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562 U.S. 844 | C. A 11th Cir. Certiorari denied. |
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8 Cl. Ct. 470 | OPINION
LYDON, Judge:
In this Indian Claims case, the Walker River Tribe, one of six organized tribes of the Northern Paiute Nation, seeks damages based on defendant's alleged failure to honor its obligation to provide an irrigation system sufficient to irrigate 10,-000 acres of land on the Walker River Reservation in Nevada. The court has before it defendant's motion for summary judgment asserting that this irrigation claim by the Walker River Tribe is outside the jurisdiction of this court because it is an aggregate of individual Indian claims as opposed to a unitary tribal claim. Plaintiff opposes defendant's motion contending that its claim is tribal in nature. After review of the facts, pertinent statutes, documents, relevant case law, and the submissions of the parties, and after oral argument, the court concludes that it does have jurisdiction over plaintiff's irrigation claim and thus defendant's motion for summary judgment must be denied.
I.
The following is a narrative of those facts which the court finds relevant to the jurisdictional issue presented in this case.
Plaintiff, the Walker River Tribe, is a tribal organization formed under the Indian Reorganization Act of June 18, 1934, 48 Stat. 987, 988, 25 U.S.C. § 476, 477. The Secretary of the Interior has acknowledged plaintiff's authority to represent its enrolled members. Plaintiff was previously known as the Pah Ute Indians of the Walker River Reservation.
The Pah Ute Indians were originally members of the aboriginal Northern Paiute Nation. The aboriginal territory of the Northern Paiutes encompassed more than 20 million acres in the northwestern section of the United States. In the mid-1800s the Department of the Interior selected tracts of land within the Northern Paiute Indian territory to serve as reservations for various tribal entities. The federal government then acted to induce the various Indian groups to move and settle upon the new reservations. Northern Paiute Nation v. United States, 225 Ct.Cl. 275, 278, 634 F.2d 594, 596 (1980). Eventually the Pah Ute Indians, now the Walker River Tribe (plain tiff), were induced to settle on the Walker River Reservation in Nevada.
The Walker River Reservation was originally set apart by the Department of the Interior for the Pah Ute Indians in 1859. See 27 Ind.Cl.Comm. 39 (1972). This reservation is located in west central Nevada, about 70 miles southeast of Reno, Nevada. It originally encompassed approximately 320,000 acres of which Walker Lake, which was 22 miles long and 8 miles wide, was a part. About two-thirds of the land area of the reservation was rugged mountain and timber country. However, there was also several thousand acres of riverbottom land along both sides of the Walker River which flows from the northwestern corner of the reservation in a southeasterly direction for about 25 miles before emptying into Walker Lake. The entire reservation is located in the Walker River Subbasin. The area is quite arid and farming required irrigation from the Walker River. The Walker River, which begins in the Sierra Nevada mountains in California, west of the reservation, is fed primarily by melting snow pack. As a result, river flows generally are large in the spring and early summer and low during the remaining parts of the year.
In their aboriginal territory the Northern Paiute Indians lived on hunting, fishing, and the gathering of wild food. They were not farmers. However, when the Pah Ute Indians settled on the Walker River Reservation there was not enough suitable land to sustain their former lifestyle. Both the government and the Indians soon realized that the Indians would have to begin farming as their primary means of subsistence. It was evident that the Indians would need financial and technical assistance from the government in order to acquire seed and farming tools and to develop the necessary irrigation system to water the arid ground. It was clear at this early stage that an irrigation system of some sort would be necessary if farming were to be undertaken in this arid region. Rough irrigation ditches were dug in the late 1800's.
The State of Nevada had insufficient resources to help the Indians develop their new agricultural way of life. The population in the Walker River Reservation, which at one time reached 1500 Indians in 1872, dwindled to around 500 in 1875 due to crop failures precipitated by an inadequate irrigation system, insufficient funding, and encroachment by white men. The population on the Reservation averaged around 500 from 1876 to 1908 (population ranged from a low of 381 to a high of 601). However, there was insufficient irrigated farm land (1000 acres) to support the Indians who lived on the reservation.
In order to expand the amount of farmland on the reservation, the irrigation system, consisting basically of ditches and temporary dams, had to be expanded. In order to expand the irrigation system adequately a dam or reservoir was needed to store the surplus spring flows of the Walker River to be used in the dryer months. Such a reservoir would hopefully alleviate any concerns about upstream users of the Walker River water. Such diversions began to seriously eat into the normal flow of the Walker River in the late 1800's. However, it was felt that a dam with the capacity to store the excess spring flows would solve this diversion problem. Government officials suggested that the mineral lands, located on nonfarming lands of the Walker River Reservation, be sold in order to finance such a reservoir and attendant irrigation project.
In a June 19, 1900, letter, Frank M. Con-ser (Conser), Superintendent of Indian Schools, set out his recommendations regarding the Walker River Reservation to the Commissioner of Indian Affairs. First, he recommended that the rich mineral lands on the reservation be sold for about 50 cents per acre ($125,000) and the proceeds be utilized "for the construction of a storage reservoir, irrigating ditches, purchase of cattle, farm implements etc." for the benefit of the Indians on the reservation. This recommendation would reduce the reservation to about 75,000 acres, including all the irrigable land and common pasture land suitable for grazing cattle. He found potentially 8,000 to 12,000 acres of irrigable land. He recommended that this irrigable land be surveyed into 20-acre parcels and allotted to the members of the tribe.
Conser stated, however, that without an adequate irrigation system, including a reservoir, the allotment efforts would be "a useless expenditure of money." He stated further:
All of the Indians belonging to the reservation should be compelled to reside thereon if it were possible for them to make a living there but in fact the surveying and allotting of land to them on the reservation in addition to what is now being cultivated will be a useless expenditure of money unless they are assured of a sufficient amount of water to enable them to raise a crop and the only way to do this is to provide a means of storing the surplus that comes down the Walker River during the spring months. When the snow in the mountains melts in the spring there is always an abundance of water in the river that cannot be utilized but as soon as the snow is gone, usually about the middle of June, the supply in the river on the reservation diminishes very rapidly, generally by about the middle of July the river is dry and year by year the regular supply from the river is gradually diminishing because of the increased appropriation of the water in the valleys above the reservation. I observed this particularly in Mason Valley which adjoins the reservation on the West where new land is being broken, new ditches are being constructed and old ones extended and enlarged.
The only way of assuring these Indians of a permanent supply of water for the land they should have under irrigation is by a storage reservoir. [Footnote added.]
Conser felt that providing the Indians with an adequate agricultural means of subsistence would keep them on the reservation and away from the "evil influences" the Indians often encountered in the surrounding towns.
While the Pah Ute Indians on the Walker River Reservation were suffering due to insufficient irrigable land on which to grow an adequate food supply and while certain government officials were making recommendations to improve the Indians' situation, a gradual movement was also stirring to reduce the size of the Walker River Reservation so that white men could gain access to the valuable minerals located on a portion of the reservation. In 1891, the Nevada Legislature adopted a joint resolution urging that the reservation be reduced in size while maintaining "all agricultural and grazing lands and water privileges" for the Indians. Several bills were also introduced in the United States Congress in subsequent years which were designed to open up these mineral lands.
Efforts to reduce the size of the Walker River Reservation were unsuccessful until government officials, such as Conser {see also note 3), advocated a reduction in size of the reservation accompanied with a proposal to benefit the Pah Ute Indians with the development of an irrigation system to provide an adequate water supply to irrigate the reservation's farm lands. These government officials also advocated allotting the irrigable land on the reservation to the members of the Tribe. These recommendations eventually resulted in the passage of the Act of May 27, 1902, 32 Stat. 245, 260-61, the Joint Resolution of June 19, 1902, 32 Stat. 744 and the Act of June 21, 1906, 34 Stat. 325, 358, along with the adoption of the Agreement of July 20, 1906.
The Act of May 27, 1902, 32 Stat. 245, 260-61 set out the plan to allot the irrigable land on the Walker River Reservation and the subsequent cession by the Indians of the reservation land in excess of the needed irrigable land. The Act stated in pertinent part:
That the Secretary of the Interior be, and he is hereby, directed to allot from the land on the Walker River Reservation in Nevada susceptible of irrigation by the present ditches or extensions thereof twenty acres to each head of a family residing on said reservation, the remainder of such irrigable land to be allotted to such Indians on said reservation as the Secretary of the Interior may designate, not exceeding twenty acres each; and when a majority of the heads of families on said reservation shall have accepted such allotments and consented to the relinquishment of the right of occupancy to land on said reservation which can not be irrigated from existing ditches and extensions thereof and land which is not necessary for dwellings, school buildings or habitations for the members of said tribe, such allottees who are heads of families shall receive the sum of three hundred dollars each to enable them to commence the business of agriculture, to be paid in such manner and at such times as may be agreed upon between said allottees and the Secretary of the Interior. And when such allotments shall have been made, and the consent of the Indians obtained as aforesaid, the President shall, by proclamation, open the land so relinquished to settlement, to be disposed of under existing laws. And the money necessary to pay said Indians is hereby appropriated out of any money in the Treasury not otherwise appropriated.
The Joint Resolution of June 19, 1902, 32 Stat. 744, added to the Act of May 27, 1902 by providing that, before the Pah Ute Indians gave up their land in excess of the needed irrigable land, they were also entitled to some grazing land. The resolution stated in relevant part:
In addition to the allotment in severalty of lands in the Walker River Indian Reservation in the State of Nevada, the Secretary of the Interior shall, before any of said lands are opened to disposition under any public land law, select and set apart for the use in common of the Indians of that reservation such an amount of nonirrigable grazing lands therein at one or more places as will subserve the reasonable requirements of said Indians for the grazing of live stock.
The Act of June 21, 1906, 34 Stat. 325, 358 further added to the Act of May 27, 1902 and the Joint Resolution of June 19, 1902. In addition to the allotted irrigable land and nonirrigable grazing land, Congress directed the Secretary of the Interior to "select and set apart for the use in common of the Indians of said reservation such tract or tracts of timber land therein at one or more places as will subserve the reasonable requirements of said Indians for fuel and improvements" before any excess reservation lands were to be opened for disposition.
The three acts of Congress set out above essentially indicate to what the Pah Ute Indians were entitled in exchange for ceding the remainder of the Walker River Reservation lands to the government. An irrigated allotment for each head of a family, the $300 for each head of a family, the grazing land, and the timberland constituted consideration for their agreement to relinquish the right to occupy the remainder of the reservation land which was to be opened to the public.
The Agreement of July 20, 1906 formalized the Pah Ute Indians' consent to the cession of a large portion of their reservation land in exchange for the consideration set out above. The agreement was signed by 108 Indians. The Act of May 27, 1902, required a majority of the heads of families on the reservation to accept the allotments and to consent to the relinquishment of the right to occupy the remaining reservation land. The Agreement of July 20, 1906 stated that there were 140 heads of families living on the reservation and that a majority thereof had consented to the allotment and relinquishment of land as required by the Act of May 27, 1902.
The Agreement of July 20, 1906, signed by 108 Pah Ute Indians and William E. Casson, Special Allotting Agent acting for the United States, ceded about 268,000 acres of the total 320,000 acre reservation to the United States. This 268,000 acres included the valuable mineral lands which many had toiled for so long to open up to prospecting and mining. These lands were opened for entry pursuant to a Proclamation of the President dated October 29, 1906.
After ceding 268,000 acres of reservation land to the government, the Indians were left with about 51,000 acres. Of that 51,-000 acres 10,000 acres of irrigable lands were allotted and 280 acres were for agency, school and church purposes, as set out in the Act of May 27,1902, and the July 20, 1906, Agreement. Pursuant to the Act of June 19, 1902, 37,400 acres were set aside as common grazing land. Finally, 3,300 acres of timber land were retained pursuant to the Act of June 21, 1906.
Between the passage of the Act of May 27, 1902, and the signing of the Agreement of July 20, 1906, the government made efforts to allot the irrigable lands and to study means to provide the necessary irrigation. In a letter dated October 30, 1905, and approved by the Secretary of the Interior on November 3, 1905, William E. Cas-son (Casson) was informed that he had been assigned to make the allotments on the reservation. Pursuant to the Act of May 27, 1902, the letter designated that each Indian of the reservation receive a 20-acre allotment if possible. Eventually, 504 allotments were made by Casson which comprised 10,080 acres.
Measures were also taken from 1902 to 1906 to prepare for the provision of an adequate irrigation system to supply vital water to the irrigable lands which would be allotted as required by the Act of May 27, 1902. The existing irrigation facilities were studied and plans were developed to extend the existing ditches to provide irrigation for all the allotted lands. These studies pinpointed the areas of irrigable land which should be allotted to the Indians and it was from that irrigable land that Casson made the allotments. In the March 3, 1903, Act, supra, Congress made a general appropriation of $150,000 for " the construction of ditches and reservoirs, purchase and use of irrigating tools and appliances, and of water rights on Indian reservations, in the discretion of the Secretary of the Interior and subject to his control ".
While plans were being made regarding the extension of the existing irrigation system, concerns again surfaced regarding the adequacy of the flow of the Walker River during the growing season to provide sufficient water for an irrigation network. Apparently, upstream users of the river were diverting more and more water. These actions of the upstream users combined with naturally low flows in the months of July through October essentially cut off the water for irrigation in those vital months. It became clear that allotting "irrigable" land to the Indians would be worthless to the Indians without the assurance that a sufficient water supply would exist.
In a July 22, 1905, letter, the Acting Commissioner of Indian Affairs directed James R. Meskimons (Meskimons), Superintendent of Irrigation, to study the irrigation problems on the Walker River Reservation. He was informed that about 10,000 acres would have to be irrigated. In his report dated January 19, 1906, Meskimons reported that only a little over 1400 acres of land within the Reservation were being cultivated to which water, if available, could reach through the existing irrigation system. However, since the white farmers living upstream were diverting so much water, the Indians received little or no water especially during the dry months. There were additional "tillable" lands on the reservation, which only received water during high water periods, which could also be irrigated.
One of Meskimon's duties in studying the irrigation system on the reservation was to ascertain the Indians' water rights as against those of the upstream users. Meskimons concluded in his January 19, 1906, report in pertinent part:
[I]t is my opinion that if we succeed in getting a priority of right for 300 or 400 acres and a pro rata right for the other 1000 acres which is already under cultivation, that it is as much as we can expect, and that we must look to the excess or flood water, or to pumps for the irrigation of the tract of land before mentioned [10,000 acres].
Therefore, based on Meskimons views, the Indians would be unable to acquire sufficient water rights to irrigate 10,000 acres using an extension of the existing irrigation system.
Since Meskimons concluded that the Indians would not be able to obtain the necessary water right priorities, he suggested alternative sources of irrigation in his reports of January 19 and March 2, 1906. In addition to suggesting the pumping of water from wells or Walker Lake, Meskimons also suggested the construction of a reservoir on a natural dry lake site. Such a reservoir could store the river's excess flow and provide a water supply sufficient to irrigate the 10,000 acres even during the drier months. Apparently, the United States controlled the area where the proposed reservoir would be located and Mesk-imons urged the government to secure the site for the Indians.
A subsequent study of this water supply problem by William H. Code (Code), Chief Irrigation Engineer, dated July 7, 1906, confirmed Meskimons' conclusions regarding the Indians' limited water rights priority. Code also confirmed that the reservoir site selected by Meskimons was ideal. However, Code found that a private individual owned a great deal of the land where the potential reservoir would be located. In addition, apparently the United States Reclamation Service, which controlled a part of the site, had no intention of surrendering it for use by the Indians on the Walker River Reservation. Code proposed an alternative irrigation plan which would irrigate 5,000 acres of the allotted land by enlarging and extending an existing irrigation canal and by seeking permission from the State of Nevada "to appropriate 150 cubic feet of water per second of the surplus waters of Walker River for the benefit of the Indians for the contemplated enlarged canal ." Code realized this proposal would not meet all of the irrigation needs of the allotted lands but it was a beginning and he observed a "half a loaf is better than no loaf."
On July 18,1906, the Acting Commissioner of Indian Affairs concurred in Code's recommendation. The Acting Secretary of the Interior subsequently approved the recommendations in a letter dated July 25, 1906. It is clear, however, that the Indians on the Walker River Reservation never received an irrigation system capable of irri gating all of their allotted acreage (i.e., 10,000 acres). Defendant does not dispute this fact. Indeed, it is undisputed that the Indians never received even the "half a loaf" mentioned above. This was clearly indicated in a February 1972 Department of the Interior report which stated that a proposed Rehabilitation and Betterment Program for the Walker River Reservation would add irrigation works to serve 1,250 additional acres over the 2,750 acres then being served. The report indicated that the proposed additional irrigation project would mean that "[wjater can be delivered to Indian landowners holding twenty-acre trust allotment tracts, completing in part, the true intent of an agreement dated May 25 [sic] [July 20], 1906."
On December 26,1950, the Northern Paiute Nation and six present day organized tribes, including the Walker River Tribe, plaintiff herein, filed a petition under the Indian Claims Commission Act asserting a variety of claims including the one at issue in this case. On April 24, 1957, the Indian Claims Commission (ICC) ordered that the claims for compensation for the taking of the Northern Paiute aboriginal lands be severed. These land claims were designated Docket No. 87. The remainder of the claims, including the one at bar, was reasserted in an amended petition designated Docket No. 87-A. After the land claims in Docket No. 87 were completely adjudicated, proceedings in Docket No. 87-A again commenced. After at least one claim in Docket No. 87-A was separated out and adjudicated, the ICC granted a motion to allow the petition in Docket No. 87-A to be amended and supplemented. This amended petition, which set forth various claims in ten separate counts, was filed with the ICC on July 23, 1975. Defendant's answer to said amended petition was filed with the ICC on February 18, 1976. On March 2, 1978, Docket No. 87-A was transferred from the ICC to the Court of Claims, this court's predecessor.
Each of the ten counts in Docket No. 87-A constitute separate causes of action. Several of these claims or counts have been separated out and completely adjudicated. The claim at issue in this case is part of plaintiff's claim under Count IV in the petition. Plaintiff asserts under Count IV that defendant failed to provide the Indians a sufficient water supply to irrigate its lands. Plaintiff's brief in this case denotes its claim as one for damages resulting from defendant's failure to construct an irrigation system for the Tribe with the capacity to supply water to the allotted irrigable lands on the reservation.
II.
In its motion for summary judgment, defendant contends that plaintiff is essentially asserting the claims of individual Indian allottees and not the Tribe as required by 25 U.S.C. § 70a (1976). Defendant asserts that such individual claims are beyond the jurisdiction of the Indian Claims Commission Act, 25 U.S.C. § 70, et seq., and thus outside the jurisdiction of this court. If plaintiff is asserting the claims of individual Indians, defendant is correct is stating that such claims are not within this court's jurisdiction. See Absentee Shawnee Tribe of Oklahoma v. United States, 165 Ct.Cl. 510, 514 (1964); Cherokee Freedmen v. United States, 161 Ct.Cl. 787, 788 (1963).
Defendant bases its assertion that plaintiff's claim is really that of the individual Indian land allottees on the argument that the water use rights appurtenant to the 10,000 acres of allotted irrigable land passed to the individual Indians and a failure to supply adequate water for irrigation brings about individual claims of the allot-tees injured by defendant's admitted failure to act. Defendant contends that its failure to provide an adequate water system only injured the individual allottees to whom the irrigable lands and' water rights appurtenant thereto passed pro rata. The Tribe, defendant alleges, was not injured by defendant's acts.
Plaintiff, on the other hand, argues that the primary issue in this case is defendant's admitted failure to provide the Indians on the Walker River Reservation with an irrigation system which would provide an adequate water supply to the 10,000 acres of irrigable land on the reservation. Plaintiff contends that the Act of May 27, 1902, and the Agreement of July 20, 1906, obligated defendant to provide the Tribe with an irrigation system sufficient to irrigate 10,000 acres. Defendant's failure to provide such a system to the Tribe damaged it by depriving the Tribe of a valuable asset, the irrigation system, which plaintiff claims would have belonged to the Tribe. Plaintiff contends that defendant's failure to meet its obligations to the Tribe brings this claim within the confines of 25 U.S.C. § 70a(2).
The court agrees that the wrong at issue at this time is defendant's failure to supply an adequate irrigation system. Defendant was obligated by the Act of May 27, 1902, to provide such a system to the Pah Ute Indians, subsequently renamed the Walker River Tribe. It can be said that defendant's failure to construct the irrigation system either violated that Act or constituted a breach of the Agreement of July 20, 1906, to supply such a system in exchange for the Indians giving up a great deal of their reservation lands. Defendant's breach of its obligation, however characterized, is not in question. What is in question is whether this claim belongs to the individual Indians or to the Tribe.
Defendant contends that the injuries plaintiff is attempting to redress are those of individual Indians in that the deprivation of a sufficient water supply hurt the individual allottees who could not farm their lands. The court agrees that the generality of Count IV of plaintiff's petition could be read to include a claim for damages to the individual Indians. If those were the only damages plaintiff is seeking in this case, this court would be without jurisdiction to hear the claim. See Absentee Shawnee Tribe of Oklahoma, supra, 165 Ct.Cl. at 514-15; Cherokee Freedman v. United States, supra, 161 Ct.Cl. at 788-89.
Plaintiff, however, in its brief explains that it is seeking damages for the injury suffered by the Tribe in not receiving the irrigation system defendant was obligated to provide it. Plaintiff denies that it is asserting any claim at this time for the deprivation of water which could have been utilized to farm the irrigable reservation lands. Plaintiff asserts that it has a separate tribal claim based only on defendant's failure to provide the Tribe with an irrigation network.
In this regard plaintiff's claim, as honed by its brief, is much like that presented by the plaintiff in Fort Sill Apache Tribe v. United, States, 201 Ct.Cl. 630, 477 F.2d 1360 (1973) cert. denied, 416 U.S. 993, 94 S.Ct. 2406, 40 L.Ed.2d 772 (1974). In Fort Sill Apache Tribe, the plaintiff brought a claim for damages arising from 27 years of internment allegedly suffered by its tribal members. However, the court found that the plaintiff was not "seeking damages for false arrest and imprisonment of each member of the tribe, apparently recognizing that these would be little more than multiple individual claims and therefore outside the jurisdiction of the Indian Claims Commission." Id. 201 Ct.Cl. at 634-35, 477 F.2d at 1362 (citations omitted). Instead, the plaintiff in Fort Sill Apache Tribe presented a "novel argument" that the alleged years of internment of its tribal members resulted in injuries to the "tribe's traditional power and structure ." Id. The plaintiff was alleging a "separate and distinct compensable injury to the tribe recoverable under both clause 2 and clause 5 of 25 U.S.C. § 70a." Id. 201 Ct.Cl. at 635, 477 F.2d at 1362.
Plaintiff, in this case has similarly asserted that it, the Walker River Tribe, was injured by defendant's failure to construct an adequate irrigation system. It has, at least implicitly, denounced the fact that it is joining, into one claim, many individual Indian claims for damages based on the lack of an adequate irrigation system. Such a claim would clearly be outside the jurisdiction of the court. Id. 201 Ct.Cl. at 637, 477 F.2d at 1363-64; Cherokee Freedmen v. United States, supra, 161 Ct.Cl. at 789. Therefore, as the Court of Claims found in Fort Sill Apache Tribe, the critical issue is "whether there is a distinct cause of action and right resting with the tribe itself." Fort Sill Apache Tribe v. United States, supra, 201 Ct.Cl. at 637, 477 F.2d at 1364.
In Fort Sill Apache Tribe, the court concluded that the plaintiff's claim based on damage to "the power structure and viability of the tribal unit" was not the assertion of a group interest or right within the intendment of clause 2 of 25 U.S.C. § 70a. Id. 201 Ct.Cl. at 638-39, 477 F.2d at 1364. The court found that the Act was not intended to "include a separate and distinct tribal right to recover for injuries so closely tied to those suffered personally by individual Indians, which injuries are the whole basis for any damage to the tribe as such." Id. 201 Ct.Cl. at 639, 477 F.2d at 1365. Plaintiff, in this case, argues that its claim for damages is not so closely linked to the potential claims of the individual Indians to be subsumed by such claims. Plaintiff contends that defendant obligated itself by the Act of May 27, 1902, and the Agreement of July 20, 1906, to construct for the Tribe an irrigation system. Irrespective of the fact that the right to use the water carried by the irrigation network itself may have passed to the allottees giving them individual claims, plaintiff argues it was damaged by defendant's failure to provide the Tribe with the actual system. Such a system, plaintiff asserts, would have belonged to the Tribe.
Although plaintiff seeks relief under both clauses 2 and 5 of 25 U.S.C. § 70a, the court concludes that plaintiff's claim is more appropriately within the confines of clause 5 of 25 U.S.C. § 70a. Clause 5 is the "fair and honorable dealings" provision. The Court of Claims set out the criteria for a claim of a breach of fair and honorable dealings in Aleut Community of St. Paul Island v. United States, 202 Ct.Cl. 182, 480 F.2d 831 (1973). The court stated: "There must be a showing that the United States undertook an obligation, a 'special relationship', the obligation was to the Tribe, that the United States failed to meet its obligation, and that as a result the Tribe suffered damages." Id. 202 Ct.Cl. at 196, 480 F.2d at 839. The Court of Claims stated in a previous case: "[T]he United States is held liable under this 'fair and honorable dealings' clause where 'by its own acts, it has undertaken special duties which it has failed to fulfill.' Lipan Apache Tribe v. United States, 180 Ct.Cl. 487, 502 (1967)." Fort Sill Apache Tribe v. United States, supra, 201 Ct.Cl. at 640, 477 F.2d at 1365. The issue, as presented by plaintiff in this case, is whether defendant undertook a special duty or obligation to provide the Tribe with an irrigation system. If defendant undertook no special duty or obligation to the Tribe itself, then plaintiff's claim is outside the pale of the fair and honorable dealings provision of 25 U.S.C. § 70a.
As stated earlier, plaintiff asserts that defendant's obligation or special duty to provide the Tribe with an irrigation system arose under the Act of May 29, 1902 and the Agreement of July 20, 1906. The irrigation system was part of the consideration for the Indians agreement to cede 268,-000 acres of land to defendant. The court agrees with plaintiff's assessment of the 1902 Act and 1906 Agreement.
It is arguable that any obligation undertaken by defendant in this case flowed to the individual Indians. The Act of May 27, 1902 referred to the consent of the Indians and not the Tribe. The consent was to be from a majority of the heads of families and not from a Tribal representative. Defendant asserts that communications from the superintendents of the Walker River Reservation both before and after 1902 comprise the legislative history or contemporaneous administrative construction of the 1902 Act. It claims that these documents indicate that the irrigation system was built for the allottees and not the Tribe. The Agreement of July 20,1906, set forth herein, stated that the Indians, for the consideration stated, ceded and relinquished their reservation lands. The stated consideration included the allotments and $300 for each family head which clearly was consideration to the individual Indians. Therefore, the literal statutory obligation would appear to flow to the individual Indians and the fact that the consideration primarily went to the Tribal members and not the Tribe would suggest that any obligation defendant had was to individual Indians. Such an obligation would not give rise to a tribal claim. However, such a reading of the 1902 Act and 1906 Agreement would be violative of some well-established rules of law.
The general rule is that "[wjhatever title the Indians have is in the tribe, and not in the individuals, although held by the tribe for the common use and equal benefit of all the members." Cherokee Nation v. Hitchcock, 187 U.S. 294, 307, 23 S.Ct. 115, 120, 47 L.Ed. 183 (1902) (as quoted in Wilson v. Omaha Indian Tribe, 442 U.S. 653, 665, 99 S.Ct. 2529, 2536, 61 L.Ed.2d 153 (1979); United States v. Jim, 409 U.S. 80, 82, 93 S.Ct. 261, 263, 34 L.Ed.2d 282 (1972)). Felix Cohen, one of the preeminent commentators on Indian law wrote as follows on this ownership rule:
The interests that Indian tribes hold in real and personal property represent a unique form of property right in the American legal system, shaped by the federal trust over tribal land and statutory restraints against alienation. Tribal property is a form of "ownership in common;" it is not analogous to tenancy in common, however, or other collective forms of ownership known to Anglo-American private property law because an individual tribal member has no alienable or inheritable interest in the communal holding. Rather, tribal property interests are held in common for the benefit of all living members of the tribe, a class whose composition continually changes as a result of births, deaths, and other factors. The manner in which a tribe chooses to use its property can be controlled by individual tribal members only to the extent that the members participate in the governmental processes of the tribe. [F. Cohen, Handbook of Federal Indian Law, 472 (1982 ed.)] [emphasis added and footnotes omitted],
Cohen went on to state:
It is well established that title to the communal land or personal property of a tribe resides in the tribe itself and is not held by tribal members individually. An individual member cannot convey title to any particular tract of tribal land and has no right against the tribe to any specific part of tribal property, absent a federal law or treaty granting vested rights to individual members. In observing that the Cherokee lands were held in communal ownership, the Supreme Court stated: "[T]hat does not mean that each member had such an interest, as a tenant in common, that he could claim a pro rata proportion of the proceeds of sales made of any part of them." [citing Cherokee Trust Funds, 117 U.S. 288, 308, 6 S.Ct. 718, 727, 29 L.Ed. 880 (1886) ].
A member's right to tribal property is no more than prospective and inchoate unless federal or tribal law recognizes a more definite right. An individual has no vested right in tribal land unless some designated interest in it has been set aside for him or her severally or as a tenant in common. [F. Cohen, supra, at 605-06] [emphasis added and footnotes omitted].
In this case the Secretary of the Interior selected the 320,000 acre Walker River Reservation and induced the Pah Ute Indians to settle on it. Given the above rule regarding tribal ownership of land, it is clear that the tribal entity {see infra note 8) which settled on the reservation was the beneficial owner of the reservation lands as opposed to the individual Indians. {See infra note 12 and accompanying text.) Also, accepting the rule that individual members of the Tribe could not convey title to any particular tract of tribal land, the Tribe in this case would have had to agree to cede the land to the government under the Act of May 27, 1902, and the Agreement of June 20, 1906. This is true even though the 1902 Act referred to a majority of the heads of Indian families agreeing to relinquish their right to occupy the reservation land which could not be irrigated and the 1906 Agreement appeared to seek the consent of individual Indians to cede a portion of the reservation lands. The law and common notion of the day indicated that Indian land was tribally owned, and it is in that light that the 1902 Act and 1906 Agreement must be read. See Oliphant v. Su-quamish Indian Tribe, 435 U.S. 191, 206, 98 S.Ct. 1011, 1019, 55 L.Ed.2d 209 (1978).
Having concluded that the Tribe was the beneficial owner of all the reservation land, any consideration set out in the July 20, 1906, Agreement as well as any governmental obligation to the Indians in the Act of May 27, 1902, flowed to the Tribe in exchange for its cession of the 268,000 acres of nonirrigable reservation land. Though some of the consideration may have flowed directly to the individual Indians, i.e., the $300 for each family head and the allotments as provided in the 1902 Act, the irrigation system itself which would serve all of the irrigable land held by the allottees passed to the Tribe.
In agreeing to exchange with the beneficial owner of the land, the Tribe, certain benefits for the Tribe's members, including an irrigation system in exchange for the Tribe's land, defendant did by its own acts undertake a special duty or obligation to the Tribe. Such an obligation to the Tribe makes this claim a tribal claim. This satisfies the first criterion for establishing a breach of fair and honorable dealings as set out in Aleut Community of St. Paul Island v. United States, supra, 202 Ct.Cl. at 196, 480 F.2d at 839. See also Fort Sill Apache Tribe v. United States, supra, 201 Ct.Cl. at 640, 477 F.2d at 1365.
Further support for the court's conclusion that this is a tribal claim can be found in United States v. Creek Nation, 201 Ct.Cl. 386, 476 F.2d 1290 (1973). In Creek Nation, the plaintiff Tribe ceded 5,200,000 acres of land to the government pursuant to a treaty. The principal consideration for this cession was 2,187,200 acres of the same land being reserved from the cession for the use by and promised fee title possession (or value thereof) for individual Creek chiefs and family heads. Id. 201 Ct.Cl. at 388, 476 F.2d at 1291. The plaintiff claimed it received insufficient consideration for its 5,200,000 acres of land under the treaty, because most of the individual Creeks were unable to acquire patents on the reserved 2,187,200 acres of land, and requested damages equaling the fair market value of the full 5,200,000 acres. The defendant did not object to paying the difference between the treaty consideration and the fair market value of the 3,012,800 acres (5,200,000 minus 2,187,200) not returned to individual Creeks. However, defendant objected to and appealed the Indian Claims Commission's order (26 Ind.Cl. Comm. 410 (1971)) requiring it to pay the fair market value for the lands given to individual Creeks. One of the primary issues which was addressed by the Court of Claims in that case was whether the claim for compensation for the 2,187,200 acres held by individual Creeks was a tribal claim or a composite of individual Indians' claims. Id. 201 Ct.Cl. at 389, 476 F.2d at 1291-92.
In discussing whether the claim in the Creek Nation case was tribal in nature the court stated: "[W]e hold that under the facts and circumstances of this case where the whole individual-reserves scheme constituted unconscionable treaty consideration [because it should have been known that patents were not likely to vest in the individual Creeks], the tribe can present a valid claim under the Indian Claims Commission Act." Id. 201 Ct.Cl. at 409, 476 F.2d at 1304. The court noted that the Creeks were neither seeking compensation for frauds committed against them individually nor claiming damages for individual losses. Instead, quoting the Indian Claims Commission, the court wrote:
The rights which have been allegedly violated are those of the tribe. The 5,200,000 acres was tribal property. The treaty by which it was ceded to the United States was negotiated by representatives of the tribe on behalf of the tribe. Although rights of individuals may also have been violated the wrongdoings complained of were only to the tribe. 26 Ind.Cl.Comm, at 434 [Id., 201 Ct.Cl. at 409-10, 476 F.2d at 1304] [emphasis added].
Plaintiff, in this case, like the Creek Nation above, ceded its tribal land to the government. Though there has been no allegation of unconscionable consideration in this case, plaintiff's claim is analogous, in that it is essentially claiming failure of consider-átion in exchange for its ceded land.
Defendant attempts to distinguish this case from United States v. Creek Nation, supra, by arguing that the land ceded by the Creek Nation including the acreage which went to individual Creeks, was tribal land whereas the 10,000 acres of irrigable land on the Walker River Reservation had been allotted prior to the 1906 Agreement and thus was no longer Tribal land at the time of the 1906 cession. United States v. Arenas, 158 F.2d 730, 749-50 (9th Cir. 1946), cert. denied, 331 U.S. 842, 67 S.Ct. 1531, 91 L.Ed. 1853 (1947); First Nat'l Bank of Decatur, Neb. v. United States, 59 F.2d 367, 369 (8th Cir.1932). Even assuming that defendant's factual and legal assertions regarding this issue are true, the court finds defendant's argument unpersuasive. The Creek Nation ceded 5,200,000 acres of land it owned. The Creek Nation brought a claim based on unconscionable consideration for this land it ceded. Plaintiff in this case ceded 268,-000 acres of land it owned. Plaintiff's claim in this case is that defendant failed to provide the Tribe with the consideration it had promised the Tribe for the 268,000 acres. The 10,000 acres are not at issue. Therefore, defendant's attempt to distinguish United States v. Creek Nation, supra, must be rejected.
Defendant also argues that the case of Sac and Fox Tribe v. United States, 9 Ind.Cl.Comm. 301 (1961), aff'd, 159 Ct.Cl. 247 (1962), cert. denied, 375 U.S. 921, 84 S.Ct. 266, 11 L.Ed.2d 165 (1963) controls in this case and establishes that plaintiff's claim is not tribal in nature. In Sac and Fox Tribe, pursuant to a treaty, the Sac and Fox Tribe ceded a very large area of land in exchange for a relatively small sum of money and a small tract of land to be used by the half-breeds of the Sac and Fox Tribe. The defendant subsequently failed to survey the half-breed tract and determine the eligible claimants to that land, as the plaintiff claimed defendant was obligated to do, all to the injury of the Tribe. 9 Ind.Cl.Comm. at 313.
The Indian Claims Commission found that the Tribe was not asserting a tribal claim on a tract of land which it no longer owned. It stated: "[T]he United States created the half-breed tract at the behest of the Sac and Fox nation, not for the tribe's benefit or the Government's benefit, but for the sole benefit of the Sac and Fox half breeds." Id., 9 Ind.Cl.Comm. at 313 (as quoted in Sac and Fox Tribe v. United States, supra, 159 Ct.Cl. at 254. The Commission concluded:
Royce Area 120 was created for the direct benefit of the Sac and Fox half breeds, and for them alone. Any failure on the part of the defendant to survey the tract and determine the rightful claimants (assuming there was such an obligation), was of genuine concern to the half breeds and worked an injury upon them and not upon the tribe. Any potential damage suits inured to the benefit of individual half breed owners and claimants. Even assuming the capacity of the petitioners herein to present the accumulated grievances of all the Sac and Fox half breeds with respect to subject tract, this fact alone does not convert a collection of individual claims into a tribal interest cognizable within the meaning of the Indian Claims Commission Act. [Id., 9 Ind.Cl.Comm. at 314] [footnote omitted].
The Court of Claims concurred in this conclusion. Sac and Fox Tribe v. United States, supra, 159 Ct.Cl. at 254 n. 11.
Defendant reads the Sac and Fox Tribe decision as standing for the proposition that if individual Indians are the third-party beneficiaries óf a "contractual obligation" to the Tribe then any attempt to enforce that contractual obligation is a claim of the individual Indian beneficiaries and not the Tribe itself. Defendant contends that the irrigation system in this case is analogous to the half-breed tract consideration for the cession of tribal lands in Sac and Fox Tribe. Based on this contention, defendant asserts that any obligation it may have had to provide the Tribe with an irrigation system was essentially for the benefit of the individual Indian allottees and thus this claim is in reality a collection of individual claims outside this court's jurisdiction. See also Sioux Tribe v. United States, 89 Ct.Cl. 31 (1939).
The court, however, concludes that Sac and Fox Tribe v. United States, supra, is distinguishable from the case at bar. First, the court finds that the irrigation system in this case which defendant was obligated to provide was for the Tribe's benefit and not for the benefit of a small portion of the Pah Ute Indian Tribe. The court concludes that the irrigation system itself would have become a communal tribal asset which could be used by the individual Indians. Such an asset was for the benefit of the Tribe. The half-breed tract in Sac and Fox Tribe, on the other hand, was totally divorced from the Tribe and no longer capable of being considered tribal property.
Another point which distinguishes this case from Sac and Fox Tribe v. United States, supra, is the nature of the claim asserted in each ease. In Sac and Fox Tribe, the Tribe filed a claim based on defendant's failure to survey the half-breed tract and to determine the rightful claimants to that land. That claim concerned land no longer owned by the Tribe and injuries suffered strictly by individuals. In this case, however, the Tribe has filed a claim essentially for failure of consideration in exchange for its land. Such a claim is clearly distinguishable and has been recognized as a tribal claim in the analogous case of United States v. Creek Nation, supra. Therefore, the court concludes that Sac and Fox Tribe is not controlling in this case.
Plaintiff's counsel at oral argument brought another case to the court's attention regarding the issue of whether a tribal claim exists in this case. That case is Pueblo of Isleta v. Universal Constructors, Inc., 570 F.2d 300 (10th Cir.1978) where the Tenth Circuit found that the tribe could bring a claim on behalf of individual Indians whose property was injured due to the blasting of the defendant because the court found that the tribe had a reversionary interest in the same property. Though the facts in Pueblo of Isleta are distinguishable from those in the ease at bar, the court finds that the decision generally supports the court's finding that plaintiff's claim in this case is tribal in nature.
To counter plaintiff's introduction of Pueblo of Isleta v. Universal Constructors, Inc., supra, at oral argument defendant's counsel asserted that Assiniboine & Sioux Tribes v. Montana, 568 F.Supp. 269 (D.Mont.1983) supports defendant's view that plaintiff's claim is not a tribal one. In Assiniboine & Sioux Tribes, the district court rejected the plaintiff tribe's position that it could bring tax refund claims on behalf of individual Indians based on the parens patriae doctrine. Id. 568 F.Supp. at 277. In addressing defendant's reliance on Assiniboine & Sioux Tribes, the court notes that the Tenth Circuit specifically refused to decide whether the Tribe in Pueblo of lsleta v. Universal Contractors, Inc., supra, could have successfully brought its action based on its parens patriae relationship to its members. Id. 570 F.2d at 302 n. 2. The court also notes that the district court in Assiniboine & Sioux Tribes v. Montana, supra, in addressing the plaintiff's parens patriae jurisdictional theory stated: "The court is convinced, however, that the entity purporting to advance the claim must be acting on behalf of the collective interests of all its citizens." Id. 568 F.Supp. at 277 (citing Louisiana v. Texas, 176 U.S. 1, 19, 20 S.Ct. 251, 257, 44 L.Ed. 347 (1900) (emphasis in original). The tax refund claim being asserted by the tribe in that case on behalf of its members was only for a limited number of Indians. However, plaintiff's claim in the case at bar is essentially on behalf of all the tribal members and thus, if anything, the ruling in Assiniboine & Sioux Tribes supports this court's finding of a tribal claim in this case.
Defendant disagrees with any assertion that the irrigation system at issue would in fact have been owned by the Tribe. Defendant implicitly argues that if the Tribe had no property interest in the irrigation system then: (1) the individual Indian allot-tees may be considered the primary beneficiaries of defendant's obligation to supply the irrigation system and thus this claim is really that of the individual Indians, and/or (2) the Tribe suffered no damages which is the third required criterion of a breach of fair and honorable dealings. Aleut Community of St. Paul Island v. United States, supra, 202 Ct.Cl. at 196, 480 F.2d at 839. If the Tribe was not damaged, then its claim is not cognizable in this court. See e.g., Bay Mills Indian Community v. United States, 35 Ind.Cl.Comm. 32, 49-50 (1974). The court, however, is persuaded that the legal niceties of ownership are not controlling in this case and that plaintiff had a compensable interest in the irrigation system which defendant failed to provide. See F. Cohen, supra, at 472, 605-06.
Defendant argues that it and not the Tribe owned the portion of the irrigation system actually installed and would have owned the entire project when and if it was constructed. See United States v. Morrison, 203 F. 364, 365 (C.C.D.Colo.1901). Defendant asserts that its control over Indian irrigation projects in general indicates its ownership of such systems. Defendant also cites legislative history which refers to certain Indian irrigation projects as "Federal projects". See H.R.Rep. No. 2130, 70th Cong., 2d Sess. 2 (1929). Defendant also points out the purchasers of some of the allotted land on the Walker River Reservation were required to reimburse the government for accrued construction, operation, and maintenance costs of the irrigation system. Defendant argues that if plaintiff had owned the system it would have been reimbursed for these costs. Defendant essentially contends that it only agreed to provide plaintiff with the service of providing irrigation water in exchange for the cession of its lands and that it never agreed to give plaintiff the system.
Whether plaintiff had legal title, in the strict sense, to the irrigation system is not controlling in this Indian case. The court views the irrigation system at issue as analogous to any other natural resources found on a reservation. See generally, F. Cohen, supra, at 728-36. It is the general rule that legal title to an Indian reservation is held by the United States in trust for the Tribe. The Tribe is the beneficial owner of the reservation. See United States v. Shoshone Tribe of Indians, 304 U.S. 111, 115-16, 58 S.Ct. 794, 797-98, 82 L.Ed. 1213 (1938). See also United States v. Algoma Lumber Co., 305 U.S. 415, 420-21, 59 S.Ct. 267, 270-71, 83 L.Ed. 260 (1939); Navajo Tribe of Indians v. United States, 176 Ct.Cl. 502, 550-51, n. 2, 364 F.2d 320, 322-23, n. 2 (1966); United States Department of the Interior, Federal Indian Law, 20 (1958). The natural resources on the reservation, like the reservation itself, are held in trust by the government for the Tribe arid the Tribe is the beneficial owner of these natural resources. See United States v. Shoshone Tribe of Indians, supra, 304 U.S. at 116-18, 58 S.Ct. at 797-98. See also D. Getches, D. Rosenfelt & C. Wilkinson, Federal Indian Law, 542 n. 1 (1979). Such a relationship between plaintiff and defendant regarding the natural resources on the reservation placed certain responsibilities on defendant to control and supervise the resources including the irrigation system. See Navajo Tribe of Indians v. United States, 224 Ct.Cl. 171, 186-87, 624 F.2d 981, 988-89 (1980); Navajo Tribe of Indians v. United States, 176 Ct.Cl. 502, 506, 364 F.2d 320, 322 (1966). Given these rules, the court concludes that plaintiff was at least the beneficial owner of the irrigation system and any control over that system by defendant did not diminish that ownership interest. See United States v. Algoma Lumber Co., supra, 305 U.S. at 420-21, 59 S.Ct. at 270-71.
Defendant's counsel at oral argument placed a great deal of reliance upon United States v. Morrison, supra, in support of defendant's position that it owns or would have owned the irrigation system at issue. The court finds Morrison unpersuasive in that regard. The court does not read Morrison as stating that defendant owned the irrigation system at issue in that case. The defendant, Morrison, may have alleged that the government owned the irrigation sys-' tem, but the court reads the Morrison decision as standing for the proposition that if defendant supplies the Indians with an irrigation project it has a duty to preserve that system for the benefit of the Indians. See also United States v. Walker River Irrigation Dist., supra. Therefore, the tenor of United States v. Morrison, supra, supports this court's position that plaintiff is at least the beneficial owner of any irrigation system on the reservation even though legal title thereto may be held by defendant.
In any event, whatever ownership interest plaintiff may have in the irrigation system it is clear to the court that it is a compensable interest. As the court stated earlier, the 268,000 acres ceded to the government was tribal property which could not be conveyed by the individual tribal members. See F. Cohen, supra, at 605-06. In exchange for ceding this land to defendant, plaintiff was to receive an irrigation system capable of irrigating 10,-000 acres of allotted land. Under these circumstances the court finds plaintiff has a compensable interest in the irrigation system.
In an analogous case involving timber lands and the plaintiff Tribe's interest therein the Court of Claims stated:
In determining the character and nature of the Indian interest in land created as a reservation, the circumstances surrounding the creation of that reservation, especially where the Executive order language is cryptic, should not be disregarded. The totality of the circumstances surrounding the creation of the timber reservation in 1864 clearly show that it was created to meet the timber needs of the Pyramid Lake Indian Reservation with the objectives of keeping the Indians on this Reservation, making them self-sufficient, and providing them with the materials to become civilized. This purpose and these objectives are clearly compatible with the conclusion that the 1864 Executive order conveyed to plaintiff a compensable interest in the timber reservation. See United States v. Walker River Irr. Dist., supra, 104 F.2d at 336. [Northern Paiute Nation v. United States, 225 Ct.Cl. 275, 292, 634 F.2d 594, 604 (1980).]
In Northern Paiute Nation v. United States, supra, the issue was whether timber land given to the Indians on the Pyramid Lake Reservation could be taken from the Indians by subsequent Executive order without compensation. The court concluded that said timber land could not be taken without compensation.
The court, in Northern Paiute Nation, found that the government placed the Indians on the Pyramid Lake Reservation and induced them to cease their nomadic way of life by agreeing to provide them with the necessary materials and assistance to become self-sustaining and civilized. Id. 225 Ct.Cl. at 294, 634 F.2d at 605. The materials promised included timber land and a saw mill and the promised assistance was governmental aid in running the saw mill. The court went on to state:
It is not unreasonable to believe that the Indians understood that this plan was part of the quid pro quo, i.e., acceptance of reservation life in return for assistance in civilized and self-sufficiency development. See Choctaw Nation v. United States, 318 U.S. 423, 432, 63 S.Ct. 672, 678, 87 L.Ed. 877 (1943). Under such circumstances, a special relationship was created by the 1864 Executive order, implementing this plan, between the federal government and the plaintiff. This special relationship and attendant governmental duty are sufficient to support a claim under the "fair and honorable dealings" provision, section 2, subsection (5), of the Indian Claims Commission Act. See Gila River Community v. United States, 190 Ct.Cl. 790, 794-801, 427 F.2d 1194, 1196-1200, cert, denied, 400 U.S. 819, 91 S.Ct. 37, 27 L.Ed.2d 47 (1970). Plaintiff premises its entitlement to compensation on subsection (5), as well as subsection (1) of that Act. [Id. 225 Ct.Cl. at 294, 634 F.2d at 605.]
The circumstances surrounding the promised creation of the irrigation system in this case similarly indicate that plaintiff has a compensable interest in the irrigation system. The system was to be in consideration for plaintiff ceding 268,000 acres of its reservation land. The overall objective of the government was to turn the Pah Ute Indians into farmers, keeping them on the reservation and making them self-sufficient. The Pah Ute Indians could not achieve those goals on its arid reservation lands without an irrigation system. It appears that a quid pro quo arrangement existed, i.e., an exchange of tribal lands for an irrigation system and an opportunity to become farmers. As the court found in Northern Paiute Nation v. United States, supra, such an arrangement created a tribal compensable interest in the irrigation system.
Further support for this finding of a tribal compensable interest in the irrigation system can be found in the rule that "[d]oeuments setting aside land [or other assets] for the use and benefit of Indians have uniformly been given a liberal interpretation favorable to the Indians." Id., 225 Ct.Cl. at 292, 634 F.2d at 604. (citations omitted). Whatever conflicting inferences or legal niceties may exist in this case as to the status of the irrigation system when defendant became obligated to provide it under the 1902 Act and 1906 Agreement, that which makes it possible to find that the irrigation system was set aside for the use of the Pah Ute Indians so as to create a compensable interest in said system is of greater force than any implication or inference that all defendant agreed to provide in exchange for the cession of tribal lands was the service of providing water. Id. (citing Winters v. United States, 207 U.S. 564, 576, 28 S.Ct. 207, 211, 52 L.Ed. 340 (1908)). "Any doubts as to the scope of the interest conferred on plaintiff are to be resolved in favor of the Indian wards as against the guardian United States." Northern Paiute Nation v. United States, supra, 225 Ct.Cl. at 292, 634 F.2d at 604.
Having found that the Tribe has at least a compensable interest in the irrigation system the court returns to the criteria for a claim of a breach of fair and honorable dealings as set out in Aleut Community of St. Paul Island v. United States, supra, 202 Ct.Cl. at 196, 480 F.2d at 839. First, the court has concluded that defendant through the Act of May 27, 1902 and Agreement of June 20, 1906, undertook an obligation to the Tribe of Pah Ute Indians. Second, there is no real dispute that defendant has failed to fulfill its obligation of providing the Tribe with an irrigation system capable of irrigating the 10,000 acres of allotted land. And third, due to the Tribe's compensable interest in the irrigation system, the court concludes that plaintiff was damaged by defendant's failure to construct the irrigation system it undertook a special duty to provide. Therefore, the court concludes that plaintiff's claim is a tribal claim within the "fair and honorable dealings" clause of 25 U.S.C. § 70a which is within this court's jurisdiction. See id., 202 Ct.Cl. at 196, 480 F.2d at 839.
Since the court has concluded that plaintiff's claim is a distinct tribal claim within the intendment of Fort Sill Apache Tribe v. United States, supra, 201 Ct.Cl. at 635-40, 477 F.2d at 1362-65, and since there is no dispute that defendant in fact has failed to fulfill its obligation to the tribe to provide an irrigation system capable of irrigating the allotted acreage of irrigable land, the only remaining issue to be resolved is the measure of damage.
III.
Based upon the above discussion, the court concludes that defendant's motion for summary judgment is denied. The parties are directed to advise the court whether, in light of this opinion, the water and irrigation claims of the Walker River Tribe have a probability of settlement. If there is no probability of settlement, the parties are to advise when they will be ready for trial on these claims. Such a status report shall be filed with the court by the parties, after consultation with each other, within sixty (60) days from the date of this opinion.
. This irrigation claim is only one of several claims presented by the Walker River Tribe in this case. This case also involves other claims by other tribes. See Northern Paiute Nation v. United States, 225 Ct.Cl. 275, 276 n. 1, 634 F.2d 594, 595 n. 1 (1980).
. Conser estimated the cost of a reservoir to be at least $50,000 with the necessary attendant ditch system costing about $10,000.
. Subsequent to Conser's report, other government officials recommended a similar course of action, i.e., sell parts of the reservation, and provide an improved irrigation system. In a June 3, 1901, report, Special Agent Frank C. Armstrong made such recommendations to the Secretary of the Interior. In his annual reports to the Commissioner of Indian Affairs dated August 21, 1899, and August 22, 1901, James K. Allen, Superintendent of the Indian Industrial School at Carson, Nevada, and Superintendent in Charge of the Walker River Agency, made similar recommendations.
. Congress had previously passed Acts, i.e., the Act of July 1, 1902, 32 Stat. 552, 569 and March 3, 1903, 32 Stat. 982, 997, directing that the allotment surveys be done and appropriating money to do the work.
. As of 1903, increased use of the water of the Walker River created problems. In the early days there was an abundance of water and the Indians and white settlers had little problems. As settlers upstream of the Reservation increased, the downstream reservation, and indeed the increased settlers upstream, began to experience at times an inadequate water supply. Upstream appropriators of the Walker River made adverse priority claims to the waters of said river which resulted in a suit around 1902 in the United States Circuit Court for the District of Nevada. The Secretary of the Interior, relative to this litigation, requested the Attorney General of the United States on September 23, 1903, "to take such action as may be necessary and proper to secure and protect the right of the United States and of the Indians of the Walker River Reservation, to the use of water for irrigation on said reservation." This request was honored and the United States subsequently entered the litigation to protect its water rights and the water rights of the Walker River reservation. See Un1ited States v. Walker River Irr. Dist., 11 F.Supp. 158 (D.Nev.1935), reconsid. denied, 14 F.Supp. 10 (D.Nev.1936), reversed, 104 F.2d 334 (9th Cir.1939).
. All of the claims of the Pyramid Lake Tribe, z.e., its claims in Counts VII, VIII, IX and X which were separated from Docket No. 87-A and assigned to Docket No. 87-C, were finally adjudicated by the Court of Claims on November 20, 1981. See Pyramid Lake Tribe v. United States, 229 Ct.Cl. 872 (1981). All claims of the Fort McDermitt Paiute Shoshone Tribe in Docket 87-A, i.e., its claims in Count X which were separated from Docket No. 87-A and placed in Docket No. 87-D, were finally adjudicated by this court on June 24, 1983. The "fisheries" claim of the Walker River Tribe, plaintiff herein, was separated from Docket No. 87-A, assigned to Docket No. 87-E, and was terminated by the award of a final judgment by this court on October 19, 1983.
. Though the issue of water rights is intimately involved in other aspects of this case, the court does not find the rule of Winters v. United States, 207 U.S. 564, 28 S.Ct. 207, 52 L.Ed. 340 (1908) (i.e., the doctrine of reserved water rights) and its progeny to be applicable or of great relevance to the particular issue at bar. Whether defendant's failure to provide an irrigation system gave rise to a Tribal claim or individual claims can be determined by reviewing the relevant Acts and Agreements without venturing into the nature of the water rights held by the allottees and the Tribe.
For a detailed discussion of plaintiffs water rights, the application of the Winters doctrine thereto, and the history of the Walker River Reservation see United States v. Walker River Irrigation Dist., 104 F.2d 334 (9th Cir.1939). In the above-cited case, the United States, on behalf of the Walker River Tribe, in a suit against the Walker River Irrigation District and certain upstream users of the Walker River, contended that the Walker River Reservation was entitled to enough water {i.e., a natural flow of 150 cubic feet per second) from the Walker River to irrigate some 10,000 acres of irrigable land on the reservation. The Ninth Circuit, however, held that under the Winters doctrine, the reservation was only entitled to a natural flow of 26.25 cubic feet per second for 2,100 acres of reservation land. The Ninth Circuit found that the number of Indians living on the reservation had never been large, pointing out that in 1866 the reservation had a population of about 600 and in 1939 the population was about 500, and further concluded, " the number of Indians is not increasing and it has not been shown that there is the necessity or demand for the cultivation of a larger area than 2,100 acres." The Ninth Circuit accepted these figures as "a fair measure of the needs of the reservation as demonstrated by seventy years of experience." Id. 104 F.2d at 340.
