torgerson v. City of Rochester , 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (alterations in original) (quoting Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). "If the movant does so, the nonmovant must respond by submitting evidentiary materials that set out 'specific facts showing that there is a genuine issue for trial.' " Id . (quoting Celotex Corp. , 477 U.S. at 324, 106 S.Ct. 2548 ). "The nonmovant 'must do more than simply show that there is some metaphysical doubt as to the material facts.' " Id . (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ).
III. Discussion
Mensie argues the City violated her "substantive due process rights" by denying her rezoning applications based at least partially on her race. She also argues the City violated her equal protection rights by discriminating against her as a "class of one" in comparison to other similarly situated salons throughout the City. Viewing both of these arguments as equal protection claims, we find them to be without merit for the reasons discussed below.
A. Race-Discrimination
Mensie alleges the City's denial of her rezoning request constituted racial discrimination in violation of her right to equal protection under the law. To establish a violation of the Equal Protection Clause under this theory, Mensie is required to show "proof that a [racially] discriminatory purpose has been a motivating factor in the decision." Village of Arlington Heights v. Metro. Hous. Dev. Corp. , 429 U.S. 252, 265-66, 97 S.Ct. 555, 50 L.Ed.2d 450 (1977). "[D]etermining the existence of a discriminatory purpose 'demands a sensitive inquiry into such circumstantial and direct evidence as may be available.' " Clients' Council v. Pierce , 711 F.2d 1406, 1409 (8th Cir. 1983) (quoting Rogers v. Lodge , 458 U.S. 613, 618, 102 S.Ct. 3272, 73 L.Ed.2d 1012 (1982) ). This standard requires examining the "totality of the relevant facts," id ., including racially discriminatory impact, historical background, the sequence of events leading up to the challenged decisions, and legislative or administrative history, especially "contemporary statements by members of the decisionmaking body, minutes of its meetings, or reports." Village of Arlington Heights , 429 U.S. at 266-68, 97 S.Ct. 555.
Mensie argues the historical background and relevant sequence of events give rise to an inference of racial discrimination here. She notes the City's Director of Planning and Development opposed the idea "before the process had even begun." She also observes that the Commission rejected her applications even after she incorporated changes recommended by Commission staff in a preliminary meeting. Specifically, Mensie submitted a revised plan clarifying that her property would not contain a dumpster and would comply with the overlay standards of the surrounding Hillcrest neighborhood. At a hearing before the Commission, Mensie proposed several more changes on her own initiative, including reducing the number of employees, operating on an appointment-only schedule, and cutting the number of parking spaces in a parking lot she planned to pave in her backyard. The Commission still did not approve.
We see no evidence of racial discrimination on these facts, particularly in light of the Supreme Court's decision in Village of Arlington Heights . There, a Chicago suburb (the "Village") denied an application to rezone a parcel of land from a single-family to a multiple-family classification for building racially-integrated low- and moderate-income housing. Village of Arlington Heights , 429 U.S. at 255-58, 97 S.Ct. 555. The Supreme Court upheld the decision against a challenge under the Equal Protection Clause, finding no inference of racial discrimination even where the developer incorporated every change recommended by the Village's staff for compliance with local regulations. Id . at 257, 269-71, 97 S.Ct. 555. The Supreme Court emphasized the property had historically been zoned R-3, it was surrounded by single-family homes, and the developer's application progressed according to usual procedures. Id . at 269-70, 97 S.Ct. 555 (noting the Village's Plan Commission even scheduled two additional hearings and permitted the developer to supplement its earlier presentation).
Here Mensie's property was also zoned Single Family in a historically single-family neighborhood. Furthermore, the record indicates her applications progressed according to usual procedures. She met with several City staff members prior to submitting her applications. See Little Rock Rev. Code § 36-454(b) (requiring a "preapplication conference" between the applicant and City staff prior to submitting a Planned Development application). Commission staff then conducted two written analyses and recommended that the Commission deny Mensie's proposal. See id . § 36-454(c)(2) (requiring planning staff to review an applicant's preliminary plan and forward a recommendation to the Commission). Mensie then had a timely public hearing before the Commission and two timely public hearings on appeal before the Board. See id . (requiring a public hearing before the Commission on an applicant's preliminary plan within sixty days after planning staff files its review and recommendation); see also id . § 36-85(a) (authorizing rezoning applicants to appeal Commission's denial to the Board for review). Additionally, the changes Mensie incorporated at the Commission's request were merely, in its words, "technical issues" to comply with local rules. Put simply, "there is little about the sequence of events leading up to the decision that would spark suspicion." Village of Arlington Heights , 429 U.S. at 269, 97 S.Ct. 555.
The administrative history here supports this conclusion. The Commission staff's pre-hearing analyses "focused ... exclusively on the zoning aspects of [Mensie's] petition." Id . at 270, 97 S.Ct. 555. For instance, Commission staff expressed concern that Van Buren Street had been under pressure in recent years to change from a residential to a commercial corridor. They noted Mensie's house was located within an area covered by the "Hillcrest Neighborhood Action Plan," which included a goal of "no net loss of residential units by demolition or conversion to other uses." See Little Rock Rev. Code §§ 36-434.10 to 36-434.16 (adopting the Hillcrest overlay district into City's zoning ordinance). They also observed that a suburban office area located south of Mensie's property served primarily as a buffer zone. Additionally, opposition voiced by several neighbors at three public hearings focused on the possibility of increased traffic and a desire to maintain residential zoning in the area. See Village of Arlington Heights , 429 U.S. at 258, 270, 97 S.Ct. 555 (noting that "the zoning factors on which [Village decisionmakers] relied are not novel criteria in the Village's rezoning decisions," including the reliance of neighbors on maintaining area single-family zoning and the consistent application of a prior policy treating multi-family housing primarily as a buffer zone).
We find no basis for Mensie's argument that the City relied on racist "code words" by crediting neighbors' concerns about the possibility of decreased property values and increased crime as a result of Mensie's salon. Mensie notes one Board member who voted to deny Mensie's appeal later testified that she found the neighbors' opposition persuasive. Mensie then notes the Board ultimately denied her proposal by a 4-to-4 vote, making the neighbors' coded racism a dispositive factor in its demise. However, "[f]acially race-neutral statements, without more, do not demonstrate racial animus on the part of the speaker." Twymon v. Wells Fargo & Co. , 462 F.3d 925, 934 (8th Cir. 2006). Here, the record indicates her neighbors' opposition was based not on Mensie's mere "presence," as Mensie argues, but rather on the commercial nature of her proposal. See Nelson v. City of Selma , 881 F.2d 836, 839 (9th Cir. 1989) (noting that "[t]he preservation of the character and integrity of single-family neighborhoods, ... prevention of traffic congestion and maintenance of property values are all legitimate purposes of planning and zoning" (citing Village of Belle Terre v. Boraas , 416 U.S. 1, 9, 94 S.Ct. 1536, 39 L.Ed.2d 797 (1974) )).
Even if concerns about increased crime in this context could be considered racial code words, nothing indicates the City itself was improperly motivated by this concern or by Mensie's race. The record indicates that only one opponent mentioned increased crime as a concern at any of the hearings. Many others expressed opposition based on preventing increased commercialization of the residential neighborhood, consistent with the Commission staff's analysis. The testifying Board member merely said she was persuaded by the "objections of the neighborhood" in general as well as by the Commission staff's recommendation, without any indication of discriminatory motive. See Village of Arlington Heights , 429 U.S. at 270, 97 S.Ct. 555 (finding no inference of racial discrimination in part where "one member of the Village Board [took] the stand at trial" and "[n]othing in her testimony support[ed] an inference of invidious purpose"). We decline to impute any implied racism from the opposing testimony to the City here. See Twymon , 462 F.3d at 934 ("While we are required to make all reasonable inferences in favor of the nonmoving party in considering summary judgment, we do so without resort to speculation.").
We also reject any argument that we should infer racial opposition in the overall comments of Mensie's neighbors to the City in light of their allegedly hostile treatment toward her when she moved into the neighborhood and from the fact City officials allegedly voted against her applications mostly along racial lines. Unlike these allegations, the City's interest in preserving the neighborhood's residential character from increased commercialization is supported by the record, and this precludes any inference that the City's decision was racially motivated. See Gallagher v. Magner , 619 F.3d 823, 833 (8th Cir. 2010) (noting that city's race-neutral explanation for inspecting rental properties disproportionately occupied by racial minorities "ha[d] greater support in the record" than any alleged discriminatory purpose); see also Thomas v. Corwin , 483 F.3d 516, 527 (8th Cir. 2007) (stating that "[m]ere allegations, unsupported by ... evidence beyond the nonmoving party's own conclusions, are insufficient to withstand a motion for summary judgment").
Therefore, Mensie's race-discrimination claim under the Equal Protection Clause must fail.
B. Class-of-One Discrimination
We next address Mensie's class-of-one discrimination claim. "The Equal Protection Clause requires that the government treat all similarly situated people alike." Barstad , 420 F.3d at 884.
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545757-13809 | WASHINGTON, Circuit Judge.
Appellant was tried in the District Court on four counts of perjury. D.C.Code 1951, Tit. 22, § 2501. The first three counts concerned his testimony before the Reconstruction Finance Corporation Subcommittee of the Senate Banking and Currency Committee. The fourth concerned his testimony before the grand jury. He was found guilty on all four counts and sentenced to a term of imprisonment of from four months to two years, to run concurrently, on each. Since the sentences are to run concurrently the judgment of the District Court must be upheld if the conviction of appellant on any count is valid. Kiyoshi Hirabayashi v. United States, 1943, 320 U.S. 81, 63 S.Ct. 1375, 87 L.Ed. 1774. We consider appellant’s conviction on the first count to be clearly valid. We accordingly affirm on that count, and in this opinion will discuss only those contentions of the appellant which are applicable to it.
At the outset appellant attacks the validity of the indictment. Each count asserts that an oath was duly taken before “a competent tribunal * * * in which a law of the United States authorizes an oath to be administered * * It does not set forth the name of the individual who administered the oath or his authority to do so. This, appellant urges, renders the indictment fatally defective. He relies on a section of the District of Columbia Code which provides that a perjury indictment must set forth “by what court, or before whom the oath was taken (averring such court, or person or persons, to have a competent authority to administer the same) * * * ” D.C.Code 1951, Tit. 23, § 204. Since the passage of this section, how-ever, the Federal Rules of Criminal Procedure, 18 U.S.C.A. have been promulgated. Rule 7(c) provides that “The indictment or the information shall be a plain, concise and definite written statement of the essential facts constituting the offense charged. * * * It need not contain * * * any other matter not necessary to such statement. * * * ” The substantive elements of perjury in this jurisdiction are set out in Section 22-2501 of the District of Columbia Code. That section is nearly identical in its terms to Section 1621 of Title 18 of the United States Code, and under the latter section an allegation of the name or authority of the individual who administered the oath has been held to be unnecessary. United States v. Debrow, 1953, 346 U.S. 374, 74 S.Ct. 113. Similar ' reasoning is applicable here. We do not consider that Section 23-204 of the District of Columbia Code — which is purely procedural — has the effect of adding to the substantive elements of perjury (“the essential facts constituting the offense charged”) a requirement that the name of the giver of the oath be alleged. The instant indictment thus complies with Rule 7(c), and that compliance sustains it. See Fed.R.Crim.P. 1; 18 U.S.C. § 687 (1946) ; United States v. Bickford, 9 Cir., 1948, 168 F.2d 26.
Appellant also attacks the indictment on the basis of the selection of the grand jury panel. The jury commissioners excluded from the jury list all persons who voted outside the District of Columbia, on the ground that they could not be “residents” of the District of Columbia. This practice, which has since been discontinued, was certainly erroneous. The question is whether it warrants reversal.
Appellant relies primarily on Ballard v. United States, 1946, 329 U.S. 187, 67 S.Ct. 261, 91 L.Ed. 181, and Thiel v. Southern Pacific Co., 1946, 328 U.S. 217, 66 S.Ct. 984, 90 L.Ed. 1181. In those cases convictions were reversed because of the exclusion from the jury panel of women (Ballard) and daily wage earners (Thiel). In both cases a cohesive class, united by common interests, was excluded. The Court stressed this fact and demonstrated a concern to secure jury panels which were representative of the communities from which they were drawn. In Thiel it listed six groups— economic, social, religious, racial, political and geographical — which could not be excluded. 328 U.S. at page 220, 66 S.Ct. at page 985. Here none of these were excluded. Persons who reside in the District of Columbia but vote elsewhere come from either sex and from all racial, religious and political groups. They comprise no cohesive group. Their exclusion does not threaten the representative nature of jury panels. We do not believe, therefore, that the Ballard and Thiel cases are applicable. The exclu sion here is a mere irregularity and does not warrant reversal.
Appellant next contests the competency of the Subcommittee before which he testified. He alleges that at the time he gave the testimony on which the first three counts are based the Subcommittee was not engaged in a legislative function.
The instant Subcommittee was authorized by the Senate to conduct a study of the operations of the Reconstruction Finance Corporation. Pursuant to this authorization it conducted extensive hearings and issued three interim reports. The third, issued on February 5, 1951, was entitled “Favoritism and Influence.” It said that “there has been improper use of the Corporation’s vast authority in response to the influence which persons outside of the RFC have over individual members of the Board of Directors.” It added: “The individual named most frequently in the reports of alleged influence which have reached the subcommittee is E. Merl Young. * * * By July of 1948 his salary at RFC had risen to $7,193 a year. More recently, Merl Young has been an $18,000-a-year vice president of the Lustron Corp. and, simultaneously, a $10,000-a-year official of F. L. Jacobs Co. Both were RFC borrowers at the time. * * * It seems that Young acquired and held both of these positions because of the influential atmosphere which surrounds him.”
The third report favorably reported a bill — S. 514 — proposing a reorganization of the RFC. On February 19, 1951, the President submitted to Congress an executive reorganization plan which also proposed to( reorganize the Reconstruction Finance Corporation. As a result the passage of S. 514 was rendered unlikely, at best. On February 21, 1951, the Subcommittee on the Reconstruction Finance Corporation re-commenced its hearings. The chairman stated, at that time, that the purpose of the hearings would be to clarify the third interim report, to rebut criticism of it, to develop evidence in its support, and to afford persons mentioned in it an opportunity to reply. It was at this set of hearings that the testimony in question was given.
Appellant argues here that the Subcommittee’s purpose was- one of “ventilation” and that this is not a valid legislative purpose. He points to the chairman’s remarks and the fact that S. 514 had been, in effect, superseded by the President’s reorganization plan. There is no merit in this argument. Certainly a committee can hold hearings to substantiate an earlier report, where the bill reported is pending before Congress. Here, to be sure, S. 514 appeared doubtful of passage, in view of the presidential reorganization plan. But the report was also pertinent to that plan. And at the time of the hearings in question the plan was before Congress for its acceptance or rejection. It was entitled to know whether or not the report of the Subcommittee was subject to refutation.
The clearly valid legislative purpose which thus underlay these hearings was not vitiated by the incidental desire of the Subcommittee to give interested parties a chance to reply to statements made in the third report. That desire was fair and reasonable. The mere “ventilation” of sensational facts, of a sort not conceivably linked or linkable to valid congressional legislation, has been the target of much criticism. But nothing of that kind is present here.
Appellant next alleges that the District Court erred in denying a motion for acquittal. He urges that the evidence is insufficient on all counts. We briefly summarize the evidence as to the first count, to which this opinion is limited.
Count I charges appellant with perju-riously testifying: “While I was employed by the Reconstruction Finance Corporation I never had anything to do with the loan applications made by Lus-tron.” This representation was contained in a prepared statement read by appellant at the hearing of February 21, 1951.
The Lustron Corporation first applied for a loan in 1947. Appellant was then a loan examiner in the RFC. It is conceded that he had nothing to do with the application for this loan. He did, however, “service” the loan after it was granted. In June of 1948 Lustron applied for an additional loan of $10,000,-000. It is this second application with which appellant was found to have been connected. The primary evidence connecting him with it is a document of the Reconstruction Finance Corporation review committee recommending the loan. in the lower left hand corner of the last page of this document, underneath the word “concur,” is appellant’s signature. Hubert Steele, a former loan examiner at the Reconstruction Finance Corporation, testified that it was usual for an examiner who was servicing a loan to make a recommendation on any additional loan requested by that borrower. Harvey J. Gunderson, a Director of the Reconstruction Finance Corporation at the time, testified that when the review committee’s recommendation came before the Directors they sent it back for appellant’s signature. He implied that this was because appellant was servicing the original Lustron loan. Appellant testified that he signed the document because he was servicing the original loan and because he received a memorandum from the head of his division asking him to do so. (It read: “Please sign and return.”) He denied that he made an official recommendation and said that he was not qualified to write a report on so large a loan. He further testified: “As far as trying to show that me quitting RFC on the same day as the Lustron loan was approved, that has no significance whatsoever.” The offer of employment from Lustron came, he said, some two or three weeks earlier.
Such, in brief, was the evidence on the first count. To return a verdict of guilty on a charge of perjury a jury must, of course, be convinced, beyond a reasonable doubt, not only that the accused testified falsely but that he did not, at the time, believe his testimony to be true. The first inquiry in a de termination of whether or not the evidence was sufficient for the jury to find an accused guilty of perjury relates to the application of the “two witness rule.” This rule is misnamed. It does not require the testimony of two witnesses. Properly stated it is that “the uncorroborated oath of one witness is not enough to establish, for purposes of conviction of perjury, the falsity of sworn testimony.” Maragon v. United States, 1950, 87 U.S.App.D.C. 349, 350, 187 F.2d 79, 80, certiorari denied, 1951, 341 U.S. 932, 71 S.Ct. 804, 95 L.Ed. 1361. See Hammer v. United States, 1926, 271 U.S. 620, 46 S.Ct. 603, 70 L.Ed. 1118; Weiler v. United States, 1945, 323 U.S. 606, 65 S. Ct. 548, 89 L.Ed. 495. Defendant’s admissions and documentary evidence go toward its fulfillment. Maragon v. United States, supra. We think the evidence offered on the first count satisfies the rule.
Fulfillment of the two witness rule is necessary for conviction of perjury. It is not, however, sufficient for conviction. An additional requirement is that the jury could reasonably believe that there was no reasonable doubt as to defendant’s guilt. Curley v. United States, 81 U.S.App.D.C. 389, 160 F.2d 229, certiorari denied, 1947, 331 U.S. 837, 67 S.Ct. 1511, 91 L.Ed. 1850. This requirement, of course, relates to both elements of perjury: the falsity of the testimony and the lack of a belief in its truth. Generally, a belief as to the falsity of testimony may be inferred by the jury from proof of the falsity itself. In some cases perhaps this might not be so —as where the testimony concerned a triviality or an occurrence of long before. See Fotie v. United States, 8 Cir., 1943, 137 F.2d 831. We do not think any such situation exists here. Of course, the jury could have found that there was a reasonable doubt that appellant believed his testimony on which the first count is based to be inaccurate. But we also think that the jury could reasonably find, and did find as to that count, that there was no reasonable doubt as to appellant’s guilt.
Finally, appellant complains of several of the questions asked and remarks made at the trial by the prosecutor. We have studied the record as to these incidents. We do not believe they warrant a new trial, and hence do not deem it necessary to detail them here.
For these reasons, the judgment of the District Court must be
Affirmed.
. Section 204 was incorporated into the District of Columbia Code by the Act of March 3, 1901, 31 Stat. 1189. Its inclusion in the 1951 edition of the Code does not constitute a reenactment and it has not otherwise been reenacted.
Now 18 U.S.C.A. § 3771.
. D.C.Code 1951, Tit. 11, § 1417, requires all District of Columbia jurors to be “residents.”
. United States v. Cross, D.C., 9 Mackey 365, appeal dismissed, 1892, 145 U.S. 571, 12 S.Ct. 842, 36 L.Ed. 821; United States v. Nardello, D.C.1886, 4 Mackey 503. Both cases concern the converse of the instant issue; a prospective juror was challenged as not being a resident of the District of Columbia beeause he voted elsewhere. Held, the juror was a resident. The applicable statute differed from the present one only in that it contained no requirement that jurors be able to read or write.
, See, also, Dow v. United States Steel Corp., 3 Cir., 1952, 195 F.2d 478 (naturalized foreign born citizens, negroes, veterans, labor people); United States v. Roemig, D.C.N.D.Iowa 1943, 52 F.Supp. 857 (women).
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3914225-28455 | Memorandum and Order
KEETON, District Judge.
This matter, a diversity action for negligence and breach of warranty against the manufacturers of a motorcycle helmet worn by the plaintiff when injured in a motorcycle accident, is before the court on defendant Uniroyal, Inc.’s Motion to Vacate Allowance of Motion to File Amended Complaint. The accident in which plaintiff was injured occurred on July 29, 1973. As a result of injuries suffered in that accident, plaintiff is a quadriplegic.
I.
Plaintiff commenced this action against the manufacturer of the helmet, Safetech, Inc., on June 4, 1975. Between 1976 and the end of 1979 discovery proceeded fitfully, and in the interim Safetech went out of business. In March 1976 plaintiff took the deposition of a former Safetech quality control manager, Richard Lenarth, who was produced pursuant to an order of the court. After considerable delays, plaintiff subsequently obtained answers to interrogatories and production of requested documents, in 1978 and 1979, respectively. Plaintiff then took the deposition of Safetech’s president, Fred Plotkin. Shortly after Plotkin’s deposition, on January 23, 1980, plaintiff moved to file an amended complaint adding as defendants Uniroyal and two other firms (American Sports Company, Inc. and Wil-shire Foam Products, Inc.). Plaintiff’s motion to amend was based on “newly discovered evidence” first disclosed at the Plotkin deposition concerning “the crucial role of the proposed new defendants” in the design and selection of materials used in plaintiff’s helmet. The motion was allowed on February 7, 1980, no opposition having been filed. On July 7, 1980, Uniroyal filed its motion to vacate allowance of plaintiff’s amendment. A hearing on Uniroyal’s motion was held before the court on December 22,1980. Both plaintiff and Uniroyal have filed affidavits and appendices of exhibits in support of their motions.
Uniroyal presents essentially two arguments in support of its motion to vacate. First, Uniroyal argues that as a matter of law plaintiff’s claims against Uniroyal were barred by the then-applicable two-year statutes of limitation as of July 29, 1975, and pursuant to Fed.R.Civ.P. 15(c) fail to “re late back” to the date the original action was filed. Second, Uniroyal argues that the court should reconsider its allowance of the amendment adding Uniroyal, and in the exercise of discretion (pursuant to Fed.R. Civ.P. 15(a)) now deny the amendment on grounds of inexcusable delay by plaintiff in adding Uniroyal and undue prejudice to Uniroyal as a result of the lack of timely notice of the action. Plaintiff contends that through no fault of his own “he had, until Plotkin’s deposition, no knowledge and no way of knowing Uniroyal, Inc.’s role in the selection of the composition and thickness of the padding,” and that the delay in obtaining Plotkin’s deposition was entirely the fault of Safetech. Pltf. Mem. at 10. Plaintiff further contends that its claims against Uniroyal are governed by Massachusetts law, not the federal rule, and that under Mass.R.Civ.P. 15(c) his amendment relates back. For reasons stated below, I sustain plaintiff’s position and deny Uniroyal’s motion to vacate.
II.
A.
Under the two-year state statutes of limitation applicable in this diversity action, Mass.Gen.L. c. 260 § 2A and Mass.Gen.L. c. 106 § 2-318, plaintiff’s claims against Uniroyal are barred unless they “relate back” to the date the original complaint was filed. Uniroyal argues that relation-back is to be determined by the standards specified in Fed.R.Civ.P. 15(c), and that by virtue of its lack of timely notice those conditions are not met.
An examination of Massachusetts statutes and case law discloses that Massachusetts has long had an unusually liberal relation-back rule, reflecting a conscious substantive policy choice in favor of allowing plaintiffs to add new transaction-related defendants allegedly liable for the injury that gave rise to the original cause of action, even though as to them the statute of limitation would have run but for relation-back. As the Massachusetts rule is usually articulated, an amendment relates back where “[t]he cause of action for which the suit was brought was the injury, and the plaintiff intended to bring it against the party liable for the injury.” McLaughlin v. West End St Ry., 186 Mass. 150, 71 N.E. 317 (1904). See, e.g., Wadsworth v. Boston Gas Co., 352 Mass. 86, 89, 223 N.E.2d 807, 809-10 (1967); Johnson v. Carroll, 272 Mass. 134, 138, 172 N.E. 85 (1930). Thus, the Massachusetts relation-back rule is a firm declaration of substantive policy, in contrast to a rule merely regulating “procedure” in the Erie -related sense. This relation-back rule is an “integral part” of Massachusetts limitation doctrine, in the nature of a tolling provision for certain types of claims. Cf. Walker v. Armco Steel Corp., 446 U.S. 740, 751, 100 S.Ct. 1978, 1985, 64 L.Ed.2d 659 (1980); Ragan v. Merchants Transfer & Warehouse Co., 337 U.S. 530, 533-34, 69 S.Ct. 1233, 1234-35, 93 L.Ed. 1520 (1949). It therefore “must be considered part and parcel of the statute of limitations,” Walker, supra, 446 U.S. at 752, 100 S.Ct. at 1986. This rule, expressed previously by statute — Mass.Gen.Laws c. 231 § 51 (1959 ed., amended 1973), was recently codified in Mass.R.Civ.P. 15(c), effective July 1, 1974, which provides:
Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment (including an amendment changing a party) relates back to the original pleading.
Although the remainder of Mass.R.Civ.P. 15 is substantially identical to Fed.R.Civ.P. 15, the Reporters’ Notes to Mass.R.Civ.P. 15(c) confirm that “Massachusetts practice is more liberal than Federal Rule 15(c) in allowing amendments adding or substituting party defendants after expiration of the period of limitations,” 43A Mass.Gen.L.Ann. at 171. The decision to reaffirm the longstanding Massachusetts rule in what was otherwise substantially a verbatim adoption of the Federal Rules of Civil Procedure manifests a deliberate choice by the Massa chusetts Supreme Judicial Court and indicates the strength of the Commonwealth’s substantive interest in the matter. See Walker, supra, 446 U.S. at 751, 100 S.Ct. at 1985. Indeed, in contrast with the predecessor statute, Mass.Gen.L. c. 231 § 51, which declared that the court “may allow” an amendment adding a transactionally-re-lated defendant to relate back, Mass.R. Civ.P. 15(c) is in form categorical, saying simply that “the amendment (including an amendment changing a party) relates back to the original pleading.” The Reporters’ Notes to Mass.R.Civ.P. make clear that the Massachusetts rule does not distinguish between adding and substituting a defendant. 43 Mass.Gen.L.Ann. at 171-72. “[T]he propriety of allowing the amendment in both cases is governed by the same rules.” Wadsworth v. Boston Gas Co., supra, 352 Mass, at 89, 223 N.E.2d at 810.
B.
Marshall v. Mulrenin, 508 F.2d 39 (1st Cir. 1974) held that relation-back is controlled by the Massachusetts rule rather than Fed. R.Civ.P. 15(c) when the claim arises under Massachusetts law. See Ward v. Hercules, Inc., 75 F.R.D. 455 (D.Mass.1977). The court in Marshall v. Mulrenin reasoned that under the Erie doctrine the relation-back of an amendment (at least under Massachusetts law) is a substantive, rather than purely procedural matter, and that under Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), such a substantive state rule is not superseded by a conflicting Federal Rule of Civil Procedure. 508 F.2d at 44. In so ruling, the court noted and explicitly declined to follow the rulings of other circuits, applying Fed.R.Civ.P. 15(c), in Simmons v. Fenton, 480 F.2d 133, 136 (7th Cir. 1973); Welch v. Louisiana Power & Light Co., 466 F.2d 1344, 1345 (5th Cir. 1972); and Loudenslager v. Teeple, 466 F.2d 249, 250 (3d Cir. 1972). Other circuits have subsequently applied Fed.R.Civ.P. 15(c) rather than a conflicting rule of state law. E.g., Davis v. Piper Aircraft Corp., 615 F.2d 606, 612 (4th Cir.), cert. dismissed, 448 U.S. 911, 101 S.Ct. 25, 65 L.Ed.2d 1141 (1980); Ingram v. Kumar, 585 F.2d 566, 570 (2d Cir. 1978), cert. denied, 440 U.S. 940, 99 S.Ct. 1289, 59 L.Ed.2d 499 (1979); Britt v. Arvanitis, 590 F.2d 57 (3d Cir. 1978). See 6 C. Wright & A. Miller, Federal Practice and Procedure § 1503 & nn. 58, 68 (1971 & 1981 pocket part).
On its face Hanna might appear to compel the conclusion that Fed.R.Civ.P. 15(c), rather than the Massachusetts relation-back rule, must be applied. However, the precise issue before the First Circuit in Marshall v. Mulrenin, supra, and now before this court, was not before the Supreme Court in Hanna or the courts of other circuits whose opinions conflict in rationale with Marshall v. Mulrenin. The precise issue here is whether a state tolling rule long integrated into the statute of limitation, extending the time when certain claims may be brought by prescribing more liberal relation-back than that prescribed in Fed.R.Civ.P. 15(c), is to be applied in a federal court in a diversity action. In contrast, Hanna addressed the question whether in a diversity action “service of process shall be made in the manner prescribed by state law or that set forth in Rule 4(d)(1) of the Federal Rules of Civil Procedure.” 380 U.S. at 461, 85 S.Ct. at 1138. Faced with a conflict over the required type of notice (i.e., in-hand delivery rather than delivery to defendant’s dwelling, etc.), the Court in Hanna held that the federal rule applied. The Court’s broad language about the presumptive validity and application of a Federal Rule, 380 U.S. at 470-72, 85 S.Ct. at 1143-44, should be viewed in the context that the Court was resolving a clash between what it determined to be two clearly “procedural” rules.
Hanna held that “the adoption, of Rule 4(d)(1), designed to control service of process in diversity actions, neither exceeded the congressional mandate embodied in the Rules Enabling Act nor transgressed constitutional bounds, and that the Rule is therefore the standard against which the District Court should have measured the adequacy of the service.” 380 U.S. at 463-64, 85 S.Ct. at 1139-40 (footnote omitted). It has been argued that, in view of the stated holding of Hanna, the rule of Erie is irrelevant to the issue before a court confronted with a clash between a federal rule of civil procedure and state law. The'fact remains, however, that in Hanna the Court devoted much of its opinion to the meaning and effect of Erie, and the Court explicitly stated that in relation to the Erie rule “outcome-determination” analysis is not “to serve as a talisman,” 380 U.S. 467, 85 S.Ct. 1141, and is not to be applied “without reference to the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws,” 380 U.S. 468, 85 S.Ct. 1142 (footnote omitted). See Feinstein v. Massachu setts Gen. Hosp., 643 F.2d 880, 884 (1st Cir. 1981). If Erie applies, analysis of the circumstances of the present case in relation to the twin aims of Erie strongly supports application of the more liberal state law of relation-back. The Massachusetts rule would be relevant both to choice of forum and equitable administration of the laws in all cases in which an injured claimant might anticipate possible difficulty in promptly and correctly identifying all of the parties potentially responsible for the injury.
Most but not all of the circuit cases cited as inconsistent with Marshall v. Mulrenin involved conflicting federal and state rules concerning the procedural questions of manner of service or form of notice of the action and did not involve a state rule of relation-back more liberal than Fed.R.Civ.P. 15(c). This latter distinction is especially significant in view of the policy arguments offered by commentators explaining Hanna and the line of decisions that conflict in rationale with Marshall v. Mulrenin. In arguing that Fed.R.Civ.P. 15(c) should displace a conflicting state relation-back rule, commentators emphasize the typically wore restrictive nature of state relation-back rules. It is suggested, for example, that the federal standard of notice implicit in Fed.R.Civ.P. 15(c) adequately protects the objective of the state limitation provision, e.g., 6 C. Wright and A. Miller, supra, § 1503, at 535, and that displacing Fed.R.Civ.P. 15(c) by applying a more restrictive state rule would frustrate the federal policy of facilitating decisions on the merits, e.g., 3 Moore’s Federal Practice ¶ 15.15[2], at 15-193 (2d ed. 1980); 6 C. Wright & A. Miller § 1503, at 535. In contrast, it cannot fairly be said either that the objectives of the more liberal relation-back provisions of Massachusetts law would be protected, or that a policy — whether state or federal — of facilitating decision on the merits would be served, by holding Fed.R.Civ.P. 15(c) applicable in the circumstances of the present case. Indeed, the policy of facilitating decisions on the merits will be served rather than frustrated by applying the Massachusetts law of relation-back in the present case (albeit with some cost to the federal interest in uniformity).
This purposive analysis of Fed.R.Civ.P. 15(c) advanced by commentators is consistent with, and indeed is fortified by, Advisory Committee Notes. The sentence of Rule 15(c) relating to “changing the party against whom a claim is asserted” was added by amendment in 1966. The Advisory Committee Notes to this 1966 amendment call attention to the objectionable consequences of a more restrictive relation-back rule and do not at any point discuss the relationship between the amended rule and a more liberal state law regarding relation-back. See Advisory Committee Notes, reproduced in 12 C. Wright and A. Miller, supra, at 394-396 (1973); Kaplan, Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rules of Civil Procedure (I), 81 Harv.L.Rev. 356, 407-410 (1967).
In view of the compelling indicia that the purpose of the 1966 amendment of Fed.R.Civ.P. 15(c) was to prescribe a more liberal rule of relation-back than some federal decisions had applied in construing the less explicit provisions of Rule 15(c) as it stood before amendment, a proposed interpretation of that amendment as designed to override a more liberal state law provision of relation back is suspect. Approaching Fed.R.Civ.P. 15(c) with this perspective, one finds that literally it states only an affirmative proposition — that an amendment changing a party relates back if prescribed conditions are satisfied. It does not state the negative proposition that an amendment changing a party does not relate back when these conditions are not satisfied. Absent indicia of the purpose of the 1966 amendment, one might be uneasy about reading the amended rule as not addressing the negative proposition, even by implication. In light of the compelling indicia of purpose, however, I conclude that the amended rule does not preclude a more liberal relation-back principle found in the otherwise applicable law of limitation of actions. As in Walker, supra, it is there fore unnecessary to address the question posed by Hanna whether Fed.R.Civ.P. 15(e), if it were construed as applying here, “would be outside the scope of the Rules Enabling Act or beyond the power of Congress under the Constitution,” 446 U.S. at 752, n. 14, 100 S.Ct. at 1986, n. 14.
In summary, I conclude that Fed. R.Civ.P. 15(e), properly construed, does not govern the issue presented here, was not meant to override a state law of limitation allowing more liberal relation-back, and should not be applied when to do so would give it the practical effect of preempting a state relation-back rule that is an integral part of the state’s law of limitation of actions and is more liberal than the federal rule. Therefore I conclude that Erie applies and that, in accordance with Marshall v. Mulrenin, Mass.R.Civ.P. 15(c) governs the question of relation-back in this case.
C.
It is clear that the claims plaintiff seeks to add against Uniroyal come within the terms of Mass.R.Civ.P. 15(c). Plaintiff’s negligence and warranty claims against Uniroyal in Counts III and IV of the amended complaint arose out of the same “occurrence” (plaintiff’s injury) and state the same type of legal “claims” (or “causes of action”) asserted against Safetech in the original complaint. The only change in plaintiff’s theory of the case relates to the factual question of who did what in relation to the design of the helmet. It seems clear that “plaintiff intended to bring [the action] against the partpes] liable for the injury,” McLaughlin, supra, and that plaintiff would have sued Uniroyal initially if he had known in 1975 what he now knows about the alleged role of Uniroyal in the design of his helmet.
For these reasons, I conclude that if plaintiff is allowed to amend and state claims against Uniroyal, the amendment relates back to the original filing and thus the claims are not barred by the statute of limitations.
III.
I turn next to considering the factors relevant under Fed.R.Civ.P. 15(a) to allowing the amendment adding Uniroyal as a party.
After examination of the exhibits filed with the memoranda of Uniroyal and plaintiff, consisting primarily of affidavits, answers to interrogatories, and excerpts from the Lenarth and Plotkin depositions, I find that plaintiff did in fact first learn of the alleged role of Uniroyal and the other new defendants at Plotkin’s deposition on December. 27, 1979. Whether or not plaintiff previously knew or should have known that the padding in plaintiff’s helmet was made of Ensolite manufactured by Uniroyal (facts that were disclosed at the Lenarth deposition on March 30, 1976, Lenarth dep. at 50), before Plotkin’s deposition plaintiff had no reason to know or suspect that anyone other than the ostensible manufacturer, Safetech, had been responsible for the critical materials and design decisions reflected in the construction of plaintiff’s helmet.
Also, I find that plaintiff’s failure to discover sooner this potentially critical circumstance was not caused by culpable neglect on plaintiff’s part in pursuing discovery. Plaintiff’s attempts to obtain discovery from Safetech were frustrated by Safe-tech’s protracted failure to produce documents and answer interrogatories. • Safe-tech’s apparent resistance to discovery, together with the fact that Safetech, a California corporation, went out of business at some point during discovery, were the effective causes of delay.
The fact that plaintiff’s counsel assented to numerous extensions in Safetech’s time to answer interrogatories and produce documents (which were finally done in March, 1978 and June, 1979, respectively) does not of itself make plaintiff responsible for these unfortunate delays. A more reasonable inference, and the one I draw, is that any other course on the part of plaintiff’s counsel (e.g., motions to compel or for sanctions) would have been largely futile, in light of the defunct status of Safetech and the fact that this court’s overcrowded docket made unlikely a speedy trial or quick action on discovery motions. Under these circumstances, plaintiff’s counsel may have found he had no alternative but to accommodate Safetech’s counsel because of the difficulties of obtaining a response from an uncooperative client. Plaintiff’s counsel reasonably represented that he needed to complete the document discovery before proceeding to depose Safetech president Plot-kin. Once the documents were finally produced, plaintiff acted expeditiously to analyze them and to obtain Plotkin’s deposition, which disclosed the unanticipated information on the basis of which plaintiff promptly moved to amend to add Uniroyal et al.
In short, plaintiff has shown a “valid reason” for his delay in moving to add claims against Uniroyal, Hayes v. New England Millwork Distributors, Inc., 602 F.2d 15, 19-20 (1st Cir. 1979). This is not a case of inexcusable failure to prosecute. Plaintiff’s motion to amend based on newly discovered evidence should not be disallowed because of his delay in bringing this motion.
Nor is the potential prejudice to Uniroyal in having to defend this action a sufficient reason under the circumstances to warrant denial of plaintiff’s motion to amend. Although the passage of considerable time without notice of this action undoubtedly makes more difficult Uniroyal’s task in preparing its defense, the severity of the prejudice likely to result is unclear, and in any event, for reasons stated below, is outweighed by other factors relevant to the exercise of discretion under Fed.R.Civ.P. 15(a).
There is no dispute that Uniroyal received no notice of this action until it was served with the amended complaint after February 7, 1980. Uniroyal claims it would be prejudiced in preparing its defense as a result of its lack of timely notice of its potential liability, in that pertinent Ensolite sales and testing records were routinely destroyed between 1975 and 1977, and that the employees involved in the sale of Ensol-ite to Safetech and in Ensolite research and development have left Uniroyal’s employment. Murphy affid. ¶¶ 8, 10-12. However, there is no contention that the departed employees are deceased or have become unavailable, to Uniroyal as witnesses. See Murphy affid. ¶ 12. It may develop that it is the testimony of these employees, rather than documentary evidence, that is critical to the success or failure of plaintiff’s theory of Uniroyal’s liability — 1. e., what materials and design advice did Uniroyal’s “sales engineers” give Safetech that was incorporated into the design of plaintiff’s helmet. The significance of lost sales records is speculative; it appears that there is no dispute that Uniroyal sold the particular Ensolite in question to Safetech, and the density and specifications of the Ensolite used in plaintiff’s helmet may be verified from other sources. Also, some such records have been retained by Uniroyal in connection with a nonpayment suit against Safetech. Murphy affid. ¶ 10.
The unavailability of test data regarding the Ensolite used in plaintiff’s helmet is a more serious matter. Data concerning the material’s density and compression resistance properties indeed appear “highly pertinent to Uniroyal’s defense that the material supplied to Safetech was adequate for its intended purpose.” Murphy affid. ¶ 11. However, the fact that Uniroyal may not be able to “duplicate” the previous test data does not establish that Uniroyal will be completely unable to perform substitute tests that would provide relevant evidence. Therefore, the claim of prejudice from the lost test data is overstated.
The prejudice to plaintiff in being precluded from trying its claims against Uniroyal (which is alleged to have had substantial and perhaps primary responsibility for the design defect complained of) is clearly substantial and weighs even more heavily than the potential prejudice to Uniroyal from the delay for which neither plaintiff nor Uniroyal is accountable. Moreover, as discussed supra, Part II, under the controlling First Circuit rule, the applicable Massachusetts rule on relation-back of amendments adding parties reflects a strong policy in favor of allowing plaintiffs to join at any time additional defendants allegedly liable for the injury that gave rise to the original action. That rule and policy cannot be ignored in addressing Uniroyal’s motion. Absent a showing that the lateness of the amendment was caused by plaintiff’s inexcusable delay or neglect, it would be inappropriate for the court to exercise its discretion to disallow an amendment adding such a defendant in the circumstances of the present case.
For these reasons, treating the matter as one of discretion to reconsider under Rule 15(a) the previous allowance of the amendment, I find it appropriate and fair to allow plaintiff to add Uniroyal as a defendant at this time, and therefore inappropriate to vacate the order allowing the amendment.
IV.
In its Supplementary Memorandum in support of its motion to vacate, Uniroyal made the additional argument that even if plaintiff’s breach of warranty claims relate back, they are barred by lack of privity. Plaintiff’s memoranda did not address this issue.
Even if valid, this argument goes to only part of plaintiff’s claim and would not support a denial of leave to file the amended complaint. This ruling is, of course, without prejudice to defendants’ right to present this argument again by appropriate motion or request for ruling.
ORDER
For the above reasons, it is ORDERED: Defendant Uniroyal’s Motion to Vacate Allowance of Motion to File Amended Complaint is denied.
. Uniroyal sold to Safetech a closed-cell foam material, known as “Ensolite,” used as the shock-absorbing padding in the type of Safe-tech helmet worn by plaintiff when injured. Plaintiff claims, inter alia, that the helmet was negligently designed and manufactured because the Ensolite used was of insufficient thickness and density to prevent spinal injuries of the kind suffered by plaintiff.
. The applicable statutes of limitation are Mass.Gen.Laws c. 260 § 2A (tort actions and contract actions for personal injuries) and c. 106 § 2-318 (warranty claims against manufacturer), both of which specified two years at the time of plaintiffs 1973 accident, and have been subsequently amended to provide a three year limitation period. The question whether Mass. R.Civ.P. 15(c), which has replaced Mass.Gen. Laws c. 231 § 51, is to be treated as a part of the Massachusetts law of limitation of actions is at issue in this case.
. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).
. In determining whether it is appropriate to grant leave to amend, however, a Massachusetts court still has discretion under Mass.R. Civ.P. 15(a), which is identical in relevant part to Fed.R.Civ.P. 15(a).
. At the close of its opinion in Hanna, the Court described the Federal Rules of Civil Procedure as “housekeeping rules for federal courts” which may differ from “comparable state rules,” and described such rules of procedure as regulating “the forms and mode of enforcing [a state-created] right.” 380 U.S. at 473, 85 S.Ct. at 1145.
. For example, if the federal relation-back rule applied in such diversity actions in federal court, plaintiffs would naturally prefer to litigate their claims in Massachusetts state courts. If citizenship of the parties was such that late-joined defendants could remove, they would prefer to do so in order to reap the benefit of the more restrictive federal relation-back rule. Thus, a plaintiffs ability to litigate claims against late-joined defendants would depend on the fortuity of citizenship.
. See Davis v. Piper Aircrañ Corp., 615 F.2d at 610-12 (Fed.R.Civ.P. 15(c) applied to allow amendment that contrary state rule would “categorically prohibit,” relying on Hanna, and in alternative, on Erie policies); Ingram v. Ku-mar, 585 F.2d at 570 n.5 (Fed.R.Civ.P. applies “notwithstanding a possibly more restrictive state practice,” in light of strong federal policy interests, minimal impairment of state interests, and no encouragement of forum shopping); Skidmore v. Syntex Laboratories, Inc., 529 F.2d 1244, 1249 (5th Cir. 1976) (assuming, citing Welch, that federal rule applies, but noting that the choice “makes no difference here”); Simmons v. Fenton, 480 F.2d at 136 (federal rule applied, without discussion of state law, to deny amendment for lack of timely notice); Welch v. Louisiana Power & Light Co., 466 F.2d at 1345 (federal rule applied to allow amendment that would not relate back under state law, relying on Hanna, liberal federal pleading policies, and sufficiency of Fed.R. Civ.P. 15(c) notice requirements to serve purposes of state limitation statute); Loudenslager v. Teeple, 466 F.2d at 250 (federal rule applied to allow amendment barred by state law, citing federal policy of facilitating decisions on merits); Crowder v. Gordon Transports, Inc., 387 F.2d 413, 415-16 (8th Cir. 1967) (federal rule applied to allow amendment where relation back was in “grave doubt” under state law, relying on Hanna and federal policy of facilitating decisions on merits).
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11187654-18828 | ORDER
WM. THURMOND BISHOP, Bankruptcy Judge.
This matter came before the Court on the plaintiffs adversary complaint seeking: (1) a determination, pursuant to Section 505 of the Bankruptcy Code, that he was not liable for a Trust Fund Recovery Pen alty assessment made against him by the defendant, pursuant to 26 U.S.C. § 6672 in the amount of $75,608.97; and (2) for an award of attorney’s fees pursuant to 26 U.S.C. § 7430. A trial was held in this matter on December 14, 1999. After considering all of the evidence presented at trial, a judgment in favor of the defendant is hereby entered on both counts of the complaint for the reasons set forth below.
FINDINGS OF FACT
The plaintiff, Glen Sheppard, is an individual who filed a Chapter 13 bankruptcy case on November 5, 1998, and is the debtor in this bankruptcy case.
3 M Construction Company, Inc. (“3 M Construction”) failed to fully pay its Form 941 federal employment tax liabilities for the tax periods ending June 30, 1996, September 30, 1996, and December 31, 1996.
As a result of these unpaid liabilities, the defendant assessed a Trust Fund Recovery Penalty against Sheppard on June 28, 1999 in the amount of $75,608.97 based upon the outstanding “trust fund” portion of 3 M Construction’s unpaid employment taxes for the periods ending June 30, 1996, September 30, 1996, and December 31, 1996. The trust fund portion of 3 M Construction’s liabilities represented the employee’s portion of the FICA tax and the employee’s income tax withholding. The assessment was made after the defendant determined that Sheppard was a “responsible officer” of 3 M Construction and that he willfully failed to ensure that the trust fund taxes of the corporation were remitted during the periods at issue.
In 1988, Sheppard founded CHS Engineering Associates, Inc. (“CHS Engineering”) to provide architectural design services for construction companies. He was the President of this corporation and was responsible for the payment of the payroll and employment tax liabilities for the corporation.
In early 1994, CHS Engineering was hired by 3 M Construction to provide architectural design services for a project where 3 M Construction was the general contractor. 3 M Construction had been formed in the early 1970s by George Phillip Murphy. At the time 3 M Construction hired CHS Engineering, Murphy was the President and sole shareholder of 3 M Construction.
After completing the project, Sheppard and Murphy entered into discussions regarding the merging of their businesses into a “design-build” operation where one corporation would provide both the design and construction for building projects.
While Sheppard and Murphy entered into discussions about formally merging their businesses at that time, no formal merger occurred. However, Sheppard and Murphy began operating their businesses together during 1994. To this end, in October 1994, Murphy hired Sheppard as an employee of 3 M Construction. Murphy appointed Sheppard as the Vice-President of 3 M Construction and granted him a salary equal to his own. Murphy remained the sole shareholder of 3 M Construction. On December 8, 1994, Sheppard was granted signature authority over 3 M Construction’s corporate bank account at First Citizens Bank. All corporate expenditures were paid out of this account, including payroll.
As Vice President of 3 M Construction, Sheppard was responsible for all the architectural design aspects of 3 M Construction’s business. In this position, Sheppard had primary responsibility for hiring any “design” consultants required for a project, which included architectural engineers, electrical engineers, and plumbing engineers and determining how much they were to be paid, even though he consulted with Murphy prior to any hires. All of these contractors were paid directly by 3 M Construction, not CHS Engineering, and were supervised by Sheppard in his position as Vice President of 3 M Construction.
In his position of Vice President of 3 M Construction from October 1994 until he left the corporation at the end of 1996, Sheppard was responsible for calculating the estimated construction costs of 3 M Construction. Sheppard also was responsible for the scheduling and procurement of supplies for the construction projects of 3 M. As a result of his knowledge of the costs of potential projects, Sheppard worked directly with Murphy in preparing bids for new projects and negotiated contracts with clients and subcontractors on behalf of 3 M Construction. Sheppard signed every construction contract entered into by 3 M Construction as its design agent.
Sheppard also was substantially involved in the financial affairs of the corporation from the time he was hired until he left the corporation at the end of 1996. Sheppard assisted Murphy in the hiring of Raye Albers as the bookkeeper of the corporation in the fall of 1994. After she was hired, Sheppard worked closely with Alb-ers to teach her the financial side of the construction business and to assist her with the corporation’s financial affairs. Sheppard assisted Albers in the preparation draw requests for 3 M Construction with respect to its various projects. Sheppard also sat down with Albers once a month to review the accounts receivable of the corporation and to develop a payment schedule for the corporation’s accounts payable. Sheppard then discussed the payment schedule with Murphy and they jointly agreed as to how the corporation’s liabilities would be paid. Both Sheppard and Murphy then signed checks on behalf of the corporation to pay the corporation’s expenses, including payroll. In fact, one of Sheppard’s duties as Vice President of the corporation was to sign checks for the corporation when necessary to pay corporate expenses. While Murphy was the sole owner of the corporation, Sheppard and Murphy were clearly partners in the business and jointly made corporate decisions, including the payment of corporate creditors.
During 1995, 3 M Construction’s business grew at a healthy pace. However, the corporation experienced cash flow problems. To this end, Sheppard made personal loans to 3 M Construction to assist with the payment of payroll. Further, from the time he was hired until the end of 1996, Sheppard personally guaranteed lines of credit for supplies on behalf of the corporation. Sheppard also co-signed loans for the purchase of a vehicle and office equipment for the corporation. As a result of the expansion of the business, Sheppard also began spending more time at the corporation’s construction sites and became more involved in the day-to-day management of the corporation’s projects. These management responsibilities continued through the end of 1996.
Sheppard first became aware that 3 M Construction had not timely paid its Form 941 federal employment tax liabilities at the end of March 1996 when Albers came to him with the corporation’s unfiled Form 941 tax return and informed him that the corporation had not paid its outstanding tax liability for that period. Sheppard then contacted with Neal Meyer, the corporation’s accountant, to discuss the unpaid taxes and'to develop a plan to pay the liabilities for the first quarter of 1996. Based upon these discussions, Meyer negotiated an installment plan with the IRS to satisfy this liability. However, despite Sheppard’s testimony that he monitored the installment agreement and recalled that payments were scheduled to satisfy the first quarter of 1996 liability, no payments were in fact made on this liability until 1997, after Sheppard had left the corporation.
• The tax problems continued to get worse for 3 M Construction during the second quarter of 1996. The corporation failed to make any federal'tax deposits with respect to its federal employment tax liability for this period. As a result, at the end of the quarter (June 30, 1996), the corporation had an unpaid federal employment tax lia bility of $18,550.72. Sheppard became aware of this liability in July 1996. However, Sheppard took no actions to assure that the liability was satisfied. While Sheppard had discussions with Albers and Murphy regarding the nonpayment of the tax liabilities, no payments in fact were made on the tax liability at the time even though the corporation had adequate funds available to satisfy the liability.
3 M Construction continued to shirk its tax responsibilities for the remainder of 1996. Despite accruing a federal employment tax liability in the amount of $33,434.49 for the third quarter of 1996 and a liability of $39,172.55 for the fourth quarter of 1996, the corporation made no payments with respect to these liabilities. Instead, the corporation continued to prefer its other creditors over the defendant.
Sheppard gave notice to Murphy that he was going to leave the corporation in September 1996. However, Sheppard continued to work until the end of 1996 and his responsibilities with respect to the corporation did not change after he gave notice of his departure. In fact, Sheppard continued to sign checks on behalf of the corporation up until December 31, 1996. Sheppard also received a salary from the corporation through the end of November 1996 and wrote the check paying his own salary for October 1996.
Despite 3 M Construction’s financial difficulties during the later part of 1996, the corporation had more than sufficient funds available to satisfy its federal employment tax liabilities. Further, despite his knowledge that the corporation had not paid its federal employment tax liabilities for the second, third, and fourth quarters of 1996, Sheppard continued to pay corporate creditors to the detriment of the defendant by signing corporate checks. The following chart reflects the funds available to 3 M Construction and the payments made on behalf of the corporation by Sheppard:
While Sheppard signed 637 checks on 3 M Construction’s corporate account between May and December 1996 in the total amount of $555,806.65, none of these checks was to the Internal Revenue Service with respect to the corporation’s outstanding employment tax liabilities, even though sufficient funds were available in the corporation’s account to satisfy these liabilities.
Sheppard also made a $50,000 loan to 3 M Construction to assist the corporation with its financial difficulties. While it is unclear whether this loan was made before Sheppard left 3 M Construction or after he departed, Sheppard did not designate that these funds be applied to the corporation’s federal employment tax liability and took no actions to ensure that the funds were used for that purpose, even though he was aware that the corporation had not paid its tax liabilities.
ANALYSIS
I. Trust Fund Recovery Penalty
Sections 3102(a) and 3402(a) of the Internal Revenue Code (26 U.S.C.) require an employer to withhold federal income taxes and the employees’ share of social security taxes from the wages paid to its employees. The taxes withheld from each employee’s wages constitute a special fund held in trust under Section 7501 of the Code for the exclusive use of the United States. These “trust funds” shall not be used to pay the employer’s expenses, including salaries, or for any other purpose. The withholding tax liability arises as soon as wages are paid, not when the quarter’s tax return is due. Begier v. I.R.S., 496 U.S. 53, 61, 110 S.Ct. 2258, 110 L.Ed.2d 46 (1990).
Section 6672 of the Internal Revenue Code imposes liability for a company’s unpaid “trust fund” taxes upon any person “required to collect, truthfully account for, and pay over any tax ...” who willfully fails to do so. Section 6672, the “Trust Fund Recovery Penalty” provision, is a collection device designed to ensure that the unpaid trust fund taxes are paid, if not by the defaulting corporate employer, then by those persons responsible for the default. Smith v. United States, 894 F.2d 1549, 1553 (11th Cir.1990). It. is a liability separate and distinct from that of the delinquent corporation. Plett v. United States, 185 F.3d 216, 218 (4th Cir.1999).
Personal liability under Section 6672 properly is imposed upon the person or persons who were: “(1) responsible for collecting, accounting for, and remitting payroll taxes, and (2) who willfully failed ho do so.” Plett, 185 F.3d at 218; 26 U.S.C. § 6672; see O’Connor v. United States, 956 F.2d 48, 50 (4th Cir.1992), Malloy v. United States, 17 F.3d 329, 331 (11th Cir.1994); Williams v. United States, 931 F.2d 805, 810, reh’g granted and opinion supplemented, 939 F.2d 915 (11th Cir.1991); Smith, 894 F.2d at 1553; Thibodeau v. United States, 828 F.2d 1499, 1504 (11th Cir.1987); Roth v. United States, 779 F.2d 1567, 1571-72 (11th Cir.1986); Howard v. United States, 711 F.2d 729, 734-35 (5th Cir.1983). The person required to collect, account for, and remit payroll taxes is generally referred to as a “responsible person.” Plett, 185 F.3d at 219. However, a company may have multiple responsible persons for purposes of Section 6672. Id.; O’Connor, 956 F.2d at 50.
In a Section 6672 ease the Government first should submit evidence of a tax liability and assessment. Tax assessments are presumptively correct, Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed. 212 (1933), and Certificates of Assessments and Payments evidencing a tax assessment and liability are presumed correct and establish a prima facie case of liability. United States v. Pomponio, 635 F.2d 293, 296 (4th Cir.1980); United States v. Chila, 871 F.2d 1015, 1017-18 (11th Cir.), cert. denied, 493 U.S. 975, 110 S.Ct. 498, 107 L.Ed.2d 501 (1989).
Once the Government has submitted evidence that taxes were assessed and unpaid, individuals against whom the trust fund recovery penalty has been assessed have the burden of proving by a preponderance of the evidence that they were not “responsible persons” or that they did not “willfully” fail to pay over the unpaid trust fund taxes. Pomponio, 635 F.2d at 296 (4th Cir.1980); see In re Landbank Equity Corp., 973 F.2d 265, 270-271 (4th Cir.1992).
The Certificate of Assessments and Payments admitted into evidence with respect to the Trust Fund Recovery Penalty assessment against the plaintiff established a prima facie case of the plaintiffs liability. The burden therefore shifted to the plaintiff to prove, by a preponderance of the evidence, that (1) he was not a “responsible officer” or (2) that he did not “willfully” fail to pay over the unpaid trust taxes to the defendant. The plaintiff has failed to meet its burden on either point.
(a) Responsibility
In order to determine whether an individual is a responsible officer, this court must “undertake a pragmatic, substance-over-form inquiry into whether an officer or employee so ‘participate[d] in decisions concerning creditors and disbursement of funds’ that he effectively had the authority — and hence a duty — to ensure payment of the corporation’s payroll taxes.” Plett, 185 F.3d at 219 (citing O’Connor, 956 F.2d at 51). The important inquiry “is whether the person had the ‘effective power’ to pay the taxes — that is, whether he had the actual authority or ability, in view of his status within the corporation, to the pay the taxes owed.” Plett, 185 F.3d at 219. The following factors serve as indicia of the requisite authority:
1. Served as an officer of the company or as a member of its board of directors;
2. Controlled the company’s payroll;
3. Determined which creditors to pay and when to pay them;
4. Participated in the day-to-day management of the corporation;
5. Possessed the power to write checks; and
6. Had the ability to hire and fire employees.
Id.; Thibodeau, 828 F.2d at 1503-04; George, 819 F.2d at 1011; Roth, 779 F.2d at 1569.
Based upon the evidence presented at trial, there is no doubt that Sheppard was a responsible officer of 3 M Construction. Sheppard’s responsibilities as Vice President of the corporation and his actions in that position clearly satisfy the standard enunciated above as he satisfied all six factors enunciated in Plett.
First, Sheppard was an officer of the corporation as he was named Vice President of the corporation by its President and only shareholder. Second, Sheppard also had control over the company’s payroll. Sheppard was primarily responsible for determining the salaries of all the design contractors and employees of 3 M Construction and worked closely with the company’s bookkeeper to schedule payments of the corporation’s payroll. Third, on most occasions, Sheppard and Murphy jointly determined what creditors to pay and when to pay them. Fourth, Sheppard participated in the day-to-day management of the corporation as he oversaw all of the design aspects of the business, while also managing construction projects and reviewing the day-to-day finances of the corporation. Fifth, Sheppard had the ability to write checks on behalf of the corporation and exercised this authority thoroughly during periods at issue during 1996. Sixth, as head of the design aspects of the corporation, Sheppard had the ability to hire and fire employees in this area, even though he consulted with Murphy before making these decisions.
The plaintiff has argued that he was not a responsible officer of 3 M Construction because he was not “ultimately” responsible for any decisions made by the corporation as Murphy was the sole shareholder of the corporation and could fire him at any time. However, this argument is without merit as liability under Section 6672 is not limited to the person with ultimate fiscal control, but encompasses all persons in a position to exercise authority over the corporation’s financial affairs, which included Sheppard. Plett, 185 F.3d at 222, Smith, 894 F.2d at 1553; Thibodeau, 828 F.2d at 1504; George, 819 F.2d at 1011; Roth, 779 F.2d at 1572; Howard, 711 F.2d at 734-35. Further, ownership of the company is not necessary for an individual to be a responsible officer. Plett, 185 F.3d at 222; Thibodeau, 828 F.2d at 1504. The fact that one responsible person reported to another and served in his or her position at the will of another responsible person does not affect the duty to collect, account for or pay over trust fund taxes. Plett, 185 F.3d at 221; Smith, 894 F.2d at 1553; Thibodeau, 828 F.2d at 1504; Roth, 779 F.2d at 1572.
Further, even if Sheppard’s unconvincing assertions that he had no independent authority to sign checks for the payment of taxes without the express approval of Murphy were true, this would still not reheve him of responsibility under Section 6672. An otherwise “responsible person” is not relieved of responsibility despite instructions not to pay the trust fund taxes by an owner or CEO of the company who has the power to fire that individual. Thibodeau, 828 F.2d at 1504; Roth, 779 F.2d at 1572; Howard, 711 F.2d at 734.
(b) Willfulness
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1886738-12092 | PHILIPS, District Judge.
This is an action instituted by the widow of J. F. Clark against the defendant railroad company to recover damages for personal injury resulting in his death. The court sustained .a demurrer to the petition, which presented two objections thereto: (1) That the petition does not state facts sufficient to con stitutc a cause of action; and (2) because it discloses that the deceased was guilty of negligence directly contributing to his injury. The -plaintiff below declining to plead further, final judgment was entered on the demurrer.
The substantive facts disclosed by the petition are as follows: The defendant railroad was operated between the city of Boulder and the town of Eklora, in Boulder county, Colo. On the 13th day of July, 1906, the said J. P. Clark was invited by the conductor, engineer, and master mechanic of the defendant company to ride in the cal) of an engine drawing a train of cars on said road. While so traveling in said cab the engine collided with the end of a freight car which defendant’s cmployés had run out on a siding of the railroad track, but left the end or corner of said car protruding onto the main track, so that the said engine in passing collided therewith, breaking in the side of the cab on which the said J. P. Clark was sitting or standing, whereby he was killed. The petition alleges “that deceased was not ati employé of the defendant company and was not a passenger for Tire; that is, was not required to pay for traveling on said car.” The prayer of the petition is for $25,000 damages.
It will be observed that, while the petition discloses that the engine iri question was drawing a train of cars, it does not allege that it was a train of passenger cars, adaptable to and used for the carriage of passengers. .Non constat, it may have been a freight train, which did not carry passengers at all. Therefore the case presented by the petition is that the deceased, without paying or agreeing to pay any fare, establishing a contractual relation between him and the carrier for his safe carriage, voluntarily entered into the cab of a locomotive engine to take a free ride for his own-accommodation.
- To avoid the obvious nonliability of the defendant railroad company for said Clark's death, the petition alleges that he was so much in their personal favor that he received simultaneously an invitation from the conductor, the engineer, and the master mechanic to ride in the engine cab. As the petition does not aver that either of said employes had authority to extend such invitation, the authority must arise, if at all, from mere implication. Most certainly no such authority can be assumed to have resided with the master mechanic, who had no connection whatever with the operation of the railroad train while running. Judge Caldwell, in Condran v. Chicago, M. & St. P. Railway Compainq 67 Fed., loc. cit. 523, 14 C. C. A. 508, 28 L. R. A. 749, said:
“It is a matter of common knowledge, of which the court will take judicial notice, and of which the public are bound to take notice, that railroad passenger trains are operated to carry passengers for hire. They are not eleemosynary agencies. It is equally well settled that the authority of a railroad conductor docs not, extend to the carrying of passengers without the payment of the regular fare.”
So Judge Sanborn, in Purple v. Union Pacific Railroad Company, 114 Fed., loc. cit. 126, 51 C. C. A. 567, 57 L. R. A. 700, said:
“A contract is indispensable to the relation of’carrier and passenger. The minds of the parties must meet upon the agreement that the carrier will transport and the passenger will pay for the transportation, in the absence of a specific agreement or x>ermission by the proper officer of the transporta tion company that the latter will carry the passenger without compensation. This contract of carriage may, it is true, he express or implied; but, if it does not exist in either form, the relation of carrier and passenger cannot have been created. An implied agreement to pay fare, and hence the'relation of carrier and passenger, undoubtedly arises where one enters a passenger car and rides towards his destination. But it is equally true that if one enters and rides under an express or implied agreement with a conductor. whom he knows or has reasonable cause to believe has no authority to make such a contract, that he shall not pay his fare, but shall cheat the company out of the transportation, no contract of carriage is created; but the existence of such an agreement is conclusively negatived by the actual flaudulent contract, so that it cannot exist.”
As the petition alleges that the deceased was not a passenger for hire, he knew, what every man is presumed to know, that the railroad was being operated for hire. If so, he knew that he was cheating the railroad out of its rightful due, as he certainly understood that the men whose guest it is claimed he was were not to pay it for him. Every sensible man comprehends that, while a railroad conductor is in charge of the train, he is placed there by the company to collect fares from passengers, and if he neglects this duty he is wronging his employer. His very position and office as conductor advise every person who enters upon the train to be carried that, presumptively, he is without authority to carry him free of charge. He also knows that the engineer in his cab has nothing to do with the admission of a passenger to the train for carriage.- Much less had either the engineer or the conductor authority to invite the deceased to take passage in the engine cab. The law imputed to him, when he entered the cab, knowledge of the fact that the railroad company had not constructed or designed such a place for the carrying of passengers. It is a place fashioned and intended alone for the engineer and fireman. It is equipped with a narrow seat on the right-hand side for the engineer, and a corresponding seat on the left-hand side for the fireman, with a small space between for the engineer when standing at the throttle of the engine and for the fireman when shoveling coal. It is necessarily exclusive of outsiders, who by their presence and talk are liable to divert the attention of the engineer and fireman from their required constant watchfulness. Public policy itself demands this rule, and forbids any deviation from its observance.
The authorities are in harmony in holding that in a place like an engine cab, drawing a train of cars, the person who voluntarily enters therein to ride is presumed to know that it is not designed for such use, and no presumption arises in favor of such person that the engineer and conductor have either express or implied authoibty to grant him such permission. Robertson v. N. Y. & E. R. R. Co., 22 Barb. (N. Y.) 91; Powers v. Boston & M. R. Co., 153 Mass. 188, 26 N. E. 446; Eaton v. Delaware, L. & W. R. Co., 57 N. Y. 382, 15 Am. Rep. 513; Files v. Boston & A. R. Co., 149 Mass. 204, 21 N. E. 311, 14 Am. St. Rep. 411 Whitehead v. St. Louis, I. M. & S. Ry. Co., 22 Mo. App. 60. While some courts have gone to considerable length in holding railroad companies responsible for the acts, and assumptions of their employés while in positions of apparent authority, yet, when requested to hold that there is any presumption in favor of the authority of the employés to permit third persons to •use places and instrumentalities obviously not designed therefor by the master, they come to a halt If a conductor or engineer should invite a person to ride on the cowcatcher, a cross-beam is front of the ■engine, or on a brake-beam of a moving car, the foolhardy acceptor, receiving an injury thereby, would not be heard to say that he assumed the conductor or engineer had authority from the railroad company to invite him to ride there.
By voluntarily entering the engine cab to ride, the deceased assumed all the known hazards incident to such exposed position, because it is not a place designed by the railroad company for carrying passengers, and because it is a known place of increased danger. If a bridge be down, or any obstruction be on the track, the engine first encounters the danger and incurs the disaster. Danger lurks in such position., It was the side of the cab on which Clark stood or sat that first encountered the projecting end or corner of the car on the side track. The side of the cab was crushed in, which occasioned his injury. No derailment of, or other injury to, the train is alleged. So the fact is confronting that, had the deceased not chosen to ride where he did, no harm would have come to him. In voluntarily assuming such extrahazardotis position he was guilty of contributor negligence. This proposition of law has recently been announced by this court in Chicago G. W. Ry. Co. v. Mohaupt (C. C. A.) 162 Fed. 665. It is reinforced by the following pertinent decisions: Doggett v. Illinois C. R. Co., 34 Iowa, 284; Radley v. Columbia Southern R. Co., 44 Or. 332, 75 Pac. 212; Texas & P. R. Co. v. Boyd, 6 Tex. Civ. App. 205, 24 S. W. 1086; Files v. Boston & A. R. Co., 149 Mass. 204, 21 N. E. 311, 14 Am. St. Rep. 411, and citations; St. Louis, K. C. & C. R. Co. v. Conway (C. C. A.) 156 Fed. 234, 235.
Counsel for plaintiff in error placed great stress in argument upon the contention that, notwithstanding the deceased may have been in an improper place on the engine, he was not a trespasser, but a licensee, and therefore the company owed him the duty not to wantonly or recklessly injure him. This may be conceded. The contention of counsel is that the petition charges gross negligence in the switching crew of the defendant company leaving the end of the freight car on the siding so as to conflict with the main track. In the first place, there is no allegation in the petition of wanton and reckless conduct by the defendant’s employés. “The term ‘gross,’ in this connection, is nothing but an epithet. It means no more than the failure to exercise ordinary diligence iu lite circumstances of the particular case. It distinguishes no legal degree of negligence, and it is not error to refuse to apply it to the negligence for which a defendant may be liable, because its use merely tends to create doubt and to increase confusion.” Purple v. Union Pacific R. Co., 114 Fed., loc. cit. 130, 51 C. C. A. 571 (57 L. R. A. 700).
Even had the petition charged wantonness or recklessness in the switching crew', as applied to the instance at bar it would not have helped the case. The following excerpt from the well-considered opinion in Eaton v. Delaware, L. & W. R. Co., 57 N. Y., loc. cit. 394, 15 Am. Rep. 513, presents the correct rule:
“But it is said that by the act of the conductor the plaintiff was lawfully on the train, and that for this reason the defendant was liable to him for the negligence of its servants. With due submission, this is simply begging the question. The plaintiff could only he lawfully on the train by an authorized act of the conductor. The question still recurs: Had the conductor the authority to take plaintiff on the train? If not, he could not lawfully be there. It is not necessary to consider whether he was a trespasser. It is enough to hold that a duty to be careful toward him would only spring up on the part of the defendant by an act on the conductor’s part coming within the scope of his authority.”
The switching crew did not know that the deceased was on the engine, and had no reason to anticipate that any passenger would be in such exposed position. Nor did the engineer or conductor know or have reason to anticipate that the freight car extended onto the main track. While it is to be conceded that it was a culpable, negligent act on the part of the switching crew in not taking pains to see that the freight car cleared the main track, the deceased, in voluntarily riding in the engine cab — a place not designed for the carriage of passengers, and in which he would obviously be exposed to first encounter any obstruction that might be on the track — was none the less guilty of contributory negligence.
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5702459-12834 | OPINION OF THE COURT
JOHNSON, Judge:
Based on Ms plea of guilty, Airman Hawkins was convicted of disobeying a lawful order restricting Mm to McChord Air Force Base, Washington. The members of his court-martial also found him guilty of fraudulent enlistment, damaging two military vehicles by bombing them, reckless driving, stealing a motorcycle, stealing $2,900.94 from his insurance company, setting fire to a government building, concealing a stolen automobile, and false swearing. He argues a number of issues before us, one of which warrants modification of the findings as to one specification, and modification of the sentence.
THEFT OF MOTORCYCLE
Late one evening members of a security police patrol saw a motorcycle being operated on the installation at high speed. A chase ensued, but the motorcyclist escaped. Shortly thereafter a motorcycle similar in appearance to the one involved in the chase was found parked on the installation. Its engine was still hot. The motorcycle was impounded as evidence in the investigation of various traffic offenses, and it was soon identified as belonging to Airman Hawkins. About a week later, Airman Hawkins demanded his motorcycle be returned to him. When this demand was refused, Airman Hawkins took it without authority. He was convicted of larceny on the basis of this taking, and he now argues before us the evidence is insufficient to support this finding of guilty.
Airman Hawkins argues he cannot be convicted of stealing his own motorcycle from the security police. He has no quarrel with the instructions of the military judge that one of the elements of larceny that must be proven beyond a reasonable doubt was that the accused wrongfully took the motorcycle from the possession of the security police, and that it “belonged” to the security police. The military judge defined “possession” and “owner” as follows:
The term “possession” means care, custody, management, or control. The term “owner” refers to the person who, at the time of the taking ... had a greater right to possess the property than the accused did, in light of all the conflicting interests. Property belongs to a person who has a greater right to possession of the property than the accused, or possession of the property____
Now, with respect to [the motorcycle]; a taking is wrongful only if it’s done without the consent of the owner and with a criminal state of mind. In determining whether the taking was wrongful you should consider all the facts and circumstances which have been presented by the evidence.
No objection was raised at trial to this instruction, which is taken verbatim from the relevant portion of the model instruction on the elements of larceny in paragraph 3-90 of Department of the Army Pamphlet 27-9, Military Judges Bench-book, Change 3, 15 February 1989. Airman Hawkins now argues before us that in the facts of this ease the security police had no superior right to possession of the motorcycle. Therefore, he argues, the evidence is not factually or legally sufficient to support his conviction of stealing the motorcycle.
Under Article 66(c), UCMJ, 10 U.S.C. § 866(c), a court of military review has the duty to determine not only the legal sufficiency of the evidence but also its factual sufficiency. The test for the former is whether, considering the evidence in the light most favorable to the prosecution, a reasonable fact-finder could have found all the essential elements beyond a reasonable doubt. For factual sufficiency, the test is whether, after weighing the evidence in the record of trial and making allowances for not having personally observed the witnesses, the judges of the court of military review are themselves convinced of the accused’s guilt beyond a reasonable doubt. United States v. Turner, 25 M.J. 324 (C.M.A.1987).
There is no question that law enforcement officials have the authority to impound personal property as evidence of crime and to retain it until final disposition of the case, especially when the property concerned was the instrumentality by which the offense was committed. See Air Force Regulation 125-3, Security Police Policies and Procedures, para 81 (Mar 1991); Air Force Regulation 125-21, Security Police Investigations, paras 13-16 (Change 7, Mar 1990). Airman Hawkins does not contest this authority. Instead, he argues the security police did not establish at trial that they needed to retain the motorcycle for specific investigative tests or procedures, and they did not promptly move the motorcycle to their vehicle impound lot, but instead left it parked for over a week under a roof overhang in front of the security police office. Airman Hawkins speculates the motive of security police in retaining his motorcycle was to “spite him” because he would not admit he operated it on base on the night in question.
We are not inclined to create a rule that law enforcement officials must deliver evidence back to the person holding its legal title as soon as they have finished conducting all intended investigatory tests or procedures on it. As the investigation proceeds,' the property may prove to be useful in ways that were previously unanticipated. In any event, it may be necessary to present the property as evidence before a court or other forum.
We are also not inclined to speculate as to why the security police delayed moving the motorcycle to their impound lot, although the record does indicate that a security police investigator invited Airman Hawkins to bring in a cover for the motorcycle before it was moved from the covered area to the open impound lot. There is no evidence whatever of any misconduct or spiteful motive that might raise due process issues that arguably could operate to vitiate the authority of the security police to retain custody of Airman Hawkins’ motorcycle.
It remains to be considered whether the right of the security police to custody of Airman Hawkins’ motorcycle was a property right superior to his, violation of which subjects a wrongful taker to conviction for larceny. We conclude it was. The unquestioned right of law enforcement authorities to seize personal property based on probable cause to believe it is the instrumentality by which a crime was committed, and to retain possession of that property until the case is disposed of, is a limited property right similar to that of a lienholder or a lessee. The security police acted within their authority and in a reasonable manner in this case, and their right of possession of the motorcycle was superior to that of Airman Hawkins. We therefore conclude that the evidence of record is legally and factually sufficient to support Airman Hawkins’s conviction of larceny of his own motorcycle from the custody of the security police.
The value of the government’s possessory interest is not, however, the full value of the property, as the military judge and counsel apparently assumed in calculating the maximum sentence in this case. See MCM, Part IV, paragraph 46d(l)(g)(iv) (1984). There being no apparent way to calculate the value of the government’s interest, we find only that it was of “some value”. The finding of guilty as to specification 1 of Charge V is therefore modified by excepting the words “of a value of about $2,900,” substituting therefore the words “of some value.”
APPROPRIATENESS OF SENTENCE
Airman Hawkins argues his sentence is inappropriately severe. He calls attention to his youth and commendable duty performance, but he relies primarily on the argument that his sentence was disproportional to that of his three civilian co-actors in bombing two automobiles and setting fire to a building, all used by the Air Force Office of Special Investigations (OSI). Airman Hawkins’ co-actors testified against him in exchange for a cap of 5 years on their sentences to confinement in a Washington state penitentiary, while Airman Hawkins’ sentence included 15 years of confinement.
This Court has previously expressed its concern about highly disparate sentences in closely related cases. In United States v. Kent, 9 M.J. 836 (A.F.C.M.R. 1980), we indicated disparate sentences would be examined closely when (1) there is a direct correlation between each of the accused and their respective offenses, (2) the sentences are highly disparate, and (3) there are no good and cogent reasons for the difference in punishment. Id. at 838-39.
This is a narrow exception to the general rule that the appropriateness of an accused’s sentence is to be determined without reference or comparison to sentences in other cases. United States v. Olinger, 12 M.J. 458, 460 (C.M.A.1982). The appropriateness of an accused’s sentence must be judged on an individual basis, considering the nature and seriousness of the offense and the character of the offender. United States v. Snelling, 14 M.J. 267, 268 (C.M.A.1982). Furthermore, there is no burden on the government to identify and justify differences between the sentences of co-actors. Olinger, 12 M.J. at 461 (Cook, J., concurring in the result). The most that can be said is that convening authorities and the courts of military review may elect to consider sentences in related cases in determining sentencing appropriateness. The weight to be given any sentence comparison is a matter for their discretion. United States v. Ballard, 20 M.J. 282 (C.M.A.1985); United States v. Thorn, 36 M.J. 955 (A.F.C.M.R. 1993).
Applying these principles to the case at hand, we find that sentence comparison deserves very little weight. Airman Hawkins’ three co-actors in bombing the OSI vehicles and setting fire to the OSI building were apparently charged only with those offenses, while Airman Hawkins was also found guilty of a number of other offenses. Each of Airman Hawkins’s three civilian co-actors testified against him in his court-martial. Airman Hawkins provided no such assistance to law enforcement or prosecution officials. Looking to the facts of the incident itself, the evidence of record indicates that Airman Hawkins first proposed the plan to damage the OSI vehicles and building as retaliation for OSI involvement in breaking up a car theft and burglary ring, and that he participated fully in it. Finally, sentence comparisons among cases disposed of in civilian courts and those tried by courts-martial are even less persuasive than comparisons among court-martial sentences, given the differing approaches in the civilian and military systems to sentencing principles and the administration of punishment.
It remains to reassess Airman Hawkins’ sentence because of the error in the trial court’s calculation of the value of the government’s interest in the stolen motorcycle, as discussed above. Our task is to determine what sentence the trial court probably would have imposed if the error had not occurred. United States v. Peoples, 29 M.J. 426 (C.M.A.1990); United States v. Crowe, 30 M.J. 1144 (A.F.C.M.R.1990), pet denied, 32 M.J. 43 (C.M.A.1990). In the circumstances of this case we are confident we can do so.
The maximum punishment for larceny of an item of “some value” is the punishment prescribed for larceny of items of a value of $100 or less. This includes 6 months of confinement, rather than the 5 years of confinement authorized as part of the maximum punishment for larceny of property worth more than $100. The aggregate maximum sentence to confinement for Airman Hawkins’ offenses is therefore reduced from 33 years and 6 months, as announced at trial, to 29 years.
Airman Hawkins was convicted of nine offenses under seven UCMJ articles. The motorcycle larceny was not the most serious of these offenses. The error in this case was only in identifying the maximum authorized punishment for this offense; the finding of guilt was not set aside. The punishment imposed included less than half the maximum authorized confinement as announced at trial. In these circumstances we are confident that the members, if they had been properly informed of the maximum authorized punishment, would still have sentenced Airman Hawkins to a bad-conduct discharge, total forfeitures, and reduction to E-l. We conclude they might have sentenced Airman Hawkins to somewhat less confinement than the 15 years they originally imposed, but not less than 12 years. We therefore approve only so much of Airman Hawkins’ sentence as provides for a bad-conduct discharge, confinement for 12 years, forfeiture of all pay and allowances, and reduction to E-l.
We have examined the entire record, the convictions, and the sentence, giving due consideration to the characteristics of this offender and to the crimes of which he was convicted. We are satisfied the sentence, as modified, is not inappropriate. United States v. Healy, 26 M.J. 394 (C.M.A.1988); United States v. Snelling, 14 M.J. 267 (C.M.A.1982).
GROSTEFON SUBMISSIONS
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4269475-17592 | MEMORANDUM OPINION AND ORDER REGARDING DEFENDANT’S MOTION TO DISMISS OR STAY AND TO COMPEL ARBITRATION AND ORDER CERTIFY-, ING QUESTIONS TO THE IOWA SUPREME COURT
MARKW. BENNETT, UNITED STATES DISTRICT COURT JUDGE, NORTHERN DISTRICT OF IOWA
TABLE OF CONTENTS
/. INTRODUCTION .. .808
II. LEGAL ANALYSIS .. .809
A. The Estate’s Claims .,. 809
B. The. Roth Children’s Claims ...810
1. The effect of language in the arbitration clause ... 810
2. Theories to compel non-signatories to arbitration ... 811
a. Estoppel .. .811
b. “Derivative” or “independent” nature of the consortium claims ...812
C. Certification Of Questions To The Iowa Supreme Court .., 813
D. Dismissal Or Stay? .. .,814
III. CONCLUSION ,. .814
I. INTRODUCTION
This case arises from alleged negligent, grossly negligent, or reckless treatment and dependent adult abuse of Cletus Roth, while he was a resident in the defendant’s nursing home; breach by the nursing home of a contract entered into by Cletus Roth’s son Michael for Cletus’s care; and Cletus’s adult children’s loss of parental consortium. It .is before me on the September 22, 2015, Combined Motion To Dismiss. Or Stay The Proceedings And To Compel Arbitration (Combined Motion) (docket no. 6), as subsequently supplemented, by defendant The Evangelical Lutheran Good Samaritan Society d/b/a Good Samaritan Society — George (Good Samaritan).- ■> .>■
Good Samaritan’s original Combined Motion was premised on Good Samaritan’s understanding that Michael Roth had falsely represented that he had the healthcare and financial power of attorney for his father when he signed an Admission Agreement on Cletus’s behalf.- That Ad mission Agreement included an arbitration provision (called “Resolution Of Legal Disputes”) that the signatory could accept or decline without affecting Cletus’s admission to the nursing home. On October-1; 2015, however, Good Samaritan filed a motion (docket no. 10) to supplement its Com* bined Motion, based on initial disclosures by the plaintiffs (collectively the Roths) that demonstrated that Michael Roth did have general and healthcare powers of attorney for Cletus Roth, jointly or separately, with Mary Roth, at the pertinent time. Good Samaritan requested and was granted time to supplement its' Combined Motion in light of the new information. See Order (docket no. 11). Good' Samaritan filed its Supplement To Combined Motion To Dismiss Or Stay The Proceedings And To Compel Arbitration (docket no. 12)-on October 13, 2015. The Roths filed their Resistance (docket no. 13) on October 30, 2015, and Good Samaritan filed its Reply (docket no. 14) on November . 5,. 2015. Notwithstanding the Roths’ requests for discovery and a hearing, I conclude that Good Samaritan’s Combined Motion, as supplemented, is fully. submitted on the parties’ written submissions. ,
II. LEGAL ANALYSIÉ
A. The Estate’s Claims
Indeed, I find that the question of whether I must compel arbitration of the estate’s claims in this case is settled, much more simply and directly than the parties argue, simply by reference to the arbitration provision in the Admission Agreement. In pertinent part, that- arbitration provision states, in bold font,
The Parties expressly agree that the Arbitrator shall have exclusive authority to resolve any disputes .related to the existence and/or enforceability of this Resolution of Legal Disputes provision, including but not limited to any claim that all or any part of this Resolution of Legal Disputes provision is void or voidable.
Good Samaritan’s Combined Motion, Exhibit A (docket no. 6-2), 15. As the parties acknowledge' in their extensive" briefing, the United States Supreme Court has explained, “The .question whether the parties have submitted a particular dispute to arbitration, ie./ the ‘question of arbitrability,’ is ‘an issue for judicial determination [ujnless the parties clearly arid unmistakably provide otherwise.’” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (quoting AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), with emphasis added in Howsam). Notwithstanding the portion of the arbitration provision quoted above, which on its face unmistakably provides that questions of arbitrability are for the arbitrator, the Roths rely on the presumption that arbi-trability is to be determined by the court, citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), They also argue that issues concerning the “validity” of the arbitration agreement are always “threshold questions” for the court to decide. These arguments are not enough to require me to decide any question of arbitra-bility or validity‘in this case, in light of the language of the arbitration clause that unmistakably provides that such questions are for the arbitrator. Howsam, 537 U.S. at 83, 123 S.Ct. 588.
This case contrasts sharply with the circumstances .in Nebraska Machinery Company v. Cargotec Solutions, L.L.C., 762 F.3d 737 (8th Cir.2014), a case in which the Eighth Circuit Court, of Appeals addressed the resisting party’s contention that, despite certain language in the arbitration provision, “validity” issues still belonged to the court. In that case, the court concluded that the parties had not eliminated the presumption of judicial determination of all “threshold questions” simply by pointing to the invocation of the rules of the American Arbitration Association in the arbitration provision. 762 F.3d at 740-41 and n. 2. The court explained,
Cargotec relies on the disputed arbitration agreement itself in arguing that the parties intended to submit the present case to an arbitrator. . Cargotec insists that because the arbitration provision incorporates the AAA’s Commercial Rules of Arbitration, which vests an arbitrator with authority to determine its own jurisdiction, an arbitrator must determine arbitrability. In Fallo v, High-Tech Institute, we held that an. arbitration provision that incorporated the AAA Rules was “a clear and unmistakable expression of the' parties’ intent to reserve the question of arbitrability for the arbitrator and not the court.” 559 F.3d 874, 878 (8th Cir.2009). However, Fallo did not address the threshold question we now confront: whether the arbitration agreement itself is valid. Thus, Cargotec’s argument puts the cart before the horse, as it presumes the arbitration provision formed part of the contract at issue.
Nebraska Machinery, 762 F.3d at 741 n. 2.
Unlike the situation in Nebraska Machinery, the arbitration provision in the Admission Agreement, here, does more than simply vest the arbitrator with authority to determine its own jurisdiction. Instead, it vests the arbitrator with the “exclusive authority to resolve any disputes related to the existence and/or enforceability of this Resolution of Legal Disputes provision,” as well as “any claim that all or any part of this Resolution of Legal Disputes provision is void or voidable.” Such authority plainly includes the authority to resolve the “threshold questions” of validity raised by the Roths, based on their arguments concerning the circumstances in which Michael Roth signed, and the genuineness of his signatures on, the arbitration provision and the Admission Agreement, as well as “threshold questions” concerning purported “unconscionability” of the arbitration provision. Here, compelling arbitration of the estate’s claims does not “put the cart before the horse,” compare id. because the arbitration provision unmistakably gives the arbitrator the authority to drive the horse and cart. Thus, the estate’s claims must be submitted to arbitration.
B. The Roth Children’s Claims
1. The effect of language in the arbitration clause
Whether I must compel arbitration of Cletus Roth’s adult children’s claims for loss of parental consortium, see State Court Petition, Count IV (docket no. 3), is a considerably more complicated question. The’ ' arbitration provision purports to “bind[ ] all parties whose claims may arise out -of or relate to treatment or service provided by the center including any spouse or heirs of the Resident,” and provides that “[t]he issue of whether a Party’s claim(s) is subject to arbitration under this Resolution of Legal Disputes provision shall be decided by the arbitrator.” Good Samaritan’s Combined Motion, Exhibit A (docket no. 6-2), 14. While this provision purportedly requires arbitration of the Roth children’s consortium claims, it is an oft-repeated principle of arbitration law “that ‘arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ ” Howsam, 537 U.S. at 83, 123 S.Ct. 588 (quoting Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960)). The Roth children are correct that none of them signed the arbitration agreement in their individual capacities or otherwise agreed to arbitration of their individual claims. Thus, the first question concern ing arbitration of the loss of consortium claims is whether Good Samaritan, as a signatory to the arbitration agreement, can compel non-signatories, the Roth children, to arbitrate the loss of consortium claims.
2. Theories to compel non-signatories to arbitration
As the Eighth Circuit Court of Appeals has explained,
“[A] willing signatory [here, Good Samaritan] seeking to arbitrate with a non-signatory [here, the Roth children] that is unwilling must establish at least one of the five theories described' in Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir.1995).” CD Partners, LLC v. Grizzle, 424 F.3d 795, 799 (8th Cir.2005), quoting Merrill Lynch Inv. Managers v. Optibase, Ltd., 337 F.3d 125, 131-32 (2d Cir.2003). Those five theoi'ies are (1) incorporation by reference; (2) assumption; (3) agency; (4) veil-piercin^alter ego; and (5) estoppel. Thomson-CSF, 64 F.3d at 776.
Reid v. Doe Run Resources Corp., 701 F.3d 840, 846 (8th Cir.2012); see also Bank of America, N.A. v. UMB Fin. Services, Inc., 618 F.3d 906, 912 (8th Cir.2010) (“ ‘[Traditional principles of state law allow a contract to be enforced by or against nonparties to the contract through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estop-ped.]’ ” (quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009)).
a. Estoppel
In Reid, the court described two forms of “direct benefits estoppel”: (1) where the non-signatory knowingly seeks and obtains “direct benefits” from the contract containing the arbitration clause, and (2) where the non-signatory seeks to enforce the terms of the contract containing the arbitration clause or asserts claims that must be determined by reference to the contract containing the arbitration clause. Id. Good Samaritan relies on the second form. Good Samaritan asserts that several claims in the Roths’ Complaint expressly rely on provisions of the Admission Agreement, but that contention is unavailing, because Good Samaritan has not demonstrated that the Roth children could assert any claims at issue in this case except loss of consortium in their individual capacities. The Roth children’s individual claims of loss of consortium nowhere rely on the terms of the Admission Agreement. Rather, they expressly rely only on the negligence of Good Samaritan as the cause of damages that they have suffered from the loss of services, companionship, society, and support of Cletus Roth. See State Court Petition, Count IV.
Good Samaritan’s reliance on PRM Energy Systems, Inc. v. Primenergy, L.L.C., 592 F.3d 830 (8th Cir.2010), for “alternative estoppel” is misplaced for at least two reasons. First, PRM involved a non-signatory’s attempt to compel a signatory to arbitrate the signatory’s claims, which is the reverse of the situation, here. 592 F.3d at 835. Second, the claims that are compelled to arbitration under “alternative estoppel” are claims that are “so intertwined with the agreement containing the arbitration clause that it would be unfair to allow the signatory to rely on the agreement in formulating its claims but to disavow availability of the arbitration clause of that same agreement.” ■, Id. (emphasis added). As explained, just above, the Roth children’s loss of consortium claims do not rely on and are not intertwined with the Admission Agreement containing the arbitration provision, but rely exclusively on the alleged negligence of Good Samaritan.
b. “Derivative” or “independent” nature of the consortium claims
Good .Samaritan shoots nearer the mark when it argues that the Roth children’s loss of consortium claims should also be sent to arbitration, because their loss of consortium, claims are “derivative” of the estate’s claims. The Roth children counter that their loss of consortium claims are “independent” of the estate’s claims. Good. Samaritan has not cited, and I have not found, any decisions of Iowa state courts clearly describing adult children’s loss of consortium claims as “derivative.” What I have found is that, some twenty-five years ago, the Iowa Supreme Court explained that it has modified its description of such claims as “independent”:
In October of 1981, this court, in a plurality decision, recognized a child’s independent cause of action for loss of parental consortium. Weitl v. Moes, 311 N.W.2d [259,] 270 [ (Iowa 1981) ]. Since then, we have considerably modified this rule. We rejected the independent cause of action concept, holding instead that this cause of action was derived from Iowa Code section 613.15 and was to be commenced by the injured parent or the parent’s estate. Audubon-Exira Ready Mix, Inc. v. Ill. Cent. Gulf R.R., 335 N.W.2d 148, 152 (Iowa 1983); see also Madison v. Colby, 348 N.W.2d 202, 208 (Iowa 1984). However, we retained the ownership of the proceeds in the child. Audubon-Exira, 335 N.W.2d at 152; Beeck v. S.R. Smith Co., 359 N.W.2d 482, 486 (Iowa 1984). We also tempered the requirement of the proper party to bring the action by acknowledging that it may not always have been feasible for a parent or parent’s estate to bring the ;action because Weitl had not yet1 been decided. Beeck, 359 N.W.2d at 486; Madison, 348 N.W.2d at 209 (if action brought separately, the burden is on the consortium claimant to show joinder was not feasible); see also Nelson v. Ludovissy, 368 N.W.2d 141, 146 (Iowa 1985) (adult children may bring the action if it is impossible, impractical or not in the child’s best interest for the parent to maintain the action).
Roquet by Roquet v. Jervis B. Webb Co.,436 N.W.2d 46, 47 (Iowa 1989); see also Nelson, 368 N.W.2d at 146 (also noting that § 613.15 “does not indicate any distinction between adult children and minor children in the application of those provisions’ of section 613.15 which govern who shall bring the action[,] [n]or is any distinction between adult children and mi nor children recognized for this purpose in our later decision of Madison v. Colby, 348 N.W.2d 202 (Iowa 1984), which approves the injured parent bringing the statutory-action for loss of services, although the recovery belongs to the child”).
What is not entirely clear to me, about § 613.15 is whether “any action for damages” in § 613.15 refers to an action in any tribunal, whether judicial or arbitral. The later reference in the statute to recovery of damages “in such sum as the jury deems proper” could suggest that the scope of the statute is limited to judicial actions. On the other hand, one could reasonably read the statute to refer, to “any action” in any tribunal. One could also reasonably conclude that the fact that the estate must arbitrate family members’ loss of consortium claims, based on a proper signatory’s agreement to an arbitration provision, is not a circumstance that makes it “impossible, impractical, or not in the best interest” of the family meiilbers for the estate to assert those claims. Nelson, 368 N.W.2d at 146 (adult children may bring the action if it is impossible, impractical,, or not in the child’s best interest for the parent to maintain the action). In light of the uncertainty about the proper construction of § 613.15, the unanswered questions are the following: (1) Does Iowa Code § 613.15 require that adult children’s lo'ss of parental consortium claims be arbitrated, when the deceased parent’s estate’s claims are otherwise subject to'’arbitration? (2) Does the fact that a deceased parent’s estate’s claims are subject to arbitration establish that it is impossible, impracticable, or not in the best interest of the decedent’s adult children for the decedent’s estate to maintain their claims for loss of parental consortium, such that the loss of consortium claims can be maintained separately in court, notwithstanding that the estate’s claims must be arbitrated?
C. Certification Of Questions To The Iowa Supreme Court
Although none of the parties has requested that I do so, I believe that the appropriate course is to certify the questions set out in the previous paragraph to the Iowa Supreme Court pursuant to Iowa Code § 684A.1 and N.D. Ia. L.R. 83. As the United States Supreme Court has recognized,
Certification procedure ... allows a federal court faced with a novel state-law question to put the question directly to the State’s highest court, reducing the delay, cutting, the cost, and increasing the assurance of .gaining an authoritative response.
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474913-7927 | FIELD, Circuit Judge:
Finding an indemnification provision in a lease of motor carrier equipment to be violative of a pertinent regulation of the Interstate Commerce Commission, the district court granted defendant’s motion for judgment on the pleadings and the plaintiff has appealed.
The facts are not in dispute. Carolina Freight Carriers Corporation [Carolina] leased a tractor-trailer truck accompanied by its driver from Pitt County Transportation Company [Pitt]. During the rental period the driver allegedly parked improperly on a highway wayside and the truck moved backwards striking one Robert Powers and his infant daughter. The infant was killed and Powers was seriously injured. Thereafter, Carolina’s insurer compromised the claims by payment of $50,000, and Carolina now seeks indemnity on behalf of its insurer from Pitt, the lessor.
The issue presented to the court below was whether Pitt owed a duty to indemnify Carolina under the provisions of the lease, a copy of which was incorporated in the complaint as an exhibit thereto and which reads in pertinent part as follows:
Carolina Freight Carriers Corporation, Lessee, hereby acknowledges receipt of and leases from Pitt County-Trucking Co., Lessor, of Farmville, North Carolina * * * for its exclusive possession, control, and use, and assumes complete responsibility in respect thereto for the duration of this Motor Vehicle Trip Agreement, the following vehicular equipment to be used by said lessee beginning at 1 PM o’clock on 6/19/69 in its interstate service to transport merchandise. # # * * * *
2. LESSEE will assume and pay all costs of public liability and property damage insurance on the vehicle while operating at the direction of the Lessee and provide insurance covering cargo being transported at the direction of the Lessee. However, in the event any loss or damage to cargo or property damage or personal injury to any third person takes place by reason of negligence or dishonesty of the owner, its Agents, servants, or employees, then the owner does hereby agree to assume and be fully responsible for any such damage and, in the event payment shall be made by the Lessee herein, Lessor does hereby agree to indemnify the Lessee and hold the Lessee harmless for any and all claims. In the event that Lessee’s insurance company is required to make payment therefor, then, and in that event, the insurance company shall be subrogated to the rights of the Lessee against the Lessor herein.
* * * * •>:- *
5. LESSOR agrees that during the term of this lease the motor vehicle equipment described above shall be under such control of the LESSEE as required by the rules and regulation of the Interstate Commerce Commission and for the limited purpose of safety to the public and safe delivery of shipment.
* -X- *X- * -X- *
7. LESSOR agrees to be fully responsible for the above described equipment maintaining said equipment in accordance with the “safety” regulations and specifications set forth by the Interstate Commerce Commission to keep said equipment in good operating condition and appearance; to maintain such records as shall be required by the Interstate Commerce Commission, Government, State, or any other regulatory authority. LESSOR agrees to provide at his sole and own expense all necessary oil, gasoline, fuel, tires, repairs, accessories, and/or other items required for the operation and maintenance of said vehicle during the term of this lease. LESSEE may require LESSOR to store his equipment when not in use on the LESSEE’S premises.
* * * * * *
9. LESSOR agrees that during the term of this lease:
(a) He will be solely responsible for the payment of his own Social Security Taxes, Old Age Benefits, Unemployment compensation, Taxes, Workmen’s Compensation Insurance, Federal Income Taxes, license fees, and payment of all payroll deductions and taxes for employees furnished by the LESSOR.
(b) To pay fines, costs and expenses incurred in the operation of the equipment leased herein in the performance of this lease are to be borne by and be the sole responsibility of the LESSOR.
(e) To indemnify LESSEE against loss or liability, if any resulting from the injury or death of the driver or drivers of the vehicle above described or any helpers employed by such drivers in connection with the loading or unloading of said vehicles.
(d) To indemnify LESSEE against any loss or damage resulting from the negligence, incompetence or dishonesty of said drivers or helpers.
(e) To indemnify LESSEE against any loss or damage to or destruction of the trailer or other such equipment of the LESSEE towed by the LESSOR or his employee.
(f) To indemnify the LESSEE against any loss resulting from claims brought against the LESSEE for any property damage and bodily injury sustained by the public while the tractor is detached from a trailer.
•* * * -X- -X- *
11. The LESSOR shall perform this contract in a safe, competent and workmanlike manner and shall be responsible to the LESSEE for complying and together with his employees, agents and servants shall comply with all applicable requirements of federal, state and local government including but not limited to the rules and regulations of the Interstate Commerce Commission.
12. The LESSOR shall at its expense employ all necessary drivers, driver’s helpers, and laborers who shall be experienced, competent, and qualified to carry out work to be performed by the LESSOR under this contract. Such employees shall also be qualified under and meet all the requirements of applicable federal and state laws and municipal ordinance and the rules and regulations of the Interstate Commerce Commission and other regulatory authorities.
->:• * -x- •» -x* *
18. This is the entire agreement of the parties. No alteration, amendment or future understanding shall be binding unless in writing and signed by both parties. This agreement shall be governed by the laws of the State of North Carolina. This Motor Vehicle Equipment Lease supercedes and cancels all prior agreements and leases entered into by the parties.
(Emphasis supplied)
In its answer to the complaint Pitt did not dispute the execution or terms of the lease agreement, but.alleged that the provisions with respect to indemnification and the responsibility of Pitt are unenforceable since they are contrary to the regulations of the Interstate Commerce Commission. The relevant regulatory section, 49 C.F.R. 1057.4, reads:
“(a) Contract requirements. The contract, lease, or other arrangement for the use of such equipment:
•X- * -X- -X- -X- -X-
(4) Exclusive possession and responsibilities. Shall provide for the exclusive possession, control, and use of the equipment, and for the complete assumption of responsibility in respect thereto, by the lessee for the duration of said contract, lease or other arrangement, * *
Although acknowledging that North Carolina law, designated as controlling in the agreement, recognizes the validity of such an indemnification provision, the district judge concluded that the effect of the provision was to relieve the lessee from responsibility for damages to third parties and, accordingly, it was “violative of the spirit and letter” of the federal regulation and therefore unenforceable.
In all deference, we think the district court misread the lease agreement for there is nothing in it which purports to relieve Carolina from any responsibility to third parties for damages resulting from the operation of the leased equipment. On the contrary, the agreement specifically provides that Carolina was taking exclusive possession and control of the equipment and assuming “complete responsibility in respect thereto.” Recognizing the regulatory obligations, the instrument states that the equipment should be under “the control of the LESSEE as required by the rules and regulations of the Interstate Commerce Commission” for the purpose of safety to the public.
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9122720-30229 | MEMORANDUM OPINION AND ORDER
TAYLOR, District Judge.
I.
Plaintiff, Utica Enterprises, Inc. (“Uti-ca”), has alleged that Defendant, Federal Broach and Machine Company (“Federal Broach”), infringed claims 1, 3, 6 and 7 of Plaintiffs Patent No. 6,256,857 B1 (“ ’857 Patent”). The ’857 Patent covers a method to retain a broach-cutting tool in a tool holder. “Broaching” involves a unique metal removing process to make precise and refined cuts to various machined parts.
Before the Court is the parties’ request for claim construction of the ’857 Patent as is required pursuant to Markman v. Westview Instruments, Inc., 52 F.3d 967, 979 (Fed.Cir.1995), aff'd., 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996). Claim construction is a matter of law, exclusively within the Court’s province, while infringement is an issue of fact. Id. Having held a hearing on January 15, 2003 wherein the Court received the testimony of both parties’ expert witnesses, and having received supplemental post-hearing briefs, the Court’s determination of the ’857 Patent’s disputed claim terms follows.
II.
Standard of Review
For the purposes of claim construction, the Court should rely primarily on evidence intrinsic to the patent, that being the patent claims, specifications and prosecution history. Teleflex, Inc. v. Ficosa North Am. Corp., 299 F.3d 1313, 1324-25 (Fed.Cir.2002)(citing Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed.Cir.1996))(stating that such evidence is “the most significant source of the legally operative meaning of the disputed claim language”). To determine the meaning of the claim terms, the Court must begin with the words of the claims themselves. Id. Unless the specifications or prosecution history indicate otherwise, claim terms should be given the ordinary meaning that a person of ordinary skill in the art would ascribe to them. Id.; Texas Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193, 1204-05 (Fed.Cir.2002); CCS Fitness, Inc. v. Brunswick, Corp., 288 F.3d 1359, 1366 (Fed.Cir.2001); see also, Amerikam, Inc. v. Home Depot, Inc., 99 F.Supp.2d 810, 812 (W.D.Mich.2000).
The claims also must be construed within the context of the specifications to determine whether it appears that the inventor intended to impart novel meanings to the claim terms by deviating from the ordinary definitions. Teleflex, 299 F.3d at 1324. If the claim language is unclear on its face, then the Court may consider the specifications and the prosecution history to resolve the lack of clarity. Id.; Interactive Gift Express, Inc. v. CompuServe, Inc., 256 F.3d 1323, 1331 (Fed.Cir.2001). With one exception, the specifications may not further limit the claims beyond the limitations contained in the claims themselves. Teleflex, 299 F.3d at 1326 (citing Markman, 52 F.3d at 979, and cautioning that “claims must be read in light of the specifications, but limitations from the specifications are not to be read into the claims”). When the claims describe a method in terms of the function that the method must serve, then, by statute, the claim construction will be limited to cover the structures, materials, or actions contained in the specifications and their equivalents. 35 U.S.C. § 112, ¶ 6 (hereinafter § 112, ¶ 6). In addition, the Court must not determine the claims to be broader than what the inventor represented to the Patent and Trademark Office (“PTO”) during the patent application process. Teleflex, 299 F.3d at 1326 (citation omitted) (“[P]rosecution history limits the interpretation of claims so as to exclude any interpretation that may have been disclaimed or disavowed during prosecution in order to obtain claim allowance”); see also, Ecolab, Inc. v. Envirochem, Inc., 264 F.3d 1358, 1368 (Fed.Cir.2001) (citations omitted).
The Court may rely on extrinsic evidence including dictionaries, treatises and expert testimony to assist with comprehending the underlying subject matter as it is understood by those of ordinary skill in the particular trade, and to assist with claim construction, when necessary, so long as the extrinsic evidence does not contradict the claim language. Altiris, Inc. v. Symantec Corp., 318 F.3d 1363, 1369 (Fed.Cir.2003); Markman, 52 F.3d at 981. This memorandum constitutes the Court’s findings of law on claim construction for the ’857 Patent.
III.
A. Claim 1
Defendant asserts that all of the terms needing construction can be found in Claim 1. Plaintiff asserts that those terms have a different scope in Claim 3, and, therefore, that the Court should construe Claim 3 as well. For the reasons explained more fully in Part III.B., infra, the Court only will construe the disputed terms contained in Claim 1. Claim 1 reads, in part: •
A method of retaining a broach cutting tool member in a broach tool holder, said broach tool holder comprising: a top surface, an oppositely disposed bottom surface, and an intermediate surface interposed said top and bottom surfaces, said broach tool holder further comprising a first planar abutment surface extending from said top surface and spaced a predetermined distance from said first planar abutment surface, said first planar abutment surface and said second planar abutment surface forming a dihedral right angle, said first and second planar abutment surfaces further forming a right angle with said top surface;
said broach cutting tool member comprising a bottom end surface, a top end surface opposite said bottom end surface, a peripheral outer surface interposed said top end surface and said bottom end surface, said peripheral outer surface having two planar abutment surfaces disposed along said peripheral outer surface and extending perpendicularly to said top end surface and said bottom end surface of said broach cutting tool member, said two planar abutment surfaces adapted to be complementary, respectively, to said first planar and second planar abutment surfaces, disposed on said broach tool holder, said peripheral outer surface of said broach cutting tool member further having a third planar abutment surface disposed along said peripheral outer surface, said third planar abutment surface having at least a portion extending obliquely with respect to one of said top end surface and said bottom end surface of said broach cutting tool member ... ’857 Patent, Col. 7, ll. 26-56.
Both parties request that the Court 1) determine whether or not the tool holder assembly cited in Claim 1 must be a unitary structure, 2) determine and/or clarify the meaning of “predetermined accurate work position,” and 3) determine whether Claim 1 contemplates that the locking step would require a single device, and if so, whether that device is limited to a wedge-like object. Defendant further requests that the Court construe the terms “top surface,” “planar abutment surfaces,” and “contiguous.”
1) Tool Holder Structure
Utica maintains that neither the specification nor the prosecution history expresses its intent to limit Claim 1 to the preferred embodiments which describe the tool holder as a unitary structure machined from a single piece of metal. To support its contention that the tool holder is a one-piece, unitary structure, Federal Broach relies on Figures 1 and 2 of the ’857 Patent as well as on the deposition testimony of Robert Roseliep (“Roseliep”), the inventor, that the planar surface on the tool holder must be an integral part of the tool holder itself. See Def.’s Markman Br., App. D, Roseliep Dep. p. 41, ll. 23-25; p. 42, ll. 1-14. The Court’s construction must begin with the claim’s language. Teleflex, 299 F.3d at 1324-25. To that end, the Court will begin by construing the terms “top surface” and “planar abutment surface” as these terms are included in Claim l’s description of the tool holder body.
a. “Top Surface”
Claim 1 indicates that the tool holder is comprised of a top surface that is directly opposite a bottom surface with an intermediate surface between the two.
’857 Patent, Col. 7, ll. 28-30. Claim 1 further advises that two planar abutment surfaces extend from the top surface, forming a dihedral right angle to each other, and also forming a right angle with the top surface. ’857 Patent, Col. 7, ll. 31-38. Since the parties did not offer any definitions for the term “top surface” or “planar abutment surface,” that are particular to the broaching trade, the Court assumes that persons of ordinary skill in the art would ascribe to these terms the same meanings that a lay person would ascribe. The Court thus relies on dictionary definitions that are consistent with the intrinsic evidence of the ’857 Patent to construe these terms. See Altiris, 318 F.3d at 1369.
“Top” means the “highest point, level, or part of something.” Webster’s Third International Dictionary (1976) (hereinafter Webster’s). Accordingly, the Court construes the term “top surface” to mean the highest part of the tool holder, above which nothing else extends.
b. “Planar Abutment Surface”
The term “plane” connotes a “surface such that the straight line that joins any two of its points lies wholly in that surface; a surface any intersection of which by a like surface is a straight line,” or a “flat, level surface.” Id. To “abut” is simply “to touch.” Id. The “planar abutment surfaces,” then are flat, straight surfaces which are designed to come into contact with the mirror-image, corresponding surfaces of the cutting tool. Given the Court’s above-mentioned construction of the term “top surface,” and Claim l’s requirement that the planar abutment surfaces extend from the top surface, it follows that the planar abutment surfaces must extend downward from the top surface of the tool holder to the tool holder’s intermediate surface.
c.Single or Multi-Piece Assembly
Utica asserts that the claims do not limit the invention to a unitary structure, but rather, that the claim terms also cover a multi-piece assembly for the tool holder. Federal Broach argues that the only way in which Claim 1 defines over the prior art is if the tool holder body is of a one-piece construction.
Except for the statement in the second paragraph that the cutting tool’s planar abutment surfaces must be “complementary .. .to said first planar and second planar abutment surfaces, disposed on said broach tool holder,” the claim otherwise is silent as to whether the tool holder must be a unitary structure or whether it also may be a multi-piece assembly. ’857 Patent, Col. 7, 47-49. To be “disposed on” connotes “to put in place or order.” Webster’s. Again, because the parties have not provided a definition for the term “disposed on” from the perspective of one with ordinary skill in the broaching trade, the Court relies on the dictionary definition to determine the term’s ordinary meaning. The ordinary meaning of the term “disposed on” conveys that the planar abutment surfaces are placed upon something, the tool holder body in this instance.
The Court next considers the specifications and the prosecution history for further guidance and to resolve the lack of clarity surrounding the inventor’s intentions regarding the tool holder structure. Interactive Gift, 256 F.3d at 1331 (Fed.Cir.2001). Claim terms should be construed to sustain their validity, when possible, and should be read in light of the specifications. Process Control, Corp. v. HydReclaim Corp., 190 F.3d 1350, 1356 (Fed.Cir.1999), cert. denied, 529 U.S. 1037, 120 S.Ct. 1531, 146 L.Ed.2d 346 (2000)(citing Vitronics, 90 F.3d at 1582). Furthermore, the Court may restrict a claim term’s ordinary meaning when the intrinsic evidence shows that “the patentee distinguished the term from prior art on the basis of a particular embodiment.” CCS Fitness, 288 F.3d at 1366.
The specifications state that the flat faces of the cutting tool directly contact the flat faces of the tool holder. ’857 Patent, Col. 4, ll. 19-23. The precision with which the flat faces of the cutting tool and tool holder are ground facilitate the elimination of clearances and a more accurate positioning of the cutting tool. ’857 Patent, Col. 4, ll. 27-32. Reading Claim 1 in light of this specification, as well as in light of Figures 1 and 2 of the ’857 Patent, indicates that the planar abutment surfaces of the cutting tool and the tool holder must “directly contact” each other, in order to achieve the purpose of this invention-to eliminate clearances, as discussed more fully in Part III.A.2, infra. A multi-piece assembly whereby parts would be added to constitute the planar abutment surfaces, as Utica proposed at the Hearing, would frustrate Claim l’s instruction that the cutting tool’s planar abutment surfaces “be complementary ... to the first planar and second planar abutment surfaces disposed on said broach tool holder.” ’857 Patent, Col. 7, ll. 47-49.
The specifications also state that with the prior art, it was impossible to have zero tolerance between the outside diameter of the cutting tool and the inside diameter of the tool holder. ’857 Patent, Col. 3, ll. 45-48. The prior art thus had “built-in error” due to the movement of a radial wedge or key into the “V” notch or key slot, “until surface-to-surface contact is obtained” by the complementary outer diameter of the cutting tool and inside diameter of the tool holder. ’857 Patent, Col. 3, ll. 50-53. “The present invention eliminates the above described built-in error.” ’857 Patent, Col. 3, ll. 54-55. Any multi-piece assembly would invalidate the current invention’s ability to eliminate built-in error, because a multi-piece assembly makes it “impossible to have zero tolerance” between the cutting tool and the tool holder. ’857 Patent, Co. 3, ll. 46-47. Inasmuch as the Court finds that Utica defined over the prior art by representing to the PTO that this invention would eliminate the errors caused by radial wedges or keys, “V” notches or key slots, in other words, multiple pieces that generate clearances between the cutting tool and the tool holder, the Court holds that the tool holder must be a single, one-piece structure upon which the planar abutment surfaces are formed as a unitary part.
2) “Predetermined Accurate Work Position”
The relevant portion of Claim 1 reads:
said method comprising the steps of positioning said two planar abutment surfaces of said broach cutting tool member contiguous said first planar and said second planar abutment surfaces, respectively, of said broach tool holder and simultaneously locating said bottom end surface of said broach cutting tool member on said intermediate surface of said broach tool holder whereby when said broach cutting tool member is positioned in said broach tool holder a predetermined accurate work position is established for said broach cutting tool member ... ’857 Patent, Col. 7, ll. 57-67.
Utica contends that the term, “predetermined accurate work position,” should be given the ordinary meaning that a person of ordinary skill in the art would attribute to it. Utica asserts that “predetermined” means to determine beforehand or to set- tie in advance, and that “accurate” means free from error or mistake, precisely fixed, executed with care. Webster’s. Utica proposes that predetermined accurate work position means “a work position that was determined in advance and in which care was taken to make it as free from error or mistake as reasonably possible.” Pl.’s Post-Markman Br., p. 6. Utica also relies on Roseliep’s testimony that the predetermined accurate work position is determined by the designer in advance by measuring from the center axis of the tool to the planar surfaces, and then machining the planar surfaces to accurately reflect that measurement. Hearing Tr., p. 27. Utica posits that Federal Broach’s President, William Martin (“Martin”), also testified that the cutting tool’s work position is measured from the center axis of the cutting tool to the appropriate surface. Hearing Tr., p. 91.
Federal Broach contends, however, that predetermined accurate work position means “a position in which the tool is supported on the tool holder -with the complementary planar abutment surfaces of the tool and the tool holder in engagement with one another with no clearance between the surfaces.” Def.’s Post-Mark-man Br., p. 6. To support its contention, Federal Broach relies on Claim l’s plain language, as well as the specification that “it is an object of the present invention to provide a cutting tool retention device that provides for accurate positioning of a cutting tool by eliminating any clearance between the cutting tool and the tool holder.” ’857 Patent, Col. 2, ln. 61. Federal Broach further relies on the specification that “the accuracy in positioning the cutting tool 12 is improved because the clearance between the mounting block hole and the cutting tool, as shown in the prior art, is eliminated.” ’857 Patent, Col. 6, ln. 45 (referencing FIGS. 1-5). Federal Broach also references Utica’s statements to the PTO on two occasions that
when the broach cutting tool is mounted in a broach tool holder, the two precision planar faces of each of the broach cutting tool and broach tool holder are forced against each other by the use of the locking force applied against the oblique portion of the third planar surface locking so as to generate an accurate work position. See Def.’s Markman Br., App. C, Preliminary Amendment, Aug. 22, 2000, p. 10; PTO Prosecution History, Dec. 21, 2000, Reply, p. 8.
Utica’s contention that predetermined accurate work position should be limited to its ordinary meaning is expressly contradicted by the specification’s clear, unambiguous, and express language that an object of the invention is to eliminate any clearance between the cutting tool and the tool holder. In its initial brief, Utica represented to this Court that:
In other words, the flat mounting surfaces of the tool holder against which the corresponding abutment surfaces of the cutting tool will be radially positioned are fixed and not subject to accumulated clearances or tolerances that would compromise the accuracy of that location, as the wedge like device locates and locks the cutting tool into the tool holder. Because the flat mounting surfaces of the tool holder are in a fixed position, rather than fitted into a slot or bore, there is a net surface that remains in the same position as the cutting tool is located and locked into place. This creates a predetermined accurate work position not only when the tool is initially installed, but also when resharpened, refurbished, or replacement tools are positioned and locked into the tool holder. Pl.’s Br. Regarding Claim Construction, p. 9 [Emphasis added].
The Court is not persuaded that the term “predetermined accurate work position” should be given its ordinary meaning, and doubts that upon reading the ’857 Patent in its entirety, particularly upon reviewing Roseliep’s representations to the PTO, a person of ordinary skill in the art would ascribe the meaning for which Utica advocates. In fact, the specifications state that “[i]t should be appreciated by those skilled in the art that the closer the tolerance obtained in manufacturing the flat faces ... the higher the accuracy of the radial positioning of the cutting tool.” ’857 Patent, Col. 4, 11. 27-32. Though the language of Claim 1 itself does not limit the term “predetermined accurate work position” to the elimination of clearances, this Court cannot ignore the construction Roseliep gave when he presented his invention to the PTO in order to obtain the patent. Teleflex. 299 F.3d at 1326.
The Court agrees that the term “predetermined” means determined beforehand or settled in advance. Webster’s. The Court finds that Roseliep’s and Martin’s testimony that the cutting tool’s position is measured from its center axis to the appropriate surface of the tool holder is consistent with this definition. As previously indicated, however, the specifications and the prosecution history, here in evidence, indicate that the inventor intended to deviate from the ordinary meaning of the term “accurate,” by “characterizing the invention in the intrinsic record using words or expressions of manifest exclusion or restriction, representing a clear disavowal of claim scope.” Teleflex, 299 F.3d at 1327; see also Beckson Marine, Inc. v. NFM. Inc., 292 F.3d 718 (Fed.Cir.2002)(explaining that “the inventor may act as his own lexicographer and use the specification to supply implicitly or explicitly new meanings for terms”). The inventor amended Claim 1 with the PTO to indicate that the predetermined accurate work position specifically meant that the “planar faces of the tool and tool holder are forced against each other.” Def.’s Markman Br., App. C, Preliminary Amendment, Aug. 22, 2000, p. 10; PTO Prosecution History, Dec. 21, 2000, Reply, p. 8.
While adhering to the admonishment that claim terms should be given their ordinary meaning and that the limitations of the specifications should not be imported into the claim language, the Court may look to the specifications for guidance and context for claim construction, as well as to the prosecution history when it appears that the inventor offered a particular embodiment in order to obtain the patent. Ecolab, 264 F.3d at 1366 (Fed.Cir.2001). The Court, thus, is constrained to grant a construction of the term predetermined accurate work position that includes a reference to the elimination of clearances because it appears that the inventor ascribed that meaning to the claim term in the patent’s specifications, as well as in the inventor’s representations to the PTO and to this Court. The Court finds that the term “predetermined accurate work position” means the fixed placement of the tool in the tool holder. This placement is achieved by precisely measuring the distance from the surface of the center axis of the tool to the appropriate surfaces of the tool holder in advance, such that the flat mounting surfaces of the tool directly contact the corresponding surfaces of the tool holder, without any spaces in between, thereby maintaining the cutting tool’s original placement until the tool is removed.
3) Locking Step
Utica asserts that the claim language does not limit the locking force to any particular device or to a single device, as long as the lateral and downward locking force components impose a locking force on at least a portion of the third planar surface of the cutting tool. Utica argues that this construction is consistent with the statement in the specification that the invention may be practiced other than as specifically described. ’857 Patent, Col 7, ll. 21-24. Contrarily, Federal Broach asserts that the locking force is generated by a single locking member that must act alone to secure the tool in the tool holder. The relevant language of Claim 1 reads:
said method comprising the steps of positioning said two planar abutment surfaces ... whereby a predetermined accurate work position is established; and locking said broach cutting tool member in said predetermined accurate work position, by imposing a locking force on said at least a portion of said third planar abutment surface of said broach cutting tool member, said locking force having a force component directed towards said two planar abutment surfaces of said broach cutting tool member and a force component directed downward from said top surface towards said intermediate surface of said broach tool holder to securely hold said broach cutting tool member in said broach tool holder. ’857 Patent, Col. 7, ll. 57-58, 65-67; Col. 8, ll. 1-11.
The parties do not dispute that Claim 1 is an independent method claim. Although the parties neither briefed nor argued its applicability, § 112, ¶ 6 is instructive. By associating the word “steps” with two functions-establishing a predetermined accurate work position and locking the tool in the tool holder-Claim 1 contains express step-plus-function language to describe the locking element. This language creates the presumption that § 112, ¶ 6 governs the Court’s construction of the locking force element. Relume Corp. v. Dialight Corp., 63 F.Supp.2d 788, 798 (E.D.Mich.1999) (citing Al-Site Corp. v. VSI Int’l, Inc., 174 F.3d 1308, 1318 (Fed.Cir.1999))(holding that the use of “means for” or “step for” terminology typically invokes § 112, ¶ 6). The presumption that § 112, ¶ 6 applies is rebutted if the claim itself recites sufficient structures or materials to perform the stated function. Al-Site, 174 F.3d at 1318 (citing Sage Prods., Inc. v. Devon Indus., Inc., 126 F.3d 1420, 1427-28 (Fed.Cir.1997)). A claim recites sufficient structure when it elaborates the structure, material, or acts necessary to perform entirely the recited function. See Sage, 126 F.3d at 1427-28.
When construing a step-plus-function limitation pursuant to § 112, ¶ 6, the Court first must identify the function explicitly recited in the claim. Asyst Tech., Inc. v. Empak, Inc., 268 F.3d 1364, 1369 (Fed.Cir.2001) (citations omitted). Next, the Court must identify the “corresponding structure set forth in the written description that performs the particular function set forth in the claim.” Id. The proper application of § 112, ¶ 6, mandates reading the claim element to embrace distinct and alternative structures described in the specifications that perform the claimed element. Ishida Co. v. Taylor, 221 F.3d 1310, 1316 (Fed.Cir.2000)(citing Serrano v. Telular Corp., 111 F.3d 1578, 1583 (Fed.Cir.1997)). § 112, ¶ 6, does not, however, “permit incorporation of structure from the written description beyond that necessary to perform the claimed function.” Asyst Tech., 268 F.3d at 1370 (quoting Micro Chem., Inc. v. Great Plains Chem. Co., 194 F.3d 1250, 1257-58 (Fed.Cir.1999)). Structural features that do not actually perform the recited function do not constitute corresponding structure and thus do not serve as claim limita tions. Id. (citing B. Braun Med., Inc. v. Abbott Labs., 124 F.3d 1419, 1424 (Fed.Cir.1997)). Additionally, once the corresponding structure(s) is identified, its scope cannot be extended solely by the inventor’s statement that unspecified structures may perform the same function. See Fonar Corp. v. General Electric Co., 107 F.3d 1543, 1551-52 (Fed.Cir.1997).
Since Claim 1 does not recite definite structures that will generate the locking force, the presumption that § 112, ¶ 6, applies is unrebutted. Air-Site, 174 F.3d at 1318. Therefore, the Court will construe the claim to cover the corresponding structures described in the specifications and their equivalents. Id. As an initial matter, the Court finds that the function of the locking step in Claim 1, is to provide adequate force to securely or firmly retain the cutting tool in the tool holder in the predetermined accurate work position, as that term was defined earlier in this Opinion. ’857 Patent, Col. 8, 11. 1-2, 10-12; Asyst Tech, 268 F.3d at 1369.
The Court next must identify the corresponding structures that retain the cutting tool in the tool holder in the predetermined accurate work position. Id. The specifications indicate that a “wedge lock arrangement” generates the locking force. See, e.g., ’857 Patent, Col. 4,11. 8-9; Col. 5, 11. 54-61. The wedge lock arrangement “includes a wedge member having a first tapered edge, a second tapered edge, a threaded collar having a cross pin, and a retaining screw.” ’857 Patent, Col. 5, 11. 54-58. The specifications also reference “an optional configuration of the wedge lock arrangement” which would have only one tapered edge instead of two, however this configuration, the inventor notes, while functional, would not be optimal. ’857 Patent, Col. 6, 11. 25-29. “Only one retaining device is required to hold the cutting tool in place.... By reducing the number of parts necessary to secure the cutting tool to a single wedge lock arrangement, the time and effort required to change the tools is greatly reduced.” ’857 Patent, Col. 6,11. 59-60, 63-66. The specifications go on to state that “one skilled in the art may appreciate the use of other wedge locking configurations to mount the cutting tool to the tool holder.” ’857 Patent, Col. 6, 11. 32-34. Finally, the specifications state that “[m]any modifications and variations of the present invention are possible .... Therefore, within the scope of the appended claims, the present invention may be practiced other than as specifically described.” ’857 Patent, Col. 7, 11. 21-24.
Although the specifications state that other wedge-like configurations may be used, no such configurations are specified. Per § 112, ¶ 6, the method described in Claim 1 is, thus, limited to a wedge-like device and its equivalents. Accordingly, the Court finds that the locking step described in Claim 1 is limited to a single wedge-like device, with two tapered edges, or with one tapered edge as is described in the specification’s optional configuration, and its equivalents. ’857 Patent, Col 6, 11.25-27. Moreover, the Court finds that the scope of the corresponding structure to perform Claim l’s stated functions cannot be extended solely by the inventor’s statement that “[m]any modifications and variations are possible,” or that unspecified structures may perform the same function. ’857 Patent, Col. 7, 11. 21-24; see Fonar, 107 F.3d at 1551-52.
B. Claim 3
Utica contends that, at least with regard to the locking step, Claim 3 is broader than Claim 1, because Claim 3 does not require that the locking force be imposed “to securely hold said broach cutting tool member in said tool holder.” ’857 Patent, 8, 11. 10-11. Claim 3, Utica argues, only requires that the locking force result in a downward force component from the top surface towards a lower surface. Federal Broach asserts that Claim 3 is incomplete and indefinite because it does not require the bottom of the tool to be supported on anything and the tool must be supported in some way, nor does it require the locking force to be in the direction of the intermediate surface, which surface is not recited in Claim 3. Federal Broach maintains that, other than the differences mentioned, the same claim language appears in Claims 1 and 3, and that those claim terms should be given the same construction.
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3685740-7674 | PER CURIAM:
Defendant Marcelo Castaneda-Baltazar plead guilty to illegal reentry. In sentencing Castaneda, the district court added twelve levels under U.S.S.G. § 2L1.2(b)(1)(B), which mandates enhancement when the defendant was previously convicted of a felony “drug trafficking offense” for which the sentence was thirteen months or less. The court based the enhancement on Castaneda’s 1995 California state conviction for, as alleged in the state indictment, “Transport/Sell/Offer to Sell Marijuana (Felony),” in violation of Cal. Health & Safety Code § 11360(a) (1995), for which he received probation. Castaneda challenges the enhancement on appeal.
Castaneda concedes that we should review for plain error because his counsel never objected to the enhancement below. Unsatisfied with this concession, the Government urges that Castaneda waived— not just forfeited — the argument, precluding us from considering it. See United States v. Arviso-Mata, 442 F.3d 382, 384 (5th Cir.2006) (discussing difference between waiver and forfeiture). This, the Government asserts, because at sentencing Castaneda’s counsel told the district court that she “understood] that the guideline score is correct. It does call for a twelve-level enhancement.” Waiver, however, is the “intentional relinquishment or abandonment of a known right,” United States v. Olano, 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993) (quoting Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938)), and Castaneda did not intentionally relinquish a known right here. Indeed, given that counsel failed to object below on the basis raised on appeal, presumably because she did not recognize the argument, she had no choice but to concede to the district court in the words used that the Guidelines calculation was correct. This court came to the same conclusion in Arviso-Mata, 442 F.3d at 384, a case presenting almost identical facts in which the court declined to find waiver because there was “no evidence ... that counsel knew of the sentencing guidelines issue and ... consciously chose to forego it.” And we recently applied Arviso-Mata to another case just like the present one. See United States v. Duque-Hernandez, 227 Fed.Appx. 326 (5th Cir. 2007) (unpub.). Castaneda did not waive this argument.
To establish plain error, Castaneda must show: “(1) there was an error; (2) the error was clear and obvious; and (3) the error affected [his] substantial rights. When these elements are present, [this Court] may exercise [its] discretion to correct the error only if it seriously affects the fairness, integrity, or public reputation of judicial proceedings.” United States v. Gracia-Cantu, 302 F.3d 308, 310 (5th Cir. 2002). The Government argues first that we cannot analyze whether there was error here because Castaneda has never produced the California indictment, judgment of conviction, or anything else showing of what he was actually convicted in state court. Castaneda responds that the PSR makes clear of what crime he was convicted, and in any event this court has repeatedly remanded for the district court to obtain and review the relevant documents, even in cases of plain error review, as the Government concedes. See United States v. Bonilla-Mungia, 422 F.3d 316, 321-22 (5th Cir.2005); United States v. Gonzalez-Chavez, 432 F.3d 334, 338-39 (5th Cir. 2005). We need not worry (or remand), however, because we granted Castaneda’s unopposed motion to supplement the record on appeal with the relevant documents, submitted after the Government filed its brief, so we now have everything we need to dispose of this appeal.
Castanenda argues there was error because his statute of conviction encompasses acts not included in the definition of “drug trafficking offense,” in violation of the categorical approach, see United States v. Rodriguez-Rodriguez, 323 F.3d 317, 318-19 (5th Cir.2003). Namely, he argues, § 11360(a) encompasses mere transportation of drugs and offering to sell drugs, acts not considered “drug trafficking offense[s],” see United States v. Garza-Lopez, 410 F.3d 268, 274 (5th Cir.2005), and his indictment and statute of conviction leave open the possibility that he was convicted for offering to sell. Indeed, he notes, we have recently held as much in two cases involving Cal. Health & Safety Code § 11352(a), a statute in relevant part identical to § 11360(a) but substituting various other drugs for “marijuana,” see United States v. Gutierrez-Ramirez, 405 F.3d 352 (5th Cir.2005); United States v. Gonzalez-Borjas, 125 Fed.Appx. 556 (5th Cir.2005) (unpub.), and in a recent unpublished opinion we held the same regarding the actual statute as issue here, United States v. Acosta-Avitia, 145 Fed.Appx. 70 (5th Cir.2005). The Government offers no persuasive rejoinder, focusing instead on Castaneda’s forfeiture or supposed waiver, which is irrelevant to whether there was error. It is clear there was error here, and the error was plain.
Castaneda continues that the plain error affects his substantial rights and seriously affects the fairness, integrity, and public reputation of the judicial proceedings because, without the enhancement here, his Guidelines range would have been, at a maximum, fifteen to twenty-one months, and he was actually sentenced to twenty-seven months, the bottom of the erroneous twenty-seven to thirty-three month range. He correctly notes that we have consistently found reversible plain error in similar situations. See Gracia-Cantu, 302 F.3d at 313; United States v. Alarcon, 261 F.3d 416, 423-24 (5th Cir.2001); United States v. Aderholt, 87 F.3d 740, 744 (5th Cir.1996); United States v. Green, 46 F.3d 461, 467 (5th Cir.1995); United States v. Franks, 46 F.3d 402, 404-05 (5th Cir.1995). Indeed, in Gonzalez-Borjas, this court corrected the error where the erroneous range was forty-six to fifty-seven months, the defendant was sentenced at the bottom, and the corrected range would have been, at most, thirty-three to forty-one months. 125 Fed.Appx. at 559. The Government makes no response to this prong of plain error review. We conclude that the error here affected Castaneda’s substantial rights and seriously affected the fairness, integrity, and public reputation of the judicial proceedings. Hence we must vacate and remand.
Castaneda also challenges the constitutionality of § 1326(b)’s treatment of prior felony and aggravated felony convictions as sentencing factors. He makes two claims: that the statute is unconstitutional as applied to him because his prior conviction wasn’t alleged in his federal indictment and he never admitted its existence in pleading guilty, and that § 1326(b) is unconstitutional on its face because it can never be applied constitutionally. As he properly concedes, both arguments are foreclosed by Almendarez-Torres v. United States, 523 U.S. 224, 235, 118 S.Ct. 1219, 140 L.Ed.2d 350 (1998), and he raises the arguments only to preserve them.
SENTENCE VACATED AND REMANDED FOR RE-SENTENCING.
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.
. Cal. Health & Safety Code § 11360(a) states: “Except as otherwise provided by this section or as authorized by law, every person who transports, imports into this state, sells, furnishes, administers, or gives away, or offers to transport, import into this state, sell, furnish, administer, or give away, or attempts to import into this state or transport any marijuana shall be punished by imprisonment in the state prison for a period of two, three or four years.”
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10530151-12331 | JOHNSON, Circuit Judge:
Defendant George Bratton appeals his conviction on six counts of aiding and abetting the commission of wire fraud and possession of stolen money in violation of 18 U.S.C. § 1343 and § 2315. On appeal, Bratton challenges the sufficiency of the evidence adduced at trial to support his conviction, as well as the admission of certain impeachment evidence by the district court. We reject both contentions of Brat-ton and affirm.
I. FACTS AND PROCEDURAL HISTORY
The arrest and conviction of defendant George Bratton for wire fraud and possession of stolen money stems from the unauthorized transfer of funds by Bratton’s wife, Doris Bratton, during her employment from April 1982 until September 1987 as a market coordinator for the Diamond Shamrock Refining and Marketing Company in San Antonio, Texas. Among her duties as a market coordinator for Diamond Shamrock, Mrs. Bratton was responsible for administering the necessary paperwork on monetary “futures” accounts maintained by the New York broker for Diamond Shamrock, E.F. Hutton, and transferring large sums of money to and from the futures accounts through the use of a telephone fascimile machine located at the San Antonio office of Diamond Shamrock. As the records of transactions involving the futures accounts for Diamond Shamrock were not yet computerized during the employ of Mrs. Bratton as a market coordinator, Diamond Shamrock necessarily relied heavily on the representations of Mrs. Bratton concerning the status of its accounts and the transfer of its monies.
After serving approximately four years as a market coordinator for Diamond Shamrock, Mrs. Bratton, on July 16, 1986, sent an unauthorized telephone fascimile message to E.F. Hutton in New York requesting the transfer of $250,000 from a Diamond Shamrock futures account to an account at San Antonio Savings Association (SASA) styled “DJ’s,” which Mrs. Bratton represented to E.F. Hutton to be a subsidiary of Diamond Shamrock. In reality, Diamond Shamrock did not own such a subsidiary; rather, DJ’s was a business solely owned by George Bratton who was the sole authorized signator on the DJ’s account at SASA. Thereafter, in June 1987, Mrs. Bratton sent a second unauthorized telephone fascimile to E.F. Hutton requesting the transfer of $223,541 to an account at SASA styled “DJ’s Dance Club.”
Ultimately, the Brattons were indicted on several counts of wire fraud and receipt and possession of stolen property in violation of 18 U.S.C. § 1343 and § 2315. Mrs. Bratton subsequently entered into a plea agreement with the Government pursuant to which she pleaded guilty to two counts of wire fraud. At the subsequent jury trial of George Bratton, Mrs. Bratton testified on behalf of her husband. Specifically, Mrs. Bratton testified that George Bratton had not instructed, encouraged, or directed her in any manner to transfer the funds at Diamond Shamrock. Mrs. Bratton further stated that she informed her husband that the transferred funds were part of an inheritance from her recently deceased grandmother in Japan. Ultimately, however, the jury convicted Mr. Bratton of six counts of aiding and abetting Mrs. Bratton in the commission of wire fraud and of possessing stolen property. After the district court denied his motion for judgment of acquittal, Mr. Bratton was sentenced to four years’ imprisonment on each count with the sentences to be served concurrently and further ordered to make restitution to Diamond Shamrock in the amount of $473,541. Mr. Bratton now appeals.
II. DISCUSSION
A. Sufficiency of the Evidence
On appeal, Mr. Bratton challenges the sufficiency of the evidence adduced at trial to support his conviction of aiding and abetting his wife in the commission of wire fraud and of possession of stolen property. The only element of the above two crimes which Mr. Bratton maintains that the Government failed to prove at trial, however, is his knowledge of the stolen character of the funds deposited into the DJ’s account at SASA at the time he received the stolen funds and appropriated those funds to his personal use. In reviewing an insufficiency of the evidence claim in a criminal matter, this Court inquires “ ‘whether after viewing the evidence in a light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.’ ” United States v. Santiesteban, 833 F.2d 513, 516 (5th Cir.1987) (quoting Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979)). Further, this Court will accept all credibility choices, whether based on direct or circumstantial evidence, which tend to support the verdict of the jury. United States v. Vergara, 687 F.2d 57, 60 (5th Cir.1982). Applying the above deferential standard of review to the facts of the instant case, we conclude that the evidence presented by the Government at trial is sufficient to support the conviction of Mr. Bratton for the crimes with which he was charged.
As noted previously, Mr. Bratton directs the attention of this Court to what he perceives to be the absence of any direct evidence establishing his knowledge of the stolen character of the Diamond Shamrock funds at the time he appropriated those funds to his personal use in San Antonio. Specifically, Mr. Bratton asserts that he innocently believed the explanation of his wife that the transferred funds were part of an inheritance from her deceased grandmother in Japan. Mr. Bratton does acknowledge that he was suffering from financial difficulties at the time the Diamond Shamrock funds were illegally transferred to the DJ’s account; nevertheless, as evidence of his lack of knowledge of the stolen character of the funds, Mr. Bratton notes that he did not in any manner secret his activities with the funds once they were transferred to the DJ’s account.
In response, to establish Mr. Bratton’s knowledge of the stolen character of the transferred funds, the Government relies on the circumstances surrounding the unauthorized transfers of funds. In particular, the Government points to the active control and management of the stolen funds exercised by Mr. Bratton after the transfer of the funds to the SASA account upon which Mr. Bratton was the sole authorized signator. In this regard, the Government maintains that Mr. Bratton primarily directed the transfer and disposition of the funds after they were placed in the DJ’s account to the exclusion of Mrs. Bratton. Moreover, as evidence of Mr. Bratton’s guilt, the Government notes that Mr. Bratton kept open the DJ’s account at SASA following the first fraudulent transfer of Diamond Shamrock funds in July 1986 despite the fact that the business DJ’s closed shortly after that transfer. Stressing the significance of the above act by Mr. Bratton, the Government maintains that the decision by Mr. Bratton to keep the DJ’s account open after the initial fraudulent transfer was a calculated decision made solely for the purpose of facilitating the subsequent fraudulent transfer of funds in June 1987. Further, the Government mentions the financial difficulties suffered by Mr. Bratton at the time of the unauthorized transfers of funds as providing a motive for the participation of Mr. Bratton in the thefts. Finally, the Government notes that, while Mr. Bratton did not secret his activities with the funds following their deposit in the DJ’s account, Mr. Bratton curiously did not mention to any friends and family the large inheritance received from his wife’s deceased grandmother in Japan. In this regard, the Government maintains that this lack of disclosure to others by Mr. Bratton regarding the inheritance supports a conclusion that the inheritance story was fabricated by the Brattons.
In addition to the circumstantial evidence presented at trial establishing Mr. Brat-ton’s knowledge of the stolen character of the transferred funds, the Government notes the rebuttable inference which arises from the unexplained possession of stolen property by a defendant that such a defendant has knowledge of the stolen character of the property. Barnes v. United States, 412 U.S. 837, 843, 93 S.Ct. 2357, 2361, 37 L.Ed.2d 380 (1973). The Government insists that Mr. Bratton failed to rebut the above inference arising from his possession of the stolen funds that he possessed knowledge of the stolen character of those funds since the jury chose to disbelieve the story of Mr. Bratton and his wife that the funds were in actuality a portion of his wife’s inheritance from her deceased grandmother in Japan.
Despite the seemingly overwhelming amount of circumstantial evidence offered by the Government supporting Mr. Brat-ton’s guilt, it is observed that the circumstantial evidence of Mr. Bratton’s guilt offered by the Government at trial is entirely consistent with the explanation of Mrs. Bratton that she informed her husband that the transferred funds were part of an inheritance from her deceased grandmother in Japan. In this regard, it is undisputed that Mrs. Bratton’s grandmother did indeed pass away in Japan at the relevant time. The Government, however, cites the following evidence which tips the evidentia-ry scales in the instant case in favor of the Government. Specifically, the Government notes that, on June 6, 1987, Mr. Bratton called both SASA and Chemical Bank (E.F. Hutton’s bank in New York) looking for the second transfer of funds ($223,541) pri- or to the deposit of those funds being made in the DJ’s account at SASA. Further, Mr. Bratton provided SASA with the missing numerals in the DJ’s account number which enabled the fraudulent transfer of funds to be successfully completed. Significantly, the above actions of Mr. Bratton directly contradict the testimony of Mrs. Bratton that she did not inform Mr. Brat-ton about the second transfer of funds until after the funds were placed in the DJ’s account at SASA. The above contradiction between Mrs. Bratton’s testimony and the actions of Mr. Bratton during the relevant time period support an inference by the jury that Mr. Bratton did indeed have knowledge of the stolen character of the funds. Moreover, while not producing direct evidence of the receipt by Mr. Brat-ton of a copy of the advice of wire transfer from Chemical Bank to SASA regarding the illegal transfers of funds, the Government did present evidence to the jury that it was standard practice for SASA to mail a copy of the advice of wire transfer to its account holder upon completion of the transfer. Thus, in the regular course of business, Mr. Bratton should have received a copy of the advice of the unauthorized transfers from E.F. Hutton, New York, to SASA, San Antonio.
In sum, based on the circumstantial evidence of Mr. Bratton’s guilt cited above, the rebuttable inference of Mr. Bratton’s knowledge of the stolen character of the funds arising from his possession of those funds, as well as the contradiction between the testimony of Mrs. Bratton and the actions of Mr. Bratton regarding the second transfer of funds, we conclude that the evidence was sufficient to enable a rational trier of fact to conclude that Mr. Bratton possessed knowledge of the stolen character of the transferred funds. Accordingly, we reject the contention of Mr. Bratton in this regard.
B. Admission of Impeachment Evidence
Our inquiry in the instant appeal, however, is not complete as Mr. Bratton also challenges a decision by the district court to allow the Government to introduce impeachment evidence during the cross-examination of Mrs. Bratton regarding past physical abuse by Mr. Bratton against his wife. As with the sufficiency of the evidence issue, the instant evidentiary challenge posed by Mr. Bratton is a close one. Nevertheless, the standard of review which this Court employs in assessing the decision of a district court to admit relevant, but potentially prejudicial, evidence is the deferential one of abuse of discretion. United States v. Soudan, 812 F.2d 920, 930 (5th Cir.1986), cert. denied, 481 U.S. 1052, 107 S.Ct. 2187, 95 L.Ed.2d 843 (1987). Applying the above deferential standard of review, we cannot say that the district court abused its discretion in allowing the impeachment evidence regarding the past physical abuse by Mr. Bratton of his wife for the following reasons.
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3579878-8610 | TJOFLAT, Circuit Judge:
The petitioner, Johnel Edward Taylor, is serving sentences in a Georgia prison for murder and possession of a firearm. On July 8, 2005, he challenged the constitutional validity of his convictions in a petition for a writ of habeas corpus filed with the United States District Court for the Northern District of Georgia pursuant to 28 U.S.C. § 2254. On October 26, 2006, the district court denied the writ as time-barred by the one-year statute of limitations created by the Anti-Terrorism and Effective Death Penalty Act of 1996 (“AEDPA”), 28 U.S.C. § 2244(d)(1). He thereafter filed a timely notice of appeal, and we granted his application for a certificate of appealability (“COA”) as to one issue: whether the district court erred when it found that the Georgia procedural rule, which deems a petition for post-conviction relief filed when it is received and marked as filed by the clerk of the petitioned court, governs the date when AED-PA’s one-year limitations period is tolled.
I.
On December 1, 1998, a Spalding County Superior Court jury found Taylor guilty of felony murder and possession of a firearm during the commission of a crime. The superior court thereafter sentenced him to life imprisonment on the murder charge and a consecutive five-year term for the firearm possession offense. His convictions and sentences were affirmed by the Georgia Supreme Court on July 5, 2000. Taylor v. State, 272 Ga. 559, 532 S.E.2d 395 (2000). Taylor did not move the court for a rehearing or seek a writ of certiorari from the United States Supreme Court. Accordingly, his convictions became final on October 3, 2000. See Sup. Ct. R. 13 (“[A] petition for a writ of certio-rari to review a judgment in any case, civil or criminal, entered by a state court of last resort ... is timely when it is filed with the Clerk of this Court within 90 days after entry of judgment.”); Bond v. Moore, 309 F.3d 770, 774 (11th Cir.2002) (holding that AEDPA’s statute of limitations does not begin to run until the 90-day window for seeking a writ of certiorari in the Supreme Court expires.).
On January 17, 2001, Taylor signed and deposited a pro se petition for a writ of habeas corpus, directed to the Superior Court of Chattooga County, into the prison mail system. The clerk of that court filed Taylor’s petition on February 2, 2001. On August 26, 2002, following two evidentiary hearings, the superior court denied relief. The Georgia Supreme Court denied Taylor a certificate of probable cause to appeal that decision on October 25, 2004.
On July 8, 2005, Taylor, proceeding pro se, signed the habeas petition now before us and presumably delivered it to the prison authorities for mailing. It was received by the clerk of the United States District Court for the Northern District of Georgia four days later. Warden Williams, the respondent, moved the court to dismiss the petition as untimely, arguing that Taylor failed to file it within AED-PA’s one-year limitations period. As noted above, the district court dismissed the petition as time-barred on October 26, 2006.
II.
A.
In this case, AEDPA’s one-year limitations period began to run on October 3, 2000, the undisputed date that Taylor’s convictions became final. See 28 U.S.C. § 2244(d)(1)(A). Thus, absent a tolling of the one-year limitations period, Taylor had until October 3, 2001, to file the instant petition.
AEDPA’s limitations period is tolled while “a properly filed application for State post-conviction or other collateral review ... is pending.” 28 U.S.C. § 2244(d)(2). Taylor argues that we should use January 17, 2001, the date he signed his state habe-as petition and deposited it into the prison mail system, as the date that the petition was properly filed for tolling purposes. Warden Williams responds that February 2, 2001, the date the clerk of the Superior Court filed Taylor’s petition, is the appropriate date to begin tolling the limitations period. This distinction is of utmost importance. If tolling began on the date Taylor signed his petition, then only 362 days passed before he filed his federal petition. However, if tolling began on February 2, 2001, when Taylor’s state petition was filed by the clerk of the Superior Court, then 378 days elapsed, and the instant petition would be time-barred under AEDPA. Our decision in this case, therefore, turns on when Taylor “properly filed” his state habeas petition, thereby tolling the one-year limitations period for filing his federal petition.
B.
To determine when a state habeas petition has been “properly filed,” we look to the applicable state law governing filings. See Artuz v. Bennett, 531 U.S. 4, 8, 121 S.Ct. 361, 364, 148 L.Ed.2d 213 (2000); Wade v. Battle, 379 F.3d 1254, 1260 (11th Cir.2004). At the outset, it is important to note that the particular question before us has not been addressed by the Georgia courts. See Wade, 379 F.3d at 1258 n. 2 (“[W]e are aware of no Georgia court applying the mailbox rule to initial pro se state habeas petitions.”). A lack of explicit Georgia precedent on an issue, however, does not absolve us of our duty “to decide what the state courts would hold if faced with [the issue].” Arceneaux v. Texaco, Inc., 623 F.2d 924, 926 (5th Cir.1980) (citations omitted). . We must anticipate what the Georgia Supreme Court would say. See Ernie Havre Ford, Inc. v. Ford Motor Co., 260 F.3d 1285, 1290 (11th Cir.2001).
In Massaline v. Williams, 274 Ga. 552, 554 S.E.2d 720, 722-23 (2001), the Georgia Supreme Court adopted the mailbox rule when a pro se prisoner seeks to appeal from a superior court decision denying his habeas corpus petition. Adopting the reasoning of Houston v. Lack, 487 U.S. 266, 108 S.Ct. 2379, 101 L.Ed.2d 245 (1988), the Massaline court recognized that a mailbox rule was necessary because of the “unique obstacles” faced by pro se prisoners:
Unlike litigants who are not incarcerated, pro se prisoners cannot monitor the processing of their appellate filings to ensure that the clerk of the court timely receives them .... And, of course, being pro se, they cannot rely on their lawyer to ensure the safe and timely filing of their appeals. Pro se prisoners also must entrust their legal papers to the prison officials, even though the warden is typically the named defendant in a habeas corpus action.
Massaline, 274 Ga. at 552-53, 554 S.E.2d 720 (citing Houston, 487 U.S. at 270-72, 108 S.Ct. at 2382, 101 L.Ed.2d 245).
The rationale of Massaline applies equally in the case, at. hand. We discern no basis for distinguishing between a pro se prisoner filing a habeas petition and a pro se prisoner filing a habeas appeal, and we have no reason to believe that the Georgia Supreme Court would find one. “[Ajdopting a mailbox rule for pro se prisoners promotes judicial fairness and helps assure that habeas corpus cases are decided on the merits and not the overly technical application of procedural rules.” Id. at 722.
We therefore hold that Taylor’s state habeas petition was “properly filed” when Taylor deposited it into his prison’s mail system on January 17, 2001. This was three days prior to the expiration of AED-PA’s one-year limitations period and thus was timely. The judgment of the district court is accordingly vacated, and the case is remanded for further proceedings.
VACATED and REMANDED.
. 28 U.S.C. § 2254(a) provides that:
[t]he Supreme Court, a Justice thereof, a circuit judge, or a district court shall entertain an application for a writ of habeas corpus in behalf of a person in custody pursuant to the judgment of a State court only on the ground that he is in custody in violation of the Constitution or laws or treaties of the United States.
. 28 U.S.C. § 2244(d)(1) states, in pertinent part:
A l-year period of limitation shall apply to an application for a writ of habeas corpus by a person in custody pursuant to the judgment of a State court. The limitation shall run from the latest of—
(A) the date on which the judgment became final by the conclusion of direct review or the expiration of the time for seeking such review ....
. Under the federal "mailbox rule,” a pro se federal habeas petition is deemed to be filed on the date it is delivered to prison authorities for mailing. Alexanderv. Secy, Dep't of Corr., 523 F.3d 1291, 1294 n. 4 (11th Cir.2008). After filing his petition, Taylor retained counsel and, on December 21, 2005, counsel filed an amended habeas petition.
. We review a district court’s determination that a § 2254 petition is time-barred under AEDPA de novo. Wade v. Battle, 379 F.3d 1254, 1259 n. 5 (11th Cir.2004).
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5702694-10513 | MEMORANDUM OPINION
Denying the Plaintiffs’ Motion for Relief from Order Dismissing Case and for Leave to File a Third Amended Complaint
RICARDO M. URBINA, District Judge.
I. INTRODUCTION
This matter comes before the court on the plaintiffs’ motion for relief from the court’s order dismissing this case and for leave to file a third amended complaint. The plaintiffs, current and former employees of the District of Columbia Department of Corrections, brought constitutional and state law tort claims against the District of Columbia after the Department of Corrections terminated their employment. In March 2008, the court issued an order dismissing the plaintiffs’ amended complaint, determining that the plaintiffs had failed to exhaust their administrative remedies before filing suit. The plaintiffs now seek relief from that order. Because the plaintiffs still have not exhausted their administrative remedies, however, the court sees no reason to grant the requested relief. Accordingly, the court denies the plaintiffs’ motion.
II. FACTUAL & PROCEDURAL BACKGROUND
As the facts underlying this case were discussed in more detail in the court’s memorandum opinion of March 18, 2008, 538 F.Supp.2d 269, see Mem. Op. (Mar. 18, 2008) at 2-4, 538 F.Supp.2d at 272-73, the court will only briefly summarize them here. Following two inmates’ highly publicized escape from the District of Columbia Central Detention Facility in June 2006, see Am. Compl. ¶ 3, the defendants summarily terminated the plaintiffs’ employment in or about August 2006, see id. ¶¶ 9-15. Pursuant to the procedures established in the Comprehensive Merit Personnel Act (“CMPA”), D.C.Code §§ 1-601.01 et seq., the plaintiffs initiated an administrative action in the Office of Employee Appeals (“OEA”) contesting the propriety of their termination, see Am. Compl. ¶ 16.
While the administrative action was still proceeding in the OEA, the plaintiffs filed a complaint against the defendants in this court in June 2007. See generally Compl. Shortly thereafter, the plaintiffs filed an amended complaint asserting a procedural due process claim under 42 U.S.C. § 1983, as well as common law tort claims of “defamation plus” and intentional and negligent infliction of emotional distress. See Am. Compl. ¶¶ 32-57. The defendants filed a motion to dismiss the amended complaint in July 2007, which the court granted on March 18, 2008. See Order (Mar. 18, 2008). As the court explained in the memorandum opinion accompanying the order, the dismissal was appropriate because the plaintiffs had failed to exhaust their administrative remedies before filing suit. See Mem. Op. (Mar. 18, 2008) at 6-17, 538 F.Supp.2d at 274-80.
In July 2009, the plaintiffs filed the instant motion requesting relief from the court’s March 18, 2008 order. See gener ally Pis.’ Mot. The defendants filed an opposition on August 11, 2009, see generally Defs.’ Opp’n, to which the plaintiffs replied on August 18, 2009, see generally Pis.’ Reply. The court turns now to the applicable legal standard and the parties’ arguments.
III. ANALYSIS
A. Legal Standard for Relief Under Federal Rule of Civil Procedure 60(b)
In its discretion, the court may relieve a party from an otherwise final judgment pursuant to any one of six reasons set forth in Rule 60(b). Fed.R.CivP. 60(b); Lepkowski v. Dep’t of Treasury, 804 F.2d 1310, 1311-12 (D.C.Cir.1986). First, the court may grant relief from a judgment involving “mistake, inadvertence, surprise, or excusable neglect.” Fed. R.CivP. 60(b)(1). Relief under Rule 60(b)(1) turns on equitable factors, notably whether any neglect was excusable. Pioneer Inv. Servs. Co. v. Brunswick Associates Ltd. P’ship, 507 U.S. 380, 392, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993). Second, the court may grant relief where there is “newly discovered evidence” that the moving party could not have discovered through its exercise of due diligence. Fed. R.CrvP. 60(b)(2). Third, the court may set aside a final judgment for fraud, misrepresentation or other misconduct by an adverse party. Id. 60(b)(3); Mayfair Extension, Inc. v. Magee, 241 F.2d 453, 454 (D.C.Cir.1957). Specifically, the movant must show that “such ‘fraud’ prevented him from fully and fairly presenting his case,” and that “the fraud is attributable to the party or, at least, to counsel.” Richardson v. Nat’l R.R. Passenger Corp., 150 F.R.D. 1, 7 (D.D.C.1993) (internal citations omitted). Fourth, the court may grant relief in cases in which the judgment is “void.” Fed.R.CivP. 60(b)(4). A judgment may be void if the court lacked personal or subject matter jurisdiction in the ease, acted in a manner inconsistent with due process or proceeded beyond the powers granted to it by law. Eberhardt v. Integrated Design & Constr., Inc., 167 F.3d 861, 871 (4th Cir.1999). Fifth, the court may grant relief if the “the judgment has been satisfied, released, or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable.” Fed. R.CivP. 60(b)(5); Twelve John Does v. District of Columbia, 841 F.2d 1133, 1138 (D.C.Cir.1988) (noting that not all judgments having continuing consequences are “prospective” for the purposes of Rule 60(b)(5)). Sixth, the court may grant relief from a judgment for “any ... reason that justifies [such] relief.” Fed.R.CivP. 60(b)(6). Using this final catch-all reason sparingly, courts apply it only in “extraordinary circumstances.” Pioneer Inv. Servs., 507 U.S. at 393, 113 S.Ct. 1489.
A party proceeding under one of the first three reasons must file his Rule 60(b) motion within one year after the judgment at issue. Fed.R.CivP. 60(c)(1). A party relying on one of the remaining three reasons may file his Rule 60(b) motion within a reasonable time. Id. The party seeking relief from a judgment bears the burden of demonstrating that he satisfies the prerequisites for such relief. McCurry ex rel. Turner v. Adventist Health Sys./Sunbelt, Inc., 298 F.3d 586, 592 (6th Cir.2002).
B. The Court Denies the Plaintiffs’ Motion for Relief from the Order of March 18, 2008 and for Leave to File a Third Amended Complaint
Invoking Federal Rules of Civil Procedure 60(b)(5) and 60(b)(6), the plaintiffs ask that the court grant them relief from its order of March 18, 2008. See generally Pis.’ Mot. Although they acknowledge that the administrative proceedings have yet to conclude, see id. at 1-2, they assert that the administrative judge refused to consider their constitutional claims, see id. at 2. “Therefore,” the plaintiffs argue, “insofar as [they] were required to pursue their administrative remedies to exhaustion, they have no administrative remedies with regard to the violations of their constitutional rights. This Court is the only open venue for them.” Id. The plaintiffs ask that the court reopen, and then stay, this case while they exhaust their administrative remedies with respect to their state law tort claims. See id. The plaintiffs’ request is premised on their concern that the statute of limitations on their claims will have run by the time their administrative remedies are exhausted. See id. at 3.
The plaintiffs assert that they are entitled to relief from the court’s March 2008 order under both Rule 60(b)(5) and Rule 60(b)(6). See id. at 3-4. Rule 60(b)(5) entitles them to relief, they maintain, because “applying [the March 2008 memorandum opinion and order] prospectively is no longer equitable” in that it may result in the running of the statute of limitations. Id. Likewise, the plaintiffs contend, the catch-all provision articulated in Rule 60(b)(6) entitles them to relief because they “would be severely prejudiced if the statute of limitations ran on their claims.” Id. at 4.
The defendants oppose the plaintiffs’ motion, arguing first that Rule 60(b)(5) applies only to judgments that “apply prospectively and thus require[ ] future consequences or implications.” Defs.’ Opp’n at 1. The defendants assert that in the court’s March 2008 order, rather than prescribing a future course of conduct, the court simply dismissed the plaintiffs’ complaint outright. Id. at 1-2. Accordingly, the defendants argue, the plaintiffs’ reliance on Rule 60(b)(5) is misplaced. Id.
Turning their attention to Rule 60(b)(6), the defendants emphasize the stringent standard applied to requests for relief under this provision. Id. at 3. The defendants assert that the plaintiffs’ motion constitutes an improper attempt to reargue a legal theory upon which the court has already ruled, namely, the contention that the plaintiffs need not exhaust their administrative remedies with respect to their state law claims before asserting constitutional claims in this court. Id. at 4-5. Moreover, the defendants argue, the fact that the plaintiffs’ request under Rule 60(b)(6) is based on their purported entitlement to equitable tolling is unavailing because the court is in no position to determine whether the statute of limitations should be equitably tolled before the plaintiffs have exhausted their administrative remedies. Id. at 5-6.
The court firmly agrees with the defendants that the plaintiffs’ request lacks merit. As the court held in its March 2008 memorandum opinion, because the plain tiffs’ state law tort claims and their constitutional claims “are ‘premised on the same facts’ and ‘the administrative process [is] fully capable of granting full relief,’” the plaintiffs must exhaust their administrative remedies before bringing suit in this court. Mem. Op. (Mar. 18, 2008) at 13, 538 F.Supp.2d at 278 (citing Nat’l Treasury Employees Union v. King, 961 F.2d 240, 243 (D.C.Cir.1992)). “Were the court to decide the merits of the plaintiffs’ constitutional claims now,” the court explained, “it would prejudge local procedural questions pending before a local adjudicatory body.” Id. at 277.
The fact that the administrative judge recently refused to consider the plaintiffs’ constitutional claims in the OEA proceedings, see Pis.’ Mot. at 2, 4, does not alter this determination. As the court stated in its March 2008 memorandum opinion, the plaintiffs are barred from asserting their constitutional claims in this court pending exhaustion of their administrative remedies not because the administrative proceeding may yield a ruling on those claims, but rather, because resolution of the state law claims may obviate the need for the court to rule on the constitutional claims. See Mem. Op. (Mar. 18, 2008) at 12-13, 538 F.Supp.2d at 277-78.
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1318046-6485 | AINSWORTH, Circuit Judge.
Perry Russell Tunnell was convicted on each of three counts for willfully attempting to evade federal income tax during the years 1965, 1966, and 1967, in violation of 26 U.S.C. § 7201 (1970). The central issue on appeal concerns the sufficiency of the Government’s evidence based on the net worth method. We affirm.
I.
One of the essential elements which the Government had to prove was that taxpayer owed tax on at least some unreported income for each of the three years named in the indictment. Because taxpayer’s records were inadequate, the Government utilized the so-called “net worth method” described and approved in the leading Supreme Court case of Holland v. United States, 348 U.S. 121, 125, 75 S.Ct. 127, 130, 99 L.Ed. 150 (1954):
In a typical net worth prosecution, the Government, having concluded that the taxpayer’s records are inadequate as a basis for determining income tax liability, attempts to establish an “opening net worth” or total net value of the taxpayer’s assets at the beginning of a given year. It then proves increases in the taxpayer’s net worth for each succeeding year during the period under examination and calculates the difference between the adjusted net values of the taxpayer’s assets at the beginning and end of each of the years involved. The taxpayer’s nondeductible expenditures, including living expenses, are added to these in creases, and if the resulting figure for any year is substantially greater than the taxable income reported by the taxpayer for that year, the Government claims the excess represents unreported taxable income. In addition, it asks the jury to infer willfulness from this understatement, when taken in connection with direct evidence of “conduct, the likely effect of which would be to mislead or to conceal.” Spies v. United States, 317 U.S. 492, 499 [63 S.Ct. 364, 368, 87 L.Ed. 418].
See also United States v. Newman, 5 Cir., 1972, 468 F.2d 791, cert. denied, 411 U.S. 905, 93 S.Ct. 1527, 36 L.Ed.2d 194 (1973); Lee v. United States, 5 Cir., 1972, 466 F.2d 11. In the present case the Government determined the correct taxable income and tax to be the amounts set out below, compared to the taxable income and. tax actually reported by Tunnell on his returns, as follows:
Government Determination Tunnell Reported
Year Income Tax Income Tax
1965 $ 9,236.73 $ 971.55 $ 181.52 $ 142.08
1966 35,579.77 5,942.14 2,241.98 113.33
1967 34,783.42 7,738.31 (20,864.63) -0-
To rely on determinations of income by the net worth method, it was necessary that the Government establish Tunnell’s opening net worth at the start of 1965 with reasonable certainty, introduce evidence supporting the inference that his net worth increased due to currently taxable income, and negate all reasonable explanations and leads furnished by Tunnell which were inconsistent with guilt. See Holland, 348 U.S. at 132, 135, 137, 75 S.Ct. at 134-136. In examining the record we find that the Government sustained its burden.
Based on a detailed financial analysis, the Government determined Tunnell’s assets on December 31, 1964 to be $57,686.89, including cash on hand, cash in banks, the Pines Motel and Trailer Park, some farm land he inherited, mobile homes, automobiles, trucks, and deferred expenses. But he had offsetting liabilities of $64,447.55, so the Government set his opening net worth at a deficit of $6,760.66, which we find to. be fully supported by the record. Counsel for taxpayer objected to the Government’s introduction into evidence of tax returns for 1962, 1963, and 1964, and when the jury during its deliberations requested the 1963 and 1964 returns, counsel also objected to the district judge’s allowing the jury to see the returns again. These returns were admissible and could be viewed by the jury at its request, because the small amounts of income reflected in these returns were relevant to corroborate the asserted deficit net worth as of December 31, 1964. The returns consistently showed the taxpayer had little income during the prior three years. Furthermore, the district judge gave the jury a proper limiting instruction that the documents could only be considered for the limited purpose of determining Tunnell’s opening net worth.
The Government showed that the likely source of Tunnell’s net worth increases was from taxable income, as opposed to exempt income, by showing that he could have had income from the Pines Motel other than that reported. Appellant objected to testimony that this motel, in addition to providing the taxable income generally expected, also provided Tunnell with an opportunity for income from prostitution activities. This was necessarily admissible to fulfill the Government’s responsibility under Holland of showing a likely source for the unreported income over the three-year period. Tunnell, himself, volunteered the information to a Government agent that he had two to four girls working for him during all three years of 1965 through 1967 and that he made as much as $12,000 from their prostitution in one year. This income was taxable even if it was unlawful. See James v. United States, 366 U.S. 213, 219, 81 S.Ct. 1052, 1055, 6 L.Ed. 246 (1961).
