Busy contractors focused on day-to-day issues and future opportunities sometimes put other matters off to the extent they miss contractual deadlines. The recent decision of the Armed Services Board of Contract Appeals (ASBCA) in Black Bear Construction Company, ASBCA No. 61181 (November 14, 2017) serves as a reminder of the potentially high cost of excessive procrastination.
The matter involved an appeal by Black Bear Construction Company (Black Bear) of a contracting officer's denial of a claim seeking $462,160.00 for settlement costs due to the government’s termination for convenience of its contract for runway improvement construction in Afghanistan. Black Bear claimed the costs sought were incurred between its receiving a notice to proceed and the government’s terminating the contract for convenience. The government filed a motion for summary judgment based on the fact that Black Bear waited more than one year to file its settlement proposal as required by the contract.
The parties did not dispute that the contract incorporated by reference Federal Acquisition Regulation (FAR) clause 52.249-2, TERMINATION FOR CONVENIENCE OF THE GOVERNMENT (FIXED-PRICE) (APR 2012)-ALTERNATE I. That clause provides in pertinent part: “After termination, the Contractor shall submit a final termination settlement proposal to the Contracting Officer . . . promptly, but not later than I year from the effective date of termination, unless extended in writing by the Contracting Officer upon written request of the Contractor within this I-year period.” Also undisputed was the time line: after the government terminated the contract for its convenience on August 12, 2012, Black Bear waited until March 25, 2017 before submitting its termination settlement claim to the contracting officer. The record contained no evidence that Black Bear had requested an extension of time from the contracting officer.
The Board first confirmed its jurisdiction over the appeal, explaining that the Court of Appeals for the Federal Circuit has held that the ASBCA has jurisdiction over termination settlement appeals where, as here, the contractor has failed to submit a settlement proposal within one year but has filed a certified claim with the contracting officer. It then made short work of Black Bear’s claim. FAR 52.249-2 allowed Black Bear one year to file unless it received an extension of time from the contracting officer. Because no extension of time was ever sought, much less granted, and the claim was submitted to the contracting officer after that one year period had passed, the Board had no trouble agreeing with the government that the claim was late and the appeal must be denied.
The takeaway here is simple: don’t let other concerns prevent you from timely preparing and submitting your termination settlement claim before the due date established by your contract. If you do, you’re essentially throwing money away.
As we approach the end of the Government’s fiscal year at the end of September, we are once again facing a risk that the Federal Government could shut-down. The risk is heightened this time by: (1) the impending debt ceiling crisis, which Treasury estimates will be hit on September 28 or 29; and (2) President Trump’s reiteration earlier this week that he would be willing to shut-down the Government if he does not get the requested funding for his proposed U.S./Mexico border wall. As you may recall, the latter was a sticking point last spring, when a shut-down was avoided by President Trump stating that he would defer seeking such funding until this Fall as part of the FY18 budget. It seems likely that the debt ceiling will be increased and a crisis avoided on that score, as Republicans are unlikely to want to have the Government default on their watch. However, FY18 budget differences may be more difficult to resolve, particularly given the Democrats’ opposition to funding the wall. There is certainly the possibility of a further Continuing Resolution to buy additional time to reach agreement, and House Speaker Paul Ryan raised this possibility earlier this week.
At this point there are lots of questions, and government contracting industry experts, including a recent panel sponsored by the Professional Services Council, are urging contractors to take the threat seriously and undertake advance contingency planning. We therefore urge contractors to review their current contracts, and start planning and communicating with their respective government contracting officers about how to address a possible federal government shut-down at the end of September (likely effective Monday, October 3, 2017), if a further continuing resolution is not passed. If there is a shut-down, virtually all federal government contractors face serious impacts. Action now will enable contractors to respond appropriately in the event of a shut-down, and minimize adverse impacts to government programs, control non-reimbursable costs and mitigate, document and account for shut-down costs for which the Government will be liable.
Timely submit and claim reimbursement for all reasonably incurred shut-down costs.
In addition, contractors should assess the impact of a shut-down on non-contract deadlines. Contractors also may want to assess their ability and plans to continue other business operations in view of delays in government payments in the event of a shut-down or debt ceiling crisis. Contractors may want to review their available bank credit lines or other financing sources, to ensure sufficient credit availability and flexibility to deal with possible Government payment delays. They also should expedite the submission of any pending invoices for current work.
Background: No money can be paid from the Treasury except pursuant to Congressionally-passed funding authorizations. Federal officials cannot obligate funds before an appropriations measure has been enacted, and cannot accept voluntary services. However, contracting officers are authorized to incur costs necessary to shut-down operations.
This means that contractors cannot rely upon oral or even written assurances, and should not “volunteer,” with the expectation of being paid later. While government employees have been paid retroactively in connection with past shut-downs, the same cannot be said as to contractor employees. Contractors therefore need to protect themselves.
Current Status: The federal Government is presently operating under a continuing resolution (CR) that expires at midnight on September 30, 2017. Thereafter, the Government must shut-down unless Congress passes new authorization and funding for FY18, or some new CR is passed and signed by the President. It is possible that Congress could pass a short-term CR extension to buy time to permit further negotiation of a longer-term resolution. If no resolution is agreed upon, there will be a lapse in funding and the government will shut-down.
Legal Parameters: If there is a shut-down, all contracts dependent upon FY18 funding will be shut-down, with only limited exceptions for activities determined necessary to save lives or protect property. Contracts that are already fully funded will not be affected, nor will those few contracts otherwise authorized by law to continue notwithstanding a shut-down.
Ideally each contracting officer would issue a “stop work” order for each affected contract, directing each contractor specifically as to what to do on such contract. However, it is more likely that contracting officers will issue broad guidance memos affecting multiple contracts, under which each affected contract will be subject to a “stop work” order. Upon receipt of notice, each affected contractor will be obligated to shut-down operations as directed, and mitigate the government’s shut-down costs exposure. Contractors will be entitled to recover reasonable and necessary shut-down costs. However, contractors will need to carefully document and separately account for such costs, and timely submit appropriately documented claims to recover them. Re-start costs will need to be tracked separately, and should be negotiated at the time of re-start. “Volunteered” interim activities will not be reimbursed; and any promises or agreements to compensate interim activities likely will not be honored as being outside the authority of any involved government official.
During any shut-down contracting officers will be barred from making new awards, issuing new task orders under ID/IQ contracts, entering into contract amendments or modifications and exercising contract options, which depend on current year funding. Note that other government deadlines, such as for option exercises, proposal submission, claims and agency appeals, bid protests and court filings, will not necessarily be stayed by a shut-down, and contractors will need to assess carefully their obligations in each such instance.
Conclusion: If a shut-down occurs, such will have far-reaching consequences for all government contractors, going to the very heart of their business operations. Contractors need to be prepared and take appropriate actions to minimize their costs and the adverse business impacts of a shut-down. The key is careful planning and timely and regular communication with all involved, particularly the relevant government contracting officers.
As President Trump approaches the end of his first 100 days, there is a risk that the Federal Government could shut-down starting at midnight this coming Friday, when current funding expires. Congress, which is finally back from its two-week Easter recess, is working on both a short one- or two- week interim extension, as well as a longer extension through the end of the current Government fiscal year (i.e., September 30, 2017). Prospects for some agreement have improved with President Trump’s withdrawal of his demand that any extension include initial funding for the proposed U.S./Mexico border wall, and statement that he will defer seeking such funding until Fall as part of the FY18 budget. However, there are still a number of other issues to be resolved, and there are elements on both sides of the aisle that appear willing, and even eager, to let a shut-down occur. President Trump has stated he wants to avoid a shut-down. However, he needs Democratic support to pass the needed extension. Democrats have been united in opposing virtually everything, and are eager to embarrass the President (although they don’t want to be blamed for a shut-down). Meanwhile, some Republicans appear to believe that a shut-down wouldn’t be that serious. The odds at this point suggest that some resolution will be reached, at least on an interim basis. However, Government agencies are preparing for the possibility, and last Friday OMB issued contingency plans just in case, which are available for review here.
Contractors similarly need to start planning and communicating with their respective government contracting officers about how to address a possible federal government shut-down, possibly as early as this coming Saturday if some continuing resolution is not passed. If there is a shut-down, virtually all federal government contractors face serious impacts. Action now will enable contractors to respond appropriately in the event of a shut-down, and to minimize adverse impacts to government programs, control non-reimbursable costs and mitigate, document and account for shut-down costs for which the government will be liable.
In addition, contractors should assess the impact of a shut-down on non-contract deadlines. Contractors also may want to assess their ability and plans to continue other business operations in view of delays in government payments in the event of a shut-down.
Current Status: The federal Government is presently operating under a continuing resolution (CR) that expires at midnight this coming Friday. Thereafter, the Government must shut-down unless some new CR is passed and signed by the President. It is possible that Congress could pass a short-term CR extension to buy an extra week or two to permit further negotiation of a longer-term resolution to the end of the fiscal year. However, even if an interim resolution is reached by midnight this coming Friday, the situation will recur when that expires unless a longer-term resolution is reached. If no resolution is agreed, there will be a lapse in funding and the government will shut-down at midnight, April 28, 2017.
Legal Parameters: If there is a shut-down, all contracts dependent upon FY17 funding will be shut-down, with only limited exceptions for activities determined necessary to save lives or protect property. Contracts that are already fully funded will not be affected, nor will those few contracts otherwise authorized by law to continue notwithstanding a shut-down.
