_id
stringlengths 9
14
| text
stringlengths 2.26k
32.7k
|
|---|---|
3815389-20871 | ORDER
DONALD W. MOLLOY, District Judge.
I. Introduction
United States Magistrate Judge Jeremiah C. Lynch entered Findings and Recommendation in this matter on August 25, 2009. Judge Lynch recommended granting Plaintiffs motion for summary judgment and reversing the Commissioner’s decision and remanding the matter for further proceedings. Defendant timely objected on September 14, 2009. Defendant therefore is entitled to de novo review of those portions of the Findings and Recommendation to which he objected. 28 U.S.C. § 636(b)(1). The portions of the Findings and Recommendation not specifically objected to will be reviewed for clear error. McDonnell Douglas Corp. v. Commodore Bus. Mach., Inc., 656 F.2d 1309, 1313 (9th Cir.1981).
Because I agree with Judge Lynch’s analysis and conclusions, I adopt his Findings and Recommendation in full. The parties are familiar with the factual background of this case, so it will not be restated here.
II. Analysis
The Commissioner objects to Magistrate Judge Lynch’s finding that the Administrative Law Judge (“ALJ”), did not acknowledge Dr. Bekemeyer’s November 2006 assessment of Mr. Crismore. The Commissioner contends that there are noted inconsistencies between Dr. Bekemeyer’s November 2006 examination and previous evaluations of Mr. Crismore, which could support the discounting of Dr. Bekemeyer’s opinion. The Commissioner further asserts that he is not required to refute every contention of every piece of evidence in the assessment. The Commissioner offers the concurrent assertion, that even if the reason for the omission of Dr. Bekemeyer’s November 2006 opinions were not expressly addressed, the error was harmless.
A finding that a treating source medical opinion is inconsistent with the other substantial evidence in the case record does not mean the opinion should be rejected or is not entitled to controlling weight. Orn v. Astrue, 495 F.3d 625, 632 (9th Cir.2007). “Treating source medical opinions are still entitled to deference and must be weighted using all of the factors provided in 20 C.F.R. § 404.1527.” Id. Where the treating doctor’s opinion is not contradicted by another doctor, it may be rejected only for “clear and convincing” reasons supported by substantial evidence in the record. Lester v. Chater, 81 F.3d 821, 830 (9th Cir.1995).
There is no indication that the ALJ assessed or evaluated Dr. Bekemeyer’s findings from his November 11, 2006 examination of Mr. Crismore. The ALJ accepted Dr. Bekemeyer’s opinions prior to November 2006, yet no reasons were given for rejecting the most recent opinion developed from the November 2006 examination of Mr. Crismore. If the ALJ chooses to disregard portions of Dr. Bekemeyer’s opinion, especially the most current examination, it must provide “clear and convincing reasons supported by substantial evidence in the record.” Lester, 81 F.3d at 830. The ALJ did not. At most the ALJ provides insinuations of inconsistencies between Dr. Bekemeyer’s examinations. The ALJ fails to provide substantial evidence to provide guidance as to what these inconsistencies indicated to them, or how they may have weighed against Dr. Bekemeyer’s testimony in such a way as to discount it.
This error was not harmless. On November 11, 2006, Dr. Bekemeyer completed a residual functional capacity questionnaire assessing Mr. Crismore’s pulmonary functions. Dr. Bekemeyer indicated that, due to the current state of his health, Mr. Crismore would be required to take unscheduled work breaks during the day, for unknown lengths of time, some lasting hours. Dr. Bekemeyer further estimated that Mr. Crismore would be absent from any work, as a result of his impairment, about four times a month. These are not mere pieces of evidence failing to warrant examination but material facts deserving due consideration. Absent from the assessment performed by the ALJ are any clear or convincing reasons for rejecting these opinions in regard to the state Mr. Crismore’s health in November 2006.
III. Conclusion
IT IS HEREBY ORDERED that Judge Lynch’s Findings and Recommendation (dkt # 17) are adopted in full. Crismore’s motion for summary judgment (dkt #11) is GRANTED and Commissioner’s motion for summary judgment (dkt # 12) is DENIED.
IT IS FURTHER ORDERED that the Commissioner’s decision denying benefits to Crismore is REVERSED pursuant to sentence four of 42 U.S.C. § 405(g) and the matter is REMANDED for additional administrative proceedings.
FINDINGS AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
JEREMIAH C. LYNCH, United States Magistrate Judge.
Plaintiff Wayne Crismore (“Crismore”) brings this action under 42 U.S.C. § 405(g) seeking judicial review of the decision of the Commissioner of Social Security (Commissioner) denying his application for disability insurance benefits under Title II of the Social Security Act (“the Act”), 42 U.S.C. §§ 40H33.
Crismore filed his application for benefits on January 10, 2005, alleging he became disabled on August 6, 2003 due to respiratory problems, weakness in his left leg, and back pain. Tr. 160. Crismore’s application was denied initially and on reconsideration. Tr. 38039, 43^14, 46-48. After an administrative hearing at which Crismore appeared with counsel, an Administrative Law Judge found Crismore was not disabled within the meaning of the Act. Tr. 15-25; 571-621. The Appeals Council denied Crismore’s subsequent request for review, thereby making the ALJ’s decision the agency’s final decision for purposes of judicial review. Tr. 6-8. Jurisdiction vests with this Court pursuant to 42 U.S.C. § 405(g).
Crismore was 40 years old when he filed his application for benefits in January 2005, and 42 years old at the time of the ALJ’s decision.
I. STANDARD OF REVIEW
This Court’s review is limited. The Court may set aside the Commissioner’s decision only where the decision is not supported by substantial evidence or where the decision is based on legal error. Bayliss v. Barnhart, 427 F.3d 1211, 1214 n. 1 (9th Cir.2005); Thomas v. Barnhart, 278 F.3d 947, 954 (9th Cir.2002). Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971); Widmark v. Barnhart, 454 F.3d 1063, 1070 (9th Cir. 2006).
“The ALJ is responsible for determining credibility, resolving conflicts in medical testimony, and resolving ambiguities.” Edlund v. Massanari, 253 F.3d 1152, 1156 (9th Cir.2001). This Court must uphold the Commissioner’s findings “if supported by inferences reasonably drawn from the record.” Batson v. Commissioner of Social Security Administration, 359 F.3d 1190, 1193 (9th Cir.2004). “[I]f evidence exists to support more than one rational interpretation,” the Court “must defer to the Commissioner’s decision.” Batson, 359 F.3d at 1193 (citing Morgan v. Commissioner, 169 F.3d 595, 599 (9th Cir.1999).) This Court “may not substitute its judgment for that of the Commissioner.” Widmark, 454 F.3d at 1070 (quoting Edlund, 253 F.3d at 1156).
II. BURDEN OF PROOF
To establish disability, a claimant bears “the burden of proving an ‘inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which ... has lasted or can be expected to last for a continuous period of not less than 12 months.’ ” Batson, 359 F.3d at 1193-94 (quoting 42 U.S.C. § 423(d)(1)(A)).
In determining whether a claimant is disabled, the Commissioner follows a five-step sequential evaluation process. 20 C.F.R. § 404.1520. The claimant bears the burden of establishing disability at steps one through four of this process. Burch v. Barnhart, 400 F.3d 676, 679 (9th Cir.2005). At the first step, the ALJ will consider whether the claimant is engaged in “substantial gainful activity.” 20 C.F.R. § 404.1520(a)(4)(I). If not, the ALJ must determine at step two whether the claimant has any impairments that qualify as “severe” under the regulations. 20 C.F.R. § 404.1520(a)(4)(ii). If the ALJ finds that the claimant does have one or more severe impairments, the ALJ will compare those impairments to the impairments listed in the regulations. 20 C.F.R. § 404.1520(a)(4)(iii). If the ALJ finds at step three that the claimant has an impairment that meets or equals a listed impairment, then the claimant is considered disabled. 20 C.F.R. § 404.1520(a)(iii). If, however, the claimant’s impairments do not meet or equal the severity of any impairment described in the Listing of Impairments, then the ALJ must proceed to step four and consider whether the claimant retains the residual functional capacity (RFC) to perform his or her past relevant work. 20 C.F.R. § 404.1520(a)(4)(iv). If the claimant establishes an inability to engage in past work, the burden shifts to the Commissioner at step five to establish that the claimant can perform other work in the national economy. 20 C.F.R. § 404.1520(a)(4)(v).
III. DISCUSSION
Following the steps in the sequential evaluation process, the ALJ first found that Crismore met the insured status requirements of the Act through December 31, 2008, and had not engaged in substantial gainful activity since his August 6, 2003, alleged onset date. Tr. 17. The ALJ found at step two that Crismore suffered from reactive airway dysfunction syndrome, which constituted a severe impairment. Tr. 17. At step three, the ALJ determined that Crismore did not have an impairment or combination of impairments that met or medically equaled any impairment described in the Listing of Impairments. Tr. 18. The ALJ also found that while Crismore’s “medically determinable impairments could reasonably be expected to produce the alleged symptoms,” his “statements concerning the intensity, persistence, and limiting effects of th[o]se symptoms [were] not entirely credible.” Tr. 21-22. Having done so, the ALJ next determined that Crismore retained the residual functional capacity to perform a limited range of light work. Tr. 18. Although the ALJ found that Crismore could not return to his past relevant work, he concluded that there remained a significant number of jobs in the economy that Crismore could perform, including light level work as a file clerk, order clerk, and telephone solicitor. Tr. 24-25.
Crismore challenges the ALJ’s decision on several grounds. First, Crismore argues the ALJ erred by ignoring a pulmonary residual functional capacity questionnaire completed by his treating physician, Dr. William Bekemeyer. Second, Crismore maintains the ALJ erred at step two by finding that his orthopedic impairments were not severe. Crismore also contends the ALJ failed to adequately account for the effects of his obesity. Finally, Crismore claims the ALJ did not cite sufficient reasons for discrediting his subjective testimony, and failed to develop the record as to his mental impairments. As a result of these errors, Crismore claims the ALJ erroneously assessed his residual functional capacity and posed a flawed hypothetical to the vocational expert. Because it is dispositive, the Court turns first to the question of whether the ALJ properly evaluated Dr. Bekemeyer’s opinion.
Crismore was injured on August 6, 2003, when he was exposed to fumes while working as a welder. Tr. 266. Dr. Bekemeyer has been Crismore’s treating pulmonologist since the time of that accident, and has diagnosed Crismore with reactive airway disease. Tr. 238-55; 466-76; 530-39. On November 11, 2006, just days before Crismore’s hearing before the ALJ, Dr. Bekemeyer completed a residual functional capacity questionnaire in which he assessed Crismore’s pulmonary restrictions. Tr. 477-80. Dr. Bekemeyer indicated that Crismore’s symptoms included shortness of breath, chest tightness, wheezing, episodic acute asthma, fatigue, and coughing. Tr. 477. He characterized Crismore’s attacks as severe, and wrote that they occurred “weekly to daily” and typically left Crismore incapacitated for “hours” at a time. Tr. 477. As a result, Dr. Bekemeyer indicated that Crismore would need to take unscheduled work breaks on a daily basis. Tr. 479. When asked how long Crismore would have to rest before returning to work, Dr. Bekemeyer wrote: “unknown — may be hours.” Tr. 479. Dr. Bekemeyer estimated that Crismore would be absent from work as a result of his impairment about four times a month, and wrote in a brief addendum that “environmental irritants have been precipitating factors in worsening symptoms ever since onset of illness in 2003 and I advised against any exposures in 2006.” Tr. 480.
Crismore argues the ALJ erred because he did not discuss Dr. Bekemeyer’s assessment in his written decision, either for purposes of adopting the restrictions Dr. Bekemeyer identified or rejecting them. Crismore is correct.
It is well-established that a treating physician’s opinion is ordinarily entitled to great weight. See Batson v. Commissioner, 359 F.3d 1190, 1195 (9th Cir.2004); Lester v. Chater, 81 F.3d 821, 833 (9th Cir.1995). While “a treating physician’s opinion is generally afforded the greatest weight in disability cases, it is not binding on an ALJ with respect to the existence of an impairment or the ultimate determination of disability.” Batson, 359 F.3d at 1195 (quoting Tonapetyan v. Halter, 242 F.3d 1144, 1149 (9th Cir.2001)). “The ALJ may disregard the treating physician’s opinion whether or not that opinion is contradicted.” Batson, 359 F.3d at 1195 (quoting Magallanes v. Bowen, 881 F.2d 747, 751 (9th Cir.1989)).
If the ALJ chooses to disregard a treating physician’s opinion, however, he must provide reasons for doing so. See e.g. Thomas v. Barnhart, 278 F.3d 947, 957-58 (9th Cir.2002). “Where the treating doctor’s opinion is not contradicted by another doctor, it may be rejected only for ‘clear and convincing’ reasons supported by substantial evidence in the record.” Reddick v. Chater, 157 F.3d 715, 725 (9th Cir.1998) (quoting Lester v. Chater, 81 F.3d 821, 830 (9th Cir.1996)). Even where “the treating doctor’s opinion is contradict ed by another doctor, the ALJ may not reject this opinion without providing ‘specific and legitimate reasons’ supported by substantial evidence in the record.” Reddick, 157 F.3d at 725 (quoting Lester, 81 F.3d at 830). The ALJ can accomplish this by setting forth “a detailed and thorough summary of the facts and conflicting clinical evidence, stating his interpretation thereof, and making findings.” Magallanes v. Bowen, 881 F.2d 747, 751 (9th Cir.1989).
The ALJ in this case failed to even mention Dr. Bekemeyer’s assessment, much less provide any reasons for rejecting it. Tr. 15-25. That the ALJ effectively rejected Dr. Bekemeyer’s assessment is clear from the fact that he did not incorporate certain restrictions identified by Dr. Bekemeyer into Crismore’s residual functional capacity. The ALJ described Crismore’s residual functional capacity as follows:
After careful consideration of the entire record, the undesigned finds that the claimant has the residual functional capacity to lift 20 pounds occasionally and 10 pounds frequently; walk up to 1/4 of a mile, stand 30 minutes to 1 hour at a time, and sit for up to 1 horn- at a time with the ability to alternate positions as needed over the course of an 8 hour day. He is able to frequently balance, stoop, kneel, crouch, or crawl, and limited to no more than occasional climbing of stairs or ramps. He must avoid concentrated exposure to extreme temperatures, vibrations, and uneven surfaces; avoid even moderate exposure to fumes, odors, dust, and gasses, and work in an environment which does not require high or constant stress. He must also work in a controlled environment with avoidance of public contact, and a small number of co-workers.
Tr. 19.
Notably absent from the ALJ’s assessment of Crismore’s residual functional capacity is any mention of his apparent need to take daily unscheduled breaks for up to hours at a time or the fact that he would likely be absent from work about four times a month — both of which were limitations identified by Dr. Bekemeyer in his November 2006 opinion. While the ALJ’s assessment of Crismore’s residual functional capacity was consistent with some of the other limitations identified by Dr. Bekemeyer, the ALJ did not explain why he rejected Dr. Bekemeyer’s opinion regarding Crismore’s need for breaks and anticipated absences. The ALJ was certainly entitled to reject Dr. Bekemeyer’s opinion regarding Crismore’s limitations, but he could not do so without first providing, at a minimum, specific and legitimate reasons supported by substantial evidence of record. See Reddick, 157 F.3d at 725. The ALJ did not meet that burden here. In fact, he did not discuss Dr. Bekemeyer’s November 2006, assessment at all. Tr. 15-25.
There can be no dispute that the ALJ was aware of Dr. Bekemeyer’s assessment, as evidenced by the fact that he referred to it at various points during the administrative hearing. Tr. 583, 603-04. Following up on the ALJ’s line of questioning, Crismore’s attorney noted that Dr. Bekemeyer believed Crismore would need to take unscheduled breaks on a daily basis. Tr. 605. And on further questioning, Crismore confirmed that he would have to take frequent breaks due to shortness of breath. Tr. 605-06. Despite the fact that the ALJ was thus aware of Dr. Bekemeyer’s assessment, he failed to discuss the report in his written decision. The significance of the ALJ’s omission in this regard is underscored by the testimony of the vocational expert, who indicated there were no suitable jobs for an individual requiring more than the normally sched uled work breaks and who would miss more than two workdays a month. Tr. 615-16.
The Commissioner apparently reads the ALJ’s decision differently and suggests that he did consider Dr. Bekemeyer’s November 2006 opinion. According to the Commissioner, the ALJ “expressly stated that Dr. Bekemeyer’s residual functional capacity assessment was consistent with the other medical evidence of record, and [Crismore’s] testimony regarding his physical capacity, with the exception of the need for extended breaks throughout the day, of which he found no evidence in the file.” Def.’s Br. in Support 6 (July 30, 2009).
But the residual functional capacity assessment to which the ALJ referred in his decision was one completed by Dr. Bekemeyer some two years earlier — in May 2004. Tr. 23, 530-39. The ALJ accepted that assessment, in which Dr. Bekemeyer indicated Crismore was limited to light exertional work with a lifting restriction of 15 pounds and should avoid fumes, vapors, dust, or dramatic changes in temperature or humidity. Tr. 23. The ALJ found that Dr. Bekemeyer’s May 2004 “residual functional capacity evaluation closely paralleled] the claimant’s own testimony regarding his physical capacity with the exception of the need for extended breaks throughout the day.” Tr. 23. The ALJ then explained that he could “find no evidence in [the] file that the claimant requires such restrictions.” Tr. 23.
In doing so, however, the ALJ overlooked Dr. Bekemeyer’s November 2006 pulmonary residual functional capacity assessment. That assessment corroborated Crismore’s testimony as to his need for extended breaks. As noted above, the ALJ was free to reject Dr. Bekemeyer’s opinion, but was required to cite legally sufficient reasons for doing so.
In briefing before this Court, the Commissioner indeed points to several reasons the ALJ could well have provided for rejecting Dr Bekemeyer’s November 2006, opinion. For example, the Commissioner argues that Dr. Bekemeyer’s November 2006 assessment is not supported by clinical and laboratory findings. Def.’s Br. in Support 8. While the ALJ could well have cited the lack of clinical findings as a reason for rejecting Dr. Bekemeyer’s opinion, he did not do so. Nor did the ALJ provide any other reasons for declining to adopt Dr. Bekemeyer’s most recent opinion as to Crismore’s various limitations. Because the ALJ provided no explanation whatsoever for rejecting Dr. Bekemeyer’s November 2006, opinion, this matter must be remanded.
That having been said, the question becomes whether to remand for an award of benefits or for further proceedings. This question in turn implicates what has come to be known in the Ninth Circuit as the “credit as true” rule, which may apply when the ALJ fails to provide legally sufficient reasons for rejecting the opinion of a treating or examining physician. See e.g., Widmark v. Barnhart, 454 F.3d 1063, 1069 (9th Cir.2006); Harman v. Apfel, 211 F.3d 1172, 1178 (9th Cir.2000); Lester, 81 F.3d 821, 834 (9th Cir.1995). Under this rule, if the ALJ does not “provide adequate reasons for rejecting the opinion of a treating or examining physician, [the court] will credit that opinion ‘as a matter of law.’ ” Lester, 81 F.3d at 834.
|
913839-18861 | OPINION OF THE COURT
COHILL, District Judge.
On September 22, 1976, the Occupational Safety and Health Review Commission (the “Commission”) rendered a decision holding that petitioner, Cornell and Company, Inc. (“Cornell”), had violated the safety standards of 29 C.F.R. §§ 1926.28(a) and 1926.-104, promulgated pursuant to the Occupational Safety & Health Act of 1970, 29 U.S.C. § 651 et seq (the “Act”). The Commission assessed a $700 penalty against Cornell. Pursuant to 29 U.S.C. § 660(a), we are here reviewing that decision.
I
After carefully reviewing the facts, we conclude that the Commission abused its discretion in allowing the Secretary of Labor (the “Secretary”), pursuant to Fed.R. Civ.P. 15, to amend twice a complaint against Cornell, the last one being over 4 months after the original citation alleging a violation by Cornell. We therefore vacate the Commission’s order permitting the amendment of the citation and the assessment of a penalty.
Cornell is a steel construction contractor, which in the summer of 1974 was erecting at a refinery in Philadelphia a steel flare stack (a metal chimney) and a supporting three-legged steel frame, resembling an oil derrick. This structure was constructed in two stages. The first stage, known as the “connecting stage,” consisted of two steps. In the first step — the “vertical connecting” step — workers called “connectors” initially secured the vertical beams into position. In the second step — the “horizontal connecting” step — the vertical beams were secured temporarily by connecting horizontal and diagonal beams as cross-bracing. When these two steps were completed, the procedure was repeated at the next level until the structure reached the required elevation. After the frame was completely erected and connected, the ironworkers proceeded to the second stage of construction, the “bolting up” stage. This involved securing the entire structure by fastening additional bolts at each connection joint. Only after this was completed was the structure sufficiently braced to meet the architect’s specifications.
On June 27, 1974, a compliance officer for the Department of Labor, Occupational Safety and Health Administration inspected the jobsite while Cornell’s employees were in the connecting stage, working at an elevation of 100 feet. On July 2, 1974, as a result of that inspection, the Secretary issued a citation against Cornell and proposed a $700 penalty for a serious violation of 29 C.F.R. § 1926.750(b)(2), which mandates the use of temporary flooring, where practical, for skeleton steel erection in tiered buildings. Cornell timely contested the citation, asserting that the specified safety standard did not apply to Cornell’s project, since the frame was a non-tiered structure.
Apparently the Secretary agreed, and on August 22, 1974, he issued a complaint, but moved to amend the citation by adding a violation of another standard, this time citing 29 C.F.R. § 1926.750(b)(1)(ii), which requires the use of safety nets where it is impractical to use temporary flooring for skeleton steel erection in tiered buildings. The unopposed motion was granted, and Cornell’s contest letter was treated as an answer to the complaint.
On November 4, 1974, just nine days before the hearing, and more than 4 months after the inspection, the Secretary again moved to amend the citation and complaint by withdrawing the allegations of violations of 29 C.F.R. §§ 1926.750(b)(2) and 1926. 750(b)(1)(ii), and alleging instead violations of 29 C.F.R. §§ 1926.28(a) and 1926.104, requiring the use of safety belts. The Secretary conceded that the violations previously alleged were inapplicable. Cornell did not receive a copy of the proposed amended complaint until November 6 or 7; the hearing took place on November 13.
At the start of the hearing on November 13, 1974, the administrative law judge (“ALJ”) tentatively denied a motion by Cornell to dismiss the complaint on the ground of undue prejudice to Cornell from the Secretary’s delay in citing violations of the proper safety standards. At the conclusion of the hearing on the merits, the ALJ offered Cornell 30 days to gather and present additional evidence. Cornell, how ever, concluded that the additional time would not remedy the prejudice it had suffered in preparing its defense and therefore presented no additional evidence.
In his decision, the ALJ ruled that Cornell’s ability to prepare a defense had been materially impaired by the delay in filing the last amendment. He also held that even if it were assumed that Cornell’s ability to defend the citation had not been impaired, the Secretary had failed to prove a violation. Accordingly he granted Cornell’s motion to dismiss and vacated the citation and penalty. On the Secretary’s petition for review, the Commission reversed in a 2-1 decision, holding that the amendments did not prejudice Cornell and that the evidence established a safety belt violation. The Commission affirmed the citation, as amended, and assessed a $700 penalty.
The primary issue presented is whether the Commission erred in permitting the Secretary on November 4, 1974 to amend his citation and complaint to allege a violation of the safety belt standards. Cornell argues that the amendment changed the legal and factual basis of the alleged violation, thereby preventing it from presenting its sole defense. We agree.
II
Under the Commission’s procedural rules, the standard applicable to amendment of the Secretary’s citation and complaint is Fed.R.Civ.P. 15. See 29 C.F.R. § 2200.2; Bloomfield Mechanical Contracting, Inc. v. OSHRC, 519 F.2d 1257, 1262 (3d Cir. 1975). In general, the grant or denial of a motion for leave to amend, pursuant to Fed.R.Civ.P. 15(a), is within the sound discretion of the district court; it will be reversed only for an abuse of discretion. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330-31, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971); Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Canister Co. v. Leahy, 191 F.2d 255, 257 (3d Cir.), cert. denied, 342 U.S. 893, 72 S.Ct. 201, 96 L.Ed. 669 (1951). Rule 15(a) directs that leave to amend “shall be freely given when justice so requires.”
In Foman the Supreme Court identified factors governing motions to amend under Rule 15(a):
“Rule 15(a) declares that leave to amend ‘shall be freely given when justice so requires’; this mandate is to be heeded. See generally, 3 Moore, Federal Practice (2d ed. 1948), ¶¶ 15.08, 15.10. If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. —the leave sought should as the rules require, be ‘freely given.’ ”
371 U.S. at. 182, 83 S.Ct. at 230. See Moore’s Federal Practice ¶ 15.08[4], at 897-900 (2d ed. 1974); 6 C. Wright & A. Miller, Federal Civil Procedure § 1487 (1971). Delay alone, however, is an insufficient ground to deny an amendment, unless the delay unduly prejudices the non-moving party. Deakyne v. Commissioners of Lewes, 416 F.2d 290, 300 n.19 (3d Cir. 1969); Mercantile Trust Company National Association v. Inland Marine Products Corp., 542 F.2d 1010,1012 (8th Cir. 1976); Moore 115.08[4], at 901; Wright & Miller § 1488, at 438.
It is well-settled that prejudice to the non-moving party is the touchstone for the denial of an amendment. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 330-31, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971); Kerrigan’s Estate v. Joseph E. Seagram & Sons, 199 F.2d 694, 696 (3d Cir. 1952); Moore It 15.08[4], at 897; Wright & Miller § 1487, at 428. In evaluating the extent of prejudice, courts may inquire into the hardship to the non-moving party if leave to amend is denied. Moore ¶ 15.08[4], at 902; Wright & Miller § 1487, at 429.
Having set out the basic principles concerning Fed.R.Civ.P. 15, we turn to the present case. We are reviewing the order of the Commission, not of the ALJ. 29 U.S.C. § 660(a); Accu-Namics, Inc. v. OSHRC, 515 F.2d 828, 834-35 (5th Cir. 1975), cert. denied, 425 U.S. 903, 96 S.Ct. 1492, 47 L.Ed.2d 752 (1976). Since the Commission allowed the November 4 amendment, the question becomes whether the Commission abused its discretion in so doing. We conclude that it did.
Cornell’s sole defense to the last amendment to the complaint was that at the time the compliance officer made his inspection it would have been more dangerous for the ironworkers to use the safety belts than not to use them because the beams were not sufficiently braced. See United States Steel Corp. v. OSHRC, 537 F.2d 780 (3d Cir. 1976); Hunt, The Elusive Burden of Proof Under the Occupational Safety and Health Act of 1970, 30 Sw.L.J. 693, 713 (1976).
In this type of construction there are times when the vertical beams are in place, but not securely fastened, so it may be dangerous to attach a safety belt to them; if the beam toppled it would carry the workman with it. To present this defense adequately, Cornell needed as witnesses the workers who were on the job at the time of the inspection. It was undisputed that the workers were wearing but not using safety belts at the time of the inspection, but testimony as to the stability of the beams where they were working at the precise time of the inspection, and the danger of using the belts in accordance with the safety belt standard at that exact time, was vital to Cornell’s defense. Contrary to the position taken by the Commission and the Secretary, we therefore regard the workers’ testimony as indispensable.
The record indicates that the timing of the final amendment, more than 4 months after the inspection, made it impossible for Cornell to locate these needed witnesses. The workers were transients, hired from union halls to work at various job sites. Cornell had long since lost contact with them and had tried unsuccessfully to get workers from that particular job as witnesses at the hearing. This inability to secure necessary witnesses, caused solely by the delay of the Secretary in seeking the amendment, vitiated Cornell’s ability to present its sole affirmative defense.
Furthermore, the last amendment to the complaint completely changed the nature of the charges against Cornell. At the time of the inspection the compliance officer alleged that there was no temporary flooring, for which Cornell was subsequently cited under 29 C.F.R. § 1926.750(b)(2). Cornell advised the Secretary that the structure was not a tiered building requiring such flooring. The Secretary then, for reasons not clear, sought to amend the citation by adding an alternative violation, alleging lack of safety nets as required by 29 C.F.R. § 1926.750(b)(1)(ii); this standard also was applicable only to tiered buildings. Thus the only issue in dispute until a few days before the hearing was whether or not the structure was a “tiered building” to which the alternative sections of the regulations applied. Cornell did not need the ironworkers’ testimony to prevail on that issue.
When the Secretary moved to amend the complaint to allege a safety belt violation, however, months after the inspection and just before the hearing, the legal and factual matters in dispute changed drastically. Instead of thé issue being whether the structure was or was not a “tiered building,” the inquiry suddenly shifted to whether that part of the structure near the iron-workers was sufficiently secure at the time of the inspection to permit the workers to attach their safety belts to it. In the preparation of its defense, Cornell was entitled to rely on the Secretary’s earlier allegations in the matter; this justifiable reliance obviously prevented Cornell from securing testimony of the ironworkers needed to assert its affirmative defense. Cf. Deakyne v. Commissioner of Lewes, 416 F.2d 290, 300 (3d Cir. 1969); Ricciuti v. Voltarc Tubes, Inc., 277 F.2d 809, 814 (2d Cir. 1960). See also Hayden v. Ford Motor Company, 497 F.2d 1292, 1294-96 (6th Cir. 1974). In light of this unmistakable prejudice, we conclude that the Commission abused its discretion in allowing the amendment.
To permit the amendment in the current case would work a greater prejudice to the employer than the amendment denied in Secretary of Labor v. Frank Briscoe Company, Inc., 4 OSHC 1729 (1976). There, the Commission reversed the administrative law judge’s allowance of an amendment offered two days before the hearing without any explanation by the Secretary for the delay. The original citation in that case concerned the manner in which guard rails were installed, whereas the amended citation pertained to the lack of different protective equipment. The Commission concluded:
“Complainant completely abandoned the original charge; he changed the factual basis for the charge as well as his legal theory (the standard on which the charge was based) and thereby injected new issues into the case. In the circumstances we do not consider it fair to require Respondent to defend against an amendment of this kind particularly since the physical condition of the scaffold was observed during the inspection and therefore could have been properly alleged in the first instance.”
4 OSHC at 1132-33. (footnote omitted.) In the instant case, the prejudice resulting from permitting the amendment is even clearer since the record shows that the Secretary’s delay was the direct cause of the inability of Cornell to secure the testimony of witnesses vital to its defense.
The Secretary argues that “administrative pleadings are very liberally construed and very easily amended,” citing National Realty and Construction Co. v. OSHRC, 160 U.S.App.D.C. 133, 489 F.2d 1257, 1264 (1973), and that an employer “does not have any vested right to go to trial on the specific charge[s] mentioned in the citation,” citing Long Manufacturing Co. v. OSHRC, 554 F.2d 903, 907 (8th Cir. 1977). Nevertheless, there must be limits to such generalizations. It has been said that “the key to pleading and notice in the administrative process is adequate opportunity to prepare. . . . ” 1 K. Davis, Administrative Law Treatise § 8.05, at 530 (1958). The potential for prejudice in permitting unlimited and untimely amendments has been realized in the case at bar.
The Secretary further urges that any prejudice Cornell suffered was cured by the 30 day extension that the ALJ granted Cornell to present additional evidence after the hearing. The Secretary asserts, moreover, that Cornell suffered no prejudice because it had been on notice of the safety belt issue since the inspection and because the hazard of workmen falling was the danger underlying all alleged violations. We disagree with the Secretary’s assertion that once Cornell became aware of the alleged hazard, Cornell then had the obligation to prepare or preserve defenses for all possible standards under which it might be cited, including the safety belt standard. Even the attorney for the Secretary was unsure at the hearing which part or parts of the two safety standards specified in the amended complaint were controlling, thereby demonstrating the inordinate difficulty imposed on Cornell to ascertain the standards applicable to its conduct.
Preparing for a hearing of this nature is not the same as preparing for a football game. Surely it is unfair to charge an employer with the burden of guessing what violations the Secretary might charge and preparing a number of defenses accordingly. The Secretary’s rationale that the un derlying hazard was common to all cited standards ignores the crucial distinction that the different standards put different facts in dispute. A defense based on the type of structure Cornell erected, in response to a charge grounded on a lack of flooring or a safety net, is quite different from a defense based on whether or not the use of safety belts might increase, rather than decrease, the hazard of workmen falling at that moment in time when the compliance officer was observing those men from a distance of some 100 feet.
We agree with the principle of National Realty stated above, but a line must be drawn at some procedural point. Comparing the harm to the public interest from dismissing the amended citation in a case where the job has been completed with the prejudice to Cornell if the last amendment were allowed, permits only the conclusion that allowing the amendment would be to permit procedural unfairness.
Lastly, the Secretary urges that Usery v. Marquette Cement Manufacturing Co., 568 F.2d 902 (2d Cir. 1977) is analogous to the present controversy. We disagree. In Marquette the citation was for a violation of the “general duty clause” of the Act, 29 U.S.C. § 654(a)(1), for the hazardous dumping of debris in the process of relining a kiln. The complaint, however, charged a violation of a specific safety standard applicable only to the construction industry. Seven months later the case was submitted to an administrative law judge on stipulated facts and accompanying briefs. The Secretary moved before the administrative law judge to amend the complaint to reallege a violation of the general duty clause in the event that the judge found the specific construction standard inapplicable. To this, Marquette objected.
The Second Circuit held that the Commission abused its discretion in not permitting the Secretary to amend pursuant to Fed.R. Civ.P. 15(a). 568 F.2d 909. The court pointed out that the condition allegedly violative of the Act was identical under either the general duty clause or the specific standard, and that the Secretary proposed the same means of abatement in both. The particular standard, the court noted, required the same kind of protection as did the general duty clause in situations not covered by the specific standard. The court concluded that Marquette was not prejudiced in the least, and that even if it were prejudiced, Marquette could have sought a continuance, which would have enabled it to present any additional evidence needed in rebuttal, thereby curing the prejudice.
Although several distinctions exist between Marquette and the case before us, the controlling difference in short is the lack of incurable prejudice in Marquette, as opposed to the severe, irremediable prejudice that Cornell would suffer from allowing the amended complaint. In our view, therefore, Marquette adds no vitality to the Secretary’s arguments.
Ill
For the reasons expressed above, the Commission’s order will be vacated and the Commission directed to dismiss the citation.
|
3598433-13115 | OPINION OF THE COURT
HAESSIG, Judge:
A general court-martial composed of officer and enlisted members convicted the appellant, contrary to his pleas, of felony-murder, robbery, and sodomy in violation of Articles 118,122, and 125, Uniform Code of Military Justice, 10 U.S.C. §§ 918, 922, and 925 (1982) [hereinafter UCMJ], The appellant’s approved sentence includes a dishonorable discharge, confinement for twenty-five years, total forfeitures, and reduction to the grade of Private E1.
I
Facts
On the afternoon of 30 January 1989, the appellant, a twenty-one year old married soldier, began drinking in his barracks, and later continued drinking with friends at a bar near his installation in Ludwigsburg, Federal Republic of Germany. At about 2300, he and his friends left the bar. The appellant’s friends returned to their installation while the appellant, carrying a bottle of beer and unsteady on his feet, decided to walk to see his girlfriend, Ms. Monika Pres-tel, who lived approximately 500 yards away. As he walked towards Ms. Pres-tel’s, a car drove up to him, and the driver, Mr. Otto R. Bode, a seventy-four year old German male wearing a wig, necklace, lipstick, and a man’s suit, asked the appellant in broken English where he was going. The appellant replied that he was going to see his girlfriend. Mr. Bode asked the appellant if he wanted a ride and the appellant declined. The car drove off slowly and the appellant continued to walk. Shortly thereafter, the car reappeared and Mr. Bode again asked the appellant if he wanted a ride, saying that he looked drunk. The appellant momentarily thought about the offer and approached the car. Mr. Bode, according to the appellant, appeared to be a woman between thirty and forty years old. The appellant got in the car and the two drove off. They drove past Ms. Prestel’s, and as they approached another bar, the appellant told Mr. Bode to stop because he wanted a beer. Mr. Bode said it wasn’t necessary to stop and produced a beer from the back seat which the appellant accepted. They again started going toward Ms. Prestel’s but the appellant “got wrapped up into conversation more or less with her [Mr. Bode] and so we drove past my girlfriend’s house, so I gave that up for a little while.”
After driving for some time, Mr. Bode ran his hand up the appellant’s leg and to his crotch. While stopped at a traffic light, and as Mr. Bode continued to rub the appellant’s crotch, the appellant became sexually excited and French kissed Mr. Bode. The traffic light changed and by the time the pair stopped at the next traffic light Mr, Bode had unzipped the appellant’s pants and was fondling his penis. Mr. Bode began to perform fellatio upon the appellant who objected because “we were around all these lights” and because he was not wearing a condom and did not want to contract a disease. The light changed and Mr. Bode asked the appellant, “Do you want to go somewhere?” The appellant responded, “Yeah.”
Mr. Bode and the appellant rode together for approximately an hour before ending up in an isolated field. Mr. Bode again began to perform fellatio on the appellant who “nudged” Mr. Bode off because he again did not have on a condom. Before the appellant could produce a condom of his own, Mr. Bode produced one and put it on the appellant. Mr. Bode again started to perform fellatio on the appellant. Mr. Bode put his seat in a reclining position and the appellant began masturbating. Mr. Bode then removed his pants and moved onto the appellant’s lap, facing forward toward the windshield of the car with his back and buttocks toward the appellant. The appellant climaxed as he thought he was inserting his penis into a vagina, and reached around Mr. Bode to “fondle her clitoris” when he found Mr. Bode’s penis instead.
The appellant, a weight lifter who could bench press 250 pounds, testified that he “freaked” and “started yelling at him and I jumped on him ..., with my arm on him and I was hitting him and he hit me back and then I just-like grabbed him and shoved him into the back ... threw him into the back.” The appellant buttoned up Mr. Bode’s pants and removed his wallet “to see who this dirt bag was.” After finding nothing but about sixty German Deutsch Marks (US $32.60 at the existing exchange rate) in the billfold, the appellant decided, “Well, hey! He did me wrong so I’ll take his money____ I just said ‘fuck him’ and took them [deutsch marks]. He deserved it. That was basically — this is what I feel — I felt at the time. I took the money because I was of the opinion that the man had done wrong to me and that he was owing me something.” In addition to taking Mr. Bode’s cash, the appellant also took Mr. Bode’s watch, bracelet and ring valued at $210.00. When asked what he did when he left Mr. Bode, the appellant said, “I kicked at him. I’m not even sure I did it. I couldn’t see, I might have kicked the gear shirt [sic] or something.” In response to questioning from his civilian defense counsel, the appellant said that the only reason he would have had to kick was to kick Mr. Bode. Before leaving the scene, the appellant took another beer from the back seat of Mr. Bode’s car and drank approximately half of it prior to reaching Ms. Prestel’s. At the time the appellant left the scene he said that Mr. Bode was breathing in a manner described as shallow, painful, and gasping for breath. Mr. Bode was not moving. The cause of Mr. Bode’s death was later determined to be from suffocation as a result of paralysis caused by a broken neck.
Upon reaching Ms. Prestel’s, the appellant gave her Mr. Bode's watch, bracelet and ring, telling her, “I think I just killed someone.” During that conversation, the appellant was overheard by another person to say that he had “choked the shit” out of this same person. The appellant later told a fellow soldier that he had “biffed some faggot.”
II
Mistake of Fact Instruction
The appellant contends that the military judge erroneously instructed the members on the defense of mistake of fact. His theory regarding the charge of robbery, its lesser included offense of larceny and felony-murder was that: he believed Mr. Bode to be a thirty to forty year old female instead of the seventy-four year old male he was; Mr. Bode tricked him into homosexual activity; as a result, he believed Mr. Bode owed him something for having so tricked him; and his taking of Mr. Bode’s money and jewelry was merely the taking of property to which he was legally entitled. He requested that the military judge instruct the members on mistake of fact with respect to those offenses.
The military judge gave the following mistake of fact instruction regarding felony-murder, robbery, and the lesser included offense of larceny:
If the accused took this property under the mistaken belief that the victim owed him the property because he was tricked into having sex with Mr. Bode he cannot be convicted of felony-murder, robbery or larceny if the accused actually had such belief, no matter how unreasonable such a belief, and if that was the sole reason he took the property. However, if the accused took the property for the purpose of teaching Mr. Bode a lesson, the fact that he believed he was entitled to the property would not be a defense. (Emphasis added).
As a general rule, an accused’s mistaken but subjectively honest belief that he is the owner of property he forcibly takes from another is a defense to a charge of robbery. United States v. Kachoughian, 21 C.M.R. 276 (C.M.A.1956); United States v. Petrie, 1 M.J. 332 (C.M.A.1976). Manual for Courts-Martial, United States, 1984, Rule for Courts-Martial 916(j) [hereinafter R.C.M.]. This is because robbery is a compound offense consisting of larceny and assault, United States v. Chambers, 12 M.J. 443, 446 (C.M.A.1982), and the mistaken belief of ownership negates the intent to steal required in larceny. Petrie, 1 M.J. at 334.
There are, however, limits to the general rule. For example, a person does not have a right to retrieve contraband or property taken in lieu of contraband. Petrie, 1 M.J. at 334. The rule does not apply to the taking of “money or valuables in liquidation of an uncertain obligation or debt for money.” United States v. Cunningham, 14 M.J. 539, 541 (A.C.M.R.1982), reversed on other grounds, 15 M.J. 282 (C.M.A.1983). It does not apply where the property taken had been previously stolen by the robbery victim, or where the victim was engaged in illegal activity, or where the proceeds taken were from the sale of drugs. United States v. Robinson, 49 C.M.R. 183, 187 (A.C.M.R.1973). Additionally, while a bona fide mistake of fact that the property being recaptured is one’s own can be a defense to the larceny component of robbery, it is not a defense to the second component of that offense, assault in its various forms, United States v. Mack, 6 M.J. 598 (A.C.M.R.1976), petition denied, 6 M.J. 157 (C.M.A.1978), and the accused’s mistaken belief must be one which, if true, would make his conduct noncriminal. See United States v. Vega, 29 M.J. 892 (A.F.C.M.R.1989), petition denied, 31 M.J. 403 (C.M.A.1990).
Here the appellant was engaged in criminal activity and therefore was not entitled to the mistake of fact defense. The appellant testified that he believed he was having sexual intercourse with a female rather than engaging in homosexual acts with a seventy-four year old male. Thus, even if the facts had been as the appellant believed them to be, the defense of mistake of fact was not available to him for two reasons. First, he was engaging in criminal conduct by attempting to commit adultery by having sexual intercourse with a woman not his wife in violation of Article 80, Uniform Code of Military Justice, 10 U.S.C. § 880 (1982), and by engaging in sodomy in violation of Article 125, Uniform Code of Military Justice, 10 U.S.C. § 925 (1982). Second, he admitted he was reclaiming money and valuables in liquidation of an uncertain obligation or debt for money for rendering homosexual services: “I was of the opinion that the man had done wrong to me and that he was owing me something.” Accordingly, we hold as a matter of law that the defense of mistake of fact was not available to the appellant, and the military judge should not have given such an instruction.
In his mistake of fact instruction, the military judge initially and erroneously instructed the court members that if they believed the appellant took Mr. Bode’s property because he believed Mr. Bode owed him something for tricking him into engaging in homosexual activity, they could not find him guilty of felony-murder, robbery or larceny. He then compounded his error by apparently combining intent and motive, and instructed the members that if the appellant had any other “reason” for his actions, i.e., to teach Mr. Bode a lesson, in addition to his mistaken belief of fact, that “reason” would negate the appellant’s mistake of fact defense. See generally United States v. Kastner, 17 M.J. 11 (C.M.A.1983) (discusses the distinc tion between motive and intent). This deviation from the model instruction contained in Department of the Army Pamphlet 27-9, Military Judge's Bench Book, para. 5-11 (1 May 1982) had the net effect of neutralizing the instruction in that what the instruction provided in the first half was negated in the second half, underlined above. Notwithstanding the above, the defense did not object to the mistake of fact instruction at trial. Such failure to object constitutes waiver, absent plain error. United States v. Hargrove, 25 M.J. 68 (C.M.A.1987); United States v. Fisher, 21 M.J. 327 (C.M.A.1986); R.C.M. 920(f) and 1005(f). We do not find plain error.
Although the military judge erred, we are satisfied beyond a reasonable doubt that the appellant suffered no prejudice. See United States v. Eason, 21 M.J. 79 (C.M.A.1985). The appellant cannot complain of receiving the benefit of a mistake of fact instruction which was too restrictive when, as a matter of law, he was not entitled to the instruction in the first place. Article 59(a), UCMJ, 10 U.S.C. § 859(a). We are not faced with a situation like that found in United States v. Berg, 30 M.J. 195 (C.M.A.1990), where the court found that it could not say that a particular instruction did or did not provide the basis for conviction. Here, even if the members applied the instruction given, and found against the appellant based on it, he would have been in no worse position that if the instruction had never been given.
III
The Defense Requested Instruction on Felony-Murder
The defense requested, and the military judge refused to give, the following instruction regarding the causal connection required between the commission of the robbery and the acts which caused Mr. Bode’s death:
The causal connection requires that the accused have the intent to commit the underlying felony at the time of the actions which caused the killing. In this case, the government must prove beyond a reasonable doubt that the accused intended to rob the deceased at the time of the actions which caused Mr. Bode to die.
|
12147485-5605 | PER CURIAM:
Derrick Adams appeals his conviction for conspiracy to distribute and possess with intent to distribute 280 grams or more of cocaine base and cocaine. Specifically, he seeks review of the district court’s denial of his motion for a judgment of acquittal. After careful consideration of the parties’ briefs and the record, we affirm.
I
In October 2014, Adams and two others, Anthony Wyatt and Mary Davis, were indicted for various drug offenses. The indictment alleged, among other things, that between “January 1, 2013, and October 7, 2014,” Adams, Wyatt, and Davis conspired “together and with other persons to distribute and possess with intent to distribute ... two hundred eighty (280) grams or more of ... cocaine base ... and cocaine.”
At trial, the government offered evidence that Adams sold cocaine base to Wyatt and that Adams purchased cocaine base from an out-of-state supplier. First, Wyatt—who was Adams’s neighbor—testified that from May 2014 through July 2014, he regularly purchased cocaine base from Adams. According to Wyatt, he bought the cocaine base from Adams with the intent to resell it for profit. Second, three witnesses testified that Adams purchased cocaine base from an out-of-state supplier. Two witnesses stated that in 2013 they drove with Adams to purchase cocaine base from the out-of-state supplier. The supplier himself also testified. He testified that he (1) sold over 1,000 grams of cocaine base to Adams from early 2013 through early 2014, (2) sold Adams drugs at Adams’s residence on a number of occasions, and (3) recognized Wyatt because he saw Wyatt and Adams together before.
At the conclusion of the government’s case, Adams moved for a judgment of acquittal on the drug conspiracy charged in his indictment, arguing that the government failed to prove the conspiracy involved 280 grams or more of cocaine base and cocaine. The district court deferred ruling on the motion until the conclusion of trial. After the jury’s guilty verdict but prior to sentencing, Adams filed a memorandum of law in support of the motion.
In the memorandum, Adams asserted that the government charged him for a mid-2014 conspiracy with Wyatt and Davis but only showed that the conspiracy involved 160 grams of cocaine base and cocaine, not the 280 grams required for a conviction. According to Adams, the government improperly relied on a separate, unindicted conspiracy—his conspiracy with the out-of-state supplier—to bolster the quantity of drugs attributable to him and convict him for conspiring to distribute and possess with intent to distribute 280 grams or more of drügs. In other words, Adams contended that, rather than proving the single conspiracy for which he was charged, the government varied from his indictment and obtained a conviction based on multiple conspiracies.
The district court denied Adams’s motion. The court concluded that a jury could have reasonably found that Adams’s dealings with Wyatt and the out-of-state supplier were part of the same conspiracy charged in Adams’s indictment. This appeal followed.
II
The district court did not err in denying Adams’s motion for a judgment of acquittal. In challenging the district court’s denial of the motion, Adams reiterates his claim that the government varied from his indictment and showed multiple conspiracies rather than proving the single conspiracy for which he was charged. However, “[w]e will not reverse a conviction because a single conspiracy is charged in the indictment while multiple conspiracies may have been revealed at trial unless the variance is (1) material and (2) substantially prejudiced the defendant.” United States v. Edouard, 485 F.3d 1324, 1347 (11th Cir. 2007) (internal quotation marks omitted). And Adams has not shown a material variance.
“The arguable existence of multiple conspiracies does not constitute a material variance from the indictment if, viewing the evidence in the light most favorable to the government, a rational trier of fact could have found that a single conspiracy existed beyond a reasonable doubt.” Id. (internal quotation marks omitted). “[Tjhe jury makes the initial determination of whether the evidence supports a single conspiracy and their determination will not be disturbed if supported by substantial evidence.” Id. (internal quotation marks omitted).
“To determine whether the jury could have found a single conspiracy, we consider: (1) whether a common goal existed; (2) the nature of the underlying scheme; and (3) the overlap of participants.” Id. (internal quotation marks omitted). “If a defendant’s actions facilitated the endeavors of other co-conspirators or facilitated the venture as a whole, then a single conspiracy is shown.” Id. (internal quotation marks omitted). Moreover, “the finding of a single conspiracy is permitted where a ‘key man’ directs and coordinates the activities and individual efforts of various combinations of people.” Id.
Here, viewing the evidence in the light most favorable to the government, substantial evidence supports a determination that there was a single conspiracy. Adams was indicted for conspiring in 2013 and 2014 with Wyatt and others to distribute and possess with intent to distribute cocaine base and cocaine. The evidence demonstrates that during 2013 and 2014, Adams obtained large amounts of cocaine base from the out-of-state supplier and sold cocaine base to Wyatt. A rational trier of fact could find that—consistent with the indictment—Adams’s dealings with the supplier and Wyatt were a part of a single drug conspiracy that spanned from 2013 through 2014.
|
51674-4178 | ORDER AND JUDGMENT
PER CURIAM.
In October 2003, Petitioner-Appellant Jason Hughes entered five guilty pleas in Oklahoma state court arising from a series of crimes. Following the pleas, the state court sentenced Hughes to eight years imprisonment based on a total of eight felonies and five misdemeanors, all to be served concurrently.
Failing to file a direct appeal, Hughes filed for state post-conviction relief. The Oklahoma district court denied relief. This denial was subsequently affirmed by the OWahoma Court of Criminal Appeals. Both OMahoma courts deemed Hughes’s claims waived, finding that all of his claims should have been brought on direct appeal.
Hughes then sought a writ of habeas corpus in federal court pursuant to 28 U.S.C. § 2254, asserting eight grounds for relief, including the following: (1) Oklahoma state post-conviction procedures are inadequate and ineffective to protect Hughes’s federal constitutional rights; (2) ineffective assistance of trial counsel; (3) lack of jurisdiction by the state trial court based on Hughes’s unlawful transfer between counties without a court order; (4) trial error in accepting Hughes’s guilty pleas without informing Hughes that he would be sentenced in excess of the mini mum; (5) denial of due process; (6) Oklahoma statutory language excludes Hughes’s crimes from punishment by incarceration; (7) statutory language requiring parole consideration to be included in Hughes’s sentence and failure by the state parole board to comply with this legislative mandate; and (8) trial error in separating one continuous act into different counts for purposes of sentencing.
The federal district court denied the writ, finding that claim one and claims three through eight were procedurally barred. With regards to the second claim, ineffective assistance of counsel, the district court reached the merits and determined that because Hughes rendered his plea voluntarily, his claim failed.
1.
In December 2005, this court construed Hughes’s pro se pleadings, in particular his ineffective assistance of counsel claim, possibly to include an allegation of conflict of interest. This court granted a certificate of appealability (“COA”) with respect to the conflict of interest claim, directing the government to file a response. See 28 U.S.C. § 2253(c)(1).
Since the grant of COA, this court has determined that Hughes failed to properly raise the conflict of interest claim in the district court. Although we must liberally construe a petitioner’s pro se pleadings, we “may not rewrite a petition to include claims that were never presented.” Barnett v. Hargett, 174 F.3d 1128, 1133 (10th Cir.1999). Specifically, Hughes’s ineffective assistance of counsel argument before the district court plainly does not include a claim that his counsel had a conflict of interest. Accordingly, that claim has been waived and COA should not have been granted.
2.
We have also carefully reviewed the record with regard to claim one and claims three through eight and agree with the reasoning set forth by the magistrate judge precluding such claims as procedurally barred by Oklahoma state law. See Okla. Stat. tit. 22, § 1086 (“All grounds for relief available to an applicant under this act must be raised in his original, supplemental or amended application. Any ground ... not so raised ... may not be the basis for a subsequent application, unless the court finds a ground for relief asserted which for sufficient reason was not asserted or was inadequately raised in the prior application.”). According to the district court, Oklahoma’s procedural bar rule is both adequate and independent such that it precludes Hughes’s claims. The district court further reasoned that Hughes could not overcome the procedural bar both because he failed to demonstrate that any ineffectiveness on the part of his counsel constituted cause for the default and he failed to show any fundamental miscarriage of justice. We therefore conclude that Hughes has not made “a substantial showing of the denial of a constitutional right.” 28 U.S.C. § 2253(c)(2); accord Slack v. McDaniel, 529 U.S. 473, 484, 120 S.Ct. 1595, 146 L.Ed.2d 542 (2000).
3.
|
3708386-22747 | ORDER AND REASONS
CHARLES SCHWARTZ, Jr., District Judge.
This matter is before the court on the below listed Motions to Quash Service of Process and to Dismiss for Lack of In Personam Jurisdiction:
(1) Motion of SIG Schweizerische Industrie-Gesellschaft Holding AG [“SIG”] To Quash Service of Process and to Dismiss SIG from these consolidated proceedings for Lack of In Personam Jurisdiction.
(2) Motion of SIG To Quash Service of Process and to Dismiss the Complaint of Marvin Harrington, et al., for Lack of In Personam Jurisdiction.
(3) Motion of Uni-Storebrand Insurance Co., Ltd. [“STOREBRAND”] To Quash Service of Process and to Dismiss Third Party Complaint of Chang Xin for Lack of In Personam Jurisdiction.
(4) Motion of Porsgrunn, Stall & Maskin [“PORSGRUNN”] To Quash Service of Process and to Dismiss Third Party Complaint of Chang Xin for Lack of In Personam Jurisdiction.
(5) Motion of PORSGRUNN To Quash Service of Process and to Dismiss the Complaint of Isiah Anderson, et al., for Lack of In Personam Jurisdiction.
(6) Motion of PORSGRUNN To Quash Service of Process and to Dismiss the Complaint of Abraham Allen, et al., for Lack of In Personam Jurisdiction.
(7) Motion of PORSGRUNN To Quash Service of Process and to Dismiss the Complaint of Marvin Harrington, et al., for Lack of In Personam Jurisdiction.
(8) Motion of STOREBRAND To Dismiss Trosvik Industri, A/S [“TROSVIK”] as a Bankrupt.
These matters in the captioned consolidated proceedings were set for oral argument on Wednesday, September 25, 1991. At said oral hearing counsel for third-party plaintiff/defendant Chang Xin withdrew its opposition to the aforementioned motions to dismiss. Regardless, this Court shall address the merits of said motions because the individual claimants did not withdraw their opposition to the above listed motions to dismiss for lack of in personam jurisdiction.
The question before this Court is whether its exercise of personal jurisdiction over PORSGRUNN, TROSVIK, SIG and STOREBRAND in these consolidated proceedings would offend the “traditional notions of fair play and substantial justice.” This Court holds for reasons which follow that third party defendants/movants herein lack “minimum contacts” with Louisiana, and therefore, are not subject to suit in this forum. This decision pretermits consideration and discussion of the issues inherent in STOREBRAND’S Motion to Dismiss Trosvik Industri, A/S as a bankrupt and “tagging” PORSGRUNN’s service representative sent upon request of the MANDAN interest to repair the vessel’s steering gear post-accident.
I. FACTUAL BACKGROUND:
This consolidated matter arises out of the August 15th, 1991 collision of the M/V MANDAN with certain vessels owned by the United States Corps of Engineers moored along the right descending bank of the Mississippi River near Venice, Louisiana. Following the collision, the United States filed suit against the vessel owner Chang Xin and her operators. Chang Xin first filed a Complaint for Exoneration from or Limitation of Liability. Thereafter, Chang Xin filed third party complaints against the following entities:
1. SIG, the manufacturer of the hydraulic steering component aboard the MAN-DAN;
2. Zurich Versicherungs-Gesellschaft [“Zurich”], SIG’s insurer;
3. PORSGRUNN, the alleged “successor” to the assets of TROSVIK and the service provider to the MANDAN’s steering assembly; and
4. STOREBRAND, Trosvik’s and presently Porsgrunn’s insurer.
STOREBRAND is a Norwegian company, which issued policies of insurance to both TROSVIK and PORSGRUNN, and sued herein pursuant to Louisiana’s Direct Action Statute. It is not licensed and/or authorized to do business in this State, nor does it issue or deliver policies in the state of Louisiana.
STOREBRAND’S assured PORSGRUNN is also a Norwegian company, organized under the laws of the Kingdom of Norway, with its office in Porsgrunn, Norway. It has never maintained an office, employees, agents, assets, or property of any kind in Louisiana. It is not disputed that sole occasions of the presence of PORSGRUNN personnel in Louisiana were two in number, prior to the collision which is the subject of these consolidated proceedings. On both occasions, PORSGRUNN dispatched service personnel, at the vessel owner’s request and for the limited purpose of servicing the vessel.
On the first occasion, the service man merely utilized the New Orleans airport to facilitate travel to the M/Y YAGUAR the vessel upon which service was performed. No business other than servicing the vessel at the vessel owner's request was conducted.
The second occasion entailed a service man traveling from Porsgrunn to Louisiana to provide service to the M/V RANGER, which was located at the Port of New Orleans.
The only other contact PORSGRUNN had with either the MANDAN or this jurisdiction was after the casualty upon request for service on M/V MANDAN from Orient Ship Management. PORSGRUNN dispatched Rolf Kihle, who spent eight days in New Orleans aboard the MANDAN, and then departed because certain replacement parts were not available. PORSGRUNN later sent Kai Gullicksen, who performed contract service work for the company, to attend the installation of the replacement parts in the MANDAN’ steering gear. Other than previously mentioned, PORS-GRUNN had no contact or otherwise made any appearance in Louisiana. It has neither advertised nor established channels for the provision of services to customers in Louisiana.
Of these few instances aforementioned, wherein PORSGRUNN service men travelled to Louisiana, all arose in response to requests/actions of consumers of its services who happened to be located in Louisiana at the time service was requested. None of the contacts were the result of specific solicitations by PORSGRUNN in the State of Louisiana. It was mere happenstance that PORSGRUNN service men travelled to Louisiana prior to and after the casualty in question.
SIG is a corporation organized and existing pursuant to the laws of Switzerland. Though it owns wholly or partially, directly or indirectly, various subsidiary companies, including a United States Holding Company, SIG is not now, nor has it ever been qualified to do business in the State of Louisiana. It has never had an office, warehouse, place of business, employees, agents or representatives in Louisiana. It has never had an agent designated for service of process in Louisiana.
SIG’s only contacts with the state of Louisiana were: (1) the sale of sugar packing machines in 1981 to a Colorado company, which in turn ultimately installed same at a sugar company in Reserve, Louisiana; and (2) the 1984 sale of sugar packing machines to Reserve, Louisiana sugar packing company, which machinery was then delivered and installed at the vendee’s Scotts Bluff, Nebraska plant. From time to time, SIG has sold miscellaneous spare parts for the aforementioned machines.
In 1975, SIG sold two hydraulic control units in Switzerland to Trosvik, a Norwegian company. These hydroelectric mechanisms which are the subject of this litigation were shipped from Switzerland to Trosvik in Porsgrunn, Norway in 1975. SIG has never sold any such control mechanisms in the State of Louisiana and the aforementioned sales transaction bears no relationship to the State of Louisiana. SIG neither designed nor installed the steering system aboard the MANDAN.
Trosvik [PORSGRUNN’s alleged “predecessor corporation”] manufactured the steering gear for the MANDAN utilizing various components, including the two hydraulic control units purchased from SIG. Trosvik then sold the steering gear to the Swedish shipyard that built the MAN-DAN in Sweden. PORSGRUNN bought certain assets of Trosvik and hired certain employees of Trosvik who were formerly involved in the servicing of Trosvik manufactured steering gears. By the Agreement of Acquisition, PORSGRUNN assumed responsibility only for steering gears delivered on and after September 1, 1985. Trosvik was adjudged a bankrupt company under the laws of the Kingdom of Norway in said country on August 7, 1986. Trosvik’s affairs were wound up as September 29th, 1989.
Trosvik has had no connection, whatsoever, with the State of Louisiana.
From the time the SIG hydraulic units were manufactured in Switzerland until the MANDAN was completed and delivered to her purchaser in Sweden, all the manufacturing and sales transactions occurred in Europe. No part of the chain of commercial transaction that resulted in the construction and sale of the MANDAN had any connection with the United States or the State of Louisiana, for that matter.
II. DISCUSSION:
The MANDAN interests contend that aforementioned movants are subject to the personal jurisdiction of this Court. It is the opinion of this Court based on the aforementioned limited contacts with the State of Louisiana, that the exercise of personal jurisdiction over SIG, PORS-GRUNN, TROSVIK and their insurer, STOREBRAND exceed the limits of “due process” and is consequently constitutionally impermissible.
The determination of the validity of a court’s assertion of jurisdiction over a nonresident under a long-arm statute generally involves a two-step analysis: (1) the state statute must provide authority for the court to exercise personal jurisdiction over the non-resident in the litigation; and (2) there must be sufficient contacts between the defendant, the litigation and the forum state so as not to offend the traditional notions of due process. Because the Louisiana Long-Arm Statute LSA-R.S. 13:3201 has been construed to extend jurisdiction coextensively with the limits of “due process,” the first inquiry collapses into the second. Thus, the sole issue for this Court to decide is whether it is consistent with the Due Process Clause to require movants herein to defend this suit in Louisiana federal district court.
In Helicopters Nacionales De Colombia, S.A. v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 1872, 80 L.Ed.2d 404 (1984) the Supreme Court explained:
The Due Process Clause of the Fourteenth Amendment operates to limit the power of a State to assert in personam jurisdiction over a nonresident defendant. Due process requirements are satisfied when in personam jurisdiction is asserted over a nonresident corporate defendant that has “certain minimum contacts with [the forum] such that the maintenance of suit does not offend ‘traditional notions of fair play and substantial justice.’ ” When a controversy is related to or “arises out of” a defendant’s contacts with the forum, the Court has said that a “relationship among the defendant, the forum, and the litigation” is the essential foundation of in personam jurisdiction.
Even when the cause of action does not arise out of or relate to the foreign corporation’s activities in the forum State, due process is not offended by a State’s subjecting the corporation to its in person-am jurisdiction when there are sufficient contacts between the State and the foreign corporation, [citations omitted and emphasis supplied].
While the non-movants in the instant case do not concede that their claims against PORSGRUNN, TROSYIK, SIG, and STOREBRAND did not “arise out of”, and are not “related to” said foreign entities activities with Louisiana, the facts admit but one conclusion, that said claims did not “arise out of” and are not “related to” their activities in this forum.
Plaintiffs and MANDAN interests rely heavily on Bean Dredging Corporation v. Dredge Technology Corp., 744 F.2d 1081 (5th Cir.1984) asserting by virtue of the “stream of commerce” theory, specific jurisdiction is established as to movants. This position ignores both the criticism of the plurality decision of Supreme Court in Asahi Metal Industry Co., Ltd. v. Superior Court, 480 U.S. 102, 117, 107 S.Ct. 1026, 1032, 94 L.Ed.2d 92 (1987) specifically rejecting the “stream of commerce” theory advocated by the Fifth Circuit in Bean Dredging, and that said theory contemplates a sales and/or distribution process which brings the product into the forum. In the case at bar, the sales/distribution process ended in Europe, Sweden to be exact. The mere fact that a consumer happens to bring a product into the forum state is insufficient to support personal jurisdiction over the manufacturer.
The stream of commerce refers not to unpredictable currents or eddies, but to regular and anticipated flow of products from manufacture to distribution to retail sale.
As movants herein aptly argue, this simply is not a “stream of commerce” case. The component in this case did not reach the state of Louisiana through the “stream of commerce” which traversed only as far as Sweden. That a consumer, the operator of the vessel MANDAN had a port of call or passed through Louisiana 15 years later is not synonymous with serving the Louisiana market. This Court is bound by the Supreme Court’s pronouncements in Asahi, to wit:
Applying the principal that minimum contacts must be based on an act of the defendant, the Court in World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), rejected the assertion that a consumer’s unilateral act of bringing the defendant’s product into the forum state was a sufficient constitutional basis for personal jurisdiction over the defendant. It had been argued in World-Wide Volkswagen that because an automobile dealer and its wholesale distributor sold a product mobil by design and purpose, they could foresee being haled into court in the distant states into which their customers might drive. The court rejected this concept of foreseeability as an insufficient basis for jurisdiction under the Due Process clause. 107 S.Ct. at 1026.
Having resolved that this is not a “specific jurisdiction” case, the focus shifts to the movant companies’ contacts with the State of Louisiana to determine whether they constitute the kind of “continuous” and “systematic” general business contacts such the exercise of “general jurisdiction” would be proper. The Court finds no such contact exists.
A close examination of the activities of PORSGRUNN, TROSVIK, STOREBRAND, and SIG vis a vis this forum reveals a paucity of contacts with Louisiana. As was the case in Bayou Steel Corporation v. M/V Amstelvoorn, 809 F.2d 1147, 1150 (5th Cir.1987), movants in the case at bar had neither offices nor employees in Louisiana and transacted no business here. This Court finds only that Trosvik manufactured the steering gear, SIG supplied component hydraulic units, and that PORSGRUNN’s sent two service men to the MANDAN in Louisiana post-accident at the request of the MANDAN interests to repair the steering gear, which was an insignificant “contact” at best. That the MANDAN travelled through the State of Louisiana or even made port calls in Louisiana or that it was foreseeable that it would do so are wholly irrelevant lines of inquiry under the aforementioned jurisprudence.
Borrowing language from the Bayou Steel court, “stripped to its essentials, the position of [the plaintiffs and the MAN-DAN interests] is that [PORSGRUNN, TROSVIK, and SIG] introduced a product [via] the vessel, into the stream of commerce, that its presence in Louisiana was foreseeable, and that [they] could have anticipated being haled into court in Louisiana.” Id. As noted previously, movants herein have had no intercourse with Louisiana, the visits of vessels which contain component parts manufactured by them comprise the totality of their contacts with this forum. To subject these entities to the jurisdiction of the federal court in Louisiana because of the fortuity that the vessel at issue visited Louisiana waters, unsupported by systematic and continuous contact, offends the principle of due process.
Plaintiffs and the MANDAN interests vigorously argue the uncertainty of the Supreme Court in Asahi, supra, pointing to the division of that Court with respect to the dimension of the “stream of commerce” doctrine. Regardless of any such uncertainty, Asahi involved a question of specific jurisdiction which is not the issue here. As the Fifth Circuit in Bearry observed “nothing in Asahi signaled that the Supreme Court wished to eliminate the distinction between specific and general jurisdiction, recognized as recently as its opinion in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 2182 n. 15, 85 L.Ed.2d 528 (1985).” In a nutshell, here the cause of action is unrelated to movants’ contacts with the forum.
Turning to non-movants argument in the case at bar with respect to SIG’s subsidiaries’ contacts, it is well-settled that the mere existence of a parent-subsidiary relationship will not support the assertion of jurisdiction over a foreign defendant,. Plaintiffs’ focus on contacts of other companies comprising the SIG group of companies is thus, “much ado about nothing.”
This Court is mindful of both “the unique burdens placed upon one who must defend oneself in a foreign legal system” and the “significant weight” accorded this factor “in assessing the reasonableness of stretching the long arm of personal jurisdiction over national borders” . These international considerations alone weigh against finding the reasonableness of asserting jurisdiction in this case. When considered together with the total absence of contacts in the case of TROSVIK, the insignificant contacts of PORSGRUNN and SIG, which in no manner or stretch to the circumstances approximate “continuous” and “systematic contacts” as required, this Court is left no choice but to grant their motions to dismiss for lack of in personam jurisdiction.
Even assuming arguendo that PORSGRUNN’s SIG’s, and STOREBRAND’S connections with the State of Louisiana were continuous and systematic, this Court is persuaded that the exercise of general jurisdiction would not be fair and reasonable. In assessing the fairness of asserting jurisdiction, Asahi requires the court to look at the following factors: (1) the burden on the defendant; (2) the interests of the forum state; (3) the plaintiffs’ interest in obtaining relief; and (4) the interests of the several states.
As previously discussed, the burden placed upon the defendants here is real. However, this is not the sole determinant. This suit further implicates no distinct interest of Louisiana. Neither PORS-GRUNN, TROSVIK, STOREBRAND nor SIG have ever been qualified to do business in Louisiana. They own no property in Louisiana, and have no facilities in Louisiana. None of the moving entities have an office or an agent in Louisiana. The work performed on the MANDAN subsequent to the collision at issue by service personnel of PORSGRUNN was scheduled at the request of the vessel’s owners and operators and was for a period of limited duration. Yet, they are asked to defend lawsuits here.
The assertion of such broad general interest [i.e., that Louisiana has an interest in the quality and safety of products that PORSGRUNN and SIG manufacture and/or service or that TROSVIK, now defunct, used to manufacture because said products may find their way into this State], does not suffice to override the burdens placed on foreign defendants by these consolidated proceedings. Third party plaintiff’s, the MANDAN interests [i.e., the vessel and her owners and operators Chang Xin] are Hong Kong based. Though many of the individual plaintiff’s are Louisiana residents who have seen fit to amend their claims and add movants following the lead of Chang Xin, the limitation fund exceeding $17 million is more than adequate to satisfy their claims. That Louisiana is the locus of the injury/damage is simply insufficient to satisfy the notion of “fairness.” Accordingly, and for all of the aforementioned reasons,
IT IS ORDERED that the MOTIONS TO DISMISS for lack of in personam jurisdiction filed on behalf of PORSGRUNN, TROSVIK, STOREBRAND, and SIG are hereby GRANTED.
IT IS FURTHER ORDERED that the Motions to Quash Service of Process filed on behalf of the aforementioned movants, PORSGRUNN, STOREBRAND, and SIG are hereby DISMISSED AS MOOT.
IT IS FURTHER ORDERED that the Motion to Dismiss Trosvik Industri, A/S, as a bankrupt filed on behalf of STOREBRAND its insurer, is DISMISSED AS MOOT.
. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945) [citing Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)].
. STOREBRAND moved to dismiss the action against its assured Trosvik on the grounds that it is and was at all pertinent times a bankrupt entity, the affairs of which were wound up on August 7, 1986 by the appropriate judicial authority in the Kingdom of Norway. Essentially, STOREBRAND contends that Trosvik was not a judicial person at the time of suit, and therefore cannot be made a party to these proceedings. The adequacy of the submissions relative to Trosvik’s bankruptcy, and additionally whether PORSGRUNN qualifies as Trosvik’s "successor”, are subordinate with respect to the determination of personal jurisdiction with respect to these foreign defendants.
. Similarly, movants have alleged plaintiff's service of process was defective. This issue is also mooted by the finding of no personal jurisdiction as to said foreign defendants.
. The MANDAN is owned by defendant Chang Xin Shipping Company, Ltd.
. The MANDAN limitation fund exceeds $17 million.
. Both of the occasions of PORSGRUNN having flown service personnel to Louisiana were unsolicited by PORSGRUNN and fortuitous in that Louisiana happened to be the location of the vessel when service was required.
. PORSGRUNN neither designed nor manufactured the steering gear aboard the MANDAN. PORSGRUNN’s sole involvement with the MAN-DAN prior to the instant casualty occurred outside of the jurisdiction of this Court and involved the installation of a totally unrelated component [i.e., the Power Refilling System not the steering gear],
. In 1986, 1987, and 1989, SIG also sold four packing machines to the Folger Coffee Company of Cincinnati, Ohio, which machines were ultimately placed by Folgers at their New Orleans, Louisiana plant.
. When it was originally delivered the MAN-DAN was named ANGELIC SKY.
. Petroleum Helicopters, Inc. v. Avco Corporation, 834 F.2d 510, 512 (5th Cir.1987).
. Cf., Federal Insurance Company v. Lake Shore, Inc., 886 F.2d 654, 657 n. 2 (4th Cir.1989).
. This is what is referred to as "specific jurisdiction”, that is when a State exercises personal jurisdiction over a defendant in a suit "arising out of or "related to” the defendant’s contact with the forum.
. The state has been said to be exercising "general jurisdiction” over the defendant, when the State exercises personal jurisdiction in a case not arising out of or related to the defendant's contacts with the forum.
|
1401382-17023 | OPINION OF THE COURT
JAMES HUNTER, III, Circuit Judge.
This case requires us once again to examine the requirement that Internal Revenue Service (IRS) summonses be issued in good faith pursuit of the congressionally authorized purposes of 26 U.S.C. § 7602. United States v. LaSalle National Bank, 437 U.S. 298, 318, 98 S.Ct. 2357, 2368, 57 L.Ed.2d 221 (1978); see United States v. Powell, 379 U.S. 48, 58, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964). It differs from prior cases involving IRS summonses in that the district court, in deciding that the summonses were not issued in good faith, focused on the effect that an informant’s motive had on the Service’s purpose of issuing the summonses rather than on the Service’s interest in civil, as opposed to criminal remedies. We conclude that the facts found and reasons given by the district court were legally insufficient to support a finding of bad faith, and we remand to the district court for further proceedings on the issue.
I
The Internal Revenue Service brought this action seeking judicial enforcement of summonses issued pursuant to § 7602. The summonses, issued by Special Agent Joseph Dollard on information provided by a confidential informant, were addressed to Americo V. Córtese, Prothonotary of the Court of Common Pleas of Philadelphia County. The summonses directed Córtese to produce “contingent fee agreements” and “statements of distribution” filed by a number of named negligence attorneys with the Prothonotary’s office pursuant to Rule 202 of the Philadelphia Local Rules of Civil Procedure. The documents involved were required to be filed under Rule 202 and contained details of contingent fees earned by the named attorneys.
Córtese responded to the complaint with a statement representing that he was prepared to produce the documents, but requesting that the affected attorneys be permitted to intervene. Nine of the attorneys did intervene and move to dismiss the complaint and quash the summonses on numerous grounds, including that the summonses were being used solely for the purpose of obtaining evidence for criminal proceedings and that there was no bona fide civil tax investigation of the intervenors.
The district court held a preliminary hearing on the motion at which special agent Dollard testified. See United States v. McCarthy, 514 F.2d 368 (3d Cir. 1975). The Court decided that further investigation into the good faith of the Service was warranted. At intervenors’ request, an ex parte, in camera hearing was held with the government attorneys to review the documents provided by the informant.
Intervenors then moved to compel discovery from Dollard and the Assistant United States Attorney who was simultaneously conducting a grand jury investigation involving the same negligence attorneys. On October 28, 1977, the district court granted intervenors’ motion in part, but specifically rejected the contention that “the summonses were issued for criminal purposes” on the ground that “intervenors have not alleged that a recommendation for criminal prosecution was made prior to the issuance of the summonses.” Discovery was limited to the issues of “a) whether the IRS is conducting a legitimate investigation, for proper purposes, in good faith; and b) whether the summonses in this case pose ‘second inspection’ problems, under § 7605(b) of the Internal Revenue Code.”
After further discovery, a hearing was held by the district court on these issues. On April 28, 1978, the court ruled that the investigation was conducted in bad faith, refused to enforce the summonses and ordered the complaint dismissed. The reasoning in support of that order is the subject matter of this appeal.
The district court found
“that the IRS investigation was not pursued in good faith. The improper purpose on the part of the informant is inextricably intertwined with the IRS investigation. . . It is our conclusion that certain interests [centered in the insurance industry], which are adverse to the class of intervenors, have used the IRS with its knowledge, as a ‘cat’s-paw’ to accomplish its purpose of retribution against the class of negligence attorneys.”
The court relied on “the unusual facts and circumstances of this case” to support its finding of bad faith. First, the court observed that there was no evidence that either the IRS or the informant had knowledge of any violations of the Internal Revenue Code. Second, the information supplied by the informant did not concern a limited number of individuals, but was “wholesale in nature and concerned virtually the entire Philadelphia negligence bar.” Third, only the negligence bar was targeted for investigation, despite the fact that Rule 202 applied to attorneys in other areas of the law. Finally, the court stated that
“[t]he IRS' had to realize that the informant, who was instrumental in furnishing thousands of documents designed to get within an IRS net all of the members of the personal injury bar who customarily handle cases for plaintiffs in Philadelphia, was pursuing its own business purpose by giving the IRS the data.”
The court concluded
“A different result would obtain if the informant gave information which linked a finite number of individuals with actual violations of the Internal Revenue Code. It suffices to say we are convinced, and so find, that certain interests centered in the insurance industry used the IRS for a wrongful purpose; unfortunately, the IRS permitted itself to be so used.”
The Order and Memorandum Opinion was signed by the district judge on April 28 and filed on May 2, 1978. The judge resigned his judgeship effective May 1, 1978.
The Government appeals the dismissal of its enforcement action. They contend that the reasons given by the district court are legally insufficient to constitute bad faith. Appellees, the intervenors below, respond that the determination of bad faith is a question of fact and that the record contains sufficient evidence to support such a finding.
Additionally, there have been several motions before this court. The appellants have moved to vacate the decision of the district court on the ground that the opinion was not filed by a sitting federal judge. Appellees have moved to gain access to the notes of testimony of the in camera hearings, claiming that without them, they are incapable of defending this appeal.
We agree with appellants that the reasons stated by the district court are legally insufficient to support a finding of bad faith on the part of the government, and we remand for further development of the record in light of the proper standard of bad faith. Because of this disposition, we need not reach the appellants’ claim that the opinion filed after the resignation of the district judge was invalid. Finally, we conclude that it is unnecessary to release the in camera transcripts to appellees at this time.
II
In United States v. LaSalle National Bank, 437 U.S. 298, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978), the Supreme Court once again examined the requirement that the IRS not abuse the process of the courts in seeking enforcement of administrative summonses issued pursuant to § 7602. See, e. g., United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964). The Court specifically established a two-step inquiry. “First, the summons must be issued before the Service recommends to the Department of Justice that a criminal prosecution, which reasonably would relate to the subject matter of the summons, be undertaken.” LaSalle National Bank, 437 U.S. at 318, 98 S.Ct. at 2368.
The second step of the inquiry, relevant where the Service had not recommended prosecution to the Justice Department prior to the issuance of the summons, requires consideration of whether the Service, as an institution, at all times used the summons authority in good faith pursuit of the congressionally authorized purposes of § 7602, specifically, the civil determination or collection of taxes. Id. The Court further explained that this second step requires consideration of the standards of good faith set forth in United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964). LaSalle National Bank, 437 U.S. at 318, 98 S.Ct. at 2368.
Powell requires the Commissioner to show that the investigation has been conducted pursuant to a legitimate purpose, that the information sought may be relevant to that purpose, that the information was not already within the Commissioner’s possession and that the administrative procedures of the Code have been followed. United States v. Powell, 379 U.S. at 57-58, 85 S.Ct. at 255. Once the IRS has met its burden, the taxpayer bears a heavy burden of establishing an abuse of the court’s process. See LaSalle National Bank, 437 U.S. at 317, 98 S.Ct. at 2368; United States v. Genser, 595 F.2d 146, 151 (3d Cir.), cert. denied, — U.S. —, 100 S.Ct. 269, 62 L.Ed.2d 185 (1979). Specifically, “[s]uch an abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation.” United States v. Powell, 379 U.S. at 58, 85 S.Ct. at 255.
Ill
We now consider whether any of the reasons proffered by the district court are sufficient to support its conclusion of bad faith on the part of the IRS and its refusal to enforce the summonses. At the outset, we note that the district court based its conclusion of bad faith on the “unusual facts and circumstances of this case.” The question before us is a legal one, whether the facts found by the district court constitute bad faith sufficient to undermine the validity of the summonses issued by the IRS. We are, therefore, not constrained by the clearly erroneous standard. See LaSalle National Bank, 437 U.S. at 319, n. 21, 98 S.Ct. at 2368, n. 21. Accordingly, we must examine the “unusual facts and circumstances” of this case to determine whether they warrant a conclusion of bad faith.
The district court first noted that there was no evidence that the IRS had knowledge of any violation of the Internal Revenue Code. It is clear, however, that the Service need not have knowledge of a violation of the tax laws in order to investigate for wrongdoing. The self-reporting system upon which our tax structure is based requires that the Service have wide powers to investigate for potential violations. See United States v. Bisceglia, 420 U.S. 141, 145-46, 95 S.Ct. 915, 918, 43 L.Ed.2d 88 (1975). In United States v. Powell, 379 U.S. 48, 57, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964), the Supreme Court held that “the Commissioner need not meet any standard of probable cause to obtain enforcement of his summons . . . .” By analogy to other agencies, the Court suggested that the Service “ ‘has a power of inquisition . . . which is not derived from the judicial function. It is more analogous to the Grand Jury, which does not depend on a case or controversy for power to get evidence but can investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not.’ ” Id. at 57, 85 S.Ct. at 255 (quoting United States v. Morton Salt Co., 338 U.S. 632, 642-43, 70 S.Ct. 357, 364, 94 L.Ed. 401 (1950)). See United States v. Bisceglia, 420 U.S. at 147, 95 S.Ct. at 919. Thus, the lack of knowledge of a violation of the code does not imply bad faith on the part of the IRS in the issuance of its summonses.
Similar reasoning leads to the conclusion that the second factor relied on by the district judge, that the investigation was aimed only at negligence lawyers while others who filed forms under Rule 202 were not being investigated, does not support a finding of bad faith. The Commissioner does not have the resources to investigate all taxpayers. That fact, combined with the broad investigative mandate of the Service to determine who may be liable, see United States v. Bisceglia, 420 U.S. at 145, 95 S.Ct. at 918, indicates that Congress has given the Service the power to select the subjects of its investigation. The district court apparently thought it relevant that no other attorneys who had filed Rule 202 forms were the subject of the summonses. However, since the Service had necessarily narrowed the subject of its investigation to the negligence bar prior to the issuance of the summonses, it would have no interest in the Rule 202 forms of other attorneys. The fact that other attorneys also filed Rule 202 forms which were not summoned is not probative of the Service’s motive in selecting its investigative target.
The third concern of the district court was the in mass nature of the information tendered by the informant. Standing alone this fact is not relevant to the determination of bad faith. The Service is, of course, permitted to accept all information offered it.
The fact that the informant saw fit „to hand over information on the entire negligence bar, however, does reflect on the motive of the informant. By far the most important factor in the district court’s decision is its finding that the “IRS had to realize that the informant, who was instrumental in furnishing thousands of documents designed to get within an IRS net all of the members of the personal injury bar who customarily handle cases for plaintiffs in Philadelphia, was pursuing its own business purpose by giving the IRS data.” “It suffices to say that we are concerned, and so find, that certain interests centered in the insurance industry used the IRS for a wrongful purpose; unfortunately, the IRS permitted itself to be so used.”
We agree with appellant that the motive of an informant is not a relevant consideration in determining good faith. Despite its conclusion, the district court recognized that informants “have historically been known to hold grudges against those who are the subject matter of the information.” Informants traditionally act in their own interest. It is a rare informant who is not interested in “pursuing his own purposes.” Indeed, 26 U.S.C. § 7623 (1976) permits the Service to pay informants for information. The motive of the informant does not taint the motive of the IRS.
A different result, however, may obtain if it were found that either the Service or the investigating agent was motivated by the same animus that motivated the informant. Portions of the district court’s ruling may be interpreted as holding that the IRS shared the informant’s motive: “the entire motivation of an informant, wedded body and soul to the insurance industry, turned out to be the motivation of the IRS itself.” We do not believe, however, that the facts found by the district court are sufficient to support such a conclusion. Some support for this conclusion may be found from the facts that a rather narrowly defined class of individuals — negligence attorneys — were selected for investigation despite the absence of a suggestion of wrongdoing in the documents provided by the informant. But these facts must be considered in light of the broad discretion given the IRS to select investigative targets, and the policy of encouraging informants to supply information. Accordingly, without specific findings- concerning the process or timing of the selection of the investigative target, the above cited facts are insufficient to support an inference that the Service was moved in the selection of its target by the improper aims of the informant.
IV
We now turn to appellees’ motion to release the notes of the in camera hearing conducted on the issue of good faith by the district court. Appellees argue that failure to release the notes of testimony renders them unable to adequately respond to the government’s appeal and, therefore, denies them due process of law.
This court recognizes the value of in camera testimony as a method of protecting the identity of a government informant while permitting an evaluation of the importance of his testimony. See United States v. Jackson, 384 F.2d 825, 827 (3d Cir. 1967), cert. denied, 392 U.S. 932, 88 S.Ct. 2292, 20 L.Ed.2d 1390 (1968). Accord, Black v. Sheraton Corp. of America, 184 U.S.App. D.C. 65, 68, 564 F.2d 550, 553 (D.C.Cir. 1977); United States v. Freund, 525 F.2d 873, 877 (5th Cir.), cert. denied, 426 U.S. 923, 96 S.Ct. 2631, 49 L.Ed.2d 377 (1976); United States v. Anderson, 509 F.2d 724, 728 (9th Cir.), cert. denied, 420 U.S. 910, 95 S.Ct. 831, 42 L.Ed.2d 840 (1975). Although here the district court went beyond the mere evaluation of the informer privilege and took testimony on the issue of the government’s good faith, this procedure was expressly requested by the appellees. Appellees’ position before this court, if adopted, would render meaningless the protections of the in camera procedure which they requested. Cf. In re United States, 565 F.2d 19, 23 (2d Cir. 1977), cert. denied, 436 U.S. 962, 98 S.Ct. 3082, 57 L.Ed.2d 1129 (1978) (disclosure to attorneys is likely to compromise the policy behind the informer privilege).
|
7654398-18957 | ORDER GRANTING THE GOVERNMENT’S MOTION TO RESENTENCE
GADOLA, District Judge.
On April 4, 1996, this court entered an order setting aside the petitioners’ convictions on count V of the indictment in criminal action number 90-50016, which alleged the use of firearms during and in relation to a felony under 18 U.S.C. § 924(c). The petitioners had each moved, pursuant to 28 U.S.C. § 2255, to vacate their convictions on the section 924(c) counts in the wake of the United States Supreme Court’s decision in Bailey v. United States, 516 U.S. -, 116 S.Ct. 501, 138 L.Ed.2d 472 (1995) (requiring “active employment” of a firearm to sustain a conviction under the “use” prong of section 924(e)). In its joint response to the petitioners’ motions, the government agreed that, in light of Bailey, there was no longer an adequate factual basis to sustain the convictions under count V. The government also requested that, because the petitioners did not receive two-point enhancements under § 2Dl.l(b) of the United States Sentencing Guidelines due to their conviction on the section 924(c) counts, the petitioners be re-sentenced on the remaining counts of their convictions after the guidelines are recalculated with the two-point enhancement. This court ordered the United States Probation Department to recalculate the guidelines range for the petitioners and set the date for resentencing in this matter for May 14, 1996.
At the resentencing, the petitioners objected to the recalculation of their guideline range for the counts remaining on their convictions on the ground that the defendants had served the entire time of their sentences on the remaining counts. On May 28, 1996, the petitioners filed an amended motion to vacate their sentences pursuant to 28 U.S.C. § 2255, supplementing the arguments presented at the May 14, 1996 hearing. The government filed a response on June 3,1996, contending that resentencing on the remaining counts was appropriate because the petitioners had violated the terms of their Rule 11 plea agreements by filing their section 2255 motions.’ This court conducted a hearing on these motions on June 20,1996.
I. Factual and Procedural Background
Before this court delves into the legal questions presented, an explication of the facts underlying the petitioners’ convictions and sentences is warranted. On May 11, 1990, the petitioners were indicted with eight other defendants on charges relating to the distribution of large quantities of marijuana. Specifically, Gerald Allen Thayer was charged with conspiracy to distribute a controlled substance in violation of 21 U.S.C. §§ 841(a)(1) and 846 (count I), possession with intent to distribute marijuana under 21 U.S.C. § 841(a)(1) (count IV), use of a firearm during and in relation to a felony drug offense in violation of 18 U.S.C. § 924(c) (count V), and a violation of 18 U.S.C. § 922(g)(1) as a felon in possession of a firearm (count VI). Dawn Marie Thayer was indicted on all of these charges except the felon in possession of a firearm charge contained in count VI of the May 11, 1990 superseding indictment.
On November 13,1990, Gerald Allen Thayer entered a plea of guilty to all four counts (counts I, IV, V and VI) pursuant to a Rule 11 plea agreement. Dawn Marie Thayer also entered a guilty plea on that date to the charges contained in counts I, IV and V pursuant to a similar Rule 11 agreement. The Rule 11 agreement provided that, based upon the petitioners’ cooperation with the government, the government would move- for a downward departure under § 5K1.1 of the United States Sentencing Guidelines and that any incarceration imposed would be limited to a total of eleven years (132 months). Before that motion was made, Gerald Allen Thayer’s maximum sentence under the Rule 11 agreement, if accepted, would have been 211 months, equalling the lower limit of the guideline range for counts I, IV and VI (151 months) plus the mandatory consecutive sentence imposed for the section 924(c) charge contained in count V (60 months). Before that motion, Dawn Marie Thayer’s maximum sentence under the Rule 11 agreement, if accepted, would have been 195 months, based upon the lower limit of her guideline range for counts I and IV (135 months) and the mandatory consecutive sentence for the section 924(e) charge in count V (60 months).
This court ultimately granted the government’s motion for downward departure and, on March 7, 1991, sentenced each of the petitioners to 132 months of incarceration. The judgment entered upon sentencing indicates that Gerald Allen Thayer was sentenced to a term of 72 months on count I, 60 months on count TV and 72 months on count VI, all of which were to run concurrently, and a term of 60 months on count V, to run consecutive to the terms imposed under the other counts. In addition to incarceration, Gerald Allen Thayer was also sentenced to supervised release for a term of 5 years on counts I and IV and a term of 3 years on counts V and VI, all to run concurrently. Similarly, the judgment entered for Dawn Marie Thayer reflected a sentence of incarceration for a term of 72 months on count I and 60 months for count IV to run concurrently, in addition to the 60 consecutive months imposed for count V. Dawn Marie Thayer was also sentenced to a term of supervised release for a term of 5 years on counts I and IV, and 3 years on count 5, concurrently.
While the petitioners were serving their sentences, the Supreme Court issued its decision in Bailey v. United States, 516 U.S. -, 116 S.Ct. 501, 133 L.Ed.2d 472 (1995). On December 20, 1995, Gerald Allen Thayer filed his motion to vacate his conviction under count V and to reduce his sentence in light of the Bailey decision pursuant to 28 U.S.C. § 2255 (Civil Case No. 95-40436). On January 15, 1996, Dawn Marie Thayer filed her section 2255 motion to vacate her conviction on count V on the same grounds (Civil Case No. 96-40031). Gerald Allen Thayer filed a motion to consolidate these actions on February 1, 1996. As detailed above, this court granted the petitioners’ motions to vacate their respective section 924(c) convictions contained in count V of the May 11, 1990 superseding indictment and scheduled the matter for resentencing.
The central issue presented by the present motion is whether this court may resentence the petitioners on the remaining counts of their respective convictions in light of the vacatur of the § 924(e)(1) conviction. The Government wishes to resentenee petitioners on these convictions so that it may request a two-level enhancement pursuant to 2D1.1(b)(1). The petitioners contend that this court is without jurisdiction to resen-tence them on the remaining conviction because they did not challenge their sentence on those counts. Further, the petitioners submit that resentencing on the remaining counts would violate the Double Jeopardy and Due Process Clauses.
II. Discussion
In the wake of Bailey, district courts across the country have confronted the thorny legal issues presently before this court concerning the propriety of adjusting the sentence of a successful § 2255 petitioner to allow for a two-level increase pursuant to 2Dl.l(b)(l). Review of several of the early decisions on the question discloses that the courts are fairly evenly divided. For example, compare Rodriguez v. United States, 933 F.Supp. 279 (S.D.N.Y.1996) (holding that court’s limited jurisdiction precludes two-level increase on resentencing), and Warner v. United States, 926 F.Supp. 1387 (E.D.Ark.1996) (holding that Constitution and court’s limited jurisdiction preclude two-level increase on resentencing), with Merritt v. United States, 930 F.Supp. 1109 (E.D.N.C.1996) (holding that Constitution and court’s jurisdiction allow for two-level increase on resentencing), arid Mixon v. United States, 926 F.Supp. 178 (S.D.Ala.1996) (same). This court agrees with those courts that hold that it is proper for the district court to recalculate an entire sentencing package, even if only one of the multiple, interdependent convictions underlying the sentence is collaterally attacked.
Authority to Revisit Sentences Under 28 U.S.C. § 2255
Upon review of the relevant authorities, this court finds that section 2255 authorizes this court to recalculate the petitioners’ aggregate sentences, despite the fact that they directly challenged their sentences only on the section 924(c) convictions. Section 2255 provides, in part:
A prisoner in custody under sentence of a court established by Act of Congress claiming the right to be released upon the ground that the sentence was imposed in violation of the Constitution or the laws of the United States ... may move the court which imposed the sentence to vacate, set aside, or correct the sentence.
... If the court finds that the sentence imposed was not authorized by law or otherwise open to collateral attack ... the court shall vacate and set the judgment aside and shall discharge the prisoner or resentence him or grant a new trial or correct the sentence as may appear appropriate.
28 U.S.C. § 2255. It has been recognized that, as used in § 2255, the term “resen-tenee” implies that the court will “reexamine the aggregate sentence thus allowing it to enhance the sentences on the other convictions as appropriate.” Merritt, 930 F.Supp. at 1114; see United States v. Tucker, 90 F.3d 1135, 1143-44 (6th Cir.1996) (holding that “reversal of the § 924(c) convictions [under Bailey ] means that the Government may now seek such enhancements [under § 2Dl.l(b)(l) ].”). The logic behind this conclusion is well stated by the First Circuit:
[Wjhen a defendant is found guilty on a multicount indictment, there is a strong likelihood that the district court will craft a disposition in which the sentences on the various counts form part of an overall plan. When the conviction on one or more of the component counts is vacated, common sense dictates that the judge should be free to review the efficacy of what remains in light of the original plan, and to reconstruct the sentencing architecture upon remand, within applicable constitutional and statutory limits, if that appears necessary in order to ensure that the punishment still fits both the crime and the criminal.
United States v. Pimienta-Redondo, 874 F.2d 9, 14 (1st Cir.1989), cert. denied, 493 U.S. 890, 110 S.Ct. 233, 107 L.Ed.2d 185 (1989) (holding that on direct appeal, appellate court may remand for resentencing of all counts). This court is satisfied that the logic and language of section 2255 grants this court the authority to revisit an entire sentencing package and to include the two-point enhancement provided in § 2Dl.l(b) for possession of firearms, if necessary, after the vacatur of a section 924(c) count.
The structure of the Sentencing Guidelines and common sense buttress this construction of section 2255 and militate in favor of revisiting the petitioners’ aggregate sentences. As the judgments demonstrate, the petitioners’ entire sentences were based upon their pleas of guilty to all of the counts and the downward departure permitted by this court, not simply the section § 924(c) charge in count V. It is clear that all of these convictions were factored interdependently into the petitioners’ final, aggregate sentences of 132 months. Accordingly, it only makes sense to conclude that, when the petitioners brought their § 2255 motions, they attacked the sentence that they received, not simply the sentence on count V, as they contend. See United States v. Clements, 86 F.3d 599 (6th Cir.1996) (recognizing that interdependence of convictions leads to a single sentencing package).
To be certain, it would create a perverse result this court were to construe section 2255 to grant this court the power to “correct” the petitioners’ sentence, yet require this court to leave in place a sentence that is undoubtedly incorrect, in that, it no longer represents the seriousness of petitioners’ actions, reflects the terms of the Rule 11 agreement, or comports with the Sentencing Guidelines. This court can appreciate the ardor of the petitioners in advancing this construction, but this court cannot conclude that section 2255 compels this result. Accordingly, this court holds that under section 2255, this court has jurisdiction to adjust the guideline calculations on petitioners’ remaining convictions so that their aggregate sentences properly represent the seriousness of their actions and the terms of the Rule 11 agreements accepted by this court.
Constitutional Limitations to Resentenc-ing
In their objections during the original re-sentencing hearing on May 14, 1996, the petitioners contended that recalculation of their guideline ranges for the counts remaining on their conviction would violate the double jeopardy and due process clauses, because the petitioners have served the entire sentences imposed on the remaining counts. On August 1, 1996, the petitioners submitted letters from the Federal Bureau of Prisons, calculating the proposed release date for each of the petitioners following the vacatur of the section 924(c) charges in their respective convictions. These letters estimate that the petitioners would have been released from federal custody on November 21, 1995, in the absence of a conviction on count V. Based on the dates in these letters, the petitioners assert that they have- served their entire sentences on the remaining counts and that, therefore, either the double jeopardy or due process clause prevents this court from revisiting the sentences imposed on those counts. This court disagrees and will address these claims in turn.
Double Jeopardy
“[T]he Double Jeopardy Clause protects against three distinct abuses: a second prosecution for the same offense after acquittal; a second prosecution for the same offense after conviction; and multiple punishments for the same offense.” United States v. Halper, 490 U.S. 435, 440, 109 S.Ct. 1892, 1897, 104 L.Ed.2d 487 (1989). The imposition of a longer or harsher sentence upon resentencing may constitute multiple punishments for the same offense only if a petitioner has a legitimate “expectation of finality in the original sentence.” United States v. DiFrancesco, 449 U.S. 117, 139, 101 S.Ct. 426, 438, 66 L.Ed.2d 328 (1980). In the context of a defendant who challenges on direct appeal any one of several interdependent sentences or underlying convictions, it has been held that the defendant does not enjoy a legitimate expectation of finality in any discrete portion of the aggregate sentence. United States v. Shue, 825 F.2d 1111, 1115 (7th Cir.1987); Mixon v. United States, 926 F.Supp. 178 (S.D.Ala.1996); Alton v. United States, 928 F.Supp. 885 (E.D.Mo.1996).
This court finds that, for purposes of the double jeopardy clause, a habeas petitioner’s expectation of finality in one discrete portion of an interdependent sentence does not differ in any material respect from that of a defendant on direct appeal. Accordingly, the petitioners cannot claim a legitimate expectation of finality in their sentences on the remaining convictions. The double jeopardy clause does not prevent this court from revisiting the sentences on those convictions to consider the two-point enhancement under § 2Dl.l(b)(l) so that the petitioners’ new aggregate sentence may adequately reflect the severity of their actions, comport with the sentencing guidelines and carry out the terms of the Rule 11 agreement.
Due Process
A two point enhancement under § 2Dl.l(b)(l) imposed on the base offense level of the petitioners’ remaining convictions could implicate due process if the petitioners have “served so much of [their] sentenee[s] that [their] expectations as to its finality have crystallized and it would be fundamentally unfair to defeat them.” United States v. Lundien, 769 F.2d 981, 987 (4th Cir.1985), cert. denied, 474 U.S. 1064, 106 S.Ct. 815, 88 L.Ed.2d 789 (1986). For the reasons already discussed, this court finds that the petitioners do not enjoy a legitimate expectation of finality in the sentence calculations pertaining to the remaining counts.
This court also finds that it is not fundamentally unfair to alter those calculations in light of the vacatur of petitioners’ § 924(c)(1) conviction. As discussed above, the petitioners received sentences of 132 months based upon their respective Rule 11 agreements. The judgments of conviction incorporated a 60 month mandatory consecutive sentence under section 924(c) and imposed a maximum sentence on the remaining counts equal to the difference between 132 months and 60 months. Without the section 924(c) conviction, however, the petitioners’ minimum guideline sentence ranges on the remaining counts would have been sufficient to support the 132 month sentence imposed under the Rule 11 agreement. Under such circumstances, this court is not convinced that it would be fundamentally unfair to correct the petitioners’ sentences in the remaining counts to reflect the terms of the Rule 11 agreement. The petitioners secured a plea agreement that contemplated a sentence of 132 months and that agreement did not differentiate among the sentences to be imposed on the various charges. Any legitimate expectation of finality, therefore, would be in the overall sentence of 132 months secured by that agreement, not in the individual sentences listed in the judgment of conviction. Due process does not prohibit this court from revisiting the sentences imposed on the remaining counts to bring them into conformity with the terms of the petitioners’ respective Rule 11 agreements.
Conclusions
For the reasons stated above, this court finds that resentencing of the petitioners is appropriate in light of the vacatur of their section 924(c) convictions. Accordingly, the government’s motion to resentence the petitioners based upon a recalculation of the guidelines to include the two-point enhancement under § 2Dl.l(b)(l) of the Sentencing Guidelines will be granted. Resentencing will be scheduled for September 11, 1996 at 11:00 a.m.
ORDER
Therefore, it is hereby ORDERED that the government’s motion to resentence the petitioners, Gerald Allen Thayer and Dawn Marie Thayer, is GRANTED.
IT IS FURTHER ORDERED that resen-tencing is scheduled for September 11, 1996 at 11:00 a.m.
SO ORDERED.
. U.S.S.G. § 2D1.1(b)(1) provides for a two-level increase in petitioner’s base offense level for a conviction involving drugs "if a dangerous weapon (including a firearm) was possessed....” When the petitioners were convicted, this two-level increase could not be applied because the alleged possession of the guns also served as the basis for the § 924(c)(1) conviction. The two-level increase, if applied, would have impermissi-bly "double counted” the possession of the guns. There can be no question, however, that the government would have requested the two-level increase had the petitioners not also pled guilty to the § 924(c)(1) charge.
|
4156030-4396 | PER CURIAM.
Chikezie Ottah appeals from a decision of the United States District Court for the Southern District of New York. The district court granted summary judgment of non-infringement to Verifone Systems, Inc. (“Verifone”) with respect to U.S. Patent Number 7,152,840 (“the '840 Patent”). For the following reasons, we affirm.
BACKGROUND
This case concerns the '840 Patent, which is owned by Ottah and is titled “Book Holder.” The specification describes the invention as “a removable book holder assembly for use by a person in a protective or mobile structure such as a car seat, wheelchair, walker, or stroller.” '840 Patent col. 1 11. 6-9. Ottah argues that Verifone’s mounts for electronic display screens, used in New York City taxi cabs, infringe the '840 patent both literally and under the doctrine of equivalents.
The '840 Patent only contains one claim, which reads:
1. A book holder for removable attachment, the book holder comprising:
a book support platform, the book support platform comprising a front surface, a rear surface and a plurality of clamps, the front surface adapted for supporting a book, the plurality of clamps disposed on the front surface to engage and retain the book to the book support platform, the rear surface separated from the front surface;
a clasp comprising a clip head, a clip body and a pair of resilient clip arms, the clip arms adjustably mounted on the clip head, the clip head attached to the clip body; and
an arm comprising a first end and a second end and a telescoping arrangement, the clasp on the first end, the second end pivotally attached to the book support platform, the telescoping arrangement interconnecting the first end to[ ] the second end, the clasp spaced from the book support platform wherein the book holder is removably attached and adjusted to a reading position by the telescoping arrangement axially adjusting the spaced relation between the book support platform and the clasp and the pivotal connection on the book support platform pivotally adjusting the front surface with respect to the arm.
'840 Patent col. 6 ll.14-38 (emphasis added).
The district court granted summary judgment of non-infringement to Verifone as to both literal infringement and infringement under the doctrine of equivalents. With regard to literal infringement, it noted that several of the limitations of the '840 patent were not met by Verifone mounts, “including ‘[a] book holder for removable attachment’ ” and “ ‘[a] clasp spaced from the book support platform wherein the book is removably attached.’ ” Ottah v. VeriFone Sys. Inc., No. 1:11-cv-06187, slip op. at 4, 2012 WL 4841755 (S.D.N.Y. Oct. 10, 2012) (alterations in the original). It explained (and it is undisputed) that Verifone’s mounts are “riveted in place to the taxi’s partition or seat” and are not of the removable nature described by the claim. Id. (quotation marks omitted).
As for the doctrine of equivalents, the district court explained that Ottah’s claim was barred by prosecution history estop-pel. This is because, after the patent examiner initially rejected the '840 patent on anticipation (and various other) grounds on March 24, 2005, Ottah narrowed his claim and argued to the patent examiner that the patent was neither anticipated nor obvious because “the use of adjustable, resilient clip arms on the clasp for clasping the book holder to the movable vehicle providing quick removal without tools ... is not obvious in light of the prior art.” Ottah Reply to Office Action (July 25, 2005), at 13. Thus, “because Ottah previously argued that the defining characteristic of his book holder [wa]s its ‘quick removal and attachment without tools,’ ” the district court held that he could not “claim that the permanent rivet attachments of the Veri-Fone mounts are ‘equivalent’ to the limitations described in the 840 Patent.” Ottah, No. 1:11-cv-06187, slip op. at 6 (S.D.N.Y. Oct. 10, 2012).
Ottah timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
Disoussion
“This court reviews a district court’s grant of summary judgment of non-infringement without deference.” Computer Docking Station Corp. v. Dell, Inc., 519 F.3d 1366, 1373 (Fed.Cir.2008) (citing 02 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 467 F.3d 1355, 1369 (Fed.Cir.2006)). This de novo review requires two steps: claim construction and infringement. See id.
|
3040333-25037 | OPINION
COOPER, District Judge.
Petitioner, applying to this Court for a writ of habeas corpus pursuant to 28 U.S.C. § 2241 et seq., is presently confined in Green Haven Prison, Stormville, New York, having been convicted by a jury in 1961 of the crimes of robbery, first degree, grand larceny, first degree, and assault, second degree. Petitioner was tried jointly for these offenses in the former County Court, Kings County, with co-defendant William DeBerry. He was sentenced to terms of ten to thirty years on the robbery count, five to ten years on the grand larceny count and two and a half to five years on the assault count; the latter two sentences to run concurrently with the first.
The judgment of conviction was affirmed by the Appellate Division, People v. Savino, 20 A.D.2d 901, 248 N.Y.S.2d 984 (2d Dept. 1964), and without opinion by the New York Court of Appeals at 15 N.Y.2d 778, 257 N.Y.S.2d 345, 205 N.E.2d 536 (1965).
Petitioner previously sought a writ of habeas corpus in this Court, but his application was dismissed by Judge Cannella “in order to give the New York courts an opportunity to review their previous disposition of petitioner’s claims in the light of Chapman v. California, 386 U.S. 18, 87 S.Ct. 824, 17 L.E.2d 705 (1967).” United States ex rel. Savino v. Follette, 66 Civ. 1274 (S.D.N.Y.July 11, 1967). The New York Court of Appeals thereafter granted petitioner re-argument. The case was reconsidered in the light of Chapman, and the original judgment of affirmance was adhered to. People v. Savino, 22 N.Y.2d 732, 292 N.Y.S.2d 115, 239 N.E.2d 909 (1968).
Based upon the papers before v. and the record of petitioner’s trial, certain facts are undisputed. Mrs. Adeline Bergman was robbed by two men at her residence on March 23, 1961. The two men pushed their way into her apartment and remained there for some forty-five minutes. During this time the man she identified at trial as petitioner engaged her in intermittent but extended conversation thus affording her ample opportunity to observe his features. Mrs. Bergman called the police immediately after the robbers left. She told Detective Sutton, who conducted the investigation, that one of the robbers, whom she later identified as petitioner, was about 28 to 30 years old, five feet ten inches tall, heavy set and powerfully built, weighing about 190 pounds. She testified at trial that she described this man’s distinguishing features to the police as “bushy, thick brows,” “beady” eyes, and a “dark, pasty complexion” with “little marks,” a “full mouth” and “protruding lips,” a nose which was “not too wide” and “nice” ears. She described the clothing he wore as a dressy black overcoat of a smooth, flat material with two pockets, and a black hat having a velvet texture, a narrow brim, and a black and white intertwined band.
On June 2, 1961 at 12:30 p. m., more than two months after the robbery, Detective Sutton arrested petitioner and brought him to the station house. At a line-up consisting of five men including petitioner, none of whom were wearing a hat or coat, Mrs. Bergman quickly and positively identified petitioner as one of the two men who robbed her. Following that identification, the police along with petitioner Savino went to Savino’s apartment between 4:30 and 5 p. m. on June 2nd to conduct a warrantless search, which resulted in the discovery and seizure of a hat and coat matching the description Mrs. Bergman had given of the hat and coat worn by one of the robbers.
Mrs. Bergman was thereafter summoned to a police station to view petitioner for a second time in order that she might see him dressed in the hat and coat police had seized from his apartment. She again positively identified Savino as one of the two men who robbed her.
At trial Mrs. Bergman was the sole identifying witness for the prosecution. She testified and was cross-examined at great length as to the distinguishing features of the robber she identified as petitioner, and stated she was a “thousand percent” sure of her identification. Over the objection of petitioner’s counsel, the hat and coat seized in the search of petitioner’s apartment were admitted into evidence.
Aside from Mrs. Bergman’s testimony, only one additional piece of evidence tended to show that Savino and DeBerry were acquainted prior to their arrests. Co-defendant DeBerry offered an alibi defense in which it was alleged that on March 23, 1961, the date of the robbery, he was painting the apartment of an alibi witness. In rebuttal, the prosecution called Detective Sutton who in the course of his testimony stated that DeBerry had told him that one of the two orders of paint which DeBerry claimed at trial were purchased for the alibi witness’ apartment, in fact were bought “to paint an apartment of William Savino.” Counsel at trial and the trial judge rightly recognized that this testimony was not binding on Savino, and the jury was so instructed.
Right of Confrontation
Petitioner contends that the trial court erred in permitting Detective Sutton to testify to co-defendant DeBerry’s out-of-court statement that some of the paint was bought “in order to paint an apartment of William Savino” because, in addition to controverting DeBerry’s alibi defense, its effect was to implicate Savino.
While petitioner has not waived his right to raise as an issue herein deprivation of his right of confrontation, see United States ex rel. Floyd v. Wilkins, 367 F.2d 990, 993 (2d Cir. 1966), we need not rule with respect to it in view of our disposition below as to the effect of the introduction in evidence at trial of the illegally seized hat and overcoat. We note in passing, however, that in light of the apparent absence of crucial, “devastating,” or “powerfully incriminating” hearsay, and of the trial court’s explicit limiting instructions no fundamental error justifying relief appears present. See Bruton v. United States, 391 U.S. 123, 135, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968); United States ex rel. Catanzaro v. Mancusi, 404 F.2d 296 (2d Cir., December 2, 1968). See also, United States v. Catino, 403 F.2d 491 (2d Cir. 1968).
While we are convinced of defendant’s guilt, that does not relieve v. of the obligation to determine whether he received a fair trial in contemplation of law. Our great respect for the New York Court of Appeals which sees no merit to defendant’s complaint has compelled v. to strain in considering and reconsidering the merits of defendant’s next challenge. And so we turn now to what we view, albeit reluctantly, as the meritorious claim in these proceedings.
The Search and Seizure Were Unconstitutional
The trial judge, after a voir dire examination held to determine the admissibility of the hat and coat seized from petitioner’s apartment, found that, although no search warrant was obtained, the search was incident to a lawful arrest ; accordingly, the hat and coat were received in evidence.
Petitioner’s arrest took place on the open highway and at least four hours prior to the warrantless search of his apartment by the police. Without question this search was not incident to a lawful arrest. See Agnello v. United States, 269 U.S. 20, 46 S.Ct. 4, 70 L.Ed. 145, 51 A.L.R. 409 (1925); Stoner v. California, 376 U.S. 483, 487 n. 5, 84 S.Ct. 889, 11 L.Ed.2d 856 (1964). In fact the Appellate Division expressly so found. See People v. Savino, 20 A.D.2d 901, 248 N.Y.S.2d 984 (2d Dept. 1964). Further, the State conceded in the New York Court of Appeals and does not suggest otherwise here that petitioner did not consent to the search and seizure and that admitting the hat and coat into evidence was constitutional error.
Admission of the Hat and Coat into Evidence as Harmless Error in the State Courts
Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081, 84 A.L.R.2d 933 (1961), held that the Fourth Amendment requires the exclusion of evidence from trial if it is obtained as a result of a public officer’s illegal search and seizure in violation of defendant’s rights. The Appellate Division, however, in affirming the judgment of Savino’s conviction, held that the admission of the hat and coat into evidence was harmless error because it “did not affect [Savino’s] substantial rights.” See People v. Savino, 20 A.D.2d 901, 248 N.Y.S.2d 984 (2d Dept. 1964). The affirmance in the Court of Appeals, without opinion, apparently rested upon the same grounds. See People v. Savino, 15 N.Y.2d 778, 257 N.Y.S.2d 345, 205 N.E.2d 536 (1965).
Pursuant to Judge Cannella’s dismissal of Savino’s prior petition for a writ of habeas corpus “in order to give the New York courts an opportunity to review their previous dispositions in the light of Chapman v. California, supra,” the New York Court of Appeals permitted reargument. See People v. Savino, 20 N.Y.2d 970 (1967). Emphasizing that the complaining witness had petitioner under observation for forty-five minutes during the robbery, that she identified petitioner at a line-up at which none of the five men wore a hat or coat, and that she did not testify they were the hat and coat petitioner wore at the time of the crime but were “exactly like” those items, the Court of Appeals found “they played no meaningful role in identification” and held their receipt “harmless beyond any reasonable doubt.” See People v. Savino, 22 N.Y.2d 732, 292 N.Y.S.2d 115, 239 N.E.2d 209 (1968).
Applicability of Harmless Error Doctrine
Petitioner first claims that the harmless error doctrine should have no application to evidence illegally seized in violation of the Fourth Amendment and erroneously admitted into evidence.
In Chapman v. California, 386 U.S. 18, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967) the United States Supreme Court established a uniform standard binding upon both state and federal courts for determining whether a constitutional error is harmless. At the same time, however, it noted that certain prior Supreme Court "cases have indicated that there are some constitutional rights so basic to a fair trial that their infraction can never be treated as harmless error." 386 U.S. at 23, 87 S.Ct. at 827. In particular, the Supreme Court may have left open whether violation of the Fourth Amendment's prohibition against unreasonable search and seizure can ever be harmless error. See Henry v. Mississippi, 379 U.S. 443, 449 n. 6, 85 S.Ct. 564, 13 L.Ed.2d 408 (1965); Fahy v. Connecticut, 375 U.S. 85, 86, 84 S.Ct. 229, 11 L.Ed.2d 171 (1963). See also, Pope v. Swenson, 395 F.2d 321, 324 n. 2 (8th Cir. 1968); United States v. Birrell, 269 F.Supp. 716, 725 n. 13 (S.D.N.Y. 1967), rev'd on other grounds, 400 F.2d 93 (2d Cir. 1968). Cf. Bumper v. North Carolina, 391 U.S. 543, 560-561, 88 S.Ct. 1788, 20 L.Ed.2d 797 (1968) (Black, J. dissenting). But see, Stoner v. California, 376 U.S. 483, 490, 84 S.Ct. 889, 11 L.Ed.2d 856 (1964); Bumper v. North Carolina, supra 391 U.S. at 550, 88 S.Ct. 1788; Rosenthall v. Henderson, 389 F.2d 514, 516 (6th Cir. 1968); Gladden v. Frazier, 388 F.2d 777 (9th Cir. 1968); Lockett v. United States, 390 F.2d 168 (9th Cir. 1968); Theriault v. United States, 401 F.2d 79, 84 (8th Cir. 1968); United States v. Ramseur, 378 F.2d 902, 903 (6th Cir. 1967); United States v. Reed, 392 F.2d 865, 867 (7th Cir. 1968).
Petitioner argues that the purpose of the Fourth Amendment exclusionary rule —to deter police officers from conducting illegal searches — is a policy distinct from preventing prejudice to the individual and requires automatic reversal. We need not determine this issue, however, in light of our holding immediately below that under Chapman the error at trial cannot be deemed harmless.
Erroneous Admission not Harmless Beyond a Reasonable Doubt
Petitioner contends that the State has not sustained its burden of proving that the introduction of the illegally seized hat and coat was harmless error beyond a reasonable doubt. We agree.
In Chapman v. California, 386 U.S. 18, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967), the United States Supreme Court declared “that before a federal constitutional error can be held harmless, the court must be able to declare a belief that it was harmless beyond a reasonable doubt.” 386 U.S. at 24, 87 S.Ct. at 828. This standard requires “the beneficiary of a constitutional error to prove beyond a reasonable doubt that the error complained of did not contribute to the verdict obtained,” a rephrasing of the test employed earlier in Fahy v. Connecticut, 375 U.S. 85, 84 S.Ct. 229, 11 L.Ed.2d 171 (1963). Thus, “[a]n error in admitting plainly relevant evidence which possibly influenced the jury adversely to a litigant cannot under Fahy, be conceived of as harmless.” 386 U.S. at 23-24, 87 S. Ct. at 828.
Whether or not there was sufficient evidence in the case, aside from the hat and coat, for the jury to have found petitioner guilty is not the issue; nor is the issue whether this particular jury was in fact influenced by the hat and coat. See Rosenthall v. Henderson, 389 F.2d 514, 516 (6th Cir. 1968); Reeves v. Warden, Maryland Penitentiary, 346 F.2d 915, 923 (4th Cir. 1965). Rather, the issue is whether there is a reasonable possibility that the hat and coat might have contributed to the verdict. See Chapman v. California, 386 U.S. at 24, 87 S.Ct. 824; Fahy v. Connecticut, 375 U.S. at 86-87, 84 S.Ct. 229; Gladden v. Unsworth, 396 F.2d 373, 377 (9th Cir. 1968).
A thorough examination of the trial record in view of the Chapman standard discloses that the hat and coat supported the State’s case in two different respects. On the one hand, the introduction of the hat and coat served to show that Mrs. Bergman’s identification was positive when petitioner was wearing a hat and coat, as well as when he was not. It was this aspect the State focused on in arguing that the error was harmless since Mrs. Bergman’s first identification of petitioner came when he was wearing neither a hat nor a coat; and that her identification would be none-the-less positive in the absence of the hat and coat.
There is another far more important aspect to this evidence, however, which neither the State nor the New York courts appear to have expressly considered. The admission of these articles seized from petitioner’s apartment and matching Mrs. Bergman’s description of the clothing worn by one of the robbers, independently tied petitioner to the crime and independently corroborated Mrs. Bergman’s identification of petitioner as one of the two robbers. Thus, the jury heard Mrs. Bergman testify to the description she gave the police immediately after the robbery of the black coat and the black hat with the “unusual black and white intertwined” band worn, by one of the robbers; they heard Detective Sutton testify to subsequently finding a hat and coat matching that description in Savino’s apartment; and they could compare that hat and coat to Mrs. Bergman’s description.
This independent link connecting petitioner to the robbery is particularly significant in the light of the nature of the State’s evidence. Aside from the hat and coat, the People’s case rested solely upon Mrs. Bergman’s identification of petitioner; the jury’s impression of the credibility her testimony warranted was critical; therefore, the discovery of a hat and coat identical to the ones described by Mrs. Bergman, in petitioner’s apartment subsequent to her identification of petitioner, provided a potentially determinative cross-check of her testimony.
The force of this independently significant and corroborative evidence was effectively brought home to the jury. Near the outset of her testimony, Mrs. Bergman stated:
“I gave the original description the morning of the robbery. I said it was a black hat, and I described its shape, and I particularly remembered it because it had a black and white intertwined band on it; and as I described it, it is exactly as the description I originally gave, and it is exactly what he wore.
******
It was the shape of the hat that is different than the average; that it was like velvety in texture; I remember that. It looked very dressy for that hour of the morning; and the hat band was unusual, the black and white intertwined, so that it gave it a sort of tweedy appearance.”
At another point, Mrs. Bergman quoted herself as saying to the police after the hat and coat had been seized from petitioner’s apartment and during her identification of petitioner while he wore his hat and coat:
“So you gentlemen were asked a question : ‘This is the only evidence that the prosecution has?’ That is counsel’s argument. Well, gentlemen, I am giving you all the evidence I have. I can’t manufacture evidence. I am giving you everything I have, and I only have this woman phis the hat and coat that this Savino had; that’s all. And if you don’t think this woman is an accurate witness, well, I am finished; that’s all I have to give you. I have given you everything that I have.” (emphasis supplied).
“I said, ‘Just look at that hat. It is exactly the way I described it to you. Just look at that hat,’ and I was amazed at the photograph I had made in my own mind that here was the man wearing the identical hat as I described and just as I remembered it.”
Recognizing the devastating character of this evidence, the District Attorney stressed in summation:
“For goodness sake, men, what more could you expect from this woman? She said he had a black hat, Savino, and a black coat, and she never at any time said, T am sure this is the coat.’ She said, ‘It looks exactly like it.’ She said the hat looks exactly like it. So, when you stop to think about it, here is the interesting thing: Just think about this when you go into that jury room, and I know you will analyze it.
Did the detectives know when they bagged him, Savino, that he had a black hat and black coat? He didn’t have it when they grabbed him. After they took him to the precinct and the woman says, ‘That is one of the men,’ then they went to his apartment and what do you think they found, — a black hat and a black coat. Is that just a coincidence that they found a black hat and black coat; and she described the band, — a small band.”
Viewing the brief trial transcript as a whole, this is not an instance where the illegally seized evidence admitted at trial is merely cumulative of other properly admissible evidence, or of defendant's own testimony, and therefore harmless beyond a reasonable doubt. See Gladden v. Frazier, 388 F.2d 777 (9th Cir. 1968); Lockett v. United States, 390 F.2d 168 (9th Cir. 1968); Application of Reynolds, 397 F.2d 131, 135-136 (3d Cir. 1968); Luna v. Beto, 395 F.2d 35, 39 (5th Cir. 1968); Theriault v. United States, 401 F.2d 79, 84 (8th Cir. 1968). Nor is this an instance where the illegally seized evidence is so insignificant and unimportant that it could not have made any difference in the outcome of the trial. See United States v. Ramseur, 378 F.2d 902, 903 (6th Cir. 1967); United States v. Reed, 392 F.2d 865, 867 (7th Cir. 1968). Rather, the hat and coat in this prosecution played a role akin to that of the illegally seized evidence in Stoner v. California, 376 U.S. 483, 84 S.Ct. 889, 11 L.Ed.2d 856 (1964), and Bumper v. North Carolina, 391 U.S. 543, 88 S.Ct. 1788, 20 L.Ed.2d 797 (1968), discussed below.
In Stoner v. California, supra, eyewitnesses had described one of two robbers as carrying a gun and wearing horned rimmed glasses and a grey jacket. Pursuing a lead, police discovered a pair of horned rimmed glasses, a grey jacket and a gun in the room of a man the two eyewitnesses had identified from a photograph as the robber who carried the gun. This evidence, seized illegally without a warrant, was introduced at the trial against Stoner, along with the testimony of eyewitnesses and his own confession to the crime charged.
The majority reversed the judgment of conviction. In footnote 8 of their opinion, the eight majority Justices state as to harmless error:
“The respondent has argued that the case should be remanded to let the California District Court of Appeal decide whether the admission of this evidence was harmless error. But the conviction depended in large part upon the jury’s resolution of the question of the credibility of witnesses, and that determination must almost certainly have been influenced by the incriminating nature of the physical evidence illegally seized and erroneously admitted. There is thus at least ‘a reasonable possibility that the evidence complained of might have contributed to the conviction.’ Fahy v. Connecticut, 375 U.S. 85, 86, 84 S.Ct. 229, 230, 11 L.Ed.2d 171.” 376 U.S. n. 8 at 490, 84 S.Ct. at 893.
Mr. Justice Harlan’s concurring opinion in Bumper v. North Carolina, supra is even more instructive here:
“[T]he question cannot be whether, in the view of this Court, the defendant actually committed the crimes charged, so that the error was ‘harmless’ in the sense that petitioner got what he deserved. The question is whether the error was such that it cannot be said that petitioner’s guilt was adjudicated on the basis of constitutionally admissible evidence * *.
I do not think this can be said here. The critical question was the identity of the perpetrator of these crimes. The State introduced eyewitness identification of petitioner by his two victims, and a gun with which there was evidence these victims were shot, together with testimony that it had been found in petitioner’s place of abode. The jury could, of course, have found the testimony of the victims credible beyond a reasonable doubt, and convicted petitioner on this basis alone. But it might well not have. The addition of a tangible cross-check linking petitioner with the crime can hardly be said, from the judicial vantage point, to have been harmless surplus-age.”
Conclusion
We find the State has failed to meet its burden of establishing beyond a reasonable doubt that the erroneously admitted evidence did not contribute to the verdict obtained. Moreover, even if we treat the determination of the harmless error issue as one of fact, upon a thorough examination of the trial record we are unable to find fair support for the holding of the New York Court of Appeals that the erroneous “receipt [of the hat and overcoat into evidence] was harmless” beyond a reasonable doubt. See 28 U.S.C. § 2254(d) (8). Accordingly, despite the existence of evidence properly in the record which the jury was entitled to credit fully and which, if so credited, would have been clearly sufficient to establish Savino’s guilt beyond a reasonable doubt, we are constrained to recognize that petitioner is entitled to a new trial free from infectious constitutional error.
For the reason set forth above, petitioner’s application for a writ of habeas corpus is granted. The respondent shall unconditionally release the petitioner from confinement unless within thirty days from the date hereof the People of the State of New York proceed to retry him. If respondent chooses to appeal from this decision, for which purpose a certificate of probable cause is hereby granted, this order shall be stayed upon the filing of a notice of appeal, pending the mandate of the Court of Appeals for the Second Circuit.
. Petitioner was tried upon Kings County indictment 1968/61. Trial commenced on October 31, 1961 in the former County Court, Kings County before then County Judge Samuel S. Leibowitz. Only the jury was chosen on that day. Testimony was given on November 1, 1961 for a full court day and for about one half hour on November 2, 1961 in the afternoon. Summations of counsel were then completed. The Court charged the jury on the morning of November 3, 1961. The jury left the courtroom to begin deliberations at about 11:30 on that morning and returned with a verdict at 1:10 p. m. The uncertified 368 page transcript has been provided to the Court by the Attorney General for the State of New York.
. Record, p. 87, People v. Savino & DeBerry, County Court, Kings County (1961).
. Record, supra at 79.
. Record, supra at 57, 67.
. Record, supra at 51-52, 70, 76.
. Record, supra at 52-53.
. Record, supra at 50-54, 57.
. Record, supra at 76. She had identified Savino’s co-defendant, DeBerry, at a station house lineup on June 3, 1961 at 12:30 a. m. as the other robber. Record, supra at 71.
. Record, supra at 54 and 57.
. Record, supra at 205, 206 and 223. Neither Savino nor DeBerry testified at trial.
. Record, supra at 228.
. Record, supra at 229, 247-48, and 349-50.
. Petitioner has exhausted his New York State remedies with respect to all claims herein.
. Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081, 84 A.L.R.2d 933, decided on June 19, 1961, held the Fourth Amendment’s prohibition against unreasonable searches and seizures equally applicable to the States.- Petitioner’s trial, which took place in October and November of 1961, was subject to the mandate of Mapp. See Linkletter v. Walker, 381 U.S. 618, 85 S.Ct. 1731, 14 L.Ed.2d 601 (1965).
. Record, supra at 51-52.
. Respondent’s brief on reargument to the New York Court of Appeals, p. 9 (May, 1968) :
|
6110199-4997 | ORDER ON MOTION FOR SUMMARY JUDGMENT
ALEXANDER L. PASKAY, Chief Judge.
THIS is a Chapter 7 liquidation case and the matter under consideration is a Complaint filed by First USA, Inc. (Plaintiff) against Thomas Savage (Debtor) seeking a determination that the debt due and owing the Plaintiff by the Debtor is nondischargeable pursuant to § 523(a)(2)(A) of the Bankruptcy Code. In due course, the Debtor filed an Answer in which he asserts an affirmative defense that he did not incur any liability with the Plaintiff. The Plaintiff and the Debtor both filed Motions for Summary Judgment alleging that no material issue of fact exists and that each is entitled to judgment in its favor as a matter of law. The facts relevant to resolution of the cross-motion for summary judgment are, in fact, without dispute and are as follows:
In March, 1993 the Debtor received a pre-approved acceptance certificate for a First USA Bank Visa card. The Certificate was addressed to Thomas J. Savage, and did not include his wife’s name. The Certificate pre-approved the Debtor for a credit line of $5,000.00. The Certificate requested certain information from the Debtor, including his social security number and annual income, and required his signature on the card. It is undisputed that Mrs. Savage completed the information on the Certificate and signed her husband’s name on the Certificate. She also requested a second card in her name. In due course, a First USA Visa Gold card was issued to the Debtor with a credit line of $5,000.00, and a second card was issued in Mrs. Savages’ name, giving her authority to use the account.
On May 21, 1993, Mrs. Savage wrote a convenience check on the First USA Gold card account in the amount of $5,000.00. Although she was authorized to use the account, Mrs. Savage signed her husband’s name to the check. The check was made payable to Chemical Bank to transfer the existing balance on a Chemical Bank credit card to the First USA card account.
Based upon these facts, the Debtor contends that his wife handled all the financial responsibilities for the family since the time of the marriage. Since she executed the application and the convenience check, albeit in his name, he could not have formed the intent to commit fraud and therefore, the debt should be determined to be dischargea-ble. In opposition, the Plaintiff contends that Mrs. Savage acted as an agent of the Debtor and the fraud claimed to have been committed by her should be imputed to the Debtor based on this claimed agency relationship.
Section 523(a)(2)(A) provides in pertinent part as follows:
§ 523. Exceptions to Discharge.
(a) A discharge under section 727, 1141, 1228(a), 1228(b) of this title does not discharge an individual debtor from any debt—
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
Section 523 requires a showing by the credi-, tor that the debtor obtained money, property, services or an extension, renewal or refinancing of credit, to the extent obtained by false pretenses, a false representation or actual fraud. In the context of credit card abuse, the Courts have generally inferred actual fraud where the debtor used the credit card without an intent to repay the obligation, or when he knew or should have known he lacked the ability to repay the obligation. Since it is undisputed that the entire transaction under scrutiny was conducted solely and only by Mrs. Savage and not the Debtor, neither at the behest of the Debtor nor at his direction and approval, the question remains whether or not the alleged fraud committed by Mrs. Savage can be imputed to Mr. Savage solely on the marriage relationship.
In the matter of Chicago Title Insurance Co. v. Mart, 75 B.R. 808 (Bankr.S.D.Fla.1987) the court addressed the issue of imputing fraud upon a spouse in an action brought under both § 523(a)(2)(A) and § 727(a)(2)(A), stating:
The fraudulent intent of a husband is not necessarily imputed to his wife and the fact that the wife derived a benefit from her husband’s conduct, even if the wife had no idea of this misconduct ... the evidence presented by the plaintiffs is insufficient in this instance.
The Mart court relied upon the Fifth Circuit clear enunciation on this issue in In the Matter of Reed, 700 F.2d 986 (5th Cir.1983) in which they stated:
The Code does not allow attribution of intent from spouse to spouse.
cf. United States v. One 1977 Cherokee Jeep, 639 F.2d 212 (5th Cir.1981). Without specific evidence as to the spouse’s specific actions, fraud cannot be imputed. In re Espino, 48 B.R. 232 (Bankr.S.D.Fla.1985). This leaves for consideration whether or not Mrs. Savage acted as an agent, a point not without serious doubt and, if so, may a fraud committed by an agent be imputed to the principal and under what circumstances.
|
12270903-13177 | OPINION AND ORDER ON APPLICATION FOR FEES PURSUANT TO EAJA
Garr M. King, United States District Judge
Pending before me is an Application for Fees Pursuant to the Equal Access to Justice Act (“EAJA”) filed by the Oregon Natural Desert Association (“ONDA”) (ECF Nos. 124,137).
BACKGROUND
ONDA sued the Bureau of Land Management (“BLM”) challenging its plan to control juniper expansion on Steens Mountain (the “Juniper Treatment Project”), as set forth in the BLM’s North Steens Ecosystem Restoration Project Environmental Impact Statement and Record of Decision. ONDA’s lawsuit alleged violations of the National Environmental Policy Act of 1969 (“NEPA”), 42 U.S.C. §§ 4321-61, the Federal Land Policy , and Management Act of 1976 (“FLPMA”), 43 U.S.C. §§ 1701-87, and the Steens Mountain Cooperative Management and Protection Act of 2000 (“Steens Act”), 16 U.S.C. §§ 460nnn-460nnn-122. In November 2011, I granted in part and denied in part the parties’ cross-motions for summary judgment; I remanded to the Interior Board of Land Appeals (“IBLA”) the limited issue of whether the Juniper Treatment Project impermissibly allowed off-road motorized use in Wilderness Study Areas in violation of the Steens Act. Op. and Order (Nov. 15, 2011) (EOF No. 95).
The parties reached a stipulation on ONDA’s initial EAJA request for attorneys’ fees and expenses. The BLM agreed to pay $45,000 to ONDA, which ONDA agreed to accept in satisfaction of all costs and fees it incurred before December 15, 2011.
ONDA subsequently pursued the IBLA remand. After the IBLA issued its decision, concluding no violation of the Steens Act, ONDA moved to reopen this litigation, filed a Second Supplemental Complaint, and both parties filed cross-motions for summary judgment. The only remaining issue was whether the BLM’s Juniper Treatment Project violated the Steens Act by allowing off-road vehicle use in Wilderness Study Areas.
In an August 2015 decision, I agreed with ONDA that the statute is unambiguous. See Op. and Order on Renewed Mots, for Summ. J. (Aug. 19, 2015) (EOF No. 120). I held that the relevant Steens Act provision begins with the general premise that off-road vehicle use is prohibited. It is permitted only if the Secretary determines .that such use is “needed for administrative purposes” or if the Secretary determines such use is “appropriate for ... ecological restoration projects.” The latter “ecological restoration” exception contains an exception of its own: off-road driving for ecological restoration projects is permitted except in wilderness and Wilderness Study Areas. The BLM could not rely on the “administrative purposes” exception in subsection (A) when subsection (B) specifically precludes off-road motorized vehicles in Wilderness Study Areas for the purpose of implementing an ecological restoration project. As a result, driving off-road in Wilderness Study Areas to implement the Juniper Treatment Project is prohibited by the Steens Act. Therefore, I concluded, the decision to allow such use was arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with the Steens Act. Similarly, the IBLA’s decision approving off-road vehicle use in Wilderness Study Areas within the Steens Mountain CMPA was .unlawful.
The parties disputed the proper remedy, and I instructed the parties to confer. They submitted a stipulated judgment vacating the part of the IBLA’s decision (and corresponding Project Design Element in the Record of Decision) which allowed the off-road use of motorized or mechanized vehicles in the Wildernéss Study Areas; I entered a supplemental judgment on September 28,2015.
ONDA now moves for attorneys’ fees in the amount of $70,455 and costs in the amount of $39.92. The BLM does not object to the requested costs, but does dispute whether ONDA is entitled to attorneys’ fees in the first place or, alternatively, whether ONDA has properly justified the amount of attorneys’ fees it seeks.'
LEGAL STANDARD
EAJA provides that the court shall award attorney fees and costs to a prevailing party in any civil action brought by or against the United States “unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A).
DISCUSSION
The BLM challenges ONDA’s EAJA petition in the following particulars:
I. Substantial Justification
The BLM contends its interpretation of the Steens Act was substantially-justified in that it appropriately reconciled two provisions-the juniper management mandate in Section 113(c) of the Steens Act, 16 U.S.C. § 460nnn-28(c), and the prohibition on motorized or mechanized vehicles in Wilderness Study Areas in Section 112(b) of the Steens Act, 16 U.S.C. § 460nnn-22(b). In support of its argument on the ambiguity of the Steens Act provisions, the BLM points to my November 2011 decision remanding the issue to the IBLA (rather than ruling outright in ONDA’s favor) and the later sympathy I described for the BLM’s position. Finally, BLM underscores the “first impression” nature of its decision, as well as ONDA’s willingness during the IBLA remand to allow vehicles off-road in Wilderness Study Areas so long as the organization agreed in writing first.
The test for determining whether the government was substantially justified is whether its position had a reasonable basis both in law and fact. Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988); Flores v. Shalala, 49 F.3d 562, 569-70 (9th Cir. 1995). The burden is on the government to prove substantial justification. Flores, 49 F.3d at 569. In evaluating the government’s position, the court must look at both the underlying government conduct and the positions taken by the government during the litigation. Meier v. Colvin, 727 F.3d 867, 870 (9th Cir. 2013). If the underlying agency action was not substantially justified, the court need not consider whether the government’s litigation position was substantially justified. Id. at 872.
While the BLM’s loss is not alone sufficient to demonstrate it lacked a substantial justification for its decision, Kali v. Bowen, 854 F.2d 329, 334 (9th Cir. 1988), this is not the “ ‘decidedly unusual case in which there is substantial justification under the EAJA even though the agency’s decision was reversed as lacking in reasonable, substantial and probative evidence in the record.’ ” Thangaraja v. Gonzales, 428 F.3d 870, 874 (9th Cir. 2005) (quoting Al-Harbi v. INS, 284 F.3d 1080, 1085 (9th Cir. 2002)); see also Meier, 727 F.3d at 872 (same); League of Wilderness Defenders/Blue Mountains Biodiversity Project v. U.S. Forest Serv., 3:10-cv-01397-SI, 2014 WL 3546858, at *4 (D. Or. July 15, 2014) (same).
Indeed, I questioned the interpretation the BLM proffered during the initial stage of litigation—an interpretation which the IBLA failed to articulate in the underlying proceeding despite ONDA’s having raised the issue in the administrative proceeding. I expressed confusion at what appeared to be a strained construction of the relevant provisions, but since the IBLA had not weighed in I felt remand was the most appropriate remedy. See, e.g., Sec. and Exch. Comm’n v. Chenery Corp., 332 U.S. 194, 197, 67 S.Ct. 1760, 91 L.Ed. 1995 (1947) (quoting United States v. Chicago, M., St. P. & P.R. Co., 294 U.S. 499, 511, 55 S.Ct. 462, 79 L.Ed. 1023 (1935) (“ ‘We must know what a decision means before the duty becomes ours to say whether it is right or wrong.’ ”)).
My comment in the August 2015 decision that I was “sympathetic” to the BLM was in the context of the agency’s concerns about “the difficulty and expense of implementing its statutory mandate on a landscape level without the ability to use mechanized vehicles off-road” not that I was sympathetic to its statutory interpretation. Op. and Order on Renewed Mots, for Summ. J., at 12.
Further, as ONDA points out, there is no “first impression” free pass in the Ninth Circuit. Gutierrez v. Barnhart, 274 F.3d 1255, 1261-62 (9th Cir. 2001) (“[tjhere is no per se rule that EAJA fees cannot be awarded where the government’s litigation position contains an issue of first impression” and that “[w]e have never held that the government is automatically shielded from a fee award because its argument involves any issue on which this court has not ruled.”). I also note ONDA’s willingness to agree to limited exceptions during the pendency of the IBLA remand does not suggest its concession to BLM’s interpretation.
In the end, after carefully reviewing the IBLA’s interpretation and all of the arguments the BLM expressed in support of its interpretation, I conclude the BLM’s attempt to reconcile the two provisions was simply not reasonable. Thus, the BLM’s position, both in the underlying remand and in the subsequent litigation, was not substantially justified.
II. Appropriate Amount of Request
[7-10] Under EAJA, attorney’s fees must be reasonable. 28 U.S.C. § 2412(d)(1)(A). Looking at the facts of each case, courts start by determining the amount of hours reasonably spent on the case multiplied by a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 429, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). Courts “should generally defer to the winning lawyer’s professional judgment as to how much time he was required to spend on the case.” Costa v. Comm’r of Soc. Sec. Admin., 690 F.3d 1132, 1136 (9th Cir. 2012) (internal quotation omitted). The court may, however, “impose a small reduction, no greater than 10 percent—a ‘haircut’—based on its exercise of discretion and without a more specific explanation.’ ” Gonzalez v. City of Maywood, 729 F.3d 1196, 1203 (quoting Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008)).
A. Number of Hours
The BLM argues ONDA is not entitled to its fees for litigating the IBLA remand. It is true that generally a prevailing party is not entitled to an award of fees for its work in administrative proceedings. However, under Western Watersheds Project v. Department of the Interior, 677 F.3d 922, 926 (9th Cir. 2012), ONDA is entitled to these fees if it can demonstrate that the administrative proceedings are “intimately tied to the resolution of the judicial action,” and “necessary to the attainment of the results Congress sought to promote by providing for fees.” In other words, “the Court has stated consistently that fees for administrative proceedings can only be awarded under [EAJA] if the district court ordered the further proceedings, and the district court action remained pending until the conclusion of the administrative proceedings.” Id. at 927. ONDA satisfies these criteria. I ordered the re mand to the IBLA and retained jurisdiction to allow ONDA to reopen the case following the IBLA’s decision. ONDA is entitled to these fees.
The BLM complains that, if ONDA is entitled to fees for its work during the IBLA remand, it should not get to double dip and collect fees for its summary judgment briefing following remand. Additionally, it complains about excessive staffing, and criticizes a handful of entries-some of which ONDA already conceded and some of which it conceded in its reply.
Frankly, ONDA’s attorneys worked on the IBLA remand briefing in a restrained fashion—I calculate approximately 17 hours between the two senior attorneys- and, as ONDA points out, its attorneys needed to update their research when pursuing summary judgment two years later. See Moreno, 534 F.3d at 1112 (“When a case goes on for many years, a lot of legal work product will grow stale; a competent lawyer won’t rely entirely on last year’s, or even last month’s research[.]”); Fourth Lacy Decl. Ex. A (entries from May 1-4, 2012 adding up to 9.7 hours on IBLA remand); Fourth Becker Decl. Ex. A (entries from Apr. 23-May 4, 2012 on IBLA remand adding up to 6.9 hours). In any event, ONDA’s attorneys spent fewer than 30 hours on the subsequent summary judgment briefing, which I consider eminently reasonable. ONDA’s Reply 8. The BLM’s attorneys offer no evidence as to the time they spent on their briefing.
I am not concerned about any “excessive staffing.” ONDA’s attorneys were judicious in the tasks on which they collaborated and efficiently used each other in strategic discussions and on editing submissions; I note, for example, that only one attorney and one legal fellow worked on the summary judgment briefing. Further, the BLM complains about ONDA’s billing for internal communications, but the issue at hand involved delicate policy questions, as well as a legal interpretation, which required conferral with the organization leaders. Furthermore, “lawyers are not likely to spend unnecessary time on contingency fee cases in the hope of inflating their fees because the payoff is too uncertain.” Costa, 690 F.3d at 1136 (internal quotation and alteration omitted).
B. Hourly Rate
ONDA seeks enhanced billing rates for its attorneys. Mr. Lacy seeks rates ranging from $335 to $400 an hour and Mr. Becker seeks rates ranging from $350 to $420 an hour, for the years 2012-2016. Ms. Feenstra seeks a rate of $195 an hour for 2014 and 2015. The BLM objects to these enhanced rates.
|
11240879-20761 | DECISION & ORDER
MARRERO, District Judge.
Plaintiff Prithibee Ghose (“Ghose”) brings this action alleging national origin and racial discrimination by defendants Century 21, Inc., a retail department stox^e, and James Betesh (“Betesh”), an employee of the store (collectively, “Century 21”). Century 21 has moved for summary judgment on all claims set forth in the Third Amended Complaint, arguing, inter alia, that Ghose has not established a prima facie case of discrimination and that some of his claims are precluded because they were not filed with the Equal Employment Opportunity Commission (“EEOC”). For the reasons set forth below, the Court grants the motion in its entirety.
FACTS
Century 21 employed Ghose as a security guard in the Loss Prevention Department of its Manhattan store starting in May 1991. In the spring of 1995, in response to an increased amount of theft, Century 21 transferred Betesh from its Brooklyn store to the Manhattan location to serve as Director of Loss Prevention. In January 1996, citing problems with his conduct and performance, Century 21 fired Ghose.
Ghose, who is of Bangladeshi origin, alleges four causes of action under the following statutes: (1) 42 U.S.C. § 1981 (“Section 1981”); (2) 42 U.S.C. § 2000e et seq. (“Title VII”); (3) New York State Human Rights Law (N.Y.Exec.Law § 290 et seq.); and (4) New York City Human Rights Law (New York City Administrative Code § 8-107). Ghose alleges that Century 21, through its employees, and Betesh in particular, violated all four statutes by considering Ghose’s national origin in connection with his compensation, promotion, discipline and discharge; making inappropriate and derogatory remarks about Ghose’s accent and national origin; warning Ghose against associating with African-American employees; fostering a racially hostile work environment; retaliating against and harassing Ghose for registering complaints of discrimination; and failing to interview, hire or promote qualified minority workers for both management and subsidiary positions. See Compl. ¶ 18. Ghose seeks compensatory damages in the form of back pay, reinstatement, damages for emotional distress, punitive damages and attorney’s fees. See Compl. ¶¶ 28, 32, 35.
DISCUSSION
I. EEOC Preclusion
Federal law requires timely filing of discrimination charges with the EEOC. See 42 U.S.C. § 2000e-5(b); Tadros v. Coleman, 898 F.2d 10, 11 (2d Cir.1990), cert. denied, 498 U.S. 869, 111 S.Ct. 186, 112 L.Ed.2d 149 (1990). In a state which has a fair employment agency, such as New York, charges must be filed with the EEOC within either 300 days of the alleged discrimination or 30 days of notice of termination of state proceedings, whichever occurs first. See 42 U.S.C. § 2000e-5(e)(1) (2000). A district court lacks jurisdiction over discrimination claims that are not included in the EEOC complaint. See Wilson v. Fairchild Republic Co. Inc., 143 F.3d 733, 739 (2d Cir.1998).
The purpose of the notice provision is to encourage settlement. This objective would be undermined if new claims not presented to the EEOC were allowed to be litigated. See Miller v. ITT Corp., 755 F.2d 20, 26 (2d Cir.1984), cert. denied, 474 U.S. 851, 106 S.Ct. 148, 88 L.Ed.2d 122 (1985). As a general rule, where a plaintiff fails to file a timely charge with the EEOC with respect to a specific claim of discrimination, that claim is barred from future litigation. See Butts v. City of New York Dep’t of Hous. Preservation & Dev., 990 F.2d 1397, 1401 (2d Cir.1993). There are, however, exceptions to this rule regarding untimely claims, for a court may consider claims absent from the EEOC charge if such claims are “reasonably related” to allegations actually set forth in the charge. See Shah v. New York State Dep’t of Civil Serv., 168 F.3d 610, 614 (2d Cir.1999); Kirkland v. Buffalo Bd. of Educ., 622 F.2d 1066, 1068 (2d Cir.1980).
Three circumstances have been recognized satisfying the “reasonably related” requirement. The first, loose pleadings, encompasses claims in which the conduct complained of falls within the scope of the EEOC investigation that reasonably would be expected to ensue from the original charge of discrimination. See Smith v. American President Lines, Ltd., 571 F.2d 102, 107, (2d Cir.1978). Because EEOC charges are usually filed without the advice of counsel and merely in order to alert the EEOC to the alleged discrimination, loose pleadings are generally accepted. See Butts, 990 F.2d at 1397.
Second, an employer’s alleged retaliatory acts following the EEOC charge normally satisfy the reasonably related requirement. See id. at 1402; Malarkey v. Texaco, Inc., 983 F.2d 1204, 1209 (2d Cir. 1993); Owens v. New York City Hous. Auth., 934 F.2d 405, 410-11 (2d Cir.1991), cert. denied, 502 U.S. 964, 112 S.Ct. 431, 116 L.Ed.2d 451 (1991). Such claims of retaliation are excepted from the EEOC preclusion rule because in the typical case, employers are alleged to retaliate upon learning of the EEOC charge or investigation. The final common exception to the EEOC preclusion rule arises where subsequent discrimination of the same type alleged in the EEOC complaint occurs, and such further incidents transpire in “precisely the same manner” as established in the EEOC complaint. See Butts, 990 F.2d at 1403. This final exception protects a plaintiff from the inconvenience and bur den of having to file a separate EEOC complaint for additional instances of the same discriminatory behavior. See id.
Century 21 argues that Ghose’s claims of discrimination based on his association with African-American co-woz’kers, a hostile work environment and retaliation are precluded because these claims were not alleged in Ghose’s original filing with the EEOC, which charged only racial and national origin discrimination. Ghose has not attempted to refute this argument in his opposition papers to the present motion.
Ghose’s EEOC complaint, filed in January, 1996, describes in minor detail the circumstances surrounding Ghose’s dismissal. It contains no references whatsoever to a hostile work environment, mistreatment for associating with African-American employees or retaliatory harassment. Furthermore, because all of Ghose’s allegations occurred during his tenure at Century 21, and prior to filing with the EEOC, Ghose ostensibly could have included these charges in his EEOC complaint.
None of Ghose’s three additional claims satisfies any of the recognized exceptions to the EEOC preclusion rule. The retaliatory act alleged was not Ghose’s dismissal by Century 21, but rather “harassment” and “accusations” committed by Betesh prior to Ghose’s EEOC filing. See Plaintiff’s Memorandum of Law in Opposition to Motion for Summary Judgment, dated Dec. 29, 1999 (“Plaintiffs Memo”), at 4. In this respect, Ghose’s retaliation claim is atypical of the common instances of retaliation sustained by case law. The Butts court, in explaining the justification for the retaliation exception, stressed the perverse effect of requiring a plaintiff to file a second EEOC complaint to encompass retaliatory conduct that occurred as a result of the first charge. See Butts, 990 F.2d at 1402. But in this case, Ghose would not have had to file a second EEOC complaint because the retaliation he asserted in the case before this Court occurred prior to Ghose’s dismissal and subsequent EEOC filing.
In addition, these additional claims do not satisfy the third exception to the preclusion rule because the specifics associated with each of the claims for hostile work environment, discrimination by discouraging association with African-American employees, and retaliation did not occur, as required by Butts, in “precisely the same manner” as Ghose’s alleged termination by reason of race or national origin. See id. at 1403. Furthermore, these three claims could not reasonably have been expected to be contemplated within the scope of the EEOC investigation prompted by Ghose’s original claim of wrongful termination. Ghose made no indication on the EEOC complaint that he had been discriminated against in any way other than being wrongfully terminated, referring only to his discharge and claims that he was fired on account of his national origin. Viewing Ghose’s EEOC complaint in its most favorable light and drawing reasonable inferences in his favor, the absence of any mention of circumstances related to these three additional claims further evidences that such claims would not reasonably fall under the scope of an EEOC investigation in connection with the original claim for wrongful termination. Accordingly, Ghose may not litigate these causes of action before this Court.
II. Summary Judgment Standard
A motion for summary judgment may be granted only if, upon review of the material submitted in support of and against the motion, the Court determines that there is no genuine issue of material fact to be tried, and the facts to which there is no triable issue warrant judgment for the moving party as a matter of law. See Fed.R.Civ.P. 56. See also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving-party bears the burden of demonstrating the absence of any issues of material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). In weighing the evidence to determine if any genuine issue of fact exists, the Court must resolve all ambiguities and draw all reasonable inferences in favor of the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A court cannot determine the merits or issues of fact, or assess the credibility of evidence on a motion for summary judgment; it can only ascertain whether there are disputed issues of material fact to be decided by the eventual trier of fact. See Gallo v. Prudential Residential Serv. Ltd., 22 F.3d 1219, 1224 (2d. Cir.1994).
III. Wrongful Termination Under Title VII
Title VII provides:
It shall be an unlawful employment practice for an employer ... to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.
42 U.S.C. § 2000e-2(a)(l). National origin, under Title VII, refers to the country where a person was born, or more broadly, the country from which a person’s ancestors came. See Espinoza v. Farah Mfg. Co., Inc., 414 U.S. 86, 94 S.Ct. 334, 38 L.Ed.2d 287 (1973).
This Court’s consideration of Ghose’s federal, state, and city claims for discrimination in violation of Title VII, and the related state and city claims may be consolidated into a single examination of the federal claim because consideration of the city and state claims parallels that of the federal claim. See Cruz v. Coach Stores, Inc., 202 F.3d 560, 565 (2d Cir.2000). In fact, it has been suggested that state law imposes a stricter standard with respect to imputing liability to an employer for alleged discrimination than does the applicable federal standard. See Torres v. Pisa-no, 116 F.3d 625, 629 (2d Cir.1997). This Court, however, need not concern itself with the heightened standard of state law unless plaintiff here can first successfully establish a prima facie case under federal law.
To survive a motion for summary judgment on a claim under Title VII, a plaintiff must establish a prima face case of discrimination. See Texas Dep’t of Community Affairs v. Burdine, 450 U.S. 248, 253, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981); McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973); Song v. Ives Labs., Inc., 957 F.2d 1041, 1045 (2d Cir.1992). In order to establish a prima facie case of discrimination in violation of Title VII, a plaintiff who claims to have been discharged for discriminatory reasons must show that (1) he belongs to a protected class; (2) he was qualified for the job from which he was fired; (3) he was fired; and (4) the discharge occurred under circumstances giving rise to an inference of discrimination. See Chambers v. TRM Copy Centers Corp., 43 F.3d 29, 37 (2d. Cir. 1994). See also Burdine, 450 U.S. at 253, 101 S.Ct. 1089.
If a plaintiff successfully establishes a prima facie case of discrimination, then it becomes defendant’s burden to proffer, through sufficient admissible evidence, a legitimate, nondiscriminatory reason for the employee’s dismissal. See St. Mary’s Honor Center v. Hicks, 509 U.S. 502, 507, 113 S.Ct. 2742, 125 L.Ed.2d 407 (1993) (quoting Burdine, 450 U.S. at 255, 101 S.Ct. 1089). Upon such a showing by defendant, plaintiff then must demonstrate through admissible evidence that the employer’s justification for dismissal was pre-textual. See Fisher v. Vassar College, 114 F.3d 1332, 1339 (2d Cir.1997); Cronin, 46 F.3d at 204. Because such evidence must be sufficient to permit a rational fact finder to infer that the adverse employment decision was, more likely than not, motivated by discriminatory animus, evidence barely sufficient to establish a prima facie case may not be sufficient to establish discrimination after a defendant has offered a neutral rationale. See Stern v. Trustees of Columbia Univ., 131 F.3d 305, 312 (2d Cir.1997).
In the case at hand, there is no dispute that Ghose satisfies the first three elements of prima facie case of national origin discrimination. Ghose is a member of a protected class. He was qualified for the position (evident in that retained his employment for nearly five years) and was dismissed. The outstanding issue is whether Ghose was fired under circumstances giving rise to an inference of discrimination. This Court finds that Ghose has failed to established this requisite.
In opposition to the motion, Ghose asserts that he has “clearly established” a prima facie case, yet offers little evidence to support such a claim. See Plaintiff’s Memo at 8. Ghose alleges that Century 21 discriminated against minorities in its ordinary employment decisions — including hiring, firing and promotion — an accusation that, if corroborated, might create circumstances from which discrimination could be inferred. Ghose further points to the fact Betesh terminated two African-American managers from the Century 21 store in Brooklyn.
Ghose, however, introduces no statistical evidence indicating that Century 21 systematically discriminated against minorities, and the record developed here supports the contrary. According to Century 21’s rebuttal evidence, during Betesh’s tenure as Director of Loss Prevention, seven out of seventeen employees hired at Century 21’s Manhattan store were members of minorities, as were six out of fourteen security guards hired. See Affidavit of James Betesh, sworn to July 26, 1999 (“Betesh Aff.”), ¶ 8. Moreover, Century 21 justifies its dismissals of these two employees with evidence of poor job performance evaluations, coupled with oral and written warnings that were given to them prior to their dismissal. See Defendants’ Statement of Material Facts, dated July 23, 1999 (“Statement”), Ex. 2 at 81-82, 85-86, 97-98. Furthermore, a Hispanic manager was hired to fill one of these positions. See Betesh Aff., ¶ 8.
Ghose further relies on the allegation that his supervisor, William Seeger, insulted his nationality by making fun of his accent, supposedly evidenced in that Seeger would ask Ghose to repeat himself. See Compl. ¶ 18(b); Plaintiffs Counter-statement of Material Facts, dated July 28, 1999 (“Counterstatement”), Ex. 1 at 160. Ghose points to an instance in which Seeger even asked him to repeat himself while Ghose was informing Seeger of an altercation between a customer and security guards. See Counterstatement, Ex. 1 at 160. This evidence, however, suggests nothing more than Seeger’s difficulty understanding Ghose. Although it is not the Court’s task to weigh or assess the credibility of the evidence submitted, summary judgment cannot be defeated by either a “scintilla of evidence” or through mere speculation; a trier of fact must be able to find for the non-movant. See Cronin, 46 F.3d at 206 (mere speculation); Anderson, 477 U.S. at 252, 106 S.Ct. 2505 (scintilla of evidence). Therefore, because the evidence submitted by Ghose alleging that Century 21’s managers insulted his accent is wholly speculative, Ghose has not sufficiently depicted circumstances giving rise to an inference of discrimination. Cf. Rivera v. Baccarat, Inc., 10 F.Supp.2d 318 (S.D.N.Y.1998) (testimony establishing that employer’s president unequivocally said that he did not like plaintiff-employee’s accent during a meeting in which plaintiff was being evaluated found sufficient to establish a prima facie claim of national origin discrimination).
In addition, Ghose contends that summary judgment is inappropriate because there are material issues of fact with respect to whether or not he was required to work extended hours during the holiday season; whether Century 21 notified him of the extended schedule; and whether his performance, aside from his refusal to work holidays, was inferior to others. See Plaintiffs Memo at 5-6. Viewing these discrepancies in a light most favorable to plaintiff, as the Court is obliged to do upon considering a motion for summary judgment, Ghose is still unable to establish a prima facie case of discrimination on account of national origin. Even if Ghose could establish a prima facie case of discrimination, Century 21 has proffered un-controverted evidence of and a legitimate, nondiscriminatory reason for Ghose’s dismissal in that Ghose was often late to work, tardy returning from breaks, exhibited a poor attitude and talked back to his superiors. See Statement, Ex. 2 at 169, 199, 213; Ex. 4 at 30, 43; Ex. 5 at 16, 22, 23-4, 31.
If Ghose were able to establish circumstances from which discrimination could be inferred on the evidence he has presented, he could not demonstrate that Century 21’s reason for Ghose’s dismissal was pretextual. See James v. Runyon, 843 F.Supp. 816 (N.D.N.Y.1994). To establish a prima facie case for a disparate treatment claim under Title VII requires that plaintiff was both qualified for the job and satisfied his employer’s normal requirements in his work. See Carter v. AT & T Communications, 759 F.Supp. 155 (S.D.N.Y.1991). Ghose’s tardiness and unsatisfactory attitude, as documented by evidence Ghose has not sufficiently refuted, may reasonably sustain a determination that Ghose was no longer fulfilling normal employment requirements, thereby further supporting his failure to establish a prima facie case of discrimination.
While acknowledging that a district court should hesitate in granting summary judgment where an employer’s intent is at issue, on the record here adduced, this Court finds no sufficient evidence of circumstances from which a discriminatory motive could be inferred by the decision to terminate Ghose’s employment. Ghose has failed to produce any evidence from which a rational fact finder could conclude that either his Century 21 supervisors or any other employee at Century 21 harbored any hostility towards Ghose on account of his national origin, let alone animus of a magnitude that would impel his being discharged. See Chambers, 43 F.3d at 35. Ghose also alleges that Century 21 mistreated him with the specific purpose of causing him to resign. See Compl. ¶¶ 23, 24. But, beyond his conclusory assertions, Ghose presents no evidence to support this speculative accusation.
Furthermore, Ghose has not presented any evidence indicating the existence of more extensive, systemic hostile treatment towards any protected class. Although Ghose contends that Betesh told him not to associate with African-American employees, Ghose admits that Betesh, while orally reprimanding him for socializing while on duty, asked him not to talk to “them,” referring to the two African-American co-workers with whom Ghose was conversing. See Statement, Ex. 2 at 141-42. Ghose simply interpreted Betesh’s reprimand to refer to African-Americans in general (see id. at 142), and such speculation does not suffice to establish circumstances from which a rational trier of fact could infer a discriminatory motive directed at Ghose sufficient to cause his dismissal. See Cronin, 46 F.3d at 206.
The Court concludes that outstanding questions of fact, if any, resulting from discrepancies between Ghose’s and Century 21’s account of the facts here are not material because, even in viewing these issues of fact most favorably to Ghose, he has not established a prima face case of discrimination. Accordingly, summary judgment is appropriate. See Chambers, 43 F.3d at 35.
IV. Section 1981
|
2644896-4876 | PER CURIAM:
Delores Lockhart appeals her convictions and 30-month sentence for misappropriation of postal funds, in violation of 18 U.S.C. § 1711, and 25 counts of making false entries and reports in connection with her employment by the U.S. Postal Service (USPS), in violation of 18 U.S.C. § 2073. On appeal, she first argues that the government did not present sufficient evidence from which a reasonable jury could have found that she acted with criminal intent, and that at most the evidence demonstrated Lockhart’s failure to follow proper post office procedures.
We review de novo challenges to the sufficiency of the evidence, viewing the evidence in a light most favorable to the government. United States v. Futrell, 209 F.3d 1286, 1288 (11th Cir.2000). “A jury’s verdict cannot be overturned if any reasonable construction of the evidence would have allowed the jury to find the appellant guilty beyond a reasonable doubt.” United States v. Ventura, 936 F.2d 1228, 1230 (11th Cir.1991)(internal citations and quotations omitted). We have explained that the government’s evidence is not insufficient merely because the defense produces evidence of another plausible explanation, as a jury is entitled to choose between the two theories supported by the evidence. Id.
Specific intent to defraud can be difficult to prove, and in some cases “circumstantial evidence must be introduced to allow the jury to infer intent.” United States, v. Ethridge, 948 F.2d 1215, 1217 (11th Cir.1991). Further, “convictions challenged on sufficiency of the evidence grounds can be affirmed based on a finding that a jury reasonably could infer from circumstantial evidence that the defendants acted knowingly and willfully.” United States v. Gafyczk, 847 F.2d 685, 692 (11th Cir.1988) “The Government need not produce direct proof of scienter in a fraud case, [as] circumstantial evidence of criminal intent can suffice.” United States v. Hawkins, 905 F.2d 1489,1496 (11th Cir.1990).