. Further support for the court's conclusion that any obligation or consideration to the Pah Ute Indians actually flowed to the Tribe can be found in the general rule that reference to the word "Indians" in the 1902 Act and 1906 Agreement is generally considered a reference to the Tribe of Pah Ute Indians. Wilson v. Omaha Indian Tribe, 442 U.S. 653, 665, 99 S.Ct. 2529, 2536, 61 L.Ed.2d 153 (1979). See also generally Morton v. Mancari, 417 U.S. 535, 551-55, 94 S.Ct. 2474, 2483-85, 41 L.Ed.2d 290 (1974).
In addition, the court notes that any doubtful expressions in statutes passed for the benefit of groups of Indians are to be liberally construed in favor of the Indians as a Tribe. Wilson v. Omaha Indian Tribe, supra, 442 U.S. at 662, 99 S.Ct. at 2535 and cases cited therein. The court construes that general rule as requiring a reading in this case of the 1902 Act and 1906 Agreement such that defendant's obligation in the 1902 Act and the consideration in the 1906 Agreement flows to the Tribe (plaintiff).
. As the court stated earlier (see supra note 8), references to "Indians" are usually construed as references to a Tribe. See Wilson v. Omaha Indian Tribe, 442 U.S. 653, 665, 99 S.Ct. 2529, 2536, 61 L.Ed.2d 153 (1979). Under this rule the 1902 Act and 1906 Agreement can be construed as dealing with the Tribe. There is evidence in the documents, which pre-dated the 1906 Agreement, submitted by plaintiff, that both State and Federal officials who met with the Indians on the Walker River Reservation dealt with individuals who the officials referred to as chiefs, captains or headmen of the Tribe. This evidence indicates that there was in fact a Tribe and tribal hierarchy that the government could and did deal with in setting up the allotments and arranging the cession of reservation lands.
. In Sac and Fox Tribe v. United States, 9 Ind.Cl.Comm. 301 (1961), aff'd, 159 Ct.Cl. 247 (1962), cert. denied, 375 U.S. 921, 84 S.Ct. 266, 11 L.Ed.2d 165 (1963), there were only 38 half-breeds out of the entire Sac and Fox Tribe eligible to own land on the half-breed tract. 9 Ind.Cl.Comm. at 311. However, in this case all the Indians belonging to the Walker River Reservation were entitled to the benefits of the irrigation system. The Indian Reorganization Act of June 18, 1934, 48 Stat. 987, 988, 25 U.S.C. § 476 at least implicitly considered the groups of Indians living on the various reservations to be tribal entities.
. The irrigation system at issue would have become a communal asset utilized by all the members of the Tribe. Though the irrigation system may have been constructed and maintained by the government, if any disputes between individual Indians arose regarding the irrigation system, presumably, as a practical matter, the Tribe would settle such disputes. This would make the irrigation system an asset of the nature of communal Indian property, the title to which resides in the Tribe and not the individual members. F. Cohen, supra, at 610. The title to such property remains in the Tribe even though used by individual members. Id. at 609. See generally Whitefoot v. United States, 155 Ct.Cl. 127, 293 F.2d 658 (1961), cert. denied, 369 U.S. 818, 82 S.Ct. 829, 7 L.Ed.2d 784 (1962). Given this rule, it is only reasonable to conclude that the irrigation system was part of the consideration which flowed to the Tribe in exchange for its cession of a substantial portion of its reservation lands because the irrigation system was an asset which was communal in nature.
. If defendant's argument was taken to its logical conclusion, there would be no such thing as a tribal claim regarding tribal property. The rule is that "[w]hatever title the Indians have is in the tribe, and not in the individuals, although held by the tribe for the common use and equal benefit of all members." Cherokee Nation v. Hitchcock, 187 U.S. 294, 307, 23 S.Ct. 115, 120, 47 L.Ed. 183 (1902) (emphasis added). If all tribal land is actually held for the equal benefit of all individual tribal members then under defendant's theory all claims regarding defendant's obligations as to tribal property would be those of the individual Indians and not the Tribe's. Such a rule is both contrary to reason and the law.
. "While title to most tribal land is held by the United States in trust, tribes such as the Pueblos of New Mexico and the Tuscarora of New York hold fee title to their land. In both instances, however, the tribe may not convey without the consent of the United States." D. Getches, D. Rosenfelt & C. Wilkinson, Federal Indian Law, 542 n. 2 (1979). There is no indication in this case that plaintiff had such a fee title to its reservation lands. However, the taking of plaintiff's land of which it was the beneficial owner is compensable. See Three Tribes of Fort Berthold Reservation v. United States, 182 Ct.Cl. 543, 561-63, 390 F.2d 686, 696-97 (1968).
. Felix Cohen recounted a portion of the history of Indian irrigation projects in his treatise on Federal Indian Law. He wrote:
"Evidence of ancient irrigation works abounds in the more arid regions of western part of the United States, indicating that irrigation was practiced by the Indian in prehistoric times. Without irrigation, much of this land is unproductive and unsuited to human life. When Indian reservations were established in this country, the Federal Government, in order to make it possible for the Indian to become self-supporting, embarked on a program of irrigation development." (F. Cohen, Federal Indian Law, 248 (1942 ed.) (footnotes omitted).
Cohen noted the role the Federal Government played in constructing and maintaining the irrigation systems.
He recounted:
"Until 1902 irrigation construction, maintenance, and operation were carried on under the direction of the reservation superintendents, with occasional assistance from local engineers temporarily employed.
"In 1906, a chief engineer was appointed and gradually since that time a technical staff and organization has been developed to supervise and carry on Indian irrigation.
"In addition to construction, operation and maintenance of systems of canals and ditches, the Indian irrigation service has supervised the construction and operation and maintenance of numerous drainage systems, pumping plants, storage and flood control dams, and miscellaneous irrigation developments in connection with subsistence gardens or homesteads." (Id.) (footnotes omitted).
. Essentially what defendant is attempting to do in this case is to acquire 268,000 acres of tribal land without ever providing the Tribe with any consideration therefor. Defendant argues that the irrigation system was really for the benefit of the individual tribal members and not for the Tribe. The practical effect of the court so ruling would be that the Tribe could not recover on its claim and the individual Indians' claims would either be barred by the statute of limitations or the Indians would never bring such claims. Defendant has lost sight of the fact that Tribes bring all of their suits on behalf of their members. Attempting to use legal niceties regarding the ownership of the irrigation system or third party beneficiary theories to eliminate the Tribal claim will have its greatest impact on those individuals the government asserts should be bringing the claims in this case. Such a position runs head-on into the principle of resolving such questions in favor of the Indians (Northern Paiute Nation v. United States, supra, 225 Ct.Cl. at 292, 634 F.2d at 604) and has been rejected essentially by the Tenth Circuit Court of Appeals in Pueblo of Isleta v. Universal Constructors, Inc., 570 F.2d 300, 302 (10th Cir.1978).
Defendant's counsel also alleged at oral argument that plaintiff received back from defendant more than the 268,000 acres of land plaintiff ceded to the government in 1906. Defendant's counsel implied that such an alleged receipt of more land than plaintiff originally ceded (though not necessarily the same land) may extinguish any claim the tribe might have had based on failure of consideration. The court is not persuaded that defendant's obligation to provide the tribe with an irrigation system was terminated by the alleged fact that the tribe subsequently received additional reservation land under totally unrelated circumstances. Cf. Sioux Nation of Indians v. United States, 220 Ct.Cl. 442, 462, 601 F.2d 1157, 1168-69 (1979), cert. denied, Yankton Sioux Tribe v. United States, 446 U.S. 953, 100 S.Ct. 2920, 64 L.Ed.2d 810 (1980). Furthermore, defendant's counsel was unable to demonstrate to the court whether plaintiff was required to give anything up in exchange for the additional acreage it received which would weigh against defendant's implied theory.
. The parties have intimated to the court during informal generalized discussions that, once the court resolved this jurisdictional question, the likelihood of settlement regarding the damages aspect of the total water claim of the Walker River Tribe in this case was probable. The court believes that this is a claim which should be settled and urges the parties to work toward that end. The court notes that in a situation similar to the one in this case another Northern Paiute Nation Tribe was able to settle remaining disputes it had with defendant after the Court of Claims issued a decision on a pivotal preliminary issue. See Northern Paiute Nation v. United States, 225 Ct.Cl. 275, 634 F.2d 594 (1980). The court hopes that the parties will be able to resolve, in a similar manner, any further differences they may have in the case of the Walker River Tribe. Indian litigation surely must come to an end at some point in this century.
With regard to the damages emanating from plaintiffs claim at bar, the court deems it prudent to make a few brief comments thereon. Plaintiffs claim is for injuries suffered by the Tribe as a result of defendant's failure to provide it with an irrigation system capable of irrigating approximately 10,000 acres. Having reviewed all of the documentation submitted by plaintiff, the court finds that the estimated costs of such an irrigation system in the early 1900's ranged from $10,000 to $15,000 for a reservoir and ditch system capable of irrigating a total of 10,000 acres up to $50,000 for a system capable of only irrigating 5,000 acres. In July 1906, authorization was given by the Assistant Secretary of Interior to extend Ditch No. 2 on the reservation at a cost not to exceed $50,000. The Annual Report of the Department of Interior for 1901, House Doc. No. 5, 57th Cong., 1st Sess. suggests that $134,000 would be ample to provide storage water and irrigation ditches by selling the non-irrigation land at 50 cents an acre (.50 X 268,000 acres).
In a February 1972 Report, known as the Walker River Rehabilitation and Betterment Report, prepared by the Nevada Indian Agency at the request of the Walker River Paiute Tribal Council and transmitted to the Bureau of Indian Affairs, Department of Interior, it was estimated that $1,080,000 would be required to make certain improvements on the Walker River Irrigation System embracing a 4-year construction schedule. The Report, noting that the existing irrigation system served 2,750 acres, advised its suggested project would extend the irrigation system to serve an additional 2,750 acres. The Report also entailed making major repairs on Weber Dam, repairs on 17.23 miles of canals and 13.51 miles of laterals and construction of 16.87 miles of new laterals, and new construction of some 400 water control structures. The goal of the program was to develop the irrigation system so each 20-acre allotment could be delivered an irrigation head of approximately 6 to 10 cubic feet per second of water. After this discussion of potential measures of damages, the court does note that it appears that damages should be valued as of the date when defendant's breach of its obligation occurred. See F. Cohen, supra, at 569. See also Kiowa, Comanche and Apache Tribes v. United States, 143 Ct.Cl. 534, 541-42, 163 F.Supp. 603, 608-09 (1958). Based on the facts submitted in this case, the court believes that defendant should have been able to provide plaintiff with an adequate irrigation system within a reasonable time after 1906 and thus that is the time period in which defendant's breach occurred.
The court also notes that, since this claim relating to the irrigation system is not grounded on a constitutional fifth amendment taking theory, plaintiff would not be entitled to interest on any damages due it as a result of defendant's failure to provide the irrigation system. See Northern Paiute Nation v. United States, supra, 225 Ct.Cl. at 297 n. 20, 634 F.2d at 607 n. 20. See also generally Mitchell v. United States, 229 Ct.Cl. 1, 16, 664 F.2d 265, 275 (1981), aff'd, 463 U.S. 206, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983); United States v. Mescalero Apache Tribe, 207 Ct.Cl. 369, 392, 518 F.2d 1309, 1323 (1975), cert. denied, 425 U.S. 911, 96 S.Ct. 1506, 47 L.Ed.2d 761 (1976). In addition, "[i]f the claim is predicated upon inadequate contractual consideration [similar to plaintiff's theory in this case] no interest is due on any additional sum awarded to the tribe in excess of the agreed-upon compensation." F. Cohen, supra, at 570. See Nez Perce Tribe v. United States, 176 Ct.Cl. 815, 829-30 (1966), cert, denied, 386 U.S. 984, 87 S.Ct. 1285, 18 L.Ed.2d 233 (1967). |
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563 U.S. 1038 | C. A. 7th Cir. Certiorari denied. |
|
226 U.S. 324 | Mr. Justice Lurton
delivered the opinion of the court.
This is a .petition in equity filed by the United States in the Circuit Court of the United States for the Eastern District of Pennsylvania, for the purpose of enforcing the provisions of the act of July 2, 1890, known as the Sherman Anti-trust Act, against an alleged combination of railroad and coal mining companies formed and continued for the purpose of restraining competition in the production, sale and transportation of anthracite coal in commerce among the States.
The defendants originally made such, and alone referred to hereafter as the defendants, were the following:
The Philadelphia & Reading Railway Company; The Philadelphia & Reading Coal and Iron Company; The Lehigh Valley Railroad Company; The Lehigh Valley Coal Company; The Delaware, Lackawanna & Western Railroad Company; The Central Railroad Company of New Jersey; The Erie Railroad Company; The New York, Susquehanna & Western Railroad Company; The New York, Susquehanna & Western Coal Company; The Le-high & Wilkes-Barre Coal Company; The Pennsylvania Coal Company; The Hillside Coal Company; The Reading Company and the Temple Iron Company. By an amendment certain other defendants were brought in, consisting of holders of contracts made by independent operators of coal mines, and trustees holding securities which might be affected by the relief sought against the carrier and coal mining companies, the original defendants. A list of these later defendants is set out in the margin, and when they are referred to herein they will be specifically mentioned.
The bill alleges that anthracite coal is an article of prime necessity as a fuel and finds its market mainly in the New England and Middle Atlantic States. The deposits of the coal, with unimportant exceptions, lie in the State of Pennsylvania, but do not occupy a continuous field, though found in certain counties adjoining in the eastern half of the State, and embrace an area of 484 square miles. This coal region is from one hundred and fifty to two hundred and fifty miles from tide-water. The region itself is broken and mountainous, and the natural conditions and character of the deposits are such that the mining and reduction of the coal to suitable sizes for domestic use require very large amounts of capital. Its value commercially is dependent, in a large degree, upon quick and cheap transportation to convenient shipping points at tide-water, from whence it may be distributed to the great consuming markets of the Atlantic Coast States.
The whole problem of advantageously developing these deposits and supplying the eastern demand for fuel was one which presented enormous difficulties. From an early day it has been the settled policy of the State of Penn sylvania to encourage the development of this coal region by canal and railroad construction, which would furnish transportation to convenient shipping points at tidewater. One of the "defendant carriers, the Delaware, Lackawanna & Western Company, was given the power to acquire coal lands and engage in the business of mining and selling coal in addition to the business of .a common carrier, and all railroad companies were permitted to aid in the production of coal by assisting coal mining companies through the purchase of capital stock and bonds. Thus, it has come about that the .defendant carriers not only dominate' the transportation of coal from this anthracite region to the great distributing ports at New York harbor, but also through their controlled coal-producing companies, produce and sell about seventy-five per cent, of the annual supply of anthracite. As a further direct consequence of the state authorized alliance between coal-producing and coal-transporting companies, it has come about that the defendant carrier companies and the coal-mining companies affiliated with the carrier companies now own or control about ninety per cent, of the entire unmined area of anthracite, distributed, according to the averments of the petition, as follows:
Reading Company. _ 'stf ^
Lehigh Valley Company. t-00 «O i — H
Del., Lack. & Western Company >0 K3 id
Central Railroad of New Jersey. 05 T — I
Erie Railroad.. . 05 lO ci
N. Y., Sus. & Western Railroad . rtt id
89.55%
It further appears that in addition to the great coal-mining companies subsidiary to one or. another of the defendant carrier companies, there are a large number of independent coal operators whose aggregate production from coal lands, in part leased from the railroad companies or the railroad-controlled coal-producing companies, amounts to about twenty per cent, of the annual anthracite supply. These independent operators are said to no longer have the power to compete with the carrier defendants and their subsidiary coal companies, because a large proportion of them have severally entered into contracts with one or the other of the carrier or coal-mining companies defendant for the sale of the entire product of their mines for the consideration of sixty-five per cent, of the average market price at tide-water.
Thus, -there exists,. independently of any agreement, combination or contract between the several defendant carrier companies for the purpose of suppressing competition among them, this condition:
First: Excluding two carrier companies not made defendants which reach but a limited number of collieries, the Pennsylvania Railroad Company and the New York, Ontario. & Western Railroad Company, the six carrier companies who are defendants are shown to control the only means of transportation between this great anthracite deposit and tide-water from whence the product may be distributed by rail and water to the great consuming markets of the Atlantic Coast States.
Second: These carriers and their subsidiary coal-mining and selling companies produce and sell about seventy-five per cent, of the total annual supply of anthracite coal. Of the remainder, the independent operators mentioned above produce about twenty per cent.
The chief significance of the fact that the six carrier defendants control substantially the only means for the transportation of coal from the mines to distributing points at tide-water is in the fact that they, cellectively, also control nearly three-fourths of the annual supply of anthracite which there finds a market. The situation is therefore one which invites concerted-action and makes ex ceedingly easy the accomplishment of any purpose to dominate the supply and control the prices at seaboard. The one-fourth of the total annual supply which comes from independent operators in the same region has been sold in competition with the larger supply of the defendants. If, by concert of action, that source of competition be removed, the monopoly which the defendants, acting together, may exert over production and sale will be complete. -
This bill avers that the defendants have combined for the purpose of securing their collective grip upon the anthracite coal supply by exerting their activities to shut out from the district any new line of transportation from the mines to tide-water points, and to shut out from competition at tide-water the coal of independent operators with their own coal. The steps said to have been taken having this end in view, we shall now consider:
The community of interest which has resulted from the charter powers of the carrier companies to directly or indirectly engage in the business of mining and selling coal has produced the relation between the carrier and coal-mining defendants shown by the several groups into which we have arranged them, thus:
1. The Reading Company is a Pennsylvania corporation, and apparently nothing more than a holding company. That company holds:
a. The entire capital stock of the Philadelphia & Reading. Railway, one of the defendant carriers.
b. The entire capital stock of the Philadelphia & Reading Coal & Iron Company, a coal-mining company.
The three companies have the same president.
2. The Lehigh Valley Railroad Company owns all of the capital stock of the Lehigh Valley Coal Company, and the two companies have the same president.
3. The Central Railroad of New Jersey owns ninety per cent, of the capital stock of the Lehigh & Wilkes- Barre Coal Company, and the two companies have the same president, who is also the president of the Reading Company and its two controlled companies.
4. The Erie Railroad Company owns all of the capital stock of the Pennsylvania Coal Company and a large majority of the stock of the Hillside Coal Company, and the three companies have the same president.
5. The New York, Susquehanna & Western Railroad Company owns nearly the entire capital stock of the New York, Susquehanna & Western Coal Company, and they have the same president, who is also the president of the Erie Railroad Company and of its two allied coal companies mentioned above.
6. The Delaware, Lackawanna & Western Railroad Company is itself an owner and producer of anthracite and seems to have no subsidiary coal company.
7. The Temple Iron Company. The relation of this company to the several carrier companies will be considered .separately.
Excluding the Temple Iron Company the groups as arranged are independent of each other, and each group, in the absence of any agreement or combination, possesses the power to compete with every other in the production, sale and transportation of coal from the mines to tidewater. Indeed, the plain averment of the bill is that prior to 1896 they were actually competing in the market reached at New York harbor, and that the competition continued, except as interrupted by abortive or abandoned efforts to combine, until they entered into the general combination which it' is the purpose of this proceeding to dissolve.
That the Delaware, Lackawanna & Western Railroad Company was itself the owner of coal lands and was engaged in mining, transporting ancj marketing its own coal, and that the other railway defendants were also engaged, through their subsidiary coal companies, in mining and selling coal, as well as in transporting the coal so mined, is not determinative of any issue here presented, since this bill was filed before the Commodities clause of the Hepburn Act of June 29, 1906, 34 Stat. 584, c. 3591, became effective, which forbids any carrier engaged in interstate transportation from transporting coal for market, when the coal at the time of transportation is owned by the carrier company. See United States v. D., L. & W. R. Co., 213 U. S. 366. Any relief against a continuance of such forbidden transportation must, therefore, be sought in another proceeding based upon the act of Congress referred to.
The Scope and Theory of the Bill.
The theory upon which the bill is framed and upon which the case has been presented by counsel is, that there exists between the defendants a general combination to control the anthracite coal industry, both in respect of mining and transportation from the mines to the general consuming markets reached from shipping points at New York harbor, and the production and sale of coal throughout the United States.
The contention is that this general combination is established, first, by evidence of an agreement between the carrier defendants to apportion between themselves the total coal tonnage transported from the mines to tidewater according to a scale of percentages; second, by a combination between them, through the instrumentality of the defendant, the Temple Iron Company, to prevent the construction of a new and competing line of railroad from the mines to tide-water; third, by a combination between the defendants by means of a series of identical contracts for the 'control of the coal produced by independent coal operators, thereby preventing competition in the markets of other States between the coal of such independent operators and that produced by the defendants; and,' finally, by certain so-called contributary combinations, already referred, to, between some, but not all, of the defendants.
Aside from the particular transactions averred as "steps" or "acts in furtherance" of a presupposed general combination, the charge of such a combination is general and indefinite.
The cáse is barren of documentary evidence of solidarity. The fact of such general combination, if it exists, must be deduced from specific acts or transactions in which the companies have united and from which such a general combination may be inferred. When and how did such a combination come about? We start with the proposition that if any such combination exists it had an origin not earlier than 1896. Attempts to bring about a suppression of competition prior to that time, indicated by some of the evidence, had either proved abortive or had been abandoned. Thus, it is stated that in 1890 and 1891 the price of coal, of certain sizes at tide-water was from $3.71 to $3.85 per ton; that in 1892 the Philadelphia & Reading Railroad Company, the predecessor in title of the defendant the Philadelphia & Reading Railway Company, leased the lines of the Lehigh Valley Railroad Company and of the. Central Railroad Company of New Jersey for rune hundred and ninety-nine years, and that the .three companies together owned or controlled about eighty per cent, of the coal deposits of this anthracite region and transported nearly fifty per cent, of the entire tonnage; that while these leases were in force the price of coal was advanced to $4.15 and $4.19 per ton for the same sizes. It is then averred that in a proceeding in the courts of New Jersey these leases of the Central Railroad Company of New Jersey were held null and void, and that in 1893 this decree was followed by a rescission of the lease of the Lehigh Valley Railroad Company to the Philadelphia & Reading Railroad Company. It is then averred that under the influence of competition thereby restored, the price of the same grade of coal in 1894 fell to $3.60 per ton and in 1895 to $3.12 per ton. "Whereupon," the petition avers, "in violation of the provisions of sections 1 and 2, respectively, of the Act of Congress of July 2, 1890, . the defendants, the Reading Company, and the defendant carriers, and the defendant coal companies, owning or controlling 90 per cent., more or less, of all the anthracite deposits, and producing 75 per cent., more or less, of the annual anthracite supply, and controlling all the means of transportation between the anthracite mines and tide-water, save the railroads operated by the Pennsylvania Railroad Company and the New York, Ontario and' Western Railway Company, which, as aforesaid, reach only a limited number of collieries, (not defendants here),, entered into an agreement, scheme, combination, ,or conspiracy, by virtue whereof they, acquired the power to control, regulate, restrain, and monopolize, and have controlled, regulated, restrained, and monopolized, not only the production of anthracite coal, but its transportation from the mines in Pennsylvania to market points in other States and its price and sale throughout the several States, with the result that competition in the transportation and sale of anthracite has been wholly suppressed and the price thereof greatly enhanced."
1. We come first to the evidence relied upon to show such a general combination through an agreement between the carriers to distribute the total tonnage of coal from this region to shipping points at New York harbor according to a scale of percentages spoken of as the "Presidents' percentages."
There is some evidence tending to show that early in 1896 there was an effort made at a conference of the presidents of the carrier companies to distribute the coal tonnage between the several carriers, based upon the average percentage of coal carried in prior years by each carrier. The limited character of the coal field, the control of so large a proportion of the deposits and of the transportation, was such as to invite agreements and combinations. A pooling arrangement would largely prevent competition between the otherwise independent groups of carriers and producers. That any such pooling agreement was made is denied most earnestly by all of the defendants. That there occurred a conference in 1896 looking to such an arrangement seems probable on the evidence. But the weight of. proof satisfies us that whatever might have been contemplated or attempted, the scheme proved .abortive, or, if attempted, was abandoned long before this bill was filed. We do not set out the circumstances which are pointed out as tending to show such an illegal agreement, nor do we deem it necessary to discuss the conflicting direct testimony. We have gone through the record. The facts are discussed and largely set out in the opinion, of the court below. Though its judges differed in respect to the relief which might be granted upon other grounds, they agreed in holding that the Government had failed to show any contract or agreement, for the distribution of tonnage. In this we concur.
The Temple Iron Company Combination.
2. We come, then, to the several acts, agreements or transactions set out in the seventh paragraph of the bill, two of which are said to have been participated in by all of the defendants, and therefore to constitute evidence of the general combination charged, and to be, in and of themselves, illegal combinations between all of the principal defendants which come under the frame of the bill as in violation of the act of July 2,1890, 26 Stat. 209, c. 647.
The transactions referred to are introduced immediately following the general charge, and are characterized in the bill as "steps in the development of this illegal combination and in furtherance of its illegal purposes." It is then averred, that "the defendants, or some of them, became parties to the following additional acts, schemes and contracts, among others, in violation of the aforesaid Act of July 2, 1890." This is followed by five distinct paragraphs, each setting out some distinct contract, combination or agreement alleged to have been the act of all of the defendants, or of two or some number less than all. These alleged "steps" and "additional acts, schemes and contracts," in violation of the Sherman law and in furtherance of the alleged illegal general scheme or purpose, — are: a. the making of the sixty-five per cent, contracts with the independent operators; b. the absorption by the Erie Railroad of the New York, Susquehanna & Western Railroad Company; c.. the acquisition by the Reading Company of the majority of the capital stock of the Central Railroad of New Jersey; d. the acquisition of the Temple Iron Company, and through it of a large number of collieries, for the purpose of defeating a projected independent line of railway into the coal region; and, e. the acquisition by the Erie Railroad Company, while controlling the Hillside Coal & Iron Company, of all of the shares of the Delaware Valley & Kingston Railroad Company, a projected common carrier, and all of the shares of the Pennsylvania Coal Company.
As we have already stated, two of these transactions aire averred to be transactions into which all of the defendants entered in pursuance of a -common purpose and general design to suppress-competition and restrain commerce in coal between the States.
The first which we shall consider is the alleged combination through the Temple Iron Company. Concerning this, the petition, in substance, states, that in 1898 many of the independent coal operators in the Wyoming or Northern field became dissatisfied with the transportation and market conditions under which they were obliged to conduct their collieries. ' Many contracts for the sale of their coal to the defendant coal companies had expired or were about to expire, and they demanded either lower freight rates or better prices from the coal companies. A competing line of railway from the Northern or Wyoming zone of the anthracite region to a point on the Delaware River, where connection would be made with two or more lines extending to shipping points at New York harbor, was projected as a means of relieving the situation. The New York, Wyoming & Western Railroad was accordingly incorporated. Large subscriptions of stock were taken, the line in part surveyed, parts of the right-of-way procured, and a large quantity of steel rails contracted for. As the road was to be mainly a coal-carrying road, support from coal-mining companies was essential. Its chief backing came from independent coal operators. The most important and influential of them was the firm of Simpson & Watkins, who controlled and operated eight collieries in the region, having an annual output, of more than a million tons. The time for such a competing means of transportation was auspicious. Much of the output of the district not tied up by contracts of sale or transportation was pledged to this project and much more was promised.
The petition alleges that the construction of the projected -independent railroad would not only have introduced competition into the transportation of anthracite coal to tide-water, but it would have enabled independent operators reached by it to sell their coal at distributing points in free competition with the defendant coal companies. " Wherefore," avers the pleading, "the defendants, the Reading Company, owning the entire capital stock" of the Philadelphia & Reading Railway Company, and the other carrier companies defendants herein, controlling •collectively, all means of transportation between the mines and shipping points at New York harbor, combined together for the purpose of shutting out the proposed railroad and preventing competition with them in the transportation of coal from the mines to other States, and the sale of coal in competition with their own controlled coal in the markets of other States." The plan devised was to detach from the enterprise the powerful support of Simpson & Watkins and the great tonnage which their cooperation would give to the new road, by acquiring for the combination the coal properties and collieries controlled by that great independent firm of operators. This would not only strangle the project, but secure them forever against new schemes induced by the large tonnage produced by these eight collieries, and secure not only that tonnage for their own lines, but keep the coal forever out of competition with that of their controlled coal-producing companies.
The scheme was worked out with the result foreseen and intended. The capital stock of the Temple Iron Company, aggregating only $240,000, was all seemed. That company was then operating a small iron furnace near Reading. .Its assets were small, but its charter was a special legislative charter which gave it power to engage in almost any sort of business, and to increase its capital substantially at will. Control of that company having been secured, it was used as the instrument for the purpose intended.
- The plan by which the defendant carriers were enabled to carry out this scheme and apportion among themselves proportionate interests in the property acquired and the burden to be assumed was not simple, but elaborate. The financial arrangements séem to have been made through Mr. Baer, who was the president of and a large stockholder in the Temple Company, and Mr. Robert Bacon, of the firm of J. P. Morgan & Company. Shortly Stated, it was this: The Temple Company increased its capital stock to $2,500,000 and issued mortgage bonds aggregating $3,500,000. ' Simpson & Watkins agreed to sell to the Temple Company their .properties for something near $5,000,000. They accordingly transferred to the Temple Company the capital shares in the several coal companies., holding the title to their eight collieries, and received in exchange $2,260,000 in the shares of' the Temple Company, and $3,500,000 of its mortgage bonds. By contemporaneous instruments Simpson & Watkins transferred to the defendant, the Guaranty Trust Company of New York, as trustee, this capital stock and $2,100,000 of the bonds of the Temple Company, and received from the Guaranty Company, $3,238,396.66 in money and $1,000,000 in certificates of beneficial interest in the stock of the Temple Company. The Guaranty Company seems to have been but a medium and was accordingly protected by a contemporaneous contract with the Reading Company and the other carrier defendants by which they severally contracted with the Guaranty Company to purchase the Temple Company's capital stock in a certain agreed proportion or percentage of the total capital stock, and to guarantee the bonded debt of the Temple Company in the same proportion. A large .proportion of the- bonds and of the beneficial certificates of interest in stock of the Temple Company was later guaranteed, or underwritten as the stock phrase goes, by a syndicate including J. P. Morgan, William Rockefeller;, the Guaranty Company and others.
Thus, it came about that when this bill was filed the stock of the Temple Company, which, as seen, is a mere holding company for the several defendant carrier companies, was owned by the defendants, and the obligations of thát company were guaranteed by them in proportions .based on the percentage, of the total anthracite tonnage carried annually by each of. the defendant carriers, namely: The Reading Company and .the Reading Rail way Company, being treated as one and the same in this matter, 29.96%; the Lehigh Valley Railroad Company, 22.88%; the Central Railroad of New Jersey, 17.12%; the Delaware, Lackawanna & Western Railroad Company, 19.52%; the Erie Railroad Company, 5.84%; the New York, Susquehanna & Western Railroad Company, 4.86%. At the time this proof was taken the average annual output of the collieries thus acquired was about 1,600,000 tons, and in the last year the output had arisen to 1,950,000 tons. This combination of the defendants through, the Temple Iron Company was effective in bringing about the designed result. The New'York, Wyoming & Western Railroad Company was successfully strangled, and the monopoly of transportation collectively held by the six defendant carrier companies was maintained.
The projected competing railroad was undoubtedly a good faith proposition and held out promise to independent coal operators not only of the prospect of competition in transportation from the mines to tide-water, but the possibility of selling their coal either to the controlled coal companies defendant at better prices or to the consuming public at tide-water in competition with that of the controlled coal companies. But if we assume that its construction was doubtful, the result must be the same as characterizing the purpose and design of the concerted action of the defendants: They were so far convinced of the threatening character of the enterprise that they were moved at great cost to thwart it and at the same time remove the temptation for like competition by securing to themselves forever the product of the collieries named.
That the collieries to be reached by the new road were not all reached by each of the defendants is true. The great bulk of tonnage, from them seems to have been carried by the Erie, the Lehigh and the Lackawanna. But the preservation, of the monopoly of transportation from the .mines to tide-water held by the six lines which were serving the region, was plainly a common interest,— a collective monopoly by which the-profits in coal could be secured and the monopoly maintained by . shutting out any new line totide'-water. The extent of the. interest of each in the desired "result seems to have been, estimated by themselves as fairly measured by the. percentage of the total, tonnage theretofore carried annually by each. Thus it was that they became owners of the shares in the Temple Company, and guarantors of its obhgations in the same porportions. - _ .
Tt has been" suggested that since the New York, Wyoming & Western Railroad has been effectively strangled that it will be,idle, to enjoin the doing of'an act already accomplished. But that is a 'narrow view of the relief which may bé granted under the statute and the frame of this bill. '
The combination by means of the Temple Company still exists. It has been and-still is an efficient agency for .the ' collective activities of. the defendant carriers for the purpose of preventing competition in the transportation and sale of coal in other States.
That under the law of Pennsylvania each of the defendant carrier companies has the power to acquire and hold the stock of coal-producing companies may be true. That the Temple Company may, under the same law, have the power to acquire and hold the capital stock of the Simpson & Watkins' collieries may also be conceded. But if the defendant carriers did, as we have found to. be the fact, combine to restrain the freedom of interstate commerce either in the transportation or in the sale of anthracite coal in thé markets of other States, and adopted as a means, for that purpose the Temple Company, and, through it, the control of the great Simpson & Watkins' collieries, the parts of the general scheme, however lawful considered alone, become parts of an illegal combination under the Federal statute which it is the duty of the court to dissolve, irrespective of how the legal title to the shares is held. Harriman v. Northern Securities Co., 197 U. S. 244, 291. So long as the defendants are able to exercise the power thus illegally acquired, it may be most efficiently exerted for the continued and further suppression of competition. Through it, the defendants, in combination, may absorb the remaining output of independent producers. The evil is in the combination. Without it. the several groups of coal-carrying and coal-producing companies have the power and motive to compete. That each may for itself advance the price of coal or cut down the production, is true. But in the power which each other group would have' to compete would be found a corrective. The statute forbids the concerted action which has already brought about the strangling of a projected competing railroad and the complete control of the sale of an immense tonnage of independent coal which had prior thereto not only been a menace to their collective control of the means of transportation to New York harbor points, but a large competing factor in sales at these points. The Temple Company, therefore, affords a powerful agency by means of which the unlawful purpose which induced its acquisition may be continued beyond the mere operation of the Simpson & Watkins' collieries.
Its board of directors includes the presidents of the defendant carriers, who also are the presidents of the defendant coal companies, and these defendant companies absolutely dominate its affairs. The Temple Company also owns and dominates the great collieries obtained from Simpson & Watkins. Its board of directors, composed as it is of men representing the defendants, supplies time, place and occasion for the expression of plans or combinations requiring or inviting concert of action. Though as a board it may not dictate the activities of the owning corporations, still, in view of the relation of the Temple Company to- the defendant carriers and their respective coal-mining companies, and of the constitution of its directors, the attitude of its board as indicated by the proceedings spread upon the. corporate minutes is of significance upon the question of the existence of any concerted purpose to unite the activities of its corporate owners to suppress competition. There are to be found on the minutes of the Temple Company a number of entries which point strongly to combinations between, the defendants. Thus, on June 27, 1899, a committee was appointed to consider the establishment of a statistical bureau, "to keep a record of all matters of interest to the anthracite companies." What resulted does not appear from any further minutes. On July 2, 1901, a resolution in these words was adopted:
".Resolved, That Mr. Cumming, Mr. Sayre, Mr. Henderson, Mr. Caldwell and Mr. Warren be appointed a committee to consider the advisability and expediency of making a 40 per cent, rate to outside shippers, or a flat rate, and, if so, what rate."
By "outside shippers" the'-witness says was meant "independent operators," who- shipped their own coal. The witness by whom this action was proved says that he never saw the report and does not know that any was made by the committee. It is true that Mr. Baer, the' president of the Temple Company, denied that the Temple Company had or undertook to exercise any power in respect of carrier rates, or in fixing prices of coal. He says that the minute entries referred to above are matters "interjected by somebody," under a misconception of the powers and duties of the directors of that company, and came to nothing. That he shortly took the presidency himself and- that the Temple Company "has been run as .the most harmless mining company in thé State of Pennsylvania," and has had nothing to do with the price of coal or with rates for transportation. But this disclaimer of power does not detract from the significance of the minutes of the Board referred to as evidence bearing upon the question of the relation of the several defendants to each other.
We are in entire accord with the view of thé court below in.holding that the transaction involved a concerted scheme and combination for the purpose of restraining commerce among the States in plain violation of the Act of Congress of July'2, ,1890.
3. We come now to the sixty-five per cent, contracts.
The charge of the petition in respect to these contracts is substantially this:
a. That the defendant carriers possessed a substantial monopoly of all- of the means of transportation between the coal region and tide-water.
b. That they directly or indirectly through their controlled coal companies produced about seventy-five per cent, of the annual supply of anthracite coal.
c. That twenty per cent, or more of the annual supply was produced by independent operators, whose collieries were located contiguous to the carrier lines of the defendant companies.
d. This being the situation, it is charged, that for the purpose of preventing the output of these independent producers "from being sold throughout the several States in competition with the output from their own mines, or of the mines of their subsidiary coal companies, the said defendant carriers, having almost a complete monopoly of the means of transportation between the anthracite mines and tide-water, entered into and now maintain an agreement, combination or conspiracy to use their power as said carriers to obtain control of the sale and disposition of the aforesaid output of the independent mines in the markets of the several States, particularly of the great distributing market at New York harbor, in violation of the aforesaid Act of July 2, 1890."
It is further averred:
e. That prior to 1900 the defendants "severally made" a large number of short term contracts for the purchase of the coal of independent operators "along their respective lines," at prices ranging from fifty-five to sixty per cent, of the average price at tide-water.
That upon the termination of these contracts the defendants "in pursuance of a previous agreement between themselves, severally offered to make and did make and conclude with nearly all of the independent operators along their lines new contracts containing substantially uniform provisions agreed upon beforehand by the defendant carriers in concert, some of the operators contracting with one of the defendants and some with another," by which such operators "severally agreed" to deliver on cars at breakers "to one or the other of the defendant carriers, or its subsidiary coal company, all the anthracite coal thereafter mined from any of their mines now opened and operated, or which they might thereafter open and operate, deliveries to be made from time to time as called for," etc. In consideration, the sellers were to receive for prepared sizes sixty-five per cent, of the general average price prevailing at tide-water points at or near New York as computed from month to month, this average price to be settled by an expert agreed upon by the parties.
It is further averred that this price was such as to enable the independent operator entering into one of these contracts to realize upon his coal from fifteen to fifty cents more than he could when shipping on his own account after paying the established rates of transportation, waste'and cost of selling, in competition with the coal of the defendants. Thát the difference was the price paid for the privilege of controlling the sale of the independent output, "so as to prevent it from selling in competition with the output of their own mines."
It is then further alleged that the result of this plan, "as was intended, was to draw, if not to force, the great body of independent operators into making the aforesaid contracts, thereby enabling the defendants to control absolutely, and until the mines are exhausted, the output of most of the independent anthracite mines, and to prevent it, as aforesaid, from being sold in competition with the output of their own mines in the markets of the several States, particularly in the great tide-water markets."
It is obvious that the averments do not touch upon the legality of the contracts considered severally, and ask no relief upon the theory that each was a contract in restraint of trade. The theory and charge of the bill is that by concerted action between the defendants the independent operators were to be induced to enter singly into uniform agreements for the sale of the entire output of their several mines and any other they might thereafter acquire, excluding. a' negligible amount of unmarketable coal and coal for local consumption. And the further theory of the pleading is that by such concerted action and through the higher price offered, the defendants. would obtain suph control of independent coal as to prevent competition in the markets' of other States.
It is not essential that these -contracts considered singly be unlawful as in restraint of trade. So considered, they may be wholly innocent. Even acts absolutely lawful may be steps in a criminal plot. Aikens v. Wisconsin, 195 U. S. 194, 206. But a series of such contracts, if the result of a concerted plan or plot-between the defendants to thereby secure control of the sale of the independent coal in the markets of other States, and thereby suppress competition in prices between their own output and that of the independent operators, would come plainly within the terms of the statute, and as parts of the scheme oi plot would be unlawful. Thus in Swift & Company v. United States, 196 U. S. 375, 396, where a plan or scheme consisting in many parts or elements was averred to constitute a combination forbidden by the act of July 2, 1890, it was said:
"The scheme as a whole seems to us to be within reach of the law. The constituent elements, as we have stated them, are enough to give to the scheme a body and, for all that we can say, to accomplish it. Moreover, whatever we may think of them separately when we take them up as distinct charges, they are alleged sufficiently as elements of the scheme. It is suggested that the several acts charged are lawful and that intent can make no difference. But they are bound together as the parts of a single plan. The plan may make the parts unlawful."
That the plan was calculated to accomplish the design averred, in the present case, seems plain enough. The anthracite field was very limited. The means for transportation from the mines to seaboard shipping points were in the hands of the defendant carriers. They, together with their subsidiary companies, controlled about ninety per cent, of the coal deposit and about seventy-five per cent, of the annual output. If the remaining output, that of the independent operators along their several lines, could be controlled as to production and sale at tide-water points, there would inevitably result such a dominating control of a necessity of life as to bring the scheme or combination within the condemnation of the statute.
That these sixty-five per cent, contracts were the re-, suit of an agreement through protracted conferences be-' tween the independent operators, acting through an authorized committee, and officials of the carrier defendants, who were likewise officials of the coal companies subsidiary to the railroad companies, is plainly established. That- they were designed by the defendants as a means of controlling the sale of the independent output in the market at tide-water points, thereby preventing competition with their own coal and as a plan for removing the great tonnage controlled by the independents from being used as an inducement for the entry of competing carriers into the district, is a plain deduction.
Some of the facts which lead to this conclusion will be referred to as briefly as the great importance of the case will permit:
That for a long time many of the independent operators had been selling their output to their great rivals, the defendant carriers and their, several coal companies, is true. By means of such sales and deliveries at their own breakers, the sellers avoided freight, waste and expense of sales through agents, etc. The price they would thereby realize was fixed, and they were not dependent upon a fluctuating market. So long, therefore, as they could" sell to their rivals at their breakers to better advantage than they could ship and sell on their own accpunt, the method appealed to them. But, obviously, buyer and seller were not upon an equal plane. The former had control of freight rates and car service. The seller must pay the rate exacted and accept the car service supplied him by the buyer, or appeal to the remedies afforded by the law. If the rate of freight to tide-water was onerous and was imposed upon the coal .produced by the defendants and their allied coal producers without discrimination against, the coal of the independent shipper, it would nevertheless bear upon the latter oppressively, since the rate paid would find its way into-the pocket of the defendants. Therefore, it~was that the higher the freight rate, the greater the inducement to sell to the carrier com-. panies. That the conditions were not accepted by the independent • producers as satisfactory, is evident. The majority at all times stood out,; and those making such agreements as well as those refusing to- do so, maintained an agitation for better freight rates and better prices for those who preferred to sell at their breakers. For many years before this proceeding they maintained an organization called "The Anthracite Coal Operators' Association," and through that body endeavored to improve their situation.
The Series of contracts here involved were all made since 1900, and are therefore subsequent to the combination through the Temple Iron Company, already considered. The charge is that since that combination the defendants further combined through these contracts. Prior to 1900, we find no evidence of any combination or agreement for the procurement of contracts.of sale with independent operators. Upon the contrary there is much to indicate that there was more or less competition for coal accessible to more than one of the buying defendants. The effect of competition is shown by the gradual rise in the price the great companies were willing to pay. In the earliest stages of the business the buying price seems to have been fixed with some relation to the varying wage scale of miners. This gave way to an agreed percentage of the current price at tide-water. Thus the earlier contracts allowed the selling operator only forty per cent, of the' tide-water price for prepared sizes. Through competition between the existing companies, and through that which resulted from the entry of new carrier fines with their subsidiary coal companies, the-price was forced gradually up from forty to sixty per cent, of the tidewater price, and at this latter figure the price stood when the combination here averred came into existence.
We have mentioned the influence of the coming into the region .of new coal-carrying railroads upon the per cent.- of the tide-water price which the independent operators were able to obtain from the buying coal companies. This influence, as we shall see, was a large factor in bringing about the contracts now in question. The carriers here defendant did not all obtain their footing in this anthracite field at the same time. Thus, when the New York, Susquehanna & Western was projected, it, through its. coal company, offered to buy coal on fifty per cent, contracts. The price before that had been forty to forty-five per cent. The result was that the other companies came gradually up to the same price. This was late in the eighties, the exact date not being at hand. Again, it is said in the brief for the defendants, that:
"In the early 90's, the New York, Ontario & Western Railroad built a branch into the Wyoming region and sought tonnage. Mr. Sturgis was commissioned beforehand by the coal company of that railroad to offer 60%. contracts on the understanding that, if he could secure a half million tons annually, the branch would be built. The branch railroad was built, and by its help large new acreages of coal lands were developed, tributary to the Ontario & Western Railroad."
As a consequence, says the same brief, "the other coal companies began to raise their rates to sixty per cent.," and by 1892 that had become the settled price.
The influence of competition, actual or threatened, was also illustrated in 1898, when the New York, Wyoming & Western was projected. A large number of coal contracts had expired or were about to expire, thus creating a great tonnage open to competition. Many of the operators in the Wyoming region of the coalfield united their influence to procure the building of a competing line between the mines and New York harbor points. To this end a large tonnage was pledged to its coal-selling company, which offered to-pay sixty-five per cent, of the tide-water price to such operators. How and why that project failed we have already shown in the section of this opinion devoted to the Temple Iron Company combination.
When that effort failed there arose a movement for a new road from the mines to tide-water through the Pennsylvania Coal Company. That was one of the greatest of the independent companies, producing in 1899 about two million tons. It controlled a coal-gathering railroad called the Erie & Wyoming Valley Railroad, and proposed its extension to Lackawaxen, and to cause the construction from thaf'point of a railroad line to the Hudson River. To this end it caused to be organized the Delaware Valley & Kingston Railroad. Of this project, Mr. Thomas, the president of the Erie Railroad Company, said: "They were threatening and had started to build a competing road to the Hudson River." The independent operators, in an association maintained by them for their mutual protection, hailed this scheme with joy. At a meeting of the association on November 22, 1899, the following minute was made:
"Mr. E. L. Fuller, chairman of the executive committee, on being called upon, told of the efforts which have been made to induce the various anthracite railroads to offer more satisfactory terms for the purchase of the operators' coal, and of the absolute failure of these efforts to bring about any definite result. He then reported the organization of the Delaware Valley & Kingston Railroad, backed by the Pennsylvania Coal Company, and the proffer of this latter company to purchase coal from operators in the Wyoming and Lehigh region, paying 65 per cent, of the tide-water price for chestnut and larger; 50 per cent, for pea coal, and a flat 85 per cent, freight rate on buckwheat and smaller sizes. These contracts were to be for all of the coal in the ground, thus settling permanently the price which the operator would receive.
"After extended discussion as to the details of these contracts, and a comparison with the results obtained under the old contracts, the following resolution was offered and-passed unanimously:
"Whereas the Erie & Wyoming Valley Railroad Com pany has arranged to build a branch line from Hawley, Pa., to a point on the boundary line between New York and Pennsylvania at Lackawaxen, forming a connection with a railroad proposed to be constructed by the Delaware Yalley and Kingston Railroad Company to tidewater, at Kingston, on the Hudson River;
"'And whereas the construction of the said railroads is approved and promoted by the Pennsylvania Coal Company, which has large interests in the anthracite coal region;
'"And whereas the independent operators and the general public are now largely at the mercy of the existing railroad companies, which charge unreasonable rates for their services, owing in part to the large amounts for which the said companies have been capitalized;
'"And whereas it would be highly advantageous to all the independent owners of coal properties throughout the entire anthracite region of Pennsylvania to have the railroad connection, now proposed, completed as speedily as possible;
'"And whereas it is equally desirable, in the interests of the people of the State of New York and the public in general, that such railroad connection shall be made (since it will necessarily result in a material reduction of the price paid for anthracite coal by consumers), now, therefore, it is
111 Resolved, I. That this association hereby expresses its hearty and unqualified approval of the proposed plan for the construction of the said railroads, and hereby pledges its constant support and active assistance in promoting the speedy construction and completion of the said railroads.
. '"II. That a committee of three be appointed by the president, of which the president shall be a member, to take such steps as may be deemed advisable toward furthering the said plans and cooperating with the said com panies for the completion of the said railroads, and that a report of their proceedings be submitted to the next meeting of this association.'
"In the discussion which followed, it was the opinion of those present that, in view of the hearty assistance which had been accorded the operators by the Pennsylvania Coal Company, it was the duty of the members to give to this company all of the tonnage which they could deliver and not to permit any more advantageous offers which the older companies might make, to divert freight from a road which was constructed to give the operators a fair share in the selling price. A vote of thanks was accorded Mr. Fuller for his labor and great success in accomplishing a work which was for the advantage of every individual operator in the anthracite regions."
It is enough to say of this project that it was abandoned when, in 1901, the Erie Railroad acquired, without any concert of action between it and the other carrier defendants, the capital stock of the Pennsylvania Coal Company, which carried with it the capital stock of the Erie & Wyoming Valley Railroad and the Delaware & Kingston Railroads
The persistent effort of the independents to bring into the field competing carrier and coal-producing compames was a menace to the monopoly of transportation from that field to tide-water which the defendants collectively possessed. The independent output was one-fourth of the annual supply. It was mainly sold at tide-water, where it came into active competition with the larger production of the defendants; but, as we have already seen, this enormous tonnage offered a great inducement to the organization of new carrier fines from the mines to the seaboard. The contracts theretofore made for the purchase of this output had been for short terms. The expiration of a considerable number had more than once been the occasion for new carrier projects backed by the independent operators. To renew the contracts for short terms would but postpone the day of competition. The control in perpetuity of such a large proportion of the output as would prevent in the future effective competition in the selling markets of the coast, and at the same time remove inducement to the entry of other lines of carriers, was the obvious solution of the situation. The necessary control could only come about through concerted action. If one of the several independent groups of defendants, or two, or any less number than all, had sought to obtain control, it would have been resisted by those not included. Therefore, it is plain that if the coal of these operators was to be placed in such situation as that it could not affect the price of their own coal, nor longer constitute a mass of tonnage sufficient to invite the construction of new lines from the mines to the sea, it must be brought about through the concerted action of the defendants.
In 1900 there occurred the great strike of the coal miners. Settled by arbitration in the fall of that year, the miners obtained a ten per cent, increase in wages. Of course, this affected the railroad coal-producing companies and the independent coal companies alike. The great companies took the lead in the arbitration and accepted the result. The independent companies were compelled to follow this lead. The latter, as we have seen, had before the strike been particularly urgent in their efforts to secure better conditions from the railroads and their allied coal companies. This rebellious attitude is partially shown by the resolution of the Anthracite Coal Operators' Association of November 22, 1899, heretofore set out. When the strike settlement was made, there was some hesitation among the independent operators about posting notice of the advance in wages, and through committees they urged upon the defendants that such advance in wages justified a reduction in freight rates and a price of not less than sixty-five per cent, for coal sold to the defendant companies. The committees reported back that they could not obtain "any definite promise," but there has been "an intimation" that something would be done to improve the present conditions. It was thereupon resolved that the advance scale should be posted, and that a committee should be. appointed "to confer with the various carrier companies, relative to a, new contract." At the same meeting a number of the operators present signed -an agreement empowering the committee named "to adjust all differences with certain transportation companies," and agree upon a basis of contract which should definitely and for a period of years fix the commercial relations between the said operators and the transportation companies,each of the parties agreeing to make a particular contract for himself with the proper transportation company." This agreement, after being signed by those present, was placed in the hands of Mr. McNulty to secure further signatures. These matters appear on the minutes of the individual operators of October 5th. There ensued a-number of conferences between the representatives of the sellers and buyers. The result was that a form of contract and a price was mutually agreed upon, being the form of the sixty-five per cent, contracts, which were thereafter entered into as the short term agreements theretofore made expired. Thus the independents put in force the advance wage scale imposed by the strike arbitrators before any agreement whatever was made or promised by the defendants. _This increased scale which the' arbitration imposed having been accepted by the large companies, could not be successfully resisted by the independents. It only operated to make them more persistent in their demand for some improvement in the methods and prices theretofore prevailing.
That the defendant companies should offer such terms is not surprising. The contracts to be made would be not only for the' life of the mines being operated at the daté of the sale, but was to extend to any other mines thereafter opened by the seller . The menace of the independent output as an invitation to competing carriers and as a competing coal at tide-water would be removed forever.
Upon this aspect of the case we find ourselves in agreement with Judge Buffington, who concluded a discussion of the evidence by saying (183 Fed. Rep. 474):
"By such perpetual contracts. . . . these defendant railroads through their subsidiary coal companies severally made with other collieries these combiners withdrew, and still continue to withdraw, such product, for all time, from competition, either in interstate transportation or sale. To my mind there is no more subtle and effective agency for the gradual, unnoted absorption by interstate carriers of the remaining interstate product than these perpetual contracts. Holding then that they are in the words of the statute,'contracts . . . in restraint of trade or commerce among the states/ I record my dissent to the action of the court in refusing to enjoin them."
The coal contracts acquired when this proceeding was begun aggregated nearly one-half the tonnage of the independent operators. Much of the coal so bought was sold in Pennsylvania and all of the contracts were made in that State and the coal was also there delivered to the buying defendants. That the defendants were free to sell again within Pennsylvania, or transport and sell beyond the State, is true. That some of the coal was intended for local consumption may also be true. But the general market contemplated was the market at tide-water, and the sales were made upon the basis of the .average price at tide-water. The mere fact that- the sales and deliveries took place in Pennsylvania is not controlling when, as here, the expectation was that the coal would, for the most part, fall into and become a part of-the well-known current of commerce between the mines and the general consuming markets of other States. "Commerce among the States is not a technical legal conception, but a practical one, drawn from the course of business." Swift & Company v. United States, 196 U. S. 375, 398; Loewe v. Lawlar, 208 U. S. 274. The purchase and delivery within the State was but one step in a plan and purpose to control and dominate trade and commerce in other States for an illegal purpose. As was said by the Chief Justice, in Loewe v. Lawlor, (p. 301) cited above:
"Although some of the means whereby the interstate traffic was to be destroyed were acts within a State, and some of them were in themselves as a part of their obvious purpose and effect beyond the scope of Federal authority, still, as we have seen, the acts must be considered as a whole; and the plan is open to condemnation, notwithstanding a negligible amount of intrastate business might be affected in carrying it out. If the purposes of the combination were, as alleged, to prevent any interstate transportation at all, the fact that the means operated at one end before physical transportation commenced and at the other end after the physical transportation ended was immaterial."
The general view which this court took of the effect of these contracts upon interstate traffic in the coal of this region is indicated in Interstate Commerce Commission v. Baird, 194 U. S. 25, 42. The concerted plan concerned the relations of these railroads to their interstate commerce and directly affected the transportation and sale and price of the coal in other States. The prime object in engaging in this scheme was not so much the control and' sale of coal in Pennsylvania, but the control of sales at New York harbor.