As we have discussed, contractors must pay careful attention to, and comply strictly with, timeliness and related submission requirements, whether in the claims or bid protests context. This is not a one-way street, however. Government contracting officers also must comply strictly with such requirements. The equal application of these principles is reflected in two recent decisions involving the “deemed denial” doctrine. In the most recent case, the Armed Services Board of Contract Appeals (ASBCA) held that a contracting officer’s failure to set a precise final decision deadline did not comply with the CDA, entitling the contractor to immediately appeal to the Board on a deemed denial basis. In the second case, the Court of Federal Claims (COFC) held that the contracting officer gets only one bite at extending the final decision deadline, and that an attempted second extension was invalid and again entitled the contractor to appeal immediately on a deemed denial basis.
By way of background, and as you likely know, the CDA requires contracting officers to issue a final decision within 60 days of receipt of a properly certified claim over $100,000, or notify the contractor of the time within which the decision will be issued. 41 U.S.C. § 7103(f)(2); FAR 33.211(c)(2). In setting such further decision deadline, the contracting officer can consider the size and complexity of the claim, the adequacy of the contractor’s supporting data and other relevant factors. 41 U.S.C. § 7103(f)(3); FAR 33.211(d). If the contracting officer issues a proper final decision, such decision triggers the start of the contractor’s 90 days within which to appeal to the Board or one year to the COFC. However, if the contracting officer fails to issue a decision within the initial 60-day period, or any timely proper extension thereof, then the contractor can deem such failure as a denial and appeal immediately to the Board or Court. 41 U.S.C. § 7103(f)(5); FAR 33.211(g).
The Board summarily denied the government’s motion, stating that the CDA requires the contracting officer to “pinpoint” a specific future date by which the final decision will be issued. The Board stated that “[i]t is not enough to state that a final decision will be issued within a specified number of days of the occurrence of some future event.” Aetna therefore was free to construe the contracting officer’s improper attempted extension of the decision deadline as a “denned denial,” and immediately appeal. The Board also rejected the government’s alternate request to stay proceedings and remand to the contracting officer for a final decision, stating that the government provided no rationale for such request.
The COFC similarly held the government to strict compliance with the CDA’s decision timeframes in Rudolph and Sletten, Inc. [R&S] v. U.S., COFC No. 14-647, 120 Fed. Cl. 127 (2015). That case involved a $27M certified claim for delay and disruption and other costs. R&S submitted its claim on August 20, 2013. On the very last day (adjusted for the 60th day being a weekend day), the contracting officer informed R&S that, due to the complexity and extensive nature of the claim, a final decision would be issued within nine months from the date of such letter. So far, so good. However, on July 8, 2014, the contracting officer informed R&S that the final decision would not be reached by July 15, 2015, as originally estimated, but instead would be issued on March 15, 2015 – another eight months down the road. R&S declined to wait further, and filed suit at the COFC on July 23, 2014 – eight days after the expiration of the initial nine-month extension. The government again moved to dismiss for lack of jurisdiction, arguing that R&S failed to obtain a final decision before filing suit.
The Court denied the government’s motion, stating that the CDA gives the government only one right to extend the final decision deadline and that the contracting officer needs to consider the claim complexity and other factors in setting such extended deadline. There is no right to further extend the deadline, and a contractor can treat any attempted further extension as a deemed denial. However, the Court, in the interest of judicial economy, did grant the government’s alternative stay and remand request, in view of the government’s representation that the contracting officer’s decision was by then imminent and had “great potential” to narrow the disputed issues. However, the Court put a tight leash on the government, and directed issuance of the final decision within 30 days of the Court’s Memorandum and Order.
The bottom line is that the government also must comply strictly with the CDA’s timeliness requirements. While this does not ease contractors’ compliance burdens, contractors may at least take some solace in the fact that the government similarly is held to account. Specifically, contractors can treat any contracting officer failure, within 60 days of receipt of a properly certified claim, to issue a decision, or extend the decision deadline to a precise, reasonable, future date and issue a decision within such extended period, as a deemed denial and proceed immediately to the Board or Court. The government does not have the right to condition any extended decision deadline on a contingency or further extend the decision deadline a second time.
A recent Postal Service case reminds us how important it is to know how to proceed if your contract is terminated. Clifford B. Finkle, Inc. v. U.S. Postal Service, PSBCA No. 6540 (March 25, 2015). The Postal Service terminated with notice a contract with Clifford B. Finkle Inc. (CBF) who then (i) appealed the termination to the Postal Service Board of Contract Appeals (Board) and subsequently (ii) filed a monetary claim with the contracting officer (CO). When the CO denied its monetary claim, CBF failed to appeal the CO’s decision, despite the fact that the CO provided written notice of the appeal rights and counsel for the Postal Service sent CBF an email admonishing them to “keep in mind” that CBF has a “90 day deadline to appeal the recent final decision.” CBF didn’t listen. The Postal Service moved to dismiss the termination appeal arguing the Board lacks jurisdiction where, as here, the contractor (i) challenges a termination without a monetary claim and prior to receiving a decision from the CO and (ii) fails to file a notice of appeal within 90 days of receiving the CO’s final decision on its monetary claim.
As most of us know, the Contract Disputes Act (CDA) requires that contractor claims be in writing, certified (if over $100,000), and submitted to the contracting officer for a decision. The contracting officer must then issue a decision in writing, whereupon the contractor, if it wants to appeal this decision to the Board, must do so within 90 days from the date of receipt of the decision. The Board is then authorized to hear and decide the contractor’s appeal from the decision of the contracting officer.
CBF made a mess of its termination and, as a result, eliminated any possibility of obtaining relief. Don’t make the same mistake. Know the rules and follow them. If you don’t, you’ll see that Boards have hearts of stone.
Small businesses participating in the Small Business Administration’s (SBA’s) 8(a) Business Development Program (BD Program) would do well to recall the story of Pinocchio, the marionette who wanted to be a real boy. Pinocchio learned two important lessons: be self-reliant and don’t lie. Similarly, the petitioner in the recent The Desa Group, Inc., SBA No. BDPT-543 (February 5, 2015) decision was given credit for trying to tell the truth, but found out the hard way that you cannot rely too heavily on another, non-disadvantaged, entity. The decision makes clear it is not enough that a socially and economically disadvantaged business be free from the control and management of a non-disadvantaged business; overreliance on the non-disadvantaged business may independently lead to the 8(a) firm’s termination from the BD Program.
The appeal arose in response to the SBA’s termination of The Desa Group (DGI) from the 8(a) BD Program based on two grounds set forth in SBA’s Regulations (13 C.F.R. §124.202): DGI alleged (i) submission of false information in its program application, and (ii) failure to maintain full-time, day-to-day management and control by a disadvantaged individual. Specifically, SBA received a tip that DGI’s president, Dionne Fleshman, whose socially and economically disadvantaged status qualified DGI for the 8(a) BD Program, actually worked for DESA Inc. (DESA) and did not manage DGI. DESA was owned by Ms. Fleshman’s mother, Diane Sumpter, who is no longer disadvantaged.
On appeal, OHA rejected SBA’s conclusion that DGI should be terminated from the program based on Ms. Fleshman’s allegedly false statements in the Program Application, finding her statements contained merely honest and reasonable mistakes. Absent evidence of intent to deceive SBA, OHA concluded that inaccurate statements are not grounds to terminate an 8(a) firm from the BD Program. OHA also rejected the SBA’s finding that DGI was managed and controlled by a non-disadvantaged individual (Ms. Sumpter), after considering and rejecting the evidence on which SBA based its conclusions: that (i) DGI and DESA were referenced on each other’s LinkedIn and Facebook profiles and company websites; (ii) Ms. Fleshman was listed as a “leader” on DESA’s website and earned between $7,000-$10,000/month from DESA over a two-year period; and (iii) DGI’s website referenced the accomplishments of DESA.
OHA found that none of the evidence identified by SBA established that DESA controlled DGI. For example, according to OHA, DESA and DGI’s references to each other on their websites only showed that DESA and DGI were related. Moreover, the monthly payments to Ms. Fleshman were actually payments to DGI under a subcontract from DESA and did not establish that Ms. Fleshman worked for DESA instead of DGI. OHA concluded that, at most, the evidence showed that DGI and DESA were interconnected, not that DGI was controlled or managed by DESA or Ms. Sumpter.
But OHA’s inquiry did not end there however. OHA considered additional evidence and, based on this evidence, concluded that DGI and DESA were so interconnected that their business relationship interfered with DGI’s ability to “exercise independent business judgment without great economic risk” – a different basis for terminating DGI from the 8(a) BD Program.
This decision underscores for 8(a) firms the importance of closely examining their relationships with individuals and entities that are not disadvantaged. Even if such individuals or entities do not manage, own or control the participant, the 8(a) firm’s interconnectedness with non-disadvantaged companies and individuals (including sufficiently substantial contractual relationships) may still be enough to justify the 8(a) firm’s termination from the BD Program. On a positive note, The Desa Group, Inc. decision should provide 8(a) BD Program applicants with a sense of relief that an honest misunderstanding about an application question is unlikely to provide grounds for 8(a) BD Program termination.
Lara Nochomovitz is responsible for the contents of this article.
