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1226764-8843 | OPINION
PER CURIAM
Lorenzo Oliver, an inmate of the East Jersey state prison (EJSP), filed a § 1983 complaint in November 2000, which he amended in January 2003, alleging that the defendants retaliated against him for filing a civil suit against the New Jersey prison system from March 2000 through May 2000, by (1) preventing him from visiting his sick mother and from attending her funeral (Count I — defendants Robinson and Cathel); (2) removing about $25 from his prison inmate account for commissary items that he never received (Count II— defendant Garrett); (3) subjecting him to torture with an “electrical device” which affected anything made of metal in his cell, including his bunk bed (Count III — defendants Moore and Robinson); and (4) filing false disciplinary charges against him that were later dismissed (Count IV — defendant Barnes). He claimed that the alleged electrical torture by defendants Robinson and Moore also violated his Eighth Amendment rights and denied him access to the courts. He sought injunctive relief and damages.
The defendants moved for summary judgment, claiming non-exhaustion of the retaliation claims, and that, even assuming exhaustion of the torture claim, it should be dismissed on its merits. In reply, Oliver argued substantial compliance with the prison’s administrative remedy process, contending that he properly exhausted all of his claims, although he did not follow the inmate grievance procedure by using the prescribed “administrative remedy form” (ARF) in every instance. He claimed that “it shouldn’t matter what particular paper a complaint is written on” as long as the defendants were aware of the alleged constitutional violations. He also claimed that in 1999, he was placed in segregation when he attempted to have the ARF signed by the required prison authority, and that ever since, he has placed his ARFs in the Administrative mailbox instead of delivering them to the custody supervisor. The District Court granted summary judgment in favor of the defendants on Counts I, II, and IV for failure to exhaust and dismissed those claims without prejudice. The District Court granted summary judgment on the torture claim on the merits, ruling that Oliver failed to produce any evidence to suggest that an electrical device was used upon him, or that Moore or Robinson were in any way involved. Oliver timely appealed.
We review de novo an order granting summary judgment. Saldana v. Kmart Corp., 260 F.3d 228, 231 (3d Cir.2001). Summary judgment is proper when, viewing the evidence in the light most favorable to the nonmovant, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. at 232; Fed.R.Civ.P. 56(c). Once the moving party has carried the initial burden of showing that no genuine issue of material fact exists, the “nonmoving party cannot rely upon conclusory allegations in its pleadings or in memoranda and briefs to establish a genuine issue of material fact.” Pastore v. Bell Telephone Co. of Pennsylvania, 24 F.3d 508, 511-12 (3d Cir.1994). Rather, the nonmoving party “must make a showing sufficient to establish the existence of every element essential to his case, based on the affidavits or by the depositions and admissions on file.” Harter v. GAF Corp., 967 F.2d 846, 852 (3d Cir.1992).
We will affirm the District Court’s judgment on Count III substantially for the reasons set forth in the District Court’s opinion. Oliver admitted in his deposition that he had no basis for alleging that Moore or Robinson were involved in his alleged torture except his belief that they were. Oliver’s belief is insufficient evidence to support his claim, and thus we find that the District Court properly granted summary judgment in the defendants’ favor. As for Counts I, II, and IV, we will affirm the District Court order granting summary judgment and dismissing these claims for non-exhaustion, as further discussed below.
The Prison Litigation Reform Act of 1995 (“PLRA”) prohibits an inmate from bringing a civil rights suit alleging specific acts of unconstitutional conduct by prison officials until the inmate has exhausted available administrative remedies. 42 U.S.C. § 1997e(a) (2001). The exhaustion requirement of the PLRA applies to grievance procedures “regardless of the relief offered by the administrative procedures.” Booth v. Churner, 532 U.S. 731, 741, 121 S.Ct. 1819, 149 L.Ed.2d 958 (2001); see also Nyhuis v. Reno, 204 F.3d 65, 78 (3d Cir.2000) (explaining that “the PLRA amended § 1997e(a) in such a way as to make exhaustion of all administrative remedies mandatory-whether or not they provide the inmate-plaintiff with the relief he says he desires in his federal action”). A prisoner must properly exhaust administrative remedies or risk procedural default. See Spruill v. Gillis, 372 F.3d 218 (3d Cir.2004). To determine whether a prisoner has properly exhausted administrative remedies, the court looks to the prison grievance procedure, not federal law. Id. at 231. However, “[cjompliance with the administrative remedy scheme will be satisfactory if it is substantial.” Spruill, 372 F.3d at 232 (quoting Nyhuis, 204 F.3d at 77-78); Cf. Camp v. Brennan, 219 F.3d 279 (3d Cir.2000).
In support of their motion for summary judgment, the defendants submitted ah affidavit indicating that a search of the files and databases containing ARFs and inmate request forms revealed no such forms from Oliver alleging the same retaliatory acts complained of in this case. The defendants also submitted the affidavit of Terrance Moore, Administrator of the EJSP, stating that a search of his records revealed no correspondence from Oliver concerning the alleged retaliatory denial of hospital and funeral visits, the alleged retaliatory removal of money from Oliver’s prison account, or the alleged retaliatory filing of false disciplinary charges. Oliver, however, submitted a letter to Commissioner Terhune regarding the denial of a hospital visit, stating in pertinent part that “[t]he Administration is retaliating against me for filing a (sic) appeal at the State Appellate Court in Oliver v. Department of Corrections, ” see Appellant’s Brief at PA 9, letters to Garrett, Moore, and Terhune regarding money taken from his inmate account in retaliation for his having filed a civil rights complaint in state court, Id. at PA 12, PA 15, and PA 16, and an incomplete ARF addressed to Moore and dated May 24, 2000, regarding false disciplinary charges allegedly imposed to “punish” Oliver for filing an answer to the prison’s motion to dismiss his civil rights case, see Oliver Affidavit in opposition to motion for summary judgment (Docket # 76), at PA 123.
The Defendants countered that even if the afore-mentioned letters were sent to Garrett, Moore, and Terhune, they do not comply with the EJSP remedy procedure because he failed to use the proper ARF. They maintain that Oliver has not substantially complied because he failed to file ARFs for Counts I, II, and IV prior to filing suit. Finally, the defendants contend that the letters do not mention the retaliatory conduct alleged in the complaint and fail to identify the defendants by name.
According to EJSP’s provision in the “Inmate Handbook,” entitled “Administrative Remedy (Inmate Grievance),” the prison grievance process provides “an avenue for all inmates to express their problems knowing that a complaint will be investigated by an appropriate staff member.” Appellees’ App. at Sa5. The inmate completes a multi-part ARF, and submits the ARF to his custody supervisor, who signs and dates the ARF and returns a copy of the signed and dated form to the inmate. Id. Every attempt at resolving the matter at the housing unit or departmental level should be made before resorting to the Administrative Remedy process. Id. The Handbook does not provide an investigation process or set any time limits for filing an ARF or for responding to one. There is no express provision in the Handbook for appeal or review by an ultimate administrative authority. And, there is no requirement that the inmate identify in the ARF the parties against whom he complains.
The District Court summarily dismissed Counts I, II, and IV without addressing the issue of Oliver’s substantial compliance. Oliver’s submissions appear to contradict the defendants’ assertions that they did not receive any correspondence with regard to the incidents alleged in Counts I, II, and TV, and arguably raise a question of fact. Viewing the facts in the light most favorable to Oliver and assuming that the letter/complaints were in fact delivered to their intended recipients, however, we conclude that the letter/complaints do not constitute substantial compliance because there is no evidence that the prison’s administrative remedy was not available.
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7834392-5806 | MEMORANDUM AND ORDER
JOHNSON, District Judge.
The following is an amended Memorandum and Order intended to clarify this Court’s March 15, 1995 Memorandum and Order.
INTRODUCTION
Claimant, Anthony Viola, moves for reconsideration of this Court’s October 27, 1993 order granting the United States partial summary judgment of civil forfeiture as to the defendants in rem, and denying claimant’s motion for partial summary judgment. This motion presents new legal issues which give cause for this Court to change its determination based upon the record that the claimant was not given notice before his properties were seized.
BACKGROUND
On December 4, 1992, after a jury trial in this Court, Anthony Viola was convicted of numerous crimes including conspiring and attempting to possess cocaine, trafficking in large amounts of stolen goods, and violating the Racketeer Influenced and Corrupt Organizations Act (RICO). United States v. Anthony Viola, et al., 91 CR 800 (s-5) (SJ), 1992 WL 333650 (“United States v. Viola”). The RICO enterprise, in which Viola was convicted of participating, was headquartered at the offices of Blue Chip Coffee, Inc. (“Blue Chip”), a company which Viola owned and operated. Blue Chip is headquartered at the defendant premises: 615 Sackett Street, Brooklyn, New York (“615 Sackett”), 601 Sackett Street, Brooklyn, New York (“601 Sackett”), and 41 Summit Street, Brooklyn, New York (“45 Summit”) which is also a defendant in this action.
The government contends that, as a result of its role in Viola’s criminal enterprises, all of these properties including defendant Blue Chip are subject to forfeiture pursuant to 21 U.S.C. § 881 and 18 U.S.C. § 981. The government seized the properties on July 23, 1991.
The claimant then moved for summary judgment to dismiss the government’s claims against the defendants in rem. Viola maintained that the seizure of the defendant properties pursuant to the court issued warrant violated his due process rights as the seizure occurred without prior notice and opportunity to be heard. This Court denied the claimant’s motion for summary judgment. United States v. All Assets of Blue Chip Coffee, Inc., et al., 836 F.Supp. 104 (E.D.N.Y.1993) (Johnson, J.).
The claimant now brings this motion for reconsideration.
DISCUSSION
A motion for reconsideration may only be granted when a court has “overlooked matters or controlling decisions which, had they been considered, might reasonably have altered the result reached by the court.” Consolidated Gold Fields v. Anglo American Corp., 713 F.Supp. 1457 (S.D.N.Y.1989). A motion for reconsideration is left to the discretion of the court. United States v. Clark, 984 F.2d 31 (2d Cir. 1993). In his request for reconsideration of this Court’s Order, claimant has cited case law which was originally overlooked by this Court. Therefore, claimant’s motion for reconsideration is granted.
In support of his motion for reconsideration, claimant points to United States v. James Daniel Good Real Property, — U.S. —, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993). In Good, the Supreme Court held that, ab- . sent exigent circumstances, the government must afford notice and a meaningful opportunity to be heard before seizing real property subject to civil forfeiture. Though the Supreme Court decided Good two months after this Court granted the government’s motion for summary judgment the holding in Good was intended to be applied retroactively.
In its decision to grant the government’s motion for summary judgment without a hearing this Court did not take into account the requirements of the Due Process Clause as established in Good. Had it done so, the result of the motion would have been different.
The government is allowed to seize property without a hearing only if there are exigent circumstances. Good, at —, 114 S.Ct. at 498. In Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452 (1974), a case cited by the Court in Good, the Court held that “the government could seize a yacht subject to civil forfeiture without affording prior notice or hearing,” because of the ease with which the yacht could have been taken out of the court’s jurisdiction had there been prior notice. Good, at — , 114 S.Ct. at 500. The Court in Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), also held that the deprivation of kitchen appliances and household furniture was significant enough to warrant a hearing. Fuentes, at 70-71, 92 S.Ct. at 1989.
However, according to the Supreme Court: “based upon the importance of the private interests at risk and the absence of countervailing Government needs ... the seizure of real property under 21 U.S.C § 881(a)(7) is not one of these extraordinary instances that justify the postponement of notice and hearing.” Good at -, 114 S.Ct. at 505.
Therefore, absent exigent circumstances, there must be an opportunity to be heard prior to the deprivation of property.
In this case there were clearly no exigent circumstances. The property being seized, as in Good, was real property not in jeopardy of being moved.
As the Court stated in Good:
“[requiring the government to postpone seizure until after an adversary hearing creates no significant administrative burden. From an administrative stand point it makes little difference whether that hearing is held before or after the seizure. And any harm that results from delay is minimal in comparison to the injury occasioned by erroneous seizure.” Good, at -, 114 S.Ct. at 504.
Thus, this Court’s failure to factor the Fifth Amendment’s Due Process consideration into the decision was an error and the claimant’s motion for reconsideration is granted because the case law now cited by the plaintiff would have reasonably altered the result reached by the Court.
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10527108-14452 | BOUDIN, Circuit Judge.
This is a suit by the owners of federal savings bonds that were allegedly stolen and redeemed without the owners’ permission. The district court dismissed the suit on the ground that it had been brought in the wrong court. With certain clarifications, we affirm.
I.
In this case Victor and Betty Zelman, a husband and wife residing in Maine, brought suit pro se in district court against the Secretary of the Treasury and the Commissioner of the Public Debt. Their complaint alleged that six series E bonds issued to one or both of the Zelmans, currently worth (in total) more than $10,000, had been stolen from them and that the government was now refusing to issue replacements. Claiming that the government had breached the contractual rights reflected in the bonds, the Zelmans sought an injunction to require the issuance of replacements.
Prior to bringing suit, the Zelmans had requested replacements from the Bureau of Public Debt which administers the savings bond program for the Treasury. In reply the Bureau told the Zelmans the following: first, government records showed the bonds to have been redeemed more than ten years ago; second, government regulations create a presumption that redeemed bonds have been properly paid if no claims have been filed within ten years of redemption; and third, since the government now retains no other records after ten years has elapsed following redemption, “no details regarding ... redemption [of the Zelmans’ bonds] can be furnished.”
Broadly speaking and with certain qualifications, government bonds are viewed as contracts between the government and the owners, whose terms are fixed by statutes, regulations and offering circulars. Estate of Curry v. United States, 409 F.2d 671, 675 (6th Cir.1969); Wolak v. United States, 366 F.Supp. 1106, 1111-12 (D.Conn.1973) (collecting and quoting numerous cases). In response to the Zelmans’ suit, which explicitly alleged a breach of contract, the U.S. Attorney asserted that the district court lacked subject matter jurisdiction over the suit. This is so, the U.S. Attorney argued in a motion to dismiss, because contract claims against the United States for amounts of over $10,000 may be brought only in the Claims Court. 28 U.S.C. §§ 1346(a)(1), 1491(a)(1).
The district court agreed with the government, stating that “since this is an action for breach of contract and more than $10,000 is at stake, the Tucker Act provides that jurisdiction exists only in the ... Claims Court....” Noting that no request for such a transfer had been made, see 28 U.S.C. § 1631, the district court dismissed the ease for want of jurisdiction and without prejudice to a new action in a court with jurisdiction. The Zelmans have sought review in this court, arguing that the dismissal was improper and that redress apart from damages should be afforded to them.
II.
On appeal, the Zelmans first argue that each bond should be treated as a separate contract and that, individually, each such claim in this ease is under $10,000 and within the jurisdiction of the district court. The government responds that there is “some authority” for the proposition that separate claims for under $10,000 should not be aggregated; but it says that the district court still “lacked jurisdiction” to afford the only remedy sought by the Zelmans in this case, namely, an injunction directing re-issuance of the bonds. Indeed, we have held that “[f]ederal courts do not have the power to order specific performance by the United States of its alleged contractual obligations.” Coggeshall Development Corp. v. Diamond, 884 F.2d 1, 3 (1st Cir.1989).
One could argue about whether “jurisdiction” — a term with many shades of meaning — is lacking if the complaint has asserted a colorable claim (in this case, for breach of contract) but named an unavailable remedy. But the Zelmans did not argue to the district court that the claims may be disaggregated (although two sentences in their memorandum hinted at such an argument) and even now the government does not quite concede the point. We are reluctant to overturn the district court in a civil suit based on a disaggregation theory not raised in that court. Indeed, the government does not confess error on this issue and may dispute or hope to distinguish the disaggregation precedents.
Accordingly, we are disposed to affirm the district court but without prejudice to the Zelmans’ filing of a new suit in the same district court if they wish to pursue their disaggregation theory. We say “if’ because the Claims Court has unquestioned jurisdiction, assuming that the Zelmans are now prepared to accept damages as their relief. The Zelmans might prefer to refile their suit in the Maine district court or they might conclude that the Claims Court, although more distant, is a preferable forum in order to avoid another possible round of jurisdictional controversy. The initial choice is theirs.
But we have something more to say about the course of this matter. The pages of correspondence between the Zelmans and the Treasury’s Bureau of the Public Debt will be familiar, at least as a prototype, to anyone who has ventured to assert a money claim against a public body. Although the Bureau’s letters to the Zelmans (and later to their senator) may well be accurate in a literal sense, most lay readers would likely believe that the Bureau had determined the Zelmans’ claim to be without merit. The critical sentences, repeated in several of the letters, are these:
[T]he regulations governing savings bonds provide that bonds for which no claim has been filed within 10 years of the recorded date of redemption will be presumed to have been properly paid. At that time, the payment records of such bonds are destroyed and from then on there is no data available from which photographs or other details regarding the redemption can be obtained.
The critical phrase, “presumed to have been properly paid,” is taken verbatim from the current Treasury regulations, 31 C.F.R. § 315.29(b), although the regulation in question is not cited in the letters. The word “presumed” has more than one meaning but it quite often refers to a rebuttable presumption; that is, when the predicate fact is proved (here, that the bonds were redeemed by someone over ten years ago), then some other “presumed” fact (here, that the bonds were redeemed by their real owners) will be taken to be true — unless and until the party disputing the presumed fact offers substantial countervailing evidence. See Fed.R.Evid. 301; 2 J. Strong, McCormick on Evidence § 342 (4th Ed.1992).
Assuming for purposes of discussion that the regulation refers to a rebuttable presumption, then quite likely the Zelmans have the burden of offering evidence to establish that the bonds were stolen from them and if redeemed were redeemed without their permission. They might have such a burden even without the presumption. The Zelmans may be hindered because the Bureau has apparently disposed of the records of redemption apart from recording the fact of redemption. Still, a factfinder might well believe the Zelmans, especially if they can corroborate the theft of the bonds. Stolen bonds are unlikely to have been redeemed by their rightful owner.
If the Bureau regards the presumption as rebuttable, one might expect at least one of its letters to say this to the Zelmans in plain language and, further, to tell them what process (a review board, a court) is available to get a decision on the factual issue. If instead the Bureau thinks that the regulation creates an irrebuttable presumption — a kind of mini-statute of limitations — then it ought to have said so plainly to the Zelmans. To leave the matter in a state of confusion is not an attractive posture for an agency that must face this very issue with some frequency.
The government is a huge body employing millions of people, and needs to use regulations, routines and form letters. It is also right that its servants should be chary about claims against the Treasury, claims that are often ill-founded and sometimes dishonest. But it is not too much to ask that the Bureau of the Public Debt give a plain statement of its position — and even useful directions — to those citizens who have lent the government money, seek repayment, and have very little idea how to navigate through the forest of rules and procedures.
III.
The Zelmans’ filings, both in the district court and in this court, argue variously that case law supports equitable relief; that it is a violation of the due process clause to apply regulation § 315.29(b) as a statute of limitations to bonds sold before the regulation was promulgated; and that the records concerning the redemption should not have been destroyed since without them the Zel-mans cannot prove their case. These arguments do not alter our view that the district court should be affirmed.
The Zelmans’ argument for equitable relief rests on the ground that the government had an obligation, under the law as it existed when the bonds were purchased, to replace stolen bonds that have been improperly redeemed. This argument is difficult to appraise because the text of the provisions relied upon by the Zelmans is not quoted by the Zelmans, and the statutes and regulations to which the Zelmans cite do not clearly set forth the obligation that the Zelmans impute. Whether such an obligation might be made out, however, is an issue we need not determine.
On the Zelmans’ own version of the matter, the obligation on which they rely existed under statutory or regulatory language that has since been repealed. Although their position is not clearly explained, they may be arguing that the procedures and remedies that applied in 1968 and 1969 were incorporated into the bond contracts by implication or by the offering circular (which is not, however, quoted or cited). See generally Wolak, 366 F.Supp. at 1113-14. If this is their argument, then the Zelmans are back to arguing that the government has breached its contract and that equitable relief should be afforded for this breach.
The difficulty is that it is settled in this circuit that equitable relief cannot be obtained on contract claims against the government, Coggeshall, 884 F.2d at 3, with very narrow statutory exceptions that are not here relevant. 28 U.S.C. §§ 1491(a)(2), (3). This rule may not be followed everywhere and it can be especially hard to apply where contract claims are mingled with other claims not dependent on contract. See, e.g., Transohio Savings Bank v. Director, Office of Thrift Supervision, 967 F.2d 598 (D.C.Cir.1992). However, the rule remains the law of this circuit and may not normally be reconsidered except by the court en banc.
The Zelmans’ next argument is that it violates due process for the government to impose, through regulation 315.29, a ten-year statute of limitations (measured from an illegal redemption) on requests by rightful owners for replacement or payment of their stolen bonds. No such regulation existed, say the Zelmans, when their bonds were purchased; and (they say) their bonds have been extended by the Treasury for thirty years past their original maturity so the Zelmans had no earlier reason to inquire into their theft or illegal redemption.
It will be time enough for the courts to consider such a constitutional attack on the regulation if and when the government endorses the reading of the regulation as a statute of limitations and if and when the courts accept that reading. As we have already noted, the regulation on its face is susceptible to a quite different reading, namely, that it creates a rebuttable presumption (starting ten years after a redemption) that the bonds were lawfully redeemed. This in turn would leave it open to the rightful owner to show that the bonds were lost or stolen and were not redeemed by the rightful owner.
The Zelmans, appearing pro se, may misunderstand what is entailed in a showing of this kind. It would not be their automatic obligation to establish the details of the theft or identify the party who wrongfully redeemed the bonds. One might expect them to shed some light on where the bonds were kept, how they might have been purloined, why it took so long to discover the loss, whether the loss was reported to the police, and what investigations were made; but these are matters that go to plausibility and corroboration. If the Zelmans tell a plausible story, nothing prevents the trier of fact from accepting it.
As for the details of the redemption, all that a trier of fact would likely demand from the Zelmans is testimony that they did not redeem the bonds, did not authorize anyone to do so, and have no idea who did redeem the bonds. The fact that the government has destroyed the records is more likely to inconvenience it rather than the Zelmans, assuming that they have a plausible story to tell. Of course, we are proceeding on the arguen-do premise that the regulation is not a statute of limitations; but if it is a statute of limitations, the destruction of the records is probably irrelevant anyway.
We do not know whether the Zelmans will refile their contract claim lawsuit in the district court or in the Claims Court. But we trust that, once a forum with jurisdiction is chosen, government counsel will pay some mind to the question whether the Zelmans have a valid claim against the government or how to get this issue decided at minimum expense and without further delay. Thus far, this case is not much of an advertisement for savings bonds.
The judgment of the district court is affirmed without prejudice to the filing of a new suit for damages either in the Claims Court or in the district court (subject to resolution of the disaggregation issue). No costs.
. The series E bonds assertedly stolen from the Zelmans appear to have been registered bonds rather than bearer bonds. See 31 C.F.R. § 315.5 ("Savings bonds are issued only in registered form.... The registration is conclusive of ownership, except as provided in § 315.49 [relating to correction of error in registration].”).
. See e.g., Baker v. United States, 722 F.2d 517, 518 (9th Cir.1983); United States v. Louisville & Nashville R.R., 221 F.2d 698, 701-03 (6th Cir.1955); Sutcliffe Storage & Warehouse Co. v. United States, 162 F.2d 849, 851-52 (1st Cir.1947); see also 14 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure, § 3647 at 287 (2d ed. 1985).
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10523208-29005 | OPINION OF THE COURT
COWEN, Circuit Judge.
This appeal arises from an order of the district court denying appellant Jerry L. Smith (“Smith”) a writ of habeas corpus pursuant to 28 U.S.C. § 2254 (1982). Because we conclude that Smith was not afforded a full and fair evidentiary hearing in state court on his claim that his guilty plea was involuntary due to mental incompetence, we will vacate the order of the district court denying the writ of habeas corpus and remand for further proceedings.
I.
According to the prosecution, on February 19, 1981, Smith and his co-conspirator and ex-wife, Brenda Meinkrantz (“Mein-krantz”), drove from Missouri to Schwenks-ville, Montgomery County, Pennsylvania for the purpose of stealing money from the apartment of eighty-year-old Martha Thomas (“Thomas”). Late in the evening of February 20, after they checked into a local motel, Meinkrantz drove Smith to the apartment of Thomas and left him there.
A few hours later, Meinkrantz returned to Thomas’ apartment, met Smith inside and helped him carry out a tan overnight bag. The bag contained $700 in stolen cash. Later that day, the body of Thomas was discovered in her bedroom by police. A post-mortem autopsy revealed that she had died of manual strangulation.
Smith was apprehended a month later and charged with numerous crimes in connection with this incident, including the murder of Thomas. On September 11, 1981, Smith entered a plea of guilty to the charges of second-degree murder, conspiracy and burglary in exchange for a recommendation from the prosecution that he be given a life sentence on the murder charge and suspended sentences on the conspiracy and burglary charges. All the remaining charges were nol prossed. Smith was thereafter sentenced to life imprisonment by Judge William T. Nicholas. Since the defects present at the September 11 guilty plea colloquy between Judge Nicholas, Smith and Smith’s court-appointed counsel, Thomas J. Speers (“Speers”), form the basis of Smith’s current habeas claim, we discuss this colloquy in some detail.
Before accepting Smith’s plea, Judge Nicholas ascertained that Smith was being held in Norristown State Hospital (“Norris-town”), a psychiatric facility, had been committed there for two weeks prior to his decision to plead guilty, and received medication the night before. App. at 32-34. Smith told the court that this medication was to soothe his nerves and help him sleep, but that it did not affect his judgment. App. at 42. The court accepted Smith’s characterization of his medication and sought neither its name nor any expert opinion as to its effects.
Smith also informed the court that he had experienced mental problems in the past, including a psychiatric episode while in the Air Force which resulted in discharge after a period of hospitalization. App. at 34-35, 37. At this point in the proceeding, Judge Nicholas, noting that Speers had been authorized to retain a psychiatrist, asked what that psychiatrist’s opinion was as to Smith’s competency. Speers represented to the court that the psychiatrist, Dr. Robert L. Sadoff, in consultation with two other specialists, had informed Speers by letter that it was their opinion that Smith was competent. App. at 38-39. In addition, Speers stated that he had spoken by telephone with Dr. Sadoff that very morning and that Dr. Sadoff had recently received “various reports from various agencies and other individuals who ha[d] examined” Smith. App. at 39-40. Speers told the court that, based on these contacts, Dr. Sadoff was still of the opinion that Smith was competent. Id.
As later revealed, Speers’ representations to the court were false. Dr. Sadoff’s August 17 letter stated, contrary to the representation of Speers, that it was his opinion that Smith “is not mentally competent to proceed at the present time.” App. at 301. Moreover, because Dr. Sadoff did not re-examine Smith during the interim, he could not have told Speers in a later telephone conversation that he was still of the opinion that Smith was competent. In order for Speers’ representation to the court of Dr. Sadoff’s opinion on the day of the guilty plea to be true, the doctor would have had to completely reverse his professional opinion in the space of less than a month with no basis appearing in the record for such an about face. Furthermore, in his letter to Speers, Dr. Sadoff referenced only one other psychologist, Dr. Gerald Cooke, whose psychiatric opinion he had sought. As actually reported by Dr. Sadoff to Speers, Dr. Cooke also diagnosed “Smith as borderline with a question about his competency.” App. at 300.
Other facts lend credence to a strong inference that Speers misrepresented the contents of his telephone conversation with Dr. Sadoff on the day of the plea. Contrary to Speers’ suggestion in court, the various “individuals who ha[d] examined” Smith up to this point appear to have had serious concerns about his mental health. Smith had been committed to Norristown because prison staff psychologists believed he was suicidal. App. at 108. Upon commitment, the hospital staff placed Smith on “suicidal precautions.” App. at 110. While at Norristown, Smith was extremely disturbed, showed an inability to process information and manifested physical disturbances such as twitching movements. App. at 110-15.
As the testimony of Dr. Paul A. Grayce, one of Smith’s treating physicians at Nor-ristown, and Nancy Haines, a case worker at Norristown, established at Smith’s later nunc pro tunc hearing, the mental health professionals in contact with Smith during the period immediately after his plea had grave doubts about his competency. Dr. Grayce testified that although Smith was not immediately diagnosed upon admission, his eventual diagnosis sometime after September 11 was that of a “border-line personality disorder.” App. at 124. Dr. Grayce explained that this condition is marked by instability in mood, feeling and perception of oneself. Id. Under stress, persons with this disorder can rapidly “de-compensate,” and become psychotic and disorganized in their thinking. App. at 125. In addition, Dr. Grayce noted some marked dependency characteristics of Smith, as well as his “border-line personality disorder.” Dr. Grayce stated that Smith tended to make decisions and responses based on “outside influences, which he perceives to be significant,” e.g., “other people’s opinions, comments and/or state-ments_” App. at 125-26, 208. Haines testified that, as of September 14, Smith appeared extremely anxious — “as though he were a frightened child” — and constantly repeated nonsense phrases in response to most questions. App. at 201-02.
However, without the benefit of Dr. Sa-doff’s true opinion, and also without the benefit of any other expert opinion as to Smith’s competency, Judge Nicholas accepted the representation of Speers, as well as the statement of Smith himself, that he was competent. Thus, the court concluded that “[b]ased upon the colloquy with the defendant ... the Court finds that [Smith] has knowingly, intelligently, and voluntarily entered a plea of guilty to these three bills of information.” App. at 86.
Little more than a month later, on October 27, 1981, Smith filed a motion to challenge his guilty plea nunc pro tunc on the grounds that he had been incompetent both to enter his plea and to have understood his limited right under Pennsylvania law to challenge his guilty plea. See Pa.R.Crim.P. 321(a) (West Supp.1989). Speers was allowed to withdraw from the case and a newly-appointed counsel, Blake Dunbar, filed an amended motion adding additional allegations. Those allegations included that the guilty plea colloquy was defective and that trial counsel was ineffective both during the colloquy and for a period in excess of ten days thereafter.