The only leads furnished by taxpayer as inconsistent with guilt were that he had available $20,000 to $21,000 from the sale of a motel in Galveston during the prior tax year of 1964, that he “floated” checks, and that he borrowed money to live on during the years 1965 through 1967. The sale of the motel was reported on his 1964 return as a loss, and the correctness of that return was not disputed by the Government. Thus no tax was due on the proceeds received from the sale at an amount less than the basis. But contrary to appellant’s assertion in his brief that he had $20,000 available as a result of the sale, testimony by one of two other people with interests in the motel indicates that a promissory note of about $15,000 had to be paid after the sale and the remaining $5,000 from the sale was divided among three people, so that Tunnell probably got less than $2,000.
“Floating” checks was defined as writing a- check in excess of the amount in the bank account but then depositing money from another account in time to cover the check. Evidence indicates that Government agents thoroughly reviewed Tunnell’s assets and liabilities and bank accounts to negate either his borrowing money or his floating checks as sufficient to account for the net worth increases.
II.
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9145722-14945 | MEMORANDUM OPINION
HEYBURN, Chief Judge.
This case arises out of disciplinary action the Jefferson County Corrections Department took against an employee, James Higgins, which resulted in his termination. Plaintiff now alleges violations of his constitutional due process rights. Higgins alleges that Defendants violated both his property interest in his employment or the liberty interest in preserving the integrity of his name. The analysis for each is essentially the same. The Court concludes that the notice and hearing Plaintiff actually received prior to his termination together with the availability of more extensive hearings afterwards protected all his con stitutional due process rights. The Court therefore will sustain Defendants’ motion for summary judgment.
I.
On June 16, 2002, Plaintiff restrained a belligerent arrestee and during the course of doing so, a struggle ensued and the arrestee was injured. Soon thereafter, Plaintiff gave oral statements to his immediate supervisor and completed an extraordinary incident report. After police staff reviewed a video of the incident, Lieutenant Colonel Green (“Lt.Green”) placed Plaintiff on “no inmate contact” orders pending further review of the incident. On June 18, Lt. Green reviewed the incident on video and placed Plaintiff on administrative leave of absence pending an investigation by the Department of Corrections. He notified Plaintiff by sending both a suspension letter and a Disciplinary Action Notice (the “Action Notice”). The suspension letter indicated he was to report on June 21 for his administrative hearing. The Action Notice stated the charges against Plaintiff, described the incident, and set out the reasoning behind the charges. Lt. Green did not interview Plaintiff in the course of his investigation as required by the then applicable Collective Bargaining Agreement between Jefferson County and the Teamsters Local Union 783 (the “CBA”).
On June 21, Lt. Green once again served Plaintiff with the Action Notice this time in the presence of his union steward, Officer Anthony Summerall, and Plaintiff signed it. Defendants assert that after serving Plaintiff the Action Notice, a disciplinary action meeting was held with Plaintiff, Lt. Green, and the union steward all present. Plaintiff admits that he did speak during this meeting, mostly apologizing for the incident, but asserts that there was no real or meaningful “opportunity to be heard” and amounted to a direct firing. Plaintiff was then given a letter terminating his employment.
On June 24, Plaintiff submitted a grievance to appeal the disciplinary action. Plaintiff followed Step 1 of the grievance procedure set out in Article 7, Section 4(B), by submitting a written appeal to Chief of Corrections Horton as to the discipline imposed in the June 21 disciplinary action meeting. A few days later, Defendant Horton denied the grievance. Plaintiff did not proceed to Step 2 of the mediation and the grievance process, therefore, ended.
Plaintiff argues that Defendants violated his procedural due process rights by failing to provide him with an opportunity to be heard prior to his termination. Defendants have moved to dismiss all of Plaintiffs constitutional law claims pursuant to Fed.R.Civ.P. 12(b)(6), or in the alternative summary judgment pursuant to Fed. R.Civ.P. 56(c). The only issue is whether the disciplinary action meeting and other procedures provided Plaintiff with an adequate due process during and after the termination process.
II.
The Supreme Court has said that prior to termination a public employee dismissable only for cause is entitled to a limited pre-termination hearing followed by a more comprehensive post-termination hearing. Cleveland Board of Education v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985). An employee is not entitled to a full evidentiary hearing prior to termination, but is entitled to (1) notice of the charges against him and (2) an opportunity to respond either orally or in writing before discharge. See id. The pre-termination process “should be an initial check against mistaken decisions — essentially, a determination of whether there are reasonable grounds to believe that the charges against the employee are true and support the proposed action.” Id. at 545-546, 105 S.Ct. 1487. The Sixth Circuit has explained that a public employee terminable only for “just cause” under the CBA, had a constitutional right 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.” Buckner v. City of Highland Park, 901 F.2d 491, 494 (6th Cir.1990). “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.” Loudermill, 470 U.S. at 546, 105 S.Ct. 1487.
The pre-termination process need not be elaborate, and the amount of process depends, in part, on the importance of the competing interests at stake. Id. at 542, 105 S.Ct. 1487; see also FDIC v. Mallen, 486 U.S. 230, 240, 108 S.Ct. 1780, 100 L.Ed.2d 265 (1988); Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972). The specific dictates of due process are determined by considering factors such as the employee’s interest in retaining employment, the governmental interest in the expeditious removal of unsatisfactory employees and the avoidance of administrative burdens, and the risk of an erroneous termination. See Loudermill, 470 U.S. at 542-43, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985) (citing Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976)).
Here Plaintiff received notice of the pending termination when he was
served with the Action Notice. The only question is whether Plaintiff had an “opportunity to be heard” before his discipline — an explanation of the employer’s evidence and an opportunity to present his side of the story. Id. at 542, 105 S.Ct. 1487. Plaintiff did have an opportunity to explain his side of the incident immediately after it occurred and then wrote his synopsis of events in his extraordinary incident report. Lt. Green’s June 18 letter suspended Plaintiff pending a Corrections Department investigation and set the date for an administrative hearing. The original Action Notice, served on June 19, explained the charges with great specificity and also detailed which actions violated specific provisions of the CBA. Defendants were not constitutionally required to share their internal investigation or include Plaintiffs input in such an investigation. See Parks v. City of Chattanooga, No. 01-6543, 2003 WL 21674749, at *1, 74 Fed.Appx. 432, 442-443 (6th Cir. July 16, 2003).
Plaintiffs own recollection of the June 21 disciplinary action meeting is that he was instructed to sign the Action Notice and told that he would be escorted from the building. The report of the incident was read to him. Plaintiff asked for per mission to speak. He spoke briefly and apologized for his actions, stating that he had no intention of inflicting injury on the inmate. Plaintiff asserts that even though he spoke about his case, he was never given a chance to clarify any questions, fix any discrepancies of his report, or to speak on his own behalf. Nevertheless, Plaintiff did have an opportunity to speak at the pre-termination hearing, even if briefly. Pre-termination due process requires only that an employee have the opportunity to respond after being confronted, regardless if the employee fails to take the opportunity or put it to its best and intended use. See Buckner, 901 F.2d at 496.
The application of Loudermill requires the Court to balance the competing interests of the government in terminating an unsatisfactory employee and the employee in retaining his property right in a job. 470 U.S. at 546, 105 S.Ct. 1487. The government has an interest in the abbreviated pre-termination process. See Morrison v. Warren, 375 F.3d 468, 476 (6th Cir.2004). Plaintiff was charged with protecting citizens, the government’s interest in effective law enforcement is extremely high, and the need to replace officers who are using unnecessary excessive force against inmates is obvious. Id. Defendants’ interest in efficiently employing safe and effective law enforcement balances Plaintiffs interest in reinstatement or less discipline, particularly when there was actual evidence of excessive force on video and Plaintiff was given multi-levels of disciplinary action. Id.
The purpose of a pre-termination hearing — to assure that there are reasonable grounds to support the termination — was assured by Defendants’ multi-tier level of pre-termination review of the incident. Plaintiff had an initial discussion with his immediate supervisor; he provided a synopsis of the event in his “extraordinary” incident report; the staff reviewed a videotaped surveillance of the incident before Plaintiff was put on “no inmate” duty; Lt. Green reviewed the video before placing Plaintiff on suspension pending the Corrections’ investigation; and Plaintiff had a disciplinary action meeting, with his union steward present, after notice of disciplinary action pursuant to the Action Notice. Even though Defendants may have had discretion not to terminate Plaintiff, that does not mean that Plaintiff is entitled to unlimited opportunities for argument. See FDIC, 486 U.S. at 234-235, 108 S.Ct. 1780. Instead, only some meaningful opportunity to invoke the discretion of the decision maker needed to be provided. See Loudermill, 470 U.S. at 543, 105 S.Ct. 1487; see also Gilbert v. Homar, 520 U.S. 924, 934, 117 S.Ct. 1807, 138 L.Ed.2d 120 (1997). Plaintiff received that opportunity.
The adequacy of pre-termination due process is not completely separable from the extent of post-termination remedies available. The availability of posUdeprivation remedies allows for an even less formal pre-termination hearing. See Guarino v. Brookfield Township Trustees, 980 F.2d 399, 409 (6th Cir.1992); see also Leary v. Daeschner, 228 F.3d 729, 743 (6th Cir.2000). The abbreviated pre-termination hearing, or an “initial check against mistaken decisions,” is all that is necessary where an employee is provided with a full post-termination hearing that is substantially more meaningful. See Mitchell v. Fankhauser, 375 F.3d 477, 481 (6th Cir.2004). The CBA provides comprehensive post-termination mediation, arbitration, and other post-discipline procedures that provide a “meaningful” post-termination process. The availability of such a system of post-termination procedures that includes arbitration, coupled with a pre-ter-mination right of reply hearing, provides an employee with all the process due. See Farhat v. Jopke, 370 F.3d 580, 596 (6th Cir.2004). That an employee fails to take advantage of such post-termination processes is irrelevant. The adequacy of pretermination procedures is determined by the availability of more elaborate post-termination review. Id.; see also Parks, 2003 WL 21674749 at *7, 74 Fed.Appx. at 442. Inasmuch as Plaintiff received notice of the charges against him and was afforded an opportunity to rebut them, the pre-termination hearing satisfies constitutional requirements. See Morrison, 375 F.3d 468, 474-75. Therefore, the Court finds that Plaintiff was given all the pre-termi-nation process required by the Fourteenth Amendment.
The Court will enter an order consistent with this Memorandum Opinion.
ORDER
Defendants have moved for summary judgment on all of Plaintiffs remaining claims. The Court has considered the evidence and being otherwise sufficiently advised,
IT IS HEREBY ORDERED that Defendants motion shall be SUSTAINED and all of. Plaintiffs claims are DISMISSED WITH PREJUDICE.
This is a final order.
. Because Plaintiff was a non-probationary sworn officer his discipline was governed by the Teamster's CBA. Article 6 of the CBA preserves and acknowledges Jefferson County government's authority to terminate employees for proper cause, and Article 19 permits termination for a first offense if such offense is a major offense like excessive force.
. Article 19, Section 3 of the CBA requires that an employee be entitled to have one union representative present at a disciplinary action meeting.
. Section 4(B) of Article 7 is post-discipline procedures for grievances as to termination.
. Article 7, Grievance Procedure, Section 4(B), Grievances regarding termination or demotion shall be settled in the following manner:
Step 1. Within seven (7) working days from the date an employee knew or should have known of an alleged infraction giving rise to a grievance, the employee may present a written grievance to the Chief of Corrections, with a copy to the Chief Union Steward. The Chief shall give a written answer to the employee within seven (7) working days after such presentation with a copy to the Chief Union Steward.
.Step 2. If the employee is not satisfied with the answer from the Chief of Corrections, a written grievance concerning termination or demotion shall be appealed by requesting mediation within seven (7) working days of receipt of the Chief's response.
. As stated in the Court's former Memorandum and Opinion, no one disputes Plaintiff's constitutional property interest in his employment under the CBA. Leary v. Daeschner, 228 F.3d 729, 742 (6th Cir.2000). The determination of a cognizable property interest is the first step in a procedural due process analysis under the Fourteenth Amendment. See Johnston-Taylor v. Gannon, 907 F.2d 1577, 1581 (6th Cir.1990). The real question presented by Defendants' previous and current motion to dismiss is whether the pre-termination procedures afforded to Plaintiff were constitutionally sufficient, i.e., whether Plaintiff has sufficiently alleged that he was deprived of the right to present his side of the story prior to termination. The Court earlier concluded that whether Plaintiff alleged facts sufficient to establish a denial of notice or an opportunity to be heard was not absolutely clear because the facts were not sufficiently set out. The Court noted that it may need an eviden-tiary hearing to resolve this issue. See Johnston-Taylor, 907 F.2d at 1582.
The Court reached the same conclusion on Plaintiff's claim that he was deprived of a liberty interest because he was stigmatized and his reputation injured by the suspension, charges, and termination, i.e., that as a matter of law it would be impossible for Plaintiff to prevail on this claim. The Court stated that since the Constitution requires no formal procedure, any opportunity Plaintiff had to prove the falsity of the charges against him prior to termination would seem to be sufficient. Chilingirian v. Boris, 882 F.2d 200, 205-206 (6th Cir.1989). However, as already explained, it was unclear whether Plaintiff was presented with a pre-termination opportunity to contest the charges.
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4056081-18996 | HAYNES, Circuit Judge:
Kellogg Brown & Root, L.L.C., (“KBR”) appeals from the judgment entered against it following a bench trial on Aubrey Clark’s Jones Act, maintenance and cure, and unseaworthiness claims against his former employer. The district court held KBR liable on the Jones Act personal injury theory alone, finding that Clark was exposed to benzene while working for KBR and that this exposure “caused” Clark’s acute myelogenous leukemia (“AML”) under that statute. KBR argues on appeal that the district court applied the wrong standard for causation and that the district court clearly erred in finding that the benzene to which Clark was exposed while working for KBR caused his AML.
We find no abuse of discretion in the district court’s challenged evidentiary rulings, no clear error in its findings of fact, and no reversible error in its conclusions of law. We therefore AFFIRM.
I. Facts & Procedural History
Aubrey Clark worked for Brown & Root Marine Operators (“Brown & Root”), a predecessor of KBR, from 1972 to 1986 as a helper, rigger, and leadman aboard various barges owned by Brown & Root. The parties agree that Clark was a “seaman” under the Jones Act, 46 U.S.C. § 30104. The district court found that, while working for Brown & Root, Clark was exposed to benzene. Specifically, the district court found that
[djuring the course and scope of his employment with Brown & Root ..., Mr. Clark was exposed to benzene provided to him for use in his employment. He used benzene as a solvent to clean his tools, his hands, and his equipment. The benzene was contained in a drum stored ... on the barge.... Mr. Clark used benzene, on average, about every other day; however, the number of times he used it varied from day to day and from week to week. He would use benzene anywhere from fifteen minutes to a couple of hours. Mr. Clark was close enough to the benzene to feel lightheaded sometimes. He stopped using benzene in the late 1970s.
(record citations omitted).
On April 10, 2006, Clark was diagnosed with AML. On May 16, 2007, Clark filed suit in admiralty in the United States District Court for the Eastern District of Texas. Clark alleged that his benzene exposure while working for Brown & Root had caused his AML, and that KBR was liable to him for personal injury under the Jones Act as well as under admiralty theories of maintenance and cure and unseaworthiness.
The district court held a three-day bench trial and entered findings of fact and conclusions of law finding KBR liable to Clark under the Jones Act but rejecting all other grounds of liability. Clark died shortly after trial. The district court entered a final judgment on April 29, 2009, and, pursuant to timely motions to alter or amend the judgment, an amended final judgment on October 22, 2009. The amended final judgment awarded relief to Richard Clark, administrator of Clark’s estate, (the “Clark Estate”) and against KBR.
KBR timely appealed, asserting that the district court applied the wrong standard of proof and made factual, legal, and evi-dentiary errors with respect to the question of whether benzene exposure caused Clark’s AML.
II. Standard of Review
“Our standard of review for bench trials is well established: findings of fact are reviewed for clear error; legal issues, de novo.” Seal v. Knorpp, 957 F.2d 1230, 1234 (5th Cir.1992). The “clear error” standard, codified in Federal Rule of Civil Procedure 52(a), requires us to defer to the district court’s findings of fact except where, after reviewing the entire record, we are “left with the definite and firm conviction that a mistake has been committed.” Justiss Oil Co. v. Kerr-McGee Ref. Corp., 75 F.3d 1057, 1062 (5th Cir.1996) (citing United States v. U.S. Gypsum, Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)). This standard is highly deferential to the right of the district court to determine facts in that the
standard plainly does not entitle a reviewing court to reverse the finding of the trier of fact simply because it is convinced that it would have decided the case differently.... If the district court’s account of the evidence is plausible in light of the record viewed in its entirety, the court of appeals may not reverse it even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence differently. Where there are two permissible views of the evidence, the factfinder’s choice between them cannot be clearly erroneous.
Anderson v. City of Bessemer City, 470 U.S. 564, 573-74, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). These standards apply identically in admiralty cases. Tittle v. Aldacosta, 544 F.2d 752, 753 (5th Cir.1977).
We review the district court’s decision to admit expert testimony for an abuse of discretion. See, e.g., United States v. Hicks, 389 F.3d 514, 524 (5th Cir.2004); see also Gen. Elec. Co. v. Joiner, 522 U.S. 136, 141-42, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997). The scope of this discretion is unquestionably “wide,” see, e.g., Watkins v. Telsmith, Inc., 121 F.3d 984, 988 (5th Cir.1997), and “applies as much to the trial court’s decisions about how to determine reliability as to its ultimate conclusion,” Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).
III. Analysis
KBR focuses its appeal on three asserted errors. First, KBR argues that the district court improperly applied the “featherweight” causation standard to Clark’s Jones Act claim rather than a “proximate” causation standard. Second, KBR argues that the district court’s finding of fact that benzene was a specific cause of Clark’s AML was clearly errone ous. This argument is closely related to KBR’s third contention: that the court abused its discretion in allowing Clark’s expert causation witnesses to testify. We address these arguments in turn, treating the asserted specific causation errors together.
A. Standard for Causation
The standard of proof for causation in Jones Act cases has been recited many times in this circuit’s precedent. Our most definitive statement of the law is found in Gautreaux v. Scurlock Marine, where the en banc court articulated the standard as follows:
A seaman is entitled to recovery under the Jones Act ... if his employer’s negligence is the cause, in whole or in part, of his injury. In their earlier articulations of [this standard of] liability, courts had replaced the phrase “in whole or in part” with the adjective “slightest.” In Rogers v. Missouri Pacific R. Co., 352 U.S. 500, 506 [77 S.Ct. 443, 1 L.Ed.2d 493] (1957), the Supreme Court used the term “slightest” to describe the reduced standard of causation between the employer’s negligence and the employee’s injury in [Federal Employers’ Liability Act (“FELA”) ] cases. In Ferguson v. Moore-McCormack Lines, Inc., 352 U.S. 521, 523, 77 S.Ct. 459, 1 L.Ed.2d 515 (1957), the Court applied the same standard to a Jones Act case, writing, “ ‘Under this statute the test of a jury case is simply whether the proofs justify with reason the conclusion that employer negligence played any part, even the slightest, in producing the injury or death for which damages are sought.’ ” (quoting Rogers, 352 U.S. at 506, 77 S.Ct. [443]).
107 F.3d 331, 335 (5th Cir.1997) (en banc). We have explained that the standard is one of “producing cause” rather than “proximate cause” and that the burden of proof is “featherweight.” Chisholm v. Sabine Towing & Transp. Co., 679 F.2d 60, 62 (5th Cir.1982). Thus, two concepts come into play here—the type of causation that must be shown (producing) and the plaintiffs burden to show that cause (featherweight).
KBR argues that the court’s precedents reflect a misapprehension of the statute and contends that Justice Souter’s concurring opinion in Norfolk Southern Railway v. Sorrell rejects the producing cause standard in favor of the usual proximate cause requirement. See 549 U.S. 158, 173 & n. *, 127 S.Ct. 799, 166 L.Ed.2d 638 (2007) (Souter, J., concurring). The concurrence, while suggestive of the direction that the Court might head in the future, is not the law we must follow; the opinion of the Court in Sorrell declined to reach the standard-of-eausation issue, see id. at 163-65, 127 S.Ct. 799 (noting that the Court had not granted certiorari on the question of the standard for causation), 171-72 (“The question presented in this case is a narrow one, and we see no need to do more than answer that question in today’s decision.”), and we are bound to follow our circuit’s clear precedent on this question absent a contrary holding from the Supreme Court or this court sitting en banc.
We are therefore obliged to hold that the district court committed no error of law in identifying the standard and burden of proof of causation applicable to this case.
B. Proof of Specific Causation
KBR next contends that the district court erred in finding that Clark had proved specific causation in this case, that is, that Clark’s benzene exposure while working at KBR caused his AML. It also argues the district court abused its discretion in considering the testimony of Clark’s expert causation witnesses, which provided the evidentiary support for the district court’s conclusion.
These two arguments are, taken together, an attack on Clark’s chain of proof of his exposure to benzene. It is perhaps simplest to identify KBR’s points of contention by first following the district court’s logic in concluding that Clark had adequately proved specific causation.
As an initial matter, the district court found as fact that Clark was exposed to benzene while working on KBR’s barges. In so finding, the district court expressly credited the testimony of Clark himself and of Robert Biddle, a coworker of Clark’s. Clark testified that he used benzene as a solvent to clean his tools, hands, and equipment, and Biddle corroborated that benzene was present on KBR’s barges and was used regularly as a cleaning solvent. Biddle did not, however, testify that he ever observed Clark using benzene. Clark’s doctor, Dr. Deborah Thomas, also testified that Clark told her that he had been exposed to benzene while giving his medical history and before he saw a lawyer. KBR put on contrary witnesses who testified that there was no benzene on the company’s barges, but the district court concluded that Clark’s three fact witnesses were more credible and expressly credited their testimony as true. To the extent that KBR attempts to challenge the district court’s decision to credit Clark’s, Biddle’s, and Thomas’s testimony, we reject that challenge; under the already deferential clear error standard, the district court’s “[f]indings based on the credibility of witnesses demand even greater deference.” See Tokio Marine & Fire Ins. Co. v. FLORA M/V, 235 F.3d 963, 970 (5th Cir.2001). The district court’s determination that Clark, Biddle, and Thomas testified truthfully is “plausible in light of the record viewed in its entirety” and surely a “permissible view of the evidence,” and we therefore are obliged to treat it as conclusive. See Anderson, 470 U.S. at 573-74, 105 S.Ct. 1504.
Next, the district court looked to the parties’ respective expert testimony interpreting the fact witnesses’ statements concerning Clark’s exposure to benzene. Clark presented four expert witnesses: John Martonik, an industrial hygienist; Peter Infante, D.D.S., D.P.H., an epidemiologist; Frank Gardner, M.D., a hematologist and oncologist; and Frank Parker, an industrial hygienist. Martonik died between discovery and trial and so did not personally testify, but his pre-trial work was considered as evidence. KBR also presented the testimony of Robert Schu-macher, an industrial hygienist.
Martonik reviewed Clark’s deposition testimony and spoke with him on one occasion, then prepared a report attempting to identify the frequency, extent, and duration of Clark’s exposures to benzene. Martonik’s report can be said to serve two related but distinct purposes: first, it summarized Clark’s various exposures to benzene, and, second, it attempted to convert those exposures from Clark’s descriptions into quantifiable parts-per-million (“ppm”) exposure levels based on literature describing what exposure levels translate to particular reportable effects. While disagreeing with the precise resulting calculations, KBR’s expert, Schumacher, testified that Martonik’s approach was an “acceptable” and “generally accepted” means of determining an exposure level from self-reported information.
Infante, Clark’s witness, and Schumacher, KBR’s witness, then attempted to extrapolate Clark’s total benzene exposure level from Martonik’s calculations. Each witness presented what the district court termed different “scenarios” for Clark’s total exposure based on different assumptions and readings of the evidence regarding the frequency, duration, and strength of Clark’s exposures to benzene. At the high end, Infante testified in his deposition that Clark’s benzene exposure range could be between 1436 and 1532 ppm-years, and, at the low end, Schumacher testified to a benzene exposure level of 230 ppm-years. At trial, Infante revised his estimate downward to between 350 and 500 ppm-years. All of these various numbers were based, at bottom, on Clark’s testimony, which the district court credited fully, as bolstered by the testimony given by Biddle and Thomas. After trial, the district court accepted Infante’s findings in part, apparently rejecting only the contention “that benzene was present in the workplace to the extent the plaintiffs’ third party exposure witnesses suggested it was.” The court expressly did accept Clark’s own testimony about “the frequency and manner of’ his exposure to benzene.
Next, Gardner testified that his review of Clark’s testimony and the exposure data led him to conclude that Clark’s exposure to benzene while working for KBR caused his AML. Gardner also relied on undisputed literature that benzene is a known general cause of AML. Clark’s expert witnesses testified that the increase in relative risk of AML from benzene exposure was statistically significant at levels of exposure in the single digits of ppm-years; at the 230 ppm-years level calculated by KBR’s expert, Schumacher, Infante testified that the relative risk of AML was twenty-seven times higher than in the unexposed population. KBR did not rebut this quantification of risk. Thus, even using the most conservative numbers supported by the factual evidence the district court credited, the exposure numbers at issue in this case are very high. The court accepted Clark’s testimony that he used benzene every other day from somewhere between fifteen minutes and a few hours from 1972 until sometime the late 1970s. The court accepted Clark’s testimony that he did not use protective equipment when working with benzene and occasionally felt light-headed from exposure. Taking that evidence together with the experts’ testimony correlating symptoms with particular exposure levels and identifying the relatively low exposure levels known to be hazardous, the district court found that “it is more likely than not that Mr. Clark was exposed to benzene at hazardous levels.” That finding is eminently “plausible in light of the record viewed in its entirety,” and we therefore must uphold it. See Anderson, 470 U.S. at 573-74, 105 S.Ct. 1504.
KBR’s contrary argument, citing to our decision in Allen v. Pennsylvania Engineering Corp., 102 F.3d 194, 199 (5th Cir.1996), is essentially that Gardner was required to quantify precisely the dosage of benzene that is hazardous and the dosage of benzene to which Clark was exposed before he could lawfully be permitted to testify, and similarly that the district court was required to make those same determinations before it could find specific causation. Because Gardner did not do so, KBR reasoned, admission of his testimony was an abuse of discretion and there was no evidence upon which the district court could permissibly rely in finding specific causation. Our precedent has no such requirement. In Allen, we stated the uncontroversial principle that “[s]cientific knowledge of the harmful level of exposure to a chemical, plus knowledge that the plaintiff was exposed to such quantities, are minimal facts necessary to sustain the plaintiffs’ burden in a toxic tort case.” Id. Here, Clark did meet this burden: Gardner and other witnesses testified to the toxic levels of benzene exposure, and both Gardner and the court had sufficient factual evidence to conclude that Clark was exposed to some level of benzene high enough to cause AML. While the district court did not credit that Clark was exposed to as much benzene as Infante concluded, even a much lower number, well supported by the evidence the district court did credit, was acknowledged by the experts to be sufficient to have caused Clark’s AML. Gardner’s methodology remained “reliable,” and his testimony remained useful to “assist the trier of fact to understand the evidence.” See Fed.R.Evid. 702. Assisted by the testimony that Gardner gave, the district court could evaluate the exposure evidence and conclude, without committing clear error, that, even if he was exposed to somewhat less benzene than Infante originally suggested, Clark was exposed to a level of benzene known to the scientific community to substantially and significantly increase the risk of AML.
We find no abuse of discretion in the district court’s decision to admit Clark’s expert witnesses’ testimony—notwithstanding its refusal to wholly credit their assessment of the extent of Clark’s benzene exposure—and no clear error in the district court’s finding of specific causation.
IV. Conclusion
For the foregoing reasons, the judgment of the district court is AFFIRMED.
EDITH H. JONES, Chief Judge, specially concurring:
Based on the facts as they were presented to the trial court and as represented in Judge Haynes’s careful opinion, I concur in the judgment. I emphasize, though, that the district court assessed liability only under the “featherweight” causation standard that this court uses in Jones Act cases and explicitly denied liability premised upon “proximate” causation.
Pursuant to 5th Cm. 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 Cut. R. 47.5.4.
.In its brief, KBR asserted a fourth error— that the district court erred in concluding that it was liable to the Clark Estate under the Jones Act—but makes no arguments in support of this contention other than the three asserted underlying errors described in this paragraph. We therefore need not and do not address this argument separately.
. Similarly, our decision in Johnson v. Cenac Towing Inc., 544 F.3d 296, 302 n. 4 (5th Cir.2008), does no more than note the content of Justice Souter's concurrence; it does not adopt it or change the circuit’s law, nor, under the rule of orderliness, could it.
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498606-14560 | FIELD, Senior Circuit Judge:
Bristol Steel & Iron Works, Inc. (Bristol) appeals from an order of the Occupational Safety and Health Review Commission (Commission) holding that Bristol had violated § 5(a)(2) of the Occupational Safety and Health Act (Act), 29 U.S.C. § 651, et seq. Judicial review of the Commission’s order is provided by § 11(a) of the Act, 29 U.S.C. § 660(a).
The parties stipulated to the underlying facts of the case. During an inspection by an Occupational Safety and Health Administration (OSHA) officer of a work site where Bristol was engaged in skeleton steel erection, two of Bristol’s employees, while rigging up a float scaffold which was to be used in skeleton steel erection, were observed on a wall, 12 to 18 inches wide, which was located on the second floor of a building and which was approximately 16 feet in height above concrete stairs. Both employees were wearing but not using safety belts, nor were they using lanyards or any other personal, protective, fall equipment. Bristol stipulated that the two employees were exposed to the hazard of falling and that if such a fall had occurred, there existed a substantial probability of serious injury or death.
Bristol was cited by the OSHA inspector for violation of the general construction safety standard set forth at 29 C.F.R. § 1926.28(a) as well as four other standards. Bristol contested the § 1926.28(a) violation but did not contest the remaining four violations. Reasoning that no specific safety standard was directly applicable to the facts presented which would preempt the general construction safety standard found in § 1926.28(a), the administrative law judge (ALJ) affirmed the citation for violation of § 1926.28(a) and assessed a $600 penalty. On review the Commission affirmed the decision of the ALJ by a one-one vote. Voting for affirmance, Commissioner Cleary felt that absent an applicable specific safety standard, the general construction safety standard of § 1926.28(a) was applicable and that avoidance of a duty to use safety belts under that section was an affirmative defense which had not been proven. Voting for reversal, Commissioner Barnako took the position that specific safety standards applicable to steel erection applied to the nature of the work performed by the two employees, and that these specific standards precluded the application of the § 1926.28(a) general construction safety standard; and that even if § 1926.28(a) applied, the Secretary had the burden of proving the feasibility and utility of the specific measures necessary to abate the hazard and had failed to carry that burden.
I
Not unexpectedly, Bristol adopts the position of Commissioner Barnako that the action of the Secretary in promulgating the specific safety standards applicable to steel erection in Subpart R of Section 1926 pre- eludes a citation under the general construction standards set forth in 1926.28(a). Bristol argues that the Secretary considered the entire subject of fall protection for steel erectors in Subpart R and, accordingly, the specific standards are exclusive in this area. In our opinion, however, this argument runs counter to the legislative pattern and objectives.
The declared purpose of the Act is “to assure so far as possible every working man and woman in the Nation safe and healthful working conditions and to preserve our human resources * * 29 U.S.C. § 651(b). Being remedial and preventative in nature, the Act must “be construed liberally in favor of the workers whom it was designed to protect * * Southern Railway Co. v. OSHRC, 539 F.2d 335, 388 (4 Cir. 1976), cert. den., 429 U.S. 999, 97 S.Ct. 525, 50 L.Ed.2d 609 (1976) (quoting Wirtz v. Ti Ti Peat Humus Co., 378 F.2d 209, 212 (4 Cir. 1967)). While the Act substantially contemplates specific safety standards promulgated by the Secretary, see American Smelting & Refining Co. v. OSHRC, 501 F.2d 504, 512 (8 Cir. 1974); Brennan v. OSHRC (Gerosa, Inc.), 491 F.2d 1340, 1343 (2 Cir. 1974), its purposes are also effectuated by the general safety standards and the general duty clause which are designed to fill those interstices necessarily remaining after the promulgation of specific safety standards.
The specific standards relied upon by Bristol, while providing safety protection, to employees engaged in steel erection, cannot achieve the goal of adequately protecting those employees in every conceivable situation. Infinite hypothetical can be envisioned in which employees engaged in steel erection would be exposed to an unnecessary hazard not covered by a Subpart R specific safety standard. The general safety standard dealing with personal protective equipment found in 29 C.F.R. § 1926.28(a) complements the Subpart R specific standards dealing with steel erection by requiring “the wearing of appropriate personal protective equipment [where there is a need] for using such equipment to reduce the hazards to the employees.”
Bristol suggests that its position is supported by 29 C.F.R. § 1910.5(c)(1) which provides that a specific standard applicable to a condition shall prevail over any different general standard which might otherwise be applicable thereto. This argument, however, elides the language of § 1910.5(c)(2) that any standard shall apply according to its terms, even though particular standards are also prescribed for an industry, to the extent that none of such particular standards apply. Were § 1910.5(c) read in the manner Bristol suggests, the Secretary would be prevented from coping with the variety of hazards not covered by the specific standards, and we decline to read it in such a limited fashion.
II
While § 1926.28(a) is not preempted by the Subpart R specific safety standards, it cannot be so broadly construed and applied as to deny Bristol reasonable notice of what safety precautions are required. To satisfy due process requirements the courts have applied some form of the reasonable man test to the general duty clause and the various general safety standards found in the regulations. In McLean Trucking Co. v. OSHRC, 503 F.2d 8 (4 Cir. 1974), we rejected a vagueness challenge to 29 C.F.R. § 1910.132(a), a general personal protective equipment safety standard, by adopting “an external and objective test, namely, whether or not a reasonable person would recognize a hazard of foot injuries to dockmen * * 503 F.2d at 10 (quoting Ryder Truck Lines, Inc. v. Brennan, 497 F.2d 230, 233 (5 Cir. 1974)). The Fifth Circuit, from which the above test was quoted, continued: “So long as the mandate affords a reasonable warning of the proscribed conduct in light of common understanding and practices, it will pass constitutional muster.” 497 F.2d at 233.
This reasonable man test has recently been more fully considered by the Fifth Circuit in B. & B. Insulation, Inc. v. OSHRC, 583 F.2d 1364 (5 Cir. 1978). Like the present case, the company in B. & B. was cited for a violation of 29 C.F.R. § 1926.28(a). Rejecting the argument that § 1926.28(a) was unenforceably vague, the court read the standard
to require only those protective measures which the knowledge and experience of the employer’s industry, which the employer is presumed to share, would clearly deem appropriate under the circumstances.
* * * *
* * * [T]he employer whose activity is not yet addressed by a specific regulation and whose conduct conforms to the common practice of those similarly situated in his industry should generally not bear an extra burden.
Where the Government seeks to encourage a higher standard of safety performance from the industry than customary industry practices exhibit, the proper recourse is to the standard-making machinery provided in the Act, selective enforcement of general standards being inappropriate to achieve such a purpose.
583 F.2d at 1367, 1371 (footnotes omitted).
Unlike the Fifth Circuit, other courts have not limited the reasonable man test to the custom and practice of the industry. In Cape & Vineyard Div. v. OSHRC, 512 F.2d 1148 (1 Cir. 1975), the First Circuit interpreted 29 C.F.R. § 1910.132(a) to incorporate a reasonable man test which went beyond the custom and practice of the industry:
[A]n appropriate test is whether a reasonably prudent man familiar with the circumstances of the industry would have protected against the hazard, [citations omitted]. We would expect, most often, that reference to industry custom and practice will establish the standard of conduct. There may, however, be instances where industry practice fails to take reasonable precautions against hazards generally known in the industry; in such event it may not be unfair to hold the employer to a standard higher than that of actual practice.
512 F.2d at 1152; see Brennan v. Smoke-Craft, Inc., 530 F.2d 843, 845 (9 Cir. 1976). We agree with the First and Ninth Circuits that the reasonable man test should not be limited to the custom and practice of the industry. While the custom and practice of most industries will adequately protect employees from hazardous conditions, the inquiry must be broad enough to prevent an industry, which fails to take sufficient precautionary measures against hazardous conditions, from subverting the underlying purposes of the Act. In determining whether Bristol violated § 1926.28(a), the appropriate inquiry is whether under the circumstances a reasonably prudent employer familiar with steel erection would have protected against the hazard of falling by the means specified in the citation.
Ill
While we agree that the citation under § 1926.28(a) was proper, we think the Commission erred in its conclusion that Bristol must bear the burden of proving the infeasibility of the method of abatement as an affirmative defense to the citation. Such a conclusion ignores the clear wording of 29 C.F.R. 2200.73(a) which provides: “In all proceedings commenced by the filing of a notice of contest, the burden of proof shall rest with the Secretary.” The breadth of the burden cast upon the Secretary was recognized early on by Judge Skelly Wright in his landmark opinion in National Rlty. & Constr. Co., Inc. v. OSHRC, 160 U.S.App.D.C. 133, 489 F.2d 1257, 1263 (1973):
Published regulations of the Commission impose on the Secretary the burden of proving a violation of the general duty clause. When the Secretary fails to produce evidence on all necessary elements of a violation, the record will — as a practical consequence — lack substantial evidence to support a Commission finding in the Secretary’s favor. That is the story of this case. It may well be that National Realty failed to meet its general duty under the Act, but the Secretary neglected to present evidence demonstrating in what manner the company’s conduct fell short of the statutory standard. Thus the burden of proof was not carried, and substantial evidence of a violation is absent. (Footnotes omitted.)
The burden resting upon the Secretary in a case such as the one before us was succinctly stated by the First Circuit in Cape & Vineyard Div. v. OSHRC, supra, where the court stated:
In the absence of evidence from those qualified to express such an opinion that further protective equipment was necessary and should have been required on the field-side primary wires and, clamps, we hold that the Commission’s finding of a violation of the safety standard was not supported by substantial evidence.
512 F.2d at 1155. In B. & B. Insulation, Inc. v. OSHRC, supra, the Fifth Circuit reached a similar conclusion on the question of the burden of proof:
The Secretary has the burden of proving all elements of a violation. 29 C.F.R. § 2200.73. In this case that burden included a demonstration that a reasonable insulation industry employer would have used safety belts where B&B did not.
583 F.2d at 1372.
Where the Secretary, in the absence of a specific regulation, elects to proceed under a general safety standard, as a matter of fundamental fairness it is
[o]nly by requiring the Secretary, at the hearing, to formulate and defend his own theory of what a cited defendant should have done [that] the Commission and the courts assure evenhanded enforcement of the general duty clause. [Footnote omitted]. * * * To assure that citations issue only upon careful deliberation, the Secretary must be constrained to specify the particular steps a cited employer should have taken to avoid citation, and to demonstrate the feasibility and likely utility of those measures.
National Rlty. & Constr. Co., Inc. v. OSHRC, supra, 489 F.2d at 1268. Since there was nothing in the record to demonstrate that a reasonably prudent employer familiar with steel erection would have protected against the hazard of falling by the means specified in the citation, the Commission’s finding of a violation of the § 1926.-28(a) general safety standard was not supported by substantial evidence. Accordingly, the order of the Commission is reversed and this case is remanded for further proceedings consistent with this opinion.
REVERSED and REMANDED.
. Section 5(a)(2) of the Act provides:
(a) Each employer—
(2) shall comply with occupational safety and health standards promulgated under this chapter.
29 U.S.C. § 654(a)(2). The standard which Bristol allegedly violated was a general safety standard under the Safety and Health Regulations For Construction, and is found at 29 C.F.R. § 1926.28(a). See note 4 infra.
. Inspection is authorized by § 8(a) of the Act, 29 U.S.C. § 657(a).
. Issuance of a citation is authorized by § 9(a) of the Act, 29 U.S.C.A. § 658(a).
. (a) The employer is responsible for requiring the wearing of appropriate personal protective equipment in all operations where there is an exposure to hazardous conditions or where this part indicates the need for using such equipment to reduce the hazards to the employees.
29 C.F.R. § 1926.28(a).
Although Bristol did not require the two employees to wear safety belts, they were wearing but not using the belts. Bristol was cited for not requiring “the wearing of appropriate personal protective equipment (safety belts and lanyards).” (App. at 2). Since Bristol has not raised the issue of whether there exists any distinction between “wearing” and “using” personal protective equipment, we do not address that issue here.
. An employer is authorized under § 10(a) of the Act, 29 U.S.C. § 659(a), to contest a citation.
. The parties stipulated that “if it is ultimately determined that respondent is in violation of 29 C.F.R. § 1926.28(a), then the proposed penalty is reasonable and in accordance with the Act * * (App. at 11).
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11497353-7691 | ORDER ON MOTION FOR RELIEF FROM AUTOMATIC STAY BY SAFEWAY, INC.
ALEXANDER L. PASKAY, Chief Judge.
THIS CAUSE came on for hearing upon the Motion for Relief From Automatic Stay filed by Safeway, Inc. (Safeway). The Court has considered the Motion, and the record, heard argument of counsel and now finds and concludes as follows:
Scott Wetzel Services, Inc. (Debtor) was in the business of administering insurance plans for entities that maintained self-insured type programs. The Debtor would establish trust accounts for depositing funds received from clients and would then use those funds to pay claims and expenses on behalf of those clients.
One of the Debtor’s clients was Safeway, a grocery store chain located in California, that had hired the Debtor to administer workers’ compensation claims. Safeway claims that an agent or employee of the Debtor misappropriated over $1 million of Safeway’s money from its trust account.
The Debtor had purchased an insurance policy issued by National Union Fire for liability coverage in the amount of $3 million; and another liability insurance policy providing excess coverage in the amount of $2 million (the “Liability Insurance Policies”). Once the $3 million from the primary policy has been exhausted, then claims may be paid from the $2 million policy. No matter how many claims are asserted during the claims period, the total liability of National Union Fire is $3 million and the total liability of Reliable is $2 million.
The Debtor filed its voluntary Petition for relief under Chapter 11 of the Bankruptcy Code on October 21, 1998. Subsequently, the Debtor’s case was converted to a case under Chapter 7. Larry Hyman has been appointed as the Chapter 7 Trustee.
Several claims have been asserted against the Debtor. A factual dispute presently exists as to whether the aggregate covered claims will exceed the coverage provided by the Liability Insurance Policies.
Based on the loss of funds that Safeway claims was misappropriated by the Debt- or’s agent, Safeway filed a proof of claim, asserting an unliquidated claim under various legal theories, including tortious interference with business relationships and breach of fiduciary duty. Pursuant to 11 U.S.C. § 502(c), the claim must be either estimated or liquidated before it can be allowed.
Safeway seeks relief from the automatic stay in order to pursue an action against the Debtor as a nominal defendant for the purpose of recovering under the Liability Insurance Policies. Safeway’s Motion is one of at least three motions for relief from stay filed by claimants seeking to pursue the proceeds of the Liability Insurance Policies. The Chapter 7 Trustee opposes the Motion.
In determining whether to grant relief from the automatic stay, the initial consideration is whether the proceeds of the Liability Insurance Policies insuring the Debtor are property of the estate. If the proceeds are not property of the estate, then the scope of the automatic stay does not extend to the insurance proceeds and, since the Trustee has not sought an injunction under 11 U.S.C. § 105, Safeway may proceed with its lawsuit.
“Property of the estate,” as defined in 11 U.S.C. § 541(a)(1) includes “all legal or equitable interests of the debtor in property as of the commencement of the case.” Although the law is clear that an insurance policy issued to the debtor will generally constitute “property of the estate”, See Matter of Edgeworth, 993 F.2d 51, 55 (5th Cir.1993), the question of whether the proceeds of an insurance policy are property of the estate must be analyzed in light of the facts of each case. See In re Sfuzzi, Inc., 191 B.R. 664, 668 (Bankr.N.D.Tx.1996).
In Edgeworth, supra, individuals holding a medical malpractice claim against the Chapter 7 debtor sought authority to pursue their lawsuit against the debtor in order to collect any judgment solely from the proceeds of the debtor’s malpractice liability policy. The Fifty Circuit Court of Appeals held that the claimants could do so because 11 U.S.C. § 524(e) excludes the liability insurance carrier from the protection of the bankruptcy discharge and the proceeds of the policy were not property of the debtor’s estate. In making this determination, the court stated,
The overriding question when determining whether insurance proceeds are property of the estate is whether the debtor would have a right to receive and keep those proceeds when the insurer paid on the claim. When a payment by an insurer cannot inure to the debtor’s pecuniary benefit, then that payment should neither enhance nor decrease the bankruptcy estate.
Edgeworth, supra at 55-56.
Thus, in applying the Edgeworth test, a debtor will not have a cognizable interest in the proceeds of the typical liability policy because the proceeds will normally be payable only for the benefit of those harmed by the debtor under the terms of the insurance contract. Edgeworth, Id. at 55.
The Trustee points to Matter of Vitek, Inc., 51 F.3d 530 (5th Cir.1995) in support of his position that the insurance proceeds are property of the estate. In Vitek, however, whether the liability insurance proceeds constituted property of the estate was not an issue. The bankruptcy court had merely approved a compromise between the tort claimants, the trustee and the insurance companies which provided that the proceeds of the policies would be paid into the bankruptcy ■ estate for the benefit of creditors. The Fifth Circuit made an erroneous generalization in stating, “On the other extreme, when a debtor corporation owns an insurance policy that covers its own liability vis-a-vis third parties, we — like almost all other courts that have considered the issue — declare or at least imply that both the policy and the proceeds of that policy are property of the debtor’s bankruptcy estate.” Vitek, Id. at 535 (citations omitted). In making this generalization, the court, without any analysis, cited to mass tort eases, clearly distinguishable from the instant case, where the courts shared two common goals — to insure equitable division of a limited insurance fund, and to facilitate the debtor’s swift and efficient reorganization. In re Titan Energy, Inc., 837 F.2d 325, 329 (8th Cir.1988). The issue actually decided in Vitek was “... [W]hen one of two or more coinsureds declares bankruptcy and seeks protection under Chapter 7, what part of the proceeds of the liability policy that covered the non-bankruptcy coinsureds should enrich the estate of the coinsured debtor?” Vitek does not abrogate Edge-worth and this Court is satisfied that the Edgeworth test is appropriate to apply here.
Several other courts have also resolved the issue of whether insurance proceeds are property of the estate by determining whether the debtor directly benefits from the proceeds. See Sjuzzi, supra. For instance, casualty, fire, or theft insurance proceeds have been held to be property of the estate because the debtor directly receives the proceeds as merely a change in form of estate property. See In re Asay, 184 B.R. 265 (Bankr.N.D.Tx.1995). On the other hand, where the debtor assigns the proceeds or designates a third party as beneficiary pre-petition, the proceeds have been held to be outside the scope of property of the estate. See In re Louisiana World Exposition, Inc., 832 F.2d 1391, 1399-1400 (5th Cir.1987) (liability proceeds payable to the debtor’s directors and officers are not part of the bankruptcy estate.); see also In re Florian, 233 B.R. 25 (Bankr.Conn.1999) (Since liability insurance policy, although purchased by the debtors, was intended to cover damages to non-estate property, proceeds were not property of the estate.)
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4171470-13069 | HAMILTON, District Judge.
This is an action by the Birdsell Manufacturing Company against A. M. Anderson, receiver of the National Bank of Kentucky, seeking to , recover of him $41,481.74, and is submitted on demurrer to the petition.
On April 24, 1930, the plaintiff, then engaged in the manufacture of farm wagons at South Bend, Ind., under the trade names of “Old Hickory,” “Tennessee,” and “Studebaker,” entered into an agreement with the Kentucky Wagon Manufacturing Company to engage it to 'manufacture farm wagons under the above trade-names, the plaintiff to discontinue this branch of its business. By the terms of the contract, the plaintiff was to furnish to the wagon company, at an inventoried price, its supply of raw materials and parts to be used by it in the manufacture of wagons, for which it was to pay the plaintiff the inventoried price for all material used and that remaining unused June 30, 1932.
The plaintiff had delivered to the wagon company $61,565.25 in supplies and materials up to January 12, 1931, when it was adjudged a bankrupt and its trustee repudiated the contract. At this time a balance of $46,330.90 remained in the inventory, which was later sold by the plaintiff, net to it $4,849.16. The plaintiff seeks to hold the defendant as receiver for the National Bank of Kentucky, which is in statutory liquidation, for the difference on the ground that the Kentucky Wagon Manufacturing Company was, at the time plaintiff contracted with it, owned and controlled by the National Bank of Kentucky, and that the business of the wagon company was conducted solely as an agency of the bank, and that the contract between the plaintiff and the wagon company was in fact for the use and benefit of the bank.
The defendant demurs to the petition on the ground that the operation of the wagon company by the bank was ultra vires, and it is not bound on the contract between the wagon company and the plaintiff, although the agency and operation of said company by the bank is admitted for the purpose of demurrer.
The power of the bank to operate the wagon company, if it exists, must be found in U.S.C.A., title 12, chapter 2, § 24, subd. 7 (Rev.St. § 5136, 42 Stat. 767, § 1, 44 Stat. 1226, § 2, 48 Stat. 184, § 16, 49 Stat. 709, § 308), which authorizes the board of directors and officers and agents of a national bank to exercise such incidental powers as may be necessary to carry on the business of banking.
A national bank differs from an ordinary business' corporation in its” relationship to the public. The latter éoncerns its creditors and stockholders only. Banks receive the money and property of others and the principle of ultra vires is applied with greater firmness to them than to other corporations. The limitation of the power of national banks to that expressly granted by the statute has been definitely and firmly fixed by decisions of the courts in passing on the legality of the business transactions of such institutions. In Logan County National Bank v. Townsend, 139 U.S. 67, 11 S.Ct. 496, 35 L.Ed. 107, it was held: “The national banking act is an enabling act for associations organized under it, and one cannot rightly exercise any powers except those expressly granted, or such incidental powers as are necessary to carry on the business for which it was established.”
In the case of California Bank v. Kennedy, 167 U.S. 362, 17 S.Ct. 831, 833, 42 L.Ed. 198, the Supreme Court said:
“It is settled that the United States statutes relative to national banks constitute the measure of the authority of such corporations, and that they cannot rightfully exercise any powers except those expressly granted, or which are incidental to carrying on the business for which they are established. Logan County Bank v. Townsend, 139 U.S. 67, 73, 11 S.Ct. 496, [35 L.Ed. 107]. No express power to acquire the stock of another corporation is conferred upon a national bank, but it has been held that, as incidental to the power to loan money on personal security, a bank may, in the usual course of doing such business, accept stock of another corporation as collateral, and, by the enforcement of its rights as pledgee, it may become the owner of the collateral, and be subject to liability as other stockholders. Germania National Bank v. Case, 99 U.S. 628, [25 L.Ed. 448]. So, also, a national bank may be conceded to possess the incidental power of accepting in good faith stock of another corporation as security for a previous indebtedness. It is clear, however, that a national bank does not possess the power to deal in stocks. The prohibition is implied from the failure to grant the power. First National Bank v. National Exchange Bank, 92 U.S. 122, 128, [23 L.Ed. 679].
“On behalf of the plaintiff below it was admitted at the trial that the stock of the savings bank was not ‘taken as security, or anything of the kind’; and it is not disputed in the argument at bar that the transaction by which this stock was placed in the name of the bank was one not in the course of the business of banking, for which the bank was organized.”
In First National Bank v. Converse, 200 U.S. 425, 26 S.Ct. 306, 50 L.Ed. 537, it was held: “A national bank has no power to engage in or promote a purely speculative business or to take stock in a corporation organized for that purpose, nor can the power to take such stock as a means of protecting itself from loss on preexisting indebtedness be inferred from the right to accept it as security for a present loan.”
In Cooper v. Hill (C.C.A.) 94 F. 582, it was held:
“A national bank which has lawfully acquired the title to property in payment of a debt has implied authority to make reasonable repairs thereon for the purpose of putting it in salable condition, and its directors cannot be held personally liable for money so expended in good faith.
“A national bank, however, has no power to prosecute a mining business on property which it has ácquired, — much less, to expend its funds in prospecting for mineral on such property; and directors who authorize such expenditure are personally liable therefor to the bank or its receiver.”
In Cockrill v. Abeles (C.C.A.) 86 F. 505, it was held in the syllabus: “Where a national bank acquired certain mill property in satisfaction of a debt, and the directors organized a corporation among themselves for the purpose of operating the mills as the bank’s agent, using its funds, and operated them for the bank at a loss of $23,000, the directors of the bank participating are liable to the creditors for the loss.”
In the opinion, at page 512 of 86 F., it is stated that: “The most liberal view which may be fairly taken of the implied powers of national banks would not sustain their right to engage directly in a manufacturing or business enterprise under any circumstances; but, even if the power in question should be conceded to exist under certain conditions, the present case was not one which warranted its exercise. The directors of the bank had no right to employ its funds in an attempt to operate the cotton mills for the bank’s account, in the manner alleged in the bill, and such action on their part was unauthorized and wrongful.”
In First National Bank v. American National Bank, 173 Mo. 153, 72 S.W. 1059, 1060, it was held: “When a national bank enters into a contract which is beyond its powers, it cannot be estopped from pleading ultra vires by the performance of the contract by the other party.”
In Merchants’ National Bank v. Wehrmann, 202 U.S. 295, 26 S.Ct. 613, 50 L.Ed. 1036, it was held:
“While a national bank may take by way of security property in which it is not authorized to invest, and may become the owner thereof by foreclosure in satisfaction of the debt; but, without deciding whether it could take shares in a partnership formed for purely speculative purposes as security, it cannot, even in satisfaction of a debt so secured, become the absolute owner of such shares. It would be ultra vires and as it cannot take the shares it is not, and cannot be held, liable for any of the debts of the firm. . ,
“A national bank which has taken such shares in satisfaction- of a debt is not •estopped either from denying that it was a partner or that it is liable for the debts of the firm.”
In First National Bank v. Converse, 200 U.S. 425, 26 S.Ct. 306, 50 L.Ed. 537, it was held: “Notwiths'tanding its subscription, a national bank, taking stock in a corporation organized for purely speculative purposes, may plead its want of authority so to do as a defense to the claim of a receiver of such corporation for the ■double liability imposed by a state statute on the stockholders thereof.”
In California National Bank v. Kennedy, 167 U.S. 362, 17 S.Ct. 831, 42 L.Ed. 198, it was held: “The want of such authority may be set up by a bank to defeat an attempt to enforce against it the' liability of a stockholder.”
In First National Bank v. Hawkins, 174 U.S. 364, 19 S.Ct. 739, 43 L.Ed. 1007, it was held: “In the case of such an actual purchase by a national bank, it is not estopped to deny its liability, as an apparent stockholder, for an assessment on such stock ordered by the Comptroller of the Currency.”
The plaintiff relies'on the principle that a National Bank cannot repudiate its ultra vires contract. until it disgorges its benefits. There is no doubt this is a salutary principle of the law and should be vigorously applied. However, the facts do not bring the case at bar within the principle so strongly urged by the plaintiff. The facts show it delivered to the wagon company articles with an inventoried value of $61,565.25. , There was used out of the inventory by the wagon company $15,234.35, which sum was paid to the plaintiff. When the wagon company went into bankruptcy and the National Bank of Kentucky into liquidation, there remained in the inventory $46,330.90. The plaintiff refused to repossess the property as it could have done, but notified the trustee of the wagon company and the receiver of the bank that it proposed to sell the inventory to the highest bidder and make claim for the deficiency, if any, which it did, and in this action seeks to recover the difference between the inventory value and the selling price. The bank received no direct benefit from the contract between the plaintiff and the wagon company.
In the case of Citizens’ Central National Bank v. Appleton, Receiver of the Cooper Exchange Bank, 216 U.S. 196, 30 S.Ct. 364, 54 L.Ed. 443, cited by the plaintiff, Samuels was indebted in the sum of $10,000* to the Central National Bank, subsequently acquired by the Citizens National Bank, and borrowed from the Cooper Exchange Bank $12,000, the repayment of which was guaranteed by the Central National Bank, and out of the loan Samuels repaid the $10,000.
The receiver of the Cooper Exchange Bank sued the Citizens National on its guaranty and it pleaded ultra vires, which the court refuse'd to sustain solely on the ground the bank retained the $10,000 and could not avail itself of the lack of legal power to enter into the suretyship so long as it received its benefits.
In the case of National Bank of Commerce v. Equitable Trust Company (C.C. A.) 227 F. 526, 533, also relied on by the plaintiff, the bank received dividends on stock which it acquired in an ultra vires transaction., When sued for the dividends, it sought to avoid recovery on the ground they had been acquired under a contract the bank was not authorized to make. The court said: “This position cannot be maintained, where the, proceeding is to recover moneys which have' gotten into the hands of the bank but belonged to the plaintiff.”
In the case of Earling v. Emigh, 218 U.S. 27, 30 S.Ct. 672, 676, 54 L.Ed. 915, the Jenne Creamery Company was in financial difficulties, having outstanding, unpaid checks drawn on the Berlin National Bank in favor of milk producers of about $8,000, with no funds available with which to meet them, also an unsecured debt of $2,200 owed by a member of the firm to the bank.
To prevent the loss which would be occasioned by bankruptcy, and with the expectation of rehabilitating the business, the bank caused the entire stock of the company to be assigned to Brown, its cashier, who held it for its account. The property of the partnership and the individual members thereof was also transferred to Brown,' and the bank paid the outstanding unpaid checks due milk producers by the Company. The business was then carried on by the bank in the name of the Jenne Creamery Company.
The milk producers were not parties to the transfer to the bank, and no notification was given them that the bank was virtually carrying on the business. No new contracts were made with them, and the affairs were carried on as previously agreed.
The operation by the bank was not profitable, and when it failed it had not recouped itself for the $8,000 checks outstanding when the business was taken over, and there were large amounts due the milk producers. The drafts received by the company were mingled with the other moneys in the bank.
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3592881-15489 | PER CURIAM:
This is a Section 1988 suit brought by Will Aguilar, a motorcyclist who was injured in a traffic stop. He claims two deputies in the Williamson County Sheriffs Office, Daniel Robertson and Michael Baxter, used excessive force to arrest him. The district court denied the deputies’ motions that had sought summary judgment based on qualified immunity. The deputies appeal. We REVERSE as to Deputy Robertson, AFFIRM as to Deputy Baxter, and REMAND.
FACTS
On April 9, 2009, Will Aguilar was riding his motorcycle on a rural road in Williamson County, Texas. His affidavit states that as he rode around a turn, he saw Deputies Daniel Robertson and Michael Baxter standing in the middle of the road waving for him to stop. Aguilar states that upon seeing the deputies, he used his brakes and had almost stopped when he reached Deputy Robertson.
The details of what Aguilar and the deputies each did is disputed, though whether those disputes are material is a question we will address later. At this point, it is enough to say that Aguilar was knocked from his motorcycle to the pavement and suffered injuries. He was transported to a hospital and was diagnosed with a broken clavicle.
Aguilar was charged with aggravated assault of an officer with a deadly weapon (i.e., the motorcycle). The case was presented to a grand jury, which did not indict him.
Aguilar brought this suit against Williamson County and the two deputies, Robertson and Baxter, in the United States District Court for the Western District of Texas, relying on 42 U.S.C. § 1983. Aguilar alleged the deputies used excessive force in stopping him for speeding. Robertson and Baxter filed a motion for summary judgment on the basis of qualified immunity, which the district court denied. Robertson and Baxter appealed.
During the pendency of this appeal, the county moved for summary judgment. The district court denied the motion as premature, as that court is awaiting the ruling of this court on the appeal.
DISCUSSION
A district court’s order denying qualified immunity is a collateral order that is immediately appealable “to the extent that it turns on a question of law rather than a factual dispute.” Elizondo v. Green, 671 F.3d 506, 509 (5th Cir.2012). Qualified immunity should be granted to a deputy unless, first, the deputy’s “conduct would, as a matter of law, be objectively unreasonable in light of clearly established law,” and, second, at least “a genuine issue of fact exists regarding whether the [deputy] did, in fact, engage in such conduct.” Cantrell v. City of Murphy, 666 F.3d 911, 921 (5th Cir.2012) (quotation marks omitted). This court’s review is limited to whether the deputies’ conduct was “objectively unreasonable in light of clearly established law.” Id. at 922.
Ordinarily, this court reviews a district court’s denial of summary judgment de novo. Kinney v. Weaver, 367 F.Bd 337, 347 (5th Cir.2004). In an interlocutory appeal, though, “we lack the power to review the district court’s decision that a genuine factual dispute exists.” Id. at 348. Therefore, we “consider only whether the district court erred in assessing the legal significance of the conduct that the district court deemed sufficiently supported for purposes of summary judgment.” Id.
Aguilar’s claim is that these deputies used excessive force to arrest him. The claim is analyzed under the Fourth Amendment’s reasonableness standard, which requires “two overlapping objective reasonableness inquiries.” Lytle v. Bexar Cnty., Tex., 560 F.3d 404, 410 (5th Cir. 2009) (quotation marks omitted). First, a constitutional violation occurs if the plaintiff demonstrates (1) an injury (2) which “resulted directly and only from the use of force that was excessive to the need” and (3) the force used was objectively unreasonable. Bush v. Strain, 513 F.3d 492, 500-01 (5th Cir.2008). Then, “we must ask the somewhat convoluted question of whether the law lacked such clarity that it would be reasonable for an officer to erroneously believe that his conduct was reasonable.” Lytle, 560 F.3d at 410. Aguilar was injured as a result of the arrest, but the deputies claim the force was not excessive and no clearly established constitutional duty existed to refrain from the actions they took to stop and detain Aguilar.
We first determine what must be accepted at this point as the relevant facts. Aguilar’s version of events was set out in his affidavit. After seeing the deputies, Aguilar began to slow his motorcycle. He estimates he was still traveling one to three miles per hour and not yet completely stopped when “Defendant Robertson then hit [Aguilar’s] left shoulder with his left hand, fracturing [Aguilar’s] clavicle in [his] left shoulder. It was obvious to [Aguilar] that it was an intentional strike on his part on [Aguilar’s] shoulder.”
Robertson’s version, most of which is not disputed by Aguilar, is basically consistent. Robertson stated that Aguilar was traveling at 65 miles per hour in a 40 miles-per-hour zone. Aguilar had an unobstructed view of the deputies, who were both wearing uniforms. Baxter and Robertson began waving their arms to cause Aguilar to stop. As Aguilar approached, Robertson took a step into the path of the motorcycle and put his hands out. Robertson agrees that Aguilar was braking hard, but contends Aguilar was not stopping fast enough. Robertson continued waving his arms while stepping out of the way. When Aguilar passed, Robertson alleges his “left hand caught the [driver’s] left shoulder.” This caused Robertson to “spin around and hit the ground causing abrasions to [his] right hand, pain in [his] right ankle and [a] rip in [his] pants under the right knee.”
As to Baxter, Aguilar stated that a few seconds after Robertson hit Aguilar on the shoulder, Baxter tackled Aguilar, knocking him off the motorcycle onto the ground, causing further injury to his shoulder. Aguilar stated Baxter took out his gun and hit him in the front of the head with it, then poked him with it on his face shield, and kicked him in the leg. Aguilar maintains that he did not resist arrest or take actions that would indicate he intended to flee. He states he kept his hands in the air to indicate he was not a threat to the deputies.
Baxter’s account in his affidavit differs somewhat. He alleges that Aguilar slowed and rolled past Baxter after coming into contact with Robertson. Baxter shouted at Aguilar to stop. Baxter continued to give these orders after Robertson fell, and the motorcycle rolled slowly forward with Aguilar still astride it. Baxter believed Aguilar was going to flee because of Aguilar’s failure to comply with the order to stop, and because Aguilar was looking in Baxter’s direction and also at the motorcycle. At that point, Baxter decided to push Aguilar, causing him and the motorcycle to fall over. Aguilar fell on his left side. Baxter put his firearm to Aguilar’s helmet’s face shield while trying to grab his jacket. By this time, Robertson had gotten up and he “grabbed [Aguilar’s] left hand [and] rolle[d] him over allowing [Aguilar] to be cuffed by Deputy Robertson.”
For each deputy, the question is whether his actions were objectively unreasonable due to a clearly established constitutional duty not to use the kind of physical force he employed, and whether that duty was established at the time of the incident. “The defendant’s acts are held to be objectively reasonable unless all reasonable officials in the defendant’s circumstances would have then known that the defendant’s conduct violated the United States Constitution or the federal statute as alleged by the plaintiff.” Thompson v. Upshur Cnty., Tex., 245 F.3d 447, 457 (5th Cir.2001).
The right to use some degree of force to effectuate an arrest or investigatory stop is clearly established. Graham v. Connor, 490 U.S. 386, 396, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989). The deputies assert the law lacked clarity, meaning that every reasonable officer in this situation would not understand that the chosen force was of a degree that violated a constitutional right. In determining whether an officer’s conduct violated a constitutional right, courts examine whether the right was clearly established “in light of the specific context of the case, not as a broad general proposition.” Saucier v. Katz, 533 U.S. 194, 201, 121 S.Ct. 2151, 150 L.Ed.2d 272 (2001). Despite the lack of a precedent with the exact facts, the law can be clearly established from factually distinguishable cases “so long as the prior decisions gave reasonable warning that the conduct then at issue violated constitutional rights.” Lytle, 560 F.3d at 417.
The deputies point to three cases in which the degree of force was held to be reasonable under the circumstances. First, a district court determined that an officer pointing a gun at the plaintiff for 20 seconds in the process of serving an arrest warrant was not objectively unreasonable. Greene v. Knight, 564 F.Supp.2d 604, 61-13 (N.D.Tex.2008). Second, the Second Circuit held it was not unreasonable under the circumstances for an officer to point his gun at the plaintiffs head when the plaintiff was struggling with two other officers. Davis v. Rodriguez, 364 F.3d 424, 427, 431 (2d Cir.2004). Finally, a district court held that a leg sweep technique employed by an officer to knock the plaintiff down was not unreasonable. Kellough v. Bertrand, 22 F.Supp.2d 602, 608 (S.D.Tex.1998). In Kellough, an armed robbery had recently occurred in the area; the officers suspected the plaintiff might be involved, and he refused to follow the officers’ instructions. Id. We conclude that it was clearly established that some degree of force was permissible in effectuating an arrest where the suspect fails to comply with an officer’s orders.
In contrast, cases in which the degree of force used violated a constitutional right generally involved fairly significant acts of force. For example, we have held that an officer pushing an arrestee’s head into the window of a car resulting in injuries to her face, teeth, and jaw was not objectively reasonable, even if she was initially resisting. Bush, 513 F.3d at 496, 501. The court reasoned that though the officer had a viable argument for using some force when the plaintiff initially resisted arrest, according to the plaintiff at least part of the officer’s actions occurred after he had control of her. Id. at Additionally, we have affirmed the denial of summary judgment based on qualified immunity where a police officer broke the plaintiffs window with his flashlight when she refused to exit the vehicle, dragged her out of the car, and threw her against the window. Deville v. Marcantel, 567 F.3d 156, 162 (5th Cir.2009). The plaintiff had been pulled over for exceeding the speed limit by 10 miles per hour and testified there was no indication she might flee. Id. at 167. The plaintiff alleged she only passively resisted the officers by refusing to get out of her vehicle until her husband arrived. Id.
We now examine the evidence as to each deputy’s conduct.
A. Deputy Robertson
Some level of force may be used by a deputy to stop a violation of the law. Graham, 490 U.S. at 396, 109 S.Ct. 1865. Aguilar asserts his certainty that Robertson intended to hit him on the shoulder. Even if such an intent would make Robertson’s conduct more questionable, and we are not sure it does, intent does not matter under qualified immunity analysis. We examine the objective reasonableness of the deputy’s conduct. Cantrell, 666 F.3d at 921. It was objectively reasonable for Robertson to use some force to detain Aguilar for speeding. These are the relevant facts alleged by Aguilar as viewed from the perspective of a reasonable officer: Aguilar was traveling at a high rate of speed; Robertson was in the middle of the road waving Aguilar down; Robertson could see Aguilar braking from at least 20 feet away; and Aguilar was still moving when he reached Robertson.
Permissible force depends on “the [1] severity of the crime at issue, [2] whether the suspect posed a threat to the officer’s safety, and [3] whether the suspect was resisting arrest or attempting to flee.” Deville, 567 F.3d at 169.
As to the first element, both Robertson and Baxter stated that Aguilar was traveling 65 miles per hour in a 40 miles per hour zone. Aguilar does not assert otherwise. Stopping someone for speeding might not warrant the same amount of force as in Davis, where the officer saw the plaintiff struggling with other officers, or in Kellough, where a robbery suspect was in the area. Davis, 364 F.3d at 427; Kellough, 22 F.Supp.2d at 606. Similarly, the force used in Greene while serving a warrant is distinguishable because that kind of situation could escalate quickly. Greene, 564 F.Supp.2d at 613. The severity of the violation here is between that of a speeding violation for traveling 10 miles per hour over the limit and that of serving a warrant.
Next, the potential threat posed to the deputy weighs in Robertson’s favor. Aguilar posed a threat because he was still moving and traveling towards Robertson. Like serving a warrant, the situation could have become more dangerous. Recognizing Aguilar was slowing down, Robertson had stepped in front of the motorcycle and was in its path — a dangerous position even if the motorcycle was traveling slowly.
Finally, whether Aguilar was resisting arrest or attempting to flee is disputed. The deputies were gesturing for him to stop, and Aguilar insists he was trying to comply. Aguilar’s version of events is that he was still moving on his motorcycle when Robertson hit him on the shoulder. He admits two deputies were in the middle of the road waving for him to stop. Robertson was at least close enough to Aguilar to strike him, and Aguilar was still moving despite his close proximity to the deputy. We And no basis to hold that every reasonable officer would know at the time of this incident that hitting a motorcycle rider on the shoulder who had so far not stopped despite being ordered to do so, and despite being immediately adjacent to the deputy on the moving motorcycle, would have violated the motorcycle rider’s constitutional rights. Between fending off the approaching rider, and assuring he stops as opposed to picking up speed as soon as he passed the deputies, the striking of a rider on the shoulder was not objectively unreasonable.
The relevant precedents in which qualified immunity was denied do not suggest otherwise. Unlike in Bush, Robertson was not already in control of Aguilar when he struck him. Unlike in Deville, Aguilar was not in a stopped vehicle, he could have fled, and his traffic violation was at least somewhat more severe — 25 miles per hour over the speed limit as opposed to 10. Further, the amount of force used by Robertson was of a lesser degree than in De-ville.
We conclude that not every reasonable official in Robertson’s circumstances would have known this conduct violated the Constitution. We reverse the denial of qualified immunity as to Robertson and remand to the district court for entry of judgment dismissing him from the suit.
B. Deputy Baxter
Baxter contends he committed no constitutional violation because he did not cause Aguilar’s shoulder injury. Instead, he argues that it was Robertson who caused that injury. Baxter also contends he had no clearly established constitutional duty to refrain from using force in stopping Aguilar and his actions were objectively reasonable.
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2216929-6933 | TRASK, Circuit Judge:
Appellants were jointly tried before a jury and convicted on two counts of knowingly receiving, concealing and facilitating the transportation and concealment of marihuana in violation of 21 U. S.C. § 176a and of conspiracy to violate 21 U.S.C. § 176a. Both appellants were sentenced to five years imprisonment on each count, to be served concurrently. They have prosecutéd separate appeals which we have consolidated for argument and disposition.
The pertinent facts are as follows: At approximately 8:00 P.M. on April 29, 1969, Special Agent Rex Holgerson of the United States Customs Service in Nogales, Arizona, received a telephone call from a known informer whom he believed to be in Mexico. The caller, speaking Spanish, informed him that a green 1955 Buick sedan and a white Ford pickup truck, both with Mexican license plates, were then parked in a supermarket parking lot in Nogales, one-third block from the Mexican border. The Buick contained a load of marihuana and, later that evening, persons unknown to the informer would pick up the Buick and drive it north from Nogales. The informer added that the pickup was also involved in the operation.
Agent Holgerson proceeded immediately to the parking lot and discovered the two vehicles there. The details given by the caller were accurate in every respect. Holgerson detected a strong odor of marihuana emanating from the area of the vehicles. About one-half hour later, Holgerson observed three people — later identified as the two defendants and one Elvira Galvan Rodriguez — approach the vehicles together. Gibbs carefully walked around the Buick while the others remained at the rear of the cars. The three then left the parking lot. Soon thereafter, Gibbs and Fernandez-Ortiz returned to the lot but again walked away.
Agent Horace Cavitt, whom Holgerson had summoned, approached the Buick and, looking underneath it, discovered a specially-built iron compartment welded to the frame of the car. The compartment contained a large number of green packages. The odor of marihuana was very strong underneath the car. Agent Holgerson then peered underneath the car and confirmed the observation.
As Holgerson completed the examination, about 9:00 P.M., Fernandez-Ortiz reappeared and drove the Ford pickup out of the parking lot and into Mexico. At approximately 9:30 P.M., Gibbs and Fernandez-Ortiz entered the lot. Gibbs replaced the Mexican license plates on the Buick with California plates as Fernandez-Ortiz looked up and down the street. About fifteen minutes later, Gibbs took the Buick out of the parking lot and drove it several blocks northward until he was apprehended by Holgerson. A search of the compartment underneath the ear’s frame revealed one-hundred five pounds of marihuana. At the same time, another agent apprehended Fernandez-Ortiz as he prepared to enter a taxicab.
Appellants argue that the agents’ search of the underside of the car while it was parked in the lot violated their Fourth Amendment right to be free of unreasonable searches. They further contend that the trial court erred in refusing to order the disclosure of the identity of the informer. Appellant Gibbs also asserts that the government failed to introduce any evidence that the marihuana had been imported into the United States contrary to law. We affirm.
(1) Validity of the search
Appellants allege that the agents’ inspection of the underside of the Buick sedan constituted an unlawful, warrant-less search and the evidence obtained as a result of that search — the marihuana —was inadmissible at trial. Appellants contend that, even though the evidence was located in an area which might be termed accessible to the public, they sought to preserve it as private and it is therefore constitutionally protected. See Katz v. United States, 389 U.S. 347, 351, 88 S.Ct. 507,19 L.Ed.2d 576 (1967).
Assuming arguendo that the agents’ visual inspection constituted a search and that both appellants have standing to object to that search, the Fourth Amendment does not prohibit the warrantless search of a vehicle if it is made upon probable cause. Chambers v. Maroney, 399 U.S. 42, 90 S.Ct. 1975, 26 L.Ed.2d 419 (1970); Carroll v. United States, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543 (1925). We think that the agent had probable cause to inspect the vehicle. He had received a detailed tip from a known informer to the effect that the automobile contained marihuana. The tip proved correct in every other detail. Moreover, there was a strong odor of marihuana around the automobile.
The Supreme Court has held that, assuming the existence of probable cause, vehicles may be searched under circumstances which would not justify a warrantless search of a house, office or other immovable structure. Dyke v. Taylor Implement Mfg. Co., 391 U.S. 216, 221, 88 S.Ct. 1472, 20 L.Ed.2d 538 (1968). The reason for this distinction is that vehicles can be quickly moved out of the jurisdiction in which the warrant must be sought. Chimel v. California, 395 U.S. 752, 764 n. 9, 89 S.Ct. 2034, 23 L.Ed.2d 685 (1969); Carroll, supra, 267 U.S. at 153, 45 S.Ct. 280. Here, despite the fact that the automobile was unoccupied at the time of the search, the agents had reasonable cause to believe that it would soon be moved outside the jurisdiction. The informer- — reliable in all particulars to this point — had reported at 8:00 P.M. that the automobile would be driven north that evening. Moreover, two persons — later identified as the appellants — had twice approached and carefully examined the vehicle.
We hold that, under the facts of this case, the agents’ visual inspection of the vehicle was not an unreasonable search.
(2) Refusal to disclose informer’s identity
Appellants, at the hearing on their motion to suppress evidence and again at trial, requested the court to order the government to reveal the name of the informer who telephoned Agent Holgerson. Appellants now allege that the court erred in denying these requests.
There is no absolute rule entitling a defendant to disclosure of the name of an informer who has furnished information used against him. The court must weigh the interest of the defendant’s right to prepare a defense against the public policy of conserving the usefulness of an informer and protecting him personally. The Supreme Court said in Roviaro v. United States, 353 U.S. 53, 62, 77 S.Ct. 623, 628, 1 L.Ed.2d 639 (1957):
“We believe that no fixed rule with respect to disclosure is justifiable. The problem is one that calls for balancing the public interest in protecting the flow of information against the individual’s right to prepare his defense. Whether a proper balance renders nondisclosure erroneous must depend on the particular circumstances of each case, taking into consideration the crime charged, the possible defenses, the possible significance of the informer’s testimony, and other relevant factors.”
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3555601-17884 | OPINION AND ORDER
PANNER, District Judge.
Plaintiff alleges defendant infringed its patented band saw mechanism. Defendant denies infringement and counterclaims for unfair competition and antitrust violations. The question presented is whether defendant is entitled to production of certain documents for which plaintiff asserts a privilege. I find that it is, and order the documents produced.
BACKGROUND
In its original complaint, plaintiff alleged defendant infringed its patent for a band mill air strain mechanism, U.S. Letters Patent 3,838,620 (the ’620 patent), as well as two related patents, U.S. Letters Patents 3,946,634 (the ’634 patent) and 3,810,409 (the ’409 patent). On September 17, 1982, the parties stipulated the ’634 patent invalid, void and unenforceable and that there was no infringement with respect to the ’409 patent. In its amended answer and counterclaims, filed September 29, 1982, defendant charged antitrust violations (counterclaim # 2) and unfair competition (counterclaim # 3).
On December 3, 1982, defendant moved to compel plaintiff to produce numerous documents for which plaintiff claimed a privilege. I heard oral argument on December 28, 1982, and then partially granted defendant’s motion. Discovery Order (Dec. 30, 1982). I found that defendant had established a prima facie case of fraud as to the '409 and ’634 patents, and ordered plaintiff to produce within ten (10) days “all documents pertaining to those patents, including the documents for which it asserts a privilege.” Id., p. 2. The Order invited plaintiff to submit for determination in camera any document which it reasonably believed “should not be produced for good reason apart from this lawsuit .... ” Id.
Plaintiff responded by producing for defendant twenty-one (21) additional documents. Plaintiff did not produce three other documents, nor submit them for determination in camera, but rather sought a clarification of the Order. On February 3,1983, I ordered the disputed documents submitted to me in camera. The documents are identified as Nos. 19-21 on Schedule D of plaintiff’s response to defendant’s Third Request for Production of Documents, and all pertain to the ’634 patent.
After examining the documents, on February 10, 1983 I ordered production to defendant by February 22, 1983. Minute Order (Feb. 10, 1983). I also denied defendant’s motion for attorneys’ fees. Id. Plaintiff did not produce the documents as ordered but rather, on February 22, filed a motion for reconsideration or, alternatively, for certification for interlocutory appeal under 28 U.S.C. § 1292(b). On March 7,1982, I heard oral argument on the motion. Defendant moved for imposition of sanctions pursuant to Fed.R.Civ.P. 37(b)(2)(C). I DENY both motions.
DISCUSSION
Plaintiff offers three reasons why the privileged status of these documents should not be vitiated. First, that there was no fraud in the procurement of the ’634 patent. Second, that even if a prima facie showing of fraud is conceded, that these documents were not prepared in furtherance of the fraud. Third, that even if the attorney-client privilege is to be vitiated the attorney work product immunity should nevertheless isolate the documents from disclosure.
A prima facie showing of fraud will vitiate the attorney-client privilege. United States v. Shewfelt, 455 F.2d 836, 840 (9th Cir.), cert. denied, 406 U.S. 944, 92 S.Ct. 2042, 32 L.Ed.2d 331 (1972). In this circuit, evidence of the fraud must be established independent of the privileged communications themselves. Id. But cf., In Re Berkley & Co., Inc., 629 F.2d 548, 553 n. 9 (8th Cir.1980). A prima facie showing
[N]eed not be such as to actually prove the disputed fact, [but] it must be such as to subject the opposing party to the risk of non-persuasion if the evidence as to the disputed facts is left unrebutted.
Duplan Corp. v. Deering Milliken, Inc., 540 F.2d 1215, 1220 (4th Cir.1976) (footnote and citations omitted).
Plaintiff sold an air strain band mill apparatus of the precise type claimed in the ’634 patent more than one year prior to the filing of its U.S. patent application, without revealing this sale to the U.S. Patent Office as relevant prior art. These facts rendered the patent invalid, void, and unenforceable. I found that defendant established a prima facie case of technical fraud independent of the three documents in dispute, indeed, well before they were submitted to me in camera. See Discovery Order (Dec. 30,1982). Plaintiff has offered no new evidence to cause me to reconsider this finding. But cf., Rohm & Haas Co. v. Dawson Chemical Co., 214 U.S.P.Q. 56 (S.D. Tex.1981) (following in camera review, no prima facie case of fraud established).
Generally, the attorney-client privilege or work product immunity will not be vitiated unless the attorney was retained in furtherance of the fraud. See Hercules, Inc. v. EXXON Corp., 434 F.Supp. 136, 155 (D.Del.1977). See also United States v. Hodge and Zweig, 548 F.2d 1347, 1354 (9th Cir.1977). Cf. Pfizer, Inc. v. Lord, 456 F.2d 545 (8th Cir.1972). Plaintiff quite correctly argues that none of the disputed documents could have been prepared in furtherance of a fraud on the U.S. Patent Office since all were prepared subsequent to the March 30, 1976 issuance date of the ’634 patent.
Defendant, however, points to a substantial difference between Hercules and the present case. There was no claim in the former case that plaintiff sued upon a fraudulently obtained patent. Thus, any proof of fraudulent conduct subsequent to the patent’s issuance date would have been immaterial to any issue in that suit. Here, by contrast, defendant argues that plaintiff brought suit on patents which it knew were obtained by fraud, are invalid or not infringed, or both, and are unenforceable. Thus, defendant contends, the fraud upon the Patent Office was perpetuated by the plaintiff’s lawsuit and has become a fraud upon the court. Cf. Portland Wire & Iron Works v. Barrier Corp., Civ. No. 75-1083 (D.Or. May 20, 1980) (Burns, J.), op. at 10-11 (“Communications made to further a business tort such as an antitrust violation may also vitiate the attorney-client privilege.”)
Even if a patent defendant establishes a prima facie case of fraud on the Patent Office, the simple filing of a counterclaim by that party should not entitle it to discover all privileged communications which have occurred or been prepared subsequent to the date of issuance of the allegedly fraudulent patent. One of the main purposes of the attorney-client privilege is “to allow consultation in the interest of establishing a legal defense.” Hercules, 434 F.Supp. at 155. That purpose would be seriously frustrated if the privileged status of communications turned on little more than a defendant’s allegations.
A more satisfactory analytical framework than alleged “fraud on the court” is presented by the decision in AM International, Inc. v. Eastman Kodak Co., Civ. No. 80-C-4016 (N.D.Ill. Oct. 15, 1982) (Decker, J.). Plaintiff AM International (“AMI”) brought suit against Kodak alleging that defendant’s Ektaprint Copier-Duplicator infringed four of plaintiff’s patents. Kodak, in turn, charged that AMI’s suit was groundless and brought in bad faith to achieve objectives unrelated to the patents in issue. Kodak served AMI with interrogatories and a request for production of documents. AMI refused to respond to certain items claiming the benefit of its attorneys’ work product privilege. Kodak then moved to compel discovery. The court reasoned:
One of Kodak’s major allegations in its counterclaim is that AMI knowingly filed suit based on invalid patents in order to unfairly compete with Kodak. Kodak’s success thus depends upon a showing that AMI pursued this suit knowing it would be unsuccessful on the merits. Directly at issue, then, are the opinions of AMI’s attorneys as to the merits of the action and the validity of the underlying patents. Kodak has a particularized and compelling need for the production of the relevant work product of these attorneys.
An attorney’s work product is discoverable where such information is directly at issue and the need for production is compelling. These requirements are satisfied in the case at bar. A review of the record indicates that the recommendation to include the now disclaimed Sargis patent in this action was made by AMI’s current trial counsel, ... that it was considered and reviewed by another counsel of record, ... and that it was also reviewed by AMI’s then general patent counsel .... These same individuals advised AMI concerning the disclaimer of the Sargis patent. The advice of counsel regarding the Sargis patent, as well as other patents sued upon, is thus directly at issue in Kodak’s counterclaim. AMI’s knowledge and motivations when it issued the patents sued upon, when it sought to determine whether they were valid and infringed and when it sued Kodak, are all of critical importance to the resolution of this case ....
Id., op. at 3-4, 6. See Panter v. Marshall Field & Co., 80 F.R.D. 718, 725-26 (N.D.Ill. 1978); Handgards, Inc. v. Johnson & Johnson, 413 F.Supp. 926, 931-33 (N.D.Cal.1976); Bird v. Penn Central Co., 61 F.R.D. 43, 47 (E.D.Pa.1973); and Kearney & Trecker Corp. v. Giddings & Lewis, Inc., 296 F.Supp. 979, 982 (E.D.Wisc.1969), cited by the court in support of its decision. See also Donovan v. Fitzsimmons, 90 F.R.D. 583, 588 (N.D.Ill. 1981) (discovery allowed over claim of attorney work product privilege where advice of counsel “a critical area of inquiry”); Truck Insurance Exchange v. St. Paul Fire & Marine Ins. Co., 66 F.R.D. 129, 136 (E.D.Pa. 1975) (discovery allowed where activities of opposing counsel basis of moving party’s defense); Bourget v. Gov’t. Employees Ins. Co., 48 F.R.D. 29 (D.Conn.1969) (discovery allowed following in camera inspection where moving party showed good cause to pierce attorney-client and work product privileges); 4 Moore’s Federal Practice ¶ 26.64[4] at 26-447 (1982) (“[Wjhen the activities of counsel are inquired into because they are at issue in the action before the court, there is cause for production of documents, that deal with such activities ....”). Compare Loctite Corp. v. Fel-Pro, Inc., 667 F.2d 577, 582 (7th Cir.1981), aff’g, 210 U.S. P.Q. 280 (N.D.Ill.1980) (holding work product privilege not absolute), with Duplan Corp. v. Moulinage et Retorderie de Chavanoz, 509 F.2d 730 (4th Cir.1974), cert. denied, 420 U.S. 997, 95 S.Ct. 1438, 43 L.Ed.2d 680 (1975) (holding opinion work product privilege absolute).
In discussing the Duplan case, the AMI court made these pertinent observations:
While an attorney’s private thoughts and impressions are certainly deserving of particular protection, the court has concluded, as indicated in the preceding discussion, that this privacy must take a back seat when advice of counsel is directly at issue in the case. The fear of the Duplan court has merit only if discovery is permitted frequently or if the standards for allowing disclosure are unclear. By allowing discovery of opinion work product only in extraordinary circumstance, such as when advice of counsel is directly at issue, the inhibiting effect on the attorney should be minimal. Moreover, an absolute ban on discovery could very well impair the pursuit of truth in many cases. As is the case in the instant action, opinion work product may be of paramount importance to the moving party’s case ....
AM International, op. at 8 n. 1. See Handgards, 413 F.Supp. at 932-33.
I am persuaded that with but little refinement, the AMI approach will serve well in the instant proceeding. The refinements are, first, that defendant must establish a prima facie case as to a counterclaim to which the disputed documents would be material, and second, that the documents be examined in camera before their release. Both refinements have been met here.
Defendant has counterclaimed alleging unfair competition and antitrust violations. If a patent infringement suit is brought in bad faith and utilized to intimidate actual or potential competitors, then the antitrust laws are violated. Von Kalinowski, 7 Antitrust Laws and Trade Regulation ¶ 59.08[l][a] at 59-111 to -112 (1982). On the other hand, a good faith infringement suit will not violate the antitrust laws even though the patent proves to be invalid. Id. at 59-112 to -113. See also id., v. 3, ¶ 9.03[2] at 9-62 to -63 (1982) (antitrust violation in procuring patent by knowing and wilful fraud). Cf. Airtex Corp. v. Shelley Radiant Ceiling Co., 400 F.Supp. 170, 177 (N.D.Ill.1975), aff’d, 536 F.2d 145 (7th Cir.1976); Technicon Instruments Corp. v. Coleman Instruments, Inc., 255 F.Supp. 630, 642 (N.D.Ill.1966), aff’d, 385 F.2d 391 (7th Cir.1967). Furthermore, an infringement suit is entitled to a presumption of good faith rebuttable only by clear and convincing evidence. Carpet Seaming Tape Licensing Corp. v. Best Seam, Inc., 616 F.2d 1133, 1138-39 (9th Cir.1980); Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 996 (9th Cir. 1979), cert. denied, 444 U.S. 1025, 100 S.Ct. 688, 62 L.Ed.2d 659 (1980).
Fed.R.Civ.P. 26(b)(3) provides that attorney work product is only discoverable “upon a showing that the party seeking discovery has substantial need of the materials in the preparation of his case and that he is unable without undue hardship to obtain the substantial equivalent of the materials by other means.” The Rule goes on to provide that, in ordering discovery, the court shall “protect against” disclosure of opinion work product. Id. These provisions do not bar discovery of all opinion work product but do require that the party seeking discovery establish that the information sought “is directly at issue and the need for production is compelling,” AM International op. at 6, that is, that an “extraordinary circumstance” exists. Id. at 8 n. 1.
Defendant here has a compelling need to discover the plaintiff’s attorney work product, including legal opinions. Without access to such material, the defendant will have no chance to prove its potentially valid counterclaims. At the same time, the clear and convincing evidence standard protects the plaintiff for only serious misuse will overcome the presumption that this infringement action was instituted in good faith.
Yet the privileged status of the opinion work product of plaintiff’s attorney cannot turn simply on whether the plaintiff has filed a counterclaim. Defendant must make a showing of “extraordinary circumstances.” AM International, op. at 8 n. 1. I hold that extraordinary circumstances requires here a prima facie showing of unfair competition or antitrust violations, independent of the privileged communications themselves, but without reference to the strong presumption of good faith to which plaintiff will be entitled in the evaluation of the evidence at trial. I conclude that de fendant has adequately met its burden of showing extraordinary circumstances to negate plaintiff’s claim of insulation by the work product immunity. My conclusion is based on the following chronology.
In approximately October, 1970, the band mill strain apparatus which is the subject of the ’634 patent was installed at the Fort Hill Lumber Company sawmill at Grande Ronde, Oregon. The apparatus was sold to the company later that month after successful demonstration of its operation. In April, 1971, the band mill strain apparatus which is the subject of the ’409 patent was shipped from British Columbia, Canada to Atlanta, Georgia, and was publicly displayed and demonstrated there at the Atlanta Machinery Exhibition during April 30 —May 3, 1971. On April 3, 1972, a single patent application covering the band mill apparatus described in the ’634 and ’409 patents was filed in the U.S. Patent and Trademark Office, claiming an effective filing date under 35 U.S.C. § 119 of April 6, 1971, the date when the counterpart British application had been filed. The original U.S. application was later divided into two separate parent applications. The Fort Hill sale was not disclosed to the Patent Office during the prosecution of the applications for the ’409 and ’634 patents. Nor was it disclosed in the May 29, 1973 filing of the application which matured into the ’620 patent. In March, 1980, plaintiff filed an application for reissue of the ’620 patent calling twenty (20) prior art references to the attention of the examiner, including the ’409 patent, but not the Fort Hill sale or the Atlanta Exhibition.
The application which matured into the ’634 and ’409 patents was filed more than one year after the Fort Hill sale. Since the Fort Hill apparatus is identical to the apparatus disclosed in the ’634 patent, and only slightly different from the apparatus disclosed in the parent application, the Fort Hill apparatus was clearly prior art that would have been considered highly pertinent to the patentability of the inventions claimed in both patents. The nondisclosure of the Fort Hill sale violated 35 U.S.C. §§ 102(b), 103, and rendered the subject matter of the ’634 patent unpatentable. On September 17, 1982, the parties stipulated the ’634 patent invalid, void and unenforceable.
This chronology shows that plaintiff sued upon an invalid patent, and the evidence does not foreclose the possibility that plaintiff knew of the invalidity of the patent at the time of its suit and brought the suit in bad faith. Critical to a resolution of defendant’s counterclaims is an examination of the opinions offered by plaintiff’s attorney. Because defendant established a prima facie case of unfair competition independent of the disputed communications, I ordered the documents provided to me in camera for review. Minute Order (Feb. 3, 1983). Now that I have reviewed the documents, I order them produced for defendant. Accordingly, plaintiff’s motion for reconsideration is DENIED.
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5511780-20916 | OPINION
HIGGINBOTHAM, District Judge.
I.
INTRODUCTION
Over a decade ago, when relator was an adolescent of fifteen years of age, he and two other youthful companions confessed to the murder and attempted robbery of a Philadelphia druggist. The collateral proceedings seeking to invalidate relator’s and his co-defendants’ subsequent convictions of first degree murder, of which the present petition for a writ of habeas corpus is only one of many, may well last several more years.The events and circumstances surrounding the confessions and convictions of relator and his co-defendants raise perplexing legal and factual issues which have been presented to various state and federal judges over a period of time.
After a plea of guilty to murder generally and a trial to determine the degree of guilt, relator was sentenced to a term of life imprisonment on September 9, 1957.
The instant petition for a writ of habeas corpus was filed in this Court on March 5, 1968, and was dismissed for failure to exhaust state remedies under the Post Conviction Hearing Act, 19 P.S. § 1180-1 et seq. on the basis of United States ex rel. Singer v. Meyers, 384 F.2d 279 (3rd Cir., 1967) reversed per curiam 392 U.S. 647, 88 S.Ct. 2307, 20 L.Ed.2d 1358 (1968). The Third Circuit had held in Singer that a state prisoner who had already filed a state habeas corpus petition, must file a petition under the then newly enacted and broader Post Conviction Hearing Act, supra, before he could be held to have exhausted his state remedies. The Supreme Court reversed this opinion without a written opinion.
Following the reversal of Singer, the Commonwealth requested that the instant matter be remanded to this Court for disposition.
The relator urges four essential grounds as a basis for habeas corpus relief. Firstly, the relator contends that his unrecorded guilty plea was invalid per se. Secondly, he alleges that his guilty plea was in fact involuntary, be cause of relator’s youth, and the unfamilarity of his court appointed counsel with the relevant portions of the law of homicide. Thirdly, relator urges that his plea of guilty was the result of a coerced confession. And lastly, relator alleges that he was denied his right to counsel at the hearing before the juvenile court to certify him for trial as an adult. In its Answer, but not in its brief, the Commonwealth raised the issue that the relator has still failed to exhaust his state remedies.
I find that I have jurisdiction under the facts of this case. After a full plenary hearing and considerations of the well argued briefs of both the Commonwealth and counsel for the relator, I find for reasons stated hereafter, that relator is not entitled to the writ of habeas corpus and the petition is therefore dismissed.
II.
FACTS
After the arrest of relator’s co-defendant, Isaiah Green, at 12:15 A.M., on July 27, 1957, relator, Edwin Walker, was arrested at 3:00 A.M., on July 27, 1957 (N.T., 52). At the time of his arrest, Walker was fifteen years, eleven months of age (N.T., 148). He was awakened from a deep sleep at 3:00 A.M. by twelve or fourteen law enforcement officers and questioned as to the whereabouts of the alleged murder weapon. (H.C., 53). The relator first lead the officers to a sewer where the weapon was supposedly hidden. During the course of the search for the weapon in the sewer, according to Walker’s testimony, one officer told him that he should throw him down the sewer, but another officer assured the relator that no such threat would be carried out. (H.C., 54-55). Under the facts of this case, I find the relator was not apprehensive of any physical harm at this time. Relator then showed the police officers where the weapon was actually hidden, in a backyard. Newspaper reporters and photographers accompanied the police during the search for the weapon. At the direction of a police officer, relator was photographed by newspaper photographers indicating where the weapon was hidden. (H.C., 56).
Later that morning the relator was interrogated at police headquarters by several police officers. After 3:45 A.M., Walker was taken to City Hall, where he was questioned by five detectives. Walker signed the typewritten confession at 8:35 A.M., in the presence of his two co-defendants. (N.T., 140). Thus, for a period of approximately five hours during the middle of the night, Walker was questioned by five policemen.
During this period of questioning of Walker, no attorney or friendly adult was present. (H.C., 60). On Thursday, July 25, 1957, prior to relator’s arrest, a police officer informed relator’s older sister that relator was wanted for questioning. (H.C., 38). After relator’s arrest and after he had given his confession, his sister was told on either Monday or Tuesday that there was no need to get a lawyer since the relator would be treated as a juvenile. (H.C., 40).
Four days after his arrest, during which time he had no family visitors, the relator had a hearing before a juvenile judge sitting as a committing magistrate, on July 30, 1957. A prima facie case of murder was made out and relator was certified to stand trial as an adult for murder. The next day, July 31, 1957, relator was indicted for murder by the Grand Jury and sent to County Prison. He was not allowed to be visited by his sister at County Prison, although she attempted to do so. (H.C., 41). Counsel was not appointed for the relator until twelve days later, August 12, 1957. Relator first conferred with appointed counsel on August 20, 1957. (H.C., 69).
During this conference between the relator and court appointed counsel, counsel advised the relator to plead guilty since there was testimony identifying him as a participant in the crime; but the confession was a primary factor in counsel’s advice to the relator that he plead guilty. (H.C., 17-18).
The next contact between relator and his court-appointed attorneys was on September 4, 1957, when relator plead guilty to murder generally. (H.C., 103). This plea of guilty was unrecorded. (N.T., 45.) The relator was sentenced to a term of life imprisonment on September 5, 1957.
III.
EXHAUSTION OF STATE REMEDIES
The Commonwealth has in its answer urged that the filing of a petition under the Post Conviction Hearing Act, supra, by the relator after he had filed the instant federal petition means the relator has failed to exhaust his state remedies. The Commonwealth relied upon United States ex rel. Davis v. Maroney, 400 F.2d 85, (1968), where the Court stated:
“It should be noted that, after the application for Federal habeas corpus, further collateral proceedings were initiated in the state trial court under the Post-Conviction Hearing Act. This statutory procedure became effective in Pennsylvania after the original State habeas corpus petition * * * [Citations omitted]; and the petitioner has not exhausted his remedies thereunder.”
But recognizing that the exhaustion of state remedies doctrine is a matter of comity between state and federal courts and not a matter of jurisdictional power of the federal district courts, Fay v. Noia, 372 U.S. 391, 420, 83 S.Ct. 839, 9 L.Ed.2d 837 (1963), I used my discretion to accept jurisdiction and ordered a hearing in this matter. In a situation where the Commonwealth has requested a remand of a ease from the Court of Appeals to this Court for further proceedings where the sole issue on appeal was whether the petitioner had exhausted his state remedies, it would appear unfair to force the petitioner to endure further delays while the courts refine the intricacies of the exhaustion doctrine. “For it is clear that there are sharp limits to the sacrifices men must make upon the altar of comity. * * * ” United States ex rel. Lusterino v. Dros, 260 F.Supp. 13, 16 (S.D.N.Y., 1966.) I have thus accepted jurisdiction in this case, where a certificate of probable cause for appeal will be granted so that relator may pursue his substantive constitutional claims upon appeal if he so desires.
IV.
THE CONFESSION
For me, the most troublesome issue in this case is whether under “all of the attendant circumstances” relator’s confession “was obtained by coercion or improper inducement” and thus became an involuntary confession. Haynes v. State of Washington, 373 U.S. 503, 83 S.Ct. 1336, 10 L.Ed.2d 513 (1963).
Appellant’s confession was obtained and his guilty plea entered prior to the time of Escobedo v. State of Illinois, 378 U.S. 478, 84 S.Ct. 1758, 12 L.Ed.2d 977 (1964), and Miranda v. State of Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), and thus he does not have the benefit of those greater prohibitions against police interrogation since these latter cases have been held to be not retroactive. Johnson v. State of New Jersey, 384 U.S. 719, 731, 86 S.Ct. 1772, 1780, 16 L.Ed.2d 882 (1966). In one of the major pre-Miranda decisions, Chief Justice Warren has noted:
“In all such cases [pertaining to the voluntariness or involuntariness of a confession], we are forced to resolve conflict between two fundamental interests of society; its interest in prompt and efficient law enforcement, and its interest in preventing the rights of its individual members from being abridged by unconstitutional methods of law enforcement.” Spano v. New York, 360 U.S. 315, 79 S.Ct. 1202, 1203, 3 L.Ed.2d 1265 (1959).
Mr. Justice Frankfurter has reminded us that in making the determination between voluntary and involuntary confessions we must look to the “test in Anglo-American Courts for 200 years”:
“ * * * Is the confession the product of an essentially free and unconstrained choice by its maker? If it is, if he has willed to confess, it may be used against him. If it is not, if his will has been overborne and his capacity for self-determination critically impaired, the use of his confession offends due process.” Culombe v. Connecticut, 367 U.S. 568, 602, 81 S.Ct. 1860, 1879, 6 L.Ed.2d 1037 (1961).
Justice Frankfurter further noted that:
“In light of our past opinions and in light of the wide divergence of use which men may reasonably maintain concerning the propriety of various police investigative procedures not involving the employment of obvious brutality, this much seems certain: It is impossible for this Court, in enforcing the Fourteenth Amendment, to attempt precisely to delimit, or to surround with specific, all inclusive restrictions, the power of interrogation allowed to state law enforcement officers in obtaining confessions. No single litmus-paper test for constitutionally impermissible interrogation has been evolved: neither extensive cross questioning — deprecated by the English Judges; nor undue delay in arraignment — proscribed by McNabb; nor failure to caution a prisoner — enjoined by the Judges’ Rules; nor refusal to permit communication with friends and legal counsel at stages of the proceeding when the prisoner is still only a suspect — prohibited by several state statutes. * * * Each of these factors, in company with aü of the surrounding circumstances * * is relevant.” 367 U.S. 601-602, 81 S.Ct. 1878-1879. (Emphasis added.)
Thus, obviously, as a matter of logic, as differentiated from constitutional nomenclature, it could be argued that under the circumstances of this case, Walker’s confession was not voluntary — since he certainly would not have volunteered this information if the police had not originally questioned him; his attitude after this brutal shooting does not appear to be that of the individual described by Mr. Justice Frankfurter’s language, where the “police may be midwife to a declaration naturally born of remorse, or relief.” 367 U.S. 576, 81 S.Ct. 1864.
In Spano v. People of the State of New York, 360 U.S. 315, 321, 79 S.Ct. 1202, 1206, 3 L.Ed.2d 1265 (1959), the Court noted:
“The facts of no ease recently in this Court have quite approached the brutal beatings in Brown v. State of Mississippi, 1936, 297 U.S. 278, 56 S.Ct. 461, 80 L.Ed. 682, or the 36 consecutive hours of questioning present in Ashcraft v. State of Tennessee, 1944, 322 U.S. 143, 64 S.Ct. 921, 88 L.Ed. 1192. But as law enforcement officers become more responsible, and the methods used to extract confessions more sophisticated, our duty to' enforce federal constitutional protections does not cease. It only becomes more difficult because of the more delicate judgments to be made.” (Emphasis added.)
Indeed, the instant case is one where my task is “more difficult because of the more delicate judgments to be made.” For I could imagine very few cases where the totality of facts would be as close to that magical line of factual demarcation which separates voluntariness from involuntariness. The relator's case is in an intriguing twilight zone where from one perspective some light is shed on this problem by the decisions of the United States Supreme Court in Haley v. Ohio, 332 U.S. 596, 68 S.Ct. 302, 92 L.Ed. 224 (1948), and Gallegos v. State of Colorado, 370 U.S. 49, 82 S.Ct. 1209, 8 L.Ed.2d 325 (1962), and from a different perspective some light is shed by the opinion of my distinguished colleague, Judge Ralph Body, who was affirmed by a unanimous Court of Appeals on the holding that the relator’s accomplice, James Crowson’s statement was constitutionally a “voluntary confession.” United States ex rel. Crowson, 300 F.Supp. 1175, (E.D.Pa., 1968) affirmed 411 F.2d 910.
In Haley v. Ohio, 332 U.S. 596, 68 S.Ct. 302 (1948), the Supreme Court through Justice Douglas, held that the confession of a 15 year old youth interrogated for five hours during the middle of the night was an involuntary confession. Although there was no evidence of actual physical coercion to the youthful defendant, Justice Douglas relied upon the delay in arraignment and confinement without contact with parents or counsel as a basis for the determination that the confession was involuntary.
In Gallegos v. State of Colorado, 370 U.S. 49, 82 S.Ct. 1209 (1962), speaking once again through Justice Douglas, the Supreme Court held that the confession of a 14 year old suspect was involuntary where there was no evidence of prolonged questioning and where, in fact, he “after being picked up by the police * * * immediately admitted the assault and robbery.” However, he did not sign the confession which provided “the crucial evidence introduced at the trial * * * [until] he had been held for five days during which time he saw no lawyer, parent or other friendly adult.” Certainly Gallegos, supra, and particularly Haley, supra, contain some formidable inferences suggesting that the instant confession of Walker may be beyond, though barely beyond, the permissible borderline of police questioning, and thus under the totality of circumstances reached the point of constitutional involuntariness.
Balanced against Gallegos and Haley, is the opinion in United States ex rel. Crowson v. Brierley, supra. I cannot find any overriding factual distinctions between Crowson’s experiences and those of relator which require a different constitutional result in Walker’s case. If Crowson’s confession was voluntary, so was Walker’s. For within less than an hour Walker had shown the police where the murder weapon — a sawed-off shotgun — had been hidden. Walker was 15 years old and Crowson was 15 years old. They were both questioned in the early morning hours. Walker was visited by the police at approximately 3:00 A.M., after which time the questioning began, and Judge Body has found that Crowson was “picked up” at 2:20 A.M., and within an hour, the 15 year old Crowson had given his oral confession. This confession was given at some time between 3:15 A.M. and 4:00 A.M., and Judge Body has found:
“At about 4:00 A.M., Green began giving answers for a written statement in the presence of the relator Crowson. Sometime later Edwin Walker, a co-defendant, was brought in. Green finished his written confession at about 5:00 A.M. The questions and answers were typewritten by the police. The police began relator’s confession about 6:00 A.M. Walker’s confession was written after relator’s [Crowson]. At about 8:00 A.M. each defendant signed all three typewritten confessions which had been given in each other’s presence and which were consistent in all important particulars.” 300 F.Supp. 1176-1177.
The only significant factual difference between Crowson and Walker is that Crowson’s family had notice of the questioning since he was picked up at his home around 2:20 A.M. Saturday morning, and Walker’s family had no notice of his police interrogation. But under the totality of circumstances, I do not find that this factual difference of actual notice to the parents in the Crowson case and no notice to an adult in Walker’s case, constitute an adequate basis to warrant a different result wherein Walker’s confession could be held to be constitutionally involuntary.
Judge Body dealt in detail with the leading cases of Gallegos, supra, and Haley, supra. The Court of Appeals noted that it had given “careful consideration of the record” and it affirmed the Order of the District Court “for the reasons so well stated by Judge Body in his Opinion of October 17, 1968.” 411 F.2d 911.
Though Justice Frankfurter suggested in Culombe v. Connecticut, supra, that there was no “litmus paper test” to differentiate involuntariness from voluntariness, the instant case may be an exception. For I have been presented with a unique litmus paper test performed by the Court of Appeals in their affirmance of Judge Body’s opinion. This appellate test was performed on basically the same batch of facts which also immersed Walker and from which the determination of voluntariness or involuntariness was made. Since I can find no facts to significantly differentiate Walker’s case from that of his fellow accomplices, I find as a matter of law that his confession was constitutionally a voluntary statement.
V.
VOLUNTARINESS. OF THE GUILTY PLEA
Since the confession was in fact voluntary, it did not induce relator’s guilty plea. Relator, nonetheless, maintains that the unrecorded plea was in fact involuntarily and unintelligently entered. To prove this contention relator relies primarily on an alleged misunderstanding of the law of homicide on the part of court appointed counsel, and thus presumably the fifteen year old relator was not fully advised of the consequences of his plea of guilty. The burden of proof is on the Commonwealth since the plea was unrecorded. United States ex rel. Fink v. Rundle, 414 F.2d 542 (3rd Cir., 1969). But the Commonwealth has sustained its burden of proving the plea was in fact intelligently and voluntarily entered.
Counsel for relator made the following statement, at the beginning of the trial to determine the degree of guilt:
“MR. KANNUER: May it please the Court, on behalf of Walker, we are at this time ready to plead and enter a plea of guilty, generally to murder. And under the statutes, as I understand it, at this stage it is presumed to be second degree. The burden is on the Commonwealth to raise it to first, and the burden would be upon the defendants to reduce it to manslaughter.” (N.T., 4).
Relator contends that the above statement is inaccurate. It is his theory that when a homicide occurs during the course of an attempted robbery, the crime would necessarily be first degree murder under the Statute (18 Pa.Purdon’s, § 4701.) Furthermore, he maintains there could have been no second degree or manslaughter conviction under the statutory classification of various degrees of murder.
Relator’s theory is not in accordance with the interpretation of the law of homicide in Pennsylvania where the defendant has pleaded guilty to murder generally. It is impossible to plead guilty to murder in the first degree in Pennsylvania. The presumption upon a guilty plea to murder generally is that the degree of murder is no higher than second degree. Commonwealth v. Jones, 355 Pa. 522, 50 A.2d 317, 319 (1947). The Commonwealth would thus have to come forward with evidence to make out a case of first degree murder. To find the relator guilty of second degree murder or manslaughter would not have been a “legal impossibility” as relator contends, but only against the weight of all the evidence developed since the attempted robbery was established at trial.
When I balance the relator’s age and capacity against the level of legal assistance granted, as relator suggests, I find that relator understood the nature of his guilty plea. Thus the testimony at the hearing before me shows that court appointed counsel, Mr. Kanner, discussed fully with relator the charges against him and the possible penalties. (H.C., 16, 17). The fact of identification and a confession weighed heavily in the decision (H.C., 24). And finally relator’s plea was motivated by a desire to escape the death penalty, despite the fact he testified he was not aware he was admitting the charges against him. (H.C., 71.)
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4073348-28621 | STRAUB, Circuit Judge:
The United States appeals from an August 21, 2012 order of the United States District Court for the Eastern District of New York (Jack B. Weinstein, Judge) entering a post-verdict judgment of acquittal in favor of Defendant-Appellee Lawrence DiCristina, setting aside the guilty verdict on one count of violating the Illegal Gambling Business Act (the “IGBA”), 18 U.S.C. § 1955, and one count of conspiring to do so under 18 U.S.C. § 371. The District Court ruled that DiCristina’s conviction must be set aside because “Texas Hold’em” poker was not covered by the IGBA. United States v. Dicristina, 886 F.Supp.2d 164 (E.D.N.Y.2012). Because we find that the plain language of the IGBA covers DiCristina’s poker business, we REVERSE the judgment of acquittal and REMAND to the District Court with instructions to reinstate the jury verdict, enter a judgment of conviction on both counts, and proceed with sentencing Di-Cristina.
BACKGROUND
The basic facts of this case are not in dispute: between December 2010 and May 2011, DiCristina, along with his co-defendant Stefano Lombardo and others, operated a poker club in the back room of a warehouse in Staten Island, New York, out of which he conducted a legitimate business selling electric bicycles. Dicristina, 886 F.Supp.2d at 198. The poker games, which were generally held twice a week, were advertised by word of mouth and text message. Id. “The club contained two tables at which No Limit Texas Hold’em was played.” Id. The dealers collected a five percent “rake” for the house from each pot, twenty-five percent of which they kept as payment. Id. “The remaining funds from the rake were used for expenses relating to the operation of the business and for profits.” Id. Other than the operation of these poker games, no unlawful conduct by DiCristina is alleged. Id. Di-Cristina and Lombardo pleaded guilty on December 12, 2011. On May 1, 2012, Di-Cristina was permitted to withdraw his guilty plea, and the matter was set for trial.
On June 29, 2012, DiCristina moved to dismiss the second superseding indictment on the basis that poker is not house-banked or predominated by chance, and thus is not encompassed in the IGBA’s enumerated list of illegal types of “gambling.” The District Court heard testimony by DiCristina’s expert, Dr. Randall Heeb, as to why skill predominates over chance in poker, Dicristina, 886 F.Supp.2d at 178-85, but reserved decision on the motion to dismiss, and the parties went forward with trial. Id. at 168. Over Di-Cristina’s objection, the District Court ruled that the question of whether poker fell within the IGBA was a question of law to be decided by the court, excluded Dr. Heeb’s testimony as irrelevant, id. at 171, and instructed the jury that gambling under the IGBA “includes playing poker for money.” [GA205]
The jury found DiCristina guilty on both counts charged in the second superseding indictment. DiCristina then renewed his motion to dismiss in the form of a motion for a judgment of acquittal under Federal Rule of Criminal Procedure 29. He argued that (1) in order for conduct to come under the purview of the IGBA, it must be sufficiently similar to the nine games enumerated in § 1955(b)(2); and (2) poker did not fall within the statutory definition of an illegal gambling business because it was neither house-banked nor predominated by chance. Dicristina, 886 F.Supp.2d at 169. The Government argued that subsection (b)(2) did not, by its plain language, restrict the games that constitute unlawful gambling under the IGBA and therefore it was sufficient for purposes of the statute that a gambling activity was illegal under state law, as poker was under New York law in this instance. Id. After considering additional briefing and expert testimony from both sides, the District Court dismissed the second superseding indictment and entered a judgment of acquittal.
The District Court determined that both the Government and DiCristina presented plausible readings of the statute, and that the legislative history was not decisive as to whether Congress meant to include poker within the IGBA. Reasoning that the IGBA did not “provide explicit criteria” for defining gambling, and that there were “ambiguities in the federal definition of gambling,” the District Court found that the “governing criteria must be derived by determining what common characteristics unif[y] the games listed in § 1955[ (b)(2) ] into a cohesive group.” Id. at 226. The District Court found that “dictionary, common law, and other federal definitions of gambling argue in favor of a definition limited to games of chance.” Id. at 230. It then determined that poker did not constitute “gambling” under the IGBA because poker is predominated by skill rather than chance. Id. at 234. This timely appeal followed.
DISCUSSION
I. Applicable Law
We review a district court’s legal conclusions, including those interpreting the meaning of a statute, de novo. United States v. Stewart, 590 F.3d 93, 109 (2d Cir.2009); United States v. Koh, 199 F.3d 632, 636 (2d Cir.1999).
When interpreting a statute, we “must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.” United States v. Kozeny, 541 F.3d 166, 171 (2d Cir.2008) (interpreting 18 U.S.C. § 3292) (quoting United States v. Albertini, 472 U.S. 675, 680, 105 S.Ct. 2897, 86 L.Ed.2d 536 (1985)) (internal quotation marks omitted). “Where the statute’s language is ‘plain, the sole function of the courts is to enforce it according to its terms.’ ” Id. (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)); see also Conn. Nat’l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) (“We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there.”).
Statutory enactments should, moreover, be read so as “to give effect, if possible, to every clause and word of a statute.” Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) (quoting United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 99 L.Ed. 615 (1955)) (internal quotation marks omitted); see also United States v. Nordic Vill, Inc., 503 U.S. 30, 36, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992) (noting “the settled rule that a statute must, if possible, be construed in such fashion that every word has some operative effect”); United States v. Anderson, 15 F.3d 278, 283 (2d Cir.1994) (“[Cjourts will avoid statutory interpretations that render provisions superfluous.”). And “[t]he ‘whole act’ rule of statutory construction exhorts us to read a section of a statute not ‘in isolation from the context of the whole Act’ but to ‘look to the provisions of the whole law, and to its object and policy.’ ” United States v. Pacheco, 225 F.3d 148, 154 (2d Cir.2000) (quoting Richards v. United States, 369 U.S. 1, 11, 82 S.Ct. 585, 7 L.Ed.2d 492 (1962)).
In the event that the text of a statute is not clear, a court interpreting the statute may consult the legislative history to discern “the legislative purpose as revealed by the history of the statute.” Concrete Pipe & Prods, of Cal, Inc. v. Constr. Laborers Pension Trust for S. Cal, 508 U.S. 602, 627, 113 S.Ct. 2264, 124 L.Ed.2d 539 (1993); see also United States v. Gayle, 342 F.3d 89, 93-94 (2d Cir.2003) (looking to legislative history where text of statute was ambiguous as to what constitutes a predicate offense under 18 U.S.C. § 922(g)(1)). “Our obligation is to give effect to congressional purpose so long as the congressional language does not itself bar that result.” Johnson v. United States, 529 U.S. 694, 710 n. 10, 120 S.Ct. 1795, 146 L.Ed.2d 727 (2000). Where Congress provides no definition for a term in a statute, we “consider the ordinary, common-sense meaning of the words.” United States v. Dauray, 215 F.3d 257, 260 (2d Cir.2000).
Finally, we have recognized that “[t]he rule of lenity provides that ambiguities concerning legislative intent in criminal statutes should be resolved in favor of the accused.” United States v. Figueroa, 165 F.3d 111, 119 (2d Cir.1998). The rule of lenity “ensures fair warning by so resolving ambiguity in a criminal statute as to apply it only to conduct clearly covered.” United States v. Lanier, 520 U.S. 259, 266, 117 S.Ct. 1219, 137 L.Ed.2d 432 (1997). However, “the rule of lenity only applies if, after considering text, structure, history, and purpose, there remains a grievous ambiguity or uncertainty in the statute, such that the Court must simply guess as to what Congress intended.” Barber v. Thomas, 560 U.S. 474, 130 S.Ct. 2499, 2508-09, 177 L.Ed.2d 1 (2010) (internal citations and quotation marks omitted); see also Bifulco v. United States, 447 U.S. 381, 387, 100 S.Ct. 2247, 65 L.Ed.2d 205 (1980) (“[T]he touchstone of the rule of lenity is statutory ambiguity.” (internal quotation marks omitted)).
II. Text of the Statute
A. Statutory Scheme
The IGBA provides in relevant part:
Prohibition of illegal gambling businesses
(a) Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both.
(b) As used in this section—
(1) “illegal gambling business” means a gambling business which—
(i) is a violation of the law of a State or political subdivision in which it is conducted;
(ii) involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and
(iii) has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day.
(2) “gambling” includes but is not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy , bolita or numbers games, or selling chances therein.
(3) “State” means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States.
18 U.S.C. § 1955 (emphasis added).
Subsection (e) of the IGBA excludes from the statute’s scope “any bingo game, lottery, or similar game of chance conducted by” a tax-exempt organization. Id. § 1955(e) (emphasis added).
Pursuant to § 1955(b)(1)®, we look to state law definitions of gambling. New York law provides that:
A person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome.
N.Y. Penal Law § 225.00(2).
? “contest of chance” is in turn defined under New York law as “any contest, game, gaming scheme or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein.” Id. § 225.00(1). The parties do not dispute that poker constitutes gambling under New York State law. See Dicristina, 886 F.Supp.2d at 168-69 (noting that Di-Cristina had waived the argument that poker was not gambling under New York law and explaining that it has no merit).
The Supreme Court has observed that the IGBA “declares] that certain gambling activities violate federal as well as state law,” thereby “giv[ing] the Federal Government a new substantive weapon” with which to “strike at organized crime’s principal source of revenue: illegal gambling.” Iannelli v. United States, 420 U.S. 770, 788, 95 S.Ct. 1284, 43 L.Ed.2d 616 (1975). In Sanabria v. United States, 437 U.S. 54, 98 S.Ct. 2170, 57 L.Ed.2d 43 (1978), the Court noted that:
Congress did not assimilate state gambling laws per se into the federal penal code, nor did it define discrete acts of gambling as independent federal offenses. The Government need not prove that the defendant himself performed any act of gambling prohibited by state law. It is participation in the gambling business that is a federal offense, and it is only the gambling business that must violate state law.
Id. at 70, 98 S.Ct. 2170 (internal citations and footnotes omitted).
B. Requirements of the IGBA
The plain language of § 1955 clearly outlines the activity that it pro scribes. It criminalizes the act of running a gambling business that (1) operates in violation of the law of the state in which the business is conducted; (2) is conducted by five people or more; and (3) is either in operation for more than thirty days or earns more than $2,000 in one day. See 18 U.S.C. § 1955(b)(1). The inclusion of elements (2) and (3) demonstrates that the focus of the statute’s criminal proscription is not on what game is being played, but on the size of the business and the revenue derived by those who are running it. See Sanabria, 437 U.S. at 70, 98 S.Ct. 2170 (“It is participation in the gambling business that is a federal offense”) (emphasis added). As the District Court noted, “most ‘kitchen table’ poker games would not satisfy either or both of these requirements.” Dicristina, 886 F.Supp.2d at 201. DiCristina’s poker business, it is undisputed, satisfied both.
DiCristina contends that the IGBA does not apply to a poker business, however, because poker does not fit within the “definition of gambling” set forth in subsection (b)(2). See Appellee’s Br. at 12-17. But unlike subsection (b)(1), which defines “illegal gambling business,” or subsection (b)(3), which defines the term “State,” subsection (b)(2) is tellingly not prefaced by the verb “means.” See Groman v. Comm’r of Internal Revenue, 302 U.S. 82, 86, 58 S.Ct. 108, 82 L.Ed. 63 (1937) (“[W]hen an exclusive definition is intended the word ‘means’ is employed .... ”). Had Congress intended to create a definition of “gambling” unique to the IGBA, or to confine the reach of the IGBA to businesses involving certain types of gambling, it could have inserted such language. Instead, subsection (b)(2) states that “gambling includes but is not limited to” the nine activities listed. 18 U.S.C. § 1955(b)(2) (emphasis added). It does not include the words “games similar to” or any other such language limiting subsection (b)(2) to include only games analogous to those enumerated. Rather, the phrase “includes but is not limited to” signals a non-exhaustive list of examples of gambling activities.
DiCristina contends that reading the statute in this way renders subsection (b)(2) purposeless. See Appellee’s Br. at 24-29. We disagree. Subsection (b)(2) lists acts of running a gambling business— “poolselling,” “bookmaking,” “maintaining” gambling devices, and “conducting” games — rather than the games themselves. 18 U.S.C. § 1955(b)(2). It thus serves as an illustration of what may constitute running a gambling operation. As the District Court recognized, this reading of subsection (b)(2) supports the notion that Congress was “concerned with illustrating types of gambling businesses ... rather than on creating a limiting definition of gambling under federal law.” Dicristina, 886 F.Supp.2d at 222.
DiCristina also argues that § 1955(e) “confirms that the unifying characteristic of the prohibited games is that each is a game of chance,” Appellee’s Br. at 17, because the games that are included by the language of subsection (b)(2) must be the same as those games that are excluded by subsection (e). Subsection (e), it is undisputed, creates an exemption for the activities of charities. It does not make any reference to subsection (b)(2), and does not state that it modifies or applies to that subsection in any way. Had Congress intended to limit the reach of the IGBA to businesses operating games of chance, it could have done so by inserting that language in subsection (b)(2). The District Court’s decision to limit the IGBA to games of chance was based on its finding that the statute was ambiguous as to what gambling activities it covered. See Dicristina, 886 F.Supp.2d at 230. Because we find no such ambiguity, we decline to limit the statute’s reach beyond its plain terms.
Thus, the question of whether skill or chance predominates in poker is inapposite to this appeal. The language of the statute is clear that it contains only three requirements, all set forth in subsection (b)(1), and all of which were met in this case.
Our precedent is consistent with this holding. In United States v. Gotti, 459 F.3d 296 (2d Cir.2006), we ruled of § 1955:
This statute provides that “[w]hoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both.” 18 U.S.C. § 1955(a). An “illegal gambling business,” in turn, is defined as one “which (i) is a violation of the law of a State ... in which it is conducted; (ii) involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and (iii) has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day.” 18 U.S.C. § 1955(b)(1).
Id. at 340 (emphasis in original).
In Gotti, defendant Bondi was convicted of two counts of violating the IGBA — one for running a bookmaking business, and one for maintaining an electronic machine poker game called Joker-Poker. He challenged his conviction of the latter count on the grounds that Joker-Poker machines were not “illegal gambling devices” under New York State law because the games played thereon were “games of skill rather than contests of chance.” Id. at 342. We rejected this argument, finding that under New York law a “contest of chance” encompasses games in which the skill of the contestants may play a role, so long as the outcome depends in a material degree on chance. Id.
While the parties in Gotti did not raise the argument now made by DiCristina, we specifically ruled in that case that an “illegal gambling business” is “defined as one which” met the three elements articulated in subsection (b)(1). Id. at 340. DiCristina now asks us to find that the statute requires the Government to prove that the alleged business activity meets a fourth element — the “definition of gambling” in subsection (b)(2).
As the District Court acknowledged, the only Circuit court to have directly addressed this issue is the Third Circuit in United States v. Atiyeh, 402 F.3d 354 (3d Cir.2005). In Atiyeh, the Third Circuit rejected the argument DiCristina now advances, stating:
[Defendant] argues that the conduct for which he was convicted, becoming a custodian of funds that were wagered or to be wagered, does not come within the limited definition of what constitutes “gambling” under 18 U.S.C. § 1955(b)(2). This argument is flawed. The relevant definition for our purposes is that of an “illegal gambling business,” provided for in 18 U.S.C. § 1955(b)(1), not the definition of “gambling” provided for in § 1955(b)(2). The jury found that [defendant] violated [a Pennsylvania statute], and therefore operated an “illegal gambling business” as defined by 18 U.S.C. § 1955(b)(1). We have held that the mere custodianship of gambling-related funds is sufficient to constitute a violation of 18 U.S.C. § 1955, because such custodianship is considered to be “gambling” under state law even though it may not appear to fit within “gambling” as defined in § 1955(b)(2).
402 F.3d at 372 (footnote omitted). Thus, the Third Circuit has arrived at an understanding of the IGBA similar to the one we reach today.
Indeed, federal courts have repeatedly applied the IGBA to businesses operating games — including poker — that are not enumerated therein, without reading the statute to contain a definition in subsection (b)(2). See United States v. Useni, 516 F.3d 634, 656-57 (7th Cir.2008) (applying IGBA to bingo hall); Gotti, 459 F.3d at 341 (same as to business operating video game Joker Poker); United States v. Pack, 16 F.3d 1222, 1994 WL 19945, at *2-3 (6th Cir. Jan. 25, 1994) (unpublished opinion) (same as to multi-faceted gambling business that included poker); United States v. Trupiano, 11 F.3d 769, 771-72 (8th Cir.1993) (same as to gin rummy business); United States v. Rieger, 942 F.2d 230, 233 (3d Cir.1991) (same as to poker business); United States v. Zannino, 895 F.2d 1, 4-5 (1st Cir.1990) (same); United States v. Angiulo, 897 F.2d 1169, 1200-01 (1st Cir.1990) (same); United States v. Reitano, 862 F.2d 982, 984 (2d Cir.1988) (same as to blackjack business); United States v. Shursen, 649 F.2d 1250, 1257 (8th Cir.1981) (same); United States v. Dadanian, 818 F.2d 1443, 1447-49 (9th Cir.1987) (same as to poker club), rev’d on reh’g on other grounds, 856 F.2d 1391 (1988); United States v. Tarter, 522 F.2d 520, 524, 527 (6th Cir.1975) (rejecting argument that IGBA did not cover defendant’s small scale back-room poker business, which consisted of “seven card stud with a fifty cent opener and a two to four dollar limit on raises”); United States v. Dey, No. 07-cr-725, 2009 WL 1730956, at *1 (E.D.N.Y. June 18, 2009) (poker business); United States v. Hsieh, Cr. No. 11-00081, 2013 WL 1499520, at *4-6, *7 (D.Guam Apr. 12, 2013) (same).
In sum, courts have overwhelmingly read the IGBA to have only three elements: (1) the gambling business violates the law of the state in which the business is conducted; (2) the business involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and (3) the business has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day. See, e.g., United States v. Truesdale, 152 F.3d 443, 446 (5th Cir.1998) (“Under section 1955, an illegal gambling business is defined as a gambling business that: (1) violates state or local law, (2) involves 5 or more people, and (3) is in continuous operation for more than 30 days or has gross revenue of $2,000 in any single day.”); United States v. Cyprian, 23 F.3d 1189, 1199 n. 14 (7th Cir.1994) (same); United States v. Sacco, 491 F.2d 995, 998 (9th Cir.1974) (en banc) (same). We agree, and today hold that an “illegal gambling business” is one which meets the three elements articulated in subsection (b)(1).
III. Legislative History
Based on the clear text of the IGBA, we could conclude without an examination of Congress’s intention in drafting it. Indeed, we look to the legislative history of a statute only where the text itself is not “absolutely clear.” Disabled in Action of Metro. N.Y. v. Hammons, 202 F.3d 110, 124 (2d Cir.2000); accord, Mary Jo C., 707 F.3d at 171 (“[Hjaving found the relevant provisions of the statute unambiguous, we do not have warrant to [consult the legislative history of the statute].”). We agree with the District Court that there appears to be “something for everybody” in the legislative history, Dicristina, 886 F.Supp.2d at 223, and we review it here briefly only to demonstrate that Congress’s unmistakable purpose in enacting the IGBA bolsters our reading of the statute’s clear and unambiguous text.
The legislative history is remarkably clear that the passage of this statute was driven by the desire to crack down on organized crime. As the District Court noted, “[t]he debates focused not on prohibiting particular kinds of gambling, but on targeting particular kinds of criminals — i.e., reaching ‘those who are engaged in an illicit gambling business of major proportions.’” Dicristina, 886 F.Supp.2d at 204 (quoting S.Rep. No. 91-617, at 73 (1969); H.R.Rep. No. 91-1549, at 53 (1970), 1970 U.S.C.C.A.N. 4007). The aim of 18 U.S.C. § 1955 was “to give the Federal Government a new substantive weapon, a weapon which will strike at organized crime’s principal source of revenue: illegal gambling.” S.Rep. No. 91-617, at 71; see also Senate Judiciary Hr’gs at 449 (Message from the President of the United States Relative to the Fight Against Organized Crime) (“The purpose of this legislation is to bring under federal jurisdiction all large-scale illegal gambling operations which involve or affect interstate commerce.”). Thus, the IGBA was driven by concerns about the revenue generated by large scale gambling business rather than the games that were played. See, e.g., S.Rep. No. 91-617, at 71; Senate Judiciary Hr’gs at 158 (statement of Sen. Tydings) (“The greatest single source of revenue for organized crime is its gambling activities, which net an estimated seven (7) to fifty (50) billion dollars a year....”).
There was some discussion during the legislative debates of which games organized crime was using toward this end. Various legislators noted the fact that organized crime was involved in “lotteries, dice games, and illegal casinos” in addition to “horse racing and sporting events.” 116 Cong. Rec. 590 (Jan. 21, 1970) (statement of Sen. McClellan). “Mafia-run numbers rackets,” Dicristina, 886 F.Supp.2d at 208, were discussed, as was bookmaking, which many were concerned allowed national crime syndicates to finance their activities, see id. at 208-09 (legislative history reflects, concern about money made in bookmaking). As the District Court acknowledged, there is nothing in the legislative history suggesting that whether a game was predominated by chance was relevant to whether a business operating that game constituted an illegal gambling business under the IGBA. See Dicristina, 886 F.Supp.2d at 206.
Although poker was not discussed at length, the dialogue about poker that did occur suggests Congress anticipated that poker would be included within the reach of the IGBA as it was ultimately enacted.
Mr. MIKVA: I would like to yield further but I have more examples of overreach that would even curl the hair of the gentleman from Virginia.
I do not know how many of my colleagues engage in a friendly game of poker now and then, but under th[e IGBA’s] definition [of gambling] if five or more of them engage in such a game of poker and it lasts past midnight — you do have that safeguard — thus continuing for a period of 2 days, then you have been running an organized gambling business and you can get 20 years, and the Federal Government can grab the pot besides [....]
We have a whole series of new crimes involving gambling and some of them, as I indicated, include even the poker game that goes beyond midnight. Under the bill, it can be an organized gambling game and one can get up to 20 years for having participated in that poker game.
116 Cong. Rec. 35204-05 (Oct. 6,1970).
The concern that the IGBA would criminalize non-commercial private poker games was assuaged by comments mentioning the requirements currently set forth under § 1955(b)(1), and not by comments indicating that poker is a game of skill.
Mr. POFF: I suggest that the gentleman is in error when he poses his hypothetical statement. I direct his attention to page 11, line 15 and 16 of the bill. There you will find that illegal gambling means a business and has been and remains in substantially continuous operation for a period in excess of 30 days or has a gross revenue in excess of $2,000 in any single day. The poker game which the gentleman has described does not meet that criterion.
Mr. MIKVA: But that is not true because later on there is a presumption that it is an illegal gambling business. That language appears on page 114 and is as follows:
If five or more persons conduct, finance, manage, supervise, direct, or own all or part of a gambling business and such business operates for 2 or more successive days, then, for the purpose of obtaining warrants for arrests, interceptions, and other searches and seizures, probable cause that the business receives gross revenue in excess of $2,000 in any single day shall be deemed to have been established.
Mr. POFF: If they are in the gambling business.
Mr. MIKVA: I suppose it depends on whether you are gambling for profit or pleasure, but I happen to know a lot of people who do enjoy the profit as well as the pleasure, and I would hate to rely on the “nondefinition” of business to protect somebody from a zealous U.S. attorney.
Id. at 35205.
Thus, to the extent that poker was discussed, there was some acknowledgment that some businesses operating poker games would fall within the IGBA, but that the other requirements of the statute would exclude the typical friendly game of poker from the statute’s reach.
IV. Rule of Lenity
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3664775-19068 | Chapter 11
MEMORANDUM OPINION ON CREDITOR’S MOTION TO CHANGE VOTE ON PURCHASED CLAIM
Michael G. Williamson, United States Bankruptcy Judge
Under Federal Rule of Bankruptcy Procedure 3018(a), the Court may permit a creditor to change a ballot accepting or rejecting a plan for “cause shown.” In this case, the Debtor filed a plan of reorganization that attempted to cram down its major secured creditor, SPCP Group V, LLC, under Bankruptcy Code § 1129(b). So SPCP purchased an unsecured claim that had previously voted in favor of the plan and attempted to change that vote to one against the plan in order to block confirmation. SPCP’s motivation to block confirmation, however, does not constitute sufficient “cause” under Rule 3018. Accordingly, the Court will deny SPCP’s motion to change the vote of the unsecured claim it purchased.
Background
The Debtor owns 7.13 acres of land in Plant City, Florida, consisting of a 30,420 square-foot multi-tenant retail shopping complex, a small commercial office building, and a rental home. The Debtor originally financed the purchase of that property through Bank of America. AmSouth Bank acquired the loan from Bank of America and later sold it to SPCP. The loan now held by SPCP, which is secured by the Debtor’s property, matured in June 2012.
Despite its best efforts, the Debtor was unable to refinance the SPCP loan when it became due. So SPCP sued to foreclose its mortgage on the property. At the time, the Debtor had nearly $800,000 in equity in the property (the debt owed to SPCP totaled approximately $1 million, while the property securing the debt was worth about $1.8 million). Hoping to preserve its $800,000 of equity in the proper ty, the Debtor filed this chapter 11 case.
At the time it filed this case, the Debtor only had two unsecured creditors: Tampa Electric Company held a $32,254.52 unsecured claim, and Tom Murtha (the Debt- or’s accountant) held a $8,200 unsecured claim. The Debtor also had three secured creditors: SPCP (which was owed just over $1 million), the Hillsborough County Tax Collector (in an unknown amount), and BB & T (which was owed about $18,755.26). When the Debtor filed its plan, each of its three secured creditors were classified separately (Classes 2, 3 & 4), while the two unsecured creditors were classified together (Class 5).
Two of the three secured creditors— SPCP and BB & T — voted to reject the plan. The third secured creditor — the Hillsborough County Tax Collector — did not vote because its claim was unimpaired. As for the unsecured claims, Tampa Electric did not timely file a ballot. Murtha, the only other unsecured creditor, voted in favor of the plan. So Class 5 accepted the plan based solely on the vote of Murtha’s $3,200 claim.
And once the Debtor had one impaired class voting in favor of the plan, it sought to cram down SPCP’s secured claim. SPCP, naturally, opposed cramdown. In order to block confirmation, SPCP ae-quired Murtha’s unsecured claim one week before the confirmation hearing. SPCP then sought leave of court to change Mur-tha’s ballot from a vote in favor of the plan to one against it. According to SPCP, once it acquired Murtha’s claim, Murtha no longer had an interest in the claim. For that reason alone, SPCP said it should be able to decide how the claim was voted. Plus, SPCP said it would be unfair if Mur-tha’s claim — which only made up 10% of the unsecured class — had the effect of carrying the entire class. The Debtor objected that SPCP had failed to demonstrate the “cause” required to change its vote under Rule 3018.
The Debtor cited two cases — In re Kellogg Square Partnership and In re Windmill Durango Office, LLC — for the proposition that “cause” for changing a vote under Rule 3018 does not exist when the purpose of changing the vote is to block confirmation. In both Kellogg Square and Windmill Durango, the courts — in denying motions to change ballots — held that the proper test for “cause” is whether the creditor’s decision is “tainted” by an “improper motivation.” While this Court agrees with the outcome in Kellogg Square and Windmill Durango, it is not comfortable resting its ruling in this case entirely on the reasoning in those decisions for two reasons.
First, the Kellogg Square and Windmill Durango courts both based their decisions, in part, on the law of assignments:
Where an entity acquires a creditor’s claim after the creditor has already case a vote on a plan of reorganization, the assignor-creditor’s evidenced commitment to that specific participation in the case is a permanent, binding limitation on the transferred claim.
But that statement of the law of assignments does not resolve the question this Court faces (or the one the court faced in Kellogg Square) since an entity that acquires another creditor’s claim would be entitled to change the previously filed ballot if it can demonstrate cause, just the same as the original creditor would be able to if it could make the required showing.
Second, the Court has some concern regarding the basis for the test employed by the Kellogg Square and Windmill Duran-go courts. It appears, based on this Court’s review of those decisions, that the test employed by those courts originated from Collier on Bankruptcy — a widely respected bankruptcy treatise that is often viewed as persuasive authority. The problem is that the test in Collier on Bankruptcy is derived from three cases construing a slightly different version of Rule 3018.
The original version of Rule 3018 imposed two requirements: (i) like the current version of Rule 3018, a creditor was required to demonstrate cause in order to change its vote; and (ii) unlike the current version of the rule, the original version required the creditor to file any motion to change a vote before the ballot deadline expired. Courts construing the original Rule 3018 applied the “tainted by improper motivation” test for determining cause if the motion was filed before the ballot deadline and an “exceptional circumstances” test if it was filed after the deadline. Given the uncertainty regarding the test employed by the Kellogg Square and Windmill Durango courts, it is important for this Court to conduct its own examination of the text of Rule 3018 and, more specifically, the meaning of the term “cause.”
Conclusions of Law
The term “cause” is the central focus of this Court’s inquiry because, as explained above, the plain language of Rule 3018 requires a creditor to demonstrate “cause” before it is allowed to change a vote in favor of or against a plan: “For cause shown, the court after notice and hearing may permit a creditor or equity security holder to change or withdraw an acceptance or rejection” of a proposed plan of reorganization. The problem, however, is that Rule 3018 does not define what constitutes “cause.” Ordinarily, where the bankruptcy rules fail to define a term, the Court looks to the Bankruptcy Code to determine its meaning. But the Bankruptcy Code, like Rule 3018, does not define cause either.
Instead, the Code provides examples of what constitutes cause. For example, § 707(a) provides that unreasonable delay by a debtor that is prejudicial to creditors, nonpayment of fees, and the failure to file information requested by § 521 all constitute “cause” for dismissing a chapter 7 case. Similarly, § 1112 provides sixteen examples of “cause” for converting or dismissing a chapter 11 case. The examples of “cause” set forth in the Bankruptcy Code, however, are not helpful here because those examples deal with what is akin to “bad cause.”
“Cause” under Rule 8018, by contrast, is more akin to “good cause.” The Bankruptcy Code does contain instances where “cause” is used in the sense of “good cause.” Unfortunately, in those instances, the Bankruptcy Code does not— unlike instances where “cause” is understood to mean “bad cause” — provide any examples. Since the Bankruptcy Code does not provide any guidance on what constitutes “good cause,” the Court turns to the dictionary. Black’s Law Dictionary defines the term “cause” to mean a “ground for legal action.” “Good cause,” according to Black’s Law Dictionary, means a “legally sufficient reason.”
Legally sufficient, of course, must be determined in context. The only way to determine whether “cause” is legally sufficient under a Federal Rule of Bankruptcy Procedure in the context of a chapter 11 case is to look to the public policy underlying chapter 11 cases. The two public policies specifically underlying Chapter 11 are “preserving going concerns and maximizing property available to satisfy creditors.” In order to promote both those policies, the bankruptcy process encourages consensual negotiation and fair bargaining. So, here, the Court must determine whether allowing a creditor to buy an already-voted claim and change the vote to block confirmation promotes consensual negotiation and fair bargaining.
The Court concludes that it does not. In order to promote consensual negotiating and fair bargaining, the Code attempts to balance the powers and limitations of debtors and creditors alike. For instance, the Bankruptcy Code grants debtors the sole right to file a proposed plan during the first 120 days of the case. A party-in-interest — such as a secured creditor— may not file a plan unless (i) a trustee has been appointed; (ii) the debtor has not filed a plan during the 120-day “exclusivity” period; or (iii) the debtor has filed a plan but it has not been accepted within 180 days of the order for relief. And the voting requirements for confirming a plan ensure that a debtor engages in good-faith negotiations with its creditors to achieve at least a rough consensus on the terms for repaying its debts. Allowing one creditor to acquire another creditor’s claim and change that claim’s vote to block confirmation destroys the carefully constructed bal-anee between debtor and creditors in the confirmation process.
In fact, it would sharply shift that balance toward the creditor that has attained a blocking position. Other creditors will be forced into the untenable position of either complying with the blocking creditor’s demands or facing diminution of their interests. That encourages side deals that lead to plans that unfairly treat other creditors, as well as the debtor. Creditors will be “ ‘left to select not the best plan of reorganization but the best deal they might be able to individually negotiate,’ with major constituencies vying for control of the case behind the scene of the confirmation process.”
Instead of a plan resulting from the consultation between a debtor and the body of creditors, the blocking creditor alone can now dictate the terms of any potential reorganization. Any plan that emerges out of that unequal bargaining position will likely favor the creditor’s short-term return at the expense of the debtor’s long-term viability. A debtor’s long-term viability, of course, is one of the fundamental policies underlying the reorganization process. To be sure, a debtor could overcome the blocking creditor by treating that creditor’s class as unimpaired or paying the class its absolute priority entitlement.
By limiting a debtor to those two options, however, the blocking creditor has already managed to successfully divert significant value to itself or its class in a manner never envisioned by the Bankruptcy Code. And as a consequence, the claims of other classes of creditors will be altered to their detriment. In the end, allowing a creditor to acquire a claim that had previously voted and change the previously filed vote to block confirmation not only creates a huge risk of opportunistic behavior but encourages behavior that is inconsistent with consensual negotiation and fair bargaining.
On top of that, it would negatively impact the otherwise orderly reorganization process. For starters, certain creditors will realize that no vote is final or definitive. And last-minute vote changing (to suit one creditor’s interest) would invariably throw into doubt previous negotiations and arrangements between the debt- or and its other creditors, creating the kind of chaos that Chapter ll’s procedures were designed to avoid. Perhaps worse, investments in time and money so critical to the successful rehabilitation of a debtor will have been squandered, and prior negotiations and accommodations among a debtor and other creditors will be undone. No creditor could ever be confident in investing either their time.or money in any debtor-proposed plan so long as a blocking creditor might eventually arise. Other creditors, moreover, might decide to change their ballots for strategic reasons to gain leverage in what would be never-ending negotiations. All of this leads to one unmistakable conclusion: changing a vote to block confirmation cannot constitute cause under Rule 3018.
This conclusion is buttressed by the cases allowing a creditor to change a previously cast vote. In some cases, courts have allowed a creditor to change a ballot where some defect — i.e., a breakdown in communications at the voting entity, misreading the terms of the plan, or execution of the ballot by someone without authority — resulted in the original ballot not intelligently expressing the will of the creditor at the time the ballot was cast. In other cases, courts have allowed creditors to change a previously filed ballot where other creditors would not be prejudiced by the change. For instance, courts have found “cause” existed where (i) due to the brevity of the voting period and the intricacy of the amended plan, it was necessary for creditors to reevaluate their votes, and the only injury complained of from the changed vote was entirely speculative; (ii) the debtor had drafted a new plan that offered a higher return than under the original plan; and, (iii) the debtor and creditor seeking to change its vote had negotiated and agreed upon a new “consensual plan.” A single thread runs throughout these cases: the change in vote advanced the objectives of Chapter 11— i.e., promoting consensual negotiation and fair bargaining in order to preserve going concerns and maximize property available to satisfy creditors.
Conclusion
In the end, the reason for changing a vote is legally sufficient under Rule 3018 if it promotes consensual negotiation and fair bargaining. Changing a previously cast ballot to block confirmation does not promote consensual negotiation or fair bargaining. In fact, it does the opposite. Here, SPCP’s sole purpose in changing Murtha’s vote was to block confirmation and cramdown of its secured claim. Accordingly, SPCP has failed to demonstrate the “cause” required to change Murtha’s vote under Rule 3018, and this Court will enter a separate order denying SPCP’s motion.
. A more complete background of this case can be found in the Court’s Findings of Fact and Conclusions of Law on Confirmation. In re J.C. Householder Land Trust # 1, 501 B.R. 441, 444-47 (Bankr.M.D.Fla.2013).
. Doc. No. 9 at 1-2.
. Id. at 3-4.
. Doc. Nos. 13 & 70. The Debtor’s plan actually had a total of six classes. Class 1 consisted of allowed priority claims; Class 6 consisted of the equity interests in the Debtor.
. Doc. No. 69 at 1.
. Id.
. Tampa Electric eventually filed a ballot accepting the plan — albeit after the ballot deadline. The Debtor moved to allow Tampa Electric's late-filed ballot. Doc. No. 88. That motion was granted at the confirmation hearing.
. Doc. No. 69 at 1 & 5.
. 11 U.S.C. § 1126(c).
. Doc. No. 83.
. Doc. No. 85.
. Id. at 2-4 (citing In re Kellogg Square P’ship, 160 B.R. 332, 333-35 (Bankr.D.Minn.1993) and In re Windmill Durango Office, LLC, 481 B.R. 51, 65-66 (9th Cir. BAP 2012)).
. Kellogg Square, 160 B.R. at 334; Windmill Durango Office, 481 B.R. at 65-66.
. Kellogg Square, 160 B.R. at 335 (emphasis in original).
. In re E. Sys., Inc., 118 B.R. 223, 226 (Bankr.S.D.N.Y.1990) (observing that Collier based its "tainted” language on three cases: Tex. Extrusion Corp. v. Lockheed Corp. (In re Tex. Extrusion Corp.), 844 F.2d 1142, 1163 (5th Cir.1988); In re Jartran, Inc., 44 B.R. 331, 363 (Bankr.N.D.Ill.1984); In re Am. Solar King Corp., 90 B.R. 808, 827 (Bankr.W.D.Tex.1988)).
. In re E. Sys., Inc., 118 B.R. at 226.
. The Court has jurisdiction over this proceeding under 28 U.S.C. § 1334(a). This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (L), and (O).
. Fed. R. Bankr.P. 3018(a).
. Id.
. Schwab v. Reilly, 560 U.S. 770, 130 S.Ct. 2652, 177 L.Ed.2d 234 (2010) ("[W]e may look to dictionaries and the Bankruptcy Rules to determine the meaning of words the Code does not define.”); In re Ralston, 400 B.R. 854, 860 (Bankr.M.D.Fla.2009) (explaining that courts should look to a term’s ordinary, dictionary-defined meaning where the term is undefined in the Bankruptcy Code) (citing Consol. Bank, N.A. v. U.S. Dep’t of the Treasury, 118 F.3d 1461, 1464 (11th Cir.1997)).
. In re Brown, 290 B.R. 415, 423 (Bankr.M.D.Fla.2003) (explaining that "cause” is not defined in the Bankruptcy Code).
. 11 U.S.C. §§ 707(a), 1104(a)(1), 1112(b)(4) & 1307(c).
. 11 U.S.C. § 707(a).
. 11 U.S.C. § 1112(b)(4).
. 11 U.S.C. §§ 707(a), 1104(a)(1), 1112(b)(4) & 1307(c).
. See, e.g., 11 U.S.C. § 303(e) (providing that court may, for cause, require petitioning creditors to post bond in involuntary case); § 521(a)(2)(A) (providing that court may extend time to file statement of intentions for cause), § 1121(d)(1) (providing that bankruptcy courts may, after notice and a hearing, modify the exclusivity period for "cause”).
. In re Rodriguez, 319 B.R. 894, 897 (Bankr.M.D.Fla.2005) (applying the plain everyday dictionary meaning of the term "nonprofit institution” since that term is not defined in the Bankruptcy Code).
. Black's Law Dictionary 213 (7th ed. 1999).
. Id.
. Florida Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 50, 128 S.Ct. 2326, 171 L.Ed.2d 203 (2008); Bank of Am. Nat'l Trust & Sav. Ass’n v. 203 N. LaSalle St. P'ship, 526 U.S. 434, 453, 119 S.Ct. 1411, 143 L.Ed.2d 607 (1999).
. In re Fur Creations by Varriale, Ltd., 188 B.R. 754, 758 (Bankr.S.D.N.Y.1995) (quoting In re 500 Fifth Ave. Assocs., 148 B.R. 1010, 1017 (Bankr.S.D.N.Y.1993)); see also Am. United Mut. Life Ins. Co. v. Avon Park, 311 U.S. 138, 146, 61 S.Ct. 157, 85 L.Ed. 91 (1940); In re Am. Family Enters., 256 B.R. 377, 401 (D.N.J.2000) (quoting In re New Valley Corp., 168 B.R. 73, 81 (Bankr.D.N.J.1994)); H.R.Rep. No. 95-595, at 221 (1977).
. 11 U.S.C. § 1121(b) (providing that "only the debtor may file a plan until after 120 after the date of the order for relief”).
. 11 U.S.C. § 1121(c)(l)-(3).
. In re OBT Partners, 214 B.R. 863, 870 (Bankr.N.D.Ill.1997).
. Id.
. In re Kellogg Square P’ship, 160 B.R. 332, 335 (Bankr.D.Minn.1993) (quoting In re Applegate Prop., Ltd., 133 B.R. 827, 836 (Bankr.W.D.Tex.1991)).
. David A. Skeel, Jr., The Nature and Effect of Corporate Voting in Chapter II Reorganization Cases, 78 Va. L.Rev. 461, 479-80 (1992).
. Frederick Tung, Confirmation and Claims Trading, 90 Nw. U.L.Rev. 1684, 1729 (1996).
|
8973080-27078 | Reversed and remanded by published opinion. Judge TRAXLER wrote the opinion, in which Judge MOTZ and Judge SHEDD joined.
OPINION
TRAXLER, Circuit Judge:
The Prison Litigation Reform Act (the “PLRA”) requires that inmates exhaust all administrative remedies before filing an action challenging prison conditions under federal law. See 42 U.S.C.A. § 1997e(a) (West 2003). The question in this case is whether this requirement imposes a heightened pleading obligation on the inmate, such that a district court may sua sponte dismiss a complaint that fails to allege exhaustion of remedies. While the circuit courts have not spoken uniformly, most of the courts that have considered the question have held that exhaustion of administrative remedies is not a pleading requirement. In this case, however, the district court was persuaded by the minority approach and concluded that exhaustion must be alleged in the complaint. The court therefore sua sponte dismissed a complaint filed by Rodney Anderson for failure to sufficiently allege exhaustion. Anderson appeals.
We conclude that the PLRA does not require a prisoner to allege that he has exhausted his administrative remedies, so that a district court may not dismiss a complaint that fails to allege exhaustion, at least not before giving the prisoner an opportunity to address the exhaustion question. Accordingly, we reverse the decision of the district court and remand for further proceedings.
I.
Rodney Anderson was an inmate in the custody of the Michigan state prison system. In 1999, however, he was transferred to a prison in Virginia, where he was housed for approximately ten months. While in Virginia, Anderson broke his arm, and he claims that the Virginia officials failed to provide him proper medical treatment.
In 2002, Anderson filed a complaint against various Virginia prison officials. In his complaint, Anderson asserted, by way of § 1983, that the defendants violated the Eighth Amendment. Anderson also included various claims under state law. Two of the defendants filed a motion to dismiss, contending the federal claims were not cognizable under § 1983 and that the state claims were barred under various Virginia statutes of limitation. Anderson filed a response in which he addressed the claims raised by Virginia in its motion to dismiss.
The district court thereafter dismissed Anderson’s complaint on an issue not raised in the motion to dismiss— Anderson’s failure to plead in his complaint that he had exhausted his administrative remedies. Anderson filed a motion to reconsider, arguing that he had not been given an opportunity to address the exhaustion issue. The district court denied the motion, and this appeal followed.
II.
In response to an ever-growing number of prison-condition lawsuits that were threatening to overwhelm the capacity of the federal judiciary, Congress in 1996 passed the Prison Litigation Reform Act. See Para-Prof'l Law Clinic v. Beard, 334 F.3d 301, 303 (3d Cir.2003) (“Congress enacted the PLRA in an apparent effort ... to discourage prisoners from filing frivolous lawsuits which strain the judiciary’s scarce resources.... ”); Doe v. Washington County, 150 F.3d 920, 924 (8th Cir.1998) (“The PLRA was designed to discourage the initiation of litigation by a certain class of individuals- — prisoners— that is otherwise motivated to bring frivolous complaints as a means of gaining a short sabbatical in the nearest Federal courthouse.” (internal quotation marks omitted)). The PLRA imposes a number of restrictions on an inmate’s ability to initiate civil litigation. For example, after the PLRA, inmates can no longer use the in forma pauperis statute to avoid paying filing fees, but must instead pay all filing fees without regard to their financial status. See 28 U.S.C.A. § 1915(b)(1) (West Supp.2004). The PLRA also authorizes a district court to sua sponte dismiss prison-condition lawsuits “if the court is satisfied that the action is frivolous, malicious, fails to state a claim upon which relief can be granted, or seeks monetary relief from a defendant who is immune from such relief.” 42 U.S.C.A. § 1997e(c).
Of importance to this case is the PLRA’s exhaustion-of-remedies requirement. As a general rule, plaintiffs proceeding under § 1983 need not exhaust state administrative remedies before filing suit. See Porter v. Nussle, 534 U.S. 516, 523, 122 S.Ct. 983, 152 L.Ed.2d 12 (2002); Patsy v. Board of Regents, 457 U.S. 496, 516, 102 S.Ct. 2557, 73 L.Ed.2d 172 (1982). The PLRA, however, reversed that rule as to prison-condition lawsuits. See 42 U.S.C.A. § 1997e(a) (“No action shall be brought with respect to prison conditions under section 1983 of this title, or any other Federal law, by a prisoner confined in any jail, prison, or other correctional facility until such administrative remedies as are available are exhausted.”). There is no doubt that the PLRA’s exhaustion requirement is mandatory. See Porter, 534 U.S. at 524, 122 S.Ct. 983 (“Once within the discretion of the district court, exhaustion in cases covered by § 1997e(a) is now mandatory. All available remedies must now be exhausted; those remedies need not meet federal standards, nor must they be plain, speedy, and effective. Even when the prisoner seeks relief not available in grievance proceedings, notably money damages, exhaustion is a prerequisite to suit.” (citations and internal quotation marks omitted)). The question we must answer is whether this exhaustion-of-remedies requirement is a pleading requirement as well, such that a complaint is subject to dismissal if it fails to include an allegation that the inmate has exhausted his administrative remedies.
A majority of the circuit courts of appeals considering the question have concluded that exhaustion of administrative remedies need not be alleged by the plaintiff in his complaint but is instead an affirmative defense to be raised by the defendant. See Wyatt v. Terhune, 315 F.3d 1108, 1119 (9th Cir.2003); Casanova v. Dubois, 304 F.3d 75, 77 (1st Cir.2002); Ray v. Kertes, 285 F.3d 287, 295 (3d Cir.2002); Foulk v. Charrier, 262 F.3d 687, 697 (8th Cir.2001); Massey v. Helman, 196 F.3d 727, 735 (7th Cir.1999); Jenkins v. Haubert, 179 F.3d 19, 28-29 (2d Cir.1999); see also Jackson v. District of Columbia, 254 F.3d 262, 267 (D.C.Cir.2001) (suggesting but not directly holding that exhaustion is an affirmative defense). Only two circuits have concluded that exhaustion is a pleading requirement borne by the plaintiff, so that failure to allege exhaustion makes the complaint subject to dismissal by the district court. See Steele v. Federal Bureau of Prisons, 355 F.3d 1204, 1209 (10th Cir.2003); Brown v. Toombs, 139 F.3d 1102, 1104 (6th Cir.1998) (per curiam). As we explain below, we agree with the majority approach and conclude that the PLRA does not require that an inmate allege in his complaint that he has exhausted all administrative remedies.
A.
If the PLRA’s exhaustion-of-remedies requirement were one that implicated the district court’s subject-matter jurisdiction, then there would be no question that an inmate would be obliged to allege exhaustion in his complaint. See Pinkley, Inc. v. City of Frederick, Md., 191 F.3d 394, 399 (4th Cir.1999) (“Federal courts are courts of limited subject matter jurisdiction, and as such there is no presumption that the court has jurisdiction. Thus the facts providing the court jurisdiction must be affirmatively alleged in the complaint.” (citation omitted)); Fed.R.Civ.P. 8(a) (stating that complaints must contain “a short and plain statement of the grounds upon which the court’s jurisdiction depends”).
Every court to have considered the question has concluded that § 1997e(a)’s exhaustion requirement is not a jurisdictional requirement. See Steele, 355 F.3d at 1208; Richardson v. Goord, 347 F.3d 431, 434 (2d Cir.2003) (per curiam); Casanova v. Dubois, 289 F.3d 142, 147 (1st Cir.2002); Ali v. District of Columbia, 278 F.3d 1, 5-6 (D.C.Cir.2002); Wright v. Hollingsworth, 260 F.3d 357, 358 n. 2 (5th Cir.2001); Chelette v. Harris, 229 F.3d 684, 688 (8th Cir.2000); Nyhuis v. Reno, 204 F.3d 65, 69 n. 4 (3d Cir.2000); Massey, 196 F.3d at 732; Wyatt v. Leonard, 193 F.3d 876, 879 (6th Cir.1999); Rumbles v. Hill, 182 F.3d 1064, 1068 (9th Cir.1999), overruled on other grounds by Booth v. Churner, 532 U.S. 731, 740-41, 121 S.Ct. 1819, 149 L.Ed.2d 958 (2001). We agree.
While Congress could have provided that a district court lacks subject-matter jurisdiction in prison-condition cases unless the inmate has exhausted his administrative remedies, the PLRA does not do that. To the contrary, the structure of the PLRA itself clearly indicates that exhaustion of remedies is not a jurisdictional requirement.
Section 1997e(c)(2) states that:
In the event that a claim is, on its face, frivolous, malicious, fails to state a claim upon which relief can be granted, or seeks monetary relief from a defendant who is immune from such relief, the court may dismiss the underlying claim without first requiring the exhaustion of administrative remedies.
42 U.S.C.A. § 1997e(c)(2). Section 1997e(c)(2) clearly contemplates the dismissal on the merits of some claims that have not been exhausted. Because a district court must have subject-matter jurisdiction before it can dismiss a claim on the merits, failure to exhaust can-not be viewed as affecting the district court’s subject-matter jurisdiction over the claim. See Chelette, 229 F.3d at 687 (“Because the existence of jurisdiction is a prerequisite to the evaluation and dismissal of a claim on its merits, it follows that jurisdiction is not divested by the failure to exhaust administrative remedies.”); Underwood v. Wilson, 151 F.3d 292, 295 (5th Cir.1998) (per cu-riam) (“The statute provides that the court may dismiss such claims without requiring the exhaustion of administrative remedies. The court would not be empowered to do so if the exhaustion provision deprived the court of jurisdiction over the action.” (citation omitted)). We therefore conclude that the PLRA’s exhaustion-of-remedies requirement does not operate as a bar to the district court’s exercise of its subject-matter jurisdiction.
B.
Because exhaustion of remedies is not a jurisdictional requirement, we must determine whether the PLRA otherwise makes exhaustion a pleading requirement.
The appellate courts that have found exhaustion to be a pleading requirement — to date, only the Sixth and Tenth Circuits — have focused on the fact that the exhaustion of remedies required by the PLRA is mandatory. See Porter, 534 U.S. at 524, 122 S.Ct. 983 (“Once within the discretion of the district court, exhaustion in cases covered by § 1997e(a) is now mandatory.”). These courts concluded, in essence, that because exhaustion is mandatory under the PLRA, then it must be a pleading requirement. The Tenth Circuit’s analysis in Steele is illustrative:
Our ... conclusion is compelled by the Supreme Court’s emphasis on the mandatory nature of exhaustion, implications of the PLRA statutory scheme, the structure of the Rules of Civil Procedure and our own precedent. We decline to characterize exhaustion as an affirmative defense because it cannot be waived. Under Federal Rule of Civil Procedure 8(c), a failure to plead an affirmative defense results in a waiver of that defense ....
... [Classification of the PLRA’s exhaustion requirement as an affirmative defense means that defendants may choose to ignore it for their own strategic reasons. This court, however, has warned against trivializing the Supreme Court’s holding that exhaustion is now mandatory.
Steele, 355 F.3d at 1209 (citations, internal quotation marks, and alterations omitted). While the Sixth Circuit’s analysis of the issue is abbreviated, concerns similar to those articulated by the Tenth Circuit seem to have guided its decision. See Brown, 139 F.3d at 1104 (“In light of the plain mandatory language of the statute regarding exhaustion of remedies, the legislative purpose underlying the plain language, and the sound policy on which it is based, this court will henceforth require that prisoners filing § 1983 cases involving prison conditions must allege and show that they have exhausted all available state administrative remedies.”); see also Knuckles El v. Toombs, 215 F.3d 640, 642 (6th Cir.2000) (explaining that the rule announced in Brown was necessary because the PLRA provides that “no action shall be brought until all available administrative remedies are exhausted” and requiring plaintiff to allege exhaustion permits the district court to “intelligently decide if the issues raised can be decided on the merits”).
These circuits thus seem to view the PLRA as having created a requirement that is not jurisdictional, but yet is not forfeitable, such that compliance with the requirement must be addressed sua sponte by the district court. This circuit, however, has rejected that sort of analysis, albeit in a different context. See Brickwood Contractors, Inc. v. Datanet Eng’g, Inc., 369 F.3d 385 (4th Cir.2004) (en banc).
In Brickwood, we concluded that the “safe-harbor” provision governing the imposition of sanctions undér Rule 11, see Fed.R.Civ.P. 11(c)(1)(A), created a mandatory condition precedent to the imposition of sanctions under the rule. See id. at 389. However, because Rule 11(c)(1)(A) does not implicate the district court’s subject-matter jurisdiction, see id. at 392, we concluded that the safe-harbor protections, though mandatory, could be forfeited by a defendant who fails to timely raise them, see id. at 396. In reaching that conclusion, we rejected the suggestion that there might be a category of rules “which do not implicate a court’s subject-matter jurisdiction, but are nonetheless not forfeitable by a party, and which must be enforced by a court without regard to whether compliance with the rule was timely (or ever) raised by the appropriate party.” Id. at 395.
Our decision in Brickwood, of course, does not directly control our disposition of this case. Nonetheless, we think that the analysis in Brickwood suggests that it would be improper to conclude, as did the Sixth and Tenth Circuits, that simply because the PLRA’s exhaustion requirement is mandatory, it cannot be waived or forfeited by the defendant. Cf. Kontrick v. Ryan, 540 U.S. 443, 456, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) (noting the difference between a rule of subject-matter jurisdiction and a mandatory but non-jurisdictional rule: “[A] court’s subject-matter juris diction cannot be expanded to account for the parties’ litigation conduct; a claim-processing rule, on the other hand, even if unalterable on a party’s application, can nonetheless be forfeited if the party asserting the rule waits too long to raise the point.” (emphasis added)); Perez v. Wisconsin Dep’t of Corr., 182 F.3d 532, 536 (7th Cir.1999) (“Filing suit before exhausting prison remedies ... is not the sort of defect that judges must notice even if the defendant is happy to contest the suit on the merits.... The statute gives prisons and their officials a valuable entitlement— the right not to face a decision on the merits — which courts must respect if a defendant chooses to invoke it” (first and third emphasis added)). Accordingly, we reject any suggestion that the mandatory nature of the PLRA’s exhaustion requirement compels the conclusion that exhaustion of remedies must be alleged by an inmate in his complaint.
C.