Last month the Armed Services Board of Contract Appeals (ASBCA) affirmed that even a defective termination notice starts the 90-day appeals clock, unless the contractor can establish it was actually prejudiced by the defective notice. In Mansoor International Development, ASBCA No. 58423, September 04, 2014, the ASBCA denied the government’s motion to dismiss the appeal as untimely, but only because it found both that the termination notice in question lacked the notification of rights required by FAR 33.21 l(a)(4), and that the contractor was actually prejudiced by the defect in the notice.
Mansoor was an inexperienced Army contractor providing trucking services in Afghanistan. On March 31, 2012, the contracting officer (CO) sent Mansoor a letter stating that (i) Mansoor’s contract would be terminated at the completion of its current task order and (ii) Mansoor could appeal the termination under the Disputes Clause. Months later, on September 1, 2012, the CO issued a modification to the pending task order, again giving notice of contract termination as described in the March 31, 2012 letter, but this time setting out the full notice required by FAR 33.211(a)(4) which includes a clear statement that the contractor has a right (i) to appeal to the ASBCA by furnishing written notice of that intent within 90 days or, instead, (ii) to bring an action directly in the United States Court of Federal Claims within 12 months of the CO’s decision.
Mansoor filed its notice of appeal with the Board within 90 days of its receipt of the September notice. When the Board sought comments from the parties concerning the timeliness of the appeal, the government filed a motion to dismiss for lack of jurisdiction based on timeliness. The questions raised before the Board were whether or not the March 31, 2012 letter was a proper notice of termination and, if not, whether the notice’s lack of an explicit statement of appeal rights prejudiced Mansoor’s ability to prosecute a timely appeal.
The Board, relying on Decker & Co. v. West, 76 F.3d 1573 (Fed. Cir. 1996), held that a contractor cannot rely on a defective notice of termination to delay the due date of an appeal unless it can demonstrate it was prejudiced by the notice. Here, Mansoor presented evidence that it “understood and believed that any time limits flowed from the completion of the contract close out process, including the completing of outstanding missions and submission of final invoices and claims” and that it “did not understand [its] appeal rights and obligations and was prejudiced by the failure of the Contracting Officer in March to explicitly recite them." On the basis of the evidence presented, the Board found that Mansoor was prejudiced by the defective notice. But even a slightly different fact pattern might have triggered a different result.
The lesson? Because a contractor must be able to show prejudice before relying on a defective termination notice to excuse an otherwise untimely appeal, it is vitally important to clarify any notice suggesting termination, however faulty it may seem to be, and to assume the most conservative approach to the start date for counting down the days within which to file a timely appeal with a Board or the Court.
Heather Joyce is the lawyer responsible for the contents of this article.


CHECHELE v. Apollo Group, Inc., Nominal Defendant–Appellee.
Donna Ann Gabriele CHECHELE, Plaintiff–Appellant, v. John G. SPERLING, Peter V. Sperling, Defendants–Appellees, Apollo Group, Inc., Nominal Defendant–Appellee.
Before WALKER, WESLEY, and HALL, Circuit Judges. James A. Hunter, Hunter & Kmiec, New York, NY, for Plaintiff–Appellant. Dennis H. Tracey, III (Nathaniel E. Marmon, on the brief), Hogan Lovells U.S. LLP, New York, NY, for Defendants–Appellees.
Plaintiff–Appellant Donna Ann Gabriele Chechele appeals from the judgment of the United States District Court for the Southern District of New York (Paul A. Crotty, Judge) granting insider Defendants–Appellees' motion to dismiss her short-swing trading complaint. Specifically, the district court found that the requirements of a claim under section 16(b) of the Securities Exchange Act of 1934 (“Exchange Act”), mandating disgorgement of short-swing profits by statutory insiders, had not been satisfied. We agree and affirm the district court's judgment.
Appellant Chechele is a shareholder of Apollo Group, Inc. (“Apollo”). Appellees John and Peter Sperling, father and son, are the Executive Chairman and Vice Chairman of Apollo's Board of Directors, respectively. Chechele sued the Sperlings under section 16(b) of the Exchange Act, 15 U.S.C. § 78p(b), seeking disgorgement of alleged short-swing profits. Short-swing profits are realized under section 16(b) when an insider buys and sells stock of his company within a six-month period. It is undisputed that the 29 Sperlings are insiders for the purposes of section 16(b).
As insiders, John and Peter Sperling had considerable holdings of Apollo stock. In order to convert some of their shares of Apollo Class A common stock into cash, in 2006 and 2007, John Sperling entered into two prepaid variable forward contracts (“PVFCs”) and Peter Sperling entered into three PVFCs. The terms of each PVFC were contained in three documents: (1) a Master Agreement, (2) a Pledge Agreement, and (3) a Transaction Confirmation.
The Master Agreements provided the general framework for the PVFC transactions.1 On the “Payment Date,” the banks would pay John and Peter an agreed-upon amount of cash. In exchange, the Sperlings promised to deliver to the banks, on a pre-determined “Settlement Date,” some number of Apollo shares, or their cash equivalent. The number of shares to be delivered varied with the market closing price of Apollo stock three days prior to the Settlement Date according to a formula provided in each agreement.
Additionally, on the Payment Date, the Sperlings pledged as collateral the maximum number of shares that could be delivered under the agreement to secure the banks' interest in the shares. In the meantime, however, the Sperlings retained ownership of the shares until delivery on the Settlement Date; they continued to have the right to exercise the shares' voting rights and receive cash dividends.
The particulars of each PVFC transaction, including the Payment Date, upfront cash payment amount, number of pledged shares, Settlement Date, and settlement formula, were all set forth in the Transaction Confirmation. For example, John Sperling's July 11, 2007 Transaction Confirmation called for him to pledge one million shares on July 16, 2007 (the Payment Date) in return for approximately $52.4 million from Bank of America. The Settlement Date occurred approximately eighteen months later, on January 12, 2009.
Under the settlement formula in this transaction, if the share price three trading days prior to settlement (the “Maturity Date”) fell below $60.2235 (the “floor price”), John was required to deliver all of the pledged shares or a cash equivalent. The floor price protected John from a decline in the stock price because he was required to deliver one million shares (or the cash equivalent) regardless of how much below the floor price the share price fell.
But if the share price at the Maturity Date was between the floor price and $78.2906 (the “ceiling price”), the number of shares to be delivered would decline as the share price rose above the floor price according to a formula that maintained a constant cash equivalent value. John would keep any undelivered shares.
The transaction could be viewed as a bet on whether the share price would be above the ceiling price (bank's bet) or below the floor price (John's bet) on the Maturity Date. John would “win the bet” if the settlement price was below the floor, because he would be satisfying his obligation to the bank with relatively inexpensive shares. The bank would “win the bet” if the settlement price was above the ceiling, because it would receive an increasing number of shares of increasing value. For settlement prices in between the floor and ceiling, the transaction resembled a loan; John borrowed $52.4 million from the bank on the Payment Date and was obligated to pay the bank back approximately $62 million (the $52.4 million he borrowed plus the implied financing cost of the loan).
On January 9, 2009, the share price was $85.3300—above the ceiling—so the bank “won” the bet and John had to deliver some, but not all, of the pledged shares on January 12.
All five PVFC transactions were settled by delivery of shares rather than the cash equivalent. The following charts summarize their terms.
Within six months of the settlement of the PVFC transactions at issue, the Sperlings sold some of their Apollo stock on the open market. Chechele alleges that those sales, in light of the PVFC settlement, violated section 16(b). According to her theory of the case, the Sperlings sold the shares they pledged to the banks on the Payment Dates of the PVFCs, but then “repurchased” the undelivered shares on the Settlement Dates. She claims that their subsequent sales of company stock on the open market—less than six months after the PVFC's settled—can be matched to the “purchase” that occurred at settlement. If she is correct, any profits made from the later sales must be disgorged as short-swing profits under section 16(b).
The district court concluded that because the “Sperlings' rights ‘became fixed and irrevocable’ at the time they entered into the [PVFCs] ․ the repurchases of the [Sperlings'] retained shares on the settlement date did not constitute a ‘purchase’ under Section 16(b).” Chechele v. Sperling, No. 11 Civ. 0146, 2012 WL 1038653, at *5 (S.D.N.Y. Mar. 29, 2012).
Chechele raises only one issue on appeal: whether the Sperlings' retention of a portion of the shares that were pledged but not delivered to the banks constituted a “purchase” of company stock within the meaning of section 16(b) of the Securities Exchange Act. We review de novo the district court's grant of a motion to dismiss under Federal Rule of Procedure 12(b)(6), Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 107 (2d Cir.2012), and conclude that the Sperlings' ultimate retention of shares pledged to the banks in the various PVFC transactions did not constitute “purchases” under section 16(b).
[A]ny profit realized by [a corporate insider] from any purchase and sale, or any sale and purchase, of any equity security ․ within any period of less than six months ․ shall inure to and be recoverable by the issuer, irrespective of any intention on the part of [the insider].
Were we to confine our focus to the loan aspects of the PVFC, to the exclusion of its option-equivalent elements, we would not only contravene the SEC rules, but also create a new vehicle for insider trading. Suppose an insider anticipated a temporary dip in his company's stock price. The insider could enter into a PVFC with a settlement date during the expected price dip. The insider could then settle in cash, paying the price of the now devalued shares, but retaining the shares themselves for the anticipated upswing in the stock price. When the stock price returned to normal, the insider would have kept his shares and profited by the difference between the up-front payment (based on the normal stock value) and the settlement price (based on the stock value during the market dip).