That per cent, of the average price at tide-water retained by the buyer was assumed to cover the freight, waste and cost of sale. There is evidence tending strongly to show that an independent accepting one of these con tracts realized slightly more than he could realize if he had shipped and sold on his own account. This advanced price, therefore, as charged in the bill, constituted a great inducement to draw the independents within the control of the defendants, and makes it highly probable that if not enjoined they will absorb the entire independent output.
The defendants insist that these contracts were but the outgrowth of conditions peculiar to the anthracite coal region and are not unreasonably in restraint of competition- but mutually advantageous to buyer and seller.
That the act of Congress "does not forbid or restrain the power to make normal and usual contracts to further trade by resorting to all normal . methods, whether by agreement or otherwise, to accomplish such purpose," was pointed out in the Standard Oil Case, 221 U. S. 1. In that case it was also said that "the words 'restraint of trade/ should be given a meaning which would not destroy the individual right of contract, and render difficult, if not impossible, any movement of trade in the character of interstate commerce, the free movement of which it was the purpose of the statute to protect." We reaffirm this view of the plain meaning of the statute, and in so doing limit ourselves to the inquiry as to whether this plan or system of contracts entered into according to a concerted scheme does not operate to unduly suppress competition and restrain freedom of commerce among the States.
Before these contracts there existed not only the power to compete but actual competition between the coal of the independents and that produced by the buying defendants. Such competition was after the contracts-impracticable. It is, of course, obvious that the law may not compel competition between these independent coal operators and the defendants, but it may at least remove illegal barriers resulting from illegal agreements which will make such competition impracticable.
Whether a particular act, contract or agreement was a reasonable and normal method in furtherance of trade and commerce may, in doubtful cases, turn upon the intent to be inferred from the. extent of the control thereby secured over the commerce affected, as well as by the method which was used. Of course, if the necessary result is materially to restrain trade between the States, the intent with which the thing was done is of no consequence. But when there is only a probability, the intent to produce the consequences may become important. United States v. St. Louis Terminal Association, 224 U. S. 383, 394; Swift & Co. v. United States, 196 U. S. 375.
In the instant case the extent of the control over the limited supply of anthracite coal by means of the great proportion theretofore owned or controlled by the defendant companies, and the extent of the control acquired over the independent output which constituted the only competing supply,, affords evidence of an intent to suppress that competition and of a purpose to unduly restrain the freedom of production, transportation and sale of the article at tide-water markets.
The case falls well within not only the Standard Oil and Tobacco Cases, 221 U. S. 1, 106, but is of such an unreasonable character as to be within the authority of a long line of cases decided by this court. Among them we may cite: Northern Securities Company v. United States, 193 U. S. 197; Swift & Co. v. United States, 196 U. S. 375; National Cotton Oil Company v. Texas, 197 U. S. 115; United States v. St. Louis Terminal Association, 224 U. S. 383, and the recent case of United States v. Union Pacific Railway, ante, p. 61.
We are thus led to the conclusion that the defendants did combine for two distinct purposes, — first, by and through the instrumentality of the Temple Iron Company, with the object of preventing the construction of an independent and competing line of railway into the anthracite region; and, second, by and through the instrumentality of the sixty-five per cent, contracts with the purpose and design of controlling the sale of the independent output at tide-water.
. The acts and transactions which the bill avers to have been committed by some of the defendants in furtherance of the illegal plan and scheme of a general combination, are these:
• a. The absorption in January,. 1898, of the New York, Susquehanna & Western Railroad, through the purchase by the Erie Railroad of a large majority of its shares, whereby two lines of competing railroad came under one control and management.
b. The acquisition in 1901 of a controlling majority of the capital stock of the Central Railroad of New Jersey by the Reading Company, which then owned the entire capital stock of the Philadelphia & Reading Railway Company, and the Philadelphia & Reading Coal & Iron Company, "thereby uniting and bringing together under a common head and source of . control the said Philadelphia & Reading Railway Company and Central Railroad Company of New Jersey, operating parallel and competitive lines of railroad, and the said Philadelphia & Reading Coal & Iron Company and Lehigh & Wilkes-Barre Coal Company," theretofore owned or controlled by the Central Railroad of New Jersey, thereby destroying competition between former competing carriers and coal-producing companies.
c. The absorption in 1899 by the Erie Railroad Company of the Pennsylvania Coal Company, thereby acquiring the .stock control of the Erie & Wyoming Railroad Company and of the Delaware Valley & Kingston Railroad, thus defeating a projected construction of the last named railroad.
These were all minor combinations in which only some of the defendants participated. The accomplishment of these several subordinate transactions only completed one or another of the several groups of carriers and coal-producing companies, which several groups were thereafter not only possessed of the power to compete with every other group, but, as we have already seen, were actually engaged in competing, one with another, prior to the general combination through the Temple Iron Company and the sixty-five per cent, contract scheme.
So far as this record shows not one of these transactions was the result of any general combination between all of the defendants and constituted no part of any such general combination. None of the defendants had any part or lot in bringing them about except the particular combining companies.
It is true that the bill asks injunctions against the continuance of each of these minor combinations. But if, as we conclude, they did not constitute any part of any general plan or combination entered into by all of the carrier companies, their separate consideration as independent violations of the act of Congress is not'admissible under the general frame of this bill. To treat the bill as one seeking to apply the prohibition of the act of Congress to each one of these independent combinations would condemn the pleading as a plain misjoinder of parties and of causes of suit, and a plain confession of multifariousness. All of the defendants had a common interest in the defense of the Temple Iron Company combination, and that of the sixty-five per cent, contracts, because it was alleged that all had joined therein. But all of the defendants did not have a common interest' in the defense of these three minor combinations, unless it appear that they were, as charged, "steps," or acts and agreements in furtherance of the general combination to which they were all parties. This we find not to be the fact. If, therefore, we shall treat the bill as broad enough to involve combinations which were not steps or acts in furtherance of any general combination, we shall overrule the objection of multifariousness made below and here, for we shall then maintain a bill setting up three separate and distinct causes of action against the distinct groups of defendants, one having no interest in or connection with the other. The grounds of each suit would be different and the-parties defending different. See the discussion and cases cited in Simpkins' Federal Eqüity Suit, pp. 290 et seq.
Having failed to show that these minor combinations were acts in furtherance of the general scheme, or the acts of the combiners in the two combinations condemned, we are asked to deal with them as separate illegal combinations by such of the defendants as participated. This the court below declined to do, and we in this find no error.
As to the legality of the minor combinations, we therefore express no opinion. We affirm the action of the court below in declining to enjoin them, because to construe the bill as directed against them as independent combinations, between some but not all of the principal defendants, would make the pleading objectionably multifarious. We therefore direct that the bill be dismissed, without prejudice, in so far as it seeks relief against the three- alleged minor combinations.
The decree of the court , below is affirmed as to the Temple Iron Company combination. It is reversed as to the sixty-five per cent, contracts, and the case will be remanded with direction to enter a decree cancelling each of these contracts, and perpetually enjoining their further execution, and for such proceedings as are in conformity with this opinion.
Mr. Justice Day, Mr. Justice Hughes and Mr. Justice Pitney did not participate in the consideration or decision of this case.
The Delaware & Hudson Company; Elk Hill Coal & Iron Company; St. Clair Coal Company; Enterprise Coal Company; Buck Run Coal Company; Llewellyn Mining Company; Clear Spring Coal Company; Pancoast Coal Company; Price-Pancoast Coal Company; Mount Lookout Coal Company; Peoples Coal Company; George F. Lee Coal Company; North End Coal Company; Melville Coal Company; Parrish Coal Company; Red Ash Coal Company; Raub Coal Company; Mid Valley Coal Company; Austin Coal Company; Clarence Coal Company; Nay Aug Coal Company; Green Ridge Coal Company; Excelsior Coal Company; Lackawanna Coal Company; Dolph Coal Company, Limited; Mary F. W. Howe, Frank Pardee, and Sarah Drexel Van Rensellaer, constituting A. Pardee & Co.; Lafayette Lentz, William 0. Lentz and Lewis A. Riley, constituting Lentz & Company; William Law and John M. Robertson, constituting Robertson & Law; Richard White, W. R. McTürk and Robert White,' constituting E. White Company; Joseph- J. Jermyn, George B. Jermyn, Emma J. Jermyn, constituting John Jermyn Estate; Joseph J. Jermyn, Michael F. Dolphin; The Pennsylvania Company for Insurance on Lives and Granting Annuities; and the Mercantile Trust'Company. |
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371 U.S. 957 | Appellate Division, Supreme Court of New York, Fourth Judicial Department. Certiorari denied. |
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30 T.C. 831 | The Commissioner determined a deficiency in gift tax for the year 1953 in the amount of $4,141.31. The deficiency is based on two adjustments, only one of which is in issue. The adjustment in issue is the respondent's disallowance of four $3,000 exclusions claimed for certain transfers in trust on the ground that the transfers were of future interests within the meaning of section 1003 (b), I. R. C. 1939.
FINDINGS OF FACT.'
A stipulation of facts has been filed and is incorporated herein by this reference.
Frances Carroll Brown, petitioner, of Roseland, New Jersey, filed a gift tax return for the year 1953 with the district director of internal revenue, Baltimore, Maryland.
Petitioner, on November 17, 1953, pursuant to an indenture of trust dated the same day, between petitioner, as settlor, and Ambler H. Moss and Mercantile-Safe Deposit and Trust Company (hereinafter referred to as Mercantile), as trustees, both of Baltimore, irrevocably transferred, without consideration, to the trustees the following securities, hereinafter called the trust estate:
Number of Type of Name of atocle shares atocle
American Telephone & Telegraph Oo_ 400 Common
Atchison, Topeka & Santa Fe Railroad Co_ 400 Common
Mid-Continent Petroleum Corp_ 300 Common
Standard Oil Company of Calif_ 300 Common
Standard Oil Company of N. J_ 300 Common
Union Pacific Railroad Co_ 200 Common
The indenture of trust provided the trustees shall hold the trust estate for the uses and purposes, subject to the terms and conditions and with the powers hereinafter stated:
First: [To pay over in monthly installments, as nearly equal as may he practicable, one-third of the net income from the trust estate to Helene Mavro, during her lifetime; one-third to Deborah Zimmerman, during her lifetime; and one-third to Stuart Paul and Isobel Margaret Garver, jointly, during their joint lives, and to the survivor of them during the lifetime of the survivor. Upon the death of any of the named beneficiaries,. the trustees were directed to pay his share of the net income to petitioner's father, H. Carroll Brown, for life, whereupon, or in the event of his prior decease, the trustees were directed to pay the shares of the net income to Providence Bible Institute, Providence, Rhode Island. Upon the death of the last surviving individual beneficiary, the trustees were directed to pay over the corpus of the trust to Providence Bible Institute.] Second :
(a) The Trustees shall have all powers necessary and proper for the management of the properties comprising the trusts,
(b) The Trustees shall have full power: to postpone until such time as they, in their absolute and unqualified discretion shall deem expedient, the sale of any part of the real or personal estate which the Trustees may receive under or by virtue of this Indenture of Trust, irrespective of the number or size of the investments involved or of their character and without regard to diversification of investments, without liability for any loss or damage occasioned by such retention; to invest and reinvest, irrespective of the number or size of the investments involved and without regard to diversification of investments, the principal of the trusts or any part thereof, or the proceeds of any sales or other dispositions of the trust properties in such securities and other property, real, leasehold (improved or unimproved) or personal, as they may deem to he to the best interests of the trusts,
(c) The Trustees shall not be required to create a sinking fund from income ' or otherwise make good to the principal any loss on securities or other property purchased when the original cost thereof is lost, in whole or in part, through sale or otherwise, or to retire or absorb the premiums at which any securities may have been purchased, but may, in their discretion, allocate income or accumulated income to principal for such purposes, nor shall the Trustees be obligated to credit to income profits from sales or other disposition of assets.
(d) All payments provided to be made under the trusts shall be of the net amount or property payable after the payment of all taxes and costs of administration of the trusts,
(e) Except as in this instrument otherwise provided, all payments of corpus, as well as income provided to be made hereunder to individuals, shall he made to the beneficiaries direct
(f) Dividends, interest, rents and other similar payments, other than liquidating dividends, received in cash by the Trustees shall normally be dealt with as income, whether ordinary or extraordinary, and whether or not in the nature of dividends on mining stocks or other assets of a wasting nature (even though the corporation declaring such dividends may have designated the same as in whole or in part a return of capital or a distribution from depletion reserve), and whether or not the securities to which they relate shall have been purchased at a premium and irrespective of the character of the assets or account out of which they are paid or the time when they shall have accrued or accumulated or shall have been earned, declared or made payable, but the Trustees are authorized, in their absolute discretion, to allocate the whole or any part of any such payment to principal, if they shall deem such action advisable for any reason.
(g)Dividends paid in, and rights to subscribe to, securities or other property, whether or not of the same corporation, and liquidating dividends received in cash, shall normally be dealt with as principal, but the Trustees are authorized, in their absolute discretion, to allocate the whole or any part of any such dividend or right to income, if they shall deem such action advisable for any reason.
Fifth : The trust hereby created shall be irrevocable. And the Settlor further understands and intends, and it is the intention of all the parties to the instrument, that this trust shall at all times be administered and governed as to its legal operation, effect, construction, administration and in all other respects in accordance with the laws of the State of Maryland. It is not the intention of the parties hereto that the trust hereby created shall be administered under the jurisdiction or supervision of a Court of Equity or any other Court, and it shall not he so administered unless it be deemed by the Trustees advisable that it be so administered.
At the time of the transfer in trust all of the income beneficiaries were over 21 years of age. Their dates of birth were as follows:
Isobel Margaret Garver_Nov. 18, 1012
Stuart Paul Garver_Dec. 21, 1008
Deborah Zimmerman_Dec. 20, 1012
Helene Mavro_ 1809
Petitioner valued the securities transferred pursuant to the indenture of trust at $175,000 on her 1953 gift tax return. That was the only gift reported during the year and the return showed the following:
(a) Total gifts of donor_$175, 000. 00
*
(e) Total gifts for year_$175, 000. 00
(f) Less total exclusions not exceeding $3,000 for each donee (except gifts of future interests)_ 12, 000. 00
(g) Total included amount of gifts for year_$163, 000. 00
(h) Deductions
(1) Charitable, public and similar gifts _$77,423. 51
*
(i)Total deductions _ $77,423.51
(j)Amount of net gifts for year _ $85,570.49
The $12.000 in exclusions claimed (line (f)) was for the gift to the income beneficiaries and was explained as follows:
Inasmuch as they are each entitled to receive income immediately, a $3,000.00 exclusion has been taken as to each as it is believed that the value of the present as distinguished from the future interest is worth not less than $3,000.00 to each beneficiary.
The Commissioner, in his notice of deficiency, adjusted net gifts by disallowing the $12,000 of claimed exclusions and explained the adjustment as follows:
No exclusions are allowed for the transfers made in trust since they are gifts of future interests within the meaning of Section 1003 (b) of the Internal Revenue Code of 1939.
The interest received by each income beneficiary under the indenture of trust was a present interest with a value in excess of $3,000.
The corpus of the trust created by petitioner on November 17,1958, has at all times material hereto been invested in income-producing assets.
Since the inception of the trust, the trustees have distributed the income therefrom, after deducting the usual expenses of administration, to the four persons referred to in the trust indenture in the proportions described in paragraph First of the trust indenture in approximately equal monthly installments and year-end distributions of accumulated income.
The discretionary powers found in subparagraphs (c) and (f) of paragraph Second of the trust indenture were inserted therein in order to permit the trustees to exercise discretion in determining what is principal and what is income and thus to aid in the administration of the trust and to avoid the expense of equity proceedings.
OPINION.
Black, Judge:
The only issue here relates to the disallowance of the four $8,000 exclusions. The respondent" determined, and now contends, that the gifts to the income beneficiaries were gifts of "future interests" within the meaning of section 1003(b) (3) and that, therefore, the petitioner is not entitled to the exclusions claimed under that section. Section 1003(b)(3) provides that tlie first $3,000 of gifts (other than gifts of future interests) made to any person during the year shall not be included in the total amount of gifts for the year. The question is whether the gifts to the income beneficiaries are future interests, which are defined in Regulations 108, section 86.11, as interests "limited to commence in use, possession, or enjoyment at some future date or time." See Commissioner v. Disston, 325 U. S. 442, 446 (1945). Whether the gifts in question are of future interests as defined by Federal law, see United States v. Pelzer, 312 U. S. 399, 402-403 (1941), depends upon the rights of the beneficiaries under the indenture of trust as determined by Maryland law. Helvering v. Stuart, 317 U. S. 154, 161-162 (1942). And since the Maryland courts have not construed the trust instrument in question we must determine its meaning under Maryland law as best we can. Anthony J. Drexel Biddle, Jr., 11 T. C. 868, 872 (1948).
In Maryland, as elsewhere, the rights of the beneficiary are determined by the intention of the settlor as gleaned from the entire instrument. Paragraph First of the indenture of trust provides that the net income of the trust estate shall be paid in monthly installments to the income beneficiaries for their lives. There is no question but that that provision, standing alone, entitles the income beneficiaries to substantial present interests at the time the gift was made. Principal and Income (Uniform Act), Md. Ann. Code art. 75B (1951).
However, paragraph Second provides, inter alia, that:
(c.) The Trustees shall not be required to create a sinking fund from income or otherwise make good to the principal any loss on securities or other property purchased when the original cost thereof is lost, in whole or in part, through sale or otherwise, or to retire or absorb the premiums at which any securities may have been purchased, but may, in their discretion, allocate income or accumulated income to principal for such purposes, nor shall the Trustees be obligated to credit to income profits from sales or other disposition of assets.
(f) Dividends, interest, rents and other similar payments, other than liquidating dividends, received in cash by the Trustees shall normally be dealt with as income, whether ordinary or extraordinary, and whether or not in the nature of dividends on mining stocks or other assets of a wasting nature (even though the corporation declaring such dividends may have designated the same as in whole or in part a return of capital or a distribution from depletion reserve), and whether or not the securities to which they relate shall have been purchased at a premium and irrespective of the character of the assets or account out of which they are paid or the time when they shall have accrued or accumulated or shall have been earned, declared or made payable, but the Trustees are authorized, in their absolute discretion, to allocate the whole or any part of any such payment to principal, if they shall deem such action advisable for any reason.
Respondent contends that under these provisions of paragraph Second the trustees could allocate all of the receipts of, and accretions to, the trust estate to principal so that there would be no income for the income beneficiaries to receive and that their interest is contingent and therefore a "future interest." Petitioner, on the other hand, contends that the powers contained in the above-quoted provisions are administrative and managerial in character and could not, if properly exercised, result in a substantial diversion of the receipts of the trust from the income beneficiaries, and that the income beneficiaries could resort to a court of equity to prevent the improper exercise of the powers.
Ho Maryland cases have been cited and none have been found which were concerned with similar trust provisions. Plowever, there have been several cases in other jurisdictions. The question has usually been whether the settlor intended the trustee to have power to override local rules relating to the apportionment between principal and income of receipts of, and accretions to, the trust estate. Although the results have not been uniform, we have not found any case which has held that a trustee, as respondent here contends, has the power to treat all of the receipts and accretions as principal. The reason, we think, is obvious. In cases where the question of the trustee's power in this respect arises there is usually present a conflict between the interest of the life tenant and the remainderman. To hold that the trustee has the power under an "absolute discretion clause" to cut off all the rights of the life tenant would confer upon the trustee the power to destroy one of the primary purposes of the trust, i. e., the purpose to benefit the life tenant. An attempted destruction of*one of the purposes of the trust would constitute an abuse of discretion which the courts would control. Here, the beneficiaries were life tenants and entitled to the income for life.
In Doty v. Commissioner, (C. A. 1, 1945) 148 F. 2d 503, affirming 3 T. C. 1013, the question was whether certain ordinary dividends of a trust were distributable to the income beneficiary. The trustee, under a clause in the trust giving him full power and authority to determine in all cases what accretions to the trust property should be considered as income and what as principal, all without regard to the general rule of law (Massachusetts law in this instance) on the subject, had allocated ordinary dividends to principal. The court held that "accretions to the trust property" did not cover receipts such as ordinary dividends. The court then said:
But even if we assume arguendo that the testatrix intended to give the trustee an absolute discretion in the allocation of trust receipts to corpus or to income, that discretion is not completely uncurbed. It must be exercised reasonably and in good faith in the interest of beneficiaries and remaindermen and must not be abused or exercised arbitrarily. Mayherry v. Carey, 268 Mass. 255, 167 N. E. 281; Dumaine v. Dumaine, supra; Sears v. Childs, 309 Mass. 337, 35 N. E. 2d 663. The action of the trustee here in classifying ordinary dividends as corpus deprives the beneficiary of all income from the trust. In the absence of most unusual circumstances — and none appear here — it seems clear that on the facts of this case equity would find such action on the part of the trustee arbitrary and an abuse of discretion.
In Maryland a trustee's discretionary power is subject to control of the courts to prevent an abuse of discretion. Offut v. Offut, 204 Md. 101, 102 A. 2d 554, 558 (1954). Restatement, Trusts, sec. 187, which was cited with approval by the court in Offut v. Offut, supra, states (comment d) that among the factors which may be relevant in determining whether a trustee is guilty of an abuse of discretion (in exercising or failing to exercise) are:
(2) the purposes of the trust; (3) the nature of the power; (4) the existence or non-existence, the definiteness or indefiniteness, of an external standard by which the reasonableness of the trustee's conduct can be judged;
A careful reading of the whole indenture of trust indicates that the intention of the settlor was to give the income beneficiaries a substantial present interest and nowhere does it appear that she intended to favor the remainderman to their (income beneficiaries') detriment. It does not appear that the trustees' discretionary powers were granted for any other purpose than to facilitate the administration of the trust. It seems clear tons that the income beneficiaries received a substantial present interest under the indenture of trust and that the trustees could not properly exercise their powers in such a manner as to deprive the income beneficiaries of their present interest. To do so. would constitute an abuse of discretion which the Maryland courts would prevent.
Respondent also contends that if the interests iii question are present interests the exclusions are nevertheless unallowable because the trustees were not required to pay over a definitely ascertainable amount of income thereby rendering the interests incapable of valuation.
We think respondent's contention is without merit. His contention in this respect is based on precisely the same argument that was advanced in support of his contention that the interests were future interests, viz, that the trustees could allocate all of the receipts and accretions of the trust estate to principal. As we have stated previously, the trustees could do no such thing without violating their trust. Therefore, the interests of the income beneficiaries which are concededly otherwise capable of valuation are not rendered incapable of valuation by the trustees' power under subparagraphs (c) and (f) of paragraph Second.
Accordingly, the petitioner is entitled to the four $3,000 exclusions which she claims. Because of the respondent's adjustment in the amount of the charitable deduction, which is not contested,
Decision will be entered wnder Rule 50.
All section references are to the Internal Revenue Code of 1939, as amended.
Hereinafter referred to as Income beneficiaries.
The trust officer of Mercantile, which administers numerous trusts and which was the corporate trustee of the trust to which petitioner conveyed the property here involved, testified that similar clauses are contained in about i)0 per cent of the trusts which Mercantile administers and that Mercantile usually requests such clauses so as to facilitate administration and avoid litigation on doubtful items. He also testified that since the inception of the trust the income beneficiaries have received substantially all of the receipts of the trust estate. In the course of the testimony of this trust officer of Mercantile, the following question and answer appear:
Q. Wlmt is the purpose of inserting powers of this nature In the trust Instrument?
A. So that as and when some unusual distribution is received by the trustee it would not be necessary to go into equity for instructions, that we have some area in which we can operate under our discretion to determine what Is principal and what is income; not to withhold income but to determine what part of the distribution represents income and what part represents principal. |
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434 U.S. 817 | Sup. Ct. N. J. Certiorari denied. |
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313 U.S. 594 | Petition for writ of certiorari to the Circuit Court of Appeals for the Ninth Circuit denied. |
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528 U.S. 857 | C. A. 4th Cir. Certiorari denied. |
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7 Cust. Ct. 423 | Oliver, Presiding Judge:
This appeal to reappraisement involves the proper dutiable value of certain glass animals exported from Germany and imported at-the port of Boston, Mass.
The case has been submitted for decision on a stipulation entered into by and between counsel for the -respective parties, wherein it is agreed, in substance, as follows:
(1) That the glass animals in question were exported from Germany on or about May 25, 1936.
(2) That the instant merchandise is similar in all material respects to that which was the subject of the decision in the case of F. W. Woolworth Co. et al. v. United States (Reap. Dec. 5094).
(3) That the market conditions existing on the date of exportation of the articles in question were similar, if not identical, to the conditions found to be prevailing in the foreign fnarket as described in the Woolworth Co. case, supra.
(4) That the record in the Woolworth Co. case, supra, may be incorporated in and made a part of the record in the present case.
On the agreed facts, as hereinabove set forth, I find that on the date of exportation of the instant merchandise glass animals, such as and similar to those involved herein, were freely offered for sale to' all purchasers in the principal market of the country of exportation, to wit, the Sonneberg-Lauscha district of Germany, in the usual wholesale quantities and in the ordinary course of trade for exportation to the United States.
Accordingly, I hold'as matter of law that the proper dutiable export values of the glass animals exported on or about May 25, 1936, are the per se unit invoice prices, plus, when not included in such per se. unit invoice prices, the cost of cases and packing and the cost of all containers and coverings of whatever nature, and all other costs, charges, and expenses incident to placing the'merchandise in condition, packed ready for shipment to the United States, as invoiced, whenever reported as dutiable by the appraiser.
' The appeal having been abandoned insofar as it relates to all other merchandise, to that extent the.appeal is hereby dismissed. Judgment will be rendered accordingly. |
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60 Cust. Ct. 1064 | In accordance with stipulation of counsel that the merchandise and issues are similar in all material respects to those involved in Gehrig Hoban & Co., Inc. v. United States (57 Cust. Ct. 727, A.R.D. 210), the court found and held that cost of production, as that value is defined in section 402a (f), Tariff Act of 1930, as amended by the Customs Simplification Act of 1956, is the proper basis for the determination of the value of the "Canoe" 'cologne here involved and that such value is as stated in schedule "B," said schedule "B" being attached to and made a part of the decision, plus the fro rata share of the cost of packing as indicated on the invoices. |
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6 Cust. Ct. 492 | Opinion by
Kincheloe, J.
Following the authorities cited in Abstract 15400 the court dismissed the protests. |
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546 U.S. 1122 | C. A. 7th Cir. Cer-tiorari, denied. |
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385 U.S. 821 | C. A. 7th Cir. Certiorari denied. |
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26 B.T.A. 626 | OPINION.
Brack:
In this proceeding the petitioner seeks a redeterniination of its income-tax liability for the years 1925 and 1926, for which years the respondent has 'determined deficiencies in the amount of $8,491.36 and $234.97, respectively. The year 1924 was also included in the petition, but at the hearing both parties agreed that, since the deficiency notice and statement thereto attached show that respondent- determined an overassessment for 1924, the Board has no jurisdiction for 1924. Accordingly, the proceeding, in so far as it relates to 1924, is hereby dismissed.
Some of the adjustments made by respondent in petitioner's income for the taxable years are not contested and so much of the deficiency as is based thereon is not in controversy.
Petitioner's onty assignment of error is that the Commissioner erred in reducing' the cost of certain property acquired by the petitioner in April, 1920, from a cost price of $150,000 to $50,000. Respondent and petitioner agree as to the basis of cost of one of the tracts of land owned by petitioner, and as to the other tract respondent in the deficiency notice determined a cost of $50,000, but now concedes that the basis of cost of this tract should be $52,500 (cost to transferor). Respondent, in the statement attached to the deficiency notice, states: " Your contention that the cost of sales should not be decreased each of the years under consideration, is denied. This office holds that the basis for determining the cost of the land -sold, is the same as the cost in the hands of the predecessor owner. See Article 1597, Regulations 69."
It is true that the lands from which petitioner plotted its cemetery lots were acquired in 1920, when the Revenue- Act of 1918 was in effect, and the profits, if any, involved in this proceeding are from the sale of cemetery lots which took place in 1925 and 1926. Hence the basis of cost of these cemetery lots is determined under the provisions of the Revenue Act of 1926, which governs both taxable years.
Tlie respondent having determined that petitioner acquired the lots in a " reorganization " as defined by the Act of 1926, and that the basis of cost of the land to the petitioner is the same as it was in the hands of the transferor, the burden of proof is on petitioner to show that it did not acquire the land in a " reorganization " as defined by the 1926 Act, and that, hence, its basis of cost is actual cost to it, without reference to what the transferor originally paid for the land.
The petitioner is a corporation, organized under the laws of the State of Illinois on May 10, 1920, for the purpose of acquiring land and operating a cemetery in the immediate vicinity of Chicago, Cook County, Illinois. Its orginial authorized capital stock was $200,000 or 20,000 shares of a par value of $10 each. Of this amount, $2,000 was subscribed for in cash and $100,000 in property, being the real estate involved in this proceeding.
The petition filed by petitioner contains the following allegation:
The petitioner on April 20, 1920, purchased from the Ohas. F. Heinig Co. 98 acres of land costing them some years previously $52,500. The sale price was $150,000 and the Ohas. F. Heinig Co. accepted as payment two mortgages amounting to $50,000 and 10,000 shares of stock of a par value of $10 each of the Ridgewood Cemetery Company in payment thereof.
This allegation was never qualified, modified or abandoned by petitioner. The facts show that in May, 1920, one L. M. Bangham offered to sell to the petitioner a certain tract of land containing 98 acres subject to two mortgages aggregating $50,000 and on condition that the petitioner would issue to Bangham $100,000 of its capital stock, being 10,000 shares of a par value of $10 each. This offer was accepted. The land was conveyed to the petitioner by one George Brinkman, who appears to have held title to the land, and 10,000 shares of stock of the petitioner were issued to L. M. Bang-ham, May 20, 1920. The petitioner, on the same day that it acquired the land, employed the Chas. F. Heinig Company as fiscal agent to sell the balance of its stock on the basis of a 20 per cent commission, the selling to begin as soon as the petitioner had qualified under the rules of the Securities Department of the State of Illinois.
In a protest filed by the Chas. F. Heinig Company with the Commissioner of Internal Revenue, January 18, 1926, which was offered in evidence by petitioner and referred to by petitioner in its pleadings, the Chas. F. Heinig Company speaks of the above transaction by which petitioner acquired the lands for the cemetery lots, as follows:
The" Company, on April 20, 1920, transferred to the Ridgewood Cemetery Company, property costing $52,500 in return for 10,000 shares of stock valued at $5.00 per share and first and second mortgages amounting to $50,000 and the following entries were made on the books of the company at that time:
Dr.: $52,500.
Gr.:
1st Mortgage_$20, 000
2nd Mortgage- 30,000
Ridgewood Cemetery stock_ 50, 000
Total_ 100, 000
It is the petitioner's contention that the cost of the 98-acre tract of land here under consideration is to be determined under section 202(b) of the Revenue Act of 1918, which provides in part as follows:
Seo. 202. (b) When property is exchanged for other property, the property received in exchange shall for the purpose of determining gain or loss be treated as the equivalent of cash to the amount of the fair market value, if any .
The petitioner contends that the cost of the land to it was $50,000 in mortgages assumed and 10,000 shares of stock of a par value of $10 per share and having a fair market value same as par, making total cost of the land $150,000. The respondent takes the position that the transaction falls within the provisions of section 204(a) (7) of the Revenue Act of 1926, which provides as follows:
Sec. 204. (a) The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property, except that • •
(7) If the property (other than stock or securities in a corporation a party to the reorganization) was acquired after December 31, 1917, by a corporation in connection with a reorganization, and immediately after the transfer an interest or control in such property of 80 per centum or more remained in the same persons or any of them, then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain or decreased in the amount of loss recognized to the transferor upon such transfer under the law applicable to the year in which the transfer was made.
Section 203 (h) of the Revenue Act of 1926 provides:
Sec. 203. (h) As used in this section and section 201 and 204—
(1) The term "reorganization" means (b) a transfer by a corporation of all or part of its assets to another corporation, if immediately after the transfer the transferor or its stockholders or both are in control of the corporation to which the assets were transferred
(2) The term "a party to a reorganization" includes a corporation resulting from a reorganization .
The respondent claims that the Chas. F. Heinig Company owned the land in question, although it was held in the name of Brinkman, and that it organized the petitioner and transferred the land to the petitioner for part of its capital stock issued upon incorporation, and was immediately in control of petitioner because of its ownership of much more than 80 per cent of its then issued and outstanding capital stock. We think respondent's contention on this issue must bo sustained.
The Chas. F. Heinig Company was organized under the laws of the State of Illinois on February 21, 1920, a date preceding the organization of petitioner, to act as financial, commercial or general agent for corporations, firms or individuals. It was not authorized under the terms of its charter to hold or own real estate. As we interpret the evidence in this proceeding, including the protest of the Chas. F. Heinig Company filed with the Commissioner of Internal Revenue in a proceeding involving its own tax liability, which protest was offered in evidence by petitioner without objection from respondent, Chas. F. Heinig acquired the land some time before it was transferred to petitioner (just how long is not shown) for Chas. F. Heinig Company and paid therefor $52,500. The Chas. F. Heinig Company lacked authority to hold real estate; therefore, title to the land was in the name of Brinkman and when Brinkman conveyed the land to petitioner and it issued 10,000 shares of stock therefor to L. M. Bangham, Bangham held the stock as the nominee of the Chas. F. Heinig Company and the stock was owned by that company. If these facts are not true, then the .facts stated in the protest by the Chas. F. Heinig Company offered in evidence by petitioner were not true and the burden was on petitioner to show what the true facts were.
On the facts we hold the petitioner was " a corporation resulting from a reorganization " within the meaning of section 203 (h) (2) of the Revenue Act of 1926. The Heinig Company was " in control of the corporation to which the assets are transferred," according to the terms of section 203(h) (1) of the Revenue Act of 1926, as it had received over 98 per cent of the outstanding stock.
Accordingly, we are of the opinion that the transaction falls within the provisions of section 204(a) (7) of the Revenue Act of 1926, and that the basis for determining gain or loss from sales i of lots is the same as it would be in the hands of the transferor, that is, $52,500. This basis of cost will neither be increased nor diminished by any profit or loss recognized under the 1918 Act as to the transfer in 1920 by the Chas. F. Heinig Company of the land in question to petitioner. The evidence shows that the Commissioner treated this transaction as one involving neither gain nor loss.
Decision will be entered under Rule 50. |
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485 U.S. 1020 | C. A. 11th Cir. Certiorari denied. |
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389 U.S. 913 | C. A. 6th Cir. Certiorari denied. |
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179 L. Ed. 2d 499 | Petition for writ of cer-tiorari to the District Court of Appeal of Florida, Third District, denied.
Same case below, 22 So. 3d 567. |
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42 T.C. 455 | Arundell, Judge:
In these consolidated proceedings the respondent determined deficiencies in income tax for the calendar years 1951 and 1954 through 1957 in amounts as follows:
Two issues are presented: (1) Whether during all the years here involved petitioner received capital gains or ordinary income as the result of a contract entered into with Kyowa Fermentation Industry Co., Ltd., on August 6, 1951; and (2) whether petitioner realized management fees subject to tax in the amount of $50,833.83 in 1956 and $616,666.67 in 1957 from Northwest Nitro-Chemicals, Ltd.
The parties filed a stipulation of facts to which was attached 45 exhibits. There was no oral testimony.
FINDINGS OF FACT
The stipulated facts are so found and are incorporated herein by this reference.
Petitioner is a corporation organized in 1919 and existing under the laws of the State of Maryland with its principal office in New York, N.Y. Its returns for the years here involved were filed with the district director of internal revenue in Upper Manhattan (now Manhattan) , New York, N.Y.
Petitioner's common stock is traded oh the New York Stock Exchange. It was organized to manufacture, import, export, sell, purchase, and generally deal in and with chemicals, solvents, fertilizers, paints, varnishes, dyes, colors, pigments, and all kinds of merchandise entering into the manufacture of same, and all products and byproducts thereof. Petitioner used the accrual method of accounting, and it used the specific chargeoff method for bad debts during the years in issue.
Since its organization and until some time during February 1951 petitioner was a producer of acetone, butyl alcohol, and ethyl alcohol by the bacterial fermentation process described in the second following paragraph below.
Petitioner began manufacturing operations in May 1920 producing acetone, butanol (sometimes described as butyl alcohol or n-butyl alcohol), and a small amount of ethyl alcohol by a bacterial fermentation process using a com mash. The process was developed and patented by Chaim Weizmann, an eminent British scientist. Exclusive rights to the use of this process were acquired by petitioner, and petitioner was the sole producer of acetone and butanol by bacterial fermentation until the rights expired in 1936 when others entered the field.
Acetone and butyl alcohol are produced by the action of bacteria on starches and sugars. A mash of carbohydrates of either amyla-ceous (starchy) or saccharine (sugary) nature is prepared by mixing nutrient material with water. Examples of amylaceous carbohydrates are maize, kaffir com, wheat, and oats. Examples of saccharine carbohydrates are blackstrap molasses, hydrol, wood sugars, and xylose. After the carbohydrate material is mixed with water, it is subjected to a cooking process for the purpose of sterilizing the material and breaking it down into a form more easily acted upon by bacteria. After sterilization, the mash is cooled and inoculated with a culture of butyl alcohol and acetone-forming organisms. The mash is then allowed to ferment. After fermentation, the products, consisting essentially of butyl alcohol, acetone, and ethyl alcohol, in approximately the proportions by weight of 6:3:1, are separated and recovered by fractional distillation.
During 1922 the bacteria used by petitioner in the fermentation process suddenly and mysteriously ceased to fmiction. Some fermen-tations yielded one-tenth of the normal amount of acetone and butyl alcohol, and many fermentations yielded none at all. Research and experimentation led to the discovery that alien bacteria lurking in the factory piping had infected the fermentation bacteria with a disease that made the cultures impotent. As a result, petitioner developed an effective method of steam sterilization. This experience caused petitioner to increase the size of its laboratory and expand its research staff. A research and development program was begun which continued for many years. As a result of its research and development work, petitioner learned how to vary the yields of acetone, butanol, and ethyl alcohol from the fermentations through the employment of different strains of bacteria which it discovered and cultivated. Petitioner also discovered how to use cheaper raw materials in place of corn. Between August 7,1934, and October 21, 1941, 26 U.S. patents were issued to petitioner on the fermentation process with respect to bacterial cultures, raw materials, equipment, and treating materials. The 26 patents are attached to the stipulation as Exhibit 1-A and are incorporated herein by this reference. They describe: (1) The increased yields of solvents as a percent of sugar contained in the fermentation mash, and (2) the increased yields of butyl alcohol as a percent of total solvent yield, which resulted from petitioner's research and development work. Petitioner never applied for or received any Japanese patents on the acetone-butanol-ethanol fermentation process.
Kyowa Fermentation Industry Co., Ltd. (now known as Kyowa Hakko Kogyo), hereinafter sometimes referred to as Kyowa, was organized-under the laws of Japan on July 1, 1949, as successor to Kyowa Gangyo K. K., which was the successor to Toa Chemical Industry Co., Ltd., originally established in March 1943 at Hofu, Yamaguchi Prefecture, for the purpose of manufacturing aircraft fuel for the Japanese Army. Kyowa's principal office during the years in issue was located in Tokyo, Japan.
Kyowa was the first company in Japan to produce acetone and butanol through the utilization of waste molasses on a co'mmmercial basis. By February 1959 it became the largest producer of solvents in Japan, with an annual production of 15,600 tons.
On September 15, 1950, Benzaburo Kato, as president of Kyowa, wrote a letter to Thomas S. Carswell, a vice president of petitioner, in which Kato stated that his company would be interested in obtaining petitioner's technical know-how with respect to the production of butanol and acetone by fermentation and gave the reasons therefor. In this letter Kato also stated:
If the percentage of butyl alcohol in the total solvents is increased by introducing into our process certain techniques and cultures used by Commercial Solvents Corporation, it may aid materially in increasing the percentage of butyl alcohol in our fermentations. If this should prove to be true, we will be able to pay some part of the additional profit accruing to our Company to Commercial Solvents in the form of royalties. As to the amount of royalties, how to calculate and how to pay such royalties and other details connected with same, I am ready to discuss and negotiate with my utmost sincerity.
Petitioner's cultures produced a yield of butyl alcohol higher than the 3,000 long tons produced by Kyowa as set forth in Kato's letter.
Negotiations were thereafter carried out between petitioner and Kyowa, and an agreement, hereinafter sometimes referred to as the agreement, was entered into on August 6,1951, as a result thereof. A copy of the 13-page agreement is attached to the stipulation as Exhibit 3-C and is incorporated herein by this reference. The pertinent parts of the agreement are paraphrased in these findings.
Petitioner, as first party to the agreement, was referred to as Solvents, and Kyowa, as second party, was referred to as Kyowa. Solvents represented that it had developed and was the owner of processes, know-how, and cultures (collectively referred to as processes) relating to the production of n-butyl alcohol, acetone, and ethyl alcohol by the fermentation of molasses-containing fermentation media. Kyowa represented that is was producing annually 6,600,000 pounds of solvents (n-butyl alcohol, acetone, and ethyl alcohol) by the fermentation of molasses-containing fermentation media, the solvents yield being about 29 percent of the amount of fermentable sugar in the molasses and consisting of 58 to 62 percent n-butyl alcohol, 27 to 33 percent acetone, and 7 to 12 percent alcohol. Kyowa also represented that it was desirous of acquiring the said processes (processes, know-how, and cultures) from Solvents "for the territory of Japan" for the purpose of improving its process and increasing its total solvents yield and in changing the ratios of solvents produced. For adequate consideration the parties then agreed, in paragraph (1), that Solvents would supply Kyowa with a true and accurate written report, showing the solvents yield and ratios, times of fermentation, concentrations of fermentable sugar, and such other data as may be necessary to enable Kyowa to determine the degree of improvement which may be effected in its process, using its customary types of molasses, by the use of Solvents' improvements, and, in paragraph (2), that Kyowa would, within 2 months after receipt of such report, notify Solvents, in writing whether it desired to acquire Solvents' said processes (processes, know-how, and cultures). Only in the event that Kyowa notified Solvents that it desired to acquire Solvents' said processes were the remaining provisions of the agreement to become effective.
On September 25, 1951, Kyowa officially notified petitioner that it desired to acquire the processes mentioned in the agreement of August 6, 1951. This made effective the remaining provisions or, as they were called, paragraphs, of the August 6, 1951 agreement which are now paraphrased.
Under paragraph (3), Solvents agreed to furnish Kyowa promptly with cultures and a detailed written description of its processes and up to two competent technicians for a period of not in excess of 2 months, if so requested by Kyowa.
Under paragraph (4), Solvents and Kyowa agreed that each would promptly advise the other of all improvements, patentable or unpat-entable, made by either relating to the production of n-butyl alcohol, acetone, and ethyl alcohol by the fermentation of molasses-containing media. Solvents agreed to grant Kyowa a royalty-free exclusive license to use in Japan any such improvement made by Solvents in re-pect of which a patent would be issued, and Kyowa likewise agreed to grant Solvents a royalty-free exclusive license to use in the United States any such improvement made by Kyowa in respect of which a patent would be issued. (Petitioner's books and records show that no improvements in the fermentation process, and no licenses, were furnished to or received from Kyowa pursuant to paragraph (4).)
Under paragraph (5), Kyowa was to pay Solvents an amount equal to 10 percent of the total value of the improvements furnished by Solvents for a 5-year period. The value of the improvements was to be determined in part on the basis of a detailed report for a 6-month period ending June 30, 1951, called the base period, showing a mass of information relative to the exact amount of each material used, the total number of factory man-hours and the total quantities each of n-butyl alcohol, acetone, and ethyl alcohol produced during the base period. Kyowa was also to furnish a report setting forth (i) the highest total quantity of solvents ever produced by it during any 6-month period, and (ii) the dates of such 6-month period. A similar report to the one made for the base period was to be made by Kyowa for each 6-month period, called the installment period, during the 5-year period. By comparing each installment period report with the base period report, the total value to Kyowa during the installment period of the improvements in its process furnished by Solvents was determined, 10 percent of which value was payable to Solvents with the furnishings of the particular installment period report.
Paragraph (6) of the agreement provided:
On tlie date of delivery by Solvents to Kyowa of the cultures and detailed description referred to in Paragraph. (3) hereof, and simultaneously with such delivery, Kyowa shall pay to Solvents the sum of Twenty-Five Thousand Dollars ($25,000.00). Such sum shall constitute a credit against which installments payable hereunder by Kyowa to Solvents shall be charged until such installments exceed such sum provided, however, that, should installments payable hereunder by Kyowa never exceed such sum, Solvents shall nevertheless be entitled to retain the whole thereof as payment for selling such cultures and detailed description.
Under paragraph (8), Kyowa agreed to keep full, true, and ac curate books of account, the inspection of which was at all times open to Solvents.
Under paragraph (9), Kyowa agreed to exercise its best efforts to prevent any cultures, know-how, or other technical information "sold to it in accordance with the terms of this agreement" from being made available to or coming into the possession of anyone without prior permission in writing from Solvents.
Paragraph (10) of the agreement provided:
Kyowa shall have the exclusive right, in so far as Solvents is able to give Kyowa such right, to make, use and vend in Japan products resulting from the use of the processes sold hereunder, provided, however, that Solvents shall have the right to sell similar products of its own manufacture in Japan. Kyowa shall, of course, have the right to use and vend outside Japan products resulting from the use of the processes sold hereunder.
Paragraph (12) provided that a waiver by either party of any breach of any provision of the agreement was not to be construed as, or constitute, a continuing waiver, or a waiver of any other breach, of any provision of the agreement.
The final paragraph (15) provided that the agreement could not be assigned by either party without the written consent of the other party.
In the years 1949 through 1956 petitioner did not sell or ship any acetone, butyl alcohol, or ethyl alcohol to Japan. Records prior to 1949 are not available. On March 13,1957, petitioner sold, F.A.S. New York, to Toyomenka, Inc., 79 Wall Street, New York 5, N.Y., for shipment to Yokohama, Japan, 44,400 pounds of n-butyl alcohol for $6,959.70, and on May 31, 1957, 46,990 pounds of n-butyl alcohol for $7,365.75. In 1958 petitioner did not sell or ship any of the aforesaid products to Japan. In 1959 petitioner sold and shipped four gallons of ethyl alcohol to Japan.
These shipments of butyl alcohol in 1957 were made because there was a severe shortage of raw materials in Japan in 1957.
Under the terms of the agreement dated August 6, 1951, petitioner received the following income from Kyowa:
Year Amount
1951 $25,000
1952 None
1953 39, 213
1954 82, 383
1955 97, 574
1956 96, 588
1957 32, '556
On petitioner's Federal income tax returns for the years 1951 and 1954 through 1957 petitioner reported the above-mentioned income received in those years from Kyowa as long-term capital gain.
Petitioner's fermentation process for the production of acetone, bu-tanol, and ethyl alcohol was a secret process which petitioner owned for more than 6 months prior to August 6, 1951. At the time the agreement was entered into, petitioner did not hold its fermentation process primarily for sale to customers in the ordinary course of trade or business.
Ultimate Findings or Fact as to FiRst Issue
1. Petitioner did not transfer all substantial rights in its secret processes to Kyowa under the August 6, 1951, agreement.
2. Petitioner retained rights in said processes which were of value.
3. Petitioner did not sell or exchange the secret process in issue, and the income therefrom received from Kyowa was taxable as ordinary income.
Issue %
Northwest Nitro-Chemicals, Ltd., hereinafter sometimes referred to as Northwest, was incorporated on August 9, 1954, under the laws of Alberta, Canada, for the purpose of constructing and operating a synthetic fertilizer plant and engaging in the business of manufacturing, distributing, and selling fertilizers.
The authorized capital of Northwest consisted of 10,000 shares of 5 percent preferred stock, Can$100 par value each, and 5 million shares of common stock, 1 cent (Canadian) par value each. The funds necessary to construct the plant and put it into operation, including funds for the acquisition of land, construction of plant, and working capital, in the amount of approximately $21,400,000, were raised principally through:
(1) The sale to the Koyal Bank of Canada, hereinafter sometimes referred to as the Bank, of Can$12 million principal amount of first mortgage 4y2 percent serial bonds, payable in installments from 1958 to 1962 and issued under a deed of trust and mortgage dated January 2,1956;
(2) The sale to the public, through underwriters, in 1955 of US$8,500,000 principal amount of 10-year 5y2 percent subordinate income debentures, hereinafter sometimes referred to as the debentures, due July 31, 1965;
(3) The sale to the public, through underwriters, in 1955 of 300,000 shares of common stock, at an aggregate price of US$450,000; and
(4) The sale to petitioner and New British Dominion Oil Co., Ltd., the prospective supplier to Northwest of natural gas needed in its operation, of 10,000 shares of preferred stock, at an aggregate price of Can$l million.
The debentures were sold in units of $50 each, thus making 170,000 units. With each unit the purchaser received five shares of common stock. Each unit with the stock was sold for US$50. There were 850,000 shares of common stock issued in this manner.
In addition, upon its organization, Northwest had issued 2,600,000 shares of its common stock at par for an aggregate amount of Can-$26,000.
After the completion of the financing referred to above, petitioner was the owner of the largest single blocks of the debentures ($1 million) ; of preferred stock (66% percent); and of common stock (approximately 43 percent) of Northwest issued and outstanding.
An additional investment by petitioner was made during September 1957 in the common and preferred stocks of Northwest, increasing its percentage of the common stock of Northwest to 52.7 percent and its percentage of the preferred stock of Northwest to 83.4 percent. The cost to petitioner of the additional investment in the common and preferred stock of Northwest made in September 1957 was $1,102,313.
The first mortgage bonds sold to the bank were issued to mature at the rate of $1 million semiannually on January 2 and July 2 of each year, commencing January 2, 1958, until July 2, 1961. The unpaid principal balance of $4 million was to be payable on January 2,1962. Interest at the rate of 4% percent was payable semiannually on January 2 and July 2 of each year.
The debentures were dated August 1,1955, to mature July 31, 1965. They were issued under a trust indenture executed by Northwest in favor of Chemical Corn Exchange Bank in the city of New York to bear fixed interest at the rate of 5% percent per annum, payable on the first days of November and May for the period commencing August 1, 1955, and ending November 1, 1957. Commencing November 1, 1957, the debentures were to bear cumulative interest at the rate of 5% percent, payable on May 1 and November 1, in each year, commencing May 1, 1958, which, prior to the maturity of the debentures, was payable only out of available net income for the preceding fiscal year. Any deficiency in payment of cumulative interest was to accumulate and was to be payable on any subsequent interest date or dates to the extent that there would be sufficient available net income for the preceding fiscal year for such purpose, and was to be payable in any event on the maturity of the debentures, whether by lapse of time, by redemption, by declaration, or otherwise.
The holders of the preferred shares were not entitled to receive notice of or attend meetings of shareholders or vote thereat except in respect of the dissolution of Northwest, or the sale of its assets or a substantial part thereof, or when full cumulative dividends for four quarterly dividend periods, whether or not consecutive, upon the preferred shares should be unpaid, after which they were to have the exclusive right to elect two directors of the company, such rights ceasing when full cumulative dividends upon the preferred shares were to have been paid, or declared and set apart for payment.
The common shares were entitled to one vote per share and ranked after the preferred shares both as regards dividends and distribution of assets. Under the first mortgage trust deed no dividends could be paid on any of Northwest's common stock so long as any first mortgage bonds are outstanding.
As of March 1, 1955, Northwest entered into a management agreement with petitioner for a period of 10 years. Under this agreement to manage Northwest's business, petitioner agreed, among other things, to furnish through individuals in its own organization all services of an executive and administrative nature which might be required by Northwest's board of directors in order to conduct the business of Northwest, to make available specialists of petitioner for consultations, and otherwise to assist Northwest in its operations. The executives of petitioner were to fill the offices of Northwest's president, vice presidents, secretary, treasurer, and controller. Prior to the commencement of commercial production by Northwest, petitioner was to be paid, in full compensation for its services to Northwest, 150 percent of the salaries or wages paid by petitioner to its officers and employees prorated on the basis of actual time spent by such persons on Northwest's affairs, plus reimbursement for traveling and out-of-pocket expenses. Commencing with the start-up of commercial production of any product by Northwest, petitioner was to be paid in U.S. dollars at the rate of $650,000 per year.
As of August 23, 1955, Northwest's principal officers included J. Albert Woods, director and president (who was also a director and president of petitioner), Maynard C. Wheeler, director and vice president (who was also a director and vice president of petitioner), Howard L. Sanders, director, vice president and treasurer (who was also a vice president and treasurer of petitioner), and Alexander K. Bergen, secretary and assistant treasurer (who was also secretary of petitioner).
By letter agreement dated November 7,1955, the management agreement was amended as of October 27,1955, to provide, in pertinent part, that petitioner would not be required to provide from or through its organization an individual for the office of president of Northwest, and that the rate of compensation thereunder would accordingly be reduced from US$650,000 to US$610,000 per year. By letter agreement dated December 2,1957, the letter agreement dated November 7,1955 (amending the management agreement), was itself terminated and canceled, reinstating the management agreement in its original form, effective as of November 1,1957.
Northwest commenced commercial operations in December 1956. Petitioner accrued in its books and reported as taxable income in its income tax return for 1956 the sum of $50,833.33 as management fees earned in December 1956, which represented one-twelfth of the then effective annual management fee rate of $610,000. The sum of $616,666.67 was accrued on petitioner's books for 1957 as income from management fees earned during said year for 10 months at the rate of $610,000 per year and 2 months at the rate of $650,000 per year but the amount of $616,666.67 was not reported by petitioner as taxable income for 1957. An operating loss was incurred for the month of December 1956 in the amount of $224,293, including management fees.
An operating loss was incurred by Northwest for the first 6 months of 1957 in the amount of $1,428,546, including management fees. On June 30,1957, Northwest had current assets of $2,312,768 and current liabilities of $3,703,349, including management fees.
On or about January 31,1957, Northwest borrowed $1 million from the bank.
By letter dated July 5, 1957, from Northwest to the bank, Northwest advised the bank that it was necessary to have an immediate loan of $500,000 with probable additional loans between then and December 31,1957,.of $2,500,000 in order to operate its plant at the required full production. The reason therefor given by Northwest was the delay in its receiving the final $2 million takedown of the $12 million first mortgage bonds which Northwest had expected to receive from the bank prior to July 1, 1957, but which, because of delays in the completion of construction of one of the manufacturing plants of Northwest, was extended to October 1, 1957, pursuant to the bond purchase agreement under which the bonds were issued.
The letter to the bank of July 5, 1957, also stated that variations in the cash position of Northwest from the original feasibility report prepared in May 1955 resulted from the following:
(1) Delays in receipt of equipment and operational difficulties which prevented Northwest from reaching a total production figure close to the feasibility report until March 1957, instead of October 1956 as originally planned;
(2) As a result, production in early 1957 was insufficient to meet demand and orders had to be canceled;
(3) Currency differentials reduced the net back return; and
(4) Many production units which had been installed did not operate satisfactorily, necessitating changes and new equipment which increased the direct cost of the plant.
On July 17, 1957, Sanders, in the capacity of vice president of petitioner, wrote a letter to the bank concerning its management fee contract with Northwest, the body of which letter is as follows:
In connection with the revolving credit presently being negotiated between yourselves and Northwest Nitro-Chemieals Ltd., we understand that you have raised the question regarding the actual payment to this corporation of the regular installments of its management fee.