Section 1711 states:
[w]hoever, being a Postal Service officer or employee ... converts to his own use, or deposits in any bank, or exchanges for other funds or property, except as authorized by law, any money or property coming into his hands or under his control in any manner, in the execution or under color of his office, employment, or service, whether or not the same shall be the money or property of the United States ...; or
fails or refuses to remit to or deposit in the Treasury of the United States or in a designated depository, or to account for or turn over to the proper officer or agent, any such money or property, when required to do so by law or the regulations of the Postal Service, or upon demand or order of the Postal Service, either directly or through a duly authorized officer or agent, is guilty of embezzlement.
18 U.S.C. § 1711.
In this case, the government provided evidence that on an almost daily basis over a period of 3 years, Lockhart made unsupported cash refunds in her role as supervisor. The evidence suggested Lockhart was responsible for more than 1,100 entries, and that collectively these entries amounted to $166,304.56 in unsupported refunds. The sheer volume of unsupported refunds made by Lockhart, and the enormous difference in the amount of refunds between Lockhart and others do ing the exact same job at the exact same branch, support the jury’s conclusion that Lockhart possessed the necessary intent to embezzle.
Lockhart also argues that the 30-month sentence imposed was unreasonable in light of the § 3553(a) factors, as this was a nonviolent offense, she was a first-time offender unlikely to re-offend, and the public is better served by allowing her to work in society so that she can pay back her debt and not cost taxpayers the money needed to house her in prison.
After United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 765, 160 L.Ed.2d 621 (2005), we review sentences under the advisory guideline regime for “unreasonable[ness].” The Supreme Court, in Booker, directed sentencing courts to consider the following factors in imposing sentences under the advisory guidelines scheme:
(1) the nature and circumstances of the offense and the history and characteristics of the defendant; (2) the need for the sentence imposed (A) to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense; (B) to afford adequate deterrence to criminal conduct; (C) to protect the public from further crimes of the defendant; and (D) to provide the defendant with needed [treatment]; (3)the kinds of sentences available; (4) the kinds of sentence and the sentencing range ... ;(6) the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct; and (7) the need to provide restitution to any victims of the offense.
|
12403610-4316 | ORDER
The disposition filed on December 27, 2016 is WITHDRAWN and replaced by the superseding disposition filed concurrently with this order.
With that substitution, the panel has voted to deny the petition for rehearing. Chief Judge Thomas and Judge Berzon vote to deny the petition for rehearing en banc, and Judge Fisher so recommends.
The full court was advised of the petition for rehearing en banc and no judge has requested a vote on whether to rehear the matter en banc. Fed. R. App. P. 35. Appel-lee’s petition for panel rehearing and petition for rehearing en banc are DENIED.
MEMORANDUM
The United States appeals from the district court’s order reducing the prison sentence of defendant-appellee Jimmy Lee Thornton pursuant to 18 U.S.C. § 3582(c)(2). We ordered supplemental briefing regarding whether our en banc opinion in United States v. Davis, 825 F.3d 1014 (9th Cir. 2016), affected Thornton’s case. We conclude that Thornton is ineligible for a sentence reduction even in light of Davis, and so reverse.
A defendant is generally eligible- for a sentence reduction when he or she is sentenced “based on a sentencing range [under the United States Sentencing Guidelines] that has subsequently been lowered by the Sentencing Commission.” 18 U.S.C. § 3582(c)(2). The parties agree that Thornton faced a mandatory minimum sentence of 60 months’ imprisonment, that the calculated Guidelines range in Thornton’s case was initially 46 to 57 months, and that subsequent amendments to the Guidelines would have lowered the calculated range to 30-37 months. The parties dispute only whether Thornton’s sentence was actually “based on” the calculated range.
Davis adopted the reasoning of Justice Kennedy’s plurality opinion in Freeman v. United States, 564 U.S. 522, 534, 131 S.Ct. 2685, 180 L.Ed.2d 519 (2011), concluding that even when a sentence is determined by a Rule 11(c)(1)(C) agreement, that sentence is “likely” based on the Guidelines. Davis held that “a defendant should be eligible for a sentence reduction when one factor in a defendant’s sentence was a ‘since-rejected Guideline.’” 825 F.3d at 1027 (emphasis added) (quoting Freeman, 564 U.S. at 530, 131 S.Ct. 2685).
Thornton’s plea agreement expressly stated that his sentence “should be calculated pursuant to the Sentencing Guidelines,” and recognized that a “sentence of imprisonment within the Guidelines range set forth [in the agreement]” was reasonable. We therefore conclude that the calculated Guidelines range was a factor in Thornton’s sentence.
Thornton is nevertheless ineligible for a sentence reduction because the mandatory minimum sentence applicable to him displaced the calculated Guidelines range. Although the government concedes that it did not raise this argument before the district court, we have held that eligibility for a sentencing reduction under 18 U.S.C. § 3582(c)(2) is a jurisdictional question. United States v. Spears, 824 F.3d 908, 916 (9th Cir. 2016). We are therefore required to consider the question regardless of whether the parties raised it below.
The Guidelines state that “[w]here a statutorily required minimum sentence is greater than the maximum of the applicable guideline range, the statutorily required minimum sentence shall be the guideline sentence.” U.S.S.G. § 5G1.1(b) (emphasis added). The policy statement applicable at the time of Thornton’s 2010 sentencing provides that a reduction is not appropriate when a mandatory minimum displaces a Guidelines range. See 18 U.S.C. § 3582(c)(2) (requiring that any reduction be “consistent with applicable policy statements issued by the Sentencing Commission.”). The relevant policy statement instructed that “a reduction in the defendant’s term of imprisonment is not authorized under 18 U.S.C. § 3582(c)(2) and is not consistent with this policy statement if ... an amendment ... does not have the effect of lowering the defendant’s applicable guideline range because of the operation of another guideline or statutory provision (e.g., a statutory mandatory minimum term of imprisonment).” U.S.S.G. § 1B1.10(a) cmt. n.1 (emphasis added). Here, although Thornton’s Guidelines range would normally have been 46 to 57 months, his 60-month mandatory minimum sentence displaced that range. Thornton is thus ineligible for a sentence reduction.
|
3884174-6538 | MEMORANDUM
Anthony Ritchie entered an unconditional guilty plea before the district court on charges of conspiracy to possess 1000 kilograms or more of marijuana with intent to distribute, 21 U.S.C. §§ 841(a)(1), 841(b)(l)(A)(vii), 846 (Count 1), and possession of 1000 kilograms or more of marijuana with intent to distribute, 21 U.S.C. §§ 841(a)(1), 841(b)(l)(A)(vn) (Count 2). He now appeals his sentence, arguing that the district court erred by (1) denying a third-level reduction for acceptance of responsibility under United States Sentencing Guidelines § 3El.l(b), (2) failing to depart downward for providing substantial assistance to the government under United States Sentencing Guidelines § 5K1.1, and (3) relying on an erroneous factual determination.
Jose Gonzalez-Lopez was convicted alter a jury trial on the same charges brought against Ritchie: conspiracy to possess marijuana and marijuana possession. He argues that the district court erred by (1) failing to find that he had a reasonable expectation of privacy in a shed that contained marijuana, (2) finding that his initial detention was lawful, and (3) refusing to grant his motion for judgment of acquittal.
The parties are familiar with the facts of this case, and we do not repeat them here. For the reasons set forth below, we affirm.
A. Ritchie
1. Acceptance of Responsibility and Substantial Assistance
We review a prosecutor’s exercise of discretion under § 3El.l(b) and § 5K1.1 only to determine if the decision was based on “an unconstitutional motive (e.g., racial discrimination)” or made “arbitrarily (i.e., for reasons not rationally related to any legitimate governmental interest).” United States v. Espinoza-Cano, 456 F.3d 1126, 1136 (9th Cir.2006) (internal quotation marks omitted). The government refused to move for a third-level reduction under § 3El.l(b) for a legitimate reason: Ritchie failed to enter a plea until two weeks before trial and thus forced the government to engage in extensive trial preparations. Similarly, the government refused to file a substantial assistance motion for at least two legitimate reasons: (1) it had already accounted for Ritchie’s assistance by electing not to pursue other charges against him, and (2) the prosecutor felt that the sentencing guidelines failed to adequately account for Rit-chie’s prior drug convictions and involvement in drug trafficking.
2. Factual Determination at Sentencing
The district court’s factual finding that Ritchie had been involved in the drug trafficking business “for a while” was not clearly erroneous based on the circumstances of his involvement in the current scheme and his criminal history.
B. Gonzalez-Lopez
1. Expectation of Privacy In the Shed
We agree with the district court that even if Gonzalez-Lopez could estab lish a reasonable expectation of privacy in the trailer where he claims to have spent the night, he has failed to establish a reasonable expectation of privacy in the shed containing the marijuana. Gonzalez-Lopez’s purported invitation to help with livestock does nothing more than show that he was legitimately on the property and that he had permission to enter the shed. Simply being “legitimately on the premises” is “insufficient to demonstrate a legitimate expectation of privacy.” United States v. Armenta, 69 F.3d 304, 309 (9th Cir.1995) (internal quotation marks omitted).
2. Detention
The information available to officers at the time they confronted Gonzalez-Lopez was sufficient to establish a reasonable suspicion of criminal activity. See Terry v. Ohio, 392 U.S. 1, 21, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968). The Fourth Amendment allows for “intrusive and aggressive police conduct ... in those circumstances when it is a reasonable response to legitimate safety concerns on the part of the investigating officers.” Washington v. Lambert, 98 F.3d 1181, 1186 (9th Cir.1996). Under the circumstances here, detaining Gonzalez-Lopez at gunpoint, on the ground, and ultimately in handcuffs was a reasonable response to a legitimate concern for the officer’s safety. See United States v. Miles, 247 F.3d 1009, 1013 (9th Cir.2001).
3. Motion for Judgment of Acquittal
a. Conspiracy
Where, as here, “the existence of a conspiracy is established, evidence which establishes beyond 'a reasonable doubt that a defendant is even slightly connected with the conspiracy is sufficient to convict.” United States v. Boone, 951 F.2d 1526, 1543 (9th Cir.1991). We find the following facts would allow a jury to find beyond a reasonable doubt that Gonzalez-Lopez was connected with the ongoing drug trafficking conspiracy: (1) Gonzalez-Lopez approached agents and told them that he was renting the property to keep horses, even though the property was devoid of any sign of horses and actually held over 1000 kilograms of marijuana, (2) Gonzalez-Lopez had a bullet in his pocket that matched an assault rifle discovered in the shed containing marijuana, and (3) Gonzalez-Lopez fled with Ritchie after the appearance of a border patrol agent on the property.
b. Possession
“Mere proximity to contraband, presence on property where it is found, and association with a person or persons having control of it are all insufficient to establish constructive possession.” United States v. Sanchez-Mata, 925 F.2d 1166, 1169 (9th Cir.1991). However, in the present case the government introduced evidence that Gonzalez-Lopez represented to officers that he was renting the entire property. Gonzalez-Lopez’s asserted ownership, combined with the large quantity of marijuana, Gonzalez-Lopez’s proximity to the drugs, the ammunition found on Gon— zalez-Lopez’s person, and the fact that he was only one of two people on the property were sufficient to establish constructive possession. See United States v. Lopez, 477 F.3d 1110 (9th Cir.2007).
AFFIRMED.
This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.
. Ritchie’s opening brief challenges the district court’s decision to deny his motion to suppress. We GRANT the government’s unopposed motion to dismiss this argument because Ritchie did not reserve the right to appeal in his guilty plea. See United States v. Jacobo Castillo, 496 F.3d 947, 954 (9th Cir.2007) (en banc).
. Gonzalez-Lopez was also charged with possession of a firearm during and in furtherance of a drug trafficking crime, 18 U.S.C. § 924(c)(1)(A). Because the district court dismissed this count, Gonzalez-Lopez’s claims on appeal regarding the firearm charge are moot.
|
10535743-16622 | CONTIE, Senior Circuit Judge.
Sheila Arbour appeals the district court’s order granting the United States’ motions (1) to substitute itself as the proper defendant and (2) to dismiss the action. For the following reasons, we reverse the district court’s order.
I.
Plaintiff-appellant Sheila Arbour brought this wrongful death action on behalf of her deceased husband, Victor Arbour, against Eugene Jenkins, John T. Smith, Edward Novak, and Charles Kehoe, all employees of the Detroit Post Office. The decedent was employed at the Detroit Post Office from 1982 until his death on December 30, 1985. Appellant alleges that postal supervisors Jenkins, Smith, and Kehoe, along with Labor Relations Representative No-vak, unfairly and unjustifiably harassed her husband with employment-related disciplinary actions. Sheila Arbour alleges that, as a result of these disciplinary actions, her husband “suffered from delayed physical functions caused by negative stimulus thus causing decedent to be involved in a head on collision with a truck.” The factual background is as follows:
On May 1, 1982, Victor Arbour, a veteran, received a career appointment to the Detroit Post Office as an automobile mechanic. Arbour thereafter became a member of the American Postal Workers Union (“Union”), the postal workers’ exclusive bargaining agent. On December 8, 1982, the Postal Service issued a proposed notice to terminate Arbour’s employment due to his failure to disclose his full criminal record on his employment application. On December 21, 1982, management and the Union entered into a grievance settlement which modified Arbour’s removal to a thirty-day suspension. Labor Relations Representative Novak signed the settlement agreement on management’s behalf.
On March 5, 1983, Arbour was promoted to body fender repairman. On September 28, 1983, the Postal Service again issued a proposed notice to terminate Arbour due to his excessive absenteeism and his absences without permission. Arbour’s supervisor, Eugene Jenkins, issued the removal notice. Arbour filed a grievance with the Union appealing the removal action. On November 4, 1983, management and the Union entered into a second grievance settlement which modified the removal to a thirty-day suspension. This grievance settlement, termed a “Last Chance” settlement, placed Arbour on notice that he had to alleviate his attendance-related problems.
On February 22, 1984, Postal Service officials notified Arbour that his scheduled salary increase would be withheld because he had failed to meet the requirements of his position. On April 24, 1984, Arbour received another proposed termination notice for his absences without permission. The decedent filed a grievance with the Union regarding the proposed removal. Postal Service supervisor Kehoe affirmed the proposed notice of removal on May 23, 1984. Management and the Union, however, reached a grievance settlement on June 11, 1984, which rescinded Arbour’s proposed removal. Meanwhile, on May 25, 1984, Postal Service officials again withheld Arbour’s scheduled salary increase due to the decedent’s alleged failure to meet his job requirements.
On June 18, 1984, Arbour received yet another proposed termination notice for his absences without permission. The termination was affirmed by supervisor Kehoe on July 10, 1984. Arbour thereafter filed a grievance appealing his removal, but the grievance was denied at the final step of the grievance procedure on August 21, 1984. Arbour appealed the June 18, 1984 removal notice to the Merit Systems Protection Board (“Board”).
On October 31, 1984, a Board hearing was held. Arbour testified on his own behalf, called witnesses, and presented evidence. On December 12, 1984, the Board reversed the June 18, 1984 removal action and reinstated Arbour with back pay. The Board determined that Arbour had properly notified Postal Service supervisors of his absences, adding that Arbour had acute personal problems during the relevant time period. The Board concluded, however, that Arbour had failed to advise his supervisors of his emotional problems, thereby precluding any recovery on Arbour’s handicap discrimination claim.
On November 8, 1985, the Postal Service issued a warning letter to Arbour for an absence without permission. Later that day, while driving home from work in his personal automobile, Arbour was involved in an automobile accident. Arbour died on December 30, 1985, from the injuries sustained in the accident.
On April 3, 1987, Arbour’s widow, the plain tiff-appellant, filed a workman’s compensation claim with the Department of Labor for death benefits. The Department of Labor denied Arbour’s workman’s compensation claim on October 6, 1987, after determining that the injuries sustained on November 8, 1985 (and the decedent’s death on December 30, 1985) were not employment related. The Department of Labor affirmed its decision on reconsideration on December 21, 1987.
On December 30, 1987, two years after her husband’s death, Sheila Arbour filed a tort action in state court against Eugene Jenkins, John T. Smith, Edward Novak, and Charles Kehoe. The appellant claimed that these employees had committed common law torts which were responsible for her husband’s death. Mrs. Arbour alleged that, during the two years preceding the automobile accident, the appellees had taken various actions which had caused her husband much emotional distress ultimately leading to a mental collapse causing the decedent’s fatal accident. The appellant specifically alleged that these employees: filed incorrect reports regarding Mr. Arb-our’s absences from work; wrongfully denied Mr. Arbour leave time; required Mr. Arbour to take a safety course following a job-related eye injury; referred Mr. Arbour to a substance abuse treatment program; and locked Mr. Arbour in a maintenance garage.
The defendants, represented by the United States, removed the suit from state court to federal court in February, 1988. In November, 1988, the Federal Employees Liability Reform and Tort Compensation Act of 1988 (“Westfall Act”) went into effect. By its terms the Westfall Act “applies] to all claims, civil actions, and proceedings pending on ... the date of the enactment of this Act.” Pub.L. No. 100-694, § 8(b), 102 Stat. 4563, 4565-66. Accordingly, the provisions of the Westfall Act apply to this action even though Mrs. Arbour filed suit before the Westfall Act was enacted.
In January, 1989, acting pursuant to the Attorney General’s delegation of authority, the United States Attorney for the Eastern District of Michigan certified that the defendants had been acting within the scope of their employment with regard to the events underlying the appellant’s cause of action. Once such a certification is made the Westfall Act provides that the suit “shall be deemed an action against the United States” under the Federal Tort Claims Act (“FTCA”) and “the United States shall be substituted as the party defendant.” 28 U.S.C. § 2679(d)(1), (d)(2) (1989). The United States thereupon moved the district court to substitute it as the proper defendant. The United States also moved to dismiss the suit due to Mrs. Arbour’s failure to exhaust administrative remedies under the FTCA.
Mrs. Arbour opposed the United States’ motions as premature. Though the defendants had provided answers to written interrogatories, Mrs. Arbour asked the district court to allow her additional discovery before acting on United States’ motions. The appellant suggested that additional discovery was necessary to determine if the defendants had been acting within the scope of their employment. Mrs. Arbour also suggested that further discovery was necessary to determine whether the defendants’ actions had been discretionary.
On May 26, 1989, the district court granted the government’s motion to substitute the United States as the proper defendant. 713 F.Supp. 229. The district court thereafter dismissed the suit for appellant’s failure to exhaust administrative remedies. The district court observed that “the plain language of the various provisions” of the Westfall Act and the FTCA make the United States the sole defendant and require that Mrs. Arbour comply with the FTCA’s administrative exhaustion requirement. The district court, holding that a scope certification by the Attorney General,- or his designee, is conclusive for purposes of substitution under the Westfall Act, rejected the appellant’s demand for additional discovery.
Arbour thereafter filed a timely notice of appeal.
II.
The Federal Employees Liability Reform and Tort Compensation Act of 1988 (Westfall Act), Pub.L. No. 100-694, 102 Stat. 4563 (codified as amended at 28 U.S.C. § 2679 (Supp.1989)) became law when President Reagan signed the Act on November 18, 1988. The law amended the Federal Tort Claims Act to provide for the substitution of the United States as a defendant in an action where a federal employee is sued for monetary damages aris ing from a common law tort allegedly committed by the federal employee acting within the scope of his or her employment. See Sowell v. American Cyanamid Co., 888 F.2d 802, 805 (11th Cir.1989). The Act provides the exclusive remedy for injuries to persons or property arising from the tortious acts of federal employees acting within the scope of their employment. Id.
The Act, in pertinent part, provides: (d)(1) Upon certification by the Attorney General that the defendant employee was acting within the scope of his office or employment at the time of the incident out of which the claim arose, any civil action or proceeding commenced upon such claim in a United States district court shall be deemed an action against the United States under the provisions of this title and all references thereto, and the United States shall be substituted as the party defendant.
Federal Employees Liability Reform and Tort Compensation Act of 1988, Pub.L. No. 100-694 at § 6.
The Westfall Act is Congress’ response to the Supreme Court’s decision in Westfall v. Erwin, 484 U.S. 292, 108 S.Ct. 580, 98 L.Ed.2d 619 (1988), which limited a federal official’s absolute immunity from tort claims to situations where the official’s actions were “within the outer perimeter of an official’s duties and ... discretionary in nature.” Id. at 300, 108 S.Ct. at 585. Congress saw the Westfall decision as an erosion of the common law tort immunity formerly available to federal employees.
In enacting the 1988 Act, Congress found that the Supreme Court’s decision in Westfall v. Erwin seriously erode[d] the common law tort immunity previously available to federal employees and create[d] an immediate crisis involving the prospect of personal liability, and that the threat of protracted personal tort litigation would seriously undermine the morale and well-being of federal employees, impede the ability of agencies to carry out their missions, and diminish the vitality of the Federal Tort Claims Act as the proper remedy for federal employee torts. Congress also recognized that plaintiffs could also benefit from the new legislation in that they would have an administrative claim against the government which could be resolved without costly litigation; and perhaps most importantly, the government would be able to pay any judgment whereas an individual federal employee might be judgment proof.
Sowell v. American Cyanamid Co., 888 F.2d at 805 (citation omitted).
Though Mrs. Arbour challenges the constitutionality of the Westfall Act, the Eleventh Circuit has noted: “The great weight of authority upholds the constitutionality of [the Westfall Act]. Several statutes have been passed in recent years substituting the United States as a defendant for its employees or contractors and denying the right of recovery against the individual defendants.... ” Id. The West-fall Act, by its terms, applies to cases not yet final and unreviewable. Section 8(b) of the Westfall Act establishes that the Act “shall apply to all claims, civil actions, and proceedings pending on, or filed on or after, the date of the enactment of this Act.” It is therefore clear that Congress specifically provided that the Westfall Act was to apply to suits pending at the time of its enactment. Lunsford v. Price, 885 F.2d 236, 240 (5th Cir.1989); Yalkut v. Gemignani, 873 F.2d 31, 34 (2d Cir.1989). “The fact that the statute is retroactive does not make it unconstitutional [because] a legal claim affords no definite or enforceable property right until reduced to final judgment.” Sowell v. American Cyanamid Co., 888 F.2d at 805 (citing In re Consol. United States Atmospheric Testing Litig., 820 F.2d 982 (9th Cir.1987), cert. denied, 485 U.S. 905, 108 S.Ct. 1076, 99 L.Ed.2d 235 (1988); Hammond v. United States, 786 F.2d 8 (1st Cir.1986)).
The heart of the Westfall Act lies in Sections 5 and 6. Section 5 amends 28 U.S.C. § 2679(b) to provide that the FTCA’s remedy against the United States for negligent or wrongful acts by government employees acting within the scope of their employment “is exclusive of any other civil action or proceeding for money damages ... against the employee whose act or omission gave rise to the claim.” 28 U.S.C. § 2679(b)(1) (1989). Section 6 implements section 5’s exclusive-remedy provision by authorizing the Attorney General to issue a “scope certification.” A “scope certification” is a certification that “the defendant employee was acting within the scope of his office or employment at the time of the incident out of which the claim arose....” 28 U.S.C. § 2679(d)(1), (d)(2). The Attorney General has delegated this authority to United States Attorneys who make the scope certification determinations in consultation with the Department of Justice. See 28 U.S.C. § 510 (Attorney General’s delegation authority); 28 C.F.R. § 15.3 (1989). When the Attorney General, or his desig-nee, certifies that the employee’s actions were within his or her scope of employment, the Westfall Act mandates that the suit “shall be deemed an action against the United States” under the FTCA and “the United States shall be substituted as the party defendant.” 28 U.S.C. § 2679(d)(1), (d)(2).
The United States Attorney, in the instant action, certified that the defendants were acting within the scope of their employment in connection with the events underlying Mrs. Arbour’s suit. The district court then substituted the United States as the defendant and dismissed Arbour’s action for failure to exhaust administrative remedies. The district court determined that the Attorney General’s scope certification was conclusive and nonreviewable. Appellant argues, inter alia, that the district court erred by deeming the “scope certification” conclusive and by denying her the opportunity to conduct additional discovery relevant to whether the defendants were indeed acting within the scope of their employment.
The district court determined that the Attorney General’s scope certification was entitled to conclusive effect under the Westfall Act (thereby precluding judicial examination). The district court’s determination is erroneous. See Petrousky v. United States, 728 F.Supp. 890, 891 (N.D.N.Y.1990) (new Justice Department guidelines provide for judicial review of scope certifications). Where a statute is clear on its face, its plain meaning should be given effect without reference to legislative history. United States v. James, 478 U.S. 597, 606, 106 S.Ct. 3116, 3121-22, 92 L.Ed.2d 483 (1986). However, when reading the scope certification provisions of the Westfall Act as a whole, as we are required to do, see Carchman v. Nash, 473 U.S. 716, 743 n. 11, 105 S.Ct. 3401, 3415 n. 11, 87 L.Ed.2d 516 (1985), the Act is ambiguous regarding the reviewability of the Attorney General’s scope certification. We must therefore look to the legislative history for guidance. See Newman v. Soballe, 871 F.2d 969, 972 (11th Cir.1989).
Representative Frank of Massachusetts, the sponsor of the Westfall Act, noted that a plaintiff would still have the right to contest the certification under the Westfall Act if he or she thought the Attorney General was certifying without justification. In response, a representative of the Department of Justice agreed that a plaintiff may challenge a certification, adding that the certification would be reviewable by a court.
Accordingly, a plaintiff who is dissatisfied with a scope certification may challenge the certification judicially. The district court therefore erred by finding the scope of employment certification non-reviewable and by, accordingly, denying Arbour’s discovery request.
|
11165107-20869 | COFFEY, Circuit Judge.
On July 30, 1998, the United States Attorney for the Northern District of Illinois filed a criminal information charging the defendants-appellants Donial Carter and Kelly Jemison each with one count of conspiring to make false statements in an application for the purchase of firearms from a federally licensed firearms dealer, in violation of 18 U.S.C. § 371, and three counts of causing false statements to be made in the records of a federally licensed firearms dealer, in violation of 18 U.S.C. § 924(a)(1)(A).
On December 22, 1998, Jemison pled guilty to Count One of the information (conspiracy to make a false statement in an application for the purchase of a firearm from a federally licenced firearms dealer) and the other three counts charged were dismissed -pursuant to a plea agreement. At Jemison’s March 31, 1999 sentencing hearing, the trial judge sentenced her to 16 months of imprisonment, three years of supervised release, and a special assessment of $100. Carter pled guilty to all four counts of the indictment on March 31,1999. At Carter’s April 8,1999 sentencing hearing, the trial judge ordered him imprisoned for a period of 66 months on each of the four counts with each of his sentences to run concurrent with each other, three years of supervised release, a $500 fine, and a $400 special assessment. On appeal, Jemison argues that she received ineffective assistance of counsel. Carter argues: (1) that the sentencing court committed clear error in increasing his base offense level by four points pursuant to U.S.S.G. § 2K2.1(b)(5) for attempting to transfer firearms with reason to believe that those firearms would be used in connection with felony offenses; and (2) that the court erred in sentencing him to four concurrent terms of imprisonment of 66 months each when the statutory maximum term of imprisonment for each count was only 60 months. We affirm as to Jemi-son. As to Carter, we affirm in part, reverse in part, and remand for re-sentencing.
I. BACKGROUND
A. The Crimes
On November 29, 1997, Donial Carter went to the Shootin’ Shack gun shop in Rockford, Illinois, and ordered two nine-millimeter pistols. Mike Douglas, the owner of the gun store, called the Illinois State Police’s Firearm Transfer Inquiry Program (“FTIP”) and gave Carter’s Illinois Firearms Owners Identification Card (“FOID”) number for approval to purchase the weapons and the FTIP refused to approve the gun sale to Carter based upon an outstanding arrest warrant. Due to the FTIP’s failure to approve the transaction, Douglas declined to make the sale to Carter.
After being refused the opportunity to purchase the pistols, Carter contacted his half-sister, Kelly Jemison, who had a valid Illinois FOID, and requested that she purchase the firearms for him. Jemison agreed, and on December 6, 1997, she accompanied Carter to the gun store and executed a Bureau of Alcohol, Tobacco, and Firearms (“ATF”) Form 4473 for the purchase of two firearms, including one of the pistols Carter previously had attempted to purchase in November. In response to the question on the gun sale form asking “Are you the actual buyer of the firearm indicated below?” Jemison answered “Yes.” Neither Jemison nor Carter contests that her answer on the application was false and, in fact, Jemison subsequently admitted, in a signed statement to the police, that she was purchasing the weapons for Carter.
Just one month later, on February 5, 1998, Jemison again accompanied Carter to the gun shop and purchased a nine-millimeter pistol. Jemison again executed an ATF Form 4473 in which she answered ‘Tes” to the question “Are you the actual buyer of the firearm indicated below?” when in fact she was acting as a “straw-man” in purchasing the guns for Carter, who in turn resold the nine-millimeter pistol.
On June 12, 1998, Carter called Douglas at the gun store and stated that he wished to purchase 10 Lorcine nine-millimeter pistols. After being quoted a price of $110 per pistol, Carter informed Douglas that it was his intention to resell these ten guns for a profít. Although Carter did not disclose the identity of the prospective gun buyers to Douglas, he did admit later to the police that he planned to sell the guns to members of the Gangster Disciples, a nationally known street gang. Douglas advised Carter that it would be illegal to re-sell the pistols without a federal firearms dealer’s license. Later that day, Carter and Jemi-son spoke with Douglas on a conference call, and informed him that Jemison would purchase the ten pistols because he (Carter) still did not possess a valid FOID. Douglas advised Carter and Jemison that their plan constituted an illegal “straw purchase.” In spite of this information, Carter told Douglas that he wanted to go through with the purchase of the pistols through Jemison. After their discussion, Douglas notified ATF about the pending gun sale to Jemison for Carter and agreed to cooperate in an investigation of the illegal transaction.
On June 24, 1998, Carter visited the Shootin’ Shack and, during a tape-recorded conversation, told Douglas that he intended to take possession of the pistols that Jemison was purchasing from him and sell them to buyers in Chicago. Carter also informed Douglas that in the future he intended to buy about $1,000 worth of guns from him per week for re-sale purposes. Carter left the gun store without making any down-payment on the pistols. Later that day, Carter called to confirm that Jemison would return and make the actual purchase and pick up the weapons. During this telephone conversation, Carter mentioned that he would be re-selling the firearms to buyers living in the Chicago, Illinois, area.
On July 2, 1998, Carter arrived at the store in a car with one other passenger, identified as Tommy Davidson, a member of the Gangster Disciples. Unbeknownst to Carter and Jemison, not only was then-trip surveilled by ATF agents, but their conversation in the Shootin’ Shack was recorded. Carter and Jemison counted out $1062 in cash for the ten guns, and Carter handed the money to Douglas. After the sale, Carter requested that Douglas prepare a false sales receipt in the amount of $1867.51 to facilitate his charging an inflated price for the guns. Carter left the store carrying the box containing the pistols. He and Davidson stashed nine of the guns in the trunk of their vehicle, and placed the other pistol on the console between them on the front seat. When Jemison exited the store with the phony receipt, she and Carter were arrested and taken into custody.
B. The Confessions
After their arrest, Jemison and Carter were conveyed to the Rockford Public Safety Building (police station) and questioned. Jemison initially stated that she was a gun collector and had purchased the ten pistols for her personal use, but later recanted this fabrication and, in a signed confession, admitted that she had purchased the guns for Carter. Her statement reads:
3 weeks ago Donial called me and asked me if I wanted to make some money and he was going to pay $300.00 using my FOID card. He used my number to order guns at the Shooting Shack in Rockford and told me only that I had to sign gun forms.... Donial never paid me the money and (sic) he said he was, and I did not know what he was doing with the guns. No clue.
Carter also initially stated that the guns were purchased for Jemison’s private use as a collector. Later, he also retracted that story and admitted in a signed confession that he was purchasing the guns for a Gangster Disciple named “Will” who had directed that Tommy Davidson accompany Carter and observe the transaction. Carter told the police:
I ran into Will after being jumped by some Urban Lord gang members and I talked to him about being protected because he was a G.D. [Gangster Disciple] and we came to a(sic) agreement that if I could find him some guns that he could help me be protected from the gang members. So last week I came to see Mike Douglas about it and he told me that he would order the guns under my sister’s name [as I requested.] ... [Will] gave Tommy the money to ride with me to purchase the guns because he didn’t trust me with the money.
C. Jemison’s Plea Agreement and Sentencing
In Jemison’s negotiated plea agreement, the government agreed not to pursue the two-level enhancement set forth in the United States Sentencing Guideline 3B1.1 and in return Jemison consented to waive her right to appeal either her conviction or sentence. The appellate waiver clause stated:
Defendant understands that by pleading guilty she is waiving all the rights set forth in the prior paragraph. Defendant’s attorney has explained those rights to her and the consequences of waiving all appellate issues that might have been available if she had exercised her right to trial. The defendant is also aware that Title 18, United States Code, Section 3742 affords defendant a right to appeal the sentence imposed. Acknowledging all of this, the defendant knowingly waives the right to appeal any sentence within the maximum provided in the statute of conviction (or manner in which that sentence was determined) on the grounds set forth in section 3742 or on any other ground whatsoever, in exchange for the concessions made by the United States in this Plea Agreement. The defendant also waives her right to challenge her sentence or the manner in which it was determined in any collateral attack, including, but not limited to, a motion brought under Title 28, United States Code, Section 2255.
On December 22, 1998, Jemison and her attorney, Mark Danielson, signed the agreement which averred that they had read the entire plea document, including the appellate waiver provision. Jemison subsequently entered a plea of guilty to Count One of the information (conspiracy to make a false statement in an application for the purchase of a firearm from a federally licenced firearms dealer) and the other three counts charged were dismissed pursuant to the plea agreement. The court, after interrogating her as to the voluntariness of her plea and knowledge of the plea agreement, accepted her plea, ordered a pre-sentence report, and continued her sentencing hearing to March 31,1998.
At Jemison’s sentencing hearing, defense counsel moved for a continuance and informed the court he had been advised by his client at the start of the hearing that, for reasons not set forth in the record, she was attempting to hire new counsel. In support thereof, Jemison went on and asserted that she had already hired new counsel. The court, after questioning her, found Jemison’s claim of newly retained counsel to be implausible given the fact that no other attorney had either filed a written notice of substitution of counsel nor was a substitute attorney present in court for the scheduled sentencing hearing. The trial judge denied her motion for a continuance and proceeded with the hearing and sentenced her to 16 months’ imprisonment. Carrying out the terms of the plea agreement, the prosecution did not request (and the court did not apply) enhancements to Jemison’s sentence. Je-mison appeals her conviction and sentence, apparently arguing that her counsel was somehow ineffective in: (1) failing to file pretrial motions attacking unspecified “violations of her Fourth and Fifth Amendment Rights,” and (2) failing to file a motion requesting the he be allowed to withdraw prior to her sentencing hearing based upon a “break-down” in communications between counsel and Jemison.
D. Carter’s Sentencing
On December 22, 1998, Carter appeared before the sentencing judge and entered a plea of guilty to Counts One through Four of the information. The trial judge, after interrogating Carter and satisfying himself that the plea was being entered knowingly and voluntarily, found Carter guilty and ordered a Presentence Investigation Report (“PSR”). The PSR recommended that Carter’s offense level be increased four levels under U.S.S.G. § 2K2.1(b)(5) since Carter purchased the firearms with the intent to transfer them to another while having “reason to believe” those firearms would be used in connection with the commission of a felony offense. Carter objected to this enhancement, arguing that just because he had knowledge that the guns were being purchased by gang members did not give him reason to believe that the weapons would be used in a future felony.
The trial judge rejected this argument and stated:
He knew that the Gangster Disciples, as a Gang, that they are engaged in all sorts of illegal activity. It’s well known the Gangster Disciples gang is engaged in felony drug offenses and other crimes of violence and shootings that are felony offenses and that they are using weapons for illegal purposes. It would just be naive of me to say that under the facts, well, you have to show that even though he knew they were being provided to a gang, he really didn’t know what they were going to be used for. I think that that would be an unreasonable assumption and that he knew that they were going to be used for felony offenses.
II. ISSUES
On appeal, Jemison argues that she received ineffective assistance of counsel. Carter argues that: (1) the district court committed clear error in enhancing his offense level four levels pursuant to U.S.S.G. § 2K2.1(b)(5) for attempting to transfer firearms with “reason to believe” that those weapons would be used in connection with a future felony offense; and (2) that the district court erred in sentencing him to concurrent terms of 66 months when the statutory maximum term of imprisonment on each count was only 60 months.
III. ANALYSIS
A. Waiver of Jemison’s Ineffective Assistance of Counsel Claim
On appeal, Jemison broadly asserts that she received ineffective assistance of counsel in violation of her Sixth Amendment rights, but fails to set forth particulars as to how her counsel was ineffective. If we hold that she has entered into a binding appellate waiver, we need not address the merits of her claim of ineffective assistance of counsel as we “have routinely held that a defendant may waive the right to a direct appeal as part of a written plea agreement.” Jones v. United States, 167 F.3d 1142, 1144 (7th Cir.1999).
1. Enforceability of the Appellate Waiver
As previously stated, both Jemison and her attorney, Mark Danielson, knowingly and voluntarily signed the plea agreement and averred that they had read the plea document, including the appellate waiver provision. Thereafter, Jemison entered a plea of guilty on December 22, 1998 which was accepted by the court. The appellate waiver clause in Jemison’s plea agreement explicitly stated:
Defendant understands that by pleading guilty she is waiving all the rights set forth in the prior paragraph. Defendant’s attorney has explained those rights to her and the consequences of waiving all appellate issues that might have been available if she had exercised her right to trial. The defendant is also aware that Title 18, United States Code, Section 3742 affords defendant a right to appeal the sentence imposed. Acknowledging all of this, the defendant knowingly waives the right to appeal any sentence within the maximum provided in the statute of conviction (or manner in which that sentence was determined) on the grounds set forth in section 3742 or on any other ground whatsoever, in exchange for the concessions made by the United States in this Plea Agreement. The defendant also waives her right to challenge her sentence or the manner in which it was determined in any collateral attack, including, but not limited to, a motion brought under Title 28, United States Code, Section 2255.
An appellate waiver will be enforced if: (1) its terms are clear and unambiguous; and (2) the record demonstrates that it was entered into “knowingly and voluntarily.” Jones, 167 F.3d at 1144. We are convinced that the appellate waiver set forth in Jemison’s plea agreement fulfills these requirements. Furthermore, we note that we have previously enforced an appellate waiver identical to the waiver language contained in Jemison’s plea agreement. United States v. Williams, 184 F.3d 666, 667-68 (7th Cir.1999). In Williams, we found that the terms of the waiver, as in this case, constituted an “express and unambiguous” waiver. Id. Second, we believe that Jemison’s testimony before an Illinois state court judge at her December 22, 1998, sentencing hearing clearly illustrates that she “knowingly and voluntarily” entered into and accepted the appellate waiver terms of the plea agreement. At that hearing, the following colloquy took place:
THE COURT: You have seen this plea agreement?
MS. JEMISON: Yes, I have.
THE COURT: And you have read it? MS. JEMISON: Yes.
THE COURT: And you have discussed it with your lawyer?
MS. JEMISON: Yes.
THE COURT: And you understand it? MS. JEMISON: Yes.
THE COURT: Did anybody force you to sign it either physically or mentally? MS. JEMISON: No.
The prosecution then recited for the record the evidence that would have been introduced at trial had Jemison not entered a plea of guilty, including the fact that Jemison had falsely filled out multiple ATF Form 4473’s when she knew Carter’s FOID card was invalid during the time period that she was making the firearms purchases. Jemison also admitted that she was told by Carter that she would be paid to make the purchases, allowing the fact-finder to conclude that she knew the illegality of the gun-buying scheme and the assistance she was providing in its furtherance. Furthermore, she conceded that she had been less then truthful when telling the police that she was a firearms collector when she was well aware that she was acting as a “strawman” for Carter and making firearms purchases because he did not possess a valid FOID. When asked if she had committed the acts set forth by the prosecution in its offer of proof, Jemi-son answered “Correct.” Following Jemi-son’s admission, the trial judge advised her that she was giving up her Constitutional rights (including, but not limited to the-right to a trial by jury, the right to appointed counsel, and the right to examine the prosecution’s witnesses and present her own witnesses) by entering into the plea agreement. The district court also carefully explained in basic terms the effect that the appellate waiver would have on Jemison’s guilty plea:
THE COURT: Normally you would have the right when you plead guilty to appeal the sentence or appeal the sentencing procedures or any error that I might make today in the plea of guilty proceedings, but in your plea agreement you have agreed that you are not going to take an appeal at all or any other form of action to go to a higher court to try to ultimately overturn what I may rule in this case to be your sentence or any other matter that I may rule on. Do you understand that?
MS. JEMISON: Yes.
THE COURT: The essence is that I’m the last judge in your case, and you ordinarily would have a right to go to a higher judge. Do you understand that?
MS. JEMISON: Yes.
THE COURT: And you have discussed that with your lawyer?
MS. JEMISON: Yes.
THE COURT: And you understand. I take it you think that’s in your best interest, is that correct?
MS. JEMISON: Correct.
THE COURT: Now, I have explained to you all your rights, and you say that you understand them. Do you wish to give them up and plead guilty?
MS. JEMISON: Yes.
Based upon the facts set forth in the record, including the admissions and statements made by Jemison in open court, we are convinced that she knowingly and voluntarily entered into an enforceable appellate waiver whose terms were clear and unambiguous. Jemison’s appeal is dismissed.
B. Carter’s Objection to his Sentencing Enhancement
United States Sentencing Guideline Section 2K2.1(b)(5) authorizes an increase in the base offense level in firearms offenses if the defendant “possessed or transferred any firearm or ammunition with knowledge, intent, or reason to believe that it would be used or possessed in connection with another felony offense.” U.S.S.G. § 2K2.1 (b)(5). Carter argues (in order that it might benefit his own situation) that the sentencing court should have interpreted section 2K2.1(b)(5) so that the mere transfer of multiple firearms to a street gang, in and of itself, is insufficient for a court to hold that he had “reason to believe” such weapons would be used in felonious activities. Essentially Carter asserts that the guideline requires the prosecution to establish that he had “reason to believe” that the pistols would be used in a specific offense in the future. We review the district court’s finding at sentencing that Carter attempted to “transfer” firearms with “reason to believe they would be used in connection with other felonies” for clear error. United States v. Purchess, 107 F.3d 1261, 1265 (7th Cir.1997).
|
10814953-15141 | Davis, Judge,
delivered the opinion of the court:
The claim made in this petition is for administrative charges which the Government has deducted from the proceeds of sales of timber from individual Indian allotments on the Quinault Reservation in the State of Washington. Under the General Allotment Act of 1887, as amended, 25 U.S.C. §§ 331, et seg., parcels within the Reservation, mainly forest lands, were allotted in trust to individual Indians, the great mass of whom are “noncompetent” (in the Indian sense). The Bureau of Indian Affairs has managed these tracts essentially as a single unit (known as the Quinault Forest), selling timber regularly to logging companies. From the proceeds credited to the allottees’ trust accounts, the Bureau has, for many years, deducted an “administrative charge” of 10%. Plaintiffs’ position is that this charge is being unlawfully collected, contrary to the General Allotment Act, the Fifth Amendment, and the trust patents, and the affected Indians are entitled to recover (with interest) the total of the deductions within the limitations period.
The petition was filed (on March 15,1971) in the name of The Quinault Allottee Association and of three individual allottees “on their own behalf and on behalf of all individual allottees of the Quinault Reservation.” After answer but before any other significant proceedings, plaintiffs moved for an order making provision for the giving of appropriate notice of the pendency and nature of this action to the allot-tees of the Quinault Reservation (or their successors) shown on a list supplied by the movants. Characterizing this as a “class action”, plaintiffs ask us to invoke procedures parallel to those of Rule 23 of the Federal Rules of Civil Procedure.
We are told (and defendant does not deny) that there are over one thousand Quinault Reservation allottees in the same position as the three individual plaintiffs, the interests of these allottees vary from full ownership of one or more allotments to fractional interests in a single allotment, the legal question raised by the petition as to the Government’s liability is common to the entire group, the claims and defenses of the named individual plaintiffs are typical of the claims and defenses of the group, and the separate claims of many of the individual allottees are very small in amount. The Quinault Allottees Association is an organization of these allottees, numbering now over 530 members. Both the Association and the individual plaintiffs assert that they can and will fairly and adequately protect the interests of the entire group, and they deem all the prerequisites of Eule 23, F.E.C.P., for designation as a class action to have been met. The defendant opposes the motion and sees no power, as well as no need, to characterize or treat this as a class action.
I
We reject, at the outset, the Government’s broadside challenge to the power of this court to entertain class actions '(apparently of any type or character). Under 28 U.S.C. § 2071 we can prescribe rules for the conduct of our business, just as 28 U.S.C. § 2072 authorizes the promulgation of rules of civil procedure for the district courts. Obviously, Eule 23, F.E.C.P., was within the Supreme 'Court’s mandate to adopt rules of “practice and procedure” for the district courts; the class suit is basically a procedural technique for resolving the claims of many individuals at one time (Eisen v. Carlisle & Jacquelin, 391 F. 2d 555, 560 (C.A. 2, 1968)), comparable to joinder of multiple parties and intervention. There is no reason why this court cannot use the same device, if it is appropriate. So long as relief is confined to a money judgment (United States v. King, 395 U.S. 1, 3 (1969); Glidden Co. v. Zdanok, 370 U.S. 530, 557 (1962)), there is nothing in the type of jurisdiction we have, or the fact that claims in this court are normally against the United States, to deprive us of this modern aid to speedier and less repetitious litigation. Congress has limited us to monetary judgments but it has not said or implied that we cannot use new procedural techniques, if we consider them advisable, in deciding whether or not to make monetary awards in fair and efficient fashion. The directive that waiver of sovereign immunity not be read expansively (e.g. United States v. King, 395 U.S. 1, 4, 6 (1969)) goes to the relief we can award, the subjects we can consider, and the timing of claims, not the intermediate procedural steps we take in cases plainly within our jurisdiction. Long ago, the Supreme Court 'said that in hearing and determining the causes that come before this court for adjudication “we see no reason why it [the Court of Claims] may not use such machinery as courts of more general jurisdiction are accustomed to employ under similar circumstances to aid in their investigations.” United States v. Raymond, 92 U.S. 651, 654 (1875).
Eule 23, F.E.C.P., is applicable to all civil litigation in the district courts even though they have Tucker Act jurisdiction up to $10,000 and unlimited Tort Claims Act jurisdiction. The only decision on the point holds that those courts can entertain class actions pursuant to Eule 23 against the United States under both of those statutes. Northern Natural Gas Co. v. Grounds, 292 F. Supp. 619, 641-44 (D. Kans. 1968). Since the district courts’ Tucker Act jurisdiction is “concurrent with the Court of Claims” (28 U.S.C. § 1346 (a)) and the Tort Claims Act is comparable to the Tucker Act in all respects pertinent to this case (both involve claims against the United States for money only), we can see no distinction between the power of the district courts and of this court to accept class suits against the United States. Indeed, if there were, an unfair inconsistency would be created 'between claimants asking more than $10,000 and those demanding less.
Though, we have not adopted a rule akin to Rule 23 nor have we gone as far as that provision permits in binding absent members of a class, this court has acknowledged both that groups of claimants can join together in “class” suits, and that special procedures may be applicable to that category of litigation. Our Rule 221 provides for a smaller filing fee in a case involving less than $500 if “it is not a class case.” We have at times envisaged class and representative suits here. Lucking v. United States, 102 Ct. Cl. 233, 239, 243, 245 (1944). In fact, Indian cases have several times been denominated or treated as class actions. An old one is United States v. Old Settlers, 148 U.S. 427, 479-80 (1893). More recent examples are Menominee Tribe of Indians v. United States, 179 Ct. Cl. 496, 499, 388 F. 2d 998, 1000 (1967), aff'd, 391 U.S.404 (1968) ; Klamath, and Modoc Tribes v. United States, No. 125-61 and Anderson v. United States, No. 87-62, order of April 24, 1964; Short v. United States, No. 102-63, order of April 15, 1966. See, also, McGhee v. Creek Nation, 122 Ct. Cl. 380, 394, cert. denied, 344 U.S. 856 (1952). Despite the defendant’s argument, we have no sufficient reason to question the legality of this practice.
II
Of course, the existence of power in this court to adopt a rule equivalent to Rule 23, F.R.C.P., or without such a rule to borrow those district court provisions in a particular case of our own, does not mean that we must or should do so. We often follow the practice and procedure of the district courts (Love v. United States, 122 Ct. Cl. 144, 149, 104 F. Supp. 102 (1952)), but there is no compulsion; we have departed from the Federal Rules in other aspects, such as discovery. The fact is that, even though present Rule 23 has been in effect since 1966, we have not adopted an analogue or parallel. Tbe practice in class suits (including the prescription of standards for giving actions that characterization) is still flexible and open in this forum.
We have now decided that, for the time being, we will not adopt or promulgate any general rule on the subject, though we shall continue to consider that possibility for the future. Rule 23, particularly the part which contemplates binding absent members of the class, has evoked controversy, and “the jury is not yet in.” Wright, Class Actions, 47 F.R.D. 169, 170-71 (1970) ; see, also, Frankel, Some Preliminary Observations Concerning Civil Rule £§, 43 F.R.D. 39, 43—47, 52; Eisen v. Carlisle & Jacquelin, 391 F. 2d 555, 560-61 (C.A. 2, 1968). The former Rule 23, replaced in 1966, is no longer considered an acceptable model. Id. Above all, the “class suit” is a rainbow concept, merging many shades and forms of multiple claim litigation into one summary phrase. Some of these forms may fit our cases, others not. It may possibly be that not all of the current Rule 23 mechanisms may be needed or apt for this court, or will work efficiently here. Time, experience, and perhaps experiment should precede the jelling of an over-all formula.
We could, of course, refuse to take any steps at all until a general rule is prescribed, but we think the better road to follow, until we are clearer as to the shape of the class-suit needs in this court and the functioning of various class-suit devices, is to proceed on a case-by-case basis, gaining and evaluating experience as we study and decide the class-suit issues presented by individual, concrete cases coming up for resolution. If we ultimately adopt a general rule, it will be in the light of this ad hoc experience.
In this instance, using some of the Rule 23 criteria, we are satisfied that (i) the Quinault Reservation allottees constitute a large but manageable class, (ii) there is a question of law (the legality of the Government’s imposition of the administrative timber charge) common to the whole class, (iii) this common legal issue is a predominant one, overriding any separate factual issues affecting the individual members, (iv) the claims of the present plaintiffs are typical of the claims of the class, (v) the Government has acted on grounds generally applicable to the whole class, (vi) the claims of many allottees are so small that it is doubtful that they would be pursued other than through this case, (vii) the current plaintiffs will fairly and adequately protect the interests of the class without conflict of interest, and (viii) the prosecution of individual actions by members of the class, some in district courts and some in this court, would create a risk of inconsistent or varying adjudications. In combination, these are good reasons for giving special treatment to this proceeding as a class suit.
We are not satisfied, however, that it is necessary or appropriate to bind allottees who fail to join the suit, or that we should adopt the device of Rule 23(c) (2) (3) for notice to class members that, unless they request exclusion from the suit by a specified date, the judgment, whether favorable or not, will cover them. This is not a widely scattered class. Most of the allottees live on or near the Reservation and participate in Quinault tribal affairs. They know about the Quinault Allottee Association, and presumably about this suit (and its companions). Plaintiffs’ counsel indicated at oral argument that many who had not joined the Association (about half of the allottees) were wary or suspicious of it, and possibly of the litigation. They are probably not sophisticated in the realm of judicial proceedings. In this situation, we are not disposed to force the remaining individuals in the group to affirmatively elect to stay out of the case if they do not wish to be bound. We believe, rather, that they should be given easy opportunity to appear and to include themselves if they desire the advantages (and are willing to bear the risks and costs) of the suit.
Accordingly, we authorize a notice of the pendency of this action to be sent to all Quinault allottees known to plaintiffs (and not already named in the petition). Plaintiffs suggest that this notice be signed and sent by plaintiffs’ counsel, and we are willing that this be done. The notice should be dated and describe the litigation and its purpose, including the plaintiffs’ general position and also the defendant’s general position denying liability. It should inform the recipient that (a) he is believed to be a member of the class of Quinault allottees, (b) if he wishes to be included in the suit, 'he should sign and file with the Clerk of this court the attached Notice of Appearance within six months of the date of the notice to him, (c) if he files such Notice of Appearance, the judgment in the action, whether favorable or not, will apply to and bind him, (d) if he files the Notice of Appearance, he may be liable for his pro rata share of the costs and expenses of the litigation but need not join the Quinault Allottee Association, and (e) if he does not file the Notice of Appearance by the due date, he will not be bound by an unfavorable judgment in the case, nor will he receive any monetary recovery under a favorable judgment. The notice should also say that the recipient may, if he so desires, enter his appearance through his own counsel by filing a motion for leave to intervene as a plaintiff, and in that event he will be responsible himself for the fees, costs and disbursements resulting therefrom. Finally, the notice should say that neither the sending of the notice pursuant to this court’s authorization, nor the filing of the petition, implies that the court has ruled as yet that the Government is liable or that the recipient will be entitled to recover any amount. Attached to the notice should be a Notice of Appearance which can be used by those allottees wishing to enter their appearance.
’Counsel for plaintiffs and defendant, together with the Clerk of the court, will endeavor to agree upon the exact form of the notice (and the Notice of Appearance to be attached) and the procedure for distribution. If agreement is reached, the forms should be submitted to the trial commissioner for approval before being sent. If agreement cannot be had, the commissioner shall prescribe the notices and the distribution process.
'In addition, we waive the filing of fees (in excess of the $10 already paid) by the allottees who elect to join and appear by the date set in the notice for filing the Notice of Appearance. We do so because we consider this suit as one form of class action and the fee already paid should be adequate for this type of class suit.
Further steps to be taken (with respect to the class nature of the suit) once the class is closed should be prescribed by the commissioner, after consultation with the parties and, where appropriate, the Clerk.
Finally, it is well to note explicitly that nothing we say or hold in this opinion prevents any Quinault allottee (or group of them) from instituting another suit on the same claim through the filing of another petition — if that should be desired.
The plaintiffs’ motion for an order providing for the giving of notice of a class action is granted to the extent provided in, and in accordance with, this opinion, and the case is returned to the trial commissioner for further proceedings.
|
4068215-9247 | REAVLEY, Circuit Judge:
Edward Ashford sued several defendants on a variety of causes of action after he was violently assaulted in prison. Each defendant was granted summary judgment. Ashford contends here that the district court erred only in granting the United States summary judgment on his negligence claim under the Federal Tort Claims Act (“FTCA”). The district court ruled that the FTCA’s discretionary-function exception shielded the United States from suit. Because there are issues of material fact as to whether that exception applies, we reverse the grant of summary judgment and remand the case to the district court.
I. Background
Ashford committed a disciplinary infraction while at a medium-security prison and learned that he would soon be transferred to a high-security prison. He was concerned that the move would place him in confinement with prisoners from Washington, D.C. While he had previously been involved in several incidents with prisoners when he was imprisoned in D.C., he was particularly concerned about an inmate named Kelvin Smith, who had attacked him when they had been locked up together. According to Ashford, after Smith assaulted him, corrections officials in Washington issued two separation orders, which forbid the two from being housed in the same prison population.
Ashford explained his concerns to the prison warden of the medium-security prison. The warden advised him to contact several different prison officials. Ash-ford wrote those officials and outlined his concerns, explaining that Smith and other gang members had previously attacked him. He emphasized that he should not be housed with prisoners from D.C. Ashford claims that the warden assured him that his safety concerns would be investigated before his transfer.
Ashford was eventually transferred to the high-security prison, but prison officials had failed to investigate his concerns. When Ashford arrived at the prison, he was interviewed by Lieutenant Russell Haas. According to Ashford, he asked Haas if Smith was housed there and explained to Haas his history with Smith. Ashford claims that Haas assured him that Smith was not being housed there. It is uncontested that Smith was in fact being housed at the prison. Haas, however, disputes that Ashford ever mentioned Smith during the intake interview.
Whether Ashford did in fact voice concerns about Smith to Haas is important to this litigation. Prison official Patricia Doty testified that if Ashford had mentioned Smith as a “security threat” during his intake interview, Ashford “would have been placed in some sort of administrative segregation until that could be investigated.” But Doty also testified that prison officials at the intake interview have discretion in determining where to put a prisoner in confinement. Nevertheless, Haas himself confirmed that if Ashford indicated that there was a security risk with another inmate, the “only procedure” that he would have followed would have been to place Ashford in special housing and a further investigation would have been conducted. But that procedure was not followed and Ashford was placed in the general population.
Two days after Ashford arrived at the new prison, an inmate approached Ashford and purportedly said: “I ain’t got no beef with you personally, right; but [Smith] sent us.” Ashford was then viciously attacked and stabbed approximately 13 times. He sustained wounds to his back, head, inner left ear canal, and upper torso. His left lung was punctured. The attack has left Ashford with both hearing and vision problems.
Ashford filed suit against several of the prison officials and the United States, alleging violations of his civil rights and the FTCA. His FTCA claim accused the United States of negligence for putting him into the general prison population with prisoners from D.C., including Smith. The parties consented to have a magistrate judge hear and decide the FTCA claim, and a Flowers evidentiary hearing was held. A Flowers hearing “amounts to a bench trial replete with credibility determinations and findings of fact.”
After the Flowers hearing in which numerous witnesses testified, the magistrate judge decided no issues of credibility and instead granted the United States summary judgment on the discretionary-function exception to the FTCA.
We review grants of summary judgment de novo, applying the same standards as the lower court. The Government was properly granted summary judgment on the discretionary-function exception only if there are no material facts in dispute and the exception applied as a matter of law.
II. Analysis
Our issue is whether the discretionary-exception applied as a matter of law. We begin with the basics. Generally, sovereign immunity bars suits against the Government; this notion “derives from the British legal fiction that ‘the King can do no wrong,’ and therefore can never appear as a defendant in ‘his’ own courts.” Under the FTCA, however, the Government has waived sovereign immunity for personal injury claims caused by “the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his [or her] office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.” While the FTCA takes two steps forward in allowing individuals to receive compensation for the negligent conduct of the Government, it takes one step back with the numerous statutory exceptions that limit the circumstances under which individuals may bring suit. Perhaps the exception that is the most frequent retreat is the discretionary-function exception, which affords the United States protection against any FTCA claim “based upon the exercise or performance or failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government.” The Supreme Court has added some flesh to that bare-boned statutory skeleton, setting up a two-part test to determine whether the discretionary-function exception has been triggered. First, for the exception to apply, the challenged act must involve an element of judgment. In other words, the Government needs to establish there was “room for choice” in making the allegedly negligent decision. If a “federal statute, regulation or policy” specifically prescribes a course of action for the federal employee to follow, the employee has no choice but to adhere to the directive. If the Government can establish that the challenged act involved an element of judgment, step two of the test is met and the discretionary-function exception will apply only if that judgment is of the kind that the exception was designed to shield.
Here, the Government cannot show that step one of the test has been met as a matter of law. Two Government witnesses, Doty and Hass, testified that if an inmate raised a safety concern like the one Ashford claims he raised at the intake interview, prison policy required him to be put into solitary confinement until an investigation could be conducted. That policy constrained the prison officials’ discretion such that if the factual predicate to the policy was met, there was no room for choice in making the decision whether to place Ashford in solitary confinement. There is a dispute, however, about whether the factual predicate to the policy was met: Ashford claims he raised safety concerns, thereby triggering the policy. Government witnesses testified to the contrary. That fact dispute makes summary judgment on the discretionary-function exception improper.
In an attempt to avoid this result, the Government cites a string of cases in which courts have held that the discretionary-function exception protects prison officials’ decisions about inmate safety. But in each of those cases, the inmate could point to no specific prison policy or regulation that constrained prison officials’ judgment other than the prison’s general duty to protect its prison population. Here, however, there is a specific policy in place that constrained the decision-making ability of the prison officials. Accordingly, the United States should not have been granted summary judgment on the discretionary-function exception.
We REVERSE the grant of summary judgment in favor of the United States on Ashford’s FTCA claim and REMAND. Because we reverse, we DENY Ashford’s motion for the production of the audio tape of the Flowers hearing as moot.
. See Flowers v. Phelps, 956 F.2d 488 (5th Cir.), modified in pan on other grounds, 964 F.2d 400 (5th Cir.1992).
. McAfee v. Martin, 63 F.3d 436, 437 (5th Cir.1995).
. Triple Tee Golf, Inc. v. Nike, Inc., 485 F.3d 253, 261 (5th Cir.2007).
. See Fed. R. Civ. Proc. 56(c).
. Santana-Rosa v. United States, 335 F.3d 39, 41-42 (1st Cir.2003) (internal citation omitted).
. 28 U.S.C. § 1346(b)(1).
. Id. § 2680 (listing the numerous statutory exceptions to the FTCA).
. Id. § 2680(a).
. United States v. Gaubert, 499 U.S. 315, 322-23, 111 S.Ct. 1267, 1273-74, 113 L.Ed.2d 335 (1991).
. Id. at 322, 111 S.Ct. at 1273.
. Id. at 323, 111 S.Ct. at 1274.
. Id. at 322, 111 S.Ct. at 1273.
. Id. at 322-23, 111 S.Ct. at 1273-74.
|
4167066-7598 | MEMORANDUM
TROUTMAN, District Judge.
Negotiations for the purchase of numerous trucks and bottom dumpers commenced between the parties to this litigation in November 1972 in Milan, Italy. Representatives of plaintiffs met with defendants and reportedly informed them that they, plaintiffs, needed trucks and bottom dumpers to perform earth moving and excavation work under a potential contract amounting to well over one hundred million dollars between Impregilo and Centráis Eléctricas de Minas Gerais S.A. (CEMIG) for the construction of one of the largest dams ever built in South America. Defendants allegedly represented to plaintiffs that the machinery met all specifications for the work. When Impregilo received the contract award, the parties consummated the agreement of sale for the machinery. Upon delivery of the trucks to the project site in San Simao, Brazil, Impregilo allegedly experienced numerous breakdowns and difficulties attributable to failing front and rear differentials, piston deterioration and air compressor insufficiencies. Consequently, Impregilo could not use the trucks and bottom dumpers for the intended purposes and incurred additional costs occasioned thereby in order to meet its contractual obligations to CEMIG. To recover damages for breach of contract and warranties, plaintiffs instituted this action in October 1977.
Subsequently, the parties engaged in pre-trial discovery. In March 1980 defendant filed a motion to compel production of documents and answers to interrogatories. Specifically, defendant sought a document entitled the “documentation of the Mack claim” compiled by Impregilo and submitted to Impregilo SPA in Milan and to plaintiffs’ counsel in Washington, D.C. In addition, defendants requested production of communications in which plaintiffs discussed particular aspects of the preparation of Item Four. The Court referred the matter to the magistrate, who, after hearing argument, issued an order dated March 14, 1980, granting defendants’ motion as to Items Five, Six and Seven and denying it as to Item Four. On August 1,1980, plaintiffs filed a motion to reverse the magistrate’s discovery order. For all intents and purposes this motion, in fact, constitutes an appeal, which defendants attack preliminarily as untimely.
In pertinent part, the Federal Magistrates Act of 1968, as amended, 28 U.S.C. § 636(b)(1), provides that
a judge may designate a magistrate to hear and determine any pretrial matter pending before the court ... A judge of the court may reconsider any pretrial matter under this subparagraph (A) where it has been shown that the magistrate’s order is clearly erroneous or contrary to law.
Within ten days after being served with a copy, any party may serve and file written objections to such proposed findings and recommendations as provided by rules of court.
(emphasis added). At the time the magistrate issued his order E.D.Pa.R. 46(b)(5)(a) permitted magistrates to determine discovery motions “subject to the right of appeal to the assigned Judge within ten days”. On August 1, 1980, the date on which defendants filed this appeal, a superseding local rule of civil procedure became effective. The new rule, 7(IV)(a), affords any party the right to appeal a matter submitted to the magistrate “within ten days after issuance of the magistrate’s order, unless a different time is prescribed by the magistrate or a judge”. Whether the new rule operates retroactively will not be an issue. Viewed within the context of § 636(b), the new rule, more broadly phrased than the old one, neither anticipates nor permits, absent extraordinary circumstances, nunc pro tunc extensions of time in which to file an appeal.
Although the statute does not specifically allow a party to petition the court for an extension of time in which to file written objections to magistrates’ rulings, certainly the court has the power, if not the duty, to review magistrates’ rulings independently and carefully, irrespective of timely objections raised by the parties. See Mathews v. Weber, 423 U.S. 261, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976) and Webb v. Califano, 468 F.Supp. 825 (E.D.Cal.1979). However, where a dissatisfied party fails to file timely objections, the court need not entertain the appeal, for the ten-day period provided by § 636(b)(1) forms a maximum, not a minimum, framework. United States v. Barney, 568 F.2d 134 (9th Cir.), cert. denied, 435 U.S. 955, 98 S.Ct. 1586, 55 L.Ed.2d 806 (1978).
Moreover, E.D.Pa.R. 7(IV)(a)’s language-“unless a different time is prescribed by the magistrate or judge”-clearly indicates that extensions are to be requested prior to expiration of the ten-day period. The word “prescribe” surely suggests an action in the future, not the past. Furthermore, where the magistrate’s ruling is nondispositive, allowing appeal almost five months after entry thereof undermines the certainty and expedition which filing deadlines serve. To allow dissatisfied parties who could have petitioned the court within the ten-day period to file the appeal invites unnecessary and possibly arbitrary and prejudicial delay.
In In re Scheid’s, Inc., 342 F.Supp. 290, 291 (E.D.Pa.1972), the court held that the ten-day period for filing petitions for review of a referee’s order under the former Bankruptcy Act of 1898, 11 U.S.C. § 67(c), was mandatory and inelastic, thus precluding any discretion on the part of the Court to consider petitions filed after the ten-day period [had] expired”.
More recently, in Bank Building & Equipment Corp. of America v. Mack Local 677 Federal Credit Union, 87 F.R.D. 553 (E.D.Pa.1980), the plaintiff failed to demand a trial by jury within ten days after the service of the last pleading directed to that issue. See Fed.R.Civ.P. 38(b). Having failed to demand a jury trial within ten days after replying to defendant’s counterclaim, plaintiff had waived the right, which the court had the power and discretion to revive if the moving party had proffered an adequate and proper reason for untimely application therefor. However,
mere inadvertence, oversight, or lack of diligence [did] not justify the omission or abrogate the waiver. Nor [did] unfamiliarity with or misinterpretation of rules excuse compliance with procedural requirements.
Id. at 555 (citations omitted).
Plaintiff attributes the delay in the case at bar to its desire to ascertain whether compliance with the magistrate’s ruling, which it still considers erroneous, would entail undue time and expense. Notwithstanding plaintiff’s commendable desire to avoid evitable expenditure of valuable time and resources of both lawyers and judge, the fact remains that plaintiff could have petitioned the Court for an extension of time well within the ten — day period required by statute and local rule. As the Court observed in Bank Building & Equipment Corp. of America v. Mack Local 677 Federal Credit Union, at 555,
[t]o sanction [plaintiff’s] omission would invite disregard of procedural requirements in all of the Rules, cause delay in disposition of disputes by creating confusion on trial dockets and prejudice the opposing party by injecting an unnecessary element of uncertainty into trial strategy and preparation. Worse, the Rules’ articulated purpose of securing the “just, speedy and inexpensive determination of every action” would be reduced to an empyrean principle with no practical meaning. See Fed.R.Civ.P. 1. Avoiding this undesirable result and encouraging familiarity with federal procedure so that all litigants receive prompt and full consideration impels the conclusion that
|
67321-8859 | RICE, District Judge.
Appellant, Ardis Gadd Killpack, brought an action in her individual capacity as the proposed beneficiary of an insurance policy and, in addition, other alternative causes in her representative capacity as executrix of the estate of her deceased husband, Theron W. Kill-pack, to recover from the National Old Line Insurance Company, appellee, under an alleged life insurance contract. The trial court sustained appellee’s motion for summary judgment and dismissed the actions. This appeal challenges the correctness of the summary judgment.
The undisputed facts as established by the pleadings, affidavits, and supporting exhibits show that on June 25, 1954, at the solicitation of appellee's local agent, appellant’s husband signed a life insurance application form and received appellee’s standard binding receipt in exchange for his check for the first annual premium. The policy was to pay to appellant, as beneficiary, $12,000 in the event of her husband’s death during the first year. The application carried the notation, “Date contract so insurance age is 50,” which was inserted because the policy in question was not issued to persons over 50. Appellant’s husband was to become 51 on August 26, 1954. Both the application and the binding receipt contained the provision that “If within sixty days a policy has not been received by me or if I have not received notice of approval or rejection, then this application shall be deemed to have been declined by the company.” The binding receipt also provided that the insurance was to be in force upon approval at appellee’s home office.
On June 29, 1954, the application with Killpack’s check for the first premium was received at appellee’s home office and processing was begun. On August 16, 1954, however, because it had received no medical examination report, appellee cancelled the application in accordance with its underwriting rules and returned the premium check together with a notice of cancellation dated August 11, 1954, to appellant’s husband. The medical examination had in fact taken place on August 10, 1954, and the report was received by appellee on August 16, 1954. On that date appellee wrote its local agent suggesting that the case would be “reopened” on the submission of a new application. Appellee’s agent thereupon obtained a new application and another premium check. The local agent told appellant’s husband at this time that his insurance had been approved. However, the second application, which was received by appellee on August 25, 1954, contained no request to date the contract so as to reflect an insurance age of 50. On August 27, 1954, appellee accordingly sent its general agent (the local agent having resigned on August 25) a suitable amendment but on September 8, 1954, appellant’s husband died suddenly before his signature had been obtained.
On October 27, 1954, an attorney for appellee called on appellant at her home. The company attorney denied liability, but, in addition to returning the premium, offered appellant a check for $500 in exchange for her promise not to claim coverage. Appellant, in her individual capacity, executed a release and accepted the check, but on further consideration refused to negotiate it and instituted this suit.
In her suit below appellant contended first, that a valid contract of insurance had been created, and second, that even if there was no contract, appellee was liable in damages on the basis of tort liability.
The court below, in dismissing the action, found that appellee had acted with reasonable diligence; that neither application had been approved by the home office and that consequently no contract of insurance was ever entered into; that in the absence of a contract of insurance appellee is not liable to appellant or either of them; and, finally, that in any event the appellant had executed a valid and binding release of all liability. Appellant challenges all three findings on this appeal.
Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A., authorized the entry of a summary judgment when it affirmatively appears from the pleadings, admissions, affidavits, depositions, and exhibits on file that there is no genuine issue as to any material fact. Since this procedure was not designed as a substitute for the regular trial of cases, however, it should be invoked with due caution and all substantial doubts concerning the existence of a disputed material issue of fact should be resolved against the moving party after a careful scrutiny of the record.
A review of the pleadings and supporting affidavits and exhibits in this case reveals the existence of several conflicts. A detailed discussion of the points of difference is not necessary, however, since in our opinion none involves an issue upon which the outcome of this litigation depends. The decision is here controlled by unchallenged documentary evidence.
Turning to appellant’s first contention, that a valid insurance contract had been created prior to her husband’s death, there is no material dispute concerning any of the transactions between her husband and appellee’s agents, nor does appellant contest the accuracy of appellee’s records which reflect its intracompany activity. Only the legal significance of these events is at issue.
The construction of provisions in both insurance application forms and “Binding Receipts” with respect to coverage during the interim period between the submission of the application and either rejection or acceptance by the insurer has been the subject of frequent litigation and much scholarly comment. See, for example, Note, “Operation of Binding Receipts in Life Insurance,” 44 Yale L.J. 1223; Note, “Construction and Operation of * * * Binding Receipt,” 60 Harv.L.R. 1164. The usual binding receipts discussed in the case reports contain a clause to the effect that the insurance is to become effective as of the date of the application or the medical examination provided either that the applicant was • in fact insurable at that time or that his application was later approved at the insurer’s home office. The courts have generally held even in these cases, where the binder receipt provides for the creation of the insurance contract retroactively as of a date almost always earlier than the date of approval, that nevertheless there is no “interim insurance,” and no insurance at all until either the application has been formally approved by the insurer or the insured’s counter offer has been accepted by the applicant. And this court has followed the weight of authority in a case arising in Utah.
Here, moreover, both the application form signed by appellant’s husband and the binding receipt provided that the policy would be dated, and the insurance would therefore become effective, on the date the application was approved at appellee’s home office. The express terms of this kind of agreement are clear and unambiguous, and the courts have consistently upheld such provisions.
Unless one or the other of the applications was approved at appellee’s home office, then, appellant’s contention must fail. A careful study of the record causes us to agree with the trial court’s conclusion that no such approval took place. The first application was can-celled and returned to appellant’s husband together with his premium check. The second application could not be approved until the amendment was signed by appellant’s husband and returned to appellee, since appellee had no authority to ante-date the policy without the applicant’s consent. The second application was accordingly being held in suspense at the time of appellant’s husband’s death. The trial court was therefore justified in concluding as a matter of law that no insurance contract had been created.
With respect to appellant’s second contention, that appellee is liable in tort, the law of Arkansas, the location of appellee’s home office, controls.
While we agree with the trial court’s finding that appellee “ * * * acted with reasonable diligence in the handling and processing of both said applications”, we consider this point moot, because Arkansas, together with a number of other states, has rejected the theory of tort liability in cases of this sort.
In view of the absence of liability whether based on contract or tort, it is unnecessary to discuss the purported release agreement.
The trial court was correct in dismissing the action and the judgment is therefore affirmed.
. Safeway Stores, Inc., v. Wilcox, 10 Cir., 220 F.2d 661; Broderick Wood Products Co. v. United States, 10 Cir., 195 F.2d 433; Harris v. Railway Express Agency, Inc., 10 Cir., 178 F.2d 8.
. SMS Manufacturing Co., Inc., v. United States—Mengel Plywoods, Inc., 10 Cir., 219 F.2d 606, and cases cited therein; Zampos v. United States Smelting, Refining & Mining Co., 10 Cir., 206 F.2d 171.
|
4300692-7320 | ORDER AND JUDGMENT
JEROME A. HOLMES, Circuit Judge.
David Lee Wilson, proceeding pro se and in forma pauperis (“IFP”), appeals from the district court’s order dismissing his complaint with prejudice. We have jurisdiction under 28 U.S.C. § 1291, and we affirm. We also deny Mr. Wilson’s motion for appointed counsel as moot, and revoke his IFP status.
I
Mr. Wilson has filed over forty frivolous or otherwise meritless lawsuits in the U.S. District Court for the Western District of Oklahoma since 2005. On November 29, 2012, after affording Mr. Wilson notice and an opportunity to respond, that district court imposed filing restrictions that (1) enjoined Mr. Wilson from filing pro se civil actions in the Western District; and (2) established a procedure under which any future pro se pleadings submitted by Mr. Wilson would be reviewed by the Chief Judge of the Western District. When Mr. Wilson attempted to file pro se pleadings on February 6, 2013, the Chief Judge “denied approval for these cases to be filed,” R. at 12 (Letter from Dist. Ct. Clerk, dated Feb. 13, 2013), presumably for noncompliance with these filing restrictions.
On March 22, 2013, Mr. Wilson filed a civil-rights complaint in the Eastern District of Oklahoma, pursuant to 42 U.S.C. § 1983, wherein he vaguely alleged, inter alia, “adverse possession[ ]” and “abuse of process” by several governmental defendants. Id. at 9-10 (Compl., filed Mar. 22, 2013). Mr. Wilson requested money dam ages, and injunctive relief — namely, for the court to allow “an investigation” and to “observe any filing” he might lodge. Id. at 9. Various defendants subsequently filed four separate motions to dismiss for failure to state an actionable claim.
On September 3, 2013, the district court issued an order dismissing the complaint with prejudice, concluding that Mr. Wilson (1) was improperly attempting an end-run around the Western District’s filing restrictions; and (2) had stated no legally cognizable claim as to any defendant. This appeal followed.
II
A
“Generally speaking, we review de novo a district court’s ruling on a motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.” ClearOne Commc’ns, Inc. v. Biamp Sys., 653 F.3d 1163, 1171 (10th Cir.2011). In so doing, we “accept as true all well-pleaded facts, as distinguished from conclusory allegations, and view those facts in the light most favorable to the nonmoving party.” Moya v. Schollenbarger, 465 F.3d 444, 455 (10th Cir.2006) (internal quotation marks omitted). Our task is to determine whether the plaintiff has alleged facts sufficient to make his claims facially plausible, which is the standard to avoid dismissal. See Kerber v. Qwest Grp. Life Ins. Plan, 647 F.3d 950, 959 (10th Cir.2011); see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”).
“The court’s function on a Rule 12(b)(6) motion is ... to assess whether the plaintiffs complaint alone is legally sufficient to state a claim for which relief may be granted.” Smith v. United States, 561 F.3d 1090, 1098 (10th Cir.2009) (internal quotation marks omitted). In a § 1983 action, the complaint must specify “the violation of a right secured by the Constitution and laws of the United States, and ... that the alleged deprivation was committed by a person acting under color of state law.” Bruner v. Baker, 506 F.3d 1021, 1025-26 (10th Cir.2007) (internal quotation marks omitted). When governmental entities are named as defendants, the plaintiff is obliged to “demonstrate a direct causal link between the [entity’s] action and the deprivation of federal rights.” Schneider v. City of Grand Junction Police Dep’t, 717 F.3d 760, 770 (10th Cir.2013) (internal quotation marks omitted).
B
Our practice of liberally construing pro se filings “stops ... at the point at which we begin to serve as [the plaintiffs] advocate.” United States v. Pinson, 584 F.3d 972, 975 (10th Cir.2009). It is not our office to “supply additional factual allegations to round out a plaintiffs complaint or construct a legal theory on a plaintiffs behalf.” Whitney v. New Mexico, 113 F.3d 1170, 1173-74 (10th Cir.1997). Moreover, we consider it beyond cavil that a district court “[does] not err in refusing to attempt to create order out of chaos[, i.e., when] [t]he complaint failed to state a claim under any conceivable matching of allegations.” Glenn v. First Nat’l Bank in Grand Junction, 868 F.2d 368, 372 (10th Cir.1989).
Mr. Wilson’s complaint can be fairly called chaotic for several reasons. Critically, the allegations contained therein do not “make clear exactly who is alleged to have done what to whom, to provide each [defendant] with fair notice as to the basis of the claims.” Kan. Penn Gaming, LLC v. Collins, 656 F.3d 1210, 1215 (10th Cir.2011) (internal quotation marks omitted); see also Pahls v. Thomas, 718 F.3d 1210, 1225 (10th Cir.2013) (stressing “the need for careful attention to particulars, especially in lawsuits involving multiple defendants”). Although Mr. Wilson makes known his desire to have appointed counsel so he can investigate and serve various papers, he presents no facts or legal theories that might justify the relief he seeks. This deficiency is fatal, even in the pro se context. See McBride v. Deer, 240 F.3d 1287, 1290 (10th Cir.2001) (“Although pro se complaints ... are held to less stringent standards than formal pleadings drafted by lawyers, the [basic] pleading hurdle is not automatically overcome.” (citation omitted) (internal quotation marks omitted)).
Mr. Wilson’s complaint can also be construed as an attempt to re-litigate unsuccessful actions in the Western District involving his prior arrests and incarcerations. -See R. at 84 n. 1 (Order, filed Nov. 29, 2012) (enumerating several of his lawsuits which terminated with entries of final judgment). However, Mr. Wilson is not entitled to mount yet another challenge to the issues decided in those proceedings, or to any issues that could have been settled therein (if, indeed, that is what he seeks here). In this circuit, all claims stemming from one transaction “must ... be presented in one suit or be barred from subsequent litigation.” Plotner v. AT & T Corp., 224 F.3d 1161, 1169 (10th Cir.2000) (quoting Nwosun v. Gen. Mills Rests., Inc., 124 F.3d 1255, 1257 (10th Cir.1997)) (internal quotation marks omitted); cf. Jarrett v. Gramling, 841 F.2d 354, 357 (10th Cir.1988) (noting our acceptance of the Oklahoma Supreme Court’s view that “relief must be sought in one suit or stand barred by the prior adjudication”). We regularly uphold the dismissal of “vexatious, abusive, or stubbornly litigious ” filings, see Lorillard Tobacco Co. v. Engida, 611 F.3d 1209, 1219 (10th Cir.2010) (internal quotation marks omitted), and we are constrained to do the same in Mr. Wilson’s case.
In sum, we conclude that the district court did not err in finding that Mr. Wilson failed to state a claim under Rule 12(b)(6) and that dismissal with prejudice was appropriate. We therefore affirm the district court’s dismissal of Mr. Wilson’s complaint on that basis.
C
|
10525093-13168 | MAGILL, Circuit Judge.
A jury found Loyal Jones, Herbert Brandenburg, and Willie Ricks, Sr., guilty of manufacturing marijuana in violation of 21 U.S.C. § 841(a) (1988) and 18 U.S.C. § 2 (1988). Each defendant appeals his conviction on the ground that there was insufficient evidence to support the jury’s verdict. Additionally, Jones asserts that the district court erred in admitting into evidence his alleged involuntary confession, and Brandenburg argues that the court erred in failing to grant his motions for a severance and to suppress evidence. We affirm.
I. BACKGROUND
On July 22, 1992, a United States Forest Service officer found two marijuana patches in the Ozark National Forest. The patches were about 150 yards apart, contained over one hundred marijuana plants, and were both equipped with water barrels, chicken wire, mulch, and fertilizer. On August 2, several officers inspected the patches and discovered that someone had harvested several plants and done some weeding. Officers then in stalled a motion-activated surveillance camera on August 11; the camera captured two individuals, and possibly a third, tending the plants.
On August 21, six officers conducted surveillance of one of the patches and a nearby public road. At about 9:15 p.m., Officer Carl Turpin saw a dark-colored Ford pickup truck containing three people drive past his station toward the marijuana patches. Officer Fred Goldthorpe, stationed down the road from Officer Turpin, observed a truck with three people in it stop near his location soon after the time a truck had passed Officer Turpin. He heard people get out of the truck and talk. He also heard what sounded like plastic buckets banging together and people walking toward the patches. The truck started up again and drove away. Several vehicles drove by Officers Turpin and Gold-thorpe during the more than seven hours that they conducted surveillance that day and evening.
Two officers positioned about sixty feet from one patch then observed two people enter the patch carrying lights and some buckets, at least one of which was red. The individuals went back and forth between the water barrels and the marijuana plants. The officers, however, could not see the faces of the suspects or identify them by sight. After the subjects left the patch and headed toward the road, the officers inspected the plants and confirmed that they had just been watered.
Officer Goldthorpe then heard two people return from the direction of the patches. He observed the pickup truck return and the individuals put what sounded like plastic buckets in the truck. The truck then drove past his station with three people in it. Officer Turpin saw the same truck he had seen earlier, and fitting the description of the one that had driven past Officer Goldthorpe, now drive past his station in the opposite direction. He radioed Franklin County police officers participating in the investigation, who stopped the truck and identified the occupants as Herbert Brandenburg, Willie Ricks, Sr., and Loyal Jones. Officers placed the three men under arrest and searched the truck. Among the items the officers found in the back of the track were two portable lamps, camouflage clothing, and two five-gallon plastic buckets,' one of which was white and one of which was red, that were wet inside.
While officers were completing a search of Brandenburg, Jones began running down the road with handcuffs on. A deputy sheriff pursued Jones and shot him with a .12 gauge shotgun. Officers called an ambulance, which took Jones to a hospital. Doctors treated him and released him to the custody of the sheriff early in the morning of August 22. After repeated questioning that same day, Jones signed a confession admitting his involvement in the growing operation. Pursuant to a search warrant, officers also conducted a search of Ricks’ house and found marijuana in a suitcase that belonged to Ricks’ son.
The district court denied pretrial motions to suppress Jones’ confession and the evidence obtained from Ricks’ house and motions to sever. The court also denied each defendant’s motion for a judgment of acquittal at the close of the prosecution’s ease. The jury convicted each defendant of aiding and abetting the manufacture of marijuana. The defendants now appeal.
II. DISCUSSION
A. Sufficiency of the Evidence
The defendants first argue that the district court erred in denying their motions for judgments of acquittal because there was insufficient evidence to support their convictions in this case. Our standard for reviewing the sufficiency of the evidence is familiar. We view the evidence in the light most favorable to the government, giving it the benefit of all inferences that may logically be drawn from such evidence. United States v. Brown, 921 F.2d 785, 791 (8th Cir.1990). We must sustain the verdict if it is supported by substantial evidence, id., and may only reverse if we find that a reasonable jury could not have found the defendant guilty beyond a reasonable doubt. United States v. Temple, 890 F.2d 1043, 1045 (8th Cir.1989). Each element of a crime, including intent, may be proven by circumstantial evidence. United States v. Lanier, 838 F.2d 281, 283 (8th Cir.1988).
The indictment charged the defendants with aiding and abetting each other in the manufacture of marijuana in violation of 21 U.S.C. § 841(a) and 18 U.S.C. § 2. The elements of the crime of manufacturing marijuana are listed in the statute: “[I]t shall be unlawful for any person [ (1) ] knowingly or intentionally ... [ (2) ] to manufacture ... [(3)] a controlled substance.” 21 U.S.C. § 841(a). “The term ‘manufacture’ means the production ... of a drug,” id. § 802(15), and the term “ ‘production’ includes the manufacture, planting, cultivation, growing, or harvesting of a controlled substance.” Id. § 802(22).
The parties agree that marijuana is a controlled substance and that the evidence was sufficient to prove that the patches in the forest contained marijuana plants. Moreover, there was testimony that a truck containing three people stopped on a road near two marijuana patches; that two individuals got out and walked toward the patches carrying night lights and plastic buckets, one of which was red; that, although the officers could not identify them, the two people carrying buckets went to one patch and walked back and forth between water barrels and the marijuana plants with the buckets; that officers inspected the plants after the suspects left and concluded that the suspects had watered the plants; that the same truck returned to the spot where it had dropped off two people and picked up two people who were returning from the direction of the patches; that the two individuals placed buckets in the back of the truck; that moments later officers stopped a truck fitting the description of the one that had just picked up the two people and arrested the occupants, who were identified as the defendants; and that there were wet red and white buckets, camouflage clothing, and night lights in the back of the truck. We find that this evidence sufficiently supports the defendants’ convictions for intentionally manufacturing marijuana within the meaning of 21 U.S.C. § 841(a).
This is so even though there was also testimony that Brandenburg was the driver of the truck. Although the jury could have found that he did not actually tend the plants, Brandenburg’s participation as a cultivator of marijuana is not a prerequisite to his liability as a principal to the crime of intentionally manufacturing marijuana. A party who aids and abets a crime under 18 U.S.C. § 2 is liable as a principal. To prove aiding and abetting, the prosecution must show that each defendant “associated himself with the unlawful venture”; “participated in it as something he wished to bring about”; and “sought by his actions to make it succeed.” Lanier, 838 F.2d at 284. Even if the prosecution introduced no evidence that Brandenburg physically tended the plants as the others did, the evidence discussed above was sufficient for the jury to find that he drove the truck and did so willingly to further the success of the operation as an aider and abetter. Similarly, the evidence was also sufficient to support the convictions of Ricks and Jones for aiding and abetting each other and Brandenburg in the violation of § 841(a). Thus, we hold that the district court did not err in denying the defendants’ motions for judgments of acquittal.
B. Jones’ Confession
Jones next argues that the district court erred in admitting into evidence his signed statement confessing to participation in the marijuana-growing venture. The district court denied Jones’ motion to suppress, finding that the statement was not obtained in violation of his constitutional rights. Jones asserts that his confession was involuntary under the totality of the circumstances because he had diminished capacity to resist pressure to confess and police questioned him frequently at odd hours and made false promises of leniency to him. Even assuming Jones is correct, we find that his conviction stands because failing to suppress the confession, in this case, was harmless error.
In Arizona v. Fulminante, 499 U.S. 279, 310, 111 S.Ct. 1246, 1265, 113 L.Ed.2d 302 (1991), the Supreme Court held that a trial court’s admission of an involuntary confession is subject to harmless error review on appeal. An error is harmless only if it is “ ‘clear beyond a reasonable doubt that the jury would have returned a verdict of guilty’ ” absent the error. United States v. Barnhart, 979 F.2d 647, 652 (8th Cir.1992) (quoting United States v. Hasting, 461 U.S. 499, 510-11, 103 S.Ct. 1974, 1981, 76 L.Ed.2d 96 (1983)).
Since Fulminante, no Eighth Circuit case has applied harmless error analysis to admission of an involuntary confession. Cf. United States v. Moore, 872 F.2d 251, 252 (8th Cir.1989) (applying harmless error analysis to admission of incriminating statements defendant made without receiving Miranda warnings). We analyze this question realizing that “[a] confession is like no other evidence” because it is “ ‘probably the most probative and damaging evidence that can be admitted against [a defendant].’” Fulminante, 499 U.S. at 296, 111 S.Ct. at 1257 (quoting Bruton v. United States, 391 U.S. 123, 139, 88 S.Ct. 1620, 1630, 20 L.Ed.2d 476 (1968) (White, J., dissenting)). It is also the case, however, that an error is harmless if it was “unimportant in relation to everything else the jury considered on the issue in question, as revealed in the record.” Yates v. Evatt, 500 U.S. 391, -, 111 S.Ct. 1884, 1893, 114 L.Ed.2d 432 (1991), overruled on other grounds by Estelle v. McGuire, — U.S. -, - n. 4, 112 S.Ct. 475, 482 n. 4, 116 L.Ed.2d 385 (1991). Outside of the confession, the main evidence that the prosecution offered against Jones was the testimony of the Forest Service officers as to their observations while conducting surveillance.
This evidence was, of course, circumstantial evidence that required the jury to make inferences to convict Jones. We have recognized, however, that “[c]ircumstantial evidence is ‘intrinsically as probative as direct evidence’ and may be the sole support for a conviction.” United States v. McCrady, 774 F.2d 868, 874 (8th Cir.1985) (quoting United States v. Two Eagle, 633 F.2d 93, 97 (8th Cir.1980)). To convict Jones based on this evidence, the jury had to believe that the pickup truck that police stopped was the same one that Officer Turpin had seen drive toward and return from the direction of the marijuana patches and that Officer Gold-thorpe had seen drop off two individuals carrying plastic buckets and it had to believe that the two individuals carrying the buckets were the same people that the other officers had seen tending the plants. We believe that the presence of the wet buckets in the truck when police stopped it and the officers’ respective descriptions of the truck and suspects they saw and the times at which various events occurred leads to the inescapable conclusion that the defendants were the individuals who had cultivated the marijuana. Especially given the wet red bucket, which was virtual “smoking gun” evidence, the confession was a relatively unimportant aspect of the prosecution’s case. See Yates, 500 U.S. at -, 111 S.Ct. at 1893. We are convinced beyond a reasonable doubt, in light of this clear evidence, that the jury would have convicted Jones even absent his confession.
C. Brandenburg’s Motions to Suppress and Sever
In his brief, Brandenburg claims that “[t]he trial court erred in denying [his] motion[s] to suppress and sever.” Appellant’s Br. at 20. His discussion then focuses on the argument that the court should have granted him a separate trial because of the risk that the jury would use the marijuana police obtained in their search of Ricks’ house against him. To the extent he asserts that the district court erred by failing to suppress the marijuana, Brandenburg lacks standing to challenge the search because he had no legitimate expectation of privacy in Ricks’ house. See United States v. Gutberlet, 939 F.2d 643, 646 (8th Cir.1991).
|
3769740-12688 | ORDER
JAMES G. CARR, Chief Judge.
On June 18, 2008, Fidelity National Title Insurance Company [Fidelity] wrote a letter informing me of a discovery dispute concerning plaintiffs’ request for production of documents. The parties, failing to resolve the issue on their own, have requested my intervention. Each party has submitted statements of their discovery positions, which I have reviewed.
For the reasons that follow, plaintiffs’ request for production of documents shall be denied.
Background
Plaintiffs have asked Fidelity to produce all drafts of the agent, broker and lender affidavits submitted by Fidelity in support of its brief in opposition to plaintiffs’ motion for class certification. Plaintiffs have also requested Fidelity produce counsel correspondence between defendant and agents, brokers and lenders pertaining to the affidavits. These requests are made in connection with planned depositions of some of the agents, brokers and lenders, none of whom is a Fidelity employee.
According to plaintiffs, this information is important because it may have an impact on their ability to test the credibility of the agents, brokers and lenders from whom Fidelity obtained affidavits. Plaintiffs refer to the recent deposition of a title insurance agent who had provided an affidavit in a comparable Northern District of Ohio title insurance case. In his deposition, the agent acknowledged that a portion of his affidavit, in which he explained his company’s practice, was inaccurate.
Plaintiffs speculate affiants in this case may no longer endorse statements in their affidavits. They claim information regarding the evolution of the affidavits is necessary to elicit critical evidence in this case. Plaintiffs argue information regarding the evolution of an affidavit does not constitute work product, or, in the alternative, it is nonetheless discoverable under Fed.R.Civ.P. 26(b)(3) because plaintiffs have a “substantial need of the materials.” They also suggest that the draft affidavits and counsel communications with agents, brokers and lenders should be treated in the same manner as draft affidavits and materials pertaining to expert reports.
Fidelity raised attorney-client privilege and attorney work product doctrine objections to plaintiffs’ request for production of documents.
At my request, Fidelity submitted copies of the draft affidavits prepared by counsel and related counsel communications under seal for in camera inspection.
Discussion
1. The Attorney-Client Privilege
Fidelity contends that its communications with the affiant agents, brokers and lenders are protected by the attorney-client privilege, and are, therefore, not discoverable. “The attorney-client privilege protects from disclosure ‘confidential communications between a lawyer and his client in matters that relate to the legal interests of society and the client.’ ” In re Grand Jury Subpoena (United States v. Doe), 886 F.2d 135, 137 (6th Cir.1989) (quoting In re Grand Jury Investigation, 723 F.2d 447, 451 (6th Cir.1983)). The burden of establishing the attorney-client privilege rests with the party asserting it. United States v. Dakota, 197 F.3d 821, 825 (6th Cir.1999). The attorney-client privilege can be waived by disclosure of otherwise private communications to third parties. See In re Grand Jury Proceedings Oct. 12, 1995, 78 F.3d 251, 254 (6th Cir.1996).
In this action, defendant carries the burden of establishing that the communications are protected by the attorney-client privilege and that it has not waived the privilege. Even assuming privilege in the first instance, defendant waived the privilege because the counsel’s advice and documents were discussed with agents, brokers and lenders — third parties to the suit. Defendant does not challenge this argument; accordingly, the requested communications are not protected by the attorney-client privilege.
2. The Attorney Work Product Doctrine
A. Governing Law
Although questions of evidentiary privilege arising in the context of a state law claim are governed by state law, Fed.R.Evid. 501, the work product doctrine, Fed.R.Civ.P. 26(b)(3), is not an evidentiary privilege. Consequently, the scope of the work product doctrine is “unquestionably a matter of federal procedural law even in a diversity action.” Scotts Co. LLC v. Liberty Mut. Ins. Co., 2007 WL 1500899, at *3 (S.D.Ohio) (citing In re Powerhouse Licensing, LLC, 441 F.3d 467, 472 (6th Cir.2006)). See also Zigler v. Allstate Ins. Co., 2007 WL 1087607, at *2-4 (N.D.Ohio) (applying the Boone exception to documents withheld under the attorney-client privilege and federal law to those withheld under the work product doctrine).
The work product doctrine protects the adversarial trial process and is designed to prevent a potential adversary from gaining an unfair advantage. It reflects a strong public policy “against invading the privacy of an attorney’s course of preparation.” Hickman v. Taylor, 329 U.S. 495, 512, 67 S.Ct. 385, 91 L.Ed. 451 (1947).
Federal Rule of Civil Procedure 26(b)(3) codifies the doctrine and provides a party may “discover documents and tangible things that are prepared in anticipation of litigation or for trial” only if 1) such material is otherwise discoverable under the rule or 2) a party shows a substantial need for the material and cannot, without undue hardship, obtain equivalent material by other means. Fed. R.Civ.P. 26(b)(3)(A)(i), (ii). In addition, the rule provides for protection against disclosure. It flatly states that the court is not to permit discovery of the “mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of the party concerning the litigation.” Fed.R.Civ.P. 26(b)(3)(B).
The burden of establishing the existence of the work product privilege rests with the party asserting it. Shields v. Unum Provident Corp. 2007 WL 764298, at *6 (S.D.Ohio).
B. Privileged Attorney Work Product
The Southern District of Ohio, in Tuttle v. Tyco Electronics Installation Services, Inc., 2007 WL 4561530, at *2 (S.D.Ohio) (Frost, J.), unambiguously stated that the work product doctrine protects information about the evolution of an affidavit from disclosure:
the work product doctrine does protect information relevant to the evolution of an affidavit, including but not limited to communications with the counsel relating to the affidavit, prior drafts of the affidavit, and any notes made by counsel while engaging in the process of drafting the affidavit. See Infosystems[, Inc. v. Ceridian Corp.], 197 F.R.D. [303] at 307, n. 4 [(E.D.Mich.2000)]....
I am inclined to agree with this decision.
Plaintiffs argue that Tuttle’s reliance on InFoSystems, Inc. v. Ceridian Corp., 197 F.R.D. 303 (E.D.Mich.2000), is misplaced because in Infosystems the court stated “facts set forth in the affidavits are not protected;” an affidavit “purports to be a statement of facts within the personal knowledge of the witness, and not an expression of the opinion of counsel;” and “one court has noted the risk of treating draft affidavits as protected work product.” Id. at 306-07 (emphasis in original).
In Infosystems the court acknowledged that, at the time of the decision, there was “little precedent squarely on point.” Id. at 307. It did, nonetheless, find the reasoning of Milwaukee Concrete Studios, Ltd. v. Greeley Ornamental Concrete Products, Inc., 140 F.R.D. 373, 378-79 (E.D.Wis.1991), persuasive. Id. That case does not, however, substantively address the issue of draft affidavits or counsel communication, and lacks legal analysis regarding these types of documents. Further, Milwaukee Concrete Studios allows for the production of the draft affidavits after the affiants were later deposed and unable to recall earlier factual statements previously made. This inability to recall earlier statements, and the subsequent unavailability of the factual information, is not, at present at least, an issue in this case.
Although not controlling, recent cases have addressed this issue, and the trend is to consider draft affidavits and communications with counsel relating to affidavits as covered by the attorney work product doctrine. See, e.g., Tuttle, supra, 2007 WL 4561530, at *2; Kyoei Fire & Marine Ins. Co., Ltd. v. M/V Maritime Antalya, 248 F.R.D. 126, 155 (S.D.N.Y.2007) (creating of affidavit subject to the “attorney work product privilege”); Ideal Elec. Co. v. Flowserve Corp., 230 F.R.D. 603, 608-09 (D.Nev.2005) (draft affidavits protected by the work product doctrine).
I find the reasoning of these courts persuasive and find that the draft affidavits and counsel correspondence are protected materials.
C. Filing of Final Version Does Not Constitute Waiver
The protection of the work product doctrine is not absolute, and it may be waived. See United States v. Nobles, 422 U.S. 225, 239, 95 S.Ct. 2160, 45 L.Ed.2d 141 (1975).
Plaintiffs assert defendant waived the work product privilege by filing final versions of the affidavits to the court. They rely on Infosystems for their argument. In that case, the defendant had not produced the final affidavit it obtained from a non-party witness. The Infosystems court was concerned that the plaintiff would be unable to “test the perception and credibility” of the witness at his deposition unless the final affidavit was produced. Infosystems, supra, 197 F.R.D. at 307. The court ordered the defendant to produce the final affidavit along with drafts and written communications between counsel and the witness pertaining to the evolution of the affidavit. There, the court focused on the final affidavit; it did not provide legal analysis regarding the draft affidavits or counsel communication, but simply included them in the materials to be produced.
In Infosystems the court did not hold that the filing of a final affidavit waives the work product privilege as to draft affidavits or counsel communications. Rather, it held that if the defendant ultimately chose to make evidentiary use of a final affidavit which had not been produced to the plaintiff, the defendant would waive any work product claim as to that affidavit. In this case, plaintiffs have the final affidavits signed by the third-party witnesses and their need for the prehminary versions is less apparent.
This case differs from Infosystems in a significant way; Fidelity’s filing of the affidavits with the court did not waive the work product doctrine’s protection of earlier material.
D. No Substantial Need or Undue Hardship
Rule 26(b)(3) also provides that a court may order production if the requesting party shows a “substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.” Fed.R.Civ.P. 26(b)(3)(A)(ii). Plaintiffs claim that they have demonstrated a substantial need for the materials. According to them, they have no way of cross-examining the witnesses regarding the preparation of the affidavits to test their credibility and perception. They also state that the information to be obtained from the defendant’s draft materials is not otherwise available.
i. Plaintiffs Have the Ability to Inquire in Depositions
Plaintiffs can test the credibility of witnesses through depositions, and they are free to depose some or all of the affiants. Although deposition inquiries about the role of counsel and communications with counsel may be restricted, plaintiffs’ counsel can ask questions to determine the extent to which an affiant endorses or qualifies the statements in the affidavit. Effective examination can uncover the extent to which someone other than the affiant “framed” the statements in the affidavit, even if the attorney conducting the examination has not seen the prior versions.
The affiants swore to the final affidavits, not the preliminary drafts. What matters now is whether the affiants in fact adopt and endorse the statements in the final affidavits. Moreover, if the drafts initially said something an affiant removed, that hardly undercuts either the reliability of the final statements or the affiant’s credibility.
Further, to the extent that statements previously recorded in draft affidavits are not recollected by the affiant, depositions are the appropriate way to determine whether the affiant can recall his or her prior sworn statements. If, as in Milwaukee Concrete Studios, an affiant is unable to recall factual statements, production of the draft affidavits might be appropriate. However, without a showing that the affiants are unable to recall prior statements, the defendant need not produce the draft affidavits and related communications.
E. Protection Against Disclosure
|
2151217-6471 | JONES, Circuit Judge:
The appellant, Eugene Anthony Nolan, was charged in the first count of an indictment with transmitting by telephone between Houston, Texas, and Baton Rouge, Louisiana, bets and wagers on football games and information assisting in the placing of bets and wagers, in violation of 18 U.S.C.A. Sec. 1084. By a second count of the indictment Nolan was accused of the interstate use of telephone facilities to carry on unlawful gambling business in violation of 18 U.S.C.A. Sec. 1952. He was convicted of the offense charged in the first count and acquitted of the offense charged in the second count of the indictment.
The appellant moved to dismiss the first count, asserting that it was duplicitous in charging more than one offense. At the same time he filed a motion to require the Government to elect between the two offenses which he contended were charged by the first count and by another motion sought particulars of the uses of the telephone. All of the motions were denied.
One of the principal witnesses against Nolan was Anthony Crappito who testified that he made a number of telephone calls from Houston, Texas, to a telephone in Baton Rouge, Louisiana, which was listed in Nolan’s name at an apartment. In these telephone calls Crappito identified himself as “Doc from Houston,” or so he testified. None of the calls were person to person calls to Nolan, and Crappito could not identify any person with whom he had talked during his telephone conversations with the Baton Rouge apartment. Crappito’s testimony indicated that wagering information was obtained and bets were placed during these telephone conversations.
Nolan had made application on an Internal Revenue form for a gambling tax stamp under 26 U.S.C.A. Sec. 4411. He made monthly tax returns, pursuant to 26 U.S.C.A. Sec. 4401, showing gambling transactions. Nolan filed a motion to suppress these documents and the motion was denied. Nolan was given by the court a continuing objection to the introduction of these papers and to testimony concerning them. Notwithstanding his effort to have the documents suppressed and to have them excluded from evidence, they were introduced in evidence.
During the examination of Crappito he was at first unable to give the name of the boss of the Baton Rouge “book.” He later gave the name as “Gene” but perhaps was aided by overhearing the word spoken by someone else in the courtroom. Nolan contended that the grand jury minutes would be in conflict with Crappito’s oral testimony about “Gene,” and further contended that, before the grand jury Crappito had said that he identified himself as “Doc” rather than “Doc from Houston.” Application was made for inspection of the grand jury minutes and the use of them if they could be so used to impeach Crappito’s testimony. A somewhat similar contention was made with respect to the testimony of the Government’s witness Taylor. The court denied the use of the grand jury minutes at the trial.
In his argument to the jury, the prosecutor talked about “organized crime,” referred to Nolan as a “racketeer” and depicted Nolan’s defense as “devious, deceitful, duplicitous,” and “otherwise untruthful” in his attempt to “trick, fool, and deceive” the jury.
On appeal, as in the district court, Nolan urges that names on the jury list from which the grand and petit jurors were selected were chosen in an unconstitutional manner. The source of the list from which the jurors were selected was made up primarily from the names of registered voters. The deputy clerk stated that aside from the random selection from the voter list, she struck the names of those she believed the judge would excuse and she included the names of some persons who she thought would make good jurors. The fact that the list was compiled primarily from a list of registered voters does not show that the list did not reflect a fair cross section of the community. Thomas v. United States, 5th Cir. 1966, 370 F.2d 96, cert. den. 386 U.S. 975, 87 S.Ct. 1164, 18 L.Ed.2d 133. While it was, we think, improper for the deputy clerk to exclude those few whom she thought the courts would excuse and to include the names of a few who she thought would make good jurors, it does not appear that this deprived the list, as it was made up, of representing the fair cross section of the community which is necessary to meet constitutional requirements. The contention of the appellant that the jury list failed to comply with required standards cannot be sustained.
We think a much better indictment might have been drawn than that upon which Nolan was convicted but we do not think that it is duplicitous or that it was so vague as to fail to charge an offense. It could have been and we think it should have been supplemented by the particulars which Nolan sought. He now knows with the Government’s evidence in the record the particulars of the Government’s charge against him. In the event that there is another trial and he thinks it desirable to do so, Nolan is not precluded from again asking the Court to require the Government to specify the particulars of the offense. It may be noted that the denial of the particulars which he sought is not specified by Nolan on this appeal as error.
Nolan argues that it was error for the court to deny the production of grand jury testimony. The granting of an application for production of testimony before a grand jury is in large measure within the discretion of the trial court. In the exercise of this discretion the court should grant the application upon a showing of particularized need, especially where, as seems to be the case here, there is little need for maintaining secrecy. Dennis v. United States, 384 U.S, 855, 86 S.Ct. 1840, 16 L.Ed.2d 973; Pittsburgh Plate Glass Co. v. United States, 360 U.S. 395, 79 S.Ct. 1237, 3 L.Ed.2d 1323. In the event that this case should again be tried, the particularized need may be as great as on the first trial with much less need for preserving the secrecy of the testimony. These questions can be determined by the district court should the need for determination arise.
The Government prosecutor in his zeal to procure a conviction was something less than discreet in some of the language which he used. We need not decide whether his comments constituted reversible error since the case is being reviewed on another ground and we will not assume that there will be any recurrence in the use of the injudicious language.
|
10535445-25279 | HATCHETT, Circuit Judge:
In reversing this public employee termination case, we distinguish Thomason v. McDaniel, 793 F.2d 1247 (11th Cir.1986) and hold that the placing of stigmatizing information in a public employee’s personnel file or in an internal affairs report (public records of Florida pursuant to state law) constitutes publication sufficient to implicate liberty interests requiring protection through procedural due process of law proceedings.
FACTS
On February 14, 1981, Plant City, Florida, hired Donald F. Buxton as a police officer. In June, 1982, the Plant City Police Department investigated Buxton for allegedly assaulting Olin English during the course of an arrest. Plant City’s Police Chief, Troy W. Surrency, assigned Officer William Hysell to conduct an internal affairs investigation. Officer Hysell interviewed Buxton. Officer Hysell also interviewed the witnesses to the arrest. Officer Hysell concluded that Buxton had physically abused English prior to placing him under arrest.
On June 22, 1982, Buxton met with Chief Surrency, Lieutenant Ruffin Cain, and Officer Hysell in Chief Surrency’s office. Chief Surrency advised Buxton that he was being suspended with pay because of the Olin English incident and that he would be contacted again at the end of the week. On June 25, 1982, Buxton again met with Chief Surrency, Lt. Cain, and Officer Hy-sell. Chief Surrency terminated Buxton for violation of departmental policies which he listed in detail, effective June 26, 1982. The meeting lasted between five and ten minutes.
Section 4.03 of Plant City’s Personnel Rules sets forth a grievance procedure available to all city employees. Buxton did not request a hearing on his termination; he contends that he was not aware that he was entitled to such a hearing or that the grievance procedure existed.
Chief Surrency sent a Notice of Termination to the Florida Criminal Justice Standards and Training Commission (FCJSTC), in compliance with Fla.Stat. § 943.23 (1982), indicating that Buxton had been terminated on June 25, 1982. On March 1, 1983, the Division of Standards and Training filed an administrative complaint with the FCJSTC seeking to suspend or revoke Buxton’s certification as a law enforcement officer. On October 9, 1984, the FCJSTC entered a final order dismissing the case due to unavailability of witnesses.
After dismissal of the case, Buxton applied for a position with the Winter Haven, Florida, Police Department. The Winter Haven Police Department requested a reference from Chief Surrency regarding Bux-ton. Prior to giving the personnel file to the Winter Haven Police Department, Chief Surrency demanded a release from Bux-ton. Buxton signed a release for the Win ter Haven Police Department dated February 10, 1986. The Winter Haven Police Department presented this release to Chief Surrency, and he provided copies of Bux-ton’s files, including the internal affairs report.
PROCEDURAL HISTORY
On June 13, 1986, Buxton filed this lawsuit in the United States District Court for the Middle District of Florida seeking in-junctive relief and damages. The complaint contained three counts and named as defendants the City of Plant City, Florida, Chief Surrency, and Netty Draughton, the city manager. Count I, a 42 U.S.C. § 1983 action, asserted violations of Buxton’s property and liberty interests as guaranteed by the due process clause of the fourteenth amendment. Count II alleged a pendent state claim based on violations of Florida’s Policeman’s Bill of Rights, Fla. Stat. § 112.532 (1982). Count III alleged a pendent state claim of defamation.
On August 4, 1986, Plant City, Chief Surrency, and Draughton filed a motion to dismiss. The district court denied the motion on Counts I and II and granted it on Count III of the complaint. Later, the district court dismissed Netty Draughton as a defendant. On May 19, 1987, the district court dismissed Buxton’s property interest claim under Count I.
On June 2, 1987, Plant City and Chief Surrency filed a motion for summary judgment. The district court granted summary judgment as to Count I of the complaint, Buxton’s liberty interest claim, dismissed the remaining count, violation of the Florida policeman’s bill of rights, Fla.Stat. § 112.532 (1982), and entered judgment. On January 12, 1988, the district court entered an order reopening the ease to consider Buxton’s claims under the Florida Policeman’s Bill of Rights. On March 22, 1988, the district court dismissed the claim.
CONTENTIONS
Buxton contends that the presence of stigmatizing information in a public employee’s personnel file in Florida is sufficient publication to implicate the liberty interest under the due process clause of the fourteenth amendment to the United States Constitution. Buxton argues that a Florida public employee’s liberty interest is vio lated when his employer places false and stigmatizing material in the public records without procedural due process. He asserts that the signing of a release does not relieve the public employer of its duty to provide due process of law. Buxton also argues that Florida’s requirement that terminations be reported to the FCJSTC does not relieve Plant City and' Chief Surrency of liability. Buxton further contends that Chief Surrency is not entitled to qualified immunity.
Plant City and Chief Surrency contend that they have not deprived Buxton of his liberty interest without procedural due process because they did not publish any false and stigmatizing information. They argue that allowing access to public records in accordance with state law, allowing access to records upon receipt of a release, and providing a termination notice to the FCJSTC, do not satisfy the publication requirement for a liberty interest deprivation. They also contend that the alleged publication, if any, did not attend Buxton’s termination, but occurred three and one-half years after his termination. Chief Surren-cy contends that he is entitled to qualified immunity.
ISSUES
The parties present the following issues:
(1) whether the presence of stigmatizing information in a public employee’s personnel file is sufficient publication to implicate the liberty interest under the due process clause;
(2) whether allowing access to public records under state law and pursuant to a release signed by the subject of the records satisfies the publication requirement for a liberty interest deprivation;
(3) whether allowing access to public records of an employee more than three years after his termination satisfies the requirement that publication of false, stigmatizing charges must attend an employee’s termination for a liberty interest deprivation;
(4) whether providing a terminated employee with an opportunity to present a statement of the facts leading to his termination and including that statement in the report on his termination satisfies the due process requirement after a liberty interest deprivation;
(5) whether providing a grievance procedure, which a terminated employee chooses not to utilize, satisfies the due process requirement after a liberty interest deprivation; and
(6) whether releasing an employee’s public records, pursuant to a signed release, constitutes an action for which a public official is entitled to qualified immunity.
DISCUSSION
I. Standard of Review
The district court granted Plant City’s and Chief Surrency’s motion for summary judgment on Count I of Buxton’s complaint, which alleged a liberty interest violation. We review the district court’s decision to determine whether the district court erred as a matter of law in granting Plant City and Chief Surrency summary judgment. Fed.R.Civ.P. 56(c); Republic Health Corp. v. Lifemark Hospitals of Florida, Inc., 755 F.2d 1453 (11th Cir.1985). Summary judgment should be entered only if “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c); Clemons v. Dougherty County, Georgia, 684 F.2d 1365, 1368 (11th Cir.1982). In reviewing a grant of summary judgment, we apply the same legal standards as those that control the district court in determining whether summary judgment is appropriate. Mays v. United States, 763 F.2d 1295, 1296 (11th Cir.), cert. denied, 474 U.S. 998, 106 S.Ct. 416, 88 L.Ed.2d 365 (1985). The party seeking summary judgment bears the exacting burden of demonstrating that no genuine dispute exists as to any material fact in the case. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Clemons v. Dougherty County, Georgia, at 1368.
In assessing whether the movant has met this burden, we review the evidence and all factual inferences arising from the evidence in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. at 157, 90 S.Ct. at 1608; Clemons v. Dougherty County, Georgia, at 1368. We must accept Buxton’s version of the facts because the district court granted summary judgment against him. Bishop v. Wood, 426 U.S. 341, 347, 96 S.Ct. 2074, 2078, 48 L.Ed.2d 684 (1976).
II. Procedural Due Process
The fifth amendment to the United States Constitution restrains the federal government, and the fourteenth amendment, section 1, restrains the states, from depriving any person of life, liberty, or property without due process of law. The requirements of procedural due process apply only to the deprivation of interest encompassed by the fourteenth amendment’s protection of liberty and property. Buxton must establish that he has been deprived of an interest that could invoke procedural due process protection. Perry v. Sindermann, 408 U.S. 593, 599, 92 S.Ct. 2694, 2698, 33 L.Ed.2d 570 (1972). To determine whether due process requirements apply, we first look to the nature of the interest at stake. Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 2600, 33 L.Ed.2d 484 (1972); Board of Regents v. Roth, 408 U.S. 564, 571, 92 S.Ct. 2701, 2705, 33 L.Ed. 2d 548 (1972).
While an individual’s interest in life is readily cognizable, definable, and apparent under the due process clause, the liberty and property interests, although comprehensible, are difficult to define. The liberty and property interests obtain constitutional status after they have been initially recognized and protected by state law. Paul v. Davis, 424 U.S. 693, 710, 96 S.Ct. 1155, 1164, 47 L.Ed.2d 405 (1976). Courts have repeatedly ruled that the procedural guarantees of the fourteenth amendment apply whenever the state seeks to remove or significantly alter that protected status. Paul v. Davis at 710, 96 S.Ct. at 1164. Chief Justice Rehnquist, writing for the majority in Paul v. Davis, provided two examples of this proposition. He explained that by issuing driver’s licenses, states recognize their citizens’ right to operate a vehicle on state highways. Thus, the Supreme Court held that the state could not withdraw this right without giving an individual due process. Bell v. Burson, 402 U.S. 535, 91 S.Ct. 1586, 29 L.Ed.2d 90 (1971). Chief Justice Rehnquist explained that the state cannot alter the status of a parolee because of alleged parole violations, after affording the parolee the right to remain at liberty as long as the conditions of his parole were not violated, without giving the parolee certain procedural safeguards which guarantee due process. Morrissey v. Brewer, 408 U.S. 471, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972).
In Bell v. Burson, and Morrissey v. Brewer, state action distinctly altered or extinguished a right or status previously recognized by state law. The Supreme Court found that these alterations, which officially removed the interest from the recognition and protection previously afforded by the state, were sufficient to invoke the procedural guarantees contained in the due process clause of the fourteenth amendment. Paul v. Davis, 424 U.S. at 711, 96 S.Ct. at 1165. The requirements of procedural due process apply only to the deprivation of interests encompassed by the fourteenth amendment’s protection of liberty and property. Board of Regents v. Roth, 408 U.S. at 569, 92 S.Ct. at 2705; Hunter v. Parole and Probation Commission, 674 F.2d 847, 848 (11th Cir.1982).
III. The Liberty and Property Interests
“ ‘Liberty’ and ‘property’ are broad and majestic terms. They are among the ‘great constitutional concepts purposely left to gather meaning from experience. They relate to the whole domain of social and economic fact, and the statesmen who founded this Nation knew too well that only a stagnant society remains unchanged.’ ” Board of Regents v. Roth, 408 U.S. at 571, 92 S.Ct. at 2705 (quoting National Insurance Co. v. Tidewater Co., 337 U.S. 582, 646, 69 S.Ct. 1173, 1209, 93 L.Ed. 1556 (1949) (Frankfurter, J., dissenting)).
Liberty and property, as judicial terms of art, have not been defined. The conceptualization of liberty and property has evolved over time. Property interests protected by procedural due process extend well beyond actual ownership of real estate, chattels, or money. Board of Regents v. Roth, 408 U.S. at 572, 92 S.Ct. at 2706. Due process protection from deprivations of liberty extend beyond the sort of formal constraints imposed by the criminal process. Although the Supreme Court has not defined “liberty” with any great precision, that term is not confined to mere freedom from bodily restraint. Board of Regents v. Roth at 572, 92 S.Ct. at 2706; Bolling v. Sharpe, 347 U.S. 497, 499, 74 S.Ct. 693, 694, 98 L.Ed. 884 (1954). While the Supreme Court has eschewed rigid or formalistic limitations on the protection of procedural due process, it has at the same time observed certain boundaries which conceptualize liberty and property. Board of Regents v. Roth, 408 U.S. at 572, 92 S.Ct. at 2706.
IV. The Liberty Interest
In reviewing the district court’s order granting summary judgment, we find one issue dispositive: whether the presence of stigmatizing information placed in both the public employee’s personnel file and the public record by a state entity, pursuant to a state statute, constitutes sufficient publication to implicate the liberty interest under the due process clause of the fourteenth amendment to the United States Constitution. Fla.Stat. § 119.07 (1987) (quoted earlier) requires the custodian of a non-exempt public record to permit the inspection of that record by any member of the public requesting to do so.
This is an issue of first impression in this circuit. The district court correctly announced this circuit’s standard for determining whether the deprivation of an individual’s liberty interest has occurred without due process of law. The district court required that Buxton prove: (1) a false statement (2) of a stigmatizing nature (3) attending a governmental employee’s discharge (4) made public (5) by the governmental employer (6) without a meaningful opportunity for employee name clearing.
The district court found that the truth of Plant City’s allegations were in material dispute; the allegations were stigmatizing and likely to tarnish Buxton’s “good name, reputation, honor, or integrity”; the allegations would likely foreclose Buxton’s future employment opportunities; the allegations attended his discharge; and that Bux-ton was not given a post-stigmatization opportunity to clear his name.
The basis of the district court’s grant of summary judgment is that the mere availability of Buxton’s internal affairs report under Fla.Stat. §§ 119.01 (1987) et seq., which detailed the circumstances leading to his discharge, did not satisfy the publication (made public) requirement under the due process analysis.
Citing Thomason v. McDaniel, 793 F.2d 1247 (11th Cir.1986), the district court relied on our holding that a discharged part-time police officer “did not satisfy the requirement of publication because he ha[d] failed to establish that any disclosure of the reasons for the discharge, that is, the substance of the complaints, was ever made to the general public.” Thomason v. McDaniel, at 1250. The district court found Buxton to be in a similar situation; Buxton failed to demonstrate that Plant City and Chief Surrency published the events surrounding his discharge.
The district court opined that a finding of publication in Buxton’s situation was discouraged by sound public policy:
To find publication here would mean that no matter how discrete a public employer is in avoiding publicity, a police officer who is discharged after an investigation reveals stigmatizing circumstances would be entitled to a hearing even though the officer had no right to continued employment. Ironically, the public employer would have to give a hearing to an at-will employee fired for just cause, but not to an at-will employee fired arbitrarily for no reason at all. This would be an unwarranted interference with public employer personnel decisions and a result certainly not required by the due process clause of the fourteenth amendment.
Buxton v. City of Plant City, Florida, Order No. 86-737-Civ-T-15C, at 5-6 (1987). Based on the finding of “no publication,” the district court granted Plant City’s and Chief Surrency’s motion for summary judgment on Buxton’s liberty interest claim.
Buxton now contends that the presence of stigmatizing material in his non-confidential personnel file and the internal affairs report of the English case, both a part of the public record, forecloses his freedom to pursue employment opportunities. Citing Kaprelian v. Texas Woman’s University, 509 F.2d 133, 139 (5th Cir.1975), Buxton suggests that we tailor the issue to “whether the governmental entity made the ‘charges public in any official or intentional manner, other than in connection with the defense of [the] action?’ ”
Buxton contends that this ease should focus on whether the stigmatizing information has been disseminated in any manner by Plant City and Chief Surrency. If so, Buxton argues that his liberty interest is necessarily implicated. Buxton bases this argument on the fact that he has been foreclosed from several employment opportunities because of information in his personnel file and the internal affairs report. Although the district court relied on Thomason v. McDaniel, presuming that the report in Thomason v. McDaniel was a matter of public record, Buxton argues that nothing in that case supports this presumption. Buxton argues that Thomason v. McDaniel is distinguishable because the court’s inquiry turned on whether proof of the foreclosure of other law enforcement opportunities existed, whereas the district court in this case found that stigmatizing information in his personnel file and internal affairs report are likely to foreclose his employment opportunities. Buxton cites Swilley v. Alexander, 629 F.2d 1018 (5th Cir.1980) (where an employer placed a reprimand letter with stigmatizing charges in an employee’s personnel file, a public record) to argue that his liberty interest has been similarly implicated.
Plant City and Chief Surrency rebut Bux-ton’s liberty interest contention in two arguments. First, they contend that they have not deprived Buxton of his liberty interest without due process because they have not published any false stigmatizing charges about him. In its simplest form, they argue that Buxton failed to prove any publication of the events surrounding his discharge.
Plant City and Chief Surrency argue that the internal affairs report at issue in this case is a public record under Florida Statute § 119.01 (1987). Because the internal affairs report is a public record, they were required by chapter 119 to provide a copy of the report to the Winter Haven Police Department upon request. Non-compliance with chapter 119 would have subjected them to the risk of criminal sanctions. Consequently, they lacked the intent required for publication when they made the report available. Citing Thomason v. McDaniel, they argue that filing a report in the public records in accord with state law does not constitute publication sufficient for a finding of a liberty interest deprivation. Likewise, allowing access to records upon receipt of a release signed by the subject of the records does not satisfy the publication requirement for a liberty deprivation. They further point out that the release specifically authorized Plant City to release any and all information requested by the Winter Haven Police Department and promised to indemnify and save harmless the city and all of its officers and employees from any legal action.
Plant City and Chief Surrency also argue that providing a termination notice to the FCJSTC does not satisfy the publication requirement for a liberty interest deprivation. Their sole activity was to provide the notice to the Commission. This activity did not constitute a deprivation of Buxton’s liberty interest because the notice did not contain any reasons for his discharge, much less false or stigmatizing information.
Plant City and Chief Surrency also contend that they have not deprived Buxton of his liberty interest without due process because the alleged publication did not attend Buxton’s termination. They did not make Buxton’s records available to the Winter Haven Police Department until after February 10, 1986, the date of Buxton’s signature on the release, more than three and one half years after Buxton’s termination.
The constitutional requirement of due process and the safeguarding of the liberty of the citizen against deprivation through the action of a state embodies the fundamental conceptions of justice which lie at the base of the civil and political institutions in the United States. Mooney v. Holohan, 294 U.S. 103, 55 S.Ct. 340, 79 L.Ed. 791 (1935). The Supreme Court has held liberty, as guaranteed in the due process clause of the fourteenth amendment to mean not only the right of the citizen to be free from the mere physical restraint of his person, as by incarceration, but also the right of the citizen to be free in the enjoyment of all his facilities; to be free to use them in all lawful ways; to live and work where he will; to earn his livelihood by any lawful calling; and to pursue any livelihood or avocation, and for that purpose to enter into all contracts which may be proper, necessary, and essential to his carrying out to a successful conclusion the purposes above mentioned. Booth v. Illinois, 184 U.S. 425, 22 S.Ct. 425, 46 L.Ed. 623 (1902); Williams v. Fears, 179 U.S. 270, 21 S.Ct. 128, 45 L.Ed. 186 (1900); and Allgeyer v. Louisiana, 165 U.S. 578, 17 S.Ct. 427, 41 L.Ed. 832 (1897). Additionally, liberty has been held to denote the right of the individual to engage in any of the common occupations of life, to acquire useful knowledge, to marry, to establish a home, to bring up children, to worship God according to the dictates of one’s conscience, and generally to enjoy those privileges long recognized at common law as being essential to the orderly pursuit of happiness by free people. Board of Regents v. Roth, 408 U.S. at 572, 92 S.Ct. at 2706; Meyer v. Nebraska, 262 U.S. 390, 43 S.Ct. 625, 67 L.Ed. 1042 (1923). The Supreme Court has declared that the meaning of liberty must be broad. Board of Regents v. Roth, 408 U.S. at 572, 92 S.Ct. at 2706. Bolling v. Sharpe, 347 U.S. at 499-500, 74 S.Ct. at 694-695.
Because of the stigmatizing material in Buxton’s personnel file and the internal affairs report of the English incident, both a part of the public records pursuant to Fla.Stat. §§ 119.01 and 119.07, Buxton has been foreclosed from several employment opportunities. Buxton’s rights “to live and work where he will”; “to pursue any livelihood or avocation”; and “to engage in the common occupations of life” have been limited by placing his personnel file and the internal affairs report of the English incident into the public record. Buxton’s personnel file and the internal affairs report of the English incident have stigmatized Bux-ton in the eyes of potential law enforcement employers and in the minds of citizens reviewing this public information. The personnel file and the internal affairs report became public, pursuant to Fla.Stat. § 112.433, at the conclusion of the investigation which culminated with Buxton’s termination. Because the information in the file may be reviewed years after it is filed, its publication, for due process purposes, must be held to occur at the time of filing. Protection of the due process name clearing right cannot be effectively afforded any other way.
We find Thomason v. McDaniel distinguishable. It did not address the issue before us. The Town of Sneads did not place stigmatizing information in Thomason’s personnel file. Thomason based his challenge on “newspaper coverage and town conversation” resulting from his complaints filed with “the Florida Commission on Ethics and the federal court.” Thomason v. McDaniel, at 1250. Accordingly, we reverse the judgment of the district court and hold that the presence of stigmatizing information placed into the public record by a state entity, pursuant to a state statute or otherwise, constitutes sufficient publication to implicate the liberty interest under the due process clause of the fourteenth amendment to the United States Constitution.
V. What Process is Due
|
6570518-16794 | Re, Judge:
In this appeal for reappraisement the merchandise consists of two-inch thick sawn slabs of black granite exported from Canada on July 30,1964 and entered at the border port of Derby Line, Vermont. The granite "was shipped by truck from Alma, Quebec by the seller, National Granite, Ltd. (National) to the John Swenson Granite Co., Inc. (Swenson) at Concord, New Hampshire.
The customs and commercial invoices disclose that the granite was sold to Swenson at a delivered price (“FOB Concord N.H.”) of U.S. $3.35 per square foot, including duties. It was entered at an invoiced unit value of U.S. $2.10 per square foot (selling price less claimed nondutiable charges of 97 cents per square foot for bracing and transportation, and 28 cents per square foot for duty and brokerage ifees).
The merchandise was appraised on the basis of export value as defined in section 402 (b), Tariff Act of 1930, as amended by the Customs Simplification Act of 1956, at U.S. $3,015 per square foot, net packed. According to the testimony of the appraiser, the appraised value was calculated by deducting 28 cents for duty and brokerage, and then deducting the freight charges within the United States from the border (Derby Line) to Barre, Vermont.
Plaintiff agrees that export value, section 402 (b) supra, is the correct basis of appraisement, but contends that U.S. $2.10 per square foot, the alleged ex-quarry price of the granite slabs, represents the correct dutiable value. Plaintiff urges, alternatively, that if the appraiser’s method of determining value is upheld, he should have made a larger allowance for duty, i.e., 36.41614 cents which, with the uncontested deductions for brokerage and freight, would result in a dutiable value of U.S. $2.91% per square foot, net packed.
The record consists of the official papers, the testimony of two witnesses called by plaintiff, and four exhibits also submitted by plaintiff.
Mr. Paul Bobitaille, president and general manager of National, who supervised production, administration and sales, testified that National produces rough, semifinished and finished granite mainly for building work; that the imported granite came from a quarry located about 25 miles from its office in Alma, Quebec; and that the shipment herein was delivered pursuant to a contract (exhibit 1) with Swenson for the sale of granite slabs and blocks to be used in construction of a building in New York City. National used its own trucks and braces to transport most of the merchandise to Concord. Swenson, which has finishing facilities in Concord, New Hampshire, put the finish on the rough sawn slabs and cut them to size, ready for installation in the building then under construction.
The contract, which is dated March 21, 1963, in relevant part, provided that National “deliver sufficient wire sawed slabs so that Swenson may fabricate therefrom * * * approximately 190,000 net square feet of 2 inch thick stones * * Delivery of the two-inch slabs was to commence oh or about February 20, 1963 in quantities of “approximately 5,000 net square feet of 2 inch slabs each week until completion.” Deliveries, Mr. Robitaille testified, commenced early in 1903 and ended about two years later.
The agreement called for payment of U.S. $3.35 per net square foot for two-inch slabs “delivered to and accepted by Swenson” with the proviso that—
“(8) The prices for slabs set forth in paragraph (7) include the costs of delivery to Swenson at its plants in Concord, New Hampshire. If Swenson shall direct delivery of slabs to other fabricating plants in New England, the prices shall be adjusted to reflect any increase or decrease in the cost to National of delivery. * * *”
The contract provided that National could bill Swenson at the rate of $2.50 per square foot for any slabs in stock it had on hand at the end of any month. It also provided that in the event Swenson terminated the agreement for any cause except breach or default by National, Swenson would pay $2.50 per square foot for all slabs produced by National and in stock in Canada.
Mr. Robitaille, who had participated in the contract negotiations with Swenson, said that National “tried to arrive at a higher price, of course, and we came to this final price” of $3.35 per square foot, lie had estimated that National would make a profit on the $3.35 price by figuring on 50 cents per foot for material, $1.50 for labor and 25 cents for depreciation and profit, which came to $2.25 in Canadian currency and $2.10 in United States currency. He then arrived at the $3.35 figure by adding 97 cents to cover the cost of bracing and transportation down to Swenson’s plant, and 28 cents for duty and brokerage fees.
Mr. Robitaille testified that bracing was necessary to protect the brittle granite slabs against breakage during shipment. He admitted, on cross-examination, that in establishing a “cost of the price for the Swenson order, I took into consideration the volume of the job and the size of the stone.”
The witness “would” have sold the merchandise ex-quarry to Swen-son at a price of U.S. $2.10 per square foot. However, since the slabs were brittle and subject to excessive breakage if hauled by inexperienced people, Swenson wanted a delivered price so that National would be responsible for breakage.
Mr. Robitaille testified that, during the 1963-1965 period that National was delivering granite to Swenson, it had quoted a price of $2.25 per square foot, Canadian Currency, f.o.b. its plant to a Canadian firm for black granite slabs similar to those in issue. It produced three invoices (exhibits 2, 3 and 4) for sales in December 1964 and February 1965 of two-inch black granite slabs at $2.25 per square foot to a firm in Quebec.
The witness was willing to sell the material at the $2.25 price to anybody at that time. But he could “not recall” whether he sold similar slabs to other firms during this period, stating that “[t]hese [Quebec invoices] are the only invoices we found.” However, he noted that “[i]t does not mean that we. did not sell more.” He subsequently stated under cross-examination that he could not recall sales in 1963, but that “[w]e had other customers in 1964, I think,” which sales were made “ [p]robably by written orders.”
When asked if he had entered into written agreements during 1965 with purchasers other than Swenson for the sale of two-inch granite slabs, Mr. Robitaille replied “[p]ossibly, but I do not recall either.” Upon further questioning, he agreed that during 1963, 1964 and 1965 he sold to others than Swenson; that the sales were usually in the form of a written order; and that he would keep a copy of the order “[f]or a certain period of time * * However, he could not produce any contracts or memoranda of the sales made during this period.
The witness explained that it was not possible to have price lists, and that National seldom gave standard prices because they “vary with the type of granite, the finishes, the thicknesses, and the work involved in the stone.”
Mr. Robitaille stated that the provision in the Swenson contract for payment of $2.50 per net square foot, for.all undelivered slabs National had on hand at the end of the month, covered storage costs. It was also intended to assist National financially since its plant had burned down and the machinery had to be rebuilt. The provision for payment of $2.50 per net square foot, in the event of Swenson’s default, for all slabs on hand was intended as compensation to National for spending “so much money to build machinery and equip a plant.”
Mr. William L. Thornton, the district director at St. Albans, Vermont, testified he had personally appraised the shipments of granite, including the one at bar, imported under the Swenson contract. The appraised value was arrived at as follows:
“They started off at $3.35, and the information I had at the time was that the brokerage and duty amounted to 280, and the difference between the two nets would be the inland freight. I allowed the freight only within the United States.”
Although the entry papers show that the merchandise went to Concord, New Hampshire, Mr. Thornton deducted the prorated freight charge between Derby Line, Vermont and Barre, Vermont, stating that “a lot of them [shipments to Swenson] stopped off in Barre.” He made the same deduction in all of the granite shipments from National.
The witness stated that he had customs agents make inquiries as to how National sold the granite. Since no information was available, that it sold at ex-quarry prices, he used the delivered sales price of $3.35 in making the appraisements.
As to its first cause of action, plaintiff contends that under the export value formula it has established that the proper dutiable value for the imported granite is U.S. $2.10 per square foot ($2.25 per square foot, Canadian currency).
Export value is defined in section 402(b), as amended, sufra, 'as follows:
“(b) Expoet Value. — For the purposes of this section, the export value of imported merchandise shall be the price, at the time of exportation to the United States of the merchandise undergoing appraisement, at which such or similar merchandise is freely sold or, in the absence of sales, offered for sale in the principal markets of the country of exportation, in the usual wholesale quantities and in the ordinary course of trade, for exportation to the United States, plus, when not included in such price, the cost of all containers and coverings of whatever nature and all other expenses incidental to placing the merchandise in condition, packed ready for shipment to the United States.”
The phrase “freely sold or, in the absence of sales, offered for sale,” in section 402(f) (1), Tariff Act of 1930, as amended, insofar as pertinent herein, means sold or, in the absence of sales, offered:
“ (A) to all purchasers at wholesale, or
* * * * * * *
without restrictions as to the disposition or use of the merchandise by the purchaser, except restrictions as to such disposition or use which (i) are imposed or required by law, (ii) limit the price at which or the territory in which the merchandise may be resold, or (iii) do not substantially affect the value of the merchandise to usual purchasers at wholesale.”
The appraiser’s finding of value carries a statutory presumption of correctness (28 U.S.C. § 2633, superseded by 28 U.S.C § 2635 by the Customs Courts Act of 1970, Pub. L. 91-271). It was, therefore, incumbent upon plaintiff to establish, by competent satisfactory evidence, that the appraised value was erroneous, and that such or similar merchandise was freely sold or, in the absence of sales, offered for sale to all purchasers at wholesale in the principal markets of Canada in the usual wholesale quantities and in the ordinary course of trade for exportation to the United States at the alleged ex-quarry price of U.S. $2.10, or $2.25, Canadian currency.
The record does not contain the required proof, and the presumption of correctness has not been rebutted. There is no evidence that such or similar merchandise was actually sold or ever offered for sale for export to the United States at an ex-quarry price during the period in issue. Although Mr. Robitaille stated that National “would” have accepted an ex-quarry price o£U.S. $2.10 from Swenson or “anybody,” he never testified that National actually sold two-inch granite slabs-for export to the United States at such price during the period in issue; nor was he able to recollect the price quoted on slabs at that time.
It is proper to note the witness’ admission that similar granite slabs were sold for export to the United States in 1964 and 1965 and his failure to produce any documents relating to those transactions. He did, however, have on hand invoices showing sales at an ex-quarry price ($2.25 Canadian currency) to a Canadian firm in those years. Under the circumstances, his unexplained failure to offer evidence of the price at which the sales of granite slabs for export to this country were made warrants an inference unfavorable to plaintiff’s claim.
Furthermore, Mr. Robitaille’s willingness to sell ex-quarry to Swenson or anybody else does not meet the requirements of export value as defined in the statute. The export value formula addresses itself to the realities of the marketplace, that is, it contemplates a market value that is established Iby what is actually done in terms of sales and offers of sale, not by mere possibilities. Thus it is well settled that neither willingness to sell merchandise at a particular price, nor the fact that it could have been sold at a particular price, is evidence of a price. United States v. Bud Berman Sportswear, Inc., 66 Cust. Ct. 628, A.R.D. 287 (1971), aff'd, 469 F.2d 1107, 60 CCPA 34, C.A.D. 1077 (1972); Delmonico International Corp. v. United States, 52 Cust. Ct. 656, A.R.D. 176 (1964). See also Ontario Stone Corporation v. United States, 319 F. Supp. 923, 65 Cust. Ct. 753, R.D. 11727 (1970).
Finally, evidence of sales made in the home market to a Canadian purchaser four and six months after the merchandise at bar was exported has no weight in establishing either the price at which it was freely sold or offered for sale for export to the United States or, indeed, what the price was “at the time of exportation” of the subject merchandise, as required by section 402(b) supra. See United States v. Robert Reiner, Inc., 35 CCPA 50, C.A.D. 370 (1947); The A. W. Fenton Co., Inc. v. United States, 61 Cust. Ct. 437, R.D. 11556 (1968), application for review dismissed, 61 Cust. Ct. 613, A.R.D. 246 (1968); Sam Yeung Co. v. United States, 52 Cust. Ct. 572, 575, R.D. 10760 (1964).
In the absence of any showing that the merchandise was freely sold for export to the United States to all purchasers at wholesale on an ex-quarry basis, plaintiff must fail on its first claim since it has failed to sustain its burden of proof.
For its alternative claim, plaintiff accepts the appraiser’s presumptively correct determination that the export value for the merchandise is the' delivered price of U.S. $3.35 per square foot less nondutia'ble charges consisting of duty, brokerage, and freight charges within the United' States. It contends, however, that the customs officer failed to deduct a sufficient amount for the duty.
For purposes of this claim plaintiff relies upon the principle that a party may challenge one or more of the elements entering into an appraisement while relying upon the presumption of correctness of the appraiser’s return as to all other elements. United States v. Fritzsche Bros., Inc., 35 CCPA 60, C.A.D. 371 (1947) ; Ontario Stone Corporation v. United States, 319 F. Supp. 923, 65 Cust. Ct. 753, R.D. 11727 (1970); Alvin Naiman Corporation v. United States, 54 Cust. Ct. 705, R.D. 11008 (1965). Where, as here, the appraisement was made by working backward from a delivered price in Concord, New Hampshire to a price at the Canadian border, and there is no dispute as to which charges were deducted, the appraisement is deemed to be separable. Ontario Stone Corporation v. United States, supra; Alvin Naiman Corporation v. United States, supra. Accordingly, plaintiff may’ challenge the deduction for duty, while relying upon the presumption of correctness attaching to the other elements of the ap-praisement. Alvin Naiman Corporation v. United States, supra.
The appraiser had arrived at a value of $3,015 per square foot by deducting 28 cents per square foot for duty and brokerage from $3.35, and deducting an additional 5.5 cents per square foot (the difference between $3.07 and $3,015) for the freight charges from the port of entry, Derby Line, Vermont, to Barre, Vermont. It is not disputed that the allowance of 28 cents includes 1.75 cents for brokerage and 26.25 cents for duty. The duty figure was based on the apparently applicable rate of duty of 12.5 per centum ad valorem upon the entered value of $2.10.
Plaintiff expressly concedes that the amount of duty figured in the delivered duty-paid price of $3.35 was 26.25 cents (based on 12.5 percent of $2.10), and that the special customs invoice states that the “selling price of 3.35 includes * * * .28 per foot for duty and brokerage fees.” It claims, nonetheless, that the “included” duty should be based on 12.5 percent of $3.2775, that, is, the-delivered price of $3.35 less 5.5 cents freight, less 1.75 cents brokerage. This would result, according to plaintiff’s calculations, in a deduction of 36.416% cents per square foot for duty, leaving a dutiable value of $2.91% per square foot, United States currency, net packed. " ■
Plaintiff argues tbat “[sjince this figure [$3.2775]: includes 12.5% duty, when divided by 112.5%, the result is equal to the dutiable value less included duty at 12.5%.”
|
10535244-4905 | BRORBY, Circuit Judge.
Mr. Arredondo-Santos having pled guilty to the crime of possession with intent to distribute less than fifty kilograms of marijuana, appeals his sentence of thirty months.
Mr. Arredondo-Santos asserts only one issue on appeal, and that is did the district court err when it refused to decrease his offense level by two levels based upon Mr. Arredondo-Santos’ contention that he was but a minor participant in the criminal activity?
The Government and Mr. Arredondo-Santos entered into a written plea agreement, which included a stipulation “that pursuant to § 3B1.2(b), the defendant was a minor participant in the criminal activity alleged in the indictment herein.” This plea agreement further provided that the defendant (Mr. Arredondo-Santos) understands that “this stipulation is not binding on the Court and that whether or not the Court accepts this stipulation is solely in the discretion of the Court after it has reviewed the pre-sentence report.”
A presentence report was then prepared and filed, which indicated that Mr. Arre-dondo-Santos was not entitled to a reduction of two offense levels for being a minor participant in the crime. This presentence report specified the offense conduct. It can be summarized as stating that Mr. Arredondo-Santos was driving a van, with a passenger, which was stopped at the United States-Mexico border. It was subsequently determined that concealed within the van was about 100 pounds of marijuana. Mr. Arredondo-Santos first claimed that, while he was in Mexico, he loaned his van to a man he had met several years ago and that this man must have concealed the marijuana in the van with the intent of recovering it later. Subsequently, Mr. Ar-redondo-Santos admitted that he knowingly transported the marijuana, which he had obtained in Mexico, and the marijuana was destined for Riverside, California.
Mr. Arredondo-Santos filed no written objections to the presentence report. Counsel for Mr. Arredondo-Santos said there was no need for an evidentiary hearing. He further stated that the defendant did not contest the facts as set forth in the presentence report. However, Mr. Arre-dondo-Santos argued at the sentencing hearing that he should receive a two-level reduction in the offense level. He contended that he was a mere driver and was less culpable than the people who purchased and sold the drugs; that he was less culpable than the owner of the marijuana; and that there was no evidence indicating that he had loaded or unloaded the marijuana or that he had concealed the marijuana in his van.
After hearing the arguments of Mr. Ar-redondo-Santos, the court stated:
I don’t find that a driver under these circumstances is a minimal or minor participant. Obviously the system breaks down without people such as the defendant to transport the narcotics. So I don’t find that he is a minor participant.
On appeal, Mr. Arredondo-Santos reiterates the same arguments advanced to the district court. The arguments can be summarized as stating that Mr. Arredondo-Santos contends that marijuana distributing operations usually involve many individuals with various responsibilities and that a “courier or mule,” whose sole function is to drive the marijuana from point A to point B, should be classified as a minor participant.
We first address the stipulation of the parties. Mr. Arredondo-Santos correctly makes no argument to this court that the stipulation was binding upon the district court.
Mr. Arredondo-Santos contends that the sentence was imposed as a result of an incorrect application of the Sentencing Guidelines. We must accept the findings of fact of the district court unless they are clearly erroneous. 18 U.S.C. § 3742(d)(2). A finding that a defendant is or is not a minor participant is a finding of fact. United States v. Sanchez-Lopez, 879 F.2d 541, 557 (9th Cir.1989) (citing United States v. Franco-Torres, 869 F.2d 797, 800 (5th Cir.1989)). We give due deference to the district court’s application of the Sentencing Guidelines to the facts. 18 U.S.C. § 3742(e); United States v. Smith, 888 F.2d 720, 723 (10th Cir.1989), cert. denied, — U.S. -, 110 S.Ct. 1786, 108 L.Ed.2d 788 (1990).
The facts are undisputed. Mr. Arredondo-Santos was apprehended with a quantity of marijuana concealed in his van. Mr. Arredondo-Santos had obtained the marijuana in Mexico and was attempting to transport it to California. We will accept Mr. Arredondo-Santos’ contention that he was a courier. Couriers are indispensable to any drug-dealing network.
Section 3B1.2(b) of the Sentencing Guidelines provides for a two-level decrease in the offense level if the defendant was a “minor participant in any criminal activity.” The commentary defines a minor participant as “any participant who is less culpable than most other participants, but whose role could not be described as minimal.” Commentary, Application Note 3.
|
863387-28826 | MOORE, Circuit Judge.
This is a diversity action for damages for wrongful death arising out of an airplane accident on October 29, 1953. In 1953 a pilot for defendant British Commonwealth Pacific Airlines, Ltd. (BC PA), an Australian corporation, in a plane coming from Honolulu, began an instrument landing, during which operation it crashed against a mountain near the San Francisco, California, airport. All aboard were killed, including plaintiffs’ deceased, the noted pianist William Kapell.
The flight having been international, BCPA and defendant Qantas Empire Aviation, Ltd. (Qantas) claimed that liability was limited by the Warsaw Convention, under which plaintiffs could recover no more than $8,291.87, unless BC PA had been guilty of “wilful misconduct.” If, on the other hand, BCPA had taken all necessary means to avoid the accident, or if that were impossible, then BCPA would not be liable to plaintiffs for any amount.
After a jury trial in 1961 before Judge Willis Ritter, the jury found for defendants on all issues; no damages were awarded. Plaintiffs moved for judgment notwithstanding the verdict or for a new trial, and two years later Judge Ritter granted judgment for plaintiff as to liability, ordering a new trial only as to damages. He also ordered a conditional new trial on all issues if the judgment n. o. v. were reversed on appeal. 219 F. Supp. 289 (S.D.N.Y.1963). Defendants object to both determinations.
After a trial in 1964 before Judge McLean a jury found damages of $924,396. Plaintiff moved for the addition of prejudgment interest from date of death— 1953 — to date of judgment. The motion was denied, 230 F.Supp. 240 (S.D.N.Y. 1964), and plaintiffs appeal.
The Pleadings
As a first cause of action against BC PA, the complaint alleged in substance that the crash “was caused solely by the wilful misconduct of defendant BCPA, its agents and employees, in and about the management, operation, control and maintenance of the aforesaid airplane, * * Other causes of action alleged negligence on the part of BCPA. These causes of action were repeated against BCPA “now doing business as Qantas Empire Aviation, Ltd.” on the theory that Qantas became a successor in interest to, and assumed the obligations of, BC PA. British Overseas Airways Corp. (BOAC) was made a defendant in two causes of action on the theory that BOAC was negligent in choosing BCPA as the air carrier to transport Kapell. Except for certain factual admissions not in dispute, BCPA (and BCPA d/b/a Qantas), denied liability generally although admitting that in its liquidation it had transferred only certain assets to Qantas. For an affirmative defense BCPA (and Qantas) alleged that the flight was in “international transportation” and that the “Convention for the Unification of Certain Rules Relating to International Transportation by Air and Additional Protocol,” referred to herein as the “Warsaw Convention” or “Convention,” limited its liability to each passenger to 125,000 francs ($8,291.87).
The Trial
The trial before a jury consumed thirteen days. Some thirty-seven witnesses testified in person or by deposition. Their testimony covered a range from technical airplane piloting and landing procedures, the rules and regulations pertaining thereto, weather conditions, the sound of the plane and the crash, to Kapell’s then and future earning capacity.
At the conclusion of plaintiffs’ case, Qantas moved for a directed verdict, which motion was denied. Decision was reserved until after verdict on a similar motion at the end of the entire case. The many issues of fact were submitted to the jury in a lengthy charge. The jury returned a verdict “Unanimous for the defendant.”
The Charge.
The trial court first expounded its views of the effect of the Warsaw Convention. After mentioning the limited damages aspect of the Convention, the Court charged, “If what the pilot or crew did, or failed to do, was ‘wilful misconduct,’ there are no limits imposed by the Warsaw Convention upon the damages that may be recovered.” The court then proceeded in a charge most favorable to plaintiff to define “wilful misconduct” as it might be found in a series of hypothetical situations in the operation of the airplane while attempting to land, including the comment that “it may be that a jury would feel justified in coming to the conclusion that some relatively minor breach of a safety regulation amounts to ‘wilful misconduct,’ although it would not do so in places and on occasions when the consequences of such an approach would be much less serious.”
The jury were told that it was their function not only to take into consideration “all of the facts and circumstances in proof” but also all the inferences fairly and reasonably to be drawn from the facts as proven. Even on the question of the pilot’s knowledge in the definition of “wilful misconduct” the jury were instructed that proof thereof did not have to be by direct evidence but that they had “a right to infer that the pilot or flight crew in charge of the aircraft had such knowledge or would have had such knowledge.” As the court finally summarized the case, in addition to weighing the evidence, the circumstantial evidence and all inferences therefrom, the jury were to hold the defendants “liable to the plaintiffs for the damages caused by that death without limitation” if the defendant “knowingly and intentionally violated any of the Civil Air Regulations or the landing instructions from the San Francisco Approach Control Tower.” The jury was to apply the law “to the facts which you may find have been established in this case.”
The jury acting upon these instructions found for the defendant. Over two years later the court, upon the same proof as had been submitted to the jury for their resolution of the facts, directed judgment n. o. v. in favor of plaintiffs and ordered a new trial on the issues of damages only. The Court’s Opinion
In a lengthy opinion, the court reviewed its version of the facts and by granting plaintiffs’ motions, in effect, substituted itself for the jury and drew its own inferences from the facts.
Some twenty printed pages are given to an analysis of the Warsaw Convention. Reference is made to various comments of German, British, Luxembourg, Italian, French, Brazilian and Swiss delegates to the Warsaw Conference with respect to “dolus,” “dol,” and “faute lourde” and the translation of these words into our law as “wilful misconduct” (a phrase accepted and used by the court in its jury charge). However, the impression is gained from the opinion that to the court “the Warsaw Convention was a device by which to subsidize the then infant industry of international air transportation” and that “it is a strange concept to us in the United States that the subsidy should be taken out of the widows and orphans of the passengers.” 219 F.Supp. at 322-323.
The Interlocutory Judgment
The court not only directed a judgment against defendant “on the issue of liability” but also, in the alternative, ordered a new trial on all issues “if the judgment non obstante veredicto is set aside on appeal.”
The Primary Appellate Issue
The primary issue to be resolved upon this appeal is whether the trial court was justified in setting aside the jury’s verdict in favor of defendant and, assuming the jury’s role as fact finder, granting judgment to plaintiffs.
The separate roles to be played by the jury with respect to the facts and by the court with respect to the law have been rather firmly settled for many generations. As the Supreme Court said in Tennant v. Peoria & Pekin Union Ry., 321 U.S. 29, 35, 64 S.Ct. 409, 412, 88 L.Ed. 520 (1944):
“It is the jury, not the court, which is the fact-finding body. It weighs the contradictory evidence and inferences, judges the credibility of witnesses, receives expert instructions, and draws the ultimate conclusion as to the facts. The very essence of its function is to select from among conflicting inferences and conclusions that which it considers most reasonable. [citing cases] That conclusion, whether it relates to negligence, causation or any other factual matter, cannot be ignored. Courts are not free to reweigh the evidence and set aside the jury verdict merely because the jury could have drawn different inferences or conclusions or because judges feel that other results are more reasonable.”
This admonition was re-emphasized in Lavender v. Kurn, 327 U.S. 645, 653, 66 S.Ct. 740, 744, 90 L.Ed. 916 (1946):
“It is no answer to say that the jury’s verdict involved speculation and conjecture. Whenever facts are in dispute or the evidence is such that fair-minded men may draw different inferences, a measure of speculation and conjecture is required on the part of those whose duty it is to settle the dispute by choosing what seems to them to be the most reasonable inference. Only when there is a complete absence of probative facts to support the conclusion reached does a reversible error appear. But where, as here, there is an evidentiary basis for the jury’s verdict, the jury is free to discard or disbelieve whatever facts are inconsistent with its conclusion. And the appellate court’s function is exhausted when that evidentiary basis becomes apparent, it being immaterial that the court might draw a contrary inference or feel that another conclusion is more reasonable.”
No useful purpose will be served by even a résumé of the many factual issues outlined in the court’s charge or raised by the testimony set forth in great detail in the opinion of 86 pages. Suffice it to say that the trial court presented the factual issues to the jury in the charge, giving to them the broadest leeway to draw such inferences as to wilful misconduct as might be warranted. They obviously resolved the facts and inferences therefrom as not supporting wilful misconduct.
I. “Wilful Misconduct” as a Matter of Law.
In granting plaintiffs’ motion for judgment n. o. v., Judge Ritter held that the evidence established “wilful misconduct” as a matter of law; i. e., that the only conclusion a reasonable jury could have reached was that the defendants were guilty of wilful misconduct. See, e. g., Wilkerson v. McCarthy, 336 U.S. 53, 62-63, 69 S.Ct. 413, 93 L.Ed. 497 (1949); Marsh v. Illinois Cent. R. R., 175 F.2d 498, 500 (5th Cir. 1949); Blum v. Fresh Grown Preserve Corp., 292 N.Y. 241, 245-246, 54 N.E.2d 809, 810 (1944).
A. The applicable standard of wilful misconduct.
1. As stated by prior decisions. Although it is immaterial to the jury’s resolution of the facts, the court in its opinion was in error in concluding that the Second Circuit does not require knowledge that damage would probably result. The charge of the trial court in Pekelis v. Transcontinental & W. Air, Inc., upheld by this court in 187 F.2d 122, 124 (2 Cir.), cert. denied, 341 U.S. 951, 71 S.Ct. 1020, 95 L.Ed. 1374 (1951), and referred to by the trial court in the present case, was that:
“wilful misconduct is the intentional performance of an act with knowl edge that the performance of that act will probably result in injury or damage, or it may be the intentional performance of an act in such a manner as to imply reckless disregard of the probable consequences * * *, [or] the intentional omission of some act, with knowledge that such omission will probably result in damage or injury, or the intentional omission of some act in a manner from which could be implied reckless disregard of the probable consequences of the omission * * * ” (Italicized portions omitted by trial court below.)
We held that an instruction requested by the plaintiff in that case was properly denied
“because it failed to state that the employee must either have known that the * * * [test] was necessary for safety, or his duty to make it must have been so obvious that in failing to make it his conduct would be reckless, rather than merely negligent.* ” (Id. at 125 (footnote omitted).)
Then, in Grey v. American Airlines, Inc., 227 F.2d 282, 285 (2d Cir. 1955), cert. denied, 350 U.S. 989, 76 S.Ct. 476, 100 L.Ed. 855 (1956), Judge Medina “in accordance with precedent” approved a charge requiring “proof of ‘a conscious intent to do or omit doing an act from which harm results to another, or an intentional omission of a manifest duty. There must be a realization of the probability of injury from the conduct, and a disregard of the probable consequences of such conduct.’ ” To like effect was the charge upheld in American Airlines, Inc. v. Ulen, 87 U.S.App.D.C. 307, 311, 186 F.2d 529, 533 (1949), which said that it would be wilful misconduct if the carrier
“wilfully performed any act with the knowledge that the performance of that act was likely to result in injury to a passenger, or performed that act with reckless disregard of its probable consequences; * * * the mere violation of those [safety rules and regulations], * * * even if intentional, would not necessarily constitute wilful misconduct, but if the violation was intentional with knowledge that the violation was likely to cause injury to a passenger, then that would be wilful misconduct, and likewise, if it was done with a wanton and reckless disregard of the consequences.”
See also Koninklijke Luchtvaart Maatschappij N. V. KLM Royal Dutch Airlines, Holland v. Tuller, 110 U.S.App.D.C. 282, 292 F.2d 775, 779-82 (D.C.Cir.), cert. denied, 368 U.S. 921, 82 S.Ct. 243, 7 L.Ed.2d 136 (1961).
2. As stated by the trial court. After excerpting only parts of the charge upheld in Pekelis, supra, the court concluded that “the Second Circuit does not” require knowledge that damage will probably result, 219 F.Supp. at 323, as is required by the Hague Protocol — an amendment to the Convention which is not in force in the United States. Rather, the court indicated approval of a statement that wilful misconduct is “care- ] lessness without any regard for the con- ¡ sequences,” ibid, (emphasis in original),' and stated that to establish wilful misconduct “it is enough that he [the pilot] realizes, or from the facts which he knows, should realize that there is a strong probability that harm may result, even though he hopes or even expects that his conduct will prove harmless.” Id. at 325-326.
B. Wilful misconduct in the plane’s approach.
There is no justification for the conclusion that the only permissible inference from all the evidence was that the pilot had been guilty of wilful misconduct —whether under Judge Ritter’s standard or under that stated by the prior cases.
Defendants argue that a reasonable inference for the jury to have made was “that the pilot from some inscrutable cause, became confused as to his actual position and commenced his let-down from a point he believed to be the proper one.” If that were so, wilful misconduct would not have been established under any standard. We cannot doubt that a jury could reasonably have thought it so on this record. The evidence shows that the pilot quite possibly thought he was making a proper landing — in most respects he was, apart from location. There is evidence from which the jury •could have inferred that the pilot would not have been likely to have tried to land without having received the requisite signals, thereby violating his clearance. The evidence also suggests that there may have been some radio communication trouble.
Against this, plaintiffs argue that, because of the technical and electronic characteristics of the indicators involved— which they assert to have been operating properly — the pilot could not have received all the signals which he was required by his clearance to receive before beginning his let-down. Because of this, they say, the pilot must have let down knowing that he had not received the proper signals, or with reckless disregard for whether or not he had. However, all these questions depend upon inferences to be drawn from essentially circumstantial evidence. Those who alone could provide direct evidence as to what in fact led the pilot to act are, unfortunately, not able to do so. One can hardly imagine a clearer case in which such questions should have been left to the jury. See, e. g., LeRoy v. Sabena Belgian World Airlines, 344 F.2d 266, 271 (2d Cir. 1965). We cannot even say that the pilot’s or the airline’s negligence was established as a matter of law, much less wilful misconduct. Once the case went to the jury, its verdict should not have been upset if reasonable men could find in defendant’s favor, as they certainly could here. Markusen v. General Aniline & Film Corp., 16 F.R.D. 455 (S.D.N.Y.1954), aff’d on the opinion below, 221 F.2d 479 (2d Cir. 1955); see, e. g., Lavender v. Kurn, 327 U.S. 645, 652-653, 66 S.Ct. 740, 90 L.Ed. 916 (1946); O’Connor v. Pennsylvania R. R., 308 F.2d 911, 914 (2d Cir. 1962); 2B Barron & Holtzoff, Federal Practice & Procedure, § 1075 at 378 (1961).
C. Wilful misconduct at headquarters.
Plaintiffs also urge that as a matter of law there was wilful misconduct at BCPA headquarters in the failure to instruct pilots as to a CAB letter interpreting clearance regulations concerning minimum altitudes in approaching San Francisco. Even if the letter itself were admissible, BCPA’s conduct cannot be characterized as wilful misconduct; at best it was negligence arising out of an honest difference of opinion. However, this theory is not available to upset the jury’s verdict. It was apparently not urged at trial and the jury was not charged about it. The trial judge made no ruling on it. The only semblance of support is a statement in Judge Ritter’s “Supplemental Opinion” that from BCPA’s failure to excuse its non-production of certain documents it was permissible to infer that the failure was deliberate and that “such documents would be unfavorable to defendant, BCPA, on such issue [wilful misconduct].” In particular, BCPA failed to produce a file relating to prescribed approach procedures, although an unspecified number of documents in that file were produced. Even if the non-production could establish that BCPA failed for some reason — perhaps a justifiable one — to tell pilots of the CAB interpretation, as we have said, that could not establish wilful misconduct as a matter of law under the theory of the case.
II. Collateral Estoppel.
Plaintiffs argue that defendant BCPA is collaterally estopped from relitigating the question of liability for “wilful mis conduct” because of a prior judgment against it in a case involving a different passenger killed in the same crash. Halmos v. British Commonwealth Pac. Airlines, Ltd., No. 34123, N.D.Cal. March 9, 1959. An action by Kapell’s estate against BCPA and Qantas seeking $750,-000 had been consolidated with Halmos. Prior to the first trial, summary judgment was granted in favor of Qantas, and the Kapell action against BCPA was dismissed on stipulation. After a jury in Halmos had returned a verdict for BCPA, Judge Ritter, sitting in California by designation, granted plaintiffs’ motion for a new trial. After the second trial, also before Judge Ritter, a jury found for plaintiffs and assessed damages at $35,000 in contrast to $500,000 sought in the complaint. BCPA did not appeal. In 1954, when the Kapell action in California was begun, similar actions were also begun by Kapell’s estate in the Supreme Court of the State of New South Wales, Australia, and in the Supreme Court of the State of New York. Service of a summons on the present defendants in the latter action was upheld in Berner v. United Airlines, Inc., 2 Misc.2d 260, 149 N.Y.S.2d 335 (Sup.Ct.), aff’d, 3 A.D.2d 9, 157 N.Y.S.2d 884 (1st Dept. 1956), aff’d 3 N.Y.2d 1003, 170 N.Y.S.2d 340, 147 N.E.2d 732 (1957). Thereafter in 1959 a complaint was served and the defendants had the action removed to the Southern District of New York. It is this action that gave rise to these appeals.