In our view, the question of whether the PLRA’s exhaustion requirement imposes a heightened pleading obligation on the plaintiff is one that is answered by a simple review of the relevant statutory language.
The PLRA specifies that district courts shall sua sponte dismiss certain prison-condition complaints:
The court shall on its own motion or on the motion of a party dismiss any action ... if the court is satisfied that the action is frivolous, malicious, fails to state a claim upon which relief can be granted, or seeks monetary relief from a defendant who is immune from such relief.
42 U.S.C.A. § 1997e(c)(l). The exhaustion-of-remedies requirement is contained in the same statutory section— § 1997e(a), just a few printed lines before the subsection listing grounds for dismissal. Under these circumstances, it seems to us that the absence of failure-to-exhaust as grounds for dismissal in § 1997e(c)(l) must be viewed as an intentional congressional omission.
Congress had not forgotten about the need for exhaustion, but chose not to include failure to exhaust among the grounds for which the court could dismiss sua sponte. Inasmuch as the omission of failure to exhaust from the categories explicitly permitting sua sponte dismissal is found in § 1997e, the same section of the PLRA that sets out the exhaustion requirement, the inference is inescapable that Congress did not intend to include failure to exhaust among the categories justifying sua sponte dismissal.
Ray, 285 F.3d at 296 (footnotes omitted); see also United States v. Vonn, 535 U.S. 55, 65, 122 S.Ct. 1043, 152 L.Ed.2d 90 (2002) (explaining that the statutory-construction canon expressio unius est exclu-sio alterius is applicable to statutes that refer to members of an “associated group or series,” so as to justify the inference that the items not mentioned were excluded deliberately rather than inadvertently); Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983) (“Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.” (internal quotation marks and alteration omitted)).
Moreover, in § 1997e(c)(2), Congress made it clear that when dismissing a complaint under a ground listed in § 1997e(e)(l), the district court need not first require the inmate to exhaust his administrative remedies. See 42 U.S.C.A. § 1997e(c)(2) (“In the event that a claim is, on its face, frivolous, malicious, fails to state a claim upon which relief can be granted, or seeks monetary relief from a defendant who is immune from such relief, the court may dismiss the underlying claim mthout first requiring the exhaustion of administrative remedies.” (emphasis added)). This statutory directive further demonstrates that Congress clearly considered the interplay of the exhaustion requirement with the district court’s obligation to dismiss some complaints sua sponte, and yet decided not to include failure to exhaust as a basis for sua sponte dismissal. It thus is not for us to read failure-to-exhaust into § 1997e(c)(2). See, e.g., United States v. Brandon, 247 F.3d 186, 190 (4th Cir.2001) (noting “the fundamental principle of statutory construction that courts are obligated to give effect to Congress’s decision to use different language in proximate subsections of the same statute.” (internal quotation marks omitted)); United States v. Childress, 104 F.3d 47, 53 (4th Cir.1996) (“Congress’ role is to enact statutes; the judiciary’s to interpret those statutes as written.”).
The defendants, however, argue that because exhaustion is mandatory, failing to allege exhaustion is the equivalent of fading to state a claim upon which relief can be granted. Thus, according to the defendants, a district court may, pursuant to § 1997e(c)(2), dismiss a complaint that does not allege exhaustion. We disagree.
If Congress had been less precise when drafting the PLRA, then perhaps this argument would be more persuasive. But § 1997e(e) quite clearly does not treat a failure to allege exhaustion as the equivalent of a failure to state a claim. As noted above, § 1997e(e)(l) requires a district court to dismiss a complaint that fails to state a claim for which relief can be granted, while § 1997e(c)(2) states that the court may dismiss a complaint under subsection (c)(1) without first requiring the inmate to exhaust his administrative remedies. If, as the defendants argue, “failure to state a claim included failure to exhaust for purposes of Section 1997e(c), then paragraph (2) would carry the highly improbable meaning that courts may dismiss for failure to exhaust administrative remedies without first requiring exhaustion of administrative remedies.” Snider v. Melindez, 199 F.3d 108, 111 (2d Cir.1999). Accordingly, we reject the contention that an inmate’s failure to allege exhaustion of remedies amounts to a failure to state a claim upon which relief can be granted.
D.
In our view, the language and structure of the PLRA make it clear that an inmate is not required to allege exhaustion of remedies in his § 1983 prison-conditions complaint. Instead, an inmate’s failure to exhaust his administrative remedies must be viewed as an affirmative defense that should be pleaded or otherwise properly raised by the defendant. See, e.g., Wyatt, 315 F.3d at 1119 (“[Njonexhaustion under § 1997e(a) of the PLRA does not impose a pleading requirement. We hold that § 1997e(a) creates a defense — defendants have the burden of raising and proving the absence of exhaustion.”); Ray, 285 F.3d at 295 (“We thus join the many other circuits that have held that failure to exhaust is an affirmative defense to be pleaded by the defendant.”); Foulk, 262 F.3d at 697 (“[RJelianee upon the PLRA exhaustion requirement is an affirmative defense.... ”). We pause to emphasize, however, that our determination that failure-to-exhaust is an affirmative defense does not foreclose in all cases the possibility of a sua sponte dismissal on exhaustion grounds.
In Nasim v. Warden, 64 F.3d 951 (4th Cir.1995) (en banc), we concluded that the district court’s authority to sua sponte dismiss an in forma pauperis case as frivolous was broad enough to permit the court to dismiss a complaint on the basis of an affirmative defense that was apparent from the facts alleged in the complaint. See id at 954-55; see also Todd v. Baskerville, 712 F.2d 70, 74 (4th Cir.1983) (affirming § 1915(d) dismissal of actions which appeared on their face to be barred by statute of limitations). While it seems unlikely that the failure to exhaust administrative remedies will often be apparent from the face of a complaint, it is certainly possible that a complaint may clearly show that an inmate has not exhausted his administrative remedies. In such a case, sua sponte dismissal under Nasim would be appropriate.
Moreover, we have recognized in the habeas context that a district court has the authority to sua sponte raise an affirmative defense (timeliness of the habeas filing) as grounds for dismissal, so long as the court gives the petitioner an opportunity to respond. See McMillan v. Jarvis, 332 F.3d 244, 249-50 (4th Cir.2003); Hill v. Braxton, 2H1 F.3d 701, 706-07 (4th Cir.2002). We found such an approach proper because the statutory time-limit for filing habeas petitions “implicates values beyond the interests of the parties and, in particular, promotes judicial efficiency and conservation of judicial resources.” Hill, 277 F.3d at 706 (internal quotation marks omitted). Similar concerns of efficiency and conservation of scarce judicial resources, of course, underlie the PLRA in general and its exhaustion requirement in particular. See, e.g., Porter, 534 U.S. at 524-25, 122 S.Ct. 983 (“Beyond doubt, Congress enacted § 1997e(a) to reduce the quantity and improve the quality of prisoner suits; to this purpose, Congress afforded corrections officials time and opportunity to address complaints internally before allowing the initiation of a federal case. In some instances, corrective action taken in response to an inmate’s grievance might improve prison administration and satisfy the inmate, thereby obviating the need for litigation. In other instances, the internal review might filter out some frivolous claims. And for cases ultimately brought to court, adjudication could be facilitated by an administrative record that clarifies the contours of the controversy.” (citations and internal quotation marks omitted)). In the context of PLRA claims, then, we believe it is appropriate to recognize that district courts have the same authority to inquire into the applicability of an affirmative defense as in the habeas context. Such a conclusion gives some teeth to the PLRA’s exhaustion requirement, yet does not do a disservice to the statutory language carefully chosen by Congress.
Accordingly, we conclude that a district court may raise the issue of exhaustion of remedies on its own motion. Except in the rare case where failure to exhaust is apparent from the face of the complaint, however, a district court cannot dismiss the complaint without first giving the inmate an opportunity to address the issue. See Snider v. Melindez, 199 F.3d 108, 113 (2d Cir.1999) (“[W]hile the district court was free to [raise exhaustion of remedies] on its own motion, it erred in dismissing the complaint without giving Snider notice and an opportunity be heard in opposition.”); cf. McMillan, 332 F.3d at 249-50 (explaining that a district court may not sua sponte dismiss a habeas petition as untimely without first giving the petitioner an opportunity to respond).
III.
Accordingly, for the foregoing reasons, we conclude that the PLRA’s exhaustion-of-remedies requirement does not impose a heightened pleading obligation on an inmate. Instead, an inmate’s failure to exhaust administrative remedies is an affirmative defense to be pleaded and proven by the defendant. That exhaustion is an affirmative defense, however, does not preclude the district court from dismissing a complaint where the failure to exhaust is apparent from the face of the complaint, nor does it preclude the district court from inquiring on its own motion into whether the inmate exhausted all administrative remedies. Because the district court in this case dismissed Anderson’s complaint on exhaustion grounds without giving him an opportunity to respond to the issue, we reverse the judgment of the district court and remand for further proceedings. Given our disposition of this issue, we need not consider whether Anderson sufficiently alleged exhaustion in his complaint, as he contends. We likewise decline to consider whether the PLRA’s requirements apply to claims brought under state law.
REVERSED AND REMANDED
. Although one of the defendants alleged in his answer that Anderson failed to exhaust his administrative remedies, that defendant did not file a motion to dismiss.
. The Rule 11 language at issue in Briclcwood is similar to the PLRA language at issue in this appeal. The PLRA provides that no prison-conditions action “shall be brought” unless the plaintiff has exhausted his administrative remedies. 42 LJ.S.C.A. § 1997e(a). Rule ll's safe-harbor provision states that a motion seeking sanctions "shall not be filed with or presented to the court” unless the party seeking sanctions served the motion on the other party at least twenty-one days before the motion is filed with the court. Fed.R.Civ.P. 11(c)(1)(A).
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4253535-10596 | ORDER
Erik Shamsud-Din challenges the 180-month sentence he received after he transported girls, including at least one minor, in interstate commerce for the purpose of prostitution. We find no clear error in the imposition of a vulnerable victim enhancement because Shamsud-Din knowingly preyed on a victim’s fear of a man who had been harming her. We also find any error in imposing a “use of a computer” enhancement based on Shamsud-Din’s use of a cell phone to be harmless, as the district court made very clear that it would have imposed the same sentence regardless of whether the enhancement was proper. We affirm Shamsud-Din’s sentence.
I. BACKGROUND
At the age of fifteen, Victim A ran away from a foster home in Minnesota and met a man whom the government calls “Individual A.” He told Victim A he would be her boyfriend and would take care of her, and he bought her a bus ticket to California. But upon her arrival 'in California, Individual A required Victim A to work as a prostitute for him. With no money and no other options, Victim A did so and gave him all the money she made. Individual A beat her multiple times while she worked for him.
In December 2006, while at an appointment at a male customer’s house, Victim A explained her circumstances to her customer, and he drove her to a hotel a few cities away. There, Victim A met Erik Shamsud-Din, the defendant. She told him that she had just escaped from a pimp who had been beating her up. She also told Shamsud-Din she was sixteen years old. After she explained her circumstances, Shamsud-Din offered that Victim A could begin working as a prostitute for him instead of for Individual A. Relieved because she thought Shamsud-Din could protect her from Individual A, Victim A gave Shamsud-Din the rest of the money she had with her and began working for him that evening.
Within a few days, Shamsud-Din began taking Victim A, along with Victims B and C, to various cities across the United States to engage in sex acts for money. When the group arrived in a new town, Shamsud-Din posted advertisements for the girls’ sexual services on Craigslist and other websites. He communicated with Victim A by cell phone about travel to locations for purposes of prostitution. He drove her to appointments and communicated with her by cell phone to arrange where she should be dropped off and picked up. Victim A gave Shamsud-Din all the money she earned from prostitution and relied on him to buy her food and other necessities. Shamsud-Din, forty years old at the time, also had sex with Victim A two or three times a week during this time.
Shamsud-Din pled guilty to two counts of transporting Victim B in interstate commerce with the intent that she engage in prostitution, in violation of 18 U.S.C. § 2421. He stipulated in the plea agreement to the additional offense of knowingly transporting Victim A, a minor, across state lines to engage in prostitution, in violation of 18 U.S.C. § 2423(a). Victim A, twenty-three years old at the time of the sentencing hearing, testified at the sentencing hearing about her experiences with Shamsud-Din and the traumatic effects they had on her.
After hearing Victim A’s testimony and considering the parties’ arguments, the district court denied the government’s request for an undue influence enhancement but applied vulnerable victim and use of a computer enhancements. The resulting advisory range under the United States Sentencing Guidelines was 135 to 168 months’ imprisonment. The district court imposed a sentence of 180 months’ imprisonment and explained that it would impose the same sentence even if the advisory guidelines were incorrectly calculated. Shamsud-Din appeals his sentence.
II. ANALYSIS
A. Vulnerable Victim Enhancement
Shamsud-Din first contends that he should not have received a vulnerable victim enhancement. The United States Sentencing Guidelines provide for a two-level enhancement if the defendant knew or should have known that a victim of the offense was a vulnerable victim. U.S.S.G. § 3Al.l(b)(l). A “vulnerable victim” under the Guidelines is one who is a victim of the offense of conviction or any relevant conduct and “who is unusually vulnerable due to age, physical or mental condition, or who is otherwise particularly susceptible to the criminal conduct.” U.S.S.G. § 3Al.l(b)(l) cmt. n. 2. We review the district court’s application of the vulnerable victim enhancement for clear error. United States v. Christiansen, 594 F.3d 571, 574 (7th Cir.2010).
In concluding that the vulnerable victim enhancement was warranted, the district court stated:
The victim here clearly conveyed to the defendant the fact that she did not have a stable place to live; that she did not have a lot of money left; that she was a runaway; and, in addition, in making it significant here, is the fact that she conveyed to the defendant — and this had nothing to do with her age, nor did the other factors, that she conveyed to the defendant — that she was afraid of the prior relationship she had; and, that Individual A was preying on her and had beaten her up and she feared him. And the defendant offered his “protection” to her and he took advantage of that.
Shamsud-Din makes several arguments as to why, in his view, the vulnerable victim enhancement was wrongly applied. For one, he contends that Victim A’s runaway status was too closely related to her age to support the enhancement. The vulnerable victim enhancement is not appropriate if the factor that makes the person vulnerable is already incorporated in the offense guideline. U.S.S.G. § 3Al.l(b)(l) cmt. n. 2. Shamsud-Din’s offense level had been calculated based upon a guideline that was limited to crimes against minors. See U.S.S.G. § 2G1.3(a)(3). Here, however, the district court specifically stated that it found Victim A vulnerable for reasons that had nothing to do with her age. Those reasons included that she was fearful of Individual A and that Shamsud-Din preyed upon that fear, as well as that she was homeless and had little money. Because these reasons were unrelated to Victim A’s age, the fact that she was a runaway does not preclude the enhancement in this case.
Shamsud-Din also argues that Victim A’s homelessness, runaway status, and economic uncertainty cannot form the basis of a vulnerable victim finding because these factors are “typical” of sex-trafficking victims and are therefore insufficient to show that Victim A was “unusually” vulnerable. See U.S.S.G. § 3Al.l(b)(l) cmt. n. 2 (defining “vulnerable victim” as one who is “unusually vulnerable due to age, physical or mental condition, or who is otherwise particularly susceptible to the criminal conduct”) (emphases added). Even if that were true, a “significant” reason the district court found Victim A vulnerable was that she feared Individual A, a man who had physically and mentally abused her, and that Shamsud-Din knowingly took advantage of that fear. That fear, and Shamsud-Din’s decision to prey on it, means it was not error for the district court to conclude that Victim A was unusually vulnerable or particularly susceptible.
Shamsud-Din also briefly challenges the district court’s finding that Victim A feared Individual A. This is a challenge to a factual finding, so we review it for clear error. See United States v. Rumsavich, 313 F.3d 407, 411 (7th Cir.2002). Victim A testified at the sentencing hearing that Individual A had- beaten her up, that she was afraid of him, and that she hoped Shamsud-Din could protect her from Individual A. The district court was well within its discretion to credit her testimony and to believe that Victim A feared Individual A. We find no error in the decision to impose the vulnerable victim enhancement.
B. Enhancement for Use of Computer to Facilitate Travel of Minor to Engage in Prohibited Sexual Conduct
Shamsud-Din also challenges the two-level enhancement he received for using a computer to facilitate the travel of a minor to engage in prohibited sexual conduct. The guideline at issue, U.S.S.G. § 2G1.3(b)(3), provides:
If the offense involved the use of a computer or an interactive computer service to (A) persuade, induce, entice, coerce, or facilitate the travel of, the minor to engage in prohibited sexual conduct; or (B) entice, encourage, offer, or solicit a person to engage in prohibited sexual conduct with the minor, increase by 2 levels.
The district court imposed this enhancement “given the use of the cell phone to facilitate the travel of and to facilitate the minor engaging in prohibited sexual conduct.”
We note first that the government does not seek the “use of a computer” enhancement on the basis of Shamsud-Din’s placement of advertisements on Craigslist and other internet websites for Victim A’s sexual services. That is likely because the application notes to U.S.S.G. § 2G1.3 state that subsection (b)(3), the subsection at issue, “is intended to apply only to the use of a computer or an interactive computer service to communicate directly with a minor or with a person who exercises custody, care, or supervisory control of the minor.” U.S.S.G. § 2G1.3(b)(3) cmt. n. 4.
Instead, the government sought and received the enhancement on the basis that Shamsud-Din’s use of a cell phone to facilitate Victim A’s travel arrangements constituted the “use of a computer” under U.S.S.G. § 2G1.3(b)(3). Shamsud-Din does not dispute that he used a cell phone to facilitate the travel of a minor to engage in prohibited sexual conduct. But he maintains a cell phone is not a “computer.” That argument certainly has intuitive appeal. The mere use of a cell phone to make and receive calls, especially if that cell phone does not have internet capability (and it is unclear from the record whether the phone at issue here could access the internet), would not seem to fall within most persons’ understanding of the “use of a computer.” Nonetheless, U.S.S.G. § 2G1.3 directs that “computer” for purposes of the enhancement has the meaning given the term in 18 U.S.C. § 1030(e)(1). See U.S.S.G. § 2G1.3 cmt. n. 1. That statute gives “computer” what the district court rightfully called a “very, very broad” definition:
[T]he term “computer” means an electronic, magnetic, optical, electrochemical, or other high speed data processing device performing logical, arithmetic, or storage functions, and includes any data storage facility directly related to or operating in conjunction with such a device, but such term does not include an automated typewriter or typesetter, a portable hand held calculator, or other similar device.
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558868-30887 | OPINION OF THE COURT
ROTH, Circuit Judge:
Appellants, participants in two top hat pension plans, filed claims in bankruptcy court seeking benefits after their employer had been declared bankrupt and terminated the plans. The bankruptcy court dismissed their claims, relying on a clause in the plan documents that reserved the company’s right to amend or terminate the plans “at any time for any reason.” The bankruptcy court found this language clear and unambiguous, and it refused appellants’ proffer of extrinsic evidence to show that the clauses did not represent the original understanding of the parties. The district court affirmed. We will reverse and remand.
We conclude that the record in this ease, viewed in the light of the special nature of top hat plans, distinguishes this ease from prior decisions in which we have held a clause reserving the right to terminate or amend unambiguous and controlling. See In re Unisys Corp. Retiree Medical Benefit “ERISA” Litig., 58 F.3d 896 (3d Cir.1995); Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1163-64 (3d Cir.1990). Therefore, we hold on the facts of this case that the bankruptcy court should have permitted the appellants to present extrinsic evidence in support of their allegations. We will remand to the district court with instructions to remand to the bankruptcy court to conduct the necessary evidentiary hearing.
I.
Appellants are former executives and highly paid personnel of Western Union Corporation (“Western Union”) who participated in two top hat plans designed to provide deferred retirement income and other retirement benefits to a select group of employees. As discussed more fully below, top hat plans represent a special category of benefit plans created under ERISA to provide these types of benefits to select employees. After the employees had retired, Western Union’s successor, New Valley Corporation (“New Valley”), terminated the plans. Appellants responded with this action for benefits. The facts are essentially undisputed.
In the mid-1970s, the first rumblings of technological revolution were felt in the communications industry. Western Union had suffered financial reverses in the early part of the decade, and its Board of Directors (“Board”) perceived a need to attract new executives to the company and to retain the key executives that it had. The Board viewed an enhanced benefits and compensation package as the principal means to that end.
In early 1977, the Board began discussing a supplemental benefits package entitled the Senior Executive Benefit Plan (“SEBP” or “SEB Plan”). The SEB Plan would provide a select group of high-level employees with supplemental pension benefits, deferred compensation benefits, and supplemental medical benefits. The plan was designed to achieve the previously identified goal of retaining Western Union’s top management personnel and luring talented candidates to the company.
The initial draft of the plan was prepared by Gerald Kent, then Vice President-Employee Relations, in a form that substantially resembled the “SEBP Plan Summary” later distributed to the executives selected to participate. This document described the plan benefits in some detail but made no mention of any reservation of the company’s unilateral right to amend or terminate the plan. Based on this summary, the Board approved the plan on August 23, 1977. The Board’s minutes similarly omitted any mention of a right to amend.
After the Board’s action, Western Union distributed copies of the Plan Summary to potential participants. As noted, the Plan Summary contained nothing indicating that Western Union reserved the right to amend or terminate the plan. Western Union also held meetings with the participants to discuss the plan. Appellants allege that at these meetings they were informed that they would earn the promised benefits by continuing their employment with Western Union until retirement and that the benefits could not be taken away after retirement. Throughout the initial stages of plan proposal, development, adoption, negotiation, and acceptance, no reservation of the right to amend or terminate existed.
Western Union’s General Counsel, Richard C. Hostetler, drafted the formal plan. The formal plan document, introduced five months later at a board meeting on February 28, 1978, included an article which reserved the right to amend or terminate the plan at any time. The text of this article, Article 12, reads:
12. Amendment and Termination. The Board of Directors may amend or termi nate the Plan at any time for any reason and thereafter Participants and their estates and dependents shall have only such rights under the Plan, if any, as shall be specifically provided for by the Board of Directors under the Plan as amended or terminated.
All subsequent versions of the plan contained this provision. However, none of the versions of the plan contained an integration clause.
Appellants are prepared to offer Mr. Hostetler’s testimony that Article 12 was included in the SEBP formal document as “boiler plate” language that had been contained in all of Western Union’s employee benefit plan documents. Mr. Hostetler would also testify that at the Board meeting where Article 12 was discussed, the general understanding was that the provision could not be used to change or terminate benefits after retirement. Appellants further allege that during a series of meetings held to discuss particular provisions in the Plan which might be of concern, Mr. Kent told them Article 12 could not be used to change or terminate their benefits after retirement. Appellants likewise contend that this understanding was conveyed to executives recruited by the company. Accordingly, although the plans as adopted contained the termination “at any time” language, the appellant’s understanding of that provision was informed by these representations.
In 1979, a separate plan was created for Walter E. Girardin (“Girardin Plan”). The motivation for the Girardin Plan was much the same as for the SEBP, to retain a key executive. At the time, Western Union faced a potentially difficult transition from its longstanding Chairman and CEO, Russell McFall, to his successor, Robert M. Flanagan. Girardin, who had worked for Western Union for more than 40 years, had been passed over for the CEO position. When Girardin announced his decision to retire, the Board decided that he should be kept on for at least a year so that his skill and experience could help in the transition. Western Union offered Girardin an enhanced benefits package to induce him to remain with the company. After some negotiating, Girardin accepted. Although the Girardin Plan was adopted separately and at a date later than the SEB Plan, its substantive provisions were identical. It ultimately met the same fate as the SEBP. Both plans will be discussed together.
After appellants had retired, New Valley terminated the plans, relying on Article 12 for its authority. Appellants believe that, under the original agreement underlying the plan documents, such action was impermissible. Appellants therefore contend that New Valley breached the SEBP and Girardin contracts. Alternatively, appellants urge that New Valley be estopped from terminating their benefits because of the promises Western Union made to the plan participants. Appellants allege a variety of damages from the breach of contract, framed alternatively as detrimental reliance on Western Union’s promise. Their claims include leaving secure employment with other companies to join Western Union, declining employment offers from other companies to remain at Western Union, uprooting families and moving to New Jersey to become eligible for the SEBP, taking early retirement based on plan benefits, and declining to pursue other retirement options because of the plan.
The procedural history of this case began in the bankruptcy court. At the time New Valley terminated the plans, its creditors had placed it in Chapter 11 bankruptcy. Appellants therefore responded to the denial of benefits by filing proofs of claims in the bankruptcy proceeding, rather than by following the traditional course of a suit in district court for benefits under 29 U.S.C. § 1132(a). In pursuing their claims, appellants argued that Article 12 had to be considered in the context in which it was created and that, when taken in that context, it was ambiguous. They asked for a hearing in which they could support their claims with extrinsic evidence, including the testimony of Mr. Hostetler.
The bankruptcy court disallowed appellants’ claims, relying principally on Article 12 of the plans. The bankruptcy court described appellants’ proposed construction of Article 12 as plainly at variance with the terms in the plans. In re New Valley Corp., Ch. 11 Case No. 91-27704, Oral Decision with respect to Omnibus Objection No. 5 at 7 (Bankr.D.N.J. Apr. 8, 1994) (hereinafter “Bankruptcy Court Opinion”). The court held that the plans had been validly terminated pursuant to Article 12. Id.
The district court affirmed the bankruptcy court’s decision, holding that the exemption of top hat plans from ERISA’s writing requirement would not permit a departure from the plain meaning of Article 12, that Article 12 could not reasonably be interpreted to mean the plans vested at retirement, and that the bankruptcy court properly refused to hold an evidentiary hearing on the intent of the parties. Senior Executive Benefit Plan Participants v. New Valley Corp. (In re New Valley Corp.), Adv. No. 94-2405, slip op. at 19-20 (D.N.J. January 18, 1995) (hereinafter “District Court Opinion”). This appeal followed.
II.
The bankruptcy court heard this action pursuant to 28 U.S.C. § 157. The district court had subject matter jurisdiction over the initial appeal under 28 U.S.C. § 158(a). This court has jurisdiction over the appeal from the district court pursuant to 28 U.S.C. § 158(d). We exercise plenary review over the district court’s determinations and over the bankruptcy court’s conclusions of law. We review the bankruptcy court’s findings of fact for clear error. Fellheimer, Eichen & Braverman v. Charter Technologies, Inc., 57 F.3d 1215, 1223 (3d Cir.1995).
III.
The principal issue before us is not whether the appellants can recover as a matter of law, but rather whether they can present evidence to establish that they bargained for a contractual set of benefits instead of a pension terminable at New Valley’s whim any time after their retirement. We hold that appellants should have the opportunity to clarify the meaning of their benefits eon-tract through a proffer of extrinsic evidence. Their claims will then succeed or fail based on the evidence presented to the fact finder.
A.
As a threshold matter, we have little difficulty concluding that ERISA provides the framework for our analysis. ERISA’s coverage extends broadly to include all employee benefit plans. See Barrowclough v. Kidder, Peabody & Co., 752 F.2d 923, 929 (3d Cir.1985). The SEB and Girardin Plans are clearly ERISA plans. See 29 U.S.C. § 1002(3) (defining “employee benefit plan”); Miller v. Eichleay Engineers, Inc., 886 F.2d 30, 33 n. 7 (3d Cir.1989).
Finding ERISA applicable, however, is only an initial step. The far more important determination is to locate the SEB and Girardin Plans within ERISA’s landscape. Both plans at issue are top hat plans, a fact that has crucial implications for this case. “A top hat plan is a ‘plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly trained employees.’ 29 U.S.C. §§ 1051(2), 1081(a)(3), and 1101(a)(1).” Miller, 886 F.2d at 34 n. 8; see also 29 U.S.C. §§ 1002(36), 1003(b). The elements of this definition make the top hat category a narrow one. Not only must the plan be unfunded and exhibit the required purpose, it must also cover a “select group” of employees. This final limitation has both quantitative and qualitative restrictions. In number, the plan must cover relatively few employees. In character, the plan must cover only high level employees. Because of these limitations, top hat plans form a rare sub-species of ERISA plans, and Congress created a special regime to cover them.
The dominant characteristic of the special top hat regime is the near-complete exemption of top hat plans from ERISA’s substantive requirements. Section 1051(2) exempts top hat plans from ERISA’s minimum participation standards, minimum vest ing standards, and various other content requirements. Section 1081(a)(3) exempts top hat plans from ERISA’s minimum funding requirements. Section 1101(a)(1) exempts top hat plans from ERISA’s fiduciary responsibility provisions, including the requirement of a written plan, the need to give control of plan funds to a trustee, the imposition of liability on fiduciaries, and limitations on transactions and investments. Section 1051(2) exempts top hat plans from ERISA’s reporting and disclosure requirements upon promulgation of the proper administrative regulations. These regulations are in place. 29 C.F.R. § 2520.104-23 (1995) (establishing minimal alternative reporting requirements for top hat plans); Pane v. RCA Corp., 868 F.2d 631, 637 (3d Cir.1989); see generally Barrowclough, 752 F.2d at 930-31. As a result, top hat plans are covered only by ERISA’s enforcement provisions. Kemmerer v. ICI Americas, Inc., 70 F.3d 281, 286-87 (3d Cir.1995), cert. denied, — U.S.-, 116 S.Ct. 1826, 134 L.Ed.2d 931 (1996); Barrowclough, 752 F.2d at 931, 935, 937.
Although all of these provisions are important in defining the top hat category, one specific exemption from this list has particular importance for the current dispute: top hat plans are excluded from ERISA’s writing requirement. Other ERISA plans, by contrast, are governed by a stringent writing requirement: “Every employee benefit plan shall be established and maintained pursuant to a written instrument.” 29 U.S.C. § 1102(a)(1). This provision has formed the cornerstone of a series of decisions by this and other courts limiting litigants to the language of the plan document. See Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1163-64 (3d Cir.1990) (citing cases). Under this interpretation, § 1102(a)(1) essentially operates as a strong integration clause, statutorily inserted in every plan document covered by the fiduciary duty provisions. Like any common law integration clause, § 1102(a)(1) makes the plan document the entire agreement of the parties and bars the introduction of parol evidence to vary or contradict the written terms. See Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1010 n. 9 (3d Cir.1980) (discussing integration clauses and parol evidence rule).
Top hat plans are exempt from § 1102(a)(1). As a result, top hat agreements can be partially or exclusively oral. They may, of course, be integrated by their own terms, just as they may contain any provision to which the parties agree. They do not, however, gain the benefit of statutory additions such as § 1102(a)(1). Consequently, Hozier and other cases which limit employees strictly to the terms of the plan document are inapposite. Top hat plans are instead governed by general principles of federal common law. Barrowclough, 752 F-2d at 936. Here, that law is the federal common law of contract.
Both parties agree that the plans in question are top hat plans. Both the SEB Plan and the Girardin Plan therefore exist in the unique top hat category of ERISA coverage and exemption. They are exempt from the writing requirement of § 1102(a)(1), and federal common law developed under the aegis of ERISA governs their enforcement.
Applying the federal common law of contract, we believe that the bankruptcy court erred in construing the plan documents. A court cannot interpret words in a vacuum, but rather must carefully consider the parties’ context and the other provisions in the plan. Moreover, extrinsic evidence should have been considered to determine whether an ambiguity existed, especially in the absence of an integration clause in the plan.
Whether a document is ambiguous presents a question of law properly resolved by this court. Stendardo v. Federal Nat’l Mortgage Ass’n, 991 F.2d 1089, 1094 (3d Cir.1993). Our precedents clearly estab lish the steps involved in resolving a contractual ambiguity.
To decide whether a contract is ambiguous, we do not simply determine whether, from our point of view, the language is clear. Rather, we “hear the proffer of the parties and determine if there [are] objective indicia that, from the linguistic reference point of the parties, the terms of the contract are susceptible of different meanings.” Sheet Metal Workers [v. 2300 Group, Inc.], 949 F.2d [1274] at 1284 [3d Cir.1991] (brackets in original) (quoting Mellon Bank, N.A. v. Aetna Business Credit, Inc., 619 F.2d 1001, 1011 (3d Cir.1980)). Before making a finding concerning the existence or absence of ambiguity, we consider the contract language, the meanings suggested by counsel, and the extrinsic evidence offered in support of each interpretation. Id.; [International Union v.] Mack Trucks, 917 F.2d [107] at 111 [3d Cir.1990]; see also Restatement (Second) of Contracts § 223 cmt. b (1981) (“There is no requirement that an agreement be ambiguous before evidence of a course of dealing can be shown____”). Extrinsic evidence may include the structure of the contract, the bargaining history, and the conduct of the parties that reflects their understanding of the contract’s meaning.
Teamsters Indus. Employees Welfare Fund v. Rolls-Royce Motor Cars, Inc., 989 F.2d 132, 135 (3d Cir.1993). And once a contract provision is found to be ambiguous, extrinsic evidence must be considered to clarify its meaning. See Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d Cir.1994); Taylor v. Continental Group Change in Control Severance Pay Plan, 933 F.2d 1227, 1234 (3d Cir.1991).
Neither the bankruptcy court nor the district court followed these steps. Both instead adopted, and then misapplied, a “four corners” approach to the contract. Mellon Bank, 619 F.2d at 1011 (“Under a ‘four corners’ approach a judge sits in chambers and determines from his point of view whether the written words before him are ambiguous.”). Since Mellon Bank, however, this court has required the judge to hear the proffer of the parties and consider extrinsic evidence to determine whether there is an ambiguity, and then to resolve or clarify any ambiguity that may exist.
B.
Our interpretation of the SEB and Girardin top hat plans is assisted by our recent decision in Kemmerer v. ICI Americas, Inc., 70 F.3d 281, 286-87 (3d Cir.1995), cert. denied, — U.S. -, 116 S.Ct. 1826, 134 L.Ed.2d 931 (1996). The unilateral contract theory in Kemmerer supports appellants’ explication of the plans as a whole and of Article 12 in particular.
In Kemmerer, we interpreted a top hat plan that permitted plan participants to elect a payment schedule by which they would receive their benefits. The plaintiffs elected an extended payment schedule and later retired. The company then unilaterally terminated the plan, paying the remaining amounts due the participants in three annual installments. 70 F.3d at 285. The participants sued, the district court found a breach, and we affirmed.
After concluding that top hat plans were subject to ERISA, we turned to contract principles to resolve the dispute. Id. at 287. Examining the contract as a whole, we found a unilateral contract which created vested rights in those employees who accepted the offer it contained by continuing in the company’s employment until retirement. Id. “Under unilateral contract principles, once the employee performs, the offer becomes irrevocable, the contract is completed, and the employer is required to comply with its side of the bargain.” Id. In response to ICI’s argument that the contract did not restrict its right to terminate the plan, we observed,
even when a plan reserves to the sponsor an explicit right to terminate the plan, acceptance by performance closes that door under unilateral contract principles (unless an explicit right to terminate or amend after the participants performance is reserved). “Any other interpretation ... would make the Plan’s several specific and mandatory provisions ineffective, rendering the promises embodied therein completely illusory.”
Id. at 287-88 (emphasis added) (quoting Carr v. First Nationwide Bank, 816 F.Supp. 1476 (N.D.Cal.1993)). In our view, the company’s claim to an unfettered right to terminate in the face of specific grants of benefits “ha[d] no basis in contract law” and was “more than minimally unfair.” Id. at 287.
Like the payout system set forth in Kemmerer, the post-retirement benefits of the New Valley plan can be construed as creating a unilateral contract offer that the employees accepted by working faithfully until retirement, at which time the benefits would vest. Thus, the plan may not be terminated unless an explicit right “to terminate ... after the participant’s performance is reserved.” Kemmerer, 70 F.3d at 287-88.
In the current case, the plan documents do contain language that could be interpreted as reserving a right for New Valley to terminate even after retirement: the plan says it can be terminated “at any time.” As a matter of plain language, New Valley contends, this phrase is unambiguous. But this is not necessarily so. A common example shows that the meaning of “at any time” depends on the context. Suppose an employer and employee enter into a contract stating that employee will work forty hours per week for $500, payable at the end of the week. The contract further states that employment is at will and employer can change employee’s wages “at any time.” After working a week, employee goes to pick up her pay check. Employer informs employee that it has exercised its right to change her wages ‘at any time,” and will be paying her $300 for that week’s work. Despite the seemingly unambiguous “at any time” language, it seems reasonable that an employee would not expect the reduction in salary to take place post-performance. Although this is not our situation, it makes clear that the words “at any time” may admit of more than one reasonable interpretation.
The appropriate question, then, is whether “at any time” is unambiguous in this context. The benefits at issue in this case, like the wages in our hypothetical case, are payable entirely after performance. As in the wage scenario, agreeing to allow New Valley to terminate the benefits even after retirement would make this “contract” largely illusory. Although parties are free to enter into illusory agreements, the unlikelihood that they will do so when significant benefits are at stake may render a term ambiguous. In this context, the unlikelihood that the Appellants agreed to allow New Valley to terminate their retirement benefits at its whim, coupled with Appellants’ reasonable alternative interpretation of “at any time” (until performance), supports the argument that the term is ambiguous. If New Valley desired to clearly indicate .its ability to terminate benefits even after performance, in the face of likely expectations to the contrary, it could have simply added the words “including after retirement” to the plan.
Moreover, in the current case, as in Kemmerer, other provisions in the plan point to a binding contractual agreement. For example, the plan documents contain several “specific and mandatory provisions” promising what appear to be benefits which vest on retirement. These provisions include Article 4, Deferred Compensation Benefit; Article 5, Supplemental Disability Benefit; and Article 6, Supplemental Medical Benefits. The language quoted here is taken from the original 1977 plan.
Article 4 states: “A deferred compensation benefit will be paid upon the death of any Participant after retirement on pension .... ” Article 5 states: “Any Participant entitled to receive [basic benefits] whose Total Service at the date of disability exceeds five years, will receive ... a supplemental disability benefit____” Article 6 states: “(a) Following termination of active employment on account of disability, a Participant may obtain supplemental medical benefits .... (b) In the event of death ..., the dependents of that Participant may obtain medical benefits ____(c) Dental benefits will be provided at no cost to [qualified participants].” App. at 33-34 (emphasis added). The mandatory language of these provisions denotes benefits that will be provided by the company once the participant retires, ie., benefits that vest at retirement.
Other provisions provide less definite support for vested benefits. Article 3 states the requirements for a participant to receive a supplemental benefit. These requirements include participation in the Basic Contributory Plan during employment, followed by retirement and receipt of a pension under the Basic plan. Article 3 also states the method for calculating the supplemental pension. This provision implies that a pension calculated in this manner will be given to those participants who satisfy these requirements.
Article 10, Suspension of Benefits, also provides indirect support for vesting at retirement. This article makes no mention of post-retirement actions that could result in termination of benefits. It discusses only “engag[ing] in any activity or conduct which, in the judgment of the Committee, is prejudicial to the best interests of the Corporation or its subsidiaries.” Id. at 34. While this omission is not conclusive, it is consistent with a pension that vests on retirement.
“An ambiguous contract is one capable of being understood in more senses than one____ Before it can be said that no ambiguity exists, it must be concluded that the questioned words or language are capable of [only] one interpretation.” American Flint Glass Workers Union, AFL-CIO v. Beaumont Glass Co., 62 F.3d 574, 581 (3d Cir. 1995) (quoting Landtect Corp. v. State Mut. Life Assur. Co., 605 F.2d 75, 80 (3d Cir. 1979)). Based on the two interpretations offered by the parties, we cannot say that here. By numerous indicia — (1) that the words “at any time” are inconclusive; (2) that the right to terminate even after retirement would render the provisions for benefits largely illusory; and (3) that the plan contains numerous specific and mandatory provisions — the contract language appears ambiguous. These factors, coupled with the oral representations made by New Valley to the plaintiffs (that the plan did not permit termination after retirement) and the fact that we are dealing with an unintegrated top hat plan, convinces us that an ambiguity exists as to whether there was a right to terminate after retirement (or only before). Our opinion is thus a narrow one, informed by this concatenation of factors. Construing the plan document “as a whole,” see Alexander v. Primerica Holdings, Inc., 967 F.2d 90, 93 (3d Cir.1992), we find appellants understanding of Article 12 at least equally plausible as New Valley’s interpretation.
Because appellants have demonstrated ambiguity in the plan, the bankruptcy court should have permitted appellants to present extrinsic evidence to clarify its meaning. See Hullett v. Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d Cir.1994); Taylor v. Continental Group Change in Control Severance Pay Plan, 933 F.2d 1227, 1234 (3d Cir.1991). Evidence of the parties’ intent, such as that proffered by appellants, is directly relevant to this issue. Smith v. Hartford, Ins. Group, 6 F.3d 131, 139 (3d Cir.1993) (“[t]o choose between these competing meanings, we can consider extrinsic evidence of the parties’ understanding of that term”); see also Taylor, 933 F.2d at 1233 (noting “the reasonable understanding of the beneficiaries, as well as the intent of the employer, may be admissible to clarify ambiguities [in an ERISA plan term]”).
C.
The bankruptcy court should also consider appellants’ promissory estoppel claims in light of their proffered extrinsic evidence. We have recognized the viability of estoppel claims against ERISA plans in general, see Rosen v. Hotel & Restaurant Employees and Bartenders Union, 637 F.2d 592, 598 (3d Cir.), cert. denied, 454 U.S. 898, 102 S.Ct. 398, 70 L.Ed.2d 213 (1981), and against top hat plans in particular, Pane v. RCA Corp., 868 F.2d at 638.
To establish a claim for equitable estoppel under ERISA, a plaintiff must prove: (1) a material representation, (2) reasonable and detrimental reliance upon the representation, and (3) extraordinary circumstances. Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 235 (3d Cir.1994). In the context of this case, the first two elements are particularly germane. Because top hat plans can be partially or exclusively oral, top hat participants may reasonably rely on oral representations of benefits, even in the face of a termination clause like Article 12.
On remand, the bankruptcy court should address these issues. Analysis of appellants’ estoppel claims will necessarily be affected by the interpretation given Article 12.
D.
In reaching these conclusions, we are well aware of our decision in In re Unisys Corp. Retiree Medical Benefit “ERISA” Litig., 58 F.3d 896 (3d Cir.1995), which reached a different conclusion about the validity of a similar termination clause in the context of a different type of ERISA plan. We do not believe that Unisys can control the uniquely narrow category of top hat benefit plans on these different facts.
First, unlike the welfare benefits at issue in Unisys, top hat plans are exempt from ERISA’s writing requirement, 29 U.S.C. § 1102(a)(1). The rationale behind this distinction seems straight-forward. The potentially expansive size and scope of welfare benefit plans makes a writing requirement necessary as a practical matter of plan administration. Our decision in Unisys, for example, addressed a large scale employee welfare plan that provided a variety of benefits to approximately 21,000 employees at all levels. 58 F.3d at 899 n. 4. Top hat plans, by contrast, cover narrow groups of select individuals. Because of the limited number of employees involved and their place in the organizational hierarchy, top hat plans can be exempted from the writing requirement without inviting administrative difficulties.
In terms of distinguishing Unisys, the exemption of top hat plans has importance beyond this practical rationale. As noted, supra, the writing requirement has formed the basis of a series of cases limiting employee-litigants to the language of plan documents. See Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1163-64 (3d Cir.1990) (citing eases). The provision buttressed our decision in Unisys, where we noted that
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966505-5681 | PER CURIAM:
Cleveland Webster appeals his 188-month sentence for possession with intent to distribute cocaine base, in violation of 21 U.S.C. § 841(a)(1). On appeal, Webster argues that the district court violated his due process rights when it classified him as a career offender and enhanced his sentence under U.S.S.G. § 4B1.1. After review, we affirm Webster’s sentence.
At sentencing, the district court concluded that Webster qualified as a career offender based on Webster’s 1982 conviction for burglary and his 1989 conviction for robbery by force and motor theft. Webster’s appeal addresses only his 1982 burglary conviction.
On appeal, Webster contends that the district court’s reliance on his 1982 burglary conviction violated his due process rights under the Fifth and Fourteenth Amendments because (1) Webster was 16 years old when he committed that offense and 17 years old when he was convicted and (2) the conviction was over 21 years old at the time of sentencing for the instant offense. In the district court, Webster did not argue that use of the 1982 burglary conviction violated his due process rights. Rather, Webster argued that it was improper to count his 1982 burglary conviction for purposes of determining his career offender status because he had received ineffective assistance of counsel during those proceedings. Therefore, he brings this due process challenge for the first time on appeal.
We generally review questions of law arising under the Sentencing Guidelines de novo. United States v. Crawford, 407 F.3d 1174, 1178 (11th Cir.2005). However, where, as here, the defendant did not raise the objection below, we review for plain error. We correct plain error only when: (1) there is error; (2) the error is plain; (3) it affects the defendant’s substantial rights; and (4) it seriously affects the fairness, integrity or public reputation of the judicial proceedings. United States v. Rodriguez, 398 F.3d 1291, 1298 (11th Cir.), cert. denied, — U.S.-, 125 S.Ct. 2935, 162 L.Ed.2d 866 (2005). In Webster’s case, we find no error, plain or otherwise.
A defendant is classified as a career offender under the guidelines “if (1) the defendant was at least eighteen years old at the time the defendant committed the offense of conviction; (2) the instant offense of conviction is a felony that is either a crime of violence or a controlled substance offense; and (3) the defendant has at least two prior felony convictions of either a crime of violence or a controlled substance offense.” U.S.S.G. § 4Bl.l(a). Webster does not dispute that he meets the three requirements set forth in U.S.S.G. § 4Bl.l(a). That is, he does not dispute that he was over 18 years old at the time he committed the instant offense, that the instant conviction is a felony, controlled substance offense and that his 1982 burglary conviction is a crime of violence. Rather, Webster contends that, because he was under 18 years old when he committed and was convicted of the 1982 burglary and because that conviction is over 21 years old, its use in classifying him as a career offender violates his due process rights.
Webster does not cite any authority to support his claim that due process prohibits sentencing enhancements based on prior convictions where either the defendant was a minor when convicted or the conviction is more than 21 years old. Due process requires that a sentencing scheme be rational and not based on an arbitrary distinction. Chapman v. United States, 500 U.S. 453, 465, 111 S.Ct. 1919, 1927, 114 L.Ed.2d 524 (1991). The longstanding practice of enhancing sentences based on recidivism has withstood many constitutional challenges, including those based on due process. See Parke v. Raley, 506 U.S. 20, 27, 113 S.Ct. 517, 522, 121 L.Ed.2d 391 (1992) (noting that the Supreme Court has repeatedly upheld recidivism statutes in the face of constitutional challenges). The few courts to have addressed the issue of whether due process requires age limitations on prior convictions used to enhance sentences have answered this question in the negative. See, e.g., United States v. Bredy, 209 F.3d 1193, 1197-98 (10th Cir. 2000) (collecting cases). We agree with these courts and conclude that imposing a sentencing enhancement based on a prior conviction that is over 21 years old is not arbitrary and does not violate substantive due process.
Likewise, due process is not implicated merely because Webster committed and was convicted of the predicate offense while a juvenile. This Court has held that, absent some evidence that a defendant was not afforded fundamental fairness in juvenile proceedings, the use of a defendant’s juvenile conviction to enhance his sentence does not violate his due process rights. See McCullough v. Singletary, 967 F.2d 530, 532-34 (11th Cir.1992). Examples of circumstances that might show that the defendant was not afforded fundamental fairness include evidence that the defendant was denied notice of the charges pending against him, that he was denied the right to confront and cross-examine witnesses, that he was forced to incriminate himself or that he was denied a jury trial. Id. at 532.
Here, Webster was prosecuted as an adult, not as a juvenile, for the 1982 burglary conviction, with representation by counsel and the other protections afforded in adult criminal prosecutions. Furthermore, Webster has presented no evidence to suggest that he was not afforded fundamental fairness during those proceedings. In sum, we see no basis for concluding that the district court violated due process by imposing § 4Bl.l(a)’s career offender enhancement based in part on Webster’s 1982 burglary conviction.
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11441577-6428 | WINTER, Circuit Judge.
Jose DelValle appeals from Judge Burns’s dismissal of his petition for a writ of habeas corpus under 28 U.S.C. § 2254. He was convicted by a jury in Connecticut state court of murder and conspiracy to commit murder. After exhausting his state remedies, appellant filed his petition in the district court claiming that the trial court improperly instructed the jury on reasonable doubt and the presumption of innocence, thereby violating his rights under the Sixth and Fourteenth Amendments. He also raised a claim for relief under Section 2254(d)(2), arguing that the decision of the Connecticut Supreme Court was based upon an unreasonable determination of the facts as presented at trial. The district court denied the petition and granted a certificate of appealability. We affirm.
BACKGROUND
Appellant was convicted of murder and conspiracy to commit murder following a drug-related turf dispute in which appellant and his two companions fired multiple rounds at the victim. One bullet struck the victim in the knee, and a second struck him in the head and neck area, killing him.
On appeal to the Connecticut Supreme Court, appellant claimed that the trial court’s jury instructions on reasonable doubt, the presumption of innocence, and the state’s burden of proof violated his constitutional rights to due process and to a jury trial. In particular, he challenged the trial court’s instruction that reasonable doubt is a “rule of law ... made to protect the innocent and not the guilty” as undermining the presumption of innocence and diluting the state’s constitutionally required burden of proof. He also claimed that the trial court’s instruction that reasonable doubt is not “a doubt suggested by the ingenuity of counsel” further diluted the state’s burden of proof and misled the jury. The Connecticut Supreme Court affirmed his conviction. State v. Delvalle, 250 Conn. 466, 736 A.2d 125, 126 (1999). The Connecticut Supreme Court exercised its supervisory authority to forbid trial courts from using the challenged language in future jury charges. Id. at 129 n. 10 and 130.
Appellant then filed the present petition in the district court. It raised the claims described above, to which appellant’s memorandum in support added the additional claim that the Connecticut Supreme Court’s decision, was based upon an unreasonable determination of the facts in light of the evidence presented at trial. Appellant based the additional claim on the fact that the opinion of the Connecticut Supreme Court stated that the victim’s fatal wound was the result of two bullets striking his head and neck, id. at 127, whereas the facts established at trial were that only one bullet had entered that region of the victim’s body. The district court denied the petition and granted a certificate of appealability on all claims.
DISCUSSION
We review the district court’s denial of á petition for writ of habeas corpus de novo and its factual findings for clear error. Ponnapula v. Spitzer, 297 F.3d 172, 179 (2d Cir.2002) (citations omitted). Consideration of appellant’s petition is governed by 28 U.S.C. § 2254, as amended •by the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Pub.L. No. 104-132, § 104, 110 Stat. 1214, 1218-19. Under the AEDPA amendments, habeas relief cannot be granted on any claim “adjudicated on the merits in State court proceedings unless the adjudication of the claim ... resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States,” or “resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceedings.” 28 U.S.C. § 2254(d). A, state court decision is “contrary to” federal law clearly established by the Supreme Court if it either “arrives at a conclusion opposite to that reached by [the Supreme Court] on a question of law” or if the state court arrives at a result opposite to one reached by the Supreme Court on “materially indistinguishable” facts. Williams v. Taylor, 529 U.S. 362, 405, 120 S.Ct. 1495, 146 L.Ed.2d 389 (2000) (O’Connor, J., for ■the Court). With regard to issues of law, therefore, if the state court’s decision was not an unreasonable application of, or contrary to, clearly established federal law as defined by Section 2254(d), we may not grant habeas relief even if in our judgment its application was erroneous. Id. at 411, 120 S.Ct. 1495.
We have found reversible error where a trial' court instructed a jury that the presumption of innocence and reasonable doubt are “rules of law ... designed to protect the innocent and not the guilty.” See United States v. Doyle, 130 F.3d 523, 533, 539-40 (2d Cir.1997). However, even if our present standard of review were not governed by AEDPA, it is not clear that Doyle would be controlling authority on this issue. In Doyle, we specifically noted that its ruling might not be applicable to a collateral attack on a state court jury charge. Id. at 540 n. 14.
In any event, after AEDPA, Doyle cannot serve as a basis for federal habeas relief under Section 2254 because it has no counterpart in Supreme Court jurisprudence. Williams, 529 U.S. at 412, 120 S.Ct. 1495; Mask v. McGinnis, 252 F.3d 85, 90 (2d Cir.2001) (denying habeas relief where “petitioner has established, at most, that the state courts unreasonably applied clearly established Second Circuit precedent”) (emphasis in original). The Supreme Court has not directly addressed either of the two jury instructions at issue in this petition.
The Supreme Court has, however, articulated general principles that guide our analysis of appellant’s constitutional claims. In particular, the Court has held that a state prisoner making a claim of improper jury instructions faces a substantial burden.
The burden of demonstrating that an erroneous instruction was so prejudicial that it will support a collateral attack on the constitutional validity of a state court’s judgment is even greater than the showing required to establish plain error on direct appeal. The question in such a collateral proceeding is “whether the ailing instruction by itself so infected the entire trial that the resulting conviction violates due process,” not merely whether “the instruction is undesirable, erroneous, or even ‘universally condemned.’ ”
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900129-20727 | OPINION OF THE COURT
MORGAN, C. H., II, Judge:
On April 9, 1997, petitioner, who is in pretrial custody awaiting trial by general court-martial, filed a petition for extraordinary relief in the form of a writ of habeas corpus. In that petition he alleged that he was no longer in the Air Force, and hence was not subject to court-martial jurisdiction. After considering the submissions and arguments of the parties, including oral argument, we decline to grant the relief requested.
Background
On April 14,1995, petitioner enlisted in the Air National Guard of the United States for a term of six years. He was ordered pursuant to 10 U.S.C. § 672(d) and 10 U.S.C. § 511 to active duty to attend basic military training and technical school by Special Order ACJ-23, dated 21 July 1995, for the period 27 July 1995 until 1 November 1995. On October 18, 1995, petitioner allegedly committed one of the two offenses with which he is now charged, stealing $320 from a fellow basic airman. On October 19,1995, petitioner allegedly deserted the Air Force, and remained so until he was apprehended by San Antonio civil authorities on November 30,1996.
What took place in the meantime in the California Air National Guard is the focal point of petitioner’s argument. Petitioner’s parent unit in the California Air National Guard was the 234th Combat Communications Squadron (CCS). In paragraph 5 of ACJ-23, “Remarks,” petitioner was attached to the 8129 Student Flight, Moffett Federal Air Field, California, for “disciphne/adminis-tration.” On November 3, 1995, after learning of petitioner’s alleged absence without leave (AWOL) the commander of the 234th CCS, Major (now Lieutenant Colonel (Lt Col)) King, by authority of the Secretary of the Air Force, amended the period of the original active-duty order, ACJ-23, from 1 November 1995 to 31 December 1995.
At this point, the 8129 Mission Support Flight of the California Air National Guard, in the person of Master Sergeant (MSgt) Mikulovsky, took a hand in matters. Working his way, apparently on his own, through Table 1 of Air Force Instruction (AFI) 36-2911, Desertion and Unauthorized Absence, 8 Jul 1994, he saw that at the six month point, a deserter was to be “removed from unit rolls.” Calculating from the alleged date of absence, October 19, 1995, Mikulov-sky computed that, effective April 18, 1996, petitioner should be removed from unit rolls — and then decided, again without any consultation with legal or command authority, that removal from unit rolls meant discharge. He accordingly prepared Special Order AZ-96, 02 May 96, which purported to discharge petitioner from the California Guard and as a Reserve of the Air Force, effective 19 Apr 96. The order was signed by Chief Master Sergeant (CMSgt) Ratliff, the noncommissioned officer in charge of the 8129 Personnel Support Flight, “By order of the governor.” The stated authority for the discharge was AFI 36-2911.
Mikulovsky also prepared a DD Form 214, “Certificate of Release or Discharge.” In that form Mikulovsky listed the authority for the separation action as AFI 36-2911, Desertion and Unauthorized Absence, and AFI 36-3208, Administrative Separation of Airmen, 14 Oct 94. In block 21, “SIGNATURE OF MEMBER BEING SEPARATED,” Mi-kulovsky typed “MEMBER NOT AVAILABLE TO SIGN.” In block 28, “NARRATIVE REASON FOR SEPARATION,” he entered, “DESERTER DROPPED FROM UNIT ROLLS,” and in block 24, “CHARACTER OF SERVICE,” he entered “UNDER OTHER THAN HONORABLE CONDITIONS.” Since petitioner was still unavailable, he mailed it to petitioner’s home of record in California (although his father had told authorities that petitioner no longer lived there and he did not know where he was). Mikulovsky also prepared and signed a National Guard Bureau Form 22, styled “Report of Separation and Record of Service in the Air National Guard of the State of California and as a Reserve of the Air Force” which reported petitioner’s “discharge” under other than honorable conditions.
On November 30, 1996, petitioner was apprehended by San Antonio authorities and placed into pretrial confinement. CMSgt Epp, the National Guard liaison at Lackland Air Force Base, contacted the 8129 Personnel Support Flight in the person of CMSgt Ratliff, the signatory to the discharge order. Ratliff informed him that petitioner had been discharged. Epp relayed this in due course to various base authorities and the confinement officer ordered petitioner’s release. CMSgt Epp personally escorted petitioner off base, telling him he was now a civilian.
After petitioner’s release, however, the base legal office looked into the factual circumstances of petitioner’s discharge, and, upon learning what had actually happened in California, decided that petitioner had not really been discharged at all. Petitioner was again apprehended on January 7, 1997, and placed into pretrial confinement. Charges were preferred on January 9,1997, a pretrial investigation was conducted from January 10-17, and on February 12, 1997, charges of desertion and larceny were referred to a general court-martial. At defense counsel’s request, the military judge ordered an inquiry into petitioner’s mental responsibility under R.C.M. 706 on February 18, 1997. On March 17, 1997, a petition for a writ of habeas corpus was filed in the United States District Court for the Western District of Texas, San Antonio Division, styled Wilson v. Widnal, SA-97-CA-0310.
On March 27,1997, following receipt of the preliminary conclusion of the mental responsibility board that petitioner was mentally competent to stand trial, the military judge conducted a pretrial hearing on the question of jurisdiction. After listening to testimony and considering the written and oral arguments of counsel, along with a stipulation of fact, the military judge issued her decision on March 29, 1997, rejecting petitioner’s claims, and set trial for May 7,1997.
Active Duty Status
As at trial, petitioner offers a bifurcated argument. His first is that he is no longer on active duty because the order calling him to active duty expired on November 1,1995, and subsequent efforts to extend the period of active duty are in some fashion defective. This argument leans heavily on United States v. Self, 13 M.J. 132 (C.M.A. 1982). Accused of having burnt his car with an eye towards insurance fraud, Self, who was an Army guardsman serving on active duty at the time of the crime, made much the same argument petitioner makes now. He argued that since his term of service on active duty as a national guardsman had expired by the time of trial, and Army officials had not taken definitive action against him with a view toward prosecution, the Army lacked in personam jurisdiction. Citing United States v. Brown, 31 C.M.R. 279, 1962 WL 4412 (C.M.A.1962), the Court declared that for guardsmen in Selfs situation, jurisdiction was indeed lost once a period of active duty was over. Nevertheless, it held against Selfs claim because it found that there were statutory and regulatory mechanisms which could validly extend a guardsman’s period of active duty. In Selfs ease, an Army regulation providing for the involuntary extension of active duty where action was being taken with a view towards court-martial was sufficient where the Army had, in fact, taken such action before the expiration of Selfs active duty status. The Court also mentioned in dictum that 10 U.S.C. § 972, which provided for the make-up of bad time lost by an unauthorized absence, supplied sufficient authority for the involuntary extension of active duty time.
Both parties have exhaustively briefed whether the various orders cut by the sedulous MSgt Mikulovsky purporting to extend petitioner’s active duty were valid, and whether the government took sufficient measures with a view toward court-martial. All center on whether the strictures of Self were satisfied. From a jurisdictional point of view, at least, this focus is misplaced. In 1986, Article 3 of the UCMJ, 10 U.S.C. § 803, was amended to add subsection (d). That subsection, in obvious reference to the Self line of cases, laid the active duty status issue to rest once and for all. It says:
A member of a reserve component who is subject to this chapter is not, by virtue of the termination of a period of active duty or inactive-duty training, relieved from amenability to the jurisdiction of this chapter for an offense against this chapter committed during such period of active duty or inactive-duty training.
At the time of the alleged offenses, petitioner was serving in his Federal status on active duty pursuant to 10 U.S.C. § 12301(d). Hence, for jurisdictional purposes, his continuation on that status subsequently, or even its expiration, is irrelevant. See also United States v. Ernest, 32 M.J. 135, 139 (C.M.A.1991). The manifold infirmities in the preparation of the various orders aimed at extending this period of duty do not obscure the reality that petitioner was on Federal active status at the time of the alleged offenses. Id.
A related, but not jurisdictional, question is whether, once petitioner was apprehended for the second time on January 7, 1997, respondents were obliged to extend his active service in order to bring him to trial. Petitioner argues that he was not validly still on active status at the time of his apprehension. According to his, argument, his original active duty orders only extended to November 1, 1995, leaving at most only 13 days left at the time he allegedly departed the base without authority. Conceding that those days did not pass during his alleged desertion, petitioner argues that the clock restarted when he was apprehended on November 30, 1996 and continued to run through his second apprehension on January 7, 1997. Consequently, petitioner concludes, the Air Force was obliged to extend his active duty for purposes of trial.
A member of a reserve component must be on active duty prior to arraignment. R.C.M. 204(b)(1). It is pertinent, therefore, to ask whether petitioner was on active duty Federal status at the time of his second apprehension. If not, then the Air Force was required to recall him to active duty in accordance with Article 2(d), UCMJ, 10 U.S.C. § 802(d). On the other hand, if he were on active duty status, it is well settled that apprehension is sufficient action taken with a view toward trial to attach jurisdiction. See R.C.M. 202(c).
Leaving aside, for now, the question of whether petitioner was discharged, we are satisfied that he was on active duty Federal status at the time of his second apprehension, and hence, that he remains so. See R.C.M. 202(c)(1) (when jurisdiction attaches over a servicemember on active duty, the servicemember may be held on active duty over objection pending disposition of any offense for which held and shall remain subject to the code during the entire period).
Three orders were cut purporting to extend petitioner on active duty Federal status. The first, accomplished at the direction of Lt Co 1 King, petitioner’s National Guard unit commander, is ACJ-3, dated 3 Nov 95, which extends the original order calling petitioner to active duty through December 31, 1995. This order appropriately recites the Secretary of the Air Force as the authorizing official. The next two, handiwork of MSgt Mikulovsky, AZ-31, dated 15 Jan 97, and ACZ-2, 3 Feb 97, purport to extend the period to 30 Mar 97 and 31 May 97, respectively. Both of the Mikulovsky orders recite the governor of California as the authorizing official, prompting petitioner to dispute their validity. Without deciding the validity of those two orders, it is sufficient that we are satisfied that Lt Col King’s order, with the Secretary of the Air Force cited as the authority, was sufficient to extend petitioner’s active duty. Petitioner’s argument that the order was invalid as a nunc pro tunc abridgement of his constitutional rights is unavailing, since, at the time the King order was cut, petitioner remained on active status notwithstanding the expiration of the original order calling him to active duty. Cf. Self, 13 M.J. at 135 (such orders may not be used to revive a jurisdictional status which has already lapsed at the time of the order).
Even assuming then, as petitioner argues, that the clock restarted when he was first apprehended on November 30, 1996, he was still on active duty Federal status at the time of his second apprehension since only 39 days elapsed of the total of 74 days remaining on his amended order.
Legal Effect of 8129 Student Flight (California Air Guard)
Discharge Papers
Notwithstanding the above discussion, it is plain that if petitioner has been validly discharged from Federal service in accordance with law or regulations promulgated by the Secretary concerned, he is no longer amenable to court-martial jurisdiction and the writ must issue. Article 2(c)(4), UCMJ, 10 U.S.C. § 802(c)(4); United States v. Howard, 20 M.J. 353 (C.M.A.1985). This is true, even if the issuance of a properly issued discharge certificate is a mistake. Cole, 24 M.J. at 26 (C.M.A.), cert, denied, 484 U.S. 828, 108 S.Ct. 97, 98 L.Ed.2d 58 (1987); Vanderbush v. Smith, 45 M.J. 590 (Army Ct.Crim.App.1996). Here, the trial judge decided that the discharge in petitioner’s case was not merely a mistake, but was a “nullity.” We agree for the following reasons.
Since petitioner’s enlistment had not expired, nor had his active duty Federal status expired while he was allegedly absent without authority, the validity of the discharge should be tested against the three-part test of our superior Court in United States v. King, 27 M.J. 327, 329 (C.M.A. 1989). There the Court held that such a discharge had three requisites: (1) delivery of a valid discharge certificate; (2) a final accounting of pay; and (3) undergoing the clearing process required under appropriate service regulations to separate a service-member from military service. Petitioner’s discharge meets none of these criteria.
We begin by restating the obvious. There is nothing talismanic about a DD Form 214. The discharge it memorializes must be a valid discharge, that is, it must be issued by competent authority, or if by delegation from that competent authority, according to the requirements and limitations of that delegation. United States v. Garvin, 26 M.J. 194 (C.M.A.1988). A personnel clerk is not a competent discharge authority, although he may be permitted to prepare a DD Form 214 in compliance with a specific delegation of authority or in accordance with an applicable regulation, instruction, or directive. Compare United States v. Howard, 20 M.J. 353 (C.M.A.1985) (decision to give member discharge certificate early made by competent discharge authority) with United States v. Batchelder, 41 M.J. 337 (1994) (personnel clerk’s unauthorized early delivery of otherwise valid DD Form 214 held not effective.)
MSgt Mikulovsky testified that he misunderstood AFI 36-2911, Table 1, the regulation dealing with the administrative processing of desertions and unauthorized absences, to require discharge at the six month point of petitioner’s allegedly unauthorized absence. What the regulation actually requires the servicing military personnel facility to do is to “Initiate AF Form 2098 to drop [the] absentee from the unit rolls.” Mikulovsky prepared the requisite AF Form 2098s, but then strode well beyond the boundaries of the regulation to prepare Special Order AZ-96, the DD Form 214, and the NGB Form 22. These documents corroborate Mikulovsky’s story that he mistakenly believed AFI 36-2911 to require a discharge, because all three list AFI 36-2911 as the authority for discharge. We note further that, upon discovery of the mistake, MSgt Mikulovsky cut special order AZ-31, 17 Dec 96, revoking AZ-96, the discharge order. Cf. Garvin, 26 M.J. at 196 (Cox, J., concurring) (issuance of discharge certificate without actual authority an ultra vires act and does not terminate jurisdiction.)
Mikulovsky also cited AFI 36-3208 as an authority for discharge. That regulation concerns the procedures for administrative discharge, and expressly requires that Air National Guard members serving on active duty first be released from active duty and then processed for discharge according to the appropriate National Guard regulation, in this case AFI 36-3209. AFI 36-3209 echoes the admonition in AFI 36-3208 — that guardsmen serving on active duty in Federal status must first be relieved of that status before they can be processed for discharge by Guard authorities. Consequently, there was no competent authority authorizing MSgt Mi kulovsky to discharge petitioner. In so holding, we specifically reject petitioner’s contention that his assignment to the 8129 Student Flight for administrative and disciplinary purposes constituted a “waiver” by the Secretary of the Air Force of her authority with respect to the discharge of airmen on active Federal service. It is quite clear that “no member may be discharged or released before expiration of term of service (ETS) except as prescribed by the Secretary of the Air Force, by sentence of court-martial, or as otherwise prescribed by law.” AFI 36-3208, ¶ 1.1.1.
Petitioner has offered us another reason to accept the validity of the discharge — the California Military and Veterans Code, §§ 260-261, authorizing administrative separation of Guard enlisted personnel when they have been absent without authority for 90 days. There are two problems with this approach. The first, adverted to above, is that while petitioner was in active Federal status, the State of California was incompetent to effect his discharge. U.S. Constitution, Section 8, cl. 15; Art. 2(c), UCMJ, 10 U.S.C. § 802(c); Self, 13 M.J. at 135. The requirement to effect discharges consistent with Federal law and regulation is acknowledged in the California Military and Veterans Code at § 261(a). To the extent there is conflict (and we see none) Federal statutory and regulatory law trumps any inconsistency arising from California law and procedures pertaining to the National Guard.
The second is that, even if California were competent to effect such a discharge, petitioner’s discharge did not even comply with applicable California law. Neither CMSgt Ratliff nor MSgt Mikulovsky possessed the delegated authority from the governor to approve a discharge for unauthorized absence, and a discharge under other than honorable conditions was not authorized. California Military and Veterans Code, § 271(b) (adjutant general, on behalf of governor, authorized to discharge AWOL individual with general discharge under honorable conditions); AFI 36-3209, II 1.4.1. (adjutant may further delegate authority for general discharge to commander in grade of 0-6 or higher.)
Of course, there are other problems with the discharge certificate. It purports to issue petitioner a discharge under other than honorable conditions. Both for active duty and Guard airmen, such a discharge, to be approved, must first be recommended by an administrative discharge board, or the board must be specifically waived by the member. AFI 36-3209, ¶ 3.21; AFI 36-3208, ¶ 6.2.2. Petitioner’s argument that the character of the discharge can be decoupled from the fact of it, while ingenious, does not deflect us from our conclusion that the discharge certificates and order were void ab initio as they were issued without competent authority and in violation of applicable law and regulations.
The second and third prongs of King are likewise unmet here. There is no evidence that petitioner ever received a final accounting of pay. In fact, the military judge found that he had on three occasions drawn casual pay since being returned to military control. He has never formally out-processed.
Conclusion
We hold that petitioner was validly on active-duty in Federal status when he allegedly left military control without authority on October 19, 1995, and that he was then subject to court-martial jurisdiction for any crimes committed while in that status. We further hold that petitioner remained on active Federal status during the duration of his allegedly unauthorized absence, and that he held such status on January 7,1997, when he was apprehended. Absent a valid discharge, petitioner remains in such status through the disposition of the charges sub judice throughout any trial, appeal, and for purposes of punishment.
Accordingly, the petition for extraordinary relief in the form of a writ of habeas corpus is
DENIED.
Judge J.H. MORGAN concurs.
. Sic. In 1994 these sections were recodified to 10 U.S.C. § 12301 and 10 U.S.C. § 12103; respectively. Act of Oct. 5, 1994, P.L. 103-337, §§ 1662(b)(2), (e)(2), 1675(c)(1).
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553330-4124 | OPINION
DUNIWAY, Circuit Judge:
Blosvern appeals from a judgment of conviction of violating 21 U.S.C. § 841(a)(1), distribution of 221.9 grams of cocaine. We affirm.
1. Voir dire of jurors
Rule 24, F.R.Crim.P., provides that, if the court conducts the examination of the jurors, it “shall itself submit to the prospective jurors such additional questions by the parties or their attorneys as it deems proper.” Implementing Rule 24, Local Rule 19(a) of the District Court provides that “requested questions for voir dire examination shall be in writing, filed . . . before commencement of the trial.”
When the case was called for trial, Blosvern’s counsel submitted a list of 18 proposed questions. Government counsel submitted a list of 11 proposed questions. After the jury box was filled, and after the judge had, by questions, ascertained the name, address, marital status and occupation of each juror, and the occupation of the spouse of each married juror, and before putting other questions, the court said:
I make it a regular practice at the inception of every case ... to indicate to counsel, as I do now, for both sides that if anything occurs of any character, whether it is a remark of the judge Or something done or said by opposing counsel, I want to make it very clear to counsel that the court expects they will immediately make appropriate objection. This is very important, because if the Court has made a mistake it gives the Court an opportunity promptly to correct it if the Court is convinced it has made a mistake, whereas if it has not been promptly corrected, it may not be capable of correction. So I want to make it very clear to counsel again for both sides, if the Court — the Court instructs them to indicate promptly whenever they feel anything which has occurred ought to be objected to.
R.T. at 15-16.
The court then gave the jurors a brief statement of the nature of the case, and followed this by putting a number of questions to the jurors. These covered most of the ground covered in counsel’s lists of questions. Before putting what it described as “the last question I am going to present now,” the court remarked: “The attorneys have suggested some questions. I will look at them.” Having done so, it put one of the questions suggested by Blosvern’s counsel. After receiving some answers, it proceeded at once to the peremptory challenges.
Through all of this, Blosvern’s counsel sat silent. He never asked the judge to put any of the questions on his list that the judge left out. Much less did he give the judge any reasons why they should be put, or why, if they were not put, there might be reversible error. Yet he now asks ús to reverse because the court did not put five of his proposed questions to the jury. Four of them relate to whether the jury would be more likely to believe federal agents or informers than other persons. One asked, in substance, whether the jurors could accept the defense of entrapment.
We decline to consider the merits, if any, of counsel’s claim of error. To do so would be contrary to the trial court’s instructions to counsel to object. Rule 24 makes it clear that the court has discretion — “such additional questions as [the court] deems proper”; so does local rule 19(a) referring, as it does, to “requested questions”; so say the cases, e. g., Silverthorne v. United States, 9 Cir. 1968, 400 F.2d 627, 638, appeal after remand, 1970, 430 F.2d 675, 678; Fredrick v. United States, 9 Cir. 1947, 163 F.2d 536, 550-51.
In preparing a list of proposed questions to jurors, counsel will often submit questions which are such that the court could well decide to use them, but which are also such that it cannot be an abuse of discretion to fail to use them. If there are particular questions that counsel deems essential, and such that refusal to put them may be reversible error, counsel must tell the court so, and state his reasons, before the examination of the jurors is completed. Otherwise, counsel’s list may be a trap for an unwary judge, because counsel has not given him a fair chance to avoid error before it is too late.
2. Entrapment
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1908931-6393 | ESCHBACH, Circuit Judge.
The appellant, Carl Welsh, was convicted on one count of an indictment charging him with knowing possession of stolen property, in violation of 18 U.S.C. § 659. In this appeal, he challenges the district court’s decision not to suppress certain incriminating statements he gave to the police. The appellant also claims that there was insufficient evidence to prove that he was in knowing possession of stolen property. Finding no merit to these claims, we affirm the judgment of conviction.
I.
At 9:20 a.m. on March 5, 1982, eight F.B.I. agents and two Chicago police officers executed a search warrant at the apartment of Rosa Jones. Jones shared the apartment with her daughter and the appellant. The object of the search was items stolen in a burglary of a United Parcels Service facility. On entering the apartment, the agents discovered the appellant hiding under a bed. While the testimony is contradictory, it appears that the appellant was read his Miranda rights by Officer Carroll of the Chicago Police Department soon after the officers entered the apartment. Agent Leadell Lee also testified that he read the appellant his rights soon after 9:20 a.m., and that the appellant refused at that time to sign a form waiving those rights. The search continued for approximately two hours. The agents discovered several items they believed to be from the UPS burglary, and prepared those items for seizure. At approximately 11:00 a.m., as the agents were gathering the items they believed to be stolen, the appellant told Agent Lee, “You guys are taking things that aren’t stolen.” Lee again advised the appellant of his rights, and at that time, the appellant signed a form waiving those rights. According to Lee, the appellant then said, “I will tell you what is stolen and what isn’t. Leave Rosie out of it ... She doesn’t know where this stuff came from.” The appellant then proceeded to show the agents which items in the apartment were stolen. The items retrieved included a television set identified as one of the items stolen in the UPS burglary.
Before trial, the appellant moved to suppress the statements he had given in the apartment because he claimed they were given involuntarily. The appellant claimed that the statements were the product of coercion on the part of Agent Lee, who, Welsh testified, repeatedly told him that the situation “looked awfully bad for Rose.” The appellant also claimed that he was under duress at the time of the statements, because he had been handcuffed for most of the two-hour search. After a hearing, the trial judge denied the appellant’s motion. The court found that the agents had not used improper threats or physical coercion, that anything Welsh might have been told about possible adverse consequences for Rosa Jones was not coercive under the circumstances, and that Welsh’s statements had been voluntarily given.
After a jury trial, the appellant was acquitted on a firearms charge, and convicted on one count of knowingly possessing a stolen television set. He was sentenced to a three-year prison term.
II.
A. Denial of the Motion to Suppress
On appeal, Welsh again argues that his statements should have been suppressed because they were given involuntarily. His argument is, in substance, that the fact that he was handcuffed for most of the time the search was conducted, combined with the presence of ten armed officers and Agent Lee’s statements about possible adverse consequences for Rosa Jones, rendered his statements involuntary. “In resolving this issue, we must consider all the relevant facts and circumstances of record to determine whether [the appellant] made the decision to confess of his own free will or was coerced into confession by police actions.” Montes v. Jenkins, 626 F.2d 584 (7th Cir.1980).
We agree with the district court that the appellant’s statements were not the result of improper police coercion. The district court found that, while the officers and agents were armed, their guns were put away as soon as they assured themselves that the apartment was secure. The appellant had been informed of his Miranda rights when he decided to make the statements to Agent Lee. The record supports the district court’s finding that the appellant was not subjected to improper physical force or threats. There was no testimony that indicated the appellant was extensively questioned during the search. Finally, it is by no means clear from the record what, if anything, the appellant was told about possible adverse consequences for Rosa Jones. Assuming, arguendo, that Lee did make the statements attributed to him by the appellant, the fact that it “looked awfully bad for Rose” must already have been independently apparent to the appellant. The stolen television was found in an apartment leased by Rosa Jones, who was present during the search. While accepting the appellant’s concern for Jones as sincere, we believe his argument that this concern amounted to coercion “is founded upon a misconceived identity between those choices which are physically or psychologically coerced and those which are merely difficult.” United States v. Mullens, 586 F.2d 997, 1000 (2d Cir.1976). As the Mullens court noted, “[N]o federal court has yet held that a confession is involuntary solely on the ground that it was prompted by the defendant’s desire to protect a relative from the rigors of arrest, interrogation and possible confinement.” Id. We believe the district court correctly found that the appellant’s statements were given voluntarily.
For the first time on appeal, the appellant claims that his statements were the product of improper police interrogation in violation of Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). He cites Rhode Island v. Innis, 446 U.S. 291, 100 S.Ct. 1682, 64 L.Ed.2d 297 (1980) for the proposition that, once a defendant in custody has invoked his Miranda rights, the police must refrain, not only from express questioning, but also from “any words or actions ... (other than those normally attendant to arrest and custody) that the police should know are reasonably likely to elicit an incriminating response from the suspect.” Id. at 301,100 S.Ct. at 1689 (footnotes omitted). The appellant maintains that Agent Lee’s alleged comments concerning Rosa Jones constituted improper interrogation under the Innis standard.
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9086446-6961 | ORDER
RAINEY, District Judge.
Pending before the Court is Defendant’s Partial Motion to Dismiss and Motion to Strike. (Dkt.# 5). Also pending is Plaintiffs request for leave to file a Second Amended Complaint. (Dkt.# 6, ¶ 33). After considering the motions, the parties’ arguments and the applicable law, the Court is of the opinion that Defendant’s motions should be denied, and Plaintiffs request should be granted.
Factual and Procedural Background
Plaintiff Frank C. Laurence (“Laurence”) was discharged from his position as a salesperson by Defendant Atzenhoffer Chevrolet (“Atzenhoffer”) on or about June 1, 2002. At the time of his discharge, Laurence was 62 years old and had been employed at Atzenhoffer for over ten years. On April 17, 2003, Laurence filed suit against Atzenhoffer alleging that he was illegally discharged because of his age, and that he was illegally discharged for refusing to commit an illegal act. In its answer, Atzenhoffer claims that Laurence was discharged for insubordination. Included in Atzenhoffer’s answer is a motion to dismiss Laurence’s claim that he was fired for failing to perform an illegal act and a motion to strike all references to that claim from the pleadings. Included in his response to Atzenhoffer’s answer, Laurence requested that the Court grant him leave to amend his complaint for the purpose of adding a cause of action for race discrimination.
Discussion
1. Defendant’s Motion to Dismiss Plaintiffs Sabine Pilot Claim
A. Whether Laurence Has Alleged that He Was Asked to Perform an Act With Criminal Penalties
In Laurence’s first amended complaint, he claims that his supervisor at Atzenhoffer “advised him” to misrepresent the trade-in value of automobiles to consumers and that he was “criticized” by his supervisors for not making misrepresentations. Laurence further alleges that he was discharged for his refusal to make such representations. Laurence argues that performing the requested acts would have been a violation of Texas Penal Code § 32.00 et seq. Therefore, firing him for refusing to perform the acts would be in violation of the Supreme Court of Texas’s holding in Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex.1985). See id. at 735 (stating, ‘We now hold that public policy, as expressed in the laws of this state and the United States which carry criminal penalties, requires a very narrow exception to the employment-at-will doctrine .... ” That narrow exception covers only the discharge of an employee for the sole reason that the employee refused to perform an illegal act.). Atzenhoffer claims that the misrepresentation of a ve- hide’s trade-in value to consumers does not constitute an illegal act, and asks the Court to dismiss Laurence’s Sabine Pilot claim.
Although no Texas cases have been published on this specific issue, the Court finds that the misrepresentations as alleged would violate Texas Penal Code § 32.42(b). Therefore, Laurence has raised a valid Sabine Pilot claim against Atzenhoffer.
B. Whether Laurence May Bring Both a Sabine Pilot Claim and an ADEA Claim in the Same Complaint
Atzenhoffer next contends that Laurence’s inclusion of a claim of age discrimination precludes Laurence’s ability to bring a claim under Sabine Pilot. The Court disagrees. Atzenhoffer correctly states that a plaintiff must allege that his refusal to commit an illegal act was the sole cause of his termination in order to state a claim under Sabine Pilot. Thus, it appears inconsistent to allow a plaintiff to plead both a Sabine Pilot claim and an alternative theory of wrongful discharge, such as age discrimination. However, Federal Rule of Civil Procedure 8 provides that “a party may ... state as many separate claims or defenses as the party has regardless of consistency.” Fed.R.Civ.P. 8(e)(2). Although parties are barred from recovering damages based on mutually exclusive theories, see Robertson v. Bell Helicopter Textron, 32 F.3d 948, 952-53 (5th Cir.1994) (affirming a district court’s dismissal of a plaintiffs Sabine Pilot claim after the plaintiff received a judgment in his favor on his retaliation claim), parties can properly plead alternative, inconsistent theories of liability and can properly argue alternative claims to the jury. See Vasquez v. Bridgestone/Firestone, Inc., 325 F.3d 665, 674 (5th Cir.2003); Fredonia Broadcasting Corp. v. RCA Corp., 481 F.2d 781, 801 (5th Cir.1973), overruled on other grounds in Valdes v. Leisure Resource Group, Inc., 810 F.2d 1345, 1350 n. 3 (5th Cir.1987); see also Scott v. District of Columbia, 101 F.3d 748, 753 (D.C.Cir.1996) (citing Fredonia for the proposition that a party can argue mutually inconsistent theories of liability to a jury). Until an action has actually reached the point of entering a judgment, Rule 8 allows a plaintiff to explore alternative, mutually exclusive theories. Therefore, while Laurence will only be able to succeed on one of his inconsistent theories of liability, his Sabine Pilot claim is not invalidated by the assertion of any inconsistent claims within the same pleading.
Accordingly, Atzenhoffer’s motion to dismiss Laurence’s Sabine Pilot claim at this point in the litigation on the grounds that a Sabine Pilot claim and an age discrimination claim are mutually exclusive is denied.
2. Motion to Strike the Allegations in Paragraphs 13 and 17
Atzenhoffer also asks the Court to strike the allegations in paragraphs 13 and 17 from Plaintiffs complaint because paragraph 13 merely states that Laurence was criticized for his refusal to misrepresent values and paragraph 17 states that Laurence was discharged for the same behavior. Atzenhoffer believes that these two statements are inconsistent and should be stricken for their inconsistency. The Court does not find it inconsistent to plead that an employee was criticized for the same behavior for which he was ultimately terminated. The two statements are not inherently mutually exclusive. Therefore, the Court declines to strike the allegations as inconsistent.
Atzenhoffer also argues that since it believes the entire Sabine Pilot claim should be dismissed, the allegations in paragraphs 13 and 17 should be stricken as unrelated to any of the non-Sabine Pilot claims. Because this Court has found that Laurence’s Sabine Pilot claim can go forward, the fact that the allegations do not relate to Laurence’s other claims is immaterial. Accordingly, Atzenhoffer’s motion to strike these allegations is denied.
3. Plaintiff’s Request for Leave to File a Second Amended Complaint
Laurence seeks to add a claim of race discrimination against Atzenhoffer in violation of 42 U.S.C. § 1981. Atzenhoffer argues that Laurence’s request should be denied because Laurence has not exhausted what Atzenhoffer believes to be mandatory administrative remedies in order to have a valid claim for race-based employment discrimination. Atzenhoffer also alleges that such administrative remedies are now time-barred.
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3075337-17625 | OPINION
FOX, District Judge.
Background and facts.
This action is brought pursuant to Section 205(g) of the Social Security Act, 42 U.S.C. § 405(g). On January 17, 1968, this court remanded the case to the defendant in order to acquire additional evidence. Hearing Examiner, Milton C. Ferguson, recommended that the claimant was entitled to a period of disability beginning June 2, 1957, and to disability insurance benefits. However, on November 8, 1968, the Appeals Council rejected this recommendation and held that the claimant was not entitled to a period of disability and disability insurance benefits.
The fifteen page opinion of the Hearing Examiner is summarized as follows:
The Examiner’s review of the claimant’s earning record established that she last met the earnings requirement for entitlement to disability benefits on June 30, 1961. In order for the claimant to be eligible for disability benefits, the disability must have had its onset at a time when she met this earning requirement, on or before June 30, 1961.
The precipitating accident occurred March 8, 1957, at Bagozzi’s Chop House in Detroit. The petitioner fell, injuring her left arm, side and cervical vertebrae. She was initially confined to a bed for three and one-half weeks. She then managed to return to work for about two months, but because of increased pain, again left work in June of 1957. Since then she has not held any kind of gainful employment. Her testimony also discloses that her pain and discomfort disable her to the extent that she can do little or no housework and has difficulty with many other normal activities.
After receiving concurring lay testimony from the claimant’s brother and husband, the Hearing Examiner restated the medical evidence that was available. She has been treated for this disability by numerous physicians with medication, heat, diathermy and osteopathic adjustments. These doctors have over the years given diverse diagnoses and opinions of her condition. Some report that she has chronic dorsal fibromyositis, or traumatic arthritis, or derangement of the spinal vertebrae. One doctor has changed his diagnosis from torn ligaments to generalized neuritis to osteoporosis to myelitis. Even though these diagnoses have been diverse, they have with but one exception found some physical impairment.
The Trial Examiner also recounted the testimony of two psychiatrists. Both found that the claimant possessed a mental disorder, but only one of them concluded that it disabled the plaintiff.
The Hearing Examiner reached the conclusion that the claimant was entitled to disability benefits under this statute. He found support for his position in the fact that only one doctor had concluded that the claimant had no physical disability. Moreover, this particular doctor examined the claimant only once, and that was in June 1958, over three years before the claimant last met the special earnings requirement for entitlement to disability insurance benefits under the Act. The other doctors never did agree on the exact nature of the claimant’s disability, but the Hearing Examiner felt that there was ample medical testimony to support the uncontradicted lay testimony that the claimant is unable to work because of the constant pain she had endured since 1957.
The Hearing Examiner’s recommendation that the claimant was entitled to a period of disability insurance benefits was not adopted by the Appeals Council. Instead the Appeals Council concluded that the medical history of the claimant prior to June 30, 1961, showed “that evidence of any significant physical or organic impairment” was “meager.” The Appeals Council also recognized that pain may be an important factor in causing functional loss. Since pain by its very nature is hard to evaluate and since there was no medical evidence of abnormal findings which may have indicated severe pain, the Appeals Council concluded that the claimant’s subjective complaints were all out of proportion with the clinical and laboratory findings that have been reported. Thus, the Appeals Council concluded that “the claimant had only a slight physical impairment which would not have prevented her from engaging in her former work as a waitress” before June 30,1961.
The Hearing Examiner’s conclusion that the claimant was psychologically impaired was also rejected by the Appeals Council. Though there was testimony and medical evidence to the effect that the claimant was presently inflicted with a severe psychiatric disability, the Appeals Council concluded that no medical evidence or lay testimony established that this psychiatric impairment existed on or before June 30,1961.
Issue.
The only issue before the court is whether or not the decision of the Secretary, adverse to the claimant, is supported by substantial evidence in the record as a whole.
The Appeals Council failed to find that the plaintiff had a psychological disability within the meaning of the Social Security Act. The evidence showed that one neuropsychiatrist, Dr. Adolf Dasler, specifically found the claimant to be suffering from two psychiatric illnesses and then concluded: “I am of the firm belief that she is now incapacitated for any work and probably has been since June 4, 1957.” Another psychiatrist, Dr. Kenneth Nickel, also examined the claimant. Though he observed the same characteristics that Dr. Dasler did, and found ample evidence that the claimant is possessed of a personality disorder, personality trait disturbance and passive-aggressive personality, he concluded that she was not mentally disabled.
This conflict in expert testimony, however, is sufficient for one to reasonably draw the inference that the claimant did not have a mental disability.
Even if this court discounts Dr. Nickel’s testimony because of his social philosophy, the fact that Dr. Dasler did not examine the claimant until 1968, permits the Secretary to reasonably infer that the claimant has not proven that she was psychologically disabled on or before June 30, 1961. This is particularly true in light of two additional facts.
First, it is clear that the claimant has the burden of proving that a disability existed when she was last covered by the Act. Section 223(d) (42 U.S.C. § 423(d)) provides:
“(5) An individual shall not be considered to be under a disability unless he furnishes such medical and other evidence of the existence thereof as the Secretary may require.”
Secondly, almost all of the evidence indicating that the claimant is highly nervous and has a mental disorder only relates back to 1964-1965, when she be gan to prosecute this claim for disability-insurance. The Secretary could reasonably have inferred from these facts that the claimant was not mentally disabled on or before June 30, 1961. Thus, this aspect of the Secretary’s decision is supported by substantial evidence and is affirmed by this court.
The Secretary also concluded that the claimant was not physically disabled on or before June 30, 1961. There is no dispute to the testimony that the claimant had worked almost continually from 1937 to the time of her accident in 1957, and that she has not worked since June of that year. Uncontradicted evidence also shows that the claimant has not been able to continue to do household chores or other normal activities. The reason given for this marked decrease in activity is the pain and discomfort the claimant suffers as a result of the 1957 fall.
Since an individual’s pain must be considered by the Secretary in determining whether the individual is disabled, Sayers v. Gardner, 380 F.2d 940, 948, 23 A.L.R.3d 1014 (6th Cir. 1967), the Secretary’s decision was in effect holding that the claimant’s pain was insufficient to prevent her from engaging in her former work. More specifically, the Appeals Council stated that “her subjective complaints are all out of proportion to the clinical and laboratory findings that have been reported.” (Tr. p. 8.)
The Secretary seems to rely on a regulation promulgated under the 1967 Amendments to the Social Security Act, as the basis for discounting the claimant’s testimony. (20 C.F.R. § 404.-15026).
“ * * * Medical considerations alone can justify a finding that the individual is not under a disability where the only impairment is a slight neurosis, slight impairment of sight or hearing, or other slight abnormality or combination of slight abnormalities.” Reg. 4. Sub Part P, § 404.-1502(a).
The relevant portions of 1967 Amendments provide that:
“A ‘physical or mental impairment’ is an • impairment that results from anatomical, physiological, or psychological abnormalities which are demonstrable by medically acceptable clinical and laboratory diagnostic techniques.” § 223 of the Social Security Act (42 U.S.C. §423).
The effect of the above quoted regulations is to permit the Secretary not only to discount but even to ignore the claimant’s own testimony as to her condition if medical evidence shows only a “slight abnormality, or slight abnormalities.”
Even if this court assumes that this regulation is valid, it should be construed narrowly in light of the over-all purpose of the Social Security Act. As stated by Senior Circuit Judge Mc-Allister in Sayers v. Gardner, supra, at 942:
“[1] Because of the repeated necessity of reversing the Secretary in these cases, we should go back to the origins of the statute and consider first things first. The Act was adopted pursuant to a public policy unknown to the common law, designed for the protection of society, and enacted to alleviate the burdens which rest on large numbers of the population because of the insecurities of modern life, particularly those accompanying old age, unemployment, and disability, through the establishment in advance of a provident fund for the needy worker, out of which he will be paid disability benefits, annuities, and compensation; and there is no question that the Social Security Act is constitutional.
* * * # *
“The Social Security Act brought with it, among other provisions, the right to disability benefits for workers who have become disabled from doing the work — usually the hard manual work — that they have done during their’ lives.”
In Miracle v. Celebrezze, 351 F.2d 361 (6th Cir. 1965), the court quoted Judge Brown in Butler v. Flemming, 288 F.2d 591, 595 (5th Cir. 1961):
“If, as suggested in the Government’s brief, Hallard v. Fleming, D.C. W.D.Ark.1958, 167 F.Supp. 205, and Judge Learned Hand’s statements in Theberge v. United States, 2 Cir., 1937, 87 F.2d 697, 698, concerning a different statute enacted for a different policy in a different era, are to stand for the proposition that pain, no matter how severe, is not disabling unless work does ‘more than hurt’ so that it ‘substantially aggravate [s] his malady,’ 87 F.2d at page 698, we regard them as contrary to the standard announced in Booker and Kerner and many others like them. Perhaps it is true that history teaches that ‘A man may have to endure discomfort or pain and not be totally disabled; much of the best work of life goes on under such disabilities * * But the purpose of much social security legislation is to ameliorate some of these rigors that life imposes. Congress has in effect stated that if a person is unable except under great pain to engage in any substantial gainful activity in which he might be employable, taking into consideration his age, training, work experience and physical and mental capacities, he ■ shall be deemed to be disabled for the purposes of this Act.” 351 F.2d at 373-374.
Finally, in Combs v. Gardner, 382 F. 2d 949 (6th Cir. 1967), the court stated:
“It has been noted that the Social Security Act is remedial in nature, and that a liberal construction in favor of disability, if such is reasonably made out, is therefore required.” 382 F.2d at 956.
Having the purpose and goal of the Social Security Act in mind, the medical evidence clearly indicates that the claimant was suffering from more than a “slight abnormality or combination of slight abnormalities” within the meaning of this regulation.
As was noted above, the claimant has seen many doctors over the past thirteen years, some for treatment and others for single examinations. In the period prior to June 30, 1961, she saw her brother, Dr. John Pechacek, D.O., most frequently. She visited him regularly from the date of the accident to 1962. His report states that his sister had developed traumatic arthritis due to the accident in 1957.
The other doctors who examined the claimant prior to 1961 saw her at least three years prior to the last date she qualified under the Act. Of these only Dr. MacMillan, M.D., who saw the claimant on June 9, 1968, concluded that there was no physiological disability. Dr. Maguire, M.D., saw the claimant on November 14, 1957, and reported that “there was evidence of minimal degenerative arthritis of the mid-dorsal spine.” Dr. Heleotis, D.O., saw the claimant on July 11, 1958, and diagnosed her condition as “chronic dorsal fibromyositis.” The only other doctor who examined the claimant close to the June 30, 1961 date was Dr. Emery, D.O., who began treating her on August 1, 1962, and continued to see her until January 1967. During this period this doctor treated her seventy-one times for a condition variously diagnosed as “torn ligaments shoulder girdle and neck;” “generalized neuritis;” “1. Osteoporosis. 2. Muscular tension neck, shoulder, upper dorsal. 3. Nerves;” “1. Myalitis along the muscles of spine. 2 Nerves;” and “Chronic myelitis.”
In light of the purpose of the Act, the claimant’s condition up to and including June 30, 1961, as described by the above five medical reports, should not be considered a “slight abnormality.” Dr. Pechacek and Dr. Emery were the only doctors to see her more than once. Also, they were the only ones to see her near June 30, 1961. Both considered her disability to be so serious that they continued to see her and apply corrective physical therapy, manipulation, heat, diather my, ultrasound, anti-rheumatic and arthritis injections and pills. This medical testimony indicates that the claimant’s condition cannot be described as a “slight abnormality.” Thus, it would follow that the Secretary improperly relied upon the above quoted regulation as his basis for discounting the claimant's uncontradicted testimony that she has suffered great pain and discomfort since 1957.
Looking then at the whole record, the Secretary’s conclusion that the claimant was not physically disabled on or before June 30, 1961, is not supported by substantial evidence. When the above recited medical testimony is coupled with the testimony of the other four doctors who examined her between 1963 and 1965 and the uncontradicted lay evidence of the great pain the claimant suffered, it is unreasonable for the Secretary to have inferred that she was not disabled on or before June 30,1961.
Each of these four doctors diagnosed varying degrees of physical impairment in the spinal area. She was seen and treated by A. W. Carlson, D.C. (Ex. 21) from December 14, 1963 to October 29, 1964 for a condition diagnosed as “misaligned vertebrae causing pressure or strain on spinal nerves with resulting pain and muscle spasms.” She then was seen and treated by William A. Firth, D.C., from October 30, 1964 to November 24, 1964 (Ex. 22) for a condition diagnosed as “Subluxation of vertebrae upper and lower dorsal region and lumbar region of spine.” She was seen on September 13, 1965 by Orthopedic Surgeon Alfred Swanson (Ex. 26) and his report indicates that “she has limitation of motion in the cervical spine in both flexion-extension rotation” and that x-rays of the cervical spine show “some osteo-arthritic changes especially severe in the C6-7 area with bridging and some ensmalling of the vertetral foramina in this area.” She was seen on June 18, 1965 by Clair E. Basinger, M.D. (Ex. 29), whose full-time specialty is Thoracic Surgery and Cardiovascular Disease. Dr. Basinger reported that he “felt this patient probably could not be gainfully employed unless orthopedic treatment or correction could be of benefit to her.”
The lay testimony clearly indicates that the claimant has endured great discomfort over the last thirteen years, and that this condition has prevented her from working or leading a normal life. Moreover, the claimant’s very active work record for twenty years before her accident and the motivation to lead an active life to which it attests substantiate the evidence that she is unable to work due to her physical disability and not any bad faith desire to receive insurance benefits.
From the evidence presented in this case, the Secretary’s decision is not supported by substantial evidence. Almost the entire record supports the Hearing Examiner’s conclusion — the claimant was disabled, as defined by the Act — and recommendation — the claimant was entitled to a period of disability and to disability insurance benefits.
Considering, then, the totality of the evidence, the Appeal Council’s findings are insubstantial under the mandate of liberal construction, fostered by the humanitarian purpose and public policy of the Act.
. He did not state any conclusion on whether he thought the claimant was physically disabled or employable.
. Compare Dr. Nickel’s testimony in Wilk v. Finch, C.A. 5951 (Tr. p. 92) with Dr. Nickel’s instant conclusions .(Tr. pp. 185-186).
. In Teague v. Gardner, 281 F.Supp. 43, 48 (E.D.Tenn.1968), Chief Judge Taylor stated that the testimony of a treating physician “is entitled to more consideration than the testimony of doctors who merely examine.”
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130002-8847 | OAKES, Circuit Judge:
Appellants, American citizens and residents, were indicted in Canada in 1972 for conspiracy to import, conspiracy to export and conspiracy to traffic in Cannabis Resin (hashish). Appellants were brought to trial in the Saint John County Court where, after presentation of all the evidence, the case was dismissed on a finding by the judge that there was a variance between the offenses charged in the indictment and the proof adduced at trial: while three separate conspiracies were set forth in the indictment, a single conspiracy was proved at trial. Thereupon appellants returned home to the United States.
Pursuant to Canadian law, the Crown appealed the dismissal of the case and the decision of the lower court was reversed. In accordance with Canadian law, the appellate court entered a judgment of conviction for conspiracy to import hashish against the appellants, in absentia. The conviction carries with it a mandatory seven year sentence. Extradition proceedings were commenced after appellants were arrested in the Southern District of New York.
Appellants claim that the applicable treaty does not provide for their extradition; that, in view of the Canadian procedures underlying their conviction, extradition would result in a violation of the guarantee to them of due process of law under the United States Constitution; and that there is insufficient evi dence to find probable cause of their guilt. The case comes to us by way of an appeal from orders of the United States District Court for the Southern District of New York, William C. Conner, Judge, denying petitions for a writ of habeas corpus and adopting the opinion of Gerard L. Goettel, United States Magistrate, holding that there were “no valid grounds for refusing the petition for extradition to the Dominion of Canada.” We agree with Magistrate Goettel and accordingly affirm Judge Conner’s orders.
There is need for little discussion of appellants’ treaty and sufficiency points. The appellants were convicted by the Supreme Court of New Brunswick, Appeal Division, of conspiring to import hashish, a violation of § 423(l)(d) of the Canadian Criminal Code.
Under the provisions of the Webster-Ashburton Treaty of 1842, Art. X, 8 Stat. 576, the United States is required to deliver to justice all persons found in the United States who were convicted of a crime committed within the jurisdiction of Canada.
provided that this shall only be done upon such evidence of criminality as, according to the laws of the place where the fugitive or person so charged shall be found would justify his apprehension and commitment for trial, if the crime or offence had there been committed . . .
Appellants argue that if they had been acquitted in a New York state or federal court for the offenses charged in the Canadian indictment, the double jeopardy clauses of the New York state constitution and the federal constitution would have barred the Government’s appeal of the acquittal. From this, appellants argue, in effect, that the treaty confers upon them the extraterritorial protection of these double jeopardy clauses and that extradition is improper.
Appellants’ position, to paraphrase the language of the treaty, is that a full application of the laws of* the place where the fugitives were found would not justify their apprehension and commitment for trial if the crime had there been committed. That is to say, in New York there could have been no conviction after an acquittal and for that reason no grounds for their apprehension. We decline to adopt this rather novel reading of the treaty. We note in passing our agreement with the appellants that, even though no final judgment of acquittal had been entered, there would have been double jeopardy in the United States, United States v. Sisson, 399 U.S. 267, 302-307, 90 S.Ct. 2117, 26 L.Ed.2d 608 (1970); Fong Foo v. United States, 369 U.S. 141, 82 S.Ct. 671, 7 L.Ed.2d 629 (1962), a rule of federal constitutional law applicable to the states under Benton v. Maryland, 395 U.S. 784, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1969), overruling Palko v. Connecticut, 302 U.S. 319, 58 S.Ct. 149, 82 L.Ed. 288 (1937). See generally Note, Government Appeals of “Dismissals” in Criminal Cases, 87 Harv. L.Rev. 1822 (1974).
Their argument, nevertheless, does not take away from the proposition that appellants were convicted under Canadian law, that under existing federal law conspiracy to import hashish is criminal, and that the record evidences sufficient “evidence of criminality” to have justified a trial of the, case. This is all that the treaty requires. Since appellants have not served their sentences, they are extraditable under the Extradition Convention between the United States and Great Britain, Art. VII, 26 Stat. 1508 (1899), and 18 U.S.C. § 3184.
The major point of the appeal, that appellants would be denied due process by extradition, is grounded on not only their claim of conviction in absentia but on the argument that they were never permitted to put in a defense. While ordinarily the courts of the extraditing country will not “inquire into the [internal legal] procedures which await the relator upon extradition,” Gallina v. Fraser, 278 F.2d 77, 78 (2d Cir.), cert. denied, 364 U.S. 851, 81 S.Ct. 97, 5 L.Ed.2d 74 (1960) (claim of Italian trial in absentia), leaving this to executive discretion, of. Sweeney v. Woodall, 344 U.S. 86, 73 S.Ct. 139, 97 L.Ed. 114 (1952), our court has been able to imagine, as we can, situations where the relator on extradition “would be subject to procedures or punishment so antipathetic to a federal court’s sense of decency as to require reexamination” of this principle. Inability to assert a defense might be one such situation. But here there is no indication that, despite representation by counsel, appellants had any defense to make, other than their legal one challenging the indictment. Indeed, it affirmatively appears that Canadian counsel each expressly waived calling any witnesses and rested solely on the legal argument, and that the trial court’s ruling was made after close of all the evidence. Appellants did not appeal the decision of the Appeal Division on this or any other ground so that a conviction against them is outstanding. Our “sense of decency” is not shocked either by this Canadian conviction or by the tough, apparently mandatory sentence of seven years; the importation of drugs across foreign border lines is a serious offense, whatever arguments can be made for “decriminalization” in this country.
Appellants’ claim of conviction in absentia is a technical one; they were present for their trial and they were represented by counsel at the trial level who successfully obtained exclusion of their confessions and an initial ruling dismissing the indictment. Because Canada, as many of our states constitutionally used to do, Palko v. Connecticut, 302 U.S. at 321 n. 1, 58 S.Ct. 149, still permits appeals by the prosecution from adverse rulings of law, with the further fillip that the appellate court may enter a conviction in a proper case, does not mean that the appellants have been shockingly denied any right under American law to be present at all stages of the proceedings. Appellants, moreover, were not tried in absentia. Instead of awaiting the final outcome of the criminal proceeding against them, they left Canada voluntarily after the original dismissal of charges.
The argument raised for the first time on this appeal that the evidence against appellants was insufficient is frivolous, especially in the light of our limited scope of review. Shapiro v. Ferrandina, 2 Cir., 478 F.2d 894, 901, cert. dismissed, 414 U.S. 884, 94 S.Ct. 204, 38 L.Ed.2d 133 (1973). The habeas judge was required to determine whether there was any competent evidence warranting the finding that there was reasonable ground to believe the appellants guilty. There was evidence that appellants acted as lookouts for their coconspirator, Cormier, who was ultimately apprehended with the hashish in his possession. In addition, on appellants’ arrest, they were in possession of a road map suitably marked to show a route crossing the Canadian border at a point where customs officers would not be on duty late at night. The evidence thus provided reasonable ground to believe the appellants guilty.
Judgment affirmed.
. Shapiro v. Ferrandina, 2 Cir., 478 F.2d 894, 901 & n. 4, cert. dismissed, 414 U.S. 884, 94 S.Ct. 204, 38 L.Ed.2d 133 (1973), states that the phrase “the laws of the place where the person sought shall be found,” contained in the extraditing treaty, refers to the laws of the state where an arrest occurs rather than to the laws of the United States. In the present case, New York does not have a statute which would exactly parallel the crime here charged: conspiracy to import hashish.
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11688000-15530 | MEMORANDUM
DALZELL, District Judge.
Plaintiff Cheyenne Sales, Limited, a Jamaica business, seeks to enjoin Western Union from terminating, on one-day’s notice, its “Quick Collect” money transfer service. The parties have filed cross-motions for summary judgment. For the reasons stated below, we will grant defendant’s motion and enter judgment against plaintiff.
I. Factual Background
The parties agree on the following facts. Cheyenne Sales, Ltd. (“Cheyenne”) contracted with Western Union Financial Services International (“Western Union”) to set up a “Quick Collect” account, which is “designed to assist commercial businéss entities in receiving direct payments from their various account debtors.” Joint Stip. at ¶3. In both applications for the service, Cheyenne represented that it was a garment and haberdasher wholesaler, id. at ex. A, at 3-4, and also estimated that it would conduct 500-999 Quick Collect transactions per month. Id. at ex. A, at 1, 5. The service contract between the parties provided that it could be “terminated by either party on thirty days’ written notice.” Joint Stip. at ex. A, at 7.
Cheyenne now admits that “its only business was receiving money through the Quick Pay Service,” id. at ¶ 8; see also Mem. Supp. Prelim. Inj. at 2, presumably for distribution to customers such as English Sports Betting, with whom Cheyenne admits it shares a “symbiotic relationship.” Id.; see also Joint Stip. at ¶ 14. Between April and November, 1997, Cheyenne received in excess of 18,200 Quick Collect transactions from all over the United States — an average of more than 2,275 per month — including more than 2,000 transactions from the state of Florida. Id. at ¶ 15.
The Florida Attorney General, concerned that citizens of that state were using Western Union’s service to transmit funds for illegal offshore gambling, see Fla. Stat. §§ 849.14, 849.25; see also 18 U.S.C. § 1084, “contacted Western Union sometime prior to December 22, 1997, and requested that Western Union voluntarily terminate a number of its customers, including Cheyenne.” Joint Stip. at ¶ 9. On December 22, 1997, Western Union entered into an “Agreement of Voluntary Cooperation” with the state of Florida whereby, inter alia, Western Union “agree[d] to implement procedures designed to prevent funds from being transferred from Florida through Western Union’s Quick Pay service to” a list of Western Union Quick Pay subscribers that Florida provided. Joint Stip. at ex. C, at 3. That same day, “Western Union issued Cheyenne a letter informing Cheyenne of the Agreement with the Florida Attorney General, and notifying Cheyenne that effective December 23, 1997, Western Union no longer would permit payments to be sent from persons within the United States to Cheyenne via Western Union’s Quick Pay service.” Def.’s Br. Supp. Summ. J. at 7 (citing Joint Stip. at ¶ 11).
On December 29, 1997, believing Western to be acting in an “arbitrary and capacious manner,” Compl. at ¶ 12, Cheyenne filed this action, seeking first to preliminarily enjoin Western Union from terminating Cheyenne’s Quick Pay account “during the penance of this action.” Id. at 4, at ¶ 1. On December 30, 1997, Judge Eduardo C. Ro-breno, sitting as Emergency Judge in our stead, denied plaintiff a temporary restraining order. Cheyenne now seeks a permanent injunction reversing Western Union’s termination of its service, and “such other and further relief-as the Court deems proper.” Id. at 5, at ¶4. Since we conclude otherwise, we will enter judgment in defendant’s favor.
II. Legal Analysis
“ ‘In deciding whether a permanent injunction should be issued, the court must deter mine if the plaintiff has actually succeeded on the merits (i.e. met its burden of proof). If so, the court must then consider the appropriate remedy.’ ” ACLU v. Black Horse Pike Reg. Bd. of Educ., 84 F.3d 1471, 1477 n. 3 (3d Cir.1996)(quoting CIBA-GEIGY Corp. v. Bolar Pharm. Co., Inc., 747 F.2d 844, 850 (3d Cir.1984)). In addition, other district courts in our District have also considered whether “the court’s exercise of equity jurisdiction is proper,” Ruscavage v. Zuratt, 821 F.Supp. 1078, 1081 (E.D.Pa.1993); see also Bess v. Correctional Officers c/o Sgt. Brent Post, No. Civ. A. 96-6315, 1997 WL 509817, at *1 (E.D.Pa. Aug. 14, 1997)(citing Rusca-vage,) a prerequisite we also think logical and therefore adopt.
A. Equity Jurisdiction and . Choice of Remedy
We have equity jurisdiction over this action if there is no adequate remedy at law, there is actual threatened injury, and no equitable defense precludes our exercise of jurisdiction. Ruscavage, 821 F.Supp. at 1081.
Western Union argues that Cheyenne has an adequate remedy at law because (1) Cheyenne has alleged that it is losing $1,500 a day due to termination of the Quick Collect service, see Joint Stip. at ¶ 16; and (2) the contract between the parties that governs the Quick Collect service provides that it “can be terminated by either party on thirty days’ written notice.” Id. at ex. A, at 7, at ¶ 9. Thus, Western Union argues that the damages, if any, that Cheyenne may recover are $1,500 for each day Western Union failed to give notice pursuant to the contract, or $43,500.
Cheyenne’s contract remedy is foreclosed, however, by the terms of 18 U.S.C. § 1084(d). Under the terms of that statute, Cheyenne’s sole possible remedy in this action is for restoration of the Quick Collect service:
When any common carrier, subject to the jurisdiction of the Federal Communications Commission, is notified in writing by a Federal, State, or local law enforcement agency, acting within its jurisdiction, that any facility furnished by it is being used or will be-used for the purpose of transmitting or receiving gambling information in interstate or foreign commerce in violation of Federal, State, or local law, it shall discontinue or refuse, the leasing, furnishing, or maintaining of such facility, after reasonable notice to the subscriber, but no damages, penalty or forfeiture, civil or criminal, shall be found against any common carrier for any act done in compliance with any notice received from a law enforcement agency. Nothing in this section shall be deemed to prejudice the right of any person affected thereby to secure an appropriate determination, as otherwise provided by law, in a Federal court or in a State or local tribunal or agency, that such facility should not be discontinued or removed, or should be restored.
Id. (emphasis added). The parties do not dispute that Western Union terminated Cheyenne’s Quick Collect service as a result of being contacted by the Florida Attorney General. Thus, Western Union’s actions are protected in toto from plaintiffs efforts to secure money damages for loss of the Quick Collect service. See Delaware Sports Serv. v. Diamond State Tel. Co., 241 F.Supp. 847, 851 n. 8 (D.Del.1965), aff'd mem., 355 F.2d 929 (3d Cir.)(per curiam), cert. denied, 385 U.S. 817, 87 S.Ct. 38, 17 L.Ed.2d 55 (1966)(pointing out that § 1084(d) “provides a means of forcing ... utilities to terminate service and at the same time removes the risk of a suit for damages from the utility”).
Section 1084(d) is not, however, a defense to equity jurisdiction. The last sentence of § 1084(d) preserves Cheyenne’s equitable right “to secure an appropriate determination, as otherwise provided by law, in a Federal court ... that such facility should not be discontinued or removed, or should be restored.” Id. The only question before us, then, is whether Cheyenne is entitled to equitable relief from termination of its service “as otherwise provided by law.” 18 U.S.C. § 1084(d).
Cheyenne seeks to invoke our equity jurisdiction by arguing that, in terminating its Quick Collect service, Western Union violated 47 U.S.C. § 202(a), which makes it unlawful for “any common carrier to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.” Id. Although Cheyenne cites only 47 U.S.C. § 202(a) as a basis for relief in this action, that statute itself provides no remedy — equitable or legal — for violation of its provisions. See id. We presume, therefore, that Cheyenne properly seeks to restore its Quick Collect service pursuant to 47 U.S.C. § 406, the statute that empowers courts “to issue a writ or writs of mandamus against [a carrier] commanding such carrier to furnish facilities for such communication or transmission to the party applying for the writ.” See, e.g., Palermo v. Bell Tel. Co. of Pa., 415 F.2d 298, 299 (3d Cir.1969)(per curiamfnoting that plaintiff relies on § 406 for its claim to injunctive relief for defendant’s violation of § 202(a)); Mical Communications, Inc. v. Sprint Telemedia, Inc., 1 F.3d 1031, 1035 (10th Cir.1993)(same).
Writs of mandamus were abolished in the District Courts by Fed.R.Civ.P. 81(b), but that Rule allows Cheyenne “to substitute a motion for an injunction for a prayer for mandamus, thus relieving the necessity of pleading in relator form-” MCI Communications Corp. v. American Tel. & Tel. Co., 369 F.Supp. 1004, 1025 (E.D.Pa.1973), vacated on other grounds, 496 F.2d 214 (3d Cir.1974) (citing McBride v. Western Union Tel. Co., 171 F.2d 1 (9th Cir.1948)). Thus, we find that we have equitable jurisdiction over this action, and that the sole possible remedy available to Cheyenne is that of restoration of Quick Collect service pursuant to 47 U.S.C. § 406, as reserved by 18 U.S.C. § 1084(d).
B. Success on the Merits
Although writs of mandamus have been abolished, the substantive rights of the parties are still governed by the principles that formerly applied in mandamus cases. See id. (citing Rines v. Com. of Pennsylvania, 285 F.Supp. 391 (E.D.Pa.1968)); see also Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d § 3134 at 474-75 (1997) (“The same principles that governed the former writ now govern attempts to secure similar relief by action or motion.”) Therefore, in order to merit injunctive relief against Western Union, Cheyenne must demonstrate that the defendant’s duties under the Act — in this case, § 202(a) — are “clear and unequivocal.” Mical, 1 F.3d at 1036; Bell Tel. Co. of Pa. v. F.C.C., 503 F.2d 1250, 1263 (3d Cir.1974), cert. denied sub nom. American Tel. and Tel. Co. v. F.C.C., 422 U.S. 1026, 95 S.Ct. 2620, 45 L.Ed.2d 684 (1975) (applying “clear and unequivocal” mandamus standard to § 406).
In canvassing the caselaw of our Circuit for guidance, we have discovered a helpful precedent that escaped the parties’ notice, Palermo v. Bell Tel. Co. of Pa., 415 F.2d 298 (3d Cir.1969)(per curiam), which presents a factual scenario remarkably similar to this one. In that case, the Palermos brought suit against their telephone company and the Philadelphia District Attorney under 47 U.S.C. § 406 and § 202(a), challenging the telephone company’s termination of its service after receipt of notice from the District Attorney that the service was being used in violation of banking and gambling laws of Pennsylvania. Our Court of Appeals, in affirming the District Court’s refusal to reinstate service, held that where (1) the telephone company was obligated to terminate service upon notification from the District Attorney that plaintiffs were using the telephone service in violation of the gambling laws of Pennsylvania, and (2) the telephone company acted reasonably in terminating the plaintiffs’ telephone service, plaintiffs had no cause of action under § 202(a). Thus, applying Palermo to this case, in order to show that it is entitled to court-ordered reinstatement of its service, Cheyenne must show that Western Union’s termination was (1) not required under the law, and (2) carried out unreasonably. Palermo, 415 F.2d at 298.
Cheyenne cannot clearly and unequivocally show that Western Union’s termination of its Quick Collect service was not required by law. Cheyenne appears to accept that, at a minimum, the Agreement of Voluntary Cooperation between Western Union and the Florida Attorney General constituted reasonable grounds for Western Union to terminate Cheyenne’s Quick Pay service as to transactions between it and the state of Florida. See Pl.’s Mot. Summ. J. at 8, 9. Although unclear from plaintiffs briefs, our best-and perhaps overly-eharitable-reading of Cheyenne’s argument is that Western Union unjustifiably and unreasonably terminated all Quick Collect service&emdash;and not just as to Florida&emdash;to Cheyenne in response to its agreement with the Florida Attorney General.
We disagree. “The right and duty of a telephone, telegraph, or other wire service company to refuse service used, or to be used, in furtherance of illegal gambling operations, has been generally recognized,” and is well-established. A.L. Schwartz, Annotation, Right or Duty to Refuse Telephone, Telegraph, or Other Wire Service in Aid of Illegal Gambling Operations, 30 A.L.R.3d 1143, 1151-52 (1970 & Supp.1997); see also 74 Am.Jur.2d Telecommunications § 58 (1974) (“Discontinuance or Refusal of Service to Persons Engaged in Illegal Activities; Bookies”). State and federal courts across the country have upheld a carrier’s termination of wire service upon notice from either a state or federal law enforcement official that a customer is using the service in furtherance of illegal gambling operations. See, e.g., Palermo, 415 F.2d 298; DiGiacomo v. Diamond State Tel. Co., 356 F.Supp. 1063 (D.Del.1973); Palma v. Powers, 295 F.Supp. 924, 940 (N.D.Ill.1969); Hamilton v. Western Union Tel. Co., 34 F.Supp. 928 (N.D.Ohio 1940); Schwartz, 30 A.L.R.3d at 1154-55 & Supp. at 517-18; 74 Am.Jur. § 58. Indeed, given that the federal government and other states across the country have passed laws (1) prohibiting gambling over telephone and wire services, and (2) allowing-and in some cases mandating-termination of service under these circumstances, see, e.g., Ohio Rev. Code Ann. § 2915.02 (Baldwin 1989); N.Y.Gen.Oblig. Law § 5-401 (McKinney 1989); see generally 74 Am.Jur. § 58 at n. 32, it is unsurprising that Western Union decided to terminate all service to Cheyenne. Moreover, we note that 18 U.S.C. § 1084(d) requires a carrier to “discontinue or refuse” service without limitation to a customer upon notice from a federal, state, or local law enforcement agency. Thus, the legality of Western Union’s action does not depend for its scope on the terms of the Agreement of Voluntary Cooperation with the Florida Attorney General. Western Union was legally and logically justified in terminating all Quick Collect service to Cheyenne.
Cheyenne also objects to the fact that it was not provided with fair notice of the termination of its Quick Collect service, and thus argues that Western Union’s actions were unreasonable. 18 U.S.C. § 1084 does by its plain terms require “reasonable notice to the subscriber.” Id. Failure to receive such reasonable notice, however, does not violate Cheyenne’s due process rights. See Hatteras v. Southwestern Bell Tel. Co., 774 F.2d 1341 (5th Cir.1985); Lopez v. New Jersey Bell Tel. Co., 51 N.J. 362, 240 A.2d 670 (1968); Taglianetti v. New England Tel. & Tel. Co., 81 R.I. 351, 103 A.2d 67 (1954). In light of Cheyenne’s (1) admitted involvement in gambling activities — an improper use of the Quick Collect system — and (2) the unqualified thirty-day termination in the contract between Cheyenne and Western Union, defendants’ defective notice does not provide clear and unequivocal grounds to restore Cheyenne’s Quick Collect service.
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832203-19829 | J. JOSEPH SMITH, Circuit Judge:
This is an appeal from conviction and sentence on trial to the jury in the United States District Court for the Eastern District of New York, Edward R. Neaher, Judge, of a school board official for solicitation and receipt “under color of official right” of a payment of $5,000 from a seller of school supplies, in violation of the Hobbs Act, 18 U.S.C. § 1951, and conspiracy to defraud the United States of federal funds granted to the school district, in violation of 18 U.S.C. § 371. We find no reversible error and affirm the judgment.
In 1973, while Wright was chairman of New York City Community School Board 23, Behavioral Research Laboratories, Inc. (“BRL”), a seller of educational systems and materials to schools, which had a contract with the board for the 1972 — 73 school year amounting to over $500,000, invited Wright to speak at a conference which it conducted. Wright received $5,500 for this appearance, $5,000 of which the government contended and the jury must have found was induced by Wright and paid by BRL to influence the decision of the board to purchase educational materials from BRL.
On appeal, Wright contends that the evidence was insufficient to show that the payment was solicited in order to influence his official action, that the government wrongfully refused to grant immunity to a witness, that the admission of an out-of-court statement deprived him of his right to confront the witnesses against him, that the prosecution was biased and that the government’s inflammatory summation deprived him of a fair trial. We find all of Wright’s contentions to be without merit and affirm for the reasons discussed below.
Wright argues that the evidence was not sufficient to support a conviction on either the Hobbs Act count or the conspiracy count. He claims that there was no proof that he demanded anything from BRL under color of official right. Rather, Wright insists that the evidence shows nothing more than a request by him for an increase in the honorarium that he was to be paid for his appearance at the BRL conference. He contends that such an innocent attempt to negotiate a fee to which he had a legal right cannot constitute a violation of the Hobbs Act. Likewise, Wright contends that the conspiracy conviction must be reversed because there was no proof of an agreement, express or implied, between Wright and BRL to defraud the United States.
We disagree with Wright’s characterization of the case against him and conclude that the evidence, viewed in the light most favorable to the government, Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942), was sufficient to support the jury’s verdict.
In late 1972 or early 1973, James Phipps, then the Divisional Marketing Director of BRL and responsible for sales in the Northeast region of the country, invited Wright to speak at a conference to be held by BRL on February 1 and 2, 1973 at a hotel in San Francisco. Wright accepted the invitation and delivered a forty-five minute address on February 2. The other speakers at the conference were the education editor of Newsweek magazine, the president of the American Federation of Teachers, the director of the Experimental School Program of the National Institute for Education and John Tunney, United States Senator from California..
Phipps received a telephone call from Wright on February 3, as a result of which they later engaged in a conversation in the lobby of the hotel. Phipps testified that Wright asked whether the honorarium he was to receive could be increased. During the same conversation, Wright referred to the expenditures that would be incurred in conducting a successful election campaign and mentioned that people in the district which he represented found it very difficult to raise funds. However, when Phipps was asked on the witness stand whether Wright asked “for anything with regard to the funds necessary to run a political campaign,” he responded, “Not specifically, no.”
Phipps subsequently conveyed the substance of his conversation with Wright to Bert Parker, BRL’s Vice President for Marketing. Allan Calvin, Chairman of the Board of BRL, testified that Parker then informed him that Wright had requested a $5,000 cash political contribution. As a result of his conversation with Parker, Calvin asked Phipps to request Herbert Corbin, president of Kanan, Corbin & Shupack (“KCS”), BRL’s public relations firm, to “generate the cash for the political contribution.” Corbin resisted the request, but after a conversation with Parker, he agreed that KCS would issue a $5,500 check to Wright if BRL would first issue a check for that amount payable to KCS.
Meanwhile, Roger Sullivan, the president of BRL, had approved four separate check request forms to pay the conference speakers. (Senator Tunney’s agent previously had been paid $2,500, of which the Senator was to receive $1,500.) One request form, in the amount of $700, was for the Newsweek education editor. The other three, including Wright’s, were each in the amount of $500. Four checks were drawn on BRL’s account at the United California Bank, but all were voided on February 12, before they could be delivered. On that same day, BRL issued a $5,500 check to KCS. The request for this check was not a printed form, but instead a handwritten page from the memo pad of Carl Peters, BRL’s Comptroller, containing the words “$5,500.00 Herb Corbin.” Three days later, Sullivan approved a printed check request form in the amount of $1,700 payable to KCS. This form included a handwritten list of the other three speakers and the same amounts as requested in the original individual forms. A check for $1,700 was issued to KCS, which in turn issued separate $500 and $700 checks to the three speakers.
On February 14, KCS issued a $5,500 check payable to Wright. Corbin gave this check to Phipps, who delivered it to Wright’s office. Phipps testified that he handed the check to Wright, who in return gave him a letter of intent which indicated that Wright’s school district was interested in renewing and expanding the program that it had purchased from BRL. Calvin and Parker were dissatisfied with this first letter and sought to obtain a stronger one. A second letter of intent bearing Wright’s signature and dated February 23 was subsequently delivered to BRL. Both of these letters violated a directive of the Chancellor of the Board of Education of the City of New York, which forbade the issuance of letters of intent without the Chancellor’s approval.
In August 1973, Community School Board 23 approved the purchase of an expanded program from BRL. The vote was five to four, with Wright and the other four board members who had run for election as part of his slate casting the votes in favor of the purchase. The funds used to purchase the program were provided by the federal government under Title I of the Elementary and Secondary Education Act of 1965.
This court in United States v. Trotta, 525 F.2d 1096, 1100 (2d Cir. 1975), cert. denied, 425 U.S. 971, 96 S.Ct. 2167, 48 L.Ed.2d 794 (1976), approved the Seventh Circuit’s description of the offense of extortion under color of official right as set forth in United States v. Braasch, 505 F.2d 139, 151 (7th Cir. 1974), cert. denied, 421 U.S. 910, 95 S.Ct. 1561, 43 L.Ed.2d 775 (1975):
The use of office to obtain payments is the crux of the statutory requirement of “under color of official right” . It matters not whether the public official induces payments to perform his duties or not to perform his duties . . . . So long as the motivation for payment focuses on the recipient’s office, the conduct falls within the ambit of 18 U.S.C. § 1951.
The trial judge here correctly instructed the jury that § 1951
would not bar the payment to, and receipt by defendant of an honorarium or speaking fee, unless you are satisfied beyond a reasonable doubt that the payment focused on his public office and ability to aid B.R.L. and the defendant knew that that was the reason the money was paid to him.
Appellant asserts that the evidence failed to establish that he demanded a cash political contribution. He argues that a strictly voluntary payment by BRL would not amount to extortion within the meaning of 18 U.S.C. § 1951, citing United States v. Hathaway, 534 F.2d 386 (1st Cir.), cert. denied, 429 U.S. 819, 97 S.Ct. 64, 50 L.Ed.2d 79 (1976). He further contends that we need only look to the Phipps-Wright conversation in the hotel lobby to determine whether or not there was proof of a demand under color of official right. We decline, however, to view the proof so narrowly, for it is settled law that the evidence “must be viewed in light of the totality of the Government’s case, since one fact may gain color from others.” United States v. Tramunti, 500 F.2d 1334, 1338 (2d Cir.), cert. denied, 419 U.S. 1079, 95 S.Ct. 667, 42 L.Ed.2d 673 (1974).
The jury properly could have found Wright guilty beyond a reasonable doubt of a violation of the Hobbs Act. Phipps’ testimony that Wright did not specifically ask for a political contribution did not preclude the jury from reaching such a verdict. The jury would have been justified in giving weight to Phipps’ testimony that Wright spoke of the difficulties of campaign fund-raising. They could have concluded, as did BRL, that Wright was seeking to use the power of his public office to obtain $5,000 in addition to the concededly legal $500 honorarium. Wright’s assertion of his innocent motives is further undercut by the simultaneous exchange of the $5,500 check for the first letter of intent. In addition, Wright’s action in providing both letters of intent in contravention of an explicit directive of the Chancellor of the Board of Education supports a conclusion that the letters and Wright’s successful efforts to increase the district’s purchases from BRL were part of a quid pro quo involving the additional $5,000.
The indictment also charged Wright with conspiring with BRL to defraud the United States by depriving it of “the impartial, fair and honest distribution of federal funds and of the faithful and honest participation of the Board of Education of the City of New York in the financial grant program under Title I of the Elementary and Secondary Education Act of 1965,” in violation of 18 U.S.C. § 371.
Wright contends that there was no proof that he agreed with BRL to defraud the United States. We disagree. The agreement which constitutes the essence of a conspiracy need not be explicit, but can be inferred from the facts and circumstances of the case. Iannelli v. United States, 420 U.S. 770, 777 n. 10, 95 S.Ct. 1289, 43 L.Ed.2d 616 (1975); American Tobacco Co. v. United States, 328 U.S. 781, 809, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946); United States v. Green, 523 F.2d 229, 233 n. 5 (2d Cir. 1975), cert. denied, 423 U.S. 1074, 96 S.Ct. 858, 47 L.Ed.2d 84 (1976). The facts which we have already discussed were sufficient to support a finding that Wright implicitly agreed to exercise the powers of his office to bring about the expenditure of federal funds for continued and expanded purchases from BRL in return for BRL’s additional $5,000 payment to him.
Wright next contends that the government’s failure to provide use immunity to Parker, pursuant to 18 U.S.C. §§ 6001-6003, deprived appellant of his right to due process guaranteed by the fifth amendment. He concedes that the decision to confer immunity ordinarily is within the sole discretion of the prosecutor. United States v. Lang, 589 F.2d 92 (2d Cir. 1978); United States v. Housand, 550 F.2d 818 (2d Cir.), cert. denied, 431 U.S. 970, 97 S.Ct. 2931, 53 L.Ed.2d 1066 (1977). But, citing United States v. Morrison, 535 F.2d 223 (3d Cir. 1976), Wright argues that under extraordinary circumstances, due process may require that the government confer use immunity on a witness for the defendant.
Wright alleges that such extraordinary circumstances existed here. He contends that Parker was “perhaps the most critical witness” against him in that Parker’s alleged out-of-court statement to Calvin constituted the only evidence that Wright had demanded a political contribution from BRL. Wright notes that Calvin testified that in his presence Parker denied having transmitted any such demand for money. Thus Wright argues that Parker’s own testimony in court was essential to provide him with a fair trial. He contends that the government’s refusal to confer use immunity deprived him of that testimony, because Parker’s attorney said that without such immunity Parker would claim his fifth amendment right against self-incrimination and refuse to testify.
Our summary of the evidence, set out above, makes clear that Parker’s extra-judicial statement in fact was not the only, nor even the most important, evidence that Wright extorted money from BRL. But we do not find it necessary to decide under what circumstances, if any, due process would require the government to confer use immunity on a witness at the request of a defendant. For we conclude that Wright failed to make a sufficient showing that he desired to have Parker testify and that Parker would refuse to testify without use immunity.
After Corbin testified that Parker had denied transmitting Wright’s demand to Calvin, appellant’s counsel obtained from the government Parker’s address in Oregon and the name of his attorney in New York. Appellant’s counsel later told the court that he had spoken by telephone with Parker’s attorney who asserted that Parker would not speak with Wright’s lawyer and that Parker would “take the Fifth Amendment” if Wright subpoenaed him. Wright’s counsel then said that if he subpoenaed Parker, he would ask the government to .confer immunity on him. The trial court urged appellant’s counsel to issue a subpoena as soon as possible. Counsel indicated that he would do so. At that point, the prosecutor informed the court that he did not intend to seek a grant of use immunity for Parker because he did not believe such a grant to be “in the public interest” as required by 18 U.S.C. § 6003(b)(1). On the following day, however, the prosecutor offered to provide Parker with informal “letter immunity,” the type of immunity which had been granted to a number of the government’s witnesses. He also stated that if Parker found that proposal unacceptable, he would attempt to obtain authorization from the Justice Department for an application for use immunity, despite his own belief that the request would not satisfy the Department’s criteria.
On the next day,. Wright’s attorney informed the court that he had again spoken with Parker’s attorney, who stated that he (Parker’s attorney) would not be satisfied with letter immunity and that he would insist on “full-blown immunity.” Wright’s attorney then told the court that “as a result, I am not wasting any money to subpoena his client.” The record discloses no further communications between Wright’s counsel and either Parker or his attorney. No subpoena was issued.
We conclude that Wright failed to establish the need for a grant of use immunity to Parker. Wright argues that the proposition “that there was an insufficient basis on which to apply for statutory immunity . is clearly without merit,” because 18 U.S.C. § 6003(b)(2) provides that an application for immunity can be made where an individual “has refused or is likely to refuse to testify.” This argument falls wide of the mark because the issue presented here is not whether the government had the power to apply for a grant of immunity, but rather whether it had an obligation to do so. We hold that it did not.
.The key question raised by Wright’s due process claim is whether the failure to grant immunity denied him a fair trial. Because Wright failed to subpoena Parker and to prove any need for use immunity, he cannot now demonstrate that the refusal to confer immunity prejudiced his trial. Here, as in United States v. Carman, 577 F.2d 556, 561 (9th Cir. 1978), the appellant’s argument “is based purely on speculation as to what [the witness] would do if called to the stand.” (Emphasis in original.) It is true that Parker’s attorney asserted that his client would not testify without use immunity. But without calling Parker to the witness stand, “neither [the appellant] nor anyone else could be certain that [the witness] would assert his right against self-incrimination.” Id. It is not improbable that Parker, for reasons of his own, might have preferred to avoid having to travel from Oregon to New York in order to testify about his role in the payment to Wright. Whether Parker would have maintained the position that his attorney asserted, had he actually been subpoenaed and called to the stand, is a matter of speculation upon which this court cannot base a finding that Wright was denied his due process right to a fair trial.
Wright also suggests that the refusal to grant immunity violated his sixth amendment right to have compulsory process for obtaining witnesses in his favor. A claim that the use immunity statute is unconstitutional because witnesses and defendants are not authorized to compel testimony on the same basis as the government was rejected in In re Kilgo, 484 F.2d 1215, 1222 (4th Cir. 1973), where the court said:
The sixth amendment assures an accused “compulsory process for obtaining witnesses in his favor.” But the authors of the Bill of Rights did not deem it essential to enhance this right by empowering the accused to confer immunity, and nowhere in the Constitution do we find any justification for conditioning the government’s ability to grant immunity on a corresponding grant to private individuals.
It has also been held that the sixth amendment imposes no obligation on the government to confer immunity on a witness at the defendant’s request. United States v. Alessio, 528 F.2d 1079 (9th Cir.), cert. denied, 426 U.S. 948, 96 S.Ct. 3167, 49 L.Ed.2d 1184 (1976); compare, United States v. La-couture, 495 F.2d 1237 (5th Cir.), cert. denied, 419 U.S. 1053, 95 S.Ct. 631, 42 L.Ed.2d 648 (1974); see generally Kastigar v. United States, 406 U.S. 441, 443-47, 92 S.Ct. 1653, 32 L.Ed.2d 212 (1972). But see United States v. Leonard, 161 U.S.App.D.C. 36, 66 n. 79, 494 F.2d 955, 985 n. 79 (1974) (Bazelon, C.J., concurring in part and dissenting in part); United States v. La Duca, 447 F.Supp. 779, 787 (D.N.J.1978) (dictum).
We need not determine whether the sixth amendment might ever require the government to confer immunity on a defense witness. Wright did not avail himself of the compulsory process to which he clearly was entitled, the right to subpoena Parker. He cannot now complain that he was denied whatever other rights he might have had under the compulsory process clause, had his unexercised right of subpoena proved unavailing.
We next consider Wright’s argument that he was denied his sixth amendment right to confront the witnesses against him when the government failed itself to call Parker as a witness after the admission of the extra-judicial statement. He argues that Parker’s statement was crucial to the government as well as devastating to the defense and that there was nothing inherently reliable about the statement.
Wright does not claim on appeal that Calvin’s testimony reporting Parker’s statement did not satisfy the requirements of Fed.R.Evid. 801(d)(2)(E), as the statement of a co-conspirator. That the testimony was admissible under the rules of evidence does not, however, conclude our inquiry, but merely turns our attention to the constitutional issue involved. The confrontation clause is not merely the equivalent of the hearsay rules. Dutton v. Evans, 400 U.S. 74, 81-82, 91 S.Ct. 210, 27 L.Ed.2d 213 (1970); California v. Green, 399 U.S. 149, 155-56, 90 S.Ct. 1930, 26 L.Ed.2d 489 (1970).
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3551648-15916 | O’BRIEN, Circuit Judge.
The district court refused to suppress evidence against Marcos Sanchez. He contends police officers did not have reasonable suspicion of criminal activity so as to justify an investigatory stop of the vehicle in which he was riding. Further, he contends even if the stop was justified at its inception, the officers exceeded the scope of the stop by frisking him for weapons. We examine the use of statements and verbal acts of unidentified, but identifiable tipsters in contributing to the officers’ suspicion of criminal activity. We also consider the circumstances which might justify a pat-down search incident to an investigatory stop. We affirm.
I. BACKGROUND
At approximately 2:30 p.m. on July 25, 2004, Albuquerque Police Officers Jaramillo and Lopez were standing outside their respective patrol cars when they were flagged down by an unknown woman driving a white van. The woman was very excited and told them she had seen a man wearing a gray shirt striking a woman in the face at a nearby intersection. The woman provided no other details and the police did not question her further.
The officers immediately drove toward the described intersection, approximately one block away. The officers did not see a man hitting a woman; they did, however, see a blue sedan and a white van pulling away quickly from a single-family home. Officer Lopez, testifying at the suppression hearing, said “it appeared to me as if [the vehicles] were trying to get out of this quickly, you know, like they were in a little bit of a hurry to get out of there.... ” (R. Vol. Ill at 37.) Officer Jaramillo likewise testified: “It just seemed like [the vehicles] were leaving the area ... in a non-prudent manner ... they were moving quickly.” (Id. at 72.)
The officers also saw a number of individuals, later determined to be neighbors, pointing to the two vehicles as if to say “that’s them.” (Id. at 8.) Officer Lopez testified “it didn’t feel like a coincidence” that the neighbors were pointing at two vehicles located near the intersection right after the officers had been alerted to a potential assault and battery in that area. (Id. at 31.) He “felt [the pointing] had to do with this male beating up the female.” (Id.)
Officer Lopez stopped the van in the driveway and Officer Jaramillo stopped the sedan on the street, approximately ten yards away, out of concern the victim and/or suspect was in one of the vehicles. Lopez asked the driver and sole occupant of the van, James Wicker, to step out of the vehicle. Lopez asked Wicker if he was armed, to which Wicker responded he had a handgun in his front pocket. Lopez handcuffed Wicker and removed a .25 caliber handgun (described as approximately two inches long). Lopez alerted Jaramillo to the presence of the gun.
At this point Officer Hinson arrived. Officers Jaramillo and Hinson ordered the three occupants out of the sedan and placed them in handcuffs. Because Wicker was armed, Jaramillo performed a pat down search of the three for officer safety reasons. Jaramillo located an empty gun holster in the waistband of the backseat passenger, later identified as Sanchez, who was wearing a gray shirt. Because Wicker had produced a concealed firearm, Jaramillo and Hinson asked the occupants of the sedan to remove their shoes in order to check for hidden weapons. Hinson located a small bag containing a white substance, later identified as methamphetamine, in the driver’s shoe. After discovering the narcotics, Jaramillo asked the driver for consent to search the sedan. The driver gave oral and written consent to search.
The search revealed a .22 caliber pistol located underneath the driver’s seat, but closer to the reach of a person in the backseat, where Sanchez had been sitting. Jaramillo testified the firearm fit perfectly into the holster found on Sanchez. After locating the gun, Jaramillo went to talk to the neighbors while Lopez and Hinson remained with the four individuals. While Jaramillo was speaking with the neighbors, Sanchez said, “Fucking neighbors!” (R. Vol. Ill at 15.) Lopez informed Sanchez the detention had nothing to do with the neighbors, but was based on a report of an assault from a passer-by. Sanchez said: “Yeah ... I did get in an argument with my girlfriend. We had a verbal argument. There was nothing physical, you know. I didn’t hit her.” (Id. at 15-16.) He added: “I have no reason to lie to you. I’m a convicted felon. I’ve done time. I’m retired.” (Id. at 17.) Based on the discovery of the firearm and Sanchez’s statement, Jaramillo arrested Sanchez for being a felon in possession of a firearm and transported him to the police station where records confirmed his felony status.
Sanchez was indicted on one count of being a felon in possession of a firearm, in violation of 18 U.S.C. §§ 922(g)(1) and 924(a)(2). He moved to suppress all evidence seized from the vehicle and all statements he made, contending the police lacked justification for the initial stop and exceeded the scope of the stop by frisking him for weapons. The court held a hearing at which Officers Jaramillo and Lopez testified. The court found their testimony to be credible and denied Sanchez’s motion to suppress. Sanchez then pled guilty, reserving his right to appeal from the denial of his motion to suppress. He was sentenced to the mandatory minimum of 180 months imprisonment. He now challenges the denial of his motion to suppress.
II. DISCUSSION
“When reviewing a district court decision on suppression of evidence, we must accept the court’s findings of fact unless, viewing the evidence in the light most favorable to the court’s findings, we conclude the findings were clearly erroneous. Evaluation of the credibility of witnesses, the weight to be given the evidence, and inferences to be drawn from the evidence are for the district court. However, the ultimate determination of whether a search and seizure were reasonable under the Fourth Amendment is subject to de novo review.” United States v. Hernandez, 93 F.3d 1493, 1498 (10th Cir. 1996).
A traffic stop is an investigatory detention which we analyze according to the principles set forth in Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968). United States v. Leos-Quijada, 107 F.3d 786, 792 (10th Cir.1997). “Terry sets up a two-prong test of the reasonableness of investigatory detentions and weapons searches. First, we must decide whether the detention was justified at its inception.... Second, the officer’s actions must be reasonably related in scope to the circumstances which justified the interference in the first place. At both stages, the reasonableness of the officer’s suspicions is judged by an objective standard taking the totality of the circumstances and information available to the officers into account.” United States v. Johnson, 364 F.3d 1185, 1189 (10th Cir.2004) (quotations and citations omitted).
A. Initial Justification for the Stop
“In order to conduct a lawful investigatory stop of a vehicle, the detaining officers must have, based on all the circumstances, ‘a particularized and objective basis for suspecting the particular person stopped of criminal activity.’ ” Leos-Quijada, 107 F.3d at 792 (quoting United States v. Cortez, 449 U.S. 411, 417-18, 101 S.Ct. 690, 66 L.Ed.2d 621 (1981)). The district court concluded the officers had reasonable suspicion of criminal activity based on the woman’s tip, the pointing neighbors, and the apparent urgency exhibited by the departing vehicles. Sanchez contends the officers lacked reasonable suspicion because the anonymous nature of the witnesses made their tips unreliable.
We first consider the woman’s tip. In Johnson, we identified two reasons “why anonymous tips trouble the courts and sometimes lead to the suppression of otherwise reliable evidence.” 364 F.3d at 1190. “The first concern relates to the motives of the tipster.... This is why the Supreme Court ... has required that anonymous tips be accompanied by corroboration and other indicia of reliability.” Id. at 1190-91 (quotations and citation omitted). “A second concern relates not to a tip’s anonymity but to its level of specificity. Overly generic tips, even if made in good faith, could give police excessive discretion to stop and search large numbers of citizens.” Id. at 1191. Here, these concerns are mitigated by the circumstances surrounding the tip.
The woman’s motive was less suspect than the typical anonymous tipster because she was seeking help for a victim. In United States v. Brown, we “considered] it important that the caller’s primary motive in contacting 911 ... was not to implicate the armed man but to obtain aid and protection for his friend.” 496 F.3d 1070, 1077 (10th Cir.2007). We noted the “call is more analogous to a plea for help from a victim than to an informant’s tip.” Id.; see also Adams v. Williams, 407 U.S. 143, 147, 92 S.Ct. 1921, 32 L.Ed.2d 612 (1972) (recognizing the greater weight carried by a witness’s recent report, such as “when the victim of a street crime seeks immediate police aid and gives a description of the assailant”).
Moreover, the woman reported the assault to the police in a face-to-face encounter, thus putting her anonymity at risk, at least to a limited degree, and allowing the police an opportunity to evaluate her credibility and demeanor. We stated in Brown that “a[n] unnamed individual who divulges enough distinguishing characteristics to limit his possible identity to only a handful of people may be nameless, but he is capable of being identified and thus is not anonymous.” 496 F.3d at 1075. So it is with this woman tipster; she and/or her vehicle could have been identified by the police at the time she made her statement, as would have been obvious to her. Thus, her tip bears an indicium of reliability because she would have known she could be held liable for providing the police with false information. See United States v. Jenkins, 313 F.3d 549, 554 (10th Cir.2002) (“A reasonable person ... would realize that in all likelihood the police could, if they so chose, determine the person’s identity, and could hold him responsible if his allegations turned out to be fabricated.”). That the police understandably did not take the time to obtain her personal information does not mean she was anonymous.
Many cases have recognized the difference between in-person informants and anonymous calls. See, e.g., Florida v. J.L., 529 U.S. 266, 276, 120 S.Ct. 1375, 146 L.Ed.2d 254 (2000) (Kennedy, J., concurring) (“An instance where a tip might be considered anonymous but nevertheless sufficiently reliable to justify a proportionate police response may be when an unnamed person driving a car the police officer later describes stops for a moment and, face to face, informs the police that criminal activity is occurring.”); Davis v. United States, 759 A.2d 665 (D.C.App.2000) (police officer had probable cause for a search after citizen informant who declined to give his name flagged down the officer and told him a man nearby in a wheelchair was selling crack out of his right shoe); United States v. Salazar, 945 F.2d 47, 50-51 (2d Cir.1991) (“[A] face-to-face informant must, as a general matter, be thought more reliable than an anonymous telephone tipster.”); United States v. Sierra-Hernandez, 581 F.2d 760, 763 (9th Cir.1978) (“[Ajlthough the informant did not identify himself by name, he would have been available for further questioning if the agent had judged the procedure appropriate. Unlike a person who makes an anonymous telephone call, this informant confronted the agent directly.”); United States v. Gorin, 564 F.2d 159, 161 (4th Cir.1977) (“[Sjtandards of reliability should not prevent appropriate action when a victim of a crime immediately has contacted the police. That same analysis applies [when a witness informs the police in person about a crime].”) (citation omitted).
As to the second concern — specificity — the woman’s tip was not overly general. The woman described an aspect of the assailant’s clothing (gray shirt). Though she did not provide the age, race or any other physical characteristics of the victim or assailant, her tip was spatially specific. The officers knew they were looking for someone in a residential neighborhood only a block away. The tip did not provide the officers with excessive discretion to stop and search a large number of citizens — this was not a dragnet. The officers also knew the alleged assault occurred shortly before they were flagged down and could be continuing.
Moreover, the woman’s tip was not all the officers had to go on. After driving to the area described by the woman, the officers observed two vehicles departing quickly from a single-family home. While quickly departing vehicles do not, in and of themselves, suggest criminal activity, it is a suspicious circumstance to be considered as part of the universe of facts. Here it becomes more significant when coupled with a number of people pointing at the vehicles as if to say “that’s them.”
We reject Sanchez’s contention that the pointing neighbors were anonymous. Like the woman tipster, the neighbors divulged enough information about themselves to be capable of identification. They stood outside their houses throughout the duration of the stop and allowed themselves to be questioned by the officers. In addition to being readily identifiable by the police, they were known to the occupants of the two vehicles and exposed themselves to a risk of retaliation by their conduct. The neighbors were not anonymous and the concerns relating to anonymous tips — motive and specificity — are not present.
While each individual factor might not have been sufficient to establish reasonable suspicion of criminal activity, we don’t parse the elements but consider the totality of the circumstances. See Johnson, 364 F.3d at 1189. In doing so, we “defer to the ‘ability of a trained law enforcement officer to distinguish between innocent and suspicious actions.’ ” United States v. Santos, 403 F.3d 1120, 1124 (10th Cir.2005) (quoting United States v. McRae, 81 F.3d 1528, 1534 (10th Cir.1996)). “A determination that reasonable suspicion exists ... need not rule out the possibility of innocent conduct.” United States v. Arvizu, 534 U.S. 266, 277, 122 S.Ct. 744, 151 L.Ed.2d 740 (2002). Indeed, “the likelihood of criminal activity need not rise to the level required for probable cause, and it falls considerably short of satisfying a preponderance of the evidence standard.” Id. at 274, 122 S.Ct. 744; see also Johnson, 364 F.3d at 1194 (“[A]s long as [the officer] has a particularized and objective basis for suspecting an individual may be involved in criminal activity, he may initiate an investigatory detention even if it is more likely than not that the individual is not involved in any illegality.”).
This case is easily distinguishable from Florida v. J.L., where the Court concluded the police did not have reasonable suspicion to conduct a search based on an anonymous tip lacking sufficient indicia of reliability. 529 U.S. at 273-74, 120 S.Ct. 1375. The Court noted “[a]ll the police had to go on ... was the bare report of an unknown, unaccountable informant who neither explained how he knew about the gun nor supplied any basis for believing he had inside information about J.L.” Id. at 271, 120 S.Ct. 1375. Here, by contrast, we have much more. An identifiable woman reported an assault to the police in a face-to-face encounter. The officers knew the basis for her knowledge (direct observation) and were able to evaluate her credibility and demeanor. Moreover, her report was corroborated by identifiable (and later identified) neighbors pointing at two quickly departing vehicles. These factors distinguish this case from J.L. and, considered together, provide sufficient justification for the initial stop.
B. Scope of the Stop
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1111451-19604 | CORRECTED OPINION
PER CURIAM:
This case involves alleged civil rights violations. Appellant brought an action against multiple defendants in the United States District Court for the Southern District of Florida alleging inter alia five violations of 42 U.S.C. § 1983 (1981). Little v. City of North Miami, 624 F.Supp. 768, 770 (S.D.Fla.1985). The District Judge dismissed the civil rights claims for failure to state a claim upon which relief could be granted. Little, 624 F.Supp. at 771-74. Because we conclude that appellant’s first amendment and procedural due process claims state causes of action cognizable under Section 1983, we reverse.
I.
BACKGROUND
For the purpose of evaluating the sufficiency of a complaint, we must accept the facts pleaded as true and construe them in the light most favorable to appellant. Quality Foods de Centro Americo, S.A. v. Latin American Agribusiness Development Corp., S.A., 711 F.2d 989, 994-95 (11th Cir.1983). Appellant is a member of the Florida Bar Association and a professor of law at the University of Florida. Prior to October, 1983, appellant represented the Florida Defenders of the Environment in two Florida state court civil actions. This representation was on a pro bono publico basis with the approval of the University of Florida. The City of North Miami was an intervening party in the second lawsuit and was represented by Jennifer Hurst Kroner, an attorney employed by Simon, Schindler and Hurst, P.A. This state litigation involved the constitutionality of state appropriation for the purchase of land owned by the City of North Miami.
On October 11, 1983, the city Council of North Miami adopted Resolution No. R83-65 which states: “the Council of the City of North Miami hereby censures Professor Joseph W. Little for improper use of public funds to represent private parties in litigation against the State and against the interests of the City of North Miami.” This resolution was passed and read aloud at a public meeting without notice to appellant and without verification that the assertions were truthful. Copies of R83-65 were circulated to twenty persons, including the president of the University of Florida, the dean of the University of Florida College of Law, the chairman and members of the Florida Board of Regents, the members of the Florida Legislature representing Dade County, and the Florida State Auditor General.
As a result of the passage and publication of the resolution, governmental investigations were undertaken and appellant claims he “suffered damage to his reputation, his employment relations, and mental and emotional pain and distress.” Appellant does not assert that his employment has been terminated or that he has been denied tenure. Nevertheless, appellant brought an action against the city of North Miami, the mayor and council members, the attorney who prepared the resolution and the legal professional association who employed her. The complaint sought damages for five alleged constitutional violations and five pendant state law claims. As indicated, the district court dismissed the federal claims pursuant to Fed.R.Civ.P. 12(b)(6) without prejudice for appellant to seek redress for his state claims in state court. Little, 624 F.Supp. at 774. We have distilled the federal claims down to four issues and shall analyze them seriatim in order to determine whether appellant set forth sufficient facts which would entitle him to relief. For the reasons that follow, we reverse the ruling of the district court with respect to appellants’ first amendment and procedural due process claims.
II.
ANALYSIS
42 U.S.C. § 1983 (1981) provides in pertinent part:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.
To state a claim under this Section, “a plaintiff must allege facts showing that the defendant’s act or omission, done under color of state law, deprived him of a right privilege, or immunity protected by the Constitution or laws of the United States.” Emory v. Peeler, 756 F.2d 1547, 1554 (11th Cir.1985). Section 1983 creates no substantive rights; it does, however, provide remedies for deprivations of constitutionally protected interests. See Baker v. McCollan, 443 U.S. 137, 144 n. 3, 99 S.Ct. 2689, 2694 n. 3, 61 L.Ed.2d 433 (1979). Local governing bodies and local officials in their official capacities can be sued under Section 1983 when a party can establish that he or she has suffered a constitutional deprivation as a result of either “a policy statement, ordinance, regulation, or decision officially adopted and promulgated by that body’s officers” or a “governmental ‘custom’ even though such a custom has not received .formal approval through the body’s official decision making channels.” Monell v. Department of Social Services, 436 U.S. 658, 690, 91, 98 S.Ct. 2018, 2036, 56 L.Ed.2d 611 (1978).
For the purposes of determining the sufficiency of a claim, the likelihood of recovery is irrelevant. See Seheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). As the Supreme Court observed, “[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test.” Seheuer, 416 U.S. at 236, 94 S.Ct. at 1686. This Court has acknowledged that “a complaint should not be dismissed for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) ‘unless it appears beyond doubt that plaintiff can prove no set of facts that would entitle him to relief.’ ” Bradberry v. Pinellas County, 789 F.2d 1513, 1515 (11th Cir.1986) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)).
A. Bill of Attainder
Appellant claims that R83-65 adopted and disseminated by the Council of the City of North Miami operates as a bill of attainder. A bill of attainder, forbidden by U.S. Const. Art. I § 9, cl. 3 and § 10, cl. 1, has been described as “a law that legislatively determines guilt and inflicts punishment upon an identifiable individual without provision of the protections of a judicial trial.” Selective Service System v. Minnesota Public Interest Research Group, 468 U.S. 841, 846-47, 104 S.Ct. 3348, 3352, 82 L.Ed.2d 632 (1984) (quoting Nixon v. Administrator of General Services, 433 U.S. 425, 468, 97 S.Ct. 2777, 53 L.Ed.2d 867 (1977)). The resolution in question, censuring appellant for “improper use of public funds,” unquestionably resembles a bill of attainder in several respects.
First, R83-65 clearly identifies an individual. Second, the resolution arguably accuses appellant of unprofessional, unethical and criminal conduct. Third, the City Council, by passing the resolution, impliedly found appellant guilty without affording him the protections guaranteed by the formal adversarial process. Despite the similarities between the resolution and a bill of attainder, the district court determined that R83-64 is not a bill of attainder because the resolution “is not a legislative pronouncement with the force of law” and because it “does not prescribe a punishment, penalty or forfeiture.” Little, 624 F.Supp. at 771.
Regarding the punishment requirement, the Supreme Court has recognized three tests for determining whether a law penalizes an individual for bill of attainder purposes: “(1) whether the challenged statute falls within the historical meaning of legislative punishment; (2) whether the statute, ‘viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes’; and (3) whether the legislative record ‘evinces a [legislative] intent to punish.’ ” Selective Service System, 468 U.S. at 852, 104 S.Ct. at 3355 (quoting Nixon, 433 U.S. 425 at 473, 475-76, 478, 97 S.Ct. 2777, 2805, 2806-07, 2809, 53 L.Ed.2d 867).
Although a public censure is not as harsh a sanction as the historical “pains and penalties” of imprisonment, banishment, punitive confiscation of property or “a legislative enactment barring designated individuals or groups from participation in specified employments or vocations,” it is a recognized mode of punishment in certain circumstances. Second, given the unique facts presented by this case, we are unable to conceive of any non-punitive, legitimate municipal purpose justifying the passage of R83-65. Considering the third test for determining a bill of attainder penalty, the record clearly evinces a legislative intent to punish the appellant. After applying these tests, we recognize that whether public censure constitutes punishment for bill of attainder purposes may present a meritorious issue; nevertheless, we decline to resolve this question because we agree with the district court that any punishment inflicted by the resolution was not occasioned by a legislative act having the force of law.
A municipal ordinance may constitute a bill of attainder. See e.g., Crain v. City of Mountain Home, 611 F.2d 726 (8th Cir. 1979). Nevertheless, the municipal legislation in question was in the form of resolution. The Supreme Court’s definition of a bill of attainder in Selective Service System specifically states that the first element required to be present is a law. Selective Service System, 468 U.S. at 846, 104 S.Ct. at 3352. Florida law explicitly provides that an ordinance, and not a resolution is “enforceable as a local law.” Fla. Stat. § 166.041(l)(a) (West Supp.1985). A resolution is defined as “an expression of a governing body concerning matters of administration, an expression of a temporary character, or a provision for the disposition of a particular item of the administrative business of the governing body.” Fla.Stat. § 166.041(1)(b) (West Supp.1985). Legal actions which are “required to be accomplished by ordinance may not be accomplished by resolution.” Carlton v. Jones, 158 So. 170, 170 (1934); see Brown v. City of St. Petersburg, 153 So. 141, 142 (1933). Here, the resolution is not “ ‘a regulation of a general and permanent nature_en-forceable as a local law’ ” as it represents little more than the City Council’s opinion regarding the propriety of appellant’s activities. Fla.Stat. § 166.041(1)(a) (West Supp. 1985).
Appellant argues that an act should be judged by its character and not by its label. Florida case law acknowledges that “a resolution passed with all the formalities required for passing ordinances may operate as an ordinance regardless of the name by which it is called.” Brown, 153 So. at 144. When the character of R83-65 is evaluated with an impartial but critical eye, however, we conclude that the resolution is “merely deeláratory of the will of the corporation in a given matter” and not “a continuing regulation [or a] permanent rule of government.” Brown, 153 So. at 144. In addition, it does not affirmatively appear from the record that the resolution in question was passed with all the formalities required for an ordinance. For these reasons, we affirm the ruling of the district court.
B. First Amendment
Appellant claims that R83-65 is violative of his first amendment rights as a vindictive and retaliatory act taken under the color of state law. Little, 624 F.Supp. at 771. The district court dismissed the claim, ruling that (1) a single act does not amount to “custom or usage” within the purview of Section 1983 and (2) the resolution did not have the force of law. Little, 624 F.Supp. at 771-72. Because the district court erroneously applied the pertinent law and because it is conceivable that appellant can prove the facts in support of his claim for retaliation of appellant’s use of the courts, we reverse.
First, the district court erroneously ruled that appellant must prove a “custom or usage” of the municipality which caused the alleged constitutional infringement. Little, 624 F.Supp. at 772. With all due respect to the district court, this language, when applied to municipalities, refers only to situations akin to respondeat superior, where a claimant sues a city for alleged constitutional deprivations caused by municipal employees. City of Oklahoma City v. Tuttle, 471 U.S. 808, 105 S.Ct. 2427, 2433 (1985), reh’g denied, — U.S. -, 106 S.Ct. 16, 87 L.Ed.2d 695 (1985); Monell, 436 U.S. at 690-91, 98 S.Ct. at 2035-36; see e.g. Gilmere v. City of Atlanta, 774 F.2d 1495 (11th Cir.1985), cert. denied, — U.S. -, 106 S.Ct. 1993, 90 L.Ed.2d 673 (1986). In these instances, a single act attributable to improper activity of an employee is insufficient to impose vicarious liability on the municipality because of the lack of a “custom or policy” as defined in Monell. City of Oklahoma City, 471 U.S. 808, 105 S.Ct. at 2436; Gilmere, 774 F.2d at 1504; see Monell, 436 U.S. at 691, 98 S.Ct. at 2036.
In this case, the act which allegedly infringed upon appellant’s first amendment rights is the resolution adopted by a local governmental body — the City Council of North Miami. As indicated, “local governing bodies ... can be sued directly under § 1983 for monetary, declaratory, and in-junctive relief where ... the action that is alleged to be unconstitutional implements or executes a policy statement, ordinance, regulation, or decision officially adopted and promulgated by that body’s officers.” Monell, 436 U.S. at 690, 98 S.Ct. at 2035. Viewing the facts in the light most favorable to appellant, it appears that the City Council decided that appellant was guilty of culpable conduct and decided to publicly censure him as punishment. Because we conclude that the resolution in question can be fairly characterized as “a decision officially adopted and promulgated” by the City Council of North Miami, we conclude that the minimum requirements for imposing municipal liability have been alleged. Monell, 436 U.S. at 690, 98 S.Ct. at 2035 (emphasis added).
Second, unlike a Section 1983 claim based on an alleged bill of attainder, a Section 1983 action premised on an infringement of First Amendment rights does not require a legislative act having the force of law. See Hall v. Sutton, 755 F.2d 786 (11th Cir. 1985). The only requirement is an action “under color of state law” which inhibits the exercise of protected rights. See Parratt v. Taylor, 451 U.S. 527, 535, 101 S.Ct. 1908, 1912, 68 L.Ed.2d 420 (1981) (emphasis added). When an infringement of first amendment rights is alleged, the deprivation of a property interest is irrelevant. Perry v. Sindermann, 408 U.S. 593, 597-98, 92 S.Ct. 2694, 2697-98, 33 L.Ed.2d 570 (1972).
By representing the Florida Defenders of the Environment, himself and others in state litigation, appellant was engaging in a “form of political expression” entitled to First and Fourteenth Amendment protection. In re Primus, 436 U.S. 412, 428, 98 S.Ct. 1893, 1902, 56 L.Ed.2d 417 (1978); NAACP v. Button, 371 U.S. 415, 429, 83 S.Ct. 328, 335, 9 L.Ed.2d 405 (1963). This protection not only extends to prohibitions on prior restraints of speech; it also forbids the imposition of retaliatory sanctions designed to punish the legitimate exercise of First Amendment rights. Perry, 408 U.S. at 598, 92 S.Ct. at 2698; Hall, 755 F.2d at 787; Cate v. Oldham, 707 F.2d 1176, 1186 (11th Cir.1983); Muir v. Alabama Educational Television Commission, 688 F.2d 1033, 1037 (5th Cir.1982), cert. denied, 460 U.S. 1023, 103 S.Ct. 1274 (1983).
Viewed in the light most favorable to appellant, appellant’s complaint asserts that the City Council of North Miami, acting under the color of Florida law, adopted and disseminated an official resolution publicly censuring appellant in retaliation for appellant’s representation of an adverse party in state litigation, thereby subjecting appellant to official investigation and intentionally placing appellant in potential criminal, professional, social, political and economic jeopardy without any justification. A municipality, like any state governmental entity, may not retaliate against an individual because of that person’s legitimate use of the courts. See Hall, 755 F.2d at 787. Thus, we conclude that under the facts as alleged, appellant’s First Amendment claim states an action cognizable under Section 1983. Accordingly, the decision of the district court dismissing this claim is reversed.
C. Sixth Amendment
Appellant claims that the adoption and dissemination of R83-65 denied appellant the right to notice, the right to confront accusers, the right to present witnesses and the right to be assisted by counsel — all in violation of the Sixth Amendment. In support of this claim appellant cites Jenkins v. McKeithen, 395 U.S. 411, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969), reh’g denied, 396 U.S. 869, 90 S.Ct. 35, 24 L.Ed.2d 123 (1968). The district court dismissed the claim finding insufficient prece-dential value in Jenkins to support á Sixth Amendment violation. Little, 624 F.Supp. at 772-73.
In Jenkins, a commission created by Louisiana statute was empowered to investigate criminal violations “in the field of labor-management relations,” to determine whether probable cause of violations existed and to file appropriate charges. Jenkins, 395 U.S. at 414-17, 89 S.Ct. at 1845-46. Characterizing this function as “accusatory,” the Supreme Court ruled that procedural due process requires that the commission “afford a person being investigated the right to confront and cross-examine the witness against him” and the right to present evidence. Jenkins, 395 U.S. at 429, 89 S.Ct. at 1852. Jenkins does not stand as authority for the proposition that an imputation of criminal culpability necessarily triggers Sixth Amendment rights. Jenkins merely holds that public officials may not publicly condemn an individual for criminal acts without affording the individual procedural requirements guaranteed by the fourteenth amendment. Jenkins, 395 U.S. at 428, 89 S.Ct. at 1852.
