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Ruminations of a Toronto Tax Lawyer: Should there be a judicially-created due diligence defence on the reporting of significant foreign property?
Should there be a judicially-created due diligence defence on the reporting of significant foreign property?
The following was co-authored with Darcy MacPherson and is published on TaxnetPro. The article discusses whether a taxpayer can claim a due diligence defence for the failure to file Form T1135 - Foreign Income Verification Statement. We argue no.
Since 1997 subsection 233.3(3) of the Income Tax Act(“Act”) mandates that Canadian resident taxpayers are required to file Form T1135 - Foreign Income Verification Statement - with their income tax returns where such taxpayers own specified foreign property with a cost amount of 100,000 or more. Form T1135 is not required where the foreign property is personal property such as vacation property used by the taxpayer or personal property such as work of art, jewelry, rare books, stamps and coins. Failure to file Form T1135 will subject the taxpayer to a penalty of $25 a day up to a maximum of 100 days pursuant to subsection 162(7) of the Act. There is no indication on the language of the statute that there is a defence of due diligence available when a taxpayer is late in filing this form. Yet, in a recent case, Tax Court Judge Woods has clearly decided that the judiciary has the final say on the application of penalties.
In the view of the authors, there are problems with such an interpretation, on at least four levels. First, as a matter as interpretation of taxing statutes, it is said that the taxpayer is always free to order his or her affairs so as to avoid liability to tax. Thus, where a taxpayer does not do so, it lies ill in the mouth of the taxpayer to cry foul after litigation has commenced. Second, as a matter of stare decisis, the case does not address other cases that have confronted the issue. Third, as a factual matter, it is difficult to say how due diligence can be made on the facts of the particular case, or more generally. Fourth, there are legitimate reasons that explain why a strict interpretation – meaning that the due diligence defence is unavailable in the case of a deliberate non-filing of the form – is preferable, from a policy perspective.
 Although the penalty in subsection 162(7) is strict and Parliament has not provided for a due diligence defence, this Court has held that even strict penalties should not be applied if a taxpayer has taken all reasonable measures to comply with the legislation: Home Depot of Canada Inc. v. The Queen, 2009 TCC 281.
 It has been my view that the judge-made due diligence defence should be applied sparingly. However, this is an appropriate case in which it should be applied.
While Tax Court Judge Woods claims that the defence should be “applied sparingly”, there is little to distinguish the facts of this case from that of those of many others. For example, the Court says that it is “common knowledge in Canada” that a tax return can be filed late without negative consequences to the taxpayer if no tax is payable, by virtue of subsection 162(1) of the Act (para. 11). The T1135 form says that the form is be filed with one’s tax return (para. 12). To expect professional advice to be sought in these circumstances would not have been reasonable (para. 16). The logic of Her Honour seems to be that the imposition of the penalty is inequitable, and that this inequity should not be visited upon the taxpayer.
Since 1935, it has been a basic principle of English and Canadian tax law that a taxpayer may organize his or her affairs in a way that seeks to avoid the application of tax. See I.R.C. v. Duke of Westminster,  A.C. 1. From the point of view of the authors, the necessary corollary to this principle is that, if a taxpayer organizes his or her affairs in such a way that he or she is obligated by the rules to greater tax, or to make payments or other remittances to the government at a particular time, the taxpayer should be in no position to complain that had he or she organized his or her affairs in a different way, he or she would not have ben liable to these obligations.
This principle has been recognized by the drafters of the GAAR provision of the Act. According to the Explanatory Notes to the GAAR provision subsection 245(3), Parliament recognized the Duke of Westminster principle that tax planning with the objective of attracting the least possible tax is a legitimate and accepted part of Canadian tax law.
On the facts of Douglas, this would seem to suggest that since the taxpayer “made his bed” by not filing on time, he should not be allowed to avoid “lying in it”, that is, by paying the penalty.
Under the informal procedure, used in the Douglas case, the decision of the Tax Court Judge has no precedential value. Therefore, it is clear that the Douglas case is not precedent-setting for future cases. However, this is not the end of the issue of stare decisis. Just because the Douglas case has no precedential value in future case cannot be read to allow the judge in Douglas to ignore prior cases.
It is virtually beyond debate that stare decisis has two components. The first is horizontal stare decisis; the second is vertical stare decisis. In terms of vertical stare decisis, this is the basic rule that a lower court is bound to follow the decisions of any court that is directly above it in the judicial hierarchy. However, as far as the authors can tell, there are no higher court decisions that specifically contradict the holding in Douglas. Therefore, vertical stare decisis is not really at play here.
Horizontal stare decisis, on the other hand, is a critical component of this discussion. This element essentially holds that the Court as an institution should be relatively consistent in its application of the law. In other words, one member of a court should not lightly depart from a precedent established by another member of the same court. The authors have already written on this topic, in discussing the case of The Queen v. John H. Craig, a case with respect to which an appeal was heard by the Supreme Court of Canada on March 23, 2012. There is no need to repeat ourselves. Below, we discuss both some recent case law dealing with the application of subsection 162(7) of the Income Tax Act, and the case of Home Depot Canada, on which Tax Court Judge Woods relies in reaching her decision. In the view of the authors, the doctrine of stare decisis does not necessarily mean that there can be no change in the law. However, in the Douglas decision, Her Honour paid insufficient attention to stare decisis in focussing her attention on the Home Depot case.
"No penalty will be assessed where it appears there was confusion concerning obligations and it is the first time a penalty is considered."
The Applicant submitted that if there was confusion with respect to the rules, then the CRA should have been more lenient about penalties. At the very minimum, the CRA should have accepted that the Applicant's representative was interpreting the rules in good faith, relying on accurate and timely reports being made to the CRA by money managers. It wrote: "The conclusion was wrong, but that does not detract from the reasonableness of the belief that the forms did not have to be filed."
In my view, the Minister's delegate's reasons responded to the facts before him. He characterized the decision as a conscious decision by the Applicant's representative or the Applicant, one that was lacking due diligence rather than confusion. I find the reasoning draws a conclusion that was within the range of possible outcomes defensible on the facts. Moreover, since section 220(3.1) of the does not obligate the Minister to provide relief, the decision was clearly defensible in respect of the law as well as the facts.
Therefore, even though there was a specific program in place at the time to provide relief in appropriate circumstances, the Court indicated that the “confusion” on the part of the taxpayer was not attributable to a lack of clarity by the taxing authorities. Rather, it was due to a lack of diligence by the taxpayer in fulfilling its obligations.
It must be acknowledged that in Asper, the Court was engaged in a substantive review of the decision of an official (the “Minister’s delegate”) in an administrative-law context. Also, the Court was reviewing the decision on a standard of reasonableness. However, if the law demanded a due diligence defence on these facts, and the Minister’s delegate failed to even consider this issue, the authors would argue that the decision of the Minister’s delegate would have been unreasonable. Given the result of the case, therefore, the sole conclusion to be drawn is that the due diligence defence is not available on these facts. Therefore, given the similarity between the facts of this case and those presented in Douglas, if the due diligence defence was not available in Asper, there is little to distinguish Douglas and thus the same result should follow in the subsequent case.
The facts of Leclerc v. Canada, 2010 TCC 99 are even more similar to the Douglas case. In Leclerc, the taxpayer has an expensive condominium in France, and did not report this in two non-consecutive years (2003 and 2006). More accurately, because the taxpayer did not file his tax returns on time, the Forms T1135 for those years were also filed late. From his other tax returns, the government knew that the taxpayer had this property (para. 12). Though other factors were alleged to have contributed to his late filing, notably his studies and mental illness of his mother (see para. 9), Tax Court Judge Favreau upheld the imposition of the penalty. This is also despite the fact that the administrative program that would have provided relief to the taxpayer had been withdrawn earlier by the taxing authorities, without notice to the taxpayer, even though the Agency knew that the change would affect him (para. 11). As in Douglas, the total penalty was significantly higher than the total tax payable by the taxpayer for the years in issue (para. 13). Nonetheless, the penalty was found to be appropriate.
In the end, therefore, the courts that had considered this issue prior to the Douglas decision found that the due diligence defence (even if there were one) had no application on facts similar to those before Tax Court Judge Woods.
Interestingly, Tax Court Judge Woods does not even refers to either Asper or Leclerc. Instead, Her Honour chooses to rely on the case of Home Depot of Canada Inc. v. Canada, a decision of Tax Court Judge Miller. In this case, Deloitte Tax LLP was a company hired by the taxpayer to make its tax returns and other tax remittances, including the remittance of Goods and Services Tax collected pursuant to the Excise Tax Act, RSC 1985 c E15. The remittance was sent to the wrong address by Deloitte. The taxing authorities sought to impose a penalty for the lateness of the remittance.
The CRA may accept a due diligence defence in a situation where a person remits or pays an amount that is less than the amount actually owed where that amount was arrived at after having made an incorrect assumption based on genuine uncertainty regarding the application of the ETA. In addition, in a situation where a person is a recipient who fails to report and remit the tax on a self-assessment situation and this failure can be attributed to an incorrect assumption based on genuine uncertainty over the application of the ETA, a due diligence defence may be accepted by the CRA. Also, the CRA may accept a due diligence defence where a person believed on reasonable grounds in a non-existent fact situation, which if it had existed, would have made the person's actions or omission innocent; that is, the person relied on a reasonable but erroneous belief in a fact situation. In any case, for a person to be duly diligent it must be clearly evident that despite making an incorrect assumption, or having an erroneous belief in a fact situation, all reasonable care has been taken to the best of the person's ability in ensuring that the correct amount was remitted or paid, and the return filed, when required.
The CRA would not generally accept a due diligence defence where the correct amount was paid or remitted after the due date. In particular, where the CRA determines that a person has complied with the obligation to collect the correct amount as required but has failed to remit this amount when required, the person's due diligence defence would not be accepted. It is the CRA's position that a person who has failed to take reasonable care to ensure that the correct amount was paid or remitted by its due date, has not exercised due diligence.