The fee arises in connection with the management agreement between Northwest and Commercial Solvents Corporation dated March 1, 1955. Such agreement provides for payment to Commercial Solvents for CSC's services during "that portion of the term of this agreement which shall begin on the date on which such facilities shall begin the manufacture of any commodity on a commercial scale." The agreement further provides for the payment of such fees in advance in equal quarterly installments.
In spite of the wording above mentioned, although Northwest has accrued such fees on its boohs, it has yet to make its first payment of fee to Commercial Solvents. Furthermore, it is not the intention of Solvents to exact payment of the fee installments during the period or periods when Northwest finds it necessary to borrow money under its revolving credit arrangement. However, this should not under any circumstances be construed to mean that Commercial Solvents waives any payments or any contractual rights with respect thereto.
We trust this will give you fair indication of our intentions in this matter. Obviously, we do not expect your good bank to lend money to Northwest simply to pay management fees to Commercial Solvents Corporation.
On or about July 23, 1957, the supervisor of the bank sent the manager of the bank a telegram concerning Sanders' letter dated July 17,1957. The telegram reads:
Northwest Nitro-Chemicals Ltd. Referring . our telephone conversation this morning we certainly do not wish to be picayune about the form of postponement however we feel that something a little more definite than the "intention" expressed in letter July 17 is called for. We would be'satisfied if the latter were altered to read in the second sentence, third paragraph "furthermore, Commercial Solvents Corporation undertakes not to exact payment or [sic] the fee installments during". Presumably you will arrange for alteration in the terminology.
On the following day, July 24, 1957, the supervisor of the bank wrote the manager of the bank, in part, as follows:
on further reflection it may be that the company for legal reasons will not wish to alter their letter from an • "intention" as expressed to an "undertaking". Accordingly it will not be necessary to insist on the alteration of the letter as suggested in our telegram yesterday.
On December 23, 1957, Sanders, who was then president of Northwest, wrote a letter to Woods who was still president of petitioner (CSC) and was then also the chairman of the board of Northwest, the body of which is as follows:
As you know, because of the tight financial position of this company during its initial year of operation we have withheld payment to Commercial Solvents Corporation of fees due under the management contract between us commencing with December 1, 1956. Earlier this year, CSC informed Royal Bank of Canada by letter that payment of such fees would not be enforced for the present time in order to assist this company in making adequate loan arrangements with the Royal Bank.
The question of payment procedure for these fees has been discussed by the writer with Mr. James Muir, President of the Royal Bank of Canada. The bank has agreed to the postponement of the first payment under our mortgage bonds from January 2, 1958 to June 2, 1958, with the expectation that prior to that date this company will be able to clean up all, or essentially all, of its outstanding loan obligations to the bank. At that time suitable borrowing arrangements will be provided by Royal Bank so that this company can meet its obligations both under the mortgage bonds and under its contract with CSC. The bank recognizes that our obligation to CSC for management fees is long past due and they are anxious to place this company in a position to keep its debts on a current basis. Based on our cash forecast which has been reviewed with Mr. Muir, we expect to be placed in a position in June 1958, to at least pay to CSC all of our past due indebtedness as of December 31, 1957. At the same time, we will advise you of our intentions with respect to our 1958 obligation for management fees.
James Muir, referred to in the aboye letter as president of the bank, was also a director of Northwest.
On or about January 1, 1958, the management agreement between Northwest and petitioner, dated March 1, 1955, was again amended, effective as of January 1,1958.
After several meetings and discussions between the bank and Northwest regarding the $1 million payment on the first mortgage bonds which matured on January 2, 1958, and the management fee, an agreement was reached on May 15, 1958, the material provisions of which are as follows:
Northwest Nitro-Chemieals Limited aud Commercial Solvents Corporation in turn agree:
(a) The management fee of approximately $667,000 which has been accumulated up to January 1, 1958 is postponed until after July 1, 1959 and by a further agreement amongst the bank, Solvents and Northwest the amount cannot 'be paid except with 45 days prior notice to and the consent of the bank.
On June 2, 1958, petitioner's president wrote the bank's president a letter, the material part of which is as follows:
This Corporation hereby agrees with The Royal Bank of Canada that (a) until after July 1, 1959, it will not accept or receive any payment on account of the management fees mentioned above other than the $90,000 which is unconditionally payable for the fiscal year ending June 30, 1959, and (b) after July 1, 1959, it will accept or receive any such payment only upon 45 days' notice in writing to The Royal Bank of Canada.
As of July 1, 1959, the management agreement was again amended in particulars not material here. In a letter dated June 30, 1959, from petitioner to the bank enclosing a copy of the amended management agreement as of July 1, 1959, petitioner made reference to the $667,500 owing petitioner by Northwest for the period prior to January 1, 1958, saying petitioner "will not accept or receive any payment on account of the management fees mentioned above, other than said fees at the rate of $90,000 per annum which are unconditionally payable, without first giving 45 days' notice thereof in writing to you."
ULTIMATE FINDINGS OK FACT AS TO SECOND ISSUE
The management fees of $50,833.33 accrued during the month of December 1956 and are properly included in income for the taxable year 1956.
The management fees of $616,666.67 did not accrue during the taxable year 1957 and are not includable in income for the taxable year 1957.
OPINION
Issue 1
In determining whether the income received from Kyowa during the taxable years here involved is long-term capital gain or ordinary income, we must, for the year 1951, look to section 117 (a) (4) of the Internal Revenue Code of 1939, and for the years 1954 through 1957, look to section 1222(3) of the Internal Revenue Code of 1954.
The parties have stipulated that petitioner's fermentation process for the production of acetone, butanol, and ethyl alcohol was a "secret process" which petitioner had owned for more than 6 months prior to August 6, 1951, the date of the agreement between petitioner and Kyowa; and that at the time of the agreement petitioner did not hold its fermentation process primarily for sale to customers in the ordinary course of its trade or business. Such secret process was not property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year.
"It is well settled that secret processes may constitute property and be dealt with contractually as such." Nelson v. Commissioner, 203 F. 2d 1 (C.A. 6, 1953), reversing and remanding on other grounds a Memorandum Opinion of this Court.
Since the term "capital asset" means "property" held by the taxpayer, section 117(a)(1), supra, and section 1221, I.R.C. 1954, the issue before us is narrowed to whether under the agreement of August 6, 1951, there was a "sale" oí petitioner's secret process to Kyowa. Petitioner contends that under this agreement there was a sale of its secret process; respondent contends otherwise. In support of their respective contentions both parties have cited E. I. DuPont DeNemours & Co. v. United States, 288 F. 2d 904, 909-912 (Ct. Cl. 1961), and Stalker Corporation v. United States, 209 F. Supp. 30 (E.D. Mich. 1962). Both of these cases dealt with whether there was a sale of a secret process, and, upon the particular facts present in those cases, both courts held that no sale occurred.
The court in the Stalker case, in determining whether or not there had been a sale of a trade secret, applied the tests used in determining whether or not there had been a sale of a patent, citing the DuPont case.
It is well settled that the transfer of the exclusive right to make, use, and vend a patented article for the full term of the patent results in an assignment, that is, a sale, rather than a mere licensing of the patent. Waterman v. Mackenzie, 138 U.S. 252 (1891); Edward C. Myers, 6 T.C. 258.
There is ample authority that the exclusive licensing of a patent within a given industry, United States v. Carruthers, 219 F. 2d 21 (C.A. 9, 1955), within a limited geographical location, Vincent A. Marco, 25 T.C. 544, appeal to C.A. 9 dismissed nol. pros. July 26,1956, or within a given field of application, William S. Rowoerol, 42 T.C. 186 (1964), results in the sale of the patent rather than a license.
The Supreme Court, in Waterman v. Mackenzie, supra, after stating the transfer of the exclusive right to make, use, and vend a patented article for the full term of the patent constituted a sale of the patent, said, "Any assignment or transfer, short of one of these, is a mere license, giving the licensee no title in the patent, and no right to sue at law in his own name for an infringement." (Emphasis added.)
Petitioner, in support of its contention that it transferred the exclusive right to make, use, and vend in Japan the products resulting from the use of the secret processes, relies upon paragraph (10) of the agreement set out in full in our findings. As we read paragraph (10), petitioner did not transfer to Kyowa the exclusive right to sell in Japan for the reason that paragraph (10) of the agreement contained a proviso that petitioner "shall have the right to sell similar products of its own manufacture in Japan." It would seem that by reason of this proviso, petitioner not only reserved the right to make, use, and vend in general but it specifically retained the right to vend in Japan, and since petitioner retained these rights it obviously could dispose of them to third parties.
Furthermore, under paragraph (9) of the agreement, Kyowa could make no disclosure of the secret process to anyone, not even to anyone in Japan, without prior permission in writing from petitioner. This is not indicative of a sale of the process from petitioner to Kyowa. In the DuPont case, the Court of Claims, among other things, said:
It follows that the essential element of a trade secret which permits of ownership and which distinguishes it from other forms of ideas is the right in the discoverer to prevent unauthorized disclosure of the secret. No disposition of a trade secret is .complete without some transfer of this right to prevent unauthorized disclosure.
In the instant case we do not think that petitioner, under the agreement, transferred to Kyowa any right to prevent unauthorized disclosure. As the court, in Stalker Corporation v. United States, said: "A transfer of anything less results in a transaction which is not a sale under the Code."
We hold that the income received by petitioner under the agreement of August 6, 1951, was taxable as ordinary income rather than as long-term capital gain.
Issue 2
Petitioner contends the management fees owed to petitioner by Northwest for the period December 1, 1956, to December 31, 1957, did not accrue as income ¡to petitioner in 1956 and 1957, and, in the alternative, if the management fees due petitioner from Northwest for the month of December 1956 accrued as income to petitioner in 1956, such accrual of income should be reversed during 1957.
The parties are in agreement as to the law with respect to the ac-cruability of income. Both parties cite San Francisco Stevedoring Co., 8 T.C. 222, and Standard Lumber Co., 35 T.C. 192, affirmed on another issue 299 F. 2d 882 (C.A. 9, 1962). These cases hold that under the accrual method of accounting, income is accruable when all the events have occurred which fix the right to receive the income, and the amount can be determined with reasonable accuracy. To the same effect is section 1.451-1 (a) of the Income Tax Regulations which provides:
Under an accrual method of accounting, income is includible in gross income when all the events have occurred which fix the right to receive such income and the amount thereof can be determined with reasonable accuracy.
In San Francisco Stevedoring Co., supra, we said:
A taxpayer, using an accrual method of accounting, must accrue an item in the year in which the taxpayer acquires a fixed and unconditional right to receive the amount, even though actual payment is to be deferred. There must be no contingency or unreasonable uncertainty qualifying the payment or receipt. Income does not accrue to a;'taxpayer using an accrual method until there arises in him a fixed or unconditional right to receive it. United States v. Anderson, 269 U.S. 422; Continental Tie & Lumber Co. v. United States, 286 U.S. 290; Spring City Foundry Co. v. Commissioner, 292 U.S. 182; United States v. Safety Car Heating & Lighting Co., 297 U.S. 88; Putnam's Estate v. Commissioner, 324 U.S. 393; H. Liebes & Co. v. Commissioner, 90 Fed. (2d) 932; Mertens Law of Federal Income Taxation, sec. 12.60. The time when an item accrues is largely a question of fact, to be determined in each ease. ♦ • *
We have found as ultimate facts that the $50,833.33 of fees accrued in 1956 but that the $616,666.67 of fees did not accrue in 1957.
At the end of 1956 Northwest's financial difficulties had not yet arisen. Although Northwest had sustained an operating loss for the month of December 1956, this was nothing unusual in the case of a business just beginning. All the events had occurred which fixed petitioner's unconditional right to receive the fee provided for in the management agreement dated March 1,1955, as amended by the agreement effective as of October 27,1955.
Beginning in 1957, Northwest began having financial difficulties. It started the year by borrowing $1 million from the bank. For the first 6 months it sustained an operating loss of $1,428,546. It commenced negotiations with the bank to establish a revolving credit arrangement. On July 5, 1957, it wrote the bank that it was in need of an immediate loan of $500,000 and would probably need another $2,500,000 before December 31, 1957, in order to operate its plant at full production. Before approving any loans to Northwest, the bank requested petitioner to waive its rights to payments of the management fees during the period that Northwest was indebted to the bank which petitioner in fact did. This is in effect substantiated by the letter from petitioner to the bank dated July 17,1957, and by what occurred after 1957 set out in our findings. The events which occurred after 1957 were stipulated by the parties but objected to by the respondent in his brief as being irrelevant and immaterial. Of course, events occurring in a later year making payment doubtful are not relevant to the propriety of the accrual of the income in an earlier year. However, the events which we have set out in our findings which occurred after December 31, 1957, are found merely to substantiate the existence of the events in 1957 in which year petitioner gave up its right to receive payment of its management fee as long as Northwest was indebted to the bank. This modification of petitioner's management fee contract with Northwest was an event which made payment to petitioner uncertain so that no income accrued to petitioner in 1957 from the contract. It was not until February 22,1960, that the Supreme Court of Alberta provided an installment basis under which petitioner was to receive payment of its fees earned prior to January 1, 1958, commencing June 30,1961, and continuing to June 30,1965.
We think the facts in the instant case are practically on all fours with the facts in Standard Lumber Co., supra. In that case the taxpayer held debentures of another corporation. On or about December 31, 1953, the taxpayer executed a consent postponing the due date of principal and interest payments until an RFC loan was paid in full. The taxpayer also executed a "standby" agreement to induce the RFC to make advances to the other corporation. This agreement provided that the taxpayer would take no action to collect principal or interest under the debentures without written consent from the RFC as long as the other corporation was indebted to the RFC. We held that the postponed interest for 1954 on the debentures did not constitute accrued income taxable to the taxpayer in 1954.
In the instant case we think the contingency and uncertainty of the possible receipt by petitioner of its management fee for 1957 was too uncertain and too conditional to require its accrual as income in 1957. This is not a simple case of a delay in payment. This is a case where the expectation of payment ceased to exist until the occurrence of a future event. As the court said in Corn Exchange Bank v. United States, 37 F. 2d 34 (C.A. 2, 1930):
The government should not tax under the claim of income, that which is not received during the taxable year and in all probability will not be paid within a reasonable time thereafter. When and if such income is received, it must be returned as such for the year received.
Regarding petitioner's alternative contention that if the management fees due petitioner from Northwest for the month of December 1956 accrued as income to petitioner in 1956, as we have previously held, such accrual of income should be reversed during 1957. We know of no authority in the law for such a holding. The fees either accrued as income in 1956 or they did not. We have found from the stipulated evidentiary facts that the fees accrued in 1956. Where uncollectibility of an accrued item develops in a later year, the taxpayer must usually seek his remedy in the bad debt or loss provisions of the Code. Cf. Spring City Foundry Co. v. Commissioner, 292 U.S. 613. Petitioner has made no claim for either a bad debt or a loss in connection with the accrual of the management fees for December 1956.
We find and hold that petitioner did not err in reporting the management fees of $50,833.33 as accrued taxable income in 1956, but that the respondent erred in determining that the $616,666.67 of management fees was accrued taxable income in 1957.
Decisions will be entered wider Bule 50.
Referred to In par. (6) of the agreement.
SEC. 117. CAPITAL GAINS AND LOSSES.
(a) Definitions. — As used in this chapter—
(1) Capital assets. — The term "capital assets" means property held'by the taxpayer (whether or not connected with his trade or bnsiness)., but does not include — •
(A) stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business;
(4) Long-term capital gain. — The term "long-term capital gain" means gain from the sale or exchange of a capital asset held for more than 6 months .
SEC. 1222. OTHER TERMS RELATING TO CAPITAL GAINS AND LOSSES. Eor purposes of this subtitle—
*
(3) Long-term capital gain. — The term "long-term capital gain" means gain from the sale or exchange of a capital asset held for more than 6 months .
SEC. 1221. CAPITAL ASSET DEFINED.
For purposes of this subtitle, the term "capital asset" means property held by the taxpayer |
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43 Cust. Ct. 451 | LawREnce, Judge:
The above-enumerated causes of action are presently before me on remand from a classification proceeding decided by the second division of this court in Keuffel & Esser Co. v. United States, 41 Cust. Ct. 409, Abstract 62470, wherein the matters were remanded to a single judge sitting in reappraisement, pursuant to the provisions of title 28 U.S.C. section 2636(d).
The parties to these proceedings have stipulated and agreed as follows:
1. That the merchandise consists of instruments and eases which were held by the Court in Abstract 62470 to be subject to appraisement separately according to the value of each class of article.
2. That the market value or the price of the instruments and cases herein at the time of exportation of such merchandise to the United States at which such or similar merchandise was freely offered for sale to all purchasers in the principal markets of the country from which exported, in the usual wholesale quantities and in the ordinary course of trade for exportation to the United States including the cost of all containers and coverings of whatever nature and all other costs, charges and expenses incident to placing the merchandise in condition packed ready for shipment to the United States was as set forth below.
Protest No. 235996-K/20538/53
Item Instrument Case Total
10860 8.55 1.51 10.06
4236 4236M 8.16 8.16 1.53 1.53 9.69 9.69
4242 24.80 2.43 27.23
Protest No. 256833-K/11916/54
1086C 8.55 1.51 10.06
3. That there was no higher foreign value.
4. That the instant ease may be submitted on the foregoing stipulation.
Upon the agreed facts, I find and hold that export value, as that value is defined in section 402(d) of the Tariff Act of 1930 (19 U.S.C. § 1402 (d)), is the proper basis for determining the value of the drawing instruments and cases covered by the remand of protests, above enumerated, and that such value is as indicated in paragraph 2 of the stipulation quoted, supra.
I further find and hold such values to be the proper dutiable values of said merchandise.
As to all other merchandise, the remand is dismissed.
Judgment will issue accordingly. |
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1 Cl. Ct. 253 | MEMORANDUM AND ORDER ON PLAINTIFFS' APPLICATION FOR TEMPORARY RESTRAINING ORDER AND MOTION FOR PRELIMINARY INJUNCTION
WILLI, Judge.
Plaintiffs instituted this suit on October 4, 1982, by filing a Complaint for Temporary Restraining Order, Preliminary Injunction, Permanent Injunction and Declaratory Judgment. Concurrently they filed a Motion for Temporary Restraining Order and a Motion for Preliminary Injunction. At 10 a.m. on October 5, 1982, argument was heard on those motions, the disposition of which is the subject of this memorandum and order.
This action is directed to two General Services Administration (GSA) contracts for the renovation of certain Government buildings. Plaintiff Grimberg was the second-low bidder on one of them (bid opening on July 8, 1982) and plaintiff Schlosser the same on the other (bid opening on September 13, 1982). In each instance the low bidder was P.W. Parker Inc. (Parker), a company with a wholly-owned subsidiary, R & P Contractors, Inc. (R & P).
The Invitation for Bid on each of the above contracts included the mandatory GSA clause entitled "Listing of Subcontractors," a provision, the parties agree, designed to discourage post-award "bid shopping" by the successful prime for subcontract work. Hoel-Steffen Constr. Co. v. United States, 231 Ct.Cl. -, 684 F.2d 843, 850 (1982).
On both of its bids Parker identified R & P as subcontractor for performance of all mechanical work required under the contracts. In the same particular, plaintiffs, on the other hand, designated various independent suppliers for performance of such areas of the mechanical work as sheet metal, insulation, temperature controls and system balancing.
On July 12,1982, four days after the first bid opening, plaintiff Grimberg, believing that R & P lacked the functional capability to perform the items of mechanical work mentioned above, lodged a protest with the GSA contracting officer challenging the responsiveness of Parker's bid on the ground that the designation of R & P for all mechanical work violated the "Listing of Subcontractors" clause. By a letter of July 29, 1982, the contracting officer acknowledged receipt of the protest. His letter concluded: "The bids are being evaluated by the contracting officer, and you will be advised of his decision."
On September 16,1982, following the bid opening of September 13, plaintiff Schlosser wrote the contracting officer to interpose, as to the second contract, essentially the same challenge as that made by plaintiff Grimberg to the first. The contracting officer acknowledged the protest by a letter of September 20,1982. That letter concluded: "The bids are being evaluated and you will be advised of our decision before an award is made."
At the outset of the hearing on the pending motions the defendant, citing Section 133(a) of the Federal Courts Improvement Act of 1982, 96 Stat. 25, proferred a motion to dismiss this action, instituted October 4, 1982, for want of jurisdiction on the ground that on September 29, 1982, GSA had awarded Parker Contract GS-03B-98224 (Schlosser bid) and on September 30, 1982, had awarded the same firm Contract GS-11B-18208 (the Grimberg bid). The referenced provision amends section 1491, Title 28, United States Code, effective October 1, 1982, to read in pertinent part, as follows:
(3) To afford complete relief on any contract claim brought before the contract is awarded, the court shall have exclusive jurisdiction to grant declaratory judgments and such equitable and extraordinary relief as it deems proper, including but not limited to injunctive relief.
Defendant's motion marked the first point in this proceeding at which the fact of award became affirmatively indicated. With plaintiffs theretofore unaware of such actions, their moving papers did not treat with the question of jurisdiction. The parties were accordingly afforded one day within which to file such further papers as they desired, addressing only that issue. Both sides have exercised that opportunity and their additional submissions have been carefully considered.
Rule 12(h)(3) of the Rules of this Court (identical to Rule 12(h)(3), FRCP) commands:
Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.
Among first principles is that which prescribes that the jurisdiction of the federal courts cannot be conferred by the prior action or consent of the parties. American Fire & Casualty Co. v. Finn, 341 U.S. 6, 17-18, 71 S.Ct. 534, 541-542, 95 L.Ed. 702 (1951). Put otherwise, the rule is that the parties cannot confer on a federal court jurisdiction that has not been vested in the court by the Constitution and Congress. The parties cannot waive lack of jurisdiction, whether by express consent, or by conduct, nor yet even by estoppel. Wright, Law of Federal Courts at 17 (3rd Ed.1976).
It is with the foregoing tenets in mind that I must determine whether this court may grant equitable relief in respect of a contract awarded prior to the institution of suit for such relief.
If the language of 28 U.S.C. § 1491, as amended, referring to a "[cjontract claim brought before the contract is awarded " can be susceptible of ambiguity, all subsisting doubt is removed by the legislative history attending the amendatory legislation. I refer specifically to statements of uniform purport appearing in the Reports of the House and Senate Committees on the Judiciary. Housing Authority of City of Omaha Nebraska v. United States Housing Authority, 468 F.2d 1, 7, n. 7 (8th Cir.1972). For present purposes those statements are significant not only for the proposition that this court is without equitable jurisdiction in a post-award situation but equally so for the principle that by its legislative action Congress did not intend to void the District Court jurisdiction confirmed in Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (CADC 1970), to redress grievances arising out of contracting activity, at least in those cases where, as here, award precedes suit for equitable relief.
In the House of Representatives the first version of H.R. 4482, 97th Cong., that contained the language found in Section 133(a) of the Act was the Bill as reported by the Judiciary Committee on November 4, 1981. Concerning that language, which represent ed a retrenchment from an earlier, more expansive charter conferring on the Claims Court the broad power to grant equitable relief in all controversies within its jurisdiction, the Committee's Report states (H.Rep. No. 97-312, 97th Cong. 1st Sess., pp. 43 — 44):
The new section 1491(a) does give the new Claims Court the augmented power to grant declaratory judgments and give equitable relief in contract actions prior to award. This engaged authority is exclusive of the Board of Contract Appeals and not to the exclusion of the district courts. It is not the intent of the Committee to change existing case law as to the ability of parties to proceed in the district court pursuant to the provisions of the Administrative Procedure Act in instances of illegal agency action. See, e.g., Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C.Cir.1970). Nor is it the intent of the Committee to oblige lawyers, litigants, and possibly witnesses to travel to Washington, D.C., whenever equitable relief is sought in a contract action prior to award. Although Claims Court judges will travel, they cannot be expected to do so at extremely short notice. Therefore, for the time being, the Committee is satisfied by clothing the Claims Court with enlarged equitable powers not to the exclusion of the district courts. The dual questions of whether these powers should be exclusive of the district courts will have to wait for a later date. (Emphasis added.)
On November 19,1981, the Senate Judiciary Committee favorably reported S. 1700. As to the matter at hand, it contained the same language as earlier reported in the House. Regarding that language the Committee observed (S.Rep. No. 97-275, 97th Cong., 1st Sess., pp. 22-23):
[Sjection 133 gives the new Claims Court the power to grant declaratory judgments and give equitable relief in contract actions prior to award. Since the funds which the Government utilizes to purchase goods and services are derived solely from public sources, the public possesses a strong interest in the ability of the Government to fulfill its requirements in these areas at the lowest possible cost. Accordingly, in the vast majority of circumstances, the Government must be permitted to exercise its right to conduct business with those suppliers it selects and to do so in an expeditious manner.
The courts ordinarily refrain from interference with the procurement process by declining to enjoin the Government from awarding a contract to a contractor which the Government has selected.
By conferring jurisdiction upon the Claims Court to award injunctive relief in the pre-award stage of the procurement process, the Committee does not intend to alter the current state of the substantive law in this area. Specifically, the Scan-well doctrine as enunciated by the D.C. Circuit Court of Appeals in 1970 is left in tact. See Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C.Circ.1970). Moreover, the Committee expects that the court will utilize the authority conferred upon it by this section only in circumstances where the contract, if awarded, would be the result of arbitrary or capricious action by the contracting officials, to deny qualified firms the opportunity to compete fairly for the procurement award. The Committee intends the court to take care not to delay or prevent the award of contracts for goods or services which relate to the national defense or security.
Since the court is granted jurisdiction in this area, boards of contract appeals would not possess comparable authority pursuant to the last sentence of section 8(d) of the Contract Disputes Act. (Emphasis added.)
In sum, however compelling plaintiffs' suggestion that in making the subject awards GSA may very well have offended its anti-bid shopping regulation, the fact remains that in obedience to the clearly expressed will of Congress this court must stay its hand by acknowledging the dispositive impact of the pre-suit awards on its jurisdiction.
Despite the want of jurisdiction here, plaintiffs are not without a forum in which to air their grievances. Congress has affirmatively identified that forum as the United States District Court. Section 301(a) of the Act, amended Title 28, United States Code, by the addition of Section 1631 provides express authority for a transfer of this action there.
A final point remains for attention. On October 5, 1982, Parker, pursuant to Rule 24(a) of the Rules of this court, filed a Petition for Leave to Intervene in this proceeding. On October 6, 1982, Parker filed an amended petition for leave so to do. In view of the disposition that must be made of plaintiffs' motions, Parker's motions have become moot.
IT IS THEREFORE ORDERED that plaintiffs' motions are DENIED.
IT IS FURTHER ORDERED that, this court lacking subject matter jurisdiction, in the premises, the case is TRANSFERRED pursuant to 28 U.S.C. § 1631, to the United States District Court for the District of Columbia.
IT IS FINALLY ORDERED that the petitions of P.W. Parker, Inc. are DENIED as moot. |
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176 L. Ed. 2d 775 | Petition for writ of cer-tiorari to the United States Court of Appeals for the Fifth Circuit denied. |
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493 U.S. 842 | Sup. Ct. N. M. Certiorari denied. |
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546 U.S. 863 | C. A. 5th Cir. Certiorari denied. |
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485 U.S. 933 | C. A. 6th Cir. Certiorari granted. |
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26 Cust. Ct. 363 | Opinion by
Johnson, J.
It was stipulated that the items in question consist of earthenware articles similar in all material respects to those the subject of Abstract 51676. In accordance with stipulation of counsel and following the cited authority it was held that the merchandise consists of earthenware articles composed of a nonvitrifled absorbent body, not artifieally colored and composed wholly of clay, which articles are painted, colored, tinted, stained, enameled, gilded, printed, ornamented, or decorated. The claim of the plaintiff was therefore sustained. |
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523 U.S. 1101 | C. A. 6th Cir. Certiorari denied. |
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517 U.S. 1131 | Disbarment entered. |
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502 U.S. 813 | C. A. 8th Cir. Certiorari denied. |
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399 U.S. 932 | C. A. 6th Cir. Certiorari denied. |
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528 U.S. 1150 | Michael E. Mc-Gill, of Toledo, Ohio, is suspended from the practice of law in this Court, and a rule will issue, returnable within 40 days, requiring him to show cause why he should not be disbarred from the practice of law in this Court. |
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419 U.S. 964 | C. A. 7th Cir. Certiorari denied. |
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529 U.S. 1023 | Ct. Crim. App. Tex. Certiorari denied. |
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470 U.S. 1058 | C. A. D. C. Cir. Certiorari denied. |
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105 U.S. 667 | Mr. Justice Gray
delivered the opinion of the court.
These actions are brought upon municipal bonds, purporting to have been issued under an act of the General Assembly of Illinois of Feb. 18, 1857. The facts of the cases do not substantially differ from those which appeared when one of the cases was before this court,at October Term, 1876, and the principles then affirmed must control the present decision. See Town of South Ottawa v. Perkins and Supervisors of Kendall County v. Post, 94 U. S. 260. Those principles may be summed up as follows: —
First, By the law of the State of Illinois, as often declared by the Supreme Court of that State, before as well as after the execution of the bonds in suit, the provisions of the Constitution of 1848, requiring each house of the legislature to. keep and publish a journal of its proceedings, and, on the final passage of all bills, to take the-vote by ayes and noes, and ordaining that no bill shall become a law without thé. concurrence of a majority of all' the members elect of. each' house,' are not merely directory; but if the journals, being produced or proved, fail to' show that an act has -been passed in. the mode prescribed by the Constitution, the presumption of its validity, arising from the signatures of the presiding officers and of- the executive, is overthrown, and' the act is void.
Second, Whether a seeming-act of the. legislature is or is not a law is a judicial question to be determined by the court,' and not a question of fact to be tried by a jury.
Third, The construction uniformly given to the Constitution of a State by its highest court is binding on the courts of the United States as a rule of decision.
Fourth, An act of the legislature of a State, which has been held by its highest court not to be a statute of the State, because never passed as its Constitution requires, cannot be held by the courts of the United States, upon the' same evidence, to be- a law of the State.
. Fifth, That which is not a law can give no validity to bonds purporting to .be issued under it, even in the hands of those who take them for value and in the belief that they have been lawfully issued.
It was accordingly held that the act of the General Assembly of Illinois of Feb. 18, 1857, under which the bonds in suit were issued, having been adjudged by the Supreme Court of that State in 1870 in the cases of Ryan v. Lynch (68 Ill. 160) and Miller v. Goodwin (70 id. 659), upon proof that the journals did not show it to have been enacted in conformity with the requirements of the Constitution, to have never become a law, and to have conferred no power, although referred to in later statutes as an existing law, those decisions-must" govern the action of the courts of the United States.
The weight of those decisions as authoritative expositions of the Constitution of the State is not affected by the fact that' these plaintiffs were not parties to the suits in which they were delivered. Township of Elmwood v. Marcy, 92 U. S. 289; Township of East Oakland v. Skinner, 94 id. 255.
Nor is it of any importance that the act of 1857 had been assumed to be an existing law in Dunnovan v. Green (57 Ill. 68), and in Force v. Batavia (61 id. 99); for in each of those cases the validity of the statute was not controverted, and' by the established practice of that court no evidence of the contents of the journals could be considered on appeal, which had not been produced and made part of the case in the court below. Illinois Central Railroad Co. v. Wren, 48 Ill. 77; Bedard v. Hall, 44 id. 91; Grob v. Cushman, 45 id. 119. See also People v. Dewolf, 62 id. 253, 256; Binz v. Weber, 81 id. 288, 291.
The copies of the journals, certified by the secretary of state, and the printed journals, published in obedience to law, are both competent evidence of the proceedings in tbe legislature.
By virtue of the statute of Illinois of Feb. 12, 1849, the copies of the original daily journals kept by the clerks of the two houses, made by persons contracted with or employed for the purpose as authorized and directed by that act (though not sworn public officers), in well-bound books furnished by the secretary of state, pursuant to the duty thereby imposed upon him, and afterwards deposited and kept in his office, are official records in his custody, copies of which certified by him are admissible upon settled rules of evidence, as well as by the decision of the Supreme Court of Illinois in Miller v. Goodwin, above cited; and' neither the competency nor the effect of such copies is impaired by the loss or destruction of the daily journals or minutes.
The remark of the judge delivering the opinion in Illinois Central Railroad Co. v. Wren (43 Ill. 79), "We are not aware of any law which makes the printed journal evidence of the contents of the original," was but obiter dictum (for the case was decided upon the ground that no copy whatever of the journal had been made part of the case before the court), and is in conflict with the general current of decision in that court and in this. People v. Campbell, 8 id. 466; Prescott v. Trustees of Illinois & Michigan Canal, 19 id. 324; Happel v. Brethauer, 70 id. 166; Watkins v. Holman, 16 Pet. 25, 55, 56; Bryan v. Forsyth, 19 How. 334; Gregg v. Forsyth, 24 id. 179.
For these reasons, tlie act of Feb. 18, 1857, under which all .the bonds in suit purport to have been, issued, must be held to be of no force or effect, and the plaintiffs can maintain no action on the bonds. 'Upon the attempt made at the argument to support their validity in the first case under the statute of Nov. -6, 1849, and in the second case under the statute of March. 6, 1867, it is enough to say that there is nothing in the record to show that either of those statutes was ever complied with by the defendant in issuing the bonds, or relied on by the plaintiff in purchasing .them.
Judgments affirmed,.
By the Constitution of Illinois of 1848, art. 3, sect. 39, " the General Assembly shall provide by law that the copying, printing, binding, and distributing the laws and journals shall be let by contract to the lowest bidder."-
By the statute of Jan. 16, 1836, in force at the time of the adoption of that Constitution, the journal of each house of the General Assembly was required to be "kept in well-bound volumes;" the clerks of each house were required to furnish daily to the public printer " a copy of the journal kept by them respectively," and after the final adjournment to." deposit the original journals kept by them respectively, with the secretary of state; " and the secretary of state was required to " superintend the printing of .the journals." Statutes of Illinois of 1839, p. 551; Revised Statutes of Illinois of 1845, c. 84, sect. 3.
By the statute of Reb. 12, 1849, the secretary of state was required, before the meeting of the General Assembly, to publish an advertisement "inviting proposals for copying the laws, joint resolutions, and journals of the General Assembly," and to " give the contract to the lowest competent responsible bidder," and was also, required " to furnish a well-bound book, in which the journals shall be copied," and, in case the person contracting for the copying should fail to perform his contract, to cause the same to be done by some competent person. 2 Statutes of Illinois (Scates ed.), p. 734. |
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1 D. Haw. 303 | Estee, J.
This is an application for a writ of habeas corpus, arising upon the petition of one Osald Manldchi, a Japanese.
The evidence, oral and documentary, shows that on the 4th day of May, 1899, a presentment was filed against the petitioner by the then Circuit Judge of the First Circuit of the Tenitory of Hawaii, and without the intervention of a grand jury, charging him with the crime of murder1; that afterwards, in the May term of that court, of the samei year, he was tried on the said presentment and convicted of the crime of manslaughter in the first degree. The verdict was returned by nine out of the. twelve jurors. On the 22nd day of May, 1899, he was by the said court sentenced to twenty years' imprisonment at hard labor.
Petitioner now seeks his discharge upcm the ground that he is being illegally imprisoned because of the fact that he was1 not indicted by a grand' jury, nor convicted by the unanimous verdict -of a jury of twelve men, as is required by the Constitution of the United States, it being claimed that the Constitution of the United States was in force in these Islands during the period! covered by the trial, conviction and sentence of petitioner, and. that Aricles V, VI and VII of the Amendments to the Constitution. were thus violated.
(1). The first point made by the learned Assistant Attorney General for the Territory is that this court has no jurisdiction, to act and determine upon the questions involved in this matter, because a writ of error should be sued out of the Supreme Court', of the United States' by the petitioner herein.; that whatever may have been the action of the territorial courts, the United States court ought not to interfere; that this case is not one of' sufficient gravity- to call for the interposition of this court on habeas corpus .
This is a Federal question raised in a -territory of the United! States which is governed, by Federal law under the Constitution of the United States. The authorities referred to by the Deputy Attorney General, as sustaining his position against this court's-assuming jurisdiction in this proceeding are not in point. Not one of the decisions1 cited relate to this class of cases. Thistearitory is under the control of Congress and is not an independent state with a constitution and local statutes governing • thei trial and conviction or acquittal of persons charged with crime. Where a state is a party, and where a constitutional, question is involved, a writ of error should, save in excep- tional cases, he sued out of the Supreme Court of the United! States, because of the delicate nature of a conflict of state and' national jurisdictions. Here there can be no such conflict. I have been unable to find any authorities of libe import where > a conviction is had in a territory. Territorial action alone is involved here. The courts which have considered this matter be- fore are all territorial courts, the alleged conviction of petitioner occurring under territorial law.
It should be here said that the territorial situation in Hawaii is peculiar. We are by land and sea over* five thousand miles from the capital of our country, and practically the judicial officers of this country arle beyond the immediate range of all -appellate judicial tribunals. So all judicial officers here should -be especially interested in maintaining public law in this teari'-tory, and more particularly in maintaining the Constitution and ¿Statutes of the United States applicable hereto'.
.In this 'habeas corpus matter 'there is a wide difference of opinion between the territorial judges. Both the Supreme and Circuit Courts differ from each other and the members of the Supreme Court differ among themselves and especially so. upon the question of the relation which this territory bears to the Constitution and laws of the United States. Bor instance, the -•Supreme Court of this Territory held in the. very recent case of Honomu Sugar Co. v. Sayewiz (12 Haw. 96), that certain Amendments of the Constitution of the United States were not in force here between: the 7th day of July, 1898, and the 14th day of June, 1900, namely, Articles Y, YU, YIII and XIII, which Articles relate to indictment by a grand jury for infamous •crimes, to a common law jury trial, and to the existence of slavery in the United States. While the Supreme Court decided m the case of Ex Pande Edtoards (13 Haw. 32) that no person could be put upon, trial for an infamous crime in the HaAvaiian Islands after August 12th, 1898 (the date of the raising of the American flag here) without having been first indicted by a .grand jury, nor could he be convicted of such crime save by the unanimous verdict of a jury of twelve.
It Avas further held by the Supreme Court of the territory, on the 5th day of June, 1899, in the case of Spencer v. Collector of Customs (12 Haw. 66) that Hawaii could register vessels, although the territory Avas annexed to and formed a part of the United States.
This Avas practically overruled by tire Attorney General of the United States-, who in a written opinion (22 Op. Atty. Gen. 578) instructed' tbe Secretary -of tbe Treasurer that:—
'With, due rlesp-ect to tbe judgment of tbe Supreme Oourt of Hawaii, I am unable to admit that an Hawaiian register can now be issued to a vessel, and the flag -of Hawaii, the: usual token of registration, be flown by her."
From these decisions it is clear there is a wide divergence of opinion on the part of the Supreme Oourt of the territory, as to the constitutional question involved herein, and as to whether or not the people of this territory were during the period between July 7, 1898, and June 14th, 1900, living in an- American- territory and subject to such laws as were no-t inconsistent with the Joint Resolution of Annexation "nor contrary to the Constitution of the United States."
The familiar rule -of stare decisis does not seem to receive recognition by the Supreme Oourt o-f the territory, for that court decides one way at one time and another way at other times upon questions of the gravest importance and which cases involve identically the same principle. The very uncertainty -o-f that court's opinions tends to disturb- and unsettle the public mind as to the national Constitution and its application to the people of and conditions in this territory, and is a strong inducement for this court to exercise its discretion in taking jurisdiction -o-f this proceeding.
It is argued that the District and Circuit Courts -of the United States are courts of original and limited jurisdiction, which is true; but the United States statutes make it the duty of United States Disrict and Circuit judges to issue the writ of habeas corpus when justice demands it, or when "a person is in custody in violation of the Constitution." (Section 753 Rev. Stats. U. S. 2nd Ed)
"It is the duty of the courts to be watchful -of the constitutional rights of the citizen." Boyd v. U. S., 116 U. S. 616. So constitutional pro-visions for the security of persons and property should be liberally construed. Id. 636.
As was said by the Supreme Court -o-f the United States in
the case of Walker v. S. P. R. R. Co., 165 U. S. 593, quoting from. page 595-6:
"We deem it unnecessary to consider the contention of de>fendant in error that the territorial courts are not courts of the United States and that the Seventh Amendment is not operative in the territories, for by the Act of April 7, 1874, C. 80, 18 Sta.t. 27, Congress, legislating for all the territories, declared that no party shall be deprived <of the right of trial by jury in cases cognizable at common law; and while this may not in terms extend all the provisions of the ¡Seventh Amendment to the territories it does secure a.11 the rights of trial by jury as they existed at common law."
If it he true that the Constitution and the Act of Congress referred to in Walker v. S. P. R. R. Co., supra, has been nullified so far as tbis territory is concerned by the local territorial courts, then there should be an immediate remedy.
Tbe learned Assistant Attorney General on tbe argument pressed upon tbe attention of tbe court tbe fact tbat on October 20th, 1900, tbis Court dismissed tbe petition for a writ of habeas corpus presented in tbe case of In re Marshall, on tbe ground of lack of jurisdiction. Rnt in that case tbe petitioner bad been convicted of a misdemeanor and no1 Federal question was involved; tbe court then saying generally, tbat "only in. very rare and extreme cases will it review upon habeas corpus the judgments or verdicts found in tbe highest territorial courts of tbe territory." And tbis court is still of the same opinion.
Tire question now presented is: Is tbis an exceptional case? I am compelled to believe tbat it is. Whatever tbe intention of the local territorial courts, their decisions upon tbis question are an attack upon tbe constitutional rights of the citizen affecting life and liberty, which are thereby made insecure. In view of all the circumstances, therefore, I think it would be in furtherance of public justice for me to exercise my discretion by assuming jurisdiction in tbis proceeding. I shall therefore consider tbe case under tire writ
The right of appeal in habeas corpus cases from the territorial circuit to the territorial Supreme- Court, this court will not consider. This is a matter entirely within the province of the territorial courts.
So abo as to' the objections submitted in relation to Mr. Justice Perry sitting as one of the appellate judges in this ease, originally tried by him while a circuit judge. That is largely a matter of discretion on his part, and I will not assume to question the wisdom of such discretion.
(2). Petitioner claims that he is in custody in violation of the Constitution of the United States in that he was tried and convicted of an infamous crime without an indictment by a grand jury, and by a verdict of less than twelve jurors, i. e., by nine of the twelve jurors. The specific Articles of the Constitution claimed to have been violated by such conviction are Articles V, VI and VII of the Amendments thereto.
There is no question as to the infamous character of the crime with which he was charged.
The Joint Resolution of both Houses of Congress annexing the Hawaiian Islands, passed by Congress July Ith, 1898, prescribes, amonig other things, that: —
"The Hawaiian Islands and their dependencies........are hereby annexed as a part of the territory of the United States, and are subject to the sovereign dominion thereof, and all and singular the property and rights hereinbefore mentioned are vested in the United States of America."
After providing for the disposition of the revenues of the Islands and for the future enactment by Congress of special public land laws, the Resolution then prescribes:
"......The municipal legislation of the Hawaiian Islands .not inconsistent with this Resolution, nor contrary to the Constitution of the United States........shall remain in force until the Congress of the United S-tatesi shall otherwise determine." (Vol. 30, U. S. Stats., J50.)
Municipal law is defined to be:
"The rule of law by which a particular district, community or nation is governed." (1 Blackstone's Comm. 44; 1 Kent's Comm. 447; 2 Burrill's Law Dictionary, 215.)
The Resolution! of Annexation of tiie Hawaiian Islands, as passed by Congress, prescribes that "they are 'annexed as a part of the territory of the United States" and are "subject to- the sovereign dominion thereof," 'and on August 12th, 1898, the American flag' was raised on the Islands. It matters not technically whether the Constitution followed the flag or followed American sovereignty here, for with American sovereignty came all of American law not especially reserved by the Joint Resolution of Annexation. It goes without saying that two sovereignties could not exist here at the same time, and when the Resolution of Annexation provided that "thei municipal legislation of the Hawaiian Islands not inconsistent with this Joint Resolution nor contrary to the Constitution of the United States shall remain in force'," it meant that all municipal legislative enactments of the Republic of Hawaii contrary thereto' should be abrogated. No' reservation was made in tire Joint Resolution of Annexation of Articles V, VI and VII of the Amendments to the Constitution, relating to- indictments or trial by jury, in common law or criminal cases. This showed that American sovereignty not only prevailed here, as elsewhere in the territories of the United States, but that nothing could be done or permitted here contrary to the Constitution of the United States. This annexation was not, as claimed by the Supreme Court of the territory in the ease of Peacock v. Republic of Hawaii (12 Haw. 27-33), in a transition or inchoate state, but was complete, and the Constitution came with annexation, and became and ever since has been the supreme law of this territory. This is of paramount interest to the people of this territory, as it secures to all the equal protection of life, liberty and property, which are fundamental rights, and chief 'among which is the tidal by jury.
It appears that the petitioner was indicted for the crime of murder under an indictment presented by tire prosecuting officer of the territory and found by the Circuit Judg'e of the Oir suit Court under the provisions of Section 616 of the Penal-Laws (compiled in 1897) of the Republic of Hawaii, which reads-as follows:
"The necessary bills of indictment shall be prepared by a-legal prosecuting officer and be duly presented to- the Presiding-Judge- of tire court before the arraignment of the accused, -andJ such judge shall, after examination, certify upon each bill of indictment whether he finds the same a true bill or not."
The petitioner was then tried upon the said indictment and a verdict of conviction of manslaughter was rendered by nine-out of twelve jurors who heard the case in accordance with. Section 1345 of the Civil Laws (compiled in 1897) of the Republic of Hawaii, which prescribes as follows:
"No jury, for the trial of -any case, civil or criminal, shall be-less than twelve in number, but when nine of such jury shall-agree upon a verdict, they may render the same and such verdict shall be as valid and binding upon the parties -as if rendered by-all twelve."
The questions then presented are:
Were the provisions of the Penal and Civil Laws of the Republic o-f Hawaii under which this petitioner was indicted, tried; and convicted, "Municipal legislation contrary to the Constitution of the United States?" Or, in other words,
"Could a person in the Territory of Hawaii, between the 7th day of July, 1898, and the 14th day of June, 1900, when the Act for the government of the Territory -of Hawaii went into effect, be legally tried for an infamous crime without having been first indicted by a grand jury, as required by Article V o£ the Amendments to the Constitution -of the United States, on-convicted by less than an imanimous verdict of twelve jurors,! as provided by Articles VI and VII of said Amendment?
Article V of the Constitution of the United States reads im parts as follows:
"No person shall be held to answer for a capital or otherwise-infamous crime unless on a presentment or indictment of a grand jury."
EVen if this constitutional provision had never been construed, the language is too1 plain for doubt.
It has been held by the Supreme Court of the United States that the Eifth and Sixth Amendments to- the Constitution were not designed as limits upon tire state governments in reference to their own citizens, but are only restrictions upon the Federal power. (Barron v. Baltimore, 7 Peters 243; Thorington v. Montgomery, 141 U. S. 490.)
The Hawaiian Islands were territory of the United States, "subject to the sovereignty thereof," and under the control of Congress when the original proceedings in this matter were heard before the Circuit Court of the territory.
Mr. Justice Bradley held in the case of the Mormon Church v. United States, 136 U. S. 1:
"That tire power >of Congress over the territories of the United States is general and plenary arising from and incidental to the right to acquire the territory itself, and from the power . given by the Constitution to- make all needful rules and regulations respecting the territory or other property belonging to .the United States......
"It would be absurd to- hold that the United States had power 'to acquire territory and no power to govern it when acquired."
To the same point let me add it was recently decided in the case of Downs v. Bidwell, 182 U. S. 244, quoting with approval from the decision of Chief Justice Marshall in McCullough v. Maryland, 4 Wheaton, 316:
"That the power over the territories is vested in Congress 'without limitation, and this power has been considered the foun.Ration upon which the territorial government rests."
As to territorial authorities on questions of the territories ' being subject to- Federal provisions, see Bradford v. Terry, 1 Okl. 366; Walker v. N. M. R. R. Co., 7 N. Mex, 282.
In the exercise of the plenary power conferred upon it, Oon-Igress provided by the Joint Resolution of Annexation that all .municipal legislation of the Republic of Hawaii "contrary to rthe Constitution of the United States," should be repealed, leaving in force all that was not in conflict therewith. No lan guage could be plainer. I am constrained to> hold that it was the intention of Congress to' extend the Constitution, save as limited by the other provisions of the Joint Resolution, over these Islands and any other construction would be a staining after that which do'es not appear in the language of the Act.
As was said by the Supreme Court of the United States in the recent Insular cases (Downs v. Bidwell, 182 U. S. 244, 271)
"When the Constitution has been once formally extended by Congress to territories, neither Congress nor the territorial legislature can enact laws inconsistent therewith." And if Congress cannot control the constitutional rights of citizens after they have once been extended to them in the territories, how can the territories "themselves do this through their courtsi or otherwise?
See Thompson v. Utah, 170, where the court, at page 349, says:
"Assuming that the provisions of the Constitution relating to trials for crimes and to criminal prosecutions apply to the territories of the, United States, the next inquiry is, whether the jury referred to in the original Constitution and in the Sixth Amendment thereto is a jury constituted as it was at common law of twelve persons, neither more nor less.....This question must he answered in the 'affirmative."
Quoting approvingly from Springville v. Thomas, 166 U. S. 707, where the court says:
"In our opinion the Seventh Amendment secured unanimity in finding a verdict, as an essential feature of trial by jury in common law cases, and the Act of Congress could not impart the power to change the constitutional rule and could not be treated as attempting to do so."
And again on page 355 (Thompson v. Utah, supra), the court says:
"The Constitution of the United States gave the accused at the time of the commission of the offense, a right to be tried by a jury of twelve persons, and made it impossible to deprive him of his liberty except by the unanimous verdict of such a jury."
See also Webster v. Reid, 11 How. 437, 460; American Publishing Co. v. Fisher, 166 U. S. 464, 468.
Tlie finding of a true bill by a circuit judge of this territory, or in any other manner than by the indictment of a grand jury properly empowered to act in the premises, is in direct violation of the provisions of Article V.- of the Amendments to the Constitution of the United States, and any person; found guilty of an infamous crime without such indictment by a grand jury is illegally convicted and should be released on habeas corpus. (Ex parte Bain, 121 U. S. 1; Ex parte Parks, 93 U. S. 18. Gallon v. Wilson, 127 U. S. 540.)
It is fallacious to attempt to limit the force of the Constitution in this territory, or in view of the clear intent of the Resolution of Annexation, to curtail the constitutional rights of the citizen. The pointing out to' the people), as the Supreme Court of the territory has done, that the Constitution "is not here in all its fullness," without stating what parts are and what parts are not here, simply befogs the question; and the argument of the Assistant Attorney General of the territory that trial by jury is not one of the fundamental propositions of the Constitution is contrary to the settled opinions of such illustrious American jurists as Marshall, Story and Kent, and also of the leading American statesmen who assisted in framing those Amendments to the Constitution.
The history of the trial by jury is the history of English and American civilization. It has come down to' us from Magna Oharta, and in criminal cases every presumption is in favor of sustaining it.
I am of the opinion that the proceedings in the Territorial Courts of Hawaii for the indictment and conviction of the petitioner herein were contrary to1 law and void, and that he is entitled to be discharged on 'habeas corpus.
Let the prisoner be discharged.
Note: Reversed on appeal by U. S. Sup. Court, June 1, 1903. Not yet reported.
Ante, P. 34. |
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40 Cust. Ct. 548 | C. D. 1860 affirmed January 22, 1958. C. A. D. 673. |
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94 F.2d 230 | LENROOT, Associate Judge.
This is an appeal from a decision of the Commissioner of Patents sustaining an opposition filed by appellee to prevent the registration, under the Trade-mark Act of February 20, 1905, of appellant's mark "Starlash," applied to eyelash and eyebrow mascara, for which registration he filed application on January 28, 1935.
Appellee on May 1, 1935, filed notice of opposition to the registration of appellant's mark, and alleged therein: Prior use, ownership, and registration of the trademark "Kurlash," applied to "eyelash curlers," and the trade-mark "Kurlash Tweezette," for tweezers for removing hair; that the goods to which the respective marks are applied possess the same descriptive properties; that the marks of the respective parties are confusingly similar; and that opposer believed it would be damaged by the registration of appellant's mark.
Appellant answered said notice of opposition and, inter alia, denied that the goods of the parties possess the same descriptive properties, that the marks "Star-lash" and "Kurlash" were confusingly similar, and that appellee would be damaged by the registration of appellant's mark.
Both parties took testimony. It appears therefrom that appellee's mark "Kurlash" is applied to an instrument for curling eyelashes, while appellant's mark is applied to mascara, a cosmetic used on eyelashes; it further appears that mascara and eyelash curlers are sold in the same stores and to the same class of people.
The Examiner dismissed the'notice of opposition and adjudged that appellant was entitled to the registration of the mark applied for, holding that the marks may be concurrently used upon the goods of the respective parties without reasonable likelihood of confusion.
Upon appeal by the opposer, the Commissioner reversed the decision of the Examiner of Interferences and sustained the opposition of appellee, holding that the marks involved are used upon goods possessing the same descriptive properties and are confusingly similar. From this decision appellant has taken this appeal'.
Both parties cite many cases in support of their respective contentions.
The Commissioner held that the marks here involved are not more dissimilar than the marks "Rotex" and "Kotex," which, in the case of Kotex Co. v. McArthur, 45 F.2d 256, 18 C.C.P.A., Patents, 787, we held to be confusingly similar, applied to goods possessing the same descriptive properties.
Obviously, in cases of the character before us, only general principles of law are applicable, and, after being applied, it is very largely a matter of opinion whether two marks used upon goods of the same descriptive properties are confusingly similar. The Proctor & Gamble Co. v. J. L. Prescott Co., 49 F.2d 959, 18 C.C.P.A., Patents, 1433.
We have no hesitation in holding that the goods to which the respective marks are applied possess the same descriptive properties, and we do not deem it necessary to cite authorities in support of this holding. At the same time it is proper, in considering the question of confusion, to recognize the differences in the goods. Duro Pump & Mfg. Co. v. Thomas Maddock's Sons Co., 36 F.2d 1005, 17 C.C.P.A., Patents, 785; Fashion Park, Inc., v. The Fair, 49 F.2d 830, 18 C.C.P.A., Patents, 1399.
It is familiar doctrine that, in determining the question of confusing similarity of marks, they must be considered as a whole, but it does not follow that portions of marks which are similar- must be given equal weight with portions of marks which are dissimilar. In the case of Yeasties Products, Inc., v. General Mills, Inc., 77 F.2d 523, 22 C.C.P.A., Patents, 1215, the marks "Yeasties" and "Wheaties" were involved, applied to goods not identical, but nevertheless possessing the same descriptive properties. We there said: "It is evident from the record, and no claim is made to the contrary, that appellee is not the exclusive owner of the suffix 'ies.' Accordingly, if the word 'Yeast,' of appellant's mark, is sufficiently dissimilar with the word 'Wheat,' of appellee's mark, so that, when considered as a whole, the marks are not confusingly similar, appellant is entitled to the registration of its mark."
So in the case at bar the last syllable of each mark is identical. Appellee makes no claim to a monopoly of the word "lash," applied to goods possessing the same descriptive properties as do the goods to which it applies its mark, but does insist that, the marks being considered as a whole, the syllable "lash" is a very important part of both marks.