The amended motion was heard by Judge Nicholas, the same judge who took Smith’s guilty plea. An evidentiary hearing was held, but only for the purpose of determining whether Smith was competent during the ten days following the entry of his plea. App. at 103-04, 226. Judge Nicholas reaffirmed his original finding of competency at the time of the guilty plea without hearing any evidence bearing on the competency of Smith at the time he pled guilty. His decision was based solely on his own recollection and the colloquy record. App. at 220-21, 230.
Although four witnesses were called at the hearing, none were permitted to testify as to Smith’s competency at the time of his guilty plea. As to Smith’s competency during the ten day period following his guilty plea, the only witnesses called by Smith were Dr. Grayce and Nancy Haines whose testimony has already been summarized. The prosecution called Speers who testified that he met with Smith during the ten days following the guilty plea and that Smith was competent and unwilling to challenge his plea despite appearing even more “distraught” than at the colloquy. App. at 154-55, 158-59, 163-64. The prosecution also called Meinkrantz’s mother who testified that she spoke to Smith during the ten day period and he appeared rational, although upset and depressed. App. at 188-91.
Based on this testimony, the court gave greater credence to the testimony of Speers and Meinkrantz’s mother , and found that Smith was competent during the ten day period after his guilty plea. App. at 220 (“I credit Mr. Speers’ testimony as an officer of the Court and as a person who is specifically trained to make such determinations that the defendant was fully competent, understood his options, understood the advice.”). Since Smith was found to have been competent both at the guilty plea stage and for ten days thereafter, the court found Speers to have been effective counsel who was simply unwilling to raise a frivolous incompetency claim.
Smith appealed to the Pennsylvania Superior Court from the denial of his motion. In a published opinion, the Superior Court affirmed the lower court’s ruling denying his motion to withdraw the guilty plea nunc 'pro tunc. Commonwealth v. Smith, 322 Pa.Super. 504, 469 A.2d 1104 (1983). In particular, the Superior Court relied heavily on Speers’ representations at the guilty plea colloquy in upholding Judge Nicholas’ reaffirmation that Smith was competent at the plea stage:
We are satisfied that the court’s explanation of the competency test and its seeking from counsel both his opinion and the opinions of licensed psychiatrists who had evaluated [Smith] satisfied the necessity of determining [Smith’s] competence [at the plea colloquy], A [competency] hearing would have been superfluous.
Id. at 514, 469 A.2d 1104. A petition for allowance to appeal to the Pennsylvania Supreme Court was denied.
On May 16, 1985, Smith filed a motion under Pennsylvania’s Post Conviction Hearing Act (“PCHA”), 42 Pa.Cons.Stat. Ann. § 9541-9551 (Purdon 1982). Smith’s petition was once again assigned to Judge Nicholas. In this motion, Smith repeated his competency claim. For the first time he combined the claim of incompetency to enter a plea with an ineffectiveness of counsel argument based on Speers’ misrepresentations of Dr. Sadoff’s psychiatric opinion, as well as subsequent failure of counsel to discover and raise the misrepresentation on appeal.
Following argument by counsel, Judge Nicholas granted the Commonwealth’s motion to dismiss the PCHA petition without an evidentiary hearing on the basis that Smith’s claims had already been fully litigated. In reaching this result, Judge Nicholas pointed to his own finding after the nunc pro tunc hearing, and the Superior Court’s affirmation of that finding, that Smith was competent to enter his guilty plea: “Simply stated, inasmuch as this court had earlier concluded that appellant was mentally competent to enter his guilty plea on September 11, 1981, which conclusion was affirmed by the Superior Court, this issue has been fully litigated.” App. at 289.
Our review of the record reflects that no serious consideration was given to how the misrepresentations of Speers might have effected the court’s original analysis that Smith was competent. Instead, Judge Nicholas concluded that “this is a case where Smith has had his bite at the apple and a further [evidentiary] hearing would simply [be] a hearing that would be directed at issues that have been finally litigated.” App. at 284. The dismissal was affirmed in an unpublished memorandum opinion by the Pennsylvania Superior Court. App. at 297-99. Smith’s petition for allowance of appeal to the Pennsylvania Supreme Court was denied on April 24, 1987.
Thereafter, Smith filed with the district court a pro se petition for a writ of habeas corpus. The petition alleged that Smith’s guilty plea was involuntary due to his mental incompetency at the time of the plea. Smith also repeated his ineffective assistance of counsel claims. The case was assigned to a magistrate who issued a report recommending that the petition be denied. The district court adopted the magistrate’s recommendation and denied the writ. This appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 1291 (1982).
II.
We begin our analysis by examining the argument of the appellees that the failure of Smith to challenge his guilty plea within ten days of his plea of guilty, as required by Pa.R.Crim.P. 321(a), constitutes a procedural default under Wainwright v. Sykes, 433 U.S. 72, 97 S.Ct. 2497, 53 L.Ed.2d 594 (1977). See Appellees’ Brief at 9. Because we find that no state court has barred Smith’s repeated challenges to his guilty plea because of a failure to comply with state procedural rules, the appellees’ argument must be rejected.
Wainwright v. Sykes made clear that federal courts will not consider an issue of federal law in a habeas corpus proceeding if the underlying state court judgment rests on a state law ground that is both independent of the merits of the federal claim and an adequate basis for the court’s decision. Harris v. Reed, — U.S. -, 109 S.Ct. 1038, 1042, 1043, 103 L.Ed.2d 308 (1989). This procedural default doctrine is not jurisdictional, but instead rests on principles of comity and federalism. See, e.g., Murray v. Carrier, 477 U.S. 478, 487, 106 S.Ct. 2639, 2644, 91 L.Ed.2d 397 (1986). However, the doctrine does not bar consideration of a federal claim on habeas review unless the last state court rendering a judgment in the case clearly and expressly states that its judgment rests on a procedural bar. Harris, 109 S.Ct. at 1043. See also Wainwright v. Witt, 469 U.S. 412, 431 n. 11, 105 S.Ct. 844, 855 n. 11, 83 L.Ed.2d 841 (1985); Connecticut v. Johnson, 460 U.S. 73, 80 n. 8, 103 S.Ct. 969, 973 n. 8, 74 L.Ed.2d 823 (1983) (plurality opinion); Hochman v. Rafferty, 831 F.2d 1199, 1203 (3d Cir.1987), cert. denied, 485 U.S. 1022, 108 S.Ct. 1577, 99 L.Ed.2d 892 (1988). The logic of this rule is obvious since where “neither the state legislature nor the state courts indicate that a federal constitutional claim is barred by some state procedural rule, a federal court implies no disrespect for the State by entertaining the claim.” County Court of Ulster County, N.Y. v. Allen, 442 U.S. 140, 154, 99 S.Ct. 2213, 2223, 60 L.Ed.2d 777 (1979).
None of the Pennsylvania courts which addressed the repeated challenges of Smith to his guilty plea indicated that his claim was barred by Rule 321(a). To the contrary, each court that addressed Smith’s competency claim reached the merits. Judge Nicholas, in hearing Smith’s nunc pro tunc motion, determined that he was bound under Pennsylvania law to reach the merits of Smith’s claim of incompetency. See App. at 231, 327. As he later described his reasoning:
[A]fter I read [Commonwealth v.] Higgins[, 492 Pa. 343, 424 A.2d 1222 (1980), cert. denied, 452 U.S. 919, 101 S.Ct. 3057, 69 L.Ed.2d 424 (1981) ], it became clear to me that you can never waive competency with respect to a Guilty plea. You can always raise the issue of mental incompetency, at the time of the plea. Always.
So while it’s true that the hearing of January 12th [on the nunc pro tunc motion] didn’t focus on the issues of competency at the time of the original plea, I considered it. And in my Opinion I said that the record fully supports the Court’s conclusion made and announced at the time of the original plea that he was competent to enter that plea....
App. at 275-76.
The Superior Court, in affirming the denial of Smith’s nunc pro tunc motion, also reached the merits of the competency claim by reviewing Judge Nicholas’ initial finding of fact on the issue. Smith, 322 Pa.Super. at 509-12, 469 A.2d 1104. The Superior Court concluded that: “We are satisfied that the court’s explanation of the competency test and its seeking from counsel both his opinion and the opinions of licensed psychiatrists who had evaluated [Smith] satisfied the necessity of determining [Smith’s] competence.” Id. at 514, 469 A.2d 1104. The only claim found to be procedurally barred by Rule 321(a) was Smith’s challenge to the adequacy of the plea colloquy itself, a claim which is not at issue in this habeas corpus proceeding. Id. The Pennsylvania Supreme Court declined to review Smith’s claim.
Similarly, both the trial and appellate courts which heard Smith’s PCHA petition dismissed it on the basis that it lacked merit, not because the claim was barred by Rule 321(a). Specifically, both courts relied on 42 Pa. Cons.Stat.Ann. § 9543(4) (Purdon 1982), which reads in relevant part: “To be eligible for relief under [PCHA] ... a person ... must prove ... (4) That the error resulting in his conviction and sentence has not been fully litigated....” Since both courts found that Smith’s competency claim had been fully litigated in connection with his nunc pro tunc motion, the claim was summarily dismissed. Cf. Hochman, 831 F.2d at 1203 (New Jersey petitioner’s claim was not procedurally barred in federal court where both state trial and appellate courts reached the merits, and the claim was dismissed in state post conviction proceedings because of those prior adjudications on the merits).
In sum, no Pennsylvania court, at any level, relied on Rule 321(a) to bar Smith from litigating his competency claim. Under the principles of Harris, we are not bound to enforce a state procedural rule when the state itself has not done so, even if the procedural rule is theoretically applicable to our facts. See Harris, 109 S.Ct. at 1045; United States v. Frady, 456 U.S. 152, 177, 102 S.Ct. 1584, 1599, 71 L.Ed.2d 816 (1982) (Blackmun, J., concurring in the judgment) (“The Court has long recognized that the Wainwright v. Sykes standard need not be met where a state has declined to enforce its own ... rule”); Hochman, 831 F.2d at 1202-03. Therefore, we turn to address the substance of Smith’s argument on appeal.
III.
The gravamen of Smith’s habeas corpus action is that the state courts failed to adequately examine the issue of whether he was mentally competent at the time he entered his plea of guilty to the murder of Martha Thomas. Because of the defects in the state court proceedings, Smith contends that he is entitled to an evidentiary hearing in federal court on the issue of whether his plea was voluntary. The district court found no defects in the state proceedings and denied the writ without holding an evidentiary hearing. Presuming that the findings of competency of the state courts were correct, the district court concluded that on the basis of the state court record, Smith “was sufficiently rational to understand the facts and consequences of the legal proceedings and to understand and consult with his attorney to meet the legal standard of competency to enter a voluntary plea.” App. at 317.
A district court decision denying a petition for a writ of habeas corpus is generally reviewed de novo. Norris v. Risley, 878 F.2d 1178, 1180 (9th Cir.1989); Toomey v. Clark, 876 F.2d 1433, 1435 (9th Cir.1989); Hopkinson v. Shillinger, 866 F.2d 1185, 1197 (10th Cir.1989). Cf. Sullivan v. Cuyler, 723 F.2d 1077, 1082 (3d Cir.1983) (appellate review of habeas corpus petitioner’s contentions “which implicate the interpretation and application of legal precepts is plenary”). When the district court has denied a petition without holding an evidentiary hearing our review consists of a two-step analysis. Toomey, 876 F.2d at 1435. We must first determine whether Smith has alleged facts that, if proved, would entitle him to relief. Townsend v. Sain, 372 U.S. 293, 312, 83 S.Ct. 745, 756, 9 L.Ed.2d 770 (1963); Toomey, 876 F.2d at 1435. And, if so, we must then decide whether an evidentiary hearing is necessary to establish the truth of those allegations. Townsend, 372 U.S. at 312-19, 83 S.Ct. at 756-60; Toomey, 876 F.2d at 1435.
Taking the factual assertions of Smith in the light most favorable to him, see Keller v. Petsock, 853 F.2d 1122, 1128 (3d Cir. 1988), it is clear that if his allegations are proved, he will have established a violation of his constitutional rights. The entry of a guilty plea necessarily involves the waiver of certain constitutional rights. McCarthy v. United States, 394 U.S. 459, 466, 89 S.Ct. 1166, 1170, 22 L.Ed.2d 418 (1969); United States v. Cole, 813 F.2d 43, 46 (3d Cir.1987). Such a waiver is valid under the due process clause only if it constitutes an intentional relinquishment or abandonment of a known right or privilege. McCarthy, 394 U.S. at 466, 89 S.Ct. at 1170. In other words, a defendant’s plea must be both intelligent and voluntary. Boykin v. Alabama, 395 U.S. 238, 242-43, 89 S.Ct. 1709, 1711-12, 23 L.Ed.2d 274 (1969). It is axiomatic that a mentally incompetent defendant cannot enter an intelligent and voluntary guilty plea. See, e.g., Dusky v. United States, 362 U.S. 402, 80 S.Ct. 788, 4 L.Ed.2d 824 (1960) (“the test [for determining a defendant’s competency] must be whether [the defendant] has sufficient present ability to consult with his lawyer with a reasonable degree of rational understanding — and whether he has a rational as well as a factual understanding of the proceedings against him”).
Since the allegations of Smith, if true, would establish a cognizable claim under 28 U.S.C. § 2254, we now turn to determine whether the district court erred in not affording Smith an evidentiary hearing. The standard we apply is a familiar one: “Where the facts are in dispute, the federal court in habeas corpus [proceedings] must hold an evidentiary hearing if the habeas applicant did not receive a full and fair evidentiary hearing in a state court, either at the time of the trial or in a collateral proceeding.” Townsend, 372 U.S. at 312, 83 S.Ct. at 756. See also Bibby v. Tard, 741 F.2d 26, 30 (3d Cir.1984); United States ex rel. Choice v. Brierly, 460 F.2d 68, 73 (3d Cir.1972); Rock v. Zimmerman, 543 F.Supp. 179, 195 n. 15 (M.D.Pa.1982). A habeas corpus petitioner is denied a full and fair hearing when:
(1) the merits of the factual dispute were not resolved in the state hearing; (2) the state factual determination is not fairly supported by the record as a whole; (3) the fact-finding procedure employed by the state court was not adequate to afford a full and fair hearing; (4) there is a substantial allegation of newly discovered evidence; (5) the material facts were not adequately developed at the state-court hearing; or (6) for any reason it appears that the state trier of fact did not afford the habeas applicant a full and fair fact hearing.
Townsend, 372 U.S. at 313, 83 S.Ct. at 757.
We find that “evidence crucial to the adequate consideration of [Smith’s] constitutional claim was not developed at the state hearing.” Townsend, 372 U.S. at 317, 83 S.Ct. at 759. See also 28 U.S.C. § 2254(d)(3) (1982). Moreover, we also find that such inadequate factual development was not due to the “inexcusable neglect” of Smith, and thus a federal hearing on the issue of competency is compelled. Townsend, 372 U.S. at 317, 83 S.Ct. at 759.
Our focus is on the record of the guilty plea colloquy since this was the only state hearing which dealt specifically with the issue of Smith’s competency at the time of his plea. Although subsequent state findings as to Smith’s competency at the time of his plea were made, these findings were always based solely on the record of the guilty plea colloquy. No other factual development on this issue was made in any of the various other state proceedings instituted by Smith. For example, the eviden-tiary hearing held in connection with Smith’s nunc pro tunc motion was expressly limited to the issue of whether Smith was competent during the ten days after his plea. No factual development was made as to his competency at the time of the plea. All attempts by counsel to probe the issue of competency at the time of the plea were blocked by the court. E.g., App. at 173-74. Similarly, the brief oral argument held during Smith’s PCHA proceeding — before his petition was summarily dismissed — was limited to the question of whether Smith’s competency claim had already been litigated and, if so, whether Smith’s new ineffective assistance of counsel argument was a surreptitious attempt to relitigate it. No evidentiary hearing, and thus no further factual development, was held on the merits of the claim during the PCHA proceedings.
Turning then to the guilty plea colloquy, it is beyond cavil that important and substantial evidence material to Smith’s mental competency was not developed during the course of that hearing. Indeed, one of the most crucial facts, i.e., the opinion of the court-authorized psychiatrist, was clearly misrepresented to the court. Contrary to the statement in court of Smith’s defense counsel, as of a month before the plea of guilty Dr. Sadoff’s opinion was that Smith was mentally incompetent. In addition, contrary to the representations of Speers to the court, the psychologist on whose report Dr. Sadoff relied also questioned Smith’s competency.
Other material facts were also not developed at the guilty plea colloquy. They include such matters as the basis for Dr. Sadoff’s opinion that Smith was incompetent, the opinion of Dr. Cooke who examined Smith and on whose report Dr. Sadoff relied in forming his own opinion, the opinion of the Norristown treating team as to Smith’s competency at the time of the plea, the admitting diagnosis at Norris-town that Smith was suicidal, and the identity, physical effect and purpose of medication taken by Smith at the time. As the Supreme Court has noted, evidence establishing a defendant’s irrational behavior and any prior medical opinion on competency is relevant to a trial court’s determination of whether or not further judicial inquiry into the defendant’s competency is required. Drope v. Missouri, 420 U.S. 162, 180, 95 S.Ct. 896, 908, 43 L.Ed.2d 103 (1975). Clearly, the more material facts that were left undeveloped, the less confident one can be in the conclusion emanating from this guilty plea colloquy.
The objectively inadequate factual development that occurred during the plea colloquy was the result of Speers’ misrepresentations which, in the absence of information casting doubt upon them, were entitled to acceptance by Judge Nicholas. However, we are confident that, despite Judge Nicholas’ statements to the contrary four years later, had the true contents of Dr. Sadoff’s letter, as well as the opinions of Smith’s Norristown treating team been revealed to the court by responsible counsel during the plea colloquy, further inquiry into this issue would have been deemed appropriate. Cf. Smith, 322 Pa.Super. at 514, 469 A.2d 1104 (in later reviewing and affirming Judge Nicholas’ decision not to hold a competency hearing, the Superior Court stressed that it was sufficient that he sought from Speers both his own opinion that Smith was competent, and the opinions of licensed psychiatrists who had examined Smith). Judge Nicholas was already alarmed by Smith’s nervous and anxious mental state, id. at 513, 469 A.2d 1104, was aware of Smith’s prior history of mental difficulties and that Smith was currently hospitalized in a psychiatric facility and receiving medication. Add to this troubling mix both Dr. Sadoff’s real opinion as of a month before the plea as well as Smith’s admitting diagnosis, and further inquiry would certainly have been warranted. See Pate v. Robinson, 383 U.S. 375, 385-87, 86 S.Ct. 836, 842-43, 15 L.Ed.2d 815 (1966). Cf. United States ex rel. Trantino v. Hatrack, 563 F.2d 86, 92-93 (3d Cir.1977), cert. denied, 435 U.S. 928, 98 S.Ct. 1499, 55 L.Ed.2d 524 (1978) (no competency hearing indicated when no psychiatrist expressed doubts as to petitioner’s competency, petitioner’s counsel expressed no worries and the petitioner exhibited “impressive demeanor and extensive vocabulary”). But since no further inquiry was conducted by Judge Nicholas, and since all subsequent findings that Smith was competent were based on the record of the guilty plea colloquy, all of the subsequent state findings necessarily suffer from the same Townsend defect.
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100342-7526 | OPINION
BARRY, Circuit Judge.
On September 27, 1993, after a jury trial in the Superior Court of New Jersey, appellant Vernol Stewart was convicted of first degree murder, possession of a handgun without a permit, and possession of a weapon for an unlawful purpose, and was sentenced to thirty years incarceration without the possibility of parole. He now appeals from the District Court’s sua sponte dismissal of his petition for a writ of habeas corpus on the ground that it was barred by the one-year statute of limitations set forth in 28 U.S.C. § 2244(d). For the reasons set forth below, we will vacate the District Court’s order and remand for further proceedings.
I.
Stewart filed a direct appeal to the Superior Court of New Jersey, Appellate Division, which affirmed his conviction on January 9, 1996. On March 26, 1996, the Supreme Court of New Jersey denied his Petition for Certification. State v. Stewart, 144 N.J. 175, 675 A.2d 1123 (N.J.1996) (table). Having exhausted his direct appeals, on March 21, 1997, Stewart filed a petition for post-conviction relief with the Superior Court, which was denied on July 31, 1997. The Appellate Division affirmed the denial, and on October 26, 1999, the Supreme Court denied Stewart’s Petition for Certification. State v. Stewart, 162 N.J. 199, 743 A.2d 851 (N.J.1999) (table).
On September 26, 2000, Stewart filed the instant habeas petition pro se, pursuant to 28 U.S.C. § 2254, alleging (1) that his trial and appellate counsel had rendered constitutionally ineffective assistance; (2) prosecutorial misconduct; and (3) errors by the trial court in instructing the jury. On April 25, 2001, the District Court ordered respondents to file an answer to the petition, and, on June 28, 2001, they filed a 39-page answer which addressed Stewart’s petition on the merits, but did not raise, much less raise as an issue, the applicable statutory limitations period. Stewart filed a pro se traverse responding to the answer on July 31, 2001.
Six months later, on January 23, 2002, the District Court dismissed Stewart’s petition because it had not been filed within the one-year limitations period prescribed by 28 U.S.C. § 2244(d). The District Court found that section 2244(d)’s one-year period for filing a habeas petition began to run for Stewart on April 23, 1996, the effective date of the Antiterrorism and Effective Death Penalty Act (“AEDPA”) and the beginning of the one-year grace period for claims arising prior to that date. The District Court concluded that, even after tolling the one-year limitations period for the time that Stewart’s petition for post-conviction relief was pending before the state courts, the limitations period had run on November 30, 1999, ten months before Stewart filed his habeas petition. The District Court’s dismissal of that petition was based solely on its conclusion that it was thus time-barred, and did not address any other procedural issues or the merits of the petition or respondents’ answer.
On February 28, 2002, Stewart filed a notice of appeal with this Court, and on March 15, 2002, we remanded the matter to the District Court with instructions to either issue a certificate of appealability or to state why such a certificate should not issue. On March 18, 2002, the District Court issued an order which stated that Stewart was not entitled to a certificate of appealability because he had not made a substantial showing of the denial of a constitutional right, and for the reasons it had set forth in its January 23, 2002 order dismissing the petition.
On November 29, 2002, we issued an order treating Stewart’s notice of appeal as a request for a certificate of appealability pursuant to 28 U.S.C. § 2253(c)(1), and granted the request as to the following question: “Whether the district court erred by sua sponte dismissing Appellant’s petition for a writ of habeas corpus as time barred by the one year period of limitation prescribed in 28 U.S.C. § 2244(d), where the respondents did not assert the affirmative defense in their answer to the petition.”
II.
In our recent en banc decision in Robinson v. Johnson, 313 F.3d 128 (3d Cir. 2002), we held that “because the AEDPA limitations period [28 U.S.C. § 2244(d) ] is subject to equitable modifications such as tolling, it is also subject to other non-jurisdietional, equitable considerations, such as waiver.” Id. at 134. Accordingly, we held that the AEDPA’s limitations provision is an affirmative defense, which, just like any other statute of limitations defense, mil be waived if not timely raised by a state respondent to a habeas petition.
In Robinson, after concluding that a state respondent could waive the limitations defense, we went on to consider at what point in a habeas proceeding the limitations defense will be considered waived. We noted that although Federal Rule of Civil Procedure 8(c) requires that a defendant plead a statute of limitations defense in his or her answer, the established rule of this Court also allows a statute of limitations defense to be raised by motion under Federal Rule of Civil Procedure 12(b)(6), “but only if ‘the time alleged in the statement of a claim shows that the cause of action has not been brought within the statute of limitations.’ ” Id. at 135 (quoting Hanna v. U.S. Veteran’s Admin. Hosp., 514 F.2d 1092, 1094 (3d Cir.1975)). In accordance with these rules, we held that “affirmative defenses under the AEDPA ... if not pleaded in the answer ... must be raised at the earliest practicable moment thereafter.” Id. at 137.
In Robinson, the state respondents’ initial response to Robinson’s habeas petition did not mention the statute of limitations defense, but instead argued that the District Court lacked jurisdiction to consider the petition because it was a successive petition filed without authorization from this Court as required by 28 U.S.C. § 2244(b)(3)(A). Only after we found that Robinson’s petition was not a successive petition precluded by section 2244(b)(3) and remanded the petition to the District Court did the state respondents raise the limitations defense in their answer.
Under these facts, we held that the state respondents had not waived the limitations defense. We reasoned that the state respondents’ initial response to Robinson’s petition was the equivalent of a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(6), and, thus, the affirmative limitations defense need not then have been raised. Accordingly, the state respondents’ assertion of the limitations defense in their first pleading after the petition was remanded was timely.
In light of our analysis and holdings in Robinson, of which the District Court did not have the benefit when it dismissed the petition, it is clear that the District Court should not have sua sponte dismissed the petition on the ground it was time-barred under section 2244(d). Unlike the state respondents in Robinson, respondents here never even mentioned the limitations defense in any pleading and thereby waived the defense. As we held in Robinson, the AEDPA’s limitations defense, if not raised in the answer, “must be raised at the earliest practicable moment thereafter.” Robinson, 313 F.3d at 137. Here, over six months passed between the filing of the answer to Stewart’s petition and the District Court’s dismissal. Clearly, the “earliest practicable moment” that respondents could have raised the limitations issue had long since passed by the time the District Court dismissed the petition.
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1694423-8372 | SYMES, District Judge.
The United States filed its petition on August 13, 1923, in the District Court for the Western District of Oklahoma, alleging it had entered into a contract with Ered B. Hannan, the defendant here and below, for the construction of an annex to a government school building at the Et. Sill Indian School; further, that the said Hannan, as principal, and the defendants Robertson and McLennan, as sureties, had obligated themselves for the faithful performance of the contract in all respects, including the payment of all persons supplying labor or materials in the prosecution of the work in accordance with the Act of August 13,1894, as amended by the Act of February 24, 1905, c. 778 (33 Stat. 811 [Comp. St. § 6923]). It alleged next that Hannan was long delinquent in the date of the completion of the work, by reason of which there became due to the government, at the rate of $6 per day for each day of such delinquency, the sum of $1,870 as liquidated damages.
On October 15, 1923, the Antrim Lumber Company by leave of court intervened, and by its amended petition set up that between September 9, 1918, and September 30, 1919, it furnished certain materials used in the construction of the building, to the value of $625.10, and asked judgment for .that amount, with interest, subject to the prior claim of the United States.
The defendant Hannan, to this petition in intervention, pleaded a general denial, and, further, that the intervener was not entitled to maintain its petition, as suit was not commenced until August 13, 1923, as aforesaid, and that the performance and final settlement of said contract, as provided for by the act referred to, occurred on September 13, 1921, and not thereafter, so that the alleged cause of action of the intervener, if any, as well as of the United States, was barred by the limitation of time in which said action was entitled to be prosecuted. The other defendants, the sureties, adopted this answer as their own. The intervener replied by a general denial.
The material facts were not disputed, and the case was tried to the court, which held that the defendant was not indebted to the United States in any amount under the bond, but that there was due the said Fred B. Han-nan from the government the sum of $638; that the settlement had occurred at least as early as December 30, 1920, when the Commissioner of Indian Affairs had demanded of Hannan the payment of $1,870 as the amount due the government, and that 2 years and nearly 8 months had elapsed between that date and the institution of the suit.
The court, however, held that the suit of the United States was not prematurely brought, as its right of action was not founded on the statute, but that the materialmen were barred by the terms of the statute, and accordingly dismissed the petitions of the United States and the intervener. The latter brings the case here, the United States not appealing.
The errors assigned are: That the court erred in deciding that there has been a final settlement of the contract within the meaning of the Act of August 13,1894, as amended by the Act of February 24,1905 (33 Stat. 811 [Comp. St. § 6923]); and error in holding that the Antrim Lumber Company was not entitled to intervene.
The act in question, which we are required in part to interpret, provides substantially that all contractors entering into a formal agreement with the United States for the construction of public buildings, etc., shall give the usual penal bond, with thé additional obligation that the contractor shall promptly make payments to all persons supplying him with labor and materials, who shall have the right to intervene, and have their rights and claims adjudicated, in any action instituted by the United States on the bond, subject to the prior claim and judgment of the United States. If no suit is brought by the government within six months from the completion and final settlement of said contract, then such person supplying labor or materials to the contractor may obtaiii a copy of the contract, and bring his own action in the name of the United States upon the bond in the federal court for the district in which the contract was to be performed, “provided that, where suit is instituted by any of such creditors on the bond of the contractor, it shall not be commenced until after the complete performance of said contract and final settlement thereof, and shall be commenced within one year after the performance and final settlement of said contract; and not later,” and further that, where a suit is so instituted by a creditor or creditors, only one action shall be brought, in which any creditor may file his claim and be made a party thereto within one year from the completion of the work under the contract, and not later. There are other provisions not material to this discussion.
The principal question is: When did a final settlement, as defined in this statute, take place? Plaintiff in error argues that there was no final settlement of the contract as such until the conclusion of this trial in the lower court and the failure of the United States to appeal, as up to that time the United States had never released its claim against the bond; that the expression “final settlement,” as here used, means the time when the United States, through its proper officials, indicates a decision not to sue on the ’bond — citing U. S. v. Robinson (C. C. A.) 214 F. 38 (Second Circuit), and other cases.
The matter, however, is authoritatively settled in Illinois Surety Co. v. U. S., 240 U. S. 214, 36 S. Ct. 321, 60 L. Ed. 609. In that case the building in question was completed, and on the 21st of August, 1912, the Treasury Department “stated and determined the final balance” to be paid was the sum of $3,999.01, and so notified the contractor. On August 26,1912, a voucher was prepared for this amount and accepted by the contractor, and on September 11,1912, a cheek for that sum was delivered and cashed by him. The Supreme Court held that “final settlement” of a contractor’s account, within this act, is not when the final payment is made, but is the final administrative determination by the proper authority of the ' amount due, and that therefore the suit which was brought by the subcontractor against the surety, six months after the date of such determination, but within six months after the payment, was not prematurely brought; the United States not having meanwhile brought an action. The opinion points out that Congress must have used the words “final settlement” advisedly, instead of “final payment”; that the former, when used in connection with a public transaction and account, connotes an administrative determination of- the amount due, and that such has been the interpretation put upon the word “settlement” by the Treasury Department from the very beginning; in other words, that it‘means an appropriate administrative determination of the amount which the government is finally bound to pay, or entitled to receive, as indicated by some public record or official act, and it does not depend, nor can the time he put off by a refusal to agree.