In Home Depot, the taxing authorities themselves had produced guidelines indicating that when a late remittance occurred notwithstanding the due diligence of the taxpayer, the penalty for such a late remittance would not be imposed. These same guidelines continue on to explain what would be considered “due diligence” for the purposes of these guidelines, as well as what would generally not qualify. With all due respect to Her Honour, this is in sharp distinction to the facts of Douglas. There was no specific guidelines for a finding of due diligence mentioned in any of the cases involving the application of subsection 162(7). Furthermore, in Home Depot, there was a genuine attempt on the part of the taxpayer at issue to comply with the requirements of the relevant statute on time. In Douglas, the belief was not that he was making a genuine attempt to comply, but rather, the error was that the taxpayer believed that non-compliance would attract no negative consequences. The authors discuss this issue in greater detail in the section immediately below. For current purposes, however, it is sufficient to note the following. Home Depot arose under a different statute, with non-statutory guidance provided by governmental authorities (that the due diligence defence was potentially available, and the circumstances under which the defence was likely to be successfully invoked), and with a very different factual scenario (in that there was a genuine attempt by the taxpayer to comply with the statutory requirements). These differences make it difficult for the authors to see why the Home Depot case is more persuasive than is either Asper or Leclerc.
 In this case, Mr. Douglas was not cavalier about his income tax obligations. As far as the evidence reveals, he was diligent in his compliance efforts and he acted reasonably, and competently. It was not suggested by the respondent that there was information readily available to Mr. Douglas that would have alerted him to this problem.
However, with all due respect to Her Honour, the authors have great difficulty with this holding. With respect to the last sentence, the Act itself draws the distinction. The distinction was not “buried” in a regulation that could not be found without special skills, nor located in an administrative bulletin not easily accessed without professional assistance. The matter is evident on the face of the Act itself.
While it is true that the Form itself says that it is to be filed “with your tax return”, the Form is very short (two pages). Therefore, to fully explain the expectations of the taxing authorities in a variety of circumstances, including the particular scenario of a tax return where no tax would be payable could add significantly to the size and complexity of the form. Forms should not be more complex than necessary.
The essence of the claim of the taxpayer is not that the taxpayer attempted to comply with his obligations under Income Tax Act. On the contrary, in past years, the taxpayer had not submitted his tax documentation until well after the applicable deadline. This implies that the taxpayer knew what the deadline was, and thus knew what his obligations were. In the view of the authors, the taxpayer’s real complaint was that he was ill-informed as to the consequence of shirking his obligations. In past years, there had been no real negative consequence to the late filing. The taxpayer assumed that this treatment of his late filing would continue. It did not. Rather, the administrative indulgence previously granted in situations such as that involving Mr. Douglas was changed. This in and of itself is not sufficient to ground a remedy. Although taken from a different context (notably the law of promissory estoppel in the law of contracts), the case of John Burrows Ltd. v. Subsurface Surveys Ltd., per Justice Ritchie, for the Court, is instructive. The granting of an indulgence, even on multiple occasions, does not, in and of itself, change the legal relationship between the parties.
 The appellant made an honest mistake because he did not know the consequences of failing to file form T1135 by the due date. The penalty under subsection 162(7) of the Act was imposed correctly, and the due diligence defence is not applicable in this case.
 It is not so much being subject to the penalty under subsection 162(7) of the Act that poses the problem as the lack of statutory provisions setting out a defence that does not require you to use a program that was not designed to deal with a simple late filing of a form. That is obviously a matter for Parliament. The same observation could be made with respect to the quantum of the penalty; Parliament could consider providing relief to take into account cases similar to the appellant's where the penalty is disproportionate to the tax otherwise payable.
In the view of the authors, everyone (the Asper companies, Mr. Leclerc, Mr. Douglas, the judges involved and the taxing authorities) seems to accept that the penalty provided for under subsection 162(7) of the Act is meant to be strict. As Tax Court Judge Favreau points out in Leclerc, there are no problems of interpretation in the section (para. n). In the view of the authors, this is accurate. Each of the taxpayers involved sought relief from the consequences of the late filing. It is one thing for judges to point out to the legislature the potentially undesirable effects that a particular provision are having. In the view of the authors, it is quite another for the court to appropriate to itself the ability to countermand the directive of the legislature. There is undoubtedly a degree of statutory construction in this exercise. But, the Court acknowledges (i) the strict nature of the penalty and (ii) that Parliament could have provided for a due diligence defence and did not do so. Therefore, this is not construction of the statute; this is judicial alteration of its express, and therefore, ignorance of the will of the legislature. In the view of the authors, this cannot be countenanced.
(ii) $25 times the number of days, not exceeding 100, from the day on which the return was required to be filed to the day on which the return is filed.
Clearly, then, for a non-resident corporation, the penalty for the failure to file on time is determined by both (i) the amount of tax due and payable; and (ii) the lateness of the performance of the filing obligation. Why would this be so? The Income Tax Act clearly treats non-residents differently than it does residents of this country, both in terms of their substantive obligations to tax (in terms of for example the availability of deductions), and their reporting obligations.
When it comes to the latter, in the view of the authors, this is quite logical. With respect to residents and their property within Canada, information may be obtained from a variety of sources. Municipal tax records and provincial records with respect to land transfers (and other major purchases, such as motor vehicles) come to mind in this regard. Similar records for foreign jurisdictions are not as easily accessible by Canadian authorities, if they exist at all. Therefore, there must be a significant incentive for the major source of information with respect to the foreign assets to make full disclosure. The major source is the taxpayer him- or herself.
Given that in all three of the cases referred under subsection 162(7) were situations where no tax revenue was lost, are there other practical reasons why the penalty would need to be a possibility? The concept of “out of sight, out of mind” is one potential reason. By definition, the subsection is concerned with residents. Residents spend more than half their time in Canada. Yet, the property at issue is both high in value and elsewhere. Many people have a tendency not to focus attention on material that they do not use on a regular basis. It is unsurprising that the government decided to make reporting an annual requirement, regardless of the income produced by the property at issue. By regular reporting, “out of sight, out of mind” is less likely to occur. To make reporting truly regular in this sense, the need to report has to be independent of the income earned by the taxpayer, either from the foreign property or otherwise.
3. Duly Diligent in a Non-Filing?
As mentioned above, it is very difficult for the authors to accept the idea that a lack of action on the part of the taxpayer is a show of due diligence. As a general rule, diligence requires active participation in the activity concerned. In Soper v. Canada,  1 F.C. 124 (C.A.), Justice Robertson considered the use of the due diligence defence found subsection 227.1(3) of the Income Tax Act. The section deals with the liability of corporate directors for the making of remittances of source deductions from the wages of employees. In the case, a company, RBI, did not make its source deduction remittances. Soper was an experienced businessman. He claimed that there was a “conspiracy of silence” to avoid his learning of the fact that remittances were not being made (para. 58). The Court held that Soper was aware of financial difficulties for RBI. Therefore, this knowledge meant as a director, Soper was under an obligation to ask about whether remittances were being made. In other words, diligence required that the director not make an assumption in the face of cause for concern, but to take an active role in ensuring that the obligation is met.
It is true that parts of the decision in Soper were questioned in the case of Peoples Department Stores Inc. v. Wise,  3 SCR 461. Nonetheless, the principles referred to were not questioned. In fact, the main point of contention in the Supreme Court of Canada was whether there was a subjective component in the due diligence defence. The Federal Court of Appeal was of the view that there was a degree of subjectivity; the Supreme Court of Canada that the standard entirely objective under the duty of care for corporate directors (which used the same wording as the due diligence defence under subsection 227.1(3)). If anything, the lack of a subjective element makes the due diligence harder to use than provided for in the Federal Court of Appeal’s decision in Soper.
In the view of the authors, even to the extent that a due diligence defence should be read into subsection 162(7), the judicially created due diligence defence should be no less rigorous than its statutory counterpart within the same statutory framework. In other words, Mr. Soper could not rely on the due diligence defence because he was not active enough in light of what his knowledge. In the same way, Mr. Douglas knew that he had significant foreign property. In light of this knowledge, doing nothing with respect to reporting the significant foreign property to the government is not duly diligent on the part of Mr. Douglas.
In the end, the authors believe that it is problematic to imply a due diligence defence where the Court acknowledges that the intention of Parliament was to the contrary. Such an approach is in the view of the contrary to the prior case law that considers the imposition of penalties under subsection 162(7). Complete inaction by the taxpayer will rarely be duly diligent. This view is also consistent the approach take to the statutory due diligence defence within the Income Tax Act. Finally, the need for information from the taxpayer makes the imposition of the penalty a meaningful incentive for the taxpayer to be forthcoming about his or her significant foreign property. This serves a legitimate practical purpose, and the decision of Tax Judge Woods in Douglas undermines this purpose to an extent. Therefore, in the view of the authors, the decision in Douglas is highly questionable.
** Associate Professor, Faculty of Law, University of Manitoba, Winnipeg, Manitoba.
The cost amount is defined in subsection 248(1) as the cost based. It is not the fair market value of the asset. For new immigrants to Canada, the cost amount is equal to the fair market value of the property at time of entry into Canada.
 As will be seen in the case law section below, this is not in fact technically correct. Prior to the formation of the Tax Court of Canada, the Tax Appeal Board was the initial level of appeal for decisions of the various predecessors of what is now known as the Canada Revenue Agency. From the Tax Appeal Board, an appeal was available to what was then known as the Federal Court, Trial Division (now the Federal Court of Canada). Currently, an appeal lies from the Tax Court of Canada to the Federal Court of Appeal. Therefore, currently, there is no direct appeal from the Tax Court of Canada to the Federal Court of Canada. Nonetheless, due to this historical reality, the Federal Court is viewed in some quarters as being above the Tax Court of Canada. However, beyond this short explanation, the authors will not focus on this distinction.