The Sixth Amendment is limited by its very terms to criminal prosecutions. U.S. Const, amend. VI; see Hannah v. Larche, 363 U.S. 420, 440 n. 16, 80 S.Ct. 1502, 1513, 4 L.Ed.2d 1307 (1960), reh’g denied, 364 U.S. 855, 81 S.Ct. 33, 5 L.Ed.2d 79 (1960). The Supreme Court has emphatically ruled that the Sixth Amendment is not implicated until adversarial judicial proceedings have been initiated. United States v. Gouveia, 467 U.S. 180, 104 S.Ct. 2292, 81 L.Ed.2d 146 (1984); Kirby v. Illinois, 406 U.S. 682, 92 S.Ct. 1877, 32 L.Ed.2d 411 (1972); United States v. Wade, 388 U.S. 218, 87 S.Ct. 1926, 18 L.Ed.2d 149 (1967). Since appellant has not alleged that criminal charges were brought against him, we affirm the dismissal of appellant’s 1983 claim premised on the violation of Sixth Amendment rights.
D. Procedural Due Process — Deprivation of a Property and Liberty Interest
Appellant claims that he has been deprived of a property and a liberty inter est without due process of law. Little, 624 F.Supp. at 773. The district court, relying principally on Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976), reh’g denied, 425 U.S. 985, 96 S.Ct. 2194, 48 L.Ed.2d 811 (1976) dismissed the claim. Because appellant’s claim of injury to his business reputation/goodwill is actionable under Section 1983, we reverse.
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1329953-16687 | DUNIWAY, Circuit Judge:
This is an appeal from the granting of an injunction. The action was brought under 28 U.S.C. §§ 1331 and 1343, and 42 U.S.C. § 1983. The relief sought and granted was an injunction against harrassment of the plaintiffs by prosecutions brought against them in bad faith in the courts of Phoenix, Arizona under that state’s anti-obscenity law, Ariz.Rev.Stat. § 13-532. We affirm in part and reverse in part.
1. The facts.
The following statement of facts, which is fully supported by the record, is largely taken from the brief of the plaintiff-appellees :
Plaintiffs are owners of and clerks in newsstands and bookstores in Phoenix, Arizona. Defendants are the mayor, the chief of police and the city prosecutor of Phoenix. In 1968 and 1969 over 100 criminal charges for the sale of allegedly obscene books and magazines were initiated against plaintiffs in the City Court of Phoenix by Phoenix police officers at the direction of the defendants.
Eleven of the cases came to trial. None resulted in convictions. Of these cases, two were dismissed at the close of the prosecution’s case; in three there was a directed verdict of not guilty; in two the judge found the defendants not guilty; in four a jury found them not guilty. The cases were tried before different judges and different juries. The police were filing cases faster than they could be tried. On May 16, 1969, after 6 findings of Not Guilty in a 2-week period, 14 new prosecutions were instituted. The 11th and last trial was held in the middle of June of 1969. There were 2 more eases set for trial that month and the plaintiffs (defendants in City Court) and their attorney prepared and appeared in court on those dates ready for trial, but at the last minute those cases were dismissed on motion of the prosecutor. No more cases were set down for trial for a while.
On June 25, 1969, an anti-pornography campaign began, spearheaded by the mayor, with announcements on television and to the newspapers. Concurrently, at the mayor’s direction, anti-obscenity petitions were circulated to 50,000 people in Phoenix, Arizona, over 21 years of age. The mayor stated publicly that the purpose of the petitions was to influence the tenor of the community so that jurors would be more likely to convict than they had been in the cases already tried. The newspapers reported this statement. The mayor announced that another purpose of the drive was to “make clear to the courts” what the community felt about pornography, and that was reported in the papers. The city magistrates can be fired without cause by the city manager who, in turn, can be fired without cause by the mayor and council.
The mayor indicated to a newspaper reporter that plaintiffs were involved with the Mafia. This appeared in the newspapers. At trial the mayor admitted he had no basis for this statement. He stated publicly that parents had told him that minors were being sold obscene items; at trial he could name no parents or minors, nor could he name any stores that had sold to minors and he admitted he had never reported any of these alleged sales to minors to the police. These alleged sales to minors were further rebutted by the police officer in charge of the obscenity detail who admitted under cross-examination that plaintiffs do not sell to minors and that minors are not even allowed in the “adult” section of plaintiffs’ stores. The mayor also indicated to a newspaper reporter that he had been offered a bribe because of his anti-pornography stand. Although at trial he claimed that he had a general discussion with the police about the alleged bribe, he admitted that he gave the police no names and did not tell them, or imply, “That any individual had made me a flat bribe offer.” A month or two after the drive began, 19 more cases were filed against plaintiffs making a total of 101. The mayor was a candidate for re-election in the fall.
Concurrently with the filing of charges the police seized merchandise from plaintiffs on at least eleven occasions, and, in spite of a state court order that the method they were using to seize material was illegal, defendants continued to make illegal seizures of large amounts of materials until stopped by the Federal District Court in Arizona. Good, et al. v. Blubaum, et al., D.C.Ariz., No.Civ. 6774 Phx.; Sayles v. Graham, D.C.Ariz., No.Civ. 6981 Phx.
All of the pending cases are similar to the eleven that resulted in. acquittals and the two that were dismissed on the morning of trial. In all cases the “victim” of the alleged crime (the purchaser) was a willing police officer. In none was there any pandering, obtrusive assaults upon privacy or sale to minors. Yet after the eleven straight acquittals, no move was made to dismiss the remaining cases except for the two already mentioned.
Although no court or jury at any level, in either a civil or criminal action, had ever determined that plaintiffs sold or were selling obscene material or had engaged in criminal conduct, the defendants achieved the following results by their actions: Plaintiffs closed down their stores for two days, large amounts of “adult” merchandise were removed from the stands, money was expended for legal defense and for the quashing of illegal seizures and the return of merchandise wrongfully taken by the police.' The prospective costs for future defense and appeals of the cases yet untried and yet to be filed were mounting. Some plaintiffs sold their stores and left town. Another considered selling his.
2. The judgment.
The trial judge did not rule upon the constitutionality of the method of appointing and removing city magistrates. Nor did he feel it necessary “to redress any alleged attempts on the part of the defendants to influence judicial and public opinion against plaintiffs.” The judge did find that there was “bad faith law enforcement,” which had a “chilling effect,” and that the facts met the “special circumstances” rule of Dombrowski v. Pfister, 1965, 380 U.S. 479, 85 S.Ct. 1116, 14 L.Ed.2d 22.
The judgment enjoins (1) further prosecution of any pending criminal action against any of the plaintiffs under A.R.S. § 13-532, and (2) any future actions against any of them under that statute in the absence of a prior adversary judicial hearing on the question of obscenity.
3. Propriety of an injunction.
The Supreme Court has held that a federal court may enjoin state prosecution only under special circumstances. Dombrowski v. Pfister, supra. There the Court found that absent a federal injunction the appellants would have been irreparably injured by the bad faith prosecutions of local authorities. The Court felt that the criminal process was being invoked against the appellants with no hope of ultimate success, but as a device to discourage the appellants’ civil rights activities. That case, like this one, involved claims that the plaintiffs’ First Amendment rights were being invaded.
This case was decided on February 12, 1970. On February 23, 1971, the Court handed down a sextet of decisions dealing with problems more or less common to those in Dombrowski and in this case. See Younger v. Harris, 1971, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669; Samuels v. Mackell, 1971, 401 U.S. 66, 91 S.Ct. 764, 27 L.Ed.2d 688; Boyle v. Landry, 1971, 401 U.S. 77, 91 S.Ct. 758, 27 L.Ed.2d 696; Perez v. Ledesma, 1971, 401 U.S. 82, 91 S.Ct. 674, 27 L.Ed.2d 701; Dyson v. Stein, 1971, 401 U.S. 200, 91 S.Ct. 769, 27 L.Ed.2d 781; Byrne v. Karalexis, 1971, 401 U.S. 216, 91 S.Ct. 777, 27 L.Ed.2d 792. These eases stand for the following propositions: (1) Principles of equity govern federal orders enjoining state proceedings, and federal courts should therefore refuse to grant an injunction unless irreparable injury is demonstrated. (2) In the case of state criminal prosecutions, the injury must be both “great and immediate.” Younger v. Harris, 401 U.S. at 46, 91 S.Ct. 746. (3) The cost, anxiety, and inconvenience of defending against a single state prosecution do not constitute such injury. (4) The threat to plaintiff’s federally protected right must be one that could not be eliminated by his defense against a single state criminal prosecution. Id. (5) Plaintiff must be able to demonstrate that the prosecution was undertaken in bad faith. Id. at 49, 91 S.Ct. 746. In each of the sextet cases the Court held that a federal order enjoining state criminal prosecutions was unjustified because these prerequisites had not been shown.
It is argued that the sextet require that we reverse the judgment and direct that the action be dismissed. We have heard it suggested that the effect of the sextet is that henceforth Dombrowski will be authoritative only in cases in which the plaintiff is named Dombrow-ski and the defendant is named Pfister. We do not find that the sextet go that far. Dombrowski was distinguished, not overruled; it is still good law in those cases where the sextet’s criteria are met. They are met here.
Here over 100 prosecutions are involved, not just one. Nor is it correct that only a few, an average of four, prosecutions have been instituted against each particular plaintiff. We are unpersuaded by defendants’ rather deceptive mathematics. Plaintiff Arizona Magazine Distributors, Inc., for example, which employs or employed six other plaintiffs, has twenty-one charges pending against it. Plaintiffs Sam Bard, Myles Bard, and Bard Enterprises, Inc. have eleven charges pending against them. Defendants have filed ten charges against plaintiffs Vernon and Phyllis Hickman.
Surely the damage from this sort of activity is both irreparable and “great and immediate.” It can put the plaintiffs out of business without ever convicting any of them of anything. Nor can the threat to plaintiffs’ first amendment rights be eliminated by defense against the state prosecutions. Successful defense against eleven of them, plus the voluntary dismissal of two others, brought the filing of fourteen more, and later of an additional nineteen. There are about ninety still pending.
We also agree with the trial judge’s finding of bad faith. Defendants argue that the fact that there were no arrests — the plaintiffs appeared in response to summonses — and few seizures of materials distinguishes the present case from Dombrowski, supra, where the Court based its decision in part on the presence of illegal seizures and arrests. Being summoned to answer a criminal charge may be less traumatic to the defendant than an arrest. The summons, however, is not a mere piece of paper to be lightly cast aside. It is a substitute for an arrest, and carries the threat of arrest if it is disregarded. It initiates the burden of defense just as surely as an arrest does. There were enough seizures to force the plaintiffs to institute an action in the state court and, when defendants disregarded that judgment, two other actions in the District Court. The attempted distinction is specious.
Nor can Dombrowski be distinguished on the ground that the state statute there involved was unconstitutional while here the constitutionality of A.R. S. § 13-532 is conceded. In the vital area of First Amendment rights it is just as easy to discourage exercise of them by abusing a valid statute as by using an invalid one. The fact was recognized by the Supreme Court as long ago as 1896, in Yick Wo v. Hopkins, 118 U.S. 356, 6 S.Ct. 1064, 30 L.Ed. 220. See also Dombrowski, supra, 380 U.S. at 489-490, 85 S.Ct. at 1122:
“We hold that the abstention doctrine is inappropriate for eases where . . . statutes are justifiably attacked ... as applied for the purpose of discouraging protected activities.”
Defendants finally argue that even assuming that plaintiffs demonstrated irreparable injury and bad faith prosecution, 28 U.S.C. § 2283 prohibits the issuance of injunctive relief. Section 2283 provides:
“A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.”
In the sextet, the Court did not decide whether 42 U.S.C. § 1983 is an express authorization by Act of Congress within the meaning of § 2283. Younger v. Harris, 401 U.S. at 40-41, 91 S.Ct. at 748-749 (Black, J.) and at 55, 91 S.Ct. at 757 (concurring opinion of Stewart, J.'). The question was also reserved in Dombrowski v. Pfister, 380 U.S. at 484 n. 2, 85 S.Ct. 1116, in Cameron v. Johnson, 1968, 390 U.S. 611-613 n. 3, 88 S.Ct. 1335, 20 L.Ed.2d 182, and in Lynch v. Household Finance Co., 1972, 405 U.S. 538, 92 S.Ct. 1113, 31 L.Ed.2d 424 (1972).
In Lenske v. Sercombe, 9 Cir., 1968, 401 F.2d 520, we found it unnecessary to decide the question. We did observe, however, that if § 1983 is an exception, it would be applicable only “under extraordinary circumstances where irreparable injury is threatened to federally created rights.” Id. at 521. Other circuits are divided on the question. Compare Baines v. City of Danville, 4 Cir., 1964, 337 F.2d 579; Goss v. Illinois, 7 Cir., 1963, 312 F.2d 257; Smith v. Village of Lansing, 7 Cir., 1957, 241 F.2d 856; Sexton v. Barry, 6 Cir., 1956, 233 F.2d 220, 226, holding that § 1983 is not an exception to § 2283 with Cooper v. Hutchinson, 3 Cir., 1950, 184 F.2d 119, 124, holding that § 1983 is such an exception.
We confess that we find the reservation of the question in Dombrowski rather puzzling. It is based on the proposition that § 2283 applies only to enjoining pending state court proceedings, not to enjoining threatened proceedings not yet filed. In Dombrowski, no state proceeding had been commenced when Dombrowski filed his civil rights action. However, while that action was pending, a restraining order having been dissolved and no injunction having issued, state prosecutions were begun, and the Court in Dombrowski, in its order of remand, specifically provided for “prompt framing of a decree restraining prosecution of the pending indictments . . ..” 380 U.S. at 497, 85 S.Ct. at 1127. This was in accord with the ancient rule in equity applied by the Court in Chapman v. Sheridan-Wyoming Coal Co., 1950, 338 U.S. 621, 630, 70 S.Ct. 392, 397, 94 L.Ed. 393:
“But the action is one in equity, and ‘equity will administer such relief as the exigencies of the case demand at the close of the trial.’ Bloomquist v. Farson, 222 N.Y. 375, 380, 118 N.E. 855, 856; Lightfoot v. Davis, 198 N.Y. 261, 273, 91 N.E. 582, 586.”
Section 2283 does not prohibit the filing of an action; it prohibits the granting of an injunction. The idea that the decree in Dombrowski does not enjoin pending prosecutions and thus does not conflict with § 2283 is, we confess, a bit of metaphysics that eludes our grasp. All that it can accomplish is a race between prospective defendants and the prosecutor, the former running to the federal courts, the latter to the state courts. See Honey v. Goodman, 6 Cir., 1970, 432 F.2d 333, 343.
Be that as it may, we find that the injunction issued here was not in violation of § 2283, but for a different reason. Judge Haynesworth, speaking for the Fourth Circuit in Baines v. City of Danville, supra, holds that § 2283 is a limitation on the exercise by the federal courts of their equitable jurisdiction, but is not a jurisdictional statute. It is grounded on principles of comity. Thus, it is “inapplicable in extraordinary cases in which an injunction against state court proceedings is the only means of avoiding grave and irreparable injury.” 337 F.2d at 593. Accord, Honey v. Goodman, supra, 432 F.2d at 343.
There can be no doubt that the civil rights act confers upon the federal courts not only jurisdiction, but equitable jurisdiction, to enforce federal constitutional rights against state action which violates those rights. In the extraordinary type of case to which Judge Haynesworth refers, an injunction against state prosecutions, pending or prospective, may indeed be necessary in aid of that jurisdiction. Such an injunction, under such circumstances, is expressly permitted by § 2283.
Nothing in the sextet cases is contrary to the foregoing. In those cases the Court expressly recognized the exceptional type of case that we are discussing. E. g., Younger v. Harris, supra, 401 U.S. at 46, 53-54, 91 S.Ct. at 751, 754-755 (Black, J.); at 56, 91 S.Ct. at 757 (Stewart, J.); Perez v. Ledesma, supra, 401 U.S. at 85, 91 S.Ct. at 677 (Black, J.) and at 96-97, 91 S.Ct. at 682-683 (Brennan, J.) ; Dyson v. Stein, supra, 401 U.S. at 203, 91 S.Ct. 769.
We hold that the court properly enjoined the pending prosecutions.
4. The requirement that future prosecutions be preceded by adversary hearings.
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1277866-11428 | COFFIN, Chief Judge.
This is an appeal from an order of the United States District Court for the District of Massachusetts enforcing an Internal Revenue Service summons issued to the appellant, Arthur Andersen & Co. (“Andersen”). Andersen’s appeal asserts that this summons did not meet the relevance requirement of 26 U.S.C. § 7602. The IRS, in addition to arguing the propriety of the district court’s order enforcing its summons, filed a motion to dismiss Andersen’s appeal as moot. Because we find the question of mootness dispositive, we do not reach the merits of Andersen’s appeal.
The summons at issue in this case was served upon Andersen in the course of an IRS investigation of Good Hope Industries, Inc., (“Good Hope”), for whom Andersen had acted as auditor and tax advisor for the fiscal years ending July 31, 1973 through 1976. The IRS directed Andersen to produce and to testify about various records and workpapers related to its auditing and tax planning work for Good Hope. Andersen resisted producing its audit work programs, tax planning papers, and tax accrual audit workpapers. The district court, after holding an evidentiary hearing, ordered Andersen to comply with all aspects of the summons. Motions for a stay of the court’s enforcement order were denied first by the district court and then by this court. After filing its notice of appeal from the district court’s order, Andersen complied with the summons by producing all the documents requested by the IRS. In this appeal, Andersen has challenged only that part of the order requiring the production of the tax accrual workpapers prepared in conjunction with its audit of Good Hope.
Since Andersen has produced all of the documents forming the subject matter of this appeal, the Controversy presented to this court appears, on its face, to be moot. See United States v. Lyons, 442 F.2d 1144 (1st Cir. 1971) (dismissing as moot an appeal by a taxpayer of an order enforcing an IRS summons that had been complied with). See also Barney v. United States, 568 F.2d 116 (8th Cir. 1978); United States v. Carpenter, 425 F.2d 264 (5th Cir. 1970). Andersen seeks to avoid the preclusive effect of the mootness doctrine by invoking the “capable of repetition yet evading review” exception recognized by the Supreme Court in Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911). An action falls within this exception if “(1) the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration, and (2) there [is] a reasonable expectation that the same complaining party [will] be subjected to the same action again.” Weinstein v. Bradford, 423 U.S. 147, 149, 96 S.Ct. 347, 349, 46 L.Ed.2d 350 (1975).
We are satisfied that this case meets the latter prong of the exception — that the controversy be sufficiently likely to be repeated. In May of 1979, the Chief Counsel of the IRS stated in an address to the Federal Tax Division of the American Institute of Certified Public Accountants that the IRS would actively seek access to accountants’ workpapers in connection with its investigations and that recurring litigation over summonses of the type at issue in this case was likely. Andersen is one of the nation’s largest accounting firms; one. or more of its clients is likely to be subjected to tax investigations in which the IRS would demand from Andersen its tax accrual workpapers for that client. The likelihood of recurrence here is at least as great as in other cases in which the Supreme Court has found the “capable of repetition yet evading review” exception applicable. See, e. g., Gannett v. DePasquale, 443 U.S. 368, 377-378, 99 S.Ct. 2898, 2904-05, 61 L.Ed.2d 608 (U.S. June 26, 1979) (sufficient likelihood that newspaper will again be enjoined from publishing aspects of criminal proceeding); United States v. New York Telephone Co., 434 U.S. 159, 165, 98 S.Ct. 364, 368, 54 L.Ed.2d 376 (1977) (sufficient likelihood that telephone company will again be ordered to assist FBI in performing pen register surveillance).
The basic requirement of the exception— that the question be one that will otherwise evade review — presents a more difficult problem. Andersen argues that the strong policy opposing delays in the enforcement of IRS summonses makes it unlikely that a district court would set a compliance date that would allow time, for a prior appeal. Cf. United States v. Salter, 432 F.2d 697, 700-01 (1st Cir. 1970) (public policy militates against permitting taxpayer to engage in discovery in proceeding for enforcement of IRS summons since delay would “jeopardize the integrity and effectiveness” of the investigation). Andersen argues further that the difficulty in meeting the “likelihood of success” and “irreparable harm” requirements for a stay pending appeal make this an equally unavailable avenue for obtaining review of an enforcement order prior to compliance. Finally, since Andersen is not likely to be a party to any judicial proceeding arising out of Good Hope’s tax deficiency, it will have no future opportunity to litigate the validity of the summons.
There is, however, one remaining means for a third party to obtain appellate review of such an enforcement order: it can refuse to comply and litigate the merits of the summons as a defense to a contempt citation. In its brief opposing the government’s motion to dismiss this appeal as moot, Andersen acknowledges this possibility, but argues that “a person should not be required to stand in contempt of a court order to obtain appellate review.” As support for this assertion, Andersen cites the Seventh Circuit’s recent decision in In re Special April 1977 Grand Jury, 581 F.2d 589 (7th Cir.), cert. denied, Scott v. United States, 439 U.S. 1046, 58 L.Ed.2d 705 (1979), which permitted a post-compliance appeal from an order enforcing grand jury subpoenas. In that case the court stated “the Supreme Court has not required litigants to subject themselves to contempt or criminal sanctions in order to meet this prong of the mootness test.” Id. at 591, citing Nebraska Press Association v. Stuart, 427 U.S. 539, 96 S.Ct. 2791, 49 L.Ed.2d 683 (1976); First National Bank of Boston v. Bellotti, 435 U.S. 765, 98 S.Ct. 1407, 55 L.Ed.2d 707 (1978).
We see two difficulties with Andersen’s reliance on In re Special Grand Jury. First, the case is distinguishable in one important aspect. The grand jury subpoenas at issue were directed at members of the appellant’s staff, not the appellant himself. It would be unreasonable to expect individuals with no strong interest in resisting the subpoenas to expose themselves to contempt by refusing to comply. Cf. Perlman v. United States, 247 U.S. 7, 38 S.Ct. 417, 62 L.Ed. 950 (1918) (interlocutory appeal from discovery order permitted when order directed to person other than appellant who has insufficient incentive to risk contempt). Here, in contrast, although Andersen is not the immediate target of the IRS investigation, it has asserted strenuously that it is damaged by the disclosure of these workpapers to the IRS. According to Andersen, its ability to obtain information from its clients necessary to perform its auditing function properly will be seriously impaired. This asserted interest provides sufficient incentive for Andersen to take all available steps to avoid disclosure. See In re Oberkoetter, 612 F.2d 15 at 18 (1st Cir. Jan. 4, 1980) (attorney would have adequate incentive to risk contempt to avoid testifying against his client).
Second, the Supreme Court decisions cited by the Seventh Circuit in In re Special Grand Jury do not lead inevitably to the conclusion that a litigant need not incur a contempt citation before meeting the “evading review” test. It is true that in Nebraska Press Association the court applied the mootness exception even though the newspaper publishers who were enjoined from reporting certain facts regarding an ongoing trial could have tested the court’s order by violating it and contesting the resulting contempt sanction. Similarly, in First National Bank of Boston the Court noted that the criminal penalties imposed by a Massachusetts statute prohibiting certain political expenditures by banks “discourage challenge by violation”. Both of these eases, however, involved prior restraints on arguably protected speech. We believe the Court’s unwillingness to require the parties in these cases to invite criminal sanctions in order to obtain appellate review more probably reflected the Court’s traditionally disapproving view of prior restraints on speech than a broadly applicable statement on the scope of the “capable of repetition yet evading review” exception.
Well established doctrine regarding the appealability of interlocutory orders suggests that the burden of incurring a contempt citation is not an unreasonable one to impose on a party seeking review of a question that will otherwise become moot. In United States v. Ryan, 402 U.S. 530, 533, 91 S.Ct. 1580, 1582, 29 L.Ed.2d 85 (1971), the Supreme Court stated that interlocutory review of grand jury subpoenas was available only wher. denial would render “any review whatsoever”, including defense to contempt, impossible. See also Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1940); In re Oberkoetter, supra. Similarly, in the context of subpoenas issued for discovery pursuant to rule 45 of the Federal Rules of Civil Procedure, the general rule is that interlocutory review of orders with regard to such subpoenas may be obtained only as a defense to a contempt citation. See Grinnell Corp. v. Hackett, 519 F.2d 595, 596-98 (1st Cir. 1975); Ryan v. Commissioner, 517 F.2d 13, 18-20 (7th Cir. 1975); United States v. Fried, 386 F.2d 691, 694-95 (2d Cir. 1967); C. Wright & A. Miller, Federal Practice & Procedure § 2463 (1971). But see Covey Oil Co. v. Continental Oil Co., 340 F.2d 993 (10th Cir.), cert. denied, 380 U.S. 964, 85 S.Ct. 1110, 14 L.Ed.2d 155 (1965). In Grinnell Corp., we dismissed an interlocutory appeal, holding that a discovery order did not meet the requirements of an appealable collateral order in part because it was not a question that would otherwise evade review. In reaching this conclusion we noted that appellants could have availed themselves of the “familiar procedure” of risking a contempt citation in order to obtain appellate review. 519 F.2d at 598 (citing Maness v. Meyers, 419 U.S. 449, 95 S.Ct. 584, 42 L.Ed.2d 574 (1975); United States v. Ryan, supra).
In the case at bar, Andersen seeks review because it faces the prospect of repeated orders to produce its tax accrual workpa-pers for other clients. In addition, the American Institute of Certified Public Accountants, as amicus curiae, argues that the continued use of IRS summonses for such workpapers would have a broad detrimental impact on the accounting industry. We are aware that this case differs from the ap-pealability cases noted above because the consequence of our denial of jurisdiction here is final foreclosure of Andersen’s opportunity to appeal, rather than merely delay of an appeal until a final judgment has been obtained. But to the extent that the issue sought to be reviewed is of such as-sertedly vital importance to both Andersen and the industry, it does not seem too draconian to insist on resort to contempt in order to preserve the issue for appeal.
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4117014-27204 | ORDER REGARDING PLAINTIFF’S SOCIAL SECURITY COMPLAINT
ORDER DIRECTING REMAND PURSUANT TO SENTENCE FOUR OF 42 U.S.C. § 405(g)
ORDER DIRECTING,THE CLERK TO ENTER JUDGMENT FOR PLAINTIFF ERNIE TERRAZAS AND AGAINST DEFENDANT MICHAEL J. ASTRUE
JENNIFER L. THURSTON, United States Magistrate Judge.
BACKGROUND
Plaintiff Ernie Terrazas (“Plaintiff’) seeks judicial review of an administrative decision denying his claim for and disability insurance benefits (“DIB”) under Title II of the Social Security Act (the “Act”).
FACTS AND PRIOR PROCEEDINGS
On December 23, 2005, Plaintiff filed an application for DIB under Title II of the Act in which he alleged that he suffered from a disability with a claimed onset date of October 4, 2005. See AR at 14, 117-18. After his application for benefits was denied by the agency, Plaintiff requested a hearing before an Administrative Law Judge (“ALJ”). On January 23, 2009, the ALJ issued a decision denying benefits. Id. at 9-19. Specifically, the ALJ found that Plaintiff was not disabled within the meaning of the Act. Id. at 19. On March 16, 2009, the Appeals Council affirmed the ALJ’s opinion and it became the decision of the Commissioner. Id. at 1-4.
Hearing Testimony
At the hearing before the ALJ on December 2, 2008, Plaintiff testified that he worked at Valley Perforating for about nine years prior to his disability onset date of October 4, 2005. AR at 26, 30. In fact, with brief breaks to work for other companies, Plaintiff stated that he worked for Valley Perforating off-and-on for about 23 years. Id. at 33. He stated he worked for Valley Perforating in the positions of machinist and forklift, operator. Id. He stated that machinist job required him to operate a “perforating” machine that punched holes in oil field pipes. Id. at 31. He said that this job required him to maintain the perforating machine also. Id. at 32. He estimated that he lifted objects weighing as much as 50 pounds while performing this job. Id. at 31.
Plaintiff testified he worked for about one year for a company known as Triad. AR at 32. He stated that his job at Triad also involved operating a perforating machine and a forklift. Id. In addition, Plaintiff testified that years before he worked for about four months at Bakersfield Wellhead. AR at 32. He described this work as temporary and part-time. Id. at 33. He performed the same type of work at Bakersfield Wellhead as he performed at Triad and Valley Perforating. Id.
Plaintiff testified that he stopped working after he fell off a ladder at work in October 2005. See AR at 38. He described having “severe pain all the time” since then. Id. at 39. He estimated the pain at 6 or 7 on an 10 point scale, but indicated that after he took his medications, the pain fell to a 3. Id. at 40.
Plaintiff testified that he suffered both back and neck pain. AR at 46. He reported that the back and neck pain were about equal and both were severe. Id. Plaintiff stated also that he smoked for over 40 years. Id. at 30. He described having a collapsed lung and breathing trouble. Id. Plaintiff also stated that he had three grand mal seizures several years earlier. Id. at 29.
Plaintiff believed that if he took his medications he could work, but not for very long. AR at 41. He stated that he tried to perform office work but had trouble doing that job because he couldn’t stand or sit for extended periods. Id. He believed that his condition worsened after he went back to work. Id. at 42. He testified that he wished he could work but believed his health wouldn’t permit it. Id. at 49.
Plaintiff estimated that he could stand and/or walk about two hours in an eight-hour day but believed he would suffer a lot of pain if tried to do so. AR at 42. He believed that he could sit for about 30 minutes at once. Id. at 29. He estimated that he could walk about one to two blocks at a time. Id. He thought that he could lift 20- to 30-pounds. Id.
Plaintiff testified that he had used a cane for the last five years. AR at 34. He believed he needed the cane to support his legs and used it “everywhere,” even to get from room to room at home. Id. at 35. He stated that a doctor “prescribed” the cane. Id.
Plaintiff testified that he saw doctors frequently because of his conditions. AR at 28. He estimated that he visited the doctor about once every two months. Id. In particular, he stated that he saw a doctor for “pain management” therapy, which involved, primarily, taking medication. See id. He reported that he took medications such as Tylenol, Codeine and Vicodin. Id. at 37. He stated that sometimes the medicine caused side effects like nausea and fatigue. See id. at 38.
Plaintiff testified that his medications helped him tolerate the pain and allowed him to get a “little” sleep. AR at 42. Still, he believed that he could sleep for only 20 to 30 minutes at one time. Id. at 43. He stated that tranquilizers did not help much. Id. He indicated that he would try to obtain relief by lying down one to two hours a day and elevating his legs. Id. at 44. Plaintiff stated that he felt tired all the time. Id. At 45. He reported that he had high blood pressure and diabetes. AR at 45. He described feeling dizzy if he didn’t eat right or take his medications. Id.
Plaintiff testified that his wife assisted him with his personal grooming habits. AR at 25. In particular, he stated that she helped bathe him because he had difficulty standing. Id. Plaintiff characterized his ability to do household chores as “limited.” Id. Plaintiff estimated that he watched about two hours of television a day. AR at 25. He stated that he read the newspaper for about 20 minutes each day. Id. He stated that sometimes he visited family and friends but didn’t engage in any social activities like going to church or to the movies. Id. at 26, 38. Plaintiff stated that he had a driver’s license and did drive. Id. at 24.
Plaintiff acknowledged that in 2006, he was involved in an altercation with the police as a result of being publicly intoxicated. AR at 47. He stated that this incident involved an argument with a neighbor. Id. He testified that he had not had a drink in four or five years, although he did not deny that the public intoxication incident occurred in 2006. Id. at 47-48.
A vocational expert (“VE”), Jose Chaparro, testified also. He categorized Plaintiffs past work as a perforator as that of industrial machine operator and defined this work as skilled and heavy. AR at 52. He described Plaintiffs work as a forklift operator as medium and semi-skilled. Id.
In his first hypothetical, the ALJ described a person of Plaintiffs age, education and work history, who was capable of lifting 20 pounds occasionally and 10 pounds frequently, sitting/standing/walking for six hours in an eight-hour day, who was prohibited from continuous repetitive neck motion and from holding his neck in a fixed position for prolonged periods, precluded from overhead work and precluded from commercial driving and working at night or around dangerous machinery. AR at 53. The VE opined that such a person could not perform any of Plaintiffs past work. Id. However, the VE believed that the person could perform other work in the regional and national economy, including that of airline security representative, cafeteria attendant and fast food worker. Id. The VE characterized these jobs as light and unskilled. Id. In response to a question from the ALJ, the VE stated that his testimony conformed to the requirements of the Dictionary of Occupational Titles (“DOT”). Id. at 54.
In a second hypothetical, the ALJ described the same person in the first hypothetical but, in addition, he added that the person needed to stand and sit at will and use a cane for walking and for balance. AR at 54. The VE repeated that such a person could not perform Plaintiffs past work but could perform other light and unskilled work like ticket seller and cashier. Id. The VE also believed that this person could perform sedentary jobs. Id. at 55. As an example he mentioned the job of “table worker.” Id. Again, he affirmed that his opinion was in conformity with the DOT. Id.
Last, in a third hypothetical, the ALJ described a person of Plaintiffs age, education and work history, but who was unable to complete an 8-hour day or 40-hour workweek. AR at 55. The VE opined that such a person could perform no work. Id. at 55-56.
Relevant Medical Evidence
Dr. Paul Walsh examined Plaintiff on October 4, 2005. Plaintiff told him he fell from a ladder that morning and sustained injuries to his back and neck with ensuing pain. AR at 599. He characterized x-rays taken of Plaintiffs cervical, thoracic and lumbar spine as showing no fracture or acute bony abnormality. Id. During his examination, Dr. Walsh noted no acute distress and found Plaintiff to be alert and cooperative. Id. He noted diffuse tenderness in his neck with palpation over the cervical spine. Id. Based upon his examination and the x-rays, Dr. Walsh concluded that Plaintiff had acute cervical, thoracic and lumbar spine strain, status post fall. Id.
Dr. J.R. Grandhe examined Plaintiff on October 17, 2005. He noted Plaintiffs October 4 injury. AR at 366. Plaintiff complained of lower back and neck pain that was constant, burning and sharp, and worse in the morning. AR at 366-67. Plaintiff described his neck pain as radiating to the upper extremities and accompanied by numbness and tingling. Id. at 366. Plaintiff complained of headaches also. Id. at 367.
Dr. Grandhe noted that Plaintiff walked with a severe limp. AR at 368. Dr. Grandhe found that movement in Plaintiffs cervical spine was restricted with left radiculopathy. Id. He described the greater occipital nerve as severely tender and noted severe tenderness on the left facet joint. Id. Dr. Grandhe found that Plaintiffs lumbar spine was restricted with left radiculopathy and trigger point tenderness and found also that the sacroiliac joint was tender on the left. Id.
Dr. Grandhe found a severe, lower back, work-related injury with possible lumbar disc rupture causing total numbness in the left, lower extremities. AR at 369. He noted that Plaintiffs lumbar strain that was acute and chronic. Id. He believed that Plaintiffs left sacroiliac strain could lead to arthropathy. Id. Also, Dr. Grandhe determined that Plaintiff suffered from a severe cervical spine strain with possible acute left cervical facet joint arthropathy. Id. He believed Plaintiffs headaches were secondary to irritation of his bilateral occipital nerves or cervical trigger points. Id. Based on these findings, Dr. Grandhe recommended pain relief via medication and massage therapy, and an MRI and a CT scan of the cervical and lumbar spine. Id.
Dr. Vernon Sorenson examined Plaintiff in November 2005. He diagnosed Plaintiff with a neck sprain and authorized an MRI of his cervical and lumbar spine. AR at 397. He characterized Plaintiff as totally temporarily disabled and prescribed Naprosyn, Tylenol and Soma for relief. Id.
Dr. John Grundzik of Kern Radiology Medical Group, Inc., performed an MRI on Plaintiff in December 2005. It revealed mild spondylosis at L4-5 and L5-S1 but no significant stenosis. AR at 379. As a result, Dr. Grundzik concluded that Plaintiff had minimal sporadic spondylotic changes but there was no evidence of acute focal disc herniation or stenosis. Id. at 380.
In follow-up exams, Dr. Sorenson noted the same cervical and lumbar spine strain and recorded slow progress. See AR at 398-410, 412-18. However, following a January 13, 2006 examination, Dr. Sorenson concluded that Plaintiff needed no further evaluation and should be discharged from treatment and returned to “[f]ull duty with no restrictions.” Id. at 411.
Dr. Arthur Harris examined Plaintiff in April 2006. Dr. Harris recounted Plaintiffs medical history including his October 4, 2005 injury. AR at 441. Plaintiff complained to Dr. Harris of radiating pain and limited range of motion in both the cervical and lumbar spine with headaches. Id. at 443. Dr. Harris noted that Plaintiff moved about without obvious discomfort but observed a “stuttering-type gait.” AR at 444. Upon examination, he found the cervical spine was tender to palpation in the upper, mid and lower cervical paravertebral muscles and in both trapezial regions. Id. In addition, he noted increasing cervical pain with motion but found Plaintiff negative for Spurling and Adson maneuvers. Id.
Dr. Harris noted that Plaintiffs x-rays revealed mild degenerative changes in the cervical and lumbar spine with transitional lumbar vertebra having partial sacrilization of the right L5 process. AR at 446. He concluded that Plaintiff sustained a eontusion/straining injury to the cervical and lumbar spine with left lumbar radiculopathy. Id. He referred Plaintiff to electro diagnostic studies for further evaluation of his lumbar radiculopathy “as he has remained symptomatic in spite of the passage of time and his care to date.” Id. at 447.
Dr. Harris examined Plaintiff again in June 2006. He characterized Plaintiffs condition as roughly the same as two months earlier. AR at 424-25. In addition, he noted a decreased sensation in Plaintiffs left lower extremity, “most notably in the L5 distribution.” Id. at 425. Dr. Harris provided the same diagnosis of eontusion/straining injury in both the cervical and lumbar spine with left lumbar radiculopathy. AR at 426. He believed that Plaintiff had received the maximum benefit from treatment and that his condition was permanent and stationary. Id. at 427.
Dr. Harris opined that the condition of Plaintiffs cervical spine precluded work that involved continuous or repetitive cervical motion, holding his head in a fixed position for an extended period of time, or using his upper extremities at or above shoulder level. AR at 427-28. He believed that Plaintiffs spinal impairments precluded him from performing very heavy work. Id. at 428. Based on Plaintiffs descriptions of his prior work, Dr. Harris did not believe that he could return to that work. Id.
Dr. Jonathan Gurdin examined Plaintiff in May 2006. Again, Plaintiff complained of low back and neck pain with pain radiating to the left arm and leg. AR at 419. Dr. Gurdin reviewed the December 2005 MRI of the lumbar spine and found a partial sacrilization of the L5 vertebra with mild spondylosis at L4-5 and L5-S1. AR at 419. He noted that the MRI of Plaintiffs cervical spine indicated minimal spondylotic change. Id.
Upon examination, Dr. Gurdin found the entire area of Plaintiffs neck to be “non-tender” despite Plaintiffs complaints that it ached. AR at 420. Dr. Gurdin believed that Plaintiffs constant pain complaints “appeared to be an exaggerated pain response.” Id. at 419. He noted that Plaintiffs only treatment involved taking medications like Norco and Tylenol # 3. Id.
Dr. Gurdin described Plaintiff as walking slowly with a left-sided antalgic limp. AR at 420. He noted that Plaintiff was slow and deliberate getting on and off the exam table and when lying down. Id. As with the cervical spine, Dr. Gurdin found the lumbar spine nontender to palpation despite Plaintiffs complaints of aching. Id. He did note positive Waddell’s sign with worsening of lower back pain with gentle axial compression and trank rotation. Id.
Dr. Gurdin diagnosed Plaintiff with partial sacrilization at the L5 vertebra, lumbar spondylosis, cervical spondylosis and possible vascular insufficiency in the left leg. AR at 421. However, he reiterated his belief that Plaintiff exaggerated his pain and stated that because of this exaggeration he was unable to accurately estimate his activity capacity. Id.
In June 2006, Dr. M.O. Nawar, a non-examining agency expert, completed a physical residual functional capacity (“RFC”) evaluation of Plaintiff. Although Dr. Nawar diagnosed back pain (AR at 450), he concluded that Plaintiff could lift 50 pounds occasionally, 25 pounds frequently and stand/walk/sit six hours each in an eight-hour day with no restrictions for pushing/pulling. Id. at 451. Also, he concluded that Plaintiff could climb, balance and stoop occasionally, and kneel, crouch and crawl frequently. Id. at 452. He found no manipulative, communicative, visual or environmental limitations. Id. at 452-53. He characterized his diagnosis and RFC findings as consistent with those of treating/examining sources. Id. at 454.
Records indicate that in September 2006, Plaintiff was treated in the emergency room due to an “altered level of consciousness/seizure.” See AR at 522. The treating doctor’s report found no acute injury but noted evidence of a craniotomy overlying the right temporal lobe. Id. He described Plaintiffs condition as status post previous right temporal lobe craniotomy with no intra cranial abnormalities currently detected. Id.
ALJ Findings
The ALJ evaluated Plaintiff pursuant to the customary five-step sequential evaluation. First, he determined that Plaintiff had not engaged in substantial gainful activity since his claimed onset date of October 4, 2005. AR at 14. Second, he found that Plaintiff had severe impairments caused by degenerative disc disease (neck and back) and seizure disorder. Id. Third, the ALJ determined that Plaintiff did not have an impairment, or a combination of impairments, that met or exceeded the level required under agency guidelines for presumed disability. Id.
Fourth, the ALJ determined that Plaintiff had the RFC to lift and carry 20 pounds occasionally and 10 pounds frequently; sit, stand and walk six hours out of an eight-hour day; with no continuous repetitive neck motions, and no holding of his neck in fixed positions for prolonged periods; no overhead work; no work at heights or around dangerous machinery; and no commercial driving. AR at 16. Based on his RFC assessment and the testimony of the VE, the ALJ found that Plaintiff could not perform his past relevant work, but concluded that Plaintiff retained the ability to perform other work in the national economy. Id. at 18. As a result, the ALJ determined that Plaintiff was not disabled as defined by the Act. Id. at 19.
SCOPE OF REVIEW
Congress has provided a limited scope of judicial review of the Commissioner’s decision to deny benefits under the Act. When reviewing the findings of fact, the Court must determine whether the Commissioner’s decision is supported by substantial evidence. 42 U.S.C. 405(g). Substantial evidence means “more than a mere scintilla,” Richardson v. Perales, 402 U.S. 389, 402, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971), but less than a preponderance. Sorenson v. Weinberger, 514 F.2d 1112, 1119, n. 10 (9th Cir.1975). It is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Richardson, 402 U.S. at 401, 91 S.Ct. 1420. The record as a whole must be considered, weighing the evidence that supports and detracts from the Commissioner’s conclusion. Jones v. Heckler, 760 F.2d 993, 995 (9th Cir.1985). The Court must uphold the determination that the claimant is not disabled if the Commissioner applied the proper legal standards and if the findings are supported by substantial evidence. See Sanchez v. Sec’y of Health and Human Serv., 812 F.2d 509, 510 (9th Cir.1987).
REVIEW
In order to qualify for benefits, a claimant must establish that he is unable to engage in substantial gainful activity due to a medically determinable physical or mental impairment which has lasted or can be expected to last for a continuous period of not less than 12 months. 42 U.S.C. § 1382c (a)(3)(A). A claimant must show that he has a physical or mental impairment of such severity that he is not only unable to do his previous work, but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy. Quang Van Han v. Bowen, 882 F.2d 1453, 1456 (9th Cir.1989). The burden is on the claimant to establish disability. Terry v. Sullivan, 903 F.2d 1273, 1275 (9th Cir.1990).
In an effort to achieve uniformity of decisions, the Commissioner has promulgated regulations which include the five-step sequential disability evaluation process described above. 20 C.F.R. §§ 404.1520(a)-(f), 416.920(a)-(f) (1994). As noted, applying this process in this case, the ALJ found that Plaintiff: (1) had not engaged in substantial gainful activity since the alleged onset of his disability; (2) had medically determinable severe impairments (degenerative disc disease (neck and back) and seizure disorder); (3) did not have an impairment which met or equaled one of the impairments set forth in Appendix 1, Subpart P, Regulations No. 4; (4) could not perform his past relevant work; but (5) retained the RFC to perform other work related activities. AR at 14-18. The ALJ then determined that Plaintiff was not under a “disability” as defined in the Act. Id. at 19.
Plaintiff challenges the ALJ’s determination at Step 5 of the sequential evaluation process, where an individual’s ability to perform work is assessed based on his RFC. In particular, Plaintiff alleges that the ALJ failed to properly incorporate the findings of an examining physician in the hypothetical he presented to the VE and thus erred in relying on this hypothetical and the VE’s opinion in concluding that he retained the ability to perform other work in the national economy. (Doc. 15 at 4-5).
DISCUSSION
1. The ALJ’s hypothetical to the VE was incomplete and remand is warranted
Plaintiff raises just one issue on appeal. He contends that the hypothetical the ALJ posed to the VE, and upon which he based his RFC finding, failed to include a limitation on reaching at shoulder level and, thus, failed to account for all of his functional limitations. (Doc. 15 at 4-5).
In concluding that Plaintiff could not perform his past work but could perform other work, the ALJ cited Dr. Harris’s conclusion that Plaintiffs impairments prevented him from performing work that required “repetitive use of the upper extremities at or above shoulder level.” AR at 18, 428 (emphasis added). In fact, the ALJ found Dr. Harris’s opinion “persuasive and [gave] it great weight.” Id. at 18. Nevertheless, in the hypothetical posed to the VE, and subsequently incorporated into his RFC finding, the ALJ included a restriction only for “overhead work.” AR at 16, 53. Based on this hypothetical, the VE concluded that Plaintiff retained the ability to perform “light and unskilled” jobs like airline security representative, cafeteria attendant, and fast food worker. Id. at 53. The ALJ specifically cited the VE’s opinion to support his conclusion that Plaintiff retained the ability to perform these jobs. Id. at 19.
Plaintiff contends that each of the jobs cited by the ALJ “require frequent to constant reaching” and argues that his failure to incorporate a restriction on shoulder level reaching rendered the hypothetical incomplete. As a result, he asserts that the ALJ’s reliance on the VE’s opinion was error and that remand is warranted to propound a proper hypothetical that “includes the limitation of no reaching ‘at’ shoulder level.” (Doc. 15 at 5).
The Commissioner may carry his burden of showing an ability to do other work by eliciting the testimony of a VE in response to a hypothetical that sets out all the limitations and restrictions of the claimant that are supported by the record. Andrews v. Shalala, 53 F.3d 1035, 1043 (9th Cir.1995). A hypothetical question posed to a VE must include all impairments supported by substantial evidence. Osenbrock v. Apfel, 240 F.3d 1157, 1164-65 (9th Cir.2001). Reliance on a hypothetical that fails to include all accepted limitations is insufficient to carry the agency’s burden of proving the ability to engage in alternative work. Andrews, 53 F.3d at 1044.
The issue of the sufficiency of the hypothetical posed to the VE and relied upon by the ALJ turns on whether there is a substantive difference between a restriction to use of the upper extremities for overhead work and a restriction to use of the upper extremities at shoulder level. This question was addressed recently in Shafigi v. Astrue, 2009 WL 4267499 (C.D.Cal., Nov. 23, 2009). In Shafigi, the ALJ propounded a hypothetical to the VE that contained a limitation “for ‘no repetitive, overhead reaching or push/pull.’ ” Id. at *3. However, in his decision, the ALJ expanded the restriction beyond the hypothetical posed to the VE and prohibited Shafigi “from all ‘work at or above shoulder level.’ ” Id. The court concluded that,
While the hypothetical includes work above shoulder level, it fails to account for work at shoulder level. As a result, the ALJ posed an incomplete hypothetical to the VE. Moreover, the jobs identified by the vocational expert require frequent or occasional reaching. There is no indication whether the reaching includes at or above shoulder level reaching.
Based on the foregoing, the Court finds that the ALJ committed legal error by failing to pose a complete hypothetical to the VE to include a limitation for work at shoulder level ....
Id. (Emphasis added.)
Based on Shafigi, the Court concludes that there is a substantive difference between a restriction to overhead work and work at shoulder level. While the ALJ need not include restrictions not supported by substantial evidence in the record, see Magallanes v. Bowen, 881 F.2d 747, 756-57 (9th Cir.1989), here he accorded “great weight” to Dr. Harris’s opinion, and specifically cited his preclusion of Plaintiff from performing work requiring repetitive use of his upper extremities at or above shoulder level. AR at 18 (emphasis added). As a result, this preclusion was accepted by the ALJ and constituted substantial evidence that should have been presented in the hypothetical posed to the VE. Osenbrock, 240 F.3d at 1164-65 (holding that a hypothetical question posed to a VE must include all impairments supported by substantial evidence); see also Tonapetyan v. Halter, 242 F.3d 1144, 1149 (9th Cir.2001) (holding that an examining physician’s opinion constitutes substantial evidence if based upon the physician’s own independent examination of the claimant).
Plaintiff contends that the jobs listed by the VE (airline security representative, cafeteria attendant, and fast food worker) involve frequent-to-constant reaching. Defendant does not dispute this fact and, because no limitation on repetitive use of the upper extremities at shoulder level was included in the hypothetical, the VE did not address the impact such a restriction might have on Plaintiffs ability to perform these jobs. Under these circumstances, the ALJ’s failure to incorporate this re strietion rendered the hypothetical incomplete. As a result, his reliance on the VE’s opinion to conclude that Plaintiff retained the ability to perform other work was error and warrants remand. See Andrews, 53 F.3d at 1044; see also Matthews v. Shalala, 10 F.3d 678, 681 (9th Cir.1993) (“If a vocational expert’s hypothetical does not reflect all the claimant’s limitations, then the ‘expert’s testimony has no evidentiary value to support a finding that the claimant can perform jobs in the national economy.’ ”)
2. Remand is appropriate in this case
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4109532-21946 | MEMORANDUM AND ORDER ON DEFENDANT’S MOTION TO DISMISS
GERTNER, District Judge:
This case comes before the court on respondent’s motion to dismiss Roger Herbert’s (“Herbert”) petition for habeas corpus, which he brings pursuant to 28 U.S.C. § 2254. Herbert asserts numerous constitutional defects in his trial and in his representation both at trial and on direct appeal. On the assented motion of the parties, the proceedings have been bifurcated such that, at this time, the only issue before the Court is whether Herbert’s petition is timely under 28 U.S.C. § 2244(d). And central to that determination is the application of the “prison mailbox rule.” The mailbox rule, simply put, holds “that a pro se prisoner’s motion ... is filed on the date that it is deposited in the prison’s internal mail-system ... provided that the prisoner utilizes, if available, the prison’s system for recording legal mail.” Morales-Rivera v. United States, 184 F.3d 109 (1st Cir.1999). For the reasons stated herein, notably the application of that rule to the facts of this case, I find that the petition is timely and, therefore, the motion to dismiss (document # 18) is DENIED.
I. PROCEDURAL BACKGROUND
On March 8, 1991, Herbert was convicted of armed robbery and first-degree felony murder by a jury in the Superior Court of Suffolk County, Massachusetts. See Pet’r.’s Mem. Regarding Timeliness Ex. 1 (document # 17-2) [hereinafter State Court Docket]. Herbert appealed, and the Massachusetts Supreme Judicial Court (“SJC”) affirmed his conviction on November 9, 1995. See Commonwealth v. Herbert, 421 Mass. 307, 656 N.E.2d 899 (1995). Herbert did not pursue a direct appeal to the United States Supreme Court. As such, his conviction became final on February 6, 1996, when the ninety-day period for seeking certiorari in the Supreme Court expired. See Voravongsa v. Wall, 349 F.3d 1, 2 (1st Cir.2003).
After his conviction was affirmed, Herbert claims that he mailed a motion for a new trial and a motion for appointment of counsel to the Suffolk County Superior Court on December 17, 1996 — 316 days after his conviction was finalized and 238 days after the Anti-Terrorism and Effective Death Penalty Act (“AEDPA”) became effective on April 24, 1996. The motion for appointment of counsel was received and docketed on December 19, 1996, see State Court Docket at Paper No. 42; however, the motion for a new trial was never docketed. The Superior Court never took any action on either motion. Six years later, Herbert filed renewed motions for a new trial and for appointment of counsel, which the Superior Court received and docketed on December 19, 2002. See State Court Docket at Paper No. 45. This time around, the Superior Court did rule on the motions, denying both on November 20, 2003. See State Court Docket at Paper No. 48.
On February 10, 2004, Herbert sought permission from a “gatekeeper” justice of the SJC to appeal the denial of his motion to the full SJC, pursuant to Mass. Gen. L. ch. 278 § 33E. See Pet’r.’s Mem. Regarding Timeliness Ex. 4 (document # 17-5). The gatekeeper justice denied Herbert permission to appeal to the SJC on July 15, 2004. Herbert filed a motion to reconsider before the gatekeeper justice on July 29, 2004, which was denied on August 4, 2004. Id. Herbert then sought to appeal the gatekeeper’s decision to the full SJC, which dismissed his appeal on December 12, 2005. See Commonwealth v. Herbert, 445 Mass. 1018, 838 N.E.2d 1236 (2005). Herbert filed his habeas petition in this court twenty-five days later on January 5, 2006.
II. ANALYSIS
The timeliness of Herbert’s petition turns on two key periods of time. The first is the period between December 17, 1996, when Herbert claims to have mailed his first motion for a new trial, and November 20, 2003, when Herbert’s request for a new trial was finally ruled on and denied by the state trial court. Whether or not this period ought to be tolled turns on the meaning of the word “filed” in 28 U.S.C. § 2244(d)(2) and on the application of the “prisoner mailbox rule.” See Morales-Rivera v. United States, 184 F.3d 109 (1st Cir.1999). The second key period is the time between February 10, 2004, the date that Herbert sought review of his denied motion in the SJC, and December 12, 2005, the date the full SJC dismissed his appeal. Whether or not this entire period ought to be tolled turns on the meaning of the word “pending” in 28 U.S.C. § 2244(d)(2), for which we must rely on state law. See Currie v. Matesanz, 281 F.3d 261 (1st Cir.2002).
If both of these time periods are tolled, then 263 non-tolled days will have elapsed since Herbert’s AEDPA clock started running on April 24, 1996, and his petition will be timely. However, if either of these periods are not tolled, then Herbert’s petition will be multiple years late.
A. The Prisoner Mailbox Rule
The question of whether or not Herbert’s AEDPA clock stopped ticking on December 17, 1996 — the day he claims to have mailed his motion for a new trial to the Superior Court — depends on the application of the prisoner mailbox rule. Though the First Circuit has clearly held that the prisoner mailbox rule applies to petitions filed in federal court, see Morales-Rivera v. United States, 184 F.3d 109 (1st Cir.1999), it has not “express[ed] an opinion on the applicability vel non of the prisoner mailbox rule to a state-court petition for post-conviction relief.” Donovan v. Maine, 276 F.3d 87, 90 (1st Cir.2002). “However, ... to the extent (if at all) this is a question of state law,” id. at n. 3, the question left open in Donovan does not bear on this case, as the prisoner mailbox rule applies in Massachusetts. See Commonwealth v. Hartsgrove, 407 Mass. 441, 444, 553 N.E.2d 1299 (1990) (holding that “an incarcerated pro se inmate[’s]” filing “should be deemed to have occurred on the inmate’s relinquishment of control of his [filing] to the prison authorities”). Because the authoritative state and federal courts both employ the prisoner mailbox rule, I apply it here.
The mailbox rule, simply put, holds “that a pro se prisoner’s motion ... is filed on the date that it is deposited in the prison’s internal mail-system ... provided that the prisoner utilizes, if available, the prison’s system for recording legal mail.” Morales-Rivera, 184 F.3d at 109. In instances where there is no system in place for recording legal mail, a court may rely on other evidence to establish whether and when a filing was actually mailed. See Lattimore v. Dubois, 311 F.3d 46, 54 n. 5 (1st Cir.2002) (relying on a “a fair inference that the petition was placed in the mail” when the prison “where the petitioner is incarcerated, does not keep a log of outgoing legal mail”); Casanova v. Dubois, 304 F.3d 75, 79 (1st. Cir.2002) (applying the rule to Massachusetts institutions even though they lack a “process for tracking legal mail”).
There is ample evidence here to support a finding that Herbert did in fact mail his motion for a new trial to the Suffolk Superior Court on December 17, 1996. For one thing, the motion itself is signed and dated as of that date. See Pet’r.’s Mem. Regarding Timeliness Ex. 2 (document # 17-3) [hereinafter Herbert Aff.]. Multiple courts in this circuit have found such evidence, standing alone, sufficient to satisfy the mailbox rule. See Guzman v. United States, No. 05-214-ML, 2007 WL 141073, at *2 n. 4, 2007 U.S. Dist. LEXIS 3823, at *7 n. 4 (D.P.I. Jan. 17, 2007) (“[U]nder the mailbox rule, the motion will be considered filed as of the date it was signed.” (citation omitted) (citing Morales-Rivera, 184 F.3d at 110)); Blackmer v. Warden, No. 03-275-PB, 2004 WL 2823216, at *1 n. 1, 2004 U.S. Dist. LEXIS 24824, at *1 n. 1 (D.N.H. Dec. 9, 2004) (relying on “the date that appears on the petition” to establish the filing date) (citing Adeline v. Stinson, 206 F.3d 249, 251 n. 1 (2d Cir.2000)); cf. Lattimore, 311 F.3d at 54 n. 5 (“The petition was signed and dated on Friday, April 25, 1997, and dock eted on Monday, April 28, 1997. It is a fair inference that the petition was placed in the mail on April 25, 1997”). But see Parrila Sanes v. United States, No. 98-123-PG, 2005 WL 1397431, at *7, 2005 U.S. Dist. LEXIS 40294, at *20 (D.P.R. June 9, 2005) (“Petitioner signed his petition on September 24, 2002, which in itself is not conclusive.”).
In this case, the date written on the motion itself is not the only evidence indicating when it was filed; to the contrary, “the record provides additional verification of the date that [the petitioner] placed the complaint into the prison mail system.” Casanova, 304 F.3d at 80 n. 6. First, Herbert has declared, under oath and on pain of perjury, that he mailed his motion through the prison mail system on December 17, 1996. Herbert Aff. ¶ 5 (document # 17-3); see Casanova, 304 F.3d at 79 (suggesting that prisoners may “demonstrate that their filings are timely by including a declaration or a notarized statement specifying the date the mail was deposited in the prison system”). In addition, there is the docket entry of December 19, 1996, logging the Superior Court’s receipt of Herbert’s supplemental motion for appointment of counsel, which he filed along with his motion for a new trial. Courts in this circuit have found similarly circumstantial documentary evidence sufficient to establish the filing date for purposes of the prisoner mailbox rule. See Casanova, 304 F.3d at 80 n. 6 (relying on evidence that petitioner withdrew money “in order to send his complaint via certified mail” to support finding that the complaint was in fact sent); Breese v. Maloney, 322 F.Supp.2d 109, 112 n. 2 (D.Mass. 2004) (relying on the date on “the envelope forwarding the filing fee” to set the date for the mailbox rule); cf. Dias v. Maloney, 156 F.Supp.2d 104, 122 n. 4 (D.Mass.2001) (relying on the date of “an application to proceed in forma pauperis” to establish “the date [petitioner] filed his petition for purposes of section 2244(d)”). Given that each piece of evidence in this case has been found, in its own right, sufficient to support application of the mailbox rule, surely their combination underscores the appropriateness of a finding that Herbert’s motion for a new trial was mailed, and therefore filed, on December 17, 1996.
It is worth observing that most cases applying the prisoner mailbox rule do so in situations where the filing at issue was ultimately received. However, the animating logic of the mailbox rule supports applying it with equal force to situations where a filing is mailed but there is no proof that it was ever docketed or received. As the Supreme Court observed in Houston v. Lack, the case first establishing the federal prisoner mailbox rule, “prisoners cannot take the steps other litigants can take to monitor the processing of their notices of appeal and to ensure that the court clerk receives and stamps their notices of appeal.” 487 U.S. 266, 270-71, 108 S.Ct. 2379, 101 L.Ed.2d 245 (emphasis added). “[T]he vagaries of the mail” system that may cause a prisoner’s filing to arrive late can just as easily cause it not to arrive at all, and the prisoner’s inability to “call[ ] the court to determine whether the notice has been received” places him in a uniquely powerless position. Id. at 271, 108 S.Ct. 2379. For that reason, a prisoner’s “control over the processing of his notice necessarily ceases as soon as he hands it over to the only public officials to whom he has access — the prison authorities”; what happens to the filing after that point is beyond the prisoner’s capacity to affect or, often, even to ascertain. Id. (emphasis added). As such, the policy goals and logic Houston embodies apply with equal force to late filings as they do to filings that may never arrive.
Nor does the fact that the rule’s application in this case would toll a lengthy period of time — -approximately seven years — suggest that the rule ought not to apply here. Cf. 56 Am.Jur.2d Motions, Rules, and Orders § 32 (2007) (“A motion filed but not ruled upon, dismissed, or withdrawn generally is still pending.”). There is no indication here that the state court would have acted on Herbert’s new trial motion any more quickly had the motion been docketed or received in 1996, seeing as the Superior Court never acted on Herbert’s initial motion for appointment of counsel, which was docketed on December 19, 1996. Unfortunately, as the case-law on AEDPA’s exhaustion requirement makes clear, delays of four, five, or six years are not uncommon in state courts’ post-conviction processes. See, e.g., Cotten v. Marshall, 791 F.2d 931, No. 85-3925, 1986 WL 16893, at *1, 1986 U.S.App. LEXIS 19194, at *3 (6th Cir. April 17, 1986) (finding exhaustion requirement met where “petition for post conviction relief had been pending in the state court for six years and ultimately was determined by the clerk’s office to be lost” (emphasis added)); Dangerfield v. McLemore, No. 01-cv-71501-DT, 2002 WL 169382, at *2, 2002 U.S. Dist. LEXIS 1864, at *9 (E.D.Mich. Jan. 8, 2002) (noting the “four years that [petitioner’s] post conviction motion was pending in state court”); United States ex rel. Gholston v. Godinez, No. 93-cv-5754, 1994 WL 395130, at *1, 1994 U.S. Dist. LEXIS 10367, at *2 (N.D.Ill. July 28, 1994) (noting that “[petitioner’s] state court petition for post conviction relief had been pending for six years”). The fact that the exhaustion doctrine excuses petitioners from meeting AEDPA’s exhaustion requirement when their state post-conviction relief drags on for multiple years indicates the- absurdity that would result if courts then used the very same state-court delays to penalize properly filed petitions under AEDPA’s tolling provisions.
As such, it is not at all surprising that a district court facing facts remarkably similar to those presented in this case tolled an equally substantial period of time, “granting [the] defendant a six-year extension of time in which to file his [petition].” United States v. Jackson-Bey, 302 F.Supp.2d 621, 629 (E.D.Va.2004). In Jackson-Bey, the petitioner’s request for habeas relief inexplicably “disappeared from the case file” after likely having been “misplaced by the Clerk’s Office.” Id. at 628-29. Despite there being strong direct and circumstantial evidence that the filings were mailed, there was no “docket entry of any filings received by the Clerk’s Office.” Id. Given these “sufficiently extraordinary” facts, the court tolled the statute of limitations, noting that because the “defendant’s own conduct did not lead to the inexplicable long lapse of time in th[e] case, ‘it would be unconscionable to enforce the limitation period against [him] and gross injustice would result’ by doing so.” Id. (quoting Harris v. Hutchinson, 209 F.3d 325, 330 (4th Cir.2000)).
Because I find that Herbert mailed his motion for state post-conviction relief on December 17, 1996, I hold that the period of time from that date until November 20, 2003, when Herbert’s request for a new trial was finally denied, is tolled under § 2244(d)(2).
B. Herbert’s Appeal Before the SJC
The second key temporal period affecting the timeliness of Herbert’s appeal is the period between February 10, 2004, when Herbert appealed his denied motion for a new trial to the gatekeeper justice of the SJC, and December 12, 2005, when the full SJC dismissed his appeal. More specifically, the timeliness of the petition turns on whether Herbert’s appeal continued to be “pending,” 28 U.S.C. § 2244(d)(2), after July 15, 2004, when the gatekeeper denied him leave to appeal to the full SJC. If the appeal was not still pending after that date, then 540 days will have elapsed between the gatekeeper justice’s denial and the filing of Herbert’s habeas petition. However, if the appeal was pending during that period, then only twenty-five days will have transpired between the SJC’s dismissal and the initiation of this habeas proceeding.
According to the First Circuit, “an application for post conviction relief is pending ‘from the time it is first filed until finally disposed of and further appellate review is unavailable under the particular state’s procedures.’ ” Currie v. Matesanz, 281 F.3d 261, 263 (1st Cir.2002) (emphasis added) (quoting Bennett v. Artuz, 199 F.3d 116, 120 (2d Cir.1999), aff'd on other grounds, 531 U.S. 4, 121 S.Ct. 361, 148 L.Ed.2d 213 (2000)). Massachusetts has adopted a somewhat unique procedure for appeals from motions for post-conviction relief in capital cases. See Mass. Gen. Laws ch. 278 § 33E. While an individual convicted of first-degree murder may file a motion for a new trial at any time in the state’s trial court, the denial of such a motion can be appealed only if a “single justice of the supreme judicial court” finds that the appeal “presents a new and substantial question which ought to be determined by the full court.” Id.
The First Circuit has assumed that, as a result of section 33E, Massachusetts state law prohibits further relief after a gatekeeper justice denies permission to appeal. As such, the First Circuit has held that a Massachusetts capital appellant’s post-conviction appeal is “pending until the gatekeeper justice denie[s] his application for leave to appeal.” Currie, 281 F.3d at 266; see also Mazza v. Hall, 28 Fed.Appx. 7, 7 (1st Cir.2002) (per curiam) (“[A] properly filed application for state post conviction review is ‘pending’ for purposes of § 2244(d)(2) from the time it is filed in the state superior court until it is disposed of by an SJC single justice.”). Indeed, there is substantial Massachusetts case law— stemming from the SJC’s opinion in Leaster v. Commonwealth, 385 Mass. 547, 548, 432 N.E.2d 708 (1982) — indicating that “[a] single justice’s denial of a defendant’s petition for leave to appeal is final and unreviewable.” Dickerson v. Attorney Gen., 396 Mass. 740, 742, 488 N.E.2d 757 (1986); see also Commonwealth v. Scott, 437 Mass. 1008, 1008, 770 N.E.2d 474 (2002); Commonwealth v. Francis, 411 Mass. 579, 583, 583 N.E.2d 849 (1992); Commonwealth v. Robinson, 408 Mass. 245, 248 n. 3, 557 N.E.2d 752 (1990).
Despite the absolutist language in many of these opinions, the SJC has in fact not adopted a strict prohibition against all appeals from a gatekeeper justice to the full SJC; to the contrary, it has carved out two very narrow exceptions. Cf. Hurley v. Superior Court Dep’t of the Trial Court, 424 Mass. 1008, 1009, 675 N.E.2d 771 (1997) (acknowledging the SJC’s “superintendence power to review rulings in matters in which the Legislature has expressly stated that the decision of another court or judge ‘shall be final.’ ”). The first exception was created in Fuller v. Commonwealth, 419 Mass. 1002, 643 N.E.2d 36 (1994), when the court “permit[ted a] petitioner to appeal” a gatekeeper justice’s “denial of ancillary motions” to the appeal. Parker v. Commonwealth, 448 Mass. 1021, 1022, 863 N.E.2d 40 (2007). One year after Fuller, the SJC created a second exception to the finality of a gatekeeper justice’s denial of leave to appeal, which is relevant here.
In Haberek v. Commonwealth, 421 Mass. 1005, 657 N.E.2d 228 (1995), a defendant “sought leave to appeal from a single justice of [the SJC]” to the full court, even though a “single justice [had already] denied the defendant’s motions.” Id. at 1005, 657 N.E.2d 228. The SJC was clearly aware of the provisions laid out in section 33E, as it cited the statute in its opinion. See id. But instead of refusing to hear the appeal, the SJC entertained the appeal and reversed the gatekeeper justice. Turning directly to the merits of the appeal, the SJC held that “it was error for the trial judge to deny ... the defendant’s motion for a new trial.” Id.
The factual background of Haberek is essential, as the case has been interpreted to apply only to its specific facts. See Commonwealth v. Shipps, 440 Mass. 1018, 1019 n. 1, 797 N.E.2d 1202 (2003). In Haberek, 421 Mass. 1005, 657 N.E.2d 228, the SJC overturned the gatekeeper justice’s ruling on the basis of a specific constitutional harm at issue in the case: “the same counsel was both the trial attorney and the appellate attorney, [and therefore] the ineffective assistance of counsel claim could not have been raised earlier.” Id. at 1005, 657 N.E.2d 228. As such, the court held that, even though the gatekeeper justice had denied the defendant permission to appeal, “there must be a remand.” Id. at 1006, 657 N.E.2d 228.
Importantly, the very same constitutional harm that caused the SJC to overrule the gatekeeper justice in Haberek was at issue during Herbert’s state-court appeal, and continues to be at issue in the instant petition for habeas corpus. See Pet’r.’s Opp’n to Resp.’s Mot. to Dismiss at 2 (“In his motion for a new trial ... the petitioner claim[ed] that he was denied effective assistance of counsel to the effect that both trial counsel and appellate counsel were one of the same.”); cf Pet. for Habeas Corpus ¶ 18.D. (“Appellate counsel and trial counsel were one of the same.... Attorney Shapiro represented the Plaintiff at his original trial as well as on his direct appeal to the Supreme Judicial Court.”). When ruling on his new trial motion, the Superior Court expressly denied Herbert’s ineffective assistance claims. See Commonwealth v. Herbert, Nos. 084646, 084647, slip op. at 1 n. 1 (Mass.Super.Ct. Feb. 13, 2004). As such, Herbert’s appeal fell squarely within the narrow exception carved out by Haberek; he sought review of the gatekeeper justice’s ruling that denied him relief with respect to the same form of ineffective assistance of counsel as was at issue in Haberek. Indeed, when he sought to appeal the gatekeeper justice’s denial of his appeal, Herbert explicitly in voked Haberek, asking the SJC to “hear this particular case pursuant to Haberek v. Commonwealth, 421 Mass. 1005, 657 N.E.2d 228 (1995).” Pet’r.’s Mem. Regarding Timeliness Ex. 5 (document # 17E).
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3574711-7312 | MICHAEL, Judge:
Between 16 June and 1 August 1980, appellant, a Marine Corps private, was tried at general court-martial before members. Pursuant to his plea of guilty, he was convicted of unlawfully selling government property, a violation of Article 108, Uniform Code of Military Justice (UCMJ), 10 U.S.C. § 908. Appellant pled guilty to wrongful appropriation of private property but was found guilty of the greater offense of larceny, a violation of Article 121, UCMJ, 10 U.S.C. § 921. Contrary to his pleas, he was convicted under three further specifications of larceny — of a government movie projector, of 24 blank Armed Forces identification cards, and of one government field safe with more than 230 negotiable government checks therein — all in violation of Article 121, UCMJ. Appellant was further convicted — again, contrary to his pleas — of unlawful entry into a government office with intent to commit larceny, a violation of Article 130, UCMJ, 10 U.S.C. § 930. Ap pellant was sentenced to confinement for seven years, forfeiture of all pay and allowances, and a dishonorable discharge. The sentence was approved by the convening authority.
Appellant now petitions this Court for a new trial on two specifications under Charge II. The two specifications alleged, respectively, larceny of the 24 blank identification cards and larceny of the safe and checks contained therein.
Appellant argues that a new trial is warranted on the basis of newly discovered evidence and fraud on the court. See generally Article 73, UCMJ, 10 U.S.C. § 873, paragraph 109, Manual for Courts-Martial, 1969 (Rev.) (MCM). The newly discovered evidence which appellant claims exists would arguably appear, in one instance, in immunized future testimony by the Government’s key witness at trial, Private Olsen. Appellant argues that Private Olsen “is now willing to testify that petitioner did not steal the checks or identification cards; that [Private Olsen] was the sole perpetrator; and that [Private Olsen] perjured himself at [appellant’s] court-martial.”
Appellant bases this argument on an affidavit from Private Olsen. Interestingly, Private Olsen does not recant his earlier testimony at appellant’s trial. He merely says: “I have evidence relevant to the guilt or innocence of Private (E-l) George D. Papageorgiou, USMC, [ XXX-XX-XXXX ], regarding the theft of Government checks and I.D. cards at Camp Lejeune, North Carolina. However, I will not bring this evidence forth without a grant of immunity for future prosecution for the charge of perjury.”
Private Olsen’s affidavit is just as consistent with an adherence to his prior testimony implicating appellant as it is with a renunciation of that testimony. On the basis of the affidavit, we cannot say whether or not there may have been perjury at the prior trial and whether or not it may have related to appellant. Private Olsen’s affidavit avoids the issue, and there is no assurance that he will ever clarify it — since he has no right to a grant of immunity from prosecution for perjury.
Appellant also claims the existence of newly discovered evidence in affidavits from ten inmates of the confinement facilities where appellant was incarcerated with Private Olsen. These affidavits purportedly constitute evidence that Private Olsen informed the affiants — in some cases, after appellant’s trial — that Private Olsen had perjured himself at the trial; that appellant had not been involved in the thefts of the identification cards, the safe and the checks; and that Private Olsen had wanted appellant to “burn” for exposing Private Olsen’s involvement in the crime to the Naval Investigative Service.
We have examined the defense’s many affidavits and the possibility of Private Olsen’s recantation. We are not convinced that the impeachment of Private Olsen’s testimony by the fellow inmates who have submitted affidavits or the possibility of Olsen’s own recantation would lead to a substantially more favorable result for appellant at a new trial. We are, as is the defense, still faced with the fact that there was at trial unrebutted testimony of appellant’s admission to commission of the two thefts at issue. Prosecutorial examination of Lance Corporal Vincent elicited the following statements:
The accused [appellant] started talking about the safe that was ripped off at battalion, started bragging about himself and Olson [sic] had ripped off it in town. * * * * * *
Well, he [appellant] told me that him and Private Olson [sic] got something and pried the window of the office, but it did not open. It buckled and shattered the glass. Private Olson [sic] reached around and unlocked the door, and then they went in; Private Olson [sic] got the safe up on his shoulder and ran around. And then they had a jeep that was sitting out in front that they had stolen prior, and they took it out and hid it.
$ sjc if: sfc
Record, at 206.
As to the theft of the military identification cards, the witness testified:
Yes, sir, he [appellant] was telling me that him and Private Olson [sic] had gone into the legal office down at battalion, and he’d been talking sitting there talking with Lance Corporal Austin, the WM that worked there, and she went out to the SRB section to get an SRB to type up a UPB or something like that. The safe drawers were open, say about four or five inches, and they would reach in there and grab I.D. cards and stick them in their camis.
Record, at 206.
Relative to petitioner’s alleged involvement in the theft of the identification cards, another witness, Lance Corporal Johnson, testified as follows:
Q. Lance Corporal Johnson, did you ever have the occasion to see the accused in possession of any I.D. cards?
A. Yes, sir.
* * * * * *
Q. And, would you please describe for the court what these identification cards looked like?
A. One of them was filled out with PAPAGEORGIOU’s picture on it, and there was two or three lying on the bed; two or three blank ones.
* * * * * *
Q. What, if anything, did you say to Private PAPAGEORGIOU concerning those I.D. cards?
A. I just asked him if he was going in the reserves and if he was getting out .. . And, I asked him what he was doing with them, and he said you can make money off I.D. cards, and picked them up and walked off.
Record, at 213.
At trial, defense counsel suggested that appellant could have been “kidding” about his involvement in the thefts; that he might have been aware of the details simply because Private Olsen had related them to him. (Record, at 211). Appellant himself has never come forward to lend substance to those suggestions. Silence at trial has been held to preclude the later attempt by an accused to present evidence in defense of the charge. United States v. Borner, 3 U.S.C.M.A. 313, 12 C.M.R. 69 (1953). Here, appellant’s silence, both at trial and before this Court, precludes any implied rebuttal by him to the testimony below of Lance Corporals Vincent and Johnson. Based on that testimony and the corroborating evidence that the thefts actually occurred, we cannot agree with appellant that, even assuming arguendo the impeachment of Private Olsen’s testimony by means of evidence along the lines contained in the affidavits which appellant now submits, a substantially more favorable result would be likely at another trial.
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3712396-14418 | ELLIS, Senior District Judge:
Petitioner Linda Morgan seeks review of a decision and order of the United States Department of Labor Benefits Review Board (Board) affirming the Administrative Law Judge’s (ALJ) denial of her claim for survivor’s benefits under the Black Lung Benefits Act, 30 U.S.C. § 901 et seq. (the Act). Because the factual findings of the ALJ are supported by substantial evidence and the legal conclusions of both the ALJ and the Board are consistent with applicable law, we affirm.
I.
Noble Morgan (Morgan), a former coal miner, died on July 7, 1999, at the age of 61. During his years of employment with the coal mines, Morgan engaged primarily in underground work as a roof bolter, working in dusty conditions. He also worked as a carpenter for several years, and then later as a security guard for a coal mine, where he was not exposed to a significant amount of coal dust. Morgan filed two applications for black lung benefits during his lifetime, the first in 1973 and the second in 1997. Both of Morgan’s claims for living black lung benefits were denied by the District Director.
Two years prior to his death, Morgan was diagnosed with colon cancer. Although he was treated for the cancer and underwent chemotherapy, the medical evidence reflects that at some point prior to his death, the cancer may have metastasized to his spine and possibly other areas, as well. Additionally, the record reflects that Morgan suffered from congestive heart failure and smoked tobacco for more than forty-five years at the rate of a pack of cigarettes or more per day.
Morgan’s death certificate lists his immediate cause of death as “lobar pneumonia” and indicates that an autopsy was performed of the “lung only.” J.A. 92. The autopsy report was issued by Dr. Alex Racadag on July 12, 1999, five days after Morgan’s death. Based on his examination of Morgan’s lung tissue, Dr. Racadag rendered a diagnosis of “acute bronchopneumonia and lobar pneumonia,” “mild simple coal worker’s pneumoconiosis with focal emphysema” and “pleural adhesions,” noting simply, as a “comment,” that these conditions “probably contributed to the patient’s morbidity and subsequent demise.” J.A. 93.
On July 29, 1999, petitioner, Morgan’s surviving spouse, filed a timely claim for survivor’s benefits under the Act. On October 4, 1999, the District Director denied petitioner’s claim for survivor’s benefits. Petitioner then requested a formal hearing before the Office of Administrative Law Judges and a de novo hearing was eventually held before an ALJ on February 28, 2002. On August 27, 2002, following the presentation of evidence and the submission of written closing arguments, the ALJ denied petitioner’s claim for black lung survivor’s benefits. J.A. 352-73. The ALJ’s August 27, 2002 decision included a lengthy description of Morgan’s work and medical history, as well as a detailed summary of the medical evidence in the administrative record, including chest x-rays, pulmonary function studies, arterial blood gas studies and various physicians’ reports. In the end, the ALJ found that petitioner had established the existence of legal pneumoconiosis on the basis of chest x-ray and certain medical opinion evidence, but concluded nonetheless that petitioner had failed to establish that the pneumoconiosis caused, substantially contributed to, or hastened Morgan’s death, a required element for entitlement to survivor’s benefits under the Act. J.A. 368-71.
Petitioner sought review of the ALJ’s August 27, 2002 decision, arguing essentially that the particular medical opinions relied on by the ALJ to support his causa tion conclusion could carry little or no weight given that these physicians did not diagnose Morgan with pneumoconiosis, as did the ALJ. Thus, on September 12, 2003, the Board remanded petitioner’s claim to the ALJ for further consideration in light of Scott v. Mason Coal Co., 289 F.3d 263 (4th Cir.2002), wherein we recognized that when a medical opinion is in “direct contradiction” to the ALJ’s finding that a miner suffers from pneumoconiosis arising out of his coal mine employment, the ALJ can give weight to that opinion only if he provides specific and persuasive reasons for doing so, and even then, the opinion can “carry little weight, at the most.” Id. at 269.
On remand, and by Order dated February 12, 2004, the ALJ again denied petitioner’s request for survivor’s benefits, concluding, as before, that petitioner was unable to sustain her burden of proving that pneumoconiosis caused or contributed to Morgan’s death. J.A. 410. In reaching this result, the ALJ relied primarily on the causation opinions of four physicians, namely Dr. Everett F. Oesterling, Dr. P. Raphael Caffrey, Dr. Stephen T. Bush and Dr. Samuel V. Spagnolo. Specifically responding to the concerns expressed by the Board in their remand order, the ALJ found, inter alia, that these four physicians had diagnosed symptoms consistent with, and therefore not in direct contradiction to, the AL J’s finding of legal pneumoconiosis and thus, that their opinions could be relied on under Scott. J.A. 408-10. A brief summary of these four physicians’ findings illustrates this point.
First, Dr. Oesterling, a pathologist board-certified in anatomic and clinical pathology as well as nuclear medicine, reviewed Morgan’s autopsy slides and medical records. He found the “most significant aggregate of mine dust deposition” in Morgan’s lung tissue to be approximately 0.5 millimeters in greatest dimension, a size “not sufficient to warrant a diagnosis of coalworkers’ pneumoconiosis.” J.A. 206-07. Dr. Oesterling reported that he observed “limited black pigment contained within a loose matrix of pink fibers” in the lung tissue; he also identified “abundant numbers of elongate birefringent silica crystals,” noting specifically that “the dust is indeed of coalmine origin.” J.A. 207. He nonetheless opined that “[d]espite the presence of this mine dust, the quantities are insufficient to warrant more than a comment that these lungs demonstrate anthracotic pigmentation.” J.A. 207. Noting the presence of pneumonia and emphysema in Morgan’s lungs, Dr. Oesterling found those conditions attributable to Morgan’s long-time cigarette use rather than to his exposure to coal dust. He further concluded that the extensive pneumonia that led to Morgan’s death was caused by congestive heart failure, cancer, and the resultant therapies associated with cancer. Finally, and particularly relevant here, he concluded that “the limited structural change [in the lungs] due to mine dust exposure could have in no way hastened or contributed to [Morgan’s] death.” J.A. 209. Put differently, Dr, Oesterling concluded that “mine dust exposure could not have produced lifetime disability nor could it have in any way contributed to or accelerated [Morgan’s] death.” J.A. 207.
Dr. Caffrey, also a board-certified pathologist, observed a “moderate amount of anthracotic pigment with a few tiny hilanized nodules” when examining the autopsy slides of Morgan’s lung tissue. J.A. 186. He likewise observed “some bireMngent particles present” in the lung tissue, noting that “the changes on the left side are very minimal” and that “in the lymph node tissues there is only a small amount present.” J.A. 186. Dr. Caffrey further noted that “[tjhere is only a very minimal amount of anthracotic pigment present and most of this is subpleurally located with a very minimal amount around a few blood vessels and respiratory bronchioles.” J.A. 187. He stated definitively that he did not see “any anthracotic pigment with associated reticulin deposits and focal emphysema.” J.A. 187. Thus, he concluded that “[t]here is no evidence of silicosis within the lung tissue, there is no evidence of complicated pneumoconiosis, and there is no evidence of simple coal worker’s pneumoconiosis either in my opinion.” J.A. 187. On this issue, he specifically stated, inter alia, the following: ,
It is my opinion ... that Mr. Noble Morgan definitely did not have coal worker’s pneumoconiosis or any other occupational lung disease. I say this because there is only a very minimal amount of anthracotic pigment within the sections of lung tissue. I definitely do not agree with the Autopsy Pathologists’s diagnosis of mild simple worker’s pneumoconiosis and I definitely do not agree with ... Frances H.Y. Green’s diagnosis of simple coal worker’s pneumoconiosis of mild severity.
J.A. at 189. Dr. Caffrey concluded that “the minimal amount of anthracotic pigment, coal dust, found in [Morgan’s] lungs definitely did not cause him pulmonary or respiratory impairment and did not cause him any disability nor did it play any role in, or hasten, his death.” J.A. 191.
Dr. Bush, a board-certified anatomical and clinical pathologist, likewise acknowledged the presence of coal mine dust in Morgan’s lung tissue, but concluded that “the degree of change from coal mine dust in the lungs is too limited in degree and extent to have any contribution to the events leading to death.” J.A. 198. He further concluded that “[t]he coal dust deposited in the lungs of Mr. Morgan produced no barrier to lung function and therefore could not have hastened death by any means including a contribution to hypoxemia.” J.A. 198. In reaching these conclusions, Dr. Bush noted, inter alia, that
[t]he reports of the autopsy prosector [Dr. Racadag] and Dr. Green exaggerate the microscopic changes in the lung related to dust deposition. In addition, they exaggerate the effects of these proposed changes on lung function. They incorrectly force a theory of causation. Mr. Morgan died as a result of carcinoma and its complications, a straightforward and unfortunately common event.
J.A. 198.
Finally, Dr. Spagnolo, a board-certified physician in internal medicine and pulmonary disease, concluded that Morgan’s death was “a direct result of his invasive and metastatic cancer in association with complications related to cancer chemotherapy, i.e. bronchopneumonia, lung fibrosis and probable sepsis.” J.A. 128. While Dr. Spagnolo acknowledged that Morgan experienced symptoms of “coughing, wheezing and sputum production,” he attributed these symptoms to Morgan’s long-term cigarette smoking. Id. He also attributed Morgan’s “exertional chest pain, two-pillow orthopnea and ankle edema” to his underlying coronary artery disease. Id. Dr. Spagnolo concluded that Morgan had no “pulmonary/respiratory impairment attributable to pneumoconiosis or related to his prior coalmine employment” and that “[n]one of his symptoms, complaints, or medical conditions is related to his coal dust exposure or coalmine employment.” J.A. 129. He further found that there was “not sufficient evidence in the lung tissue to justify a diagnosis of coal workers’ pneumoconiosis.” J.A. 134. On the basis of his review, Dr. Spagnolo concluded that “Morgan’s death was unrelated to and not hastened, even briefly, by pneumoconiosis nor was pneumoconiosis a contributing factor in his death.” J.A. 129. Alternatively, Dr. Spagnolo opined that even assuming Morgan had some degree of pneumoconiosis, any such “dust-related lung disease was far too limited to have contributed to or hastened ... death.” J.A. 134.
Based primarily on the causation opinions of Drs. Oesterling, Caffrey, Bush and Spagnolo, the ALJ concluded that while Morgan’s legal pneumoconiosis had been established for purposes of the Act, petitioner had not sustained her burden of proving this condition caused or hastened Morgan’s death as required for petitioner to be entitled to black lung survivor’s benefits. J.A. 410. Petitioner’s claim was therefore denied by the ALJ on remand, by Order dated February 12, 2004. J.A. 411.
Following the ALJ’s second denial of petitioner’s claim for black lung survivor’s benefits, petitioner again appealed the ALJ’s decision to the Board. This time, the Board affirmed the ALJ’s denial of benefits, finding specifically that the ALJ’s decision “is supported by substantial evidence and is in accordance with law.” J.A. 449. Petitioner then filed a timely appeal of the Board’s March 30, 2005 Decision and Order to this court.
II.
We review the Board’s decision upholding the ALJ’s denial of survivor’s benefits to petitioner to determine whether the Board correctly found that the ALJ’s factual findings were supported by substantial evidence in the record. See Bill Branch Coal Corp. v. Sparks, 213 F.3d 186, 190 (4th Cir.2000). To do so, we review the record independently, assessing the ALJ’s findings under the substantial evidence standard. Scott, 289 F.3d at 267. In this regard, “[s]ubstantial evidence consists of sufficient relevant evidence to convince a reasonable mind that the evidence is adequate to support a conclusion.” Id. (citations omitted). Thus, applying this standard, “we must affirm the Board if it properly determined that the ALJ’s findings are supported by substantial evidence.” Doss v. Director, Office of Workers’ Comp. Programs, 53 F.3d 654, 659 (4th Cir.1995). We review the ALJ’s and the Board’s conclusions of law de novo. See Scott v. Mason Coal Co., 60 F.3d 1138, 1140 (4th Cir.1995).
III.
The regulatory standards applicable to petitioner’s claim are clear. Specifically, to be entitled to survivor’s benefits under the Act, a petitioner must establish that the coal miner’s death was “due to pneumoconiosis” in accordance with 20 C.F.R. § 718.205. In this regard, for purposes of adjudicating survivors’ claims filed, as here, on or after January 1, 1982, death is considered to be “due to pneumoconiosis” if any of the following criteria are met:
(1) Where competent medical evidence establishes that pneumoconiosis was the cause of the miner’s death, or
(2) Where pneumoconiosis was a substantially contributing cause or factor leading to the miner’s death or where the death was caused by complications of pneumoconiosis, or
(3) Where the presumption set forth at § 718.304 is applicable.
20 C.F.R. § 718.205(c). Thus, the regulations expressly provide that “survivors are not eligible for benefits where the miner’s death was caused by a traumatic injury or the principal cause of death was a medical condition not related to pneumoconiosis, unless the evidence establishes that pneumoconiosis was a substantially contributing cause of death,” that is, if the pneumoconiosis “hasten[ed] the miner’s death.” 20 C.F.R. § 718.205(c).
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4185801-8511 | SWINFORD, District Judge.
This case is before me on a motion by certain of the defendants to dismiss the bill of complaint.
The ground of the motion is that this Court is without jurisdiction of the parties. That there is not the diversity of citizenship required by Section 24 of the Judicial Code, 28 U.S.C.A. § 41 (1) (b).
The plaintiff, a resident of West Virginia, holds a mortgage on certain oil and gas leases on land in Johnson County, Kentucky. The defendant Louie H. Oberreich is the owner of the mortgaged property. The defendants Sue Evans Caperton and Woods A. Caperton, Jr., claim a right of subrogation to certain proceeds which might be expected to be derived from the property. Their interest as parties has nothing to do with the determination of the question here involved. These three persons, Oberreich and the two Capertons, were originally the only defendants and all were residents of Indiana.
The suit was brought in this court to foreclose the mortgage on the oil and gas leases, and for the appointment of a receiver to take charge, of the property. The receiver was • appointed. Thereafter the defendant Oberreich and the two Caper-tons filed their answers and joined in the plaintiff’s prayer for a foreclosure of the mortgage.
Thereafter, one W. J. Maier, Jr., a citizen and resident of West Virginia, intervened in the proceeding and filed his answer and cross-complaint. The intervener set up an agreement entered into with the defendant Oberreich, owner of the mortgaged property.
The intervening petition, among other things, alleges:
“Pursuant to the authority so vested, the defendant Louie H. Oberreich, Trustee, entered into an agreement with intervener dated July 15, 1935, whereby said Trustee sold to intervener at the well heads all gas that might be produced from said property and intervener undertook to operate said property and to connect or cause to be connected to pipe line the major portion of the gas wells drilled thereon. Said agreement was made and executed with the knowledge, consent and approval of the complainant, The Charleston National Bank.”
“At the time of the negotiations for said contract of July 15, 1935 between the intervener and the Trustee, complainant, The Charleston National Bank, not only approved the terms proposed for the operation of’ said property but urged intervener to proceed with his proposed arrangement for the marketing of the gas and represented to intervener that it was not complainant’s intention to foreclose said purported mortgage and that even in the event of such attempted foreclosure, complainant, which would have to purchase the property, would not disturb the arrangement for the operation thereof and the marketing of gas therefrom. Relying upon such representations and promises, intervener entered into said agreement of July 15, 1935 with said Trustee, negotiated and entered into said agreement of July 30, 1935 with W. E. Lockhart, Receiver of Inland Gas Corporation, arranged for the laying of said pipe lines, and made the expenditures for connecting said wells, installing said meters, and otherwise placing said property on an income-producing basis, as alleged in paragraph 11 hereof, and by reason of such representations of the complainant and the reliance of intervener thereon, intervener avers that complainant is estopped to seek the cancellation of said contracts or any of them, or to dispossess intervener of the operation of said property, or to have said property sold otherwise than subject to the obligations of said contracts.”
Following the filing of this intervening petition the defendants Oberreich and the Capertons moved the Court to dismiss the proceeding on the ground that the presence of Maier as a party defendant destroyed the requisite diversity of citizenship and thereby deprived this court of jurisdiction. Alexander v. Hillman, 296 U.S. 222, 233, 56 S.Ct. 204, 80 L.Ed. 192.
When the motion to dismiss was originally made this Court, speaking through Judge H. Church Ford, said: “The sole question presented by the defendant’s motion is whether intervention by Mr. Maier, a citizen of the same state as the complainant, has the effect of defeating the jurisdiction which originally rested upon complete diversity of citizenship.
“Unless Mr. Maier was an indispensable party to the original action, the question is clearly decided by the case of Wichita R. [& Light Co.] v. Public Utilities Comm., 260 U.S. 48 [43 S.Ct. 51, 53, 67 L.Ed. 124], in which Chief Justice Taft said:
“ ‘The intervention of the Kansas Company, a citizen of the same state as the Wichita Company, its opponent, did not take away the ground of diverse citizenship. That ground existed when the suit was begun and the plaintiff set it forth in the bill as a matter entitling it to go into the District Court. Jurisdiction once acquired on that ground is not divested by a subsequent change in the citizenship of the parties. Mullen v. Torrance, 9 Wheat. .537, 539, 6 L.Ed. 154; Clarke v. Mathewson, 12 Pet. 164, 171, 9 L.Ed. 1041; Koenigsberger v. Richmond [Silver] Mining Co., 158 U.S. 41, 49, 15 S.Ct. 751, 39 L.Ed. 889; Louisville [New Albany & Chicago] R. Co. v. Louisville Trust Co., 174 U.S. 552, 566, 19 S.Ct. 817, 43 L.Ed. 1081. Much less is such jurisdiction defeated by the intervention, by leave of the court, of a party whose presence is not essential to a decision of the controversy between the original parties. See Equity Rule 37 (33 S.Ct. XXVIII) ; Adler v. Seaman [8 Cir.], 266 F. 828, 841; King v. Barr [9 Cir.], 262 F. 56, 59; Jennings v. Smith [D.C.], 242 F. 561, 564. The Kansas Company, while it had an interest and was a proper party, was not an indispensable party. In re Engelhard [& Sons], 231 U.S. 646, 34 S.Ct. 258, 58 L.Ed. 4167
“The doctrine is. well established ‘that persons who might otherwise be deemed necessary or proper parties to the suit cannot be made parties, by reason of their being out of the jurisdiction of the court, or incapable otherwise of being made parties, or because their joinder would oust the jurisdiction as to the parties before it, the court may, in its discretion, proceed in the cause without such persons parties, and in such case the decree shall be without prejudice to the rights of the absent parties.’ Fisher v. Shropshire, 147 U.S. [133], 145 [13 S.Ct. 201, 205, 37 L.Ed. 109]; Judicial Code § 50; 28 U.S.C.A. § 111.
“It thus seems that the sole question confronting us in this case is whether Mr. Maier was an ‘indispensable’ party or merely a necessary or proper party.”
I am of the opinion that Maier is an indispensable party.
The rule is well expressed and cases cited in 21 Words and Phrases, Perm.Ed., 180: “Indispensable parties are those who not only have an interest in the subject-matter of the controversy, but an interest of such nature that a final decree cannot be made without either affecting their interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. Shields v. Barrow, 58 U.S. (17 Flow.) 130, 139, 15 L.Ed. 158; Coiron v. Millaudon, 60 U.S. (19 How.) 113, 15 L.Ed. 575; Ribon v. Chicago, R. I. & P. R. Co., 83 U. S. (16 Wall.) 446, 450, 21 L.Ed. 367; Williams v. Bankhead, 86 U.S. (19 Wall.) 563, 571, 22 L.Ed. 184; Kendig v. Dean, 97 U.S. 423, 425, 24 L.Ed. 1061; Alexander v. Horner, 1 Fed.Cas. [No. 169] 366, 370; Chadbourne v. Coe [8 Cir.], 51 F. 479, 480, 2 C. C. A. 327; Donovan v. Campion [9 Cir.], 85 F. 71, 72, 29 C. C. A. 30; Sioux City Terminal R. & W. Co. v. Trust Co. of North America [8 Cir.], 82 F. 124, 126, 27 C. C. A. 73; King v. Commissioners’ Court of Throckmorton County, 10 Tex. Civ.App. 114, 30 S.W. 257, 258.”
The authorities cited by counsel for the complainant are good authority for the proposition that a junior lienor is not an indispensable party to a foreclosure suit. The case here goes much farther. • The allegations of the intervening petition speak for themselves. There was privity of contract • between the bank and Maier. Maier was in possession of the property and had made expenditures and contractual obligations at the insistence of the complainant.' The intervenor claims a right to the continued use and possession of the property until his rights are determined by a proper tribunal. Certainly there could be no adequate and complete termination of the issues presented by the record without fully considering the relation between the intervenor and the complainant.
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11585157-22545 | LYNCH, Circuit Judge.
This ease is another in a series of cases arising out of the elections in Puerto Rico in 1992, in which the New Progressive Party (NPP) won power from its rival, the Popular Democratic Party (PDP). During the current decade, plaintiffs in these cases usually have been members of the PDP who complain that the incoming NPP administration has deprived them of their government jobs in violation of their rights under the First Amendment. In this case, plaintiff Waldo G. Vazquez, an NPP supporter, claims his job at a government contractor was eliminated as part of an internal party feud. He sues his employer, its major client (a public corporation), and a member of the client’s board under 42 U.S.C. § 1983 (1994).
The district court concluded that Vazquez’s evidence, principally his own testimony, amounted to no more than “hearsay upon hearsay” and “rumors, hearsay, gossip, his personal feelings, his intuition and his conclusions,” and granted summary judgment for defendants. Vazquez argues that the district court committed error in excluding evidence as hearsay when the statements were admissions by party-opponents. Thus, we explore in some detail the requirements of Fed. R.Evid. 801(d)(2) as to party-opponent admissions, a recurring issue in employment eases.
We agree with Vazquez that some of the conversations which the district court excluded on hearsay grounds are admissions of a party-opponent and should have been considered as part of his case. To win the battle is not necessarily to win the war. Because the evidence Vazquez presents is insufficient to create a genuine issue of material fact in any event, we affirm.
I.
We state the facts in the light most favorable to the party opposing summary judgment, Acosta-Owzco v. Rodriguez-de-Rivera, 132 F.3d 97, 98 (1st Cir.1997), and describe the evidence in some detail.
Waldo Vazquez was employed for many years by Puerto Rico Maritime Management, Inc. (PRMMI), a private corporation that provides management services to the Puerto Rico Marine Shipping Authority (PRMSA), a public corporation created by the Puerto Rico legislature. PRMSA’s Governing Board has seven members appointed by the Governor of Puerto Rico, subject to confirmation by the Commonwealth’s Senate. See 23 L.P.R.A. § 3054 (1994). PRMSA acknowledges it is a government agency, and we have held it is a “political subdivision” of the Commonwealth of Puerto Rico under the National Labor Relations Act. See Chaparro-Febus v. International Longshoremen Ass’n, Local 1575, 983 F.2d 325 (1st Cir.1992). At the time of his dismissal from PRMMI in 1993, Vazquez held the title Vice President of Operations, Caribbean Division.
In 1992, a new contract between PRMSA and PRMMI was signed, giving authority to the PRMSA Board over “key personnel” within PRMMI. PRMSA was given the right to dismiss high-level PRMMI employees “for any material breach of its contract by such [PRMMI] key personnel and/or for just cause.” Vazquez’s position was among those designated “key personnel.”
In 1993, PRMSA had accumulated losses in excess of $300 million. Vazquez does not dispute this. On February 24, 1993, the PRMSA Board voted, in light of these high losses, to authorize a reduetion-in-force (RIF) of twenty-six employees at PRMMI; eventually at least forty-one employees’ jobs were eliminated. Vazquez’s position was among those selected for elimination, either directly by the Board or pursuant to its RIF directive. The record is not clear whether Vazquez’s position was among those originally selected for elimination by the Board. However, as some evidence supports the conclusion that the Board directly authorized Vazquez’s dismissal, we will assume that it did.
In late March 1993, Steve Sehulein, a high-level PRMMI official, informed Vazquez over breakfast at the Ambassador Plaza Hotel in Puerto Rico that his position was going to be eliminated at the beginning of April. According to Vazquez’s testimony, Sehulein told Vazquez that he did not understand why Vazquez was to be dismissed, and that the elimination of his position had not been part of the original reorganization plan submitted to the PRMSA Board. Sehulein said that he understood that the decision came from a member of the PRMSA Board. This conversation took place in the period when the other PRMMI employees were also being let go.
The next day, Vazquez called Manuel Luis del Valle, Chairman of the Governing Board of PRMSA, in order to ascertain why his position had been selected for elimination in the Board’s new plans for PRMMI’s reorganization. Vazquez told Del Valle that his dismissal “was an injustice and a persecution.” Vazquez argued that similar employees had not been eliminated, and that he had rejected the company’s early retirement program two years before because he needed the salary and felt he still had much to offer the company. Del Valle promised he would help Vazquez fight his proposed dismissal, because, according to Vazquez, Del Valle “also understood that it was an injustice.”
On April 2,1993, Vazquez received a letter informing him that “due to [PRMMI’s] current financial condition you will be laid off....”
Vazquez continued his inquiries and protests about his dismissal. At some later time, Del Valle told Vazquez of a conversation Del Valle had with Carlos Lopez-Rosario, a member of the PRMSA Board. According to Vazquez, Del Valle told him that Lopez had told Del Valle that “the problem” was that Vazquez had “political differences” with Lopez. The record is unclear when the conversation between Lopez and Del Valle supposedly took place or whether it had anything to do with Vazquez’s dismissal. Del Valle’s comments also confirmed what Vazquez calls “hallway gossip” that Lopez disliked Vazquez.
Vazquez suspected that these “political differences” stemmed from the NPP’s gubernatorial primary in 1992. Vazquez had supported the losing candidate, Carlos Romero-Barcelo (“Romero”), now the Commonwealth’s Resident Commissioner in Washington, while Lopez had supported the winner, Pedro Rosello, now the Governor of Puerto Rico.
Vazquez speculated that this disagreement must have motivated his dismissal. He remembered a conversation with Lopez a few years earlier at an NPP activity in the home of a prominent supporter. Vazquez had expressed his preference for Romero as a gubernatorial . candidate and Lopez had disagreed, arguing for Rosello. Vazquez also speculated that Lopez might be retaliating against him for the work of Vazquez’s wife in organizing a women’s group to support Romero in a political campaign almost two decades earlier.
According to Vazquez, Miguel Rossy, PRMMI’s President, confirmed in a conversation at a local restaurant that Vazquez’s position was not included in the original reorganization plan and that the decision came from an unnamed PRMSA Board member, “[s]omebody who doesn’t ... like you, who is opposed to Carlos [Romero’s] people.” Vazquez took this unnamed person to be Lopez.
On several occasions, Vazquez also asked both Commissioner Romero and Governor Rosello personally to intervene and reverse the decision, citing his long record of service with PRMMI. The Governor told Vazquez that he would have to handle the issue with the PRMSA Board himself. According to Vazquez, at some point Ricardo Gonzalez, a PRMSA Board member, told Vazquez that he had tried to get the decision reversed, but that “the pressure was too strong.” Gonzalez did not explain what he meant by “pressure,” or who was applying pressure.
Finally, in May 1993, Vazquez met with Lopez personally in Lopez’s office at PRMSA. Vazquez asked Lopez whether what Del Valle had told him about “political differences” was true. Lopez replied, according to Vazquez, “I made some remarks ... those remarks to Manuel Luis [del Valle] over a Coca-Cola or a cup of coffee, but Manuel Luis shouldn’t have told you.” There is no indication when such remarks were made.
II.
Vazquez filed suit against PRMSA, PRMMI and Lopez, alleging that his dismissal was retaliation for his support of Romero, in violation of his First Amendment rights of political association under Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976) and Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574 (1980). Following discovery, the district court granted motions for summary judgment for PRMMI and Lopez, and a few days later, granted summary judgment sua sponte for PRMSA, which had not joined the other defendants’ motions. On appeal, Vazquez claims that the district court erred in excluding the conversations he relates in his deposition on hearsay grounds, because most of the statements, he says, were admissible under Fed.R.Evid. 801(d)(2) as admissions of a party-opponent. Vazquez claims that the conversations he describes were sufficient evidence to permit his case to survive summary judgment. He also claims that the district court abused its discretion in entering summary judgment sua sponte for PRMSA.
III.
Evidence that is inadmissible at trial, such as inadmissible hearsay, may not be considered on summary judgment. See Fed.R.Civ.P. 56(e); FDIC v. Roldan Fonseca, 795 F.2d 1102, 1110 (1st Cir.1986). We review the district court’s decision to exclude such evidence for abuse of discretion. See General Elec. Co. v. Joiner, — U.S.-,-, 118 S.Ct. 512, 516-17, 139 L.Ed.2d 508 (1997); Nieves-Villanueva v. Soto-Rivera, 133 F.3d 92, 97-98 (1st Cir.1997). Once we determine what evidence can properly be considered, we review the district court’s decision to grant summary judgment de novo. Acosta-Orozco v. Rodriguez-de-Rivera, 132 F.3d 97, 98 (1st Cir.1997).
A. Hearsay and Party-Opponent Admissions
Fed.R.Evid. 801(e) defines hearsay generally as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” All of the conversations which Vazquez relates fit this general definition, as they are offered to show that Lopez was behind Vazquez’s dismissal, and that his motive was to retaliate for Vazquez’s support of Romero. Indeed, most of the conversations are hearsay within hearsay.
Vazquez argues, however, that these conversations are nonetheless admissible because the Federal Rules of Evidence define admissions by a party-opponent as “not hearsay.” See Fed.R.Evid. 801(d)(2). Vazquez argues that the comments by high PRMSA and PRMMI officials, acting within the scope of their agency or employment, are admissible under this rule. In addition, Vazquez properly notes, there is no objection to “hearsay within hearsay” if each link in the chain is admissible under an exception to the hearsay rules or is not defined as hearsay. See Fed.R.Evid. 805. Careful scrutiny of the comments on which Vazquez relies is necessary to evaluate this argument.
For a statement to be an admission under Rule 801(d)(2), the statement must be made by a party, or by a party’s agent or servant within the scope of the agency or employment. See, e.g., Woodman v. Haemonetics Corp., 51 F.3d 1087, 1093-94 (1st Cir. 1995); Union Mutual Life Ins. Co. v. Chrysler Corp., 793 F.2d 1, 6-8 (1st Cir.1986). Each link in the chain must be admissible, either because it is an admission and thus not hearsay or under some other hearsay exception.
The conversations that Vazquez himself describes as “hallway gossip” were properly excluded as hearsay. Although Vazquez identifies some of the individuals who related the rumor that Lopez disliked him, nothing in the record identifies the sources of this information. While there may be a controversy over whether admissions must be based on personal knowledge, see Brookover v. Mary Hitchcock Mem. Hosp., 893 F.2d 411, 414-16 (1st Cir.1990) (canvassing the controversy), unattributed statements repeated by party-opponents cannot be admissible. As the original declarant is unknown, it is impossible to determine whether the original declarant also fits within the party-opponent definition, and thus the exclusion of such office gossip was proper. See, e.g., Carden v. Westinghouse Elec. Corp., 850 F.2d 996, 1001-02 (3rd Cir.1988) (excluding such unattributed hearsay when repeated by party-opponent); Cedeck v. Hamiltonian Fed. Sav. & Loan Ass’n, 551 F.2d 1136, 1138 (8th Cir.1977) (“That part of [the party-opponent’s] statement which contains a reiteration of what someone told him is not admissible as an admission by [a] party-opponent since the author of the statement is unknown.”)
Likewise, the exclusion as hearsay of the statement of Miguel Rossy, PRMMI’s president, that Vazquez’s dismissal was at the behest of “someone [at PRMSA] who doesn’t like you, who is opposed to Carlos [Romero’s] people,” was within the district court’s discretion. Even assuming dubitante that Rossy’s description of the statement is enough to identify the declarant as Lopez, or at least as a Board member and thus an agent of PRMSA, Rossy was the President of PRMMI, not PRMSA. This breaks the link in the hearsay chain. There is no evidence that Rossy was authorized to speak for PRMSA’s Board, and thus his statement cannot be considered within the scope of his agency as an officer of PRMMI. See Skillsky v. Lucky Stores, Inc., 893 F.2d 1088, 1091-92 (9th Cir.1990) (no abuse of discretion in exclusion of double-hearsay statement which was related to plaintiff by an agent of a different employer where there was “no evidence that [the person who related the alleged statement] had any authority to make [such] admissions”); cf. Woodman, 51 F.3d at 1094 (examining record to determine whether manager was acting within scope of her employment); Miles v. M.N.C. Corp., 750 F.2d 867, 874 (11th Cir.1985) (same).
However, many of the other conversations on which Vazquez relies should not have been excluded as hearsay. Del Valle’s conversation with Vazquez relating the “problem” of Lopez’s “political differences” with Vazquez fits within the Rule 801(d)(2) exception. The statement concerning political differences was made by a party (Lopez) and related by Del Valle, who was Chairman of the PRMSA Board and thus the agent of PRMSA, a party. The district court abused its discretion by excluding this conversation as “hearsay,” if that is indeed what it did.
Similarly, the statement of Gonzalez, a PRMSA Board member, that “the pressure was too strong” to reverse the decision is not hearsay, as Gonzalez was clearly an agent of PRMSA. Thus, Gonzalez’s statement can properly be used to prove the truth of the matter asserted, i.e., that he felt under “pressure” not to reverse the PRMSA decision. However, Gonzalez’s statement cannot be used as “hearsay within hearsay” to prove that Lopez had urged the Board to stand by a decision to dismiss Vazquez. Gonzalez does not identify the person applying “pressure,” and the statement of an unidentified declarant is hearsay.
Finally, Vazquez’s description of his confrontation with Lopez is plainly not hearsay. Lopez is a party, and his direct admission that he had made some informal comments to Del Valle that he did not want Vazquez to hear is not hearsay. Again, Lopez’s statement can be used to prove the truth of the matter asserted, i.e., that he made comments to Del Valle that he did not want repeated to Vazquez.
The Lopez statement, however, is insufficient to establish an “adoptive admission” that Lopez acknowledged that he had been responsible for Vazquez’s dismissal and that it was in retaliation for Vazquez’s support of Romero, as Vazquez argues. See Fed.R.Evid. 801(d)(2)(B) (defining as “not hearsay” “a statement of which the party has manifested an adoption or belief in its truth”). The burden is on Vazquez to show that the circumstances surrounding the conversation with Lopez demonstrate that Lopez manifested a belief in the accusation of retaliation. See Ricciardi v. Children’s Hosp. Med. Ctr., 811 F.2d 18, 24 (1st Cir.1987). “In all cases, the burden is on the proponent to convince the judge that in the circumstances of the case a failure to respond is so unnatural that it supports the inference that the party acquiesced in the statement.” Id. (quoting J. Weinstein & M. Berger, Weinstein’s Evidence ¶ 801(d)(2)(B)[01], at 801-202 n.15 (1985) (internal quotation marks and alterations omitted)).
The record, however, reveals that Vazquez, at most, accused Lopez of making statements to Del Valle, and Lopez responded by admitting that he had made “some remarks.” Vazquez does not say that he accused Lopez directly of retaliating against him, only that he accused him of making statements to Del Valle about their political differences. It would hardly be unnatural to fail to respond to an accusation that Vazquez does not claim to have made.
B. Summary Judgment on the Motive for Vazquez’s Dismissal
In order to forestall summary judgment, Vazquez must have demonstrated that his support of Romero was at least a “motivating factor” in the Board’s decision to dismiss him. See Rodriguez Rodriguez v. Munoz Munoz, 808 F.2d 138, 143 (1st Cir.1986). Vazquez must “point[ ] to [admissible] evidence in the record which, if credited, would permit a rational fact finder to conclude that [his dismissal] stemmed from a politically based discriminatory animus,” LaRou v. Ridlon, 98 F.3d 659, 661 (1st Cir.1996) (quoting Rivera-Cotto v. Rivera, 38 F.3d 611, 614 (1st Cir.1994) (internal quotation marks and alterations omitted)), rather than for economic reasons. “Without more, [Vazquez’s] unsupported and speculative assertions regarding political discrimination will not be enough to survive summary judgment.” Id.
The record reveals that Vazquez felt his dismissal was unfair and that many of his friends agreed with him. He had worked for many years at PRMMI, climbing the corporate ladder, had rejected early retirement two years before and was then dismissed. The conversations he relates contain many statements of support from PRMSA and PRMMI employees who sympathized with him. However, “[m]erely juxtaposing a protected characteristic — [Lopez’s] politics — with the fact plaintiff was treated unfairly is not enough to state a constitutional claim.” Acosta-Orozco, 132 F.3d 97, 101 (quoting Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 58 (1st Cir.1990) (internal quotation marks omitted)).
Instead, Vazquez must point to evidence which shows that Lopez singled out Vazquez’s position, which was not included in the original reorganization plan, for elimination and that he did so to retaliate for Vazquez’s support of Romero. Vazquez can point to three conversations to support this theory. First, he can point to Del Valle’s comments that “the problem” was Vazquez’s “political differences” with Lopez. Second, he can point to Lopez’s acknowledgement that he made “some comments” to Del Valle that he did not want Vazquez to hear. Finally, he can note Gonzalez’s statement that Gonzalez felt “pressure” not to reverse Vazquez’s dismissal.
These comments are insufficient to establish that Lopez engineered Vazquez’s dismissal in order to retaliate for Vazquez’s support of Romero, and amount to no more than “unsupported and speculative assertions.” LaRou, 98 F.3d at 661. Even viewing these statements in the light most favorable to Vazquez, no reasonable jury could find that such statements prove by a preponderance of the evidence that Vazquez’s support of Romero was a “substantial” or “motivating” factor in the PRMSA Board’s decision to include his position in the reorganization. That Vazquez had “political differences” with a single PRMSA Board member at some unidentified time does not establish that the Board or a majority of the Board acquiesced in a plan to eliminate his position in retaliation for those differences. Nor does it establish that “the problem” referred to the elimination of Vazquez’s position. Similarly, Gonzalez’s statement that he felt “pressure” not to reverse Vazquez’s dismissal says nothing about the reason for the pressure. Facing a deficit in excess of $300 million, PRMSA Board members undoubtedly felt pressure to stand by the reorganization plan.
Finally, we find no abuse of discretion in the action of the district court in entering summary judgment sua sponte for PRMSA, following the district court’s grant of summary judgment to PRMMI and Lopez. Vazquez had “appropriate notice and a chance to present [his] evidence on the essential elements of [his] claim....” Berkovitz v. Home Box Office, Inc., 89 F.3d 24, 29 (1st Cir.1996). Vazquez does not identify how his opposition to summary judgment for PRMSA would have differed in any way from his opposition to summary judgment for PRMMI and Lopez.
The judgment of the district court is affirmed. Costs to appellees.
. See, e.g., Acosta-Orozco v. Rodriguez-de-Rivera, 132 F.3d 97, 104 n. 8 (1st Cir.1997) (citing cases).
. We note that, under plaintiff's theory, the state action doctrine poses no bar to his assertion of a First Amendment claim against PRMSA and Lopez, although he was employed at a private company. Cf. Yeo v. Town of Lexington, 131 F.3d 241, 248-49 (1st Cir.1997) (en banc) ("If there is no state action, then the court may not impose constitutional obligations on (and thus restrict the freedom of) private actors.”). For summary judgment purposes, we take it that Vazquez’s dismissal came at the insistence of the Board of Governors of a state agency, an agency which had retained the power in its contract to demand the dismissal of "key personnel.” Furthermore, although plaintiff was not a government employee, he was dismissed, at the government’s insistence, from his job with a government contractor. The First Amendment forbids the government not only from interfering with the associational rights of its employees, but also from using its power over contractors to punish its political opponents. See Board of County Comm'rs v. Umbehr, 518 U.S. 668, 116 S.Ct. 2342, 135 L.Ed.2d 843 (1996); O’Hare Truck Serv., Inc. v. City of Northlake, 518 U.S. 712, 116 S.Ct. 2353, 135 L.Ed.2d 874 (1996). Moreover, because his claim fails against the state actors, it fails against the private or semiprivate actors who did the state’s bidding.
. Under Elrod and Branti, the government may not condition employment on membership in the party in power, unless party affiliation is an appropriate requirement for the position. See Branti, 445 U.S. at 517-18, 100 S.Ct. at 1294-95. Vazquez’s claim is that his support of Romero prompted his dismissal by a member of a rival faction within the same party.
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3511875-12122 | OPINION
WOOD, Judge:
In this action, before the court on defendant’s motion for summary judgment and plaintiff’s opposition thereto, plaintiff, whose late husband was a retired lieutenant commander of the Navy, sues to recover an amount representing the cost of health care rendered to the decedent at a private nursing facility during the seven-month period immediately preceding his death.
The claim of right to recover is founded on the Civilian Health and Medical Program of the Uniformed Services (“CHAMPUS”), established pursuant to the Dependents Medical Care Act of 1956, as amended, 10 U.S.C. §§ 1071-89 (1982), and implemented, during the period here relevant, by Department of Defense (DOD) Regulation 6010.8-R, 42 Fed.Reg. 17972, April 4, 1977. Defendant contends that there is no genuine dispute with respect to any material fact, and that on the record before the court the administrative denial of plaintiff’s claim (on the ground that the care the decedent received during the period here in issue was custodial in nature, and therefore specifically excluded from coverage under CHAMPUS) should be sustained. Those contentions have merit. Defendant’s motion for summary judgment is therefore granted, and plaintiff’s complaint will be dismissed.
I
On March 27, 1977, while a “covered beneficiary” under CHAMPUS (see 32 C.F.R. § 199.9 (1978)), the decedent suffered a myocardial infarction; severe brain damage due to anoxia resulted. After a brief stay in a civilian hospital, he was transferred to a Navy medical facility. He remained there until August 29,1977, when he was moved to the Cathedral Health and Rehabilitation Center (“the Center”), a private “skilled nursing facility,” 32 C.F.R. § 199.8(b)(160) (1978). He remained a patient at the Center to his death on July 26, 1978. To December 31, 1977, the cost of the decedent’s stay at the Center was borne by defendant. For the period January 1, 1978, to July 26, 1978, however, only “CHAMPUS benefits for all prescription drugs administered to the patient and for one hour of nursing care per day” have been extended.
More specifically, on May 24, 1978, the Office of the Civilian Health and Medical Program of the Uniformed Services (OCHAMPUS) formally denied governmental responsibility for the cost of the decedent’s care at the Center, on the ground that his care was primarily “custodial.” {See 10 U.S.C. §§ 1077(b)(1), 1086; 32 C.F.R. § 199.8(b)(18), (46) (1978)), defining custodial care, and providing in pertinent substance that such care is not covered under the CHAMPUS Basic Program). Plaintiff alleges that on the decedent’s death she was left “with an unpaid bill * * of approximately $24,000,” most of which “is the responsibility of OCHAMPUS under applicable regulations.”
Following OCHAMPUS’s denial of responsibility, plaintiff requested, and received, a hearing before a CHAMPUS hearing officer. Under date of July 8, 1980, the hearing officer recommended that OCHAMPUS “recognize the propriety of the [plaintiff’s] claim, except for coinsurance, for the period January 1, 1978, through July 26, 1978.” The hearing officer’s recommended decision was reviewed by the Acting Assistant Secretary of Defense (Health Affairs). In a Final Decision, dated September 22, 1981, the Acting Assistant Secretary declined to follow the hearing officer’s recommendation, finding “that the care rendered the deceased patient in this case was primarily custodial in nature (and was custodial since the time of admission) and was therefore of a type of care which does not qualify for CHAMPUS Basic Program benefits.”
II
Plaintiff’s complaint alleges that the decedent was “provided * * * skilled nursing and medical care at * * * ” the Center from his admission August 29, 1977, to his death July 26, 1978. The final administrative decision denying the bulk of plaintiff’s claim was to the contrary, however, and the government’s answer herein not only denies the said allegation but affirmatively asserts that “the care provided [the decedent at the Center] is custodial care and thus excluded from cost-sharing.” And, defendant has now moved for summary judgment, asserting (among other things ) that the final administrative decision that the care decedent received at the Center was custodial in nature is not arbitrary or capricious, unsupported by substantial evidence, or erroneous as a matter of law, that no genuine issue of material fact exists in these respects, and that the decision should therefore be sustained.
Without pointing to any single “material fact” genuinely in dispute, without submitting any affidavits or other papers not already before the court, and without suggesting any new matter that would (or could) be presented at trial, if held, plaintiff seems to assert only that the care rendered to the decedent at the Center was not, as a matter of fact, custodial. Accordingly, she concludes, the government’s motion should be denied. In the circumstances of this case, however, plaintiff’s position is not a tenable one. On this record, simply alleging that the care furnished to the decedent was not custodial cannot make it so. Nor, in light of the governing case law, does the allegation serve to raise a genuine issue of material fact in that respect.
Ill
The statutory foundation on which CHAMPUS rested in 1978 (and rests) explicitly excluded the availability of benefits for “Custodial Care” , defined as (82 C.F.R. § 199.8(b)(46) (1978)):
that care rendered to a patient (i) who is mentally or physically disabled and such disability is expected to continue to be prolonged, and (ii) who requires a protected, monitored and/or controlled environment whether in an institution or in the home, and (iii) who requires assistance to support the essentials of daily living, and (iv) who is not under active and specific medical, surgical and/or psychiatric treatment which will reduce the disability to the extent necessary to enable the patient to function outside the protected, monitored and/or controlled environment. * * *
After a hearing, at which the plaintiff was given full opportunity to present whatever evidence and arguments she wished, the Acting Assistant Secretary of Defense for Health Affairs concluded that the care rendered to the decedent from the time of his admission to the Center to his death was custodial, within the meaning of the definition just cited, “and was therefore a type of care which does not qualify for CHAMPUS Basic Program benefits.”
In evaluating plaintiff’s claim and defendant’s motion for summary judgment, the first issue to be considered (in light of the arguments presented by the parties) is the effect (if any) to be accorded that decision. Defendant asserts that, unless arbitrary, capricious, unsupported by substantial evidence, or legally erroneous, the decision deserves to be upheld, and that on careful scrutiny it is not subject to any vitiating defect. It is concluded that defendant’s position is in both respects valid. King v. United States, 215 Cl.Ct. 876, 879-80, 566 F.2d 1190 (1977).
A
In promulgating CHAMPUS regulations, the Department of Defense prescribed an elaborate scheme of administrative “review of benefit decisions by OCHAMPUS and by CHAMPUS Contractors who, under contract to OCHAMPUS, perform certain work in administering the CHAMPUS benefits.” 32 C.F.R. § 199.16(a) (1978). While the establishment by the Department of appeal and hearing procedures “in no way shall be construed to deny the right to initiate legal action,” 32 C.F.R. § 199.16(j) (1978), the effect to be accorded a final administrative decision in any such legal action is not specifically treated in either the basic statute or the implementing regulations.
As defendant contends, a de novo judicial determination of the nature of the care rendered to the. decedent at the Center would plainly be inappropriate. King, 215 Cl.Ct. at 879-80, 566 F.2d 1190. In this situation, as in other analogous ones, “we see no reason to depart from the normal rule that administrative determinations * * are not to be displaced by judicial determinations made entirely de novo.” Julius Goldman’s Egg City v. United States, 214 Cl.Ct. 345, 354, 556 F.2d 1096, 1100-01 (1977). Rather, unless the final Secretarial determination, when reviewed on the record, is arbitrary or capricious, reflects an abuse of discretion, is unsupported by substantial evidence, or is violative of statute (or valid implementing regulation), it is “to be upheld.” Julius Goldman’s Egg City, 214 Cl.Ct. at 354, 556 F.2d at 1100; see also Morrow v. United States, 227 Cl.Ct. 290, 296, 647 F.2d 1099, 1102 (1981); King, 215 Cl.Ct. at 880, 566 F.2d 1190; Mountain States Tel. & Tel. Co. v. United States, 204 Cl.Ct. 521, 533, 499 F.2d 611, 615 (1974).
B
When the Acting Assistant Secretary’s final decision as to the nature of the care rendered to the decedent at the Center is tested against the governing criteria, that decision cannot be faulted. In finding that such care was primarily “custodial,” within the meaning of statute and regulation, the Acting Assistant Secretary was fully supported by the language of the regulation, the decedent’s voluminous medical records, the testimony of the decedent’s physician before the hearing officer, and the hearing officer’s own clear recognition “that much of the [decedent’s] inpatient care [at the Center] could be categorized as primarily custodial.”
Moreover, prior to the final decision, the decedent’s records had been submitted to the Colorado Foundation for Medical Care for peer review by a panel of three physicians (with specialties of neurology, internal medicine, and general practice). That panel unanimously found that the care rendered to the decedent at the Center was “custodial” in nature, as that word had been defined by CHAMPUS regulation. The Acting Assistant Secretary properly could, and patently did, rely heavily on that finding, and plaintiff cannot, and does not, demonstrate any error in either the finding itself or the reliance thereon. King, 215 Cl.Ct. at 880, 566 F.2d 1190.
In short, after affording plaintiff a full opportunity to present all of the evidence available, and after a careful, indeed painstaking, consideration of the entire record, the Acting Assistant Secretary found that the care rendered to the decedent at the Center was custodial in nature, and therefore excluded from coverage under CHAMPUS. That decision cannot fairly be char acterized as in any way arbitrary, capricious, unsupported by substantial evidence, an abuse of discretion, or legally erroneous. It is therefore to be sustained.
. See also 32 C.F.R. Part 199, "Implementation of the Civilian and Medical Program of the Uniformed Services" [sic] (1978). References in this opinion to statutes or regulations are to the provisions in force during the relevant time frame.
. The facts stated are derived from the pleadings and papers on file in this case. Unless otherwise indicated, those facts, are, at least for the purpose of ruling upon defendant's motion for summary judgment, undisputed.
. It was ultimately determined administratively that the payment of benefits under CHAMPUS for the period August 29, 1977, to December 31, 1977, had been "in error," but recoupment of all benefits paid for the said period was duly waived. Defendant does not now question the propriety of that waiver.
. The record before the court includes a transcript of the hearing, and a “Hearing File" containing a considerable number of exhibits and consisting of several hundred pages.
. The record also includes the hearing officer’s recommended decision, a memorandum from the Director, OCHAMPUS, to the Principal Deputy Assistant Secretary of Defense (Health Affairs) recommending rejection of the recommended decision, and a Final Decision described below.
. The Final Decision did waive recoupment of benefits paid for the period prior to January 1, 1978. See n. 3, supra. It also extended some benefits (for prescription drugs and one hour per day of nursing care) from January 1, 1978, to the date of the decedent’s death. See n. 11, infra.
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3832625-23788 | MEMORANDUM OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR JUDGMENT AS A MATTER OF LAW
JOHN R. TUNHEIM, District Judge.
Plaintiff John Schedin brought claims against defendant Ortho-McNeil-Janssen Pharmaceuticals, Inc. (“Ortho-McNeil”) for failure to warn about certain risks he was taking in using its drug, Levaquin, namely tendon rupture. His case was the first case tried in a larger multi-district litigation involving numerous plaintiffs. The jury found for Schedin, and defendant has moved for judgment as a matter of law. Ortho-McNeil argues that Schedin’s failure to warn claims required the jury to return a verdict that is inconsistent with, and thus preempted by, federal law, specifically Food and Drug Administration (“FDA”) regulations made pursuant to the Food, Drug, and Cosmetic Act (“FDCA”). See, e.g., 21 C.F.R. § 201.57 (requirements on the format and labeling for prescription drugs). Ortho-McNeil contends that the Levaquin label was approved by the FDA and was subject to strict guidelines related to changes of labeling that left it unable to alter the warnings on the drug’s label. Further, Ortho-McNeil argues that Schedin’s state punitive damages claim is based on “fraud on the FDA” and is therefore similarly pre-empted. Because the Court finds that Schedin’s state law failure to warn claims are not preempted by the FDCA, Ortho-McNeil had many options at its disposal to effectuate an adequate warning, and Schedin’s case does not hinge on a defrauding of the FDA, the Court denies the motion.
BACKGROUND
Schedin was prescribed Levaquin for an upper respiratory infection in February 2008 and, after eight days of consuming the drug, suffered bilateral Achilles tendon ruptures. (Compl. ¶ 108, Docket No. 1.) At the time Schedin was prescribed Levaquin, the drug contained a warning regarding tendon rupture stating:
Tendon effects: Ruptures of the shoulder, hand, Achilles tendon, or other tendons that required surgical repair or resulted in prolonged disability have been reported in patients receiving quinolones, including levofloxacin. Post-marketing surveillance reports indicate that this risk may be increased in patients receiving concomitant corticosteroids, especially in the elderly.
(Def. Ex. 12.) Schedin claims this label alone was inadequate to warn him of the risk he was taking in using Levaquin, in part because of the way the warning was worded, where it was located in the label insert and not easily noticed, and because it did not warn that Levaquin had higher tendon toxicity than other fluoroquinolones.
At the time Schedin was prescribed Levaquin, it was already subject to class labeling as a fluoroquinolone, a class of broad-spectrum antibiotics, and the FDA had not yet mandated a black box warning for the specific injury Schedin suffered. OrthoMcNeil asserts that it could not have instituted a black box warning independently without an FDA mandate. See 21 C.F.R. § 201.80(e) (“If a boxed warning is required, its location will be specified by the [FDA].”). Schedin concedes that Or-tho-McNeil probably could not have unilaterally instituted a black box warning. However, he contends that Ortho-McNeil knew of the risk posed by Levaquin and could have taken numerous other steps to warn consumers about those risks, such as sending out “Dear Doctor” letters, having sales representatives meet and confer -with doctors, hosting training seminars, and other such measures to draw attention to the risks. As a result, Schedin argues his state law claims are not pre-empted by the FDCA.
ANALYSIS
I. STANDARD OF REVIEW
Under Rule 50 of the Federal Rules of Civil Procedure, judgment as a matter of law is appropriate if no reasonable juror could return a verdict for the nonmoving party. Weber v. Strippit, Inc., 186 F.3d 907, 912 (8th Cir.1999). In analyzing a Rule 50 motion, the Court must consider the evidence in the light most favorable to the nonmovant, resolve all factual conflicts in the nonmovant’s favor, and give the nonmovant the benefit of all reasonable inferences. Ogden v. Wax Works, Inc., 214 F.3d 999, 1002 (8th Cir.2000). “[J]udgment as a matter of law is proper when the record contains no proof beyond speculation to support the verdict.” Heating & Air Specialists, Inc. v. Jones, 180 F.3d 923, 932-33 (8th Cir.1999) (internal quotation marks omitted).
II. FAILURE TO WARN CLAIMS
A. Pre-emption Principles
Whether Schedin’s state law failure to warn claims are pre-empted by conflict preemption with federal law is the central question posed by Ortho-McNeil’s motion for judgment as a matter of law. The Supremacy Clause of the United States Constitution provides that the “Laws of the United States ... shall be the supreme Law of the Land.” U.S. Const, art. VI, cl. 2. The principle of preemption is the application of this clause, resulting in the rule that any “state law that conflicts with federal law is without effect.” Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (internal quotation marks omitted). “Preemption is disfavored in areas of historic importance to the states’ police powers — areas such as public health and safety.” In re St. Jude Med. Inc. Silzone Heart Valves Prod. Liab. Litig., No. 01-MDL-1396, 2004 WL 45503, at *5 (D.Minn. Jan. 5, 2004) (citing Kemp v. Medtronic, Inc., 231 F.3d 216, 222 (6th Cir.2000)).
Pre-emption can be either express or implied. Express pre-emption is found when Congress “pre-empt[s] state law by so stating in express terms.” Hillsborough Cnty., Fla. v. Automated Med. Labs., Inc., 471 U.S. 707, 712-13, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985) (citing Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977)). In addition to express pre-emption, “a court may find that Congress impliedly preempted such claims by ‘conflict’ if 1) compliance with both federal and state law is impossible, or 2) the claims would stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Mensing v. Wyeth, Inc., 588 F.3d 603, 608 (8th Cir.2009) (alteration and quotation marks omitted) (citing Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 372-73, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000)), cert. granted, — U.S. -, 131 S.Ct. 817, 178 L.Ed.2d 550 (2010) (No. 09-993). Therefore, “a conflict arises when compliance with both federal and state regulations is a physical impossibility. ...” Automated Med. Labs., Inc., 471 U.S. at 712-13, 105 S.Ct. 2371. (emphasis added) (internal quotations omitted); see also, Mensing, 588 F.3d at 608 (finding no conflict preemption for manufacturers of generic drugs in a state failure to warn action). “Impossibility pre-emption is a demanding defense.” Wyeth v. Levine, 555 U.S. 555, 129 S.Ct. 1187, 1199, 173 L.Ed.2d 51 (2009). The Supreme Court recently evaluated the FDCA and preemption and described the process by which such determination should be made:
Our answer to [the] question [of preemption] must be guided by two cornerstones of our pre-emption jurisprudence. First, the purpose of Congress is the ultimate touchstone in every pre-emption case. Second, in all pre-emption cases, and particularly in those in which Congress has legislated in a field which the States have traditionally occupied, we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.
Wyeth, 129 S.Ct. at 1194-95 (internal citations, alternations, and quotation marks omitted).
Articulating Congress’ purpose in the enactment of and amendments to the FDCA, the Wyeth Court noted:
[When Congress] enlarged the FDA’s powers to protect the public health and assure the safety, effectiveness, and reliability of drugs, [it] took care to preserve state law.... In 2007, ... Congress ... granted the FDA statutory authority to require a manufacturer to change its drug label based on safety information that becomes available after a drug’s initial approval. In doing so, however, Congress did not enact a provision in the Senate bill that would have required the FDA to preapprove all changes to drug labels.... [T]hrough many amendments to the FDCA and to FDA regulations, it has remained a central premise of federal drug regulation that the manufacturer bears responsibility for the content of its label at all times.
Id. at 1196-98 (emphasis added) (internal citations, quotation marks, and alterations omitted).
With the Wyeth Court’s interpretation of Congress’ intent in mind, the remaining question is whether, in the instant case, compliance with both state and federal law regarding adequate warnings presented Ortho-McNeil a “physical impossibility” such that state law must yield to the federal law. Automated Med. Labs., Inc., 471 U.S. at 713, 105 S.Ct. 2371. “The question before this court is whether [Or-tho-McNeil] can both fulfill a state law duty to warn and comply with the FDCA. Does federal law forbid [Ortho-McNeil] from taking steps to warn [its] customers?” Mensing, 588 F.3d at 610-11.
B. Defendant’s Obligation to Maintain Adequate Warnings
Ortho-McNeil argues that since Levaquin was already subject to an FDA approved label, FDA regulations would not have permitted Ortho-McNeil to alter the label to provide stronger warnings. Even if Ortho-McNeil is correct about an inability to strengthen the warnings on the label, Ortho-McNeil still had various other options at its disposal to warn consumers, such as “Dear Doctor” letters, or training by sales representatives with individual doctors. It could also have proposed an alteration to the label. As the Eighth Circuit noted in Mensing: “In this case we need not decide whether ... manufacturers may unilaterally enhance a label warning ... because the ... defendants could have at least proposed a label change that the FDA could receive and impose ... if approved.” Mensing, 588 F.3d at 608 (emphasis original). Given the Supreme Court’s central holding in Wyeth, that the manufacturer bears responsibility for the content of its label at all times, the Court is also not convinced that FDA regulations prohibited OrthoMcNeil from making a label change, let alone from proposing one.
The FDA provides a process whereby a manufacturer can alter or propose an alteration to an already approved label to reflect new information about a drug. 21 C.F.R. § 314.70. “Major changes” require the FDA’s prior approval through a prior approval supplement. 21 C.F.R. § 314.70(b). Manufacturers may implement “moderate changes,” including changing a label to strengthen a warning based on newly acquired information, through a Changes Being Effected (“CBE”) supplement. 21 C.F.R. § 314.70(c)(6)(iii)(A)-(D). Manufacturers may implement CBE changes before the FDA formally approves them. Id.
In Wyeth, the defendant claimed that using the CBE process would have rendered its drug misbranded, in violation of 21 U.S.C. § 352. Wyeth, 129 S.Ct. at 1197. The Supreme Court disagreed. Rather, the Court held that the statute regarding misbranding would apply to a drug “that fail[ed] to include ‘adequate warnings.’ ” Id. (citing 21 U.S.C. § 352(f) (noting that a drug is misbranded if it does not contain “adequate warnings against use ... in such manner and form, as are necessary for the protection of users”)).
The Supreme Court noted that the CBE regulation
provides that if a manufacturer is changing a label to “add or strengthen a contraindication, warning, precaution, or adverse reaction” or to “add or strengthen an instruction about dosage and administration that is intended to increase the safe use of the drug product,” it may make the labeling change upon filing its supplemental application with the FDA; it need not wait for FDA approval.
Id. at 1196 (citing 21 C.F.R. § 314.70(c)(6)(iii)(A), (C)).
Ortho-McNeil asserts that the CBE process is not applicable to the instant litigation, and therefore the holding of Wyeth is inapposite, since Ortho-McNeil could not have unilaterally instituted a black box warning, could not utilize comparative data in its labeling of Levaquin, and was bound by class labeling for fluoroquinolones. OrthoMcNeil argues that these options made it a “physical impossibility” to comply with both state and federal law therefore it is entitled to judgment at a matter of law. See Automated Med. Labs., Inc., 471 U.S. at 713, 105 S.Ct. 2371. Keeping in mind that these were not the only options available to defendant to warn its consumers, the Court evaluates each of these arguments in turn.
1. Black Box Warnings
In the instant case, the FDA ultimately ordered Ortho-McNeil to include a black box warning about tendon rupture. The FDA requires certain drugs with “[s]pecial problems, particularly those that may lead to death or serious injury, ... to [have a warning] placed in a prominently displayed box [a ‘black box’].” 21 C.F.R. § 201.80(e). Schedin’s experts concede that OrthoMcNeil probably could not have unilaterally instituted a black box warning. {See, e.g., Aff. of Dana M. Lenahan, Nov. 16, 2010, Ex. E, at 49-50, Docket No. 150.) FDA regulations on black box warnings, while reserving the inclusion of the black box to the discretion of the FDA, note that a manufacturer’s “desires about location and wording of boxed warnings, however, will be considered.” 44 Fed.Reg. 37,434, 37,448 (June 26, 1979). This guidance implies a role for the manufacturer in the design and content of black box warnings.
Regardless, Ortho-McNeil’s potential inability to unilaterally institute a black box warning is not a hindrance to state tort liability since it could have instituted other label changes short of a black box warning or proposed a black box warning instead of waiting for the FDA to act. OrthoMcNeil points out that the FDA did not institute a black box warning after requests from citizens’ petitions in 2005, 2006, and 2007. Ortho-McNeil cites Robinson v. McNeil Consumer Healthcare, 615 F.3d 861 (7th Cir.2010), as support for the proposition that the FDA’s failure to alter the label in the face of these citizens’ petitions constitutes “clear evidence” that it would not have approved of the change had Ortho-McNeil proposed it. The Robinson court held that “a court cannot order a drug company to place on a label a warning if there is ‘clear evidence’ that the FDA would not approve it.” Id. at 873 (citing Wyeth, 129 S.Ct. at 1198). However, in Robinson the manufacturer had submitted a proposed label change that the FDA rejected, and the court cited the “clear evidence” standard as one reason of several to uphold the lower court’s refusal to allow the plaintiff, on the eve of trial, to add a breach of implied warranty claim. Id. The Court was not addressing the applicability of failure to warn claims under state tort law. In contrast, Ortho-McNeil presents no evidence as to what action the FDA might have taken had Ortho-McNeil proposed or requested a black box warning. See, e.g., Bartlett v. Mutual Pharm. Co., Inc., 742 F.Supp.2d 182, 194-95 (D.N.H.2010) (discussing and allowing expert testimony regarding the issue of whether a manufacturer should have requested a black box warning).
Therefore, assuming without deciding that Ortho-McNeil could not have added a black box warning without FDA approval, it has not demonstrated that it was “physically impossible” for it to request one from the FDA. Further, instituting a black box warning was not the only option available to Ortho-McNeil to adequately warn prescribing doctors. Schedin’s claim are failure to warn claims, not failure to institute a black box warning claims and as such, Ortho-McNeil’s protestations that it was “physically impossible” to change its label are both legally inadequate and immaterial.
2. Comparative data
Ortho-McNeil argues that it could not have altered its label through the CBE process to include comparative data regarding Levaquin relative to other fluoro quinolones due to the lack of an “adequate and well-controlled study.” 21 C.F.R. § 201.57(c)(2)(iii). Inclusion of comparative information could have alerted physicians to the higher tendon toxicity of Levaquin as compared to other fluoroquinolones. The FDA requires either an “adequate and well-controlled stud[y]” or a waiver from this requirement when a manufacturer intends to make statements in the “[indications and usage” section of the label comparing the safety or effectiveness of the drug with other agents for the same indication. Id. The same regulation notes that to make changes to the “[w]arnings and precautions” section of the label, such a change should be made “to include a warning about a clinically significant hazard as soon as there is reasonable evidence of a causal association with a drug; a causal relationship need not have been definitely established.” 21 C.F.R. § 201.57(c)(6)© (emphasis added). Conspicuously absent from the regulation governing the “[w]arnings and precautions” section is a requirement of adequate and well-controlled studies supporting such warnings.
Here, both parties concede that a “well-controlled study” as defined by the FDA cannot be conducted ethically since such a study requires a placebo concurrent control group that could be fatal to elderly patients with respiratory infections. See 21 C.F.R. § 314.126(b)(2)(i); (Aff. of Ronald Goldser, July 30, 2010, Ex. B at 31:12 to 36:18, 08-MDL-1943 Docket No. 1659). Regardless, Ortho-McNeil has presented no evidence that it applied for a waiver from that requirement as the regulation permits. 21 C.F.R. § 314.126(c).
Ortho-McNeil similarly presents no case law, and the Court is not aware of any, distinguishing between the requirements to alter the “[indications and usage” section and the “[warnings and precautions” section, where the comparative information likely would belong. Courts have compared the “[indications and usage” section of a drug’s label to its advertising, indicating that stricter requirements for what manufacturers can claim in that section are potentially aimed at preventing false advertising. See, e.g., Procter & Gamble Pharms., Inc. v. Roffmann-LaRoche Inc., No. 06-0034, 2006 WL 2588002, at *6-7 (S.D.N.Y. Sept. 6, 2006).
Textual differences between sections within the same statute demonstrate that such differences may have been intentional. See, e.g., King v. St. Vincent’s Hosp., 502 U.S. 215, 221 n. 9, 112 S.Ct. 570, 116 L.Ed.2d 578 (1991) (discussing the interpretation of congressional intent when presented with textual differences in the Veterans’ Reemployment Rights Act). Had Congress intended alterations to the “[w]arnings and precautions” section of a manufacturer’s label to be subject to the same limitations of an “adequate and well controlled study” as specified in the “[indications and usage section,” it could have included that language. Congress did not. Given that the regulations urge a change to the “[wjarnings and precautions” section “as soon as there is reasonable evidence of a causal association” and make no mention of “adequate and well-controlled studies” the Court finds support for the proposition that changes to the “[wjarnings and precautions” section do not require manufacturers to submit such studies.
Additionally, Ortho-McNeil asserts that a manufacturer is under no duty to provide information about the superiority of other drugs. Ackley v. Wyeth Labs., Inc., 919 F.2d 397, 405 (6th Cir.1990); Pluto v. Searle Labs., 294 Ill.App.3d 393, 228 Ill.Dec. 860, 690 N.E.2d 619, 621 (in.Ct.App. 1997). In Pluto, the court held that an Intrauterine Device (“IUD”) manufacturer was not obligated to disclose that IUD’s posed an “increased risk” of sexually transmitted diseases (“STDs”) as compared to other forms of birth control, since the purpose of the IUD was to prevent pregnancy, not STDs. Pluto, 228 Ill.Dec. 860, 690 N.E.2d at 621.
In Ackley, the Sixth Circuit upheld summary judgment for a manufacturer of an “unavoidably unsafe” drug describing the risks posed by that drug. Ackley, 919 F.2d at 405. The court held that such a manufacturer need not discuss alternative medicines in its label. Id. These cases are distinguishable from the instant case, however, since information on comparative drugs was germane to the particular condition at issue and Levaquin has not been classified as “unavoidably unsafe.” See Restatement (Second) of Torts § 402A(k) (defining unavoidably unsafe products their warnings). Further, while the Sixth Circuit has adopted the general proposition that a manufacturer is under no duty to provide information about the superiority of other drugs, it also recognizes the principle that “[t]he manufacturer is obligated to make a reasonable disclosure of all the risks inherent in its own drug.” Id.
Therefore, the Court finds that OrthoMcNeil could have submitted the comparative data demonstrating “evidence of a causal association” to the FDA to alter the “[wjarnings and precautions” section of Levaquin’s label through the CBE process. At the very least, Ortho-McNeil has not demonstrated “physical impossibility” of the nature required to satisfy the principles of conflict pre-emption, particularly given its burden at this stage of the litigation and taking all inferences in favor of the nonmovant. Ogden, 214 F.3d at 1002.
Again, as with the black box warning, Schedin’s claims are failure to warn claims, not failure to provide comparative data claims. Ortho-McNeil had other means by which it could have warned prescribing physicians of the dangers of Levaquin, even if it was unable to utilize the comparative data of which it had knowledge to alter its label.
3. Class labeling
Ortho-McNeil asserts, without reference to statutes or case law, that since Levaquin was subject to class labeling, it was unable to alter the labeling through the CBE process to include more adequate warnings about tendon toxicity. Again, the Court fails to see how this precluded Ortho-McNeil from proposing a label change to the FDA. Indeed, its own expert testified about numerous other drugs, also subject to class label requirements, whose labels included information that went beyond the class-required labeling. (Aff. of Ronald Goldser, Aug. 13, 2010, Ex 1, 08-MDL-1943 Docket No. 1853.) For example, the drug Floxin has an insomnia warning different from other drugs in its class. (Id. at 18-19.) The drug Baycol has warnings related to combined use with other drugs that differs from the class label. (Id. at 185-87.) The same is true for Paxil (id. at 190-92), Bextra (id. at 193-94), and Ortho-Evra (id. at 195-96). Further, Schedin notes at least three differences in labeling between Levaquin and other fluoroquinolones. (PL’s Mem. in Opp’n at 11 (Docket No. 157).) Defendant’s expert concedes that Ortho-McNeil could have used the CBE process despite class labeling. (Goldser Aff., Ex. 1 at 18, 08-MDL-1943 (Docket No. 1853).) As a result, the Court finds that class labeling, at least in practice, creates a floor below which no label in the class can fall, but does not preclude a manufacturer from including more information in its label. This finding is consistent with the central holding of Wyeth that “the manufacturer bears responsibility for the content of its label at all times.” Wyeth, 129 S.Ct. at 1197-98.
In summation, the Court finds that Or-tho-McNeil has not demonstrated “physical impossibility” as required to satisfy the principles of conflict pre-emption. Even if its contentions about black box warnings, the inclusion of comparative data, and deviations from class warnings were accurate, Ortho-McNeil provides no explanation for not proposing label changes and offers no argument that other methods of warning were “physically impossible.”
III. FRAUD ON THE FDA
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10943-13190 | RULING ON DEFENDANT’S MOTION TO DISMISS
POLOZOLA, District Judge.
This matter is before the Court on a motion to dismiss filed by the defendant, Colonel Paul W. Fontenot. Colonel Fontenot contends he is entitled to qualified immunity against the plaintiffs claim under 42 U.S.C. § 1983. However, the plaintiffs claim that he has been denied procedural due process is now moot. Therefore, without reaching the merits of the defendant’s motion, the Court dismisses this claim supa sponte. To the extent the complaint can also be read as alleging the plaintiff has been denied the equal protection of the laws, the Court dismisses that claim sua sponte pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
FACTS AND PROCEDURAL HISTORY
This suit arises from a personnel dispute within the Department of Public Safety and Corrections, Office of State Police. The plaintiff, Edward H. Kuhnert, is an officer with the State Police. He was notified in May, 1993, that for various disciplinary reasons, he was being demoted from the rank of Captain to that of Lieutenant. The demotion carried with it a corresponding reduction in salary. The letter informing the plaintiff of his demotion was signed by Colonel Fontenot, who was head of the Louisiana State Police and a Deputy Secretary in the same office. Attached to the letter was a summary of an Internal Affairs investigation of the plaintiff.
The plaintiff timely filed an appeal with the State Police Commission (the “Commission”). The plaintiffs argument on appeal was three-fold: (1) he denied the allegations which supposedly justified his demotion; (2) he argued that the demotion letter and accompanying investigation summary did not satisfy State Police Commission Rule 12.3, which requires that a person being demoted be furnished with written detailed reasons for the disciplinary action; and (3) he argued that portions of the investigation summary would be inadmissible as evidence at a hearing on the merits, and that by making the entire summary part of the record, the defendant was improperly trying to inflame the Commission.
In April, 1994, the plaintiff filed a motion for summary disposition with the Commission, based on his allegation that Rule 12.3 had not been complied with. In a decision dated June 21,1994, the Commission granted the motion with respect to all but two of the charges leveled against the plaintiff. A hearing on the merits of the remaining two charges was held in November, 1994. Subsequently, on January 20, 1995, the Commission reversed the demotion and reinstated the plaintiff to his former rank, awarded the plaintiff his lost salary plus $2,500 in attorney fees, and ordered the defendant to remove all references to the demotion from the plaintiffs personnel file.
On January 13,1995, one week prior to the Commission’s decision on the merits of the remaining two charges, the plaintiff filed this action under 42 U.S.C. § 1983 in this Court. In his complaint, he alleges the deféndant improperly sought to influence the pending, decision on the remaining two charges, and thereby denied the plaintiff his constitutional right to procedural due process. Specifically, he alleges the defendant improperly communicated ex parte with Commission members, and improperly attached the entire investigative summary to the letter of demotion. One week after the complaint was filed, the Commission rendered its decision reinstating the plaintiff and awarding him his lost salary.
On January 23, 1995, Magistrate Judge Christine Noland issued an order setting a scheduling conference for April 20, and requiring the parties to file a joint status report no later than April 18. In this status report, the defendant raised the issue whether he was entitled to qualified immunity from a section 1983 suit. This issue was raised again during the April 20 scheduling conference. Later that same day, Magistrate Judge Noland signed a scheduling order granting the defendant until May 12 (later extended to May 19) to file a motion for summary judgment based on his qualified immunity. Subsequently, the defendant filed a Rule 12(b)(6) motion to dismiss. That motion alleges multiple grounds for dismissal, though the supporting memorandum only discusses the qualified immunity issue. The plaintiff timely opposed the motion. The matter is now before this Court for decision.
THE ELEVENTH AMENDMENT
Prior to reaching the merits of the motion, consideration of several threshold issues is appropriate, since their resolution may dispose of this case entirely and obviate the need to consider the qualified immunity issue. First, it must be noted that the related questions of whether the defendant is a “person” within the meaning of section 1983, and whether the Eleventh Amendment precludes this suit from being entertained in federal court, depend on the capacity in which the defendant is sued, not on the capacity in which he was acting at the time of the complained-of conduct. Because the complaint expressly states that the defendant is being sued in his individual capacity, the defendant is a section 1983 “person” and this suit is not barred by the Eleventh Amendment.
MOOTNESS
A The Procedural Due Process Claim
The second threshold issue is whether this suit has been mooted by the Commission’s January 20 decision. That decision, rendered on the merits of the dispute one week after this suit was commenced, reinstated the plaintiff to his former rank and awarded him his lost wages attributable to the improper demotion. It therefore appears the plaintiff has been fully vindicated, and this suit thereby mooted, unless the plaintiff seeks to recover for a wrong different from that already remedied by the Commission. Hence, it becomes necessary to compare the two proceedings.
The wrong the plaintiff now seeks to remedy is the infringement of his right to a fair and impartial hearing before the Commission. The wrong he sought to remedy before the Commission was his wrongful demotion. At first glance, it may appear that the two proceedings are unrelated, and that this lawsuit cannot now be mooted by the Commission’s January 20 decision. Such a conclusion is incorrect. While a fair and impartial hearing is unquestionably a distinct right unto itself, it is also a procedural means to a substantive end. In this particular case, the substantive end was a resolution of the dispute regarding the plaintiffs demotion. The Commission ultimately resolved the dispute in the plaintiffs favor, negating any suggestion that the decision-making process was meaningfully tainted against him. Even assuming, as the plaintiff alleges, that the defendant intended to subvert the process, it is obvious that the plaintiff had an adequate remedy before the Commission, which ultimately ruled in his favor. Thus, the Court concludes there is no case or controversy within the meaning of Article III on this issue, and this claim must be dismissed as moot.
In his opposition to the motion now before this Court, the plaintiff addresses the possibility that his claims may be moot. He argues that the damage was done once the defendant attached the summary to the demotion letter and contacted the Commission members ex parte. He further argues that the January 20 Commission ruling is relevant only as to the issue of damages. In support of his argument, he directs this Court to the United States Supreme Court case of Carey v. Piphus. In that case, two Chicago students, one in high school and the other in grade school, were summarily suspended from school for disciplinary reasons. The students filed separate section 1988 actions, which were consolidated for trial. The trial court held the students were suspended without procedural due process, a holding not challenged by the school authorities. Regarding the issue of damages, the Supreme Court held that even if the suspensions were justified, the students could nevertheless recover those mental and emotional distress damages caused by the denial of procedural due process. The Court also held that even if the students could not prove any actual damages, they were still entitled to nominal damages, due to the importance of procedural due process to organized society.
The plaintiffs reliance on Carey is misplaced. The plaintiff correctly points out that the Court in Carey held that compensatory damages might be awarded even though the suspensions were justified. But the Court in that case was not confronted with the preliminary issue whether there had ever been a denial of procedural due process; rather, because the school authorities did not challenge the trial court’s ruling on that issue, the Supreme Court assumed there had been such a denial. In the present ease, there has been no denial of procedural due process. Instead, the process worked exactly as intended. The Commission has given the plaintiff a full and fair hearing and has ruled in his favor.
B. Other Claims
Successful maintenance of a section 1983 action requires a complainant to point to specific constitutional or statutory rights that have been violated. In this case, the complaint appears to be totally devoted to the denial-of-procedural-due-process argument. However, at the end of the complaint, the plaintiff also alleges the defendant engaged in “discriminatory, illegal practices with malice or with reckless indifference to the federally protected rights of complainant.” This language was apparently included to bolster the plaintiffs claim for punitive damages and attorney fees; indeed, nearly identical language appears in the paragraph in which the plaintiff asks for punitive damages and attorney fees. Yet the language can also be read as alleging an infringement of a second constitutional right: the plaintiffs right to equal protection of the laws. If the plaintiff is in fact alleging an infringement of a second constitutional right, he does so in a conclusory manner only, and makes no attempt whatsoever to comply with Morrison v. City of Baton Rouge. That case requires a section 1983 plaintiff to allege with particularity all material facts which establish his right to recovery, if the defendant is potentially immune. Because this particular plaintiff has failed to do that, to whatever extent his complaint might be construed as asserting an infringement of a second constitutional right, this Court dismisses that claim sua sponte pursuant to Rule 12(b)(6).
Finally, the Court notes that in his memorandum in opposition to the pending motion, the plaintiff argues that his rights under State Police Commission Rules 12.3 and 13.19 have been violated. Rule 12.3 requires a person being demoted to be furnished with written detailed reasons for the demotion, and Rule 13.19 prohibits the Commission from receiving ex parte statements as evidence. The plaintiff alleges that his being denied these statutory rights establishes another basis for this section 1983 suit. Whatever the merits of these allegations, they were not included in the plaintiffs pleadings, and therefore will not be considered by the Court. Furthermore, it appears almost certain these claims are inextricably bound up with the plaintiffs due process claim, and are therefore moot.
G. Summary
Because the Commission’s January 20 decision mooted the plaintiffs claim that he was denied procedural due process, that claim is dismissed sua sponte. Dismissal of that one claim should suffice to dismiss the entire suit; however, to the extent the plaintiff alleges he was denied equal protection of the laws as a second basis for this section 1983 suit, that portion of the suit is dismissed sua sponte pursuant to Rule 12(b)(6). Finally, because the plaintiff did not allege in his complaint that his statutory rights under State Police Commission Rules 12.3 and 13.19 were denied, any such denials will not be considered as a third basis for this section 1983 suit.
The Court must note that it should not have been necessary for a federal court to be involved in this matter. Both the plaintiff and the defendant had adequate remedies before the Commission and the Louisiana courts. Indeed, the same issues raised in this suit could have been and should have been raised before the Commission and the Louisiana First Circuit Court of Appeal. The decision of the Commission is now final since the State Police has dismissed its appeals with the Louisiana First Circuit Court of Appeal. It is a waste of precious judicial resources to litigate the same issues in this Court when they have been decided by a state agency and state court which have been given the statutory authority to hear such a claim. There are no further issues to resolve in this case. Since there is no case or controversy remaining between the parties, this Court no longer has jurisdiction in this case.
Therefore:
IT IS ORDERED that the defendant’s motion to dismiss be and it is hereby GRANTED.
Judgment shall be entered dismissing this suit with prejudice.
.The State Police appealed both the June 21, 1994 decision and the January 20, 1995 decision, to the Louisiana First Circuit Court of Appeal. The State Police voluntarily dismissed both appeals in January, 1996.
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11887961-16643 | LYNCH, Circuit Judge.
Kenneth Silva appeals from a directed verdict on his claims alleging violations of the First and Fourteenth Amendments. The First Amendment claims are that Silva was subjected to a ban on parking cars in a city employee parking lot when the ears carry political roof rack signs, that the ban was selectively enforced against him, and that the termination of his city employment was in retaliation for his support of his wife’s political candidacy for city office when she ran against a candidate whom the mayor supported. The Fourteenth Amendment claim is that Silva’s liberty or property interests under the Due Process Clause were violated when he was not given a name-clearing hearing before his employment was terminated for pushing another city employee.
At the close of plaintiffs evidence, defendants moved for a directed verdict. The district court took the motion under advisement and then, at the close of all evidence, directed a verdict against the plaintiff as to the roof rack ban, selective enforcement, and due process claims. The court let the retaliatory firing claim against defendant Worden go to the jury, which held in favor of the defendant. The retaliatory firing claim against the City of New Bedford and Mayor were dismissed. Silva appeals the directed verdict, but not the jury finding against him on his retaliatory firing claim. We affirm. In so doing, we hold that the roof rack ban was not a custom or practice so well established as to be attributable to the City through its policy-making officials. We further hold that Silva’s termination did not occur under circumstances entitling him to a hearing.
I
Silva was hired by the City as an employee in the Department of Public Works on May 24, 1993. Silva was a probationary employee; as such he could not obtain full civil service status until six months after the date of his hiring. In June 1993, Ramone Silva, Silva’s wife, announced her intention to run for election as City Councilor for Ward 4. Mrs. Silva was one of five candidates who sought election to this vacant seat. The leading candidate in this campaign was Joseph Fortes, a political ally of defendant Rosemary Tierney, the Mayor of New Bed-ford. Defendant Lawrence Worden, the DPW Commissioner, and Jose Pontes, the DPW Superintendent and manager of the city yard, were also supporters of Mayor Tierney.
Because she was a write-in candidate and not on the ballot, Mrs. Silva relied heavily on signs to bring herself to the attention of voters. Such a write-in campaign is unusual in New Bedford, so Mrs. Silva’s efforts received much publicity. Silva vigorously supported his wife’s candidacy and worked on her behalf. Pictures of Silva and his wife were widely distributed in campaign literature and published in area newspapers.
Silva worked for the DPW without incident until September 23,1993, when Silva went to the supply area to get work gloves and was ignored by the supply clerk, Timothy Lobo. Lobo, a supporter of Mayor Tierney, knew that Silva’s wife was campaigning against Fortes. Lobo refused to give any gloves to Silva, telling him he “was not important.” When Silva later approached Lobo to discuss the incident, a physical altercation resulted in which Silva pushed Lobo. While no one was injured and the incident was treated by both parties as “no big deal,” Lobo reported the incident to Pontes.
Pontes called Silva to his office and chastised Silva for the incident. Pontes also told Silva to remove his car from the city yard, where Silva had parked. The city yard is a large area, primarily containing the DPW Highway Department, where DPW employees commonly park. Silva’s car had a roof rack advertising his wife’s candidacy for City Councilor. Pontes told Silva that city policy prohibited employees from parking cars with political roof rack signs in the city yard. There was evidence that other DPW employees had parked their personal cars in the city yard with political roof rack signs advocating other candidates for public office. Some DPW employees also had bumper stickers on their cars. But no other person, except Silva, has recently been instructed to move his or her car. Silva relocated his car and never parked in the city yard again.
Pontes, as DPW Superintendent, was second in the DPW heirachy below Worden. Commissioner Worden, not Superintendent Pontes, ran the agency. Pontes supervised the day-to-day operations of the DPW. While Worden had formal authority over the city yard, Pontes administered the yard on a daily basis, a responsibility traditionally exercised by the DPW Supervisor.
On September 24, 1993, Pontes gave Silva a written warning indicating that Silva “pushed Tim Lobo” and recommending that Silva’s probation be extended. Silva refused to sign the warning. Pontes sent a copy of the warning to the union steward and placed a copy in Silva’s personnel file. Although Pontes instructed Silva that he would be given a hearing before Worden, as was customary practice for probationary employees, Silva was never contacted by Worden for this purpose.
On October 7, 1993, Silva received a letter signed by Worden discharging him because of the events giving rise to the warning. Worden never spoke to Silva about the discharge and declined to grant Silva a hearing at which Silva might defend himself. Silva was unable to find other work for two years. On election day, 1993, Mrs. Silva defeated Fortes for the Ward 4 seat.
In April 1994, Silva sued the City, Mayor Tierney, and Worden under 42 U.S.C. § 1983 and Mass. Gen. Laws ch. 12 § 11H, I (the state civil rights acts), claiming that the roof rack ban violated the First Amendment, that it was selectively enforced against him, that he was discharged in retaliation for his support of his wife’s candidacy, and that the City’s failure to provide him a name-clearing hearing prior to his discharge violated his liberty interests under the Due Process Clause of the Fourteenth Amendment.
At trial, Commissioner Worden testified that Pontes had informed him there was a longstanding city “policy” set by the DPW Superintendents prohibiting political roof rack signs in the city yard, although Worden also testified that he had no knowledge of any such practice until after Silva had filed suit against the City. Pontes testified that the policy had been first instituted by a DPW Superintendent in the 1970’s and was continued by later Superintendents, including Pontes. Pontes and Lobo both testified that they remembered past incidents of people being asked to move their cars on account of political roof racks.
At the close of Silva’s case, defendants moved for a directed verdict. The court reserved ruling on the motion and instructed the defendants to proceed with their case, “understanding that I’ll be judging the evidence as of this point, without considering the evidence that you introduce, rather than keep the jury waiting.” After the defendants completed presenting their evidence, they renewed their motion for directed verdict, which the court granted. The court let the retaliatory firing claim go to the jury, which found in favor of Worden, the sole remaining defendant.
II
In reviewing a directed verdict under Fed.R.Civ.P. 50(a), “we take the evidence most favorable to the losing party and ask de novo whether a reasonable jury had inevitably to decide in favor of the victor.” Abraham v. Nagle, 116 F.3d 11, 13 (1st Cir.1997).
We consider all evidence offered during trial, including evidence introduced by the defendants. We do this notwithstanding the defendants’ motion for directed verdict at the end of Silva’s case and the court’s statement that it would rule, although at the close of all evidence, only on the plaintiff’s evidence. The court’s reservation on the initial motion at the end of Silva’s case acted as a denial of the motion, upon which the City had the choice of either standing on its motion or proceeding with its evidence. The defendants chose to proceed with their evidence, and this court must now view all of the evidence presented. See Gillentine v. McKeand, 426 F.2d 717, 722-23 (1st Cir.1970); A & N. Club v. Great American Ins. Co., 404 F.2d 100, 103-104 (6th Cir.1968) (citing O’Malley v. Cover, 221 F.2d 156, 158-59 (8th Cir.1955)). Moreover, the court held that directed verdict was proper based both on Silva’s evidence alone and on all evidence presented during the trial, thereby effectively making two separate rulings.
In reviewing a directed verdict, the appellate court “may not consider the credibility of witnesses, resolve conflicts in testimony, or evaluate the weight of the evidence.” Wagenmann v. Adams, 829 F.2d 196, 200 (1st Cir.1987). “Nevertheless, the evidence to which the nonmovant points must comprise more than fragmentary tendrils: a mere scintilla of evidence is not enough to forestall a directed verdict, especially on a claim or issue as to which the burden of proof belongs to the objecting party.” Fashion House, Inc. v. K mart Corp., 892 F.2d 1076, 1088 (1st Cir.1989) (citations omitted).
We repeat the procedural context. A jury heard and rejected the retaliatory firing claim. At issue here is the potential liability of the City on the other First Amendment claims and the due process claim. With this in mind, we face the central questions in this appeal: (1) whether Pontes is a “policymaker” under Monell v. Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978) and its progeny, (2) whether the City had a “policy” or “custom” of banning political roof rack signs, and (3) whether Silva was deprived of a liberty interest under the Due Process clause of the Fourteenth Amendment by the method of his termination. We answer each question in the negative.