In this hypothetical, if the PVFC is treated as a loan, section 16(b) was not violated. No shares changed hands, and there was no “purchase” or “sale” to trigger section 16(b). Viewing the PVFC as a derivative, however, the potential for abuse becomes clear: the insider offered the PVFC “call option” as consideration for the “put option,” knowing that the call option would never be exercised. In other words, he used his informational advantage to sell something he knew to be worthless.
Precisely to prevent what would happen in our hypothetical, we have held that “for purposes of Section 16(b), the expiration of a call option within six months of its writing is to be deemed a ‘purchase’ by the option writer to be matched against the ‘sale’ deemed to occur when that option was written.” Roth v. Goldman Sachs Grp., Inc., 740 F.3d 865, 872 (2d Cir.2014); see also 17 C.F.R. § 240.16b–6(d). This rule prevents an insider from profiting by selling call options with expiration dates within six months, while knowing, by virtue of his inside information, that the stock price would not rise above the strike price and the option would never be exercised. We think this rule should apply here as well. We therefore hold that a PVFC is akin to the “sale” of a call option (and purchase of a put) by the insider, and this sale should be matched to a “purchase” at the settlement date, should the call option expire. Thus for purposes of section 16 liability, the Sperlings “sold” call options to the banks on the day they signed the contract, and any matching “purchases” would occur—if at all—on the settlement date if these options went unexercised.
Viewing the instant transactions in this manner, it becomes clear why the Sperlings did not violate section 16(b). First, for the transactions that settled above the ceiling, nothing of significance occurred on the settlement date. The bank merely exercised its call options, which is neither a purchase nor a sale under section 16(b). The exercise of a traditional derivative security (as opposed to its expiration) is a “non-event” for section 16(b) purposes. Magma Power Co. v. Dow Chem. Co., 136 F.3d 316, 322 (2d Cir.1998). Second, even if the banks' call options had expired—as they did in several cases—the expiration of an option can only be matched to its own writing for section 16 purposes, not to another unrelated sale of stock. Allaire Corp. v. Okumus, 433 F.3d 248, 254 (2d Cir.2006). Since the Sperlings' subsequent stock purchases were not part of the PFVC derivative transaction, the two could never have been matched.
Although Chechele would agree with our conclusion that the PVFCs at issue here are a species of derivative, she attempts to analyze these contracts under our emerging “hybrid derivatives” case law governing options without a fixed exercise price. This is the incorrect mode of analysis.
In Analytical Surveys, Inc. v. Tonga Partners, L.P., 684 F.3d 36, 49–50 (2d Cir.2012), we held that a hybrid derivative—a derivative without a fixed exercise price—is not “purchased” until the price becomes fixed because only then is “the extent of the profit opportunity defined[ .]”9 Our hybrid derivative cases, however, have all dealt with contracts where one of the parties controlled the timing, and thus the price, at which the option would be exercised. See Analytical Surveys, 684 F.3d at 41; At Home Corp. v. Cox Commc'ns Inc., 446 F.3d 403, 405 (2d Cir.2006); Magma Power, 136 F.3d at 319. This is critical.
Because one of the parties controls the timing of the exercise, hybrids present two opportunities to use inside information, once at the writing of the contract and again at their exercise. In Analytical Surveys, we emphasized that the “insider's additional opportunity to rely on inside information to time the date of exercise” presented an additional danger. 684 F.3d at 50. This is why we held that the “purchase” for section 16(b) purposes occurs when the price is fixed. The time the price is fixed is when the last opportunity to use inside information occurs, and when the six-month clock for a matching sale should start. See id. at 49–50.
The PVFCs at issue here, however, do not present the same risk of manipulation at the time of their settlement that hybrids do at the time of their exercise. It is true that with these PVFCs, as with the securities in our hybrid cases, the number of shares that may be called and the price of those shares is not known at the time the contract is written. Nonetheless, with these PVFCs the price was set by a predetermined formula. There is thus no opportunity for additional manipulation after the contract is signed.10 Because the parties are bound to the formula and dates from the time of contracting, the prices of these PVFC options were fixed at the time they entered the contract even if they are not known.
17 C.F.R. § 240.16b–6(a). The purpose of this regulation is to avoid “the unfairness of subjecting insiders to liability under Section 16(b) who engage in a purchase or sale and then have an offsetting sale or purchase thrust upon them thereafter by events ‘not known in advance’ and ‘outside the[ir] control.’ “ Magma Power, 136 F.3d at 322.
Still, because there is some risk of manipulation, as we discussed above, PVFCs do not—and should not—get the benefit of a total section 16(b) exemption. Nonetheless, treating PVFCs as hybrid derivatives could produce the same “unfairness” that prompted the issuance of 17 C.F.R. § 240.16b–6(a). If the “purchase” or “sale” of the derivative does not occur until the price is “fixed” in the sense of being determined, every PVFC could subject the insider to section 16(b) liability. This is because under a hybrid derivative analysis a “sale” will always occur shortly before settlement, when the value to be delivered is determined. Because, under Roth, an expiration of the bank's call option is a “purchase” (by the insider) to be matched with this “sale,” section 16 liability would result whenever a PVFC settles below the floor and the bank's call option expires. This does not make sense.
Viewing the PVFCs as traditional derivatives, however, avoids this odd result. The transactions to be matched are not the “fixing” of the price shortly before settlement and the settlement itself, but the writing of the contract and the settlement. As long contract date, there is no risk of any short-swing profit.
In short, the Sperlings did not violate section 16(b). First, nothing of significance occurred on the Settlement Dates. The banks simply exercised their call options, which is neither a purchase nor a sale under section 16(b). The exercise of a traditional derivative security is a “non-event” for section 16(b) purposes. Magma Power, 136 F.3d at 322. Therefore the Sperlings' subsequent sale of stock after settlement did not trigger liability. Second, even if the banks' call options had expired, under SEC Rule 16b–6(a) “the expiration of an option, when matched against any transaction other than its own writing, is not [a transaction].” Allaire Corp., 433 F.3d at 254. Furthermore, as mentioned earlier, the expiration of the banks' call options is “deemed a ‘purchase’ by the option writer to be matched against the ‘sale’ deemed to occur when that option was written.” Roth, 740 F.3d at 872. And third, the PVFC transaction was a sale of stock; both the rights the Sperlings granted and received are “put equivalent positions” deemed to be “sale[s] of the underlying securities for purposes of section 16(b)[.]” 17 C.F.R. § 240.16b–6(a). To trigger section 16(b) liability there must be both a purchase and a sale, not two sales. See Roth, 740 F.3d at 870.
To sum up, the PVFCs in this case are properly analyzed under traditional, and not hybrid, derivatives analysis. When that is done, it becomes evident that no “purchase” occurred against which a “sale” could be matched for section 16(b) purposes.
2. We have represented this PVFC's formula graphically at the end of this opinion. As one can see, the value John delivered to the bank rises steadily as the share price rises, until it reaches the floor price. The value then remains constant, until the share price reaches ceiling price, at which point the value delivered rises again.
3. For the purposes of section 16(b) an insider is “an officer or director of the issuer or ․ a shareholder who owns more than ten percent of any one class of the issuer's securities[.]” Gwozdzinsky, 156 F.3d at 308.
4. We and the parties refer to the transactions here as “PVFCs.” This label is useful as far as this transaction goes. We must be cautious, however, not to rely too heavily on labels because the creativity of Wall Street lawyers and bankers is boundless. A future instrument that resembles today's PVFC may contain a heretofore unthought-of contractual term that fundamentally changes the analysis.
5. Derivatives include, among other things, options to buy or sell securities at particular prices in the future. 17 C.F.R. § 240.16a–1(c).
6. A “put option” is a contract giving one party the right to sell, and obligating one party to buy, a stock or commodity at a given price, known as a “strike price,” on a particular date. If the market price on that date is below the strike price, then the option becomes valuable because one could purchase the stock in the market and immediately resell it for a profit. See Michael S. Knoll, Put–Call Parity and the Law, 24 Cardozo L.Rev. 61, 70 (2002). We are further convinced that this transaction was a put equivalent by the fact that the potential loss to the bank here if the transaction settled below the floor, and the potential loss to the writer of a traditional put option are nearly identical. Intrigued readers are encouraged to compare our graph of this transaction with Knoll's profit/loss graph of a put option. Id.
7. A “call option” is a standardized contract giving one party the right to buy, and obligating one party to sell, a stock or commodity at a given price, again a “strike price,” on a particular date. If the market price of the stock rises above the strike price, the option becomes valuable because one could exercise the option and immediately sell the purchased shares on the open market at a profit. See Knoll, supra, at 70. Again, comparing our graph of the profit to the bank if this transaction settled above the ceiling with a graph of the profit to the holder of a traditional call option reveals just how much like a call option this transaction was. See id.