 On this point, please see Sunita Doobay and Darcy L. MacPherson, “Craig and Stare Decisis” Canadian Tax Highlights, (a publication of the Canadian Tax Foundation) Volume 20, No. 2 (February, 2012), at 2-3 and Sunita Doobay and Darcy L. MacPherson, “Gunn & Craig – Hobbies, Farms and Stare Decisis” (TaxNetPro and The Tax Practitioners’ Forum, January 2012) at 1.

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An applicant for naturalization shall make and file with the Attorney General a sworn application in writing, signed by the applicant in the applicant's own handwriting if physically able to write, which application shall be on a form prescribed by the Attorney General and shall include averments of all facts which in the opinion of the Attorney General may be material to the applicant's naturalization, and required to be proved under this subchapter. In the case of an applicant subject to a requirement of continuous residence under section 1427(a) or 1430(a) of this title, the application for naturalization may be filed up to 3 months before the date the applicant would first otherwise meet such continuous residence requirement.
No person shall file a valid application for naturalization unless he shall have attained the age of eighteen years. An application for naturalization by an alien shall contain an averment of lawful admission for permanent residence.
Hearings under section 1447(a) of this title on applications for naturalization shall be held at regular intervals specified by the Attorney General.
Except as provided in subsection (e), an application for naturalization shall be filed in the office of the Attorney General.
An alien over 18 years of age who is residing in the United States pursuant to a lawful admission for permanent residence may file with the Attorney General a declaration of intention to become a citizen of the United States. Such a declaration shall be filed in duplicate and in a form prescribed by the Attorney General and shall be accompanied by an application prescribed and approved by the Attorney General. Nothing in this subsection shall be construed as requiring any such alien to make and file a declaration of intention as a condition precedent to filing an application for naturalization nor shall any such declaration of intention be regarded as conferring or having conferred upon any such alien United States citizenship or nationality or the right to United States citizenship or nationality, nor shall such declaration be regarded as evidence of such alien's lawful admission for permanent residence in any proceeding, action, or matter arising under this chapter or any other Act.
This chapter, referred to in subsec. (f), was in the original a reference to this Act, meaning act June 27, 1952, ch. 477, 66 Stat. 163 , known as the Immigration and Nationality Act, which is classified principally to this chapter. For complete classification of this Act to the Code, see Short Title note set out under section 1101 of this title and Tables.
1991-Subsec. (a). Pub. L. 102–232, §305(m)(7), struck out ", in duplicate," after "file with the Attorney General".
Pub. L. 102–232, §305(e), made technical correction to directory language of Pub. L. 101–649, §407(d)(12)(B). See 1990 Amendment note below.
Subsecs. (f), (g). Pub. L. 102–232, §305(d), redesignated subsec. (g) as (f).
1990-Pub. L. 101–649, §407(d)(12)(A), substituted "Application for naturalization; declaration of intention" for "Petition for naturalization" in section catchline.
Subsec. (a). Pub. L. 101–649, §407(c)(15), (d)(12)(B), as amended by Pub. L. 102–232, §305(e), substituted "with the Attorney General" for "in the office of the clerk of a naturalization court", "under this subchapter" for "upon the hearing of such petition", and "application" for "petition" wherever appearing.
Pub. L. 101–649, §401(b), inserted at end "In the case of an applicant subject to a requirement of continuous residence under section 1427(a) or 1430(a) of this title, the application for naturalization may be filed up to 3 months before the date the applicant would first otherwise meet such continuous residence requirement."
Subsec. (b). Pub. L. 101–649, §407(c)(15), (d)(12)(C), substituted "application" for "petition" in first sentence, and struck out "(1)" before "he shall have attained", "and (2) he shall have first filed an application therefor at an office of the Service in the form and manner prescribed by the Attorney General" after "eighteen years", and "petition for" after "An application for".
Subsecs. (c) to (e). Pub. L. 101–649, §407(d)(12)(F), added subsecs. (c) to (e) and struck out former subsecs. (c) to (e) which related to time to file, substitute filing place, and investigation into reasons for substitute filing place, respectively.
Subsecs. (f), (g). Pub. L. 101–649, §407(c)(15), (d)(12)(D), (E), redesignated subsec. (f) as (g), substituted "An alien over 18 years of age who is residing in the United States pursuant to a lawful admission for permanent residence may file with the Attorney General a declaration of intention to become a citizen of the United States. Such a declaration shall be filed in duplicate and in a form prescribed by the Attorney General and shall be accompanied by an application prescribed and approved by the Attorney General." for "Any alien over eighteen years of age who is residing in the United States pursuant to a lawful admission for permanent residence may, upon an application prescribed, filed with, and approved by the Service, make and file in duplicate in the office of the clerk of court, regardless of the alien's place of residence in the United States, a signed declaration of intention to become a citizen of the United States, in such form as the Attorney General shall prescribe.", and substituted "an application" for "a petition" in last sentence.
1981-Subsec. (a). Pub. L. 97–116 struck out "and duly verified by two witnesses," after "able to write,".
Amendment by section 305(d), (e) of Pub. L. 102–232 effective as if included in the enactment of the Immigration Act of 1990, Pub. L. 101–649, see section 310(1) of Pub. L. 102–232, set out as a note under section 1101 of this title.
Pub. L. 102–232, title III, §305(m), Dec. 12, 1991, 105 Stat. 1750 , provided that the amendment made by section 305(m) is effective as if included in section 407(d) of the Immigration Act of 1990, Pub. L. 101–649.


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Comments Off on 017-8-055 – Orion Marine Construction Inc. v. Colonna’s Ship Yard Inc.
017-8-044 – Fixture Specialists Inc. v. MGT Construction Mgmt. Inc.
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017-8-036 – Harlan v. Norfolk Festevents Ltd.
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It is astounding how twisted the Left’s thinking has become. I’m not even sure that they are aware how distorted their view of the world is.
This morning Barry Lynn (Executive Director, Americans United for Separation of Church & State ) was on C-Span with Jay Sekulow (Amer. Ctr. for Law & Justice, Chief Counsel). The topic under discussion was the nomination of Judge John Roberts for the Supreme Court. Barry Lynn spent the entire morning distorting the history of the Supreme Court and of John Roberts.
His opening salvo was stating the possibility that a Justice John Roberts might vote to reverse the past thirty-five years of Supreme Court Rulings (actually Barry, with any luck the figure is closer to forty-five years).
People of my (and Reverend Lynn’s) generation all went to schools in which there was not only moments of silence, but actual teacher led prayers in classes.
Where are all of the people who were irrevocably damaged by this process? Where are all of the little Jewish or Muslim or Buddhist kids whose lives were destroyed by this? How many of my fellow classmates were so traumatized by being forced to recite or listen to the rest of us recite prayers that they had nervous breakdowns or changed their religious affiliation. How many little atheists suffered “brain-lock” and became failures in life due to our school sanctioned prayers? I’m not talking about some nebulous “possible” damage or feelings of being outcast or an outsider, I’m asking for genuine verifiable damage.
Show me the horrors of majority rules in these cases. Who was hurt? Names, case numbers, documentation please. These are the kinds of questions Liberals hate. The ACLU and the PFAW run and hide from these questions. The problem is, they can’t provide any of that. That is the problem with most of the Left’s fear mongering; it’s all based on anecdotal non-evidence. One hears a lot about “someone I know of,” or “they reported,” or “I heard,” or my personal favorite, “studies have shown,” but one never hears any real substantiation of these charges.
I am an American, I was born and raised here, and this culture is a Judeo-Christian, Western European, culture. I don’t care about your “hurt feelings,” I only care about actual verifiable damage. I don’t wish to hurt anyone, but injured feelings are not actual injuries. Feeling “bad” is not justification for the oppression of the Majority by a Minority of Citizens. If your feelings get hurt, grow up and get over it. The world is full of disappointment, get used to it.
Err...what war is that Barry? You mean he’s trying to take away our 2nd Amendment rights? Oh yeah, that’s you Liberals doing that. You mean he’s trying to prevent us from freely expressing our religion...No actually that’s you Liberals too. Hmm...Maybe he’s going to take away our 5th Amendment right protecting our private property from seizure for public use without due process of law. Oops, Liberal justices again. Hey Barry, it looks to me like you guys are the ones bent on taking away our basic liberties. It has been the Left that has been at war with our Bill of Rights, not the Right.
Uh...Barry, weren’t those “decades of settled church-state law” put into place by “scrap[ping]” a century and a half “of settled church-state law?” Your hypocrisy knows no bounds it seems. There was no “separation of church and state” until Justice Hugo Black suddenly decided that the Danbury Letter was equivalent in law to the constitution in Everson v. Board of Education 1947.
Not to be repetitive Barry, but there is no wall of separation between church and state to be dismantled. Oh, and Heaven forefend that the majority ever get its way on matters of state, whether religious or otherwise...Err...isn’t this nation a Democratic Republic? Doesn’t that mean that the majority does rule?
Sorry Barry, “judicial demeanor and...technical quality” are the only issues that should be at stake. “An understanding and concern for religious minorities and fundamental civil and human rights” are not requirements for a Supreme Court Justice.
I submit that an understanding and concern for the meaning and integrity of our Constitution, and an ability to render verdict in a dispassionate and objective manner are requirements for a Supreme Court Justice.
Conservatives and most Republicans define judicial activism as the act of creating law from the bench. It usually entails an “activist judge” putting his own desire for what he believes the law should say in place of a judicious attempt at interpretation of what the law actually says. It is legislation by judicial fiat.
Liberals and Democrats define judicial activism as any attempt be a judge to reverse the excesses of activist (by Conservative definition) judges and to reinstate the law as it was written. Thus any attempt to overturn Roe v. Wade or Griswald v. Connecticut, or Everson v. Board of Education, or Dred Scott v. Sanford, is seen by Liberals as judicial activism. So tell me Barry, was Lincoln wrong? Do you believe that Dred Scott v. Sanford still be in effect? Do you believe in slavery?