Application of the doctrine of collateral estoppel raises many questions. Plaintiffs suggest that the lack of mutuality of estoppel (BCPA could not assert a judgment against Halmos as a bar to this action) need be no barrier here under our recent decision in Zdanok v. Glidden Co., 327 F.2d 944 (2d Cir.), cert. denied, 377 U.S. 934, 84 S.Ct. 1338, 12 L.Ed.2d 298 (1964), 64 Colum.L.Rev. 1141. However, it is not altogether clear that Zdanok would govern the question of collateral estoppel in this ease. Zdanok involved two federal court cases resting on federal question jurisdiction. We have two federal court cases here, but in both jurisdiction rests on diversity of citizenship. Therefore, in light of the radiations of Erie R. R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), and Angel v. Bullington, 330 U.S. 183, 67 S.Ct. 657, 91 L.Ed. 832 (1947), we might properly look initially to New York law to determine what law governs. Under it the question of collateral estoppel would seem to be governed by New York local law. See Hinchey v. Sellers, 7 N.Y.2d 287, 295-296, 197 N.Y.S.2d 129, 133- 134, 165 N.E.2d 156, 160-161 (1959). Compare Peare v. Griggs, 8 N.Y.2d 44, 47, 201 N.Y.S.2d 326, 327, 167 N.E.2d 734, 735 (1960). But see Restatement (Second), Conflict of Laws § 430a (Tent. Draft No. 10, 1964). New York does not permit other persons injured in an accident to avail themselves of a prior plaintiff’s judgment. Elder v. New York & Pa. Motor Express, Inc., 284 N.Y. 350, 31 N.E.2d 188, 133 A.L.R. 176 (1940). Should New York look to California law, the result would seem to be the same in a multi-plaintiff accident case like this. See Nevarov v. Caldwell, 161 Cal.App.2d 762, 773-775, 327 P.2d 111, 119 (1958) (hearing denied by California Sup.Ct.); cf. Zdanok v. Glidden Co., supra, 327 F.2d at 955. But cf. Bernhard v. Bank of America, 19 Cal.2d 807, 122 P.2d 892 (1942); Teitelbaum Furs, Inc. v. Dominion Ins. Co., 58 Cal.2d 601, 25 Cal.Rptr. 559, 561, 375 P.2d 439, 441 (1962).
There are further questions. The collateral estoppel effect to be given to a prior federal court judgment in a subsequent action in either a federal or state court might itself be a matter of federal law. The same holds for the collateral estoppel effect to be given to a prior judgment — federal or state — in a subsequent federal court action. Here both the prior judgment and the subsequent actions are federal, although they are both, as noted, diversity actions. Thus, in United States v. United Airlines, Inc., 216 F.Supp. 709, 718-725 (E.D.Wash.1962), aff’d on the opinion below sub nom. United Airlines v. Weiner, 335 F.2d 379, 404 (9th Cir.), cert. dismissed 379 U.S. 951, 85 S.Ct. 452, 13 L.Ed.2d 549 (1964), the court determined as a matter of federal law that a prior federal court judgment in a diversity case was “final” for the purposes of res judicata or collateral estoppel, cf. Lummus Co. v. Commonwealth Oil Ref. Co., 297 F.2d 80, 89-90 (2d Cir. 1961), cert. denied sub nom. Dawson v. Lummus Co., 368 U.S. 986, 82 S.Ct. 601, 7 L.Ed.2d 524 (1962); moreover, it indicated that the same federal rule would apply even if the first judgment was in a state court. Even so, the application of either res judicata or collateral estoppel was in fact determined as a matter of state law; jurisdiction in both cases was based, to the extent here relevant, on diversity of citizenship.
A choice among these various routes need not be made. For even if this case might be subject to a federal rule including the elimination of mutuality (see Zdanok), the defendants here should not be confronted with the Zdanok rule. Abandonment of mutuality was there thought sound unless (1) assertion of the plea of estoppel in successive actions would create anomalous results, or (2) the party had not had a full and fair opportunity to litigate the issue effectively. As Halmos and this case seem to be the only actions by the estates of passengers involved in this accident, there is no probability of anomalous results. However, while not necessarily suggesting that BCPA did not have a “full and fair opportunity to litigate” in Halmos, we think it would be unfair in this case to use the result of the second Halmos trial to the disadvantage of BCPA. At the conclusion of the second trial, Zdanok had not been decided. The result of the first trial was a victory for BCPA; of the second, a relatively small judgment. Had it sought still a third trial, it had to weigh victory against a much larger judgment. The failure to appeal for correction of whatever errors may have been made seems altogether reasonable and would very probably not have been the case if BCPA knew then that that judgment would govern the Kapell action in which far more — $7,003,000—was sought as damages. In Zdanok, however, the first action was litigated as strenuously as would seem possible, see 327 F.2d at 946 n. 1, and the issues — interpretation of a collective bargaining contract — were not likely to be decided on the basis of a jury’s choice among different factual inferences, as was the case here.
Even if the Zdanok approach were thought applicable to this prior judgment, mutuality should not so quickly be discarded in multiple accident cases like this. See 327 F.2d at 955. The rejection of mutuality in United States v. United Airlines, Inc., supra, 216 F.Supp. at 725-729, may be distinguished on the ground that the first judgment involved 24 of 31 pending actions; the gravity of the potential liability is shown by the fact that the ultimate judgments against the airline totalled $2,337,308. 216 F.Supp. at 730. Obviously, the airline would have exerted its full efforts with so much at stake. See note 5 supra. Moreover, the first judgment was being appealed, so that possible errors were not being overlooked. Although the first judgment was affirmed, a reversal would presumably have redounded to the benefit of the defendant in the second action, compare Maryland for Use of Levin v. United States, 381 U.S. 41, 53 n. 38, 85 S.Ct. 1293, 14 L.Ed.2d 205 (1965); consolidation of the actions on appeal eliminated much of the possible conflict.
Thus, whether the applicability of collateral estoppel is governed by federal, New York or California law, the result in this case would be the same; BCPA was free to relitigate the question of “wilful misconduct.”
III. Conditional Grant of a New Trial on All Issues.
Defendants attack as an abuse of discretion Judge Ritter’s decision conditionally ordering a new trial on all issues if his granting of judgment n. o. v. were reversed on appeal. We agree. We observe initially that our review of this issue is hampered somewhat by the fact that Judge Ritter gave no reason for granting a new trial. Plaintiffs had asserted several possible grounds in making the motion, but our study of the record reveals that the grounds relied upon must have been (1) that the verdict was against the weight of the evidence and (2) that defendants’ counsel was guilty of prejudicial misconduct in his argument to the jury. Cf. Leighton v. One William St. Fund, Inc., 343 F.2d 565, 567 (2d Cir. 1965).
A. Verdict against the weight of the evidence.
We have already held that there was sufficient evidence to go to the jury either under the governing Second Circuit standard or under Judge Ritter’s lesser standard of wilful misconduct. To order a new trial on the asserted ground when there was sufficient evidence to go to the jury need not be an abuse of discretion in every case, see 6 Moore, Federal Practice ¶59.08 (5), at 3817, 3820 (2d ed. 1953), but we find that it was in this case. In light of the possible inferences as to what actually happened when the pilot began his let-down, we'cannot agree that, viewed in light of the proper standard, the verdict could be called against the weight of the evidence. Cf. Damanti v. A/S Inger, 314 F.2d 395, 398 (2d Cir.), cert. denied sub nom. Daniels & Kennedy, Inc. v. A/S Inger, 375 U.S. 834, 84 S.Ct. 46, 11 L.Ed.2d 64 (1963).
Nor can we accept plaintiffs’ suggestion that the jury acted not on the evidence but out of prejudice and misunderstanding because it failed to award even the limited damages allowed under the Convention. It is true that defendants’ counsel in his argument to the jury virtually conceded that their burden of proof on complete immunity had not been met. His statement, however, did not have sufficient formality or conclusiveness to be a judicial admission. See Rhoades, Inc. v. United Airlines, Inc., 340 F.2d 481, 484 (3d Cir. 1965); Note, Judicial Admissions, 64 Colum.L.Rev. 1121, 1132-33 (1964). Moreover, plaintiffs’ counsel thereafter urged quite ardently that the jury should award all or nothing. The jury having adopted the latter suggestion, plaintiffs cannot now complain because their quite understandable strategy backfired.
B. Prejudicial statements.
|
1824783-6422 | ATWELL, District Judge.
The Southwest National Bank, of Dallas, Tex., in the process of liquidation, 'and Gordon West, its agent, seek an injunction against Harry D. Farraey, trustee of L. H. Lewis Company, bankrupt, and Hal Hood, sheriff of Dallas county, and John Moffitt, and all other deputies of .said sheriff, to restrain them from selling certain real property that has been seized under execution issued out of a state court judgment.
All of the parties, plaintiff and defendant, are Texas citizens. Jurisdiction is asserted under section 2 of the Bankruptcy Act (11 USCA § 11), and under subdivisions a and b of section 68 (11 USCA § 108 (a) (b), of said act, on the ground that the judgment recovered by Farraey is subject to an offset for a lesser amount, in the form of a claim proven and allowed in the estate of the Lewis Company; and because the bank is in process of liquidation under and by virtue of the provisions of section 181, title 12 of USCA.
The bank is the successor of the Security National Bank. The latter institution made a loan of $50,000 to the Lewis corporation. Later it made another loan of $50,000 to officers of that corporation. When the bank was in stress, the officers of the bank induced the officers of the Lewis corporation to execute notes of that corporation in lieu of their individual notes for the second $50,000. Later the Lewis corporation went into bankruptcy. The successor of the Security National proved in the bankruptcy proceedings the first $50,000 note, and a remaining balance of $20,000 on the second note. Seventy per cent, dividends have been paid upon those claims. The trustee in bankruptcy, after payment of such dividends, discovered the facts with reference to the substitution of the corporation note for the individual note, and thereupon brought suit in the state court for the payments that had- been made thereon as well as for the dividends that had been paid by him upon the remainder thereof. The litigation finally reached the Supreme Court of the state (29 S.W.[2d] 1073), which reversed the judgments of the lower courts, and rendered a decision for him, which aggregates, with interest, the sum of $53,700, and he has secured an execution and levied it upon certain real assets.
It is claimed in the pleadings that the bank has been in the process of liquidating since 1925. That it has assets of $165,000, and liabilities of approximately $65,000.
The complainants pray that the trustee and the sheriffs levying such execution be restrained.
Our system of government demands the utmost care lest one court impinge upon the territory of another. National courts are not only cautioned by this consideration, but are forbidden by a plain statute to enjoin the state courts. R. S.. § 720 (28 USCA § 379). Important exceptions are when it is necessary to preserve and continue jurisdiction or to save from spoliation a national utility.
The first ground of jurisdiction urged by the complainant does not seem to be well taken. The affairs of the Lewis corporation are being administered in the bankruptcy court. If the complainants have anything to offer as a set-off, they should seek entry there. Whether there is an obligation to go there or into the court which rendered the judgment against the bank, this court is not, at the present time, called upon to decide. It is certain that there is no right to come here under the present situation. See, also, Tootle-Weakley Millinery Co. v. Billingsley, 74 Neb. 531, 105 N. W. 85; In re Petrich (D. C.) 43 F.(2d) 435; 34 C. J. 701; Cumberland v. DeWitt, 237 U. S. 447, 35 S. Ct. 636, 59 L. Ed. 1042; Wallace v. Ohio Bank (C. C. A.) 2 F.(2d) 53.
Secondly, thé complainants assert their right to seek an injunction from this court because this court has general jurisdiction to afford such relief by virtue of the laws of the United States.
The elaborate provisions for the incorporation, supervision, and control of national banking associations, include power to issue circulating notes, to go into voluntary dissolution (section 181, 12 USCA), and general grounds for appointment of receivers (section 191, tit. 12, USCA).
Section 5,220 of the - Revised Statutes, which is now section 181, of title 12, USCA, provides that, “Any association may go into liquidation and be closed by the vote of its shareholders owning two-thirds of its stock.” This provision may be advantaged by either a solvent or an insolvent institution. Green v. Bennett (Tex. Civ. App.) 110 S. W. 108; Planten v. National Nassau Bank, 93 Misc. Rep. 344, 157 N. Y. S. 31, affirmed 174 App. Div. 254, 160 N. Y. S. 297; Planten v. Earl, 220 N. Y. 677, 116 N. E. 1070; see also King v. Pomeroy (C. C. A.) 121 F. 287, generally as to liquidation and receivership.
Voluntary liquidation is a preservation of the corporate existence. Nebraska National Bank v. Union Stock Yards National Bank, 108 Neb. 417, 187 N. W. 883; Brown v. Deposit National Bank, 125 Misc. Rep. 247, 211 N. Y. S. 366; Fagan v. Texas Co. (Tex. Civ. App.) 220 S. W. 346; Merchants’ National Bank v. Gaslin, 41 Minn. 552, 43 N. W. 483. And the bank continues to exist during the process of liquidation and is capable of suing and being sued for the purpose of winding up its business and until its affairs are eoifepletely settled. Central National Bank v. Connecticut Mutual Life Insurance Co., 104 U. S. 54, 26 L. Ed. 693; Chemical National Bank v. Hartford Deposit Co., 161 U. S. 1, 16 S. Ct. 439, 40 L. Ed. 595; Standard Trust Co. of New York v. Commercial National Bank (C. C. A.) 240 F. 303.
The Supreme Court, in Central National Bank v. Insurance Co., 104 U. S. 54, 74, 26 L. Ed. 693, pointed the way to the power of such continuing corporation while thus liquidating. “If there are claims made which the directors of the association are not willing to acknowledge as just .debts, there is nothing in the statute which is inconsistent with the right of the claimant to obtain a judicial determination of the controversy by process against the association, nor with that of the association to collect by suit debts due to it.”
That course up to this point has been followed-by the parties here. See Warner v. Citizens’ Nat. Bank (C. C. A.) 267 F. 661. The bank has finally been cast in the litigation and the successful creditor having been unable to realize upon the judgment is pursuing legal steps for its collection. May such an effort be halted?
|
11292110-19024 | ORDER
On consideration of the grant of the petition for rehearing, this court withdrew its opinion in this case issued on July 17, 1992, to allow circulation to the entire court pursuant to Circuit Rule 40(f). As a result of that circulation,
IT IS ORDERED that the opinion of this court originally issued on July 17, 1992, and withdrawn on October 16, 1992, is hereby reissued and amended by the addition of the following footnote on page 1115, noted after reissue date:
Before BAUER, Chief Judge, CUDAHY and KANNE, Circuit Judges.
KANNE, Circuit Judge.
In this case the National Labor Relations Board (“the Board”) asks us to enforce its order requiring Del Rey Tortilleria, Inc. (“the Company”) to pay backpay to two employees it discharged. The Company cross-petitions for review of that order, in part on the ground that it is inconsistent with Sure-Tan, Inc. v. NLRB, 467 U.S. 883, 104 S.Ct. 2803, 81 L.Ed.2d 732 (1984). Because we agree with the Company that the Board’s order is inconsistent with Sure-Tan, we deny enforcement.
On June 7, 1985, following the filing of an unfair labor practice charge by Local 76, affiliated with the International Ladies’ Garment Workers’ Union, AFL-CIO (“the Union”), the Board’s Regional Director for Region 13 issued an unfair labor practice complaint against the Company. The complaint alleged, inter alia, that the Company had discharged employees Bernardo Bravo and Nicolas Paredez in violation of the Act.
Later that month, the Board’s General Counsel, the Company and the Union reached a settlement. In the settlement stipulation, the Company did not admit to engaging in any unfair labor practices, but agreed to reinstate and make whole Bravo and Paredez. The Company also waived all further proceedings except a compliance hearing to determine any issues relating to reinstatement and backpay. In accordance with the stipulation, the Board sought enforcement of its order in this court. On September 23, 1986, we entered judgment in favor of the Board, enforcing its order.
After the stipulation, the Company contested the employees’ entitlement to reinstatement and backpay on several grounds, and also contested the amount of backpay owed to the employees. The Company’s principal argument was that the employees had no entitlement to backpay under the Immigration and Nationality Act (“INA”), 8 U.S.C. § 1101, et seq., because they were undocumented aliens. Shortly thereafter, the Regional Director issued a Backpay Specification and Notice of Hearing seeking reinstatement and liquidated amounts of backpay for the two employees. At the hearing before an administrative law judge, the parties stipulated that Bravo and Paredez were undocumented aliens during their employment with the Company. Moreover, Bravo and Paredez testified that they had applied for legalization under the Immigration Reform and Control Act of 1986 (“IRCA”), 8 U.S.C. §§ 1101 et seq., based on their beliefs that they qualified for legalization.
On December 7,1988, the ALJ issued her decision. She concluded that Bravo and Paredez were entitled to full backpay for all periods after their termination and before the Company offered reinstatement, notwithstanding their undocumented alien status. In her opinion, the ALJ relied on Local 512, Warehouse and Office Workers’ Union v. NLRB, 795 F.2d 705 (9th Cir.1986), which held that Sure-Tan’& remedial holding applied only to aliens who are not present within the United States. She therefore found that undocumented aliens who remain in the United States are eligible to receive backpay. The AU further found that such aliens were entitled to reinstatement and backpay unless the employer could prove their illegal presence by means of a final INS deportation order. Because the Company had not met that burden, the AU ruled that Bravo and Par-edez must be presumed to have been legally present at all times and entitled to the full panoply of Board remedies. The AU determined that Bravo and Paredez should be awarded backpay for the periods in which they were available for work.
. On March 27, 1991, the Board issued its supplemental decision and order, adopting the recommended order of the AU. This appeal followed.
Section 10(c) of the National Labor Relations Act (“NLRA”), 29 U.S.C. § 160(c), authorizes the Board to remedy the effects of unfair labor practices by ordering violators “to take such affirmative action, including ... backpay, as will effectuate the policies of th[e] Act....” The backpay remedy under the Act is designed to restore “the situation, as nearly as possible, to that which would have obtained, but for the illegal discrimination.” Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 194, 61 S.Ct. 845, 852, 85 L.Ed. 1271 (1941).
In a backpay proceeding, the General Counsel has the burden to show the gross amounts of backpay due. When it has done so, the Company has the burden to produce evidence to mitigate its backpay liability. NLRB v. P*I*E Nationwide, Inc., 923 F.2d 506, 513 (7th Cir.1991); NLRB v. Brown & Root, 311 F.2d 447, 454 (8th Cir.1963).
Initially, we note that our review of the Board’s factual findings and legal conclusions is limited. We must uphold the Board’s factual findings if they are supported by substantial evidence on the record as a whole. Kankakee-Iroquois County Employers’ Ass’n v. NLRB, 825 F.2d 1091, 1093 (7th Cir.1987); Lapham-Hickey Steel Corp. v. NLRB, 904 F.2d 1180, 1184 (7th Cir.1990); see also Universal Camera v. NLRB, 340 U.S. 474, 488, 71 S.Ct. 456, 464, 95 L.Ed. 456 (1951). The Board’s legal conclusions also warrant deference. On review, we “ ‘must uphold the legal conclusions of the Board unless they are irrational or inconsistent with the National Labor Relations Act.’ ” NLRB v. Augusta Bakery Corp., 957 F.2d 1467, 1471 (7th Cir.1992) (quoting Aqua-Chem, Inc. Cleaver-Brooks Div. v. NLRB, 910 F.2d 1487, 1490 (7th Cir.1990)). We must uphold a remedial order of the Board “ ‘unless it can be shown that the order is a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the [NLRA].’ ” Id. (quoting Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 216, 85 S.Ct. 398, 406, 13 L.Ed.2d 233 (1964)).
As it did before the Board, the Company argues that the employees are not entitled to any backpay as a matter of law because they are undocumented aliens. The Company claims that the Board’s decision disregards the Supreme Court’s holding concerning the backpay remedy in Sure-Tan, while the Board counters that its decision is entirely consistent with Sure-Tan. Because the decision in Sure-Tan is dispositive, we will examine it at some length.
In Sure-Tan, after a Board election for Union certification, the companies involved (petitioners in the Supreme Court) informed the INS that several of their employees were undocumented aliens. 467 U.S. at 887, 104 S.Ct. at 2806. After an investigation by the INS, five of the employees agreed to voluntarily depart the United States. Id. The Board concluded that the companies had engaged in an unfair labor practice by informing the INS of the employees’ undocumented status “ ‘solely because the employees supported the Union.’ ” Id. at 888, 104 S.Ct. at 2807 (quoting Sure-Tan, Inc., 234 N.L.R.B. 1187 (1978)). As a remedy, the Board found that the deported employees should be entitled to receive reinstatement with backpay, id. at 889, 104 S.Ct. at 2807, but it left until compliance proceedings the determination of whether the employees had in fact been available for work. Id.
This court modified the Board’s order, and concluded that the Board should consider awarding the employees six months backpay. NLRB v. Sure-Tan, 672 F.2d 592, 606 (7th Cir.1982). In so ruling, we reasoned that awarding six months back-pay would better effectuate the policies of the Act, by deterring the employer from future violations. Id. The Supreme Court reversed.
The Supreme Court first held that undocumented aliens are “employees” within the meaning of the NLRA. Sure-Tan, 467 U.S. at 891-94, 104 S.Ct. at 2808-09. Turning to the remedial order, the Court stated that it generally approved the Board’s course of action in ordering “the conventional remedy of reinstatement with back- pay, leaving until the compliance proceedings more specific calculations as to the amounts of backpay, if any, due these employees.” Id. at 902, 104 S.Ct. at 2814 (emphasis added). The Court agreed with our holding that “the implementation of the Board’s traditional remedies at the compliance proceedings must be conditioned upon the employees’ legal readmittance to the United States.” Id. at 902-03, 104 S.Ct. at 2814. The Court further explained that: “in computing backpay, the employees must be deemed ‘unavailable’ for work (and the accrual or backpay therefore tolled) during any period when they were not lawfully entitled to be present and employed in the United States.” Id. at 903, 104 S.Ct. at 2814 (emphasis added). Finally, the Supreme Court stated: “[w]e share the Court of Appeals’ uncertainty concerning whether any of the discharged employees will be able either to enter the country lawfully to accept the reinstatement offers or to establish at the compliance proceedings that they were lawfully available for employment during the backpay period.” Id. at 904, 104 S.Ct. at 2815 (emphasis added).
In requiring employees to show that they were “lawfully available for employment during the backpay period,” the Supreme Court reasoned that the Board could not simply disregard the “equally important” Congressional policies underlying the INA. Id. at 903, 104 S.Ct. at 2814. The Court seemed to determine that the policy behind the INA — “the objective of deterring unauthorized immigration” — required the employees to show that they were lawfully available for employment during the back-pay period. Otherwise, undocumented aliens would be rewarded by the NLRB for entering the United States illegally. As Judge Beezer of the Ninth Circuit has argued:
The unstated premise behind' [Sure-Tan ’s] holding appears to be that an undocumented alien has not been legally harmed by a lay-off or termination. An alien who had no right to be present in this country at all, and consequently-had no right to employment, has not been harmed in a legal sense by the deprivation of employment to which he had no entitlement. It may promote the purpose of the NLRA to guarantee the collective bargaining rights of the NLRA to every employee, regardless of immigrant status. But the award provisions of the NLRA are remedial, not punitive, in nature, and thus should be awarded only to those individuals who have suffered harm.
Local 512, 795 F.2d at 725 (Beezer, J., dissenting in part). We agree with Judge Beezer, and find that Bravo and Paredez have not been harmed in a legal sense and therefore are not entitled to backpay.
The Company asserts that under the language of Sure-Tan, Bravo and Paredez may not receive backpay as a matter of law. Initially, we are inclined to agree with the Company that the plain language of the Supreme Court’s opinion bars undocumented aliens from receiving backpay. The Board follows the ALT in arguing for a narrower interpretation of Sure-Tan: that Sure-Tan’s holding applies only to undocumented aliens who are no longer within the United States. According to the Board, only if an undocumented alien is outside of the country is he “unavailable” and not eligible to receive backpay.
The Board bases its narrow view of Sure-Tan’s holding, in part, on its reading of footnote 11 of the opinion. 467 U.S. at 901 n. 11, 104 S.Ct. at 2814 n. 11. That footnote states in part that: “[i]n the instant case, the Court of Appeals ‘estimated’ an appropriate period of backpay without any evidence whatsoever as to the period of time these employees might have continued working before apprehension by the INS and without affording [the companies] with any opportunity to provide mitigating evidence.” The Board insists that footnote 11 indicates that the court intended to limit its holding to the specific factual setting presented — where the undocumented alien employees were no longer within the United States.
We disagree with the Board’s interpretation of footnote 11. That footnote is more properly viewed as an additional criticism of our decision to recommend that the Board award six months backpay to the employees. In any event, the text of the opinion is quite clear — undocumented aliens may not receive backpay unless they can show that they were “lawfully entitled to be present and ' employed in the United States.” Sure-Tan, 467 U.S. at 903, 104 S.Ct. at 2814.
Moreover, the dissenting opinion, of Justice Brennan supports our interpretation of the majority opinion. Sure-Tan, 467 U.S. at 906, 104 S.Ct. at 2816 (Brennan, J., concurring in part and dissenting in part). Justice Brennan interpreted the majority’s holding to limit the availability of backpay to all undocumented aliens. He wrote: “[o]nce employers, such as petitioners, realize that they may violate the NLRA with respect to their undocumented alien employees without fear of having to recompense those workers for lost backpay, their incentive to hire such illegal aliens will not decline, it will increase.” Id. at 912, 104 S.Ct. at 2819 (emphasis added).
The Sure-Tan majority responded to Justice Brennan’s dissent at footnote 13, but it is striking that the majority did not criticize Justice Brennan’s broad view of its holding. Instead, the majority insisted that the dissent ignored the deterrence value of the cease and desist order, which was unaffected by the majority’s holding. Id. at 905, 104 S.Ct. at 2815.
The Supreme Court did not limit Sure-Tan in I.N.S. v. Lopez-Mendoza, 468 U.S. 1032, 104 S.Ct. 3479, 82 L.Ed.2d 778 (1984). In Lopez-Mendoza, the Court stated that Sure-Tan’s remedial holding permits retrospective sanctions against an employer even where the employee is an illegal alien. Id. at 1047 n. 4, 104 S.Ct. at 3488 n. 4. However, an illegal alien “is plainly not entitled to prospective relief — reinstatement and continued employment — that probably would be granted to other victims of similar unfair labor practices.” Id., 104 S.Ct. at 3488 n. 4. Lopez-Mendoza did not mention backpay; but it should not be read to permit the NLRB to award backpay in view of the language of Sure-Tan. Id.; see Sure-Tan, 467 U.S. at 903, 104 S.Ct. at 2814. Thus, footnote 4 of Lopez-Mendoza undercuts the Union’s argument that Sure-Tan held only that backpay is tolled where an employee is physically unavailable for work.
The Board argues strenuously that in interpreting Sure-Tan, we should follow the Ninth Circuit’s decision in Local 512, to permit backpay awards to undocumented aliens who remain in the country. The Local 512 majority reasoned that Sure-Tan ’s holding applies only to undocumented aliens who have departed from the United States. It concluded that because the undocumented alien employees of the company had remained in the country, their wage loss could be “easily and accurately calculated.” 795 F.2d at 717. The majority also reasoned that a contrary result would encourage employers to continue to violate the NLRA. It stated: “[i]f employers know that they will incur no backpay liability, they will have less incentive to obey the NLRA.” Id. at 719. This is same argument made by Justice Brennan in his dissenting opinion, which took issue with the Sure-Tan majority’s remedial holding. 467 U.S. at 912, 104 S.Ct. at 2819.
The Local 512 court also insisted that its holding was consistent with two major goals of the INA, which were identified in Sure-Tan. The majority reasoned that allowing undocumented aliens to receive backpay would help prevent the loss of American workers’ jobs and would help protect American workers’ wage rates and working conditions because it would make hiring undocumented aliens less attractive to employers. 795 F.2d at 720. The majority insisted that employers would have less incentive to hire undocumented aliens if they knew that the Board would require them to pay backpay. Id. Again, we note that this argument, contained in Justice Brennan’s dissenting opinion, see 467 U.S. at 912, 104 S.Ct. at 2819, was rejected by the Sure-Tan majority. See 467 U.S. at 904 n. 13, 104 S.Ct. at 2815 n. 13. See also Local 512, 795 F.2d at 724-25 (Beezer, J., dissenting in part). We find unpersuasive the attempt to recast the plain language of the Sure-Tan decision.
The Board’s final argument is that the legislative history of IRCA supports its interpretation of the Sure-Tan decision. The ALJ concluded that, in enacting IRCA, Congress intended to give the Board broad discretion in deciding whether to award reinstatement and backpay to undocumented aliens. In reaching that conclusion, the AU quoted from the House Judiciary Committee Report adopting the bill that eventually became enacted as IRCA. The Committee Report states:
It is not the intention of the Committee that the employer sanctions provisions of the bill be used to undermine or diminish in any way labor protections in existing law, or to limit the powers of federal or state labor relations boards, labor standards agencies, or labor arbitrators to remedy unfair practices committed against undocumented employees for exercising their rights before such agencies or for engaging in activities protected by existing law. In particular, the employer sanctions provisions are not intended to limit in any way the scope of the term ‘employee’ in Section 2(3) of the [NLRA], as amended, or of the rights and protections stated in Sections 7 and 8 of that Act. As the Supreme Court observed in [Sure-Tan ], application of the NLRA ‘helps to assure that the wages and employment conditions of lawful residents are not adversely affected by the competition of illegal alien employees who are not subject to the standard terms of employment.’ 467 U.S. at 893 [, 104 S.Ct. at 2809].
H.R. Rep. No. 1,000, 99th Cong.2d Sess. 58 (1986) (emphasis added); see also H.Rep. No. 99-682 (III), 99th Cong.2d Sess., at 8-9 (Report of House Education and Labor Committee).
We agree with the Company that the Committee Report merely endorses the first holding of Sure-Tan, that undocumented aliens are employees within the meaning of the NLRA. The Committee did not disapprove of the part of the decision holding that undocumented aliens are entitled to receive backpay only for those periods when they are lawfully entitled to be present and employed in the United States. The Committee’s preference that existing law be preserved can be read as support for the remedial holding of Sure-Tan. We do not believe that Congress, in passing IRCA, expressed its dissatisfaction with Sure-Tan’s remedial holding. Indeed, in INS v. National Center For Immigrants’ Rights, — U.S. -, - n. 8, 112 S.Ct. 551, 558 n. 8, 116 L.Ed.2d 546 (1991), the court noted that IRCA reinforced the policy of the INA to preserve employment for American workers.
|
5920030-10950 | MURPHY, Circuit Judge.
David Miller brought this action against the City of St. Paul, its police chief, and police officer Patricia Englund, alleging violations of his First Amendment right to engage in religious speech at the 2014 Irish Fair. Miller also sought a preliminary injunction to enjoin similar violations at future Irish Fairs. The district court denied Miller’s preliminary injunction motion and dismissed his complaint after concluding that he lacked standing to pursue his claims. Miller appeals. We affirm in part and reverse and remand in part.
I.
The Irish Fair of Minnesota (IFM) is a private nonprofit organization which organizes the annual Irish Fair, a three day event celebrating Irish culture. The fair takes place at Harriet Island Regional Park (Harriet Island), a public park in St. Paul, Minnesota. IFM obtains permits from the city allowing it to host the fair, which is open to the public free of charge. Harriet Island remains a public park during the fair.
The city’s administrative regulations governing permits for the use of Harriet Island require a security plan to be submitted sixty days before an event. St. Paul patrol commander Patricia Englund drafted the security plan for the 2014 Irish Fair, which was implemented by off duty St. Paul police officers. The plan contained a list of “prohibited items” which included signs. In addition, IFM’s policies and procedures limited solicitation by vendors and prohibited the distribution of “merchandise, promotional items or materials” at the fair.
Miller is an evangelical Christian who planned to share his religious views at the 2014 Irish Fair by carrying signs, distributing literature, open air preaching, and initiating conversations with passersby. On August 9, 2014 he and a few friends met outside the fair entrance, carrying signs and planning to express their shared religious views. Before they entered the fairgrounds, however, they were approached by an unidentified police officer and commander Englund. One of Miller’s friends videotaped the following exchange.
Englund told the group that Harriet Island was IFM’s property during the fair, that its permit allowed it to “make the rules for the property,” and that their “signage, all that stuff, it’s just not welcome.” Miller asked her whether she would arrest him if he displayed a banner on the fairgrounds, and she responded that she would confiscate it until after the fair. He then asked Englund if she would arrest him if he distributed religious literature, and she told him that she would “consult with [IFM] to see what their preference was.” He also asked if Englund would arrest him if he started to open air preach, and she replied that she had not yet decided. Miller told Englund that her position “wouldn’t hold up in court,” and the group left to discuss how to proceed. They eventually departed without attempting to enter the fairgrounds.
Miller’s attorney later wrote a letter to St. Paul officials, asserting that Englund had violated Miller’s First Amendment rights and demanding nominal damages, attorney fees, and written assurance that the city would not prohibit Miller’s religious expression at future Irish Fairs. In a written response, the city denied any wrongdoing, but it acknowledged that Miller could engage in protected speech and confirmed that it would ensure compliance with the law during future fairs. Not satisfied with this response, Miller filed a § 1983 suit against the city, its police chief, and Englund in both her official and individual capacities. His complaint alleged violations of his First Amendment and due process rights and requested nominal damages, attorney fees, and declaratory and injunctive relief. Specifically, Miller alleged that based on his conversation with Englund, he had concluded that IFM’s permit allowed it to exercise “proprietary control” over speech at the 2014 Irish Fair, thereby facilitating an unconstitutional “heckler’s veto” barring his religious speech. He later filed a motion for a preliminary injunction in the district court to enjoin similar abridgements of his religious expression at future Irish Fairs.
After a hearing, the district court denied the preliminary injunction and dismissed Miller’s complaint for lack of jurisdiction, concluding that he lacked standing to pursue his claims. The court reasoned that Miller’s expectations about how Englund may have responded to his religious speech, which were based on her answers to “hypothetical questions,” did not demonstrate a specific present harm because she never took any “overt action” to prevent his religious expression. The court further concluded that Miller had not shown a threat of specific future harm at subsequent Irish Fairs, emphasizing that St. Paul had assured him that he could engage in protected speech at those fairs. Miller appeals.
II.
“We review a decision dismissing a complaint for lack of standing de novo, construing the allegations of the complaint, and the reasonable inferences drawn therefrom, most favorably to the plaintiff.” Glickert v. Loop Trolley Transp. Dev. Dist., 792 F.3d 876, 880 (8th Cir.2015) (internal quotation marks omitted). To demonstrate standing, a party must allege an “injury in fact, causation, and redressability.” Mo. Roundtable for Life v. Carnahan, 676 F.3d 665, 672 (8th Cir.2012). A party may allege an-injury in fact “by showing that its First Amendment rights have been chilled by harm to reputation or threat of criminal prosecution.” Id. at 673. That party “must present more than allegations of a subjective chill,” however, and must allege a “specific present objective harm or a threat of specific future harm” to establish standing. Eckles v. City of Corydon, 341 F.3d 762, 767 (8th Cir.2003) (alterations and internal quotation marks omitted).
A.
We first address whether Miller has standing to pursue his claims against the city, its police chief, and commander Englund in her official capacity based on Englund’s alleged conduct at the 2014 Irish Fair. “A plaintiff who sues public employees in their official ... capacities sues only the public employer and therefore must establish the municipality’s liability for the alleged conduct.” Kelly v. City of Omaha, Neb., 813 F.3d 1070, 1075 (8th Cir.2016). Municipal liability under § 1983 cannot be based on respondeat superior, but instead must arise from “action pursuant to official municipal policy of some nature.” Monell v. Dep’t of Soc. Servs. of New York, 436 U.S. 658, 691, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). We conclude that Miller has not “asserted facts that affirmatively and plausibly suggest 'that [he was] indeed subject to a credible threat of prosecution” under St. Paul’s policies for engaging in religious expression, as he must to establish standing. Zanders v. Swanson, 573 F.3d 591, 594 (8th Cir.2009).
Miller’s complaint alleges that St. Paul’s permitting scheme gave IFM “proprietary control” over speech at the 2014 Irish Fair, subjecting him to criminal prosecution if he engaged in religious expression and chilling his exercise of First Amendment rights. We have found nothing in the record, however, showing that the IFM’s permits or the city’s permitting regulations would subject Miller to prosecution for engaging in his desired religious expression. See Zanders, 573 F.3d at 594. Those regulations neither give permit holders control over speech content nor threaten criminal penalties against those engaging in religious speech in permitted areas. Cf. McGlone v. Bell, 681 F.3d 718, 730-31 (6th Cir.2012). Indeed, the city and officers acknowledged below that En-glund’s statements to Miller did “not accurately reflect the City’s laws or policies.” Her actions thus could “not confer standing on Mr. [Miller] to challenge whether the [permitting policies] violate the First Amendment ... because he has not shown the requisite intention to bring himself within the scope of’ any conduct proscribed by those policies. Travis v. Park City Police Dep’t, 277 Fed.App.x 829, 832 (10th Cir.2008) (unpublished).
On appeal, Miller apparently abandons his claims regarding the city’s permitting policies and instead argues that the fair security plan prohibiting signs and IFM’s policy barring literature distribution violated his First Amendment rights. Neither policy was mentioned in his complaint, however, and neither appears to represent an “official municipal policy” of the city. Monell, 436 U.S. at 691, 98 S.Ct. 2018. While Miller points out that commander Englund was responsible for drafting the security plan — which he asserts incorporates IFM’s policy — he has not alleged any facts showing that she was “responsible for establishing final government policy respecting such activity,” a prerequisite to municipal liability under § 1983. Pembaur v. City of Cincinnati, 475 U.S. 469, 483, 106 S.Ct. 1292, 89 L.Ed.2d 452 (1986). Nor has he alleged any “facts showing that policymaking officials had notice of or authorized [Englund]’s conduct” which could give rise to municipal liability. Kelly, 813 F.3d at 1076. We therefore affirm the dismissal of his claims against the city, its police chief, and Englund in her official capacity.
We also conclude, however, that Miller has standing to pursue his claim against commander Englund in her individual capacity. Englund argues that she did not subject Miller to an objective threat of harm because there was no city policy restricting his expression and she did not take any “overt enforcement action” against him. We disagree. While there was no official policy restricting Miller’s expression, § 1983 imposes liability on an official who “oversteps [her] authority and misuses power.” Magee v. Trustees of Hamline Univ., Minn., 747 F.3d 532, 535 (8th Cir.2014). Further, we do not believe that Englund had to take any actions more “overt” than those alleged for Miller to bring a First Amendment claim against her. Englund allegedly threatened to confiscate any banners Miller displayed, creating a concrete threat of injury regardless of whether she also threatened to arrest him. See Eckles, 341 F.3d at 768. Miller therefore has standing to pursue his claim against commander Englund in her individual capacity, and we reverse and remand for further proceedings.
B.
We finally address whether Miller has standing to seek an injunction prohibiting restrictions on his religious expression at future Irish Fairs. Our court has recognized that “a threatened injury must be certainly impending to constitute injury in fact,” and that “allegations of future injury must be particular and concrete.” Johnson v. Missouri, 142 F.3d 1087, 1089 (8th Cir.1998) (alterations and internal quotation marks omitted). Here, Miller contends that St. Paul’s refusal to acknowledge any wrongdoing during the 2014 Irish Fair shows that it maintains an unconstitutional policy that it may invoke to violate his rights in the future. We disagree.
|
3742379-8150 | DELEHANT, District Judge.
The plaintiff, a citizen of Colorado, instituted this action against the defendant, Con Parsons, a citizen of Nebraska, and resident of Sioux County, within this division of this district, and the defendant, Charles Parsons, a citizen of Wyoming. Process was served upon both defendants within the territorial area of this division.
The complaint is in three counts distinctly separated but not numbered. First, the plaintiff claims judgment against the defendant, Con Parsons, for damage resulting from the latter’s averred breach of an alleged written contract in his behalf signed by the defendant, Charles Parsons, as his agent, for the sale and delivery to the plaintiff of from 130 to 135 three year old steers for a specified price per hundred weight. The breach allegedly resulted from the ostensible seller’s sale and delivery of the steers to another party, prior to the allowable delivery dates under the pleaded contract, and his consequent disability thereafter to perform the contract in accordance with its terms. In two separate alternative claims, both made against the defendant, Charles Parsons, in the event of the successful maintenance by the defendant, Con Parsons, of a claim made by him that Charles Parsons was without authority to contract with the plaintiff in behalf of Con Parsons, the plaintiff seeks judgment for his damages against the defendant, Charles Parsons, first for breach of an alleged warranty by the defendant, Charles Parsons, touching his authority to sign the contract as Con Parson’s agent, and secondly for deceit and misrepresentation touching the same subject matter.
The defendant, Con Parsons, has not answered, but has filed a motion to dismiss the action. Two of its assigned grounds (a) a defect of parties plaintiff, and (b) a defect of parties defendant, have not been urged upon the court and are manifestly without point or pertinence. And see also Federal Rules of Civil Procedure, rule 21, 28 U.S.C.A. following section 723c. But the moving defendant has supported his assignment of his other grounds; first, the failure of the complaint to state a claim upon which relief may be granted against him; and, secondly, the absence of a joint liability as between the defendants on the several causes of action, in that no claim is asserted against the defendant, Charles Parsons, under the first count, or against the defendant, Con Parsons, under either of the other two counts.
The moving defendant supports his positions both upon substantive law and in respect of pleading by the statutes of Nebraska, and certain decisions of its Supreme Court. So far as his argument is addressed to the issue of the substantive law administrable in the case, his authority is from the correct source. The contract declared upon appears to have been a Nebraska instrument whose performance was to have occurred in this state. The facts necessary to warrant a recovery under it are, therefore, to be determined by the laws of Nebraska, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188. But this action was instituted and is pending in this court. The procedure to be followed throughout its course, therefore, is not governed or affected by Nebraska’s procedural statutes or judicial usages, but is controlled by the Federal Rules of Civil Procedure, supra.
By Rule 1, it is provided that, “these rules govern the procedure in the district courts of the United States in all suits of a civil nature, whether cognizable as cases at law or in equity,” with certain presently inapplicable exceptions. Ettman v. Federal Life Ins. Co., 8 Cir., 137 F.2d 121; Swift & Co. v. Young, 4 Cir., 107 F.2d 170; Gipps Brewing Corporation v. Central Mfrs’ Mut. Ins. Co., 7 Cir., 147 F.2d 6; Newman v. Clayton F. Summy Co., 2 Cir., 133 F.2d 465; Kravas v. Great Atlantic & Pacific Tea Co., D.C.Pa., 28 F.Supp. 66; De Rosmo v. Feeney, D.C.N.Y., 38 F.Supp. 834; Roth v. Great Atlantic & Pacific Tea Co., D.C.Ohio, 2 F.R.D. 182; Kellman v. Stoltz, D.C.Iowa, 1 F.R.D. 726. And that rule applies especially to pleading. Ettman v. Federal Life Ins. Co., 8 Cir., supra, and Bohn v. American Export Lines, D.C.N.Y., 42 F.Supp. 228.
In large part, the motion to dismiss appears to rest upon the contention that, although the complaint against the defendant, Con Parsons, is based upon a written contract ostensibly made in his name by his codefendant as his agent for the sale of live stock of a value largely exceeding $500, See Section 69-404, R.S.Neb.1943, it is not expressly alleged that the agent was authorized in writing by the principal to make the contract in his behalf. See section 36-409, R.S.Neb.1943. To that extent it attempts to challenge the complaint’s supposed omission to state in detail a factual history negativing the defense of the Statute of Frauds. Whether such an omission in a petition upon the same state of facts filed in a state court of Nebraska would render the petition vulnerable to a general demurrer need not be decided or considered here. It may be observed that the present complaint does allege that in making the contract, Charles Parsons “was the authorized and acting agent of defendant, Con Parsons and * * * was acting for and on his behalf.” Therefore, the authority of the agent is affirmatively alleged, though precisely how it was conferred is not made to appear. At least, the absence of written authority is not affirmatively disclosed upon the face of the complaint. So, the court may not, at this point in the pleading, conclude that no written authority to the agent can possibly be proved within • the framework of the complaint. And that suffices to support the complaint against a motion to dismiss, based upon the suggested point.
It is a mistake to assume that the abolition of the demurrer by Rule 7(c) is a “tongue in chéek” proclamation, or that the demurrer persists in federal procedure under the label of the motion to dismiss. The two devices are quite different. In the state practices which retain the demurrer “for failure to allege facts sufficient to constitute a cause of action”, the petition must affirmatively allege, item by item, the facts whose proof is requisite to support relief; failing in which it is demurrable. But upon a motion to dismiss in the federal practice under Rule 12(b) (6) “The complaint should be construed in the light most favorable to the plaintiff with all doubts resolved in his favor”; Cool v. International Shoe Co., 8 Cir., 142 F.2d 318, 320; and the motion is not to be granted unless “it appears to a certainty that the plaintiff would be entitled to no relief under any state of facts which could be proved in support of the claim asserted by him.” Musteen v. Johnson, 8 Cir., 133 F.2d 106, 108. See also Cohen v. United States, 8 Cir., 129 F.2d 733; Leimer v. State Mut. Life Assur. Co., 8 Cir., 108 F.2d 302; Sparks v. England, 8 Cir., 113 F.2d 579; Louisiana Farmers Protective Union v. Great Atlantic & Pacific Tea Co., 8 Cir., 131 F.2d 419; United States v. Association of American Railroads, D.C.Neb., 4 F.R.D. 510, and Schwartzman v. United Air Lines Transp. Corporation, D.C.Neb., 6 F.R.D. 517.
In the light of the rule just stated, the court is compelled to deny the motion to dismiss, to the extent that it rests upon the asserted failure of the plaintiff to allege explicitly the existence of a written authorization from the moving defendant to his alleged agent. Such a writing would unquestionably be provable under the allegations actually made in the complaint. Besides, by Rule 8(c), the statute of frauds is expressly included among the affirmative defenses which “in pleading to a preceding pleading, a party shall set forth affirmatively.” Zeligson v. Hartman-Blair Inc., 10 Cir., 135 F.2d 874; Piest v. Tide Water Oil Co., D.C.N.Y., 27 F.Supp. 1020; Dirk v. Seaboard Oil Co., D.C.Cal., 1 F.R.D. 598. Whether it may be resorted to in support of a motion to dismiss where its availability is disclosed in a complaint need not be declared now. But it certainly may not be so employed where its applicability is not made to appear in the challenged pleading.
|
655752-27690 | FLETCHER, Circuit Judge:
Robert Michenfelder, a maximum security prisoner, appeals an adverse judgment in his § 1983 action against Nevada state prison officials for conducting strip searches and otherwise exposing unclothed male inmates to view by female guards in the course of their duties in violation of the fourth and eighth amendments. The district court found the searches reasonable, given the prison’s legitimate security concerns and female prison employees’ rights to equal employment opportunities. It also found that the prison’s taser gun policy did not violate the Eighth Amendment. We affirm.
BACKGROUND
When this action commenced Michenfelder was an inmate in the Nevada State Prison’s (NSP) Unit 7, the maximum security unit for the state’s 40 most dangerous prisoners. Defendant Sumner was then warden of the NSP and is now Director of the Nevada Department of Prisons. Other named defendants are correctional officers and prison administrators at NSP.
Strip searches are conducted every time a Unit Seven inmate leaves or returns to the unit, as well as after movement under escort within the unit, such as for sick call, recreation, disciplinary hearings, and visits. The strip searches complained of here include visual body cavity searches, but not physical contact searches. They are conducted at the end of the tier’s hallway, in front of a barred gate behind which the guards conducting the searches stand (in an area known as the “sally port”). The searches are visible to the tier’s other prisoners whose cell doors open onto the corridor, and, through a small window, to guards controlling the cell doors from the “lock box” located in the main corridor outside the tier. The searches also can be observed indirectly by officers in the “control bubble”, a room with video screens for monitoring activity on the tiers by means of video cameras located at either end of the hallways. Female officers are permitted to work in the control bubble, at the lock box, and any other position available to a correctional officer (including shower duty). They do not conduct strip searches except in severe emergencies.
Prison regulations allow officers at NSP to carry “taser” guns. The taser operates by firing a tiny dart, attached to the gun with wires, into the prisoner, and by administering a low amperage, high voltage electrical shock which temporarily incapacitates the prisoner. See People v. Heffner, 70 Cal.App.3d 643, 647, 139 Cal.Rptr. 45, 46 (1977). NSP officers have threatened and in some instances actually fired tasers to enforce compliance with the strip searches and have also used the tasers in other disciplinary situations in the prison.
PROCEEDINGS BELOW
Michenfelder commenced this § 1983 action on July 5,1984. The complaint seeks a declaratory judgment that the frequent searches, conducted where other inmates and female correctional officers could observe him naked and subject to threatened use of the taser, violated Michenfelder’s constitutional rights. He simultaneously filed a separate motion for a preliminary injunction prohibiting prison officials from strip searching him in view of female officers and and other inmates, from conducting searches before and after transport to certain activities within Unit Seven when he would be under escort at all times, and from using the taser at any time.
The magistrate consolidated the hearing of the preliminary injunction motion with the trial of the action by minute order dated August 27, 1984. Over Michenfelder’s objections the district court affirmed the consolidation by order filed September 19, 1984. The trial was held on October 3 and October 24, 1984. On March 29, 1985 the magistrate recommended denial of the injunction and grant of judgment for the defendants. She found that the location and frequency of the searches was a reasonable response to a legitimate security interest within the prison, and that using female correctional officers for tasks that offer occasional views of nude prisoners is a good faith attempt to comply with the officers’ equal employment opportunities. The magistrate further found that use of tasers was a reasonable method of ensuring compliance with the strip search policy, and thus was not cruel and unusual punishment. See Michenfelder v. Sumner, 624 F.Supp. 457, 459-60 (D.Nev.1985). Over Michenfelder’s timely objections, the district court accepted the magistrate’s report and recommendations in their entirety. Id. at 464. This appeal followed. We have jurisdiction under 28 U.S.C. § 1291.
STANDARD OF REVIEW
We review the trial court’s findings of fact for clear error. United States v. McConney, 728 F.2d 1195, 1200-01 (9th Cir.1984). We will affirm the trial court’s determinations unless we are left with a definite and firm conviction that a mistake has been committed. Pullman-Standard v. Swint, 456 U.S. 273, 284-85 n. 14, 102 S.Ct. 1781, 1788 n. 14, 72 L.Ed.2d 66 (1982). Conclusions of law are reviewed de novo, McConney, 728 F.2d at 1201, as are most mixed questions of law and fact, especially those implicating constitutional rights. Id. at 1203.
DISCUSSION
“[Cjonvicted prisoners do not forfeit all constitutional protections by reason of their conviction and confinement in prison.” Bell v. Wolfish, 441 U.S. 520, 545, 99 S.Ct. 1861, 1877, 60 L.Ed.2d 447 (1979). However, “[t]he limitations on the exercise of constitutional rights arise both from the fact of incarceration and from valid peno-logical objectives — including deterrence of crime, rehabilitation of prisoners, and institutional security.” O’Lone v. Estate of Shabazz, 482 U.S. 342, 107 S.Ct. 2400, 2404, 96 L.Ed.2d 282 (1987). Recently, the Supreme Court emphatically set forth the standard for reviewing alleged infringements of prisoners’ constitutional rights. In Turner v. Safley, 482 U.S. 78, 107 S.Ct. 2254, 2260-61, 96 L.Ed.2d 64 (1987), the Court rejected a standard of heightened scrutiny in favor of the following rational relationship test: “when a prison regulation impinges on inmates’ constitutional rights, the regulation is valid if it is reasonably related to legitimate penological interests.” See also O’Lone, 107 S.Ct. at 2404. The Court provided four factors to guide reviewing courts in applying this test: 1) the existence of a valid, rational connection between the prison regulation and the legitimate governmental interest put forward to justify it; 2) the existence of alternative means of exercising the right that remain open to prison inmates; 3) the impact that accommodation of the asserted constitutional right will have on guards and other inmates, and on the allocation of prison resources generally; and 4) the absence of ready alternatives as evidence of the reasonableness of the regulation (the presence of obvious easy alternatives may evidence the opposite). Turner 107 S.Ct. at 2262.
In applying the Turner v. Safley test we must accord great deference to prison officials’ assessments of their interests: “Prison administration is ... a task that has been committed to the responsibility of [the legislative and executive branches], and separation of powers concerns counsel a policy of judicial restraint. Where a state penal system is involved, federal courts have, as we indicated in [Procunier v.] Martinez [416 U.S. 396, 94 S.Ct. 1800, 40 L.Ed.2d 224 (1974)], additional reason to accord deference to the appropriate prison authorities.” 107 S.Ct. at 2259. The Court reasoned, “In our view, such a standard is necessary if ‘prison administrators ..., and not the courts, [are] to make the difficult judgments concerning institutional operations.’ ” Id. at 2262 (quoting Jones v. North Carolina Prisoners’ Union, 433 U.S. 119, 128, 97 S.Ct. 2532, 2539, 53 L.Ed.2d 629 (1977)).
I. FREQUENCY AND MANNER OF CONDUCTING STRIP SEARCHES
Michenfelder contends that NSP’s strip search policy, which calls for visual body cavity searches whenever an inmate leaves or returns to the unit, as well as when he travels under escort within the unit — including when leaving to or returning from sick call, recreation, disciplinary hearings, and visits — is constitutionally infirm. The district court deferred to the prison officials’ judgment regarding the searches’ necessity, finding Michenfelder failed to show the searches were an exaggerated or excessive means of providing needed security. Michenfelder, 624 F.Supp. at 462.
The fourth amendment guarantees “[t]he right of the people to be secure ... against unreasonable searches and seizures.” This right extends to incarcerated prisoners; however, the reasonableness of a particular search is determined by reference to the prison context. In Bell v. Wolfish, 441 U.S. 520, 558, 99 S.Ct. 1861, 1884, 60 L.Ed.2d 447 (1979), the Supreme Court set forth a balancing test for determining a search’s reasonableness:
“The test of reasonableness under the Fourth Amendment is not capable of precise definition or mechanical application. In each case it requires a balancing of the need for the particular search against the invasion of personal rights that the search entails. Courts must consider the scope of the particular intrusion, the manner in which it is conducted, the justification for initiating it, and the place in which it is conducted.”
Id. at 559, 99 S.Ct. at 1884 (emphasis added). The Court obviously recognized that not all strip search procedures will be reasonable; some could be excessive, vindictive, harassing, or unrelated to any legitimate penological interest. Thus our task is to consider carefully the reasonableness of NSP’s strip search policies in Unit Seven.
Scope and manner. The searches are conducted on convicted prisoners in NSP’s most restrictive unit, and are visual only, involving no touching. See Rickman v. Avaniti, 854 F.2d 327, 328 (9th Cir.1988); contrast with Bonitz v. Fair, 804 F.2d 164, 172-73 (1st Cir.1986) (contact body cavity searches of female inmates conducted by police officers, without medical personnel, in non-hygienic manner and in presence of male officers not reasonable). Visual body cavity searches conducted after contact visits as a means of preventing prisoners’ possession of weapons and contraband, even absent probable cause, have been found reasonable by the Supreme Court. Bell v. Wolfish, 441 U.S. 520, 558-60, 99 S.Ct. 1861, 1884-85, 60 L.Ed.2d 447 (1979). While the Court has not yet ruled on the constitutionality of routine searches such as are conducted in Unit Seven, we and other circuit courts have found them reasonable. In Rickman v. Avaniti, 854 F.2d 327, we approved strip searches that were conducted every time prisoners in administrative segregation left their cells for any purpose. As here, Rickman’s custody status was the most restrictive available. Elevated security precautions are justified for prisoners placed in maximum security settings usually because of a history of maladaptive behavior within prison. See also Hay v. Waldron, 834 F.2d 481, 486 (5th Cir.1987) (visual body cavity search each time an administrative segregation inmate enters or leaves his cell reasonable); Goff v. Nix, 803 F.2d 358, 364-65 (8th Cir.1986) (strip searches and visual body cavity searches every time an inmate leaves the maximum security unit reasonable), cert. denied — U.S. -, 108 S.Ct. 115, 98 L.Ed.2d 73 (1987); Campbell v. Miller, 787 F.2d 217, 228 (7th Cir.) (routine visual body cavity searches before and after library visits reasonable), cert. denied 479 U.S. 1019, 107 S.Ct. 673, 93 L.Ed.2d 724 (1986); Arruda v. Fair, 710 F.2d 886 (1st Cir.1983) (upheld routine visual body cavity searches of maximum security inmates when leaving or returning from law library, infirmary, and visits).
The frequency of strip searches in Unit Seven appears, from this record, to be very high. Prisoners are searched both coming and leaving their cells, even when traveling only within the unit while under escort and in chains at all times. However, so long as a prisoner is presented with the opportunity to obtain contraband or a weapon while outside of his cell, a visual strip search has a legitimate penological purpose. Turner v. Safley, 107 S.Ct. at 2261. Michenfelder, who bears the burden of showing NSP officials intentionally used exaggerated or excessive means to enforce security, see Soto v. Dickey, 744 F.2d 1260, 1271 (7th Cir.1984); Bell v. Wolfish, 441 U.S. at 561-62, 99 S.Ct. at 1885-86, has failed to demonstrate that the searches at issue here were conducted in the absence of such opportunities.
Justification. The fact that Unit 7 houses the state’s most difficult prisoners gives rise to a legitimate governmental security interest in procedures that might be unreasonable elsewhere. In addition, testimony and physical evidence before the district court substantiated several incidents in which contraband and homemade weapons were confiscated from Unit Seven inmates. Though Shift Lieutenant Koon testified that no strip search in Unit Seven had produced a hidden weapon, he also testified that the policy was “the only thing that has prevented that from happening.”
Place. Michenfelder argues that strip searches should be conducted within the privacy of prisoners’ cells rather than out in the hallway, and says the practice’s irrationality is highlighted by the fact that visual strip searches in other units — and sometimes within Unit Seven — are still conducted through closed cell doors. The district court was persuaded by the State’s position that officers are placed at a “dangerous disadvantage” when required to conduct the search through the solid cell door or enter a cell to enforce compliance, and that alternative sites are unavailable outside the cells that were more private than the hallway. Michenfelder, 624 F.Supp. at 460.
Michenfelder’s argument is not merit-less. In Rickman the fact that visual strip searches are conducted in the inmate’s cell was a factor in determining their reasonableness. 854 F.2d at 328-29. However, Turner v. Safley’s fourth factor — the presence or absence of ready alternatives— must be considered here. It is unfortunate that Unit Seven’s layout appears to present only two alternative locations — the hallway or the prisoner’s cell. NSP guards testified that conducting searches through the food slot in the cell’s solid door was problematic. While we encourage NSP to opt for less public searches when security considerations allow, we will not question its judgment that conditions in Unit Seven reasonably require searches outside the prisoners’ cells in order to protect the safety of the officers conducting them. Furthermore, the third Turner v. Safley factor— impact on prison personnel and the allocation of prison resources generally, 107 S.Ct. at 2262 — also bears consideration. The magistrate considered evidence that conducting searches in cells would require additional officers, as would transporting inmates to less public locations elsewhere in the prison. Remodeling the facility to prevent other inmates from observing the searches through their cell doors could also be costly.
In sum, evidence in the record supports the district court’s finding that NSP’s strip search policy was reasonably related to legitimate penological interests.
II. INFRINGEMENT OF PRISONERS’ PRIVACY RIGHTS
Michenfelder also alleges that the routine strip searches are unconstitutional because female correctional officers and visitors can observe their occurrence. In the same vein, he contests the prison’s practice of sometimes employing female officers for shower duty.
We recognize that incarcerated prisoners retain a limited right to bodily privacy. Shielding one’s unclothed figure from the view of strangers, particularly strangers of the opposite sex is impelled by elementary self-respect and personal dignity. Grummett v. Rushen, 779 F.2d 491, 494 (9th Cir.1985); see also Cumbey v. Meachum, 684 F.2d 712, 714 (10th Cir.1982) (“Although the inmates’ right to privacy must yield to the penal institution’s need to maintain security, it does not vanish altogether.”). Thus we analyze this claim, too, by using Turner v. Safley’s rational relationship test to determine whether NSP’s impingement on inmates’ right to privacy by employing females is “reasonably related to legitimate penological interests.” 107 S.Ct. at 2260-61. We recognize as legitimate both the interest in providing equal employment opportunities and the security interest in deploying available staff effectively. Our circuit’s law respects an incarcerated prisoner’s right to bodily privacy, but has found that assigned positions of female guards that require only infrequent and casual observation, or observation at distance, and that are reasonably related to prison needs are not so degrading as to warrant court interference. Grummett v. Rushen, 779 F.2d at 494-95. See also Bagley v. Watson, 579 F.Supp. 1099, 1103 (D.Or.1983); Smith v. Chrans, 629 F.Supp. 606 (C.D.Ill.1986). In Grummett, prisoners in San Quentin prison challenged the constitutionality of the prison’s search and surveillance activities when performed by members of the opposite gender. There, female officers were assigned to positions from which their observations of nude male prisoners were infrequent and casual, or from a distance. The court found that, given the restricted duties of female officers, the prisoners’ privacy rights were not unreasonably infringed by the prison’s policies and practices.
Therefore, the issue here, therefore, is whether NSP’s female officers regularly or frequently observe unclothed inmates without a legitimate reason for doing so. As in Grummett, female officers at NSP are not routinely present for strip searches. The record fails to show that Officer Jenae Holmes’s alleged presence at a search involving Michenfelder was anything but an isolated incident, nor could the witnesses testify with certainty that she was actually observing the search from her position at the lock box in the main corridor. The record does support the magistrate’s finding that the control bubble’s video monitors would provide at most an indistinct, limited view should female officers, contrary to prison policy, closely watch the searches rather than simply monitor all the screens for unusual activity. Evidence of female officers’ role in shower duty likewise did not establish an inappropriate amount of contact with disrobed prisoners.
The third Turner v. Safley factor has special relevance here. Prohibiting female employees from working in the control bubble, or requiring them to be replaced by males for the duration of strip searches, would displace officers throughout the prison. The prison’s current allocation of responsibilities among male and female employees already represents a reasonable attempt to accommodate prisoners’ privacy concerns consistent with internal security needs and equal employment concerns. See Grummett v. Rushen, 779 F.2d at 496.
With regard to visitors’ opportunities to view the searches on the video monitors, the evidence supports the magistrate’s finding that opaque screens covering the windows of the control bubble prevent visitors and attorneys from discerning anything other than “some movement” on the screens.
III. EIGHTH AMENDMENT CLAIM REGARDING USE OF A TASER GUN
Michenfelder also contends that the prison’s policy of allowing its guards to carry taser guns and to use them to enforce compliance with orders constitutes cruel and unusual punishment in violation of the eighth amendment. This is a question of first impression in our circuit, and, as best we can tell, for other circuits as well.
Michenfelder was threatened with a ta-ser when he refused to submit to a strip search outside his cell upon returning from recreation. Guards informed Michen-felder that the inmate taken inside immediately before him, upon insisting he be strip searched in his cell, was shot twice with the taser before complying. Michenfelder himself, however, was not actually shot with one. The district court found NSP’s use of tasers constitutional. Presented with a slim record regarding the taser’s adverse effects on humans, the court concluded, “It seems safe to assume that the [Nevada State Board of Prison Commissioners] received input from persons with experience and expertise before prescribing the Regulation.” Michenfelder, 624 F.Supp. at 463-64. It also found acceptable the threatened use in this particular instance, but erroneously assumed Michenfelder was threatened for refusing to leave his cell, rather than for requesting to be taken to his cell.
“Whatever rights one may lose at the prison gates, ... the full protections of the eighth amendment most certainly remain in force. The whole point of the amendment is to protect persons convicted of crimes.” Spain v. Procunier, 600 F.2d 189, 193-94 (9th Cir.1979) (citation omitted). Punishments “repugnant to the Eighth Amendment [are those] incompatible with ‘the evolving standards of decency that mark the progress of a maturing society,’ or which ‘involve the unnecessary and wanton infliction of pain.’ ” Estelle v. Gamble, 429 U.S. 97, 102-03, 97 S.Ct. 285, 290, 50 L.Ed.2d 251 (1976) (citations omitted). “Among ‘unnecessary and wanton’ inflictions of pain are those that are ‘totally without penological justification.’ ” Rhodes v. Chapman, 452 U.S. 337, 346, 101 S.Ct. 2392, 2399, 69 L.Ed.2d 59 (1981) (citations omitted).
The Supreme Court has said that administering electric shocks to prisoners as punishment for misconduct was “unusual”. Hutto v. Finney, 437 U.S. 678, 682, 98 S.Ct. 2565, 2569, 57 L.Ed.2d 522 (1978). There, guards in an Arkansas prison used the “Tucker telephone”, a hand-cranked device, to administer electrical shocks to various sensitive parts of an inmate’s body. Id. From the record before us, NSP’s use of tasers is distinguishable. The taser was used to enforce compliance with a search that had a reasonable security purpose, not as punishment. The legitimate intended result of a shooting is incapacitation of a dangerous person, not the infliction of pain.
In Spain v. Procunier, 600 F.2d 189, in which we found that limited use of a demonstrably dangerous and painful substance, tear gas, did not violate the eighth amendment when used to contain disturbances that threatened an equal or greater harm. Id. at 195. Implicit in the court’s holding is the requirement that the instrumentality not be used for punishment and be used in furtherance of a legitimate prison interest only when absolutely necessary:
[U]se of the substance in small amounts may be a necessary prison technique if a prisoner refuses after adequate warning to move from a cell or upon other provocation presenting a reasonable possibility that slight force will be required____ The infliction of pain and the danger of serious bodily harm may be necessary if there is a threat of an equal or greater harm to others ...
Id. at 195.
Nevada’s Department of Prison Regulation 405 specifies that tasers are for controlling potentially dangerous situations, not for punishment: “When situations arise, such as an inmate who refuses to leave his cell, in which physical handling is inadequate and in which the use of batons would be inappropriate, the use of tasers or stun guns may be employed.” NSP authorities believe the taser is the preferred method for controlling prisoners because it is the “least confrontational” when compared to the use of physical restraint, billy clubs, mace, or stun guns. . By disabling the inmate, it prevents further violence.
Apparently, long-term effects of tasers are currently unknown. While the record regarding the risk of tasers is sketchy at best, Michenfelder has not cast doubt on the State’s evidence of safe use and low risk of long term adverse effects. The evidence before the district court included the manufacturer’s literature regarding testing on animals, which the court credited. Also, when contrasted to alternative methods for physically controlling inmates, some of which can have serious after effects, the taser compared favorably. At trial the only evidence of the taser’s harmful effects was anecdotal. Michenfelder’s witnesses said they felt only nausea, slight headaches, and “long-term anger.” No one has been hospitalized at NSP as a result of a taser shot. Though Michenfelder argues that the court should have postponed trial on the merits so he could line up evidence of long term effects, and though such an endeavor might have produced useful results, Michenfelder’s failure to pursue evidence diligently before and during trial precludes him from claiming prejudicial error. We do not lightly find abuses of discretion in decisions to limit discovery or to consolidate hearings. See Section IV.A., infra. Our affirmance of the district court is not, however, to be taken as holding that use of a device whose long-term effects are unknown would never violate the eighth amendment, nor that research could not uncover evidence of adverse long-term effects that would call into question the use of tasers. We simply find that Michenfelder has failed to meet his burden. See infra note 3.
A finding that the taser gun is not per se unconstitutional would not validate its unrestricted use. “[T]he appropriateness of the use must be determined by the facts and circumstances of the case.” Soto v. Dickey, 744 F.2d at 1270. A legitimate prison policy of carrying tasers to enforce discipline and security would not warrant their use when unnecessary or “for the sole purpose of punishment or the infliction of pain.” Id. at 1270. Overall, the evidence does not establish “unwarranted use of this painful and dangerous [device] as a matter of practice.” See Spain v. Procunier, 600 F.2d at 195. With regard to the incident involving Michenfelder, the legitimate penological purpose of strip searches — to discover hidden weapons and contraband — justifies using force necessary to induce compliance by difficult inmates. Employing the alternative suggested by Michenfelder — allowing prisoners who refused to be strip searched to be restrained, taken to their cells and searched there — could have a ripple effect throughout the prison, necessitating the use of additional prison staff if other prisoners joined in the passive resistance. Furthermore, the evidence in this case does not support finding an unconstitutional use of the taser gun against Michenfelder himself, who has complained only of its threatened use in the course of a strip search, nor does it support a finding that the taser’s use violated state prison regulations. Evidence adduced at trial that the taser was fired at others, was not sufficient to establish that Michenfelder would, himself, be a target in unwarranted circumstances.
IV. ALLEGED PROCEDURAL VIOLATIONS
Michenfelder’s brief on appeal raises several procedural issues, including the magistrate’s limitation of pretrial discovery of prison procedures and the warden’s schedule, consolidation of the preliminary injunction hearing with the trial on the merits, failure to appoint lay counsel, inadequate access to library facilities, and the magistrate’s failure to view personally the prison setup. The State, on its part, has moved to strike portions of Michenfelder’s brief on appeal. We have carefully considered each contention in turn and find them meritless; only the consolidation issue and motion to strike warrant elaboration.
A. Consolidation of Hearing on Preliminary Injunction and Trial on the Merits
The magistrate consolidated the hearing on Michenfelder’s preliminary injunction with the trial on the merits, as permitted by Fed.R.Civ.P. 65(a)(2). The district court approved the order.
|
12028443-18549 | WOLLMAN, Circuit Judge.
A jury convicted Kenneth A. Possick of one count of conspiracy to possess with intent to distribute cocaine, in violation of 21 U.S.C. § 846 (1986); three counts of use of a communication facility in committing, causing, or facilitating a conspiracy, in violation of 21 U.S.C. § 843(b) and 18 U.S.C. § 2; two counts of interstate travel in aid of racketeering, in violation of 18 U.S.C. §§ 1952, 2; one count of distribution of cocaine, in violation of 21 U.S.C. § 841(a)(1) and 18 U.S.C. § 2; and one count of conducting a continuing criminal enterprise (CCE), in violation of 21 U.S.C. § 848. In addition, Possick was found guilty of one count of using or intending to use his home in Florida to facilitate the commission of a criminal offense, in violation of 21 U.S.C. § 853. The district court sentenced Pos-sick to terms of imprisonment ranging from four to fifteen years on each count save the CCE count, all to run concurrently, with a sentence of twenty years’ imprisonment without parole imposed on the CCE count. The jury also found that Possick’s house in Florida was subject to forfeiture, and the district court so ordered.
The evidence at trial showed that from late 1984 through 1985, Possick, a Florida resident, distributed large quantities of cocaine, primarily in St. Louis, Missouri. Possick arranged for several individuals to transport cocaine to St. Louis for delivery to various buyers. Possick ordinarily fronted or consigned the cocaine to these buyers. After the buyers sold the cocaine in the St. Louis area, they either sent pay ment to Possick pursuant to his directions, or they were met by someone Possick sent to collect. Although Possick did visit St. Louis to oversee his business, he conducted the majority of his transactions over the phone.
On appeal, Possick raises the following contentions: (1) that the evidence was insufficient to establish the supervisory or managerial element of a CCE violation, (2) that the district court erred in refusing to sever the CCE count, (3) that the district court erroneously allowed the introduction of several charts into evidence, (4) that the government made improper remarks during its closing arguments, (5) that the jury did not receive the appropriate guidance on the forfeiture count, and (6) that the conviction for both conspiracy and CCE cannot stand. We affirm the district court in all respects save the simultaneous convictions for conspiracy and CCE. We remand for the sole purpose of allowing the district court to vacate the conspiracy conviction. The convictions on all the other counts are affirmed, and Possick’s sentence remains unaffected.
I. Sufficiency of the Evidence for the CCE Conviction
We first note that our review of a jury verdict is limited to determining whether “any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979) (emphasis retained). “It is not for us to weigh the evidence or to determine the credibility of witnesses. The verdict of a jury must be sustained if there is substantial evidence, taking the view most favorable to the Government, to support it.” Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942); see United States v. Wajda, 810 F.2d 754, 761 (8th Cir.), cert. denied, — U.S. -, 107 S.Ct. 1981, 95 L.Ed.2d 821 (1987).
To prove a CCE violation, the government must establish four elements: (1) a felony violation of the federal narcotics laws, (2) as part of a continuing series of violations, (3) in concert with five or more persons for whom the defendant “occupies a position of organizer, a supervisory position, or any other position of management,” and (4) from which the defendant derives substantial income or resources. 21 U.S.C. § 848(d); Garrett v. United States, 471 U.S. 773, 781, 105 S.Ct. 2407, 2413, 85 L.Ed.2d 764 (1985); United States v. Tarvers, 833 F.2d 1068, 1074 (1st Cir.1987). Possick claims that there was insufficient evidence for the jury to find that he organized, supervised, or managed five or more persons in conducting his drug business. He does not dispute the existence of the other CCE elements.
The basic outlines of the disputed management element have been liberally construed. See United States v. Maull, 806 F.2d 1340, 1343 (8th Cir.1986), cert. denied, — U.S. -, 107 S.Ct. 1352, 94 L.Ed.2d 522 (1987); United States v. Lewis, 759 F.2d 1316, 1331 (8th Cir.), cert. denied, 474 U.S. 994, 106 S.Ct. 406, 88 L.Ed.2d 357 (1985). The statute is written in disjunctive language, and the government need prove only that the defendant was an organizer, or a supervisor, or held some management role, not all three. United States v. Dickey, 736 F.2d 571, 587 (10th Cir.1984), cert. denied, 469 U.S. 1188, 105 S.Ct. 957, 83 L.Ed.2d 964 (1985); United States v. Phillips, 664 F.2d 971, 1013 (5th Cir.1981), cert. denied, 457 U.S. 1136, 102 S.Ct. 2965, 73 L.Ed.2d 1354 (1982). The terms “organizer,” “supervisory,” and “management” have been given their plain meaning. United States v. Oberski, 734 F.2d 1030, 1032 (5th Cir.1984); United States v. Mannino, 635 F.2d 110, 117 (2d Cir.1980).
A defendant need not be the “king pin” or ultimate authority in the organization, but need only occupy some managerial position, Maull, 806 F.2d at 1343; United States v. Becton, 751 F.2d 250, 255 (8th Cir.1984), cert. denied, 472 U.S. 1018, 105 S.Ct. 3480, 87 L.Ed.2d 615 (1985), or perform a “central role.” Lewis, 759 F.2d at 1331. The government need not establish that the defendant managed five people at once, that the five acted in concert with each other, that the defendant exercised the same kind of control over each of the five, or even that the defendant had personal contact with each of the five. See, e.g., Maull, 806 F.2d at 1343; United States v. Jones, 801 F.2d 304, 308 (8th Cir.1986); Becton, 751 F.2d at 254-55. In essence, the management element is established by demonstrating that the defendant exerted some type of influence over another individual as exemplified by that individual’s compliance with the defendant’s directions, instructions, or terms. See United States v. Grubbs, 829 F.2d 18, 19-20 (8th Cir.1987) (per curiam); United States v. Lueth, 807 F.2d 719, 732 (8th Cir.1986); Jones, 801 F.2d at 310.
As Possick concedes that he managed two former co-defendants (Daniel Byers and Robert Lesmeister), we need find only that there was sufficient evidence to support the jury’s verdict with regard to three other individuals. We find that there was substantial evidence to support the jury’s finding that Possick managed, supervised, or organized Keith Kalemis, Robert Bell, and Marjorie Byers, and we therefore affirm his CCE conviction.
A. Keith Kalemis
The evidence at trial showed that from April to August of 1985, Keith Kalemis acquired cocaine from Possick on terms dictated by Possick. Possick gave the cocaine to Kalemis on consignment, or “fronted” it to him, and instructed him on how to arrange for collection of and payment for the drugs. On one occasion, Possick directed Kalemis to fly to Atlanta to make a $23,000 payment to Byers. Later, Possick instructed Kalemis to wire payment to Florida in Byers’s name. On another occasion, Kalemis was instructed to make payment by way of a money order made out to a corporation owned by Byers. Possick also instructed Kalemis how to transact drug sales with one of his customers, although Kalemis did not follow this advice. In addition, Possick and Byers travelled to Kalemis’s residence in St. Louis, where they beat him, forced him to ingest orally a large quantity of cocaine, and threatened to kill him if he did not promptly pay the money he owed to Possick. Thereafter, Byers often threatened Kalemis over the phone.
We find these facts ample to support the jury’s finding that Possick exerted some type of influence over Kalemis. Although the mere “fronting” of cocaine alone is insufficient to support finding a management relationship, Jones, 801 F.2d at 308; defendants who arrange the acquisition of the drug, its delivery, and set the price and credit terms have been found to fill a “ ‘sufficiently central role’ ” to satisfy the requirements of the management element. Grubbs, 829 F.2d at 19-20 (quoting Lewis, 759 F.2d at 1331). See also Lewis, 759 F.2d at 1332 (defendant found to manage an individual who made three trips to purchase cocaine at the defendant’s bidding); Becton, 751 F.2d at 253, 255 (defendant found to manage one individual who assisted the defendant in weighing and delivering a truckload of marijuana, and another individual who bought large quantities of marijuana from the defendant and made one large delivery of drugs according to the defendant’s instructions); Dickey, 736 F.2d at 587-88 (defendant who set up meetings for drug transactions and dictated the terms of delivery and payment was found to occupy a managerial position).
Possick’s relationship with Kalemis is well within the parameters of these cases. Furthermore, the use of force or threats to coerce payment is strong evidence of control. Jones, 801 F.2d at 308-09. Although Kalemis failed to follow Pos-sick’s directions in one instance, and apparently purchased cocaine from other drug dealers, this does not refute the evidence that Possick exerted some control over Ka-lemis. There is nothing in the language of the CCE statute, or the cases applying it, that requires the government to establish that the defendant wielded absolute and exclusive control over his subordinates.
B. Robert Bell
From late 1984 through the first half of 1985, Robert Bell purchased eighty ounces of cocaine from Possick for approximately $88,000. At all times Possick set the prices and the means of delivery and payment. Possick also instructed Bell that he was not to sell to Lesmeister, another former co-defendant, and tutored Bell in how to carry drugs through airport security without detection. Possick offered Bell an exclusive cocaine distributorship at the “Park Avenue,” a Pompano Beach, Florida, lounge, although this was later given to another unidentified individual. In addition, on at least one occasion Possick used Bell’s apartment to package cocaine that he was mailing elsewhere.
This evidence more than justifies the jury's finding of a management relationship between Possick and Bell. The enormous quantity of cocaine involved alone is indicative of a formal management relationship, see Becton, 751 F.2d at 253; United States v. Samuelson, 697 F.2d 255, 259 (8th Cir.1983), cert. denied, 465 U.S. 1038, 104 S.Ct. 1314, 79 L.Ed.2d 711 (1984), as is the regularity with which Possick and Bell transacted business. See Jones, 801 F.2d at 309. Dictating to whom a subordinate may sell, see Jones, 801 F.2d at 308; Mannino, 635 F.2d at 117, and instructing a subordinate on means of avoiding arrest or detection also indicate managerial control. See Lewis, 759 F.2d at 1333 (use of code words); Mannino, 635 F.2d at 117. Finally, a defendant’s use of another’s home to conceal or process drugs has been found to evidence that defendant’s dominant or managerial position. See Lueth, 807 F.2d at 732; see also Lewis, 759 F.2d at 1332.
C. Marjorie Byers
The evidence of Possick’s relationship with Marjorie Byers, wife of acknowledged subordinate Daniel Byers, shows that Ms. Byers assisted Possick in executing his drug transactions. With knowledge of Possick’s drug dealings and her husband’s participation, Ms. Byers often made flight reservations for Possick and her husband to enable them to make trips to sell drugs or collect payment. Ms. Byers accepted delivery of the airplane tickets and paid for them in cash given to her by Possick. On one occasion, when Mr. Byers was reluctant to travel alone, Possick paid for Ms. Byers and her two children to accompany him on a trip to St. Louis to collect money for Possick. Possick also maintained and paid for a telephone in the Byers’s home, again with Ms. Byers’s knowledge. In addition, Ms. Byers was aware that cocaine was stored in and dealt out of her home.
Persons performing functions similar to a secretary or bookkeeper in the defendant’s drug organization have been found to be subordinates within the defendant’s supervision. See Lueth, 807 F.2d at 732; Jones, 801 F.2d at 309; Lewis, 759 F.2d at 1332. Although Ms. Byers’s purchase of airplane tickets alone is not equivalent to the vaguely secretarial or actuarial functions performed in Lueth and Jones, she clearly facilitated Possick in carrying out his drug business. Accepting paid travel, see Maull, 806 F.2d at 1344, and acquiescing in the use of her home for the storage, preparation, and sale of cocaine also indicate that Ms. Byers was a member of Possick’s organization under his management. See Lueth, 807 F.2d at 732; see also Lewis, 759 F.2d at 1332.
The evidence of the involvement of Kalemis, Bell, and Ms. Byers, along with Possick’s conceded control over Mr. Byers and Lesmeister, satisfies the statutory requirement of five or more subordinates. We also note that Bell’s testimony that Possick gave an unidentified individual an exclusive cocaine distributorship at the Park Avenue lounge tends to establish Pos-sick’s supervision of that individual, and the fact that that individual’s identity was unknown is irrelevant. See Tarvers, 833 F.2d at 1074; United States v. Markowski, 772 F.2d 358, 364 (7th Cir.1985), cert. denied, 475 U.S. 1018, 106 S.Ct. 1202, 89 L.Ed.2d 316 (1986). In sum, we find there is substantial evidence to support the jury’s verdict that Possick organized, managed, or supervised at least five people in connection with his drug trafficking.
II. Denial of Severance
Possick’s next contention is that the district court erred by denying his motion to sever the CCE charge from the other charges against him. Possick claims that he wished to testify in reference to the CCE charge while invoking his right to remain silent on the others. Anticipating that the jury would look unfavorably on the invocation of the right to remain silent on selected counts, Possick chose not to testify at all. Now Possick alleges that he was prejudiced within the meaning of Fed.R.Crim.P. 14.
Fed.R.Crim.P. 14 provides that “[i]f it appears that a defendant * * * is prejudiced by a joinder of offenses * * * the court may order * * * separate trials of counts * * * or provide whatever other relief justice requires.” Denial of a motion for severance will be grounds for reversal only if the denial was an abuse of discretion and resulted in clear prejudice. See United States v. Bohr, 581 F.2d 1294, 1300-01 (8th Cir.), cert. denied, 439 U.S. 958, 99 S.Ct. 361, 58 L.Ed.2d 351 (1978); United States v. Losing, 560 F.2d 906, 911 (8th Cir.), cert. denied, 434 U.S. 969, 98 S.Ct. 516, 54 L.Ed.2d 457 (1977).
For reversal, Possick relies on Cross v. United States, 335 F.2d 987 (D.C.Cir.1964), and quotes it for the proposition that “[p]rejudice may develop when an accused wishes to testify on one but not the other of two joined offenses which are clearly distinct in time, place and evidence. * * * [Because] silence on one count would be damaging in the face of [an] express denial of the other.” Id. at 989 (emphasis added). In Cross, the defendant was charged with two counts of robbery, one for his participation in the robbery of a church on February 23, 1962, and one for his involvement in the robbery of a private home on May 2, 1962. The two charged crimes were factually unrelated. In contrast, the CCE charge is entirely interrelated with the other drug charges against Possick (conspiracy to distribute cocaine, use of a communication facility to commit a conspiracy, interstate travel in aid of racketeering, and distribution of cocaine), and is not distinct in time, place, or evidence.
Furthermore, Cross is no longer the last word on severance. See United States v. Corbin, 734 F.2d 643, 648-49 (11th Cir.1984); United States v. Jardan, 552 F.2d 216, 220 (8th Cir.), cert. denied, 433 U.S. 912, 97 S.Ct. 2982, 53 L.Ed.2d 1097 (1977). In order to gain a severance, a defendant must make a persuasive and detailed showing regarding the testimony he would give on the one count he wishes severed and the reason he cannot testify on the other counts. See Corbin, 734 F.2d at 648-49; United States v. Lewis, 547 F.2d 1030, 1034 (8th Cir.1976), cert. denied, 429 U.S. 1111, 97 S.Ct. 1149, 51 L.Ed.2d 566 (1977). Possick failed to make the requisite showing. In a pretrial motion before the district court, Possick simply claimed he was “not a kingpin [and] did not supervise five or more persons [or] obtain substantial income.” Tr. July 8, 1986, p. 3. This is not the type of detailed showing that convinces us that the district court abused its discretion.
Finally, Possick cannot establish prejudice. See, e.g., United States v. Hutchings, 751 F.2d 230, 236 (8th Cir.1984), cert. denied, 474 U.S. 829, 106 S.Ct. 92, 88 L.Ed.2d 75 (1985); United States v. Rodgers, 732 F.2d 625, 630 (8th Cir.1984). “ ‘Where evidence that a defendant had committed one crime would be probative and thus admissible at the defendant’s separate trial for another crime, the defendant does not suffer any additional prejudice if the two crimes are tried together.' ” Rodgers, 732 F.2d at 630 (quoting United States v. Dennis, 625 F.2d 782, 802 (8th Cir.1980)). The evidence of Possick’s guilt on the other drug charges would be probative and admissible in a separate trial of the CCE count, just as evidence of Possick’s relationship with his subordinates and the amount of cocaine involved would be admissible in a separate trial of the other counts. Additionally, because we have found that the government’s evidence was more than sufficient to support a conviction on the CCE count, we find that Possick suffered no clear prejudice. See United States v. Yates, 734 F.2d 368, 370 (8th Cir.1984).
III. Admission of Charts
Possick also alleges that the district court erroneously admitted several charts into evidence and permitted the jury to use them in their deliberations without giving a limiting instruction. The charts in question are three handwritten one-page charts compiled by Bell listing the dates and nature of his various drug transactions, and two charts prepared by DEA agents, one showing the number of telephone calls made between Possick’s home and the homes of his subordinates, and a flow chart that purports to show the organization of his group.
|
11322184-17898 | The memorandum disposition filed September 15, 1993, is redesignated as an authored opinion by Judge Kelly.
PAUL KELLY, Jr., Circuit Judge:
Background
GlenFed, Inc. is a real estate and financial services holding company that declared a $140.8 million loss for the second quarter of fiscal year (“FY”) 1991, after several years of reporting profitable operations. John Decker and other investors (the proposed class, or the “Plaintiffs”) appeal the district court’s dismissal of their second amended complaint against GlenFed, Inc. and its officers and directors under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “1934 Act”), 15 U.S.C. §§ 78j(b) and 78t(a), Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated by the Securities and Exchange Commission (SEC), and §§ 11,12 and 15 of the Securities Act of 1933 (the “1933 Act”), 15 U.S.C. §§ 77k, 111 and 77o, and various California state law theories including fraud, deceit and negligent misrepresentation.
Plaintiffs allege that GlenFed’s officers and directors made misrepresentations and omissions designed to conceal GlenFed’s deteriorating financial condition, lack of adequate internal controls and declining market. Plaintiffs -contend that the district court erred in dismissing their complaint for failing to plead fraud with particularity, Fed. R.Civ.P. 9(b), and for failing to adequately allege conspiracy, aiding and abetting and control person liability. Plaintiffs farther contend that, in rejecting a “fraud on the market” theory of reliance, the district court prematurely dismissed their state law claims. We resolve the case on the adequacy of the complaint under Rule 9(b).
Discussion
I. Major Claims of the Plaintiffs
Plaintiffs claim that GlenFed concealed deficiencies concerning its asset monitoring and loan underwriting policies that affected the quality of assets. They also claim that GlenFed understated loan loss reserves and failed to. disclose the true facts regarding the disposition of subsidiaries, instead attempting to gain more favorable accounting treatment than the true facts would have warranted.
A.Asset Quality and Strict Credit Procedures
GlenFed’s annual reports referred to its “superior” or “excellent” asset quality and “stringent,” “strict” and “rigorous” underwriting and credit procedures. Plaintiffs refer to a $20 million reduction in non-performing assets in the fourth quarter of 1990, supposedly attributable to rigorous loan approval and asset review procedures. According to Plaintiffs, it was apparent to the Defendants at least until June 1990 that loan underwriting and monitoring policies were inadequate and were not being followed. They contend that non-public information was available to the Defendants (reports from the internal audit department, an accounting firm providing management advisory services, government regulators and an investment banking firm) revealing that GlenFed’s procedures were inadequate to detect non-performing assets and set loan loss reserves. Plaintiffs allege the following facts: inaccurate (delayed) reporting of in-substanee foreclosures (where collateral’s fan-value is less than the carrying value of the loan); inadequate monitoring of a loan to one borrower; failure to timely refer loans to foreclosure; concentration on loans 91 + days delinquent, rather than also attending to loans 31-60 and 60-90 days delinquent; and failing to update appraisals.
B.Loan Loss Reserves
GlenFed embarked on a restructuring program with the stated purpose of improving core earnings and increasing capital as would be required by the Financial Institutions Reform, Recovery and Enforcement Act (FIR-REA). Form 10-Q filed with the SEC for the second quarter of FY 1990 characterized a $35 million increase in loan loss reserves as primarily due to a $30 million special charge to increase loan loss reserves to a more conservative level. In December 1990 (the second quarter of FY 1991), however, GlenFed announced that loan loss reserves were inadequate and had to be increased by $150 million, resulting in a $141 million loss and elimination of dividend payments. According to Plaintiffs, the cause of the huge increase in loan loss reserves was the result of finally disclosing what the Defendants knew all along, despite prior statements to the contrary: (1) loan loss reserves were inadequate, and (2) despite assurances of stability, many of the problem assets were in the California and Florida real estate markets. Plaintiffs contend that an inference of fraudulent intent is warranted because: (1) financial analysts expected GlenFed to have operating income, rather than the loss attributable to the increased loan loss reserves, (2) the Florida economy had been in decline for many years and this was known to Defendants, (3) other thrifts reported increases in non-performing assets as of June 30, 1990, whereas GlenFed did not, and (4) other thrifts took losses on real estate loans and operations- at least a year earlier than GlenFed. See Complaint ¶ 97A at 68,
C.Restructuring to Eliminate Subsidiaries
GlenFed operated three subsidiaries which in March 1990 it decided to divest. According to Plaintiffs, GlenFed announced that it had adopted a plan to discontinue operations with no aggregate net loss. Complaint ¶ 37 at 85. In order to obtain discontinued operations accounting treatment (and defer reporting losses on the subsidiaries), GlenFed was required to represent to its outside auditors that it intended to sell the three subsidiaries. According to Plaintiffs, Defendants knew that this was completely infeasible given the declining real estate economy and the non-performing assets held by the subsidiaries. A strategic plan presented at a September 25, 1990 GlenFed board meeting indicated that the discontinued operations might have to be liquidated rather than sold, resulting in an after-tax loss of $17 million. The plan indicated that the sale of GDC was not a viable alternative in the current market and that no buyers were capable of purchasing the other two subsidiaries except at fire sale prices. Almost contemporaneously, however, minutes of board meetings discuss an expected total of “three to five” bids for GDC as of August 31, 1990, and the receipt of “about eight to ten bids” for the finance subsidiaries and three offers for GDC (all unsatisfactory) by September 25, 1990. Complaint ¶48 at 40-41.
Plaintiffs point to the September 30, 1990 Form 10-Q which indicated that no net loss was expected on disposition by sale. Relying on an internal position paper, Plaintiffs also allege that the senior management Defendants deliberately delayed the losses from these subsidiaries until December 31, 1990, when the plan to sell them was publicly acknowledged to be infeasible and “discontinued operations” accounting treatment was terminated.
D. Stock Price Decline
Plaintiffs’ real complaint is that the Defendants portrayed GlenFed as able to withstand the recession and systemic problems in the thrift industry when, in fact, “GlenFed was just another problem-plagued thrift riddled by systemic defects.” Aplt. Brief at 8. According to Plaintiffs, the motive for this was to keep the stock price artificially inflated. “[A]s the truth about Glenfed’s condition began to be revealed to the investing public, Glenfed’s stock price plummeted from $21.375 on August 25, 1988 at the beginning of the Class Period to $4.625 on January 16, 1991 at the close of the Class Period.” Aplt. Brief at 17; Complaint ¶ 114 at 85.
II. Application of Rule 9(b)
A. Section 10(b) and Rule 10b-5 Claims
A complaint under § 10(b) and Rule 10b-5 requires an allegation of scienter, that a defendant acted with intent to deceive, manipulate or defraud. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193, 96 S.Ct. 1375, 1381, 47 L.Ed.2d 668 (1976); Hanon v. Dataproducts Corp., 976 F.2d 497, 507 (9th Cir.1992). The necessary scienter may be satisfied by actual knowledge or by a heightened standard of recklessness involving an extreme departure from ordinary care. Hollinger v. Titan Capital Corp., 914 F.2d 1564, 1569-70 (9th Cir.1990) (en banc), cert. denied, 499 U.S. 976, 111 S.Ct. 1621, 113 L.Ed.2d 719 (1991). Allegations of negligence are insufficient. Ernst, 425 U.S. at 201, 96 S.Ct. at 1385. Rule 10b-5 complaints must satisfy Fed.R.Civ.P. 9(b) which requires that fraud be pleaded with particularity.
We review a Rule 9(b) dismissal of a complaint de novo. Wool v. Tandem, Computers, Inc., 818 F.2d 1433, 1439 (9th Cir.1987). Although Fed.R.Civ.P. 8(a) only requires “a short and plain statement of the claim showing that the pleader is entitled to relief,” Rule 9(b) requires that “[i]n all aver-ments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” Rule 9(b) applies to securities fraud claims and serves to provide defendants with adequate notice of both the nature and grounds of the claim, to protect defendants from the reputational harm associated with fraud claims, and to prevent the filing of claims merely to discover unknown wrongs. Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir.1985). Rule 9(b) also serves to deter suits pursued for their settlement value, rather than their merits. Ross v. A.H. Robbins Co., 607 F.2d 545, 557 (2d Cir.1979), cert. denied, 446 U.S. 946, 100 S.Ct. 2175, 64 L.Ed.2d 802 (1980). Those alleging fraud in connection with securities are required to allege specific acts or omissions on which the claim is based. Id. Rule 9(b) requires “times, dates, places or other details of [the] alleged fraudulent involvement” of the actors. Semegen, 780 F.2d at 731. This assures at least a colorable factual basis for proceeding with the lawsuit. Although Rule 9(b) allows scienter to be pleaded generally, courts have required that the facts pled provide a basis for a strong inference of fraudulent intent. See O’Brien v. National Property Analysts Partners, 936 F.2d 674, 676 (2d Cir.1991); Ross, 607 F.2d at 558.
Plaintiffs first contend that they have adequately pled actionable misstatements, placing great reliance on Virginia Bankshares, Inc. v. Sandberg, - U.S. -, 111 S.Ct. 2749, 115 L.Ed.2d 929 (1991). In Virginia Bankshares, a proxy solicitation for a merger described the price per share offered to minority stockholders as a "high" value and a "fair" price for the stock. The Court held that such statements could be materially false and misleading, when the plaintiff alleged that the directors recommended the merger solely because they wanted to retain their seats on the board. Id. at -, 111 S.Ct. at 2759. The Court reasoned that such statements are factual as opinions genuinely held or as expressions about the subject matter at hand. Id. at -, 111 S.Ct. at 2758. “[S]uch conclusory terms in a commercial context are reasonably understood to rest on a factual basis that justifies them as accurate, the absence of which renders them misleading.” Id.
Relying on Virginia Banks hares the Third Circuit in Shapiro v. UJB Financial Corp. 964 F.2d 272 (3rd Cir.) cert. denied - U.S. -, 113 S.Ct. 365 121 L.Ed.2d 278 (1992) held that statements characterizing loan loss reserves as "ade quate describing the loan portfolio as "well collateralized" and of high "quality and praising internal controls as properly central ized supervised and managed could state a claim. Id. at 283. "By addressing the quali ty of a particular management practice a defendant declares the subject of its repre sentation to be material to the reasonable shareholder and thus is bound to speak truthfully." Id. at 282. Also relying on Vir ginia Bankshares the Sixth Circuit in Mayer v. Mylod 988 F.2d 635 (6th Cir.1993) held that statements characterizing the loan portfolio as “soundly underwritten,” a stock buyback as a “good investment” were actionable along with allegations of misrepresentation concerning non-performing assets and inadequate loan loss reserves. Id. at 636-40.
Neither Virginia Bankshares nor Mayer addressed- compliance with Fed. R.Civ.P. 9(b). Shapiro addressed compliance with Rule 9(b) and remanded to the district court to allow the plaintiffs to meet this requirement. Id., 964 F.2d at 284-85. Plaintiffs correctly assert that they are not required to plead evidentiary matters which may be in control of the Defendants. See Id. at 285. They must explain their theory of the fraud, though. See Walling v. Beverly Enter., 476 F.2d 393, 397 (9th Cir.1973). At the pleading stage without the benefit of discovery, the facts may be largely in the exclusive possession of Defendants, so Rule 9(b) may be satisfied by pleading facts on information and belief, identifying the facts on which the belief is founded. Shapiro, 964 F.2d at 285.
Plaintiffs have had access to discovery materials obtained in a derivative action, so it cannot be said that all facts are in the exclusive control of the Defendants. Despite Plaintiffs’ repeated efforts to plead facts, as well as facts thought to be so on information and belief, the facts alleged simply do not support an inference of fraud, notwithstanding that the material allegations of the complaint must be taken as true. See Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 1832, 104 L.Ed.2d 338 (1989) (complaint may not be dismissed “based on a judge’s disbelief of a complaint’s factual allegations”). Here, nothing links these Defendants with knowledge or reckless disregard of facts indicating that lending practices were unsound, asset review procedures were inadequate, loan loss reserves were inadequate or that restructuring to dispose of the subsidiaries was a ruse. See SEC v. Seaboard Corp., 677 F.2d 1315, 1316 (9th Cir.1982); DiLeo v. Ernst & Young, 901 F.2d 624, 629 (7th Cir.), cert. denied, 498 U.S. 941, 111 S.Ct. 347, 112 L.Ed.2d 312 (1990). Many of the facts plainly deal with what Plaintiffs perceive as faulty management practices, such as weak internal controls. Fiduciary misconduct or internal mismanagement of a corporation is an area traditionally left to state law, not federal securities law. Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 478-79, 97 S.Ct. 1292, 1303-04, 51 L.Ed.2d 480 (1977).
Plaintiffs cast the issue as whether favorable descriptions of operating policies (“strict” credit underwriting and monitoring policies), financial estimates (“conservative” loan loss reserves), and forecasting (expected sale of subsidiaries without a loss), constitute actionable misstatements. The real inquiry, however, must be whether the facts in the amended complaint would give rise to an inference that the Defendants either did not believe the statements or knew that the statements were false. Plaintiffs’ complaint is largely an extended comparison between SEC filings and press releases and routine internal correspondence about GlenFed’s problems and proposed corrective action (management’s normal function). By virtue of reliance on public information, Plaintiffs are able to plead the time, place, content, and sometimes a specific author of the alleged misrepresentation, but they have not pled sufficient facts warranting an inference of securities fraud. See Ferber v. Travelers Corp., 802 F.Supp. 698, 715-16 (D.Conn.1992); Steiner v. Shawmut Nat’l Corp., 766 F.Supp. 1236, 1246-47 (D.Conn.1991). At best, the allegations reflect the benefit of hindsight and perhaps corporate mismanagement or negligence. See Denny v. Barber, 576 F.2d 465, 470 (2d Cir.1978). For example, the failure to have current appraisals on some properties does not support the inference that the Defendants fraudulently stated that the asset monitoring procedures (as a whole) were adequate. The fact that some of the Defendants were aware of the general state of the economy in Florida, yet still indicated that certain markets in Florida were viable, does not suggest fraud. A failure to predict the future is not actionable. See Shapiro, 964 F.2d at 283. See also In re Lyondell Petrochem. Co. Sec. Litig., 984 F.2d 1050, 1053 (9th Cir.1993). Likewise, the claim that GlenFed should have drastically increased loan loss reserves six months earlier, by itself, does not speak to fraud; rather it is a dispute about when the Defendants should have recognized the loss based on the probability of uneollectibility. See DiLeo, 901 F.2d at 627 (“No matter when a bank [writes off or writes down a loan], someone may say that it should have acted sooner”). See also Complaint ¶ 120 at 88-89.
B. Secondary Liability and Civil Conspiracy Claims
In the absence of an adequately pled primary violation, we need not address whether certain statements in question would be attributed to all of the Defendants as “group published information.” See Blake v. Dierdorff, 856 F.2d 1365, 1369 (9th Cir.1988); Wool, 818 F.2d at 1440. Nor do we address liability premised on aiding and abetting, control person status or civil conspiracy. See Steiner, 766 F.Supp. at 1247.
C. Sections 11 and 12 Claims
Under § 11 of the 1933 Act, a person who acquires a security issued pursuant to a false and misleading registration statement may sue for damages. 15 U.S.C. § 77k(a). Under § 12(2) of the 1933 Act, a person who offers or sells securities by a prospectus or oral communication that contains misrepresentations or omissions of material facts is liable to the purchaser. 15 U.S.C. § 771(2). Plaintiffs who purchased GlenFed common stock through GlenFed’s Dividend Reinvestment Plan claim against all Defendants pursuant to § 11, and only against GlenFed as to § 12. The shares covered by the Plan were registered with the SEC, and the prospectuses in the various registration statements incorporated by reference the SEC filings (Forms 10-K and 10-Q) discussed in the amended complaint. See Complaint ¶ 143 at 107. The district court dismissed these claims for failing to allege the specific offending statements in the registration statements.
|
4073601-30683 | CABÁN, Bankruptcy Judge.
This opinion addresses two appeals that present the same legal issue and similar facts. Both appeals arise out of adversary proceedings in which the debtors sought a determination that the state income tax liabilities they owed to the defendant, the Massachusetts Department of Revenue (the “MDOR”), were subject to discharge pursuant to § 727, notwithstanding that they filed their corresponding tax returns late. The controlling issue in both cases is whether late-filed Massachusetts income tax returns, including returns filed post-assessment by the MDOR, qualify as re turns for discharge purposes. The bankruptcy court answered this question in the negative, and both debtors appealed. For the reasons set forth below, we AFFIRM the judgments of the bankruptcy court in part, and REVERSE in part.
BACKGROUND
The material facts are not in dispute. On October 5, 2009, Timothy P. Pender-gast (“Pendergast”) filed his Massachusetts resident income tax returns for the tax years 2001, 2002, 2003, 2004, 2005, and 2007. All were overdue. Furthermore, for the tax years 2002, 2003, 2004, and 2005, Pendergast filed his returns after the MDOR had already assessed a personal income tax against him. Pendergast filed a voluntary petition for chapter 7 relief on May 22, 2012. On Schedule F accompanying his petition, Pendergast listed personal income tax debts owed to the MDOR for the years 2001, 2002, 2003, 2005, and 2007 totaling more than $20,000.00. He did not list a liability to the MDOR for the 2004 tax year; nor did he subsequently amend his return to include that year. On August 21, 2012, he received a discharge of his debts pursuant to § 727.
Steven P. Wood (“Wood”) similarly failed to timely file his Massachusetts resident income tax returns for the tax years 2000 through 2005, all of which he filed on July 20, 2009. Furthermore, for all but tax year 2003, Wood filed his returns after the MDOR had assessed a personal income tax against him. On December 6, 2011, Wood filed a voluntary chapter 12 bankruptcy petition, which the court subsequently converted to a chapter 7. On his Schedule F, he listed income tax liabilities to the MDOR for 2000 through 2005, exceeding $40,000.00. On January 13, 2014, the bankruptcy court entered an order granting Wood a discharge under § 727.
Pendergast and Wood (collectively the “Debtors”), represented by the same counsel, initiated separate adversary proceedings against the MDOR, seeking determinations that their prepetition state income tax debts had been discharged. The MDOR, also represented by the same counsel in both adversary proceedings, filed summary judgment motions in both cases, arguing that as a matter of law the income tax liabilities in question were not discharged because the Debtors filed late tax returns for all of the applicable years.
The MDOR’s argument turned on the language in BAPCPA which amended § 523(a) by adding an unnumbered hanging paragraph, which states:
For purposes of this subsection, the term ‘return’ means a return that satisfies the requirements of applicable non-bankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.
11 U.S.C. § 523(a)(*) (footnotes added).
The MDOR argued that the definition of “return” provided in § 523(a)(*) requires that a purported return satisfy the requirements of applicable nonbankruptcy law (including applicable filing requirements). The MDOR contended that the parenthetical phrase, “including applicable filing requirements,” included the requirement that income tax returns be filed timely. Because neither Pendergast nor Wood filed his returns timely, the MDOR concluded that their late-filed returns did not qualify as “returns” under § 523(a)(*). It followed under this theory that no returns were filed for the years at issue, rendering the taxes in question excepted from discharge pursuant to § 523(a)(l)(B)(i).
The MDOR relied on cases holding that the definition of “return” in amended § 523 means that a late-filed federal income tax return, unless filed pursuant to 26 U.S.C. § 6020(a), can never qualify as a return for dischargeability purposes because it does not comply with the applicable filing requirements. See, e.g., Shinn v. Internal Revenue Serv. (In re Shinn), Adv. No. 10-8139, 2012 WL 986752 (Bankr.C.D.Ill. Mar. 22, 2012); Hernandez v. United States (In re Hernandez), Adv. No. 11-5126-C, 2012 WL 78668 (Bankr. W.D.Tex. Jan. 11, 2012); Cannon v. United States (In re Cannon), 451 B.R. 204 (Bankr.N.D.Ga.2011); Links v. United States (In re Links), No. 08-3178, 2009 WL 2966162 (Bankr.N.D.Ohio Aug. 21, 2009); Creekmore v. Internal Revenue Serv. (In re Creekmore), 401 B.R. 748 (Bankr.N.D.Miss.2008). The MDOR also cited McCoy v. Miss. State Tax Comm’n, 666 F.3d 924 (5th Cir.2012), for the same principle, in the context of state income tax returns. The MDOR further argued that the bankruptcy court wrongly decided Gonzalez v. Mass. Dep’t of Revenue (In re Gonzalez), 489 B.R. 1 (Bankr.D.Mass. 2013), aff'd, 506 B.R. 317 (1st Cir. BAP 2014), appeal docketed, No. 14-9002 (1st Cir. Mar. 31, 2014), and Brown v. Mass. Dep’t of Revenue (In re Brown), 489 B.R. 1 (Bankr.D.Mass.2013), aff'd, BAP No. MW 13-027, 2014 WL 1815393 (1st Cir. BAP April 3, 2014), appeal docketed, No. 14-9003 (1st Cir. April 11, 2014). There, another Massachusetts bankruptcy court ruled that “applicable filing requirements” must refer to something other than timeliness and the debtors’ liabilities for which the corresponding returns were filed late were nonetheless within the scope of the debtors’ discharge. Lastly, the MDOR maintained that a majority of courts have held that post-assessment tax returns do not qualify as “returns” for dischargeability purposes because they do not represent an honest and reasonable effort to satisfy the tax law, as required by pre-BAPCPA case law.
The Debtors opposed the entry of summary judgment. Relying on the bankruptcy court’s decision in In re Brown/In re Gonzalez, the Debtors argued that a late-filed return still serves as a formal assessment pursuant to Mass. Gen. Laws ch. 62C, § 26(a). They further asserted that under the MDOR’s view, § 523(a)(l)(B)(ii) would apply only to rare instances when the Internal Revenue Service (the “IRS”) prepares returns pursuant to 26 U.S.C. § 6020(a).
The bankruptcy court decided Pender-gast’s case first. On June 11, 2013, it entered summary judgment in favor of the MDOR, reasoning as follows:
I do not start “from the premise that this language is imprecise,” but instead must “assume that ... Congress said what it meant.” Moreover, “[i]t is ‘a cardinal principle of statutory construction’ that ‘a statute ought, upon the whole, to be so construed that if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.’ ”
At the risk of sounding overly simplistic, the filing deadline contained in Mass. Gen. Laws ch. 62C, § 6(c) would seem to be exactly the type of “filing requirements” to which the parenthetical phrase applies. The “filing requirements,” to the extent that such term was separately emphasized in the parenthetical phrase, is clearly distinct from the issue of whether the attributes of any particular form qualify as a “return” under state or federal law. The vast majority of courts agree. While I recognize that there is something unsavory about saying that a “late-filed return” is not a “return” under 11 U.S.C. § 523(a) by virtue of its tardiness, I cannot characterize this result as absurd.
Admittedly, other courts within this district have concluded that this reading “does too much violence to the statute.” In In re Brown/Gonzalez, Judge Hoffman, relying on In re Martin [, 482 B.R. 635 (Bankr.D.Colo.2012) ], reasoned that if all Massachusetts late-filed returns are not “returns” for purposes of this section, 11 U.S.C. § 523(a)(l)(B)(ii), which only applies to untimely returns, would be rendered “virtually meaningless” and “a nullity” because the number of returns filed pursuant to 26 U.S.C. § 6020(a) are minute and not within a debtor’s control. Judge Hoffman also found that “if all late-filed returns except § 6020(a) returns are not returns[,] there is no need to state that § 6020(b) returns are not returns,” rendering the reference to 26 U.S.C. § 6020(b) superfluous. In closing, he noted that in the absence of legislative history to shed light on the Congressional intent behind the hanging paragraph, he was reluctant to interpret it to effectuate a major change in pre-BAPCPA practice. Judge Boroff subsequently adopted Judge Hoffman’s reasoning in its entirety and without discussion in In re Perkins.
Unfortunately, I must respectfully disagree with my colleagues. The fact that 11 U.S.C. § 523(a)(1)(B)(ii) applies to only a small number of cases does not render it a nullity. So long as there is at least one situation where an untimely return is still considered a “return” for purposes of 11 U.S.C. § 523(a), 11 U.S.C. § 523(a)(l)(B)(ii) will apply and have meaning. I am also unpersuaded that the reference to 26 U.S.C. § 6020(b) is superfluous under this construction. As elucidated by the United State[s] Court of Appeals for the Fifth Circuit in In re McCoy, the reference “simply explains that returns filed pursuant to § 6020(a) do qualify as returns for discharge purposes, while those filed pursuant to § 6020(b) do not.”
Pendergast v. Mass. Dep’t of Revenue (In re Pendergast), 494 B.R. 8, 13-15 (Bankr. D.Mass.2013) (footnotes omitted).
The bankruptcy court concluded that because each of Pendergast’s tax returns for the periods at issue was filed late, “they each failed to satisfy Mass. Gen. Laws ch. 62C, § 6(c), one of the ‘applicable filing requirements’ of the ‘applicable nonbank-ruptcy law,’ and therefore, [were] not ‘returns’ within the meaning of [ ] § 523(a).” Id. at 16 (footnote omitted). Thus, the tax liabilities for the years at issue were non-dischargeable. Id.
Subsequently, following a December 11, 2013 hearing, the bankruptcy court similarly granted the MDOR’s summary judgment motion in Wood’s case. Wood filed a motion for reconsideration, which the bankruptcy court promptly denied, citing its decision in In re Pendergast supra.
The Debtors filed separate appeals to this Panel. On appeal, the parties largely reiterate the arguments presented below. In a reversal of its earlier position, however, the MDOR argues that the Panel should reject the position advocated by the IRS in analogous cases involving federal tax returns, namely, that only an income tax return filed after the taxing authority makes its own assessment does not qualify as a return. The MDOR’s current rationale for rejecting this approach is threefold: (1) § 523(a)(*) is devoid of any reference to the date of assessment; (2) this approach returns to the pre-BAPCPA, common law standard established in Beard v. Comm’r, 82 T.C. 766, 774-79 (1984), aff'd, 793 F.2d 139 (6th Cir.1986); and (3) the interpretation advocated by the IRS is irrelevant, as the taxing authority involved in these eases is the Commonwealth of Massachusetts. The Debtors acknowledge the IRS position, without taking a stance on the pre- or post-assessment issue.
JURISDICTION
A bankruptcy appellate panel is duty-bound to determine its jurisdiction before proceeding to the merits even if not raised by the litigants. See Boylan v. George E. Bumpus, Jr. Constr. Co. (In re George E. Bumpus, Jr. Constr. Co.), 226 B.R. 724, 725 (1st Cir. BAP 1998). A panel may hear appeals from “final judgments, orders, and decrees [pursuant to 28 U.S.C. § 158(a)(1) ] or with leave of the court, from interlocutory orders and decrees [pursuant to 28 U.S.C. § 158(a)(3) ].” Fleet Data Processing Corp. v. Branch (In re Bank of New England Corp.), 218 B.R. 643, 645 (1st Cir. BAP 1998) (internal quotations omitted). “An order granting sum mary judgment, where no counts remain, is a final order.” DeGiacomo v. Traverse (In re Traverse), 485 B.R. 815, 817 (1st Cir. BAP 2013) (internal quotations and citations omitted). Thus, the Panel has jurisdiction.
STANDARD OF REVIEW
A bankruptcy court’s findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo. Lessard v. Wilton-Lyndeborough Coop. Sch. Dist., 592 F.3d 267, 269 (1st Cir.2010). “We apply a de novo standard of review to orders granting summary judgment.” In re Traverse, 485 B.R. at 819 (citation omitted).
DISCUSSION
I. The Standard
Section 727 governs the scope of a chapter 7 discharge. 11 U.S.C. § 727. This section excepts from discharge those debts outlined in § 523. 11 U.S.C. § 727(b). Exceptions to discharge must be strictly construed in favor of the debtor. McCrory v. Spigel (In re Spigel), 260 F.3d 27, 32 (1st Cir.2001) (citation omitted). In relevant part, § 523 provides that:
(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt—
(1) for a tax or a customs duty—
(A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed;
(B) with respect to which a return, or equivalent report or notice, if required—
(i) was not filed or given; or
(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition....
11 U.S.C. § 523(a)(1)(A) and (B).
Subsection (i) of § 523(a)(1)(B) excludes from discharge tax liabilities where the debtor never files or gives a return. In re Ryan, 504 B.R. 686, 700 (Bank.D.Mass. 2013) (citation omitted); see also Moroney v. United States (In re Moroney), 352 F.3d 902, 904 (4th Cir.2003). Subsection (ii) “provides a time requirement for filing a return for dischargeability purposes.” Savage v. Internal Revenue Serv. (In re Savage), 218 B.R. 126, 132 (10th Cir. BAP 1998). In this subsection, sometimes referred to as the “two-year rule,” Congress “dealt specifically with the issue of when a return must be filed in order for the tax liability for that year to be dischargeable.” Id. This rule “excludes from discharge taxes for which a return was filed both after its original due date and within two years of the filing of the debtor’s bankruptcy petition.” Moroney, 352 F.3d at 905 n. 1 (emphasis added). Thus, even if the return was not timely filed, any related delinquent tax debt was not excepted from discharge solely because the return was untimely. The purpose of this rule was to avoid bankruptcy filings for the purpose of discharging tax debt. Wood v. United States (In re Wood), 78 B.R. 316, 322 (Bankr.M.D.Fla.1987).
“Pre-BAPCPA, the Bankruptcy Code did not define ‘return.’ ” Perry v. United States, 500 B.R. 796, 800 (M.D.Ala.2013). In the absence of a statutory definition, the majority of courts applied a four-factor test articulated by the United States Tax Court in Beard, supra, subsequently reiterated by the Sixth Circuit in United States v. Hindenlang (In re Hindenlang), 164 F.3d 1029 (6th Cir.1999), and referred to alternately as the “Beard test” or the “Hindenlang test.” See Perry v. United States, 500 B.R. at 800; see also Wogoman v. Internal Revenue Serv. (In re Wogo-man), 475 B.R. 239, 248-49 (10th Cir. BAP 2012). Under this test, in order for a document to qualify as a return under § 523, “(1) it must purport to be a return; (2) it must be executed under penalty of perjury; (3) it must contain sufficient data to allow calculation of tax; and (4) it must represent an honest and reasonable attempt to satisfy the requirements of the tax law.” Hindenlang, 164 F.3d at 1033 (internal quotations and citation omitted). Prior to BAPCPA, a debtor’s tardiness was relevant to the question of whether a tax return qualified as an honest and genuine attempt to comply with the tax laws, thereby satisfying the fourth prong of the Beard test. See, e.g., In re Moroney, 352 F.3d at 906-907 (holding that a return filed post-assessment by the IRS does not satisfy fourth element of Beard test).
As we previously explained, due to the BAPCPA amendments, § 523(a) now defines the term “return” for purposes of that subsection as follows:
For purposes of this subsection, the term ‘return’ means a return that satisfies the requirements of applicable non-bankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986, or a similar State or local law.
11 U.S.C. § 523(a)(*).
“Section 6020(a) returns are those in which a taxpayer who has failed to file his or her returns on time nonetheless discloses all information necessary for the I.R.S. to prepare a substitute return that the taxpayer can then sign and submit.” McCoy, 666 F.3d at 928 (citation and footnote omitted). “In contrast, a § 6020(b) return is one in which the taxpayer submits either no information or fraudulent information, and the I.R.S. prepares a substitute return based on the best information it can collect independently.” Id. (citation and footnote omitted).
II. The Standards Applied
In In re Gonzalez, supra, we recently considered whether a chapter 7 debtor’s state income tax returns filed after the due date specified by Massachusetts law, but before any assessment by the state taxing authority, qualified as returns. There, we declined to adopt a “per se” rule that any late-filed return is not a “return,” for the following reasons:
[First,] exceptions to discharge must be strictly construed in favor of the debtorf. Second,] under the “two-year rule,” it is an undisputed fact that debtors’ late tax returns are eligible for a discharge. 11 U.S.C. § 523(a)(l)(B)(ii). In other words, Congress allowed tax debt to be discharged if it was owed more than two years before filing the bankruptcy, even if the return was filed late. Third, the definition of “return” in the “hanging paragraph,” § 523[ (a) ](*), appears to be grounded on what is filed rather than when it is filed because it specifically includes a late-filed return under § 6020 of the Internal Revenue Code. The inclusion of 26 U.S.C. § 6020(a) versus § 6020(b) hinges on the cooperation of the taxpayer, not on any time requirement. Therefore, it seems inconsistent to conclude that the satisfaction of filing requirements allows only timely filed returns. This absolute exclusion of any late-filed return would render § 523(a)(l)(B)(ii) and the second sentence of § 523[ (a) ](*) superfluous, since both specifically allow for late-filed returns. Fourth, under Massachusetts state law, the definition of a “return” does not include a timeliness requirement. Furthermore, the MDOR acknowledged during oral argument that a late-filed return is treated as a return and that there are consequences for a return’s lateness.
In re Gonzalez, 506 B.R. at 328.
Moreover, in Gonzalez, we made it clear that: (1) § 523(a)(*) replaces the Beard test; (2) when determining whether a Massachusetts state income tax return satisfies § 523(a)(*), Massachusetts state law provides the “applicable nonbankruptcy law”; and (3) we discerned no timeliness requirement encompassed in the applicable nonbankruptcy law governing the case of a late-filed — but pre-assessment — income tax return in Massachusetts. Gonzalez, 506 B.R. at 325-28. Accordingly, we held that the bankruptcy court in that case properly determined that the debtor’s obligations to the MDOR were discharged, notwithstanding the late filing of his returns. Id. at 328. We explicitly refrained from opining as to the consequence of filing either a state or federal income tax return post-assessment, as that issue was not then before us. Id. at 327.
It is, however, now ripe for adjudication. Pendergast tardily filed all of his returns for the years at issue; and for the tax years 2002, 2003, 2004, and 2005, he filed those returns post-assessment by the taxing authority. Wood likewise filed five out of six of the subject tax returns not only late but post-assessment. Only his return for the tax year 2003 was filed pre-assessment.
Here, as in Brown and Gonzalez, Massachusetts state law provides the “applicable nonbankruptcy law (including applicable filing requirements).” In Massachusetts,
“An assessment of a tax liability may come about in two ways: by self-assessment or by a deficiency assessment made by [the M]DOR. A self-assessment occurs when a taxpayer files a return. The tax is ‘deemed assessed’ when the return is filed or required to be filed, whichever is later, and in the amount shown on the return or properly due, whichever is less.... If [the M]DOR determines, through audit or otherwise, that the full amount of a tax is not assessed or deemed assessed (as when no return has been filed), a deficiency assessment may be made.”
RHI Holdings, Inc. v. Comm’r of Revenue, No. 98-P-1164, 2001 WL 114686, at *1 n. 2 (Mass.App.Ct. Feb. 9, 2001) (quoting 5 Official Mass. Tax Guide at 639 (West 1999)); see also Mass. Gen. Laws ch. 62C, § 26(d) (“In the case of ... a failure to file a return, the commissioner may make an assessment at any time, without giving notice of his intention to assess, determining the tax due according to his best information and belief’).
As we stated in Gonzalez, based upon information provided to us by the MDOR, providing there is no deficiency assessment, a return, notwithstanding its untimeliness, would create an assessment under Massachusetts law and would still be treated as a return (with certain penalties imposed for its tardiness). 506 B.R. at 327. However, according to the MDOR, “[w]hen the late-filed return is made post-assessment, it is treated as an abatement application.” Id. As we previously noted: “Only in this limited instance is a return treated differently. In no other instance of a late filing does Massachusetts law treat the document as something other than a return.” Id.
Section 523(a)(*) provides that a document prepared under 26 U.S.C. § 6020(a) or a similar state law is a “return” for purposes of dischargeability while one under § 6020(b) or a similar state law is not. The difference between the two sections hinges upon the taxpayer’s cooperation in providing all the information necessary for the determination of a tax liability. This cooperation, which surely reduces the amount of resources and energy that the taxing authority must expend on the assessment of taxes, is decisive for purposes of § 523(a)(*). Massachusetts has no state law provision similar to 26 U.S.C. § 6020(a). The Massachusetts statutory scheme, however, provides for taxpayers who do not file timely returns to receive similar treatment as that set forth in the sections of the Internal Revenue Code of 1986 referenced in § 523(a)(*)-
Under Massachusetts law, a late filed return is treated as a return, subject to interest and penalties arising from the untimely filing. However, when the taxpayer has failed to file a return, the commissioner is not required to give a taxpayer notice of the intention to assess a deficiency. 830 Mass.Code Regs. 62C.26.1(8). If the commissioner determines that a taxpayer has not filed a return, the commissioner may make a deficiency assessment according to his best information and belief, without issuing a notice of intention to assess, pursuant to Mass. Gen. Laws ch. 62C, § 26(d). This Massachusetts provision is similar to 26 U.S.C. § 6020(b) since the commissioner prepares the assessment without the cooperation of the taxpayer. The commissioner, after preparing the assessment, then issues a written notice of deficiency assessment to the taxpayer, as prescribed under 830 Mass.Code Regs. 62C.25.1(6)(f) through (i). If the taxpayer wishes to seek an application for abatement, which is a procedure to challenge the validity of a tax assessment, the taxpayer must file, as a prerequisite, the corresponding tax return for that period. 830 Mass.Code Regs. 62C.37.1(5)(a)(l). However, based on the information provided by the MDOR in Gonzalez, such a post-assessment return is not treated as a return; rather it is deemed a request for an abatement of the previous assessment.
Therefore, when the entirety of § 523(a)(*) is applied to the Massachusetts statutory scheme, if a tax return is never filed, then it is clear that the tax obligation is nondischargeable. If a return is filed late, dischargeability depends on the taxpayer’s cooperation with the taxing authorities. In Massachusetts, if the debtor engages in self-assessment by filing a late return before the taxing authority assesses a deficiency (analogous to 26 U.S.C. § 6020(a)), then the tax liability may be dischargeable if the return was filed more than two years before the filing of the petition. If the Massachusetts tax authority assesses a deficiency before the debtor’s self-assessment (analogous to 26 U.S.C. § 6020(b)), the debtor’s tax liability will not be dischargeable. Once the taxing authority does an assessment, the taxpayer is not barred from requesting an abatement (i.e., a reduction of the assessed amount of tax liability). Nevertheless, the final amount determined, whether by a non-cooperative assessment process or an abatement process, is still not dischargea-ble. This view is consistent with the entirety of § 528(a)(*).
Accordingly, we now conclude that a late-filed, post-assessment Massachusetts state income tax return does not qualify as a return for discharge purposes. Thus, Pendergast’s post-assessment returns for the tax years 2002, 2003, 2004, and 2005 do not satisfy § 523(a)(*)’s definition of a return under the applicable non-bankruptcy law of Massachusetts; he therefore cannot discharge his tax liabilities for those years. Based upon the rule we articulated in Gonzalez, however, we conclude that Pendergast’s tax obligations to the MDOR for the 2001 and 2007 tax years are discharged. Likewise, Wood’s post-assessment returns for the tax years 2000, 2001, 2002, 2004, and 2005 do not qualify as returns and his tax liabilities for those years are therefore excepted from discharge. However, because he filed his return for the tax year 2003 prior to any assessment by the MDOR (albeit late), his liability for that year falls within the scope of his discharge under the Gonzalez rule.
CONCLUSION
Based on the foregoing, the judgment of the bankruptcy court in Pendergast is hereby AFFIRMED to the extent that the court held that Pendergast’s tax liabilities for 2002, 2003, 2004, and 2005 were nondis-chargeable and REVERSED to the extent that it determined that his liabilities for the tax years 2001 and 2007 were nondischargeable. Similarly, we AFFIRM the judgment of the bankruptcy court in Wood to the extent that the court ruled that Wood’s liabilities to the MDOR for the tax years 2000, 2001, 2002, 2004, and 2005 were excepted from discharge, and REVERSE the judgment of the bankruptcy court to the extent that Wood’s liability for the year 2003 was excepted from discharge.
. Unless otherwise indicated, the terms "Bankruptcy Code,” “section” and "§ " refer to Title 11 of the United States Code, 11 U.S.C. §§ 101, et seq., as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8, 119 Stat. 37 ("BAPCPA").
. Massachusetts law defines an “assessment” as:
[T]he process of the Department of Revenue’s determination or verification of the amount of tax, as provided under M.G.L. c. 62C, §§ 24, 25, and 26, imposed and due from a taxpayer under M.G.L. chs. 60A; 62 through 64J; 65B and 65C; M.G.L. c. 121A, § 10; M.G.L. c. 138, § 21; and the entry of the amount of the tax due in the Commissioner's assessment records; or the taxpayer's calculation and declaration of the tax due, as provided under M.G.L. c. 62C, § 26(a), completed in full on a return, including any amendment, correction, or supplement thereto, by the taxpayer or the taxpayer's representative and duly filed with the Commissioner.
830 Mass.Code Regs. 62C.26.1(2).
. In his adversary complaint, Pendergast sought to have his tax liability for the tax year 2004 included within the scope of his discharge, notwithstanding his failure to list 2004 on his Schedule F.
. Section 6020(a) of the Internal Revenue Code provides:
(a) Preparation of return by Secretary. If any person shall fail to make a return required by this title or by regulations prescribed thereunder, but shall consent to disclose all information necessary for the preparation thereof, then, and in that case, the Secretary may prepare such return, which, being signed by such person, may be received by the Secretary as the return of such person.
26 U.S.C. § 6020(a).
. Section 6020(b)(1) of the Internal Revenue Code provides:
(b) Execution of return by Secretary.
(1) Authority of Secretary to execute return. If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.
26 U.S.C. § 6020(b)(1).
. Courts denote this hanging paragraph, inserted immediately after § 523(a)(19), with an asterisk, a practice which we adopt.
. We note that since the publication of In re Brown/In re Gonzalez and the subsequent af-firmances by this Panel, the United States District Court for the District of Massachusetts adopted the position of the MDOR and the above-cited cases. See Perkins v. Mass. Dep't of Revenue/Fahey v. Mass. Dep’t of Revenue, 507 B.R. 45 (D.Mass.2014) (holding that late state income tax returns fail to comply with “applicable filing requirements”). Thus, at both the trial and appellate levels, courts within the District of Massachusetts are divided on the issue of whether a late-filed return is nonetheless a return for dischargeability purposes.
. In both of these cases, we entered an order indicating that we would dispense with oral argument as it would not aid the decisional process. See. Fed. R. Bankr.P. 8012.
|
3299348-21762 | OPINION
MEROW, Judge.
This pre-award contract claim comes before the court on defendant’s motion for summary judgment and plaintiff’s opposition.
BACKGROUND
The controversy which has produced this litigation had its genesis in a solicitation (DLA 120-88-R-0496) issued in March 1988 by the Defense Logistics Agency (DLA), Defense Personnel Support Center, Philadelphia, Pennsylvania (DPSC) for offers (negotiated) for a requirements contract to supply orders for the stethoscopes needed by listed government activities during the one-year period after the date of award.
On April 19, 1988 plaintiff submitted its proposal on Solicitation DLA 120-88-R-0496. Under the “Manufacturing Facilities” section of this submission, plaintiff listed “SICOA Ridgewood N.J. 07657” for the stethoscopes offered. Under the “Place of Performance” section of its submission, for “100%” of the items offered, plaintiff listed:
SICOA
1185 Edgewater Avenue
Ridgefield, NJ 07657
Bergen County
Following a conviction on fraud and false statement counts in the United States District Court for the District of New Jersey, the Surgical Instrument Company of America (SICOA) was debarred by DLA effective December 28, 1987 through March 26, 1991, such that it is ineligible to contract with the government.
By telephone call and a subsequent letter dated July 18, 1988 to plaintiff, DPSC took the position that “Surgical Instrument Company of America has been debarred by the Defense Logistics Agency and is, therefore, not eligible to be a subcontractor for this procurement.” On August 17, 1988 plaintiff transmitted a protest to the General Accounting Office (B-232336) (GAO). By letter of August 29, 1988 to plaintiff, DLA rescinded the letter of July 18, 1988 and stated the position that plaintiff “is fully eligible to be considered for award.” DLA’s contracting officer did advise, however, that “if you do intend to use SICOA as a supplier, that fact will have a bearing on my determination of your responsibility to perform the contract.” On September 14, 1988, GAO dismissed protest B-232336 as “academic,” as Medical Devices (MDI) “has received the relief it requested * * GAO noted that, as plaintiff is a small business, if it is found to be nonresponsible, “that determination would then be forwarded to the Small Business Administration (SBA) for possible issuance of a certificate of competency (COC).” Because of SBA’s role and the conclusive nature of the COC determination on the procuring agency, GAO declined to retain the matter for consideration as to any future small business nonresponsive aspect.
On September 2, 1988, DLA issued a negotiated solicitation (DLA 120-88-R-1418) for offers to supply a set quantity of stethoscopes. Plaintiff submitted its offer on October 7, 1988, listing SICOA as its source for “100%” of the items offered. Upon receipt of a DPSC letter dated January 11, 1989 stating that SICOA was “unacceptable as a source,” counsel for plaintiff transmitted a protest letter to the contracting officer referencing the prior positions taken on still-pending Solicitation 120-88-R-0496 for a one-year requirements contract and the GAO action in reliance thereon. DPSC responded by cancel-ling Solicitation DLA 120-88-R-1418 stating that the stethoscopes will be included as part of the requirements covered by the still-pending Solicitation DLA 120-88-R-0496, on which an amendment “0001” was issued to all offerors extending the closing date to April 5, 1989 and adding “Clause 52.209- 1005 Certification or Disclosure of Debarred or Suspended Subcontractors.” The cited new clause provided, in part, “(a) contractors are prohibited from using suspended or debarred contractors as subcontractors.”
The instant suit was filed on April 4, 1989, by which plaintiff seeks to obtain an award on Solicitation DLA 120-88-R-0496, together with fees and expenses, or a judgment for bid proposal costs.
Following a request for briefing on the validity of the amendment 0001 changes to DLA 120-88-R-0496, defendant, by amendment No. 0002 effective April 20, 1989, issued to all offerors, deleted “Clause 52.-209-1005” from this solicitation, changed the closing date to May 11, 1989, and substituted the following clauses:
FAR 52.209-5 Certification Regarding Debarment, Suspension, Proposed Debarment, And Other Responsibility Matters (APR 1989)
FAR 52.209-6 Protecting The Government’s Interest When Subcontracting With Contractors Suspended, Debarred Or Proposed For Debarment (APR 1989).
These clauses (FAR 52.209-5 and FAR 52.209- 6) resulted from a recently concluded FAR case, No. 87-24, concerning a proposed rule published in the Federal Register on July 31, 1987 (52 Fed.Reg. 28,642 (1987)) to revise the suspension and debarment procedures. While the new clauses had not been published in the Federal Register, defendant asserts that by use of the deviation procedure, they may be incorporated in the subject solicitation.
Following extensive oral argument, an order was issued in this matter on April 25, 1989 suspending proceedings to await an award ■decision, at which point the nature of the further proceedings required to present and resolve the issues would be considered.
In May of 1989 the contracting officer, on Solicitation DLA 120-88-R-4M96, initiated the procedures required to obtain a pre-award survey of plaintiff and of its supplier, SICOA, by the Defense Contract Administration Services Management Area (DCASMA). As the procurement was for medical devices, the contracting officer also requested that the Food and Drug Administration (FDA) provide a quality assurance survey of plaintiff and SICOA. Plaintiff was requested to provide pre-award samples of the stethoscopes.
On Jiine 5, 1989 an on-site pre-award survey was conducted at Medical Devices, Inc., Fall River, Massachusetts, by an Industrial Specialist for DCASMA-Boston. The resulting report, dated June 20, 1989, concluded that “[bjased on the satisfactory review of all factors investigated, a ‘Complete Award’ is recommended.” DCASMA-Springfield performed the pre-award survey at SICOA. The report on SICOA found that firm to be unsatisfactory, both because it was debarred and not considered to be a reasonable and reliable source from which to receive a quality product, and because the firm had not adequately supported its ability to produce and deliver on orders beyond the 7,000 stethoscopes on hand. DCASMA-Springfield recommended no award. The “no award” recommendation was adopted as the final DCASMABoston position submitted to DPSC.
The FDA conducted an inspection at SI-COA on June 12, 1989 and based upon statements from the manager on the site and his own observations, the FDA investigator concluded that SICOA had not been in operation for over a year such that it was not possible to conduct a meaningful evaluation of the firm’s compliance with FDA regulations. The FDA reported this to the contracting officer.
On June 27, 1989, Amendment No. 0003 to Solicitation DLA 120-88-R-0496 was issued to all offerors extending the closing date and adding three clauses dealing with recently enacted procurement integrity legislation. Amendment No. 0004 was issued to all offerors on July 12, 1989, further extending the closing date.
On July 25, 1989, the contracting officer issued his Findings and Determinations that “Medical Devices of Fall River, Inc., is non-responsible and is, therefore, unacceptable for an award of items Nos. 0001 and 0002 under Solicitation # DLA 120-88-R-0496.” The concluding findings (Nos. 27 and 28) and Determination read as follows:
27. As shown in the above, SICOA:
a. cannot comply with the required delivery schedule set forth in the solicitation based on a lack of capacity,
b. it is a debarred firm and, therefore, has an unsatisfactory record of integrity and business ethics,
c. cannot be determined responsible by the contracting officer based on FDA’s survey report on the firm.
28. As shown in the above, MDI:
a. lacks adequate controls and procedures to insure contract performance,
b. cannot comply with the required delivery schedule set forth in the solicitation based on DCASMA Springfield’s unsatisfactory rating of its subcontractor’s production capability,
c. cannot be determined responsible by the contracting officer based on the FDA’s survey report on its subcontractor,
d. has not demonstrated its ability to protect the Government’s interest particularly in light of the fact that it is proposing a debarred firm as its subcontractor,
e. by its insistence on the use of a debarred firm — SIGOA—as its subcontractor demonstrates an unsatisfactory record of integrity and business ethics on its own part.
DETERMINATION
Based on the above findings, it is the determination of the contracting officer that Medical Devices of Fall River, Inc. and its subcontractor — Surgical, Instrument Company of America — lack the competency, capability, capacity and integrity to perform and are, therefore, considered non-responsible and unacceptable for award of items # 0001 and # 0002 under solicitation # DLA120-88-R-0496.
The contracting officer forwarded his Findings and Determination of non-responsibility to the Small Business Administration. On August 23, 1989 a field visit was conducted at Medical Devices of Fall River by Industrial Specialist William F. Little-field. His 15 page report concluded with the following summary and recommendation:
1) Facilities and equipment are adequate.
2) Materials and subcontracts are suspect.
3) Costs are not verified.
4) Technical capability is suspect.
5) Quality control is not verified.
6) Production input requested regarding SICOA was not received and therefore production is not satisfactory.
7) Performance is unacceptable.
8) There is no recommendation from the Industrial Specialist regarding the Integrity issue.
RECOMMENDATION
The Industrial Specialist’s recommendation is for No Award.
By its letters dated August 31, 1989 the SBA denied a Certificate of Competency (COC) to plaintiff on Solicitation No. DLA 120-88-R-0496 and so notified DPSC that “you are free to award to the next lowest bidder.”
On October 27, 1989, after undertaking discovery, plaintiff filed an amended complaint and the instant summary judgment proceedings ensued.
DISCUSSION
Plaintiff opposes summary judgment both on legal grounds and by asserting that there are material factual issues in dispute which require evidentiary proceedings. The claimed material factual issues involve plaintiffs assertion of bias and predisposition on the part of the contracting officer to deny an award to plaintiff. In support, plaintiff has filed substantial portions of the contracting officer’s deposition taken as discovery in this matter. Plaintiff has also filed a copy of a supplemental memorandum in support of a motion for reduction of sentence which counsel in the criminal proceeding involving SICOA has filed in the United States District Court for the District of New Jersey. In this motion, portions of the contracting officer’s discovery deposition testimony in the instant matter are asserted to cast doubt on the credibility of his testimony in the criminal proceeding which resulted in SICOA’s fraud and false statement conviction. Plaintiff claims this raises a credibility problem concerning the contracting officer’s actions with respect to plaintiff on the instant solicitation for a one-year requirements contract such that summary judgment proceedings are not appropriate.
Upon analysis of the submissions filed, it is concluded that plaintiff has not established the existence of a material factual dispute such as to preclude disposition of this matter on Rule 56 proceedings. Rather, the issues presented are essentially legal ones which may be resolved on the briefs and exhibits submitted.
The fact of SICOA’s District Court conviction for fraud and false statement and the resulting debarment from federal contracting effective December 28, 1987 through March 26, 1991, are undisputed and not subject to relitigation in this matter. See Horton J. Brown v. United States, 207 Ct.Cl. 768, 524 F.2d 693 (1975).
As SICOA was debarred prior to the date the solicitation was issued for the one-year requirements contract (DLA 120-88-R-0496), had SICOA attempted to contract directly with DPSC for this stethoscope procurement, no jurisdiction would exist in the Claims Court to consider any pre-award contract claim on the matter. This is because no contract for fair and honest consideration of an offer can be formed with a contractor who is debarred from entering into any contract with the United States. See 28 U.S.C. § 1491(a)(3); United States v. Grimberg Co., 702 F.2d 1362 (Fed.Cir.1983); Electro-Methods, Inc. v. United States, 728 F.2d 1471 (Fed.Cir.1984); ATL, Inc. v. United States, 735 F.2d 1343 (Fed.Cir.1984); ATL, Inc. v. United States, 736 F.2d 677 (Fed.Cir.1984).
However, SICOA has not submitted a direct offer to supply the stethoscopes needed for one year from date of award to DPSC. Rather, the offer was submitted by Medical Devices of Fall River, Inc., with SICOA to be its subcontractor for 100 percent of the stethoscopes involved. Thus, with the submission of plaintiff’s offer on Solicitation DLA 120-88-R-0496, there exists an implied contract to have the offer fairly and honestly considered such that jurisdiction exists to consider the present pre-award claim under 28 U.S.C. § 1491. United States v. Grimberg Co., supra.
Contracts may be awarded only to a “responsible source.” 10 U.S.C. § 2305(b); 48 C.F.R. § 9.103. A responsible source is a contractor who:
(A) has adequate financial resources to perform the contract or the ability to obtain such resources;
(B) is able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and Government business commitments;
(G) has a satisfactory performance record;
(D) has a satisfactory record of integrity and business ethics;
(E) has the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain such organization, experience, controls, and skills;
(F) has the necessary production, construction, and technical equipment and facilities, or the ability to obtain such equipment and facilities; and
(G) is otherwise qualified and eligible to receive an award under applicable laws and regulations; * * *.
10 U.S.C. § 2302(3); 41 U.S.C. § 403; 48 C.F.R. § 9.104-1.
Under the applicable regulations, plaintiff was not expressly precluded from using a debarred contractor as a 100 percent source for the stethoscopes. The regulations (48 C.F.R. § 9.104-4) provided as follows:
Subcontractor responsibility.
(a) Generally, prospective prime contractors are responsible for determining the responsibility of their prospective subcontractors (but see 9.405 and 9.405-2 regarding debarred, ineligible, or suspended firms). Determinations of prospective subcontractor responsibility may affect the Government’s determination of the prospective prime contractor’s responsibility. A prospective contractor may be required to provide written evidence of a proposed subcontractor’s responsibility.
(b) When it is in the Government’s interest to do so, the contracting officer may directly determine a prospective subcontractor’s responsibility (e.g., when the prospective contract involves medical supplies, urgent requirements, or substantial subcontracting). In this case, the same standards used to determine a prime contractor’s responsibility shall be used by the Government to determine subcontractor responsibility.
Accordingly, under the regulations, the use of a debarred contractor by plaintiff for the stethoscopes may affect the government’s determination of plaintiff’s responsibility and the contracting officer may directly determine subcontractor responsibility, given the medical supply nature of the procurement. Clearly, the regulations do not encourage the use of debarred contractors as subcontractors.
Here, the contracting officer reached an adverse determination as to SICOA’s responsibility and largely, but not wholly, on this basis determined that plaintiff was non-responsible and unacceptable for award of the items under Solicitation DLA 120-88-R-0496 on which it was the lowest offeror using SICOA as a 100 percent source.
Plaintiff attacks the contracting officer’s determination of responsibility as an abuse of discretion and attempts to raise a credibility issue in this regard by citations to the contracting officer’s discovery deposition.
With respect to the credibility issue, it is well settled that a party may not defeat a properly supported motion for summary judgment by raising generalized questions as to the credibility of the movant’s affiants. Robinson v. Cheney, 876 F.2d 152, 162 (D.C.Cir.1989). Testimony by the contracting officer recognizing that the applicable regulations did not expressly preclude use of a debarred contractor as a subcontractor in no logical way undercuts his determination in this matter that SI-COA lacked responsibility and plaintiff’s use of SICOA for 100 percent of the procurement adversely impacted on plaintiff’s responsibility. 48 C.F.R. § 9.104-4 provides express warning to a contractor that subcontractor responsibility may affect the prime contractor’s responsibility and provides for a separate determination of subcontractor responsibility by the contracting officer when medical supplies are involved. The contracting officer’s personal views as to whether SICOA should have been convicted or debarred are irrelevant to his determination with respect to responsibility on Solicitation DLA 120-88-R-0496.
Overturning the contracting officer’s determination requires a showing that it is arbitrary, capricious or constitutes an abuse of discretion. Prineville Sawmill Co. v. United States, 859 F.2d 905 (Fed.Cir.1988). Where the procurement decision has a reasonable or rational basis, it is not contemplated that the Claims Court will intervene in the matter. CACI, Inc. v. United States, 719 F.2d 1567, 1581 (Fed.Cir.1983); Venice Maid Co. v. United States, 225 Ct.Cl. 418, 431, 639 F.2d 690, 698 (1980).
In the instant case, the contracting officer’s determination has a rational and reasonable basis. The contracting officer has a statutory duty of dealing only with responsible contractors and he must make the decision as to responsibility on the evidence available. Robinson v. Cheney, 876 F.2d 152, 162 (D.C.Cir.1989). The evidence available to the contracting officer in the form of the pre-award surveys and the prior conviction and existing debarment of SICOA amply support the decision reached. Plaintiff points to those portions of the pre-award surveys favorable to it as indicating an abuse of discretion by the contracting officer, but the negative aspects of these reports far outweigh the positive.
It can hardly be unreasonable for the contracting officer to determine not to deal with a company using a debarred contractor to supply all of the procurement items where this contractor cannot support an ability to deliver the items in the quantities estimated to be required.
While the applicable regulations did not expressly preclude the use of a debarred contractor as a subcontractor for 100 percent of the procurement requirements, legislation or regulations do not always specify the full panoply of remedies available to effectuate the purposes of the act or regulation. For example, in United States v. Acme Process Equipment Co., 385 U.S. 138, 87 S.Ct. 350,17 L.Ed.2d 249 (1966), the Supreme Court upheld cancellation of a contract for improper subcontract activity, overruling the Court of Claims’ reasoning “that had Congress wanted ‘to provide the additional remedy of contract annulment, it could have done so’ by express language, 171 Ct.Cl. [324] at 343, 347 F.2d [509] at 521, * * 385 U.S. at 142, 87 S.Ct. at 354. See also Mil-Tech Systems, Inc. v. United States, 6 Cl.Ct. 26 (1984) (upholding a finding of ineligibility based upon procurement policy). The contracting officer’s determination in the instant matter is fully in accord with the policy implicit in the regulations which precludes the direct use of debarred contractors by the government and clearly does not encourage their use as subcontractors.
Plaintiff also claims that the decision of the SBA not to issue a Certificate of Competency lacks validity. A violation of 48 C.F.R. § 19.601(b) is claimed, presumably because in its letter of August 31, 1989 to plaintiff the SBA stated, in part:
2) Medical Devices has not complied with the Federal Acquisition Regulations governing the use of debarred subcontractors. The use of SICOA effects [sic] Medical Devices own responsibility and eligibility for award and therefore there is no sufficient reason to put aside the integrity findings of the contracting officer.
Plaintiff cites a discovery deposition response by the contracting officer that this statement by SBA, as to plaintiff’s compliance with Federal Acquisition Regulations, was, in his opinion, not correct.
In context, however, the SBA statement is correct. 48 C.F.R. § 9.104-4 clearly places the requirement on the prime contractor to demonstrate subcontractor responsibility and warns that the subcontractor responsibility determination may affect that of the prime. Use of a debarred contractor as a full source subcontractor placed a substantial obligation on plaintiff to demonstrate the responsibility of both SICOA and itself, and compliance with this requirement did not occur. No relevant violation of applicable regulations in regard to the SBA’s action was been shown. See Cavalier Clothes, Inc. v. United States, 810 F.2d 1108 (Fed.Cir.1987).
|
1420899-3396 | DARR, Senior Judge.
For injunctive relief and damages under the anti-trust laws, this suit has been instituted against the Cosmopolitan Funeral Homes, Inc. and others.
The Cosmopolitan Funeral Homes, Inc., presents a motion to quash the summons and to dismiss the case because of failure of venue under section 22 of Title 15 U.S.C.A. This section provides:
“Any suit, action or proceeding under the anti-trust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found.”
The movant presents an affidavit to the effect that it is not an inhabitant of this judicial district, may not be found in this judicial district, and does not transact business in this judicial district.
The respondent has a counter affidavit setting out that Cosmopolitan has done business in this judicial district within the last year.
There are some cases ruling that the amendment to the general venue statute, now contained at section 1391(c) of Title 28 U.S.C.A., was also an amendment to the venue statute under the anti-trust laws. These cases seem to be based on Professor Moore’s observations in his commentary on the United States Judicial Code. See Lipp v. National Screen Service Corp., D.C., 95 F.Supp. 66, 69. However, this view has been authoritatively negated by the Supreme Court’s decision in the case of Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 228, 77 S.Ct. 787,1 L.Ed.2d 786.
The word “inhabitant” seems to imply a permanent resident. For a long number of years the courts have considered that a corporation was a resident of the state in which it was incorporated; and more specifically where the state was divided into two or more districts, then in the district where the official residence was designated by its charter or state law and in the absence of such designation, then in the district where the corporation maintained its home office.
While this definition seems harsh for venue purposes, it will have to be adopted and Cosmopolitan was not an inhabitant of this judicial district at the time the suit was commenced and for the same reason it could not be “found” in this district at that time.
The plaintiffs are residents of this district and the claims for relief are for happenings in this district. Cosmopolitan did a regular business in this district, according to its own affidavit, until 1959 and according to the respondent’s affidavit has continued some business, apparently fulfilling obligations theretofore contracted. But in any event, the words “transact business” do not intend to mean that the defendant has to be transacting business on the day the suit is commenced. Referenee is made to the ease of United States v. Scophony Corp., 333 U.S. 795, 68 S.Ct. 855, 92 L.Ed. 1091, for a general discussion of this question. This case, after announcing the obvious purpose of the venue statute and its intended liberality and extension, concludes at the bottom of page 808 of 333 U.S., at page 862 of 68 S.Ct., “A foreign corporation no longer could come to a district, perpetrate there the injuries outlawed, and then by retreating or even without retreating to its headquarters defeat or delay the retribution due.”
|
5746541-15626 | WESTENHAVER, District Judge.
This is an appeal from a judgment of deportation rendered by a United States commissioner on a former hearing. The commissioner’s order was affirmed, and on appeal to the Circuit Court of Appeals this judgment of affirmance was reversed, and the case was remanded for a new trial. 242 Fed. 405, - C. C. A. -. At this new trial additional evidence has been introduced. Upon consideration of all the evidence, I find the following facts:
Lew Loy is a Chinese person, and the son of Lew Fook Shing. The father, in October, 1910, when defendant entered the United States, was a'merchant resident in the United States. He was then, and from October 6, 1907, had been, interested in and connected with a store at No. 1261 Broadway, Oakland, Cal., which business was later removed to No. 527 Twelfth street, Oakland, Cal., and was there continued until a recent date. This appears from the testimony of de fendant, his father, and R. J. Faneuf, superintendent of the United States post office at Oakland, Cal.
Defendant arrived at the port of San Francisco on the steamship Mbngolia about October IS, 1910. lie was not permitted to land until about a month later, during which time the United States immigration officers investigated his right to be admitted. Witnesses were brought forward, who, it must be held, established to the satisfaction of these officials the defendant’s status as a minor son of Lew Fook Shing, and the latter’s status as a Chinese merchant lawfully in the United States, tie was thereupon permitted to enter, and a proper certificate was issued to him, bearing date of December 12, 1910. Attached to this certificate is a photograph plainly recognizable, notwithstanding the lapse of time, as the defendant. This certificate states defendant’s age as being 20. On this hearing defendant’s father testifies that his son was really only 19, as the age thus given is according to the Chinese rule of counting ages, which, it seems, treats a child as one year of age as soon as he is born, and two years of age at the next birthday of the Chinese emperor, even though that birthday should arrive one or two months after the birth of the child. I accept as true this statement, first, because the photograph attached to the certificate is obviously that of an immature youth; and, second, the father’s testimony in my presence convinced me that he was a witness entitled to full credit.
About a year later a younger son, named Lew Horn, arrived at the port of San Francisco, was also admitted as the minor son of a resident Chinese merchant, and is now, according to the testimony, at Los Angeles, Cal., engaged in business, not as a laborer, but as a Chinese merchant.
These two sons are the only children of Lew Fook Shing. The mother remains in China; and, in explanation, Lew Fook Shing testifies that she is a bound-foot woman, that she has a home, that he at one time furnished her with $2,000 in money, and has since sent her money to aid in her support; that, because she is a bound-foot woman, it is difficult for her to get about; that she likes to be with relatives, and is adverse to coming aboard a steamer.
Defendant, upon his arrival and after the delay in San Francisco, incident to establishing his right to enter, went to- Oakland, Cal. There is some uncertainty in the testimony as to how long he remained in Oakland and San Francisco before coming to Cleveland, Ohio. Defendant, when first arrested, April 30, 1914, at Cleveland, Ohio, was immediately interrogated by the immigration inspector, and at that time answered the question, “How long did you stay in Oakland?” “About one or two months; then I came here.” Upon the former hearing he said:
“I stayed, in San Francisco about, two months to learn the business, and then went, to Oakland and stayed with my lather about four months, and left Mm and came to Cleveland.”
His father on this hearing goes into greater detail, and says that when his son was, first admitted he came to his store and lived with his father at Oakland for a few months, then he went to San Fran cisco and stayed at the-Fook Weh store at No. 707 Grand avenue, for the purpose of learning the business, and attended school. Then,' about two months later, he returned to his father’s store at Oakland, remaining there some two months more, before his departure for Cleveland.
The father did not testify at the former hearing, but his statement was taken ex parte before an immigration inspector at San Francisco, and was introduced on behalf of the government. He was not asked how long his son had remained with him in Oakland, nor how long he remained in San Francisco. He does say that his son was engaged in learning business after his arrival and before his departure for the East.
I believe and find that the father’s statement of his son’s movements before coming East is true. The unrefreshed recollection of the son, made immediately upon his arrest, does not deprive his later testimony, or that of his father, of credibility, especially as other inaccuracies to the defendant’s prejudice in matters of time appear in the same statement.
Defendant came to Cleveland, Ohio, not later than six months after his arrival in the United States. He and his father say that he came in company with two Chinese merchants and family friends named Chin Check Weh and Dow Dim, and that he came for the purpose of finding a suitable location and engaging in business. He has not, since his arrival in Cleveland, been engaged in or connected with any mercantile business, but has lived with the owner of a laundry, and such labor as he has performed has been in and about that laundry; hence the government’s contention that he did not in fact and in good faith enter as the minor son of a Chinese merchant, but really for the purpose of engaging in the occupation of a laborer.
The government’s evidence, other than statements of.defendant and his father, shows only that defendant had worked in the laundry of Ben Hop Dee, 10613 Euclid avenue, during a period of less than one year prior to his arrest. The witnesses, William Graham, John G. Harvie, W. I. Rich, Frank M. Potter, Franklin J. Savesky, George F. Wilson, Joseph Francis, and H. T. Grubbs, testified June 4, 1915. None of them had seen the defendant more than two or three times; none of them fix the time at which he was seen in the laundry at work earlier than 13 months prior to this date. The others give dates ranging from 2 or 3 months to 6 months. He was apparently, as testified to by these witnesses, in working clothes, sometimes ironing, other times handing out laundry parcels, and apparently occupying the same relation to the business as any other Chinese person there employed. Defendant was arrested April 30, 1914, and practically all of the work thus done was at a date later than his arrest.
An inspection of defendant’s hands, made by the United States commissioner at the hearing May 22, 1914, and at the former hearing June, 1915, showed that the defendant’s hands were calloused, as those of a person doing manual labor. The defendant’s movements from the time he left-Oakland, shortly after his arrival,'until the time covered by the foregoing testimony, depend on his statements, those of his father, and Eoo Way, owner of the laundry in question.
Father and son have testified that the son left Oakland with the two Chinese merchants, as already stated; that when he left Oakland no definite destination was in the mind of any person; that these Chinese persons then believed that the Fast afforded good prospects for engaging in business; that the father furnished the son with ,$200 in money and intrusted him to the supervision primarily of Loo Lim. The father next heard from the son in Cleveland. All witnesses agree that he immediately took up his residence at the Ben Hop' Lee laundry. About a year later Loo Lim left Cleveland and went to Boston, later returning to Cleveland, and in 1913 returning to China. Chin Check Weh remained longer in Cleveland, but within a period of 2 years he disappeared; he was not produced at the trial, and his whereabouts, counsel state, are unknown. The father says he was advised that his son had been left with a friend of Chin Check Weh.
The son testifies that he made iuqífiries and investigations after his arrival in Cleveland, relating to his project of engaging in business, but admits he never engaged in any mercantile business. The evidence is inconclusive and unsatisfactory touching his efforts to engage in business.
I agree with the finding made at the former hearing that defendant’s statement that he remained continuously at this laundry until the time of his arrest, without laboring on bis own account, and depending exclusively upon remittances from his father for support, is too improbable to be believed. The greater probability is that at some time, either immediately after his arrival or more remotely he did engage in manual labor, and that such labor was in and about the Ben Hop Lee Laundry. This finding of fact, however, is not, in my opinion, controlling in the disposition of this case.
The father’s testimony on this hearing agrees with the son’s testimony on the former hearing, in that they say $200 was given by the father to the son when he started Fast, and that the father had sent him money from time to time thereafter, aggregating from $70 to $90 per year. The ex parte statement of the father, introduced on behalf of the government at the former hearing, does not mention the $200, and does say that $80 or $90 was all the money he had sent to his son. The father in the ex parte statement was not inquired of as to the money given to- his son at his departure, and, in explanation of the other statement, says that he understood the question asked and to be answered was liow much money he had sent his son this year. He also testifies to frequent communications by letter during this period of absence, but no letters are introduced.
The father impressed me as a witness worthy of credit, and as a person of the mercantile, and not of the laboring, class. His appearance and manner of testifying were substantial evidence of this conclusion. His intelligence was obvious, notwithstanding the difficulty of interrogating him through an interpreter. The son’s appearance also impressed me as that of an intelligent, clean-cut, young Chinese person, not of the laboring class.
From these facts, the ultimate question to be determined is whether or not defendant’s entry was in good faith in the interest of the re lationship of a minor son of a resident Chinese merchant, or was in bad faith and in reality as and for the purpose of immediately becoming a laborer, in evasion of the Chinese Exclusion Act. This ultimate conclusion must be drawn from the facts above found — in other words, is an inference from the other facts.
The law is settled that if the entry of the Chinese person is valid — that is, as a student or merchant — he does not lose his right to remain because subsequently thereto he changes his occupation and becomes a laborer. Liu Hop Fong v. United States, 209 U. S. 453, 28 Sup. Ct. 576, 52 L. Ed. 888; Lew Ling Chong v. United States (6 C. C. A.) 222 Fed. 195, 137 C. C. A. 635; Lam Fung Yen v. Frick (6 C. C. A.) 233 Fed. 393, 395, 147 C. C. A. 329, Ann. Cas. 1917C, 232; Lew Loy v. United States (6 C. C. A.) 242 Fed. 405, 155 C. C. A. 181; Lui Hip Chin v. Plummer (9 C. C. A.) 238 Fed. 763, 151 C. C. A. 613.
The inquiry, then, is whether or not, at the time of entry, the defendant was a minor son of a Chinese merchant, and, if a minor son of a Chinese merchant, was his real purpose then to obtain entry with a view to becoming a laborer? It is conceded that he was the minor son (of a Chinese merchant. The inference that his entry was unlawful and in bad faith results exclusively from his conduct after he departed from Oakland and arrived in Cleveland. Cases are cited in which it is said that if a Chinese person seeks admission as a merchant, and immediately after admission becomes and continues a laborer, this is strong evidence tending to show that he came into the United States as a laborer. United States v. Foo Duck (9 C. C. A.) 172 Fed. 856, 97 C. C. A. 204; Lew Loy v. United States, supra.
The weight to be accorded the inference from immediate adoption of the occupation of a laborer depends upon the circumstances. If the person thus entering obtains admission as a student or merchant, and immediately engaged in the employment of a laborer, great, if not controlling, weight should be attached thereto. If, however, such admission is obtained as the minor son of a Chinese merchant, and, in point of fact, he is such minor son of a Chinese merchant, the inference is less strong. If the minor is several years under age, the inference probably could not be made. Likewise, if of age, the force of the inference diminishes in proportion as the change of occupation is remote from the date of entry.
In the present case the defendant was at least 2 years under age, as I have already found, and for 6 months after his arrival he was domiciled with his father, or in close proximity to him, and was engaged in studying and learning business conditions. In this situation there is not such close proximity of time between his admission, arriving at full age, or engaging in labor, as to warrant a strong inference that his purpose in coming to the United States and obtaining admission was to engage in manual lahor. He did so engage at some time after his arrival in Cleveland; but another explanation, more probable than fraudulent entry, suggests itself for this conduct. Considering the father’s undoubted status here and in China as of the mercantile class, the greater probability is that both father and son in good faith entertained the belief, when defendant was admitted and for some period of time after his departure for the Blast, that the son would adopt and follow his father’s calling. Their obvious intelligence and apparent superiority to the ordinary Chinese person impresses me with the fact that defendant did not purposely and intentionally drop immediately into the laboring class, but that his doing so was the result of other conditions and circumstances.
My conclusion is that defendant entered lawfully and in good faith as the minor son of a Chinese merchant. This conclusion is emphasized by another consideration. The immigration officials at the port of San Francisco, upon his arrival, must be held to have investigated carefully his status and right to enter, consuming therein not less than one month’s time, and after doing so they found that he was entitled to be admitted and issued to him the usual certificate. His right to enter or to remain is not called into question until 3% years later, and then only because of fraud practiced in procuring admission, and not for any offense against the laws of the United States. This certificate of admission, having been produced on this trial, casts upon the government the burden of showing that the entry was not in fact for the purpose of conserving the family relation and following the occupation of a merchant, hut for the purpose of immediately becoming a laborer. Liu Hop Fong v. United States, supra; Lew Ling Chong v. United States, supra; Ong Chew Lung v. Burnett (9 C. C. A.) 232 Fed. 853, 147 C. C. A. 47; Wong Yee Toon v. Stump (4 C. C. A.) 233 Fed. 194, 147 C. C. A. 200; Lam Fung Yen v. Frick, 233 Fed. 393, 147 C. C. A. 329, Ann. Cas. 1917C, 232; Lew Loy v. United States, supra; Lui Hip Chin v. Plummer, supra.
|
10541802-15598 | RONEY, Senior Circuit Judge:
This appeal requires an answer to two discrete arguments concerning the sentence Bennie Ray Hardeman received when he pled guilty to conspiracy to possess crack cocaine. First, as to the argument that his criminal history was improperly increased by one point for a prior Texas misdemeanor conviction for failure to maintain financial responsibility, although presenting a difficult issue of first impression in this circuit, we reverse. Second, as to the argument that he was improperly denied a two point adjustment of his offense level for acceptance of responsibility, we affirm.
Prior Misdemeanor Conviction
Two years prior to sentencing, Harde-man pled nolo contendere in Texas to a second offense for failure to maintain financial responsibility, i.e., driving his automobile without insurance. The Texas Pe nal Code provided for punishment of a fine of $200 to $1,000 or up to 180 days of jail term, or both. Hardeman was sentenced to one day in jail and fined $250.
The district court added one point to Hardeman’s criminal history score for this offense. As a result, Hardeman received a total of 10 criminal history points, placing him in Criminal History Category V. Combined with an offense level of 16, this gave Hardeman a sentencing range of 41 to 51 months. He was sentenced to the maximum penalty. If the point had not been added, Hardeman’s 9 point criminal history would have fallen into Criminal History Category IV with a resultant range of punishment of 33 to 41 months in prison.