We believe that purchasers would pay little attention to the last syllable of the marks as bearing upon the origin of the goods, but, seeing the marks as a whole, the mind would fasten upon the syllable "Kur" in appellee's mark and "Star" in appellant's mark, and the last syllable in each mark would be given little attention other than with respect to its descriptive character.
While it is true that marks should not be dissected in considering the question of confusion, it is also true that similarities and dissimilarities in marks should both be considered.
In our judgment "Kurlash" and "Star-lash" are much more dissimilar in sound and appearance than are the marks "Rotex" and "Kotex," the subject of our decision in Kotex Co. v. McArthur, supra, relied upon by the Commissioner.
Considering the fact that appellee's mark is applied to an instrument for curling eyelashes, and appellant's mark is applied to a cosmetic for eyelashes, and considering also the difference in the marks of the parties, we are of the opinion that the concurrent use by the parties of their respective marks would not be likely to cause confusion or mistake in the mind of the public or to deceive purchasers.
It follows from the foregoing that we are of the opinion that the decision of the Examiner of Interferences should have been affirmed, dismissing the notice of opposition, and adjudging that appellant is entitled to the registration applied for.
The decision of the Commissioner of Patents is reversed.
Reversed.
BLAND, Associate Judge, dissents. |
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372 U.S. 924 | C. A. 5th Cir. Certiorari denied. |
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340 U.S. 820 | Supreme Court of Ohio. Certiorari denied. |
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470 F.2d 1344 | TIMBERS, Circuit Judge:
Appellant Ernest Klein appeals from orders entered in the Southern District of New York, Harold R. Tyler, District Judge, which (1) granted appellees' motion to dismiss with prejudice Klein's pro se complaint which alleged violations of the federal securities laws and breach of contract; and (2) awarded $600 attorney's fees to defendants. For the reasons stated below, we affirm the dismissal of the complaint on the ground that appellant's claims are barred by the applicable statute of limitations; and we remand the action to the district court with directions to make appropriate findings of fact and conclusions of law with respect to the award of attorney's fees.
I.
The transaction leading to the present litigation took place in 1959. In August of that year, appellant opened an account with appellee Shields & Co. (Shields), a New York brokerage firm and a member of the New York Stock Exchange. He thereafter directed Shields to purchase a large amount of designated securities, and to deliver them against payment to a specified bank branch. Shields sent, and appellant received, written confirmation of the purchases.
Upon appellant's failure to pay for the securities, Shields in 1960 brought suit against appellant in the New York County Supreme Court on a claim of breach of contract, alleging a $7,839.38 loss on the resale of the purchased securities. Appellant counterclaimed for $16,000, al leging that Shields had breached the contract by refusing to deliver the securities appellant had purchased. Shields' demand for a bill of particulars was ignored. In view of the small amount of its claim against appellant, Shields ceased active prosecution of the action in 1961.
The action remained in this dormant condition until March 1971, when appellant noticed and took the deposition of Shields (through appellee Cosgrove). Shortly thereafter, at appellant's request, a meeting was held between Shields' attorney and appellant. At that meeting, appellant offered a "settlement"; in ef.fect, his proposal was that, in exchange for Shields' agreement to satisfy appellant's counterclaim and to withdraw Shields' complaint, appellant would fore-go the commencement of a new action in the federal court. Shields understandably rejected appellant's "offer". The instant action followed.
Appellant's complaint, filed in the district court on July 12, 1971, basically restated his 1960 state court counterclaim, with the addition of allegations of fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j (1970), and Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q (1970). Jurisdiction was asserted under Section 27 of the 1934 Act, 15 U.S.C. § 78aa (1970), with the state claims said to be within the district court's pendent jurisdiction.
The district court dismissed the complaint with prejudice. It held that the complaint was fatally deficient in (1) its insufficient allegations of fraud; (2) its failure to state a claim upon which relief could be granted under either the Securities Act of 1933 or the Securities Exchange Act of 1934, and the consequent absence of any basis for pendent jurisdiction with respect to the state claims; and (3) its claims being barred by the running of "every conceivably applicable statute of limitations". The court subsequently awarded to appellees partial attorney's fees in the amount of $600.
II.
It is clear that, if it were not for the injection of the allegations of fraud in the instant complaint, the action would be barred by the New York statute of limitations relating to actions on contracts. N.Y.Civ.Prac.Law § 213(2) (McKinney 1972) (6 years from date on which cause of action arose). The presence of the fraud claim, however, detours that result only momentarily.
The provisions of the federal securities laws upon which appellant's federal claims are predicated have no specific limitations provisions. We therefore look to the applicable state statute. Klein v. Bower, 421 F.2d 338, 343 (2 Cir. 1970). Under New York law, an action based upon fraud must be brought within six years of the time the plaintiff "discovered the fraud, or could with reasonable diligence have discovered it", whichever is earlier. N.Y.Civ.Prac. Law § 213(9) (McKinney 1972). (emphasis added). That section must be read with N.Y.Civ.Prac.Law § 203(f), which provides that, where a limitation period is to run from the time the fraud was or should have been discovered, suit must be brought within two years of the actual or imputed discovery. Consequently, appellant's suit is time barred unless he did not discover, or with reasonable diligence could not have discovered, the alleged fraud prior to March 1969 (two years before commencement of the instant action). Hoff Research & Dev. Lab., Inc. v. Philippine National Bank, 426 F.2d 1023, 1025-26 (2 Cir. 1970); Klein v. Auchincloss, Parker & Redpath, 436 F.2d 339, 341 (2 Cir. 1971).
We are satisfied that appellant with reasonable diligence could have discovered the alleged fraud as early as 1960. The transaction underlying the instant claim is in all respects the same as that upon which appellant's 1960 state court counterclaim was based. Cf. Klein v. Auchincloss, Parker & Redpath, supra. At that point in time, at least the possibility of fraud should have been apparent to appellant; and the opportunity to inquire further, by taking Shields' deposition through its employees, of course was available. That this would have provided whatever further insight was necessary is manifested by appellant's contention that his knowledge of fraudulent conduct did not arise until March 1971 when the deposition of appellee Cosgrove was taken.
We hold that constructive knowledge as of 1960 may be imputed to appellant. As in Klein v. Bower, supra, 421 F.2d at 343, "the statutory period began to run then and did not await appellant's leisurely discovery of the full details of the alleged scheme." We further hold that the district court did not abuse its discretion in refusing to exercise pendent jurisdiction over the similarly time-barred state law claims. UMW v. Gibbs, 383 U.S. 715, 725-27 (1966); Ryan v. J. Walter Thompson Co., 453 F.2d 444, 446 (2 Cir. 1971), cert. denied, 406 U.S. 907 (1972).
Since the statute of limitations is a complete bar to the action, it is not necessary for us to consider the correctness of the district court's conclusion that appellant failed to state a federal claim upon which relief could be granted.
III.
The remaining question is the propriety of the district court's award to appellees of $600 in attorney's fees.
Following the court's dismissal of the complaint, appellees filed a motion for attorney's fees in amount of $4,000. On February 1, 1972, the court entered an order awarding $600 attorney's fees as part of the costs of the action.
Section 11(e) of the Securities Act of 1933, 15 U.S.C. § 77k(e) (1970), provides in pertinent part:
"In any suit under this or any other section of this subchapter the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney's fees, and if judgment shall be rendered against a party litigant, upon the motion of the other party litigant, such costs may be assessed in favor of such party litigant (whether or not such undertaking has been required) if the court believes the suit or the defense to have been without merit, in an amount sufficient to reimburse him for the reasonable expenses incurred by him, in connection with such suit, such costs to be taxed in the manner usually provided for taxing of costs in the court in which the suit was heard." (emphasis added).
This provision consistently has been held to require a specific finding by the district court that the action was "without merit", often stated in terms of "bordering on frivolity" and not merely unconvincing. Can-Am Petroleum Co. v. Beck, 331 F.2d 371, 374 (10 Cir. 1964); Katz v. Delka Research Corp., 295 F.Supp. 647, 649 (S.D.N.Y.1968), modified on other grounds sub nom. Katz v. Amos Treat & Co., 411 F.2d 1046, 1056 (2 Cir. 1969). In Oil & Gas Income, Inc. v. Trotter, 395 F.2d 753 (5 Cir. 1968), urged by appellees as precedent for the granting of attorney's fees under § 11 (e), the award was allowed only following a remand for the specific purpose of findings of fact and conclusions of law by the district court with respect to the "frivolity" of the complaint. Here, we have not had the benefit of such findings and conclusions. Consequently, on the present record we are unable to determine whether the award of attorney's fees was clearly erroneous.
The dismissal of the complaint is affirmed. The action is remanded to the district court with directions to make appropriate findings of fact and conclusions of law with respect to the award of attorney's fees.
Affirmed in part; remanded in part.
. Appellant should not be confused with the typical pro se plaintiff. He is no stranger to the courts of this Circuit. His litigious history has evoked pointed comment. See, e. g., Klein v. Spear, Leeds & Kellogg, 306 F.Supp. 743, 745-46 (S.D.N.Y.1969); Klein v. H. N. Whitney, Goadby & Co., 341 F.Supp. 699, 702 (S.D.N.Y.1971).
. The more favorable ten year period relating to general equity actions for causes of action occurring prior to 1963, N.Y. Civ.Prac.Act § 53, made applicable by N.Y.Civ.Prac.Law § 218(b) (McKinney 1972), would govern here only if the claim alleged constructive fraud. On a claim of actual fraud, the provisions of N.Y.Civ.Prac.Law § 213(9) and 203 (f) apply. McCabe v. Gelfard, 58 Misc.2d 497, 295 N.Y.S.2d 583 (Sup.Ct.Kings Co.1968), vacating 57 Misc.2d 12, 291 N.Y.S.2d 261 (Sup.Ct.Kings Co.1968).
. We note also that a like result could be reached on the ground that allegations of fraud must be stated with particularity. Fed.R.Civ.P. 9(b). Shemtob v. Shearson, Hammill and Co., 448 F.2d 442, 444-45 (2 Cir. 1971). Appellant's mere conclusory allegations of fraud cannot support a federal cause of action. |
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520 U.S. 1158 | C. A. 2d Cir. Certiorari denied. |
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537 U.S. 889 | C. A. 5th Cir. Certiorari denied. |
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45 Cust. Ct. 367 | Opinion by
Richardson, J.
In accordance with stipulation of counsel that the merchandise and issues are similar in all material respects to those involved in United States v. R. C. Williams & Co., Inc. (40 C.C.P.A. 130, C.A.D. 508), and Austin, Nichols & Co., Inc. v. United States (22 Cust. Ct. 33, C.D. 1155), the claim of the plaintiffs was sustained. |
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27 B.T.A. 972 | OPINION.
Trammell :
This proceeding is for the redetermination of a deficiency in estate tax of $9,395.31. The matters presented for determination are (1) whether any amount is to be included in the taxable estate of decedent as representing the value of certain bonds transferred in trust by the decedent prior to his death, the income from which was to be paid to two of his daughters during their respective lives and upon their respective deaths the entire corpus or principal of such trusts to be paid over to the decedent if living or if he be not living then unto such person or persons as he might by his will direct, limit and appoint and (2) what amount should be allowed as a deduction from the gross estate on account of bequests made by the decedent to certain charitable organizations.
The proceeding was submitted on a stipulation of facts, the pertinent portions of which are as follows:
1. That Alfred. J. Reach, the decedent in this proceeding, died on January 14th, 1928, leaving a last will and testament bearing date of December 4th, 1926, a copy of which last will and testament is attached hereto and made a part hereof as Exhibit "A" .
2. That on December 26th, 1918, the decedent, Alfred J. Reach, transferred to the Girard Trust Company, Trustee, by irrevocable deed of trust, United States Liberty Bonds of the par value of $50,000.00 and Philadelphia Electric Company First Mortgage Bonds of the par value of $45,000.00, the net income from which was to be paid to Louise Gray Jeffries, daughter of the decedent, during her natural life. A copy of said deed of trust is attached hereto and made a part hereof as Exhibit " B " .
3. That on December 26th, 1918, the decedent, Alfred J. Reach, transferred to the Girard Trust Company, Trustee, by irrevocable deed of trust, United States Liberty Bonds of the par value of $50,000.00 and Philadelphia Electric Company First Mortgage Bonds of the par value of $45,000.00, the net income from which was to be paid to Emma Mercer Christ, daughter of the decedent, during her natural life. A copy of said deed of trust is attached hereto and made a part hereof as Exhibit " C " .
4. Both Louise Gray Jeffries and Emma Mercer Christ, daughters of this decedent, survived this decedent, Alfred J. Beach.
5. In the compilation of the Federal Estate Tax Keturn of this decedent by the Executors of his estate nothing was included in the gross estate representing the value of the bonds transferred to the Girard Trust Company, Trustee, as set forth in paragraphs " 2 " and " 3 " hereof.
6. The respondent, in his determination of the net taxable estate of this decedent, included in gross estate the sum of $110,217.80, which amount is the value of the Liberty Bonds of the par value of $100,000.00 and the Philadelphia Electric Company Bonds of the par value of $90,000.00 transferred to the Girard Trust Company, Trustee, on December 26th, 1918, as set forth in paragraphs " 2 " and " 3 " hereof, based upon the life expectancies of the decedent's daughters, Louise Gray Jeffries, and Emma Mercer Christ.
7. The decedent, Alfred J. Beach, made no mention of the powers of appointment reserved in the deeds of trust herein referred to in paragraphs " 2 " and " 3 " hereof in his last will and testament, referred to in paragraph " 1 " hereof.
8. The decedent, Alfred J. Beach, by his will dated December 4th, 192:6, made provision for the ultimate payment from his estate of $50,000.00, each, to the Young Men's Christian Association, the Young Women's Christian Association, and the Salvation Army, which amounts were to be paid to these several beneficiaries upon the death of the last survivor of seven persons, aged respectively, 51, 55, 55, 57, 57, 60 and 82 years.
9. In the computation of the Federal Estate Tax liability of the estate of the decedent, Alfred J. Beach, a deduction for the charitable bequests referred to in paragraph " 8 " hereof was taken in the sum of $73,966.50, which amount represents the present value of $150,000.00, as of the date of the death of this decedent, using a factor of .49311, which factor is the present worth of $1.00 the payment of which is postponed until the death of a person of fifty one years of age, as set forth in Table "A" page 20 of Estate Tax Begulations 70.
10. The respondent, in his determination of the amount to be allowed as a deduction from gross estate for the charitable bequests referred to in paragraph " 8 " hereof, amounting in the aggregate to $150,000.00, used a factor of .32977 and allowed the sum of $49,465.50 in lieu of the amount claimed by the estate namely $73,966.50. In arriving at the said remainder factor of .32977 the actuary for the Bureau considered the possibility that the youngest of the life beneficiaries would be survived by one if not by all of the other six life tenants, as well as the other possibilities of survivorship.
11. It Is Further Stipulated and Agreed that there are only two questions before the Board for decision, namely:
(a) Whether or not anything is to be included in the value of the estate of this decedent, for purposes of Federal Estate Tax, representing the value of the bonds transferred in trust to the Girard Trust Company, trustee, by the two deeds of trust made and executed by the decedent on December 26th, 1918.
(b) What amount should be allowed as a deduction from gross estate, for the purposes of Federal Estate Tax, for the charitable bequests made to the Young Men's Christian Association, the Young Women's Christian Association, and the Salvation Army.
12. That this case is hereby submitted to the Board for decision upon the basis of the pleadings and this stipulation, subject, however, to the right of both parties to contest, by appropriate proceedings, any decision by the Board with respect to any issue in this case .
The deed of trust by which the petitioner transferred to the trustee Liberty bonds and corporate bonds the income from which was to be paid to Louise Gray Jeffries during her life, and referred to in the stipulation as Exhibit B, is as follows:
This Indenture, made this 26th day of December in the year of our Lord One Thousand Nine Hundred and Eighteen, between Alfred J. Reach, of the City of Philadelphia, and State of Pennsylvania, hereinafter called Geantob, and Girabd Trust Company, a corporation of the State of Pennsylvania, hereinafter called Trustee, Witnesseth :
That Grantor, for and in consideration of the sum of One Dollar to him in hand paid by. Trustee at and before the ensealing and delivery hereof, the receipt whereof is hereby acknowledged, and in consideration of the covenants and agreements herein contained, and for the purpose of reserving the properties and estate hereinafter designated, and for the accomplishment of the purposes hereinafter set forth, Hath granted, bargained, sold, assigned, transferred and set over, and by these presents Doth grant, bargain, sell, assign, transfer and set over unto Trustee, its successors and assigns, the following:
$50,000. United States of America Fourth Liberty Loan 4%'s
$45,000. Philadelphia Electric Company First Mortgage 5's and such other sums of money, securities or other property, real or personal, as may be delivered to Trustee or assigned to it or its successor or successors by endorsement hereon or otherwise placed under the trusts herein created by a proper instrument or instruments;
To Have and to Hold, Receive and Take the above mentioned stocks, securities and other properties and every part thereof unto the said Trustee, its successors and assigns, to and for its only proper use, benefit and behoof forever, In Trust Nevertheless for the following uses and purposes, that is to say:
In Trust to hold, manage, invest, reinvest and keep invested the corpus or principal thereof, and to collect and receive the income therefrom, and after the deduction of all proper or necessary charges and expenses, to pay over the net income therefrom, quarterly, unto Louise Gray Jeffries, wife of William K. Jeffries, daughter of Grantor, for and during the term of her natural life.
In Trust upon the death of the said Louise Gray Jeffries to assign, transfer and pay over the entire corpus or principal held hereunder unto Grantor, if he be living at that time, or, should Grantor not then be living, unto such person or persons as Grantor may by his last Will and Testament direct, limit and appoint.
Trustee shall have power to sell the Philadelphia Electric First Mortgage Five Per cent, bonds hereby assigned to it if, in its judgment, it shall seem advisable so to do and to reinvest the proceeds therefrom in United States of America Liberty bonds.
All payments of income hereunder shall be so made that the same shall be free and clear of the debts, contracts, engagements, alienations and anticipations of the beneficiary herein named and free and clear from the lien of judgments recovered against her and free from liability for levies, judgments, executions and sequestrations.
The deed of trust by which the petitioner transferred to the trustee Liberty bonds and corporate bonds, the income from which was to be paid to Emma Mercer Christ during her life, and referred to in the stipulation as Exhibit C, is identical with the above quoted deed of trust, with the exception of the name and partial description of the beneficiary.
While the decedent made no specific mention in his will of the powers of .appointment reserved in the above mentioned deeds of trust, the will, after providing for certain specific bequests, contains the following provision with respect to the residuary portion of the decedent's estate:
Eighth : I give, devise and bequeath all the rest, residue and remainder oí my estate, real and personal, of every sort and hind, to the.Fidelity-Philadelphia Trust Company, In Trust, for the uses, persons and purposes, and with the powers following:
In Trust, to collect the rents, income and profits thereof and, after deducting the necessary expenses of the trust, to distribute the net income thereof as follows:
In Trust, to pay to my sister, Maria L. Reach, during her lifetime an annuity of Twenty-five hundred dollars ($2500) in equal quarterly payments; the first payment to be made within three months after my decease.
In Trust, until the decease of my wife and the last survivor of my four children, George A. Reach, Emma M. Christ, Louise G. Jeffries and Bertha A. Reach, and my sons-in-law, to pay over one-third of the residue of the net income during her lifetime to my wife, in equal quarterly payments, and to divide the remaining two-thirds of the net income, during her lifetime, and the whole net income after her decease, as follows:
In Trust, to divide said two-thirds or the whole, as the case may be, at each time of quarterly distribution, into as many parts or shares as at each of said times there shall be children of mine then living and children of mine then dead represented by descendants then living; to subdivide the share falling to each set of descendants of a child of mine then dead among them, per stirpes, upon the principle of representation; and to pay over to each child and descendant of a dead child who, at each of said times shall be found entitled, its share of said income in fee simple.
In Trust, in the event of the death of either of my married daughters leaving her husband but no issue, her surviving, to pay over to such husband during his lifetime, so much of the income to which such daughter would have been entitled if living, as shall not exceed interest at the rate of five per centum (5%) per annum on One Hundred Thousand Dollars ($100,000) ; such sum to be paid in like equal quarterly installments.
In Trust, upon the death of the last survivor of my wife, children and sons-in-law, to distribute one-third of the principal of the share of which each child received in his or her lifetime the income, to such persons and in such amounts as such child may by Will or instrument in the nature thereof, appoint, and to distribute so much of the entire principal of my estate as shall not have been so appointed, as follows:
To pay to the Young Men's Christian Association of Philadelphia the sum of Fifty Thousand Dollars ($50,000) absolutely;
To the Young Women's Christian Association of Philadelphia the sum of . Fifty Thousand Dollars ($50,000) absolutely; and
To the Salvation Army, Incorporated, of Philadelphia, the sum of Fifty Thousand Dollars ($50,000) absolutely.
To divide the remainder of my said residuary estate into as many parts or shares as at that time there shall be children of mine then dead represented by descendants then living; to subdivide the share falling to each set of descendants of a child of mine then dead among, them per stirpes, upon the principle of representation; and to pay over to each descendant of mine who shall then be found entitled, its share in fee simple.
Nothing was included in the estate tax return as a part of the decedent's gross estate on account of the Liberty bonds of a par value of $100,000 and the corporate bonds of a par value of $90,000 transferred by the decedent under the two trust deeds to the trustee, the income from which was payable to decedent's two daughters during their respective lives and upon their respective deaths the principal or corpus of such trusts to be paid to the decedent if living and ii he were not living then to such person or persons as the decedent might by his will direct, limit and appoint. In determining the net taxable estate of the decedent the respondent has included as a part of the gross estate the amount of $110,217.80 as representing the value of the bonds based upon the life expectancies of the decedent's two daughters who were to receive the income from the bonds during their respective lives.
The petitioners contend that this action of the respondent is erroneous and that no amount should be included in the gross estate on account of the bonds. In support of this contention the petitioners urge that the decedent in creating the two trusts divested himself of all the incidents of ownership of the property transferred, putting it beyond his power to ever repossess it and under the laws of Pennsylvania definitely fixing the remaindermen should he fail to designate in his will to whom the property should go. The petitioners insist that the trust instruments themselves show that all right, title and interest in the trust property passed from the decedent absolutely and irrevocably upon the execution of the instruments, and not only a life interest to the daughters. The petitioners also urge that under the laws of Pennsylvania a gift of property for life with a remainder over to others vests the interests of such others. The petitioners also insist that so far as the two trusts are concerned nothing passed at the time of the death of the decedent.
By two trust deeds executed on December 26, 1918, the decedent placed in trust for two of his daughters the property in controversy. Under the provisions of these instruments the trustee was to pay over the net income from the trust property to the respective daughters for and during the term of the natural life of each. The instruments further specifically provided that upon the death of the respective daughters the trustee was " to assign, transfer and pay over the entire corpus or principal held hereunder unto Grantor, if he be living at that time, or, should Grantor not then be living, unto such person or persons as Grantor may by his last Will and Testament direct, limit and appoint." We fail to find anything in the trust instruments to indicate that the decedent intended for either of the daughters to receive or that either did receive anything more under the trust instruments than the net income from the property of the respective trusts " for and during the term of her natural life." At all times the decedent had a reversionary interest in the trust property. By the trust instruments the interests remaining after the grant of the income from the property to the daughters for their respective lives was retained by the decedent himself and was not granted or given by him to another or others. At his death the interest thus retained constituted a part of his estate just the same as any other property that he then owned. Since he did not make it the subject of a specific bequest by his will, it became a part of the residuary portion of his estate, the disposition of which the will specifically provided for as heretofore set forth. Under these circumstances the interest retained by the decedent in the property of the two trusts passed upon his death and by the terms of his will to those entitled to take under the residuary clause of the will. Those entitled to share in the residuary estate of the decedent acquired such right not by the terms of instruments creating the two trusts in controversy, but by reason of the decedent's death and the provisions of his will.
If the decedent had provided in the trust instruments that the corpus of each trust should be paid over to him only in the event the beneficiary should predecease him, but that the corpus should go to the beneficiary or another in the event the beneficiary did not predecease him, such a provision alone would not have subjected the corpus of the trusts to tax as a part of the decedent's gross estate. Nanaline H. Duke et al., Executors, 23 B. T. A. 1104, and authorities cited.
However, the provisions of these trust instruments went much further. It was provided that the entire corpus or principal of each trust should, upon the death of the beneficiary, be paid over to the decedent, if then living, and if not then living, it should be paid over to such person or persons as the decedent might appoint by his will. Thus .it is made clear that the decedent did not intend to transfer to the trustee anything more than the management and control of the trust estates for the purpose of paying the net income to the daughters during their respective lives, and that the decedent intended to and did reserve to himself all interest in and to the corpus of each trust, to be disposed of by him under his will as he might see fit.
These facts, we think, bring the case within the principle applied by the Supreme Court in Klein v. United States, 283 U. S. 231. In that case the decedent, Klein, prior to his death conveyed certain real estate to his wife, the deed providing that the grantee should have the land for the term of her natural life, but if she died before the grantor, the reversion in fee should be and remain vested in the grantor. The court held that the real estate was subject to tax, saying:
The two clauses of the deed are quite distinct — the first conveys a life estate; the second deals with the remainder. The life estate is granted with an express reversion of the fee It follows that only a life estate immediately was vested. The remainder was retained by the grantor; and whether that ever would become vested in the grantee depended upon the condition precedent that the death of the grantor happened before that of the grantee. The grant of the remainder was, therefore, contingent. It is perfectly plain that the death of the grantor was the indispensable and intended event which brought the larger estate into being for the grantee and effected its transmission from the dead to the living, thus satisfying the terms of the taxing act and justifying the tax imposed.
The facts of the instant case are less favorable for the petitioners than those of the Klein case. Here the decedent did not even grant contingent remainders to.his daughters. The trust instruments did not purport to provide for the disposition of the corpus, other than to reserve such powers to the decedent.
Each trust beneficiary survived the decedent, and upon his death the beneficial title of the corpus of each trust became vested in the persons appointed by his will. The transfer of the corpus of each trust resulted from the exercise by the decedent of his reserved powers of appointment, and was obviously intended to take effect in possession or enjoyment after his death, upon the decease of the daughters, and thus comes clearly within the purview of the taxing statute. Sec. 302 (c), Revenue Act of 1926. Sargent v. White, 50 Fed. (2d) 410; Union Trust Co. v. United States (Ct. Cls.) 54 Fed. (2d) 152.
In view of the foregoing we think the contention of the petitioners must be denied. As the respondent has included in the gross estate of the decedent only the value of the property in controversy based upon the life expectancies of the two daughters who were to receive the income therefrom during their respective lives, and there being no controversy between the parties as to such value, we think the respondent's action is correct and it is accordingly sustained. Cf. Chemical Bank & Trust Co. et al., Executors, 25 B. T. A. 1153.
The decedent made certain charitable bequests totaling $150,000. The payment of these bequests was deferred until the death of the last survivor of seven persons, aged respectively, 51, 55, 55, 57, 57, 60 and 82 years. In the computation of the decedent's gross estate the petitioners took a deduction of $73,966.50 as representing the present value of $150,000 as of the date of the decedent's death. The amount of the deduction was computed by using the factor .49311 as representing the present worth of $1, the payment of which is postponed until the death of a person 51 years of age. In determining the deficiency here involved the respondent allowed only $49,465.50 of the amount of $73,966.50 taken by the petitioners. In computing the amount allowed the respondent used a factor of .32977. In arriving at the factor of .32977 the respondent considered the possibility that the youngest of the life beneficiaries would be survived by one if not by all of the other six life tenants, as well as other undisclosed possibilities of survivorship. The issue with respect to this action of the respondent is what amount should be allowed as a deduction from the gross estate on account of the charitable bequests in question.
In Henry B. Ickelheimer et al., Executors, 14 B. T. A. 1317, the will of the decedent provided that the income from certain property and specific amounts of money should be paid to the widow of the decedent during her lifetime and that at her death such property and money should be paid over to certain corporations organized and operated exclusively for religious, charitable, scientific, literary or educational purposes. We there said:
It is apparent that the corporations tools vested remainders at the time of the death of the decedent. The value of such remainders is properly deductible from the gross estate. Mercantile Trust Co., Executor, 13 B. T. A. 85.
The estate tax is a tax upon the passing of the estate of the decedent and the value of the estate must be determined as of the time of the death of the decedent. The corporations did not receive the absolute ownership of the property in question, but were entitled to the corpus only after the expiration of the life estate of the widow. In such a case it is proper to value the remainder by reducing the amount to be received by an amount representing the delayed receipt of the bequest by the charities. See Dugan v. Miles, 292 Fed. 131; United States v. Farr's Executor, 196 Fed. 996; and Simpson v. United States, 252 U. S. 547.
Where property is given to charity, but subject to the use or enjoyment of another for life, the value of the property for the purpose of determining the amount deductible from the gross estate is to be determined by the use of mortality tables. Ithaca Trust Co. v. United States, 279 U. S. 151; Cortlandt F. Bishop, Executor, 23 B. T. A. 920. Since the bequests here in controversy were to be paid upon the death of the last survivor of seven persons, whose ages ranged from 51 to 82 years, the petitioners computed the deduction taken by them on the basis of the life expectancy of a person 51 years of age, on the ground that the remaining life expectancy of a person of that age was greater than that of any of the six others, who were from four to twenty-one years older. The factor used by the petitioners on the foregoing basis was .49311. The respondent determined a factor of only .32977 on the principle that the life expectancy of the survivor of seven persons is greater than the life expectancy of one person in the group, even though that person be the youngest. The parties submitted this question on the theory that it was a question of law. In our opinion, this is a question to be determined as a fact based on the testimony of qualified witnesses. It is not a question of law as to what the life expectancy of a person is, whether that person be an individual alone or the survivor of a group of individuals. The determination of the Commissioner is presumed to be correct until overcome by evidence. There is nothing in the record here to show that the determination of the Commissioner is not correct. We accordingly approve his action in this respect.
Reviewed by the Board.
Judgment will he entered under Bule 50. |
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1 Cust. Ct. 501 | Opinion by
Tilson, J.
As there was nothing to warrant disturbing the action •of the -collector the protests were dismissed following the authorities cited in Abstract 15400. |
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33 T.C. 667 | OPINION.
Murdock, Judge:
The Commissioner mailed a notice on April 10, 1959, to—
Estate of William Krueger, Deceased
Anna Krueger, Administratrix, and
Mrs. Anna Krueger, Surviving Wife
10230 South Walden Parkway
Chicago 43, Illinois
determining a deficiency in income tax for 1955. Anna filed a petition with the Court for her seif and as Administratrix of William's estate pursuant to that notice, on August 18, 1959, which was more than 90 days but less than 150 days after the mailing of the notice of deficiency. The Commissioner moved to dismiss the proceeding for lack of jurisdiction on the ground that the petition was not filed within the 90-day period required by law. The petitioners filed an objection to the granting of the motion on the ground that they had 150 days within which to file the petition. The motion came on for hearing on December 16, 1959, prior to which time the parties had filed a stipulation of facts.
Anna resides at the address to which the notice of deficiency was mailed. She is the widow of William Krueger who died on February 19, 1957. They filed a joint return for 1955. Anna was outside the United States on a world cruise from January 17, 1959, to May 9, and on April 10, 1959, the day on which the notice of deficiency was mailed, she was in Yokohama, Japan.
Section 272(a) (1) of the 1939 Code requires that a petition be filed within 90 days after the mailing of the notice. The last sentence of that section is as follows: "If the notice is addressed to a person outside the States of the Union and the District of Columbia, the period specified in this paragraph shall be one hundred and fifty days in lieu of ninety days." The Tax Court, in Rebecca S. Hamilton, 13 T.C. 747, interpreted the quoted sentence as meaning that the taxpayer should have 150 days within which to file the petition if the person, to whom the notice of deficiency was addressed, was outside the United States and that it did not refer to an address outside the United States. This interpretation was approved by the Court of Appeals for the Second Circuit in Mindell v. Commissioner, 200 F. 2d 38. However, the court in the Mindell case added:
But we cannot agree with its additional conclusion in that case, 13 T.C. at page 753, that the statute grants the 150 day period only to persons outside the designated area "on some settled business and residential basis, and not on a temporary basis .» We nothing in the language of the statute or in its legislative history to suggest that Congress intended to differentiate between persons temporarily absent from the United States and persons "regularly residing" abroad. Whatever the reason for the taxpayer's absence from the country receipt of the deficiency notice was likely to be delayed if he was not physically present at the address to which the notice was sent; hence he was given additional time to apply for review of the deficiency.
The Tax Court agrees with the opinion of the Court of Appeals for the Second Circuit in the Mindell case and has held in the present case that the petition filed after 90 days, but within 150 days from the mailing of the notice, was timely filed. The statutory provision applicable here is section 6213(a) of the 1954 Code but it contains provisions similar to those quoted above.
Reviewed by the Court. |
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355 U.S. 902 | Petition for writ of certiorari to the United States Court of Appeals for the Fifth Circuit granted limited to question 2 presented by the petition for the writ which reads as follows:
"Whether the petitioners were twice placed in jeopardy in violation of the Fifth Amendment to the Constitution of the United States, where the evidence shows that they had been previously convicted in the Courts of the State of Illinois of the crime of conspiracy to destroy the property of the Southern Bell Telephone Company, upon the same facts as were presented in the Courts of the United States, and upon which they were convicted of conspiracy to destroy a communications line operated or controlled by the United States." |
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444 U.S. 1027 | ante, p. 925;
ante, p. 927;
ante, p. 967;
ante, p. 873; and
ante, p. 933. Petitions for rehearing denied. |
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565 U.S. 895 | Ct. App. Ind. Certiorari denied. |
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544 U.S. 1032 | C. A. D. C. Cir. Certiorari denied. |
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498 U.S. 1013 | C. A. 9th Cir. Certiorari denied. |
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531 U.S. 952 | C. A. 9th Cir. Motion of respondent for leave to proceed in forma pauperis granted. Certiorari denied. |
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11 Cust. Ct. 309 | Opinion by
Walker, J.
At the hearing the examiner testified that all of the items on the invoice, with the exception of 3, consisted of lumber and that those 3 consisted of timber and should have been returned at the 50-cent rate under paragraph 401, but free of the tax imposed under the revenue act. In accordance therewith and on the authority of Laurence Phillips Lumber Co. v. United States (T. D. 49624), which record was incorporated herein, the protest was sustained only as to the 3 items above mentioned. |
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528 U.S. 898 | C. A. 4th Cir. Cer-tiorari denied. |
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414 U.S. 843 | C. A. D. C. Cir. Certio-rari denied. |
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2 Dall. 41 | the presiding Commissioners, delivered the decision of the Court:
BY THE COURT.
Having considered the evidence, and arguments adduced by the Counsel for the petitioners, and respondents, we are of opinion, that there is not sufficient cause to admit the appeal of the petitioners, from the decree of the Court of Admiralty, in the State of South Carolina, condemning the Sloop Chester, her Apparel, and Cargo. If the appeal should be admitted, it must be on this principle, that there had been such irregularities in the proceedings, as that justice and right required, that the cause should be re-heard, in order to do that justice here, which had not been done in the Court below. The irregularity suggested is, that the captors did not bring, or send, the matter of the captured vessel, in order to be enquired of touching the property, &c. nor produce the documents mentioned by the matter, in his protest; and that, for want thereof, a condemnation had taken place. However blamable the captor may have been, in omitting to send, or bring the master before the Admiralty Court, and in not producing those documents, such omission alone is not sufficient to set aside the decree and re-hear the cause, unless it appeared that substantial justice has been thereby prevented. In this case, upon an examination of all the evidence produced, it appears that the condemnation of the Sloop Chester must have taken place, if the same evidence had been offered in the Admiralty Court. Peter Theodore Vantylengen appears to have been a merchant in a British settlement, on the Bay of Honduras; not barely having a transient residence, but carrying on trade from that settlement, like other inhabitants. It is not material to whom his natural allegiance was due; he was enjoying the privileges, and subject to the inconveniences of other merchants, residing in the same place. The Sloop Chester appears to have been a British vessel, possefied of British papers, purchased by Vantylengen, and employed by him; and although he might have executed the Bill of Sale of her, to certain subjects of the United Netherlands, with whom the United States were at peace and amity, for the purpose, as he expresses it, of preventing her being taken, such a transfer cannot be considered as bona fide ; but, from the tenor of the instructions of said Vantylengen, to the master of the Sloop, that transfer appears to have been intended merely to deceive and cover, under the name of a friend, property which ought to be considered as that of an enemy. Examining the protest made by the master of the Sloop Chester, it does not appear, that he was prevented by the captors from going to Charleston; but on the contrary, his going on shore at St. Eustatia, upon the privateer's leaving that place, seems to have been in consequence of his own solicitation. For these reasons, the Court do not admit the appeal of the petitioners. And, it is considered by the Court, that the petition be dismissed ; but as some irregularities, on the part of the captors, have given colour to the petition, the Court do not award costs to the respondents. |
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544 U.S. 1018 | C. A. 11th Cir. Certiorari denied. |
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211 U.S. App. D.C. 284 | Opinion for the Court filed by Circuit Judge ROBB.
ROBB, Circuit Judge:
This case presents the question whether a United States Senator has standing to challenge the constitutionality of the procedures established by the Federal Reserve Act, 12 U.S.C. § 221 et seq. (1976) for the appointment of the five Reserve Bank members of the Federal Open Market Committee. A corollary question is whether, assuming the Senator has standing, this court should afford him relief. The complaint of the appellant, Senator Donald W. Riegle, Jr., of Michigan, was dismissed by the United States District Court for the District of Columbia on the ground that the Senator lacked standing to seek injunctive relief from the allegedly unconstitutional procedures authorized by the Act. Riegle v. Federal Open Market Committee, et al., 84 F.R.D. 114, 116 (D.D.C.1979) (Gesell, J.). We affirm on a ground different from that relied upon below.
I.
The Federal Reserve System, which was created by Congress in 1913 as this nation's central bank, is comprised of public and private entities organized on a regional basis with federal supervisory authority. The System includes a seven-member Board of Governors, the twelve regional Federal Reserve Banks, the FOMC, the Federal Advisory Council, and approximately 5,500 privately-owned member commercial banks. (Br. of FOMC at 4) The primary role of the System in the conduct of monetary policy is to facilitate the achievement of national economic goals through influence on the availability and cost of bank reserves, bank credit, and money. Three basic mechanisms employed by the System to implement monetary policy are open market operations, regulation of member bank borrowing from the Federal Reserve Banks, and establishment of member bank reserve requirements. The most flexible and potentially significant of these tools is open market transactions. (Br. of FOMC at 6)
Open market trading, which consists of the purchase and sale of government and other securities in the financial markets by the Reserve Banks, is exclusively directed and regulated by the FOMC. 12 U.S.C. § 263(b) (1976). The FOMC, like the System as a whole, is constituted to reflect both public and private interests. Since 1935 the FOMC has been composed of the seven members of the Board of Governors of the Federal Reserve System, 12 U.S.C. § 241 (1976), who are appointed by the President with the advice and consent of the Senate, and five representatives of the Federal Reserve Banks, who are elected annually by the boards of directors of the Banks. 12 U.S.C. § 263(a) (1976). Since 1942 Congress has required that the five Reserve Bank members of the FOMC be either presidents or first vice presidents of the Reserve Banks. 12 U.S.C. § 263(a). The Reserve Banks are private corporations whose stock is owned by the member commercial banks within their districts. 12 U.S.C. § 321 (1976). These member commercial banks elect six of the nine members of the board of directors of each Reserve Bank, and the Board of Governors of the Federal Reserve System selects the remaining three. 12 U.S.C. § 302, 304 (1976). The presidents and first vice presidents of the Reserve Banks, although selected by the respective boards of directors, are subject to the approval, suspension, and removal authority of the Board of Governors. 12 U.S.C. § 341, 248 (1976). In short, the FOMC consists of seven members who hold their offices by virtue of presidential appointments confirmed by the Senate, and five members who are elected by the boards of directors of the Banks and who hold their offices subject to the approval of the Board of Governors. 12 U.S.C. § 263(a).
The securities transactions directed by the FOMC have a significant effect on the financial markets. In 1974, for example, the FOMC alone was responsible for approximately $19.4 billion in outright transactions in U.S. Government Securities. (Br. of Riegle at 5) These transactions potentially affect the value of the dollar, foreign exchange rates, interest rates, investment, and employment. Id. Approximately every 45 days, the FOMC formulates its monetary policy objectives for the immediate future by setting targets for growth rates in the money supply and the range of variance in the Federal Funds rate (the member banks' rate for overnight loans of excess reserves to other banks). The FOMC then issues a domestic policy directive to the Federal Reserve Bank of New York for the management of the System Open Market Account, which is a central entity representing the open market transaction interests of the twelve Reserve Banks. The manager of the Account, who maintains daily contact with Federal Reserve staff members in Washington, engages in financial transactions designed to achieve the monetary conditions sought by the FOMC. Reserve Banks are prohibited under the Act from engaging in any open market transactions except those directed by the FOMC through the Account. 12 U.S.C. § 263(b).
Considering the substantial economic power wielded by the FOMC, it is not surprising that controversy over the balance between public and private control of the Committee has existed since its creation. As originally constituted, the FOMC was privately dominated, consisting solely of representatives of the twelve Reserve Banks. Banking Act of 1933, 48 Stat. 162. This arrangement was unsatisfactory to those who favored greater governmental control over disposition of Reserve Bank funds. During debates on the Senate floor preceding passage of the Banking Act of 1935, 49 Stat. 684, Chairman Carter Glass of the Senate Banking Committee (a supporter of Reserve Bank control of the FOMC) explained the legislative compromise between public (Board of Governors) and private (Reserve Bank) interests which produced the present procedure for constituting the FOMC:
[We are] amazed to have it proposed that the Federal Reserve Board alone should constitute the open-market committee of the system. . . . The Government of the United States has never contributed a dollar to one of the Reserve Banks; yet it is proposed to have the Federal Reserve Board, having not a dollar of pecuniary interest in the Reserve funds or the deposits of the Federal Reserve banks or of the member banks . to make such disposition of the reserve funds of the country, and in large measure the deposits of the member banks of the country, as they may please . [I]n order to reconcile bitter differences there was yielding, and we have now proposed an open-market committee composed of all 7 members of the Federal Reserve Board and 5 representatives of the regional reserve banks.
79 Cong.Rec. 11778 (1935).
Despite the passage of the compromise represented by the Banking Act of 1935, the debate over public and private control of the FOMC has continued during the past 48 years. The late Congressman Wright Pat-man, Chairman of the House Banking Committee, asserted in 1938 that the Reserve Bank members of the FOMC did not represent the "people's interest." Mr. Pat-man's successor, Congressman Henry S. Reuss, has made several unsuccessful attempts, both in Congress by amendment of 12 U.S.C. § 263(a) and in the federal courts, to require that the five Reserve Bank members of the FOMC be appointed with the advice and consent of the Senate pursuant to the Appointments Clause. United States Constitution, Art. II, sec. 2, cl. 2. Based on his belief that the work of the FOMC "is essentially a governmental function, and should not be exercised by private people," Mr. Reuss in 1976 introduced the "Federal Reserve Reform Act," H.R. 12934, 94th Cong., 2d Sess. (1976), which in part would have required that the five Reserve Bank seats on the FOMC be limited to Bank presidents appointed by the President with the advice and consent of the Senate. The House Banking Committee defeated this provision on April 30, 1976. (Br. of FOMC at 21) Mr. Reuss then brought an action in federal court seeking, in part, to have 12 U.S.C. § 263(a) declared unconstitutional. The District Court dismissed the action on the ground that the Congressman lacked standing to sue either in his capacity as a congressman or as a private bondholder. Reuss v. Balles, 73 F.R.D. 90 (D.D.C.1976) (Parker, J.), aff'd, 189 U.S.App.D.C. 303, 584 F.2d 461, cert. denied, 439 U.S. 997, 99 S.Ct. 598, 58 L.Ed.2d 670 (1978). On April 1, 1980 Congressman Reuss introduced another bill, H.R. 7001, which would amend 12 U.S.C. § 263(a) in the manner sought by Senator Riegle in this case: a prohibition on voting by the five Reserve Bank members of the FOMC. This legislation was not enacted. (Br. of FOMC at 21-22)
Senator Riegle instituted the present suit on July 2, 1979 (prior to the introduction of H.R. 7001 by Congressman Reuss) in the United States District Court for the District of Columbia, seeking injunctive relief in the form of an absolute prohibition on voting by the Reserve Bank members of the FOMC. (J.A. at 8) In an opinion by District Judge Gesell, the court dismissed the action for lack of standing. Riegle v. Federal Open Market Committee, supra, at 116. The court reasoned that
Senator Riegle's injury is of a political nature, deriving solely from the acts or omissions of his colleagues and not in any way from the actions of the named defendants. Reuss v. Balles, supra 584 F.2d at 468.... What the Court must decide is whether or not a Congressman from either chamber has standing to challenge the constitutionality of a statutory provision on which he has failed to persuade his colleagues in the past and remains free to attempt persuasion in the future. The Court concludes that to confer standing upon such a Congressman without more would improperly interfere with the legislative process.
84 F.R.D. at 116 (citations omitted). The decision of the District Court is now before us on appeal.
II.
Senator Riegle alleges that both the defendant individuals, "[b]y acting as officers of the United States when their nominations have never been submitted to the Senate," and the defendant executive agency» "[b]y permitting the defendant individuals to act as officers of the United States when their nominations have never been submitted to the Senate," deprive him of his constitutional right to vote in determining the advice and consent of the Senate to the appointment of the five Reserve Bank members of the FOMC. (Complaint, J.A. at 11) When ruling on a motion to dismiss for want of standing, "both the trial and reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party." Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975). We assume, therefore, that the procedure for constituting the FOMC contained in 12 U.S.C. § 263(a) of the Act results in a deprivation of Senator Riegle's constitutional right to advise and consent regarding the appointment of the defendant officers of the executive branch. Senator Riegle seeks not declaratory relief but rather "an injunction against their [five Reserve Bank members] voting as members of the FOMC, conduct which deprives him of his right to vote in determining the advice and consent of the Senate to the appointment of officers at the highest level of government." (Br. of Riegle at 43) (Emphasis in original)
Two contradictory principles pervade the opinions of this court concerning the standing of congressional plaintiffs. First, no distinctions are to be made between congressional and private plaintiffs in the standing analysis. As we stated in Harrington v. Bush, 180 U.S.App.D.C. 45, 553 F.2d 190, 204 (1977) (emphasis omitted), "there are no special standards for determining Congressional standing questions." Second, this court will not confer standing on a congressional plaintiff unless he is suffering an injury that his colleagues cannot redress. When congressional plaintiffs have sought to accomplish in this court what they were unable to persuade their colleagues to do, we have usually refused to confer standing because of our concern for non-interference in the legislative process. See, e. g., Reuss v. Balles, supra; Harrington v. Bush, supra. Cf. Kennedy v. Sampson, 167 U.S.App.D.C. 192, 511 F.2d 430 (1974), holding that nullification of a senator's vote due to pocket veto of bill by the President constitutes sufficient injury to confer standing; Goldwater v. Carter, 199 U.S.App.D.C. 115, 617 F.2d 697 (en banc), holding that disenfranchisement of a senator because of the attempt by the President to terminate the Taiwan Treaty without the advice and consent of the Senate is injury sufficient to confer standing, judgment vacated, 444 U.S. 996, 100 S.Ct. 533, 62 L.Ed.2d 428 (1979) (mem.). We believe that these two contradictory principles create unnecessary confusion when applied to suits brought by congressional plaintiffs. As the former Chief Judge of this court recently observed,
There can be no peaceful coexistence between, on the one hand, the notion that legislators are treated like any other plaintiff for standing purposes, and, on the other, the idea that courts should rigorously scrutinize whether the congressional plaintiff's true quarrel is with his colleagues, rather than the executive. There is no general requirement that a private litigant employ self-help before seeking judicial relief. Nor should there be, because an ordinary plaintiff, having suffered injury in fact within the contemplation of the law he invokes, is entitled to his day in court. If the plaintiff passes the standing test and presents a justiciable dispute, it is assumed that the political branches have decided to commit such disputes to the judiciary and, barring extraordinary circumstances, that is a judgment which courts are bound to respect.
Hon. Carl McGowan, "Congressmen in Court: The New Plaintiffs," 15 Ga.L.Rev. 241, 254-255 (1981) (McGowan) (citations omitted). Accordingly we shall proceed by applying to this case the traditional standing tests for non-congressional plaintiffs gleaned from opinions of the Supreme Court. Thereafter, we shall examine what additional considerations, if any, must enter our analysis by virtue of the plaintiff's status as a Member of the United States Senate.
The Supreme Court in Ass'n of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970), established a two-part test for standing: injury (i) in fact and (ii) to an interest "arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Id. at 152-53, 90 S.Ct. at 829. A causation requirement was added in Warth v. Seldin, supra, 442 U.S. at 505, 95 S.Ct. at 2208: the plaintiff must prove that "the asserted injury was the consequence of the defendants' actions, or that prospective relief will remove the harm." This causation requirement was elaborated upon in Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 41-42, 45, 96 S.Ct. 1917, 1925-26, 1927, 48 L.Ed.2d 450 (1976), where the Court observed that "the 'case or controversy' limitation of Art. Ill still requires that a federal court act only to redress injury that fairly can be traced to the challenged action of the defendant, and not injury that results from the independent action of some third party not before the court." Again, however, the Court stated the causation requirement in the alternative, quoting Warth v. Seidin, supra: the causation requirement is satisfied if the plaintiff establishes that the injury was "the consequence of the defendants' actions" or that exercise of the court's remedial powers would redress the injury. 426 U.S. at 45, 96 S.Ct. at 1927. See also Duke Power Co. v. North Carolina Environmental Study Group, Inc., 438 U.S. 59, 74, 98 S.Ct. 2620, 2631, 57 L.Ed.2d 595 (1978). Although recent cases have suggested a slight relaxation of the above tests, see, e. g., Duke Power, supra at 80-81, 98 S.Ct. at 2634, the three requirements stated above represent the maximum burden which a plaintiff must bear to attain standing: establishment of (i) injury-in-fact (ii) to an interest protected by the relevant law (iii) where the injury is caused by defendants' actions or capable of judicial redress.
We think it may be argued plausibly that Senator Riegle has met the above burden. First, assuming that the five Reserve Bank members of the FOMC are officers who must be appointed with the advice and consent of the Senate, Riegle's inability to exercise his right under the Appointments Clause of the Constitution is an injury sufficiently personal to constitute an injury-in-fact. As the Court observed in Warth v. Seidin, supra 442 U.S. at 498-99, 95 S.Ct. at 2204-05, the plaintiff must allege " 'such a personal stake in the outcome of the controversy' as to warrant his invocation of feder al-court jurisdiction and to justify exercise of the court's remedial powers on his behalf." Second, with regard to the causation requirement, we note that the named defendants in this action (the five Reserve Bank members of the FOMC) are not the causes of the injury to Senator Riegle. The five Reserve Bank members were elected by the directors of the Federal Reserve Banks. It is these directors, rather than the five FOMC members in question, who are exercising an appointment power which deprives Senator Riegle of his right to vote on determining the advice and consent of the Senate to the appointments of officers. Thus, the requirement that "the asserted injury was the consequence of the defendants' actions," Warth v. Seldin, supra, has not been met. However, as noted above at page 10, the causation requirement can also be met by showing that "prospective [judicial] relief will remove the harm." Warth v. Seldin, supra. Because it is within the power of this court to redress the alleged injury by holding that 12 U.S.C. § 263(a) is unconstitutional, the causation requirement has been satisfied despite the naming of inappropriate defendants. Third, the interest which Riegle claims was injured by defendants' action (his right to advise and consent to the appointment of officers of the executive branch) is within the zone of interests protected by the Appointments Clause of the Constitution, supra. In short, although there is room for argument as to whether Senator Riegle clearly satisfies all requirements of the most stringent version of the Supreme Court's standing test, we think it reasonable to hold that he has standing.
III.
Appellant's status as a Member of the United States Senate, however, raises separation-of-powers concerns which are best addressed independently of the standing issue. As we observed supra at pages 8-9, the principle that a legislator must lack collegial or "in-house" remedies before this court will confer standing has been a theme of our congressional plaintiff opinions. This principle is a departure from traditional standing analysis because it violates the principle of equality between legislator and private plaintiffs; non-legislator plaintiffs are not routinely denied standing because of the presence of an alternative remedy. Moreover, the inappropriateness of the collegial remedy principle as an aspect of congressional standing analysis has resulted in its inconsistent application in the case law of this court. For example, in Public Citizen v. Sampson, 379 F.Supp. 662 (D.D.C. 1974), aff'd mem., 169 U.S.App.D.C. 301, 515 F.2d 1018 (1975), Harrington v. Bush, supra, 553 F.2d at 212-214, and Reuss v. Balles, supra, 584 F.2d at 468, standing was withheld from congressional plaintiffs in part because their power to vote, i. e., to enact legislation to cure the alleged injury, remained unimpaired. Yet in Kennedy v. Sampson, supra, the court conferred standing on Senator Kennedy to challenge the legality of an attempted pocket veto of a bill for which he had voted. We reasoned that executive impairment of the Senator's past vote had nullified Kennedy's legislative power. Id. at 511 F.2d 436. The Senator had, however, collegial remedies comparable to those which negated standing in the Public Citizen, Harrington, and Reuss cases; Senator Kennedy's power to reintroduce the relevant legislation in the next session of Congress and to vote thereon remained unimpaired. In Goldwater v. Carter, supra, this court's most recent opinion regarding congressional standing, legislator plaintiffs were again granted standing despite the presence of adequate collegial remedies. The plaintiffs in the Goldwater case were a small group of senators and representatives who asserted that President Carter could not terminate the Mutual Defense Treaty with Taiwan without either a two-thirds vote of the Senate or a majority of both houses of Congress. A majority of this court reasoned that the plaintiffs had been "disenfranchised" by the President's action because a requisite number of senators coiild never force an unwilling Senate to vote on a declaration of their right to block rescission of the Taiwan Treaty, nor was there any assurance that the President would heed any Senate action. 617 F.2d at 702-703. Yet collegial remedies existed because Senate resolutions regarding the Treaty were pending at the time. McGowan, at 247 — 48. On appeal the Supreme Court vacated our judgment on the grounds that the plaintiffs did not pose a justiciable question. 444 U.S. 996, 100 S.Ct. 533, 62 L.Ed.2d 428 (1979) (mem.) The Court ignored the standing concept altogether and, in separate opinions by Justices Powell and Rehnquist, neither of which gained a majority of the Court, relied upon the doctrines of ripeness and political question, respectively. Id. at 997,1002,100 S.Ct. at 534-37.
If, as the ultimate disposition of Goldwater v. Carter suggests, the Supreme Court does not believe that the standing doctrine is capable of reflecting the prudential concerns raised by congressional plaintiff suits, this court ought not persist in the attempt to make it do so. The doctrinal difficulties presented by an attempt to reconcile our denial of congressional standing in the Public Citizen, Harrington, and Reuss cases, on the one hand, with our conferral of legislator standing in the Kennedy and Goldwater cases, on the other, suggest that
[t]he use of the standing doctrine to address the separation-of-powers concerns arising when federal legislators sue the executive branch in federal court is fraught with difficulties both in theory and in application. Although it has been the most popular method of judicial self-restraint in these cases, the recent Supreme Court decision in Goldwater, which made no use of the term, suggests that its day may have passed insofar as these lawsuits are concerned.