We understand Reverend, it’s hard to be consistent and Liberal. It’s also hard to be honest and Liberal isn’t it?


Ambrose v. E. F. Hutton Co.
Action on account; summary judgment. Dooly Superior Court. Before Judge Gregory.
Roberts, Roberts Rainwater, Guy Velpoe Roberts, for appellant.
Hutton Friend, William D. Friend, for appellee.
Appellee sued the appellant for a balance due on a commodities account. Appellant denied owing the account. Appellee made a motion for summary judgment attaching to the motion an affidavit of the vice-president and resident manager. The affidavit had attached thereto "point out" sheets showing an indebtedness of $1,716.81. Appellant filed an affidavit objecting to the statements in the affidavit referring to "computer entries," "proper credits given," "no lawful set offs" and a denial of indebtedness. The trial court granted appellee's motion for summary judgment and ordered that appellee recover from appellant the sum of $1,716.81 plus costs of court.
1. The statement of account attached to appellee's affidavit was admissible as a business record pursuant to Code Ann. § 38-711: Smith v. Bank of the South, 141 Ga. App. 114 ( 232 S.E.2d 629); Vaughn Co. v. Saul, 143 Ga. App. 74, 79 ( 237 S.E.2d 622).
2. The affidavit of the appellee pierced the general denial of the appellant and the appellant by his affidavit having failed to set forth specific facts which show there is a genuine issue, the grant of summary judgment was proper. Continental Carriers v. Seaboard C. L. R. Co., 129 Ga. App. 889 ( 201 S.E.2d 826); Young v. Climatrol Southeast Dist. Corp., 141 Ga. App. 235 ( 233 S.E.2d 54).
Judgment affirmed. Bell, C. J., and Shulman, J., concur.
ARGUED APRIL 10, 1978 — DECIDED JUNE 23, 1978.


text:
Diffractive waveplate technology presents an opportunity for designing arrays of all types of optical components. We present here different architectures of arrays of waveplate lenses and vector vortex waveplates. Due to the continuous nature of diffractive waveplate coatings and the high spatial resolution of the technology, the sizes of array elements can span from micrometers to tens of millimeters. Both fixed and electrically switchable arrays are discussed. Arrays of diffractive waveplates present new challenges and opportunities for digital light polarization holography for applications in polarizer-free displays, smart windows, optical communications, beam shaping, and other photonics technologies.
S. R. Nersisyan, N. V. Tabiryan, D. M. Steeves, and B. R. Kimball, “The promise of diffractive waveplates,” Opt. Photon. News 21(3), 40–45 (2010).
N. V. Tabiryan, D. E. Roberts, E. Serabyn, D. M. Steeves, and B. R. Kimball, “Superlens in the skies: liquid-crystal-polymer technology for telescopes,” SPIE Newsroom, February5, 2016, doi:10.1117/2.1201601.006317.
N. V. Tabiryan, S. V. Serak, S. R. Nersisyan, D. E. Roberts, B. Y. Zeldovich, D. M. Steeves, and B. R. Kimball, “Broadband waveplate lenses,” Opt. Express 24, 7091–7102 (2016).
N. V. Tabiryan, S. V. Serak, D. E. Roberts, D. M. Steeves, and B. R. Kimball, “Thin waveplate lenses of switchable focal length—new generation in optics,” Opt. Express 23, 25783 (2015).
A. M. W. Tam, F. Fan, H. S. Chen, D. Tao, V. G. Chigrinov, H. S. Kwok, and Y. S. Lin, “Continuous nanoscale patterned photoalignment for thin film Pancharatnam-Berry phase diffractive lens,” SID Symp. Dig. Tech. Pap. 46, 8 (2015).
K. Gao, H. H. Cheng, A. Bhowmik, C. McGinty, and P. Bos, “Nonmechanical zoom lens based on the Pancharatnam phase effect,” Appl. Opt. 55, 1145–1150 (2016).
K. L. Woon, M. O’Neil, P. Vlachos, M. P. Aldred, and S. M. Kelly, “Highly birefringent nematic and chiral nematic liquid crystals,” Liq. Cryst. 32, 1191–1194 (2005).
L. Nikolova and P. S. Ramanujam, Polarization Holography (Cambridge University, 2009), pp. 1–239.
S. R. Nersisyan, N. V. Tabiryan, D. M. Steeves, and B. R. Kimball, “Optical axis gratings in liquid crystals and their use for polarization insensitive optical switching,” J. Nonlinear Opt. Phys. Mater. 18, 1–47 (2009).
L. De Sio, D. Roberts, Z. Liao, S. Nersisyan, O. Uskova, L. Wickboldt, N. Tabiryan, D. Steeves, and B. Kimball, “Digital polarization holography advancing geometrical phase optics,” Opt. Express 24, 18297–18306 (2016).
S. R. Nersisyan, N. V. Tabiryan, D. Mawet, and E. Serabyn, “Improving vector vortex waveplates for high contrast coronagraphy,” Opt. Express 21, 8205–8213 (2013).
J. Hodgkinson and Q. H. Wu, Birefringent Thin Films and Polarizing Elements (World Scientific, 1997), pp. 1–379.
S. R. Nersisyan, N. V. Tabiryan, L. Hoke, D. M. Steeves, and B. Kimball, “Polarization insensitive imaging through polarization gratings,” Opt. Express 17, 1817–1830 (2009).
C. Oh and M. J. Escuti, “Achromatic diffraction from polarization gratings with high efficiency,” Opt. Lett. 33, 2287–2289 (2008).
S. R. Nersisyan, N. V. Tabiryan, D. M. Steeves, and B. R. Kimball, “Characterization of optically imprinted polarization gratings,” Appl. Opt. 48, 4062–4067 (2009).
F. M. Dickey and S. C. Holswade, eds., Laser Beam Shaping: Theory and Techniques (Marcel Dekker, 2000).
J. Kobashi, H. Yoshida, and M. Ozaki, “Planar optics with patterned chiral liquid crystals,” Nat. Photonics 10, 389–392 (2016).
S. V. Serak, U. Hrozhyk, J. Hwang, N. V. Tabiryan, D. Steeves, and B. R. Kimball, “High contrast switching of transmission due to electro-hydrodynamic effect in stacked thin systems of liquid crystals,” Appl. Opt. 55, 8506–8512 (2016).
J. P. Vernon, S. V. Serak, R. S. Hakobyan, A. K. Aleksanyan, V. P. Tondiglia, T. J. White, T. J. Bunning, and N. V. Tabiryan, “Recording polarization gratings with a standing spiral wave,” Appl. Phys. Lett. 103, 201101 (2013).
J. P. Vernon, S. V. Serak, R. S. Hakobyan, V. P. Tondiglia, T. J. White, N. V. Tabiryan, and T. J. Bunning, “Generation of light scattering states in cholesteric liquid crystals by optically controlled boundary conditions,” Crystals 3, 234–247 (2013).
S. Chandrasekhar, Liquid Crystals (Cambridge University, 1977).
V. V. Kotlyar, A. A. Almazov, S. N. Khonina, and V. A. Soifer, “Generation of phase singularity through diffracting a plane or Gaussian beam by a spiral phase plate,” J. Opt. Soc. Am. A 22, 849–861 (2005).
S. R. Nersisyan, B. R. Kimball, D. M. Steeves, and N. V. Tabiryan, “Technology of diffractive waveplates for polarizer-free displays,” in IMID/IDMC/Asia Display Digest (2010), pp. 277–278.
N. Tabiryan, D. Roberts, T. J. Bunning, D. Steeves, and B. Kimball, “4G optics: new technology extends limits to the extremes,” Photon. Spectra46–50 (2017).
N. Tabiryan, H. Xianyu, D. Roberts, Z. Liao, D. Steeves, B. Kimball, E. Serabyn, and D. Mawet, “4G optics for communications and astronomy,” in IEEE Aerospace Conference, Big Sky, Montana, 2016, pp. 1–8.
K. L. Marshall, D. Saulnier, H. Xianyu, S. Serak, and N. Tabiryan, “Liquid crystal near-IR laser beam shapers employing photoaddressable alignment layers for high-peak-power applications,” Proc. SPIE 8828, 88280N (2013).
Fig. 1. (a) Molecular orientation pattern of a square grid of round lenslets. (b) 8 × 8 LCP WLA between crossed polarizers. (c) Focusing pattern of derivative array. (d) Diffraction efficiency spectra for the template (1) and derivative (2) arrays.
Fig. 2. Central and peripheral regions of lenslets in (a, c) template and (b, d) derivative LCP WLAs under polarizing microscope; note doubling of spatial frequency in the derivative lenslet. (e, f) Distribution of anisotropy axis in a lenslet measured by Mueller matrix spectropolarimeter.
Fig. 3. Effects of WLA on a light beam. (a) Schematic depiction of focusing and defocusing of light of orthogonal circular polarization handedness by a WL. (b)–(g) Photos of an argon-ion laser beam of different polarization states (b)–(d) in the focal plane of lenslets and (e)–(g) 200 mm away from the array. The beam is (b, e) right-hand circular polarized, (c, f) left-hand circular polarized, and (d, g) linearly polarized.
Fig. 4. (a, b) Brick wall architecture of LCP WLA; (b) shows the texture between crossed polarizers. (c) Focusing pattern on a screen for He–Cd laser beam. (d) Diffraction efficiency spectra for the template (1) and derivative (2) arrays.
Fig. 5. (a, b) Fish-scale architecture of LCP WLA; (b) shows the texture between crossed polarizers. (c) Focusing pattern on a screen for white light. (d) Diffraction efficiency spectra for the template (1) and derivative (2) arrays.
Fig. 6. Anisotropy axis distribution in transition areas of lens arrays. (a) Transition area between square lenslets. (b) Fish-scale texture. (c) Magnified view of different transition areas in square array along with the waveplate axis distribution image obtained by Mueller matrix spectropolarimeter.