A. Municipal Liability
In Monell, the Supreme Court held that a municipality may not be held vicariously liable under § 1983 for the torts of an employee solely on the basis of its employer-employee relationship with the tortfeasor. Id. at 691, 98 S.Ct. at 2036. Instead, a plaintiff seeking to impose liability on a mu nicipality under § 1983 must identify a municipal “policy” or a “custom” that caused the plaintiffs injury. See Board of County Comm’rs of Bryan County v. Brown, — U.S. -, -, 117 S.Ct. 1382, 1388, 137 L.Ed.2d 626 (1997); Pembaur v. Cincinnati, 475 U.S. 469, 479-81, 106 S.Ct. 1292, 1298-99, 89 L.Ed.2d 452 (1986); Monell, 436 U.S. at 694, 98 S.Ct. at 2037-38. The disputed “policy” or “custom” must also be the cause and moving force behind the deprivation of constitutional rights. See Bryan County Comm’rs, — U.S. at -, 117 S.Ct. at 1388. Because neither policy nor custom is shown here, we do not reach the causation issue.
A municipality may be held hable for acts taken pursuant to a “policy” by at least two methods: when the deprivation resulted (1) “from the decisions of its duly constituted legislative body”, or (2) from the decisions “of those officials whose acts may fairly be said to be those of the municipality.” Id. In such cases, “[mjunicipal liability attaches only where the decisionmaker possesses final authority to establish municipal policy with respect to the action ordered.” Pembaur, 475 U.S. at 481, 106 S.Ct. at 1299 (emphasis added).
Liability may also be premised on a “custom” which caused plaintiffs injury. In particular, a municipality might be held hable when the plaintiff is injured by “an act performed pursuant to a ‘custom’ that has not been formally approved by an appropriate decisionmaker [when] the relevant practice is so widespread as to have the force of law.” Bryan County Comm’rs, — U.S. at -, 117 S.Ct. at 1388. As this court explained in Bordanaro v. McLeod, 871 F.2d 1151 (1st Cir.1989), one method of showing custom is to demonstrate that the custom or practice is so “wellsettled and widespread that the poli-cymaking officials of the municipahty can be said to have either actual or constructive knowledge of it yet did nothing to end the practice.” Id. at 1156.
The evidence presented in this case does not demonstrate the existence of either a policy or a custom under § 1983. First, Pontes, the individual who told Silva he could not park in the city yard, is clearly not the “final authority” in the city yard. The City Code of New Bedford specifically provides that “[t]he commissioner of public works under the direction of the mayor and the city council shall ... [h]ave the charge of the city yard____” New Bedford City Code § 19-143; see also Jett v. Dallas Independent School Dist., 491 U.S. 701, 737, 109 S.Ct. 2702, 2723-24, 105 L.Ed.2d 598 (“[W]hether a particular official has ‘final policymaking authority’ is a question of state law.” (quoting St. Louis v. Praprotnik, 485 U.S. 112, 123, 108 S.Ct. 915, 924, 99 L.Ed.2d 107 (1988))). Thus Worden, as DPW Commissioner, was Pontes’s superior in matters concerning the city yard and ultimately responsible for the manner in which the yard was run. That Worden acknowledged at trial that Pontes was “the head guy” at the yard is insufficient, without more, to demonstrate that Worden delegated final decisionmaking authority regarding the yard to Pontes. This is especially true in light of Worden’s assertions at trial that Pontes, as DPW Superintendent, was “directly beneath my position,” and that “I am the department head.”
We agree with the district court’s assessment that Pontes’s discretion to run the yard does not constitute final decisionmaking authority which might trigger liability under § 1983 as interpreted by Bryan County Comm’rs and Pembaur. Pontes’s testimony that an unidentified DPW Superintendent in the 1970’s first came up with the roof rack ban does not suffice. Such a decision was not made by New Bedford’s legislative body; nor are superintendents, who are second-in- command figures, the final authority to establish DPW policy.
Second, Silva has not met the burden of showing a “custom” under Bordanaro. The roof rack ban was not so “wellsettled and widespread” as to have force of law, nor is there sufficient evidence that the City’s policymaking officials could be said to have had actual or constructive knowledge of the practice. See Bordanaro, 871 F.2d at 1156-57. At the close of evidence, witnesses such as Lobo and Pontes could only remember a few instances over the last twenty years when any roof rack policy had been enforced. More significantly, Commissioner Worden testified that he did not even know of the existence of a roof rack ban until several months after Silva had been fired and, indeed, not until after Silva had filed suit against the City. Moreover, there is no evidence that Mayor Tierney or other high ranking city officials, or prior policymakers, were even aware of the practice, much less that they did nothing to end it. We do not suggest that, and need not reach the issue of whether, a flat ban on political roof racks on cars in city employee parking lots is unconstitutional. Even if Silva’s “custom” claim is recast as involving a custom of selective enforcement of such a ban depending on which candidate’s sign is displayed, a far more potent constitutional claim, the claim still fails for want of evidence that it involves a custom.
Under Bordanaro, in order to show that City officials had constructive knowledge of the practice, the plaintiff must show that “the practices have been so widespread or flagrant that in the proper exercise of their official responsibilities the municipal policymakers should have known of them.” Bordanaro, 871 F.2d at 1157 (citations, internal quotation marks, and alterations omitted). In Bordanaro, the plaintiff had presented considerable evidence demonstrating a comprehensive failure by the defendant City of Everett to train and monitor the actions of its police officers, and the court found that the evidence demonstrated the existence of a widespread practice of which the defendant’s policymaking officials should have been aware. See Id. at 1159-61. In contrast, the evidence in this case at best suggests a practice, sporadic at most, of which only some lower-level managerial employees were aware. This evidence is insufficient to show that the City’s policymaking officials had constructive notice of the practice.
B. Due process considerations
Silva claims he was deprived of a liberty interest under the Due Process clause of the Fourteenth Amendment by the termination of his employment in that the termination stigmatized him and damaged his ability to obtain other employment. Silva further argues that the City violated his right to due process by refusing to grant him a hearing at which he might clear his name.
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4055592-28784 | SUSAN L. CARNEY, Circuit Judge:
Defendant SEFCU, a lender, appeals from a judgment of the United States District Court for the Northern District of New York (Suddaby, J.) reversing an order of the United States Bankruptcy Court for the Northern District of New York (Littlefield, J.) and remanding the case to the Bankruptcy Court for further proceedings. The District Court concluded that SEFCU violated the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362, when, after lawfully repossessing a vehicle belonging to the debtor, plaintiff Christopher Weber, it failed to deliver the vehicle to him notwithstanding its knowledge of the debtor’s pending petition under Chapter 13 of the Bankruptcy Code. The District Court affirmed, holding that, by declining to surrender the vehicle absent a turnover order and protection SEF-CU considered adequate, the lender wrongfully “exercised control” over the vehicle in contravention of section 362 and was liable for Weber’s related damages, attorneys’ fees, and costs.
On appeal to onr Court, SEFCU challenges the District Court’s interpretation of section 362 and other relevant provisions of the Bankruptcy Code, and argues that, under the authority of Manufacturers & Traders Trust Co. v. Alberto (In re Alberto), 271 B.R. 223 (N.D.N.Y.2001), it was entitled to retain the vehicle notwithstanding the pending bankruptcy proceedings. For the reasons set forth below, we AFFIRM the judgment of the District Court and REMAND the cause to the district court for a determination of the amount of damages, costs, and attorneys’ fees that SEFCU owes Weber under section 362(k), and any other proceedings consistent with this opinion.
BACKGROUND
The relevant facts are undisputed.
In August 2006, Weber and SEFCU (identified in Bankruptcy Court pleadings as the “State Employees Federal Credit Union”) entered into a loan agreement pursuant to which SEFCU obtained a security interest in Weber’s vehicle, a pickup truck. The loan agreement entitled SEF-CU to repossess Weber’s vehicle upon default.
In 2009, SEFCU became entitled to proceed against Weber. As a result, on January 10, 2010, SEFCU took possession of Weber’s vehicle pursuant to the loan agreement, and, by notices dated January 10 and 11, 2010, advised him of his right under New York law to redeem the vehicle upon payment of amounts due and certain costs. Four days after the seizure, on January 14, Weber filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code, 11 U.S.C. §§ 109(e), 1301-08, 1321-30, in the United States Bankruptcy Court for the Northern District of New York. Weber’s attorney concurrently gave SEFCU written notice of Weber’s bankruptcy filing, and, invoking the stay imposed by Bankruptcy Code section 362, 11 U.S.C. § 362(a), requested the vehicle’s return.
One week later, SEFCU still had the vehicle, and accordingly, on January 22, Weber filed an adversary proceeding against SEFCU seeking its return so that, as later explained by his counsel to the Bankruptcy Court, he could “continue his construction business” during the pen-dency of his petition. On March 1, with the vehicle still in SEFCU’s possession, the Bankruptcy Court entered an order requiring SEFCU to show cause why it should not return the vehicle and why the court should not grant Weber an award of damages for SEFCU’s violation of section 362 and for other relief. On March 4, the court heard argument on the order to show cause, and, although the record does not reflect entry of a related order at that time, SEFCU is reported to have returned the vehicle to Weber the following day.
The proceedings in the Bankruptcy Court continued, as Weber sought damages for his inability to use the vehicle between January 14 and March 5, attorneys’ fees, and sanctions. In November 2010, SEFCU moved for summary judg- merit, putting to the Bankruptcy Court the question of law whether SEFCU’s failure to release the vehicle promptly after the petition was filed constituted a “willful” violation of the automatic stay under subsections (a) and (k)(l) of section 362 (providing for recovery of damages, costs, and attorneys’ fees for “any willful violation of a stay”). SEFCU maintained that there was no violation, and that an earlier district court decision in other proceedings, Alberto, 271 B.R. 223 (N.D.N.Y.2001), gave it a reasonable basis for declining to release the vehicle absent a court order issued pursuant to Bankruptcy Code section 542, 11 U.S.C. § 542 (relating to “Turnover of property to the estate”). Weber, for his part, argued that Alberto was wrongly decided, and that section 362 required SEFCU to release the vehicle promptly after the petition was filed. The Bankruptcy Court, in a brief Order, granted summary judgment for SEFCU.
Weber appealed to the District Court. Relying primarily on the Supreme Court’s decision in United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983), and rejecting the reasoning of the Alberto court, the district court concluded that SEFCU was bound to release the vehicle to Weber, the debtor-in-possession, upon learning of Weber’s pending Chapter 13 proceedings. The district court further determined that, having failed to do so, SEFCU violated section 362. Because it knew of the petition and retained the vehicle, SEFCU’s violation was willful, making it liable for damages and attorneys’ fees. Weber v. SEFCU, 477 B.R. 308, 311 (N.D.N.Y.2012). SEFCU timely appealed.
DISCUSSION
We conduct a “plenary review” of a decision of “a district court functioning in its capacity as an appellate court in a bankruptcy case.” Mazzeo v. United States (In re Mazzeo), 131 F.3d 295, 301 (2d Cir.1997). Thus, we review de novo the bankruptcy court’s legal conclusions. Resolution Trust Corp. v. Best Prods. Co. (In re Best Prods. Co.), 68 F.3d 26, 29 (2d Cir.1995). As noted above, the relevant facts are not contested; we have no occasion to subject them to further review.
Under Bankruptcy Code section 541, governing “Property of the estate,” the act of filing a petition for bankruptcy creates an estate comprised of (as relevant here) “all legal or equitable interests of the debt- or in property as of the commencement of the [bankruptcy] case.” 11 U.S.C. § 541(a)(1). Section 541 gathers into the estate all such interests in property, “wherever located and by whomever held.” Id. § 541(a).
To assemble the bankruptcy estate, section 542 of the Code requires that, during bankruptcy proceedings, an entity “in possession, custody, or control” of certain property in the estate “shall deliver ” that property to the trustee, “unless such property is of inconsequential value or benefit to the estate.” 11 U.S.C. § 542(a) (emphasis added). The property subject to this delivery obligation is “property that the trustee may use, sell, or lease under section 363,” which grants broad powers over the estate’s property to the trustee. Id. In a Chapter 13 bankruptcy, the debtor “remain[s] in possession of all property of the estate” — acting in effect as trustee under section 542(a) — unless the debtor’s reorganization plan provides otherwise. 11 U.S.C. § 1306(b). The delivery obligation of section 542(a) thus contemplates the debtor-in-possession as the recipient of the property of the estate.
While bankruptcy proceedings are pending, the automatic stay provisions of section 362 work with sections 541 and 542 to shelter the debtor’s estate from action by creditors, enabling the debtor to get the relief and fresh start that are among the goals of the bankruptcy regime. Thus, under section 362, filing a bankruptcy petition automatically effects a stay of “any act to obtain possession of property of the estate ... or to exercise control over property of the estate.” 11 U.S.C. § 362(a)(3). Those who violate section 362 are liable for related damages and costs: under section 362(k), a debtor “injured by any willful violation of a stay provided by [section 362] shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.” Id. § 362(k)(l) (emphasis added).
We first consider whether SEFCU’s refusal to return the vehicle to Weber promptly upon learning of his Chapter 13 bankruptcy filing constituted an unlawful “exercise [of] control” over the “property” of his estate, in violation of the automatic stay. We then examine whether SEFCU may be excused from promptly surrendering the vehicle because Weber had not provided “adequate protection” for SEF-CU’s security interest in the vehicle. Finally, because we conclude that SEFCU’s actions did violate section 362, we then turn to the question whether, in light of its reliance on Alberto, SEFCU’s violation was nonetheless “willful” under section 362(k), making it liable for Weber’s actual damages, costs, and attorneys’ fees under that section.
I.
As observed above, section 541(a) provides that a bankruptcy estate is comprised of “all legal or equitable interests in property as of the commencement of the case.” Although SEFCU’s repossession of the vehicle before Weber filed his petition lawfully overrode Weber’s immediate possessory rights, the parties agree that New York law afforded Weber at least a continuing equitable interest in the vehicle. See Womick v. Gaffney, 544 F.3d 486, 490 (2d Cir.2008) (“Whether the debtor has a legal or equitable interest in property such that it becomes property of the estate under section 541 is determined by applicable state law.” (internal quotation marks omitted)). That interest arose from Weber’s right pursuant to the state Uniform Commercial Code to redeem the vehicle before sale. See N.Y. U.C.C. § 9-623. It was this right that SEFCU acknowledged and identified for Weber in its notice to him dated January 11. Weber’s equitable interest thus constituted “property” of the bankruptcy estate under section 541. Neither party seriously challenges the scope of that definition.
Rather, Weber and SEFCU dispute whether, by failing to surrender the vehicle immediately upon receiving notice of the petition’s filing, SEFCU “exercise[d] control” over Weber’s equitable interest in the vehicle and thereby violated the stay imposed by section 362. The Supreme Court’s decision in United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983), provides important guidance for our resolution of this issue.
The dispute in Whiting Pools arose when, to satisfy a tax lien, the IRS seized all of the tangible personal property of the corporation. One day after the seizure, the corporation filed for bankruptcy. The IRS moved for relief from the automatic stay, wishing to be free to sell the personal property that it had seized in satisfaction of the tax debts owed. The debtor corporation counterclaimed and, in the bankruptcy court, successfully sought an order under section 542 that required the IRS to return the property to the estate. Id. at 199-201,103 S.Ct. 2309.
The Supreme Court affirmed the bankruptcy court’s turnover order. Characterizing the IRS’s interest in the seized property as “its lien” — not ownership — and analogizing the Service’s right to effect a seizure to the remedies available to private secured creditors, the Court described the seizure as “not determining] the Service’s rights to the seized property, but merely bringing] the property into the Service’s legal custody.” Id. at 210-11, 103 S.Ct. 2309. It explained that “[i]n effect, § 542(a) grants to the estate a possessory interest in certain property of the debtor that was not held by the debtor at the commencement of reorganization proceedings,” id. at 207, 103 S.Ct. 2309, and “requires an entity ... holding any property of the debtor that the trustee can use under § 363 to turn that property over to the trustee.” Id. at 205-06,103 S.Ct. 2309.
The Court underscored the Congressional intent, in shaping the definition of “property” set forth in section 541(a), to include “a broad range” of property in the estate, and indeed, to capture “any property made available to the estate by other provisions of the Bankruptcy Code.” Id. at 204-05, 103 S.Ct. 2309. Section 542(a) is such a provision. It requires delivery to the trustee of “any property of the debtor that the trustee can use under § 363,” including property repossessed by a secured creditor. Id. at 205-06, 103 S.Ct. 2309. “Any other interpretation of § 542(a),” the Court declared, “would deprive the bankruptcy estate of the assets and property essential to its rehabilitation effort and thereby would frustrate the congressional purpose behind the reorganization provisions.” Id. at 208, 103 S.Ct. 2309.
For these reasons, the Court restricted the IRS — like any other creditor seizing property in which it held a security interest — to seeking protection of its interests “according to the congressionally established bankruptcy procedures, rather than by withholding the seized property from the debtor’s efforts to reorganize.” Id. at 212,103 S.Ct. 2309.
Similarly, here, SEFCU seized Weber’s vehicle before Weber filed for bankruptcy, but under New York law, Weber retained at least an equitable interest in the property notwithstanding its repossession. SEF-CU did not automatically obtain an ownership interest in the vehicle: its rights to seize and sell were subject to U.C.C. provisions of state law, including certain continuing rights held by Weber, and also subject to the rights and remedies established by the Bankruptcy Code. Whiting Pools teaches that, upon Weber’s filing of his bankruptcy petition, Weber’s equitable interest under state law gave the bankruptcy estate a possessory right in the secured property, as property that the trustee could use under section 363. Under section 542, that right took precedence over the state law possessory right of SEFCU. See id. at 207, 103 S.Ct. 2309.
It is true that Whiting Pools involved a Chapter 11 corporate reorganization, and that the Supreme Court expressly reserved judgment as to whether its analysis would also apply to Chapter 13 personal reorganizations like Weber’s. 462 U.S. at 208 n. 17, 103 S.Ct. 2309. But, like other courts to have addressed the issue, we observe that the language of sections 541, 542, and 362 applies to the “estate,” not just the “reorganization estate.” See Austein v. Schwartz (In re Gerwer), 898 F.2d 730, 734 (9th Cir.1990) (cited in In re Velichko, 473 B.R. 64, 67 (Bankr.S.D.N.Y. 2012)). We see no reason — and the parties have presented none — to restrict application of the reasoning of the Whiting Pools Court to corporate reorganizations: the same concerns apply fully in the Chapter 13 context as well. See, e.g., Thompson v. General Motors Acceptance Corp., 566 F.3d 699, 705-06 (7th Cir.2009) (applying Whiting Pools in Chapter 13 setting and observing that the “purpose of reorganization bankruptcy, be it corporate or personal, is to allow the debtor to regain his financial foothold and repay his creditors”) (emphasis added). As noted above, Weber required his vehicle to conduct his construction business; Whiting Pools required its equipment and other personal property to conduct its business. In each case, the reorganization’s chances for success would seem markedly improved if operations could be maintained during the pendency of the petition and formulation of the plan.
Whiting Pools does not resolve, however, whether by demanding a turnover order of the bankruptcy court or “adequate protection” as a condition of its relinquishment, SEFCU “exercise[d] control” over the vehicle in contravention of the stay. In Whiting Pools, the IRS — unlike SEF-CU — moved for relief from the stay, and did not simply wait for the debtor to initiate an adversary proceeding or seek a turnover order under section 542. Id. at 201,103 S.Ct. 2309. Thus, the Court there held only that the bankruptcy court properly ordered the IRS to return the seized property to the estate under section 542. Id. at 212,103 S.Ct. 2309.
The district court’s decision in Alberto, relied upon by SEFCU here, directly addressed the question left unanswered by Whiting Pools. The Alberto ' court concluded that a secured creditor did not violate the automatic stay when, after learning of the debtor’s bankruptcy, it failed immediately to return a debtor’s repossessed vehicle. 271 B.R. at 228. Rather, the court held that before such a secured creditor was obligated to surrender the collateral to the estate, the debtor must “take[] an affirmative step,” such as obtaining a turnover order under section 542. Id. at 227. Because (as it found) a repossessed vehicle was not part of the debtor’s estate until such an action had occurred, the court reasoned that a creditor that had taken possession of its security did not “exercise control” over “property” of the estate by declining to surrender the pos-sessory interest to the estate. Id. at 228. Since the debtor no longer had a possesso-ry interest, the court concluded, the creditor “did not ‘act to obtain possession ... or to exercise control’ of the vehicle in violation of the stay, since it already lawfully possessed and controlled the vehicle when the stay went into effect.” Id. at 226 (alteration in original) (quoting 11 U.S.C. § 362(a)(3)).
We find the Alberto court’s reasoning unpersuasive. Section 541 expressly provides that the “property” of Weber’s estate includes equitable interests, and Weber’s right to redeem and other rights cata-logued above, together with his lingering claim to ownership of title, comprise such an interest. That SEFCU had already effected a repossession does not alter the conclusion that the equitable interest is property of the estate: section 541 provides further that the estate is comprised of property “wherever located and by whomever held.” 11 U.S.C. § 541(a). Nor was Weber obligated to initiate an additional proceeding. Section 542 requires that any entity in possession of property of the estate deliver it to the trustees, without condition or any further action: the provision is “self-executing.” Collier on Bankruptcy § 542.02 (16th ed. 2012) (“By its express terms, [section 542] is self-executing, and does not require that the trustee take any action or commence a proceeding or obtain a court order to compel the turnover.”). And Whiting Pools teaches that the filing of a petition will generally transform a debtor’s equitable interest into a bankruptcy estate’s posses-sory right in the vehicle.
As for whether SEFCU’s refusal to return the vehicle to the estate violated the stay, section 362 forbids any act to “obtain possession” or “exercise control” over the property of the estate. We need consult only an ordinary dictionary to confirm that a typical definition of “control” is: “To exercise authority over; direct; command.” Webster’s New World College Dictionary (4th ed. 2002). In light of that definition, we see no way to avoid the conclusion that, by keeping custody of the vehicle and refusing Weber access to or use of it, SEFCU was “exercising control” over the object in which the estate’s equitable interest lay, and its retention of the vehicle violated the stay.
The Bankruptcy Amendments and Federal Judgeship Act of 1984 (the “1984 Amendments”) confirms our conclusion. The 1984 Amendments, passed after the Whiting Pools decision in 1983, broadened the already sweeping provisions of the automatic stay even further to prohibit expressly not only “acts to obtain possession” of property of the estate, but also “any act ... to exercise control over the property of the estate.” Pub. L. No. 98-353, 98 Stat. 333, 371. This significant textual enlargement is consonant with our understanding and the Supreme Court’s interpretation that Congress intended to prevent creditors from retaining property of the debtor in derogation of the bankruptcy procedure and the broad goals of debtor protection discussed above, without regard to what party was in possession of the property in question when the petition was filed. As the Seventh Circuit has pointed out, “Although Congress did not provide an explanation of that amendment, the mere fact that Congress expanded the provision to prohibit conduct above and beyond obtaining possession of an asset suggests that it intended to include conduct by creditors who seized an asset pre-petition.” Thompson, 566 F.3d at 702 (citation omitted).
The rule adopted by the Alberto court and urged on us by SEFCU — that some additional act by the debtor is required before the creditor is obligated to surrender the property — would, in contrast, place on the debtor or trustee the burden of undertaking a series of adversary proceedings to pull together the bankruptcy estate, and thereby increase the costs of administering the estate and decrease the assets available to effect a successful reorganization. In our view, the plain language of section 542 (directing that those in custody of assets of the estate “shall deliver” them to the trustee); the approach of the Whiting Pools Court to equitable interests and bankruptcy estates; and the broad language of the 1984 Amendments enlarging the scope of the automatic stay point unmistakably away from any Congressional desire to impose such an additional burden on debtors seeking bankruptcy protection. As the Eighth Circuit wrote,
[I]f persons who could make no substantial adverse claim to a debtor’s property in their possession could, without cost to themselves, compel the debtor or his trustee to bring suit as a prerequisite to returning the property, the powers of a bankruptcy court ... to collect the estate for the benefit of creditors would be vastly reduced.
Knaus v. Concordia Lumber Co. (In re Knaus), 889 F.2d 773, 775 (8th Cir.1989) (internal quotation marks omitted). SEF-CU has identified no basis for concluding that Congress intended this result.
The district court’s decision in Alberto also runs counter to the strong trend of decisions from our sister Circuits. For example, the Seventh Circuit has bluntly ruled that “a plain reading of the Bankruptcy Code’s provisions, the Supreme Court’s decision in [Whiting Pools ], and various practical considerations require that a creditor immediately return a seized asset in which a debtor has an equity interest to the debtor’s estate upon his filing of Chapter 13 bankruptcy.” Thompson, 566 F.3d at 700; see also Knaus, 889 F.2d at 775. Bankruptcy Appellate Panels from other Circuits agree. E.g., Unified People’s Fed. Credit Union v. Yates (In re Yates), 332 B.R. 1, 7 (10th Cir. BAP 2005); TranSouth Fin. Corp. v. Sharon (In re Sharon), 234 B.R. 676, 682 (6th Cir. BAP 1999); Abrams v. Sw. Leasing & Rental Inc. (In re Abrams), 127 B.R. 239, 243 (9th Cir. BAP 1991).
Only the Eleventh Circuit has adopted a contrary approach, and those decisions have largely relied on readings of state law with regard to the relative legal property interests of debtor and secured creditor after a lawful repossession. See Bell-Tel Fed. Credit Union v. Kalter (In re Kalter), 292 F.3d 1350, 1356-60 (11th Cir.2002) (applying Florida law); Charles R. Hall Motors, Inc. v. Lewis (In re Lewis), 137 F.3d 1280, 1284-85 (11th Cir.1998) (applying Alabama law).
In our view, the majority rule adheres more faithfully to the text of the Bankruptcy Code and the reasoning of Whiting Pools. In addition, sound policy supports the majority’s reading of the statutory text:
The primary goal of reorganization bankruptcy is to group all of the debt- or’s property together in his estate such that he may rehabilitate his credit and pay off his debts; this necessarily extends to all property, even property lawfully seized pre-petition. An asset actively used by a debtor serves a greater purpose to both the debtor and his creditors than an asset sitting idle on a creditor’s lot.
Thompson, 566 F.3d at 702 (citations omitted) (emphasis in original).
We therefore join the majority of other Circuits to have addressed this issue and conclude that section 362 requires a creditor in possession of property seized as security — but subject to a state-law-based residual equitable interest in the debtor— to deliver that property to the trustee or debtor-in-possession promptly after the debtor has filed a petition in bankruptcy under Chapter 13.
II.
SEFCU argues that even if the Code did not permit SEFCU to await a turnover order before relinquishing the vehicle, SEFCU was entitled to withhold the vehicle until Weber offered or the court ordered Weber to provide SEFCU “adequate protection” for SEFCU’s security interest. Appellant’s Br. 15. We need not pause long over this argument, for the plain text of the Bankruptcy Code contradicts this position. As we have observed, section 542(a) provides without qualification that anyone in possession of the property of the estate “shall deliver” it to the trustee. 11 U.S.C. § 542(a). The Code requires the creditor first to surrender the property. Only then or in conjunction with that surrender may it proceed to “request” from the Bankruptcy Court “adequate protection” for its interests. 11 U.S.C. §§ 362(d), 363(e). The provisions authorizing imposition of such protection operate only upon application of the creditor to the Bankruptcy Court. Unlike section 542(a), these are not self-executing.
SEFCU points to no provision of the Code permitting a creditor to withhold property of the estate until the debtor has offered protection that is “adequate” in the creditor’s view, separate from any formal proceeding before the Bankruptcy Court. Rather, the Code provides for protection that the court deems adequate: “[0]n request of an entity that has an interest in property used ... by the trustee, the court ... shall prohibit or condition such use ... as is necessary to provide adequate protection of such interest.” 11 U.S.C. § 363(e). See Sharon, 234 B.R. at 683 (holding that “[t]here is no ‘exception’ ... that excuses [the creditor’s] refusal to deliver possession of the Debtor’s car based on [the creditor’s] subjective opinion that adequate protection offered by the Debtor was not ‘adequate’ ”). To hold otherwise would permit a creditor holding the debtor’s property at the time of the debtor’s bankruptcy filing to “negotiat[e] a better security package” than other creditors, thereby ensuring that creditor “a position above other secured creditors” and circumventing the bankruptcy court’s authority to approve the debtor’s plan to repay his or her debts. Thompson, 566 F.3d at 707.
SEFCU points principally to the Fourth Circuit’s decision in Tidewater Finance Co. v. Moffett (In re Moffett), 356 F.3d 518 (4th Cir.2004), in support of the proposition that a secured creditor may await delivery of what it deems adequate protection before surrendering the debtor’s property to the estate. But Moffett is in-apposite. That case did not concern the creditor’s assessment of whether the debt- or’s proffered protection was “adequate:” Rather, there, the creditor moved in the bankruptcy court for relief from the stay, seeking permission to sell the previously repossessed vehicle. Id. at 520. The Fourth Circuit agreed with the bankruptcy court that the debtor’s reorganization plan provided “adequate protection” to the creditor and declined to lift the stay, requiring the creditor to return the vehicle to the debtor. Id. at 523.
We easily conclude that SEFCU’s belief that Weber had not provided “adequate protection” for SEFCU’s security interest in the vehicle does not cure SEFCU’s violation of section 362.
III.
Finally, SEFCU asserts that even if its actions violated section 362, its violation was not “willful” within the meaning of section 362(k), and therefore the court may not require it to pay Weber’s damages, costs, or attorneys’ fees, or to impose any sanction. SEFCU asserts primarily that, because it relied in good faith on the Alberto decision and the “rule and custom” of the Northern District of New York, any violation that it committed should not be deemed “willful” under section 362(k). Appellant’s Br. at 3.
We appreciate that, since one district court rendered its decision in Alberto, a practice may have developed in the Northern District of New York under which creditors felt entitled to await a turnover order and that SEFCU may therefore have felt justified in failing to surrender Weber’s vehicle absent a court order. Nothing prevented SEFCU from surrendering the vehicle in response to Weber’s request, however: it always was free to do so, and free concurrently to move the Bankruptcy Court for entry of an order that would — in the court’s view — provide “adequate protection” to SEFCU. The creditor’s error in this regard does not justify placing costs related to the vehicle’s retention on the debtor.
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4183108-13516 | BEAM, Circuit Judge.
Arena Holdings Charitable, LLC, and RE Arena, Inc. (“Arena Holdings”) appeal the district court’s grant of summary judgment in favor of Harman Professional in this tort claim arising out of a fire that occurred at the Ralph Engelstad Arena in Grand Forks, North Dakota. We affirm.
I. BACKGROUND
The facts involved in this case as described by the district court are uncontested on appeal. This matter arises from a fire that occurred at the Ralph Engelstad Arena on July 3, 2011. Arena Holdings alleges the fire started when a Crown Macro-Tech 5002VZ amplifier produced a direct current to a speaker that spread to adjoining speakers located in the catwalk area of the Engelstad Arena. Harman Professional is the manufacturer .of the alleged defective amplifier, and Impulse Group installed the sound reinforcement system at the Engelstad Arena when it was originally built, and so installed the amplifier as well, ■
The fire caused approximately $5 million of damage throughout the Engelstad Arena, including damage to the building and fixtures, as well as damage to personal property. The fire directly damaged the arena structure and equipment in the vicinity of the amplifier and speakers. The presence of smoke and soot throughout the Engelstad Arena after the fire caused additional damage. Arena Holdings initiated this action against Harman alleging negligence, strict liability and post-sale failure-to-warn claims. Harman then filed a third-party complaint against Impulse Group, and others. The district court granted Harman’s motion for summary judgment, finding that the economic loss doctrine precluded Arena Holdings from recovering tort damages.
II. DISCUSSION
We review the district court’s grant of summary judgment de novo. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir.2011). Summary judgment is proper “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Id. (quotation omitted).
A. Economic Loss Doctrine
Under the economic loss doctrine in North Dakota, economic loss resulting from damage to a defective product, as distinguished from damage to persons or other property, may be recovered in a cause of action sounding in contract, but not in tort. Leno v. K & L Homes, Inc., 803 N.W.2d 543, 550 (N.D.2011). “The economic loss doctrine distinguishes between bargain expectation interests, which are protected under contract law, and safety interests, which are protected under tort law.” Steiner v. Ford Motor Co., 606 N.W.2d 881, 885 (N.D.2000). North Dakota has yet to directly rule on the issue presented here — whether, or to what extent, redress can be sought in tort where there is injury not only to the defective product but also to other property.
In 1996, this circuit had occasion to predict how North Dakota would analyze this very subject in Dakota Gasification Co. v. Pascoe Building Systems and held that the North Dakota Supreme Court would likely conclude “that the economic loss doctrine extends to preclude liability in tort for physical damage to other nearby property of commercial purchasers who could foresee such risks at the time of purchase.” 91 F.3d 1094, 1101 (8th Cir. 1996). The facts and circumstances of Dakota Gasification as they relate to the contracting parties in this case are nearly identical.
In Dakota Gasification, the predecessor to the owner of a large coal gasification plant contracted for the construction of a federally guaranteed $2 billion synthetic natural gas production plant, which was to be “one of the largest synthetic fuel plants in the world and the only one of its kind in the United States.” Id. at 1096. In part, the plans called for the construction of an oxygen plant, which was to be housed in a separate steel building but still within the larger plant. Id. Down a chain of subcontractors involved in the overall project, none of whom directly contracted with the Dakota Gasification plaintiff, one subcontractor that was to furnish the pre-engineered metal building that would enclose the oxygen plant contracted with Defendant Pascoe Building Systems who furnished the structural steel for the building. Id.
During the construction process in Dakota Gasification, several defective welds were discovered on some of the Pascoe materials and Pascoe repaired them. Id. The building was ultimately accepted after construction was completed. Id. However, eight years later, the roof of the building collapsed, causing damage to the steel building as well as parts of the oxygen plant contained within. Id. at 1097. Thé owner of the gasification plant sued Pascoe, among others, seeking to recover damages. Id. On appeal of an adverse summary judgment ruling in favor of Pascoe, the Eighth Circuit predicted that North Dakota would take the “modern,” foreseeability approach to the economic loss doctrine. Id. at 1100-01. Applying this approach, this court held that because damage to the other property in the physical proximity of the oxygen plant was foreseeable and within the contemplation of the parties when the oxygen plant was built, the economic loss doctrine precluded recovery. Id. at 1101.
Arena Holdings contends that Dakota Gasification missed the mark, pointing to a Supreme Court decision in 1997, see Saratoga Fishing Co. v. J.M. Martinac & Co., 520 U.S. 875, 117 S.Ct. 1783, 138 L.Ed.2d 76 (1997), as well as the Restatement (Third) of Torts: Products Liability § 21, which both take a different approach to the economic loss doctrine. Arena Holdings essentially urges this court to define a more bright line rule — that physical damage to anything other than the product itself would be considered damage to “other property” and therefore subject to suit in tort. This, they argue, is more in line with the Supreme Court’s articulation in Saratoga Fishing and is most likely the avenue North Dakota would travel.
In Saratoga Fishing, the Court addressed the limits on the damages that a tort plaintiff can recover for physical damage to property caused by a defective product. 520 U.S. at 876, 117 S.Ct. 1783. The admiralty case involved a defectively designed hydraulic system in a fishing vessel, and the specific issue was whether equipment that had been added on by the boat’s initial owner after its purchase from the manufacturer was “other property” such that its loss could be recovered in tort. Id. at 877-78, 117 S.Ct. 1783. The ship itself constituted the original property. Id. at 877, 117 S.Ct. 1783. Applying and building upon its previous decision in East River S.S. Corp. v. Transamerica Delaval Inc., 476 U.S. 858, 106 S.Ct. 2295, 90 L.Ed.2d 865 (1986), the Court determined that equipment added to a product after manufacture is not part of the original property, and in fact is “other property,” and compensation for damage to this other property can be recovered in tort. Id. at 879, 881,106 S.Ct. 2295.
Arena Holdings also alleges that the most recent version of the Restatement of Torts adopts the Saratoga Fishing approach as to whether damages to “other property” due to a defective product can be recovered in tort. Restatement (Third) of Torts: Products Liability Ch. 4, Topic 3, § 21 cmt. e (“A defective product that causes harm to property other than the defective product itself is governed by the rules of this Restatement. What constitutes harm to other property rather than harm to the product itself may be difficult to determine.”). According to Arena Holdings, the Court’s position in Saratoga Fishing (bolstered by the Restatement) provides a reason for us to distance ourselves from the Dakota Gasification decision. At bottom, though, Saratoga Fishing is inapposite in the instant analysis primarily because it does not construe North Dakota law, as we are bound to do, but rather was an admiralty case and thus does not address the heart of the matter we now face.
The North Dakota Supreme Court has rarely spoken of the economic loss doctrine subsequent to Dakota Gasification, and as relevant to the specific question before us today, has only done so in dicta. Arena Holdings cites this dicta, however, in support of its position on appeal. In Clarys v. Ford Motor Co., 592 N.W.2d 573 (N.D. 1999), the plaintiff sought to recover in tort for the loss of a used van that was destroyed by fire due to a defective ignition switch. Id. at 573. Damage to “other property” was not at issue in the case. In dicta, however, the Supreme Court of North Dakota stated that there was a distinction between damage to the product and damage to “other property” and that this distinction was not without consequence under the public policy of North Dakota. Id. at 574-75. The court cited the Restatement (Third) of Torts, and noted that while the economic loss doctrine should preclude tort recovery for damage to the defective product itself, when the defective product causes damage to persons or other property, tort law would apply. Id. at 578-79; see also Steiner, 606 N.W.2d at 884 (applying the economic loss doctrine in a case where the only damage was to the defective product, a car, and quoting the language from Clarys distinguishing the situation from when the defective product causes damage to persons or other property). The ultimate holding in Clarys, however, only clarified that the economic loss doctrine applies equally in commercial and consumer contexts alike, as that was the “sole” issue raised. Clarys, 592 N.W.2d at 574, 579. Importantly, Clarys did not discuss the rationale underlying the economic loss doctrine in the context of discerning the definition of “other property” and where the line falls between “[t]he separate and distinct functions served by tort and contract law.” Id. at 575.
While we acknowledge that some doubt concerning the issue at hand is raised by North Dakota’s subsequent discussion of the economic loss doctrine, Clarys and Steiner do not stand as decisive legal authority sufficient to conclude that North Dakota would shun the foreseeability approach advanced in Dakota Gasification. It still remains that North Dakota has specifically discerned the very critical distinction that exists between contract and tort and the balance achieved by limiting liability so that one does not subsume the other. Too, this dicta could be interpreted differently. It is not axiomatic that North Dakota’s later discussion points to a rejection of the foreseeability approach to the economic loss doctrine. Clarys acknowledges that the economic loss doctrine protects the purchaser’s expectation of receiying the bargained-for product, and that the comprehensive framework available in contract compensates consumers when a product fails to fulfill a purchaser’s economic expectations. Clarys, 592 N.W.2d at 576. “ ‘Tort principles more adequately address the creation of an unreasonable risk of harm when a person or other property sustains accidental or unexpected injury.’ ” Id. (quoting Alloway v. Gen. Marine Indus., 149 N.J. 620, 695 A.2d 264, 268-69 (1997)). “The economic loss rule is the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby encourages citizens to avoid causing physical harm to others.” Id. (internal quotation' omitted). These analyses discussed in Clarys parallel that of the foreseeability approach used when discussing damage to “other property,” and it is thus not certain that if faced with the very issue of how to define “other property” in light of those considerations, North Dakota would not follow suit and apply the foreseeability approach.
Barring tort claims where a plaintiff seeks economic damages for foreseeable losses for which the plaintiff could have contractually allocated risk' is admittedly no longer a “modern trend” as we described in 1996. Dakota Gasification, 91 F.3d at 1099. However, neither is it an antiquated or disfavored approach. In fact, the Third Circuit recently discussed the split.in authority regarding the meaning of “other property” in the context of the economic loss doctrine and deduced that:
[t]he majority of jurisdictions employ some variation of a test under which tort remedies are unavailable for property damage experienced by the owner where the damage was a foreseeable result of a defect at the time the parties contractually determined their respective exposure to risk, regardless whether the damage was to the “goods” themselves or to “other property.”
Travelers Indent. Co. v. Dammann & Co., 594 F.3d 238, 250 (3d Cir.2010) (internal quotation omitted) (predicting the course New Jersey would take on the matter and collecting cases employing the foreseeability approach as opposed to those applying a more bright line approach).
The similarities between the instant case and Dakota Gasification, in the end, dictate the result. No matter our independent inquiry today, and because North Dakota has yet to speak on the matter, we follow the precedent established in Dakota Gasification.
Although our circuit has never specifically determined the binding effect of a state law determination by a prior panel, other circuits defer to prior panel decisions absent a subsequent state court decision or statutory amendment that makes the prior federal opinion clearly wrong. This provides us with an additional basis for our holding.
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9155945-17680 | OPINION AND ORDER
SARGUS, District Judge.
This matter is before the Court on the parties’ cross-Motions for Summary Judgment on the administrative record. (Doc. # 11 and # 13). For the reasons that follow, the Plaintiffs motion is granted, in part, and the Defendants’ motion is denied.
I.
Plaintiff, Kimberly Meyer [“Plaintiff’], brings this action pursuant to the Employee Retirement Income Security Act [“ERISA”], 29 U.S.C. § 1132(a)(1)(B), seeking long-term disability benefits under a plan maintained by her former employer, Defendant Shell Oil Company. Defendant Metropolitan Life Insurance Company [“MetLife”] is the Claims Fiduciary. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331.
Plaintiff was employed at the Shell Oil Company Chemical Plant in Belpre, Ohio as a Drafting Coordinator. (Administrative Record at 52). Plaintiffs job required her to sit for five to six hours, stand and walk for one to two hours, use her hands and occasionally lift up to ten pounds. (Id.). Plaintiff is a college graduate with a bachelor’s degree in human resources. (Id. at 53). As an employee of Shell, Plaintiff was eligible to participate in the company’s short and long-term disability plans.
On November 10, 2000, Plaintiff was involved in an automobile accident. As Plaintiff was turning into the parking lot of her employer, her vehicle was rear-ended by another automobile which, according to Plaintiff, was traveling at a speed of approximately sixty miles per hour. (Id. at 34). Plaintiff claims to have suffered injury to her back as a result of the accident. Plaintiff further claims that the accident aggravated an earlier back injury she experienced in 1993, also as a result of an automobile accident. (Id.). Plaintiff was forty-two years old at the time of the November 2000 accident.
Following the accident in November 2000, Plaintiff underwent various medical tests. CT scans performed were normal, but an MRI of Plaintiffs lower back revealed “[h]yperlordosis with an old LI compression and degenerative disc changes at the T12-L1 level (no acute fracture detected).” (Admin. R. at 67). Plaintiffs physician, Dr. Powderly, issued a disability certificate for Plaintiff from November 10 to December 21, 2000, stating that Plaintiff could return to work on December 22, 2000, pending a consult with Dr. Zerick, a neurosurgeon. (Id. at 72). Dr. Zerick concluded that Plaintiff was not a candidate for surgery and referred her to twelve sessions of physical therapy. (Id. at 94). Plaintiff received short-term disability benefits for one year following the November 2000 accident.
A physical therapy report dated January 3, 2001 states that Plaintiff “reports no serious injury, however, she has had low back pain that feels like a dull ache in the bilateral lumbar region ever since the motor vehicle accident.” (Id. at 96). According to the report, Plaintiff described the pain as “constant” and “worse while sitting and rising from sitting.” (Id.). By January 15, 2001, Plaintiff reported to her physical therapist that she was “feeling better.” (Id. at 100). Plaintiff cancelled three out of the next five scheduled therapy sessions due to a cold and inclement weather. (Id. at 100-01). Plaintiff did not finish her physical therapy sessions.
On January 23, 2001, Plaintiffs physician, Dr. Powderly, completed a report in support of Plaintiffs application for disability benefits. Dr. Powderly characterized Plaintiff as suffering from a “[d]e-creased range of motion of the lumbar spine with history of compression fracture in 1993. Plaintiff has chronic back pain.” (Id. at 102). At the request of Defendant Shell, Plaintiff was examined by Dr. Randal Heavner. Dr. Heavner also completed a report in support of Plaintiffs application for disability benefits, stating that Plaintiff suffered from chronic back pain. (Admin. R. at 103). Dr. Heavner further stated that Plaintiffs decreased range of motion and pain limited her ability to lift, sit or stand. (Id.).
The Administrative Record details Plaintiffs contacts with Dr. Powderly from February to October 2001. None of the contacts references treatment for Plaintiffs back condition. On November 6, 2001, Plaintiff saw Dr. Powderly for low back pain. She was given a prescription for Celebrex. (Id. at 62). ■ Plaintiff saw Dr. Powderly again in November and December 2001 for conditions unrelated to back pain. (Id. at 60).
Plaintiff applied for long-term disability benefits on December 12, 2001. With respect to long-term disability benefits, the Plan states:
“Disability” or “Disabled” means that, due to an Injury or Sickness, you require the regular care and attendance of a Doctor and:
1. during the Elimination Period and the 24-month period immediately following the, Elimination Period, you are unable to perform each of the material duties of your regular job or a Comparable Occupation with the Employer which the Employer will have offered to such Employee, provided a Comparable Occupation is available; and
2. after the first 24 months of benefit payments, you must also be unable to perform each of the material duties of any gainful work or service for which you are reasonably qualified taking into consideration your training, education, experience and past earnings. “Elimination Period” means the number of consecutive days of Disability before Long Term Disability Benefits become payable under This Plan....
(Admin. R. at 12). Plaintiffs Elimination Period was the one year period during which she received short-term disability benefits.
Dr. Powderly completed a form in support of Plaintiffs request for long-term disability benefits, in December 2001. Dr. Powderly states that Plaintiff has the ability to sit for two hours; stand for zero hours; and walk for zero hours. Without any explanation, Dr. Powderly concluded that Plaintiff was unable to perform her job duties and that her condition would not improve. (Id. at 88). Dr. Powderly also answered negatively in response to a question as to whether he had advised Plaintiff to engage in any forms of therapy. (Id.).
On February 5, 2002, MetLife denied Plaintiffs request for long-term disability benefits. The letter denying benefits states, in pertinent part:
All of the clinical findings provided are consistent with an old back injury which you reported occurred in 1993. You further reported that you had returned to work after this injury.
Dr. Powderly’s note of 11/7/00 states that “patient has now recovered sufficiently to be able to return to regular work duties on 12/22/00.” In the restrictions section Dr. Powderly wrote “pending Dr. Zerick’s evaluation.”
You have
reported that you did attempt to return to work in December of 2000 but after evaluation by the Company doctor you were not allowed to return. I have attempted to confirm this information with your employer, however [sic] the site where you were employed has since closed and the Corporate Office has no record of a return to work in your file.
In summary, although you may have complaints of low back pain there are no clinical findings that would correlate with your inability to perform your job as a CAD Operator which is classified as sedentary.
Based on this information you[r] claim for Long Term Disability benefits is being denied effective 11/9/00.
(Admin. R. at 118).
Plaintiff appealed this decision and the matter was referred to MetLife’s independent review appeals unit on April 2, 2002. (Admin. R. at 121). In connection with her appeal, Plaintiff presented a statement from Defendant Shell’s human resources manager, which states:
KRATON polymers was created in March, 2001 when Shell Chemical Company sold its elastomers business to a private equity firm.
Prior to the sale, Kimberly D. Meyer applied for a Shell Disability Pension on the basis of being permanently disabled from performing the duties of her job. The Shell Disability Pension process required certification of her disability by both her personal physician and a company-appointed physician. These certifications were received and Ms. Meyer’s application for a Disability Pension was approved by Shell Chemical Company. She retired from the Belpre Plant on a Shell Disability Pension effective March 1, 2001.
(Admin. R. at 104).
Also in connection with her appeal, Plaintiff submitted a March 20, 2002 office note of Dr. Heavner, the physician who examined Plaintiff at Shell’s request. The note states:
[Plaintiff] is here today for reevaluation. She was a former Shell employee and has been disabled due to chronic low back pain. She has a history of L4 compression fracture approximately ten years ago and was disabled on November 10, 2000, when she was hit from behind in a motor vehicle accident. She has had significant low back pain since that time. She has been unable to return to work because of persistent severe pain that doesn’t allow her to sit or stand for more than an hour at a time. She has to lay down to relieve her pain. She sees Dr. Powderly as her family doctor. Her job at the plant was a computer desk type of job. She states that she is unable to do some normal household duties like running a sweeper, or significant activity, because it aggravates her back. She takes Vioxx for pain, but this does not give her significant relief. She has been through trials of physical therapy without any relief. She has seen neurosurgery regarding this. She received a letter from her disability company that was requesting additional verification of her disability. I saw her as the plant physician at Shell Chemical and agreed with her disability status approximately two years ago. The records from Shell were transferred to Houston when Shell was bought by Kraton and, in attempts to retrieve the records, it appears at this time that those records may have been stored in New York and lost in the 9/11 incident. Her physical exam today is significant for marked degree of limitation of motion in her back. She is only able to forward bend to about forty-five degrees because of pain, and she has limited range of motion to either side because of pain as well.
Impression: Chronic low back pain with history of L4 compression fracture.
Plan: I would agree from the plant standpoint that she remains unable to return to her job at the plant at this time. I cannot foresee her returning at any time in the future. I would recommend she stay on a permanent medical disability status.
(Admin. R. at 141).
In connection with her appeal, Plaintiff also submitted a letter from Dr. Powderly, dated February 25, 2002, which states that Plaintiff is “totally and permanently disabled. If you require further medical information, please contact my office.” (Id. at 105).
Upon receipt of Plaintiffs appeal, Defendant MetLife forwarded the Plaintiffs records to Dr. J.W. Rodgers for a physician consultant review. Dr. Rodgers stated:
My impression at this point based on all of the information in this file would be that this patient continues to have low back pain. There is, however, no objective evidence in this file that this patient is incapable of walking. It is clear that no one has felt that she is incapable of driving her car or maintaining her activities of daily living.
At this point, based on the objective evidence in this file, it would appear that this patient should be tolerant of sedentary levels of activity and, in fact, sedentary levels of activity that would be very similar to her activities of daily living, and there are no descriptions of this patient having substantial restrictions in her activities of daily living.
(Id. at 133).'
On May 3, 2002, MetLife notified Plaintiff of its decision to uphold the denial of long-term disability benefits.
A board certified Internal Medicine and Occupational Medicine Physician rendered an independent Physician Consultation. The Physician Consultant clinically reviewed the medical documentation on file. The Physician Consultant Review indicates that based on the information on file you continue to have low back pain. However, there is no objective evidence that you are incapable of walking, driving or maintaining your activities of daily living. There are no descriptions that you are having substantial restrictions in your activities of daily living. Therefore, the Physician Consultant indicates that based on the objective evidence on file, it would appear that you should be tolerant of sedentary levels of activity, in fact, sedentary levels of activity that would be similar to your activities of daily living.
The existence of pain alone can not be considered as evidence of disability. The clinical testing results must demonstrate an existence of medical impairment that has resulted from anatomical, and/or physiological abnormality. The medical documentation indicates primarily degenerative changes. No severe physical limitations or deficits were shown on clinical testing or on physical examination. The Physician Consultant review also indicates that there were no restrictions from your activities of daily living and that you should tolerate sedentary levels of activities.
The medical documentation does not demonstrate that you were functionally precluded from your own sedentary occupation. Therefore, in our review of the claim, and in consideration of the definition of disability, it is our determination that the denial of your Long Term Disability claim was appropriate. Based upon all of the above information, we must uphold the denial of your claim for Long Term Disability benefits.
(Admin. R. at 126).
Plaintiff commenced the instant action following the MetLife’s decision to uphold the denial of long-term disability benefits. Both parties move for summary judgment on the administrative record.
II.
Under 29 U.S.C. § 1132(a)(1)(B), a civil action may be brought by a participant or beneficiary of a disability benefits plan “to recover benefits due him [or her] under the terms of his [or her] plan, to enforce his [or her] rights under the terms of the plan, or to clarify his [or her] rights to future benefits under the terms of the plan.” In reviewing a claim for alleged wrongful denial of benefits, the district court must base its decision solely upon the underlying administrative record. Evidence that was not presented to the plan administrator cannot be considered by the court. Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 619 (6th Cir.1998). As a result, summary judgment procedures are inconsistent with the appropriate standard of review for recovery of benefits claims under ERISA. Id. Accordingly, in this case, the Court will treat the parties’ cross-motions for summary judgment as motions for entry of judgment on the merits.
In considering the parties’ motions, the Court first addresses the appropriate standard for reviewing Plaintiffs claim. The Supreme Court has held that “a denial of benefits challenged under section 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). If the plan vests such discretion in the administrator or fiduciary, the decision is reviewed under the deferential arbitrary and capricious standard. See Perry v. United Food & Comm’l Workers District, 64 F.3d 238 242 (6th Cir.1995); Perez v. Aetna Life Insurance Co., 150 F.3d 550, 555 (6th Cir.1998). This standard “is the least demanding form of judicial review .... When it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, that outcome is not arbitrary or capricious.” Perry, 64 F.3d at 242. Determinations are not arbitrary or capricious if they are “rational in light of the plan’s provisions.” Miller v. Metropolitan Life Ins. Co., 925 F.2d 979, 984 (6th Cir.1991), quoting Daniel v. Eaton Corp., 889 F.2d 263, 267 (6th Cir.1988). Although a plan need not include “magic words” in order to vest the plan administrator with discretion, the grant of discretionary authority must be “clear” in order to trigger the arbitrary and capricious standard of review. Hoover v. Provident Life & Acc. Ins. Co., 290 F.3d 801, 807 (6th Cir.2002); Perez v. Aetna Life Ins. Co., 150 F.3d 550, 555 (6th Cir.1998) (en banc).
In contrast, the Sixth Circuit holds that “when applying a de novo standard in the ERISA context, the role of the Court reviewing a denial of benefits ‘is to determine whether the administrator ... made a correct decision.’ ” Hoover 290 F.3d at 808, quoting Perry v. Simplicity Eng’g, 900 F.2d at 963, 965 (6th Cir.1990). Further, under the de novo standard of review, the decision of the administrator is not accorded a presumption of correctness or deference. Perry, 900 F.2d at 965.
III.
The benefits plan in this case states as follows:
If the written proof of a claim:
a. has been made on time; and
b. is satisfactory to us;
we will pay the accrued benefits monthly at the end of the period for which they are due.
(Admin. R. at 18). In addition, the plan states:
In carrying out their respective responsibilities under the Plan, the Plan administrator and other Plan fiduciaries shall have discretionary authority to interpret the terms of the Plan and to determine eligibility for and entitlement to Plan benefits in accordance with the terms of the Plan. Any interpretation or determination made pursuant to such discretionary authority shall be given full force and effect, unless it can be shown that the interpretation or determination was arbitrary and capricious.
{Id. at 22).
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5751475-29709 | ORDER
KATHLEEN CARDONE, District Judge.
On this date, the Court considered “Defendant’s Motion to Dismiss, or, in the Alternative, Motion for Summary Judgment” (“Defendant’s Motion”). For the reasons set forth herein, Defendant’s Motion is GRANTED.
I. BACKGROUND
The instant case involves a claim by the Estate of Miller Carr, represented by Daisy Carr, and Daisy Carr, individually, (“Plaintiff’) against the United States of America (“Defendant”) for medical negligence.
On September 24, 2003, Miller Carr retained the services of Walter L. Boyaki (“Boyaki”) for injuries and damages resulting from medical negligence, which he allegedly suffered between August 2002 and July 2003. Def.’s Proposed Undisputed Facts 1 (citing Def.’s Ex. 1); Pl.’s Resp. to Proposed Undisputed Facts 1.1 (admitting the same). Shortly thereafter, on October 3, 2003, Miller Carr filed an individual administrative claim with Defendant, alleging medical malpractice for failing to properly diagnose, treat, and operate on his esophageal cancer. Def.’s Proposed Undisputed Facts 2 (citing Def.’s Exs. 1, 2, and 4); Pl.’s Resp. to Proposed Undisputed Facts 1.2 (admitting the same). Miller Carr then passed away on March 5, 2004. Pl.’s Resp. in Opp’n to Def.’s Mot. to Dismiss or in the Alternative for Summ. J., Ex. B. (“Pl.’s Resp.”).
On March 24, 2004, Plaintiff signed an administrative claim form against Defendant, alleging medical malpractice and wrongful death for failing to properly diagnose and treat esophageal and other cancer in her deceased husband, Miller Carr. Def.’s Proposed Undisputed Facts, Ex. 3. Plaintiff filed this claim with the Army Claims Service on March 26, 2004, thereby amending Miller Carr’s administrative claim of October 3, 2003. Id.
On April 30, 2004, Plaintiff signed the contract, which was initially signed by her husband, retaining Boyaki as counsel in the medical malpractice case. Def.’s Proposed Undisputed Facts 4 (citing Def.’s Ex. 1); PL’s Resp. to Proposed Undisputed Facts 1.4 (admitting the same).
On February 4, 2005, Defendant denied Plaintiffs administrative claim by certified letter. Def.’s Proposed Undisputed Facts 5 (citing Def.’s Ex. 4); Pl.’s Resp. to Proposed Undisputed Facts 1.5 (admitting the same). In this certified letter, Defendant advised Plaintiff of her right to file suit in district court, or to request reconsideration from the Department of Veterans Affairs General Counsel (“VA”), within six months. Def.’s Proposed Undisputed Facts 5 (citing Def.’s Ex. 4); Pl.’s Resp. to Proposed Undisputed Facts 1.5 (admitting the same).
On June 20, 2005, Plaintiff, individually, filed a bankruptcy petition under Chapter 13 of the United States Bankruptcy Code, with the United States Bankruptcy Court for the Western District of Texas in El Paso, cause no. 05-31403. Def.’s Proposed Undisputed Facts 6 (citing Def.’s Ex. 5); Pl.’s Resp. to Proposed Undisputed Facts 1.6 (admitting the same).
Thereafter, on August 2, 2005, Plaintiff filed suit against Defendant in the United States District Court for the Western District of Texas for medical negligence. Def.’s Proposed Undisputed Facts, Ex. 6. The judge assigned to this case was the Honorable Frank Montalvo. Id. On this same date, Plaintiff also requested reconsideration from the VA. Def.’s Proposed Undisputed Facts, Ex. 7.
On August 29, 2005, Plaintiff filed an “Amended Schedules and Summary” in the United States Bankruptcy Court, listing the wrongful death suit against the Veterans Affairs Medical Clinic as exempt personal property of an unknown value. In re Daisy D. Carr, No. 05-31403 (Bankr.W.D. Tex. filed June 20, 2006), doc. no. 8. The United States Bankruptcy Court entered an order confirming Plaintiffs bankruptcy plan on November 28, 2005. Id., doc. no. 10.
On October 12, 2005, Plaintiff moved for a voluntary dismissal without prejudice of her federal district court case pending before Judge Montalvo. Def.’s Proposed Undisputed Facts 8 (citing Def.’s Ex. 8); PL’s Resp. to Proposed Undisputed Facts 1.8 (admitting the same). On October 14, 2005, the VA denied Plaintiffs request for reconsideration by certified letter. Def.’s Proposed Undisputed Facts 9 (citing Def.’s Ex. 9); PL’s Resp. to Proposed Undisputed Facts 1.9 (admitting the same). Judge Montalvo granted Plaintiffs request for voluntary dismissal without prejudice on October 20, 2005. Def.’s Proposed Undisputed Facts 10 (citing Def.’s Ex. 10); PL’s Resp. to Proposed Undisputed Facts 1.10 (admitting the same).
On January 30, 2006, Boyaki contacted Plaintiffs bankruptcy attorney, Carl Johnson (“Johnson”), to both inform Johnson that Boyaki would file suit for the death of Miller Carr and to request “the appropriate paperwork” in light of the pending bankruptcy. PL’s Resp., Ex. B; Def.’s Reply to PL’s Resp. to Proposed Undisputed Facts II.2 (admitting the contents of the unauthenticated letter attached to Plaintiffs Response, without objecting to it). Johnson contacted the Bankruptcy Trustee, Stuart C. Cox (“Trustee”), via email on February 23, 2006. PL’s Resp., Ex. B; Def.’s Reply to PL’s Resp. to Proposed Undisputed Facts II.2 (admitting the contents of the unauthenticated email attached to Plaintiffs Response, without objecting to it). Johnson informed the Trustee that he would be amending the bankruptcy schedules because he “just learned that the Debtor ha[d] a wrongful death claim against the VA,” even though the “Amended Schedules and Summary” of August 29, 2005 already included the wrongful death suit as an asset. Pl.’s Resp., Ex. B; Def.’s Reply to Pl.’s Resp. to Proposed Undisputed Facts II.2 (admitting the contents of the unauthenticated email attached to Plaintiffs Response, without objecting to it).
On March 7, 2006, the Trustee wrote to Boyaki informing him that the commencement of the bankruptcy created an estate consisting of all legal or equitable interests of the Debtor, and hence that any proceeds of the wrongful death suit would be property belonging to this bankruptcy estate. PL’s Resp., Ex. B; Def.’s Reply to Pl.’s Resp. to Proposed Undisputed Facts II.2 (admitting the contents of the unauthenticated letter attached to Plaintiffs Response, without objecting to it). The Trustee advised Boyaki that he would need to obtain approval from both the Trustee and the United States Bankruptcy Court in order to pursue the wrongful death action in federal district court. Pl.’s Resp., Ex. B; Def.’s Reply to Pl.’s Resp. to Proposed Undisputed Facts II.2 (admitting the contents of the unauthenticated letter attached to Plaintiffs Response, without objecting to it).
On April 4, 2006, Plaintiff filed “Debtor’s Motion to Approve Employment of Counsel” with the United States Bankruptcy Court. PL’s Resp. Ex. B. In this motion, Plaintiff represented that she had retained Boyaki after the death of her husband, in order to provide adequate representation of her legal rights in a matter relating to her husband’s medical malpractice claim against Defendant. Id. She requested that the United States Bankruptcy Court approve the employment of Boyaki to perform the professional services required in connection with the civil case. Id. The United States Bankruptcy Court approved the employment of Boyaki “as counsel for the Debtor in a civil case” on May 3, 2006. Id.
On May 18, 2006, Plaintiff filed the instant action in federal district court, alleging violations of the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b) and 2671 et seq.
II. DISCUSSION
A. Standards
Defendant has filed a Motion to Dismiss, or, in the Alternative, Motion for Summary Judgment. The standards for each are discussed below:
1. Motion to dismiss
Federal courts are courts of limited jurisdiction. Peoples Nat’l Bank v. Office of the Comptroller of the Currency of the United States, 362 F.3d 333, 336 (5th Cir. 2004). Without jurisdiction conferred by statute, federal courts lack the power to adjudicate claims. Id. A party may challenge a district court’s subject matter jurisdiction by filing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1). Fed.R.CivP. 12(b)(1).
A motion to dismiss pursuant to Rule 12(b)(1) must be considered before any other challenge, because a court must have jurisdiction before determining the validity of a claim. Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir. 1994). In ruling upon such motion, a district court is free to weigh the evidence and satisfy itself as to its power over the case. MDPhysicians & Assoc., Inc. v. State Bd. of Ins., 957 F.2d 178, 181 (5th Cir.1992). In making this ruling, the district court may rely upon: (1) the complaint alone, (2) the complaint supplemented by undisputed facts in the record, or (3) the complaint supplemented by undisputed facts in addition to the court’s resolution of disputed facts. Barrera-Montenegro v. United States and Drug Enforcement Admin., 74 F.3d 657, 659 (5th Cir.1996).
The standard of reviewing a motion to dismiss pursuant to 12(b)(1) depends upon whether the defendant makes a facial or factual challenge to the plaintiffs complaint. Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir.1981). When the defendant makes a facial attack by the mere filing of a Rule 12(b)(1) motion, the trial court looks to the sufficiency of the plaintiffs allegations, which are presumed to be true. Id. When the defendant makes a factual attack by providing affidavits, testimony, and other evidence challenging the court’s jurisdiction, the plaintiff must submit facts in support of the court’s jurisdiction and thereafter bear the burden of proving that the trial court has subject matter jurisdiction. Middle S. Energy, Inc. v. City of New Orleans, 800 F.2d 488, 490 (5th Cir.1986).
A motion to dismiss pursuant to Rule 12(b)(6), on the other hand, challenges a complaint on the basis that it fails to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6). In ruling on a Rule 12(b)(6) motion, the court must accept well-pleaded facts as true, and view them in a light most favorable to the plaintiff. Id.; Calhoun v. Hargrove, 312 F.3d 730, 733 (5th Cir.2002). A court will dismiss a complaint pursuant to Rule 12(b)(6) only if it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. S. Christian Leadership Conference v. Supreme Court of Louisiana, 252 F.3d 781, 786 (5th Cir.2001).
When matters outside the pleadings are considered, a motion to dismiss pursuant to Rule 12(b)(6) must be treated as a motion for summary judgment, with Rule 56’s requirements of notice and an opportunity to respond. Fed.R.Civ.P. 12(b); Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 283 (5th Cir.1993); see Scanlan v. Tex. A & M Univ., 343 F.3d 533, 539 (5th Cir.2003) (noting that district court should have converted the motion to dismiss into a motion for summary judgment because it considered evidence external to the pleadings).
2. Summary judgment
A summary judgment movant must show by affidavit or other evidence that there is no genuine issue regarding any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To establish that there is no genuine issue as to any material fact, the movant must either submit evidence that negates the existence of some material element of the nonmoving party’s claim or defense, or, if the crucial issue is one for which the nonmoving party will bear the burden of proof at trial, merely point out that the evidence in the record is insufficient to support an essential element of the nonmovant’s claim or defense. Lavespere v. Niagara Machine & Tool Works, Inc., 910 F.2d 167, 178 (5th Cir.1990). Once the movant carries the initial burden, the burden shifts to the nonmovant to show that summary judgment is inappropriate. See Fields v. City of S. Houston, 922 F.2d 1183, 1187 (5th Cir.1991).
Summary judgment is required 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. Fed.R.Civ.P. 56(c); Celotex Corp., 477 U.S. at 322, 106 S.Ct. 2548. In order for a court to conclude that there are no genuine issues of material fact, the court must be satisfied that no reasonable trier of fact could have found for the nonmovant, or, in other words, that the evidence favoring the non-movant is insufficient to enable a reasonable jury to return a verdict for the non-movant. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n. 4, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
B. Statute of Limitations
Defendant argues that Plaintiff filed suit outside the six month limitations period allowed under the Federal Tort Claims Act (“FTCA”), and thus her claims are time-barred. Def.’s Mot. 2. Specifically, Defendant argues that under the FTCA, Plaintiff was required to file suit in federal district court within six months from either the date her claim was denied by the VA or from the date the VA denied a valid request for reconsideration of its denial of her claim. Id. She failed to do so, and thus Defendant argues that her claim is barred. Id. Defendant further argues that neither 11 U.S.C. § 108(a) (“section 108(a)”) nor § 362 (“section 362”) extend the six month limitations period. Id. at 8-10; Def.’s Reply to Pl.’s Resp. to Def.’s Mot. 1-5 (“Def.’s Reply”).
Plaintiff first asserts that Boyaki pursues the instant case with the permission of, and on behalf of, the Trustee. PL’s Resp. 2. Because of this, and pursuant to section 108(a), Plaintiff argues that she is entitled to a two-year statute of limitations, thus preserving the timeliness of her suit. Id. Alternatively, Plaintiff argues that the United States Bankruptcy Court issued an automatic stay order pursuant to section 362, thus preserving the timeliness of her suit. Id.
The FTCA acts as a limited waiver of the sovereign immunity of the United States. Johnston v. United States, 85 F.3d 217, 218-19 (5th Cir.1996). With some exceptions, the FTCA provides that the United States is liable in tort for certain damages caused by the negligence of any employee of the Government “ ‘if a private person would be liable to the claimant in accordance with the law of the place where the act or omission occurred.’ ” Id. at 219. While substantive state law determines whether a cause of action exists, federal law governs the statute of limitations. Id.
With respect to the statute of limitations, the FTCA provides that:
A tort claim against the United States shall be forever barred unless it is presented in writing to the appropriate Federal agency within two years after such claim accrues or unless action is begun within six months after the date of mailing, by certified or registered mail, of notice of final denial of the claim by the agency to which it was presented.
28 U.S.C. § 2401(b); Flory v. United States, 138 F.3d 157, 159 (5th Cir.1998).
Although this statute is phrased in the disjunctive, it requires that a claimant first file an administrative claim within two years after the claim accrues, and then file suit only after the claim has been denied. Houston v. United States Postal Serv., 823 F.2d 896, 902-04 (5th Cir.1987); Willis v. United States, 719 F.2d 608 (2d Cir.1983); see Schuler v. United States, 628 F.2d 199, 201 (D.C.Cir.1980) (“Though the section is not happily drafted, common sense and the legislative history tell us that it requires the claimant to both file the claim with the agency within two years after accrual of the claim and then to file a complaint in the District Court within six months after the agency denies the claim.”). Additionally, “[pjrior to the commencement of suit and prior to the expiration of the 6-month period provided in 28 U.S.C. 2401(b), a claimant ... may file a written request with the agency for reconsideration of a final denial of a claim.... ” 28 C.F.R. § 14.9(b) (2007). If a claimant chooses to seek reconsideration, he or she must file suit no later than six months after the date of mailing of the notification of denial of reconsideration. 28 C.F.R. § 14.9(a)-(b); see Houston, 823 F.2d at 904 (“We strongly emphasize ... that in FTCA cases prudent plaintiffs will always institute a fresh suit against the United States in federal court sometime in the six months that follow the administrative denial.”). In essence, “a suit instituted within two years from the date the claim accrued, but more than six months after the notice by registered mail of the denial of the claim [is] barred by section 2401(b).... ” Childers v. United States, 442 F.2d 1299, 1301 (5th Cir.1971).
This limitations period is jurisdictional. Flory, 138 F.3d at 159. Because the Government’s exposure to liability can be no greater than the doctrine of sovereign immunity permits, “[ejquitable considerations that may waive or toll limitations periods in litigation between private parties do not have that same effect when suit is brought against the sovereign.” Houston, 823 F.2d at 902. A waiver of the Government’s sovereign immunity, such as the FTCA, must be strictly construed in favor of the sovereign. Lane v. Pena, 518 U.S. 187, 192, 116 S.Ct. 2092, 135 L.Ed.2d 486 (1996); Metro. Life Ins. Co. v. Atkins, 225 F.3d 510, 511 (5th Cir. 2000). In addition, the limitations period continues to run during the pendency of earlier actions that have been voluntarily dismissed, because a voluntary dismissal leaves the parties as though the action had never been brought. Hoosier Bancorp of Ind. v. Rasmussen, 90 F.3d 180, 184 (7th Cir.1996); Brown v. Hartshorne Pub. Sch. Dist. #1, 926 F.2d 959, 961 (10th Cir. 1991); Davis v. Smith’s Transfer, Inc., 841 F.2d 139, 140 (6th Cir.1988).
In the instant case, Plaintiff filed an amended claim with the VA on March 26, 2004, which claim was denied on February 4, 2005. Thereafter, on August 2, 2005, Plaintiff requested reconsideration of the denial and filed suit in federal court, though the statute indicates that she should have only chosen one option. See 28 C.F.R. § 14.9(b) (“Prior to the commencement of suit ... a claimant ... may file a written request with the agency for reconsideration of a final denial of a claim”). On October 14, 2005, the VA denied Plaintiffs claim for the second time, and on October 20, 2005, Judge Montalvo granted Plaintiffs request for voluntary dismissal of her suit pending in federal court. Subsequently, on May 18, 2006, Plaintiff filed the action now pending before this Court.
Under a straightforward application of the FTCA, Plaintiff should have filed suit within six months of the denial of her claim. The parties dispute which date of denial — February 4, 2005 or October 14, 2005 — is the appropriate date from which to calculate the limitations period. However, this Court need not decide this issue at this time.
If the limitations period began to run on February 4, 2005, Plaintiff should have filed suit on or before August 4, 2005. Conversely, if the limitations period began to run on October 14, 2005, Plaintiff should have filed suit on or before April 14, 2006. Nonetheless, Plaintiff waited until May 18, 2006 to file the instant suit — well beyond both dates. Therefore, unless Plaintiff is entitled to an extension of the statute of limitations, her complaint is untimely and barred under section 2401(b).
1. Section 108(a)
Defendant argues that section 108(a) does not operate to save Plaintiffs complaint because it is inapplicable to Chapter 13 debtors, like the Plaintiff, and there is no evidence that she brings suit on behalf of the Trustee who would be entitled to the benefits of section 108(a). Defi’s Mot. 8. Plaintiff responds by arguing that Boyaki brings suit on behalf of the Trustee, and thus section 108(a) applies, allowing her two years within which to file suit, rather than six months. Pl.’s Resp. 2-3.
Section 108(a) provides that:
If applicable nonbankruptcy law ... fixes a period within which the debtor may commence an action, and such period has not expired before the date of the filing of the petition, the Trustee may commence such action only before the later of (1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or (2) two years after the order for relief.
11 U.S.C. § 108(a).
In other words, section 108(a) generally allows a Trustee or debtor-in-possession to commence an action in a non-bankruptcy proceeding within the later of the limitations period allowed for such proceeding or two years after the order for relief. United States ex rel. Am. Bank v. C.I.T. Constr. Inc. of Tex., 944 F.2d 253, 259-60 (5th Cir.1991). The legislative history to section 108(a) indicates that it was intended to permit the Trustee, when he steps into the debtor’s shoes, an extension of time to take action that is required to preserve the debtor’s rights. H.R.Rep. No. 95-595, at 318 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5963, 6275. However, in the context of bankruptcies filed under Chapter 13, the extension offered by section 108(a) is available to Trustees only, and not to Chapter 13 debtors. In re Bowen, 2004 Bankr.LEXIS 356, at *25 (Bankr.N.D.Tex. Mar. 29, 2004) (“There is no statutory authority allowing a Chapter 13 debtor to utilize this tolling provision.”); see also In re Ranasinghe, 341 B.R. 556, 564-68 (Bankr.E.D.Va.2006) (detailing the issue of whether a Chapter 13 debtor is entitled to the section 108(a) extension and concluding that he is not); In re Gaskins, 98 B.R. 328, 330 (Bankr.E.D.Tenn.1989) (“Section 108(a) specifically extends the time for the bankruptcy Trustee, not for the debtor who is in bankruptcy.”); In re Craig, 7 B.R. 864, 865-66 (Bankr. E.D.Tenn.1980) (noting that section 108(a) was not meant to extend the time for debtors to file suit).
In the instant case, if the limitations period began to run two years “after the order for relief,” meaning two years after Plaintiff filed for bankruptcy, then it began to run on June 20, 2005 and expires on June 20, 2007. See Ramming v. United States, 281 F.3d 158, 160, 164 (5th Cir. 2001) (treating the date of filing for bankruptcy as the date of the “order for relief’). Since Plaintiff filed suit on May 18, 2006, her Complaint is timely as long as she is entitled to this extended two-year statute of limitations under section 108(a).
Although Plaintiff asserts that Boyaki was hired by the Trustee to pursue the instant case on behalf of the Trustee, thus entitling her to section 108(a), she cites absolutely no evidence to support this proposition! Pl.’s Resp. 2; PL’s Second Resp. in Opp’n to Def.’s Mot. 1. Indeed, one of the only pieces of evidence to link Boyaki with the Trustee is an unauthenticated email dated February 23, 2006 between Johnson, Plaintiffs bankruptcy attorney, and the Trustee, in which Johnson asks the Trustee whether the Trustee will employ Boyaki as an attorney for the estate. PL’s Resp., Ex. B.
A March 7, 2006 letter from the Trustee to Boyaki similarly fails to make the necessary connection. In this letter, the Trustee informed Boyaki of the requirement that he obtain permission from both the United States Bankruptcy Court and the Trustee prior to pursuing the instant case. Id. In relevant part, the letter also states the following:
It has been brought to my attention that you represent Daisy D. Carr in a pending legal matter.... Be advised that any fees or costs incurred on behalf of the debtors during the suit are the sole responsibility of the Debtor(s).
Id. (emphasis added).
Nothing in this letter indicates that Bo-yaki asked for and/or received permission from the Trustee to bring suit on his behalf. To the contrary, the letter appears to indicate to Boyaki that he needed to obtain the Trustee’s permission but had not yet done so. The language regarding costs and fees also indicates that the Trustee had no intention of hiring Boyaki to pursue the case on behalf of the estate.
Finally, although Plaintiff points to the May 3, 2006 Order of the United States Bankruptcy Court in support of her position, the Order and corresponding motion provide evidence only that the United States Bankruptcy Court approved Bo-yaki’s employment, and then only “as counsel for the Debtor in a civil case.” Id. This Order, and the language of the March 7, 2006 letter, indicate that Boyaki does not bring this suit on behalf of the Trustee, but rather on behalf of the debtor-Plaintiff.
In a case such as this, “the debtor would be wise to have an order from the bankruptcy court showing that the debtor is suing for the benefit of the bankruptcy estate.” In re Gaskins, 98 B.R. at 330 (providing this advice to attorneys who have proceedings pending in different courts and finding that because all proceedings in Gaskins were before a single judge, the court could determine whether the attorney was bringing suit for the benefit of the estate). This Court has combed the bankruptcy docket, as well as its own, and can find no evidence showing that Plaintiff brings the instant suit on behalf of the Trustee. Accordingly, the Court will grant Defendant’s Motion. However, the Court will grant the Motion without prejudice and allow Plaintiff ten (10) days from the date of this order to provide this Court with evidence that, at the time Plaintiff brought suit, Plaintiff brought suit on behalf of the Trustee. See In re Bowen, 2004 Bankr.LEXIS 356, at *32 (discussing requirement that creditor sue in the trustee’s name on behalf of the estate in order to use section 108(a)); see also In re Ranasinghe, 341 B.R. at 566 (“[I]t is an insufficient reason to allow a chapter 13 debtor to avail himself or herself of the benefit of § 108 simply because there is a benefit to the estate.”); In re Craig, 7 B.R. at 865-66 (holding that trustee could proceed where the chapter 13 debtor could not). Otherwise, this Court will enter a final judgment and grant the Motion with prejudice.
2. Section 362
Defendant argues that section 362 does not operate to save Plaintiffs complaint because section 362 is meant to be used as a shield by a bankruptcy debtor, rather than as a sword by a debtor-plaintiff. Def.’s Reply 1. Although Plaintiffs argument is unclear, it appears as though Plaintiff argues that the United States Bankruptcy Court issued an automatic stay pursuant to section 362, which somehow justified her voluntary dismissal of the earlier action pending before Judge Mon-talvo. Pl.’s Resp. to Proposed Undisputed Facts II.1.; Pl.’s Resp. 1-2. Plaintiff also claims that this stay somehow provides “umbrella protection” for her. Pl.’s Resp. 2.
Section 362(a), which defines the scope of the automatic stay, provides that:
(a) Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title [11 USCS § 301, 302, or 303], or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970 [15 USCS § 78eee(a)(3) ], operates as a stay, applicable to all entities, of
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of the estate;
(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title;
(7) the setoff of any debt owing to the debtor that arose before the commencement of the case under this title against any claim against the debtor; and
(8) the commencement or continuation of a proceeding before the United States Tax Court concerning a corporate debtor’s tax liability for a taxable period the bankruptcy court may determine or concerning the tax liability of a debtor who is an individual for a taxable period ending before the date of the order for relief under this title.
11 U.S.C. §§ 362(a)(l)-(8) (emphasis added); see also H.R.Rep. No. 95-595, at 340-44 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5963, 6296-6301.
The legislative history to section 362 indicates that it is “one of the fundamental debtor protections provided by the bankruptcy laws,” designed to give “the debtor a breathing spell from his creditors.” H.R.Rep. No. 95-595, at 340-44 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5963, 6296-6301. Section 362 is meant to stop “all collection efforts, all harassment, and all foreclosure actions,” thereby permitting the debtor “to attempt a repayment or reorganization plan, or simply be relieved of the financial pressures that drove him into bankruptcy.” Id. Section 362 also provides an orderly liquidation procedure under which creditors are treated equally, thus eliminating the race between creditors to act first and receive preferential payment. Id. “Without it, certain creditors would be able to pursue their own remedies against the debtor’s property.” Id.
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367763-21860 | EDWIN M. STANLEY, Chief Judge.
The plaintiff seeks judicial review, pursuant to § 205(g) of the Social Security Act, as amended, 42 U.S.C.A. § 405(g), of the final decision of the Secretary of Health, Education, and Welfare, denying her the establishment of a period of disability and disability insurance benefits.
The plaintiff first filed her application to establish a period of disability and for disability insurance benefits on December 13, 1960, alleging that she first became unable to work on October 1, 1958, because of a back injury. When the application was disallowed, the plaintiff requested a hearing before a hearing examiner. The requested hearing was-held on June 19, 1962, before Hearing Examiner Ben D. Worcester. The plaintiff was not represented by counsel at this hearing. On June 22, 1962, the Hearing Examiner rendered his decision, holding that the plaintiff had not established that she had impairments, either singularly or in combination, of such severity as to preclude her from engaging in any substantial gainful activity at any time for which her application of December 13, 1960, was effective, and that she was not entitled to disability insurance benefits or to a period of disability. When the Appeals Council denied plaintiff’s request for review, the decision of the Hearing Examiner became the final decision of the Secretary.
On November 9, 1962, the plaintiff brought this action to obtain judicial review of the final decision of the Secretary, following which the parties cross-moved for summary judgment. After considering the motions, briefs and supporting documents filed in support of and in objection thereto, and the transcript of the record of proceedings before the Secretary, the Court, on June 19, 1963, filed its Memorandum Opinion, D.C., 217 F.Supp. 905, wherein it was concluded that there was no substantial evidence before the Secretary to support his findings, unless the condition of the plaintiff was remediable, and that a final decision on the merits of plaintiff’s claim should be deferred until there hád been an opportunity to present further evidence concerning the nature, extent and duration of her disability, and the employment opportunities available to her. An order was thereupon entered remanding the cause to the Secretary for taking additional evidence in accordance with § 205(g) of the Social Security Act, 42 U.S.C.A. § 405(g).
The hearing on remand was held on November 12 and November 22,1963, before Hearing Examiner Albert C. Osof-sky. Plaintiff was represented at this hearing by her present counsel. On December 20, 1963, Hearing Examiner Osofsky rendered his recommended decision, holding that plaintiff had failed to establish impairments of such severity as to preclude her from engaging in any substantial gainful activity, and recommending that she not be awarded a period of disability or disability insurance benefits under §§ 223(a) and 216 (i) of the Act. The Appeals Council thereafter reviewed the recommended decision of Hearing Examiner Osofsky and, on March 31, 1964, rendered its decision, adopting and approving the recommended decision of the Hearing Examiner. Thus, the decision of the Appeals Council has now become the final decision of the Secretary.
After the matter was returned to this Court for judicial review of the proceedings before the Secretary, the defendant filed a transcript of the supplemental record of proceedings, and the matter is once again before the Court on cross-motions for summary judgment.
The issue for decision before the Secretary was stated by Hearing Examiner Worcester as follows:
“The issues are dependent upon specific findings as to whether during the effective period of the application, filed December 13, 1960, and while the special earnings requirements were met, the claimant was under a disability in that she was unable to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration and, if so, the beginning date of such disability. The claimant met the special earnings requirements during the effective period of the application, and continues to meet such requirements through December 31, 1961. Thus, on the basis of her application filed on December 13, 1960, the evidence must establish that the claimant was under a disability as defined in the Act beginning on or before March 1, 1961, for entitlement to disability insurance benefits, and on or before March 13,1961, for establishment of a period of disability.”
The issue before this Court is the sub-stantiality of the evidence to support the Secretary’s findings on the issues before him. In Thomas v. Celebrezze, 4 Cir., 381 F.2d 541 (1964), the prescribed standard for judicial review is clearly set out by Chief Judge Sobeloff as follows:
“The prescribed standard of review, found in section 205(g) of the Act, 42 U.S.C.A. § 405(g), is as follows : ‘ * * * The findings of the Secretary as to any fact, if supported by substantial evidence, shall be conclusive, * * Substantial evidence has been defined innumerable times as more than a scintilla, but less than preponderance. Consolidated Edison Co. v. N. L. R. B., 305 U.S. 197, 59 S.Ct. 206, 83 L.Ed. 126 (1938). The Secretary, and not the courts, is charged with resolving conflicts in the evidence, and it is immaterial that the evidence before him will permit a conclusion inconsistent with his. Snyder v. Ribicoff, 307 F.2d 518, 520 (4th Cir. 1962). If his findings are supported by substantial evidence, the courts are bound to accept them. Underwood v. Ribicoff, 298 F.2d 850 (4th Cir. 1962). In short, the courts are not to try the case de novo. At the same time, they must not abdicate their traditional functions; they cannot escape their duty to scrutinize ‘the record as a whole’ to determine whether the conclusions reached are rational. Universal Camera Corp. v. N. L. R. B., 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951); Boyd v. Folson, 257 F.2d 778 (3d Cir. 1958); 4 Davis, Administrative Law (1958) § 29.02, pp. 118-126. If they are, they must be upheld; but if, for example, reliance has been placed upon one portion of the record to the disregard of overwhelming evidence to the contrary, the courts are equally bound to decide against the Secretary. Park v. Celebrezze, 214 F. Supp. 153 (W.D.Ark.1963); Corn v. Flemming, 184 F.Supp. 490 (S.D. Fla.1960). In such a circumstance the courts are empowered either to modify or reverse the Secretary’s decision ‘with or without remanding the cause for a hearing.’ 42 U.S. C.A. § 405(g).”
The plaintiff is now 54 years of age. She has a seventh grade education and has worked in textile mills and veneer plants off and on since she was 13 years of age, either as a winder, spool-tender, machine helper, or boarding socks. She claims that she became unable to work on October 1, 1958, when she was 47 years of age, because of a back injury sustained while working at Pickett Cotton Mills, High Point, North Carolina.
At the hearing before Hearing Examiner Worcester on June 19, 1962, the plaintiff described the injury she received to her back on the night of October 1, 1958, while moving heavy crates, and her subsequent examination and treatment by many doctors in a number of cities over a period of several months. After the Hearing Examiner stated that the evidence failed to support a finding of a permanent impairment, the plaintiff commented:
“If anybody can find me a job I can do, I’m willing to take any kind of a job. And if I could work, I’d go to work. I’ve worked all my life and I'm not sittin’ around a sufferin’ and not sleepin’ at nights * * * I can’t even stand on my feet long enough to wash my dishes and I can’t do my work. And if anybody don’t believe it, they can come to the house and see it and if you want to hire somebody to come and stay with me and see for themselves. They don’t have to take my word for it 'cause I’m tellin’ the truth and I’m not trying to git somethin’ for nothin’. I never have been a person to do somethin’ like that. I’m absolutely not able to work and I couldn’t work if somebody was standin’ over me with a gun. I'd just tell ’em to go ahead and shoot. That’s the very word I’d tell ’em. Nobody knows what I suffer but me and I tell my husband every day or two, I’d just be as good off dead as I am a livin’, because I’m no good to myself or my family either and I can’t help what the doctor says, I know my own feeling. I know my sufferin’. One person don’t know what another person suffers.”
The plaintiff then went on to relate that a short time later she returned to work at the Pickett Cotton Mills for about one week, but that she “couldn’t make it” because she suffered so much pain. She further stated that she was unable to dress herself, get in or out of the bath tub, or do much of the household work. She impressed the Hearing Examiner as being an “honest, truthful and sincere person.”
Several medical reports were received in evidence at the hearing before Hearing Examiner Worcester in 1962. Dr. Robert C. Johnston reported that he had treated the plaintiff between October 1,1958, and March 6, 1959, with symptoms of low back pain. He found multiple tender areas in the lumbosacral region of her back. An x-ray of plaintiff’s spine on February 20, 1959, showed slight hyper-trophic arthritis. Dr. Johnston was of the opinion that plaintiff had hyper-trophic arthritis of the spine and a chronic low back sprain, with an acute episode on October 1, 1958. He described her condition as static and advised against heavy lifting or excessive bending-.
During the latter part of 1959, the plaintiff was examined at the Baptist Hospital in Winston-Salem, North Carolina. There was no objective evidence of either nerve root compression or disc protrusion. It was recommended that she refrain indefinitely from heavy lifting and bending due to her history of back strain. Dr. Frederick Bergen, a neurosurgeon, reported the impression that the plaintiff suffered from a possible herniated disc at Region L4, L5.
On April 1,1961, Dr. Richard H. Ames, a neurosurgeon, reported that he was well satisfied that the plaintiff had a chronic recurrent disc at the fourth inter-space on the left side, and that surgery was the only form of definitive treatment he could offer. Dr. Ames did not advise surgery, but stated the plaintiff alone would have to make the decision.
On August 21, 1961, Dr. W. G. Smith reported that he had treated plaintiff periodically since 1958 for low back pain, and that her response to therapy had been very poor. He stated that no improvement could be expected, and the plaintiff was unable to work due to her back. Again on June 18, 1962, Dr. Smith reported that plaintiff’s condition had become worse and that, in his opinion, she would be troubled with the condition “from now on,” which would render her unable to do any work. On August 2, 1962, Dr. Smith further reported that as the plaintiff advances in age her heart condition will become worse, and that the rheumatoid arthritis which had “involved all large joints of the body along with the spine is also a progressive disease.”
Upon the foregoing record, Hearing Examiner Worcester found that the plaintiff was not suffering from a disability within the meaning of the Act, and this Court, in its Memorandum Opinion of June 19, 1963, observed:
“On the basis of the entire record, including the objective medical evidence, and the substantial subjective evidence of incapacity, all of which is uncontradicted, and considering the work history, education, age and experience of the plaintiff, the Court is unable to sustain the finding that the plaintiff is capable of engaging in substantial gainful activity.”
At the remand hearing conducted by Hearing Examiner Osofsky on November 12 and November 22, 1963, the testimony of the plaintiff and her husband, William B. Hall, Dr. Richard C. Proctor, Dr. Edwin H. Martinat and Jerry Dee Cooper was taken. Other medical reports were also placed in the record.
Dr. Richard C. Proctor, a specialist in psychiatry and a member of the faculty of Bowman Gray School of Medicine, testified that he examined the plaintiff on September 25, 1963, at the request of North Carolina Department of Public Welfare. His diagnosis was:
“Conversion reaction, mixed type, manifested by numerous somatic complaints, referrable to many organ systems without much evidence of organic pathology, in a basically immature individual with limited intellectual capacity.”
Dr. Proctor considered the plaintiff’s prognosis to be “quite poor.” He expressed the opinion that plaintiff’s psychiatric impairment would preclude her from accepting employment, because an individual in her condition would be “incapable of functioning at a remunerative job.” Dr. Proctor went on to state that an individual such as the plaintiff may be capable of doing housework, and at the same time be unable “to function in outside employment.” He was unable to express an opinion as to her condition, or her ability to engage in remunerative employment, during the period from 1958 to 1961.
Dr. Edwin H. Martinat, an orthopedic surgeon connected with the Bowman Gray School of Medicine, stated that he also examined the plaintiff on September 26, 1963, at the request of the North Carolina Department of Public Welfare. His examination was a limited one due to the fact that the plaintiff declined to have further x-rays made of her back. The reason she gave for not wanting further x-rays made was that another doctor had told her that it would be dangerous. Dr. Martinat found some limited motion in plaintiff’s lumbar spine, and a one-half inch shortness of the left lower extremity. He went on to explain that plaintiff was restricted in her back motion to 30 degrees, and that the shortness of her left lower extremity could give her an unbalance which could lead to some low back trouble. He expressed the opinion that plaintiff’s condition, as disclosed by his limited examination, would be remediable in a majority of cases, and that, speaking in generalities, a herniated disc was also a remediable condition. However, not having the advantage of x-rays, Dr. Martinat was unable to state whether he would advise an operation for the plaintiff. He further stated that it was possible for the plaintiff to be suffering from “severe back pain and back trouble,” and that the condition would not be revealed by x-rays or other objective evidence. And finally, Dr. Martinat stated that he did not have enough information on the plaintiff to express an opinion with any degree of accuracy as to whether she was physically able to engage in any type of strenuous activity involving her back.
On November 22, 1963, at the remand hearing, the plaintiff testified that she had been unable to do any work since her injury in 1958, and was unable to go to church or visit her children. William B. Hall, the plaintiff’s husband, testified that since the plaintiff was injured he had done most of the laundry, the “biggest part” of the shopping, and that his wife had difficulty at times in even dressing herself. He further stated that his wife had complained since the date of her injury of soreness and pain in her back and legs, had frequently visited various doctors, and that a “little cooking” was about the only thing she was able to do.
The only other significant medical evidence placed in the record at the remand hearing were reports by Dr. Basil M. Boyd, Jr., Dr. Courtland H. Davis, Jr., and Dr. J. F. Register, and additional reports by Dr. W. G. Smith.
Dr. Boyd, an orthopedic surgeon, reported that from an examination of the plaintiff on March 19, 1960, he gained the impression that she was suffering from a “ruptured intervertebral disc L-5 left.” The plaintiff was admitted on that date to the Charlotte Memorial Hospital for a period of conservative treatment. She was discharged on April 2, 1960, after having responded to traction and physical therapy. While a lumbar myelo-gram performed on March 28, 1960, was negative, Dr. Boyd stated he still believed the plaintiff was suffering from a “sprain of her lumbosacral spine superimposed upon a degenerative disc.” He did not feel that the condition was operative at that time. The plaintiff was back to see Dr. Boyd on April 30, 1960, still suffering with “a good bit of pain.”
On November .il, 1959, Dr. Courtland H. Davis, Jr., a neurosurgeon and a member of the faculty of the Bowman Gray School of Medicine, reported that his examination failed to reveal any objective evidence of either nerve root compression or disc protrusion. Upon the assumption that plaintiff was suffering from a back strain, he recommended against heavy lifting and bending indefinitely. However, on November 28, 1959, Dr. Davis reported the impression of a “herniated disc, L4, 5.”
On April 9, 1959, Dr. J. F. Register, an orthopedic surgeon, reported that x-rays of the lumbar spine showed no evidence of any injury or disease, but that he was “unable to make out a great deal of objective findings” on the plaintiff. Dr. Register concluded by stating that he did not believe he could make any definite diagnosis, unless the plaintiff had some strain of the lower lumbar muscles.
On January 4, 1963, Dr. W. G. Smith, in reporting the results of another physical examination of the plaintiff, stated that her large joints were involved with arthritis and were very sore and tender. The diagnosis was “myocarditis with ascites and arthritis of spine involving the -larger joints of the body.” Again, on September 11, 1963, Dr. Smith reported that the plaintiff was suffering from generalized arthritis and that her condition would never improve.
The remaining evidence before the Hearing Examiner was the testimony of Jerry Dee Cooper, who testified with respect to job opportunities available to the plaintiff. Mr. Cooper received an M.S. Degree in Rehabilitation Counseling at the University of West Virginia on May 30, 1962, and since June 25, 1962, has been employed by Goodwill Industries Rehabilitation Center, Winston-Salem, North Carolina, as Supervisor of Personnel Training and Evaluation. He testified that he had read the transcript of testimony taken on June 19, 1962, and the testimony of Drs. Proctor and Mar-tinat given on November 12, 1963, and, based on this testimony, together with information concerning the age, education, training and experience of the plaintiff, was of the opinion that the plaintiff was physically able to work from October 18, 1958, through March 13, 1961. He explained that even if the diagnosis made by Dr. Proctor was present during the critical period, he was still of the opinion that the plaintiff could have worked. This opinion was based on certain information the witness had acquired by reading from a publication entitled “American Psychiatric Association Diagnostic and Statistical Manual of Mental Disorders.” By using a Dictionary of Occupational Titles published by the United States Department of Labor in 1956, describing some 40,000 jobs, Mr. Cooper was of the opinion that, during the period mentioned, the plaintiff was capable of making the final inspection of knitted stockings, reinspecting men’s stockings, sewing decorative or reinforcing cross-stitches around the neck or down the front of a knitted garment, trimming cloth, marking grey goods or sorting rags in the textile industry, or performing the service of a “bagger” in either the clothing or baking industry. On cross-examination, Mr. Cooper testified that he had never seen the plaintiff before that day, and was mindful of the fact that his evaluation of the plaintiff’s physical condition was at variance with the diagnosis made by Dr. Proctor. He stated he did not know whether any of the job classifications mentioned were available to the plaintiff, and that the only purpose of his testimony was to establish that they were available in the vicinity of where the plaintiff lived. He acknowledged that he did not know whether any employer with the job classifications mentioned would have actually hired a person with plaintiff’s mental and physical impairments, or even whether there were any vacancies during the period in question. It was his feeling “that the competition would be stiff” for a person with the plaintiff’s background. Mr. Cooper then explained that he did not intend to indicate that any of the job classifications were available, but only “that they were in existence.” He stated that before he could definitely state whether any given employer would hire a particular individual at a specific time, he would have to know them both, and know the requirements of the employer. He was not sure whether the Dictionary of Occupational Titles he was using had been revised since 1956, had made no effort to find out, and stated that it was possible some of the job classifications had later been eliminated. He conceded that the plaintiff probably would have had difficulty in obtaining employment, even if there had been a vacancy. He had not checked with any textile or other industrial plant concerning job classifications, or the existence of any vacancies in the classifications he had mentioned. And finally, in making his evaluation with respect to the physical and mental ability of the plaintiff to work, Mr. Cooper stated that he necessarily had to evaluate the statements of the plaintiff in light of the medical testimony and then make a judgment as to the weight to be given the subjective complaints of the plaintiff as compared to the reports of the various doctors. At no time did the witness state what training or experience qualified him to evaluate the medical testimony, or express an expert opinion in this area.
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4067347-19690 | OPINION AND ORDER ADOPTING REPORT AND RECOMMENDATION
DANIEL R. DOMÍNGUEZ, District Judge.
Pending before the Court are: (a) Motion Requesting Suppression of Evidence filed by the defendant Luis Daniel Robles Costoso (“Robles Costoso”), Docket No. 27; (b) United States of America’s Response in Opposition to Defendant’s Motion to Suppress, Docket No. 33; (c) Report and Recommendation, Docket No. 34; (d) Objection to Report and Recommendation on Motion Requesting Suppression of Evidence filed by Robles Costoso, Docket No. 35; and (e) United States of America’s Response in Opposition to Defendant’s Objection to Report and Recommendation on Motion to Suppress, Docket No. 39. For the reasons set forth below, the defendant’s Motion to Suppress, Docket No. 27, is denied.
Issue
The core of this case is whether a search warrant is needed in a border search. The simple answer is no, provided that the border search does not disturb certain constitutional rights. The Court briefly explains below after considering the factual circumstances of this case.
Factual and Procedural Background
On or about October 30, 2013, the defendant Robles Costoso was approached by a Puerto Rico Police Department (“PRPD”) Officer, nearby Gate 25, used by Southwest Airlines at the Luis Muñoz Marín International Airport (“LMMIA”), moved by an alert provided by a K-9 known as “Sam-6” related to a piece of luggage with a bag tag # 0332897036. The K-9 has shown a behavior consistent with the odor to controlled substances. The Officer identified himself and requested the defendant for his boarding pass and a photo identification. When the Officer compared the defendant’s boarding pass number with the bag tag number alerted by the K-9, both numbers matched. The defendant’s boarding pass was for flight 5122 (Air Tran 122) from San Juan to Atlanta by Southwest Airlines, connecting with Southwest flight 5058 (Air Tran 58) from Atlanta to La Guardia Airport, New York. The officer advised the defendant that his luggage has been alerted by the K-9 for the presence of controlled substances. See Docket No. 1-1.
When asked by the Officer and a Drug Enforcement Agency (“DEA”) Agent “if he was willing to voluntary accompany them to the PRPD Drug Unit Office to identify his luggage and answer some questions,” the defendant agreed and followed the Officer and the DEA Agent to the office. Id. Whereupon at the unit defendant Robles Costoso identified his luggage as the black bag with tag # 0332897036. Id. The defendant Robles Costoso “provided written consent to open and search his bags.” Id. “Upon inspection, officers observed in Robles [Costo-so]’s black bag a total of 12 bricks, with a gross weight of 15.75 kilograms.” Id. “A field test was conducted and the substances tested positive for cocaine.” Id. Thereafter, the defendant Robles Costoso was read his Miranda rights, signed the Miranda form, and stated that he understood his rights. Id. Whereupon, the defendant admitted that the bag containing the kilograms of cocaine belonged to him, and explained how he prepared the controlled substance and placed them inside the bag. Id. Defendant Robles Costoso provided a detailed statement as to how He prepared the 12 bricks of cocaine, totaling a gross weight of 15.75 kilograms. See Docket No. 1-1. Defendant further explained what was the purpose of his trip to the Bronx, New York; his role on this trip; how and from whom he got the controlled substances, including names and addresses. Id.
The Grand Jury filed a two count Indictment on November 7, 2013 against the defendant Robles Costoso, charging the defendant with: (a) Count One, conspiracy to possess with intent to distribute five kilograms or more of a mixture or substance containing a detectable amount of cocaine, a controlled substance, in violation of 21 U.S.C. § 841(a)(1) and § 846; and (b) Count Two, possession with intent to distribute five kilograms or more of a mixture or substance containing a detectable amount of cocaine, a controlled substance, in violation of 21 U.S.C. § 841(a)(1). See Docket No. 9.
The defendant’s Motion Requesting Suppression of Evidence, Docket No. 27, was referred to Magistrate Judge Marcos E. López for report and recommendation. See Docket entries No. 29, 30. The Magistrate Judge entered a Report and Recommendation on August 14, 2014 without holding an evidentiary hearing, Docket No. 34. The Report and Recommendation was timely objected by the defendant on August 28, 2014, Docket No. 35, followed by the Government’s opposition to the defendant’s objections to the Report and Recommendation filed on September 25, 2014, Docket No. 39.
Standard of Review
The District Court may refer dispositive motions to a United States Magistrate Judge for a Report and Recommendation. 28 U.S.C. § 636(b)(1)(B) (1993); Rule 59(b)(2) of the Federal Rules of Criminal Procedure (“Fed. R.Crim.P.”), and Local Rule 72(a)(6) of the Local Rules for the District of Puerto Rico, as amended (“Local Rules”). See Mathews v. Weber, 423 U.S. 261, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976). As a general rule, an adversely affected party may contest the Magistrate Judge’s report and recommendation by filing its objections within fourteen (14) days after being served a copy thereof. See Local Rule 72. Moreover, 28 U.S.C. § 636(b)(1), in its pertinent part, provides that:
Within fourteen days of being served with a copy, any party may serve and file written objections to such proposed findings and recommendations as provided by rules of court. A judge of the Court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made. A judge of the court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate.
“The district judge need not normally conduct a new hearing and may consider the record developed before the magistrate judge, making his or her own determination on the basis if that record.” See Local Rule 72(d) of December 3, 2009, as amended on September 2, 2010.
However, “[ajbsent objection by the plaintiffs, [a] district court ha[s] a right to assume that [a party] agree[s] to the magistrate’s recommendation.” Templeman v. Chris Craft Corp., 770 F.2d 245, 247 (1st Cir.1985), cert. denied, 474 U.S. 1021, 106 S.Ct. 571, 88 L.Ed.2d 556 (1985). Moreover, “[f]ailure to raise objections to the Report and Recommendation .waives that party’s right to review in the district court and those claims not preserved by such objection are precluded on appeal.” Davet v. Maccarone, 973 F.2d 22, 30-31 (1st Cir. 1992). See also Henley Drilling Co. v. McGee, 36 F.3d 143, 150-151 (1st Cir.1994) (holding that specific objections are required when challenging findings actually set out in magistrate’s recommendation, as well as magistrate’s failure to make additional findings); Lewry v. Town of Standish, 984 F.2d 25, 27 (1st Cir.1993) (stating that “[o]bjection to a magistrate’s report preserves only those objections that are specified”); Keating v. Secretary of H.H.S., 848 F.2d 271, 275 (1st Cir.1988); Borden v. Secretary of H.H.S., 836 F.2d 4, 6 (1st Cir.1987) (holding that appellant was entitled to a de novo review, “however he was not entitled to a de novo review of an argument never raised”). See generally United States v. Valencia-Copete, 792 F.2d 4, 6 (1st Cir.1986); Park Motor Mart, Inc. v. Ford Motor Co., 616 F.2d 603, 605 (1st Cir.1980). Hence, the standard for review of an objected report and recommendation is de novo review of those matters properly objected. (Emphasis ours). See Borden v. Secretary of H.H.S., 836 F.2d at 6. The Court, therefore proceeds, as the Report and Recommendation has been objected, to review de novo the Report and Recommendation issued by the Magistrate Judge, as to those parts that have been objected. Borden v. Secretary of H.H.S., supra.
Discussion
A. The Objections:
Defendant Robles Costoso’s objections are the following:
“(1) That Defendant is not entitle[d] [sic] to an evidentiary hearing base[d] [sic] on the facts that were alleged in the motion to suppress; and (2) After analyzing the facts in the case it [the Magistrate Judge] concludes that defendant was not under custody when State Agents approach him and took his id and boarding pass.” See Docket No. 35. Defendant further alleges that “there is a significant discrepancy” as to when defendant was first under custody and the voluntariness of his movements.” Id. Furthermore, the defendant also alleges that absent a search warrant, “the events that occur after the initial intervention with Robles-Costoso are fruit of the poisonous tree.” (Citations omitted). See Docket No. 35.
B. The Government’s Response:
The Government’s response to the defendant’s objections to the Report and Recommendation on the motion to suppress, Docket’No. 39, emphasizes on the following:
(1) There is no right to an evidentiary hearing on a motion to suppress. The Government alleges, that “[a] criminal defendant has no presumptive right to an evidentiary hearing on a motion to suppress.” United States v. Cintrón, 724 F.3d 32, 36 (1st Cir.2013). “A decision to hold an evidentiary hearing on a motion _ . to suppress rests with the sound discretion of the district court. United States v. Calderon, 77 F.3d 6, 9 (1st Cir.1996).” The Court agrees and incorporates the Magistrate Judge’s findings and recommendation on this matter. See Report and Recommendation, Docket No. 34, pages 3-4.
(2) “When law enforcement [agents] first approached the defendant, they conducted an investigatory stop.” See Docket No. 39, page 3. “Investigatory stops are lawful when there is reasonable suspicion that an individual has engages in criminal activity. See United States v. Arvizu, 534 U.S. 266, 275-77, 122 S.Ct. 744, 151 L.Ed.2d 740 (2002).” Id. “During the stop, police may ask questions or request documents to establish a person’s identity and to confirm or dispel suspicions of criminal activity. See Adams v. Williams, 407 U.S. 143, 146, 92 S.Ct. 1921, 32 L.Ed.2d 612 (1972),” and the collection of cases cited therein. Id.
(3) In the instant case, the K-9 had “alerted positive to the odor of controlled substances in the defendant’s luggage ... See Adams, 407 U.S. at 145, 92 S.Ct. 1921 (“The Fourth Amendment does not require a policeman who lacks precise level of information necessary for probable cause to arrest to simply shrug Ms shoulders and allow a crime to occur or a criminal to escape”).” (Emphasis on the original). See Docket No. 39, page 4.'The Court agrees and briefly explains.
In order to proceed expeditiously, the Court will examine the facts as described by the defendant in his Motion Requesting Suppression of Evidence, Docket No. 27. The Court makes emphasis on the following facts when issuing the final ruling, as these facts are hereby quoted directly from the defendant’s motion to suppress, in order to avoid any wrong interpretation:
• A PRPD officer went to Gate 25, identified Mr. Robles-Costoso and then approached him. After approaching him, 'the PRPD officer identified himself as a PRPD officer, and demanded Mr. Robles-Costoso’s boarding pass and photo identification.
• The officer advised Robles-Costoso that his luggage was alerted by the K-9 for the presence of a controlled substance. A PRPD officer and DEA moved Mr. Robles-Costoso to the PRPD Unit Office to identify his luggage and answer some questions. There is a controversy as to the vol-untariness of Mr. Robles-Costoso movements once under Governments . [sic] Agents custody.
• At the Unit, Robles-Costoso identified his luggage as the black bag with tag # 0332897036. Robles-Cos-toso provided written consent to open and search his bags. Upon inspection, officers observed in the black bag a total of 12 bricks, with, a gross weight of 15.75 kilograms. A field test was conducted and substances tested positive for cocaine.
• Robles-Costoso then was read his Miranda Rights, signed the Miranda form, and stated that he understood his rights. He also stated that the bag .containing the kilograms belonged to him, that he prepared the kilograms and placed them inside his bag. He claimed that he owned the cocaine and that he purchased the cocaine at the streets near his residence in Bayamon, Puerto Rico. That he picked up the kilograms from an individual in a blue, two-story house.
• After being confronted with the fact of whether he was the owner of the 12 kilograms, he admitted that he was a courier.
See Docket No. 27, page 2.
Analysis
The Court finds that there are no dis-crepáncies as to the facts pled by the defendant in his motion to suppress and the findings of fact made by the Magistrate Judge in the Report and Recommendation, Docket No. 34, pages 1-2. Hence, the Court hereby adopts the findings of fact as they appear in the Report and Recommendation, Docket No. 34. In any event, the Court finds that the question of the defendant’s voluntariness is a credibility issue, which is best reserved to the jury.
The Border Search
The United States has a right to protect its borders by stopping and checking individuals and property entering or leaving the Nation’s borders. The border search constitutes an exception of the Fourth Amendment of the Constitution of the United States of America (“Fourth Amendment”).
“The broad contours of the scope of searches at our international borders are rooted in ‘the long standing right of the sovereign to protect itself and examining persons and property crossing into this country.’ ” United States v. Cotterman, 709 F.3d 952, 960 (9th Cir.2013), citing Ramsey, 431 U.S. at 616, 97 S.Ct. 1972. “Thus, border searches form ‘a narrow exception to the Fourth Amendment prohibition against warrantless searches without probable cause.’ ” Id., citing United States v. Seljan, 547 F.3d 993, 999 (9th Cir.2008). “Because ‘[t]he Government’s interest in preventing the entry of unwanted persons and effects is at its zenith at the international border,’ United States v. Flores-Montano, 541 U.S. 149, 152, 124 S.Ct. 1582, 158 L.Ed.2d 311 (2004), border searches are generally deemed ‘reasonable simply by virtue of the fact that they occur at the border.’ ” Id., citing Ramsey, 431 U.S. at 616, 97 S.Ct. 1972.
“Whether a search or seizure is constitutionally reasonable is judged by ‘balancing its intrusion on the individual’s Fourth Amendment interests against its promotion of legitimate government interests.’ ” Denson v. United States, 574 F.3d 1318 (11th Cir.2009), citing United States v. Montoya de Hernandez, 473 U.S. 4 531, 537, 105 S.Ct. 3304, 87 L.Ed.2d 381 (1985); Brown v. Texas, 443 U.S. 47, 50-51, 99 S.Ct. 2637, 61 L.Ed.2d 357 (1979); Camara v. Municipal Court, 387 U.S. 523, 534, 87 S.Ct. 1727, 18 L.Ed.2d 930 (1967). “The Government’s interest in policing our borders has grown exponentially in the present era of foreign drug trafficking.” Denson, 574 F.3d at 1339, citing United States v. Mendenhall, 446 U.S. 544, 561, 100 S.Ct. 1870, 64 L.Ed.2d 497 (1980). “Stopping the flood of illicit drugs pouring into the United States has become particularly difficult as drug syndicates develop new techniques to prevent detection.” Id. “As a whole, the law provides that when Customs Officers first encounter an individual seeking entry into the United States the officer has discretion to stop the person and conduct a preliminary border search without fear of running afoul of the Constitution.” Denson, 574 F.3d at 1340, citing United States v. Ramsey, 431 U.S. 606, 619, 97 S.Ct. 1972, 52 L.Ed.2d 617 (1977). The preliminary border search includes “conduct routine questioning, examine the entrant’s luggage, and conduct Terry patdowns and frisks.” Denson, 574 F.3d at 1340, and the collection of cases cited therein. “Because an individual’s expectation of privacy is at its lowermost at border entry points, the officer need not possess any level of suspicion.” Id., and the collection of cases cited therein.
In view of the foregoing, the Court finds that the investigatory questioning of defendant Robles-Costoso does not offend the Fourth Amendment, simply because the Sovereign has a right to protect its borders. Furthermore, the record shows, that law enforcement agents had been informed that the K-9 had alerted positive as to one particular piece of luggage [the defendant’s], as the K-9’s change of behavior was consistent with the odor of controlled substances. (Emphasis ours). Thus, the Court finds that the officers’ investigatory stop was not a mere pretext, but an opportunity to corroborate information provided by a trained canine in the detection of controlled substances relating to the possession of controlled substances by a passenger traveling to Continental United States with the eventual intent to distribute the controlled substances in the State of New York.
Custody
It is settled that “Miranda applies only to custodial interrogations; our analysis, therefore, focuses upon whether [the defendant] was in custody at any point during his initial questioning.” United States v. Jones, 187 F.3d 210, 217-218 (1st Cir.1999). “The decisive issue in the custody inquiry is ‘whether there was a formal arrest or restraint of freedom of movement of the degree associated with a formal arrest.’ ” Jones, 187 F.3d at 217-218, citing Stansbury v. California, 511 U.S. 318, 322, 114 S.Ct. 1526, 128 L.Ed.2d 293 (1994). “In making this determination, we engage in a fact-specific inquiry, evaluating all of the circumstances surrounding the incident.” Id. “Although no single element dictates the outcome of this analysis, factors that we consider in deciding whether a defendant was in custody at the time of the questioning include: ‘whether the suspect was questioned in familiar or at least neutral surroundings, the number of law enforcement officers present at the scene, the degree of physical restraint placed upon the suspect, and the duration and character of the interrogation.’ ” Id., citing United States v. Masse, 816 F.2d 805, 809 (1st Cir.1987).
In the instant case, defendant Robles-Costoso failed to meet the threshold of “custody,” that is, the defendant fails to show that he was under arrest when the officers were questioning him about his black bag, which tag number coincided perfectly with the defendant’s boarding pass number. Defendant failed to state whether he was hand-cuffed; placed in a locked cell; whether he was mistreated or physically abused; restraint; and, most critical the duration of the officers’ questioning.
Hence, based on the information provided by the defendant, the Court understands that defendant Robles-Costoso was not under custody, at any time during the investigatory stop and interrogation that followed, until the defendant was read his Miranda rights.
“Additionally, from defendant’s allegation that he provided written consent to search his luggage prior to being read his Miranda rights, a reasonable inference can be drawn that he [defendant] was asked to provide consent to the search.” See Report and Recommendation, Docket No. 34, page 5. “Seeking consent to search property, absent other indicia of a custodial interrogation, does not require Miranda warnings. See United States v. Smith, 3 F.3d 1088, 1098 (7th Cir.1993) (holding that consenting to a search is not a self-incriminating statement, and “therefore a request to search does not amount to interrogation”).” See also the collection of cases cited in the Report and Recommendation, Docket No. 34, pages 6-7. Consequently, the defendant’s motion to suppress is denied.
The Illegal and Unreasonable Search v. the Fruit of the Poisonous Tree
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1573807-12818 | PIERCE, Circuit Judge:
This case presents the issue of whether a district court may amend a consent order and judgment pursuant to Fed.R.Civ.P. 60(a) after it has been affirmed on appeal. Because we hold that the court (Charles S. Haight, Judge) had jurisdiction to grant appellee’s Rule 60(a) motion under this court’s ruling in Marc Rich & Co., A.G. v. United States, 739 F.2d 834 (2d Cir.1984), we affirm. Familiarity with the facts as stated in prior opinions concerning the instant litigation is assumed, see 500 F.Supp. 787 (S.D.N.Y.1980), aff'd, 650 F.2d 408 (2d Cir.1981); 362 F.Supp. 735 (S.D.N.Y.1973), aff'd, 496 F.2d 533 (2d Cir.1974) (per curiam), and they will be repeated only briefly here.
BACKGROUND
Prior to 1965, plaintiff-appellant Panama Processes, S.A. (PPSA), together with a subsidiary of defendant-appellee Cities Service Company (Cities), and Celanese Corporation formed a Brazilian corporation, Com-panhia Petroquímica Brasileira — Copebras (Copebras). In 1965, the Cities’ subsidiary acquired Celanese Corporation’s share in Copebras to become a majority shareholder. PPSA claims that it accepted this restructuring and its subsequent minority shareholder status only because of a letter agreement signed by the Cities’ subsidiary which set forth future investment and dividend policies of Copebras. In 1970 the subsidiary was merged into Cities, its corporate parent.
Subsequently, Copebras announced plans to borrow money which, until repayment, would restrict its payable dividends. PPSA claimed that this would violate the 1965 letter agreement and sought a declaratory judgment. The suit was dismissed by the United States District Court for the Southern District of New York (Gurfein, Judge) on the ground that the declaration sought was limited to the binding nature of the contract and would not resolve the issue of its interpretation. 362 F.Supp. at 738.
In 1979, PPSA filed another complaint in the United States District Court for the Southern District of New York (Haight, Judge), which later gave rise to this appeal, claiming that Cities breached the 1965 agreement and its fiduciary duty as majority shareholder of Copebras by employing manipulative accounting devices and through its investment policies. Judge Haight conditionally dismissed the complaint on the ground of forum non conve-niens. After a careful review of the relevant factors, the district court concluded that Brazil and not New York was an appropriate forum for the action. 500 F.Supp. at 792-801. In 1980, under the court’s direction, Cities filed a consent agreement which the district court retitled a Consent Judgment and Order (Consent Judgment) stating, in relevant part, that Cities:
(1) Consents to personal jurisdiction over it by any court located in the Republic of Brazil which has appropriate subject matter jurisdiction with respect to the claims raised by plaintiff Panama Processes, S.A., against defendant Cities Service Company in the complaint filed in the within action and agrees to contest on their merits any such claims raised by plaintiff in any such court;
(2) Agrees to waive any statute of limitations defense with respect to any such claims based upon facts or events which have arisen since the commencement of the within action in this Court; and
(3) Agrees to pay any final judgment which may be rendered against it in favor of Panama Processes, S.A., upon such claims by such Brazilian court, provided, however, that such agreement does not prevent Cities Service Company from pursuing any and all remedies by way of appeal which might be available to it under the statutes and regulations prevailing in the Brazilian court system.
Instead of bringing an action in Brazil, PPSA sued Cities in a state court in Oklahoma, which is Cities’ principal place of business. In an order dated March 15, 1982, that court denied Cities’ forum non conveniens motion stating that the court did not consider the New York district court’s holding to mandate litigation only in Brazil and that the dismissal in New York was “conclusive only as to the availability of New York as a forum.”
Pursuant to Fed.R.Civ.P. 60(a), (b)(5) and (b)(6), Cities then moved before Judge Haight to amend the 1980 Consent Judgment to limit the waiver of the statute of limitations to an action brought in Brazil only. In a memorandum opinion and order dated April 8, 1985, the district court, pursuant to Rule 60(a), amended paragraph two of the Consent Judgment to read that Cities:
Agrees to waive any statute of limitations defense in any subsequent action which may be filed against it by plaintiff in Brazil with respect to any such claims based upon facts or events which have arisen since the commencement of the within action in this Court.
(Emphasis added). The court stated that its “understanding and intent was that the phrase ‘any such claims’ in paragraph (2) is derived from, and mirrors, the phrase ‘any such claims raised by plaintiff in any such court’ in paragraph (1), which in turn refers to claims asserted in the courts of Brazil— and nowhere else.” Thus, the court granted Cities motion to amend the statute of limitations waiver provision in the Consent Judgment “to make the implicit explicit [and] so that the Court’s purpose be fully implemented.”
On appeal, PPSA contends that the district court lacked the jurisdiction and authority to amend the Consent Judgment because it had been affirmed by this court, and that even if jurisdiction were present, the error alleged by appellee’s motion was not within the purview of Rule 60.
For the following reasons, we reject appellant’s contentions and affirm the holding of the April 8, 1985 memorandum opinion and order of the district court.
DISCUSSION
PPSA first contends that the district court had no jurisdiction to amend the statute of limitations condition in the Consent Judgment because this court affirmed that Judgment on appeal. Appellant argues that the district court had no power to entertain a Rule 60 motion because a lower court may not deviate from the mandate issued by an appellate tribunal. Thus, appellant claims, the conditions as stated in the Consent Judgment are the “law of the case” and cannot be changed by the district court.
This court’s decision in Marc Rich, 739 F.2d 834, makes clear that the fact that a judgment has been reviewed on the appellate level does not preclude action pursuant to an appropriate Rule 60 motion. In Marc Rich, the district court was permitted under Rule 60(a) to correct an ambiguity in its original order to ensure that a contemnor would be under the compulsion of a daily fine for a period of eighteen months. The court’s original contempt order stated that a sanction for failure to comply with a subpoena would run until compliance, the expiration of the Grand Jury term or March 13, 1984, eighteen months from the date of the order. The court stayed the imposition of the fine pending appellate review. The order was affirmed on May 4, 1983; however, due to motions by the con-temnor to vacate the sanction, the order had not been in effect for eighteen months by March 13, 1984. At that time, Marc Rich & Co. informed the court that it considered the sanction terminated under the terms of the order. The district court granted the government’s Rule 60(a) motion to amend the order “to make clear that the original order contemplated a full eighteen months of sanctions.” 739 F.2d at 836.
This court affirmed the district court’s action and held that Rule 60(a) “permits the correction not only of clerical mistakes, but also of inadvertent errors ‘arising from oversight or omission.’” Id. The court reviewed the district court record and concluded that the amendment was not the result of a “new and subsequent intent of the court,” but rather reflected its “ ‘contemporaneous intent.’ ” Id. at 837 (quoting Jackson v. Jackson, 276 F.2d 501, 523 (D.C. Cir.), cert. denied, 364 U.S. 849, 81 S.Ct. 94, 5 L.Ed.2d 73 (1960)). Although Rule 60(a) inquires a district court to seek leave in order to amend its judgment during a pending appeal, the Marc Rich court ruled that the fact that an appeal was pending in the case did not require the district court to seek leave to amend since the appeal itself did not involve the order amended, and “this court already had affirmed the ... contempt order, ” Marc Rich, 739 F.2d at 838 (emphasis added).
Appellant seeks to distinguish Marc Rich on the ground that there were further proceedings to be conducted in the district court in that case, while here there are no such proceedings. See id. (no leave to amend required after appeal “ ‘particularly ... where [there are] further proceedings [in] the district court’”) (quoting 6A J. Moore, Moore’s Federal Practice ¶ 60.08[3] at 4073 (2d ed. 1971)). PPSA also claims that Marc Rich is inapposite because the appellate court only decided the issue of personal jurisdiction and not the length of time of the contempt order. Appellant argues that here, by contrast, the Second Circuit panel “recited and considered” the conditions imposed on the dismissal.
We must reject appellant’s efforts to so distinguish its case and we decline to adopt appellant’s proposal that a district court can never amend its order if there are no further proceedings before that court. Such a posture would not preclude amendment here in any event where the forum non conveniens dismissal was conditional and where the district court retained jurisdiction to reinstate the case in the event of breach of the conditions set forth in its Consent Judgment. See Calavo Growers v. Generali Belgium, 632 F.2d 963, 968 (2d Cir.1980), cert. denied, 449 U.S. 1084, 101 S.Ct. 871, 66 L.Ed.2d 809 (1981). Furthermore, we decline to so limit an appropriate Rule 60(a) amendment in the manner suggested by the appellant. The rule explicitly allows the district court to correct clerical mistakes or errors arising from oversight or omission. The focus of the inquiry should be whether the correction is of the type contemplated by the rule. As long as the appellate court has not expressly or implicitly ruled on the issue, the district court has not transgressed any jurisdictional boundaries by amending after an appeal has been taken. See Dura-Wood Treating Co. v. Century Forest Industries, Inc., 694 F.2d 112, 114 & n. 2 (5th Cir.1982); Eutectic Corp. v. Metco Inc., 597 F.2d 32, 34 (2d Cir.1979) (per curiam); United States v. Cirami, 563 F.2d 26, 32-33 (2d Cir.1977); see also Advisory Committee Notes to Fed.R.Civ.P. 60(a) (1946 amendment to allow correction after docketing of appeal by leave to amend meant to overrule cases which prohibited such amendments); J. Moore supra (“district court should also have the power to correct clerical mistakes even where the mandate of the appellate court finally disposes of the action”); 11 C. Wright & A. Miller, Federal Practice and Procedure, § 2856 at 157 (1973) (“may be wondered why leave [to amend] should be necessary [after appeal] if the mistake is truly a clerical one rather than one going to the merits of the case”).
We further reject the appellant’s formulation that the appellate court in Marc Rich did not rule on the issue amended while the appellate court here did consider the statute of limitations condition. In the first appeal in Marc Rich, the panel primarily considered the issue of the court’s jurisdiction to issue the contempt order; however, that opinion also noted that “the coercive fine of $50,000 per day did not constitute an abuse of the district court’s discretion.” Marc Rich & Co., A.G. v. United States, 707 F.2d 663, 670 (2d Cir.), cert. denied, 463 U.S. 1215, 103 S.Ct. 3555, 77 L.Ed.2d 1400 (1983). Similarly, the appellate court in reviewing the Consent Judgment here primarily discussed the propriety of the forum non conveniens dismissal; in referring to the district court’s order, the court merely noted the conditions of dismissal. See Panama Processes, 650 F.2d at 414. Thus, appellant’s assertion that the court considered the conditions on appeal either explicitly or implicitly is without foundation. While it is true that issues considered and disposed of by an appellate court on appeal cannot thereafter be altered by a district court, see Briggs v. Pennsylvania R. Co., 334 U.S. 304, 306, 68 S.Ct. 1039, 1040, 92 L.Ed. 1403 (1948); Eutectic Corp., 597 F.2d at 34; Gulf Coast Building and Supply Co. v. International Brotherhood of Electrical Workers, 460 F.2d 105, 107 (5th Cir.1972), it may consider matters not explicitly or implicitly decided, Cirami, 563 F.2d at 32-33; see Standard Oil Co. v. United States, 429 U.S. 17, 18, 97 S.Ct. 31, 32, 50 L.Ed.2d 21 (1976) (per curiam). We therefore reject the contention that the district court was without jurisdiction to amend the Consent Judgment.
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174524-10982 | COFFIN, Chief Judge.
Plaintiffs are a class of prisoners who brought an action against the warden of the New Hampshire State Prison under 42 U.S.C. § 1983 seeking injunctive relief and damages arising from an extended lockup, ranging from three weeks for some of the prisoners to two months for others. The district court granted partial relief but granted summary judgment dismissing that part of the complaint seeking damages for the prisoners’ confinement. 361 F.Supp. 1238 (D.N.H.1973). Plaintiffs appeal from that judgment.
The complaint alleged that a wholesale lockup of ninety per cent of the prison population followed threats by prison guards to leave their work when the food steward, long a target of prisoners’ criticisms, was dismissed. Appellants allege an absence of any real emergency situation or danger, they being in no possession of weapons or dangerous instrumentalities, the lockup having been a means of appeasing the guards and having been instituted without such procedural due process safeguards as notice, hearing, findings of facts, or probable cause. As the result of the lockup, the appellants allege, they suffered an unreasonable and unnecessary deprivation of (1) toiletries and hygienic aids for some fourteen days, (2) medicines and medications for many days, (3) nutri tionally balanced hot meals for some eleven days, (4) writing materials for seven days, (5) access to counsel for nine days, (6) toilet facilities for four days, (7) access to church services for some five weeks, and (8) opportunity to work for prison wages during the period of their confinement.
Certain facts concerning the lockup were stipulated. The warden submitted a motion to dismiss and an affidavit stating that the actions which he took were compelled by his conviction that an emergency existed. The district court, after considering the complaint, stipulation, and affidavit held that the challenge to the validity of the lockup failed to state a cause of action, since, the warden having acted in good faith, damages could not be recovered.
The district court read the complaint as requesting an examination of the conditions at NHSP prior to the warden’s institution of the lockup to determine whether the warden was correct in his assessment that an emergency existed or that it was caused by the prisoners. We read much of the complaint and the plaintiffs’ statement of contested facts in the same light. We agree with the district court in its determination that if a prison-wide emergency is deemed to exist it “is not within the province of a court to second-guess the judgment of correction officials by deciding after the fact whether a lockup was, in fact, justified.” 361 F.Supp. 1238, 1242. As we have recently said in connection with emergency transfers of prisoners, “We recognize that present or impending disturbances which might overtax the control capacity of a prison creates a dominant interest in prison authorities being able to act without delay if they feel that delay would endanger the inmate, others, or the prison community. Boddie v. Connecticut, 401 U.S. 371, 379, 91 S.Ct. 780, 28 L.Ed.2d 113 (1970). This is so even though the assessment of difficulties may subsequently prove to be unfounded.” Gomes v. Travisono, 490 F.2d 1209, 1215 (1st Cir. 1973).
We therefore hold that there was no right to procedural due process and no denial thereof in effecting the lockup and that the emergency confinement by itself did not constitute cruel- and unusual punishment. O’Brien v. Moriarty, 489 F.2d 941 (1st Cir. 1974). We add that we share the concern of the district court, expressed in an order during the proceedings below. “[Emergencies, however, cease to be emergencies when they continue indefinitely and inmates cannot be kept confined to their cells indefinitely in alleged violation of their constitutional rights merely on the assertion of the Warden that prison security requires it.” The unreviewable discretion of prison authorities in what they deem to be an emergency is not open-ended or time unlimited. A complaint seeking an injunction, alleging in suitable detail an extensive and unreasonable continuation of a lockup after the termination of an emergency, would survive a motion to dismiss; summary judgment would be appropriate where essential facts are undisputed. See O’Brien v. Moriarty, supra, at 944. And such allegations, coupled with an assertion that the confinement was being continued in bad faith as a subterfuge for the denial of prisoners’ procedural rights, would call for an evi dentiary hearing in a suit seeking damages. See Palmigiano v. Baxter, 487 F.2d 1280, 1293 (1st Cir. 1973).
Apart from claims based on the confinement itself, the claims of deprivation of various necessities, amenities, and services during confinement warrant separate comment. Prisoners have not made these claims before in the context of a prison-wide emergency. However, even where normal conditions obtain in a prison some of the claims stated would fail under previous standards. Others tread into areas uncharted by prior guidance.
In the first category are the claims alleging cruel and unusual punishment based upon deprivation of medications and medical care and deprivation of hot meals. As to the medical claims, the complaint failed to allege either an intent to harm the inmates or injuries and illnesses so severe or obvious, as to require medical attention. Page v. Sharpe, 487 F.2d 567 (1st Cir. 1973), Church v. Hegstrom, 416 F.2d 449 (2d Cir. 1969). See also Hirons v. Director, Patuxent Institution, 351 F.2d 613 (4th Cir. 1965); Basista v. Weir, 340 F.2d 74 (3d Cir. 1965). The allegation of deprivation of hot meals also fails to state a claim of cruel and unusual punishment, given the stipulation that three meals were provided daily, including milk, cereal, and four meat sandwiches.
What remains in the complaint are allegations of continued deprivation of hygienic necessities, writing materials, work opportunity, and access to counsel and church services for periods ranging from four days to the maximum two month period of confinement. To the extent that the allegations challenged the imposition of these restrictions as an emergency measure — the major thrust of the complaint — we have already disposed of the allegations in holding that emergency decisions of a warden are not reviewable by a court. To the extent that the allegations challenge the duration of the restrictions, they raise novel questions of liability and defense with which we must briefly deal.
The assessment of the continued validity of broad scale measures to deal with prison-wide problems is not to be resolved by reference to cases dealing with individuals, and involving preexisting standards of common law tort liability. The allegations we are now considering probe an area where little or no precedent is available and force us to consider the proper principle to apply. Questions of both pleading and proof must be approached within the context of the qualified immunity available to prison authorities. As Pierson v. Ray, 386 U.S. 547, 554, 87 S.Ct. 1213, 1218, 18 L.Ed.2d 288 (1967), makes clear, § 1983 does not “abolish wholesale all common law immunities”. A prison warden, charged with controlling an unwilling population, aided by perhaps an inadequate number of guards, faces the most demanding and delicate decisions as to the nature and extent of the sanctions he should impose and the timing and effect of their removal. Thus, as we said recently in Palmigiano v. Mullen, 491 F.2d 978, 980 (1st Cir. 1974), before there can be recovery there must be proof of “bad faith or at least such a degree of neglect or malice . . . as to deprive defendants of official immunity for merely erroneous action.”
While this concept of immunity is usually thought of in connection with defenses which can be raised, its exis fence necessarily has some bearing on what must be alleged by a plaintiff. In such a case as this, involving officials clothed with a qualified immunity, we would assume that a viable complaint challenging a post-emergency lockup must allege nothing less than the continued deprivation of basic rights or needs for an unreasonable length of time, maliciously, through excessive neglect, or arbitrarily (e. g., without any justification of practical necessity related to prison security). The complaints in this case, liberally read, arguably meet those requirements. But that is not the end of our examination.
Another principle, very much alive in § 1983 damage actions, is that cases are to be judged “against the background of tort liability that makes a man responsible for the natural consequences of his action.” Monroe v. Pape, 365 U.S. 167, 187, 81 S.Ct. 473, 484, 5 L.Ed.2d 492 (1961). The corollary is that for one to anticipate consequences, there must be some consequences to anticipate. As the Court said in Pierson v. Ray, 386 U.S. at 557, an official “is not charged with predicting the future course of constitutional law.” See also Bowens v. Knazze, 237 F.Supp. 826, 828 (N.D.Ill.1965). Since, as we have noted, there has been virtually no guidance given on this subject, the district court acted properly in dismissing the complaint. We add that we view this as an exceedingly rare kind of disposition, applicable only in an exceptional situation where, as here, a broad field of conduct has been singularly bereft of standards, some of which we hope we have now supplied.
Affirmed.
. The affidavit of the warden being “outside the pleading”, we will treat the court’s ruling on the warden’s motion to dismiss as summary judgment. F.R.Civ.P. 12(b)(6). The plaintiffs assert that this was not a proper ease for summary judgment because they were not afforded the opportunity to submit affidavits. The district court specifically requested an offer of proof to which plaintiffs responded by a general offer to substantiate all their allegations. Even if this was an adequate response, the court’s action in proceeding to judgment was proper. The plaintiffs both in their pleadings and statement of factual issues never contended that the warden did not believe an emergency existed. The plaintiff’s claim was that there was no emergency. There was therefore no factual dispute on the issue of good faith determination of emergency and no reason for the district court to afford further opportunity to present material under Rule 56.
. Cases involving individuals wlio were deprived of hygienic necessities include Wright v. McMann, 387 F.2d 519, 521 (2d Cir. 1967); Hancock v. Avery, 301 F.Supp. 786 (M.D.Tenn.1969); Jordan v. Fitzharris, 257 F.Supp. 674 (N.D.Cal.1966). Cases involving deprivation of access to the courts or counsel include Johnson v. Avery, 393 U.S. 483, 89 S.Ct. 747, 21 L.Ed.2d 718 (1969); Ex parte Hull, 312 U.S. 546, 61 S.Ct. 640, 85 L.Ed. 1034 (1941); Smith v. Robbins, 454 F.2d 696 (1st Cir. 1972); Nolan v. Scafati, 430 F.2d 548 (1st Cir. 1970).
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654596-16372 | KRUPANSKY, Circuit Judge.
In this appeal from the Southern District of Ohio, Western Division, plaintiff-appellant Leanna Jaco (Jaco) has challenged the lower court’s dismissal of the plaintiff’s complaint for failure to state a cause of action upon which relief could be granted pursuant to Fed.R.Civ.P. 12(b)(6). Plaintiff’s son (the decedent) was shot and instantly killed by police officers following an incident in which he had reportedly been discharging firearms outside of his home. Believing the shooting unjustified, plaintiff initiated this action in district court, alleging violations of the decedent’s civil rights. The police officers involved in the shooting and the Mad River Township Board of Trustees were named as defendants.
Specifically, plaintiff alleged violations of decedent’s civil rights as guaranteed by the due process and equal protection clauses of the Fourteenth Amendment to the Constitution, the First, Fourth, and Fifth Amendments, and 42 U.S.C. §§ 1983, 1985(2) and (3), 1986, and 1988. Jaco also sought compensation under Ohio’s wrongful death statute, Ohio Rev.Code § 2125.05. In the language of the Amended Complaint, the plaintiff “brings this action as a survivor’s action on behalf of the heirs of the decedent and the wrongful death action for benefit to the beneficially titled next of kin in accordance with Ohio Revised Code 2125.01 et seq. who are plaintiff Leanna Jaco, the decedent’s father Ralph C. Storer and decedent’s brother David L. Storer”.
The district court held that decedent’s civil rights cause of action did not survive his death, and therefore granted defendant’s motion to dismiss for failure to state a claim. There ensued this appeal.
The real controversy in this case is more one of standing than of the sufficiency of the complaint to state a cause of action. The resolution of the standing issue requires an examination of the interrelationship between the federal civil rights statute, 42 U.S.C. § 1983, and Ohio’s survival and wrongful death statutes..
Section 1983 creates a cause of action for deprivation of civil rights. By its own terminology, the statute grants the cause of action “to the party injured”. Accordingly, it is an action personal to the injured party. In addressing the very issue presented herein, the United States Supreme Court in Robertson v. Wegmann, 436 U.S. 584, 98 S.Ct. 1991, 56 L.Ed.2d 554 (1978), mandated that determination of the applicable survivorship rule for actions arising pursuant to 42 U.S.C. § 1983, was governed by 42 U.S.C. § 1988. In Robertson, the Court stated that:
This statute recognizes that in certain areas “federal law is unsuited or insufficient ‘to furnish suitable remedies’ federal law simply does not “cover every issue that may arise in the context of a federal civil rights action.” Moor v. County of Alameda, 411 U.S. 693, 702, 703, 93 S.Ct. 1785, 1795, 1792, 36 L.Ed.2d 596 (1973), quoting 42 U.S.C. § 1988. When federal law is thus “deficient”, § 1988 instructs us to turn to “the common law, as modified and changed by the constitution and statutes of the (forum) State,” as long as these are “not inconsistent with the Constitution and laws of the United States.”
* * * * * 4=
[0]ne specific area not covered by federal law is that relating to “the survival of civil rights actions under § 1983 upon the death of either the plaintiff or defendant.”
436 U.S. at 587, 589, 98 S.Ct. at 1994.
As noted in Robertson v. Wegmann, the law of the forum is “the principle reference point in determining survival of civil rights actions, subject to the important proviso that state law may not be applied when it is ‘inconsistent with the Constitution and laws of the United States’ ”. 436 U.S. at 590, 98 S.Ct. at 1995. [emphasis added]. Accordingly, a review of the law of the State of Ohio as it applies in this case is in order. Ohio’s survival of actions statute, Ohio Rev.Code § 2305.21 reads [emphasis added]:
In addition to the causes of action which survive at common law, causes of action for mesne profits, or injuries to the person or property, or for deceit or fraud, also shall survive; and such actions may be brought notwithstanding the death of the person entitled or liable thereto.
Ohio’s survivorship statute explains that “injuries to the person” survive the death of the decedent. The complaint in the in stant action admits that the injury resulting from the shotgun blast caused the instant death of the decedent. In addition to the state survival act, the district court also considered the state’s wrongful death statute relevant in deciding the issue of standing in this federal civil rights claim.
The decedent’s cause of action for infringement of his civil rights, measured by the precise mandate of 42 U.S.C. § 1983, cannot survive by virtue of the Ohio survival statute, § 2305.21 of the Ohio Revised Code since'death was instantaneous. It is perhaps appropriate at this juncture to distinguish between survival actions and wrongful death actions. It is conceded by most courts that they are distinct causes of action. E.g., Rosa v. Cantrell, 705 F.2d 1208, 1222 (10th Cir.1982). A survival claim is predicated upon the decedent’s claim for damages sustained during his lifetime. On the other hand, a wrongful death action creates a new and separate claim or cause of action for the damages sustained by decedent’s estate as a result of his death. The distinction as it arises in conjunction with alleged § 1983 violations is apparent. The § 1983 cause of action, by virtue of the explicit language of the section itself, is a personal action cognizable only by the party-whose civil rights had been violated; while, on the other hand, the ■ wrongful death action is a cause of action that inures to the benefit of decedent’s estate, as a result of, not the personal injury suffered by the decedent, but rather,. injuries to his estate caused by his wrongful death. This court has consistently distinguished these separate causes of action in Jones v. Wittenberg University, 534 F.2d 1203 (6th Cir.1976), and Hall v. Wooten, 506 F.2d 564 (6th Cir.1974), interpreting Ohio and Kentucky law, respectively. This court’s pronouncements in Wittenberg University and Wooten reflect a concise and accurate interpretation of both legislative enactments. The perspicuous language of both the Ohio and Kentucky statutes leaves no area for their reinterpretation. -It should be noted that in both Wittenberg University and Wooten,- the plaintiffs’ decedents survived their injuries for a discernible period before their demise and experienced, during that period of survival, conscious pain and suffering. Accordingly, it was the period of conscious pain and suffering experienced by the plaintiffs’ decedents during the interval between injury and ultimate death, not the death itself, which constituted the cause of action which survived the death of the decedent. Patently, Ohio’s wrongful death statute creates a cause of action in tort in favor of the decedent’s heirs for damages resulting from losses of prospective advantages which have been pretermitted by the wrongful death of the victim. Certainly, in a sense, the heirs are injured parties as a result of decedent’s premature demise however, to arbitrarily conclude that their injuries resulted from an infringement of their civil rights would be sheer obfuscation of the issue. Simply stated, the wrongful death of the decedent resulting from a tort, which gives rise to the cause of action for the benefit of his heirs, is not equivalent to decedent’s personal § 1983 claim, and decedent’s administratrix is therefore without standing in the federal forum to commence an action, pursuant to §§ 1983 and 1988, under either the Ohio survivor or wrongful death statute. See Jones v. Wittenberg, supra.
Having concluded that Ohio law forecloses the survival of this § 1983 action, this court is constrained to again scrutinize Robertson v. Wegmann for direction. Section 1988 of Title 42, as applied by the Supreme Court in Robertson v. Wegmann, mandates this court to decide if the abatement of the decedent’s civil rights action by the statutes of the forum state would be “inconsistent with the Constitution and laws of the United States”. 42 U.S.C. § 1988; Robertson v. Wegmann, 436 U.S. at 590, 98 S.Ct. at 1995. When the relevant state law appears “inhospitable to survival of § 1983 actions”, Robertson, 436 U.S. at 594, 98 S.Ct. at 1997, federal courts are directed to determine if abatement would have an “independent adverse effect on the policies underlying § 1983”, id.:
In resolving questions of inconsistency between state and federal law raised under § 1988, courts must look not only at particular federal statutes and constitutional provisions, but also at “the policies expressed in (them).” Of particular importance is whether application of state law “would be inconsistent with the federal policy underlying the cause of action under consideration.” The instant cause of action arises under 42 U.S.C. § 1983, one of the “Reconstruction civil rights statutes” that this Court has accorded “ ‘a sweep as broad as (their) language.’ ”
436 U.S. at 590, 98 S.Ct. at 1995 [citations omitted]. Notwithstanding the broad interpretative range provided to the Reconstruction Acts, there is no “rule of absolute survivorship” respecting § 1983 claims. Id. For the purposes of the § 1988 analysis, state law cannot be deemed “inconsistent” with federal law merely because it results in a loss of the action. Id., 436 U.S. at 593, 98 S.Ct. at 1996. Instead, the abatement must be judged against the congressional intent of § 1983 to compensate those injured by an infringement of their civil rights effected under color of law; only if the forum state’s legislative enactments fail to provide for the survival of the § 1983 action in a manner contrary to that policy does § 1988 allow the federal court to disregard the' state law.
In Robertson, the Louisiana decedent filed his civil rights action and four years later, prior to the commencement of trial, he died of causes unrelated to the civil rights violations. Upon his death the executor of his estate was substituted as plaintiff. Defendants thereupon moved the district court to dismiss the action because the relevant state law provided that the plaintiff’s action survived only in his immediate heirs, none of whom were living at the time of his demise. The trial court held that by failing to provide for broader survival of the decedent’s civil rights action, the state law was inconsistent with the policies underlying § 1983 and therefore to be disre garded in favor of survival. The court of appeals affirmed.
The Supreme Court reversed. It concluded that the state law was not generally hostile to survivorship of tort claims merely because it restricted the power to prosecute those claims to the immediate relatives of the decedent. Because the Court considered the restriction reasonable, it found it “difficult to see how any of § 1983’s policies would be undermined” by permitting abatement of the § 1983 action.
In reaching that decision, the Court in Robertson v. Wegmann, identified two policies underlying § 1983 which must be analyzed before a féderal court can, notwithstanding abatement under the stricture of state law, declare the necessity for a survival of a civil rights claim thus, effectively, creating a “federal common law” survival of actions rule. 436 U.S. at 590-92, 98 S.Ct. 1995-96. Specifically, courts are instructed to gauge the impact of abatement upon the “goal of compensating those injured”, and “§ 1983’s role in preventing official illegality”. 436 U.S. at 592, 98 5. Ct. at 1996. The Court’s explication of the analysis is particularly enlightening with respect to the instant appeal:
Despite the broad sweep of § 1983, we can find nothing in the statute or its underlying policies to indicate that a state law causing abatement of a particular action should invariably be ignored in favor of a rule of absolute survivorship. The policies underlying § 1983 include compensation of persons injured by a deprivation of power by those acting under color of state law.
£ * H* * * „ sjc
The goal of compensating those injured by a deprivation of rights provides no basis for requiring compensation of one who merely survives as the executor of the deceased’s estate. And, given that most Louisiana actions survive the plaintiff’s death, the fact that a particular action might abate surely would not adversely affect § 1983’s role in preventing official illegality, at least in situations in which there is no claim that the illegality caused the plaintiff's death. A state official contemplating illegal activity must always be prepared to face the prospect of a § 1983 action being filed against him. In light of this prospect, even an official aware of the intricacies of Louisiana survivorship law would hardly be influenced in his behavior by its provisions.
436 U.S. at 5920-9, 98 S.Ct. at 1995-96 [emphasis added, footnotes deleted].
In Robertson, the state law had afforded the decedent an opportunity to pursue his constitutional claim .and, upon his death from causes unrelated to the alleged illegal act, a reasonable state vehicle for the survival of that claim had been provided. In contrast, in the case at bar strict adherence to the relevant state law eviscerates the civil rights claim. Under Ohio’s survival statute, this decedent’s civil rights cause of action would have survived if his death had not been instantaneous; in light of the sweeping language of the enactment, to suggest that the Congress had intended that a civil rights infringement be cognizable only when the victim encounters pain and suffering before his demise, is absurd. The § 1983 objective of protecting individual civil liberties by providing compensation to the victim for an illegal deprivation of constitutional entitlements by state officers cannot be advanced, and is only undermined, by deferring to a state law which decrees abatement under circumstances where, as here, asserted constitutional infringements resulting from action taken under color of law caused instant death. Surely, § 1983’s further purpose to discourage official constitutional infringement would be threatened if Jaco were not permitted to champion her dead son’s civil rights. Ohio’s survivorship law is then hostile to “the Constitution and laws of the United States”. To afford effect to the expressions and directions of the Supreme Court in Robertson v. Wegmann, where, as here, the survival statutes of the forum state are hostile to promoting deterrence, protection and vindication against § 1983 civil rights infringements perpetrated under color of law, the federal court must implement the congressional intent by allowing survival.
Accordingly, this court concludes that the decedent’s civil rights claim, a personal cause of action, may be pursued in the name of the decedent’s personal representative, as defined by the law of the forum jurisdiction, in this case Ohio. Insofar as Jaco qualifies as her son’s personal representative under Ohio law, see generally Schaeffer v. D & J Produce, Inc., 62 Ohio App.2d 53, 403 N.E.2d 1015 (1978); Adams v. Malik, 106 Ohio App. 461, 155 N.E.2d 237 (1957); Hunter v. McKinney, 45 Ohio Op. 498, 101 N.E.2d 810 (Ohio C.C.P.1951), she has standing to prosecute the § 1983-claims arising from his death. Therefore, the dismissal of appellant’s § 1983 complaint is reversed.
The district court also dismissed appellant’s complaint alleging violations of 42 U.S.C. §§ 1985(2), and 1985(3), which create a cause of action against those who conspire to obstruct justice, or to deprive any person of equal protection or the privileges and immunities provided by the Constitution, and § 1986, which makes actionable the failure to prevent “any of the wrongs conspired to be done” under § 1985. Jaco had alleged that the basis of the conspiracy was the failure of the township to adequately maintain and control its police officers, who are the remaining defendants to the action. The district court’s dismissal of the § 1985(2) claim was correct, since even in its most liberal construction, plaintiff’s complaint merely alleged broad conclusory negligence language void of the factual allegations necessary to support a conspiracy theory.
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3826790-12844 | MEMORANDUM OPINION AND ORDER
SHERMAN G. FINESILVER, District Judge,
Sitting by Designation.
This matter comes before the Court on Defendant’s Motion for Judgment of Acquittal, or in the alternative, for a New Trial. Trial of this matter was held on August 7, 1975, in Cheyenne, Wyoming, after which the jury returned a verdict of guilty against defendant on a one-count indictment of violation of 18 U.S.C. § 111, resisting or assaulting federal Internal Revenue Service agents while in the performance of their official duties. Defendant now moves to set aside this verdict or for a new trial.
After consideration of the various points raised by defendant and the memoranda filed by both parties in regard to this motion, we conclude that the motion should be denied.
I. MOTION FOR JUDGMENT OF ACQUITTAL
Defendant advances several grounds in support of his motion for judgment of acquittal. Defendant’s primary argument is that the evidence presented at trial does not support his conviction but rather establishes that he was, in fact, assaulted by the Internal Revenue agents and acted thereafter only in self-defense. Defendant further argues that his arrest was unlawful because he was not shown the official identification of the agents, was arrested at night, and was not shown the arrest warrant at the time.
We conclude that the evidence presented at trial fully supports defendant’s conviction. The evidence was such that the jury could conclude that defendant was acquainted with Mr. Vickers of the Internal Revenue Service, had seen his identification on previous occasions, was informed that he was under arrest at the time in question, and was shown the arrest warrant fifteen to twenty minutes after his arrest. The circum stances surrounding petitioner’s arrest demonstrate a lawful arrest; petitioner has cited no authority to support his claim of unlawful arrest. See Rule 4, Fed.R.Crim.P.
Further, defendant was allowed to present testimony regarding his claim of self-defense and assault against him by the officers. There was conflicting testimony on this point from which the jury was entitled to draw its conclusions as to the facts. Defendant was permitted to present all facets of his version of the facts; it is within the province of the jury to determine the credibility of the witnesses. We conclude that the evidence fully supports the jury’s finding of guilty of the offense charged.
For these reasons, we conclude that defendant’s motion for judgment of acquittal based on the evidence presented at trial must be denied.
II. MOTION FOR A NEW TRIAL
Defendant also alleges several grounds in support of his motion for a new trial, some of which were presented and ruled on at trial by way of motions.
Initially, we dispose of defendant’s argument that the trial was illegally held in Cheyenne, Wyoming instead of Casper, Wyoming and thus defendant was prejudiced through inability to bring witnesses to Cheyenne. This argument is without merit. The Court, in its administration, is responsible for establishing the place of trial; the defendant does not have the right to choose a division within the district of the alleged crime in which to be tried. See Rule 18, Fed.R.Crim.P. Defendant never demonstrated any persuasive reason as to why the trial should be held in Casper. The Court was well within its discretion in scheduling the trial in Cheyenne.
We note further that defendant had full opportunity to avail himself of the power of the court in order to subpoena any necessary witnesses. He presented several witnesses during the trial and at no time during the trial did he indicate to the court that he was unable to secure any necessary witnesses. This argument cannot serve as a basis for the granting of a new trial.
The other grounds urged by defendant in support of his motion for a new trial were brought to the attention of the court prior to trial as motions made by defendant. Initially defendant moved for this judge to disqualify himself on the ground that this judge is a defendant in a civil action brought by plaintiff and several other persons against virtually all federal judges in the country. Defendant further moved that he be allowed to have a lay person represent him during the trial, stating that he did not want to be represented by a licensed attorney. The court at that time denied both motions and explained the bases for the denials. These rulings are expanded on herein. The issues are treated separately for clarity.
A. Disqualification of Judge
Prior to trial, defendant made an oral motion for this judge to disqualify himself from hearing this matter. The motion was based primarily on the ground that this judge is named as a defendant in a suit filed by defendant and others against virtually every federal judge in the United States, among others. Rev. Dr. John Joseph Afflerbach et al., v. American Bar Association et al., 401 F.Supp. 108 (D.Wyo., filed July 22, 1975).
The court denied and reaffirms its denial of defendant’s motion for two principal reasons:
1) The procedure for moving to disqualify a judge from hearing a matter because of personal bias or partiality is set forth in 28 U.S.C. § 144. This statute requires that a party who believes that a judge has a personal bias or prejudice against him shall file a timely and sufficient affidavit with the judge stating the facts and reasons for his belief. The statutory requirement was not followed in this case; no affidavit was ever filed and no showing of personal bias or prejudice sufficient to require disqualification was made. See e. g. U.S. v. Corrigan, No. 74-1539 (10th Cir. July 28, 1975—unpublished opinion); Antonello v. Wunsch, 500 F.2d 1260 (10th Cir. 1974); Calveresi v. United States, 216 F.2d 891 (10th Cir. 1954); Annot., Form and Requirements of Certificate and Affidavit of Disqualification of Trial Judge Under 28 U.S.C. § 144, 23 A.L.R.Fed. 637 (1975). See Note, Disqualification of Judges for Bias in the Federal Courts, 79 Harv.L.Rev. 1435 (1966).
2) Another statute, 28 U.S.C. § 455, provides that a judge shall disqualify himself in any case in which he has a substantial interest or his impartiality might be questioned. Ordinarily when a judge is named as a defendant in a suit brought by a defendant before him in trial, such judge should automatically disqualify himself.
However, necessity may obviate this rule when virtually no judge would be available to hear the suit because all federal judges are co-defendants. See Butler and Daly v. The ABA, et al., No. 75-C-72 (N.D.Ill., order entered by Judge Frank McGarr on Jan. 9, 1975); Evans v. Gore, 253 U.S. 245, 40 S.Ct. 550, 64 L.Ed. 887 (1920); Brinkley v. Hassig, 83 F.2d 351 (10th Cir. 1936). In this situation, if we were to disqualify ourself from hearing the matter on the ground urged by defendant, there would be few, if any, federal judges who could hear the trial and none in this circuit. Thus, we conclude that the necessity for the ease to be heard by a federal judge militates strongly against disqualification of this judge.
In addition, we note that the mere filing of a complaint against a judge is not sufficient to require disqualification of that judge from another case. To rule otherwise would allow a defendant to thwart the judicial process by simply filing an action against any judge assigned to hear a trial whom he did not wish to hear the matter. See Bonner v. Circuit Court of the City of St. Louis, et al., 74-811(C)(4) (E.D.Mo., order and memorandum entered by Judge John F. Nangle, Feb. 13, 1975). We conclude that defendant did not demonstrate partiality on the part of this judge by virtue of the filing of a civil suit such as to call for disqualification of this judge from hearing this trial.
In sum, defendant has not put forward any legally sufficient basis to support disqualification of this judge in this matter. The failure of the judge to disqualify himself was not error and does not require a new trial.
B. Representation of Defendant
Until approximately two days before trial, defendant was represented by James R. McCarty, a licensed attorney from Casper, Wyoming. However, two days prior to trial, defendant informed Mr. McCarty that he no longer wished his services and did not desire Mr. McCarty to represent him at trial.
At the commencement of trial, defendant moved this court to allow defendant to be represented by Mr. Jerome Daly. Mr. Daly is a disbarred attorney from Minnesota who has participated in several civil actions against the ABA and various federal and state officials throughout the country. At trial, we denied this motion of defendant and explained to him that he had two alternatives: (a) he could be represented by a licensed attorney such as Mr. McCarty (or could have an attorney appointed if indigency was established) or (b) he could represent himself if he made a knowing and intelligent decision to do so and knowingly and intelligently waived representation by counsel. Defendant chose to represent himself after having an opportunity to speak privately with both Mr. McCarty and Mr. Daly.
The Sixth Amendment to the United States Constitution guarantees to all persons accused of criminal activity the right “to have the Assistance of Counsel for [their] defense.” However, the Sixth Amendment does not allow a state or federal court to force a defendant to accept the services of an attorney. Faretta v. California, 422 U.S. 806, 95 S.Ct. 2525, 45 L.Ed.2d 562 (1975); see 28 U.S.C. § 1654. The Sixth Amendr ment grants an accused the personal right to present his own defense so long as he knowingly and intelligently waives his right to assistance of counsel, being fully cognizant of the possible consequences of such a waiver. Faretta, supra; Johnson v. Zerbst, 304 U.S. 458, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938); U. S. v. Dujanovic, 486 F.2d 182 (9th Cir. 1973). Thus, the right of defendant to represent himself in this matter is clear.
However, in considering a defendant’s request to proceed pro se, the court must be careful to ensure that a defendant’s decision to waive his constitutional right to assistance of competent counsel is knowingly and intelligently made with full realization of the potential consequences. In this regard, we afforded Mr. Corrigan the opportunity to confer with Mr. McCarty and Mr. Daly before making his decision. We questioned him thoroughly as to his understanding of the charges against him and the potential penalties involved, the realization of the possible consequences of self-representation, the fact that Mr. McCarty had provided excellent representation for him in the past, and his mental capacity to make the decision.
After careful consideration of defendant’s statements and reasons for his decision, we concluded that defendant was fully capable of considering the question of self-representation and that his decision was made freely and voluntarily with full realization of its possible consequences. Therefore, defendant was allowed to represent himself with the opportunity of consulting with Mr. McCarty or Mr. Daly during the trial though neither of these gentlemen sat at counsel table with the defendant.
Defendant argues that his Sixth Amendment right to assistance of counsel also grants him the right to have any “counsel” represent him during the trial, including lay friends or disbarred attorneys. Defendant points out that the Constitution does not limit “counsel” to licensed attorneys.
Our reading of the Constitution and case authorities indicates that the “right to counsel” does not include the right to be represented by any lay person at trial. U. S. v. Jordan, 508 F.2d 750 (7th Cir. 1975); U. S. v. Cooper, 493 F.2d 473 (5th Cir. 1974); Lepiscopo v. U. S., 469 F.2d 650 (5th Cir. 1972); Guajardo v. Luna, 432 F.2d 1324 (5th Cir. 1970). See U. S. v. Corrigan, supra. Rather, an accused may be represented by competent, licensed counsel or may represent himself. Such a conclusion can also be inferred from cases which have emphasized the importance of the right to counsel and have interpreted said right to mean the right to effective and competent counsel. See Argersinger v. Hamlin, 407 U.S. 25, 92 S.Ct. 2006, 32 L.Ed.2d 530 (1972); Gideon v. Wainwright, 372 U.S. 335, 83 S.Ct. 792, 9 L.Ed.2d 799 (1963).
Thus we conclude that defendant was not constitutionally entitled to have Mr. Daly represent him at trial, and the court did not err in denying him this opportunity. While we declined to allow Mr. Daly to sit at counsel table with the defendant, Mr. Daly was permitted to be present in the courtroom throughout the trial. Defendant did, in fact, confer with Mr. Daly at several points during the trial. In this manner, we believe defendant’s desires, as well as his constitutional rights, were adequately protected throughout trial of this matter.
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6098675-15181 | Re, Chief Judge:
The question presented in this case pertains to the proper classification, for customs duty purposes, of certain merchandise imported from Taiwan, and described on the customs invoice as “copper clad laminates.”
The imported copper clad laminates are used to manufacture printed circuit boards, and consist of two types: (1) FR 4, comprised of eight plies of woven fiberglass fabric impregnated by epoxy resin, and (2) Oak 910, comprised of three plies of non-woven fiberglass fabric placed between two plies of woven fiberglass fabric, and impregnated by epoxy resin. In addition, copper foil is added on both sides of the FR 4 and Oak 910 laminate sheets.
The merchandise was classified by the Customs Service as “articles not specially provided for, of rubber or plastics * * * other,” under item 774.55 of the Tariff Schedules of the United States (TSUS). Therefore, it was assessed with duty at the rate of 8.5% ad valorem.
Plaintiff protests this classification and contends that the merchandise is properly classifiable under item 770.05, TSUS, as “articles not specially provided for wholly or almost wholly of reinforced or laminated plastics,” duty-free under the Generalized System of Preferences.
The pertinent statutory provisions of the tariff schedules are as follows:
Classified Under:
Schedule 7, Part 12, Subpart D
Articles not specially provided for, of rubber or plastics:
* ***** *
774.55 Other. 8.5% ad valorem.
Claimed Under:
Schedule 7, Part 12, Subpart A
Articles not specially provided for wholly or almost wholly of reinforced or laminated plastics:
Laminated:
774.05 Plates or Sheets (under the Free. Generalized System of Preferences).
Specifically, therefore, the question presented is whether the imported merchandise consists of “articles not specially provided for, of rubber or plastics * * * other,” as classified by Customs, with a duty rate of 8.5% ad valorem, or plates or sheets “almost wholly of reinforced or laminated plastics,” duty-free under the Generalized System of Preferences.
After careful examination of the imported merchandise, the testimony of the witnesses, and the entire record, it is the determination of the court that the plaintiff has not overcome the presumption of correctness which attaches to the Customs Service’s classification of the imported merchandise. Jarvis Clark Co. v. United States, 733 F.2d 873, 878, reh’g denied, No. 83-1108 (Fed. Cir. July 17, 1984); E. R. Hawthorne & Co. v. United States, 730 F.2d 1490 (Fed. Cir. 1984).
At trial, plaintiff called two witnesses familiar with the manufacture of laminates for the printed circuit board industry. Plaintiffs first witness, Dr. Jiri Konicek, holds a Ph.D. in Thermal Chemistry and a M.S. in Physical Chemistry. He has substantial experience in the printed circuit board industry, holds several patents that relate to printed circuit board technology, and is currently Vice President of Research and Product Engineering at plaintiffs company, Oak Materials Group.
In his testimony, Dr. Konicek traced the evolution of electric circuit technology, and highlighted the role copper has played in that evolution. In earlier times, according to Dr. Konicek, copper served two purposes: (1) to provide the transfer of current from component to component, and (2) to provide a strong bond or good adhesion between the conductive lines and the laminate core. As electric circuit technology developed, a process was created to produce conductive patterns on both sides of a laminate core, and to connect them by plating. This process, as stated by Dr. Konicek, entailed placing copper foil on both sides of a plastic laminate sheet. In addition, in order to connect the circuit patterns on either side of the sheet, it was necessary to drill holes through the board, and deposit an electrical conductor in those holes where no copper was present. The depositing of copper in the holes necessarily involved adding copper to the surface of the copper foil already present. Dr. Konicek stated that, since the total current transfer can be accomplished by the plated-on copper, it is his belief that the conductive property of the original copper foil is no longer necessary. Therefore, he stated that since it is no longer necessary to have the copper foil provide a current transfer function, it is the laminate core that is indispensable in the manufacture of printed circuit boards.
Dr. Konicek also explained how circuit boards can be manufactured from unclad laminates, i.e., laminates which do not contain copper foil. He stated that the unclad laminates must go through a process, either semi-additive or fully additive, which requires the purchasers of unclad laminates to apply the cooper. Dr. Konicek concluded his testimony by stating that, since the laminate core contains all the components, and provides all the insulating properties of circuit boards, the laminate core is the essential element of the article.
Plaintiffs second witness was Mr. Herbert Allen, Manager of Research and Development for the Advanced Circuitry Division of Litton Industries in Springfield, Missouri, a company engaged in the manufacture of printed circuit boards for the retail market.
Mr. Allen testified that his company purchases both clad and unclad laminates from the plaintiff. He stated that printed circuit boards manufactured from clad and unclad laminates are commercially interchangeable, and indicated that his company had sold printed circuit boards made from both types of laminates to several customers. Mr. Allen also testified that the purpose of the copper foil is to obtain good adhesion between the plated-on copper and the surface of the laminate core. He stated that this function could be performed by some other materials such as phenolic resin, nickel, aluminum, or silver. In Mr. Allen’s opinion, it is the plastic core, not the copper foil, that is indispensable in the manufacture of a printed circuit board.