As a general rule, misdemeanor offenses are to be counted in computing a criminal history score. See United States Sentencing Commission, Guidelines Manual (U.S.S.G.) § 4A1.2(c). Guidelines sections 4Al.2(c)(1) and (c)(2), however, set out a list of certain offenses “and offenses similar to them” that are not to be counted. These listed offenses and those similar to them should be excluded, unless (A) the term of probation is greater than one year or the term of imprisonment is greater than 30 days, or (B) the prior offense is similar to the current offense. U.S.S.G. § 4A1.2(c)(l). Other listed offenses and those similar to them are never to be counted regardless of the penalty imposed. U.S. S.G. § 4A1.2(c)(2). Since defendant received only a one day jail term and the offense is not similar to a cocaine conviction, his misdemeanor conviction should not be counted if it is similar to one of the offenses on either list in the Guidelines.
The problem comes in trying to establish a method for deciding if one offense is “similar” to another. Hardeman argues for a comparative punishment approach, which would let the similarity of state punishment for the two offenses control the point. He contends that because the punishment for failure to maintain financial responsibility is almost identical to the punishment for the listed offenses of driving with a revoked or suspended license, it too should be excluded from his criminal history score. The Government points out that an analysis which focuses on state law in applying the Guidelines has generally been rejected by the courts. United States v. Brunson, 907 F.2d 117, 121 (10th Cir.1990); United States v. Martinez, 905 F.2d 251, 253 (9th Cir.1990). It maintains that such a method would run counter to the Sentencing Reform Act’s attempt to provide uniform treatment for similarly situated defendants. United States v. Unger, 915 F.2d 759, 762-63 (1st Cir.1990), cert. denied, — U.S. -, 111 S.Ct. 1005, 112 L.Ed.2d 1088 (1991).
The Government suggests instead that we compare the elements and purposes of each offense to determine whether they are similar. It contends that failure to obtain insurance demonstrates not simply indifference to the law, but indifference toward the public generally by leaving- other persons exposed to financial risk. This offense, it argues, contains this additional element which driving without a license does not, thus making them dissimilar.
Cases in other circuits have rather strictly followed the listed offenses and have generally been reluctant to expand the number of offenses which are “similar” to those listed. The opinions, however, provide little in the way of guidance and they fail to establish any kind of analytical framework from which to approach this issue. Most simply state, usually in a paragraph or less, that the offense the defendant is charged with is not similar to a listed offense. See, e.g., Unger, 915 F.2d at 763 (“[ujnder no stretch of the imagination” can the conduct underlying prior juvenile offense for waywardness be considered similar to status offenses like loitering); United States v. Russell, 913 F.2d 1288, 1294 (8th Cir.1990) (rejecting argument that conviction for assault and criminal damage to property is similar to disorderly conduct or disturbing the peace); cert. denied, — U.S. -, 111 S.Ct. 1687, 114 L.Ed.2d 81 (1991); United States v. Dillon, 905 F.2d 1034 (7th Cir.1990) (“While the exempted offenses listed by [defendant] are similar to the resisting arrest aspect of his prior offense, none of the exempted offenses is similar to the battery aspect of [defendant’s] prior conviction.”); United States v. Lewis, 896 F.2d 246, 250 (7th Cir.1990) (operating a motor vehicle while intoxicated is “under no stretch of the imagination” similar to any of the listed offenses).
The only decision outlining a position in any depth is the Ninth Circuit’s opinion in United States v. Martinez, 905 F.2d 251 (9th Cir.1990). The majority in that case adopted an approach which examines the level of culpability involved in the offenses being compared and the degree to which the unlisted offense indicates a likelihood of recurring criminal conduct. Judge Wallace in his concurring opinion took exception to the majority’s approach and stated that the court should simply compare the elements of the listed and unlisted offense to determine whether the two offenses are similar. See also Unger, 915 F.2d at 762 n. 5 (explicitly rejecting Martinez majority’s approach and accepting position of J. Wallace). He also noted that the method adopted by the majority is less useful when analyzing the offenses in subsection (c)(1), the section we address here, because that section contains offenses which do exhibit an element of culpable conduct. Id. at 256. The offenses listed in subsection (c)(2), in contrast, are rather innocuous offenses such as loitering or hitchhiking, offenses which are easily distinguishable from violations involving a greater degree of public concern.
We conclude that sentencing courts should not be restricted either by the method suggested by the parties or by the approach adopted by the majority in Martinez, with its focus on culpability and the likelihood of recurring criminal conduct. Vague as it may seem, we suggest a common sense approach which relies on all possible factors of similarity, including a comparison of punishments imposed for the listed and unlisted offenses, the perceived seriousness of the offense as indicated by the level of punishment, the elements of the offense, the level of culpability involved, and- the degree to which the commission of the offense indicates a likelihood of recurring criminal conduct. These factors should assist the district court in determining whether it makes good sense to include the offense in question in the defendant’s criminal history score.
This standard is consistent with the purpose of this section of the Guidelines: to screen out past conduct which is of such minor significance that it is not relevant to the goals of sentencing. Martinez, 905 F.2d at 253; United States v. Rich, 900 F.2d 582, 585 (2nd Cir.1990). The legislative history to this section reveals that the criminal history score is' designed to take into account the seriousness of the past offense and the degree to which it suggests the possibility of future criminality. Supplementary Report on the Initial Sentencing Guidelines and Policy Statements, at 42-43 (June 18, 1987) (frequency, seriousness, and recency of past offenses indicate likelihood of recurring criminal behavior and thus serve as the basis for the criminal history score); S.Rep. No. 225, 98th Cong., 2d Sess. 174, reprinted in, 1984 U.S.Code Cong. & Admin. News 3182, 3357 (same). As a result, if these tests for similarity, taken as a whole, indicate that the offense is, like the listed offenses, neither particularly serious nor likely to indicate recurring criminal conduct, then the defendant’s prior offense should be excluded.
In applying this standard to the present case, it is clear that the defendant’s prior conviction should have been excluded from his criminal history score. First, the offenses of driving with a revoked or suspended license and failure to maintain financial responsibility are similar under a comparative punishment approach. In Texas, a second offense for failure to maintain financial responsibility is a Class B misdemeanor punishable by a fine of between $200 and $1,000, confinement in jail for up to six months, or both. Tex.Rev.Civ.Stat. Ann. art. 6701h, § 1C (Vernon 1990); Tex. Penal Code Ann. § 12.22 (Vernon 1990). A first offense for driving with a- suspended or revoked license carries a fine of $100-$500 and a prison term of not less than 72 hours or more than six months. Tex.Rev. Civ.Stat.Ann. art. 6687b, § 34(e) (Vernon 1990). Based on this type of comparison, driving with a revoked license is a more serious offense than failure to maintain financial responsibility.
Second, Hardeman’s sentence of one day in jail and a $250 fine indicate that the offense should not be included in his criminal history score. The level of punishment imposed for a particular offense serves as a reasonable proxy for the perceived severity of the crime. Rich, 900 F.2d at 585. Section 4A1.2(c) itself uses the penalty imposed as a surrogate for severity in determining whether or not even the listed offenses should be included in the criminal history score. Under subsection (c)(1), otherwise minor offenses are to be included in the criminal history calculations if the defendant received a significant sentence, either 30 days of imprisonment or probation of more than a year. A comparison between the level of punishment for a listed and unlisted offense, therefore, is pertinent to determining if the unlisted offense, like the listed offenses, is sufficiently serious to warrant inclusion. Clearly, the State of Texas views these offenses as being comparable in terms of severity and views the individuals who violate these statutes as posing a similar threat to society.
We do not suggest that any offense which carries a penalty similar to that imposed for a listed offense should automatically be excluded from the criminal history calculation. The other factors involved may indicate that the defendant’s prior offense should be included.
Third, the elements approach, suggested by the Government, requires exclusion of this offense. This offense is similar to other listed offenses which involve regulations that must be complied with if one is to drive an automobile. The Government has argued that failure to maintain financial responsibility contains an element of indifference toward society, by leaving others exposed to the financial risk of an accident, which driving without a license does not. This element, however, does not distinguish this offense from the other listed offenses. An individual driving with a revoked or suspended license has been specifically instructed to give up his or her license. Continuing to drive, despite this explicit instruction, could be seen as demonstrating a willful indifference to society. The license may have been revoked because the individual drives recklessly, is a chronic drinker, is susceptible to strokes or periods of blackout, or a host of other reasons, but generally it is because some action or condition brings the individual's ability to drive safely into question.
In any event, an examination of the offenses listed in subsection (c)(1) reveals that many of these offenses also exhibit some measure of indifference to the public. This section lists disorderly conduct, gam bling, non-support, giving false information to a police officer, hindering a police officer, and trespassing, all of which are more than simple regulatory violations and which could, in certain circumstances, be interpreted as displaying a similar attitude of disrespect for others. In fact, the 1990 Amendments to this section add the offenses of careless or reckless driving and passing a check with insufficient funds to the list of excluded acts, both of which clearly exhibit indifference to society’s welfare and well-being. Cf. United States v. Aichele, 912 F.2d 1170 (9th Cir.1990) (pre-amendment decision rejecting argument that reckless driving should be excluded under this section); see also United States v. Kingston, 922 F.2d 1234, 1239 (6th Cir. 1990) (following Aichele). Moreover, several of the listed misdemeanors, such as child support, have immediate and certain adverse effects on others, while failure to maintain insurance results in harm only in the event the individual is involved in an accident. In that light, defendant’s offense is once again less serious than several of the listed offenses.
The discussion of the previous factors sheds considerable light on the remaining issues concerning both culpability and recurring criminal conduct. Although comparisons between the level of culpability exhibited by the unlisted offense and offenses mentioned in subsection (c)(1) is made more difficult by the fact that not all the offenses are mere regulatory violations, it is possible in certain circumstances to make distinctions. In this case, for example, the defendant’s prior offense demonstrates very little in the way of culpable conduct. It is merely a violation of one of many regulations concerning automobiles and clearly represents far less egregious conduct than the listed offense of reckless driving. Failure to maintain insurance is more like a local ordinance violation in the degree to which it represents a reprehensible or morally incorrect action.
It is also difficult to suggest that failure to maintain insurance has any more bearing on an individual’s likelihood of becoming involved in other criminal activity than any of the other offenses listed under subsection (c)(1). As the legislative history suggests, the seriousness of the offense is one indication of whether the offense has any predictive capacity for future criminality. In view of the light sentence Harde-man received for this offense and the regulatory nature of the violation, we do not believe his conviction for failure to maintain insurance has any bearing on whether Hardeman is likely to commit other crimes in the future.
Under this type of analysis, defendant’s conviction for driving without adequate insurance fits comfortably within the enumerated offenses, and is sufficiently similar to those crimes that it should have been excluded from the calculation of his criminal history score.
Acceptance of Responsibility
Defendant contends that he was entitled to a reduction of his offense level by two points under Sentencing Guidelines § 3E1.1 because of his acceptance of responsibility. Due to the unique position of the sentencing judge in determining the degree to which a defendant has accepted responsibility for his acts, a trial court will not be reversed on this issue unless clearly erroneous. United States v. Thomas, 870 F.2d 174, 176 (5th Cir.1989).
|
1980369-9771 | SOPER, Circuit Judge.
This civil action was brought by William Luther Blankenship against Eller-man’s Wilson Line New York, Inc., owner of the SS Bassano, for injuries suffered by him on February 26, 1956, in the nighttime, while engaged as a carpenter in repairing and constructing grain fittings in the No. 2 hold of the ship in the Port of Baltimore.
The complainant and nine other carpenters were employed by Oriole Ship Ceiling Co., Inc., the contractor in charge of the work. During the progress of the work the complainant was engaged in nailing a niece of timber to the wall of the hold while standing on a scaffold and the other carpenters in the gang were hoisting excess lumber out of the hold by means of a winch and cable. In so doing the draft of boards came in contact with the scaffold and dislodged it, causing the complainant to fall a distance of 10 feet to the bottom of the hold and to sustain substantial injuries.
The gist of the action is that the accident was due to insufficient lighting in the hold and that the owner of the ship failed in its duty to furnish a seaworthy vessel and also neglected to furnish a safe place for the complainant to work. The owner filed a third-party complaint against Oriole, alleging that the complainant’s injuries were due to the negligence of Oriole’s employees. Oriole filed an answer and joined issue on this charge.
The evidence on the question of lighting was conflicting. There was testimony that two clusters of lights were furnished by the ship and lowered into the hold by the carpenters; that each cluster consisted of five or six bulbs, of which one-third were burned out; that it was the regular practice to use four clusters, one in each corner of the hold, for such work; and that it was a dark night and the lighting was insufficient. There was also evidence that the carpenters from time to time asked members of the crew for more lights but were told that no more lights were available.
On the other hand there was testimony that three 250-watt electric bulbs, and not clusters of lights, were furnished by the ship and installed in the hold, which afforded adequate light for the purpose — as good as that furnished at any other time — and that no one complained to the foreman of Oriole or asked for additional lights, which Oriole could have furnished if needed.
The case was submitted to the jury on four issues, as follows:
1. Did any unseaworthiness of the SS Bassano cause or contribute to the accident of which the plaintiff complains? Yes- No-
If question 1 is answered “No”, it is not necessary to answer the other questions.
2. If question 1 is answered “Yes”, was such unseaworthiness caused by any negligence on the part of Oriole Ship Ceiling Company or of any officer or employee of said Company? Yes-No —--
3. Did any negligence of the plaintiff cause or contribute to the accident of which he complains? Yes - No -
4. Was the accident of which the plaintiff complains the result of risks or hazards which he voluntarily assumed? Yes-No-
The jury answered the first question “No” in favor of the ship owner so that it was not necessary for them to answer the remaining questions. The court entered judgment on the verdict in favor of the owner of the ship and of the third-party defendant against the complainant for costs and dismissed the third-party complaint without prejudice since it had become moot.
On this appeal it is contended, first, that the judge erred in holding that there was no evidence legally sufficient to prove that the plaintiff was injured by the negligence of the defendant and in refusing to submit a separate question on this subject to the jury. The judge based this ruling on the ground that there was no claim and no evidence that any officer or member of the crew or any agent of the defendant was negligent in any way except insofar as there was evidence of failure on the part of the ship to furnish adequate lighting for the work that was in progress, and that this matter was placed in the light most favorable to the plaintiff in the charge to the jury on the subject of seaworthiness. The jury were told that it was the duty of the owner of the ship to provide a seaworthy ship with appurtenant appliances and equipment, that this duty was absolute and not dependent upon negligence, that it was inalienable and continuing, and that proof of injury caused by the existence of unseaworthiness was all that was necessary to impose liability on the owner of the ship. Under these circumstances there was no error on the part of the judge and no prejudice to the plaintiff.
In the next place, the plaintiff contends that the judge erred in refusing to instruct the jury that the ship owner was not relieved from liability to the plaintiff if he was injured by reason of the unseaworthiness of the ship merely because the unseaworthiness was attributable to the negligence of his fellow employees rather than the negligence of the owner. This argument relates to evidence tending to show that the plaintiff’s fellow workmen, in removing the draft of lumber from the hold, negligently displaced the lighting appliances so that they thereupon became inadequate. It is contended that if the jury should find that such a state of affairs existed, then there would be a breach of the duty of the owner to furnish a seaworthy ship with its attendant liability under such decisions as Mahnich v. Southern S.S. Co., 321 U.S. 96, 64 S.Ct. 455, 88 L.Ed. 561, and Petterson v. Alaska S.S. Co., 9 Cir., 205 F.2d 478, affirmed 347 U.S. 396, 74 S.Ct. 601, 98 L.Ed. 798.
We do not think that this position is tenable. The established rule in admiralty in the United States prior to legislative changes was that a seaman could recover damages for unseaworthiness but could not recover damages for the negligence of a ship’s officer or member of a crew, The Osceola, 189 U.S. 158, 23 S.Ct. 483, 47 L.Ed. 760; Mahnich v. Southern S. S. Co., supra, 321 U.S. at page 99, 64 S.Ct. at page 457; and the courts have not as yet generally accepted the view that the obligation of seaworthiness has been so extended that a seaman may now recover damages from the shipowner for injuries caused by the negligence of a stevedoring contractor contemporaneous with the use of seaworthy appliances whereby a condition of unseaworthiness is created. See Freitas v. Pacific-Atlantic S. S. Co., 9 Cir., 218 F.2d 562; Imperial Oil Ltd. v. Drlik, 6 Cir., 234 F.2d 4; Crumady v. The Joachim Hendrik Fisser, 3 Cir., 249 F.2d 818, certiorari granted, 357 U.S. 903, 78 S.Ct. 1150, 2 L.Ed.2d 1154. (The judg- Blent of the Court of Appeals in the last mentioned case was reversed by the Supreme Court on the ground that its finding that the vessel was seaworthy was erroneous, 79 S.Ct. 445. Cf. Grillea v. United States, 2 Cir., 232 F.2d 919; Titus v. Santorini, 9 Cir., 258 F.2d 352, 355; Petterson v. Alaska S. S. Co., 9 Cir., 205 F.2d 478, affirmed 347 U.S. 396, 74 S.Ct. 601, 98 L.Ed. 798.
The plaintiff also contends, under the authority of Seas Shipping Co. v. Sieracki, 328 U.S. 85, 66 S.Ct. 872, 90 L.Ed. 1099, that there was error in refusing an instruction requested by him that he and the other carpenters employed by Oriole became members of the crew while working on the ship, and hence the shipowner became liable to him for injuries caused by their negligence. Sieracki does not support this proposition. Liability in that case was not based on the negligence of the shipowner. It extended the obligation of seaworthiness, traditionally owed by the shipowner to the seaman, to include stevedores working on board the ship as employees of an independent contractor. It did not extend the liability of the shipowner for negligence of members of the crew to include liability for the negligence of employees of an independent contractor. See Fireman’s Fund Indemnity Co. v. United States, 5 Cir., 211 F.2d 773; Berti v. Compagnie De Navigation Cyprien Fabre, 2 Cir., 213 F.2d 397; Freitas v. Pacific-Atlantic S. S. Co., 9 Cir., 218 F.2d 562; Crumady v. The Joachim Hendrik Fisser, 3 Cir., 249 F.2d 818, certiorari granted 357 U.S. 903, 78 S.Ct. 1150, 2 L.Ed.2d 1154; Ventrone v. United States, 134 F.Supp. 169, affirmed 2 Cir., 239 F.2d 862.
There remains the question that the judge erred not only in refusing the plaintiff’s request to instruct the jury that the plaintiff in the performance of his duties was not deemed to assume the risk of unseaworthy appliances, but also in submitting to the jury at the request of the defendant the question whether the accident was the result of risks or hazards which the plaintiff voluntarily assumed. The plaintiff did not request an instruction as to the assumption of the risk as a separate proposition of law but coupled it with the instruction that the ship owner was liable to the plaintiff if he was injured as a result of unseaworthiness even if the unseaworthiness was attributable to the negligence of his fellow workers. Since the last mentioned position was unsound, for the reasons indicated above, the instruction was properly refused and in this respect the plaintiff has no just cause of complaint. However, the plaintiff objected separately to the submission of the issue of the assumption of the risk on the ground that it was not appropriate in a case involving unseaworthiness, and hence the matter was specifically drawn to the attention of the court. The judge was of the view that assumption of the risk is not a defense to a condition of unseaworthiness. Nevertheless, being uncertain as to what the final decision on the question might be in the appellate courts, he submitted the issue so that the fact might be established one way or the other for the aid of the courts in reaching a final determination.
|
6118412-18524 | MEMORANDUM
JAMES N. GABRIEL, Bankruptcy Judge.
STATEMENT OF FACTS:
In these two adversary proceedings, the Chapter XI and Chapter 11 debtor nursing homes (“debtors” or “nursing homes”) seek to enjoin the Commonwealth of Massachusetts Rate Setting Commission (“Commission”) from making deductions because of the debtors’ “negative equity” for numerous years prior to 1979. After evidentiary hearing on the debtors’ Motion for Preliminary Injunction, and based upon the pleadings, agreed facts, and testimony, the Court makes the following findings.
West Side Corporation, Claflin Hill Corporation, Houghton Corporation and First Ipswich Company, Inc. filed Chapter XI Petitions under the former Bankruptcy Act on September 6, 1979. Dartmouth House Nursing Home, Inc., St. John’s Nursing Home, Inc., and Erlin Manor Nursing Home, Inc. filed Chapter 11 Petitions under the Bankruptcy Code on December 31,1981. Each debtor has been retained as debtor-in-possession, and provides long-term health care to patients who qualify for Medicaid, under the Social Security Act, 42 U.S.C. Section 1396 et seq. Pursuant to the Medicaid statute, the Massachusetts Department of Public Welfare is required to reimburse participating nursing homes for the costs of health care services to Medicaid patients. Massachusetts, by statute, has established a regulatory scheme for setting the rates of reimbursement, whereby the Rate Setting Commission establishes the binding rate. See 114.2 C.M.R. 2.11. An interim rate is set for all facilities for an annual period commencing July 1 of each year. At the end of each calendar year, a provider must submit cost reports to the Commission which is then bound to set the final rate of payment within a reasonable time. Any difference between the final rate and the interim rate is either an obligation of the state or of the home depending on whether the final rate is lower or higher than the interim rate. The final rate is a calculation of reasonable operating costs on a per diem basis based on a number of elements: an administration policy planning allowance, reasonable costs for patient care, and prior to 1979 there was an adjustment for positive or negative equity capital. 114.2 C.M.R Section 2.06-2-11.
Prior to setting the final rates, the Commission conducts a field or desk audit to determine a provider’s allowable costs. It disallows unreasonable, unnecessary and unsubstantiated costs, plus those exceeding the Commission’s limits. In addition, prior to 1979, the Commission calculated into the rate an “equity factor”, which is the subject of this dispute. The equity regulation was repealed by the Massachusetts legislature effective as of November 1,1979. The rate of a provider with a negative equity position was decreased by a determined percentage of the average equity capital divided by the number of patient days. The negative equity assessment was made after the Commission’s determination of the provider’s allowable expenses for patient care. 114 C.M.R. Section 2.09(1). It was not imposed however, on non-profit homes or on those which had negative equity because their costs exceeded state limits.
The rate of a provider with a positive or zero equity remained unaffected by the equity factor, and its costs would be fully reimbursed. If a provider had a negative equity, however, the final rate would be decreased so that allowable costs would not be fully reimbursed. In these cases the negative equity deduction was computed in accordance with the regulation by first determining each facility’s average equity capital. This was essentially a determination of a home’s worth, less certain items excluded by the state, such as notes owed by insiders and mortgages incurred after construction. Next, the state applied an interest rate which differed from year to year, and then divided this by patient days to figure the per diem negative equity deduction. The Commission finally subtracted this amount from the debtor’s allowable fixed and variable costs in determining the final rates. The effect of the deduction was to deny the provider reimbursement for services already provided.
No final rates had been established for these homes for years 1977, 1978 or 1979 as of the date of the filing. In December, 1981 the Commission set the 1976 rate. In August 1983 the Commission announced proposed final rates for years 1977, 1978, 1979 and 1980. After the filing of these adversary proceedings and after counsel for the Commonwealth had agreed to maintain the status quo, the Commission set the final rates as proposed. The debtors’ rates included deductions totalling one-million two hundred eighty-two thousand dollars ($1,282,000) by reason of the negative factor.
THE COMMONWEALTH’S MOTION TO DISMISS:
The Commonwealth moves to dismiss the debtors’ complaints in both the Act and Code cases, raising numerous objections to this Court’s jurisdiction to enjoin the negative equity assessment.
The Commonwealth contends that the Court lacks jurisdiction over the adversary proceedings in the Code cases because of the Supreme Court’s decision in Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). The Commonwealth argues that Northern Pipeline struck down the entire jurisdictional grant of Section 1471 depriving district courts as well as bankruptcy courts of all jurisdiction. Thus, it argues the Emergency Rule adopted in this district is invalid. There is authority in support of the Commonwealth’s position. E.g., In Re Herrero, 10 B.C.D. 123 (D.Colo. 1983); In Re Color Craft Press, Ltd., 36 B.R. 680, 10 B.C.D. 53 (D.Utah 1983).
The emergency rule has however, been upheld by every court of appeals which has examined it. See In Re White Motors Corp. v. Citibank, 704 F.2d 254 (6th Cir.1983); Matter of Hansen, 702 F.2d 728 (8th Cir. 1983); In Re Braniff Airways, 27 B.R. 231 (D.C.Tex.1983); aff’d, 700 F.2d 214 (5th Cir. 1983); In Re Coastal Steel Corp., 709 F.2d 190 (3d Cir.1983). Moreover, the rule has been held valid in this district by the district court, In Re WHET, Inc., Slip Opinion No. 80-1542-HL-T (D.Mass. May 16, 1983), and by two judges of the bankruptcy court for this district. In Re Lipman Bros., 27 B.R. 529 (Bkrtey.D.Mass.1983); In Re Sentinel Energy Control Systems, Inc., 27 B.R. 795 (Bkrtcy.D.Mass.1983).
This Court is mindful of the many difficulties created by the emergency rule’s re sponse to Congress’ failure to remedy the Code’s jurisdictional defect. I believe it presumptuous, however to depart from the Rule’s directive contrary to the decisions of the courts of appeals and contrary to the decisions in this jurisdiction upholding the rule. More importantly, a determination that the rule is invalid would deprive debtors and creditors of any bankruptcy relief, and would create such enormous chaos as to be an abandonment of judicial responsibility. Therefore, I will exercise that jurisdiction granted by the emergency rule.
Under the terms of the rule, the Bankruptcy Court may enter a judgment in “non-related” proceedings, which includes matters concerning estate administration, claims against the estate, turnover of estate property, and “similar matters.” Emergency Rule, December 24, 1982, sub-section (d)(3)(A). In related proceedings, the Bankruptcy Court is not empowered to enter orders, but must propose orders and findings to the District Court. Related proceedings are “civil proceedings that, in the absence of a petition in bankruptcy, could have been brought in a district court or a state court and include claims brought by the estate against parties who have not filed claims against the estate.” Emergency Rule, subsection (d)(3)(A). The term “claim” as defined in the Code means “right to payment ... whether reduced to judgment, liquidate, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal equitable, secured or unsecured”.
These adversary proceedings are not related proceedings, but rather are matters arising under Title 11. The question presented in these cases is whether the state’s reduction of the debtors’ rates constitutes a claim for a penalty which should be subordinated or disallowed in the distribution scheme of Chapter 11. Resolution of this issue requires interpretation of Code sections 507, 726 and 1129. This action could not have been brought in a state or district court but can only be resolved in a bankruptcy forum.
The absence of a claim filed by the Commonwealth does not alter this conclusion, because in effect, and directly, the Commonwealth is asserting a right to payment against the debtor’s right to reimbursement. Accordingly, these adversary proceedings are subject to judgment by this Court.
The Commonwealth moves to dismiss the complaints in the Act cases on the ground the controversy is beyond the summary jurisdiction of the bankruptcy courts under the former Act. The Commonwealth’s argument ignores Section 2a(15) of the Act, which empowers bankruptcy courts to “make such orders and enter such judgments in addition to those provided for, as may be necessary for the enforcement of the provisions of the Act”. Bankruptcy Act, Section 2a(15), 11 U.S.C., Section lla.(15) (repealed October 1, 1979). This broad grant of residual equitable jurisdiction includes the power to issue injunctions to protect the assets of the Chapter XI debtor as a means to achieve the ultimate aim of rehabilitation and to prevent interference with the Court’s administration of the case. J. Moore, 1 Collier on Bankruptcy, Section 2.61, at 324-25 (14th ed. Supp. 1982).
The Commonwealth is correct in pointing out that the Act does not confer jurisdiction over all controversies that in some way affect the debtor’s estate. Callaway v. Benton, 336 U.S. 132, 142, 69 S.Ct. 435, 441, 93 L.Ed. 553 (1949). However, where there exists a controversy over a property interest of the estate, the Court has jurisdiction to enjoin interference with the property interest. There is no doubt that the debtors’ right to reimbursement is a property interest of the estate. This Court may enjoin interference with this asset. See American Training Services, Inc., vs. Veterans Administration, 434 F.Supp. 988, 992 (D.N.J.1977). There, the district court sustained bankruptcy court jurisdiction over an action by the debtor, a school, seeking an injunction against the Veterans Administration to compel it to pay students benefits directly to the school. Id. at 990. Basing the existence of jurisdiction to enjoin the V.A. on section 2a(15), the Court found that the V.A.’s action impaired a substantial property interest—the estate’s entitlement to benefits—to the detriment of creditors, and interfered with the object of reorganization. Id. at 992. The Court rejected the assertion that since a V.A. administrative regulation barred the direct payment procedure, that it was without power to adjudicate the dispute. Id. at 992. Similarly, in the present case, the state has asserted a right to deduct amounts from debtors’ entitlement to reimbursement. This is a controversy over a substantial property interest of the debtors over which this Court has jurisdiction to entertain a request for equitable relief.
The defendant relies on French and Polyclinic Medical School and Health Center, Inc. v. Associated Hospital Service of New York, 387 F.Supp. 1359 (S.D.N.Y.1973) in support of its contention that this Court lacks jurisdiction over an action to recover the difference between rates paid and alleged allowable rates. Although that decision did hold such an action a plenary suit, the Court’s reasoning was based on 28 U.S.C. Section 1334, which gives district courts bankruptcy jurisdiction, and did not consider Section 2a(15) or any other jurisdictional grant under the Act. Id. at 1362.
Third, the Commonwealth moves to dismiss all the complaints in both the Act and Code cases on the ground that the negative equity assessment is purely a state regulatory function of the rate setting system in which the bankruptcy court has no jurisdiction to interfere. The Commonwealth asserts that the Court must defer to the absolute exclusive jurisdiction of the Rate Setting Commission.
The Supremacy Clause of the United States Constitution provides that Congress shall establish uniform bankruptcy laws throughout the United States U.S.C.A., Constitution, Article I, Section 8. Where Congress has enacted bankruptcy legislation which conflicts with state law, state law must yield. Johnson v. First National Bank of Montevideo, 719 F.2d 270, 273 (8th Cir.1983). Thus, even though a state regulation may be viable in the state sphere, once it conflicts with bankruptcy law, it loses its validity in the bankruptcy context. Matter of the Bohack Corp., 2 B.C.D. 1740, 1742 (Bankr.E.D.N.Y.1977). See Perez v. Campbell, 402 U.S. 637, 652, 91 S.Ct. 1704, 1712, 29 L.Ed.2d 233 (1971).
The issue presented in this case is whether the state’s negative equity assessment is incompatible with bankruptcy law because it is in essence a penalty. Whether a claim is a penalty presents a purely bankruptcy question. In Re Idak Corp., 19 B.R. 765, 769, 771 (Bkrtcy.D.Mass.1982). The debtors are not requesting that the Court redetermine the debtors’ rates but rather request the Court to examine whether the application of the negative equity factor is in effect a penalty which is contrary to bankruptcy law.
The Commonwealth asserts that this Court is prohibited from entertaining the present actions because debtors are seeking a redetermination of their rates, establishment of which is solely within the state’s police power. Courts have consistently distinguished governmental actions which attempt to obtain a pecuniary advantage from those which attempt to further the public welfare. See, e.g., In Re Aegean Fare, Inc., 35 B.R. 923 (Bkrtcy.D.Mass. 1983). The former are subject to the Bankruptcy Code’s automatic stay provisions and injunctive power. Missouri v. U.S. Bankruptcy Court for the E.D. of Arkansas (Lindsey), 647 F.2d 768 (8th Cir. 1981). The latter are exempt from bankruptcy court interference. Colonial Tavern, Inc. v. Byrne, 420 F.Supp. 44 (D.Mass.1976).
A state’s regulatory action in enforcing a monetary assessment against a provider because of alleged financial difficulties is not, in my view, in furtherance of the public health, safety and welfare. Rather, the monetary assessment is an attempt to regulate the financial structure of the debtors. In Re Idak Corp., 19 B.R. 765 (Bkrtcy. D.Mass.1982). Accordingly, adjudication of whether the assessment constitutes a penal ty does not interfere with the state’s legitimate exercise of its police power.
Next, the Commonwealth contends that the complaints in both cases should be dismissed because the debtors have failed to exhaust required administrative remedies under state law. Any provider aggrieved by a final rate has the right to appeal to the Division of Hearing Officers and if unsatisfied by that ruling to the Superior Court. 114 C.M.R. 2.25. Normally, an aggrieved party would be required to follow the administrative route prior to seeking relief in court. Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463-464, 82 L.Ed. 638 (1938). Where, however, the challenge to the deduction is based upon grounds available only in bankruptcy proceedings, exhaustion of state law remedies is not required. In Re Idak Corp., 19 B.R. 765 (Bkrtcy.D.Mass. 1982). For the same reason, the Court rejects the contention that these adversary proceedings are an impermissible collateral attack requiring dismissal of these adversary proceedings. The Commonwealth asserts that the rates are binding on the homes unless modified by appeal. The debtors’ challenge to the application of the negative equity factor is not a request for redetermination of the allowable reimbursement under state law. A different issue is raised by the request for injunctive relief— whether the deductions are penalties contrary to bankruptcy law. The challenge is limited to a claim that the deductions are unenforceable in bankruptcy, which this Court is competent to determine.
Finally, I reject the Commonwealth’s assertion that the debtors have waived their right to contest the negative equity deduction because they have agreed to accept the final rates as set by the commission in the provider contracts. The debtors’ agreement to accept the final rates established by the Commission does not preclude the current challenge, which is based solely on bankruptcy law.
REQUEST FOR INJUNCTIVE RELIEF:
The debtors request that the Court enjoin the challenged deductions because they translate into penalties. Claims for penalties are accorded different status under the old Act and the Code. The former Bankruptcy Act specifically disallowed, in full, fines, penalties, or forfeiture claims by a governmental unit which were not compensation for actual pecuniary loss. Bankruptcy Act, Section 57j, 11 U.S.C. Section 93j (repealed October 1, 1979). See In Re Kline, 403 F.Supp. 974 (D.Md.1975), aff’d 547 F.2d 823 (4th Cir.1977).
The Bankruptcy Code, in contrast, does not prohibit allowance of such claims. Rather, Section 726(a)(6) recognizes such claims, but subordinates them to a position inferior to all other claims in the order of distribution. 11 U.S.C. Section 726(a)(6) (1979). Initially, however, it appears that the distribution rules of Section 726 are inapplicable in Chapter 11 cases. 11 U.S.C. Section 103(b) (1979). Upon closer examination and analysis, it is my conclusion that claims for penalties should be subordinated in Chapter 11 as well as in Chapter 7 cases. A contrary conclusion would be inconsistent with Section 1129 of the Code. This section requires, as a prerequisite to confirmation of a Chapter 11 plan, that the plan provide creditors, including unsecured claimants, the amount they would receive if the debtor were liquidated under Chapter 7. 11 U.S.C. Section 1129(a)(7)(A)(ii). Thus, if in Chapter 11 cases, penalties were treated on a parity with unsecured claims, the amount of unsecured liabilities would increase, and the proportional dividend to Chapter 11 unsecured creditors would not be equivalent to their distribution in a Chapter 7. If claims for penalties were allowed in Chapter 11, no Chapter 11 plan could be confirmed because creditors would receive more in Chapter 7. Accordingly, under the Code claims for penalties are accorded inferior status in Chapter 11.
|
4165227-22356 | ORDER
JANE MAGNUS-STINSON, District Judge.
Presently before the Court is Defendant Firestone Natural Rubber Company’s (“FNRC”) Motion for Judgment on the Pleadings or, in the Alternative, for Summary Judgment. [Dkt. 208]. As filed, it sought judgment under either Federal Rule of Civil Procedure 12(c) or Rule 56. But because the motion relied upon materials outside the pleadings — an impermissible circumstance for any judgment entered under Rule 12(c) — the Court previously announced that it would treat the motion exclusively as one requesting summary judgment under Rule 56. [Dkt. 234 at 2 (converting request for judgment on the pleadings to request for summary judgment, as permitted under Fed. R. Civ. Pro. 12(d))].
Background
Following the Court’s ruling on Firestone’s motion to dismiss, [dkt. 40], only one potential cause of action remains in this action: a cause of action authorized by the Alien Tort Statute (the “ATS”), 28 U.S.C. § 1350. That statute provides that “[t]he district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350. The Court held that Plaintiffs — a group of Liberian children' — could state a cause of action under international law by alleging (1) that an FNRC subsidiary named Firestone Liberia, Inc. (“Firestone Liberia”), formerly called Firestone Plantations Company, was “encouraging] and even requiring] [Plaintiffs’ guardians] to put their children to work” on the Liberian rubber plantation where the guardians were employees and (2) that the work that the Plaintiffs were being forced to do was so hazardous, oppressive, and injurious to their moral development as to constitute a prohibited “worst form” of child labor under ILO Convention 182, an international convention ratified by both the United States and Liberia (among many other countries). [Id at 63, 67-69].
Because Plaintiffs couldn’t obtain service on Firestone Liberia, it was dismissed. [Dkt. 69]. Plaintiffs’ worst-form-of-child labor claim proceeds against FNRC because Plaintiffs contend that FNRC was responsible for the actions and inactions of its subsidiary, Firestone Liberia. [See dkt. 2 ¶¶ 73-75].
Through the present motion, FNRC has moved for summary judgment on several grounds. One of those grounds is that “international law does not impose liability on corporations” and, thus, Plaintiffs have no cognizable cause of action against FNRC. [Dkt. 209 at 31].
On September 17, 2010, while FNRC’s motion for summary judgment remained under advisement, the Second Circuit handed down its opinion in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir.2010). There, in one of the few appellate decisions to interpret the ATS, the majority held that the ATS does not authorize subject-matter jurisdiction for a federal court to hear claims brought against corporations — only against individuals. Id. at 147.
Because the Seventh Circuit hasn’t addressed the issue of corporate liability in claims brought under the ATS, the Court ordered supplemental briefing on this new, out-of-Circuit, appellate authority. The parties submitted their briefs on September 24. [Dkt. 597-98].
Discussion
Because Kiobel frames the issue of potential corporate liability under the ATS as a jurisdictional one, the Court must first consider whether it has jurisdiction to decide whether Plaintiffs can state a claim against FNRC. After concluding that the Court does, in fact, possess jurisdiction, the Court will decide whether an ATS claim against a corporation fails to state a valid cause of action, thereby entitling FNRC to summary judgment on the merits.
A. Does the Court Have Jurisdiction to Hear an ATS Claim Filed Against FNRC?
The issue of subject-matter jurisdiction “refers to a tribunal’s power to hear a case. It presents an issue quite separate from the question whether the allegations the plaintiff makes entitle him to relief.” Morrison v. Nat’l Austl. Bank Ltd., — U.S.-, 130 S.Ct. 2869, 2877, 177 L.Ed.2d 535 (2010) (quotation omitted). A court with subject-matter jurisdiction can tell the plaintiff that the plaintiff wins or loses under the law. A court without subject-matter jurisdiction may tell the plaintiff only that “you have selected the wrong forum for your dispute” and generally may not opine about the merits. See, e.g., T.W. v. Brophy, 124 F.3d 893, 898 (7th Cir.1997) (explaining that a dismissal for lack of jurisdiction is not a determination on the merits, thus permitting the plaintiff to re-file the same suit in any other forum where jurisdiction may be had).
There is, however, one small exception to the rule that the jurisdictional inquiry completely differs from a merits inquiry. If a claim theoretically within a court’s jurisdiction is “so insubstantial, implausible, foreclosed by prior decisions of [the Supreme Court], or otherwise completely devoid of merit as not to involve a ... controversy,” Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 666, 94 S.Ct. 772, 39 L.Ed.2d 73 (1974) (collecting cases) — in other words, if it is “wholly insubstantial and frivolous,” Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 90 L.Ed. 939 (1946) — a federal court will lack subject-matter jurisdiction over the claim.
As mentioned above, Kiobel held that the ATS doesn’t confer jurisdiction upon the federal courts to hear claims filed under the ATS against corporations because, in its view, international law has never embraced the concept of corporate liability. The majority’s opinion, however, resulted in a very spirited eighty-seven page concurrence from Judge Leval rejecting that holding as a misinterpretation of international law. Further, the majority’s rule conflicts with the law in the Eleventh Circuit that courts not only have jurisdiction to decide whether corporations may be civilly liable under the ATS, but that corporations are, in fact, liable. Romero v. Drummond Co., 552 F.3d 1303, 1315 (11th Cir.2008) (“The text of the Alien Tort Statute provides no express exception for corporations, see 28 U.S.C. § 1350, and the law of this Circuit is that this statute grants jurisdiction from complaints of torture against corporate defendants.” (citation omitted)).
Given that neither the Seventh Circuit nor the Supreme Court has definitively resolved the issue, and given the significant conflicting authority on the issue from outside this Circuit, the Court cannot find Plaintiffs’ theory of ATS corporate liability “wholly insubstantial and frivolous,” Bell, 327 U.S. at 682-83, 66 S.Ct. 773, so as to deprive the Court of jurisdiction to consider the merits of their legal claim against FNRC.
B. Is FNRC Entitled to Summary Judgment Because It Is a Corporation?
Because the material facts relevant to the narrow issue of corporate liability are undisputed — that is, everyone agrees that FNRC is, in fact, a corporation — the Court must enter summary judgment in FNRC’s favor if a corporation cannot be held liable for the actions of its employees in an action filed under the ATS. See Fed. R. Civ. Pro. 56(c) (specifying that summary judgment is available when “there is no genuine issue as to any material fact and ... the movant is entitled to judgment as a matter of law”).
As this Court has explained previously, “the Supreme Court gave its first [and only] detailed consideration to the scope of the ATS in Sosa v. Alvarez-Machain, 542 U.S. 692, 124 S.Ct. 2739, 159 L.Ed.2d 718 (2004).” [Dkt. 40 at 39]. There, the Supreme Court explained that the First Congress enacted the ATS to ensure that the federal courts would be available to hear civil actions alleging violations of international law if the states continued, as they did under the Articles of Confederation, to refuse to open their courthouse doors to aliens raising such complaints, a situation that was jeopardizing the diplomatic relations of the young nation. See Sosa, 542 U.S. at 716-17, 124 S.Ct. 2739. Sosa held that the ATS permits federal courts to “recognize private causes of action for certain torts in violation of the law of nations” and already recognized at common law at the time of the First Congress: “violation of safe conducts, infringement of rights of ambassadors, and piracy.” Id. at 724, 124 S.Ct. 2739. In recognition of the constantly changing nature of international law, however, it also held that federal courts can recognize new federal common-law causes of action for violations of other international norms that are, among other things, as “specific, universal, and obligatory” as the original three international norms that existed at the time of the First Congress. [Dkt. 40 at 41 (explaining that Sosa cited with approval that test, formulated in the Ninth Circuit, and then applying it to Plaintiffs’ claims here) ].
Although Sosa permitted the courts to recognize new causes of action, it “posted many warning signs against judicial innovation under the ATS.” [Id.]. For example, it explained that the federal courts are, under our Constitution, generally ill-equipped to make a “legislative judgment” about when “conduct should be allowed or not” and, even if the law should prohibit certain conduct, whether “to permit enforcement [of the law] without the check imposed by prosecutorial discretion.” Sosa, 542 U.S. at 727, 124 S.Ct. 2739. Nonetheless, Sosa permits courts to recognize new causes of actions if violating a specific, universal, and obligatory international norm would render the perpetrator “hostis humani generis, an enemy of all mankind.” Id. at 732, 124 S.Ct. 2739 (quotation omitted). Thus, the Supreme Court declared that the door to new cognizable claims was only left “ajar subject to vigilant doorkeeping.” Id. at 729, 124 S.Ct. 2739.
Here, the Court has previously concluded that Plaintiffs’ allegations of being forced by Firestone Liberia employees to perform “worst” forms of child labor could squeeze through the door that Sosa left ajar. [See dkt. 40]. In so holding, the Court implicitly assumed — because it was required to do so under the standard of review for a motion to dismiss — that the conduct of Firestone Liberia’s employees conduct could be imputed to FNRC under the traditional common-law doctrine of respondeat superior. Because that assumption has now been challenged, the Court must confront it directly.
FNRC argues, and the majority in Kiobel holds, (1) that the ATS requires federal courts to look to international law to decide whether corporations are civilly liable for the actions of their employees who allegedly commit human rights violations and (2) that international law clearly says that corporations are not liable. [Dkt. 209 at 31]; Kiobel, 621 F.3d at 148-50 (explaining as to the second point that “[n]o corporation has ever been subject to any form of liability (whether civil, criminal, or otherwise) under the customary international law of human rights” and indeed “sources of customary international law have, on several occasions, explicitly rejected the idea of corporate liability” (original emphasis)).
For their part, Plaintiffs don’t dispute that international law itself provides no direct basis for corporate liability. [See dkt. 295 at 22-23]. They argue instead that either federal common law always governs the issue or, alternatively as Judge Leval’s concurrence concludes, that federal common law can fill in the gaps of international law in ATS actions. [Id.; dkt. 598 at 4-7]; Kiobel, 621 F.3d at 152 (“The position of international law on whether civil liability should be imposed for violations of its norms is that international law takes no position and leaves that question to each nation to resolve.”) (Le-val, J., concurring).
1. In Claims Filed Under the ATS, Does Federal Common Law Automatically Control the Extent of Corporate Liability?
As to whether federal common law or international law automatically controls the scope of liability for violations of “specific, universal, and obligatory” international norms, the Court concludes that Sosa has already rejected Plaintiffs’ argument. After articulating the test for when courts can recognize new causes of action filed under the ATS, the Supreme Court noted in Sosa that “[a] related consideration [to whether the norm meets the test Sosa identified] is whether international law extends the scope of liability for a violation of a given norm to the perpetrator being sued, if the defendant is a private actor such as a corporation or individual.” Sosa, 542 U.S. at 732 n. 20, 124 S.Ct. 2739 (emphasis added). Plaintiffs’ argument that federal common law provides the scope of liability in ATS claims — no matter what international law may say on the matter — impermissibly conflicts with the plain language of Sosa. Indeed, even Judge Leval would reject it. See Kiobel, 621 F.3d at 174 (“[I]f we found that international law in fact exempts corporations from liability for violating its norms, we would be forced to accept that answer whether it seemed reasonable to us or not.”) (Leval, J., concurring).
2. Does International Law Direct American Courts Adjudicating Claims Under the ATS to Apply Federal Common Law?
The majority and concurring opinions in Kiobel thoroughly review the arguments for and against importing federal common-law concepts of corporate liability to an action brought under the ATS. The Court will not repeat all those arguments here. Generally speaking, the Court finds that the approach of the Kiobel majority— no corporate liability under the ATS unless and until international law (or Congress) affirmatively approves the doctrine — better comports with the mandate in Sosa that ATS liability only attaches after a consensus exists that a defendant’s conduct violates international law. Indeed, the Seventh Circuit caselaw already indicates that trial courts must be especially vigilant in their “doorkeeping” function for ATS claims. Cf. Enahoro v. Abubakar, 408 F.3d 877, 886 (7th Cir.2005) (suggesting that it may find exhaustion-of-remedies a condition of ATS claims). The Court finds the analysis of the Kiobel majority especially compelling for at least the following three reasons.
a. The Lack of Corporate Liability in International Criminal Law
Much of the dispute between the majority and Judge Leval in Kiobel concerns the relevance of the fact that international tribunals don’t impose criminal liability on corporations but insist instead that the individual wrongdoers be prosecuted. The majority views that fact as evidence of a lack of consensus about the propriety of corporate liability for violations of international law. Kiobel, 621 F.3d at 132-33 (chronicling international tribunals that have held individuals criminally accountable for violations of international law and failing to find a single counterexample).
Judge Leval discounts the relevance of that fact because criminal law serves punitive ends, which in his view makes it unfair to subject corporations to criminal violations. As he explains, a corporation “exists solely as a juridical construct and can form no intent of any kind, [so] it is an anomaly to view a corporation as criminal.” Id. at 167 (Leval, J., concurring) (footnote omitted). Furthermore, the only form of punishment available for corporations is a monetary fine, but “its burden falls on the corporation’s owners or creditors (or even possibly its customers if it can succeed in passing on its costs in increased prices), [and thus] may well fail to hurt the persons who were responsible for the corporation’s misdeeds.” Id. at 168 (Leval, J., concurring). And, perhaps most importantly for Judge Leval, “criminal prosecution of the corporation can undermine the objectives of criminal law by misdirecting prosecution away from those deserving of punishment.” Id. (Leval, J., concurring) (original emphasis).
Judge Laval’s concurrence, however, proves too much; each of his points cautions against recognizing corporate liability here. As to his first point, Plaintiffs haven’t argued that liability for causing a “worst” form of child labor is a strict liability offense. [See, e.g., dkt. 295 at 8 (calling Firestone’s actions “deliberate[ ]”) ]. To label FNRC an “enemy of all mankind,” this Court must be able to assess FNRC’s mental state, an “anomaly” for Judge Le-val. But Plaintiffs not only want the Court to determine FNRC’s mental state, they also want the Court to find that FNRC’s mental state can support an award of punitive damages. [Dkt. 530 at 24], Using the ATS to “punish” a corporation rather than to merely “compensate” injured parties runs counter to internationally accepted norms, as Judge Leval understands them, because innocent third parties will be called upon to subsidize the malfeasance of any plantation employees who (allegedly) were responsible for Plaintiffs’ plight. Finally, the Court notes that Plaintiffs made no attempt here to sue the low-level managers whom they claimed “encouraged” their guardians to put them to work in the fields. Permitting corporate liability under the ATS will lessen the deteri’ent effect of litigation for individual actors; few plaintiffs would sue an individual employee if the plaintiffs can sue the deeper-pocketed corporate employer instead. Cf. FDIC v. Meyer, 510 U.S. 471, 485, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994) (rejecting respondeat superior in Bivens actions) (“If we were to imply a damages action directly against federal agencies, thereby permitting claimants to bypass qualified immunity, there would be no reason for aggrieved parties to bring damages actions against individual officers. Under Meyer’s regime, the deterrent effects of the Bivens remedy would be lost.”),
b. The Lack of Corporate Liability Under the Torture Victim Protection Act
Deciding to permit civil corporate liability reflects a policy judgment — a policy judgment better made by a legislature than a federal coxxrt — that facilitating victim compensation is more desirable than deterring individual misconduct. To that end, the majority in Kiobel advanced a powerful argument to which Judge Leval had no response. It explained that its default rule of no ATS corporate liability absent affirmative international or congressional authorization comported with the Torture Victim Protection Act of 1991 (the “TVPA”), Pub. L. No. 102-256, 106 Stat. 73 (codified at 28 U.S.C. § 1350 note), which Congress enacted to codify a classic (pre-Sosa) ATS claim. Kiobel, 621 F.3d at 123 n. 23. The TVPA provides a cause of action for victims of torture committed by “[a]n individual” acting under color of foreign law. Id. § 2(a). Requiring the defendant to be an “individual” precludes corporate liability — unlike the term “person” that Congress originally considered for the TVPA but rejected. [Dkt. 597-1 at 5 (a copy of the House committee markup of the TVPA) (receiving unanimous consent to change “person” to “individual” so as “to make it clear we are applying [the TVPA] to individuals and not to corporations”) ].
Because authorizing ATS suits has “such obvious potential to affect foreign relations,” Sosa indicated that the courts “would welcome any congressional guidance.” 542 U.S. at 731, 124 S.Ct. 2739. The only congressional guidance that the Court has found (albeit pre-Sosa) is guidance that considered but rejected corporate liability for former ATS human rights violations now codified under the TVPA.
c. The Availability of Civil Corporate Liability Outside the ATS
While Judge Leval correctly notes that nations regularly permit corporations to be sued in run-of-the-mill torts, Kiobel, 621 F.3d at 159-60 (Leval, J., concurring), he also notes that “most nations have not recognized tort liability for violations of international law,” id. at 152. American citizens cannot sue under the ATS when their human rights are violated, whether by foreign corporations or domestic ones. See Serra v. Lappin, 600 F.3d 1191, 1198 (9th Cir.2010) (dismissing ATS suit filed by federal prisoners over low wages and collecting cases holding that U.S. citizens aren’t “aliens” eligible to sue under the ATS). Recognizing corporate liability under the ATS would further exacerbate the disparate treatment between citizens and aliens in American courts and would promote forum shopping. Cf. Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir.1980) (authorizing ATS suit by one citizen of Paraguay against another citizen of Paraguay). Inasmuch as recognizing new ATS causes of action involves comity considerations, see Sosa, 542 U.S. at 761, 124 S.Ct. 2739 (Breyer, J., concurring), those considerations don’t support the expansion of liability that Plaintiffs seek here.
Conclusion
Plaintiffs have sued a corporation under the ATS for an alleged violation of international law. The Court has jurisdiction to hear Plaintiffs’ claim and concludes that Plaintiffs have failed to establish a legally cognizable claim because no corporate liability exists under the ATS. Accordingly, FNRC’s motion for summary judgment, [dkt. 208], is GRANTED.
Final judgment will not, however, issue at this time. To permit effective appellate review of the large evidentiary record submitted in connection with the motion for summary judgment in this exceedingly complicated action, the Court deems it necessary to address several other arguments raised in FNRC’s motion for summary judgment, which provide alternative bases for granting summary judgment in favor of FNRC. See Stephenson v. Wilson, 619 F.3d 664, 666 (7th Cir.2010) (criticizing district court for only addressing one issue raised in a complicated habeas petition because “if we reject the ground on which the court did rule, we must reverse and remand for consideration of the other grounds, while if those grounds for relief had been before us we might have agreed with one of them and thereby spared the parties a further proceeding in the district court, possibly followed by a further appeal”). Given the impending departure of counsel for an expensive, time-consuming, and potentially dangerous round of trial preservation depositions in Liberia, the Court elected to expedite its consideration of one dispositive issue, corporate liability, rather than further delay while finalizing its opinion addressing FNRC’s other arguments. A comprehensive final opinion will be issued shortly.
|
7384030-19514 | OPINION AND ORDER
MUKASEY, District Judge.
Plaintiff seeks a judgment in this court declaring its rights under a contract with the City of New York which incorporates federal regulations that define how to calculate additional payments for change orders and delays. Plaintiff argues that incorporation of these regulations in the contract makes this a case arising under the laws of the United States and thus gives this court jurisdiction over the dispute. However, for the reasons set forth below, the regulations in question create no federal rights for the plaintiff. Accordingly, and because there is no diversity of citizenship between the parties, the action must be dismissed for lack of subject-matter jurisdiction.
I.
Plaintiff J.A. Jones Construction Co. and Daidone Electric Co. of N.Y., Inc. (“Jones”), a joint venture of a New York corporation and a North Carolina corporation, contracted in March 1986 with defendant, City of New York, to perform electrical construction work at the North River Water Pollution Control Project. The project was funded by a grant from the Environmental Protection Agency (“EPA”) under the Clean Water Act (“CWA”), 33 U.S.C. § 1251-1376 (1986) — specifically § 1281, which authorizes the EPA “to make grants to any State, municipality, or intermunicipal or interstate agency for the construction of publicly owned treatment plants.” During construction of the project, the City initiated various changes in the original plans (“change orders”) and caused other delays in Jones’ performance.
This action arises from a dispute over how to calculate additional amounts claimed by Jones for change orders and City-caused delays. The contract between Jones and the City is subject by its terms to a set of regulations promulgated by the EPA and contained in 40 CFR Part 33 entitled “Procurement Under Assistance Agreements” (“EPA procurement regulations”). Plaintiff contends that the EPA procurement regulations require that additional amounts for change orders be calculated pursuant to cost accounting principles contained in 41 CFR § 1-15.4 of the Federal Procurement Regulations and that amounts relating to City-caused delays be calculated under a model equitable adjustment clause contained in 40 CFR § 33.1010, subpart 5. Jones claims that a proper reading of the EPA procurement regulations mandates that these two provisions supersede any conflicting provisions elsewhere in the contract.
The City contends that Article 13 of the contract contains a waiver, permitted by the regulations, for any claims based on City-caused delays, and that any additional change order costs should be calculated under a formula set out in Article 26 of the contract because the EPA procurement regulations provide that the City’s duties are governed by OMB Circular A-87, specifically applicable to local governments, rather than the Federal Procurement Regulations. Not surprisingly, as plaintiff interprets the EPA procurement regulations, it would be entitled to more money than it would get under clauses cited by the City.
Pursuant to the federal declaratory judgment statute, 28 U.S.C. § 2201, plaintiff has requested a judgment declaring (i) that the cost accounting principles contained in the Federal Procurement Regulations be applied in calculating reimbursements for change orders issued under the contract, and (ii) that defendant must construe the contract to incorporate the equitable adjustment clause contained in 40 CFR § 33.1030, subpart 5.
Defendant has brought several motions, including one to dismiss for lack of subject matter jurisdiction pursuant to Fed.R. Civ.P. 12(b)(1).
II.
Plaintiffs complaint alleges jurisdiction pursuant to both 28 U.S.C. § 2201, the federal declaratory judgment statute, and § 1331, which provides that “[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States.”
It is well settled that “federal jurisdiction cannot be based on the fact that a declaratory judgment is sought because the declaratory judgment statute does not expand the jurisdiction of the federal courts.” West 14th Street Commercial Corp. v. 5 West 14th Owners Corp., 815 F.2d 188, 194 (2d Cir.), cert. denied, 484 U.S. 850, 108 S.Ct. 151, 98 L.Ed.2d 107 (1987); Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 16, 103 S.Ct. 2841, 2850, 77 L.Ed.2d 420 (1983); Shelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-2, 70 S.Ct. 876, 879, 94 L.Ed. 1194 (1950).
There is no diversity of citizenship between the parties, so federal jurisdiction can be based only on 28 U.S.C. § 1331. Therefore, plaintiffs complaint must be dismissed unless it “arises under” federal law.
In determining whether a complaint arises under federal law, the claims must be examined in accordance with the well-pleaded-complaint rule, which requires that “federal jurisdiction ... be found from ‘what necessarily appears in the plaintiffs statement of his own claim ..., unaided by anything alleged in anticipation of or avoidance of defenses which it is thought the defendant may interpose.’ ” West 14th Street Commercial Corp, 815 F.2d at 192 (quoting Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 724, 58 L.Ed. 1218 (1914)).
To determine whether a well-pleaded declaratory judgment complaint arises under federal law, a court must look beyond the fact allegations and, by identifying the substantive theories upon which plaintiff could have brought its action, determine whether there necessarily would be federal jurisdiction in a suit for coercive relief brought either by the declaratory defendant or the declaratory plaintiff, apart from any anticipated defenses. See Franchise Tax Board, 463 U.S. at 19, 103 S.Ct. at 2851; West 14th Street Commercial Corp., 815 F.2d at 194-95; Stone & Webster Engineering Corp. v. Ilsley, 690 F.2d 323, 327-28 (2d Cir.1982), aff'd, 463 U.S. 1220, 103 S.Ct. 3564, 77 L.Ed.2d 1405 (1983).
Applying the well-pleaded-complaint rule here, it is clear that plaintiff’s claim is essentially one for breach of contract. A suit for coercive relief by either party necessarily would be a contract action. The central issue would be whether defendant breached its contract with plaintiff by failing to apply the appropriate cost accounting principles. Essentially, plaintiff contends that defendant has breached certain provisions which are incorporated into the contract through the operation of the EPA procurement regulations. On the other hand, defendant contends that although the regulations are applicable to the contract, defendant’s contractual duties are governed by specific provisions in the written agreement between the parties. Other than breach of contract, plaintiff has not suggested a theory under which either it or the City could bring a coercive suit to enforce rights. Plaintiff has presented its claim as “in the nature of breach of contract,” and the central issue as “whether certain federal regulations ... are ... mandatory or ... merely permissive.” Plaintiff’s Memorandum of Law at 1. However, plaintiff’s only basis for enforcing the rights allegedly guaranteed by the EPA procurement regulations is the contract. Therefore, in determining whether plaintiff’s claims arise under federal law, its declaratory action will be analyzed as a contract action whose resolution requires construction of federal regulations.
III.
The Supreme Court has emphasized that “in exploring the outer reaches of § 1331, determinations about federal jurisdiction require sensitive judgments about congressional intent, judicial power, and the federal system.” Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 810, 106 S.Ct. 3229, 3233, 92 L.Ed.2d 650 (1986). The mere fact that a court necessarily must interpret federal law or federal regulations to determine the merits of a claim is insufficient to confer federal jurisdiction. Merrell Dow, 478 U.S. at 813, 106 S.Ct. at 3234; Gully v. First Nat’l Bank, 299 U.S. 109, 115, 57 S.Ct. 96, 99, 81 L.Ed. 70 (1936) (“Not every question of federal law emerging in a suit is proof that a federal law is the basis of the suit.”).
Nor does even the mandatory incorporation of federal standards into a contract necessarily create federal jurisdiction in a contract action based on an alleged breach of those standards. Jackson Transit Authority v. Local Division 1285, Amalgamated Transit Union, AFL-CIO-CLC, 457 U.S. 15, 29, 102 S.Ct. 2202, 2210, 72 L.Ed.2d 639 (1982). In Jackson, a union sued a municipal transit authority for breach of both a collective bargaining agreement and a related “§ 13(c) agreement,” which preserved transit workers’ pre-existing collective bargaining rights. Such guarantee of pre-existing rights was required by § 13(c) of the Urban Mass Transportation Act of 1964, 49 U.S.C. § 1609(c), as a condition for the receipt by local governments of federal mass transit funds. The union argued that because the contract rights in the § 13(c) agreement were guaranteed by federal law, its complaint stated claims arising under federal law. The Court rejected that argument and held that determining federal jurisdiction in an action “to enforce contracts contemplated by federal statutes” turns on Congressional intent. After analyzing the legislative history of the statute, the Court held that there was no federal jurisdiction over the Union’s claims because Congress did not “intend[] such contract actions to set forth federal, rather than state, claims.” Id. at 21, 102 S.Ct. at 2206.
In the case at bar, plaintiff alleges that defendant has breached contractual provisions required by the EPA procurement regulations. Plaintiff does not contend that the federal regulations, or the Act under which they were promulgated, create independent of contract either an express or an implied right of action for violations of those provisions. Plaintiff’s Opposition Memorandum at 7. The absence of any basis for such a claim independent of the contract is confirmed by applying the familiar test for determining wheth er there is an implied right of action in a federal statute or regulatory scheme. That test has four factors: (1) whether plaintiff is part of the class for whose special benefit the statute was passed; (2) any indicia of Congressional intent to create a private right of action; (3) whether a federal cause of action would further the underlying purpose of the legislative scheme; and (4) whether the plaintiffs cause of action is a subject traditionally relegated to state law. See Merrell Dow, 478 U.S. at 810-11, 106 S.Ct. at 3233; California v. Sierra Club, 451 U.S. 287, 293, 101 S.Ct. 1775, 1779, 68 L.Ed.2d 101 (1981); Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2088, 45 L.Ed.2d 26 (1975).
Applying these four factors to this case demonstrates that the City’s alleged violation of the EPA procurement regulations does not present a federal claim. These regulations appear to be designed primarily to protect the public treasury from excessive expenditures, rather than to protect private contractors whose agreements contain provisions not as generous as those available in the regulations. For example, the regulations provide that “[recipients must assure that only fair and reasonable profits are paid to contractors,” forbid “cost-plus-percentage-of-cost” types of agreements between recipients and contractors, and require recipients to conduct a cost analysis of all negotiated change orders or subagreements that exceed $10,-000. See 40 CFR §§ 33.235, 33.285 and 33.290. Even the equitable adjustment clause in 40 CFR § 33.1030, subpart 5, which allows an adjustment for added costs resulting from recipient-caused suspensions, delays or interruptions, sets a ceiling on additional costs by providing that no adjustment shall be made (1) to the extent performance would have been delayed by any other cause, (2) to the extent that an equitable adjustment is provided for or excluded elsewhere in the contract, and (3) to the extent a timely claim for adjustment is not made in writing.
As to the second factor, there is no indication that Congress intended these regulations to create a private right of action. The EPA procurement regulations are management rules enacted pursuant to 33 U.S.C. § 1361(a), which gave the agency authority to promulgate regulations necessary for it to carry out its functions,' one of which is the administration of grants for the construction of publicly owned treatment works. See 33 U.S.C.' § 1281(g). Even assuming that EPA had the authority to create private federal rights of action, there is no indication that the procurement regulations were intended to establish any such rights, in addition to contract rights that can be protected in separate state-law breach of contract actions. One portion of the regulations creates an administrative protest process for challenging a grant “recipient’s solicitation or award of a suba-greement.” 40 CFR § 33.1110(a). This protects the financial interests of parties that do not have a contractual relationship with a grant recipient from actions that violate the regulations. Without such a procedure, these parties would be unable to challenge procurement actions adverse to them and allegedly in violation of the regulations. However, contract parties such as Jones that wish to challenge a grant recipient’s procurement actions do not need an administrative procedure or right of action under the regulations themselves, because a contract action is available.
A federal cause of action would not further the underlying purposes of the regulatory scheme. The EPA procurement regulations are designed to “rely heavily” on the procurement systems of recipients, see 48 Fed.Reg. 12,922 (1983), and those regulations state specifically in the first section, § 33.001(g) “Applicability and Scope of this Part,” that “In the construction of treatment works program [sic ] under the Clean Water Act ..., it is EPA’s policy to delegate determinations on individual projects to state agencies to the maximum extent possible.” These statements, as well as the entire structure of 33 U.S.C. § 1281(g) (allowing grants to “any state, municipality, or intermunicipal or interstate agency for the construction of publicly owned treatment works”) and the EPA procurement regulations governing those grants, reflect that this regulatory scheme seeks to delegate procurement and contract determinations as much as possible to the local level. Finally, in this case, the subject matter of plaintiff’s cause of action, breach of a construction contract, is traditionally relegated to state law. This factor as well strongly supports that there is no federal right of action for violation of the procurement regulations. Therefore, there is no private right of action for violations of the EPA procurement regulations other than a right emanating from the contract. See also Dan Caputo Co. v. Russian River County Sanitation Dist., 749 F.2d 571, 576 (9th Cir.1984) (finding that contractor had no private right of action against public entity under the Clean Water Act with respect to contractual dispute and reallocation of EPA grant funds allegedly in violation of regulations).
IV.
The significance of the conclusion “that there is no private cause of action cannot be overstated.” Merrell Dow, 478 U.S. at 812, 106 S.Ct. at 3234. This conclusion virtually mandates a finding that plaintiffs claims should not be in a federal court.
In Merrell Dow, plaintiffs brought a tort action alleging, inter alia, that the defendant drug company labeled its product in violation of the Federal Food, Drug, and Cosmetic Act (FDCA) thereby creating a rebuttable presumption of negligence. Id. at 805-06, 106 S.Ct. at 3230-31. After acknowledging language in several earlier cases, principally Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 199, 41 S.Ct. 243, 245, 65 L.Ed. 577 (1921) and Franchise Tax Board, 463 U.S. at 13, 103 S.Ct. at 2848, suggesting that federal jurisdiction is proper where the state law claim necessarily requires construction of a federal provision or where the federal claim is “substantial,” the Court noted that current analysis of arising under jurisdiction must apply recent limitations on inferring a private right of action where Congress is silent. After concluding that there was no federal cause of action for FDCA violations, the Court wrote that:
The significance of the necessary assumption that there is no private cause of action ... cannot be overstated. For the ultimate import of such a conclusion, as we have repeatedly emphasized, is that it would flout congressional intent to provide a private federal remedy for the violation of the federal statute. We think it would similarly flout, or at least undermine, congressional intent to conclude that the federal courts might nonetheless exercise federal-question jurisdiction and provide remedies for violations of that federal statute solely because the violation of the federal statute is said to be a “rebuttable presumption” or a “proximate cause” under state law, rather than a federal action under federal law.
We simply conclude that the congressional determination that there should be no federal remedy for the violation of this federal statute is tantamount to a congressional conclusion that the presence of a claimed violation of the statute as an element of a state cause of action is insufficiently “substantial” to confer federal jurisdiction.
Id. 478 U.S. at 812-14, 106 S.Ct. at 3234-35.
The holding in Merrell Dow governs plaintiff’s breach of contract claim. Although some court will have to interpret the EPA procurement regulations in order to determine if defendant has breached contractual obligations, Merrell Dow teaches that the potential significance of regulations in deciding the outcome of a lawsuit is insufficient to confer federal jurisdiction where there is no private right of action for violations of the regulations themselves. See Dillon v. Combs, 895 F.2d 1175, 1177 (7th Cir.1990) (finding that federal jurisdiction was improper for claims alleging violation of federal statute where Congress did not create private right of action and where actions in state courts under state law provided “ample power” for parties to enforce federal statute); Willy v. Coastal Corp., 855 F.2d 1160, 1168 (5th Cir.1988) (existence of a “private, federal remedy ... [is] a necessary predicate to determining that the presence of a federal element in a state-created cause of action result[s] in that cause of action being one which ar[ises] under federal law”); Utley v. Varian Associates, Inc., 811 F.2d 1279, 1283 (9th Cir.) (“Under Merrell Dow, if a federal law does not provide a private right of action, then a state law action based on its violation perforce does not raise a ‘substantial federal question’ sufficient to confer federal-question jurisdiction.”), cert. denied, 484 U.S. 824, 108 S.Ct. 89, 98 L.Ed.2d 50 (1987); Foxrun Workshop, Ltd. v. Klone Mfg. Inc., 686 F.Supp. 86, 89 (S.D.N.Y.1988) (citing Merrell Dow for proposition that a “state law cause of action to enforce federal statutory right is not within federal question jurisdiction”); Angela Cummings, Inc. v. Purolator Courier Corp., 670 F.Supp. 92, 94 (S.D.N.Y.1987) (“A federal statute that does not create or imply private rights of action does not present a federal question pursuant to 28 U.S.C. § 1331 on behalf of private individuals.”).
|
9452895-24362 | MEMORANDUM
DAVIS, District Judge.
In this lawsuit, plaintiff David Wilson • McKeel alleges that he contracted a disabling pulmonary condition — bronchiolitis—as a result of his exposure to polycholorinated byphenyls (“PCBs”) while he was work ing as a sheet-metal worker in a government building located at the United States Army’s Aberdeen Proving Ground, in Aberdeen, Maryland (“Army”). McKeel has sued the United States of America (“the government”) under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. § 2671, et seq. Now pending are the government’s motions (1) to dismiss for lack of subject matter jurisdiction pursuant to Fed. R.Civ.P. 12(b)(1) and (2) for summary judgment pursuant to Fed.R.Civ.P. 56. The motions have been fully briefed and no hearing is necessary. Local Rule 105.6. I shall grant the government’s motion to dismiss; the motion for summary judgement is therefore moot.
©
The determination of jurisdiction is a threshold issue, requiring me to resolve the government’s motion to dismiss at the outset. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (“Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause.” (internal quotations omitted)). When the government challenges the court’s subject matter jurisdiction, the plaintiff bears the burden of persuasion and must demonstrate an unequivocal waiver of sovereign immunity. See Williams v. United States, 50 F.3d 299, 304 (4th Cir.1995). In ruling on a 12(b)(1) motion, the court is free to consider and to weigh evidence outside of the pleadings to determine its power to hear the case. Id.
(Ü)
In 1984 the Army began receiving complaints from employees regarding dust falling from the air diffusers at the Army’s Aberdeen research laboratory, Building E-3100 (“the building”). Thomas Caldwell (“Caldwell”), an air conditioning mechanic, determined that the source of the dust was deteriorating felt insulation located within the ventilation system. Caldwell Dep. at 29-30. According to Caldwell, the deteriorating insulation originated in the air handlers, which were located on the roof of the building. Id. at 31. As a temporary solution, filters were installed to reduce the amount of the dust falling into offices from the air diffusers. Id. at 31-33. The air handlers were replaced and the Army decided to solicit bids to retrofit and reba-lance the existing air conditioning and heating ducts in the building.
On August 16, 1989, the Army issued a solicitation to prospective bidders. On or about September 15, 1989, the Army received its only bid to perform the work from Horton Mechanical Contractors, Inc. (“Horton”). Because Horton was the sole bidder for the project, the Army converted the solicitation to a negotiated procurement action and requested that Horton submit a revised bid, and Horton did so on September 25,1989.
The performance of the contract entailed, inter alia, sheet-metal work. To perform the necessary sheet-metal work on the ducts, Horton retained BTR Sheetmetal, Inc. (“BTR”). McKeel, a sheet-metal worker, was employed by BTR and worked on the air conditioning and heating ducts in Building E-3100 from ap proximately July 1990 until September 1990. McKeel Decl at ¶ 2. McKeel’s tasks included cleaning, removing and replacing old duct work. During the course of the work, gray dust fell from the air ducts. McKeel and his co-workers (and others) complained to government personnel about this “falling dust.” Amended Compl. at ¶20. According to McKeel, after complaints from various workers were voiced, the building manager directed McKeel to collect a sample of the material for testing. McKeel Decl. at ¶ 4. These tests revealed that the dust contained a PCB level of 50 parts per million. Boisseau Dep. at ¶ 41. Subsequent to the initial testing, McKeel contends that he was directed by the building manager and by Donald Wayne Naff (“Naff’), the government’s construction representative, to gather additional samples for further testing and he did so by cutting six by six-inch holes in the ducts. McKeel Decl. at ¶ 5.
On August 29,1990, a safety and occupational health specialist conducted a site visit, and thereafter recommended that a qualified contractor in PCB removal be engaged. Pl.’s Ex. 16 at 3a. On August 30, 1990, a “stop work” order was issued and the Army Environmental Hygiene Agency took over the work site to perform testing. Soon after the stop work order was issued, McKeel claims he began having difficulty breathing. McKeel eventually filed a worker’s compensation claim alleging occupational exposure to chemicals and he was awarded benefits.
(iii)
The gravamen of McKeel’s claims is that government officials negligently caused his exposure to harmful chemicals, negligently failed to warn him of a potential hazard in the performance of his work and, more specifically, negligently failed to advise him that he should wear protective clothing while he collected the samples. By way of his amended complaint, McKeel also asserts a “negligent misrepresentation” claim.
The FTCA provides a waiver of federal sovereign immunity for tort claims. 28 U.S.C. § 2674. This waiver is constrained by an extensive list of exceptions. At issue here are the “independent contractor” exception, “discretionary function” exception ' and the “misrepresentation” exception. See 28 U.S.C. §§ 1346(b)(1), 2680(a), 2680(h).
The Independent Contractor Exception
The plain language of the FTCA insulates the government from liability arising out of tortious conduct by independent contractors. 28 U.S.C. § 1346(b). Whether an entity is an independent contractor is a question of federal law. Logue v. United States, 412 U.S. 521, 528, 93 S.Ct. 2215, 37 L.Ed.2d 121 (1973). In determining whether an entity is an independent contractor the critical inquiry is whether the government has the power “to control the detailed physical performance of the contractor,” United States v. Orleans, 425 U.S. 807, 814, 96 S.Ct. 1971, 48 L.Ed.2d 390 (1976) (quoting Logue, 412 U.S. at 528, 93 S.Ct. 2215), or whether the government supervises the “day-to-day” operations of the project. See Logue, 412 U.S. at 530, 93 S.Ct. 2215. In sum, to avoid the bar of the independent contractor exception, a claimant must establish that the government “managed the details” or ran the “daily routine” of the activities constituting the alleged tortious conduct. See Williams, 50 F.3d at 306-7(citations omitted).
The government argues that, under the facts here, McKeel’s negligence claims, including his failure to warn claims, are barred by the independent contractor exception. I agree. There is no dispute that Horton was hired by the government as a general contractor, and Horton subsequently engaged BTR as a subcontractor; manifestly, each is an independent contractor under the circumstances of this case. McKeel contends, however, that the independent contractor exception does not apply because the government controlled the “day-to-day” activities of Horton and BTR with regard to safety and quality of the work. More specifically, McKeel relies on the following four factors in support of his contention that the government exercised day-to-day control over the project: (1) the government had the right to “suspend, delay, or interrupt all or part of the work” at any given time; (2) the government was responsible for inspecting the job site to determine whether workers were safe; (3) the government directed and supervised the sampling of the dust falling from the ducts; and (4) the government had the responsibility to test unknown substances: PI. ’s Opp. at 13-14. Plaintiffs argument is unavailing.
With regard to the first two factors, namely the government’s right to stop the work at any time and the government’s responsibility to inspect the work, the case law is abundantly clear that such factors do not establish sufficient control over “day-to-day” operations. See Williams, 50 F.3d at 306-7(explaining that the government’s right to ensure compliance with federal standards or to inspect job sites or job performance periodically does not amount to control of day-to-day operations); see also Berkman v. United States, 957 F.2d 108, 113-4 (4th Cir.1992) (reasoning that the government’s right to approve work schedules of a maintenance contractor, inspect the job site to ensure compli-anee, and supervise certain cleaning tasks did not amount to day-to-day control).
Furthermore, the plain language of the contract awarded to Horton clearly establishes that the contractor assumed the responsibility for protecting workers on the site. First, the contract explicitly states:
The Contractor shall control construction quality by conducting daily inspection of the phases of construction in progress and shall provide the Contracting Officer in a weekly inspection report results of these inspections ....
Contract, Exh. 8 to Pl.’s Brief, § 01401. Second, the terms of the contract required the contractor to ensure compliance with safety regulations, stating that the “contractor shall ... execute constant supervision to ensure full and immediate compliance with pertinent provisions of ... safety regulations.” Id. at § 01011. Third, the contract explicitly placed responsibility on the contractor in the event that a potential hazard was uncovered. The contract states:
[Djuring operations, such as excavation or demolition, materials may be uncovered which could be hazardous (e.g. asbestos). Contractor personnel, if they encounter unrecognized or unknown materials in which they are unsure of possible contamination or actions to take, shall immediately discontinue work in that area, and shall notify, through the Contracting Officer or his representative, the installation Safety Office ....
Id. In view of these provisions, therefore, the first two factors cited by McKeel as probative of the government’s day-to-day control are not persuasive.
As to McKeel’s contention that the government’s directives to collect samples of the suspicious material demonstrate the government’s day-to day control, the record contains no evidence that the Army supervised the collection of the samples, i.e., what equipment was to be used or what gear was worn. In fact, McKeel apparently concedes that the instruction by the government to drill holes for the purposes of collecting dust, by itself, is insufficient to impute liability to the government. See PI. ’s Opp. at 14 (“While any one of these factors may not be sufficient to demonstrate the inapplicability of the independent contractor exception, collectively [they do].”). Thus, to the extent that McKeel attempts to impute liability to the government for the alleged negligence of Horton or BTR with regard to ensuring his safety in obtaining samples of the material, such claims are barred by the independent contractor exception.
The government also correctly contends that the independent contractor exception bars McKeel’s claims that the government breached an alleged duty to warn invitees of dangers on its premises. McKeel argues that because the government never delegated the duty to warn of “a possible danger, namely the deteriorating insulation,” the independent contractor exception is inapplicable. McKeel’s argument fails, however; the language of the contract is clear. The contract disclosed to Horton that workers could encounter hazardous substances during the course of the project. In addition, provisions of the contract specifically delegated all safety matters to Horton. Consequently, the government did not retain any duty to warn about the deteriorating insulation.
McKeel argues in the alternative that even assuming that the job site was not within the control of the Army, the government is nevertheless liable because it had a nondelegable duty to warn invitees of dangers located on the premises because an owner of property has a nondelegable duty. I must reject this argument, however. The Fourth Circuit explained in Berkman, 957 F.2d at 112-13, that the FTCA exception for independent contractors preempts state law nondelegable duties. See also Roditis v. United States, 122 F.3d 108, 111 (2nd Cir.1997) (explaining that “in adopting the independent contractor exception to liability, Congress did not simultaneously adopt the exceptions to that doctrine”), cert. denied, 523 U.S. 1095, 118 S.Ct. 1562, 140 L.Ed.2d 794 (1998); Norman v. United States, 111 F.3d 356 (3rd Cir.1997) (declining to follow Dicker son, infra) (adopting the Fourth Circuit’s reasoning that a state nondelegable duty cannot override the sovereign immunity of the United States); Clark v. United States, 52 F.3d 1122 (D.C.Cir.1995) (unpublished) (“[T]he nondelegable duty doctrine is inapplicable to cases arising under the Federal Tort Claims Act because federal law does not permit the application to the United States of a generalized state-defined duty.”); but see Dickerson, Inc. v. United States, 875 F.2d 1577, 1582-83 (11th Cir.1989)(holding that the independent contractor exception does not protect the government from contractor’s negligence if the duty was nondelegable under state law). Therefore, McKeel’s argument that liability can be imputed to the government because of state nondelegable duty doctrine must fail.
Discretionary Function Exception
McKeel seems to advance one theory of liability which is arguably rooted in acts and omissions of government employees involving duties existing outside of those delegated in the contract for the work: he contends that the government was negligent in its failure to cordon off the areas containing the deteriorating insulation and in failing to conduct testing in advance of the work. The government maintains, however, that if this theory is analytically distinct from McKeel’s other claims, it is not liable for this alleged tor-tious conduct by virtue of the discretionary function exception provided for in the FTCA. I agree that the discretionary function exception applies to the government’s decision not to “sample, test and/or have the premises cordoned off’ when it discovered the deteriorating insulation within the ventilation system.
The Fourth Circuit has consistently held that the discretionary function exception provides a broad form of protection for the United States, limiting liability of the government under the FTCA. Bowman v. United States, 820 F.2d 1393 (4th Cir.1987). By its express terms, the FTCA does not impose liability upon the United States for acts or omissions of government employees “based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused.” 28 U.S.C. § 2680(a). The exception does not apply, however, if “a federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow.” Williams, 50 F.3d at 309 (quoting Berkovitz v. United States, 486 U.S. 531, 536, 108 S.Ct. 1954, 100 L.Ed.2d 531 (1988)); see, e.g., In re Sabin, 984 F.2d 124 (4th Cir.1993) (violation of standards regarding testing of polio vaccine); Musick v. United States, 768 F.Supp. 183 (W.D.Va.1991) (violation by Ar Force pilot of mandatory squadron policy regarding minimum flying altitude).
The Supreme Court adopted a two-pronged test for determining the applicability of this exception in Berkovitz, 486 U.S. at 537, 108 S.Ct. 1954, and United States v. Gaubert, 499 U.S. 315, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991). The first prong involves a determination of whether the alleged acts or omissions are discretionary in nature, ie., those involving judgment or choice. Williams, 50 F.3d at 309 (citing Gaubert, 499 U.S. at 324, 111 S.Ct. 1267). This determination hinges upon whether the government conduct is governed by any mandatory statute, regulation or policy. If such a mandatory rule applies, then the conduct involves no element of discretion and the claim is not barred by the discretionary function exception. Berkovitz, 486 U.S. at 546, 108 S.Ct. 1954. If no such mandatory statute, regulation or policy applies, then the second prong of the Berkovitz-Gaubert test must be examined.
The second prong requires that the discretion be “based on considerations of public policy.” Berkovitz, 486 U.S. at 531, 108 S.Ct. 1954; Gaubert, 499 U.S. at 316, 111 S.Ct. 1267. If the discretionary actions are determined to be in furtherance of public policy or a regulatory scheme then the exception applies. Id. In resolving this inquiry, the focus is on whether the government’s discretion is “of the nature and quality that Congress intended to shield from liability.” Williams, 50 F.3d at 309 (quoting United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines), 467 U.S. 797, 807-08, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984)). In United States v. Baum, the Fourth Circuit noted that this is not a fact-based inquiry; rather, the court is “to look to the nature of the challenged decision in an objective, or general sense, and ask whether that decision is one which we would expect inherently to be grounded in considerations of policy.” 986 F.2d 716, 721 (4th Cir.1993). The Fourth Circuit further stated that the absence of a deliberative process is not relevant to an inquiry under the discretionary function exception. Id. (“[W]e find it largely irrelevant the presence or absence of evidence that involved government agents which did or did not engage in a deliberative process before exercising their judgment.”). Thus, the focus of the inquiry is on “the nature of the actions taken and on whether they are susceptible to policy analysis.” Gaubert, 499 U.S. at 325, 111 S.Ct. 1267.
McKeel strives to find a specific directive governing the Army’s response when it encountered the deteriorating insulation in the ventilation ducts. McKeel suggests that specific safety policies and procedures mandated that if there was an unknown substance found in the duct work or building, “the substance should be sampled; the area cordoned; and the individuals warned to keep out of the area until the substance is identified.” Pl.’s Opp. at 4. McKeel argues that the Army had no option but to adhere to the above directives when it encountered the deteriorating vent insulation in Building E-3100. The government contends, to the contrary, that it had complete discretion in the manner in which to respond to the deteriorating insulation, namely hiring a contractor to replace, retrofit and rebalance the air system. The government is correct.
McKeel has failed to show the existence of any mandatory statutes, regulations or policies constraining the Army’s response to the problem of “falling dust.” In fact, the deposition testimony of government officials submitted by McKeel supports the government. One deposition clearly states that there was no standard operating procedure regarding the testing of substances suspected of being hazardous. Similarly, a second deposition supports the government’s position that it had discretion to respond to the deteriorating insulation in the manner it chose. The testimony of Benjamin Casóle, III, the Chief of Safety and Chemical Operations Branch at the U.S. Army Medical Research Institute of Chemical Defense, is likewise unavailing. Although Casóle testified that regulations govern the testing of unknown substances, Casóle qualified his testimony, stating that such regulations are only pertinent to substances suspected of being hazardous. Ca-sole’s Dep. at 20. Here, McKeel has failed to establish that the government believed or had reason to believe that the deteriorating insulation contained any hazardous substances. In fact, there was testimony to the contrary — that there was no reason to believe that the deteriorating ducts would contain hazardous substances. Boisseau Dep. at 19-21. Therefore, even if there were regulations or procedures governing the testing of suspected hazards, McKeel has failed to establish their application in the instant case. Consequently, I cannot conclude that the government was compelled to follow any specified directives with respect to the discovery of deteriorating insulation within the vents.
Moreover, as discussed supra, the state nondelegable duty doctrine does not apply under the FTCA; therefore, when the government contracted away its duty to ensure the safety of the contractor’s employees, the government retained full dis cretion to decide the manner in which to formulate a response to a potential hazard or even whether to formulate a response at all.
Finding that no mandatory regulation or policy governed the handling of the deteriorating insulation, I turn now to the second prong of the Berkovitz — Gaubert analysis- — whether the government’s response to the deteriorating insulation in the air ventilation system is the type of decision that normally involves considerations of policy. Specifically, the proper inquiry is whether the government’s response to the deteriorating insulation is susceptible to policy analysis. Here, the government responded to the deteriorating insulation by hiring a contractor to retrofit and to reba-lance the air system, i.e., deciding to engage an independent contractor to remove the parts of the air ventilation system which contained the deteriorating insulation.
Case law clearly establishes that “[t]he decision to hire an independent contractor to render services for the United States is precisely the type of decision that the exception is designed to shield from liability because it involves exercising judgment based on considerations of policy .... ” Williams, 50 F.3d at 310 (citing Myers & Myers, Inc. v. Unites States Postal Serv., 527 F.2d 1252, 1256 (2d Cir.1975); Scanwell Lab., Inc. v. Thomas, 521 F.2d 941, 948 (D.C.Cir.1975), cert. denied, 425 U.S. 910, 96 S.Ct. 1507, 47 L.Ed.2d 761 (1976); Gowdy v. United States, 412 F.2d 525, 529 (6th Cir.), cert. denied, 396 U.S. 960, 90 S.Ct. 437, 24 L.Ed.2d 425 (1969); Thompson v. Dilger, 696 F.Supp. 1071, 1077 n. 9 (E.D.Va.1988)). In Williams, the Fourth Circuit reasoned that before deciding to engage a contractor the government has to weigh considerations such as expenses, payment, access to the premises, administration, and a “veritable plethora of factors.” 50 F.3d at 310. Similarly, in the instant case, the government’s decision to hire an independent contractor to remedy the problem of the deteriorating insulation falls within the discretionary function exception.
Moreover, inherent in the government’s decision to engage an independent contractor is the government’s discretionary judgment that the insulation need not be tested for hazardous substances. Therefore, no genuine question remains as to whether the government’s election not to test the insulation is of the type that normally involves considerations of policy.
Case law is replete with examples where governmental decisions concerning the proper response to hazards are protected from tort liability by the discretionary function exception. See, e.g., Lockett v. United States, 938 F.2d 630, 639 (6th Cir.1991) (proper response to the discovery of PCBs in a residential area, including not making any response at all, is within the discretionary function exception to the FTCA); Myslakowski v. United States, 806 F.2d 94, 97 (6th Cir.1986), cert. denied, 480 U.S. 948, 107 S.Ct. 1608, 94 L.Ed.2d 793 (1987) (decision whether to warn public that government jeeps for sale to the public might be susceptible to rollover is a discretionary function); Childers v. United States, 40 F.3d 973, 976 (9th Cir.1994), cert. denied, 514 U.S. 1095, 115 S.Ct. 1821, 131 L.Ed.2d 744 (1995) (decisions concerning the manner and types of warnings to be placed on hiking trails is a discretionary function barring suit); Kiehn v. United States, 984 F.2d 1100, 1106 (10th Cir.1993) (decision whether to warn of dangers of rock climbing a discretionary function); Layton v. United States, 984 F.2d 1496, 1502-03 (8th Cir.), cert. denied, 510 U.S. 877, 114 S.Ct. 213, 126 L.Ed.2d 170 (1993) (failure to warn tree-cutting contractor re garding hazards in cutting trees protected by discretionary function exception).
|
1020901-13311 | PER CURIAM.
Defendant-appellee Sitmar Cruises, Inc., advertised and sold tickets for a 14-day pleasure cruise departing and returning to Los Angeles, California. The original itinerary included the ports of Acajutla, El Salvador, and Cabo San Lucas. Before departing Sitmar gave notice to various travel agents that these two ports (which were located in the southern tip of the proposed cruise) had been eliminated from the scheduled ports-of-call. Defendant stated that the change in plans was due to the fuel crisis during the winter of 1973-74. The defendant alleges that it was unable to secure a commitment for sufficient fuel in the southern ports. The 757 passengers were still provided with a 14-day cruise. The port of Manganillo was added to the itinerary and the passengers were given an extra day in Acapulco.
The passage contracts had been negotiated on behalf of the defendant by different travel agencies. Notice of the change in itinerary was only given to the respective travel agents. This notice advised the agents to notify the individual passengers who had already booked passage.
The individual passenger tickets contained a provision under paragraph 18(c) requiring that notice of any claim against the carrier be made within fifteen days after completion of the cruise. Within the fifteen day period plaintiff caused a notice of claim to be served on the defendant Sitmar Cruises on behalf of himself and sought to serve notice for all persons similarly situated. This lawsuit followed seeking damages, in the alternative, for (a) the difference in value between the cruise as advertised and as performed, or (b) the amount by which defendant was unjustly enriched by the elimination of the ports-of-call.
The trial court entered an opinion and order denying class action status to the plaintiff on the basis that the plaintiff’s notice of the claim was not effective to preserve or create a cause of action for all the other passengers. Plaintiff seeks a review of the trial judge’s decision.
I. THE DEATH KNELL DOCTRINE
The issue of whether or not an order denying class status is appealable was first seriously presented in Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir. 1966), cert. denied, 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598 (1967) [Eisen I.]. The case earned immediate fame because of the difficulty of the litigation and its immense proportions. In Eisen I the Court of Appeals for the Second Circuit said:
“Dismissal of the class action in the present case . . . will irreparably harm [the plaintiff] and all others similarly situated, for, as we have already noted, it will for all practical purposes terminate the litigation. Where the effect of a district court’s order, if not reviewed, is the death knell of the action, review should be allowed.”
Thus nearly ten years ago the “death knell” doctrine was born. However the idea never really has reached maturity. For awhile the Second Circuit used the death knell doctrine as an exception to the finality rule of 28 U.S.C. § 1291 and allowed an interlocutory appeal in cases wherein the plaintiff’s individual claim was so small that continued prosecution of the complaint was improbable. Green v. Wolf Corp., 406 F.2d 291 (2d Cir. 1968); Korn v. Franchard Corp., 443 F.2d 1301 (2d Cir. 1972). We rejected the death knell doctrine in King v. Kansas City Southern Industries, 479 F.2d 1259 (7th Cir. 1973) as did other circuits in Hackett v. General Host Corporation, 455 F.2d 618 (3d Cir.), cert. denied, 407 U.S. 925, 92 S.Ct. 2460, 32 L.Ed.2d 812 (1972); Graci v. United States, 472 F.2d 124 (5th Cir.), cert. denied, 412 U.S. 928, 93 S.Ct. 2752, 37 L.Ed.2d 155 (1973); Falk v. Dempsey-Tegeler & Co., Inc., 472 F.2d 142 (9th Cir. 1972). Generally these decisions criticize the death knell doctrine as being too mechanical and having a discriminatory effect in that it does not permit appeals by defendants or by plaintiffs who had the economic ability or personal interest to prosecute the lawsuit on their own behalf. Eventually even in the Second Circuit, “the rumblings of disapproval” were heard as was noted recently in Shayne v. Madison Square Garden Corp., 491 F.2d 397 (2d Cir. 1974). However, the court decided not to take a second look at the death knell doctrine because of the pendency of the Eisen case in the Supreme Court.
II. THE COLLATERAL ORDER DOCTRINE
In Eisen, preliminary to its decision on the merits, the Supreme Court was required to “decide whether the Court of Appeals in Eisen III had jurisdiction to review the District Court’s orders permitting the suit to proceed as a class action and allocating costs of notice,” 94 S.Ct. 2148. The Supreme Court found the question under its consideration controlled by its prior decision in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). Quoting from Cohen, the Court stated:
“This decision appears to fall in that small class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated.”
The Court then reasoned:
“Analysis of the instant case reveals that the District Court’s order imposing 90% of the notice costs on respondents likewise falls within, ‘that small class’. It conclusively rejected respondent’s contention that they could not lawfully be required to bear the expense of notice to the members of petitioner’s proposed class. Moreover, it involved a collateral matter unrelated to the merits of petitioner’s claims. Like the order in Cohen, the District Court’s judgment on the allocation of notice costs was a ‘final disposition of a claimed right which is not an ingredient of the cause of action and does not require consideration with it,’ id., at 546-547, 69 S.Ct. 1226, and it was similarly appealable as a ‘final decision’ under § 1291 . . . ” 94 S.Ct. 2150, 2149-50.
The Court then held that the court of appeals had jurisdiction to review fully the district court’s resolution of the class notice problem in that case. In this Circuit, since we do not believe that the death knell doctrine is a viable test we must determine whether the collateral order doctrine is applicable in light of the Supreme Court’s recent decision. The Court mugt determine whether the decision of the district court denying class action status falls within “that small class” of decisions defined in Cohen, supra, in that it finally determined a claim of right separable from, and collateral to, rights asserted in the action; which claim of right is too important to be denied review, and, too independent of the cause itself, to require that appellate consideration be deferred until the whole case is adjudicated.
We conclude that this case does not fall within that small class.
Unlike the Supreme Court’s decision in Eisen there is no question raised about the cost of notice. Eisen involved a district court order allowing class designation and apportioning the cost of notice. This case only presents the question of whether or not the district court order denying class status was improper. That question can still be reviewed on the merits after the case has reached final judgment. Here there is no claim of right which will escape review.
III. APPELLATE REVIEW UNDER 28 U.S.C. § 1292(b) CERTIFICATION
We fully realize that by our continued refusal to review district court decisions denying and granting class status there is a possibility of procedural problems preventing a proper review of the substantive issues.
In recent years, class actions “have sprouted and multiplied like the leaves of the green bay tree” (Eisen III at 1018), allowing the federal courts the opportunity to deal with important rights of consumers and small claimants whose individual claims might otherwise have never been recognized. Concomitant with these new opportunities provided by Rule 23 F.R.C.P. comes the responsibility, which must be borne by the courts, of developing the law in a way which is consistent with both the limited resources of the federal court system and the rights of the parties to adequately present the appropriate claims and defenses.
The threshold decision of whether to allow class status is enormously important. Since the adoption of Rule 23 eight years ago most decisions have advocated that it be construed liberally. However, there are only a limited number of appellate decisions which provide any meaningful guidelines for the district court in making a determination on class status. Nevertheless a clear majority of the members of the district court have acted admirably in handling these problems. Our judicial system is built in large part on the studied discretion of the individual trial judge. Consequently we are not shocked nor disturbed by the fact that the trial judge alone must make the “big decision.” The problem, of course, is the case wherein the parties and the court are in agreement that the class decision is unprecedented and difficult. Thus in these few instances where the question of class status is a very close decision a certification under 1292(b) might be appropriate. This approach has now found some support in the Second Circuit where the death knell doctrine difficulties have become obvious. As Judge Friendly stated in Parkinson v. April Indus., 520 F.2d 650 (2d Cir. 1975):
“The § 1292(b) procedure permits determination whether there is to be an appeal within weeks rather than months. To be sure, since that procedure requires initial certification by the district court, there is the possibility that an obdurate judge might thwart review in a case where the court of appeals would be disposed to grant it; but this risk must be weighed against the valuable input which district judges can make in cases of this sort and the disadvantages of any other procedure. Moreover, as said in Hackett v. General Host Corp., supra, 455 F.2d at 624, ‘If in isolated instances arbitrariness creeps in, there remains the ultimate remedy of mandamus’ with respect to the grant or denial of class action status.
Since the attempts to imprison the appealability of orders granting or denying class action designation within judicially-created formulae have proved to be failures and, in my judgment, will continue to be so, we should return to the earlier wisdom.”
Previously this Court has suggested appeals under § 1292(b) because we believe this procedure was intended by the Committee that drafted revised Rule 23. In other circuits interlocutory appeals under § 1292(b) have been granted to review class action determinations. Thus by our decision today we seek not to broaden our jurisdiction but simply to reaffirm the use of the § 1292(b) procedure in those limited situations wherein the trial judge determines that there is substantial ground for difference of opinion on the question of class status and that an immediate appeal may materially advance the ultimate termination of the case. Since we continue to reject the death knell doctrine and because we do not think that the collateral order doctrine is applicable there is no way we can consider appellant’s claim since it was not raised under § 1292(b). The § 1292(b) procedure does not require that every time a trial judge makes a determination on class status that the question must be certified for appeal. Furthermore, under § 1292(b) this Court has the option not to hear the appeal if certification was improvidently granted.
APPEAL DISMISSED FOR WANT OF JURISDICTION.
The original panel voted 2-1 to allow an interlocutory appeal from denial of class status which would overrule previous decisions of this Court. King v. Kansas City, 479 F.2d 1259 (7th Cir. 1973); Thill Securities Corp. v. New York Stock Exchange, 469 F.2d 14 (7th Cir. 1972). The proposed opinion was circulated to all the active members of the Court pursuant to the Court’s internal rules. However, the entire Court voted against allowing an appeal from a denial of class status as a matter of right. Thus, this per curiam opinion represents the views of Judge Frederick van Pelt Bryan as well as the active members of the Court, except Judges Swygert and Bauer, who dissent.
. The question of appealability has been raised from both affirmative and negative orders. For decisions denying class status see King v. Kansas City, 479 F.2d 1259 (7th Cir. 1973) (per curiam); Eisen v. Carlisle & Jacquelin, supra [Eisen I]; Shayne v. Madison Square Garden Corp., 491 F.2d 397 (2nd Cir. 1974); Korn v. Franchard Corp., 443 F.2d 1301 (2nd Cir. 1971); Caceres v. Int. Air Transport Association, 422 F.2d 141 (1970); City of New York v. International Pipe & Ceramics Corp., 410 F.2d 295 (2nd Cir. 1969); Green v. Wolf Corp., 406 F.2d 291 (2nd Cir. 1968); Hackett v. General Host Corp., 455 F.2d 618 (3d Cir. 1972); Graci v. United States, 472 F.2d 124 (5th Cir. 1973); Miller v. Mackey Int’l Inc., 452 F.2d 424, 427, n. 3 (5th Cir. 1971); Gosa v. Securities Investment Co., 449 F.2d 1330 (5th Cir. 1971); Falk v. Dempsey-Tegeler & Co., 472 F.2d 142 (9th Cir. 1972); Gerstle v. Continental Airlines, Inc., 466 F.2d 1374 (10th Cir. 1972). Also cf. Jumps v. Leverone, 150 F.2d 876 (7th Cir. 1945).
|
4338013-8829 | OPINION
PER CURIAM.
Michael Duffy appeals pro se from District Court orders entering judgment in favor of the defendants. For the following reasons, we will grant the Appellees’ motions to summarily affirm.
In May 2008, a storm damaged structures on a property in Kent County, Delaware, that is owned by Duffy. The Division of Inspections and Enforcement of the Kent County Department of Planning Services deemed several of those structures unsafe and ordered their demolition if the unsafe conditions were not corrected. After negotiating for several months with Kent County authorities regarding the rehabilitation or demolition of the structures, Duffy filed a civil action in the Court of Chancery. While that lawsuit was ongoing, Duffy was granted a demolition permit but failed to fully raze the structures. Consequently, after proving Duffy with notice that it intended to proceed with demolition, Kent County caused the structures to be demolished. Kent County placed a lien on the property in the amount of $1400, the cost of the demolition. Thereafter, Duffy initiated several lawsuits, including the two District of Delaware cases relevant to his present appeals.
In the first case, Duffy, who claims that he is disabled because of Parkinson’s Disease, alleged that the Kent County Levy Court (Kent County) and one.of its commissioners, P. Brooks Banta, violated the Americans with Disabilities Act (ADA). By order entered September 27, 2010, the District Court granted the defendants’ motions to dismiss Commissioner Banta because the ADA provides for recovery against only a public entity. Several years later, a Magistrate Judge recommended granting Kent County’s motion for summary judgment because Duffy failed to “produce sufficient evidence to create a material issue of fact as to whether he suffers from a disability within the meaning of the ADA.” The Magistrate Judge also concluded that even if Duffy were disabled, his ADA claim would fail because he did not demonstrate that he was excluded from participation in, or denied the benefits of, a public entity’s services, programs, or activities. By order entered March 10, 2014, the District Court adopted the Magistrate Judge’s recommendation, granted the motion for summary judgment, and entered judgment in favor of Kent County. Duffy appealed, and the matter was docketed here at C.A. No. 14-1668.
In the second case, Duffy alleged that Kent County, Banta, and another commissioner, Michael J. Petit de Mange, caused a taking of his property without compensation in violation of the Fifth Amendment, and that the demolition of the structures resulted in an unlawful seizure under the Fourth Amendment. The defendants filed a motion for summary judgment. The Magistrate Judge recommended granting that motion because condemnation of the structures was necessary to protect public safety and' because Duffy was given proper notice and adequate recourse to challenge the demolition. The District Court adopted the Magistrate Judge’s report and recommendation. Duffy appealed. The matter was docketed here at C.A. No. 14-1669.
We have jurisdiction under 28 U.S.C. § 1291. “We review district court decisions regarding both summary judgment and dismissal for failure to state a claim under the same de novo standard of review.” Barefoot Architect, Inc. v. Bunge, 632 F.3d 822, 826 (3d Cir.2011), “To survive a motion to-dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotations omitted). Summary judgment is proper where, viewing the evidence in- the light most favorable to the nonmoving party and drawing all inferences in favor of that party, there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(a); Kaucher v. Cnty. of Bucks, 455 F.3d 418, 422-23 (3d Cir.2006). We may affirm on any basis supported by the record. See Fairview Twp. v. EPA, 773 F.2d 517, 525 n. 15 (3d Cir.1985).
Duffy alleged that Kent County and Commissioner Banta violated Title II of the ADA, which provides that “no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity.” 42 U.S.C. § 12132. To establish a prima facie case under the ADA, Duffy “must demonstrate (1) that [ ]he is a qualified individual with a disability; (2) that the defendants are subject to [the ADA]; and (3) that [ ]he was denied the opportunity to participate in or benefit from defendants’ services, programs, or activities, or was otherwise discriminated against by defendants, by reason of [his] disability.” Harris v. Mills, 572 F.3d 66, 73-74 (2d Cir.2009). In support of his claim, Duffy asserted that- Kent County and Commissioner Banta failed to assist him in correcting the violations on his property and denied his request for a trash dumpster. The undisputed facts, however, establish that Duffy was neither “excluded from participation” nor “denied ... benefits” because of his disability.
After receiving notification that structures on his property had been deemed unsafe, Duffy contacted Kent County, identifying himself as disabled and requesting assistance in complying with the condemnation order. In response, Kent County met with Duffy and explained the demolition and rehabilitation process, discussed the requirements for permits and deadline extensions, and offered to assign a staff member to assist Duffy. Kent County also provided Duffy several extensions of time in which to correct the unsafe conditions on his property and granted his request for a demolition permit. The only adverse action occurred when Kent County rejected Duffy’s request for a trash dumpster. The Director of the Department of Planning Services for Kent County explained in an affidavit that, although the County had provided two dumpsters for a community-organized storm debris cleanup event, it “never provides trash dumpsters at its expense to private land owners for activities that benefit only one person or parcel of land.” By contrast, Duffy offered no evidence indicating that the decision to deny a dumpster was motivated by his disability. See CG v. Pa. Dep’t of Educ., 734 F.3d 229, 236 (3d Cir.2013) (stating that to satisfy the ADA’s causation requirement, “Plaintiffs must prove that they were treated differently based on the protected characteristic, namely the existence of their disability.”). Under these circumstances, we conclude that the District Court properly granted the motion to dismiss Commissioner Banta and Kent County’s motion for summary judgment on Duffy’s ADA claims.
The District Court also properly granted summary judgment in favor of the defendants on Duffy’s Fourth and Fifth Amendment claims. The Fifth Amendment, made applicable to state and local governments through the Fourteenth Amendment, authorizes the taking of private property for public use if just compensation is paid to the owner. See Cowell v. Palmer Twp., 263 F.3d 286, 290 (3d Cir.2001). A Takings Clause claim cannot lie where the plaintiff was not deprived of all beneficial uses of his property. See Andrus v. Allard, 444 U.S. 51, 65-66, 100 S.Ct. 318, 62 L.Ed.2d 210 (1979). Assuming that Duffy’s Fifth Amendment claim was ripe, see Williamson Cnty. Reg’l Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 186, 195, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985), we conclude that the defendants’ actions did not constitute a taking. There is no dispute that Duffy maintained ownership of the property and that the structures on that property were unsafe. Notably, the destruction of the unsafe structures was performed pursuant to exercises of traditional police power, “which do not entitle the individuals affected to compensation.” National Amusements Inc. v. Borough of Palmyra, 716 F.3d 57, 63 (3d Cir.2013) (recognizing that the “government must pay just compensation for ... takings ‘except to the extent that “background principles of nuisance and property law” independently restrict the owner’s intended use of the property.’” (quoting Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005))); McKenzie v. City of Chicago, 118 F.3d 552, 557 (7th Cir.1997) (“Razing nuisances, like killing diseased livestock and burning infected plants, is a time-honored use of a state’s police power”). In addition, Duffy has not shown that the lien on his property “foreclose[d] all economically viable uses of the land.” Cowell, 263 F.3d at 291 (holding that imposition of a municipal lien did not constitute a taking).
|
12403383-10742 | PER CURIAM:
Pro se Plaintiff Trent S. Griffin appeals the district court’s dismissal of his claims against various defendants stemming from an alleged conspiracy which resulted in, inter alia, a foreclosure on his home and the garnishment of his veteran’s benefits. We AFFIRM.
I.
Plaintiff Trent S. Griffin, proceeding pro se, initially filed suit to assert claims of violations of his rights, inter alia, under: the First, Fourth, Fifth, Thirteenth, and Fourteenth Amendment rights; Title VII of the Civil Rights Act of 1964; the Americans with Disabilities Act (“ADA”); the Age Discrimination in Employment Act; and 38 U.S.C. § 5301. These claims are made against four groups of defendants: (1) American Zurich Insurance Company; (2) Walgreens Company and various employees (collectively, ‘Walgreens”); (3) Wells Fargo Bank; and (4) the Texas Department of Insurance, the Texas Department of Family and Protective Services, and various employees of the state of Texas (“State Defendants”). Griffin’s claims appear to stem from various events, including: (a) a determination by American Zurich concerning an injury suffered during his employment at Walgreens, (b) alleged discrimination, retaliation, harassment, and a hostile work environment during his employment at Walgreens, (c) Wells Fargo’s foreclosure on his house and garnishment of his veteran’s benefits, and (d) some sort of dispute over custody and child care payments ordered by the State Defendants.
Griffin’s complaint generated a flurry of activity, with the defendants filing motions to dismiss, Griffin filing out-of-time amended complaints and motions for summary judgment, and the defendants filing motions to strike in response to these amended complaints. The district court eventually denied most of these motions and re-set the litigation process by ordering Griffin to file a new amended complaint. Once Griffin filed his new amended complaint, American Zurich, Walgreens, and the State Defendants filed a motion to dismiss the amended complaint, while Wells Fargo filed an answer and then subsequently filed a motion to dismiss. The district court individually granted all four motions to dismiss and entered final judgment in favor of each of the groups of defendants. Griffin filed motions for new trials against each of the groups of defendants, which were subsequently denied in an electronic order. Griffin now appeals.
II.
We review de novo a district court’s dismissal for either lack of subject matter jurisdiction or failure to state a claim. Ctr. for Biological Diversity, Inc. v. BP Am. Prod. Co., 704 F.3d 413, 421 (5th Cir. 2013). When evaluating a motion to dismiss for failure to state a claim, we accept all well-pleaded facts as true and view those facts in the light most favorable' to the plaintiff. Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 672 (5th Cir. 2013). We will deny such a motion if the complaint contains sufficient factual matter which, if accepted as true, states.a plausible claim for relief. Id. (citing Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). As for a motion to dismiss for lack of subject matter jurisdiction, a district court can resolve factual disputes “to the extent necessary to determine jurisdiction” and, based upon such facts, we then determine whether the district court correctly applied the law. See Smith v. Reg’l Transit Auth., 756 F.3d 340, 346 (5th Cir. 2014).
Griffin’s appeal also challenges the manner in which the district court handled the various motions filed in his case. The management of a district court’s docket is reviewed for an abuse of discretion. Fin. Acquisition Partners LP v. Blackwell, 440 F.3d 278, 291 (5th Cir. 2006).
III.
Griffin’s sprawling, ninety-seven page appeal attempts to revisit most of the decisions of the district court in dismissing his claims. Our review, however, finds that the order appealed must be affirmed for substantially the same reasons given by the district court. We briefly address the dis-cernable arguments made by Griffin both as to the district court’s general handling of his case and to the specific claims against each group of defendants.
A. The District Court’s Management of Griffin’s Case
Griffin lodges two types of arguments against the district court’s management of his claims. First, Griffin repeatedly argues that, as a pro se plaintiff, the district court was under an obligation to liberally construe his complaints and failed to do so. Griffin is correct on the law, but we conclude that the district court here liberally construed Griffin’s amended complaint. “We hold pro se plaintiffs to a more lenient standard than lawyers when analyzing complaints, but pro se plaintiffs must still plead factual allegations that raise the right to relief above the speculative level.” Chhim v. Univ. of Tex. at Austin, 836 F.3d 467, 469 (5th Cir. 2016) (per curiam), cert. denied, — U.S. -, 137 S.Ct. 1339, 197 L.Ed.2d 529 (2017). Griffin’s amended complaint, even under a liberal construction, failed to raise anything more than speculative claims. The district court was correct to grant dismissal even granting a liberal interpretation of Griffin’s amended complaint.
Griffin also argues that the district court abused its discretion in managing his case. Griffin alleges that errors by the district court include: not allowing Griffin to initially amend his complaint, not requiring defendants to respond to his motion for partial summary judgment, not converting motions to dismiss his amended complaint into motions for summary judgment, forcing Griffin to respond to “untimely” motions to dismiss his amended complaint, and ultimately granting these untimely motions. We disagree. The district court did not abuse its discretion when it gave Griffin leave to file an amended complaint. Once filed, that amended complaint rendered all earlier motions, including Griffin’s motion for partial summary judgment, moot. See King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994). Similarly, Griffin’s claims that the motions to dismiss his amended complaint were untimely also fail given his request to refile his amended complaint. The subsequent motions to dismiss were all timely based on this refiling. See Fed. R. Civ. P. 12(a)(1)®. The district court did not abuse its discretion.
B.Claims Against American Zurich
Griffin’s appeal argues that the district court erred when it dismissed his claims against American Zurich based on res judicata. Griffin is incorrect: res judica-ta bars his claim. We note that Texas, not federal, res judicata applies to Griffin’s claim before the district court, as the pre-clusive opinion comes from a state court. See Cox v. Nueces Cty., 839 F.3d 418, 421 & n.3 (5th Cir. 2016). But even though the district court incorrectly applied the federal res judicata standard, its analysis nonetheless supports a finding of res judicata under Texas law.
In Texas, res judicata requires: (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity with them; and (3) a second action based on claims that were raised or could have been raised in the first action. See Cox, 839 F.3d at 421. The district court determined that the parties were identical, that a court of competent jurisdiction rendered a final judgment on the merits, and that Griffin based both actions on the same nucleus of operative facts. These determinations support a conclusion that res judicata barred this claim under Texas law, and we therefore affirm the district court as to Griffin’s claims against American Zurich.
C. Claims Against Walgreens
Griffin’s appeal as to Walgreens appears to only challenge the district court’s determination that his ADA claim failed because he failed to identify any major life activities that are substantially limited by an impairment. Griffin raises no new arguments to this issue, however, and our review of his complaint reveals that his pleadings on this specific point contain no facts about how his impairment affects him major life activities. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Without pleading facts of how his major life activities were limited, Griffin cannot state a sufficient claim to a claim under the ADA. Hale v. King, 642 F.3d 492, 499-501 (5th Cir. 2011) (per curiam). Griffin raises no other issues on appeal as to Walgreens. We therefore hold that the district court correctly dismissed all claims against Wal-greens.
D, Claims Against Wells Fargo Bank
Wells Fargo was the only party to file an answer to Griffin’s amended complaint before filing its motion to dismiss. Griffin argues in his appeal that the district court improperly handled Wells Fargo’s motion, but the district court correctly converted the motion to dismiss into a motion for judgment on the pleadings and ruled on that motion. See Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999).
Griffin’s substantive arguments as to Wells Fargo, on appeal concern (1) the procedure surrounding Wells Fargo’s placement of child support liens on his accounts and (2) the foreclosure of his home. None of these arguments is persuasive. Griffin provides no law to support his allegations that Wells Fargo was required to provide notice before placing the liens on his accounts, and our review of potentially applicable law reveals that Griffin’s complaint is devoid of factual allegations that could potentially support a claim. As to Griffin’s foreclosure claim, wrongful foreclosure in Texas requires a plaintiff to plead that there was (1) a defect in the foreclosure, (2) a grossly inadequate selling price, and (3) a causal connection between the two. See Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763, 767-68 (5th Cir. 2016). Assuming arguendo that Griffin’s complaint pleads a defect in the foreclosure, Griffin pleaded neither that the selling price was inadequate nor that the inadequate selling price was caused by that defect. See Martins v. BAC Home Loans Serv., L.P., 722 F.3d 249, 256 (5th Cir. 2013) (per curiam). Accordingly, the district court was correct to grant Wells Fargo judgment on the pleadings on all claims asserted by Griffin.
E, Claims Against State Defendants
Griffin’s appeal as to the State Defendants attacks various aspects of the district court order dismissing his claims on the basis of, inter alia, sovereign immunity, qualified immunity, the Rooker-Feldman doctrine, and Griffin’s failure to state a claim. None of his arguments on appeal is persuasive.
|
10516306-13209 | MELLOY, Chief District Judge.
Appellant Claudette Atkins was found guilty of one count of conspiracy to defraud the United States Department of Treasury and its agency, the Internal Revenue Service, by obtaining and aiding .to obtain the payment of false, fictitious and fraudulent claims, a violation of 18 U.S.C. § 286, and guilty of four counts of making and presenting false, fictitious and fraudulent claims to the United States Department of Treasury, a violation of 18 U.S.C. § 287. Her co-Defendant, Sarah Harris, was also found guilty of one count of conspiracy to defraud the government by obtaining payment through false claims, and guilty of five counts of making and presenting false claims to the United States Department of Treasury. Atkins was sentenced to 21 months.
Atkins raises the following issues on appeal: 1) whether it was proper for the district court to attribute thirty falsified income tax returns to Atkins in computing Atkins’ base offense level; 2) whether it was proper for the district court to deny Atkins’ motion for downward departure on the ground that Atkins’ crime was not a single act of aberrant behavior; and 3) whether the government met its burden of providing a race-neutral explanation for its strikes of black jurors. We affirm on all issues.
I. Facts
The facts of this case reveal that Atkins and Harris entered into a conspiracy to defraud the Internal Revenue Service (the “IRS”) through use of the IRS’s electronic tax return network. Atkins or Harris would recruit someone, usually a neighbor, friend, or family member, to pose as a taxpayer. Then, either Atkins or Harris would take the person down to the Johnson Real Estate Office where Atkins worked. At the office, either Atkins or Harris would create fraudulent W-2’s for the person on a typewriter in the office. All of the W-2’s listed the Fish’N’Such, a company owned by Harris that burned to the ground in 1991, as the employer. Atkins or Harris would then drive the person down to a local H & R Block office where a tax return would be prepared and electronically filed. Since the person was “entitled” to a refund, an application for a Rapid Refund Loan would also be submitted. A few days later, after the loan check arrived at the H & R Block office, Atkins or Harris would drive the person down to the H & R Block office to pick up their check. The check would then be picked up and endorsed over to Harris. The person filing the return received between one-hundred and three-hundred dollars.
II. Discussion
A. Offense Level
Atkins first argues that a preponderance of the evidence only supports a 2 level increase in her base offense level, not the 6 level increase recommended by the probation office and accepted by the district court. See U.S.S.G, § 2F1.1(b)(1). In so arguing, Atkins admits that a preponderance of the evidence links her to four of the fraudulent tax returns, i.e., the returns filed by LaTasha Nelson, LaRhonda Nelson, Stanley Johnson, and Pernal Mozee.. Atkins disputes, however, whether the evidence links her to the other twenty-six returns which were filed. Based on the evidence presented at trial, the district court concluded that all thirty returns were filed in furtherance of the conspiracy. As a result, the district court attributed all thirty returns (for a total of $57,902) to Atkins.
We review a sentencing court’s factual findings for clear error and will reverse the sentencing court if, and only if, we are “left with the definite and firm conviction that the sentencing court erred.” United States v. Garrido, 995 F.2d 808, 812 (8th Cir.), cert. denied, - U.S. -, 114 S.Ct. 331, 126 L.Ed.2d 276 (1993). Atkins can only be linked to the thirty returns (for sentencing purposes) if the filing of the returns were “reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity, that occurred during the commission of the offense-” U.S.S.G. § lB1.3(a)(l)(B).
In this case, the evidence showed that Atkins was involved in the conspiracy at all levels. Atkins recruited others to file fraudulent tax returns; she gave the individuals instructions on how to file fraudulent returns; she obtained personal information from the individuals; she prepared fraudulent W-2’s ; she told one individual what to tell H & R Block if they asked why her W-2 was not typed; she went with at least two of the individuals when they filed their false returns; and she was compensated for her role in the conspiracy. The evidence also showed that the Johnson Real Estate Office served as the headquarters for the conspiracy; that Atkins worked at the Johnson Real Estate Office; that Atkins’ brother, Virgil Johnson, Jr., owned the Johnson Real Estate Office; and that numerous friends and family members of Atkins filed fraudulent returns. As for the returns themselves, thirty returns listed the Fish’N’Such as their employer; twenty-eight claimed head of household status; and twenty-three claimed an extra credit for a child born in 1991. When viewed in the aggregate, these facts support the district court’s decision to attribute all of the returns to Atkins. The close working relationship between Harris and Atkins, and the similarities between all 30 fraudulent returns, leads us to the conclusion that the full extent of the conspiracy was reasonably foreseeable to Atkins. See, e.g., United States v. Granados, 962 F.2d 767, 771 (8th Cir.1992) (close working relationship between co-conspirators provides a strong indication that each co-conspirator knew the full scope of the conspiracy); United States v. Rowe, 911 F.2d 50, 51 (8th Cir.1990) (same).
Accordingly, we affirm the district court’s finding that all thirty returns should be attributed to Atkins.
B. Downward Departure
Atkins next argues that the district court should have granted her motion for a downward departure since, according to Atkins, her crime was a single act of aberrant behavior. Pointing to certain statements made by the district court during sentencing, Atkins further argues that the district court would have departed downward but for the district court’s mistaken belief that it lacked the authority to depart. In response, and construing these same statements, the government argues that the district court’s refusal to depart was based on the facts of the case which show that Atkins’ crime was not a single act of aberrant behavior.
We can only review a district court’s refusal to depart downward if the district court mistakenly believed that it lacked the authority to depart. United States v. Bieri, 21 F.3d 811, 817 (8th Cir.1994); United States v. Parham, 16 F.3d 844, 847 (8th Cir.1994); United States v. Hall, 7 F.3d 1394, 1396 (8th Cir.1993); United States v. Evidente, 894 F.2d 1000, 1005 (8th Cir.), cert. denied, 495 U.S. 922, 110 S.Ct. 1956, 109 L.Ed.2d 318 (1990). In this case, we conclude that the district court was aware of its authority to depart, but refused to depart based on the facts of the case.
Specifically, the following statements by the district court demonstrate to us that the district court’s refusal to depart was based on a consideration of the facts of the case which showed that Atkins’ crime was non-spontaneous and pre-planned:
I’m going to deny the motion for downward departure. I agree with [Assistant United States Attorney] Muchnick that the guideline provisions there envision something other than a conspiracy situation, where the defendant has been convicted not only of conspiracy but of numerous counts. In all candor, absent the guidelines, I think my sentences in both of these cases would have been very' different but I feel bound by the guidelines. So on that basis, I will deny the motion for downward departure.
Sent.Tr. at 10.
Even if we accepted Atkins’ argument that the district court believed it had no authority to depart, the conclusion that the district court erred does not follow since Atkins’ crime was not a single act of aberrant behavior. We have previously defined a single act of aberrant behavior as an act that is “spontaneous and seemingly thoughtless.” United States v. Garlich, 951 F.2d 161, 164 (8th Cir.1991) (quoting United States v. Carey, 895 F.2d 318, 324-25 (7th Cir.1990), and United States v. Glick, 946 F.2d 335, 338 (4th Cir.1991)).
In this case, as we have previously stated, the evidence showed that Atkins recruited others to file fraudulent tax returns; Atkins gave instructions on how to file the fraudulent returns; Atkins obtained personal information from the individuals; Atkins prepared fraudulent W-2 forms; and Atkins went with at least two of the individuals when they filed their false returns. In short, the evidence showed that Atkins was an active participant in a conspiracy that spanned a two-month period and that Atkins committed a number of non-spontaneous and preplanned acts throughout the course of the conspiracy. Given the length of the conspiracy and the large number of pre-planned acts which were committed by Atkins, we conclude that Atkins’ crime was not a single act of aberrant behavior. See Garlich, 951 F.2d at 164 (“Garlich’s actions in planning and executing the financing scheme over a one-year period were not ‘spontaneous and seemingly thoughtless.’ ”); United States v. Marcello, 13 F.3d 752, 761 (3rd Cir.1994) (scheme that required the defendant to pre-plan the deposit of $9,000 each day over a one-week period of time was not aberrant behavior).
Accordingly, we conclude that we have no jurisdictional authority to review the district court’s refusal to depart downward since the district court’s refusal to depart was an exercise of discretion. We further conclude that, even if we were to reach the issue, the district court did not err, as a matter of law, in refusing to depart.
C. Batson Challenge
Atkins, a black female, next argues that the government deliberately struck blacks from the jury pool in violation of Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712, 90 L.Ed.2d 69 (1986). More specifically, Atkins argues that the Government did not offer a racially-neutral reason for striking two of the three blacks in the jury pool, namely Juror #3 and Juror #4. The Government disagrees, arguing that Juror #3 was struck because she did not have an attachment to the community — she was the only venireper-son who did not own or rent a home in the community — and because she made a “funny face” when asked if filing a false claim against the government should be a crime. As for Juror # 4, the government contends that she was struck because she had a daughter who was a low-level government employee and low-level government employees tend to show hostility towards the government.
We begin our review by noting the proper course of action to be followed after a defendant raises a Batson challenge:
A defendant who raises a Batson claim must make a prima facie showing that the prosecutor exercised peremptory challenges on the basis of race. Hernandez v. New York, [500] U.S. [352], [358-60], 111 S.Ct. 1859, 1866, 114 L.Ed.2d 395 (1991) (plurality). If the defendant makes this showing, the burden shifts to the prosecutor to give a race-neutral explanation for striking the prospective jurors in question. Id. A prosecutor’s explanation for a strike is considered race neutral if the explanation is facially based on something other than the juror’s race, i.e., if discriminatory intent is not inherent in the stated reason. Id. After the defendant has a chance to develop a record showing the prosecutor’s reason is pretextual, United States v. Alvarado-Sandoval, 997 F.2d 491, 491-93 (8th Cir.1993), the district court must decide whether the defendant carried the burden of proving purposeful discrimination, Hernandez, [500] U.S. [358-60], 111 S.Ct. at 1866. We review a district court’s rulings on Batson claims for clear error. United States v. Day, 949 F.2d 973, 979 (8th Cir.1991).
United States v. Brooks, 2 F.3d 838, 840 (8th Cir.1993).
In this case, we are satisfied that the district court did not clearly err in allowing the government to strike Juror # 3 and Ju ror #4. First, as to Juror #3, we have recognized that the government can strike a venireperson who lacks an attachment or commitment to the community. See, e.g., United States v. Day, 949 F.2d 973, 979 (8th Cir.1991) (black female who had a sporadic work history and who did not own property could properly be struck since she did not have an attachment to the community); United States v. Jackson, 914 F.2d 1050, 1052-53 (8th Cir.1990) (government can strike those jurors who lack “some experience and commitment to the community”). We have also recognized that “negative body language” can justify a government strike. See, e.g., Reynolds v. Benefield, 931 F.2d 506, 512-13 (8th Cir.), cert. denied, 501 U.S. 1204, 111 S.Ct. 2795, 115 L.Ed.2d 969 (1991) (so long as the record is fully developed on the point, venireman can be struck if the veniremen grimaces, stares, and/or makes a facial expression which indicates a venireman’s hostility towards an attorney or an issue in the case). Thus, we can find no clear error in the district court’s decision to allow the government to strike Juror #3.
|
6047782-8350 | PER CURIAM:
Ulysses Antwan Harris appeals his conviction for possession of a firearm by a convicted felon, in violation of 18 U.S.C. §§ 922(g) and 924(e), and seeks a new trial on two grounds: (1) the district court erred by denying his motion to suppress a .357 caliber Magnum pistol found by an Atlanta, Georgia police officer under the floor mat in the passenger’s compartment of a Yellow taxicab in which he was riding; (2) statements he made to federal ATF agents while he was being held in state custody on state criminal charges (but before he was charged in the instant case), which the court admitted into evidence, were taken in violation of his Sixth Amendment right to counsel. We address these grounds in turn.
I.
The facts giving rise to the police officer’s seizure of the pistol were these. At 1:00 a.m. on May 16, 2005, Officer Min Woo Cha was on routine patrol in a high crime area where crack cocaine trafficking was routine. He observed Harris walk into a parking lot, reach behind some bushes along the fence line, remove what appeared to be a dark-colored handgun, and place it in his pocket. This caught Cha’s attention because drug traffickers frequently hide drugs and handguns behind bushes. Shortly thereafter, a Yellow taxicab van arrived and picked up Harris. Cha followed the cab down a four-lane street (two lanes in each direction), and observed it change lanes without using its turn signal, in violation of Georgia law. Cha promptly pulled the cab over, explained the violation to the driver, asked Harris to exit the cab, and inquired as to where he was going. Cha also asked him if he had any drugs or weapons on his person; Harris said “no.” Harris then consented to a search of his person, and Cha found no drugs or weapon. Cha then obtained the cab driver’s consent to search the passenger compartment of the cab, where Harris had been sitting. On lifting the floor mat, Cha found the .357 Magnum at issue.
Harris asserts that the district court erred in admitting the pistol into evidence because (1) Officer Cha lacked probable cause to stop the taxicab ; (2) Harris had a legitimate expectation of privacy in the entire passenger compartment of the cab; and (3) the cab driver’s consent was ineffective because Harris had a superior privacy interest.
“The Fourth Amendment protects individuals from unreasonable search and seizure.” Chanthasouxat, 342 F.3d at 1275. A traffic stop, however, is constitutional if it is either based upon probable cause to believe a traffic violation has occurred or justified by reasonable suspicion in accordance with Terry, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889. Chanthasouxat, 342 F.3d at 1275. When determining whether an officer had probable cause to believe that a traffic violation occurred, the “officer’s motive in making the traffic stop does not invalidate what is otherwise objectively justifiable behavior under the Fourth Amendment.” United States v. Simmons, 172 F.3d 775, 778 (11th Cir.1999) (quotation omitted). The Constitution also permits police officers to conduct a brief investigatory stop, Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968), “if they have a reasonable, articulable suspicion based on objective facts that” an individual is engaged in criminal activity. United States v. Powell, 222 F.3d 913, 917 (11th Cir.2000). A determination of reasonable suspicion is based on the totality of the circumstances, and “[i]t does not require officers to catch the suspect in a crime. Instead, [a] reasonable suspicion of criminal activity may be formed by observing exclusively legal activity.” United States v. Acosta, 363 F.3d 1141, 1145 (11th Cir.2004) (citations omitted). Additionally, the issue is not whether the particular officer involved “actually and subjectively had the pertinent reasonable suspicion, but whether, given the circumstances, reasonable suspicion objectively existed to justify [the investigatory stop].” United States v. Nunez, 455 F.3d 1223, 1226 (11th Cir.2006). With the foregoing principles in hand, we assess Harris’s first point: Officer Cha lacked probable cause to stop the taxicab.
Officer Cha had probable cause to stop the taxicab because he observed the taxicab commit a traffic violation when it failed to signal during a lane change. Georgia law requires drivers to signal an intention to change lanes when necessary to alert other drivers. O.C.G.A. § 40-6-123(b). Cha also had reasonable suspicion to conduct an investigatory Terry stop because he witnessed Harris remove a dark object that looked like a handgun from behind some bushes immediately before getting into the taxicab.
Regarding Harris’s second point, the parties dispute whether Harris had a legitimate expectation of privacy in the cab’s passenger compartment, particularly the area underneath the compartment’s floor mat.
The accused bears the burden of demonstrating a legitimate expectation of privacy in the area searched. See United States v. Cooper, 133 F.3d 1394, 1398 (11th Cir.1998) (holding that the individual challenging the search has the burden of both proof and persuasion). If the accused successfully establishes an expectation of privacy, the burden then shifts to the government to prove that the search was reasonable based upon a recognized exception to the warrant requirement. United States v. Bachner, 706 F.2d 1121, 1125-26 (11th Cir.1983). A person has a legitimate expectation of privacy if (1) he has a subjective expectation of privacy, and (2) society is prepared to recognize that expectation as objectively reasonable. United States v. Segura-Baltazar, 448 F.3d 1281, 1286 (11th Cir.2006). “A legitimate expectation of privacy [must] be proven by factors beyond mere possession, such as a right to exclude or a right to privacy.” United States v. Espinosa-Orlando, 704 F.2d 507, 512 (11th Cir.1983) (citing Rakas v. Illinois, 439 U.S. 128, 143-44 & n. 12, 99 S.Ct. 421, 430-31 & n. 12, 58 L.Ed.2d 387 (1978)).
Supreme Court cases suggest in dicta that a taxicab passenger may enjoy a legitimate expectation of privacy in a cab, although the Court has not defined the exact parameters of such expectation. See Katz v. United States, 389 U.S. 347, 352, 88 S.Ct. 507, 511-12, 19 L.Ed.2d 576 (1967) (noting that “[n]o less than an individual ... in a taxicab,” an individual in a telephone booth “who occupies it, shuts the door behind him, and pays the toll” is entitled to the protection of the Fourth Amendment); Rios v. United States, 364 U.S. 253, 261-62, 80 S.Ct. 1431, 1436-37, 4 L.Ed.2d 1688 (1960) (applying Fourth Amendment principles to the search of the passenger area of an occupied taxicab without addressing the occupant’s expectation of privacy). Regarding passengers in a private car, the Court has held that a passenger, who has no possessory interest in the automobile, does not have a legitimate expectation of privacy in the interior of the automobile because he does not have the right to exclude others from the car. Rakas, 439 U.S. at 140, 143 n. 12, 148, 99 S.Ct. at 429, 430 n. 12. Of course, we do not know the effect of Rakas on Katz and Rios.
While we have established some general boundaries regarding a passenger’s legitimate expectation of privacy in a private vehicle, we have not specifically addressed a taxicab passenger’s standing to challenge a search of the passenger compartment of the cab. See Cooper, 133 F.3d at 1398 (“A passenger usually lacks a privacy interest in a vehicle that the passenger neither owns nor rents”). We have recognized a Fourth Amendment right to challenge the search of a hidden compartment in which there was no legitimate expectation of privacy, because the authorities gained access to the compartment through an area in which there was a reasonable expectation of privacy. United States v. Morales, 847 F.2d 671, 672-73 (11th Cir.1988) (holding that because discovery of a hidden compartment in the floor of the crewmembers’ sleeping quarters involved a search of the sleeping quarters itself, the crewmembers had “a reasonable expectation of privacy to prevent the unwarranted process of the search”). Id. at 672-73.
However, we need not resolve whether and to what extent a taxicab passenger enjoys a legitimate expectation of privacy in a cab because in this case the cab driver gave the officers consent to search the cab.
|
2017212-10635 | MARTIN, Circuit Judge.
The issue on this appeal is whether or not the United States District Court for the Eastern District of Michigan abused its discretion when it refused to grant a temporary injunction to restrain the Supervisor in Charge of the Alcohol and Tobacco Tax Unit in Detroit, Michigan, from enforcing letters which demanded that the appellant’s incorporated wholesale grocery file information reports concerning the sale at its place of business of sugar, rye and cracked corn. The action of the appellee supervisor was taken under authority of Federal Regulations of the Secretary of the Treasury, adopted pursuant to section 5213(a) of the Internal Revenue Code of 1954, revised by section 5291, I.R.C. [P.L. 85-859, Title II, § 201 (1958), 72 Stat. 1373], 26 U.S.C.A. § 5291.
The regulations promulgated by the Secretary of the Treasury, through his delegate [20 F.R. 4818 (July 6, 1955), amending 20 C.F.R., section 173.10] provided, in effect, that the appellant, who falls within the coverage of the regulations, should mate a detailed report to the Internal Revenue Service of every sale of sugar and cracked corn of 100 pounds, or more, and of every sale of rye of 200 pounds, or more, except sales made to local trade buyers by delivery at their places of business. The demand letters required that such reports must include the name and address of the purchaser, the automobile registration number of the vehicle used by him, and the number and date of issuance of his operator’s license. The basis for the action filed by appellant in the district court is that the foregoing demand letters and the regulations authorizing them are invalid as applied to appellant, for the reason that they are beyond the authority granted to the Secretary of the Treasury, or his delegate, by the aforesaid section 5213(a) of the Internal Revenue Code of 1954 [Revised section 5291]; and for the further reason that the letters and regulations promulgated pursuant to statutory authority of the code section constituted a means of depriving appellant of property in violation of the Fifth Amendment to our national Constitution.
Appellant alleges that enforcement of the demand letters would cause irreparable injury to its business. It avers that its annual business aggregated one and three-fourths million dollars in 1958: all of which sales were made by delivery to known trade buyers at their places of business, with the exception of $330,000. $300,000 of the $330,000 in sales was made to known trade buyers who picked up the merchandise at appellant’s place of business; and the remaining $30,000 in sales was said to have been made to known customers, who also picked up the merchandise at appellant’s place of business.
A known trade buyer is one who operates a retail store, such as a grocery store, and purchases the commodity for resale. Appellant avers that the requirement of making the foregoing reports would be-costly and burdensome, that it would be discriminatory against it in view of the fact that most of its competitors were not required to make such reports ; and that it will suffer irreparable injury if a preliminary injunction against the enforcement of the letters is not issued pending a trial on the merits. It insists that its legal rights have been invaded by the' issuance of the demand letters; that the regulations, as applied to it, are void because in excess of authority granted by the statute; that the regulations are arbitrary and capricious; and that they are violative of the Fifth Amendment.
Appellant thus states its exact position: “The appeal in the present case has not attacked the statute, but has assumed that it is constitutional. It has taken the position that the regulation and demand letter issued pursuant thereto are as against the appellant, in violation of the due process clause of the Fifth Amendment to the Federal Constitution.”
The further argument is made that the district court erred in failing to make findings of fact and conclusions of law as a basis for its refusal to grant the preliminary injunction in the case. The prayer of appellant is that the order of the district court denying its motion for a preliminary injunction be set aside and that the case be remanded with instructions that a preliminary injunction be entered pending a trial on the merits; or, in the alternative, that the district court grant appellant a new hearing on its motion for a preliminary injunction, and thereafter enter findings of-fact and conclusions of law in support of its decision on the motion.
We are of opinion that appellant is not entitled to the relief prayed on either of its stated grounds, or on any ground. We find no abuse of discretion by the district court in refusing to grant a preliminary injunction to restrain the appellee Supervisor from enforcing the demand letters requiring appellant to file the prescribed information reports concerning sales, at its place of business, of sugar, rye and cracked corn in the quantities specified.
It appears that nothing new has been presented in this appeal. The issues raised by appellant have been determined against it long ago. More than twenty-six years ago, this court .upheld regulations (similar to those here involved) which required wholesale and retail grocers to report to the Internal Revenue Commissioner their sales of sugar, the regulations having been promulgated pursuant to the statute requiring information concerning the disposition made of substances used in the manufacture of distilled. spirits. DiSanto v. United States, 6 Cir., 93 F.2d 948, 950, certiorari denied 303 U.S. 662, 58 S.Ct. 829, 82 L.Ed. 1121. Neither the statute nor the regulation was found to violate the Constitution of the United States. Moreover, the matter of discrimination was not deemed consequential. Speaking for this court, Judge Hicks said: “The necessity and propriety of empowering the Commissioner to require one dealer to make returns without requiring the same duty of all was a matter for Congress to determine [citing Supreme Court opinion]. There was a substantial basis for it * * * The regulations did not disturb any property right of appellant, and the provision in the act that their violation subjected him to fine and imprisonment did not affect its constitutionality. U. S. v. Grimaud, supra, 220 U.S. 506, at page 517, 31 S.Ct. 480, 55 L.Ed. 563. Our conclusion is in accord with United States v. Goldsmith et al., 2 Cir., 91 F.2d 983; Dano v. United States, 3 Cir., 91 F.2d 1012; and United States v. Turner Bros., D.C., 11 F.Supp. 908.”
United States District Judge West, whose judgment in the DiSanto case was affirmed [6 Cir., 93 F.2d 948, 950], said [D.C.N.D.Ohio, 20 F.Supp. 254, 255]:
“Legislative power is not improperly delegated to the Commission er. True, he may or may not require a dealer in sugar, yeast, etc., to report his sales. The situation may well be such that instead of being fair, it would be quite unfair to treat all dealers alike in this respect. The Commissioner and his subordinates may be expected to have information on which to base discretionary action, and the regularity of his acts is to be presumed. United States v. Chemical Foundation, 272 U.S. 1, 14, 47 S.Ct. 1, 71 L.Ed. 131. * * * The validity of the Resolution and the sufficiency of the indictment therefore turn on the power of Congress to vest in the Commissioner the right to require returns from the defendant, while not demanding like returns from all other dealers. I have no doubt of the existence of this power.
“Congress may make all laws proper for carrying into execution its powers with respect to the collection of taxes. And where the law is not prohibited and is calculated to aid in effecting this object, the court will not inquire into the degree of its necessity. McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579. The making of these reports by dealers in sugar can be expected under proper administration of the law to aid materially in discovering frauds on the revenue.”
The argument that there was unlawful discrimination against one grocer in favor of many competitors was thus rejected many years ago by the Court of Appeals for the Second Circuit in United States v. Goldsmith, 2 Cir., 91 F.2d 983, 985: “It is said that this resolution offends the constitution in that the Commissioner may require reports from whomsoever he pleases of those who dispose of the kind of substances covered and so oppress some and favor others as he may desire. It must, however, be noticed that while it cannot be said with absolute certainty that such power may not be abused, the plain purpose of the resolution is to provide a means for checking the supply of raw materials going into the manufacture of distilled spirits in order that the government may have that means of determining whether its proper revenue from such product is being collected. To this end the Commissioner is given the power to require records to be kept and reports to be made ‘with such details as to the quantity so disposed of or other information as will enable the Commissioner to determine whether all taxes due with respect to any distilled spirits manufactured from such substances have been paid.’ * * * One who disposed of the substances covered by the resolution, of which sugar was certainly one, was liable under the law to make such reports designed to provide the check which the Commissioner might find he needed in determining whether all of the taxes mentioned were paid. Congress could provide him with the means for obtaining such information in whatever detail might be necessary and that it preferred to let the Commissioner decide as to the need in the actual administration of the law rather than to require all dealers in such substances make reports, often perhaps wholly unnecessary and unwanted, curtailed the rights of no one.”
We see no merit or logic in the argument that the regulation should be so narrowly construed as to hold it unenforceable in requiring reports to be made concerning the future sales, as well as past sales, of sugar, rye and cracked corn. We do not construe the language of either the Internal Revenue Code or the Treasury Regulations promulgated under it to require any such interpretation. The regulation is concerned with furnishing a means of collecting the Internal Revenue taxes on whiskey; and whether the reports on the sales of sugar, rye and cracked com be made in the past or in the future is immaterial. The Congress desired evidently that useful facts be divulged, whether concerned with past or with future sales of these commodities.
|
10514306-8256 | NOONAN, Circuit Judge:
Marvin Carpenter was found by this court to have been wrongly convicted under the Lacey Act, 16 U.S.C. § 3372, and his case was remanded for sentencing for the other offenses he had committed. United States v. Carpenter, 933 F.2d 748, 762 (9th Cir.1991). He now appeals his new sentence. We reverse and remand for resentencing.
PROCEEDINGS
Carpenter was convicted of making a false statement to the United States Fish and Wildlife Service (the Service) in violation of 18 U.S.C. § 1001; of killing migratory birds in violation of the Migratory Bird Treaty Act, 16 U.S.C. §§ 703, 707(a); and of violating the Lacey Act, 16 U.S.C. § 3372, 3373(d)(2) by “acquiring migratory birds killed in violation of federal law.” Id. at 749.
The probation office calculated Carpenter’s sentence under § 2Q2.1 of the Sentencing Guidelines. This section is headed: “Specially Protected Fish, Wildlife, and Plants; Smuggling and Otherwise Unlawfully Dealing in Fish, Wildlife, and Plants.” Its Commentary gives as the relevant statutory provisions, inter alia, 16 U.S.C. § 707(b). Its Background states: “This section applies to violations of the Endangered Species Act, the Bald Eagle Protection Act, the Migratory Bird Treaty, the Marine Mammal Protection Act, the Wild Free-Roaming Horses and Burros Act, the Fur Seal Act, the Lacey Act, and to violations of 18 U.S.C. § 545 where the smuggling activity involved fish, wildlife [and/or] plants.” The probation office began with a base offense level of 2; added 2 points for the defendant’s commercial purpose; 4 points for his being an organizer or leader of a criminal activity that involved 5 or more participants; and 2 points for obstruction of the investigation. No credit was given for acceptance of responsibility. The guideline range was 10 to 16 months. The probation office recommended a sentence of 13 months and a fine of $12,500. The court followed the recommendation.
On appeal to this court, the convictions of violating the Lacey Act, 16 U.S.C. § 3372, were reversed. Carpenter, 933 F.2d at 751. We declined to pass on Carpenter’s other challenges to the sentence he had received, stating:
As his Lacey Act convictions, which were Class A misdemeanors, have been reversed, the district court should have the opportunity to resentenee him. We assume that having been successful on his appeal he will not receive a more severe sentence under the Migratory Bird Treaty Act, in terms of which his offenses are Class B misdemeanors, 16 U.S.C. § 707(a) (1988), than he received under the Lacey Act. A new presentence report and a new sentencing hearing- should be had.
Id. at 752.
‘ On remand the probation office calculated Carpenter’s sentence under § 2F1.1 of the Guidelines, a section entitled “Fraud and Deceit.” The probation office now recommended that Carpenter be given credit for acceptance of responsibility and. no upward adjustment either for his role in the offense or his obstruction of justice. The probation office’s report determined that the applicable sentencing range was 0 to 6 months, and 3 months was recommended. The government objected to the probation report. The district court responded to these objections only by finding that Carpenter should, be sentenced under- § 2Q2.1.
The third presentence report, following the court’s order, calculated the sentence under § 2Q2.1 with a base offense level of 6; 2 points for Carpenter’s commercial' purpose; 4 points for his role in the offense; 2 points for obstruction of justice; and no adjustment for acceptance of responsibility. The result was a level of 14, resulting in a guideline sentencing range of 15 to 21 months-obviously “a more severe sentence” than Carpenter had received before he appealed to this court.
The defendant objected and the district court responded on April 28, 1992 with “Findings of Fact,” in which the court again concluded that he should be sentenced under § 2Q2.1. The court stated that the background section of § 2Q2.1 made these guidelines “applicable to all violations of the Migratory Bird Treaty” (emphasis in original).
A hearing was held by the district court on May 4,1992. The court there stated that the offense level under § 2Q2.1 was 6, to which it added 2 points for a commercial enterprise and 4 points for Carpenter’s role in the offense. The court then reduced ,the level 2 points for, his acceptance, of .responsibility, giving a total of 10. The defense objected that the section of the Migratory Bird Act under which Carpenter was convicted was 16 U.S.C. § 707(a) and the Guidelines referred only to 16 U.S.C. § 707(b). The court stated its belief that the commentary embraced “an area larger than the sections cited.”
With a sentencing guideline level of 10 the range for sentencing was 6 to 12 months. The court sentenced Carpenter to 12 months for violation of the False Statement Act, 18 U.S.C. § 1001, and gave him concurrent terms of three months, each on the misdemeanor counts of violating the Migratory Bird Treaty Act, 16 U.S.C. §§ 703, 707(a). The court imposed a fine of $7,750.
Carpenter appeals.
ANALYSIS.
We review application of the Guidelines de novo. United States v. Kohl, 972 F.2d 294, 297 (9th Cir.1992). Directed by 18 U.S.C. § 3742(f) (1988), we must first decide if the district court erred in ordering Carpenter’s sentence calculated under § 2Q2.1. See United States v. Rodríguez-Razo, 962.F.2d 1418, 1420 (9th Cir.1992). An error, of course, may be harmless and not require remand if it “did not affect the district court’s choice of the sentence imposed.” Id. If, however, remand is necessary, the district court should be given appropriate instructions.
The district court sentenced Carpenter under § 2Q2.1. This section applies only to the felony portion of the Migratory Bird Treaty, ,16 U.S.C. 707(b). There is no indication that it applies to “all” violations of the Migratory Bird Treaty or that its commentary embraces an area larger than the statutory section it cites. Carpenter was sentenced under the wrong Guideline and must be resentenced.
The relevant statutory provisions are two: The misdemeanor portion of the Migratory Bird Treaty Act, 18 U.S.C. 707(a) and 18 U.S.C. § 1001, the statute applying to Carpenter’s false statements to the service. As to the Class B misdemeanors under § 707(a), “For the sake of judicial economy, the Com mission has exempted all Class B and C misdemeanors and infractions from the coverage of the guidelines.” U.S.S.G. § 1B1.9, comment, (backg’d). As to 18 U.S.C. § 1001, the applicable sentencing guideline is § 2F1.1, which covers all sorts of false statements even though their primary objection was not monetary. See, id., applic. note 10(a).
In the background of the sentencing problems in this case is the tension between punishment based on the criminal charge of which the defendant was convicted and punishment based on conduct in some way relevant to that charge. Through the appeal process one serious set of charges against Carpenter was eliminated. As to them, his slate was wiped clean. But the conduct which had led to those charges was, of course, completely unaffected by the appeal. When he returned for resentencing the government could and did point to the same conduct in slaughtering birds which this court had set out in Carpenter, 933 F.2d at 750, and the district court had in view when it first sentenced Carpenter.
The United States Sentencing Commission states in its introduction to the Guidelines that it has made a compromise between a “real offense system” which would “sentence on the basis of all identifiable conduct” and a “charge offense system” which would “overlook some of the harms that did not constitute statutory elements of the offense of which the defendant was convicted.” The Commission contends that the pre-Guidelines Sentencing system was a real offense system.
The Commission is operating within the structure provided by 18 U.S.C. § 3661, which reads:
Use of information for sentencing
No limitation shall be placed on the information concerning the background, character, and conduct of a person convicted of an offense which a court of the United States may receive and consider for the purpose of imposing an appropriate sentence.
|
4167966-9891 | OPINION
COLE, Circuit Judge.
Defendant-Appellant Phillip Gazzola pleaded guilty to three counts of possessing firearms and ammunition as a convicted felon, in violation of 18 U.S.C. § 922(g)(1). At sentencing, the district court classified Gazzola as an armed career criminal under the Armed Career Criminal Act (“ACCA”), 18 U.S.C. § 924(e), and sentenced him to 200 months of incarceration followed by 5 years of supervised release. Gazzola now appeals his sentence, including his classification as an armed career criminal under the ACCA, and the terms of his release. For the following reasons, we affirm the sentence imposed by the district court.
I.
The following facts are not in dispute:
On July 22, 2011, law enforcement officers from the Cowan Police Department and Franklin County Sheriffs Department executed a search warrant at the defendant’s residence. The search warrant was based on 2 controlled buys of morphine from the defendant in the preceding 72 hours. When officers knocked on the door and announced their presence, the defendant ran through the living room to the basement. Officers made entry and pursued the defendant downstairs, where they were finally able to subdue him after a brief struggle. They then searched the house and found small amounts of various pills and several grams of marijuana, along with $3,500 cash. Additionally, they recovered 2 firearms: a 12 gauge shotgun with 15 shells and a .17 caliber rifle with approximately 100 hollow point rounds of ammunition and other assorted ammunition.
A trace of the firearms by ATF shows that both guns traced back to the same person, who was interviewed and identified the defendant as being the person that purchased the firearms.
Prior to the date the defendant was in possession of the firearms, he had been convicted of a felony offense. All firearms and ammunition were manufactured outside the state of Tennessee or otherwise affected interstate or foreign commerce.
Gazzola pleaded guilty to three counts of possessing firearms and ammunition as a convicted felon, in violation of 18 U.S.C. § 922(g)(1). This was not his first brush with the law.
Among other crimes, Gazzola had previously been charged in the State of Washington of rape in 1977, second-degree assault in 2004, and third-degree assault in 2009. He was convicted of these crimes in 1978, 2005 and 2010 respectively. Each of these convictions was based on sexual assault or rape.
At sentencing, over Gazzola’s objection, the district court adopted the recommendation of the PSR and concluded that the Washington offenses qualified as violent felonies under the ACCA. The court accordingly sentenced Gazzola as an armed career criminal, increasing his base offense level and subjecting him to a mandatory minimum sentence of fifteen years of imprisonment. See 18 U.S.C. § 924(e). Gazzola argued that his age and medical condition, including a history of strokes, justified a downward variance in the interest of justice. The district court rejected this argument and sentenced Gazzola to 200 months incarceration, determining that “a sentence about a year longer than the bottom of [Gazzola’s] guidelines range [was] appropriate in this case.” In addition, Gazzola received 5 years of supervised release with sex-offender conditions.
Gazzola now argues that (1) the district court erred by using the 1977 rape and 2009 assault to classify him as an armed career criminal under the ACCA; (2) the ACCA is unconstitutionally vague; and (3) his sentence and conditions for supervised release were procedurally unreasonable. We address these arguments in turn.
II.
“The ACCA authorizes an enhanced prison term for a defendant who is (1) convicted of being a felon in possession of a firearm, and (2) has ‘three previous convictions by any court ... for a violent felony or a serious drug offense, or both, committed on occasions different from one another.’ ” United States v. Mosley, 339 Fed.Appx. 568, 575 (6th Cir.2009) (quoting 18 U.S.C. § 924(e)(1)) (alteration in original). Gazzola argues that the district court improperly counted two of his prior crimes from Washington toward the ACCA’s three previous violent felony convictions requirement. We review de novo a district court’s determination whether a defendant qualifies as an armed career criminal under the ACCA.. See United States v. Benton, 639 F.3d 723, 729 (6th Cir.2011); United States v. LaCasse, 567 F.3d 763, 765 (6th Cir.2009).
A.
Gazzola first argues that the district court erred by categorizing his 1977 rape conviction as a “conviction” under the ACCA. The ACCA states:
a conviction of such a crime shall be determined in accordance with the law of the jurisdiction in which the proceedings were held. Any conviction which has been expunged, or set aside or for which a person has been pardoned or has had civil rights restored shall not be considered a conviction for purposes of this chapter, unless such pardon, ex-pungement, or restoration of civil rights expressly provides that the person may. not ship, transport, possess, or receive firearms.
18 U.S.C. § 921(a)(20)(B). Gazzola argues that the 1977 rape should not have counted as a conviction because the charges were dismissed under Washington Revised Code § 9.95.240. This argument, however, fails.
A person found guilty of rape in Washington is prohibited from possessing a firearm even after their conviction has been dismissed pursuant to § 9.95.240. See Wash. Rev.Code § 9.41.040(4)(a). Gazzola was convicted of rape. Under ACCA § 921(a)(20)(B), a dismissed conviction which “provides that the person may not ... possess ... firearms” is still a “conviction.” This on its own is enough to affirm the district court’s judgment with respect to the 1977 rape.
Were we to seek more support, however, the Washington Supreme Court recently considered the issue of whether crimes dismissed pursuant to § 9.95.240 could be considered “convictions” for purposes of Washington’s Sentencing Reform Act. See In re Carrier, 173 Wash.2d 791, 272 P.3d 209 (2012) (en banc). The defendant in the case argued that his prior crime of indecent exposure should not be considered part of his criminal history for sentencing purposes. He argued, for the same reasons that Gazzola does here, that his crime could no longer be considered a “conviction.” The Washington Supreme Court disagreed, holding that “while ... [§ ] 9.95.240 releases the defendant from all penalties and disabilities associated with the conviction, it does not erase the fact of the conviction itself. Nor does it restrict the State’s ability to use the conviction in a later prosecution for at least some limited purposes.” Id. at 215. Thus, Washington courts consider crimes dismissed under § 9.95.240 to be “convictions” for sentencing purposes. The district court, therefore, properly counted the 1977 rape as a conviction under the ACCA.
B.
Gazzola next argues that the district court erred by categorizing his 2009 assault as a qualifying felony under the ACCA. Pursuant to 18 U.S.C. § 924(e)(2)(B), a “qualifying felony” is “any crime punishable by imprisonment for a term exceeding one year.” Excluded from that definition, however, is “any State offense classified by the laws of the State as a misdemeanor and punishable by a term of imprisonment of two years or less.” 18 U.S.C. § 921(a)(20). Gazzola now contends that under Washington law his 2009 assault was a gross misdemeanor punishable by less than two years and, therefore, the district court improperly counted the crime as a qualifying felony under 18 U.S.C. § 921(a)(20).
To determine if the prior offense was a felony or a misdemeanor, we look to Washington’s “statutory definition[s], charging document[s], written plea agreement[s] ... and any explicit factual finding[s] by the trial judge.” Shepard v. United States, 544 U.S. 13, 16, 125 S.Ct. 1254, 161 L.Ed.2d 205 (2005). Gazzola’s judgment demonstrates that he pleaded guilty to “Assault in the Third Degree” as defined by Washington Revised Code § 9A.36.031.1F. Assault in the third degree “is a Class C felony” punishable by up to five years of imprisonment under Washington law. Wash. Rev.Code. § 9A.36.031.1F; § 9A.20.021(1)(C). Gaz-zola responds that the judgment also notes that his crime was a gross misdemeanor, not a felony. While we acknowledge the ambiguity in the judgment, Washington’s statutory definition for assault in the third degree clearly indicates that the crime is a felony. We therefore hold that the district court properly classified the 2009 assault as a felony under the ACCA. See Taylor v. United States, 495 U.S. 575, 602, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990) (‘We think the only plausible interpretation of § 924(e)(2)(B)(ii) is that, like the rest of the enhancement statute, it generally requires the trial court to look only to the fact of conviction and the statutory definition of the prior offense.”)
III.
Gazzola next makes the perfunctory claim that the district court sentenced him as an armed career criminal pursuant to an unconstitutionally vague provision of the ACCA, 18 U.S.C. § 924(e)(2)(B)(ii), commonly called the “residual clause.” As we have held on more than one occasion, see, e.g., United States v. Taylor, 696 F.3d 628, 633 (6th Cir.2012), this argument lacks merit. Because we are bound by our prior decisions — not to mention those of the Supreme Court — we hold that the district court did not err in sentencing Gazzo-la under the ACCA.
IV.
Finally, Gazzola contends that his sentence is proeedurally unreasonable. He makes two claims to this effect: First, he argues that the district court failed to adequately consider whether his medical condition and age justified a downward variance. Second, he argues that the district court failed to articulate its reasoning under 18 U.S.C. § 3558(a) for imposing sex-offender conditions on his supervised release.
|
11884118-14028 | OPINION
MARLAR, Bankruptcy Judge:
After the debtor’s chapter 11 case was dismissed, her bankruptcy attorney filed a state-court lawsuit against her for $10,000.00 of unpaid chapter 11 attorneys’ fees. The debtor filed a motion for summary judgment in the state-court action, arguing that her former attorney was not entitled to any fees because he had secured his employment in the bankruptcy case fraudulently by failing to disclose his prior connection with the debt- or, the fee he received for the bankruptcy retainer, or his receipt of a potential $3,000.00 preference from the debtor on the eve of filing.
Prior to ruling on the motion for summary judgment, the state court requested that the bankruptcy court rule upon the viability of the attorney’s lien, the status of the attorney’s employment in the bankruptcy case, and whether a preference claim against the attorney could affect his ability to collect a fee.
Pursuant to the state court’s request, the debtor filed a motion in the bankruptcy court seeking to vacate the order authorizing counsel’s employment, cancel the attorney’s hen, and determine that counsel was not entitled to any fees.
Exercising its discretion, the bankruptcy court denied the debtor’s motion. The bankruptcy court also found that it had no jurisdiction to enter further orders concerning the disputed fees. The debtor appealed. We AFFIRM.
7.FACTS
Shelly Elias (“the Debtor”) filed a voluntary chapter 11 proceeding on February 18, 1994. Her attorney, James F. Lisowski of the Lisowski Law Firm, Chtd., applied for retention as her attorney on February 28, 1994. The application stated that the Debtor had paid nothing as a retainer, and, further, that neither LisowsM nor Ms firm “have any connection with the Debtor, her creditors or any other party in interest ... and represent rio interest adverse to the Estate in the matters upon which [they are] to be retained.” The application was supported by LisowsM’s affidavit, wherein he repeated the statement that he did not represent or hold an adverse interest. An order appointing the firm was signed by the bankruptcy court on March 8,1994.
In fact, for some time before the bankruptcy, LisowsM and his firm had represented the Debtor in connection with her cocktail lounge. Just prior to the bankruptcy filing, the Debtor owed the LisowsM firm $8,000.00. Knowing that he could not represent the Debtor in her chapter 11 proceeding while his firm was a creditor, LisowsM and the Debtor agreed that the debtor would pay $8,000.00 toward the $8,000.00 outstanding legal bill, and the $5,000.00 balance would be forgiven. The Debtor then paid an additional $4,200.00 for a bankruptcy fee, together with $800.00 to cover the cost of filing the chapter 11. It is unclear from the record, and immaterial to this opinion, whether the Debtor also paid an additional $500.00.
The payment of a $4,200.00 (or $4,700.00) attorneys’ fee was inconsistent with Lisow-sM’s representation that the firm was paid “- 0 — ” for its services in filing the chapter 11. On March 22, 1994, the Debtor executed her Statement of Financial Affairs and noted, in question 9, that LisowsM had indeed been paid $4,200.00 on February 17,1994.
The § 341 meeting of creditors was held on March 23, 1994, and the $3,000.00 preferential payment was raised and discussed by the U.S. Trustee’s attorney. According to LisowsM, the U.S. Trustee’s attorney indicated by a “shake of the head” that it was unnecessary for the Debtor to amend the Statement of Affairs and note that item in writing. The existence of this head nod is unsupported by the record, and counsel’s reference to it is suspicious because the Statement of Affairs, question 3, requires disclosure of “all payments” aggregating more than $600.00 made within 90 days prior to commencement of the case. The Debtor never disclosed the $3,000.00 pre-petition payment to the LisowsM firm in writing, and the U.S. Trustee had no authority to waive the answer to that question.
The case proceeded through various stages for almost a year. In December 1994, the Debtor, through counsel, filed a motion to dismiss her case. Thereafter, the Debtor apparently had a falling out with the Lisow-sM firm and filed the actual order of dismissal herself, without consulting her attorneys. The case was dismissed on January 11,1995. The LisowsM firm, up to and through dismissal, never moved to withdraw as counsel, and now maintains that the order dismissing the case was entered before its attorneys knew of the entry of the order dismissing the case.
All parties agree that, during the course of the chapter 11 proceeding and to the current date, LisowsM never applied for, nor was he awarded, fees by the bankruptcy court.
On April 14,1995, LisowsM sued the Debt- or in state court for Ms fees. In that proceeding, the state-court judge declined to rule unless and until the parties obtained a ruling from the bankruptcy . court, in the dismissed chapter 11, concerning the propriety and amount of fees. Specifically, the state court requested that the parties refer the matter to the bankruptcy court “for consideration of the following issues in order to avoid conflicting results:
1. The viability of the attorney’s lien held by LisowsM Law Firm, Chtd.
2. The status of Mr. LisowsM as an employee of Ms client, Shelly Elias, in the Bankruptcy action.
3. Could a preference claim against Mr. LisowsM affect Ms ability to collect his attorney’s fees?”
Thereafter, new motions were filed in the bankruptcy court, seeking to disqualify the LisowsM firm and rescind the order of employment. On November 14, 1995, the trial court exercised its discretion and refused to act on the request, and, in addition, found that the bankruptcy court was without jurisdiction to resolve the state court’s concerns. The court then returned the parties to the state court, noting that it was “fully capable of adjusting the fees requested based upon the nature and extent of services rendered.”
This appeal of the bankruptcy court’s Order followed.