Fig. 7. (a, b) Photo of a square 8 × 8 LC WLA element between crossed polarizers: (a) the center and (b) the edge of a lenslet viewed with a polarizing microscope. (c)–(e) Imaging through a LC WLA: (c) photo of an eyechart without WLA; (d) photo taken with the LC WLA in front of camera; (e) photo taken with the LC WLA in front of camera during application of voltage, 10 V at 1 kHz. (f) Attenuation as a function of voltage measured for argon-ion laser beam of 514 nm wavelength.
Fig. 8. Switching of expanded and collimated argon-ion laser beams of different wavelengths using two LC WLAs: (1, 2) 457 nm; (3, 4) 488 nm; (5, 6) 514 nm. Scattering state corresponds to zero voltage. The transparent state corresponds to 10 V at 1 kHz. The screen was at 1 m distance from WLAs system.
Fig. 9. (a)–(c) Effect of the system of two NLC WLAs on a laser beam. (a) High transmission obtained for 10 V at 1 kHz on both cells. (b) Light diffusion and (c) compensation of diffusion by NLC WLAs of opposite and same signs, respectively, with no voltage. (d)–(h) Effect of WLA on visibility of an eye chart: photograph of eye chart (d) without any WLA; (e) imaged through a single NLC WLA; imaged through a system of two WLAs of (f) opposite and (g) the same signs; and (h) imaged through two WLAs at application of voltage on both arrays, 10 V at 1 kHz.
Fig. 10. (a) Photo of template LCP WLA between polarizers and (b) diffraction spectra of derivative NLC WLA at different voltages applied to the NLC cell.
Fig. 11. (a, b) Eye chart viewed through paired NLC WLAs (a) without voltage and (b) with voltage applied (10 V at 1 kHz). (c)–(f) Photos of a laser beam (532 nm) on a screen (c, d) at 0.2 m and (e, f) 1 m away from the NLC WLA pair in (c, e) with voltage and (d, f) without voltage applied.
Fig. 12. (a) Schematic depiction of a lenslet in a CLC WLA focusing a reflected LHCP beam (red lines). RHCP beam is transmitted unchanged (blue lines). (b) Photo of a CLC WLA. (c) CLC lenslet structure under microscope. (d, e) Reflected green laser beam is (d) focused and (e) defocused when incident from the opposite sides of the CLC WLA.
Fig. 13. (a, a’) Circular polarized beam propagated through a triangular aperture is reflected from a uniform planar CLC structure (no transverse modulation). (b, b’) Beam reflected from the concave and convex sides of a CLC WL. (c, c’) Beam reflected from the edges of concave and convex sides to separate the focused/defocused images from the undiffracted beam. The reflection coefficients are approximately 80%.
Fig. 14. Images of transmitted and reflected beams taken simultaneously for a CLC WL: (a) transmitted mode; (b) bandgap/reflective mode, convex side of CLC WL; (c) bandgap/reflective mode, opposite/concave side of CLC WL.
Fig. 15. Wavefronts of (a) transmitted and (b) reflected beams measured with a Shack–Hartmann wavefront sensor show less than 1 wave variation in the transmitted beam and 3 waves modulation (at 543 nm) in the reflected beam.
Fig. 16. Molecular orientation patterns (top), phase maps of a beam at the output of the VVW (middle), and far-field point spread functions (bottom) for a single and 3 × 3 arrays of VVW of q = 1 / 2 of continuous and discontinuous structure.
Fig. 17. Electrically switchable NLC array of VVWs of q = 8 at different states. (a) Diffractive state in the absence of voltage. (b) Clear state with application of voltage (10 V at 1 kHz). (c) Far field image with illumination by white light. (d) Output color of an individual VVW pixel.
Fig. 18. (a) WLA recorded on a polycarbonate substrate. (b, c) VVW array on a curved polycarbonate lens viewed (b) without polarizers and (c) between polarizers. (d, e) Switchable WLA with polycarbonate substrates (d) in voltage on and (e) voltage off states.
Fig. 19. Imaging through a system of WLAs. (a) WLAs of opposite sign with a half-wave retarder in between maintain light collimation independent of polarization. (b) In the absence of half-wave retarder, orthogonal circular polarization components of input unpolarized light are focused/defocused with double the effective focal length of an individual lens. (c) Imaging through uncompensated state and (d) compensated state.
Fig. 20. Photo of a Gaussian beam shaped into “BEAM Co.” in the far field, and the related anisotropy axis pattern produced in a LCP beam shaper.

matches: V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V. V.


text: Ancient Laws of Ireland, eds. Hancock, W. Neilson (vols. I, II) O'Mahony, Thaddeus, Rev. (vols. I, II, III, IV) O'Donovan, John, MRIA (1809-1861) (vols. I, II, III, V) O'Curry, Eugene (1794-1862) (vols. III, V) Hennessy, William Maunsell, MRIA (1828-1889) (vol. IV) Richey, Alexander George (vols. III, IV) Atkinson, Robert, MRIA, (1839-1908) (vol. V), v. I: Senchus Mór: introduction to Senchus Mór and Athgabhail, or, Law of Distress, as contained in the Harleian manuscripts; v. II: Senchus Mór pt.2: Law of Distress, laws of hostage-sureties, fosterage, saer-stock tenure, daer-stock tenure, and of social connexions; v. III: Senchus Mór (conclusion) being the Corus Bescna, or Customary law, and the Book of Aicill; v. IV: Din Techtugad and certain other selected Brehon Law tracts; v. V: Uraicecht Becc and certain other selected Brehon Law tracts; v. VI: Glossary to volumes I-V (Dublin: Thom; Longman) 1865-1901.


General principles of utility restriction are set forth in Chapter 800 of the MPEP. These principles are also applicable to design restriction practice with the exception of those differences set forth in this section.
Unlike a utility patent application, which can contain plural claims directed to plural inventions, a design patent application may only have a single claim. See 37 CFR 1.153(a). More than one embodiment of a design may be protected by a single claim. However, such embodiments may be presented only if they involve a single inventive concept according to the nonstatutory double patenting practice for designs. See In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959). Therefore, the examiner will require restriction in each design application which contains more than one patentably distinct design.
Restriction will be required under 35 U.S.C. 121 if a design patent application claims multiple designs that are patentably distinct from each other. The issue of whether a search and examination of an entire application can be made without serious burden to an examiner (as noted in MPEP § 803) is not applicable to design applications when determining whether a restriction requirement should be made. Clear admission on the record by the applicant that the embodiments are not patentably distinct will not overcome a requirement for restriction if the embodiments do not meet the following two requirements: (A) the embodiments have overall appearances with basically the same design characteristics; and (B) the differences between the embodiments are insufficient to patentably distinguish one design from the other. Regarding the second requirement, without evidence, such an admission is merely a conclusory statement. If multiple designs are held to be patentably indistinct and can be covered by a single claim, any rejection of one over prior art will apply equally to all. See Ex parte Appeal No. 315-40, 152 USPQ 71 (Bd. App. 1965).
Design inventions are independent if there is no apparent relationship between two or more disparate articles disclosed in the drawings; for example, a pair of eyeglasses and a door handle; a bicycle and a camera; an automobile and a bathtub. Also note examples in MPEP § 806.06. Restriction in such cases is clearly proper. This situation may be rarely presented since design patent applications are seldom filed containing disclosures of independent articles.
In determining patentable distinctness, the examiner must compare the overall appearances of the multiple designs. Each design must be considered as a whole, i.e., the elements of the design are not considered individually as they may be when establishing a prima facie case of obviousness under 35 U.S.C. 103. Designs are not distinct inventions if: (A) the multiple designs have overall appearances with basically the same design characteristics; and (B) the differences between the multiple designs are insufficient to patentably distinguish one design from the other. Differences may be considered insufficient to patentably distinguish when they are de minimis or obvious to a designer of ordinary skill in the art. Therefore, in determining the question of patentable distinctness under 35 U.S.C. 121 in a design application, a search of the prior art may be necessary. Both of the above considerations are important. Differences between the designs may prove to be obvious in view of the prior art, but if the overall appearances are not basically the same, the designs remain patentably distinct. Embodiments claiming different scopes of the same design can be patentably distinct using the two-step analysis above. When an application illustrates a component, which is a subcombination of another embodiment, the subcombination often has a distinct overall appearance and a restriction should be required. When an application illustrates only a portion of the design, which is the subject of another embodiment, that portion often has a distinct overall appearance and a restriction should be required.
It is permissible to illustrate more than one embodiment of a design invention in a single application. However, such embodiments may be presented only if they involve a single inventive concept. Two designs involve a single inventive concept when the two designs are patentably indistinct according to the standard of nonstatutory double patenting. See In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959). Embodiments that are patentably distinct over one another do not constitute a single inventive concept and thus may not be included in the same design application. See In re Platner, 155 USPQ 222 (Comm’r Pat. 1967). The disclosure of plural embodiments does not require or justify more than a single claim, which claim must be in the formal terms stated in MPEP § 1503.01, subsection III. The specification should make clear that multiple embodiments are disclosed and should particularize the differences between the embodiments. If the disclosure of any embodiment relies on the disclosure of another embodiment for completeness to satisfy the requirements of 35 U.S.C. 112(a) (or for applications filed prior to September 16, 2012, 35 U.S.C. 112, first paragraph), the differences between the embodiments must be identified either in the figure descriptions or by way of a descriptive statement in the specification of the application as filed. For example, the second embodiment of a cabinet discloses a single view showing only the difference in the front door of the cabinet of the first embodiment; the figure description should state that this view "is a second embodiment of Figure 1, the only difference being the configuration of the door, it being understood that all other surfaces are the same as those of the first embodiment." This type of statement in the description is understood to incorporate the disclosure of the first embodiment to complete the disclosure of the second embodiment. However, in the absence of such a statement in the specification of an application as filed, the disclosure of one embodiment will normally not be permitted to provide antecedent basis for any written or visual amendment to the disclosure of other embodiments.