8. Furthermore, the view that PVFCs are derivatives—not loans—is consistent with every authority revealed by research. First, the SEC treats PVFCs as derivatives. See Exchange Act Release No. 47809, 68 Fed.Reg. 25,788, 25,789 (May 13, 2003) (“In particular, section 16(a) requires insiders to report all securitybased swap agreements and transactions involving derivative securities, including ․ forwards․”). Second, two separate district courts have now analyzed PVFCs as derivatives. See Chechele, 2012 WL 1038653; Donoghue v. Centillium Commc'ns Inc., No. 05 Civ. 4082, 2006 WL 775122 (S.D.N.Y. Mar. 28, 2006). Moreover, leading treatises treat PVFCs as derivatives with potential insider-trading implications. See Peter J. Romeo & Alan L. Dye, Section 16 Treatise and Reporting Guide §§ 3.03[h], 10.05 (4th ed.2012). Finally, both parties to this litigation go to great lengths to analyze the contracts as transactions in derivative securities.
9. This is in keeping with SEC regulations, which exclude from the definition of a traditional derivative “[r]ights with an exercise or conversion privilege at a price that is not fixed[.]” 17 C.F.R. § 240.16a–1 (c)(6).
10. As one district court put it, insiders writing PVFCs arepowerless to manipulate the settlement [to their] advantage. [They are] obligated to settle [on the contractual date], regardless of whether the stock price [is] favorable․ While the ultimate number of shares to be transferred [is] not [known], that number [is] dictated by financial formulae and criteria set forth in the [PVFC] and, ․ [can]not be modified[.]Donoghue, 2006 WL 775122, at *5 (internal quotation marks omitted).


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Beginning his career as a journalist with the South China Morning Post in Hong Kong and the Peterborough Examiner in Ontario, Gary Botting completed his LL.B. at The University of Calgary in 1990 and began practicing law in Victoria, B.C. the following year. He received his LL.M from University of British Columbia in 1999 and Ph.D. in Law in 2004. He spent four years as a visiting scholar at the University of Washington School of Law, and was an original Paetzold Fellow and honorary research associate in U.B.C.'s Faculty of Law before returning to practice full time as an extradition lawyer.
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The 8th District Business Blog reviews recent decisions by the Ohio 8th District Court of Appeals related to civil matters that could affect business owners, plaintiffs, or defendants.
The ancient doctrine of caveat emptor (buyer beware) was on full display in a recent 8th District decision regarding a residential real estate dispute. The case is a cautionary tale to residential home buyers, confirming that buyers should have a professional property inspection no matter how good the house appears during the open house.
In its Complaint, AE claimed Sotonji actively concealed holes in wood at the Property that were caused by termites. AE claimed Sotonji hid the damage by filing the holes and painting over them and by installing a peg board ceiling in the basement to conceal damaged support beams. AE said it discovered extensive termite damage throughout the Property when it was making repairs following a burst pipe.
AE asserted claims for: (i) fraud; (ii) fraudulent concealment; (iii) negligence; and (iv) negligent misrepresentation. AE claimed its damages exceeded $35,000 and that the Property may have to be demolished.
• AE, which specialized in house flipping and property management, did not hire a professional building inspector. AE expressly waived its right to have a professional inspection. Instead, AE’s owner and manager inspected the property on three occasions. The owner had 20 years of experience in construction trades including commercial and residential remodeling.
• In her affidavit, Sotonji stated that her late husband performed all maintenance work on the Property. The family thought cockroaches were entering the house through a sewer line, but she denied knowledge of any termite damage or cover up.
In deconstructing each of AE’s claim, the 8th District provided an excellent summary of the relevant issues.
AE argued caveat emptor does not apply to claims of fraud and fraudulent concealment. The 8th District disagreed.
As a general rule, Ohio follows the doctrine of caveat emptor in all real estate transactions, which precludes a purchaser from recovering for a structural defect if: “(1) the condition complained of is open to observation or discoverable upon reasonable inspection; (2) the purchaser had the unimpeded opportunity to examine the premises; and (3) there is no fraud on the part of the vendor.” McDonald v. JP Dev. Group, L.L.C., 8th Dist. Cuyahoga No. 99322, 2013-Ohio-3914, quoting Layman v. Binns, 35 Ohio St.3d 176, 519 N.E.2d 642 (1988), syllabus.
(f) a resulting injury proximately caused by the reliance.
See, Burr v. Board of County Comm’rs, 23 Ohio St. 3d 69, 23 Ohio B. 200, 491 N.E.2d 1101 (1986), paragraph two of the syllabus.
The 8th District held summary judgment was appropriate because AE accepted the risk when it failed to have a professional inspection completed. AE’s owner averred that he considered himself to be an expert in the construction field and had extensive experience in residential and commercial remodeling. The owner observed that the rooms had been freshly painted and walked through the Property three times, but he did not hire a professional inspector to examine for termites, plumbing, electrical, or other issues. AE expressly declined to hire an inspector.
Id. at P28, citing ORC § 5302.30(D)(1).
AE did not fare any better with its negligence claims. “An ‘as is’ clause in a real estate contract places the risk upon the purchaser as to the existence of defects and relieves the seller of any duty to disclose.’” Id. at P29, quoting Moreland v. Ksiazek, 8th Dist. Cuyahoga No. 83509, 2004-Ohio-2974, ¶ 56, quoting Rogers v. Hill, 124 Ohio App.3d 468, 471, 706 N.E.2d 438 (4th Dist.1998). “Therefore, as long as a seller does not engage in fraud, these two principles, caveat emptor and the ‘as is’ clause, bar any claims brought by a buyer.” Id.
Caveat emptor survived the death of Latin for a reason. “Let the buyer beware” has been a central tenet of contract and property law for almost 500 years. Buyers can and should be aware of hidden defects. It is nearly impossible to discover every flaw and defect in a house, but if a buyer waives the right to inspect they can also wave goodbye to any possible claims down the road.
Scott Heasley is a litigation and business attorney at Meyers, Roman, Friedberg & Lewis. If you have questions regarding legal matters affecting you or your business, Scott can be reached at sheasley@meyersroman.com or here.


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STATE of Minnesota, Respondent, v. Antonius HUDSPETH, Appellant.
*293 Mark D. Nyvold, St. Paul, for appellant.
Hubert H. Humphrey, III, Atty. Gen., St. Paul, and Susan Gaertner, Ramsey County Attorney, Darrell C. Hill, Assistant Ramsey County Atty., St. Paul, for respondent.
Defendant was convicted of first-degree murder and aggravated robbery for killing one man and robbing another in separate incidents on October 5, 1993. He was sentenced to consecutive prison terms of life plus 68 months. On appeal he seeks an outright reversal of his convictions on the ground that the evidence that he intentionally aided or abetted the commission of the offenses was legally insufficient. Failing that, he seeks a new trial on the ground that the trial court erred in certain evidentiary rulings, including the admission of evidence of defendant's participation in a prior aggravated robbery, and also erred in communicating with the jury in open court in defendant's absence. Finally, even if his convictions are affirmed, defendant seeks a reduction in his consecutive sentence for aggravated robbery from 68 months to 48 months. We affirm.
There is no merit to defendant's contention that the evidence of his guilt was insufficient and that, therefore, his convictions should be reversed outright.
Defendant, Carlos Smith and Shane Pierson rode with John Edmondson from Minneapolis to the area of King's Market, on the northwest corner of Selby and Milton in St. Paul. Marcus Jackson and the robbery victim, Raymond Barnett, lived a block north of the store, at the northeast corner of Dayton and Milton. As they left the store and headed for home, Jackson talked briefly with the driver, Edmondson, whom he knew. Jackson also recognized Smith and Pierson, but not defendant. As Jackson and Barnett approached and were about to enter their home, they were approached on foot by Smith, Pierson and defendant. Jackson went in the house but Barnett remained outside. Smith approached Barnett from behind, put a gun to his head and ordered him to the ground. When Barnett turned, Smith hit him in the head with the gun, knocking him to the ground. Barnett felt someone going through his pockets and heard one of them, he thought defendant, scream, "Shoot him." He also believed defendant hit him on the head with his fist. After taking Barnett's pager and shoes and ripping off his pants, the men walked down Milton toward the store, "cheering, whistling, yelling loud" as they did so.
Dural Woods, the murder victim, was standing outside the store when the three *294 men arrived there. The three men approached Woods, one of them said "jack move" (which is a street name for robbery), and they grabbed Woods. Woods resisted, saying "Get off of me." Smith then shot Woods in the head. After Woods fell, Smith shot him several more times. Woods, who died, sustained two gunshot wounds to the head, one in the neck area and one in the abdomen. After attacking Woods, the three men, still whooping it up as if their team had just scored a touchdown, jumped in the car driven by Edmondson and sped off.
Shortly after hearing a "shots fired" call on the police radio, St. Paul police officers spotted the car on Lexington Avenue headed onto westbound I-94. The officers followed the car toward Minneapolis and lawfully stopped it in Minneapolis after observing it speed and twice cross the highway lanes from the left side almost all the way over to the right shoulder. Police did not find the gun, which apparently was abandoned somewhere between the scene of the killing and the scene of the arrest, but did find evidence in the car connecting the men to the robbery of Barnett.
Defendant testified in his own defense, claiming that it was Edmondson, not defendant, who was with Smith and Pierson during the robbery of Barnett and during the attack on Woods that resulted in the murder of Woods. Defendant claimed specifically that he was in an alley answering a call of nature when the men robbed Barnett and that he was passively waiting at the corner of Selby and Milton when the other three men arrived at the King's Market corner and attacked Woods.