Likewise, in U. S. v. Title G. & S. Co. (C. C. A.) 254 F. 958, it was held that there might be a final settlement between the gov- . -ernment and. the contractor, which would fix the rights of creditors furnishing labor or material, although full payment is not then made, and the balance may be subject to change. Even in the Robinson Case, supra, the court held that final settlement occurred when the supervising architect, or the .Treasury Department, by letter, approved a final settlement, even though a part of the contract price was reserved to insure the completion of certain unfinished work, because it was then evident that the United States was satisfied that the performance of the contract by the contractor had been substantially sufficient to discharge the surety as to it. Therefore, as the opinion states, there is no merit in the contention that the subcontractor must or can wait to begin his suit until all disputes as to the completion are finally settled.
The statute does not constitute a limitation on the United States. U. S. v. Marshall (D. C.) 225 F. 687, affirmed (C. C. A.) 225 F. 760. But the intervener is not in so fortunate a position, its cause of action being purely statutory.
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1615189-30184 | CUDAHY, Circuit Judge.
These two appeals involve regulations governing the reimbursement of hospitals for the cost of providing health care to Medicare beneficiaries. The Secretary of Health and Human Services (the “Secretary”) appeals the district court’s reversal of his determination that the “concentrated care unit” at St. Elizabeth Hospital (“St. Elizabeth’s”) is not entitled to reimbursement as a “special care hospital inpatient unit.” St. Elizabeth’s appeals the district court’s affirmance of the Secretary’s determination that earnings on funds that it pays into an employee health benefit trust fund must be used to offset interest expense that the hospital accounts for as an “allowable cost” under Medicare. We reverse as to the concentrated care unit on the ground that the Secretary’s decision was supported by substantial evidence. As for the investment income offset, we cannot affirm on the grounds offered by the Secretary. Therefore, see SEC v. Chenery Corp., 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1943), we remand this portion of the case to HHS for further action.
I. THE CONCENTRATED CARE UNIT
A.
The Medicare program, Title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq., provides hospital insurance benefits to certain classes of people, primarily the elderly. Health care facilities certified as “providers of services” are reimbursed by the federal government for services rendered Medicare beneficiaries, either directly or through a fiscal intermediary. St. Elizabeth’s is a Medicare provider of services receiving reimbursement through Blue Cross of Wisconsin (“Blue Cross”).
For care provided a Medicare beneficiary, St. Elizabeth’s is entitled to be reimbursed the lesser of either the “reasonable cost” of the services or the “customary charge” for such services. 42 U.S.C. § 1395f(b). Congress has charged the Secretary with promulgating regulations governing computation of the “reasonable cost” of services, requiring that any method incorporate accurate cost accounting and an accurate allocation of costs between Medicare and non-Medicare patients:
The reasonable cost of any service shall be determined in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs for various types or classes of institutions, agencies, and services____ Such regulations may provide for determination of the costs of services on a per diem, per unit, per capita, or other basis, may provide for using different methods in different circumstances, may provide for the use of estimates of costs of particular items of services, and may provide for the use of charges or a percentage of charges where this method reasonably reflects the costs. Such regulations shall ... take into account both direct and indirect costs of providers of services in order that, under the methods of determining costs, the costs with respect to individuals covered by the insurance programs established by this subchapter will not be borne by individuals not so covered, and the costs with respect to individuals not so covered will not be borne by such insurance programs.
42 U.S.C. § 1395x(v)(l).
The Secretary has promulgated “apportionment” regulations that detail how to allocate costs between Medicare and non-Medicare patients “so that the share borne by the program is based upon actual services received by program beneficiaries,” 42 C.F.B. § 405.452(b). Because St. Elizabeth’s has more than one hundred beds, it must use the “departmental” method of apportionment. Id. § 405.452(c)(2). Under this method all units within a hospital are classified as either “routine patient care areas” or “intensive care units, coronary care units, and other special care inpatient hospital units” (herinafter “special care units”). A special care unit must meet the following requirements:
[T]he unit must be in a hospital, must be one in which the care required is extraordinary and on a concentrated and continuous basis and must be physically identifiable as separate from general patient care areas. There shall be specific written policies for each of such designated units which include, but are not limited to burn, coronary care, pulmonary care, trauma, and intensive care units but exclude postoperative recovery rooms, postanesthesia recovery rooms, or maternity labor rooms.
Id. § 405.452(d)(10).
The “reasonable” daily cost of services provided to Medicare patients in either a special care unit or the routine care areas is based on an “average cost per diem.” The average cost per diem is computed by dividing the total cost of “routine service” (all services save those provided by such “ancillary” departments as x-ray and pharmacy, which traditionally bill separately, see id. §§ 405.452(d)(2), 405.452(d)(3)) incurred by both Medicare and non-Medicare patients, by the total number of patient days (Medicare and non-Medicare) in that area. Id. § 405.453(d)(7). To this is added a fraction of total patient charges in the ancillary departments. The total is the “reasonable cost” of services. This set of calculations is done separately for each of the special care units in a hospital and then for all of the routine care areas taken together. Thus, whether a particular unit is classified as a routine care area or special care unit may alter the amount of Medicare reimbursement to which a hospital is entitled. St. Elizabeth’s believes that it will not receive adequate reimbursement for the care it provides to Medicare patients if its concentrated care unit (“CCU”) is classified as a routine care area for apportionment purposes.
B.
St. Elizabeth’s CCU is a 21-bed unit, adjacent to but physically separate from its 14-bed intensive care unit, that provides rehabilitation and reorientation to patients suffering from heart trauma. It also cares for stroke patients and other patients who no longer need intensive care but who are not yet ready to return to the routine care wards.
Until 1978, St. Elizabeth’s treated the CCU as a special care unit for apportionment and reimbursement purposes. In January 1978 Blue Cross conducted a study of per diem costs in Wisconsin hospitals. It found that the average per diem nursing salary and average per diem patient cost in St. Elizabeth’s CCU was substantially lower than those in special care units in hospitals of a comparable size. Conversely, it found that the costs in St. Elizabeth’s intensive care unit were somewhat higher than the state average for special care units. Blue Cross reported its findings to the Health Care Financing Administration (“HCFA”), the agency within HHS that administers Medicare. The HCFA instructed Blue Cross to examine whether the CCU qualified, under the regulations, as a special care unit.
Blue Cross relying on the requirements set forth in 42 C.F.R. § 402.452(d)(10), supra, determined that the CCU did not qualify as a special care unit. Based on this determination, Blue Cross adjusted St. Elizabeth’s cost reports for 1975, 1976 and 1977 to reflect the CCU’s new status as a routine care area. The difference in reimbursement after adjustment was $34,299, $22,027, and $23,117, respectively, for the three years in question.
St. Elizabeth’s appealed this adjustment to the Provider Reimbursement Review Board (the “PRRB”), which decided that Blue Cross had erred in classifying the CCU as a routine care area. The Secretary reversed this decision, ruling that the CCU was a routine care area. St. Elizabeth’s brought suit in federal court in the Eastern District of Wisconsin, challenging the Secretary’s final decision. The district court referred the matter to a magistrate, who recommended reversing the Secretary. Magistrate’s Recommendation, No. 82-C-656 (Nov. 2,1984), at 14. The district court adopted the magistrate’s recommendation. St. Elizabeth Hospital, Inc. v. Heckler, No. 82 C 656 (Jan. 30, 1985), at 4, The Secretary appeals.
We must examine (1) whether the Secretary’s decision that the CCU at St. Elizabeth’s does not qualify as a special care unit is supported by substantial evidence and (2) whether the Secretary’s interpretation of the apportionment regulations as mandating only two levels of care is arbitrary and capricious.
C.
The magistrate ruled that the Secretary had not shown that his finding was supported by substantial evidence. The Secretary argues that the magistrate, whose recommendation the district court adopted without comment, misapplied our holding in Community Hospital of Indianapolis v. Schweiker, 717 F.2d 372 (7th Cir.1983). In that case we were asked to review the Secretary’s determination that a physical rehabilitation center — a hospital unit providing health care and therapy to physically disabled individuals — did not qualify as a special care unit. There, as here, the question was what was meant by the requirement that care provided in such a unit be “extraordinary, concentrated and continuous.” We rejected as “not implicit in the plain meaning” of § 405.452(d)(10) the Secretary’s contention that in order to qualify as a special care unit a hospital unit had to treat critically ill patients “in immediate life-threatening situations.” 717 F.2d at 376. Instead, we held that the regulation required only that “the level of care provided in a special care unit be comparable to the level of care provided patients in ... recognized units.” Id. (emphasis supplied). In so doing we rejected the ejusdem generis approach (adopted by several circuits ) which would require that all special care units treat the critically ill since those cited in the regulation as examples do. See 717 F.2d at 378 (Wood, J., dissenting). We examined the administrative record and noted that
nursing staff-patient ratios and operational costs of the rehabilitation center were much closer to those of the recognized special care units than to those of the Hospital’s routine service areas. Moreover, the rehabilitation center, like the recognized special care units, did not employ nurse’s aides although such employees are regularly engaged to perform tasks in routine service areas____
Id. at 377. We concluded that the level of care provided in the physical rehabilitation center was comparable to that provided in a special care unit, even if the type of care and patient treated was not.
In the case before us, as in Community Hospital, the Secretary offered the magistrate comparative data on per diem costs, nursing hours, nursing salaries and depreciation costs. He argued that these tended to show that St. Elizabeth’s CCU had operational costs more “comparable” to those in the routine care areas than to those in intensive care, a recognized special care unit. The magistrate agreed with the statistical inference: “A statistical comparison shows that the CCU falls between intensive care and routine____ In most areas the CCU is in closer proximity to routine care than to intensive care.” Magistrate’s Recommendation at 9. Nonetheless, he held that these comparisons, taken alone, did not provide substantial evidence to support the Secretary’s determination that the CCU was not a special care unit. He held that “a ‘middle level’ of care can still qualify as a special care unit,” id. at 9, “where as here the care being provided is not ‘routine,’ ” id. at 10.
We agree that the magistrate did not apply Community Hospital correctly. Community Hospital merely held that in deciding whether a hospital unit provides special care the Secretary could not consider dispositive the type of care provided and patient treated; he had to look at the level, or intensity, of care offered. The latter approach would conform to the regulation’s language and its purpose, increasing the accuracy of cost allocation.
The magistrate properly looked at the same criteria we examined in Community Hospital and determined that the level of care provided in the CCU was not comparable to that provided in one of St. Elizabeth’s special care units. But he then ruled that the CCU should be deemed a special care unit because the care offered was not “routine.” Routine care cannot be the benchmark in these circumstances. The regulatory scheme recognizes that a continuum of types and levels of care are present in any hospital and creates a threshold, a certain point at which the level of care reaches such an intensity that Medicare accounts for it separately for apportionment purposes. This is special care, or care that is “extraordinary, concentrated, and continuous.” All care that falls below that mark is, by definition, routine. It does not matter whether care is considered “routine” in layman's terms; if the care provided in the CCU is not comparable to special care, it is routine. We hold that there was substantial evidence, of the sort we approved in Community Hospital, to support the Secretary’s determination that the CCU was not a special care unit.
D.
St. Elizabeth’s also suggests that the Secretary’s interpretation of the apportionment regulations as mandating only two levels of care is arbitrary and capricious. It does not challenge the regulations themselves (an almost insurmountable burden, since the Secretary’s formal rule-making in this field is entitled to “legislative effect,” Schweiker v. Gray Panthers, 453 U.S. 34, 44, 101 S.Ct. 2633, 2640, 69 L.Ed.2d 460 (1981)); rather, it argues that the Secretary is bound to assure accurate allocation of costs between Medicare and non-Medicare patients by reading his regulations as authorizing an “intermediate” level of care subject, like special care, to individualized unit cost determinations. Although the Secretary’s interpretation of his own regulations is entitled to considerable deference, we are charged with the task of ensuring that this interpretation is consistent with the language and purpose of the regulation.
Much of the argument on appeal is over semantics and we believe that the parties’ characterizations of their preferred outcomes as involving “two” versus “three” levels of care only serves to confuse the issue. As we stated supra, all care that is not denominated “special care” is considered in the aggregate under the catch-all label “routine care” in determining average cost per diem and hence the reasonable cost of a hospital stay. Each unit that provides “special care” is treated separately, with its own average cost per diem and reasonable reimbursement figure. In one sense, then, St. Elizabeth’s is correct in stating that the regulations do not, by their terms, limit reimbursement to two levels of care only. There will be as many reimbursement levels as there are special care units — plus one (routine care). But the Secretary’s interpretation is supported by the fact that the regulations mention only special and routine care: no third “level” of care appears in the regulations.
What St. Elizabeth’s wishes us to do, in effect, is push down the threshold point that divides special care from routine so that the CCU can also be considered separately for apportionment purposes. With the issue before us thus framed, the question is really whether the point at which the cut-off is currently made — that is, the definition of “special care” — is arbitrary, capricious and inconsistent with the purpose of the regulation.
Taking a hospital unit out of routine care and making it a special care unit will (if the costs of that unit are, like the CCU’s, on the higher end of the routine care spectrum) raise the average recorded cost per diem of Medicare patients in the CCU — and correspondingly lower the average cost per diem of Medicare patients left in a routine care area. If Medicare patients were uniformly spread throughout a hospital and were receiving the average amount of services provided in their respective units, it would not matter how the Secretary divvied up the units for reimbursement. There would be no need for any special care units at all. But common sense tells us that this is not the case and that a higher percentage of elderly patients (hence, Medicare beneficiaries) will be receiving hospital care of a more intensive— and expensive — kind. If this is the case, computing average per diem cost without differentiating between levels of care would put hospitals at risk of not receiving adequate reimbursement for the care they provide Medicare patients.
This effect apparently motivated the 1972 amendments to the apportionment regulations, which first adopted the special care unit classification. This scheme allowed the Secretary to provide a more accurate allocation of costs without creating an unmanageable administrative burden. Certain hospital units with significantly higher costs were separated out, but not so many as to destroy the administrative benefits of aggregation. The question is one of balancing further refinement of allocation against increased administrative costs. We are not sure where another threshold point, more reasonable than the one the Secretary has set, would be found. A hospital would always have the incentive to seek to have its higher cost routine care areas (so long as they were disproportionately Medicare-utilized) accounted for as special care units. St. Elizabeth’s told us at oral argument that Medicare patients are disproportionately represented in the CCU. Thus, it is to its advantage to have the CCU accounted for separately and receive a correspondingly smaller reimbursement amount for those (fewer) Medicare patients in the remaining routine care areas. Of course, as St. Elizabeth’s is at pains to point out, it is to the Secretary’s financial benefit to have the CCU remain a routine care area. But this will not always be the case. If the special care threshold were lowered, other areas in a hospital that benefit the hospital by retaining their routine care designation would also be candidates for special care status. These could be typically Medicare-underutilized units, such as narcotics rehabilitation or neonatal care. (Maternity wards, also typically Medicare-underutilized, are required by the regulation to be considered routine care areas. See 42 C.F.R. § 402.452(d)(10)). The fact that special care unit status is not a one-way street suggests that the increased refinement to be achieved by St. Elizabeth’s proffered interpretation would probably not be so great as to overcome the increased administrative burdens, and certainly not weighty enough to persuade us that the Secretary’s interpretation is unreasonable. Classification for cost purposes is an area where judgment and discretion must always play a significant role.
Therefore the judgment insofar as it sets aside the Secretary’s classification of the concentrated care unit is reversed.
II. THE INVESTMENT INCOME OFFSET
St. Elizabeth’s provides its employees health insurance through a self-funded insurance plan called the St. Elizabeth Hospital Health Benefit Plan. The Plan is administered as an independent trust — the St. Elizabeth Health Trust (“Trust”) — into which St. Elizabeth’s contributes funds on a regular basis, based on needs projected by an actuary. In its 1975, 1976 and 1977 cost reports, St. Elizabeth’s claimed as an allowable cost its contributions into the Trust. The Trust’s assets are invested and generate investment income, which must be retained in the Trust and used to pay for employee health care. We must consider here the treatment of this investment income under Medicare’s provider reimbursement scheme. (We will also touch upon the treatment of contributions to self-insurance funds, an issue which has not been appealed to this court but which is related to the investment income offset.)
In determining which of a hospital’s expenses may be included in the reasonable cost of a Medicare patient’s hospital stay, “[njecessary and proper interest on both current and capital indebtedness is an allowable cost,” 42 C.F.R. § 405.419(a). The definition of “necessary” requires that the interest be
reduced by investment income except where such income is from gifts and grants, whether restricted or unrestricted, and which are held separate and not commingled with other funds. Income from funded depreciation or provider’s qualified pension fund is not used to reduce interest expense. Interest received as a result of judicial review by a Federal court ... is not used to reduce interest expense.
Id. § 405.419(b)(iii). The Secretary has interpreted this regulation as requiring that the income earned by the Trust be offset against and reduce St. Elizabeth’s otherwise allowable interest expense.
When Blue Cross reopened St. Elizabeth’s cost reports for 1975,1976 and 1977, it denied reimbursement for contributions to the Trust and also denied reimbursement for interest expense to the extent it was offset by income earned by the Trust. St. Elizabeth’s appealed both of these issues to the PRRB, which upheld Blue Cross’ position on both. The HCFA then affirmed the PRRB, and the district court referred both issues to the magistrate, who recommended affirming the Secretary on both. As for allowing the cost of contributions to the Trust, the magistrate noted that while the applicable regulation states that “premium payments for employee health ... plans” are an allowable cost, the Provider Reimbursement Manual (the “Manual”), which contains the Secretary’s interpretation of the regulations, states that when payments are made into a self-insurance fund, the cost of contributions is not allowable. Magistrate’s Recommendation at 15. He concluded that it was not arbitrary, capricious or an abuse of discretion for the Secretary to interpret the regulation providing for reimbursement for premiums as applying to commercial insurance policies only. As to the investment income offset, the magistrate cited Manual section 2161B, which states that “the provider’s total allowable interest expense under the Medicare program will be offset by income earned by invested insurance reserve funds.” He also noted that investment income from employee health benefit self-insurance is not one of the four enumerated exceptions to the general rule of the income-offset regulation and again concluded that the Secretary’s interpretation was reasonable. Magistrate’s Recommendation at 15-16.
The district court adopted the recommendation about the income offset without comment but declined to adopt the Magistrate’s recommendation on the treatment of contributions to a self-insurance fund. It rejected the distinction between commercial insurance and self-insurance, finding no warrant in the regulations or in reason and ruled that the amounts contributed into the Trust were allowable. District Court Opinion at 5 (“The payments made by the hospital for its employees’ health insurance do not lose their status as ‘premiums’ ... simply because the insurance plan is self-funded____”). The Secretary apparently accepts this decision as he has not appealed it.
St. Elizabeth’s, however, appealed the district court’s decision on the investment income offset, arguing that it is unreasonable to read the offset regulation as applying to income earned by a trust fund to which St. Elizabeth’s has no effective access. The Secretary supports his interpretation of the regulation with the two reasons given by the magistrate, supra: (1) that the offset is required by section 2161B of the Manual and (2) that income from an employee health benefit self-insurance fund is not one of the listed exceptions to the general offset rule.
Section 2161B establishes the conditions under which a provider may be reimbursed for “actual losses” met by a self-insurance reserve fund. One of the eight conditions that a plan must meet to receive reimbursement for such losses is that “[t]he provider’s total allowable interest expense under the Medicare program ... be offset by income earned by invested insurance reserve funds.” Manual, § 2161B(6). For two reasons, however, we do not think that this condition, relied upon by the magistrate and the Secretary, is dispositive of the question before us.
First, the Manual was amended during the course of this litigation to add new provisions on the treatment of employee health benefit trust funds. Section 2161B, upon which the Secretary relies, now appears to apply only
[w]here a provider maintains a selfinsurance program for other than malpractice and comprehensive general liability coverage in conjunction with malpractice coverage, as well as unemployment compensation and workers’ compensation coverage coupled with secondary injury coverage, or employee health-insurance coverage, provided it meets the requirements of § 2162.7____
Manual, § 2161B (emphasis supplied). New Section 2162 covers “Provider Costs for Malpractice and Comprehensive General Liability Protection, Unemployment Compensation, Workers’ Compensation and Employee Health Care Insurance” and subsection 2162.7 sets forth the conditions which self-insurance funds must meet in order to be reimbursed for all payments into the trust fund. These amendments for employee health benefit coverage were added in January 1983, Action Transmittal No. 276, and are effective for all cost reports' “under appeal as of or subsequent to January 15, 1983,” Manual § 2162.11(c). Therefore, we think there is a real question whether section 2161B still applies to the Trust or whether section 2162, which does not expressly condition reimbursement on an investment income offset, has superseded it.
Second, even if section 2162 is not relevant here, the district court’s decision in this case casts doubt on the continued applicability of section 2161B to employee health benefit trust funds. This section, as noted, instructs providers how to set up a self-insurance plan so that “actual losses” met by the plan can be reimbursed. But the district court ruled that it was unreasonable to distinguish between commercial insurance and self-insurance and that therefore all contributions made by St. Elizabeth’s into the Trust were allowable costs. Therefore, section 2161B is no longer strictly applicable to the St. Elizabeth’s Trust: the offset requirement of section 2161B(6) is a condition precedent to a result — reimbursement for actual losses— that St. Elizabeth’s no longer wishes to achieve.
The Secretary also supports his interpretation of the offset regulation by appealing to its language: the regulation lists four exceptions to a general offset requirement and employee health benefit trust funds is not among them. St. Elizabeth’s counters by arguing that when a provider self-insures for malpractice, it need not offset the income earned by the reserve fund: this exception, it points out, is also not among those listed. In support of this claim it points to the requirement in section 2162 that, in order to be reimbursed for all contributions, a malpractice self-insurance fund must ensure that “any income earned by the fund must become part of the fund and used in establishing adequate fund levels.” Manual, § 2162.7(B)(6). Since the Trust retains earnings in the same way, St. Elizabeth’s argues that it is arbitrary for the Secretary to apply the offset rule to employee health benefit self-insurance funds.
No one has explained why the conclusion about the offset follows from the requirement that earnings be retained, but the Secretary does not dispute it. In fact, he seizes upon this requirement to distinguish malpractice self-insurance from employee health self-insurance. Appellant’s Reply Brief at 10. However, section 2162 and its requirement that income become part of the fund applies to employee health benefit self-insurance as well. If there is no offset for malpractice funds (as the Secretary’s silence suggests), then the Secretary has articulated no reason why there should be an offset for investment income generated by St. Elizabeth’s Trust. He cannot rely on the language of the regulation since neither of these forms of self-insurance are expressly exempted from the offset requirement.
In sum, neither of the reasons given us by the Secretary seems to support his interpretation of the offset regulation. Therefore, we vacate and remand to the Secretary for further action consistent with this opinion that part of the judgment concerning the investment income offset. On remand, the Secretary will want to consider (1) whether section 2162 of the Manual applies to the Trust; (2) if not, whether section 2161B applies to the Trust in light of the district court’s decision to allow the cost of self-insurance “premiums”; and (3) whether malpractice and employee health benefit self-insurance may be distinguished under the regulations.
REVERSED IN PART AND REVERSED AND REMANDED IN PART
. Medicare also provides supplementary medical insurance to the elderly and disabled. See 42 U.S.C. § 1395j et seq. This element of the program is not involved in this case.
. The regulations describe "departmental” apportionment as follows:
The ratio of beneficiary charges to total patient charges for the services of each ancillary department is applied to the cost of the department; to this is added the cost of routine service for program beneficiaries, determined on the basis of a separate average cost per diem for general routine patient care areas____[A]nd in hospitals, a separate average cost per diem for each intensive care unit, coronary care unit, and other special care inpatient hospital units.
Id. § 405.452(b)(1).
. Section 405.452(d)(10) was amended in 1980. 45 Fed.Reg. 54,757 (1980). Under the amended regulation, effective for cost reporting periods beginning on or after October 1, 1980, only an “intensive care type inpatient hospital unit” qualifies for separate reimbursement. Id. (emphasis supplied). Such a unit furnishes services only to "critically ill” patients and expressly does not include "subintensive” cr “intermediate" care units. The case before us, however, involves only the older version quoted in the text.
. There, as here, it was agreed that the unit was (1) in a hospital; (2) physically identifiable and separate from general patient care areas; and (3) governed by specific written policies. See 42 C.F.R. § 405.452(d)(10).
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696051-15736 | VOGEL, Circuit Judge.
Charles McChesney, a citizen of Montana, plaintiff-appellee, brought this ae tion against the Farmers Union Federated Cooperative Shipping Association, a North Dakota corporation, asking for damages arising out of a collision between an automobile driven by McChesney and a tractor-trailer truck operated in behalf of the defendant-appellant. The ease was tried to a jury and resulted in a verdict in plaintiff’s favor in the amount of $32,211. Upon denial of a motion for a new trial, the case was appealed to this court.
On March 25, 1955, plaintiff was driving in an easterly direction on U. S. Highway No. 2 about seven miles east of the City of Ray, North Dakota. He encountered blizzard conditions and reduced his speed to about ten miles per hour. He came to a cut in the highway and quite suddenly found that he could see nothing because of blowing snow. He stopped and opened the door to ascertain where the center yellow line of the highway was located and to get his bearings. As he did so, he heard the noise of a Diesel truck from the rear. He closed his door, began honking his horn and proceeded on east at about two to five miles per hour. After he had been honking his horn for approximately 20 seconds or longer, he was struck in the rear by the defendant’s truck.
Plaintiff claimed that he suffered a permanent whiplash injury to his neck and cervical spine and that his ability to follow his occupation as a rancher and stock raiser was greatly impaired.
Defendant’s first contention of error on appeal is that:
“The Trial Court Committed Prejudicial Error in Admitting into the Evidence the Testimony of John Bill-stein, Witness for the Plaintiff, and Exhibit 11, Pertaining to the Cost of an Annuity Contract and the Annuity Mortality Life Expectancy.”
John Billstein, district manager for a life insurance company in the business of selling life insurance and annuities, testified in behalf of the plaintiff, over objection, concerning the premium that would have to be paid to his insurance company to purchase an annuity for the plaintiff. He testified that his company would consider paying the plaintiff $10.00 a month for the rest of his life, considering his birth date, for a single premium of $1,691; a $100-a-month annuity for the rest of plaintiff’s life would require a single immediate premium of $16,910; an annuity of $500 a month would require a single premium annuity payment of $84,550. The witness stated that these calculations were based upon “The Annuity Table For 1949, based on the averages through the years 1939 and 1949”. Such annuity table fixed the life expectancy of the plaintiff at 14.83 years. A standard mortality table gave a life expectancy for the plaintiff of 11.55 years. The witness used the so-called annuity table because “It’s a known fact that a man who receives an income after age 65 without financial worry has a greater life expectancy”. Plaintiff’s Exhibit 11 was a computation showing the cost of a life annuity policy with Billstein’s company for Charles McChesney, date of birth August 4, 1891, age 65-J4. with a life expectancy “based on Annuity Mortality Table for 1949 . . . 14.83 Years” and which set forth the single premium costs as heretofore indicated.
The correct rule for the recovery of damages for loss of or diminished earning power is the gross amount of such lost earnings reduced to their present cash value. See Geier v. Tjaden, N.D., 1955, 74 N.W.2d 361, 365; Jones v. Eppler, Okl.1953, 266 P.2d 451, 457. To assist the jury in determining the gross amount of lost earnings where such decreased or lost earning capacity is considered permanent, standard mortality tables are admissible. Pauly v. McCarthy, Utah, 1947, 184 P.2d 123, 129; Geier v. Tjaden, supra, 74 N.W.2d at page 368, and Section 31-0805, North Dakota Revised Code, 1943:
“Statistical Tables Admissible to Establish Life Expectancy. In all cases in which the probable duration of the natural life of any person from and after a particular age is material, standard statistical tables of mortality are competent evidence of such probable duration or expectation of life.”
To assist the jury in determining the present cash value of lost future earnings, the testimony of an actuary with reference to the present cash value or the introduction of present worth tables is entirely proper.
The cost of an annuity for the remainder of the injured person’s life is not the measure of recovery for lost or diminished earning power. The measure is, as we have stated, the gross amount of the lost earnings reduced to their present cash value. Plaintiff’s method of proof here sought to hold defendant to the cost of this particular insurance company’s annuity, which of course included a profit to the company, whose interest or discount rate was undisclosed and which was based upon a special annuity life expectancy table indicating an increased life expectancy existing solely because of the annuity itself. An additional reason for inadmissibility of the cost of an annuity is the fact that it does not take into consideration that earning capacity, at least to its fullest extent, does not endure to the end of life expectancy but diminishes with age. We conclude that the trial court erred in admitting the evidence as to the cost of an annuity. Whether this error alone would, in view of the fact that the court correctly -instructed the jury as to the proper measure of damages for loss of earning capacity, require the reversal of the judgment appealed from, we find it unnecessary to decide.
Defendant’s second point is:
“The Trial Court Committed Reversible and Prejudicial Error on Cross Examination of Dr. Paul L. Johnson in Permitting Counsel for Pláintiffi to Quote and Read Extensively from an Article on Back Problems from the School of Medicine at Western Reserve University of Cleveland, Ohio.”
Dr. Johnson, defendant’s expert witness, was being cross examined. He was asked the following question:
“Q. I have here the volume that was a discussion of various back problems at the school of medicine at the Western Reserve University of Medicine in Cleveland. You have attended that, have you not, on numerous occasions in your study? Didn’t you spend a part of your time of your training there?”