II. STANDARD OF REVIEW
A bankruptcy court’s decision regarding an application for the employment of a professional is reviewed for abuse of discretion. First Interstate Bank of Nevada v. CIC Investment Corp. (In re CIC Investment Corp.), 175 B.R. 52 53 (9th Cir. BAP 1994). Similarly, a bankruptcy court’s decision as to the proper amount of attorneys’ fees to be awarded is reviewed for an abuse of discretion. Neben & Starrett, Inc. v. Chartwell Financial Corp. (In re Park-Helena Corp.), 68 F.3d 877, 880 (9th Cir.1995) cert. den. — U.S. -, 116 S.Ct. 712, 133 L.Ed.2d 667 (1996). Finally, “[a] bankruptcy court’s decision to decline to exercise jurisdiction over related proceedings following dismissal of the underlying bankruptcy case is set aside only for abuse of discretion.” Davis v. C.G. Courington (In re Davis), 177 B.R. 907, 910-11 (9th Cir. BAP 1995) (citation omitted).
III. DISCUSSION
A. Jurisdiction'
The first issue on appeal, is whether the bankruptcy court was correct in deciding that it was without jurisdiction to resolve post-dismissal disputes regarding the Debt- or’s bankruptcy attorneys’ fees.
Once a case has been dismissed, property of the debtor’s estate re-vests in the debtor, and, unless the court orders otherwise, certain, types of transfers which might have been avoided in the bankruptcy are reinstated as if no bankruptcy had intervened. 11 U.S.C. § 349(b). See also H.R.Rep. No. 95-595, at 338 (1977) (“The basic purpose of § 349(b) is to undo the bankruptcy ease, as far as practicable.”) In finding that it had no jurisdiction, the trial court also is supported by Ninth Circuit decisions which hold that a trial court retains subject-matter jurisdiction to interpret orders entered prior to dismissal of the underlying case, but that it does not retain jurisdiction to grant new relief in a case that has been dismissed. See Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478, 481 (9th Cir.1989); Beneficial Trust Deeds v. Franklin (In re Franklin), 802 F.2d 324, 327 (9th Cir.1986). In Taylor,. the Ninth Circuit observed, that, in addition to interpreting orders entered prior to dismissal of the underlying bankruptcy case, a bankruptcy court has power to dispose of ancillary matters such as an application for an award of attorneys’ fees for services rendered in connection with the underlying action. 884 F.2d at 481 (citing U.S.A. Motel Corp. v. Danning (Matter of U.S.A. Motel Corp.), 521 F.2d 117 (9th Cir.1975)). Thus, while it is possible that, under the right set of facts, a bankruptcy court has inherent power to determine compensation questions presented even after the case has been dismissed, such power does not extend to the granting of “new relief.” In this case, the trial court correctly determined that the relief requested by the Debtor would have constituted “new relief’ and was, therefore, beyond the bankruptcy court’s jurisdiction.
Here, the Debtor’s position that the bankruptcy court should invalidate her contract with LisowsM is based not upon the argument that Lisowski did not earn his fees during her bankruptcy case, but, rather, upon the assertion that he acted unethically in the representation. The bankruptcy court does have an interest in ensuring that attorneys appearing before it conduct themselves properly, and that, interest can be vindicated through the initiation of disciplinary proceedings concerning an attorney’s conduct and fitness to practice before the court. However, that interest does not extend so far as to grant the bankruptcy court jurisdiction to involve itself in a state-court dispute by launching an independent inquiry into an attorney’s conduct during a now-dismissed bankruptcy case. Such an inquiry would not have any connection to the issues presented in the bankruptcy, would not affect: the rights of any creditor, and would not serve any of the purposes underlying the bankruptcy code. In short, the bankruptcy court would be granting the Debtor new relief that would serve no purpose in advancing the dismissed case.
Furthermore, subsequent to the Ninth Circuit’s rulings in Taylor and Franklin, the United States Supreme Court has determined that the scope of a federal court’s residual jurisdiction in a dismissed case is quite limited. In Kokkonen v. Guardian Life Insurance Co. of America, the court held that “[i]t is to be presumed that a cause lies outside [a federal court’s] limited jurisdiction.” 511 U.S. 375, 377, 114 S.Ct. 1673, 1675, 128 L.Ed.2d 391 (1994) (citation omitted). This presumption operates to deny a federal court jurisdiction even to enforce a court-approved agreement whereby a case in that same court was settled, unless the order approving the settlement agreement adopts the agreement’s terms, the court expressly maintains jurisdiction over the agreement, or “there is some independent basis for federal jurisdiction.” Id. at 381-82, 114 S.Ct. at 1677. In this case, there is no independent constitutional or statutory basis for the bankruptcy court to decide the ethical issues presented in this matter, or the impact of those issues upon the validity of the employment contract between the Debtor and Lisowski. Moreover, that matter currently is pending in a state court with full jurisdiction to resolve the contract issues before it.
Thus, even if the bankruptcy court were to have set aside the order of employment, it had no jurisdiction to order the additional relief requested. Accordingly, the bankruptcy court was jurisdictionally unable to decide the questions posed by the state court.
B. Advisory Opinion
In addition to the jurisdictional grounds stated above, federal courts also are prohibited from rendering advisory opinions. Muskrat v. United States, 219 U.S. 346, 31 S.Ct. 250, 55 L.Ed. 246 (1911); Flast v. Cohen, 392 U.S. 83, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968); American State Bank v. Marks (In re MacNeil), 907 F.2d 903, 904 (9th Cir.1990). In essence, because the issues upon which the state court requested guidance are immaterial to any matter in the dismissed bankruptcy ease, an order of the bankruptcy court would merely be advice to the state court. For this reason, also, the bankruptcy court was correct in refusing to issue further orders in this matter.
C. Discretion
Even if the bankruptcy court had the jurisdiction to consider the new motions, it properly exercised its discretion not to do so. Section 350(b) of the Bankruptcy Code provides that “[a] ease may be reopened in the court in which such case was closed ... to accord relief to the debtor, or for other cause.” The court’s decision to reopen is entirely within its sound discretion, based upon the circumstances of each case. Rosinski v. Boyd (In re Rosinski), 759 F.2d 539, 540-41 (6th Cir.1985); Citizens Bank & Trust Co. v. Case (Matter of Case), 937 F.2d 1014, 1018 (5th Cir.1991); In re Rediker, 25 B.R. 71, 73 (Bankr.M.D.Tenn.1982). Procedure requires that a motion be filed, something that was lacking in the instant case. Rule 5010, Federal Rules of Bankruptcy Procedure. One circuit has held that a bankruptcy court may reopen a case sua sponte if prima facie evidence discloses that an estate has not been administered fully. See Mullendore v. United States (In re Mullendore), 741 F.2d 306, 308-09 (10th Cir.1984). However, this exception is narrow, and is not present here.
Thus, one must look to the known facts of this case, as disclosed by the record chosen by the parties, to consider whether the bankruptcy court abused its discretion in refusing to reopen the ease and answer the questions posed by the state-court trial judge. As this court noted in Kashani v. Fulton (In re Kashani),
[u]nder the abuse of discretion standard, the Ninth Circuit has clearly stated that the trial court’s exercise of its discretion will not be disturbed unless there is “‘a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.’ ”
|
2120925-9112 | EDWARDS, Circuit Judge.
These cases present 'ai complicated set of facts and at least one appellate issue of some importance in federal tax law. They were heard by the Tax Court which found for the Commissioner in an opinion containing a detailed statement of the cases and findings of fact and conclusions of law. (T.C. Memo 1969-111). We shall rely upon the Tax Court opinion for the details of the case and recite only those facts (most of which were stipulated) which are directly relevant to our decision.
The basic issue presented by this appeal is whether this record supports the conclusion of the Tax Court that approximately $294,000 of payments made by five corporations owned or controlled by appellant, Theodore B. Livernois Trust, were loans to the Trust, as claimed by the taxpayers, or dividends, as claimed by the Commissioner and as found by the Tax Court.
The Theodore B. Livernois Trust was created May 2, 1958, by Theodore B. Livernois, Sr., — one month before he died from an accidental gunshot wound. Livernois, Sr., conveyed to the Trust substantially all of his assets, including his stock in five corporations in which he was the sole or principal shareholder. The Trust instrument provided that Livernois, Sr., would receive the income of the Trust for his lifetime and that on his death, his wife Alma would receive the income, with rights to invade the corpus. On her death the Trust was to terminate with distributions to children and grandchildren. The Trust instrument required the Trust to pay all debts and tax obligations of the settlor’s estate.
The Trust instrument provided for four Trustees — Livernois, Sr., Theodore Livernois, Jr., Albert Grigsby, and Ed Degree. During all relevant times Trustees Livernois, Jr., and Albert Grigsby were not only the dominant Trustees, but were also members of the Boards of Directors of all five of the corporations which made payments to the Trust.
After Livernois, Sr.’s, death, his estate filed its tax return. On I.R.S. audit an additional assessment of $61,000 was made. In addition, the I.R.S. made a joint assessment against Theodore Livernois, deceased, and Alma Livernois for $123,000 tax deficiencies (including fraud penalties) for the prior years 1950-1955. Neither Livernois, Sr.’s estate nor the Trust had money to pay these tax liabilities and the I.R.S. threatened to file liens upon the five corporations owned by the Trust. Livernois, Jr., and Grigsby, Trustees of the Trust, then caused the five corporations, of which they were also officers and directors, to make certain payments to meet the Trust obligations just referred to. These payments are summarized in this record as follows:
Name of Corporation 1958 1959 1960 1961 1962 1963 Totals
Supply $22,000.00 $ 9,500.00 $ 2,000.00 $ 33,500.00
Ohio Lumber 20,333.41 70,000.00 $12,000.00 $46,000.00 148,333.41
Greenfield 1,000.00 14,000.00 23,500.00 $26,501.00 11,000.00 76,001.00
Blue Water 9,000.00 9,000.00 9.000. 00 3,000.00 1,000.00 31,000.00
Style King_ _ _ 6.000. 00 ___6,000.00
TOTALS $22,000.00 $39,833.41 $95,000.00 $50,500.00 $29,501.00 $58,000.00 $294,834.41
CA28063
During the years in question, aside from these payments, the Trust had only about $30,000 of income. The earned surplus of the corporations during the years concerned is shown as follows:
Name of Corgoration^ 1959 1960> 1961 ¿222, £222.
Supply. $ 59,011.39 $ 52,766.95 $ 52,142.37 $ 63,423.15 $ 51,890.74 Ohio
Lumber 477,122.42 391,764.54 369,436.24 352,438.80 332,156.21
Greenfield 111,181.08 97,929.67 100,141.39 103,279.82 109,490.78
Blue Water 86,857.56 105,871.37 119,598.82 128,247.84 139,238.23
Style King 3,495.55 5,150.09 7,398.70 (11,336.16) (25,446.67)
CA28053
Every payment by the corporations to the Trust was recorded as a loan and an unsecured “demand” note bearing 6 % interest was given in exchange. Generally, the notes were entered on the books of the corporations as receivables, but the interest was not. - No interest was ever paid. No demand for payment was ever made. In one year $4,000 was repaid, but in that same year $95,000 was transferred from the corporations to the Trust.
Appellants assert that the payments were bona fide loans and that there was a plan for repayment of them through liquidation of some of the Trust assets. As to Trust contentions the Tax Court found:
“After consideration of all the evidence, we conclude that at the time of the payments there was no intention or expectation that they would be repaid and that they are properly taxable as dividends.
“We are not persuaded that at the time of the payments the Trust intended to repay the Corporations. The Trust was the sole shareholder of Supply, Ohio Lumber, and Style King. It was the 70 percent majority shareholder of Blue Water and the 75 percent majority shareholder- of Greenfield. The balance of the stock of the latter two corporations was owned by Theodore Sr.’s three children. This stock represented substantially all of the Trust’s assets. By 1960, due to the disposition of certain other property held by the Trust, the stock was the Trust’s sole asset with the exception of a house and lots which had been mortgaged for $20,000. We think it is clear from the record that the Trust had but one source from which it could acquire funds. That source was the Corporations which it controlled. In a factual situation such as this, transactions are subject to the closest scrutiny. See Elliott J. Rosehuni, 29 T.C. 1193 (1958), affd. per curiam 271 F.2d 267 (C.A.5, 1959), certiorari denied 362 U.S. 988, 80 S.Ct. 1074, 4 L.Ed.2d 1021 (1960).
“From the date of Theodore Sr.’s death, the Trust has looked to the Corporations whenever and for whatever purpose it required money. The Corporations paid money to the Trust without collateral and without any express limitation as to the ceiling amount of such payments. Though the notes accompanying these payments called for the payment of interest at the rate of 6 percent per annum, no interest was in fact paid to, or accrued by, the Corporations. Nor have there been any significant payments of principal by the Trust to the Corporations. In essence, the trustees have withdrawn from the Corporations whatever money they needed to administer the terms of the Trust Agreement. We hold that the petitioners have not met their burden of demonstrating that there was any real intention or expectation that the monies advanced to the Trust by the Corporations would ever be repaid.
“The testimony about liquidating Ohio Lumber and Blue Water as part of a repayment plan is vague and unconvincing. Initially there is no evidence that such a plan was conceived when the withdrawal of money from the Corporations began. Nor are we convinced that such a plan was in any way a realistic consideration in the decision to pay the money to the Trust.
“For the first time on brief petitioners argue that the loans from Ohio Lumber and Blue Water were in reality in furtherance of informal plans of complete liquidation and should be treated under section 331(a) (1). They further argue that to the extent the money advanced by the Corporations was used to pay Federal estate taxes, Michigan inheritance taxes, and funeral and administration expenses of the Estate, they are distributions in redemption of stock under section 303. Aside from the procedural point that these arguments were not raised until briefs were filed, the short answer is that neither of them is supported by the facts. Petitioners have not shown the presence of an informal plan of complete liquidation for the purposes of section .331. Nor have they shown facts to support the existence of a redemption, that is, the acquisition of its shares by a corporation, for the purposes of section 303.
“In light of the foregoing analyses and because we have found that the earnings and profits of each Corporation exceeded the respective payments, we hold that the corporate payments are taxable as dividends.”
Essentially the problem here is one of self-dealing between the Trustees of a trust and five corporations which those same Trustees controlled. In order to liquidate tax liabilities of the deceased Theodore B. Livernois, Sr., who is settlor of the Trust, the Trustees occasioned the five corporations to make payments of approximately $294,000. The Trust was completely devoid of funds to meet its liabilities or to contemplate repayment. No schedule of repayments was ever tendered or demanded. No interest was ever paid and the one repayment of $4,-000 was offset by payments to the Trust of $95,000 in the same year. The only “plan” for- repayment advanced by the Trustees was not in existence when the corporation payments started and the liquidations which the “plan” contemplated soon proved not to be feasible. The Tax Court which heard the evidence characterized the testimony on the “repayment”
plan as “vague and unconvincing.”
This case is in large measure Berthold v. Commissioner of Internal Revenue revisited (404 F.2d 119 (6th Cir. 1968)). In Berthold this court employed language which we believe to be directly applicable to our instant case:
|
4098325-10189 | PER CURIAM:
Preston Grice appeals his convictions for conspiracy to distribute and possess with intent to distribute marijuana, cocaine base, and cocaine, in violation of 21 U.S.C. § 846, and for distribution and possession with intent to distribute marijuana, cocaine base, and cocaine, in violation of § 841(a)(1). Grice challenges (1) the validity of the search warrant issue for the residence at 589 Holcombe Street; (2) the traffic stop which led to his arrest; and (3) the Government’s exercise of a peremptory challenge during jury selection. We find no merit in these challenges, and accordingly affirm.
I.
The events that led to the issuance of the search warrant and Grice’s arrest are thoroughly set forth in the magistrate judge’s Report and Recommendation which formed the basis of the district court’s denial of Grice’s motion to suppress and are implicated in Grice’s first two challenges.
On November 1, 2005, at approximately 11:45 to 12:00 a.m., Corporal R.J. Steelman, a police officer with the Montgomery Police Department, received information from a confidential source (CS) that Preston Grice and “Corey,” along with someone else called “Bunky,” were at 879 Holcombe Street cooking or cutting a large amount of crack cocaine. The CS indicated that a black Cadillac and a dark mini-van, as well as an older dark blue or black truck and an older Chevy Caprice were parked at the residence, which was next to two vacant lots at the corner of Holcombe and South Street. Steelman ran Preston Grice’s name through the police department’s narcotics files, and his name came up in the database as being involved with drugs in some way.
At approximately 12:20 or 12:30 p.m. on the same day, Steelman drove to the 800 block of Holcombe Street, but could not locate the house or the vehicles. He then proceeded to the 500 block of the same street and found a black pick-up truck, a mini-van and a black Cadillac at 589 Holcombe Street (“the residence”), which was a white single story dwelling near the corner of Holcombe and South Streets, with a vacant lot on either side. A Caprice was parked at the rear of the residence. Steelman set up surveillance near this residence. He observed foot traffic throughout the area — -people walking down the street and a man (later identified as defendant [Corey] Harvey) coming from the front of this house and meeting cars. Steelman believed that these activities were consistent with street level drug dealing.
After 20 or 30 minutes passed, a black male (later identified as Leenandora Woods) came out of the residence with a plastic bag in his hand and got into the Cadillac. Steelman called Sergeant Drummond on the radio, told him what he had heard and seen, and asked him to get the Cadillac stopped. Corporal Mills, who was also with the Montgomery Police Department, stopped the Cadillac at Drummond’s request. Woods consented to a search of the vehicle, and no drugs were found; however, a narcotics dog thereafter alerted on the center console. Woods took off running on foot, and
Lieutenant Bullard used his Taser to stop him. Corporal Conway, the K-9 officer who had arrived with the drug dog, found approximately 450 grams of crack cocaine and 99 grams of powder cocaine in the console area of the car....
When Steelman was informed of the results of the search of the Cadillac, he left the residence to prepare an applica tion for a search warrant at the police department’s Special Operations Division, and Lieutenant Caviness and Captain Hughes set up surveillance in his place. At some point, DEA special agent Neil Thompson — who had also received a call from the CS, and was riding with Drummond — participated in the surveillance. Meanwhile, Detective Hamil typed the warrant affidavit as Steelman dictated it. While they were working on the affidavit, officers still on Holcombe Street saw four other vehicles leave the residence. One of these was a black Ford Escort. Detective Wright stopped this car, which took off and had to be pursued. During the pursuit, Wright observed a large quantity of marijuana thrown from the window. A mini-van driven by Preston Grice also left the residence and was stopped. No drugs were found in Grice’s possession or in this van.
When Steelman and Hamil completed the warrant affidavit, they took it to municipal judge Troy Massey, who issued a search warrant for the residence. Police executed the warrant and found documents there in the name of Corey Harvey. Harvey, who was observed across the street, was taken into custody. According to the evidence log, police seized numerous bags and bricks of marijuana, bags of crack cocaine, digital scales, a quantity of U.S. currency, and multiple firearms from the residence.
Report and Recommendation, March 15, 2007.
The denial of a motion to suppress presents a mixed question of law and fact. United States v. Delancy, 502 F.3d 1297, 1304 (11th Cir.2007). We review the district court’s factual findings for clear error and its interpretation and application of the law de novo. Id. “Probable cause to support a search warrant exists when the totality of the circumstances allow[s] a conclusion that there is a fair probability of finding contraband or evidence at a partic-' ular location.” United States v. Brun-didge, 170 F.3d 1350, 1352 (11th Cir.1999). The “veracity” and “basis of knowledge” of an informant’s tip are “relevant considerations in the totality of the circumstances analysis,” and “a deficiency in one may be compensated for ... by a strong showing as to the other.” Id. at 1352-53. Further, “some other indicia of reliability” may make up for a deficiency in an informant’s veracity or basis of knowledge, “such as corroborating evidence gathered by law enforcement.” United States v. Foree, 43 F.3d 1572, 1576 (11th Cir.1995).
Search warrant affidavits are presumptively valid. Franks v. Delaware, 438 U.S. 154, 171, 98 S.Ct. 2674, 2684, 57 L.Ed.2d 667 (1978). A search warrant must be voided and the fruits of the search excluded, however, if the affidavit supporting the search warrant contains a false statement made knowingly and intentionally or with reckless disregard for the truth. Id. at 155-56, 98 S.Ct. at 2676. Nevertheless, a warrant is valid “when material that is the subject of the alleged falsity or reckless disregard is set to one side, [and] there remains sufficient content in the warrant affidavit to support a finding of probable cause.” Id. at 171-72, 98 S.Ct. at 2684. Thus, a defendant must show (1) “that the alleged misrepresentations or omissions were knowingly or recklessly made” and (2) “that the result of excluding the alleged misrepresentations and including the alleged omissions would have been a lack of probable cause for issuance of the warrants.” United States v. Novaton, 271 F.3d 968, 986-87 (11th Cir.2001).
The district court did not err in denying Grice’s motion to suppress evidence. The was no clear error in the court’s adoption of the magistrate judge’s finding that the affidavit underpinning the warrant, which established probable cause, was not the product of knowingly or recklessly made false information.
II.
Grice argues that the district court erred in denying his motion to suppress evidence seized as a result of a warrantless stop of his vehicle. He submits that the stop of his vehicle, his arrest, and the seizure of his keys was unlawful — conducted solely for investigative purposes. He had not violated traffic laws, and they had no reason to believe that he was connected to the Holcombe Street residence, or that he possessed illegal drugs or contraband.
“A traffic stop is a seizure within the meaning of the Fourth Amendment.” United States v. Purcell, 236 F.3d 1274, 1277 (11th Cir.2001). “A traffic stop ... is constitutional if it is either based upon probable cause to believe a traffic violation has occurred or justified by reasonable suspicion in accordance with [Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968) ],” which requires that the officers “have a reasonable, articulable suspicion based on objective facts that an individual is engaged in criminal activity.” United States v. Harris, 526 F.3d 1334, 1337 (11th Cir.) (quotation omitted), petition for cert. filed, (U.S. Aug. 6, 2008) (No. 08-6074). “A determination of reasonable suspicion is based on the totality of the circumstances, and [i]t does not require officers to catch the suspect in a crime.” Id. (quotation omitted). “Instead, [a] reasonable suspicion of criminal activity may be formed by observing exclusively legal activity.” Id.
“Probable cause to arrest exists where the facts and circumstances within the officers’ knowledge, of which they had reasonably trustworthy information, are sufficient to cause a person of reasonable caution to believe that an offense has been or is being committed.” United States v. Ollet, 848 F.2d 1193, 1195 (11th Cir.1988). “[C]ircumstanees unique to the vehicle context justify a search incident to a lawful arrest when it is reasonable to believe evidence relevant to the crime of arrest might be found in the vehicle.” Arizona v. Gant, 556 U.S. -, 129 S.Ct. 1710, 1719, 173 L.Ed.2d 485 (2009) (quotation omitted). In such a case, “the offense of arrest will supply a basis for searching the passenger compartment of an arrestee’s vehicle and any containers therein.” Id.
The district court did not err in denying Grice’s motion to suppress evidence seized as a result of the traffic stop because the police had reasonable suspicion to believe that he was engaged in criminal activity, had probable cause for his arrest after discovering that he was the driver of the vehicle, and were entitled to search the vehicle incident to his lawful arrest.
III.
Grice argues that the district court erred in denying his challenge to the Government’s peremptory strike of a juror under Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712, 90 L.Ed.2d 69 (1986). Citing Miller-El v. Dretke, 545 U.S. 231, 125 S.Ct. 2317, 162 L.Ed.2d 196 (2005), he maintains that the Government’s reason for striking the juror was insufficient and the court erred in failing to conduct a meaningful voir dire regarding the issue.
|
12402601-19939 | PER CURIAM:
Southern Atlantic Companies, LLC, appeals the summary judgment entered by the district court on its First Amendment retaliation claim. Southern Atlantic argues that the district court erroneously concluded that it failed to establish municipal liability under 42 U.S.C. § 1983. Edward Hutchins and Raymond McIntosh, officers of Southern Atlantic, appeal the award of attorneys’ fees entered against them under 42 U.S.C. § 1988 on their First Amendment retaliation claims. After a careful review of the record, and with the benefit of oral argument, we affirm.
I
Because we write for the parties, we set out only what is necessary to explain our decision.
A
Southern Atlantic is an electrical subcontractor, and Mr. Hutchins and Mr. McIntosh are its vice president and president, respectively. The School Board of Orange County contracted with Wharton-Smith, Inc., to serve as the construction manager on a renovation project. Wharton-Smith solicited bids for the project. After Wharton-Smith selected Southern Atlantic’s bid for the first phase of the project, but not the second, Southern Atlantic submitted a bid protest petition to the School Board. As part of the bid protest process, Southern Atlantic posted a bond in the amount of $127,920, which was issued by International Fidelity Insurance Company (“IFIC”) in favor of the School Board.
The School Board invoked an indemnification provision in its contract with Wharton-Smith and tendered it the defense of the bid protest. Wharton-Smith defended the bid selection in an administrative hearing. On November 10, 2010, the administrative judge entered a recommended order finding that Wharton-Smith, and not the School Board, had selected the winning bid. As a result, Southern Atlantic lacked standing to maintain its bid protest against the School Board. Although the School Board had sought an award of attorneys’ fees and costs, the recommended order did not mention the request. The School Board adopted the recommended order on February 8, 2011.
Meanwhile, in December of 2010, Southern Atlantic sued Wharton-Smith in Florida state court for refusing to award it the electrical subcontract. The state court granted Wharton-Smith summary judgment a few years later, and the state appellate court affirmed.
On February 24, 2011, the School Board demanded that IFIC reimburse it approximately $40,000 for fees and costs incurred in connection with Southern Atlantic’s bid protest. IFIC rejected the claim. The School Board responded that, to the extent IFIC’s rejection was based on the fact that the School Board had not yet reimbursed Wharton-Smith for the bid protest defense, it would assign its claim for reimbursement to Wharton-Smith.
The School Board assigned Wharton-Smith its bond claim on August 2, 2011, and Wharton-Smith sued IFIC in state court the next day. Southern Atlantic intervened as a defendant. The state court ultimately entered summary judgment against Wharton-Smith in November of 2012. Following the entry of summary judgment, IFIC and Southern Atlantic moved for attorneys’ fees against Wharton-Smith. The state court denied their motions. The state appellate court denied a similar motion by Southern Atlantic on appeal, and- later affirmed the summary judgment on the merits.
B
Years of spinoff adversary proceedings at the administrative and state levels did not prevent this municipal bid protest from ending up in federal district court. A round of motions to dismiss pared down the complaint to First Amendment retaliation claims asserted by Southern Atlantic, Mr. Hutchins, and Mr. McIntosh against the School Board. At its core, the plaintiffs’ theory was that the School Board retaliated against them for speaking out about alleged irregularities in the bidding process (which had been handled by Wharton-Smith) by asserting a claim against the bid protest bond for legal fees and costs, and then assigning the claim to Wharton-Smith following IFIC’s denial. See, e.g., D.E. 30 at 14 ¶ 76; D.E. 70 at 15-16 (arguing, in response to the School Board’s motion for summary judgment, that, “because of the School Board’s attack and assignment of the [b]ond,” “[Mr.] Hutchins and [Mr.] McIntosh had their company’s [b]ond attacked, which resulted in a tarnished business reputation, sureties not consistently issuing bonds to [Southern Atlantic], a decreased bonding capacity ..., and ultimately lost profits”).
The School Board moved for summary judgment, and the district court granted its motions. With respect to Mr. Hutchins and Mr. McIntosh, the district court concluded that they had not suffered a retaliatory act because the School Board’s alleged actions were directed at Southern Atlantic, and not at them individually. The district court also determined that they had not produced evidence of any alleged harm, such as reputational loss, inability to obtain a bond, or lost profits.
As for Southern Atlantic, the district court explained that its First Amendment retaliation claim, on the merits, survived summary judgment because there was evidence that the School Board had asserted an “unjustified bond claim” against it (by way of its surety, IFIC), “which had the effect of tying up the [b]ond” and causing damage. See D.E. 163 at 8. But the district court nonetheless granted the School Board summary judgment after concluding that Southern Atlantic had failed to establish municipal liability under § 1983. Specifically, the district court determined that Southern Atlantic had not demonstrated that the School Board’s general counsel, Woody Rodriguez (who Southern Atlantic believed was the person responsible for making the claim against the bond and assigning the claim to Wharton-Smith), had been the School Board’s final policymaker, as required by Monell v. Dep’t of Soc. Servs., 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978).
Later, the district court awarded the School Board $18,983.60 in attorneys’ fees under § 1988 against Mr. Hutchins and Mr. McIntosh, reasoning that their First Amendment retaliation claims had been meritless because they could not point to a retaliatory act directed at them. This appeal followed.
II
We exercise plenary review over a district court’s grant of summary judgment. See Moton v. Cowart, 631 F.3d 1337, 1341 (11th Cir. 2011). In doing so, we draw all inferences and review all of the evidence in the light most favorable to the non-moving party. Id. The party moving for summary judgment bears the burden of demonstrating that there is no genuine dispute of any material fact and that it is entitled to judgment as a matter of law. Id. If the evidence supporting the nonmoving party is merely colorable or not significantly probative, summary judgment may be granted. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
We review an award of attorneys’ fees under 42 U.S.C. § 1988 for abuse of discretion. See Thompson v. Pharmacy Corp. of Am., 334 F.3d 1242, 1244 (11th Cir. 2003). We review a district court’s determination that a claim is frivolous for abuse of discretion. See, e.g., Cordoba v. Dillard’s, Inc., 419 F.3d 1169, 1179 (11th Cir. 2005) (reviewing for abuse of discretion whether a plaintiffs Americans with Disabilities Act claims were frivolous). Generally speaking, a district court abuses its discretion when it applies the wrong legal standard or commits a clear error of judgment. See, e.g., Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir. 2005).
III
Southern Atlantic contends that the district court erred in concluding that the School Board could not be held liable under § 1983 for Mr. Rodriguez’s decision to seek fees and costs against the protest bond on the School Board’s behalf, and thereafter assign the claim to Wharton-Smith following IFIC’s denial. A municipality is not vicariously liable under § 1983 for the actions or omissions of an employee unless those actions “may fairly be said to represent [the municipality’s] official policy.” Monell, 436 U.S. at 694, 98 S.Ct. 2018. Accordingly, “Municipal liability attaches only where [a municipal] decisionmaker possesses final authority to establish municipal policy with respect to the action ordered.” Pembaur v. City of Cincinnati, 475 U.S. 469, 481, 106 S.Ct. 1292, 89 L.Ed.2d 452 (1986). See also Hill v. Clifton, 74 F.3d 1150, 1152 (11th Cir. 1996) (“Only those officials who have final policy-making authority may render the municipality liable under § 1983.”).
No one disputes that neither state positive law, such as a statute, see Jett v. Dallas Indep. Sch. Dist., 491 U.S. 701, 737, 109 S.Ct. 2702, 105 L.Ed.2d 598 (1989), nor official municipal policy, see Monell, 436 U.S. at 690, 98 S.Ct. 2018 (“policy statement, ordinance, regulation, or decision officially adopted and promulgated by [the municipality’s] officers”), vested the general counsel with final policymaking authority to assert and assign bond claims on behalf of the School Board. Southern Atlantic instead argues that Mr. Rodriguez held final policymaking authority because (a) the School Board had a custom of delegating final authority to its general counsel to settle legal disputes under $50,000, which allegedly would have included the bond claim since the fees and costs sought were under that amount; (b) the School Board’s chairman, on behalf of the Board, had expressly delegated Mr. Rodriguez final policymaking authority over Southern Atlantic’s request to have its bond returned; and (c) Mr. Rodriguez was the School Board’s de facto final policymaker because Southern Atlantic did not have a meaningful opportunity to seek the Board’s review of his decision to assign the bond claim to Wharton-Smith.
A
Southern Atlantic maintáins that, pursuant to a longstanding Board practice, the general counsel possessed final authority to settle litigation under $50,000, “as well as other ‘ministerial functions’ like assigning [a] [b]ond.” Br. of Appellants at 38 (quoting D.E. 59 at 149-150). Southern Atlantic asserts that, because the fees and costs sought against the bond totaled less than $50,000, Mr. Rodriguez had final poli-cymaking authority over the alleged unconstitutional actions.
Assuming that the general counsel’s alleged decision-making authority over settlements and assignments was so “permanent and well settled as to constitute a ‘custom or usage’ with the force of law,” Brown v. City of Fort Lauderdale, 923 F.2d 1474, 1481 (11th Cir. 1991) (internal quotation marks omitted), Southern Atlantic’s argument fails because his authority is not plenipotentiary. And that is a problem for Southern Atlantic because, as the district court explained, our precedent makes it clear that a government employee is a final policymaker “only if his decisions have legal effect without further action by the governing body”—in this case, the Board—“and if the governing body lacks the power to reverse the member or employee’s decision.” Holloman ex rel. Holloman v. Harland, 370 F.3d 1252, 1292 (11th Cir. 2004) (internal quotation marks and citations omitted).
None of the record evidence cited by Southern Atlantic indicates that the School Board lacked the authority to override the general counsel’s litigation decisions. To the contrary, the testimony cited by Southern Atlantic, see Br. of Appellants at 38 (citing D.E. 59 at 148-151), shows that the Board was responsible for setting policy, see D.E, 59 at 151 (“The [B]oard makes overall guiding policies.... ”), and at all times retained the authority to micromanage litigation and overrule the general counsel’s decisions, see id. at 161-152 (explaining that the Board retains decision-making authority over important legal matters). It therefore does not matter that the Board generally did not review the general counsel’s litigation decisions.
What matters is that the Board could have intervened in the decision-making process and, as the entity vested with final policymaking authority, decided the matter. See Manor Healthcare Corp. v. Lomelo, 929 F.2d 633, 638 (11th Cir. 1991) (holding that mayor was not the final policymaker for the city when he vetoed the city council’s zoning decision because the city council could have overridden his veto, even though it never held a vote on the override). The alleged custom, even as characterized by Southern Atlantic, did not prevent the Board from intervening and overriding the general counsel’s decisions, so it remained the final policymaker.
B
Southern Atlantic also contends that, at a so-called pre-agenda Board meeting, the chairman of the School Board, on behalf of the whole Board, expressly delegated final policymaking authority to the general counsel over all issues related to the protest bond. The district court rejected Southern Atlantic’s characterization of what occurred, and we agree.
From the meeting’s transcript, it is clear that the Board did not delegate final poli-cymaking authority to the general counsel. Mr. Hutchins told the Board that Southern Atlantic had “put up a protest bond,” and that it was wondering “what [was] going on with it.” D.E. 58-8 at 7. In response, the chairman referred the question to the general counsel, apparently in an attempt to avoid potential ex parte communication issues' (because the Board was ultimately responsible for approving the administrative judge’s recommended order on the bid protest). See id. at 4-8. Nothing in that exchange reveals that the Board delegated decision-making authority to the general counsel over Southern Atlantic’s bond.
More importantly, even if that exchange could be characterized as some form of delegation, “the mere delegation of authority to a subordinate to exercise discretion is not sufficient to give the subordinate policymaking authority. Rather, the delegation must be such that the subordinate’s discretionary decisions are not constrained by official policies and are not subject to review.” Mandel v. Doe, 888 F.2d 783, 792 (11th Cir. 1989) (emphasis added). No reasonable juror could find that the chairman’s comments expressly delegated final, unreviewable authority over any and all matters related to the bond.
C
Finally, Southern Atlantic maintains that, even if the School Board theoretically retained the power to review and reverse the assignment of the bond, such review was unavailable in this case because Wharton-Smith sued as assignee the day after the assignment was executed. Citing Holloman, 370 F.3d at 1292, Southern Atlantic contends that the lack of a meaningful opportunity for review rendered Mr. Rodriguez the School Board’s defacto final policymaker. This argument, however, runs into several critical problems.
First, the assignment was not executed by Mr. Rodriguez, but by John Morris as “Chief Facilities Officer.” Southern Atlantic has not argued that Mr. Morris is a final policymaker for the School Board, so his actions cannot be imputed to the Board for § 1983 purposes.
Second, assuming Mr. Rodriguez was behind the assignment decision like Bertrand the monkey, see Stimpson v. City of Tuscaloosa, 186 F.3d 1328, 1332 (11th Cir. 1999) (discussing “cat’s paw” theory), and that the assignment was actually an unlawful retaliatory act, his unlawful decision does not expose the Board to municipal liability because at no point was he authorized to set the overall policy for the Board’s legal affairs. See D.E. 59 at 151 (explaining that the Board sets overall pol icy). Rather, the Board set policy and gave Mr. Rodriguez discretion to pursue legal recourses in conformity with that policy. The general counsel’s decision to “exercise[ ] [his] discretion in an unconstitutional manner” is not the Board’s “decision to act unlawfully.” Pembaur, 475 U.S. at 483 n.12, 106 S.Ct. 1292. And, as we have explained, the Board’s failure to affirmatively intervene and reverse Mr. Rodriguez’s decisions does not matter:
Simply going along with discretionary decisions made by one’s subordinates ... is not a delegation to them of the authority to make policy. [This is] consistent with a presumption that the subordinates are faithfully attempting to comply with the policies that are supposed to guide them.... [T]he mere failure to investigate the basis of a subordinate’s discretionary decisions does not amount to a delegation of policymak-ing authority, especially where (as here) the wrongfulness of the subordinate’s decision arises from a retaliatory motive or other unstated rationale.
Scala v. City of Winter Park, 116 F.3d 1396, 1400-01 (11th Cir. 1997) (internal quotation marks omitted) (quoting City of St. Louis v. Praprotnik, 485 U.S. 112, 129-30, 108 S.Ct. 915, 99 L.Ed.2d 107 (1988)).
Southern Atlantic’s Holloman-based argument relies heavily on Willingham v. City of Valparaiso Florida, 638 Fed.Appx. 903, 904 (11th Cir. 2016), but that case is distinguishable. In Willingham, a jury returned a verdict finding that the mayor of the City of Valparaiso unlawfully fired a city police officer in retaliation for First Amendment conduct. See id. at 905.' Although the mayor was responsible for personnel decisions on behalf of the city, the city charter empowered the city commission to review and overturn his decisions. See id. at 907-08. Despite review being “theoretically available on paper,” the district court, relying on Holloman, ruled that the mayor’s termination decision could be imputed to the city because he had “sabotaged the entire process- of review over his own decision.” Id. (quoting Willingham v. City of Valparaiso, 97 F.Supp.3d 1345, 1354 (N.D. Fla. 2015)).
In affirming that decision, we explained that the mayor had “effectively prevented meaningful review” in a way that only he could because of his unique position:
Since [the mayor] was [c]hairman of the [c]ity Commission and controlled its agenda, the other Commission members—and therefore the [cjommission as a whole—were unable to force [him] to even entertain their motions [concerning the police officer’s termination].... As Chairman ..., [the mayor’s] conduct effectively nullified the [city charter’s] very procedures designed to review [his] termination decision.
Id. at 907-08 (emphasis added).
In this case, by contrast, there is no evidence that the Board or the superintendent were powerless to review the general counsel’s decisions. As the district court noted, even though the Board apparently ignored Southern Atlantic’s requests for the return of its bond, “nothing [in the record] supports] the notion that the School Board could not have taken action had it wished to do so.” D.E. 163 at 10. Similarly, nothing indicates that, had he wanted to, the superintendent could not have unilaterally intervened in the assignment of the bond after the general counsel made the initial call. Southern Atlantic seems to confuse the inability to exercise review with the choice not to. Willingham was about the former, and this case is about the latter.
D
In sum, none of the theories advanced by Southern Atlantic establish municipal liability. There is no evidence that the Board had a custom of delegating final, unreviewable policymaking authority to the general counsel over litigation; that the Board expressly delegated final policymak-ing authority to Mr. Rodriguez over any issue related to Southern Atlantic’s bond; and that there was no opportunity for either the Board or the superintendent to meaningfully review Mr. Rodriguez’s decisions.
IV
Mr. Hutchins and Mr. McIntosh also argue that the district court abused its discretion in awarding the School Board attorneys’ fees under § 1988 because it erroneously concluded that their First Amendment retaliation claims were frivolous. The district court ruled that Mr. Hutchins’ and Mr. McIntosh’s claims were frivolous because they had failed to present evidence that any alleged retaliatory act by the School Board was aimed at them specifically, as opposed to their company, Southern Atlantic.
|
1047231-24078 | MEMORANDUM AND ORDER
KOPF, District Judge.
The jury has rendered a verdict in favor of the plaintiff (Pedersen) and against the defendant (Casey’s) on the plaintiffs claim of religious discrimination in the employment context. The jury found that Pedersen had been constructively discharged after failing to come to work at Casey’s on Easter'Sunday and Casey’s thus violated 42 U.S.C. § 2000e-2 (“It shall be an unlawful employment practice for an employer to ... discharge any individual ... because of such individual’s ... religion.”).
I did not to submit the issue of “front pay” to the jury. Cf. Newhouse v. McCormick & Co., Inc., 110 F.3d 635, 642 (8th Cir.1997) (in an ADEA ease, whether to award front pay and how much front pay is an issue for the court and not the jury). As a result, there remains for decision the question of what, if any, additional relief Pedersen should be given. Moreover, there also remains for decision a related state law claim that the parties have agreed must be resolved by the court. This memorandum and order will settle both issues, and will also establish a schedule for submitting an application for, and an objection to, attorney fees.
Ultimately, I find and conclude that Pedersen is entitled to “front pay” rather than reinstatement on the Title VII claim and that she is entitled to $7,411.17.- I also find and conclude that Pedersen has proven religious discrimination under Nebraska law, and is entitled to “back pay” of $25,076.51, compensatory damages of $10,000.00, and “front pay” of $7,411.17.
I. Background
Casey’s operates a chain of convenience stores throughout the Midwest. One store it operated is in Holdrege, Nebraska, and that is where Pedersen worked.
After two earlier stints as a Casey’s employee (that resulted in Pedersen voluntarily ending her employment),. Casey’s hired Pedersen a third time. During this period of employment, Pedersen worked as a cashier. Casey’s regarded Pedersen as an outstanding employee, and that is why it hired her a third time. Pedersen was especially highly regarded by a' former manager of the Casey’s store where Pedersen worked and by a former Casey’s area supervisor. These women, and other witnesses, gave, glowing accounts of Pedersen’s work.
Pedersen is a fundamentalist Christian. Because of her religious convictions, Pedersen does not believe that she should work on Easter Sunday. It was her practice to attend church in the morning and evening on Easter Sunday, and not to work at all on that day.
She claimed that Casey’s had known of and accommodated her religious beliefs in the past, but failed to do so in April of 1995. In particular, Pedersen asserted that the new manager scheduled Pedersen to work although a former manager had promised Pedersen Easter off in exchange for working secular holidays.
Shortly before Easter in 1995, Pedersen learned that the new manager had scheduled her to work on Easter Sunday evening. After first protesting in writing and without success, Pedersen decided not to work as scheduled. Later, complaining that Casey’s had discharged her, Pedersen sued.
Pedersen argued that Casey’s violated 42 U.S.C. § 2000e-2 by forcing her to work on Easter Sunday when Casey’s knew of her sincere religious convictions that prevented such work. For the same reason, Pedersen also claimed that Casey’s violated the Nebraska Fair Employment Practice Act. Neb. Rev.Stat. § 48-1101 to 48-1126 (Michie 1995). Among other things, Pedersen sought damages and “reinstatement or front pay in lieu thereof.” (Filing 1, Complaint.)
The Title VII claim was tried to a jury, except the- issue of reinstatement or front pay. While the plaintiff argued that the front pay issue should go to the jury, the parties agreed that, if we did not submit the issue, we would resolve the reinstatement and front pay issue on the record made during the jury trial.
By further agreement of the parties, we tried the state law claim to the court. Again, the parties agreed that the record made before the jury is also the record for resolution of the state law claim.
On the issue of liability under Title VII, the jury was instructed that before it could return a verdict for Pedersen, it must find that she had proven the following:
(1) Pedersen had a bona fide belief that working on Easter Sunday was contrary to her religious beliefs;
(2) Pedersen informed Casey’s about the conflict between compliance with an employment requirement and her religious beliefs; and
(3) Pedersen was constructively discharged because: (a) Casey’s made her working conditions intolerable by requiring her to work on Easter Sunday, and, (b) Pedersen’s religion was a motivating factor in Casey’s decision, and (c) Pedersen’s failure to return to work was a reasonably foreseeable result of Casey’s actions. (Filing 63, Instruction 6, Pt. I.)
We also instructed the jury to consider Casey’s affirmative defense. We told the jury that Casey’s had the burden to prove the defense. Casey’s claimed that it (1) offered a reasonable accommodation to the manner in which Pedersen proposed to observe her religious beliefs or (2) was unable reasonably to accommodate Pedersen’s religious beliefs without undue hardship. (Id. Pt. II.)
As earlier noted, the jury returned a verdict for Pedersen and against Casey’s. They jury members awarded Pedersen “back pay” of $15,000.00 and general damages of $10,-000.00. The jury specifically declined to award punitive damages. (Filing 68, Verdict Form.)
II. Findings of Fact and Conclusions of Law on Title VII Claim Regarding Reinstatement and Front Pay
I find and conclude that reinstatement is not a proper remedy, but that front pay in the amount of $7,411.17 should be awarded instead of reinstatement. I arrive at these findings and conclusions for the following reasons.
First, where intentional discrimination has been proven under Title VII, the court may grant equitable relief pursuant, to 42 U.S.C. § 2000e-5(g)(l). The statute specifically authorizes the court to grant reinstatement. Id. The statute also authorizes the court to grant “any other equitable relief as the court deems appropriate.” Id. If reinstatement is inappropriate, the court may award “front pay” in lieu of reinstátement. See, e.g., Hukkanen v. International Union of Operating Engineers, Hoisting & Portable Local No. 101, 3 F.3d 281, 285-86 (8th Cir.1993) (applying Title VII, and holding that district court did not abuse its discretion in awarding front pay to an employee who was constructively discharged due to sexual harassment where reinstatement was inappropriate) (citing MacDissi v. Valmont Indus., Inc., 856 F.2d 1054, 1060 (8th Cir.1988)).
Second, reinstatement here is not appropriate. When Casey’s employed Pedersen for the third and last time, it made it clear that it would never again willingly rehire her. Furthermore, Mrs. Pedersen has testified that she does not want to return to Casey’s because, considering her prior treatment, she no longer trusts her previous employer. Also, I observed the parties and their representatives at trial, and I believe the trial itself may have additionally impaired the ability of the parties meaningfully to interact with one another. All these factors collectively (rather than one individually) convince me that requiring Casey’s to reinstate Mrs. Pedersen would result in a hostile working environment that would not be productive for Casey’s or Pedersen.
Third, although Pedersen is presently a healthy 57-year-old woman who testified that she wanted to work until at least 65, her work history has been sporadic. Until relatively late in life, Pedersen did not work outside the home. More important, before her constructive discharge from Casey’s, Casey’s had employed Pedersen twice before. Twice, Pedersen voluntarily resigned. On the first occasion, Pedersen worked for about nine months. On the second occasion, she worked for a little more than one year. On the third occasion, Pedersen again worked for slightly more than a year before the constructive discharge.
Pedersen’s work history with Casey’s convinces me that she would not have remained at Casey’s until her retirement. Instead, I am persuaded she would likely have voluntarily ended her employment as she had done twice in the past. More specifically, it is not likely that Pedersen would have continued working for Casey’s much longer than she had worked for Casey’s in the past. Before her constructive discharge, Pedersen had worked at Casey’s for roughly three years total during three different periods of employment. Accordingly, given that Pedersen is entitled and will receive “back pay” from April 15, 1995, to September 18, 1997, and giving Pedersen the benefit of the doubt, a period of “front pay” equivalent to one year will serve to make her whole.
Fourth, for the one-year period of “front pay,” Pedersen is entitled to $7,411.17. We compute this sum in the following manner:
a. The parties have stipulated that, had Pedersen been working at Casey’s on the date of the verdict, she would have earned approximately $6.05 per hour. (Ex. 38.) She was paid at least monthly.
b. There is no non-speeulative evidence in the record to establish what, if any, fringe benefits Pedersen would have received had she been working for Casey’s on September 19,1997.
c. During the last full week with Casey’s, Pedersen worked 39 hours. (Ex. lh.) This is representative of her hours of work while employed by Casey’s. It is also a fair- approximation of what she would have worked in the future had she been employed on the date of the verdict.
d. The evidence shows that Pedersen is presently employed with the Holdrege Chamber of Commerce. She works between 11 and 15 hours a week. They pay her $5.70 per hour. They pay her at least monthly. There is no non-speculative evidence of what, if any, fringe benefits Pedersen receives while working at the Chamber of Commerce.
e. If Pedersen would work 39 hours per week for 50 weeks at $6.05 per hour had she not been constructively discharged, she would have earned approximately $11,-797.50 at Casey’s during one year. If she now works 15 hours per week for 50 weeks per year at $5.70 per hour, Pedersen now earns approximately $4,275.00- per year working at the Chamber of Commerce. The difference between those two figures is $7,522.50, and represents Pedersen’s lost earnings over a one-year period.
f. Taking into account that Pedersen will be paid a lump sum, and therefore reducing $7,522.50 to present value, Pedersen is entitled to “front pay” of $7,411.17.
Fifth, I have considered the argument that Pedersen has not mitigated her “front pay” damages. This argument does not persuade me. There is some suggestion in the evidence that Pedersen did not fully mitigate her damages for a year or so after they discharged her. Nevertheless, the evidence convinces me that even if one accepts in fact lack of full mitigation during the first year, Pedersen after that did everything she reasonably could to mitigate her damages. For example, Pedersen testified without contradiction that she vigorously sought out her present job, and turned what was originally a temporary job into a permanent, although part-time, position.
III. Findings of Fact and Conclusions of Law on State Law Claim
I find and conclude that Pedersen has proven a violation of Nebraska’s law against religious discrimination in the work place, and must be compensated accordingly. I find and conclude that Pedersen is entitled to $25,076.51 as “back pay” and $10,000.00 in compensatory damages. Moreover, for the reasons articulated in Part II of this Memorandum and Order, I also find that reinstatement is inappropriate but Pedersen should receive “front pay” in the sum of $7,411.17. I do not believe Nebraska law authorizes punitive damages, and I therefore decline to consider that question. The reasons for these findings and conclusions are set forth below.
First, Nebraska law makes religious discrimination an unlawful employment practice. Neb.Rev.Stat. § 48-1104 (Michie 1995) (“It shall be an unlawful employment practice for an employer: To ... discharge ... any individual ... because of such individual’s ... religion.”). If religious discrimination is proved, “any successful complainant shall be entitled to appropriate relief, including temporary or permanent injunctive relief, general and special damages, reasonable attorney’s fees, and costs.” Neb.Rev.Stat. § 48-1119(4) (Michie 1995).
Second, the parties have assumed, and so shall I, that Nebraska law is identical to federal law regarding (1) the elements of Pedersen’s prima facie case, (2) the fact that Casey’s defense is an affirmative defense for which it bears the burden of proof, and (3) the elements of Casey’s defense. This assumption is well-founded because “the Nebraska Fair Employment Practice Act is patterned after title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (1988)” and “it is appropriate to consider federal court decisions construing the federal legislation.” City of Fort Calhoun v. Collins, 243 Neb. 528, 532, 500 N.W.2d 822, 825 (1993) (citing Airport Inn, Inc. v. Nebraska Equal Opportunity Comm’n, 217 Neb. 852, 353 N.W.2d 727 (1984)).
Third, the elements of Pedersen’s prima facie case are set forth in Jury Instruction 6. (Filing 63, Instruction 6, Pt. I.) Pedersen must prove three things to prove religious discrimination. See Brown v. General Motors Corp., 601 F.2d 956, 959 (8th Cir.1979) (setting forth elements of prima facie case of religious discrimination when an employee is discharged).
Pedersen must prove that she had a bona fide belief that working on Easter Sunday was contrary to her religious beliefs. Id. Next, Pedersen must prove that she informed Caséy’s about the conflict between compliance with an employment requirement and her religious beliefs. Id. Finally, since Pedersen did not claim that they fired her, she must prove a “constructive discharge.” See Manual of Model Civil Jury Instructions for the District Courts of the Eighth Circuit 5.93, at 172 (1995) (setting forth elements of constructive discharge) (citing, among other cases, Hukkanen n. International Union of Operating Engineers, Hoisting & Portable Local No. 101, 3 F.3d 281, 284 (8th Cir.1993)). Regarding “constructive discharge,” Pedersen must prove that (a) Casey’s made her working conditions intolerable by requiring her to work on Easter Sunday, (b) Pedersen’s religion was a motivating factor in Casey’s action, and (c) Pedersen’s failure to return to work was a reasonably foreseeable result of Casey’s action. Id.
As for Pedersen’s burden to prove that her religion was a “motivating factor” in Casey’s action, both parties agreed that Jury Instruction 6 accurately described what a “motivating factor” was. The instruction told the jury that the “plaintiff is not required to prove that religion was the sole motivation or even the primary motivation,” but the plaintiff is “required to prove that religion played a part in the defendant’s action even though other factors may also have motivated the defendant.” (Filing 63, Instruction 6, Pt. I.) See also Manual of Model Civil Jury Instructions for the District Courts of the Eighth Circuit 5.01, at 89 n. 6 (citing Estes v. Dick Smith Ford, Inc., 856 F.2d 1097, 1101 (8th Cir.1988)). In addition, after a question by the jury, we told the jury, with the agreement of the parties, that “the motivating factor may be direct or indirect so long as it moved the defendant towards its decision.” (Filing 66, Answer to Jury’s First Question.)
Fourth, Casey’s has a defense to liability if it (1) offered a reasonable accommodation to the manner in which Pedersen proposed to observe her religious beliefs or (2) was unable reasonably to accommodate Pedersen’s religious beliefs without undue hardship. See 42 U.S.C. § 2000e(j) (“The term ‘religion’ includes all aspects of religious observance and practice, as well as belief, unless an employer demonstrates that he is unable to reasonably accommodate to an employee’s ... religious observance or practice without undue hardship on the conduct of the employer’s business.”). The burden to prove this defense is on Casey’s. See Brown, 601 F.2d at 961 (stating that General Motors, the defendant, had the “burden of proving undue hardship”).
Sixth, the evidence overwhelmingly establishes that Pedersen held a sincere and strong belief that working on Easter Sunday violated a fundamental aspect of her Christian religious convictions. As she stated in a letter to the manager of Casey’s store, Easter is “the most important day of praise & worship in the life of a born[-]again Christian” and “it’s so against my religious belief[s] to work on this day.” (Ex. 8.)
Seventh, Pedersen informed Casey’s about the conflict between compliance with the employment requirement that she work on Easter Sunday and her religious beliefs. With the agreement of Tammy Thorell, who was then managing Casey’s store, Pedersen worked on Thanksgiving and New Year’s in exchange for not working on Christmas in 1994 and Easter in 1995. Accordingly, Thorell marked Pedersen “off” the schedule for Christmas and Easter. Moreover, after learning that the new manager in April 1995 had changed the schedule, Pedersen wrote the manager and clearly informed the manager of her strong religious objection to working on Easter. (Ex. 8.) Then Pedersen also gave the new manager a copy of a pamphlet ostensibly prepared by the Nebraska Department of Labor setting forth the “religious accommodation” provisions of Title VIL (Id.)
Eighth, Pedersen was constructively discharged. Despite knowing that Pedersen could not work on Easter without violating sincere and strong religious beliefs, Radonda Veltkamp Barton, who was the new manager, scheduled Pedersen to work. This was an intolerable working condition to Pedersen, and Barton knew it.
Moreover, I am convinced that Pedersen’s religion played a part in Barton’s, and thus Casey’s, action. Barton resented Pedersen for insisting that she be given the day off for religious reasons, and Barton intended to punish Pedersen by insisting that Pedersen choose her job or her god. I am so persuaded, for among Other reasons, because:
(1) Barton was obligated to work Easter Sunday and since she was salaried, Barton would not be additionally compensated for working the holiday. This upset Barton.
(2) Brad Pahl, the area supervisor for Casey’s, admitted on cross-examination that he would have accommodated Mrs. Pedersen, especially considering the fact that Mrs. Pedersen was an outstanding employee.
(3) Tammy Thorell, the former manager, testified that she had enthusiastically agreed to an accommodation with Pedersen which required Pedersen to work important, but secular, holidays in exchange for not working on Christmas and Easter.
(4) Despite Casey’s attempt to prove otherwise, Barton did not need to schedule Mrs. Pedersen to work on Easter Sunday, especially .since (a) the store was fully staffed without scheduling Pedersen, and (b) even if the store was not fully staffed, Barton did not try to call or schedule Tom Watenpaugh, who was always willing to work.
Barton claimed to be a “born-again” Christian with no motive to discriminate against Pedersen. However, inconsistencies , weak excuses , and a checkered employment histo ry with Casey’s badly damaged Barton’s credibility. For example, Barton testified that she thought she had discussed Pedersen’s request for accommodation with Brad Pahl, Casey’s area supervisor, but he did not remember having such a conversation. To the contrary, and as indicated above, Pahl stated that he would have accommodated Pedersen had he known of the request.
Still further, it was apparent to Barton that if she scheduled Pedersen to work on Easter, such a decision would force Pedersen to quit. In her letter to Barton protesting the scheduling, Pedersen stated that if she was scheduled on Easter she would be forced to quit. (Ex. 8.) A paper schedule, maintained by Barton, confirmed that Barton considered the Saturday before Easter as Pedersen’s “last day.” (Ex. lh.)
Ninth, Casey’s did not convince me either that it offered a reasonable accommodation or that it could not do so without undue hardship. Considering each part of this alternative defense separately is useful.
As for the first alternative, if Casey’s offered Pedersen a reasonable accommodation, then we cannot say that the employer discriminated against Pedersen because of her religion. See Ansonia Bd. of Educ. v. Phil-brook, 479 U.S. 60, 68, 107 S.Ct. 367, 371-72, 93 L.Ed.2d 305 (1986) (“[A]ny reasonable accommodation by the employer is sufficient to meet its accommodation obligation” and when proven “the statutory inquiry is at an end.”). In fact, an employer need not accept an employee’s specific request if a reasonable alternative exists which the employer will grant. Id. 68-69, 107 S.Ct. at 371-72.
Casey’s accurately observes that Pedersen’s employment agreement (ex. 25 (last two pages)) exempted her from working Sunday mornings, but at no other time. From this premise, Casey’s argues that it offered Pedersen a “reasonable accommodation” when it required her to work the evening shift on Easter. This assertion does not persuade me.
Casey’s agrees that “an accommodation that requires the employee substantially to violate his or her religious beliefs is not a reasonable accommodation.” (Filing 63, Instruction 6, Pt. II.C.) See, e.g., Wright v. Runyan, 2 F.3d 214, 217 (7th Cir.1993) (“A reasonable accommodation of an employee’s religion is one that ‘eliminates the conflict between employment requirements and religious practices ....’”) (quoting Ansonia Bd. of Educ., 479 U.S. at 70, 107 S.Ct. at 372-73), cert. denied, 510 U.S. 1121, 114 S.Ct. 1077, 127 L.Ed.2d 394 (1994). Therefore, it is from this perspective that I must judge Casey’s “reasonable accommodation” argument.
Casey’s knew that the entirety of Easter was of paramount religious significance to Pedersen, and was unlike a normal Sunday. For example, Tammy Thorell, the previous manager, agreed to an arrangement for Pedersen to work secular holidays, so that Pedersen could take off the entire days of Christmas and Easter. Still further, the evidence is undisputed that Pedersen regularly attended church services both in the morning and in the evening on Easter Sunday.
By requiring Pedersen to work Easter evening, Casey’s was requiring Pedersen not only to break her religious convictions about laboring on Easter, but Casey’s was also requiring her to forego an Easter worship service that she regularly attended. Consequently, the “evening” accommodation was not reasonable, as it forced Pedersen substantially to violate her religious beliefs.
Casey’s fall-back argument is that it was unable to offer Pedersen a reasonable accommodation because any accommodation that would satisfy Pedersen’s religious needs would have also caused Casey’s to suffer an undue burden. See Trans World Airlines, Inc. v. Hardison, 432 U.S. 63, 84, 97 S.Ct. 2264, 2276-77, 53 L.Ed.2d 113 (1977) (“To require TWA to bear more than a de minim-is cost in order to give Hardison Saturdays off is an undue hardship.”). Again, Casey’s agreed what .an “undue burden” meant:
[T]he employer is not required to incur a cost, loss of efficiency, discontent by other employees, or scheduling difficulty regarding other employees unless such cost, loss, discontent, or difficulty is minimal. In other words, the law does not require an employer to accommodate an employee’s religious beliefs if the result of such an accommodation is a more than minimal burden on the employer. Nevertheless, if an accommodation can be made by the employer that only burdens the employer in a minimal way, then the employer must offer the accommodation in order to take advantage of this defense. In this regard, in order for a burden to be undue (more than minimal), it must be real rather than speculative or merely conceivable or hypothetical.
(Filing 63, Instruction 6, Pt. II.A.)
|
947096-21156 | OPINION
McKEAGUE, Circuit Judge.
A Kentucky jury convicted defendant Woodrow Wilson George of carjacking with a firearm, in violation of 18 U.S.C. § 2119 and § 924(c). The district court sentenced George to 194 months imprisonment. George appeals his conviction and sentence, arguing that: (a) the identification testimony was unreliable; (b) the Government submitted insufficient evidence to meet its standard of proof; (c) the court should have granted a mistrial based on improperly admitted mug-shot evidence; (d) his trial attorney provided ineffective assistance of counsel; and (e) he was sentenced contrary to the Supreme Court’s recent ruling in United States v. Booker.
As explained below, we affirm George’s conviction, but vacate his sentence and remand to the district court for resentencing.
I. BACKGROUND
A. Carjacking and Robbery
Early in the morning of October 21, 2003, George, along with his cohorts Maurice “Bert” Sternberg and Dewayne Bethel, participated in a scheme to rob Joshua McFarland. Sternberg masterminded the plan. He knew that McFarland sold marijuana, because the two had engaged in prior drug deals together. He reasoned that robbing a drug dealer was a good idea because the dealer would not want to get the police involved. To implement his plan, Sternberg set up a meeting with McFarland for the ostensible purpose of buying marijuana. While Sternberg distracted McFarland, the other two were to surprise and rob him.
Midway through the robbery, Stern-berg’s plan began to unravel. McFarland told Bethel and George that he did not have any money on him. Bethel and George forced their way into McFarland’s car, with Bethel in the back, McFarland now in the passenger’s seat and George in the driver’s seat. McFarland refused to tell them where he lived, so George drove to where he and Bethel thought McFarland lived. They repeatedly beat McFarland during the drive. Sternberg followed from a distance in his own car.
Unknown to George or Bethel, the house to which they went was McFarland’s prior residence. When they arrived, the two robbers discovered that McFarland had been carrying several hundred dollars. Upset that he had lied to them, George and Bethel forced McFarland out of the car and on the ground, pistol whipping and yelling at him the entire time.
Alerted by the commotion, two of the current residents of the house — Tahra and Alan Beam — came out. George and Bethel demanded they give McFarland’s money to them. Tahra Beam tried to explain that she had no idea who McFarland was, and did not have any of his money. After several minutes of escalating confusion, culminating in George forcing both Beams to lie face down on their porch, Tahra Beam went back into the house to get the Beams’ housemate, a tech sergeant in the military who had a gun. George and Bethel fled before the housemate came out.
Sternberg did not go to the residence, but rather drove around the neighborhood. He met up with Bethel (but not George) shortly after the incident. The two ditched Sternberg’s car and split up the stolen cash and jewelry.
B. Investigation and Trial
After the melee, Sternberg’s plan took another unexpected turn- — -the police were called to investigate. The detective in charge, Chris Flowers, noted that the Beams seemed to be in shock when he arrived. Alan Beam could not identify either of the assailants. Tahra Beam was “terrified” and could only describe the two robbers as “a white guy and a black guy.” She said the “white guy” was closest to her on the porch, and had pointed his gun at her and her husband.
The detective also interviewed McFarland. McFarland was reluctant to tell the detective he was a drug dealer, so he initially told him that he was vacuuming his car at the time of the carjacking; he later admitted to police that he was a drug dealer. He knew Sternberg (who was arrested shortly after the incident), and recognized George from school, but could not “put a name to his face right then.” He gave Detective Flowers two names he thought might be that of the Caucasian assailant, but told the detective he was not sure about either name. Detective Flowers encouraged McFarland to talk with some other people and even look at a yearbook if necessary. McFarland did not know or recognize Bethel.
Within a couple of days, McFarland spoke to another schoolmate who suggested that his description matched that of Will George. McFarland testified that when he heard the name, he recognized it immediately. Based on this information, Detective Flowers compiled a photographic array, using a prior mug shot of George and photographs of five other individuals with similar appearances. In selecting the other photographs, Detective Flowers testified that officers searched thousands of pictures.
McFarland and Tahra Beam each looked at the photographic array. Detective Flowers instructed them to make a positive identification only if “absolutely certain.” He informed them that they would have to testify in court about any identification made or not made. He instructed them to place a finger on the person they recognized and tell him how they knew that person — e.g., was he the person who committed the crime, was he someone the witness knew socially, etc. Both victims identified George as the assailant.
George was arrested based on the eye witness identification. Although none of the victims could identify Bethel, he was subsequently arrested after trying to fence some of the stolen jewelry. Sternberg and Bethel pleaded guilty to state charges for their involvement in the crime; neither were charged in federal court. The Gov ernment charged George with carjacking with a firearm, in violation of 18 U.S.C. § 2119 and § 924(c).
Prior to trial, George’s counsel moved to suppress the photographic array identification. Counsel argued that it was impermissibly suggestive. The district court denied the motion.
Sternberg and Bethel testified for the Government. Both identified George as the third participant in the crime. Both also admitted, however, to lying to police on several occasions. For example, Stern-berg initially refused to give the police George’s and Bethel’s real names, instead giving police “false names” in an attempt to “protect them.” After he was arrested, Bethel gave to the police a statement consistent with his testimony at trial — Stern-berg devised the plan, Bethel and George carried it out. After talking with Stern-berg in jail, however, Bethel tried to retract the statement. Sternberg and Bethel then made various attempts to reduce their respective roles in the crime, including suggesting that George went beyond the scope of the original plan (Sternberg’s version) and that George forced Bethel to participate (Bethel’s version). Sternberg even recruited a cousin to confirm their new stories with the police, and tried to get the help of an ex-girlfriend, but she refused.
Two of the victims, McFarland and Tahra Beam, also testified for the Government. Both witnesses identified George as the Caucasian assailant.
C. Motion for Mistrial
Detective Flowers testified about his investigation as well as the photographic array used to identify George. Near the end of his direct examination, the following colloquy occurred:
Q .. .When you were showing us who they picked, I guess we really probably couldn’t see exactly who that was. Just to make the record perfectly clear, if you would just indicate to the jury which photograph both Mr. McFarland and Miss Beam picked.
A. Ladies and gentlemen, both Mr. McFarland and Miss Beam identified Photo No. 2, which is Jefferson County Identification Jail Number 448-
Defense counsel objected and later moved for a mistrial, arguing that any evidence of George’s prior incarceration or arrest was inadmissible and prejudicial to George’s right to a fair trial. The district court denied the motion, opting instead to give the following instruction directly after Detective Flowers’s testimony:
One other thing I want to mention to the jury. During the discussion about the photo pack identification, I don’t want the jury to be misled. No one should conclude from anything the officer said that Mr. George has previously been in jail. You should not conclude that or you should not conclude that he’s previously been arrested for a felony or other crime, okay? There may have been some confusion there.
D. Conviction and Sentence
The jury convicted George of both counts. The district court sentenced him to 110 months imprisonment for the carjacking and 84 months imprisonment for the firearm, to run consecutively. The district court issued the sentence under the then-mandatory federal sentencing guidelines. George objected to several sentencing matters, but did not challenge the constitutionality or mandatory nature of the guidelines.
George now appeals both his conviction and sentence.
II. DISCUSSION
A. Reliability of Witness Identification
The main issue at trial centered around the identity of the Caucasian assailant. Accordingly, eye witness testimony was critical. George claims on appeal that the photographic array was so unreliable as to violate his Fifth Amendment right to due process. He takes issue with the inclusion of his mug shot in the array as well as how Detective Flowers administered the array.
In analyzing the district court’s ruling on George’s pretrial motion to suppress, we review its factual findings for clear error and its legal conclusions de novo. United States v. Meyer, 359 F.3d 820, 824 (6th Cir.), cert. denied, 543 U.S. 906, 125 S.Ct. 112, 160 L.Ed.2d 182 (2004) (citing United States v. Dotson, 49 F.3d 227, 229 (6th Cir.1995)). “Whether identification evidence was ‘sufficiently reliable so as not to offend appellant’s rights under the due process clause’ is a question of law.” Id. (quoting Smith v. Perini, 723 F.2d 478, 481 (6th Cir.1983)).
To maintain his due process claim, George must show that the identification procedure was so “impermissibly suggestive as to give rise to a very substantial likelihood of irreparable misidentification.” Thigpen v. Cory, 804 F.2d 893, 895 (6th Cir.1986) (quoting Simmons v. United States, 390 U.S. 377, 384, 88 S.Ct. 967, 19 L.Ed.2d 1247 (1968)). We rely on a two-step analysis to determine whether such likelihood of misidentification existed. George bears the initial burden of proving that the identification procedure was impermissibly suggestive. If he meets this burden, we then evaluate “the totality of the circumstances to determine whether the identification was nevertheless reliable.” Meyer, 359 F.3d at 824 (citing Ledbetter v. Edwards, 35 F.3d 1062, 1071-72 (6th Cir.1994)). If the identification procedure was not impermissibly suggestive or the identification was nevertheless reliable, there is no due process violation and we leave it to “the jury to determine the ultimate weight to be given the identification.” Smith, 723 F.2d at 482 (citation omitted); see also Meyer, 359 F.3d at 824.
The record shows that the Government’s identification procedure accorded with due process. George does not point to any specific item in the photograph of him used in the array which would suggest it was, in fact, a mug shot. His photograph appeared similar in size and appearance to the photographs of the other five individuals in the array. There were no jail identification numbers visible. Thus, the use of George’s mug shot in the array did not create an inference that he had previously been in jail.
Moreover, police searched thousands of pictures of individuals before selecting five individuals who were similar to George in appearance. The victims were instructed to make a positive identification only if absolutely certain. The police used these and other procedures to safeguard against a false-positive identification.
George asserts, however, that more should have been done. He lists a number of additional procedures that should have been used, including videotaping the identification and creating a written record to which the witness could “change, add, emphasize, or de-emphasize anything.” George fails to cite, however, any authority suggesting that due process requires the use of such procedures during a photographic array. We decline to create a checklist of procedures law enforcement must use when administering such arrays, and find that the procedures used here were sufficient.
George also argues that Tahra Beam’s positive identification of him must have been the result of an unduly suggestive photographic array. In support, he cites her inability to give a detailed description of the Caucasian assailant shortly after the crime, as well as the change in George’s appearance from the time of the crime to the time of the mug shot. This argument does not stand on its own as a separate legal claim for relief, but rather as another evidentiary basis for his due process claim that the use of his mug shot, and the alleged deficiencies in administering the array, were unduly suggestive. Even with this inferential evidence, George does not satisfy his initial burden of showing that the pre-trial identification was unduly suggestive. Accordingly, we need not determine whether the identification was reliable notwithstanding the identification procedures used.
B. Sufficiency of the Evidence
In addition to his claim that the photographic array was unreliable, George argues more broadly that the Government presented insufficient evidence that he — as opposed to someone else — participated in the crime. To prevail on this claim, George must carry a heavy burden. United States v. Wright, 16 F.3d 1429, 1439 (6th Cir.1994). There exists sufficient evidence to support a conviction if a rational jury could find the elements of a crime beyond a reasonable doubt. Id. In reviewing his claim, we view the evidence in the light most favorable to the Government, giving it the benefit of all reasonably drawn inferences. United States v. Sawyers, 409 F.3d 732, 735 (6th Cir.), cert. denied, — U.S.-, 126 S.Ct. 457, 163 L.Ed.2d 347 (2005); United States v. Barnett, 398 F.3d 516, 521-22 (6th Cir.), cert. dismissed, — U.S.-, 126 S.Ct. 33, 162 L.Ed.2d 931 (2005). We will reverse “a judgment for insufficiency of the evidence ‘only if [the] judgment is not supported by substantial and competent evidence upon the record as a whole.’” Barnett, 398 F.3d at 522 (quoting United States v. Stone, 748 F.2d 361, 363 (6th Cir.1984)).
We note at the outset that George does not address any of the specific elements of the two counts of which he was convicted. He argues instead that someone else committed the crime. Therefore, we confine our review to the identification evidence. While the Government presented no direct physical evidence of his involvement, it did provide conclusive direct and circumstantial testimonial evidence. Most importantly, four eye witnesses — two accomplices and two victims — testified that George participated in the crime.
A criminal conviction can be supported by accomplice testimony alone. United States v. Tines, 70 F.3d 891, 899 (6th Cir. 1995); United States v. Frost, 914 F.2d 756, 762 (6th Cir.1990). Of course, as is common with criminal accomplices, Stern-berg and Bethel were hardly model witnesses. Both admitted lying to the police as well as scheming to place most or all of the blame on George. We point out, however, that throughout the various iterations of their stories, they invariably identified George as the Caucasian assailant, with the lone deviation being Sternberg’s initial attempt to give the police “false names.” There is nothing in the record to link these unidentified “false names” to any specific person — -i.e., the “false names” referred to fictitious persons, rather than actual persons Sternberg knew whom he may have later tried to protect by implicating George. Thus, other than this initial attempt to divert the police, the two accomplices consistently identified George as the third participant, even though they also consistently tried to reduce their own respective roles in the crime.
In any event, the jury heard about the earlier lies and schemes during Stern-berg’s and Bethel’s testimony. The jury had the opportunity to assess the accomplices’ credibility as witnesses and determine the weight to be given (if any) to their testimony in light of these admissions. We have steadfastly held that in cases in which this court is asked to assess the sufficiency of the evidence, we will not usurp the province of the jury by reweighing the evidence, reassessing the credibility of witnesses, or substituting our judgment for that of the jury. Barnett, 398 F.3d at 522; Wright, 16 F.3d at 1440.
As previously mentioned, the Government did not rely solely on accomplice testimony. The testimony of McFarland and Tahra Beam itself provided sufficient evidence of George’s involvement, and further bolstered the accomplice testimony. Both McFarland and Tahra Beam unambiguously identified George as one of the assailants. While defense counsel attacked both witnesses’ identification during trial — e.g., McFarland was unable to identify George by name immediately after the crime, even though the two went to school together, and Tahra Beam could provide little descriptive information immediately after the crime — these matters again went to their credibility as witnesses and the weight of their testimony, not the sufficiency of their identification.
C. Witness Reference to Jail Identification Number
George next claims that the district court erred in denying his motion for mistrial based on Officer Flowers’s reference during testimony to the mug shot jail identification number. Whether to declare a mistrial is within the trial court’s sound discretion. United States v. Macias, 387 F.3d 509, 515 (6th Cir.2004). We review the denial of a motion for mistrial for an abuse of discretion, id.; United States v. Ursery, 109 F.3d 1129, 1133 (6th Cir.1997), and we find none here.
Trial courts generally exclude mug shots from evidence. Mug shots, like evidence of prior convictions, are usually not admissible under Fed.R.Evid. 404(b) (evidence of other crimes, wrongs, or acts). Even if relevant, a mug shot tends to make people believe that the person is “bad,” and therefore can be unfairly prejudicial. Fed. R.Evid. 403. Moreover, the visual impact of a mug shot, apart from mere references to a prior conviction, can leave a lasting, although illegitimate, impact on the jury. United States v. McCoy, 848 F.2d 743, 745-46 (6th Cir.1988). Accordingly, the use of mug shots at trial is highly disfavored.
In the instant case, the parties agreed before trial that the Government could introduce a photocopy of the photographic array. The photograph of George in the array does not contain any of the typical indicia of a mug shot, at least from what can be seen from the photocopy. For example, there are no jail identification numbers visible nor any lines in the background for measuring a person’s height. George does not argue, and we do not find, that the photocopy of George’s picture resembled a mug shot. Therefore, only the testimonial reference by Detective Flowers is challenged here.
Without a doubt, Detective Flowers’s reference to the jail identification number was inadmissible. See Fed.R.Evid. 404(b); McCoy, 848 F.2d at 745-46. The Government did not, however, directly ask Detective Flowers about the identification number or otherwise elicit information about it — i.e., there was “no deliberate effort to inflame the jury.” Ursery, 109 F.3d at 1133. Rather, Detective Flowers gave a more complete answer to the Government’s inquiry than he should have.
The district court properly handled the matter. The reference to the number was brief and innocuous. The district court gave the jury a curative instruction immediately at the end of Detective Flowers’s testimony. The instruction was clear and simple: no juror should conclude from anything the detective said that George had previously been in jail. As we explained in United States v. Blakeney, “properly prepared curative instructions are often sufficient to cure any prejudice resulting from the jury hearing inadmissible evidence.” 942 F.2d 1001, 1030 (6th Cir.1991) (citing United States v. Bowers, 739 F.2d 1050, 1054-55 (6th Cir.1984)); see also Ursery, 109 F.3d at 1133. The court’s instruction cured any prejudice to George from Detective Flowers’s inadmissible statement, and therefore the court correctly denied the request for mistrial.
D. Sentence in Light of United States v. Booker
George contends that the district court sentenced him in violation of the Supreme Court’s decision in United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). The Government concedes that George’s sentence imposed under the then-mandatory sentencing guidelines constituted plain error and that remand to the district court for resentencing is appropriate. United States v. McCraven, 401 F.3d 693, 700 (6th Cir. 2005); Barnett, 398 F.3d at 527, 530-31. We agree, and will vacate George’s sentence and remand the case for resentencing.
E. Ineffective Assistance of Trial Counsel
|
887841-29917 | MEMORANDUM AND ORDER
ANITA B. BRODY, District Judge.
I. INTRODUCTION
This is an appeal from a final judgment of the United States bankruptcy court, dismissing the Chapter 13 petition of Appellant-debtor Margaret Myers as filed in bad faith. In re Myers, No. 04-30938 (Bankr.E.D.Pa. September 21, 2004) {“Myers /”). For the reasons set forth below, I will affirm the judgment of the bankruptcy court.
II. FACTUAL BACKGROUND
The bankruptcy court found the facts as follows. In June 1999, Appellee-creditor Southern Medical Supply Co. (SMS) obtained a $739,044.32 judgment in Georgia state court against Appellant-debtor’s husband, Paul F. Myers, and two corporations owned by him, Alpha Technology and Micro Design. In January 2001, SMS transferred this Georgia judgment to Bucks County, Pennsylvania, where Mr. and Mrs. Myers reside.
In October 2000, SMS filed a lawsuit in the Bucks County Court of Common Pleas (the “CCP”; the “2000 CCP suit”) against Mr. Myers, Appellant-debtor, and Alpha Watch, Inc. (“AWI”), a corporation of which Appellant-debtor was the president and sole or controlling shareholder. Like the other corporations owned by Appellant-debtor and her husband, AWI was engaged in the sale of “wander-control” and patient-monitoring systems to nursing homes. Mrs. Myers and her husband were involved in the operations of AWI and both earned income from it. The 2000 CCP suit alleged that the assets of Mr. Myers’ corporations, Alpha Technology and Micro Design, had been fraudulently transferred to AWI by Mr. and Mrs. Myers. On January 15, 2003, Mr. Myers filed a voluntary Chapter 7 bankruptcy petition, and he ultimately received a bankruptcy discharge.
On August 9, 2004, a bench trial began in the 2000 CCP suit to decide SMS’s fraudulent conveyance claim. Appellant-debtor and AWI were the only remaining defendants, and were both represented by Scott L. Feldman, Esquire. Mr. Myers later testified to the bankruptcy court that, just before the trial commenced, he discussed with his wife the possibility of her filing her own bankruptcy petition. However, he explained that they decided to await the outcome of the litigation before doing so.
On August 11, 2004, the trial judge in the 2000 CCP suit, Judge Robert J. Mellon, stated that he would issue his judgment in open court on Friday, August 13. Appellant-debtor was not present in court on the date of this announcement. However, the bankruptcy court concluded that Mr. Feldman and Mr. Myers, who were both present, believed that the state court intended to enter judgments against both AWI and Appellant-debtor on August 13, and that they advised Mrs. Myers of this and recommended a bankruptcy filing.
On August 12, 2004, the day before the state court was to render judgment in the 2000 CCP case, Appellant-debtor filed a bankruptcy petition under Chapter 13. Her attorneys promptly informed counsel for SMS and Judge Mellon of her bankruptcy filing. Earlier that same week, on August 10, 2004, SMS had commenced an additional lawsuit in the Bucks County Court of Common Pleas (the “2004 CCP suit”). This lawsuit named Mr. and Mrs. Myers as defendants, along with Stroll Control, Inc. (SCI), a corporation formed and owned by Mr. Myers. In the 2004 CCP suit, SMS sought to enjoin defendants from transferring any assets from AWI to SCI. A preliminary injunction hearing was scheduled for August 13, 2004, before Judge Mellon.
On August 13, 2004, Judge Mellon issued rulings in both the 2000 and 2004 CCP suits against Mrs. Myers, Mr. Myers, and SCI. Mr. and Mrs. Myers did not attend the August 13 hearing, but Mr. Feldman was present and asserted that Mrs. Myers’ bankruptcy filing the day before and Mr. Myers’ prior bankruptcy filing prevented any adjudications on the two lawsuits. Thus, the bankruptcy court “considered] it likely that Mr. and Mrs. Myers believed that her bankruptcy filing, coupled with his bankruptcy discharge, would stay all litigation against themselves as well as their two corporations.” Myers I, at 4.
In rendering its August 13 decision, the state court explained that it was aware of Appellant-debtor’s bankruptcy filing, but believed that the bankruptcy stay only applied to matters against her in her individual capacity, not in her capacity as president of AWI. The state court orally ruled that Mr. and Mrs. Myers had transferred all of the assets of Alpha Technology and Micro Design to AWI with the intent to defraud SMS. Furthermore, the state court found that because AWI operated from the same location as the other two corporations, in the same business, with the same telephone numbers, and involving the same customers, it was appropriate to pierce the corporate veil of AWI and hold Appellant-debtor personally liable for the fraudulent conveyance. Judge Mellon then stated his intention to enter judgments against AWI and Appellant-debtor in the amount of the original Georgia state court judgment, plus interest, totaling $1,198,778.19. As to Mrs. Myers, judgment was to be entered “in her corporate capacity, and will be in her individual capacity when the stay is lifted, in the similar amounts.” Myers I, at 5.
The state court also orally froze all of the assets of AWI and announced its intention to appoint a receiver for the corporation. Because the state court found that Mr. and Mrs. Myers’ conduct was “solely for the purpose of defrauding creditors” and “obstructed and was designed to obstruct justice,” the court further sanctioned them by awarding attorney’s fees to SMS and referring the case for possible criminal sanctions. (Def.’s Resp. Pis.’ Mot. TRO & PI Ex. A at 13-14.) After placing these rulings on the record, the state court entered several orders dated August 13, 2004, which: (1) entered judgment against Appellant-debtor and AWI in the amount of $1,198,778.19, (2) placed Mrs. Myers’ stock in AWI in constructive trust in favor of SMS with the stock to be held by the state court, (3) froze the assets of AWI and enjoined defendants from transferring, selling or otherwise disposing of AWI’s assets, (4) appointed a receiver for AWI, (5) assessed sanctions against defendants in the amount of $55,284.37, (6) directed Appellant-debtor to appear for a contempt hearing on August 16th due to her failure to appear in court on August 13, (7) enjoined SCI, as well as Mr. and Mrs. Myers, from transferring any assets already delivered from AWI to SCI, (8) appointed a receiver for SCI, and (9) enjoined Mr. and Mrs. Myers from owning, operating, investing in, or working for any entity involved in the business of patient monitoring or wander control.
Although Mr. and Mrs. Myers were not present in state court on August 13, the bankruptcy court concluded that Mr. Feld-man probably informed them of the substance of the state court’s rulings. Myers /, at 7. Nonetheless, on August 14, 2004, Mr. Myers withdrew $6,000 from AWI’s bank account and $1,184.10 (the entire balance) from SCI’s account, in violation of the state court’s orders. The bankruptcy court found that Appellant-debtor knew of her husband’s actions regarding these withdrawals. Moreover, the bankruptcy court found that she approved or appointed her husband vice-president of AWI, and that together they approved the corporate bankruptcy filings of AWI and SCI. Those two corporations filed voluntary bankruptcy petitions on August 15, 2004, which the bankruptcy court found was probably intended to undo the freeze on their assets and the court-ordered receiverships. The $6,000 withdrawn from the AWI account was paid to state court counsel for AWI and Appellant-debtor, to her bankruptcy attorneys, and to the bankruptcy attorney for AWI and SCI.
On August 19, 2004, SMS filed a motion in the bankruptcy court to dismiss Appellant debtor’s Chapter 13 filing of August 12 as made in bad faith. On August 23, Appellant-debtor initiated an adversary proceeding against SMS, seeking to void the August 13 state court orders .against Mrs. Myers as violations of the automatic bankruptcy stay. Appellant-debtor also requested a temporary restraining order (“TRO”) and preliminary injunction (“PI”) enjoining SMS from enforcing the August 13 orders. The bankruptcy judge, Judge Bruce I. Fox, held a TRO hearing on August 27, 2004, and on August 30 he issued a TRO preventing SMS from enforcing certain provisions of the state court’s orders. On August 31, SMS moved for relief from the automatic stay. The bankruptcy court decided to consolidate SMS’s motions to dismiss and for relief from the stay with Appellant-debtor’s motion for a PI.
On September 10, 2004, Appellant-debt- or filed her bankruptcy schedules and proposed Chapter 13 plan. She listed SMS as an unsecured creditor holding a .contingent, unliquidated, disputed claim in the amount of $740,000. She listed her and her spouse’s total income as “$0.00” and proposed a Chapter 13 plan providing for payments to the Chapter 13 trustee of $10 per month for three months. Prior to August 13, 2004, Mrs. Myers was current on all of her debts other than her obligations to SMS.
According to Appellant-debtor, on September 15, 2004, the state court scheduled a hearing for September 20 to hold her and her husband in civil contempt for violating its orders. (Br. for Appellant at 7.) On September 17, 2004, Appellant-debt- or filed a second motion for a TRO, asking the bankruptcy court to enjoin the CCP contempt hearing as a violation of the automatic stay. (Id.) The bankruptcy court did not address this motion directly, however, and on September 21, 2004, the bankruptcy court dismissed the Appellant-debtor’s case under 11 U.S.C. 1307(c) as having been filed in bad faith. Appellant-debtor filed a motion for reconsideration and to convert her case to one under Chapter 7, which the bankruptcy court denied on October 8, 2004. This appeal followed.
III. STANDARD OF REVIEW
I have jurisdiction pursuant to 28 U.S.C. § 158(a)(1), which grants the district courts jurisdiction over “appeals from final judgments, orders and decrees” of the bankruptcy court. Id. The dismissal of a bankruptcy case as a bad-faith filing is “a fact intensive determination better left to the discretion of the bankruptcy court.” In re Lilley, 91 F.3d 491, 496 (3d Cir.1996) (quoting In re Love, 957 F.2d 1350, 1355 (7th Cir.1992)). Thus, I review the bankruptcy court’s decision for abuse of discretion. See In re SGL Carbon Corp., 200 F.3d 154, 159 (3d Cir.1999); Lucabaugh v. IRS, 2001 WL 997416, at *2 (E.D.Pa. Jun.16, 2001). An abuse of discretion can be based on “a clearly erroneous finding of fact, an errant conclusion of law,’ or an improper application of law to fact.” SGL Carbon, 200 F.3d at 159. I review the bankruptcy court’s legal conclusions de novo but will not disturb its factual findings unless clearly erroneous. See IRS v. Pransky, 318 F.3d 536, 542 (3d Cir.2003).
IV. DISCUSSION
A. Bad Faith
The bankruptcy code, 11 U.S.C. § 1307(c), provides that a Chapter 13 filing may be dismissed “for cause.” Id. Although there is no explicit mention of bad faith in 1307(c), a bankruptcy filing made in bad faith may be dismissed “for cause” under 1307(c). See Lilley, 91 F.3d at 496; Lucabaugh, 2001 WL 997416 at *2. The question of whether a filing was made in bad faith is a fact-intensive inquiry committed to the sound discretion of the bankruptcy court. SGL Carbon, 200 F.3d at 159. In deciding whether a filing was in bad faith, a court looks to the “totality of the circumstances,” Lilley, 91 F.3d at 496, and may focus on the following factors, among others: (1) the nature of the debt, (2)the timing of the petition, (3) how the debt arose, (4) the debtor’s motive in filing the petition, (5) how the debtor’s actions affected creditors, (6) the debtor’s treatment of creditors both before and after the petition was filed, and (7) whether the debtor has been forthcoming with the bankruptcy court and the creditors. Id.
In this case, after examining the totality of the circumstances, the bankruptcy court concluded that Appellant-debtor’s filing had been in bad faith for five reasons:
(1) Appellant-debtor’s decision to time her Chapter 13 petition “after the state court announced its intention to rule, but just before it did so,” Myers I, at 13;
(2) the conclusion that Appellant-debt- or’s filing was probably a “tactic to preclude adverse rulings against [AWI] and [SCI],” id. at 13;
(3) the fact that SMS’s state court claim against Appellant-debtor was for actively, fraudulently converting assets and represented “the vast majority in dollar amount of the claims against her,” id. at 14 (citing In re Goddard, 212 B.R. 233, 239 (D.N.J. 1997));
(4) the fact that Mrs. Myers allowed her husband to withdraw $6,000 from AWI’s bank account on August 14th, and use a portion of those funds to pay her bankruptcy counsel, in violation of the state court’s August 13 rulings freezing the assets of AWI and SCI;
(5) Appellant-debtor’s failure to meet the requirements for filing a Chapter 13 case.
As to the first reason (the timing of the filing), the bankruptcy court noted that while the filing’s timing would not in itself constitute bad faith, it was certainly a relevant factor in the bad-faith inquiry. Id. at 13. The bankruptcy court found that Mrs. Myers had correctly predicted that the state court’s ruling would be adverse to her, and that she timed her bankruptcy petition to defeat, or at least delay the ruling, thereby allowing her and her husband “to continue to control and benefit from assets improperly transferred.” Id. Appellant-debtor cites several cases, none of them from this Circuit, in which bankruptcy filings made while state court litigation was pending were nonetheless found to be in good faith. See In re Bayer, 210 B.R. 794, 796 (8th Cir. BAP 1997);- In re James Wilson Assocs., 965 F.2d 160, 170-71 (7th Cir.1992); In re Cadwell’s Comers P’ship, 174 B.R. 744, 762 (Bankr.N.D.Ill. 1994). However, these cases are readily distinguishable. In Bayer, the state court had not yet entered any findings .in the state litigation at the time the bankruptcy petition was filed, nor had the debtor even responded to the suit. See 210 B.R. at 795. Here, by contrast, the state court was poised to issue judgment against Appellant-debtor at the moment she filed for bankruptcy. The other cases Appellant-debtor cites deal with bankruptcies filed to postpone foreclosure sales, and stand only for the proposition that a debtor can file for bankruptcy to prevent foreclosure “if there is a reasonable chance for an effective reorganization.” Cadwell’s Comers, 174 B.R. at 762 (citing James Wilson, 965 F.2d at 171). However, in this district, it has been held that filing a Chapter 13 petition for the sole purpose of preventing foreclosure may constitute bad faith justifying dismissal. In re Lippolis, 228 B.R. 106, 112 (E.D.Pa.1998). Here, the bankruptcy court found that the sole purpose of Appellant-debtor’s filing for bankruptcy when she did was to frustrate the impending state court judgment. Also, in this Circuit, bankruptcy courts have held that “where the purpose of the bankruptcy filing is to defeat state court litigation without a reorganization purpose, bad faith exists.” In re Dami, 172 B.R. 6, 10 (Bankr.E.D.Pa.1994); In re Privitera, 2003 WL 21460027, at *2 (Bankr.E.D.Pa. Jun.12, 2003).
Appellant-debtor’s objections to the bankruptcy court’s second and third reasons for dismissal are without merit. As to the second reason, that the filing was a tactic to prevent adverse rulings against AWI and SCI, she contends that “it is too late to save AWI or SCI, which the CCP orders have destroyed, from any adverse rulings.... ” (Id.) However, the mere fact that Appellant-debtor’s dilatory tactics did not ultimately succeed does not mean that they were not tactics to begin with. Appellant-debtor also argues that the bankruptcy court’s third reason, the fact that the largest claim against her was a claim for fraudulent conveyance, goes only to whether that claim is ultimately discharge-able in bankruptcy, not to whether her petition was filed in bad faith. Yet the fact that the nature of the debt would also have been grounds to challenge its dis-chargeability does not mean that the bankruptcy court erred in considering it in the bad-faith inquiry. To the contrary, Lilley specifically instructs courts to look to “the nature of the debt” in considering whether a petition was filed in bad faith, as well as “how the debt arose.” See 91 F.3d at 496.
Appellant-debtor also asserts that the conduct cited by the bankruptcy court as its fourth reason, the withdrawal of $6000 in violation of the state court orders, was in fact perfectly innocent, as neither Appellant-debtor nor her husband had notice of the orders. (Id.) However, the bankruptcy court specifically concluded that, in all probability, both Mr. and Mrs. Myers had actual notice of these orders through their counsel when they withdrew funds from the frozen AWI account. See Myers I, at 7. As this finding of fact does not appear clearly erroneous, I will not disturb it on appeal.
The bankruptcy court’s fifth reason for finding that Mrs. Myers’ filing was in bad faith was her probable failure of both the “income-eligibility” and “debt-eligibility” requirements for filing a Chapter 13 petition. To be eligible for Chapter 13 bankruptcy, a debtor must have: (1) “regular income” and (2) “noncontingent, liquidated, unsecured debts of less than $307,-675.” 11 U.S.C. § 109(e). With regard to income-eligibility, the bankruptcy court noted that Appellant-debtor listed zero income in her schedules and that her Chapter 13 plan provided for payments of only $10 per month to the Chapter 13 trustee. As to debt eligibility, the bankruptcy court noted that since SMS’s claim against Appellant-debtor exceeded $1 million, the judgment would have put her well over the debt-eligibility limit of 109(e) if it were “noncontingent” and “liquidated” at the time of filing. After examining the respective definitions of the terms “noncon-tingent” and “liquidated,” the bankruptcy court concluded that “on August 12, 2004, Southern’s claim against Mrs. Myers may have been liquidated and not contingent.” Id. at 23. Because the amount SMS sought from Mrs. Myers was merely the amount of the original Georgia state court judgment plus interest, it was easily calculable on August 12, 2004, and thus “liquidated.” Moreover, because the state court had already announced its intention to rule against Appellant-debtor on August 11, and the only thing left for it to do on August 13 was to enter judgment, the claim would seem to be no longer “contingent” when Appellant-debtor filed for bankruptcy on August 12. See id. at 22 (citing cases in which tort claims were held to be noncontingent before entry of judgment).
Appellant-debtor notes, as the bankruptcy court did, that the eligibility requirements of Chapter 13 are assessed “on the date of the filing of the petition.” 11 U.S.C. § 109(e). While conceding that she could not meet Chapter 13’s requirements after the state court’s judgments made her income zero and her debt well above the 109(e) limit, Mrs. Myers argues that she did meet the requirements on August 12, 2004, prior to the judgments. However, the bad-faith inquiry of Lilley allows courts to look not only at the bankruptcy filing itself, but also at the debtor’s pre- and post-filing conduct. See 91 F.3d at 496 (instructing courts to consider, inter alia, “the debtor’s treatment of creditors both before and after the petition was filed”). The fact that Appellant-debtor ultimately presented a Chapter 13 plan listing her income as zero and her proposed monthly payment as $10 would seem relevant to whether she had a legitimate reorganization purpose in the first place. See Dami, 172 B.R. at 10 (filing for bankruptcy to defeat state court litigation without valid reorganization purpose constitutes bad faith). Moreover, there is no merit to Appellant-debtor’s assertion that on August 12 she had “no basis to expect” that the state court would render a substantial money judgment against her that would render her ineligible for Chapter 13 relief. (Br. for Appellant at 17.) To the contrary, the bankruptcy court found that Mrs. Myers’ correct prediction of such a judgment was the driving force behind her bankruptcy filing.
Finally, even if Appellant-debtor could show that she met the requirements of Chapter 13 on the date of filing, it would not mean that the bankruptcy court abused its discretion in dismissing her case as filed in bad faith. As Judge Fox explained in his opinion denying Appellant-debtor’s motion for reconsideration {“Myers II”), “[h]er probable lack of eligibility was but one of five factors, considered ‘collectively,’ ... that caused me to exercise my discretion under 1307(c) and to dismiss the case.” Myers II, at 2.
After reviewing the bankruptcy court’s reasons for its decision and considering Appellant-debtor’s arguments, I conclude that the bankruptcy court did not abuse its discretion in dismissing this case as a bad-faith filing. The question of bad faith is a fact-intensive inquiry and I have found no factual finding on which the bankruptcy court relied to be clearly erroneous. Nor were any of the bankruptcy court’s legal conclusions in error. Therefore, I will affirm the judgment of the bankruptcy court dismissing Appellant-debtor’s Chapter 13 case as filed in bad faith.
B. Conversion to Chapter 7
Appellant-debtor argues that even if the dismissal of her Chapter 13 filing was proper, the bankruptcy court nonetheless should have allowed her to convert her case to one under Chapter 7. See 11 U.S.C. § 1307(a) (“The debtor may convert a ease under this chapter to a case under chapter 7 of this title at any time.”). However,
[t]he decision to dismiss or convert a bankruptcy case is within the discretion of the bankruptcy judge. Once ‘cause’ for dismissal or conversion has been established under § 1307, whether conversion or dismissal is more appropriate is a question Congress left to the sound discretion of the bankruptcy court.
In re Vincente, 260 B.R. 354, 361 (Bankr. E.D.Pa.2001) (citing Matter of Sullivan Central Plaza I. Ltd., 935 F.2d 723, 728 (5th Cir.1991) and Hall v. Vance, 887 F.2d 1041, 1044 (10th Cir.1989)). Here, the bankruptcy court did not abuse its discretion in dismissing, rather than converting, Appellant-debtor’s case.
A bankruptcy court need not provide an “exhaustive discussion of its reasoning” when dismissing or converting a case, Vincente, 260 B.R. at 361 (citing In re Nardy 1991 WL 255681, at *2 (E.D.Pa. Nov.25, 1991)). Here, the bankruptcy court found that the reasons justifying a bad-faith dismissal under Chapter 13 also precluded allowing Appellant-debtor to convert to Chapter 7. Like Chapter 13 cases, Chapter 7 cases are also subject to dismissal “for cause” if filed in bad faith. 11 U.S.C. § 707(a); In re Tamecki, 229 F.3d 205, 207 (3d Cir.2000). Thus, in denying Appellant-debtor’s request for leave to convert to Chapter 7, the bankruptcy court reiterated that “[h]er case was dismissed because of a lack of good faith filing, not because she was ineligible for chapter 13 relief.” Concluding, as it did, that Appellant-debtor’s Chapter 13 was filed in bad faith, the bankruptcy court did not abuse its discretion in denying Appellant-debtor’s request to convert to Chapter 7.
C. Violations of the Automatic Stay
Appellant-debtor argues that the bankruptcy court’s dismissal of her case without conversion to Chapter 7 denied her the opportunity to pursue an adversary proceeding against Appellee-creditor for violations of the automatic bankruptcy stay. The bankruptcy court noted: “If I dismiss this case as filed in bad faith, I believe it inappropriate to retain jurisdiction over Mrs. Myers’ adversary proceeding.” Myers I, at 10; see In re Smith, 866 F.2d 576, 580 (3d Cir. 1989) (dismissal of bankruptcy case usually results in dismissal of pending adversary proceedings). Appellant-debtor argues that the result of the bankruptcy court’s ruling is to “exonerate gross violations of the automatic stay.” (Br. for Appellant at 9.) A bankruptcy court’s decision to grant relief from the automatic stay to a creditor is reviewed for abuse of discretion. Lippolis, 228 B.R. at 111— 12. Although I cannot condone SMS’s violations of the automatic stay, the bankruptcy court did not abuse its discretion in deciding that Appellant-debtor was not entitled to a remedy for these violations because she filed for bankruptcy in bad faith.
Appellant-debtor alleges, and SMS does not deny, at least two serious violations of the automatic stay during the course of the bankruptcy. One was the CCP’s entry of orders in the 2000 CCP suit against Mrs. Myers in her “corporate” capacity on August 13, 2004, the day after she had filed for bankruptcy and invoked the protections of the automatic stay. Another was the CCP’s order holding Appellant-debtor in contempt of court and incarcerating her until she could pay $5,196 to counsel. See In re Cherry, 78 B.R. 65, 70 (Bankr.E.D.Pa.1987) (civil contempt proceedings are subject to the automatic stay). I acknowledge that it was the state court, and not SMS, that ultimately took these actions in violation of the stay, despite the fact that Appellant-debtor promptly notified both the court and opposing counsel of her bankruptcy filing. However, the state court’s complicity in the stay violations does not excuse SMS’s role in them. See In re Lori, 241 B.R. 353, 354 (Bankr.M.D.Pa.1999) (holding that creditor violated automatic stay where she obtained state court enforcement of child support order against debtor during pen-dency of the stay). Indeed, courts have held that where a creditor has set in motion an action against the debtor prior to the bankruptcy filing, once the bankruptcy is filed and the automatic stay takes effect, the creditor has an affirmative duty to notify the court in which the action is pending and “take any other action necessary to assure that the action does not continue.” 3 Collier on Bankruptcy ¶ 362.03[3], at 362-15 (Lawrence P. King ed., 15th rev. ed.1996). Courts have held creditors responsible for passively failing to stop state court actions in violation of the stay. See In re Soares, 107 F.3d 969, 978 (1st Cir.1997); In re Outlaw, 66 B.R. 413, 416-17 (Bankr.E.D.N.C.1986). More over, Appellant-debtor claims that SMS did not play a mere passive role in the acts of the CCP, but instead actively encouraged the court to violate the automatic stay.
However, courts have held that a debtor’s filing of a Chapter 13 petition in bad faith is grounds for granting a creditor relief from the automatic stay. See Lippolis, 228 B.R. at 112 (“To allow a Debtor to file a petition in bad faith and still enjoy Chapter 13’s automatic stay would encourage illicit filings.... ”). The question in this case is whether such relief should be granted retroactively to validate a creditor’s actions during the pendency of the stay, which are generally considered void ab initio. In re Siciliano, 13 F.3d 748, 750 (3d Cir.1994). Given the important congressional policy underlying the automatic bankruptcy stay, courts are “especially hesitant to validate acts committed during the pendency of the stay.” In re Albany Partners, 749 F.2d 670, 675 (11th Cir.1984). Even though Appellant-debt- or’s Chapter 13 filing was later found to have been in bad faith, SMS’s proper remedy was to seek emergency relief from the automatic stay in the bankruptcy court— not to take the law into its own hands by seeking to have the state court violate the automatic stay.
Nonetheless, in certain circumstances, courts may validate violations of the stay retroactively by “annulling” the stay nunc pro tunc. See 11 U.S.C. § 362(d); Siciliano, 13 F.3d at 751. One such circumstance is when the bankruptcy petition has been filed in bad faith. See In re Kissinger, 72 F.3d 107, 109 (9th Cir. 1995) (bankruptcy court did not abuse its discretion in annulling stay where petition was filed in bad faith); Albany Partners, 749 F.2d at 670 (same). The decision whether to annul the bankruptcy stay is committed to the bankruptcy court’s discretion and may be reversed only for abuse of that discretion. In re Brown, 311 B.R. 409, 412 (E.D.Pa.2004). Here, the bankruptcy court noted that Appellant-debtor’s bad-faith filing would justify annulling the automatic stay, Myers II, at 3, and in so concluding, the bankruptcy court did not abuse its discretion.
Like the bankruptcy court below, I find Kissinger closely analogous to the present case. There, a lawyer being sued in state court for malpractice filed for Chapter 11 bankruptcy just before the judge was to submit the case to the jury. Kissinger, 72 F.3d at 108. The judge ordered completion of the trial despite the automatic bankruptcy stay, and the jury returned a $90,000 verdict. Id. The bankruptcy court found that the petition was filed in bad faith and granted retroactive relief from the stay to validate the jury verdict; the district court affirmed. Id. In upholding the bankruptcy court’s decision, the Ninth Circuit noted that refusing to annul the stay, and thereby voiding the verdict, would have led to bizarre or inequitable results: either the case would have to be re-submitted to the same jury that had just entered the verdict or the parties would have to complete a costly retrial. Id. at 109. Here, Appellant-debtor filed for Chapter 13 bankruptcy in bad faith on the eve of a state court judgment against her, with the intent of frustrating that judgment. If the bankruptcy court had not effectively annulled the stay, the state court would presumably have had to reenter its earlier judgment, the creditor would have been put to additional expense, and nothing would have been accomplished except to reward Appellant-debtor’s abuse of the bankruptcy code.
|
6547777-7044 | MEMORANDUM DECISION
ROBERT D. MARTIN, Bankruptcy Judge.
On July 21,1981, Carl J. Bessel and Linda Bessel filed a petition in bankruptcy under chapter 7 and William Rameker was appointed interim trustee. On August 17, Ra-meker became the elected trustee by virtue of 11 U.S.C. § 702(d) and on August 27, he filed a report of exempt property and mailed a copy to the Bessels. In the report, Rameker disallowed the homestead exemption claimed by Carl J. Bessel for the “Sigal property” on the grounds that it was no longer homestead property. The property in question was in the process of judicial foreclosure and sale when the bankruptcy petition was filed, and the debtors were living on other property in Richland Center.
The Bessels received the report no earlier than August 28, 1981. On September 14, 1981, they filed an objection to the trustee’s report. They then filed an amendment to their exemption schedules on September 28, 1981. By the amendment, Mrs. Bessel switched from state exemptions to federal exemptions, while Mr. Bessel changed from federal exemptions to state. In her original exemption schedules Mrs. Bessel claimed an exemption in a truck that was actually owned by Mr. Bessel. In the new schedules Mr. Bessel claimed the truck. The debtors continued to claim a homestead exemption for the “Sigal property,” and claimed (additionally or alternatively) a homestead exemption for the real estate in Richland Center.
On October 6, 1981, Rameker filed a motion to quash both the objection to the trustee’s report and the debtors’ amended schedules arguing that they had not been timely filed under Bankruptcy Rule 403(c). The Bessels responded that (1) the Code abolishes the trustee’s report and, therefore, the debtors had no duty to respond, (2) the trustee’s report was not timely filed and was, therefore, of no effect, and (3) the objections were timely filed.
Bankruptcy Rule 403(b) requires that the trustee file no later than 15 days after he qualifies a report setting out the exemptions claimed by the debtors which are not allowable. Once the report is filed, the debtors have 15 days to object to the report. There is no affirmative duty upon the trustee prescribed by 11 U.S.C. § 704 to file an exemption report. There is not, however, any prohibition upon the trustee following the procedure of Bankruptcy Rule 403(b). In this case, the trustee chose to do so. Bankruptcy Rules are effective to the extent not inconsistent with the Bankruptcy Reform Act of 1978. § 405(d), Pub.L. 95-598 (Nov. 6, 1978), 92 Stat. 2549.
The Bessels contend that the trustee did not comply with the 15-day time limit prescribed in Bankruptcy Rule 403. That contention depends upon a determination that an interim trustee has the same responsibility as a trustee serving after election. The report was filed 36 days after Rameker’s initial appointment under 11 U.S.C. § 701(a) as interim trustee, but only 10 days after the trustee election was effective. 11 U.S.C. § 701(c) provides that “[a]n interim trustee serving under this section is a trustee in a case under this title.” Thus it would appear that when he undertook the optional duty of filing the report, Rameker had been in the position of trustee for longer than 15 days. The report was therefore untimely.
Several courts have considered the effect of a trustee’s report filed after the 15-day period has run. Courts have generally found that a report filed late by the trustee must still be responded to within 15 days by any creditor or debtor wishing to object to the report. See In Re Oliver, 4 B.C.D. 49 (S.D.Ca.1978), In Re Santoro, 3 B.R. 210 (E.D.N.Y.1980), and In Re Tanke, 4 B.R. 339, 6 B.C.D. 406, 2 C.B.C.2d 240 (D.Colo.1980). However, the 5th Circuit Court of Appeals has in a well-reasoned decision held that the 15-day period begins to run when the objecting party receives actual notice of the trustee’s report. In In Re Levens, 563 F.2d 1223 (5th Cir. 1977), the court reasoned:
Creditors are entitled to notice before their property rights are cut off, and economy dictates that they withhold their objections until they are sure the trustee disagrees. Rule 403(b) provides constructive notice to them by requiring the trustee to file his report within 15 days of qualification. Once that period passes, however, the constructive notice either evaporates or the creditors must shoulder the onerous burden, not intended by the rules, of checking court records daily for an indefinite period of time.
The trustee’s delay upset the equipoise of rights and duties envisioned by the rules, and equity requires that the balance be restored here by not starting the 15 day time limit on creditors until they received actual notice of the filing. See In re Perl, 47 F.2d 923 (W.D.Pa.1930) (actual notice required when trustee missed deadline under General Order No. 17); 1A Collier on Bankruptcy ¶ 6.22 n. 3 (1976). To hold otherwise would not only burden creditors with an open-ended duty to check court records, but it would also encourage trustees to nurture hopes of dilatory ambush. 563 F.2d at 1224.
The Levens court held further that putting a letter in a mailbox does not provide actual notice. Actual notice occurs only upon receipt of the letter.
Although In Re Levens involved creditors’ objections to the trustee’s report, the arguments seem equally compelling when the objector is the debtor. Certainly where it is arguable that the debtor had no reason to anticipate the procedure employed gratuitously by the trustee there is a significant difference from the pre-Bankruptcy Code debtor who was charged with a reasonable duty to inform himself of when the mandatory report was actually filed. The 15-day period for the Bessels to respond to the trustee’s report should begin when they received actual notice of the report. The report was mailed to the Bessels on August 27, 1981. The earliest they could have received the report is August 28, 1981. Thus, the 15-day period should begin to run on August 28, 1981.
In applying time periods in bankruptcy cases, Bankruptcy Rule 906(a) refers the court to F.R.C.P. 6(a). This rule provides:
In computing any period of time prescribed or allowed by these rules, by the local rules of any district court, by order of court, or by any applicable statute, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is a Saturday, a Sunday, or a legal holiday, in which event the period runs until the end of the next day which is not a Saturday, a Sunday, or a legal holiday.
In computing 15 days from August 28, 1981, the last day falls on September 12, a Saturday. Therefore, the last day to file under F.R.C.P. 6(a) adopted by Bankruptcy Rule 906(a) is the next day which is not a Saturday, Sunday or legal holiday or Monday, September 14, 1981. As the Bessels’ objections were filed on September 14, they were timely filed. The trustee’s motion to quash should be denied.
|
7409810-26081 | RIPPLE, Circuit Judge.
Charles Michalek pled guilty to one count of bankruptcy fraud, 18 U.S.C. § 152, and three counts of income tax fraud, 26 U.S.C. § 7206(1). He now appeals four two-point sentencing enhancements ordered by the district court. For the reasons set forth in the following opinion, we affirm.
I
BACKGROUND
A. Facts
Charles Michalek owned and operated a video store. During the early 1980s, the business was profitable. However, by 1986, the video store was losing money. That year, Mr. Michalek filed separate bankruptcy petitions to protect both his troubled business and his personal assets. The Bankruptcy Code obligated him to report all of his assets to the bankruptcy trustee. 11 U.S.C. § 521(4); see also Bankr.Rule 4002, and Forms 1; 6, sched. B; and 10. However, Mr. Michalek did not comply with this requirement; he failed to disclose his ownership of artwork and other property. During the bankruptcy period, Mr. Michalek sold approximately $72,000 of this artwork. At Mr. Michalek’s request, one purchaser paid $22,000 in cash. The other purchasers provided personal checks made payable to Barbara Kadlec, who, at the time, was Mr. Mi-chalek’s wife. Ms. Kadlec deposited two such checks into the couple’s personal accounts and two others into the video store’s accounts. Mr. Michalek did not disclose his receipt of these proceeds either to the bankruptcy court or to the trustee. He also failed to report a $23,850 capital gain he realized in 1990 on the sale of a portion of this artwork.
In addition, Mr. Michalek lied to the bankruptcy trustee about one of his disclosed assets, a Tiffany-style lamp. This lamp was among the contents of the Michalek home. The bankruptcy trustee sold the house and its contents in July 1989. However, Mr. Michalek removed the lamp prior to closing, pursuant to an arrangement with the new owners. The trustee sought the bankruptcy court’s approval of this compromise. In doing so, the trustee relied upon two false documents that Mr. Michalek had given him. The first was a statement that Barbara Kad-lec had drafted at Mr. Michalek’s request. In that statement, Ms. Kadlec falsely claimed that the lamp had been in her family for generations. The second statement was a fake appraisal of the lamp. The appraisal appeared on an appraisal company’s stationery, but had been signed by one of Mr. Michalek’s former employees at Mr. Micha-lek’s request. The appraisal incorrectly valued the lamp at less than $500.
During the bankruptcy period, Mr. Micha-lek also instructed Ms. Kadlec to use money from the video store operation to pay the couple’s personal bills. Thereafter, Ms. Kad-lec regularly deposited portions of the video store’s daily cash receipts into the Michaleks’ personal accounts. At times, Mr. Michalek ordered additional transfers when he believed the video store’s books indicated that the business possessed too much money. When Ms. Kadlec questioned these bookkeeping practices, Mr. Michalek told her that they were permissible. Mr. Michalek failed to report any of the income he earned through these transfers on his 1988, 1989, and 1990 federal income tax returns.
In April 1991, the government learned that Mr. Michalek was selling the artwork that he had concealed from the bankruptcy trustee. Government agents obtained a warrant to search Mr. Michalek’s residence. They discovered an additional $57,000 in artwork and furniture. Mr. Michalek owned all of this property. Shortly after the search, however, Mr. Michalek called Lester Kadlec, his wife’s father, and asked him to claim falsely that he owned some of Michalek’s art. Mr. Kadlec initially agreed, but eventually told federal agents the truth. Following these events, the government charged Mr. Michalek with one count of bankruptcy fraud, 18 U.S.C. § 152, for concealing assets from the trustee and creditors in a bankruptcy proceeding, and with three counts of income tax fraud, 26 U.S.C. § 7206(1), for failing to report income in 1988, 1989, and 1990.
B. Earlier Proceedings
Mr. Miehalek pled guilty to all counts, and the district court proceeded to sentence him pursuant to U.S.S.G. § 2F1.1. This broad guideline assigns a base offense level of six to a wide variety of crimes involving fraud, deceit, forgery, and counterfeiting. The court enhanced Mr. Michalek’s sentence seven levels to reflect the amount of loss involved in his fraudulent scheme. See U.S.S.G. § 2F1.1(b)(1)(H) (providing for seven-level enhancement when the value of property unlawfully taken exceeds $120,000). Next, it added the four additional enhancements at issue in this appeal.
First, the district court determined that a two-point enhancement was justified for “more than minimal planning.” See U.S.S.G. § 2Fl.l(b)(2). The court found that Mr. Michalek’s crime was “complex” and required “more than the typical planning that was necessary for such a crime.” R. 45 at 2-3. It noted that Mr. Miehalek had concealed assets, and then, to cover up the initial fraud, had concealed the sale of these assets as well as his receipt and use of the sale proceeds. The district court also found the enhancement appropriate on the alternative ground that Mr. Michalek’s crime involved multiple victims. Second, the court determined that Mr. Miehalek merited a two-point enhancement for violating a judicial order, injunction, decree, or process. See U.S.S.G. § 2Fl.l(b)(3)(B). The court commented that bankruptcy fraud typically involves violation of a judicial order. It also remarked that such an enhancement was “appropriate in all bankruptcy fraud cases ... because it is not a typical fraud ... it is a fraud on the judicial process that Mr. Miehalek availed himself of and then defiled.” R. 45 at 3. Third, the court ruled that Mr. Miehalek should receive a two-point enhancement for his aggravating role in the offense. See U.S.S.G. § 3Bl.l(c). The court noted that Mr. Miehalek had planned and organized the operation. It further noted that he had “directed others in connection with [the fraud]” and had “even directed others to violate the law.” R. 45 at 4. Finally, the court found that Mr. Miehalek merited a two-point enhancement for obstruction of justice. See U.S.S.G. § 3C1.1. The court commented that Mr. Miehalek had made false statements to F.B.I. agents. Additionally, it emphasized that Mr. Miehalek had suborned perjury by asking Mr. Kadlec to claim falsely that he owned some of Mr. Michalek’s art.
The court then reduced Mr. Michalek’s total offense level by three levels to reflect his acceptance of responsibility. See U.S.S.G. §§ 3El.l(a), (b). Mr. Michalek’s total offense level of 18 and criminal history category of I generated a guideline range of 27 to 33 months. The district court sentenced him to 30-month concurrent sentences on each of the four counts, to be followed by three years of supervised release. It also ordered him to make restitution in the amount of $94,000 to his bankruptcy creditors.
II
DISCUSSION
A. Enhancement Under U.S.S.G. § 2F1.1 (b)(2)
Mr. Michalek argues that the district court erred in enhancing his sentence for more than minimal planning because he did not engage in more planning than is typical for the commission of this crime. Similarly, he contends that the “multiple victim” enhancement was inappropriate because bankruptcy fraud typically involves multiple victims. Therefore, he concludes, this aspect of the offense already must be accounted for in § 2Fl.l’s base offense level. The government responds that the enhancement was appropriate in light of Mr. Michalek’s complex scheme which defrauded multiple victims.
1.
We review a district court’s enhancement for more than minimal planning only for clear error. United States v. Mau, 45 F.3d 212, 214 (7th Cir.1995); United States v. Harrison, 42 F.3d 427, 430 (7th Cir.1994). Guideline § 2F1.1(b)(2)(A) authorizes a two-level enhancement if the defendant’s fraud involved “more than minimal planning.” The Sentencing Commission noted that more than minimal planning may exist: (1) when there has been more planning “than is typical for commission of the offense in a simple form”; (2) when “significant affirmative steps were taken to conceal the offense, other than conduct to which § 3C1.1 ... applies”; or (3) when there have been “repeated acts over a period of time, unless it is clear that each instance was purely opportune.” U.S.S.G. § 1B1.1, comment, (n. 1(f)); see also U.S.S.G. § 2F1.1, comment, (n. 2) (referencing the definition). The transcript of the sentencing hearing indicates that the district court focused upon the first factor to justify the enhancement. It also commented on Mr. Michalek’s steps to conceal the crime. The court described the fraudulent scheme as “complex” and specifically noted that Mr. Michalek’s concealment of artwork, sales of artwork, and receipt and use of the sales proceeds involved “more than the typical planning that was necessary for such a crime.” R. 45 at 2-3.
After reviewing the record, we cannot say that the district court’s finding is clearly erroneous. Mr. Michalek engaged in a protracted course of conduct which served to conceal assets from both the bankruptcy trustee and his creditors for over four years. Cf. United States v. Brown, 47 F.3d 198, 205 (7th Cir.1995) (indicating that “duration and nature” of fraudulent scheme were factors relevant to determination that it involved careful planning); United States v. Lindholm, 24 F.3d 1078, 1086 (9th Cir.1994) (noting, in bankruptcy fraud case, that “[t]he fact that defendant’s behavior was repeated and involved an extended period of time implicates appellant’s scheme as involving more than minimal planning”); United States v. Loscalzo, 18 F.3d 374, 388 (7th Cir.1994) (indicating that duration of fraudulent scheme was relevant factor). When Mr. Mi-chalek sold these concealed assets, he planned the transactions to avoid detection. One purchaser paid him $22,000 in cash. Others provided personal checks made out to Barbara Kadlec. These checks were then distributed across Michalek’s personal and business accounts. The record also indicates that Mr. Michalek carefully monitored the cash level of the video store’s account and that he siphoned proceeds whenever he felt the account balance was too high. Finally, the record establishes that Mr. Michalek engaged in detañed planning to deceive the trustee about the value of the Tiffany-style lamp. Mr. Michalek presented two false documents to the trustee, one of which was a phony appraisal written on an appraisal company’s stationery. These facts support the district court’s finding that Mr. Michalek’s offense involved planning beyond what is typical for the commission of bankruptcy fraud, or other fraud, “in its simple form.” See United States v. Bean, 18 F.3d 1367, 1370 (7th Cir.1994) (indicating that relevant inquiry is “the crime of which the defendant has been convicted, not ... the particular way in which he committed it”); cf. United States v. Beard, 913 F.2d 193, 199 (5th Cir.1990) (holding that district court did not err in finding more than minimal planning where evidence established that defendant had engaged in “systematic scheme,” involving multiple banks and individuals, designed to disperse funds defendant had concealed from the bankruptcy court).
2.
Moreover, even if the district court erred in ordering the more than minimal planning enhancement under § 2Fl.l(b)(2)(A), the § 2Fl.l(b)(2) enhancement nevertheless was proper under § 2F1.1(b)(2)(B) because Mr. Michalek engaged in a “scheme to defraud more than one victim.” The guideline commentary provides that a “ ‘[s]cheme to defraud more than one victim’ ... refers to a design or plan to obtain something of value from more than one person. In this context, ‘victim’ refers to the person or entity from which the funds are to come directly.” U.S.S.G. § 2F1.1, comment, (n. 3). When assessed in the context of this commentary, the record, considered as a whole, supports the district court’s finding. Mr. Michalek deceived the bankruptcy trustee by failing to report his ownership of artwork and other assets. He also fañed to report his subsequent sales of certain artwork, and he concealed the sales proceeds. These actions harmed not only the trustee, but also each of Mr. Michalek’s creditors. Mr. Michalek’s scheme
was intended to result in an undervaluation of the estate in bankruptcy and the availability of less money to satisfy the demands of the creditors. Thus, [Michalek] would have obtained something of value from more than one person, that being whatever portion of the estate to which they as creditors were entitled but which was hidden[.]
United States v. Nazifpour, 944 F.2d 472, 474 (9th Cir.1991) (per curiam) (quotation omitted); see also United States v. Walker, 29 F.3d 908, 913 n. 3 (4th Cir.1994) (noting, in bankruptcy fraud case, that defendant’s challenge to multiple victim enhancement was “patently without merit”). Thus, the district court did not err in ordering Mr. Michalek’s sentence enhancement on this alternate basis.
B. Violation of Judicial Process
Next, Mr. Michalek argues that the district court erred in ordering the two-level enhancement for violation of a judicial process. He claims that the district court’s reasoning would apply to all cases of bankruptcy fraud. This result, Mr. Michalek submits, is inconsistent with the Guidelines’ focus on offender conduct. In response, the government contends that Mr. Michalek’s position is contrary to the existing ease law. To resolve this issue, we must determine whether the term “judicial process,” as used in U.S.S.G. § 2Fl.l(b)(3)(B), includes bankruptcy proceedings. We review the district court’s analysis of this question of guideline interpretation de novo. See United States v. Tai, 41 F.3d 1170, 1174 (7th Cir.1994); see also United States v. Mumford, 25 F.3d 461, 465 (7th Cir.1994).
The two circuits that have confronted this issue have held that § 2Fl.l(b)(3)(B) applies to violations of 18 U.S.C. § 152 when debtors have concealed assets after filing for bankruptcy. See United States v. Bellew, 35 F.3d 518, 520 (11th Cir.1994) (per curiam); United States v. Lloyd, 947 F.2d 339, 340 (8th Cir.1991) (per curiam). We believe that these decisions accurately reflect the intent of the Congress and the Sentencing Commission. Accordingly, we join those circuits in holding that the enhancement is appropriate in circumstances such as those that confront us in this case.
At the threshold of our analysis, it is useful to note that the applicable guideline, § 2F1.1, is a dragnet guideline that sweeps within its ambit a great number of offenses involving dishonesty found in the federal criminal code and elsewhere in federal statutes. It covers many offenses that impact our society in a variety of ways. Consequently, the guideline is structured to require the district court to tailor the imposed sentence to the actual crime committed by the particular defendant before the court. The district court must make the punishment fit the crime or, to be more precise, to reflect accurately the intent of the Congress with respect to the seriousness of each of the many proscribed acts. The base offense level of this guideline, standing alone, is not reflective of any of the offenses to which it must be applied. The district court necessarily must take into account the specific offense characteristics applicable to the defendant’s conduct. These specific offense characteristics expand drastically the permissible punishment depending on the amount of the monetary loss. Additional increases in punishment are mandated if the offense involved more than minimal planning, involved multiple victims, or if the defendant, in the course of the fraud or deceit, held himself out as the representative of a charitable, educational, religious, or governmental entity. Increasing the risk of serious bodily harm or of harm to a financial institution will also increase the permissible punishment, as will the concealment of the fraud through the use of foreign banks. Finally, additional punishment is permitted when the defendant violates “any judicial or administrative order, injunction, decree, or process.” See U.S.S.G. § 2Fl.l(b)(3)(B).
The offense committed by Mr. Michalek, bankruptcy fraud in violation of 18 U.S.C. § 152, is among the crimes that the Commission has mandated be controlled by this guideline. As noted, above, § 2F1.1(b)(3)(B) authorizes courts to enhance the base offense level of a defendant’s sentence if the crime involved “violation of any judicial or administrative order, injunction, decree, or process not addressed elsewhere in the guidelines.” The imposition of the § 2F1.1(b)(3)(B) enhancement is hardly impermissible double counting. Section 2F1.1 is a very broad guideline that covers a variety of crimes involving fraud, deceit, forgery, and certain types of counterfeiting. It necessarily must be adjusted through the use of the specific offense characteristics. The fact that this enhancement might apply in a great number of cases where a debtor conceals assets does not establish that § 2F1.1(b)(3)(B) is somehow flawed. Rather, it demonstrates that such violations of 18 U.S.C. § 152, in their most basic form, involve a higher level of culpability, and thus deserve greater punishment, than some of the other crimes that correspond to Guideline § 2F1.1.
We cannot accept the argument that the enhancement ought not apply because the defendant did not violate an identifiable order, injunction, decree or process. Such a contention overlooks an essential difference between bankruptcy proceedings and other types of litigation. Although expressing its views in an abbreviated per curiam opinion, the Court of Appeals for the Eighth Circuit put its collective finger on this essential concept when it pointed out that the defendant had “sought protection from his creditors under the shelter of bankruptcy” and then had “abused the bankruptcy process and hindered the orderly administration of the bankruptcy estate by concealing assets.” Lloyd, 947 F.2d at 340. A bankruptcy proceeding is not just another transitory cause of action that serves to adjudicate the rights and obligations of individuals. It is a special procedure by which the debtor seeks the protection of federal law from his creditors. In order to gain that protection, he must submit his property to the jurisdiction and active supervision of the bankruptcy court which acts through its trustee. As our colleague Judge Selya of the First Circuit has noted, the broad grant of jurisdictional authority, combined with the operation of the automatic stay provision, 11 U.S.C. § 362, provides the court and its trustee with the authority and the responsibility to administer the assets of the bankrupt estate. See Sunshine Dev., Inc. v. FDIC, 33 F.3d 106, 114 (1st Cir.1994); accord Edwards v. Armstrong World Indus., Inc., 6 F.3d 312, 316 (5th Cir.1993) (noting that the automatic stay provisions of the Bankruptcy Code “enable bankruptcy courts to take control of all of the assets of the debtor giving the court opportunity to survey the landscape of debtor’s financial condition”), cert. granted in part, — U.S. —, 114 S.Ct. 2099, 128 L.Ed.2d 661 (1994).
For the Eighth Circuit in Lloyd, the gravamen of bankruptcy fraud was that the defendant had abused the process of the bankruptcy court. In United States v. Linville, 10 F.3d 630, 632-33 (9th Cir.1993), the Court of Appeals for the Ninth Circuit set forth an analysis that indicated its agreement with the approach of the Eighth Circuit. Linville did not involve a bankruptcy matter but rather an administrative warning issued by the Department of Agriculture. Although rejecting the imposition of the enhancement in that context, our colleagues on the Ninth Circuit contrasted the situation before them with that before the Eighth Circuit in Lloyd. In analyzing § 2F1.1(b)(3)(B), the Ninth Circuit noted:
Courts interpreting this enhancement provision have upheld its application to violations of formal judicial orders which resulted from adversarial proceedings. For example, in United States v. Lloyd, 947 F.2d 339, 340 (8th Cir.1991), the court approved the imposition of an offense level increase under the section based on defendant’s abuse of the judicial bankruptcy process by concealing assets in a Chapter 11 proceeding. The court reasoned that even though defendant had not violated a specific court order, he had violated a specific adjudicatory process.
10 F.3d at 632. By citing the bankruptcy proceedings in Lloyd as an “example” of an “adversarial” proceeding, and by paraphrasing Lloyd’s determination that such proceedings constitute “judicial process,” see 947 F.2d at 340, the Ninth Circuit indicated its agreement with the Eighth Circuit that bankruptcy proceedings involved “the kind of formalities that undergird orders, injunctions and decrees.” Linville, 10 F.3d at 633.
The Eighth Circuit’s view that fraudulent representations to the bankruptcy court and its trustee violate the judicial “process” of the court is consistent with the realities of bankruptcy practice. Even if we were to depart from that view, however, the imposition of the enhancement would still be appropriate. The falsehoods submitted by the defendant to the court were, as the Court of Appeals for the Eleventh Circuit has pointed out in United States v. Bellew, 35 F.3d 518 (11th Cir.1994), in direct violation of the requirements of the rules and forms of the Bankruptcy Rules to declare truthfully all assets and liabilities. In a bankruptcy adjudication, this requirement is, as the Eleventh Circuit pointed out, “in the context of formal, adversary court proceedings.” Id. at 521.
In any event, we cannot overlook the fact that the defendant’s conduct violated the automatic stay provision, 11 U.S.C. § 362. Although the automatic stay is imposed initially not by judicial decree but by legislative command, it would exalt form over substance to maintain that the stay is not, for purposes of this guideline, a judicial order. The stay is imposed automatically in order to give the bankruptcy court an opportunity to assess the debtor’s situation and to embark on an orderly course in resolving the estate. In short, the stay is to ensure the orderly conduct of a judicial proceeding. The stay is therefore under the control of the bankruptcy court and may be lifted or modified after the court has had an opportunity to examine “the adequacy of protections for creditors’ interests and other equitable considerations.” In re McGaughey, 24 F.3d 904, 906 (7th Cir.1994); see also In re Vitreous Steel Prods. Co., 911 F.2d 1223, 1231-32 (7th Cir.1990); In re Boomgarden, 780 F.2d 657, 660 (7th Cir.1985). It would be difficult to find a judicial order more explicit or conduct more violative of that order.
Accordingly, we conclude that the district court committed no error when it imposed this enhancement.
C. Aggravating Role
Mr. Michalek also challenges the district court’s imposition of a two-point enhancement for his aggravating role in the offense. He notes that a defendant must supervise at least one other criminally responsible person to qualify for this enhancement. He then argues that there were no other criminally responsible individuals involved in his bankruptcy fraud. He emphasizes that Ms. Kadlec did not sign his bankruptcy petitions and that, although she pled guilty to tax evasion, she did not plead guilty to bankruptcy fraud. The government characterizes the bankruptcy fraud as a continuing offense and argues that Mr. Michalek was its leader-organizer. It notes that he specifically recruited Ms. Kadlec into the scheme and that he directed Ms. Kadlec’s efforts to conceal assets from the trustee.
We review a district court’s finding that a defendant played an aggravating role in the offense for clear error. United States v. Young, 34 F.3d 500, 507 (7th Cir.1994). The aggravating role enhancement is outlined in U.S.S.G. § 3B1.1. In part, that provision authorizes a two-level enhancement to the base offense level of any defendant who “was an organizer, leader, manager, or supervisor in any criminal activity.” U.S.S.G. § 3B1.1(c). Application note 2 of this guideline indicates that “[t]o qualify for an adjustment under this section, the defendant must have been the organizer, leader, manager, or supervisor of one or more other participants.” U.S.S.G. § 3B1.1, comment, (n. 2). Another note defines “participant” as a “person who is criminally responsible for the commission of the offense, but [who] need not have been convicted.” Id., comment. (n. 1). Thus, the application notes make clear that Ms. Kadlec can qualify as a criminally responsible individual even though she was not convicted of bankruptcy fraud. Moreover, the record supports a finding that Ms. Kadlec was criminally responsible for the commission of this offense. She knowingly signed a document that falsely stated to the bankruptcy trustee that the Tiffany-style lamp was a family heirloom. She knowingly accepted checks from the sale of Mr. Micha-lek’s hidden artwork and deposited the proceeds into various bank accounts. The record also indicates that Mr. Michalek consistently directed Ms. Kadlec’s activities in connection with his fraudulent scheme. Accordingly, the district court did not clearly err in ordering this enhancement.
D. Obstruction of Justice
Finally, Mr. Michalek contends that the district court erred in ordering the two-point enhancement for obstruction of justice. He argues that the false statements he made to FBI agents did not obstruct significantly their investigation. Similarly, he claims that his attempt to suborn perjury does not warrant the enhancement because the false testimony he hoped to elicit would not have impeded the government’s investigation. The government focuses exclusively on the perjury question. It notes that the commentary to guideline § 3C1.1 indicates that an obstruction enhancement is appropriate in such circumstances.
|
9188491-12968 | ORDER
I. INTRODUCTION
A. Procedural Background
This case involves a dispute over a right-of-way easement granted by Plaintiffs predecessor in interest to the U.S. Forest Service in 1965. The United States has moved to dismiss the complaint for lack of subject matter jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1). In so doing, it submitted declarations and other documents outside of the pleadings. In response, the Plaintiff also submitted affidavits, maps, photos and other documents. The United States then moved to strike certain paragraphs from two of Plaintiffs affidavits because they were not within the personal knowledge of the affiant. In response, the Plaintiff argued that the Court should convert the government’s motion into a motion for summary judgment, and simultaneously moved for a continuance of the summary judgment briefing so that it could conduct discovery.
The government correctly argues that motions to dismiss under Rule 12(b)(1) are distinct from 12(b)(6) motions. “When subject matter jurisdiction is challenged under Federal Rule of Procedure 12(b)(1), the plaintiff has the burden of proving jurisdiction in order to survive the motion.” Tosco Corp. v. Communities for a Better Env’t, 236 F.3d 495, 499 (9th Cir.2001). The court presumes lack of jurisdiction until the plaintiff proves otherwise. See Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir.1989).
While 12(b)(6) motions look only at the complaint, and are converted into summary judgment motions upon the filing of additional documents, a party making a 12(b)(1) motion may submit extra-pleading materials without converting the motion into one for summary judgment. Assoc. of American Medical Colleges v. United States, 217 F.3d 770, 778-79 (9th Cir.2000). Federal courts are courts of limited jurisdiction, and may rely on factual evidence to determine whether they have jurisdiction. Id.; see also McCarthy v. United States, 850 F.2d 558, 560 (9th Cir.1988) (“Moreover, when considering a motion to dismiss pursuant to Rule 12(b)(1) the district court is not restricted to the face of the pleadings, but may review any evidence, such as affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction.”).
I am therefore denying the Plaintiffs Motion for Rule 56(f) Continuance (Dkt. #22). Similarly, I am denying the Government’s Motion to Strike, as the offending paragraphs in the Plaintiffs declarations are not necessary to resolution of the underlying statute of limitations question.
B. Factual Background
The disputed easement is about 1130 feet long. Exhibit B, C, Motion to Dismiss. From its easternmost edge for the first 730 feet, it is 40 feet wide. It then begins flaring for the final 400 feet, gradually increasing in width to 208 feet at its western edge. See Exhibit E, Government Motion to Dismiss; Higgins Declaration, ¶ 5. The shape, then, is long and thin for the first two-thirds, with a triangular shape at the end — not unlike a trumpet with the end flared on only one half.
The right-of-way easement was granted to the United States by Magdoline Jelli-son, Plaintiffs predecessor in interest, and recorded on February 15, 1965. Exhibit B, Motion to Dismiss. The easement document states, “The said right-of-way is to be in conformity with and located upon the ground according to the survey line, the figures, measurements, widths, and other references shown on the plat hereto attached and made a part hereof.” Id. at 1. The document provides that “if at any time this easement, or any road constructed thereon, shall be abandoned by the United States or its assigns, the rights and privileges hereby granted shall cease and terminate and the premises traversed thereby shall be freed from said easement as fully and completely as if this indenture had not been made.” Id.
The long, thin portion of the easement is used for Kootenai Canyon Road. The Forest Service has maintained an animal loading ramp, parking area, hitching rail and bulletin board on some part of the triangular-shaped section of the easement since the early 1970s. Wilson Declaration, attached to Government Motion to Dismiss, ¶ 3. It also had an outhouse on the easement until 1983, at which time the Forest Service took it down because of continual vandalism. Id. ¶ 4. The agency improved the facilities and the road in 1984. Exhibits J & K, Motion to Dismiss.
Plaintiff purchased the property in 1991. Hughes Declaration, attached to Plaintiffs Brief in Opposition, ¶ 6. It contends that it has allowed the Forest Service to maintain signs, hitching posts and a loading ramp at the end of the road, like its predecessors in interest. Id. ¶¶ 7-9, 11. However, it argues that this permissive use is outside the scope of the easement, and that it can withdraw permission at any time.
In May 2000, the Forest Service notified interested parties of its plans to improve the trailhead facilities at the Kootenai Creek trailhead, on the trumpet-shaped portion of the easement property. Exhibit M, Motion to Dismiss. The letter informed the reader that the agency intended to install a precast concrete outhouse; expand the parking area to better accommodate horse trailers; allow for more parking by leveling the south portion and improving the surface; improve the surface of the existing parking area; and install 250-600 feet of fence “to define public/private land.” Id. According to Michael Wilson, Resource Assistant on the Stevensville Ranger District since 1980, “The improvements proposed are no different in kind than the improvements that have existed historically on the easement property.” Wilson Decl. ¶ 4.
C. Parties’ Arguments
Plaintiffs primary argument is that the easement is for a road only, and that trail-head facilities are not permitted under the express terms of the easement. Plaintiff does not dispute that trailhead facilities— i.e., a hitching post, parking area, bulletin board, and animal loading ramp — have existed continuously at this site since at least the early 1970s. Nonetheless, it contends that the use of the property for these facilities was permissive only, and that such use was not granted to the government by the right-of-way easement in 1965. Moreover, it contends that the United States has abandoned a “significant portion of the real property contained within the boundaries of the easement,” and that the easement “relative to the abandoned property should cease and terminate” pursuant to the contract. Am. Complt. ¶ 27.
Plaintiffs Amended Complaint contains two claims for relief. The first is for a declaratory judgment that the Forest Service has abandoned part of the easement, and the second is that the Forest Service has no right to construct improvements on the easement property. Am. Complt. ¶¶ 28-35.
Defendant moved to dismiss the original complaint on three grounds. The first is that Plaintiff did not seek relief under the Quiet Title Act, 28 U.S.C. § 2409(a), which is the exclusive means by which claimants may challenge the United States’ title to real property. Block v. North Dakota, 461 U.S. 273, 286, 103 S.Ct. 1811, 75 L.Ed.2d 840 (1983). The second is that under the Quiet Title Act, Plaintiffs’ claim is barred by the 12-year statute of limitations, which is jurisdictional. The final argument made by the government is that even if the easement document did not specify trail-head facilities as a contemplated use of the easement, the government’s use of the area for the past 35 years has ripened into a prescriptive easement.
After the motion to dismiss was fully briefed, the Plaintiff amended its complaint with the government’s consent. The primary amendment was the addition of a claim under the Quiet Title Act, thereby mooting the government’s first argument for dismissal. The second argument remains, however, namely, whether the 12-year statute of limitations in the QTA di vests this Court of jurisdiction to hear the merits of this case. Because I find that it does, I am dismissing the case with prejudice.
II. QUIET TITLE ACT
Prior to. 1972, real property disputes could not be litigated against the United States unless the government initiated suit. Block v. North Dakota, 461 U.S. 273, 280, 103 S.Ct. 1811, 75 L.Ed.2d 840 (1983). Congress waived sovereign immunity in the Quiet Title Act, allowing plaintiffs to bring suit against the government. 28 U.S.C. § 1346. However, the waiver is not unconditional; suits must be brought within 12 years of accrual. 28 U.S.C. § 2409a(f).
“[I]f the Quiet Title Act does not apply, the district court does not have jurisdiction.” Leisnoi, Inc. v. United States, 170 F.3d 1188, 1191 (9th Cir.1999) (Leisnoi I)- The initial prerequisites to jurisdiction are that (1) the United States must claim an interest in the property at issue, and (2) there must be a disputed title to real property. Those prerequisites are met here: the government has an easement in land for which the Plaintiff owns the servient estate, and the parties dispute the scope of that easement.
The QTA’s statute of limitations provides: “Any civil action under this section, except for an action brought by a State, shall be barred unless it is commenced within twelve years of the date upon which it accrued. Such action shall be deemed to have accrued on the date the plaintiff or his predecessor in interest knew or should have known of the claim of the United States.” 28 U.S.C. § 2409(g). This limitations period has been described as a “central condition of the consent [to be sued] given by the [Quiet Title] Act.” United States v. Mottaz, 476 U.S. 834, 843, 106 S.Ct. 2224, 90 L.Ed.2d 841 (1986).
Moreover, the limitations period is jurisdictional. Park County, Mont. v. United States, 626 F.2d 718, 720 (9th Cir.1980). “When waiver legislation contains a statute of limitations, the limitations provision constitutes a condition on the waiver of sovereign immunity.” Block, 461 U.S. at 287, 103 S.Ct. 1811.
The Court must determine whether and when the Plaintiff or its predecessors in interest knew or should have known of the United States’ belief that its easement allowed it to construct and maintain trail-head improvements. The test is one of reasonableness. California v. Yuba Goldfields, Inc., 752 F.2d 393, 396 (9th Cir.1985). “The question is whether the United States’ actions would have alerted a reasonable landowner that the government claimed an interest in the land.” Shultz v. Department of Army, U.S., 886 F.2d 1157, 1160 (9th Cir.1989).
Here, the issue is not the government’s mere claiming of an interest, but the scope of the interest claimed. Moreover, for purposes of the statute of limitations, it is irrelevant whether the government’s use was prescriptive or permissive. Plaintiff filed suit on August 14, 2003. If the Plaintiff knew the government was using the easement for more than a road, i.e., for trailhead facilities, and if that knowledge predates August 14, 1991, the QTA statute of limitations bars the Court from inquiring further into the merits of the action.
Plaintiffs immediate predecessor, Ruth Hughes, bought the Kootenai Canyon Ranch in 1991. Hughes Deck ¶ 1. She has been aware since the time she bought the property of the Forest Service’s easement, and its unique shape. Id. ¶ 4. She has also been aware of the hitching post, loading ramp, and signs posted by the Forest Service, and believes the use has been ongoing since the early 1970s. Id. ¶ 8-11.
Although the record does not reflect the exact month Ruth Hughes purchased the property, it was purchased in 1991. Nonetheless, the facts are undisputed that the Forest Service installed and maintained a hitching post, animal loading ramp, bulletin board, signs, and for a period of time, an outhouse, on this easement in the early 1970s. Importantly, all of the trailhead facilities are on property covered by the easement; had the government placed improvements on land outside of the easement, the inquiry would be different.
Plaintiff argues that the easement provided only for a road, and that the government’s use of the property for trailhead facilities exceeded the scope of the easement; however, even if that argument is correct, a reasonable landowner would have been on notice for the past 30 years of the expansive use of the easement. Thus, because Plaintiff or its predecessors had notice long before August 1991, the QTA statute of imitations divests this Court of jurisdiction, and Plaintiffs claim that the easement does not allow for such facilities must be dismissed.
III. ABANDONMENT
Plaintiffs claim that the Forest Service has abandoned a small portion of the easement is cognizable only if the easement can be severed into small chunks, each of which has to be “used” in order to avoid the inference of abandonment. Otherwise, the Plaintiffs claim that the Forest Service has abandoned part of the easement is subject to the same limitations analysis as above, and must be dismissed.
|
6107276-8072 | MEMORANDUM ON NOMINEE TRUST
HAROLD LAVIEN, Chief Judge.
The voluntary petition in question was filed on February 20, 1986 pursuant to 11 U.S.C. § 301. The Court must determine if the named debtor qualifies to file for bankruptcy as delineated within the Bankruptcy Code. 11 U.S.C. § 109(a) states that only a person may be a debtor. The Code defines person in 11 U.S.C. § 101(33) to include corporations. Corporations are defined in 11 U.S.C. § 101(8)(A)(v) to include business trusts. The question before the Court is whether the debtor trust is a business trust, which would qualify it within the Code as a proper debtor, or a nominee trust which would exclude it from the jurisdiction of the Bankruptcy Court.
The L & V Realty Trust was established on May 25, 1972. Originally, there were two named Trustees, Anthony A. Lavargna and Harold T. Vigdor, but, in August of 1974, Mr. Lavargna resigned. The beneficiaries of the Trust, Patricia A. Lavargna and Mary P. Vigdor, are sisters. Under the terms of the Trust instrument, the Trustees were given broad powers to make all decisions, to contract, to employ counsel, and to sue and be sued. The Trust held one asset, a piece of real estate, 668-676 Winthrop Avenue, Revere, Massachusetts, which was purchased in 1972. The sole occupant of the real estate, Suffolk Downs Cafe, Inc., was wholly owned by Harold T. and Mary Vigdor, the only present Trustee and his wife, a one-half beneficiary to the Trust. A loan was taken from the Metropolitan Credit Union in order to purchase this piece of real estate by the individuals; their wives, the beneficiaries of the Trust, did not participate in the financing. A mortgage for $29,000 was taken in 1979 from the Small Business Administration (SBA) to the Suffolk Downs Cafe, Inc., accompanied by a promissory note from Harold T. Vigdor, as Trustee. In November of 1983, another loan was taken for $45,000 under the same arrangement as above-mentioned. From 1979 through 1985, the Cafe rented its premises from the debtor under an arrangement in which the Cafe paid the principal, interest and taxes on the real estate. In August 1985, the Cafe was substantially destroyed by a fire, resulting in its closing. It was at this time that the Cafe stopped paying the principle and interest on the loans and taxes owed by the Trust.
After several continuances, a hearing was held in this matter at which time Mr. Harold T. Vigdor was the only witness to testify. In addition to the above-mentioned facts, Mr. Vigdor gave the following relevant testimony. Neither of the beneficiaries invested any money in the Trust or participated in any of the business decisions. There were no books kept for the Trust or accounting provided by the Trustee to the beneficiaries. The Cafe was responsible for the finances of the Trust. There had never been income tax returns filed on behalf of the Trust. The Trust did not maintain a checking account because the Cafe was responsible for all of its debts. There were no transferable certificates issued by the Trust to the beneficiaries.
The Trust in question does not qualify as a business trust. The Supreme Court delineated the characteristics of a business trust as required in Massachusetts in Hect v. Malley, 265 U.S. 144, 146, 44 S.Ct. 462, 463, 68 L.Ed. 949 (1924).
The “Massachusetts Trust” is a form of business organization, common in that State, consisting essentially of an arrangement whereby property is conveyed to trustees, in accordance with the terms of an instrument of trust, to be held and managed for the benefit of such persons as may from time to time be the holders of transferable certificates issued by the trustees showing the shares into which the beneficial interest in the property is divided. These certificates, which resemble certificates for shares of stock in a corporation and are issued and transferred in like manner, entitle the holders to share ratably in the income of the property, and, upon termination of the trust, in the proceeds.
Under the Massachusetts decisions these trust instruments are held to create either pure trusts or partnerships, according to the way in which the trustees are to conduct the affairs committed to their charge. If they are the principals and are free from the control of the certificate holders in the management of the property, a trust is created; but if the certificate holders are associated together in the control of the property as principals and the trustees are merely their managing agents, a partnership relation between the certificate holders is created. Williams v. Milton, 215 Mass. 1, 6 [102 N.E. 355]; Frost v. Thompson, 219 Mass. 360, 365 [106 N.E. 1009]; Dana v. Treasurer, 227 Mass. 562, 565 [116 N.E. 941]; Priestley v. Treasurer, 230 Mass. 452, 455 [120 N.E. 100].
These trusts — whether pure trusts or partnerships — are unincorporated. They are not organized under any statute; and they derive no power, benefit or privilege from any statute. The Massachusetts statutes, however, recognize their existence and impose upon them, as “associations,” certain obligations and liabilities.
The “obligations and liabilities” referred to above are outlined in Massachusetts General Laws Chapter 182 § 2, which states in part:
The trustees of an association or trust shall file a copy of the written instrument or declaration of trust creating it with the commissioner and with the clerk of every city or town where such association or trust has a usual place of business.
In this case there was neither an appropriate filing or the issuing of transferable shares. The court in Pope and Cottle Co. v. Fairbanks Realty Trust, 124 F.2d 132 (1st Cir.1941) was presented with the question of whether a voluntarily declared bankrupt trust fits within the definition of debtor as used within the Bankruptcy Code. As part of the Court’s determination that the Trust was not a business trust, it considered the following factors: the two beneficiaries did not contribute capital to the Trust, the beneficiaries were the mothers of the Trustees, the shares of the Trust were neither represented by certificates, nor transferable. In considering the similarity between the Trust presently under consideration and the critique by the court of the trust in Pope and Cottle Co. and the definition of a business trust given by the court in Hect v. Malley, supra, it is clear that the Trust in question does not satisfy the requirements of a business trust.
Having established the fact that the Trust is not a business trust, the next question to be resolved is whether, nonetheless, a nominee trust can file as a Chapter 11 debtor under 11 U.S.C. § 301. In order to file as a debtor, it is necessary that the petitioner meet the Code’s definition of a debtor. As already mentioned, the Code defines “debtor” in 11 U.S.C. § 109(a) as a person and then expands on this definition in 11 U.S.C. § 101(33) to include corporations, among other entities, which it then defines in 11 U.S.C. § 101(8)(A)(V) to include business trusts.
The court in Pope and Cottle Co. v. Fairbanks Realty Trust, 124 F.2d at 135, after first determining that the trust in question was not a business trust, and citing to the operative section within the Code, went on to quote from the district court opinion [40 F.Supp. 77, 80]:
“While it is conceded that there are no certificates representing shares in the ‘Fairbanks Realty Trust’, it is urged that the trust instrument itself is a written instrument evidencing beneficial interests in the trust. This contention is not sustained. If Congress had intended to include within its definition of .‘corpora tion’ all trusts reduced to writing in which the trustees are empowered to conduct a business, it could easily have done so. Since it chose instead to use the language just quoted, it seems to me that only such trusts are included as employ some written instrument, other than the trust itself, for the purpose of evidencing the interests of the various beneficiaries therein.” In re Bloom, D.C.N.D.Ill.1935, 10 F.Supp. 806, was cited.
|
1084195-11351 | J. JOSEPH SMITH, Circuit Judge:
In 1971, appellant Kahane, an orthodox Jewish rabbi, was sentenced in the Eastern District of New York to imprisonment and fine for conspiracy to violate the federal Firearms Act. 18 U.S.C. § 371. However, the sentence of imprisonment was suspended by the court, and Kahane was placed on probation. Kahane and his family had made their home in the Eastern District for many years prior to his conviction. While Kahane was on probation, they had removed to Israel with the permission of the court and Kahane had become a candidate for election to the Knesset, the Israeli Parliament. Kahane subsequently admitted to violating the terms of his probation. His probation was accordingly revoked, but his sentence of imprisonment was reduced to a term of one year. Kahane then sought, by several forms of action in the Eastern District of New York, orders requiring the prison administrators to conform the conditions of his incarceration to his religious beliefs concerning diet and prayer. The court, Jack B. Weinstein, Judge, found jurisdiction and venue in the Eastern District of New York and granted Kahane relief in the nature of mandamus.
We conclude that jurisdiction and venue were properly found by the district court in the instant action, that a need for relief was shown, but that the relief granted by the court was somewhat broader than required. We therefore modify the order and, as modified, affirm.
Jurisdiction in the court below was founded upon the mandamus power provided by 28 U.S.C. § 1361:
The district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.
The United States contends however that, even though mandamus jurisdiction exists generally in the district courts, venue does not properly lie in the Eastern District of New York for this particular mandamus action.
28 U.S.C. § 1391(e) governs venue in mandamus cases. According to the government, neither the prisoner’s present or contemplated place of incarceration, nor the residence of any respondent was in the Eastern District. No real property is involved in the instant action nor could the cause of action regarding deprivation of kosher diet be said to have arisen in the Eastern District. Finally, the government maintains, plaintiff’s residence is not in the Eastern District of. New York. With this last assertion, we disagree.
The parties agree that the case does not qualify under subdivisions (1) and (3) of § 1391(e). We need not pass upon Kahane’s contention that venue can be sustained under subdivision (2) since the circumstances do qualify the case under § 1391(e)(4), which establishes mandamus venue in the district of the plaintiff’s residence. To be sure, residence for the purposes of § 1391 is often interpreted as equivalent to domicile, and there are some indications that Kahane has changed his domicile from the Eastern District of New York. 1 J. Moore, Federal Practice 10.142[5.1-1, 5.1-2, 7]; Ellingburg v. Connett, 457 F.2d 240, 241 (5th Cir. 1972); Ott v. United States Board of Parole, 324 F.Supp. 1034, 1037 (W.D.Mo.1971).
After his sentencing, Kahane moved to Israel with his family and ran for office there. Under ordinary circumstances that would be strong support for a finding of Israeli domicile. At the time of his conviction and sentence, however, he was a long-time resident of the Eastern District and was under active probation supervision there, a probation which he violated. Under these circumstances we hold that, until he had successfully completed probation and had been released from supervision, Kahane should have been considered a resident of the Eastern District for the purpose of venue, entitled to turn to the court for that district.
Venue is a doctrine of convenience of the forum. Denver & R. G. W. R. R. v. Brotherhood of Railroad Trainmen, 387 U.S. 556, 560, 87 S.Ct. 1746, 18 L.Ed.2d 954 (1967); Rutland Ry. v. Brotherhood of Locomotive Engineers, 307 F.2d 21, 29 (2d Cir. 1962), cert. denied, 372 U.S. 954, 83 S.Ct. 949, 9 L.Ed.2d 978 (1963); Penrod Drilling Co. v. Johnson, 414 F.2d 1217 (5th Cir. 1969), cert. denied, 396 U.S. 1003, 90 S.Ct. 552, 24 L.Ed.2d 495 (1970). Domicile is usually the best measure of that convenience since removal, with intent to relinquish personal ties to the old home and remain indefinitely at the new, is the handiest dividing line in measuring relative convenience of the forum. Here, however, continuing probation obligations to the court of the Eastern District made it more sensible to consider that district as Kahane’s residence for the purposes of the venue statute. Because of the unusual circumstances here — Kahane’s long-time residence in the Eastern District combined with his probation obligations to the court of that district — we conclude that venue was properly laid in the Eastern District of New York.
We therefore reach the merits of the matter.
It is by now quite well established that, while prisoners in penal institutions are subject to restrictions on their freedoms, the restrictions are not without limit. Procunier v. Martinez, 416 U.S. 396, 94 S.Ct. 1800, 40 L.Ed.2d 224 (1974). Where they operate on fundamental rights such as the freedom of worship, the degree of restriction must be only that which can be justified by an “important or substantial government interest” in the restriction by the penal institution. Id. at 413, 94 S.Ct. 1800.
The courts have properly recognized that prison authorities must accommodate the right of prisoners to receive diets consistent with their religious scruples. Chapman v. Kleindienst, 507 F.2d 1246, 1251 (7th Cir. 1974); Ross v. Blackledge, 477 F.2d 616 (4th Cir. 1973); Barnett v. Rodgers, 133 U.S.App.D.C. 296, 410 F.2d 995 (1969).
Their [Muslims’] request for “one full-course pork-free diet once a day and coffee three times daily” is essentially a plea for a modest degree of official deference to their religious obligations. Certainly if this concession is feasible from the standpoint of prison management, it represents the bare minimum that jail authorities, with or without specific request, are constitutionally required to do, not only for Muslims but indeed for any group of inmates with religious restrictions on diet.
Barnett v. Rodgers, supra at 1001.
The evidence in this case justifies the court’s finding of the deep religious significance to a practising orthodox Jew (which this prisoner concededly is) of the laws of Kashruth. The dietary laws are an important, integral part of the covenant between the Jewish people and the God of Israel.
The district court on the evidence before it was thoroughly justified in its finding of the religious importance to the prisoner of the Jewish dietary rules. We agree with the court below that the prison authorities are proscribed by the constitutional status of religious freedom from managing the institution in a manner which unnecessarily prevents Kahane’s observance of his dietary obligations. The difficulties for the prisons inherent in this rule would seem surmountable in view of the small number of practising orthodox Jews in federal prisons (which the evidence indicated would not exceed approximately twelve), and in view of the fact that state and city prisons provide kosher food, that federal institutions do so on high holidays and that medical diets are not unknown in the federal system.
The order under review indicates that there are several means within the reach of the respondents by which Kahane’s rights may be respected. Some of these means, such as methods for self-preparation of vegetables and fruits, are suggested by respondents themselves. Provision of tinned fish, boiled eggs and cheese may be made from regular institution supplies. The language of the opinion incorporated in the order may be interpreted to require hot kosher TV dinners. If these are merely suggested methods, we find no fault with them. If, however, the order requires implementation of each and every one of these methods, it would go further than necessary to reach the required result. Such details are best left to the prison’s management which can provide from the food supplies available within budgetary limitations. Prison authorities have reasonable discretion in selecting the means by which prisoners’ rights are effectuated. See Pell v. Procunier, 417 U.S. 817, 94 S.Ct. 2800, 41 L.Ed.2d 495 (1974); Shakur v. Malcolm, 525 F.2d 1144, 1148, n. 3 (2d Cir. 1975).
The use of frozen, prepared foods, while perhaps helpful, is not constitutionally required if another acceptable means of keeping kosher is provided. We therefore modify the order to require the provision of a diet sufficient to sustain the prisoner in good health without violating the Jewish dietary laws, without otherwise mandating specific items of diet. As so modified, the order is affirmed.
Mandate may issue forthwith.
. Our Brother Friendly, in his concurring opinion, argues that mandamus under § 1361 is inappropriate for cases such as this because prisoners who reside in states far removed from the site of their incarceration will be able to bring suit over prison conditions in their home states, causing great inconvenience to all concerned. We simply note that 28 U.S.C. § 1404(a) gives the district judge very broad discretion to remove the prisoner’s cause of action to another judicial district. If the district of the prisoner’s residence is an inconvenient location for the mandamus action, § 1404(a) authorizes a shift of the lawsuit to the district of incarceration. Several other circuits have granted § 1361 relief against prison officials, see, e. g., Taylor v. Blackwell, 418 F.2d 199 (5th Cir. 1969); Barnett v. Rodgers, 133 U.S.App.D.C. 296, 410 F.2d 995 (1969); Long v. Parker, 390 F.2d 816 (3d Cir. 1968), vacated and remanded on other grounds, 384 U.S. 32, 86 S.Ct. 1285, 16 L.Ed.2d 333 (1969); Walker v. Blackwell, 360 F.2d 66 (5th Cir. 1966). Indeed, the present action is a more appealing candidate for mandamus than those earlier cases, since Kahane is in effect challenging a nationwide policy of the Bureau of Prisons rather than the conditions of confinement in a single penitentiary.
. 28 U.S.C. § 1391(e) provides:
A civil action in which each defendant is an officer or employee of the United States or any agency thereof acting in his official capacity or under color of legal authority, or an agency of the United States, may, except as otherwise provided by law, be brought in any judicial district in which: (1) a defendant in the action resides, or (2) the cause of action arose, or (3) any real property involved in the action is situated, or (4) the plaintiff resides if no real property is involved in the action.
. Venue was broadened generally in mandamus actions against federal agencies to end concentration of actions in the District of Columbia and inconvenience to petitioners in the many distant districts in which the agencies operate. The Congress might well, however, consider narrowing the provisions for cases such as this which seek to affect the conduct of fixed institutions to the districts in which the institutions lie. See Coleman, J., dissenting in Ellingburg v. Connett, 457 F.2d 240 (5th Cir. 1972).
|
3919957-12789 | STAHL, Circuit Judge.
Plaintiff-appellant Michael Foley appeals the dismissal of his 42 U.S.C. § 1983 claims against Defendants Lawrence Kiely and Gerald Collins, Massachusetts State Troopers, and Defendant Diana DiPientrantonio, a sergeant with the Massachusetts State Police. Foley claims that Troopers Kiely and Collins unconstitutionally seized and arrested him. The District of Massachusetts granted summary judgment in favor of Defendants, and after a de novo review, we affirm.
I. Facts and Background
Because we review this case after a grant of summary judgment, we present the facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party’s favor. Estrada v. Rhode Island, 594 F.3d 56, 59 n. 2 (1st Cir.2010).
Foley is fifty-five years old and has no home address, but sleeps outside in different locations in the Newton, Weston, and Waltham, Massachusetts area. One place he frequents is the Norumbega Park (“Norumbega”) in Weston.
On December 4, 2004, Kiely and Collins were working their regular assigned patrol shift as Massachusetts State Troopers. Their patrol area included performing periodic facilities checks at Norumbega. Norumbega is a public park, and there had been complaints of lewd and lascivious behavior as well as car break-ins in the area. Additionally, the Massachusetts Water Resources Authority (“MWRA”) has access pipes on site, and since September 11, 2001, the State Police have conducted security checks at Norumbega for the MWRA.
On the afternoon of December 4, “probably between three and 4:30, 5:00,” Collins performed a facilities check at Norumbega. At that time, Collins observed Foley walking around the pond. There were many other people in the area at the time, and Collins had no interaction with Foley. When Collins returned to the area at about 6:30 p.m., he noticed a few distinct flashes from a flashlight. He discovered that the person shining the flashlight was the same person he had previously observed walking around the pond. Collins asked Foley why he had been shining a flashlight in Collins’s direction, and Foley said he had the flashlight for his own safety and so he could see what he was doing. Collins informed Foley that he was in a high crime area and that there had been problems with lewd and lascivious behavior and breaking into cars. He asked Foley if anyone had ever bothered Foley or given him a hard time, and Foley said that lately he had been left alone for the most part. Collins neither knew, nor did he inquire about, Foley’s name.