McGowan, at 256. Moreover, we are convinced that the doctrines of ripeness and political question are no "more elegant in their conception [n]or more satisfying in their execution" than the standing concept as a means of articulating our prudential concerns in congressional plaintiff cases. McGowan, at 256-261. The political question doctrine justifies a finding of nonjusticiability primarily when there is an explicit textual commitment of the controversy to a non-judicial branch of government for resolution. Id. at 258. In the case under review, the Appointments Clause of the Constitution has no such textual commitment of the advice and consent issue exclusively to the legislature. On the contrary, "[n]othing in articles II or III [of the Constitution] suggests that, assuming the court has jurisdiction, anyone but the judicial branch should decide this question." McGowan, at 258. In short, a clear constitutional or statutory prohibition of judicial review will surely not be present in many cases where prudential concerns nevertheless warrant a court in finding it improper for a congressional plaintiff to invoke the judicial power. As to ripeness, one can conceive of instances when executive action has been taken which may create a situation ripe for judicial review (this case, for example), but separation-of-powers concerns justify judicial restraint. Neither the ripeness nor political question doctrine, in summary, is sufficiently catholic in formulation or flexible in application to resolve the prudential issues arising in congressional plaintiff cases.
The most satisfactory means of translating our separation-of-powers concerns into principled decisionmaking is through a doctrine of circumscribed equitable discretion. Where a congressional plaintiff could obtain substantial relief from his fellow legislators through the enactment, repeal, or amendment of a statute, this court should exercise its equitable discretion to dismiss the legislator's action. For the reasons set forth below, this test avoids the problems engendered by the doctrines of standing, political question, and ripeness. The standard would counsel the courts to refrain from hearing cases which represent the most obvious intrusion by the judiciary into the legislative arena: challenges concerning congressional action or inaction regarding legislation. Yet this standard would assure that non-frivolous claims of unconstitutional action which could only be brought by members of Congress will be reviewed on the merits.
The above standard would counsel dismissal of a congressional plaintiff's claim in cases concerning legislative action or inaction because it is in these cases that the plaintiff's dispute appears to be primarily with his fellow legislators. In these circumstances, separation-of-powers concerns are most acute. Judges are presented not with a chance to mediate between two political branches but rather with the possibility of thwarting Congress's will by allowing a plaintiff to circumvent the processes of democratic decisionmaking. "This meddling with the internal decisionmaking processes of one of the political branches extends judicial power beyond the limits inherent in the constitutional scheme for dividing federal power." McGowan, at 251. See, e. g., Harrington v. Bush, supra, 553 F.2d at 214; Holtzman v. Schlesinger, 484 F.2d 1307 (2d Cir. 1973). Thus, where a congressional plaintiff has standing to challenge the actions of those acting pursuant to a statute which could be repealed or amended by his colleagues, or where he alleges an injury which could be substantially cured by legislative action, our standard would counsel judicial restraint. In all such cases, it is unlikely that an unconstitutional action or statute would go unreviewed. While we discourage congressional plaintiffs in such circumstances, it is probable that a private plaintiff could acquire standing to raise the issue of unconstitutionality before a court. Because such a private plaintiff's suit would not raise separation-of-powers concerns, the court would be obliged to reach the merits of the claim. In this case, for example, although prudential considerations warrant the dismissal of Senator Riegle's claim, one can easily conceive of a private plaintiff who could acquire standing to bring a similar claim. A person with significant economic interests in the open securities markets and prime lending rates, e. g., a major corporation, pension fund, or other major investor, might qualify for standing to challenge the constitutionality of a procedure which allegedly permits improperly appointed officials to so substantially influence the monetary policy of the United States, open market trading, and prime rates.
When a congressional plaintiff brings a suit involving circumstances in which legislative redress is not available or a private plaintiff would likely not qualify for standing, the court would be counseled under our standard to hear the case. Thus, such actions as impeachment, expulsion proceedings, impoundment, and certain acts of the executive not subject to direct legislative redress or private party challenge (e. g., the pocket veto in Kennedy v. Sampson, supra) would be subject to judicial review in a congressional plaintiff case. These circumstances (which are not intended to exhaust the possibilities) represent situations where absent congressional plaintiff actions, it is possible that non-frivolous claims of unconstitutional action would go unreviewed by a court.
In short, our standard would counsel dismissal of congressional plaintiff actions only in cases in which (i) the plaintiff lacks standing under the traditional tests, or (ii) the plaintiff has standing but could get legislative redress and a similar action could be brought by a private plaintiff. Nondiscriminatory application of standing principles warrants dismissal of the action in the former circumstance; non-interference in the legislative process counsels dismissal in the latter situation. We would welcome congressional plaintiff actions involving non-frivolous claims of unconstitutional action which, because they could not be brought by a private plaintiff and are not subject to legislative redress, would go unreviewed unless brought by a legislative plaintiff. In this last situation, there are no prudential considerations or separation-of-powers concerns which would outweigh the mandate of the federal courts to "say what the law is". Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60 (1803).
In this case there can be no doubt that Senator Riegle's congressional colleagues are capable of affording him substantial relief. Indeed, a bill which would accomplish Senator Riegle's objective was introduced in Congress as recently as 1980. See note 4 supra. The Senator remains free to attempt to persuade his fellow legislators of the wisdom of his views. His colleagues, if so persuaded, are empowered to redress the alleged inadequacies of 12 U.S.C. § 263(a) of the Act through amending legislation. Senator Riegle's attempt to prohibit voting by the five Reserve Bank members of the FOMC is yet another skirmish in the war over public versus private control of the Committee which has been waged in the legislative arena since 1933. It would be unwise to permit the federal courts to become a higher legislature where a congressman who has failed to persuade his colleagues can always renew the battle.
Assuming that the current procedure for constituting the FOMC may be unconstitutional, we must nevertheless weigh the danger of permitting such a statute to stand against two countervailing concerns: (1) the potential for misuse of the judicial system inherent in hearing a case brought by this particular plaintiff, who, because of his congressional status, has adequate collegial remedies; and (2) the unwarranted interference in the legislative process which judicial action would represent at this time. We conclude that rendering a decision on the merits in this case would pose a greater threat to the constitutional system than would the principled exercise of judicial restraint. As Judge Gesell perceptively recognized, we should not "improperly interfere with the legislative process." 84 F.R.D., supra at 116.
We hold that Senator Riegle has standing to bring this action but exercise our equitable discretion to dismiss the case on the ground that judicial action would improperly interfere with the legislative process.
The judgment dismissing the complaint is
Affirmed.
. See Reuss v. Balles, 189 U.S.App.D.C. 303, 584 F.2d 461, 462-65, cert. denied, 439 U.S. 997, 99 S.Ct. 598, 58 L.Ed.2d 670 (1978) for a description of the Federal Reserve System, open market operations, and the evolution and functions of the FOMC. See also T. Mayer, J. Duesenberry, & R. Aliber, Money, Banking, and the Economy (1981); "A Look Inside Paul Volcker's Fed," N.Y. Times (May 3, 1981), sec. 3, at 1, 8-9.
. Hearings before the House Banking and Currency Committee on H.R. 7230, 75th Cong., 3d Sess. 56 (1938).
. Hearings before the Subcommittee on Domestic Finance of the House Committee on Banking and Currency "The Federal Reserve System After Fifty Years," 88th Cong., 2d Sess. 37 (1964).
.H.R. 7001, after consideration by the Subcommittee on Domestic Monetary Policy, was forwarded as a clean bill, H.R. 8223, to the Committee on Banking on October 1, 1980. The bill died within this Committee.
. By postponing consideration of this court's congressional standing opinions until the latter part of the discussion, we seek to illustrate the conceptual imprecision which results from attempts to achieve through standing analysis the resolution of those separation-of-powers problems peculiar to congressional plaintiff cases. See generally, McGowan, supra; Note, "Congressional Access to the Federal Courts," 90 Harv.L.Rev. 1632 (1977).
. Although it can be argued that the Senate rather than the directors of the Federal Reserve Banks has, through the passage of 12 U.S.C. § 263(a) of the Act, caused Riegle's injury, to conclude therefrom that the Senator would not satisfy the first formulation of the causation test even had he named the Bank directors as defendants would violate the principle of equality between private and congressional plaintiffs in the standing inquiry. When a plaintiff alleges injury by unconstitutional action taken pursuant to a statute, his proper defendants are those acting unconstitutionally under the law (i. e., the Bank directors), and not the legislature which enacted the statute. See generally, Marbury v. Madison, 5 U.S. (1 Cranch) 137, 175-80, 2 L.Ed. 60 (1803).
. This case differs from Reuss v. Balles, supra at note 1, where standing was denied to a congressman who claimed, in part, that improper delegation of responsibilities to the FOMC resulted in usurpation of his powers under Article I, sec. 8 of the Constitution to coin and regulate the value of money, to regulate commerce, and to borrow money on the credit of the United States. Id. 584 F.2d at 467. The court noted in the Reuss case that judicial relief could not possibly cure the alleged injury, for even were the court to require that all FOMC members be presidential appointees, the Committee would retain delegated powers and the congressman's role in setting monetary policy would not be enhanced by the judicial relief he sought. In this case, on the other hand, judicial relief in the form of invalidation of 12 U.S.C. § 263(a) would prevent the directors of the Banks from exercising their allegedly unconstitutional appointment power as well as render invalid the appointments of the five Reserve Bank members of the FOMC. and which shall be established by Law; but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.
. The Appointments Clause of the Constitution, Art. II, sec. 2, cl. 2, reads as follows:
[The President] shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur; and he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, |
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456 U.S. 913 | C. A. 1st Cir. [Probable jurisdiction noted, 454 U. S. 1140.] Motion of Paul W. Johnson, Esquire, to permit Gerald J. Caruso, Esquire, to present oral argument pro hoc vice granted. |
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469 U.S. 1193 | C. A. 4th Cir. Certiorari denied. |
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6 B.T.A. 419 | Milliken :
This proceeding results from the determination by the Commissioner of a deficiency in income taxes for the calendar year 1921, in the amount of $6,016.44. Petitioner claimed as a deduction, in his tax return filed for the year 1921, the amount of $78,584.38, representing a loss. sustained on stock that became worthless in that year. The Commissioner determined that the stock became worthless in 1920 and allowed the deduction for that year. - The sole issue involved in this proceeding is the year in which petitioner sustained the loss.
FINDINGS OF FACT.
Petitioner is a resident of Kemmerer, Wyo. In the year 1918, the Liberty Potash Co. was organized and incorporated, under the laws of the State of Utah, and erected a plant at Green River, Wyo., to extract potash from the leucite deposits in Sweetwater County, Wyoming. Petitioner was approached, during the year 1918, with respect to the purchase of stock in the corporation, it being represented to him that the manufacturing plant would use large quantities of coal, and, as he was the owner of adjacent coal mines, hé believed that an investment in the stock would prove advantageous not only in itself, but also in that the establishment of a manufacturing plant would provide a ready market for his coal. During the years 1918 and 1919, he purchased stock for cash, in the Liberty Potash Co., to the extent of $76,575. In the latter part of 1919, the corporation began active operations and shipped large quantities of potash to the eastern markets. Much of the machinery and equipment had been purchased on the basis of a small cash payment, with title to remain in the seller until full payment had been made. The company did not promptly pay its bills as they became due. In the latter part of 1919 many of the creditors were demanding immediate payment for supplies. Creditors of the company, in 1919, filed a petition in the proper court for the appointment of a receiver. On January 2, 1920, a receiver was appointed for the company. The receiver took over the operation of the plant and ran it until February 26, 1920, upon which date the court, upon petition of the receiver, directed that the plant be shut down and that the company cease operations.
Prior to the issuance of the order to close down the plant, the court had, on February 16, 1920, authorized the receiver to issue receiver's certificates in the amount of $37,500. Petitioner purchased receiver's certificates in the amount of $3,750.
After the receiver was appointed for the Liberty Potash Co., a committee for the protection of creditors and preferred stockholders was formed, held meetings, and took joint action under the name of "Joint Committee of Creditors and Preferred Stockholders of the Liberty Potash Company." Petitioner was a member of this committee.
The committee of creditors and stockholders conducted active negotiations with various parties seeking to interest capital, to the end that the company might be financially rehabilitated. During the years 1919, 1920, and 1921, they were successful in interesting Armour & Co. to the extent that the latter made many experiments and tests at the property of the corporation and only withdrew from active participation in lending financial assistance owing to its own difficulties in that particular. The American Smelting & liefining Co. also made experiments and tests. Finally, under date of May 14, 1921, a contract was entered into between the Liberty Potash Co. and W. W. Crocker, of San Francisco, Calif., by the terms of which the latter agreed to take over the operation of the plant, satisfy the claims of creditors, and give the stockholders a portion of stock in a corporation to be organized.
Stockholders were assessed by the committee during the years 1920 and 1921, in various amounts, on the stock owned by them. Petitioner paid assessments as follows:
April 8, 1920_$760.76
November 21, 1920_,_ 880.38
March 12, 1921_ 600. 00
August 17, 1921_ 368.25
The assessments received were used to defray the expenses of the committee in carrying on its negotiations during the years 1920 and 1921.
In 1919, the Liberty Potash Co. purchased certain boilers under a title-retaining contract. Large sums were due on the boilers, and the parties secured by the title-retaining contract petitioned a proper court, on January 13, 1921, for permission to remove the boilers. Petitioner, on March 25,1921, agreed to purchase the boilers provided the parties would consent to leave the boilers in the plant of the Liberty Potash Co. Petitioner agreed to assume this liability, believing, as he did, that to remove the boilers would result unfavorably in concluding the contract with the Crockers for the taking over of the plant.
In the fall of 1921, W. W. Crocker advised the committee that he did not desire to proceed under his contract. All creditors and stockholders were advised that Crocker had determined not to proceed under the contract. The efforts of the committee were thus made futile.
On October 10, 1921, the receiver, after all negotiations for the rehabilitation of the company by outside interests had failed, petitioned the court for authority to sell at public or private sale all of the property and assets of the Liberty Potash Co. In 1921 the court authorized the sale, basing its approval of the sale on the facts that the Liberty Potash Co. had no cash on hand, owed creditors $489,500, owed receiver's participating certificates $37,500, and had incurred receiver's expenses in the amount of $75,000. The assets of the Liberty Potash Co. were not sufficient to pay the creditors, the receiver's certificates, or the expenses of receivership.
The stock of the petitioner in the Liberty Potash Co. became worthless in the year 1921, and he sustained a loss in that year in the amount of $78,584.38.
Judgment will be entered on 15 days' notice, under Bule 50. |
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63 F.3d 429 | POLITZ, Chief Judge:
Rose Marie Ray appeals the entry of summary judgment in favor of her former employer, Tandem Computers Inc., on her claims of sex and age discrimination and retaliation. We affirm.
Background
Ray, a white female born in 1941, joined Tandem in 1982 as a sales representative. Initially her sales were low, but her performance improved over time, resulting in company recognition and several awards.
In September of 1988 Ray was placed under the supervision of Keith Keister in Tandem's Dallas office. Shortly thereafter, one of Tandem's major clients, MoneyMaker/TransFirst, requested that Ray be removed from its account after she had an argument with one of its representatives. Tandem reassigned the account to John Koe-nigs, a transfer which Ray viewed as sex discrimination notwithstanding the fact that she had recommended another male as a replacement. Ray disputed the reassignment and Tandem's failure to reserve in her favor all of the commissions earned within 90 days of the reassignment. Ray complained to Keister's superiors and then confronted him demanding an explanation. Keister allegedly yelled that he was tired of her going over his head and that she should get out of his office. Keister later apologized for his behavior but criticized Ray for her conduct, including her "crying wolf' about discrimination. Tandem ultimately concluded that Ray was entitled to a 75/25 split of the commissions and corrected the original award.
In June of 1989 Koenigs transferred to California and it became necessary to reassign Tandem's account with the Mobil Oil Company. Keister initially reassigned this account to Dana Alagna, a male younger than Ray, but later reassigned the account to Ray. Keister then escorted Ray to an introductory lunch meeting with a Mobil representative at Hooters, a restaurant/bar known more for the attire of its service personnel than its cuisine. Ray complained to Keister that they should not do business in a bar, and informed his superiors that the atmosphere was inappropriate for female sales representatives.
When Koenigs returned to the Dallas office in 1991, Keister reassigned the Mobil account to him, granting Ray an unprecedented one year reservation of commissions. In place of the Mobil account Tandem reas signed several accounts to Ray. Ray protested the reassignment of the Mobil account but was told by an upper level manager that Koenigs was the "better man for the job" because of his well developed contacts within that organization. Incensed, Ray gave the manager a most vulgar suggestion and stormed out of his office.
While this acrimonious relationship with Tandem was developing, Ray's performance suffered. Her sales dropped significantly in 1989, largely due to the hostile takeover of her largest client. She asked for, and received, a reduction in her quota for 1989, but failed to meet the reduced revenue goal. In each of the next three years, Ray again failed to meet her sales quota, sometimes by nearly one-half.
In February of 1992 Tandem placed Ray on a Performance Improvement Plan or "PIP" for a 90 day period. The plan included revenue goals, established by Ray, and once a week "coaching" meetings with her immediate supervisors. After Ray failed to meet the goals of her PIP, Tandem terminated her employment. Ray subsequently filed the instant suit alleging sex and age discrimination in the terms and conditions of her employment and in Tandem's termination of her employment, retaliation in her placement on the PIP and in her termination, and various state law tort claims not relevant to this appeal.
Tandem moved for summary judgment, offering evidence that its adverse employment actions were based on legitimate nondiscriminatory reasons, namely Ray's lackluster performance. Ray contended that these reasons were pretextual and that various work-related incidents and remarks by her supervisors demonstrated Tandem's discriminatory animus in the challenged actions. The district court ruled that Ray failed to provide sufficient evidence that Tandem's articulated legitimate nondiscriminatory reasons were pretexts for either sex or age discrimination or retaliation. Ray timely appealed.
Analysis
We review the district court's grant of summary judgment de novo. "Summary judgment is proper when no issue of material fact exists and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was proper, all fact questions are viewed in the light most favorable to the non-movant."
Ray claims that Tandem discriminated on the basis of sex in reassigning her accounts to younger males, in denying her promotions and transfers within the company, in denying her requests for increased compensation, in placing her on a PIP, and ultimately in discharging her. For the purposes of today's disposition, we assume, as did the district court, that Ray established a prima facie case of sex discrimination on these allegations. Under the burden shifting framework established in McDonnell Douglas Corp. v. Green and its progeny, this showing requires Tandem to articulate a legitimate nondiscriminatory reason for its adverse employment actions.
In its motion for summary judgment Tandem offered evidence that it based its employment decisions upon neutral performance-related factors. Tandem maintained that smaller accounts were regularly taken from all senior sales representatives, whether male or female, and given to younger sales representatives who were paid lower commissions. This allowed the more senior representatives to focus their efforts and experience on more lucrative and difficult accounts. Tandem maintained that Ray's poor performance from 1989 until her discharge motivated its pay increase and promotion decisions, the decision to place her on the PIP, and its decision to terminate her employment. Finally, Tandem maintained that Ray's request for a transfer to another office was not processed after Ray told her supervisor that she did not want to move. In articulating these reasons, Tandem met its burden of production.
We thus turn to the ultimate question: whether Ray has provided sufficient summary judgment evidence that Tandem discriminated against her on the basis of sex. Ray seeks to establish that Tandem's proffered reasons are pretexts for discrimination by demonstrating discriminatory animus in certain pre-limitations period actions. First, she contends that the prelimitations period assignment of the lucrative Mobil Oil account to Koenigs and a nonprodueing account to her demonstrates Tandem's sexual bias in the workplace. We are not persuaded. The record reflects that Koenigs had significantly better relations with Mobil than did Ray and that she requested the assignment of the questioned account. Her subjective belief that discriminatory intent motivated these actions is insufficient to establish a material question of fact regarding Tandem's motives.
Next, Ray contends that her supervisor's scheduling of a lunch meeting at Hooters restaurant is evidence of Tandem's sexually discriminatory animus in the challenged actions. Although we agree that scheduling a business meeting for mixed company at Hooters was grossly unprofessional and may be relevant to a supervisor's motives in employment actions, it is not sufficient to support a discrimination verdict absent some proof of a causal connection between the incident and the adverse employment action.
Ray also contends that this discriminatory environment is further demonstrated by Keister's alleged statement four years prior to her discharge that he was going to get rid of "the cunt in the office." While the repeated use of this crude and contumelious appellation might well support a finding of discriminatory animus, a single comment, made several years prior to the challenged conduct, is a stray remark too remote in time to support an inference of sex discrimination in later employment actions. Ray also points to Tandem supervisor Jerry Earle's statement that Koenigs was the "better man for the job" when explaining to Ray why the Mobil account was being reassigned. The record reflects that Tandem had an ample basis to conclude that Koenigs was better suited for the position because of his strong contacts and extensive experience with key Mobil personnel. Earle's articulation of this fact using the common but clearly dated phrase "better man for the job" does not support a finding of discriminatory animus in the challenged actions.
Ray's remaining evidence of discrimination is equally unpersuasive. Although she complains about Tandem's initial denial of a reservation of commissions following her removal from the MoneyMaker account and Tandem's later placement of her on a PIP, she fails to controvert Tandem's evidence that other similarly situated employees, both male and female, were treated the same. The district court's entry of summary judgment for Tandem on this claim must be affirmed.
Ray next contends that the district court erred in entering summary judgment for Tandem on her age discrimination claims. Again we assume, arguendo, that Ray established a prima facie case of discrimination. Ray fails, however, to demonstrate that Tandem's articulated reasons for its actions were pretextual. Although Ray makes several conclusionary assertions that her supervisors showed preference to younger sales representatives, she provides no evidence of this preference other than her own assertions that older workers are routinely "forced out" by Tandem. We conclude that Ray's bald assertions of age discrimination are inadequate to permit a finding that proscribed discrimination motivated Tandem's actions against her.
Finally, Ray contends that she provided sufficient evidence to support a finding that Tandem retaliated against her because of her complaints of sex discrimination when it placed her on a PIP and terminated her employment. Ray has made out a sufficient prima facie case of retaliation; she filed a sex discrimination complaint with Tandem's human resources department and was placed on a PIP shortly thereafter. As with other Title VII claims, the establishment of a prima facie case of retaliation shifts the burden to Tandem to articulate a legitimate nonretaliatory reason for its adverse actions. If done, Ray must then prove that Tandem's reasons are pretextual and that "but for" her protected activities, she would not have been subject to the adverse actions.
Tandem justified its placement of Ray on a PIP on the basis that she had failed to meet her sales quota in every year since 1989. We therefore turn to Rays evidence to determine whether a jury could find that "but for" her complaints of discrimination, she would not have been placed on the PIP or ultimately discharged. Ray relies principally upon an alleged statement by Keister to Ray shortly after she had been placed on the PIP to the effect that "if you had not gone crying to your friends in Cupertino (Tandem's headquarters), you would not be in the position you are in." She characterizes this statement as an admission that her complaints resulted in her placement on the PIP.
Ray accords too much significance to this oblique statement. The record reflects that Ray made numerous complaints to Keister's supervisors listing a multitude of perceived problems explaining her poor performance, only one of which was discrimination. When considered in light of this history, this single vague statement is susceptible of several interpretations, most of which are innocuous. We have held that such statements are insufficient to avoid summary judgment on discrimination claims. We now likewise hold with respect to claims of retaliation. This conclusion is supported by Tandem's history of tolerance for Ray's claims of discrimination since they began in 1983.
Ray also points to a 1988 statement by Keister where he observed that Ray frequently "cried wolf' regarding discrimination. Even if we construe this observation as evincing disdain for Ray's exercise of her protected rights, this remark occurred almost four years prior to the alleged retaliation and is too remote to support a finding that her complaints of discrimination were the "but for" cause of her placement on the PIP or her termination. The same is true for Keister's alleged remark in 1988 that he wanted "to get rid of Rosie." We also note that each of the remarks Ray relies on to demonstrate pretext for retaliation is attributable to Keister. Tandem offered uncontro-verted evidence that Keister was not solely responsible for the decision to place Ray on a PIP and that he had no input into the decision to terminate her. Under these circumstances, we perforce conclude that Ray failed to demonstrate that Tandem's proffered reasons for its adverse employment actions were pretexts for illegal retaliation or that "but for" her complaints of discrimination, she would not have suffered these adverse employment actions.
The judgment appealed is AFFIRMED.
. In late 1991, Ray filed a formal, internal complaint alleging sex, but not age, discrimination in her treatment by the company since 1988. The company investigated the charge, found no evidence of discrimination and so informed Ray in January of 1992.
. Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq.
. Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et seq.
. Both Title VII and the ADEA prohibit an employer from retaliating against employees who exercise their rights under the respective act. See 42 U.S.C. § 2000e-3(a); 29 U.S.C. § 623(d).
. The district court ruled that Ray's claims based on incidents occurring prior to August 22, 1991 were timed-barred. See 42 U.S.C. § 2000e-5(e); 29 U.S.C. § 626(d)(2). Ray does not appeal this ruling.'
. Moore v. Eli Lilly Co., 990 F.2d 812, 815 (5th Cir.) (citations omitted), cert. denied, - U.S. -, 114 S.Ct. 467, 126 L.Ed.2d 419 (1993).
. See Davis v. Chevron U.S.A. Inc., 14 F.3d 1082 (5th Cir.1994) (outlining the prima facie case for discrimination claims).
. 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973).
. Tandem also notes that the employees against which Ray seeks to compare salaries held different titles and job responsibilities and were paid on a different scale.
. St. Mary's Honor Center v. Hicks, — U.S. —, —, 113 S.Ct. 2742, 2748, 125 L.Ed.2d 407 (1993) ("By producing evidence (whether ultimately persuasive or not) of nondiscriminatory reasons, petitioners sustained their burden of production.").
. Armstrong v. City of Dallas, 997 F.2d 62 (5th Cir.1993).
. We note that time-barred acts can be used as evidence of discriminatory intent in later actions. See Cortes v. Maxus Exploration Co., 977 F.2d 195 (5th Cir.1992) (citing cases).
. Molnar v. Ebasco Constructors, Inc., 986 F.2d 115 (5th Cir.1993).
. We underscore that Ray expressly disavows raising any hostile environment or sexual harassment claims.
. Moore. Ray also points to an incident on a company golf outing where another female Tandem employee attempted to discourage Ray from playing golf. This incident suggests only that another Tandem employee was mistaken in assuming that Ray did not play golf; it does not support an inference of sex discrimination.
. Brown v. East Mississippi Elec. Power Ass'n, 989 F.2d 858 (5th Cir.1993) (concluding that routine use of the word "nigger" was direct evidence of discrimination).
. See Armendariz v. Pinkerton Tobacco Co., 58 F.3d 144 (5th Cir.1995).
. See Guthrie v. Tifco Industries, 941 F.2d 374 (5th Cir.1991), cert. denied, 503 U.S. 908, 112 S.Ct. 1267, 117 L.Ed.2d 495 (1992). See also Neuren v. Adduci, Mastriani, Meeks & Schill, 43 F.3d 1507 (D.C.Cir.1995) (holding use of term "bitch" in employee evaluation not to support finding of discriminatory animus when considered in conjunction with evidence indicating that evaluation was based on gender-neutral factors).
. Ray's claims of discrimination are undermined by her statement that Keister was an evenhanded harasser, treating all of his employees poorly. Title VII does not exist to punish poor management skills; rather, it exists to eliminate certain types of bias in the workplace. See Bienkowski v. American Airlines, Inc., 851 F.2d 1503 (5th Cir.1988).
. We apply the same analysis to Ray's age claim that we applied to her sex discrimination claim. See Burns v. Texas City Refining, Inc., 890 F.2d 747 (5th Cir.1989).
. Molnar.
. To establish a prima facie case of retaliation, Ray must demonstrate: "(1) that she [] engaged in an activity protected by Title VII, (2) that an adverse employment action occurred; and (3) that there was a causal connection between the participation in the protected activity and the adverse employment action." EEOC v. J.M. Huber Corp., 927 F.2d 1322, 1326 (5th Cir.1991) (quoting McMillan v. Rust College, Inc., 710 F.2d 1112, 1116 (5th Cir.1983)).
. See Payne v. McLemore's Wholesale & Retail Stores, 654 F.2d 1130 n. 13 (5th Cir.1981) (allowing inference of causation based on employer's knowledge of activities and temporal proximity of this knowledge and the adverse action), cert. denied, 455 U.S. 1000, 102 S.Ct. 1630, 71 L.Ed.2d 866 (1982).
. Shirley v. Chrysler First, Inc., 970 F.2d 39 (5th Cir.1992); Jack v. Texaco Research Center, 743 F.2d 1129 (5th Cir.1984).
. See Guthrie.
. See Grizzle v. Travelers Health Network, Inc., 14 F.3d 261 (5th Cir.1994). Ray admits that she had complained to Tandem about Keister as early as 1989 and sought to have him fired on numerous occasions.
. See Waggoner v. City of Garland, Tex., 987 F.2d 1160 (5th Cir.1993) (finding statements too remote to support finding of discrimination under ADEA); Armendariz.
. Cf. McMillan (upholding summary judgment for employer on retaliation claims despite open criticism by employer of employee's discrimination complaints when clear that employee would have suffered adverse action in any event). |
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230 Ct. Cl. 1063 | On April 16, 1982, the court awarded attorneys' fees to Marvin J. Sonosky, on behalf of himself and all other contract attorneys having an interest in the fee, in the amount of $62,300. |
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409 F.3d 1356 | RADER, Circuit Judge.
The United States Court of Appeals for Veterans Claims (Veterans Court) denied the applications of John R. Briddell and Mabel A. Akers (collectively, appellants) for awards of attorney fees and expenses under the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412 (2000). Both applications were denied on the ground that applicants were not "prevailing parties." Akers v. Principi, 18 Vet.App. 430 (Table) (2003); Briddell v. Principi, 16 Vet.App. 267 (2002). Because neither appellant is a "prevailing party" under the criteria established by Buckhannon Board & Care Home, Inc. v. West Virginia Dep't of Health & Human Res., 532 U.S. 598, 121 S.Ct. 1835, 149 L.Ed.2d 855, and by Vaughn v. Principi, 336 F.3d 1351 (Fed.Cir.2003), this court affirms both decisions.
I.
Mr. Briddell's claim arose when the Board of Veterans Appeals (BVA), on March 18, 1999, denied, inter alia, an increase in the ratings for his shoulder, back, and knee disabilities. On September 28, 2000, the Secretary of Veterans Affairs filed a motion asking for remand of Mr. Briddell's shoulder claim "on the grounds that the Board had failed to consider, under Fenderson v. West, 12 Vet.App. 119 (1999), whether a staged rating was appropriate and to discuss the provisions of 38 C.F.R. § 4.71a." Briddell, 16 Vet.App. at 268. While the Secretary's motion was pending, Congress enacted the Veterans Claims Assistance Act (VCAA), 38 U.S.C. § 5100. The Veterans Court then ordered the Secretary to show cause to avoid remand of Mr. Briddell's claims for consideration in the light of the VCAA. Id. at 269. The Secretary instead made an unopposed motion for vacatur and remand, which the Veterans Court granted. See Briddell v. Gober, U.S. Vet.App. No. 99-1198, slip op. at 1-2 (Dec. 21, 2000). The Veterans Court did not act on the Secretary's motion of September 28, 2000. Mr. Briddell now argues that the Secretary's motion of September 28, 2000 was a "concession of .BVA error" which, together with the remand that was subsequently — but not consequently — ordered by the Veterans Court, makes him a "prevailing party" under EAJA.
II..
Ms. Akers sought waiver of a debt to the VA. This debt arose from her simultaneous collection of a VA pension and Social Security disability benefits. Ms. Akers received the VA pension in 1991 by virtue of her deceased husband's service during the Korean war; the Social Security disability benefits as a result of a malicious beating she received shortly after applying for the pension. The VA contended that her Social Security benefits disqualified her from receiving the VA pension. Therefore, the VA requested that she return to the VA the entire sum she had received as a pension. The VA regional office and the BVA denied the request for waiver. Later, Ms. Akers appealed the denial to the Veterans Court. While her appeal was pending, the Veterans Court decided, in a different case, that the BVA could consider methods other than waiver to forgive a debt to the VA. See Gordon v. Principi, 15 Vet.App. 124 (2001). As a result, Ms. Akers and the VA jointly filed a motion for remand, which was granted on November 2, 2001. Ms. Akers then applied for an EAJA award, predicated on the remand.
Because both the Briddell and Akers cases concern the basis for remand, and in turn whether that remand justifies "prevailing party" status, this court addresses both appeals in this opinion.
III.
These cases require this court to determine whether the Veterans Court applied the proper legal standard in determining "prevailing party" status under EAJA. This court reviews an interpretation of EAJA without deference. Jones v. Brown, 41 F.3d 634, 637 (Fed.Cir.1994).
This court follows the Supreme Court's decision in Buckhannon in deciding prevailing party status under EAJA. See Brickwood Contractors, Inc. v. United States, 288 F.3d 1371, 1379 (Fed.Cir.2002). In Buckhannon, the Supreme Court rejected the catalyst theory and set forth standards for a party to prevail under attorney fees statutes. Under the catalyst theory, a party "prevails" because the lawsuit brought about a voluntary change in the defendant's conduct. See Buckhannon, 532 U.S. at 601, 121 S.Ct. 1835. After examining its own precedents and statutory language, the Court found the catalyst theory insufficient because "[i]t allows an award where there is no judicially sanctioned change in the legal relationship of the parties." Id. at 605, 121 S.Ct. 1835. The Court dismissed the catalyst theory because it would "authorize! ] federal courts to award attorney's fees to a plaintiff who, by simply filing a nonfrivo-lous but nonetheless potentially meritless lawsuit (it will never be determined), has reached the 'sought-after destination' without obtaining any judicial relief." Id. at 606, 121 S.Ct. 1835.
The Court then proceeded to construe the phrase "prevailing party." Finding that the term has a "clear meaning," id. at 607, 121 S.Ct. 1835, the Court stated that this language permits "the interim award of counsel fees only when a party has prevailed on the merits of at least some of his claims." Id. at 603, 121 S.Ct. 1835 (quoting Hanrahan v. Hampton, 446 U.S. 754, 758, 100 S.Ct. 1987, 64 L.Ed.2d 670 (1980) (per curiam)) (emphasis added). To qualify as "prevailing," then, a party must have obtained'a court-ordered consent decree based on a settlement, an enforceable judgment on the merits, or an award of even "nominal" damages. See Buckhannon, 532 U.S. at 603-04, 121 S.Ct. 1835.
The Buckhannon case thus sets forth several standards to identify a prevailing party. Prevailing party status requires some judicial action that changes the legal relationship between the parties on the merits of the claim. In other words, to prevail, a party must have received a judicial imprimatur tantamount to a judgment in favor of that party on the merits of the original claim. See id. at 605, 121 S.Ct. 1835. That judicial action could take the form of a consent decree settling the claim in favor of the plaintiff, a judgment on the merits, or an award of damages.
IV.
Mr. Briddell contends that he prevailed in his action because the Secretary of Veterans Affairs filed a motion admitting procedural error that asked for remand of Mr. Briddell's claim. The Veterans Court, however, remanded solely on the basis of the intervening passage of the VCAA, not the Secretary's September 2000 motion. Briddell, 16 Vet.App. at 273. Because the remand did not reach the merits of Mr. Briddell's case, the remand also produced no change in the legal relationship between Mr. Briddell and the Secretary. Moreover, the court gave no judicial approval to any alteration in that legal relationship. The parties simply agreed to a procedural remand. Thus, the remand in Mr. Briddell's case does not qualify him as a "prevailing party" under the standards in Buckhannon, because it provides "only the opportunity for further adjudication." Vaughn, 336 F.3d at 1356.
Ms. Akers, like Mr. Briddell, contends that she .was the "prevailing party" in her action because the Veterans Court granted a motion to remand. In her case, the intervening Gordon decision offered new possibilities for settling her debt. On that basis alone, the Veterans Court granted a joint motion to remand. The Veterans Court properly held that the remand accorded Ms. Akers no judgment on the merits of her case. Akers, 18 Vet.App. 430 As in Mr. Briddell's case, Ms. Akers received only the opportunity for further adjudication. Again, under the Buckhan-non standards, the remand by the Veterans Court does not qualify her as a "prevailing party."
To determine "prevailing party" status in these cases, the Veterans Court had no need or occasion to go beyond the standards set forth by Buckhannon. The remand in Mr. Briddell's case did not involve the merits, but rather arose from a change in law. The Secretary accordingly consented to a remand. The need for a remand neither resulted from nor led to any immediate judicial action on the merits. Thus, the remand did not place a judicial imprimatur on any decision concerning the merits of Mr. Briddell's claim.
Ms. Akers also did not present any merits discussion in her application for a remand. Instead, the parties jointly requested a remand based on a new possibility for settlement that arose from the Gordon case. Once again, the court's ac tion in granting the joint motion for remand afforded no judicial imprimatur on a change in the legal relationship between Ms. Akers and the Secretary. The court granted the remand with no consideration of the merits of Ms. Akers's ease.
Neither of these cases meet the Buck-hannon standards for a "prevailing party" as also described by this court in Vaughn. In Vaughn, the BVA had denied the request of Mr. Vaughn's wife for survivor benefits. The survivor appealed the denial to the Veterans Court. While her appeal before that court was pending, Congress enacted the VCAA. Citing the need for re-adjudication in light of the VCAA, the parties filed a joint motion for remand. After the Veterans Court consented to the remand request, Mrs. Vaughn filed an EAJA application for attorney fees. On appeal, this court denied that request, stating that "the correct legal standard, as articulated in Buckhannon, is that a party must receive 'at least some relief on the merits of his claim.' " Vaughn, 336 F.3d at 1356-57 (citations omitted). To qualify as prevailing under EAJA, Mrs. Vaughn would have had to have received some judgment on the merits, or a consent decree, or a "similar resultf]." See id. at 1357. Mr. Briddell, like Mrs. Vaughn, has asked for attorney fees under EAJA because his case was remanded for re-adjudication in light of new law, the VCAA. As in Vaughn, Mr. Briddell received no judgment on the merits or similar result. Ms. Akers has asked for attorney fees under EAJA because her case was remanded for consideration of new grounds made evident in Gordon. As in Vaughn, Ms. Akers received no judgment on the merits, or any similar result. Under the rule of Vaughn, neither appellant "prevailed." A boxer thrown out of the ring and then allowed back in to continue the fight has not prevailed; similarly, neither appellant here meets the requirements for "prevailing party" status.
CONCLUSION
For the foregoing reasons, the Veterans Court holdings that appellants are not "prevailing parties" under EAJA are affirmed.
COSTS
Each party shall bear its own costs.
AFFIRMED. |
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22 Cust. Ct. 345 | Opinion by
Ekwall, J.
It was stipulated that the issue herein is the same in all material respects as that presented in Mamary Bros., Inc. v. United States (21 Cust. Ct. 135, C. D. 1142). In accordance therewith it was held that the currency of the invoices should be converted at the buying rate in the New York market at noon on the day of exportation (the "free" rate of exchange for pounds sterling), as certified by the Federal Reserve bank and set forth by the collector on each of the entries involved. The protests were sustained to this extent. |
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467 U.S. 1240 | Super. Ct. N. J., App. Div. Certiorari denied. |
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398 U.S. App. D.C. 397 | Opinion for the Court filed PER CURIAM.
Concurring opinion filed by Circuit Judge BROWN.
PER CURIAM:
Pursuant to the Clean Air Act ("CAA"), the Environmental Protection Agency enacted twin rules in 2010 setting emissions standards for portland cement facilities— one under a section called National Emission Standards for Hazardous Air Pollutants (NESHAP), 42 U.S.C. § 7412(a)(4), the second under a section called New Source Performance Standards (NSPS), id. § 7411. Petitioners, Portland Cement Association and other cement manufacturers ("PCA"), argue that both rules violate the CAA and are arbitrary and capricious. A consortium of environmental groups including the Sierra Club ("Environmental Petitioners") filed their own petition, arguing that EPA abused its discretion by declining to include greenhouse gas emissions standards in its NSPS rule.
For the reasons set forth below, we agree that EPA acted arbitrarily when it promulgated the final NESHAP rule and therefore grant PCA's petition for review with respect to EPA's denial of reconsideration on that issue. We also stay the NESHAP standards for clinker storage piles pending reconsideration by EPA. We deny PCA's petitions with respect to all other issues relating to NESHAP and NSPS, and dismiss Environmental Petitioners' petition for lack of jurisdiction.
I
Portland cement, a fine gray powder used to make construction-grade concrete, is produced by combining raw materials in a kiln and heating the mixture to produce a substance called "clinker," which is then cooled and ground into powder. This kiln firing process causes the airborne emission of particulate matter ("PM"), as well as a number of other dangerous chemicals. Once produced, the clinker is stored in piles which may also continue to emit some hazardous chemicals.
There are three basic types of portland cement kilns. The first, called "long wet" or "long dry" process kilns, are the least efficient. These kilns, which tend to be older, simply heat raw materials as they pass through a large rotating cylinder. The second type of kiln, called a "preheat-er," is more modern and efficient. Preheater kilns preheat the raw materials by first passing them through a tower filled with hot exhaust gases. Finally, the most modern and efficient kilns, preheater/precalciner kilns, are equipped with both pre heater towers and a combustion vessel which heats raw materials at a high temperature before they reach the core of the kiln, removing moisture and undesirable compounds. Ultimately, the type of kiln directly affects the amount of uncontrolled pollutants emitted. For example, long wet and long dry process kilns emit between eight to ten times the amount of sulfur dioxide as preheater/precalciner kilns.
Two separate sections of the CAA, 42 U.S.C. § 7401 et seq., require EPA to promulgate emissions standards for "stationary sources" of pollution such as cement kilns. The first, NESHAP, requires EPA to set emissions standards for both new and existing sources. Id. § 7412(a)(4); (a)(10). The second, NSPS, requires EPA to set emissions standards for new and newly-modified sources. Id. § 7411. (A "modified" source, for the purposes of the CAA, is a source that has undergone a physical or operational change "which increases the amount of any air pollutant emitted by such source, or which results in the emission of any air pollutant not previously emitted." Id. § 7411(a)(4)). Thus, although NESHAP and NSPS overlap as to regulation of new sources, NESHAP alone governs the regulation of existing sources, and NSPS alone governs the regulation of modified sources.
Pursuant to CAA Section 112, EPA sets NESHAP emissions limits in a two-stage process. First, EPA sets what it calls a "floor." For new sources, the floor is equal to the amount of emissions reduction "achieved in practice by the best controlled similar source." 42 U.S.C. § 7412(d)(3). For existing sources, the floor equals the amount of emissions reduction "achieved [on average] by the best performing 12 percent of the existing sources (for which the Administrator has emissions information)" in the source category. Id. If the category contains fewer than 30 sources, the floor is to be set based on the amount of emissions reduction achieved by the best performing five sources for which the Administrator has emissions information. Id. NESHAP emissions standards "shall not be less stringent than" this floor. Id. Second, EPA may go "beyond-the-floor" and set a more stringent standard if, taking cost and other factors into account, it determines that such a standard would be "achievable." Id. § 7412(d)(2); see also Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855, 857-58 (D.C.Cir.2001) (describing the two-step regulatory framework and noting that "floors" apply "without regard to either costs or . other factors," but that EPA may set limits "beyond-the-floor" if it takes cost and other factors into account). The promulgated NESHAP standard is known as the "maximum achievable control technology" or "MACT."
Under NSPS, however, EPA is required to set standards for emissions that "reflect ] the degree of emission limitation achievable through the application of the best system of emission reduction." 42 U.S.C. § 7411(a)(1). In contrast to NESHAP's two-stage process, under which EPA is prohibited from considering cost, achievability, or countervailing considerations at step one, NSPS requires EPA take into account the "cost of achieving" emissions reductions, as well as health, environmental, and energy considerations. Id. § 7411(a)(1).
In June 2008, EPA initiated two rule-making procedures to revise emissions standards for the portland cement industry: one under NESHAP and one under NSPS. Following a comment period, these rules were finalized in September 2010. In the NESHAP rule, EPA set standards for new sources and existing sources for emissions of PM, mercury, hydrochloric acid, and hydrocarbons. EPA did not go "beyond-the-floor," so these standards are instead equal to the respective floors. Because the rulemaking took place entirely at the first NESHAP step, EPA did not— because it could not at that step — take into account cost or other considerations.
In the NSPS rule, EPA, for the first time, set standards for both new and modified sources for emissions of nitrogen oxide and sulfur dioxide. In addition, EPA revised its existing NSPS emissions standard for PM, setting a limit of 0.01 pounds of PM emitted per ton of clinker produced. EPA concluded that this revised PM standard was achievable if kilns installed a particular type of pollution control technology: fabric filters with membrane bags.
EPA declined to include emissions standards for carbon dioxide or other greenhouse gases in its final NSPS rule. Explaining its decision to omit such standards, EPA noted that because it had proposed no specific emissions standard for greenhouse gases in the proposed regulations, "promulgating such a standard without providing opportunity to comment on it would . violate the norms of notice and comment rulemaking." 75 Fed.Reg. 54,970, 54,996 (Sept. 9, 2010). Moreover, although EPA's "preliminary evaluation" indicated "it may be appropriate for the Agency to set a standard of performance for greenhouse gases," EPA determined that it did "not yet have adequate information about greenhouse gas emissions to set a standard." Id. at 54,996-97. EPA then identified specific types of pertinent information it was lacking, such as information about greenhouse gas emissions from cement plants and site-specific factors that could affect the performance of emissions controls. Id. at 54,997. EPA concluded by stating that it was "working towards a proposal for greenhouse gas standards," which it would promulgate after receiving additional information from cement facilities. Id.
PCA sought administrative reconsideration of both the NESHAP and NSPS rules. EPA denied PCA's petitions for reconsideration on all but two issues. First, EPA granted PCA's petition for reconsideration of emissions regulations for outdoor clinker storage piles, holding that "petitioners are correct that the Agency did not give sufficient notice of what [clinker storage pile] standards might be." 76 Fed.Reg. 28,318, 28,325 (May 17, 2011). Second, EPA granted PCA's petition for reconsideration of the NSPS PM emissions standards for modified sources. Although PCA asked EPA to stay both standards pending reconsideration, EPA declined to do so.
PCA subsequently filed the instant petitions for review of both the rules themselves and EPA's denials of reconsideration. Environmental Petitioners filed their own petition challenging EPA's decision not to include greenhouse gas emissions standards in its final NSPS rule. PCA intervened on behalf of EPA on this issue.
II
While EPA was establishing the NESHAP standards at issue in this case, it was simultaneously developing a definition of commercial and industrial solid waste incinerators ("CISWI"). This definition would create a separate category of pollutant sources subject to emissions standards distinct from NESHAP. This rulemaking process, which EPA described as "relevant" to NESHAP, would impact the NESHAP rulemaking because some cement kilns "combust secondary materials [like solid waste] as alternative fuels." Such kilns would be subject to standards under the CISWI rules rather than under the NESHAP rules, since the two regimes are mutually exclusive. 74 Fed.Reg. 21,- 136, 21,138 (May 6, 2009); see also 42 U.S.C. § 7429(h)(2) (requiring exclusivity); Natural Res. Def. Council v. EPA, 489 F.3d 1250, 1260-61 (D.C.Cir.2007) (same). EPA proposed the CISWI definition ten months after the close of the NESHAP comment period but three months before the final NESHAP rule was issued. The CISWI definition was enacted six months after the NESHAP rule became final.
PCA argues that EPA improperly ignored this ongoing CISWI process when it set the NESHAP standards. EPA realized the CISWI definition could potentially impact the NESHAP rule, since under the proposed definition, EPA could reclassify close to a third of all cement kilns out of NESHAP and into CISWI. (In fact, PCA notes that some of the best performing sources central to the setting of the NESHAP floor are excised from the NESHAP universe altogether under the new CISWI rule.) But EPA was unconcerned that its NESHAP floor-setting calculations might include sources that actually would not be subject to the NESHAP standard once the rules were completed. Instead of treating the two rules as truly interdependent efforts and acknowledging their close correlation, EPA let each run its own course regardless of the collateral impact. PCA argues that it both violated the CAA and was arbitrary and capricious for EPA to have set the NESHAP standard on the premise that all kilns would be subject to NESHAP while at the same time modifying the dataset to change that premise. We agree it is arbitrary and capricious.
Before reaching the merits, we must decide whether we have jurisdiction. PCA cannot challenge the rule directly. Before an objection can be raised in this Court, it must be "raised with reasonable specificity during the period for public comment." 42 U.S.C. § 7607(d)(7)(B). PCA did not comment on this issue in the NESHAP rulemaking, so even if we agreed with PCA on the merits, we could not vacate the NESHAP rule. However, "[i]f the person raising an objection can demonstrate . that it was impracticable to raise [an] objection within [the comment period] or if the grounds for [the] objection arose after the period for public comment ., the Administrator shall convene a proceeding for reconsideration of the rule." Id. If reconsideration is denied, review of the Administrator's refusal is available "in the United States court of appeals for the appropriate circuit." Id. Although it is a very close question, we are satisfied PCA could not have reasonably anticipated the extent to which EPA would base the final NESHAP standard on data from kilns it would soon reclassify into a different — and mutually exclusive— regulatory regime. Because EPA refused to reconsider the rule, we have jurisdiction to review that refusal.
In its proposed, rule, EPA acknowledged the CISWI rulemaking was ongoing and noted some unknown number of kilns might ultimately be classified as CISWI sources. Because EPA did not yet know what shape the CISWI rule would take, however, EPA said it would continue to assume no kilns were CISWI sources "until the solid waste definition . is promulgated." 74 Fed.Reg. 21,186, 21,138 (May 6, 2009). These statements left open a couple of possibilities. First, the re-sorting of some kilns into CISWI was, while likely, not inevitable. Id. ("EPA therefore cannot reliably determine at this time if the secondary materials combusted by cement kilns are to be classified as solid wastes."); see also Office of Air Quality Planning and Standards, Development of the MACT Floors for the Proposed NESHAP for Portland Cement 4 (Apr. 15, 2009) ("Pending the outcome of other rulemakings, there is a possibility that some of the kilns currently in the Portland Cement NESH-AP source category will at some point become subject to the [CISWI] regulation, and thus no longer subject to this regulation.") (emphases added). Second, EPA's conditional language — "until the solid waste definition . is promulgated" — suggested that, should any kilns ultimately fall under the CISWI definition, EPA would adjust the NESHAP rule accordingly.
While we certainly require some degree of foresight on the part of commenters, we do not require telepathy. We should be especially reluctant to require advocates for affected industries and groups to anticipate every contingency. To hold otherwise would encourage strategic vagueness on the part of agencies and overly defensive, excessive commentary on the part of interested parties seeking to preserve all possible options for appeal. Neither response well serves the administrative process. Whatever warning EPA offered regarding CISWI was too vague and noncommittal to trigger a response from PCA. Indeed, as far as EPA did hint at its next steps, it suggested it would reevaluate the NESHAP standards after the CISWI definition was promulgated.
Having determined that PCA is not jurisdictionally barred from petitioning EPA for reconsideration and that it may therefore seek review in this Court of EPA's denial, we proceed to the merits of its objection. In none of EPA's proposals, final rules, or briefs in this Court has EPA attempted to defend the principle that, in the face of a final and promulgated CISWI definition, data from CISWI kilns could now be considered in setting NESHAP standards. And rightly so: it would certainly be arbitrary, as well as a violation of the CAA itself, for EPA to set one standard based on data already placed in another source category in light of the mutual exclusivity of the standards themselves. See North Carolina v. EPA, 531 F.3d 896, 930 (D.C.Cir.2008) (noting that it is "entirely arbitrary" to base standards on "irrelevant factors"); 42 U.S.C. § 7412(d)(1), (d)(3) (requiring EPA to set NESHAP standards based on emissions reductions achieved by similar sources within the same NESHAP category).
EPA instead defends the otherwise indefensible by claiming the unique circumstances of this parallel rulemaking left no other choice. As EPA said in the final NESHAP rule, because it "cannot prejudge the outcome of the recently proposed [CISWI] rulemaking" and because it could only "bas[e] all determinations as to source classification on the emissions information now available," it simply had .to include "all portland cement kilns as . subject to regulation under [NESHAP]." 75 Fed.Reg. 54,970, 54,972 (Sept. 9, 2010). EPA made the same argument here: a substantial number of sources subject to being reclassified as CISWI sources were included in the NESHAP calculation be cause EPA had not yet decided the precise parameters of its definition.
Basing its decision on a premise the agency itself has already planned to disrupt is arbitrary and capricious. Reasoned decisionmaking requires an agency to "examine the relevant data and articulate a satisfactory explanation for its action[s]." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). The impending definition of an undeniably related source category is clearly a "relevant factor[ ]" or an "important aspect of the problem" that must be considered. Id. Indeed, EPA stated as much in its proposed rule, describing the CISWI rulemaking as "relevant" to the NESHAP proceeding. 74 Fed.Reg. 21,-136, 21,138 (May 6, 2009).
Since agencies "have an obligation to deal with newly acquired evidence in some reasonable fashion," Catawba Cnty. v. EPA 571 F.3d 20, 45 (D.C.Cir.2009), or to "reexamine" their approaches "if a significant factual predicate" changes, Bechtel v. FCC, 957 F.2d 873, 881 (D.C.Cir.1992), an agency must have a similar obligation to acknowledge and account for a changed regulatory posture the agency creates— especially when the change impacts a contemporaneous and closely related rule-making. See Office of Commc'n of the United Church of Christ v. FCC, 707 F.2d 1413, 1441-2 (D.C.Cir.1983) (finding it "seriously disturbing" and "almost beyond belief' that an agency would take rule-making action undercutting another "concurrent" rulemaking process); see also Gen. Chem. Corp. v. United States, 817 F.2d 844, 846 (D.C.Cir.1987) (finding agency action arbitrary and capricious because it was "internally inconsistent and inadequately explained"). All EPA did to satisfy this obligation with regard to the NESHAP rule was decide that it would do nothing "so long as no final definition of solid waste changed [the] status [of cement kilns] prior to promulgation of the NESHAP." EPA Br. 25 (emphasis added). This is not a "satisfactory explanation," State Farm, 463 U.S. at 43, 103 S.Ct. 2856, or a "hard look at the salient problems," Panhandle E. Pipe Line Co. v. FERC, 890 F.2d 435, 439 (D.C.Cir.1989). It is nothing more than a determination that EPA would not address the problem unless it happened to appear at an inconvenient time — an eventuality over which EPA had full control. The refrain that EPA must promulgate rules based on the information it currently possesses simply cannot excuse its reliance on that information when its own process is about to render it irrelevant.
EPA makes two arguments in response, neither of which addresses this basic principle. First, EPA insists that it would be absurd to require revised calculations every time the content of a source category changes, i.e., when a source closes or a new source is built. EPA Br. 26. But no such absurdity is involved here. No actions by the regulated community changed the dataset relevant to EPA's calculations; EPA's definition did that. And EPA undermined the premise of its calculations at the same time it was enshrining those calculations in a final rule — without accounting for the impact of the change. It is not absurd to require that an agency's right hand take account of what its left hand is doing. In fact, this is nothing new: this Court has required EPA to recalculate standards because of changes to category definitions when "the populations of units subject to [exclusive] rules will change substantially." Natural Res. Def. Council, 489 F.3d at 1261.