To which question he answered:
“A. I did not. I have been at Western Reserve University in Cleveland, but I never attended any courses there.”
Objections were made to the reading and cross examining of the witness from the volume which was apparently a transcript of a discussion held at the School of Medicine at Western Reserve University. The objections were that it was incompetent, no proper foundation, improper cross examination, no showing that the “volume” was an accepted medical book or accepted in the field of medicine, no showing that the witness had read it or that he had relied upon it for his diagnosis. The objections were overruled and counsel for the plaintiff was permitted to read extensive paragraphs from the “volume”, whose author or authors remained unidentified and who, of course, were not there subject to cross examination.
Ordinarily the scope of cross éxamination must necessarily be left largely to the discretion of the trial court. Where that discretion has been abused, however, this court has the duty of taking cognizance thereof and we think this such a case. One example of the type of question based upon the unknown volume will suffice:
“Q. Now I have a summary that I would like to ask you about. Briefly that summarizes the pathology of the common arthritic conditions of the spine. ‘Now what is the specific effect of injuries on these involved spines? The effect in the arthritic spine is exactly the effect that we see in the non-arthritic spine. We see the same fractures, the same disherniations, the same muscle tears, the same ligamentous injuries that have already been covered in this symposium. What is the difference? The difference is that the arthritic spine is the unprotected spine. The normal resilience of the structures about the vertebral column, the normal resilience of the muscles and of the ligaments has been completely lost. The difficulties can have degenerated and the normal cushioning effect of the disc is completely lost so that relatively minimal trauma in an arthritic sprain may produce gross damage, and the patient who says, “I sat down hard in a chair and felt something give in my back” should be X-rayed because even trauma that slight may produce severe compression fractures. The patient who leans over in an awkward position and picks up a 10-pound weight may produce the same severe degree of muscular damage that the younger patient who lifted 150 pounds may produce. The reason for this, of course, is that there has occurred gross atrophy of the muscles, and we have noted these muscles are much more easily damaged than normal muscles and are slower to repair, so that in addition to being much more susceptible to injury the effects of the injury may last inmeasureably longer in these people.’ Isn’t that a fair statement of the situation, Doctor?
“A. I don’t believe that it applies to this case because he specifically states that these muscles are atrophied. There was no evidence of atrophy of any muscles in this individual, and it appears to be indicated that he has been a very healthy and active individual.”
There was no attempt to introduce the unknown “volume” itself, and of course, the great weight of authority would prohibit the introduction of medical books or treatises even if it were established that such were recognized standard authorities on the subject, the reason, among others, being that the authors are not present and subject to cross examination. See Briggs v. Chicago, Great Western Ry., 1953, 243 Minn. 472, 57 N.W.2d 572, 582; 20 Am.Jur., Evidence, § 968, pp. 816, 817. The effect here was to do indirectly that which plaintiff’s counsel could not do directly; in other words, there was gotten before the jury the substance of an unrecognized medical symposium whose participants were unknown and which had not been relied on or read by the witness. We think the allowance was improper. There are situations where medical books may be properly used in cross examination of a medical witness. A medical witness may be cross examined on a book which he admittedly has used in giving his direct examination and there need be no foundation laid for the use of the book other than that the witness has relied thereon. A medical witness who admittedly has based his testimony on standard recognized authorities may, for impeachment purposes, be cross examined on such authorities generally. This requires a foundation establishing that the references used in cross examination were generally recognized as being standard authorities by the medical profession. Bowles v. Bourdon, 1949, 148 Tex. 1, 219 S.W.2d 779, 13 A.L.R.2d 1, 6; Briggs v. Chicago, Great Western Ry., 1953, 243 Minn. 472, 57 N.W.2d 572. Neither of these situations exists in the instant case. The witness here had not used the volume from which he was being cross examined; and, further, he was not familiar with it. No foundation was laid establishing the volume as a standard recognized authority.
Plaintiff cites the case of State v. Brunette, 1914, 28 N.D. 539, 150 N.W. 271, as support for his contention that the cross examination of the witness here was proper. No claim was made there that the book being used was not a standard accepted medical authority. That case is support for the proposition that where a medical witness has, in direct examination, based his opinions upon medical authorities generally, it is permissible in cross examination to read to him portions of medical authorities and ask if he concurs therewith or differs therefrom; but that when this is done, the proper practice is for the court to caution the jury that it is the testimony of the witness and not what is read from the book that constitutes evidence in the case. We find no case which goes so far as to say that a medical witness may be cross examined from a completely unknown, unauthenticated volume describing itself as a “symposium” and which was neither read nor relied upon by the witness. The effect here is to give to the statements, put in the form of questions, an authenticity as having come from an established medical text sponsored by Western Reserve University. No such authenticity was established. The speakers at this “symposium” are anonymous and insofar as the record indicates may have been medical students or persons not even learned in the medical profession. We think the objection to this type of cross examination should have been sustained and that failure to do so was error.
The next claim of error is:
“The Trial Court Committed Reversible and Prejudicial Error in the Admission of the Testimony of the Plaintiff and the Plaintiff’s Witness, Frank LaPlant, Regarding the Offer Made by a Prospective Purchaser of the Ranch Providing That MeChesney Would Manage Said Ranch at a Salary of $10,000.00 a Year.”
Over objections, plaintiff was allowed to testify that in 1951 he had received an offer from a prospective purchaser of his ranch to stay on and manage the ranch for a salary of $10,000 a year. Witness LaPlant testified that he overheard the specific offer. The prospective purchaser who allegedly made the offer to employ the plaintiff and pay him $10,-000 a year in 1951 was not present subject to cross examination. We think the admission of. the testimony with reference to the offer to hire was improper.
Offers to hire in order to establish the value of services are in the same classification as offers to buy property in order to establish the market value thereof. The Supreme Court of the United States, in the early and much-quoted case of Sharp v. United States, 1903, 191 U.S. 341, 349, 24 S.Ct. 114, 115, 48 L.Ed. 211, had this to say:
“To be of the slightest value as evidence in any court, an offer must, of course, be an honest offer, made by an individual capable of forming a fair and intelligent judgment, really desirous of purchasing, entirely able to do so, and to give the amount of money mentioned in the offer, for otherwise the offer would be but a vain thing. Whether the owner himself, while declining the offer, really believed in the good faith of the party making it and in his ability and desire to pay the amount offered, if such offer should be accepted, or whether the offer was regarded as a mere idle remark, not intended for acceptance, would also be material upon the question of the bona fides of the refusal. Oral and not binding offers are so easily made and refused in a mere passing conversation, and under circumstances involving no responsibility on either side, as to cast no light upon the question of value. It is frequently very difficult to show precisely the situation under which these offers were made. In our judgment they do not tend to show value, and they are unsatisfactory, easy of fabrication and even dangerous in their character as evidence upon this subject. Especially is this the case when the offers are proved only by the party to whom they are alleged to have been made, and not by the party making them. There is no chance to cross-examine as to the circumstances of the party making the offer in regard to good faith, etc. Evidence of this character is entire ly different from evidence as to the price offered and accepted or rejected for articles which have a known and ready sale in the market. The price at the stock exchange of shares of stock in corporations which are there offered for sale or dealt in is some evidence of the value of such shares.”
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6117704-10337 | ORDER DENYING CONFIRMATION OF CHAPTER 11 PLAN
LEWIS M. KILLIAN, Jr., Bankruptcy Judge.
THIS MATTER was heard on March 3, 1988, on confirmation of the debtors’ John and Geneva P. Wester’s modified Second Amended Plan of Reorganization. Merchants & Southern Bank of Alachua County, (hereinafter referred to as M & S) the major secured creditor has rejected the plan and has filed its objection to confirmation. The debtors-in-possession have requested that the plan be confirmed pursuant to the provisions of § 1129(b) of the Bankruptcy Code over the objection of the bank.
This case was commenced by the debtors filing their voluntary petition for relief under Chapter 11 of the Bankruptcy Code on October 17, 1986. On June 29, 1987, following the entry of an order by this Court setting a date for the filing of a plan of reorganization, the debtors filed their first plan and disclosure statement. The plan was amended on July 30, 1987 and a Second Amended Plan of Reorganization was filed on August 27, 1987. The Disclosure Statement received approval on September 27,1987 and hearing on confirmation of the plan was scheduled for November 5, 1987.
Merchants & Southern is the holder of a claim secured by a first mortgage on the debtors’ home and 51 contiguous acres. The amount of the claim as of the date of this hearing was in excess of $123,000, exclusive of attorneys fees. The Second Amended Plan of Reorganization provided that the claim would be reamortized over a thirty (30) year period at 11% interest. It further provided that the debtors would sell off portions of the 51 acres with the sales proceeds going to the bank in exchange for releases. The bank objected and filed its ballot rejecting the plan. Two other classes failed to vote on the plan, and consequently, the November 5 hearing was continued until January 14, 1988 to enable the debtors to attempt to resolve their differences with the non-accepting classes. At the January 14 hearing, the debtors had obtained acceptances from all classes except for that consisting of M & S. The debtors had not made any request under § 1129(b) for confirmation notwithstanding the failure of all impaired classes to accept the plan, and accordingly, the hearing was once again continued in order to deal with M & S under § 1129(b).
Hearing was scheduled for March 2, 1988, and the debtors filed their § 1129(b) motion on February 24th. On February 25th, the debtors filed another modification to their plan to deal specifically with the M & S claim. This modification provided for an interest rate of twelve (12%) percent on the reamortized debt and set forth a detailed plan for sales of five (5) acre tracts with releases to be given by M & S at release prices of the larger of $2000 per acre or the net sales proceeds received for the tracts. At the hearing on March 2nd, the debtors presented yet another proposal regarding sales of the property. This proposal provided for the debtors to sell five (5) acre parcels owned by the debtor John Wester’s mother with the proceeds from such sales being paid to the bank. The debtors would then deed to the mother, free and clear of the bank’s mortgage, similar sized tracts of the debtors’ property which is contiguous to property owned by the mother.
The position of M & S at the hearing was that the plan could not be confirmed because it was not feasible and that it did not provide the bank with the “indubitable equivalent” of its claim.
The evidence presented, together with the monthly operating reports filed by the debtors, reflects that John Wester is employed as an electrician. During most of the time that this case has been pending, he has been working on jobs in New York state earning wages considerably higher than those he can earn in the Alachua County Florida area. During that period, he was able to accumulate in excess of $9,000 in the bank. However, during that period, no payments were being made on the M & S mortgage. In January, 1988, pursuant to an agreement, the debtors commenced making monthly payments to M & S in the amount of $1,300. Mr. Wes-ter returned to Florida from New York in December of 1987. Since Mr. Wester’s return to Florida and his commencement of payments to M & S, his cash on hand has diminished to the sum of $2,350.70 as of the end of February. A review of his income and expenses for the months of December 1987 — February 1988 indicates that on average, his expenses exceed his income by approximately $450 per month. Mrs. Wester is not employed. Thus, it appears that the debtors would not be able to make the payments provided for under the plan.
At hearing, the debtors’ counsel acknowledged that success of the plan would be dependent on the debtors ability to reduce the debt by selling five (5) acre parcels and obtaining releases from M & S. The debt- or, John Wester, however, has no experience at all in the sale and development of real estate. While he testified that he had discussed selling the property with various realtors, he had not developed any plans for dividing and developing the property, and had not attempted to list any of it for sale. He claimed that he was negotiating a sale of one of his mother’s parcels but did not produce any written evidence of a pending contract for sale. M & S objected to being forced to release any portions of its collateral under the conditions set forth by the debtors. In particular, M & S opposed the subdivision of its collateral without first seeing a comprehensive development plan for the property to include plans for roads, sewers, utilities, and site engineering. It was also concerned with the negative effect on the value of its remaining collateral if there were no building restrictions placed on the tracts it might release and mobile homes were placed thereon.
Merchants & Southern presented testimony of a real estate appraiser who had performed an appraisal of the property in July of 1987. He testified that when he had done his appraisal, the total value of the property was $185,000, with $122,400 of that attributable to the land. Since the appraisal, he had visited the property again, and his testimony was that the appearance of the land had deteriorated through lack of maintenance and subsequently had lost marketability. He felt that the fair market value had dropped from an average of $2,400 per acre to $2,250 per acre. His opinion regarding marketing possibilities for the five (5) acre tracts was that it would take two to five years to sell them if favorable financing were not provided. The debtors did not present any evidence to rebut that of the bank’s appraiser.
Under the provisions of § 1129(b), the Court can confirm a Chapter 11 plan notwithstanding the lack of acceptance by all classes of impaired claims only if the treatment of such classes under the plan is “fair and equitable.” Section 1129(b)(2)(A) defines “fair and equitable” for classes of secured claims as follows:
(A) With respect to a class of secured claims, the plan provides—
(i)(I) that the holders of such claims retain the liens securing such claims, whether the property subject to such liens is retained by the debtor or transferred to another entity to the extent of the allowed amount of such claims; and
(II) that each holder of a claim of such class receive on account of such claim deferred cash payments totalling at least the allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holders interest in the estate’s interest in such property;
(ii) for the sale, subject to section 363(K) of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or
(iii) for the realization by such holders of the indubitable equivalence of such claims.
In this case, the plan requires that M & S release portions of the collateral from its lien prior to payment in full of its claim, thus, the treatment of the claim does not fall under subparagraph (i). While the plan for trading tracts with Mr. Wester’s mother may have the ultimate effect of sale free and clear of liens as permitted under subparagraph (ii), such sales of property subject to the lien of M & S are not subject to § 363(k) and the lien of M & S will not attach to any proceeds from the sale of its collateral. The debtors have failed to demonstrate that the piecemeal carving up of the property subject to the lien of M & S will not result in a diminution in value of the remaining property to such an extent that M & S will lose the protection of whatever equity cushion is presently available. Accordingly, we cannot find that this plan will give M & S the “indubitable equivalent” of its claim. Thus, this plan is not fair and equitable with respect to the claim of M & S.
In addition to the requirement that either all impaired classes have accepted the plan or that the requirements of § 1129(b) have been met, in order for the Court to confirm a plan under Chapter 11 of the Bankruptcy Code, it must specifically find that “Confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorgani zation, of the debtor or any successor to the debtor under the plan, unless such liquidation or reorganization is proposed under the plan.” 11 U.S.C. § 1129(a)(ll). This requires a determination of the feasibility of the proposed plan. In the instant case, the debtors have totally failed to prove that their plan is feasible. They are currently spending more on a monthly basis than they are earning. The accumulated funds which have enabled .them to make payments to M & S since January will be depleted in a few months. The various proposals for disposition of the land as presented in the various iterations of the Chapter 11 plan and as presented in Court demonstrate that the debtors are merely grasping at straws in attempting to come up with something that sounds good in hopes of winning confirmation. However, they have presented nothing but Mr. Wes-ter’s own optimistic hopes to support their proposals. Based on the foregoing, we cannot find that the debtors’ plan is feasible and confirmation thereof will be denied.
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4239988-17143 | GILBERT, District Judge.
On January 16, 2013, a jury found Gregory Walker guilty of two counts of wire fraud in violation of 18 U.S.C. § 1343. On appeal, Walker makes the following three arguments: (1) the failure to obtain and turn over Walker’s seized items from a previous unrelated state case constitutes a Brady violation and prevented Walker from presenting his theory of defense; (2) the district court erred when it refused to give Walker’s proposed buyer-seller instruction to the jury; and (3) the district erred in ordering restitution. For the following reasons, we affirm the district court.
In sum, Walker was involved in a mortgage fraud scheme encompassing at least ten different loans and seven different properties in the Chicago area. Throughout the scheme, Walker served as both a fraudulent buyer and seller. He also used his then-girlfriend, co-defendant Tanya McChristion, as a straw purchaser in some transactions. With respect to the two wire fraud counts that went to trial, Walker fraudulently caused Long Beach Mortgage to loan money on two different occasions with properties located at 9023 South Kingston, Chicago, Illinois (“the Kingston property”) and 277 Allegheny Street, Park Forest, Illinois (“the Park Forest property”) serving as collateral.
In his role as a fraudulent buyer, Walker first obtained a ft-audulent loan for the Kingston property on May 19, 2005, when he submitted a loan application through co-defendant Carol Simmons, a loan processor. Simmons prepared and submitted the loan application containing false information about Walker’s employment, assets, and rental income. Thereafter, Walker sold the Kingston property to McChristion on January 31, 2006. This transaction, in Walker’s role as a fraudulent seller, is the subject of Count Two. To obtain the January 2006 mortgage on the Kingston property, Simmons submitted loan applications on behalf of McChristion to Long Beach Mortgage. The application was replete with false information regarding MeChristion’s assets, employment, income, and earnest money payments. Walker obtained control of a portion of the loan proceeds through a check made payable to Real Deal Construction, a company owned by Walker.
The loan for the Park Forest property, the subject of Count Three, was obtained through Walker’s use of McChristion as a straw buyer. This loan was obtained in a similar manner as the Kingston property loan, wherein Simmons prepared and submitted fraudulent loan documents in MeChristion’s name. In addition to listing MeChristion’s fraudulent income information, the loan application stated the sale price was $137,000; however, at trial the seller testified the negotiated sale price was $86,000. Eventually, the loans went into default and the properties were foreclosed on. In sum, Walker’s conduct relating to the ten fraudulent transactions caused an estimated $956,300 in loss to Long Beach Mortgage.
Walker’s trial counsel entered his appearance in the instant case just a few weeks prior to trial. Counsel filed a motion to continue citing his need to conduct an investigation of the evidence to determine whether Walker had a Silverthome claim. Specifically, counsel was concerned that illegally seized material from an unrelated state case, in the possession of the South Holland Police Department, may have been used to form the basis of the instant federal case. That evidence stems from Walker’s 2006 arrest by Secret Service and others for possession of a gun. During that arrest, law enforcement seized property from Walker’s home, including third parties’ state identification cards, social security numbers, and credit histories; electronic storage devices; and documents and ledgers. The state court held that the search was in violation of Walker’s Fourth Amendment rights and suppressed the evidence in his state case.
Throughout the district court proceedings, the government maintained that its evidence for the instant case came from lenders, title companies, financial institutions and eyewitness testimony, not from the 2006 state search. It further maintained that the only investigating agency was Housing and Urban Development, not the Secret Service.
During an October 17, 2012, hearing on Walker’s motion for return of a subpoena directed at the South Holland Police Department, the district court clarified the information sought by Walker. Specifically, defense counsel said, “All I’m asking for is disclosure from the police as to what they did with this stuff,” and “I want to know what they did with the stuff. That’s all, what the police did with the stuff.” Defense counsel further explained that he was no longer seeking production of the seized property because “it would be a little unwise for a criminal attorney to ask for evidence of crimes that he wasn’t charged with.” Defense counsel then clarified that his request was in the alternative, and he was alternatively requesting, pursuant to Brady, “a disclosure as to what the Federal Government or the state authorities” did with the seized property.
The district court directed the government to inquire as to the status and location of the seized 2006 property. As such, the government filed a status report on October 24, 2012, detailing its contact with the South Holland Police Department. Specifically, the government found that the seized property was still in the South Holland Police Department’s possession and no one had made a claim to the seized property since the 2006 seizure. The government further informed the district court that the South Holland Police Department affirmed it had no connection with or knowledge of the instant federal case. Thereafter, Walker did not attempt to obtain the evidence in the custody of the South Holland Police Department and proceeded to trial.
At the jury instruction conference, Walker proposed the following buyer-seller instruction:
The existence of a simpler buyer-seller relationship between a defendant and another person, without more, is not sufficient to establish a criminal enterprise, even where the buyer intends to resell the property. The fact that a defendant may have bought property from another person is not sufficient without more to establish that the defendant was a member of the charged criminal enterprise.
In considering whether a criminal enterprise or a simple buyer-seller relationship existed, you should consider all of the evidence, including the following factors:
(1) Whether the transactions involved large quantities of property or properties;
(2) Whether the parties had a standardized way of doing business over time;
(3) Whether the sales were on credit or on consignment;
(4) Whether the parties had a continuing relationship;
(5) Whether the seller had a financial stake in a resale by the buyer;
(6) Whether the parties had an understanding that the property or properties would be resold.
No single factor necessarily indicates by itself that a defendant was or was not engaged in a simple buyer-seller relationship.
The district court rejected Walker’s proposed buyer-seller instruction.
Ultimately, the jury found Walker guilty on both Counts Two and Three of the indictment. Walker filed a motion for a new trial or judgment N.O.V. arguing there was insufficient evidence and that the court’s refusal to give his buyer-seller instruction was reversible error. The district court denied the motion.
Based on an offense level of twenty-three and a criminal history category of four, Walker’s sentencing guidelines range was seventy to eight-seven months’ imprisonment. The district court imposed a below-guideline sentence of sixty months on each count to run concurrently. The Court further imposed a three-year term of supervised release and a $200 special assessment.
The presentence report (“PSR”) recommended the Court impose restitution in the amount of $956,300 to compensate Long Beach mortgage for its losses. The Government’s Version of the Offense put forth the methodology by which the government calculated the loss amount. The loss amounts for the various properties were obtained by subtracting the sale price the victim-lender received after recovering possession of the property from the amount of the fraudulent loan. Walker objected to the PSR’s restitution amount only to the extent that he stated it was unfair to impose restitution in an amount representing losses caused by others in the scheme and that the evidence showed that Walker had made payments on the mortgages for properties he purchased. Walker did not, however, object to or present evidence contrary to the loss calculations contained in the PSR. The district court adopted the PSR’s actual loss calculation of $956,300 and ordered restitution joint and several with Walker’s co-defendants.
We will now consider each of Walker’s arguments in turn.
1. Brady Violation
First, Walker argues a Brady violation stemming from the government’s failure to provide him with the South Holland Police Department evidence. He further argues this alleged Brady violation prevented him from presenting his theory of defense because the evidence in question contained evidence relevant to his defense. We review a district court’s denial of a motion for a new trial based on a Brady violation for abuse of discretion. United States v. Wilson, 237 F.3d 827, 831-32 (7th Cir.2001). Where a defendant fails to preserve a Brady violation claim before the district court, we review for plain error. United States v. Mota, 685 F.3d 644, 648 (7th Cir.2012). “That means that ‘the alleged Brady violation must be an obvious error that affected [the defendant’s] substantial rights and created a substantial risk of convicting an innocent person.” Id. (quoting United States v. Daniel, 576 F.3d 772, 774 (7th Cir.2009)) (internal quotations omitted).
Here, Walker made it clear to the district court that he simply wanted to know “what the police did with the stuff’ and the government satisfied that request when it found that the evidence was still at the South Holland Police Department. After receipt of that information, Walker no longer pursued the evidence at issue. Accordingly, it is appropriate to review Walker’s Brady claim for plain error. However, Walker’s claim fails under either plain-error or abuse-of-discretion review.
Brady explained that failure to disclose favorable evidence upon a defendant’s request “violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution.” Brady v. Maryland, 373 U.S. 83, 87, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). To succeed on a Brady claim, Walker bears the burden of proving that the evidence is “(1) favorable, (2) suppressed, and (3) material to the defense.” United States v. Wilson, 237 F.3d 827, 832 (7th Cir.2001). The government’s duty to disclose favorable evidence extends beyond evidence in its immediate possession to evidence in the possession of other actors assisting the government in its investigation. Fields v. Wharrie, 672 F.3d 505, 513 (7th Cir.2012). However, even if the government failed to disclose material evidence, the evidence is not “suppressed” if the defendant knew of the evidence and could have obtained it through the exercise of reasonable diligence. United States v. Dimas, 3 F.3d 1015, 1018-19 (7th Cir.1993).
Walker fails to establish a Brady violation for two reasons. First, the evidence suppressed in the state case was not in the control of the government or any actors assisting the government in its federal investigation. While Walker has repeatedly contended that the suppressed evidence was in some way connected to the instant federal prosecution, Walker has failed to show that the government or any actors assisting the government in its investigation had any access to or knowledge of the suppressed evidence. To the contrary, the government repeatedly denied any knowledge of the suppressed evidence. The government further explained that the sole investigating agency involved in the instant investigation was Housing and Urban Development, and the South Holland Police Department reported it had no knowledge of the instant case. As such, Walker fails to establish that the government suppressed any evidence in violation of Brady.
Second, Walker failed to exercise reasonable diligence in obtaining the suppressed evidence from the South Holland Police Department. As was made clear at oral argument, Walker never even asked the South Department Police Department to provide him with the evidence. At a minimum, Walker would have to ask for law enforcement to turn over his property before he can claim he has made a reasonably diligent effort to obtain it. Accordingly, the South Holland Police Department evidence was not suppressed within the meaning of Brady.
To the extent Walker argues he was denied due process when the district court failed to issue a subpoena for the South Holland Police Department evidence, his claim fails. Walker’s counsel ultimately withdrew his request to obtain the evidence. Instead, he sought simply to learn the location of the evidence. This move was indeed a strategic move by counsel as he acknowledged before the district court “it would be a little unwise for a criminal attorney to ask for evidence of crimes that he wasn’t charged with.” As such, Walker waived any due process claim involving the district court’s failure to issue a subpoena for the South Holland Police Department evidence.
2. Proposed Buyer-Seller Instruction
Next, Walker argues he was denied an opportunity to present his theory of defense when the district court refused to give his proposed buyer-seller jury instruction. While Walker did not go to trial on the conspiracy charge, the government still argued Walker was involved in a scheme to defraud. Walker contends he was entitled to his proposed buyer-seller instruction, an instruction given in a conspiracy context, because the scheme theory relies on conspiracy concepts. We review a district court’s refusal to give a requested theory-of-defense jury instruction de novo. United States v. Choiniere, 517 F.3d 967, 970 (7th Cir.2008).
Defendants are not automatically entitled to any particular theory-of-defense jury instruction. Id. A defendant is only entitled to a jury instruction that encompasses his theory of defense if “(1) the instruction represents an accurate statement of the law; (2) the instruction reflects a theory that is supported by the evidence; (3) the instruction reflects a theory which is not already part of the charge; and (4) the failure to include the instruction would deny the [defendant] a fair trial.” United States v. Swanquist, 161 F.3d 1064, 1075 (7th Cir.1998).
As indicated in the Committee Comment to the buyer-seller instruction contained in the Seventh Circuit Pattern Jury Instruction, “[t]his instruction should be used only in cases in which a jury reasonably could find that there was only a buyer-seller relationship rather than a conspiracy.” This makes sense. To prove a conspiracy, the government must prove more than a buyer-seller agreement. United States v. Gee, 226 F.3d 885, 893-94 (7th Cir.2000). Specifically, a conspiracy “is an agreement with a particular kind of object — an agreement to commit a crime.... What is required for conspiracy in such a case is an agreement to commit some other crime beyond the crime constituted by the agreement itself.” United States v. Lechuga, 994 F.2d 346, 349 (7th Cir.1993). Accordingly, a mere buyer-seller relationship provides a defense to a conspiracy charge because it negates an essential element, the agreement to commit a crime, of a conspiracy. See United States v. Turner, 93 F.3d 276, 285 (7th Cir.1996) (In the context of a drug conspiracy charge, “[t]he purpose of the ‘mere buyer-seller instruction’ is to ensure that the jury understands that an agreement to purchase the contraband, without any other agreement to achieve another criminal objective, is not a conspiracy.”)
The buyer-seller instruction, however, does not provide a defense to an element contained in a charge for wire fraud. The government must prove the following elements to convict a defendant of wire fraud: “(1) the defendant participated in a scheme to defraud; (2) the defendant intended to defraud; and (3) a use of an interstate wire in furtherance of the fraudulent scheme.” United States v. Turner, 551 F.3d 657, 664 (7th Cir.2008). Walker argues that the buyer-seller instruction encompasses his defense to the scheme-to-defraud element. However, “a scheme to defraud is conduct intended or reasonably calculated to deceive a person of ordinary prudence or comprehension.” United States v. Hanson, 41 F.3d 580, 583 (10th Cir.1994). It does not involve an agreement with another to commit a crime. Accordingly, the existence of a mere buyer-seller relationship is not a defense to the scheme-to-defraud element of wire fraud. As such, the failure to include Walker’s buyer-seller instruction did not deny Walker a fair trial and it was not error for the district court to reject that instruction.
3. Restitution
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3523593-18588 | ALARCÓN, Circuit Judge:
Richard Franklin has appealed from the district court’s order denying his motion to suppress firearms seized from within his residence following his arrest outside the house pursuant to a warrant for absconding from his conditional release on parole. He was indicted on three counts that charged him with two counts of being a felon in possession of firearms in violation of 18 U.S.C. §§ 922(g)(1) and 924(e), on separate dates, and one count of possessing a firearm not registered to him in violation of 26 U.S.C. §§ 5861(d) and 5871.
Franklin contends that the district court erred in concluding that the warrantless entry of his residence did not violate the Fourth Amendment because the evidence showed that probable cause existed that illegally possessed firearms were in the residence and that exigent circumstances justified an entry without obtaining a search warrant.
We agree with the district court that the officer’s conduct did not violate the Fourth Amendment and affirm.
I
A _
The following evidence was presented at a hearing conducted by the magistrate judge regarding the validity of the warrantless search of Franklin’s residence. After serving a term of imprisonment in a Florida state prison, following his conviction for burglary and grand theft, Franklin was granted conditional release of the remainder of his sentence on April 29, 2006. The length of his conditional release was set to expire on July 16, 2006. Probation Specialist William Lally (“Officer Lally”) began supervising Franklin on May 2, 2006. Franklin was informed of the conditions of his release by Officer Lally on that date. Franklin was instructed that, as a condition of his release, he was required to allow Officer Lally to search his person, property, and premises.
On June 23, 2006, Franklin telephoned Office Lally. Franklin stated that the officer could look for him but he would not find him. He also admitted that he had not followed Officer Lally’s instruction to report for a drug test because he had used and - was in possession of marijuana. Franklin stated further that “if he had a gun he would stick it in his mouth and end it all.’-’
Officer Lally submitted a report to the Florida Parole Commission on the same date setting forth several violations of the terms of Franklin’s conditional release. The Parole Commission issued a warrant for Franklin’s arrest that day.