A number of state's witnesses, however, identified defendant as a participant in both the robbery of Barnett and the murder of Woods. Barnett himself identified defendant and testified that he believed it was defendant who urged Smith to shoot him. Peter Hajjar, who lived across the street from Barnett and who had observed the robbery from a second floor window, identified defendant at the scene of the arrest. He also testified that he watched the three men as they walked toward the store and saw the three men attack and shoot Woods, then run away cheering and yelling. Dennis Presley and Michael Kirkwood, both eyewitnesses to the murder, also identified defendant as being one of the three men who participated in the murder.
Considering all of the evidence in the light most favorable to the verdicts, we have no hesitancy in concluding that there was sufficient evidence for the jury to conclude beyond any reasonable doubt that defendant intentionally participated in both crimes. Therefore, defendant is not entitled to an outright reversal of his convictions.
Defendant bases his alternative claim for a new trial on a number of alleged trial errors, including error in the admission of other-crime evidence under Minn.R.Evid. 404(b) and violation of defendant's right to be present at all stages of the trial.
The other-crime evidence admitted by the trial court pursuant to Minn.R.Evid. 404(b) was evidence that a little over two weeks before the current offenses defendant actively participated with others in an aggravated robbery of another man in Minneapolis. There is no need for us to address in any detail the general issue of the admission of other-crime evidence pursuant to Rule 404(b). We have done so in a number of recent decisions, including State v. Bolte, 530 N.W.2d 191 (Minn.1995); State v. Wermerskirchen, 497 N.W.2d 235 (Minn.1993); and State v. Frisinger, 484 N.W.2d 27 (Minn. 1992). Here defendant clearly was present at the scene of the crimes. The issue is not whether defendant was present but whether he was an intentional participant or an unwitting, *295 passive nonparticipant. The evidence that defendant intentionally participated in a somewhat similar armed robbery just a little over two weeks earlier was highly relevant evidence tending to rebut defendant's claim that he was innocently involved and that the eyewitnesses were mistaken in identifying him as one of the active participants.
Defendant complains further about the trial court's admission of testimony by a police officer that he had talked with defendant the week of March 27, 1994, shortly before trial began, and that there were noticeable differences between how defendant appeared during that meeting and how he appeared at trial. Defendant argues that the state presented this evidence to create the impression that he changed his appearance to frustrate any efforts to identify him and contends the testimony should have been excluded for discovery violations of Minn. R.Crim.P. 7.01 and 9.01, subd. 1(2), (3). We see no point in addressing these arguments because the officer's testimony concerning defendant's changed appearance was cumulative to the other extensive and properly admitted evidence concerning defendant's changed appearance. In view of the overwhelming evidence of defendant's guilt, there is no reasonable possibility that any error in admitting the officer's testimony prejudiced defendant.
Defendant also complains about the trial court's exclusion of testimony that a defense investigator was currently employed as a law clerk for a trial judge in an outstate county. The trial court excluded as irrelevant the reference to the current employment of the witness. We believe the trial court's ruling is sustainable pursuant to Minn.R.Evid. 401-403.
Defendant points next to the admission of testimony by one of the officers who followed the getaway car that he suspected someone threw something out of the car at a certain point. The testimony was not admitted as expert opinion testimony by the officer but rather was merely offered as a nonexpert opinion or inference drawn from his observations. See Minn.R.Evid. 701. The trial court did not abuse its discretion in admitting the evidence.
Finally, defendant claims that the trial court erred by responding to several jury questions in open court in the presence of the attorneys but in defendant's absence. Defendant argues that this violated his right to be present. Since the record does not include any waiver by defendant, we agree that there was a violation of defendant's right to be present. State v. Ware, 498 N.W.2d 454, 457 (Minn.1993). However, the error clearly was harmless beyond a reasonable doubt because the trial court's answers were neutral and nonsubstantive and could not have played a significant role in the verdict. Id. at 458; see also United States v. Reynolds, 489 F.2d 4, 7-8 (6th Cir.1973), cert. denied, 416 U.S. 988, 94 S. Ct. 2395, 40 L. Ed. 2d 766 (1974).
In summary, the trial court committed no prejudicial error; therefore, defendant is not entitled to a new trial on any of the grounds advanced.
Defendant's final contention is that the trial court erred in imposing a 68-month sentence for the aggravated robbery, 20 months more than the presumptive sentence for the offense by one with defendant's criminal history score. We find no error. The offense was not a typical aggravated robbery but was one in which there was gratuitous violence and a gratuitous directive (fortunately not followed) by one of the participants (apparently defendant) to shoot the victim.
In summary, defendant received a fair trial and was properly convicted of and sentenced for both first-degree murder and aggravated robbery.
 Defendant contends that the trial court improperly sustained an objection to a question whether Kirkwood, who pleaded guilty to a felony charge in connection with a totally unrelated offense, would receive any benefit from the sentencing judge for having testified against defendant. Any response by the witness, an assistant prosecutor, would have been speculative. In our view, it was sufficient that the jury was informed that the prosecutor would inform Kirkwood's sentencing judge of his cooperation. The jury was free to take that into account in assessing Kirkwood's credibility, but was not required to reject Kirkwood's testimony. State v. Poganski, 257 N.W.2d 578, 581 (Minn.1977).

matches: v. v. v. v. v. v. v.


This civil action is before the Court pursuant to 28 U.S.C. § 636(b), the Rules of this Court, and by the Order [Docs. 49, 64] of the Honorable Thomas A. Varlan, United States District Judge, for disposition of defendant Conway Mason's Motion to Exclude and Strike the Deposition of Dr. Bruce Shack [Doc. 47], and the plaintiff's Motion to Continue. [Doc. 61] On October 17, 2008, the parties appeared before the Court for a hearing on the instant motion. Attorney John Eldridge appeared on behalf of the plaintiff, attorney Benjamin Lauderback appeared on behalf of defendant Mason, and attorney John Duffy appeared on behalf of defendants Jones and Morgan. For the reasons set forth more fully below, the motions [Docs. 47, 61] will be denied.
Defendant Mason moves the Court to exclude from evidence the deposition of Dr. Shack. As grounds, the defendant states that the deposition failed to meet the procedural requirements of the Federal Rules of Civil Procedure, and thus the testimony elicited during the deposition is unreliable and inadmissible. The defendant further argues that the exhibits made to Dr. Shack's deposition were submitted five days after the pretrial disclosure deadline in this matter. The deposition at issue was taken by telephone. Plaintiff's counsel and the court reporter were located in Knoxville, Dr. Shack and counsel for defendant Mason were located in Nashville, and counsel for defendants Jones and Morgan was at a third location. The parties agreed to a telephonic deposition, but defendant Mason contends that there was no agreement to suspend the other procedural requirements of the Federal Rules of Civil Procedure.
Within the United States or a territory or insular possession subject to United States Jurisdiction, a deposition must be taken before: (A) an officer authorized to administer oaths either by federal law or by the law in the place of examination; or (B) a person appointed by the court where the action is pending to administer oaths and take testimony.
Unless the parties stipulate otherwise, a deposition must be conducted before an officer appointed or designated under Rule 28. The officer must begin the deposition with an on-the-record statement that includes: (i) the officer's name and business address; (ii) the date, time, and place of the deposition; (iii) the deponent's name; (iv) the officer's administration of the oath or affirmation to the deponent; and (v) the identity of all persons present.
Fed.R.Civ.P. 30(b)(5)(A). Rule 30 further provides that "[t]he parties may stipulate — or the court may on motion order — that a deposition be taken by telephone or other remote means. For the purpose of this rule and Rules 28(a), 37(a)(2), and 37(b)(1), the deposition takes place where the deponent answers the question." Fed.R.Civ.P. 30(b)(4). Thus, under the Rules, a telephonic deposition is deemed to occur at the location of the testifying witness, and the deposition must be taken before an officer authorized to administer the appropriate oath.
Defendant Mason contends that, because, in this instance, the court reporter was in Knoxville, while the testifying witness was in Nashville, the deposition was not taken before an authorized officer, and thus the deposition was invalid. The defendant cites two cases in support of his motion: United States v. Ruiz Castro, 92 F.3d 1519, 1532-33 (10th Cir. 1996), overruled on other grounds by United States v. Flowers, 464 F.3d 1127, 1130 n. 1 (10th Cir. 2006); and Loucas G. Matsas Salvage Towage Maritime Co. v. M/T Cold Spring I, Nos. CIV.A. 96-0621, CIV. A 96-0931, 1997 WL 102491 (E.D. La. Mar. 5, 1997). However, both of these cases involved telephonic depositions where the testifying witness was located outside the United States, and part of the issue before each of those courts was whether the court officer was authorized to administer an oath to a witness testifying in a foreign country. Additionally, the Ruiz Castro court was faced with additional procedural issues, including whether the proper treaties were in place to allow the telephonic deposition in question to occur. Thus, both of the cases relied on by the defendant are somewhat distinguishable from the instant case, as in the instant case no issue has been raised as to whether the court reporter was authorized to administer the oath in question, but only whether the oath administered was valid when the court reporter was in Knoxville while the witness was in Nashville.