Second, EPA asserts it could not delay finalizing the NESHAP rule until after it promulgated a definition of solid waste. EPA insists such a delay would have been harmful to ah' quality and health. EPA Br. 27. Perhaps. But reasoned decisionmaking is not a dispensable part of the administrative machine that can be blithely discarded even in pursuit of a laudable regulatory goal. "The importance of reasoned decisionmaking in an agency action cannot be overemphasized. When an agency . is vested with discretion to impose restrictions on an entity's freedom to conduct its business, the agency must exercise that discretion in a well-reasoned, consistent, and evenhanded manner." Greyhound Corp. v. ICC, 668 F.2d 1354, 1359 (D.C.Cir.1981). EPA also notes that it was facing a NESHAP deadline pursuant to a settlement agreement with PCA, but of course, it could have begun the CISWI process much sooner. After all, EPA had been working on the NESHAP rule for ten years, and so it should have come as no surprise that the CISWI definition would play a critical role in setting that standard. It takes a certain amount of chutzpah for EPA to claim it had no time to be careful — after ten years of work on NESHAP — when it waited to propose a CISWI definition until after the NESHAP comment period had closed. It takes even more chutzpah to repeat that claim after the district court has already called the argument "silly" in a closely analogous context. Am. Petroleum Inst. v. Johnson, 541 F.Supp.2d 165, 185 (D.D.C.2008) ("The fact that the proposed rule had been on the shelf for ten years is no excuse for failing to consider a directly relevant" intervening legal change "decided before the final rule was promulgated.").
Simply put, there was no CISWI definition when the NESHAP rule was finalized because, even though EPA knew it would be critical to the NESHAP process, EPA did not even propose it until after the comment period for the NESH-AP rules had closed. Far from justifying EPA's conduct, the unique circumstances of this parallel rulemaking are what doom it: when an agency is simultaneously in control of both defining the universe of relevant data and of applying that data to a given rulemaking, it cannot allow itself to do the latter-without having already done the former. If an agency can say its failure to decide what data are relevant justifies its decision to just consider all data, arbitrary and capricious review would' be pointless. EPA has put the cart before the horse, and there is no justification, least of all an agency's own timing choices, for such a cavalier and unscientific attitude.
EPA points out that the final CISWI definition — promulgated a mere six months after NESHAP — resulted in about 23 kilns being reclassified, and that removing these kilns from the NESHAP calculations does little to relax the ultimate standards. In fact, one emissions standard would even become more stringent after removing the CISWI kilns from the data set. We have no reason to doubt that conclusion; perhaps PCA would be better off had they not brought this issue to our attention. But we are not interested in whether the rule becomes more or less stringent upon reconsideration. Our province is simply to ensure that agencies do not act arbitrarily or capriciously, 5 U.S.C. § 706(2)(A), and the magnitude or direction of the effect of an agency's arbitrariness does not excuse it.
PCA also argues EPA violated the CAA when it premised the NESHAP standards on bare emissions data rather than on data that specifically isolated the effect of technology by controlling for variations in input quality. We considered and rejected this very argument quite recently. In Sierra Club v. EPA, 479 F.3d 875, 883 (D.C.Cir.2007), we declined to read the "the Clean Air Act's command that it assess the emission 'control' or 'limitation' 'achieved' [as] referfring] to the deliberate steps kiln operators take to reduce emissions rather than to the 'happenstance' of being located near cleaner clay." Instead, we held that EPA must do exactly what it did here. Id. PCA's attempt to dismiss this holding as dicta is unavailing since the question of how to account for raw material quality — in that case, "clay type" — was squarely presented. Id. at 882-83.
We have carefully considered PCA's other objections to the NESHAP rule and are unconvinced by them. PCA's argument that EPA's pollutant-by-pollutant approach to setting NESHAP floors violates the CAA is barred because it was not raised within sixty days of EPA's first use of that approach, Medical Waste Inst. v. EPA, 645 F.3d 420, 427 (D.C.Cir.2011), and their argument that EPA impermissibly reset NESHAP floors rather than revise existing floors is based on a flawed reading of the CAA. Though EPA must review and revise standards "no less often than every eight years," 42 U.S.C. § 7412(d)(6), nothing prohibits EPA from reassessing its standards more often.
PCA also argues that the adoption of a continuously-monitored standard ("CEMS") rather than a sampling standard for particulate matter emissions was not a "logical outgrowth" of the proposed rule, Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 543 (D.C.Cir.1983), but this is not true. EPA sought comment on a CEMS requirement in its first proposal, and PCA even commented on it. 74 Fed.Reg. 21,136, 21,-157 (May 6, 2009). Moreover, any individual hardship resulting from the CEMS requirement is mitigated by the fact that a kiln may employ "alternative monitoring" if it demonstrates the "technical or economic infeasibility" of installing CEMS. 40 C.F.R. § 63.8(f)(4)(ii). Similarly, the proposed NESHAP rule provided adequate notice that EPA was considering modifying emissions standards for startup and shutdown periods, and PCA commented on that as well. 74 Fed.Reg. 21,136, 21,162 (May 6, 2009). PCA's final claims of arbitrariness also fail since EPA adequately explained its reasons for, among other things, not setting separate hydrocarbon standards for raw material dryers. Nothing in the CAA or our caselaw requires EPA to collect additional data before making that decision. See Sierra Club v. EPA, 167 F.3d 658, 662 (D.C.Cir.1999) (noting that EPA "typically has wide latitude in determining the extent of data-gathering necessary to solve a problem").
Because EPA's treatment of the CI-SWI-NESHAP interaction was arbitrary and capricious, we grant the petition for review with respect to EPA's denial of reconsideration, and remand for further action consistent with this decision. We decline to stay the NESHAP rule pending reconsideration. The CAA does not mandate a stay, 42 U.S.C. § 7607(d)(7)(B), and because it is unlikely that significant changes will be made to the standards upon reconsideration, we see little chance of PCA suffering irreparable harm.
We will, however, enter a stay of the NESHAP standards applicable to clinker storage piles. EPA has conceded that it "did not give sufficient notice" of those standards and has granted PCA's request for reconsideration, but it denied PCA's request for a stay. 76 Fed.Reg. 28,318, 28,325-26 (May 17, 2011). Because EPA will now be receiving comments for the first time, the standards could likely change substantially. Thus, industry should not have to build expensive new containment structures until the standard is finally determined.
III
Turning to PCA's challenge to the NSPS rulemaking, we begin by addressing its contention that for all regulated pollutants, EPA failed to "consider . the range of relevant variables that may affect emissions in different plants." PCA Opening Br. 33 (quoting Nat'l Lime Ass'n v. EPA, 627 F.2d 416, 433 (D.C.Cir.1980)). PCA argues that EPA failed adequately to consider the impact of its NSPS standards on kilns of older design that, if modified, could become subject to NSPS. Instead, PCA argues that EPA illegitimately focused solely on kilns with preheater/precalciner technology.
This argument fails on its own terms because contrary to PCA's contention, EPA demonstrated how all regulated kilns could meet NSPS standards. EPA based its PM and sulfur dioxide limits "on control technologies that can be applied to any kiln type and achieve the same control levels that would be expected with a new kiln at similar costs." 75 Fed.Reg. 54,970, 54,995-96 (Sept. 9, 2010) (emphasis added). PCA nowhere even attempts to dispute this point. As to nitrous oxide, EPA did note that it would be more difficult for older kilns to meet its final emissions limits, and indeed "investigated whether [it] should set a different [nitrogen oxide] emissions limit for modified kilns." Id. at 54,996. But based on detailed studies, EPA ultimately determined that older kilns could avoid increasing their nitrogen oxide emissions — and thus, remain in compliance with NSPS standards — by utilizing a variety of different controls. Id. See ASARCO, Inc. v. EPA 578 F.2d 319, 328-29 (D.C.Cir.1978) ("[T]he operator of an existing facility can make any alterations he wishes in the facility without becoming subject to the NSPS as long as the level of emissions from the altered facility does not increase.... The record does not indicate why more flexibility than this is necessary or even appropriate.") (emphasis added). We thus reject as unfounded PCA's contention that EPA failed to consider the effects of its standards on older kilns.
It is true, as PCA notes, that EPA expected the NSPS limits would primarily apply to preheater/precalciner kilns and focused its rulemaking accordingly — for example, by using data primarily derived from preheater/precalciner kilns. See 73 Fed.Reg. 34,072, 34,075 (June 16, 2008) ("EPA believes that the limits proposed today are appropriate for new, modified, and reconstructed kilns since the preheat-er/precalciner design will be utilized in each of these instances."). But this was an eminently reasonable decision based on the facts EPA had before it. As EPA explained, industry statistics show that virtually all older kilns are being replaced by newer preheater/precalciner units. Id. Indeed, during the past 20 years only two long wet or long dry kilns were modified, rather than replaced, and both were modified to include preheater/precalciner technology. Id. At its core, then, PCA's argument is that EPA abused its discretion by failing adequately to consider the effects of its standards on an entirely conjectural species of kiln: a newly modified long wet or long dry kiln without preheater/precalciner technology. But given the universal movement in the portland cement industry towards adoption of preheater/precalciner technology, we have no basis for concluding that EPA's decision to focus primarily — but not exclusively — on preheater/precalciner kilns was arbitrary or capricious. 42 U.S.C. § 7607(d)(9)(A).
We next turn to PCA's various challenges to the final PM limits. PCA first argues that in promulgating the PM NSPS EPA improperly "incorporated the entirely distinct new source PM limit from the NESHAP rulemaking in lieu of undertaking the analysis and considering the factors required by [NSPS]." PCA Opening Br. 20. In particular, PCA contends that EPA adopted the 0.01 pound/ton NESHAP PM standard as the NSPS PM standard without "consideration of the cost or other non-air impacts that [NSPS] requires." PCA Opening Br. 22.
This assertion is incorrect. Although both the NSPS and NESHAP rulemaking resulted in a PM emissions limit of 0.01 pounds per ton, EPA arrived at that limit using two different mechanisms. Under NESHAP, EPA set the PM emissions limit at 0.01 pounds per ton because that was the level achieved by the best-performing existing source. 75 Fed.Reg. 54,970, 54,-987 (Sept. 9, 2010). By contrast, under NSPS, EPA determined that the "best system of emission reduction," 42 U.S.C. § 7411(a)(1), for PM was "well-operated and maintained fabric filters" with membrane bags. 73 Fed.Reg. 34,072, 34,076-77 (June 16, 2008). Expressly considering the cost of these filters, EPA's proposed NSPS rule determined that the technology was "well within the range of cost-effectiveness . accepted as reasonable for other [non cement kiln] stationary sources." Id. at 34,077. And once EPA determined that fabric filter technology could result in greater emissions reductions than previously thought, its final rule stated the self-evident proposition that fabric filter "technology would now be evaluated as more cost-effective than at proposal, since greater PM reductions will result from its use." 75 Fed.Reg. 54,970, 54,995 (Sept. 9, 2010) (emphasis added). To be sure, the final rule also noted that kilns would have to install fabric filter technology to comply with NESHAP, concluding that the parallel NSPS rule would therefore have no additional cost. Id. But this statement hardly means that EPA "adopted" the NESHAP standards, nor does it somehow invalidate EPA's earlier cost analysis of fabric filter technology. We therefore reject PCA's contention that EPA failed to consider cost when promulgating its NSPS standard. Nor do we find merit in PCA's novel argument — unsupported by any authority — that EPA was required to "reanalyze costs . in promulgating the final PM limit," and thus improperly relied on the cost analysis it had previously conducted in the proposed rule. PCA Reply Br. 5. Neither law nor logic requires EPA to spend its time and resources conducting a perfunctory cost analysis when doing so would duplicate information the agency already has before it.
Similarly, we have little trouble rejecting PCA's argument that EPA failed to consider the other countervailing factors required by NSPS: "nonair quality healthf,] environmental impact and energy," 42 U.S.C. § 7411(a)(1). EPA's final order included sections surveying the PM standard's 1) water quality impact, 2) solid waste impact, 3) secondary environmental impacts, 4) energy impacts, and 5) cost impacts. 75 Fed.Reg. 54,970, 55,022-23 (Sept. 9, 2010). Although PCA correctly notes that these sections are commingled with discussion of various NESHAP regulations, nothing in the Clean Air Act requires a segmented discussion of NSPS factors. Instead, the statute requires only that EPA "tak[e] into account" health, environmental, and energy impacts. 42 U.S.C. § 7411(a)(1). The final order's discussion of these factors shows that EPA did just that. The fact that the final order also discussed the health, environmental, and energy impacts of NESHAP regulations is immaterial.
Next, we address PCA's claims that we should vacate the PM standards "because EPA did not give . notice of its methodology for setting the NSPS limit, and be cause the final PM limit is not a logical outgrowth of the one EPA proposed." PCA Opening Br. 29. This notice-based argument rests primarily on the premise that EPA set NSPS standards by "incorporating] . the new source NESHAP limit for PM as the NSPS." PCA Opening Br. 26. Having already rejected that argument, we have little difficulty rejecting PCA's parallel claims that EPA "never provided notice that it would adopt the new source NESHAP limit for PM as the NSPS limit." PCA Opening Br. at 30.
But we do see merit in one of PCA's notice-based claims: that EPA failed to provide notice that it would require continuous monitoring of PM emissions from cement kilns. EPA proposed requiring kilns to demonstrate compliance with the PM standard by conducting periodic stack tests. The only mention of continuous monitoring in the proposed rule came when EPA proposed providing an "option" for plants to demonstrate compliance with the PM standard by installing a CEMS. 73 Fed.Reg. 34,072, 34,082 (June 16, 2008). In its final NSPS rule, however, EPA required plants to demonstrate compliance with the standard through continuous emissions monitoring. PCA contends that this "change in limit and fundamental approach" contravenes this court's directive that a proposed rule must "describe the range of alternatives being considered with reasonable specificity." PCA Opening Br. 29 (quoting Horsehead Res. Dev. Inc. v. Browner, 16 F.3d 1246, 1268 (D.C.Cir.1994) (per curiam) (quotation omitted)). We agree. The fact that EPA proposed providing kilns with a CEMS option hardly placed PCA on notice that kilns could be required to demonstrate NSPS compliance through continuous emissions monitoring. On this point, we find it instructive to compare EPA's proposed NSPS rule to its proposed NESH-AP rule. As here, EPA's final NESHAP rule required kilns to demonstrate compliance with a PM standard through periodic stack tests. But unlike here, the proposed NESHAP rule expressly invited comment on whether to require CEMS monitoring. 74 Fed.Reg. 21,136, 21,157 (May 6, 2009) ("[W]e are specifically soliciting comment on making the use of a PM CEMS a requirement") (emphasis added).
But although EPA gave inadequate notice that it might adopt a CEMS requirement under NSPS, this error was harmless precisely because the proposed NESHAP rule put PCA on notice that EPA might require kilns to install CEMS systems. During NESHAP rulemaking, PCA commented on the propriety of requiring CEMS. In response, EPA made changes to the way in which CEMS limits were calculated from raw stack test data for both NESHAP and NSPS rules. 75 Fed.Reg. 54,970, 54,975 (Sept. 9, 2010). Thus, PCA had an opportunity to comment on the potential for a required CEMS system — and did so. We "may invalidate [a] rale" for "alleged procedural errors" only if "there is a substantial likelihood that the rule would have been significantly changed if such errors had not been made." 42 U.S.C. § 7607(d)(8). PCA does not argue that repeating the comments it made in response to the proposed NESHAP rulemaking would have resulted in a "substantial likelihood" that NSPS standards would have "significantly changed," and we fail to see how this could have been the case. Given EPA's harmless procedural error, we thus have no basis for invalidating the NSPS standard.
Finally, PCA contends that having granted reconsideration on the final PM standard as applied to modified sources, EPA abused its discretion by refusing to stay the implementation of that standard. But because the fabric filter cost analysis EPA conducted — which applied to both new and modified kilns — was sufficient to support the 0.01 lb/ton PM standard, supra p. 191, we think it entirely unlikely that EPA will impose a different standard for modified sources on reconsideration. As a result, and as with the NESHAP standards, we see little chance that PCA will suffer irreparable harm. We therefore deny PCA's request for a stay. See 42 U.S.C. § 7607(d)(7)(B).
IV
This brings us to Environmental Petitioners' challenge to EPA's failure to adopt greenhouse gas emissions standards as part of its portland cement NSPS. We agree with PCA intervenors that we lack jurisdiction to hear this challenge. The Clean Air Act gives us jurisdiction to review only "final" agency actions, 42 U.S.C. § 7607(b), and there was nothing "final" in EPA's decision to collect additional information before proposing greenhouse emissions standards.
EPA's final NSPS rule states that: 1) EPA did "not yet have adequate information about [greenhouse gas] emissions sufficient to set a standard," but 2) "based on our initial evaluation it appears that there are cost-effective control strategies . that would provide an appropriate basis for establishing a standard of performance for [greenhouse gas] emissions." 75 Fed. Reg. 54,970, 54,996-97 (Sept. 9, 2010). EPA, the rule explains, "is working towards a proposal for [greenhouse gas] standards from Portland cement facilities" — a proposal it will promulgate after it receives data necessary "to develop proposed standards." Id. at 54,997. We fail to understand how explicitly tentative and conditional statements — which expressed certainty only as to EPA's decision to continue the process of studying greenhouse gases — could possibly be considered "final." Indeed, as the final rule states, "[t]his is not the end of the matter." Id. at 54,996.
As an alternative, Environmental Petitioners attempt to recast the final rule as a reviewable final decision to defer performance of a duty pursuant to Section 7607(b)(2). This section provides: "Where a final decision by the Administrator defers performance of any nondiscretionary statutory action to a later time, any person may challenge the deferral...." 42 U.S.C. § 7607(b)(2) (emphasis added). As environmental petitioners point out, EPA undertook the instant NSPS rulemaking pursuant to its nondiscretionary duty to "at least every 8 years, review and, if appropriate, revise [NSPS] standards." See Environmental Pets' Reply Br. 7 (quoting 42 U.S.C. § 7411(b)(1)(B)). Arguing that this same section confers upon EPA a nondiscretionary duty to "complete [any] revision within the same period," Environmental Petitioners contend that EPA's decision to collect additional data on greenhouse gas emissions constitutes a reviewable "final decision" to defer performance of that duty. Id. at 7-8.
We are unconvinced. First, it is unclear whether EPA has such a duty with respect to pollutants it has not previously regulated, but in any event, nothing in the NSPS rule indicates that EPA has made a final decision to defer performance of its duty to "review and revise" standards. Quite to the contrary: EPA began the process of reviewing its NSPS standards for greenhouse gases, decided it needed further information, and is now continuing that process of review. This might be a different case if EPA had stated that it was deferring consideration of greenhouse gas emissions standards until its next mandatory NSPS review. But EPA did no such thing. Instead, it reviewed the information it had, decided its data was insuffi cient, and continued "working towards a proposal for [greenhouse gas] standards from Portland cement facilities." 75 Fed. Reg. 54,970, 54,997 (Sept. 9, 2010). This court has never considered an agency decision to continue the rulemaking process to be a "final agency action," nor has any court held that we have jurisdiction to review such a decision under Section 7607(b)(2). But see Maine v. Thomas, 874 F.2d 883 (1st Cir.1989) (decided prior to promulgation of 7607(b)(2)).
At various points in their brief, Environmental Petitioners also appear to recast their petition as a challenge to EPA's "refus[al] to act," see, e.g., Environmental Pets' Opening Br. 35, noting that since promulgation of its NSPS rule, EPA "has taken no steps towards either information collection or regulating cement plants' [greenhouse gas] emissions." Id. at 20. But if environmental petitioners are indeed challenging a "refusal to act," they should have brought their case in the district court. The Clean Air Act provides that any individual may file suit alleging that EPA has failed "to perform any act or duty . which is not discretionary with the Administrator," 42 U.S.C. § 7604(a)(2), and that "[t]he district courts shall have jurisdiction" over these suits, id. § 7604(a) (emphasis added).
Because we lack statutory jurisdiction over environmental petitioners' claims, we have no need to consider PCA's alternative argument that environmental petitioners lack Article III standing. See Nat'l Ass'n of Home Builders v. Norton, 415 F.3d 8, 12 n. 4 (D.C.Cir.2005).
V
For the aforementioned reasons, we grant PCA's petition for review with respect to EPA's denial of reconsideration of the NESHAP rule and remand the rule for further action, deny PCA's petition for review with respect to the NSPS rule, and dismiss Environmental Petitioners' petition for lack of jurisdiction. All of the standards will remain in place except for the NESHAP standards applicable to clinker storage piles, which are stayed pending reconsideration. We nonetheless urge EPA to act expeditiously on remand. See 42 U.S.C. § 7604(a) ("any person may commence a civil action" in district court "to compel . agency action unreasonably delayed"); NRDC v. EPA 902 F.2d 962, 985 (D.C.Cir.1990) ("the Clean Air Act's citizen suit [provision] . may in appropriate circumstances provide a check against indefinite stalling by EPA.").
So ordered.
. The final CISWI definition ultimately reclassified fewer sources. PCA and EPA disagree as to the number: EPA's most recent estimate is that closer to 16 percent were reclassified. 76 Fed.Reg. 28,318, 28,322 (May 17, 2011).
. EPA did not violate the provision of the CAA stating that "no solid waste incineration unit subject to performance standards under [CI-SWI] shall be subject to standards under [NESHAP]," 42 U.S.C. § 7429(h)(2), because no unit has actually been subjected to both standards. The provisions requiring EPA to set NESHAP standards based on emissions reductions achieved by similar sources within the same NESHAP category, id. § 7412(d)(1), (d)(3), on the other hand, come closer to being implicated here. But at the time EPA set the NESHAP standards, all of the sources it examined were within the same category. While we find EPA's ostrich-like approach to its recategorization efforts was arbitrary, it did not violate the text of the CAA. |
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545 U.S. 1140 | Commw. Ct. Pa. Certiorari denied. |
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519 U.S. 826 | C. A. 11th Cir. Certiorari denied. |
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56 Cust. Ct. 866 | Opinion by
Foed, J.
In accordance with stipulation of counsel that the merchandise consists of echo-sounding equipment or essential parts thereof dedicated to use therewith, in chief value of metal, similar in all material respects to those the subject of Kelvin & Hughes America Corp. v. United States (53 Cust. Ct. 21, C.D. 2468), the claim of the plaintiff was sustained. |
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513 U.S. 889 | App. Div., Sup. Ct. N. Y., 4th Jud. Dept. Certiorari denied. |
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347 U.S. 922 | United States Court of Appeals for the District of Columbia Circuit. Certiorari denied. |
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277 U.S. App. D.C. 297 | Opinion for the court filed by Circuit Judge MIKVA.
Opinion concurring in part and dissenting in part filed by Circuit Judge BUCKLEY.
MIKVA, Circuit Judge:
This attorney's fee dispute presents the question whether the district court abused its discretion in awarding an enhancement of attorney's fees and costs based on the risk of nonpayment (i.e., the contingent nature of the case) and the quality of representation. Following Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986) ("Delaware Valley I "), and Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987) ("Delaware Valley II"), we affirm the district court's award.
I. Introduction
This case involves the fees and costs of counsel for a class of black employees at the Government Printing Office ("GPO"), whose legal odyssey has stretched over the better part of two decades. In 1973, the employees ("plaintiffs") filed an action alleging racial discrimination in hiring, training, and promotion practices, in violation of Title VII of the Civil Rights Act of 1964, which had been extended in 1973 to cover federal workers, see 42 U.S.C. § 2000e-16. In 1977, the district court granted plaintiffs' motion for summary judgment on all claims of liability under Title VII, see McKenzie v. McCormick, 425 F.Supp. 137, 142 (D.D.C.1977), and four years later, the district court issued its remedial decree, see McKenzie v. Saylor, 508 F.Supp. 641, 647-59 (D.D.C.1981). On appeal, this court affirmed the district court in large part, see McKenzie v. Sawyer, 684 F.2d 62, 80 (D.C.Cir.1982).
Although the suit was both a class and an individual action, only the claims of counsel for the class are involved in this appeal. Class counsel include the Institute for Public Representation ("Institute"), part of the clinical education program of the Georgetown University Law Center; the Washington Lawyers' Committee for Civil Rights Under Law ("Lawyers' Committee"), a non-profit, tax-exempt organization affiliated with the National Lawyers Committee for Civil Rights; and the law firm of Hogan & Hartson. Class counsel (collectively "applicants") first filed a petition requesting attorney's fees and costs in April 1981, pursuant to 42 U.S.C. § 2000e-5(k), 2000e-16(d). Applicants were granted an interim award covering the period from the outset of the case until January 30, 1981, the date of the final relief order. See McKenzie v. Kennickell, 645 F.Supp. 437, 441 (D.D.C.1986). After some considerable delay, the government eventually complied with the district court's order, see McKenzie v. Kennickell, 669 F.Supp. 529, 530-31, 535 (D.D.C.1987).
Following the resolution of the litigation on the merits, applicants again petitioned the district court for an interim award of attorney's fees (for services since 1981) pending a final determination of fees. On August 10, 1987, the district court ordered the government to identify an amount that in its opinion represented the "irreducible minimum lodestar fee" to which applicants were entitled, see 669 F.Supp. at 531. Under this order, the government ultimately paid applicants some $200,000, see 669 F.Supp. at 536.
On April 8, 1988, the district court approved a final stipulation in which the government agreed to a lodestar fee of $740,000 that covered the total fee claims of counsel for the individual plaintiffs and counsel handling all fee claims, and the lodestar claims of counsel for the class. This sum was paid on April 28, 1988. See McKenzie v. Kennickell, 684 F.Supp. 1097, 1098 (D.D.C.1988).
On April 18, 1988, the district judge granted counsel for the class two enhancements of the lodestar award: a 50 percent enhancement to reflect the contingent nature of the claim and the resulting risk of nonpayment, and a 25 percent enhancement on the basis of quality of representation. See McKenzie, 684 F.Supp. at 1099. The government appeals these enhancements.
II. Discussion
A. The Contingency Enhancement
In Delaware Valley II, the Supreme Court specifically addressed the legal standard for contingency enhancements under fee-shifting statutes. A majority of the Court reversed a 100 percent risk enhancement before it, and a plurality of four contended that contingency enhancements "should be reserved for exceptional cases." 107 S.Ct. at 3088. But Justice O'Connor, in a controlling opinion, concluded that "Congress did not intend to foreclose consideration of contingency in setting a reasonable fee under fee-shifting provisions," 107 S.Ct. at 3089 (O'Connor, J., concurring in part and concurring in the judgment). Four Justices in dissent agreed, see 107 S.Ct. at 3091 (Blackmun, J., dissenting, joined by Brennan, Marshall, and Stevens, JJ.).
Justice O'Connor's opinion in Delaware Valley II is currently the effective legal standard for contingency enhancements, see Weisberg v. U.S. Dep't of Justice, 848 F.2d 1265, 1272 (D.C.Cir.1988); Thompson v. Kennickell, 836 F.2d 616, 621 (D.C.Cir. 1988). Her test was twofold. First, she urged lower courts to view contingency cases "as a class" and "treat a determination of how a particular market compensates for contingency as controlling future cases involving the same market." 107 S.Ct. at 3090. Justice O'Connor recommended that "courts strive for consistency from one fee determination to the next." Id. She emphasized that "at all times a fee applicant bears the burden of proving the degree to which the relevant market compensates for contingency." Id. Second, Justice O'Connor agreed with the plurality that "no enhancement for risk is appropriate unless the applicant can establish that without an adjustment for risk the prevailing party 'would have faced substantial difficulties in finding counsel in the local or other relevant market.' " Id. at 3091 (quoting plurality opinion, 107 S.Ct. at 3089).
Justice O'Connor's opinion must be understood with reference to the overall pro cess by which attorney's fees are awarded, because she recognized that contingency is but one factor that a district court may consider in setting a "reasonable fee," 107 S.Ct. at 3089. As the Supreme Court recently reaffirmed, "reasonableness" is the overarching standard by which a fee award is to be measured, and it is to be determined by a district court "in light of all the circumstances" of a case. Blanchard v. Bergeron, — U.S.-, 109 S.Ct. 939, 944, 103 L.Ed.2d 67 (1989). A district court judge has broad discretion to examine the relevant factors in each individual case; "[i]t is central to the awarding of attorney's fees under § 1988 that the district court judge, in his or her good judgment, make the assessment of what is a reasonable fee under the circumstances of the case." Blanchard, 109 S.Ct. at 946. This means that the size of the contingency enhancement may vary from case to case; a district court may often find it useful to set the contingency enhancement last, after other enhancements have been made, so that the total fees awarded do not exceed what is "reasonable."
We note that in some areas Congress has seen fit to prescribe a particular percentage of the recovery as a cap on recoverable fees, see, e.g., 42 U.S.C. § 406(b)(1) (establishing 25 percent of recovery as ceiling in social security disability cases). This parallels the market practice whereby fees are often set as a percentage (say, 33 percent) of the recovery. Such a rule cannot be rigidly applied under fee-shifting statutes, because of the frequent inapplicability of "the private market model of contingency compensation," 107 S.Ct. at 3090 (O'Con-nor, J., concurring in part and concurring in the judgment), and because under most statutes the opponent rather than the client pays the fee. See Rodriquez v. Bowen, 865 F.2d 739 (6th Cir.1989) (en banc). Still, a district court often may wish to compare the fee award to the overall recovery, in order to ensure that the market practice is not exceeded and the fee remains reasonable.
With these principles in mind, we turn to the issues presented by the case sub judice.
1. Whether Applicants Are Eligible for an Enhancement
At the outset, the government maintains that the Institute and the Lawyers' Committee are not eligible for enhancements for the risk of nonpayment. The government contends that because these organizations do not accept fee-paying clients, they did not incur any opportunity cost in representing the plaintiffs in this action. They did not, in other words, fore-go any work for which they would have been compensated on an hourly basis. Furthermore, neither accepted the case on the expectation of a contingency enhancement; indeed, their raison d'etre is to assist litigants who cannot afford to pay fees. See New York Ass'n for Retarded Children v. Carey, 711 F.2d 1136, 1154 (2d Cir.1983) (holding unreasonable the addition of contingency bonuses to fee awards to non-profit law offices).
The Supreme Court, however, has stressed that the computation of fees does not vary according to the identity of the recipient. "Congress did not intend the calculation of the awards to vary depending on whether the plaintiff was represented by private counsel or by a nonprofit legal services organization." Blum v. Stenson, 465 U.S. 886, 894, 104 S.Ct. 1541, 1547, 79 L.Ed.2d 891 (1984); see also id. at 904, 104 S.Ct. at 1551 (noting that risk enhancements are available for "nonprofit legal service organizations and private attorneys" on an equal basis) (Brennan, J., concurring). Indeed, as the Supreme Court recently opined, the fact "[t]hat a nonprofit legal services organization may contractually have agreed not to charge any fee of a civil rights plaintiff does not preclude the award of a reasonable fee to a prevailing party in a § 1983 action, calculated in the usual way." Blanchard v. Bergeron, 109 S.Ct. 939, 945 (1989) (emphasis in original). If this were not so, the Delaware II Court need not have reached the question of the appropriate standards for contingency enhancements generally, because it could have found that non-profit law firms were ineligible for such enhancements. See 107 S.Ct. at 3088, n. 10 (noting that the attorneys for Delaware Valley were part of a non-profit, tax-exempt law corporation, but expressly declining to pass on argument— not aired in the lower courts — that such a firm, by its very nature, is ineligible for a risk-of-not-prevailing enhancement); 107 S.Ct. at 3096 (Blackmun, J., dissenting) (rejecting the argument that non-profits are ineligible for contingency enhancements as an "attempt to do indirectly what the Court refused to do directly in Blum")-, see also Blanchard, 109 S.Ct. at 945.
In addition, this circuit has rejected the notion that the identity of counsel should play any role in the determination of fees. See Save Our Cumberland Mountains, Inc. v. Hodel, 857 F.2d 1516, 1521-24 (D.C. Cir.1988) (en banc). Far from constituting "economic relief" or a "windfall" to nonprofit firms, the equal availability of contingency enhancements creates a level playing field. If enhancements were available to for-profit firms, but not to non-profits, then over time the chronic imbalance would encourage legal resources to move to the for-profit sector where the risk of nonpayment could be fully compensated. This would inhibit the Institute and Lawyers' Committee from bringing contingent Title VII cases and subvert the congressional intent that fee-shifting statutes should benefit non-profits. See New York Gaslight Club, Inc. v. Carey, 447 U.S. 54, 70 n. 9, 100 S.Ct. 2024, 2034 n. 9, 64 L.Ed.2d 723 (1980).
We conclude that applicants are eligible for a contingency enhancement.
2. The First Prong: Whether "The Relevant Market" Adds a Premium for Contingency
We proceed to the first prong of Justice O'Connor's test: whether the relevant legal market adds a premium for contingency. The term "relevant market" is a source of disagreement between the parties. Applicants urge that it be defined as including all contingent cases in the contemporary Washington, D.C., legal market; the government contends that the phrase should be interpreted to encompass only Title VII and related cases at the time plaintiffs brought their suit.
We hold that the "relevant market" in this case is composed of all contingency claims in the District of Columbia, particularly other types of complex federal litigation, at the time the case was undertaken by counsel (rather than at the time that fees were awarded). Throughout her concurrence, Justice O'Connor referred to "the class" of contingency cases, without suggesting that the class should be restricted according to the subject matter of the plaintiff's complaint. See, e.g., 107 S.Ct. at 3090. "It does not appear that Justice O'Connor contemplated that the class of cases to be studied be anything less than all contingency cases in a given geographic market Blum v. Witco Chemical Corp., 829 F.2d 367, 381 (3d Cir.1987); see also Blum v. Stenson, 465 U.S. 886, 890-91, 892 & n. 5, 104 S.Ct. 1541, 1544-45 & n. 5, 79 L.Ed.2d 891 (1984) (referring to "the prevailing market rate" for attorneys of comparable experience, skill, and reputation) (emphasis added). This definition of "relevant market" is consistent with congressional intent, see S.Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976), U.S.Code Cong. & Admin.News 1976, p. 5913 ("It is intended that the amount of fees awarded under [section 1988] be governed by the same standards which prevail in other types of equally complex Federal litigation, such as antitrust cases[,] and not be reduced because the rights involved may be nonpecuniary in nature.").
We also hold that the "relevant market" is that which existed at the time the case was undertaken by counsel and the suit commenced, rather than the market existing at the time that fees were awarded. Congress has instructed that fees be set according to "what is traditional with attorneys compensated by a fee-paying client." S.Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976), U.S.Code Cong. & Admin.News 1976, p. 5913; see also H.R.Rep. No. 1558, 94th Cong., 2d Sess. 9 (1976). In private markets, the fee is negotiated up front at the beginning of a case. No lawyer would seek to enlarge a contingency premium, or create one where none existed before, if the community practice changed during the course of the lawsuit. Similarly, we see no need to reward applicants in this case if, since the time they agreed to represent the class of GPO employees, fee practices in competitive markets have changed. We remind applicants that a "reasonable" fee is one that is "adequate to attract competent counsel, but [that does] not produce windfalls to attorneys." S.Rep. No. 1011, 94th Cong., 2d Sess. 6 (1976), U.S.Code Cong. & Admin.News 1976, p. 5913.
Focusing on the time when the case was commenced provides practitioners more predictability than would the contrary approach. A lawyer deciding whether to take on a case, on the basis of fees provided under a statute, can ascertain whether a contingency enhancement will be available by examining then-existing market practices. She need not be troubled by the possibility that those practices might later change (say, by making contingency enhancements unavailable) before the suit is completed and she applies for fees.
The government urges that "relevant market" be defined according to the antitrust notion of "market": a group of goods as defined by the cross-elasticity of demand between a product and its substitutes. See Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218-19 (D.C.Cir. 1986) (Bork, J.), cert. denied, 479 U.S. 1033, 107 S.Ct. 880, 93 L.Ed.2d 834 (1987). Thus, the government would have us define the relevant market in the case sub judice by looking at actions in the subject areas of law — age discrimination, civil rights, or commercial litigation — whose fees influence, and are influenced by, rates of compensation in the Title VII area. According to the government, a showing that personal injury or antitrust lawyers are usually compensated for contingent risk cannot justify a contingency enhancement in this case, unless applicants can demonstrate that those lawyers would accept a Title VII action against the government. If applicants can show no broader market as evidenced by high cross-elasticity of demand, then they must show that the Title VII market itself provides an enhancement for the risk of not prevailing. The government cites Fadhl v. City and County of San Francisco, 859 F.2d 649, 650 (9th Cir.1988) (per curiam) (defining the "relevant market" as "Title VII cases in San Francisco").
We are unpersuaded by this argument. First, Title VII cases by themselves cannot qualify as a "relevant market" because "these types of cases are never compensated on a straight contingency and hence there is no relevant market for comparison." Blum v. Witco Chemical Corp., 829 F.2d 367, 381 (3d Cir.1987). The same can be said for many environmental and other cases brought under fee-shifting statutes, which have no private market analogues. See Delaware II, 107 S.Ct. at 3090 (O'Con-nor, J., concurring in part and concurring in the judgment).
As a result, fee petitioners would be forced to focus entirely on the types of cases that show a high cross-elasticity of demand with respect to Title VII actions. Applicants would be required to conduct elaborate market surveys of attorneys in particular locales, showing the number of lawyers willing to accept Title VII cases at various hypothetical levels of fee awards. The parties would clash over the accuracy of the data, the appropriate cross-elasticities to be calculated, the existence of possible sub-markets, the extent of product differentiation within the legal market as a whole, and the significance of barriers to entry, to name but a few topics. We need only glance at contemporary antitrust litigation, with its momentous battles over the definition of the appropriate "market," to see how much litigation would be created in practice by the government's proposal. See P. Areeda & L. Kaplow, Antitrust Analysis 1111341-45 (4th ed. 1988).
The Supreme Court, of course, has inveighed against precisely this type of approach to fee-setting. "Fee litigation is often protracted, complicated, and exhausting. There is little doubt that it should be simplified to the maximum extent possible." Delaware Valley II, 107 S.Ct. at 3085 (plurality opinion); see also Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983) ("A request for attorney's fees should not result in a second major litigation"). The government's proposal would result in ap pendage litigation that would dwarf the principal actions.
For similar reasons we reject the government's suggestion that the contingency premium should be measured by some sort of statistically valid market survey, rather than merely by affidavits produced by a fee petitioner. The type of scientifically controlled survey sought by the government again would invite a second litigation over fees. In addition, there is nothing in Supreme Court precedent or the legislative history of fee-shifting statutes that demands such an expensive, exhaustive, and stringent measure of proof. Justice O'Connor, in Delaware Valley II, merely required district courts to make specific "findings of fact," 107 S.Ct. at 3091, indicating why an enhancement was proper. This was also the approach used in Blum v. Stenson, 465 U.S. 886, 898-99,104 S.Ct. 1541, 1548-49, 79 L.Ed.2d 891 (1984).
We are satisfied that applicants in this case have met their burden. They submitted more than 20 affidavits from practitioners to bolster their claim that the enhancement should amount to at least 50 percent. The affidavits in fact supported a wide spectrum of enhancements, ranging from 5 percent to 33V3 percent and 300 percent. The district court found that these were adequate to justify an enhancement of 50 percent, see McKenzie, 684 F.Supp. at 1102-03, and we agree. While much of applicants' evidence concerns current market practices rather than the market practices that existed in 1973 and 1974, when the case was undertaken by counsel, we find that applicants have shown that this contemporary evidence is equally applicable to the historic 1973-74 time frame. The district court found that "fee petitioners have demonstrated that the legal market required compensation for contingency during the 1970s. Several of the affiants discussed their firm[s'] policies in the 1970's and stated that a premium for contingency was routinely required." McKenzie, 684 F.Supp. at 1102. After examining the record, we agree with the district court. We note that applicants' evidence must be evaluated in terms of the types of contingency arrangements existing at the time; the lodestar method of analysis was not announced until Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 167 (3d Cir.1973), and first made its appearance in this circuit in Copeland v. Marshall, 641 F.2d 880 (D.C.Cir.1980) (en banc), so that we would not expect to see any modem form of contingency enhancement reflected in applicants' submissions.
The enhancement in this case is also consistent with Justice O'Connor's recommendation that the lower courts in each relevant market area should determine the appropriate enhancement to be used in entire classes of contingent cases. "District Courts and Courts of Appeals should treat a determination of how a particular market compensates for contingency as controlling future cases involving the same market." 107 S.Ct. at 3090 (O'Connor, J., concurring in part and concurring in the judgment). We note that 50 percent is, if anything, below the Title VII contingency enhancements typically awarded in this circuit. See Thompson v. Kennickell, Civ. No. 74-1101, Mem. op. at 2, 16-17 (D.D.C. Mar. 30, 1989) (granting a 100 percent contingency enhancement in a Title VII and Equal Pay Act class action); Palmer v. Shultz, 679 F.Supp. 68, 74-76 (D.D.C.1988), appeal dism'd, No. 88-5108 (D.C.Cir.1988) (awarding a 50 percent risk enhancement in a partially contingent Title VII case in which the client agreed to pay half the usual contingent fee, win or lose); King v. Palmer, Civ. No. 83-1980, Mem. op. at 4-5, 1988 WL 104970 (D.D.C. Sept. 20, 1988) (awarding a 50 percent enhancement in a partially contingent Title VII case and noting that "[a] simple and fair application of these principles would establish 100 percent enhancement for contingent fees, and 50 percent for partially contingent fees"). We find that the award of 50 percent in this case for a wholly contingent risk was not excessive.
3. The Second Prong: Whether, in the Absence of an Enhancement for Risk, Plaintiffs Would Have Faced Substantial Difficulty in Finding Counsel
Justice O'Connor also stated that "no enhancement of risk is appropriate un less the applicant can establish that without an adjustment for risk the prevailing party 'would have faced substantial difficulties in finding counsel in the local or other relevant market.'" Delaware Valley II, 107 S.Ct. at 3091 (O'Connor, J., concurring in part and concurring in the judgment) (quoting plurality opinion). We hold that applicants are required to demonstrate that absent a contingency enhancement, plaintiffs would have encountered substantial difficulty in finding counsel in 1973 and 1974, when they commenced their lawsuit. This is necessarily a counterfactual inquiry; applicants are not required to show that plaintiffs actually did face difficulty.
A standard of actual difficulty, urged by the government in this case, would have perverse effects in practice. It would penalize plaintiffs who were lucky enough to stumble across on their first try the one-in-a-hundred lawyer who was willing to take their case. It would also discourage referral services such as the Lawyers' Committee that make it easier for litigants to find legal representation. Cf. Texas State Teachers Ass'n v. Garland Independent School District, — U.S. -, 109 S.Ct. 1486, 1494, 103 L.Ed.2d 866 (1989) (O'Con-nor, J.) (noting that the Civil Rights Attorney's Fees Awards Act of 1976 was meant to "promote" service by counsel in the "private attorney general" role). Finally, it would lead to a charade in which clients seeking representation under fee-shifting statutes would be steered to several attorneys whose pre-arranged role it would be to "refuse" the case, knowing that such refusals were necessary to permit the eventual award of fees. For these reasons, we conclude that applicants need not show that plaintiffs actually experienced difficulty in obtaining representation. They must only establish, according to the test formulated by Justice O'Connor, that plaintiffs would have faced "substantial difficulties" in the absence of a contingency enhancement.
The district court found that today "there exists a general dearth of counsel willing to accept [Title VII] suits in the absence of [a contingency] enhancement," McKenzie, 684 F.Supp. at 1103, and concluded that applicants had shown that but for the availability of a contingency enhancement, plaintiffs would have encountered substantial difficulty in securing representation. We repeat that the relevant time frame is the period in which the case was undertaken by counsel and the suit commenced, rather than the time the fees were awarded.
We believe that applicants have met their burden in this case. Although much of their evidence pertains to conditions in the current legal market, they have demonstrated that in 1973 and 1974 counsel in Title VII actions expected some form of enhancement for the contingent character of a case. See Stipulation Concerning the Testimony of the Hon. John Ferren, Joint Appendix ("J.A.") at 67, 68 ("private attorneys general" during the 1972-73 period expected to be compensated "by awards of reasonable attorneys fees"); Declaration of Julius Chambers, J.A. at 156 ("Title VII cases present tremendous risks [to practitioners] irrespective of their ultimate outcomes. This was even more true in 1972 and 1973 than now, when many issues under Title VII were still largely unsettled."); Declaration of Bradley G. McDonald, J.A. at 113 (noting he "anticipated" a contingency enhancement when he agreed to serve as counsel in a Title VII class action in 1972).
The government raises two objections to the evidence adduced and the findings predicated on such evidence. First, it challenges the sufficiency of the evidence introduced by applicants to demonstrate the need for an enhancement. The government maintains that the affidavits, which by their nature are based on opinion and speculation, are not scientific enough to establish that "adjustment for contingency was a crucial factor in plaintiffs' ability to obtain counsel." Jenkins v. State of Missouri, 838 F.2d 260, 268 (8th Cir.), cert. granted, — U.S.-, 109 S.Ct. 218, 102 L.Ed.2d 209 (1988). This contention is similar to the adequacy of the evidence argument made by the government under the first prong of Justice O'Connor's test, and we reject it in this context as well. In short, we find no reason to require elaborate statistical proof by applicants. Evidence in the form of affidavits from practitioners is acceptable, and the conclusions of fact of the district court in this case are not clearly erroneous, see Weisberg, 848 F.2d at 1268.
Second, the government argues that a contingency fee enhancement was unnecessary in this case to attract the particular counsel who represented plaintiffs. Both the Institute and the Lawyers' Committee specialize in representing clients who cannot afford to pay, and the head of the Hogan & Hartson Community Services Department stated that in his opinion his firm would not have refused to represent the McKenzie plaintiffs even if it believed that no enhancement to the lodestar fee would be available.
We reject the notion that applicants must demonstrate that they, or any other particular counsel who represented plaintiffs, were specifically attracted by the possibility of a contingency enhancement. Such a standard would contravene the settled doctriné discussed earlier that fees must be awarded regardless of the identity of the fee petitioner. To deny a contingency enhancement on the ground that a public interest firm took the case without an expectation of a risk premium, or without the expectation of any fees at all, would run counter to Blum v. Stenson, 465 U.S. 886, 894, 104 S.Ct. 1541, 1546, 79 L.Ed.2d 891 (1984). In addition, the government's approach would invite a second litigation over fees, as the parties sought to establish the subjective expectations of plaintiffs' counsel. This prospect would encourage a charade similar to the one discussed above: public interest lawyers would accept a case only after announcing loudly that they were doing so on the assumption of a contingency enhancement. Justice O'Connor's opinion instructs us to adopt a class-wide view of contingent cases; if the unavailability of risk enhancements would have caused plaintiffs to have experienced "substantial difficulty" in locating counsel, then, notwithstanding the particular circumstances of their case, such an enhancement may be granted. We agree with the district court that, absent an enhancement, the plaintiffs in this case would have encountered such difficulty.
B. The Quality Enhancement
The district court also awarded a 25 percent enhancement on the basis of "the quality of representation and exceptional results." McKenzie, 684 F.Supp. at 1105. The district court acknowledged that enhancements made on the basis of superior quality of representation are available only in "rare" and "exceptional" cases, 684 F.Supp. at 1105 (quoting Delaware Valley I, 478 U.S. at 565, 106 S.Ct. at 3098), but contended that "[i]f the Supreme Court's caveat authorizing enhancements in rare and exceptional cases is to be more than a theoretical possibility, then this proceeding is one of such cases, deserving of an enhancement." 684 F.Supp. at 1105. We agree, and uphold the district court's award.
The Supreme Court has taught that " 'the special skill and experience of counsel,' the 'quality of representation,' and the 'results obtained' from the litigation are presumably fully reflected in the lodestar amount, and thus cannot serve as independent bases for increasing the basic fee award." Delaware Valley I, 478 U.S. at 565, 106 S.Ct. at 3098 (quoting Blum, 465 U.S. at 898-900, 104 S.Ct. at 1548-49). Enhancements can only be made after " 'specific evidence' on the record and detailed findings by the lower courts." Delaware Valley I, 478 U.S. at 565, 106 S.Ct. at 3098 (quoting Blum, 465 U.S. at 899, 104 S.Ct. at 1549); see also Norman v. Housing Authority of City of Montgomery, 836 F.2d 1292, 1302 (11th Cir.1988).
In this case, the district court made specific findings that the attorneys for whom a low rate was charged in the lodestar in fact performed in a manner worthy of much higher rates, see McKenzie, 684 F.Supp. at 1107. It noted that a good deal of the work on the case was done by two junior associates who "performed at levels well beyond the standards expected of attorneys with such limited experience." 684 F.Supp. at 1107. The two remained active in the litigation over a period of 15 years, an "extremely rare" occurrence. Id. The district court, which was involved with the litigation from the beginning, was in a good position to evaluate the quality of the lawyering performed. "The court that tries a case is best qualified to make an appropriate allowance of attorney fees," Craig v. Secretary, Department of Health and Human Services, 864 F.2d 324, 328 (4th Cir.1989), especially with respect to a quality enhancement.
The government contends that the district court erroneously relied upon the "exceptional results" obtained by the applicants, in awarding them an enhancement. The results, according to the government, are an improper factor for the district court to consider because they presumably are already included in the lodestar. See Delaware Valley I, 478 U.S. at 566, 106 S.Ct. at 3098 (rejecting enhancement based on "outstanding result" obtained).
We find that the district court did not err in this case. While it would be error to award an enhancement solely on the basis of "exceptional results," it is not error to consider such results as a threshold requirement to be met before an enhancement for quality can be awarded. Indeed, it would be peculiar to reward a high quality of representation which led to only mediocre results. We find that the district court in fact followed this reasoning. It recognized that "our Court of Appeals has instructed that remarkable success, alone, is insufficient to warrant an enhancement," McKenzie, 684 F.Supp. at 1106 and maintained merely that "the degree of success cannot be ignored," id., and "a review of the exceptional results is integral to an analysis of the quality of representation." Id. The district court thus properly considered the results obtained as a necessary, but not a sufficient, factor in awarding an enhancement.
III. Conclusion
Fee applicants must establish that at the time counsel undertook the case, contingent claims — especially in other types of complex federal litigation — in the relevant geographic area (here, Washington, D.C.) received a premium for the risk of non-payment; and that in the absence of a contingency enhancement plaintiffs would have experienced substantial difficulty in obtaining representation, irrespective of whether plaintiffs actually did encounter difficulty in locating counsel, or whether the particular counsel ultimately secured by plaintiffs entered the case with the subjective expectation of a contingency enhancement. These showings can be made by introducing affidavits from knowledgeable practitioners and other parties. We reiterate that the risk of not prevailing is one factor in determining the reasonableness of a fee award, and that a district court has the obligation to ensure that the overall award does not exceed a reasonable amount.
We also find that the district court's award of an enhancement based on quality of representation was accompanied by sufficiently specific findings of fact. The district court properly interpreted "exceptional results" as a threshold to be met before a quality enhancement could be considered and awarded.
We affirm the district court's award of enhancements for both contingency and quality of representation.
It is so ordered. |
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342 U.S. 850 | C. A. 6th Cir. Certiorari denied. |
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273 U.S. 685 | Petition for a writ of certio- rari to the Circuit Court of Appeals for the Third Circuit granted.
Mr. Frederic B. Scott for petitioner.
Mr. I si-dor Kalisch for respondents. |
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314 U.S. 649 | Petition for writ of certiorari to the Circuit Court of Appeals for the Fifth Circuit denied. |
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532 U.S. 980 | C. A. 11th Cir. Certiorari denied. |
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56 Cust. Ct. 848 | Opinion by
Oliver, J.
In accordance with stipulation of counsel that the merchandise consists of plastic paperweights similar in all material respects to those the subject of Abstract 67488, the claim of the plaintiffs was sustained. |
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340 U.S. 814 | C. A. 5th Cir. Certio-rari denied. |
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361 U.S. 950 | Per Curiam:
The application of the United States for an order vacating the stay order of the Court of Appeals entered January 21, 1960, and reinstating the decree of. the District Court, together with the request of the Attorney General of Louisiana for argument thereon, has been considered by the Court.
1. It appears, as respondents pointed out in their application to the Court of Appeals for the stay herein, that the issues in No. 64, United States v. Raines, now pending on appeal in this Court, are' pertinent to the disposition of this case. In view of this, and of the fact that the issues raised by this application are closely reláted to those involved on the merits of the controversy now before the Court of Appeals, the Court believes that, the entire matter should be considered at' one time. In light of the foregoing, and of the imminence of the State general election scheduled for April 19, 1960, the Court will entertain a petition for certiorari to review the judgement of the District Court, 28 U. S. C. § 1254 (1), 2101 (e)l' if filed by the Solicitor General on or before January 29, 1960. The petition may be filed in type-, written form. See the action of the Court as to Bolling v. Sharpe, 344 U. S., at 3.
Solicitor General Rankin- for the United States. Jack P. F. Gremillion, Attorney General of Louisiana, for respondents.
•2. In the event that such a pétition is so filed, the Court will hear argument upon the present application, the petition, and the merits, on February 23, 1960, the case to be set at the head of the calendar for that' day. See No. 549, Hannah v. Larche, and No. 550, Hannah v. Slawson, 361 U. S. 910, December 7, 1959.
3. The record, which may be filed in typewritten form, and the Government's brief on all matters will be filed on or before February 10, 1960, and the answering briefs of the respondents will be filed on or before February 20, 1960. The Government may file a reply brief on or before February 22, 1960. |
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474 U.S. 809 | C. A. 4th Cir. [Certiorari granted, 472 U. S. 1026.] Motion of Telephone Ratepayers Association for Cost-Based and Equitable Rates for leave to file a brief as amicus curiae granted.
Justice Powell and Justice O'Connor took no part in the consideration or decision of this motion. |
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484 U.S. 818 | C. A. 7th Cir. Certiorari denied. |
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493 U.S. 844 | C. A. 3d Cir. Certiorari denied. |
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45 B.T.A. 52 | OPINION.
Murdock :
The Commissioner recognizes the reasonableness of the termination charge and its validity as an obligation which had to be paid from the property included in the gross estate. He says it "is just another debt of the decedent, and would be deductible, were it not for the express provision in the Estate Tax Eegulations, Article 33, which specifically provides that trustees' commissions are not deductible." The regulation states that trustees' commissions do not constitute expenses of administration and are not deductible. That regulation applies to commissions of trustees under the will of a decedent who perform some service separate from that of executors or administrators in the usual administration and settlement of an estate. It also applies to commissions of other trustees who perform services long after the death of the decedent. Adriance v. Higgins, 113 Fed. (2d) 1013; Central Hanover Bank Trust Co., Executor, 40 B. T. A. 1210; affd. 118 Fed. (2d) 270; Bretzfelder v. Commissioner, 86 Fed. (2d) 713. But it does not apply to a charge, such as this, which had to be paid to free the trust property and let it pass as a part of the decedent's estate under the power exercised in his will. Such a charge is a proper charge against the estate, allowed by the laws of Massachusetts, and deductible under section 303 (a) (1) of the Revenue Act of 1926 as amended.
Decision will be entered under Bule 50. |
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562 U.S. 924 | Sup. Ct. Cal. Certiorari denied. |
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23 Ct. Cl. 443 | Richardson, Ch. J.,
delivered the opinion of the court:
The claimant was appointed and commissioned envoy extraordinary and minister plenipotentiary to Corea February .27,1883, accepted the office, and immediately entered upon its duties. He has been paid at the rate of $5,000 a year from that date to May 7,1885.
He claims that be held that office until tbe latter date and became entitled to a salary of $10,000 a year under the provisions of the Revised 'Statutes, section 1675, as amended by the Act of March 3, 1875, chapter 153 (Supp. to Rev. Stat., 188), as follows:
"Sec. 1675. Embassadors and envoys extraordinary and ministers plenipotentiary shall be entitled to compensation at the rates following, per annum, namely:
Great Britain, and Russia, each seventeen thousand five hundred dollars.
Italy, Japan, Mexico, and Spain, each, twelve thousand dollars.
countries, unless where a different compensation is prescribed by law, each, ten thousand dollars."