In this case, the defendant did not merely rely on the statutory presumption of correctness that prevails in customs classification cases. It introduced persuasive expert testimony to refute the testimony of plaintiffs witnesses, and to prove that the merchandise was properly classified by Customs. See Schott Optical Glass, Inc. v. United States, 82 Cust. Ct. 11, 24, 468 F.Supp. 1318, 1326, aff’d 67 CCPA 32, C.A.D. 1239, 612 F.2d 1238 (1979); Ameliotex, Inc. v. United States, 77 Cust. Ct. 72, 84, C.D. 4673, 426 F.Supp. 556, 564 (1976), aff’d, 65 CCPA 22, 565 F.2d 674 (1977).
The defendant called two witnesses familiar with the printed circuit board industry, Dr. Richard J. Jablonski and Dr. Joseph Bucci. Dr. Richard J. Jablonski holds a B.S. in Chemistry and a Ph.D. in Organic Chemistry, and is Manager of Technology Development for the Laminates Division of the General Electric Company. His duties include the development of copper clad laminates, the maintenance of the specifications for raw materials used in the production of laminates, and the resolution of customer problems relating to purchased laminates.
Dr. Jablonski rejected the proposition, offered by plaintiffs witness, that the copper foil is merely an adhesive. He stated that no one in the industry considers this to be the function of the copper. He also stated that the purpose of a printed circuit board is to conduct electricity, and that, of all the raw materials or components present in the laminate, only copper has the ability to conduct electricity. Dr. Jablonski also offered extensive testimony on the importance of copper in the manufacture of the laminates. He stated that, while plaintiffs witness testified that it is theoretically possible to use metals other than copper in electric circuitry, the only other metal used, nickel, is used in negligible amounts. Thus, Dr. Jablonski concluded that copper is the predominant metal used in manufacturing printed circuit boards.
Dr. Jablonski also discussed the other types of boards available, i.e., unclad laminates put through a fully or semi-additive process, but noted that these processes are not uniformly available, since they require the printed circuit board manufacturer to be a licensee of either the Photocircuit or Litton companies. He added that General Electric, which holds a prominent place in the laminates business, terminated its manufacture of other types of circuit boards because they were not profitable, and did not produce circuitry with the same performance level as copper clad laminates.
The defendant’s second witness, Dr. Joseph Bucci, holds a Ph.D. in Solid State Physical Chemistry, has extensive experience in the electronics field, and is Manager of Market Development for the Foil Division of Gould, Incorporated. Gould manufactures the copper foil used on copper clad laminates. Dr. Bucci’s testimony pertained to the production of copper foil. He stated that numerous precautions are taken to ensure the purity of the copper used to make the foil. For example, foil consistency, strength, and surface smoothness are determined when the copper is in the liquid phase. In addition, different chemical additives are used at a latter stage to achieve the various physical properties of the copper foil. Finally, Gould applies a brass treatment or “thermal barrier” to the copper to prevent it from breaking down, and from making contact with the epoxy resin. Dr. Bucci concluded, therefore, that since the copper applied through the semi-additive or fully additive process does not possess the same properties as the copper foil, the copper foil serves a special function and is not merely an adhesive.
As in all customs classification cases, plaintiff has the burden of overcoming the statutory presumption of correctness which attaches to the government’s classification. 28 U.S.C. § 2639(a)(1) (1982). In determining whether the presumption has been rebutted, the court must consider “whether the government’s classification is correct, both independently and in comparison with the importer’s alternative.” Jarvis Clark Co. v. United States, 733 F.2d 873, 878, reh’g denied, No. 83-1108 (Fed. Cir. July 17, 1984).
In this case, plaintiff contends that the merchandise was incorrectly classified by customs, and is properly classifiable under item 770.05, TSUS, as “articles not specially provided for wholly or almost wholly of reinforced or laminated plastics.” It is plaintiffs contention that the testimony offered establishes that it is the plastic laminate core which imparts the “essential character” to the imported articles, and, therefore, the imported articles are “almost wholly of’ plastic.
To determine whether plaintiffs merchandise is “almost wholly of’ laminated plastics, the court must examine General Headnote 9(f)(iii) which defines the phrase “almost wholly of’ as follows:
(iii) “Almost wholly of’ means that the essential character of the article is imparted by the named material, notwithstanding the fact that qualities of some other material or materials may be present; * * *.
Id.
The meaning of the phrase “almost wholly of’ was first judicially construed in United China & Glass Co. v. United States, 61 Cust. Ct. 386, C.D. 3637, 293 F.Supp. 734 (1968). The merchandise in United China consisted of a glass water ball mounted on a plastic base with an insert made of artificial flowers. Plaintiff claimed that the articles were “almost wholly of’ plastic, and therefore, were dutiable under item 748.20 of the tariff schedules. In holding that the “glass water balls” were not “almost wholly of’ plastic, the court noted that, in order for the articles to be “almost wholly of’ plastic within General Headnote 9(f)(iii), the plastic must be the material which imparts the “essential character” to the article. The court found that the essential character of the article was imparted by the glass ball, and made the following pertinent observations:
The character of an article is that attribute which strongly marks or serves to distinguish what it is. Its essential character is that which is indispensable to the structure, core or condition of the article, i.e., what it is. Webster’s Third New International Dictionary, 1966 edition. The article, exhibit 1, has several distinguishing characteristics, namely, the glass ball and decorative insert of plastic flowers. * * *
The indispensable and distinguishing part, that which imparts the essential character of the structured article in this litigation is, in our opinion, the glass ball. We say this because, if we take the glass ball away, we are left with (1) some plastic flowers set in a rubber cap and (2) a plastic base, neither of which has any utility, so far as the record shows, without the glass ball. Indeed, any decorative insert could quite easily be substituted in place of the plastic flowers without destroying the essential character of the article as manifest in the glass ball.
293 F. Supp. at 737.
In Larry B. Watson Co. a/c Decoration Products Co. v. United States, 64 Cust. Ct. 343, C.D. 4001 (1970), the merchandise consisted of polyvinyl chloride film, colored or “metallized” on one or both sides. The court held that, since the essential character of the merchandise was imparted by plastic, it was “almost wholly of’ plastic. In declining to adopt the defendant’s position, that the essential character was imparted by the article’s shiny finish, the Watson court stated that:
The uncontradicted testimony reveals clearly that the characteristics of the imported film which make it desirable for the manufacture of decorations are its flexibility, its ease of die cutting and the fact that it is flameproof. These are the features or characteristics which distinguish it from other merchandise used for the same purpose, and these qualities are imparted by the polyvinyl chloride. If the color lacquer of metallic deposit were removed, or not added to the finished product, one would still have a basic raw material that could be fully utilized for the manufacture of decorations. Without minimizing the importance of the lacquer, it may be pointed out that the coloring could be added after the importation, and that the reason it is imported colored “is a matter of economics”, i.e., “it is cheaper.”
64 Cust. Ct. at 350.
In the case at bar, plaintiff contends that, since the color lacquer used in Watson is analogous to the copper foil, Watson is controlling here. The court does not agree. It is apparent from the facts of Watson that the polyvinyl chloride was usable with or without coloring, and that the coloring could have been added after importation. In this case, however, because of the composition of the laminate core, it is virtually impossible to add the copper after importation. This is due to the fact that the core’s capability to receive copper results from the addition of ingredients or components not present in the imported merchandise. In other words, in order for an unclad core to have copper added after importation, it must have a different composition than the core of thé imported merchandise. Thus, the Watson case is clearly distinguishable, and does not support plaintiffs contention.
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1202802-12156 | BREITENSTEIN, Circuit Judge.
A jury found defendant-appellant Carroll Samara guilty on all four counts of an indictment charging income tax violations arising from returns for the years 1971 and 1972. Counts I and III charged the filing of false returns in violation of 26 U.S.C. § 7206(1) and Counts II and IV charged the evasion of tax in violation of 26 U.S.C. § 7201. Defendant was sentenced to three year concurrent prison terms on each count. Fines totalling $15,000 were imposed. He appeals and we affirm.
Defendant, a practicing lawyer in Oklahoma City, Oklahoma, filed joint returns with his wife who was not indicted. The Internal Revenue Service, IRS, had audited defendant’s returns for several years before those for the years in question. The returns were prepared by lawyers and a certified public accountant in an Oklahoma firm. Defendant furnished the information on which the returns were based. The filing and bookkeeping in defendant’s office were primitive and haphazard. A substantial portion of his receipts were in cash or in checks which were converted to cash and not deposited in his bank account. Some business expenses were paid by check and some by cash.
Receipt records being unavailable, the return preparers added the expense items to an estimated sum for living expenses to arrive at gross income. The amended return for 1971 showed a tax due of $585.00, Gov’t. Ex. 5, and for 1972 of $11,314.26, Gov’t. Ex. 6. The government evidence showed an additional tax of $1,155.38 for 1971 and $3,613.64 for 1972 (see Gov’t. Ex. 198 as corrected by witness Bonifield, Tr. 1767-1769).
The government relies on “specific items” of unreported income. In a jury trial covering about three weeks, the government presented over 200 witnesses and 200 exhibits. Oklahoma state court records showed the appearance of defendant as attorney for various litigants. Some of these, about 200, testified to the payment of fees to the defendant. The government summary of the evidence, Gov’t. Ex. 194, showed additional unreported gross receipts from these sources of $30,154.37 for 1971 and of $36,-200.19 for 1972. Detailing the evidence would serve no good purpose. A few examples will suffice.
Mrs. Leo Feurborn testified that in 1971 she paid defendant checks totally $555.00 for representing her son in a criminal case. Only one check for $105.00 was deposited to defendant’s bank account. Tr. 531-536. Lynn Bailey said that she gave defendant a $650.00 check for legal services in a criminal case. The check was endorsed by defendant but no claim is made that it was deposited in his bank account. Tr. 406-410 and Gov’t. Ex. 73. Lyle Fair gave defendant a check for $750.00 in part payment of legal services of defendant in representing the witness’ son in a criminal prosecution. The cancelled check bears defendant’s endorsement and no claim is made that it was deposited in defendant’s bank account. See Tr. 638-642 and Gov’t. Ex. 101.
Several character witnesses testified for the defense. Several lawyers related their professional relationships with the defendant. Three former secretaries testified as to the routine and procedures in defendant’s office. All said that they were paid in cash. (Tr. 1586, 1611, and 1668). Former secretary Hanson said that defendant did not have a filing system; that his bookkeeping system was almost as bad as his filing system; that he kept no accounts receivable; and that he did not keep a set of books. (Tr. 1619-1620). An elevator operator in the building where defendant had an office testified to his work habits and generosity with children. An accountant, testifying as an expert, presented a summary of the trial evidence. The summary was not received in evidence but accepted for the record as an offer of proof. The defendant did not testify.
On this appeal, defendant makes no attack on the court’s instructions to the jury.
Defendant argues that the evidence is insufficient to sustain the jury verdicts. Counts I and III charge violations of 26 U.S.C. § 7206(1). “The gist of the offense is a false statement, willfully made, of a material matter.” United States v. Brown, 10 Cir., 446 F.2d 1119, 1122. Counts II and IV charge violations of 26 U.S.C. § 7201. Its elements are willfulness, existence of a tax deficiency, and an affirmative act constituting an evasion or attempted evasion of the tax. Sansone v. United States, 8 Cir., 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882 and United States v. Swallow, 10 Cir., 511 F.2d 514, 519. Defendant signed the returns which declared that they were made under the penalties of perjury. The government evidence showed that the returns were false in a material matter, the income was understated, and a substantial tax deficiency resulted.
Defendant claims that his actions were not willful. His former secretary, Ar-villa Richardson, testified for the government that defendant kept a receipt book showing cash received. Tr. 1390-1391. Defendant did not provide to the firm of Dunlap and Fitzgerald, which prepared his returns, any cash receipt books. Tr. 305. The tax preparers had no knowledge of the checks which defendant cashed rather than deposited. Tr. 309-310. Defendant’s reliance on the advice of his lawyer and accountant does not negate willfulness unless defendant made a complete disclosure of all pertinent facts. United States v. Jett, 6 Cir., 352 F.2d 179,182, and United States v. Baldwin, 7 Cir., 307 F.2d 577, 579. Defendant concealed, rather than disclosed, his cash receipts. Bank Teller Herrin said that at a minimum of once a week during 1971 and 1972, defendant cashed, without depositing in his account, checks totalling $500 to $1,000 for each transaction. Tr. 1367. Teller Rogers gave similar testimony and said that the cash was given to defendant in $50 and $100 bills. Tr. 1384-1385. Bank Teller Strawn testified that during the same period she cashed checks amounting to $500 to $1,500 three or four times a month and paid defendant in $50 bills. Tr. 1386-1387. Witness Herrin identified from bank records the checks which were cashed rather than deposited. Tr. 1368-1376.
Government witness Richardson, secretary for defendant, reported to defendant that IRS had made contact with her. She identified as Gov’t. Ex. 164 a written July 29, 1974, message to her from defendant. Tr. 1410-1411. Among other things the letter said:
“Do not even mention the Criminal work. Also, you might tell them, if you tell them anything, that I did all of my own banking and saw practically all of my clients at night and that so far as you know I did not take in very much cash money.”
In answer to a question of what portion of defendant’s practice was in criminal cases, Richardson said, Tr. 1411, “probably the majority of it.”
Willfulness to defeat or evade federal income taxes may be inferred from “concealment of assets or covering up sources of information, handling of one’s affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or conceal.” Spies v. United States, 2 Cir., 317 U.S. 492, 499, 63 S.Ct. 364, 368, 87 L.Ed. 418. Substantial evidence establishes that the false statements were made wilfully and that the attempt to evade was willful.
We do not weigh the evidence or determine the credibility of witnesses. “The verdict of a jury must be sustained if there is substantial evidence, taking the view most favorable to the Government, to support it.” Glasser v. United States, 7 Cir., 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680. See also United States v. Downen, 10 Cir., 496 F.2d 314, 319. It is enough to say that the evidence supports and justifies the verdicts of the jury.
Defendant contends that prosecution under Counts I and II is barred by the six-year period of limitations provided in 26 U.S.C. § 6531(2) and (5). Each of the questioned counts is based on an amended return filed with IRS on February 14, 1973. Gov’t. Ex. 5. The indictment was returned on January 4, 1979.
The question is whether the limitation period runs from the date of the filing of the original return, September 15, 1972, or the filing of the amended return on February 14, 1973. Defendant argues that the original return governs because the amended return merely revised a depreciation schedule.
Section 7206(1) applies to “any return, statement, or other document” not believed “to be true and correct as to every material matter.” Section 7201 applies to a person who attempts to defeat or evade a tax “in any manner.” In holding that the statute was no bar, the district court cited United States v. Habig, 7 Cir., 390 U.S. 222, 88 S.Ct. 926, 19 L.Ed.2d 1055. That decision holds that the § 6531 limitation period runs from the date of the actual filing and not from the original due date of the return. In the instant case the original due date had been extended and the original return filed within the extension period.
IRS filed the amended return and recognized the increased depreciation claim. Norwitt v. United States, 9 Cir., 195 F.2d 127, 134, and Levy v. United States, 3 Cir., 271 F. 942, 943, hold that a person may be prosecuted for filing an amended return. We agree. An amended return is “any return, or other document” within the purview of § 7206(1) and may constitute an attempt to defeat or evade a tax “in any manner” within the proscription of § 7201. Accordingly, the statute is no bar. In the circumstances we have no reason to consider the government’s alternative argument that the concurrent sentence doctrine should be applied.
Error is alleged in receipt in evidence of state court civil and criminal dockets of cases in which defendant was the attorney of record. The dockets showed the extent and nature of defendant’s law practice during the tax years. They supplied information leading the government to the many “specific items” witnesses. They disclosed the extent of the defendant’s criminal law practice and corroborated the testimony of the witness Richardson in that regard. They were relevant evidence as that term is defined in Rule 401, Federal Rules of Evidence. Defendant argues that the introduction of the dockets was an effort by the government to force him to testify. In his opening statement to the jury defense counsel said that the defendant would testify and outlined the scope of his expected testimony in some detail. Tr. 1501-1505. Later, defendant elected not to testify. Tr. 1690. Although evidence tended to implicate the defendant in the commission of the offense charged, “[t]he mere massing of evidence against a defendant cannot be regarded as a violation of his privilege against self-incrimination.” Barnes v. United States, 9 Cir., 412 U.S. 837, 847, 93 S.Ct. 2357, 2363, 37 L.Ed.2d 380.
The last defense witness was an accountant who qualified as an expert. He prepared, and the defense offered as their Exhibit 513, a summary purporting to show that certain items should be deleted from the government’s showing of gross receipts. The reasons given for item rejection was witness credibility because of felony convictions and lack of documentation. The court excluded the exhibit and its related testimony on the ground that credibility was for determination by the jury, not by a defense witness. Exhibit 513 was received as a defense offer of proof.
Ordinarily the admission of expert testimony is within the discretion of the court, Wolford v. United States, 10 Cir., 401 F.2d 331, 332, and its rulings will be disturbed only for clear abuse of discretion, United States v. Carranco, 10 Cir., 551 F.2d 1197, 1199-1200.
The defense expert did more than summarize the evidence. He gave reasons why specific items should be excluded. The “specific items” witnesses were subject to defense cross-examination. An expert “may not go so far as to usurp the exclusive function of the jury to weigh the evidence and determine credibility.” United States v. Ward, 3 Cir., 169 F.2d 460, 462; see also United States v. Brown, 10 Cir., 540 F,2d 1048, 1054, cert. denied, 429 U.S. 1100, 97 S.Ct. 1122, 51 L.Ed.2d 549. The offer of proof was properly rejected.
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3884033-18423 | MEMORANDUM OPINION AND ORDER
ASPEN, District Judge:
This civil rights action arises out of the appointment of a white man to the board of PACE, the suburban bus division of the Regional Transportation Authority (“RTA”), instead of African American plaintiff Evans R. Miller (“Miller”). Miller attempted to file a class action suit against the RTA, PACE, and the individual members of the Cook County Board responsible for the appointment. The RTA and PACE, pursuant to Federal Rule of Civil Procedure 12(c), now move for judgment on the pleadings on Counts I and II. The individual defendants, pursuant to Federal Rule of Civil Procedure 12(b)(6) and on various other grounds, seek to dismiss the plaintiffs’ complaint in its entirety. For the reasons set forth below, we grant the RTA and PACE’s motion for judgment on the pleadings, and deny in part and grant in part the individual defendants’ motion to dismiss the complaint.
I. Factual Background
The facts of this case are straightforward and largely undisputed. The RTA is responsible for providing public transportation within various Illinois counties. PACE is the Suburban Bus Division of the RTA, and is run by a Service Board comprised of appointed members drawn from six suburban regions. The Regional Transportation Authority Act delineates that when a vacancy arises, suburban members of the Cook County Board will appoint a director, from the appropriate region, to fill it. Ill.Rev.Stat. ch. 111%, ¶ 701.01, et seq. The only qualification is that applicants must be chief executive officers of municipalities within the region. Id.
In addition to Miller, plaintiffs include four African American mayors of Illinois municipalities, eligible, under Illinois law, for appointment to the PACE Board, and nine African American residents of the community served by the PACE Board.
When the director for the South Region was convicted of a felony, leaving a vacancy on the Board, Miller, the chief executive officer of a municipality in the region, renewed his outstanding application for the position. Having relayed all relevant information, he was summoned to appear for a meeting of the appointing members of the Cook County Board on August 26, 1993. According to Miller, no notice of the meeting was published.
After Miller arrived, another candidate appeared. Although Miller had not spoken to any of the Cook County Board members, the other candidate, who was white, was invited into a room with at least some of the appointing members of the Cook County Board for an interview or consultation. The white candidate’s name was submitted along with Miller’s, and the white candidate was appointed.
Miller, and the other plaintiffs, claim that the appointing members failed to consider or appoint him because of his race. Accordingly, they bring this action under 42 U.S.C. §§ 1981 and 1983 and Title VI, along with a pendent state claim for violation of the Illinois Open Meetings Act, Ill.Rev.Stat. ch. 102, ¶ 41 et seq. In Count I, plaintiffs ask for a declaration that defendants have been, and are, making appointments to the PACE Board in a racially discriminatory fashion, and an injunction against future discriminatory behavior. Count II charges defendants with violating the Illinois Open Meetings Act by failing to publish notice of and take minutes during the appointment meeting.
II. Discussion
A. Judgment on the Pleadings
The RTA and PACE seek judgment on the pleadings with respect to both counts. Once the pleadings are closed, as they are here, a motion for judgment on the pleadings is appropriate if the court determines that no material issue of fact remains and one party is entitled to judgment as a matter of law. National Fidelity Life Ins. Co. v. Karaganis, 811 F.2d 357 (7th Cir.1987). The RTA and PACE argue that, taking all of the plaintiffs allegations as true, there is no outstanding issue of material fact, and they are entitled to judgment as a matter of law on both counts. We find their arguments persuasive, and grant their motion.
(i) Count I
The RTA and PACE argue that “it is plain from the face of the pleadings that [they] had no involvement in the wrongful actions alleged by the plaintiffs.” Def. Brief at p. 3. They point out, and plaintiffs do not dispute, that under Illinois law, the RTA and PACE have no authority to appoint members of the PACE Board. Ill.Rev.Stat. ch. 111%, ¶ 703A.02. Instead, the responsibility to fill the vacancy in the South Region lay with the suburban members of the Cook County Board. Id. Given their lack of authority over the appointment process, the two defendants contend that plaintiffs cannot obtain the relief they seek against either the RTA or PACE.
While plaintiffs do not contest the RTA and PACE’s lack of formal authority, they argue that because the RTA and PACE “are part of a single authority that mainins [sic] administrative powers of review over the activities and operation of all divisions within the Authority,---- a reasonable inference can be drawn that defendants bear some responsibility for the alleged misconduct.” Def. Brief at p. 6. Such a conclusory contention, unsupported by the pleadings, will not suffice to stay judgment on the pleadings. The Act explicitly denies the RTA and PACE authority to control the appointment of Board members, limiting its domain to that of overseeing the Board’s activity once appointed. Absent any role for either the RTA or PACE in the appointment process, relief is not available against them, and we grant judgment on the pleadings in their favor.
(ii) Count II
The RTA and PACE also assert that because plaintiffs fail to allege that they had anything to do with the violation of the Open Meetings Act, we should grant them judgment on the pleadings with respect to Count II. We agree. Neither the RTA nor PACE called the meeting. Under the statute, then, they had no obligation to post notice of the meeting or to ensure that minutes be kept. Accordingly, we grant judgment on the pleadings on Count II in favor of the RTA and PACE.
B. Motion to Dismiss Count I
The individual defendants seek to dismiss Count I on a variety of grounds. We will address them in turn.
(i) Standing
Several of the grounds upon which the defendants seek dismissal devolve into the single issue of whether the plaintiffs have standing. Article III of the Constitution requires a party to have standing in order to involve, a federal court in litigation. To have standing, a plaintiff “must allege personal injury fairly traceable to the defendant’s allegedly unlawful conduct and likely to be redressed by the requested relief.” Allen v. Wright, 468 U.S. 737, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). Defendants contend that plaintiffs, including Miller, have failed to allege injury and therefore lack standing. With the exception of Miller, we agree.
Other than Miller, who clearly suffered the direct injury of losing a position on the PACE Board as a result of defendants’ alleged racial discrimination, there are two categories of plaintiffs involved in this action. First, all of the plaintiffs are African American residents of the community served by the PACE Board. Second, four of the plaintiffs are current or former chief executive officers of Illinois municipalities who are eligible for appointment to the PACE Board. In order to assert standing, these plaintiffs must allege a particularized injury which is fairly traceable to defendants’ alleged wrongful act.
(a) Community Residents
The community residents claim that the alleged discriminatory failure to appoint Miller has harmed them, but it is not clear whether they believe their rights have been violated by (1) the absence of Miller on the PACE Board, or (2) the allegedly discriminatory appointment process. In either case, the plaintiffs lack standing.
In order to bring a claim under §§ 1981 and 1983, a plaintiff must allege a violation of his constitutional rights, that is, an injury. While plaintiffs have alleged discrimination against Miller, they have not alleged a cognizable violation of their own constitutional rights, or, consequently, an injury. See New Christian Valley M.B. Church v. School Dist. 149, 704 F.Supp. 868 (N.D.Ill.1989) (while plaintiffs need not be the direct victims of discrimination, they must have suffered injury as a result of defendant’s conduct). At bottom, plaintiffs assert that the Cook County Board members have denied them the representation of an African American, of Miller, on the PACE Board. The Constitution, however, does not recognize a right to be represented by a person of a particular race, let alone the right to be represented by a particular person. Rather, the Constitution, and measures such as the Voting Rights Act, guarantee a fair political process. For these reasons, we do not read the complaint to state a violation of the residents’ constitutional rights. Without such an injury, the residents have no cause of action under the relevant statutes.
Nor do the residents have standing to assert a claim against the Cook County Board members for subverting the appointment process with racial discrimination. In order to have standing, plaintiffs must assert a particularized grievance. If the grievance is generalized, then plaintiffs lack standing to pursue it. See Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 209, 94 S.Ct. 2925, 2926, 41 L.Ed.2d 706 (1974) (Court ruled that “while standing is not to be denied simply because many people [each] suffer the same injury,” a citizen lacks standing if his adverse impact is “ ‘undifferentiated’ from that of all other citizens.”) See also Freedom from Religion Foundation, Inc. v. Zielke, 845 F.2d 1468, 1468 (7th Cir.1988) (“[C]ourts will refrain from ‘adjudicating “abstract questions of wide public significance” which amount to “generalized grievances,” pervasively shared and most appropriately addressed in the representative branches.’ ”). When an appointment process is tainted by racial discrimination, all citizens suffer. See, e.g., Powers v. Ohio, 499 U.S. 400, 111 S.Ct. 1364, 1365, 113 L.Ed.2d 411 (1991) (defendant has standing to object to use of discriminatory peremptories regardless of whether his race differs from that of the excluded juror); Peters v. Kiff, 407 U.S. 493, 92 S.Ct. 2163, 33 L.Ed.2d 83 (1972) (white defendant can bring due process claim when blacks are excluded from juries). Lacking a sufficiently particularized grievance, the community residents do not have standing to pursue this claim, and they are therefore dismissed.
(b) Eligible Appointees
Although they do not have standing as community residents, the four named plaintiffs who are current or past chief executive officers of Illinois municipalities may have standing as eligible appointees. These plaintiffs aver, in their brief, that “once the barriers of racial discrimination have been leveled, each of the named plaintiffs may present themselves for consideration as well.” PI. Brief at p. 14. They pointedly do not allege that they have ever submitted their names for appointment, let alone been rejected. The mayors’ assertion exemplifies just the sort of speculative claim that the standing requirement is designed to address. Having never applied for appointment, and, therefore, having never been denied appointment on the basis of their race, no case in controversy exists with respect to these plaintiffs. The mayors, then, also lack standing to bring suit under the civil rights statutes and are dismissed from Count I.
(ii) Failure to State a Claim
(a) Discrimination
The individual defendants contend that Miller’s allegations are mere conclusions which fail to sufficiently allege intentional racial discrimination as required by the statutes. Although the elements of the three causes of action vary, all three of the invoked statutes require a plaintiff to allege facts demonstrating racial discrimination. Simmons v. John F. Kennedy Medical Center, 727 F.Supp. 440 (N.D.Ill.1989) (“To sufficiently state a cause of action under 42 U.S.C. § 1981, the plaintiff must allege some facts that demonstrate that she was discriminated against because of her race.”); Patrick v. Staples, 780 F.Supp. 1528 (N.D.Ind.1991) (“To state a claim under the Equal Protection Clause, a plaintiff must allege that a state actor intentionally discriminated against the plaintiff based upon his or her membership in a protected class.”) (citing Shango v. Jurich, 681 F.2d 1091, 1104 (7th Cir.1982)); 42 U.S.C. § 2000d (“No person in the United States shall, on the grounds of race ... be subjected to discrimination under any program or activity receiving Federal financial assistance.”). At issue here is whether Miller has sufficiently alleged intentional discrimination.
Although this circuit has previously held civil rights plaintiffs to heightened pleading requirements, in a recent opinion, the Supreme Court held this practice unconstitutional. Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, — U.S. -, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993) (§ 1983 cases are governed by the same pleading rules as the majority of other federal civil actions). While there is little detail in the complaint, plaintiffs do allege that the white candidate and Miller were treated differently. Miller appeared for the meeting and was left to himself. On the other hand, at least some of the suburban Cook County Board members took the white candidate aside for a discussion or interview. Allegations of this disparate treatment put the defendants on notice of the conduct underlying the claim, and the alleged conduct itself supports an inference that the Cook County Board members treated Miller differently because of his race. Accordingly, plaintiffs have met their burden. See Talley v. Leo J. Shapiro & Assoc., Inc., 713 F.Supp. 254, 257 (N.D.Ill.1989) (despite lack of factual detail, § 1981 claim met pleading requirements because it provided defendant with notice of plaintiffs claim and the grounds underlying it).
(b) Municipal Custom or Policy under § 1983
In their reply brief, defendants assert that Miller has not, and cannot, allege a county policy or custom as required under § 1983 in official capacity suits. In light of defendants’ failure to raise this issue in its motion, we decline to reach it now.
(c) Financial Nexus under Title VI
Title VI provides that [n]o person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.
42 U.S.C. § 2000d. To state a cause of action under Title VI, a plaintiff must allege that he is the intended beneficiary of, an applicant for, or a participant in a federally funded program. . Doe on Behalf of Doe v. St. Joseph’s Hospital, 788 F.2d 411 (7th Cir.1986). Although Miller alleges that the RTA receives federal funds, he fails to allege that he is an intended beneficiary of the RTA generally, or a particular RTA program. In truth, the most likely beneficiaries of the RTA are the riders, not the Cook County Board members tapped to appoint the PACE Board.
While “a private cause of action lies if the alleged discrimination ‘necessarily causes discrimination against the primary beneficiaries of the federal aid,’” Miller does not allege how it might be that discrimination in the appointment to the PACE Board results in discrimination against riders on the basis of race. See Id. at 421 (quoting Trageser v. Libbie Rehabilitation Center, 590 F.2d 87, 89 (4th Cir.1978), cert. denied, 442 U.S. 947, 99 S.Ct. 2895, 61 L.Ed.2d 318 (1979). Although we can infer that African American residents will not have the benefit of Miller’s representation, there is nothing in the complaint, beyond conclnsory allegations, to suggest that the existing PACE Board cannot adequately serve the needs of African American bus riders. Miller, then, fails to state a cause of action under Title VI, and this claim is dismissed. See Doe, 788 F.2d at 421 (absent specific allegations of how discrimination against doctors resulted in discrimination against patients on the basis of race, plaintiff did not state a cause of action under Title VI).
(iv) Immunity
Defendants ask us to consider whether they are immune from suit under §§ 1981 and 1983. Before we can address this issue, we must determine whether Miller has sued the suburban Cook County Board members in their official or individual capacities, or both. The law in this circuit is clear. If a civil rights plaintiff fails to specify whether he is bringing suit against the defendant in his official or individual capacity, courts will construe the suit as an action against the defendant in his official capacity only. Yeksigian v. Nappi, 900 F.2d 101 (7th Cir.1990) (“In the absence of any express statement that the parties are being sued in their individual capacities, an allegation that the defendants were acting under color of law generally is construed as a suit against the defendants in their official capacities only.”); 704 F.Supp. 868. Since Miller failed to state in what capacity he is suing defendants, we construe this as an official capacity suit.
A suit against a county official, in turn, is tantamount to a suit against the county itself. See Kentucky v. Graham, 473 U.S. 159, 166-67 & n. 14, 105 S.Ct. 3099, 3105-06 & n. 14, 87 L.Ed.2d 114 (1985). As such, the doctrines of absolute and qualified immunity, designed to protect officials from damages under certain circumstances, do not apply here.
The only remaining immunity is that afforded to states under the Eleventh Amendment. This immunity is not available to municipalities or counties, which, after Monell v. Dept. of Soc. Sues, of the City of New York, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1977), are considered persons within the meaning of § 1983. Because the Cook County Board is not an arm of the state, nor is there any reason to believe that it acted as an arm of the state in appointing a new member to the PACE Board, defendants are not immune from suit.
(iv) Political Discretion
Finally, with regard to Count I, defendants argue that judicial intervention in this controversy would involve unwarranted interference with the Cook County Board’s exercise of political discretion. We do not find this argument persuasive.
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12263453-11144 | KAYATTA, Circuit Judge.
Victor Lopez-Ortiz appeals the revocation of his supervised release and the imposition of a statutorily authorized, but above-guidelines, three-year term of imprisonment. He contends that the district court improperly shifted the burdens of production and persuasion at his final revocation hearing, an error requiring remand and resentencing. For the reasons described below, we affirm the judgment and sentence.
I.
In early 2015, Lopez-Ortiz completed a sentence of imprisonment for conspiring to distribute cocaine in violation of federal laws. Just three months into an eight-year term of supervised release, he was charged with repeatedly violating the conditions of that release.
The charges against Lopez-Ortiz led to a hearing on the government’s motion'- to revoke his supervised release. Revocation involves two stages. First, the court conducts a preliminary hearing “to determine whether there is' probable cause to believe that a violation occurred.” Fed. R. Crim. P. 32.1(b)(1)(A),' Second, the court- holds a final revocation hearing, at which the defendant has “an opportunity to appear, present evidence, and question any adverse witness” and to “present any information in mitigation.” Fed, R. Crim. P. 32.1(b)(2)(C), (E).
At Lopez-Ortiz’s preliminary revocation hearing on August 11, 2015, the probation officer responsible for Lopez-Ortiz testified that Lopez-Ortiz had reported an address of record at which he did not actually live, failed to appear for scheduled drug tests on- three occasions, admitted to another probation officer that he was using synthetic marijuana, failed to attend scheduled mental health treatment, and failed to remain at his transitional housing program and follow its rules, all in violation of several stated conditions of his supervised release. On cross-exathination, defense counsel raised no challenge to the officer’s description of Lopez-Ortiz’s cqnduct. Rather, counsel sought to question the witness about the results of a mental health examination performed on Lopez-Ortiz at his counsel’s request prior to the hearing. The government objected, arguing that Lopez-Ortiz’s mental health assessment was irrelevant to whether probable cause existed for the charged violations. Defense counsel responded that the information about Lopez-Ortiz’s mental health went “directly ... to why he didn’t participate” in the scheduled mental health treatment. The government noted that defense counsel must therefore be “making an admission that he violated the conditions.” Counsel for Lopez-Ortiz did not respond , to this characterization, and the questioning continued. At the conclusion of the hearing, the magistrate judge determined that probable cause existed for the charged violations.
Before the final revocation hearing, counsel for Lopez-Ortiz filed a motion requesting a continuance and updating the court on the status of the case. In addition to requesting the continuance due to a scheduling conflict, defense counsel used the motion to explain Lopez-Ortiz’s position. That explanation eschewed any contention that Lopez-Ortiz had not acted as charged by the government. Instead, counsel argued that “[o]f the alleged violations, the only one which by statute requires mandatory revocation [is] the failure to attend drug testing” and that Lopez-Ortiz “did not violate said condition willfully and voluntarily.” Counsel also requested that “should the Court find that he willingly and voluntarily incurred in [sic] any of the alleged violation[s] other than the drug testing, his supervision be modified rather than revoked.” The motion further admitted that Lopez-Ortiz, “without the [probation office’s] 'consent, squatted an apartment in [a] housing project and refused to leave the apartment to attend appointments scheduled by [the probation office],” claiming that Lopez-Ortiz did so “due to fear for his [life].” Finally, the motion excerpted a portion of the report of the psychologist, Dr. Alexandra Ramos, who conducted Lopez-Ortiz’s mental health examination, noting that the report’s excerpt “summarizes the arguments which will be presented at the final revocation hearing,” The report concluded that a “combination of factors is the reason why [Lopez-Ortiz] violated the terms of his probation by fleeing his placement and not participating in mental health treatment.”
The beginning of the final revocation hearing evidenced some confusion over which party should proceed first. Over Lopez-Ortiz’s objection, the district court ordered his counsel to proceed first, stating that the burden is “on you.”
Defense counsel then called two witnesses: (1) Lopez-Ortiz’s probation officer and (2) the psychologist who evaluated Lopez-Ortiz and authored the report containing her evaluation. Both witnesses testified on direct examination that Lopez-Ortiz did not comply with certain conditions of his supervised release. The probation officer testified that Lopez-Ortiz had “left the housing project” at which he was supposed to remain and “did not attend” a scheduled appointment. The psychologist testified that a “combination of ... factors,” including “a limited intellectual capacity,” a “severe beating” Lopez-Ortiz had endured, “the use of synthetic marijuana,” “and the perceived threat on his life and subsequent paranoia,” “explains why he violated the conditions of his supervised release.” The government cross-examined both witnesses, eliciting further testimony that Lopez-Ortiz abandoned his transitional housing program, failed to report for mental health treatment, failed to follow the probation officer’s instructions, and missed three scheduled drug tests in February and March of 2015.
The court concluded that “it is a fact that [Lopez-Ortiz] has violated the conditions of his supervised release.” The court further explained that it had read the psychologist’s report as to Lopez-Ortiz’s mental health and agreed that “he needs treatment.” The court then revoked Lopez-Ortiz’s supervised release. Lopez-Ortiz unsuccessfully sought reconsideration, arguing again that his violations were not voluntary because of his mental health issues. The court sentenced Lopez-Ortiz to a three-year term of imprisonment, the maximum allowed under 18 U.S.C § 3583(e)(3), plus three years of supervised release. The court also stated that it would “strongly recommend to the Bureau of Prisons that .., Mr. Lopez-Ortiz be designated to serve this sentence at the Butner Medical Institute in Butner, North Carolina, so that he can receive inpatient substance abuse treatment” and other health services.
II.
Lopez-Ortiz contends that the district court erred in announcing that he bore “the burden of proof and persuasion.” Although that was not quite what the district court said, the government does not seem to contest Lopez-Ortiz’s spin on the district court’s statement, or that the district court erred. The government also says that the district court erred because it “required that Lopez-Ortiz present evidence at the final revocation hearing,” which is also not what the court said.
We think it more likely that the district court presumed, although failed to confirm, that there was no challenge to the fact of a violation, and that Lopez-Ortiz simply wanted to “present any information in mitigation.” Fed. R. Crim. P. 32.1(b)(2)(E). Nevertheless, given the government’s acquiescence, we will assume that the district court did indeed err in announcing that Lopez-Ortiz need proceed first as the party with the burdens ■ of production and proof. So the pivotal question is whether and with what degree of confidence we can say there was no harm. Claiming that his constitutional due process rights are at stake, Lopez-Ortiz argues that we should vacate his sentence unless we can find that the assumed error was harmless beyond a reasonable doubt, citing Chapman v. California, 386 U.S. 18, 24, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967). Whether that is the appropriate standard we need not decide because any error here was harmless by any measure.
To explain why this is so, we train our attention on what was at issue in the final revocation hearing. As the parties’ pre-hearing filings made clear, Lopez-Ortiz indisputably conducted himself as claimed by the government. Even on appeal, Lopez-Ortiz forthrightly makes no argument that he did not act as charged.
In theory, the parties’ concordance nevertheless left unresolved the question of mens rea. The relevant statute, 18 U.S.C. § 3583(e)(3), authorizes revocation of a term of supervised release in favor of imprisonment if, pursuant to Federal Rule of Criminal Procedure 32.1, the court “finds by a preponderance of the evidence that the defendant violated a condition of supervised release.” Revocation is mandatory if the defendant “refuses to comply with drug testing imposed as a condition of supervised release.” 18 U.S.C. § 3583(g)(3). Although the statute makes no express mention of any mens rea requirement, the word “refusal” arguably implies some such element, and at least one circuit court has squarely held that revocation requires that a violation be “knowing.” See United States v. Napulou, 593 F.3d 1041, 1045 (9th Cir. 2010); see also United States v. Muñoz, 812 F.3d 809, 822-23 (10th Cir. 2016) (reading a “knowing” standard into a condition of supervised release); United States v. Adkins, 743 F.3d 176, 196 (7th Cir. 2014) (noting that Due Process requires clarity in supervised release prohibitions). Such a conclusion is consistent with our own case law presuming that one generally need know the facts that make one’s conduct unlawful in order to be convicted of a crime. See United States v. Ford, 821 F.3d 63, 74-75 (1st Cir. 2016). So, had there been a dispute concerning whether Lopez-Ortiz knew that he was missing his required drug testing, an order that he must proceed first to prove a lack of such knowledge might well have caused prejudice.
Here, though, Lopez-Ortiz never even hinted that he was unaware that he was skipping his required drug testing. To the contrary, even before the final revocation hearing he left undisputed the evidence that he understood his obligation to appear for drug testing, and understood that he was choosing to fail to appear. The probation officer testified at the probable cause hearing that he spoke with Lopez-Ortiz on the phone about his obligation to attend drug testing. His counsel never suggested any interest in challenging the existence of such awareness. And on appeal he makes no claim that his conduct was not knowing.
Instead, counsel sought to present evidence from a psychologist aimed at establishing that Lopez-Ortiz did not act in a manner that was “truly voluntary.” In the words of the psychologist, “a combination of a limited intellectual capacity, [a] severe beating, the use' of synthetic marijuana and [a] perceived threat on his life and subsequent paranoia impaired his ... ability ... to make a decision and evaluate the consequences of his actions.” This “combination of factors,” opined the psychologist, “explains why he violated the conditions of his supervised release.”
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7396889-8343 | ORDER
MARY LOU ROBINSON, Judge.
Before the Court is Plaintiffs’ application for costs and attorney’s fees and Defendant’s motion to dismiss Plaintiff’s application. This action arises out of a disagreement between the parents of Kristi W. and the Graham Independent School District over the appropriate educational arrangements for Kristi, who is a school-aged handicapped child.
An admission, review and dismissal committee (ARD) met on April 28, 1986, and developed an individualized education program (IEP) for Kristi. The IEP provided the following curriculum for Kristi: 1) she is to be placed in regular education classes in science and social studies; 2) she is to be placed in special education classes in language arts, math, health, fine arts and physical education; and 3) she is to have related services of physical therapy, occupational therapy, speech therapy and supplemental aids.
On May 23, 1986, Kristi’s parents appealed the ARD decision to Commissioner W.N. Kirby of the Texas Education Agency and requested a hearing. The points disputed were as follows: 1) the physical therapy program; 2) scheduling additional regular education classes as opposed to special education classes; 3) continued employment of an outside consultant; 4) purchasing a specific type of computer as recommended by the outside consultant; and 5) modifications and supplementary aids to allow better functional abilities and to enhance Kristi’s classroom participation.
A hearing was held on July 24-25, 1986, before an impartial hearing officer that was appointed by the Texas Education Agency. He made findings of fact and conclusions of law and entered an order. The order left intact the physical and occupational therapy program as set out by the ARD. The order requires the school district to place Kristi in regular education classes in science, social studies, language arts, health, and fine arts, and leaves her in special education classes in math and physical education. The order further requires the school district to provide modifications and aids when and where necessary for Kristi to benefit educationally. The order omits any ruling on the employment of the outside consultant and the purchase of the computer.
Plaintiffs argue in their application that because they prevailed at the administrative hearing, they are entitled to attorney’s fees and costs pursuant to 20 U.S.C. § 1415(e)(4)(B). Plaintiffs ask for $8,500 in attorney’s fees and for $1,706.58 in costs at the administrative hearing plus costs incurred in filing the application that is now before the Court.
In its motion to dismiss, Defendant asserts three grounds: 1) this Court lacks jurisdiction to hear the application because Plaintiffs have no original complaint pending in this Court; instead, Plaintiffs have filed only an application for attorney’s fees without asking the Court to decide the merits of their dispute with the school district, and 20 U.S.C. § 1415(e) requires that an original action be filed in the United States District Court before the attorney’s fees provision of § 1415(e)(4)(B) applies; 2) Plaintiffs have not exhausted their state administrative remedies; and 3) Plaintiffs were not the prevailing party and thus are not entitled to attorney’s fees and costs under § 1415(e)(4)(B).
Section 1415(e)(4)(B), which is a recent amendment to the Education of All Handicapped Children (EHA), states:
“In any action or proceeding brought under this subsection, the Court, in its discretion, may award reasonable attorney’s fees as part of the costs to the parents or guardian of a handicapped child or youth who is the prevailing party.”
I. JURISDICTION TO HEAR THE APPLICATION FOR ATTORNEY’S FEES
Defendant asserts that before this Court has jurisdiction over the application for attorney’s fees, Plaintiff must file an original complaint that would put the merits of the dispute before the Court. Thus, Defendant continues, this Court has no jurisdiction because Plaintiffs only are seeking attorney’s fees for the work done at the administrative level.
Section 1415(e)(4)(B) allows attorney’s fees to prevailing parents or guardians in any “action or proceeding” brought under this subsection. Although “action or proceeding” is not expressly defined, § 1415(e)(4)(D), which limits the award of attorney's fees where settlement offers are made, states: “or, in the case of an administrative proceeding ...” (emphasis added). Thus, § 1415(e)(4)(B) appears to encompass administrative hearings within the terms “action or proceedings.”
Several other District Court opinions have reached the conclusion that an award of attorney’s fees for work done at the administrative level is proper where the underlying merits never reach the Court. In particular, in Prescott v. Palos Verdes Peninsula Unified School District, 659 F.Supp. 921 (1987), the Court analyzed the language of the statute and ruled that while the language of the statute is not conclusive as to whether a prevailing parent can recover attorney’s fees solely for work done at the administrative level, the legislative history compels the conclusion that such an award of fees is what Congress intended. Id. 923-24; accord Michael F. v. Cambridge School Dep’t, C.A. No. 86-2532-C (D.Mass. March 5, 1987) [Available on WESTLAW, DCT database]; Burpee v. Manchester School Dist., C.A. Nos. 86-531-D & 86-532-D (D.N.H. February 12, 1987); but cf. Rollison v. Biggs, 660 F.Supp. 875 (D.Del.1987) (reaches opposite result relying in part on other portions of the legislative history).
Prescott further cited an EHA policy letter that was written by the Director of the Office of Special Education Programs of the U.S. Department of Education, which also concludes that recovery of attorney’s fees for work done at the administrative level may be properly before a Court without the underlying merits having to be considered. Prescott at 925.
Relying on the language of § 1415(e)(4)(B), which states “any action or proceeding” and the language of § 1415(e)(4)(D), which states “or, in the case of an administrative proceeding ...” and on the careful analysis of Prescott, this Court concludes that Plaintiffs’ application for attorney’s fees for the work done at the administrative level is properly before this Court despite the fact that the underlying merits of their claim is not under consideration. Accordingly, Defendant’s motion to dismiss on this ground is- denied.
II. EXHAUSTION OF STATE ADMINISTRATIVE REMEDIES
Defendant’s second ground for dismissal is that Plaintiffs have failed to exhaust their administrative remedies. Defendants argue that Plaintiffs did not request a rehearing within 15 days of the rendering of the hearing officer’s opinion, which is a prerequisite to administrative appeal under Texas Revised Civil Statutes Annotated article 6252-13a, § 16(e), and thus, the opinion is final. Moreover, Defendants argue, the opinion did not award Plaintiffs’ attorney’s fees, and thus Plaintiffs are not entitled to attorney’s fees.
Defendant’s argument is specious. Although the general rule in EHA cases is that a party must exhaust its administrative remedies before filing suit in Federal Court, See Riley v. Ambach, 668 F.2d 635, 640 (2nd Cir.1981), there is no provision in Texas for attorney’s fees in relation to ARD hearings. Thus, the present application is Plaintiff’s first opportunity to seek attorney’s fees. Apart from the fact that Texas law does not authorize an award of attorney’s fees for an administrative appeal of an ARD decision, there is no indication that Plaintiffs are appealing the hearing officer’s opinion. It is axiomatic that one need not exhaust administrative remedies if one is not appealing anything. Accordingly, Defendant’s motion to dismiss on the ground of failure to exhaust remedies is denied.
III. PREVAILING PARTY
Plaintiffs asked the Commissioner of Education to address five points at the hearing. The impartial hearing officer affirmed the ARD on one point, ruled for the Plaintiffs on two points and omitted ruling on two points. Because the amendment to § 1415 that provides for awards of attorney’s fees is so recent, the Fifth Circuit has not as yet articulated a test to determine who is the prevailing party. It has however, stated the test for determining prevailing party status in civil rights cases.
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12516643-5260 | 4 The portion of the trial transcript included in the record on appeal was sufficient to enable the DCA to provide meaningful review of this issue.
5 His six claims of ineffective assistance were as follows:
(1) Trial counsel failed to contemporaneously object and to renew all objections pursuant to the trial court's denial of the defense's peremptory challenge of a juror.
(2) Trial counsel failed to properly authenticate x-rays in support of the testimony of Bush's expert witness.
(3) Trial counsel failed to allow Bush to testify.
(4) Trial counsel failed to object or move for a mistrial when the prosecutor made statements ridiculing the defense in the presence of the jury.
(5) Trial counsel failed to submit into evidence certain certified medical records.
(6) Trial counsel failed to impeach or attempt to impeach the inconsistent testimony and credibility of one of the state's witnesses.
6 The State began the hearing by calling Lindsey Glazer, one of Bush's trial attorneys, and Benjamin Simon, the prosecutor. Byrd followed with the testimony of Gregg Toung, Bush's other trial attorney, and Bush.
7 The three claims raised on appeal were claims (1), (2), and (6) in Bush's Rule 3.850 motion. See supra note 5.
8 Bush did not specify how or why the missing transcript resulted in a violation of his United States constitutional rights. The sole federal authority his brief cited on this point was Hardy v. United States , 375 U.S. 277, 84 S.Ct. 424, 11 L.Ed.2d 331 (1964), which is inapposite. See infra note 9.
9 Jones v. State , 923 So.2d 486 (Fla. 2006) ; Delap v. State , 350 So.2d 462 (Fla. 1977) (per curiam); Vilsaint v. State , 890 So.2d 1293 (Fla. 3d Dist. Ct. App. 2005) (mem.); L.I.B. v. State , 811 So.2d 748 (Fla. 2d Dist. Ct. App. 2002) ; Blasco v. State , 680 So.2d 1052 (Fla. 3d Dist. Ct. App. 1996). In addition to these decisions, Bush cited Justice Goldberg's statement in Hardy , 375 U.S. at 288, 84 S.Ct. at 431 (Goldberg, J., concurring), that:
the most basic and fundamental tool of [an appellate advocate's] profession is the complete trial transcript, through which his trained fingers may leaf and his trained eyes may roam in search of an error, a lead to an error, or even a basis upon which to urge a change in an established and hitherto accepted principle of law.
The Hardy Court was addressing the question of whether under the scheme created in 28 U.S.C. § 1915, which allowed "any federal court [to] authorize an 'appeal' in forma pauperis ," a court-appointed counsel, who had not represented the indigent defendant at trial, should be provided a complete transcript of the trial proceedings at government expense in order to discharge his professional duty to the defendant, as his appellate counsel, as described in Ellis v. United States , 356 U.S. 674, 78 S.Ct. 974, 975, 2 L.Ed.2d 1060 (1958). Hardy , 375 U.S. at 278-82, 84 S.Ct. at 425-28. In answering the question in the affirmative, the Court did not "reach a consideration of constitutional requirements." Id. at 282, 84 S.Ct. at 428.
10 The Florida Supreme Court reviewed the defendant's conviction in exercising its "conflict" jurisdiction. See Fla. Const. art. V, § 3 (b)(3).
11 Delap , 350 So.2d 462 ; L.I.B. , 811 So.2d 748.
12 The District Court expressed the claim in these quoted words in its order denying Bush's petition. As stated in Bush's petition and by the Magistrate Judge in his report and recommendation to the District Court, the claim was this: "The petitioner has a constitutional right under the Fifth Amendment and Fourteenth Amendments to the guarantee of due process and fundamental right to access the courts through a complete record on appeal which is indispensable to the realization of this constitutional right."
13 Mayer involved an Illinois Supreme Court's denial of a transcript to an indigent who had been convicted of violating Chicago ordinances. 404 U.S. at 190-93, 92 S.Ct. at 412-14. Applying the principle it announced in Griffin v. Illinois , 351 U.S. 12, 76 S.Ct. 585, 100 L.Ed. 891 (1956) -that the "constitutional guarantees of due process and equal protection" require the provision of trial transcripts sufficiently complete to permit proper consideration of an indigent's direct appeal of his conviction-the United States Supreme Court vacated the Illinois Supreme Court's order denying the transcript. Mayer , 404 U.S. at 199, 92 S.Ct. at 417. Nothing in Mayer or any other United States Supreme Court decision we are aware of extends this equal protection right to a case in which the State has not discriminated against the defendant on account of his indigent status.
14 We note that the quoted part of these statements did not distinguish between the direct appeal of a conviction and the appeal of an adverse postconviction decision.
15 The District Court noted that "[i]n Ground Four [of his petition, Bush] argues that his Fifth and Fourteenth Amendment rights to due process and access to the courts were violated by being required to appeal and seek post-conviction remedies with an incomplete record." In adopting the Magistrate Judge's recommendation, however, the Court did not explicitly address the question of whether the Due Process Clause incorporated a right to access the courts.
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3639392-13732 | BARRETT, District Judge.
Bill No. 51 in the caption is by certain stockholders of the Georgia-Alabama Power Company against said company and others; No. 52 is against such company alone. Both were brought in the superior court of Dougherty county, Ga. Removal of each was had to the District Court of the United States, and in each a motion to remand is made. Both parties agree that both causes are removable, if the Georgia-Alabama Power Company is, for jurisdictional purposes, a citizen of North Carolina, and not a citizen of Georgia.
The Georgia-Alabama Power Company (hereinafter called company) was, prior to August 17, 1920, chartered under the laws of the state of North Carolina, and was a citizen of sáid state for all ■ purposes. On August 17, 1920, there was approved an act of the General Assembly of the state of Georgia (Acts 1920, p. 151) captioned:
“An act to authorize foreign corporations doing business in the state of Georgia to become domesticated and to provide the means therefor and the consequence thereof.”
Such act provides that any foreign corporation, desiring to be domesticated, shall file in the office of the clerk of the superior court of the county in Georgia wherein it desires to have its principal place of business a petition, showing that it desires to become domesticated, and shall set out a certified copy of the charter granted by its home state and a certified copy of the resolution adopted by a majority of its stockholders authorizing the filing of such petition, which petition shall be published in the manner required by the laws of this state for incorporation by the superior courts. After such publication the petition shall be examined by the judge of the superior court, and, if it is found that the purpose “of said corporation is not against the public policy of the state, an order shall be entered domesticating the said company.” If any of the provisions of the'home charter are such, as would not have been granted by Georgia, “such powers shall not be exercised within this state.” The domestication shall extend for 20 years, unless the original charter would expire earlier, in which event only to the duration of the original charter, unless it be renewed by the home state. “A certified copy of the proceedings granting said petition shall be filed with the secretary of this state.” “The petition shall state the principal office of said company in Georgia, the amount,of capital stock authorized, the amount of capital stock subscribed for, whether preferred or common, and the amount actually paid. The said corporation shall have no power which it could not have acquired, if it had been incorporated under the laws of Georgia. The state of Georgia shall have- the same viátorial power over such domesticated corporations as it has over corporations created under the laws of Georgia.”
After compliance with the requirements of such act, there was passed by the judge of the superior court of Dougherty county, Ga., an order domesticating the Georgia-Alabama Power Company. Thereafter there were certain condemnation proceedings instituted and contracts entered into by said company, in which it was recited that such company was a Georgia corporation. A certified copy of the proceedings of domestication was not filed with the secretary of’state of Georgia. There was no formal acceptance, of the domesticating order, and there was introduced an affidavit of the president of said company that, “at one time said corporation decided to domesticate under the laws of Georgia * * * of 1920, page 151, but after filing its petition and certified copies in the clerk’s office of the superior court of Dougherty county said company decided not to domesticate, and so advised and instructed its attorneys; that said company has never exercised any rights or privileges of a domesticated corporation, nor has said company by any corporate act accepted the domestication of said corporation.”
1. Was said company domesticated under the act of 1920? It is urged that acceptance, either formal or by conduct, is essential; and that neither the precedent act of the stockholders directing the application for domestication nor the acts in pais are sufficient to constitute acceptance.. It is beyond question that generally a charter must be accepted before the corporation exists, and the same principle applies to domestication. Fletcher, Cyclopedia Corporations, vol. 1, § 405, and volume 8, § 5712; Bridge Co. v. Wood, 14 Ga. 80; Brooke v. Day, 129 Ga. 694, 59 S. E. 769; Adams v. Overland Co., 27 Ga. App. 531, 109 S. E. 413. But such acceptance need not be proved by formal acts or acts in pais subsequent to the grant of the charter. I do not overlook that in Brooke v. Day, 129 Ga. supra, it is stated that the acts of acceptance must be after the grant of the charter. I think that decision must be limited to the special facts, and is not controlling or convincing under the facts of this case. Indeed, it has bgen held that:
“In title case of corporations formed under general laics [our italics], no acceptance is necessary. Under such circumstances, compliance by the corporators with the statutory conditions precedent to incorporation takes the place of an acceptance and is all that is required.” Fletcher, Cyclopedia Corporations, vol. 1, § 405.
The resolution adopted by the stockholders of this North Carolina corporation contained this language:
“That this company do become domesticated under the laws of the state of Georgia, and that it do accept the terms, conditions, and privileges of a certain act of the Legislature of the state of Georgia approved on the-day of August, 1920, entitled ‘An act to authorize foreign corporations doing business in the state of Georgia to become domesticated and to provide the means therefor and the consequences thereof.’ ”
And thereafter every step prescribed for the domestication, inclusive of the grant of the order of domestication by the judge of the superior court of Dougherty county, was taken. It is true that the direction that “a certified copy of the proceedings granting said petition shall be filed with the secretary of this state” was not complied with. This failure I consider' a mere informality or irregularity. This provision of the statute is very different from those statutes forbidding doing any business in a state by a foreign corporation until a certified copy of its charter shall have been filed with the secretary of state, as discussed in R. C. E. vol. 12, §§ 38 and 39.
Acceptance of domestication was formal, affirmative, and definite, though prior to the order of domestication. Such acceptance might have been revocable at any time prior to the grant of the order of domestication, but not subsequent to its being an accomplished fact. “The government cannot compel persons to become an incorporated body without their consent. And this consent, either express or implied, is generally subsequent [italics ours], in point of time, to the creation of the charter.” Bridge Co. v. Wood, 14 Ga. 80-86.
The principle which I consider sound, and therefore controlling, is that stated in City of Atlanta v. Gate City Gas Co., 71 Ga. 106 (1) :
“If a charter is granted after having been applied for, acceptance may be presumed from such previous application.”
That certain provisions of the general law of Georgia as. to incorporating make this inapplicable to corporations thereunder, and that such decision was in a case where a charter was granted by a special act of the Legislature, do not impair its soundness or prevent its applicability here, and especially in view of the language of the resolution quoted above.
Furthermore, there were ample acts in pais to prove acceptance of "domestication. The chief benefit to be obtained from domestication was the exercise of the right of eminent domain, and in the exercise, of this right thus obtained it was recited, on at least two occasions, that this company was domesticated under the laws of Georgia, or was a Georgia corporation, and one or more contracts contained like recitals. Error in such recital, if error it was, cannot be laid solely upon the unauthorized acts of the attorneys at law, for the vice president and secretary of the company signed at least some of such papers. Such proof of acceptance is sufficient. Louisville Trust Co. v Louisville, etc., Ry. Co., 75 Fed. 433(4), 444, 22 C. C. A. 378 (C. C. A. Sixth Circuit) ; Fletcher, Cyclopedia Corporations, vol. 1, §§ 246 and 405, and volume 8, § 5712. Acceptance thus having been completed, no subsequent resolution of the company can establish that such acceptance was not accomplished.
2. Did such domestication make the North Carolina company a Georgia corporation, or make a separate corporation, and, if so, was such corporation thus made a citizen of Georgia for jurisdictional purposes, under the judicial article of the Constitution of the United States (section 2, art. 3) ? This act did not = create a Georgia corporation. While, domestication is different from license- (Angier v. East Tenn., etc., Ry. Co., 74 Ga. 634), it is not of itself equivalent to incorporation. If incorporation, as distinguished from domestication, was in contemplation, that portion of the act would necessarily be unconstitutional, because not indicated in the caption, as required by our state Constitution (article 3, § 7, par. 8), that “no law or ordinance shail pass which refers to more than one subject-matter, or contains matter different from what is expressed in the title.”
• Throughout the act the accomplishment is domestication, and not incorporation. The foreign corporations shall have the power to become “domesticated,” and upon becoming “domesticated” such corporations shall have the same powers as similar corporations created under the laws of Georgia; the foreign corporations which desire to become “domesticated.” The judge of the superior court shall, upon conditions, enter an order “domesticating” said company, provided that its “domestication” shall extend for a period, etc. The “domestication” shall extend only to the duration of the original charter of said foreign corporation. Upon the grant of the petition for “domestication,” a certified copy of the proceedings granting said petition shall be filed with the secretary of state. “The said corporation shall have no power which it could not have acquired if it had been incorporated under the laws of Georgia. The state of Georgia shall have the same visitorial power over such domesticated corporations as it has over corporations created under the laws of this state.” Does not this last sentence remove any vestige of doubt, and show that the act did not intend to incorporate, but merely to domesticate, as distinguished from incorporation, and to give only such visitorial powers over this “domesticated corporation” as the state has over its own corporations?
Even, however, if the act authorized incorporation in Georgia, and all of the prerequisites were complied with, and this North Carolina corporation became a Georgia corporation, it could not become such for jurisdictional purposes, as against the aforesaid judicial article of the Constitution of the United States. A corporation of one state may become a corporation of another state for many purposes, even though it is not such as against the aforesaid judicial article. The United States Supreme Court says, in Louisville, etc., Ry. Co. v. Louisville Trust Co., 174 U. S. 562, 19 Sup. Ct. 821, 43 L. Ed. 1081:
“This court has often recognized that a corporation of one state may be made a corporation of another state by the Legislature of that state, in regard to property and acts within its territorial jurisdiction.”
—citing many cases, and in the same case quoting from the opinion in Penn. Co. v. St. Louis, etc., R. Co., 118 U. S. 290, 296, 6 Sup. Ct. 1094, 1096 ( 30 L. Ed. 83) :
To do so “the language used must imply creation or adoption in such form as to confer the power usually exercised over corporations by the State, or by the Legislature, and such allegiance as a state corporation owes to its creator. The mere grant of privileges or powers to it as an existing corporation, without more, does not do this.”
The language quoted from the last two cases is given in substance by Mr. Simkins in Federal Practice, at page 335, supporting the text with many citations.
But this does not prevent removal to the federal courts, as provided by the aforesaid judicial article of the Constitution of the United States, even when in formal language, as in the act of the Legislature of Georgia of 1920, the definite prohibition is embodied that such domesticated corporation “shall no longer have that power of removing causes to the United States courts which inheres in foreign corporation.” It is universally-acknowledged that statements contradictory of this proposition may be found in some earlier decisions of the Supreme Court of the United States, but there has for many years been adopted and followed, without exception, a policy sustaining this proposition. More than a citation of some of the cases would be superfluous and valueless. Terral v. Burke Construction Co., 257 U. S. 529, 42 Sup. Ct. 188, 66 L. Ed. 352, 21 A. L. R. 186; Wisconsin v. Phila. & Reading Coal Co., 241 U. S. 329, 36 Sup. Ct. 563, 60 L. Ed. 1027; Harrison v. St. Louis, etc., R. Co., 232 U. S. 318, 34 Sup. Ct. 333, 58 L. Ed. 621, L. R. A. 1915F, 1187; Southern Ry. v. Allison, 190 U. S. 326, 23 Sup. Ct. 713, 47 L. Ed. 1078; St. Louis, etc., R. Co. v. James, 161 U. S. 545, 16. Sup. Ct. 621, 40 L. Ed. 802; Fletcher, Cyclopedia Corporations, vol. 1, § 390, at page 833; Simkins' Federal Practice, pp. 335, 338.
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3660121-5472 | MEMORANDUM ORDER GRANTING DEFAULT JUDGMENT MOTIONS AND INJUNCTION
LAURA TAYLOR SWAIN, District Judge.
In this trademark infringement action, Plaintiff GMA Accessories, Inc. (“GMA”) moves for judgment by default against three of the Defendants — Girlshop, Inc. (“Girlshop”), Showroom Seven Studios, Inc. (“Showroom 7”), and Jonathan Sol-nicki (“Solnicki” and, collectively, “Defendants”). GMA seeks immediate relief in the form of a determination on the issue of liability as to each Defendant and the issuance of a permanent injunction, and requests further proceedings relating to damages. The Clerk of Court has issued a Certificate of Default as to each of the Defendants, each of whom has also been served with the Court’s order authorizing the default application and the relevant motion for judgment by default. None of the Defendants has responded to the default judgment motions.
The Court has jurisdiction of this action pursuant to 15 U.S.C. § 1121 and 28 U.S.C. §§ 1331 and 1338. For the following reasons, GMA’s default judgment motions (docket entries 32 and 45) are granted. This Memorandum Order constitutes the Court’s findings of fact and conclusions of law for purposes of Rules 52 and 65 of the Federal Rules of Civil Procedure.
By reason of their failure to respond to GMA’s Amended Complaint (“Complaint”), Defendants are deemed to have admitted the factual allegations set forth in the Complaint. See Fed.R.Civ.P. 8(d); see also Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir.1992). The Court makes the following findings of fact based on GMA’s allegations in its Complaint and its further evidentiary proffers in connection with the instant motion practice.
ANALYSIS
Findings of Fact
GMA does business as “Capelli New York.” (Compl. ¶ 1.) GMA sells its CHARLOTTE brand clothing to numerous retail outlets, including boutiques, specialty stores and department stores. (Decl. of William Maloof, dated June 18, 2007 (“Ma-loof Deck”) ¶4.) Since 1999, GMA has been the owner of the registered trademark “CHARLOTTE” in International Classes 18 and 26. This mark was deemed incontestable pursuant to section 15 of the Lanham Act. {Id. ¶¶ 22, 23; see 15 U.S.C. § 1065.) Since 2002, GMA has been the owner of the registered mark “CHARLOTTE” in International Class 25. This mark has also been deemed incontestable pursuant to section 15 of the Lanham Act. (Compl. ¶ 27.) Pursuant to an assignment, GMA’s use in commerce of the mark dates back to January 2, 1979. GMA is also the owner of the registered mark “CHARLOTTE & Friends.” {Id. ¶ 26.) These marks consist of words only, with the dominant word “CHARLOTTE” in block letters. (Id. ¶ 28.) The CHARLOTTE mark has been in continuous use on a nationwide basis in connection with GMA’s products since 1996, and each of GMA’s CHARLOTTE registrations predates Defendants’ first use of the CHARLOTTE mark. {Id. ¶¶ 18, 20.) GMA has incurred substantial expense in promoting and advertising its products under the CHARLOTTE mark. {Id. ¶ 19; Maloof Deck ¶ 7.)
Defendants are using the mark CHARLOTTE and/or CHARLOTTE SOLNICKI to display, market, distribute, sell and/or offer for sale merchandise, including clothing, to the public. (Compl. ¶¶ 9, 13; Exs. D, E, H, I, J to Deck of Andrew T. Sweeney in Support of Motion for Default Judgment as to Jonathan Solnicki; Exs. A, B, C, F to Deck of Andrew T. Sweeney in Support of Motion for Default Judgment as to Girlshop and Showroom 7 (collectively, “Sweeney Decís.”).) Defendants use the mark CHARLOTTE alone and/or in conjunction with the name CHARLOTTE SOLNICKI to identify their goods. (Compl. ¶¶31, 32; exhibits to Sweeney Decís.) Defendants were aware of the GMA marks before they began using CHARLOTTE and/or CHARLOTTE SOLNICKI to identify their goods, are intentionally infringing on the GMA marks, and are doing so in bad faith. (Compl. ¶¶ 30, 33, 34.) Defendants failed to conduct a trademark search before using the CHARLOTTE mark. The items on which Defendants use the CHARLOTTE and/or CHARLOTTE SOLNICKI marks are closely related to those for which GMA owns registered trademarks. (Compl. ¶¶ 35, 41; exhibits to Sweeney and Maloof Decís.)
Conclusions of Law
To obtain relief under the Lan-ham Act, Plaintiffs must show that (1) them marks are entitled to protection and (2) Defendant’s use of the marks is likely to cause consumer confusion as to the origin or sponsorship of Defendant’s goods. See Virgin Enter. Ltd. v. Nawab, 335 F.3d 141, 146 (2d Cir.2003). The likelihood of confusion is assessed with reference to the nonexclusive factors cited in Polaroid Corp. v. Polarad Elec. Corp., 287 F.2d 492 (2d Cir.1961), where a senior user challenges a junior user’s allegedly infringing use of a mark. See Polaroid 287 F.2d at 492; The Sports Auth., Inc. v. Prime Hospitality Corp., 89 F.3d 955, 960 (2d Cir.1996); Virgin Enter. Ltd., 335 F.3d at 146; Pfizer, Inc. v. Y2K Shipping & Trading, Inc., No. 00 Civ. 5304, 2004 WL 896952, at *2 (E.D.N.Y. Mar. 26, 2004).
Plaintiffs uncontroverted demonstration that it owns registered, incontestable CHARLOTTE marks for the relevant types of merchandise is sufficient to show that its marks are entitled to protection. The registration of an incontestible mark is conclusive evidence of the validity of the registered mark and of the registrant’s exclusive right to use the registered mark in commerce in connection with the relevant goods. 15 U.S.C.A. § 1115(b) (West 2006).
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4062972-24223 | ORDER
NELVA GONZALES RAMOS, District Judge.
Before the Court is Respondents’ Motion to Dismiss (D.E. 11) filed by Arizon Structures Worldwide, LLC (Arizon) and Johnson Marcraft, Inc. (JMI), along with briefing in opposition (D.E. 15), reply (D.E. 27), sur-reply (D.E. 36), and response to sur-reply (D.E. 37). For the reasons set out below, the Court GRANTS the Motion to Dismiss.
JURISDICTION
Petitioners, David Wills (Wills) and James Salmon (Salmon), are natural persons who are citizens of Texas and Florida, respectively, whereas Respondent Arizon is a citizen of Illinois and Missouri and Respondent JMI is a citizen of Missouri. Respondents Ron Scharf and Jan Ligas, who have since been dismissed from this case, are natural persons who are citizens of Missouri and New Jersey, respectively. The amount in controversy exceeds $75,000. Wills and Salmon properly predicate jurisdiction in this Court on diversity of citizenship, 28 U.S.C. § 1332, and the Federal Arbitration Act, 9 U.S.C. § 4.
STANDARD OF REVIEW
The test of pleadings under Federal Rule of Civil Procedure 12(b)(6) is devised to balance a party’s right to redress against the interests of all parties and the court in minimizing expenditure of time, money, and resources devoted to meritless claims. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 558, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A motion to dismiss based upon principles of res judicata or collateral estoppel, while ordinarily adjudicated . in a summary judgment motion based upon the affirmative defense, is proper under Rule 12(b)(6) where the basis for dismissal is clear on the record. Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 570-76 (5th Cir.2005).
“Whether res judicata applies is a question of law. Id. at 571. Arizon and JMI assert that their claim of res judicata may be demonstrated on the face of the record, consistent with Rule 12(b)(6) because relevant documents are attached to the Petition (D.E. 1). Kennedy v. Chase Manhattan Bank USA, NA, 369 F.3d 833, 839 (5th Cir.2004) (court may consider documents attached to the complaint in a Rule 12(b)(6) challenge). At issue are the contracts between the parties and the orders of the Missouri state courts: D.E. 1-1, 1-2,1-5,1-6,1-7,1-8.
The Court may also consider documents filed in the public record of the parallel state court action, all of which are put in issue by the Petition (D.E. 1) and were provided in the Motion to Dismiss (D.E. 11). Cinel v. Connick, 15 F.3d 1338, 1343 n. 6 (5th Cir.1994). In a separate notice, Wills and Salmon filed a copy of the order denying their motion to compel arbitration for the Court’s consideration—another public record pertaining to the res judicata issue. D.E. 26-1. Also at issue is Petitioners Wills and Salmon’s relationship with Global Blue Technologies-Cameron, LLC and its affiliates (jointly GBT). In their Petition, Petitioners state that they are agents of GBT. D.E. 1, pp. 5, 10, 12. In answers to the Missouri state court action, copies of which Petitioners submitted for the Court’s consideration, Wills states that he is the Chief Executive Offi cer of GBT. D.E. 35. And Salmon is President of an affiliate.. Id.
Wills and Salmon do not resist treatment of the res judicata issue as one for dismissal under Rule 12(b)(6). Thus the Court proceeds under Rule 12 and does not convert this matter to a summary judgment motion under Rule 56.
FACTS
On April 16, 2013, GBT, along with Arizon and its affiliate, JMI (jointly referred to as Arizon), executed a Non-Disclosure Agreement, Financing and Supply Agreement (NDAFS) whereby GBT and Arizon could' freely exchange trade secret and other confidential information in' connection with the purchase and sale of large outdoor dome structures. GBT, which is in the business of shrimp farming in Taft, Texas, sought these structures from Arizon ' in connection with its operations. Wills, Chief Executive Officer for GBT, signed the NDAFS in his representative capacity. The Arizon. representative signed the NDAFS as Chairman of both Arizon and JMI.
In separate but immediately .sequential clauses, the NDAFS contains both an arbitration clause ruling out litigation and a forum-selection clause in the event of litigation:
• “Any dispute relating to this Agreement or any other matter shall be fully and finally resolved by binding Arbitration under the rules of the American Arbitration Association ‘AAA’ at a location that is mutually agreed by the Parties hereto, or if no such agreement is reached, then at a location specified by an Arbitrator shall be final and binding upon the Parties, from which there shall be no appeal.” D.E. 1-1, p. 3.
• “Should either Party bring any action arising from this Agreement, such action must be initiated and maintained in a federal or state court located in or ■ covering Saint Louis County, Missouri (“Competent Court”).” Id.
A few weeks later, on April 29, 2013, Arizon issued three Quotations for the sale of separate structures, listing as “Buyer” the following: David K. Wills, Jim Salmon, and GBT. D.E. 1-2. The Quotations begin with the statement: “Buyer expressly acknowledges the Non-Disclosure Agreement, Financing and Supply Agreement (“NDAFS”) dated April 16th, 2013.... The Goods being purchased by the Buyer from the Seller are a part of the Exclusive products and processes provided for in said NDAFS.” Id., p. 2. The terms of the Quotation include a combination forum-selection and arbitration clause:
• “Any controversy or claim arising out of or relating to payment, or to Seller’s Submittal, Buyer and Seller’s Contract, including these Terms and Conditions of Sale, or any other matter, shall be settled exclusively in St. Louis County Missouri Circuit Court, or at Seller’s option, by arbitration administered by the American Arbitration Association (AAA) under its Construction Industry Arbitration Rules in St. Louis County, Missouri, and Buyer hereby waives any appeal from the-arbitration award and Fast Track Procedures provided for by AAA Rules and Procedures.” D.E. 1-2, p. 4.
This agreement was signed on the Buyer’s Acceptance page by Wills and Salmon, without stating their representative capacities for GBT, on lines preceding the indication “Duly Authorized Representatives.” Id., p. 3.
A dispute between the parties ensued and GBT did not make a June 1, 2014 payment to Arizon or other payments thereafter. On December 11, 2014, Arizon filed suit against GBT, Wills, and Salmon in the Circuit Court of the County of St. Louis, State of Missouri under Case No. 14SL-CC04233. Before being served with that lawsuit, GBT (without inclusion of Wills and Salmon) initiated an arbitration proceeding in Houston, Texas, against Arizon. In the Missouri Circuit Court, Arizon filed a motion to stay the arbitration, claiming that there was no enforceable arbitration agreement between the parties; GBT filed a motion to compel arbitration. Neither Wills nor Salmon defended against Arizon’s motion to stay and neither joined in GBT’s motion to compel.
On February 10, 2015, the Missouri Circuit Court denied GBT’s request to compel arbitration and granted Arizon a stay of arbitration. D.E. 1-5. The Missouri Circuit Court’s subsequent order of March 27, 2015, refusing to stay the litigation pending appeal of the arbitration order, finds that Wills and Salmon did not oppose the motion to stay arbitration. D.E. 1-6, p. 2. After the Circuit Court converted its no-arbitration “order” to a “judgment,” the Missouri Court of Appeals, Eastern District, in No. ED102757, accepted GBT’s appeal of the no-arbitration order and, on April 22, 2015, issued a stay of litigation as to claims against GBT, but not as to the individuals. D.E. 18. GBT’s appeal remains pending.
On April 29, 2015, Wills and Salmon filed their motion to dismiss the Missouri Circuit Court action, contesting personal and subject matter jurisdiction, individual liability, and seeking to compel arbitration. D.E. 11-8. On the same date, they filed this action to stay the Missouri state court action and compel arbitration. D.E. 1. On June 2, 2015, Arizon filed its Motion to Dismiss this federal action. Thereafter, on June 7, 2015 (in advance of a June 10, 2015 hearing in the Missouri Circuit Court), Wills and Salmon sought a temporary restraining order and preliminary injunction from this Court to prevent further litigation in the Missouri Circuit Court action pending.an order compelling arbitration. D.E. 14.
On July 1, 2015, the Missouri Circuit Court entered its order denying Wills and Salmon’s motion to dismiss that action. D.E. 26-1. In that order, the Missouri Circuit Court observed that it had already ruled against arbitration of the claims in the case and further stated that Wills and Salmon had an even lesser claim to arbitration than GBT because they were not parties to the NDAFS. Id. There is nothing in the record indicating whether Wills and Salmon appealed that decision. However, they have complied with the Missouri Circuit Court’s order that' they file their answers to the claims against them, thus continuing the Missouri Circuit Court litigation on the merits. D.E. 35.
DISCUSSION OF RES JUDICATA
In its Motion to Dismiss now pending before this Court, Arizon argues that Wills and Salmon are bound by the Missouri Circuit Court’s April 8, 2015 no-arbitration judgment under principles of .res judicata or collateral estoppel because Wills and Salmon are in privity with GBT. Arizon disclaims any reliance on the July 1, 2015 Missouri Circuit Court order denying Wills and Salmon’s motion to dismiss in which they sought to compel arbitration, themselves.
Prior to Wills and Salmon’s Petition (D.E. 1) invoking this Court’s jurisdiction, the Missouri Circuit Court had already exercised jurisdiction, issuing its no-arbitration order. For this Court to proceed, this Court must find that (a) Wills and Salmon were not bound by the April 8, 2015 Missouri no-arbitration judgment or (b) the Missouri no-arbitration judgment is not entitled to preclusive effect. Because the Court finds that the Missouri no-arbitration judgment binds Wills and Salmon and is entitled to preclusive effect, the Court DISMISSES this action without reaching Arizon’s additional arguments regarding abstention and forum-selection or forum non conveniens.
1. Binding Wills and Salmon a. The Individuals’ Approach to Arbitration, as Reflected in the Procedural History, Shows that Their Interests are Aligned with GBT’s.
Wills and Salmon were joined as parties Defendant in the Missouri action no later than January 7, 2015, when Arizon amended its petition to include Count IV, seeking a declaration that any claims between the parties were not subject to arbitration. Amended Petition, D.E. 10-2, p. 3. Along with GBT and using the same counsel, Wills and Salmon entered an appearance in the Missouri case on January 21, 2015. D.E. 11-2. Before those appearances, however, Arizon had filed its motion to stay arbitration, serving the motion on two attorneys, one of which was served as General Counsel to GBT. D.E. 112, p. 13.
The effect of Arizoris motion was to accelerate the declaratory judgment sought in Count IV and prevent arbitration by any of the defendants—GBT, Wills, and Salmon. Id, pp. 2-3. While GBT opposed Arizon’s motion and filed its own motion to compel arbitration, neither Wills nor Salmon opposed Arizoris motion or sought arbitration, themselves, at that time.
On January 23, 2015, Wills and Salmon sought an extension of time in which to respond to the complaint. D.E. 11-3. In their motion for extension of time, they acknowledge the competing motions on arbitration, defer to GBT’s efforts to litigate that issue, and ask that their deadline be extended to 21 days after a ruling on the competing arbitration motions. D.E. 11-3. While the record does not contain a ruling on that motion, it appears that the motion for extension of time was granted. They thus sought and obtained relief based upon GBT’s litigation of the arbitration issue.
The Missouri Circuit Court granted the motion to stay arbitration on February 10, 2015. D.E. 1-5. Thereafter, the Court issued its no-arbitrati'on decision in a judgment, which GBT appealed. The Missouri Circuit Court denied GBT’s request to stay the litigation pending appeal, and observed that Wills • and Salmon had not opposed Arizon’s motion to stay arbitration, had not filed their own motion to- compel arbitration, and had not joined the appeal of the no-arbitration order. D.E. 1-6, p. 2. The Court of Appeals granted a stay of the Missouri Circuit Court litigation, but only as to claims against GBT, the appellant. Thus the Missouri litigation was to proceed on the claims of Arizon, JMI, Scharf, and Ligas against Wills and Salmon.
On April 29, 2015, Wills and Salmon filed their motion to dismiss, based in part on their claim that they were entitled to arbitration pursuant to the NDAFS. D.E. 11-8. In their opposition to the motion to dismiss, Arizon, JMI, Scharf, and Ligas argued that Wills and Salmon were bound by the prior no-arbitration decision that involved only GBT by virtue of their privity with GBT. D.E. 11-9, pp. 16-17. In its July 1, 2015 order denying the motion in its entirety, the Missouri Circuit Court stated with respect to arbitration:
The Individual Defendants are not parties to the NDAFS and the Court has already ruled that the corporate defendants are not entitled to arbitration under the NDAFS. As non-signatories to the NDAFS, the Individual Defendants cannot have arbitration rights that are greater than those of the signatories to the NDAFS.
D.E. 26-1, p. 4. In this Court, Arizon renews its argument that Wills and Salmon are bound by the April 8, 2015 no-arbitration judgment, thus rendering this action moot.
Wills and Salmon stood by while GBT litigated the arbitration matter to a conclusion in the Missouri court. At the hearing on the Motion to Dismiss in this Court, Wills and Salmon’s attorney stated that they did not oppose Arizon’s motion to stay arbitration in the Missouri court because they would have waived their right to contest jurisdiction. In any event, Arizon’s argument is based exclusively on Wills and Salmon’s privity with GBT and that privity is the basis for this Court’s decision.
b. Wills and Salmon Are in Privity with GBT with Respect to Arbitration
Missouri law' governing the application of principles of claim preclusion is consistent with that generally applied in the Fifth Circuit. To bind Wills and Salmon under res judicata, there must generally be: (a) identity of the thing sued for, (b) identity of the cause of action, (c) identity of the persons or parties to the action, and (d) an identity of the quality of the person for or against whom the claim is made. E.g., Norwood v. Norwood, 353 Mo. 548, 183 S.W.2d 118, 122 (1944). See also, Drier v. Tarpon Oil Co., 522 F.2d 199, 200 (5th Cir.1975).
This case clearly involves the same thing sued for (arbitration) and is based on the same cause of action (enforceability of arbitration pursuant to the NDAFS) as was raised in the Missouri Circuit Court. The parties seeking to avoid arbitration are identical. Thus the only question is the identity of the parties seeking to compel arbitration—GBT versus Wills and Salmon. GBT will be considered “identical” to Wills and Salmon if there is privity between them. Varnal v. Kansas Gity, 481 S.W.2d 575 (Mo.Ct.App.1972).
In discussing Vamal and the nature of privity, the Missouri Supreme Court described the requirement as having “an identity of interests in the subject matter.” Am. Polled Hereford Ass’n v. City of Kansas City, 626 S.W.2d 237, 241 (Mo.1982). Wills and Salmon, just like GBT, have been sued on the basis of alleged contractual obligations arising from the NDAFS and Quotations. Wills and Salmon, just like GBT, seek to enforce arbitration by relying on the terms of the NDAFS. GBT’s inducement and 'desire to protect the common interest is clear. Seibert v. City of Columbia, 461 S.W.2d 808, 811 (Mo.1970). The only difference between them—that GBT signed the NDAFS whereas Wills and Salmon did not (in an individual capacity)—makes GBT an even better’ proxy for achieving the arbitration that Wills and Salmon seek. D.E. 26-1. This represents the necessary “identity of interest in the subject matter.”
However, Wills and Salmon claim to have an independent right to advance arbitration by virtue of having been-sued in their individual capacities. But they have failed to identify any aspect of being sued individually that causes their interest in compelling arbitration to diverge from that advocated by the corporation they served when participating in the transactions triggering this case. They have identified no argument of fact or law that elevates their claim to arbitration above that of GBT’s,
And to the contrary, they defend the Missouri Circuit Court action by arguing that they participated in the underlying transactions only as corporate agents of GBT. D.E. 11-8. In that respect, they concede that they have privity with GBT to the extent that they acted in that corporate representative capacity. See Drier; 522 F.2d at 200 (when an individual has a position of control over a corporation and there is no evidence of a genuine issue that would defeat the actual ability of that perspn to control the corporation, then there is privity).
Whatever the merits of the underlying claim of liability may be, Wills and Salmon are aligned with GBT with respect to the claimed right to arbitration. Their claims involve the same transaction and they rely on the same contractual clause. The. fact that they are also represented by the same counsel speaks to the lack of divergent interests between them.
The capacity in which they have been sued has no impact on the relevant interests—those interests employed in their effort to obtain arbitration. See Steinhilber v. Lake Winnebago Home Owner’s Ass’n, No. 89-0554-CV-W-9, 1991. WL 220249, *7 (W.D.Mo. Sept. 5,1991) (Assessing privity on the basis of the close relationship between the corporation and the individuals, regardless of the fact that the individuals had not previously been sued), aff'd, 965 F.2d 602 (8th Cir.1992). Without some proof regarding a difference in interests between the corporation and its representatives who are- commonly represented by counsel, a finding of privity is appropriate. Missouri Mexican Prods,, Inc. v. Dunafon, 873 S.W.2d 282, 286 (Mo.Ct.App. 1994). See also Patmore v. City of Pacific, 393 S.W,3d 657, 667 (Mo.Ct.App.2013) (finding privity between related corporations).
Wills and Salmon’s reliance on Gamble v. Browning, 379 S.W.3d 194, 200 (Mo.Ct. App.2012), is misplaced. That case involved an order allowing Gamble, a criminal defendant, to withdraw a guilty plea based upon manifest injustice related to the conduct of the police officers who acted against him in retaliation. In the later malicious prosecution civil action against the .officers involved, Gamble sought to admit the prior order from the criminal case. The court held that the interests of the State and its law enforcement officers were sufficiently distinct to eliminate any claim of privity. Gamble is based upon a clear difference between a criminal prose- , cution where the State has an obligation to act for the public good and a civil case against individuals with a private interest in avoiding a judgment for damages. Thus the case has no bearing here, where the effort to compel arbitration is identical for both GBT and Wills and Salmon.
Similarly, De Llano v. Berglund, 183 , F.3d 780, 781-82 (8th Cir.1999), is not helpful because it involved separate claims against a city under Title VII and against its employees under Section 1983. There was no privity because the parties had demonstrated divergent interests in defending against the claims. That is not the case here, where GBT and Wills and Salmon sought arbitration-under the same contractual rights, with GBT having a stronger claim to achieve Wills and Salmon’s desired result.
The Court finds that GBT and Wills and Salmon share an identity of interests in the subject matter of compelling arbitration. Their common interests arising from the same documents, their close corporate relationship, and their representation by the same legal counsel all support a finding that there is privity between them.
2. The No-Arbitration Judgment is Entitled to Preclusive Effect
Wills and Salmon concede that this Court is “required to give the same preclusive effect to state court judgments that those judgments would be given in the courts of the state from which the judgments emerged.” D.E. 15, p. 4. More specifically, a prior state court judgment may have res judicata effect in a parallel federal proceeding seeking to compel arbitration. Merrill, Lynch, Pierce, Fenner & Smith, Inc. v. Haydu (Haydu I), 637 F.2d 391, 395 & n. 5 (5th Cir.1981) (applying Florida law). So the question is whether the Missouri Circuit Court’s no-arbitration judgment is sufficiently final for res judicata purposes even while the order remains on appeal in the state court system and the underlying case is preparing for trial.
The parties agree that Missouri state law rather than federal law applies to the decision whether the state court judgment is entitled to res judicata effect. This is consistent with the Full Faith and Credit Act, 28 U.S.C. § 1738 (state court decision is to be given the effect accorded by the law of the state that issued the decision); Haydn I, 637 F.2d at 398.
Wills and Salmon focus on the concept of a “final judgment.” According to them, while appealable, the orders denying arbitration are not considered “final.” For this proposition, they cite two opinions issued by the Missouri Supreme Court en banc: Lawrence v. Beverly Manor, 273 S.W.3d 525, 527 n. 2 (Mo.2009) and Triarch Indus., Inc. v. Crabtree, 158 S.W.3d 772, 774 (Mo.2005). Those-opinions note that arbitration decisions are appealable despite not being “final judgments” in the traditional sense. Lawrence and Triarch, however, do not address the issue of whether no-arbitration judgments, which are non-traditional judgments, are nonetheless entitled to preclusive effect.
Arizon, viewing the no-arbitration judgment like any other final judgment, argues that it is automatically preclusive, citing Brown v. Brown-Thill, 437 S.W.3d 344, 349 (Mo.Ct.App.2014). That opinion states that “[ujnder Missouri law, a judgment on the merits at the trial-court level is consid1 ered a final judgment for purposes of res judicata and collateral estoppel, even if the appeal of that judgment is still pending.” Brown, 437 S.W.3d at 349 (quoting Noble v. Shawnee Gun Shop, Inc., 316 S.W.3d 364, 369 (Mo.Ct.App.2010)). While this may be an accurate statement of the law, the case involved a final judgment “on the merits” -resulting from the court’s confirmation of an arbitrator’s award. It was not the preliminary decision whether to permit arbitration in the first instance.
To supply the missing logical link, Arizon cites Nicholson v. Surrey Vacation Resorts, Inc.) 463 S.W.3d 358, 367-68 (Mo.Ct.App.2015), an unpublished opinion. There, the Missouri appellate court dismissed an appeal of the denial of a successive request for arbitration, stating:
Surrey’s Second Renewed Motion to Compel Arbitration concerned the exact same matter and issue involved in the first appeal-compelling, arbitration, which was pending in our Court- during the time Surrey’s second renewed motion was filed in, pending before, heard and decided by the trial court. Accordingly, any action taken by the trial court on that motion is a nullity, is void, and presents nothing for appeal.
Id. (citing Love v. First Crown Fin. Corp., 662 S.W.2d 283, 285-86 (Mo.Ct.App.1983) (which held that an injunction order, which was considered appealable even though not a “final judgment,” had preclusive effect)). See also, Kaplan v. Divosta Homes, L.P., No. 2:10-cv-208-FtM-29SPC, 2010 WL 3945110.(M.D.Fla. Oct. 7 2010) (holding that while the state court applying Florida law may confirm or vacate its own order compelling arbitration, that order is res judicata as to the federal court).
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11855420-21309 | ORDER
JOYCE BIHARY, Bankruptcy Judge.
This matter is before the Court on a motion for summary judgment filed by defendant William W. Hopson. Plaintiff, debtor’s ex-wife, brought this adversary proceeding against the debtor, requesting a determination that a debt incurred as a part of a divorce settlement is not dischargeable under 11 U.S.C. § 523(a)(5). The debt at issue is a promissory note for $85,000.00. This adversary proceeding is a core proceeding under 28 U.S.C. § 157(b)(2)(I).
After carefully reviewing the briefs and affidavits filed by the parties, the Court finds that material disputed facts and issues exist which make summary judgment inappropriate at this time. Nevertheless, when a motion is brought under Fed.R.Bankr.P. 7056, incorporating Fed.R.Civ.P. 56, and judgment is not rendered for all the relief requested, the Court can, if practicable} ascertain what material facts exist without substantial controversy and what material facts are actually in- good faith controverted. In accordance with Fed.R.Civ.P. 56(d), the Court finds that a number of facts exist without substantial controversy.
I. Undisputed Facts
The debtor and the plaintiff were married in 1966 and divorced in 1990. Plaintiff filed for divorce in the Superior Court of Fulton County, and the parties settled their differences and signed an agreement entitled Alimony and Property Settlement Agreement (the “Agreement”) dated October 26, 1990. This Agreement was incorporated into a divorce decree rendered by the Superior Court of Fulton County on November 27, 1990.
Paragraph 14 of the Agreement, entitled “Alimony,” provided as follows:
Husband, upon execution of this Agreement, shall pay to Wife the sum of $3,400.00 per month as alimony for the support and maintenance of Wife, such periodic payments shall continue until Wife dies or remarries, or until the expiration of sixty-six (66) months after the date of execution of this Agreement, whichever event shall first occur. The foregoing payments shall be made on the first day of each ■month, beginning November 1, 1990, and continuing thereafter as provided by this paragraph. Husband shall, in addition, pay to Wife the total sum of $7,000.00 as additional alimony for the support and maintenance of Wife during calendar year 1991. Such additional alimony shall be paid at the rate of $1,000.00 per month beginning January 1,1991. Husband shall not be liable for any payment of alimony after the death or remarriage of Wife or after sixty-six (66) months from the execution of this Agreement.
Debtor filed for Chapter 7 bankruptcy relief on February 5, 1992. The alimony payments were scheduled in the debtor’s bankruptcy as an undisputed claim. That debt was not discharged, and debtor has paid this debt in full.
Only one debt provided for by the Agreement has not been paid by the debtor, and the dischargeability of that- debt is the sole issue before the Court. That debt is described in ¶ 11 of the Agreement, which is entitled “Investments.” ' The first subsection of ¶ 11 identifies six - investment properties held in the husband’s name.. The second sub-paragraph, ¶ 11(b), states that plaintiffs claims or interests in these six investments are released in exchange for a promissory note. The Agreement-provides, in pertinent part, as follows: “It is the intent of the parties hereto that the exchange of property pursuant to this Section 11 shall constitute an equitable division of property to be governed by .Internal Revenue Section 1041 (as amended) and shall not constitute taxable alimony to either party.”
The note is described in ¶ 11(c) as a promissory note in the amount of $85,000.00. The payment terms are listed as follows:.
(1) $35,000 shall be due and payable to Wife on or before April 1,1996;
(2) $35,000 shall be due and payable to Wife on or before April 1,1997;
(3) $15,000 shall be due and payable to Wife on or before April 1,1998;
(4) Said Promissory Note shall bear no interest during the first sixty-six (66) months. After sixty-six (66) months said Promissory Note shall bear interest at the rate of nine percent (9%) per annum, and shall be payable with the annual payment;
(5) Said Promissory Note may be prepaid in whole or in part and at any time without notice or penalty;
(6) Said Promissory Note shall provide that in the event of Wife’s remarriage or death prior to the date of the first scheduled payment, as set forth in (1) above, the payment schedule shall be accelerated to provide that the first payment, as set forth in (1) above, shall be due and payable on the earlier of the scheduled date or ninety (90) days after the occurrence of such death or marriage and the remaining payments shall be due and payable annually thereafter in the amounts set forth in (2) and (3) above on the succeeding anniversaries of the date on which the first payment is made. Said Promissory Note shall bear interest in accordance with (4) above, regardless of any such occurrence of Wife’s death or remarriage.
(7) Said Promissory Note shall provide that upon the Wife’s election in writing the payments otherwise due under (1), (2) and (3) above shall be made in thirty-six (36) equal monthly installments of $2,361.11 each plus interest beginning April 1, 1996. The election, if made by Wife, will not alter, amend or otherwise modify the provisions of (4), (5) or (6) above, except that said election shall be available to Wife under (6) above.
(8) It is the intent of the parties hereto that Wife shall bear no cost or expense for Federal and/or State income taxes (and interest and penalties thereon) in the event interest is imputed to Wife under the said Promissory Note for Federal and/or State income tax purposes in accordance with law and published regulations as of October 1, 1990. In the event interest is imputed to Wife under said Promissory Note for Federal and/or State income tax purposes in accordance with such law and published regulations as of October 1, 1990, then in such event Husband agrees to indemnify and hold Wife harmless for any such costs or expenses incurred by Wife as a result of such imputation of interest. Husband shall have no indemnity obligation in connection with any tax owed by Wife respecting said Promissory Note or any other provisions of this Agreement arising out of laws made or regulations published after October 1,1990.
This note to Mrs. Hopson was scheduled by debtor in the bankruptcy case as a “property settlement” in the amount of $85,000.00. Mr. Hopson received a discharge on May 27, 1992, and plaintiff received notice of the discharge. The case was closed, on June 15, 1992.
In September of 1996, debtor sought to reopen this case. The parties filed various motions referenced in the Court’s Order of February 21, 1997. In addition, Mrs. Hop-son filed the instant dischargeability proceeding under 11 U.S.C. § 523(a)(5), contending that the note obligation is in the nature of support or maintenance and that the debt was not covered by debtor’s bankruptcy discharge.
II. The Summary Judgment Motion
On October 21, 1997, defendant filed a motion for summary judgment, contending that’ the note obligation is a dischargeable property settlement as a matter of law. Plaintiff filed a response, arguing that the intent of the parties to the Agreement was that this note obligation be in the nature of alimony, support or maintenance. To support her response, plaintiff submitted two affidavits: an affidavit by the plaintiff and an affidavit by plaintiff’s divorce attorney, Bax ter L. Davis. In Ms. Hopson’s affidavit, she states that for most of the marriage, she was a housewife and mother, did not work, and depended almost exclusively on her husband for support. She states that the design of the note was at all times to pay off the debt on the house, “as a matter of maintenance and support.” She states that labeling the $85,000.00 note in the Agreement as an equitable division of property was designed for tax purposes only. Mr. Davis states in his affidavit that the amount of the note was tied directly to the mortgage on the home, and that the note was to insure that Mrs. Hopson could pay off the mortgage so she could remain in the home. He further states that the note payments were scheduled to begin immediately after the termination' of the periodic payments of support and that the Agreement contained a provision allowing Mrs. Hopson to elect to receive monthly payments, which provision was negotiated to enable Mrs. Hopson to make the monthly mortgage payments on the home.
Defendant filed a reply brief, vigorously disputing that the note was intended to be used to pay mortgage payments. He contends that in 1994, two years before the note became due, Mrs. Hopson actually sold the house for $270,000.00, an amount far in excess of the $85,000.00 note. Defendant also argues that plaintiff is estopped from asserting a claim under § 523(a)(5), that principles of contract construction preclude the Court’s consideration of the affidavits of plaintiff and Mr. Davis, and that even considering the disputes of fact raised by the affidavits, the debtor is entitled to a judgment that this debt is dischargeable as a matter of law.
Section 523(a)(5) provides that a debt is not dischargeable if it is “actually in the nature of alimony, maintenance or support.” 11 U.S.C. § 523(a)(5); Harrell v. Sharp (In re Harrell), 754 F.2d 902, 904 (11th Cir.1985). The exact text of the statute reads:
(a) A discharge under section 727, 1141, 1228(a), 1228(b),- or 1328(b) of this title does not discharge an individual debtor from any debt — ...
(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, determination made in accordance with State or territorial law by a governmental unit, or property settlement agreement, but not to the extent that—
(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise (other than debts assigned pursuant to section 402(a)(26) of the Social Security Act, or any such debt which has been assigned to the Federal Government or to a State or any political subdivision of such State); or
(B) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support;
11 U.S.C. § 523(a)(5) (1994 & Supp.1996). The party seeking to hold the debt nondis-chargeable has the burden of proving by a preponderance of the evidence that the obligation was intended as support and that the substance of the obligation was in fact support. Sampson v. Sampson (In re Sampson), 997 F.2d 717, 723 (10th Cir.1993) (citing Grogan v. Garner, 498 U.S. 279, 290, 111 S.Ct. 654, 661, 112 L.Ed.2d.755 (1991)); Person v. Karell (In re Karell), 200 B.R. 700, 701 (Bankr.N.D.Ga.1995). Exceptions to discharge are to be strictly construéd, and the burden is on the creditor to prove the exception. Karell, 200 B.R. at 701; Brody v. Brody (In re Brody), 154 B.R. 408, 412 (E.D.N.Y.), aff'd, 3 F.3d 35 (2d Cir.1993).
The determination of whether an obligation is in the nature of alimony, maintenance or support is a question of federal bankruptcy law. Harrell, 754 F.2d at 905; Long v. Calhoun (In re Calhoun), 715 F.2d 1103, 1107 (6th Cir.1983). Labels given to particular debts Under state law or by agreement. of the parties may be persuasive, but they are not controlling. Brody, 3 F.3d at 38. The bankruptcy court should look to the substance of the obligation, not to its form, to determine if the obligation is alimony, maintenance or support. Slingerland v. Slinger- land (In re Slingerland), 87 B.R. 981, 984 (Bankr.S.D.Ill.1988); Hack v. Laney (In re Laney), 53 B.R. 231, 232 (Bankr.N.D.Tex.1985). If the debt in question is contained in a settlement agreement, the critical inquiry is to ascertain the intent of the parties at the time they entered into the settlement agreement. Yeates v. Yeates (In re Yeates), 807 F.2d 874, 878 (10th Cir.1986); Calhoun, 715 F.2d at 1109; Bedingfield v. Bedingfield (In re Bedingfield), 42 B.R. 641, 646 (S.D.Ga.1983); Slingerland, 87 B.R. at 984; Coffman v. Coffman (In re Coffman), 52 B.R. 667, 672 (Bankr.D.Md.1985).
Defendant’s primary argument is that traditional principles of contract interpretation and construction preclude consideration of plaintiffs affidavits or any evidence that the parties intended the $85,000.00 note to be in the nature of support or maintenance. Defendant argues that the language in the Agreement is unambiguous and that extrinsic evidence may not be used to determine the parties’ intention. Significantly, the cases cited by defendant do not involve actions under § 523(a)(5) or agreements in divorce cases. The relevant eases are those involving § 523(a)(5), and these cases suggest that traditional contract principles do not preclude extrinsic evidence of the parties’ intent, where the issue before the court is whether a debt created in an agreement settling a divorce case is in the nature of support or maintenance for purposes of a § 523(a)(5) dischargeability determination. In such actions, the courts have been reluctant to limit their consideration to the four comers of the agreement.
In Brody v. Brody (In re Brody), 3 F.3d 35 (2nd Cir.1993), the court affirmed the bankruptcy court’s decision that a $1 million obligation to be paid in installments was a support obligation rather than a property settlement. The ease involved a separation agreement, which referred to this obligation in a paragraph entitled “Distributive Award” and stated the $1 million was “in full satisfaction of all claims by the wife to equitable distribution of the marital estate.” Id. at 37. Nonetheless, the court considered the parties’ testimony on intent. The wife and her divorce lawyer testified that the $1 million obligation was designed to generate an annual income for her to be used as support. The husband and his lawyer testified that the $1 million obligation was intended to represent half of the marital estate and had not been intended as support. The bankruptcy court found the wife’s testimony more credible and held that the debt was actually in the nature of alimony or support and thus not dis-chargeable. The Second Circuit affirmed, holding that although a written manifestation of agreement is persuasive evidence of intent, “the label that the parties attach to a payment is not dispositive; the court must look to the substance, and not merely the form, of the payments. The parol evidence rule does not apply in cases such as the instant one, and factual inquiry under section 523(a)(5) is not limited to the four corners of a separation agreement or divorce decree.” Id. at 38-39 (citations omitted).
The court in Tsanos v. Bell (In re Bell), 47 B.R. 284 (Bankr.E.D.N.Y.1985) commented on the applicability of the parol evidence rule to § 523(a)(5) cases as follows:
[N]otwithstanding the parol evidence rule, a bankruptcy court is bound by the statute to look beyond the agreement in order to determine the underlying purpose of the debt assumption; i.e., whether the debts were assumed in lieu of regular alimony payments, or only as a means of dividing property. Such an inquiry must take the bankruptcy court beyond the face of any separation agreement or state court judgment.
Id. at 287.
The rationale for allowing extrinsic evidence is suggested in Gianakas v. Gianakas (In re Gianakas), 917 F.2d 759, 762-68 (3rd Cir. 1990), where the court noted that it is likely that parties do not contemplate the effect of a subsequent bankruptcy when they enter into a settlement agreement, and often an obligation designated as a property settlement may be related to support. See also Benich v. Benich (In re Benich), 811 F.2d 943, 945 & nn. 5-6 (5th Cir.1987) (where the Fifth Circuit held that the Bankruptcy Code requires the court to determine the true nature of the debt, regardless of the characterization placed on it by the parties’ agreement, and in doing so, the bankruptcy court may consider extrinsic evidence); Sampson v. Sampson, 997 F.2d 717, 722 (10th Cir.1993); Young v. Young, 35 F.3d 499, 500 (10th Cir.1994) (where the Tenth Circuit held that an unambiguous settlement agreement in a divorce case does not end the inquiry, and bankruptcy courts must look beyond the language of the agreement to the intent of the parties and the substance of the obligation to determine whether the obligation is actually in the nature of alimony, support and maintenance.) These cases are persuasive, and the Court will consider the affidavits in deciding the summary judgment motion.
Defendant also argues that he is entitled to summary judgment, even if the Court considers the affidavits of Mrs. Hopson and her divorce lawyer, Mr. Davis. Defendant is correct that the Agreement is the starting point in the analysis regarding intent of the parties, and the Court agrees that the language and structure of the Agreement here suggest that the mutual intent was for the $85,000.00 note to be part of a property settlement. The note is described under a heading in the Agreement called “Investments,” and the provision states that the exchange of property is to be construed, for tax purposes, as an- equitable division of property, not alimony. The obligation does not terminate upon the wife’s death or remarriage, and there is no mention in the Agreement that this $85,000.00 note is related in any way to maintaining the home. Nonetheless, construing the evidence in the light most favorable to the non-moving party, as the Court must do on a motion for summary judgment, the Court finds that Mr. Davis’ affidavit creates a disputed issue of material fact. See Hershey v. City of Clearwater, 834 F.2d 937, 941 (11th Cir.1987). The affidavit appears to present evidence of a mutual intent that is contrary to the Agreement. Mr. Davis states that Mrs. Hopson had not worked outside the home during the twenty-three year marriage, that the $85,-000.00 note was tied to the house mortgage, and the note was to insure that plaintiff could pay off the mortgage and live in the house. Defendant disputes all of the facts proffered in Mr. Davis’ affidavit. The Court cannot determine the probative value of this evidence or the credibility of the parties,- without hearing live testimony. Even, in cases where the divorce agreement is so clear as to create a “substantial obstacle,” the courts still hear the evidence. See Tilley v. Jessee, 789 F.2d 1074, 1078 (4th Cir.1986).
There is also a disputed fact as to when Mrs. Hopson knew that Mr. Hopson contended this debt was discharged by the bankruptcy. Defendant submitted an affidavit of Alvin B. Ginsberg, the lawyer who represented the debtor in filing the bankruptcy in 1992. Mr. Ginsberg states that Mrs. Hopson was present at the first meeting of creditors and after the first meeting of creditors, Mrs. Hopson telephoned Mr. Ginsberg and asked him whether the $85,000.00 property settlement was discharged by the bankruptcy proceeding. Mr. Ginsberg states that he affirmatively represented to her that it would be discharged. In Mrs. Hopson’s affidavit, she states that at no time prior to the close of the bankruptcy case did she have a conversation with Mr. Ginsberg regarding the discharge of the debt. She states, however, that she knew from Mr. Hopson in 1994 that he contended the debt had been discharged. While neither the Bankruptcy Code nor the Federal Rules of Bankruptcy Procedure contain a deadline for filing complaints to determine dischargeability under § 523(a)(5), the testimony on this issue may have a bearing on the credibility of the parties.
Finally, defendant argues that ¶¶ 18 and 20 of the Agreement preclude plaintiff from bringing an action under 11 U.S.C. § 523(a)(5). This argument is without merit. Paragraph 18 does not explicitly waive the right to seek a determination of non-dischargeability under the Bankruptcy Code. Furthermore, even if the parties had attempted to make a determination regarding dischargeability in advance of the filing of the bankruptcy petition, such a provision would be unenforceable. See Engram v. MacDonald (In re MacDonald), 194 B.R. 283, 287 (Bankr.N.D.Ga.1996); Henry J. Sommer et al., Collier Family Law and the Baneruptcy Code ¶ 6.04[3], at 6-31 & n. 16 (1997) (“The parties may not agree in advance, contrary to the provisions of the Bankruptcy Code[,] that a debt will be non-dischargeable in a bankruptcy case ... ”). Similarly, ¶ 20 of the Agreement, which prevents the parties from bringing an action to modify alimony, is not relevant here. This adversary proceeding is not an action to modify alimony or to modify the Agreement, but is an action to determine dischargeability under § 523.
In accordance with the above reasoning, defendant’s motion for summary judgment is DENIED.
. After subsection (7) of ¶ 11(c), there is handwritten the notation: "(8) See Addendum — Exhibit 'A' Attached.” ' The text of subsection (8) is taken from this Addendum.
. Defendant appealed the February 21, 1997 Order, and the United States District Court entered an Order affirming the Bankruptcy Court on September 16, 1997.
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1475505-9709 | ZAMPANO, District Judge.
This is an action brought by the Secretary of Labor under the Fair Labor Standards Act of 1938 as amended 29 U.S.C.A. § 201 et seq., to enjoin the defendants from violating the provisions of the Act. The Court’s jurisdiction is conferred by Section 17 of the Act. 29 U.S.C.A. § 217.
The complaint alleges that defendant Construction Survey Cooperative and defendant Szmak, as Manager of the Cooperative, have violated the provisions of Sections 7 and 15(a) (2) of the Act by not paying overtime compensation to approximately seven men who work as quantity surveyors for the Cooperative; and by failing to keep certain records as required by the regulations issued by the Administrator of the Wage and Hour Division, Department of Labor, pursuant to Sections 11(c) and 15(a) (5) of the Act.
The defendants admit they have violated the overtime and record-keeping provisions of the Act but contend the Act is not applicable to them. Therefore, the only issue for determination by this Court is whether the seven quantity surveyors, all of whom are members of the defendant Cooperative, are “employees” of the defendants within the meaning of the Act. If they are found to be “employees”, the defendants have violated the Act and the injunction should issue.
Evidence upon the issue was heard by the Court on November 4, 5 and 6, 1964. Five members of the Cooperative, defendant Szmak, Panettieri, Kasper, McDonald and Martini, testified as well as Richard McMullen, investigator for the Department of Labor, and Philip Pavia, a former member of the Cooperative. The parties stipulated that if the remaining members of the Cooperative, Mailloux, Ouimette and Fensky, were called to testify, they would respond to direct and cross-examination on all material facts with substantially the same answers as Panettieri, Kasper, McDonald and Martini.
The defendant Szmak is a self-made, self-styled economist and professional construction surveyor. During the throes of the depression in the early thirties, Szmak studied various social, political, and economic philosophies and organizations through which the processes of production, distribution, exchange, and consumption operate. He concluded that the evil of economic depression was caused by the private ownership of the agencies of production by a relatively small class of capitalists and the employment for wages of the large mass of workers in society. In an attempt to provide an improved standard of living for himself and a few others, he embraced the principles of the cooperative movement which, in effect, is the name used to designate those forms of economic activity in which organized groups own and operate business enterprises for the mutual benefit of their members.
At the outset, therefore, it must be noted that the economic base which supports the cooperative structure, as Szmak visualized it, was antithetical to the wage and hour system of production which the Act was designed to control. United States v. Darby, 312 U.S. 100, 109, 61 S.Ct. 451, 85 L.Ed. 609 (1941). The Cooperative’s Charter of Organization states one of its aims is to “Abolish the barrier between capital, labor and management as employers and employees by placing them on par as co-investors, coworkers, co-partners, co-managers and co-owners”; and one of its purposes is to “Prevent wage and other forms of exploitation by and of labor, capital, management, development and government through over and under payment of compensation ; impossible to avoid under the wage system”. (Exh. A).
The modus operandi of the Construction Survey Cooperative as established by Szmak has remained substantially the same from 1933 to the present. It is an unincorporated association, a small group of people, ranging over the years from five to twenty-five persons, who render services to clients in the construction field by providing cost estimates of materials based upon an analysis of relevant blueprints, plans and specifications. At one time there were four such cooperatives, in New York, Connecticut, California and Illinois, but only two are operating presently, in New York and Connecticut.
Most of the new members join the Cooperative as trainees who complement their apprenticeship by nightschool courses in drafting and blueprint analyses. Upon joining the Cooperative they are informed of the aims and objectives of the group, method of compensation and operation and subsequently sign a document acknowledging that they are coworkers, co-managers, co-investors and co-owners in the firm. Neither membership fee nor monetary investment is required.
The men work as a unit under the leadership and guidance of Szmak and Martini. Compensation for all members is computed on a labor merit rating system. The hourly investment rate assigned to each member depends on the prevailing market price for his various capabilities, experience and knowledge and ranges from $1.00 per hour to $3.50 per hour. There is an automatic labor investment hourly increase of $.25 per hour each six months. Labor investment ratings are subject to the approval of the entire membership and may be changed by the unanimous vote of all the members. The proportion formula used to determine compensation is based on the so-called “Golden Rule”:
Group Income x Individual Investment = Individual Dividend Group Expenditures
In addition, some members received dividends based on materials or capital investment. No member receives a set salary; no member receives any compensation based on other than the “Golden Rule” formula.
The entire income of the Cooperative is disbursed monthly according to the above-mentioned formula. Expenses are paid first and the remaining profits are thereafter distributed. There is no capital accumulation of wealth. Each member is contractually responsible for debts and each member underwrites expenditures in ratio to their respective labor investment rating. Thus, the members share not only profits but also losses. In periods of slow business, the labor investment rating method, by vote of the entire membership, has been changed from an hourly rate to a monthly rating system based on a four-week month premise. When business prospers, the system reverts to an hourly base.
Each month a detailed typewritten account is distributed to each member, setting forth current receipts, current expenditures and a statement of dividend distribution. (Exh. B). The balance ■sheet is prepared monthly by an accountant and verified by an auditor. The members are paid by check which has attached to it a Certificate of Distribution detailing a monthly profit and loss report. (Exh. C).
Membership meetings are held several times a year but no recorded minutes are kept. Policy, management and operational suggestions and decisions are discussed and voted upon at these meetings. Each member has one vote and unanimous consent is necessary to carry any measure.
Qualified persons may become members of the Cooperative upon the unanimous vote of all members. No tenure of membership is required. A member may work or not, come and go as he chooses, and cannot be discharged. Withdrawal from the Cooperative is by voluntary resignation only. Any member who resigns may again become a member at his will.
In 1959, the Department of Labor conducted an investigation of the defendants under the Act, determined that there were violations but declined further action when the members refused to press any claim they may have had to overtime compensation.
In 1961, the Department of Labor again investigated the defendants under the Act, but despite the members’ disclaimers, instituted this action when the defendants refused to comply.
The parties have stipulated that the defendants are engaged in a business in interstate commerce, that the defendants have failed to keep records and failed to pay overtime compensation in accordance with the provisions of the Act. As indicated, the only issue presented to the Court is whether or not the members of the Cooperative are “employees” within the meaning of the Act.
Section 3(e) of the Act defines “employee” as including “any individual employed by an employer” and section 3(g) defines “employ” as including “to suffer or permit to work”. The courts have consistently given a liberal and comprehensive construction to this statutory language, United States v. Rosenwasser, 323 U.S. 360, 362, 65 S.Ct. 295, 89 L.Ed. 301 (1945), and have concluded that these definitions are “comprehensive enough to require its (the Act’s) application to many persons and working relationships, which prior to the Act, were not deemed to fall within an employer-employee category.” Rutherford Food Corp. v. McComb, 331 U.S. 722, 729, 67 S.Ct. 1473, 91 L.Ed. 1772 (1946). See, also Goldberg v. Whitaker House Coop., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed. 2d 100 (1960) ; United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1946). The Act has been described as “highly remedial” to protect workers from selling their services for less than the prescribed wage regulations. Walling v. Portland Terminal Co., 330 U.S. 148, 152, 67 S.Ct. 639, 91 L.Ed. 809 (1946); McComb v. Consolidated Fisheries Co., 75 F.Supp. 798, 800 (D.C.Del., 1948) , affirmed 174 F.2d 74 (3 Cir. 1949) . No traditional, mechanical application of the usual tests to determine the employment relationship will suffice; rather, the Court is required to sift the linguistic chaff of labels and scrutinize the kernel of the “economic realities” of the situation. United States v. Silk, 331 U.S. 704, 713, 67 S.Ct. 1463 (1947). Thus, protection of the Act should be given if the Court reasonably may adjudge an employment relationship.
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3961452-8764 | OPINION AND ORDER
MUKASEY, District Judge.
Stephen Mokone, convicted in May 1980 following a jury trial in the state courts of New York of Assault in the First Degree, New York Penal Law § 120.10(2), in connection with a sulfuric acid attack on Ann Boylan Rogers, his wife’s divorce lawyer, that left her blind in one eye and permanently scarred, petitioned in December 1986 for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. Mokone’s 128-page brief challenged his conviction on essentially six grounds: insufficiency of the evidence, an impermissible variance between the judge’s charge to the jury and the indictment, a legal inconsistency between his co-defendant’s acquittal and his conviction, improper use of hypnotically induced testimony, introduction of inadmissible evidence relating to other crimes and bad acts, and denial of a speedy trial. This Court, per Hon. Louis L. Stanton, U.S.D.J., referred the petition to Magistrate James C. Francis IV, who filed his Report and Recommendation (the “Report”) on August 12, 1987, after which the case was reassigned to me. The Magistrate reviewed petitioner’s contentions in detail, and recommended that the writ be denied and the petition dismissed.
In a document styled “Reply to Report & Recommendation,” Mokone, through counsel, reasserts in summary fashion all the grounds in his petition, except for the speedy trial claim which he appears to have abandoned. A district court’s responsibilities in connection with a Magistrate’s report and recommendation in cases such as this are set forth in Rule 72(b) Fed.R.Civ.P. and 28 U.S.C. § 636(b)(1), which permit the court to adopt those parts of the report to which no specific objection is made so long as they are not facially erroneous. Nelson v. Smith, 618 F.Supp. 1186, 1189 (S.D.N.Y.1985). When objection is made, the court must make a de novo determination as to those parts objected to. Here it bears emphasis that what is required is a de novo determi nation, not a de novo hearing. United States v. Raddatz, 447 U.S. 667, 676, 100 S.Ct. 2406, 2412-13, 65 L.Ed.2d 424 (1980).
Because Mokone does not object specifically to any part of the Report but merely cites certain portions of it that deal with the issues he raised initially in his brief to the Magistrate, and restates in summary fashion the arguments in that brief, it should be sufficient to find, as I do, that the Report is without apparent error.
However, even construing the mere citation of the Report at various points in petitioner’s brief as an objection to the portions cited, I find that Mokone’s objections to the Report, if such they be, are without substance, as set forth below.
1. Sufficiency of Evidence
To the extent Mokone’s reference to the Report may be construed as an objection to its finding that the evidence was sufficient to convict him, it is clear that the evidence was not merely sufficient but overwhelming, including the following:
(i) Ronnie Sello, Mokone’s son, testified that about two months before the incident he obtained a bottle of sulfuric acid at Mokone’s request from a New Jersey pharmacy, and the day of the incident Mokone asked him to bring a spare pair of trousers to a motel where Mokone changed into those trousers and told Sello to throw away the ones he had been wearing. (Tr. 350-52, 364-66)
(ii) The assailant who attacked Ms. Rogers escaped in a Mercedes Benz of the type and color that Mokone drove. (Tr. 873-75, 911, 916)
(iii) Shortly after the attack, when Sello noticed an apparent burn on Mokone’s hand, Mokone told him to tell anyone who asked that Mokone had burned himself while cooking. (Tr. 381, 388-89)
(iv) The interior of Mokone’s Mercedes Benz showed stains chemically analyzed as sulfuric acid, which stains were similar to those on the coat the victim wore when she was attacked. (Tr. 253, 922,1632,1637,1641)
(v) Sello testified that Mokone had asked him to scrape the stains off the interior of the automobile. (Tr. 373-75)
(vi) Sello testified that Mokone boasted after the attack that he had arranged it. (Tr. 467-68)
(vii) The victim testified that Mokone called her six weeks after the attack to tell her that although she was “not dead yet” she soon would be, and then called back 20 minutes later to tell her that she had “overplayed your cards” by getting “Henry Thomas” involved; the name of one of the detectives investigating the acid attack was Thomas Henry. (Tr. 87, 89, 907, 910)
Applying a standard that mandates upholding a conviction if, “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,” United States v. Resto, 824 F.2d 210, 212 (2d Cir.1987) (citation omitted) (emphasis in original), it is obvious the conviction must stand.
2. Variance Between Indictment and Trial Judge’s Charge
Here Mokone’s claim is in essence that the indictment as amplified by the People’s bill of particulars accused him either as a principal or as the aider and abettor of his codefendant, Campbell, who was acquitted. Because the judge’s charge to the jury permitted him to be convicted even if Campbell was acquitted, Mokone argues, it varied the indictment to permit Mokone’s conviction as the accomplice of some unidentified assailant, in violation of his constitutional right to be tried on the accusation contained in the indictment. Stirone v. United States, 361 U.S. 212, 217, 80 S.Ct. 270, 273, 4 L.Ed.2d 252 (1960); United States v. Alaimo, 297 F.2d 604, 606-07 (3d Cir.1961), cert. denied, 369 U.S. 817, 82 S.Ct. 829, 7 L.Ed.2d 784 (1962).
First, it is doubtful that a variation in the names of co-conspirators between indict ment and jury charge would violate a criminal defendant’s constitutional rights. United States v. Howard, 590 F.2d 564 (4th Cir.), cert. denied, 440 U.S. 976, 99 S.Ct. 1547, 59 L.Ed.2d 795 (1979).
But further, there was no such variance here. The judge charged the jury merely that Mokone’s guilt and Campbell’s were independent (Tr. 4066-68), which, as Magistrate Francis found, is consistent with New York Penal Law § 20.05 and Standefer v. United States, 447 U.S. 10, 100 S.Ct. 1999, 64 L.Ed.2d 689 (1980), which upheld a federal statute permitting conviction of an aider and abettor notwithstanding acquittal of the principal.
3. Legal Inconsistency Between Campbell’s Acquittal and Mokone’s Conviction
To the extent Mokone asserts an inconsistency as a matter of law between his own conviction and Campbell’s acquittal, this is merely a variation on his baseless attack on the jury charge. It is barred by Standefer v. United States, supra.
4. Improper Use of Hypnotically Induced Testimony
Mokone appears to complain that the trial judge permitted the victim to testify after she had been hypnotized in an attempt to enhance her ability to identify her attacker. Here Mokone is, if possible, even wider of the mark than elsewhere since the result of the hypnosis was that she identified Campbell, not Mokone, as her assailant. To the extent Mokone may be suggesting that she became a generally tractable witness for the prosecution as a result of hypnosis, he offers no record evidence to support that theory.
5. Evidence of Other Crimes and Bad Acts
There was received at trial evidence reflecting other crimes and bad acts by Mokone. However, each item of such evidence was received for a discrete and proper reason. Moreover, substantial evidence reflecting other criminal and improper behavior by Mokone was excluded. In view of the trial judge’s obvious awareness of the danger of undue prejudice to Mokone, and her exercise of informed discretion to avoid such prejudice, Mokone’s objections to such evidence are insufficient.
At trial the prosecution sought to prove that the attack on Ms. Rogers was part of a single course of conduct on which Mokone embarked when he purchased sulfuric acid in August 1977: to maim with caustic substances three women who had caused him difficulty. One was Ms. Rogers, who had represented his wife in a divorce and custody battle; another was his former wife and Ms. Rogers’ client, Joyce Maaga; the third was another former wife of Mokone, Caroline Rice, who terminated the marriage and their relationship when she discovered Mokone had not yet divorced his prior wife, Joyce Maaga. Thus the prosecution was permitted to show the purchase of the acid through Sello, its use on Ms. Rogers, Mokone’s apparent attempt to use the remainder of it on Ms. Rice eight days later when he was arrested outside her house with a half-full bottle of sulfuric acid (Tr. 350-53, 771-72, 779, 781-82, 796-98, 1189), and Mokone’s aborted plan to throw lye in the face of Joyce Maaga a short time later. (Tr. 431-61)
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4233367-21822 | EDITH BROWN CLEMENT, Circuit Judge.
Plaintiffs-Appellants Mark Zastrow and his company Heights Autohaus (collectively, “Zastrow”) appeal from the district court’s grant of summary judgment on their claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961-1968, and 42 U.S.C. §§ 1981 and 1982. For the reasons to be explained, we AFFIRM the district court’s judgment on Zastrow’s civil RICO claim and § 1982 claim, but VACATE its judgment on Zastrow’s retaliation claim under § 1981 and REMAND the case for further proceedings consistent with this opinion.
I.
Zastrow owns Heights Autohaus, an automobile repair shop that performs mechanical repairs on German cars. Zas-trow previously purchased all of his Mercedes-Benz parts from Houston Auto M. Imports, Ltd. d/b/a Mercedes-Benz of Houston Greenway (“Mercedes Green-way”) at a 25% discount. In September of 2012, Zastrow’s customer and attorney in this action, Reginald E. McKamie, Sr., brought Zastrow a 2006 Mercedes-Benz CLK (“CLK”) to inspect. Unbeknownst to Zastrow at the time, the vehicle was the subject of a lawsuit against Mercedes Greenway that had been compelled to arbitration. The plaintiffs in that suit, Jesse Howard and JoAnn Jefferson-Howard (collectively, the “Howards”), also represented by McKamie, alleged that the CLK that Mercedes Greenway sold them was defective, and asserted claims against the dealership for fraud, negligence, breach of contract, breach of warranty, breach of fiduciary duty, credit discrimination, and racial discrimination and retaliation.
Zastrow inspected the CLK and discovered a number of mechanical problems with the vehicle. McKamie then asked Zastrow if he would testify as an expert witness in the Howards’ lawsuit and Zas-trow agreed. Zastrow’s deposition was scheduled for January 8, 2013. Zastrow alleges that on January 7, 2013, he received a phone call from a Mercedes Greenway employee advising him not to sit for the deposition and warning him that he would regret it. Zastrow, however, appeared for the deposition and testified about his inspection of the vehicle. On January 9, 2013, the day after his deposition, Zastrow received a phone call from the same Mercedes Greenway employee, who then informed Zastrow that Mercedes Greenway would no longer sell parts to him.
The final arbitration hearing began the following week on January 14 and concluded on January 17, 2013. On January 14, Mercedes Greenway’s counsel, George A. Kurisky, Jr., mailed Zastrow a letter on behalf of Mercedes Greenway formally severing the dealership’s business relationship with Zastrow because of his deposition testimony. Zastrow did not testify at the arbitration hearing and was unaware it was taking place. His deposition testimony, however, was read to the arbitrator.
On January 23, 2013, McKamie sent the arbitrator a letter captioned “Notice of Retaliation Against Witness in Discrimination Suit and Intent to Sue.” On March 4, 2013, Zastrow filed the instant lawsuit naming as defendants Mercedes Green-way, Kurisky, and Kurisky’s law firm, Johnson, Deluca, Kurisky & Gould, P.C. Although Zastrow propounds a potpourri of legal theories, the gravamen of his complaint is that Mercedes Greenway threatened him to prevent him from testifying and then, with the assistance of Kurisky, retaliated against him by refusing to sell him auto parts after he gave his deposition. The district court granted summary judgment to defendants on all claims, and Zastrow appealed the judgment as to his claims under RICO and 42 U.S.C. §§ 1981 and 1982.
II.
We review a district court’s grant of summary judgment de novo, applying the same legal standard as the district court. Performance Autoplex II Ltd. v. Mid-Continent Cas. Co., 322 F.3d 847, 853 (5th Cir.2003) (per curiam). Summary-judgment is appropriate only if, -interpreting all facts and drawing all reasonable inferences in favor of the non-moving party, “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).
Where a summary judgment motion mounts challenges solely to the sufficiency of a plaintiffs pleadings, we review those challenges under a motion to dismiss standard. Ashe v. Corley, 992 F.2d 540, 544 (5th Cir.1993). Under this standard, “[t]he plaintiff must plead enough facts to state a claim to relief that is plausible on its face.” Cines v. D.R. Horton, Inc., 699 F.3d 812, 816 (5th Cir.2012) (internal quotation marks omitted). “We accept all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” Id. (alteration and internal quotation marks omitted).
III.
Zastrow first argues that the district court erred in granting summary judgment to defendants on his civil RICO claim. A civil plaintiff has standing to sue under RICO if he has been “injured in his business or property by reason of a violation of section 1962.” 18 U.S.C. § 1964(c). Zastrow brought his claim under § 1962(c), which we have distilled to mean that “a person who is employed by or associated with an enterprise cannot conduct the enterprise’s affairs through a pattern of racketeering.” In re Burzynski, 989 F.2d 733, 741 (5th Cir.1993) (per cu-riam). To succeed on his claim, Zastrow must provide evidence of the existence of “1) a person who engages in 2) a pattern of racketeering activity, 3) connected to the acquisition, establishment, conduct, or control of an enterprise.'” Id. (internal quotation marks omitted).
“Racketeering activity” means any of the predicate acts specified in § 1961(1). Zastrow alleges that defendants obstructed justice in violation of 18 U.S.C. § 1503 by attempting to intimidate him to prevent him from giving deposition testimony and testifying at the arbitration hearing. As relevant here, that statute makes it a criminal offense to “corruptly or by threats or force, or by any threatening letter or communication.... endeavor[ ] to influence, obstruct, or impede, the due administration of justice.” 18 U.S.C. § 1503(a). In support of his claim, Zas- trow identifies three purported criminal actions by defendants: (1) the January 7 phone call from Mercedes Greenway warning him not to testify; (2) the January 9 phone call from Mercedes Greenway informing Zastrow that it would no longer sell him auto parts; and (3) the January 14 letter from Kurisky officially ending Mercedes Greenway’s business relationship with Zastrow because of his deposition testimony.
A.
Zastrow’s claim fails initially because he cannot show the “pattern of racketeering activity” required to prosecute a civil RICO claim. A pattern of racketeering activity “consists of two or more predicate criminal acts that are (1) related and (2) amount to or pose a threat of continued criminal activity.” Abraham v. Singh, 480 F.3d 351, 355 (5th Cir.2007) (internal quotation marks omitted).
First, Zastrow has, at best, identified only a single predicate act under § 1503: the January 7 phone call. Although he attempts to squeeze all three of defendants’ actions under § 1503, an obstruction of justice statute, it is clear that the phone call and letter terminating Mercedes Greenway’s business relationship with Zastrow were not attempts “to obstruct or impede the proceeding,” United States v. Williams, 874 F.2d 968, 977 (5th Cir.1989), but, as Zastrow claims in his briefing, “retaliatory in nature.” (emphasis added)'. That is, Mercedes Greenway’s termination of dealings with Zastrow cannot be construed as threats to prevent his live testimony in the arbitration hearing because there was no threat of further penalty—the dealership unequivocally terminated its business with Zastrow because of his deposition testimony, it did not make future dealings contingent on his absence at the hearing (or indicate in any way that it would reconsider its decision if Zastrow did not testify).
Witness retaliation is a separate crime covered by 18 U.S.C. § 1513, .the violation of which also qualifies as a predicate act under RICO. 18 U.S.C. § 1961(1). Defendants’ purported misconduct, however, clearly does not fall under this statute (and Zastrow does not argue that it does). See 18 U.S.C. § 1513(a)-(b) (prohibiting killing, causing bodily injury, or damaging the tangible property of another person, or threatening to do so, with the intent to retaliate against a witness); id. § 1513(e) (prohibiting the “interference with the lawful employment or livelihood of any person[] for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense”). Thus, even assuming the validity of Zastrow’s theory that threatening to sever a voluntary business relationship constitutes obstruction of justice under § 1503, only Mercedes Green-way’s initial phone call warning Zastrow not to testify would qualify as a predicate act under RICO.
Moreover, even assuming that the two phone calls and the letter constitute three predicate acts under § 1503, Zastrow would still fail to satisfy the continuity requirement. “To establish continuity, plaintiffs must prove ‘continuity of racketeering activity, or its threat.’ ” Word of Faith World Outreach Ctr. Church, Inc. v. Sawyer, 90 F.3d 118, 122 (5th Cir.1996) (quoting H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229, 241, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989)). “This may be shown by either a closed period of repeated conduct, or an open-ended period of conduct that ‘by its nature projects into the future with a threat of repetition.’” Id. (quoting H.J. Inc., 492 U.S. at 241, 109 S.Ct. 2893). Continuity over a closed period requires proof of “a series of related predicates extending over a substantial period of time.” H.J. Inc., 492 U.S. at 242, 109 5.Ct. 2893. “Predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement.... ” Id. Continuity over an open period requires “a threat of continued racketeering activity.” Id. This may be established where the predicate acts “themselves involve a distinct threat of long-term racketeering activity” or “are part of an ongoing entity’s regular way of doing business.” Id. at 242-43, 109 S.Ct. 2893.
The alleged witness intimidation and retaliation were committed within one week and were directed towards, at most, two discrete events: Zas-trow’s deposition and his possible testimony at the arbitration hearing. “[WJhere alleged RICO predicate acts are part and parcel of a single, otherwise lawful transaction, a ‘pattern of racketeering activity’ has not been shown.” Word of Faith, 90 F.3d at 123. We have held that, where all of the alleged predicate acts took place in the context of defending a lawsuit, the unlawful conduct “did not constitute or threaten long-term criminal activity.” Bur-zynski, 989 F.2d at 742-43 (dismissing civil RICO claims because multiple acts of alleged mail and wire fraud were committed in an “otherwise lawful” defense of a lawsuit that was “now over”). As in Burzyn-ski, the alleged predicate acts here were committed in the context of Mercedes Greenway’s defense of a lawsuit. Zastrow cannot credibly argue that obstructing justice is part of defendants’ regular way of doing business or that their purported attempts to intimidate him create a threat of long-term racketeering activity. The entirety of Zastrow’s claim is that Mercedes Greenway refused to sell him parts after he served as an expert witness against the dealership in an arbitration. Any argument that Mercedes Greenway’s business decision threatens long-term criminal 'activity is frivolous. Thus, Zastrow has not shown that defendants’ alleged predicate acts amount to or constitute a threat of continuing racketeering activity.
B.
Finally, even if Zastrow had produced evidence of a pattern of racketeering activity, he has not demonstrated the existence of an enterprise. Zastrow argues that he has properly pled an “asso-eiation-in-fact” enterprise between Mercedes Greenway, Kurisky, and his law firm, and points to the allegation in his complaint that “[defendants] in combination agreed to engage in unlawful acts of obstructing, impeding or influencing the due administration of justice by communicating by telephone and later threatening letter to a witness in an arbitration hearing in violation of 18 U.S.C. § 1503.” “An enterprise is a group of persons or entities associating together for the common purpose of engaging in a course of conduct.” Whelan v. Winchester Prod. Co., 319 F.3d 225, 229 (5th Cir.2003). An association-in-fact enterprise “must have an ongoing organization or be a continuing unit, such that the enterprise has an existence that can be defined apart from the commission of the predicate acts.” Montesano v. Seafirst Commercial Corp., 818 F.2d 423, 427 (5th Cir.1987). Construed generously, Zastrow’s complaint alleges an enterprise created by the alleged racketeering activity itself. This is obviously not sufficient to plead the existence of an enterprise “separate and apart from the pattern of racketeering activity in which it engages.” Whelan, 319 F.3d at 229.
The district court properly granted summary judgment on Zastrow’s breach of contract claim dressed in civil RICO garb.
IV.
Zastrow also appeals the district court’s grant of summary judgment to defendants on his claims under §§ 1981 and 1982. Section 1981 prohibits racial discrimination in the “making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” 42 U.S.C. § 1981. Section 1981 also prohibits retaliation against an individual who “has tried to help a different individual, suffering direct racial discrimination, secure his § 1981 rights.” CBOCS W., Inc. v. Humphries, 553 U.S. 442, 452, 128 S.Ct. 1951, 170 L.Ed.2d 864 (2008). Section 1982 offers the same protection for “rights related to the ownership of property,” id. at 446, 128 S.Ct. 1951, and is not relevant here.
Zastrow argues that his testimony regarding the condition of the CLK was necessary to prove the Howards’ claims that Mercedes Greenway sold them a defective vehicle because of their race and in retaliation for complaining about discriminatory treatment, and thus that he was helping the Howards secure their § 1981 rights. The district court held that Zas- trow’s testimony was not protected by § 1981 because “he only provided technical, expert testimony about the [v]ehicle” and he “had no knowledge of any specific instances of racial discrimination against the Howards by Mercedes Greenway.” This was error.
Section 1981 prohibits retaliation against an individual who has attempted to vindicate another’s § 1981 rights; statutory protection is not limited only to those who have personally witnessed the alleged discriminatory conduct. Likewise, it is immaterial that Zastrow did not speculate that Mercedes Greenway discriminated against the Howards. The Howards could not prove that the dealership sold them a defective car because of their race without Zastrow’s testimony that the vehicle was, in fact, defective. Because Zastrow’s testimony supported the Howards’ § 1981 claim, it is protected under the statute. See Sayger v. Riceland Foods, Inc., 735 F.3d 1025, 1032 (8th Cir.2013) (holding that an employee who provided an interview in the course of an internal investigation into alleged discriminatory conduct by a supervisor was protected from retaliation under § 1981 because “someone who has substantiated a complaint of a civil rights violation has ... acted to vindicate the rights of minorities”).
Defendants also argued in the district court that Texas public policy favors freedom of contract and a company’s termination of a business relationship with an expert witness who testified against it is not actionable retaliation. This is true, so long as the refusal to contract with the witness is not based on his race, or because he has attempted to vindicate another’s § 1981 rights. See Humphries, 553 U.S. at 452-53, 128 S.Ct. 1951 (holding that § 1981’s protection extends to an individual who attempts to secure another’s rights under the statute); Patterson v. McLean Credit Union, 491 U.S. 164, 176-77, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989) (explaining that § 1981 “prohibits, when based on race, the refusal to enter into a contract with someone”), superseded by statute, Civil Rights Act of 1991, Pub.L. No. 102-166, 105 Stat. 1074, as recognized in Humphries, 553 U.S. at 450, 128 S.Ct. 1951. Because Zastrow has alleged that Mercedes Greenway refused to sell him parts after he testified in support of the Howards’ discrimination claims, he has stated a claim for retaliation under § 1981.
We are skeptical, however, that Zastrow can prove that defendants violated Zastrow’s § 1981 rights. Perhaps because non-employment retaliation claims under § 1981 are exceedingly rare, none of the parties has articulated the legal framework to apply to Zastrow’s claim. Section 1981 retaliation claims are evaluated under the familiar three-part test of McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). See, e.g., Willis v. Cleco Corp., 749 F.3d 314, 317 (5th Cir.2014). First, to establish a prima facie case of non-employment retaliation under § 1981, a plaintiff must show that: (1) he engaged in activity protected by § 1981; (2) he was subjected to an adverse action; and (3) a causal link exists between the protected activity and the adverse action. See id. at 317; Lizardo v. Denny’s, Inc., 270 F.3d 94, 105 (2d Cir.2001) (adapting prima facie elements for a non-employment retaliation claim under § 1981 from the elements of a retaliation claim under Title VII). If the plaintiff establishes a prima facie case, the burden shifts to the defendant to proffer a legitimate, non-retaliatory reason for the adverse action. See Willis, 749 F.3d at 317-18. And if the defendant provides such an explanation, the burden returns to the plaintiff to show that the proffered reason was pretext for retaliation. See id. at 318.
Defendants have challenged only the first two prongs of the prima facie case, arguing (incorrectly) that Zastrow’s testimony was not protected by § 1981 and that refusal to contract is not an adverse action. They have not challenged Zas-trow’s ability to demonstrate pretext. As discussed above, however, a company’s refusal to contract with someone who has criticized its business and impugned its reputation is not illegal retaliation — so long as that refusal is not a reprisal for a complaint of racial discrimination or an attempt to support the complaint of another. Zastrow’s testimony about the condition of the CLK was necessary to establish almost all of the Howards’ claims, including those for fraud, negligence, breach of contract, and breach of warranty. If Mercedes Greenway contended that it severed its business relationship with Zastrow simply because he disparaged the dealership’s products or quality of service, Zastrow would have to show that it actually did so because his testimony supported the How-ards’ § 1981 claims. In other words, he would have to show that, but for his testimony’s relevance to the Howards’ discrimination claims — his attempt to secure their § 1981 rights — the dealership would not have stopped selling him parts. See, e.g., Willis, 749 F.3d at 317-18 (applying “but for” standard of causation to third-step pretext inquiry for § 1981 employment retaliation claim); see also Roberts v. Lubrizol Corp., 582 Fed.Appx. 455, 460-61 & n. 4 (5th Cir.2014) (per curiam) (same).
It appears to us that, in light of the general nature of his testimony and the plethora of claims in the Howards’ case, it will be difficult for Zastrow to create a genuine issue of fact as to pretext. But defendants have not made any arguments related to steps two or three of the burden-shifting analysis and thus we do not decide the issue. See Gilbert v. Donahoe, 751 F.3d 303, 311 (5th Cir.2014) (explaining that we may affirm a judgment on a ground not addressed by the district court only if the argument was raised below). Accordingly, we VACATE the district court’s grant of summary judgment on Zastrow’s § 1981 claim and REMAND the case to the district court. That court may choose to allow additional summary judgment briefing and perform the McDonnell Douglas analysis in the first instance.
V.
For the foregoing reasons, we AFFIRM the district court’s grant of summary judgment on Zastrow’s civil RICO claim and his § 1982 claim, but VACATE its judgment on Zastrow’s § 1981 claim and REMAND the case for further proceedings consistent with this opinion.
. The letter from Kurisky stated, in relevant part: "Pursuant to your expert testimony in the above-referenced matter, this correspondence will serve as notice that Mercedes-Benz of Houston Greenway is terminating their relationship with Heights Autohaus, effective immediately.”
. Section 1962(c) states: "It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.”
. To the extent that Zastrow also purports to raise an independent claim under 18 U.S.C. § 1503 itself, this claim fails because § 1503 is a criminal statute that does not provide for a private cause of action.” Forsyth v. Humana, Inc., 114 F.3d 1467, 1482 (9th Cir.1997), overruled in part on other grounds by Lacey v. Maricopa Cnty., 693 F.3d 896, 928 (9th Cir.2012) (en banc); accord Hanna v. Home Ins. Co., 281 F.2d 298, 303 (5th Cir.1960).
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3768365-23460 | OPINION
B. FLETCHER, Circuit Judge:
Advertise.com, Inc., appeals the district court’s entry of a preliminary injunction barring it from using a designation or trade name that is confusingly similar to Appellees’ (“AOL”) ADVERTISING.COM mark. We have jurisdiction under 28 U.S.C. § 1292(a)(1). We reverse and vacate the preliminary injunction in part.
Facts and Procedural History
AOL owns trademark registrations covering certain stylized representations of the mark ADVERTISING.COM. While AOL’s applications for those registrations were pending before the United States Patent and Trademark Office (“PTO”), the PTO requested that AOL disclaim the standard text version of ADVERTISING.COM to obtain registration of the stylized representations of that term. AOL refused to disclaim the standard text version of the mark, maintaining that although it did not claim exclusive rights to the term “advertising,” the standard text version of ADVERTISING.COM mark was distinctive and protectable. AOL’s registrations eventually issued without the requested disclaimer.
On August 17, 2009, AOL filed a complaint against Advertise.com in the Eastern District of Virginia and shortly thereafter filed a motion for a preliminary injunction. AOL alleged that Advertise.com had infringed AOL’s trademark rights by using the designation ADVERTISE.COM and by using a stylized version of that designation that was confusingly similar to AOL’s stylized ADVERTISING.COM marks. The case was transferred to the Central District of California and the motion for a preliminary injunction was re-filed.
The district court enjoined Advertise.com from using “any design mark or logo that is confusingly similar to the stylized forms of AOL’s ADVERTISING.COM marks” and from using the designation and trade name ADVERTISE.COM or any other name confusingly similar to ADVERTISING.COM. Advertise.com was not enjoined from using its website address “advertise.com.” The court found that AOL was likely to show that the ADVERTISING.COM marks, including the standard text mark, are descriptive and therefore protectable under trademark law. Because it found that the other preliminary injunction factors also weighed in favor of AOL, the district court granted the injunction. The district court denied a stay of the injunction pending appeal, but a Ninth Circuit panel granted a stay as to the portion of the injunction prohibiting Advertise.com from using the designation or trade name ADVERTISE.COM.
Advertise.com appeals the district court’s decision to grant the preliminary injunction, arguing primarily that the standard text mark ADVERTISING.COM is generic. Advertise.com, however, does not contest that part of the preliminary injunction that enjoined it from using any design mark that was confusingly similar to AOL’s stylized marks.
DISCUSSION
We review the district court’s grant of a preliminary injunction for abuse of discretion. Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 876 (9th Cir.2009). The district court “should be reversed if [it] based its decision on an erroneous legal standard or on clearly erroneous findings of fact.” Stormans, Inc. v. Selecky, 586 F.3d 1109, 1119 (9th Cir.2009) (quotation marks omitted). “A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Marlyn Nutraceuticals, 571 F.3d at 877 (quotation marks omitted). The issue of substance in this appeal is whether the district court correctly determined that AOL was likely to succeed on the merits. That issue is controlled by whether the district court correctly determined that ADVERTISING. COM is a descriptive mark. Because ADVERTISING.COM is a registered trademark, “a presumption of validity places the burden of proving genericness upon the defendant,” Advertise.com. Filipino Yellow Pages, Inc. v. Asian Journal Publ’ns Inc., 198 F.3d 1143, 1146 (9th Cir.1999).
Generic terms are those that refer to “the genus of which the particular product or service is a species,” i.e., the name of the product or service itself. Id. at 1147. “To determine whether a term [is] generic, we look to whether consumers understand the word to refer only to a particular producer’s goods or whether the consumer understands the word to refer to the goods themselves.” Yellow Cab Co. v. Yellow Cab of Elk Grove, Inc., 419 F.3d 925, 929 (9th Cir.2005). A descriptive mark describes the qualities or characteristics of a product. See KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 408 F.3d 596, 602 (9th Cir.2005). Generic terms cannot be valid marks subject to trademark protection, whereas a descriptive mark can be valid and protectable if it has acquired “secondary meaning.” Filipino Yellow Pages, 198 F.3d at 1147. “Whether a mark is generic is a question of fact.” Yellow Cab Co., 419 F.3d at 929 (quotation marks omitted).
“Context is critical to a distinctiveness analysis.... [and the level of distinctiveness of a mark] can be determined only by reference to the goods or services that [the mark] identifies.” Lahoti v. VeriCheck, Inc., 586 F.3d 1190, 1201 (9th Cir.2009) (quotation marks omitted). Because the parties do not dispute it on appeal, we accept the district court’s finding that there
are two core facets to AOL’s service offerings under its ADVERTISING.COM marks: (1) courting web publishers in order to provide them with a suite of services including placement of third-party ads on the publisher’s site, with the publisher receiving a share of the revenue generated from such placements, and (2) selling online advertising space and other services such as marketing campaign management services and research services to web marketers.
The parties likewise appear to agree that the genus of these services is “online advertising” or “internet advertising.” AOL’s brief, for example, consistently refers to the type of services it offers under the ADVERTISING.COM mark as “online-advertising services” and refers to the “online-advertising genus.” In addition to reflecting the nature of AOL’s services as described by the district court, taking “online advertising” as the genus reflects how AOL and third parties have portrayed the services offered under the mark.
With this context in mind, we consider whether ADVERTISING.COM conveys only the “genus of which [AOL’s] particular [service] is a species” or whether it is descriptive because it “directly described] the qualities or features of the product.” One Indus., LLC v. Jim O’Neal Distrib., 578 F.3d 1154, 1164 (9th Cir.2009) (quotation marks omitted). Although the distinctiveness inquiry considers the impression conveyed by the mark as a whole, see Filipino Yellow Pages, 198 F.3d at 1148, 1150, we are permitted to begin our inquiry by separately viewing the component parts of the mark. See Lahoti, 586 F.3d at 1201. Accordingly, our first step is to consider the impression conveyed by “advertising” and “.com,” taken separately. “Advertising” is concededly generic and is defined as “the action of calling something (as a commodity for sale, a service offered or desired) to the attention of the public esp. by means of printed or broadcast paid announcement.” Webster’s Third New International Dictionary 31 (2002). The term “.com” is a top-level domain indicator (“TLD”), In re Oppedahl & Larson LLP, 373 F.3d 1171, 1173 (Fed.Cir.2004), and reflects an online commercial organization or refers “generically to almost anything connected to business on the internet.” Taken separately, it is clear that “advertising” and “.com” reflect only the genus of the services offered.
This does not, however, end our inquiry. Although these definitions persuasively suggest that ADVERTISING.COM is understood as generic by the consuming public and we give them significant weight, see Filipino Yellow Pages, Inc., 198 F.3d at 1148, our cases establish that we look to the mark as a whole and that the combination of generic terms may, in some instances, result in a distinctive mark. AOL contends that it is likely to prevail on the merits because the composite of these two generic terms is descriptive and Advertise.com did not provide sufficient evidence of genericness to rebut the presumption of validity.
We disagree. We begin with our familiar “who-are-you/what-are-you” test: “A mark answers the buyer’s questions ‘Who are you?’ ‘Where do you come from?’ ‘Who vouches for you?’ But the [generic] name of the product answers the question ‘What are you?’ ” Id. at 1147 (quotation marks omitted, alteration in original). Applying this test strongly suggests that ADVERTISING.COM is generic. When any online advertising company, including AOL’s competitors, is asked the question “what are you?” it would be entirely appropriate for the company to respond “an advertising.com” or “an advertising dot-com.” See id. at 1151. Likewise, asking one of AOL’s competitors “Could you refer me to an advertising dot-com?”, one would hardly be surprised if they offered their own services. See Yellow Cab Co., 419 F.3d at 929. We see strong evidence of this in the common use of “.com” to refer to internet businesses. For example, the American Heritage Dictionary defines “dot-com” as “of or relating to business conducted on the Internet: dot-com advertising.” American Heritage Dictionary of the English Language 538 (4th ed.2006). That the use of “advertising” and “.com” as a combination to refer to internet advertising is commonplace enough to be used as an example in a dictionary definition strongly suggests that ADVERTISING.COM is generic. See Surgicenters of Am., Inc. v. Med. Dental Surgeries, Co., 601 F.2d 1011, 1018 (9th Cir.1979) (looking, in part, to the natural usage of “surgical” and “centers” as reflected in the composite “Surgicenter”).
There is extensive Federal Circuit precedent in support of our conclusion that the combination of “.com” and “advertising” does not result in a descriptive mark. The Federal Circuit has repeatedly affirmed the Trademark Trial and Appeal Board’s (“TTAB”) findings that marks similar to ADVERTISING.COM are generic. See In re Hotels.com, 573 F.3d 1300, 1304 (Fed.Cir.2009) (HO TELS.COM); In re 1800Mattress.com IP, LLC, 586 F.3d 1359, 1361-62 (Fed.Cir.2009) (MATTRESS.COM); In re Reed Elsevier Props. Inc., 482 F.3d 1376, 1378 (Fed.Cir.2007) (LAWYERS.COM). The Federal Circuit has been explicit that adding “.com” or another TLD to an otherwise unprotectable term will only in rare circumstances result in a distinctive composite. See In re Steelbuilding.com, 415 F.3d 1293, 1297 (Fed.Cir.2005) (“Only in rare instances will the addition of a TLD indicator to a descriptive term operate to create a distinctive mark.”); In re Oppedahl & Larson LLP, 373 F.3d at 1174-76. This position comports with existing Ninth Circuit law explaining that, in the context of likelihood of confusion, the addition of “.com” to a mark generally does not strengthen the mark. See Brookfield Commc’ns. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1055 (9th Cir.1999).
AOL’s attempt to draw an analogy to In re Steelbuilding.com is unavailing. Although the Federal Circuit in that case vacated the TTAB’s finding that the mark STEELBUILDING.COM was generic, In re Steelbuilding.com, 415 F.3d at 1301, the court’s reasoning is inapplicable here. In large part, that decision rested on the Federal Circuit’s conclusion that there was insufficient evidence that the composite STEELBUILDING was generic for “steel buildings” and not, as AOL asserts, on a finding that the addition of “.com” to the mark resulted in a distinctive composite. See id. at 1298-99. Given the generic nature of the term “advertising,” In re Steelbuilding.com reflects a substantially different case for this reason alone. Moreover, to the extent that the Federal Circuit also concluded that STEELBUILD-ING.COM represented one of the “rare instances” in which the addition of a TLD “expanded the meaning of the mark,” it did so because the services provided under the mark went far beyond “the mere sale of steel buildings.” Id. at 1299. The addition of “.com” conveyed a unique and unexpected character of the services related to the internet: allowing the consumer to use an interactive online feature to design, determine the price of, and then purchase the building. See id. at 1298-99. In contrast, the services offered under ADVERTISING.COM remain, at core, the simple provision of online advertising services. This is not the sort of “unusual case” reflected by In re Steelbuilding.com. Id. at 1298-99. That AOL uses a mark incorporating a TLD in connection with offering a service related to and commonly provided on the internet — the use of the internet comprising, in this case, an element of the genus of the service — renders this a very different set of facts. Cases such as In re Hotels.com, 573 F.3d at 1304, are far more analogous to the present appeal than In re Steelbuilding, com.
AOL also attempts to rely on In re Oppedahl & Larson LLP, a case in which the Federal Circuit held that PATENTS.COM was not entitled to protection because it was “merely descriptive.” 373 F.3d at 1173, 1177. AOL argues that the Federal Circuit found that the mark PATENTS.COM was not generic, and, therefore, that ADVERTISING.COM is also not generic. AOL, however, misreads In re Oppedahl. The issue before the court in that case was whether the TTAB had correctly concluded that the mark was not protectable because it was merely descrip tive; the court had no occasion to consider whether the mark was generic. See id. We therefore do not consider the Federal Circuit’s determination that the PATENTS.COM was “merely descriptive” as an indication that it even considered, let alone concluded, that the mark was not generic. That issue was not before the court.
Further support for finding ADVERTISING.COM generic is evident in how the mark has been used in other domain names. See In re Hotels.com, 573 F.3d at 1304; In re 1800Mattress.com, 586 F.3d at 1363; In re Reed Elsevier Props. Inc., 482 F.3d at 1380. Advertise.com points to thirty-two separate domain names that incorporate “advertising.com,” such as “travel-advertising.com,” “aplusadvertising.com” and “domainadvertising.com.” The Federal Circuit has found such evidence is sufficient to prove genericness under a clear evidence standard when the elements of the mark are highly generic, even in the face of substantial rebuttal evidence. See, e.g., In re Hotels.com, 573 F.3d at 1304-06 (explaining that sixty four declarations that the mark was not generic and a customer survey did not negate the TTAB’s ultimate conclusion of genericness). We also observe that the PTO has rejected as generic other, nearly identical marks, such as ADVERTAIS.COM, and AOL’s own AD.COM mark.
AOL briefly argues that the addition of a TLD expands the meaning of a mark because a consumer will typically understand a mark with a TLD as an internet domain name. Noting that only a single entity can hold a domain name at any given time, AOL contends that marks that communicate domain names, such as ADVERTISING.COM, intrinsically denote source. Because “advertising,” standing alone, is an archetype of a generic term, were we to follow AOL’s logic we would be hard pressed to think of a ease in which the addition of a TLD would not result in a protectable mark. AOL is in effect proposing a per se rule that the addition of a TLD to a generic term results in a protect-able mark. The PTO, TTAB, and Federal Circuit have all rejected this position, for good reason. See In re Hotels.com, 573 F.3d at 1305-06; In re Oppedahl & Larson LLP, 373 F.3d at 1176-77; In re Hotels.com, L.P., 87 U.S.P.Q.2d 1100, 1106 (T.T.A.B.2008); TMEP §§ 1209.03(m), 1215.02(a).
Notwithstanding that only one entity can hold a particular domain name, granting trademark rights over a domain name composed of a generic term and a TLD grants the trademark holder rights over far more intellectual property than the domain name itself. In addition to potentially covering all combinations of the generic term with any TLD (e.g., “.com”; “.biz”; “.org”), such trademark protection would potentially reach almost any use of the generic term in a domain name. For example, AOL might bring suit, alleging infringement of its ADVERTISING.COM mark, against any one of the owners of the thirty-two domain names using some form of “advertising.com.” This would make it much more difficult for these entities to accurately describe their services. “To allow trademark protection for generic terms, ... even when [they] have become identified with a first user, would grant the owner of the mark a monopoly, since a competitor could not describe his goods as what they are.” Surgicenters, 601 F.2d at 1017 (quotation marks omitted). A major advantage that AOL would get from trademark protection of ADVERTISING.COM is to foreclose competitors from using a vast array of simple, easy to remember domain names and designations that describe the services provided. The effect is similar to that which would result if trade-, mark law embraced the obviously generic ADVERTISING COMPANY as a protect-able mark because it “ha[d] become identified with a first user.” Id.
Relatedly, the primary reason that a consumer is likely to associate a domain name with a source is that the second-level domain indicator (in this case the “advertising” component of “advertising.com”) is distinctive. See Brookfield Commc’ns., 174 F.3d at 1055; Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1325 (9th Cir.1998). When a generic term is used as the second-level domain indicator, however, it is far less clear that the consumer understands that the website corresponds to a brand or is seeking out a particular source. “Trademark law requires evaluation of a proposed mark to ascertain the commercial impression conveyed in light of the goods or services associated with the mark, not a simple check for ownership of an Internet address.” In re Oppedahl & Larson LLP, 373 F.3d at 1177; see also TMEP §§ 1209.03(m), 1215.02(a).
This does not appear to be the “rare case” in which the addition of a TLD to a generic term results in a distinctive mark. Rather, the record before us demonstrates that Advertise.com is likely to rebut the presumption of validity and prevail on its claim that ADVERTISING.COM is generic. How, then, did the district court reach the opposite conclusion? Examining its decision, we conclude that it did so due to an error of law and therefore abused its discretion in granting the injunctive relief challenged here. Stormans, Inc., 586 F.3d at 1119.
The district court’s analysis of whether ADVERTISING.COM is generic is brief and never explicitly states the standard the court applied. The explanation of its conclusion that ADVERTISING.COM is descriptive, however, convinces us that it did not apply the correct legal standard to the facts before it. The court’s reasoning appears in a single sentence that reads “The term ‘advertising’ describes the services that AOL offers, and the ‘.com’ either indicates a commercial entity, use of the internet in association with the mark, or describes the internet-related nature of AOL’s services.”
We conclude that the district court did not correctly apply the legal standard for determining whether a mark is generic. Even if we credit the district court’s rationales as factually accurate — i.e., if we assume that the addition of “.com” serves the three identified functions — ADVERTIS ING.COM still conveys only the generic nature of the services offered. That “.com,” when added to a generic term, “indicates a commercial entity” does not suffice to establish that the composite is distinctive, much as AOL would not have created a protectable mark by adopting the designation “Advertising Company.” See Goodyear’s Rubber Mfg. Co. v. Goodyear Rubber Co., 128 U.S. 598, 602-03, 9 S.Ct. 166, 32 L.Ed. 535 (1888) (holding that the addition of “Company” to an otherwise generic mark does not render the mark distinctive); see also In re Oppedahl & Larson LLP, 373 F.3d at 1175, 1177 (explaining that, although not a perfect analogy, TLDs are similar to entity designations such as “Corp.”).
As to the remaining two rationales, neither suggests that ADVERTISING.COM does anything more than convey the genus of the services offered under the mark: internet advertising. A mark is not descriptive merely because it conveys some minimal information about a product or service; if all it “describes” is the common name of the product or service, it is not protectable as a trademark. See Filipino Yellow Pages, 198 F.3d at 1147 (“Courts sometimes refer to generic terms as ‘common descriptive’ names, the language used in the Lanham Act for terms incapable of becoming trademarks.”). Rather, a descriptive mark conveys the “qualities or characteristics of a good or service.” Park’N Fly Inc. v. Dollar Park & Fly, 469 U.S. 189, 194, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985) (emphasis added); see Yellow Cab Co., 419 F.3d at 927 (“Descriptive marks define a particular characteristic of the product....” (quotation marks omitted)). The mark at issue in Filipino Yellow Pages is analogous to ADVERTISING.COM in this respect. In that case, the use of “Filipino” in the mark, although arguably describing the content of the “Yellow Pages,” still resulted in a mark that conveyed only the genus of the product offered. See Filipino Yellow Pages, 198 F.3d at 1148, 1151; see also Mil-Mar Shoe Co. v. Shonac Corp., 75 F.3d 1153, 1157-58 (7th Cir.1996). In the present case, the use of “.com” likewise only conveys the genus of the services offered under AOL’s mark.
We have already stated that we create no per se rule against the use of domain names, even ones formed by combining generic terms with TLDs, as trademarks. Nor, given the posture of this appeal, do we completely foreclose the possibility that AOL might prove its case on a fully developed record. See Marlyn Nutraceuticals, 571 F.3d at 876-77. It is not inconceivable but certainly highly unlikely that consumer surveys or other evidence might ultimately demonstrate that AOL’s mark is valid and protectable. However, on the record before us, we conclude that the district court abused its discretion in determining that Advertise.com could not meet its burden of rebutting the presumption of validity and that AOL was, therefore, likely to prevail on the merits. Having so concluded, we need not consider the three remaining preliminary injunction factors. See Doe v. Reed, 586 F.3d 671, 681 n. 14 (9th Cir.2009), aff'd - U.S. -, 130 S.Ct. 2811, 177 L.Edüd 493 (2010).
CONCLUSION
We reverse the district court and vacate the preliminary injunction to the extent that it enjoined Advertise.com from using “the designation and trade name ADVERTISE.COM or any other designation or trade name that is confusingly similar to AOL’s ADVERTISING.COM marks.” Because Advertise.com did not appeal the injunction as to its use of the stylized marks or logos that the district court found to be confusingly similar to AOL’s stylized marks, we leave that portion of the injunction undisturbed.
INJUNCTION VACATED IN PART.
. AOL had applied for trademark registration over the standard text mark ADVERTISING.COM, but abandoned this registration.
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11701340-27970 | BECKER, Chief Judge.
OPINION OF THE COURT
Curtis Evans appeals from his conviction on various fraud-related charges. The primary question presented, which arises out of Evans’ judgment of sentence, is whether the district court erred in conditioning his supervised release on reimbursement of the cost of court-appointed counsel. See 18 U.S.C. § 3583(d). We conclude that it did, and therefore vacate that portion of the judgment. We also remand for further sentencing proceedings because of the inadequacy of the district court’s findings supporting its determination of the amount of loss from fraudulent ■ conduct. See U.S.S.G. § 2F1.1(b)(1) (1997).
I.
A federal grand jury returned a forty-six count indictment against Evans and eleven other individuals. Evans was convicted by a jury of nineteen counts of mail fraud in violation of 18 U.S.C. § 1341; two counts of use of a fictitious name to commit mail fraud in violation of 18 U.S.C. § 1342; three counts of wire fraud in violation of 18 U.S.C. § 1343; and one count of conspiracy in violation of 18 U.S.C. § 371. The fraud inhered in a scheme of staging automobile accidents and then submitting insurance claims for non-existent medical treatment. The scheme, which operated in New York, Pennsylvania, and New Jersey, was masterminded by Alexander Grichener, but Evans played an apparently significant role in its Pittsburgh, Pennsylvania operations, particularly those involving the Keystone Medical clinic. Evans was sentenced to forty-two (42) months imprisonment and three (3) years supervised release for each count, to run concurrently; a $1250 special assessment; and payment of $2500 in restitution. The supervised release was conditioned upon the reimbursement of the costs of Evans’ court-appointed counsel, in a monthly amount of not less than ten percent of his gross monthly income.
During the trial it was revealed that Evans’ financial affidavit, submitted as part of his application for court-appointed counsel, inaccurately represented Evans’ and his wife’s annual joint income as $48,000, when their actual joint income was $104,000. Evans testified that the court clerk filling out the affidavit had asked about joint take-home pay ($48,000), not gross pay ($104,000). At the sentencing hearing the court found that Evans had made “material misstatements” in his affidavit, and ordered Evans to repay the cost of his attorney as a condition of supervised release. Upon further questioning by Evans’ counsel, the court explained that the condition was imposed because Evans “had enough income that he was not entitled to a Public Defender,” and that the condition was not punishment for the misrepresentation.
The presentence investigation report stated that the amount of loss incurred by the insurance companies was $2,851,872.42, and thus exceeded $2.5 million for sentencing guideline purposes, A government agent testified at the sentencing hearing that he had calculated the amount of loss based on insurance company reimbursement checks deposited to the bank accounts of the eleven medical clinics and supply companies involved in the scheme. On cross-examination, the agent indicated that he did not know whether every deposit was associated with a staged accident. The district court then found “from the preponderance of the evidence [at the sentencing hearing] and the trial ... that the amount of loss as a result of the conspiracy for which defendant knowingly took part and was expected and foreseeable exceeded] 2.5 million dollars.” Accordingly, Evans’ base offense level of six was increased thirteen levels pursuant to U.S.S.G. § 2F1.1(b)(1). Evans filed this timely appeal.