Officer Lally attempted to locate Franklin several times without success. He received information in August 2006 that Franklin was residing at his fiancée’s home in Fort Myers, Florida. Officer Lally went to this location several times but did not see any vehicles there.
On August 24, 2006, Officer Lally observed two vehicles in the driveway at approximately 10:30 at night. He drove around the block and on his return he saw a third car there. The lights were on in the front room of the house.
Officer Lally called the Lee County Sheriffs Office and requested backup assistance. Deputy Sheriff Jamie Thorpe, Deputy Michael Haigis and two other officers responded to Officer Lally’s request. After they arrived, Officer Lally knocked on the door loudly several times. He received no response. Officer Lally showed Deputy Haigis a photograph of Franklin and asked him to go to the back of the house. There, Deputy Haigis observed Franklin through a rear window. He also saw several firearms in plain view. Deputy Haigis reported his observations to Officer Lally. Officer Lally then knocked on the door for approximately ten or fifteen minutes.
Officer Lally also telephoned Franklin several times using his cell phone number. At first, someone answered the telephone and then immediately hung it up. After a number of attempts, Franklin responded to the telephone call. Officer Lally recognized his voice. Officer Lally told Franklin that the officers were not going to leave and that a SWAT team was on the way because this was being treated as a barricaded gunman situation. Officer Lally told Franklin the only safe way to resolve this situation was to come out the door in boxer shorts, with his hands raised. After several minutes, Franklin came out the front door with his hands raised. He was taken into custody and placed in a police car.
Officer Lally testified that, after Franklin was arrested, he entered the house out of a concern for the safety of the officers since Franklin was a convicted felon and there were other persons and firearms in the house. Two adults and a child were in the house when he entered. Upon entering the residence, he seized five weapons: three rifles, and two sawed off shotguns.
Officer Lally testified that his entry into the residence was “a combination of my position as the offender’s parole officer and officer’s safety, securing those weapons.” Officer Lally submitted a report to the Parole Commission based on the fact that Franklin was found in a house that contained illegal weapons, including sawed off shotguns.
B
On May 9, 2007, a grand jury returned an indictment in the United States District Court for the Middle District of Florida in which it charged Franklin with three counts of illegally possessing firearms. On March 1, 2010, Franklin filed a motion to suppress the firearms seized by Officer Lally after entering Franklin’s residence following his arrest outside the house. He argued that the firearms and his statements to the officers following his arrest were inadmissible because they were obtained in violation of the Fourth Amendment without a search warrant or his consent, and in the absence of facts demonstrating probable cause to enter the residence based on exigent circumstances.
The Government filed a response to the motion to suppress in which it asserted that the challenged evidence was admissible on discrete grounds. It asserted that the evidence was admissible because Franklin had consented to warrantless searches of his residence in signing his Certificate of Conditional Release and Terms and Conditions of Supervision. The Government also contended that the entry of the residence was lawful because the officers had reasonable suspicion to search Franklin’s residence when they saw firearms in the dining room through a window. The Government argued that “[t]he officers also had a right to enter the residence for officer safety .... ”
After considering the testimony presented at the evidentiary hearing, the magistrate judge recommended that the motion to suppress be granted. The magistrate judge concluded that Franklin was no longer on conditional release on August 24, 2006, because the termination date was July 16, 2006. Accordingly, the magistrate judge determined that the condition that Franklin was required to submit to a search of his property was no longer in effect on that date. He also rejected the Government’s argument that the expiration of the term of conditional release was tolled by the issuance of the arrest warrant on June 23, 2006 because of Franklin’s violations of the conditions of his release. The magistrate judge held that Florida’s parole laws do not provide for the tolling of a conditional release date.
The magistrate judge rejected the Government’s contention that the good faith exception to the exclusionary rule, set forth in United States v. Leon, 468 U.S. 897, 104 S.Ct. 3405, 82 L.Ed.2d 677 (1984), and Herring v. United States, 555 U.S. 135, 129 S.Ct. 695, 172 L.Ed.2d 496 (2009), was applicable. He reasoned that Officer Lally was not misled in his belief that he was authorized to conduct a warrantless search since “the termination date [of his conditional release] was clear on the face of the Conditions of Supervision.” The magistrate judge expressly found that his belief “was not grounded in good faith.”
The magistrate judge rejected the Government’s contention that Officer Lally had the authority to enter the residence to seize the firearms to assure his own safety and that of the other officers who were present. The magistrate judge expressly found that Officer Lally’s safety motivation testimony was not credible.
II
A
After reviewing the findings and recommendation of the magistrate judge, the district court denied Franklin’s motion to suppress on June 22, 2010. The district court agreed with the magistrate judge’s finding that Officer Lally lacked credibility in testifying that he entered the residence because he believed that the persons remaining in the residence posed a danger to the officers. The district court stated that while it “accepts and adopts the Recommended Decision on Motion to Suppress as to the issues it addresses, the Court finds there was sufficient probable cause and exigent circumstances to justify the entry of the residence and seizure of the firearms .... ” United States v. Franklin, 721 F.Supp.2d 1229, 1231 (M.D.Fla.2010) (emphasis added).
The district court acknowledged that the Government did not argue in its response to the motion to suppress or in its argument to the magistrate judge that exigent circumstances authorized the entry into the residence to seize the firearms, but nonetheless exercised its discretion to consider the issue. It concluded that the evidence was sufficient to demonstrate that Officer Lally had probable cause to believe that illegally possessed firearms were in the residence before he entered, based on Deputy Haigis’s observation of them through a window. The district court also found that exigent circumstances compelling entry without securing a search warrant existed because, “considering there were other people at the residence, and at least two cars in the driveway, under the totality of the circumstances, a reasonable, experienced officer would believe that the evidence might be destroyed or removed before a warrant could have been secured.” Id. at 1236. Based on this reasoning the district court held that “[Officer] Lally’s entry into the residence and seizure of the firearms was proper.” Id.
B
Pursuant to a plea agreement, Franklin entered a plea of guilty to Count 2 of the indictment which charged him with being a convicted felon in possession of five firearms in violation of 18 U.S.C. §§ 922(g)(1) and 924(e). Pursuant to Fed.R.Crim.P. 11(a)(2), he reserved his right to appeal the denial of his motion to suppress.
Franklin filed a timely notice of appeal. We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291.
Ill
A
Franklin contends that the district court erred in determining that the warrantless search of his residence was reasonable under the Fourth Amendment based on the probable cause and exigent circumstances exception to the exclusionary rule because the Government failed to assert this argument before the magistrate judge.
“We review for abuse of discretion the treatment by a district court of a report and recommendation of a magistrate judge.” Stephens v. Tolbert, 471 F.3d 1173, 1175 (11th Cir.2006). A district court does not abuse its discretion by accepting an argument not raised before the magistrate judge. Id. at 1176-77. In Tolbert, this Court held that “[w]e reject the notion that, in its review of the report and recommendation, the district court performed an appellate function and was barred, outside of exceptional circumstances, from considering an argument not raised before the magistrate judge.” Id. The district court did not abuse its discretion in allowing the Government to argue in its objection to the magistrate judge’s report and recommendation that the entry and seizure of the firearms did not violate the Fourth Amendment because the record demonstrated that probable cause and exigent circumstances justified the officer’s conduct.
B
Franklin also asserts that the district court erred in concluding that Officer Lally did not have a reasonable opportunity to try to obtain a search warrant after Franklin’s arrest outside the residence “while maintaining safety and [also] preserving the evidence.” Appellant’s Opening Brief at ii. He contends that “[t]he physical nature of the evidence, rifles, alone, negates any consideration that [such] evidence could not be preserved while trying to obtain any warrant(s), and safety was never an issue throughout the event in this case.” Appellant’s Opening Brief at 6.
“It is a ‘basic principle of Fourth Amendment law that searches and seizures inside a home without a warrant are presumptively unreasonable.” Payton v. New York, 445 U.S. 573, 586, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980). “A warrant-less search is allowed, however, where both probable cause and exigent circumstances exist.” United States v. Tobin, 923 F.2d 1506, 1510 (11th Cir.1991) (en banc). “The district court’s denial of the motion to suppress is reviewed as a mixed question of law and fact.” United States v. Bradley, 644 F.3d 1213, 1261 (11th Cir. 2011). “We accept the facts the district court found in resolving the exigent circumstance issue unless the findings are clearly erroneous. We determine de novo whether the court erred in applying the law to those facts.” Id. (citation omitted). Further, this Court construes all facts in the light most favorable to the prevailing party below. United States v. Jordan, 635 F.3d 1181, 1185 (11th Cir.2011). In this matter, the Government prevailed on the question of whether the evidence was sufficient to demonstrate that there was probable cause to enter the residence to prevent the destruction or removal of the firearms before a search warrant could be obtained because other persons were present inside.
“The question of what amounts to probable cause is purely a question of law and hence is subject to plenary review by this court. Probable cause exists when under the totality-of-the-circumstances ... there is a fair probability that contraband or evidence of a crime will be found in a particular place.” Tobin, 923 F.2d at 1510 (alteration in original) (citations and internal quotation marks omitted). As the district court found, there is no factual dispute that the officers had probable cause. Franklin was known to be a felon and was observed in plain view in the presence of weapons which he had no right to possess as a convicted felon.
“[T]he ‘presence of contraband without more does not give rise to exigent circumstances.’ ” Id. (quoting United States v. Torres, 705 F.2d 1287, 1297 (11th Cir.), vacated and remanded on other grounds, 718 F.2d 998 (11th Cir.1983)). “[A]n exigency exists when officers can articulate a reason, grounded in the facts of the specific case, to fear that evidence may be destroyed or lost .... ” Bradley, 644 F.3d at 1262. “An objective test applies to the exigency determination. An exigency exists if ‘the facts ... would lead a reasonable, experienced agent to believe that evidence might be destroyed before a warrant could be secured.’ ” Id. (emphasis and alteration in original) (quoting Tobin, 923 F.2d at 1510). While the question of whether officers on the scene could reasonably have believed that evidence would be destroyed, removed, or hidden before a warrant could be obtained is fact specific, there is an analogous case in this Circuit, which is dispositive of this case.
In United States v. Rodgers, 924 F.2d 219, 223 (11th Cir.1991), this Court concluded that exigent circumstances were present when “police knew there was at least one person other than Rodgers in the trailer; the handguns could easily be hidden or removed; and the people in the trailer were aware of the arrest of Rodgers.” In this matter, it is undisputed that there was at least one other person inside the residence. The record supports the district court’s finding “that this person was aware of defendant’s arrest and had cooperated with defendant by not responding to the officers’ knocking and yelling at the door.” Franklin, 721 F.Supp.2d at 1236.
In his reply brief, Franklin argues that Rodgers is not dispositive because rifles and shotguns are more difficult to remove than handguns, and therefore there was ample opportunity to obtain a warrant before Officer Lally searched the residence. We disagree. The fact that firearms including a shortened rifle and sawed off shotguns may be more difficult to remove or hidden is not dispositive. Both types of weapons can be removed by an adult. “[T]he appropriate inquiry is whether the facts ... would lead a reasonable, experienced agent to believe that evidence might be destroyed [or removed] before a warrant could be secured.” Rodgers, 924 F.2d at 222 (alterations in original) (quoting United States v. Rivera, 825 F.2d 152, 156 (7th Cir.1987)).
The evidence presented at the evidentiary hearing before the magistrate judge demonstrates that Officer Lally acted reasonably under the circumstances. Under the totality of the facts of which he was aware, he could have reasonably believed that the firearms would be removed before a warrant could be obtained. There were at least two cars in the driveway and at least one other person in the residence who had already shown the willingness to help Franklin avoid arrest by not answering the door. This case is a stark contrast from cases where this Court has found an officer’s determination of exigent circumstances to be unreasonable. See United States v. Lynch, 934 F.2d 1226, 1232 (11th Cir.1991) (finding no exigent circumstance when the arrest was made away from the suspect’s home); United States v. Satterfield, 743 F.2d 827, 844-45 (11th Cir.1984) (finding no exigent circumstance after all of the occupants were taken into custody). The district court did not err in concluding that Officer Lally had probable cause to believe that the residence contained evidence that might be hidden or removed before he could obtain a search warrant.
IV
Franklin has submitted a “motion to both file supplemental argument and legal authority.” We grant his motion, but do not find his arguments persuasive. In his motion, Franklin contends that his trial counsel was ineffective. This issue was not presented to the district court. He also attempts to distinguish Rodgers, for the first time, on the ground that Officer Lally’s search was pretextual.
Regarding his ineffective assistance of counsel claim, “[i]t is settled law in this circuit that a claim of ineffective assistance of counsel cannot be considered on direct appeal if the claims were not first raised before the district court and if there has been no opportunity to develop a record of evidence relevant to the merits of the claim.” United States v. Perez-Tosta, 36 F.3d 1552, 1563 (11th Cir.1994); accord United States v. Veltrop, 161 Fed.Appx. 914, 915 (11th Cir.2006).
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12392251-14482 | MEMORANDUM
Defendant Luis Carlos Vasquez appeals his convictions following a jury trial for conspiring to possess marijuana with intent to distribute, possessing marijuana with intent to distribute, conspiring to import marijuana, and importing marijuana, under 21 U.S.C. §§ 841, 846, 960, 963. We have jurisdiction under 28 U.S.C. § 1291. For the reasons that follow, we affirm the conviction, but vacate the sentence, and remand for resentencing without the weapon enhancement.
i.
As a preliminary matter, we deny the government’s motion to supplement the record on appeal to include cover letters, a memorandum submitted in-camera, and an email between the parties. The government argues that these documents are necessary to complete the factual record of communications between the parties. Under Federal Rule of Appellate Procedure 10(e)(2), the record may be supplemented by material that “is omitted from or misstated in the record by error or accident.” The cover letters and communications between the parties were never a part of the record before the district court, and thus do not fall within the con-fínes of this rule. No extraordinary circumstances counsel in favor of expanding the record for any other reason here. See Lowry v. Barnhart, 329 F.3d 1019, 1024 (9th Cir. 2003).
II.
We review Vasquez’s challenge to the government’s decision not to call co-defendant Victor Stuppi as a witness for plain error because Vasquez did not object at trial. See United States v. Cabrera, 201 F.3d 1243, 1246 (9th Cir. 2000). “Reversal on this basis is justified only if it appears more probable than not that prosecutorial misconduct materially affected the fairness of the trial.” Id. (quoting United States v. Sayakhom, 186 F.3d 928, 943 (9th Cir. 1999), amended by 197 F.3d 959 (9th Cir. 1999)).
Vasquez provides no case law suggesting that the government commits misconduct by failing to call a witness on its witness list. To the contrary, criminal defendants have no right to pretrial disclosure of government witnesses, see Weatherford v. Bursey, 429 U.S. 545, 559, 97 S.Ct. 837, 51 L.Ed.2d 30 (1977); United States v. Jones, 612 F.2d 453, 454 (9th Cir. 1979); it follows then that when the government opts to disclose a witness list, it is not required to call all witnesses on the list. Additionally, Vasquez has not shown that the government’s decision not to call Stuppi materially affected the fairness of his trial because he could have called Stup-pi himself, but he chose not to. Thus, the government’s decision not to call Stuppi was not misconduct materially affecting the fairness of Vasquez’s trial.
Furthermore, the decision not to call Stuppi was not suppression of exculpatory evidence or witnesses under Brady or Giglio because the government’s decision not to call a witness is not “suppression” of evidence. See United States v. Bond, 552 F.3d 1092, 1097 (9th Cir. 2009) (rejecting argument that the government “suppressed” evidence by failing to call a witness favorable to the defendant because the defendant was aware of the witness and could have called the witness himself, and the government’s decision not to call the witness was trial strategy).
III.
We review the district court’s discovery ruling and denial of Vasquez’s motion to continue for abuse of discretion. See United States v. Wilkes, 662 F.3d 524, 543 (9th Cir. 2011) (denial of motion to continue); United States v. Mitchell, 502 F.3d 931, 964 (9th Cir. 2007) (discovery ruling). To the extent Vasquez argues that the government’s actions amounted to prose-cutorial misconduct, he must show he was denied a fair trial. United States v. Christophe, 833 F.2d 1296, 1300-01 (9th Cir. 1987). “[Reversal is warranted only if it is more probable than not that the misconduct materially affected the verdict.” Id. (citations omitted).
Vasquez’s challenges based on delayed discovery or disclosure fail because Vasquez has not demonstrated an essential element of a Brady violation—suppression of exculpatory or impeaching evidence. See United States v. Olsen, 704 F.3d 1172, 1181 (9th Cir. 2013). While the government disclosed some information shortly before the second trial, the government disclosed much of the same evidence prior to the first trial, and there is no indication that the government had the newer information for any significant period of time before disclosing it. Nor is there any indication that Vasquez was unable to use any of the information at trial. See United States v. Vgeri, 51 F.3d 876, 880 (9th Cir. 1995) (finding no Brady violation where late-disclosed information was still used during cross-examination, and thus, “[t]he government disclosed the information at a time when it was of value to [the defendant]”); United States v. Gordon, 844 F.2d 1397, 1403 (9th Cir. 1988) (finding no Brady violation where the defense received the documents during the trial with enough time to make use of them, including the opportunity to recall witnesses).
Furthermore, reversal is warranted only if a Brady or Rule 16 violation resulted in prejudice, and Vasquez has shown none here. See Olsen, 704 F.3d at 1181 (Brady violation); United States v. Figueroa-Lopez, 125 F.3d 1241, 1247 (9th Cir. 1997) (Rule 16 violation).
IV.
We review the district court’s decision to admit co-defendant Karla Prieto’s testimony regarding Juan Tiznado’s statement under the coconspirator hearsay exclusion for abuse of discretion and the district court’s underlying determinations that the statement was made during and in furtherance of the conspiracy for clear error. See United States v. Moran, 493 F.3d 1002, 1010 (9th Cir. 2007). Under Federal Rule of Evidence 801(d)(2)(E), a statement is not hearsay if it “was made by the party’s coconspirator during and in furtherance of the conspiracy.”
The district court did not err in finding the statement occurred during the conspiracy because evidence suggested that the conspiracy dated back to before the 2011 statement, with border crossings occurring as early as 2010. It is less clear, however, that the statement was made in furtherance of the conspiracy. At the time of the statement, Prieto was already a member of the conspiracy. Prieto testified that she felt more secure knowing that someone at the border was working with the members of the conspiracy, but there is no indication that Tiznado, Prieto’s boyfriend and coconspirator, made the statement for that particular purpose. See United States v. Williams, 989 F.2d 1061, 1068 (9th Cir. 1993) (“In determining whether a statement is made ‘in furtherance of a conspiracy, the court looks to the declar-ant’s intent in making the statement, not the actual effect of the statement.” (citation omitted)).
Even if the district court clearly erred in finding the statement was made in furtherance of the conspiracy, however, the error is “harmless ‘unless we have grave doubt whether the erroneously admitted evidence substantially affected the verdict.’” United States v. Alvarez, 358 F.3d 1194, 1214 (9th Cir. 2004) (quoting United States v. Ellis, 147 F.3d 1131, 1134 (9th Cir. 1998)). Even without testifying about Tiznado’s statement, Prieto could have testified that she knew that someone was working with the conspiracy at the border, and that she saw Tiznado smiling or nodding at Vasquez in greeting, which likely would have conveyed a similar message. Additionally, the defense introduced significant impeachment evidence regarding Prieto, which may have lessened the impact of her testimony as a whole. Thus, any error in admitting. Prieto’s testimony regarding Tiznado’s statement was harmless because it did not substantially affect the verdict.
V.
Because Vasquez’s counsel failed to object, we must determine whether the prosecutor’s vouching comments during closing arguments amounted to plain error. United States v. Smith, 962 F.2d 923, 933 (9th Cir. 1992). We find that the prosecutor engaged in improper vouching during closing arguments by encouraging the jury to consider during their deliberations whether the prosecutor would have suborned perjury, which he stated was a federal crime that could result in jail time. See United States v. Weatherspoon, 410 F.3d 1142, 1146 (9th Cir. 2005) (finding that the prosecutor improperly vouched by stating that the police officer witnesses would risk losing their pension and livelihood, and could face perjury charges if they lied because it “urged that the existence of legal and professional repercussions served to ensure the credibility of the officers’ testimony”); Smith, 962 F.2d at 933-35 (finding improper vouching where “[t]he cumulative effect of [the prosecutor’s] statements was to submit the prosecutor’s personal conviction of [the defendant’s] guilt, together with the government’s as a whole, as factors for the jury to consider in its deliberations along with the'actual evidence”).
In light of defense counsel’s strong suggestion during closing arguments that the government suborned perjury, however, the prosecutor’s vouching did not implicate the fundamental fairness of the trial, and therefore, it was not reversible plain error. See United States v. Young, 470 U.S. 1, 11-16, 105 S.Ct. 1038, 84 L.Ed.2d 1 (1985) (concluding that vouching that is an “invited response” and does no more than “right the scale,” when considered in context, does not amount to reversible plain error). Additionally, the vouching statement did not implicate the fundamental fairness of the trial in light of the defense counsel’s impeachment evidence regarding Prieto, the district court’s general jury instructions about attorney arguments not being evidence, and the significant circumstantial evidence of Vasquez’s guilt. See United States v. Necoechea, 986 F.2d 1273, 1280-81 (9th Cir. 1993) (finding no reversible plain error where there was a general jury instruction that attorneys’ arguments were not evidence, the witness’s “credibility was forcefully challenged at trial,” and there was “significant circumstantial evidence connecting” the defendant with the crime).
VI.
Cumulatively, the above-discussed errors are not sufficiently prejudicial to require reversal. “[W]hile a defendant is entitled to a fair trial, he is not entitled to a perfect trial, ‘for there are no perfect trials.’ ” United States v. Payne, 944 F.2d 1458, 1477 (9th Cir. 1991) (quoting Brown v. United States, 411 U.S. 223, 231-32, 93 S.Ct. 1565, 36 L.Ed.2d 208 (1973)). There is significant circumstantial evidence that Vasquez was involved in the drug conspiracy, and he has not shown how any of these alleged errors, individually or cumulatively, could have changed the verdict in this case.
VII.
The district court’s factual finding supporting a 2-level enhancement for ob struction of justice under U.S.S.G. § 3C1.1 is reviewed for clear error. See United States v. Jimenez, 300 F.3d 1166, 1170 (9th Cir. 2002). To support an obstruction of justice sentencing enhancement the district court must make three findings: “(1) the defendant gave false testimony, (2) on a material matter, (3) with willful intent.” United States v. Castro-Ponce, 770 F.3d 819, 822 (9th Cir. 2014) (quoting United States v. Garro, 517 F.3d 1163, 1171 (9th Cir. 2008)). Here, the district court found that Vasquez committed perjury when he testified at both of his trials, and the court made all three necessary findings, stating “that [Vasquez’s] testimony was false, that it was material to the issues, [and] that it was willful.” Contrary to Vasquez’s contention, none of the cases cited require that the district court identify specific instances of false testimony. See id.; United States v. Acuna, 9 F.3d 1442, 1445 (9th Cir. 1993) (“[A] district court is not required to enumerate specifically which portions of a defendant’s testimony are false to justify an • enhancement for obstruction of justice.” (citation omitted)). Thus, the district court did not clearly err in applying a sentencing enhancement for obstruction of justice because it made all three required findings.
VIII.
Because Vasquez did not object to the imposition of a weapons enhancement under U.S.S.G. § 2D1.1(b)(1), we review for plain error. See United States v. Lindsey, 634 F.3d 541, 555 (9th Cir. 2011). Because Vasquez possessed a weapon during the crime due to his position as a Customs and Border Patrol Officer, the enhancement applies “unless it is clearly improbable that the weapon was connected with the offense.” U.S.S.G. § 2D1.1, n.11(A) (2012). The district court recognized that the weapon was not connected to the offense when denying the probation officer’s recommendation to apply the weapons enhancement with regard to Vasquez’s coconspirators, but applied the sentencing enhancement without explanation during Vasquez’s sentencing hearing.
Applying the weapons enhancement for possession of a service weapon during the commission of a crime may be warranted where the weapon provided additional security or where there was some likelihood that the weapon would be used during the offense. See, e.g., United States v. Marmolejo, 106 F.3d 1213, 1216 (5th Cir. 1997) (applying the weapons enhancement where armed INS officer transported drugs, acting as an “armed guard”); United States v. Ruiz, 905 F.2d 499, 507-08 (1st Cir. 1990) (applying the weapons enhancement where a police officer’s service weapon “instilled confidence in those who relied upon him for protection in exchange for drugs, and fear in those who dealt with his supplier's”).
Here, however, Vasquez’s involvement in the offense was limited to allowing vehicles to pass through his checkpoint without searching for contraband; there is no indication that the presence of Vasquez’s weapon had any impact on the offense or that Vasquez presented a risk of using the weapon in connection with the offense of conviction under any circumstances. Thus, the district court plainly erred in imposing the 2-level weapons enhancement. We vacate Vasquez’s sentence and remand for resentencing without the enhancement.
IX.
Sentencing reductions due to reduced base offense levels for drug offenses after Amendment 782 are typically sought by bringing a petition under 18 U.S.C. § 3582(c)(2), rather than by remand after direct appeal. See United States v. Boykin, 785 F.3d 1352, 1364 n.9 (9th Cir. 2015). Because remand is warranted on another ground, however, the district court may consider any change in base offense level due to Amendment 782 at Vasquez’s resen-tencing.
X.
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7823451-7223 | MEMORANDUM OPINION
KAPLAN, District Judge.
Plaintiff, Alfred Wright, commenced this action to compel the return of nine motor vehicles which have been seized as subject to civil forfeiture by the Internal Revenue Service (IRS). The parties are now before the Court on the government’s motion to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim on which relief can be granted.
Facts
In September 1994, the IRS seized four motor vehicles in South Carolina and five motor vehicles in New York, pursuant to warrants issued under 18 U.S.C. § 981(b). The warrants were issued on findings of probable cause that plaintiff was involved in illegal gambling, money laundering, and currency transactions and that the purchase of the vehicles had been part of plaintiffs money laundering and currency transaction scheme, in violation of 18 U.S.C. §§ 1956-57, and 31 U.S.C. §§ 5313(a) and 5324(a).
The IRS failed to notify plaintiff of its intent to forfeit the South Carolina vehicles until January 1995, and of its intent to forfeit the New York vehicles until March 1995. In each case plaintiff promptly notified the IRS of his claim to the vehicles and demanded their return. WTien the IRS had failed to commence forfeiture proceedings by late July 1995, plaintiff filed this action and moved, pursuant to Fed.R.Crim.P. 41(e), for an order directing the return of his vehicles. The complaint maintains that misrepresentations made by the IRS in obtaining the warrants pursuant to which plaintiffs vehicles were seized render the warrants void and the seizures violations of the Fourth Amendment, and that the IRS’s delay in instituting forfeiture proceedings violated plaintiffs Fifth Amendment right not to be deprived of his property without due process of law. On August 14,1995, one week prior to the return date of the Rule 41(e) motion, the IRS filed a complaint in the United States District Court for the District of South Carolina seeking forfeiture of plaintiffs nine vehicles. In light of the commencement of the South Carolina forfeiture proceedings, this Court denied plaintiffs Rule 41(e) motion for lack of jurisdiction.
Discussion
The complaint alleges jurisdiction under 28 U.S.C. §§ 1331, 1346 and 1356; Fed. R.CRim.P. 41(e), and the Fourth and Fifth Amendments to the United States Constitution.
Section 1346 of Title 28 provides jurisdiction for two principal, and distinct, sorts of actions against the United States. Section 1346(a)(2) (the “Tucker Act”) gives the district courts jurisdiction over actions against the United States seeking less than $10,000 in monetary damages. 28 U.S.C. § 1346(a)(2) (1988). Section 1346(b), the Federal Tort Claims Act (“FTCA”), makes the government liable for torts committed by government employees where the government would be liable if it were a private person. 28 U.S.C. § 1346(a) (1988). Both sections, however, authorize actions for money damages only. Lee v. Thornton, 420 U.S. 139, 140, 95 S.Ct. 853, 853, 43 L.Ed.2d 85 (1975) (Tucker Act); Hatahley v. United States, 351 U.S. 173, 182, 76 S.Ct. 745, 752, 100 L.Ed. 1065 (1956) (FTCA). Plaintiffs action seeks an order mandating return of his seized property. Since the relief he seeks is equitable, plaintiff cannot avail himself of the jurisdiction granted by Section 1346.
Although plaintiff has not raised it, the usual basis for injunctive relief against the United States, 5 U.S.C. § 702 (1988) (the Administrative Procedure Act or “APA”), is also inapplicable here. While the APA both grants jurisdiction to the district courts over, and waives sovereign immunity against, claims by persons who suffer legal wrongs as a result of action by an agency of the United States, it does not create jurisdiction where Congress has provided a specific mechanism for addressing a given claim. Here, plaintiff has a remedy available in the forfeiture proceeding instituted by the government against his vehicles. That remedy is exclusive, and Section 702 therefore does not confer authority to grant relief. 5 U.S.C. § 703 (1988); Estate of Watson v. Blumenthal, 586 F.2d 925, 934 (2d Cir.1978).