The obviousness standard under 35 U.S.C. 103 must be applied in determining whether multiple embodiments may be retained in a single application. See MPEP § 1504.03. That is, it must first be determined whether the embodiments have overall appearances that are basically the same as each other. If the appearances of the embodiments are considered to be basically the same, then it must be determined whether the differences are either minor between the embodiments and not a patentable distinction, or obvious to a designer of ordinary skill in view of the analogous prior art. If embodiments meet both of the above criteria they may be retained in a single application. If embodiments do not meet either one of the above criteria, restriction is required. It should be noted, that if the embodiments do not have overall appearances that are basically the same, restriction must be required since their appearances are patentably distinct. In such case it does not matter for restriction purposes, if the differences between the appearances of the embodiments are shown to be obvious in view of analogous prior art.
Form paragraph 15.27.02 or 15.27.03, if appropriate, may be used to notify applicant that restriction is not required because the embodiments are not patentably distinct.
Multiple embodiments of a single inventive concept may be included in the same design application only if they are patentably indistinct. See In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959). Embodiments that are patentably distinct from one another do not constitute a single inventive concept and thus may not be included in the same design application. See In re Platner, 155 USPQ 222 (Comm’r Pat. 1967).
The above identified embodiments are considered by the examiner to present overall appearances that are basically the same. Furthermore, the differences between the appearances of the embodiments are considered minor and patentably indistinct, or are shown to be obvious in view of analogous prior art cited. Accordingly, they are deemed to be obvious variations and are being retained and examined in the same application. Any rejection of one embodiment over prior art will apply equally to all other embodiments. See Ex parte Appeal No. 315-40, 152 USPQ 71 (Bd. App. 1965). No argument asserting patentability based on the differences between the embodiments will be considered once the embodiments have been determined to comprise a single inventive concept. Failure of applicant to traverse this determination in reply to this action will be considered an admission of lack of patentable distinction between the above identified embodiments.
In bracket 3, add embodiments as necessary.
The above identified embodiments are considered by the examiner to present overall appearances that are basically the same. Furthermore, the differences between the appearances of the embodiments are considered minor and patentably indistinct, or are shown to be obvious in view of analogous prior art cited. Accordingly, they are deemed to be obvious variations and are being retained and examined in the same application.
The following form paragraphs may be used in a restriction requirement. Examiners must include a brief explanation of the differences between the appearances of the embodiments that render them patentably distinct.
Multiple embodiments of a single inventive concept may be included in the same design application only if they are patentably indistinct. See In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959). Embodiments that are patentably distinct from one another do not constitute a single inventive concept and thus may not be included in the same design application. See In re Platner, 155 USPQ 222 (Comm’r Pat. 1967). The  create(s) patentably distinct designs.
Because of the differences identified, the embodiments are considered to either have overall appearances that are not basically the same, or if they are basically the same, the differences are not minor and patentably indistinct or are not shown to be obvious in view of analogous prior art.
Restriction is required under 35 U.S.C. 121 to one of the above identified patentably distinct groups of designs.
A reply to this requirement must include an election of a single group for prosecution on the merits, even if this requirement is traversed, 37 CFR 1.143. Any reply that does not include election of a single group will be held nonresponsive. Applicant is also requested to direct cancellation of all drawing figures and the corresponding descriptions which are directed to the nonelected groups.
Should applicant traverse this requirement on the grounds that the groups are not patentably distinct, applicant should present evidence or identify such evidence now of record showing the groups to be obvious variations of one another. If the groups are determined not to be patentably distinct and they remain in this application, any rejection of one group over prior art will apply equally to all other embodiments. See Ex parte Appeal No. 315-40, 152 USPQ 71 (Bd. App. 1965). No argument asserting patentability based on the differences between the groups will be considered once the groups have been determined to comprise a single inventive concept.
In view of the above requirement, action on the merits is deferred pending compliance with the requirement in accordance with Ex parte Heckman, 135 USPQ 229 (P.O. Super. Exam. 1960).
1. In bracket 3, add embodiments as necessary.
2. In bracket 4, insert an explanation of the difference(s) between the embodiments.
3. In bracket 7, add groups as necessary.
The embodiments disclosed within each group have overall appearances that are basically the same. Furthermore, the differences between them are considered minor and patentably indistinct, or are shown to be obvious in view analogous prior art cited. Therefore, they are considered by the examiner to be obvious variations of one another within the group. These embodiments thus comprise a single inventive concept and are grouped together. However, the  patentably distinguishes each group from the other(s).
Because of the differences identified, the embodiments of each Group are considered to either have overall appearances that are not basically the same, or if they are basically the same, the differences are not minor and patentably indistinct or are not shown to be obvious in view of analogous prior art.
Restriction is required under 35 U.S.C. 121 to one of the patentably distinct groups of the designs.
Should applicant traverse this requirement on the grounds that the groups are not patentably distinct, applicant should present evidence or identify such evidence now of record showing the groups to be obvious variations of one another. If the groups are determined not to be patentably distinct and they remain in this application, any rejection of one group over prior art will apply equally to all other groups. See Ex parte Appeal No. 315-40, 152 USPQ 71 (Bd. App. 1965). No argument asserting patentability based on the differences between the groups will be considered once the groups have been determined to comprise a single inventive concept.
2. In bracket 6, add groups as necessary.
3. In bracket 7, insert an explanation of the difference(s) between the groups.
Multiple embodiments of a single inventive concept may be included in the same design application only if they are patentably indistinct. See In re Rubinfield, 123 USPQ 210 (CCPA 1959). Embodiments that are patentably distinct from one another do not constitute a single inventive concept and thus may not be included in the same design application. See In re Platner, 155 USPQ 222 (Comm’r Pat. 1967). The  create(s) patentably distinct designs. See In re Platner, 155 USPQ 222 (Comm’r Pat. 1967).
Because of the differences identified, the embodiments of each Group are considered to either have overall appearances that are not basically the same, or, if they are basically the same, the differences are not minor and patentably indistinct or are not shown to be obvious in view of analogous prior art.
Restriction is required under 35 U.S.C. 121 to one of the patentably distinct groups of designs.
During a telephone discussion with  on , a provisional election was made  traverse to prosecute the design(s) of group . Affirmation of this election should be made by applicant in replying to this Office action.
Group  is withdrawn from further consideration by the examiner, 37 CFR 1.142(b), as being for a nonelected design(s).
4. In bracket 10, insert --with-- or --without--.
The embodiments disclosed within each group have overall appearances that are basically the same. Furthermore, the differences between them are considered minor and patentably indistinct, or are shown to be obvious in view of analogous prior art cited. Therefore, they are considered by the examiner to be obvious variations of one another within the group. These embodiments thus comprise a single inventive concept and are grouped together. However, the  patentably distinguishes each group from the other(s).
3. In bracket 7, insert an explanation of the differences between the groups.
4. In bracket 10, insert --with--or --without--.
Applicant is advised that the reply to be complete must include a provisional election of one of the enumerated designs, even though the requirement may be traversed (37 CFR 1.143 ).
A design claim covers the entire design as a whole. Furthermore, claim protection to the whole design does not extend to any individual part or portion thereof. See KeyStone Retaining Wall Systems Inc. v. Westrock Inc., 997 F.2d 1444, 27 USPQ2d 1297 (Fed. Cir. 1993). Embodiments directed to a design as a whole (combination) as well as individual parts or portions (subcombination) thereof may not be included in a single application if the appearances are patentably distinct. In such instance restriction would be required since patentably distinct combination/subcombination subject matter must be supported by separate claims. However, a design claim may cover embodiments of different scope directed to the same inventive concept within a single application if the designs are not patentably distinct. See In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959). The court held that the inventive concept of a design is not limited to its embodiment in a single specific article, and as long as the various embodiments are not patentably distinct, they may be protected by a single claim. See Blumcraft of Pittsburgh v. Ladd, 144 USPQ 562 (D.D.C. 1965). The determination that the design of the subcombination/element is patentably indistinct from the combination means that the designs are not patentable over each other (novel and unobvious) and may remain in the same application. In contrast, if the embodiments are patentably distinct, the designs are considered to be separate inventions which require separate claims, and restriction to one or the other is necessary. See In re Kelly, 200 USPQ 560 (Comm’r Pat. 1978); Ex parte Sanford, 1914 C.D. 69, 204 O.G. 1346 (Comm’r Pat. 1914); Ex parte Heckman, 135 USPQ 229 (P.O. Super. Exam. 1960). In determining whether embodiments of different scope can be retained in a single application they must have overall appearances that are basically the same, and the difference in scope must be minor and not a patentable distinction. That is, they must, by themselves, be considered obvious over each other under 35 U.S.C. 103 without the aid of analogous prior art. The reason for this, as stated above, is because claim protection to the whole design does not extend to any individual part or portion thereof. Therefore, if the difference in scope between embodiments has an impact on the overall appearance that distinguishes one over the other, they must be restricted since the difference in scope creates patentably distinct designs that must be supported by separate claims. Form paragraph 15.27.04 or 15.27.05, if appropriate, may be used to notify applicant that restriction is not required because the embodiments required are not patentably distinct.
Designs which involve a change in scope may be included in the same design application only if they are patentably indistinct. However, design patent protection does not extend to patentably distinct segregable parts of a design. Ex parte Sanford, 1914 C.D. 69, 204 OG 1346 (Comm’r Pat. 1914); Blumcraft of Pittsburgh v. Ladd, 238 F. Supp. 648, 144 USPQ 562 (D.D.C. 1965).