The Court finds the case of Hudson v. Spellman High Voltage, 178 F.R.D. 29, 32 (E.D.N.Y. 1998) instructive. The Hudson court was faced with a request by a plaintiff to take the telephonic depositions of multiple witnesses in multiple locations, but the plaintiff could not afford to have an officer on location with each witness to administer the oath. Id. The Hudson court held that rather than having an officer on site with each testifying witness, it would be acceptable for the plaintiff to have one officer on location with plaintiff and defense counsel, and that the officer could administer the oath telephonically to the remote witnesses. Id. The Court notes that the Hudson case is distinguishable from the instant case, because in Hudson the plaintiff sought leave of the court prior to taking the depositions, whereas in the instant case, the depositions occurred without prior leave of the Court or agreement of the parties.
In the instant case, the Court finds particularly relevant the fact that counsel for defendant Mason was on location with the testifying witness. Thus, counsel was able to directly observe the witness and ensure that the witness was not receiving coaching or otherwise proceeding in an improper manor. Defense counsel's presence on location with the witness greatly alleviates any concerns as to the reliability of the witness's testimony. In addition, the witness was administered an oath in this matter, though the oath was administered telephonically rather than in person. However, in this instance, the Court finds no evidence that the telephonically administered oath was disregarded by Dr. Shack, nor is there any evidence that the defendants were in some way prejudiced by the remote presence of the court reporter.
During the hearing, defense counsel relied on the case of Phye v. Thill, No. 06-1309-MLP, 2007 WL 2681106 (D. Kan. Sept. 7, 2007). The Phye case represents another instance where a court denied a party leave to conduct telephonic depositions of witnesses in a foreign country where there would be no officer of the court present to administer the oaths to, and confirm the identity of, the witnesses. The Court finds this case to also be distinguishable from the instant case. At the hearing, defense counsel stated that he had no reason to doubt the identity of witness in question. In addition, the Court finds that the Phye court's concerns as to the reliability of the testimony being offered were sufficiently guarded against by the presence of defense counsel at the deposition site.
Thus, after considering the arguments of counsel, the Court finds that while the deposition was procedurally flawed, the flaws were not so substantial or prejudicial as to warrant the striking of the deposition. The Court in no way condones plaintiff's counsel's failure to comply with the Federal Rules of Civil Procedure, but the Court finds that there is simply no evidence that the testimony at issue was rendered unreliable by these irregularities, nor is there any evidence that the defendants were prejudiced by the irregularities. Similarly, the Court recognizes that the plaintiff failed to comply with the Scheduling Order's pretrial disclosure deadline, but, given the parties' agreement to conduct the deposition beyond the discovery deadline, the Court does not find that a five day delay in compliance warrants the exclusion of the witness in question. Accordingly, the defendant's motion [Doc. 47] is hereby DENIED.
The plaintiff moves the Court to continue the trial in this matter, currently scheduled to begin on October 21, 2008. As grounds, the plaintiff states that he has sustained injuries to his face and head and argues that his injuries might improperly affect the jury's decision in this matter. The defendants oppose the motion, arguing that the plaintiff's cosmetic injuries are not sufficient to warrant continuing the trial and disrupting the schedules of the witnesses prepared to appear.
The Court notes that there is no argument that the plaintiff is medically incapable of appearing at trial, but rather, the plaintiff's motion rests solely on a fear that the jury will be prejudiced by the plaintiff's injuries. The Court finds that the risk of prejudice to the plaintiff can be reduced or eliminated simply by withholding from the jury the source of the plaintiff's injury. The Court believes that it is not the injury itself which might prejudice the plaintiff, so much as the circumstances surrounding the injury. Accordingly, the plaintiff's motion [Doc. 61] is hereby DENIED. Should the parties be concerned that the jury might be prejudiced by the injuries, they have leave to explore the possibility of such prejudice during voir dire, though the defendants shall not be allowed to describe the circumstances surrounding the injuries, other than to indicate that the injuries were not caused by the defendants, unless the plaintiff opens the door to such discussion.


text:
cambiht(e); adj. Crested :-- Cambihte helme crista cassidis (= cristata casside?; the passage is: Gigantem crista cassidis indutum, Ald. 71, 33.) Wrt. Voc. ii. 86, 79: 19, 10.
cammoc. Add :-- Cammocc (printed -e; v. Wülck. Gl. 300, 27) peucidanum, Wrt. Voc. i. 68, 63. Cammuc gotuna, ii. 42, 32. Snáda cammuces, Lch. iii. 28, 28. Commuc, 54, 21. Cammoc, ii. 270, 1.
camp. Add :-- Se camp (certamen) in þæs mannes breóste, Gr. D. 18, 3. Se stranga wiga, S. Paulus, sóhte þone feld þæs campes (certaminis campum), 110, 16. Fulfremede campe (compe) perfecto agone, Bd. 1, 7; Sch. 27, 22. Hé wolde deófol gelaþian tó campe wiþ hine, Bl. H. 29, 20. Mid heora geatwum gegyrede efne swá hié tó campe féran woldon, 221, 29. Ic wæs on ðæ-acute;m heardan campe hér on worlde, 225, 31, 32. Niwe campas and gewin nova certamina, Gr. D. 122, 22. [v. N. E. D. camp.] v. ge-, weorold-camp.
camp-dóm. Add :-- Mannes líf is campdóm ofer eorðan (militia est vita hominis super terram), for ðan þe æ-acute;lc . . . bið on gewinne wið ðone deófol, Hml. Th. ii. 454, 26: i. 418, 9 : Hml. S. 23, 86. Campdómes militiae, An. Ox. 868: 750. Compdómes, Txts. 180, 18: Rtl. 8, 15. Wæ-acute;pnu campdóme[s] úres ná flæ-acute;sclice synd the weapons of our warfare are not carnal, Scint. 207, 16. Campian on Godes campdóme, Hex. 34, 12. Hét se cwellere þæs cáseres cempan geoffrian . . . þá wæ-acute;ron on þám campdóme (soldiery) Cappadonisce cempan Hml. S. 11, 16. Hé wæs gewenod tó wæ-acute;pnum and campdóme fyligde (followed the profession of arms), 31, 17. Þæ-acute;ra cempena suna wurdon genamode tó þám ylcan campdóme (military service) þe heora fæderas on wæ-acute;ron, 32: 100.
camp-ealdor, es; m. A captain :-- Campealdra magistri militum, An. Ox. 4433.
camp-hád. Add :-- Campháde tyrocinio, An. Ox. 616. Gúðlác of þæ-acute;re gedréfednysse þissere worulde wæs gelæ-acute;ded tó campháde þæs écan lífes, Guth. 24, 23. In camphád sendan in militiam mittere, Gr. D. 298, 8.
campian. Add :-- Ic campude certaui, An. Ox. 1349. Campa dimica, Germ. 393, 175. Oumpadi (alt. from compadi) decertarent, Jn. L. 18, 36. Winnan and campian militare, R. Ben. 96, 23. Hé wæ-acute;pn gegráp mid tó campienne, Bl. H. 167, 1. Campiende agonizans, Wrt. Voc. ii. 2, 51. (1) to fight for, (a) with dat. :-- Þá þe campiað cynincge eorðlícum qui militant regi terreno, Scint. 61, 1, 2: Hex. 34, 15, 17. Oð þis ic campode þé, geþafa nú þ-bar; ic Gode campige, S. 31, 103. Gif ðú wylle campian on Godes campdóme, ne campa ð æ-acute;nigum búton Gode ánum, Hex. 34, 12. Næ-acute;nig compigende Gode nemo militans Deo, Rtl. 60, 11. (b) with for :-- Wé willað campian for ðínre hæ-acute;lo, Ap. Th. 9, 20. Tó campienne for Crístes geleáfan, Hml. S. 5, 151. (2) to fight with, serve with :-- Him ne ðuhte fremfullic þ-bar; hé fénge tó þæ-acute;re gife, and syððan ne campode mid þám cásere, Hml. S. 31, 102. (3) to fight with, against (wiþ, ongeán), (a) with dat. :-- Hé wið þám gástum campode, Guth. 24, 12. In him wunnon and campedon (certabant) þá yfel his líchaman wið þám weorce his ælmesdæ-acute;da, Gr. D. 320, 18. Campian ongeán ðám deófle mid geleáfan, Hml. Th. ii. 402, 15. (b) with acc. :-- Se eorðlica kempa kampað mid his wæ-acute;pnum ongeán gesewenlice feónd, and ðú scealt campian wið ðá ungesewenlican fýnd, Hex. 34, 24. Mid gástlican wæ-acute;pnan campian wið deófol, Ll. Th. ii. 388, 5: Hml. S. 17, 162. Campian wið leahtras, Hml. Th. i. 360, 17. Tó campigenne ongeán þone feónd, Hml. S. 5, 242. v. ge-campian.
camp-lic; adj. Military :-- Camplic meniu a body of soldiers, Hml. S. 31, 1237. Camplicere mihte tribunicae potestatis, An. Ox. 11, 156: 12, 9. Réþe, camplice tyrannici (militonum commanipulares), 858.
campung, e; f. Fighting, contest :-- Campung certatio, An. Ox. 7, 346. Compung concertatio, Wrt. Voc. ii. 20, 40. Ic mid þín ILLEGIBLE wæ-acute;pnum getrymed on þínum féþan fæste stande and for þínre campunga (a better reading is: for ðé campige. v. Bl. N. 5, 40), Bl. H. 225, 34.
camp-weorud (-od), -wered. Add :-- Ðæt compweorod (-uearod, L.) cohors, Jn. R. 18, 12. Þæs hiofoncundan compwerodes caelestis militiae, Lch. i. lxviii, 5. Ymbseald mid þon heofonlican campweorode, Bl. H. 11, 24.
camp-wísa, an; m. A superintendent of public games; agonotheta, Hpt. Gl. 405, 4.