II.
Evans contends that the conditioning of his supervised release on the reimbursement of counsel fees is violative of the supervised release statute, 18 U.S.C. § 3583. This contention was not raised in the district court, and thus we review it under the familiar plain error standard set forth infra in Part II.D. For the reasons that follow, we find that the district court committed plain error requiring the exercise of our discretion to vacate the judgment.
The supervised release statute is not open-textured. An order may be a condition of supervised release only to the extent that it:
(1) is reasonably related to the factors set forth in § 3553(a)(1), (a)(2)(B), (a)(2)(C), and (a)(2)(D);
(2) involves no greater deprivation of liberty than is reasonably necessary for the purposes set forth in § 3553(a)(2)(B), (a)(2)(C), and (a)(2)(D); and
(3) is consistent with any pertinent policy statements issued by the Sentencing Commission pursuant to 28 U.S.C. § 994(a).
18 U.S.C. § 3583(d). Section 3553(a), referenced in paragraphs (1) and (2) above, provides for consideration of:
(1) the nature and circumstances of the offense and the history and characteristics of the defendant; [and]
(2) the need for the sentence imposed—
(B) to afford adequate deterrence to criminal conduct;
(C) to protect the public from further crimes of the defendant; and
(D) to provide the defendant with needed educational or vocational training, medical care, or other correctional treatment in the most effective manner.
The question before us is whether a reimbursement order authorized by the Criminal Justice Act (“CJA”), 18 U.S.C. § 3006A, which permits a court to order repayment of fees for appointed counsel whenever it finds that funds are available, satisfies the requirements of the supervised release statute. This is a question of first impression for us. The only other court of appeals to have addressed this issue in a published opinion was the Ninth Circuit in United States v. Eyler, 67 F.3d 1386 (9th Cir.1995). The Eyler court concluded that a condition requiring reimbursement of attorney fees violated the supervised release statute because it was not related to the defendant’s underlying criminal conduct of unlawful possession of firearms and “simply bears no relationship” to the pertinent statutory goals. See 67 F.3d at 1394; see also United States v. Lorenzini, 71 F.3d 1489, 1492-93 (9th Cir.1995) (relying on Eyler to conclude without discussion that reimbursement of counsel fees is not related to offense of bank fraud). Evans contends that his reimbursement condition violates the first prong of the supervised release statute because it is not “reasonably related” to the nature and circumstances of his insurance fraud or to his history and characteristics, and does not further the statutory goals of deterrence, protection, and rehabilitation. See 18 U.S.C. § 3583(d)(1); 18 U.S.C. § 3553(a)(1), (a)(2)(B)-(D).
A.
As to the factors identified in § 3553(a)(1), we considered a cognate question in United States v. Spiropoulos, 976 F.2d 155, 165 (3d Cir.1992), where we held that “[rjecouping the costs of imprisonment has nothing to do with the nature or the seriousness of the offense, and hence is not authorized under § 3553(a)(1).” In the same vein, reimbursement of counsel fees is not related in any tangible way to insurance fraud. Furthermore, the reason for imposing the condition — Evans’ financial ability to obtain a private attorney — is not a relevant “nature and circumstance” of insurance fraud nor, in our view, is it a “history and characteristic” of Evans himself. Even if Evans had the finances to afford an attorney because of profits attained from the fraudulent insurance scheme in which he was involved, we do not believe that the profitable nature of an offense alone is sufficient to establish a reasonable relationship between a reimbursement condition of supervised release and the offense of the defendant. Otherwise, any financially profitable crime, such as robbery or drug dealing, would necessarily be related to the repayment of counsel fees (or any other financial condition) merely because of the likely financial gain from the crime and regardless of the specific “nature and circumstances” of the offense, resulting in a defendant’s “ability to pay” overriding all other relevant considerations.
The government submits that Evans’ material misstatements on his financial affidavit, which qualified him for appointment of counsel, are directly related to his filing of fraudulent insurance claims because they represent a continuation of the same criminal conduct. It is possible that without the misstatements Evans may not have been eligible for court-appointed counsel, 18 U.S.C. § 3006A(b), or would have otherwise been subject to a reimbursement order, see discus sion infra. Furthermore, making misstatements on an affidavit is similar in nature and character to making fraudulent insurance claims in that both acts involve deception and lying. However, as we have explained, the district court made it quite clear that the reimbursement condition was not imposed because of Evans’ misstatements, but rather because of his financial ability.
Moreover, even if the district court had imposed the reimbursement condition because of Evans’ misstatements, the condition is nonetheless not reasonably related to the statutory goals of § 3553(a)(2)(B)-(D). As in Spiropoulos, where we found no “reason to believe” that assessing the costs of imprisonment acts as a deterrent, protects the public, or rehabilitates the defendant, see 976 F.2d at 165-66, the government has presented no evidence (nor made any argument) that the reimbursement condition would serve any of these purposes. We conclude that requiring the repayment of counsel fees incurred in defending a prosecution would not likely deter crime, protect the public, or serve any rehabilitative function. See 18 U.S.C. § 3553(a)(2)(B)-(D); Eyler, 67 F.3d at 1394. But Cf. United States v. Turner, 998 F.2d 534, 536-37 (7th Cir.1993) (concluding that assessment of imprisonment costs deters criminal conduct).
B.
The government also relies on cases under the old Federal Probation Act, 18 U.S.C. § 3651 (repealed 1984), in which courts upheld the imposition of repayment of attorney fees as a condition of probation, for its contention that the reimbursement condition satisfies the supervised release statute. The cases are inapposite because § 3651 is materially different from the supervised release statute. The language of § 3651 was “broad and inclusive” and provided the sentencing court with an “exceptional degree of flexibility.” United States v. Gurtunca, 836 F.2d 283, 288 (7th Cir.1987) (quoting United States v. Missouri Valley Constr. Co., 741 F.2d 1542, 1552 (8th Cir.1984) (Gibson, John R., J., concurring and dissenting), and United States v. Alexander, 743 F.2d 472, 479 (7th Cir.1984)). See also United States v. Beros, 833 F.2d 455, 467 (3d Cir.1987) (recognizing that § 3651 grants broad discretion to district courts). The only limitation on this power was the court-developed “reasonable relationship to the treatment of the accused and the protection of the public.” United States v. Santarpio, 560 F.2d 448, 455 (1st Cir.1977) (quoting United States v. Alarik, 439 F.2d 1349, 1351 (8th Cir.1971)).
In contrast, the supervised release statute is limited by the statutory requirements of § 3553(a)(1) and (a)(2)(B)-(D), see 18 U.S.C. § 3583(d), and thus the imposition of conditions on supervised release must satisfy a more exacting standard. To the extent that the broad language of § 3651 may have been constrained by the same factors identified in § 3553(a)(2)(B)-(D), see Beros, 833 F.2d at 467 (interpreting § 3651 as granting discretion to impose conditions reasonably related to rehabilitation of defendant and protection of public), the supervised release statute is nonetheless further restricted by § 3553(a)(1). See supra Part II.A. Consistent with these observations, we note support for our position in the Guide to Judiciary Policies and Procedures, promulgated by the Administrative Office of the United States Courts, which states:
Subsection (f) of [the CJA] does not authorize a judicial officer to require reimbursement as a condition of probation, and the Judicial Conference believes that reimbursement of the cost of representation under the Act should not be made a condition of probation under any other authority.
VII Guide to Judiciary Polices and Procedures: Appointment and Payment of Counsel ¶ 2.22E (1997). In the context of the judiciary guidelines, we believe there is no difference between probation and supervised release because conditions of probation are now statutorily restricted in the same manner as conditions of supervised release. Compare 18 U.S.C. § 3563(b) (probation statute) with 18 U.S.C. § 3583(d) (supervised release statute).
C.
For the foregoing reasons, the district court clearly violated the first requirement of the supervised release statute when it imposed a condition that had no reasonable relationship to the factors identified in # 8E8E # 3553(a)(1) and (a)(2)(B)-(D). This, of course, is not to suggest that the district court lacks power to order the reimbursement of the cost of counsel fees, because the CJA provides for such an order. District courts frequently impose such orders at the time counsel is appointed, and can in fact do so at any time. Furthermore, if a defendant fails to satisfy such an order, the district court can seek enforcement by instituting contempt proceedings, or by entering a judgment against the defendant which will act as a hen against his property. See Lorenzini, 71 F.3d at 1493. All we hold is that reimbursement of counsel fees could not be effected in this case by making it a condition of supervised release.
D.
We must stih decide whether the district court’s mistake amounts to a plain error that warrants the exercise of our discretion to correct. We believe that it does. As noted above, we review for plain error. See Fed.R.Crim.P. 52( b); United States v. Olano, 507 U.S. 725, 731-32, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993). “There must be an ‘error’ that is ‘plain’ and that ‘affect[s] substantial rights.’ ” Olano, 507 U.S. at 732, 113 S.Ct. 1770 (quoting United States v. Young, 470 U.S. 1, 15, 105 S.Ct. 1038, 84 L.Ed.2d 1 (1985) (in turn quoting United States v. Atkinson, 297 U.S. 157, 160, 56 S.Ct. 391, 80 L.Ed. 555 (1936))). The deviation from a legal rule is “error,” and an error is “plain” if it is “clear” or “obvious.” Id. at 732-34, 113 S.Ct. 1770. In most cases, an error affects substantial rights if it is prejudicial, i.e., “affected the outcome of the district court proceedings.” Id. at 734, 113 S.Ct. 1770. When such an error exists, “the Court of Appeals has authority to order correction, but is not required to do so.” Id. at 735, 56 S.Ct. 391. We will exercise our discretion and vacate the sentence if the plain error affecting substantial rights also “seriously affect[s] the fairness, integrity, or public reputation of judicial proceedings.” United States v. Retos, 25 F.3d 1220, 1229 (3d Cir.1994) (alteration in original) (quoting Olano, 507 U.S. at 732, 113 S.Ct. 1770).
First, the district court clearly violated the supervised release statute, and thus committed error. See Olano, 507 U.S. at 732-34, 113 S.Ct. 1770. The government argues that any purported error was not plain because we had not yet addressed the propriety of a reimbursement order as a condition of supervised release, and because in United States v. Chorney, 63 F.3d 78, 83 (1st Cir.1995), the First Circuit reviewed a similar reimbursement order for compliance with the CJA, but did not address the restrictions of the supervised release statute. These contentions are without merit. Neither the absence of circuit precedent nor the lack of consideration of the issue by another court prevents the clearly erroneous application of statutory law from being plain error.
This error affects substantial rights because, if Evans fails to reimburse the cost of his attorney, he would be subject to possible incarceration for all or part of the term of supervised release. See 18 U.S.C. § 3583(e)(3); United States v. Dozier, 119 F.3d 239, 244 (3d Cir.1997) (error affects substantial right to liberty when it extends period of restriction on liberty and of governmental supervision). Furthermore, imposing a sentence not authorized by law seriously affects the fairness, integrity, and reputation of the proceedings. Dozier, 119 F.3d at 244-45. Because the plain error standard is met, we will exercise our discretion and direct that the district court vacate the portion of the sentence conditioning Evans’ supervised release on the repayment of counsel fees.
III.
Evans also contends that the district court erred in determining that the amount of loss from fraudulent conduct, for purposes of § 2F1.1 of the sentencing guidelines, exceeded $2.5 million. Evans presented this objection in the district court. Therefore our review of the district court’s interpretation of “loss” under § 2F1.1 is plenary, and our review of the district court’s application of the guidelines is governed by the clearly erroneous standard. See United States v. Collado, 975 F.2d 985, 990 (3d Cir.1992). Pursuant to § 2Fl.l(b), the specific offense characteristics provision for fraud-related crimes, a defendant’s base offense level is increased by thirteen levels when the amount of loss resulting from the fraudulent conduct exceeds $2.5 million. The “loss” is the “value of the money, property, or services unlawfully taken.” U.S.S.G. § 2F1.1, application note 7. Although “the loss need not be determined with precision,” the court must make a “reasonable estimate of the loss, given the available information.” U.S.S.G. § 2F1.1, application note 8.
A.
Evans first submits that the court improperly considered funds obtained from legitimate insurance claims submitted on behalf of legitimate accident victims. We ad dressed a similar issue in United States v. Maurello, 76 F.3d 1304 (3d Cir.1996), where the defendant was convicted of mail fraud in connection with the unauthorized practice of law. We considered the question whether money paid for satisfactory legal services performed by an unlicensed attorney should be considered “loss” for purposes of § 2F1.1. Id. at 1308. We opined that a proper measurement of actual loss must take into account the “nature and degree of the harm caused by the offense,” and that the degree of harm, in turn, depends on the quality of services rendered. Id. at 1311-12 (quoting 28 U.S.C. § 994(c)(3)). Accordingly, we wrote:
[t]o the extent that the unauthorized services provided by [the] defendant have not harmed their recipients, but to the contrary have benefited them, we conclude that [the] defendant’s base offense level should not be enhanced.
Id. at 1312.
Thus, the actual loss determination must be predicated upon the harm caused by Evans’ offenses. Evans was convicted of fraud and conspiracy in connection with the unauthorized and fraudulent submission of insurance claims. To the extent that this activity harmed the insurance companies, Evans’ sentence should be augmented. However, to the extent that any claims were legitimate and insurance companies were properly obligated to pay them, there was no harm and Evans’ sentence should not be augmented.
The government contends that Evans presented no evidence of legitimate patients at the time of his involvement in the scheme, and that to the extent there were any legitimate accidents, the claims were inflated. The burden, however, is on the government to prove by a preponderance of the evidence the facts in support of a sentence enhancement; the defendant does not have to “prove the negative” to avoid the enhanced sentence. United States v. McDowell, 888 F.2d 285, 291 (3d Cir.1989). Although the burden of production shifts to the defendant once the government has made out a prima facie case, the ultimate burden of persuasion rests with the government. Fed.R.Crim.P. 32(c); United States v. Raven, 39 F.3d 428, 434-35 (3d Cir.1994). Accordingly, the burden was on the government to prove that bank deposits sufficient to establish the basis for the loss calculation were for illegitimate or inflated claims. Only when the government had made such a prima facie showing was Evans required to come forward with evidence tending to cast doubt on the government’s evidence. See Raven, 39 F.3d at 434-35.
The evidence of fraudulent claims was considerable, and it may be that the government made a sufficient showing that there were no legitimate claims, or that the fraudulent claims alone exceeded $2.5 million. However, despite the extensive record, the district court did not make any findings on the record as to the basis for its conclusion that the loss exceeded $2.5 million. The district court only made a conclusory one sentence statement regarding its loss determination. Although the district court’s determination need not be exact and can be based on the trial record as well as the sentencing record, see Fed.R.Crim.P. 32(c), we should not be asked to rummage through the entire record without guidance from the district court as to the legal and factual basis for its determination. In light of our remand on the supervised release issue, we direct the district court to make findings on the record as to the actual loss incurred from fraudulent claims.
B.
Evans also claims that since his activity was limited to a single clinic, the losses from the other ten clinics were not foreseeable and should not be attributed to him. The district court, in making adjustments based on specific offense characteristics, must take into account all conduct relevant to the offense. See U.S.S.G. § lB1.3(a). This includes “all reasonably foreseeable acts and omissions of others in furtherance of [a] jointly undertaken criminal activity.” U.S.S.G. § lB1.3(a)(l)(B). In making the accomplice attribution assessment, the court must consider whether the loss resulting from the actions of coeonspirators was (1) “in furtherance of the jointly undertaken criminal activity,” (2) within “the scope of the criminal activity the ... defendant agreed to jointly undertake,” and (3) “reasonably foreseeable in connection with that criminal activity.” U.S.S.G. § 1B1.3, application note 2. In explaining the operation of § 1B1.3 in Collado, we stated that “it is not enough to merely determine that the defendant’s criminal activity was substantial.” 975 F.2d at 995. The sentencing court must conduct “a searching and individualized inquiry into the circumstances surrounding each defendant’s involvement in the conspiracy” in order to “ensure that the defendant’s sentence accurately reflects his or her role” and agreement. Id.
The district court concluded, without making any references on the record to specific evidence, that the losses caused by the eleven clinics were “a result of the conspiracy ... and foreseeable” to Evans. This finding is inadequate to support the sentence because it appears to focus on the scope of the conspiracy as a whole, rather than on the scope of Evans’ undertaking and involvement as required. See id. at 991. The conspiracy, which involved eleven medical clinics and supply companies owned and operated by Alexander Grichener and Vladimir Shats, was quite extensive. There is evidence that clearly indicates that Evans was involved with Keystone Medical, and which also suggests that Evans was involved with other clinics. But, there is no indication that the district court made a “searching and individualized inquiry” into the extent of Evans’ involvement, or the extent to' which the co-conspirators’ conduct was in furtherance of and foreseeable from Evans’ undertaking. Consequently, on remand, the district court should conduct further individualized fact finding as to the accomplice conduct attributable to Evans.
IV.
For the foregoing reasons, we will vacate the judgment and remand for further sentencing proceedings consistent with this opinion.
. Additionally, Evans submits that plain error was committed by the seating of a juror who purportedly expressed an inability to be fair, and the wasting of a peremptory challenge on another juror who also purportedly expressed an inability to be fair. These contentions are unfounded. Alternatively, Evans contends that trial counsel’s failure to move to strike either of these jurors constituted ineffective assistance of counsel. We will not address this claim on direct appeal. See United States v. Cocivera, 104 F.3d 566, 570 (3d Cir.1996) (recognizing that claims of ineffective assistance of counsel are "ordinarily more appropriate for collateral attack”).
. Evans' offense level was further increased two levels, pursuant to U.S.S.G. § 2F1.1(b)(2), to a final level of twenty-one because the scheme involved multiple victims.
. The district court had jurisdiction pursuant to 18 U.S.C. § 3231. We exercise appellate jurisdiction under 28 U.S.C. § 1291.
. Section 3006A(f) provides in part:
Whenever ... the court finds that funds are available for payment from or on behalf of a person furnished representation, it may authorize or direct that such funds be paid to the appointed attorney, to the bar association or legal aid agency or community defender organization which provided the appointed attorney, ... or to the court for deposit in the Treasury as a reimbursement to the appropriation ....
. Section 3651 provided in part:
[W]hen satisfied that the ends of justice and the best interest of the public as well as the defendant will be served thereby, [the court] may suspend the imposition or execution of sentence and place the defendant on probation for such period and upon such terms and conditions as the court deems best.
. Although not at issue in this case, the imposition of conditions under the current probation statute likely also necessitates a more restrictive analysis than was required under the old statute. See 18 U.S.C. § 3563(b) (requiring discretionary conditions to be reasonably related to factors set forth in § 3553(a)(1), (2)); Lorenzini, 71 F.3d at 1493-94 (considering § 3553(a)(1) and (2) factors in rejecting reimbursement of counsel fees as condition of probation).
. Evans has also relied on United States v. Cottman, 142 F.3d 160 (3d Cir.1998), where we addressed the question whether the repayment of "buy-money” to the FBI as a condition of supervised release was authorized by the supervised release statute. We determined that the condition was "restitution," and as such was governed by § 3563(b)(2) permitting “restitution to the victim,” but concluded that the definition of "victim" under § 3563(b) was parallel to the definition under the Victim Witness Protection Act, which precluded the government as "victims." Id. Accordingly, we held that the repayment condition was unlawful. Id. Evans-seeks aid from Cottman by arguing that since there is no authorization for the reimbursement condition under § 3553, the only possible authorization would be from § 3563(b), but that the only possibly applicable § 3563(b) provision is paragraph (b)(2) permitting "restitution to the victim,” which Cottman held did not apply to the government. The government responds that Cottman is inapplicable to the case at bar because it involved restitution, whereas this case involves reimbursement. We agree with the government, and accordingly do not rest our judgment on Cottman.
. The district court may, as we mentioned above, impose a reimbursement order independent of supervised release if it “finds that the person is financially able to obtain counsel or to make partial payment for the representation” or "finds that funds are available for payment from or on behalf of a person furnished representation.” 18 U.S.C. § 3006A(c), (f). The focus is on the defendant's present ability to pay for his representation. See 18 U.S.C. § 3006A(c) (referring to person that "is” financially able to obtain counsel); 18 U.S.C. § 3006A(f) (referring to funds that "are” available); United States v. Jimenez, 600 F.2d 1172, 1174 (5th Cir.1979) (recognizing that statute is written in present tense).
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10513650-10281 | BEAM, Circuit Judge.
Dennis Laverne English appeals from the district court’s denial of his 28 U.S.C. § 2255 habeas corpus petition. We affirm.
I. BACKGROUND
English was convicted of possession with intent to distribute cocaine base in violation of 21 U.S.C. § 841(a)(1), and of conspiracy to distribute cocaine base in violation of 21 U.S.C. § 846. At trial, the chief evidence against English was the testimony of the arresting officers and of his co-conspirator, Terry Robinson. At the time of arrest, Robinson possessed a canister containing 15 rocks, or 4.9 grams of cocaine base. Officer White testified that English swallowed something as he was being arrested, despite an order to spit out whatever was in his mouth. Based on the combined testimony of the officers and Robinson, the district court found that English had swallowed a number of rocks of cocaine base. For sentencing purposes the district court concluded that, including the amount that he swallowed, English was responsible for five grams or more of cocaine base. This finding, in conjunction with English’s prior drug conviction, triggered a ten-year mandatory minimum sentence under 21 U.S.C. § 841 (b)(1)(B)(iii).
English appealed his convictions, and we affirmed. United States v. English, No. 90-2169, Mem.Op., 938 F.2d 185 (8th Cir. March 26, 1991) (per curiam) (unpublished). English then filed this habeas action. The district court ruled against English on all claims. English appeals.
II. DISCUSSION
English raises three claims in his habeas petition. First, he alleges that newly discovered evidence reveals that the government presented perjured testimony at trial and at sentencing. Second, he argues that the evi dence proffered at his sentencing hearing was not sufficient for the court to find him responsible for more than five grams of cocaine base. Finally, he alleges constitutionally ineffective assistance of counsel at trial.
A. Newly Discovered Evidence
English claims that two sets of newly discovered evidence undermine the validity of his convictions. First he alleges that evidence discovered after trial reveals that Robinson’s testimony was perjured. Second, English claims that newly discovered evidence of misconduct by the arresting officers warrants a new trial.
1. Co-conspirator’s testimony
As support for his perjury contentions, English submitted affidavits to the district court from two of Robinson’s cellmates. These affidavits alleged that Robinson told them that he lied about the ownership of the cocaine base while testifying in court. In addition English asserted that Robinson lied when he testified that the money in his possession at the time of his arrest was earned helping a friend move. As support for this second contention, English introduced evidence that Robinson’s friend’s “new address” was in fact a vacant lot. English alleged that Robinson’s statement was therefore a falsehood and also alleged that had the govern-' ment checked the veracity of Robinson’s testimony they would inevitably have discovered the falsehood. The district court rejected this claim of newly discovered evidence, and denied English’s motion for a new trial.
We review a district court’s refusal to grant a new trial for abuse of discretion. United States v. Gustafson, 728 F.2d 1078, 1084 (8th Cir.), cert. denied, 469 U.S. 979, 105 S.Ct. 380, 83 L.Ed.2d 315 (1984). When newly discovered evidence is the ground for a section 2255 motion, the district court must apply a substantive standard that includes five prerequisites: (1) the evidence must have been discovered after the trial; (2) the failure to discover the evidence must not be attributable to a lack of diligence on the part of the petitioner; (3) the evidence must not be merely cumulative or impeaching; (4) the .evidence must be material; and, (5) the evidence must be likely to produce an acquittal if a new trial is granted. Lindhorst v. United States, 658 F.2d 598, 602 (8th Cir.1981), cert. denied, 454 U.S. 1153, 102 S.Ct. 1024, 71 L.Ed.2d 309 (1982).
A modified test is applied, however, when the newly discovered evidence involves a claim of perjury by prosecution witnesses. Under this relaxed standard, a petitioner need only prove “any reasonable likelihood that the false testimony could have affected the judgment of the jury.” Id. (citations omitted); United States v. Runge, 593 F.2d 66, 73 (8th Cir.), cert. denied, 444 U.S. 859, 100 S.Ct. 123, 62 L.Ed.2d 80 (1979). English urges this court' to employ the perjured evidence standard in reviewing the district court’s denial of his section 2255 petition.
Before we can apply this relaxed standard, however, English must establish that the testimony was in fact perjured. In addition, he must prove that the prosecuting officers knew, or should have known, of the perjury at the time the testimony was presented. Lindhorst, 658 F.2d at 602, English has not met this burden.
English ' alleges that his co-conspirator, Robinson perjured himself with regard to the ownership of the cocaine. He alleges that Robinson again perjured himself when he testified that he had acquired the money found in his possession by helping a friend move. Even- if we accept English’s allegations of perjury as true, he could not prevail on this claim. He has not demonstrated the requisite knowledge on the part .of the prosecutors.
It may well be true that Robinson lied about the source of the money found in his possession at the time of arrest. At the very least he misstated the address to which he helped his friend move. While the government may not turn a blind eye to doubts about the veracity of testimony presented by its witnesses, there is no obligation to investigate every collateral matter raised by a witness’s trial testimony. Neither of the alleged perjury issues raised by English are material to a determination of whether or not English was engaged in a conspiracy to distribute cocaine base. Both instances of alleged perjury are at most impeaching. Therefore, the prosecutors breached no duty and the district court did not err in concluding that English could not prevail on this claim. Moreover, the defense attorney vigorously attacked Robinson’s credibility at trial and the district court instructed the jury that Robinson had received a plea agreement in exchange for his testimony. Thus, we cannot conclude that English suffered any prejudice.
2. Police Misconduct
English also alleges that instances of official misconduct by Officers White and Sorenson, two of the four arresting officers, constitute newly discovered evidence warranting a new trial. He brings to the court’s attention the facts that subsequent to English’s trial, Officer White was accused of theft of evidence, and Officer Sorenson was charged with perjury and altering affidavits of probable cause. Officer Sorenson pled guilty to one count of felony falsification of public documents, while Officer White was acquitted after a jury trial. The charges brought against the two officers did not stem from English’s case and English does not allege official misconduct in his arrest or in his subsequent trial.
At trial, Officer White testified that as he attempted to arrest English, he saw English put something into his mouth and swallowed it. Since no cocaine base was found on English, and no cocaine was found at the scene, Officer White testified that he believed that English had swallowed some cocaine base. The district court used White’s testimony, in conjunction with the evidence of the 4.9 grams of cocaine base found in Robinson’s possession, to conclude that English was responsible for five or more grams of cocaine base. Therefore the district court imposed the requisite statutory minimum sentence of ten years imprisonment. See 21 U.S.C. § 841(b)(1)(B)(iii).
Officer White’s testimony was corroborated by Robinson and by Officer Sorenson. Had Officer Sorenson been the only witness to the incident, his subsequent guilty plea for misrepresenting drug quantities to a court might cast sufficient doubt upon the veracity of his testimony to warrant a new trial, or at least a new sentencing hearing. However, Officer Sorenson’s testimony was cumulative with the testimony of the other officers. Therefore, the evidence of his subsequent guilty plea is mere impeaching evidence and cannot be grounds a new trial. United States v. Estabrook, 774 F.2d 284, 290 (8th Cir.1985).
Officer White, the officer whose testimony was critical to establishing the quantity at issue in English’s case, was acquitted of the charges against him. Furthermore, the charges against Officer White, though constituting official misconduct, did not involve perjury or misrepresentation of drug quantities to the court. Therefore we cannot find that the newly discovered evidence concerning Officer White would be likely to produce an acquittal if a new trial is granted. Lindhorst, 658 F.2d at 602. Thus, the district court did not err by refusing to grant English section 2255 relief on this ground.
B. Insufficient Evidence
English contends that the district court had insufficient evidence to find him responsible for five or more grams of cocaine base. English raised this contention in his direct appeal, and a panel of this court rejected his argument and affirmed the sentence imposed by the district court. In doing so, we expressly stated that the determination that English was responsible for five or more grams of cocaine base was not clearly erroneous. United States v. English, No. 90-2169, Mem.Op. at 2. English cannot use a section 2255 petition to collaterally attack the sufficiency of the evidence in his case, an issue resolved on direct appeal. United States v. Serpa, 930 F.2d 639, 640 (8th Cir. 1991); United States v. Smith, 843 F.2d 1148, 1149 (8th Cir.1988). In the absence of an intervening change in the law, or newly-discovered evidence, we will not reconsider any claim that was resolved on direct appeal in a section 2255 habeas proceeding. See Davis v. United States, 417 U.S. 333, 342, 94 S.Ct. 2298, 2303, 41 L.Ed.2d 109 (1974). English makes no allegations that the law has changed, and we have rejected his claims of newly discovered evidence. Therefore, English cannot prevail on this claim.
C. Ineffective Assistance of Counsel
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1962861-11135 | HASTINGS, Chief Judge.
Willie Davis, appellant, and his co-defendant, Reid, who is not a party to this appeal, were charged jointly in a one-count indictment with receiving, concealing and facilitating the transportation of marihuana, knowing the same to have been imported into the United States contrary to law, in violation of Section 176a, Title 21 U.S.C.A. Appellant’s motions to dismiss the indictment, to suppress the evidence, for judgment at the close of the Government’s case and at the close of all the evidence, and in arrest of judgment were all overruled. Following a jury trial Davis was found guilty and was sentenced to imprisonment for a period of ten years. This appeal followed.
The errors relied upon relate to the sufficiency of the indictment to charge any offense, the overruling of the motion to suppress the evidence and admission of evidence from the Government agents, the rulings of the trial court on the other motions above referred to, and the court’s refusal to give certain instructions to the jury tendered by appellant.
Appellant offered no evidence in his own defense, and the sufficiency of the evidence to sustain the verdict of the jury is not questioned in this appeal.
The indictment in this case charges:
“That on or about July 15, 1958, in Will County, in the Northern District of Illinois, Eastern Division, Willie Davis and Osborne Reid, defendants herein, did knowingly, and with intent to defraud the United States, receive, conceal and facilitate the transportation and concealment after unlawful importation of approximately 60 pounds of marihuana, knowing the same to have been imported into the United States contrary to law; in violation of Section 176a, Title 21, United States Code, as amended by the Narcotic Control Act of 1956.”
Appellant contends that an indictment that charges an offense for dealing with something imported “contrary to law” must specify the statute which was violated by such importation and that the count in question is insufficient in this respect. He relies upon Keck v. United States, 1899, 172 U.S. 434, 19 S.Ct. 254, 43 L.Ed. 505 and Babb v. United States, 5 Cir., 1955, 218 F.2d 538. These cases arose under 18 U.S.C.A. § 545 which relates to the importation of “any merchandise” into the United States “contrary to law.”
In Keck, the defendant was charged with importation of diamonds contrary to law, and the Court held that the charge in the indictment in terms of the statute was “obviously too general, and did not sufficiently inform the defendant of the nature of the accusation against him.” 172 U.S. at page 437, 19 S.Ct. at page 255. Since the importation of merchandise (diamonds) “is not per se contrary to law, and could only become so when done in violation of specific statutory requirements,” (ibid.) the Court held that specific pleading was necessary.
In Babb, the charge related to the concealment and transportation of cattle imported contrary to law. In holding the indictment to be insufficient, that court followed Keck as authority and concluded that “the indictment should have alleged some fact or facts showing that the cattle in question were imported or brought in contrary to some law; and that it is not enough to say that they were imported or brought in 'contrary to law.’ ” 218 F.2d at page 541.
Appellant does not complain that the indictment failed to give him sufficient notice or that he was surprised by the evidence introduced by the Government. He contends, in effect, that under Keek and Babb, with or without a showing of prejudice, the indictment under consideration is insufficient as a matter of law. We disagree.
Section 174, 21 U.S.C.A. makes the importation of aU narcotics illegal, and it has been held that the failure to specify in the indictment the statutes violated is not a defect in narcotics prosecutions under this section. Wong Lung Sing v. United States, 9 Cir., 1925, 3 F.2d 780, 781 and Pon Wing Quong v. United States, 9 Cir., 1940, 111 F.2d 751, 754. Each of these cases distinguishes Keck v. United States, supra. However, appellant would have us rely on principles drawn from the line of cases decided under 18 U.S.C.A. § 545 which involve smuggling of “any merchandise” rather than those governing narcotics cases arising under Section 174, 21 U.S.C.A. While the Government concedes that under certain rare circumstances marihuana may be legally imported, it aptly points to the many state and federal statutes restricting the use, possession, transfer and importation of marihuana. 18 U.S.C.A. § 545 deals with useful articles and not narcotics. As was said in Caudillo v. United States, 9 Cir., 1958, 253 F.2d 513, at page 517, certiorari denied Romero v. United States, 1958, 357 U.S. 931, 78 S.Ct. 1375, 2 L.Ed. 1373, “ * * this Court knows of no medical or scientific use to be made of marihuana, save perhaps for occasional testing, in order to make scientific comparisons with other narcotics, barbiturates, and amphetamines.”
Having in mind the several federal statutes making the possession and use of marihuana a criminal offense, we conclude that the sufficiency of an indictment under 21 U.S.C.A. §' 176a, in the case before us, is more properly guided by the standards enunciated in narcotics cases under 21 U.S.C.A. § 174 as defined in Wong Lung Sing v. United States, 9 Cir., 3 F.2d 780 and Pon Wing Quong v. United States, 9 Cir., 111 F.2d 751, supra. We hold that the indictment in question is sufficient to inform appellant fairly of the charge he is required to meet and is drawn with enough certainty to obviate any danger of subsequent prosecution for the same conduct. Indeed, appellant concedes as much and admits there has been no prejudice to him. We hold that the trial court did not err in overruling the motion to dismiss the indictment.
Appellant further contends that the activities of the Customs Agents leading up to his arrest were of such unlawful character that this prosecution could not properly be maintained. This objection is framed in terms of a motion to suppress evidence from such agents, which was denied, and by the tender of instructions to the jury relating to such alleged violations, which were refused by the trial court. Since this objection concerns the acts of the Government agents prior to the transfer of the marihuana to the car in which appellant was riding, we are required to consider the facts relevant to such activities.
There is little controversy as to the specific conduct of appellant alleged to be in violation of Section 176a, 21 U.S. C.A. on which the indictment was based. On July 15, 1958, near Lemont, Illinois, Customs Agent Glanzer observed the transfer of two sacks of marihuana from the car of Sandy Esquivel to a car in which appellant was riding. After appellant and Reid drove away, Glanzer, in the company of several other Customs Agents, pursued appellant for about three-quarters of a mile and arrested them. In the car were found two sacks of marihuana.
Prior to the arrest under the above circumstances, we find from the record that Agent Kilman met Esquivel in Del Rio, Texas, on July 11,1958, and followed him across the border into Mexico that day where he observed Esquivel purchasing marihuana. After Esquivel had indicated his willingness to cooperate with the customs officials, he drove his Chevrolet from Del Rio to Chicago, Illinois, accompanied by Glanzer, Kilman and a third agent, the three agents traveling in two separate cars, Esquivel driving alone. Early in the trip Glanzer and Kilman saw marihuana inside the door panels of the Chevrolet. Kilman picked up and examined one of the 59 bags of marihuana inside the two larger sacks and then put it back.
As the three-car convoy made its way north, all four persons stayed overnight in the same motels, where Kilman paid Esquivel’s bills. Esquivel’s car was blocked in the car port overnight by the agents’ cars to prevent his absconding with the marihuana. The party arrived in Chicago on the morning of July 14.
Appellant contends that this course of conduct by these agents, in effect, estop-ped the Government from prosecuting him for the crime charged. He argues that the agents themselves violated several federal statutes, and this forms the basis for his motion to suppress their evidence.
The several statutes claimed by appellant to have been violated by the agents are 21 U.S.C.A. § 176a, on which the indictment is based (claiming that Es-quivel purchased and brought into the United States the marihuana in question under Agent Kilman’s direction and control) ; 19 U.S.C.A. § 482, relating to the seizure of merchandise (claiming that this statute required, the agents to seize the marihuana when they first found it); 19 U.S.C.A. §§ 1602, 1605 and 1611, relating to the disposition of seized marihuana (claiming that the agents had no right to bring the marihuana from Texas to Illinois); 21 U.S.C.A. § 176a, relating to the transportation of marihuana (claiming that the agents transported or facilitated the illegal transportation from Texas to Illinois); and finally, 26 U.S.C.A. § 4742, requiring for valid transfer a written order of the transferee (claiming that Kilman “transferred” the marihuana to Esquivel in Brownwood, Texas, when he put back the one sack of marihuana he had taken from the door panel of the Chevrolet for examination.
Appellant does not contend that the concert between the agents and Esqui-vel resulted in his entrapment, but he relies solely on his defense of estoppel.
The contention that the agents caused the importation of the marihuana from Mexico contrary to 21 U.S.C.A. § 176a, was before the jury in the following instruction given by the trial court:
“If, from the evidence you have a reasonable doubt as to whether or not the Government itself caused the marihuana referred to in the indictment to be imported into the United States, if indeed it was imported into the United States, then you must find the defendant not guilty.”
The finding of guilt inferentially indicates that the jury did not believe the Government had unlawfully imported the marihuana in question. There is no issue before us as to the sufficiency of the evidence to support that result.
As to the remaining alleged violations, appellant relies on decisions of the Supreme Court of the United States which allowed the suppression of evidence gained by federal officers. Under the facts of the instant case his reliance on these decisions is misplaced. Each is readily distinguishable.
In Nardone v. United States, 1937, 302 U.S. 379, 58 S.Ct. 275, 82 L.Ed. 314, cited by appellant, it was held that the criminal prohibition against “any person” tapping telephone wires applied to federal officers and suppressed evidence so gained. There a basic right of privacy was violated. The Supreme Court, in reaching this result, contrasted cases where “a reading which would include [public] officers would work obvious absurdity as, for example, the application of a speed law to a policeman pursuing a criminal or the driver of a fire engine responding to an alarm.” Id. at page 384, 58 S.Ct. at page 277.
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3269185-16705 | Judge BAKER
delivered the opinion of the Court.
Appellant was tried by special court-martial before a military judge alone. Pursuant to his pleas, Appellant was convicted of two specifications of failure to obey a lawful order in violation of Article 92, Uniform Code of Military Justice (UCMJ), 10 U.S.C. § 892 (2000), and one specification of assault in violation of Article 128, UCMJ, 10 U.S.C. § 928 (2000). Appellant was sentenced to a bad-conduct discharge, confinement for 100 days, partial forfeitures, and reduction to E-1. The convening authority approved the sentence as adjudged and, with the exception of the bad-conduct discharge, ordered it executed. The Navy-Marine Corps Court of Criminal Appeals found no error and af firmed. United States v. Simmons, No. NMCCA 200300528 (N.M.Ct.Crim.App. Nov. 15, 2004) (unpublished). We granted review of the following issue:
WHETHER A DUTY TO INTERVENE ARISES FOR PURPOSES OF AIDER AND ABETTOR LIABILITY WHEN A SUPERIOR WITNESSES THE COMMISSION OF AN OFFENSE BY OR AGAINST A SERVICE MEMBER IN HIS CHAIN OF COMMAND.
We hold that such a duty may arise, however, it must be accompanied by shared criminal intent for aider and abettor liability to attach.
Background
Appellant’s conviction grew out of an incident in Appellant’s barracks room between two members of his platoon, Corporal (CPL) Schuknecht and Private First Class (PFC) Whetstone. During the providence inquiry, the military judge asked Appellant about the facts leading up to the assault. Appellant responded:
ACC: It was one of our friend’s birthday [sic] that night, sir; and we were getting ready to go out; and Corporal Schuknecht—well, me and Whetstone had got in an argument because I told him to leave the room and he wouldn’t leave, sir, because he was drunk and I told him to leave; and when he walked away from me, he, like, mumbled something; and I didn’t hear him mumble anything. That’s just what I was told, and Corporal Schuk-necht got in his face and grabbed him by the neck and threw him against the rack and yelled at him; and they went outside, sir.
Appellant pled guilty to aiding and abetting CPL Schuknecht’s assault of PFC Whetstone consummated by a battery.
While explaining the elements of the offense to Appellant, the military judge noted the following:
MJ: An aider or abettor must knowingly and willfully participate in the commission of the crime as something that he or she wishes to bring about, and must aid, encourage, or incite the person to commit the criminal act____
Now, normally, presence at the scene of a crime is not enough, nor is failure to prevent the commission of an offense. It must be an intent to aid or encourage the persons who commit the crime.
On the other hand, if the accused witnessed the commission of the crime and had a duty to interfere but did not because he wanted to protect or encourage, in this case Corporal David E. Schuknecht, then he or she is considered to be a principal.
After explaining these elements, the military judge asked Appellant whether “these elements that I just described to you ... correctly describe what happened to [sic] this occasion?” Appellant responded, ‘Yes, sir.”
In response to the military judge’s specific question as to how he thought he was “criminally responsible” for the assault, Appellant offered the following: “Because my inaction encouraged it, sir, because I’m an NCO [non- commissioned officer] in Whetstone’s platoon and I should have stepped in and stopped it, sir; but I didn’t.” Appellant further indicated that the assault lasted “for about ten seconds” and that he “had time to step in” but did not. However, when the military-judge asked Appellant, “[d]id you know that Corporal Schuknecht was going to grab PFC Whetstone about the throat?,” Appellant responded, “[n]o sir.”
The military judge revisited the issue of Appellant’s intent and the two had the following exchange:
MJ: And during the ten-second interval, rather than stepping in and trying to prevent harm to your junior Marine, you just sat there and watched?
ACC: Yes, sir.
MJ: Did you actively encourage Corporal Schuknecht to assault—
ACC: By not doing anything, sir, I think that—
MJ: But you didn’t yell at him and say, [sic] “Get him or do it some more,” did you?
ACC: No, sir.
MJ: You just sat there and did nothing?
ACC: Yes, sir.
With regard to his duty to intervene, the military judge and Appellant had the following exchange:
MJ: And do you believe that and admit that even though you may not have anticipated that Corporal Schuknecht was going to do what he did, that when he did do that, that you had an obligation and a legal duty to stop that from happening?
ACC: Yes, sir.
MJ: And you had the obligation why?
ACC: I was the NCO in PFC Whetstone’s platoon, sir; and I should have stepped in.
On review, the lower court concluded that Appellant’s guilty plea to assault was provident:
[A]ppellant admitted that, as the noncom-missioned officer directly supervising the victim, he had a duty to intervene to stop another corporal from grabbing a junior Marine by the throat, and that his inaction operated to encourage his friend’s misconduct. Although the military judge could have conducted a more thorough inquiry regarding this charge, we find the facts the appellant admitted to fairly met the requirements of the Manual for Courts-Mar-tial____
Simmons, No. NMCCA 200300528, slip op. at 2.
Appellant challenges his conviction on the basis that he did not share CPL Schuknecht’s criminal intent when the latter assaulted PFC Whetstone in Appellant’s barracks room. According to Appellant, by affirming his conviction, the lower court failed to follow the mandate of Article 77, UCMJ, 10 U.S.C. § 877 (2000), and created a new standard of liability that ignores the concept of mens rea necessary to establish aider and abettor liability.
Appellant, in his brief, concedes that he had a duty to intervene in the fight between CPL Schuknecht and PFC Whetstone. However, according to Appellant, federal law also requires knowledge on the part of the accused that he is sharing in the criminal venture and its purpose as an essential element of the crime of aiding and abetting. Appellant cites United States v. Jackson, 6 C.M.A. 193, 201, 19 C.M.R. 319, 327 (1955), for the proposition that mere inactive presence at the scene of a crime does not establish guilt.
In response, the Government argues that Appellant’s failure to intervene served as encouragement, which is in and of itself sufficient to sustain the conviction for assault on the theory of aiding and abetting. In support of its position, the Government cites two lower court cases, United States v. Void, 17 M.J. 740, 743 (A.C.M.R.1983), and United States v. Toland, 19 C.M.R. 570 (N.B.R.1955). According to the Government, both cases stand for the proposition that inaction can lead to an inference of aid or encouragement and therefore liability as a principal under Article 77, UCMJ.
Discussion
“Pleas of guilty should not be set aside on appeal unless there is ‘a substantial basis in law and fact for questioning the guilty plea.’” United States v. Eberle, 44 M.J. 374, 375 (C.A.A.F.1996) (quoting United States v. Prater, 32 M.J. 433, 436 (C.M.A.1991) (quotation marks omitted)). “A military judge’s decision to accept a guilty plea is reviewed for an abuse of discretion.” Id. (citing United States v. Gallegos, 41 M.J. 446 (C.A.A.F.1995)).
A military judge may not accept a guilty plea unless he makes “such inquiry of the accused” that satisfies him of a “factual basis for the plea.” R.C.M. 910(e). See United States v. Care, 18 C.M.A. 535, 541, 40 C.M.R. 247, 253 (1969) (“[T]he record of trial ... must reflect ... that the military trial judge ... has questioned the accused about what he did or did not do, and what he intended____”). “[T]he accused must admit every element of the offense(s) to which the accused pleads guilty.” R.C.M. 910(e) Discussion. See United States v. Barton, 60 M.J. 62, 64 (C.A.A.F.2004) (“[The] factual predicate is sufficiently established if ‘the factual circumstances as revealed by the accused himself objectively support that plea.’ ”) (quoting United States v. Davenport, 9 M.J. 364, 367 (C.M.A.1980)); see also United States v. Jordan, 57 M.J. 236, 239 (C.A.A.F.2002) (finding that “ ‘mere conclusions of law recited by an accused ... are insufficient to provide a factual basis for a guilty plea’ ”) (quoting United States v. Outhier, 45 M.J. 326, 331 (C.A.A.F.1996)).
According to the explanation accompanying Article 77, UCMJ, to be guilty as a principal under an aiding and abetting theory, a person must:
(i) Assist, encourage, advise, instigate, counsel, command, or procure another to commit, or assist, encourage, advise, counsel, or command another in the commission of the offense; and
(ii) Share in the criminal purpose of design.
In some circumstances, inaction may make one liable as a party, where there is a duty to act. If a person ... has a duty to interfere in the commission of an offense, but does not interfere, that person is a party to the crime if such a noninterference is intended to and does operate as an aid or encouragement to the actual perpetrator.
Manual for Courts-Martial, United States pt. IV, para. l(b)(i), (ii) (2005 ed.) (MCM)', see United States v. Crouch, 11 M.J. 128 (C.M.A.1981) (upholding an aiding and abetting conviction where appellant had a duty to act because, while performing guard duty, he failed to stop two servicemembers from breaking into a military motor pool). However, “[m]ere presence at the scene of a crime does not make one a principal.” MCM pt. IV, para. l.b.(3)(b), cited in United States v. Pritchett, 31 M.J. 213, 217 (C.M.A.1990).
In United States v. Thompson, this Court inferred criminal intent from the appellant’s affirmative acts, including contributing to the rape victim’s intoxication and providing the condom to his friend responsible for the actual assault. 50 M.J. 257, 258 (C.A.A.F.1999). Furthermore, this Court found that Thompson “knew SGT [Sergeant] Timmons was going to have intercourse with PFC K” and he encouraged SGT Timmons by failing to dissuade him. Id. (emphasis added).
Similarly, in United States v. Jackson, this Court upheld Jackson’s conviction by inferring shared criminal purpose from the circumstances surrounding the murder of a German national by Jackson’s companion. Bums, 6 C.M.A. 193, 203, 19 C.M.R. 319, 329 (1955). “Both accused were armed with knives; both were aggressive; and Jackson knew that Burns had a predisposition to ‘fool’ with his knife. A homicide resulting from an assault under such circumstances is sufficient to support a conviction for murder.” Id. In support of this same principle of law, the Government also cites Void and Toland.
By contrast, in United States v. Lyons, this Court found insufficient evidence from which to infer criminal intent to steal a truckload of coffee. 11 C.M.A. 68, 71, 28 C.M.R. 292, 295 (1959). “[T]he only circumstance tending to show participation by the accused is his acceptance of [the] offer of a bribe. That connection is insufficient to establish a conscious sharing of the alleged intent of the co-actors.” Id.
Analysis
Article 77, UCMJ, first element
Before this Court, Appellant adopts his concession to the military judge that he had a duty to intervene and stop the fight between CPL Schuknecht and PFC Whetstone on the basis that Appellant “was the NCO in PFC Whetstone’s platoon” and he “should have stepped in.” As to Appellant’s admission of duty, we conclude there is no substantial basis in law and fact to question the sufficiency of the plea under the first element of Article 77, UCMJ.
Indeed, applicable Navy and Marine Corps regulations evidence 230 years of the custom and tradition of the service creating the type of duty espoused by Appellant before this Court and in his colloquy with the military judge. See U.S. Marine Corps, Leading Marines, MCWP 6-11, paras. 1100.2.d.(l), (3), 1100.4.b., 1100.5. (Nov. 27, 2002); Dep’t of the Navy, Begs. 1990, paras. 1023, 1034.1., 1034.2., 1037, 1131 (Sept. 14, 1990); see also Dep’t of the Navy, Marine Corps Manual, paras. 0002.1., 0003.2., lOOO.l.b., 1002.3.a., 8.a.l., 1301.1. (Mar 21, 1980) (making Navy regulations applicable to Marine Corps personnel).
Article 77, UCMJ, second element
Appellant focuses his argument on the second element of Article 77, UCMJ. Specifically, Appellant points to his lack of knowledge with regard to CPL Schuknecht’s intent prior to the assault and the relative quickness of the entire incident.' As noted, during the providence inquiry, Appellant specifically disavowed any prior knowledge of the assault and testified that the entire event took about ten seconds.
The Government asserted in its brief that “absence of action where there is a clear duty and ability to act is akin to an affirmative act and equally indicative of the requisite mens rea.” However, this argument goes too far. Establishment of a duty to intervene, without more, does not per se satisfy the requirement of a shared purpose under Article 77, UCMJ. Both parties cite cases in which this Court found aider and abettor liability premised on inaction. Failure to act in accordance with a legal duty can reflect criminal intent. However, this is a fact-specific inquiry and the facts of this plea inquiry fail to establish such shared intent. As such, we find that there is a substantial basis in fact to question the sufficiency of Appellant’s guilty plea.
Here, the facts on the record do not establish that Appellant shared CPL Sehuknecht’s criminal intent. Although he might have intended to haze PFC Whetstone, a charge he also pled guilty to, this does not necessarily mean that he intended for CPL Schuknecht to assault PFC Whetstone. By contrast to Thompson, Appellant did not know of CPL Schuknecht’s plan to assault PFC Whetstone (in fact, even CPL Schuknecht may not have known of his intent to do so until the moment he engaged in the assault), nor did he provide any affirmative assistance to CPL Schuknecht in the ten seconds it took CPL Schuknecht to assault PFC Whetstone. The Government argues that Appellant, by his inaction, encouraged CPL Schuknecht. However, the Government is mistaking intent and result. Article 77, UCMJ, is conjunctive; it requires a finding of encouragement, for example, a result plus an intent. Here, while the facts on the record might support a finding of a result, they do not support a finding of intent. Here, Appellant specifically denied any knowledge of CPL Sehukneeht’s intent to assault PFC Whetstone. Although Appellant may have shared Schuknecht’s intent, without further factual development on the record, CPL Sehuk-necht’s actions were too spontaneous and too quick to draw such an inference without further inquiry into the facts. As a result, Appellant’s case is distinguishable from the circumstances present in Thompson and Jackson. If the assault had lasted longer, or if the record reflected some affirmative action on Appellant’s part, then, perhaps this Court could infer shared criminal intent. However, those are not the facts of this case.
As a result, because Appellant did not admit on the record to all the elements of the offense, in this case the requisite mens rea, we hold that there is a substantial basis in law and fact to question the guilty plea.
The parties raised the issue of whether dereliction in the performance of duty is a lesser included offense that can be affirmed in this case. We need not reach this issue because, even assuming it is a lesser included offense in this case, affirming it would have no effect on Appellant’s sentence. Therefore, we do not address the parties’ arguments on this point.
DECISION
For the reasons stated, the decision of the United States Navy-Marine Corps Court of Criminal Appeals is reversed as to specification 2 of Charge III and that specification and the charge are dismissed. The decision as to the remaining findings and the sentence is affirmed.
. The charge sheet states: “CHARGE III: VIOLATION OF THE UCMJ, ARTICLE 128 .... SPECIFICATION 2: In that Corporal Jessie C. SIMMONS, JR., U.S. Marine Corps, 3d Battalion, 8th Marine Regiment, 2d Marine Division, Camp Lejeune, North Carolina, did, on board Camp Lejeune, North Carolina, between about January 2002 and 9 April 2002, standby and do nothing to prevent the unlawfully] grabbing of Private First Class Robert L. WHETSTONE, U.S. Marine Corps, around his throat[.] by the hand of Corporal David E. SCHUKNECHT, tbS. Marine Corps." The additions and deletions were noted on the record after a conference pursuant to Rule for Courts-Martial (R.C.M.) 802.
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4321941-30016 | ORDER
ROBERT C. JONES, District Judge.
This securities fraud case arises out of Defendant JBI, Inc.’s (“JBI”) alleged violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934. Lead Plaintiff Howard L. Howell and Plaintiff Elli-sa Pancoe (collectively “Plaintiffs”) brought suit on behalf of a putative class consisting of all individuals damaged by these alleged violations, and the Parties have now reached a settlement. Pending before the Court is Plaintiffs’ unopposed motion (the “Motion” or “Unopposed Motion”) to enter a proposed order (1) granting preliminary approval of the proposed settlement agreement; (2) provisionally certifying the proposed settlement class; (3) approving the proposed method and form of notice; and (4) scheduling a final approval hearing. (ECF No. 72). For the reasons stated herein, the Motion is denied.
I. FACTS AND PROCEDURAL HISTORY
The relevant background information includes (1) a brief description of the litigation leading to the settlement; (2) a description of the settlement discussions; and (3) a description of the settlement itself.
a. Description of the Litigation
On July 28, 2011, Plaintiffs filed the instant action, alleging violations of Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 (the “Exchange Act”) and Securities and Exchange Commission (the “SEC”) Rule 10b-5 on behalf of a putative class comprising all those who purchased JBI’s securities between August 28, 2009 and July 20, 2011 (the “Class Period”) and were damaged thereby (the “Class” or “Class Members”). (Second Am. Compl., ECF No. 55, at 35-43 [hereinafter “SAC”]). According to Plaintiffs, “throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about [JBFs] business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose: (1) that [] media credits acquired by [JBI] in connection with the acquisition of JavaCo were substantially overvalued; (2) that [JBI] was improperly accounting for acquisitions; (3) that, as such, [JBFs] financial results were not prepared in accordance with [Generally Accepted Accounting Principles (“GAAP”) ]; (4) that [JBI] lacked adequate internal and financial controls; and (5) that, as a result of the above, [JBFs] financial statements were materially false and misleading at all relevant times. (Id. at 9). Plaintiffs further allege that “as a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of [JBFs] securities, Plaintiffs and other Class members have suffered significant losses and damages.” . (Id.). Plaintiffs seek an unspecified amount of damages. (Id. at 40).
b. Settlement Discussions
In August 2012, the Parties agreed to mediate a possible resolution of the case. (Motion, ECF No. 75, at 10). As part of the mediation, the Parties submitted confidential mediation statements to mediator David Rot-man, whom the Parties characterize as “a nationally recognized mediator of complex class actions and commercial matters.” (Id. at n. 6). However, after two mediation sessions, the Parties failed to reach a settlement. (Id. at 10).
On March 20, 2013, the Parties attended a second mediation under the direction of mediator Jed. D. Melnick, of JAMS, Inc. According to the Parties, Mr. Melnick “has been involved in the mediation and successful resolution of hundreds of complex disputes.” (Id. at 11). During this mediation, the Parties reached “a basic framework for a potential settlement.” (Id.). Relying on that framework, the Parties eventually agreed to the proposed settlement now before the Court (the “Settlement” or “Proposed Settlement”). (Id.).
c. The Proposed Settlement
The Parties state that the total value of the Proposed Settlement is $1,429,738 (the “Settlement Amount” or “Settlement Fund”). (Proposed Allocation, ECF No. 74-7, at 3). JBI has agreed to fund the Proposed Settlement by issuing shares of its authorized, but unissued, common stock (“JBI Settlement Shares”). (Proposed Settlement ¶2.1, ECF No. 74-1, at 12). The number of shares to be issued is dependent on the price of JBI shares on the date of entry of final judgment in this ease (the “Judgment Date”). The Parties have agreed to a complex formula for determining the precise number of shares to be issued. (Id.). According to the Parties, “the Proposed Settlement, which recovers more than 19% of the Class’s estimated maximum damages, is excellent and is in the best interests [sic ] of the Class.” (Motion, ECF No. 75, at 11).
The Parties propose allocating $478,921, or 33.49% of the $1,429,738 Settlement Fund, to an award of attorney fees and expenses. (Proposed Allocation, ECF No. 74-7, at 3). However, the Parties do not propose using any portion of the $1,429,738 Settlement Fund to pay for administrative expenses. (See id.). Instead, JBI has separately offered to pay up to $200,000 to reimburse Plaintiffs for their mediation expenses and cover the costs of claims administration. (Proposed Settlement ¶2.2, ECF No. 74-1, at 12). Accordingly, JBI has offered to pay a maximum total of $1,629,738 to settle the instant case. Under the terms of the Proposed Settlement, Class Members are entitled to 58.3% of that total. See infra Part Il.b.i.
II. LEGAL STANDARDS AND ANALYSIS
The Ninth Circuit has declared that a strong judicial policy favors settlement of class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir.1992). However, a class action may not be settled without court approval. Fed.R.Civ.P. 23(e). When the parties to a putative class action reach a settlement agreement prior to class certification, “courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir.2003). At the preliminary stage, the court must first assess whether a class exists. Id. (citing Amchem, Prods. Inc. v. Windsor, 521 U.S. 591, 620, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)). Second, the court must determine whether the proposed settlement “is fundamentally fair, adequate, and reasonable.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir.1998). If the court preliminarily certifies the class and finds the proposed settlement fair to its members, the court schedules a fairness hearing where it will make a final determination as to the fairness of the class settlement. Third, the court must “direct notice in a reasonable manner to all class members who would be bound by the proposal.” Fed.R.Civ.P. 23(e)(1).
In the instant case, Plaintiffs have satisfied all but one of Rule 23’s certification requirements. However, inconsistencies in Plaintiffs’ moving papers preclude, at this stage, a finding that Class Counsel will fairly and adequately protect the interests of the Class, as is required by Rule 23(a)(4). These same inconsistencies, and a related failure to demonstrate the fairness and adequacy of the proposed allocation of the Settlement Fund, prevent the Court from finding that the Proposed Settlement “is fundamentally fair, adequate, and reasonable.” Likewise, misstatements in the Proposed Notice, coupled with other errors, render approval inappropriate.
a. Conditional Class Certification
Plaintiffs seek conditional certification of a settlement class under Rule 23(a) and (b)(3). To obtain class certification, the plaintiff must satisfy the four prerequisites identified in Rule 23(a) as well as one of the three subdivisions of Rule 23(b). Amchem Prods., 521 U.S. at 614, 117 S.Ct. 2231. “The four requirements of Rule 23(a) are commonly referred to as ‘numerosity,’ ‘commonality,’ ‘typicality,’ and ‘adequacy of representation’ (or just ‘adequacy’), respectively.” United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int’l Union, AFL-CIO v. ConocoPhillips Co., 593 F.3d 802, 806 (9th Cir.2010). Certification under Rule 23(b)(3) is appropriate where common questions of law or fact predominate and class resolution is superior to other available methods. Fed.R.Civ.P. 23(b)(3). The party seeking class certification bears the burden of affirmatively demonstrating that the class meets Rule 23’s requirements. Wal-Mart Stores, Inc. v. Dukes, — U.S. -, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011).
In general, “[bjefore certifying a class, the trial court must conduct a ‘rigorous analysis’ to determine whether the party seeking certification has met the prerequisites of Rule 23.” Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir.2012) (internal citations omitted). However, when evaluating class certification in the context of a proposed settlement, courts “must pay undiluted, even heightened, attention to class certification requirements” because “the court will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold.” Amchem Prods., 521 U.S. at 620, 117 S.Ct. 2231; accord Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir.1998).
i. Rule 23(a)
1. Numerosity
Generally, courts have held that numerosity is satisfied when the class size exceeds forty members. See, e.g., Slaven v. BP Am., Inc., 190 F.R.D. 649, 654-56 (C.D.Cal.2000); In re Cooper Cos. Inc. Secs. Litig., 254 F.R.D. 628, 634 (C.D.Cal.2009) (citing Consolidated Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir.1995)). Thus, in securities cases, when millions of shares are traded during the proposed class period, a court may infer that the numerosity requirement is satisfied. Cooper, 254 F.R.D. at 634; see also Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir.1975) (numerosity not an issue where the class period included 120,000 transactions involving 21,000,000 shares).
In this case, millions of JBI shares were publicly traded during the Class Period, (SAC, ECF No. 55, at 30-31), and the Class, which consists of the purchasers of JBI’s securities during the Class Period, numbers in the thousands, (Mot. ECF No. 75, at 25). Therefore, the Court can safely conclude that the Class is sufficiently numerous such that the joinder of each member would be impracticable.
2. Commonality
To demonstrate commonality, a plaintiff must show that there are “questions of law or fact common to the class.” Fed.R.Civ.P. 23(a)(2). “A class has sufficient commonality ‘if there are questions of fact and law which are common to the class.’” Hanlon, 150 F.3d at 1019. As clarified in Wal-Mart Stores, Inc. v. Dukes, a plaintiff must demonstrate that the class members “have suffered the same injury” and that their claims “depend upon a common contention ... of such a nature that it is capable of classwide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” 131 S.Ct. at 2551.
Here, the complaint raises several common questions of law and fact, including (1) whether JBI violated federal securities laws by publieally misrepresenting its business operations and earnings, and (2) whether the public disclosure of these alleged misrepresentations resulted in a decline in the price of JBI common stock. Were Plaintiffs to continue to press this action, the answers to these questions would result in classwide resolution of the claims asserted. Therefore, the Court finds that Plaintiffs have satisfied the commonality requirement.
3. Typicality
To demonstrate typicality, Plaintiffs must show that the named parties’ claims are typical of the class. Fed.R.Civ.P. 23(a)(3). “The test of typicality ‘is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.’ ” Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir.1992). “Typicality refers to the nature of the claim or defense of the class representative, and not to the specific facts from which it arose or the relief sought.” Id.
In this case, Plaintiffs’ claims and the nature of their alleged losses are sufficiently similar to other Class Members’ claims and alleged losses to be considered typical. Like the other Class Members, Plaintiffs purchased JBI shares during the Class Period and allegedly suffered significant losses as a result of Defendants’ alleged wrongdoing. Under the Proposed Plan of Allocation of Settlement Funds (the “Proposed Allocation”), it appears that the named Plaintiffs will receive the same pro rata share of the Settlement Fund as the rest of the Class. (ECF No. 74-7, at 3).
4. Adequacy of Representation
“To satisfy constitutional due process concerns, absent class members must be afforded adequate representation before entry of a judgment which binds them.” Hanlon, 150 F.3d at 1020 (citing Hansberry v. Lee, 311 U.S. 32, 42-43, 61 S.Ct. 115, 85 L.Ed. 22 (1940)). In Hanlon, the Ninth Circuit identified two issues for determining the adequacy of representation: (1) whether the named plaintiffs and their counsel have any conflicts of interest with other class members, and (2) whether the named plaintiffs and their counsel will “prosecute the action vigorously on behalf of the class.” Id. (citing Lerwill v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512 (9th Cir.1978)).
In the instant case, the Court is entirely satisfied that the named Plaintiffs will adequately represent the putative Class. However, and as explained more fully below, the Court has concerns about the fairness, adequacy, and honesty of the Proposed Settlement, which, until resolved, prohibit the Court from finding that putative Class Counsel will adequately protect the interests of the Class. Specifically, the Court is concerned about misrepresentations in the Proposed Notice and Proposed Allocation regarding attorney fees and administrative fees. The Court is particularly troubled by the Proposed Allocation, which not only fails to list the $200,000 that the Parties have set aside for administrative fees, (compare Proposed Allocation, 74-7, at 3 (omitting any reference to administrative fees), with Proposed Settlement ¶ 2.4, ECF No. 74-1 (providing $200,000, paid by JBI, for “Administrator Expenses and to reimburse Lead Counsel for Mediation Expenses”)), but also proposes an award of attorney fees significantly greater than the amount described in the Proposed Notice, (compare Proposed Notice, ECF No. 74-3, at 6 (providing that “Lead Counsel will ask the Court for attorneys’ fees not to exceed one-fourth (1/4 or 25%) of the Settlement Fund.”), with Proposed Allocation, 74-7, at 3 (proposing an award of attorney fees equaling 33.49% of the stated total Settlement Fund)). Whether these defects were intentional or not, they are cause for hesitation, and until they are cured, the Court is unable to conclude that Plaintiffs’ Counsel will adequately represent the interests of the Class. Accordingly, the Court cannot find, at this time, that Rule 23(a) is satisfied.
ii. Rule 23(b)
Rule 23(b)(3) permits certification where “the court finds that questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy” in light of, among other things, “the difficulties likely to be encountered in the management of a class action.” Fed.R.Civ.P. 23(b)(3).
This case satisfies Rule 23(b)(3)’s requirements. The common questions of whether misrepresentations were made and whether Defendants had the requisite scienter predominate over any individual questions of reliance and damages. Moreover, adjudicating this matter as a class action is a superior approach to resolving the instant controversy because it avoids the dangers of duplicative litigation and the unfairness of inconsistent judgments. As the Ninth Circuit has aptly stated, securities fraud eases fit Rule 23 “like a glove.” Epstein v. MCA, Inc., 50 F.3d 644, 668 (9th Cir.1995), rev’d on other grounds Matsushita Elec. Indus. Co., Ltd. v. Epstein, 516 U.S. 367, 116 S.Ct. 873, 134 L.Ed.2d 6 (1996).
b. Preliminary Approval of the Proposed Settlement Agreement
Courts have long recognized that “settlement class actions present unique due process concerns for absent class members.” Hanlon, 150 F.3d at 1026. One inherent risk is that class counsel may collude with the defendants, “tacitly reducing the overall settlement in return for a higher attorney’s fee.” Knisley, 312 F.3d at 1125; see Evans v. Jeff D., 475 U.S. 717, 733, 106 S.Ct. 1531, 89 L.Ed.2d 747 (1986) (recognizing that “the possibility of a tradeoff between merits relief and attorneys’ fees” is often implicit in class action settlement negotiations).
To guard against this potential for class action abuse, Federal Rule 23(e) requires court approval of all class action settlements, which may be granted only after a fairness hearing and a determination that the settlement taken as a whole is fair, reasonable, and adequate. Fed.R.Civ.P. 23(e)(2); see Staton, 327 F.3d at 972 n. 22 (The court’s role is to police the “inherent tensions among class representation, defendant’s interests in minimizing the cost of the total settlement package, and class counsel’s interest in fees.”); Hanlon, 150 F.3d at 1026.(“[T]he settlement taken as a whole, rather than the individual component parts, that must be examined for overall fairness.”).
The factors in a court’s fairness assessment will naturally vary from case to case, but courts in the Ninth Circuit generally must weigh the Churchill factors:
(1) the strength of the plaintiff’s ease; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members of the proposed settlement.
In re Bluetooth Headset Products Liab. Li-tig., 654 F.3d 935, 946 (9th Cir.2011) [hereinafter Bluetooth] (quoting Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566, 575 (9th Cir.2004)). However, where, as here, “a settlement agreement is negotiated prior to formal class certification, consideration of these eight Churchill factors alone is not enough.” Id.
Prior to formal class certification, there is an even greater potential for a breach of fiduciary duty owed the class during settlement. Accordingly, “such agreements must withstand an even higher level of scrutiny for evidence of collusion or other conflicts of interest than is ordinarily required under Rule 23(e) before securing the court’s approval as fair.” Id. (citing Hanlon, 150 F.3d at 1026); accord, In re Gen. Motors Corp. Pickr-Up Truck Fuel Tank Products Liab. Litig., 55 F.3d 768, 805 (3d Cir.1995) (courts must be “even more scrupulous than usual in approving settlements where no class has yet been formally certified”); Mars Steel Corp. v. Continental Ill. Nat’l Bank & Trust Co. of Chicago, 834 F.2d 677, 681 (7th Cir.1987) (Posner, J.) (“[W]hen class certification is deferred, a more careful scrutiny of the fairness of the settlement is required.”); Weinberger v. Kendrick, 698 F.2d 61, 73 (2d Cir.1982) (Friendly, J.) (Reviewing courts must employ “even more than the usual care”); see also Manual for Complex Litig. § 21.612 (4th ed. 2004). Therefore, before approving a preeertification settlement, this Court must not only show that it “has explored [the Churchill ] factors comprehensively, but also that the settlement is not the product of collusion among the negotiating parties.” Id. (citing In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 458 (9th Cir.2000)).
Because collusion is unlikely to be evident from the face of the settlement itself, “courts must be particularly vigilant not only for explicit collusion, but also for more subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations.” Id. (citing Staton, 327 F.3d at 960); see also Court Awarded Attorney Fees, Third Circuit Task Force, 108 F.R.D. 237, 266 (1985). A few such signs are: (1) “when counsel receive a disproportionate distribution of the settlement”; (2) “when the parties negotiate a ‘clear sailing’ arrangement providing for the payment of attorneys’ fees separate and apart from class funds”; and (3) “when the parties arrange for fees not awarded to revert to defendants rather than be added to the class fund.” Bluetooth, 654 F.3d at 947.
In the instant case, Plaintiffs allege that they agreed to the Proposed Settlement only after developing a thorough understanding of the merits of the case through, among other things, reviewing publically available materials related to JBFs sale of securities, interviewing former JBI employees, drafting an initial and amended complaint, preparing multiple mediation statements, and attending two separate mediations with reputable mediators. Plaintiffs also assert that the Proposed Settlement is the result of arm’s-length negotiations conducted by experienced counsel, and that it represents a “substantial recovery” of the Class’s estimated damages. According to Plaintiffs, the fairness and adequacy of the total settlement amount is only underscored by the foreseeable challenges that the Class would face in its efforts to succeed on the merits, the foreseeable cost and duration of litigation, and the possibility that JBI would be unable to satisfy a future judgment. (Mot. ECF No. 75, at 15).
Plaintiffs, however, have not applied these facts to the relevant Churchill factors, and they have failed to analyze the Proposed Settlement in light of the controlling, and more demanding, standard for reviewing pre-certification settlement proposals. See Blue-tooth, 654 F.3d at 947. Additionally, Plaintiffs have failed to acknowledge that the Court must examine the settlement agreement taken as a whole, and not just the fairness or adequacy of the total amount offered. Indeed, the unopposed motion addresses only the fairness of the offered $1,429,738; it includes no argument concerning the fairness or reasonableness of the proposed allocation of the Settlement Funds. Thus, even assuming that total amount of $1,429,738 is a fundamentally fair, adequate, and reasonable result, the Court has no basis for concluding that the proposed allocation is fundamentally fair. Furthermore, an examination of the Proposed Plan of Allocation reveals serious concerns with respect to holistic fairness. (See ECF No. 74-7, at 3).
i. Proposed Class Members’ Share of the Settlement
Under the Proposed Settlement, the amount to be paid to the entire Class will not exceed 58.3% of the total Settlement Amount, which itself represents roughly 19% of the Class Members’ maximum estimated damages, (ECF No. 75, at 14). Indeed, and without expressly saying so, the Parties propose allocating approximately 41.7% of the funds offered by JBI to administrative and legal fees. The Parties have failed to demonstrate that this allocation reflects a fair result for the Class.
As an initial matter, JBI has actually offered to pay $1,629,738 for the dismissal of Class Members’ claims because, in addition to the $1,429,738 Settlement Fund, JBI has separately offered $200,000, which the Parties do not list as part of the Settlement Fund, for the payment of administrative fees, (see Proposed Settlement ¶ 2.2, ECF No. 74-1). However, the Parties cannot seriously contend that this additional money is not part of the settlement fund simply because they choose to characterize it as something else. Indeed, the additional $200,000 represents additional consideration offered in exchange for settling this lawsuit. Therefore, under the Proposed Settlement, the Parties have agreed to settle this case for a total of $1,629,738.
From those funds, the Parties propose using $478,921, or 29.4%, for an award of attorney fees and expenses. (Proposed Allocation, ECF No. 74-7, at 3). As plainly stated in the Proposed Allocation, this figure represents a fee award of 30% of the $1,429,738 “Settlement Amount” plus an additional $50,000, for which there is no apparent justification. (Id.). The proposed distribution of $200,000 for administrative fees represents 12.3%. From here, simple arithmetic reveals that the Parties have proposed an agreement under which the Class Members will receive no more than 58.3% of the funds offered in exchange for their claims. This alone is cause for hesitation, and the Parties have made no effort to persuade this Court that it is a fair or reasonable result.
The greater cause for concern, however, is that the Parties, whether intentionally or otherwise, misrepresent this result in both the Proposed Allocation, (ECF No. 74-7, at 3), and the Proposed Notice, (ECF No. 74-3, at 6). Specifically, the Proposed Notice promises that “Lead Counsel will ask the Court for attorneys’ fees not to exceed one-fourth (1/4 or 25%) of the Settlement Fund.” (Id.). Another portion of the Proposed Notice similarly provides that “Lead Counsel will ask the Court for attorneys’ fees of one-fourth (1/4) of the Settlement Fund.” (Id. at 19). These promises cannot be reconciled with the Proposed Allocation, which proposes a fee award of 33.49% of the $1,429,738 stated total Settlement Fund. (See ECF No. 74-7, at 3). Of course, the Proposed Notice does not expressly state whether the “one-fourth” award of attorney fees would come from the $1,629,738 actual total or the $1,429,738 stated total. However, read in conjunction with Plaintiffs’ other filings, it strongly implies that the attorneys will seek only an award of one-fourth of the $1,429,738, and this is flatly inconsistent with the Proposed Allocation, which, on its face, allocates 30% of the Settlement Fund plus and additional, albeit unjust- ifíed, $50,000, for an award of attorney fees and expenses. Together, these numbers equal 33.49% of the stated Settlement Fund. Even assuming that the additional $50,000 represents a proposed award of costs, which is not stated in the Proposed Allocation, the proposed fee award would equal 30% of the stated Settlement Amount — a full 5% more than what is expressly stated in the Proposed Notice. Furthermore, even assuming that the Proposed Notice contemplates a fee award of “one-fourth” of the $1,629,738 actual total, which is obviously not the case, the proposed fee award would still equal 26.3%, which is still more than what is stated in the Proposed Notice.
Turning next to the Proposed Allocation itself, the Parties have failed to mention, in their Proposed Notice or the instant motion, that any sum, let alone 12.3% of the total settlement, is earmarked for administrative fees. Instead, the Parties, through their silence, appear to imply that .this money is simply not part of the settlement; it is simply a sum paid by JBI to which the Class has no claim. The Court disagrees. Any money paid by a defendant in exchange for the dismissal of Class Members’ claims is part of the total settlement fund. The Parties cannot shield certain allocations from the required precertification fairness inquiry by defining them as something other than a portion of the settlement fund. Indeed, this is the exact sort of behavior that Bluetooth requires this Court to vigilantly guard against. See, 654 F.3d 935.
The Court will not approve a precertification settlement without full disclosure and justification of the proposed allocation of settlement funds. Therefore, in order to obtain this Court’s approval, the Parties must correct their proposals to accurately reflect the intended allocation of the entire settlement fund. Moreover, the Parties must justify these allocations and thereby show that the proposed 58.3% left for the Class represents a fundamentally fair, adequate, and reasonable result.
ii. Proposed Award of Attorney Fees and Allocation of Administrative Fees
The Court recognizes that it need not directly address a proposed allocation of attorney fees until the settlement becomes final. However, the Parties must, to some degree, justify the proposed award at this stage because any award of fees will directly reduce the amount payable to the Class, and thus bears on the present fairness inquiry. Martinez v. Realogy Corp., No. 3:10-CV-00755-RCJ-VPC, 2013 WL 5883618, at *6 (D.Nev. Oct. 30, 2013).
This is a common fund case. Under regular common fund procedure, the parties settle for the total amount of the common fund and shift the fund to the court’s supervision. The plaintiffs’ lawyers then apply to the court for a fee award from the fund. See Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 271 (9th Cir.1989) (in a common fund case, “a court has control over the fund — even one created pursuant to a settlement, as here ... and assesses the litigation expenses against the entire fund so that the burden is spread proportionally among those who have benefited.”) (citing Boeing Co. v. Van Gemert, 444 U.S. 472, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980)). In setting the amount of common fund fees, the district court has a special duty to protect the interests of the class. On this issue, the class’s lawyers occupy a position adversarial to the interests of their clients. Staton, 327 F.3d at 970. As the Ninth Circuit has explained,
[b]ecause in common fund cases the relationship between plaintiffs and their attorneys turns adversarial at the fee-setting stage, courts have stressed that when awarding attorneys’ fees from a common fund, the district court must assume the role of fiduciary for the class plaintiffs. Accordingly, fee applications must be closely scrutinized. Rubber-stamp approval, even in the absence of objections, is improper.
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385246-23904 | SIMONS, District Judge.
Plaintiff alleges in his complaint that defendant erroneously claims that he and his wife Pauline Floyd, as a partnership, owned and operated a supper club in Pickens County, South Carolina, during the years 1954 to 1960; that as a partner in said business plaintiff is liable for payment of certain cabaret taxes, penalties and interest allegedly due as a result of the operation of the said supper club during the foregoing period of time; that a tax lien has been entered against plaintiff for the amounts allegedly owed; and that certain real property owned by plaintiff has been seized by defendant pursuant to Notice of Seizure, on or about May 21, 1965, for purpose of selling said property for payment of the taxes due. Plaintiff further alleges that Pauline Floyd, his wife, has always been the sole owner of the supper club; that he has never been a partner in, nor had any other interest in, the said business and owes no taxes due therefrom; and that unless the court grants relief as prayed for plaintiff will suffer irreparable injury and damage in that his property will be sold for the taxes allegedly owed. He further contends that he has no adequate remedy at law, since he is financially unable to pay the tax and sue for a refund. The prayer of plaintiff’s complaint seeks a judicial determination as follows:
“[1] That plaintiff is not, and has never been, the owner of the Casablanca Supper Club, and has not, and has never had, any ownership interest therein, either through a partnership with Pauline Floyd or with any one else;
“[2] That plaintiff is not the or a taxpayer in reference to the taxes, penalties and interest mentioned in this complaint;
“[3] That there is no legal or other liability, obligation or duty resting upon the plaintiff to pay the taxes, penalties or interest mentioned in this complaint;
“[4] That the defendant had no legal right or authority to levy the taxes, penalties and interest mentioned in this complaint against the plaintiff herein, and that defendant’s action in that regard is null and void; and that the same be vacated and set aside;
■“[5] That the defendant had no legal right or authority to enter of record the tax lien mentioned in this complaint, against the plaintiff and his property, and that the said record be ordered cancelled as to this plaintiff and his property;
“[6] That the defendant had no legal right or authority to seize the property mentioned in this-complaint, and that its action in that regard be declared null and void, and that said seizure be vacated and set aside;
“[7] That the defendant be enjoined and restrained from further harassing this plaintiff in regard to the payment of said alleged taxes, penalties and interest;
“[8] That this Court issue such temporary orders and permanent decrees as may be necessary to protect the rights of this plaintiff ; and,
“[9] For such other and further relief to which plaintiff may be entitled in law or in equity.”
The main thrust of plaintiff’s contention is that under the facts alleged in the complaint plaintiff herein is not in reality a “taxpayer” since he at no time owned any interest in the supper club against which the taxes were assessed, and under no circumstances could he be liable for the alleged taxes; consequently, defendant has wrongfully and illegally levied upon his property for the taxes due and owing by his wife, who was the sole owner and operator of said supper club; and that he is entitled to maintain this action to quiet title to his real estate, and to remove the cloud of the federal tax lien therefrom. Plaintiff strongly urges that defendant has waived its sovereign immunity to such action and has consented to be sued in this court under the provisions of Title 28 U.S.C. § 2410[a]?
Plaintiff’s complaint was originally filed in the Court of Common Pleas, Pic-kens County, S. C., on May 29, 1963. The United States filed motion for removal, and moved said action to this court pursuant to 28 U.S.C. § 1444. On July 19, 1963, defendant filed motion to dismiss plaintiff’s complaint upon following grounds:
“[1] That this court lacks jurisdiction of the subject matter of this suit, because this action seeks to enjoin the collection of internal revenue taxes assessed against the plaintiff, which is prohibited by Section 7421 of the Internal Eevenue Code of 1954 [26 U.S.C. Section 7421]; that this court lacks jurisdiction of the subject matter of this suit because this action involves a controversy with respect of federal taxes assessed against him, which is prohibited by Section 2201, Title 28, United States Code [28 U.S.C. Section 2201]; [3] that this court lacks jurisdiction of the defendant, United States of America, since this action is a suit against the United States, with respect to a matter which the United States has not waived its sovereign immunity.”
Defendant’s motion to dismiss was heard March 19, 1965, with counsel for parties presenting oral arguments. In answer to plaintiff’s contention that he was entitled to equitable relief under the circumstances presented here because he had no adequate remedy at law, defendant contended that no sufficient facts were alleged in the complaint to support the conclusion that the plaintiff had no adequate remedy at law, or to show that irreparable damage would result to him in the absence of injunctive relief by the court. Consequently, at the conclusion of the hearing upon request leave was granted plaintiff’s counsel to file an affidavit setting forth facts in support of the allegations of undue hardship, irreparable injury and lack of adequate remedy at law contained in plaintiff's complaint.
In support of its contention that this action must be dismissed, defendant asserts that this is not in actuality an action to quiet title within the scope of 28 U.S.C. § 2410[a], but instead is an attempt on the part of plaintiff to attack the merits of a tax assessment by declaring that plaintiff owes no tax liability to defendant; and that the United States has not waived its sovereign immunity to suit in such a case.
After a careful study and consideration of briefs submitted by counsel for both parties, and after reading and studying the cases and authorities cited therein, this court can reach no conclusion other than that this is essentially a suit to determine the validity of the tax assessed against the plaintiff by the defendant, and that the defendant has not withdrawn its sovereign immunity to such an action under the provisions of Section 2410[a], supra.
Formerly there was some case authority to support the proposition that a taxpayer could bring such an action to determine the validity of a tax assessment in a suit to quiet title under the authority of said Section 2410[a]. See Sonitz v. United States, 221 F.Supp. 762 [D.C.N.J.1963]; United States v. Coson, 286 F.2d 453 [9th Cir. 1961]. However, later decisions have held consistently that a taxpayer may not use said Section as a means to contest the merits of a tax assessment, predicated upon a suit to quiet title. Broadwell v. United States, 234 F.Supp. 17 [D.C.N.C.1964], aff’d. 4th Cir. March 8,1965, 343 F.2d 470; Cooper Agency v. McCleod, 235 F.Supp. 276 [D. C.S.C.1964]; Quinn v. Hook, 231 F.Supp. 718 [D.C.Pa.1964]; aff’d. 341 F.2d 920 3rd Cir. March 2, 1965; Batts v. United States, 228 F.Supp. 272 [D.C.N.C.1964]; Falik v. United States, 343 F.2d 38, [2nd Cir. March 1965]. In Broadwell, supra, the district court stated:
“In light of the legislative history of Section 2410 [a] it is apparent that the consent of the government, given under that section, does not extend to a taxpayer’s attack on the merits of a tax assessment through the vehicle of a suit to quiet title. As stated by Judge Freeman of the Eastern District of Pennsylvania in Quinn et al. v. Hook, supra:
“ ‘The purpose of the amendment, as clearly stated in the House and Senate reports, “is to permit the United States to be made a party defendant in cases involving foreclosure of mortgages or liens on personal property and to provide a method to clear real estate titles of questionable or valueless Government liens.” Its passage was recommended by Attorney General Jackson in order to protect good faith purchasers of real estate and foreclosing mortgagees.’ ”
In- affirming the district court's determination in Broadwell, the Fourth Circuit, in its Per Curiam opinion of March 8, 1965, said:
“By quia timet suits against the United States under 28 U.S.C. § 2410, Waverly G. Broadwell", Nancy, his wife, and Dohn Broadwell, appellants, endeavored to remove the lien on their properties of income taxes assessed upon them for the year 1959. The object of the complaints, the appellants candidly concede, was to dispute the validity of the assessments. With the District Judge, and for the reasons he gives in his memorandum on dismissing the actions, 234 F.Supp. 17, we think: [1] that 28 U.S.C. § 2410 is not available for the purpose for which it is now invoked, * *
From the tenets of the foregoing authorities, it is clear that the Government has not withdrawn its sovereign immunity and consented to be made a party to this action to quiet title under 28 U.S.C. § 2410 [a]; and that this court does not have jurisdiction under said section to entertain this action.
Plaintiff next contends that, under its broad equity powers, this court should declare that plaintiff is not liable for the assessed taxes, and should issue its injunction restraining the Government from further harassing plaintiff in regard to the payment of alleged taxes owed, since he has no adequate remedy at law, in that he is financially unable to pay the taxes and sue for a refund; and that sale of his property would result in irreparable damage to plaintiff.
In answer thereto, the Government urges that the court is barred from granting such injunctive relief under the provisions of Section 7421 [a] of Title 26, U.S.C., which provides, in part: “Except as provided in sections 6212 [a] and [c], and 6213[a], no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court. * * * ”
The language of this section is mandatory and prevents this court from granting injunctive relief unless plaintiff brings himself within the statutory exceptions as set forth in said section [which he does not contend here]; or unless he clearly establishes his right to come within the very limited judicial exception which has been recognized by our courts under their general powers of equity, the criteria of which have been clearly set forth in Miller v. Standard Nut Margarine Company, 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422 [1932]; and which have been further clarified in the recent landmark ease of Enochs v. Williams Packing and Navigation Company, 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 [1962], In Miller it was held that the general equity power of the court may be invoked to restrain the collection of federal taxes, if two criteria are present: [1] The tax must be shown to be illegal; and [2] there must exist special and extraordinary circumstances sufficient to bring the case within some acknowledged head of equity jurisprudence. In Enochs the Supreme Court went a step further and declared that, in addition to the criteria set forth in Miller, supra, plaintiff, to be entitled to injunctive relief, must show that under the most liberal view of the law and facts, the United States cannot establish its claim.
The Court stated at 370 U.S. 7, 82 S. Ct. 1129:
“The manifest purpose of § 7421 [a] is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund. In this manner the United States is assured of prompt collection of its lawful revenue. Nevertheless, if it is clear that under no circumstances could the Government ultimately prevail, the central purpose of the Act is inapplicable and, under the Nut Margarine case, [284 U.S. 498, 52 S.Ct. 260], the attempted collection may be enjoined if equity jurisdiction otherwise exists. In such a situation the exaction is merely in ‘the guise of a tax.’ Id., 284 U.S. at 509, [52 S.Ct. at 263].
“We believe that the question of whether the Government has a chance of ultimately prevailing is to be determined on the basis of the information available to it at the time of suit. Only if it is then apparent that, under the most liberal view of the law and the facts, the United States cannot establish its claim, may the suit for an injunction be maintained. Otherwise, the District Court is without jurisdiction, and the complaint must be dismissed. To require more than good faith on the part of the Government would unduly interfere with a collateral objective of the Act — protection of the collector from litigation pending a suit for refund.”
Under the circumstances before me I am compelled to the conclusion that plaintiff has failed to meet the prerequisities or the standards imposed by Miller and Enochs, supra. The plaintiff has not alleged in his complaint that defendant acted in an arbitrary, capricious, illegal or erroneous manner; however, he does allege that he never owned any interest in his wife’s business, that she was the sole and only owner of same. Such allegations are considered mixed conclusions of law and fact, which raise an issue concerning the ownership of the Casablanca Supper Club, on which point it is far from clear that under no circumstances could the Government prevail. Enochs, supra. The Government’s position here is that plaintiff was a partner with his wife, Pauline N. Floyd, in the ownership and operation of the supper club; that he is therefore equally liable for the payment of the excise taxes due from the operation thereof. In view of the Government’s contention, the relationship of the parties, and the other circumstances before the court, I am unable to hold as a matter of law that the plaintiff is not a “taxpayer”; that his property has been wrongfully and illegally levied upon and is about to be sold by defendant for the payment of federal taxes, which under no circumstances could defendant establish that he legally owed.
The court is indeed sympathetic with plaintiff’s dilemma and considers that he has made sufficient showing of “special and extraordinary circumstances sufficient to bring the case within some acknowledged head of equity jurisprudence;” Miller, supra; and that he has no adequate remedy at law. In balancing equities, neither is there any doubt that equity weighs heavily on plaintiff’s side, especially in view of the fact that the Government has a lien filed against plaintiff’s real estate which prevents plaintiff from disposing of said assets until such time as the validity of the lien may be determined. On the other hand, if the court grants plaintiff no relief herein his home and his income-producing property will be sold to satisfy the Government’s claims since he is unable to pay the tax and sue for refund and will suffer irreparable damage.
If the Government did not contend that plaintiff is a taxpayer who is indebted along with his wife, for the assessed taxes, there is no doubt that plaintiff would be entitled to maintain his suit in this court to prevent a levy and sale of his property for taxes for which he is not liable. Raffaele v. Granger, 196 F.2d 620, [3rd Cir. 1952]; Adler v. Nicholas, 166 F.2d 674, [10th Cir. 1948]; Rothensies v. Ullman, 110 F.2d 590, [3rd Cir. 1940]; Shelton v. Gill, 202 F.2d 503, [4th Cir. 1953], wherein at page 506 Judge Soper said:
“It may be noted, at the outset, that the broad prohibition of § 3653 [a] against the maintenance of any suit to restrain the collection of any taxes is directed at the person liable for the taxes and is not intended to preclude the courts from affording protection to one not liable to the taxes whose property may be in danger of seizure and sale by the taxing authorities.”
The foregoing cases are authority for the proposition that the courts will entertain jurisdiction and restrain the Government from levying and selling a non-taxpayer’s property for the taxes alleged to be due by a third-party taxpayer. These cases are distinguishable from the factual situation here inasmuch as the Government contends that plaintiff is the “taxpayer”, and under the circumstances it appears to the court that there is a substantial question as to this ultimate fact, and consequently under the controlling decisions of Miller and Enochs, and the other cited cases, supra, plaintiff has not established that he is entitled to the equitable and injunctive relief which he seeks.
From the court’s research, it appears that since Enochs v. Williams Packing Co., supra, every appellate decision has followed closely the tests enunciated therein for issuance of an injunction enjoining collection of taxes, and every case coming to our attention has resulted in dismissal of plaintiff’s complaint. See Johnson v. Wall, 329 F.2d 149 [4th Cir. 1964]; Vuin v. Burton, 327 F.2d 967 [6th Cir. 1964]; Cohen v. Gross, 316 F. 2d 521 [3rd Cir. 1963]; Botta v. Scanlon, 314 F.2d 392 [2nd Cir. 1963]; Licavoli v. Nixon, 312 F.2d 200 [6th Cir. 1963]; Abel v. Campbel, 309 F.2d 751 [5th Cir. 1962]; Falik v. United States, 343 F.2d 36 [2nd Cir. March 1965]; Broadwell v. United States, 343 F.2d 470 [4th Cir. March 1965].
Although the court is deeply sympathetic with the plaintiff’s position in the instant case, it is, however, mindful of the fact that it is imperative that the Government collect its taxes promptly to meet the obligation of the national economy, and, as stated by the Supreme Court in Enochs v. Williams Packing Co., supra, 370 U.S. at 8, 82 S.Ct. at 1129.
And to permit even the maintenance of a suit in which an injunction could issue only after the taxpayer’s nonliability had been conclusively established might ‘in every practical sense operate to suspend collection of the * * * taxes until the litigation is ended.’ Thus, in general, the Act [Internal Revenue Act] prohibits suits for injunctions barring the collection of federal taxes when the collecting officers have made the assessment and claim that it is valid.” [Citation omitted].
Part of the relief sought by plaintiff is for a declaratory judgment determining that he is not a taxpayer, that he has no obligation to pay the taxes assessed against him, and that defendant has no legal right to file its lien or seize his property. Thus, in effect, he is asking that the court determine the rights and legal relations of the parties to this law suit. Such declaratory judgment actions with reference to federal taxes are specifically barred by Section 2201 of Title 28 of the United States Code, which provides as follows:
“In a case of actual controversy within its jurisdiction, except with respect to Federal taxes, any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.” [Emphasis added].
See Singleton v. Mathis, 284 F.2d 616, [8th Cir. 1960]; Wilson v. Wilson, 141 F.2d 599 [4th Cir. 1944] ; Wm. B. Scaife & Sons, Co. v. Driscoll, 94 F.2d 664, [3rd Cir. 1937], cert. den. 305 U.S. 603, 59 S. Ct. 63, 83 L.Ed. 383.
In view of the foregoing it is hereby ordered that defendant’s motion to dismiss plaintiff’s complaint be, and the same is hereby granted.
Let judgment be entered accordingly.
. Taxes, penalties and interest allegedly owed amounted to $13,476.54 as of May 21, 1963.
. Title 28 U.S.C. § 2410 [a] provides: “Under the conditions prescribed in this section and section 1444 of this title for the protection of the United States, the United States may be named a party in any civil action or suit in any district court, including the District Court for the Territory of Alaska, or in any State court having jurisdiction of the subject matter, to quiet title to or for the foreclosure of a mortgage or other lien upon real or personal property on which the United States has or claims a mortgage or other lien.”
. 28 U.S.O. § 1444 provides: “Any action brought under section 2410 of this title against the United States in any State court may be removed by the United States to the district court of the United States for the district and division in which the action is pending.”
. Plaintiff’s affidavit was filed with Clerk of Court April 13, 1965. In substance it alleged that since the action was commenced plaintiff has suffered two severe heart attacks requiring that he be confined in the hospital for an extended period of time, resulting in his disability to engage in any gainful employment; that he has only a seventh grade education, and has glaucoma in both eyes; that he has no income except for the rent on his restaurant building rented to his wife, and that he has no real or personal property except his personal clothing and effects, the household goods in his home, a 1955 automobile, and a 1959 automobile over which there is an unpaid mortgage in excess of its market value; that his only real estate is the restaurant and home mentioned in the complaint, which is heavily mortgaged and would not sell upon the open market for any more than the mortgage debt; and if sold, would leave him without any income in a homeless and destitute situation; he further states that he has no available funds nor any credit so that he could borrow money with which to pay the tax claimed by defendant in order that he may sue for a refund.
. Note 2, supra.
. In Falik the Court of Appeals reversed the district court where district judge held taxpayer could test validity of assessment under 28 U.S.C. 2410 [a]. See also: Remis v. United States, 273 F.2d 293 [1st Cir. 1960]; Gordon v. Bank of America National Trust and Savings Ass’n, 150 F.Supp. 772 [D.C.Cal.1957]; Commercial Credit Corporation v. Schwartz, 126 F.Supp. 728 [D.C.Ark. 1954],
. These sections relate to procedural' prerequisites for assessment and have no application here.
. Note 4, supra.
. The Tenth Circuit, at page 678, said:
“It is equally well settled that the Revenue laws relate only to taxpayers. No procedure is prescribed for a nontaxpayer where the Government seeks to levy on property belonging to him for the collection of another’s tax, and no attempt has been made to annul the ordinary rights or remedies of a nontaxpayer in such cases. If the Government sought to levy on the property of A for a tax liability owing by B, A could not and would not be required to pay the tax under protest and then institute an action to recover the amount so paid. His remedy would be to go into a court of competent jurisdiction and enjoin the Government from proceeding against his property.”
. See also Hubbard Investment Co. v. Brast, et al., 59 F.2d 709, at page 710 [4th Cir. 1932], wherein Judge Parker stated:
“We think that the court below properly refused the injunction and dismissed the bill, not, however, because of the provisions of section 3224 of the Revised Statutes [26 TJSCA § 154], That section forbids the maintenance of a suit, the purpose of which is so restrain the ‘assessment or collection of any tax.’ It has no application to a suit instituted, not to restrain the assessment or collection of a tax, but the sale of property which does not belong to the taxpayer and is not subject to distraint and sale for taxes assessed against him. If therefore, this were a case where property equitably belonging to one person were being sold in satisfaction of taxes assessed against another, the statute relied upon would afford no reason for refusing relief.” [Citations omitted].
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312539-11898 | KNOCH, Circuit Judge.
Dr. Clarence E. Mansfield, the defendant-appellant, was found guilty in a trial by the Court sitting without a jury on a four-count indictment charging wilful evasion of income tax through filing false and fraudulent returns for 1957, 1958, 1959 and 1960, in violation of Title 26, U.S.C. § 7201. He was sentenced to serve- one year on each count, the sentences to run concurrently.
Dr. Mansfield contends that:
1. the Court erredin denying his motion to suppress books and records made available to Russell Armstrong, an internal revenue agent, who did not advise Dr. Mansfield that he was conducting an investigation which could lead to criminal prosecution for income tax evasion;
2. giving due regard to the defendant’s age, long hours of work, inept bookkeeping methods, and forgetfulness, the government did not prove the element of wilfulness;
3. the computations of the government were in error and duplicated some figures;
4. full recognition was not given to certain allowable deductions which would decrease the amount of tax.
In November, 1960, Dr. Mansfield had spoken to Gertrude Anderson, a tax technician in the Audit Section of the Internal Revenue Department, respecting his 1959 return. She had warned Dr. Mansfield that an agent might visit him.
John Creen testified that he was a special agent of the Internal Revenue Service; that he and Special Agent Ralph Bergstrom visited the defendant at his combined office and residence in Chicago; that they identified themselves and told him they wanted to speak to him about his income tax return. Dr. Mansfield had replied that he thought the matter was closed at the office, but the agents informed him that the matter had been referred to the special agents’ office which looked into these matters to see whether there had been any wilful attempt to evade and defeat taxes, that there was a possibility of criminal prosecution and that Dr. Mansfield did not have to talk to the agents or show them any records.
Later in the same visit, when they asked to see his medical records, the agents again informed the Doctor that he did not have to talk to them or submit any records to them. When asked whether repeated warnings were not unusual, Agent Creen said that the practice varied from time to time pursuant to current court rulings. He testified that Dr. Mansfield said that he understood and that he had nothing to hide; that the Doctor had then instructed an employee of his to give the agents two record books for 1959 which they were allowed to examine in his absence and made available to them an adding machine.
When Dr. Mansfield testified concerning this visit, he said he thought it occurred in January 1961. He also described the records given to the agents as more extensive than the two volumes described by the agents. He testified further that he was given no warnings, that the agents showed him cards identifying them only as from “Internal Revenue” and asked to see his office records, that he had to go out and he had left them at work in his office with his records. He said he later received a bill from Internal Revenue for $10, which he paid, and he considered the matter closed.
On July 2, 1962, Russell Armstrong, an internal revenue agent in the Audit division, was assigned to this case to make the field investigation which was a “joint” investigation for 1957, 1958 and 1959, as he advised Dr. Mansfield when he telephoned him to make an appointment. Dr. Mansfield denied that he was told even that much. Agent Armstrong said he did not explain what a “joint” investigation was, state that he was conducting a criminal investigation in conjunction with the Intelligence Unit of the Bureau of Internal Revenue, or repeat the warnings to which Agent Creen testified.
In a joint investigation a special agent is in charge of the investigation, and some time after the assignment of Agent Armstrong, Special Agent William Sandroff of the Intelligence Unit was also assigned to this investigation.
During July, August and September, 1962, Agent Armstrong made periodic visits to the Doctor’s office where he examined a cardboard box of cancelled checks, bank statements, etc., and log books showing income for daily walk-in patients. From time to time he discussed the investigation with Special Agent Sandroff.
At a conference with the special agent assigned to the case prior to William Sandroff, Agent Armstrong said it was decided that it was unnecessary for him to advise Dr. Mansfield of his rights because he had already been so advised by another agent. Dr. Mansfield argues that this was deliberate deceit amounting to subterfuge and misrepresentation and that all evidence obtained by Agent Armstrong ought to have been suppressed.
In the course of oral argument, counsel for the government suggested frankly that agents must sometimes decide whether unnecessary repetition of warnings will not frighten off co-operation which might otherwise be forthcoming. We agree that in this case the tactical decision not to repeat full warnings already given did not render the books and records produced subject to suppression as evidence.
The government observes that Dr. Mansfield made no change in his continued permission for examination of his records even after Agent Sandroff did repeat the prior warnings at the time of his own first interview with Dr. Mansfield in October 1962. This fact is at least equally persuasive of the government’s contention, that the Doctor was never misled, as of the defendant’s own assertion that the damage was already done and revocation of the permission would have served little purpose. In any event, during the entire investigation, Dr. Mansfield withheld his records regarding personal injury patients with claims for damages. The District Court did not err in denying the motion to suppress. United States v. Spomar, 7 Cir., 1964, 339 F.2d 941, 943, cert. den. 380 U.S. 975, 85 S.Ct. 1336, 14 L.Ed.2d 270, reh. den. 381 U.S. 956, 85 S.Ct. 1800, 14 L.Ed.2d 728; United States v. Achilli, 7 Cir., 1956, 234 F.2d 797, 805-806, affd. 353 U.S. 373, 77 S.Ct. 995, 1 L.Ed.2d 918.
The defense points out such circumstances as the following:
1. the Doctor’s forgetfulness: he couldn’t say when testifying whether he was 60 or 61 years old, because he didn’t recall the exact year of his birth, and he couldn’t remember in which years he attended Brown University or the year he was admitted to practice medicine in Illinois;
2. the lengthy workday he habitually followed, running to twelve hours;
3. he was under treatment for diabetes, hypertension, obesity and sinusitis in 1957 and for Bell’s palsy in 1959;
4. his records were kept by a receptionist-secretary who had neither training nor experience in bookkeeping;
5. his tax returns were made out by Robert Neal, who had only an eighth-grade education and who was 75 years old at the time of the trial;
6. he saw three types of patients: (a) those sent by welfare organizations, (b) those referred to him by attorneys, and (c) those he saw in connection with his duties as police surgeon for the City of Chicago at the lockup at 11th and State Streets in Chicago;
7. he did make his books and records available for examination.
Under all these circumstances, the defense feels that the Doctor was admittedly careless, but that there is no showing of intentional evasion.
On the other hand, the government has shown a substantial understatement of gross income for a number of years, which has been held to be evidence of wilful intent to evade. Epstein v. United States, 6 Cir., 1957, 246 F.2d 563, 566, and cases there cited, cert. den. 355 U.S. 868, 78 S.Ct. 116, 2 L.Ed.2d 74.
The returns were prepared from documents and papers supplied by the defendant; some of the figures given Mr. Neal were only estimated. In two of the years in question, Dr. Mansfield’s expenses as provided for preparation of his returns exceeded the income figures provided. Mr. Neal testified that in preparing the returns he reduced the amount of these expense deductions because he did not want the Doctor to get into any trouble, and when he told the defendant about that, the defendant was agreeable to the changes. In going through the defendant’s records, Agent Armstrong came upon an unsigñéd, uiifiled tax return for 1958 which showed substantially higher gross receipts than the return which was actually filed for that year. The defendant objected to the fact that a photocopy was made of this return form without his knowledge, but Agent Armstrong testified only from his own recollection as refreshed from his own notes. The photocopy was not offered in evidence or otherwise used during the trial.
Although the sole prepayment of taxes was made on his wages from the Police Department, which represented only one of the three sources of his income, the defendant secured annual refunds of several hundreds of dollars in the years in question. He could not have believed that he was entitled to these substantial refunds when no taxes were being prepaid on his private medical practice.
A full disclosure of income records was not made to the examining agents. The defendant told Special Agent Sandroff in October 1962 that he had five or six personal injury patients per month, which was markedly lower than the actual figure. In November 1960 when visiting the Internal Revenue office he made no mention of his personal injury patients. He told Mrs. Anderson that he had not reported some income from welfare patients, but he always withheld the receipts from the personal injury claimant patients. As this was one of the most lucrative aspects of his practice, withholding these records was inconsistent with his assertions that he put his books and records at the agents’ disposal. Conduct, the effect of which is to conceal or mislead, suggests wilfulness. Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 87 L.Ed. 418 (1943).
There was ample evidence from which the Trial Judge could have decided beyond a reasonable doubt that defendant wilfully attempted evasion. United States v. Peterson, 7 Cir., 1964, 338 F.2d 595, 598, cert. den. 380 U.S. 911, 85 S.Ct. 896, 13 L.Ed.2d 798 (1965).
In computing the correct income and deductions, the government produced in evidence cancelled checks paid to the Doctor by some thirty attorneys for services to clients with claims for personal injury. Also introduced in evidence were cancelled checks from the Illinois Public Aid Commission and the Treasurer of Cook County for services to individuals on public relief, in addition to payroll checks from the City of Chicago for services as public surgeon. These were cheeked as to date and amount against defendant’s deposit slips. A number of checks listed on these slips running to total sums in excess of $14,000 for each of the years involved were not in evidence. Many of the checks in evidence had not been deposited but had been cashed or negotiated to others as shown by endorsements. The total cash deposits listed in the deposit slips were not included in gross income because the income recorded in the defendant’s daily log books was included as a result of a conference in May 1963, in the Intelligence Division’s offices, where Dr. Mansfield, in the presence of his attorney, said that the amounts in his daily log books represented cash receipts which he used to pay expenses. The log books were considered to be a more accurate record than the cash deposits. The computations did include cash retained by the defendant when he deposited only a part of one of the checks in evidence. Interest earned on savings for 1960 were included and consideration given to amounts withheld from the Police Department pay checks. Nontaxable deposits such as tax refund checks, loans, and a cheek from an attorney which was not considered to be for medical service income, were eliminated.
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11775019-10705 | MOORE, J., delivered the opinion of the court, in which NELSON, J., joined. GUY, J. (pp. 457-460), delivered a separate dissenting opinion.
OPINION
MOORE, Circuit Judge.
This ease concerns the constitutionality of a stop and search of the appellant’s U-Haul truck, in which police found contraband videotapes and audiotapes. The initial stop of the truck was justified by a police officer’s observation of a traffic violation, and the search of the truck was justified by information the police had obtained in an encounter with the appellant the day before. We therefore AFFIRM the district court’s order denying the appellant’s motion to suppress the evidence obtained from the search.
I. BACKGROUND
On February 26,1997, Abdur-Raheem Ak-ram was riding in a U-Haul driven by Charles Bassett, heading east on the Ohio Turnpike. Mark Gooding of the Ohio State Highway Patrol (“OSHP”) stopped the truck after determining that it was traveling at sixty-seven miles per hour. The posted speed limit was sixty-five miles per hour for most vehicles but fifty-five miles per hour for trucks over eight-thousand pounds. See Ohio Rev.Code Ann. § 4511.21(D)(3) (Banks-Baldwin West 1994 & Supp.1998). Believing that the degree to which Bassett had violated the speed limit depended on the total weight of the truck and its contents, Gooding asked Bassett what they were carrying. Bassett said there was nothing in the truck. When Gooding later asked Akram the same question, Akram said they were carrying pillows and comforters. Akram also told Gooding that they were traveling from Detroit to New York, which Gooding considered “source cities” for narcotics. Akram was unable to produce rental papers for the truck.
These facts aroused Gooding’s suspicion, and he enlisted the aid of Paul Newburn and Xaver, also of the OSHP. Xaver is a dog trained to detect drugs, and Newburn is his handler. Gooding told Akram to pull the truck up the highway to where Newburn and Xaver were working. On Xaver’s second walk around the truck, he alerted by scratching at the back of the vehicle, and the officers searched the truck. They found no drugs, but they did find ten to fifteen boxes containing videotapes. Gooding noticed several titles that he did not think had been released to the public. Akram told Gooding that the tapes were “bad” and that he was returning them to New York. Unsure how to proceed, the officers called an OSHP investigator, who promised to call back and advise them. Forty-five minutes later, when the investigator had not called back, Gooding decided to release Bassett and Akram with warnings about their speed, possession of the tapes, and failure to produce their rental agreement. Soon after the pair had left, the OSHP investigator called back and told the officers that they could have arrested Bassett and Akram. The officers and the investigator discussed how they should proceed if a similar situation arose in the future.
Early the next morning, February 27, Bas-sett and Akram were driving them U-Haul on the same highway, this time headed west. Newburn and Xaver had been driving ea t and were in the process of crossing over to the westbound side when Newburn saw the truck. According to his testimony, he did not recognize either the truck or its occupants from the day before, but he did observe that the truck “went from the passing lane to the driving lane, and as I made my turn, went over the white line,” all without signaling. Joint Appendix (“J.A.”) at 161, 173 (Newburn Test.). He pulled the truck over to the side of the highway. When he approached the truck he recognized Akram and Bassett, and he called Gooding, who was working just a few miles away, to the scene.
Akram and Bassett told Newburn they were headed-back home from New York. They still did not have rental papers, and this time they said they were carrying pillows and jewelry. Newburn led Xaver around the truck twice, -and he says that Xaver again alerted. The parties dispute whether Akram consented to the subsequent search, which revealed the truck to be filled with apparently counterfeit tapes. The officers told Ak- ram and Bassett to drive to an OSHP patrol post, where federal agents examined the tapes and determined that at least some of them were counterfeit.
Akram pleaded not guilty to charges under 18 U.S.C. § 2818, which prohibits trafficking in counterfeit videotapes, and moved to suppress the fruits of the February 27 search. The district court denied this motion, holding that a traffic violation and Xaver’s alert justified the February 27 stop and search. Ak-ram then changed his plea to guilty but reserved the right to appeal the adverse ruling. He was sentenced to twelve months plus one day of incarceration, to begin on January 5, 1998, followed by two years of supervised release. Akram then filed timely notice of this appeal.
II. ANALYSIS
This court reviews a district court’s denial of a motion to suppress de novo but adheres to the district court’s factual findings unless they are clearly erroneous. See United States v. Diaz, 25 F.3d 392, 394 (6th Cir.1994).
A. PROBABLE CAUSE FOR THE FEBRUARY 27 STOP
1. Failure to Signal a Lane-Change
The parties dispute whether New-burn stopped the U-Haul on February 27 because of traffic violations or because he recognized Akram and Bassett from the previous day. However, an officer who has probable cause to believe a civil traffic violation has occurred may generally stop the vehicle regardless of his or her subjective motivation for doing so. See Whren v. United States, 517 U.S. 806, 116 S.Ct. 1769, 135 L.Ed.2d 89 (1996); United States v. Ferguson, 8 F.3d 385 (6th Cir.1993) (en banc), cert. denied, 513 U.S. 828, 115 S.Ct. 97, 130 L.Ed.2d 47 (1994). Newburn had probable cause to stop the truck because it failed to signal before changing lanes, in violation of Ohio law. See Ohio Rev.Code Ann. § 4511.39.
In the briefs, the parties focused on whether the truck had violated Ohio’s general prohibition of changing lanes “until the driver has first ascertained that such movement can be made with safety.” Ohio Rev.Code Ann. § 4511.33(A). However, both Newburn and the district court noted the truck’s failure to signal its lane-change. Section 4511.39 of the Ohio code requires the use of a turn signal when changing lanes, regardless of whether a driver complies with § 4511.33(A)’s general admonition to be safe. We affirm the constitutionality of the stop on the basis of the truck’s violation of § 4511.39.
2. Credibility of the Prosecution’s Witnesses
The dissent makes a strong case for disbelieving Newburn’s explanation for the February 27 stop. We agree that this case is an example of the very questionable police conduct that is permitted by Whren and Ferguson. Were the author of this opinion writing on a clean slate, she would hold that the police may not use a trivial traffic violation as a pretext for stopping a vehicle, when their real purpose would not justify a stop. We are, however, bound by the opposite holding. While the dissent demonstrates that the officers were uninterested in the traffic violation and were really looking for drugs, the point of Whren and Ferguson is that the motives of the police are irrelevant. A traffic violation provides a. justification under the Fourth Amendment for a stop, and the stop is deemed valid, regardless of the motive, unless the motorist can demonstrate that the police have violated some other provision of the Constitution, such as the Equal Protection Clause. Akram has not tried to do so, and we cannot see a basis for distinguishing this case from other cases of pretextual stops.
Of course, the dissent is also correct that we could hold the stop unconstitutional if we did not credit Newburn’s testimony. To do so, we would have to conclude that Newburn was lying not just about his motive for the stop-but also about the historical fact of whether the truck failed to signal. The district court, which is charged with primary responsibility for determining witness credibility, believed Newburn’s testimony that he did not see the truck signal its lane-change. J.A. at 78 (Dist.Ct.Op.). We review that factual finding for clear error, giving due deference to the district judge’s credibility determination. See Diaz, 25 F.3d at 394. Certainly this standard for reviewing that finding is not so high that it can never be overcome. However, Akram and Bassett never contradicted Newburn’s testimony. Instead, Akram has argued to us that “it was safe for Mr. Akram’s truck to move out of the passing lane into the right side lane without signaling.” Akram Br. at 15; J.A. at 28 (Suppl. Mot. to Suppress). In addition, the fact that the proceedings in the district court did not initially focus on the signaling issue could have led the district court to give Newburn’s testimony more credit. His statement that the truck did not signal was an explanation of what he saw, given in response to a question from the court, rather than part of the prosecution’s justification for the stop. In the absence of any contradictory testimony, we will abide by the district court’s findings of fact.
B. PROBABLE CAUSE FOR THE FEBRUARY 27 SEARCH
The preferred procedure for searching private property is for the government to obtain a warrant. See Ornelas v. United States, 517 U.S. 690, 699, 116 S.Ct. 1657, 134 L.Ed.2d 911 (1996). One of the exceptions to this requirement is the “automobile exception,” which excuses the police from obtaining a warrant when they have probable cause to believe that a vehicle they have stopped at the side of the road contains evidence of a crime. See United States v. Pasquarille, 20 F.3d 682, 690 (6th Cir.) (citing Carroll v. United States, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543 (1925)), cert. denied, 513 U.S. 986, 115 S.Ct. 481, 130 L.Ed.2d 394 (1994). When a judicial officer issues a search warrant, we review his or her determination of probable cause with deference. See United States v. Rosenbarger, 536 F.2d 715, 719 (6th Cir.1976), cert. denied, 431 U.S. 965, 97 S.Ct. 2920, 53 L.Ed.2d 1060 (1977). However, when a search is conducted without a warrant, the district court decides whether the objective facts known to the officers established probable cause, and we review that decision de novo. See Diaz, 25 F.3d at 394; Pasquarille, 20 F.3d at 685.
We hold that the search was constitutional because the information obtained during the February 26 search provided probable cause to believe there would be contraband or other evidence of criminal activity in the truck on February 27. We reject Akram’s argument that the information obtained on February 26 was “stale” and could not justify a repeat search.
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61886-21396 | VAN OOSTERHOUT, Circuit Judge.
This is an appeal from final judgment based upon jury verdict denying claim of appellant, hereinafter called plaintiff, and establishing counterclaim of appel-lee Downing, hereinafter called defendant, the litigation arising out of a collision of a tractor trailer combination owned by plaintiff and driven by its employee, Mangert, and a tractor, owned and driven by defendant, pulling a trailer owned by appellee Independent Truckers, Inc., on U. S. Highway No. 6 near Tiffin, Iowa, on January 8, 1953, at 1:30 A.M. Jurisdiction based upon diversity of citizenship has been established.
Highway No. 6 at the place of collision is a paved two-lane highway with a black line marking its center. The paving is 18 feet wide, including a sloping curb 11 inches wide on each side of the highway, leaving 16 feet 2 inches of paving measured from the inside edge of the curbs, or a distance from the inside edge of each curb to the center line of 8 feet 1 inch. On each side of the pavement is a dirt shoulder approximately 10 feet wide. Each tractor and trailer combination was just under 8 feet wide and about 45 feet long and was carrying a load. Plaintiff’s vehicle was proceeding west uphill. Defendant’s vehicle was traveling east downhill. There was some mist and the road was beginning to get slippery.
Plaintiff claims the collision was proximately caused by defendant’s failure to yield one-half the traveled highway, to keep a proper lookout, to have his vehicle under control, and to keep to the right when approaching a curve. Freedom from contributory negligence is asserted. . Defendant in his counterclaim relies upon the same specifications of neg ligence and asserts freedom from contributory negligence. Neither party asserts the other was traveling at an excessive speed.
Plaintiff relies principally on the testimony of its driver, Mangert, to the effect that when the vehicles were about 500 feet apart said driver observed defendant’s truck running on the black center line with the vehicle overhanging said line. Mangert states that he tried to turn to the right to get his vehicle over the curb but failed because it was too icy. When the defendant continued to encroach on plaintiff’s side of the road and got very close — about two truck-lengths away — Mangert turned more sharply to the right and got the front wheels over, the curb. The trailer jackknifed, swinging to the left, and in so doing crossed on to defendant’s side of the highway. After the collision plaintiff’s trailer was still somewhat over the center line. The collision occurred between the left front of defendant’s cab and the left rear corner of plaintiff’s trailer. In some respects Mangert’s testimony is corroborated by the driver of a truck following him.
Defendant denied that his truck was to the left of the center line. His version of the accident was that he was following another Merchants truck, that after plaintiff’s truck had passed said truck it “seemed to sway over to the shoulder of the road, back into the center of the road, and over onto my side, and then to cut way over to the left side, off to my left, which was the right side of the road for him, and up over the shoulder into a jack-knife position. The trailer kept coming toward me as I was going slowly down this hill. Now as this happened — -I will tell you the truth —I thought he was going to turn around and get out of my way before I actually did come upon him, but because he went back a second time and didn’t go into the ditch and jack-knifed like, I thought he was — the first attempt that his truck seemed to be out of control. He came •closer toward me and when I saw that, I tried to get out of his way. I pulled off to the right and I got my right wheel off into the grass shoulder of the highway, but my left wheel wouldn’t climb up the beveled shoulder. As I did that I saw his trailer start to whip towards me and then just before it happened, I ducked down in the cab and laid down out of the way, and the glass and everything from the windshield went all over me.”
The evidence will be further developed in discussing the errors asserted by the plaintiff, which we now proceed to consider.
I. Over plaintiff’s objection the defendant was allowed to testify that he had received a $7,500 offer from an undisclosed source for his tractor shortly before the collision. The court in its instructions also mentioned the offer as a factor for the jury to consider in determining the reasonable market value of defendant’s tractor before the collision. Plaintiff made proper exception to this instruction. The evidence discloses that defendant’s vehicle could be restored to its pre-accident condition by repairs. Under such circumstances the applicable measure of damages is the reasonable cost of repairs plus the reasonable value of the use of the vehicle while being repaired with ordinary diligence, not exceeding the value of the vehicle before injury. Langham v. Chicago, R. I. & P. Ry. Co., 201 Iowa 897, 901, 208 N.W. 356, 358; Kohl v. Arp, 236 Iowa 31, 33, 17 N.W.2d 824, 826, 169 A. L.R. 1067. It was stipulated that if called proper witnesses would establish the cost of repairs and damage for loss of use of the tractor at $6,557.18. Plaintiff reserved the right to assert its contention that the cost of repairs and loss of use exceeded the value of the defendant’s tractor before collision. The. defendant as a witness fixed the reasonable market value of his tractor immediately prior to the collision at $9,000. Under Iowa law the owner of personal property is qualified and competent to testify as to its value. Kohl v. Arp, supra; Slabaugh v. Eldon Miller, Inc., 244 Iowa 29, 55 N. W.2d 528. Counsel has not cited any Iowa authority, nor have we found any, directly on the issue whether the owner of property is permitted to testify as to offers he has received. Generally it appears that such evidence is not admissible. Sharp v. United States, 191 U.S. 341, 348, 24 S.Ct. 114, 48 L.Ed. 211; 31 C.J.S., Evidence, § 183, p. 898; 20 Am. Jur., Evidence, § 375, p. 341. The'jury awarded the defendant .$3,200, slightly less than one-half of the damage stipulated, subject to proof of the value of the tractor before the accident. Since there was competent evidence that the pre-accident value of the tractor was $9,-000, we can not see where any possible prejudice resulted from admitting proof of the $7,500 offer and the reference thereto in the instructions.
II. Defendant’s deposition had been taken before trial. He was examined as a witness at the trial. Some inconsistencies appeared between his testimony at the trial and that disclosed by the deposition. Plaintiff’s counsel interrogated defendant as to such inconsistencies, and secured his admission at least in most instances as to the testimony that he had given by his deposition. The plaintiff then sought to introduce the deposition as a whole, and later, certain portions thereof. The court sustained the defendant’s objection to such offer, stating:
“I will not permit a discovery deposition to be offered and received in evidence when we have the witness on the stand. If you have any particular portion that you want to offer you may interrogate the witness about it, but you have the witness here and you may elicit from the witness anything that you have tried to obtain in the deposition, but I will not admit the deposition nor questions and answers from it other than for impeachment purposes.”
Rule 26(d) (2) of the Federal Rules of Civil Procedure, 28 U.S.C.A., provides :
“The deposition of a party or of anyone who at the time of taking the deposition was an officer, director, or managing agent of a public or private corporation, partnership, or as-sociátion which is a party may be used by an adverse party for any purpose.”
This rule is broad and has been liberally interpreted. Pfotzer v. Aqua Systems, 2 Cir., 162 F.2d 779; Buder v. New York Trust Co., 2 Cir., 107 F.2d 705; 4 Moore’s Federal Practice, p. 1187.
Under the rule hereinabove quoted the plaintiff wa& entitled to introduce the defendant’s deposition into evidence, subject to the court’s right to exclude such parts thereof as might be unnecessarily repetitious in relation to the witness’ testimony on' the stand. There is considerable doubt whether the failure to receive this evidence resulted in any prejudicial error in this case, since the substantial discrepancies were admitted by the defendant when he appeared as a witness. However, since this case must be reversed for other reasons we need not decide whether this error alone would warrant a reversal.
III. Plaintiff contends the court erred in failing to sustain its motion for a directed verdict upon defendant’s counterclaim on the basis that defendant was guilty of contributory negligence as a matter of law. The plaintiff relies upon Nurnburg v. Joyce, 232 Iowa 1244, 7 N. W.2d 786; and Dircks v. Tonne, 183 Iowa 403, 167 N.W. 103, which assert the rule that where a person drives into a place of known or obvious danger, when he has means at hand to avoid a collision, he is guilty of negligence as a matter of law. We are convinced that the rule does not apply to the facts in this case. The factual situations in the cited cases are clearly distinguishable from the situation now confronting us.
A party against whom a motion for directed verdict is made is entitled to have the evidence viewed in the light most favorable to him. Hahn v. Strubel, 243 Iowa 438, 52 N.W.2d 28; Brinegar v. Green, 8 Cir., 117 F.2d 316. Mangert’s own testimony is that he did not start the turn which caused the jackknife until the vehicles were within two truck-lengths of each other. Obviously, the distance between the vehicles would be less when the danger definitely developed. Plaintiff relies heavily upon defendant’s statement in his deposition that his speed was 20 miles an hour, and that at that speed he could have stopped his truck in 50 feet. At the trial defendant testified that he could not stop his truck in 50 feet and didn’t know what distance would be required to bring it to a stop. Defendant's testimony also is that he started to pull to his right before the collision. It is obvious that a loaded truck traveling downhill at 20 miles an hour on an icy road could not stop in a distance of 50 feet. Defendant is not conclusively bound as a matter of law by the estimate as to the required stopping distance that he made in his deposition. The decision on the contributory negligence issue must be based upon the consideration of all of the evidence.
The issue of freedom from contributory negligence ordinarily presents a question of fact for the determination of the jury. If there is any evidence tending to establish freedom from contributory negligence the issue is for the jury. Weilbrenner v. Owens, Iowa, 68 N.W.2d 293; Chicago, R. I. & P. Ry. Co. v. Fleischman, 8 Cir., 204 F.2d 799. The evidence before us in this case is in conflict upon the issue of defendant’s freedom from contributory negligence. The court properly overruled the plaintiff’s motion for a directed verdict upon defendant’s counterclaim.
IV. Plaintiff vigorously contends that the court erred in failing to instruct on legal excuse and emergency. Plaintiff’s requested instructions which were refused included the legal excuse issue. The court covered legal excuse in its preliminary draft of instructions. In considering exceptions to the proposed instructions the court stated:
“I am going to rewrite number 10% and exclude therefrom the language ‘in the absence of a legal or justifiable excuse therefor.’ And the definition of it I am going to exclude, because a re-examination of the pleadings discloses that you did not plead legal excuse. And the Supreme Court of Iowa has held that giving such an instruction in such case is error. I don’t have the citation before me. Now there is no pleading here as to legal excuse and there is no evidence to support it and there is no pleading of it. It is not an issue in the case In other words. * * * ”
It is clear from the Iowa decisions that legal excuse need not be pleaded by a party to avail himself of the rule. Koob v. Schmolt, 241 Iowa 1294, 45 N.W.2d 216; Townsend v. Armstrong, 220 Iowa 396, 260 N.W. 17; Sanford v. Nesbit, 234 Iowa 14, 11 N.W.2d 695.
In the Koob case, supra, 45 N.W.2d at page 218, the court states:
“Plaintiff argues ‘the defendant did not (claim) and has not claimed that an emergency existed * It is not clear on what this argument is based. Defendant did not need to plead emergency. * * *
“Notwithstanding an intimation in one of our cases that the doctrine of emergency is available only to establish freedom from contributory negligence, Cubbage v. Conrad Youngerman’s Estate, 155 Iowa 39, 50, 134 N.W. 1074, it clearly is to be considered in any case in which is involved the conduct of a person who is put in peril not of his own creation. * * * ” (Emphasis supplied.)
Since the law does not require a party to plead legal excuse or emergency to be entitled to the benefit of the rule, we need not determine whether plaintiff has established its contention that legal excuse was pleaded.
If there is evidence to support legal excuse it is the duty of the court to submit such issue to the jury under proper instructions particularly when request for such instruction has been made. Kisling v. Thierman, 214 Iowa 911, 243 N.W. 552; Babendure v. Baker, 218 Iowa 31, 253 N.W. 834; Edwards v. Perley, 223 Iowa 1119, 274 N.W. 910; Christenson v. Northwestern Bell Telephone Co., 222 Iowa 808, 270 N.W. 394; Sanford v. Nesbit, supra.
In the Babendure case, supra, the vehicles were approaching each other from opposite directions. Plaintiff turned to the left, contending he was confronted with an emergency created by the approaching car swerving from side to side across the pavement. A directed verdict for the defendant was reversed, the court finding that there was sufficient evidence to develop a fact issue for the jury on legal excuse. In the Christenson case, supra, a jury verdict for defendant was reversed, the court finding that the failure to submit the légal excuse issue when there was evidence to support the same was error. At pages 396-397 of 270 N. W. the court says:
“The complaint to this instruction is that under it the jury would be led to believe that if the driver of the car in which decedent was riding was on the wrong side of the road the decedent’s estate could not recover, and in view of the fact that the evidence does show that the ear was on the wrong side of the road at the time of the collision, the instruction amounted to a mandatory direction to the jury to return a verdict for-the defendant, and that the instruction entirely omits reference to a sudden emergency or excuse for the decedent’s car being on the wrong side of the road.
“The instruction complained of may be correct as an abstract proposition of law, but it cannot be said that stating such abstract proposition correctly without explaining its application would not result in misleading or confusing the jury in the face of the record in this case which, without question, shows that the decedent’s automobile was on the wrong side of the road at the instant of collision. * * * ”
In the case we are now considering, as in the Christenson case, the evidence shows plaintiff’s vehicle was on the wrong side of the road at the time of the collision. Kisling v. Thierman, supra, clears up many uncertainties in the law pertaining to negligence cases, reaching the conclusion that the violation of a statute prescribing a standard of care constitutes negligence per se unless legal excuse is shown for the violation. Excepted from such rule are violations of the statutes requiring vehicles meeting each other to yield one-half of the traveled way by turning to the right. The court admits this exception is inconsistent with the general rule announced, but because of the many cases interpreting such statutes as giving a person the right to use any part of the highway outside of cities and towns except when meeting another vehicle, it is determined that proof that a vehicle is on- the wrong side of the road is only prima facie evidence of negligence. With reference to legal excuse the court states 243 N.W. at page 554:
“With this thought in mind and in accord with--this idea, a court is warranted in saying to the jury that if the defendant failed to observe the standard of care thus fixed by statute, he is guilty of negligence, unless he has shown a legal excuse for failure to observe the requirements of the statute or ordinance, ¿nd in case he has so shown such legal excuse, he is not guilty of negligence. By the term ‘legal excuse’ is meant:
“1. Anything that would make it impossible to comply with the statute or ordinance.
“2. Anything over which the-driver has no control which places his car in a position contrary to the provisions of the statute or ordinance.
“3. Where the driver of the car is confronted by an- emergency not of his own making, and by reason thereof he fails to obey the statute.
“4. Where a statute specifically provides an excuse or exception.”
The determinative issue at this point is whether the record contains evidence which would support a jury finding of legal excuse or emergency. We are convinced that it does. Much of the pertinent evidence has previously been set out. As heretofore stated the paved surface between curbs was 16 feet 2 inches wide. Each vehicle was nearly 8 feet wide. This left very little room for clearance. However, it would have been possible for the vehicles to safely pass if each observed its statutory duty and yielded one-half of the paved way. The passing margin of safety could be increased by the vehicles riding the sloping curbs. By Iowa statute, § 321.298, Iowa Code Annotated, each driver of the meeting vehicles was required to yield one-half of the paved surface. The plaintiff’s driver had a right to assume that the defendant would obey the law and yield one-half of the traveled way until he knew or in the exercise of reasonable care should have known otherwise. Jordan v. Schantz, 220 Iowa 1251, 264 N.W. 259; Thordson v. McKeighan, 235 Iowa 409, 16 N.W.2d 607. Mangert, after relating that the defendant was continuing to encroach on his side of the road by crowding over the center line, testified as follows:
“Q. Mr. Mangert, did the position of the Downing truck, in your judgment, require some immediate action on your part? A. Yes, sir, it did.
“Q. And what action did it require in your judgment, right then? A. I tried to get off on the shoulder, to get out of his way.
“Q. All right. Did you fear something would happen if you did not get off of the highway? A. I feared a head-on or a side-swipe.
“Q. In view of the approach of the Downing vehicle coming down this hill, was it your judgment immediately prior, in attempting to turn off the shoulder, that that was the time to apply brakes on that vehicle to bring it to a stop? A. No.
“Q. That was not your judgment? Your judgment was to do what? A. To get off the road on the shoulder.”
We believe that the jury would be warranted in finding from the plaintiff’s testimony that the defendant created an emergency by encroaching upon plaintiff’s side of the road, that the plaintiff’s driver exercised ordinary care under such circumstances in trying to climb the curb, and that his effort to thus avoid a collision caused the jackknifing which placed plaintiff’s truck on defendant’s side of the highway. The testimony of both drivers is that the curb was hard to climb because of its icy condition.
The defendant contends that since the jury found for the defendant they did not believe Mangert. This reasoning is not sound. The jury were not instructed on legal excuse and care required in an emergency. They may have found for the defendant under the instructions merely because the evidence showed without controversy that plaintiff’s vehicle was on the wrong side of the road after the jackknifing and just prior to the collision. This same argument was rejected in the Christenson case, supra. At 65 C.J.S., Negligence, § 252a, p. 1134, it is stated:
“Emergency. The questions whether an emergency existed, and whether a person who was confronted with a sudden emergency exercised such care as an ordinarily prudent man would have exercised, when confronted with a like emergency, ordinarily are questions of fact for the jury. The question whether one was without fault in bringing about an emergency generally is for the jury.”
The Iowa rule appears to be in accord with the above statement. Koob v. Schmolt, supra (dissenting opinion); Luppes v. Harrison, 239 Iowa 880, 32 N. W.2d 809; Leinen v. Boettger, 241 Iowa 910, 44 N.W.2d 73; Smith v. Darling & Co., 244 Iowa 133, 56 N.W.2d 47.
The question of the care to be used by a person faced with a sudden emergency is discussed in Fagen Elevator v. Pfies-ter, 244 Iowa 633, 56 N.W.2d 577, 581. The court, after reviewing the Iowa cases, and citing 65 C.J.S., Negligence, § 17a, p. 408, and 39 Am.Jur., Negligence, § 41, states:
“Under the authorities just cited and others one confronted with a sudden emergency not of his own making is required to exercise such care as an ordinarily prudent'man' would exercise when confronted with a like emergency. * .* * ”
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959-30589 | OPINION
FLETCHER, Circuit Judge:
Amrut and Sita Patel appeal the jury verdict against them on their § 1983 claim alleging that the City of San Bernardino violated their procedural due process rights by not affording them notice and an opportunity for a hearing after the City closed down their motel as a nuisance. The Patels also appeal the district court’s summary judgment for the City on their § 1983 claims of alleged violations of substantive due process and equal protection, as well as the district court’s decision declining to exercise supplemental jurisdiction over their inverse-condemnation claim based on the California constitution. We have jurisdiction over the appeal pursuant to 28 U.S.C. § 1291 and affirm in part and reverse in part.
FACTUAL BACKGROUND
The Patels purchased the Super-7 Motel in downtown San Bernardino in 1984. The motel apparently contains approximately 40 rooms, and appears to have been occupied primarily by short- and medium-term residents rather than by transient travelers. The City alleged in moving papers below that in the three years before 1990 the City’s police department reported over 300 calls to the motel for assistance with illegal activity and that the motel had been the site of “numerous drug and narcotic busts and prostitution arrests”.
Since at least 1987, the Patels had leased the motel to various lessees. In June of 1990, the lease was assigned to Mahendra and Minaxi Desai.
In 1990, the City designed and implemented a program to inspect all motels within its boundaries. In March of that year, the City issued a “Notice of Violation” regarding the motel, specifying numerous violations and indicating that four units had been “abated” and posted as “dangerous.” The Notice stated that the violations had to be corrected within ten days and that permits were required for the work needed to bring two units into compliance. A second Notice of Violation was issued the' following month.
In May 1990 another Notice of Violation was issued, apparently regarding violations on the grounds of the motel rather than in the rooms. This Notice included a note directing that rooms not be rented until the violations were corrected because the motel was in violation of its “conditions of approval.”
A “Notice to Abate Nuisance” was issued on August 27, 1990 and listed at least 14 code violations at the motel. The Notice, which identified Mahendra Desai as the property owner, indicated that the “nuisance(s)” must be corrected by September 10th, and stated that if the owner objected to the determination of a nuisance, he “must file a written protest to the City Clerk no later than 10 days from the date of this notice.” The Notice also stated that four units were closed due to unfit conditions and could not be rented until corrections were made. Mr. Patel stated in a sworn declaration that he received a copy of this Notice in the mail from Mr. Desai. On August 29, 1990, Mr. Desai apparently obtained building permits to conduct repairs.
On September 4, 1990, pursuant to an administrative warrant, the City inspected the motel. City Attorney James Penman, investigators from the City Attorney’s office, Code Compliance Supervisor Debra Daniel, several code compliance officers, and a fire department inspector were present at the inspection. The inspection found code violations including faulty plumbing, illegally installed kitchens, exposed electrical wiring, roach infestation, and missing smoke detectors. The City officials concluded that the motel constituted an extreme health and safety hazard to the residents and ordered it closed immediately. Residents were apparently provided with relocation assistance by the City.
The City appears to have acted pursuant to Chapter 15.28 of the San Bernardino Municipal Code on “Dangerous Buildings.” Section 15.28.140(A) gives the City building official the “summary power to secure from entry any structure which in his discretion he determines to be immediately dangerous or hazardous, or in any other manner injurious to public health or safety ... using methods at his discretion to accomplish the purpose which are most appropriate under the circumstances.” Section 15.28.150 allows the building official to use the same procedures “in connection with the summary abatement of all other nuisances upon private property which the building official determines in his discretion to constitute an immediately dangerous or hazardous condition.” Section 15.28.140(C) requires the building official, “immediately after” securing a dangerous building, to “mail a notice to the owners” of the property informing them:
(1) that he has secured the structure;
(2) the cost incurred by the City thereby;
(3) that he has posted signs as provided by this section;
(4) the reasons why he has taken the action;
(5) that an appeal may be made within ten days to the Board of Building Commissioners, to be set for hearing at the next regular meeting;
(6) that if his action is not annulled by the Board of Building Commissioners, the cost of securing the property shall become a lien upon the real property unless the cost is paid to the City within thirty days of the mailing of the notice.
Section 15.28.140(D) governs appeals to the Board.
A.L. Williams, a code compliance officer for the City, issued a “Notice to Abate Nuisance” on September 4th. The Notice identified “Mahendra B. Desai (agent for Patel)” as the owner and stated that the motel’s units were closed “due to safety violations, operating a business without a business license or a proper [certificate of occupancy, and] substandard conditions in this complex.” The Notice stated that the owner or his agent could not repair or improve the premises without a proper permit and that rooms could not be occupied until the motel passed an inspection by the building and safety department, the fire and police departments, and the city attorney’s office. The Notice stated that the owner had until September 14,1990 to apply for permits to make repairs and that the owner had 10 days, from the date of the notice to file a written protest with the City Clerk’s office if the determination of a nuisance was contested. Desai, in a sworn declaration, stated that he immediately sent a copy of the notice to Mr. Patel. Mr. Patel stated in a sworn declaration that he received a copy of this notice from Mr. Desai, though Patel testified at trial that he had never received the document.
On September 26, 1990, Williams wrote a letter to the Patels, addressed to them at their address in Upland, California, which stated that it constituted service of a “Correction Notice” as to the motel. Attached to the letter was a two-page “Unit Inspection Report”, prepared on September 10, 1990, that detailed the code violations at the motel found during the September 4, inspection. The report indicated that the violations had to be corrected in 10 days and that permits were required for the repairs; the letter stated the same instructions and requested that the Patels “contact this office within ten (10) calendar days from the date of this notice to make arrangements to correct [the] violations.” The report indicates that a copy was mailed to the owner by certified mail on September 26, 1990. Although Mr. Patel testified at trial that he had never received this letter, he stated in his sworn declaration that he received the letter on or about September 27,1990.
In his sworn declaration, Mr. Patel stated that within the ten-day period specified in the -September 26th letter he went to the City’s planning and building department to apply for building permits to repair the motel and that he was told by Daniel that budding permits would not be issued at that time. At trial, under cross-examination, Mr. Patel testified that he had never applied for building permits to rehabilitate the motel.
On October 29, 1990, Larry Reed, the director of the City’s Department of Planning and Building Services, wrote the Patels and notified them that the motel had been determined to be a public nuisance in violation of city ordinances. It is unclear whether this determination refers to the violations cited in the September 4 and September 26 notices or whether it is a new determination based on the unoccupied state of the motel after the closure. Reed stated that an emergency abatement of the property had been made in order to protect the health and safety of the community and that the costs of the abatement amounted to $598.34, which the Patels should remit to the city clerk’s office within 30 days. Mr. Patel testified at trial that he had never received this letter personally or by mail, but in his sworn declaration he stated that he received the letter on October 29.
The October 29 letter also stated that a hearing on the matter had been scheduled before the Board of Building Commissioners on December 7, 1990 at 9:00 a.m. and informed the Patels that they had the right to present evidence challenging the abatement at the hearing. On December 7, the Board met but immediately cancelled its meeting due to lack of a quorum.
Mr. Patel stated in his declaration that he went to the planning and building services department during the last week of November 1990 to obtain building permits for repairs to the motel but that the permits were denied. At trial, under cross-examination, Mr. Patel testified that he had never applied for building permits to rehabilitate the motel.
A criminal complaint was also filed by the City against Amrut Patel in the fall of 1990. The complaint charged 40 counts of violation of the City’s municipal code, all involving the condition of the motel on September 4, 1990. After numerous continuances, the complaint was dismissed as to Mr. Patel on July 15, 1991, and Jayanti Morarji, who was apparently the Patels’ on-site manager, was substituted as defendant. On the same day, pursuant to a plea bargain, Morarji pled nolo contendere to the first 20 counts of the complaint and was fined $1,330 and ordered to pay restitution of $2851.55 to the City; the remaining 20 counts were dismissed.
PROCEEDINGS BELOW
The Patels on March 15, 1991, filed a complaint for inverse condemnation and injunctive and declaratory relief against the City and other defendants in federal court. A first amended complaint was filed on April 24, 1991, before any responsive pleading was filed. Essentially the complaint sought compensation for a taking under the Fifth and Fourteenth Amendments. The district court dismissed the complaint nearly a year later for lack of subject matter jurisdiction “due to failure to exhaust state remedies” as required by Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985).
On March 1, 1992, the Patels filed a Second Amended Complaint alleging federal claims under 42 U.S.C. § 1983 for violations of their constitutional rights to procedural and substantive due process and to equal protection and under 42 U.S.C. § 3604(b) (the Fair Housing Act); the complaint included a supplemental state-law count for inverse condemnation under Article 1, § 19 of the California Constitution. This complaint named as defendants the City, the City’s Economic Development Agency, various named city officials (including Penman, Williams, Reed, and Daniel, as well as W.R. Holcomb, the mayor at the time of the closure), and Does 1-100.
On December 2, 1992, the district court granted summary judgment on defendants’ motion to all individual defendants (on the basis of qualified immunity and the inapplicability of Art. I, § 19 of the California constitution to individuals) and granted summary judgment on the Fair Housing Act- claim to all defendants. The Patels have not appealed from those rulings. The district court also decided to exercise its discretion under 28 U.S.C. § 1367(c) to dismiss without prejudice the Patels’ supplemental state-law claim for inverse condemnation. The Patels have appealed from this dismissal.
Three months later, the district court, in response to a summary judgment motion by the defendants, entered an “Order Determining Issues Without Substantial Controversy.” It found that no genuine issue of material fact existed (1) as to the Patels’ substantive due process claim “because defendants’ actions were not clearly arbitrary and unreasonable, [and] had a substantial relation to public health, safety, morals or general welfare” and (2) as to the Patels’ equal protection claim because the Patels “have been unable to show that other motel properties similarly situated were treated differently.”
A trial on the Patels’ remaining procedural due process claim against the City was held in January 1,995. At the beginning of the next day, the Patels abandoned their claim that their rights to procedural due process were violated by the lack of notice and opportunity to be heard before the motel was closed, so the sole remaining issue was whether the City had violated the Patels’ due process rights by denying them notice and an opportunity to be heard after the closure of the motel. The jury returned a verdict in favor of the City, from which the Patels have timely appealed.
DISCUSSION
Alleged Pretrial Errors
I. Summary Judgment
The Patels appeal the district court’s grant of summary judgment for the City on their claims of substantive due process and equal protection. A grant of summary judgment is reviewed de novo. Jesinger v. Nevada Federal Credit Union, 24 F.3d 1127, 1130 (9th Cir.1994).
A. . Substantive Due Process
Appellants argue that the City violated their substantive due process rights not merely by closing the motel but by refusing to grant building permits necessary to make repairs that would cure the cited violations and allow the Patels to reopen the motel. The gravamen of the Patels’ argument is that the City acted to drive the motel out of business. In opposing the City’s motion for summary judgment on this claim, the Patels pointed to (1) the declaration of their attorney on his unsuccessful attempts to reach an agreement with the City to allow the motel to reopen; (2) Mr. Patel’s declaration that he applied for building permits after the motel closure but that the application was denied; and (3) a January 9, 1991 memo from Daniel to Reed inquiring as to the status of proceedings to revoke the conditional use permits of the closed motels, including the Patels’, in which Daniel states that pre-permit inspections' have been completed and she expects the owners to request building permits which could not be denied in the absence of a court order and that “[i]f motel owners are allowed to rehabilitate or operate under existing approved [conditional-use-permit] requirements a temporary solution only will be created for substandard conditions and blight of motels in our downtown area”.
To establish a violation of substantive due process in this context, a plaintiff is ordinarily required to prove that a challenged government action was “clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals, or general welfare”. Euclid v. Ambler Realty Co., 272 U.S. 365, 395, 47 S.Ct. 114, 121, 71 L.Ed. 303 (1926); Bateson v. Geisse, 857 F.2d 1300, 1303 (9th Cir.1988). However, “[w]here a particular amendment ‘provides an explicit textual source of constitutional protection’ against' a particular sort of government behavior, ‘that Amendment, not the more generalized notion of “substantive due process,” must be the guide for analyzing [a plaintiffs] claims’.” Albright v. Oliver, 510 U.S. 266, 273-74, 114 S.Ct. 807, 813, 127 L.Ed.2d 114 (1994) (Rehnquist, C.J., for plurality) (quoting Graham v. Connor, 490 U.S. 386, 395, 109 S.Ct. 1865, 1871, 104 L.Ed.2d 443 (1989)).
Here, the Patels challenge government conduct that is explicitly limited by the Takings Clause of the Fifth Amendment. If the City did in fact close the motel for code violations and refuse to issue budding per mits necessary for the Patels to bring the motel into compliance all in order to drive the motel out of business, such actions would constitute a taking of the Patels’ property. See Armendariz v. Penman, 75 F.3d. 1311, 1321 (9th Cir.1996) (en banc) (alleged scheme “to evict tenants, deprive [owners] of rental income that could have been used to bring the buildings into compliance, prevent owners from learning what repairs were necessary to come into compliance, and invent new violations after [owners] had conducted repairs that would bring their properties into compliance.” all in order to cause owners to lose properties in foreclosure, “would constitute a taking”). Because the Takings Clause “provides an explicit textual source of constitutional protection” against the type of conduct challenged by the Patels, that clause preempts the Patels’ substantive due process claim. Graham, 490 U.S. at 395, 109 S.Ct. at 1871; Armendariz, 75 F.3d at 1324.
The Patels did plead a takings claim under the Fifth and Fourteenth Amendments in their original and First Amended Complaints. The district court dismissed that claim as unripe under the doctrine of Williamson County. In the Second Amended Complaint, the Patels pled as part of their § 1983 claim for violations of substantive due process that the City “acted with the motive and intent of depressing the property value in order that the City would eventually ‘acquire’ the property, either directly or indirectly, for other, possibly commercial, purpose [sic].” This allegation was not in the context of a takings claim, only substantive due process. In Armendariz, the court noted that because the plaintiffs in that case were alleging that their property had been taken by the City for a private purpose, the plaintiffs there “would not need to seek compensation in state proceedings before filing a federal takings claim under the rule of Williamson County.” 75 F.3d at 1220-21 n. 5. However, the Patels did not make such an allegation in their First Amended Complaint and, in any case, have not appealed the dismissal of that complaint on ripeness grounds.
Because the Patels’ substántive-due-process claim is preempted under Graham by the Takings Clause, we affirm the district court’s grant of summary judgment on this claim.
B. Equal Protection
The Patels argue that the City violated their right to equal protection of the laws by selectively enforcing the building code against them so as to prevent the reopening of the motel.
When a government’s action does not involve a suspect classification or implicate a fundamental right, it will survive constitutional scrutiny for an equal protection violation as long as it bears a rational relation to a legitimate state interest. New Orleans v. Dukes, 427 U.S. 297, 303-04, 96 S.Ct. 2513, 2516-17, 49 L.Ed.2d 511 (1976); Lockary v. Kayfetz, 917 F.2d 1150, 1155 (9th Cir.1990).
As an initial matter, it is entirely unclear what distinction the City has allegedly drawn that the Patels are challenging. Their complaint alleges a denial of equal protection “in that the action directed at [the Patels] were not directed at or carried out in a similar fashion as to other similarly situated residential properties in other areas of the City.” This allegation might be read to challenge an alleged distinction between motels in downtown San Bernardino and those in other areas of the city. However, the district court found in December 1992, in ruling on an earlier summary judgment motion by the City, that the City “devised and implemented a program systematically to inspect all motels in the city.” The Patels have not challenged this order on appeal and in fact appear to have conceded that finding in arguing their opposition to the City’s summary judgment motion on the equal-protection and due-process claims, in which they describe the City’s action as taken “pursuant to a policy and program ... devised and implemented in 1990 to systematically inspect all motels, including Plaintiffs’.” The Patels have offered no evidence to create a genuine issue of material fact that this inspection program was carried out only in downtown San Bernardino. We do not suggest that such a program so limited necessarily would have violated Patel’s equal protection rights. In any event on this record the inspections that led to the closure could not have violated the Patels’ rights, since similarly situated property owners — those who owned motels within San Bernardino’s boundaries — were inspected.
As to the closure of the motel, the Patels , have not raised a genuine issue of material fact sufficient to survive summary judgment. The only relevant evidence put forward by the Patels is Penman’s newspaper article and Daniel’s memo inquiring as to the status of proceedings to revoke the Conditional Use Permits of closed downtown motels. That memo -lists five motels (including the Patels’) closed between 15 June and 10 October 1990, thus making it clear that the Patels were not singled out for closure. To the extent that the Patels mean to argue that only motels located downtown, rather than in other areas of the city, were closed, however, they have offered no evidence whatsoever to suggest that non-downtown motels with code violations similar to theirs were not closed. Even if such evidence were material, none has been adduced. The Patels have failed to create a genuine issue of material fact that the closure of the downtown motels was City action based on an irrational distinction and thus violative of equal protection.
As to the inability of the Patels to obtain permits to remedy the code violations at the motel, the Patels have also faded to raise a genuine issue of material fact as to an equal-protection violation. The Penman article and the Daniel memo do raise serious questions and suggest that what was really at stake was not merely forcing the motels to comply with all applicable city health and safety codes but rather eliminating them entirely. If the City was in fact using its code enforcement process not to enforce compliance with the codes but rather to drive the downtown motels out of business, then the code-enforcement rationale that the City offers to justify its action would be the type of pretextual rationale that this court’s equal-protection decisions forbid. See Armendariz, 75 F.3d at 1327 (where plaintiffs alleged City targeted them for code enforcement in order to obtain their properties at reduced value so as to replace low-income housing with commercial development, they “raised a triable issue of fact as to whether the [City’s] asserted rationale of directing efforts to enforce the housing code at high-crime areas was merely a pretext”); Lockary, 917 F.2d at 1155-56 (plaintiffs stated equal-protection claim by raising triable issues of fact as to whether water shortage asserted as rationale for denying water hookups was pretextual). The Patels, however, have made far less of a showing as to a genuine issue of material fact on the question of pretext than did the plaintiffs in Armendariz and Lockary. See Armendariz, 75 F.3d at 1327 (affidavit by commercial developer detailing méetings with city officials to plan commercial development to replace plaintiffs’ buildings, stating that officials asked him to purchase properties as a “strawman,” recounting discussions on how to suppress value of plaintiffs’ properties, and stating that he gave officials a list of properties to be considered; evidence that when code-enforcement sweeps began, 33 of 35 buildings targeted had been on developer’s list); Lockary, 917 F.2d at 1155-56 (affidavits showing that, following imposition of moratorium on new water hookups due to alleged water shortage, local water consumption had risen by 70%, water storage capacity had risen by 1100%, utility had provided water for secondary units and swimming pools, utility had voluntarily relinquished rights to certain water sources, utility had leakage rate double that of accepted norms, and utility had sufficient water to permit population growth).
Furthermore, the Patels have offered absolutely no evidence that they were treated differently from others who were similarly situated. There is no evidence that other motel owners whose buildings were summarily abated (either downtown or elsewhere in the city) applied for and were granted permits to carry out repairs, nor is there any evidence of owners of other residential properties that had been summarily abated applying for and receiving such permits.
Thus, the Patels failed to raise a genuine issue of material fact as to their claim of an equal protection violation and we therefore affirm the district court’s grant of summary judgment.
II. Dismissal of Claim for Inverse Condemnation
A district court’s decision whether to exercise supplemental jurisdiction is reviewed for an abuse of discretion. O’Connor v. State of Nevada, 27 F.3d 357, 362 (9th Cir.1994), cert. denied, — U.S. -, 115 S.Ct. 1367, 131 L.Ed.2d 223 (1995).
Under 28 U.S.C. § 1367(a), a federal court has supplemental jurisdiction over claims “that are so related to claims in the action within [the district court’s] original jurisdiction that they form part of the same ease or controversy under Article III.” Under 28 U.S.C. § 1367(c), a district court may decline to exercise supplemental jurisdiction over a claim if (1) the claim raises novel or complex state-law issues; (2) the claim “substantially predominates” over the court’s original-jurisdiction claims; (3) the court has dismissed all the original-jurisdiction claims; or (4) in “exceptional circumstances” if there are “other compelling reasons” to decline.
The district court declined to exercise supplemental jurisdiction over the Patels’ inverse-condemnation claim only after it granted summary judgment to all individual defendants on the § 1983 claim and to all defendants on the Fair Housing Act claim. In exercising its discretion, the court stated:
I do that for this reason: The only federal claim remaining here is a Monell claim, by necessity a Monell claim, against the City under Section 1983. The State claim in inverse [condemnation] is based on the California Constitution. The thrust of the claim and what must be proved is that there is a public use taking, using a substantial factor test. There is a lot of different evidence; there’s a lot of different theories. . There, indeed is even a trier of fact, depending on which issue you’re talking about, and I’ve come to the conclusion that it is the sort of thing that 1367 is designed to eliminate.
The court noted that the decision was not a casual one or made out of a desire to avoid work.
" The Patels' argue that the district court’s reasoning does not satisfy any of the statutory criteria of § 1367(c). However, the district court appears to have decided that the state-law claim for inverse condemnation substantially predominated over the § 1983 claim against the City for due process and equal protection violations, a permissible ground for declining supplemental jurisdiction under § 1367(c)(2). This decision was not an abuse of discretion. Indeed, given that the district court subsequently granted summary judgment on the Patels’ substantive due process and equal protection claims, and that the Patels themselves abandoned their pre-closure procedural due process claim, the district court’s decision appears to have been well justified. The claim that was actually finally tried — an alleged violation of post-closure procedural due process — would be a slender federal reed on which to base jurisdiction over a state-law claim as substantial as inverse condemnation.
The Patels also argue that they were prejudiced by the district court’s decision on December 3, 1992 to decline to exercise supplemental jurisdiction because the inverse-condemnation claim had been part of the joint pre-trial conference order of May 1992, and because trial was scheduled to begin on December 15, 1992. However, the district court recognized that its early-December decisions substantially changed the nature of the case. Therefore, at the same time that it dismissed the inverse-condemnation claim, it calendared a new pretrial conference date for March 1, 1993 and directed the parties to prepare “a new order and a new witness list and all that.” It also directed that any remaining motion practice occur before that date. Given that the trial did not actually commence until over two years after the district court’s decision to decline supplemental jurisdiction over the state-law claim, the Patels do not have any real argument that they were prejudiced by that decision.
We affirm the district court’s decision to decline to exercise supplemental jurisdiction.
Alleged Trial Errors
I. Sufficiency of the Evidence
The Patels challenge the sufficiency of the evidence to support the jury verdict for the City on the Patels’ claim of violation of their procedural due process rights. The City argues that the Patels have not preserved this issue for review because they failed to move for judgment as a matter of law at the close of all the evidence as required by Federal Rule of Civil Procedure 50(b).
The Patels did move for judgment as a matter of law at the end of the City’s “reopening” statement, but that motion was denied and never renewed. This court has held that failure to comply with Rule 50(b) precludes a challenge to the sufficiency of the evidence on appeal, Farley Transportation Co., Inc. v. Santa Fe Trail Transportation Co., 786 F.2d 1342, 1345-47 (9th Cir.1985), and that “the requirement that the motion be made at the close of all the evidence is to be strictly observed,” id. at 1346.
In their reply brief, the Patels argue that an exception is made where there is no new evidence presented (or the evidence presented is very brief) after the motion is made, and thus, no one is misled or prejudiced by a formal failure to renew the motion. The only authority cited for this proposition is a 1989 District of Nebraska decision. We need not decide whether this exception exists because it does not apply here. After the Patels’ motion was denied, they called six witnesses, each of whom was subjected to both direct and cross examination, and read into evidence the prior testimony of one witness; this presentation of evidence occupies nearly 70 transcript pages. After the plaintiffs rested their ease, the City read into evidence deposition testimony by one witness and recalled one of the Patels’ witnesses, who was again subjected to both direct and cross examination.
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529567-13232 | WESLEY E. BROWN, Senior District Judge.
This appeal follows Defendant Kovic’s conviction by a jury of twenty-three counts of mail fraud, in violation of 18 U.S.C.A. § 1341, two counts of extortion in violation of the Hobbs Act, 18 U.S.C.A. § 1951, and two counts of conspiracy to conduct the affairs of the Chicago Police Department through a pattern of racketeering activities, in violation of the Racketeer Influenced and Corrupt Organizations (RICO) chapter, specifically 18 U.S.C.A. § 1962(c) and (d). Defendant Kovic seeks reversal of his convictions alleging first that the trial court’s evidentiary rulings denied him his right to testify in his own defense, and second, that the evidence failed to prove RICO crimes. We affirm.
Kovic was Chief of the Electronics and Motor Maintenance Division (EMMD) of the Chicago Police Department from 1975 to August, 1979. The EMMD purchased and maintained all police vehicles and all electronic equipment used by the Chicago Police Department. As Chief of the Division, Kovic was able to influence the selection of vendors both for purchases of new equipment and vehicles, and for maintenance and repair work. In addition, Kovic personally approved all bills received from vendors for work done on vehicles and equipment, and for items purchased by EMMD, and his signature was required before payment checks were mailed to vendors.
During his tenure as Chief of EMMD, Defendant Kovic participated in three schemes to defraud the City of Chicago. The first scheme involved employees of Motorola, Inc., a major vendor of electronic equipment to the Chicago Police Department. In addition to supplying standard electronic parts and equipment under an annual contract, Motorola would on occasion supply EMMD with equipment and parts which were not manufactured by Motorola. In such cases, Motorola would subcontract Police Department orders to other vendors, who would manufacture and deliver the equipment either to Motorola or directly to EMMD. Motorola would then add a service or “drop-ship” charge to its cost, and would invoice the City of Chicago for the total amount.
In late 1977, Robert Cox, a Motorola employee assigned to the EMMD account, formed a business called CTI Specialties Division. Thereafter, Cox and DiLeonardi, another Motorola employee assigned to EMMD, began to submit false CTI invoices to Motorola for payment. These invoices purported to be charges for goods delivered to the Chicago Police Department which in fact were never delivered. When Motorola received these false invoices and made payment on them, it forwarded a bill to the Police Department charging the amount CTI charged Motorola, plus Motorola’s service charge. In March or April, 1978, Kovic asked the Motorola employees to obtain two large-screen television sets worth $3,000 each, one for himself and the other for a friend. Cox purchased the two sets and additional system equipment on behalf of CTI, and submitted the false CTI invoice to Motorola, which paid CTI. The Motorola employees then submitted a false Motorola invoice to the City of Chicago including the usual service charge, and Kovic caused the City to pay by approving the bill. CTI was also used to obtain other items requested by Kovic which were not for Police Department use, including a television given to a retiring employee.
The second scheme employed by defendant involved two businesses, El-En, Inc., and its parent corporation, Grand Spaulding Dodge. During 1976 and 1977, Grand Spaulding had been awarded a primary vendor contract for the sale of new automobiles to the Chicago Police Department, as well as a primary vendor contract for the repair of Department vehicles. In late 1976 or early 1977, Kovic went to Grand Spauld-ing and demanded money. Kovic explained that he would inflate the amounts on “vehicle work orders” submitted by Grand Spaulding to the City of Chicago for payment, and that he was to be paid the difference between the inflated amounts and the charges for repairs actually done. Over the next six months, Kovic falsified work orders on seven or eight occasions in return for cash payments totalling approximately $4,500. On one occasion during this time, Kovic told one of the owners of Grand Spaulding that an expensive radar device was missing from a police vehicle which had been on the Grand Spaulding lot for repairs. Kovic demanded and was paid $4,500 in cash for the missing unit, refusing to accept a check or to wait for a response from Grand Spaulding’s insurer.
The third fraudulent scheme used by Defendant Kovic for personal gain involved a transmission repair business known as Trancor, Inc., owned by Joseph Smith. In 1974, Smith submitted a bid for transmission repair work on City vehicles, and Tran-cor was awarded a contract as a primary vendor. Transmission repair bids were again solicited by the City in May, 1975, and Trancor submitted its second bid. On this contract, Trancor received only secondary status and a competitor, W.L.A.-AAMCO, was given primary vendor status, though the bids of the two companies were basically the same. Smith complained to Kovic several times, but his efforts to convince Kovic to change Trancor’s status from secondary to primary vendor were unsuccessful, and Trancor received no Police Department business from May, 1975 to September, 1976. Trancor submitted its third bid for City transmission repair work on a contract that was to run from October 1, 1976 through July 31,1978. When Smith discovered that Trancor was not going to be the primary vendor on the contract, despite the fact that Trancor’s bid was $56 lower than the next lowest bid, he threatened to complain to higher City officials. About a week thereafter, Kovic met with Smith and demanded a kickback of 10% of Trancor’s billing to the City each month in return for awarding Trancor primary status. Smith agreed to Kovic’s terms, Trancor was given primary vendor status, and soon thereafter Trancor began receiving Police Department business.
When Smith brought the first payment to Kovic, during the first few days of December,' 1976, Smith stated that he was opposed to submitting any false charges to cover the 10% payments, which Kovic had suggested, but thought the way to provide the 10% would be to reduce the 40% discount in the awarded contract to 30%. Kovic replied that he could arrange that, and on January 10,1977, a change order to the contract was executed, reducing the discount from 40% to 30%. Smith delivered 10% of Trancor’s billing each month in cash to Kovic for the next 25 months, that is until January, 1979, at which time Kovic agreed to receive a flat $2,000 per month instead of the 10% pay ments. The $2,000 payments were made monthly until May or June, 1979. In all, Kovic received slightly less than $62,000 in kickbacks from Trancor.
The first issue raised by Kovic on appeal concerns the following events in the trial court. The government stated in a pretrial motion that it intended to offer evidence of similar offenses committed by Kovic with another vendor, Mar-Lin Automotive. Kovic then filed a motion in limine to prevent the introduction of such evidence, and during trial the court ruled that the similar-crimes evidence could not be introduced by the government in its case-in-chief. Subsequently, before the defense rested, defense counsel inquired of the court whether, if Kovic decided to testify, the government would be allowed to cross-examine him concerning the alleged illegal conduct with Mar-Lin Automotive. The court stated that cross-examination on these matters “... would depend, of course ... on the type of testimony furnished by the defendant ...” but would be allowed if they became the proper subject of cross-examination. Kovic submits that the trial court erred in so ruling, by denying defendant his right to testify in his own defense. Rule 404(b) of the Federal Rules of Evidence provides:
Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show that he acted in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.
The initial ruling of the District Court forbidding the use of evidence of similar acts in the government’s case-in-chief conformed to the procedure suggested by United States v. Fierson, 419 F.2d 1020 (7 Cir. 1969). However, in this prosecution for mail fraud, Hobbs Act, and RICO violations, in which intent is an essential element of the government’s case, it would not have been error for the trial court to have permitted the introduction of evidence of defendant’s similar acts before the defense put on its case. United States v. Weidman, 572 F.2d 1199 (7 Cir. 1978), cert. denied 439 U.S. 821, 99 S.Ct. 87, 58 L.Ed.2d 113 (1978); United States v. Price, 617 F.2d 455 (7 Cir. 1979). Certainly in this case, where two counts of conspiracy to conduct the affairs of the Chicago Police Department through a pattern of racketeering activities were charged, evidence that defendant acted in a manner similar to the acts charged in the indictment would tend to prove the existence of a plan or design. United States v. Grzywacz, 603 F.2d 682 (7 Cir. 1979), cert. denied 446 U.S. 935, 100 S.Ct. 2152, 64 L.Ed.2d 788 (1980). Kovic, had he chosen to testify, could of course have drawn into question the issue of intent or any of the other listed exceptions in Rule 404(b). After a defendant “sharpens” the issue of intent, or another exception, evidence of other crimes may be admitted, if the probative value of such evidence outweighs the danger of unfair prejudice, United States v. Marine, 413 F.2d 214 (7 Cir. 1969), cert. denied 396 U.S. 1001, 90 S.Ct. 550, 24 L.Ed.2d 493 (1970), and if it is clear and convincing,. United States v. Dolliole, 597 F.2d 102 (7 Cir. 1979), cert. denied 442 U.S. 946, 99 S.Ct. 2894, 61 L.Ed.2d 318 (1979).
We agree with the District Court that its preliminary ruling forbidding the use of other-crimes evidence until Kovic “sharpened” one of the issues which made such evidence admissible had nothing to do with the right of the government to properly cross-examine Kovic had he taken the stand. As Kovic acknowledges in his brief, if a criminal defendant elects to testify in his own behalf, he may be cross-examined and his testimony impeached to the same extent as any other witness. Fitzpatrick v. United States, 178 U.S. 304, 20 S.Ct. 944, 44 L.Ed. 1078 (1900). The District Court ruled only that if Kovic testified, and evidence of other crimes became properly admissible under Rule 404(b) to prove a contested issue raised by Kovic’s testimony, the government would be allowed to cross-examine him concerning that evidence. Inasmuch as the use of such evidence was conditioned not upon the mere fact of defendant taking the stand, but upon the nature of his testi mony, there was clearly no improper penalization of defendant’s right to speak in his own behalf.