The above identified embodiments are considered by the examiner to present overall appearances that are basically the same. Furthermore, the difference in scope between embodiments is considered minor and patentably indistinct. Accordingly, they are deemed to be obvious variations and are being retained and examined in the same application. Any rejection of one embodiment over prior art will apply equally to all other embodiments. Ex parte Appeal No. 315-40, 152 USPQ 71 (Bd. App. 1965). No argument asserting patentability based on the differences between the embodiments will be considered once the embodiments have been determined to comprise a single inventive concept. Failure of applicant to traverse this determination in reply to this Office action will be considered an admission of lack of patentable distinction between the embodiments.
The above identified embodiments are considered by the examiner to present overall appearances that are basically the same. Furthermore, the difference in scope between embodiments is considered minor and patentably indistinct. Accordingly, they are deemed to be obvious variations and are being retained and examined in the same application.
Form paragraph 15.29 or 15.30, if appropriate, may be used to make a restriction requirement.
Embodiment 1 – Figs.  drawn to a .
Embodiment 2 – Figs.  drawn to a .
The designs as grouped are distinct from each other since under the law a design patent covers only the invention disclosed as an entirety, and does not extend to patentably distinct segregable parts; the only way to protect such segregable parts is to apply for separate patents. See Ex parte Sanford, 1914 CD 69, 204 OG 1346 (Comm’r Pat. 1914); and Blumcraft of Pittsburgh v. Ladd, 238 F. Supp. 648, 144 USPQ 562 (D.D.C. 1965). It is further noted that patentably distinct combination/subcombination subject matter must be supported by separate claims, whereas only a single claim is permissible in a design patent application. See In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959).
Because the designs are distinct for the reason(s) given above, and have acquired separate status in the art, restriction for examination purposes as indicated is proper (35 U.S.C. 121 ).
A reply to this requirement must include an election of a single group for prosecution on the merits, even if this requirement is traversed. 37 CFR 1.143. Any reply that does not include an election of a single group will be held nonresponsive. Applicant is also requested to direct cancellation of all drawing figures and the corresponding descriptions which are directed to the nonelected groups.
Should applicant traverse this requirement on the grounds that the groups are not patentably distinct, applicant should present evidence or identify such evidence now of record showing the groups to be obvious variations of one another. If the groups are determined not to be patentably distinct and they remain in this application, any rejection of one group over the prior art will apply equally to all other groups. See Ex parte Appeal No. 315-40, 152 USPQ 71 (Bd. App. 1965). No argument asserting patentability based on the differences between the groups will be considered once the groups have been determined to comprise a single inventive concept.
1. In bracket 5, add embodiments as necessary.
2. In bracket 8, add groups as necessary.
3. In bracket 9, add comments, if necessary.
During a telephone discussion with  on , a provisional election was made  traverse to prosecute the invention of Group . Affirmation of this election should be made by applicant in replying to this Office action.
Group  withdrawn from further consideration by the examiner, 37 CFR 1.142(b) as being for a nonelected invention.
3. In bracket 9, insert additional comments, if necessary.
Form paragraph 15.27.06 or 15.27.07, if appropriate, may be used to notify applicant that restriction is not required because the designs are not patentably distinct.
Embodiment 1 - Figs.  drawn to a .
Embodiment 2 - Figs.  drawn to a .
Embodiments  involve a difference in appearance. Multiple embodiments of a single inventive concept may be included in the same design application only if they are patentably indistinct. In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959). Embodiments that are patentably distinct from one another do not constitute a single inventive concept and thus may not be included in the same design application. In re Platner, 155 USPQ 222 (Comm’r Pat. 1967).
Embodiment(s)  directed to the combination(s) in relation to Embodiment(s)  directed to the subcombination(s)/element(s). Designs which involve a change in scope may be included in the same design application only if they are patentably indistinct. However, design protection does not extend to patentably distinct segregable parts of a design. Ex parte Sanford, 1914 C.D. 69, 204 OG 1346 (Comm’r Pat. 1914); Blumcraft of Pittsburgh v. Ladd, 238 F. Supp. 648, 144 USPQ 562 (D.D.C.1965).
The above identified embodiments are considered by the examiner to present overall appearances that are basically the same. Furthermore, the differences between embodiments are considered minor and patentably indistinct, or are shown to be obvious in view of analogous prior art cited. Accordingly, they are deemed to be obvious variations and are being retained and examined in the same application. Any rejection of one embodiment over prior art will apply equally to all other embodiments. Ex parte Appeal No. 315-40, 152 USPQ 71 (Bd. App. 1965). No argument asserting patentability based on the differences between the embodiments will be considered once the embodiments have been determined to comprise a single inventive concept. Failure of applicant to traverse this determination in reply to this action will be considered an admission of lack of patentable distinction between the embodiments.
2. Insert an explanation of the differences between the designs in the explanations of the embodiments; for example, Figs. 1 – 5 directed to a cup and saucer; Figs. 6 – 9 directed to a saucer.
3. It is possible and proper that embodiments may be listed in both explanatory paragraphs.
Embodiment(s)  involve a difference in appearance. Multiple embodiments of a single inventive concept may be included in the same design application only if they are patentably indistinct. In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959). Embodiments that are patentably distinct from one another do not constitute a single inventive concept and thus may not be included in the same design application. In re Platner, 155 USPQ 222 (Comm’r Pat. 1967).
The above identified embodiments are considered by the examiner to present overall appearances that are basically the same. Furthermore, the differences between embodiments are considered minor and patentably indistinct, or are shown to be obvious in view of analogous prior art cited. Accordingly, they were deemed to be obvious variations and are being retained and examined in the same application. Accordingly, they were deemed to comprise a single inventive concept and have been examined together.
The following form paragraphs may be used in a restriction requirement.
Examiners must include a brief explanation of the differences between embodiments that render them patentably distinct.
Embodiment 1: Figs.  drawn to a .
Embodiment 2: Figs.  drawn to a .
Group(s)  involve a difference in appearance. Multiple embodiments of a single inventive concept may be included in the same design application only if they are patentably indistinct. In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959). Embodiments that are patentably distinct from one another do not constitute a single inventive concept and thus may not be included in the same design application. In re Platner, 155 USPQ 222 (Comm’r Pat. 1967). The  creates patentably distinct designs.
Group(s)  directed to the combination(s) in relation to Group(s)  directed to the subcombination(s)/element(s). The designs as grouped are distinct from each other since under the law a design patent covers only the design disclosed as an entirety, and does not extend to patentably distinct segregable parts; the only way to protect such segregable parts is to apply for separate patents. Ex parte Sanford, 1914 C.D. 69, 204 OG 1346 (Comm’r Pat. 1914); Blumcraft of Pittsburgh v. Ladd, 238 F. Supp. 648, 144 USPQ 562 (D.D.C.1965). It is further noted that combination/subcombination subject matter, if patentably distinct, must be supported by separate claims, whereas only a single claim is permissible in a design patent application. In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959).
In any groups that include multiple embodiments, the embodiments are considered by the examiner to be obvious variations of one another within the group and, therefore, patentably indistinct. These embodiments thus comprise a single inventive concept and are grouped together.
A reply to this requirement must include an election of a single group for prosecution on the merits even if this requirement is traversed. 37 CFR 1.143. Any reply that does not include an election of a single group will be held nonresponsive. Applicant is also requested to direct cancellation of all drawing figures and the corresponding descriptions which are directed to the nonelected groups.
Should applicant traverse this requirement on the grounds that the groups are not patentably distinct, applicant should present evidence or identify such evidence now of record showing the groups to be obvious variations of one another. If the groups are determined not to be patentably distinct and they remain in this application, any rejection of one group over prior art will apply equally to all other groups. Ex parte Appeal No. 315-40, 152 USPQ 71 (Bd. App. 1965). No argument asserting patentability based on the differences between the groups will be considered once the groups have been determined to comprise a single inventive concept.
2. In bracket 8, add embodiments as necessary.
3. Insert an explanation of the differences between the designs in the explanations of the embodiments; for example, Figs. 1 – 5 directed to a cup and saucer; Figs. 6 – 9 directed to a saucer.
4. It is possible and proper that embodiments may be listed in both explanatory paragraphs.
5. In bracket 10, insert an explanation of the differences between the designs.
Group(s)  directed to the combination(s) in relation to Group(s)  directed to the subcombination(s)/element(s). The designs as grouped are distinct from each other since under the law a design patent covers only the design disclosed as an entirety, and does not extend to patentably distinct segregable parts; the only way to protect such segregable parts is to apply for separate patents. Ex parte Sanford, 1914 C.D. 69, 204 OG 1346 (Comm’r Pat. 1914); Blumcraft of Pittsburg v. Ladd, 238 F. Supp. 648, 144 USPQ 562 (D.D.C.1965). It is further noted that combination/subcombination subject matter, if patentably distinct, must be supported by separate claims, whereas only a single claim is permissible in a design patent application. In re Rubinfield, 270 F.2d 391, 123 USPQ 210 (CCPA 1959).
Group  is withdrawn from further consideration by the examiner, 37 CFR 1.142(b), as being for a nonelected invention.
6. In bracket 15, insert --with-- or --without--.
The common embodiment is included in more than a single group as it is patentably indistinct from the other embodiment(s) in those groups and to give applicant the broadest possible choices in his or her election. If the common embodiment is elected in this application, then applicant is advised that the common embodiment should not be included in any continuing application to avoid a rejection on the ground of double patenting under 35 U.S.C. 171 in the new application.
The following form paragraphs may be used to notify applicant that the nonelected invention(s) are withdrawn from consideration.
Group  withdrawn from further consideration by the examiner, 37 CFR 1.142(b), as being for a nonelected design, the requirement having been traversed in the reply filed on .
The restriction requirement maintained in this application is or has been made final. Applicant must cancel Group  directed to the design(s) nonelected with traverse in the reply filed on , or take other timely appropriate action (37 CFR 1.144 ).
Group  withdrawn from further consideration by the examiner, 37 CFR 1.142(b), as being for the nonelected design. Election was made without traverse in the reply filed on .
In view of the fact that this application is in condition for allowance except for the presence of Group  directed to a design or designs nonelected without traverse in the reply filed on , and without the right to petition, such Group(s) have been canceled.