Cananéisc. Add :-- Þone Cananisca (Channanesca, L.). Cananaeum, Mk. R. 3, 18.
canc mockery, derision :-- Cance gannatura, irrisione, Hpt. Gl. 510, 73. [v. N. E. D. cank.] v. ge-canc; cancettan; cincung.
cancer (-or). Dele 'II. a crab &c.,' and add :-- Hine æt se cancor, and his weleras wæ-acute;ron áwlæ-acute;tte mid ealle, and eác his nosu fornumen mid áttre, Hml. S. 6, 284. Hym of þám andwlytan nyðer áfeóll se cancer þe hyne æ-acute;r swýðe ámyrred hæfde, Hml. A. 183, 70. Þone cancor (GREEK) þæ-acute;ra tóða, Lch. i. 294, 21.
cancer-hæbern. Dele, and see hæfern.
cancer-wund, e; f. The wound made by cancer :-- Wið cancorwund, Lch. i. 370, 7. Wið cancorwunda, genim þás wyrte . . . lege tó ðám wundum, ealne þone bite þæs cancres heó áfeormað, 296, 20.
cancettan. Add: , to chatter, mock, deride :--Cancet (printed -er) clamet, Wrt. Voc. ii. 23, 14. Cancettende gannature, 40, 51. v. canc, and next word.
cancet(t)ung. For Cot. 58 substitute :-- Cancetunge cachinnos, Wrt. Voc. ii. 24, 16.
candel. Add :-- Condel funalia, Wrt. Voc. ii. 109, 34. Candel candela, i. 284, 34: 81, 34. Gif þé smælre candelle geneódige, þonne bláw þú on þínum scytefingre, Tech. ii. 120, 20. Acolitus is gecweden sé þe candele oððe tapor byrð, Ll. Th. ii. 348, 4. Gyf man mæ-acute;te þ-bar; hé byrnende candele geseó, gód þ-bar; byð, Lch. iii. 176, 12. Ontend þreó candela, and drýp þ-bar; wex þriwa, 286, 6. Swá hwelc mon swá condella onbærne on ciricean of his gestreónum on mínum noman, Shrn. 101, 28. v. weax-candél.
candel-bryd (=-bred?) a flat candlestick (?) :-- Gyf þé smælre candelle geneódige . . . Ðonne þ candelbryd habban wille, ástrehtre þínre winstran handa ofsete hý eclinga mid þínre swí(þ)ran, Tech. ii. 120, 20-23.
candel-leóht. For C. R. Ben. 53 substitute :-- Se æ-acute;fen swá sý gefadod þæt hý candelleóhtes æt ðám gereorde ne behófien, ac eallu ðing be dæges leóhte gefyllede sýn, R. Ben. 66, 7.
Candelmæsse-æ-acute;fen Candlemas-eve :-- Æ-acute;rest on Eásteræ-acute;fen, and óðre síðe on Candelmæsseæ-acute;fen, Ll. Th. ii. 256, 28.
candel-snytels. l. -snýtels. v. snýtan.
candel-stæf. Add :-- Candelstæf candelabrum, Wrt. Voc. i. 81, 4. Leóht scínende ofer candelstæf háligne lucerna splendens super candelabrum sanctum, Scint. 226, 1: Gr. D. 99, 13. Man sceal habban candelstafas, Angl. ix. 264, 18. [Wyc. candel-staf: O. H. Ger. kentila-stab.] v. next word.
candel-sticca. Add :-- Gyf þú candelsticcan habban wille . . . , hald þíne hand sámlocene, swylce þú candelstæf hæbbe, Tech. ii. 120, 18. II. sylurene candelsticcan and II. ouergylde, Cht. Th. 243, 34. II. mycele gebónede candelsticcan, and VI. læ-acute;ssan candelsticcan gebónede, 429, 32.
candel-twist. Add :-- Candeltwist, -thwist emunctoria, Txts. 59, 745. Candeltwist (printed camel-), Wrt. Voc. ii. 29, 31: 143, 49.
candel-weoc, e ; l. -weóce, an, and add :-- Funalia, candela oððe candelweócan, Wrt. Voc. ii. 36, 18 (cf. funalia, i. lucernarum stuppae, 27).
cannon seems to represent Lat. coenum in :-- Wæs þ-bar; lond ádrígad and cannon palus sicca et ceno habundans, Nar. 20, 23.
canon. Add: -- Béte hé swá canon tæ-acute;ce, Ll. Th. i. 168, 7. On sumum canone hit cwyð .xii. geár, ii. 230, 5. Hí gesetton ðone canon þæt nán mæssepreóst on his wununge wíf hádes mann næbbe, Hml. Th. i. 97, 29. Canones beódaþ, Hml. S. 36, 387.
canon-bóc a book of canons :-- Hæbbe æ-acute;lc bisceop canonbóc tó sinoðe, Ll. Th. ii. 316, 14.
canonic, es; m. Add :-- Ná þ-bar; án be munecum, ac eác swylce be árwyrðum canonicum þe tó munuclífe cumað, R. Ben. 111, 6.
canonic; adj. Canonical :-- Sé ðe tóbrecð þá canonican gesetnysse, Hml. Th. ii. 96, 13.
cantel-cap. l. -cáp, and add: [v. N. E. D. cantel-cape, -cope.] v. next word.
canter-stæf, es; m. A staff used by a cantor (v. preceding word)] :-- III. canterstafas III. baculi cantorum (baculi quibus in ecclesia utebantur cantores, Migne), Cht. Th. 429, 23.

matches: v. v. v. v. v. v. v. v. v. v.


Plaintiff Crystalee C. Protheroe filed this pro se action against her former husband, Joseph J. Masarik, alleging that since the time of their divorce in 2014 and her loss of child custody, he has prevented Plaintiff from having a meaningful relationship with their two children. Plaintiff asserts this Court has subject matter jurisdiction based on numerous statutory and constitutional grounds, articles of the United Nations Declaration of Human rights, and diversity of citizenship. Plaintiff seeks leave to proceed in forma pauperis (Doc. 3). On April 12, 2018, Magistrate Judge Teresa J. James entered a Report and Recommendation that this Court deny Plaintiff's motion to proceed in forma pauperis and dismiss Plaintiff's Complaint under 28 U.S.C. § 1915(e)(2)(B)(ii) for lack of subject matter jurisdiction and for failure to state a plausible claim (Doc. 4). Plaintiff timely filed an objection and response (Doc. 6).
The Court has reviewed Judge James's analysis of the issues under Fed.R.Civ.P. 72(b)(3), and agrees with the proposed disposition of Plaintiff's Complaint. Plaintiff previously filed a civil action in 2016, 16-cv-2387-CM, against a number of defendants including a Kansas District Court Judge and state government employees involved in the state court proceedings concerning Plaintiff and the custody of her children, as well as her former husband Masarik. That case was dismissed by Judge Murguia for failure to state a claim upon which relief can be granted; although Plaintiff listed various federal statutes and constitutional rights, she did not state a claim under any federal statute against any named defendant for which relief may be granted in federal district court. Judge Murguia cited the tradition of federal courts avoiding review of substantive state law claims, especially in domestic relation cases such as the 2016 case brought by Plaintiff.
Judge James accurately notes that this action repeats many of the allegations from Plaintiff's 2016 case, but against only Masarik. Consequently, there is no question that the subject of Plaintiff's allegations falls within the ambit and expertise of the state courts, and that Plaintiff's Complaint fails to allege facts that would support this Court having jurisdiction over her claim against Defendant. In her objection, Plaintiff maintains that Masarik's conduct has deprived her of her constitutional, federal, and human rights, citing several cases where plaintiffs successfully brought actions involving parental and familial rights. But those cases can be distinguished as they involved challenges to specific statutes or procedures, or claims under 42 U.S.C. § 1983 against defendants who were acting “under color of state law.” In this case, Plaintiff's claims are against her former husband, a private citizen, and thus this Court cannot exercise federal jurisdiction over this lawsuit.
IT IS THEREFORE ORDERED BY THE COURT that Plaintiff's objection (Doc. 6) is overruled. The Court adopts the Report and Recommendation filed April 12, 2018 (Doc. 4). Plaintiff's Motion to Proceed in forma pauperis (Doc. 3) is denied. Plaintiff's claims are dismissed without prejudice for lack of subject matter jurisdiction.
See Protheroe v. Pokorny, Case. No. 16-cv-2387, Doc. 60.
See, e.g., Troxel v. Granville, 530 U.S. 57, 72-74 (2000) (holding state nonparental visitation statute unconstitutionally infringed on parents' fundamental right to make decisions concerning the care, custody, and control of their children); Hardwick v. Cty. of Orange, 844 F.3d 1112, 1120-21 (9th Cir. 2017) (denying social workers' motion for summary judgment based on absolute and qualified immunity in § 1983 action brought by child alleging county social workers maliciously used perjured testimony and fabricated evidence in juvenile dependency proceedings that resulted in mother losing custody of child); In re Marriage of Hutchinson and Wray, 281 P.3d 1126, 1131 (Kan.Ct.App. 2012) (discussing procedural due process right to evidentiary hearing prior to ruling on case manager's recommendations in child custody dispute).