Later that night, Collins had a conversation with Kiely about having observed the same person at Norumbega over the course of a few hours. Collins asked Kiely to go back to Norumbega with him and to back him up in the event that the individual was still there.
At approximately 10:30 p.m., Collins returned to the park with Kiely. Kiely and Collins both observed Foley walking along the water, and Foley “sought to avoid unnecessary contact with [them].” According to Kiely and Collins, Foley attempted to duck behind some shrubbery along the waterside. Kiely approached Foley and asked him for his name, and Foley replied, “Foley, Michael Foley.” Kiely then asked Foley for his date of birth, and Foley provided it. The troopers also asked Foley for his Social Security number, but he refused to provide it, allegedly saying that he did not know it. Foley alleges that the troopers then told him that he could not leave and prevented him from leaving by grabbing him.
The troopers conducted a warrant check using the name and date of birth that Foley had provided and found that a per son of that date of birth and name had a Board of Probation (“BOP”) record and that there was an outstanding federal National Crime Information Center (“NCIC”) warrant for the arrest of that person out of the state of Florida. The Florida warrant was dated April 24, 1974. Kiely contacted Troop Headquarters to confirm the information, and the dispatcher at Headquarters verified that there was an outstanding NCIC warrant out of Florida matching the name and date of birth provided by Foley. Because Foley told the troopers that he had never been to Florida, Kiely sought and obtained additional information from Foley to attempt to confirm that Foley was the subject of the warrant. Foley on inquiry provided his mother’s maiden name as “Peters,” and the dispatcher at Troop Headquarters told Kiely that according to the BOP record, the mother’s name was Marjorie Peters. Though Foley had not provided a Social Security number, the Social Security number on the BOP record matched the Social Security number on the Florida warrant. The information provided in the Warrant Management System indicated that Miami Dade County, Florida would extradite.
Foley was placed under arrest for being a fugitive from justice and transported by Kiely to the State Police barracks in Framingham. The total length of the stop prior to Foley’s arrest is unclear from the record, but we will assume that it was no longer than an hour, as Foley concedes. At Foley’s arraignment on December 6, 2004, bail was set. Because Foley was unable to post bail, he was transported to Middlesex County Jail, where he was held for approximately ten days until the criminal charge against him was dismissed.
II. Discussion
Summary judgment is appropriate if, viewing all factual disputes in the light most favorable to the non-moving party, there is no genuine issue as to any material fact that would prevent judgment in favor of the moving party as a matter of law. Cianbro Corp. v. George H. Dean, Inc., 596 F.3d 10, 14 (1st Cir.2010). We review a district court’s grant of summary judgment de novo. Id.
A. Initial Stop
As an initial matter, we presume that the troopers’ 10:30 p.m. interaction with Foley constituted a seizure in that Foley’s deposition testimony indicates that a reasonable person would not have felt free to leave or to terminate the encounter. See Florida v. Bostick, 501 U.S. 429, 436, 111 S.Ct. 2382, 115 L.Ed.2d 389 (1991).
It is well-established, however, that not every seizure is an arrest requiring probable cause under the Fourth Amendment. Foley claims that once the police prevented him from leaving, the stop constituted an arrest for which probable cause was required, but Foley misreads the law. There are “certain encounters between police and private citizens, called Terry stops, that fall short of the intrusiveness of a full arrest.” Schubert v. City of Springfield, 589 F.3d 496, 501 (1st Cir.2009). In such circumstances, an officer may make a brief investigatory stop of an individual if the officer has reasonable suspicion “that criminal activity may be afoot.” United States v. Am, 564 F.3d 25, 29 (1st Cir.2009) (citing United States v. Arvizu, 534 U.S. 266, 122 S.Ct. 744, 151 L.Ed.2d 740 (2002)).
We follow a two-pronged inquiry to evaluate “whether the officer’s action was justified at its inception, and whether the action taken was reasonably related in scope to the circumstances which justified the interference in the first place.” Am, 564 F.3d at 29 (citations omitted).
To satisfy the first prong, we evaluate whether the troopers can point to “a particularized and objective basis for suspecting the person stopped of criminal activity.” United States v. Wright, 582 F.3d 199, 205 (1st Cir.2009) (citations and quotations omitted). “Th[e] particularity requirement means, in effect, that such a finding must be ‘grounded in specific and articulable facts.’ ” United States v. Espinoza, 490 F.3d 41, 47 (1st Cir.2007) (quoting United States v. Hensley, 469 U.S. 221, 229, 105 S.Ct. 675, 83 L.Ed.2d 604 (1985)). “The ‘objective’ component requires courts to ‘focus not on what the officer himself believed but, rather, on what a reasonable officer in his position would have thought.’ ” Wright, 582 F.3d at 205 (quoting Espinoza, 490 F.3d at 47).
Here, the undisputed facts establish that when Collins and Kiely stopped Foley at about 10:30 p.m., it was reasonable for them to suspect that he was in a restricted area and therefore trespassing. The record indicates that the troopers both believed, reasonably so, that Norumbega closed at dark and that the closing time was indicated by signage at the park.
Additionally, the troopers knew that the area was one in which crimes had been reported, including lewd behavior and car break-ins, and they had reason to monitor the MWRA pipes in the area for a potential terrorist threat. While it appears that they had no particular reason to suspect Foley of any such crimes, those circumstances would have reasonably made them more alert to the presence of any individual in the park after dark, particularly one who had already been observed there on two separate occasions, hours before.
The second prong of the inquiry requires us to determine whether the troopers’ actions in connection with the stop were reasonable in light of the totality of the circumstances confronting them at the time of the stop. United States v. McCarthy, 77 F.3d 522, 530 (1st Cir.1996). Here, the troopers asked Foley for identifying information, and after he did not provide his Social Security number, they conducted a warrant check using his name and birth-date. Foley also claims that one or both of the troopers grabbed and/or pushed him, telling him not to leave. When the warrant check turned up an outstanding 1974 Florida warrant for cannabis possession, the troopers continued to detain Foley while they confirmed its validity. Eventually, they handcuffed Foley and transported him to the Framingham barracks. The length of the detention was no longer than one hour.
As we acknowledged in Klaucke v. Daly, 595 F.3d 20 (2010), “most circuits have held that an officer does not impermissibly expand the scope of a Terry stop by performing a background and warrant cheek, even where that search is unrelated to the circumstances that initially drew the officer’s attention.” Id. at 26 (citing United States v. Kirksey, 485 F.3d 955, 957 (7th Cir.2007); United States v. Cavitt, 550 F.3d 430, 437 (5th Cir.2008); United States v. Long, 532 F.3d 791, 795 (8th Cir.2008); United States v. Rusher, 966 F.2d 868, 876-77 (4th Cir.1992)). Though we elected in that case not to address whether warrant checks are always permissible in the normal course of a Terry stop, we found that Klaucke’s refusal to produce a license when the officer requested it, “reasonably roused a suspicion that his non-cooperation was driven by other considerations, like an outstanding warrant for his arrest or other criminal history....” Klaucke, 595 F.3d at 26. Here, similarly, we find that Foley’s inability (or unwillingness) to provide his Social Security number, combined with his initial attempt to avoid contact with the police, provided reasonable grounds for Collins and Kiely to investigate his criminal history.
The fact that the troopers detained Foley for as much as one hour while performing the warrant check is also not problematic, especially as the facts reveal that any delay was largely caused by the troopers’ attempts to confirm the warrant’s validity. “The excessive length of [Foley’s] detention arose not because the officers engaged in dilatory tactics, but, instead, because their investigative efforts ... failed to dispel the suspicion that gave rise to the stop.” McCarthy, 77 F.3d at 531 (holding that a seventy-five minute Terry stop was reasonable).
We note that Foley does not argue that the force which he alleges the troopers employed in detaining him violated his constitutional rights. " His argument is simply that the troopers lacked a reasonable basis on which to detain him, and as we have discussed above, that argument fails.
B. Arrest Based on Warrant
Foley next challenges the validity of the Florida warrant as a basis for his arrest, arguing that no warrant ever existed and that the computer print-out produced as evidence of the warrant was generated as part of a cover-up to justify Foley’s illegal detention. As we have already discussed, Foley’s initial detention was justified by reasonable suspicion separate and apart from the results of the warrant check.
As for the validity of the warrant itself, Mass. Gen. Laws ch. 276, § 23A, provides that “a printout of the electronic warrant from the criminal justice information system [‘CJIS’] shall constitute a true copy of the warrant.” Thus, the CJIS record of the Florida warrant was statutorily sufficient for the troopers to make an arrest.
Moreover, it was reasonable for the troopers to believe that Foley was the individual named in the warrant, as both his name and birthdate matched, and the Social Security number from his BOP record matched the Social Security number listed in the warrant.
|
4228607-18720 | POOLER, Circuit Judge:
Plaintiffs-Appellants, more than 100 U.S. Airways, Inc. (“US Airways”) pilots, over or approaching the age of sixty, appeal from a July 24, 2008 Memorandum and Order of District Court Judge Sandra Townes of the Eastern District of New York dismissing their Fourth Amended Complaint against Defendants-Appellees, the Air Line Pilots Association, International (“ALPA”) and Duane Woerth, former president of ALPA. Vaughn v. Air Line Pilots Ass’n, Int’l, 395 B.R. 520 (E.D.N.Y.2008).
In this opinion, we address only plaintiffs’ duty of fair representation claims, having addressed their remaining claims in a summary order issued simultaneously with this opinion. The district court dismissed all three of plaintiffs’ fair representation claims, concluding that plaintiffs failed to show that ALPA had breached its duty of fair representation and that, for certain claims, plaintiffs failed to show causation between ALPA’s actions and their injuries. We now affirm.
BACKGROUND
This case arises against the backdrop of the September 11, 2001 terrorist attacks and the subsequent financial troubles of the airline industry. For all times relevant to this action, ALPA was the labor organization that represented U.S. Airways pilots. Under the collective bargaining agreement in effect in 2001, U.S. Airways maintained a defined benefit plan (“DB Plan”) for the pilots that guaranteed them a certain level of pension benefits upon retirement. Although the contributed funds were invested, and thus subject to gains and losses, each pilot’s promised benefits remained constant. Pursuant to the Employee Retirement Income Security Act (“ERISA”), the plan was required to have sufficient funding to pay 80% of promised benefits at all times. If the plan’s funding dropped below 80%, U.S. Airways was required to make contributions to bring it to the required level.
Between 1999 and 2001, the DB Plan was either over-funded or fully funded and, therefore, U.S. Airways was not required to make any contributions. In 2002, however, U.S. Airways reported that, because of poor stock market performance, the plan was only funded at 64%. At the same time, U.S. Airways publicly announced that it was experiencing serious financial difficulties caused in part by the September 11 terrorist attacks.
In the spring and summer of 2002, U.S. Airways approached ALPA’s U.S. Airways Master Executive Council (“MEC”) to request substantial concessions from the pilots on wages and benefits, claiming that such concessions were necessary to stave off bankruptcy. The MEC agreed to the concessions. At the same time, U.S. Airways obtained tentative approval of a $1 billion loan package guaranteed by the Air Transportation Stabilization Board (“ATSB”), which was conditioned on U.S. Airways demonstrating that it could achieve certain revenue and cost reduction targets over a seven-year period. See In re U.S. Airways Group, Inc., 296 B.R. 734, 737 (Bankr.E.D.Va.2003).
Despite the pilots’ concessions, U.S. Airways filed for bankruptcy under Chapter 11 on August 11, 2002. Id. at 737. Seeking a “fast track” reorganization, U.S. Airways obtained a $500 million loan from Retirement Systems of Alabama (“RSA”), which also agreed to invest $240 million in U.S. Airways once it exited bankruptcy in exchange for a 37% interest in the company. Id. at 738. However, U.S. Airways’s financial condition continued to deteriorate in the wake of reduced passenger revenue and increased fuel costs and it determined that it could not meet the revenue targets upon which the ATSB and RSA loans were conditioned. Id.
As a result, U.S. Airways again approached ALPA and asked for additional concessions from the pilots. Among the concessions was modification of the DB Plan. Without conducting an independent audit to assess the financial health of the DB Plan, ALPA agreed to its modification in addition to other wage and benefit cuts. When confronted by its failure to conduct an audit, ALPA erroneously stated to its members that it could not compel the company to disclose the financial condition of the DB Plan. In fact, the collective bargaining agreement explicitly gave ALPA the right to conduct such an audit.
Unfortunately, this second round of concessions failed to solve the DB Plan’s deficit, which, according to U.S. Airways, was projected at $1.7 billion over the next seven years. Id. U.S. Airways and ALPA pursued several potential solutions, including asking the IRS for a waiver of funding obligations and the Pension Benefit Guaranty Corporation for restoration funding. Id. at 738-39. After these efforts failed, U.S. Airways and ALPA conducted confidential negotiations that produced an agreement in which U.S. Airways agreed to negotiate and create a follow-up pension plan if the DB Plan had to be terminated. Id. at 739. The terms of this agreement were to remain confidential if and until the DB Plan was terminated, although ALPA members soon learned of the agreement, interpreting it as ALPA’s tacit consent to the DB Plan’s termination.
In January 2003, U.S. Airways petitioned the bankruptcy court to “distress terminate” the DB Plan under ERISA. Over ALPA’s objection, the bankruptcy court ruled that U.S. Airways met the requirements for a distress termination, recognizing that the $1 billion loan guarantee from ATSB was dependent on resolution of the pension funding deficit. Id. at 744-46. Following the ruling, the two parties began negotiating the termination of the DB Plan and the creation of a followup plan. An actuary retained by ALPA to audit the plan verified U.S. Airways’ calculations concerning the plan’s current and projected shortfall. During negotiations, several ALPA members received letters from two union officials, assuring the pilots that they would have an opportunity to vote on any proposal to terminate the DB Plan and implement a new plan. However, on March 22, 2003, without any vote, U.S. Airways and ALPA agreed to replace the DB Plan with a new defined contribution plan (“DC Plan I”).
Under the DC Plan I, U.S. Airways was required to make contributions at different rates for each pilot based on a complex formula aimed at helping pilots achieve a target benefit amount upon retirement. The formula provided for greater contributions to pilots approaching the mandatory retirement age of 60 than to younger pilots who had more time to accrue contributions. However, the higher contributions to older pilots were still limited to 100% of the pilot’s salary, meaning that regardless of the higher contributions, pilots close to 60 were less likely to meet the targeted retirement amount than younger pilots. Plaintiffs also allege that under the plan, older pilots would also receive a significant amount of their contributions subject to immediate taxation whereas younger pilots would be able to defer their tax obligations. In contrast to the DB Plan, U.S. Airways was not required to guarantee a particular benefit level; rather, U.S. Airways only had to make the promised contributions according to the formula.
Despite these cost-saving measures, U.S. Airways filed for bankruptcy protection a second time under Chapter 11 on September 12, 2004. Subsequently, ALPA agreed to further concessions, including an amendment to the defined contribution plan (“DC Plan II”) that eliminated the formula and targeted-benefit concept and instead required U.S. Airways to make contributions to each pilot’s individual account at the same rate — 10% of the pilot’s salary — regardless of age, seniority, or any other factor. At around the same time, some pilots — but not all — received a Summary Annual Report stating that the DB Plan had been fully funded asTof December 31, 2002, directly contradicting the statements U.S. Airways and ALPA had made at the time. Following the approval of a merger with America West Airlines, U.S. Airways emerged from this second bankruptcy in September 2005.
Plaintiffs, all U.S. Airways pilots over or approaching the mandatory retirement age of 60, brought suit in the Eastern District of New York in September 2003, alleging a breach of the duty of fair representation under the Railway Labor Act, 45 U.S.C. § 151, et seq., against ALPA and Duane Woerth, former president of ALPA; violations of the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621, et seq., against ALPA and U.S. Airways; violations of ERISA, 29 U.S.C. § 1001, et seq., against U.S. Airways; and violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq., against ALPA, U.S. Airways, and RSA. In November 2006, plain tiffs voluntarily withdrew all claims against U.S. Airways. Thereafter, the remaining defendants moved to dismiss the Fourth Amended Complaint (hereinafter “complaint”) and in a Memorandum and Order dated July 24, 2008, the district court dismissed all claims against all defendants.
On appeal, plaintiffs have not pursued their ADEA claims and have voluntarily dismissed their claims against RSA. Thus, the only claims remaining are plaintiffs’ duty of fair representation and RICO claims against ALPA and Duane Woerth in his official capacity. As explained above, we only address plaintiffs’ duty of fair representation claims — counts I through III of the complaint — in this opinion.
DISCUSSION
We review de novo a district court’s decision to grant a motion for judgment on the pleadings pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Desiano v. Warner-Lambert & Co., 467 F.3d 85, 89 (2d Cir.2006). To survive a motion to dismiss, a complaint must set out only enough facts to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, — U.S. -, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). This standard “is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Id. (quotation marks omitted).
Plaintiffs contend that the district court erred in dismissing their causes of action alleging that ALPA breached its duty of fair representation. A union “has a duty to represent fairly all employees subject to the collective bargaining agreement.” Spellacy v. Airline Pilots Ass’n-Int’l, 156 F.3d 120, 126 (2d Cir.1998) (citing Air Line Pilots Ass’n v. O’Neill, 499 U.S. 65, 74, 111 S.Ct. 1127, 113 L.Ed.2d 51 (1991)). Our review of such allegations is “highly deferential, recognizing the wide latitude that [unions] need for the effective performance of their bargaining responsibilities.” O’Neill, 499 U.S. at 78, 111 S.Ct. 1127. To prove that a union has breached its duty of fair representation, the challenging members must establish two elements. First, they must prove that the union’s actions or inactions “are either ‘arbitrary, discriminatory, or in bad faith.’ ” Id. at 67, 111 S.Ct. 1127. Second, the challenging members must “demonstrate a causal connection between the union’s wrongful conduct and their injuries.” Spellacy, 156 F.3d at 126; see also Sim v. New York Mailers’ Union No. 6, 166 F.3d 465, 472-73 (2d Cir.1999).
A union’s actions are “arbitrary only if, in light of the factual and legal landscape at the time of the union’s actions, the union’s behavior is so far outside a wide range of reasonableness as to be irrational.” O’Neill, 499 U.S. at 67, 111 S.Ct. 1127 (citation and quotation marks omitted). Moreover, “[t]actical errors are insufficient to show a breach of the duty of fair representation; even negligence on the union’s part does not give rise to a breach.” Barr v. United Parcel Serv., Inc., 868 F.2d 36, 43 (2d Cir.1989). A union’s acts are discriminatory when “substantial evidence” indicates that it engaged in discrimination that was “intentional, severe, and unrelated to legitimate union objectives.” Amalgamated Ass’n of St., Elec. Ry. & Motor Coach Employees of Am. v. Lockridge, 403 U.S. 274, 301, 91 S.Ct. 1909, 29 L.Ed.2d 473 (1971). Bad faith, which “encompasses fraud, dishones ty, and other intentionally misleading conduct,” requires proof that the union acted with “an improper intent, purpose, or motive.” Spellacy, 156 F.3d at 126 (citations omitted).
Applying those standards here, we conclude that the district court did not err in dismissing counts I through III of the complaint. Count I alleges that ALPA’s failure to conduct an audit, misrepresentation of its ability to do so, and later after-the-fact audit were a breach of the duty of fair representation. However, the allegations are only capable of supporting a finding that ALPA acted negligently. Since, even as alleged in the complaint, these events occurred against a particular “factual landscape” — after September 11, 2001, when U.S. Airways “suffered further severe economic losses on top of prior financial difficulties,” — we cannot conclude that ALPA’s failure to conduct the audit was “so far outside a wide range of reasonableness as to be irrational.” O’Neill, 499 U.S. at 67, 111 S.Ct. 1127 (internal citations and quotation marks omitted).
Plaintiffs argue that ALPA acted in bad faith by agreeing to the termination of the DB Plan so that it could reap lucrative fees for managing the follow-up plan. As pled, we do not believe that the allegations “nudge [plaintiffs’ claim] across the line from conceivable to plausible.” Iqbal, 129 S.Ct. at 1951 (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). The complaint does not allege that the fees were of such proportion to the concessions so as to make it plausible that ALPA was improperly motivated by the fees when it agreed to the termination of the DB Plan. Plaintiffs have offered no plausible explanation for why ALPA would believe that such an arrangement would be in its self-interest. As for ALPA’s alleged intentional misrepresentation of its right to conduct an audit, plaintiffs themselves allege that ALPA made the misrepresentation in an attempt to “legitimize ALPA’s abdication of its responsibility,” an allegation that supports a claim of negligence, not bad faith.
Contrary to plaintiffs’ argument, the mere collection of management fees in exchange for services legally rendered does not, without more, evidence an improper motive. The cases that plaintiffs cite all involved illegal kickback schemes. See Conrad, Co. v. Jesco, Inc., No. 89-1726, 908 F.2d 966, 1990 W1 101427, at *3 (4th Cir. July 12, 1990) (per curiam) (unpublished) (stating that “receiving of a kickback or a bribe” would indicate bad faith); Peterson v. Offshore Div. of Int’l Org. of Masters, Mates & Pilots, No. 87-6374, 851 F.2d 360, 1988 WL 69763, at *1 (9th Cir. June 27, 1988) (unpublished) (holding that plaintiff had alleged fair representation claim on basis of allegations of “ ‘kickbacks’ in vacation pay”). Plaintiffs do not allege an illegal kickback scheme here. Cf. 18 U.S.C. § 1954 (prohibiting payments intended to “influence opera tions” of employee benefit plan, but stating that the provision does not prohibit “payment to or acceptance by any person of bona fide salary ... for services actually performed”).
Moreover, plaintiffs have failed to allege a causal connection between ALPA’s failure to conduct the audit and the termination of the DB Plan. When ALPA finally did hire an actuary to conduct an audit, the actuary confirmed U.S. Airways’s numbers. Thus, it is unclear how the audit would have increased ALPA’s bargaining power or changed the result of the negotiations. Plaintiffs argue that the later audit was insufficient because it “simply asked an actuary to use U.S. Airways’ same models (indeed, their same computer and numbers) to make sure those numbers added up correctly.” Pis.’ Rep. Br. 14. Yet, Plaintiffs themselves state in their complaint that the DB Plan was only funded at 64% in 2002. Thus, whether or not the later audit was sufficient, plaintiffs appear to agree with U.S. Arways that the DB Plan was substantially underfunded.
Count II makes the same allegations as those in count I but further alleges that ALPA officials promised that termination of the DB Plan would be voted on by the membership, but notwithstanding this promise, no vote was held, and the plan was terminated. As to causation, this count alleged that “ALPA’s rapid turnaround on the ratification issue prevented pilots from having any say as to the terms of the proposed DC Plan and thus disadvantaged certain ALPA members,” and further that “[t]he promise of a ratification vote lulled the pilots into a false sense of security, with the result that they could do nothing but watch as their rights and their futures were traded away.”
Assuming that the allegations in count II, if true, would constitute bad faith, plaintiffs have failed to plead a causal connection between this claim and their injuries. Plaintiffs have not alleged that, had a vote occurred, the pilots would not have voted for the DB Plan. Nor do they allege that rejecting the agreement would have resulted in a plan more generous to older pilots. It is true that if plaintiffs had been informed that no vote would take place, they might have lobbied hard to prevent termination of the DC Plan I. But even then, there is no allegation that the DB Plan could have been saved, given the bankruptcy court’s ruling that U.S. Airways qualified for distress termination. In short, plaintiffs have failed to plausibly allege that ALPA’s alleged bad faith affected the outcome of the negotiations in any way.
Finally, in count III, plaintiffs allege that ALPA discriminated against them by agreeing to the terms of the DC Plans, which “impacted older pilots more harshly than younger pilots.” PL Br. 36. As explained above, a union’s acts are only discriminatory if they are “intentional, severe, and unrelated to legitimate union objectives.” Lockridge, 403 U.S. at 301, 91 S.Ct. 1909. Here, the DC Plan I actually benefitted older pilots by requiring U.S. Airways to make larger contributions to older pilots’ plans, which directly contradicts plaintiffs’ theory that ALPA intended to discriminate against them. Similarly, the DC Plan II guaranteed older and younger pilots pension benefits based on the same formula — 10% of the pilot’s salary. The fact that older pilots may have received fewer benefits under the plan is, as the district court explained in the context of plaintiffs’ ADEA claims, “the result of basic economics, specifically the time value of money, and is not related to the older pilots’ age.”
|
1437493-21025 | STARR, Chief Judge.
The plaintiff, a citizen of Michigan residing in Kent county, began this action-in the circuit court of Kent county on. November 26, 1958, against the defendant, a New Jersey corporation authorized, to do business in Michigan, to recover-damages resulting from personal injuries. On January 2, 1959, the defendant removed the action to this court on-the basis of diversity of citizenship, 28-U.S.C. § 1441(a).
In his declaration filed in circuit court: plaintiff alleged that his employer, the American News Company, Inc., had: leased an electric wire-tying machine- ffrom the defendant through its Gerrard Steel Strapping division, to be used for ■the bailing of magazines and other news .material, and had purchased bailing wire from the defendant to be used in the machine. Plaintiff alleged that at all times the title to the leased machine remained in the defendant. He alleged that on or about December 7, 1955, while using the wire-tying machine in the bailing of magazines, the wire on a bundle being bailed broke and flew up in his face, ■causing severe facial and eye injuries. He further alleged that the defendant was careless and negligent in the manufacture and inspection of its wire-tying machine and in the manufacture of bailing wire for use in the machine; that defendant warranted that the machine was reasonably fit for the use and purpose for which it was intended; and that def end-.ant’s carelessness, negligence, and breach ■of warranty were the direct and proximate cause of his injuries and resulting ■damages.
On January 6, 1959, the defendant filed motions to quash service of summons, to strike the declaration, and to ■dismiss the action. On February 27, 1960, this court filed opinion and entered an order denying each of the defendant’s motions. 187 F.Supp. 79. On March 8th the defendant filed a motion in pursuance of 28 U.S.C. § 1292(b) to amend the order entered February 29th by including in the order a finding that it involves a controlling question of law as to which there is substantial ground for -difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination •of the litigation. Section 1292(b) as .amended relating to permissible appeals from interlocutory orders of United States district courts provides as follows:
“When a district judge, in making in a civil action an order not oth•erwise appealable under this section, ■shall be of the opinion that such order involves a controlling question of law as to which there is substantial ■ground for difference of opinion and ¡that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals may thereupon, in its discretion, permit an appeal to be taken from such order, if application is made to it within ten days after the entry of the order: Provided, however, That application for an appeal hereunder shall not stay proceedings in the district court unless the district judge or the Court of Appeals or a judge thereof shall so order.”
The question presented by defendant’s motion to amend is whether the order entered February 29, 1960, denying its motions to quash service of process, to strike plaintiff’s declaration, and dismiss the action comes within the meaning and the intent of Congress in the enactment of § 1292(b). It is clear that the determination of that question depends upon the interpretation of said section. In People of Puerto Rico v. The Shell Co. (P.R.), Limited, 302 U.S. 253, 258, 58 S. Ct. 167, 169, 82 L.Ed. 235, the court stated:
“Words generally have different shades of meaning, and are to be construed if reasonably possible to effectuate the intent of the lawmakers; and this meaning in particular instances is to be arrived at not only by a consideration of the words themselves, but by considering, as well, the context, the purposes of the law, and the circumstances under which the words were employed. Atlantic Cleaners & Dyers v. United States, 286 U.S. 427, 433, [52 S.Ct. 607, 608, 76 L.Ed. 1204]; Helvering v. Stockholms En-skilda Bank, 293 U.S. 84, 86, 87-88, [55 S.Ct. 50, 51, 79 L.Ed. 211].”
This statement in the Puerto Rico case was quoted with approval in Vermilya-Brown Co., Inc., v. Connell, 335 U.S. 377, 386, 69 S.Ct. 140, 93 L.Ed. 76. In Ebert v. Poston, 266 U.S. 548, 554, 45 S.Ct. 188, 190, 69 L.Ed. 435, the Supreme Court stated: “The judicial function to be exercised in construing a statute is limited to ascertaining the intention of the Legislature therein expressed.” In United States v. Public Utilities Commission of California, 345 U.S. 295, 315, 316, 73 S. Ct. 706, 717, 97 L.Ed. 1020, the court said:
“Where the language and purpose of the questioned statute is clear, courts, of course, follow the legislative direction in interpretation. Where the words are ambiguous, the judiciary may properly use the legislative history to reach a conclusion. And that method of determining congressional purpose is likewise applicable when the literal words would bring about an end completely at variance with the purpose of the statute. Texas & Pacific R. Co. v. Abilene [Cotton] Oil Co., 204 U.S. 426, [27 S.Ct. 350, 51 L.Ed. 553]; Feres v. United States, 340 U.S. 135, [71 S.Ct. 153, 95 L.Ed. 152]; International [Longshoremen’s & Warehousemen’s] Union v. Juneau Spruce Corp., 342 U.S. 237, 243, [72 S.Ct. 235, 239, 96 L.Ed. 275]; Jo-hansen v. United States, 343 U.S. 427, 432, [72 S.Ct. 849, 853, 96 L.Ed. 1051].”
Many other authorities could be cited which hold that a statute should be construed, if reasonably possible, to effectuate the intention of the legislature at the time of its enactment. However, there are authorities that hold that a statute should be construed in accordance with the plain or literal meaning of the words of the statute. In Gemsco, Inc., v. Walling, Administrator of the Wage and Hour Division, U. S. Department of Labor, 324 U.S. 244, 260, 65 S.Ct. 605, 614, 89 L.Ed. 921, the court stated: “The plain words and meaning of a statute cannot be overcome by a legislative history which, through strained processes of deduction from events of wholly ambiguous significance, may furnish dubious bases for inference in every direction.” In Ex parte Collett, 337 U.S. 55, 61, 69 S.Ct. 944, 947, 959, 93 L.Ed. 1207, the court said: “There is no need to refer to the legislative history where the statutory language is clear.” In Flora v. United States, 357 U.S. 63, 65, 78 S.Ct. 1079, 1081, 2 L.Ed.2d 1165, the court said: “In matters of statutory construction the duty of this Court is to give effect to the intent of Congress, and in doing so our first reference is of course to the literal meaning of words employed.”
A court’s interpretation of a statute based on the meaning of the words of the statute is but a judicial statement of what the terms mean to that particular court, rather than what the terms meant to the legislature which stated them. Therefore, in interpreting § 1292(b) relating to appeals from interlocutory orders, the court should evaluate the objective manifestations of legislative intent at the time that section was enacted. The report of the Committee on the Judiciary of the House of Representatives on the bill which became § 1292(b), House Report No. 1667, 85 Cong.2d Sess., pp. 1, 2, states in part:
“There should be some way, for example, in long-draw-out cases such as antitrust and conspiracy cases, to dispose of vital questions which are raised in the trial without having to wait for the taking of testimony and the conclusion of the trial before the questions can be finally determined on appeal. * * *
“It is felt that the instant bill, in permitting appeals in nonfinal orders, will not only save protracted and expensive litigation, but, with its built-in safeguards, prevent numerous and groundless appeals to our appellate courts. * * *
“There is made a part of this report a report to the Judicial Conference of the United States, which sponsors this legislation. Your committee adopts with approval the view contained therein that appeals under this legislation should only be used in exceptional cases where an intermediate appeal may avoid protracted and expensive litigation and is not to be used or granted in ordinary litigation wherein the issues
raised can otherwise be properly disposed of.”
The report of the Committee on the Judiciary of the Senate on this bill, 1958 U.S.Code Cong, and Adm.News, pp. 5255, 5256, states in part:
“The bill results from a growing awareness of the need for expedition of cases pending before the district courts. Many cases which are filed in the Federal district courts require the district judge to entertain motions at an early stage in the proceedings which, if determined, against the plaintiff, result in a final order which would then be appeal-able to the circuit courts of appeals of the United States. However, such motions, if determined in the plaintiff’s favor, are interlocutory since they do not end the litigation and are not therefore, under existing provisions of law, appealable. For example, in a recent case a motion to dismiss for want of jurisdiction was filed in the district court early in the proceedings. The district court denied the motion and the matter then proceeded to trial. The disposition of that case took almost 8 months. Upon final order the case was appealed and the court of appeals determined that the district court did not have jurisdiction and entered an order accordingly. Had this legislation been in effect at that time, the district judge could have stated in writing his opinion that the motion was controlling and the defendant could thereupon have made application to the court of appeals for a review of the order denying the motion. Had the court of appeals entertained such a motion and reached the conclusion which it ultimately did, it would have resulted in a saving of the time of the district court and considerable expense on the part of the litigants.
“There are many civil actions from which similar illustrations could be furnished. For example, in an antitrust action a plea may be entered that the claim is barred by the statute of limitations. If this motion is denied, under existing law the matter is not appealable and the case then goes forward to trial. Disposition of antitrust cases may take considerable time, yet upon appeal following final disposition of such cases, the court of appeals may well determine that the statute of limitations had run and for that reason the district court did not have jurisdiction.”
Attached to the Senate report was the report of the Committee on Appeals from Interlocutory Orders of the District Courts, submitted to the Chief Justice of the United States and the members of the Judicial Conference in September, 1953, 1958 U.S.Code Cong, and Adm.News, pp. 5260, 5261, which stated in part:
“Your Committee is of the view that the appeal from interlocutory orders thus provided should and will be used only in exceptional cases where a decision of the appeal may avoid protracted and expensive litigation, as in antitrust and similar protracted cases, where a question which would be dispositive of the litigation is raised and there is serious doubt as to how it should be decided, as in the recent case of Austrian v. Williams (2 Cir., 198 F.2d 697). It is not thought that district judges would grant the certificate in ordinary litigation which could otherwise be promptly disposed of or that mere question as to the correctness of the ruling would prompt the granting of the certificate. The right of appeal given by the amend-atory statute is limited both by the requirement of the certificate of the trial judge, who is familiar with the litigation and will not be disposed to countenance dilatory tactics, and by the resting of final discretion in the matter in the court of appeals, which will not permit its docket to be crowded with piecemeal or minor litigation.”
In denying an application for leave to appeal from an interlocutory order of the district court, the Court of Appeals in Milbert v. Bison Laboratories, 3 Cir., 260 F.2d 431, 433, said:
“It is quite apparent from the legislative history of the Act of September 2, 1958, that Congress intended that section 1292(b) should be sparingly applied. It is to be used only in exceptional cases where an intermediate appeal may avoid protracted and expensive litigation and is not intended to open the floodgates to a vast number of appeals from interlocutory orders in ordinary litigation. Both the district judge and the court of appeals are to exercise independent judgment in each ease and are not to act routinely.”
In Kroch v. Texas Company, D.C., 167 F.Supp. 947, 949, the court said:
“While there is as yet little authority on the extent to which this new statute (§ 1292 [b]) should be used, it is plain that it should be used sparingly and ‘only in exceptional cases where an intermediate appeal may avoid protracted or expensive litigation’. Milbert v. Bison Laboratories, Inc., 3 Cir., 1958, 260 F.2d 431, 433.”
In Bobolakis v. Compania Panamena Martima San Gerassimo, S.A., D.C., 168 F.Supp. 236, 239, 240, the court said:
“However, I believe that the legislative history of Public Law 85-919 (28 U.S.C.A. § 1292 as amended) plainly indicates that the statute is to be invoked only in exceptional cases ‘to avoid unnecessary delay and expense.’ I am fortified in this view as a result of the reading given the statute by the Third Circuit Court of Appeals in the recent case of Mil-bert v. Bison Laboratories, Inc., 3 Cir., 260 F.2d 431. It is clear that this legislation was aimed at the ‘big’ and expensive case where an unusual amount of time and money may be expended in the pre-trial phases of the case or where the trial itself is likely to be long and costly-The Senate report mentions antitrust actions as an example of the type of case in which appeals might be allowed under the statute. There-is nothing in the language of the statute or its legislative history to-support the view that Congress intended to establish something akin to a ‘certiorari’ policy for the Courts of Appeals whereby ‘important’ cases-would receive special appellate treatment. Thus, I believe that a party cannot avail himself of the statute unless he shows that the appeal would save him from the cost and delay of protracted and expensive litigation.”
In Seven-Up Company v. O-So Grape Co., D.C., 179 F.Supp. 167, 169, 170, the court said:
“Whenever leave to appeal under Section 1292(b) is requested the court to which that request is addressed must make an independent evaluation of all the circumstances of the particular case to determine whether an immediate appeal ought to be allowed. It is not perceived how any hard and fast rules for application of the statute can be devised by decision. In the final analysis, the only binding precedent is the statute itself, and the recognition that that statute merely creates an exception to the general rule that only final decisions are appealable in the ordinary case. It would seem that the most which judicial precedent can ever do is to serve as a guide to the court in making that independent evaluation of the circumstances which must be made in every case. * * *
“One cannot read the statute without an impelling conviction that it was intended to apply to the exceptional case, not to run-of-the-mill litigation. Courts which have construed the statute are largely in agreement on that principle. E. g., In re Heddendorf, supra, 263 F.2d at page 889; United States v. Wood- bury, supra, 263 F.2d at page 788; n. 11; Milbert v. Bison Laboratories, supra, 260 F.2d at page 435; Biggers v. Bankers Bond Co., D.C.W.D. Ky., 171 F.Supp. 94, 95; Bobolakis v. Compania Panamena Maritima San Gerassimo, D.C.S.D.N.Y., 168 F.Supp. 236; Kroch v. Texas Company, D.C., 167 F.Supp. 947. But the courts seem to part company in their determination of what is an •exceptional case. There would seem to be one trend of decisions which would authorize liberal use of the statutes for an immediate appeal, especially in cases where a district court has decided a jurisdictional question in favor of its having jurisdiction. E. g., Cordero v. Panama Canal Co., D.C.S.D.N.Y., 170 F. Supp. 234; Pennsylvania Turnpike Comm. v. McGinnes, D.C.E.D.Pa., 169 F.Supp. 580, leave to appeal granted and cause reversed, 3 Cir., 268 F.2d 65.
“On the other hand, the more logical view is exemplified by Bobolakis v. Compania Panamena Maritima San Gerassimo, supra. * * *
“Likewise, in Milbert v. Bison Laboratories, supra, 260 F.2d at page 433, it is said that the statute ‘is to be used only in exceptional cases where an immediate [intermediate] appeal may avoid protracted and expensive litigation and is not intended to open the floodgates to a vast number of appeals from interlocutory orders in ordinary litigation.’ To same effect, Gottesman v. General Motors Corp., 2 Cir., 268 F.2d 194; In re Heddendorf, 1 Cir., 263 F.2d 887.
“It would seem that the courts have at times been bothered by an assumed necessity to further define the term ‘exceptional,’ and, as a result of reasoning by abstract example to achieve that purpose, have made some unfortunate suggestions which might have far-reaching consequences. The pitfalls of such exemplary reasoning are demonstrated by the suggestion in United States v. Woodbury, 9 Cir., 263 F.2d 784, 787, that an immediate appeal is appropriate whenever a trial court decides a jurisdictional question in favor of its having jurisdiction. That suggestion is an unwarranted one, in my opinion, and one which would, if allowed, do much to abrogate the ‘final decision’ condition for appeals in ordinary cases.
“To say that the statute may be properly applied only to the big case or the exceptional case may well leave much to be desired, but because of the nature of the statute precision of definition is difficult except as the statute is defined and applied to each case as it arises. When the statute is so applied, I believe that the interlocutory substantive order which should commend itself to a court for immediate appeal would be a rarity, and that the interlocutory procedural order which would so command (sic) itself would be almost as rare as the dodo. As one court has suggested, a loose application of the statute could ‘only stimulate the parties to more and greater * * * sparring apart from the merits.’ Gottesman v. General Motors Corp., 2 Cir., 268 F.2d 194, 196.” (Note the appendix to the opinion in the foregoing case, which sets forth the facts and holdings in many of the reported cases relating to appeals from interlocutory orders under 28 U.S.C. § 1292 (b).)
In United States v. Canale, D.C., 176 F. Supp. 568, 570, the court said: “This is an ordinary negligence action and although it took ten days to try, the Court is of the opinion that this is not the exceptional case to which the Act (28 U.S.C. § 1292 [b]) should be applied.”
In Berger v. United States, D.C., 170 F.Supp. 795, 797, the defendant moved to dismiss the complaint for lack of jurisdiction and, in the event of denial of that motion, moved for an order pursuant to 28 U.S.C. § 1292(b) permitting an interlocutory appeal from the order denying the motion to dismiss. In denying the motion the district court said:
“The view that Section 1292(b) is to be used only in the protracted and expensive case has been taken by the Third Circuit in Milbert v. Bison Laboratories, 260 F.2d 431, and in this District in Bobolakis v. Compania Panamena Maritima San Gerassimo, S.A., D.C., 168 F.Supp. 236.
“I rest my decision, however, on the fact that there is not enough likelihood of success upon the appeal to warrant the exercise of my discretion in expediting it.”
In Securities and Exchange Commission v. Central Foundry Company, D.C., 167 F.Supp. 821, the district court denied appeal under 28 U.S.C. § 1292(b) on the ground that its interlocutory order did not involve a controlling question of law as to which there was substantial ground for difference of opinion.
In re Heddendorf, 1 Cir., 263 F.2d 887, and Gottesman v. General Motors Corporation, 2 Cir., 268 F.2d 194, the courts of appeals clearly indicated that application of § 1292(b) should be limited to exceptional eases to avoid protracted or expensive litigation. The only decision of a court of the sixth circuit interpreting § 1292(b) and directly applicable to the question presented by defendant’s motion to amend in the present action, is the case of Biggers v. Bankers Bond Company, Inc., D.C., 171 F.Supp. 94, 95. In that case in denying the defendant the right to appeal under § 1292(b) from an interlocutory order, Judge Swinford said in part:
“It has long been an express policy that piecemeal appeals are improper and delay the ultimate decision in legal proceedings. Baltimore Contractors v. Bodinger, 348 U.S. 176, 75 S.Ct. 249, 99 L.Ed. 233. * * *
|
6513958-10655 | MEMORANDUM OPINION AND ORDER
KANE, Senior District Judge.
First Interstate Bank of Denver, N.A., appeals the bankruptcy court’s February 14, 1991 order holding that its motion for relief from stay would not be deemed an informal proof of claim and sustaining the trustee’s objection to its formal proof of claim as untimely. The bankruptcy court reasoned that the bank’s motion for relief from stay did not make demand on the debtor, Anchor Resources Corporation, for payment or evince an intent to hold the estate liable for the debt, requirements for a document to be considered an informal proof of claim. I affirm.
I. Facts.
Anchor Resources filed its petition under Chapter 11 of the Bankruptcy Code on Sep tember 23, 1983. It listed First Interstate Bank as a secured creditor in an unliqui-dated amount on its schedules. Anchor Resource’s debt to the bank arose from its default on a promissory note in the principal amount of $1,925,000. The note was secured by certain equipment owned by Anchor Resources. First Interstate perfected its security interest in the equipment by filing UCC-1 financing statements.
On September 28, 1983, First Interstate filed a motion for relief from the stay and for adequate protection under § 363(e) of the Code. In its motion, the bank described the note and its security interest in the equipment, the debtor’s default on the note and the bank’s unsatisfied demand for payment and the existing amount of unpaid principal and accrued interest. (R.Doc. 1) It further alleged that the value of the equipment held as collateral, in which Anchor Resources had no equity, was substantially less than Anchor’s outstanding debt to it. (Id.) On October 5,1983, First Interstate and Anchor filed a stipulation to these facts, which was approved by the court. The parties agreed that “[t]he relief requested in the Bank’s First Claim [under the motion for relief from stay] should be granted, and the automatic stay imposed by 11 U.S.C. § 362(a) should be vacated to allow the Bank to repossess its collateral and proceed in accordance with its rights under its security agreement.” (Id. Doc. 2 at 2.)
The case was converted from Chapter 11 to Chapter 7 on February 21, 1984. August 1, 1984 was established as the bar date for filing claims against the estate. On August 10, 1984, having disposed of the equipment held as collateral, First Interstate filed a claim for $597,829.67, representing the deficiency from the sale. On December 19, 1990, Tom H. Connolly, the trustee for Anchor Resources’ estate, filed a motion to disallow the bank’s claim as untimely. First Interstate responded to the motion, arguing that it could not determine the unsecured amount of its claim before the bar date because disposition of the collateral was a complex process. Further, it claimed that its motion for relief from the stay should be deemed an informal proof of claim and its August 10 notice an amendment to that claim.
In an order dated February 14, 1991, the bankruptcy court granted the trustee’s motion, holding that First Interstate’s motion for relief from the stay could not be considered an informal proof of claim because “the documents relied upon make no demand against the estate no[r] do they manifest an intent to hold the estate liable. Rather, it would appear from the documents that the Bank, a sophisticated banking institution, intended to rely [on] only its state court rights and recover from its collateral.” (R.Doc. 8 at 2.). First Interstate thereafter commenced this appeal. Review is de novo in determining whether the bankruptcy court erred in holding that the motion for relief from stay and stipulation did not constitute an informal proof of claim. See Sambo’s Restaurants, Inc. v. Wheeler (In re Sambo’s Restaurants, Inc.), 754 F.2d 811, 815 (9th Cir.1985) (whether documents can be considered an informal proof of claim is a legal issue subject to de novo review).
II. Merits.
Under Bankruptcy Rule 3002, an unsecured or undersecured creditor in a Chapter 7 bankruptcy must timely file a proof of claim to receive a distribution from the estate. Bankr.R. 3002(a); In re Glick, 136 B.R. 654, 656 (Bankr.W.D.Va.1991); In re Padget, 119 B.R. 793, 797 (Bankr.D.Colo.1990). “The execution and timely filing of a proof of claim creates prima facie evidence as to the validity and amount of the claim.” In re Padget, 119 B.R. at 797. The trustee has the duty “to examine proofs of claim and object to the allowance of any claim that is improper.” 11 U.S.C. § 704(5); In re Padget, 119 B.R. at 798. His distribution of the assets of the estate is based on allowed unsecured claims. 11 U.S.C. § 726(a)(2); In re Glick, 136 B.R. at 656. The requirement that a creditor timely file a proof of claim to participate in this distribution furthers “the policy favoring quick and effective settlement of bankruptcy estates.” In re Pemie Bailey Drilling Co., 105 B.R. 357, 362 (Bankr.W.D.La. 1989); see also In re Glick, 136 B.R. at 656.
In some cases, where the creditor has not timely filed a formal proof of claim, courts have permitted other papers of record to be deemed an informal proof of claim. “Not every document filed in the bankruptcy court will constitute an informal proof of claim, however; the document must apprise the court of the existence, nature and amount of the claim (if ascertainable) and make clear the claimant’s intention to hold the debtor liable for the claim.” Charter Co. v. Dioxin Claimants (In re Charter Co.), 876 F.2d 861, 863 (11th Cir.1989). Some courts, including the bankruptcy court below, require the informal notice to meet the following five requirements:
1. the proof of claim must be in writing;
2. the writing must contain a demand by the creditor on the debtor’s estate;
3. the writing must express an intent to hold the debtor liable for the debt;
4. the proof of claim must be filed with the Bankruptcy Court; and
5. based on the facts of the case, it would be equitable to allow the amendment.
In re Bowers, 104 B.R. 362, 364 (Bankr. D.Colo.1989) (applying test of In re McCoy Management Servs., Inc., 44 B.R. 215, 217 (Bankr .W.D.Ky.1984)).
In this appeal, the parties do not contest the bankruptcy court’s application of the McCoy test or that the first, fourth and fifth requirements are met. The dispute centers on the second and third elements: whether First Interstate’s motion for relief from stay and the parties’ stipulation manifested the bank’s intent to hold Anchor Resources liable for the entire debt, including the unsecured portion, and its intent to make a claim against the estate for its payment. Several courts have addressed similar situations and have reached the same conclusion as the bankruptcy court.
In an early ease under the former Bankruptcy Act, Lacoe v. De Long (In re Hotel St. James Co.), 65 F.2d 82 (9th Cir.1933), the court upheld the trustee’s objection to a creditor’s amended proof of claim. It reasoned that the creditor’s earlier petition for leave to sell mortgaged premises in a Bankruptcy Act case did not constitute informal proof of claim because there was “not the slightest indication that the petition was intended as a claim against the bankruptcy estate.” Id. at 83.
Whether formal or informal, a claim must show (as the word itself implies) that a demand is made against the estate, and must show the creditor’s intention to hold the estate liable. And this is especially the duty of a secured creditor, who has the choice (if his security be not also a preference) of relying upon the security and thereby giving up all or a part of his claim upon the estate. This he will be sure to do, if the security be sufficient to pay the whole debt; and, even if it will only pay the debt in part, he will probably apply the security as far as possible and hold the estate for the remainder only. But his election to pursue the estate must be made in accordance with the act; otherwise, he will be confined to his security.
Id. at 83-84. Compare In re Guardian Mortgage Investors, 15 B.R. 284, 286 (M.D.Fla.1981) (construing as informal proof of claim motion for relief from stay to pursue state court lawsuit because, unlike Hotel St. James, lawsuit was creditor’s sole source of relief).
In Code cases since Hotel St. James, courts have continued to adhere to the view that a motion for relief from the stay to foreclose on collateral cannot be deemed an informal proof of claim when the creditor states no intention to hold the debtor or the estate liable for the amount of any deficiency. For example, in In re Glick, 136 B.R. 654 (Bankr.W.D.Va.1991), the debtors filed a Chapter 7 petition and listed the bank as a secured creditor on its schedules. The bank held two demand notes secured by credit line deeds of trust on the debtors’ residence. Shortly after the petition was filed, the bank moved for relief from the stay, arguing that it did not have adequate protection of its interest because the value of the debtors’ home was less than the outstanding amount due under the notes. The bank further stated the debtors had no equity in the property. The court granted the bank’s motion for relief from the stay, and the bank foreclosed on the property, leaving a deficiency of approximately $30,-000. The bank never filed a formal proof of claim as to the undersecured amount. See id. at 655.
Although the bank argued that its motion for relief from the stay should be construed as an informal proof of claim, the court disagreed. It held that, to give fair notice of a claim, the motion for relief from the stay must indicate “ ‘that the debt existed, that the appellant proposed to realize on the security, that the amount due exceeded the security’s market value, and that the bankrupt was obligated to pay the anticipated deficiency.’ ” Id. at 656 (citing Sun Basin Lumber Co. v. United States, 432 F.2d 48, 49 (9th Cir.1970)). Since the bank “did not assert in its motion for relief from the stay that the debtor was obligated to pay the anticipated deficiency,” id., it failed this test. Likewise, it failed under the five-factor analysis adopted in this case:
[The bank’s] motion for relief fails on two counts: First it contains no explicit intention to hold the bankruptcy estate liable for any unsecured claim it might have against the debtor. It requests only that it be permitted to foreclose its security interest in the subject real estate. Second, the motion contains no explicit or implicit claim for a right to participate in the distribution of the assets of the estate. Without these elements, [the bank’s] motion for relief from the stay can not be considered an informal proof of claim.
|
10548360-25164 | CLARK, Circuit Judge:
Defendants Elena Vila and Johnny Rivera appeal from their convictions for conspiracy to import, importation of, conspiracy to possess with intent to distribute, and possession with intent to distribute in excess of 500 grams of cocaine. For the following reasons, we affirm these convictions.
I. BACKGROUND
On August 17, 1988, Vila, Rivera, and John Stroud arrived at Miami International Airport on a flight from Barranquilla, Colombia. Vila was traveling with her three-year old child. While picking up their baggage at the luggage carousel, this group was observed by Customs Inspector Sy Schor. Inspector Schor's attention was drawn to the group because they were all young, spoke English without an accent, and arrived from Colombia, a source country for cocaine, even though none of them appeared to be Colombian. Schor approached the group after they had retrieved their luggage and requested to see their passports, customs declarations, and airplane tickets.
Schor noticed that the tickets and other travel documents indicated that the group originally had intended to fly from New York City to Miami and on to Barranquilla on August 2, 1988 and to return along the same route on August 28. These travel plans, however, had been revised, and the group actually flew from New York to Barranquilla via Miami on August 5 and returned from Barranquilla on August 17. The tickets for the three adults and the child had been purchased through the same travel agency. The boarding passes indicated that the group sat together throughout the entire trip. The total cost of the tickets was $2,769. In addition, Schor noticed that the passport of Rivera had been issued on August 3, 1988 and that Stroud’s passport had been issued on August 4, 1988.
Schor asked the group what the purpose of their trip was, and Stroud responded that they had gone just to visit Barranquilla and not to see family or friends. This heightened Schor’s suspicion because he knew that that city was not a common destination for tourists. Upon further questioning, Schor learned that Vila was Rivera’s sister-in-law and that Stroud was a very good friend. Vila also claimed that she worked as a sales clerk in a shoe store, that Stroud worked part-time installing window glass, and that Rivera was currently unemployed. Schor testified that during this preliminary questioning, the group was “fairly deadpan" and did not appear to be angry or nervous about being questioned.
Due to the unusual circumstances surrounding the group’s travel, Schor decided to examine their luggage and directed them to a table in an inspection area. Prior to this examination, Schor had each of the three persons acknowledge their individual ownership of one of the three suitcases. Schor began by inspecting Stroud’s suitcase. Upon opening it, Schor noticed immediately that the bottom portion of the suitcase had been altered and that it was unusually thick. Schor testified that this false bottom was so obvious that “it jumped out at” him. He then punctured this portion of the suitcase with a screwdriver and after withdrawing it, noticed a white powder on it which was tested as being cocaine. Schor testified that the group showed no surprise, agitation, or protest while he was probing Stroud’s luggage.
Schor then placed the three into separate rooms along with their suitcases so that they could be individually examined. The suitcases of Rivera and Vila were virtually identical to that of Stroud and also had false bottoms constructed in the same manner which contained cocaine. After .examining these suitcases, Schor informed Stroud, Rivera, and Vila that they were under arrest and recited to them their Miranda rights.
While each was being held in custody in a separate room, Schor decided to inspect the contents of each suitcase. Starting with Vila’s suitcase, Schor picked up a normal-looking can of aerosol hairspray and noticed that it weighed more than a normal hairspray can and that there was no shift in weight that should occur from the flow of liquid inside the can. Schor then detached the bottom of this can, probed with his screwdriver, and again discovered a white powder later identified to be cocaine. Schor testified that while he was searching the can, Vila had a “deadpan” reaction and did not appear to be interested or upset. A subsequent search of the suitcases of Rivera and Stroud disclosed that each also contained an aerosol can containing cocaine.
Stroud pled guilty prior to trial.
II. DISCUSSION
A.
Rivera first contends that the government violated the district court’s Standing Discovery Order and Fed.R.Crim.P. 16(a)(1)(A) by not producing his statement to Inspector Schor that one of the suitcases belonged to him. At trial, the government elicited the testimony of Inspector Schor that when Stroud, Rivera, and Villa were in the customs line, he asked whether each of them had a suitcase and that Rivera (along with the other two) identified his suitcase by saying “this is mine”. Rivera admits that this discovery violation on the part of the government was unintentional and that the government did disclose this statement on the first day of trial immediately prior to Rivera’s opening statement.
In order for this court to reverse a conviction based on the government’s violation of a discovery order, a defendant must demonstrate that the violation prejudiced his substantial rights. Substantial prejudice is established when the defendant shows that he was unduly surprised and did not have an adequate opportunity to prepare a defense or that the mistake had a substantial influence on the jury. After a review of the record, we find that Rivera has failed to establish either of these requirements.
We do not believe that Rivera could have been surprised by Schor’s testimony that Rivera had verbally claimed ownership of his suitcase. Rivera’s statement was made in response to a rather routine question that custom inspectors could ordinarily be expected to ask while questioning a citizen returning from abroad. In a trial in which all the issues revolved around whether the defendants knowingly possessed a cocaine-laden suitcase, it is doubtful that Rivera’s counsel would not anticipate or contemplate that such a statement might exist. In addition, the belated disclosure of Schor’s testimony involved Rivera’s own statement which he should have had some knowledge of making. More importantly, if Rivera had, in fact, been prejudiced by the delayed disclosure of this statement, he should have moved for a continuance. Rivera, however, did not do so and elected to proceed to trial.
Schor’s testimony concerning Rivera’s identification of his suitcase also did not have a substantial influence on the jury. The government introduced other substantial evidence linking the three members of the group to the three suitcases containing cocaine. For instance, the government introduced an airline ticket holder that had three claim checks attached which matched the claim checks fastened to the three suitcases. Since the group had spent ten days outside of the United States on their trip to Colombia, the jury could have reasonably inferred that each member had taken a suitcase on the trip. In addition, there was no confusion about whether only one of the members of the group possessed the contraband because cocaine was not found in just one suitcase, but relatively equal amounts were found in each piece of luggage. Rivera’s statement was cumulative of other evidence introduced by the government tending to show Rivera’s possession of one of the suitcases and therefore did not have a substantial effect on the jury.
B.
Vila next contends that her right to due process was violated when the government was allowed to comment at trial on her silence after having been arrested and given her warnings as required by Miranda v. Arizona. This argument is based on the accepted notion that implicit within the Miranda warnings is the assurance that a defendant’s silence “will carry no penalty.” In addition, silence in the wake of these warnings is “insolubly ambiguous because of what the State is required to advise the person arrested.” Thus, when the government has induced silence by assuring the defendant that she will suffer no penalty by being silent, the prosecution violates fundamental fairness if it then attempts to use that silence against her. Although Vila raises a substantial question about whether or not the government did in fact impermissibly comment on Vila’s silence, we find that the prejudice flowing from any constitutional violation would be harmless error.
The record indicates that Inspector Schor testified about Vila’s demeanor as he observed it at three different points during the initial confrontation in the customs line and the subsequent search. First, Schor testified that when he initially encountered the group at the luggage carousel and began to question them, all three members of the group were “fairly deadpan,” expressionless, and without any visible signs of agitation or nervousness about being singled out for questioning. Second, Schor stated that the group again expressed no reaction or protest after he began inspecting Stroud’s suitcase, pierced its construction with a screwdriver, and discovered the cocaine. After this point in the confrontation, the group was separated into different rooms, arrested, and given their Miranda warnings. Finally, Schor testified that while he inspected the contents of Vila's suitcase and discovered the cocaine in the aerosol can, she did not appear to be physically upset. In her closing statement, government counsel noted that the group had been consistently indifferent throughout the encounter and asked the jury to infer that this had been a prearranged reaction among the group in the event that their smuggling operation was detected. Vila’s counsel objected to Schor’s testimony and the prosecutor’s closing argument as an impermissible comment on her silence and moved for a mistrial, which was denied by the district court. At no point during the trial, however was the jury ever told that any of the defendants had been given Miranda warnings,
We note initially that some of Inspector Sehor’s testimony, even if construed as comments on Vila’s silence, do not raise constitutional difficulties. The government may comment on a defendant’s silence if it occurred prior to the time that he is arrested and given his Miranda warnings. Schor’s testimony about Vila’s reaction to his initial questioning prior to inspection of the group’s luggage falls within this category and therefore was not improper. In addition, the government may comment on a defendant’s silence when it occurs after arrest, but before Miranda warnings are given. The record does not state whether Vila was in custody at the time that she and the others had been directed by Schor to an inspection area. Yet, even if she was in custody at that time, the government could comment on her silence as she viewed Schor’s inspection of Stroud’s suitcase because she had not yet been given her Miranda warnings.
Thus, the only government comment on Vila’s silence that may be constitutionally problematic are those descriptions of her demeanor after she had been arrested, given her Miranda warnings, and while she observed Schor’s examination of her own suitcase. Vila argues that Schor’s testimony was a direct comment on her silence and therefore constitutionally impermissible. The government, however, contends that the prosecutor did not comment on Vila’s silence, but only on her facial expressions, mannerisms, and demeanor during the examination of the aerosol can in her suitcase. Specifically, the prosecution invited the jury to infer that Vila’s “deadpan” expression was inconsistent with the reaction of an innocent traveler with no knowledge that her luggage contained contraband. We are therefore confronted with the rather inscrutable problem of determining whether there exists a rational distinction between impermissible comments showing that the defendant is being silent and permissible comments indicating that the defendant is acting silent.
It is well-established that “it is not proper ... for the prosecutor to ask the jury to draw a direct inference of guilt from silence — to argue, in effect, that silence is inconsistent with innocence.” The complexity posed in this case is deciding what actually is “silence” within the context of the Miranda warnings. Although both logic and common sense dictate that “silence” is more than mere muteness, there is no definite outer boundary in determining what types of nonverbal conduct or demeanor, whether assertive or nonasser-tive, a prosecutor may permissibly comment on without running afoul of the dictates of Miranda. Rather, there are difficult levels of gradation between types of human behavior that constitute a purely physical act and behavior that is solely a communication. For instance, in this case, Schor’s testimony about Vila’s demeanor after exercising her right to remain silent is perhaps probative of her state of mind; a suspect can act silent in many ways that may be inconsistent with innocent knowledge. On the other hand, if the government’s position was accepted, we might force future defendants into the unenviable predicament of expressing their innocence nonverbally through flailing arms, shaking heads, furtive glances or the like, lest the government draw negative inferences from a defendant’s passive silence.
We may, however, refrain from tackling this thorny issue at this juncture because assuming that it was error for the government to comment on Vila’s demean- or after her Miranda warnings, any prejudice would be harmless beyond a reasonable doubt. Although the prosecutor did deliberately elicit Schor’s testimony on Vila’s various episodes of silence and later highlighted them in her closing argument, as our discussion above indicates, she was clearly entitled to comment on Vila’s demeanor when she was first approached by Schor at the luggage carousel and later as Stroud’s suitcase was being searched. Thus, the prosecutor still could argue in closing that Vila’s demeanor prior to arrest was not consistent with her claim of innocence. Considering that the prosecutor’s comment on Vila’s post-Miranda silence was cumulative of other permissible evidence of her “deadpan,” expressionless demeanor, any potential error on the part of the government in this case was not so harmful as to require reversal of Vila's conviction. This conclusion is further fortified when the degree of prejudice from this constitutional error is juxtaposed against the strength of the evidence of Vila’s guilt. The manner and method of the smuggling attempt and the circumstances of Vila’s arrest provided substantial evidence that Vila had knowledge of the cocaine in her suitcase. In addition, there was no countervailing evidence to suggest that Vila had no prior knowledge of the cocaine or the attempt to smuggle it in her luggage. In light of these considerations, we conclude that the government’s comment on Vila’s silence was harmless error beyond a reasonable doubt.
C.
Both Rivera and Vila contend that the district court erred in giving the jury a “deliberate ignorance” instruction. Both defendants objected to the instruction at trial, but the trial court held that the evidence was sufficient to warrant the instruction and delivered the deliberate ignorance, “conscious avoidance,” or “ostrich” instruction from this Circuit’s Pattern Jury Instructions. The defendants moved for a mistrial on the grounds that this instruction was erroneous, and the district court denied these motions.
The deliberate ignorance instruction is based on the alternative to the actual knowledge requirement at common law that “ ‘if a party has his suspicion aroused but then deliberately omits to make further enquiries, because he wishes to remain in ignorance, he is deemed to have knowledge.’ ” It is premised on the belief that acts conducted under the guise of deliberate ignorance and acts committed with positive knowledge are equally culpable. “To act ‘knowingly,’ therefore, is not necessarily to act only with positive knowledge, but also to act with an awareness of the high probability of the existence of the fact in question.”
Courts which have adopted deliberate ignorance instructions have properly cautioned that such a charge should not be given in every ease in which a defendant claims a lack of knowledge, “but only in those comparatively rare cases where ... there are facts that point in the direction of deliberate ignorance.” The danger of overly liberal use of such an instruction in an inappropriate case is that juries will convict on a basis akin to a standard of negligence: that the defendant should have known that the conduct was illegal. Thus, the important safeguard of the law that a criminal defendant must be shown to have had knowledge of culpable behavior, subjectively viewed, may be watered down in those cases in which a deliberate ignorance instruction is incongruous with the facts of a crime.
In determining whether a deliberate ignorance instruction is proper in a particular case, we have held that “it must be based upon facts which would point in the direction of deliberate ignorance.” Although broadly descriptive of the necessary factual predicate that must be established by the government before such an instruction may be given, the statement is somewhat circular and therefore insufficiently precise in identifying those cases in which an instruction would not be appropriate. We note that the Ninth Circuit— which has been primarily responsible for innovating the use of such instructions and whose decisions we have previously relied on in this area —has spelled out more specifically that such an instruction is warranted only when:
the facts ... support the inference that the defendant was aware of a high probability of the existence of the fact in question and purposely contrived to avoid learning all of the facts in order to have a defense in the event of a subsequent prosecution.
We find that this standard is more descriptive of the constitutive elements of the concept of “deliberate ignorance” and adopt it in the analysis of this case.
In addition, a necessary corollary to this standard is that a district court should not instruct the jury on “deliberate ignorance” when the relevant evidence points only to actual knowledge, rather than deliberate avoidance. In cases involving the smuggling of controlled substances in which we have upheld the use of deliberate ignorance instructions, the government established only that the defendant was probably aware that he was in the possession of contraband, but purposely avoided learning all the facts necessary to obtain positive knowledge. For example, in United States v. Batencort, a case with similar facts in which the former Fifth Circuit upheld the use of a deliberate ignorance instruction, the defendant was arrested attempting to smuggle cocaine in the false bottom of his suitcase. The defendant, formerly a street peddler in Colombia, testified at trial that he was hired by an unknown individual he met on the street to bring appliances to the United States for a large sum of money and who furnished him with false travel documents. In addition, the defendant admitted in interrogation that “ ‘he had something in the suitcase that he shouldn’t, but he didn't know exactly.' ” Similarly, in United States v. Aleman, the defendant’s briefcase was inspected by customs agents as he arrived from Colombia because it had unusually thick sides and upon examination, the case was found to contain cocaine. This court upheld the use of a deliberate ignorance instruction because the defendant stated that he had been approached by a mystery man who asked him to take the briefcase to a person in New York City, that he did not know the name of the person to whom the briefcase was to be delivered, and that no arrangements had been made for actual delivery of the briefcase.
In this case, we conclude that the district court erred in instructing the jury on deliberate ignorance because the relevant evidence presented at trial was consistent only with a theory supporting the defendants’ actual knowledge, rather than conscious avoidance on their part. More importantly, there is no evidence at all in the record suggesting that Rivera and Vila purposely contrived to avoid learning that their luggage contained contraband. Unlike Batencort and Aleman, there was no suggestion that the defendants had come into possession of their suitcases under suspicious circumstances which put them on notice of any potential illegality. The prosecution did not demonstrate that the defendants were aware of the unusual construction of their suitcases or the contents of the spray cans, but also averted any investigation that would have given them positive knowledge of the true contents. The government’s contention that the defendants should have known of the cocaine because of the false bottoms in the suitcases and the weight distribution of the hairspray cans skates dangerously close to a negligence standard under which Rivera and Vila ought to be convicted based on information that they should have had knowledge of.
Although the district court erred in giving a deliberate ignorance instruction, we conclude that the error was harmless beyond a reasonable doubt. Under the facts of this case, the jury could only find either that the defendants had actual or no knowledge of the cocaine in their suitcases; there is no evidence suggesting a middle ground of conscious avoidance. However, because the jury was also instructed that it could convict based on a theory of actual knowledge, any error is harmless if there was sufficient evidence to support the convictions under that theory. Evaluating the record as a whole, it appears to us that the district court’s error in instructing on deliberate ignorance did not affect the jury’s verdict. The evidence shows that each of the defendants, traveling as a group under very unusual circumstances, admitted ownership to one of the three suitcases in which relatively equal amounts of cocaine were found. Luggage claim tickets were also found in the possession of the defendants that corresponded to those attached to the suitcases. The jury had no reasonable factual basis upon which it could infer that the defendants had innocent knowledge and thereby cast doubt on the government’s case. We therefore conclude that the evidence was so overwhelming that a guilty verdict on all counts is compelled.
By granting the requested instruction on deliberate ignorance, the district court failed to restrain an overzealous prosecution from putting forth an alternate theory of mens rea that was not supported by the evidence. This, however, does not detract from the government’s overwhelming proof that the defendants acted with actual knowledge.
For the foregoing reasons, the convictions of Rivera and Vila are AFFIRMED.
. See United States v. Barragan, 793 F.2d 1255, 1259 (11th Cir.1986).
. See id.
. Rivera’s statement arises in the following colloquy with Inspector Schor elicited by the government’s counsel at trial:
Q: When you had the three people in the Customs line, did you ask them if each of them had a suitcase, you know, one suitcase went to a person?
A: Yes.
Q: And what kind of responses did you get?
A: "This is mine. This is mine and this is mine,” each one.
.See United States v. Silien, 825 F.2d 320, 323 (11th Cir.1987).
. 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966).
. See Wainwright v. Greenfield, 474 U.S. 284, 290, 106 S.Ct. 634, 637, 88 L.Ed.2d 623 (1986) (citation omitted).
. Doyle v. Ohio, 426 U.S. 610, 617, 96 S.Ct. 2240, 2244, 49 L.Ed.2d 91 (1976).
. See Greenfield, 474 U.S. at 290-91, 106 S.Ct. at 637-38; Doyle, 426 U.S. at 618-19, 96 S.Ct. at 2245; cf. United States v. Hale, 422 U.S. 171, 180, 95 S.Ct. 2133, 2138, 45 L.Ed.2d 99 (1975).
. During Schor’s testimony about this third instance, he stated initially about Vila’s reaction to the search of the contents of her luggage that "[njothing verbal was said.” This answer was sturck by the trial court as an obvious comment on Vila’s silence after having been given Miranda warnings.
. See Jenkins v. Anderson, 447 U.S. 231, 100 S.Ct. 2124, 65 L.Ed.2d 86 (1980).
. See Fletcher v. Weir, 455 U.S. 603, 102 S.Ct. 1309, 71 L.Ed.2d 490 (1982).
. The record indicates that Vila was not arrested or given her Miranda warnings until after Schor first discovered the cocaine in Stroud’s suitcase. The vital distinction for our purposes, however, is not when Vila was arrested or technically in custody, but when she was given her Miranda warnings and thereby given the implicit assurance that her silence would not be used against her. See id. 455 U.S. at 606-07, 102 S.Ct. at 1311-12. Because she had not yet received such affirmative assurances when Stroud’s suitcase was being searched, the government could unquestionably comment on her silence during that phase of the encounter.
|
1565347-19239 | CANBY, Circuit Judge:
Samuel N. Zack seeks review of a final order of the Commodities Futures Trading Commission (Commission) that revoked his registration as an associated person and imposed a civil monetary penalty. We affirm in part and reverse in part.
BACKGROUND
Zack was an officer and shareholder of Premex, Inc. Premex, a Michigan corporation, sells precious metals leverage contracts.
In November 1976, Zack registered with the Commission as an associated person. 7 U.S.C. § 6k. Premex registered with the Commission as a futures commission merchant (FCM) in January 1977. 7 U.S.C. § 6f. As a futures commission merchant, Premex was required to comply with certain financial and reporting requirements of the Commission, including that of maintaining minimum capital requirements. 7 U.S.C. § 6f(2); 17 C.F.R. § 1.10(d); 17 C.F.R. § 1.17
In January 1978, the Commission brought an action against Premex and the Zacks in federal district court in Illinois seeking to enjoin them from violating the minimum capital requirements and from distributing allegedly false promotional literature. The parties consented to the entry of a permanent injunction.
Subsequently, the Commission filed two administrative complaints, which are the subject of this petition. The complaints were consolidated, and the Administrative Law Judge (AU) conducted a bifurcated hearing, considering the issues of liability and sanctions separately. The ALJ issued findings of fact and legal conclusions that upheld substantially all of the charges in the complaints. On appeal, the Commission affirmed the decision of the ALJ with modifications.
The Commission found that Zack had aided and abetted Premex in violating the minimum capital requirements by “knowingly and purposely assisting Premex in doing business while undercapitalized.” It found that on four separate occasions (October 1977, December 1977, January 1978, and February 1978), Zack had willfully aided and abetted Premex in filing materially false financial statements. The Commission also found that Zack had made a materially false statement in Premex’s application for renewal of its registration as an FCM in 1978. Finally, it found that Zack had willfully omitted a material fact from his 1978 application for renewal of his registration as an associated person. The Commission assessed a civil penalty of $215,000 against Zack and revoked his registration as an associated person. Zack petitions for review of all of these findings except the finding that he made a material false statement in Premex’s application for renewal of its registration as an FCM in 1978. Zack also challenges the sanctions imposed by the Commission.
We note jurisdiction pursuant to 7 U.S.C. § 9.
DISCUSSION
I. Aiding and Abetting Violation of the Minimum Capital Requirements
Zack contends that the Commission erroneously defined the underlying violation in its finding that he aided and abetted Premex’s operation while undercapitalized. We disagree.
The Commission found that Premex violated section 4f(2) of the Commodity Exchange Act (the Act), 7 U.S.C. § 6f(2), and Regulation 1.17 by operating while in noncompliance with the minimum capital requirements. Zack contends that this is “contrary to the plain meaning of the statute and rule.” He argues that a violation of section 4(f)(2) and 17 C.F.R. § 1.17 can be premised only upon the actual fact of undercapitalization, and that no additional violation results from doing business while undercapitalized. In short, for the Commission to show that he aided and abetted a violation, Zack asserts that the Commission must prove he willfully caused Premex to become undercapitalized, not merely that he knowingly assisted Premex to continue to operate after it had become undercapitalized. This argument cannot be sustained.
Our review of an agency’s interpretation of its empowering act is of limited scope. Lawrence v. Commodity Futures Trading Commission, 759 F.2d 767, 772 (9th Cir.1985). We accord the agency’s interpretation “great deference,” id. (quoting Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965)), and will not substitute our construction of the statutory provision or rule for a reasonable interpretation by the administrative agency. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, —, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984).
Section 4f(2) of the Act, 7 U.S.C. § 6f(2), provides that “each person [registered as a futures commission merchant] shall at all times continue to meet such prescribed minimum financial requirements____” (Emphasis added). Consequently, the Act imposes an affirmative duty on registered futures commission merchants to comply with the capital requirements at all times. The. Commission’s conclusion that a registered futures commission merchant violates the Act by operating while in noncompliance with the minimum capital requirements is, therefore, a reasonable construction of the statute.
The Commission’s interpretation of the statute is consistent with the remedial purposes of the Act. The legislative history of the Act reflects Congress’s intent that the FCM financial requirements protect the public from the dangers posed by undercapitalized futures commission merchants. See, e.g., S.Rep. No. 947, 90th Cong., 2d Sess. 1-2, reprinted in 1968 U.S.Code Cong. & Ad.News, 1673,1673-74. It would be inconsistent with that statutory purpose to hold that section 4f(2) of the Act is not violated by a registered FCM who operates in an undercapitalized condition.
Zack also challenges the Commission’s finding that he aided and abetted Premex in its violation of section 4f(2) of the Act, 7 U.S.C. § 6f(2). We have already rejected Zack’s contention that the Commission improperly defined the violation underlying the aiding and abetting charge, and we find that the record amply supports the Commission’s finding that Zack aided and abetted that violation.
II. Aiding and Abetting the Filing of Materially Inaccurate Financial Statements
The Commission ruled that Zack aided and abetted Premex in its filing of inaccurate financial reports for October and December 1977 and January and February 1978 in violation of section 4f(l) of the Act, 7 U.S.C. § 6f(l), and Regulation 1.10. Zack contends that the Commission’s findings are not supported by the weight of the evidence.
The Commission based its findings on Zack’s participation in three transactions that it characterized as appearing to have had “no purpose but to assist Premex in misleading both Premex’s accountant and the Commission with respect to the true state of Premex’s capitalization.” These transactions included two $100,000 bank loans and a bank error of $150,000 that Premex treated as a loan.
Zack does not dispute that these transactions occurred or that they affected the picture of Premex’s financial condition presented to the Commission. Rather, he disputes the Commission’s refusal to accept his exculpatory explanation. Credibility determinations are questions of fact within an agency’s province. Lawrence, 759 F.2d at 774 (citing Moore v. Ross, 687 F.2d 604, 607-09 (2d Cir.1982), cert. denied, 459 U.S. 1115, 103 S.Ct. 750, 74 L.Ed.2d 969 (1983)). We have reviewed the record in this case and conclude that the weight of the evidence supports the Commission's findings.
III. Due Process
The Commission found that Zack violated section 6(b) of the Act, 7 U.S.C. § 9, because he did not reveal on his 1978 application for reregistration as an associated person that he was subject to a permanent injunction issued by the Illinois district court. Zack does not contest the factual basis of this finding. He contends, however, that he was denied due process of law because the ALJ denied his request that subpoenas be issued to six Commission employees to appear at the hearing. Zack argues that he was thereby denied the opportunity to present an affirmative defense that the Commission treated his application in a discriminatory fashion or arbitrarily deviated from its normal procedure.
Zack received a preprinted renewal application form from the Commission which he simply signed and returned. That form contained questions relating to Zack’s fitness for registration as an associated person, one of which asked whether the applicant were subject to a permanent injunction. These questions were not preanswered by the Commission, and Zack did not respond to them. The Commission processed the application as submitted and used Zack’s failure to respond to the question on injunctions as the basis for its omission charge. In essence, Zack contends that the Commission singled him out for prosecution because it did not return the incomplete form to him for additional information as, he asserts, it had done in the past. He sought to subpoena Commission personnel to obtain testimony about Commission procedures and practices at his hearing.
The rules of the Commission provide for the issuance of subpoenas ad testificandum. Regulation 10.68(b) prescribes spe cial requirements for subpoenaing Commission records and employees. Application must be by motion for which Regulation 10.68(b)(2) specifies the content:
The motion shall specifically describe the material to be produced, the information to be disclosed, or the testimony to be elicited from the witness, and shall show (i) the relevance of the material, information, or testimony to matters at issue in the proceeding; (ii) the reasonableness of the scope of the proposed subpoena; and (iii) that such material, information, or testimony is not available from other sources.
17 C.F.R. § 10.68(b)(2) (emphasis added). The AU, noting that the matter at issue in the proceeding was Zack’s fitness for registration, found that Zack had failed to satisfy the relevance requirement and thus had failed to establish that he was entitled to the subpoenas.
In support of his assertion that the ALJ’s ruling denied him due process of law, Zack argues that proof of discriminary treatment would constitute a defense to the material omission charge. We do not address the validity of Zack’s affirmative defense, because we conclude that the AU’s ruling, even if it were erroneous, would not constitute a deprivation of due process. Cf. United States v. Augenblick, 393 U.S. 348, 356, 89 S.Ct. 528, 533, 187 L.Ed.2d 537 (1969). The error, if any, did not deprive Zack of the opportunity to present his affirmative defense. In fact, the Commission addressed his defense in detail on his appeal and found that it was meritless. Zack does not appeal that finding.
IV. Sanctions
Zack challenges the sanctions imposed by the Commission. The choice of an appropriate sanction is a matter within the agency’s discretion. See Bosma v. United States Dept. of Agriculture, 754 F.2d 804, 810 (9th Cir.1984). The reviewing court may overturn a sanction only if it is unwarranted in law or unjustified in fact. Butz v. Glover Livestock Commission Co., Inc., 411 U.S. 182, 185-88, 93 S.Ct. 1455, 1457-59, 36 L.Ed.2d 142 (1973).
Zack contends that the Commission abused its discretion by revoking his registration as an associated person and by imposing a civil monetary penalty of $215,000. We conclude that the Commission’s revocation of Zack’s registration as an associated person did not constitute an abuse of discretion.
With regard to the assessment of the civil monetary penalty, Zack challenges the criteria applied by the ALJ and the Commission in arriving at the amount of the penalty. He also challenges the amount of the assessment.
The Act provides that, in determining the amount of a monetary penalty, “the Commission shall consider, ... in the case of a person whose primary business does not involve the use of the commodity futures market — the appropriateness of such penalty to the net worth of the person charged, and the gravity of the violation.” 7 U.S.C. § 9a.' The Commission has the burden of producing evidence to support the penalty it seeks. Bosma, 754 F.2d at 810.
Here, the Commission, as the proponent of the order assessing the monetary penalty, was required to produce evidence that the penalty was reasonable. See Bosma, 754 F.2d at 810. The Commission, however, presented no evidence on the appropriateness of the penalty or on the gravity of the violations at the penalty hearing. No evidence was presented to refute Zack’s testimony with regard to his assets and liabilities or on the impact of California community property laws on the determination of his net worth. The Commission chose not to cross-examine Zack on any of these issues. In the absence of such evidence, the AU and the Commission had no basis for determining the size of the penalty by applying the statutory factors. Bosma, 754 F.2d at 810. Nor does the Commission explain to us how a penalty virtually equal to the Commission’s assessment of Zack’s entire net worth constitutes a penalty that is “appropriate to his net worth.” The Commission has failed to satisfy us that its monetary penalty was imposed under the standards required by 7 U.S.C. § 9a.
We therefore conclude that the Commission’s assessment of the civil monetary penalty was unwarranted in law and, on this record, unjustified in fact. We remand for reconsideration of the penalty amount in light of this opinion.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
. Zack became president of Premex in July 1979. Prior to July 1979, Zack was vice president of Premex, and his brother, Eugene Zack, was its president. Eugene Zack was a party to this action prior to his death in July 1979. The action was then dismissed as to Eugene Zack. Zack owned 50 percent of Premex's stock.
. The Commission also found Premex liable for multiple violations of the Commodity Exchange Act, 7 U.S.C. §§ 1-26, and associated regulations. Premex’s appeal in this matter has been stayed pending the outcome of its bankruptcy proceedings.
. Although futures contracts differ from leverage contracts in several aspects, see 1 P. Johnson, Commodities Regulation § 1.08 at 23 (1982), leverage contracts were not regulated separately from futures contracts (except for a general antifraud provision now codified at 17 C.F.R. § 31.3) until 1984. In that year, the Commission promulgated comprehensive regulations for leverage contract merchants. 17 C.F.R. §§ 31.1-31.24.
. Premex was subsequently found in contempt for making false statements in promotional literature. This order was affirmed. CFTC v. Premex, Inc., 655 F.2d 779 (7th Cir.1981). The Commission was, however, unsuccessful in its attempts to persuade the district court to hold Premex and Zack in contempt for continued failure to meet the minimum financial requirements. Eventually, the district court vacated the portion of the injunction requiring Premex to comply with the minimum capital requirements on the ground that Premex did not have to meet those requirements because it was not doing business as an FCM. CFTC v. Premex, Inc., 1982-84 Comm.Fut.L.Rept. (CCH), ¶ 21,685 (N.D.Ill. Feb. 14, 1983). The district court’s order specifies that it has no collateral effect in this proceeding, which was under way when the order was entered.
. The first complaint, filed in May 1979, charged that Premex, aided and abetted by Zack; had violated section 4f(2) of the Act, 7 U.S.C. § 6f(2), by failing to meet the minimum financial requirements for the preceeding 16 months; had violated the predecessors of 7 U.S.C. § 23 and 17 C.F.R. § 31.03 by distributing false and misleading promotional materials; had violated section 4f(l) of the Act, 7 U.S.C. § 6f(l), by filing materially inaccurate financial statements (1-FRs); and had violated section 6(b) of the Act, 7 U.S.C. § 9, by willfully misstating material facts on applications for registration as a futures commission merchant and as a commodity trading advisor. Zack was also charged with willfully omitting material facts from his application for reregistration as an associated person. The second complaint, filed in August 1980, contained some additional charges and realleged the charges contained in the earlier complaint.
. The Commission modified the penalty assessment by the ALJ. The ALJ had assessed a penalty of $250,000 to be placed in escrow and subordinated to the claims of Premex’s creditors. The Commission found the escrow to be inappropriate and reduced the penalty to $215,-000 based on its computation of Zack’s net worth.
. Zack also argues that, because Premex was not operating on the commodities market, it was not "operating as a futures commission merchant” and was not under any duty to cease operating while in an undercapitalized state. He bases this argument on Regulation 1.17(a)(4) which requires an undercapitalized FCM to transfer its accounts and to "cease doing business as a futures commission merchant." 17 C.F.R. § 1.17(a)(4). But this argument misperceives the statutory requirements. Premex, as a registered FCM, was required by law to continue to meet the minimum capital requirements. Once it became undercapitalized, it violated the law. When it failed to rectify its undercapitalized state, it operated while in violation of the law. Thus, as the Commission concluded, the obligation to meet the minimum financial requirements flows from the registrant’s status as an FCM and not from the nature of its current activities.
. Section 13(a) of the Act, 7 U.S.C. § 13c(a), establishes aiding and abetting liability:
Any person ... who willfully aids, abets, counsels, commands, induces, or procures the commission of, a violation of any of the provisions of this chapter, or any of the rules, regulations, or orders issued pursuant to this chapter____may be held responsible ... for such violation as a principal.
. The record demonstrates that Zack was aware of the financial requirements applicable to all FCMs, that he was directly involved with Premex’s financial dealings and that he was aware of Premex’s failure to comply with the minimum financial requirements. As a registered associated person and an officer and director of a company engaged in a highly regulated business, Zack assumed certain responsibilities for conducting his affairs and those of the company, whose operations he directed, in accordance with the regulatory requirements. See In the Matter of Dillon-Gage, Inc., [Current Transfer Binder] Comm.Fut.L.Rep. (CCH) ¶ 22,574, p. 30,482 (CFTC 1984).
. The minimum capital deficiencies found by the AU for these months were 8144,301, 8292,-923, 8441,030, and 8321,050, respectively.
. Section 6(b) of the Act, 7 U.S.C. § 9, provides the applicable standard of review: “the findings of the Commission as to the facts, if supported by the weight of the evidence shall ... be conclusive." Weight of the evidence has been defined as the "preponderance” or the "greater weight of the evidence.” See, e.g., Haltmier v. CFTC, 554 F.2d 556, 560 (2d Cir.1977).
. Zack’s application for interlocutory review of the ALJ’s decision by the Commission was denied. The Commission indicated that not only had Zack failed to establish the relevance of his inquiry to the proceedings but he also had not laid an adequate foundation for his allegation of arbitrary conduct by Commission employees.
|
3637328-24768 | Opinion for the Court by Circuit Judge ROGERS.
ROGERS, Circuit Judge:
SFO Good-Nite Inn, LLC, withdrew recognition of Unite Here! Local 2 based on antiunion petitions that the National Labor Relations Board found were impermissibly tainted by Good-Nite’s unlawful assistance to the decertification effort in violation of sections 8(a)(5) and (1) of the National Labor Relations Act, 29 U.S.C. § 158(a)(1), (5). Good-Nite petitions for review on the principal ground that the Board applied the wrong line of its precedent, Hearst Corp., 281 N.L.R.B. 764 (1986), and expanded the conduct covered by it, unreasonably departing from its settled causality precedent in Master Slack Corp., 271 N.L.R.B. 78 (1984).
Regardless of whether the Board previously forthrightly explained the distinction between these two lines of its precedent, the Board has now articulated a clear line for applying the Hearst presumption of taint in “the narrow circumstance where an employer unlawfully instigates or propels a decertification campaign, and then invokes the results of that campaign to justify its unilateral withdrawal of recognition from its employees’ representative.” SFO Good-Nite Inn, LLC, 357 N.L.R.B. No. 16, at 4 (July 19, 2011). The Board explained that the Hearst presumption applies where the employer is directly involved in advancing a decertification petition, whereas the Master Slack test applies where the employer committed unfair labor practices unrelated to the petition that may have contributed to the erosion of support for the union. Upon finding that Good-Nite directly assisted and advanced the decertification effort by coercively asking employees to sign the petitions and unlawfully threatening to fire an employee for opposing it, the Board applied the Hearst presumption as there was no need to make a specific causation finding under Master Slack.
We hold that the Board’s Hearst presumption is reasonable and consistent with the Act, and that the Board’s factual findings are supported by substantial evidence in the record. Accordingly, we deny the petition for review and grant the Board’s cross application for enforcement.
I.
In March 2004, Good-Nite purchased a hotel located near the San Francisco International Airport and assumed the prior owner’s obligations under a collective bargaining agreement with housekeeping and janitorial employees represented by Unite Here! Local 2 (“the Union”). At the relevant time the represented unit consisted of 24 employees. The agreement was due to expire in November 2004, but in August 2004 Good-Nite and the Union agreed that it would remain in effect during their renegotiations for a new agreement.
During a bargaining session on August 23, 2005, the Union demanded that Good-Nite discharge five new housekeepers unless they paid union dues pursuant to a union-security clause in the agreement. On August 31, Good-Nite general manager Azfal “A.C.” Chaudhry and banquet manager Naomi Grace Vargas met with two of those housekeepers, Cristina Valencia and Maria Maldonado. At the meeting, Chau dhry told Valencia and Maldonado about the outstanding dues, stated that the Union was “no good,” and asked them to consider signing a “paper” to eliminate the Union. According to Valencia, Chaudhry questioned why they wanted a union when he was willing to give them paid vacation and health insurance, benefits they were not then receiving. Two hours later, Vargas approached Valencia and told her that Chaudhry was waiting for her response. Neither Valencia nor Maldonado signed a decertification petition. Maldonado told co-worker Luz Verdin that she was afraid management would make her sign a petition or lose her job.
Also in late August, Good-Nite assistant manager Leah Aquino approached housekeeper Margarita Taloma and asked her to sign an anti-union petition. A few days later Aquino unexpectedly arrived at Taloma’s home and again asked her to sign a petition. Taloma refused. Another employee testified that there were “rumors about signatures that were being requested [by Good-Nite management] for non-unionizing.” Tr. of ALJ Hr’g, Apr. 18, 2006, at 143.
Valencia, Maldonado, and Taloma all told housekeeping inspector Consuelo Contreras, who was on the Union negotiating committee, about Good-Nite’s solicitation of their signatures. On September 6, Contreras urged another housekeeper, Xiang Tan, not to sign the petitions. Two hours later, Chaudhry and Good-Nite’s owner, Eric Yokeno, asked Contreras why she was telling employees not to sign the petitions and told her that she could be fired for doing so at work. Good-Nite did not have a work rule against solicitation.
On September 7, Chaudhry fired Valencia and Maldonado, citing a seasonal slowdown in business. This was contrary to Good-Nite’s usual practice of laying off employees subject to recall, rather than firing them. Contreras, the employee most knowledgeable about their work, had not been asked about their work performance and thought they were both good workers. Other housekeepers with less seniority who had signed a decertification petition were not fired. By September 7, a Union field representative heard that Good-Nite management had been asking employees to sign a decertification petition.
On September 14, 2005, Good-Nite withdrew recognition of the Union based on petitions signed by 13 of the 24 unit employees stating that they no longer wished to be represented by the Union. When housekeeper Luz Verdin requested vacation leave, assistant manager Aquino told her on October 4 that she would grant the request if Verdin signed an anti-union petition, which she did. Aquino then backdated Verdin’s signature to make it appear that she had signed the petition on or before Good-Nite’s withdrawal of Union recognition. On October 14, 2005, the Union filed an unfair labor practice charge with the Board. The General Counsel of the Board issued a complaint on March 1, 2006.
The administrative law judge (“ALJ”) found, after a hearing, that Good-Nite had violated section 8(a)(1) of the Act by soliciting employees to sign an anti-union petition with threats or promised benefits; sections 8(a)(3) and (1) by discharging Valencia and Maldonado to discourage union membership and activities; and sections 8(a)(5) and (1) by unlawfully withdrawing recognition of and refusing to bargain with the Union. Applying the four-factor causation test of Master Slack, the ALJ found this unlawful conduct had tainted the employee petitions disavowing the Union. The ALJ, in addition to recommending reinstatement of Maldonado and Valencia with back pay and expunging references to their unlawful discharges from Good-Nite’s files, proposed a cease and desist order and various affirmative actions, including that Good-Nite bargain with the Union. In March 2008, the Board adopted the ALJ’s factual findings and proposed order. SFO Good-Nite Inn, LLC, 352 N.L.R.B. 268 (2008). Because the Board’s decision was rendered by a non-quorum of only two members, this court vacated the decision in view of New Process Steel, L.P. v. NLRB, — U.S. -, 130 S.Ct. 2635, 177 L.Ed.2d 162 (2010); Laurel Baye Healthcare of Lake Lanier, Inc. v. NLRB, 564 F.3d 469, 476 (D.C.Cir.2009), and remanded the case for further proceedings. SFO Good-Nite Inn, LLC v. NLRB, No. 08-1148 (D.C.Cir. Sept. 20, 2010).
On July 19, 2011, a three-member Board issued a decision incorporating by reference most of the 2008 decision and explaining further why Good-Nite’s withdrawal of recognition violated sections 8(a)(5) and (1) of the Act. Agreeing with the General Counsel that Good-Nite’s conduct per se precluded its reliance on the petitions as a valid basis for withdrawing recognition of the Union, the Board ruled that “the disposition of this case is properly controlled by Hearst Corp., holding that an employer may not withdraw recognition based on a petition that it unlawfully assisted, supported, or otherwise unlawfully encouraged, even absent specific proof of the misconduct’s effect on employee choice.” SFO Good-Nite Inn, 357 N.L.R.B. No. 16, at 1 (footnote omitted). One member dissented in part, on the ground that the Hearst presumption should be rebuttable while acknowledging that the difference was immaterial because Good-Nite “failed to show that its misconduct could not have tainted the employees’ petition.” Id. at 5 (Member Hayes, concurring in part, dissenting in part). A unanimous Board adopted the ALJ’s proposed order. Good-Nite petitions for review, and the Board cross-applies for enforcement of its Order.
II.
“[I]t is our longstanding rule that the Board is entitled to summary enforcement of the uncontested portions of its orders.” Carpenters & Millwrights, Local Union 2471 v. NLRB, 481 F.3d 804, 808 (D.C.Cir.2007) (internal quotation marks and alterations omitted). The Board accordingly seeks summary enforcement of its unchallenged findings that Good-Nite violated section 8(a)(1) of the Act by soliciting employees Taloma and Verdin to sign an anti-union petition with threats and promised benefits, and by threatening employee Contreras with discharge if she told other employees not to sign the petitions. Because Good-Nite did not file exceptions to these findings, section 10(e) of the Act jurisdictionally bars Good-Nite from obtaining review of them. 29 U.S.C. § 160(e); see also W & M Props. of Conn., Inc. v. NLRB, 514 F.3d 1341, 1345 (D.C.Cir.2008). The Board is therefore entitled to summary enforcement of these findings.
The Board also seeks summary enforcement of its Order directing Good-Nite to reinstate employees Valencia and Maldonado. The Board found that Good-Nite violated sections 8(a)(3) and (1) of the Act by discharging Valencia and Maldonado because they did not sign the anti-union petitions. Good-Nite challenges as clearly erroneous the factual finding that its general manager, Chaudhry, solicited Valencia’s and Maldonado’s signatures on an anti-union petition. But it does not challenge the Board’s determination that the discharges were unlawful. Good-Nite acknowledges that other record evidence— namely Chaudhry’s possession of the signed anti-union petitions at the time of the firings — would have supported the finding that the firings were unlawful, irrespectively of the alleged solicitations. The Board is therefore entitled to summary enforcement of the reinstatement portion of its Order.
III.
Good-Nite contends that the Board erred in declining to apply its traditional Master Slack test to evaluate disaffection petitions for taint and instead adopted a new rule based on “its little cited decision in Hearst Corporation,” Petr’s Br. at 18, under which, it asserts, the General Counsel is relieved of the burden to prove a causal nexus between the employer’s conduct and employee disaffection and instead can rely on what Good-Nite characterizes as overbroad “per se categories” of conduct, id. Objecting that “the Board provided no reasoned explanation for departing from Master Slack, [n]or explained how its new rule will not result in arbitrary decisions with no evidentiary support,” id., Good-Nite concludes that the new rule will impede employees’ section 7 rights and curtail employers’ free speech rights under section 8(c) of the Act. In Good-Nite’s view, had the Board properly applied its Master Slack precedent and considered all of the evidence, the Board “should have found that the unfair labor practices were isolated, mostly occurring after the Union lost majority support and were unknown to the rest of the bargaining unit.” Id. at 18-19. Good-Nite ignores the Board’s explanation and rationale for applying the Hearst presumption and the substantial evidence supporting the Board’s factual findings.
A. The court “aecord[s] a very high degree of deference to administrative adjudications by the [Board].” United Steelworkers of Am., Local Union 14534 v. NLRB, 983 F.2d 240, 244 (D.C.Cir.1993). “The Board, of course, is given considerable authority to interpret the provisions of the [Act]. If the Board adopts a rule that is rational and consistent with the Act, then the rule is entitled to deference from the courts.” Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 42, 107 S.Ct. 2225, 96 L.Ed.2d 22 (1987) (citation omitted). Such deference is appropriate here.
Section 8(a)(5) of the Act provides that “[i]t shall be an unfair labor practice for an employer ... to refuse to bargain collectively with the representatives of his employees.” 29 U.S.C. § 158(a)(5). There are circumstances, however, where an employer may unilaterally withdraw recognition from a union if it can show through objective evidence that the union has lost majority support as, for example, by presenting a petition signed by a majority of employees in the bargaining unit stating that they no longer wish to be represented by the union. See Flying Food Grp., Inc. v. NLRB, 471 F.3d 178, 182 (D.C.Cir.2006) (discussing Levitz Furniture Co., 333 N.L.R.B. 717 (2001)). This privilege is not absolute.
In Hearst Corp., 281 N.L.R.B. at 764, the Board found that the employer had unlawfully solicited employee signatures on union decertification petitions. For example, the employer had interrogated employees about their union sympathies, told them their continued representation by the union prevented their receiving better benefits, promised increased benefits and improved working conditions if they withdrew support for the union, and suggested they sign anti-union petitions and persuade their coworkers to withdraw their support for the union. See id. The unfair labor practices had occurred prior to and simultaneously with circulation of the petitions by employees. Although decertification petitions signed by a majority of the bargaining unit employees will generally be sufficient objective evidence to provide a reasonable basis for withdrawing recognition, the Board observed that it was “well settled” that an employer’s doubt about a union’s continuing majority status at the time it withdrew recognition “may not be raised in the context of any employer activities aimed at causing employee disaffection with the union.” Id. The Board concluded:
Where an employer engages in such conduct, the decertification petitions will be found to have been tainted by the employer’s unfair labor practices and the latter, consequently, will be precluded from relying on the tainted petition as a basis for questioning the union’s continued majority status and withdrawing recognition from that labor organization.
Id. The Board reached this conclusion, despite testimony from 19 of the 56 employees in the bargaining unit that they were unaware of the employer’s unlawful conduct, because an employer should not be able to “enjoy the fruits of its violations by asserting that certain of its employees did not know of its unlawful behavior.” Id. at 765 & n. 9. Drawing on its experience, the Board stated that it based the presumptive finding of taint “not ... on a finding of actual coercive effect, but rather on the ‘tendency of such conduct to interfere with the free exercise of employee rights under the Act.’ ” Id. at 765 (quoting Amason, Inc., 269 N.L.R.B. 750, 750 n. 2 (1984)).
By contrast, the question in Master Slack was whether the employer’s unremedied flagrant violations from an earlier unfair labor practice case tainted the atmosphere as a matter of law, such that the employer’s reliance in withdrawing union recognition on a petition signed 8 to 9 years later by a majority of the bargaining unit employees was unlawful. 271 N.L.R.B. at 79. There were no allegations the employer directly assisted the decertification campaign through improper solicitation, threats, or other misconduct. To determine whether there was a causal relationship between the employer’s earlier unlawful conduct and the anti-union petition, the Board applied a four-factor test: “(1) [t]he length of time between the unfair labor practices and the withdrawal of recognition; (2) the nature of the illegal acts, including the possibility of their detrimental or lasting effect on employees; (3) any possible tendency to cause employee disaffection from the union; and (4) the effect of the unlawful conduct on employee morale, organizational activities, and membership in the union.” Id. at 84. The ALJ found that there was no direct evidence of a causal relationship between the employer’s unlawful conduct in 1973-74 and the 1982 antiunion petition, and that the indirect factors were insufficient to preclude the employer as a matter of law from withdrawing recognition. See id. at 85. The Board, in adopting the ALJ’s findings, noted that the unfair labor practices “occurred many years before the petition’s circulation, and that the [employer] ha[d] complied with the ordered remedies in many significant respects well before the petition’s circulation.” Id. at 78 n. 1.
In applying the Hearst presumption here, the Board began by stating that “it is well settled that an employer may only withdraw recognition [of a union] if the expression of employee desire to decertify represents the free and uncoerced act of the employees concerned.” SFO Good-Nite Inn, 357 N.L.R.B. No. 16, at 1 (internal quotation marks omitted). Although both Hearst and Master Slack apply this limitation, the Board explained, they do so in two different contexts: “Hearst applies when an employer has engaged in unfair labor practices directly related to an employee decertification effort,” such as here, whereas Master Slack applies to “other unfair labor practices distinct from any unlawful assistance by the employer in the actual decertification petition.” Id. at 1-2 (internal quotation marks omitted). A causal nexus must be shown in the Master Slack line of cases because “there is no straight line between the employer’s unfair labor practices and the decertification campaign, and the Master Slack test must be used to draw one, if it exists.” Id. at 2. By contrast, in the Hearst line of cases, “the employer’s unfair labor practices are not merely coincident with the decertification effort; rather, they directly instigate or propel it.” Id.
The Board proceeded to elaborate on the scope and the rationale underlying the Hearst presumption. First, the Board emphasized that the presumption applies only in “the narrow circumstance where an employer unlawfully instigates or propels a decertification campaign, and then invokes the results of that campaign to justify its unilateral withdrawal of recognition from its employees’ representative.” Id. at 4. It then explained that there is “little need” for a Master Slack-type causation analysis in such circumstances because, as it had long observed, the “foreseeable consequence of such misconduct — and frequently its purpose — is ... to contribute to the union’s loss of majority status.” Id. (internal quotation marks omitted). The Board dismissed any need for evidence that employees who signed a petition knew of the employer’s unlawful labor practices because the victims of such practices frequently tell their co-workers, as occurred here, and thus “ ‘it may be presumed that employees who signed the petition ... were aware of the [employer’s unlawful acts], and such knowledge is likely to have influenced their decision.’ ” Id. at 4 & n. 29 (quoting Caterair Int’l, 309 N.L.R.B. 869, 880 (1992)). Finally, the Board explained as a matter of policy that its conclusive presumption “provides a strong incentive to employers to steer clear of potentially unlawful conduct.” Id. at 4.
The Board’s articulated distinction between these two lines of its precedent and its reasons for the Hearst presumption are rational and consistent with the Act. Good-Nite’s citation to Board decisions applying Master Slack to determine whether an employer’s involvement in a decertification campaign tainted the resulting petitions is unavailing. Whether or not the Board adequately distinguished between these two lines of its precedent in the past, it now has clarified that distinction and explained why the Hearst presumption applied to Good-Nite. The Board expressly stated that “[t]o the extent prior cases may have applied Master Slack to determine whether unfair labor practices directly related to a decertification effort caused employee disaffection, we clarify them in accordance with this decision.” SFO Good-Nite Inn, 357 N.L.R.B. No. 16, at 5 n. 33. The Board may clarify its rule in this fashion so long as it provides, as here, a rational reason and the clarification does not conflict with the Act. See FCC v. Fox Television Stations, Inc., 556 U.S. 502, 514-15, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009). Good-Nite misapprehends the nature of our review when it objects that the Board has not explained why the Hearst presumption is “necessary” or a “better tool” than the causation test of Master Slack. Petr’s Br. at 39, 41. The Board “need not demonstrate to a court’s satisfaction that the reasons for [one] policy are better than the reasons for [another]; it suffices that the ... policy is permissible under the statute [and] that there are good reasons for it.” Fox Television, 556 U.S. at 515, 129 S.Ct. 1800.
Good-Nite’s other objections are unavailing. In particular, Good-Nite mischaracterizes the Board’s decision when it contends that the Hearst presumption adopted by the Board is overbroad because it precludes withdrawal of union recognition “if an employer does anything with or says anything about a disaffection petition.” Petr’s Br. at 35. The Hearst presumption applies only in “the narrow circumstance where an employer unlawfully instigates or propels a decertification campaign.” SFO Good-Nite Inn, 357 N.L.R.B. No. 16, at 4 (emphasis added). Similarly, Good-Nite’s contention that the Hearst presumption will impede employees’ section 7 rights overlooks the fact, noted by the Board, that employees may still petition the Board directly for a decertification election, id. at 3.
Good-Nite’s remaining arguments are unpersuasive. First, its description of Hearst as “little cited” is not well taken. Petr’s Br. at 18. The Board and Good-Nite itself cite Board decisions enforced by the courts that applied the Hearst presumption where an employer solicited signatures or otherwise unlawfully encouraged a union decertification process. See, e.g., Wire Prods. Mfg., 326 N.L.R.B. 625 (1998), enforced mem. sub. nom. NLRB v. R.T. Blankenship & Assocs., Inc., 210 F.3d 375 (7th Cir.2000); V & S ProGalv, Inc., 323 N.L.R.B. 801 (1997), enforced, 168 F.3d 270 (6th Cir.1999); Am. Linen Supply Co., 297 N.L.R.B. 137 (1989), enforced, 945 F.2d 1428 (8th Cir.1991).
Second, Good-Nite attempts to distinguish those cases as limited to circumstances where the decertification petition would have failed “but for” the employer assistance, whereas the presumption in its case applies if an employer merely supports or encourages a decertification campaign. The Board pointed out that none of the cases suggested a “but for” analysis or made such a finding. See Respd’s Br. 37-38. Regardless, whether or not those cases used a direct cause analysis does not demonstrate the Board erred in applying the Hearst presumption here. At oral argument Good-Nite maintained that the Hearst presumption should be limited to instances where an employer is directly involved in the preparation and dissemination of a decertification petition. But it offered no persuasive reason why the rationale for such a rule would not extend to instances where an employee created and disseminated the petition but the employer unlawfully and coercively solicited signatures from employees in the bargaining unit, as appears to have occurred in Hearst itself, 281 N.L.R.B. at 764.
Good-Nite objects as well to the unrebuttable nature of the Hearst presumption adopted by the Board, contending it will result in arbitrary findings without substantial evidentiary support. The Board was in agreement that unlawful employer involvement would presumptively taint an anti-union petition even without specific proof that the employer’s conduct affected employee signatures. A majority concluded the presumption should be conclusive because of the “inherent unreliability” of after-the-fact employee testimony about their reasons for rejecting a union. SFO Good-Nite Inn, 357 N.L.R.B. No. 16, at 4. One Member urged that the presumption should simply shift the burden to the employer “to present objective proof that its misconduct did not cause or further disaffection,” suggesting it is “possible, even if not likely, that subsequent evidence of disaffection by an employee majority is an accurate and reliable expression of free choice.” Id. at 5 (Member Hayes, concurring in part, dissenting in part).
|
4319415-9957 | MEMORANDUM DECISION
DEBORAH L. THORNE, UNITED STATES BANKRUPTCY JUDGE
Now before the court is the amended motion of Lake Bluff Park District seeking an order instructing it as to whom it should turn over property under 11U.S.C. § 542. For the following reasons, Lake Bluff Park District is ordered to turn over currently held funds to the chapter 7 trustee.
BACKGROUND
Debtor, Glenbrook Group, Inc., was engaged in the business of roofing construction prior to filing the instant chapter 7 case. On July 27, 2015, Debtor entered into a construction contract with Lake' Bluff Park District (“LBPD”) to provide services on a roof and HVAC rehabilitation project for its recreation center. After some delays, Debtor finally finished the project in December 2015.
Before it could' pay out the $30,160.00 of remaining contract funds, LBPD received a letter from Debtor’s surety, Granite Re, Inc. (“Granite”). Granite provided Debtor with payment and performance bonds for the project. Granite’s letter requested that the remaining contract funds be paid over to it because of potential claims from Debtor’s suppliers and/or subcontractors. LBPD also received a $5,434,88 lien claim against the contract funds from the Roofer’s Pension Fund, Roofers’ Unions Welfare Trust Fund, Chicagoland Roofers’ Apprenticeship and Training Fund, Roofers’ Reserve Fund, Roofing Industry Advancement and Research Fund, Roofers’ Local 11 Promotional and Organizations Fund, National Roofing Industry Pension Plan, and the United Union of Roofers, Water-proofers and Allied Worker’s Local No. 11 (collectively referred to as “Claimants”). Claimants then sent an amended lien claim for $14,987.68.
Debtor filed a chapter 7 bankruptcy on January 26, 2016. Consequently, the chapter 7 trustee sent a letter to LBPD requesting it to turn over the funds. Around the same time, Granite contacted LBPD to instruct it to pay $5,434.88 to the claimants or transfer the remaining contract funds to Granite to pay Claimants. Subsequently, Granite paid Claimants $19,285.20 in exchange for assignment of their claims.
Due to its confusion, LBPD filed the instant motion to determine where to pay the contract funds. Both Granite and the trustee filed response and reply briefs. Granite argued that the portion it paid to the Claimants, $19,285.20, should be directly turned over to it and the rest to the trustee. The trustee argued that all of the funds came into the estate under 11 U.S.C. § 541. After reviewing the parties’ briefs, the court holds that the contract funds are property of the estate. LBPD must turn over the funds to the chapter 7 trustee. The trustee may not distribute the funds, however, until Granite’s interest is established. ,
DISCUSSION
Under 11 U.S.C. § 542(b):
Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor.
All parties agree that the contract funds were owed to Debtor on the petition date. Thus, this decision focuses on whether the entire amount of the contract funds is property of the estate.
Under a Plain Reading of Section 541, all of the Contract Funds are Property of the Estate.
Upon the filing of a bankruptcy petition, all legal and equitable interests of the debtor come into the bankruptcy estate unless excepted in 11 U.S.C. § 541(b) or (c)(2). Even property subject to the interest of another comes into the estate to the extent of the debtor’s legal title. Essentially, the plain language of § 541(a)(1) and (d) instructs that any property in which the debtor has the slightest interest comes into the. estate. Nevertheless, a finding that something is property of the estate does not mean a debtor has a greater right to the property, only that the property comes into the estate. The United States Court of Appeals for the Fifth Circuit addressed this issue and stated as follows:
Even if all or part of this sum were subject to a “constructive trust” in favor of Durar-Wood, Foster, and other suppliers to Sigma, nevertheless, at the least, Sigma had a “legal” interest in the property so impressed, which was thus property of the estate, § 541(a)(1), required to be turned over to it, § 542(a), (b), subject to the bankruptcy court’s power to recognize the suppliers’ equitable interest, § 541(d) or to issue protective order prohibiting or conditioning its use if a cash equivalent, § 363(c)(3), (4) and § 541(d). Georgia-Pacific, a debtor of Sigma, could not refuse to pay over sums due to the estate and to which the estate had legal title on the contention that some other debtor had a priority, or a constructive-trust claim to these sums superior to that of Sigma, the debtor in possession. It is for the bankruptcy court, not a stakeholder with possession of assets in which the debtor has at least a legal interest, to determine such contentions.
Georgia Pac. Corp. v. Sigma Serv. Corp., 712 F.2d 962, 967-68 (5th Cir.1983)(footnote omitted). If the debtor has any claim to the property and it is not covered by an exception, it is the bankruptcy court that determines distribution, not the creditor.
In this case, Granite argues that Debtor may have bare legal title to the remaining contract funds but Granite, has a greater equitable interest. The court has, not made a factual finding concerning Granite’s interest. Determinations of interests are governed by Federal Rule of Bankruptcy Procedure 7001(2) which provides that “a proceeding to determine the validity, priority or extent of a lien or other interest in property other than a proceeding under rule 4003(d)” is an adversary proceeding. Granite used this motion to argue its right to the funds. The appropriate avenue is an adversary proceeding. If one is filed, the court will determine Granite’s interest at that time. As such, all of the contract funds are deemed property of the estate subject to whatever interest Granite holds.
- The foregoing analysis resolves LBPD’s motion. For the sake of clarity, the fol lowing discussion addresses Granite’s arguments.
Subrogation does not take contract funds out of the estate.
Granite argues that. its claim should be subrogated above Debtor’s right to the property and therefore found not to be property of the estate. The doctrine of subrogation provides that “a surety who pays the debt of another is entitled to all the rights of the person he paid to enforce his right to be reimbursed.” Pearlman v. Reliance Ins. Co., 371 U.S. 132, 137, 83 S.Ct. 232, 9 L.Ed.2d 190 (1962). Granite argues that subrogation takes its claim out of the bankruptcy estate either by statute under 11 U.S.C. § 609 and/or by ah equitable lien as set forth in Pearlman v. Reliance. Neither of these arguments is persuasive. Assuming, for the moment, that Granite has a right to equitable or statutory subrogation, this doctrine only directs how the trustee distributes or abandons property, not its classification as property of the estate,
A. Subrogation under 11 U.S.C. § 509 does not take the contract funds out of the estate.
Granite argues that its claim should be subrogated under § 509(a) which provides “[e]xcept as provided in subsection (b) or (c) of this section, an entity that is liable with the debtor on, or that has secured, a claim of a creditor against the debtor, and that pays such a claim, is subrogated to the rights of such creditor to the extent of such payment.” Granite’s claims may be eligible for subro-gation but this provision only subrogates the claim as to the creditor whose claim Granite paid. Granite paid Claimants. Thus, § 509 would subrogate Granite’s claim above Claimants, not above Debtor or the trustee as administrator of Debtor’s bankruptcy estate. Section 509 does not take any portion of the contract funds out of the bankruptcy estate.
B. Pearlman v. Reliance Insurance ■ Company Does Not Apply to This Case.
Granite argues that the court should follow Pearlman v. Reliance Ins. Co., 371 U.S. at 135-36, 141, 83 S.Ct. 232, to find that an equitably subrogated claim is excluded from property of the estate.
In Pearlman, Dutcher Construction Corporation entered into a contract with the United States. Id. at 133, 83 S.Ct. 232. As required by federal law, Rebanee Insurance Company executed two surety bonds, one to guarantee performance of the contract and the other to guarantee payment to all persons supplying labor. Id. “Under the terms of the contract ,.. the United States was authorized to retain and hold a percentage of estimated amounts due monthly until final completion and acceptance of all work covered by the contract.” Id. at 133-34, 83 S.Ct. 232. Before completion, the United States terminated the contract due to Dutcher’s financial trouble. Id. at 134, 83 S.Ct. 232. Dutcher filed bankruptcy and the United States turned over the $87,737.35. it was holding to the bankruptcy trustee, “who held it on the assumption that it had been property of the bankrupt at the time of adjudication and therefore had vested in the trustee ‘by operation of law under s 70 of the Bankruptcy Act.” Id. Reliance then filed a petition in the District Court arguing that it was the owner of the $87,737.35 free and clear of the claims of the bankruptcy trustee. Id.
On appeal, the Supreme Court stated that “[property interests in a fund not owned by a bankrupt at the time of adjudication, whether complete or partial, legal or equitable, mortgages, liens or simple priority rights, are of course not a part of the bankrupt’s property and do not vest in the trustee.” Id. at 135, 83 S.Ct. 232. Thus, the Court used the doctrine of equitable subrogation to hold that Reliance obtained a right to the funds that did not come into the bankruptcy estate. Id. at 135-36,141, 83 S.Ct. 232.
|
3757609-18920 | MEMORANDUM OPINION AND ORDER
BABCOCK, District Judge.
By order dated March 7, 1991, attached as Appendix A, I granted the motion for summary judgment filed by plaintiff Resolution Trust Company (the RTC) and found defendants liable on a promissory note (the note). The RTC now moves for sanctions under Federal Rule of Civil Procedure 11 and 28 U.S.C. section 1927, and attorney fees under the terms of the note. In addition, the RTC moves for a summary judgment declaring that, under Colorado Rule of Civil Procedure 106(a)(5), Jonathan F. Clark (Clark), allegedly a partner in defendant TEEM Partnership, is jointly and severally liable for the judgment entered against defendants. Clark has filed a cross motion for summary judgment. A hearing was held August 8, 1991. For the reasons stated below, I deny the RTC’s motion for sanctions under Rule 11 and section 1927 but grant the motion for attorney fees under the terms of the note. I also grant Clark’s motion for summary judgment concerning his liability for the judgment and, consequently, deny the RTC’s summary judgment motion.
I. RTC’S MOTION FOR SANCTIONS AND ATTORNEY FEES
The RTC moves for sanctions against defendants’ attorneys under Federal Rule of Civil Procedure 11 and 28 U.S.C. section 1927 and for attorney fees against defendants under the terms of the note.
A. Rule 11 And Section 1927
Under Federal Rule of Civil Procedure 11,
[t]he signature of an attorney or party constitutes a certificate by the signer that the signer has read the pleading, motion, or other paper; that to the best of the signer’s knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.
In deciding a motion for sanctions under Rule 11, I apply an objective standard. I determine whether a reasonable and competent attorney would believe the merits of an argument. Dodd Ins. Serv., Inc. v. Royal Ins. Co., 935 F.2d 1152, 1155 (10th Cir.1991).
Under 28 U.S.C. section 1927, an “attorney ... who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” An award should be made under section 1927 only in instances evidencing a serious disregard for the orderly process of justice. White v. American Airlines, Inc., 915 F.2d 1414, 1427 (10th Cir.1990).
The RTC argues that defendants’ attorneys are liable under Rule 11 and section 1927 because they knew or should have known that defendants had no legally tenable defense. I disagree.
Defendants made at least two nonfrivolous defenses to the RTC’s summary judgment motion. First, they argued that 12 U.S.C. section 1823(e) violated the United States Constitution’s takings clause. This argument had been rejected in other jurisdictions. However, neither RTC’s counsel nor I uncovered any Tenth Circuit authority on this issue. Although defendants lost the point, I conclude that their constitutional argument was not frivolous.
Defendants also argued that under FDIC v. Nemecek, 641 F.Supp. 740 (D.Kan.1986), section 1823(e) did not bar their defense of accord and satisfaction. Although defendants conceded that they did not have a completed accord and satisfaction, they argued that their performance of the accord was frustrated by the actions of the RTC or its predecessor in interest. Again, there is no Tenth Circuit authority on point. The RTC’s argument was simply that Nemecek was wrongly decided. See RTC’s Reply Brief at 10-11. Reliance on a district court case that has not been rejected by the Tenth Circuit is not frivolous.
Because I conclude that the RTC has not met its burden under Rule 11 and section 1927, its motion for sanctions will be denied.
B. Attorney Fees And Costs Under The Terms Of The Note
The RTC also moves for reasonable attorney fees and costs under the terms of the note. Defendants concede that they are contractually bound to the RTC for reasonable attorney fees and costs. Defendants’ Response to Plaintiff’s Motion For Attorney Fees at 1. However, they contest the reasonableness of the fees claimed.
Although in retrospect this case may have been prosecuted more efficiently, I cannot conclude that the $38,000 fees and costs claimed is unreasonable. Accordingly, the RTC’s motion for fees and costs under the terms of the note will be granted.
The RTC also moves for prejudgment interest on the fees and costs. Although the note does not expressly provide that the holder will be entitled to interest on its attorney fees and costs, the RTC argues that it is entitled to interest because “the deed of trust ... TEEM executed to secure the note, which the note incorporates by reference, provides in ¶ 1(c) that TEEM will pay ‘all amounts which [Plaintiff] has paid if [TEEM] fails to make any payment required hereunder, or to observe or perform any of its agreements contained herein plus interest thereon at a rate of the greater of 6% per annum above the interest rate as described in the Promissory Note of 18% per annum, ... RTC’s Motion for Attorneys’ Fees and Costs at 6. Defendants do not contest the RTC’s position. Accordingly, I will grant the request for prejudgment interest.
II. CROSS MOTIONS FOR SUMMARY JUDGMENT
Approximately one month after final judgment entered for the RTC against defendants, the RTC filed a “Colorado Rule 106(a)(5) motion for issuance of citation to show cause as to Jonathan F. Clark.” Because Federal Rule of Civil Procedure 69(a) appears to make Colorado Rule of Civil Procedure 106(a)(5) applicable here, see Lowell Staats Mining Co. v. Philadelphia Elec. Co., 660 F.Supp. 809, 814-15 (D.Colo.1987), aff'd on other grounds, 878 F.2d 1271 (10th Cir.1989), I issued an order that Jonathan F. Clark (Clark) show cause why he should not be bound by the judgment entered earlier. He responded. The matter is now before me on cross motions for summary judgment.
Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). For the reasons stated below, I grant Clark’s motion and deny the RTC’s motion.
Colorado Rule of Civil Procedure 106(a)(5) reads:
When judgment is recovered against one or more of several persons jointly indebted upon an obligation, and it is desired to proceed against the persons not originally served with the summons who did not appear in the action[, s]uch persons may be cited to show cause why they should not be bound by the judgment in the same manner as though they had been originally served with the summons, and in his answer any such person may set up any defense either to the original obligation or which may have arisen subsequent to judgment, except a discharge from the original liability by the statute of limitations.
The RTC contends that Clark was a Teem partner and is therefore jointly and severally liable under the note. Clark moves for summary judgment, claiming that Rule 106(a)(5) is limited to situations in which it is discovered after trial or judgment that another person not originally served may be liable to pay the debt in question and that the RTC knew of Clark’s potential liability before judgment entered.
The parties dispute whether the RTC had reason to know that Clark was a Teem partner in early 1988. However, the RTC concedes that on January 17, 1991,. defendants produced documents that revealed to the RTC that Clark was a Teem partner. RTC’s Colorado Rule 106(a)(5) Motion 113. This was more than 45 days before hearing on the RTC’s summary judgment motion against defendants.
The only case concerning Rule 106(a)(5)’s applicability to a situation such as this is Womack v. Grandbush, 134 Colo. 1, 298 P.2d 735 (1956). That case was a Rule 106(a)(5) proceeding where a judgment creditor sought to impose liability against a wife for a judgment entered after a trial against her husband. Before trial, the husband had filed an affidavit stating the he was the sole owner of a livestock business. Evidence at the trial showed that the wife was at all times a full partner in the business. The Supreme Court held that the trial court erred in refusing to order the wife to show cause why she should not be liable under the judgment entered against her husband.
There is some justification for the trial court in refusing to have the name of the wife added as a party defendant, because application for such additional party was not made at the time of the trial when the facts appeared; however, under all the facts in the case, and in fairness and justice to all parties concerned, no injury could obtain by requiring the wife to show cause why she is not liable to answer under this judgment. Had she and her husband properly demeaned them selves concerning the matter of revealing to the public by proper affidavit the status of their business interest, she would no doubt have been made a party defendant in the original action. The judgment creditor had a right to rely upon the record at the time of filing his action. To now deny plaintiff the right to discover the true interest entering into the judgment would be to reward people in such enterprises for misrepresentation and nondisclosure to the injury and detriment upon a relying public.
Womack, 298 P.2d at 736.
The clear implication of Womack is that absent the misrepresentation, the trial court would have been justified in refusing to hold the wife bound by the judgment against her husband. Here, the RTC has shown no misrepresentation and nondisclosure attributable to Clark. More importantly, the RTC cannot excuse its failure to join Clark before final judgment. The Federal Rules of Civil Procedure allow for liberal discovery, amendments to pleadings, and joinder of parties. The complaint in this case was filed on September 28, 1988. With reasonable diligence, the RTC should have discovered Clark’s status before January 17, 1991. Even then it had ample time to amend its complaint and join Clark. Because the RTC never sought to amend or to join him, Clark has been denied meaningful, fair, and full participation in these proceedings. See Restatement (Second) of Judgments § 60(l)(b)(ii) (1982). Instead, to Clark’s prejudice, the RTC now relies belatedly on the exceptional provisions of Colorado Rule of Civil Procedure 106(a)(5).
Assuming that this state rule can be applied by a federal court via Federal Rule of Civil Procedure 69(a), Clark has met his summary judgment burden of showing cause why he should not be bound by the judgment previously entered in this case.
Accordingly, it is ORDERED that
(1) the RTC’s motion for sanctions under Rule 11 and section 1927 is DENIED;
(2) the RTC’s motion for attorney fees and costs under the terms of the note is GRANTED for $38,000 plus prejudgment interest at 18% per annum and defendants are jointly and severally liable to the RTC for this amount;
(3) Clark’s motion for summary judgment is GRANTED and the show cause order and the Colorado Rule of Civil Procedure 106(a)(5) proceeding against him is DISCHARGED;
(4) the RTC’s motion for summary judgment on the court’s order citing Jonathan F. Clark to show cause is DENIED;
(5) the final judgment shall be amended accordingly.
APPENDIX A
March 12, 1991
In the United States District Court
For the District of Colorado
RESOLUTION TRUST CORPORATION, as Conservator for First Federal Savings Bank of East Alton, Illinois, Plaintiff, v. TEEM PARTNERSHIP, a Colorado general partnership; JOHN A. WINTERS, MICHAEL P. BAHR, STEYAN G. STRAIN, and NEAL M. PRICE, individually and as general partners of the TEEM Partnership, Defendants.
Civil Action No. 88-B-1560
ORDER
LEWIS T. BABCOCK, District Judge.
The Resolution Trust Corporation (RTC), as conservator for First Federal Savings Bank of East Alton, Illinois (First Federal), brings this action to recover on a promissory note and contracts of guarantee. Defendants counterclaim, alleging breach of an unwritten agreement. Before me are the RTC’s motion for summary judgment on its claims and on defendants’ counterclaim as well as defendants’ motion to amend counterclaims. Defendants’ counterclaims, proposed counterclaims, and defenses to liability all involve unwritten agreements that may not be asserted against the RTC. 12 U.S.C. § 1823(e). Defendants’ contention that the RTC has failed to mitigate damages is without mer it. Accordingly, I grant the RTC’s motion for summary judgment and deny defendants’ motion to amend.
“The plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). To make a sufficient showing, a party may not rest on mere allegations or denial, but instead must present enough evidence that a reasonable jury could return a verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).
The record, with all disputes resolved in defendants’ favor, shows the following. Defendants are Teem Partnership (Teem), a Colorado general partnership, and its individual general partners. On July 15, 1985, Teem executed a promissory note for $387,200.00 plus interest (the note) payable to Cambridge Financial Corporation (Cambridge). The note was secured by a deed of trust (the deed of trust) on real property in Douglas County, Colorado. Also on July 15, 1985, Teem executed a rent assignment agreement (the rent assignment) with Cambridge, in which Teem agreed to assign to Cambridge all rents, revenues, and benefits produced by the property securing the note under the deed of trust should Teem default on the note. As further security, defendants John A. Winter, Michael P. Bahr (Bahr), Stevan G. Strain and Neal M. Price (Price) each entered into separate contracts of guaranty (the guarantees) under which each personally guaranteed full payment of the note to Cambridge should Teem default.
On July, 30, 1985, Cambridge assigned its interest in the note, the deed of trust, the rent assignment, and the guarantees to First Federal. In July, 1986, Teem and First Federal entered into a “Promissory Note and Deed of Trust Modification Agreement” (the modified note), in which the terms of the note were reaffirmed as consideration for First Federal’s agreement to increase the principal balance of the note to $460,000.
Teem made monthly payments on the note and modified note (collectively the notes) until December 1987, but has paid nothing since.
On May 1, 1988, in consideration for Teem allowing First Federal to implement the rent assignment, First Federal agreed not to file suit on the notes (the forbearance agreement). First Federal’s agreement not to file suit was not made in writing and was not approved by its board of directors.
This action was filed by First Federal in September, 1988. First Federal sought to recover on the notes and the guarantees, and specific performance of the rent assignment. The claim for specific performance has been abandoned.
Defendants and First Federal agreed in February 1989 that if the defendant partners paid certain property taxes and street improvements on the secured property, First Federal would cancel the notes (the settlement agreement). Although the Federal Savings and Loan Insurance Corporation (FSLIC) had notice of this agrément, it was never put into writing.
The Federal Home Loan Bank Board determined in April 1989 that First Federal was insolvent and that grounds existed to appoint FSLIC as sole conservator for First Federal. On August 9, 1989, under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 the RTC succeeded FSLIC as conservator in this action. See 12 U.S.C. § 1441a(b)(6) (West Supp. 1990).
The RTC moves for summary judgment as to its claims on the notes and on the guarantees. All of defendants’ counterclaims, proposed counterclaims, and defenses to liability derive from either the forbearance agreement or the settlement agreement. The RTC maintains that 12 U.S.C. § 1823(e) bars defendants from as serting these unwritten agreements against the RTC. I agree.
Section 1823(e) reads:
No agreement which tends to diminish or defeat the interest of the [FDIC] in any asset acquired by it under this section or section 1821 of this title, either as security for a loan or by purchase or as receiver of any insured depository institution, shall be valid against the [FDIC] unless such agreement—
(1) is in writing,
(2) was executed by the depository institution and any person claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the depository institution,
(3) was approved by the board of directors of the depository institution or its loan committee, which approval shall be reflected in the minutes of said board or committee, and
(4) has been, continuously, from the time of its execution, an official record of the depository institution.
Section 1823(e) applies to the RTC as well as the FDIC. See 12 U.S.C. § 1441a(b)(4) (“the [RTC] shall have the same powers and rights ... as the Federal Deposit Insurance Corporation has under sections 11, 12, and 13 of the Federal Deposit Insurance Act [12 U.S.C. §§ 1821, 1822, and 1823] with respect to insured depository institutions ... ”); RTC v. Colorado 126 Partnership, 746 F.Supp. 35, 37 (D.Colo.1990). This section applies whether the RTC obtains an asset in its corporate capacity or in its capacity as receiver. Vernon v. RTC, 907 F.2d 1101, 1105 n. 2 (11th Cir.1990); Carico v. First National Bank, 734 F.Supp. 768, 769 (E.D.Tex.1990).
Defendants do not assert that the forbearance agreement or the settlement agreement comply with the requirements of section 1823(e). Rather, they argue that section 1823(e) does not apply. They first contend that the forbearance agreement and the settlement agreement, which were both allegedly made before FSLIC’s takeover of First Federal, cancelled the notes such that the RTC acquired no “asset” within the meaning of the statute.
The issue whether an unwritten accord and satisfaction made before the RTC (or FDIC) acquires a note is a defense under section 1823(e) has produced mixed results. Compare FDIC v. Krause, 904 F.2d 463, 466 (8th Cir.1990) (defense barred by 1823(e)) with FDIC v. Nemecek, 641 F.Supp. 740 (D.Kan.1986) (defense not barred by 1823(e)).
|
4236232-28110 | FORMAN, Chief Judge.
Following the opinion in this case, D.C., 87 F.Supp. 157, the plaintiff filed a proposed form of final judgment in fifteen sections. The defendants have objected to certain sections of the judgment, proposed modifications thereof, and have suggested the addition of a new section. A hearing has been had and briefs were filed.
There was no dispute as to plaintiff’s proposed sections I(A) to (E), (G) and (H), II, III, IV, V(A) (1) to (5) and (B), VII(A) and (C), IX(B) (1), X(C) (D) and (E), XI, XII, XIII, XIV and XV.
The following is a disposition of the arguments on the disputed sections:
Section I, Paragraphs (F) and (I)
For its Section 1(F) the plaintiff proposes the following:
“ ‘Defendants’ shall mean all parties defendant as named in the complaint in this cause except the individual defendants Nathan Hyman and Edward Hyman.”
The defendants, relying on the case of Hartford-Empire Co. v. United States, 1945, 323 U.S. 386, 65 S.Ct. 373, 89 L.Ed. 322, object to this definition on the ground that it would include all individual defendants named in the case except as specifically excluded and would needlessly hamper the individuals particularly if they disassociated themselves from the corporate defendants and sought fresh positions in the industry. In the Hartford-Empire case the Supreme Court said:
“A word should be said concerning the inclusion in many paragraphs of the decree, and in many of the injunctions imposed, of various individual defendants who in the past have acted as, and who at present are, officers or directors of the corporate defendants. They offended against the antitrust laws by acting on behalf of, or in the name of, a corporate defendant. There are no findings, and we assume there is no evidence, that any of them have applied for, owned, dealt in, and licensed patents appertaining to the glassware art. Nor is there evidence or finding that, as individuals acting for their own account, any of them, as a principal, has entered into any of the arrangements found unlawful by the court. Despite these facts, in practically every instance where a corporate defendant is restrained from described action or conduct, these individuals, as individuals, are likewise restrained. Any injunction addressed to a corporate defendant may as various sections of the decree do, include its officers and agents. If the individual defendants are officers or agents they will be comprehended as such by the terms of the injunction. If any of them cease to be such, no reason is apparent why he may not proceed, like other individuals, to prosecute whatever lawful business he chooses free of the restraint of an injunction. On the other hand, if new officers and directors take the places of these defendants, such new agents will automatically come under the terms of the injunction. There is no apparent necessity for including them individually in each paragraph of the decree which is applicable to the. corporate defendants whose agreements and cooperation constitute the gravamen of the complaint. That these individuals may have rendered themselves liable to prosecution by virtue of the provisions of § 14 of the Clayton Act [15 U.S.C.A. § 24] is beside the point, since relief in equity is remedial, not penal.” 323 U.S. at pages 433, 434, 435, 65 S.Ct. at page 396, 89 L.Ed. 322.
As a substitute for plaintiff’s proposal defendants suggest the following:
“ ‘Defendants’ shall mean all the corporate parties defendant as named in the complaint in this cause and shall exclude the individual defendants except where otherwise expressly named.”
I shall accept the suggestion of the defendants modified as follows:
“ ‘Defendants’ shall mean all the corporate parties as named in the complaint in this cause, their directors, officers and agents.”
The individual defendants in this case were officers, directors or agents of the companies and as such they are encompassed in the definition of “defendants” as long as they serve in such capacities. If they completely disassociate themselves from their respective companies there is no reason to attempt to restrain them from pursuing normal activities. If they return to their companies they automatically find themselves under the cloud of the judgment.
The plaintiff proposes as its Section 1(1) the following:
“ ‘Patents’ shall mean United States Letters Patent and applications therefor, including all reissues, divisions, continuations or extensions thereof and patents issued upon said applications.”
Defendants oppose this definition on the ground that taken in conjunction with the plaintiff’s proposal contained later in its form of judgment covering compulsory licensing of patents within a period of five years from the date of the judgment, it would include patents which may be issued long after the expiration of the five year period upon applications made within that period. Inasmuch as this objection relates primarily to the question of licensing of future patents we will recognize and deal with defendants’ objection subsequently but will accept the definition of “patents” as proposed by the plaintiff for inclusion in the judgment.
Section V, Paragraph (A), Subparagraphs (6) (7) and (8).
In Section V, Paragraph (A), Subparagraphs (6), (7) and (8) the plaintiff proposed the following:
“(A) Bach of the following agreements is hereby adjudged and decreed to be unlawful under Sections 1 and 2 of the Sherman Act [15 U.S.C.A. §§ 1, 2] and is hereby terminated; and defendants are jointly and severally enjoined and restrained from the further performance or enforcement of any of the provisions of said agreements and of any agreements amendatory thereof or supplemental thereto: * * *
“(6) Agreement dated April 28, 1939, between De Jur Amaco and Radio and General; (7) Agreement dated June 10, 1939, between Radio and General and (8) All contracts, agreements or understandings to which defendants Development, Radio and General are jointly or severally parties covering the licensing of patents relating to variable condensers.”
Defendants oppose the inclusion of Subparagraphs (6) and (7) on the ground that the contracts described therein were not held to be entirely illegal in the opinion filed in this case. They are characterized therein, 87 F. Supp. at page 194 and concern restrictions in dealing with tools which were held to be illegal transactions in the eyes of the antitrust laws and cast a shadow on the general conduct of the defendants with relation to the said laws. But those contracts have been completely performed and terminated. There is no likelihood of their being reopened or supplemented in any way. In view of this there is no reason to enjoin the defendants from any further performance or enforcement of the provisions contained therein. The opinion contains a finding as to the extent of their illegality and it is unnecessary to repeat it in the judgment. Consequently Subparagraphs (6) and (7) will be deleted.
The defendants objected to the words “or severally” in Subparagraph (8) following the word “jointly” for the reason that it could be construed to restrict the parties from entering individually into contracts with firms not parties to this litigation and otherwise impede the defendants from pursuing normal and legitimate business relationships. Such an interpretation should not be given and to avoid its possibility the words “any two or more of the” shall be interpolated between the word “which” and the word “defendants”. This treatment will obviate the necessity of inserting the word “mutual” before the word “understandings” as suggested in proposed miscellaneous amendments.
Defendants ask for the deletion of Section VI of the judgment as proposed by the plaintiff. It reads as follows:
“(A) Each defendant is hereby -enjoined and restrained from entering into, performing, adopting, adhering to, maintaining or furthering, directly or indirectly, or claiming any rights under, any combination, conspiracy, contract, agreement, arrangement, understanding or plan or program with any person engaged in the manufacture or distribution of variable condensers which has as its purpose or effect:
“(1) Limiting, restraining .or preventing the sale of tools, dies, fixtures, or jigs, used in the manufacture of variable condensers, to any person or for use in any specified territory;
“(2) Limiting, reducing or restricting the types, models, qualities or quantities of variable condensers which are or may be developed or manufactured;
“(3) Excluding any manufacturer or distributor of variable condensers from any territory or market, or -interfering with or restricting any such manufacturer or distributor in competing in any territory or market;
“(4) Fixing, maintaining or adhering to prices or price ranges or other terms and conditions of sale or distribution of variable condensers;
“(5) Limiting or restricting, in any manner, the exercise of independent decision in the acquisition of patents or patent rights.
“(B) Each defendant is hereby enjoined and restrained from entering into any contract, agreement or understanding with the purpose or effect of admitting the validity of any patent not issued at the time of such admission.”
The defendants contend that the restraints of this section are too broad and would perpetually restrict them from engaging in normal and valid contracts unrelated to any of the issues raised in this litigation. Specifically as to Sub-paragraph (1) of Paragraph A, the defendants submit that they would be precluded from making available to another manufacturer tools with which to make condensers in the event of a war emergency, when they were operating at full capacity, and still retain any control over their tools. This provision is justified by the conduct of the defendants as found in the opinion herein, and the contingency cited by the defendants may be regarded as exposing them to a remote hazard, which hazard could be removed by an appeal to the court under the sec tion providing for retention of jurisdiction.
The defendants construe Sub-paragraph (2) as prohibiting agreement between a distributor and a manufacturer wherein the distributor orders the manufacturer to produce a special model in accordance with a new design adopted by the distributor, because thereby a prior model would be rendered obsolete and would be replaced. This the defendants submit would be a limiting or restricting of the given type or model in violation of this provision. This construction is far-fetched. The provision as proposed seen in the light of reason is an appropriate regulation to be observed by the defendants in this industry.
To the extent that the defendants object to Subparagraph (3) on the ground that they would be perpetually restrained in making agreements with the distributors or manufacturers who are not defendants in this case involving provisions for valid territorial and marketing restrictions, the plaintiff’s proposal is too broad. The defendants, however, should be enjoined from contracting between themselves in accordance with the terms of this Subparagraph. Hence Subparagraph (3) will be revised in a new paragraph (B) in the following manner:
“(B) The defendants as between themselves are hereby enjoined and restrained from' entering into, performing, adopting, adhering to, maintaining or furthering, directly or indirectly, or claiming any rights under any combination, conspiracy, contract, agreement, arrangement, understanding or plan or program which has as its purpose or effect:
“(1) Excluding each other from any territory or market, or interfering with or restricting each other in competing in any territory or market
It is probable that in the totality of the judgment proposed to be entered in this ease restraints tantamount to this provision may be included. Nevertheless, this provision is appropriate to emphasize that the design of the judgment will be to create the maximum area for competition between the defendants General and Radio and to dissolve as far as possible any barriers to such competition.
As to Subparagraph (4) the defendants assert that it should be deleted because by its terms it would preclude valid price restrictions contained in patent licensing agreements in which they might engage in the future. To meet this objection insofar as it concerns patent licensing to or from persons not parties to this case a proviso shall be added to this subparagraph to read as follows:
“except that this provision shall not apply to valid restrictions contained in patent licenses between a defendant and a person not a party to this case;”.
Since Subparagraph (3) was removed from Paragraph (A) this Subparagraph number (4) in plaintiff’s proposed judgment with the foregoing proviso shall become Subparagraph (3) of Paragraph (A).
The defendants contend that Subparagraph (5) is too vague and ambiguous. This objection should be sustained insofar as its scope over the relationship of the defendants and all other persons is concerned. However, it has definitive meaning as between the defendants General and Radio in view of the findings in the opinion in this case. Hence the provision will be'incorporated as Subparagraph (2) of the new Paragraph (B) as above directed.
The defendants object to the inclusion of plaintiff's Paragraph (B), asserting that it would preclude them from engaging in the common practice of giving or receiving a license upon a patent, the application for which has been filed but is still pending, in which license the validity of the patent, when issued, is admitted. They claim that they would be prejudiced in that competitors could obtain licenses containing such a pro vision but that licensors might refuse a license to them since it would not include a like provision.
The Supreme Court has held that a licensee may challenge the validity of a patent which he has been licensed to use, and that he is neither estopped from contesting the patent by acceptance of the license, MacGregor v. Westinghouse Co., 1947, 329 U.S. 402, 67 S.Ct. 421, 91 L.Ed. 380; Sola Electric Co. v. Jefferson Co., 1942, 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed. 165, nor barred by his own covenant not to contest the patent, Katzinger Co. v. Chicago Mfg. Co., 1947, 329 U.S. 394, 67 S.Ct. 416, 91 L.Ed. 374. In all of the above cases the licenses contained price fixing provisions, but the case of Scott Paper Co. v. Marcalus Co., 1945, 326 U.S. 249, 66 S.Ct. 101, 90 L.Ed. 47, indicates that this factor was not the gravamen of those decisions. There, where no such provision was involved, the Court held that the assignoi of a patent was not estopped from contesting the validity of the assigned patent in a suit on it brought against him by his assignee, stated:
“It is thus apparent that the patent laws preclude the patentee of an expired patent and all others including petitioner from recapturing any part of the former patent monopoly; for those laws dedicate to all the public the ideas and inventions embodied in an expired patent. They do not contemplate that anyone by contract or any form of private arrangement may withhold from the public the use of an invention for which the public has paid by its grant of a monopoly and which has been appropriated to the use of all. The rights in the invention are then no longer subject to private barter, sale, or waiver. Cf. Phillips Co. v. Grand Trunk Western R. Co., 236 U.S. 662, 35 S.Ct. 444, 59 L.Ed. 774; Midstate Horticultural Co. v. Pennsylvania R. Co., 320 U.S. 356, 361, 64 S.Ct. 128, 131, 88 L.Ed. 96; Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 704, 65 S.Ct. 895, 900, 89 L.Ed. 1296. It follows that the patent laws preclude the petitioner assignee from invoking the doctrine of estoppel, as a means or continuing as against respondent, his assignor, the benefit of an expired monopoly, and they preclude the assignor from estopping himself from enjoying rights which it is the policy of the patent laws to free from all restrictions. For no more than private contract can estoppel be the means of successfully avoiding the requirements of legislation enacted for the protection of a public interest.” 326 U.S. at pages 256-257, 66 S.Ct. at page 105, 90 L.Ed. 47.
It would appear, therefore, that whether or not price restrictions were included, an agreement by a licensee not to contest the validity of a patent would unlawfully extend the scope of monopoly granted under the patent' laws beyond their boundaries into the domain where the public has an interest, to which such a private contract would be repugnant. Consequently it would seem appropriate here, in view of the defendants’ past behavior to enjoin inclusion of provisions admitting the validity of any patent not issued at the time of such admission in patent licenses engaged in by the defendants. Therefore, plaintiff’s proposal in this respect will be included in the judgment. It will be designated as Paragraph (C) in Section VI as a result of previously discussed changes in the paragraphing of this section.
Proposed Dedication of Patents— Sections VII and IX
In Paragraph (B) of Section VII the plaintiff asks that patents relating to variable condensers now owned or controlled by Development be dedicated to the public, and in Paragraph (A) of Section IX the plaintiff asks that the same step be taken with regard to such patents owned or controlled by each defendant other than Development, or jointly with any other defendant, prior to the date of the judgment, or trans ferred to it by Development pursuant to Section VII. The defendants strenuously object to these provisions, maintaining that dedication is not a permissible requirement under existing law.
This direction is in an area left open by the decision of the Supreme Court in United States v. National Lead Co., 1947, 332 U.S. 319, 67 S.Ct. 1634, 91 L.Ed 2077, which substantially diluted its pronouncement in Hartford-Empire Co. v. United States, 1945, 323 U.S. 386, 65 S.Ct. 373, 89 L.Ed. 322, in which the Court determined that dedication as directed by the district court was confiscatory. In the National Lead case the Court said [332 U.S. 338, 67 S.Ct. 1643]:
“While it has been contended that, because of the decision of this Court in Hartford-Empire Co. v. United States, 323 U.S. 386, 65 S.Ct. 373, 89 L.Ed. 322, the District Court was not free in the present case to require the issuance of royalty-free licenses, we feel that, without reaching the question whether royalty-free licensing or a perpetual injunction against the enforcement of a patent is permissible as a matter of law in any case, the present decree represents an exercise of sound judicial discretion.” Cf. United States v. Aluminum Co. of America, D.C.S.D.N.Y.1950, 91 F.Supp. 333.
Under the present circumstances, however, I do not believe that dedication of patents is required in order to free competition from the fetters fashioned by the defendants’ illegal activities. This is not a situation where one enormous firm in the industry, overshadowing all competitors, owns a huge bundle of patents with which it maintained its dominance in violation of the antitrust laws and with which, even were it compelled to license them to competitors at reasonable royalties, it could preserve a competitive edge by virtue of the drag such royalties would have on the success of its competitors.
In the present case a sizeable firm other than the defendants (American Steel Package Company) was able to compete against the defendants in spite of the defendants’ patent pooling arrangement. Here, too, when the defendants’ cooperation with each other is ended and they are placed in a competitive stance as against each other by the terms of this judgment, the industry will not consist of a single great firm holding the bulk of the patents. Rather, the patents and the share of production will be distributed fairly evenly between at least two competing companies. In addition, some of the key patents pooled in violation of the law have expired. In view of all of these considerations it would appear that compulsory licensing of patents held by the defendants at the date of the judgment at reasonable, nondiscriminatory royalties together with the requirement of similar licensing of patents obtained within a period of five years from the date of the judgment would suffice to free competition in the variable condenser industry.
Therefore, the plaintiff’s proposal requiring dedication of patents held by Development and other defendants at the date of the judgment will be denied.
Paragraph (B) of Section VII will read:
“(B) Defendant Development is hereby ordered and directed within 30 days following entry of this judgment to transfer or assign all patents or patent rights owned or controlled by it to the person (including other defendants) from whom such patents or patent rights were acquired- — ”.
The defendants’ proposal for assignment by Development of two patents, Numbers 1,928,310 of September 26, 1933 and 1,947,069 of February 13, 1934, to General will be denied, as these patents have expired. Defendants proposed that a third patent, No. 2,064,620 of December 15, 1936, should be assigned by Development to Radio. Since this patent will have only about four months to run after the date of this judgment it is assumed that its value can be of no great moment and provision will be made in the judgment for disposition of this patent as proposed by the defendants by adding the following clause to Paragraph (B) of Section VII: “except that Patent No. 2,064,620 of December 15, 1936 shall be assigned by Development to Radio.”
Section IX, Paragraph (A) providing for dedication of patents by defendants other than Development must be deleted.
Section VIII
The plaintiff’s proposed Section VIII reads as follows:
“(A) Following the distribution of the assets of defendant Development and its dissolution pursuant to Section VII of this Judgment, each remaining defendant is hereby enjoined and restrained from holding, acquiring or claiming, directly or indirectly, any rights under any patents, manufacturing or sale facilities, plants or other assets relating to the manufacture of variable condensers, in conjunction with any other defendant or any other person engaged in the manufacture of variable condensers;
“(B) Defendants are hereby jointly and severally enjoined and restrained from acquiring, directly or indirectly, by purchase, merger, consolidation or otherwise, after entry of this Judgment, ownership or control of the business, physical assets (including patents, tools, dies, fixtures and jigs), good will, capital stock or securities, or any part thereof, of any person engaged in the manufacture of variable condensers, except that nothing herein shall prevent an individual defendant from acquiring stock in a corporation of which he is, or was at any time between July 17, 1946, and the date of this Judgment, an officer.”
Defendants ask for the deletion of this entire section because it would prohibit any defendant for all time from achieving legal horizontal growth or expansion in variable condenser manufacture and from acquiring from a competitor even a tool or die, a patent in any field, a license to a patent in conjunction with a competitor and any part of the capital stock of a competitor. The plaintiff contends that the findings in this case justify the prohibitions of this section in order to guard against a contingency wherein Radio and General should be able to defeat the terms of this judgment by merging or entering into some other form of consolidation. Also it seeks hereby to prevent either Radio or General from eliminating the competition of other manufacturers of variable condensers by purchasing ownership or control of such manufacturers.
As has been indicated it is felt that competition can only thrive in this industry if the defendants General and Radio are made completely independent of each other. To further this end Paragraph (A) is appropriate.
Paragraph (B) appears to be too broad if it should be construed to prevent General or Radio from acquiring occasional items in the way of tools or licenses to patents for their individual use. It would appear necessary, however, to assure the separation of General and Radio as competitors and to prevent them either jointly or severally, from acquiring ownership or control of competitors in the variable condenser field for a substantial period following entry of this judgment unless by the court’s permission after a showing that competition would not be substantially impaired under the reservation of jurisdiction clause of the judgment. Variable is too small a factor in the industry to bind it by these regulations. Accordingly, plaintiff’s proposed Paragraph (B) will be modified to read as follows:
“(B) Defendants, General and Radio, are hereby enjoined and restrained from acquiring directly or indirectly by purchase, merger, consolidation or otherwise the ownership or control of the business of the other, and, whether jointly or severally, for a period of seven years after the entry of this-Judgment of any other person engaged in the manufacture of variable condensers.”
Plaintiff’s proposed proviso in said Paragraph (B) permitting an individual defendant to acquire stock in a corporation of which he is or was at any time between July 17, 1946, and the date of the judgment an officer will be deleted as conferring no right upon such an individual that he does not already possess and as unnecessary.
Sections IX and X
In Section IX(B) (2) plaintiff proposes that the defendants should be enjoined from threatening or instituting suits for acts of infringement of any patent owned or controlled by any defendant and issued or applied for within five years after the entry of this judgment, unless there had been a refusal to enter into a license agreement after request so to do by such defendant as provided for in Section X. Defendants object to the extension of the judgment to those applications for patents which may be made during the five year period and upon which applications the actual patents may not issue until several years after the five year period. They suggested the elimination of this proposed feature of the judgment relating to patent applications made during the five year period.by the substitution of a new definition of the word “patents” for that proposed by the plaintiff. They also suggest the elimination of the words “or applied for” from Section IX, Paragraph (B) (2) and Section X, Paragraph (A). In this way, they submit, the judgment would control only those applications upon which patents would actually be issued during the five year period.
In the light of the time that has elapsed in this litigation and the general circumstances of the industry it would appear unnecessary to extend this injunction and license requirement to patents issuing at a date later than the expiration of five years after the entry of judgment, even though applications were filed within that' period. However, there is no fault to be found with the plaintiff’s definition of patents, and as has been previously indicated, that will not be disturbed. The words “or applied for” will be deleted from plaintiff’s proposed Section IX, Paragraph (B) (2) and Section X, Paragraph (A), which will accomplish the result the defendants seek.
The defendants requested an addition to Section X, Paragraph (B) in the following language:
“ * * * Such grant may, at the option of the licensor, be conditioned upon the reciprocal grant of a license by the applicant, at a reasonable royalty, under any and all patents. covering variable condensers, now issued or pending, or issued within five years from the date of this decree, if any, owned or controlled by such applicant. Such license or reciprocal license may, at the option of either party, contain a provision for the inspection of the books and records of the licensee by an independent auditor who shall report to the licensor only the amount of royalty due and. payable and no other information;. * '*
|
3897529-18757 | HAMILTON, Circuit Judge.
This appeal arises from an unusual class settlement for an estimated 190 million class members. Class settlements usually aim to impose a final and definitive resolution of a dispute, but this one did not. It offered class members certain benefits, including cash, in return for giving up only their right to sue the defendant through class actions or other collective actions. But the settlement left the door open for the vast majority of class members to file individual suits against the defendant, the credit reporting company Trans Union.
One key detail has led to this appeal. The settlement created a fund of $75 million for class members’ claims. It also allowed Trans Union itself to draw money from the fund as reimbursement for the cost of settling individual follow-on suits, termed “post-settlement claims” or “PSCs.” There have been many more of these PSCs than anyone expected. Trans Union has settled them, and the district court has authorized Trans Union to reimburse itself from the fund. One of the class counsel, Dawn Wheelahan, has appealed. We affirm the district court’s actions in all respects.
I. Factual and Procedural Background
A. The Trans Union Litigation and Settlement
Beginning in 1998, a number of consumer class actions were filed against Trans Union alleging that it had violated the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., by selling lists of consumer credit reports to target marketers (the “target marketing” claims) and sharing prohibited consumer information with companies that wanted to use the lists to extend offers of credit or insurance (the “firm offer” claims). In 2000, the Judicial Panel on Multidistrict Litigation transferred the cases to Judge Gettleman in the Northern District of Illinois for consolidated pretrial proceedings. A detailed account of the litigation’s course over the following decade is not necessary here. We focus on the settlement and later disputes over the post-settlement claims or PSCs.
After preliminary rulings allowed the claims to go forward, Judge Gettleman asked Magistrate Judge Mason to mediate the entire dispute. To make a long story short, with his help the parties eventually reached an agreement that the district court approved as fair and reasonable. Trans Union agreed to give all class members “basic” in-kind relief in the form of credit monitoring services. In addition, class members could either claim cash from a $75 million settlement fund established by Trans Union or claim “enhanced” in-kind relief consisting of additional financial services. Trans Union agreed to provide roughly $35 million worth of enhanced relief. Five attorneys, including Wheela-han, were named as settlement class counsel.
While the deal gave significant relief to class members, court approval under Federal Rule of Civil Procedure 23(e) remained uncertain because the claims being settled had potential value far beyond what Trans Union proposed to pay. See Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 654 (7th Cir.2006) (courts evaluating fairness of settlements generally must compare the value of the relief offered to the expected value of class claims before approving the deal); Reynolds v. Beneficial Nat. Bank, 288 F.3d 277, 284-86 (7th Cir.2002) (same); American Law Institute, Principles of the Law of Aggregate Litigation § 3.05(a) & cmt. b (advising the same).
Class counsel sought to represent every consumer whose credit Trans Union had tracked since 1987. The class was estimated to include 190 million people, although that figure surely must have grown in the years since it was cited with alarm in a related case. Trans Union LLC v. FTC, 536 U.S. 915, 917, 122 S.Ct. 2386, 153 L.Ed.2d 199 (2002) (Kennedy, J., dissenting from denial of certiorari in FTC enforcement action against Trans Union). The Fair Credit Reporting Act authorizes statutory damages of between $100 and $1000 per consumer for willful violations, 15 U.S.C. § 1681n, meaning that Trans Union faced at least the theoretical possibility of $190 billion in liability. Trans Union, 536 U.S. at 917, 122 S.Ct. 2386. There are many reasons, starting with Trans Union’s net worth, why that astronomical number may not have been meaningful, but the stakes were far greater than the $75 million in cash that Trans Union was putting on the table.
As part of their effort to persuade the district court to approve the settlement and to narrow the gap between what Trans Union was offering and what it might owe, the parties agreed to an unusual feature that preserved class members’ substantive claims even after settlement. Instead of releasing outright their claims against Trans Union, class members who did not ask for cash or enhanced in-kind relief would give up only their ability to sue as part of either a “Class Action” or an “Aggregated Action.” Both terms were defined in the settlement, as explained below. These class members retained the right to bring their modest individual claims separately.
In exchange for class members agreeing not to proceed further on a class basis, Trans Union offered online credit monitoring to everyone in the class. Even those who accepted this “basic” in-kind relief were free to head straight back to court to file their claims, so long as they filed individually. We set aside for a moment whether it would make economic sense for them to do so. The statute of limitations, at least, would be no bar. Trans Union agreed to waive that defense for pending PSCs and those commenced within two years. Class members who pursued the additional option of claiming either monetary damages or enhanced in-kind relief, however, had to release their substantive claims against Trans Union.
Class members were not the only ones authorized to draw from the $75 million cash fund. The critical feature for purposes of this appeal is that the settlement authorized reimbursements from the fund — to Trans Union itself — “equal to any amounts paid to satisfy settlements or judgments arising from Post-Settlement Claims, not including any defense costs.” Thus, Trans Union would bear any costs of defending PSCs but not the cost of settling them since it could reimburse itself for settlements from the $75 million it had already paid into the fund. The settlement put no restrictions on Trans Union’s ability to settle these claims, expressly granting it the “option to settle any suit or pre-suit demand, or litigate any suit, involving Post-Settlement Claims.” A committee of representatives selected in equal parts by Trans Union and class counsel would monitor PSC reimbursements, although any disputes would ultimately be settled by the court. Any money left in the fund after two years would be distributed among class members who had submitted timely claims for cash relief. (Approximately 450,000 class members did so.) The district court granted final approval of the settlement in September 2008.
B. Posl^Settlement Claims
Enterprising lawyers not previously involved in the case then found an economically viable way to bring individual post-settlement claims against the $75 million fund. They solicited class members who had not sought money damages or enhanced in-kind relief and thus retained their target marketing and firm offer claims against Trans Union. These lawyers eventually gathered more than 100,-000 PSCs. The more than 70,000 that were not merely informal demands to Trans Union were filed as substantially identical but formally separate individual lawsuits. Most were filed in Nueces County, Texas — presumably the jurisdiction with the lowest filing fee the lawyers could find. The remaining PSCs were filed in other low-fee jurisdictions.
The terms of the class settlement gave Trans Union little reason to fight these claims. It could settle them without paying one additional net dollar. The company struck deals with the post-settlement claimants and then sought to reimburse itself from the fund. Class counsel objected. They argued that the PSCs filed in volume in low-fee jurisdictions like Nueces County were in fact “Aggregated Actions” prohibited under the settlement. The theory might have had some appeal under the term’s ordinary meaning, but the settlement expressly defined “Aggregated Action.” Its agreed meaning was “any action in which two or more individual plaintiffs assert claims relating to the same or similar alleged conduct.” While the district court conceded that it “never contemplated such mass actions when it approved the settlement,” it ruled that the high-volume PSCs were not covered by the settlement’s definition because each claim was filed as a separate action on behalf of just one plaintiff. The claims were therefore not barred by the terms of the settlement. In re Trans Union Corp. Privacy Litig., 2011 WL 918396 (N.D.Ill. Mar. 14, 2011).
For their efforts, the PSC attorneys received contingency fees of between 45 and 50 percent. In mid-2011, class counsel other than Wheelahan asked the district court for a share of the PSC attorney fees under the common-fund doctrine. See generally Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980). Wheelahan did not join that request because she had already successfully pursued her own appeal for more fees based on her role in negotiating the original settlement. See In re Trans Union Corp. Privacy Litig., 629 F.3d 741 (7th Cir.2011). Trans Union responded in the district court by moving for final approval of its PSC settlements, which would resolve the bulk of the outstanding claims for around $35 million from the fund. In separate orders issued in August and September 2011, the district court denied class counsels’ motion for common-benefit fees and then approved the PSC settlements and Trans Union’s reimbursement for them.
C. The Prior Appeal
Class counsel minus Wheelahan appealed both of those 2011 orders. The appeals were consolidated and Wheelahan joined in, representing her own view of the class’s interests. We affirmed both orders in a terse non-precedential order. App. 11-3030 ECF 101. With the reimbursement issue seemingly resolved, Trans Union paid on its provisional PSC settlements and moved the district court for a final order that would distribute the remainder of the fund and bring the litigation to an end. Judge Gettleman issued the order in February 2013. Wheelahan now appeals from that final order, as well as several interim orders approving reimbursements for PSCs.
II. Analysis
Wheelahan raises three issues on appeal in an effort to block reimbursement of Trans Union for settling the PSCs. First, she challenges the district court’s final distribution order on the ground that it im-permissibly modified the terms of the original settlement. Second, she asks us to reverse the district court’s determination that the PSCs were not brought as prohibited class or aggregate actions. And third, she wants Trans Union to reimburse the fund for money spent settling PSCs the company could have defeated at little cost because the claims were either barred by the statute of limitations or otherwise mer-itless.'
We review de novo a district court’s interpretation of a consent decree. Bailey v. Roob, 567 F.3d 930, 940 (7th Cir.2009); United States v. Krilich, 303 F.3d 784, 789 (7th Cir.2002). Our opinions have sometimes said that we will give an unspecified amount of deference to a district court’s interpretation when that court has overseen the litigation for a long time and is familiar with the details of what may be a complex arrangement. See, e.g., Foufas v. Dru, 319 F.3d 284, 286 (7th Cir.2003) (dicta); United States v. Alshabkhoun, 277 F.3d 930, 934 (7th Cir.2002). This line of cases seems to have sprung from a footnote in a Sixth Circuit opinion simply recognizing the district court’s view of a consent decree as one of. a number of “relevant aids to contract interpretation.” Brown v. Neeb, 644 F.2d 551, 558 n. 12 (6th Cir.1981), cited in United States v. Bd. of Educ. of City of Chicago, 717 F.2d 378, 382 (7th Cir.1983).
When the issue is one of case management, such deference is appropriate. When the issue involves reliance interests, however, with parties and especially with non-parties who may not have time or opportunity to ask a court to clarify an ambiguous order, it is less clear that we should defer to the authoring judge’s interpretation. Litigants as well as third parties must be able to rely on the clear meaning of court orders setting out their substantive rights and obligations, and appellate courts should interpret those orders in the same manner. See Mendez v. Republic Bank, 725 F.3d 651, 663 (7th Cir.2013) (“It is not reasonable to expect a third-party citation respondent to investigate the intended meaning of a court order beyond the text of the order itself.”). Because we would affirm the district court under ordinary de novo review, however, we need not decide the degree of deference here.
A. Challenge to the Final Order
We begin with Wheelahan’s argument that the final distribution order im-permissibly modified the original settlement by restricting her ability to raise objections on behalf of the class. As mentioned above, the settlement called for a committee composed of equal numbers of class counsel and Trans Union agents to receive quarterly reports concerning PSCs. Wheelahan is not a member of the committee, but she retained her status as one of the class counsel. She now objects to a provision in the final order in which the court recognized “the possibility that it may be required to resolve future disputes raised by any member of the Committee chosen by Settlement Class Counsel.” Wheelahan contrasts this language with the original settlement, which said the court would address “Any dispute about thé propriety of a reimbursement,” including presumably one raised by a class attorney not on the committee. She argues that the new language will bar her from protecting the class’s interests and that the district court lacked the authority to make such a change.