If a response to a restriction requirement includes an election with traverse on the grounds that the groups are not patentably distinct, applicant must present evidence or identify such evidence of record showing the groups to be obvious variations of one another. Traversal of a restriction requirement alone without an explanation in support thereof will be treated as an election without traverse. See MPEP § 818.01(c) and form paragraph 8.25.02.
A traversal of a restriction requirement based on there being no serious burden to an examiner to search and examine an entire application (as noted in MPEP § 803) is not applicable to design patent applications. The fact that the embodiments may be searched together cannot preclude a requirement for restriction if their appearances are considered patentably distinct, since patentably distinct embodiments cannot be supported by a single formal design claim. Also, clear admission on the record by the applicant, on its own, that the embodiments are not patentably distinct (as noted in MPEP § 809.02(a)) will not overcome a requirement for restriction if the embodiments do not have overall appearances that are basically the same as each other.
When a traversal specifically points out alleged errors in a restriction, examiners must reevaluate the requirement in view of these remarks. If the restriction requirement is to be maintained, it must be repeated and made final in the next Office action and the arguments answered. If the application is otherwise in condition for allowance, except for the presence of a non-elected invention, the examiner should contact applicant and advise the applicant of the options with regard to any pending claims withdrawn from consideration. Alternatively, applicant may be notified using form paragraph 8.03. See MPEP § 821.01.


North Carolina personal injury law is complex. Not only do plaintiffs have to deal with the laws of negligence (premises liability, motor vehicle, medical malpractice) you have to deal with HIPPA, Medicare, Medicaid, as well as the state and federal laws dealing with health insurance Subrogation, herein "Subrogation." Subrogation, in essence is when a health insurance company demands repayment for monies they spent if you injuries were caused by the negligence of a third party. There are many issues that could and have previously been discussed when talking about Subrogation including the difference between federal and state laws, the different types of insurance policies, etc. The scope of this article deals just with the liability and responsibility of lawyers when dealing with Subrogation claims from health insurance carriers. This is exceedingly important since the action of the lawyer effects the net result to the client.
North Carolina courts are split on determining whether and attorney is liable to an ERISA plan administrator. Generally, an attorney is not liable to a plan administrator for funds that the attorney disperses to a client from recovery or a settlement, unless the attorney acts in bad faith or negligently. However, a plan administrator may attempt to bring a claim against an attorney for declaratory relief of funds received from a third party tortfeasor. In addition to seeking declaratory relief, a plan administrator may seek compensatory damages through claims of conversion and/ or tortious interference with a contract against an attorney.
In Barnhill, the Plan administrator (Plaintiff) brought action against a plan participant (insured) who was injured in an automobile collision, the third party tortfeasors, and the attorney and law firm (Bain Defendants) who settled the personal injury claim for the plan participant. Barnhill Contracting Co. v. Oxendine, 105 F. Supp. 3d 542 (E.D.N.C. 2015). The Plaintiff sought a declaratory judgment regarding its reimbursement rights, tortious interference with contract and conversion. The Bain Defendants moved to dismiss for failure to state a claim. Id. at 544.
The insured was injured in an automobile collision. Id. at 545. The Plaintiff expended specifically identified funds in the amount of $69,117.31 in medical benefits on behalf of the insured. Id. The Plaintiff sent several notices to the Bain Defendants to provide notice that the administrator was entitled to subrogation. Id. at 546. Despite receiving notice, the Bain Defendants and the insured settled the claim against the third party tortfeasor for $284,594 without giving notice to the Plaintiff. Id.
29 USCA § 1132(a)(3) in its pertinent part allows a claim for equitable relief against an attorney holding settlement funds subject to an equitable lien of an ERISA plan. Id. at 547. The Bain Defendants argued that the claim for declaratory relief under ERISA should be dismissed because they were not bound by the plan’s terms and that Plaintiff has not alleged any allegations that the Bain defendants acted in bad faith or negligently in dispersing the funds. Id. at 546. The Bain Defendants urged the court to follow the decisions in T.A. Loving Co. and Great-W. Life, but the court declined to follow those two cases. Id. The court referenced Sereboff, where that court determined that where funds are specifically identifiable and within the possession of a defendant attorney, the attorney will be liable for equitable relief. Id. at 547. The Sereboff decision also established that an equitable claim can be against a contingency fee held by an attorney. Id. at 548. The Bain Defendant’s argued that state law should be followed which prohibits subrogation. Id. at 549. However, the court rejected the Bain Defendant’s arguments and found that ERISA federal law preempts and that the Plaintiff stated a claim for equitable relief under ERISA. Id. at 550.
The court dismissed the Plaintiff’s state law claim of tortious interference with a contract because the Plaintiff did not establish all the necessary elements of the claim. Id. In order to assert a claim of tortious interference with a contract against an attorney, the Plaintiff must establish all of the following elements: (1) a valid contract between a plaintiff and third person which confers upon the plaintiff a contractual right against a third person, (2) defendant knows of the contract, (3) the defendant intentionally induces the third person not to perform the contract, (4) and in doing so without justification (5) results in actual damage to the plaintiff. Id.
The court found that the Plaintiff alleged sufficient facts to state a claim of conversion against the Bain Defendants. Id. at 551. The court defined conversion as, “an authorized assumption and exercise of the right of ownership over goods or personnel chattels belonging to another, to the alteration of their condition or the exclusion of an owner’s rights.” Id. The court noted how this definition of conversion is consistently used throughout North Carolina courts. Id.
In Great- W. Life & Annuity, a life insurance plan administrator (Plaintiff) brought an action against a plan participant (insured) and the insured’s attorney and law firm (Jackson Defendants) alleging ERISA claims, tortious interference with a contract and conversion. Great-W. Life & Annuity Ins. Co. v. Bullock, 202 F. Supp. 2d 461 (E.D.N.C. 2002). The Jackson Defendants moved to dismiss the claims for failure to state a claim. Id.
The insured was involved in a vehicle collision. Id. at 462. As a result of the injuries sustained in the collision, the insured received $40,000 worth of medical benefits from the Plaintiff. Id. The insured recovered $150,000 pursuant to a settlement agreement with the third party who caused the injuries. Id. Although the Jackson Defendants were aware of the Plaintiff’s rights to recover from the settlement, they failed to reimburse and dispersed the proceeds. Id. Plaintiff argued that the court should follow Greenwood, a Tennessee case, where the Middle District of Tennessee found that an attorney was liable for his actions of contravention of an ERISA regulated plan, where the attorney had knowledge of the plan, yet counseled his client to lie to the plan’s administrator to avoid having to pay the subrogation funds. Id. at 463. The court failed to follow Greenwood because the Plaintiff in this case unlike Greenwood did not allege attorney misconduct. Id. The court further opined that although under 29 USC § 1132(a)(3) (2000), ERISA grants a right to sue for violations of its provisions, it is not specific as to who can be held liable for such violations. Id. at 464. The court noted that the Supreme Court has instructed lower courts to develop “federal common law of rights and obligations under ERISA regulated plans.” Id.
In following the Supreme Court’s instructions, federal courts, including the Fourth Circuit, have consistently drawn from and sanctioned the use of the forum state’s law, if that law is compatible with ERISA’s policies. Id. Thus, the court stated that only a party to an ERISA regulated plan can be held liable under its statutory provisions. Id. The court further stated that only when an attorney signs a plan or agrees to abide by a plans provisions can the attorney be sued under ERISA. Id. The court noted how North Carolina courts are hesitant to hold attorneys liable for actions that impact non-client third parties because the third parties are not in privity with the attorney’s employment contract. Id. The Plaintiff urged the court to expand attorney liability and to apply the Code of Professional Responsibility to find liability of the Jackson Defendants. Id. at 464. The court rejected the Plaintiff’s argument and stated that a breach of the Code of Professional Responsibility does not in itself form a basis of civil liability. Id. at 464-465. Ultimately, the court dismissed the Plaintiff’s claim for ERISA, conversion and tortious interference with a contract with prejudice. Id. at 466-467.
In T.A. Loving Co., a plan administrator and fiduciary of medical benefit plan (plaintiff) brought an action against a plan participant (insured) and the insured’s attorney and law firm (Adams Defendants) for reimbursement of medical benefits under ERISA. T.A. Loving Co. v. Denton, 723 F. Supp. 2d 837 (E.D.N.C. 2010). The Plaintiff sought equitable relief in the form of constructive trust or equitable lien against proceeds from the insured’s proceeds from a settlement for a personal injury claim. Id. The Adams Defendants moved for summary judgment. Id.
The insured was involved in a vehicle collision and as a result received $48,264.48 in medical benefits from the Plaintiff. Id. The insured received a settlement in the amount of $100,000. Id. at 839. The Adams Defendants deposited the settlement into a trust account and after receiving a release of all claims from the insured, the Adams Defendants retained one third of the settlement pursuant to a contingency fee agreement and dispersed the remaining funds to the insured. Id. The Adams Defendants warned the insured that the funds might be subject to a claim from an insurer. Id. The Plaintiff’s motion for summary judgment against the insured was granted. Id. at 840. The Plaintiff also sought to recover the contingency fee from the Adams Defendants. Id. The court noted the rule established in Great-W. Life Ins., which states in its pertinent part that an attorney may liable under 29 USC § 1132(a)(3) only where the attorney is a party to the plan, the attorney agrees to abide by the plans provisions, or the attorney’s wrong-doing or intentional effort enables the beneficiary to avoid plan provisions. Id. The court further opined that an attorney’s knowledge that a client is a party to a subrogation agreement does not give rise to a claim against an attorney under ERISA. Id. at 841. Accordingly, the court granted the Adam Defendants motion for summary judgment because the plaintiff did not allege that the Adam Defendants were a party or signatory to the Plan, otherwise agreed to disperse funds in accordance with the plan or wrongfully enabled the insured to avoid the Plaintiff’s claim. Id. at 843.