To overcome the express provision of the last-quoted clause of that section, which prescribes a salary of $10,000 a year to envoys extraordinary and ministers plenipotentiary to all other countries than those named, and Corea was not of those named, the defendants rely upon the circumstances of the claimant's appointment, the action of the Secretary of State, and the appropriation made by Congress.
Congress neither established nor recognized the office of envoy extraordinary and minister plenipotentiary to Corea, nor made any express appropriation to maintain it.
The annual appropriation Act of February 26, 1883, chapter 56 (22 Stat. L., 424, 431), for the year ending June 30, 1884, contained the following:
" Sec. 2. For the purpose of enabling the President to extend diplomatic relations with the Government of Eastern Asia, five thousand dollars."
The claimant was immediately nominated as envoy extraordinary and minister plenipotentiary to Corea, the Senate consented thereto, and he was the next day so commissioned.
There seems to be no connection between the appropriation and the claimant's appointment except that the appropriation indicated a desire on the part of Congress to extend diplomatic relations with Eastern Asia, and the Secretary of State, in his first letter to the claimant, refers to it as the reason which has induced the President to make the appointment. Corea was not named in the act and the money appropriated was not available until the succeeding fiscal year, commencing July 1, 1883, four months after his appointment.
The President appears to have acted upon the prerogative claimed for tbe Executive under the Constitution, Article II, Section 2, that "he shall nominate, and by and with the advice and consent of the Senate shall appoint embassadors, other public ministers and consuls," independently of any authority from Congress. This general claim of Constitutional prerogative by the Executive we considered in the case of Byers (22 C. Cls. R., 59), where authorities are cited, and little remains to be added.
The course of legislation has generally been in accord with the interpretation claimed for the Executive. We have found but few statute provisions in which Congress appears to have directly dictated as to the establishment of diplomatic offices.
These are found in the following sections of the Revised Statutes. Section 1682 (first enacted in 1872,17 Stat. L., 142) provides that "That there shall be but one minister resident accredited to Guatemala, Costa Rica, Honduras, Salvador, and Nicaragua." Section 1613 provides that "There shall be a diplomatic representative of the United States to each of the Republics of Hayti and Liberia." This section was first enacted in 1862, June 5, chapter 96 (12 Stat. L., 421), where the President was "authorized," not required, to appoint. The title of the office was changed by Act of 1866, July 25, chapter 233 (14 Stat. L., 225). The Act of July 7,1884, chapter 333 (23 Stat. L., 228), provided that "The minister resident and consul-general at Hayti shall also be accredited as chargé d'affaires to Santo Domingo."
With those exceptions Congress has either appropriated a sum in gross "for the expenses of intercourse with foreign nations," leaving the establishment of both the offices and the salaries to the Executive, as in the early years of the Government pointed out iu Byers's Case; or, as now, by Revised Statutes, section 1675, fixing the salaries for all the diplomatic officers actually existing and establishing rates for all others, thus apparently conceding power in the Executive to make diplomatic appointments other than those expressly recognized by Congress.
Perhaps these recent exceptions may be interpreted only as indicating the offices that Congress was willing to appropriate salaries for, and not as interfering with the constitutional rights claimed for the President.
The validity of the claimant's appointment was, however, not controverted at the trial, and we refer to the matter as conclusively showing that it was not dependent upon the act appropriating $5,000 for the purpose of enabling the President to-extend diplomatic relations with eastern Asia.
In the letter of instructions given to the claimant (finding 2) he was informed that his salary would be at the rate of $5,000 a year, and he was paid at that rate throughout his official term. This was clearly erroneous. Neither the Secretary of State nor the President had authority to fix the salary of an envoy extraordinary and minister plenipotentiary. This was established by lievised Statutes, section 1675, which enacts that the salaries of "those to all other countries [among which Corea must be classed], unless where a different provision is prescribed by law, each, $10,000."
No different provision for the claimant's office was prescribed'' by law. The appropriation to extend diplomatic relations with eastern Asia, as we have shown, did not take effect until four months after his appointment. Corea was not specifically named therein, and the money was not required to be applied to the salary of a diplomatic officer. The President might have used the money in any way he saw fit to extend diplomatic relations with any of the eastern nations. That it was applied towards the payment of one-half a year's salary of the claimant, as established by law, does not prevent recovery of the other half. Nor does the payment out of the contingent fund of one half of the established salary from February 27 to June 30,1883, affect his right to the other half.
The claimant is therefore entitled to recover the unpaid balance of his salary of $10,000 a year so long as he was envoy extraordinary and minister plenipotentiary. That brings us to the question, When did he cease to hold that office?
He was appointed without Congressional action, and held his position at the will of the President. When, by the Act of July 7,1884, chapter 333 (23 Stat. L., 228), Congress made an appropriation of $5,000 for the salary of a minister, resident and consul-general at Corea, the President immediately took steps to-mate the diplomatic mission to Corea conform to the apparent wishes of Congress, and nominated and, by and with the advice and consent of the Senate, appointed the claimant as minister resident and consul-general. A commission for the new offices was sent to the claimant, and reached Mm about the 15th of September, 1884.
This was clearly the exercise of the President's will to discontinue the office of envoy extraordinary and minister plenipotentiary and to recall the claimant from that office, and it took effect, under the circumstances, upon the tender and receipt of the new commission for a different office, with instructions accompanying it. The claimant declined the new appointment tendered him, and never qualified by taking the oath and giving bond as required by law.
In his letter to the Secretary of State, explaining the reasons for that determination, he said :
'•'My present status is somewhat anomalous, but, believing that there must be some provision for such cases or some precedent to govern them, I shall continue to exercise the functions of the position until further advised. (Finding 3.) "
When this letter reached the State Department the Secretary wrote to him to take a leave of absence and come to this country, which he did. He never returned to Corea, and his resignation was finally accepted March 25,1885'
The words of his letter imply that he was aware that he ceased!, to hold the office of envoy extraordinary and minister plenipotentiary. In connection with the facts that the Executive had provided another office to supersede that which he had held,, that Congress had appropriated a salary for it, and that he had been offered the new position and declined it, we must give to-those words the interpretation, not that he intended to continue to hold an office which the President had discontinued, but that', his purpose was to continue to exercise the functions of the position of minister resident and consul-general as an officer d& facto. We think it was so understood both by him and by the' Executive. This view is strengthened by the fact that, in his last account for salary settled at the Department, he styles himself "late minister and consul-general," and in accepting his resignation the Secretary of State styles him "late minister." But whether so intended or not the facts must control, and they lead to the same result.
To hold that he ceased to be envoy extraordinary and minister plenipotentiary upon receipt of the notice of the change in the charactei of the mission gives effect to the will of .the President and the wishes of Congress and does justice to the claimant and to the defendants.
After September 17, 1884, until the acceptance of Ms resignation, he was, at most, merely a defacto minister resident and consul-general nominally holding the office, taking leave of absence, and, so far as it appears, performing no official acts and exercising no duties, and for that time he has been paid the full salary of the office. The most favorable result for him that can be reached upon his claim for compensation during that period is that he may retain what he has received. (Miller's Case, 19 C. Cls. R., 353; Palen's Case, 19 C. Cls. R., 394.)
For the previous time, while he was envoy extraordinary and minister plenipotentiary, he has been paid only one-half the salary established by law for that office, and he is now entitled to judgment for the other half, amounting to $7,760.27. This point in the case is ruled by Langston's Case (21 C. Cls. R., 10, affirmed on appeal 118 U. S. E., 389), wherein it was held that where Congress failed to appropriate a sum sufficient to pay the full salary fixed by statute for the office held by him and he had received only what had been appropriated, he was entitled to judgment for the unpaid balance. In the present case Congress has made no direct appropriation whatever for the salary established by law for the office held by the claimant, but • he has received out of the public Treasury in some other way one-half the amount due him, leaving still unpaid the sum for which the court gives him judgment.
Davis, J., did not sit at the hearing of this case, and took no oart in the decision. |
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166 Ct. Cl. 604 | Plaintiff's petition for writ of certiorari denied by the Supreme Court June 15, 1964. |
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449 U.S. 1087 | Sup. Ct. App. W. Va. Certiorari denied. |
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51 Cust. Ct. 185 | C.D. 2385. (Appeal dismissed June 3, 1963.) |
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264 U.S. 250 | Mr. Justice Van Devanter
delivered the opinion of the Court.
This was an action in ejectment by the land company against the fleet corporation and the public service com pany for a small tract of land in Camden, New Jersey. The action was begun in a state court and removed to the District Court of the United States, where, after trial, judgment was given for the defendants. The judgment was affirmed by the Circuit Court of Appeals. 284 Fed. 231.
The facts out of which the case arose are easily stated.
On and prior to May 28, 1918, the land in question was owned and possessed by the land company, and was without buildings or other improvements. It was in close proximity to shipyards whóre ships were being constructed for the United States for service in the World War, and was also in close proximity to other lands in which the fleet corporation had acquired an interest and on which it had caused, or was causing, many houses to be constructed for the use of the shipyard employees and their families. On that day the fleet corporation, acting under the Act of March 1, 1918, c. 19, 40 Stat. 438, requisitioned the fee simple title of the land and took possession. Afterwards, in conformity to the act, the fleet corporation determined the compensation to be made for the land, the amount being $19,743.20. The land company did not accept that sum or any part of it, but questioned the authority of the fleet corporation to make the requisition and take possession.
After' the land was requisitioned, the fleet corporation constructed thereon a loop of electric railway tracks with platforms and sheds, connected the same with an adjacent electric railway line operated by the public service company, and contracted with that company to run its cars over the newly made loop to and from the platforms and sheds so- constructed, all for the purpose of providing necessary and convenient transportation facilities for the employees of the shipyards and their families. The land was suitable for that purpose and, when the improvements were completed, was used therefor under the con tract between the fleet corporation and the public service company. No houses were constructed on the land by the fleet corporation; nor was it used otherwise than in providing the transportation facilities just described.
The action in ejectment was brought on the assumption that the land was unlawfully taken by the fleet corporation in that the declared purpose of the taking was to use the land in housing the employees and their families, when in truth the purpose was to use it for an electric railway terminal, or to enable the public service company so to. use it, and that the fleet corporation was without authority to take it for suck terminal use. Whether that assumption was well or ill grounded is the question presented on this writ of error.
The material part of the Act of March 1, 1918, under which the fleet corporation acted, reads as follows:
"That the United States Shipping Board Emergency Fleet Corporation is hereby authorized and empowered within the limits of the amounts herein authorized—
"(a) To purchase, lease, requisition, including the requisition of the temporary use of, or acquire by condemnation or otherwise any improved or unimproved land or any interest therein suitable for the construction thereon of houses for the use of employees and the families of employees of shipyards in which ships are being constructed for the United States.
"(b) To construct on such land for the use of such employees and their families houses and all other necessary or convenient facilities, upon such conditions and at such price as may be determined by it, and to sell, lease, or exchange such houses, land, and facilities upon such terms and conditions as it may determine.
"(c) To purchase, lease, requisition, including the requisition of the temporary use of, or acquire by condemnation or otherwise any houses or other buildings for the use of such employees and their families, together with the land on which the same are erected, or any interest therein, all necessary and proper fixtures and furnishings therefor, and all necessary and convenient facilities incidental thereto; to manage, repair,, sell, lease, or exchange such lands, houses, buildings, fixtures, furnishings and facilities upon such terms and conditions as it may determine to carry out the purposes of this Act.
"(d) To make loans to persons, firms, or corporations in such manner upon such terms and security, and for such time not exceeding ten years, as it may determine to provide houses and facilities for the employees and the families of employees of such shipyards.
"Whenever said United States Shipping Board Emergency Fleet Corporation shall acquire by requisition or condemnation such property or any interest therein, it shall determine and make just compensation therefor, and if the amount thereof so determined is unsatisfactory to the person entitled to receive the same, such person shall be paid seventy-five per centum of the amount so determined, and shall be entitled to sue the United States to recover such further sum as added to such seventy-five per centum will make such an amount as will be just compensation for the property or interest therein so taken."
The requisition, as set forth in the record, shows that the land was desired and was taken " for the uses and purposes" expressed in the act, and not, as asserted by the land company, for the sole and declared purpose of using it for housing the employees and their families. So, if the act authorized á taking to provide necessary or convenient facilities whereby these people readily could reach and use local car lines, that purpose was comprehended in the terms of the requisition.
The land company apparently takes the position that subdivision (a) of the act is alone to be considered. If this position were right, there would be good ground for thinking that the only purpose for which a taking was authorized was to provide housing facilities. But subdivision (b) must also be considered. It and subdivision (a) are so plainly interrelated that they must be read together. When this is done, it is obvious that the purposes for which a taking was authorized were not confined to providing housing facilities but extended to providing " all other necessary or convenient facilities " for the use of the employees and their families. Other parts of the act, notably subdivisions (c) and (d), strengthen this conclusion. Of course the act must be examined as a whole, and not as if each part were an independent enactment. Its purpose was to facilitate the accomplishment of large undertakings wherein it was necessary to employ artisans and laborers in unusually large numbers, and to utilize their services in the best possible way. It recognized not only that they and their families should be housed, but that many other necessary or convenient facilities should be provided for their use; and to these ends it authorized an expenditure of fifty million dollars.
Whether artisans or laborers could be obtained and retained in requisite numbers would measurably be affected by the conditions surrounding them in the employment, such as the facilities for going from their places of living to their places of work, and the converse, and the facilities for reaching markets, schools and churches from their places of living.
Here what was done was to provide facilities whereby an extensive electric railway service in the city of Camden was brought, with a suitable terminal, into close proximity to the shipyards and to the lands where houses were provided for the use of the employees and their families. In our opinion these transportation facilities were of a class which the fleet corporation was authorized to provide and for which it was empowered to requisition or take needed land. They were a legitimate complement to the housing facilities provided by the corporation in that vicinity, — at great cost according to the record. It was not essential under the act that the other facilities be on the same tract with the houses any more than that all the houses be on a single tract. The act was intended to be susceptible of practical'application in varying situations.
We conclude that the action of ejectment was brought on a mistaken assumption and was rightly determined against the land company by the courts below. Questions which would arise if the assumption or any material part of it were well grounded need not be considered.
Judgment affirmed. |
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281 U.S. App. D.C. 20 | Opinion PER CURIAM.
ON MOTION FOR SUMMARY REVERSAL
PER CURIAM:
On April 13, 1988, fifty-five Libyan citizens and residents filed suit in the district court seeking damages for injuries, death, and property loss sustained in the 1986 United States air strike on Libya. Substantial damages were sought from the United States, President Reagan, senior civilian and military officials, and from the United Kingdom and Prime Minister Thatcher as well. Plaintiffs sought to hold the British defendants liable on the basis that the Prime Minister gave the United States permission to use British air bases in the air strike. Plaintiffs asserted claims under the Federal Tort Claims Act, 28 U.S.C. § 2671, et seq., the Foreign Claims Act, 10 U.S.C. § 2734, the Alien Tort Claims Act, 28 U.S.C. § 1350, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq., and various constitutional and common law theories, including the "tort law of Libya."
Upon motions, the district court dismissed plaintiffs' claims as to all defendants. See Saltany v. Reagan, 702 F.Supp. 319 (D.D.C.1988). Plaintiffs appealed and defendants have moved this court for summary affirmance. By separate order this date, we affirm the decision dismissing plaintiffs' case. Infra, at 441.
Both the United States and the British defendants also moved the district court for sanctions pursuant to Federal Rule of Civil Procedure 11, on the grounds that plaintiffs abused the judicial process and needlessly imposed upon defendants the cost of defending against an action not supported by existing law or by any good faith argument for the extension, modification, or reversal of existing law. The district court found that plaintiffs' counsel "surely knew" that the case "offered no hope whatsoever of success," but it declined to impose sanctions in the interest of keeping the courthouse door open as a forum for suits "brought as a public statement of protest of Presidential action with which counsel (and, to be sure, their clients) were in profound disagreement." Id. at 322.
The United Kingdom has cross-appealed from, and seeks summary reversal of, the decision denying sanctions. Additionally, the United Kingdom seeks attorneys' fees and costs, pursuant to both Federal Rule of Appellate Procedure 38 and 28 U.S.C. § 1927, for the costs of defending against a frivolous appeal. For the reasons stated below, we reverse and remand the district court decision with regard to the Rule 11 sanction, and grant the United Kingdom's motion for attorneys' fees and costs on appeal pursuant to Rule 38.
I. Federal Rule of Civil Procedure 11
The United Kingdom asserts that the district court erred in denying its Rule 11 motion for attorneys' fees and costs, relying upon the well established principle that the court must impose a sanction "once it has found a violation of the rule." Weil v. Markowitz, 829 F.2d 166, 171 (D.C.Cir.1987) (footnote omitted); Westmoreland v. CBS, 770 F.2d 1168, 1174-75 (D.C.Cir.1985). Thus, the question is whether the district court found, or should have found, that plaintiffs violated Rule 11. If so, then a sanction must be imposed.
Here, the district court observed that plaintiffs, citizens or residents of Libya, could not be "presumed to be familiar with the rules of law of the United States." Saltany, 702 F.Supp. at 322. The court noted, however, that "[i]t is otherwise . with their counsel. The case offered no hope whatsoever of success, and plaintiffs' attorneys surely knew it." Id.
The court thus found, in substance if not in terms, that plaintiffs' counsel had violated Rule 11; yet the court did not impose a sanction. Instead, the court went on to observe that because the "injuries for which the suit is brought are not insubstantial," the case is not "frivolous so much as it is audacious." Id. The seriousness of the injury, however, has no bearing upon whether a complaint is properly grounded in law and fact. We may agree with the district court that the suit is audacious— that is not sanctionable in itself — but, we do not see how filing a complaint that "plaintiffs' attorneys surely knew" had "no hope whatsoever of success" can be anything but a violation of Rule 11.
Nonetheless, surmising that the suit was brought as a public statement of protest, the district court opined that courts can "serve in some respects as a forum for making such statements, and should continue to do so." Id. (citing Talamini v. Allstate Insurance Co., 470 U.S. 1067, 1070-71, 105 S.Ct. 1824, 1826-28, 85 L.Ed.2d 125 (1985) (Stevens, J., concurring in dismissal of appeal)). We do not conceive it a proper function of a federal court to serve as a forum for "protests," to the detriment of parties with serious disputes waiting to be heard. In any event, reliance upon Talamini was inappropriate. That opinion, representing the views of Justice Stevens and three other justices, argued in opposition to awarding sanctions against an attorney who had pursued an unmeritorious application for review in an otherwise unremarkable unfair trade practices action. It in no way speaks to the use of the courts as any sort of political or protest forum. Whether punitive sanctions should be imposed for invoking the judicial process is properly fit into the equation when considering whether a Rule 11 violation has occurred. Here, the district court had already determined in effect that a violation had occurred. Therefore, we grant the United Kingdom's motion for summary reversal and remand the matter to the district court for imposition of an appropriate sanction.
II. Federal Rule of Appellate Procedure 38
The United Kingdom (with the support of the United States) seeks to recover the attorneys' fees and costs it incurred by reason of plaintiffs' pursuit of a frivolous appeal. We grant attorneys' fees and costs under Rule 38, and thus do not consider the alternate claim under 28 U.S.C. § 1927.
The basis for the United Kingdom's request is that the Supreme Court's decision in Argentine Republic v. Amerada Hess Corp., 488 U.S. 428, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989), which was issued about a month after the decision of the district court, utterly foreclosed plaintiffs' argument that the United Kingdom is subject to the jurisdiction of the courts of the United States. Cf. Saltany, 702 F.Supp. at 320-21 (dismissing claims against Prime Minister Thatcher on grounds of immunity, (citing Ex Parte Republic of Peru, 318 U.S. 578, 589, 63 S.Ct. 793, 800, 87 L.Ed. 1014 (1943)) and against the United Kingdom under the "act of state" doctrine).
In Amerada Hess, the Court ruled unanimously and unequivocally that the Foreign Sovereign Immunities Act ("FSIA") provides the "sole basis for obtaining jurisdiction over a foreign state in our courts." Amerada Hess, 109 S.Ct. at 688. Furthermore, the Court held that a foreign state's use of military force allegedly in violation of international law fell outside any of the exceptions to sovereign immunity provided by the FSIA. Id. at 690-92; see also Tel Oren v. Libyan Arab Republic, 726 F.2d 774, 775 n. 1 (D.C.Cir.1984) (per curiam) (Edwards, J., concurring) (suit against the Government of Libya seeking damages for a terrorist attack in Israel was barred because of the exclusivity of the jurisdictional grant in the FSIA), cert. denied, 470 U.S. 1003, 105 S.Ct. 1354, 84 L.Ed.2d 377 (1985). Under these holdings, the present appeal was clearly doomed.
Unyielding to the holdings in Amerada Hess, however, plaintiffs suggest that the FSIA may authorize this suit because the statute provides that the immunity of a foreign state from the jurisdiction of the courts of the United States is "[sjubject to existing international agreements to which the United States is a party at the time of enactment of [the FSIA]." 28 U.S.C. § 1604. In Amerada Hess, however, the Court examined this language and found that it applies only "when international agreements 'expressly conflic[t]' with the immunity provisions of the FSIA...." Amerada Hess, 109 S.Ct. at 692 (quoting H.R.Rep. No. 1487, 94th Cong., 2d Sess. 17, reprinted in 1976 U.S.Code Cong. & Ad. News 6604, 6616; S.Rep. No. 1310, 94th Cong., 2d Sess. 17 (1976)).
On appeal, plaintiffs fail to identify any international agreement that "expressly conflicts" with the FSIA, and thus fail to establish any basis for jurisdiction in the courts of the United States. Consequently, we find that Amerada Hess clearly bars plaintiffs' claim against the United Kingdom, and that so much was apparent to counsel for plaintiffs before they imposed upon the United Kingdom the burden of this appeal. Accordingly, we grant the United Kingdom's motion for attorneys' fees and costs to be assessed against counsel.
The United Kingdom is directed to submit a statement of fees and costs; counsel for plaintiffs shall respond within fourteen days (14) of the date of their receipt of that accounting.
So ordered.
ORDER
Upon consideration of the United States' motion for summary affirmance, the United Kingdom's and Prime Minister Thatcher's motion for summary affirmance in part and for summary reversal in part, and an award of damages and costs, and the opposition and replies thereto, it is
ORDERED that the district court's memorandum and order filed December 23, 1988, granting defendants' motions to dismiss, be summarily affirmed substantially for the reasons stated therein. It is
FURTHER ORDERED that the motion for summary reversal in part, and an award of damages and costs be granted for the reasons stated in the accompanying per curiam opinion.
The Clerk is directed to withhold issuance of the mandate herein until seven days after disposition of any timely petition for rehearing. See D.C.Cir.Rule 15. |
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5 B.T.A. 696 | OPINION.
Korner, Chairman:
The- petitioner, Susie M. Hoot, brings this proceeding as executrix of her deceased husband to test the right of the Commissioner to assert a tax on the estate of the decedent, in the computation of which he has included as a part of the gross estate the value of a certain parcel of real property which was owned by the decedent and his wife up to the time of the death of the former. From the agreed statement of facts upon which the case was submitted it appears that by warranty deed, executed November 29, 1921, there was conveyed to H. L. Root and Susie May Root, husband and wife, a lot of land in Kansas City. H. L. Root died on February 26, 1923, and left surviving, as his sole heir, his wife, Susie May Root, who was duly appointed and qualified as executrix of his estate. The value of the property is not in dispute.
It is unnecessary to detail here the chronology of events leading up to the bringing of this proceeding. They are fully set out in the findings of fact. Suffice it to say that the Commissioner proposes to collect an estate tax from the estate of the decedent predicated upon the inclusion, as a part of the gross estate, of the value of the land just referred to. The petitioner, contends that the land was conveyed to her and her deceased husband as tenants by the entirety and was so held by them until the death of the decedent, and that, as such, it is no part of decedent's estate and is, therefore, not properly to be included in the value of that estate under the provisions of the Revenue Act of 1921 relating to estate taxes. The Commissioner contends that the value of the land in question should be so included, whether or not the grantees of the property were tenants by the entirety, for the reason that the value of property so held is specifically made a part of the gross estate by that statute. In answer to this contention of the Commissioner, the petitioner insists that, if such be the effect of the provisions of the Revenue Act, such provisions are in contravention of Article XIV, section 1, of the Constitution of the United States, in that it constitutes an unlawful taking of the property of Susie M. Root without due process of law.
We are convinced from the authorities called to our attention that the common law doctrine of estates by the entirety obtains in the State of Missouri. Frost v. Frost, 200 Mo. 474; 98 S. W. 527; Kegan v. Haslett, 128 Mo. App. 286; 107 S. W. 17. The portion of the Missouri statute, section 4600, R. S. 1899; Ann. Stat. 1906, p. 2499, which was construed in Kegan v. Haslett, supra, has been carried forward into the revision of 1919, being section 2213, R. S. 1919. It is equally clear from the authorities that this doctrine obtains notwithstanding the " Married Woman's Act." Frost v. Frost, supra; Stifel's Union Brewing Co. v. Saxy, 273 Mo. 159; 201 S. W. 67; Ashbaugh v. Ashbaugh, 273 Mo. 353; 201 S. W. 72. We are likewise convinced that under the laws of Missouri the deed to H. L. Root and Susie May Root, husband and wife, created in the grantees therein an estate by the entirety. Hume v. Hopkins, 140 Mo. 65; 41 S. W. 784; Wilson v. Frost, 186 Mo. 311; 85 S. W. 375; Holmes v. Kansas City, 209 Mo. 513; 108 S. W. 9; Burke v. Murphy, 275 Mo. 397; 205 S. W. 32; Traw v. Heydt (1919), 216 S. W. 1009; Elliott v. Roll (1920), 226 S. W. 590. These decisions and others which have been brought to us leave no doubt in our minds that from the earliest days down to the time of the death of Henry L. Root the doctrine of estates by the entirety and the legal consequences flowing therefrom obtained and constituted a rule of real property in that State.
We now inquire as to the effect of a rule of property, established by the laws and decisions in a State, on a Federal court, in determining an issue arising out of the same state of facts. The petitioner contends that the laws and decisions of the State of Missouri defining and determining an estate by the entirety and the legal consequences flowing therefrom, constitute a rule of property in that State which is binding upon the Federal courts in the determination of the same question. Her contention is borne out by the highest authority.
In Jackson v. Chew, 12 Wheat. 153, 161-169, the court said:
After such a settled course of decisions, and two of them in the highest court of law in the state, upon the very clause in the will now under consideration, deciding that Joseph Eden did not take an estate-tail, a contrary decision by this court would present a conflict between the state courts and those of the United States, productive of incalculable mischief. If, after such an uninterrupted scries of decisions for twenty years, this question is not at rest in New York, it is difficult to say, when any question can be so considered. And it will be seen, by reference to the decisions of this court, that to establish a contrary doctrine here, would be repugnant to the principles which have always governed this court in like eases. This court adopts the state decisions, because they settle the law applicable to the case; and the reasons assigned for this course, apply as well to rules of construction growing out of the common law, as the statute law of the state, when applied to the title of lands. And such a course is indispensable, in order to preserve uniformity; otherwise, the peculiar constitution of the judicial tribunals of the states and of the United States, would be productive of the greatest mischief and confusion.
And whether those rules of land titles grow out of the statutes of a state, or principles of the common law adopted and applied to such titles, can make no difference. There is the same necessity and fitness in preserving uniformity of decisions in the one case as in the other. * » After such a series of adjudications for such a length of time, in the state courts, upon the very point now before us, and relating to a rule of landed property in that state, we do not feel ourselves at liberty to treat it as an open question.
The same court in Suydam v. Williamson, 24 How. 427, 433-434, approved this doctrine and quoted from Jackson's case, supra, as follows:
The inquiry is very much narrowed by applying the rule which has uniformly governed this court, that where any principle of law establishing a rule of real property has been settled in the State courts, the same rule will be applied by this court that would be applied by the State tribunals.
Mr. Justice Story, in United States v. Crosby, 7 Cr. 115, 116, said:
The question presented for consideration, is, whether the lew loei contractus or the lew loot rei sites is to govern, in the disposal of real estates. The court entertain no doubt on the subject; and are clearly of opinion, that the title to land can be acquired and lost only in the manner prescribed by the law of the place where such land is situate.
To like effect the Supreme Court, in Clarke v. Clarke, 178 U. S. 186, 191, quoting from DeVaughn v. Hutchinson, 165 U. S. 566, 570, said:
It is a principle firmly established that to the law of the State in which the land is situated we must look for the rules which govern its descent, alienation and transfer, and for the effect and construction of wills and other conveyances.
To the same effect see the recent decision in United States v. Title Insurance & Trust Co., 265 U. S. 472, 486. Many decisions of the Supreme Court affirming this principle are to be found.
Decisions of Federal courts inferior to the Supreme Court are to the same effect. The District Court for the Northern District of California, in deciding Blum v. Wardell, 270 Fed. 309, at p. 313, said:
The plaintiffs further contend that this court is not bound by the construction placed upon the laws of California by the highest court of the state. With this contention I am unable to agree. The federal tax is imposed on the transfer of the net estate, and, whether there is a transfer upon the death of the husband depends upon the statutes and rule of decision in the state where the parties reside and the property is situate. (Italics ours.)
The Circuit Court of Appeals, Ninth Circuit, affirming the decision of the District Court (276 Fed. 226) went further and held that if the law of the State determined that, for purposes of the State inheritance tax there was no transfer, that determination is binding on the Government for purposes of Federal estate tax. In that case the Supreme Court denied the Government's petition for a writ of certio-rari. To the same effect see First National Bank v. Obion County, 3 Fed. (2d) 623, 626-627; Bellamy v. Pitts, 4 Fed. (2d) 523, 525 (C. C. A., Fifth Circuit). In view of these decisions, we conclude that our consideration of the issue in the instant case must be in the light of the law and decisions of the State of Missouri in respect of estates by the entirety.
We turn, then, to the decisions of the courts of Missouri, which may be regarded as stating not merely a rule of law but also a rule of property in that State, to determine what those rules are with respect to estates by the entirety. In Gibson v. Zimmerman, 12 Mo. 385, it is stated that husband and wife are the only persons who can be tenants by the entirety; that this tenancy must be created or take effect during coverture, and owes its qualities to the unity of the persons of husband and wife. The court states that it is well settled, that if an estate be given to a man and his wife, they take, neither as joint tenants, nor as tenants in common, for, being considered as one person in law, they can not take by moieties, but both are seized of the entirety, the consequence of which is that neither of them can dispose of any part without the assent of the other, but the whole goes to the survivor.
In Garner v. Jones, 52 Mo. 68, the court held that in the case of an estate by the entireties there was no survivorship as in joint tenancies, but a continuance of the estate in the survivor as it originally stood. The only change by death was in the person, not in the estate. Before death both spouses constituted one person holding the entire estate, and after the death of either, the survivor remained as the only holder of the entire estate. This case was quoted with approval in Stifel's Union Brewing Co. v. Saxy, 273 Mo. 159; 201 S. W. 67, 68.
In Frost v. Frost, supra, the Supreme Court of Missouri said:
Washburn, speaking of estates in entirety, says: "But, if the estate is conveyed to them originally as husband and wife, they are neither tenants in common nor properly joint tenants, though having the right of survivorship, but are what are called 'tenants by entirety.' While such estates have, like a joint tenancy, the quality of survivorship, they differ from that in this essential respect, that neither can convey his or her interest so as to affect the right of survivorship in the other. They are not seized, in the eye of the law, of moieties, but of entireties." 1 Washburn, R. P. (6th Ed.) p. 562. The common-law doctrine of estates in entirety is the law of this state. Hall v. Stephens, 65 Mo. 670, 27 Am. Rep. 302; Bank v. Fry, 168 Mo. 492, 68 S. W. 348. The test-writer last above quoted, on the same subject, adds that on the death of either the survivor does not acquire a new title, but holds only the same title which he or she took in the beginning, freed of the contingency.
The decisions of the courts of Missouri are replete with utterances in line with those just given, but the law of that State is exhaustively treated and seems to be well summarized in the recent cases of Stifel's Union Brewing Co. v. Saxy, supra (decided in 1918), and in Ashbaugh v. Ashbaugh, supra (decided in 1918). In the former case the court said:
Warvelle on Real Property, §111, says:
" It differs from the estate of joint tenancy in that joint tenants take by moieties and at the same time are each seized of an undivided part of the whole. In the estate by entirety neither tenant is seized of a part, or moiety, hut both of them have the entire estate, and as this involves in itself a physical impossibility in the ease of ordinary individuals it necessarily follows that effect can only be given to the grant by regarding both tenants as constituting but one person. But this, in fact, is just what the law does, and as this unity of person is never recognized save in the case of husband and wife, the estate by entirety is confined exclusively to persons within the marriage relation."
"Both would therefore be seized of the entire estate; neither could dispose of any part of same without the assent of the other, and upon the death of either the whole estate would remain in the survivor. In this latter respect while the right of survivorship gives to the estate an apparent resemblance to joint tenancy, it yet differs materially from joint tenancy, for the survivor succeeds to the whole not by the right of survivorship simply, as is the case with joint tenants, but by virtue of the grant which vested the entire estate in each grantee, or, in contemplation of law, in one person with a dual body and consciousness."
Stewart says (section 306) :
" On the death of either, the other has the whole estate, continuing alone his or her former holding, and not taking by survivorship in the sense that a surviving joint tenant does." (Italics ours.)
The court then, after quoting with approval from Garner v. Jones, supra, continues:
In Thornton v. Thornton, 3 Rand. (Va.) 179, it was said:
" But husband and wife have the whole from the moment of the conveyance to them; and the death of either cannot give the survivor more."
In Ashbaugh v. Ashbaugh, supra, the court said:
An estate by the entireties is created by a conveyance to the husband and wife by a deed in the usual form. It is one estate vested in two individuals who are by a fiction of law treated as one person, each being vested with entire estate. Neither can dispose of it or any part of it without the concurrence of the other, and in case of the death of either the other retains the estate. It differs from a joint tenancy where the survivor succeeds to the whole estate by right of the survivorship; in an estate by entireties the whole estate continues in the survivor. The estate remains the same as it was in the first place, except that there is only one tenant of the whole estate whereas before the death there were two. (Italics ours.)
That the rule obtaining in the State of Missouri is the general and accepted rule of the common law is evidenced by the opinion of Mr. Chief Justice Fuller, in Hunt v. Blackburn, 128 U. S. 464, 469, wherein he said:
Undoubtedly, at common law, husband and wife did not take under a conveyance of land to them jointly, as tenants in common or as joint tenants, but each became seized of the entirety, per tout, et non per my; the consequence of which was that neither could dispose of any part without the assent of the other, but the whole remained to the survivor under the original grant.
The fact that the husband pays with his own funds for the land taken by him and his wife as tenants by the entirety, does not make any difference. They become thereby owners by the entirety. Elliott v. Roll, supra; Bender v. Bender, 281 Mo. 473; 220 S. W. 929.
The Commissioner's position is simply stated. It is, in effect, that the statute requires that to the extent of his interest therein held as tenants by the entirety by the decedent and any other person, the value of such interest shall be included in the value of the gross estate, and that in view of this requirement the value of the property in question here must be so included. Let us examine this matter closely.
The provisions of law under which this controversy arises are sections 401 and 402 of the Revenue Act of 1921, which, so far as material here, are as follows:
Sec. 401. That, in lieu of the tax imposed by Title IV of the Revenue Act of 1918, a tax equal to the sum of the following percentages of the value of the net estate (determined as provided in section 403) is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this Act.
Sec. 402. That the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated.
(d) To the extent of the interest therein held jointly or as tenants in the entirety by the decedent or any other person.
It will be noted that the imposition of the tax is upon the " transfer " of the net estate of the decedent. This is conformable to the language of the Supreme Court in Knowlton v. Moore, 178 U. S. 41, 56, wherein, after an exhaustive review of the subject of death duties, Mr. Justice White said:
Although different modes of assessing such duties prevail, and although they have different accidental names, such as probate duties, stamp duties, taxes on the transaction, or the act of passing of an estate or a succession, legacy taxes, estate taxes, or privilege taxes, nevertheless tax laws of this nature in all countries rest in their assent upon the principle that death is the generating source from which the particular taxing power takes its being and that it is the power to transmit, or the transmission from the dead to the living, on which such taxes are more immediately rested.
If, as the statute provides and the Supreme Court holds, the tax is imposed on a " transfer " from the dead to the living, there remains for determination the sole question of what was transferred by the decedent, H. L. Root, to his wife. The rule of the common law as to estates by the entirety is clear, and the application of the rule in the State of Missouri is no less so, that there is no transfer of interest or estate to the survivor on the death of either spouse. This is necessarily so because each took the whole estate by the original grant by reason of the unity of person existing under the marriage relation. The death of one spouse added nothing to the interest or estate of the survivor. The conclusion is, therefore, irresistible that there was not a transfer of any estate from H. L. Root to Susie M. Root. The effect of the Commissioner's proposed action would be to tax the executrix on an alleged transfer to her of property which, as we have seen from the rule of property established in Missouri, has not and can not be transferred to the executrix by, or because of, the death of the decedent, and which property, as we have seen, belonged to Susie May Root in her own right, both before and after the death of her husband. In other words, the effect of the Commissioner's proposed action would be to make the estate of the decedent pay an estate tax for the transfer of property to Susie M. Root which was always hers and which was not transferred to her by her husband at any time.
It is argued that what this statute taxes is not necessarily the interest or estate to which Susie M. Root succeeded on the death of her husband, or the interest or estate transferred to her thereby, but that it is the interest of the decedent which ceased by reason of his death. This point has been raised in other similar cases. The Circuit Court of Appeals, speaking to this point in Lynch v. Congdon, 1 Fed. (2d) 133, 135, said:
It is the theory of the plaintiff in error that the tax is not upon the transfer of property included in the gross estate, but upon the cessation of decedent's interest in these deposits; that it is not a question of transfer from a joint depositor to the surviving joint depositor; that there is in fact no such transfer, each depositor being an owner of the entire interest in the entire property during their joint lives, and therefore there is no passing of property from decedent to the survivor, but merely a cessation of decedent's interest in the property; that such property is the same as any other property, and that Chester A. Congdon had the entire interest in the same, and that it ceased by reason of his death. However interesting and debatable as a matter of first impression this theory may be, we think consideration of it foreclosed by the decision of the Supreme Court of the United States in Shwab v. Doyle, 258 U. S. 529, 42 Sup. Ct. 391, 66 L. Ed. 747, 26 A. L. R. 1454 and companion cases.
We do not find that it has been held that an estate tax was or could be a tax on an interest which was annihilated at death. The decedent could not transmit, transfer or devise to someone else at his death such interest as he had in the real estate here in question. At his death his interest was reduced to nothing; it was as if it had never existed. It was annihilated — wiped out. In our opinion, cases like Y. M. C. A. v. Davis, 264 U. S. 47, and Edwards v. Slocum, 264 U. S. 61, are inapplicable, for there it was held that, where there has been a transfer to the executor, the residuary legatee may have to pay a tax more logically assessed against primary legatees.
In a recent decision of the Court of Claims in Blount v. United States, 59 Ct. Cl. 328, the court considered the same point and, at p. 346, said:
In a late case it is said that what this law taxes is not the interest to which legatees or devisees succeeded on death, but the interest of the decedent which ceased by reason of his death. See Y. M. C. A. v. Davis, 264 U. S. 47. But this does not mean that the tax is upon an estate which ceases by reason of the death. It would hardly be contended that this statute imposes a tax on an estate for life held by one at the time of his death on the theory that the tax is upon an interest which ceases by reason of the death. It was said by Mr. Justice White, in Knowlton v. Moore, 178 U. S. 41, 57: " Confusion of thought may arise unless it be always remembered that, fundamentally considered, it is the power to transmit or the transmission or receipt of property by death which is the subject levied upon by all death duties." The tax here is upon the transfer of an estate which passes from the decedent, and is not upon an estate which ceases with his death.
In the Blount case the court was speaking of an estate by the entirety. In that case the facts were in all material respects on all fours with those in the instant case. The only essential difference between the two cases is the fact that in the Blount case the grant of the estate by the entireties took place before the enactment of the statute under which the tax was sought to be imposed, while in the instant case the grant was made after the enactment of the Revenue Act of 1921 under which this controversy arises. In the Blount case the decision was not, however, made to turn on that point. After discussing the application of the doctrine of estates by the entirety in the District of Columbia, where that case arose, in connection with the Revenue Act of 1916, the terms of which are essentially identical with those of the Revenue Act of 1921 in so far as they relate to the subject matter here, the court concluded:
It follows that the tax should not be assessed against the estate of tenants by the entirety because the wife did not take as upon a transfer from the husband at his death, but took under the original grant, his estate ceasing.
In the Blount case an appeal was taken to the Supreme Court of the United States, but when the case came on for argument the appeal was dismissed on the motion of the Solicitor General. In our opinion the conclusion of the Court of Claims above quoted was the correct conclusion. We are unable to distinguish it in principle from the instant case. In our opinion the fact that the conveyance of the land in question here was made to H. L. Root and his wife subsequent to the enactment of the Revenue Act of 1921 does not alter the case.
The argument is made that it is within the power of Congress to tax the value of such an estate as is here under consideration. It is argued that while in United States v. Field, 255 U. S. 257, the court held that the existence of a power of appointment does not of itself vest any interest in the donee in the appointed estate, which may be .included as a part of the deceased donee's gross estate, that nevertheless, the decision of the court was made to turn on the point that, in the statute under consideration in that case, there was not an express purpose to tax property passing under a general power of appointment exercised by a decedent had such a purpose existed. It was further argued that the court there left the question open as to what the rule would be in a case wherein the grant was executed subject to the passage of an act specifically including such property in the gross estate. From this it is argued that, in the instant case, Congress had specifically provided for the inclusion as a part of the gross estate of the interest held by decedent as tenants by the entirety with his wife or any other person, and that it was within the power of Congress so to provide.
To our minds, this argument is beside the point. We choose rather to look to what Congress has provided, than to what it might have provided. We are impressed with the fact that each case before us carries within itself its full burden of difficulties, and we prefer to bear these than to fly to others which may be highly interesting and, under a different statute, worthy of the gravest consideration. We opine that we have fulfilled our duty in a case when we confine our views to the given situation and render a decision on that alone.
Section 401 of the Revenue Act of 1921 contains the only provision where an estate tax is imposed. That section is the imposing clause of the Federal estate tax. There is no such tax imposed by any other section. Section 402 provides the method of determining the value of the gross estate out of which the net estate (determined as provided in section 403) is evolved. When the value of the net estate is determined, the basis of the tax is found. But before the net estate can be used as a basis for such a tax it must have been transferred by the decedent at his death. The section which imposes the tax, the only section which does so, provides that " a tax is hereby imposed upon the transfer of the net estate of every decedent Rote that the tax is not upon the net estate. If it were, we would have a different question to decide, but, as we have said, we are now considering only what is provided by the statute. Since Congress has imposed the tax on the transfer of a certain estate, the whole argument and the conclusions therefrom must rest on the premise that there was a transfer. The first step to be taken, then, is to determine if there was a transfer of something. If there was, then the next step is to determine what was transferred and the value thereof. On the other hand, if it be determined that nothing was transferred, then the conclusion is both logical and irresistible that there is nothing on which to impose a tax. If the estate in question was not transferred, it becomes unnecessary and even absurd to attempt to find the value of a nonexistent element. Sections 402 and 403 enumerate the elements entering into the value of the estate and provide the method for measuring that value. If a given estate is transferred, it becomes necessary to determine its value, and at that point it may be important and interesting to consider whether Congress had acted within the scope of its power and authority in providing for its inclusion among the elements going to make up that value. But, as we have said, if it be first determined that at his death the decedent did not transfer a given estate, the question as to whether Congress might have taxed its value if it had been transferred becomes a moot question and unnecessary of decision. We have shown heretofore that the estate by the entirety held by decedent and his wife, prior to the former's death, was not transferred by his death to anyone. Since it was not so transferred, no tax is imposed by the statute in respect of it, and it becomes unnecessary to discuss its value or the power of Congress to predicate a tax on the inclusion of its value in the decedent's estate.
The statute imposes on this Board the duty of redetermining de novo the correct deficiency involved in any proceeding properly brought before it. If, in our opinion, the deficiency proposed to be collected by the Commissioner is not a correct and -proper deficiency, we conceive it to be our duty to so determine. It is our opinion that the deficiency proposed here is not a correct or proper deficiency and we so hold.
Judgment will be entered for the petitioner after 15 days' notice, under Rule 50.
Moeeis, Sternhagen, and Milliken concur in the result only. |
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280 U.S. 577 | Petition for writ of certiorari to the Circuit Court of Appeals for the Third Circuit denied.
Mr. J. T. Manning, Jr., for petitioners.
Messrs. H. Alan Dawson and Roscoe H. Hupper for respondent. |
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15 B.T.A. 872 | OPINION.
Littleton:
The Commissioner allowed depletion in the amount of $378.47, based upon total development cost of $13,624.75 and a life for petitioner's mine of 36 years. The deficiency notice shows that this development cost is made up as follows: development, $2,482.50; siding, $8,000; loss of 1919 capitalized, $3,142.37. The Commissioner also allowed depreciation in the amount of $5,962.64, which he determined as follows:
The petitioner contends that it is entitled to a total allowance for depletion and depreciation of $11,448.64, based upon a total cost of $114,486.35 for development, equipment, houses, and lease, and an average life of 10 years for these properties. The cost basis is made up as follows:
Houses_$29,568.64
Development_ 2, 482. 50
Equipment_^_ 35,122.23
Leasehold_ 40, 000. 00
Additions of eauipment and livestock averaged for six months_ 7, 312. 98
Total_ 114, 486. 35
At the hearing the Commissioner conceded that the life of petitioner's mine is 20 years, and not 36 years as stated in the deficiency notice, and that depletion should be redetermined upon the basis of the shorter period.
As to the depreciation on the houses, it will be noted that the parties are in accord as to the basis, cost of $29,568.64, and differ only as to the rate. The Commissioner used a rate of 8 per cent, while the petitioner uses a rate of 10 per cent. Upon the evidence we have found that the life of these houses is from 10 to 13 years, and the rate used by the Commissioner fairly reflects the average. The rate of 10 per cent contended for by the petitioner is premised upon a life of 10 years for the mine, but, for reasons which will be stated later, we believe that this premise is wrong. The allowance by the Commissioner for depreciation of houses will not be disturbed.
As to depletion of development, the Commissioner allowed one thirty-sixth of a total cost of $13,624.75. The cost of development shown in petitioner's schedule of property costs amounts to only $2,482.50, but it has included $32,500 for development in the cost of $40,000 claimed for leasehold. Thus, the depletion claimed by petitioner for development is based upon a total cost of $34,982.50, and a life for the mine of 10 years. We are satisfied from the evidence, and have found as a fact, that the cost of driving the entries and air systems, to January 1, 1920, was not less than $21,562.50. To this amount there should be added $8,000, representing the cost of siding as determined by the Commissioner, making a total cost for development of $29,562.50. The balance sheet, as of January 1, 1920, shows a deficit of $3,142.37, and the Commissioner has included in development cost an item of $3,14-2.37, representing " loss of 1919 capitalized." If the balance sheet items, houses and development, are increased to reflect the costs of those assets which we have found, the deficit will be wiped out, and the restoration to income of 1919 oí expenditures for capital additions will undoubtedly result in showing a net income rather than a loss for that year. For this reason, we have excluded the item of $3,142.37 which the Commissioner included in development cost.
This brings us to the question as to whether the lease acquired by petitioner from Disel, Freeman, and Lawson, at or about the date of organization, for $7,500 par value of capital stock, had a bonus value at the date of acquisition which may be made the subject of a depletion allowance. The Commissioner determined that the lease had no bonus value when paid in, while the petitioner contends that it had a value equal, at least, to the par value of the stock issued therefor. Talcing the evidence as a whole, we believe the Commissioner's determination to be correct. Two witnesses testified that in their opinion the lease had a bonus value at the date paid in. The witness Ryley testified that in his opinion the lease had a value of at least $5,000. The witness Dudley was persistently noncommittal in placing a definite value on the lease. Ryley, it was developed on cross-examination, had little or no knowledge of conditions existing in the Hazzard coal field at or about the time the lease was acquired. He was engaged, at the time, in carrying on a coal sales agency business at some distant point. He made his first visit to the field and to petitioner's mine when he acquired petitioner's stock in 1920. Even then his investigation of conditions appears to have been of the most superficial nature. Dudley based his opinion largely upon statements made to him by others as to sales of leases in this and adjacent fields, but of which he had no personal knowledge. He gave evidence as to one transaction involving the sale of a lease in which he had a personal interest, as a stockholder, but that transaction took place in 1920, more than two years after the lease in question was acquired by the petitioner, and at a time when the coal industry was still enjoying a war-made prosperity.
The lease in question was granted by the Kentucky River Coal Corporation. That company owned or controlled more than 145,-000 acres of coal lands in or adjacent to the Hazzard field. It had 33 leases in force, including 7 on Lotts Creek and Trace Fork Creek, in the immediate vicinity of the lands under lease to petitioner. Without objection there was placed in evidence a copy of the report of its leases submitted to the Commissioner by that corporation. Of the 33 leases, 19 were made in the years 1917, 1918, and 1919 on a royalty basis of 10 cents per ton and, in that respect, did not differ from the lease in question.
Petitioner calls our attention to the fact that of the original authorized capital stock, $22,500 par value was sold for cash at par. But we can give only small weight to that fact, as the evidence dis closes that nearly all such sales were made to the same persons who paid in the lease for stock.
In view of the foregoing we hojd that the lease had no bonus value at the date paid in, and that the total amount which petitioner is entitled to recover through annual allowances for depletion is $29,562.50.
Petitioner contends that the depletion allowance should be determined on the basis of a life for the mine of 10 years. This is the result of a retrospective survey of conditions affecting the lease which were not known to exist and coup! not have been reasonably anticipated during 1920. According to the statement in the return for 1920, the petitioner estimated that there were 516,000 tons of recoverable coal to be extracted under the lease. In the return for 1922, it was estimated that there were 199,200 tons of coal still to be recovered, and this return was rendered after the survey of 1922, which disclosed that there were but 94 acres of recoverable coal instead of 160 as stated in the lease. Wo have heretofore had occasion to decide that in determining what is a reasonable allowance for depletion, no consideration could be given to developments which take place in a subsequent year and which could not reasonably have been anticipated. In Sterling Coal Co., Ltd., 8 B. T. A. 549, we held as follows:
The rule contended for by the petitioner is that in the case of mines the rate of depletion applicable for any year is contingent upon the rcdetermination of the reserves in the ground as ascertained by the development prosecuted and carried on in subsequent years. Under this rule there would be no time until the end of the life of a mine or at least there would be no indefinite length of time before a final estimate of recoverable coal in place could be made. The petitioner contends that unless it is given the right in this case to revise its depletion allowance for 1917, 1918 and 1919 upon an estimate of reserves made in 1922, it will not have returned to it its capital tax-free. In our opinion, this contention is not sound. In the first place, a taxpayer is entitled only to a reasonable allowance for depletion, and that reasonable allowance must of necessity be computed upon the basis of factors known to exist during the year for which the return was filed. It is not in our opinion the purpose of the statute to permit taxpayers to determine their net incomes for a given year on the basis of facts developed in the future.
Under our decision in Stouts Mountain Coal Co. v. Commissioner, supra, if subsequent developments show that a material error has been made in the original estimates of the ore reserves, a new estimate may be made, and the capital remaining to be recovered distributed accordingly. This is in accordance with article 209 of Regulations 45, and in our opinion is a fair and reasonable interpretation of the statute. To the extent that our opinion in Appeal of Kehota Mining Co., 3 B. T. A. 885, is inconsistent with the views herein expressed, it will not be followed in the future.
What we held there is equally applicable to the case at bar, and the depletion allowance for 1920 should be determined with reference to the estimate made in the return for that year. For the nine months of 1919 during which it operated, petitioner produced 15,772.80 tons, which is at the rate of approximately 21,000 tons per annum. During 1920 it produced 23,271.50 tons, but the mine was changed during the year from mule power to electric power. In 1921 it produced 27,993.65 tons. With these facts as to imocluction in mind, and the petitioner's estimate in the 1920 return of 576,000 tons of recoverable coal, we believe that a life of 20 years for the mine, which is now conceded by the Commissioner, is fair and reasonable.
Based upon a total cost of $29,562.50 for development, and a life of 20 years for the mine, the petitioner is entitled to a depletion allowance for 1920 of $1,478.13 instead of $378.47 which the Commissioner allowed.
The petitioner asks for an allowance for depreciation of equipment based upon a cost of $42,435.21 and a life of 10 years. Apparently the petitioner has included in the classification of equipment all items other than buildings shown in the Commissioner's depreciation schedule. The Commissioner determined that the cost of all such items was $36,723.47, and he allowed depreciation in respect thereof in the amount of $3,597.15. The evidence does not establish any error in the Commissioner's determination as to costs of the several properties, or in the rates which he used.
Finally, the petitioner claims that the Commissioner has understated its invested capital. The Commissioner has apparently determined invested capital by reference to petitioner's balance sheet as of January 1, 1920. The determination in the deficiency notice is as follows:
Capital Stock-$30, 000.00
Additions:
Sale of capital stock April 6, 1920, $37,500, prorated 270/366 days- 27, 603. 93
57, 663. 93
Deduction:
Lease to wMch no value attaches_ 7, 500. 00
Invested capital for the year_ 50,103.93
In the balance sheet of January 1, 1920, houses are carried at a value of $7,590.02, development at a value of $2,482.50, and there is shown a deficit of $3,142.37. We have found that the cost of miners' houses was not less than $26,950 and that the cost of development was not less than $21,562.50. Restoring to surplus the difference between the actual cost of these two assets and the total of the values at which they are carried in the balance sheet, a difference of $38,439.98, there is a surplus of $35,297.61. Depletion for nine months of 1919 on the development cost of $19,080 restored to surplus, based on a life for the mine of 20 years, amounts to $715.50. Depreciation for nine months of 1919 on the cost of houses restored to surplus, $19,359.98, at the rate of 8 per cent, amounts to $1,161.60. The total depletion and depreciation for 1919 on costs restored to surplus amounts to $1,877.10, and deducting this amount from surplus leaves an adjusted earned surplus, as of January 1, 1920, of $33,420.51. This amount should be added to the invested capital determined by the Commissioner.
As 4o physical assets shown in the balance sheet of January 1, 1920, other than houses and development, the evidence fails to establish that the costs thereof exceeded the values at which they are included in the balance sheet. The Commissioner computed the allowance for depreciation of equipment upon the basis of a cost of $36,723.47, which included $7,322.99 for additions made during the year, although, in computing invested capital, he apparently held the cost to be the balance sheet value of $17,422.69. The reasons which led the Commissioner to take this seemingly inconsistent action are not a matter of record. His determination of a basis for computing the depreciation allowance in r'espect of certain - assets greater than the values of those same assets which he allowed for invested capital purposes may have been entirely a concession on his part. We can not assume that one is more correct than the other. The burden of proof that it is entitled to have such assets taken into invested capital at a value greater than that allowed by the Commissioner still remains with the petitioner. The evidence adduced does not suffice to overcome the prima facie correctness of the Commissioner's determination.
Judgment will be entered under Rule 50. |
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543 U.S. 843 | Sup. Ct. Cal. Certiorari denied. |
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379 U.S. 994 | C. A. 4th Cir. Certiorari denied. |
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562 U.S. 1112 | C. A. 3d Cir. Certio-rari denied. |
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337 U.S. 956 | Certiorari denied. |
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440 U.S. 917 | C. A. D. C. Cir. Certiorari denied. |