We do not see the conflict. Wheelahan retained her status as class counsel. Nothing in the final order limited her ability to fulfill her fiduciary responsibilities to the class, see Fed.R.Civ.P. 23(g)(4), even though she is not on the committee overseeing the post-settlement claims. The committee did not displace class counsel and was never designated the sole advocate for the class, which makes sense since half its members were representatives of Trans Union. As we read the original settlement and the final order, any class counsel could bring .an issue to the district court on behalf of the class.
B. Challenges to Interim Orders
More substantively, Wheelahan offers two reasons why Trans Union should not be reimbursed for all or some PSC settlements. First, she argues that the district court erred in approving settlements for PSCs that were in substance prohibited class actions. Her second argument is that Trans Union is not entitled to reimbursement for settling claims it could easily have defeated, either because they were clearly barred by the statute of limitations or meritless on their face. We discuss these arguments together here because they raise the same threshold issues of appellate procedure, though ultimately we find our way to the merits and agree with the district court. The terms of the settlement allowed Trans Union to find peace by settling arguably worthless claims from the $75 million settlement fund.
1. Appellate Jurisdiction
We have jurisdiction to hear Whee-lahan’s appeal from the final distribution order itself under 28 U.S.C. § 1291. Although the order acknowledged that the court might have to resolve residual disputes, it effectively concluded the litigation by distributing the remaining money and is final for purposes of § 1291. See Ray Haluch Gravel Co. v. Central Pension Fund, — U.S. -, 134 S.Ct. 773, 779, 187 L.Ed.2d 669 (2014); Solis v. Current Dev. Corp., 557 F.3d 772, 775-76 (7th Cir.2009). An appeal from a final judgment encompasses review of earlier interlocutory rulings — even those that could have been the subject of an interlocutory appeal — so long as the issues decided in those rulings have not become moot. Calma v. Holder, 663 F.3d 868, 873 (7th Cir.2011); Habitat Educ. Center v. U.S. Forest Service, 607 F.3d 453, 456 (7th Cir.2010); 15A Wright & Miller, Federal Practice & Procedure § 3911 (2d ed.) (“The only consequences of forgoing a collateral order appeal opportunity should be the risk that further proceedings may moot the issue, and that in some circumstances the standard of review may be different” on appeal from a final judgment.). So no jurisdictional obstacles block our examination of the district court’s orders concerning reimbursements.
2. Effects of the Prior Appeal
The procedural problem for Wheelahan is that the reimbursements she challenges were already the subject of the prior appeal before this court decided May 22, 2012. That was the consolidation of two appeals filed by Wheelahan’s fellow class counsel. The first challenged the district court’s denial of class counsels’ motion for more fees in an order dated August 8, 2011. The second challenged a broader order dated September 8, 2011 in which the district court rejected all of class counsels’ objections to the reimbursements and approved the PSC settlements in all respects.
Class counsel argued on appeal that the district court had erred in blessing Trans Union’s reimbursements. Their main contention was that the court and Trans Union both were obliged to examine the fairness of the PSC settlements, and particularly the accompanying fee arrangements, before paying from the settlement fund. Wheelahan joined the fray as an appellee, arguing that Trans Union was being reimbursed improperly for settling meritless PSCs. According to her, an FTC lawsuit had led Trans Union to stop selling lists of consumers to target marketers in 2001, yet PSC counsel were asserting target marketing claims on behalf of some consumers who had not entered Trans Union’s database until after 2001 and thus could never have been victims of target marketing practices. She argued that this disqualified Trans Union from settling any such claims because they were certainly meritless.
Our decision affirming the district court, although brief, stated conclusively that we found “no error in the [district court’s] order, or reason to enlarge on the judge’s analysis.” This language effectively adopted the reasoning of the district court’s September 8, 2011 order and rejected all the appellants’ arguments. See Burlington Northern R.R. Co. v. City of Superior, 962 F.2d 619, 620 (7th Cir.1992) (per curiam).
|
1678472-9903 | WOODS, Circuit Judge.
The Baltimore Pearl Hominy Company was notified on July 10, 1920, by the Commissioner of Internal Revenue of a claim for additional income and excess profits taxes for the years 1916, 1917, and 1918, amounting to $359,899.54v The letter of notification contained the following statement:
“This is not a notice of assessment, and no payment is required in connection herewith until you receive formal notice from the collector of internal revenue for your district.”
Some time between the receipt of the notice and February, 1921, the Hominy Company employed the firm of Humphreys, Day & Co., income tax specialists, to attempt to secure a reduction in the assessment. After negotiations with the government by Humph-reys, Day •&. Co., the claim was reduced to $72,192.34. '
On February 11, 1921, five banks, including the appellant, unsecured ureditors of the Hominy Company, to the amount of'$233,000, became concerned because of the inability of the company to meet its obligation to the government and offered to advance a sufficient sum to compromise the tax claim for $42,000 or 'less and to pay Humphreys, Day '& Co., their charge of $20,000. Each bank agreed to contribute to the sum' advanced in' proportion to its unsecured claim. The letter written j.ointly by the banks and the Hominy Company to Humphreys, Day & Co., expressing the proposition outlined, contained the following:
“It is distinctly understood that in so far as the parties hereto are able to do so, the undersigned banks shall be entitled to be subrogated to all of the rights of the government, as to a prior lien for such amounts" paid to the government for said taxes, and further that we shall receive notes of the Baltimore Hominy Company covering such advances as may be made under this agreement.”
On its books the assets of the Hominy Company at this time were largely in excess of its liabilities. In fact, its liabilities were very largely in excess of its assets.
A settlement with the government was arranged by Humphreys, Day & Co. for $35,-000. The Union Trust Company, one of the five banks mentioned, collected from each of the banks its proportionate share of the sum advanced to cover the amount of the compromise and the counsel fee of $20,000, each bank taking the note of the Hominy Company for the amount it contributed. On February 23, 1921, the Union Trust Company drew its check for $35,000 in favor of the Hominy Company, and that company indorsed it to the order of the Commissioner of Internal Revenue. The government’s representatives refused to accept this check and returned it. On March 17, 1921, the collect- or of internal revenue at Baltimore received an assessment list from the Commissioner of Revenue at Washington, upon which list appeared an assessment against the Hominy Company of $72,192.34. On the next day, March 18, 1921, a new cheek was made out by the Union Trust Company for the amount agreed upon to the order of Joshua W. Miles, collector, dated as of February 23, 1921. This check was accepted, being acknowledged as final settlement in .a letter from a deputy commissioner under date of March 22, 1921.
On April 4, 1921, the circuit court of the city of Baltimore appointed receivers for the Hominy Company, and on May 6, 1921, it was adjudicated a bankrupt. The unsecured debts of the corporation amounted to $591,-000, and its principal assets were sold for $178,000. The referee allowed the tax payment as a preference in favor of the banks who had made it. Upon the hearing of petition of one of the trustees of the bankrupt estate, the District Judge made an order disallowing the preference and directing the re- speetive claims of the banks for the amounts advanced to be allowed only as unsecured claims. This, as we understand, is a test ease to determine the rights of the banks claiming preference by way of subrogation to the government’s alleged prior lien, brought to this court on petition to superintend and revise and on appeal from the decree of the District Court.
We think the government had a lien for the tax on March 18, 1921, at the time of payment. The applicable statutory provision is:
“If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the United States from the time when the assessment list was received by the collector, except when otherwise provided, until paid, with the interest, penalties, and costs that may accrue in addition thereto upon all property and rights to property belonging to such person: Provided, however, that such lien shall not be valid as against any mortgagee, purchaser, or judgment creditor until notice of such lien shall be filed by the collector in the office of the clerk of the District Court of the district within which the property subject to such lien is situated. * * ” U. S. Compiled Statutes, § 5908.
The tax fixed by the government at $72,-192.34 was on the assessment list received by the collector of internal revenue on March 17, 1921. No payment had then been made, for the collector had refused the cheek tendered. It is true no demand in formal terms was made of the Hominy Company because of the voluntary agreement of the taxpayer to pay $35,000 which the government had agreed to accept. The statute prescribes no form and no kind of demand. The whole course of dealing shows that the government had reduced its original tentative claim of $359,899.54 to a formal assessment of $72,-192,34, that it was expecting and requiring payment of $35,000 in settlement of the assessment, and that it had made known to the Hominy Company that expectation and requirement. The expression of this expectation and requirement that the Hominy Company should pay the amount agreed upon was in effect a demand and all that was requisite to make the tax a lien. The accepted definitions support this view: “A demand signifies a request addressed to a person that he will do some act which he is legally bound to do, after the request has been made.” R. & L. Law Dictionary, p. 369. In 18 C. J. 479, a “demand” is defined as: “The assertion of a legal right; the assertion of a right to recover a sum of money; a calling for a thing due or claimed to be due; a claim; a preemptory claim to a thing of right; a request to pay; a requisition or request to do a particular tiling specified under a claim of right on the part of the person requesting.”
If, however, the transactions between the revenue officers and the Hominy Company did not amount to a demand, they clearly proved waiver by the company of demand for payment. The purpose of requiring a demand as a condition precedent to the tax becoming a lien is protection of the taxpayer; and any such right of protection may be waived by the person interested. Shutte v. Thompson, 15 Wall. 151, 21 L. Ed. 123; 6 R. C. L. p. 93; 27 R. C. L. p. 906. Surely if the Hominy Company had written to the collector expressly waiving demand and promising to pay the tax, it would be idle for the collector to go through the form of making the demand in order to create the lien. The expressed waiver would have been equivalent to the demand. Here the waiver by conduct was just as effective.
Having paid the lien of the government at the request of the debtor and thus preventing the seizure and sale of the property thereunder under an agreement with the debtor that if possible they should be substituted, the banks and trust companies have a very strong equity to subrogation in the distribution of the bankrupt’s assets. They were in no sense volunteers, but creditors surprised by the government’s large claim for taxes in arrears. They knew the Hominy Company was in danger of failure, but they hoped that the corporation’s new method of extracting sugar from com would biiñg success. Under these circumstances, believing it to be advantageous to themselves and other creditors, they paid the taxes to prevent destructive enforcement of payment. In doing so we think they brought themselves clearly within the principle and rule of subrogation thus stated in Ætna Life Insurance Co. v. Middleport, 124 U. S. 534, 548, 549, 8 S. Ct. 625, 629, 31 L. Ed. 537:
“These propositions are very clearly stated in a useful monograph on the Law of Subrogation, by Henry N. Sheldon, and are well established by the authorities which he cites. The doctrine of subrogation is derived from the civil law, and ‘it is said to be a legal fiction, by force of which an obligation extinguished by a payment made by a third person is treated as still subsisting for the benefit of this third person, so that by means of it one creditor is substituted to the rights, remedies, and securities of another. * * * It takes place for the benefit of a person who, being himself a creditor, pays another creditor whose debt, is preferred to his by reason of privileges or mortgages, being obliged to make the payment, either as standing in the situation of a surety, or that he may remove a prior incumbrance from the property on which . he relies to secure his payment. ' Subrogation, as a matter of right, independently of agreement, takes place only for the benefit of insurers; or of one who, being himself a creditor, has satisfied the lien of a prior creditor; or for the benefit of a purchaser who has extinguished an incum-brance upon the estate which he has purchased; or of a coobligor or surety who had paid the debt which ought, in whole or in part, to have been met by another.’ Sheldon on Subrogation, §§ 2, 3. * * *
“ ‘The doctrine of subrogation is not applied for the mere stranger or volunteer, who has paid the debt of another, without any assignment or agreement for subrogation, without being under any legal obligation to make the payment, and without being compelled to do so for the preservation of any rights or property of his own.’ [Sheldon on Subrogation, § 240.]”
|
3248750-13764 | MEMORANDUM OF DECISION
SWEIGERT, District Judge.
Plaintiffs, members of the faculty of Fresno State College, bring this suit under the Civil Rights Act, 42 U.S.C. § 1983, against the Trustees of the California State Colleges, the Chancellor of the State College System and the President of the College seeking declaratory and injunctive relief.
On November 25, 1970, plaintiffs Toney, Dutton, Frost, Hall and Mabey, all probationary (non-tenured) employees, were notified by the President of the College that they were not being offered appointments for the 1971-1972 academic year. On the same date plaintiff Ruhl, also a probationary employee, was offered an appointment for the academic year 1971-1972 but was informed that this appointment would be his terminal year appointment.
Probationary faculty members are appointed on a yearly basis. Each such faculty member is evaluated during each year of probationary employment by his peers — his department chairman, the dean of his school and the Vice President and the President of the College. The President of the College makes the decision whether to offer him an appointment for the following academic year. If the member is appointed for the following year, the process is again repeated and he may be appointed for the next year. This may go on for four probationary years. Only if the member is appointed for a fifth successive year (and this appointment is not made a terminal year appointment) does he obtain tenure.
After a faculty member obtains tenure he is a permanent employee whose employment continues unless he is dismissed for cause under Education Code § 24306 after proceedings established by so-called Executive Order No. 113.
Since plaintiffs herein have never attained tenure, Executive Order No. 113 is inapplicable. Plaintiffs argue that, although they do not have formal tenure, they are in a similar status because they have an “expectancy of reappointment” (within the meaning of such cases as Ferguson v. Thomas, 430 F.2d 852 (5th Cir. 1970) and Greene v. Howard Univ., 134 U.S.App.D.C. 81, 412 F.2d 1128 (1969) holding in effect that faculty having such an expectancy, are entitled to the same notice and hearing as if they were tenured).
We cannot agree with plaintiffs on this point. A reading of Ferguson, and other eases discussing “expectancy of reappointment,” makes clear that such concept is applicable only in those situations where the institution does not have a formal tenure system but deals with its faculty as though they do have tenure. The concept does not apply where there is, as in nur pending case, a formal tenure system under which the institution makes clear distinction between those who have tenure and those who do not.
. We hold, therefore, that the rights of plaintiffs in our pending case must be determined according to due process rules applicable to probationary, nontenured faculty as distinguished from tenured faculty.
It has been the consistent practice and understanding at the college that cause is not required to be shown when the employment of a non-tenured faculty member is not renewed after any given probationary year or if any reemployment is indicated as terminal.
Although California law does not require a hearing for non-tenured members whose employment is not renewed, the Chancellor, acting under Title 5, Calif .Adm. Code § 42714, has, nevertheless, provided a separate and different grievance procedure, Executive Order No. 112, issued September 30, 1970, under which any faculty member may challenge any claimed wrong relating to his employment and working conditions, including non-tenured faculty complaining about renewal of their appointments.
Plaintiffs initiated their grievance procedure under this Executive Order No. 112, complaining of the President’s decisions not to renew their appointments. Shortly thereafter, however, and before any further proceedings under Executive Order 112, they filed their complaint in this court, alleging upon information and belief that the non-reappointment decisions were based upon impermissible grounds, i. e., exercise by them of First Amendment rights and further alleging that the admittedly available grievance procedures provided by Executive Order 112 are inadequate and unconstitutional.
Plaintiffs recognize that, although a state administrative remedy, which purports to provide relief for an already accomplished deprivation of civil rights, need not be pursued before resort to federal court (See McNeese v. Bd. of Ed., 373 U.S. 668, 83 S.Ct. 1433, 10 L.Ed.2d 622 (1963)), a state administrative procedure, which is designed to forestall a threatened deprivation of civil rights, e. g., a grievance procedure, like that provided by Executive Order 112, under which plaintiffs are given opportunity to convince college authorities that they should be reappointed, must be exhausted before resort to this court under 42 U.S.C. § 1983 — provided only that the grievance procedure is fair and adequate for the purpose. Whitner v. Davis, 410 F.2d 24, 28, 29 (9th Cir. 1969).
Plaintiffs, therefore, must and do take the position that the grievance procedures provided by Executive Order No. 112 are inadequate as a means for correcting the allegedly wrongful decision of the President not to renew their employments. This is the basic question here presented.
EXECUTIVE ORDER NO. 112
Executive Order 112 provides, in substance, that the grievance procedures shall be initiated by written notice from the grievant to the President of the College setting forth the alleged wrong; that the President shall cause to be selected, by lot from the tenured academic employees, a grievance panel of three members; that the grievant and certain specified members of the administration may each exercise two peremptory challenges to any member of the panel and an unlimited number of challenges for cause; that the panel shall determine whether a hearing is required; that, if such determination is negative, the panel shall state its reasons for such determination and the grievance proceeding will be ended; that, if the determination is áffirmative, notice of the time and place for such hearing will be given to the grievant.
It further provides that a tape recording of the hearing will be made; that the grievant has the burden of persuasion and shall present his evidence first, following which other evidence shall be received; that the grievant may examine all evidence presented and question all witnesses; that the panel shall call witnesses as requested by the grievant; that such hearings shall not be open to the public; that the findings and recommendations of the panel are confidential and may not be made public except as may be filed in court or introduced in evidence in an administrative or court proceeding brought to review the action under the grievance proceedings; that the hearing shall not be conducted according to technical rules relating to evidence and witnesses and that any relevant evidence will be admitted if it is the sort of evidence on which responsible persons are accustomed to rely.
Under the grievance procedures the panel makes a written report of its findings and recommendations which it forwards to the President; the decision of the President “shall concur with the recommendations * * * except in rare instances when, in the opinion of the President, compelling reasons exist for a different result.” If the President reaches a different result he is required to detail the reasons therefor in a written Notice of Decision; this decision is final at the college level.
The procedure provides for an appeal to the Chancellor of the State College system in those cases in which the President and the panel disagree; upon such appeal the Chancellor, or his designated officer; shall determine if review is appropriate; if review is granted a Review Committee of three persons, comprised of members of the state college faculties, will review the grievance procedure and make written recommendation to the Chancellor.
The Chancellor’s decision “* * * shall agree with the Committee’s recommendation except in rare instances and for compelling reasons which shall be stated in writing in the Chancellor’s Notice of Decision.”
Just what constitutes due process as applied to decisions not to reappoint probationary, non-tenured faculty has been considered by a number of Circuits.
It is well established that, although tenured teachers are entitled to full due process before they may be dismissed, less demanding, less adversary, minimal process suffices for non-reappointment of probationary teachers. Ferguson v. Thomas, 430 F.2d 852 (5th Cir. 1970); Sindermann v. Perry, 430 F.2d 939 (5th Cir. 1970); Lucas v. Chapman, 430 F.2d 945 (5th Cir. 1970); Thaw v. Board of Public Instruction, 432 F.2d 98 (5th Cir. 1970); Drown v. Portsmouth School Dist., 435 F.2d 1182 (1st Cir. 1970).
The Tenth Circuit has held that a non-tenured teacher has no right at all to a hearing or even to notice of the reasons for his non-reappointment — even if the reason is the teacher’s exercise of his freedom of expression. Jones v. Hopper, 410 F.2d 1323 (10th Cir.) The Fifth Circuit holds that a non-tenured teacher must initiate any hearing proceeding and has the burden of proving his allegation that non-reappointment came about as a result of his exercise of First Amendment rights. The First Circuit holds that a non-tenured teacher is entitled to be given notice of the reasons for his non-reappointment but is not entitled to an adversary hearing. Drown v. Portsmouth School Dist., supra; see also, Roth v. Board of Regents, 310 F.Supp. 972, 980 (W.D.Wis.1970).
Plaintiffs complain that the grievance procedures of Executive Order 112 are not adequate for their purpose because, admittedly, they are not in any sense a “trial;” that the stated purpose of the procedure is merely to provide an equitable means of correcting actions taken by the colleges which directly aggrieve academic employees; that hearings are .not to be conducted according to technical rules relating to evidence and witnesses and that any relevant evidence shall be admitted if it is the sort of evidence on which responsible persons are accustomed to rely.
However, procedural due process does not require a formal “trial,” conducted under judicially prescribed rules of evidence — even in such cases as dismissal of students. (See Goldberg v. Regents, 248 Cal.App.2d 867, 57 Cal.Rptr. 463, 365 (1967). For stronger reasons such is not required in cases involving merely the non-reappointment of a probationary faculty member.
Plaintiffs also complain that the grievant may not be represented by an attorney. Executive Order 112 provides that the grievant may not be represented by another person except that, upon a showing of inability for self representation by reason of emotional, mental or physical ground, and upon agreement by the committee on the need for representation by another; the grievant may then be represented by anyone he selects —“so long as his representative is not an attorney admitted to practice law before any state or federal court.”
But, the right to be represented by an attorney is not an essential ingredient to a fair hearing in all kinds of proceedings. Perlman v. Shasta Joint Junior College Dist., 9 Cal.App.3d 873, 88 Cal.Rptr. 563 (1970).
It has been recognized that the localized, less formal, less adversary atmosphere of school constituted review bodies are the most appropriate forums for adjudicating problems of teacher rehiring. Lucas v. Chapman, 430 F.2d 945 (5th Cir. 1970).
We are aware that in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), the Supreme Court, considering termination by state officials of certain welfare benefits previously granted to an eligible beneficiary, held that, although counsel need not be furnished at such a pre-termination hearing, the recipient must be allowed to retain an attorney if he so desires; also that, although such a hearing need not take the form of a judicial or quasi-judicial trial, the recipient must be provided with timely and adequate notice detailing the reasons for termination, and an effective opportunity to defend by con fronting adverse witnesses and by presenting his own arguments and evidence orally before the decision maker.
In Goldberg, however, the city’s procedures, unlike the procedure here, did not afford the recipient any opportunity to personally appear, either with or without counsel, before the official who decided upon termination.
Further, in Goldberg, the hearing pertained to a statutory entitlement the termination of which affected “the interest of the eligible recipient in uninterrupted receipt of public assistance.” It was for this reason that the court held that due process required a pre-termination hearing of the kind described — including counsel if desired.
In our pending case, the plaintiffs have no such entitlement, statutory, contract or otherwise, nor any interest in the uninterrupted continuance of their employment. Goldberg is, therefore, in-apposite.
Plaintiffs also complain that the grievance procedure “leaves the formal decision making up to the very person who fired plaintiffs,” referring to provisions to the effect that at the conclusion of the panel hearing, the grievance panel submits findings and recommendations to the President of the College (or his designee) who makes the actual decision.
In the first place, as we have already noted, the President did not, in this case, “fire” or dismiss any of the plaintiffs; he merely decided not to renew their annual employment contract and, in the case of Ruhl renewed it for one year with notice, however, that the renewal was terminal.
|
4236551-29937 | OPINION OF THE COURT
FUENTES, Circuit Judge.
Ernesto Galarza is a U.S. citizen who was arrested for a drug offense, posted bail, and instead of being released, was held in custody by Lehigh County under an immigration detainer issued by federal immigration officials. Three days after Galarza posted bail, immigration officials learned that he was a U.S. citizen. The detainer was withdrawn and Galarza was released. Galarza then filed this § 1983 action against, in relevant part, Lehigh County, contending that Lehigh County detained Galarza without probable cause for more than 48 hours, without notice of the basis of his detention or the ability to contest it. The District Court dismissed the complaint against Lehigh County on the basis that it could not be held responsible for Galarza’s detention because it was compelled to follow the immigration de-tainer. On appeal, Galarza argues that under a plain reading of the relevant federal regulation, immigration detainers are permissive and, to hold otherwise, would violate the anti-commandeering principles inherent in the Tenth Amendment. We agree with Galarza that immigration de-tainers do not and cannot compel a state or local law enforcement agency to detain suspected aliens subject to removal. Accordingly, we vacate and remand for further proceedings.
I. BACKGROUND
This case arises out of Ernesto Galarza’s detention by the Allentown Police Department and the Lehigh County Prison in November 2008. Galarza is a U.S. Citizen, born in Perth Amboy, New Jersey. He is a Hispanic man of Puerto Rican heritage. On November 20, 2008, Galarza was performing construction work on a house in Allentown, Pennsylvania. Sometime that day, the contractor on the construction site sold cocaine to an undercover Allentown Police detective, Christie Correa. Detective Correa arrested the contractor, along with Galarza and two other employees who were working at the site. All were charged with conspiracy to deliver cocaine in violation of Pennsylvania law. Two of the other workers arrested were citizens of the Dominican Republic, and the third was a citizen of Honduras. At the time of Galarza’s arrest, he had a wallet, which contained his Pennsylvania driver’s license, his Social Security Card, a debit card, and his health insurance card. After his arrest, Galarza was detained by the Allentown Police Department. The Criminal Complaint prepared by Correa at the time of Galarza’s arrest listed Galarza’s place of birth as Perth Amboy, N.J. and contained Galarza’s Social Security Number and date of birth. In accordance with Allentown’s policy to contact Immigration and Customs Enforcement (“ICE”) whenever persons arrested are suspected of being “aliens subject to deportation,” Correa called ICE and provided immigration officials with Galarza’s name, date and place of birth, ethnicity, and Social Security number. Galarza contends that, by making this call, Correa gave ICE reason to believe that she suspected Galarza had given false information about his identity.
That evening, Galarza was transported to Lehigh County Prison and his bail was set at $15,000. The following morning, Friday, November 21, Galarza went through the booking process, and during this process, he told prison officials that he was born in New Jersey. The officials took his wallet, containing his driver’s license, Social Security Card, debit card, and health insurance card.
At some point that day, ICE Agent Mark Szalczyk, acting on the information relayed by Correa, filed an immigration detainer with Lehigh County Prison. The detainer described Galarza as a suspected “alien” and citizen of the Dominican Republic. The detainer read:
Investigation has been initiated to determine whether this person is subject to removal/deportation from the United States.... It is requested that you: Please accept this notice as a detainer. This is for notification purposes only.... Federal regulations (8 CFR 287.7) require that you detain the alien for a period not to exceed 48 hours (excluding Saturdays, Sundays and Federal holidays) to provide adequate time for ICE to assume custody of the alien. You may notify ICE by calling (610) 374-0743 during business hours or 802 872-6020 after hours in an emergency.
App. at 105. The detainer was accompanied by neither a warrant, an affidavit of probable cause, nor a removal order. That same day, a surety company posted bail for Galarza, and a Lehigh County Prison official told Galarza that he would be released. Shortly thereafter, the same official informed Galarza that he would not be released because he was the subject of a detainer.
When Galarza protested that there should be no detainer preventing his release, the official told Galarza that he would have to wait through the weekend until Monday, November 24 to speak with a counselor. Galarza had not been interviewed by ICE or provided with a copy of the detainer. It was not until that Monday, three days after his arrest, that a Lehigh County Prison counselor told Ga-larza for the first time that the detainer holding him was an immigration detainer filed by ICE. Galarza immediately protested that he was a U.S. Citizen, and he urged the counselor to retrieve his wallet from the property room in order to look at Galarza’s driver’s license and Social Security Card, but the counselor refused. Shortly thereafter, Galarza met with two ICE officers, who questioned him extensively about his statement that he was born in New Jersey. Galarza gave the immigration officials his Social Security Number and date of birth. The officials left and returned to inform Galarza that the detainer was being lifted. The detain-er was in fact removed at 2:05 pm on Monday, November 24. Lehigh County did not release him until more than six hours later, at about 8:30 pm. Galarza was eventually acquitted by a jury of the charge stemming from his November 20, 2008 arrest.
Galarza filed two complaints: the first against Lehigh County, the City of Allentown, and various individual federal and municipal defendants for violations of his constitutional rights, and the second against the United States under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. § 1346(b). These cases were consolidated. All defendants in the consolidated case, except the United States, moved to dismiss under Rule 12(b)(6). Galarza v. Szalczyk, 2012 WL 1080020, at *1 (E.D.Pa. Mar. 30, 2012). The District Court held that the claims against ICE Agent Szalczyk and Allentown Detective Correa, for violations of the Fourth Amendment and the Equal Protection Clause, could go forward and that these officials were not entitled to qualified immunity. Id. at *2. The District Court dismissed a procedural due process claim against ICE Agent Szalczyk on qualified immunity grounds and dismissed all claims against another ICE official, the City of Allentown, and Lehigh County. Id.
In relevant part, the District Court determined that Galarza’s continued detention after he posted bail constituted a seizure within the Fourth Amendment and that the seizure was unsupported by probable cause. Id. at *9-14. Specifically, the District Court found that Galarza had stated a Fourth Amendment claim against Correa and Szalczyk because these officers lacked probable cause to issue an immigration detainer. The District Court reasoned: “[t]he fact that Mr. Galarza is Hispanic and was working at a construction site with three other Hispanic men — two of whom are citizens of foreign countries and another who claimed to have been born in Puerto Rico but is a citizen of the Dominican Republic — does not amount to probable cause to believe that Mr. Galarza is an alien not lawfully present in the United States.” Id. at *14. It also denied these officers’ motions to dismiss these claims on grounds of qualified immunity. Id. at *14-15.
However, the District Court dismissed the Fourth Amendment and procedural due process claims against Lehigh County on the ground that “neither of the policies identified in plaintiffs Amended Complaint is unconstitutional [because] both are consistent with federal statutes and regulations.” Id. at *18. In doing so, the District Court relied on 8 C.F.R. § 287.7, concluding that detainers issued pursuant to this regulation impose mandatory obligations on state or local law enforcement agencies (“LEAs”), including municipalities, to follow such a detainer once it is received. Id. at *19. The District Court also dismissed Galarza’s procedural due process claim on the ground that Lehigh County complied with the federal regulation setting the time limits on detention because it did not hold Galarza for more than 48 hours, not including weekends. Id. The Court then dismissed the procedural due process claim against Szalczyk on grounds of the qualified immunity doctrine, noting that “even if the period of detention specified by the regulation were found to be unconstitutional, it would not be clear to every reasonable officer that the detention for a period expressly provided by federal regulation was unlawful.” Id. at *18.
Following the issuance of the District Court opinion, Galarza reached a settlement with the remaining individual defendants, the City of Allentown, and the United States, resulting in a final order dismissing the case as to all defendants. Galarza appeals only the dismissal of his complaint against Lehigh County.
II. DISCUSSION
Galarza’s claims against Lehigh County arise under 42 U.S.C. § 1983. To establish municipal liability under § 1983, Galarza must plead two elements: first, that he was deprived of rights, privileges, or immunities secured by the Constitution and laws, and, second that the deprivation of those rights was caused by an official government policy or custom. Mulholland v. Gov’t Cnty. of Berks, Pa., 706 F.3d 227, 238 (3d Cir.2013). Regarding his Fourth Amendment rights, Galarza contends that his detention resulted from Lehigh County’s stated policy and practice of enforcing all immigration detainers received from ICE, regardless of whether ICE had, or even claimed to have, probable cause to detain the suspected immigration violator. To support his claim, Galarza contends that: (1) when a Lehigh County Prison counselor first told Galarza that he had been held on an immigration detainer, the official refused to look into Galarza’s stated proof that he was a U.S. Citizen, instead waiting for ICE officers to arrive; (2) Lehigh County Prison honored the ICE detainer in this case on less than probable cause; and (3) ICE has a history of issuing and then cancelling improper ICE detain-ers lodged against inmates at the Lehigh County Prison. Regarding his procedural due process claim, Galarza contends that, under Lehigh County’s policies, he was held for three days without any notice of the basis for his detention or a meaningful opportunity to explain that he was a U.S. Citizen, despite his repeated requests to contest his detention.
At oral argument, counsel for Lehigh County conceded that the policies as alleged would be unconstitutional, and that Lehigh County’s sole basis for seeking dismissal of Galarza’s claims is the allegedly mandatory nature of ICE detainers. In this light, the only question on appeal is whether Galarza has sufficiently pleaded facts to support his claims that Lehigh County’s unconstitutional policies or customs caused the deprivations of his Fourth Amendment and procedural due process rights.
A. Interpretation of 8 C.F.R. § 287.7
The parties’ dispute centers on whether immigration detainers issued pursuant to 8 C.F.R. § 287.7 impose mandatory obligations on state and local LEAs to detain suspected aliens subject to removal. The regulation at issues provides, in relevant part, as follows:
(a) Detainers in general. Detainers are issued pursuant to sections 236 and 287 of the Act and this chapter 1. Any authorized immigration officer may at any time issue a Form 1-247, Immigration Detainer-Notice of Action, to any other Federal, State, or local law enforcement agency. A detainer serves to advise another law enforcement agency that the Department seeks custody' of an alien presently in the custody of that agency, for the purpose of arresting and removing the alien. The detainer is a request that such agency advise the Department, prior to release of the alien, in order for the Department to arrange to assume custody, in situations when gaining immediate physical custody is either impracticable or impossible.
(d) Temporary detention at Department request. Upon a determination by the Department to issue a detainer for an alien not otherwise detained by a criminal justice agency, such agency shall maintain custody of the alien for a period not to exceed 48 hours, excluding Saturdays, Sundays, and holidays in order to permit assumption of custody by the Department.
8 C.F.R. § 287.7(a), (d) (emphasis added). Lehigh County argues that the phrase “shall maintain custody” contained in § 287.7(d) means that detainers issued under § 287.7 are mandatory. Lehigh County acknowledges that § 287.7(d) is titled “Temporary detention at Department request” and that § 287.7(a) provides that “[t]he detainer is a request.” However, Lehigh County maintains this language is overshadowed by the use of the word “shall” in § 287.7(d). According to Lehigh County, the word “shall” means that the “request” is not really a request at all, but an order. Meaning, Lehigh County cannot be held responsible for Galarza’s three-day detention after he posted bail. Galarza argues that the word “shall” serves only to inform an agency that otherwise decides to comply with an ICE detainer that it should hold the person no longer than 48 hours.
We believe that Galarza’s interpretation is correct. The words “shall maintain custody,” in the context of the regulation as a whole, appear next to the use of the word “request” throughout the regulation. Given that the title of § 287.7(d) is “Temporary detention at Department request” and that § 287.7(a) generally defines a de-tainer as a “request,” it is hard to read the use of the word “shall” in the timing section to change the nature of the entire regulation. Cf. Almendarez-Torres v. United States, 523 U.S. 224, 234, 118 S.Ct. 1219, 140 L.Ed.2d 350 (1998) (observing that a statute’s title and a section’s heading may be considered in resolving doubt about a provision’s meaning).
However, even if we credit that the use of the word “shall” raises some ambiguity as to whether detainers impose mandatory obligations, this ambiguity is clarified on numerous fronts. First, no U.S. Court of Appeals has ever described ICE detainers as anything but requests. Second, no provisions of the Immigration and Nationality Act (“INA”), 8 U.S.C. § 1101 et seq., authorize federal officials to command local or state officials to detain suspected aliens subject to removal. Lastly, all federal agencies and departments having an interest in the matter have consistently described such detainers as requests. We will address each of these factors in turn.
First is the case law. All Courts of Appeals to have commented on the character of ICE detainers refer to them as “requests” or as part of an “informal procedure.” See, e.g., Ortega v. U.S. Immigration & Customs Enforcement, 737 F.3d 435, 438 (6th Cir. Dec. 10, 2013) (noting that federal immigration officials issue de-tainers to local LEAs “asking the institution to keep custody of the prisoner for the [federal immigration] agency or to let the agency know when the prisoner is about to be released”); Liranzo v. United States, 690 F.3d 78, 82 (2d Cir.2012) (noting that “ICE issued an immigration detainer to [jail] officials requesting that they release Liranzo only into ICE’s custody” so that he could be removed from the United States); United States v. Uribe-Rios, 558 F.3d 347, 350 n. 1 (4th Cir.2009) (defining detainers as a “request that another law enforcement agency temporarily detain an alien” to permit immigration officials to assume custody (citing 8 C.F.R. § 287.7)); United States v. Female Juvenile, A.F.S., 377 F.3d 27, 35 (1st Cir.2004) (noting that a “detainer ... serves as a request that another law enforcement agency notify the INS before releasing an alien from detention” (citing 8 C.F.R. § 287.7(a))); Giddings v. Chandler, 979 F.2d 1104, 1105 n. 3 (5th Cir.1992) (describing the procedure under § 287.7 as “an informal [one] in which the INS informs prison officials that a person is subject to deportation and requests that officials give the INS notice of the person’s death, impending release, or transfer to another institution”).
Second, Congress’s only specific mention of detainers appears in INA § 287, 8 U.S.C. § 1357(d). The Act does not authorize federal officials to command state or local officials to detain suspected aliens subject to removal. Moreover, in reviewing this statute, the Supreme Court has noted that § 1357(d) is a request for notice of a prisoner’s release, not a command (or even a request) to LEAs to detain suspects on behalf of the federal government. Arizona v. United States, — U.S.-, 132 S.Ct. 2492, 2507, 183 L.Ed.2d 351 (2012) (observing that “[s]tate officials can also assist the Federal Government by responding to requests for information about when an alien will be released from their custody. See § 1357(d).”).
Contrary to Lehigh County’s assertion, ICE’s (and its precursor INS’s) policy statements also hold persuasive weight in this context. See Mercy Catholic Med. Ctr. v. Thompson, 380 F.3d 142, 155 (3d Cir.2004). Since at least 1994, and perhaps as early as 1988, ICE (and its precursor INS) have consistently construed detainers as requests rather than mandatory orders. In 1994, when responding to comments provided in the process of administrative “Notice and Comment” before a “Final Rule” change amending 8 C.F.R. § 287.7, the INS wrote that, “A detainer is the mechanism by which the Service requests that the detaining agency notify the Ser vice of the date, time, or place of release of an alien who has been arrested or convicted under federal, state, or local law.” 59 Fed.Reg. 42406, 42407 (Aug. 17, 1994). Moreover, in a 2010 policy memo, ICE describes a detainer as a “request that the LEA maintain custody of an alien who would otherwise be released for a period not to exceed 48 hours.” This description is restated on ICE’s website under “Frequently Asked Questions” about ICE de-tainers in response to the specific question “What is an immigration detainer?” In response to a local official’s letter asking whether “localities are required to hold individuals pursuant to [ICE detainers],” a senior ICE official responded: “ICE views an immigration detainer as a request that a law enforcement agency maintain custody of an alien who may otherwise be released^]” And in a 2010 briefing to the Congressional Hispanic Caucus, agency representatives told congressional staff that “local [law enforcement] are not mandated to honor a detainer, and in some jurisdictions they do not.”
These policy statements are also consistent with ICE’s (and previously INS’s) litigation position that detainers are requests or notifications. For example, in 1998, the INS argued that a detainer it issued was “not a detainer but merely serve[d] to advise [a] correctional facility that the INS may find [an inmate] excluda-ble and requested] that the institution inform the INS of Vargas’s expected release.” Vargas v. Swan, 854 F.2d 1028, 1030 (7th Cir.1988). Furthermore, the immigration agency there noted “that the face of the detainer states that it is ‘for notification purposes only,’ ” and that it was “nothing more than ‘an internal administrative mechanism,’ ... accompanied by neither a warrant of arrest nor by an order to show cause.” Id.
To rebut the evidence that detainers are not mandatory or commands to other LEAs, Lehigh County suggests that these statements are contradicted by the language of the detainer form that was issued in Galarza’s case. Lehigh County’s argument here is similar to the one it made regarding the regulation itself: Because the detainer issued to Lehigh County stated that “Federal regulations (8 CFR 287.7) require that you detain the alien for a period not to exceed 48 hours (excluding Saturdays, Sundays and Federal holidays),” the detainer was mandatory. App. at 105. Again, Lehigh County overlooks the first part of the detainer filed with Lehigh County, which read at the time, “It is requested that you: Please accept this notice as a detainer. This is for notification purposes only.” Id. (emphasis added).
Lehigh County seeks to bolster its argument by highlighting the fact that the de-tainer forms were altered in 2010 so that the word “require” does not appear anywhere on the current detainer form. The form now reads: “IT IS REQUESTED THAT YOU: Maintain custody of the subject for a period NOT TO EXCEED 48 HOURS.” We believe that, on its own, this alteration in the detainer form does not support Lehigh County’s conclusion that ICE’s position changed — the alteration is also consistent with the view that ICE was merely clarifying its detainer form to reflect its longstanding interpretation of the regulation. In short, the position of federal immigration agencies has remained constant: detainers are not mandatory.
B. Constitutional Concerns
Even if there were any doubt about whether immigration detainers are requests and not mandatory orders to local law enforcement officials, settled constitutional law clearly establishes that they must be deemed requests. When confronted with two plausible interpretations of a statute, one which could require the Court to interpret the regulation as unconstitutional and one which poses no constitutional problem, we are obliged to adopt the latter interpretation, “unless such construction is plainly contrary to the intent of Congress.” Edward J. DeBartolo Corp. v. Fla. Gulf Coast Bldg. & Const. Trades Council, 485 U.S. 568, 575, 108 S.Ct. 1392, 99 L.Ed.2d 645 (1988).
Under the Tenth Amendment, immigration officials may not order state and local officials to imprison suspected aliens subject to removal at the request of the federal government. Essentially, the federal government cannot command the government agencies of the states to imprison persons of interest to federal officials.
As we have previously recognized, “all powers not explicitly conferred to the federal government are reserved to the states, a maxim reflected in the text of the Tenth Amendment.” Nat’l Collegiate Athletic Ass’n (“NCAA”) v. Governor of N.J., 730 F.3d 208, 227 (3d Cir.2013). It follows that “any law that commandeers the legislative processes [and agencies] of the States by directly compelling them to enact and enforce a federal regulatory program is beyond the inherent limitations on federal power within our dual system.” Id. (quoting Hodel v. Va. Surface Mining & Reclamation Ass’n, 452 U.S. 264, 283, 101 S.Ct. 2352, 69 L.Ed.2d 1 (1981)) (internal quotation marks omitted). In other words, a conclusion that a detainer issued by a federal agency is an order that state and local agencies are compelled to follow, is inconsistent with the anti-commandeering principle of the Tenth Amendment.
On two occasions the Supreme Court has struck down portions of federal laws that compelled states or local state agencies on anti-commandeering grounds. The first case was New York v. United States, 505 U.S. 144, 112 S.Ct. 2408, 120 L.Ed.2d 120 (1992), which concerned a federal law to regulate the disposal of radioactive wastes by the states. The most problematic aspect of this complex regulatory scheme was the requirement that a state “take title” to radioactive material, if that state could not arrange for disposal of the hazardous material within a specified date. Id. at 153-54, 112 S.Ct. 2408. The Supreme Court struck down the “take title” provision based on the idea that “Congress may not simply ‘commandeer the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program.’ ” Id. at 161, 112 S.Ct. 2408 (quoting Hodel, 452 U.S. at 288, 101 S.Ct. 2352) (alterations omitted). As we stated in NCAA the Court concluded that the “take title” provision did, in fact, “compel the states to either enact a regulatory program, or expend resources in taking title to the waste.” NCAA 730 F.3d at 229 (citing New York, 505 U.S. at 176, 112 S.Ct. 2408). The Court also observed that “the anti-commandeering principle was designed, in part, to stop Congress from blurring the line of accountability between federal and state officials and from skirting responsibility for its choices by foisting them on the states.” Id. (citing New York, 505 U.S. at 168, 112 S.Ct. 2408).
The Court next applied this anti-commandeering principle in Printz v. United States, 521 U.S. 898, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997), to invalidate provisions of the Brady Handgun Violence Prevention Act that compelled local authorities of certain states to conduct background checks on persons applying to purchase guns. Printz is relevant in determining whether federal officials can order local and state LEAs to hold suspected aliens subject to removal in detention on behalf of the federal government. The Court noted that, “[t]he power of the Federal Government would be augmented immeasurably if it were able to impress into its service — and at no cost to itself — the police officers of the 50 States.” Id. at 922, 117 S.Ct. 2365. The Court concluded that Congress “may neither issue directives requiring the States to address particular problems, nor command the States’ officers ... to administer or enforce a federal regulatory program.” Id. at 935, 117 S.Ct. 2365. The Court was clearly concerned that portions of the Brady Act required states to “absorb the financial burden of implementing a federal regulatory program” and “tak[e] the blame for its ... defects.” Id. at 930, 117 S.Ct. 2365.
In light of these principles, it is clear to us that reading § 287.7 to mean that a federal detainer filed with a state or local LEA is a command to detain an individual on behalf of the federal government, would violate the anti-commandeering doctrine of the Tenth Amendment. As in New York and Printz, immigration officials may not compel state and local agencies to expend funds and resources to effectuate a federal regulatory scheme. The District Court’s interpretation of § 287.7 as compelling Le-high County to detain prisoners for the federal government is contrary to the Federal Constitution and Supreme Court precedents.
There is no meaningful distinction between the Brady Act provisions and the regulation at issue here which would, according to Lehigh County, require state and local governments to spend public funds in order to detain suspects on behalf of the federal government for the 48-hour period. In fact, the federal government has made clear that local LEAs have to foot the bill, providing that “[n]o detainer issued as a result of a determination made under this chapter ... shall incur any fiscal obligation on the part of the Department.” 8 C.F.R. § 287.7(e). Even though, as the Amici Curiae Law Professors explain, the issue of commandeering is not one of degree, “[s]ueh direct federal control over state officials far exceeds the regulatory regime Printz invalidated.” Br. for Law Professors at 4.
Furthermore, the command to detain federal prisoners at state expense is exactly the type of command that has historically disrupted our system of federalism. As Galarza points out, the federal government has made requests to states to house federal prisoners since the Founding of the Republic, and such requests represent the quintessential type of cooperation sanctioned by the Framers. The Court in Printz relied on this history in developing the contours of the concept of commandeering that must have existed at the time of the Constitution’s Framing. See Printz, 521 U.S. at 909-10, 117 S.Ct. 2365 (discussing the practice of early Congress (1789-91) issuing recommendations to state legislatures to house federal prisoners and noting that when states failed to comply, Congress’s reaction was simply “to rent a temporary jail until provision for a permanent one could be made”).
Because of this potential constitutional problem, and because Congress has made no mention in the INA that it intends for DHS to issue mandatory detainers, see supra Part H.A., we must read the regulation as authorizing only permissive requests that local LEAs keep suspected aliens subject to deportation in custody. In fact, in recognition of their right to refuse requests under § 287.7, a number of local governments, the District of Columbia, and now the state of California, have established official policies whereby they will only detain suspects pursuant to ICE detainers in situations where the suspect named in an immigration detainer has been convicted of or is charged with a serious crime.
Thus, any remaining ambiguity must be resolved in favor of a constitutional reading of the regulation. In this case, that means we must read the regulation as authorizing only requests that state and local law enforcement agencies detain suspected aliens subject to removal.
III. CONCLUSION
For these reasons, we conclude that 8 C.F.R. § 287.7 does not compel state or local LEAs to detain suspected aliens subject to removal pending release to immigration officials. Section 287.7 merely authorizes the issuance of detainers as requests to local LEAs. Given this, Lehigh County was free to disregard the ICE detainer, and it therefore cannot use as a defense that its own policy did not cause the deprivation of Galarza’s constitutional rights. Accordingly, the District Court’s judgment dismissing Galarza’s complaint against Lehigh County is VACATED and the matter is REVERSED for proceedings consistent with this opinion.
|
35935-13038 | HERLANDS, District Judge.
The National Labor Relations Board (hereinafter referred to as the “Board”) seeks an order pursuant to section 11(2) of the National Labor Relations Act, 29 U.S.C.A. § 161(2) (hereinafter referred to as the "Act”), directing the respondent, John J. Harris, to appear before it and give testimony in connection with the pending back-pay proceeding.
Respondent, in refusing to provide the evidence sought, challenges the authority of the Board to determine alter ego responsibility in such a proceeding.
The disputed issues of law will be brought into sharper focus by a delineation of the relevant facts.
By decree filed August 21, 1957, the United States Court of Appeals for the Second Circuit enforced an order of the National Labor Relations Board [113 N. L.R.B. 841 (1955)3, finding that Mario Offset Printing Corporation (hereinafter referred to as “Mario”) had engaged in certain unfair labor practices (Applicant’s Exh. A).
The Court’s decree, which was entered on consent, ordered Mario, “its officers, agents, successors, and assigns,” inter alia, to cease and desist from certain practices, not here relevant, and to make whole six named employees for any loss of pay they may have suffered by reason of discrimination against them. This decree has been complied with in all respects except for the payment of back pay.
The Rules and Regulations of the Board provide that, if after the entry of a court decree enforcing an order of the Board, a controversy arises between the Board and a respondent concerning the amount of back pay due and the controversy is one which cannot be resolved without a formal proceeding, a back-pay specification shall be issued. The specification must show specifically and in detail the amount of back pay owing to each employee. The respondent is given fifteen days in which to file an answer; and a hearing is held before a trial examiner. (See National Labor Relations Board, Rules and Regulations and Statements of Procedure, Series 8 [19593 sections 102.-52-102.59, App. 29 U.S.C.A.)
Pursuant to these rules, a back-pay specification was issued February 4, 1960; and an answer was filed by Mario on March 9, 1960 (Applicant’s Exh. B, p. 2).
In May 1960, Mario and the Regional Office of the Board stipulated that the amount of back pay due was $5,858.88; and Mario consented to the entry of a supplemental court order and decree to that effect. The Board disapproved the stipulation (Affidavit of John J. Harris, sworn to May 25, 1961, pp. 8, 9).
On November 23, 1960, the General Counsel moved the Chief Trial Examiner for leave to amend the back-pay specification. The Board’s purpose in amending the specification was to render certain alleged alter egos liable for carrying out the decree against Mario; Mario having asserted that it had no assets with which to pay the amounts due (See Applicant’s Exh. B). The specification as amended alleged that a controversy existed both as to the amount of back pay due and the liability of the six named corporations and Harris personally for carrying out the Court’s decree.
The amendments consisted of allegations in paragraphs I through VI that John Harris is president and sole owner of Mario, Advertisers Production Services, Inc., Harris Advertisers Service, Inc., Harris Pocasset Press Corporation, Harris Union Photoengraving Corporation, Nu-Method Matrix Plate, Inc., and Facts and Features, Inc.; that Harris and all these corporations are engaged in a single, integrated enterprise in producing and distributing printed sales-promotion material; that they constitute a single employer, each the alter ego of the others; and that, in view of the foregoing, they are responsible for carrying out the remedies described in the decree and order, including the back-pay provisions; and directing that a hearing be held before a trial examiner of the Board. Paragraphs VII through XI related to the amounts of back pay owing to the individual employees.
Mario, in an attempt to prevent the Board from litigating the issue of alter ego responsibility, opposed the motion, although it was first granted as unopposed. Mario’s request for leave to ap peal this ruling was denied by the Board without prejudice to raising the issue in exceptions upon the issuance of an Intermediate Report (Applicant’s Exh. H). The Board, however, ordered the Regional Director to set a new hearing date, giving Mario an opportunity to file an answer.
Thereafter, the Trial Examiner received Mario’s opposition to the motion to' amend, but again granted it. No request was made to the Board for leave to appeal this ruling.
Mario persisted, however, in its efforts to prevent the Board from fastening liability on its alleged alter egos. In its answer to the amended back-pay specification (Applicant’s Exh. C), it sought a dismissal as to the alleged alter egos on the grounds that: (1) the Board lacked jurisdiction to consider Mario’s relationship to the other corporations in this proceeding; and (2) that the parties named in paragraphs I through VI of the amended back-pay specification (i. e., the alleged alter egos) were not served with or named in any charge as provided by section 10(b) of the Act [29 U.S.C.A. § 160 (b)] as thus are not proper parties-respondent.
At the hearing (which opened February 13,1961), the trial examiner granted the General Counsel’s motions to strike the above defenses and denied Mario’s motion to strike from the amended specification the allegations with respect to alter ego responsibility (Applicant’s Memorandum, filed May 23, 1961, p. 3). No request for leave to appeal was made to the Board.
The subpoena here in question was served on John J. Harris by registered mail and was received by him February 6, 1961 (Applicant’s Memorandum, p. 3; Applicant’s Exh. E): Ten days later, on February 16, 1961, Harris moved pursuant to section 11(1) of the Act (29 U.S.C.A. § 161 [1]) to revoke the subpoena.
Section 11(1) pertinently provides:
“Within five days after thé service of a subpoena on any person requiring the production of any evidence in' his possession or under his control, such person may petition the Board to revoke, and the Board shall revoke, such subpoena if in its opinion the evidence whose production is required does not relate to any matter under investigation, or any matter in question in such proceedings, or if in its opinion such subpoena does not describe with sufficient particularity the evidence whose production is required.”
The trial examiner refused to revoke-on two grounds: (1) that the evidence to be adduced related to matters put in issue by the specification; and (2) that the-petition to revoke was not timely (Applicant’s Exh. G). Harris did not request leave to appeal from the Board. His attorney, however, indicated that Harris would not testify with respect to the alter ego allegations in the amended specification. (See Applicant’s Exh. I).
On March 2, 1961 the Board, proceeding by order to show cause, sought judicial enforcement of its subpoena (Applicant’s Memorandum, p. 2). The District Court (Noonan, J.) enforced the subpoena, holding respondent’s defenses to be premature. In an endorsement dated April 11, 1961 (Applicant’s Exh. 1), Judge Noonan stated:
“It is the opinion of this court that the defenses raised by the respondent are premature. At present he stands as a witness from whom the N.L.R.B. seeks to obtain information in a Back Pay Proceeding. Whether he will be asked questions which are not pertinent to the proceeding at hand is a question which looms in the future.”
On April 27, 1961, the hearing on the amended back-pay specification was resumed before trial examiner Lloyd Buchanan. The respondent appeared and was sworn as a witness. However, he refused to answer questions relating to paragraphs I through VI of the amended specification.
It is not disputéd that these questions bear no relation to the amount of back-pay due but are- concerned solely with establishing an interrelationship between the companies which may form the basis for alter ego liability.
The trial examiner thereupon adjourned the hearing to enable the Board to institute further judicial proceedings to compel Harris to testify.
In the instant proceeding, the Board .•seeks an order directing Harris to appear and give testimony and answer all questions relevant and material to the matters under investigation, including all questions relevant to paragraphs I through VI of the amended back-pay specification.
A proceeding for judicial enforcement of an administrative subpoena is a case or controversy. Interstate Commerce Commission v. Brimson, 1894, 154 U.S. 447, 14 S.Ct. 1125, 88 L.Ed. 1047, to which appropriate defense may be made. Oklahoma Press Publishing Co. v. Walling, 1946, 327 U.S. 186, 66 S.Ct. 494, 90 L.Ed. 614. The judicial function in such a proceeding involves more than the automatic issuance of an order. 1 Davis, Administrative Law, section 3.12 (1958). “Instead of authorizing agencies to enforce their subpoenas, Congress has required them to resort to the courts for enforcement. In the discharge of that duty courts act as courts and not as administrative adjuncts.” Mr. Justice Frankfurter, dissenting, in Penfield Co. of California v. Securities and Exchange Commission, 1947, 330 U.S. 585, 604, 67 S.Ct. 918, 928, 91 L.Ed. 1117.
The District Court, however, is restricted in the scope of the issues presented for adjudication by such an enforcement proceeding.
The coverage of the Act is for -the administrative body to decide and not the District Court. The court must accept as sufficient the administrator’s pleading that it has reason to believe that the matter under investigation is within the coverage of the statute. Endicott Johnson Corp. v. Perkins, 1943, 317 U.S. 501, 63 S.Ct. 339, 87 L.Ed. 424; See National Labor Relations Board v. Northern Trust Co., 7 Cir., 1945, 148 F.2d 24, cer-tiorari denied 1945, 326 U.S. 731, 66 S.Ct. 38, 90 L.Ed. 435.
The inquiry of the administrative body is not limited by forecasts of the probable result of the investigation. The agency in an enforcement proceeding does not have to demonstrate to the court the existence of probable cause to believe that the law has been violated. Oklahoma Press Publishing Co. v. Walling, supra. See National Labor Relations Board v. Kingston Trap Rock Co., 3 Cir., 1955, 222 F.2d 299.
However, a court may always consider the question of the authority of the administrative body to conduct the investigation. Harriman v. Interstate Commerce Commission, 1908, 211 U.S. 407, 29 S.Ct. 115, 53 L.Ed. 253; Oklahoma Press Publishing Co. v. Walling, supra; Note, Use of Contempt Power to Enforce Subpoenas and Orders of Administrative Agencies, 71 Harv.L.Rev. 1541 (1958); 1 Davis, section 3.12; see Endicott Johnson Corp. v. Perkins, supra, 317 U.S. at page 512, 63 S.Ct. 339. If the administrative body lacks the authority to conduct the investigation, its subpoena will not be enforced.
There are circumstances in which a stockholder will be liable for the debts of a corporation, and a corporation responsible for the obligations of an affiliate. See National Labor Relations Board v. Deena Artware, Inc., 1960, 361 U.S. 398, 80 S.Ct. 441, 4 L.Ed.2d 400.
The August 21, 1957 decree of the Court of Appeals imposes an obligation for back pay on Mario, its officers, agents, successors and assigns. The responsibility of companies other than Mario for carrying out the decree of the Court of Appeals depends upon an appraisal of relationships and behavior. See Regal Knitwear Co. v. National Labor Relations Board, 1945, 324 U.S. 9, 65 S.Ct. 478, 89 L.Ed. 661.
Orders of the Board are binding upon successors and assigns who operate as “merely a disguised continuance of the old employer.” Southport Petroleum Co. v. National Labor Relations Board, 1942, 315 U.S. 100, 106, 62 S.Ct. 452, 456, 86 L.Ed. 718.
Corporations which appear to be separate may, in truth, be divisions or departments of a single enterprise jointly responsible for carrying out the decree of the court. National Labor Relations Board v. Deena Artware, Inc., supra.
The liability imposed upon the alter ego or successor is not primary but derivative. It results not from a violation of the Act but from the relationship of the alter ego to the primary obligor.
The appraisal of relationship and behavior necessary to a determination of derivative responsibility can be made by the Court of Appeals if contempt proceedings are instituted. National Labor Relations Board v. Ozark Hardwood Company, 8 Cir., 1960, 282 F.2d 1. It is also a proper subject for Board determination, a determination which the Board has authority to make prior to seeking enforcement of its order in the Court of Appeals. See National Labor Relations Board v. Charles P. Krimm Lumber Co., 2 Cir., 1953, 203 F.2d 194; National Labor Relations Board v. E. C. Brown Co., 2 Cir., 1950, 184 F.2d 829; National Labor Relations Board v. Adel Clay Products Co., 8 Cir., 1943, 134 F.2d 342.
|
4202080-22380 | MEMORANDUM
JAMES ROBERTSON, District Judge.
Michael Boardley is a professing Christian who believes it is his Christian duty and privilege to inform others about the Gospel of Jesus Christ. Compl. ¶ 7. In the summer of 2007, he and a few others traveled to Mount Rushmore National Memorial to distribute free gospel tracts. Id. ¶ 17. On August 9, Boardley handed out tracts near the entrance to the Memorial without incident. Id. ¶¶ 18-19. When he returned to the same location the next day, he was approached by a park ranger, Les Hanson, who told him that he could not distribute printed material without a permit. Id. ¶ 26. Hanson informed him that he could obtain a permit within two days if he requested one from park officials. Id. ¶¶ 29-30.
Boardley returned to his Minnesota home without distributing any more leaflets or requesting a permit. Soon after, though, he called the Mount Rushmore ranger’s office to ask for a permit in anticipation of a return trip to the park the next summer. Id. ¶ 31. He encountered some difficulties. He first spoke with a park official who promised to mail him a permit. Id. ¶ 34. When he did not receive one within a few weeks, he called another park official and left a message requesting a permit for a different date. Id. ¶ 36. The official called back and referred him to the park’s chief ranger, Mike Pflaum. Id. ¶ 37. He called Pflaum and requested a permit once more, but in the following weeks, he did not receive a permit, a permit denial, or a permit application. Id. ¶¶ 39-40.
Boardley then filed this suit against the United States Department of the Interior, the National Park Service, and five federal officials. He challenges the validity of 36 C.F.R. § 2.51 and § 2.52 — two similar regulations that apply to conduct at all national parks. Both regulations authorize park superintendents to designate the locations within each park that are available for certain activities: “[pjublic assemblies, meetings, gatherings, demonstrations, parades and other public expressions of views” under section 2.51(a), and “[t]he sale or distribution of printed matter” under section 2.52(a). To get a permit for these activities, one must fill out a short application that includes one’s name, the date, time, duration, nature, and location of the planned activity, and an estimate of the number of participants. See id. § 2.51(b); id. § 2.52(b). The park superintendent must issue the applicant a permit “without unreasonable delay” unless: a prior application for a permit for the same time and location has been made; it reasonably appears that the activity would present a clear and present danger to public health or safety; or the number of persons engaged in the activity, or the length of the activity, could not reasonably be accommodated. See id. § 2.51(c); id. § 2.52(c). If the superintendent rejects the permit application, she must inform the applicant in writing, “with the reason(s) for the denial set forth.” Id. § 2.51(d); id. § 2.52(d).
Boardley contends that both regulations are facially invalid under the First Amendment because they are unjustified prior restraints on expression and because they are substantially overbroad, and under the First and Fifth Amendments because they are impermissibly vague. He also claims that section 2.52 is invalid as-applied under the First Amendment, the Fifth Amendment’s Equal Protection Clause, and the Religious Freedom Restoration Act (RFRA). He moves for partial summary judgment on his facial challenges.
The defendants cross-move for partial summary judgment on Boardley’s facial challenges, and move to dismiss the as-applied challenges. The individual defendants move to dismiss all claims against them on qualified immunity grounds.
Analysis
A. As-applied challenges
1. Constitutional claims
Boardley claims that section 2.52 was applied to him twice: in the summer of 2007, when Ranger Hanson told him that he could not distribute printed material without a permit, and again that fall, when park officials did not give him a permit or a permit application despite his repeated requests. He contends that these actions violated the First Amendment because they “constitute^] impermissible content- and viewpoint-based restrictions on constitutionally protected expression in public fora,” compl. ¶ 73, and that they violated the Fifth Amendment because they “treat[ed][him] differently than other similarly situated individuals and groups on the basis of the content and viewpoint of his speech,” id. ¶ 99. Each of these claims must be dismissed.
Boardley does not plead sufficient facts about the first application of section 2.52 to support either of his claims. “While a complaint attacked by a [Federal Rule of Civil Procedure] 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007) (internal citations omitted). The only alleged fact that raises the possibility of content-based discrimination is that, when Boardley’s friend, Mark Oehrlein, asked for a permit to distribute religious material, an unnamed Mount Rushmore official told him that he “didn’t like that.” Compl. ¶¶ 51-52. That allegation is taken as true, but it is, not enough to sustain Boardley’s claim that Ranger Hanson asked him (and not others) to get a permit because of the religious content of his leaflets. Though Twombly “has produced some uncertainty as to exactly what is required of a plaintiff at the pleading stage,” it surely requires a plaintiff to plead enough facts to “suggest a ‘plausible’ scenario” for his entitlement to relief. Tooley v. Napolitano, 556 F.3d 836 (D.C.Cir.2009) (internal citation omitted).
The claims arising from the second application of section 2.52 — the failure of park officials to respond promptly to Boardley’s permit requests — are moot because Boardley received his requested permit months in advance of his scheduled trip to Mount Rushmore. In the fall of 2007, Boardley asked Mount Rushmore officials for a permit that covered certain days in the summer of 2008. Shortly after he filed this suit in November 2007, Boardley got his permit, see Supp. Decl. of Mike Pflaum, ¶ 4, and, in the summer of 2008, he “handed out printed material, held religious signs, and conducted open air religious preaching at Mount Rushmore” without hindrance. Dkt. 55, at 1. Boardley lacks standing to bring as-applied claims against conduct that caused him no injury. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).
2. RFRA
Boardley’s RFRA claim will also be dismissed. Under RFRA, the government may not “substantially burden a person’s exercise of religion” unless it demonstrates that the application of the burden “(1) is in furtherance of a compelling government interest; and (2) is the least restrictive means of furthering that compelling government interest.” 42 U.S.C. § 2000bb-l. A regulation is a substantial burden if it forces a person to engage in conduct that his religion forbids or prevents him from engaging in conduct his religion requires. See Henderson v. Kennedy, 253 F.3d 12, 16 (D.C.Cir.2001). Boardley “hands out gospel tracts in public areas because of his sincerely held religious beliefs concerning Christianity,” compl. ¶ 8, but he does not allege that he must distribute his gospel tracts at the United States national parks. Because the challenged regulations are, “at most[,] a restriction of one of a multitude of means” Boardley can use to spread the Gospel, they do not substantially burden his exercise of religion. Henderson, 253 F.3d at 17; see also Mahoney v. U.S. Marshals Serv., 454 F.Supp.2d 21, 38 (D.D.C.2006) (dismissing RFRA claim because plaintiffs “do not allege that their religion compels them to engage in [religious] speech at the time and place and in the manner at issue here”).
B. Facial challenges
Boardley claims that the regulations are facially invalid because they are overbroad, unjustified prior restraints on expression, and impermissibly vague. Because Boardley emphasizes his prior restraint claim, and it provides the basis for many of his arguments on the other two claims, I will begin there.
1. Prior restraint
The permit requirements found in the challenged regulations are prior restraints because they require individuals to receive authorization from government officials before engaging in certain expression. See Forsyth County v. Nationalist Movement, 505 U.S. 123, 130, 112 S.Ct. 2395, 120 L.Ed.2d 101 (1992). Although there is a “heavy presumption” against the validity of prior restraints, Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 70, 83 S.Ct. 631, 9 L.Ed.2d 584 (1963), the government may impose time, place, and manner restrictions on protected speech in a public forum if the restrictions (1) are not based on the content of the regulated speech; (2) are narrowly tailored to serve a significant governmental interest; and (3) leave open ample alternative channels for communication. See Clark v. Cmty. for Creative Non-Violence, 468 U.S. 288, 293-94, 104 S.Ct. 3065, 82 L.Ed.2d 221 (1984). For good measure, when the restrictions take the form of a permitting scheme, they must also be “narrowly drawn, reasonable, and definite,” so that the officials enforcing them do not have “limitless discretion.” Niemotko v. Maryland, 340 U.S. 268, 271-72, 71 S.Ct. 325, 95 L.Ed. 267 (1951).
Boardley concedes that the regulations are content-neutral. See dkt. 35, at 13. He focuses on the narrow tailoring and limited discretion requirements. Most of his arguments apply equally to both regulations, which cover different forms of expression but are otherwise identical. But a few of his arguments only relate to section 2.51. I will address those first,
a. Section 2.51
Section 2.51(a) requires park visitors to obtain a permit for “[p]ublie assemblies, meetings, gatherings, demonstrations, parades and other public expressions of views.” The phrase “other public expressions of views” was probably intended to cover events like those in the list that precede it. But, on its face, it does not satisfy the narrow tailoring and limited discretion requirements.
A regulation is narrowly tailored “if a substantial portion of the burden it imposes furthers the Government’s interest.” American Library Ass’n v. Reno, 33 F.3d 78, 88 (D.C.Cir.1994). The government claims that sections 2.51 and 2.52 help preserve the scenic beauty and historical value of the national parks, maintain the cleanliness and tranquility of the park grounds, and ensure the safety and security of park visitors. See dkt. 45, at 14. Those are worthy aims, but section 2.51(a) restricts far more expression than necessary to achieve them.
Many, if not most, of the visitors to the national parks engage in “public expressions of views” while there. The visitor who sports the cap of her local baseball team, wears a T-shirt supporting a political candidate, or displays a tattoo of her favorite band, is publicly expressing a view. As is any visitor who gives his opinion on any issue to a group of any size. Each of these visitors is required to obtain a permit under the plain language of section 2.51(a) even though their conduct does little, if anything, to undermine the government’s stated interests. That is unconstitutional. See, e.g., Cmty. for Creative Non-Violence v. Turner, 893 F.2d 1387, 1392 (D.C.Cir.1990) (holding that a Washington Metropolitan Area Transit Authority regulation requiring a permit for “the organized exercise of rights and privileges which deal with political, religious, or social matters and are non-commercial” on Metro proper ty was unconstitutional because it “significantly restricted] a substantial quantity of speech that d[id] not impede WMATA’s permissible goals.”).
The breadth of the phrase “public expressions of views” also invites park officials to exercise nearly unfettered discretion. Because officials obviously cannot reasonably demand a permit from all visitors whose conduct falls under section 2.51(a) (baseball caps, T-shirts, tattoos, etc.) their enforcement of section 2.51 is by definition selective, raising the specter of enforcement based on the content or viewpoint of a visitor’s expression. There is no evidence in the record that such selective enforcement has occurred at Mount Rushmore or elsewhere. “[T]he success of a facial challenge on the grounds that [a regulation] delegates overly broad discretion to the decisionmaker rests not on whether the administrator has exercised his discretion in a content-based manner,” however, but on “whether there is anything in the [regulation] preventing him from doing so.” Forsyth County, 505 U.S. at 133 n. 10, 112 S.Ct. 2395.
The National Park Service (NPS) attempted to clarify the scope of section 2.51(a) after this suit was filed. In a memorandum to all regional directors and park superintendents, the NPS director explained that:
The terms “public expressions of views” under 36 C.F.R. § 2.51 and “demonstrations” under 36 C.F.R. § 7.9[6](g) have traditionally been used interchangeably to include ‘demonstrations, picketing, speechmaking, marching, holding vigils or religious services and all other like forms of conduct which involve the communication or expression of views or grievances, engaged in by one or more persons, the conduct of which has the effect, intent or propensity to draw a crowd or onlookers. This term does not include casual park use by visitors or tourists which does not have an intent or propensity to attract a crowd or onlookers.’
Decl. of Dan Wenk, Ex. H.
This interpretation can only be considered during a facial challenge to section 2.51 if it has been “made explicit by textual incorporation, binding judicial or administrative construction, or well-established practice.” City of Lakewood v. Plain Dealer Pub. Co., 486 U.S. 750, 770, 108 S.Ct. 2138, 100 L.Ed.2d 771 (1988). Whether this interpretation meets that standard is an open question. Even if it does, the interpretation only creates a new set of problems for the government. If anything, its definition of “public expressions of views” gives officials more discretion than the regulation itself, because it allows officials to restrict speech based on their determination that a person intends to draw a crowd with her conduct. That determination can easily rest on impermissible grounds, like an official’s perception that certain expression is controversial or inappropriate. The First Amendment does not tolerate that outcome. See, e.g., id. at 763-64, 108 S.Ct. 2138.
b. Remaining Challenges
Boardley’s remaining challenges to the regulations fall short. He claims that the regulations give officials unbridled discretion because they permit the denial of a permit application if “[i]t reasonably appears that the event will present a clear and present danger to the public health or safety.” 36 C.F.R. § 2.51(c)(2); id. § 2.52(c)(2). Other district courts have found that exact language unconstitutional. See Naturist Soc’y, Inc. v. Fillyaw, 858 F.Supp. 1559, 1570 (SD.Fla.1994); United States v. Rainbow Family, 695 F.Supp. 294, 311 (E.D.Tex.1988). The Fifth Circuit, Fernandes v. Dimmer, 663 F.2d 619, 631 (5th Cir.1981), and the Supreme Court, Shuttlesworth v. City of Birmingham, 394 U.S. 147, 149, 89 S.Ct. 935, 22 L.Ed.2d 162 (1969), have invalidated somewhat broader language. But the Supreme Court has more recently found that a local ordinance permitting an official to deny a permit application if the proposed activity “would present an unreasonable danger to the health or safety of park users” did not “leave the decision ‘to the whim of the administrator.’ ” Thomas v. Chicago Park Dist., 534 U.S. 316, 324, 122 S.Ct. 775, 151 L.Ed.2d 783 (2002) (quoting Forsyth County, 505 U.S. at 133, 112 S.Ct. 2395).
Boardley argues that the “clear and present danger” standard invites park officials to restrict speech they think will be controversial, as the NPS director’s “intent” standard does. But divining an individual’s intent is far more subjective than predicting whether a proposed activity will be dangerous. The two determinations also occur at different stages of the process: the “clear and present danger” standard is used to assess whether a permit application should be granted, while the “intent” standard is used to evaluate whether a permit is needed at all. The former determination is likely to be more studied — the superintendent can digest the applicant’s description of the event and analyze its implications — whereas the latter determination is likely to be more ad hoc — an official encountering an ongoing event must make an immediate assessment of the participants’ intent based primarily on her view of the proceedings. And while there is no record of why an official decided that a permit was required in this case, the superintendent who rejects an application because of the “clear and present danger” standard must do so in writing, “with the reason(s) for the denial set forth.” 36 C.F.R. § 2.51(d); id. § 2.52(d). Taken together, these factors limit the ability of the superintendent to restrict speech she disfavors.
Boardley next asserts that the regulations are invalid because they require park superintendents to respond to permit applications “without unreasonable delay,” rather than within some limited, specified time period. Boardley fears that officials could “pocket veto” speech they do not like by ignoring applications until the date of the proposed event has passed.
“Administrative interpretation and implementation of a regulation are, of course, highly relevant” to the analysis of this claim. Ward v. Rock Against Racism, 491 U.S. 781, 795, 109 S.Ct. 2746, 105 L.Ed.2d 661 (1989). The defendants submit that permit applications for expressive activities must be processed within two days at Mount Rushmore. See Third Decl. of Mike Pflaum, ¶ 44 & Ex. E. That is but one national park, but in Boardley’s survey of eleven parks, he discovered that each had a self-imposed deadline of between three and ten days. See dkt. 50, at 19. Boardley emphasizes the lack of uniformity between the parks, but as long as they all have short and definite deadlines — ■ which they appear to have — then officials will be unable to simply ignore applications for speech they do not like.
Boardley next argues that the regulations are not narrowly tailored because they apply to individuals and small groups. He cites a handful of cases for the proposition that “[p]ermit schemes ... that potentially apply to small groups are nearly always overly broad and lack narrow tailoring.” American-Arab Anti-Discrimination Comm. v. City of Dearborn, 418 F.3d 600, 608 (6th Cir.2005). That may be the case, but the evidence here justifies the broader scope of these regulations.
These regulations do not cover city streets, see Cox v. City of Charleston, 416 F.3d 281 (4th Cir.2005), or subway entrances, Turner, 893 F.2d at 1387, or the local public park, Grossman v. City of Portland, 33 F.3d 1200 (9th Cir.1994); they cover places of immense historical significance (like Martin Luther King, Jr.’s church and the Gettysburg battlefield) and great natural beauty (like Yellowstone Park and the Grand Canyon). Unlike people walking in the city center or entering the subway, visitors to a national park expect a peaceful and tranquil environment, and the government has a legitimate interest in providing that experience to them. Even a small demonstration, or a lone pamphleteer, can disrupt that experience, particularly in some of the smaller parks. See Deck of Dan Wenk, ¶¶ 71-78.
Indeed, individuals and small groups may actually benefit from these regulations. Park officials use the information on permit applications to dispatch law enforcement personnel. See id., ¶ 68. These personnel keep a watchful eye on the participants in the event, but they also prevent park visitors from interrupting ongoing events. See id. ¶ 72. Without this law enforcement presence, participants—especially individuals or smaller groups—may be drowned out by counter-demonstrators, or even verbally or physically attacked. “To allow unregulated access to all comers could easily reduce rather than enlarge the park[s’] utility as a forum for speech.” Thomas, 534 U.S. at 322, 122 S.Ct. 775 (quoting Thomas v. Chicago Park Dish, 227 F.3d 921, 924 (7th Cir.2000)).
The regulations could be more narrowly tailored; they could, for example, impose different standards based on the size, location, or popularity of different parks. But “[t]he regulation^] will not be invalid simply because a court concludes that the government’s interest could be adequately served by some less-speech-restrictive alternative.” Ward, 491 U.S. at 800, 109 S.Ct. 2746.
Finally, Boardley argues that the regulations are not narrowly tailored because they foreclose two types of expression: spontaneous expression, because a visitor must wait to receive a permit, and anonymous expression, because a visitor must include her name on a permit application.
Spontaneous speech may often be “the most effective kind of expression,” Grossman, 33 F.3d at 1206, but once the phrase “public expressions of views” is excluded from section 2.51(a), the remaining activities—“[p]ublic assemblies, meetings, gatherings, demonstrations, [and] parades” under section 2.51(a), and “[t]he sale or distribution of printed matter” under section 2.52(a)—are unlikely to occur in truly spontaneous fashion. While a short waiting period may restrict the occasional visitor who wishes to engage in a demonstration, it also provides park officials with an opportunity to plan for upcoming events. See Third Deck of Mike Pflaum, ¶ 55. On balance, “a substantial portion of the burden [the regulations] impose furthers the government’s interest.” American Library Ass’n, 33 F.3d at 88; see also A Quaker Action Group v. Morton, 516 F.2d 717, 735 (D.C.Cir.1975) (approving requirement that park visitors apply for a permit 48 hours in advance of a planned event).
|
8903016-8975 | RULING ON DEFENDANTS’ MOTION TO DISMISS [DKT. NO. 26]
HALL, District Judge.
Plaintiff, Otis Elevator Company (“Otis”), initiated this lawsuit to halt a work stoppage initiated by Local 91, Inter national Union of Elevator Constructors (“Local 91”) and its members on March 30 and 31, 2004. Am. Compl. [Dkt. No. 21]. On April 13, 2004, this court held a hearing on plaintiffs motion for a preliminary injunction. That motion was denied on April 16, 2004. Trans., April 16, 2004 [Dkt. No. 30]. On April 12, 2004, the defendants, Local 91, Steve Bruno, and Dan Kelly, moved to dismiss the action for lack of subject matter jurisdiction. The defendants claim that prior to filing this lawsuit, the plaintiff failed to exhaust the administrative remedies provided for in the collective bargaining agreement (“CBA”) that controls the parties’ relationship. Additionally, the defendants claim that there is no present case or controversy as all Local 91 members have returned to work and the matter is moot.
I. FACTS
The facts are viewed in the light most favorable to the non-moving party. Otis and Local 91 have entered into a series of collective-bargaining agreements, the most recent of which went into effect on July 9, 2002 and remains in effect until July 8, 2007 (the “CBA”). That agreement restricts strikes and lockouts but the parties disagree as to the extent of that restriction. Otis alleges that the CBA prohibits any strike by Local 91. Local 91 alleges that where Otis violates the CBA, Local 91 is not bound by its promise not to engage in strikes or work stoppages.
On March 26, 2004, defendant Steve Bruno, Business Manager of Local 91, informed Otis that Local 91 members would not install equipment at a Connecticut Public Television facility in Hartford because, contrary to the CBA, the work of removing old equipment from that site had been performed by workers who were not Local 91 members. Otis’ contract included only the installation of new equipment, not the removal of old equipment. Otis had no knowledge that old equipment had been removed and if such equipment had been removed, it had not had control over who would be responsible for removing old equipment. Otis alleges that, rather than submit the dispute to the arbitration procedure provided for in the CBA, Local 91 chose to demand that Otis pay Local 91 members for removal of the equipment despite the fact that Local 91 members had not done that work and, when Otis refused, Local 91 members refused to work on the Connecticut Public Television project. In addition, on March 31, all Local 91 members employed by Otis engaged in a “sick-out” and refused to work. According to Otis, the work stoppage in late March and early April of this year was one of a series of short-term work stoppages occurring over the period between September 2001 and the present.
II. DISCUSSION
A. Standard
Rule 12(b)(1) of the Federal Rules of Civil Procedure provides that a defendant may, in response to a complaint, move for dismissal for lack of subject matter jurisdiction in the form of a motion. Fed. R. Civ. Proc. R. 12(b)(1). In considering a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the court must accept all factual allegations in the complaint as true and draw all inferences from those allegations in plaintiffs favor. Jaghory v. New York State Dept. of Educ., 131 F.3d 326, 329 (2d Cir.1997). The court may not dismiss a complaint unless “it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitled him to relief.” Id. Where the existence of subject matter jurisdiction turns on a factual issue raised by the defendant, however, the court is permitted to look beyond the complaint itself and may consider evidence outside the pleadings. United States v. Vazquez, 145 F.3d 74, 80 (2d Cir.1998); Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir.1997). The burden of proving jurisdiction is on the party asserting it. Malik v. Meissner, 82 F.3d 560, 562 (2d Cir.1996); see also Shenandoah v. Halbritter, 366 F.3d 89, 91 (2d Cir.2004). “[WJhen the question to be considered is one involving the jurisdiction of a federal court, jurisdiction must be shown affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to the party asserting it.” Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir.1998) (omitting citations).
B. Disputed Material Facts Prevent a Finding that the Complaint is Moot
“Because Article III is a limit on judicial power, a court will not have subject matter jurisdiction over an action absent the requisite case or controversy.” Moore’s Federal Practice 3D, § 101.02 (citing S. Jackson & Son, Inc. v. Coffee, Sugar, & Cocoa Exch., Inc., 24 F.3d 427, 431 (2d Cir.1994)). Where an action has become moot, no case or controversy exists to support a court’s subject matter jurisdiction. Local 91 claims that because there it is not currently engaging in a work stoppage,, there is no live case or controversy to be resolved by this court.
In this case, Otis alleges facts to support a finding that “the situation that prompted the invalidated [ ] activity ... is ongoing and will continue indefinitely. Thus, it is not absolutely clear that violations are unlikely to recur.” New York State Nat. Organization for Women v. Terry, 159 F.3d 86, 92 (2d Cir.1998) (citing Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Foundation, Inc., 484 U.S. 49, 66, 108 S.Ct. 376, 98 L.Ed.2d 306 (1987)). “An initially ripe case or controversy does not cease to be justiciable merely because the defendants stop violating the plaintiffs’ rights.” Id. at 92.
The parties have a fundamental disagreement over whether the CBA allows Local 91 to engage in work stoppages where it believes that Otis has violated some portion of the CBA. This difference in opinion over whether work stoppages like that in late March and early April 2004 are allowable points to the fact that the instant case or controversy is live and the mootness doctrine does not apply. Moreover, Otis contends that Local 91 has engaged in a series of illegal work stoppages over the last three years. Under the facts as alleged by Otis, the instant action falls within the “capable of repetition yet evading review” exception to the mootness doctrine. See Cedar Coal Company v. United Mine Workers of America, 560 F.2d 1153, 1163-68 (4th Cir.1977) (applying the “capable of repetition” yet evading review doctrine to an employer’s request for injunctive relief under Boys Markets). “[TJhe ‘capable of repetition, yet evading review’ exception to the mootness doctrine is limited to situations where ‘(1) the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration, and (2) there was a reasonable expectation that the same complaining party would be subjected to the same action again.’ ” Haley v. Pataki, 60 F.3d 137, 141 (2d Cir.1995) (quoting Weinstein v. Bradford, 423 U.S. 147, 149, 96 S.Ct. 347, 46 L.Ed.2d 350 (1975) (per curiam)). Indeed, “[t]he presence of an existing dispute makes this a live controversy despite the P & M employees’ return to the job.” Buffalo Forge Co. v. United Steelworkers of America, AFL-CIO, 428 U.S. 397, 403, n. 8, 96 S.Ct. 3141, 49 L.Ed.2d 1022 (1976).
While the court could not find, on the basis of a preliminary hearing, that Otis had met its burden in order to procure a preliminary injunction, Otis has alleged sufficient facts to state a claim and thus the court cannot dismiss this action.
C. Availability of Arbitration Procedures Does Not Strip This Court’s Subject Matter Jurisdiction
The requirement that a plaintiff exhaust administrative remedies does not apply to this action. The cases cited by the defendants involve statutory schemes that provide for administrative remedies. For example, the cases cited address statutory schemes and administrative structures that provide that disputes be submitted to particular agencies. See McCarthy v. Madigan, 503 U.S. 140, 112 S.Ct. 1081, 117 L.Ed.2d 291 (1992) (addressing federal prisoner’s access to prison administrative remedies with respect to claim that he received inadequate medical care in prison); Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638 (1938) (National Labor Relations Act); Gould Publishing Co. v. U.S., 934 F.2d 457, 459-60 (2d Cir.1991) (As a general rule, a litigant complaining of an administrative action is required to exhaust all of his administrative remedies before he will be permitted to seek judicial relief) (emphasis added; internal quotation omitted) (referring to complaint against the Occupational Safety and Health Administration); T.I.M.E.-DC, Inc. v. Management-Labor Welfare & Pension Funds, of Local 1730 Int’l Longshoremen’s Ass’n, 756 F.2d 939, 942 (2d Cir.1985) (Multiem-ployer Pension Amendments Act).
|
22325-29207 | WARDLAW, District Judge:
The Federal Deposit Insurance Corporation (“FDIC”) appeals adverse rulings in its actions asserting breach of fiduciary duty, negligence, and gross negligence against the directors of a failed Arizona bank, Century Bank (“Ceintury” or the “Bank”), as well as spousal liability. It is the culmination of a sorry saga of alleged mismanagement by defendants, members of the Board of Directors of Century, a state-chartered, federally insured banking institution, at various times from the Bank’s opening in January 1981 through October 1989. During most of this time, from October 1981 through October 1989, the FDIC, alone or jointly with the Arizona State Banking Department (“ASBD”), conducted yearly examinations of the Bank. These examinations repeatedly identified deficiencies in lending practices, including poor loan documentation, inadequate loss reserves, and inadequate commercial loan supervision. Each set of findings was presented to and acknowledged by the Board. Over the course of the Bank’s existence, the examinations resulted in two mem-oranda of understanding between the regulators and the bank directors and two cease and desist orders. In October 1989, the FDIC and the ASBD jointly determined that Century was insolvent. The ASBD took control of Century and the Maricopa County Superior Court appointed the FDIC as receiver. These consolidated actions followed in 1992.
The district court in a series of orders resolved all issues in favor of the Bank’s directors on various bases, with the result that all defendants were absolved of liability. On appeal the FDIC challenges the district court’s interpretation of Arizona law; to wit, it held that an action against bank directors for negligence accrues at the date an improper loan is made; the doctrine of adverse domination does not toll the running of the statute of limitations absent fraudulent conduct; bank directors whose actions are unprotected by the business judgment rule are liable only for gross negligence. It also challenges the grant of summary judgment in favor of director Harry Cavanagh.
Defendants Joseph and Marilyn Dupont cross-appeal the denial of their motion to dismiss as to them. The district court held that the second amended complaint (“SAC”) related back to the date of the original complaint, avoiding dismissal under Bankr.R. 4007(c); and that the SAC alleged sufficient facts to state a claim for fraud or defalcation against the Duponts as fiduciaries pursuant to 11 U.S.C. § 523(a)(4).
A. Accrual Date Under the Statute of Limitations
We agree that under Arizona law the cause of action for negligence accrues against directors at the time of the approval of bad loans. See RTC v. Blasdell, 930 F.Supp. 417 (D.Ariz.1994).
In Blasdell, the Resolution Trust Corporation (“RTC”) sued the directors of a failed bank for negligence, gross negligence, negligence per se, and breach of fiduciary duty. Blasdell, 930 F.Supp. at 419. The RTC argued there that the causes of action accrued at the time it became known that the loans would not be repaid, while the directors argued for accrual at the time the loans were approved or funded. Id. at 428. The court acknowledged that the RTC’s argument, which “focuse[d] on loss rather than conduct, [was] not without some force.” Id. at 429. “The incentive to bring suit based on the imprudent approval of a loan, other than to avoid limitations problems, is very low until the loan has gone into default or been declared a loss.” Id.
Nonetheless, the court agreed with the directors:
Notwithstanding these considerations, director approval of bad loans is not something that cannot be discovered until default occurs, assuming that nothing is done to conceal the circumstances surrounding the loan approvals. In fact, as made clear by the RTC’s evidence, federal regulators were aware of allegedly bad loans made by [the bank] long before default. In addition, banks sustain injury as soon as bad loans are funded: money that should not have left the bank is gone. The general rule is that “a statute of limitations begins to run against an action against directors of a corporation for malfeasance or nonfea-sance from the time of the perpetration of the wrongs complained of.” No Arizona case cited to the court calls into question the general rule. Thus, the court concludes that the cause of action accrued at the time the allegedly bad loans were made.
Blasdell, 930 F.Supp. at 430.
The rule of Blasdell has particular force here. The complaint alleges damages not from nonpayment of the loans, but from negligent practices over time which led to nonpayment.
The FDIC relies upon cases involving suits for collection of unpaid monies. However, collection causes of action accrue when the money is due. Such cases are inapplicable to the claims here. See, e.g., Baca v. Bank of Am. Nat’l Trust & Sav. Ass’n, 99 Ariz. 352, 409 P.2d 52, 52 (1965); Groves v. Sorce, 161 Ariz. 619, 780 P.2d 452, 454 (1989); Cheat-ham, v. Sahuaro Collection Serv., Inc., 118 Ariz. 452, 577 P.2d 738, 740 (1978).
The FDIC further analogizes to Arizona case law regarding accrual of causes of action for professional negligence. Yet the reasoning of these cases generally supports the district court’s finding. See Kenyon v. Hammer, 142 Ariz. 69, 688 P.2d 961, 965 (1984) (cause of action accrues at date patient experienced harm from negligence, which in that case was the date of the negligent act although the patient did not know she was harmed until years later); Sato v. Van Denburgh, 123 Ariz. 225, 599 P.2d 181 (1979) (cause of action for accountant’s negligence accrued when the negligent acts were done). Legal negligence cases have favored a later date, but are based on policy rationales absent here. See, e.g., Amfac Distr. Corp. v. Miller, 138 Ariz. 152, 673 P.2d 792, 794 (1983) (no cause of action for legal malpractice occurring during litigation until final harm has occurred, even where the negligence is known earlier); Environmental Liners, Inc. v. Ryley, Carlock & Applewhite, 187 Ariz. 379, 930 P.2d 456, 461-62 (1996) (legal malpractice claimant must sustain actual, irremediable, nonspeculative harm in order to sue, requiring a resolution of pending litigation); cf. Taylor v. State Farm Mut. Auto. Ins. Co., 185 Ariz. 174, 913 P.2d 1092, 1096-97 (1996) (indicating that because harm.from legal malpractice is not known until the appellate process is complete, and because the attorney/elient relationship must be respected until conclusion of the matter giving rise to the claim, the cause of action accrues later).
We hold that the district court correctly interpreted Arizona law to place the accrual date of the cause of action at the time the negligence itself occurred. Any possible inequity in this result due to the FDIC’s prior inability to sue may be mitigated by the application of the adverse domination doctrine.
B. Tolling of the Statute of Limitations Under the Theory of Adverse Domination
The more significant issue in this case is whether the doctrine of adverse domination, which may allow tolling for claims alleging wrongdoing by those who control the corporation, would act to toll the statute of limitations. We disagree with the district court’s conclusion that Arizona would apply the doctrine only where fraudulent director conduct is alleged.
Logical and practical inconsistencies result from the district court’s holding that adverse domination tolls the statute of limitations only in instances of fraudulent director conduct. As both the district court in this case and the Blasdell court correctly held, a cause of action in Arizona for negligent loan approval accrues at the date the loan is approved. However, the district court’s ensuing interpretation of the adverse domination doctrine would virtually preclude the FDIC from ever pursuing negligent directors.
The Blasdell decision, followed by the district court, recognized that Arizona law controls, and that although no Arizona case had expressly adopted it, “Arizona courts would recognize the doctrine of adverse domination in cases in which directors’ control of a corporation reasonably prevented others from discovering the directors’ ■ wrongdoing.” Blasdell, 930 F.Supp. at 430. However, the Blasdell court, based on its reading of other states’ application of the doctrine, particularly that of California and Texas, concluded that allegations of fraudulent or other intentional misconduct are necessary to invoke the doctrine. Id. We disagree with the Blasdell reasoning that insulates directors from liability for their negligence. We find the reasoning in Hecht v. RTC, 333 Md. 324, 635 A.2d 394, 406 (1994), more persuasive. In Hecht, the Maryland Court of Appeals analogized from Maryland’s discovery rule to hold adverse domination applicable to negligence actions:
There are situations other than those which involve fraud where a corporation cari be blamelessly unaware of a potential claim against directors and officers. Indeed, the directors and officers may be so disengaged from their responsibilities that they themselves are unaware of the breach of their duty to the corporation. Under these conditions, there is hardly greater likelihood that the corporation will be able to discover the cause of action.
Id.
We believe that the Arizona Supreme Court would likely adopt the Hecht approach rather than limit the adverse domination doctrine to actions in which fraudulent or intentional misconduct are alleged. First, Arizona appears to have recognized fraudulent concealment and adverse domination as distinct tolling doctrines. See Tornea Land & Cattle Co. v. Linsenmeyer, 100 Ariz. 107, 412 P.2d 47, 63-64 (1966). Second, the Arizona Supreme Court has generally favored use of the “discovery rule,” that a plaintiffs action does not accrue until plaintiff knows or should have known the underlying facts; and has disfavored the defense of statute of limitations. See Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182 Ariz. 586, 898 P.2d 964, 968 (1995) (finding discovery rule to apply to cause of action in contract). Third, the court has recognized that it has a “legitimate interest in the procedural rules that govern lawsuits, especially to prevent such rules from becoming a shield for serious inequity.” Hosogai v. Kadota, 145 Ariz. 227, 700 P.2d 1327, 1331 (1985) (applying equitable tolling doctrine to wrongful death action when first action was dismissed for procedural defects).
Because applying the adverse domination doctrine to negligent conduct is more consistent with its past approach, we hold that the Arizona Supreme Court would find that, at a minimum, gross negligence, rather than merely fraud or intentional misconduct, tolls the statute of limitations. Accordingly, we reverse the district court’s holding on this point.
C. Summary Judgment
The district court granted summary judgment in favor of director Harry Cavanagh and his wife. This holding was erroneous for two reasons. First, the court misapplied the business judgment rule, holding that the Arizona standard for corporate director liability is gross negligence. Second, even applying the district court’s liability standard, it erroneously disregarded genuine issues of material fact.
1. Standard of Liability Under the Business Judgment Rule
The district court dismissed all of the FDIC’s claims for simple negligence, applying the identical standard of liability for directors’ decisions without regard to whether they fell within or without the business judgment rule:
The standard of liability in Arizona for corporate directors is gross negligence. This standard applies to the defendants’ business decisions falling within the ambit of the business judgment rule, and to their business decisions that the plaintiff allege[s] fall outside the ambit of the rule, such as those that the defendants allegedly made without informing themselves of all material information reasonably available to them, as well as to the allegations that the defendants abdicated their responsibilities as directors of Century Bank. ■
March 1995 Order at 2, ER Ex. 3.
By so holding, the district court eviscerated the business judgment rule of any meaningful application and granted to all directors the protections previously afforded only those who in good faith exercised their business judgment in the conduct of the corporation’s regular affairs. This was in error because, under Arizona law, while a gross negligence standard is appropriate to impose liability for acts within the scope of the business judgment rule, a higher standard of liability, simple negligence, will apply when the act is outside the scope of the rule.
Arizona’s courts have long applied a gross negligenee/simple negligence dichotomy depending on whether the alleged wrongful acts fall within or without the ambit of the business judgment rule. The two most recent and thorough analyses of the applicable standard, however, come from two federal district courts in Arizona. The first, RTC v. Dean, 854 F.Supp. 626 (D.Ariz.1994), determined that to impose liability the business judgment rule requires gross negligence, but that where an act is outside the business judgment rule, that is, where a director acts outside of his role, simple negligence is the appropriate standard. Dean, 854 F.Supp. at 635-36. In Blasdell, decided only a few months later, another district court reached the opposite conclusion. That court cited Dean for the proposition with which it agreed, that where the business judgment rule did apply, gross negligence must be shown to establish director liability. Blasdell, 930 F.Supp. at 424. The court next addressed the applicable standard when the business judgment rule was not involved. Without distinguishing or even citing Dean’s holding on this point, the court “eonclude[d] that the Arizona courts would not impose liability on directors in the abdication context unless their conduct amounted to gross negligence.” Blasdell, 930 F.Supp. at 426. Blasdell reached its conclusion as to the Arizona standard without reference to any Arizona law whatsoever.
Logically, two different standards must apply to acts within and without the business judgment rule; otherwise the rule has no meaning or purpose. If the business judgment rule insulates covered acts from charges of simple negligence, then it follows that a simple negligence standard must generally apply to acts outside the rule. We therefore find that under Arizona law, where the business judgment rule applies to the conduct of a director, a showing of gross negligence is necessary to strip the director of the rule’s protection. Where the threshold requirements of the rule are not met, however, a showing of simple negligence can be sufficient to impose liability on the director.
2. Factual Issues
The district court also erred in granting summary judgment by failing to recognize critical facts distinguishing Cavanagh’s role from that of other directors. The district court had earlier granted judgment for Director Brown, finding that he was presumptively entitled to the benefit of the business judgment rule, and that the FDIC’s evidence was insufficient to demonstrate a factual dispute as to his entitlement. The court held that Brown’s deposition testimony, affidavit and other evidence showed the absence of facts supporting the FDIC’s claims. Further, the FDIC’s evidence was insufficient to show that Brown had breached the applicable standard of care, which it had determined, in the same order, was gross negligence. The FDIC subsequently stipulated that Directors Peters and Edmonds were not hable for gross negligence and therefore were protected by the business judgment rule to the same extent as Brown.
In granting Cavanagh’s motion, the district court relied on this stipulation, holding that the FDIC had failed to establish that Cav-anagh had not exercised the same business judgment as Brown, Peters, and Edmonds in his actions during the relevant October 1987 to October 1989 period. Therefore, “the Court conelude[d] as a matter of law that Cavanagh and his wife are entitled to summary judgment because his conduct of record during the relevant limitations period in approving the same transactions cannot rise to the level of gross negligence no matter how that term is defined.” March 22,1996 Order at 10, ER Ex. 6.
The determination whether a corporate director has properly discharged his duties is a question of fact. See RTC v. Dean, 854 F.Supp. at 639. In particular, the determination of whether a party is liable for gross negligence “is a matter of fact that must be left to the determination of the reasonable persons making up the trier of fact.” Chemical Bank v. Security Pac. Nat’l Bank, 20 F.3d 375, 378 (9th Cir.1994). Here, witness credibility, a matter particularly within the province of the factfinder, see Hanon v. Dataproducts Corp., 976 F.2d 497, 507 (9th Cir.1992), is clearly at issue, especially in view of the fact that the only evidence submitted is the testimony of the defendant and of experts.
The district court improperly evaluated the evidence under summary judgment standards. It failed to recognize that the character of Cavanagh’s actions in reviewing and approving loans was quite distinct from that of Brown, Peters, and Edmonds. The expert witness testimony before the court specifically singled out the latter three for lesser liability based on their date of entry onto the Board. See, e.g., Affidavit of Sidney C. Mar Ex. B at 1-2, ER Ex. B. “To the extent that the new Board members, Messrs. Brown, Peters, and Edmonds, participated in decisions to grant or renew troubled loans during their relatively brief tenures, those actions may be protected under the ‘business judgment’ rule.” Mar Aff. Ex. B at 5, ER Ex. B. On the other hand, as related to pre-1987 directors:
[i]n light of the considerable regulatory criticism and enforcement actions, the Board should have known that its passivity and over-reliance on management was imprudent and a complete abdication of the directors’ responsibilities. Moreover, the Board should have been aware that the Bank’s continued failure to adhere to regulations and regulatory directives, resulting in numerous regulatory enforcement actions, was an undesirable condition that should have been corrected immediately.
Id. at 5-6. As an original director charged with greater involvement and greater fault in contributing to the Bank’s condition over time, Cavanagh was potentially chargeable with greater knowledge and historical context than the other three. The evidence suggests that as a prior director, Cavanagh may have provided a source of expertise on which the later directors relied. Mar Aff. Ex. C at 6. The expert report of James A. Beeson, ER Ex. F at 3, suggests that because many of the problems came from continued reliance on management, directors who were aware of the problems violated their duties in continuing to so rely:
Of special concern is the fact that the majority of the Board members held office for this entire period [1983-1989], which covers at least three different senior management groups. The Board’s reliance on the original management team might be justified based upon their past history as savings and loan association executives, but the continued rebanee on successor management in bght of the eonstan[t] criticism by the regulatory bodies indicates a very serious disregard for the duties and responsibihties as directors.
Id. at 3. The expert report of Bradford T. Tope, Ex. H at 2, in criticizing this abdication of responsibibty to management, notes: “Once [the directors] acknowledged the problem [of rebanee on management] presented to them by the regulators, their direct involvement in the decision making process should have been paramount in their minds.”
This evidence demonstrates a genuine issue as to material facts regarding the alleged negligence of Cavanagh as compared with the conduct of the newer directors. Cav-anagh may be chargeable with an historical perspective regarding regulatory problems and actions that the other directors did not have, and therefore may have acted less reasonably. This factual dispute precludes summary judgment, even assuming that the relevant transactions are hmited to the period between October 1987 and October 1989. Therefore, we reverse the district court and remand this issue for trial.
D. Duponts’ Cross-Appeal
1. Relation Back
The district court denied the Du-ponts’ motion to dismiss on statute of limitations grounds, finding that the second amended complaint related back to the fikng date of the original complaint and thus was timely under Bankr.R. 4007(c). We agree that the FDIC’s complaint against the Du-ponts was timely under this section.
The district court correctly found that the second amended complaint related back to the original complaint pursuant to Fed. R.Civ.P. 15. While it is generally true that an amendment supersedes an original pleading, see Bullen v. DeBretteville, 239 F.2d 824, 833 (9th Cir.1956), cert. denied sub nom. Treasure Co. v. Bullen, 353 U.S. 947, 77 S.Ct. 825, 1 L.Ed.2d 856 (1957); Loux v. Rhay, 375 F.2d 55, 57 (9th Cir.1967), this Circuit has held that the filing date of an original complaint remains operative for relation-back purposes even where otherwise superseded by amendments. Martell v. Trilogy Limited, 872 F.2d 322, 323 (9th Cir.1989); Ashland v. Ling-Temco-Vought, Inc., 711 F.2d 1431, 1436-37 (9th Cir.1983).
Further, the original and second amended complaints plainly arise from the same transactions, and specifically refer to nondischargeability of Dupont’s liability under 11 U.S.C. § 523(a)(4). “In determining whether an amended cause of action is to relate back, the emphasis is not on the legal theory of the action, but whether the specified conduct of the defendant, upon which the plaintiff is relying to enforce his amended claim, is identifiable with the original claim.” Gelling v. Dean (In re Dean), 11 B.R. 542, 545 (9th Cir. BAP 1981), aff'd, 687 F.2d 307 (9th Cir.1982); see also Mission Viejo Nat’l Bank v. Englander (In re Englander), 92 B.R. 425, 427-28 (9th Cir. BAP 1988). Where an amended pleading seeks only to add new claims to an original pleading, “the district court should ... analyze[ ] the two pleadings to determine whether they share a common core of operative facts sufficient to impart fair notice of the transaction, occurrence, or conduct called into question.” Martell, 872 F.2d at 327.
In this case, the original complaint contains all of the allegations against Dupont later restated in the second amended complaint. The Duponts may not realistically claim that they were not on notice of the claims against them.
2. Section 523(a)(4) Motion to Dismiss
The district court correctly denied the Duponts’ motion to dismiss the complaint for failure to state a claim under 11 U.S.C. § 523(a)(4), finding the allegations sufficient to meet the requirements of that section.
The section exempts certain prepetition debt from discharge in bankruptcy:
A discharge under ... this title does not discharge an individual debtor from any debt-
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or lar-ceny____
11 U.S.C. § 523(a)(4). The following provision was added to the statute by the Crime Control Act of 1990: “Any institution-affiliated party of an insured depository institution shall be considered to be acting in a fiduciary capacity with respect to the purposes of subsection (a)(4)....” 11 U.S.C. § 523(e).
Nondischargeability of the Duponts’ liability under Section 523(a)(4) thus requires a determination of (1) the existence of a fiduciary relationship; and (2) acts of defalcation. In re Chavez, 140 B.R. 413, 422 (Bankr.W.D.Tex.1992). Both elements are alleged here.
First, Joseph Dupont was a fiduciary of the Bank under Section 523(e). Evidence in the legislative history evinces a clear intent to apply that section retroactively:
These are changes to the Bankruptcy Code which close off the bankruptcy escape hatch for bank and thrift insiders whose acts of financial fraud and malice will end up adding perhaps half a trillion dollars to the Federal debt. These provisions are narrowly crafted to hit only those who committed the worst abuses in the heyday of the Reagan deregulation era. But for those few who have been at the helm of one of the worst financial scandals in history, the hit will be hard. ... [W]e intend that such term [“institution-affiliated parties”] and the related bankruptcy provisions be applied to punish only those persons who personally were involved in wrongful acts that jeopardized the financial health of an insured depository institution.
136 Cong. Rec. H13, 289 (1990) (emphasis added); see also H.R.Rep. No. 101-681(1), 2d Sess. 179 (1990). The intent to apply the section to ensure coverage of those previously involved in the banking crisis is clear. The case law supports this interpretation:
The fact that the Crime Control Act of 1990 became effective after the transactions of the debtor is irrelevant. The Congressional intent is clear that the officers and directors who were most responsible for the collapse of the savings and loan industry would not be allowed to discharge the debts which accrued due to their improprieties. Had Congress merely intended to give the amendment postscriptive effect, the bulwark of the debt of the present crisis would have been left unaffected.
Chavez, 140 B.R. at 422 (citations omitted); see also FDIC v. Gaubert (In re Gaubert), 149 B.R. 819 (Bankr.E.D.Tex.1992).
Further, Joseph Dupont acted in a fiduciary capacity under Arizona law. For the purposes of Section 523(a), the existence of a fiduciary relationship is determined under federal law, but with reference to state law. Lewis v. Scott (In re Lewis), 97 F.3d 1182, 1185 (9th Cir.1996). Under Arizona law, a corporate director is a fiduciary of the corporation. See Master Records, Inc. v. Bachman, 133 Ariz. 494, 652 P.2d 1017, 1020 (1982); Atkinson v. Marquart, 112 Ariz. 304, 541 P.2d 556, 558 (1975); Shoen v. Shoen, 167 Ariz. 58, 804 P.2d 787, 795 (1991); Rhoads v. Harvey Publications, Inc., 145 Ariz. 142, 700 P.2d 840, 847 (1984).
The second amended complaint also sufficiently alleges acts of defalcation as required by 11 U.S.C. § 523(a)(4). In Lewis, a ease decided under Arizona law and not cited by-Appellees, we held that defalcation, at least for the purposes of nondischargeability under Section 523(a)(4), includes any behavior by a fiduciary, including innocent, negligent, and intentional defaults of fiduciary duty resulting in failure to provide a complete accounting. Lends, 97 F.3d at 1186 (citing Lewis v. Short (In re Short), 818 F.2d 693, 694 (9th Cir.1987); Woodworking Enters., Inc. v. Baird (In re Baird), 114 B.R. 198, 204 (9th Cir. BAP 1990)). Although those cases involved allegations of such improper accounting, Lends held that “[a]n individual may be liable for defalcation without having the intent to defraud.” Lends, 97 F.3d at 1187; see also Kaufman v. Tallant (In re Tallant), 207 B.R. 923, 929 (Bankr.E.D.Cal.1997) (“If the relationship between the debtor and the creditor falls within this [fiduciary] provision, then the slightest defalcation will render the resulting debt nondisehargeable.” (citing Lends, 97 F.3d at 1186)).
Therefore, under our Circuit’s standard, the allegations of the second amended complaint are sufficient to state a claim that would support liability against the Duponts. It alleges Joseph Dupont’s involvement in imprudent loan approvals, approval of minutes of meetings evidencing the problems, and violations of numerous fiduciary obligations sufficient to support at least negligence, if not gross negligence. Thus, the second amended complaint properly states a claim under 11 U.S.C. § 523(a)(4).
E. Conclusion
We affirm the district court’s decisions as to the determination of the accrual date and as to the issues raised by the Duponts on cross-appeal. However, we reverse the district court’s decisions with regard to the application of the adverse domination doctrine, the application of a gross negligence standard to bank directors acting outside the scope of the business judgment rule, and the grant of summary judgment in favor of Cav-anagh. The case is remanded to the district court for proceedings consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART.
. This Court has jurisdiction over these appeals pursuant to 28 U.S.C. § 1291 and 12 U.S.C. § 1819(b)(2). We review all questions raised in these appeals de novo. See Salve Regina College v. Russell, 499 U.S. 225, 237, 111 S.Ct. 1217, 1224, 113 L.Ed.2d 190 (1991) (district court's interpretation of state law); Churchill v. F/V Fjord (In re McLinn), 739 F.2d 1395, 1397 (9th Cir.1984) (en banc) (same); Huey v. Honeywell, Inc., 82 F.3d 327, 329 (9th Cir.1996) (grant of summary judgment); NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986) (dismissal for failure to state a claim); Herndon v. de la Cruz (In re de la Cruz), 176 B.R. 19, 22 (9th Cir. BAP 1994) (application of Bankr.R. 4007(c)).
|
866165-15611 | OPINION OF THE COURT
GIBBONS, Circuit Judge.
John Cervase, an attorney at law appearing pro se, appeals from the dismissal of his complaint on the government’s motion under Rule 12(c) of the Federal Rules of Civil Procedure. The complaint alleges: (1) that the Office of the Federal Register is under a statutory duty to prepare and publish an analytical subject index to the Code of Federal Regulations; (2) that the Office has breached this duty by preparing only a 164-page table of contents to the entire 120-vol-ume Code; and (3) that this breach of duty has injured Cervase and the public at large by making it almost impossible for them to know which federal regulations apply to them. The government filed an answer to this complaint,. but later moved for judgment on the pleadings. On December 16, 1976, the district court granted the government’s motion and dismissed the action. The court reasoned that mandamus would not lie to enforce the alleged statutory duty, that the Office was not a suable entity, and that the plaintiff had failed to satisfy the requirements of standing. In addition, the court declined to accept an amended complaint proffered by Cervase. The entire transcript of the exceptionally brief hearing on the government’s Rule 12(c) motion is quoted in the margin. Since we believe that such a summary disposition of Cervase’s complaint was improper, we reverse the dismissal and remand the case for further proceedings.
I
Cervase claims that the duty to prepare an analytical subject index arises out of two important federal statutes: the Federal Register Act of 1935 and the Freedom of Information Act of 1974. As amended, § 11 of the Federal Register Act provides in relevant part:
(b) A codification published under subsection (a) of this section shall be printed and bound in permanent form and shall be designated as the “Code of Federal Regulations.” The Administrative Committee shall regulate the binding of the printed codifications into separate books with a view to practical usefulness and economical manufacture. Each book shall contain an explanation of its coverage and other aids to users that the Administration Committee may require. A general index to the entire Code of Federal Regulations shall be separately printed and bound.
******
(d) The Office of the Federal Register shall prepare and publish the codifications, supplements, collations, and indexes authorized by this section.
Act of Oct. 22, 1968, Pub.L. No. 90-620, ch. 15, § 11, 82 Stat. 1277 (codified at 44 U.S.C. § 1510) (emphasis added). This version of § 11 was adopted as part of a general recodification of laws relating to public printing and public records. Since that re-codification was not intended to make any substantive changes in the law; we must look to the prior Federal Register Act of 1935, as amended, to determine the purposes underlying the statutory requirement that there be both a “Code of Federal Regulations” and a general index to that code.
Prior to 1935, although federal regulations of general applicability might have affected legal relations, they often were not conveniently available to those to whom they applied. Consequently, in that year Congress first imposed the requirement that such regulations be published in the Federal Register. The Act also provided that a document required to be published would not be valid against any person who lacked actual knowledge thereof. However, publication of the document in the Federal Register was deemed sufficient to give notice to any person subject to or affected by the document.
The original Federal Register Act provided for a compilation of all existing agency regulations of general applicability and legal effect. In 1937, however, that Act was amended to provide for codification instead of compilation, with a new codification to be made after five years.
In the 1937 amendment Congress, for the first time, imposed the indexing obligation on those responsible for preparing the periodic codifications. The significance of this obligation within the framework of what is commonly referred to as the Federal Register System is obvious. Codification of a document is prima facie evidence both of its text and of its continuing legal effect. Publication of the document in the Federal Register makes it effective against the world. But without the retrieval mechanism provided by an adequate index, a person might never be aware of a document containing a regulation affecting him until some federal bureaucrat produced a copy of the document and attempted to apply it to him. Indeed, the affected individual might already have changed his position in complete ignorance of the existence of the regulation. Such ignorance would avail him not, however, since publication in the Federal Register gives him constructive notice of the existence of the regulation. The Federal Register Act was enacted because of widespread dissatisfaction with the unsystematic manner in which executive orders, agency regulations, and similar materials were being made available to the public. The basic object of this statutory reform was to eliminate secret law. We think that the indexing obligation is a central and essential feature of this congressional plan. Without that obligation the periodic codification of regulations cannot serve the congressional purpose of providing public access to what has been published in the Federal Register.
The first codification appeared in 1938. Although the codification system was suspended during World War II, it was revived by executive order thereafter and a new codification appeared in 1949. In 1953 Congress amended the Act to provide for more frequent revisions.
The Administrative Committee of the Federal Register is charged with the statutory responsibility for publishing the Federal Register and the Code of Federal Regulations. However, through a regulation the Committee has delegated the authority to administer the Office of the Federal Register to the Director of the Federal Register. Other regulations provide for the indexing of the Federal Register and for the annual publishing of a subject index to the Code of Federal Regulations. Neither the Federal Register Act nor these regulations make this matter of indexing discretionary. On the contrary, there is a plain and mandatory duty to provide indices.
Cervase claims that the 164-page table of contents is so totally inadequate that it cannot be considered to be in compliance with that mandatory duty. In his brief to the district court Cervase observed that the 1938 codification consisted of 14 volumes, with a general index of 513 pages. The current codification has grown to 120 volumes covering fifty titles, while what passes for an index has actually shrunk to 164 pages. By contrast, the general index to the fifty titles of the annotated United States Code comprises eight bound volumes and eight supplements, or a total of 9024 pages.
Although his complaint alleged only a violation of 44 U.S.C. §§ 1510(b) and (d), in his brief to the district court Cervase also relied on the Administrative Procedure Act, as amended by the Freedom of Information Act. This Act imposes a separate indexing obligation on federal agencies:
Each agency shall also maintain and make available for public inspection and copying current indexes providing identifying information for the public as to any matter issued, adopted, or promulgated after July 4, 1967, and required by this paragraph to be made available or published. Each agency shall promptly publish, quarterly or more frequently, and distribute (by sale or otherwise) copies of each index or supplements thereto unless it determines by order published in the Federal Register that the publication would be unnecessary and impracticable, in which ease the agency shall nonetheless provide copies of such index on request at a cost not to exceed the direct cost of duplication. A final order, opinion, statement of policy, interpretation, or staff manual or instruction that affects a member of the public may be relied on, used, or cited as precedent by an agency against a party other than an agency only if—
(i) it has been indexed and either made available or published as provided by this paragraph; or
(ii) the party has actual and timely notice of the terms thereof.
5 U.S.C. § 552(a)(2) (emphasis supplied). Since Cervase’s amended complaint was not filed, we do not know whether it sought relief against any other agencies for failure to comply with the statute quoted above. But Cervase did argue that § 1510(b) should be construed in pari materia with the Freedom of Information Act. That Act reaffirmed Congress’ commitment to the principle of meaningful public access, by means of indexing, to records of agency action.
II
The government urges that under the Federal Register Act the Administrative Committee of the Federal Register is authorized to prescribe regulations providing for the manner and form in which the Federal Register shall be printed, compiled, indexed, bound, and distributed, and that therefore the Committee’s action is discretionary and beyond judicial review. Apparently the district court, in its cryptic reference to mandamus, accepted this argument. However, we believe that this argument is defective for several reasons.
Even assuming for the moment that a writ of mandamus was not available to Cervase, we think that the district court erred in dismissing the complaint. As mentioned earlier, the court refused to consider a tendered amendment which, judging from the information in the brief transcript which is available, would have added the Director of the Office of Federal Register as a party defendant. We do not know what else the proposed amended complaint would have stated since the district court refused to permit that amendment to be filed. We do know, however, that under 28 U.S.C. § 1331(a) there clearly was subject matter jurisdiction in the district court, regardless of the amount in controversy, over a complaint against the United States, any agency thereof, or any officer or employee thereof sued in his official capacity. Cervase’s original complaint invoked jurisdiction under the mandamus statute, 28 U.S.C. § 1361, and sought a direction that the defendant prepare and publish an index in conformance with the statute. If the complaint had instead invoked jurisdiction under § 1331(a) and had otherwise stated a cause of action, the identical relief would have been available by way either of an injunction or perhaps of a declaratory judgment. 28 U.S.C. § 1653 states that “[djefective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.” Mindful of this admonition, we think that even if the district court had correctly concluded that mandamus would not lie, that court was obliged to examine the tendered amendment to see if it stated a claim cognizable under § 1331(a). The district court’s failure to consider the amended complaint submitted by Cervase exceeded all bounds of permissible discretion. Since that amendment was not received, we do not know what was alleged respecting subject matter jurisdiction. But since such jurisdiction plainly does exist under § 1331(a), we will examine the pleading as if it had relied on both § 1361 and § 1331(a).
Certainly Cervase’s complaint states a cause of action cognizable under § 1331(a). The regulations promulgated by the Administrative Committee impose an indexing obligation on the Office of the Federal Register. Although the regulations do not define the term “index,” the Committee clearly intended that the word have its ordinarily understood meaning. Secondly, had the Committee attempted, by regulation, to define “index” to be something different than its ordinarily understood meaning, we would be faced with the question whether, in granting the rule-making authority found in 44 U.S.C. § 1506, Congress intended to place such rules beyond judicial review. See 5 U.S.C. §§ 704 and 706. But such a construction would fly in the face of the fundamental purpose of the Federal Register Act — to eliminate the problem of secret law. In our opinion, the Administrative Procedure Act provides aggrieved persons with an avenue for judicial review of the committee's regulations.
More fundamentally, even if Cervase’s complaint is read to invoke jurisdiction only under § 1361, that complaint does state a claim for relief. Cervase does not complain about the regulations which deal with the manner and form in which the indices shall be prepared and distributed. Rather, he complains that the Director of the Office of Federal Register is not following those regulations. Certainly that ministerial office has no discretion to disregard them. It is his inaction for which judicial intervention is sought. Mandamus will lie to compel the Director to follow the administrative regulations. See Commonwealth of Pennsylvania v. National Ass’n of Flood Insurers, 520 F.2d 11, 26-27 (3d Cir. 1975).
The government also urged successfully in the district court that the Office of Federal Register could not be sued in its agency name. As we noted above, the district court refused to permit Cervase to file an amendment naming the Director as a party defendant. Whatever might have been said for the learning on federal sovereign immunity and on the status of federal agencies or officials as parties prior to 1976, that learning became obsolete with the passage of the Judicial Review Act. This new statute amended 5 U.S.C. § 702 to provide for a general waiver of sovereign immunity whenever non-monetary relief is sought. In addition, it amended 28 U.S.C. § 1331(a) to provide for jurisdiction in the district courts over such actions without regard to the amount in controversy. The legislative history of Pub.L. No. 94-574 demonstrates that Congress intended both to eliminate sovereign immunity as a bar to judicial review of agency actions and to prevent the United States from raising technical objections to the parties named as defendants. Thus, even if Cervase had not submitted the amended complaint, the district court erred in dismissing the action. In fact, the suit could simply have proceeded against the United States, which would have been represented by the United States Attorney. House Report No. 94-1656 puts the issue nicely in focus:
The size and complexity of the Federal Government, coupled with the intricate and technical law concerning official capacity and parties defendant, has given rise to numerous cases in which a plaintiff’s claim has been dismissed because the wrong defendant was named or served.
Nor is the current practice of naming the head of an agency as defendant always an accurate description of the actual parties involved in a dispute. Rather, this practice often leads to delay and technical deficiencies in suits for judicial review.
The unsatisfactory state of the law of parties defendant has been recognized for some time and several attempts have been made by Congress to cure the deficiencies.
Despite these attempts, problems persist involving parties defendant in actions for judicial review. In the committee’s view the ends of justice are not served when government attorneys advance highly technical rules in order to prevent a determination on the merits of what may be just claims.
[1976] U.S.Code Cong. & Admin.News pp. 6137-38 (94th Cong., 2d Sess.) (footnotes omitted). The district court’s conclusion that the Office was not a suable entity was wholly inconsistent with the letter and spirit of the Judicial Review Act.
|
4329677-20983 | MEMORANDUM OPINION
Amit P. Mehta, United States District Judge
I. INTRODUCTION
The outcome of this case turns on a discrete question: Was Plaintiff Kwabena Amoah subject to the dispute resolution terms of a collective bargaining agreement, even though he denies membership in the union with whom his employer negotiated the agreement? If the answer is “yes,” Plaintiffs lawsuit must be dismissed because the collective bargaining agreement required that he first file a grievance with his employer, which he did not do. If the answer is “no,” Plaintiff may proceed with his suit, albeit not in this court.
The court concludes that, by its plain terms, the collective bargaining agreement applied to Plaintiff, even if he was not a union member. Therefore, Plaintiff was required to follow the grievance process provided in the collective bargaining agreement. Because he failed to follow that process, the court must enter judgment in favor of his employer, Defendant Paragon Systems, Inc.
II. BACKGROUND
A. Factual History
The following facts are described in the light most favorable to the non-movant, Plaintiff Kwabena Amoah. On November 10, 2012, Plaintiff began his employment as a security officer for Defendant Paragon Systems, Inc. (“Paragon”). Notice of Removal, ECF No. 1, Ex. A, Compl., ECF No. 1-2 [hereinafter Compl.], ¶ 1; Def.’s Mot. to Dismiss, ECF No. 4, Ex. 1, Decl. of llene Reiter, ECF No. 4-2 [hereinafter Reiter Decl.], ¶ 5; Reiter Decl., Ex. B, ECF No. 4-4. Plaintiff was assigned to work at 950 L’Enfant Plaza in Washington, D.C., under a contract for security services between Paragon and the Department of Homeland Security (“DHS”). Id. ¶ 4; Def.’s Mot. to Dismiss, Ex. 2, Decl. of Mike Mateer, ECF No. 4-6 [hereinafter Mateer Deck], ¶¶ 2-3.
The following year, Paragon entered into a collective bargaining agreement (the “CBA”), effective November 8, 2013, with the Union Rights for Security Officers (“URSO”). Mateer Decl., Ex. A, ECF No. 4-7 [hereinafter “CBA”]. The CBA “cover[ed] ... those security officers employed under” Paragon’s contract with DHS, including the officers working at 950 L’En-fant Plaza. CBA §§ 1.1, 1.3.' Under the CBA, Paragon “recognize[d] ... [URSO] as the sole and exclusive bargaining representative for the purpose of collective bargaining with respect to rates of pay, wages, hours of employment and other conditions of employment.” Id. § 1.2.
Among the “other conditions of employment” dictated by the CBA is a detailed employee grievance procedure. See id. § 13. The procedure is “the sole and exclusive remedy for any grievance asserted by the Union or any employee.” Id. § 13.1. As applicable here, for grievances involving suspension or termination of an employee, URSO must present the employee’s grievance in writing to Paragon’s Director of Labor Relations within 10 days of the adverse action. Id. In turn, Paragon’s Director of Labor Relations has 10 days to respond in writing. Id. If this internal process does not produce a mutually agreeable outcome, the CBA provides for binding arbitration as the final mechanism for dispute resolution. Id. § 13.3.
Plaintiff asserts that he never became a member of URSO. PL’s Opp’n to Def.’s Mot. to Dismiss, ECF No. 8 [hereinafter Pl.’s Opp’n], Aff. of Kwabena Amoah, ECF No. 8-1 [hereinafter Amoah Aff.], ¶ 4. He states that no one ever informed him of his union membership and that he never paid an initiation fee or dues to the union. Id. ¶ 5. He also never saw a copy of the CBA or met a shop steward. Id. ¶¶ 6-7. In short, he claims that he did not know that URSO even existed. Id. ¶ 15. Paragon has offered no evidence to contradict Plaintiffs assertions.
On or about October 22, 2014, Paragon suspended Plaintiff for allegedly falling asleep on the job, an accusation he steadfastly denies. PL’s Opp’n, Ex., ECF No. 8-2; Compl. ¶¶ 4-5. Because he was not aware of the union or the CBA, Plaintiff did not comply with Section 13.1 of the CBA by filing a grievance with Paragon’s Director of Labor Relations within 10 days of his suspension. Amoah Aff. ¶¶ 9-15; Ma-teer Decl. ¶¶ 4-6. Instead, Plaintiff followed a different procedure set forth in an employee manual known as the “Security Officer Handbook” (the “Handbook”). Am-oah Aff. ¶ 9; Reiter Deck, Ex. C, ECF No. 4-5. The Handbook permits disciplined employees to appeal in writing to Paragon’s Director of Employee Relations. Reiter Deck, Ex. C, at 53. If the outcome of that review is unsatisfactory, the employee may request a hearing with Senior Management. Id. The Handbook, however, clearly states that: “Employees covered by a collective bargaining agreement shall pursue their appeal in accordance with the grievance procedure outlined by the Collective Bargaining Agreement.” Id.; see also id. (“Employees not covered by a collective bargaining agreement who think they have been discipline^] unfairly, too harshly, or inappropriately may appeal the discipline within five working days by filing a written appeal.”) (emphasis added).
As provided in the Handbook, Plaintiff appealed his suspension in writing to the Director of Employee Relations. Amoah Aff. ¶ 10. He did not receive a response, and subsequently requested a hearing with Senior Management. Id. ¶ 11. He never received a hearing. Id. ¶ 12. Only after Plaintiff was well into the appeals process did someone inform him that he was a member of URSO and subject to the grievance procedures in the CBA. Id. ¶ 13. By that time, however, the CBA’s 10-day time period to file a grievance had expired. Id. ¶ 14. Paragon eventually terminated Plaintiff from his employment with the company. Compl. ¶ 3.
B. Procedural History
About four months later, on March 7, 2015, Plaintiff filed suit against Paragon and URSO in D.C. Superior Court. See generally Compl. In his Complaint, Plaintiff alleged that Paragon had wrongfully terminated him and had breached its contractual promise, as set forth in the Handbook, to afford disciplined employees an appeal and hearing. Id. ¶ 16. Plaintiff also sought a “determination” as to whether he was covered by the CBA. Id. ¶ 13.
On April 1, 2015, Paragon removed the suit to this court. See Notice of Removal. As grounds for the removal, Paragon asserted that, because Plaintiff was a member of “a bargaining unit whose terms and conditions of employment were governed” by the CBA, his state law claims were preempted by Section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 185 (granting federal courts ju risdiction over disputes “for violation of contracts between an employer and a labor organization representing employees”). See Notice of Removal, ¶¶ 8-10. Application of the LMRA thus created federal question jurisdiction in this court. Id. ¶¶ 11-12.
Seven days later, on April 8, 2015, Paragon filed a Motion to Dismiss or, in the Alternative, for Summary Judgment (“Motion to Dismiss”). See generally Def.’s Mot. to Dismiss. Plaintiff opposed the Motion to Dismiss, asserting that he was not required to follow the CBA’s grievance procedures because he was not a part of the union. Pl.’s Opp’n ¶¶ 9, 19. Because he was not subject to the CBA, Plaintiff argued, his state law claims were not preempted by federal law and therefore removal was improper. Id. ¶¶ 9, 29. Plaintiff asked for a remand to D.C. Superior Court. Id.
III. STANDARD OF REVIEW
Because both parties have submitted sworn affidavits and other evidence “outside the pleadings,” Federal Rule of Civil Procedure 12(d) requires the court to treat Defendant’s motion not as one to dismiss for failure to state a claim under Rule 12(b)(6), but as one for summary judgment under Rule 56. Fed. R. Civ. P. 12(d). When such a conversion occurs, as here, the court must determine whether there is any genuine issue of material fact. Fed. R. Civ. P. 56(c). A genuine dispute over a material fact exists when “a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court must review the evidence “in the light most favorable to the nonmoving party” and draw all inferences in favor of that party. Talavera v. Shah, 638 F.3d 303, 308 (D.C.Cir.2011) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505). The court should grant summary judgment in favor of the defendant if the plaintiff, “after adequate time for discovery,” is unable to make a showing to establish an essential element of its case for which it will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
IV. DISCUSSION
A. Whether Plaintiff Was Covered by the CBA and Its Grievance Procedures
Paragon argues that the court must enter summary judgment in its favor because Plaintiff failed to exhaust his available remedies under the CBA. Plaintiff counters with one — and only one — argument: Because he was not a member of URSO, the CBA does not apply to him; therefore, he was not required to exhaust remedies under the CBA. See Pl.’s Opp’n ¶29 (asserting that “Plaintiff is not a member of the Union and in view of his employment not being subject to the CBA” summary judgment should be denied and the case remanded to D.C. Superior Court). Thus, the dispositive issue in this case is whether Plaintiff was subject to the CBA’s grievance scheme.
To answer that question, the court must interpret the CBA. The question therefore is one of law. See Flynn v. Dick Corp., 481 F.3d 824, 829 (D.C.Cir.2007) (stating that interpretation of a collective. bargaining agreement is a question of law). Here, the CBA plainly covered Plaintiffs position as a security officer with Paragon. The CBA provides that it “covers only those security officers employed under” Paragon’s contract with DHS. CBA § 1.1. It further provides that the term “’Employee”’ under the agreement “shall include all armed and unarmed security officers] employed by Paragon Systems performing guard duties ... assigned to the following Federal facilities.” Id. § 1.8. The CBA expressly identifies “950 L’Enfant Plaza” — Plaintiffs assigned place of work — as one of the covered locations. Id.
Plaintiff does not dispute that the CBA covers Paragon employees working under the company’s contract with DHS. Nor does he debate that the location where he worked was covered under the DHS contract. Instead, he asserts that, because he was not a member of URSO, he personally was not subject to the CBA and its employee grievance provisions. See PL’s Opp’n ¶ 29. But the plain terms of the CBA do not support such a reading.
The CBA covers “only those security officers employed under” Paragon’s contract with DHS. CBA § 1.1. In terms of coverage, it makes no distinction between union and nonunion employees. Id. Indeed, the CBA defines a covered “Employee” as one who is “performing guard duties” as of the effective date of the CBA, irrespective of whether is he a union or nonunion employee. Id. § 1.8 (emphasis added). Moreover, in the CBA, Paragon agreed that it would not negotiate different terms of employment with non-union employees. Paragon recognized URSO as the “sole and exclusive bargaining representative for the purpose of collective bargaining with respect to rates of pay, wages, hours of employment, and other conditions of employment, for the employees of the Company[.]” Id. § 1.2 (emphasis added). The “other conditions of employment” included the grievance and arbitration process. Id. §§ 13.1, 13.3. Thus, when Paragon entered into the CBA, it agreed that for all covered employees it would follow the CBA’s grievance procedures and no other policy, including those contained in the Handbook.
The conclusion that the CBA’s grievance process applied to Plaintiff, notwithstanding his status as a nonunion employee, is reinforced by relevant case law. Our Court of Appeals appears not to have addressed the question whether a nonunion employee must follow a CBA’s grievance process. However, one other federal appellate court has directly addressed the issue and others have provided helpful guidance.
In Quesnel v. Prudential Insurance Co., 66 F.3d 8 (1st Cir.1995), the First Circuit held that a CBA that “encompass[ed] ‘all District Agents employed or hereafter to be employed’” by the defendant company required the plaintiff to follow the CBA’s grievance and arbitration procedures, even though he claimed not to be a member of the union. Id. at 11. The court found that, “regardless of the fact that [the plaintiff] was not a Union member, he is a member of the bargaining unit for whose benefit the CBA was created.” Id. The First Circuit explained that, because “[t]he Union was and is obligated under § 9(a) of the National Labor Relations Act, 29 U.S.C. § 159(a), to represent the interests of all employees in collective bargaining, including nonmembers,” “the fact that [the plaintiff] is not a Union member does not remove him from the bargaining unit for whose benefit the CBA was created.” Id. (citing Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967)). Thus, the court concluded, “[t]he grievance procedures set forth in the CBA is exclusive of other dispute resolution mechanisms.” Id.; see also Bhatnagar v. Medco Health, LLC, 958 F.Supp.2d 1183, 1187 (D.Nev.2013) (following Quesnel and holding that “nonunion members of a bargaining unit are covered by a collective bargaining agreement in the context of a non-union employee asserting that he is not covered”).
Two other circuit court decisions are instructive. In Saunders v. Amoco Pipeline Co., 927 F.2d 1154 (10th Cir.1991), the plaintiff argued, as Plaintiff does here, that because he was not a member of the union, the CBA did not apply to him. Id. at 1156. The Tenth Circuit concluded that “[u]nion membership ... is irrelevant to the applicability of a collective bargaining agreement. Rather, an individual employed in a craft governed by a collective bargaining agreement is bound by the terms of the agreement regardless of union membership.” Id. (citations omitted). “Plaintiff, therefore, was bound by the terms of the collective bargaining agreement as a member of the applicable bargaining unit.” Id. The court therefore concluded that his state-law claims were preempted by Section 301. Id.
In Baker v. Amsted Industries, Inc., 656 F.2d 1245 (7th Cir.1981), a group of employees sued their union for failing to pursue a pension dispute. Id. at 1248. In analyzing whether the union had breached its duty of fair representation, the court made several observations that are pertinent here. The court explained that, under Section 9(a) of the National Labor Relations Act, “a union designated by a majority of employees in an appropriate unit ‘shall be the exclusive representative of all employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment.’” Id. (quoting 29 U.S.C. § 159(a) (1976)). Thus, under Section 9(a), the court observed, “[e]ven employees who may have preferred a different [collective bargaining] representative, or none at all, are bound by the choice of a majority of their fellow workers.” Id. (emphasis added) (citation omitted). The court further observed that, “terms and conditions of employment can be arranged only by the majority representative, and the rules written into the collective bargaining agreement become the law of the plant for all employees.” Id. at 1249. In other words, once a majority of employees has elected a bargaining representative, all employees— even nonunion workers — are bound by the terms of the agreement that the representative negotiates.
Plaintiff offers no response to Quesnel, Saunders or Baker — indeed, his Opposition cites no case law at all. Nor does Plaintiff suggest an alternative interpretation of the CBA. Instead, he simply argues that, as a factual matter, he was not a member of URSO. But as the court stated in Quesnel, “[wjhether [the plaintiff] is subject to the CBA is ... a question of law, not of fact.” 66 F.3d at 11. Thus, whether the facts ultimately would show Plaintiff was a member (or not) of URSO is irrelevant. Either way, he would be bound by the CBA’s grievance procedures.
B. Plaintiff Failed to Exhaust Remedies Under the CBA
Having determined that Plaintiff was subject to the CBA and thus required to follow its grievance process, resolving Paragon’s dispositive motion becomes straightforward. Plaintiff failed to exhaust his administrative remedies and thus the court must dismiss his claims.
In Vaca v. Sipes, the Supreme Court held:
[I]f the wrongfully discharged employee himself resorts to the courts before the grievance procedures have been fully exhausted, the employer may well defend on the ground that the exclusive remedies provided by such a contract have not been exhausted. Since the employee’s claim is based upon breach of the collective bargaining agreement, he is bound by terms of that agreement which govern the manner in which contractual rights may be enforced. For this reason, it is settled that the employee must at least attempt to exhaust exclusive grievance and arbitration procedures established by the bargaining agreement.
386 U.S. at 184, 87 S.Ct. 903 (emphasis added) (citation omitted). It is undisputed that Plaintiff did not at any point present his grievance to Paragon’s Director of Labor Relations, as required by § 13.1 of the CBA. Amoah Aff. ¶ 10 (stating that he appealed only to “Human Resources, ATTN: Employee Relations”); Mateer Decl. ¶¶ 4-6 (stating that, as Program Manager, he was the person designated to receive grievances under the CBA, but he has no record of a grievance filed by Plaintiff). Therefore, because Plaintiff failed to exhaust the remedies available to him under the CBA, judgment must be entered in favor of Paragon. See Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 220-21, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985) (holding that, where claims were preempted by Section 301, the “complaint should have been dismissed for failure to make use of the grievance procedure established in the collective-bargaining agreement, or dismissed as pre-empted by § 301”) (citation omitted).
Before concluding, the court pauses to observe that Plaintiff did not raise anywhere in his opposition papers an arguably applicable exception to the exhaustion requirement. In DelCostello v. International Brotherhood of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983), the Supreme Court observed that “[ojrdinarily ... an employee is required to attempt to exhaust any grievance or arbitration remedies provided in the collective bargaining agreement.” Id. at 163, 103 S.Ct. 2281 (citation omitted.) The Court noted, however, that “this rule works an unacceptable injustice when the union representing the employee in the grievance/arbitration procedure acts in such a discriminatory, dishonest, arbitrary, or perfunctory fashion as to breach its duty of fair representation.” Id. at 164, 103 S.Ct. 2281. “In such an instance, an employee may bring suit against both the employer and the union, notwithstanding the outcome or finality of the grievance or arbitration proceeding.” Id. The Court stated, however, that for the exception to apply, it is not essential that the employer sue both the employer and the union. Id. at 165, 103 S.Ct. 2281. “The employee may, if he chooses, sue one defendant and not the other; but the case he must prove is the same whether he sues one, the other, or both.” Id.
Here, Plaintiffs Complaint asserts facts that arguably meet the exception to the exhaustion requirement recognized in Del-Costello. The Complaint alleges that: “Plaintiff attempted to contact the Defendant Union, but to no avail. In fact, the Defendant Union representative hung the telephone up on the Plaintiff while he was attempting to obtain information.” Compl. ¶ 11. It also avers that “if the Plaintiff was a member of the Defendant Union then the Defendant failed to provide services to the Plaintiff when he was improperly discharged by the Defendant Paragon.” Id. ¶ 12. Finally, the Complaint alleges that, “if the Plaintiff was to be represented by the Defendant Union, then [his] losses are also directly attributable to the Union’s failure to undertake and/or to pursue the appeal process to which the Plaintiff was entitled.” Id. ¶ 16.
Despite these allegations, Plaintiff does not argue that he was excused from the exhaustion requirement because the union refused to represent him. He cites neither DelCostello nor any case for that matter in his opposition brief. Nor does Plaintiffs sworn affidavit offer any facts that would support applying the DelCostello exception. Although the Complaint alleges that the union failed to represent him, the affidavit contains no facts to support such assertion. Instead, it focuses exclusively on establishing that Plaintiff was not a member of the union, which the court has assumed to be true.
|
397799-5402 | DANAHER, Circuit Judge.
Appellant filed a pre-trial motion to suppress evidence which, after hearing, was denied, whereupon certain seized articles were received in evidence at the trial, and appellant was convicted. His. appeal attacks the ruling of the District Judge in denying his motion to suppress.
Appellant claims standing as “a person aggrieved by an unlawful search and seizure” within the meaning of Rule 41 <e), Fed.R.Crim.P., 18 U.S.C.A. The indictment had charged in a first count that Accardo and one Rigby entered the dwelling of Jane M. Bauman and Paul R. Bauman with intent to steal, and in a second count, that Accardo and Rigby stole property of the Baumans and of one Maude J. Davis. The third and fourth counts dealt with similar entry into the store of one Lewis and with the theft of his property. *The evidence shows that on June 27, 1956, Special Agents of the Federal Bureau of Investigation arrested Accardo on a warrant charging him with unlawful flight to avoid prosecution for an offense committed in Alabama.
Appellant’s counsel in his statement of the case tells us that appellant was told by F.B.I. Agent Busher that he was being arrested as an escapee from Alabama; that Agent Busher and Agent Nau questioned appellant as to where he was staying; that appellant told them he had no definite address but had been staying at the Rigby apartment at 1855 Calvert Street, Northwest, for several days and that he was staying there at the time of his arrest; that Agent Bush-er then directed Agent Nau and another Agent to go upstairs and pick up Aecardo’s property; that permission was never asked of the appellant to pick up his things and at no time did he consent to this search.
The Agents identified themselves to Mrs. Rigby at whose apartment appellant had said he had been staying. She pointed out two suitcases as the property of Accardo. The suitcases were taken to the F.B.I. offices where they were found to contain certain property, itemized in the second count of the indictment, as having been stolen from the Baumans. The second count also described a valuable ring, worn by Accardo at the time of his arrest, which was later found to be the property of Mrs. Davis. Accardo expressly disclaimed an interest in the property described in the second count.
Accardo testified that he “was not living” at the Rigby apartment, that he had “stayed there on occasions once or twice” but had paid no rent.
His counsel took the position that since the two suitcases found in the Rigby apartment were Accardo’s property, he thus acquired standing to suppress the use in evidence against him of the stolen goods which they contained. He argued “ * * * whereas he is making a motion to suppress evidence he is asked to claim ownership, where it is necessary for him to claim ownership of the goods and that at the trial, in order to be vindicated, had to deny any interest in connection with the goods. In that case he is placed in the middle.”
The prosecutor, asked as to the Government’s position, relied upon Connolly v. Medalie, 2d Cir.1932, 58 F.2d 629, 630, from which he read two or three sentences thus:
“Men may wince at admitting that they were the owners, or in possession, of contraband property; may wish at once to secure the remedies of a possessor, and avoid the perils of the part; but equivocation will not serve. If they come as victims, they must take on that role, with enough detail to cast them without question. The petitioners at bar shrank from that predicament; but they were obliged to choose one horn of the dilemma.”
Metropolitan police upon learning of the arrest by the F.B.I. Agents, procured a search warrant on the authority of which they seized Mrs. Davis’ ring which had been turned over to the property clerk at police headquarters.
After citing and analyzing several cases we said in Jeffers v. United States :
“We believe the correct rule to be that one who seasonably objects to the use in evidence against him of property he owns which has been seized as the fruit of an unlawful search or otherwise in violation of the Fourth Amendment is entitled to its exclusion though the premises searched were not his.” (Emphasis supplied.)
Clearly, exclusion of evidence seized under the circumstances described here may be permitted only to one who claims ownership in or right to possession of the property seized.
Moreover, we have expressly held that one who is merely a guest in an apartment said to have been illegally entered and in which no interest is claimed, lacks the requisite standing. “Since the appellant’s personal rights were not violated, she has no standing to contend the entry and subsequent seizure were unlawful. [Citing cases].”
The appellant clearly lacks standing entitling him to an exclusion of the stolen property seized by the F.B.I. Agents on June 27, 1956, and the stolen ring seized by the Metropolitan police under the search warrant.
It becomes unnecessary for us to consider whether or not yet other stolen property seized the following day by Metropolitan police should have been excluded, for the sentence received upon the counts which depended upon the evidence seized as we have described, ran concurrently with the sentences imposed upon the remaining counts. We need go no farther.
Affirmed.
. Found guilty on all counts, Accardo was sentenced to serve concurrent terms of three to nine years.
|
12269215-20565 | OPINION
BY: KEVIN J. CAREY, UNITED STATES BANKRUPTCY JUDGE
Before the Court is the Debtor AW Liquidation, Inc.’s (f/k/a Associated Wholesalers, Inc.) (“AWI”) Motion for Summary Judgment Pursuant to Fed. R. Civ. P. 56 (Made Applicable by Fed. R. Bankr. P. 7056 and 9014) With Respect to Bimbo Bakeries USA, Inc.’s (“BBU”) Motion for the Allowance and Payment of Administrative Expenses (D.I. 2691) under 11 U.S.C. § 503(b)(9) (“AWI’s Motion for Summary Judgment”) (D.I. 3054). BBU filed an administrative priority claim (the “BBU Administrative Priority Claim”) for the value of unpaid goods allegedly delivered to AWI and customers of AWI (the “AWI Customers”) during the twenty day period prior to AWI’s petition date. AWI contends that the BBU Administrative Priority Claim should be reclassified as a general unsecured claim.
In its Answering Brief in opposition to AWI’s Motion for Summary Judgment, BBU argues that any determination is contingent upon material facts in dispute. I disagree. For the reasons set forth below, the Court will grant, in part, AWI’s Motion for Summary Judgment to disallow the BBU Administrative Priority Claim with respect to all deliveries made to non-debt- or third parties. In addition, the Court will deny, in part, AWI’s Motion for Summary Judgment with respect to the claim for administrative priority in connection with the goods delivered to Debtor NK Liquidation, Inc. (f/k/a Vida Nell’s, Inc.); however, .that portion of the claim is neither allowed nor disallowed by virtue of this Opinion.
BACKGROUND
AWI was a cooperative food distributor that provided distribution and retail services to member retailers (the “AWI Members”). BBU is a manufacturer and distributor of freshly baked goods. BBU and AWI participated in a business arrangement in which AWI Members would order goods from BBU, and BBU would deliver the goods directly to the AWI Member. AWI Members paid AWI for the goods delivered by BBU. AWI then remitted payment to BBU on a weekly basis for its deliveries to AWI Members, less a percentage of the invoice. amount that AWI deducted and retained.
On September 9, 2014 (the “Petition Date”), the'Debtors filed voluntary petitions for relief under title 11 of the United States Code (the “Bankruptcy Code”), BBU subsequently filed two proofs of claim against AWI. On October 14, 2014, BBU filed its first proof of claim (no. 242) (the “General Unsecured Claim”) asserting a general unsecured claim in the amount of $1,400,146.67. This figure represents the price of unpaid goods sold prepetition to AWI and. AWI Members. On October 16, 2014, BBU filed its second proof of claim (no. 263) (the “Administrative Priority Claim”), in which BBU asserts an administrative . priority claim in the amount of $962,537.87. The Administrative Priority Claim represents the portion of the General Unsecured Claim that comprises the value of goods allegedly sold and delivered to AWI and AWI Members within twenty days of the Petition Date.
On February 5, 2016, BBU filed its Motion for the Allowance and Payment of Administrative Expenses (the “BBU Motion”), attaching in support of the BBU Motion the Declaration of Basil Klipa (the “Klipa Declaration”). Mr. Klipa identified •himself as the Key Account Manager who oversaw the BBU account with AWI and AWI Members. The Klipa Declaration described the mechanics of the relationship among BBU, AWI, and AWI Members. According to Mr. Klipa, AWI was involved in important aspects of the relationship between BBU and AWI Members, including pricing, incentive programs, customer account maintenance, product promotions, handling member complaints and concerns, and negotiating vendor deals with BBU.
On March 16, 2016, AWI filed an objection to BBU’s Motion for the Allowance and Payment of Administrative Expenses (the “Objection”). In its Objection, AWI argues that BBU’s Administrative Priority Claim must be denied, inter alia, because AWI never received—physically or constructively—the goods sent by BBU to AWI Customers. On March 22, 2016, BBU filed a reply (the “Reply”) in further support of the Administrative Priority Claim. In its Reply, BBU contends that the integral role that AWI played in the cooperative and in AWI Member operations, as evidenced in the Klipa Declaration, demonstrated constructive receipt of the goods.
On July 8, 2016, AWI filed its Motion for Summary Judgment, arguing that BBU has not, and cannot, provide sufficient facts to support a conclusion that AWI received goods from BBU, as required for an administrative priority claim under section 503(b)(9).
On August 2, 2016, and August 9, 2016, BBU and AWI, respectively, filed dueling briefs with respect to AWI’s Motion for Summary Judgment. BBU, in its Answering Brief, says it obtained in third-party discovery sixty-four purchase and supply agreements (the “PSAs”) between AWI and AWI Members that purportedly established “constructive receipt” by AWI. One of the PSAs, for example, provided that AWI will “sell and supply” retail goods to the AWI Member and that the AWI Member agrees to “utilize AWI as its primary wholesale supplier for its retail supermarket business.” BBU contends that the PSAs prove constructive receipt of the goods because AWI acquired some right, title or interest in BBU’s goods that were delivered to the AWI Members subject to a' PSA AWI denies the importance of the PSAs, claiming that the agreements did not pertain to sales from third-party vendors (such as BBU), were not evidence of any actual sales from AWI to AWI Members, nor were evidence of receipt of any goods' by AWI. While not submitted in evidence, it -appears as if the purpose of the PSAs frame a general relationship between AWI and its Members, but BBU is not a party to the PSAs.
STANDARD
Rule 56 of the Federal Rules of Qivil Procedure, made applicable by Federal Rule of Bankruptcy Procedure 7056 and 9014(c), provides that “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” At the summary judgment stage, the court’s function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial.
The moving party bears the burden of establishing the absence of a genuine dispute as to a material fact. When the nonmoving party bears the burden of persuasion at trial, the moving party “may meet its burden ... by showing that the nonmoving party’s evidence is insufficient to carry that burden.”
Once the moving party has carried its initial burden, the opposing party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Summary judgment cannot be avoided by introducing only “a mere scintilla of evidence,” or by relying on “con-clusory allegations, improbable inferences and unsupported speculation.” “Brash conjecture coupled with earnest hope that something concrete will materialize, is insufficient to block summary judgment.”
Substantive law determines which facts are-material; only disputes over facts that might affect the outcome of the suit will preclude summary judgment. Moreover, a dispute over a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” The Court must resolve all doubts and consider the evidence in the light most favorable to the nonmoving party.
DISCUSSION
Bankruptcy Code section 503(b)(9) provides that, after notice and a hearing, the bankruptcy court shall allow, as administrative expenses, “the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of the debtor’s business.” Admin istrative expenses receive priority over other unsecured claims pursuant to Bankruptcy Code section 507(a)(2).
For AWI to prevail on its Motion for Summary Judgment, AWI must show that BBU will be unable, as a matter of law, to satisfy at least -one of the three requirements of section 503(b)(9). Accordingly, if BBÚ cannot allege facts that support that (1) goods were received by AWI within 20 days before the petition date, (2) goods were sold to AWI, and (3) the goods were sold in the ordinary course of business, then AWI’s Motion for Summary Judgment will succeed. The key issue to be considered here is whether AWI “received” goods from BBU within the meaning of section 503(b)(9).
The term “received” is not defined in the Bankruptcy Code. In analyzing the meaning of the term “received” in section 503(b)(9), decisional law and legislative history suggest that it have the same meaning as “received” in section 546(c), which governs. reclamation. Courts have also looked to the Uniform Commercial Code (“UCC”) for guidance in defining the term “receipt.”
The contracting parties are both incorporated and did business in Pennsylvania. In their submissions, the parties assumed that either Pennsylvania or Delaware law applied. For this purpose, there is no difference between the applicable UCC provisions. UCC § 2-103 defines receipt as taking “physical possession” of goods. Possession may be actual or constructive, and occurs when the seller can no longer stop delivery and is left only with the remedy of reclamation, UCC § 2-705(2) sets forth four events that terminate a seller’s right to stop goods in transit, Only one of those events involves the buyer taking physical possession of the goods. The other three events involve forms of constructive possession because, under UCC § 2-702(2), the right of reclamation arises only when an insolvent buyer has “received [the] goods.” However, courts have held that constructive possession in reclamation cases occurs only when the goods are delivered to a third party who is a bailee for the debtor;
It is undisputed in the present case that the goods delivered to AWI Customers were not in AWI’s actual physical possession; nor were AWI Customers bailees for AWI. Therefore, BBU faces a roadblock to establish receipt under UCC § 2-103 or Bankruptcy Code § 503(b)(9). BBU seeks to broaden the definition of constructive receipt to include situations, as here, when a buyer/debtor is so integrated into the ti’ansaction that there is an indivisible relationship between the buyer/debtor and third-party recipient of goods, constituting constructive possession. Specifically, BBU contends that because AWI controlled most aspects of the day-to-day business transactions between AWI Customers and BBU, operated the centralized billing program to facilitate payment from AWI Customers to BBU, as well as a myriad' of other operational support services; AWI constructively received the goods delivered to AWI Customers.
Should the definition of constructive receipt be expanded to include deliveries to non-bailee third parties when the debtor is substantially involved in facilitating transactions between a third party and the vendor? It should not. Courts have held that an arrangement whereby goods are delivered directly to a non-debtor, non-bailee, third party does not give rise to constructive possession and, therefore, there can be no valid administrative priority claim under section 503(b)(9).
The facts before me are comparable to cases in which courts have examined the validity of an administrative priority claim under section 503(b)(9) in the context of “drop-ship” transactions. In a “drop-ship” transaction, a buyer purchases goods from a vendor, but the goods are delivered directly from the vendor to a third party to fulfill a separate sale agreement between the buyer'and the third party.
The court in In re World Imports recently considered the validity of an administrative priority claim under section 503(b)(9) in a “drop-ship” transaction. In In re World Imports, a wholesale vendor of furniture sought an administrative priority claim under section 503(b)(9), in part, for the value of furniture delivered to the debtor’s customers in “drop-ship” transactions. In denying the claim, the court held that the claim failed because the goods had not been received by the debtor. Specifically, the court stated, “a drop-shipment to a debtor’s customer does not constitute even constructive possession for purposes of § 503(b)(9).”
The arrangement in the present case, although not a “drop-ship” transaction per se, is sufficiently analogous to justify adopting the reasoning of “drop-ship” cases to determine the matter before me. As in a “drop-ship” case, the debtor (AWI) paid the vendor (BBU) to deliver goods directly to third parties (AWI Members). The third parties (AWI Members) subsequently paid the debtor (AWI) to fulfill a separate agreement. Furthermore, the connection here between the debtor (AWT) and the vendor (BBU) is more remote than those in the “drop-ship” cases. Unlike a “drop-ship” transaction in which the debt- or orders the goods, the third parties here (AWI Members) ordered directly from the vendor (BBU). This more strongly supports denial of an administrative priority claim under section 503(b)(9).
AWI also makes a strong argument that the second section 503(b)(9) element—requiring that the goods were sold to AWI— has also not been satisfied. The undisputed facts before me reveal that, not only were the goods received by third parties, but also that the sales themselves were made to third parties, not to AWI. Specifically, the Klipa Declaration contains the following allegations, each of which describe the sales as being to the AWI Customers:
• “AWI paid [BBU] the value of the goods delivered to AWI Customers.”
• “AWI fixed the payment terms for sales to the AWI Customers.”
• “[BBU] billed AWI weekly for all sales to the AWI Customers.”
• BBU describes these sales as “transactions between [BBU] and the AWI Customers.”
• “AWI was responsible for negotiating promotions for [BBU’] products sold to the AWI Customers.”
These facts, asserted on behalf of BBU in support of its Motion, indicate that the goods were sold to and received by the AWI Customers, not AWI.
However, despite to whom the goods were sold, BBU cannot, as a matter of law, satisfy the requirement that AWI must have “received” the goods with respect to deliveries made to non-debtor third parties. It is undisputed that AWI did not take actual physical possession of the goods shipped by BBU directly to non-debtor third parties. Because AWT did not take actual or constructive possession of the goods at issue, BBU is not entitled to an administrative priority claim under section 503(b)(9) for the value of .goods delivered to non-debtor third parties.
CONCLUSION
For the reasons set forth herein, AWI’s Motion for Summary Judgment is granted, in part, as to BBU’s section 503(b)(9) claim with respect to all goods delivered directly to non-debtor third parties. The Court will deny, in part, AWI’s Motion for Summary Judgment with respect to the claim for administrative priority in connection with the goods delivered to Debtor NK Liquidation, Inc. (f/k/a Vida Nell’s, Inc.); however, that portion of the claim is neither allowed nor disallowed by virtue of this Opinion. An appropriate order follows.
. This Opinion constitutes the findings of fact and conclusions of law, as required by Fed. R, Bankr, P. 7052. This Court has jurisdiction to decide this claim objection pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B).Venue is proper in this judicial district under 28 U.S.C. §§ 1408 and 1409. The statutory predicate for the relief requested is 11 U.S.C. § 503(b)(9).
. I find that further discovery regarding nature and duration of the relationship between the parties, AWI's involvement in the relationship between BBU and AWI Customers, and the contractual obligations in the PSAs (defined infra) between AWI and AWI Customers is unnecessary. These issues are not material to determine whether AWI "received” goods delivered directly to non-debtor third parties under the meaning of section 503(b)(9).
. Specifically, Bimbo Bakeries USA, Inc.’s Memorandum of Law in Support of its Motion for the Allowance and Payment of Administrative Expenses Under 11 U.S.C. § 503(b)(9) and in Opposition to the Debtors’ Objection to Such Claim (the “BBU Motion”) (D.I. 2691) states, “[t]he 503(b)(9) Claim can be broken down into three parts:
• $916,452.48 worth of goods constructively received by AWI;
• $30,450.88 worth of goods actually received by debtor Vida Nell’s Inc.;
• $15,634.51 worth of goods actually received by debtor Vida Nell’s Inc. '
See generally [BBU] Proof of Claim No. 263.” BBU’s Administrative Expense Memorandum ¶ 24. .
. AWI provided these services both to its own entities, and to non-Debtor third party entities. For. the purposes of this Opinion only,'I will refer to all entities that purchased goods . via the "Bill Thru Program” (defined infra n. 8) as' "AWI Members.” In addition, I will refer to the non-debtor AWI Members as "AWI Customers.”
. Deck of Basil Klipa ¶ 12, D.I. 2692.
. Deck of Basil Klipa ¶ 12, D.I. 2692.
. Deck of Basil Klipa ¶ 12, D.I, 2692. The parties refer to this arrangement as the "Bill Thru Program.”
. Decl. of Basil Klipa ¶ 13-14, D.I. 2692.
. The parties do not dispute that the goods were not physically received by AWI. Therefore, the only issue to be determined here is whether the goods were constructively received by AWI, satisfying the requirement for an administrative priority claim under section 503(b)(9).
. Fed. R. Civ. P. 56(a).
. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed. R. Civ. P. 56(c)) ("[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis fqr its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,’ which it believes demonstrate the absence of a genuine issue of material fact.”).
. Foulk v. Donjon Marine Co., Inc., 144 F.3d 252, 258 n.5 (3d Cir. 1998) (quoting Wetzel v. Tucker, 139 F.3d 380, 383 n.2 (3d Cir. 1998)).
. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
. Sarko v. Penn-Del Directory Co., 968 F.Supp. 1026, 1031 (E.D. Pa. 1997) (citation omitted), aff’d 189 F.3d 464 (3d Cir. 1999).
. J. Geils Band Emp. Benefit Plan v. Smith Barney Shearson, Inc., 76 F.3d 1245, 1251 (1st Cir. 1996) (citation omitted).
. Id. (quoting Dow v. United Bhd. of Carpenters, 1 F.3d 56, 58 (1st Cir. 1993)).
. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
. Id.; see also Delta Mills, Inc. v. GMAC Commercial Fin., LLC (In re Delta Mills, Inc.), 404 B.R. 95, 105 (Bankr. D. Del. 2009) (holding that an issue is genuine ‘‘when reasonable minds could disagree on the result.”).
. Anderson, 477 U.S. at 255, 106 S.Ct. 2505 (‘‘[T]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.”).
. 11 U.S.C. § 503(b)(9).
. In re Momenta, Inc., 455 B.R. 353, 357 (Bankr. D.N.H. 2011) ("The phrase "received by the debtor” is not a term of art nor is it a defined phrase in the Bankruptcy Code”).
. In re Momenta, Inc., 455 B.R. at 357 (Bankr. D.N.H. 2011) (“This Court agrees with the rationale of Circuit City and holds that the term "received” in § 546(c) is the equivalent of "receipt" in the UCC, and the term "received” in § 503(b)(9) shall be interpreted identically.”) (citing In re Circuit City Stores, Inc., 432 B.R. 225, 228 (Bankr. E.D.Va. 2010)); see In re NE Opco, Inc., 501 B.R. 233, 253 (Bankr. D. Del. 2013) ("There is no reason why the words in one section in a code should have any different meaning ascribed to them than nearly identical words appearing in other sections of the same code. Indeed, they are to be interpreted consistently.”).
. In re Circuit City Stores, Inc., 432 B.R. 225, 228 (Bankr. E.D. Va. 2010); In re Pridgen, 2008 WL 1836950, at *4 (Bankr. E.D.N.C. Apr. 22, 2008); In re R.F. Cunningham & Co., 2006 WL 3791329, at *2 (Bankr. E.D.N.Y. Dec. 21, 2006).
. See UCC § 2-103, Because Pennsylvania and Delaware have adopted the definition of "receipt" provided in the UCC, I will look to court cases that have interpreted the definition for furthering understanding of its meaning.
|
5745420-27528 | SELYA, Circuit Judge.
Following a failed motion to suppress, defendant-appellant Byron Jones pleaded guilty to an array of drug-trafficking charges. The defendant now challenges both his conviction and his 135-month sentence. His appeal requires us, inter alia, to construe and apply for the first time a sentencing enhancement for maintaining a premises for the purpose of manufacturing or distributing drugs. See USSG § 2Dl.l(b)(12). After careful consideration of all the issues against the backdrop of a scumbled record, we affirm.
I. BACKGROUND
We briefly rehearse the genesis and travel of the case. In the fall of. 2011, a Cape Cod drug dealer (whom for simplicity’s sake we shall call GW) was under the watchful eye of the Drug Enforcement Administration (DEA). On November 7, local police observed CW meeting the defendant at an apartment in Fall River, Massachusetts before selling crack cocaine to a confidential informant. The surveillance team later saw the defendant’s alleged coconspirator, Meaghan Murphy, enter and leave the apartment on several occasions.
Aware that the defendant previously had been convicted of drug-peddling charges, the DEA began monitoring the apartment. On November 21, the authorities saw CW meet Murphy at the apartment and then sell crack cocaine to an undercover police officer. CW' again met Murphy at the apartment on December 8. Immediately after this meeting, police officers detained CW and seized 63 grams of crack cocaine. At this point, CW began cooperating with the DEA.
On three occasions between December 15, 2011 and January 24, 2012, agents directed CW to contact the defendant by text message to set up controlled buys. These messages resulted in two sales by Murphy and one sale by the defendant himself. During two of the transactions, a video recording device captured footage of Murphy or the defendant retrieving drugs from a cooler inside the apartment.
On January 24, 2012, DEA agents, armed with search and arrest warrants, entered the apartment, found the defendant there, and arrested him. The ensuing search recovered over 600 grams of crack cocaine, nearly 500 grams of powdered cocaine, and extensive evidence that crack was being cooked and packaged on site.
In due season, a federal grand jury indicted Murphy and the defendant. The indictment charged the defendant with conspiracy to distribute controlled substances, possession of controlled substances with intent to distribute, and three specific offense counts reflecting particular crack sales. See 21 U.S.C. §§ 841(a)(1), 846.
The defendant initially maintained his innocence and, in view of his indigency, a magistrate judge appointed counsel to represent him. See 18 U.S.C. § 3006A. Within a matter of weeks, the defendant moved for the appointment of new counsel, accusing his original lawyer of failing to raise certain issues during detention proceedings. On March 23, 2012, the magistrate judge granted the motion and replaced the first attorney with a second court-appointed attorney.
Slightly more than four months went by before the defendant again requested new counsel, this time citing a failure to communicate. Once again, the magistrate judge obliged, replacing the second appointed attorney with yet a third appointed attorney (Daniel Cloherty).
Based on the travel of the case, the district court anticipated that the defendant would file a motion to suppress by March 15, 2013. Instead, Attorney Cloherty moved to withdraw, asserting that there had been an irreparable breakdown in the lawyer-client relationship. The district court probed this assertion over two days of hearings. After determining that Attorney Cloherty and the defendant were communicating well enough to enable them to mount an adequate defense, the court denied the motion. Notwithstanding warnings from the court about the perils of self-representation, the defendant elected to proceed pro se on the motion to suppress (with Attorney Cloherty as standby counsel).