Plaintiff invokes also 28 U.S.C. § 1356. Section 1356 confers upon district courts “original jurisdiction ... of any seizure under any law of the United States on the land or upon waters not within admiralty and maritime jurisdiction.” 28 U.S.C. § 1356 (1988). Despite a history that stretches back to the Judiciary Act of 1789, this section appears seldom to have been used. See Hunsucker v. Phinney, 497 F.2d 29, 35 (5th Cir.1974), cert. denied, 420 U.S. 927, 95 S.Ct. 1124, 43 L.Ed.2d 397 (1975); 13B CHARLES A. WRIGHT, Arthur R. Miller, & Edward H. Cooper, Federal Practice AND Procedure: Civil § 3578, at 253-54 (2d ed. 1984). Even if it were taken to create jurisdiction over claims against the United States seeking remission of forfeiture, however, Section 1356 does not contain an express waiver of sovereign immunity. Massie v. Stuhldreher, 935 F.2d 274, 1991 WL 97627, at *1 (9th Cir.1991) (table decision with unreported opinion appearing in Westlaw); Murray v. United States, 686 F.2d 1320, 1324 (8th Cir.1982), cert. denied, 459 U.S. 1147, 103 S.Ct. 788, 74 L.Ed.2d 994 (1983). The United States is subject to suit only by its consent, which will not be implied if not expressly provided by statute, and its absence is a jurisdictional barrier to claims against the United States. Thus the exercise of jurisdiction over plaintiffs claim on the basis of Section 1356 is prohibited by the sovereign immunity of the United States.
Plaintiff contends also that jurisdiction is founded on the Fourth and Fifth Amendments to the United States Constitution and 28 U.S.C. § 1331 (1988). The amendments, of course, are silent regarding j'urisdiction and do not confer j'urisdiction of their own force. The federal question statute provides that the district courts have jurisdiction over claims “arising under the Constitution ... of the United States.” 28 U.S.C. § 1331 (1988). Thus the complaint can be read to contend that the federal question statute provides jurisdiction over constitutional tort plaintiffs claims arising under the Fourth and Fifth Amendments. The United States, however, has not waived its sovereign immunity against constitutional tort claims. Federal Deposit Ins. Corp. v. Meyer, — U.S. -, -, 114 S.Ct. 996, 1005, 127 L.Ed.2d 308 (1994). In consequence, this theory fails as well
Conclusion
The Court has ruled previously that the government’s filing of a forfeiture proceeding in the District of South Carolina divested the Court of jurisdiction over plaintiffs Rule 41(e) claim. Thus, since the Tucker Act, the FTCA, Section 1356, the federal question statute, and Fed.R.CRIM.P. 41(e) provide no basis for jurisdiction over plaintiffs complaint, defendant’s motion to dismiss is granted. The Court does not reach the merits of plaintiffs constitutional claims that the government has violated the Due Process Clause by its lengthy delay in commencing forfeiture proceedings against plaintiffs vehi-cíes and the Fourth Amendment prohibition on unreasonable searches and seizures by seizing the vehicles pursuant to defective warrants.
SO ORDERED.
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3907703-23320 | RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
BLUMENFELD, District Judge.
In this action for recission and damages, plaintiffs charge the defendant brokerage firm with violating the federal securities laws and regulations thereto by leading the plaintiffs into sophisticated margin transactions in speculative securities, inappropriate to their financial needs and circumstances. Plaintiffs and defendant have executed a stipulation of fact and cross-moved for summary judgment as to the issue of liability on Count Three of the complaint. In that count, plaintiffs contend that defendant violated Section 7 of the Securities Exchange Act, 15 U.S.C. § 78g and Regulation T of the Federal Reserve Board, 12 C.F.R. § 220 et seq., by extending credit in excess of the initial margin requirements set by the Reserve Board. The gravamen of this allegation is that defendant made purchases for the plaintiffs’ margin account which were secured by illusory credits in their Special Miscellaneous Account (SMA) rather than the deposit of cash or securities as ostensibly required by Regulation T. These credits are claimed to be illusory because they were derived from unrealized appreciations in securities which had dropped in value by the time of the purchases in question.
The parties have at the request of the court also submitted briefs on the continued viability of this cause of action in light of the passage of Section 7(f) to the Exchange Act, 15 U.S.C. § 78g(f) (1970), making it unlawful for an investor to obtain credit in excess of the margin limits.
Factual Background
To understand fully the issues involved in these motions, it is necessary to trace in some detail plaintiffs’ transactions with defendant, especially the use of their SMA to meet the initial margin requirements of Regulation T. Plaintiffs Raymond and Cora Palmer are a retired couple in their seventies. On March 21, 1972, they transferred their margin account with Shearson Hamill & Co., Inc. to the defendant. This transfer resulted in a deposit with the defendant of 2,500 shares of Jack Eckerd Corp. (Eckerd) and an extension of credit by defendant to plaintiffs of $30,735.
On that date, defendant credited plaintiffs’ SMA in the amount of $6,390. The SMA is an account designed to preserve an accrued balance of cash or credit for margin customers. Such accounts are in general use throughout the securities industry. As described by Judge Pollack in Manevich v. duPont, 338 F.Supp. 1124, 1127 (S.D.N.Y), aff’d, 465 F.2d 1398 (2d Cir. 1972) (per curiam), credits in the SMA are derived from:
“cash deposited by the customer, dividends on securities held by the broker for the customer’s account, any available portion of the sales proceeds of securities sold in the margin account by the customer and any appreciation in market value of the securities held in the account over the price at which they were purchased.”
It is this fourth component which is at issue in this case. The credit of $6,390 represented the difference between the excess loan value of the securities and plaintiffs’ adjusted debt balance. With a margin requirement of 55 per cent, the excess loan value of securities worth $82,500 was $37,-125 (45% of $82,500).
On March 28, 1972, the value of the Eckerd stock rose to $85,000. Forty-five per cent of the $2,500 increase was credited to the Palmers’ SMA ($1,125). April 5, 1972, the shares’ value rose an additional $2,500 to $87,500. Again $1,125 was added to the SMA. The next day, April 6, 1972, the value of plaintiffs’ securities jumped $5,000 to $92,500. Forty-five per cent of this increase, or $2,250, was added to the SMA which now totaled $10,871.75. By April 28, 1972, the value of plaintiffs’ Eckerd stock had declined $10,000 and returned to its initial worth of $82,500. No entry was made to the SMA to reflect this loss in value. In addition, a dividend of $87.41 was credited to the SMA and subtracted from the adjusted debit balance. Thus as of May 9, 1972, plaintiffs had an SMA of $10,959.26 and a debit balance of $30,839.79.
On May 9, 1972, defendant purchased 500 more shares of Eckerd stock for the plaintiffs at a cost of $16,952.75. To meet the 55 per cent margin requirement of Regulation T, defendant debited plaintiffs’ SMA $9,324.01 (55% of $16,952.75). After the purchase, plaintiffs had a debit balance of $47,792.54 ($30,839.79 + $16,952.75) and an SMA of $1,635.25 ($10,959.26 - $9,324.01). It is clear that if the SMA had been adjusted to reflect the decline in value of plaintiffs’ prior holdings in Eckerd, they would not have had sufficient equity in their accounts to purchase the new shares at the 55 per cent margin requirement.
Between May 9, and November 14, 1972, the only entries to plaintiffs’ margin accounts consisted of interest charges of $1,782.21 and a dividend credit of $225. At plaintiffs’ request, on November 15, 1972, the defendant sent plaintiffs a check for $200. This transaction was effected by reducing the SMA $200 and adding $200 to their debit balance. The defendant did not execute a Federal Reserve Form T — i which is normally required in cases of non-securities related customer borrowings. 12 C.F.R. § 220.7.
Finally on November 28, 1972, defendant purchased 4,500 shares of Ward Cut-Rate Drug Co. (Ward) for plaintiffs margin account at a cost of $111,936.60. On the same day, defendant created a “short” account for the plaintiffs and sold the 3,000 shares of Eckerd for $113,921.65. In con formity with its interpretation of Regulation T’s “same day transaction” rules, defendant did not require the deposit of any additional equity to plaintiffs’ account since the shares sold had a greater market value than those purchased. As the value of their Ward shares declined, plaintiffs fell below the house maintenance margin requirements of defendant. The short account was closed out March 9, 1973; the Ward shares were sold on April 24, 1973. .
Plaintiffs contend that the May 9th purchase of Eckerd stock, the November 15th “withdrawal” of $200, and the November 28th purchase of Ward securities were all violations of Regulation T for which they claim damages.
The Existence of a Private Cause of Action
As a preliminary question, the court must explore whether plaintiffs can maintain a cause of action against Thomas & McKinnon Auchincloss for the alleged violations of Section 7 of the Exchange Act and Regulation T. Section 220.3(b)(1) of Regulation T provides in pertinent part:
“A creditor shall not effect for or with any customer in a general account . any transaction which . . . creates an excess of the adjusted debit balance of such account over the maximum loan value of the securities m such account . unless in connection therewith the creditor obtains, as promptly as possible and in any event before the expiration of 5 full business days following the date of such transaction, the deposit into such account of cash or securities in such amount that the cash deposited plus the loan value of the securities deposited equals or exceeds the excess so created . . ..” (Emphasis supplied).
Plaintiffs argue that the uncorrected appreciations in the SMA were not the equivalent of cash or securities and so could not be used to satisfy the margin requirements. In Pearlstein v. Scudder & German, 429 F.2d 1136 (2d Cir. 1970), cert. denied, 401 U.S. 1013, 91 S.Ct. 1250, 28 L.Ed.2d 550 (1971), the Court of Appeals held that an investor has a federal implied right of action for violations of Regulation T. Subsequent to that decision, Congress enacted Section 7(f) of the Exchange Act which renders an investor equally responsible with his broker for observance of the margin requirements by making it unlawful for a borrower to secure credit in violation of the Reserve Board limits. 15 U.S.C. § 78g(f). The court is therefore faced with the unenviable task of determining to what extent, if any, the holding in Pearlstein has been undercut by the amendment to the Act.
Section. 7(f) states that:
“It shall be unlawful for any United States person ... to obtain, receive, or enjoy the beneficial use of a loan or other extension of credit from any lender . . . for the purpose of (A) purchasing or carrying United States securities ... if, under this section or rules and regulations prescribed thereunder, the loan or other credit transaction is prohibited.”
The Act’s implementation is entrusted to the Federal Reserve Board which may in its discretion exempt any class of persons from the statute’s application. The Reserve Board has promulgated Regulation X to enforce the Act’s prohibitions. 12 C.F.R. § 224 et seq.
First there is nothing in the legislative history to suggest that Congress intended to overrule the Pearlstein decision by amending Section 7 of the Exchange Act. Rather Congress’ stated purpose was to prevent “[t]he infusion of unregulated foreign credit into American securities markets.” According to the House Report, investors were using secret foreign banks and credit sources to finance purchases in American securities markets. There was doubt as to whether Section 7(c) reached such foreign lenders. See Metro-Goldwyn-Mayer, Inc. v. Transamerica Corp., 303 F.Supp. 1354 (S.D.N.Y.1969). To maintain the fiscal integrity of national securities and credit markets, Congress felt it most feasible to place on the investor a duty to comply with the initial margin requirements if his sources of credit were outside the United States. The House Report notes:
“Part of the reason why Section 7 was originally enacted in its present form may have been a concern over putting the small investor at risk as to whether his broker or lender was complying with the regulations. The amendment has been carefully drawn to avoid this result.”
Although the statutory language is a good deal less than clear on this point, it seems plain that Congress did not intend to deprive all investors of a private cause of action for breach of the initial margin requirements.
At the same time, Judge Waterman in the original Pearlstein decision relied heavily on the fact that the statute then forbade the broker from extending excessive credit but did not make it unlawful for the customer to accept such credit. Judge Waterman stated:
“This fact appears to indicate that Congress has placed the responsibility for observing margins on the broker, for the original need for requirements undoubtedly derived from the common desire of investors to speculate unwisely on credit. Moreover, whereas brokers are charged by law with knowledge of the margin requirements, the extent of an investor’s knowledge of these rules would frequently be difficult of tangible proof.”
429 F.2d at 1141. Pearlstein, however, involved an experienced investor who had contributed by his own actions to much of the loss incurred. Judge Waterman’s discussion of the prior statute’s failure to include investors within its prohibitions was directed to his conclusion that a defense of in pari delicto was not available to the brokerage firm. While the changes in the Act may have expanded the possible defenses of a creditor in a Section 7 action, I am not persuaded that the Court of Appeal’s holding that borrowers possess an implied right of action for violations of the margin requirements should be changed. Lewis v. Rockefeller, 431 F.2d 368, 371 (2d Cir. 1970). But see Utah State University of Agriculture and Applied Science v. Bear, Stearns & Co., 549 F.2d 164 (10th Cir. 1977).
The Supreme Court has set out a series of factors to consider in determining whether a private remedy is implicit in a statute that does not expressly provide one. The court must determine if the plaintiff is within the class the statute was intended to protect, if there is any legislative intent either to create or deny such a remedy, if a private remedy would be consistent with the underlying legislative scheme, and finally if the cause of action is one traditionally relegated to state law so that the creation of a federal remedy might be inappropriate. Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). The Securities Exchange Act of 1934 was passed to protect the general investing public against fraud and manipulation of stock prices and so encourage public participation in the capital markets. Ernst & Ernst v. Hochfelder, 425 U.S. 185, 195, 96 S.Ct. 1375, 47 L.Ed.2d 668 (1976). Section 7 of the Exchange Act was, however, directed primarily to the macroeconomic purpose of general credit regulation. The protection of the small investor who might have spread himself too thin by overspeculation was seen as “a byproduct of the main purpose.” Since Remar v. Clayton Securities Corp., 81 F.Supp. 1014 (D.Mass.1949), though, courts have recognized that private actions by investors are an effective means of protecting the national economy from margin infringements. See Pearlstein v. Scudder & German, supra, 429 F.2d at 1140 n. 7; Stonehill v. Security National Bank, 68 F.R.D. 24 (S.D.N.Y.1975). Margin violations are in the nature of “victimless crimes” which neither broker nor borrower is likely to report. The likelihood of administrative enforcement is therefore remote. The Second Circuit in Pearlstein found that private investors were within the class intended to benefit from the statute and so implied a private enforcement action. The legislative history of Section 7(f) and the regulations promulgated by the Federal Reserve Board indicate that at least with respect to the good faith borrower, private actions are still consistent with the intent and purpose of the Act.
The 1970 amendments to the Exchange Act were part of an effort at national credit regulation. There seems no intent to make small, unsophisticated investors responsible for complying with the margin requirements. Regulation X implies that only borrowers who “falsely,” “wilfully,” or “intentionally” evade the provisions of the Act are subject to its sanctions. 12 C.F.R. § 224.1. Section 224.6(a) of Regulation X makes clear:
“An innocent mistake made in good faith by a borrower in connection with the obtaining of credit shall not be deemed to be a violation of this part . if promptly after discovery of the mistake the borrower takes whatever action is practicable to remedy the noncompliance.”
An innocent, good faith borrower may not even be in violation of the new amendments then. There seems no reason, therefore, to deprive him of his cause of action when such suits continue to serve the broad public purpose of national credit regulation and aid in enforcement of the statutory prohibitions.
Thus the plaintiffs may maintain a cause of action against their broker for a violation of Section 7 of the Exchange Act and Regulation T. The effect of Section 7(f), though, is to restore to the broker certain defenses based upon comparative fault, such as in pari delicto. To prosecute an action successfully, a plaintiff must demonstrate his good faith — that he acted innocently without knowledge that the transaction violated the margin requirements. In this case, defendant has in fact put plaintiffs’ prior experience as investors and knowledge of the margin limits in issue— both in the pleadings and in depositions. Defendant portrays Mr. Palmer as an experienced trader who made his own investment decisions and was familiar with the margin rules. The plaintiffs’ good faith and knowledge of the margin regulations are questions of fact for trial which preclude summary judgment for either party on this issue.
The Margin Violations
Defendant strenuously argues that its use of the SMA credits to satisfy the margin requirements was consistent with Regulation T. If there was no violation of the regulation, defendant would, of course, be entitled to summary judgment on Count Three. Regulation T requires the creditor to obtain “cash or securities” from the customer when a purchase causes the customer’s adjusted debit balance to exceed the maximum loan value of the securities in the account. The question presented is whether a past, unrealized appreciation on securities which have subsequently declined in value is the equivalent of cash or securities for the purposes of § 220.3(b)(1) of Regulation T. I hold it is not.
The SMA accounting procedure is evidently a wide-spread practice throughout the investment industry. Each time plaintiffs’ Eckerd shares rose in value, 45 per cent of that appreciation was credited to the SMA. But market prices go down as well as up. Indeed, the market price of the Eckerd shares did decline prior to the initial May 9th purchase. However, the SMA continued to reflect the credits arising out of the past appreciation. The defendant, supported by the Federal Reserve Board, contends that the SMA merely represents sums which the customer could have withdrawn and so obtained cash, but did not. Since Regulation T deals only with the initial margin requirements and not maintenance requirements, defendant and the Federal Reserve Board maintain this procedure for preserving purchasing power complies with the regulation.
This argument confuses the time at which Regulation T comes into play. One must look to the time of the purchase of the Eckerd stock, May 9, 1972, and the Ward shares, November 28, 1972, to determine if there has been a violation of the regulation. Did the plaintiffs have sufficient cash, securities, or their equivalent to meet the margin requirements on those dates? The fact that at some prior time they might have had enough additional loan value in their securities to purchase the stock is irrelevant. The plaintiffs did not enter into a borrowing on March 28th, April 5th or April 6th when the credits arising out of the stock appreciations were entered on their accounts. They incurred no interest costs. The argument that they can be “deemed” to have borrowed the additional loan value is a fiction unsupported by the facts and in conflict with the Reserve Board’s direction that the SMA “shall not be used in any way for the purpose of evading or circumventing any of the provisions of this part.” 12 C.F.R. § 220.4(a)(3).
When the market price of a stock increases, the investor has new equity which can be used to satisfy the margin requirements when purchasing securities. If after the purchase, the appreciated stock used as collateral declines in value, there would be no violation of Regulation T since that section regulates only the margin requirement at the moment of purchase. On the other hand, if the stock used to make margin declines to its original value prior to the purchase of new securities, the shareholder’s additional investment equity has vanished. In terms of his net worth the investor is in the same position he would have been had the stock’s price remained unchanged. I am at a loss to see how a broker can extend credit on the basis of a no longer existent appreciation. A right to borrow in the past is not the equivalent of a right to borrow in the present.
I do not question the fact that the SMA procedure can be used to satisfy the margin requirements when such credits are based on cash deposits, dividends, or proceeds from the sale of securities. McCormick v. Esposito, 500 F.2d 620, 623-27 (5th Cir. 1974), cert. denied, 420 U.S. 912, 95 S.Ct. 834, 42 L.Ed.2d 842 (1975); Manevich v. Dupont, supra. When the credit is derived from an evanescent appreciation in stock value, however, the procedure allows an investment on insufficient margin and illegally attempts to circumvent Regulation T.
Because the May 9th purchase of Eckerd stock could not have been accomplished without the transfer of SMA credits based on the no longer existent appreciation, the transaction cannot conform to Regulation T. The November 28th purchase' of Ward shares is similarly tainted and cannot be immunized through the same day substitution rule of § 220.3(g). Defendant does not seriously contend otherwise. The same day transaction rule is premised on the idea that initial margin requirements were satisfied at the time of the first purchase. The broker cannot be allowed to avoid liability by churning the account or substituting new stock. For the purposes of the plaintiffs’ loss, the illegal extension of credit must be traced to include those shares substituted.
As to the $200 transaction on November 15, 1972, I conclude that this was not a borrowing requiring the execution of a Federal Reserve Form T-4. Prior to November 15th, dividends of at least $225 were credited to the plaintiffs’ account. Since the $200 sent to plaintiffs could be attributed to these dividends, the delivery of this money did not involve an extension of credit based on the illusory appreciation, but only the withdrawal of cash sanctioned by § 220.4(f)(6) of Regulation T.
Conclusion
To summarize, I find that defendant violated Regulation T and Section 7 of the Securities Exchange Act with respect to the stock purchases and that plaintiffs may maintain a cause of action for these violations. Defendant may have a defense to the violations concerning the plaintiffs’ good faith and knowledge of the ftiargin rules. This defense presents triable issues of fact which preclude summary judgment. As to the $200 payment, no Federal Reserve Form T-4 was required and therefore the defendant is entitled to partial summary judgment on that claim alone.
SO ORDERED.
. Decision on these motions was also delayed pending the filing of an amicus brief by the Federal Reserve Board.
. The Eckerd stock then had a value of $33 per share and a total value of $82,500. The margin requirement of the Federal Reserve Board promulgated pursuant to § 220.8 of Regulation T was 55 per cent. On March 21, 1972, the credit extended by the defendant to the plaintiffs was within the limits set by Regulation T.
. $37,125 - $30,735 = $6,390.
, As a result of a bookkeeping error immaterial to this action, plaintiffs’ SMA was mistakenly debited $18.25.
. These shares were sold “short against the box.” The parties agree in their stipulation that under this procedure, “the plaintiffs’ margin account continued to hold 3,000 shares of Eckerd and the defendant arranged for the plaintiffs’ short account to borrow 3,000 shares of Eckerd from a third party and to sell the borrowed stock in the short account.” Stipulation of Fact, n. 32.
. The Regulation T limits apply only to the initial purchase. Rule 431(b) of the Rules of the New York Stock Exchange provides that member brokers require a 25 per cent “maintenance margin” of all customers. The house “maintenance margin requirement” of the defendant for shares held “long” in margin accounts was 30 per cent. For stock held short against the box the house standard was only 10 per cent.
. The question is not one of “standing” as plaintiffs’ brief suggests, but rather whether the Palmers can “state a cause of action of ‘claim for relief ” against the defendant. Lank v. New York Stock Exchange, 548 F.2d 61, 64 (2d Cir. 1977).
. Section 7(c) of the Securities Exchange Act dictates:
“It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly to extend or maintain credit to or for any customer — (1) on any security ... in contravention of the rules and regulations which the Board of Governors of the Federal Reserve Board shall prescribe.”
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11891008-24423 | STEPHEN H. ANDERSON, Circuit Judge.
This case began in 1992 when plaintiff and appellant, the Apache Tribe of the Mescalero Reservation, a federally-recognized Indian tribe in New Mexico, filed an action seeking to compel the State of New Mexico to negotiate in good faith to achieve a compact permitting Class III (casino-type) gaming on the Mescalero Reservation. Eventually, in 1995, the Tribe and the State entered into a compact (“Compact”) permitting such gaming, the validity of which is an issue in this case. The present appeal is from the district court’s denial of the Tribe’s motion to strike the State’s Eleventh Amendment immunity defense, denial of the Tribe’s motion to dismiss the State’s counterclaim seeking to declare the Compact invalid, and grant of summary judgment to the State on its counterclaim. We affirm.
BACKGROUND
The Tribe’s initial action in 1992 was filed pursuant to the Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701-2721 (“IGRA”), which gives district courts jurisdiction over “any cause of action initiated by an Indian tribe arising from the failure of a State to enter into negotiations with the Indian tribe for the purpose of entering into a Tribal-State com* pact.” 25 U.S.C. § 2710(d)(7)(A)®. The State argued that such an action was barred by the Tenth and Eleventh Amendments, and the district court agreed, dismissing the Tribe’s action. On appeal to this court, we reversed, holding that the State may not assert Tenth or Eleventh Amendment immunity to an action under IGRA to compel a state to negotiate in good faith. Ponca Tribe of Oklahoma v. Oklahoma, 37 F.3d 1422 (10th Cir.1994), vacated, — U.S. -, 116 S.Ct. 1410, 134 L.Ed.2d 537 (1996). On remand to the district court, the State filed an answer along with a counterclaim against the Tribe, seeking a declaration that the Compact was invalid. The State again argued it had Tenth and Eleventh Amendment immunity.
The Tribe then filed a motion to strike the State’s Tenth and Eleventh Amendment defenses, as well as a Fed.R.Civ.P. 12(b)(1) motion to dismiss the State’s counterclaim for lack of jurisdiction. The State moved for summary judgment on its counterclaim. Meanwhile, the United States Supreme Court issued its decision in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), in which it held that .Congress lacked the authority to abrogate the states’ Eleventh Amendment immunity by means of the Indian Commerce Clause, U.S. Const., Art. 1, § 8, cl. 3, pursuant to which IGRA was enacted, thereby effectively overruling our Ponca Tribe decision. Id. at-, 116 S.Ct. at 1119. The Supreme Court did not address Tenth Amendment immunity. Id. at - n. 10, 116 S.Ct. at 1126 n. 10. Following its decision in Seminole, the Supreme Court vacated Ponca Tribe and remanded the case to us for reconsideration in light of Seminole.
The district court then held a hearing on all outstanding motions, following which it entered an order: 1) denying the Tribe’s motion to strike the State’s Eleventh Amendment immunity defense; 2) granting the Tribe’s motion to strike the State’s Tenth Amendment immunity defense; and 3) denying the Tribe’s motion to dismiss the State’s counterclaim, and granting the State’s motion for summary judgment on the issue of the Compact’s validity, holding that the Compact was invalid. The Tribe appeals. During the pendency of this appeal, our court issued a decision, Pueblo of Santa Ana v. Kelly, 104 F.3d 1546 (10th Cir.), cert. denied, — U.S. -, 118 S.Ct. 45, 139 L.Ed.2d 11 (1997), in which we held that compacts entered into by various tribes, which were virtually identical to the Compact at issue in this case, were invalid and not “in effect” under IGRA because the Governor of New Mexico lacked the authority to sign the compacts on behalf of the State. Id. at 1559.
DISCUSSION
Following the Supreme Court’s denial of certiorari in Pueblo of Santa Ana, we issued an order in this case, directing the parties to brief the following issues: 1) the effect of the decision in Pueblo of Santa Ana upon the issues presented in, and the disposition of, this appeal; 2) whether intervening changes in New Mexico state law affect any of the issues in this case, affect the necessity of our ruling on any of those issues, or require the court to consider certification of new state law issues to the New Mexico Supreme Court; and 3) whether this case should be stricken from the oral argument calendar and submitted on the briefs. We invited the parties to address any other issues they wished, and, of course, we have the parties’ original briefs filed in this appeal. We have reviewed the briefs of the parties, as well as of amici curiae, the Pueblos of Santa Ana, Tesuque, Taos, Pojoaque and Acoma.
The Tribe argues that Pueblo of Santa Ana is not dispositive of this case “because there are still outstanding issues which were not considered by this Court in the Santa Ana case.” Appellant’s Supp. Br. at 2. First, the Tribe argues this case is distinguishable from Pueblo of Santa Ana because the United States is not a party to this case, as it was in Pueblo of Santa Ana. Id. The Tribe accordingly argues we must consider whether the United States is an indispensable party in whose absence the State’s counterclaim must be dismissed. The Tribe also claims that the absence of the United States, against whom the Tribe lacks sovereign immunity, compels us to decide whether the Tribe’s immunity has been abrogated by Congress. Other issues the Tribe argues were not addressed by Pueblo of Santa Ana are whether the political question doctrine precludes us from considering this case and “whether Congress even vested the District Court with the jurisdiction to entertain the State’s counterclaim.” Id. The Tribe also claims that there are “distinctions between the sovereign immunity of New Mexico and that of Florida as they relate to the applicability of Seminole.” Id. at 3. Finally, the Tribe argues that “substantial changes in New Mexico law” since our Pueblo of Santa Ana decision “suggest[s] that the Court should revisit [that] decision.” Id.
The State argues that, to the extent issues in this appeal depend upon the validity of the Compact, Pueblo of Santa Ana’s holding that identical compacts are invalid controls. The State further argues, however, that changes in New Mexico law — specifically, New Mexico has recently enacted legislation granting the Governor authority to enter into compacts with tribes, and the Tribe and the State have just entered into a new compact for Class III gaming — require certification to the New Mexico Supreme Court of three questions of state law:
1. Is the passage of H.B. 399 the valid exercise of authority granted to the New Mexico Legislature by the New Mexico Constitution?
2. If H.B. 399 is valid under the New Mexico Constitution, did the tribal resolution presented by the Mescalero Tribe to Governor Johnson authorize the Governor to enter into a compact with the Tribe?
3. If H.B. 399 is not valid under the New Mexico Constitution, can the defects in H.B. 399 be severed from H.B. 399?
Appellee’s Supp. Br. at 9. The State’s argument is that if the new compact into which, the Tribe and State have recently entered is valid, the Tribe’s claim relating to good faith negotiation in connection with previous compacts is moot.
The district court in this ease held that: 1) the Ponca Tribe holding that IGRA does not violate the Tenth Amendment is the “law of the case” and the State’s reliance on the Tenth Amendment as a defense must be stricken; 2) under Seminole the State has Eleventh Amendment immunity from the Tribe’s good faith negotiation claim; 3) the State did not waive its Eleventh Amendment immunity by filing a counterclaim in this case; 4) it (the court) has jurisdiction under IGRA, 25 U.S.C. § 2710(d)(7)(A)(ii), to consider the State’s counterclaim challenging the validity of the Compact; 5) the Tribe’s sovereign immunity does not bar the court from considering the State’s counterclaim; 6) the political question doctrine does not prohibit the court from ruling on the State’s counterclaim; and 7) the Compact is invalid because Governor Johnson lacked the authority to enter into the Compact on behalf of the State.
I. United States as Indispensable Party
The Tribe argues the United States and/or the Secretary of the Interior are indispensable parties, in whose absence the State’s counterclaim seeking a declaration of Compact invalidity must be dismissed. The Tribe concedes that it did not raise this issue in the district court, but asserts that it can properly be raised anytime. We agree that the issue of indispensability can be raised at any time. See Thunder Basin Coal Co. v. Southwestern Pub. Serv. Co., 104 F.3d 1205, 1211 (10th Cir.1997) (“[T]he issue of indispensability is one which the court has an independent duty to raise sua sponte-”). However, we note that the Tribe raises the claim of indispensability only after receiving an unfavorable ruling in the district court. See Keweenaw Bay Indian Comm. v. United States, 940 F.Supp. 1139, 1143 (W.D.Mich.1996) (observing that the “federal defendants elected ... to wait for a decision, and now seek to claim that the State is essential after receiving a construction of the Compact with which they disagree”). We nonetheless consider the issue, and reject the Tribe’s argument that the United States is indispensable. As we have recently observed:
Determining whether an absent party is indispensable requires a two-part analysis. The court must first determine under Rule 19(a) whether the party is necessary to the suit and must therefore be joined if joinder is feasible. If the absent party is necessary but cannot be joined, the court must then determine under Rule 19(b) whether the party is indispensable.