As his second and final issue in this appeal, Kovic contends that Counts 29 and 30, charging conspiracy to conduct the affairs of the Chicago Police Department through a pattern of racketeering activities, in violation of 18 U.S.C.A. § 1962(d), did not charge the commission of an offense. The arguments made in support of this contention are variations on a single theme, which is that Counts 29 and 30 of the indictment, and the proof at trial, were fatally insufficient to bring the Chicago Police Department within the definition of “enterprise” as that term is used in the RICO chapter. 18 U.S.C.A. § 1962 provides in part:
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to violate any of the provi- ' sions of subsections (a), (b), or (c) of this section.
This Court has directly held that governmental or public entities fit within the definition of “enterprise” for purposes of RICO. United States v. Grzywacz, supra; United States v. Lee Stoller Enterprises, Inc., 652 F.2d 1313 (7 Cir. 1981). In addition to the decisions cited in Lee Stoller, supra, at 1318-1319, footnote 9, from the Third, Fourth, and Fifth Circuits, the Eighth and Second Circuits have now also held that a governmental unit may be an “enterprise” under RICO. United States v. Clark, 646 F.2d 1259 (8 Cir. 1981); United States v. Angelilli, 660 F.2d 23 (2 Cir. 1981). Only the Sixth Circuit has held to the contrary, in United States v. Thompson, 669 F.2d 1143 (1982), and the reasoning therein was fully presented in Judge Swygert’s dissenting opinion to this Circuit’s Grzywacz decision, supra. While Kovic realizes that the Chicago Police Department in some situations might certainly be within RICO as an “enterprise”, he nevertheless asserts in three integrally related arguments that it cannot be found to be one in the circumstances of this case.
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1671007-26348 | RANDALL, Circuit Judge:
Defendants Frederick Leon Dotson and Reginald Owens appeal their convictions for conspiring to distribute cocaine and marijuana in violation of 21 U.S.C. § 846, and for distribution of and possession with intent to distribute marijuana, in violation of 21 U.S.C. § 841. Dotson further appeals his conviction for willfully attempting to evade payment of federal income taxes in violation of 26 U.S.C. § 7201. We affirm the convictions entered by the district court.
I.
The Mississippi Bureau of Narcotics (“MBN”) began in 1982 to investigate tips that defendant Dotson was running a marijuana selling operation. In 1983, the Bureau’s suspicions were corroborated by the arrest and conviction of I.V. Young, later a government witness at Dotson’s trial, who stated to police that he transported marijuana for Dotson and was carrying the fifty-three pounds of marijuana found in his vehicle in that capacity. Continuing its investigation, the MBN over the next two years infiltrated Dotson’s operation with a number of informants and undercover agents who, posing as small-scale drug dealers, bought wholesale quantities of marijuana from Dotson. Information obtained in these undercover encounters indicated that defendant Owens had taken over Young’s position as Dotson’s “runner” after Young’s conviction.
During this same period, the United States Internal Revenue Service (“IRS”) investigated Dotson for tax evasion. Dotson, who claimed to run a construction and a real estate business, had neither an office, nor books or records, nor a telephone. In contrast to the prevailing poverty in the rural area in which he lived, Dotson owned two new Cadillacs, a new Lincoln Town Car, and a Rolls-Royce sedan, and had recently bought a Mercedes turbo-diesel sedan for his girlfriend.
Late in the summer of 1985, a grand jury returned a ten-count indictment against Dotson, including charges against Owens in four of the counts. The indictment charged Dotson and Owens with one count of conspiracy to distribute and possess with intent to distribute marijuana and cocaine, and three counts of distribution of and possession with intent to distribute marijuana. In addition, Dotson was charged with two counts of willful evasion of federal income taxes, three additional counts of distribution of and possession with intent to distribute marijuana, and one count of possession of cocaine.
After a one-week trial, a jury returned a verdict that, on its face, convicted Dotson of all ten of the counts in the indictment.’ The jury convicted Owens of the conspiracy count and of one count of distribution of and possession with intent to distribute marijuana, but acquitted him on two counts of distribution of and possession with intent to distribute marijuana. The district court informally polled the jury and received in response a nodding of twelve heads. The court then discharged the jury.
Later that evening, the trial judge received a telephone call from two of the jurors. The jurors stated that, contrary to the verdict read in court, the jury had unanimously voted to acquit Dotson on count ten of the indictment. The judge then telephoned the foreman of the jury, who confirmed that this was the case. Based on the foreman’s affidavit, the district court, acting ex parte, corrected the verdict to acquit Dotson on count ten. Post-trial motions for judgment of acquittal and for a new trial were denied, and this appeal followed.
On appeal, Dotson and Owens, represented by new counsel, raise four points of error. First, the defendants argue that the district court erred in changing the verdict ex parte. Citing Federal Rule of Criminal Procedure 31(d), defendants assert that the only proper course for the court to have taken would have been either to reconvene the jury for further deliberations or to order a new trial. Second, Dotson argues that Agent Baker, an expert witness whose testimony formed the basis of the government’s tax evasion case, went beyond a mere summary of his testimony and impermissibly instructed the jury as to “whether the defendant did or did not have the mental state ... constituting an element of the crime charged.” Fed.R.Evid. 704(b). Third, Dotson challenges the district court’s admission of a 2,000-word hearsay document as a prior consistent statement, despite the fact that only one or two sentences in the document supported the testimony earlier impeached. Fourth, Dotson and Owens attack the district court’s denial of their motion to suppress certain evidence relevant to the conspiracy count as the fruit of an unreasonable search and seizure.
II.
Defendants’ attack on the district court’s amendment of the jury verdict highlights a tension between the policies underlying Federal Rule of Criminal Procedure 31(d) and those underlying Federal Rule of Evidence 606(b). Defendants emphasize that, when a poll in open court reveals an inaccuracy in the jury’s verdict, rule 31(d) provides two avenues by which the district court may permit the jury to resolve the discrepancy: the court may reconvene the jury for further deliberations, or it may order a new trial so that another jury may address the problems posed by the case. When the error in the verdict is discovered after the jury has been discharged, defendants argue, the policies of protecting the privacy of jury deliberations reflected in rule 606(b) prevent the district court from interrogating jurors as to their votes in an effort to piece together the true verdict. Since reconvening the jury is no longer possible, the court has no choice, according to rule 31(d), but to order a new trial, and the district court erred in refusing to do so.
The government responds that rule 31(d) is largely inapposite to the instant case, because the poll of the jury, such as it was, revealed no error in the verdict. To the contrary, the error was revealed well after the jury’s discharge. Cases that address the problems of remedying a verdict discovered to be inadequate upon a poll in open court, the government asserts, are not relevant to the problems implicated here. Instead, rule 606(b)’s goal of ensuring the finality of verdicts prohibits, as a general rule, second thoughts, doubts, or vacillations of jurors from impeaching a verdict. If there was error in the district court’s amendment of the verdict, the government argues, the error favored the defendants and certainly does not warrant reversal.
We agree with the government that rule 31(d) does not provide much guidance in the instant case for two reasons. First, the purpose of rule 31(d) is to ensure the unanimity of jury verdicts. See United States v. Edwards, 469 F.2d 1362, 1366 (5th Cir.1972). The record in this case does not indicate a lack of unanimity, but rather a unanimous jury whose opinion differed from that reflected in the written verdict. Second, the discrepancy sub judice was discovered after the district court’s sketchy poll of the jury, and, more important, after the jury was discharged. While the questions of remedying a problematic verdict like that in this case are, on their face, similar to those of resolving problems discovered during a routine jury poll, the propriety of amending a verdict after the jury is discharged must respond to powerful considerations of finality that are not in issue in a routine jury poll. As the legislative history of rule 606(b) indicates, “[p]ublic policy requires a finality to litigation.” S.Rep.No. 1277, 93rd Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Admin. News 7051, 7060. Moreover, “[jjurors will not be able to function effectively if their deliberations are to be scrutinized in post-trial litigation. In the interest of protecting the jury system and the citizens who make it work, rule 606 should not permit any inquiry into the internal deliberations of the jurors.” Id. This case does not present a jury poll problem.
This circuit has recognized an exception to rule 606(b)’s general principle that juror testimony may not impeach a verdict in cases like that presently before us: “An affidavit of a juror is admissible to show that the verdict delivered was not that actually agreed upon ... but a juror may not subsequently impeach a verdict by stating how it was reached.” University Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 547-48 n. 43 (5th Cir.1974) (citing Fox v. United States, 417 F.2d 84, 89 (5th Cir.1969) (“It has long been well settled that the affidavit of a juror is admissible to show the true verdict or that no verdict was reached at all.”)); accord Smith v. City of Seven Points, 608 F.Supp. 458, 462 (E.D.Tex.1985) (“Jurors may testify, however, to show that through inadvertence or mistake, the verdict actually entered differed from what the jury intended.”). Our research indicates that cases to which this exception applies are few and far between. Nonetheless, courts have accepted that an appropriate means to remedy a clerical error in a verdict discovered by juror affidavits is to simply amend the verdict to reflect the intent of the jury, as the district court did here. See Young v. United States, 163 F.2d 187, 189-90 (10th Cir.) (rejecting defendants’ demands for a new trial but implicitly agreeing that appropriate remedy would be “to have the causes remanded in order that the district court may reform the verdicts so that they will correctly express the agreement actually reached by the jury but incorrectly expressed in the verdicts as returned into open court and then enter new judgments upon the corrected verdicts.”), cert. denied, 332 U.S. 770, 68 S.Ct. 83, 92 L.Ed. 355 (1947); Freid v. McGrath, 135 F.2d 833, 834 (D.C.Cir.1943) (“If the jury actually found a verdict in the amount of $850.00, but mistakenly apportioned that amount between two defendants, the District Court, if properly convinced of that fact, would have power to correct the verdict accordingly; so that it would express the conclusion actually reached, and finally agreed upon by the jury.”); Pelzer Mfg. Co. v. Hamburg-Bremen Fire Ins. Co., 71 F. 826, 834 (C.C.D.S.C.1896) (correcting error in jury verdict revealed by juror affidavits). We find no error in the district court’s decision to correct the verdict rather than order a new trial.
Defendants argue in the alternative that even if the district court properly amended the jury’s verdict, it was nonetheless improper for the judge to have done so ex parte, off the record, and by communication with selected jurors. We agree that the district court more properly should have consulted counsel in deciding how to remedy the problem with the verdict. In the peculiar circumstances of this case, however, we do not find reversible error in the district court’s acting ex parte. As the government points out, the court’s action favored the defense, and the ultimate decision was for the district court in any case. While we recommend that, in the future, the district court handle novel problems with the advice and guidance of counsel, we find that the district court did not abuse its discretion in the instant case.
III.
Dotson’s second point of error questions the district court’s admission of certain testimony of the government’s tax expert, Agent Baker. Dotson complains that Baker went beyond a mere summary of the evidence adduced at trial that tended to show that Dotson had the requisite intent to evade payment of taxes. Baker’s testimony, Dotson argues, instead impermissibly “state[d] an opinion or inference as to whether the defendant did or did not have the mental state or condition constituting an element of the crime charged.” Fed.R. Evid. 704(b). Dotson further argues that Baker, as a tax expert, was not qualified under Federal Rules of Evidence 701 or 702 to testify as to Dotson’s state of mind.
The government responds, first, that defense counsel failed to preserve the error by objecting to the testimony at trial on the grounds asserted on appeal. The government then emphasizes the extreme technicality of proving tax evasion by the “net worth” method used at trial, and asserts that Baker’s testimony was essential to guide the jury through the complexity of its case. Further, the government argues, Baker’s testimony did not reach the ultimate issue of Dotson’s state of mind, but merely highlighted the evidence that would support such an inference by the jury. Finally, the government points to expert testimony by Dotson’s accountant on the question of Dotson’s state of mind, implying that in any case Baker’s testimony was permissible on a variation of the “opening the door” principle.
We strongly question whether defense counsel’s objection at trial, even as interpreted by Dotson on appeal, was specific enough to preserve any error for review by this court. Dotson, adding the phrases bracketed below as the completion of an interrupted statement by defense counsel, would have us read the objection as follows:
Q. All right. Agent Baker, based on all of the testimony and the documents that you have reviewed and that were before the Court in this case, and based on your experience and expertise as an expert in this area, have you formed an opinion as to whether the various methods of attempted tax evasion used by the Defendant Dotson that are alleged in Counts 2 and 3, are those present, and if you will review as a summary witness what those different methods of attempting to evade taxes were, as you found them?
MR. DYER:
First of all, he has not said it is [his opinion], Your Honor. That is a presumption on the part of the questioner, and I would object to the form of the question. It [also] presupposes that his conclusion [is admissible under the rules].
MR. HAILMAN:
Your Honor, I believe he gave his opinion when we offered the summary into evidence.
THE COURT:
Objection overruled.
We question whether “[i]t presupposes that his conclusion [is admissible under the rules]” is specific enough to inform the trial judge of a ground on which the evidence might be excluded. Cf. Nowell ex rel. Nowell v. Universal Elec. Co., 792 F.2d 1310, 1316 (5th Cir.) (objection that jury instruction “ ‘did not correctly state the law that would be applicable in this case’ ” failed to adequately particularize the error alleged and precluded appellate review “unless the error [was] so fundamental as to result in a miscarriage of justice.”), cert. denied, _ U.S. _, 107 S.Ct. 578, 93 L.Ed.2d 581 (1986). Out of an abundance of caution, however, we nonetheless address Dotson’s contentions on the merits.
We find no error in the district court’s overruling Dotson’s cryptic objection. As the legislative history of Federal Rule of Evidence 704(b) indicates:
The purpose of this amendment is to eliminate the confusing spectacle of competing expert witnesses testifying to directly contradictory conclusions as to the ultimate legal issue to be found by the trier of fact. Under this proposal, expert psychiatric testimony would be limited to presenting and explaining their diagnoses, such as whether the defendant had a severe mental disease or defect and what the characteristics of such a disease or defect, if any, may have been.
S.Rep.No. 225, 98th Cong., 2d Sess. 230, reprinted in 1984 U.S.Code Cong. & Admin.News 3182, 3412 (emphasis added). As the legislative history indicates, rule 704 prohibits experts from testifying as to the “ultimate legal issue” — whether the defendant did or did not have the requisite state of mind — yet permits experts to “present and explain” their diagnosis, that is, their analysis of the facts based on their special knowledge qualifying them as experts. Having carefully reviewed the excerpts from Baker’s testimony in question here, we conclude that the record before us presents an instance where the expert’s summary merely explained his analysis of the facts indicating willful evasion, and did not, perhaps with the exception noted below, directly embrace the ultimate question of whether Dotson did in fact intend to evade income taxes.
Several considerations support our conclusion that the testimony did not violate rule 704. First, the focus of the government’s questions was on facts that might support the jury’s acceptance of an inference of intent. For example, the following question is representative of the government’s examination: “What other items have you noted in the evidence, Agent Baker, that indicate an intent willfully to evade income taxes?” Second, the responses of the expert were also focused on the evidence, rather than addressing the ultimate issue forbidden by rule 704.
The most borderline of the expert’s statements reads as follows:
In 1983, again, [Dotson’s net worth] increased again forty thousand dollars, almost the same amount it did in 1981 through the period, so they are consecutive increases, which lead me to believe that Mr. Dotson’s net worth and/or his equity was increasing through the period. This is indicative, and based on my experience shows to me, that he willfully and intentionally increased his income knowing full well that he had not reported the taxes due thereon.
The second sentence in the above excerpt can be interpreted in two ways. Interpreting the sentence more favorably to the government, the sentence simply ties the facts recited in the first sentence to the conclusion that the expert, based on his specialized experience, believes they indicate. Interpreting the sentence more favorably to the defendant, the sentence presents an instance in which, the expert draws the forbidden conclusion that the defendant “willfully and intentionally” evaded income taxes.
Although the above excerpt is indeed on the borderline between a summary and a conclusion on the ultimate issue, we find that the district court did not abuse its discretion in permitting the testimony. Dotson did not bring the statement to the attention of the district court by renewing his objection, and we believe that, viewed in the context of that otherwise straightforward portion of Baker’s examination, the first interpretion of the sentence is the more reasonable. We find no error in the district court’s admission of Baker’s summary of the evidence supporting the government’s tax evasion case.
IV.
Dotson’s third point of error challenges the district court’s admission of a lengthy hearsay document into evidence as a prior consistent statement. The government’s witness, I.V. Young, testified that he was a “runner” for Dotson before his arrest and conviction for possession with intent to distribute marijuana. Young testified that when he was working for Dotson he carried packages of marijuana for Dotson from Florida at least once a week for several months, which added up to about twenty-two deliveries. On cross-examination, defense counsel confronted Young with his testimony before the grand jury that indicted Dotson, where Young had testified that he had carried marijuana for Dotson only three or four times before he was arrested. To reaffirm the credibility of Young’s testimony on direct, the government called MBN Agent Anderson, to whom Young had given a statement upon his arrest. Agent Anderson testified that Young had at that time told her that he was making “runs” to Florida sometimes two or three times a week during the period in question. The government then introduced into evidence, over Dotson’s hearsay objection, Anderson’s report of her interview with Young. The report did contain a statement consistent with Young’s testimony at trial, but it also contained a number of damaging statements about the work Young did for Dotson.
Dotson first argues that, even if the statement in Anderson’s report of her interview with Young is arguably consistent with a statement by Young impeached at trial, its recitation in a hearsay document disqualifies it under the hearsay-within-hearsay principle of Federal Rule of Evidence 805. Since Anderson’s report is an out-of-court, unsworn statement, it constitutes a hearsay document not qualifying under any of the hearsay exceptions and therefore must be excluded. Dotson further argues that, even if the one sentence in the report that is consistent with Young’s impeached testimony was admissible, the rest of that lengthy and damaging document certainly was not.
The government responds that the case law demonstrates that prior consistent statements are often introduced through the testimony of third-party witnesses; the fact that the statement was admitted through the testimony and report of Agent Anderson is immaterial. The government further argues that if Dotson wanted to have excised those parts of the document that were not relevant to the testimony of Young that was impeached, it was Dotson’s responsibility to request the district court to do so. Finally, the availability of both Young and Anderson for further cross-examination ensured Dotson the opportunity to confront any accusations contained in the report should he have so desired.
We begin by noting that the district court is endowed with “broad discretion with respect to the admission of” prior consistent statements. United States v. Goodson, 502 F.2d 1303, 1307 (5th Cir.1974). We find no abuse of discretion here. Dotson’s objection that the report constituted “hearsay within hearsay” is misplaced. According to the terms of rule 801(d)(1), prior consistent statements are not hearsay; the hearsay-within-hearsay principle contained in rule 805 simply does not apply to prior consistent statements. Moreover, the statement in the report does not constitute a hearsay statement in any case, because it was not offered into evidence to prove the truth of the matter asserted but to shore up the impeached credibility of Young’s testimony. Cf. United States v. Williams, 573 F.2d 284, 289 (5th Cir.1978) (“Usually a prior consistent statement is not admissible because mere repetition does not enhance the veracity of the statement. However, prior statements have traditionally been admissible to reestablish the credibility of a witness who has been impeached.”). Further, at least one court has not hesitated to accept the admission of a prior consistent statement made to a police officer. See Keeney v. Lewis Revels Rare Coins, Inc., 741 F.2d 378, 383 (11th Cir.1984). We find that the prior consistent statement contained in the report was admissible.
As for Dotson’s complaint that the report contained damaging information not pertinent to Young’s impeached credibility at trial, we agree with the Eleventh Circuit that, when a party does not request excision of prejudicial portions of a document admissible as a prior consistent statement, the district court does not abuse its discretion in refraining from excising those portions on its own motion. United States v. Brantley, 733 F.2d 1429, 1438 (11th Cir.1984), cert. denied, 470 U.S. 1006, 105 S.Ct. 1362, 84 L.Ed.2d 383 (1985).
V.
Defendants’ final point of error questions the district court’s decision to admit evidence seized from the trunk of a car driven by Owens and, for all practical purposes, owned by Dotson. According to Owens, Dotson had lent him the car so that Owens could wash and clean it. Driving toward his girlfriend’s house after running some personal errands, Owens was stopped by a highway patrolman for exceeding the speed limit by three miles per hour. The officer asked Owens whether he could look in the trunk of the car, and Owens initially refused, stating that the car was not his and a search warrant was required. Eventually, and it is unclear what role Owens’s consent played in permitting the search, the officer was able to look inside the trunk. He found a quantity of marijuana shavings on the trunk’s carpet and a paper bag containing $90,000. The government sought to introduce testimony about the $90,000 at trial.
Both defendants moved to suppress the evidence as the fruit of an unreasonable search and seizure. After an evidentiary hearing, the district court denied both motions. As to Owens’s motion, the court noted that “[djuring argument counsel for defendant Owens admitted that, based upon Owens’ own testimony, he had no expectation of privacy in the vehicle or its contents and therefor [sic] lacked standing to raise the issue and withdrew his motion to suppress.” United States v. Dotson, No. CRG85-47-NB, order at 1-2 (N.D.Miss. Oct. 16, 1985) (order and memorandum denying motions to suppress and for severance). Based on our review of the record, we do not find that the district court erroneously interpreted the representations of Owens or his counsel, and therefore review only the denial of Dotson’s motion to suppress.
The district court found that Dotson did not have “standing” to protest the search of the trunk. First, the court noted that Dotson was not the legal owner of the car, since title was registered in the name of his sister. The court then held that Dotson did not have a reasonable expectation of privacy in the money found in the car’s trunk: “No one in his right mind who intended to retain a privacy interest in such a large amount of cash would ever have simply turned it over to a third party, in the trunk of a car belonging to yet another party, without informing anyone that the money was there and that the person driving the car was responsible for it.” Id. at 2-3.
Dotson argues that the uncontradicted testimony at the hearing indicated that he had been in lawful possession of the car for over a month, and for all practical purposes during this time, it was his car. As such, Dotson therefore had “a property [or] possessory interest in the automobile” sufficient to create a reasonable expectation of privacy in the vehicle. Rakas v. Illinois, 439 U.S. 128, 148, 99 S.Ct. 421, 432-33, 58 L.Ed.2d 387 (1978). Dotson argues that there is, in the American citizen, a reasonable expectation of privacy in the trunk of a car when it is temporarily entrusted to a friend.
The government responds, first, that the evidence in question was relevant only to the conspiracy count, and such evidence constituted only a small part of the evidence introduced to support the government’s conspiracy case. Thus, any error in denying the motions was at any rate harmless. Second, the government argues that Dotson did not have a reasonable expectation of privacy in the trunk of the car because he did not possess the vehicle.
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4345244-8361 | ORDER AND JUDGMENT
STEPHEN H. ANDERSON, Circuit Judge.
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.
Plaintiff and Appellant, Craig Robledo-Valdez, proceeding pro se, appeals the dismissal without prejudice of his 42 U.S.C. § 1983 complaint, which alleged some thirteen claims against twenty defendants. These claims related to a variety of events that occurred during his state criminal trial and his subsequent incarceration with the Colorado Department of Corrections, including events surrounding disciplinary action taken against Mr. Robledo-Valdez. For the following reasons, we affirm the dismissal of this case.
Mr. Robledo-Valdez filed his complaint, subsequently amended, on July 12, 2012. The matter was referred to a magistrate judge. On July 13, 2012, the magistrate judge entered an Order granting leave to Mr. Robledo-Valdez to proceed in forma pauperis (“ifp ”) pursuant to 28 U.S.C. § 1915, which stated that “[Pjlaintiff is able to pay an initial partial filing fee of $16.00” and ordered Mr. Robledo-Valdez “to pay the full amount of the required $350.00 filing fee pursuant to § 1915 regardless of the outcome of this action.” Order at 1; R. Vol. 1 at 31. The Order further required Mr. Robledo-Valdez to “make monthly payments of twenty 'percent (20%) of the preceding month’s income credited to his trust fund account or show cause each month as directed above why he has no assets and no means by which to make monthly payment.” Id. at 2; R. Vol. 1 at 32. Finally, the Order explicitly stated that “if ... the plaintiff fails to have the designated initial partial filing fee or monthly payments sent to the clerk of the court or to show cause as directed above ..., the Prisoner Complaint will be dismissed without further notice.” Id. at 2-3; R. Vol. 1 at 32-33.
On October 3, 2012, the magistrate judge entered an Order to Show Cause regarding Mr. Robledo-Valdez’s failure to make his partial filing fee payments as required by the Order granting him ifp status. As stated in the Order to Show Cause:
Pursuant to § 1915(b)(1), Mr. Robledo-Valdez was directed to pay the entire $350.00 filing fee and he was ordered to pay an initial partial filing fee of $16.00. Pursuant to § 1915(b)(2), Mr. Robledo-Valdez was ordered to make monthly installment payments until the $350.00 filing fee was paid in full. Mr. Robledo-Valdez was instructed either to make the required monthly payments or to show cause each month why he has no assets and no means by which to make a monthly payment. In order to show cause, Mr. Robledo-Valdez was directed to file a current certified copy of his inmate trust fund account statement. Mr. Robledo-Valdez was warned that a failure to comply with the requirements of § 1915(b)(2) could result in the dismissal of this action without further notice.
Order to Show Cause at 1-2; R. Vol. 1 at 108-09. On October 31, 2012, the Order to Show Case was discharged after the court received a $50.00 partial payment from Mr. Robledo-Valdez, a letter from him explaining why he had not made the monthly filing fee payments as required, and a certified copy of his inmate trust account statement. Ultimately, a total of $159.00 was paid on Mr. Robledo-Valdez’s behalf. As the magistrate judge noted, however, Mr. Robledo-Valdez failed to complete his payment obligations; he has not submitted any partial filing fee payment since February 22, 2013. A review of the docket indicates that, since February 22, 2013, Mr. Robledo-Valdez has also not submitted any evidence to the court regarding his inability to make partial filing fee payments.
On February 20, 2013, the Defendants filed a Joint Opposed Motion to Dismiss or, in the Alternative, Motion for Order to Show Cause, seeking either dismissal of the case or an order to show cause based on Mr. Robledo-Valdez’s failure to pay his partial filing fees. On March 4, Mr. Rob-ledo-Valdez filed a response.
On May 31, 2013, Mr. Robledo-Valdez filed a Notice of Change of Address, informing the court of his new address in San Antonio, Texas. On June 17, 2013, the Clerk of the district court received a letter from Mr. Robledo-Valdez asking for copies of documents and stating that his “mother pays $25 a month toward this case.” Letter to Clerk dated June 17, 2013.
In response to the Defendants’ Motion to Dismiss, the magistrate judge entered Orders granting, in part, the Motion to Dismiss, and ordering Mr. Robledo-Valdez to show cause why the action should not be dismissed pursuant to Fed.R.Civ.P. 41(b) for failure to comply with the court’s orders and applicable rules. One Order to Show Cause concerned dismissal of the action against various defendants who remained unserved, and the other related to Mr. Robledo-Valdez’s failure to make requisite fee payments. See Order dated June 21, 2013 (“Service OSC”) and Order July 1, 2013 (“Fees OSC”). Mr. Robledo-Valdez was given until July 19, 2013, to respond.
The magistrate judge discussed each of the Orders, noting that, with respect to the Service OSC, Mr. Robledo-Valdez had not responded. The court then stated that it “may extend the time for a plaintiff to serve a defendant even without a showing of good cause, ... [but] the Court is not inclined to do so here.” Order & Recommendation at 8; R. Vol. 1 at 258. As it further noted, “[t]he case against the Un-served Defendants has been pending since July 2012. Plaintiff failed to effect service of the Unserved Defendants within one hundred and twenty days of their inclusion in this case, failed to provide sufficient contact information for the Court to do so, and failed to provide good cause for the Court to find that an opportunity exists to cure the service deficiency in the future.” Id. at 8-9; R. Vol. 1 at 258-59. Furthermore, Mr. Robledo-Valdez “was warned in advance that the penalty for failing to serve or for failing to provide good cause for the service delay would be dismissal of the Unserved Defendant[s].” Id. at 9; R. Vol. 1 at 259.
With regard to the Fees OSC, the court considered the various factors it must consider before dismissing a case as a sanction for failing to make fee payments as directed by court orders. The magistrate judge recommended dismissal of the case. The district court then reviewed the magistrate judge’s recommendation, as well as Mr. Robledo-Valdez’s objections, and concluded to dismiss the case without prejudice, pursuant to Fed.R.Civ.P. 41(b):
I acknowledge the difficulties that a prisoner faces while incarcerated in pursuing a lawsuit. Nonetheless, this does not provide a basis to disregard or fail to comply with Court’s Orders, the Federal Rules of Civil Procedure and the Local Rules of this Court, and the requirements of suit, including filing fees. Magistrate Judge Mix provides detailed bases in law and in fact for her ruling and recommendation to dismiss the case as a sanction. While Plaintiff makes excuses and attempts to shift the blame to the Defendants, the fact remains that he has set forth no basis as to why the Order and Recommendation are wrongly decided or should be overruled. The proper factors were considered under Ehrenhaus v. Reynolds, 965 F.2d 916, 918 (10th Cir.1992), and I agree with Magistrate Judge Mix that dismissal is appropriate under Fed.R.Civ.P. 41(b) based on Plaintiffs failure to comply with Court Orders and obligations under law.
Order at 5; R. Vol. 1 at 288. The district court accordingly dismissed the case without prejudice. Mr. Robledo-Valdez filed a motion for reconsideration, which the court also denied. This appeal followed.
We review the dismissal of an action under Rule 41(b) for an abuse of discretion. Nasious v. Two Unknown B.I.C.E. Agents, 492 F.3d 1158, 1161 (10th Cir.2007); Cosby v. Meadors, 351 F.3d 1324, 1326 (10th Cir.2003); Olsen v. Mapes, 333 F.3d 1199, 1204 (10th Cir.2003). Under the abuse of discretion standard, we will not reverse the lower court’s decision unless we conclude the court made “a clear error of judgment or exceeded] the bounds of permissible choice in the circumstances.” Ecclesiastes 9:10-11-12, Inc. v. LMC Holding Co., 497 F.3d 1135, 1143 (10th Cir.2007).
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11083977-11533 | OPINION AND ORDER
LAFFITTE, Chief Judge.
Before the Court is Defendant’s Motion to Dismiss Information and/or for Reassignment of Case for Violations of Title 18 Section 137 and for Abuse of Discretion in the Assignment of Cases by Chief Judge. In this motion, Defendant, through counsel Adalina de Jesus Morales, levels grave charges against the Court. Counsel alleges,
[t]he trial of herein defendant, as per a court order issued by Judge Laffitte on June 28, 2000, has been assigned for July 6/July 31, 2001, before Judge Laf-fitte. Another order by Judge Laffitte regarding the assignment of cases was issued on June 5, 2001.... The chief judge in this case has usurped the authority of his fellow judges and taken control of the assignment system for criminal cases. On June 28, 2000, Chief Judge of the District Court issued a standing order in the Vieques’ trespassing cases directing that all trespassing cases shall initially be assigned to the Chief Judge for assignment for distribution by a rotation number to the District Judges, or to a Magistrate Judge, if consented to.... The recent order of June 6, 2001 suggests that, contrary to his standing order, Vieques trespass cases are being assigned randomly by the clerk’s office and then referred to the Chief Judge for reassignment. Either way, the interference with the normal practice of the Court regarding cases assignments [sic ] are [sic ] unlawful and must be voided as the Chief Judge does not have the authority to alter this practice within the District. ... In this case, Defendant’s due process rights have been violated by the Chief Judge [sic ] actions which are unlawful and in complete disregard of Section 137, supra, and/or the practice of this Court.
1. Counsel’s Conduct
Counsel’s allegation that the Chief Judge has commandeered the case-assignment system is patently false. Further, Counsel filed her motion on June 14, 2001, nine days after the Court entered an order on June 5, 2001, explaining in detail the system that the Court uses in assigning Vieques criminal cases. Counsel explicitly acknowledges the Court’s June 5, 2001 order in her motion. The Court’s June 5, 2001 order was, in fact, issued in Criminal Case 01-214(HL), just one docket entry prior to Counsel’s motion.
As the Court’s June 5, 2001 order makes clear, the Vieques criminal cases arising from the most recent spate of trespassing incidents have been assigned to the Judges and Magistrate Judges with the goal of equal distribution via a computerized randomization process conducted by the Clerk of the Court. That order also points out “the widespread but false notion that the Vieques cases were assigned to the Chief Judge for reassignment to the other Judges.”
In complete disregard of the Court’s June 5, 2001 order, Counsel filed this motion alleging that the Chief Judge controls the assignment of Vieques criminal cases. Counsel also misrepresented the substance of the Court’s June 5, 2001 order by stating that “[t]he recent order of June 5, 2001 suggests that, contrary to his standing order, Vieques trespass cases are being assigned randomly by the clerk’s office and then referred to the Chief Judge for reassignment.”
Finally, Counsel incorrectly states in her motion that “[o]n June 28, 2000, Chief Judge of the District Court issued a standing order in the Vieques’ trespassing cases.” The Court’s June 28, 2000 order was simply not a standing order; it applied only to the Vieques criminal cases arising from the first wave of trespassing incidents in June of 2000. That order provided for the even allocation of cases among the Judges. The order stated that the cases would first be assigned to the Chief Judge “for distribution by a rotation number to the District Judges, or to a Magistrate Judge.... ” This order served the purpose of preventing the Court from being overwhelmed by the 465 defendants in that wave of cases by allowing for a rational system of case distribution. At the June 15, 2001 status conference in this case, Counsel stated on the record under oath that she had done no investigation to ascertain the veracity of her serious allegations.
In her motion, Counsel cites two cases that are inapposite to the instant case. First, in Cruz v. Abbate, 812 F.2d 571 (9th Cir.1987), criminal defendants challenged the Presiding Judge’s method of case assignment, by which the Presiding Judge “assign[ed] each case to the judge of his choice.” Id. at 572. As the Court has made clear, this is not the method used in the District of Puerto Rico. The Ninth Circuit in Cmz took pains to note, however, that “a defendant has no right to any particular procedure for the selection of a judge — that being a matter of judicial administration committed to the sound discretion of the court.” Cruz, 812 F.2d at 574. Instead, a defendant is only entitled to a case-assignment method “free from bias or the desire to influence the outcome of the proceedings.” Id.
Second, Counsel cites Utah-Idaho Sugar Company v. Ritter, 461 F.2d 1100 (10th Cir.1972), for the proposition that the unilateral assignment of cases by the Chief Judge of the District Court violates 28 U.S.C. § 137. In Ritter, the Chief Judge of the United States District Court for the District of Utah violated a mandate issued by the Judicial Council of the Tenth Circuit by assigning certain criminal cases to himself. Because there is no such mandate in the instant case, and because the Chief Judge did not assign any cases to himself, Ritter is readily distinguishable from the instant case.
2. Sanctions
The Court has inherent powers that enable it to enforce standards of conduct and to perform its case-management function. These inherent powers apply in both civil and criminal cases, Kouri-Perez, 187 F.3d at 9, and “include the judicial authority to sanction counsel for litigation abuses which threaten to impugn the district court’s integrity or disrupt its efficient management of the proceedings.” Id. at 7. See also United States v. Stokes, 124 F.3d 39, 46 (1st Cir.1997) (holding that “courts may invoke their supervisory powers to implement a remedy for violation of recognized rights, to preserve judicial integrity, or to deter illegal conduct”). The choice of an appropriate sanction is within the Court’s sound discretion. Chambers, 501 U.S. at 44-45, 111 S.Ct. 2123.
There are, however, two significant limitations on the Court’s ability to impose sanctions against a party under the authority of its inherent powers. The first is that the sanctioned party must have an opportunity to be heard on the matter. See Chambers, 501 U.S. at 50, 111 S.Ct. 2123 (explaining that a court must “comply with the mandates of due process” in imposing sanctions under its inherent power); Kouri-Perez, 187 F.3d at 13 (pointing out that a district court cannot impose sanctions without complying with procedural due process); Media Duplication Services v. HDG Software, 928 F.2d 1228, 1238 (1st Cir.1991) (saying in this Rule 11 case that before imposing punitive sanctions, a court must sometimes afford the sanctioned party an opportunity to be heard and must always comply with the demands of due process); In re Cordova Gonzalez, 726 F.2d 16, 20 (1st Cir.1984) (announcing that when a court imposes sanctions such as attorney’s fees under its inherent power, the court must afford the sanctioned party notice and an opportunity for a hearing). The second limitation is that the Court must make a finding of bad faith on the part of the sanctioned party. Chambers, 501 U.S. at 49, 111 S.Ct. 2123; Whitney Bros. Co. v. Sprafkin, 60 F.3d 8, 13 (1st Cir.1995); Havinga v. Crowley Towing and Transp. Co., 24 F.3d 1480, 1490 (1st Cir.1994); Jones v. Winnepesaukee Realty, 990 F.2d 1, 5 (1st Cir.1993). But see United States v. Claros, 17 F.3d 1041, 1047 n. 4 (7th Cir.1994); Harlan v. Lewis, 982 F.2d 1255, 1260 (8th Cir.1993).
In this case, the requirement of an opportunity to be heard is satisfied by the Court’s on-the-record, under-oath colloquy with Counsel at the June 15, 2001 status conference. There, the Court specifically asked Counsel what facts underlay the allegations in her motion. Counsel was unable to point to any facts supporting her motion and admitted having no factual support for her charge that the Court was tinkering with the assignment of Vieques criminal cases.
As for the requirement of a finding of bad faith, Counsel’s bad faith is evident in her willingness via unsupported speculation to impugn the integrity and fairness of the Court in the absence of even the most elementary investigation to assure herself of a factual predicate for her charges. This sort of conduct contributes directly to the diminution of public confidence in the Court as an impartial arbiter of the law, especially when such false allegations find their way into the media. Further, Counsel filed this motion nine days after the Court entered an order explaining in detail the Court’s process for assigning Vieques criminal cases, an order which Counsel both acknowledges and misrepresents in her motion.
The Local Rules of this Court adopt the American Bar Association’s Model Rules of Professional Conduct. See Local Rule 211(4)(B). Model Rule 8.2 provides that a “lawyer shall not make a statement that the lawyer knows to be false or with reckless disregard as to its truth or falsity concerning the qualifications or integrity of a judge.... ” For reasons already set forth, Counsel’s conduct in this case stands in clear violation of this rule of conduct and thus constitutes “misconduct” under Local Rule 211(4).
In summary, the Court strongly encourages responsible criticism. The Court can not tolerate, however, unfounded, unre-searched allegations that reflect negatively on the Court’s integrity and call into doubt the public’s confidence in their institutions of justice.
WHEREFORE, the Court hereby sanctions attorney Adalina de Jesus Morales $250.00 for each of the two motions that she filed, Civil No. 01-186(HL), Dkt. No. 13 and Civil No. 01-214(HL), Dkt. No. 14, pursuant to its inherent powers to sanction counsel for litigation abuses which threaten to impugn the district court’s integrity. The Court shall not take any further disciplinary action regarding this matter. Counsel shall remit her payment of $500.00 to the Clerk of the Court by June 28, 2001 and shall notify the Court of her compliance.
IT IS SO ORDERED.
. Presumably, Defendant's motion intends to cite to 28 U.S.C. § 137, which provides,
The business of a court having more than one judge shall be divided among the judges as provided by the rules and orders of the court. The chief judge of the district court shall be responsible for the observance of such rules and orders, and shall divide the business and assign the cases so far as such rules and orders do not otherwise prescribe. If the district judges in any district are unable to agree upon the adoption of rules or orders for that purpose the judicial council of the circuit shall make the necessary orders.
. Although Local Rule 302(4) formally applies only to civil cases, the Court’s case-assignment procedure complied with its provisions, which state, "[cjases shall be assigned to judges of the Court by lot, in such manner that each Judge shall be allotted as nearly as possible the same number of cases in each category.”
. In the order, the Court explicitly warned all counsel in these cases that "it expects all attorneys to remember their obligations not only to their clients but also to the Court.”
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12418211-15051 | MEMORANDUM OPINION AND ORDER
TANYA S. CHUTEAN, United States District Judge
■ In this action filed pro se, Plaintiff Alex Rios sues the United States under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552. He challenges the Drug Enforcement Administration’s (“DEA”) responses to his initial request for records pertaining to an investigation of a DEA Special Agent (“third-party records”) and his expanded request for records pertaining to himself (“first-party records”).
Before the court is Defendant’s Motion to Dismiss or, in the Alternative, Motion for Summary' Judgment (ECF No. 35). DOJ contends that Plaintiff failed to exhaust his administrative remedies by (1) providing the special agent’s .authorization or proof of his death, and (2) certifying his own identity to enable a search for first-party records. Plaintiff does not dispute that he failed to provide the requested third-party. documentation, but DEA has nonetheless conducted a search and found no responsive records. In addition, the record establishes that Plaintiff has in fact complied with the agency’s identity certification requirement. Consequently, for the reasons explained more fully below, Defendant’s motion will be DENIED. ⅝
I. BACKGROUND
On February 2, 2015, Plaintiff requested essentially all DEA records “regarding the investigation and ‘misconduct’ of DEA Agent Bruce D. Lange within the Northern District of Texas.” (Decl. of William C. Little, Jr., ¶ 11 and Ex. A, EOF No. 35-2). In a letter dated March 3, 2015, with the subject line “Information regarding Third Party—DEA Special Agent Bruce D. Lange,” DEA informed Plaintiff that before processing his request, it needed dither proof of Lange’s death “or an original notarized authorization (DOJ Form 361 and Third Party Release Statement) from [Lange].” (Id., Ex. B at 1). Otherwise, it could neither confirm nor deny the existence of responsive records, any such records would be exempt from, disclosure under FOIA exemptions 6, 7(C), 7(D), and 7(F). (Id.). DEA further informed Plaintiff that if no response was received within 30 days, it would administratively close the request. (Id. at 2).
On March 7, 2015, Plaintiff replied that he had a “particularized need for the requested information,” having learned two years after his criminal trial that Lange was himself “under investigation for allegations of criminal activities while on duty as a DEA Agent during the time of [Plaintiffs] criminal investigation and trial[.]” (Little Decl., Ex. C -at 2): Plaintiff included purported “evidence” .of Lange’s “numerous” violations of the DEA Manual and Code of Ethics. (Id. at 2-3). DEA responded on April 8, 2015, reiterating why it could not yet process Plaintiff s request for third-party records. It explained that it was not required to conduct a search for responsive records without proof of Lange’s death or his notarized authorization, and added that any responsive records “would be categorically exempt from disclosure” under FOIA exemption 7(C) for personal privacy reasons. (Id,, Ex. D at 1). DEA assured Plaintiff that it would initiate a search upon its receipt of the requested documentation, and it informed him that he had 30 days from the original March 3, 2015 date to provide the documentation. It also informed Plaintiff that its fee structure afforded him “two (2) hours of search and 100 pages of duplication at no charge,” and that he would be provided an estimate of processing fees beyond that threshold once his request was “perfected.” (Id. at 2),
On April 18, 2015, Plaintiff appealed DEA’s denial of third-party records, which the Office of Information Policy (“OIP”) received .on May 6, 2015, On June 15,2015, OIP affirmed DEA’s decision to neither confirm nor deny the existence of respon-siye records in the absence of, “consent, proof of death, official- acknowledgment of an investigation, or an overriding public interest,.” and informed Plaintiff of his right to sue. (Little Decl., Ex. G). OIP cited FOIA exemptions 6 and 7(C), and added, “to the extent that such records exist, they would be protected from disclosure” under FOIA exemption. 7(F). (Id. at 1).
Plaintiff filed this action in July 2015. In a letter dated March 1, 2016, DEA informed Plaintiff that “during the course of the litigation review,” it discovered" “that certain information related to ... Lange and his employment -with DEA is in the public realm. As a consequence, a search for records to your request may be conducted.” (Id., Ex. H). DEA then identified various deficiencies in Plaintiffs February 2, 2015, request, some of which it advised “can be overcome, but not all.” (Id. at 3). In addition, DEA informed Plaintiff that based on the “breath [sic] and scope” of his “request as currently construed,” the search could take as long as 27 hours,, and estimated the search fee alone to be $1,000 (after exhaustion of the. first two hours of free search time). DEA further informed Plaintiff that pursuant to DOJ regulations, a requester without a payment history must “pay the entire anticipated fee” before a search begins if the estimated fee exceeds $250. (Id.).
On March 30, 2016, Plaintiff submitted a “reformulated request with specifics”' and suggested “it might be that the standard 2 hour afforded to each requestor is enough” to commence a search, but regardless, his wife would be sending “the initial $250.00 fee.” (Id., Ex. I). The reformulated request sought “reports, rough notes, 302’s that mention! ] Alex Romo Rios as a suspect in Case No.' 5:07 CR-022-l-c., Northern District of Texas, Lubbock Division,” and essentially all records “that became the basis” of Lange’s alleged removal from his position as a DEA Special Agent. (Id. at 1). Plaintiff included a citation to a Merit Systems Protection Board (“MSPB”) proceeding and offered that the requested information about Lange “would be found in the above Docket Number.” (Id.).
In a May 10, 2016 letter, DEA informed Plaintiff that it could not '“comply with [his] request at this time.” (Little Decl., Ex. J at 1). It explained that Plaintiffs reformulated request had “not narrowed the scope of the search” but in fact expanded it in several ways. Furthermore, because Plaintiff had added a request for his records, he needed to complete a “Certification of Identity, DOJ 361” form, which was enclosed. (Id. at 2).
DEA also informed Plaintiff that the records he sought about himself were not “reasonably describefd]” to permit staff “to locate responsive records with a reasonable amount of effort.” (Id.) It explained that (1) DEA does not create or prepare “302’s,” (2) DEA’s records are not indexed “by reference to a criminal case or ... MSPB docket number, and (3) the request “describe[d] records that relate to actions taken by other agencies or DOJ components.” (Id. at 2-3). DEA listed contact information for the FBI, which it advised may maintain' “302’s,”; the Executive Office for United States Attorneys “[f|or records associated with a criminal case”; the DOJ Office of the Inspector General “[f|or records associated with actions taken [there]”; and MSPB “[f]or records associated with an MSPB Docket[.]” (Id.)
Finally, DEA further explained why the estimated $1,000 search fee “still holds true for records related” to Lange. (Id. at 3). It “rejected]” as inadequate Plaintiffs offer to pay $250 and again suggested that he narrow his request. DEA concluded “[i]f the Certification of Identity is not received and the elections are not made within the next 30‘ days, DEA will assume you no longer wish that a search be conducted.” (Id.).
On June 6, 2016, Plaintiff responded with a reformulated request, referencing possible documents that he. claimed may be found in the Office of Professional Re- ■ sponsibility. (Id., Ex. K). In a letter dated August 8, 2016, DEA reminded Plaintiff that he had “been afforded the opportunity to rectify .deficiencies in your, request for [Lange’s records], to make .elections regarding the systems you wanted searched and to pay the estimated fee,” but had “not fully, availed yourself of the opportunity.” (Little Decl., Ex. L at 1). It informed Plaintiff that as “currently construed,” his request as to Lange sought records “referenced in” an “MSPB Initial Appeal File (IAF). However, an agency is not required to conduct research or obtain records from another agency to satisfy a FOIA request[.]” (Id.). Nevertheless, “at [Plaintiffs] insistence,” DEA searched “litigation files maintained by the DEA Office of Chief Counsel” for the MSPB IAF “referenced in the MSPB Opinion and Order” that Plaintiff had provided; it located no responsive records. (Id. at 1-2). DEA informed Plaintiff that the foregoing search had exhausted the two hours of free time, and that he would need to pay an estimated search fee of $160 for the search to continue. (Id. at 2).
On August 15, 2016, Plaintiff filed yet another reformulated request “based on information gleaned from an Initial Decision” of the MSPB. (Ex. M to Little Decl., “Second Reformulated FOIA/PA Request”). He included his date and place of birth and his social security number “[i]n order to assist [DEA] in identifying me.” In addition, Plaintiff declared under penalty of perjury pursuant to 28 U.S.C. § 1746 that the information in the request was true and correct. (Id. at 4). In a letter dated November 22, 2016, DEA interpreted the request as seeking (1) “documents generated, created, prepared, processed or handled by the DEA in relation to [Plaintiffs] criminal case,” and (2) MSPB “disciplinary proceedings against Agent Lange to the extent those proceedings involve, directly or indirectly [Plaintiffs] criminal case.” (Id., Ex. N). DEA again informed Plaintiff that it could not process the request for his records because “it fails to meet the requirements of DOJ Agency Rules.” (Id., Ex. N). DEA explained:
Under DOJ Agency Rules, when making a request for access to records about one’s self, an individual must verify their identity, state their full name, current address, and date and place of birth, sign their request and their signature must either be notarized or submitted by them under 28 U.S.C; § 1746, a law that permits statements to be made under penalty of perjury as a substitute for notarization. See 28 C.F.R. § 16.41(d). Without the required information, DEA cannot search for or release any records that may be responsive to your request. A DOJ Certification of Identity, DOJ 361, is enclosed for your convenience.
(Id. at 1-2).
As to the request for records connecting Lange’s MSPB proceedings with Plaintiffs criminal case, DEA explained initially that the request was “not a reasonable description of a record under FOIA, since it requires a subjective legal determination regarding what records would be responsive. Information such as the date, title or name of the record, DEA case number, a DEA file designation, or reference number, however, would assist.” (Ex. N at 3). According to DEA, the “passages” Plaintiff supplied from the MSPB decision may support the existence of records, but those would not be “sufficient to allow DEA personnel to locate those records with a reasonable amount of effort.” (Id.). Nevertheless, DEA reminded Plaintiff of its unsuccessful search for the MSPB IAF, and again suggested that Plaintiff contact the MSPB directly. (Id.).
During the course of this litigation, “DEA acquired [and reviewed] the complete MSPB opinion and orders relevant to the case to which plaintiff referred,” discovered that “the administrative agency actions taken against ... Lange [were] reversed,” and thus concluded “that the release of information by MSPB did not support the release of any information' held by DEA that could relate to any alleged misconduct of ... Lange.” (Id. ¶¶ 39-40). “Currently, DEA is awaiting the certification of identity from plaintiff which will allow DEA to inform him of any fee required to search for information that pertains to him.” (Id. ¶ 44).
II. LEGAL STANDARD
Because the court will rely on matters beyond the pleadings, it will proceed under the standards for summary judgment. See Fed. R. Civ. P. 12(d). Summary judgment may be granted if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006). Summary judgment , may be rendered on a “claim or defense ... or [a] part of each claim or defense.” Fed. R. Civ. P. 56(a). “A party asserting that a fact cannot be or is genuinely disputed must support the assertion by citing to particular parts of materials in the record.” Fed. R. Civ. P. 56(c)(1)(A). “A fact is ‘material’ if a dispute over it might affect the outcome of .a suit under the. governing law; factual disputes that are ‘irrelevant or unnecessary* do not affect the summary judgment determination.” Holcomb, 433 F.3d at 895 (quoting Liberty Lobby, 477 U.S. at 248, 106 S.Ct. 2505). An issue is “genuine” if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See id.
“FOIA provides a ‘statutory right of public access to documents and records’ held by federal government agencies.” Citizens for Responsibility & Ethics in Washington v. DOJ, 602 F.Supp.2d 121, 123 (D.D.C. 2009) (quoting Pratt v. Webster, 673 F.2d 408, 413 (D.C. Cir. 1982)). FOIA requires that federal agencies coim-ply with requests to make their records available to the public, unless such “information is exempted under [one of nine] clearly delineated statutory language.” Id. (internal quotation marks omitted); see also 5 U.S.C. § 552(a), (b). An agency is generally required to disclose only those records that are in its custody and control at the time'of the FOIA request, McGehee v. Central Intelligence Agency, 697 F.2d 1095, 1110 (D.C. Cir. 1983), and only upon receiving a “request for records which (i) reasonably describes such records and (ii) is made in accordance with published rules stating the time, place, fees (if any), and procedures to be followed[.]” 5 U.S.C. § 552(a)(3)(A). But if the agency receives no FOIA request, or one that does not comply with its published rules, it “ ‘has no reason to search or produce records[.]’” Johnson v. United States, 239 F.Supp.3d 38, 44, 2017 WL 883779, at *4 (D.D.C. Mar. 6, 2017) (quoting Carbe v. Bureau of Alcohol, Tobacco and Firearms, No. 03-CV-1658, 2004 WL 2051359, *8 (D.D.C. Aug. 12, 2004)). Moreover “when an agency does not possess or control the records a requester seeks, the agency’s non-disclosure does not violate FOIA because it .has not “withheld” anything.” DiBacco v. U.S. Army, 795 F.3d 178, 192 (D.C. Cir. 2015). In deciding whether an agency has fulfilled its disclosure'obligations, “the court shall determine the matter de novo ... and the burden is on the agency to sustain its action.” 5 U.S.C. § 552(a)(4)(B).
III. ANALYSIS
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3792836-18266 | ORDER AND REASONS
KURT D. ENGELHARDT, District Judge.
Before the Court is Plaintiff/Defendanbin-Interpleader Hartford Casualty Insurance Company’s (“Hartford”) Motion for Payment of Contract Funds and Attorney’s Fees (Rec. Doc. 65). This motion is opposed by Defendanb-in-Interpleader Investar Bank (“Investar”) as to the payment of contract funds (Rec. Doc. 75) and by Plaintiff-in-Interpleader the Audubon Commission (“Audubon”) as to the payment of attorney’s fees (Rec. Doc. 76). Defendant in Interpleader the Internal Revenue Service (“IRS”) also filed a memorandum in response to the motion (Rec. Doc. 77), indicating that it would assert a claim to the contract funds if the court determined that the funds were due to MDI Construction, LLC (“MDI”), and therefore its creditors, rather than Harb ford. Also before the Court is Audubon’s Motion to Dismiss Counterclaim Pursuant to Rule 12(b)(6), or, Alternatively, Motion for Summary Judgment (Rec. Doe. 74). This motion is opposed by Hartford (Rec. Doc. 87).
The Court held oral argument on the Motion for Payment of Contract Funds and Attorney’s Fees with regard to payment of contract funds on December 21, 2011. At this hearing, Hartford and Investar presented substantive arguments regarding their entitlement to the funds in question, which are currently in the registry of the Court. The Court presented the following questions to Hartford and Inves tar to be answered in a supplemental memorandum:
1. Is the entitlement to a summary mandamus proceeding granted in Louisiana Revised Statute 38:2191, in conjunction with Louisiana Code of Civil Procedure Article 2592 , a substantive right rather than a procedural rule?
2. If so, how does the entitlement to a summary proceeding interact with 28 U.S.C. 1335?
3. Does Great American Insurance Company v. Maurin-Piazza, et al., 1998 [1988] WL 59846, have continuing precedential value after the repeal of the Louisiana Account Receivable Act, La. R.S. 9:3102? What, if any, specific Louisiana statute that is valid today is substantively identical to the repealed Louisiana Accounts Receivable Act, La. R.S. 9:3102?
4. Was MDI’s assignment to Hartford completed on February 19, 2008 when it entered into the Indemnity Agreement, on May 29, 2008 when it entered into the Project on the basis of Hartford’s Bonds, or on December 30, 2009 when Hartford filed the UCC-1 financing statement?
5. What are Hartford’s rights to the funds through legal or conventional subrogation? Please discuss Louisiana Civil Code Article 1825.
Hartford and Investar filed supplemental memoranda answering these questions. (Rec. Docs. 95 and 94, respectively). Having considered all filings submitted by the parties, the Court rules as set forth herein.
I. BACKGROUND
On or about February 19, 2008, MDI executed and delivered to Hartford an agreement of indemnity in consideration of and as inducement for Hartford’s issuance of performance and payment bonds naming MDI as principal in connection with any certain construction project.
On May 23, 2008, pursuant to a series of loans made to MDI, Investar filed a UCC-1 Financing Statement in East Baton Rouge Parish claiming a security interest in all accounts of MDI.
On May 29, 2008, Audubon, as owner, entered into a contract with MDI, as contractor, for the construction of the Audubon Park-Batture Ball Fields Project (“the Project”). In connection with this project, Hartford, as surety, executed payment and performance bonds numbered 43BSBDU8996 in the penal amount of $3,916,000, whereby Hartford and MDI were bound jointly and severally to the Audubon Commission for the timely and complete performance of the Project.
MDI began working on the Project, but construction was delayed and Hartford took over the completion of the job from MDI in November 2009. On December 30, 2009, Hartford filed a UCC-1 Financing Statement in Orleans Parish claiming a security interest in “any and all sums due or which may become due under any contract including ... retainage ... [and] retainage accounts.” Exhibit B to Rec. Doc. 75, p. 3(a). The Project was completed on March 4, 2010.
Hartford brought the instant action against MDI on November 19, 2010 seeking indemnification for amounts it paid completing the Project. Hartford states that it has received requests for payment from several parties who have not been properly paid by MDI and has already paid $423,663.79 to these parties, whose claims totaled $760,894.60 at the time of filing. Hartford also claims to have incurred damages, administrative costs, attorney’s fees, and other fees of $46,990.94 related to the Project.
MDI answered the complaint, bringing third-party claims against several defendants, including Audubon. MDI alleged that Audubon was withholding contract retainage of around $200,000 which was due on the completed Project. Audubon answered the third-party complaint asserting a claim of liquidated damages against MDI and Hartford as a result of the delay in the completion of the project.
After all parties asserted their claims in the instant action, Hartford filed suit against Audubon in Civil District Court for the Parish of Orleans, State of Louisiana, arguing that it, rather than MDI, was entitled to the contract balance owed by Audubon of $221,171.50. On November 2, 2011, Audubon filed a Motion to Amend Counterclaim along with a Motion to Expedite Consideration of the Motion to Amend. Audubon sought leave to withdraw its claim for liquidated damages and assert an interpleader action. Magistrate Judge Alma L. Chasez granted both of these motions in a telephone conference with counsel on November 3, 2011. That same day Hartford filed a Motion for Review of Magistrate Chasez’s decision to grant the Motion to Amend Counterclaim. Audubon opposed the Motion for Review of Magistrate Decision, and the motion was denied in an Order signed by Judge Martin L.C. Feldman on November 4, 2011.
In its amended counterclaim, entered November 4, 2011, Audubon named Hartford, MDI, Investar and the IRS as Defendants-in-interpleader. Investar bank waived service on November 15, 2011, giving it until January 17, 2012 to answer the complaint. Proof of service on the IRS was filed on November 15, 2011; the IRS has until January 9, 2012 to answer the complaint.
After being granted leave to amend its counterclaim, Audubon filed, on November 3, 2011, a Motion to Deposit Funds into Court Registry in Connection with Inter-pleader Claim, for Temporary Restraining Order, and for Preliminary Injunction. This motion was opposed by Hartford. In an Order signed by Judge Feldman on November 4, 2011, the Court granted the Motion to Deposit Funds into Court Registry and granted a temporary restraining order preventing the Defendants-in-Inter-pleader from filing or further prosecuting any other lawsuits related to the contract funds.
Hartford then filed the instant Motion for Payment of Contract Funds and Attorney’s Fees on November 25, 2011. Audubon filed its Motion to Dismiss Counterclaim Pursuant to Rule 12(b)(6), or, Alternatively, Motion for Summary Judgment on December 9, 2011.
On December 1, 2011, the Court heard and granted Audubon’s request for a preliminary injunction. Thereafter, the Court issued an order stating that the Court would hear oral argument on Hartford’s Motion for Payment of Contract Funds and Attorney’s Fees on December 21, 2011. The Court further ordered that any party wishing to oppose Hartford’s motion, regardless of whether or not its answer would be due before the hearing date, should do so by December 12. Finally, the Court ordered that any Reply by Hartford be filed on December 15.
Investar filed a substantive opposition claiming its superior right to the contract funds. Audubon filed an opposition relating solely to attorney’s fees and asserting no position as to the rightful recipient of the contract funds. The IRS filed an opposition, stating that it is not currently asserting a claim to the contract funds; while the IRS does have a claim to any funds due MDI, the agency does not argue that the funds belong to MDI, but rather states that the court must make this determination. MDI failed to file any opposition to Hartford’s Motion.
II. ARGUMENTS OF THE PARTIES
Hartford argues that it is entitled to a summary procedure to recover the retained contract funds, citing Louisiana Revised Statute 38:2191. The statute, as amended in June 2011, states that a public entity failing to make payment on a public contract “shall be subject to mandamus to compel the payment of the sums due under the contract.” La.Rev.Stat. Ann. § 38:2191 (2011). While the statute does not mention summary proceeding, Article 2592 of the Louisiana Code of Civil Procedure defines mandamus as a summary proceeding.
Hartford asserts that it is entitled to the remaining contract funds through subrogation such that the funds never passed to MDI; thus, MDI’s creditors have no claim to the funds because the retainage never belonged to MDI. Hartford relies on Pearlman v. Reliance Ins. Co., 371 U.S. 132, 141-42, 83 S.Ct. 232, 9 L.Ed.2d 190 (1962), in which the United States Supreme Court held that a surety was subrogated to the rights of the owner of a public contract such that the surety had a claim to the fund that was superior to the contractor’s general creditors when the surety paid for labor and material on a construction project.
On the other hand, Investar argues that Hartford’s motion is improper. Investar asserts that while Hartford may be entitled to a state-court summary mandamus procedure under Louisiana Revised Statute 38:2191, the proceedings in this case must be governed by the Federal Rules of Civil Procedure. Investar claims that Hartford’s motion requests judgment on the pleadings, citing Federal Rule of Civil Procedure 12(c) for the proposition that a party may move for judgment on the pleadings after the pleadings are closed. Because Investar and the IRS have not yet answered Audubon’s interpleader complaint, the motion is premature. In the alternative, Hartford’s motion may be considered a motion for summary judgment under Rule 56. Investar asserts that summary judgment is improper at this time because several issues of material fact exist for which discovery is necessary. In vestar also accuses Hartford of filing this motion in an attempt to circumvent the Court’s order granting preliminary injunction.
Investar claims that its perfected security interest in the contract retainage outranks Hartford’s claim through subrogation. Investar cites the Louisiana First Circuit Court of Appeal in American Bank and Trust Co. v. Trinity Universal Ins. Co. for the proposition that “equitable subrogation does not exist in Louisiana.” 194 So.2d 164, 168 (La.Ct.App. 1 Cir.1966). Investar further relies on Great American Ins. Co. v. Maurin-Piazza, a case from this Court in which Judge Carr stated that “[ejquitable considerations cannot be permitted to prevail when in conflict with positive written law.” No. 87-413, 1988 WL 59846, at *2 (E.D.La. June 7, 1988). Investar argues that Hartford relies on the doctrine of equitable subrogation in asserting its claim to the contract retainage because Pearlman discusses equitable subrogation. Investar further asserts that equitable subrogation is in conflict with Article 1827 of the Louisiana Civil Code, which provides that “[a]n obligee who receives performance from a third person may subrogate that person to the rights of the obligee, even without the obligor’s consent. That subrogation is subject to the rules governing the assignment of rights.” La. Civ.Code. Ann. art. 1827 (2008). Investar interprets this to mean that this case is not governed by equitable subrogation, but rather by Louisiana substantive law on subrogation.
Investar asserts that under Louisiana law, Hartford must demonstrate that MDI forfeited its rights to the contract retain-age in order to prove that its right to the contract retainage through subrogation outranks Investar’s perfected security interest. Investar again relies on Great American, which distinguished Prairie State Nat. Bank v. United States, 164 U.S. 227, 32 Ct.Cl. 614, 17 S.Ct. 142, 41 L.Ed. 412 (1896), on the basis that the construction contract in Prairie State contained a forfeiture clause. 1988 WL 59846, at *2. Judge Carr found that because the construction contract involved in Prairie State contained a clause wherein the contractor forfeited its rights to the retainage in the event of the contractor’s non-fulfillment, the surety was subrogated to the owner’s rights in the retainage. Id. However, because the contract in Great American did not contain a forfeiture clause, the surety in that case was subrogated to the rights of the construction company. Id. Further, Judge Carr cited the Louisiana Accounts Receivable Act, Louisiana Revised Statute 9:3102, which provided that “[a]n assignee under a valid notice of assignment shall have a superior claim to accounts assigned and their proceeds as against all other creditors whose claims or security arose or are perfected after the filing of the notice of assignment.” Id. (quoting La.Rev.Stat. § 9:3102). Finally, Judge Carr noted that the surety could have protected itself by reviewing the mortgage records to discover prior assignments but failed to do so. Id. at *3. Thus, Judge Carr found that the surety’s interest in the contract retainage was outranked by an earlier executed and properly filed assignment of accounts receivable to a bank. Id. Because Hartford has not shown any forfeiture clause and because Hartford failed to discover Investar’s UCC-1 when Hartford filed its own in December 2009, Investar argues that Hartford is subrogated to the rights of MDI and that Investar’s perfected security interest in accounts of MDI outranks Hartford’s interest.
In response, Hartford first notes that Louisiana Revised Statute 38:2191 does not state that the mandamus action must be filed or must proceed in state court. See La.Rev.Stat. Ann. § 38:2191 (2011). Hartford argues that the allowance for mandamus is not a procedural rule but rather a substantive right of an obligee of a public entity who fails to make payment on a public contract.
Hartford refutes Investar’s claim that equitable subrogation is not recognized by Louisiana courts, citing Lambert v. Maryland Casualty Co., wherein the Louisiana Fourth Circuit Court of Appeal cited Prairie State and Pearlman for the proposition that a surety who completes a contract becomes subrogated to the rights of the owner of the contract. See 403 So.2d 739, 752 (La.Ct.App. 1 Cir.1981). Hartford also cites the Lambert Court’s reference to other Louisiana cases noting the surety’s subrogation rights. See id. at 752-53, n. 3.
Hartford asserts that its rights in the contract funds originated on February 19, 2008, the date of the Indemnity Agreement between Hartford and MDI. Investar’s claim to the contract funds arose on May 23, 2008 when Investar perfected its security interest in MDI’s accounts by filing its UCC-1 financing statement. Because it had already assigned the account to Hartford, Hartford claims that Federal Ins. Co. v. Community State Bank dictates that MDI was unable to make the later assignment to Investar because MDI could not grant greater rights in the fund than it had. 905 F.2d 112, 116 (5th Cir.1990).
Finally, Hartford asserts that Great American is of little to no precedential value as it is a 1988 case that has never been cited in a published opinion and because it relied on the Louisiana Accounts Receivable Act, which has been repealed.
III. DISCUSSION
A. Entitlement to Summary Proceeding
Under Louisiana Revised Statute 38:2191 and Louisiana Code of Civil Procedure Article 2592, Hartford would be entitled to a summary mandamus proceeding in state court. Under Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (U.S.1938), Hartford is entitled to the same rights in this court as that to which it would be entitled in state court. As such, the Court finds that Hartford is entitled to a summary proceeding to determine its rights to the contract funds deposited in the registry of this court.
B. Entitlement to the Contract Funds
In United States Fidelity & Guaranty Co. v. Housing Auth. of the Town of Berwick, 557 F.2d 482, 484 (5th Cir.1977), the United States Court of Appeals for the Fifth Circuit affirmed this Court’s finding that a surety who paid laborers and materialmen under a payment bond “was subrogated to the rights of laborers, material-men, and suppliers of [the contractor] whose claims [the surety] paid, and that the rights of those original ... creditors are superior to those of [a creditor holding a perfected security interest].” The court went on to add, “It is also true, however, that [the surety] is subrogated to the pri ority statutory position of the public owner with respect to the contract fund.” Id. The court held that because the public owner of the contract had the right to use the retained contract, funds to pay the claims of laborers and materialmen in the event that the surety did not no debt from the public owner to the contractor arose before all claims were paid. Id. at 485. As such, no outside creditor of the contractor could claim entitlement to the contract retainage. Id.
In this case, Hartford, as surety, paid $423,663.79 to subcontractors, suppliers, lessors, and materialmen for work performed and material provided on the Project. Affidavit of Laura Mahler, Rec. Doc. 65-2, p. 3. The contract retainage currently deposited in the registry of the Court totals $222,171.50. Because MDI, as contractor, failed to pay these claims, Audubon was entitled to use the contract retainage to pay them if Hartford had not stepped in to do so. Because Hartford paid the claims, it is subrogated to the rights of Audubon and the subcontractors, suppliers, lessors and materialmen whose claims it paid. Thus, no debt from Audubon to MDI ever arose regarding these funds. Because MDI was never entitled to these funds, no creditor of MDI has a valid claim to them. Rather, Hartford is entitled the funds as the subrogee of Audubon and the laborers and materialmen who had claims to the funds.
C. Entitlement to Attorney’s Fees
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3756219-15635 | KANNE, Circuit Judge.
Defendants Joe De La Cruz and Edwardo Maldonado were each convicted on a single count of misapplying public funds in violation of 18 U.S.C. § 666(a)(1)(A). On appeal, the defendants argue that they could not have misapplied funds in violation of § 666(a)(1)(A) because the expenditures in question were properly approved by the city government. Defendants also argue that an evidentiary ruling constitutes reversible error and that their sentences are the result of clear error. We disagree and affirm the convictions and sentences.
I. HISTORY
De La Cruz and Maldonado were both public officials in the city of East Chicago, Indiana. De La Cruz was a member of the City Council. Maldonado was the City Controller, which made him the chief fiscal officer for the City. His signature appeared on all checks paid with City money. Maldonado was also a member of the Board of Works, which was responsible for approving all public works projects.
In 1998, the Board of Works began soliciting bids for specific work to be done on the City’s sidewalks. Under Indiana law, any project estimated to cost more than $75,000 must be publicly bid. A flat bid of $454,155 was received for the project from a company called Reith-Riley in June. Given the amount of work solicited, that bid came out to $5.08 per foot. No action was taken on this bid. Instead, the City Engineer at that time ordered the work to be done on a piecemeal basis, in amounts lower than $75,000.
A. The 1999 Sidewalk Program
In February of 1999, Maldonado attended a meeting of the Board of Works along with a new City Engineer, Pedro Porras. Prior to that meeting, Maldonado asked Porras to ask the Board to advertise bids for work on public sidewalks. Porras obliged, even though he had no such plans before the meeting. The Board approved, and even hired an engineering consultant to oversee the prospective sidewalk plan. But the plan never got off the ground, and in March of 1999 it was postponed indefinitely.
Despite the absence of an approved plan, sidewalks were being poured in East Chicago. Several contractors were at work, despite the fact that many of them had never worked on sidewalks before. The contractors were operating without the formal approval of the Board of Works and without complying with the procedural requirements necessary to begin a city project. The orders to pour concrete came from a number of sources, including De La Cruz and Frank Kollintzas, president of the City Council.
The work was not limited to sidewalks. Contractors also poured new driveways, patios, basketball courts, boat pads, and swimming pools — all on private property. A number of private businesses had their parking lots redone. Other residents had their trees trimmed for free.
All of this work was done against the backdrop of a primary election scheduled for May 4, 1999. Kollintzas, De La Cruz, and the Mayor of East Chicago all faced primary battles. Kollintzas would knock on doors in his district, introduce himself as a councilman and then offer free concrete. Residents openly supporting Ko-llintzas, the Mayor, and their political allies were provided free services, while those supporting the political opposition were refused. Millions of dollars worth of work was performed in a ten-week period between March and May of 1999. In the days leading up to the election, contractors were working 10 to 15 hours a day, 6 to 7 days a week.
Despite the fact that he was City Engineer, Porras was first informed about the concrete work through citizen complaints and from Kollintzas. Kollintzas directed Porras to provide concrete work to specific contractors. Porras did so only after conferring with Maldonado and being assured by Maldonado that the City would handle all the bills. From March to May of 1999, Maldonado’s office issued millions of dollars worth of checks to pay for the work, including work done on private property.
De La Cruz frequently authorized and supervised concrete work. He, in fact, had work done at his home, including a driveway, steps, and a walkway. One East Chicago resident, who had campaign signs up for the political opposition, witnessed work in her neighbor’s yard and asked De La Cruz if she too would receive new concrete. De La Cruz told her she had the wrong sign up.
After the election, the City was faced with the daunting prospect of paying all the contractors and finishing up the work. On the day of the election, the City’s bank account was overdrawn by approximately three million dollars. By the middle of May, that amount increased another two million dollars, at which point the bank began dishonoring all City checks, including payroll. In the end, the City spent close to 24 million dollars in the weeks leading up to the election pouring concrete and trimming trees.
B. Ratification
The City attempted to clean up the mess by hiring an engineering consultant and a lawyer. The consultant performed an audit to determine what work had been done, what remained, and who needed to be paid. The lawyer advised the City to do what it heretofore had not — approve of the work through proper legal channels. Ordinances were passed raising millions of dollars necessary to keep the city operating. These ordinances purported to have the City Council appropriate money for the already completed work. The Board of Works then met in June of 1999 to accept the bid Reith-Riley had made nearly a year earlier. The Board accepted the bid in its $5.08 per foot form as the unit price to be paid for all outstanding claims. The City then began to settle outstanding claims with each of the contractors, requiring them to sign backdated work agreements. These agreements included paying for work done on private property. Maldonado was involved in these negotiations, and he signed the backdated agreements on behalf of the Board of Works.
C. The State Audit
The City’s problems were far from over. Each year, the State of Indiana audits the financial statements of municipalities, including those of East Chicago. The State’s 2000 audit report for East Chicago determined that the Board of Works violated state law by approving “nonpublic concrete work.” The auditors also requested, in accordance with state law, that each member of the Board of Works reimburse the City for all money spent in violation of law.
The City responded with its own legal opinion, which was required to be included in the State’s official audit report. The opinion, in short, argued that the City was in the somewhat unique position of being in control of a private nonpublic trust fund that could be used for private purposes. The source of this trust fund was a local casino. That casino generated five revenue streams for the City. Two of those revenue streams were required and authorized by statute. Two other revenue streams benefited nonprofit corporations outside of the City’s control. A final, fifth fund, apparently unique to the City of East Chicago, was created as a result of an agreement between the casino and East Chicago’s Mayor. This revenue stream ran through an expendable trust and then into a sub-fund, Fund 246, of the City’s general fund. According to the City’s legal opinion, Fund 246 “could be used for any purpose authorized [by the trust], including paying for nonpublic concrete work that improved property values within the City.” The state auditors, apparently unconvinced, did not change their report.
D. Trial and Sentencing
At trial, the defendants attempted to admit into evidence the State’s audit report and the City’s accompanying legal opinion. The government objected, arguing that the City’s response to the audit report was impermissible hearsay. While Chief Judge Miller agreed with the defendants that under Indiana law, the audit report and the City’s response were a single document, he still thought it proper to treat the two separately while addressing the hearsay objection. Judge Miller was willing to allow admission of the audit report as a public record under Federal Rule of Evidence 803(8), but ruled that the City’s response was impermissible hearsay.
The defendants were tried on a number of charges, but were only convicted on one count each of misapplication of public funds. They were acquitted on all other counts. These convictions occurred between the Supreme Court’s decisions in Blakely v. Washington, 542 U.S. 296, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004), and United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). Attempting to deal with the uncertainty created by Blakely, Judge Miller submitted the question of loss amount to the jury, which came up with amounts of between $800,000 and $1,500,000 for Maldonado, and between $120,000 and $200,000 for De La Cruz.
The defendants were not sentenced, however, until after Booker, at which point Judge Miller decided he was not bound by the jury’s loss amount finding. Judge Miller made his own finding, applicable to both defendants, of 23.97 million dollars. He agreed with the defendants that the loss amount should be offset by any value given to the City, but nevertheless determined that the City of East Chicago had received no benefit whatsoever by having its funds misapplied to pay for the work performed in the Spring of 1999. The loss amount, along with other enhancements, resulted in prison sentences for Maldonado and De La Cruz of 97 and 72 months, respectively.
II. ANALYSIS
The defendants’ main argument on appeal is that the City’s “ratification” of the work makes it legally impossible for them to be guilty of misapplication of public funds. Defendants also take aim at Judge Miller’s decision to allow the State’s 2000 audit report but not the City’s accompanying legal opinion. Finally, the defendants attack their sentences, arguing that the ratification makes the loss amount zero, and, alternatively, that they deserve some credit for the benefit they believe the City received from the concrete and other work performed in March and May of 1999.
The purported ratification consists of the actions the City Council and Board of Works took at the behest of their lawyer, including the after-the-fact authorization of the work and the acceptance of the nearly year old Reith-Riley bid. In support, the defendants delve deeply into Indiana law, explaining in detail how state law allows a city to “ratify any action of the unit ... if that action could have been approved in advance.” ind. Code ANN. § 36-1-4-16 (West 2006).
We have serious doubts that the defendants’ attempt at ratification can meet the state law’s requirement that “[r] atification of an action ... must be made by the same procedure that would have been required for approval of the action in advance.” Id. But we need not decide any questions of Indiana municipality law. For our purposes, we can assume the Board of Works and the City Council properly ratified, after the fact, all of the concrete work in question. We nevertheless reject the defendants’ premise that a municipality’s ratification, or authorization, of an expenditure is a complete defense to a federal criminal prosecution for misapplication of public funds under 18 U.S.C. § 666(a)(1)(A).
The defendants candidly admit they can find no criminal case applying their theory of defense. Our precedent has considered it under similar circumstances and rejected it. In United States v. Bailey, 859 F.2d 1265 (7th Cir.1988), the defendant was convicted of willfully misapplying the funds of a savings and loan in violation of 18 U.S.C. § 656. On appeal, the defendant argued that the district court erred by refusing to instruct the jury that the board’s consent to the expenditures in question was a complete defense to the misapplication charges. Id. at 1279. We affirmed, explaining that the Supreme Court has made clear that so long as the proper intent exists, a bank board’s authorization does not bar criminal prosecution for misapplication. Id. (citing Evans v. United States, 153 U.S. 584, 593, 14 S.Ct. 934, 38 L.Ed. 830 (1894)). We think Bailey’s reasoning applies equally to prosecutions under § 666.
Authorization, or ratification, from those with authority can be an important eviden-tiary factor in favor of the defense, militating against a finding of intentional misapplication. Id. (citations omitted); see also United States v. Castro, 887 F.2d 988, 995 (9th Cir.1989) (quoting United States v. Unruh, 855 F.2d 1363, 1368 (9th Cir.1987) (“Evidence of a bank’s consent is ... treated as ‘evidentiary matters [sic] that may be considered as part of the defense that there was either no willful misapplication or no intent to injure the bank.’ ”)). But after-the-fact ratification does not function as a complete defense to prosecution when criminal intent is proven, and this case is a good illustration of why. Many of those purportedly ratifying the work were later indicted. These officials attempted to immunize themselves from federal prosecution by simply stamping their criminal misapplication of funds as approved. Whether the defendants were acting with the intent to misapply funds, or for proper purposes, is a question for the jury. The jury found that the defendants had criminal intent to misapply funds. On review, “viewing the evidence in the light most favorable to the prosecution,” we find that a “rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” United States v. Haddad, 462 F.3d 783, 791 (7th Cir.2006) (quoting Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979)). There was substantial evidence presented to the jury that the defendants intended to provide the sidewalk and other benefits solely for their own personal and political advantage. There may be a case where the consent or authorization of those with authority, combined with a dearth of evidence supporting a criminal intent, results in insufficient evidence to find a defendant guilty under § 666(a)(1)(A). See Bailey, 859 F.2d at 1279. This is not that case. There was sufficient evidence for the jury to conclude that the defendants intentionally misapplied funds.
The defendants also argue that Judge Miller abused his discretion in refusing to allow into evidence the City’s legal opinion, which accompanies the State’s 2000 audit report. Evidentiary rulings are reviewed for an abuse of discretion. United States v. White, 443 F.3d 582, 591 (7th Cir.2006). We give “special deference to the evidentiary rulings of the trial court.” Id. (quoting United States v. Briscoe, 896 F.2d 1476, 1490 (7th Cir.1990)).
According to the defendants, Judge Miller’s ruling allowing the audit report as a public document requires the admission of the City’s legal opinion, which, under Indiana law, is considered to be part of the report. We disagree. The public records exception is justified on “the assumption that a public official will perform his duty properly and the unlikelihood that he will remember details independently of the record.” Fed.R.Evid. Adv. Cmmte. Note to Rule 803(8) (citing Wong Wing Foo v. McGrath, 196 F.2d 120 (9th Cir.1952); Chesapeake & Delaware Canal Co. v. United States, 250 U.S. 123, 39 S.Ct. 407, 63 L.Ed. 889 (1919)). Accordingly, the language of the rule focuses on reports of the activities of the office, and on observations and investigations made under the authority of law. The City’s response to the audit does not have the indicia of reliability supporting the public records exception. Judge Miller did not abuse his discretion by ruling that it was not a public record, despite its inclusion in one.
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11488313-12717 | PER CURIAM:
Applewood Chair Co. appeals the district court’s order affirming the bankruptcy court’s order clarifying a confirmed plan of reorganization. Because we find that res judicata does not bar the bankruptcy court’s clarification, we affirm.
FACTS AND PROCEEDINGS BELOW
In this bankruptcy appeal, the debtor-appellant, Applewood Chair Co. (“Apple-wood Chair”), filed a petition seeking relief under Chapter 11 on March 30, 1994. Pri- or to this filing, creditor-appellee, Three Rivers Planning and Development District (“Three Rivers”) loaned $100,000 to Apple-wood Chair and to Ronnie and Margaret Spivey (“the Spiveys”), as evidenced by a promissory note dated November 22, 1993. As security for this note, Applewood Chair executed a security agreement, through its president, Ronnie Spivey, granting Three Rivers interest in all equipment parts and inventory of Applewood Chair. In addition, as guaranty for the note, the Spiveys, individually executed a Mortgage Agree ment, granting Three Rivers a mortgage lien on real property they owned.
On May 2, 1994, Applewood filed a motion to approve the sale of its assets that was subsequently granted by the bankruptcy court on May 31, 1994 (“Sale Order”). As part of the relief granted by the Sale Order, Applewood sold substantially all of its assets to another entity or an entity to be formed, which was identified as “NewCo.” A portion of the assets to be sold consisted of the equipment used as collateral for the Three Rivers loan which was now to be transferred NewCo. New-Co was to assume the Three Rivers indebtedness due and owing by Applewood Chair. Regarding Three Rivers’s secured interest, the motion (approved by the Sale Order) stated the following:
Movant’s equipment currently serves as collateral to secure an indebtedness of movant to Three Rivers. The balance of that indebtedness is approximately $97,-000.00, and the equipment, when valued at a going concern value, has a value of approximately that same amount. It is unclear as to whether the liquidation value of the equipment is equal to or greater than the amount of the Three Rivers’ [ ] indebtedness. In any event, the equipment will be sold to NewCo, in exchange for NewCo’s agreement to assume all of the movant’s obligations and indebtedness to Three Rivers under the existing loan documents. Three Rivers’ first lien upon the equipment shall remain unaltered. Upon assumption, all claims of Three Rivers, with respect to the equipment, will be discharged and forgiven, as to all existing obligors, and NewCo will assume all of the existing obligors’ obligations in connection ivith Three Rivers’ claims and debts .... (emphasis added).
Based on the language of this Motion, Three Rivers asserts that it understood that NewCo would assume all obligations and indebtedness of the debtor to Three Rivers “with respect to the equipment” only, pursuant to the above-referenced promissory note and security agreement. The individual obligations of the Spiveys remained intact pursuant to the terms of the promissory note and the security agreement. Applewood Chair, on the other hand, argues that the Sale Order, and the bankruptcy court’s order approving of the reorganization plan, discharged not only the debts of Applewood Chair, but also discharged all officers, directors and shareholders from any debt due and owing from those claims that arose prior to the confirmation of the reorganization plan— including the Spiveys’ individual guaranty of the debt owed Three Rivers.
On June 13,1994, pursuant to the above-referenced motion and Sale Order, Three Rivers entered into an Assumption Agreement with the purchaser of the Applewood Chair’s assets, Allcreek Holdings, Inc., (“Allcreek”), which entity was described in the above motion and Sale Order as New-Co. Regarding the Spiveys’ individual indebtedness, the Assumption Agreement stated the following:
That this assumption agreement shall in no way be considered a novation nor shall it be construed in any way to impair any of the current existing collateral taken by Three Rivers at the time of the initial execution of the Promissory Note. The parties further agree that the individual guarantees shall not be im paired and that this shall not be considered to be a novation with regard to the individual guarantees of said note.
Accordingly, pursuant to the terms of the Assumption Agreement, only the indebtedness of Applewood Chair to Three Rivers was assumed by Allcreek (NewCo). The individual indebtedness of the Spiveys (as per the promissory note and mortgage agreement) to Three Rivers, was not assumed by Allcreek, nor was such indebtedness released by Three Rivers.
On September 1, 1994, Allcreek changed its corporate name to Applewood Furniture Industries, Inc. (“Applewood Furniture”). In approximately February of 1995, Applewood Furniture was in default and the Spiveys, individually, were in default as well for failure to make payments pursuant to the terms of the note. When Three Rivers called upon Applewood Furniture to pay the remaining indebtedness, it learned that Applewood Furniture was no longer in business. In addition, when Three Rivers attempted to enforce its property lien on the equipment (collateral), it learned that the equipment was missing and could not be found.
In January of 1996, Three Rivers began efforts to foreclose on the referenced mortgage agreement with respect to the real property put up as collateral by the Spiveys. During the course of these foreclosure efforts, counsel for Three Rivers received a letter from counsel for Ronnie Spivey indicating that, with respect to the foreclosure on the property, the district court’s confirmation of the reorganization plan not only discharged the debts owed by the Applewood Chair, but that it would also discharge Applewood Chair’s officers, directors and principals from any debt owed by those individuals to third parties. At this time, Three Rivers temporarily suspended efforts to foreclose and filed a motion for clarification of the Sale Order, which resulted in the entry of the bankruptcy court’s July 31, 1997 order and subsequent supplemental order of October 3,1997.
In its motion for clarification, Three Rivers argued that Applewood Chair’s Chapter 11 bankruptcy proceedings did not affect the Spivey’s individual liability, nor did those proceedings affect Three Rivers’ right to foreclose on the mortgage agreement after the default. The bankruptcy court agreed and stated the following in its July 31 order:
(1) This Court has continuing jurisdiction to clarify and/or interpret the intent and effect of its orders rendered in this Bankruptcy proceeding; and
(2) This Court’s Order Approving The Sale of Substantially All Of The Assets Of The Debtor-in-Possession, etc., dated May 31, 1994, and subsequent Order Confirming Plan of Reorganization, dated July 25, 1995, contain insufficient language and were not intended to have the effect of releasing the individual indebtedness of Ronnie C. Spivey and Margaret Spivey to Three Rivers Planning and Development District, Inc., as evidenced and created by that certain promissory note dated November 22, 1993, and that certain mortgage agreement dated November 22, 1993. (emphasis added).
On May 3, 1999, the district court affirmed the bankruptcy court’s orders. Applewood Chair filed its notice of appeal on May 13, 1999.
ISSUES ON APPEAL
Applewood raises the following issues on appeal:
1. Whether Three Rivers’s motion for clarification of the Sale Order should have been filed as an adversary proceeding, as opposed to a motion, pursuant to Bankruptcy Rule 7001.
2. Whether Three Rivers is barred from pursuing its claim against the Spiveys by the doctrine of res judi-cata.
STANDARD OF REVIEW
We review the bankruptcy court’s ruling on these issues as if they were on direct appeal to us. In re Charrier, 167 F.3d 229, 232 (5th Cir.1999). We review the bankruptcy court’s fact findings under the clearly erroneous standard and its conclusions of law de novo. See id.
THREE RIVERS’S MOTION FOR CLARIFICATION
Applewood Chair argues that Three Rivers’s motion for clarification should have been filed as an adversary proceeding. Applewood Chair categorizes Three Rivers’s motion as a prayer for declaratory relief and for a determination of the validity of Three Rivers’s claim against the Spi-veys. Three Rivers argues that its motion sought to clarify the “intent and effect” of the bankruptcy court’s Sale Order and order confirming the reorganization plan as to the individual indebtedness of the Spi-veys pursuant to the promissory note and mortgage agreement. We agree with the latter argument.
The relief requested by Three Rivers does not qualify as a type of proceeding required by Rule 7001 to be brought as an adversary proceeding. The validity of Three Rivers’s lien against the equipment which belonged to Applewood Chair was never in question. This equipment was part of the bankruptcy estate until it was sold to Allcreek who then assumed Three Rivers’s lien against the equipment. Three Rivers’s motion for clarification was properly filed as a motion rather than an adversary proceeding.
RES JUDICATA EFFECT OF BANKRUPTCY COURT’S ORDERS
Applewood Chair argues that Three Rivers was barred from seeking clarification of the Sale Order under the theory of res judicata. In Republic Supply v. Shoaf, 815 F.2d 1046 (5th Cir.1987), we held that the confirmation of a clear and “unambiguous plan” of reorganization that “expressly released” a third-party guarantor has a res judicata effect on a subsequent action against the guarantor who is also a creditor. See Shoaf, 815 F.2d at 1049-50. Because we find Shoaf distinguishable from the facts of this case, we reject Applewood Chair’s argument.
The general rule is that a discharge in bankruptcy does not affect a guarantor’s liability. See 11 U.S.C. § 524(e) (1994) (“[Discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.”); see also N.C.N.B. Texas Nat’l Bank v. Johnson, 11 F.3d 1260, 1266 (5th Cir.1994) (holding that to allow a confirmed reorganization plan to effect an accord and satisfaction on a loan guaranty “would defeat the purpose of loan guaranties; after all, a lender obtains guaranties specifically to provide an alternative source of repayment in the event that the primary obligor’s debt is discharged in bankruptcy”); Matter of Sandy Ridge Dev. Corp., 881 F.2d 1346, 1351 (5th Cir.1989) (“A discharge in bankruptcy will simply not affect the liability of a guarantor.”). The Spiveys did not file for individual bankruptcy protection, Applewood Chair was the debtor in this bankruptcy proceeding. Thus, our analysis of this issue should bear in mind the general rule codified in § 524. See, e.g., United States v. Stribling Flying Serv., Inc., 734 F.2d 221, 223 (5th Cir.1984) (noting that the obligations of individual third-party guarantors were not affected by a corporate debtor’s Chapter 11 proceeding).
In Shoaf, this Court recognized the res judicata effect of an approved reorganization plan which expressly provided for the release of a third party guarantor who was also a creditor. See 815 F.2d at 1051-54. The issue stated in Shoaf illustrates the limited nature of its holding: “In this ap peal we address the question whether the bankruptcy court’s confirmation order which, beyond the statutory grant of the Code, expressly released a third-party-guarantor, is to be given res judicata effect.” 815 F.2d at 1047. The approved final reorganization plan contained a specific paragraph for the release of Shoafs guaranty. See id. at 1049. Importantly, the final reorganization plan confirmed by the bankruptcy court in Shoaf omitted a paragraph that provided for a general release, leaving the paragraph specifically releasing the Shoaf guaranty in the plan. See id.
The reorganization plan approved by the bankruptcy court in the case sub jutdice contained no provision specifically releasing the personal guaranties of the Spiveys. The plan did contain a general release that stated the following:
The provisions of the confirmed plan shall bind all creditors and parties in interest, whether or not they accept the plan and shall discharge the Debtor, its officers, shareholders and directors from all claims that arose prior to Confirmation.
Applewood Chair argues that because Mr. Spivey was an officer, director and shareholder, and because Mrs. Spivey was a shareholder of the debtor company that this cases falls under the rationale of Shoaf. This argument inviteá this Court to extend that holding to an inapposite factual situation. We decline the invitation.
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5665527-20638 | CYR, Senior Circuit Judge.
Benson Eziamaka Onwuamaegbu appeals from the Board of Immigration Appeals’ (BIA) denial of his motion to reconsider its summary affirmance of an immigration judge’s decision, which refused to waive inadmissibility pursuant either to § 212(h) or (i) of the Immigration and Nationality Act (INA). See INA § 212(h), (i), 8 U.S.C. § 1182(h), (i). We vacate the denial, and remand to the BIA for written clarification of its grounds for summary affirmance.
I
BACKGROUND
Onwuamaegbu, a native and citizen of Nigeria, came to the United States in the early 1980s on a temporary student visa. During 1986, he (i) married a lawful permanent resident (LPR); (ii) was convicted of larceny by check in Massachusetts and received a suspended six-month sentence; and (iii) applied for adjustment to LPR status based on his recent marriage to an LPR. In his application, however, Onwua-maegbu falsely responded “no” to the question: “Have you ever, in or outside the United States, been arrested, cited, charged, indicted, convicted, fined, or imprisoned for breaking or violating any law or ordinance, including traffic violations?” In 1988, Onwuamaegbu was convicted on two occasions for forgery in New Hampshire, and again received suspended sentences. Nevertheless, Onwuamaegbu was granted unconditional LPR status in 1989.
At some point prior to March 14, 2000, Onwuamaegbu took a trip of unknown duration to Nigeria. Upon returning to the United States, he was charged with inadmissibility by the Immigration and Naturalization Service (INS), based on his three prior convictions for crimes of moral turpitude (viz., larceny by check and forgery), INA § 212(a)(2)(A)(i)(I), 8 U.S.C. § 1182(a)(2)(A)(i)(I), and for his willful misrepresentation regarding his Massachusetts conviction in his 1986 application for adjustment of status, INA § 212(a)(6)(C)(i), 8 U.S.C. § 1182(a)(6)(C)(i). Onwuamaegbu conceded removability, but contended that his deportation would result in “extreme hardship” to his family, and requested waivers of inadmissibility pursuant to INA § 212(h) and (i).
Following a hearing, the immigration judge (IJ) found Onwuamaegbu removable under INA § 212(a)(2)(A)(i)(I) or § 212(a)(6)(C)(i). Although the IJ determined that Onwuamaegbu’s family would suffer extreme hardship if he were to be deported, she denied his request for a § 212(h) and (i) waiver due to the fact that he had previously been admitted as an LPR, but had not accrued the requisite seven years of continuous lawful residence in the United States. Onwuamaegbu appealed the IJ’s decision to the BIA, contending that the IJ had erred in denying him a § 212(h) or (i) waiver, given that: (i) Onwuamaegbu had achieved LPR status in 1989; (n) the fact that he achieved that status by fraudulent means was not relevant to his entitlement to a § 212(h) waiver; (in) he therefore had lived lawfully and continuously in the United States from 1989 to 2000 (viz., more than the requisite seven years); and (iv) his brief trip to Nigeria could not — as a matter of law— have retolled the seven-year continuous residence requirement. In September 2004, the BIA summarily affirmed the IJ’s decision. Onwuamaegbu did not petition for review of that denial, electing instead to file a timely motion to reconsider the BIA’s denial of his appeal. The BIA denied the motion for reconsideration, and Onwuamaegbu filed a timely petition for review.
II
DISCUSSION
A. Standard of Review
As Onwuamaegbu filed no petition for review from the BIA’s September 2004 denial of his appeal from the IJ’s decision, and that denial became final after 30 days, we lack jurisdiction to review it. See 8 U.S.C. § 1252(b)(1); Zhang v. INS, 348 F.3d 289, 292 (1st Cir.2003) (noting that “[the] need to timely appeal is a strict jurisdictional requirement”). Rather, Onwuamaegbu submitted a timely petition for review from only the BIA’s January 2005 denial of his motion for reconsideration of the September 2004 BIA decision. See 8 C.F.R. § 1003.2(b). Although we have ju- risdietion to review this BIA decision, see Nascimento v. INS, 274 F.3d 26, 28 (1st Cir.2001), our standard of review is more circumscribed than it otherwise would have been had Onwuamaegbu petitioned for review from the BIA’s denial of his appeal. We review the denial of a motion to reconsider only for abuse of discretion. See Zhang, 348 F.3d at 293; see also Esenwah v. Ashcroft, 378 F.3d 763, 765 (8th Cir.2004) (noting that abuse-of-discretion review of the BIA’s denial of a motion for reconsideration is “considerably more deferential than the ordinary administrative-law standard that governs our review of agency decisions”), cert. denied, 544 U.S. 962, 125 S.Ct. 1741, 161 L.Ed.2d 604 (2005). In order to surmount this higher standard of review, Onwuamaegbu must demonstrate that the BIA’s denial was “made without a ‘rational explanation, inexplicably departed from established policies, or rested on an impermissible basis’ (such as race).” Zhang, 348 F.3d at 293 (citation omitted).
Although we normally review BIA decisions, and not IJ decisions, we directly review the IJ’s decision in this case because the BIA summarily affirmed it. See Stroni v. Gonzales, 454 F.3d 82, 86-87 (1st Cir.2006).
B. Removability Pursuant to INA § 212(a)(2)(A)(i)(I) & 212(a)(6)(C)(i)
First, Onwuamaegbu asserts that the IJ erred in ruling that he was removable due to his previous conviction for a crime of moral turpitude (viz., the May 1986 Massachusetts conviction for larceny by check), INA § 212(a)(2)(A)(i)(I), and that he had conceded that he was removable for failing to disclose that conviction in his September 1986 application for lawful permanent resident status, see INA § 212(a)(6)(C)(i), 8 U.S.C. § 1182(a)(6)(C)(i). Onwuamaeg-bu points out that, at the time of that conviction, the INA excepted convictions for a “petty offense,” see INA § 212(a)(9), 8 U.S.C. § 1182(a)(9) (repealed), and argues that his state conviction meets this criterion given that larceny by check is classified and/or punishable as a “misdemeanor” under Massachusetts law, see Mass. Gen. Laws Ann. ch. 274, § 1. He further contends that his failure to disclose this “misdemeanor” conviction on his 1986 LPR application was therefore, by definition, not “material,” hence not an additional ground for removability under § 212(a)(6)(C)(i).
We need not address these questions, however, as Onwuamaegbu failed to raise them before the BIA, either by appeal from the IJ’s decision, or in his motion for reconsideration. Instead, he simply challenged the IJ’s decision to deny him a waiver of inadmissibility under INA § 212(h) and (i), see infra. Arguments not raised on appeal to the BIA are deemed waived, for failure to exhaust administrative remedies. See Susanto v. Gonzales, 439 F.3d 57, 61 (1st Cir.2006).
C. The Section 212(h) Waiver of Inadmissibility
Next, Onwuamaegbu challenges the IJ’s determination that he was ineligible for a discretionary waiver of inadmissibility under INA § 212(h), which provides in pertinent part:
The Attorney General may, in his discretion, waive [inadmissibility] ...
[1](B) in the case of an immigrant who is the spouse, parent, son, or daughter of a citizen of the United States or an alien lawfully admitted for permanent residence if it is established to the satisfaction of the Attorney General that the alien’s denial of admission would result in extreme hardship to the United States citizen or lawfully resident spouse, parent, son, or daughter of such alien
[2] No waiver shall be granted under this subsection in the case of an alien who has previously been admitted to the United States as an alien lawfully admitted for permanent residence if ... the alien has not lawfully resided continuously in the United States for a period of not less than 7 years immediately preceding the date of initiation of proceedings to remove the alien from the United States.
INA § 212(h)(1)(B), 8 U.S.C. § 1182(h)(1)(B) (emphasis added). Hence, subsection 1 invests the Attorney General with the discretion to grant a waiver to an immigrant who demonstrates that his deportation will result in familial hardship, whereas subsection 2 defines several subcategories of immigrants who are per se ineligible for this waiver even if they can establish “extreme hardship”.
The IJ found that Onwuamaegbu satisfied the “extreme hardship” criterion of § 212(h)(1)(B), but went on to deny the waiver because Onwuamaegbu (i) was an immigrant “previously ... admitted” for lawful permanent residence, and (ii) had “not lawfully resided continuously in the United States for a period of not less than seven years.” The IJ noted that the BIA had interpreted the unambiguous phrase “previously ... admitted” to refer to any immigrant who had in fact obtained LPR status, regardless of whether he had done so by lawful or unlawful means. See In re Ayala-Arevalo, 1998 WL 833810, 22 I. & N. Dec. 398, 401 (BIA 1998). Thus, the IJ noted that Onwuamaegbu’s admission as an LPR in 1987, even if he obtained that status by making a material misrepresentation in his application, satisfied the “previously ... admitted” criterion of § 212(h), and Onwuamaegbu was therefore “bound” by the requirement that he must have lawfully resided continuously in the United States for at least seven years. The IJ noted that Onwuamaegbu was a “returning alien” in March 2000, and therefore did not satisfy the seven-year requirement.
In the petition for review, Onwuamaeg-bu maintains that the IJ’s decision is erroneous, as a matter of law, in that it used March 2000 as the measuring point for the “seven year” period, whereas the IJ should have inquired whether Onwuamaegbu had continuously resided in the United States from March 1993 to March 2000. The answer, Onwuamaegbu suggests, is plainly “yes.” He contends that the BIA abused its discretion in denying his reconsideration motion because Ayala, the sole basis for the IJ’s decision, does not provide a definition of the critical phrase “lawfully resided continuously”. Furthermore, On-wuamaegbu posits that the IJ could not have determined that his trip abroad had tolled his period of continuous United States residence without first determining the circumstances and duration of the trip, which she unquestionably did not do.
1. Ayala and the “Previously Admitted” Factor
Section 212(h) embodies two distinct concepts: (i) previous admission “as an alien lawfully admitted for permanent residence,” and (ii) continuous lawful residence. (Emphasis added.) The Ayala case notes that the former concept is a threshold criterion, in that it defines the class of aliens who are required to satisfy the latter “lawful residence” criterion, which is contained in a pendant “if’ clause. See Ayala, 22 I. & N. Dec. at 401. Once an immigrant has been admitted as an LPR, he may obtain a waiver only if he meets the seven-year rule. If an immigrant has never before been admitted as an LPR {viz., if he is an illegal alien), he is not disqualified from obtaining a § 212(h) waiver, whether or not he has lawfully resided continuously in the United States for seven years.
Although it may seem incongruous that Congress accorded such preferential treatment to a non-LPR immigrant over one who has already achieved LPR status, the courts uniformly have upheld this statutory distinction against equal protection challenges. See, e.g., De Leon-Reynoso v. Ashcroft, 293 F.3d 633, 640 (3d Cir.2002); Lukowski v. INS, 279 F.3d 644, 647-48 (8th Cir.2002); Lara-Ruiz v. INS, 241 F.3d 934, 947 (7th Cir.2001). The purported “rational basis” for the distinction made by Congress is that LPR immigrants have enjoyed the benefits and advantages that attend their “lawful” status, and should they engage in unlawful acts while remaining LPRs, they should be subject to harsher consequences than a non-LPR immigrant. See De Leon-Reynoso, 293 F.3d at 639-40. That is precisely the import of Ayala: even an immigrant who has obtained LPR status by unlawful means goes on to enjoy the same special benefits of LPR status as one who obtained it by lawful means. By using the term “previously admitted,” rather than (for example) “previously and lawfully admitted,” Congress demonstrated that it specifically intended to penalize those immigrants who sought and gained LPR status only to abuse its benefits.
Thus, based on the extant BIA precedent, the IJ rationally concluded, as a threshold matter, that Onwuamaegbu was an immigrant “previously ... admitted ... as an alien lawfully admitted for permanent residence,” even though he had fraudulently misrepresented a material fact in his 1986 LPR application, and the IJ determined that Onwuamaegbu therefore was “bound,” by subsection 212(h), to satisfy the seven-year rule. See Ayala, 22 I. & N. Dec. at 401 (“We are not persuaded by the respondent’s argument that we should read his proposed distinction into the law by focusing on the term ‘lawfully admitted’ and disregarding the entire phrase that provides the context for that term, namely ‘previously been admitted’ to the United States as an alien lawfully admitted for permanent residence.”); cf. In re Koloamatangi, 2003 WL 77728, 23 I. & N. Dec. 548, 551 (BIA 2003) (defining, for purposes of cancellation of removal under INA § 240A(a), the phrase “lawfully admitted for permanent residence” to exclude admissions acquired by fraudulent means, but expressly distinguishing Ayala because of § 212(h)’s differing choice of language); cf. also Savoury v. U.S. Attorney Gen., 449 F.3d 1307, 1315 (11th Cir.2006) (observing same distinction between Ayala and Koloamatangi); Obioha v. Gonzales, 431 F.3d 400, 409 n. 10 (4th Cir.2005) (same). In a word, then, like Ayala, Onwuamaegbu was not a non-LPR, viz., an illegal alien entitled to escape the strictures of the seven-year test.
2. The Lawful Continuous Residence Factor
After resolving this threshold eligibility question under Ayala, however, the IJ still was required to determine whether Onwuamaegbu had “lawfully resided continuously in the United States for a period of not less than seven years immediately preceding the date of initiation of proceedings to remove the alien from the United States.” (Emphasis added.) Ayala, which dealt exclusively with the threshold term “ ‘previously been admitted’ to the United States as an alien lawfully admitted for permanent residence,” did not reach the issue of the seven-year test’s distinct concept of lawful and continuous residence.
With respect to the latter requirement, the IJ set forth a very terse holding, which provides in toto:
Because the respondent was admitted to the United States on March 14, 2000 as a returning LPR, he has not lawfully resided continuously in the United States for seven years, rendering him ineligible for a waiver under § 212(h) of the Act. As such, he remains removable under § 212(a)(2)(A)(i)(I) of the Act.
Respondent argues that we should assume from this statement that the IJ denied the § 212(h) waiver because she determined that Onwuamaegbu had obtained his LPR status in 1989 by fraudulent means, and therefore his requisite period of seven-years “lawful” residence under § 212(h) never commenced in 1989.
The problem with the IJ’s concise holding, however, is that it fails to pinpoint with sufficient clarity the IJ’s precise rationale, and because the BIA summarily affirmed the IJ’s decision, leaves us without an adequate basis for deciding whether the BIA abused its discretion in denying Onwuamaegbu’s reconsideration. See 8 C.F.R. § 1003.1(e)(4) (noting that the BIA’s summary affirmance connotes only the BIA’s agreement with the result reached by the IJ, rather than the IJ’s specific rationale). We explain.
The IJ’s bare reference to the term “returning alien” seems to direct us implicitly to INA § 1101(a)(13), which governs the status of LPRs returning to the United States from a trip abroad. As a returning LPR, Onwuamaegbu presumptively would not have been regarded as an applicant for admission (viz., would not have been placed in deportation proceedings), unless he fell under one of six exceptions:
(i) has abandoned or relinquished that status,
(ii) has been absent from the United States for a continuous period in excess of 180 days,
(iii) has engaged in illegal activity after having departed the United States,
(iv) has departed from the United States while under legal process seeking removal of the alien from the United States, including removal proceedings under this chapter and extradition proceedings,
(v) has committed an offense identified in section 1182(a)(2) of this title, unless since such offense the alien has been granted relief under section 1182(h) or 1229b(a) of this title, or
(vi) is attempting to enter at a time or place other than as designated by immigration officers or has not been admitted to the United States after inspection and authorization by an immigration officer.
INA § 101(a)(13)(C), 8 U.S.C. § 1101(a)(13)(C). The IJ did not specify which exception she relied on in determining Onwuamaegbu inadmissible. Because Onwuamaegbu left the United States in 2000 to travel to Nigeria, he was a “returning alien” presumptively entitled to readmission, but his circumstances — -viz., his trip abroad and his prior conviction for crimes of moral turpitude — potentially barred his readmission as an LPR under exceptions (i), (ii), and/or (v) to subsection 101(a)(13).
As we have noted, however, see su'pra Section II.C.1, Ayala was the only case discussed at length by the IJ. Although the IJ correctly determined that Onwua-maegbu was required to establish seven-years’ residence under § 212(h) to obtain a waiver, Ayala did not reach the issue of the lawful-and-continuous-residence requirement, and does not constitute a valid ground for denying Onwuamaegbu a § 212(h) waiver. At the present juncture, we cannot determine whether or not the IJ rested the § 212(h) denial entirely on Ayala, and by extension, whether or not the BIA accordingly interpreted the IJ’s holding, thereby abusing its discretion.
Moreover, Onwuamaegbu plausibly contends that it is impossible for us to determine with sufficient certainty the rationale underlying the IJ’s laconic holding as to the § 212(h) “lawful” and “continuous” residency requirement, and that for all we know she may have rested her decision— for example — solely on the interruption in Onwuamaegbu’s “continuous” United States residency occasioned by his Nigerian trip in 2000. The IJ simply noted that Onwuamaegbu “has not lawfully resided continuously in the United States for seven years,” without specifying whether the fatal defect consisted of a lack of lawfulness, continuity, or both. Moreover, by adverting to the date March 14, 2000, the IJ invited an inference that Onwuamaegbu’s Nigerian trip somehow may have retolled his seven-year residency period, setting the clock back to zero. If the IJ did rely on the Nigerian trip’s interruption of On-wuamaegbu’s seven-year residency period (from March 1993 to March 2000), such a finding is not supported by “substantial evidence” in the record, since no evidence was adduced at the hearing concerning the duration of Onwuamaegbu’s trip to Nigeria, let alone any evidence that his trip had lasted more than the 180 days prescribed by § 1101(a)(13)(ii). Once again, it would have been an abuse of discretion had the BIA so interpreted the IJ’s holding, and affirmed on that ground.
Given these alternative interpretations of the IJ’s ratio decidendi, the efficacy of the respondent’s contention that the IJ must have denied the § 212(h) waiver pursuant to exception (v) of INA § 101(a)(13)(C) because the IJ determined that Onwuamaegbu had obtained his LPR status in 1989 by fraudulent means and that his “residence” for purposes of § 212(h) was “unlawful” ab initio, can hardly be deemed incontestable. Were that the intended rationale, one reasonably could expect some mention of the date of the inception of Onwuamaegbu’s unconditional LPR status in 1989, and not March 14, 2000, as the date of primary significance. Although the hearing transcript reveals that the IJ explored the “ab initio” theory with the parties, there is no such definitive ore tenus holding. Had the IJ ultimately decided to rely on the ab initio theory, moreover, one reasonably would expect some statement in her written opinion that this was the conceptual basis for denying the § 212(h) waiver. Once again we are left with a double-layered ambiguity: what was the basis for the IJ’s decision, and what inferences did the BIA draw regarding the basis for the IJ’s decision?
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4179203-27372 | Affirmed by published opinion. Judge WYNN wrote the opinion, in which Judge NIEMEYER and Judge CONRAD joined.
WYNN, Circuit Judge:
In this class action suit, Plaintiffs Denise Minter, Jason and Rachel Alborough, and Lizbeth Binks brought suit on behalf of a group of consumers alleging that Wells Fargo and Long & Foster Real Estate (collectively, “Defendants”) violated Section 8 of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2607. Specifically, Plaintiffs allege that Defendants created a joint venture, Prosperity Mortgage Company (“Prosperity”), to skirt RESPA’s prohibition on kickbacks while failing to disclose this business arrangement to its customers.
After a trial on a portion of Plaintiffs’ claims, the jury returned a verdict that foreclosed Plaintiffs’ untried kickback claims. Plaintiffs moved for a new trial on the kickback claims but were denied. Due in large part to Plaintiffs’ failure to move for judgment as a matter of law before the jury reached its verdict, as well as the highly deferential lenses through which we must review the issues before us, we conclude that the district court did not abuse its discretion as to any of Plaintiffs’ challenges. Accordingly, we affirm.
I.
In 1993, Wells Fargo and Walker Jackson Mortgage Corporation, a subsidiary and affiliate of Defendant Long & Foster Real Estate, formed Prosperity Mortgage Company as a joint venture. Prosperity was created as “a mortgage lender that funded its loans via a wholesale line of credit provided by Wells Fargo[.]” J.A. 205.
Plaintiffs Denise Minter and Jason and Rachel Alborough, along with a class of similarly ' situated consumers, purchased their homes with a Long & Foster realtor and obtained mortgages through Prosperity in 2006 and 2007. In late 2007, Plaintiffs brought this class action suit alleging that Wells Fargo and Long & Foster created Prosperity as a “sham” or a front organization formed to facilitate unlawful referral fees and kickbacks in violation of RESPA, as well as a variety of other state and federal law claims. In particular, Plaintiffs alleged that Defendants created Prosperity to allow Long & Foster to refer mortgage clients to Wells Fargo in exchange for kickbacks. Plaintiffs also alleged that Prosperity performed little to no real work in connection with the mortgage transactions and that Wells Fargo was the real lender. Plaintiffs asserted three RESPA violations:
1. The Section 8(a) claim alleged that Wells Fargo paid kickbacks to Long & Foster in exchange for settlement services.
2. The Section 8(c) claim alleged that Wells Fargo and Long & Foster operated Prosperity as a “sham” lender, i.e., not a bona fide provider of settlement services, to funnel Long & Foster real estate customers to Wells Fargo for mortgage products.
3. The Section 8(c)(4) claim alleged that Defendants, as members of an affiliated business arrangement as defined by RESPA, did not comply with RE SPA’s requirement to provide borrowers with valid affiliated business arrangement disclosures.
J.A. 206, 250, 292-301, 1036-37, 1095-97.
Plaintiffs moved to certify a class for all of their claims. The district court bifurcated Plaintiffs’ proposed class into two separate classes: (1) the Timely Class, including all the class members whose claims were brought within RESPA’s one-year statute of limitations, and (2) the Tolling Class, for all class members whose claims were brought after the statute of limitations period expired.
Thereafter, the district court certified Plaintiffs’ Section 8(c) and 8(c)(4) claims, but did not certify the Section 8(a) claims because “only those Prosperity clients who were referred [to Prosperity] by Long & Foster may proceed under [the Section 8(a) ] claim” and certifying a sub-class for that particular sub-set of members would “unnecessarily complicate and obscure” the central inquiry into Prosperity’s legitimacy as a lender. J.A. 260-61. The district court noted that “[s]hould Plaintiffs fail under their Section 8(c) claims, the Court may entertain further briefing with respect to the Section 8(a) theory.” J.A. 261. The district court also chose not to certify the Tolling Class on any of the claims because it did not have a representative member.
In response, Plaintiffs amended their complaint to include a new named plaintiff, Lizbeth Binks, as a representative of the Tolling Class, and renewed their motion to certify the Tolling Class on all their claims. The district court reiterated that it would not certify the Section 8(a) claims for either the Tolling or the Timely Class. After completing a class certification analysis, the district court certified the Tolling Class on its Section 8(c) and 8(c)(4) claims only.
Defendants then moved for summary judgment on the Timely and Tolling Classes’ claims. The district court denied their motions due to factual disputes that could not be resolved at the summary judgment stage. Before trial on the See tion 8(c) and 8(c)(4) claims, Plaintiffs suggested that the individual Section 8(a) claims, although not certified as a class, should be tried in the same trial. The district court rejected that request, stating that “Hollowing the upcoming trial, the Court will solicit proposals from the parties related to scheduling a trial of Plaintiffs’ individual § 8(a) claims.” J.A. 1097. See also J.A. 1100 n. 2 (“Plaintiffs’ individual claims under § 8(a) will be tried at a later date.”).
Before trial, Defendants moved to decer-tify both the Timely and the Tolling Classes. The district court decertified the Tolling Class due to the court’s concerns about the tolling doctrine’s individualized application. The district court also amended the Timely Class by limiting it to class members who were referred to Prosperity by Long & Foster and excluding any class members whose loans were not transferred to Wells Fargo but were instead sold to others.
Also before trial, Plaintiffs moved to exclude evidence and argument about whether Plaintiffs had suffered economic injury, including testimony from one of Defendants’ experts, Dr. Marsha Courchane. The district court agreed, ruling that Dr. Courchane’s testimony and other “evidence of a lack of economic damages” was minimally relevant and deemed the probative value of the expert testimony “substantially outweighed by a danger of unfair prejudice, confusion, misleading the jury, or delay.” J.A. 1119-20. However, the court stated that it would reconsider that ruling if Plaintiffs “open[ed] the door to evidence of economic injury during their case-in-chief[.]” J.A. 1120. Later, the district court ruled that Defendants would be allowed to ask about whether Plaintiffs “shopp[ed] around for their mortgages and whether they chose Prosperity because it was offering better rates[,] lower costs, or better service.” J.A. 1162 (quotation marks omitted). The court explained that this evidence “is relevant background on the Named Plaintiffs’ claims[,]” distinct from unfairly prejudicial evidence of their lack of economic harm. Id.
After resolving these motions, the district court held the trial on Plaintiffs’ Section 8(c) and Section 8(c)(4) claims. During this trial, several matters arose to become the bases for the issues now on appeal. First, throughout the trial, Plaintiffs objected to Defendants’ questions regarding whether Plaintiffs suffered economic harm from using Prosperity, whether Prosperity’s loans were competitive in the market, and whether Prosperity gave the named Plaintiffs the best deal. Second, during closing arguments, Long & Foster’s counsel stated that “I think the only thing I agree [with] for sure is that Long & Foster did refer the named plaintiffs to Prosperity. There’s no dispute about that.” J.A. 1686. Third, counsel for Prosperity and Wells Fargo stated that the named Plaintiffs received financially beneficial deals in their loans. And finally, during his closing argument, Wells Fargo’s counsel implied that Plain tiffs’ attorney had a financial interest in the case.
After the district court instructed the jury and deliberations concluded, the jury returned a verdict in favor of Defendants. Specifically, the jury decided that Plaintiffs did not prove by a preponderance of the evidence that Prosperity was a sham and not a bona fide provider of settlement services. In addition, the jury decided that Plaintiffs did not prove that Long & Foster referred or affirmatively influenced Plaintiffs to use Prosperity or that Prosperity referred or affirmatively influenced Plaintiffs to use Wells Fargo for settlement services. Accordingly, the district court entered judgment in favor of Defendants.
Thereafter, Plaintiffs moved for a new trial under Federal Rule of Civil Procedure 59(a). The district court denied the motion and issued an order entering judgment “in favor of Defendants and against Named Plaintiffs on Named Plaintiffs’ cláims under § 8(a) of [ RESPA], 12 U.S.C. § 2607[,]” i.e., claims that had not yet been tried (as opposed to the Section 8(c) claims, which had been tried). Appellants’ Br. at Addendum 31. Plaintiffs timely appealed.
II.
Plaintiffs first challenge the district court’s rejection of their Rule 59(a) motion for a new trial. “A district court’s denial of a motion for a new trial is reviewed for abuse of discretion, and will not be reversed ‘save in the most exceptional circumstances.’ ” FDIC v. Bakkebo, 506 F.3d 286, 294 (4th Cir.2007) (quoting Figg v. Schroeder, 312 F.3d 625, 641 (4th Cir.2002)).
Rule 59 states that “[t]he court may, on motion, grant a new trial on all or some of the issues ... after a jury trial, for any reason for which a new trial has heretofore been granted in an action at law in federal court[.]” Fed.R.Civ.P. 59(a)(1). We have recognized that, under this rule, the district court must
“set aside the verdict and grant a new trial[ ] if ... (1) the verdict is against the clear weight of the evidence, or (2) is based upon evidence which is false, or (3) will result in a miscarriage of justice, even though there may be substantial evidence which would prevent the direction of a verdict.”
Knussman v. Maryland, 272 F.3d 625, 639 (4th Cir.2001) (quoting Atlas Food Sys. & Servs., Inc. v. Crane Nat’l Vendors, Inc., 99 F.3d 587, 594 (4th Cir.1996)).
Plaintiffs brought three RESPA claims: Section 8(a), Section 8(c) and Section 8(c)(4) claims. The Section 8(c) and Section 8(c)(4) claims proceeded to trial, but the Section 8(a) claims did hot but were instead adjudicated after trial. Appellants’ Rule 59 motion is unusual in that Plaintiffs are not seeking a new trial for the purpose of re-trying their Section 8(c) claims. Instead, they are seeking “only a first trial on their [Section] 8(a) claims[.]” Appellants’ Br. at 49.
Plaintiffs’ Rule 59(a) motion specifically challenged the jury’s negative answer to Question Three of the verdict form: “Have Plaintiffs proved, by a preponderance of the evidence, that Long & Foster Real Estate, Inc. referred or affirmatively influenced the Plaintiffs to use Prosperity Mortgage • Company for the provision of settlement services?” J.A. 1212. Because Plaintiffs’ Section 8(a) claim also required Plaintiffs to prove that Long & Foster referred Plaintiffs to Prosperity, the district court held that the jury’s finding on this issue undermined both the Plaintiffs’ tried and untried RESPA claims. Plaintiffs thus seek to overturn the jury’s finding on this question and attain a trial on the Section 8(a) claims.
On appeal, Plaintiffs make two arguments for reversal of the district court’s denial of their Rule 59 motion: 1) Long & Foster’s counsel made a judicial admission that removed the referral issue from dispute, and 2) the jury’s verdict was against the clear weight of evidence. We disagree with both.
A.
First, Plaintiffs argue that the district court abused its discretion by finding that Long & Foster’s counsel’s statement in closing argument that Long & Foster referred the named Plaintiffs to Prosperity was not a judicial admission.
A judicial admission is a representation that is “ ‘conclusive in the case’ ” unless the court allows it to be withdrawn. Meyer v. Berkshire Life Ins. Co., 372 F.3d 261, 264 (4th Cir.2004) (quoting Keller v. United States, 58 F.3d 1194, 1198 n. 8 (7th Cir.1995) (further defining judicial admissions as “formal concessions in the pleadings, or stipulations by a party or its counsel, that are binding upon the party making them”)). Judicial admissions include “intentional and unambiguous waivers that release the opposing party from its burden to prove the facts necessary to establish the waived conclusion of law.” Id. at 264-65. “[A] lawyer’s statements may constitute a binding admission of a party[ ]” if the statements are “ ‘deliberate, clear, and unambiguous[.]’ ” Fraternal Order of Police Lodge No. 89 v. Prince George’s Cnty., Md., 608 F.3d 183, 190 (4th Cir.2010) (quoting Meyer, 372 F.3d at 265 n. 2). “We review the district court’s determination as to whether a particular statement constitute[d] a judicial admission ... [for] abuse of discretion.” Meyer, 372 F.3d at 264 (quotations omitted) (alterations in original).
In this case, during closing arguments, Long & Foster’s counsel stated:
First of all, at the outset, I would just ask you to ask yourselves if your assessment of the witnesses, of the documents, of their credibility, of what you heard in this case really matches what [Plaintiffs’ counsel] told you. It’s your job to weigh what occurred here.
And frankly, I’m sure you won’t be surprised, I have a lot of differences, and differences of recollection, differences in what was said.
I think the only thing I agree way [sic] for sure is that Long & Foster did refer the named plaintiffs to Prosperity. There’s no dispute about that.
J.A. 1686. Plaintiffs did not object, move for judgment as a matter of law, or seek to amend the jury verdict form after this alleged admission. After deliberations, the jury found that Plaintiffs had not proven that Long & Foster referred or affirmatively influenced Plaintiffs to use Prosperity. Plaintiffs then moved for a new trial, arguing for the first time after the jury’s verdict, that counsel’s statement during argument had constituted a judicial admission that Long & Foster had referred the plaintiffs to Prosperity.
The district court recognized that “[t]aken alone, [Long & Foster’s counsel’s] statement could possibly be considered an admission!,]” but rejected the motion for a new trial. J.A. 1353. The district court explained that
giving due regard to the context of this litigation and considerations of fairness, the Court is troubled by the fact that the supposed admission is being raised for the first time post-verdict. While the time between [Long & Foster counsel’s] statement and submission of the case to the jury was indeed short, the Court believes it was a sufficient amount of time for Plaintiffs to reconsider the task with which the jury would be charged in light of counsel’s statement, and to raise the supposed admission with the Court and with counsel. Obviously, Plaintiffs did not and, ... the conclusion which urges itself at this time is that it occurred to no one at the trial that the remarks in question constituted an admission of the nature here urged. As a result, the Court believes it would be decidedly unfair and inconsistent with the purpose of motions under Rule 59 to allow Plaintiffs to do now, what they failed to do at trial.
J.A. 1353-54 (quotation marks, citations, and footnote omitted).
On appeal, Plaintiffs claim that this ruling was an abuse of discretion. We disagree. The record reflects that Plaintiffs had ample opportunity to raise the alleged admission but failed to do so. And the fact that it occurred to no one at trial that this isolated remark constituted a binding admission undercuts the notion that the statement was sufficiently deliberate and clear so as to have preclusive effect. In the face of Plaintiffs’ failure to undertake any steps whatsoever at trial to have the statement deemed an admission or have the issue removed from the jury’s province, it simply cannot be said that “an error occurred in the conduct of the trial that was so grievous as to have rendered the trial unfair.” Bristol Steel & Iron Works v. Bethlehem Steel Corp., 41 F.3d 182, 186 (4th Cir.1994) (quotation marks omitted). Accordingly, we conclude that the district court did not abuse its discretion on this issue.
B.
Second, Plaintiffs contend that the district court abused its discretion by denying their motion for a new trial because the jury’s verdict was against the clear weight of the evidence. While a party is not required to make a Rule 50 motion for judgment as a matter of law before moving for a new trial, when, as here, a party does not do so, “our scope of review is exceedingly confined, being limited to whether there was any evidence to support the jury’s verdict, irrespective of its sufficiency, or whether plain error was committed which, if not noticed, would result in a manifest miscarriage of justice.” Bristol Steel, 41 F.3d at 187 (quotation marks and citations omitted); accord Nichols v. Ashland Hosp. Corp., 251 F.3d 496, 502 (4th Cir.2001).
In other words, when “reviewing the evidence through the medium of a motion for a new trial after failure to move for judgment as a matter of law, we.do not review sufficiency in its technical sense. What is at issue is whether there was an absolute absence of evidence to support the jury’s verdict.” Bristol Steel, 41 F.3d at 187 (quotation marks and citations omitted). Therefore, we must affirm the district court’s decision unless there was “an absolute absence of evidence” supporting the jury’s finding that Plaintiffs did not prove by a preponderance of the evidence that Long & Foster referred or affirmatively influenced them to use Prosperity for settlement services. Id.
Under RESPA’s regulations,
[a] referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business.
12 C.F.R. § 1024.14(f)(1) (2011). The district court provided this definition to the jury during its final instructions.
We cannot say that there is an “absolute absence of evidence” supporting the jury’s determination that Long & Foster did not refer the plaintiffs to Prosperity. For example, Long & Foster executive George Eastment testified that it was Long & Foster’s independently contracted real estate agents who were responsible for referring Plaintiffs to Prosperity, not Long & Foster itself. Specifically, he stated that Long & Foster’s “contact is not with the buyers and sellers,” rather the “independent contractors who are agents ... have the contact with the buyers and sellers[.]” J.A. 1495. He later reiterated that “[a]gents who were affiliated with Long & Foster made the referral. The company itself did not make the referral.” J.A. 1511.
Further evidence supported Defendants’ theory that the actions of Long & Foster real estate agents did not qualify as a referral under RESPA because Long & Foster’s agents’ actions did not “affirmatively influenc[e]” Plaintiffs to choose Prosperity. 12 C.F.R. § 1024.14(f)(1). For example, Long & Foster real estate agent Konstantino Tsamouras testified that Prosperity was not the only lender he recommended to Plaintiffs. The record supports this testimony, reflecting that Tsamouras recommended loan officers from both Prosperity and Bank of America to the Alboroughs, and that Tsamouras referred other individuals to First Mortgage. Further, the named Plaintiffs testified that they shopped around and conducted an independent search for a lender before deciding to use Prosperity and selected Prosperity because it offered the best deal. See J.A. 1526-30, 1563-69, 1570-71.
Undoubtedly, the evidence would have supported a verdict going the other way. But in light of Plaintiffs’ failure to move for judgment as a matter of law before the jury did its job and the ensuing high bar Plaintiffs face, we cannot conclude that there was an “absolute absence of evidence” supporting the jury’s verdict. Bristol Steel, 41 F.3d at 187. We therefore must affirm the district court’s denial of the Plaintiffs’ motion for a new trial.
III.
Plaintiffs also challenge the district court’s decision to admit testimony regarding the economic harm, or lack thereof, that they suffered due to using Prosperity’s settlement services. “We review a trial court’s rulings on the admissibility of evidence for abuse of discretion, and we will only overturn an evidentiary ruling that is arbitrary and irrational.” United States v. Cole, 631 F.3d 146, 153 (4th Cir.2011) (quotation marks omitted). See also United States v. Myers, 589 F.3d 117, 123 (4th Cir.2009). To be admissible, evidence must be relevant — a “low barrier” requiring only that evidence be “worth consideration by the jury[.]” United States v. Leftenant, 341 F.3d 338, 346 (4th Cir.2003) (quotation marks omitted).
Under Federal Rule of Evidence 403, determining whether the probative value of evidence is substantially outweighed by the danger of unfair prejudice, misleading the jury, or confusion of the issues is within the district court’s broad discretion. United States v. Love, 134 F.3d 595, 603 (4th Cir.1998). We will not overturn a Rule 403 decision “except under the most extraordinary of circumstances, where [a trial court’s] discretion has been plainly abused.” Id. (quotation marks omitted) (alteration in original). When reviewing the district court’s decision to admit evidence under Rule 403, “we must look at the evidence in a light most favorable to its proponent, maximizing its probative value and minimizing its prejudicial effect.” United States v. Udeozor, 515 F.3d 260, 265 (4th Cir.2008) (quotation marks omitted).
Before trial, the district court excluded Dr. Courchane’s expert testimony regarding Prosperity’s loan prices and all other testimony, evidence, or argument about whether Plaintiffs suffered economic injury. The district court explained that Plaintiffs were not required to establish economic injury to prove their RESPA claims and that the probative value of such evidence would be minimal. The district court warned that “if Plaintiffs open the door to evidence of economic injury during their case-in-chief, [the court] will reconsider this decision.” J.A. 1120.
During trial, however, the district court ruled that it would allow Defendants to question Plaintiffs about whether they “shopp[ed] around for their mortgages” and whether they chose Prosperity because it offered “better rates[,] lower costs, or better service” than its competitors. J.A. 1162 (quotation marks omitted). The district court explained that such questioning was relevant as background information on the Plaintiffs’ claims, but it cautioned that Defendants would not be allowed to suggest from the Plaintiffs’ “decisions to shop around or their decision to choose Prosperity because of its rates and/or fees” that Plaintiffs consequently did not suffer any economic harm. Id.
At trial, over Plaintiffs’ objections, Defendants asked witnesses about how Prosperity’s prices compared with other lenders. See J.A. 1538, 1568-1571, 1586-92, 1638-39. Defendants’ witnesses testified that, generally, Prosperity offered lower prices on loans than Wells Fargo. See J.A. 1592, 1638-39. In addition, the district court allowed Defendants to ask whether Plaintiffs suffered financial harm due to their involvement with Prosperity. See J.A. 1536-38, 1570. Specifically, during cross-examination, Wells Fargo’s defense counsel asked Minter: “You have absolutely no evidence that by doing your loan with Prosperity, and having Prosperity sell its loan on the secondary market to Wells Fargo, that you incurred any financial consequence one way or the other, negatively?” J.A. 1538. Minter responded that she did not know and had not looked at Wells Fargo’s rates. Id. Likewise, during crossexamination, Prosperity’s defense counsel asked Jason Al-borough if he decided to use Prosperity because he thought Prosperity was “giving [him] the best deal[,]” to which Jason Alborough responded that Prosperity’s pricing was “[o]ne of the factors” that led him to use Prosperity. J.A. 1570.
During Minter’s cross-examination, the district court distinguished between allowing such questioning on direct examination and allowing it on cross-examination, stating “the fact of whether she has or has not suffered any economic damage is not off the table with respect to cross-examining her[,]” although “[fit’s off the table with respect to any element to be required to prove the plaintiffs’ case, and I’ll instruct the jury in that respect.” J.A. 1536. During Alborough’s crossexamination, the district court allowed questioning on whether Alborough had received the “best deal for [his] loan[,]” saying “He says he felt cheated, I think this cross-examination is appropriate.” J.A. 1570. The district court later explained that:
From my perspective, the evidence has not indicated from individual plaintiffs any financial loss. To the contrary, particularly with regard to Mr. Albor- ough, who was grilled at length as to why he’s here as a plaintiff and never uttered a word that sounded to me as though there was any financial loss involved.
Nor did that come from Miss Minter, in addition to which, as I’ve already indicated, the jury’s going to be instructed that financial loss is not an issue for them to be concerned about.
So simply put, the door has not been opened, in my view. The ruling will be as before. Motion in limine sustained.
J.A. 1640.
The district court’s decision to allow Defendants to adduce general testimony from their own witnesses and cross-examination testimony about Prosperity’s competitive loan pricing did not constitute an abuse of discretion. In particular, that testimony was relevant to determining whether Prosperity was a sham business and whether Prosperity independently priced its loans to be competitive in the market rather than being exclusively controlled by Wells Fargo and Long & Foster.
Moreover, any potential prejudicial impact was mitigated by the district court’s jury instructions that stated:
[P]laintiffs are not required to prove they were overcharged by any of the defendants in connection with their loans, or that they incurred any financial detriment, or that they’ve suffered any poor service as a result of their dealings with the defendants.
Instead, for the plaintiffs to succeed on their claims, they’re only required to prove that Prosperity was a sham because it was not a bona fide provider of settlement services.
J.A. 1733.
Given the relevance of this line of questioning to the Plaintiffs’ claims and the district court’s mitigating instructions to the jury in the context of the trial as a whole-which lasted seventeen days and had over twenty witnesses-the district court’s decision to allow this limited questioning about Plaintiffs’ economic harm was not an abuse of discretion. We therefore affirm these evidentiary rulings.
IV.
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3953215-19485 | DYK, Circuit Judge.
Anthony D. Marek (“Marek”) appeals from his conviction, under 26 U.S.C. § 7212(a), for corruptly endeavoring to obstruct or impede the due administration of the Internal Revenue Code. Because we conclude that the evidence was sufficient to support Marek’s conviction, we affirm.
I.
We recite the facts in the light most favorable to the verdict. United States v. McFarland, 445 F.3d 29, 31 (1st Cir.2006).
A.
In the fall of 1994, the Internal Revenue Service (“IRS”) began a routine audit of the corporate taxes of Stoneham Towing, Inc. for tax year 1992. Stoneham Towing was an S-corporation owned at the time by Stephen Mazzola, and operated by Stephen and his siblings Joseph Mazzola and Christina Svendsen. The audit ultimately was broadened to encompass the tax years 1992-1994 and the personal income taxes of Stephen, Joseph, Christina, their father Sebastian, and other employees and the related business of Bodyworks Company, Inc. (“Bodyworks”). Stoneham Towing (a term which we use to include Bodyworks) was a customer of Marek, a local Snap-On Tools distributor; Marek was not among those audited, and it is not clear from the record whether Marek’s business was organized as a corporation, partnership, or sole proprietorship.
Stoneham Towing used an independent service called “Paychex” to administer the payroll of the business. Paychex was responsible for, among other things, issuing paychecks to employees from the payroll account, creating W-2s, withholding employee income tax, maintaining payroll records and preparing quarterly employment tax returns (IRS Form 941) based on information provided by Stoneham Towing.
At some time before March 1995, during the course of the audit, the IRS auditor noticed that there were a number of Stoneham Towing checks made out to employees that were not drawn from the payroll account, with the result that Pay-chex did not treat them as employee compensation for IRS reporting and withholding. The IRS auditor submitted information document requests to Stone-ham Towing on March 7, 1995, June 20, 1995, and August 15, 1996, seeking substantiation that these checks were business expenses. Some of these checks had “contract labor” on the memo line of the check, suggesting that the check reflected payments for contract labor work. Under 26 U.S.C. §§ 6041, 6041A, any such payments over $600 for the year must be reported to the IRS on IRS Form 1099. See IRS Instruction to Form 1099.
In an interview with Stephen Mazzola in July 1996, the IRS auditor asked why Stoneham Towing did not file the required IRS Form 1099 for contract labor. Stephen Mazzola told the auditor that the memo lines were incorrect; that the checks did not reflect payments to his employees; and that the checks had been cashed by the employees to make cash purchases of business items from vendors who refused to accept checks from Stone-ham Towing because of Stoneham Towing’s poor credit.
In order to enable Stoneham Towing to respond to the IRS information request, around June 1997 Stephen Mazzola requested that Marek and other vendors prepare backdated invoices purporting to record cash purchases for the tax years in question. It is these invoices that lie at the heart of the criminal action against Marek.
Stoneham Towing responded to the auditor’s information document requests around July 1997 by submitting the backdated vendor invoices. Neither the invoices themselves nor any other written or oral communication with the auditor indicated that the invoices were backdated recreations, rather than contemporaneous documents; the auditor testified that she would have sought additional third-party verification of the invoices if she had known they were recreations.
Based on similarities in the dates and amounts of the invoices and checks in question, the auditor concluded that the non-payroll account checks were properly used to pay vendors, rather than employees. The audits closed in late 1997 and early 1998.
The criminal investigation that ultimately resulted in Marek’s conviction began in April 1998, shortly after the audit closed, when Joseph Mazzola contacted IRS agents and alleged that the invoices submitted during the audit were false, and part of an effort to conceal a scheme to, inter alia, skim money from the company and pay employees “under the table” to help the employees evade income taxes and to enable the company to evade payroll and other employment taxes.
Two counts were returned in the indictment against Marek: a “Klein Conspiracy” to defraud the United States by obstructing the IRS, see United States v. Klein, 247 F.2d 908 (2d Cir.1957), and a separate count of “corruptly ... endeavoring] to obstruct or impede[ ] the due administration of [the Internal Revenue Code],” the so-called “omnibus provision,” 26 U.S.C. § 7212(a). The Klein Conspiracy count focused on Marek’s alleged participation in the scheme to manipulate and conceal payments to employees. The omnibus count focused on the submission of the false invoices to the IRS. Marek waived the right to a jury trial, and his case was tried to the court together with five other defendants connected to Stoneham Towing and charged with related offenses.
B.
At trial Marek stipulated that he created the invoices in question. The evidence established that Marek supplied these invoices to Stephen Mazzola who in turn supplied them to the IRS auditor. The evidence also showed that the invoices prepared by Marek and submitted to the IRS were not originals created at the time of the purported sales recorded therein, but were created by Marek in response to Stephen Mazzola’s request. As discussed below, evidence was presented bearing on the falsity of the invoices and culpable intent.
After the presentation of the government’s evidence, Marek moved for an acquittal under Federal Rule of Criminal Procedure 29 asserting that the evidence was insufficient under both counts. The district court granted the motion with respect to the Klein Conspiracy count. However, the district court denied the motion with respect to the count of corruptly endeavoring to obstruct or impede the due administration of the Internal Revenue Code. The district court ultimately found Marek guilty under this omnibus count. The district court concluded both that the invoices were false, and that Marek had the intent required by the statute. With respect to intent, the district court found that Marek either knew of or was willfully blind to the fact that the invoices would be presented to the IRS as part of an audit of Stoneham Towing. Marek was therefore guilty of the offense charged under § 7212.
On August 17, 2007, the district court sentenced Marek to one year of probation, the first six months of which would be under home detention without electronic monitoring, and a $8,000 fine. Marek timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1291.
II.
The sole issue on appeal is whether there is sufficient evidence to support Ma-rek’s conviction under 26 U.S.C. § 7212(a). We evaluate the evidence in the light most favorable to the government, accepting all reasonable inferences supporting the verdict, and determine whether “ ‘any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.’ ” McFarland, 445 F.3d at 31 (quoting United States v. Grace, 367 F.3d 29, 34 (1st Cir.2004)).
The interpretation of 26 U.S.C. § 7212(a) is a matter of first impression for this court. See United States v. Brennick, 134 F.3d 10, 12-13 (1st Cir.1998) (discussing sentencing guidelines but not the elements of the crime). However, the plain language of the statute supports an interpretation requiring proof that the defendant 1) corruptly, 2) endeavored, 3) to obstruct or impede the due administration of the Internal Revenue laws. See 26 U.S.C. § 7212(a); see, e.g., United States v. Wilson, 118 F.3d 228, 234 (4th Cir.1997). Supplying false documents knowing that the documents will be used to deceive the IRS during an audit is a quintessential violation of the statute. See Wilson, 118 F.3d at 234-36 (finding violation based on false backdated notes created by an attorney to support a client’s efforts to evade paying tax owed during an IRS audit); see also United States v. Bowman, 173 F.3d 595, 599-600 (6th Cir.1999) (holding that awareness of an audit is not required where false information returns about creditors were submitted to the IRS to harass and annoy creditors); United States v. Popkin, 943 F.2d 1535, 1540-41 (11th Cir.1991)(finding violation based on shell corporation created by an attorney to help a client hide money from the IRS).
Marek claims that 1) there was not sufficient evidence to support finding beyond a reasonable doubt that the invoices were false, and 2) even assuming the invoices were false, there was not sufficient evidence to support finding beyond a reasonable doubt that Marek knew that the invoices would be used to deceive the IRS in an audit.
A.
The evidence strongly supports the district court’s finding of falsity. As the district court found, the evidence was un-controverted that Marek “did ... ‘recre ate’ invoices that allegedly represented cash purchases.” An expert witness testified that none of the documents of either Snap-On Tools or Stoneham Towing included any support for the alleged cash transactions represented in the invoices submitted to the auditor. There were as many as 70 boxes of documents from Stoneham Towing alone that were reviewed for corroboration of the alleged cash transactions. Marek concedes that “in the records produced by Marek, there were no ledgers showing cash re-ceipts_” (Appellant’s Reply Br. 13.) The district court found, and Marek does not dispute, that none of the other copious business records in this case included any mention of, or support for, the cash purchases. There was also testimony by former employees that at least some of the items on the invoices either were never purchased or were purchased before 1992.
Several of the invoices were made out to an individual who was not even employed by Stoneham Towing at the time of the dates on the invoices. Former employees who received cash payments from Stone-ham Towing testified that these cash payments represented compensation for their regular work, and that these payments were not reported on their Paychex paycheck stubs or on their W-2s.
Joseph Mazzola testified that the checks questioned by the auditor were not used to purchase from vendors, but were instead used to pay employees, and that the Snap-On Tools invoices presented to the auditor were false. He also testified that Stephen Mazzola regularly directed employees to cash checks for cash payments to employees on weekly paydays each Friday. Joseph Mazzola described his method for keeping a second set of books to record those cash payments to the employees.
Also in evidence were a series of checks and testimony showing that Marek did not always demand cash from Stoneham Towing, contrary to the explanation Stephen Mazzola offered to the auditor. There is ample evidence to establish falsity.
B.
On the issue of intent, the evidence that the invoices were false (and that Ma-rek prepared them) in and of itself supports the district court’s finding that Ma-rek was aware of their falsity and that they would be used for an improper purpose. Marek argues, however, that, while the evidence might show that he was aware that the invoices were to be used for an improper purpose, the evidence did not support a finding that he was aware that they were to be used to corruptly influence the IRS, a required element of the offense.
We start with the premise that IRS audits of businesses routinely seek invoices to support the existence of legitimate business expenses. The IRS provides advice on recordkeeping to small businesses, including keeping invoices of receipts, purchases, and expenses. See, e.g., I.R.S. Publication 583, “Starting a Business and Keeping Records” (Nov.1995). The IRS advises that “records must support the income, expenses, and credits you report. ... You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported.” Id. at 12; see also I.R.S. Publication 552, “Recordkeep-ing for Individuals” (Nov.1994).
It is also well known that taxpayers sometimes attempt to deceive the IRS by submitting false invoices or other supporting documentation. The use of false invoices is so paradigmatic of tax fraud that the Supreme Court listed it among the classic indicia from which a willful intent to defeat or evade taxes might be inferred. Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 87 L.Ed. 418 (1943).
The district court here noted the “innate suspiciousness of the circumstances” involved with creating false invoices. General knowledge in the community can be strong circumstantial evidence of the defendant’s knowledge. See McGunnigal v. United States, 151 F.2d 162, 166 (1st Cir.1945)(general knowledge in the community may support a finding of defendant’s knowledge). Thus, an experienced businessman, such as Marek, would likely know that false invoices are often used to deceive the IRS and have no legitimate purpose, and suspect that they might be used in an IRS audit.
We need not decide whether such evidence alone would be sufficient to convict because the district court did not find that the mere knowing creation of false invoices was itself sufficient to satisfy the intent requirement. Rather the district court found that the “innate suspiciousness” coupled with Marek’s knowledge of the IRS audit was sufficient.
There was, to be sure, no direct testimony that Marek was aware of the audit; however, “purely circumstantial evidence can support an inference of knowledge.” United States v. Lachman, 521 F.3d 12, 17 (1st Cir.2008); see United States v. Mousli, 511 F.3d 7, 16 (1st Cir.2007); see also Desert Palace, Inc. v. Costa, 539 U.S. 90, 100, 123 S.Ct. 2148, 156 L.Ed.2d 84 (2003) (“[W]e have never questioned the sufficiency of circumstantial evidence in support of a criminal conviction.... ”).
The district court found that Marek knew about the IRS audit at the time he created the false invoices based on testimony by Flood. Flood, another vendor involved in creating false invoices, testified that the audit was widely known among the circle of friends that included Marek; that Marek was friendly with Stephen Mazzola; and that Stephen Mazzola had told Flood about the audit when he asked him to make false invoices. The district court inferred that Stephen Mazzola and likely others had also told Marek about the audit.
Contrary to Marek’s contention, the testimony supports the district court’s findings. When asked when he had heard about the IRS audit, Flood stated that he couldn’t recall but that “[i]t was all over town. I mean, Stephen [Mazzola] had said it himself.” The district court “credited] [Flood’s] testimony that the fact that the Mazzolas were being audited was widely known, if not in the community at large, as Mr. Flood testified, certainly it was known among the circle of friends of Stephen Mazzola of which Mr. Marek and [another vendor/defendant] were a part.”
The evidence shows that Stephen Maz-zola and Marek were close associates. Flood testified that he and Marek were not only business associates with Stephen Mazzola, but that Flood, Marek, and Stephen went on road trips to car shows together and spent time together on vacation with their families in Florida.
Flood additionally testified that Stephen Mazzola told Flood that the purpose of creating the false invoices was for an IRS audit, and that Marek had also agreed to help create invoices, supporting an inference that Marek was also told.
There was also testimony that Flood, Marek and others were seen preparing documents. Richard McDonough, a friend of Stephen Mazzola’s, testified that he came by Stephen Mazzola’s place of business one afternoon after business hours and saw Marek, Flood, and another co-conspirator who submitted false invoices sitting together with Stephen in Stephen’s office, each with “bills of sales or a book that you would write parts up for” in front of them. This itself suggested the likelihood of discussion about the purpose of the exercise.
At a minimum, the close association of Marek and Stephen Mazzola; the fact that Stephen Mazzola recruited Marek to prepare invoices; and Stephen Mazolla’s disclosures to Flood about the audit and the planned use of the invoices support an inference that Stephen Mazolla provided similar information to Marek. United States v. Azubike, 504 F.3d 30, 37 (1st Cir.2007)(holding that a jury could infer that the defendant knew that a briefcase contained narcotics because of the close association between the defendant and others who likely did know the contents of the briefcase); United States v. Ortiz, 966 F.2d 707, 712-14 (1st Cir.1992).
Appellant argues that “there are a myriad of other explanations” for why Marek would create false invoices, citing as an example a hypothetical effort to deceive the Mazzola company accountant about whether “someone like Joseph Mazzola had been stealing from the company.” But the district court found that such alternative explanations were not credible, and there is no basis for rejecting this finding. The absence of a credible alternative possible explanation for Marek’s creation of the false invoices also supports the district court’s guilty verdict.
Marek argues that “[Stephen] Mazzola had left Marek with the impression that Mazzola and his accountant were trying to determine which of the Mazzolas, who were having family problems, had pur-ehased which items. This is why, when Marek recreated the invoices in the manner described below, they were made in the name of the actual Mazzola who Ma-rek remembered selling the particular item to, rather than the name of either of the companies [Stoneham Towing, Inc. or Bodyworks] as would have been more logical had Marek known that they were to support an audit of the company.” (Appellant’s Br. at 2-3.) However, the premise of this argument is incorrect. While some of the invoices were made out in the name of an officer or employee, many were made out expressly to Bodyworks, and many others included reference to “Stoneham” in parentheses together with the name of an employee.
We conclude that the inference that Ma-rek knew about the audit was supported by the record. Thus, viewed in the light most favorable to the government and drawing all reasonable inferences in favor of the government, Marek’s conviction is supported by sufficient evidence to support a finding that Marek was guilty of the offense.
III.
Marek’s conviction is affirmed.
Affirmed.
. At trial Marek chose not to introduce any evidence. In his briefs on appeal, Marek refers to documents and other items that were not introduced into evidence. After his conviction and with the services of a new attorney, Marek moved for a new trial and to introduce new evidence under Federal Rule of Criminal Procedure 33(a). The district court denied this motion, and the motion is not at issue on this appeal. Under these circumstances we will not consider the affidavit Marek submitted to the district court or any other material submitted in support of the Rule 33(a) motion. We limit our review to the evidence in the record at trial.
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12528972-19762 | Stanley A. Bastian, United States District Judge
Before the Court is the United States' Motion to Partially Dismiss Case For Lack of Subject Matter Jurisdiction, ECF No. 10. A hearing on the motion was held on October 31, 2018, in Spokane, Washington. Plaintiff was represented by John M. Colvin.
The United States was represented by Rika Valdman.
BACKGROUND FACTS
Plaintiffs are suing the United States to recover federal income tax they maintain was erroneously, illegally, or improperly assessed and collected from them for the taxable year 2012. They are seeking recovery of $859,557 plus interest that has accrued and continues to accrue.
Plaintiffs timely filed their 2012 federal income tax return that sought a refund of $1,364,363. They asked that they be refunded $500,000 and that the remainder ($864,363) be applied to the 2013 taxes. The Internal Revenue Service (IRS) did not pay the requested refund. Rather, on March 31, 2014, it informed Plaintiffs that it was holding the refund until it finished reviewing their tax returns and asked Plaintiffs to provide more information. ECF No. 12-2. On May 7, 2014, Plaintiffs sent a letter to the IRS, providing additional information.
In November, 2014, the IRS sent a letter disallowing some of the refund. ECF No. 10-1. Specifically, the IRS indicated it was allowing only $839,999 of the claim, and disallowing the remainder because "we are unable able to verify the total amount of your withholding based on information provided by the Social Security Administration." Id. The amount of the disallowed claim was $524,364.
Plaintiffs replied by letter on December 5, 2014, indicating they were requesting a formal Appeal to the findings and also requesting an oral hearing. ECF No. 12-2. They also provided additional information regarding the requested refund.
Nothing happened until May, 2016 when the IRS sent another letter, this time stating it was disallowing the entire $1,364,363 refund claim. ECF No. 10-1. Specifically, the letter stated:
This letter is your notice that we've partially disallowed your claim for credit for the period shown above. We allowed only $.00 of the claim.
Id.
The letter also indicated that Plaintiffs were now going to owe interest and penalties. Although it did not explicitly say so in the letter, the determination of the $.00 allowance of the claim meant the IRS was also disallowing $839,999 of the refund claim that it has previously allowed as indicated in the November, 2014 letter. Because of this, Plaintiffs were now being assessed an outstanding liability of $859,557.84. As a result, the IRS took $335,871 from the 2014 refund and applied it to the 2012 tax liability since this amount had come from Plaintiffs' request to forward the remainder of the 2012 refund claim to the next year's tax bill.
In its Motion, the United States argues that while Plaintiffs' suit is timely with respect to their claim for $355,871, it is untimely with respect to the remaining amount. It maintains the claim for refund of the amount of $523,686 was not filed within two years after the IRS disallowed Plaintiffs' refund claim, as required by 26 U.S.C. § 6532. Therefore, the Court lacks subject matter jurisdiction to hear Plaintiffs' refund claim for $523,686, but has jurisdiction to hear the matter regarding Plaintiffs' refund claim for $355,871.
MOTION STANDARD
A jurisdictional challenge under Rule 12(b)(1) may be made either facial or factual. Safe Air for Everyone v. Meyer et al. , 373 F.3d 1035, 1039 (9th Cir. 2004). In a facial attack, the challenger asserts the allegations contained in the complaint are insufficient on their face to invoke federal jurisdiction. Id. In contrast, in a factual attack, the moving party disputes the truth of the allegations that, by themselves, would invoke federal jurisdiction. Id. When considering a motion to dismiss pursuant to Rule 12(b)(1), the district court is not restricted to the face of the pleadings and "may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction." McCarthy v. United States , 850 F.2d 558, 560 (9th Cir. 1988) ; Biotics Research Corp. v. Heckler , 710 F.2d 1375, 1379 (9th Cir. 1983) (consideration of material outside the pleadings did not convert a Rule 12(b)(1) motion into one for summary judgment). Thus, the Court may consider extrinsic evidence to the extent it aids in the resolution of this jurisdictional dispute.
SUBJECT MATTER JURISDICTION
To confer subject matter jurisdiction in an action against a sovereign, there must be: (1) "statutory authority vesting a district court with subject matter jurisdiction," and (2) "a waiver of sovereign immunity." Alvarado v. Table Mountain Rancheria , 509 F.3d 1008, 1016 (9th Cir. 2007).
28 U.S.C. § 1346(a)(1) confers the power of the federal courts to hear claims for recovery of taxes paid:
a) The district courts shall have original jurisdiction, concurrent with the United States Court of Federal Claims, of:
(1) Any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws.
It is well-settled the United States cannot be sued without its consent. United States v. Lee , 106 U.S. 196, 222, 1 S.Ct. 240, 27 L.Ed. 171 (1882) ; see also United States v. Mitchell , 463 U.S. 206, 212, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983) ("It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction.").
As the U.S. Supreme Court explained:
A waiver of the Federal Government's sovereign immunity must be unequivocally expressed in statutory text. Moreover, a waiver of the Government's sovereign immunity will be strictly construed, in terms of its scope, in favor of the sovereign.
Lane v. Pena , 518 U.S. 187, 192, 116 S.Ct. 2092, 135 L.Ed.2d 486 (1996) (citations omitted).
ANALYSIS
The United States maintains it has waived sovereign immunity only as to $335,871 of the claimed refund amount, relying on § 6532(a), which states:
a) Suits by taxpayers for refund.--
(1) General rule.--No suit or proceeding under section 7422(a) for the recovery of any internal revenue tax, penalty, or other sum, shall be begun before the expiration of 6 months from the date of filing the claim required under such section unless the Secretary renders a decision thereon within that time, nor after the expiration of 2 years from the date of mailing by certified mail or registered mail by the Secretary to the taxpayer of a notice of the disallowance of the part of the claim to which the suit or proceeding relates.
(2) Extension of time.--The 2-year period prescribed in paragraph (1) shall be extended for such period as may be agreed upon in writing between the taxpayer and the Secretary.
(3) Waiver of notice of disallowance.--If any person files a written waiver of the requirement that he be mailed a notice of disallowance, the 2-year period prescribed in paragraph (1) shall begin on the date such waiver is filed.
(4) Reconsideration after mailing of notice.--Any consideration, reconsideration, or action by the Secretary with respect to such claim following the mailing of a notice by certified mail or registered mail of disallowance shall not operate to extend the period within which suit may be begun.
If a provision setting forth a statute of limitations is jurisdictional, a litigant's failure to comply with the bar deprives a court of all authority to hear a case. United States v. Kwai Fun Wong , --- U.S. ----, 135 S.Ct. 1625, 1631, 191 L.Ed.2d 533 (2015). In such a case, a court must enforce the limitation even if the other party has waived any timeliness objection and must do so even if equitable considerations would support extending the prescribed time period. Id. Because the consequences are so drastic, the United States must clear a high bar to establish that a statute of limitations is jurisdictional. Id. at 1632. "[A]bsent such a clear statement, ... 'courts should treat the restriction as nonjurisdictional.' " Id. (citation omitted). "Congress must do something special, beyond setting an exception-free deadline, to tag a statute of limitations as jurisdictional and so prohibit a court from tolling it." Id.
In Volpicelli v United States , 777 F.3d 1042 (9th Cir. 2015), the Ninth Circuit held that 26 U.S.C. § 6532(c) was not jurisdictional. Id. at 1047. There, the plaintiff sued the United States for wrongfully seized $13,000 in cash from him when he was only 10 years old. Id. at 1043. The Circuit held the limitations period for filing wrongful levy suit against the IRS, which requires a taxpayer to file such suit within nine months of the levy, was not jurisdictional, and therefore was subject to equitable tolling. Id. at 1047. The Circuit read that section as not providing a clear statement that Congress intended this provision to be jurisdictional. Id. at 1044. It reasoned that section 6532(c) did not cast its filing deadline in "jurisdictional" terms any more than the statute at issue in Henderson did-a statute the U.S. Supreme Court held to be non-jurisdictional. Id.
It believed Congress signaled the non-jurisdictional nature of § 6532(c) by placing it in a subtitle of the Internal Revenue Code labeled "Procedure and Administration," while at the same time enacting a separate jurisdiction-conferring provision ( 28 U.S.C. § 1346(e) ) and placing that provision in a chapter titled "District Courts;
Jurisdiction." Id. It concluded that Congress' placement decision indicates that it viewed § 6532(c)'s limitations period as a mere "claim-processing rule" rather than a jurisdictional command. Id. The Circuit reasoned that even if § 6532(c)'s limitations period were a condition on the United States' waiver of sovereign immunity, that fact alone would not render it "jurisdictional" for purposes of deciding whether the Irwin presumption applies. Id. at 1045.
Notably, it declined to apply the reasoning set forth in United States v. Brockamp , 519 U.S. 347, 117 S.Ct. 849, 136 L.Ed.2d 818 (1997) to § 6532(c), finding this section did not share in the characteristics of § 6511. Id. at 1046. It noted the limitation was purely procedural and had no substantive impact on the amount of recovery. Id. It rejected the argument that Brockamp should apply to § 6532(c) merely because both sections were found in the Tax Code. Id. at 1047. Finally, the Ninth Circuit recognized that while other circuits have held that § 6532(c)'s limitations period is not subject to equitable tolling, it believed its own binding precedent mandated that it find § 6532(c) not jurisdictional. Id. at 1047, n.3.
Following the reasoning set forth in Volpicelli , the Court finds 26 U.S.C. § 6532(a) is not jurisdictional because the provision does not provide a clear statement that Congress intended this provision to be jurisdictional; see also Kwai Fun Wong , 135 S.Ct. at 1632 (instructing that courts should not conclude that a time bar is jurisdictional unless Congress provides a "clear statement" to that effect; in applying that clear statement rule, courts should keep in mind that most time bars, even if mandatory and emphatic, are nonjurisdictional; therefore, Congress must do something special to tag a statute of limitations as jurisdictional and so prohibit a court from tolling it).
First, Congress' separation of the filing deadline in § 6532(a) from the waiver of sovereign immunity found in 28 U.S.C. § 1346(a)(1), as well as the placement of § 6532 in the Tax Code under subtitle of the Internal Revenue Code labeled "Procedure and Administration, is a strong indication that the time bar is not jurisdictional. Second, the time limitation is purely procedural and has no substantive impact on the amount of recovery. It speaks only to a claim's timeliness and not to a court's power. Third, the recovery of a wrongfully withheld refund is akin to the traditional common law torts of conversion. Fourth, the deadline set forth in § 6532(a) is not cast in jurisdictional terms and the language/text used does not have any jurisdictional significance. Finally, the text does not define a federal court's jurisdiction over tort claims generally, does not address its authority to hear untimely suits, or in any way limit its usual equitable powers.
The next question, then, is whether Plaintiffs' claim before this Court for $859,557, plus interest, is timely. The answer is yes. Even with assistance from counsel, it is very confusing to the Court when exactly Plaintiffs' refund claims for the 2012 tax return were decided, and what amounts were covered by the first and second letters. The record suggests that the first time Plaintiffs were aware that the $839,999 refund claim, which had been accepted by the IRS as of November, 2014, was being disallowed was from the May, 2016 letter. Even then, the IRS did not explicitly notify Plaintiffs that this was the case. Instead, the IRS simply indicated to Plaintiffs that their entire claim, which presumably was for $1,364,363.00, was being disallowed.
When Plaintiffs received the letter in November, 2014, they were informed the IRS allowed $839,999.00 of their $1,364,363.00 refund. There would have been no reason to appeal this decision, except to appeal the decision to not allow the claim for $524,364, which Plaintiffs did. Fast forward to May, 2016, after being informed that their entire refund claim was being rejected, the amount of their refund claim being rejected for the 2012 tax return returned to the original amount of $1,364,363.00. By bringing suit in district court for only $839,999 plus interest charged, Plaintiffs are implicitly agreeing that the claim for $524,364 is time-barred. Because that amount was addressed by the November, 2014 letter, Plaintiffs had two years from the date of the letter to bring their claim to the district court for that amount.
In May, 2016, however, Plaintiffs were informed implicitly that they no longer were going to be receiving the $839,999 refund. Instead, they now owed interests and penalties. And the letter informed them that they had two years from the date of the letter to appeal this decision. It is this decision-the disallowal of the $839,999 and interest and penalties-that is the underlying basis for Plaintiffs' claims before this Court.
The United States attempts to manufacture a limit regarding Plaintiffs' claim by arguing that the Court only has jurisdiction over $335,871, which is the amount of the overpayment that had been credited to the 2014 taxable year but was taken away and credited to the 2012 tax liability. However, the only reason this amount was taken by the IRS, and not the $859,357 owed, was because there was an outstanding, yet unexplained credit of $523,686.45 on Plaintiff's account that apparently should not have been there. The United States' explanation is that the IRS did not immediately adjust the account transcript for the taxable year 2012 to reflect the disallowed refund amount. But if it had timely made the adjustment and Plaintiffs had no credits, then presumably it would have taken more than $335,871 from the 2014 taxable year to pay the outstanding 2012 tax. If that credit was properly adjusted pursuant to the November 2014 letter, that is, the credit was subtracted from Plaintiff's account, the logical conclusion would be that the IRS would have taken $859,557 from later tax returns to make up the difference for the now disallowed claim plus the interest charged. Under the United States' theory, Plaintiffs would have two years from the date of the letter to appeal this decision to the district court. The fact that there happened to be a credit on the account that was similar to (although not the same amount as) the 2014 disallowed claim, should not limit Plaintiffs' ability to appeal the decision of the IRS to disallow the $839,999 claim as set forth in the November, 2016 letter. The amount of Plaintiffs' claim before this Court should not be artificially limited due to the IRS's own accounting delays or errors.
Notably, the United States acknowledges the credit of $523,686 does not accurately reflect the $524,364 credit that was disallowed by the November, 2014 letter. ECF No. 10 at 5. ("Therefore, to the extent that Plaintiffs are seeking refund of any amount up to $524,364, including the $523,686 that is part of this refund suit, their claim is untimely and this Court has no subject matter jurisdiction over it."). There is no explanation in the record as to when, where, or why this amount appeared as a credit. Clearly, it does not match the disallowed refund claim of $524,364. This appears to be nothing more than an arbitrary number that the United States is now seeking to use to reduce Plaintiffs' claim before this Court.
As said before, Plaintiffs are not challenging the IRS's decision to disallow the refund of $524,364. Indeed, if they were, presumably in this lawsuit their requested relief would be $1,364,363, plus interest. And if that were the case, the Court would agree with the United States that Plaintiffs' claim for $524,364 would be untimely. But it is clear Plaintiffs are not bringing such a claim. Rather, they are challenging the IRS's decision to disallow $839,999 of the $1,364,363 refund claim-a decision to which they were notified of in May, 2016. Consequently, Plaintiffs' claim before the Court is timely.
Alternatively, even if the time limits for the $839,999 portion of the refund claim started to accrue on November, 2014, equitable considerations set forth above, including the fact that Plaintiffs were informed that $839,999 of the requested refund claim was not going to be allowed less than 6 months before the statute of limitations expired, require the tolling of the statute of limitations. As such, the Court has jurisdiction to hear the entire amount of Plaintiffs' refund claim under 26 U.S.C. § 6532(a).
Accordingly, IT IS HEREBY ORDERED:
1. Defendant's Motion to Partially Dismiss Case For Lack of Subject Matter Jurisdiction, ECF No. 10, is DENIED.
IT IS SO ORDERED. The Clerk of Court is directed to enter this Order and forward copies to counsel.
U.S.C. § 7422(a) provides:
(a) No suit prior to filing claim for refund.--No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary, according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.
Henderson ex rel. Henderson v. Shinseki , 562 U.S. 428, 131 S.Ct. 1197, 179 L.Ed.2d 159 (2011). In Henderson , the U.S. Supreme Court held the statute that permitted a veteran to appeal the Board of Veterans' Appeals denial of his claim to the United States Court of Appeals for Veterans Claims was not jurisdiction. Id. at 438, 131 S.Ct. 1197. The statute required that the notice of appeal must be filed within 120 days after the date when the Board's final decision is properly mailed. 38 U.S.C. § 7266(a). Id. at 431, 131 S.Ct. 1197.
The U.S. Supreme Court held that a veteran's failure to file a notice of appeal within the 120-day period did not have "jurisdictional" consequences, and thus, was subject to equitable toiling. Id. at 441, 131 S.Ct. 1197.
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