The defendant proceeded to file his suppression motion. Following an evidentiary hearing, the court rejected it. The defendant thereafter relinquished his pro se status and Attorney Cloherty resumed his role as defense counsel.
Eventually, the government and the defendant entered into a written plea agreement (the Agreement). The Agreement provided that the defendant would plead guilty to all five counts in exchange for the government’s withdrawal of a sentence- enhancing information. See 21 U.S.C. § 851.
At the change-of-plea hearing, the court advised the defendant of the charges against him. The subsequent colloquy revealed that the defendant had a partial college education, knew how to read and write, and had read and understood the indictment and the Agreement. At the court’s direction, the government recounted the factual basis for the charges. The prosecutor described the events leading up to the three controlled buys, the buys themselves, the search of the apartment, and the circumstances of the defendant’s arrest. When the court asked the defendant whether he disagreed with any part of this factual narrative, he replied that he did not. The court then read the indictment aloud, and the defendant pleaded guilty to each and every count.
Following the defendant’s plea to. the conspiracy charge, the court asked, “So you and Meaghan Murphy were in a conspiracy to distribute crack?” The defen--dant responded in the affirmative.
The disposition hearing proved to be contentious. The presentence investigation report recommended a two-level enhancement for maintaining the apartment as a stash house. See USSG § 2Dl.l(b)(12). It also recommended adding two points to the defendant’s criminal history score for committing the offenses of conviction while on supervised release following his incarceration for an earlier crime. See id. § 4Al.l(d). The district court resolved both disputed sentencing issues against the defendant. These rulings combined to elevate the defendant’s guideline sentencing range (GSR) to 135-168 months.
The court sentenced the defendant to a bottom-of-the-range incarcerative term of 135 months. This timely appeal ensued.
II. ANALYSIS
The defendant’s counseled brief, filed by new appellate counsel, advances three principal claims of error. In addition, the defendant has filed a pro se brief. We consider the claims set forth in the defendant’s counseled brief one by one and then deal with the claims raised in his pro se brief. Finally, we tie up a loose end.
A. The Guilty Plea.
The defendant insists that his guilty plea should be vacated because it was not knowing and voluntary. In his view, the district court failed adequately to apprise him of the nature of the charges. Since the defendant did not challenge the integrity of his plea below, our review is for plain error. See United States v. Vann, 535 U.S. 55, 58-59, 122 S.Ct. 1043, 152 L.Ed.2d 90 (2002). To satisfy this exacting standard, the defendant must demonstrate “(1) that an error occurred (2) which was clear or obvious and which not only (3) affected [his] substantial rights, but also (4) seriously impaired the fairness, integrity, or public reputation of judicial proceedings.” United States v. Duarte, 246 F.3d 56, 60 (1st Cir.2001).
Federal Rule of Criminal Procedure 11(b)(1)(G) requires a district court, before accepting a guilty plea, to “inform the defendant of, and determine that [he] understands, ... the nature of each charge to which [he] is pleading.” This rule exists “to ensure that a defendant who pleads guilty does so with full comprehension of the specific attributes of the charge and the possible consequences of the plea.” United States v. Ramos-Mejia, 721 F.3d 12, 14 (1st Cir.2013) (internal quotation marks omitted).
The defendant identifies three ostensible shortcomings in the change-of-plea colloquy. He says that the court did not explain the elements that the government would have to prove to establish each of the five charges; that no one sufficiently described either the conspiracy or the events leading up to the controlled buys; and that the court neglected to explain the meaning of terms like “conspiracy” and “willfully and intentionally.”
The defendant is foraging in an empty cupboard. Rule 11 does not require a district court either to spout a fixed catechism or to use a set of magic words. See id. at 15. Nor does the rule demand explanations of the “technical intricacies of the charges in the indictment.” Id. (internal quotation mark omitted). While a district court must touch all of the appropriate bases, it need not be precise to the point of pedantry. In the final analysis, the adequacy of a given colloquy must be assessed in light of “the attributes of the particular defendant, the nature of the specific offense, and the complexity of the attendant circumstances.” Id. When the charges are uncomplicated and the defendant is intelligent, reading the indictment to him, placing the charges in an appropriate factual context, and obtaining his acknowledgment of understanding will normally suffice. See id.; United States v. Delgado-Hernández, 420 F.3d 16, 26 (1st Cir.2005); United States v. Ramirez-Benitez, 292 F.3d 22, 27 (1st Cir.2002).
In this instance, the charges are not intricate and the circumstances that undergird the charges are about as straightforward as one could imagine. This is a run-of-the-mine two-person conspiracy. Several of the overt acts within the charged conspiracy parallel the specific offense counts in the indictment. Understanding those counts (and, thus, the conspiracy) is child’s play: they are rooted in nothing more complicated than hand-to-hand controlled buys.
The defendant’s background contains nothing to suggest that he could not easily understand and appreciate these simple charges (which were read to him by the district court). He is a high-school graduate who has some college-level education. Moreover, his prior conviction for conspiring to distribute crack cocaine evinces a degree of familiarity with the criminal justice system in general and with criminal drug-trafficking conspiracies in particular. Last but not least, the Agreement attested to the fact that the defendant had discussed the charges with his lawyer and understood them.
Given this mise-en-scene, we conclude that the district court adequately conveyed the nature of the charges. See Ramos-Mejia, 721 F.3d at 15-16. A more elaborate explanation of various terms contained in the indictment was not necessary. See United States v. Carter, 815 F.2d 827, 829 (1st Cir.1987) (concluding that similar charges were “simple enough that a man with a high school education who says that he understands them should be believed”).
The defendant’s attempt to strengthen his hand by denigrating the government’s recitation of the facts at the change-of-plea hearing is unavailing. The prosecutor explained that CW was observed meeting with the defendant and/or Murphy on divers occasions, after each of which crack was found in CW’s possession. While the prosecutor did not specify the dates of the transactions, he described how CW made three controlled buys over the course of a few weeks beginning December 15, 2011. Coupled with the reading of the charges contained in the indictment (which alleged a conspiracy that was underway by November of 2011 and specified the dates of the three controlled buys), the prosecutor’s version of the relevant events sufficiently apprised the defendant that the charges against him encompassed conduct predating the controlled buys.
The defendant’s contention that the change-of-plea colloquy did not furnish him with enough information to understand that certain sentencing enhancements might apply is wide of the mark. At the change-of-plea hearing, the government set out the minimum and maximum penalties appurtenant to the offenses of conviction and elucidated its position with respect to sentencing. The court then explained the process through which it would determine the defendant’s sentence. This was more than enough: nothing in Rule 11 obliges a district court to inform the defendant, at a change-of-plea hearing, of the exact manner in which future guideline calculations may evolve. See Fed. R.Crim.P. 11 advisory committee’s note (1989 amendment) (“Since it will be impracticable, if not impossible, to know which guidelines will be relevant prior to the formulation of a presentence report and resolution of disputed facts, [the district court is not required] to specify which guidelines will be important or which grounds for departure might prove to be significant.”). Any other rule would put the cart before the horse, requiring the court to get the functional equivalent of a full presentence investigation report before it could accept a guilty plea.
The short of it is that where, as here, criminal charges are uncomplicated, reading the indictment, supplying a factual basis for the charges, explaining the manner in which the sentencing guidelines operate, and obtaining the defendant’s acknowledgment of understanding will typically suffice to satisfy the strictures of Rule 11. It follows that there was no error, plain or otherwise, in the change-of-plea colloquy.
B. The Stash House Enhancement.
We come now to the first of the defendant’s claims of sentencing error: his claim that the district court erred in enhancing his offense level on the ground that he maintained the apartment as a stash house. We approach this aspect of the case mindful that the government bears the burden of proving the elements of a sentencing enhancement by a preponderance of the evidence. See United States v. Paneto, 661 F.3d 709, 715 (1st Cir.2011). We review the district court’s factual findings for clear error and its interpretation and application of the sentencing guidelines de novo. See id. When the raw facts are susceptible to more than one reasonable inference, a sentencing court’s choice between those competing inferences cannot be clearly erroneous. See United States v. Ruiz, 905 F.2d 499, 508 (1st Cir.1990).
In drug-trafficking cases, the sentencing guidelines direct a district court to increase a defendant’s offense level by two levels if he “maintained a premises for the purpose of manufacturing or distributing a controlled substance.” USSG § 2Dl.l(b)(12). Here, the proof — drawn largely from the suppression hearing — was something of a mixed bag.
On the one hand, the evidence showed that the defendant did not own or rent the apartment (the ostensible tenant being one Crystal Croteau), did not receive mail there, did not use the address on any official forms (say, a driver’s license), and did not contract for any of the utilities (which were billed to Croteau). The surveillance evidence indicated that the defendant’s primary residence was his girlfriend’s home, not the apartment.
On the other hand, the evidence showed that the defendant had ready access to the apartment. He testified that he had gotten a key from Croteau and admitted that he sometimes delivered the rent money on her behalf. He further admitted that he had given a duplicate key to Murphy, that he from time to time spent the night at the apartment (sometimes alone and sometimes with his girlfriend), that he kept clothes and a toothbrush there, and that he felt free to come and go as he pleased. There was no evidence that Croteau had ever lived in the apartment or that Murphy had ever spent the night there.
Based on the facts developed, during the government’s surveillance and the suppression hearing, the district court found that the defendant had dominion and control over the apartment and used it principally for purposes of his drug-distribution enterprise. The court proceeded to apply the stash house enhancement, hiking the defendant’s offense level by two levels. The defendant objected below, and renews his objection on appeal.
The stash house enhancement was developed as a response to the Fair Sentencing Act of 2010, which directed the Sentencing Commission to provide for a two-level enhancement when “the defendant maintained an establishment for the manufacture or distribution of a controlled substance, as generally described in [21 U.S.C. § 856].” Pub.L. No. 111-220, § 6(2), 124 Stat. 2372, 2373. In view of the enhancement’s lineage, courts interpreting it have generally looked to case law interpreting 21 U.S.C. § 856. See, e.g., United States v. Flores-Olague, 717 F.3d 526, 531-32 (7th Cir.2013); United States v. Miller, 698 F.3d 699, 705-07 (8th Cir.2012). We follow this praxis.
The stash house enhancement applies when a defendant knowingly maintains a premises for the purpose of manufacturing or distributing a controlled substance. See USSG § 2D1.1, comment, (n.17); see also United States v. Verners, 53 F.3d 291, 295-96 (10th Cir.1995). The term “maintains” is not defined either in the guideline or in its statutory antecedent. The Sentencing Commission’s commentary, designed to bridge this gap, instructs courts to consider, among other things, “whether the defendant held a possessory interest in {e.g., owned or rented) the premises” and “the extent to which the defendant controlled access to, or activities at, the premises.” USSG § 2D1.1, comment, (n.17). In cases arising under section 856, courts have deemed relevant considerations such as “[a]cts evidencing such matters as control, duration, acquisition of the site, renting or furnishing the site, repairing the site, supervising, protecting, supplying food to those at the site, and continuity.” United States v. Clavis, 956 F.2d 1079, 1091 (11th Cir.1992). This is obviously a non-exhaustive list; as particular cases vary, so too will the factors that may inform the question of whether a defendant maintains a premises.
The “use” component of the stash house enhancement is likewise protean. Nevertheless, one thing is clear: for the enhancement to apply, drug distribution need not be the sole reason that a defen dant maintains the premises. Rather, drug distribution must be a “primary or principal” use, as opposed to a use that is merely “incidental or collateral.” USSG § 2D1.1, comment, (n.17). A defendant’s purpose may be inferred from the totality of the circumstances, including such facts as the quantity of drugs discovered and the presence of drug paraphernalia or tools of the drug-trafficking trade. See Flores-Olague, 717 F.3d at 533-34; see also Vemers, 53 F.3d at 296-97 (explaining that “the more characteristics of a business that are present, the more likely it is that the property is being used” for a prohibited purpose). One relevant consideration is frequency; that is, how often the defendant used the premises for drug-related purposes and how often he used the premises for lawful purposes. See USSG § 2D1.1, comment, (n.17).
? through this prism, the district court’s deployment of the stash house enhancement passes muster. There was ample evidence that the defendant exercised dominion and control over the apartment. He had a key, came and went at will, and slept there whenever he pleased. He—and no one else—kept clothes and toiletries there. In addition, he controlled the activities that took place at the apartment (by, for example, furnishing a key to his coconspirator) and ensured that the premises would remain available by delivering rent payments.
The district court’s finding that a sufficient nexus existed between the premises and the defendant’s drug-trafficking activities is unimpugnable. Surveillance evidence showed that the defendant and Murphy sold drugs from the apartment for nearly three months. Furthermore, the DEA’s search of the apartment disclosed that sizeable quantities of cocaine and numerous accoutrements of the drug-trafficking trade (e.g., a digital scale, boxes of baking soda and sandwich bags, kilo wrappers bearing cocaine residue, and a pot and spoon that tested positive for cocaine) were being kept there. Viewed against this backdrop, we discern no clear error in the district court’s finding that a principal use of the apartment was for activities related to the defendant’s distribution of controlled substances.
The defendant’s efforts to resist the enhancement are unavailing. To begin, he argues that he did not maintain the apartment at all since he neither owned nor rented it. This is true as far as it goes, but it does not take the defendant very far. The enhancement does not require either ownership or a leasehold interest. See, e.g., United States v. Renteria-Saldana, 755 F.3d 856, 859-60 (8th Cir.2014); Flores-Olague, 717 F.3d at 532. This makes good sense: it would defy reason for a drug dealer to be able to evade application of the enhancement by the simple expedient of maintaining his stash house under someone else’s name. See United States v. Morgan, 117 F.3d 849, 857-58 (5th Cir.1997).
The defendant’s second plaint is no more compelling. He asserts that he lacked sufficient control over the apartment because his access was non-exclusive. This is wishful thinking: the terms of the enhancement do not require that a defendant control access to the premises to the exclusion of all others.
The defendant’s third attack on the imposition of the enhancement is an exercise in' revisionist history. He challenges the finding that a primary use of the apartment was for drug distribution on the ground that he and others used the apartment as a residence. That is pure codswallop: the court below supportably found that the apartment was not the defendant’s habitual residence, and the rec ord contains no evidence that anyone else lived there.
Finally, the defendant complains that what was sauce for the goose was not sauce for the gander: when sentenced, Murphy did not receive the stash house enhancement. Building on this rickety foundation, he suggests that applying the enhancement to him results in an unwarranted sentencing disparity. This suggestion is vecordious.
To begin, the defendant’s argument erects a false dichotomy. The issue is whether the record fairly supports the enhancement as to the defendant. Whether Murphy (who was sentenced at a different time and on what may have been a different record) deserved a similar enhancement is a different question. See, e.g., United States v. Rios, 893 F.2d 479, 481 (2d Cir.1990) (per curiam).
At any rate, the district court warrant-ably found the evidence that the defendant maintained the apartment “much stronger” than the evidence that Murphy maintained it. ' Thus, any disparate treatment was fully justified.
C. The Added Criminal History Points.
In selecting a defendant’s criminal history category (CHC), the guidelines direct the sentencing court to add two criminal history points if the defendant committed the offense(s) of conviction while under a criminal justice sentence. See USSG § 4Al.l(d). It is undisputed that a supervised release term is a criminal justice sentence, see id., and that the defendant was on supervised release in connection with a prior drug-trafficking conviction until December 13, 2011. For this reason, the court below added the two criminal history points—an action that boosted the defendant into a higher CHC.
The defendant protests. He insists that the conduct underlying the offenses of conviction did not begin until December 15, 2011 (the date of the first controlled buy) and that, therefore, the district court had no right to add the two extra criminal history points.
This dog will not hunt. The conspiracy charge is the linchpin of the government’s case, and the indictment stated that the lifespan of the conspiracy ran at least from November of 2011 to January of 2012. The defendant pleaded guilty to that charge. By doing so, the defendant admitted that he was guilty of participating in the charged conspiracy as early as November of 2011 (a time when he was still serving his supervised release term). See United States v. Hernández, 541 F.3d 422, 424-25 & n. 1 (1st Cir.2008); see also United States v. Grant, 114 F.3d 323, 329 (1st Cir.1997) (“When a criminal defendant pleads guilty, he admits not only that he committed the factual predicate underlying his conviction, but also that he committed the crime charged against him.” (internal quotation marks omitted)). No more is exigible to justify the two added criminal history points.
D. The Pro Se Brief.
This brings us to the defendant’s pro se brief, which advances what amount to three additional assignments of error. We first set the stage and then address the defendant’s claims.
1. Setting the Stage. After Attorney Cloherty moved to withdraw, the district court conducted two hearings. At the first hearing, Attorney Cloherty indicated that he and the defendant disagreed about what arguments to present in the suppression motion. He did not offer any specifics, but said that he and the defendant had been trying to reconcile their differences. For his part, the defendant provided little further illumination.
Premised in part on its own observations, the district court concluded that the defendant and Attorney Cloherty were communicating and, at most, had described “a vague dispute” over legal strategy. The court told the defendant that it would not appoint yet a fourth attorney for him. Consequently, he had the choice of continuing to be represented by Attorney Clo-herty or proceeding pro se. After conferring with Attorney Cloherty, the defendant stated a preference for representing himself with Attorney Cloherty as standby counsel. But when the court attempted to conduct a waiver colloquy, see Faretta v. California, 422 U.S. 806, 835, 95 S.Ct. 2525, 45 L.Ed.2d 562 (1975), the defendant refused to participate. On that discordant note, the court adjourned the hearing.
Attorney Cloherty thereafter filed a status report, stating that he had spoken to the defendant and that the defendant wished to proceed pro se (with Cloherty as standby counsel). The court then con-yened a second hearing, at which the defendant once again urged the court to appoint new counsel. He explained that he and Attorney Cloherty disagreed about whether and how to raise the issue of standing in connection with the apartment search. Attorney Cloherty suggested that the standing issue was not the best example of their disagreements; the defendant, he said, wanted him to raise other (unidentified) issues, none of which he (Attorney Cloherty) thought viable. The court revisited the matter, and again concluded that the attorney-client relationship had not experienced an irretrievable breakdown. Thus, the court refused to appoint new counsel.
The court then embarked on a Faretta colloquy. As a precursor, it warned the defendant that he would not represent himself as effectively as would Attorney Cloherty. The defendant acknowledged as much but nonetheless persisted in his decision to proceed pro se with standby counsel.
Beginning the Faretta colloquy, the court carefully informed the defendant that he had a constitutional right to counsel and that his waiver of that right must be knowing and voluntary. The court reminded the defendant that he was not a lawyer and that Attorney Cloherty would almost certainly do a better job for him. It then warned that “by presenting certain issues ... [the defendant] may actually be presenting certain information to the Court or to the government that may be a hazard” to him. Notwithstanding these admonitions, the defendant repeated that he wanted to represent himself — and he signed a written waiver of his right to counsel.
|
654244-20729 | BLACK, Circuit Judge:
The Government appeals the district court’s partial dismissal of the indictment against Appellees, Michael deVegter and Richard Poirier, Jr. The indictment charged Appellees with conspiracy to commit wire fraud, in violation of 18 U.S.C. § 371, and wire fraud and honest services fraud, in violation of 18 U.S.C. §§ 1343 & 1346. Appellees moved to dismiss the indictment. The district court granted the motion in part, dismissing the § 1346 counts on the ground that the allegations in the indictment were insufficient to charge violations of that section. The Government argues the district court erred in interpreting § 1346 and that the allegations were sufficient to sustain the § 1346 charges. We agree with the Government that the allegations of the indictment were sufficient to survive the motion to dismiss, and therefore reverse and remand.
I. BACKGROUND
The federal criminal charges in this case arise from alleged corruption in the process by which Fulton County, Georgia, selected an underwriter for the refunding of municipal water and sewer bonds. The following description of the facts is taken from the allegations in the indictment.
In the summer of 1992, Fulton County, acting through its Board of Commissioners, decided to take advantage of favorable interest rates by refunding some of its bonds. This process required an underwriter. For a professional recommendation about whom the county should select as the underwriter, Fulton County obtained the services of Stephens, Inc. (Stephens), an.investment banking firm. Ap-pellee deVegter was a vice president at Stephens, and was the financial advisor in charge of the Fulton County relationship.
Appellee Poirier was a partner at La-zard Freres & Co., an investment banking firm that desired to obtain the position of senior managing underwriter. Through an intermediary, Nat Cole, Poirier offered to pay deVegter in return for improper intervention and assistance in Lazard Freres winning the contract. Although deVegter told Cole that deVegter did not control the ultimate decision of the Fulton County Board of Commissioners, deVegter agreed to the offer.
Throughout Stephens’ process of crafting its recommendation to Fulton County, deVegter repeatedly manipulated the recommendation in favor of Lazard Freres. While Fulton County’s “Request for Proposals” from underwriters was being drafted, deVegter sent advance copies to Poirier and incorporated his comments to make the document more favorable to Lazard Freres. Once proposals were submitted, deVegter sent a copy of a competitor’s proposal to Poirier so that he could analyze it and provide deVegter with reasons why Lazard Freres’ proposal was superior. Later, after another banker at Stephens had ranked the various proposals, deVeg-ter ordered the banker to adjust the rankings so that Lazard Freres became the first-place proposal. The final recommendation from Stephens to Fulton County accordingly ranked Lazard Freres as the best underwriter; Fulton County adopted this recommendation and awarded Lazard Freres the underwriting contract. At no time did deVegter inform Fulton County of his financial interest in recommending Lhzard Freres.
The deal was completed when Poirier, through Cole, paid deVegter $41,936 for his manipulation of the selection process. After the transaction was completed, de-Vegter and Poirier took steps at their respective firms to cover up the misconduct.
Appellees deVegter and Poirier were indicted for conspiracy and wire fraud, including the honest services fraud theory of § 1346. The district court sustained the conspiracy and wire fraud counts of the indictment against Appellees’ motion to dismiss. The court granted part of the motion, however, concluding that the allegations of the indictment were insufficient on the § 1346 charges. The court held that § 1346 can be applied to private sector honest services fraud only when the defendant breached a “clear fiduciary duty.” The court found that the indictment failed to allege such a duty and therefore dismissed the § 1346 charges.
II. DISCUSSION
This court reviews de novo the dismissal of an indictment. See United States v. Dabbs, 134 F.3d 1071, 1079 (11th Cir.1998). “Under Fed.R.Crim.P. 12(b) an indictment may be dismissed where there is an infirmity of law in the prosecution; a court may not dismiss an indictment, however, on a determination of facts that should have been developed at trial.” United States v. Torkington, 812 F.2d 1347, 1354 (11th Cir.1987). “[T]his court must reverse a dismissal if it concludes that the factual allegations in the indictment, when viewed in the light most favorable to the government, were sufficient to charge the offense as a matter of law.” Id.
The Government appeals the district court’s dismissal of the § 1346 counts on two grounds. First, the Government argues that the district court erred in its interpretation of private sector honest services fraud under § 1346. Second, the Government asserts that the allegations of the indictment relating to the § 1346 charges were sufficient to survive the motion to dismiss.
A. Application of § 1346 to Private Sector “Honest Services” Fraud.
The federal wire fraud statute prohibits the use of the interstate wires to carry out a fraudulent scheme. The statute provides that “[w]hoever, having devised or intending to devise any scheme or artifice to defraud ... transmits or causes to be transmitted by means of wire ... communication in interstate or foreign commerce, ... for the purpose of executing such scheme or artifice,” commits a federal offense. 18 U.S.C. § 1343. In addition, “the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.” 18 U.S.C. § 1346.
The § 1346 honest services fraud provision was enacted by Congress in 1988 after the Supreme Court’s decision in McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987). In McNally, the Supreme Court held that the scope of § 1343 encompassed only schemes to defraud another of money or other property rights, but not schemes to defraud another of intangible rights. See id. at 360, 107 S.Ct. 2875. “Congress passed [§ 1346] to overrule McNally and reinstate prior law,” which had extended wire fraud liability to schemes to defraud another of intangible rights, including an intangible right of honest services. United States v. Lopez-Lukis, 102 F.3d 1164, 1168-69 (11th Cir.1997). Pre-McNally case law had recognized three kinds of intangible rights the defrauding of which would create wire fraud liability. First, defendants were convicted of defrauding persons of nonmonetary, intangible interests. See McNally, 483 U.S. at 363-64 & n. 4, 107 S.Ct. 2875 (Stevens, J., dissenting); United States v. Condolon, 600 F.2d 7, 8-9 (4th Cir.1979) (scheme to defraud women of time, effort, and expectations with seduction scam using bogus talent agency). Second, government officials were convicted for depriving their constituents of honest governmental services. See McNally, 483 U.S. at 362-63 & nn. 1-2, 107 S.Ct. 2875 (Stevens, J., dissenting); Lopez-Lukis, 102 F.3d at 1168-69 (citing cases). Third, “[i]n the private sector, purchasing agents, brokers, union leaders, and others with clear fiduciary duties to their employers or unions [were] found guilty of defrauding their employers or unions by accepting kickbacks or selling confidential information.” McNally, 483 U.S. at 363 & n. 3,107 S.Ct. 2875 (Stevens, J., dissenting); United States v. Ballard, 663 F.2d 534 (5th Cir. Unit B Dec.1981), modified in part on other grounds, 680 F.2d 352 (1982). Therefore, this Court has noted that although the paradigm case of honest services fraud is the bribery of a public official, § 1346 is not limited to such conduct but extends to the defrauding of some private sector duties of loyalty. See Lopez-Lukis, 102 F.3d at 1165 n. 1. This case involves the alleged commission of honest services fraud by private sector defendants, not a defrauding of the public of the honest governmental services of a public official.
The meaning of the “intangible right of honest services” has different implications, however, when applied to public official malfeasance and private sector misconduct. Public officials inherently owe a fiduciary duty to the public to make governmental decisions in the public’s best interest. See Lopez-Lukis, 102 F.3d at 1169. “If the official instead secretly makes his decision based on his own personal interests — as when an official accepts a bribe or personally benefits from an undisclosed conflict of interest — the official has defrauded the public of his honest services.” Id. When the prosecution can prove the other elements of the wire fraud offense, taking kickbacks or benefitting from an undisclosed conflict of interest will support the conviction of a public official for depriving his or her constituents of the official’s honest services because “[i]n a democracy, citizens elect public officials to act for the common good. When official action is corrupted by secret bribes or kickbacks, the essence of the political contract is violated.” United States v. Jain, 93 F.3d 436, 442 (8th Cir.1996). Illicit personal gain by a government official deprives the public of its intangible right to the honest services of the official.
On the other hand, such a strict duty of loyalty ordinarily is not part of private sector relationships. Most private sector interactions do not involve duties of, or rights to, the “honest services” of either party. Relationships may be accompanied by obligations of good faith and fair dealing, even in arms-length transactions. These and similar duties are quite unlike, however, the duty of loyalty and fidelity to purpose required of public officials. For example, “[e]mployee loyalty is not an end in itself, it is a means to obtain and preserve pecuniary benefits for the employer. An employee’s undisclosed conflict of interest does not by itself necessarily pose the threat of economic harm to the employer.” United States v. Lemire, 720 F.2d 1327, 1336 (D.C.Cir.1983). A public official’s undisclosed conflict of interest, in contrast, does by itself harm the constituents’ interest in the end for which the official serves — honest government in the public’s best interest. The “intangible right of honest services” must be given an analogous interpretation in the private sector. Therefore, for a private sector defendant to have violated the victim’s right to honest services, it is not enough to prove the defendant’s breach of loyalty alone. Rather, as is always true in a breach of loyalty by a public official, the breach of loyalty by a private sector defendant must in each case contravene — by inherently harming— the' purpose of the parties’ relationship.
Other Circuits have established a well-reasoned standard for determining whether private sector misconduct rises to the level of violating the victim’s right to “honest services” under § 1346. “The prosecution must prove that the employee intended to breach a fiduciary duty, and that the employee foresaw or reasonably should have foreseen that his employer might suffer an economic harm as a result of the breach.” United States v. Frost, 125 F.3d 346, 368 (6th Cir.1997) (citing Lemire, 720 F.2d at 1337), cert. denied, — U.S. -, 119 S.Ct. 40, 142 L.Ed.2d 32 (1998); see also United States v. Pennington, 168 F.3d 1060, 1065 (8th Cir.1999) (citing Jain, 93 F.3d at 441-42); United States v. Sun-Diamond Growers of Cal., 138 F.3d 961, 973-74 (D.C.Cir.), aff'd on 'other grounds, 526 U.S. 398, 119 S.Ct. 1402, 143 L.Ed.2d 576 (1999); United States v. Czubinski, 106 F.3d 1069, 1077 (1st Cir.1997); cf. Ballard, 663 F.2d at 540 (“a breach of fiduciary duty can constitute an illegal fraud under § 1341 only when there is some detriment to the employer”). The nature and interpretation of the duty owed is a question of federal law.
The cases illuminate this standard for a defrauding of “honest services” in the private sector. In Frost, university professors violated § 1346 by knowingly accepting plagiarized dissertations from graduate students, defrauding the university of their fiduciary duties as professors by awarding fraudulently earned degrees and foreseeably harming the university’s reputation if the illegitimacy of the degrees were exposed. See 125 F.3d at 366-68. Similarly, in Sun-Diamond Growers, a partner in a public relations firm violated § 1346 by funneling illegal campaign contributions to a candidate, for which it was reasonably foreseeable that the firm would suffer a significant loss in its primary asset, its public reputation. See 138 F.3d at 973-74. In Ballard, by comparison, an energy company hired a consultant to obtain the best oil purchase contracts possible, including a right of first refusal for the company. See 663 F.2d at 537-42. This Court concluded that the consultant’s contract made him an agent of the company, so his undisclosed kickbacks from oil sellers violated his fiduciary duties to the energy company and harmed the company because the nondisclosure was material to the relationship. See id. at 540-44 & n. 22 (holding, on honest services theory pri- or to enactment of § 1346, that conduct constituted violation of § 1341 mail fraud statute). Likewise, in Pennington, a CEO violated § 1346 by breaching his fiduciary duty to obtain the most advantageous contracts for the company in return for undisclosed kickbacks. See 168 F.3d at 1065. In contrast, § 1346 liability was rejected in Jain because although the defendant psychiatrist took unethical referral fees from drug companies, the court concluded that he did not have the specific intent to defraud his patients of his fiduciary duty and that the nondisclosure of the fees was not a material harm to the patients because it did not affect the quality of their treatment. See 93 F.3d at 441-42. Similarly, in Czubinski, the defendant browsed through his employer’s confidential files without authorization, but the court concluded that there was no intent to defraud the employer of the employee’s honest services because the employee achieved no private gain from his action. See 106 F.3d at 1077. Thus, a private sector violation of § 1346 honest services fraud involves a breach of a fiduciary duty and reasonably foreseeable economic harm.
B. Sufficiency of the Allegations of the Indictment
We next must determine whether the allegations of the indictment were sufficient to survive the motion to dismiss in this private sector § 1346 honest services case. We agree with the Government that the allegations of Fulton County’s right to deVegter’s honest services were sufficient.
The indictment does not allege in exact words that deVegter owed a “fiduciary” duty to Fulton County. Linguistic precision is not required in an indictment, however. Instead, an indictment may be short and simple — its allegations are sufficient if they include all elements of the offense and briefly describe the facts of the commission of the offense. See, e.g., United States v. Adkinson, 135 F.3d 1363, 1375 n. 37 (11th Cir.1998) (“An indictment need do little more than track the language of the statute charged to be sufficient.”); United States v. Fern, 155 F.3d 1318, 1325 (11th Cir.1998) (indictment sufficient if factual allegations stated therein warrant inference that jury found probable cause for all elements of offense).
The allegations of the indictment implicitly allege that deVegter breached a fiduciary duty owed to Fulton County. Fulton County retained Stephens to provide “independent advice” about whom to hire as an underwriter, and Stephens disclaimed any conflict of interest. “[A]s a financial advisor to Fulton County,” deVegter “had a duty to act honestly and faithfully in all of his dealings with Fulton County, and to transact business in the best interest of Fulton County.” This duty included obligations “to make full and fair disclosure to Fulton County of any personal interest or profit” and “not to disclose confidential information received in his capacity as a financial advisor.” In addition, Fulton County:
relied upon [deVegter] to (a) participate in the formulation of a “Request for Proposals” (the “RFP”) to send to prospective underwriters, (b) independently review and evaluate underwriting proposals submitted in response to the RFP, and (c) make an independent recommendation to the Fulton County Board of Commissioners regarding which investment firms should be [hired as underwriters].
(emphasis added). In breach of these obligations, deVegter took a bribe from Poirier to manipulate Stephens’ recommendation in favor of Lazard Freres, improperly disclosed documents to Poirier, and failed to disclose the conflict of interest to Fulton County.
Taken together, the allegations of the indictment sufficiently allege that de-Vegter owed a fiduciary duty to Fulton County. We therefore need not decide the question reached by the district court— whether a fiduciary duty is necessary in private sector § 1346 cases. The allega tions describe a relationship in which Fulton County relinquished de facto control of the underwriter selection decision to Stephens. Although the Board of Commissioners nominally retained the ultimate decision, the reality was that Stephens — and, by extension, deVegter — maintained a position of dominance, superiority, and influence over Fulton County. Just as the contract and relationship in Ballard made the consultant an agent owing a fiduciary duty of loyalty to the energy company that was violated by undisclosed kickbacks, this indictment alleges that deVegter had a fiduciary relationship with Fulton County because he was vested with a position of dominance, authority, trust, and de facto control in recommending an underwriter.
Finally, the indictment sufficiently alleges that reasonably foreseeable economic harm to Fulton County was a consequence of Appellees’ fraudulent scheme. As described above, the purpose of Fulton County’s employment of deVegter was to obtain an independent recommendation about the best underwriting proposals submitted. Corrupting the process by which this recommendation was made poses a reasonably foreseeable risk of economic harm to Fulton County because the best underwriter might not be recommended. The indictment then further specifically alleges that deVegter “directed [another] banker to change the rankings by elevating Lazard to first place.” By affirmatively acting to recommend an inferior proposal over a superior one, deVegter inflicted reasonably foreseeable economic harm on Fulton County.
The district court therefore erred when it concluded that the indictment’s allegations regarding Fulton County’s right to deVegter’s private sector honest services were insufficient to sustain the § 1346 charges. We reverse the district court’s dismissal of those charges and remand for proceedings consistent with this opinion.
III. CONCLUSION
For the foregoing reasons, the order of the district court dismissing the § 1346 counts of the indictment against Appellees is reversed, and the case remanded for proceedings consistent with this opinion.
REVERSED AND REMANDED.
. The prosecution in McNally involved a violation of the mail fraud statute, 18 U.S.C. § 1341. Except for the jurisdictional nexus (mails in § 1341, interstate wires in § 1343), the statutes are the same, are interpreted identically, and cases decided under one are controlling under the other. See Belt v. United States, 868 F.2d 1208, 1211 (11th Cir.1989) ("The statutes are given a similar construclion and are subject to the same substantive analysis.”).
. In Stein v. Reynolds Securities, Inc., 667 F.2d 33, 34 (11th Cir.1982), this Court adopted as binding precedent all decisions of Unit B of the former Fifth Circuit handed down after September 30, 1981.
. Public sector honest services fraud falls into two categories. First, "a public official owes a fiduciary duty to the public, and misuse of his office for private gain is a fraud.” McNally, 483 U.S. at 355, 107 S.Ct. 2875. Second, “an individual without formal office may be held to be a public fiduciary if others rely on him because of a special relationship in the government and he in fact makes governmental decisions.” Id. (quotation omitted). In this case, it is not alleged that deVegter deprived the public of honest governmental services. Rather, the indictment alleges that he deprived Fulton County of honest commercial services by providing corrupted financial advice. Thus, the § 1346 violation charged in this case concerns the defrauding of honest services in the private sector.
|
3656612-17869 | BARKETT, Circuit Judge:
MLS Solutions, Inc. and International Yacht Council Ltd. (“IYC”) were found by a jury to have violated the Copyright Act, 17 U.S.C. § 501, by infringing upon the selection, order, and arrangement of information contained in BUC International Corp.’s Used Boat Price Guide. The jury awarded BUC $1,598,278 in actual damages, and we affirmed that judgment. See BUC Int'l Corp. v. Int'l Yacht Council Ltd., 489 F.3d 1129 (11th Cir.2007). Pursuant to the one-satisfaction rule, MLS and IYC moved the district court to reduce the final judgment against them by the settlement amounts that BUC obtained from co-defendants that settled before trial. The district court declined. Because we conclude that the one-satisfaction rule does apply to infringement claims under the Copyright Act, we reverse.
BUC filed suit against six defendants: MLS, IYC, William Pazos, the Florida Yacht Brokers Association (“FYBA”), Bradford Yacht Sales, Inc., and Barbara Tierney. BUC primarily claimed that the six defendants had directly, vicariously, and/or contributorily infringed upon its copyright in the selection, order, and arrangement of information contained in BUC’s Used Boat Price Guide. BUC’s guide contained a centralized directory of recreational boat and yacht listings that potential buyers could access through a software application called the BUC Marine Sales & Charter Network.
Several weeks before trial, BUC entered into confidential settlement agreements with Bradford, FYBA, and Tierney. The agreement with Bradford was dated February 25, 2004 and required Bradford to pay $290,000 to BUC in exchange for dismissal with prejudice of the lawsuit filed against it. The agreement with FYBA and Tierney was dated March 11, 2004 and required FYBA and Tierney to pay $500,000 in total to BUC through their respective insurance carriers for dismissal with prejudice of the lawsuit filed against them. On March 22, 2004, BUC proceeded to trial against MLS, IYC, and Pazos on its copyright claims, and on April 7, 2004, the jury found MLS and IYC liable for BUC’s actual damages of $1,598,278 or, alternatively, its statutory damages of $1,098,000. MLS and IYC elected to recover actual damages, and the district court entered final judgment in that amount on April 15, 2004.
Pursuant to the confidential settlement agreements, BUC and the settling defendants filed their notices of dismissal on April 12, 2004 and May 7, 2004. The district court dismissed the settling defendants on May 10, 2004. On June 30, 2004, MLS filed a motion to stay execution of the final judgment, which was later denied. The penultimate paragraph of the motion, however, stated that MLS intended to file a motion pursuant to Federal Rule of Civil Procedure 60(b) to reduce the damages award by that amount already satisfied by the confidential settlements. The paragraph further stated MLS’s belief that the confidential settlement amounts totaled between $600,000 and $800,000. MLS and IYC ultimately filed their Rule 60(b) motions for relief from the judgment on November 8, 2004 and December 1, 2004, respectively. The district court denied both motions on September 30, 2005, and MLS and IYC now appeal.
DISCUSSION
Although MLS and IYC originally moved the district court for partial relief from the judgment against them pursuant to several provisions of Federal Rule of Civil Procedure 60(b), they appeal from the denial of their challenges under only subsections (5) and (6). In part, Rule 60(b)(5) allows a court to relieve a party from a final judgment if “the judgment has been satisfied, released, or discharged.” Rule 60(b)(6) allows the same remedy for “any other reason that justifies relief.” Other courts have found Rule 60(b)(5) to be an appropriate vehicle through which to seek credit against all or part of a judgment for the amount paid by a settling co-defendant. See Torres-Troche v. Municipality of Yauco, 873 F.2d 499, 501 & n. 7 (1st Cir.1989); Kassman v. Am. Univ., 546 F.2d 1029, 1033 (D.C.Cir.1976) (noting that “a motion for a credit on a judgment should be treated as a Rule 60(b)(5) motion for relief from a judgment which has been satisfied, released or discharged”); Sun-derland v. City of Philadelphia, 575 F.2d 1089, 1090-91 (3d Cir.1978). We agree that motions seeking credit for settlement amounts obtained against joint tortfeasors are appropriately brought under Rule 60(b)(5).
We review the district court’s denial of relief under Rule 60(b) for an abuse of discretion, Waddell v. Hendry County Sheriff’s Office, 329 F.3d 1300, 1309 (11th Cir.2003), bearing in mind that “[a]n error of law constitutes an abuse of discretion.” Wexler v. Lepare, 385 F.3d 1336, 1338 (11th Cir.2004). Before reaching the merits, however, we address BUC’s claim that MLS’s and IYC’s Rule 60(b)(5) challenges were untimely.
A. Whether MLS and IYC filed their Rule 60(b) motions within a reasonable time
Motions filed pursuant to Rule 60(b)(4)-(6) “must be made within a reasonable time.” Fed.R.Civ.P. 60(c)(1). BUC argues that MLS and IYC delayed in filing their Rule 60(b) motions and that we should therefore decline to consider the arguments raised in those motions now.
Although the Eleventh Circuit has not yet given substance to this limitation in the context of Rule 60(b)(5), we agree with most courts that we must consider the circumstances of each case to determine “whether the parties have been prejudiced by the delay and whether a good reason has been presented for failing to take action sooner.” United States v. Boch Oldsmobile, Inc., 909 F.2d 657, 661 (1st Cir.1990); see also In re Pac. Far E. Lines, Inc., 889 F.2d 242, 249 (9th Cir.1989); Planet Corp. v. Sullivan, 702 F.2d 123,126 (7th Cir.1983) (considering, among other related factors, prejudice and the reason given for the delay); Harduvel v. Gen. Dynamics Corp., 801 F.Supp. 597, 603 (M.D.Fla.1992).
The earliest date that MLS and IYC could have become aware of a potential settlement between BUC and the settling defendants was March 19, 2004, when all counsel, except counsel for the settling defendants, appeared before the district court before the first day of trial, which was scheduled for March 22, 2004. The settlements were confidential, however, so MLS and IYC still did not know their terms, including whether they involved any payments and, if so, the amounts of those payments. At the latest, MLS and IYC learned of the settlements on April 12, 2004 and May 7, 2004, when BUC and the settling defendants filed notices of dismissal. Even then, the terms remained confidential. MLS and IYC informally attempted to discover the settlement amounts by requesting, in letters dated June 25, 2004 and July 2, 2004, that BUC and the settling defendants waive the confidentiality provisions of the agreements. The settling defendants agreed, but BUC refused, asserting that MLS and IYC had waived any claim to credit for the settlement amounts. During that same period of time, on June 30, 2004, MLS filed a motion to stay execution of the judgment, alluding to its intention to file shortly thereafter a Rule 60(b) motion claiming credit for the settlement amounts.
On July 28, 2004, MLS initiated proceedings in bankruptcy court and served BUC, apparently on October 27, 2004, with a request to produce the confidential set tlement agreements. BUC initially refused but ultimately complied on November 9, 2004 when the bankruptcy court denied its motion for a protective order. By that time, IYC had moved the district court, as part of its Rule 60(b) motion of November 8, 2004, to compel BUC to disclose the terms of the settlement agreements. On December 1, 2004, MLS filed its Rule 60(b) motion.
We find that the delay in this case was not unreasonable in light of the difficulty that MLS and IYC encountered in attempting to discover the terms of the confidential settlement agreements. Although MLS and IYC waited approximately six and seven months, respectively, from the date of the second notice of dismissal to file their motions, MLS did notify the district court of its intention to do so within two months of the second notice of dismissal, and both MLS and IYC attempted to ascertain the terms of the settlements in the interim. Furthermore, BUC does not allege any prejudice in its briefing, and we see none. We therefore reject BUC’s challenge to the timeliness of the Rule 60(b) motions and proceed to the merits.
B. Whether the one-satisfaction rule applies to infringement claims
MLS and IYC argue on appeal that they are entitled to credit against the $1,598,278 award against them for the settlement amounts — which total $790,000 — paid by the settling defendants. MLS and IYC predicate their request on the one-satisfaction rule, which has its roots in elementary principles of tort law. See Kassman, 546 F.2d at 1033-34. The rule generally provides that a plaintiff is entitled to only one satisfaction for a single injury, such that amounts received in settlement from an alleged tortfeasor are credited against judgments for the same injury against non-settling tortfeasors. See W. Page Keeton, Prosser & Keeton on the Law of Torts §§ 48A19, at 330-32, 335-36 (5th ed.1984); McDermott, Inc. v. AmClyde, 511 U.S. 202, 219, 114 S.Ct. 1461, 128 L.Ed.2d 148 (1994).
In rejecting the request, the district court likened the attempt to claim credit for the settlements to a claim for contribution, which would only exist under the Copyright Act if either Congress created such a right, expressly or implicitly, or the courts created such a right as a matter of federal common law. See Nw. Airlines, Inc. v. Transp. Workers Union of Am., AFL-CIO, 451 U.S. 77, 90-91, 101 S.Ct. 1571, 67 L.Ed.2d 750 (1981); Lehman Bros., Inc. v. Wu, 294 F.Supp.2d 504, 504-05 (S.D.N.Y.2003). The district court determined that no right to contribution existed under the Copyright Act or as a matter of federal common law. BUC advances several alternative arguments on appeal, but essentially urges that we adopt the district court’s approach. For the reasons that follow, we disagree that the one-satisfaction rule is akin to a claim for contribution under the Copyright Act, and reverse.
MLS and IYC are not seeking contribution by invoking the one-satisfaction rule. A right of “contribution” allows a defendant “to demand that another who is jointly responsible for a third party’s injury supply part of what is required to compensate the third party.” Black’s Law Dictionary 352-53 (8th ed.2004). It “reflects the view that when two or more persons share responsibility for a wrong, it is inequitable to require one to pay the entire cost of reparation.” Nw. Airlines, 451 U.S. at 88, 101 S.Ct. 1571. The one-satisfaction rule, by contrast, operates to prevent double recovery, or the overcompensation of a plaintiff for a single injury. Rose, 501 F.2d at 809. Although similar, the theories do not always overlap. For example, the one-satisfaction rule has been applied even where a right to contribution does not lie. In Snowden v. D.C. Transit System, Inc., a settling defendant was found not liable during the trial against the non-settling co-defendant. 454 F.2d 1047, 1047-48 (D.C.Cir.1971). The non-settling defendant sought a reduction in the judgment against it by the amount of the settlement, and the plaintiff argued that credit for the settlement was inappropriate given the exoneration of the settling defendant at trial. Id. at 1048-49. The D.C. Circuit disagreed, noting that the “flaw in [the plaintiffs] argument is her failure to distinguish between the concepts of credit and contribution.” Id. at 1049. The one-satisfaction rule operates against plaintiffs and requires nothing of joint tortfeasors, whereas the right to contribution requires actual, and not just potential, joint tortfea-sors to share liability. Id.
It is therefore simply not the case that the Supreme Court’s decision in Northwest Airlines, which dealt with the existence of an independent cause of action for contribution, implicates the common-law limitation of a plaintiffs ability to recover multiple times for a single injury. The motivating force of the Northwest Airlines decision was an unwillingness of the Court to imply a private cause of action “through the exercise of judicial power to fashion appropriate remedies for unlawful conduct.” Nw. Airlines, 451 U.S. at 90-91, 101 S.Ct. 1571. The concerns expressly-associated with that unwillingness—principally that of remaining faithful to Congress’s intent—do not apply to the equitable application of the one-satisfaction rule. It is not a right created to protect defendants, but to limit plaintiffs.
Having found that Northwest Airlines does not limit our ability to apply the one-satisfaction rule to federal claims, we join the Second Circuit in holding that the rule does indeed apply to infringement actions under the Copyright Act. See Screen Gems-Columbia Music, Inc. v. Metlis & Lebow Corp., 453 F.2d 552, 553-54 (2d Cir.1972). In Screen Gems, the Second Circuit reviewed an appeal similar to the one before us now. The plaintiffs alleged copyright violations against a number of defendants, three of which settled prior to trial. Id. at 553. After a bench trial, the remaining defendants were found liable for a total amount in excess of the total settlement amounts and sought what MLS and IYC seek here, a reduction in their liability by the amount of the settlements. Id. Noting that “[cjopyright infringement is in the nature of a tort, for which all who participate in the infringement are jointly and severally liable,” and that “[u]nder elementary principles of tort law a plaintiff is entitled to only one recovery for a wrong,” the Second Circuit held “that the Copyright Act allows only a single recovery for a single sale; where multiple defendants are all involved with sales, as are the [non-settling] and the settling defendants here, their liability is joint and several and recovering from one reduces the liability of the others.” Id. at 554.
We agree. To hold otherwise would allow a plaintiff to recover multiple times for a single injury, frustrating this elementary principle of tort law in a manner that we cannot imagine envisioned by Congress. Thus, MLS and IYC are entitled to a reduction in the judgment against them by the amounts received by BUC in settlement of claims for the same injury.
BUC alternatively argues that even if the one-satisfaction rule applies, it is entitled to a hearing to determine whether the payments made to BUC by the settling defendants were for the same injury addressed by the jury’s verdict. Given the district court’s disposition, it did not address whether the injuries are the same, thus warranting application of the one-satisfaction rule, or whether a hearing is necessary to determine as much. In other circumstances, we might leave those questions to the district court for resolution in the first instance. Here, however, the record reflects that the claims settled by BUC prior to trial are for precisely the same injury accounted for by the jury’s verdict and award. The agreements with FYBA, Tierney, and Bradford settled copyright infringement claims that are identical to those against MLS and IYC. The only settled claim that is plausibly unique is that against Bradford contained in Count XIV of the Second Amended Complaint, which alleges breach of contract for Bradford’s violation of a license agreement limiting its use of the BUC Marine Sales & Charter Network. That claim alleges, however, that Bradford’s violation of the license agreement was in furtherance of the defendants’ conspiracy to eliminate BUC from the market, and that the injury is in essence identical to the injury caused by the infringing acts of the other defendants. Thus, remand is unnecessary for this purpose in this case.
We may also decide, without remand, which version of the one-satisfaction rule to apply. Although some courts refer exclusively to dollar-for-dollar, or pro tan-to, reductions when referring to the one-satisfaction rule, others consider reductions by the proportionate share of the settling defendants’ liability. MLS and IYC request a dollar-for-dollar reduction, and BUC does not argue for a proportionate-share approach. Thus, we direct the district court to reduce the judgment against MLS and IYC dollar-for-dollar by the amounts received by BUC in settlement of its claims against FYBA, Tierney, and Bradford.
For the reasons above, we REVERSE the judgment of the district court and REMAND for further proceedings consistent with this opinion.
REVERSED and REMANDED.
. A third non-settling defendant, William Pa-zos, was found not liable and is not involved in this appeal.
. In its Second Amended Complaint, BUC also alleged antitrust violations, unfair and deceptive trade practices under Florida law, and breach of contract. The district court dismissed the antitrust claims, and it granted summary judgment in the defendants' favor on the claims for injunctive relief contained in Count IV. A footnote in the district court's order of March 16, 2004 states that "due to the Court's ruling on the antitrust counts, BUC is now foreclosed from arguing that Defendants violated Florida's Deceptive and Unfair Trade Practices Act based on a violation of the antitrust laws.” The district court’s disposition of these claims is not at issue in this appeal.
. The facts of this case are recited at greater length in the related appeal. See BUC Int’l Corp., 489 F.3d at 1133-37.
. Rule 60(b)(6) “applies only to cases that do not fall into any of the other categories listed in parts (l)-(5) of Rule 60(b).” United States v. Real Prop. & Residence Located at Route 1, Box 111, Firetower Rd., Semmes, Mobile County, Ala., 920 F.2d 788, 791 (11th Cir.1991). Thus, we need not consider that portion of MLS and IYC’s appeal.
|
1357425-27613 | R. LANIER ANDERSON, III, Circuit Judge:
The appellants, the United States, the Internal Revenue Service, and several officers of the Service, appeal an order permanently enjoining them from disclosing return information of appellee, Kemlon Products and Development Company (“Kemlon”), to any of Kemlon’s business customers. Appellants maintain that the injunction falls within the scope of the Internal Revenue Code’s Anti-Injunction Act, 26 U.S.C.A. § 7421(a) (West Supp.1980), and that none of the judicially created excep tions to this Act applies. Since we find inadequate proof of irreparable harm and sufficient facts to show the government has a chance to prevail on its right to disclose such information, we agree with appellants that the case fits within none of the exceptions to the Anti-Injunction Act. We reverse the district court’s decision.
FACTS
The facts as pleaded and developed through affidavits disclose the following story.
Kemlon and Keystone Engineering Company (“Keystone”) are engaged in the research, development, manufacturing, and sale of certain patented products for use in the oil and gas industry. Kemlon and Keystone are related by common ownership and the stock of these corporations is held by Sandiford Ring, Russell K. Ring, William S. Ring, and John H. Ring. All of the foregoing were plaintiffs below, and are appellees here.
In December, 1976, the Internal Revenue Service initiated an audit of Kemlon’s and Keystone’s tax returns for the fiscal year ending September 30, 1975, and of the individuals’ tax returns for the calendar year ending December 31,1975. In the course of examining Kemlon’s tax returns, the Service questioned the accuracy of the valuation of certain patents held by Kemlon. In particular, the Service questioned whether a portion of the value which Kemlon assigned to the patents should have been allocated to assets other than the patents, such as goodwill. It was also concerned about the useful life of the patents. The Service was concerned that Kemlon had valued the patents too highly and had thereby obtained a larger depreciation deduction than was properly allowable. It is undisputed that during the audit, Kemlon has provided the Service with all the information it has raquested concerning the patents and the patented product.
Despite Kemlon’s cooperation, Engineering Agent Gary D. Brown, who was the Service’s agent in charge of valuing the patents, determined that it would be necessary to contact customers of Kemlon. When counsel for Kemlon was informed by Agent Brown that he intended to contact Kemlon’s customers and elicit information concerning the product, their use of the product and their dealings with Kemlon, Kemlon’s counsel objected on grounds that any such contact would disrupt the confidential business relationship between Kemlon and its customers and would constitute unauthorized disclosure of tax return information in violation of 26 U.S.C.A. § 6103(k)(6) (West Supp.1980). Kemlon’s counsel offered to secure information from third parties or, alternatively, to arrange a meeting with customers if Agent Brown would furnish in advance the questions to be asked. Agent Brown declined to accept the suggestions of Kemlon’s attorney.
After further consultation by Agent Brown with other officials in the Service, it was determined that the valuation of Kemlon’s patents required that Agent Brown contact Kemlon’s major customer. The Acting District Disclosure Officer notified Agent Brown that such a contact would not violate § 6103. Agent Brown thereafter contacted Kemlon and offered it the opportunity to arrange a meeting with its major customer and to be present at the meeting. Agent Brown continued to refuse to provide Kelmon with a list of questions to be asked or to have Kemlon act as intermediary.
Kemlon and the other appellees at this time filed the instant suit, seeking to enjoin Agent Brown and the Service from disclosing directly or indirectly Kemlon’s return information to Kemlon’s customers. Kemlon claimed that such an injunction did not come within the scope of the Anti-Injunction Act and that disclosure of the return information would violate (i) § 6103(k)(6) of the Internal Revenue Code, (ii) the Privacy Act of 1974, 5 U.S.C.A. § 552a(b) (West 1977), and (iii) Kemlon’s constitutional right to privacy. Kemlon alleged that the Service intended to contact its largest customer concerning the patents in question. In its pleading that such a contact would cause substantial and irreparable harm for which no adequate remedy existed at law, Kemlon alleged that its industry was highly competitive and that its largest customers are interested in doing business with technological and research-oriented companies which are considered financially stable. Kemlon alleged that disclosure of return information would result in a loss of business reputation and the opportunity for Kemlon to work on new and other patentable products.
In support of its allegation of irreparable harm, Kemlon submitted the affidavit of John H. Ring repeating the allegations of the complaint and containing an additional assertion that irreparable harm would result because Kemlon’s customers are interested only in research companies stable in the areas of acquiring raw materials for inventory, the manufacturing process, the quality control process, and the distribution process. Ring’s affidavit elaborated no further as to how irreparable harm would be suffered.
The Service submitted a motion to dismiss Kemlon’s suit on grounds that it was barred by the Anti-Injunction Act. Attached to this motion was an affidavit by Agent Brown describing in very general terms the questions he wished to ask of Kemlon’s customer. Agent Brown also gave reasons as to why the Service was opposed to giving the specific questions first to Kemlon. After a hearing on this motion on March 20, 1978, the district court entered an order dated May 22, 1978, in which it rejected Kemlon’s claim that the disclosure was barred by the Privacy Act of 1974 and the United States Constitution. The district court further held that the requested injunction was within scope of the Anti-Injunction Act, but was concerned that the judicial exception to this Act established by Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), was applicable. The district court noted that Kemlon had made a “substantial claim of irreparable injury” and had been unable to address adequately whether the Service would prevail on the § 6103(k)(6) claim because of the Service’s refusal to disclose the specific questions it wished to ask Kemlon’s customer. Rather than rule at that time on the motion to dismiss, the court on the basis of Commissioner of Internal Revenue v. Shapiro, 424 U.S. 614, 96 S.Ct. 1062, 47 L.Ed.2d 278 (1976), ordered the Service to submit to Kemlon questions to be asked of its customer in order that Kemlon could have an opportunity under Enochs to prove that it would prevail on its § 6103 claim.
The Service thereupon filed a motion requesting the district court to reconsider its May 22 order. The Service maintained that Shapiro was not applicable because Kemlon had not pleaded or proved facts establishing it would suffer irreparable harm through the contact with its customer. The Service argued in the alternative that if the district court believed Shapiro was applicable, Agent Brown’s affidavit describing generally the questions to be asked provided sufficient information to show that the Enochs exception did not apply. In the event the district court should refuse to grant the motion to reconsider its May 22 order, the Service requested that the May 22 order be certified for appeal under 28 U.S.C.A. § 1292(b), or, alternatively, that the district court issue an injunction on the basis of the record as it then stood.
On September 8,1978, a hearing was held with respect to the May 22 order. No new arguments were brought forth at that time although the Service submitted to the district court, sealed for in camera inspection, the specific questions it proposed to ask Kemlon’s customer. On December 28, 1978, the district court entered final judgment denying the Service’s motion to reconsider its May 22 order and issuing an injunction barring the Service from disclosing return information to Kemlon’s business customers. The Service timely appealed this order.
On March 27, 1979, the district court entered Findings of Fact and Conclusions of Law. The district court found that the Service offered no evidence to controvert Kemlon’s claims of irreparable injury for which there was no adequate remedy at law. Accordingly, the court found such irreparable injury to obtain. The district court further found that the Service refused to provide Kemlon with the specific questions to be asked of its customer, and that the appropriate sanction under Shapiro for such refusal was the issuance of the injunction.
APPLICABILITY OF ANTI-INJUNCTION ACT
Kemlon asserts without reference to authority that this suit to prevent alleged unnecessary disclosure of return information in violation of § 6103(k)(6) is not within the scope of the Anti-Injunction Act. The object and purpose of this suit, Kemlon maintains, is not to restrain “the assessment or collection” of taxes but is to prevent disclosure of information. The district court did not accept this argument, nor do we. Section 6103 is not one of the code sections expressly exempted from the Anti-Injunction Act. Nor do we believe the Anti-Injunction Act must be read as literally as Kemlon would read it. The policy behind this statute is “to [protect] the government’s need to assess and collect taxes as expeditiously as possible with a minimum of pre-enforcement interference . . . . ” Bob Jones University v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974). We agree with the Seventh Circuit that “this ban against judicial interference is applicable not only to the assessment or collection itself, but is equally applicable to activities which are intended to or may culminate in the assessment or collection of taxes.” United States v. Dema, 544 F.2d 1373, 1376 (7th Cir. 1976), cert. denied 429 U.S. 1093, 97 S.Ct. 1106, 51 L.Ed.2d 539 (1977). This rule is reflected in the holdings of several circuit cases which have dealt with the information gathering process of the Service. United States v. Dema, supra, (holding that an injunction retraining the Service from issuing subpoenas for taxpayer’s books violates the Anti-Injunction Act); Campbell v. Guetersloh, 287 F.2d 878 (5th Cir. 1961) (holding that an injunction barring the Service from utilizing the bank deposit and expenditure method of recomputing income violates the Act); Koin v. Coyle, 402 F.2d 468 (7th Cir. 1968) (holding that an injunction restraining the Service from using certain evidence is barred by the Act); Lewis v. Sandler, 498 F.2d 395 (4th Cir. 1974) (injunction preventing police from furnishing to the Service information about persons suspected of selling narcotics is in the violation of the Act).
Recently, in a different context, the Supreme Court rejected the taxpayer’s assertion that an injunction would lie because the injunction would not directly prevent the assessment and collection of taxes. In Bob Jones University v. Simon, 416 U.S. 725, 94 S.Ct. 2038, 40 L.Ed.2d 496 (1974), the Court held that the Act prevented a court from enjoining the Service where the Service had revoked a letter ruling of tax exempt status. The Court held, inter alia, that the Service’s action would require the taxpayer to pay FICA and FUTA taxes and would increase donors’ tax liability because their contributions would no longer be deductible. Thus, the Court reasoned, permitting the injunction would restrain the collection of these taxes. 416 U.S. at 738-742, 94 S.Ct. at 2046-2048. Accord Alexander v. “Americans United,’’ 416 U.S. 752, 94 S.Ct. 2053, 40 L.Ed.2d 518 (1974).
We believe the foregoing cases indicate that the instant injunction is well within the scope of the Anti-Injunction Act. We now turn to whether the exception to the Anti-Injunction Act applies.
JUDICIAL EXCEPTION TO ANTI-INJUNCTION ACT
In Enochs v. Williams Packing & Navigation Co., supra, and in Commissioner v. Shapiro, supra, the Supreme Court has defined a judicially created exception to the Anti-Injunction Act. Enochs establishes two prongs, both of which must be satisfied, before an injunction may issue pursuant to § 7421. The first prong is that normal equity jurisdiction must obtain, i. e., irreparable injury and inadequacy of legal remedy. 370 U.S. at 6, 82 S.Ct. at 1128. The second independent criterion is that it must be clear that under “no circumstances” could the government ultimately prevail. Only if the government does not have “a chance of ultimately prevailing” and only if under the “most liberal view of the law and the facts” the United States cannot win, may a district court issue an injunction. 370 U.S. at 7, 82 S.Ct. at 1129.
The Supreme Court in Shapiro added a procedural gloss to the second prong of the Enochs test. In Shapiro, the Commissioner assessed taxes against the taxpayer and filed liens and notices of levy against his assets. Because the taxpayer needed these assets to post bail on pending criminal charges in Israel, he brought suit to lift the notices of levy. The government claimed that the Anti-Injunction Act precluded jurisdiction over the taxpayer’s action. The Supreme Court held that because the second prong of Enochs — i. e., that it is clear the government could under no circumstances prevail — must be resolved on the basis of the information available to the government at the time of the suit, there must be a mechanism for the taxpayer to obtain information from the government. Because the government there had produced no factual evidence supporting its assessment, the Supreme Court remanded for further factual development of the record in order that the taxpayer could better argue the second prong of Enochs. The Court was concerned in Shapiro that permitting the government to seize and hold property on the basis of a good-faith allegation of an unpaid tax would raise serious constitutional problems. 424 U.S. at 629, 96 S.Ct. at 1071. The Court made clear that the burden of persuasion still remained with the taxpayer on the second prong, but held there must be some means by which a taxpayer could obtain information from the government with respect to this issue.
After a thorough review of the record, we conclude that Kemlon failed to satisfy the first prong of the Enochs exception. We do not accept Kemlon’s assertion that the Service waived any right to contest the existence of irreparable harm and inadequacy of a legal remedy. The statements by the Service’s attorney at the September 8, 1978, hearing upon which Kemlon relies are ambiguous at best and do not support a finding of waiver of this issue. Moreover, the remainder of the record demonstrates the Service adamantly argued that Kemlon had not satisfied its burden of showing irreparable harm. In two separate memoranda, one supporting the Service’s motion to dismiss and the other supporting its motion for the court to reconsider its May 22 order requiring disclosure of the specific questions, the Service argued that Kemlon had failed to plead sufficiently and to prove irreparable harm. (Record on Appeal, pp. 31-33 and pp. 100-101). At the March 29, 1978, hearing, the government suggested that if Kemlon were to put its evidence supporting its allegation of irreparable harm in affidavit form, a hearing on wheth er Shapiro required disclosure of the questions to be asked Kemlon’s customer might be avoided. (Supp. Record on Appeal, pp. 32-33). In the September 8, 1978, hearing, the Service expressly stated there had been no stipulation with respect to the irreparable harm issue; rather the Service said that part of its argument was based on this element of the Enochs exception. (Supp. Record on Appeal, pp. 44-45). In the discussion of whether there had been a stipulation of irreparable harm, Kemlon indicated it would stand on Ring’s affidavit as proof of irreparable harm. (Supp. Record on Appeal, p. 43).
Turning to the pleadings and evidence relating to irreparable harm, we note that Kemlon pleaded nothing more than its largest customers are interested in doing business only with those technological and research-oriented companies which are considered financially stable, and that disclosure of return information to its customers would result in a loss of business reputation and the opportunity to work on new and other unique products for which patents could be available. (Record on Appeal, pp. 5-6). No specific facts were alleged; only the foregoing conclusory pleading. The affidavit of Ring, which Kemlon expressly adopted as establishing irreparable injury, merely repeated the above allegation with an additional assertion that Kemlon’s customers are interested only in technological and research companies stable in the areas of acquiring raw materials for inventory, the manufacturing process, quality control process, and the distribution process. (Record on Appeal, p. 126). The whole thrust of Kemlon’s pleading and argument below was that irreparable harm would result through a loss of customers who would be concerned about Kemlon’s financial well-being should they learn that Kemlon was being audited and its valuation of a certain patent was being examined. We emphasize that Kemlon in no way asserted or proved in the court below that irreparable harm would result because of the disclosure of confidential or secret information concerning the patent or other device. Before this court, Kemlon has suggested that the purpose of this suit is to prevent disclosure by the government of confidential research and development data. Insofar as Kemlon is now arguing that irreparable harm would result because of customers’ concern over disclosure of confidential data, such an argument is raised for the first time on appeal and shall not be heard.
To describe Kemlon’s allegation of irreparable harm is to decide this case. Kemlon in effect has alleged, in conclusory fashion, that disclosure of the fact that it is under audit will cause it to lose customers because of concern for its financial instability. It in no way alleged or proved facts indicating how its customers would infer financial instability from knowledge of an audit. It in no way alleged or proved facts showing how disclosure of an examination into the value of its patents would indicate financial instability. It very well may be that in the industry of research and development, customers are sensitive to the financial stability of researchers. But that in no way indicates that customers of technologically innovative products would assume developers are financially unsound merely from the fact of an audit. Given the frequency of audits of companies as large as Kemlon, and given the stringent policy not to interfere with the tax collection process as reflected by the Anti-Injunction Act, Kemlon had to plead and prove more to demonstrate irreparable harm resulting from disclosure of an audit. We conclude that Kemlon has failed to meet its burden of proof of irreparable harm as specified by Enochs and Shapiro.
Even assuming arguendo that Kemlon met its burden of proving irreparable harm, we conclude that the government has met the Shapiro requirement of coming forward with the basic facts from which it appears the government may prevail on Kemlon’s § 6103(k)(6) claim. Section 6103(k)(6) states that an Internal Revenue officer may disclose return information for investigative purposes to the extent such information is “necessary” and is “not otherwise reasonably available.” Temp.Treas. Reg. § 404.6103(k)(6) — 1(b)(1) (1977), provides that return information may be disclosed for the purpose of securing necessary information in establishing “the correctness or completeness of any return ... or return information.” The government in the affidavit of Agent Brown established that it was seeking to determine whether any portion of the patents’ value should be allocated to goodwill and to determine the patents’ useful life. Such an inquiry would in all likelihood necessitate an interview with customers to determine why they deal with Kemlon and use the product in question and their projected future use of the product. The questions as generally described by Agent Brown are aimed at a determination of these facts. Kemlon claims that this information is “otherwise reasonably available,” — i. e., through Kemlon. Agent Brown swore that use of Kemlon as intermediary would detract from the probity of the customer’s responses, and that a direct contact would be necessary to ensure that responses were candid. All Shapiro requires is that the government establish basic facts from which it appears it may prevail. Viewing the law and the facts liberally in favor of the Service, as we must, we conclude the Service has amply established the possibility that it will prevail on the § 6103(k)(6) claim.
REVERSED.
. The Anti-Injunction Act, 26 U.S.C.A. § 7421(a) (West Supp.1980), reads in full:
Tax. Except as provided in sections 6212(a) and (c), 6213(a), 6672(b), 6694(c), 7426(a) and (b)(1), and 7429(b), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.
. The wives of Sandiford Ring, Russell K. Ring, and John H. Ring are parties to this action only by virtue of having filed joint income tax returns with their respective husbands.
. The patents are incorporated into a single patented product, a ceramic electrical connector.
. 26 U.S.C.A. § 6103(k)(6) (West Supp.1980) reads in full:
Disclosure by internal revenue officers and employees for investigative purposes. — An internal revenue officer or employee may, in connection with his official duties relating to any audit, collection activity, or civil or criminal tax investigation or any other offense under the internal revenue laws, disclose return information to the extent that such disclosure is necessary in obtaining information, which is not otherwise reasonably available, with respect to the correct determination of tax, liability for tax, or the amount to be collected or with respect to the enforcement of any other provision of this title. Such disclosure shall be made only in such situations and under such conditions as the Secretary may prescribe by regulation.
. In the alternative, Kemlon sought damages pursuant to 26 U.S.C.A. § 7217 (West Supp. 1980).
. The questions, as generally described by Agent Brown, are:
(A) Has the customer ever produced a certain type of product;
(B) Whether the customer holds any patents on these products and if so, whether royalties are paid and the amount of royalties;
(C) The history of the customer’s dealings with Kemlon;
(D) Whether the customer has knowledge of a certain type of product being sold on the open market with a certain type of rating;
(E) Whether any corporations or entities related to the customer resell or manufacture a certain type of product;
(F) Whether the customer purchases a certain product from Kemlon by virtue of a particular fact or would the customer purchase this product if a certain feature were absent;
(G) The customer’s views as to whether the patented product is superior to another type of product produced by Kemlon and the reasons therefor;
(H) Various questions dealing with a specific agreement between Kemlon and the customer;
(I) Various technical questions relating to a product used by the customer;
(J) Verification of certain specifications for a particular product;
(K) Experience which the customer has had in using a particular product;
(L) Views of the customer towards Kemlon’s abilities, technical knowledge, and quality control;
(M) Various aspects of the customer’s dealings with Kemlon; and
(N) Views of the customer toward potential market developments and changes relating to a certain product.
Agent Brown did not name or describe the product in his affidavit because at the time the motion to dismiss was filed, Kemlon had not identified the product in its pleadings and the Service was reluctant to disclose the product in light of the nature of Kemlon’s complaint.
. The reasons given by Agent Brown are:
(A) [A]ffiant [Brown] believes that Kemlon and the customer in question should not have an opportunity to collaborate on the responses that should be made to the specific inquir ies; in this regard, a potential issue in the patent valuation is whether or not a portion of Kemlon’s income should be allocated to assets other than the patent, such as goodwill; some of the questions seek to inquire as to whether or not there is any element of goodwill existing between Kemlon and the customer; in the substantiation of the patent valuation provided to affiant by Mr. Urquhart [Kemlon’s attorney], there does not appear to be any allocation of income to an element of goodwill or other assets of Kemlon, or to other products sold by Kemlon;
(B) [A]ffiant believes that to properly arrive at a fair market value of the patent, in this case, the underlying information sought from the customer and other third parties for that matter needs to be independently obtained, verified and confirmed without Kemlon’s intervention;
(C) [0]bviously, some of the information would only be within the knowledge of the customer; because of the particular circumstances in this case, affiant believes that direct contact with the third party would be the appropriate manner to secure the information so that Kemlon would not have an opportunity to influence or suggest responses to questions; and
(D) [A]nswers which the customer may make to certain questions could prompt further questions; if Kemlon obtains written responses to questions proposed by affiant, then affiant may have to ask Kemlon to submit further questions to the customer which may or may not be resisted by Kemlon; in short, this procedure is somewhat cumbersome to all parties.
. Kemlon has not cross-appealed the district court’s ruling that disclosure of the return information is not barred by the Privacy Act of 1974 or the United States Constitution.
. The parties’ briefs inform this court that the Service has since determined Kemlon’s patents to be of no value and accordingly disallowed Kemlon’s depreciable basis in the patents and its depreciation deduction. Kemlon paid a portion of the taxes assessed and filed a claim for a refund. After a denial of the refund claim, Kemlon brought suit in federal district court for a refund of the taxes paid, for damages, and for attorney’s fees resulting from the Service’s actions. The Service argues that to defend this refund suit it will be necessary to contact Kemlon’s business customers for depositions. Because the injunction is broad in scope and prohibits all contacts by the Service with Kemlon’s customers, this appeal is not moot. Kemlon does not argue otherwise.
We express no opinion with respect to the propriety of the Service’s action in holding the patents to be of no value after the district court’s judgment.
. The Supreme Court took no position on whether the government has the burden of producing evidence, or whether the taxpayer has the burden of initiating discovery to bring forth the evidence in the government’s hands. 424 U.S. at 628, 96 S.Ct. at 1070.
|
1299681-4946 | MEMORANDUM
NICKERSON, District Judge.
Currently pending is an appeal of an order of the Bankruptcy Court. Upon a review of the record and the applicable case law, the Court determines that no hearing is necessary (Bankruptcy Rule 8012) and that the decision of the Bankruptcy Court should be affirmed.
This appeal concerns the valuation of the residence of the Debtors George Colson, Sr. and Barbara Colson [“the Property”]. The Debtors filed a Chapter 7 bankruptcy case on July 17, 1995. Prior to the filing of the bankruptcy, William Buelhs obtained a judgment against the Debtors in state court for approximately $27,000, plus interest and attorneys fees. On that basis, Buellis claimed a judicial lien on the Property. Buellis’s lien, however, was junior to two other hens on the Property: a first mortgage in the amount of approximately $103,112 as of the date of the bankruptcy, and a second judgment hen having a balance of approximately $6,870 as of that same date..
On January 31,1996, Buelhs filed a Motion for Modification of the Automatic Stay. On March 4, 1996, the Debtors filed a Motion to Avoid Buelhs’s Judicial Lien on Exempt Property. On March 28, 1997, Bankruptcy Judge E. Stephen Derby held a hearing on the motions, which centered on the valuation of the Property. The Debtors took the position that the value of the Property was no more than $100,000. Thus, the Debtors argued, they had no equity in the Property that would be subject to Buelhs’s hen.
Judge Derby ultimately concluded that the Property had a fair market value of $134,000. Based on that valuation, Judge Derby entered one Order modifying the bankruptcy stay and another order granting, in part, Debtors’ motion to avoid Buelhs’s judicial hen. Each order contained a finding that $19,026.27 of Buellis’ judgment was not avoidable by the Debtors. After Judge Derby denied the Debtors’ motion to reconsider his decision, the Debtors filed the instant appeal.
At the hearing before Judge Derby, and in this appeal, the Debtors rehed on the ap praisal of Walter A. Reiter, Jr., a certified general appraiser. Based on sales of comparable homes in the vicinity, Reiter testified that the Property would have a fair market value of approximately $150,000 once certain repairs were made. Reiter then deducted from that amount the estimated costs of the repairs that he believed were needed to be made in order to render the house marketable. These include: $2,500 for repairs to the septic system; $2,500 for repairs to the roof; $3,000 for jacking, and $13,300 for structural repairs to correct the “sinking or sagging” of portions of the first floor of the residence.
Reiter also concluded that the structural problems relating to the sagging floor were so severe that an ordinary purchaser would not be interested in the home. Based on the assumption that the home could only be sold to an investor, Reiter further deducted from the estimated value of the property an additional $35,000. This $35,000 included: “$20,-000 which is for the risk and the speculation of what contingencies that [an investor] might not know about, and then an entrepreneurial reward which is why [the investor would purchase this house,]” Hearing Tr. at 22; sales and brokerage fees of $12,000; and “contingency” costs totaling $3,000 related to additional problems that might be discovered once the house was jacked up. Thus, Reiter’s estimated value for the Property was $94,700.
The Bankruptcy Court rejected this estimate. Based on an estimate from a local contractor who indicated that he would repair the structural problems for $10,639, and rounding that figure to $11,000 to include permit costs and other incidental adjustments, the Bankruptcy Court deducted that figure as a fair estimate of the diminution of value related to the structural problems in the residence. The Bankruptcy Court also allowed the $5,000 deduction for the repairs to the roof and septic system, finding those estimates reasonable. The Court did not allow, however, the additional $35,000 in deductions which the Debtors argued were necessitated by the structural problems: the sales and brokerage costs, the “risk” or “entrepreneurial” costs, and the “contingency costs”.
Factual findings of the Bankruptcy Court are reviewed under a clearly erroneous standard. Lubrizol Enterprises v. Richmond Metal Finishers, 756 F.2d 1043 (4th Cir.1985), cert. denied, 475 U.S. 1057, 106 S.Ct. 1285, 89 L.Ed.2d 592 (1986). Conclusions of law are reviewed de novo. Caswell v. Lang, 757 F.2d 608 (4th Cir.1985). In this instance, the valuation of the Property is a mixed question of law and fact. The decision whether to allow for sales and brokerage, contingency, and risk costs is a question of law. The determination of a fair estimate for diminution of value based on the cost of repairs is a question of fact. Applying the relevant standards, this Court finds no error in the Bankruptcy Court’s conclusion.
|
975377-27020 | FARIS, Circuit Judge.
Appellant was heretofore, and on the 16th day of September, 1935, adjudicated by default an involuntary bankrupt upon the petition of three creditors. The petition in involuntary bankruptcy was filed on the 18th day of July, 1935. Pending a hearing thereon and on July 19, 1935, one William S. Madden was appointed receiver of the estate of the alleged bankrupt (see section 11, cl. 3, title 11 U.S-.-G. A.) to take-possession of and hold all assets thereof till a trustee should be elected. This order appointing a temporary receiver is fair upon its face and sets out that such appointment of 'a receiver is absolutely necessary. Prior to the appointment of such receiver, no notice thereof was given to appellant, but four days after such appointment appellant filed a motion to vacate the order making it, and the record discloses that his motion to vacate was “heard, argued, submitted and overruled.” And no appeal was taken by appellant.
Thereafter, and on August 17, 1935, the receiver, appellee herein, filed a petition in the District Court, which inter alia averred that appellant had failed, neglected, and refused to turn over to appellee and had hidden and .concealed the assets, books, and papers of the alleged bankrupt, in contempt of the terms of the order appointing appellee as receiver, that the receiver could not certainly and definitely describe the kind and amount of the property and assets withheld, in effect, because appellant had withheld all the books and papers of the estate, but that as of November 15, 1934, appellant had cash and securities of the value of $102,-621.23, accounts receivable, $850,631,97, real estate $137,000, and other assets, namely collateral of customers $858,540.17, and praying that an order be entered directed to the defendant, the alleged bankrupt, “requiring him to appear and show cause why he should not be punished as for a contempt of the court, and that on a proper hearing he be punished as for a contempt of the court, its orders and processes in accordance with law.”
An order to show cause was thereupon issued, directed to appellant requiring him to appear before the court on September 11, 1935, and -show cause why he should not be punished for contempt, for his alleged failure to comply with the order of court made July 19, 1935 (the order appointing appellee as receiver), which ordered and directed appellant to turn over to the receiver, “all of his property, assets and effects, real and personal, and all choses in action, and all books, records, ledgers, papers, documents, correspondence, memoranda, bank statements,” and other papers, not relevant or presently involved herein.
Appellant on the return day, to wit, September 11, 1935, filed a formal return to the order to show cause, in which he denied generally every allegation in the petition of the receiver for the order to show cause; averred that the order of July 19, 1935, was not an order adjudicating or determining what property, if any, was in the possession of appellant, and that no order adjudicating such fact has ever been made; that the order of July 19, 1935, is void and not binding on him, because it was made without notice; that said order was made without any issue having been framed before the court, for the purpose of determining what property he had ever had in his possession and what property he was- under obligation to turn over.
Upon the issues thus made by the application of the receiver, and the allegation therein that appellant had “hidden and concealed and had failed and omitted” to turn over to the receiver his assets real and personal and his books and papers, and appellant’s general denial, and plea to the power and jurisdiction of the court, the matter came on for hearing on the 11th day of September, '1935. Appellant appeared in person and by counsel, and the hearing began and continued for three days. At1 its conclusion arguments of counsel were heard and briefs were filed, and the court took time to consider. On November 23, 1935, the court made findings of fact, and a conclusion of law. In these findings of fact, the court set out in detail item by item, the property and assets, books and papers, which he found the appellant had hidden and concealed and failed and omitted to turn over to the receiver. Among these items was the sum of $39,205 in cash, two shares of corporate stock, and a Liberty bond, which, with other items set out in detail (in the schedule made a part of the court’s order), the court found that appellant “on the 19th day of July, 1935, and thereafter had, and now has in his possession and under his control.” (Then followed, as said, a schedule or list in minute detail of such property and cash.)
Bearing upon appellant’s recalcitrancy in refusing and failing to turn over his property to the receiver, the court also found:
“That prior to June 29, 1935, the Federal Securities and Exchange Commission examined into the affairs of the alleged bankrupt, which he claims caused him to close his establishment on said June 29th; that when the receiver herein on' said July 19th took possession of the alleged bankrupt’s offices on the second floor of the office building located at 70S Olive Street, Saint Louis, Missouri, they were stripped of all assets and records, excepting office furniture and equipment, including empty safes and files; that the defendant’s safe deposit boxes were also empty and his checking and brokerage accounts had been reduced shortly prior to said June 29th from large to small balances; that at the times of the various hearings herein mentioned the whereabouts of his numerous salesmen were unknown and his other employes were then for several weeks away on vacations; that the receiver directly and through his counsel promptly and frequently demanded of defendant that he turn over all of his assets and records to the receiver and. portions thereof were gradually but reluctantly so turned over; that finally, and on or about August 7th, 1935, receiver’s counsel by mutual agreement and understanding with defendant, gave defendant until August 12th, 1935, to turn over to the receiver all of the remainder of his assets and records; that the defendant requested such time for further consultations with counsel and on said last men tioned day certain other records were delivered to the receiver, even though theretofore the defendant had asserted to the receiver and his counsel that he had turned over all of his records and assets; that the defendant’s counsel on said August 12th advised counsel for the receiver that the said certain other records would be turned over to the receiver,' but that no other assets would he turned over, and as to whether all of the records and assets were being or had been turned over he disclaimed any knowledge.”
Appellant, as the court found, was at the time of the above hearing under charges for embezzlement and for operating a bucket shop, and so he declined to testify on the ground that his testimony might tend to incriminate him and prove him guilty of numerous offenses against the laws of the United States and of the state of Missouri. It is thus clear that he made no explanation as to what had become of the $39,205 in cash. If such explanation was made or attempted so to be, by any other witness, the record fails to disclose the fact. The evidence given at the above hearing is not in the record, and so the court’s finding imports absolute verity. In the hearing in the case at bar, it developed that appellant had at least two witnesses whom he might then have offered, and whom he offered on the hearing herein involved.
As a conclusion, the trial court found and concluded and ordered as follows:
“Wherefore, the Court finds and holds that the said defendant now has in his possession, owns and controls the above described records and assets, and without now determining whether he likewise has additional records and assets that should now be turned over to said receiver herein, the Court hereby orders and directs the said Harold J. Kattelman, defendant herein, to, within five days from the date of the issuance hereof, to deliver and turn over to said W. S. Madden, the receiver herein, the records, assets and cash above specifically set out and described.”
Thereafter, and on December 27, 1935, the receiver filed a petition praying that an order be issued and served on appellant requiring him to show canse, on a day to be fixed by the court, why he should not be punished for contempt for refusing to comply with the order of the court of November 23, 1935, last above quoted. The court issued an order directed to appellant to appear and make such showing, on January 3, 1936. Appellant appeared in person and by counsel. Continuances were asked and given till January 15, 1936, pending action by the Supreme Court on a writ of prohibition (Ex parte Kattelman, 56 S.Ct. 378), for which appellant had petitioned. Such latter petition having been denied by the Supreme Court (297 U.S. 692, 56 S.Ct. 384, 80 L. Ed. 985), the matter of committing appellant for contempt was heard on the order to show cause and the petition for commitment for contempt, filed by the receiver, with the result that the court found appellant guilty of contempt, for that he had failed and refused to comply with the order of court of November 23, 1935, and to turn over the cash, assets, property, books, papers, and other things in that order set forth to the receiver. Thereupon, it was ordered that he be committed to jail pending his purging himself of contempt by a compliance with that order.
Thereafter, and on July 10, 1936, appellant filed his motion in the District Court for release from custody, for that, as he alleged he had turned over all, or produced before the referee all and singular, the assets, property, securities, hooks, and papers set out in the order of his commitment, except certain items, which were not in his possession or under his control; and that having thus done, further compliance with said order was impossible. Among the items thus excepted, as not having been turned over, and as not being in his possession or control were two certain shares of stock, a Liberty bond for $50, the whereabouts of which he alleged was not known to him; his books of account, to wit, his ledgers, general journal book, cash books, securities received, purchased, and sold records; canceled checks, drafts, and stubs; correspondence files; loose leaves showing cash receipts and disbursements since January 1, 1934; one small index book, and cash in the sum of $39,205. No paper showing was made or stated in his petition for release, as to how, or when all these items had passed from his possession, or as to where they were, or who then had them, or tinder what claim or title they were held by the then holder of them, if any.
He further alleged, seemingly as an excuse for omitting to disclose the last-mentioned information that a certain indictment was pending against him in the United States District Court, as also two charges for crimes were pending against him in a state court and other investigations, as a basis of possible criminal charges, were being made by the United States, and that to compel him to testify would have a tendency to incriminate him.
The above application for release was denied by the trial court after a hearing in” which no evidence, save possibly an affidavit made by appellant and embodying the facts last above recited, was offered. After such hearing the trial court, on July 10, 1936, denied appellant’s application for release and remanded him to the custody of the marshal to be further confined in the city jail of the city of St. Louis, until he purged himself of the contempt of which the court had found him guilty.
Thereafter and on August 1, 1936, appellant filed by leave a so-called “return to the turn-over order of November 23, 1935, and to citation for contempt and motion of said Kattelman for release from custody.” 'In this so-called return and motion for release, appellant averred that he had purged himself by tendering and delivering into the District Court all of the items set out and described in his application for release made July 10, 1936, and in his affidavit filed with the latter application (and in which affidavit he had then sworn were not in his possession or under his control), except two shares of preferred stock, a Liberty bond for $50, and cash in the sum of $39,205. As to this cash item, he stated that during the month of June, 1935, and therefore shortly before the involuntary petition in bankruptcy herein was filed against him he had “paid, delivered and turned over to his wife, Gladys L. Kattelman, the sum of $39,550, which had been in his hands since the years 1931 and 1932 trust funds belonging to his wife and her sister Mildred Logeman.”
The above application of appellant for release from imprisonment contains ’ the first and only alleged explanation of the manner in which he had disposed of the $39,205 in cash, and left this cash item, the shares of stock, and the bond as the only remaining matters in dispute, and the last barriers to the release of appellant.
The appellant’s application for release on the' ground that he. had then fully purged himself of the contempt for which he had been committed was heard at great length, with the. result that appellant was denied release and remanded to jail. In passing upon' the matter, the court briefly stated his finding of facts and his conclusion of law, thus:
“We have given much time to this hearing, and the respondent has been given every opportunity to make a full accounting. For the first time, in this hearing, the respondent now claims that the cash mentioned in the turnover order was paid over by him to his wife and sister-in-law in discharge of his indebtedness to them. It was also stated that the item of $39,205.00 had been disbursed by the respondent in ways that would incriminate him and the recipients.
“Mr. Kattelman has admitted in this hearing that he has by affidavit, and under oath, in open court, sworn falsely to the whereabouts of the items mentioned in the turnover order. He now admits that the items mentioned in the turnover order have been in his possession and under his control at all times since the institution of the bankruptcy proceedings. His testimony is, in a way, corroborated by the testimony of his wife and sister-in-law. This Court may take notice of the relationship of the witnesses to the respondent.
“This Court is not convinced that the item of $39,205.00 has passed out of the control of the respondent, and this Court is not bound to rely upon the evidence of one who admits that he has committed perjury in connection with the turnover order. The Court bears in mind that of this sum of money at least $9,000 of it is shown to have been used exclusively for the benefit of the respondent in employing lawyers and paying expenses incident to litigation.
“I am not convinced that the truth has been told in this matter and the application for release will be denied and the respondent remanded to jail.”
The appeal herein from the order denying release was granted by this court. Numerous alleged errors are relied on for reversal. Some of these are in principle mere duplications of others we shall discuss; others are bottomed on alleged facts which the record shows are lacking, or incorrect, and still others, not having been argued in the brief are deemed waived. Schnitzer v. United States (C.C.A.) 77 F.(2d) 233.
Those demanding review and decision are (a) that the petition for the appointment of a receiver was not sufficient, and the appointment of a receiver without notice to appellant (then an alleged bankrupt), and pursuant to such petition, rendered the entire proceedings void, ab initio; (b) that the decree of the court purporting to find appellant’s noucompliance with the turnover order fails to make a full finding of facts and is not supported by testimony; (c) that since the evidence on appellant’s application for release showed that the matter was one for a plenary suit, it was error to hear and determine it summarily, and in any such hearing the evidence to warrant remanding must be clear and convincing; (d) that the petition for adjudication as as involuntary bankrupt was insufficient to confer jurisdiction on the court; (e) that the turnover order of November 23, 1935, was void, because not made in response to any issue raised, or pleadings filed; and (f) the court erred in finding appellant guilty of civil contempt, since the contempt, if any, was a criminal contempt.
While the statute which provides for the appointment of a temporary receiver in cases where such appointment is “absolutely necessary for the preservation of the estate of the alleged bankrupt” does not in terms provide for or require the giving of a notice to such bankrupt, it may be conceded arguendo, at least, that the cases hold by the great weight of authority that when practicable and possible, such notice should be given. T. S. Faulk & Co. v. Steiner, Lobman & Frank (C.C.A.) 165 F. 861; Latimer v. McNeal (C.C.A.) 142 F. 451; In re Press Printers, etc., Co. (C.C.A.) 12 F.(2d) 660. But when notice to the alleged bankrupt is impracticable, or impossible for the reason that the alleged bankrupt has either absconded or cannot be found, notice, of course, since it cannot be given, need not be given. Latimer v. McNeal, supra; In re Francis (D.C.) 136 F. 912. In the case at bar, the application for the appointment of a receiver avers that appellant, the alleged bankrupt, “closed his place of business, as stated above, absented himself from his place of business and from his residence and has given neither creditors or customers any indication of when, if ever, he would resume operations.” Nor is that all. The receiver was appointed on July 19, 1935. Thereafter, and on July 23, 1935, appellant filed a motion to vacate and set aside the order appointing a receiver. Neither the evidence nor the quantity and quality thereof, heard on this motion to vacate, is found in the record, but the record does disclose that “said motion to vacate heard, argued, submitted and overruled,” and the reason of the thing inexorably constrains the conclusion, that lack of antecedent notice of the appointment of a receiver is cured and becomes immaterial, when a party, who objects to the appointment of a receiver, is later given an opportunity to appear and be heard on a motion to set aside and vacate such order of appointment. And so the cases hold. Supreme Council of Royal Arcanum v. Hobart (C.C.A.) 244 F. 385; 53 C.J. 61; Boyd v. Brown, 79 Colo. 568, 274 P. 181; West v. Chasten, 12 Fla. 315; Hancock v. Am. Bonding &c. Co., 86 Ill.App. 630. No appeal was taken by appellant from the denial of his motion to vacate the order appointing a receiver, and while no need exists, in view of the reasons already set out abdve, to rule the point, it seems both from principle and the authorities that the matter of the legal propriety of this appointment is now res adjudicata, and beyond the reach of collateral attack. Grant v. A. B. Leach & Co., 280 U.S. 351, 359, 50 S.Ct. 107, 74 L.Ed. 470; Ross v. Stroh (C.C.A.) 165 F. 628. So, as forecast by what is said above, we are of opinion that the appointment of appellee as receiver was not void and therefore the contention of appellant should on the point be disallowed.
The action taken by the court in .finding that appellant had not purged himself of the contempt for which he had been committed to prison, and the denial of his application for release, did not constitute a decree, as his counsel insists; but it was merely an order made in the course of the administration of the bankrupt’s estate. The trial court in such situation was not required to comply meticulously, if at all, with the provisions of rule in Equity No. 70½. 28 U.S.C.A. following section 723, which has no application. The contention made is bottomed on a misconception of the nature of the proceeding. In passing, it may be said that the trial court did find that appellant had not fully complied with the turnover order made on November 23, 1935, or with the order of commitment of January 15, 1936, and concluded and ordered that he be remanded pending his full compliance, with such orders.
In connection with the above contention, the validity of the order made on November 23, 1935, and called in the record the turnover order, is again attacked, on the ground that it was neither an issue, nor among the issues up for judgment when it was made. We cannot on the plain record before us accept this view. The application of the receiver, which it is true, is styled in the record, “Petition etc. for commitment for contempt”; (by whom so styled, the re.cord does not show) yet sets up that appellant had in his ppssession and under his control well-nigh all of the cash, assets, property, books, documents of the estate, except gutted office furniture and equipment; that all these things, which are described by items and in detail, appellant had hidden and concealed and failed and refused to turn over to appellee, as required by the order appointing appellee receiver. It is also true, that the prayer in the above-styled “Petition etc., for commitment for Contempt,” prayed, not for commitment for contempt, but only for an order to show cause why such commitment should not be ordered on a full hearing.
The return of appellant, among other things, was a general denial, which, of course, included a denial that he was in possession and control, and a denial that he had hidden and concealed and failed and refused to turn over to appellee the cash, assets, and other things described in the application. The order to show cause was issued, by the court, appellant came in person and by counsel, a full and lengthy hearing was had before the court, and the court, treating the so-called “Petition etc. for Commitment for Contempt” as an application for a turnover order, made such an order and did not at all pass at that time upon the question of contempt. This was later done on a formal petition by the receiver. So, we think it is incorrect, if not idle to say, that the order of the court, called in the record a turnover order, was not within the issues. It may well have been not within the specific prayer of appellee’s petition; but it seems to us quite clear that it was wholly within the issues voluntarily made by the appellant in his return. Appellant had his day in court, on two separate hearings, and so he could not have been in any way hurt or prejudiced. The contention rages over technical nomenclature only. We have thus reviewed the contention made, without considering at all whether appellant, failing to attack it directly by an appeal, may now raise it in a case such as this at bar.
It is further insisted by appellant that since the evidence heard on his application for release from custody showed that the situation called for a plenary suit, it was error to try it summarily. Again, the issues made called for no such suit, and the contention made begs the question by assuming that the trial court was in duty bound to know in advance what evidence would be adduced, and to believe the evidence adduced by' appellant. The court was bound to no such duty. Yutterman v. Sternberg (C.C.A.) 86 F.(2d) 321; In re Abesbaum (C.C.A.) 70 F.(2d) 628; Rasmussen v. Gresly (C.C.A.) 77 F.(2d) 252.
The issues or the questions to be determined on appellant’s application for release were simple. Appellant had been adjudged guilty of contempt for disobedience to, and noncompliance with, the turnover order of November 23, 1935. In and by that order he had been required to turn over $39,205 in cash; two shares of corporate stock and a certain Liberty bond (with other assets, property, and things, which in the course of time he had grudgingly and reluctantly turned over and which are no longer relevant here), which the court then found were in his possession or under his control. In order to purge himself of contempt and secure his release, the burden was on him [Reardon v. Pensoneau (C.C.A.) 18 F.(2d) 244, 245] to prove one of two things, (1) that he had turned over all of the assets, cash, property, and things,, which the court found were in his possession, or under his control on November 23, 1935, or (2) by showing that due to inability occurring since the making of the turnover order, it had become impossible for him to do so. He was given a full opportunity in a three-days’ hearing re- suiting in the turnover order, to both plead and offer evidence, as to what he had done with the $39,205 in cash and with the securities mentioned. He failed and neglected in that hearing to make any explanation about the above items, or to offer any evidence about them, which evidence was just as easily obtainable at the hearing which resulted in the making of the turnover order, as it was when he at long last proffered it in the hearing at bar. So, he may not now go behind the order of November 23, 1935, and question it. It has become res adjudicata. Oriel v. Russell, 278 U.S. 358, 363, 49 S.Ct. 173, 174, 73 L.Ed. 419; Reardon v. Pensoneau (C.C.A.) 18 F.(2d) 244; Remington on Bankruptcy (3d Ed.) § 2428. In the Russell Case, supra, the Supreme Court said: “Thereafter on the motion for commitment the only evidence that can be considered is the evidence of something that has happened since the turnover order was made showing that since that time there has newly arisen an inability on the part of the bankrupt to comply with the turnover order.” The trial court heard for some four or five days evidence offered by appellant in attempted explanation of how the $39,205 in cash had passed from his possession and control, some two or three weeks before the involuntary petition was filed against him. This evidence was objected to by appellee, but the court heard it subject to the objection; and it does not appear definitely from the record whether or not the court considered it or gave it any weight; impliedly, and from his oral opinion, we may conclude that he considered this evidence, but did not credit it. Under the Russell Case, supra, which as an inferior court we are bound to follow, such evidence was incompetent and immaterial, and trying the case here de novo we are constrained to give it no consideration.
The involuntary petition filed herein upon which (or upon an amended petition filed by leave) adjudication in bankruptcy was adjudged by default was verified “to the best of his (affiant’s) information and belief.” On this ground, appellant contends that the petition was so far insufficient as to render the adjudication absolutely void; hence, appellant contends that the court in bankruptcy never got jurisdiction of the bankruptcy case and has none now, and that all of the or-ders that have been made in it are absolutely void.
|
4061309-24452 | RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
JOSÉ A. CABRANES, District Judge:
The Secretary of Labor (“Secretary” or “plaintiff”) commenced this action under Title IV of the Labor-Management Reporting and Disclosure Act of 1959 (the “Act”), 29 U.S.C. § 401, et seq. The former president of the Connecticut Union of Telephone Workers, Inc. (“CUTW”), Local 400 of the Telecommunications International Union (“TIU”) filed a complaint with the Secretary of Labor, alleging that moneys received by labor organizations by way of dues, assessments, or similar levies were used to promote a candidate for the office of President of CUTW and that this alleged violation may have affected the outcome of the mail ballot election completed on November 30, 1984, in violation of 29 U.S.C. § 481(g). Upon investigation of the complaint, the Secretary found probable cause to believe that a violation of the Act had occurred and thus instituted this suit on April 19, 1985.
The parties originally filed cross-motions for summary judgment in January and February of 1986. On July 25, 1986, the court denied both motions for summary judgment for failure to comply with District of Connecticut Local Rule 9(c), which requires each party to file a separate statement of material facts not in dispute in conjunction with a motion for summary judgment. For several months, the parties tried without success to resolve their dispute.
In March, 1987, the parties filed renewed cross-motions for summary judgment, supported by a joint stipulation of material facts not in dispute. The Secretary of Labor asks the court to declare the defendant’s November 30, 1984 election for the office of President null and void and to direct the defendant to conduct a new election for the office of President under the supervision of the Department of Labor. For the reasons set forth below, the plaintiff’s motion for summary judgment is GRANTED, and the defendant’s motion for summary judgment is DENIED.
I. Background
Summary judgment may be granted when there are no genuine issues as to any material fact, and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c). The moving party has the burden of demonstrating the absence of any material factual issue genuinely in dispute. See American International Group, Inc. v. London American Internartional Corp., Ltd., 664 F.2d 348, 351 (2d Cir.1981). A court must resolve ambiguities and draw reasonable inferences against the moving party. Id. This inquiry is not changed when cross-motions are before the court. “Rather, the court must evaluate each party’s motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.” Schwabenbauer v. Board of Education, 667 F.2d 305, 314 (2d Cir.1981).
The existence of a disputed fact will not prevent the granting of a motion for summary judgment unless the disputed fact is material. Burlington Coat Factory Warehouse Corp. v. Esprit de Corp., 769 F.2d 919, 923 (2d Cir.1985). Moreover, a party is not permitted to create his own “genuine” issue of fact simply by presenting contradictory or unsupported statements. See Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); S.E.C. v. Research Automation Corp., 585 F.2d 31, 33-34 (2d Cir.1978). Neither party has demonstrated the existence of any disputed facts which are material; accordingly, summary judgment is appropriate in this case.
The following are the material facts as set forth by the parties in their briefs, affidavits, exhibits, and the stipulation of material facts not in dispute filed pursuant to Local Rule 9(c). In November 1984, CUTW was an affiliated local union of the TIU, and thus was also known as Local 400 of the TIU. During November 1984, CUTW conducted its triennial election of officers by mail ballot. The ballots were mailed to the CUTW membership on November 14, 1984 and were to be returned no later than November 30, 1984. George Sherwood opposed John Shaughnessy for the office of President. At the time of the election, Shaughnessy was the incumbent President of CUTW. He had been President of CUTW for approximately 26 years. Shaughnessy was also the President of TIU and had been for over 20 years.
During the two-year period preceding the November 1984 election, the issue of possi ble TIU affiliation with an AFL-CIO affiliated international union was the subject of considerable debate and controversy among CUTW and other TIU members. See Stipulated Statement of Facts Not in Dispute (filed March 3, 1987) (“Stipulated Facts”) at ¶ 4 (citing Amirault v. Shaughnessy, Civil No. H 84-113, Memorandum of Decision (D.Conn. July 20, 1984), rev’d on other grounds, 749 F.2d 140 (2d Cir.1984)). Shaughnessy, as President of both the TIU and CUTW, was the moving force behind the effort to affiliate the TIU with the American Federation of State, County and Municipal Employees (“AFSCME”). However, other member locals within the TIU supported affiliation with either the Communication Workers of America (“CWA”) or the International Brotherhood of Electrical Workers (“IBEW”). At the time of the November 1984 CUTW election, affiliation was a major, unresolved issue within the TIU. See Stipulated Facts at 1111.
Both the CWA and IBEW conducted spirited campaigns to discredit the merits of TIU affiliation with AFCSME and simultaneously to muster support within the TIU for affiliation with their respective unions. Eventually, particular individuals became identified with opposing factions on the affiliation issue. See id. at II8. For example, Vincent Messina, President of the Union of Telephone Workers (“UTW”), located in New York City, was strongly opposed to TIU affiliation with AFSCME and actively supported affiliation with CWA by mailing literature to TIU members. Shaughnessy, on the other hand, was identified as the major proponent of affiliation with AFSCME. See id. 11119-10.
During the period of November 14 to November 30,1984, two pieces of literature were mailed to certain CUTW members. The first piece, referred to by the parties as the “Messina Letter,” was drafted by UTW President Vincent Messina on November 15, 1984. See id. MI 13, 26-30. Messina wrote the letter in an effort to correct statement that Shaughnessy had made at a recent meeting with UTW members held in Syracuse, New York. See id. at 1128. At one time, UTW, like CUTW, had been affiliated with TIU. Shaughnessy’s alleged misstatements concerned the relationship between TIU’s financial difficulties and UTW’s non-payment of back TIU assessments. At the Syracuse meeting, Shaughnessy also discussed TIU’s proposed affiliation with AFSCME. See id.
Messina sent a copy of the letter to Larry Cohen, a CWA organizer with offices in New Jersey, New York and Connecticut, who was involved in CWA’s campaign to thwart TIU’s affiliation with AFSCME. See id. at 11 29. CWA clerical workers used a CWA photocopier to make 10 to 15 copies of the Messina Letter. These copies were sent to other CWA organizers so that they would be aware of the general thrust of the CWA campaign to affiliate the CWA with TIU. See id. at MI 29-35.
Thereafter Cohen distributed the letter to other CWA organizers, including Stephen Early, a CWA organizer with an office in Waltham, Massachusetts. In turn, Early sent approximately 100 copies of the letter to CUTW’s local officers throughout Connecticut. At least one CUTW local President, Elizabeth Balsley of CUTW Local 206, received a copy of the Messina Letter at her home and discussed the letter with several other members of her CUTW local. Early copied the Messina Letter on a CWA photocopy machine. In addition, CWA union funds were used to pay the postage for the mailing of the copies of the Messina Letter to CUTW members. Both parties have stipulated that Early mailed the Messina Letter in conjunction with CWA’s campaign against CUTW and AFSCME affiliation, and not expressly for the purpose of influencing CUTW’s November 1984 election. See id. at MI 14, 35-41.
The second piece of literature was a flier prepared by unnamed members of the IBEW at their headquarters in Washington, D.C (the “IBEW Flier”). The purpose of the IBEW Flier was also to undermine John Shaughnessy’s efforts to have the TIU affiliate with AFSCME. See id. at MI 15-16, 23-25. IBEW printed over 50,000 copies of the flier for distribution to TIU members across the country. See id. at 1124. This flier was only one of many fliers which the IBEW prepared and distributed in an effort to halt the proposed affiliation between TIU and AFSCME. See id. at 1125. Approximately 6,000 copies of the flier were distributed by IBEW organizers to CUTW members during the period that the election ballots were mailed to CUTW members. See id. at 111112, 23. IBEW funds were used to prepare and mail the IBEW Flier. See id. at II23.
Neither piece of literature specifically mentioned CUTW presidential candidate George Sherwood. Moreover, neither Sherwood nor any other CUTW executive board member solicited, encouraged, or aided either the CWA or IBEW in the distribution of their literature. Nevertheless, the court finds, in light of the undisputed facts, that no reasonable juror could conclude otherwise than that the probable impact of both pieces of literature was to discredit incumbent John Shaughnessy, the “major proponent” of TIU affiliation with AFSCME. See id. at 2, 5, 8, 10, 23; see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2512-13, 91 L.Ed.2d 202 (1986). The parties have stipulated that during the two-year period preceding the November 1984 election, the issue of TIU affiliation with AFSCME was the subject of considerable debate and controversy, and that it remained a “major and unresolved issue .. at the time that CUTW conducted its election ...” See Stipulated Facts at 11114, 11. Both CWA and IBEW conducted vigorous campaigns to discredit affiliation with AFSCME. See id. at 117. The purpose of the IBEW flier was to undermine Shaughnessy’s efforts to have TIU affiliate with AFSCME. See id. at ¶ 23. As discussed below, both the Messina Letter and the IBEW Flier clearly called into question Shaughnessy’s qualifications as union leader. See II., A., infra.
George Sherwood was elected President of CUTW as a result of the November 1984 mail ballot election. Since the election, Shaughnessy has taken a position with the management of Southern New England Telephone Company. He is no longer a member of CUTW and is ineligible to run for office should a new election be conducted. Moreover, since this action was filed, CUTW has completed its regularly scheduled triennial election in November 1987, in which George Sherwood was reelected President. See Stipulated Statement of Additional Fact Not in Dispute (filed Mar. 25, 1988). However, it is only alleged irregularities in the November 1984 election which are the subject of this action.
II. Discussion
The plaintiff claims that the Messina Letter and the IBEW Flier were mailed to CUTW members in violation of section 401(g) of the Act, 29 U.S.C. § 481(g), and that, because these documents may have affected the outcome of the defendant’s mail ballot election completed on November 30, 1984, the Court must order the defendant to hold a new election under the supervision of the Secretary of Labor pursuant to 29 U.S.C. § 482(c). Section 401(g) of the Act provides:
No moneys received by any labor organization by way of dues, assessment, or similar levy, and no moneys of an employer shall be contributed or applied to promote the candidacy of any person in an election subject to the provisions of this subchapter. Such moneys of a labor organization may be utilized for notices, factual statements of issues not involving candidates, and other expenses necessary for the holding of an election.
Plaintiff urges the court to construe 401(g) as prohibiting any labor organization subject to the provisions of the Act from using its funds received by way of dues, assessments or similar levy, to promote the candidacy of any person in an election, even if the election takes place in another unaffiliated union. See Memorandum of Law in Support of Plaintiff’s Motion of Summary Judgment and in Opposition to Defendant’s Motion for Summary Judgment (filed February 25, 1986) at 7 (citing 29 C.F.R. § 452.73). Defendant, on the other hand, raises three arguments in its defense: (1) The Messina Letter and the IBEW Flier did not “promote the candidacy” of George Sherwood within the meaning of section 401(g); (2) Because neither the CUTW nor any of its officers or executive board members were involved in the distribution of the Messina Letter or the IBEW Flier, the alleged violation of section 401(g) is not actionable; and (3) The action is moot because John Shaughnessy is no longer eligible to run for the office of President of CUTW. All of the defendant’s arguments are without merit.
A.
The defendant argues that the Messina Letter and the IBEW Flier did not “promote the candidacy” of George Sherwood because neither piece mentions either the election or Sherwood’s name. See Memorandum of Law in Support of Defendant’s Motion for Summary Judgment and in Opposition to Plaintiff’s Motion for Summary Judgment (filed January 30, 1986) (“Defendant’s Memorandum of Law”) at 8. Rather, the defendant claims that the publications constitute “factual statements of issues not involving candidates____” which are not prohibited by section 401(g). Id. at 9. Although there is no explicit stipulation on the subject, it is not disputed that almost any statement concerning TIU/AFSCME affiliation would be closely associated with Shaughnessy. See Stipulated Facts at ¶1¶ 2, 5, 8, 10, 23. To support its argument, the defendant in effect claims that both pieces were mailed by CWA and IBEW solely to “encourage[ ] the free flow of information so that the TIU membership would be able to case an informed ballot on the affiliation issue.” Defendant’s Memorandum of Law at 8.
“To establish a violation of Section 401(g), it is not necessary that the questioned publication be explicitly or exclusively committed to endorsing specific candidates or attacking the opposition. Rather, its overall tone, timing and content must be evaluated to determine whether there is any blatant or subtle encouragement of the incumbents [or challengers].” Donovan v. Local 719, United Automobile, Aerospace and Agricultural Implement Workers of America, 561 F.Supp. 54, 58 (N.D.Ill.1982); accord, Usery v. International Organization of Masters, Mates and Pilots, 538 F.2d 946, 949 (2d Cir.1976); Hodgson v. Liquor Salesmen’s Union, Local No. 2, 334 F.Supp. 1369, 1377 (S.D.N.Y.), aff'd, 444 F.2d 1344 (2d Cir.1971); Wirtz v. Independent Workers Union of Florida, 272 F.Supp. 31, 33 (M.D.Fla.1967). The Messina Letter and the IBEW Flier both were distributed between November 15 and November 30,1984, the exact time of balloting for the CUTW’s election of officers. It is undisputed that Shaughnessy, the incumbent CUTW President, was the official most strongly associated with support for affiliation of TIU, and ultimately, its local, CUTW, with AFSCME. Moreover, it would be difficult to mistake the import and thrust of either the Messina Letter or the IBEW Flier.
The Messina Letter was written on November 15, 1984. In this letter, Messina writes:
Dear TIU Member:
It has come to my attention that TIU President John Shaughnessy has recently been misrepresenting the state of financial relations between the TIU and the Union of Telephone Worker (UTW).
TIU members have apparently been questioning President Shaughnessy about the rather large operating deficit revealed in the organization’s recently released 1983 financial statement.
$ * $ >jc * *
President Shaughnessy ... has been claiming that TIU is not really in such bad financial shape because it will soon be collecting the $162,000 in per capita payments UTW has not sent the TIU over the last 13 months. According to Shaughnessy, a lawsuit has been filed to force payment of these “back dues” by our membership.
Let me set the record straight on this for the benefit of all TIU members:
1. UTW stopped making per capita payments to the TIU because we weren’t getting anything in return for our money!
2. No lawsuit has been filed against the UTW by TIU to collect this money....
3. With the money we saved by not sending $162,500 [sic] to TIU, UTW has been able to expand its steward training program, acquire new un ion offices, improve our publications, take more grievance cases to arbitration, and, generally, provide much better service to our 11,000 members.
******
Concerned members of the TIU, therefore, should not look to the UTW to help balance TIU’s budget. We have taken full control over our own financial affairs and will never again subsidize a national union that provides little or no services in return for the per capita payments it collects____
Affidavit of John E. Flynn (filed January 30, 1986), Defendant’s Exhibit 1 (emphasis in original).
The defendant has asserted that the letter quoted above was written solely “to set the record straight after Shaughnessy, at a meeting in Syracuse, New York, whose purpose it was to discuss with New York TIU members the AFSCME affiliation, made certain false statements concerning TIU finances.” Defendant’s Memorandum of Law at 10. The Syracuse meeting was held in late October or early November, 1984. See Affidavit of Vincent Messina (filed January 30, 1986) at 2. The CUTW election was held less than one month later. It may very well be that a primary purpose of the Messina Letter was to correct misinformation related by Shaughnessy. However, the Messina Letter does not simply correct financial facts; the document mailed in the midst of Shaughnessy’s reelection bid and distributed to CUTW members, also discredits Shaughnessy personally by implying that he provided UTW with no services in return for its money in his position as leader of TIU. There is surely a line to be drawn between the (permissible) reporting of Shaughnessy’s activities in his capacity as TIU President and an (impermissible) attack on him in the midst of an election as one who “misrepresents” facts and acts in ways which do not serve union membership. Cf. Hodgson v. Liquor Salesmen’s Union, 334 F.Supp. at 1377. By using union funds to issue a letter which suggests the unsuitability of Shaughnessy as leader of the TIU, those distributing the Messina Letter used union funds to distribute campaign literature in contravention of Section 401(g). Cf. Wirtz v. Independent Workers Union of Florida, 272 F.Supp. at 33.
Even more significantly a violation of section 401(g) is the IBEW Flier entitled “Shaughnessy & The Bell Busters.” See Affidavit of John E. Flynn, Defendant’s Exhibit 5. The IBEW Flier constitutes a clear attempt to influence adversely Shaughnessy’s chances for re-election. In part the IBEW Flier states:
No, [Shaughnessy & The Bell Busters is] not a rock-and-roll band. Maybe we would be better off if it were. We’ve been waiting a long time for AFSCME and its TIU sycophants to come clean. Maybe they thought, if they ignored it long enough, it would go away. There can be no doubt about the facts. AFSCME is guilty! And Mr. Shaughnessy ... and all the other TIU officials who are pushing AFSCME ... know it!
Because we are a decent organization we wanted to give the TIU and its Bell Buster friends every opportunity to tell you themselves. So we waited — and waited — and waited some more. We can wait no longer. You deserve to know the TRUTH.
******
The proof of the pudding is in the eating. Let’s watch carefully to see what our TIU leaders do now. Will they repudiate the Bell Busters? Or will they confirm by their actions that they’ve been in bed together all along??
Remember when we were writing letters, sending telegrams, and phoning our Congressmen?? Guess what the AFSCME Bell Busters were doing then?? The TIU has spent a lot of our dues money printing articles and holding meetings to tell us about the wonderfully efficient AFSCME political lobbying machine. The problem is, our loyal TIU leaders, in their headlong rush to cut a quickie deal with their Bell Buster friends, conveniently neglected to tell us that AFSCME used its political machine to help bust-up our jobs, our contracts, our pension plan, our work locations, our careers and, in some cases, to bust up our lives.
THANK YOU TIU
—AND THANK YOU TOO, AFSCME AND MR. SHAUGHNESSY—
We will never forget how much your Bell Busting team has done for us and for our families. Please go ahead and spend the rest of our dues deductions on lawyers, long legal briefs, appeals, and court appearances. We can hardly wait to receive the one-choice, Russian-style ballot that your Bell Busting team is fighting so hard in court to bring us. It is certainly comforting to know that your only concern is for our welfare.
Issued by: Your IBEW Volunteer Organizing Committee.
There can be no doubt that because Shaughnessy was President of the TIU, and a strong supporter of its affiliation with AFSCME, his integrity and viability as a union advocate was seriously called into question by the IBEW Flier. Even if the Messina Letter could be construed as innocuous, the IBEW Flier cannot. See 29 C.F.R. § 452.75 (“[A] union may neither attack a candidate in a union financed publication nor urge the nominations or election of a candidate in a union financed letter to the members.”). The handbill does not simply list “facts” concerning affiliation; rather, it is a personal attack which implies, inter alia, that Shaughnessy is a “sycophant” who has “busted up” the lives of TIU members. In a presidential race involving only two candidates, the obvious effect of IBEW’s scathing indictment of John Shaughnessy’s performance as a union representative was to muster support for George Sherwood.
B.
The defendant claims that its 1984 election for the office of President should not be overturned because “CUTW is not a wrongdoer” in that CWA and IBEW, rather than CUTW, violated section 401(g). Defendant’s Memorandum of Law at 10. However, section 401(g) requires the court to determine whether CUTW’s election complied with the provisions of the Act; it does not also require the court to place the “blame” for any violation it may find on CUTW. Thus, the question is whether the language of section 401(g), which bars “any labor organization” from using dues to promote the candidacy of “any person” in “an election” requires the court to order a new election where one union has impermissibly promoted a candidate in an election held in a second, unaffiliated union.
The Secretary’s position is succinctly set forth in 29 C.F.R. § 452.73. In relevant part, this regulation states:
In the interest of fair union elections, section 401(g) of the Act places two limitations upon the use of labor organization funds derived from dues, assessments, or similar levy. These limitations are: (a) No such funds may be contributed or applied to promote the candidacy of any person in an election subject to Title IV, either in an election within the organization or in any other labor organization; and (b) no such funds may be used for issuing statements involving candidates in the election____(emphasis added)
An agency regulation which interprets a statutory provision, while not dispositive, is ordinarily accorded considerable deference. See, e.g., United States v. Consumer Life Insurance Co., 430 U.S. 725, 751-52, 97 S.Ct. 1440, 1454, 52 L.Ed.2d 4 (1977). The parties have not drawn to the court’s attention, and the court has been unable to uncover, any cases in which 29 C.F.R. § 452.73 has been applied. “When a court reviews an agency’s construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue____ If ... the court determines that Congress has not directly addressed the question at issue, ... the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Chevron, U.S.A., Inc. v. Natural Resources Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). The agency’s construction need not be the only permissible one. See id. at 843, n. 11, 104 S.Ct. at 2782 n. 11.
|
4146048-21566 | MEMORANDUM OPINION AND ORDER
ROBERT J. KRESSEL, Bankruptcy Judge.
This adversary proceeding came on for trial on May 8, 2012 on the plaintiffs complaint seeking a determination that the defendant’s debt to him is excepted from the defendant’s discharge. Jill A. Brisbois and Daniel M. Eaton appeared for the plaintiff. Randall K. Strand appeared for the defendant. This court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 157(b)(1) and 1334, and Local Rule 1070-1. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(I).
FACTS
1. Defendant Marc T. Hoffmann is the owner and sole officer of Lakes Area Home Buyers, Inc.
2. Hoffmann is the owner and sole officer of Gunflint Property Holdings, LLC.
3. Including this transaction, Plaintiff Ronald J. Roller has been involved in buying or selling a house three times during the past 31 years.
4. Since 1998, Hoffmann has conducted between 120 and 270 real estate transactions involving similarly styled trusts and participated in over 5,000 hours of t real estate training classes.
5. Hoffmann met Roller in the fall of 2005. Including the initial meeting, they met on two separate occasions to discuss a transaction in which Roller and his wife Carol would sell their home, located at 1896 Florence St., White Bear Lake, MN 55110 to Lakes Area Home Buyers. The Rollers agreed to sell their home to Lakes Area Home Buyers.
6. Hoffmann provided the purchase agreement and all other documents used to effect the sale of the Rollers’ home.
7. The purchase agreement is a one page document signed on August 23, 2005 by Hoffmann on behalf of Lakes Area Home Buyers and Ronald and Carol Roller. The agreement stated that Lakes Area Home Buyers is the buyer and the Rollers are the seller with a total purchase price of $191,680. A total of $69,680 was seller financed evidenced by a promissory note and the balance of $122,000 was “subject to” existing loans. “Subject to” means the buyer “is not expressly assuming responsibility for the underlying loans” but agrees to make the payments required by the loan. The agreement stated that in case of default on the seller financing, the Rollers’ only recourse was against the property. Additionally the agreement called for either a mortgage or “other customary security agreement” subordinate to the existing mortgage with Wells Fargo. Finally, a handwritten provision called for Lakes Area Home Buyers to “cash out seller within 18 months.”
8. The October 14, 2005 closing included the following:
a. Hoffmann, on behalf of Lakes Area Home Buyers, executed a promissory note to Ronald and Carol Roller in the amount of $69,680. The note required the principle balance be paid in full on or before April 14, 2007. Additionally, the endorser of the note agreed “to pay all costs of collection, including a reasonable attorney’s fee ... on the principle ... at the respective maturity!.]”
b. A mortgage was signed by Hoff-mann as an officer of Lakes Area Home Buyers, the grantor, and named Ronald and Carol Roller as the grantees. The mortgage covenanted that Lakes Area Home Buyers held the property in fee simple and that it was free of encumbrances. It also stated that a default may result in the principal becoming due and payable upon the Rollers’ declaration.
c. A “Certification of Trust” was signed by the Rollers’ as the beneficiaries, Robert Shutan as the Trustee and Hoffmann as the witness. The trust is named “The Roller Family Trust.” The first line of the “Trust Addendum” states, “Addendum to Contract of Sale Dated August, 2nd 2005 by and Between Ronald John Roller AND Carol J. Roller as Seller(s) and Lakes Area Home Buyers, Inc. as Purchaser(s) ...” The addendum contains a paragraph stating “[sjeller is aware that this loan will not be satisfied in full at closing and may continue to appear on Seller(s) credit file.” It further states that “[b]oth Seller(s) and Purchasers) are fully aware that the mortgage(s) securing the property stated above contain provisions prohibiting the transfer of any interest in the property without satisfying the principal balance remaining on the underlying loans and/or obtaining the lender’s prior written consent ... this transaction may violate said mortgage(s).” The document also states that if Wells Fargo discovers this illegal transfer, then Wells Fargo may call the loan due, payable in full or may commence proceedings to recover title and ownership of the home.
d. The Rollers executed a “Warranty Deed to Trustee.” The Rollers, as grantors, transferred title to their home in fee simple to “Robert L. Shutan as Trustee of the Roller Family Trust.” The deed defines the beneficiary’s interest as “declared to be personal property” and only in the form of “earnings, avails or proceeds” of the sale or other disposition of the house.
e. Two identical documents titled “Assignment of the Beneficial Interest in the Roller Family Trust” were signed: one signed by Ronald Roller and Shutan and the other signed by Carol Roller and Shutan. Both documents were notarized. For “valuable consideration,” the Rollers assigned 100% of their beneficial interests in the Roller Family Trust to Gunflint Property Holdings.
f. The accompanying trust agreement is a 31 page document that defines the trust, beneficiaries, trustee, trus tee’s powers, trust administration and general provisions. The agreement has several pertinent provisions that help shape the nature of the sales transaction:
i. In “Instructions for Executing Your Trust,” step three requires the sellers to assign their beneficial interest to “an entity that limits your liability.” The instructions indicate the Rollers could assign their beneficial interests to an entity of their choosing.
ii. Section 3.01 says that “[i]f all initial Trustees shall cease to serve for any reason, Marc T. Hoff-mann, shall serve as successor Trustee.”
iii. Section 6.06 states that the agreement “shall not be placed on record in the county in which the Trust Property is situated, or elsewhere, but if it is so recorded, that recording shall not be considered as notice of the rights of any person under this Agreement derogatory to the title or powers of the Trustee.”
iv. The next section, 6.07, states that “[t]he name of the Trustee shall not be used by the Beneficiaries in connection with any advertising or other publicity whatsoever without the written consent of the Trustee.”
v. Section 6.11 allows the beneficiaries to terminate the trust with 30 days written notice returning the res to the beneficiaries.
9. Hoffmann did not provide the closing documents to the Rollers prior to the closing date.
10. The Rollers believed this agreement provided them the option to reclaim ownership of the house in the event Hoffmann defaulted on the payments.
11. The Rollers believed this agreement provided that their children would become the beneficiaries of the Roller Family Trust if Ronald and Carol died.
12. Hoffmann knew that this transaction did not provide the Rollers with a security interest in the home and that neither the Rollers nor their heirs would be the beneficiaries of the trust.
13. The Rollers would not have entered into this transaction if they knew it did not provide them with a security interest in their home.
14. The Rollers’ home was used as a rental property and Hoffmann, through Lakes Area Home Buyers via Gunflint Property Holdings, collected the rents.
15. Shutan sent a notarized letter to Hoffmann on November 20, 2005 resigning as trustee of the Roller Family Trust.
16. Between October 15, 2005 and April 2007, Lakes Area Home Buyers made eighteen $500 monthly payments to Roller totaling $9,000.
17. On or around April 2007 Hoffmann told Roller that Lakes Area Home Buyers could not make the balloon payment required by the October 14 promissory note.
18. On behalf of Lakes Area Home Buyers, Hoffmann executed a new promissory note dated May 10, 2007 promising to pay the Rollers the principal sum of $60,180. The new note called for a $25,000 initial payment with subsequent monthly payments of $500 until the earlier of either sale of the property or July 31st, 2007 at which time the principle balance would be due. The note called for annual accruing interest of 5% on any out standing balance. The new note contained a provision identical to the first promissory note requiring Lakes Area Home Buyers to pay all collection costs including reasonable attorney’s fees.
19. Lakes Area Home Buyers made the initial $25,000 payment with the promissory note and made five additional $500 payments to Roller between June 1, 2007 and September 17, 2007.
20. On December 6, 2007, Paul Gray of El Paso County, Colorado, signed two notarized Minnesota forms number 40.1-M, Minnesota Uniform Conveyancing Blank. One was titled “Certificate of Trust” and the other “Affidavit of Trustee regarding Certificate of Trust or Trust Instrument.” The certificate of trust named Paul Gray the trustee of the Roller Family Trust. The form identified the Rollers as the settlors and Shutan as the original trustee. The affidavit names Hoffmann as the previous trustee and indicates that Gray has the power to “sell, convey, pledge, mortgage, lease or transfer title to any interest in real property held in trust.”
21. The next day, December 7, 2007, Gray, acting as trustee of the Roller Family Trust, entered into a mortgage with Tracy Stubbs. The mortgage names Gray the grantor and Stubbs the grantee and states, “[i]n consideration of 40,000 [sic] and other good and valuable consideration and to secure performance of that obligation, grantor hereby grants, mortgages and conveys unto the grantee all the real property together with all appurtenances and all the estate and rights of grantor in and to” the Rollers’ former home. The mortgage document indicates there was a separate agreement signed by both parties and dated that same day.
22. Lakes Area Home Buyers made an additional $25,000 payment to Roller on January 10, 2008 for a total of $52,500 paid on the note. No further payments were made on the seller financing. On this date, the outstanding balance was $8,817.50.
23. The certificate of trust and affidavit naming Gray trustee of the Roller Family Trust and the mortgage between Gray and Stubbs were all recorded in Ramsey County, MN on February 12, 2008.
24. On June 8, 2010, Roller filed a complaint, case number 62-CV-10-6101, against Hoffmann, Lakes Area Home Buyers and Gunflint Property Holdings, et al, in the Ramsey County District Court for breach of contract, unjust enrichment, quiet title, declaratory judgment for an equitable mortgage, intentional misrepresentation and fraud, slander of title, civil conspiracy to commit fraud, conversion, civil liability for theft, negligent misrepresentation, and piercing the corporate veil.
25. On May 23, 2011, Roller made a motion in Ramsey County District Court for summary judgment.
26. Hoffmann filed a voluntary chapter 7 petition on September 29, 2011.
27. On October 13, 2011, the Ramsey County District Court held a hearing on Roller’s motion for summary judgment. No documents were filed by Hoffmann and neither Hoffmann nor his attorney, Randall R. Strand, made an appearance at the hearing.
28. On October 14, 2011, the Ramsey County District Court granted summary judgment against Hoffmann, Lakes Area Home Buyers and Gun-flint Property Holdings finding that the defendants are jointly and severally liable to Roller for: 1. damages of $20,560.02 plus interest, 2. attorney’s fees and other legal costs of $41,857.00 including all costs and legal fees for collection, 3. statutory damages of $69,680.00 plus 6% interest annually, and 4. relying on M.S.A. § 604.14, punitive damages of $69,680.00 for a total of 201,777.02.
29. The Ramsey County Court entered judgment against Hoffmann on March 8, 2012.
30. As of the date of this hearing, May 8, 2012, the total principal and interest still outstanding on the second promissory note totaled $10,393.89.
ANALYSIS
Roller claims Hoffmann’s debt to him is excepted from his discharge under 11 U.S.C. §§ 523(a)(2)(A) or 523(a)(6). Roller . also wishes to hold Hoffmann individually liable for the judgments entered by the Ramsey County Court against Lakes Area Home Buyers and Gunflint Property Holdings by “piercing their corporate veils.”
PIERCING THE CORPORATE VEIL
Roller acknowledges that the Ramsey County District Court judgment against Hoffmann is void due to the automatic stay effective when Hoffmann filed his Chapter 7 petition. Roller seeks to “pierce the corporate veil” of both Lakes Area Home Buyers and Gunflint Property Holdings to hold Hoffmann liable for the Ramsey County Court judgments entered against those two entities.
In Minnesota, a two-part test is required to pierce the corporate veil and reach a corporation’s shareholder. Tr. of the Graphic Commc’ns Int’l Union Upper Midwest Local 1M Health and Welfare Plan v. Bjorkedal, 516 F.3d 719, 731 (8th Cir.2007). The first part of the test considers whether the corporation is the alter ego or a mere instrumentality of the shareholder. Id. Several factors must exist to make such a finding including: “insufficient capitalization, failure to observe corporate formalities, nonpayment of dividends, insolvency of debtor corporation, siphoning of funds, nonfunctioning of officers and directors, absence of corporate records, or existence of corporation as a mere fagade for individual dealings.” Victoria Elevator Co. v. Meriden Grain Co., 283 N.W.2d 509, 512 (Minn.1979). The second prong of the test requires a “finding of injustice or fundamental unfairness.” Id. Both prongs of the test must be satisfied to pierce the corporate veil. Id. The burden to demonstrate the corporate veil should be pierced belongs to the moving party. Agristor Leasing v. Guggisberg, 617 F.Supp. 902, 906 (D.Minn.1985).
While Roller demonstrated Hoff-mann was the owner and sole officer of the two companies and offered evidence of some sloppy accounting, he did not offer sufficient evidence to meet his evidentiary burden to pierce the corporate veil. Hoff-mann is not liable for the state court judgments entered against Lakes Area Home Buyers and Gunflint Property Holdings.
FRAUD IS A TORT WHICH CREATES PERSONAL LIABILITY
Hoffmann is still liable for his own fraud:
One who fraudulently makes a misrepresentation of fact, opinion, intention or law for the purpose of inducing another to act or to refrain from action in reli- anee upon it, is subject to liability to the other in deceit for pecuniary loss caused to him by his justifiable reliance upon the misrepresentation.
Restatement (Second) of Torts: Liability for Fraudulent Misrepresentation § 525 (2011). In other words, even though Hoff-mann is not personally liable on the note, if he committed fraud, he is liable to Roller for Roller’s pecuniary loss.
Section 523(a)(2)(A) provides:
(а) a discharge under section 727, 141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition;
11 U.S.C. § 523(a)(2)(A).
In the Eighth Circuit, an exception to discharge is established under § 523(a)(2)(A) when the plaintiff can prove the following five elements:
1. The debtor made a [false] representation;
2. The debtor knew the representation was false at the time it was made;
3. The representation was deliberately made for the purpose of deceiving the creditor;
4. The creditor justifiably relied upon the representations; and
5. The creditor sustained the alleged loss as the proximate result of the representation having been made.
R & R Ready Mix v. Freier (In re Freier), 604 F.3d 583, 587 (8th Cir.2010).
The requirements to hold an individual liable for fraudulent misrepresentation under the Restatement (Second) of Torts are a subset of the Eighth Circuit elements necessary for an exception to discharge under § 523(a)(2)(A). A finding that the elements of § 523(a)(2)(A) have been met is a finding that a tort has been committed and individual liability may attach.
HOFFMANN COMMITTED ACTUAL FRAUD
“Exceptions to discharge are construed narrowly. The burden of proving that a debt falls within a statutory exception is on the party opposing discharge.” Belfry v. Cardozo (In re Belfry), 862 F.2d 661, 662 (8th Cir.1988) (internal citation omitted). “Actual fraud, by definition, consists of any deceit, artifice, trick or design involving direct and active operation of the mind, used to circumvent and cheat another — something said, done or omitted with the design of perpetrating what is known to be a cheat or deception.” Merchs. Nat’l Bank of Winona v. Moen (In re Moen), 238 B.R. 785, 790 (8th Cir. BAP 1999) quoting RecoverEdge L.P. v. Pentecost, 44 F.3d 1284, 1293 (5th Cir.1995).
1. Hoffmann made representations.
A false representation under § 523(a)(2)(A) must relate to a past or present fact. See Freier, 604 F.3d at 587. Through the titles and characterizations of the documents Hoffmann provided at closing — the most deleterious being the title of the trust instrument — Hoffmann represented to the Rollers that the sales transaction provided them a security interest. Not only did he represent that a security interest in the home was presently provided through the mortgage and promissory notes, he represented that the Rollers’ interest was insulated more than typical through the Roller Family Trust.
2. Hoffmann knew his representations were false.
Hoffmann’s experience in real estate transactions is a strong consideration when determining the falsity of his representation. See Moen, 238 B.R. at 791. Hoffmann’s knowledge of the falsity of his statement is satisfied when he should have known of the falsity. Id. Hoffmann knew the Rollers financing was unsecured at the time of closing. He admitted that the trust was designed to protect Lakes Area Home buyers from litigation and that the transaction as a whole did not afford the Rollers a security interest. Hoffmann knew or should have known that transferring title of the house directly to the Roller Family Trust made the mortgage granted by Lakes Area Home Buyers worthless because Lakes Area Home Buyers never held title to the home in fee simple or otherwise. Additionally, by transferring title to the trust, Hoffmann knew or should have known the sales agreement’s “recourse against the house” provision left the Roller’s with no recourse.
3. Hoffmann made these representations with the intent and purpose to deceive the Rollers.
Hoffmann must have intended that the Rollers would believe his misrepresentation that their interests were secured. Intent can be inferred from circumstantial evidence. Moen, 238 B.R. at 791. While Hoffmann may not have had malicious intentions (as evidenced by the number of payments made (26) and the total amount paid to the Rollers ($61,500 on a $69,680 debt)), a determination of malevolence is not required for non-dis-chargeability under § 523(a)(2)(A). Id.
It is equally plain that Hoffmann’s intent and purpose was to deceive the Rollers about the security provided by the sales transaction. His modus operandi was to build a fagade of legitimacy through artifices such as the void mortgage and deceivingly named trust all the while obfuscating the true legal effects of the sales transaction. Hoffmann’s scheme was designed to protect himself and his corporations from potential liability at the expense of his clients. His intent and purpose was for the Rollers to believe this nonrecourse approach to financing provided conventional protection in the event something went awry.
4. The Rollers justifiably relied on Hoffmann’s representations.
“Reliance can be justifiable even though an investigation would have revealed the falsity of a representation.” Freier, 604 F.3d at 588 quoting Field v. Mans, 516 U.S. 59, 74, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995). “Justifiable reliance is an intermediate standard between actual reliance and reasonable reliance.” Id. A close reading — by a lawyer — of all of the documents supplied by Hoffmann for the closing would have revealed the falsity of Hoffmann’s representations. Roller is a layperson who prior to this transaction had only been involved in two home purchases and had not yet sold a home. Hoffmann provided the transaction sufficient indicia of legitimacy including providing the paperwork, conducting the closing at a bank and employing a notary public to assuage any concerns of an inexperienced home seller. The Rollers justifiably relied on Hoffmann’s representations.
5. Roller suffered pecuniary damage as a result of the representations.
Lakes Area Home Buyers did not pay the entire debt it owed to Roller. The total amount still owed under the second promissory note is principal and accrued interest of $10,768.09. Hoffmann’s representations indicated the Rollers would be protected in the event of a default but his scheme left Roller with no recourse to pursue the unpaid balance. The Rollers expected to be paid $69,680 and the payments provided by Hoffmann fell short. Roller suffered pecuniary damage as a direct result of Hoffmann’s misrepresentations.
Since I find that Hoffmann obtained the Rollers’ home by actual fraud as contemplated by 11 U.S.C. § 523(a)(2)(A) there is no need to address Roller’s § 523(a)(6) claim.
DAMAGES
|
3788419-4549 | MEMORANDUM
GUNN, District Judge.
This case is before the Court on defendant Frank Fernandez’s motion to dismiss plaintiff’s second amended complaint against him. The Court has considered the exhibits and supplementary affidavits filed by defendant with its motion, and hence has treated the motion as one for summary judgment pursuant to Rule 56, F.R.C.P.
As grounds for dismissal Fernandez asserts that plaintiff’s cause of action against him is time-barred. For the following reasons, the Court accepts defendant’s argument and holds that the statute of limitations ran on plaintiff’s complaint no later than October 23, 1983.
Plaintiff filed its first complaint in this Court on September 29, 1983, alleging that defendant employees of plaintiff’s assign- or, Emerson Electric Company (Emerson), engaged in a scheme of bid-rigging and payment of kickbacks to secure the awarding of purchase contracts by Emerson to certain electrical components manufacturers also named as defendants in this action. Plaintiff in its original complaint sought recovery on the basis of unjust enrichment, fraud, and under the Racketeer Influenced Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq.. Defendant Fernandez is an associate of Components Plus, Inc., one of the manufacturers allegedly involved in the bid-rigging scheme. He was not named as a defendant in plaintiffs original complaint.
From the pleadings, affidavits and exhibits filed with the Court, it appears that Emerson was aware of the conduct giving rise to the complaint at the latest on October 23, 1978. For purposes of this action as it has proceeded to this point, the cause of action on each count has been deemed to have accrued on that date. The statute of limitations, which is five years on all three counts, § 516.120, RSMo 1978; arid see Alexander v. Perkin Elmer Corp., 729 F.2d 576, 579 (8th Cir.1984) (RICO statute, which does not contain limitations period, authorizes federal courts to apply “the most applicable statute of limitations”), ran on October 23, 1983.
Plaintiff opposes the motion of defendant Fernandez, asserting that although it was aware of the general scheme of defendants by October 23, 1978, it did not know of Fernandez’s involvement until plaintiff had an opportunity to speak with defendant Terry Gibbs after filing its original complaint. Relying on the equitable tolling doctrine, plaintiff argues that the statute of limitations on the fraud and RICO counts against defendant Fernandez did not begin to run until plaintiff “discovered” Fernandez’s fraud through its conversations with defendant Gibbs, § 516.120(5), RSMo 1978. Alternatively, plaintiff argues that whether or not plaintiff had knowledge of Fernandez’s role in the alleged scheme by October 23,1978 is a question of fact not properly determinable by the Court on motion for summary judgment.
On the basis of evidence in the paper record, the Court rejects plaintiff’s arguments. In late 1978 Emerson commissioned McGinn & Agnew, Inc., a professional legal corporation, to undertake an independent investigation of contracting practices of the Emerson procurement department. McGinn & Agnew presented a preliminary report to Emerson on October 3, 1978, notifying the company of the ongoing fraud. This report identified Fernandez as a “secondary suspect” in the alleged fraudulent scheme, see Exhibit C in support of defendant’s motion to dismiss. Employees of Emerson verified the fraudulent practices on October 23, 1978, which is the date Emerson as assignor cited to plaintiff as assignee as the date of “discovery” by Emerson. See Exhibit E in support of defendant’s motion to dismiss. The statute of limitations began to run as of this “discovery”.
The above-cited exhibits document that plaintiff had grounds for suspicion of Fernandez at the time the statute began to run. Under Missouri law, suspicion of fraudulent activity commences the running of the statute where the means of discovery exist. Burr v. National Life & Accident Insurance Company, 667 S.W.2d 5 (Mo.App.1984); Briece v. Bosso, 158 S.W.2d 463, 467 (Mo.App.1942). Suspicion of fraud imposes a duty on the plaintiff to exercise “reasonable diligence” to discover the facts. Shelter Mutual Ins. Co. v. Public Water Supply Dist., 569 F.Supp. 310 (E.D.Mo.1983). “ ‘The statutory period ... [does] not await appellant’s leisurely discovery of the full details of the alleged scheme.’ Klein v. Bower, 421 F.2d 338, 343 (2d Cir.1970),” Koke v. Stifel, Nicolaus & Co., Inc., 620 F.2d 1340, 1343 (8th Cir. 1980).
|
9124350-15151 | DECISION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
In the instant case, the Plaintiff, Shelly Hall, seeks to have a student loan obligation discharged pursuant to the “undue hardship” standard set forth in 11 U.S.C. § 523(a)(8). On this issue, the Parties, with approval from the Court, submitted the matter for decision upon a stipulated set of facts which incorporated the evidence gathered during discovery. In the stipulated set of facts submitted to the Court, the Parties stated that, in addition to the information set forth therein, the matter should be decided based upon the submission of the briefs of the Parties; only the Defendant, however, submitted a brief in support of its respective position. Based upon a review of all of the evidence and supporting materials presented in this case, the Court finds, for the reasons set forth below, that the Plaintiffs student loan obligation is a nondischargeable debt.
Under § 523(a)(8), generally those debts incurred to finance a higher education are not entitled to be discharged in bankruptcy. Section 523(a)(8), however, provides an exception where the repayment of the loan would impose an “undue hardship” upon the debtor and the debt- or’s dependents. In addition, the Sixth Circuit Court of Appeals has held that, under appropriate circumstances, a bankruptcy court may, pursuant to 11 U.S.C. § 105(a), partially discharge a student loan debt or provide a student-loan debtor with some other type of equitable relief. Tennessee Student Assistance Corp. v. Hornsby (In re Hornsby), 144 F.3d 433, 440 (6th Cir.1998). As it applies thereto, the following information, which is taken verbatim from the Stipulation of Facts submitted by the Parties, was presented to the Court:
Plaintiff, Shelly Hall, filed a voluntary petition under Chapter 7 on May 2, 2001. This adversary proceeding was initiated by the plaintiff on October 3, 2001 against the United States Department of Education (“DOE”) seeking a discharge of certain student loan obligations under the “hardship” provision of 11 U.S.C. § 523(a)(8).
The principal amount currently due on the [student] loan is $38,802.90 through November 18, 2001. The proceeds of the underlying loan were used by plaintiff to pursue her education at the University of Toledo which she attended from 1991 through 1997 and in 2001.
Plaintiff is 29 years old (DOB: 2/27/73), and married Danny Reynolds on February 14, 2002. She has two (2) children: Austin Michael Hall (DOB: 3/12/1995) and Claude Arthur Reynolds (DOB: 11/20/2000). Her husband, Danny Reynolds, is the father of Claude Arthur Reynolds, and Michael Craig is the father of Austin Michael Hall. Both of the aforementioned children live with plaintiff and her husband in Millbury, Ohio. Two (2) of Danny Reynold’s children from a prior marriage also reside with them.
Michael Anthony Craig is the subject of a court order administered through the Lucas County Child Support Enforcement Agency, requiring him to pay plaintiff the sum of $119.70 per month for Austin’s support plus $86.67 monthly on an arrearage which was $4,432.23 as of August 8, 2001. Between the issuance of the order in 1996 and the date of her deposition on March 26, 2002, plain tiff testified that she had received only-three (3) payments of approximately $210.00 each in furtherance of the order. From 1990 through 1998 and 2000, plaintiff was a student and worked part time as a waitress and bartender for a number of local restaurants and taverns. In 1999, she worked for Voll Frame & Alignment, Inc. (hereafter “Voll Frame”), • ■ • as a bookkeeper for $150.00 per week. She returned to .Voll Frame in a bookkeeping and clerical capacity in February of 2000.
Voll Frame is an automotive repair business that specializes in repairing frames and doing alignment work. The business is owned by plaintiffs mother-in-law, Nancy Reynolds, and the plaintiffs husband, Danny Reynolds, is the only full time employee engaged in performing automotive repairs. The business has been in existence for 8 to 10 years. Plaintiff earns a gross salary of $350.00 biweekly for part time clerical and bookkeeping duties. Plaintiffs husband also earns a salary of $350.00 biweekly, and the couple lives in a residence in Mill-bury, Ohio owned by Nancy Reynolds. They are permitted to live in the Mill-bury residence rent free.
Plaintiff testified that she has no income other than what she earns at Voll Frame, and the fees that she charges the members of her immediate family for the preparation of income tax returns.
Plaintiff and her husband reside together at the Millbury residence and “pool” their respective salaries to pay living expenses. Their combined income is used to support the four (4) children who reside with them, i.e., two (2) of the husband’s children from a prior marriage; the husband’s child with the plaintiff; and plaintiffs child with Michael Craig. Plaintiffs husband also has two (2) other children who do not reside in the Millbury residence, and for whom he pays support apparently through a wage withholding order. Plaintiff was not certain of the amount of the child support obligation for these two children.
Given her current financial circumstances, plaintiff would not be required to make monthly payments on her student loan obligations if she elected to participate in the Income Contingent Repayment Plan.
Plaintiff has made no payments on her student loan obligations.
Plaintiff has no physical or mental disabilities or conditions which would prevent her from seeking and obtaining a job with a salary and benefits superior to those of her current position with Voll Frame.
Plaintiff has a degree in Administrative Services from the University of Toledo. The curriculum that she completed for the degree consists mainly of general courses in business administration.
Since returning to work at Voll Frame, plaintiff has not applied for any other positions of employment. She testified that her employment with Voll Frame provides her with the flexibility to spend time at home with her children, and that she is able to bring her youngest son to work with her and avoid child care expenses. In addition, plaintiff indicated that Voll Frame doesn’t do very well financially, and the business can’t afford to hire employees at the market rate in terms of salary. She continues to work in her current position because of the flexible schedule, loyalty to her mother-in-law, and a desire to assist her husband’s family. She has no' interest at the present time or in the foreseeable future of pursuing a higher paying job because of her perception that she is needed by her children and in the family business. She is aware of the fact that she would earn more money in another type of employment.
In addition to the above information, it was stipulated that the Debtor and her husband have a combined net monthly income of One Thousand Two Hundred Seventy-one dollars ($1,271.00). In terms of expenses, it was presented to the Court that the Debtor and her husband spend One Thousand One Hundred Seventy-one dollars ($1,171.00) to meet their minimum monthly living requirements. The exhibits presented to the Court also show that the Debtor earns approximately Five Hundred dollars ($500.00) per year doing income tax preparation for other people and that for the tax year 2001, the Debtor received a refund of over One Thousand Six Hundred dollars ($1,600.00). Finally, it is noted that the Debtor, after returning to school in fall of the year 2001, received her degree in Administrative Services in December of that same year. (Plaintiffs Deposition, at pg. 6).
LEGAL DISCUSSION
The instant complaint involves the dis-chargeability of a student loan debt under 11 U.S.C. §§ 523(a)(8) and 105(a). Pursuant to 11 U.S.C. § 157(b)(2)(I), this matter is deemed a core proceeding over which this Court has the jurisdictional authority to enter final orders. 28 U.S.C. § 1334.
The first issue to address is whether the Debtor is entitled to receive an “undue hardship” discharge pursuant to § 523(a)(8) of the Bankruptcy Code which provides:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt-
(8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship or stipend, unless excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor’s dependents!.]
In determining whether “undue hardship” exists for purposes of § 523(a)(8), the Sixth Circuit has applied (although it has not actually limited itself to) those factors set forth in what is known as the Brunner Test. See Cheesman v. Tennessee Student Assistance Corp. (In re Cheesman), 25 F.3d 356 (6th Cir.1994); Tennessee Student Assistance Corp. v. Hornsby (In re Hornsby), 144 F.3d 433 (6th Cir.1998).
Under the Brunner Test, which is named after the case of Brunner v. New York State Higher Educ. Serv. Corp., a debtor must establish the existence of each of the following three elements, by a preponderance of the evidence, in order to be entitled to an “undue hardship” discharge under § 523(a)(8):
(1) the debtor cannot maintain, based on current income and expenses, a ‘minimal’ standard of living for herself and her dependents if forced to repay the loans;
(2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period; and
(3) the debtor has made good faith efforts to repay the loans.
831 F.2d 395 (2nd Cir.1987). In applying these requirements to the instant case, it is apparent, for the reasons that will now be explained, that even if the Debtor is found to have sustained her burden under the first two prongs of the Brunner Test, the Debtor has not made a good faith effort to repay her student loan obligation, and thus is not entitled to an “undue hardship” discharge under § 523(a)(8).
In determining whether a debtor has made a good faith effort to repay a student loan obligation, a primary consideration, as one would expect, is whether the debtor actually made any payments on the obligation, and if so, the total amount of payments. Green v. Sallie Mae Servicing Corp. (In re Green), 238 B.R. 727, 736 (Bankr.N.D.Ohio 1999). Nevertheless, a debtor who fails to make payments on a student loan obligation, as is clearly the situation here, is not necessarily altogether foreclosed from a finding of good faith; instead, good faith necessarily encompasses all relevant considerations. See Green v. Sallie Mae Servicing Corp. (In re Green), 238 B.R. 727, 736 (Bankr.N.D.Ohio 1999). Although not necessarily complete, this Court has employed the following list of considerations in determining whether a debtor has made a good faith effort to repay their student loan debt:
(1) whether a debtor’s failure to repay a student loan obligation is truly from factors beyond the debtor’s reasonable control;
(2) whether the debtor has realistically used all their available financial resources to pay the debt;
(3) whether the debtor is using their best efforts to maximize their financial potential;
(4) the length of time after the student loan first becomes due that the debtor seeks to discharge the debt;
(5) the percentage of the student loan debt in relation to the debtor’s total indebtedness;
(6) whether the debtor obtained any tangible benefits) from their student loan obligation.
Flores v. U.S. Dep’t of Educ. (In re Flores), 282 B.R. 847, 856 (Bankr.N.D.Ohio 2002).
In looking at the above considerations as they apply to the stipulated set of facts submitted by the Parties, there is simply no indication that the Debtor has even remotely made a good faith effort to repay her student loan obligation. For example, in contravention to the first and third factors set forth above, the Debtor, by her own admission, has failed to pursue additional employment or other possible job opportunities to enhance her earning potential. In this regard, the Debtor admitted that she is not constrained by any physical and/or mental disabilities.
Additionally, and in noncompliance with the sixth factor, the Debtor, having obtained her college degree, clearly received a tangible benefit from her student loan obligation. Moreover, as it relates to the second of the above considerations, it is noted that the Debtor could have devoted at least some of her 2001 income tax return and/or money she earns from doing income tax returns toward the repayment of her student loan obligation. The latter statement is especially true considering that it is likely that the Debtor’s ability to do income tax returns was gained, at least in part, from the education she financed.
Finally, and as set forth in the fourth of the above considerations, it is very disconcerting that the Debtor filed both her bankruptcy petition and her complaint to discharge her student loan debt shortly before completing her degree. Indeed, in the absence of very unique and extraordinary circumstances, it would be extremely difficult to make a finding of good faith when a debtor, contemporaneous with attending school, seeks to discharge his or her student loan debts.
Therefore, given the lack of any indicia pointing toward the Debtor making a good faith effort to repay her student loan obligation, the Court must find that the Debt- or has failed to sustain her burden under the third-prong of the Brunner Test. Accordingly, as all prongs of the Brunner Test must be met to establish the existence “undue hardship,” the Debtor is not entitled to receive a discharge of her student loan obligation pursuant to 11 U.S.C. § 523(a)(8). The next determination therefore to be made is whether the Debt- or is entitled to have an adjustment made on her student loan obligation pursuant to this Court’s equitable powers under 11 U.S.C. § 105(a).
Section 105(a) permits a bankruptcy court to “issue any order, process, or judgment that is necessary or .appropriate to carry out the provisions of [Title 11].” In Tennessee Student Assistance Corp. v. Hornsby (In re Hornsby), the Sixth Circuit Court of Appeals held that § 105(a) provided a bankruptcy court with the power to equitably adjust a debtor’s student loan obligation. 144 F.3d 433, 440 (6th Cir.1998). In the words of the Court, “pursuant to its powers codified in § 105(a), the bankruptcy court here may fashion a remedy allowing the [debtors] ultimately to satisfy their obligations to [the creditor] while at the same time providing them some of the benefits that bankruptcy brings in the form of relief from oppressive financial circumstances.” Id. The type of relief afforded to a student-loan debtor usually involves providing the debtor with a partial discharge of his or her student loan debts, although the Sixth Circuit held that a bankruptcy court may provide other types of relief such as deferring repayment of the debt. Id.
|
3160813-12326 | R. GUY COLE, JR., Circuit Judge.
Petitioner-Appellant Mohammed Sail seeks review of a Board of Immigration Appeals (“BIA”) order affirming an Immigration Judge’s (“IJ”) denial of his claims for asylum and withholding of removal. The IJ concluded that Sail was not credi ble and therefore denied his claims. Alternatively, for the denial of asylum, the IJ found that Sail failed to show that he applied for asylum within one year of his entry into the United States and denied his application on timeliness grounds. Because there is sufficient evidence to support the IJ’s adverse credibility finding, we DENY the petition for review.
I. Background
A. Facts
Sail claims to be a native citizen of Mauritania, a large country in Northwest Africa bordering the Atlantic Ocean, and a member of the country’s minority Wolof tribe. According to Sail, his family owned a farm in Mauritania and he belonged to a farmer’s association as well as the United Democratic Forces — New Era (“U.F.D.”), a political party. Sail testified that in April 2003 his father received a letter from the Mauritanian government stating that the government was confiscating the family’s farm, and that he and his father were later arrested while participating in a protest of the confiscation. He claims that during the protest he was shot in the eye by the National guard, arrested, and jailed for three weeks. Sail claims that upon his release he was placed on probation and ordered to pay a fine. Sail states that he fled to Senegal on July 13, 2003, and then to the United States on the following day. He states that his father was released but rearrested and subsequently beaten to death by the guards in prison on April 22, 2004.
B. Procedural History
Sail filed his asylum application on December 5, 2003. The IJ denied Sail’s applications for asylum, withholding of removal under the Immigration and Nationality Act (“INA”), and withholding of removal under the United Nations Convention Against Torture (“CAT”) on May 2, 2005. He concluded that Sail was not credible and therefore not entitled to relief. In addition, the IJ found that Sail failed to show he filed his petition for relief within one year of arrival in the United States and that he failed to show that he faced torture in Mauritania. The BIA adopted and affirmed the IJ’s decision on June 5, 2006.
On appeal, Sail contends that the BIA and IJ erred in their credibility determination. Sail also claims that the IJ erred as a matter of law in finding that he failed to make the requisite showing of timeliness. The Government contends that the IJ’s credibility finding was supported by the evidence, and that this Court lacks jurisdiction to review the timeliness decision.
II. Discussion
A. Jurisdiction to Review the Asylum Application
Because the BIA adopted the IJ’s decision, we review the IJ’s decision directly. Yu v. Ashcroft, 364 F.3d 700, 702 (6th Cir.2004). In denying Sail’s application for asylum, the IJ stated two independent reasons for denying the petition. The first was that he found Sail to be not credible, which will be addressed below. In addition, the IJ found that Sail had not shown that his petition was timely, meaning that Sail failed to provide clear and convincing evidence that his asylum application was filed within one year of his arrival in the United States, as required by 8 U.S.C. § 1158(a)(2)(B).
In this case, the IJ noted that there was no entry in the Non-Immigrant Information System (“NIIS”) for a person entering the United States in the month of July 2003 with the name, or a name similar to, the one that Sail provided. Sail produced a document purportedly from the Maurita nian government certifying that Sail was released from a jail sentence on May 2, 2008, which if credited would establish that he was still in Mauritania at that time and had not yet entered the United States. The IJ found Sail’s documents “to be questionable,” noting that “documents from Mauritania are readily counterfeited and [that he] see[s] counterfeit Mauritania documents all the time.” He stated that Sail’s Mauritanian identification was clearly a counterfeit document, but that he would not make a finding that it was false without forensic testing, which he declined to do because it would have taken at least eighteen months.
The Government cites Castellano-Chacon v. INS, 841 F.3d 533, 542-44 (6th Cir.2003) as support for its proposition that this Court lacks jurisdiction to review a denial of asylum based on a finding that a petition was untimely. However, this Court in Almuhtaseb v. Gonzales, 453 F.3d 743 (6th Cir.2006), modified “the holding of Castellano-Chacon to bar our review of asylum applications denied for untimeliness only when the appeal seeks review of discretionary or factual questions, but not when the appeal seeks review of constitutional claims or matters of statutory construction.” Id. at 748.
8 U.S.C. § 1158(a)(2)(B) requires an asylum applicant to demonstrate by clear and convincing evidence that his application was filed within a year of arrival in the United States. Due process requires that an alien in a deportation proceeding be afforded a full and fair hearing, although the IJ is entitled to broad discretion in conducting that hearing. Castellano-Chacon, 341 F.3d at 552-53. Sail argues that the IJ violated his due process rights when the IJ declined to submit Sail’s documents to forensic testing, thus depriving Sail of that method of proving his arrival date. However, Sail could have provided other corroborating evidence supporting his arrival date, including plane tickets, receipts, a record of entry into the United States, or other evidence that he was still in Mauritania or Senegal during the time period he claimed. As the IJ noted in his order, the only evidence that Sail provided to support the Mauritanian government documents was his testimony, which proved to include false information about the name provided upon entry, and the testimony of his roommate which did not provide corroboration of his date of arrival.
Because Sail was not deprived of an opportunity to provide evidence that his application was timely, it was not a due process violation for the IJ to decline to submit the documents to forensic testing for authentication. To the extent that Sail complains of the factual findings of the IJ, those claims are not renewable by this court. Almuhtaseb, 453 F.3d at 748.
B. Withholding of Removal and Relief under CAT
This Court has jurisdiction over Sail’s appeal of the BIA’s denial of his requests for withholding of removal and relief under CAT. Castellano-Chacon, 341 F.3d at 544-52 (reviewing withholding of removal and CAT requests despite lack of jurisdiction to review timeliness of asylum application). As above, because the BIA adopted the IJ’s decision, we review the IJ’s decision directly. Yu, 364 F.3d at 702. An alien seeking withholding of removal must demonstrate “that there is a clear probability that he will be subject to persecution if forced to return to the country of removal.” Singh v. Ashcroft, 398 F.3d 396, 401 (6th Cir.2005) (quoting Pilica v. Ashcroft, 388 F.3d 941, 951 (6th Cir.2004)). To be eligible for CAT relief, an alien must show that it is “more likely than not that he or she would be tortured if removed to the proposed country of removal.” 8 C.F.R. § 208.16(c)(2).
The IJ’s determination must be upheld unless “manifestly contrary to the law,” and any “administrative findings of fact are conclusive unless any reasonable adjudicator would be compelled to conclude to the contrary.” 8 U.S.C. § 1252(b)(4). In order to reverse a factual determination, this Court “must find that the evidence not only supports a contrary conclusion, but indeed compels it.” Klawitter v. INS, 970 F.2d 149, 152 (6th Cir.1992).
Here, the IJ denied the withholding of removal and relief under CAT for the same reason he found that Sail would not be entitled to asylum even if his application had been timely. He found that Sail was not credible, and that he therefore had not established a well-founded fear of persecution. See 8 U.S.C. § 1158(b)(1)(B)(iii) (listing factors that can be considered in reaching credibility determinations for asylum applications). Credibility determinations are considered findings of fact and are thus subject to the deferential standard of review set forth in § 1252(b)(4). Yu, 364 F.3d at 702. Although an adverse credibility finding is afforded substantial deference, the finding must be supported by specific reasons and an “adverse credibility finding must be based on issues that go to the heart of the applicant’s claim.” Amir v. Gonzales, 467 F.3d 921, 925 (6th Cir.2006) (quoting Sylla v. INS, 388 F.3d 924, 926 (6th Cir.2004)).
The IJ has stated specific reasons to support his finding that Sail’s testimony is not credible. He notes that while Sail claimed to be a farmer in Mauritania, Sail did not know the Mauritanian words for the different types of land, or which type of land his farm was. The IJ stated that it was “not possible that a farmer in Mauritania would not be aware of that unless [Sail] either ... was not a farmer, or possibly that he was not from Mauritania.” The IJ reported that while Sail claims to have been a local leader of the U.F.D. party, Sail initially did not know the name of the party leader, one of the most important political figures in Mauritania, or that the party had been banned by the government three years prior to Sail’s alleged departure from Mauritania. The IJ explained that “[i]t would be pretty hard for a Party member to not know that the Party was banned, since what was legal had suddenly become illegal, and he became subject to being arrested if he engaged in U.F.D. activities.” In addition, the IJ detailed skepticism regarding Sail’s omission of important events during early conversations with asylum officers, including information about the death of his sister, grandparents, and two uncles. The IJ pointed out a discrepancy regarding Sail’s testimony that he was shot in the eye with a rubber or plastic bullet, noting that the medical report stated that Sail had two pieces of metal in or near his eye, rather than plastic. He also recorded that Sail failed to mention that he had been shot or blinded on his asylum application or to the asylum officer, all of which led the IJ “to believe that [Sail] may have been blinded in an entirely different time.”
The IJ listed reasons for finding Sail’s support documents to be false. He explained that the two letters from Sail’s mother appeared to be intended for Court use; that the first did “not read like one from a mother to her son telling him that his father was killed” and that the second letter simply “restates his asylum claim by listing all the family members that had problems.” The IJ reiterated his belief that the documents purportedly from the Mauritanian government were of questionable authenticity.
On appeal, Sail asks this court to reverse the credibility determination. He argues that the inconsistencies do not go to the heart of the application and that the omission of details could be explained by cultural differences and translation difficulties. Sail argues that although the U.F.D. was banned in 2000, he only learned of the banning in 2003. He states that whether the bullet was metal or rubber is immaterial, but that he was shot and injured due to his political activities. Finally, Sail explains that there is no inconsistency between his asylum application, his interview with the asylum officer, and his testimony.
Under the substantial evidence standard, findings of fact, including credibility determinations, are “conclusive unless any reasonable adjudicator would be compelled to conclude to the contrary.” Patel v. Gonzales, 470 F.3d 216, 219 (6th Cir.2006) (quoting 8 U.S.C. § 1252(b)(4)(B)). The IJ’s determination meets this standard, as he has detailed his reasons and at least some of them go to the heart of Sail’s application, including his lack of knowledge of farming terms and details of the U.F.D. party. There is not sufficient evidence to compel a finding of credibility, which is the standard for reversal by this Court. 8 U.S.C. § 1252(b)(4)(B); see also INS v. Elias-Zacarias, 502 U.S. 478, 481 n. 1, 112 S.Ct. 812, 117 L.Ed.2d 38 (1992).
|