Rishell v. Jane Phillips Episcopal Mem’l Med. Ctr., 94 F.3d 1407, 1411 (10th Cir.1996) (citations omitted), cert. dismissed, — U.S. -, 117 S.Ct. 1331, 137 L.Ed.2d 491 (1997), cert. denied, — U.S. -, 117 S.Ct. 1427, 137 L.Ed.2d 536 (1997). To determine whether a party is necessary, we consider three factors:
(1) whether complete relief would be available to the parties already in the suit, (2) whether the absent party has an interest related to the suit which as a practical matter would be impaired, and (3) whether a party already in the suit would be subjected to a substantial risk of multiple or inconsistent obligations.
Id. Assuming the United States is necessary, and cannot be joined, since it cannot be sued without consenting, we would only dismiss the State’s counterclaim, as the Tribe urges us to do, if we find that the United States is also indispensable.
Rule 19(b) sets out factors for determining whether a person or entity is indispensable:
[Fjirst, to what extent a judgment rendered in the person’s absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person’s absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for non-joinder.
Fed.R.Civ.P. 19(b). We have recognized that:
[T]he Supreme Court requires a court addressing the issue for the first time on appeal to view the Rule 19 factors entirely from an appellate perspective, considering a victorious plaintiffs interest in preserving his judgment, the defendant’s failure to assert his interest, the interest of the outsider, and the interest of the courts and society in judicial efficiency.
Enterprise Management Consultants, Inc. v. United States, 883 F.2d 890, 894 (10th Cir.1989) (citing Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 109-11, 88 S.Ct. 733, 737-39, 19 L.Ed.2d 936 (1968)); see also 7 Charles Alan Wright, et al., FEDERAL PRACTICE AND PROCEDURE § 1609 (2d ed.1986).
The Tribe’s argument is that the United States is indispensable to a determination of the validity of a compact purportedly entered into by the State and the Tribe. We disagree. The United States is not a party to the Compact; while Secretary Babbitt approved the Compact, that approval, as we held in Pueblo of Santa Ana, did not and, under IGRA, could not, alter its validity or non-validity under state law. If we affirm the district court’s determination that the Compact is invalid under state law, the United States cannot later challenge that conclusion. We perceive no prejudice to anyone from the absence of the United States, and the subject of the counterclaim — the validity of the Compact — was fully and fairly presented without the presence of the United States as a party. Moreover, viewed from the appellate perspective, the State has won on the issue of the Compact’s validity, neither the Tribe nor the United States heretofore indicated that the presence of the United States was necessary in this case, and the interests of judicial efficiency counsel strongly against dismissing this action at this point. Accordingly, the absence of the United States as a party does not require dismissal of the State’s counterclaim.
II. Applicability of Seminole
The Tribe also argues that there are “distinctions between the sovereign immunity of New Mexico and that of Florida as they relate to the applicability of Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996) to this case.” Appellant’s Supp. Br. at 3. Seminole held that Congress lacked the authority, under the Indian Commerce Clause, to abrogate the states’ Eleventh Amendment immunity, “and therefore [25 U.S.C.] § 2710(d)(7) cannot grant jurisdiction over a State that does not consent to be sued.” Seminole, 517 U.S. at -, 116 S.Ct. at 1119. The Tribe argues that Florida’s sovereign immunity “is completely intact,” with a few statutory exceptions. Appellant’s Br. at 11. New Mexico, by contrast, judicially abolished its sovereign immunity and, the Tribe argues, has only reinstated it statutorily in a few select areas. Thus, the Tribe asserts that because New Mexico’s sovereign immunity is narrower than Florida’s, New Mexico lacks Eleventh Amendment immunity from a good faith negotiation claim under IGRA.
The Tribe’s argument confuses general state sovereign immunity and Eleventh Amendment immunity. As the Supreme Court has stated:
Although a State’s general waiver of sovereign immunity may subject it to suit in state court, it is not enough to waive the immunity guaranteed by the Eleventh Amendment. As we explained just last Term, “a State’s constitutional interest in immunity encompasses not merely whether it may be sued, but where it may be sued.” Thus, in order for a state statute or constitutional provision to constitute a waiver of Eleventh Amendment immunity, it must specify the State’s intention to subject itself to suit in federal court.
Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241, 105 S.Ct. 3142, 3146-47, 87 L.Ed.2d 171 (1985) (citation omitted) (quoting Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 99, 104 S.Ct. 900, 907, 79 L.Ed.2d 67 (1984)); see also Sherman v. Curators of the Univ. of Missouri, 16 F.3d 860, 862 n. 2, 864 n. 5 (8th Cir.1994); Richins v. Indus. Const., Inc., 502 F.2d 1051, 1055 (10th Cir.1974). The fact that New Mexico judicially abolished general common-law sovereign immunity, and then, by statute, reinstated it in selected areas does not affect whether New Mexico enjoys Eleventh Amendment immunity from actions in federal court. See Palotai v. University of Md. College Park, 959 F.Supp. 714, 719 (D.Md.1997) (“[A] general waiver of sovereign immunity is not a waiver of a State’s immunity from federal-court jurisdiction.”). Seminole applies and requires us to affirm the district court’s denial of the Tribe’s motion to strike the State’s Eleventh Amendment immunity defense.
III. Tribal Sovereign Immunity
The Tribe also argues that the issue of whether Congress in IGRA validly abrogated tribal sovereign immunity was not presented in Pueblo of Santa Ana because the United States was a party and the Tribe clearly lacked sovereign immunity against the United States. In the Tribe’s view, Congress did not unequivocally abrogate its immunity, so the district court lacked jurisdiction over the State’s counterclaim seeking a declaration as to whether the State validly entered into the Compact. The district court, relying upon Maxam v. Lower Sioux Indian Community of Minn., 829 F.Supp. 277 (D.Minn.1993), held that the Tribe had waived its sovereign immunity by engaging in gambling pursuant to a compact entered into under IGRA.
“Indian tribes have long been recognized as possessing the common-law immunity from suit traditionally enjoyed by sovereign powers.” Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 1677, 56 L.Ed.2d 106 (1978). That immunity may be abrogated by Congress or waived, but such waiver “ ‘cannot be implied but must be unequivocally expressed.’ ” Id. (quoting United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953-54, 47 L.Ed.2d 114 (1976)). Section 2710(d)(7)(A)(ii) gives district courts jurisdiction over “any cause of action initiated by a State or Indian tribe to enjoin a class III gaming activity located on Indian lands and conducted in violation of any Tribal-State compact entered into.” Seminole held that Congress unmistakably intended to abrogate the states’ Eleventh Amendment immunity by means of IGRA. Its intent to abrogate tribal sovereign immunity by section 2710(d)(7)(A)(ii) when a state seeks to “enjoin” gaming activities “conducted in violation of any Tribal-State compact entered into” seems equally clear and unmistakable. And although Seminole held that Congress lacked the authority to abrogate states’ Eleventh Amendment immunity through the Indian Commerce Clause, tribal sovereign immunity does not stem from the Eleventh Amendment.
While there is sparse case law on the issue, it appears the majority supports the view that IGRA waived tribal sovereign immunity in the narrow category of cases where compliance with IGRA’s provisions is at issue and where only declaratory or injunctive relief is sought. See Montgomery v. Flan- dreau Santee Sioux Tribe, 905 F.Supp. 740, 745 (D.S.D.1995) (“The Court has subject matter jurisdiction to consider whether defendants [tribes] have complied with [IGRA].”); Calvello v. Yankton Sioux Tribe, 899 F.Supp. 431, 438 (D.S.D.1995) (“[Federal courts may find a waiver of tribal sovereign immunity for the purpose of enforcing the provisions of the IGRA where prospective injunctive relief, and not monetary relief, is sought.”); Maxam, 829 F.Supp. at 281 (holding that, by engaging in gaming, tribe waives sovereign immunity for narrow purpose of determining compliance with IGRA); Ross v. Flandreau Santee Sioux Tribe, 809 F.Supp. 738, 745 (D.S.D.1992) (“Engaging in gaming pursuant to the IGRA constitutes an express waiver of sovereign immunity on the issue of compliance with the IGRA.”); Cohen v. Little Six, Inc., 543 N.W.2d 376, 380 (Minn.Ct.App.1996) (“LSI’s operation of a gaming hall subjects it to a non-tribal court’s authority to enforce compliance with the IGRA, not claims for money damages.”), aff'd 561 N.W.2d 889 (Minn.1997), petition for cert. filed, 65 U.S.L.W. 3839 (June 9, 1997) (No. 96-1962). But see Davids v. Coyhis, 869 F.Supp. 1401, 1408-09 (E.D.Wis.1994) (explicitly rejecting the reasoning of Ross and Maxam ).
IV.Political Question
The Tribe also argues that the resolution of the State’s counterclaim involves a non-justiciable political question. This argument was not made in Pueblo of Santa Ana and that decision demonstrates why the argument fails. “A controversy is nonjusticiable — i.e., involves a political question — where there is a ‘textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judi-dally discoverable and manageable standards for resolving it....’ ” Clinton v. Jones, — U.S. -, - n. 34, 117 S.Ct. 1636, 1647 n. 34, 137 L.Ed.2d 945 (1997) (quoting Baker v. Carr, 369 U.S. 186, 217, 82 S.Ct. 691, 710, 7 L.Ed.2d 663 (1962)). We resolved the very issue^ — the validity of the Compact — in Pueblo of Santa Ana which the Tribe claims is nonjusticiable. That opinion explains adequately the basis upon which this court resolved that claim.
V. Jurisdiction Over Counterclaim
The Tribe argues that the plaintiffs in Pueblo of Santa Ana “conceded” that the court had jurisdiction to consider the issue of the validity of the compact, but the Tribe in this case is unwilling to make that concession with respect to the State’s counterclaim. The plaintiffs’ purported “concession” in Pueblo of Santa Ana is irrelevant. We have an independent duty to satisfy ourselves that we have jurisdiction over a case. Phelps v. Hamilton, 122 F.3d 1309, 1315-16 (10th Cir.1997). We satisfied that duty in Pueblo of Santa Ana, and the same result obtains here. As the district court held, 25 U.S.C. § 2710(7) conferred jurisdiction over the State’s counterclaim.
VI. Changes in New Mexico Law
Both the State and the Tribe argue that the recent legislation passed in New Mexico has some impact on this case. The State asks us to certify questions concerning the new legislation to the New Mexico Supreme Court, and the Tribe argues that the legislation should cause us to revisit our decision in Pueblo of Santa Ana. We reject both arguments. The new legislation is, quite simply, not before us in this appeal. As amici argue, there is no case or controversy before us concerning that legislation or the compacts which it authorized. Nor do events since Pueblo of Santa Ana require us to reconsider that decision.
CONCLUSION
For the foregoing reasons, we AFFIRM the decision of the district court.
. On remand, we held that “Ponca Tribe lacks jurisdiction against both the state and the governor” of Oklahoma. Ponca Tribe of Oklahoma v. Oklahoma, 89 F.3d 690, 691 (10th Cir.1996).
. The new gaming legislation was introduced into the New Mexico legislature as House Bill 399, and provides that the Governor has authority to enter into compacts with tribes. H.B. 399, 43rd Leg., 1st Sess. -(N.M.1997). It contains some provisions which apparently are controversial. For example, it specifies that tribes waive their sovereign immunity for tort actions. It requires tribes to pay substantial regulatory fees to the State, and requires them to enter into revenue-sharing agreements with the State pursuant to which the tribes pay 16% of their "net win” to the State.
In accordance with the new law, various tribes, including the Mescalero Tribe, entered into compacts with the State. The compacts were then forwarded to the Secretary of the Interior for his approval. Under IGRA, the Sec-retaiy can either approve or reject a compact. 25 U.S.C. § 2710(d)(8). If the Secretary does nothing within 45 days, the compact automatically goes into effect "but only to the extent the compact is consistent with” IGRA's provisions. § 2710(d)(8)(C). That is what happened in this case — the Secretary took no action, so the Tribe’s Compact automatically went into effect, following publication in the Federal Register, to the extent it complied with IGRA. In allowing that to occur, the Secretary specifically stated, "[t]he Tribe and the State should be aware that the Department is particularly concerned about two provisions in the Compact that appear inconsistent with IGRA, i.e., the revenue sharing provisions and the regulatory fee structure.” Supplement to Appellee’s Supp. Br. at attachment.
. Among the statutes to which the Tribe points as indicating that the State is only immune from suit in limited areas is the New Mexico Tort Claims Act, N.M. Stat. Ann. §§ 41-4-1 to -29. However, the Act specifically states that it shall not "be construed ... as a waiver of the state's immunity from suit in federal court under the eleventh amendment to the United States constitution." N.M. Stat. Ann. § 41-4-4(F), letter from Bruce Babbitt, Sec. of Int., to Gary Johnson, Gov. of N.M. (Aug. 23, 1997).
. Although the Tribe did not raise the issue in the district court, that court on its own considered whether the State waived its Eleventh Amendment immunity by filing a counterclaim. The court held it did not. We agree.
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8973621-11807 | OPINION
GILMAN, Circuit Judge.
Aretha Tucker brought a hybrid claim under Section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185, against her former employer, the Union of Needletrades, Industrial, and Textile Employees (UNITE), and her former union, the Federation of Union Representatives (FOUR), when they refused to arbitrate the grievance that she had filed after being terminated from her employment. Tucker proceeded on a theory that she was a covered employee under the collective bargaining agreement (CBA) be tween UNITE and FOUR, and that they had violated the terms of the CBA in terminating her and refusing to arbitrate her grievance.
UNITE and FOUR subsequently filed motions for summary judgment, contending that Tucker was not subject to the CBA because she was not an employee of UNITE at the time of her termination. Tucker responded by arguing that UNITE and FOUR were bound by the doctrine of promissory estoppel to the terms of the CBA. The district court granted summary judgment in favor of both defendants.
On appeal, Tucker argues that the district court erred in refusing to consider the merits of her promissory-estoppel argument. The court based its ruling on the fact that Tucker had raised the claim for the first time in opposition to the defendants’ motions for summary judgment. It further found that in the two years her case was pending before the district court, Tucker had never attempted to amend her complaint to put the defendants on notice of this new theory of recovery. For the reasons set forth below, we AFFIRM the judgment of the district court.
I. BACKGROUND
At all times relevant to this appeal, UNITE and FOUR were signatories to the CBA that made FOUR “the exclusive bargaining agent with respect to wages, hours, and other terms and conditions of employment for organizers, business agents, and education staff employed on UNITE[] International[’s] payroll for the Chicago and Central States Joint Board.” Tucker was hired as a business agent for UNITE in January of 1996. Her wages and benefits were paid by UNITE International', and her W-2 statements listed UNITE as her employer. She also had monthly FOUR dues deducted from her paychecks. UNITE and FOUR concede that Tucker was a covered employee under the CBA during this period of time.
In December of 1997, however, Tucker’s employment situation changed. Although she remained a business agent, she became an employee of the Chicago and Central States Joint Board. The Joint Board is a subordinate affiliate of UNITE, with a separate legal existence and its own staff and budget. Tucker’s wages and benefits were thereafter paid by the Joint Board, and her W-2 statements listed the Joint Board as her employer.
Employees of the Joint Board were not subject to the CBA between UNITE and FOUR. Although a bookkeeping error by the Joint Board resulted in monthly FOUR dues continuing to be deducted from Tucker’s paychecks for nearly four years after she ceased her employment with UNITE and went to work for the Joint Board, the dues were never sent to FOUR. When the Joint Board learned of this error, it immediately refunded the full amount to Tucker, who accepted the refund.
Tucker was involuntarily terminated from her employment with the Joint Board in November of 2001. She filed a grievance with FOUR that challenged her termination, and FOUR initially accepted the grievance. When FOUR contacted UNITE, however, UNITE refused to arbitrate. UNITE insisted that, at the time of her termination, Tucker was an employee of the Joint Board and not a UNITE employee.
FOUR initially challenged UNITE’s assertion that Tucker was not subject to the CBA. In written correspondence with Tucker’s attorney, FOUR stated that “should a court find that Ms. Tucker was covered by the collective bargaining agreement, and thus entitled to arbitration, then FOUR will undertake to pursue the dis charge arbitration on her behalf.” Believing that her grievance would be arbitrated, Tucker refused the eight months of severance pay that she had been offered by the Joint Board to settle her claim.
Tucker ultimately filed suit in the United States District Court for the Northern District of Ohio, seeking to compel UNITE and FOUR to arbitrate her grievance. As part of its answer to the complaint, FOUR contended for the first time that it was not required to arbitrate Tucker’s grievance because she was an employee of the Joint Board and not subject to the CBA between UNITE and FOUR. Then, following almost a year of discovery, the district court granted summary judgment in favor of UNITE and FOUR, finding that Tucker was not covered by the CBA because she was not an employee of UNITE. The district court refused to consider Tucker’s promissory-estoppel argument because she had failed to raise this claim in her pleadings. This timely appeal followed. Upon Tucker’s motion filed in April of 2004, UNITE was dismissed as a defendant in the present appeal.
II. ANALYSIS
A. Standard of review
This court reviews a district court’s grant of summary judgment de novo. Minadeo v. ICI Paints, 398 F.3d 751, 756 (6th Cir.2005). Summary judgment is proper where there exists 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). In considering a motion for summary judgment, the district court must construe all reasonable inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The central issue is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
B. Tucker’s promissory-estoppel claim
Tucker contends that the district court erred when it refused to consider her promissory-estoppel claim. The court took this action after determining that she had neglected to include such a claim in her complaint. In so holding, Tucker argues, the district court failed to look beyond the labels in her pleading and ignored the mandate of the Federal Rules of Civil Procedure, which “direct[ ] courts to construe pleading[s] liberally within the standards of the notice-pleading regime.” Minger v. Green, 239 F.3d 793, 799 (6th Cir.2001) (observing that “the fundamental tenor of the Rules is one of liberality rather than technicality”) (citation and quotation marks omitted).
Tucker’s argument, however, misses the mark. If her case had been dismissed for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, then we would indeed be governed by the liberal notice-pleading requirements that she invokes in her brief. See Minger, 239 F.3d at 799-800 (applying the “extremely modest standard” of Rule 12(b)(6) in evaluating a complaint and reversing the district court’s dismissal of the case). But Tucker’s case was disposed of at the summary judgment stage, nearly two years after Tucker filed her complaint.
This difference in timing is crucial. A motion to dismiss typically occurs early in the course of litigation, well before discovery has been completed. See Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 566 (6th Cir.2003) (“The very purpose of Fed.R.Civ.P. 12(b)(6) is to enable defen dants to challenge the legal sufficiency of complaints without subjecting themselves to discovery.”) (citation and quotation marks omitted). In contrast, a motion for summary judgment may not be granted until a plaintiff has had an opportunity for discovery. And if a plaintiff decides to advance a new claim as a result of such discovery, liberal amendment of the complaint is provided for by Rule 15(a) of the Federal Rules of Civil Procedure, which states that leave to amend the complaint “shall be freely given when justice so requires.”
The Federal Rules of Civil Procedure therefore provide for liberal notice pleading at the outset of the litigation because “[t]he provisions for discovery are so flexible” that, by the time a case is ready for summary judgment, “the gravamen of the dispute [has been] brought frankly into the open for inspection by the court.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512-13, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (noting that the “simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims”) (citation and quotation marks omitted).
Once a case has progressed to the summary judgment stage, therefore, “the liberal pleading standards under Swierkiewicz and [the Federal Rules] are inapplicable.” Gilmour v. Gates, McDonald & Co., 382 F.3d 1312, 1315 (11th Cir.2004) (holding that a plaintiff could not raise a new claim in response to a summary judgment motion); see also 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2723 (3d ed. Supp.2005) (“A non-moving party plaintiff may not raise a new legal claim for the first time in response to the opposing party’s summary judgment motion. At the summary judgment stage, the proper procedure for plaintiffs to assert a new claim is to amend the complaint in accordance with Rule 15(a).”).
To permit a plaintiff to do otherwise would subject defendants to unfair surprise. See Guiffre v. Local Lodge No. 1124, No. 90-3540, 1991 WL 135576, at *5 (6th Cir. July 24, 1991) (unpublished) (refusing to hear claims raised for the first time in opposition to summary judgment because, “[h]aving received no notice of them, the defendants had no opportunity to investigate them when they conducted their own discovery”); see also EEOC v. J.H. Routh Packing Co., 246 F.3d 850, 854 (6th Cir.2001) (stating that even under the liberal notice-pleading regime, the Federal Rules of Civil Procedure still require “that the complaint give the defendant fair notice of the claim and its supporting facts”).
Nowhere in her complaint did Tucker allege that FOUR should be estopped from refusing to arbitrate her grievance. Even construing the allegations in her complaint as generously as possible, the only claim that she asserted was that “[p]ursuant to [her] employment with UNITE[,] Tucker was subject to and covered by the terms of the ... collective bargaining agreement.” See Minger v. Green, 239 F.3d 793, 799 (6th Cir.2001) (holding .that the courts should “not rely solely on labels in a complaint, but ... probe deeper and examine the substance of the complaint”).
A review of the record in the present action reveals that Tucker did not raise her promissory-estoppel claim until approximately a year after the filing of her complaint, and that it was in her response to the motions for summary judgment filed by UNITE and FOUR. She then had another year to seek an amendment to her complaint before the district court granted summary judgment in favor of the defendants. Tucker bases the promissory-estoppel claim on her alleged reasonable reli- anee upon a letter she received from FOUR’S counsel, assuring her that her claim would be arbitrated, and upon the fact that FOUR dues had been deducted from her pay for nearly four years when she was employed by the Joint Board. But these facts were within her knowledge well before she filed her complaint in the district court. See Sherman v. Ludington, No. 91-3936, 1992 WL 158878, at *1 (6th Cir. July 7, 1992) (unpublished) (refusing to permit the amendment of a complaint at the summary judgment stage because “the facts which formed the basis of plaintiffs ‘new claims’ were known to him from the time the original complaint was filed and should have been apparent from the outset”) (citation omitted).
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3675721-9399 | OPINION AND ORDER
LAFFITTE, District Judge.
Present before this Court is a motion for summary judgment by petitioners Puerto Rico Maritime Shipping Authority (PRMSA) and Puerto Rico Marine Management, Inc. (PRMMI), their insurers and underwriters, (shipping interests) in all the above consolidated cases, against the United States, filed on January 16, 1984. Also, on that date, Coquí Lighter group of cargo claimants, and New Hampshire Insurance Company group of cargo claimants, also filed their corresponding motions for summary judgment against the United States. On March 6, 1984, the United States filed a belated opposition to all parties’ motions for summary judgment and a cross-motion seeking summary judgment dismissing all claims against it.
I. PROCEDURAL BACKGROUND.
To commence, a brief summary of the proceedings had heretofore is necessary to understand the present posture of these cases. The above captioned cases ensued from the stranding of the SS SAN JUAN on February 11,1980, while said vessel was transiting outbound of San Juan Harbor. By Order of this Court dated November 7, 1980, all cases filed in connection therewith were consolidated into the original petition for exoneration from limitation of liability. Vessel interests and cargo interests sought recovery from each other and from the United States. The parties variously alleged that the grounding and stranding of the SS SAN JUAN occurred because of the unseaworthiness of the vessel, because buoy # 2, which according to said parties, is a critical navigation aid in San Juan Harbor, was missing prior to the night of the stranding, and because fishing vessels were negligently allowed to interfere with transiting ships.
On or about August 1982, the parties initiated discovery against the United States. Basically, the parties were seeking to establish through discovery that the grounding and stranding of the SS SAN JUAN was caused by the Coast Guard’s negligence in failing to maintain Buoy # 2. The United States failed to comply with its discovery obligations and disregarded discovery orders of this Court over a period of one and a half years. Finally, faced with this situation, the parties filed motions for sanctions against the United States. On October 7, 1983, Magistrate Justo Arenas issued a Report recommending sanctions be imposed, and on December 14, 1983, by Opinion and Order, the Court accepted the unopposed recommendation, and imposed sanctions as follows: that all factual allegations contained in the various complaints and third party complaints against the United States be deemed to be established; that the United States be prohibited from introducing evidence to rebut the facts taken as established; and that those portions of the United States answer and affirmative defenses which denied facts taken as established, be stricken from that answer.
Subsequently, on December 19, 1983, at a calendar call hearing, PRMSA (vessel interests) requested from this Court permission to file a motion for summary judgment in light of the order entered on December 14, 1983, imposing sanctions. The Court ordered that all vessel and cargo interests were to file motions for summary judgment as to the liability of the United States by January 15, 1984. The United States was granted until January 30, 1984, to oppose these motions. Also, the Court stayed all claims between vessel, cargo interests and underwriters until after the final disposition of the claims against United States.
On March 6, 1984, this Court set a hearing for May 7, 1984, on United States’ motion for leave to file opposition to summary judgment and to file its cross-motion for summary judgment dismissing all claims. On May 7, Attorney Van Emmerick, of the United States Justice Department appeared in person to give his personal excuses to the Court, accepting personal responsibility for the obstinacy of the United States in this litigation. Whereupon the Court allowed the late filing of the Government’s opposition to summary judgment, but refused to accept the filing of Government’s cross-motion for summary judgment dismissing all claims of vessel and cargo interests.
II. THE APPLICATION FOR SUMMARY JUDGMENT.
Rule 56 of the Federal Rules of Civil Procedure in its pertinent part provides as follows:
“(c) ... The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law...”
“(e) ... When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleadings, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is genuine issues for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.”
Given the facts of this case and the procedures chosen by the parties to bring these facts before the Court for disposition, i.e., motions for summary judgment, the Court is presented with a difficult situation. Although all the factual allegations contained in the various complaints and third party complaint against the United States Government were deemed to be established, and the United States was prohibited from introducing evidence to rebut facts taken as established, and those portions of the United States’ answer and affirmative defenses which denied facts taken as established were stricken from that answer, Rule 56(c) does not relieve the Court of its statutory duty of decidng a motion for summary judgment, based on the entire record. The Court must look through the entire record of all these consolidated cases, including pleadings, discovery, and attachments thereto, to assure itself that there is no genuine issue as to any material fact.
Furthermore, Rule 56(e) itself admonishes that summary judgment should be entered on the pleadings only “if appropriate” in the case. The phrase “if appropriate” includes the general standard of subdivision (c) of Rule 56 which requires the absence of genuine issue of material facts. The Advisory Committee of Rule 56(e) made crystal clear in its comments to the rule that: “[wjhere the evidentiary matters in support of the motion does not establish absence of genuine issue, summary judgment must be denied even if no opposing evidentiary matter is presented.” Advisory Comm.Notes to Rule 56 (1963 Amendment). See also, Stepanhischen v. Merchants Despatch Transp. Corp., 722 F.2d 922 (1st Cir.1983), construing the phrase “if appropriate” under Rule 56(e).
Having ferreted through the record, we feel compelled to conclude that disputed facts exist and, therefore, vessel and cargo interests have not shown that summary judgment against the United States “is appropriate” as a matter of law. The Court may not grant summary judgment as a further sanction for the United States’ failure to comply with discovery orders. An issue of fact is material if it “affects the outcome of the litigation, and it is genuine if manifested by substantial evidence going beyond the allegations of the complaint.” PIGNONS, S.A. de Mecanique, etc. v. Polaroid, 657 F.2d 482 (1st Cir.1981).
III. GENUINE ISSUE OF MATERIAL FACT.
In the case at bar, the basic factual issue on the proximate cause of the grounding and stranding of the SS SAN JUAN is disputed, by virtue of the disparate allegations of the parties, and by evidence in the record. Considering all allegations of all parties, and considering the transcripts of the sworn testimony of the Captain of the SS SAN JUAN, Conrad R. Nilsen, given during a Coast Guard investigation following stranding, and the testimony of August P. Lazzaro, Third Mate on the SS SAN JUAN, given in the same investigation, there is beyond doubt a genuine issue as to the causal connection of the missing buoy with the stranding of the SS SAN JUAN. Finally, this Court must consider whether this issue is material to United States’ defense, that is, whether the United States is solely responsible for the stranding of the SS SAN JUAN, or whether other causes proximately contributed to the stranding.
In these types of cases, summary judgment is rarely appropriate because the issue of negligence, contributory negligence and proximate cause are involved, the resolution of which requires the determination of the reasonableness of the acts and conduct of the parties. Gross v. Southern Railway Company, 414 F.2d 292 (5th Cir.1969); Croley v. Matson Naviga tion Co., 434 F.2d 73, 75 (5th Cir.1970); Wright & Miller, Federal Practice & Procedure: Civil 2nd Section 2729. In considering a motion for summary judgment, the Court has no duty or function to try or decide factual issues. Its only duty is to determine whether or not there is a factual issue to be tried. Further, all doubts as to the existence of material fact must be resolved against the party moving for summary judgment. Where, as here, the record makes plain that genuine issue of material fact is still in dispute, it has been thought not “appropriate” to grant summary judgment. Donovan v. Agnew, 712 F.2d 1509, 1509-16 (1st Cir.1983); Stepanischen v. Merchants Despatch Transp. Corp., 722 F.2d 922 (1st Cir.1983).
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3802480-12744 | MEMORANDUM
BARTLE, District Judge.
This is a civil rights action brought pursuant to 42 U.S.C. § 1983. Plaintiff Walter T. Peters, Jr. (“Peters”) alleges that the defendant Delaware' River Port Authority of Pennsylvania and New Jersey (“DRPA”) has infringed his constitutional rights of freedom of belief and association, by failing to reappoint him as its Secretary solely because he is a member of the New Jersey Republican Party. At the conclusion of discovery, the parties filed cross motions for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The issue before the Court is whether party affiliation is a constitutionally acceptable requirement for the position of Secretary of the DRPA.
The DRPA is an agency of Pennsylvania and New Jersey, formed by Compact between these two states and formally approved by Congress. 36 P.S.A. § 3503; N.J.S.A. 32:3-1 et seq. (the “Compact”). The DRPA was created in 1931, among other things, to operate and maintain the bridges owned jointly by Pennsylvania and New Jersey across the Delaware River and between the cities of Philadelphia and Camden. Under the Compact, DRPA has authority to construct and maintain facilities for the transportation of passengers, to improve and develop the Port District for port purposes, and to promote commerce on the Delaware River. It may also establish, maintain, and operate a rapid transit system between certain points in New Jersey and Pennsylvania (Compact, Art I).
The DRPA is governed by a sixteen member Board of Commissioners, eight of whom are appointed by the Governor of New Jersey for periods of five years. The Governor of Pennsylvania appoints six of the commissioners for five year terms, with the elected Auditor General and the elected State Treasurer of Pennsylvania filling the remaining two positions for their four year terms. All commissioners, other than the Pennsylvania Auditor General and State Treasurer, continue to hold office after the expiration of their terms and until their successors are appointed and qualified (Compact, Art. II). The Board of Commissioners is empowered to elect various officers including a Secretary and Treasurer (Compact, Art. IV). The Bylaws of the DRPA further provide that the Board is to elect the Secretary for a two year term.
Peters became an officer of the DRPA when the Board of Commissioners elected him as Secretary on October 20, 1989 to fill a vacancy. However, the Board did not reappoint him when his term ended on January 20, 1991. Peters, a New Jersey Republican, claims that he was not retained because the commissioners wanted the position for an individual affiliated with the New Jersey Democratic Party. The person who succeeded Peters as Secretary is in fact a Democrat.
In Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976), the Supreme Court struck a blow at the time honored system of political patronage. The Court’s plurality opinion concluded that it is generally a violation of the First Amendment right of freedom of belief and association for a public employer to fire an employee on the basis of political affiliation. Subsequent cases have extended Elrod protection to situations involving demotion, transfer and failure to reappoint based on political affiliation. See Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574 (1980); Rutan v. Republican Party of Illinois, 497 U.S. 62, 110 S.Ct. 2729, 111 L.Ed.2d 52 (1990). The Elrod plurality declared, however, that some party based dismissals would be permissible in order to protect the ability of an administration to implement its policies as mandated by the electorate. Elrod at 367, 96 S.Ct. at 2687. The plurality carved out an exception for policy making employees or employees in a position of confidence, placing the burden on the defendant to show that party affiliation “further[s] some vital government end by a means that is least restrictive of freedom of belief and association ...” Id. at 360-63, 96 S.Ct. at 2683-85.
In Branti v. Finkel, 445 U.S. 507, 100 S.Ct. 1287, 63 L.Ed.2d 574, the Supreme Court, in a majority opinion, altered the test for determining which positions are excepted from the general rule against patronage dismissals. Under Branti, the test is not whether an employee can be labeled a “policy maker,” or “confidant,” but whether “the hiring authority can demonstrate that party affiliation is an appropriate requirement for the effective performance of the public office involved.” Branti, 445 U.S. at 519, 100 S.Ct. at 1295. The Court reasoned that “a position may be appropriately considered political even though it is neither confidential nor policy making in character.” Conversely, the court observed that “party affiliation is not necessarily relevant to every policy making or confidential position.” Id. Thus, although the extent and breadth of an employee’s responsibilities may be instructive, they are not determinative.
Following Branti, the Court of Appeals of this Circuit affirmed that the crucial question is whether affiliation with a political party is somehow related to effective job performance. In Burns v. County of Cambria, for example, 971 F.2d 1015 (3d Cir.1992) the Court of Appeals held that the positions of deputy sheriff and clerk investigator were protected from patronage dismissal. The court explained that the mere fact that a position requires loyalty and confidentiality does not automatically validate politically motivated dismissals. Id. at 1022-23. Rather, in order to qualify for the exception, an employee’s duties must “relat[e] to ‘partisan political interests.’ ” Id. at 1022 (emphasis added) (citations omitted). In Mummau v. Ranck, 531 F.Supp. 402, 404 (E.D.Pa.1982) the court described the inquiry as a “functional analysis of the individual’s position with an eye to determining whether it is likely that party affiliation could cause plaintiff, a public official, to be ineffective in carrying out his duties and responsibilities.” There, the court upheld the dismissal of Lancaster County Assistant District Attorneys based on political affiliation, finding that their responsibilities implicated important governmental policies, and entailed the duty to represent the interests of the Commonwealth. See also Zold v. Township of Mantua, 935 F.2d 633 (3d Cir.1991).
Defendant asserts that the position of Secretary entails broad policy making and confidential duties which place it within the Elrod-Branti exception to the general rule prohibiting patronage dismissals. Article III, Section (D) of the Bylaws of the DRPA details the duties of Secretary as follows:
The secretary, reporting to the executive director, shall be the custodian of all records and the seal of the authority and shall keep accurate minutes of the meetings of the authority and all of the committees thereof. He shall, on behalf of the authority certify, when required, copies of the records, and shall execute legal instruments and documents on behalf of the authority when ordered to do so, and affix the seal of the authority to the same, and shall perform such other duties as may be directed by the authority. (emphasis added)
According to the DRPA, it took advantage of the ability to direct the Secretary to perform “other duties,” creating a position with wide ranging authority and responsibilities. The DRPA relies on the official description of the position promulgated by the Board of Commissioners in 1983. This document charges the Secretary with, among other things: reviewing correspondence, reports, communications and sources of information and making appropriate recommendations to the Executive Director of the DRPA; assisting in planning for the improvement and expansion of DRPA facilities, operations, organization and management; participating in high-level DRPA matters with Commissioners, committees, staff, public officers, and other public bodies; attending the executive sessions of the DRPA as requested and participating in all policy-forming discussions during executive sessions of the DRPA; acting as liaison and maintaining good public relations with other agencies and representing the Executive Director with other public agencies and members of the public; assisting the coordination of operational divisions and staff at the DRPA; and interpreting and executing DRPA policy.
Plaintiff contests defendant’s characterization of the position, asserting that it is primarily ministerial in nature. He points out that the position, as described in the Bylaws, is entirely ministerial and that all the functions which allegedly entailed policy making are additional duties delegated pursuant to the “extra duties” clause. He further asserts that those “extra duties” do not establish that he had meaningful input into decisions concerning the nature and scope of major programs, or that his affiliation was likely to cause plaintiff to be ineffective in carrying out his duties and responsibilities. Plaintiff relies on testimony from the Chairman, Vice Chairman and Executive Director of the DRPA, all of whom stated that plaintiff’s political affiliation had no bearing on his ability to perform his job.
In any event, even if the defendant’s description of the position of Secretary is accurate, plaintiff contends that the bi-state nature of the DRPA mandates that the functions of the Secretary be carried out in an non-political manner. We agree. As explained above, in order for a dismissal based on party affiliation to be appropriate, the position must implicate party politics. Burns v. County of Cambria, 971 F.2d 1015; Zold v. Township of Mantua, 935 F.2d 633. The duties of the Secretary cannot involve partisan political interests, for the simple reason that the Secretary does not serve an organization designed to further the political agenda of any one elected administration or officeholder. As ex plained above, the DRPA is a creature of both New Jersey and Pennsylvania. Fourteen of the sixteen commissioners are appointed by the Governors of Pennsylvania and New Jersey who may be of different political parties. Furthermore, the remaining two positions on the board are filled by the independently elected Auditor General and State Treasurer of Pennsylvania. The authors of the Compact sought to prevent either state from ever obtaining dominance over the other. Thus, the Compact provides not only equal state representation but also requires that all actions must be passed by a majority of the representatives of each state rather than by a simple majority of Board (Compact, Art. III). Under this scheme, the Secretary of the DRPA necessarily must be loyal to DRPA as a whole and not to either state or to any particular commissioner. If anything, the nature of the position compels the conclusion that the Secretary must be non-political to serve effectively in light of the potentially divergent interests of two different states, two different gubernatorial administrations, and the independently elected Auditor General and State Treasurer of Pennsylvania.
Defendant cites several cases in order to demonstrate that the Third Circuit has applied the Elrod-Branti exception to positions which allegedly entailed far less responsibility than that of the Secretary of the DRPA including, for example, a city solicitor, Ness v. Marshal, 660 F.2d 517 (3d Cir.1981), an assistant district attorney, Mummau v. Ranck, and an assistant director of public information, Brown v. Trench, 787 F.2d 167 (3d Cir.1986). Under Branti, however, the extent of an employee’s responsibilities, while instructive, is not controlling. In all the cases cited by defendant, the discharged employees served in one state or municipal administration or under one elected official, with a mandate from the voters to advance that administration’s or official’s agenda. In Ness v. Marshal, for example, the court concluded that the Mayor of York could dismiss the city solicitor and assistant city solicitors on the basis of their political affiliation because such solicitors act as advisors to the city. They render legal opinions, draft ordinances, and negotiate contracts. The court explained that the Mayor, “has the right to receive the complete cooperation and loyalty of a trusted adviser” in these sensitive areas. Id. at 522. In drawing this conclusion, the court stated that the appropriate test is whether “a difference in party affiliation [would] be highly likely to cause an official to be ineffective in carrying out the duties and responsibilities of the office.” Id. In contrast, it is difficult to see how any “difference in political affiliation” of a Secretary of the DRPA would hinder the ability of the DRPA to carry out its mandate.
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3603215-20120 | MEMORANDUM OF DECISION ON DEFENDANT’S MOTION TO SUPPRESS
NEWMAN, District Judge.
The defendant, Stuart B. Smith, is charged with robbery of the State National Bank in Milford, Connecticut, on July 30, 1971. He has filed a motion to suppress various items of evidence seized at various locations by officers of the Wallingford Police Department and an agent of the Federal Bureau of Investigation during the early morning hours of July 31. A hearing was held on February 16, at which testimony was received from Sergeant Darrell York and Lieutenant John J. Cei of the Wallingford Police Department, Agent Thurl Stalnaker of the Federal Bureau of Investigation, the defendant and his wife. Four separate seizures are involved: (1) money taken from defendant’s person, (2) a radio scanner and items of clothing taken from his car, (3) guns, ammunition and other items taken from his home and (4) items of clothing taken from his wife’s car. The facts that I find to be established and the lawfulness of each seizure will be considered separately.
1. Between midnight and 1 a. m. on the morning of July 31, Sergeant York was parked in his police cruiser on Old Colony Road in Wallingford. He observed the defendant driving his car in a southbound direction. Defendant’s car was weaving along the road. Believing the defendant to be driving under the influence of drugs or alcohol, Sergeant York, with his siren on and red light flashing, chased the defendant’s car for about a quarter of a mile to apprehend him. At the start of the pursuit, Ser-, geant York radioed to his headquarters a report of a “signal three operator,” indicating a drunk driver. While in pursuit, he continued to observe defendant’s car swerving all over the road. The police car pulled along side as defendant’s car slowed to a stop off the side of the road. Sergeant York got out, approached the driver’s window and asked the defendant for his license and registration. He observed the defendant look for the papers and noticed that he had extreme difficulty performing the physical movements necessary to obtain the registration from the glove compartment. Finally, he asked the defendant to get out. The odor of alcohol was noticeable coming both from the defendant and from the interior of his car. A glass was observed on the floor of the car. The defendant had difficulty standing up, and his speech was slurred. Sergeant York placed the defendant under arrest for drunk driving. The defendant was patted down for weapons, but, at that point, no other search of his person or the car was made, nor was anything seized. During these events a second police cruiser, which had heard Sergeant York’s radio report, arrived on the scene.
The defendant was then placed in the police cruiser and driven to the Walling-ford police station. His car was left where it had stopped, off the road on the premises of a business establishment. At the police station, the defendant was asked to take a breath test for sobriety; he refused. Bond on the drunk driving charge was set at $500, for lack of which the defendant was placed in the lock-up in the police station. Prior to placing him in the cell, Sergeant York made a thorough search of the defendant’s person and, in accordance with regular police practice, removed for safe-keeping all his personal effects and any items of apparel that might be used to inflict injury. The only item that fell into this second category was the defendant's shoelaces, since he was not wearing a belt when arrested. Among the personal effects was $379 in cash taken from his trouser pockets. The personal effects were inventoried and placed in an evidence envelope. Sergeant York’s purpose in removing the money was to avoid any later claim that the defendant, while in his cell and under the influence of alcohol, had flushed his money down the toilet.
Shortly after the defendant was placed in a cell, Lieutenant Cei, officer in command of the Wallingford Police Detective Division, who had been working on the second floor of the police station, came down to leave and noticed the police cars in the driveway. This indicated to him that someone had recently been brought in. Upon inquiring, he was told that Stuart B. Smith, the defendant, had been arrested for drunk driving. On July 30, Lieutenant Cei had been alerted by police teletype to the fact that the State National Bank in Milford had been robbed that morning. A second police teletype advised that the defendant was one of the suspects in the robbery. During that day, Lieutenant Cei learned from Agent Stalnaker that the suspects had taken from the bank “bait money”, i. e., bills with known serial numbers. Lieutenant Cei obtained from Sergeant York the $379 that had been taken from the defendant and went upstairs to call Agent Stalnaker. He asked Stalnaker for the serial numbers of the bait money and discovered that four of the $20 bills taken from the defendant were part of the bait money. Lieutenant Cei then went down to the defendant’s cell and placed him under arrest for possession of stolen goods.
The defendant’s essential attack upon the validity of the seizure of the money is that the drunk driving arrest was in reality a pretext to stop and search him to see if he could be connected to the State National Bank robbery. The evidence, however, overwhelmingly establishes that the entire incident was a bona fide instance of serendipity. The police had ample probable cause to believe that defendant was driving under the influence of alcohol. At the hearing the defendant never denied his drinking nor the manner of his driving. The arrest for drunk driving was entirely valid. Moreover, while Lieutenant Cei had been alerted to defendant’s status as a suspect in the bank robbery, Sergeant York and the other officers of the Patrol Division had not, and none of the officers involved in defendant’s arrest had received any instructions concerning the defendant.
But the validity of the arrest does not necessarily determine the propriety of the seizure of the $20 bills made by Sergeant York, nor the ultimate use of them that was made by Lieutenant Cei. Generally a person lawfully arrested may be subjected to a search of the contents of his pockets, United States v. Kirschenblatt, 16 F.2d 202, 203 (2d Cir. 1926); Charles v. United States, 278 F.2d 386, 388-389 (9th Cir. 1960), cert. denied 364 U.S. 831, 81 S.Ct. 46, 5 L.Ed. 2d 59 (1960), but this principle may well not apply to arrests for minor traffic offenses. Amador-Gonzalez v. United States, 391 F.2d 308, 315 (5th Cir. 1968). Once a pat down has established the absence of weapons, the justification for further search must turn on the likelihood of carefully concealed weapons or the presence of instrumentalities or evidence of the crime for which the defendant was arrested. Arrests for driving under the influence of alcohol or drugs have been recognized to permit searches for items relating to these offenses. Id. at 316, n. 8; see Annotation, 10 A.L.R.3d 314. While a search of pockets, following a pat down for weapons, is not needed to locate liquor on the defendant’s person, it is justified to find other evidence of the crime, such as a paper napkin, match cover or swizzle stick from a bar where the defendant may have been drinking. The fact that the defendant was searched at the police station, within an hour after his arrest, rather than at the scene of arrest does not impair the validity of the search of his person. United States v. Caruso, 358 F.2d 184, 185 (2d Cir. 1966), cert. denied 385 U.S. 862, 87 S.Ct. 116, 17 L.Ed.2d 88 (1966); United States v. DeLeo, 422 F.2d 487, 493 (1st Cir. 1970), cert. denied 397 U.S. 1037, 90 S.Ct. 1355, 25 L.Ed.2d 648 (1970) ; United States v. Williams et al., 416 F.2d 4, 8-9 (5th Cir. 1969), cert. denied, 397 U.S. 968, 90 S.Ct. 1008, 25 L.Ed.2d 262 (1970). The search of the defendant’s pockets is therefore valid as incident to his arrest for drunk driving.
Furthermore, it was entirely reasonable for the police to remove from the defendant his personal effects for safekeeping before placing him in a cell. See United States v. Lipscomb, 435 F.2d 795, 800 (5th Cir. 1970), cert. denied 401 U.S. 980, 91 S.Ct. 1213, 28 L.Ed.2d 331 (1971) . This guards against later false claims of loss or theft. And, in a jail, money is usually considered to be contraband which must be removed from a prisoner because of the improper purposes to which it may be put.
The question then arises whether Lieutenant Cei had the right to make investigatory use of the four $20 bills. Defendant contends that even if the initial seizure was valid, once the money was placed in an evidence envelope for safe-keeping, it could not be examined without a search warrant. As stated above, the seizure was valid as a search incident to arrest and as a search conducted administratively before the defendant was locked in a cell. Where property has been validly seized in a search incident to an arrest, the fourth amendment does not prohibit police from taking a second look at the same items. Westover v. United States, 394 F.2d 164, 165 (9th Cir. 1968) (bait money); Evalt v. United States, 382 F.2d 424, 427 (9th Cir. 1967) (money); Baskerville v. United States, 227 F.2d 454, 456 (10th Cir. 1955) (identification card). While police examination of items lawfully seized may, in some situations, include even reading of private papers, United States v. Frankenberry, 387 F.2d 337, 339 (2d Cir. 1967); Cotton v. United States, 371 F.2d 385, 392-393 (9th Cir. 1967), there can be no doubt that the police may look a second time at written matter that was in plain view at the time a seizure is made. The serial numbers on the bills were in plain view when they came into the lawful custody of the police. To the extent that the seizure was based on the custodial search, investigatory use of the bills was also valid. United States v. Lipscomb, supra. While examination of such property may be improper when additional searching is required, Brett v. United States, 412 F.2d 401, 405-406 (5th Cir. 1969), that problem is not presented here since inspection of the bills by Lieutenant Cei required no further search or examination not already performed by Sergeant York. In rejecting a search of the pockets of a jailed prisoner’s clothing, Brett, supra, distinguished cases like Westover, supra, Evalt, supra, and Baskerville, supra, on the ground that the money and identification card there examined were in plain view when seized.
2. Having determined that the $20 bills were part of the bait money, Lieutenant Cei, accompanied by Agent Stalnaker, drove at 2:30 a. m.'to the location on Old Colony Road where the defendant’s car had been left and drove it back to the police station. Lieutenant Cei searched the car either on Old Colony Road or at the police station right after he drove it in. He observed, in the glove compartment, a radio scanner, tuned to police radio frequencies, and, on the car seats and floor, a wire hanger, and items of clothing. These items were not removed until 7:15 p. m. that evening when Detective Butka, at Lieutenant Cei’s direction, inventoried the contents of the car.
The seizure of the items from the defendant’s car was valid based on probable cause to search the car for instrumentalities or evidence of the crime of drunk driving. Sergeant York, at the time of the drunk driving arrest, detected the odor of alcohol coming from the ear and saw a glass on the floor. He had probable cause to believe that there was liquor in the car. This probable cause would have justified a search of the car at the time of arrest and, upon the incarceration of the defendant, a seizure to remove it from business premises, where Sergeant York testified it would be an obstruction when the business establishment opened the following morning. Lieutenant Cei, to whom Sergeant York had reported the facts concerning the defendant’s arrest, had as much right to search the car as Sergeant York had. The fact that the search occurred a short time after the arrest when the defendant was in custody does not impair the search without warrant of a car which police had probable cause to search at the time of the arrest and which they were justified in removing. Chambers v. Maroney, Correctional Superintendent, 399 U.S. 42, 52, 90 S.Ct. 1975, 26 L.Ed.2d 419 (1970). Cf. United States v. Squires, 456 F.2d 967 (2d Cir. 1972). Defendant’s reliance on Preston v. United States, 376 U.S. 364, 84 S.Ct. 881, 11 L.Ed.2d 777 (1964) and Dyke et al. v. Taylor Implement Manufacturing Co. Inc., 391 U.S. 216, 88 S.Ct. 1472, 20 L.Ed.2d 538 (1968), is misplaced. There, searches of cars were sought to be justified as incident to arrests. Here there existed probable cause to search the car.
Moreover, by the time of the search, Lieutenant Cei also had probable cause to search the car for items connected with the crime of possession of stolen goods. Having checked the serial numbers of the $20 bills found on the defendant, he had reason to believe that other money taken from the bank might be located in the car which the defendant was driving when arrested. While this probable cause did not exist at the time of the defendant’s arrest for drunk driving, it arose within an hour thereafter, by which time the defendant was rearrested in his cell for possession of stolen goods. The thrust of Chambers v. Maroney, supra, indicates that under all the circumstances here the warrantless search of the car for items connected with the possession of stolen goods crime was not unreasonable.
Finally, the seizure of' items from the car was proper pursuant to the inventorying of the contents of the car. With the defendant in custody and his car on private property, the police had ample reason to remove the car to the police station for safe-keeping. Under normal police procedures, it was reasonable to inventory the contents to guard against later claims of loss or theft. Cf. Cooper v. California, 386 U.S. 58, 87 S.Ct. 788, 17 L.Ed.2d 730 (1967). The justification for the inventory validates the seizure of all the items removed, since the relationship of each to criminal activity was apparent as soon as the item was observed, without the need for examination of the contents of papers or other private items.
3. At 3 a. m. on the morning of July 31, Lieutenant Cei and Agent Stalnaker applied to Judge David Jacobs of the Connecticut Circuit Court for a warrant to search the defendant’s home. The affidavit in support of the warrant alleged the seizure of the $20 bills, the significance of the serial numbers, and the affiants’ belief that other money from the robbery and clothing worn by the robbers were in the defendant’s home. The defendant contends that the affidavit did not establish the location of the items to be seized with the degree of certainty required to justify a nighttime search. It is not clear whether the defendant is asserting that the lack of certainty deprives the search of fourth amendment reasonableness or that the “positiveness” standard of Rule 41(c) of the Federal Rules of Criminal Procedure has not been met. Plainly the affidavit fails to satisfy Rule 41(c) requirements for a nighttime search since the facts alleged are not “so definite and explicit that there could be little or no doubt that the property was on the premises.” United States v. West, 328 F.2d 16, 18 (2d Cir. 1964). Whether Rule 41(c) must be complied with is another matter. The Second Circuit has specifically left open the question of whether the admissibility in a federal trial of evidence seized at nighttime pursuant to a warrant issued by a state judicial officer is governed by Rule 41(c) or by state law, Conn.Gen.Stat. § 54-33a, which imposes no extra requirement of certainty for a nighttime search. United States v. Ravich et al., 421 F.2d 1196, 1201, n. 5 (2d Cir. 1970), cert. denied 400 U.S. 834, 91 S.Ct. 69, 27 L.Ed.2d 66 (1970). Additionally, there is a serious question whether the participation of Agent Stalnaker in the application for the warrant and in the search, and his previous contacts with Lieutenant Cei concerning the crime and the defendant as a possible suspect, rendered the search a federal search, see Lustig v. United States, 338 U.S. 74, 69 S.Ct. 1372, 93 L.Ed. 1819 (1949), in which event Rule 41 would apply. Navarro v. United States, 400 F.2d 315 (5th Cir. 1968).
It is unnecessary to resolve either of these questions here because the search did not meet the requirement of reasonableness of the fourth amendment. To support the affiants’ belief that the items to be seized were located in the defendant’s home, the affidavit informed the magistrate that the bank robbery had occurred at 11:45 a. m. on July 30 in Milford, a town near the defendant’s home town of Meriden, and that he had been arrested at 1 a. m. on July 31, with money from the bank, in Wallingford, a town even closer to his home (although heading in a direction away from his home). The government relies on cases where facts of similar ambiguity have been held sufficient to validate daytime searches. United States v. Lucarz, 430 F.2d 1051, 1055 (9th Cir. 1970), and cases'there cited. But the fact that a private dwelling is entered at night has constitutional significance. See United States ex rel. Boyance v. Myers, 398 F.2d 896, 897-898 (3d Cir. 1968); cf. Jones v. United States, 357 U.S. 493, 498, 78 S.Ct. 1253, 1256, 2 L.Ed.2d 1514. While the precise requirement of Rule 41(c) regarding nighttime searches may well be a higher standard than fourth amendment reasonableness , it does not follow that, even without regard to Rule 41(c), whatever would be reasonable by day is reasonable at night. The fourth amendment protects individual privacy, Katz v. United States, 389 U.S. 347, 350, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967), and intrusion into an occupied home in the middle of the night is plainly a greater invasion of privacy than entry during the day. A knock at the door is more alarming in the middle of the night, and it is no less so because the officer knocking has a search warrant. To justify such an added invasion of privacy there must be shown to the magistrate a somewhat higher degree of certainty that the property to be seized is in the home than would be required for a daytime search. Here the facts to establish location of the items are marginal at best. That the defendant may have stopped at his home after the robbery and left anything there is en tirely a matter of surmise. While this might suffice for a daytime search, it is not sufficient to make the nighttime intrusion of the defendant’s home “reasonable,” a determination that requires a balancing of “the need to search against the invasion which the search entails.” Camara v. Municipal Court, 387 U.S. 523, 537, 87 S.Ct. 1727, 1735, 18 L.Ed.2d 930 (1967). The entry occurred at 4:15 a. m. The home was then occupied by the defendant’s wife and their small children. Moreover, there were no special circumstances justifying a prompt execution of the warrant. The defendant was in custody, he had made no telephone calls subsequent to his arrest, and, while other unknown suspects were at large, the affidavit supplied no facts to indicate that search of the home would yield evidence of the identity or whereabouts of the defendant’s confederates. Under all the circumstances the nighttime search of the defendant’s home was not reasonable, and all the items seized there must be suppressed. See 26 A.L.R.3rd 951.
4. As he was leaving the defendant’s home, Lieutenant Cei asked Mrs. Smith if he could have her permission to search her car which was parked across the street from the house. He told her that the search warrant for the home did not cover the car and that he would need her consent for the search. He also told her that should she not consent, that he could obtain a warrant to search it. She told him that it was all right with her and handed him the keys to the car. Search of her car disclosed various items of clothing including stockings suitable for use as face masks.
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5749207-11131 | PRITCHARD, Circuit Judge.
This libel was filed to recover for loss of life of Alexander Wilkins, on the 29th day of October, 1916, about 6 o’clock p. m., caused by a collision at a point northerly of and in the vicinity of the can buoy at the entrance to the West Norfolk channel from the main channel of the Elizabeth river, Norfolk, Va., between an unnamed gasoline launch, in which the deceased, Edward Bishop, Elizabeth H. Simmons, and Dubertia Howell were at the time, and barge No. 4, with 28 loaded railroad freight cars on hoard, in tow of the tug Delmar, whereby the launch was capsized and lost, and the four persons on board drowned, and is an appeal to this court from the District Court of the United States for the Eastern District of Virginia, at Norfolk. Administrators for the three persons named, other than the libelant, filed their petitions in said libel case under the rule.
.The gasoline launch was about 30 feet long, 6 feet broad, 3Y¿ feet deep, with a wooden house or cabin extending from a point about 6 feet abaft the stem and extending aft to a point about 6 feet from the stern, and at the time of the accident was in charge of Wilkins, her owner and master, and Bishop was acting as engineer. Barge No. 4, designed for the transportation of railroad freight cars between Norfolk and Cape Charles, is 340 feet long, 50 feet broad, and 1,174 tons net register, and was being towed on a hawser of some 80 or 90 fathoms long, by the steam tug 'Delmar, 112.3 feet long, 26.9 feet broad, and 11.7 feet deep, and 130 tons net register, 240 tons gross.
The libelant alleges that on- the date named the launch was proceeding at about 6 miles an hour, up the Elizabeth river to the westward of the channel, bound for Norfolk, the course of the launch being in a general southeasterly direction, parallel to the main channel extending between Eambert’s Point and Pinner’s Point; and the Delmar, with the barge in tow, was proceeding from the N. Y., P. & N. terminal at Port Norfolk, bound for Cape Charles. As the tug proceeded out of the West Norfolk channel, and began to shape her course for the northward, the launch stopped her engines, and waited for the barge to follow the tug; but, instead of doing so, it made a shorter turn than the tug, and took a course to the westward of the can buoy at the entrance of the West Norfolk channel, heading in the direction of said launch, which was drifting under the influence of a strong flood tide. The launch immediately proceeded to back to avoid the barge; but the latter swung in towards the launch faster than the launch could get away, so that the cable from the barge to the tug caught the bow of the launch, tipping it over on its port side, where it lay until the forward part of the barge struck it, and carried it under water, drowning all on board, and the launch was a total loss. At the time of the collision the weather was cloudy and calm, and the tide flood.
The libelant charges the following faults against the Delmar: That she was navigating in the harbor with a tow which, including the length of the Delmar, exceeded the length of 700 feet, contrary to the harbor regulations, the hawser being 540 feet long; that she was not manned by a competent master and crew; that she was navigated without a competent lookout properly stationed and attending to his duties; that she was proceeding at an illegal rate of speed, and on the west side of the channel, and that she did not observe the launch lying to the westward of the channel, and the course of her tow, in time to take precautions against running down the launch; and further charges as faults against the barge that it was not managed by a competent master and crew; that it did not have a competent lookout, properly stationed and attending to his duties; in that it was part of a tow which including the length of the Delmar, exceeded 700 feet, and navigated in the harbor of Norfolk; that it did not follow the course of the Delmar, but steered to the port and to the westward of the can buoy at the entrance of the West Norfolk channel, and thereby without warning ran down the launch, which was waiting for it to pass on the course of the tugboat; and that, when the collision became imminent, the towing hawser was not turned loose from the barge, as it easily could have been.
The respondent admits collision with a gasoline launch at about the time stated in the libel, but contends that it occurred in the main channel of the Elizabeth river, nearly opposite black spar buoy No. 11 and denies generally the facts relating to the collision as alleged in the libel, and particularly charges that the launch, before and when it passed the Delmar, was proceeding up the river on the extreme eastern edge of the channel, the Delmar at the time proceeding out of the West Norfolk channel, and shaping her course to the northward, so as to keep to the starboard side of the main ship channel, after passing Lambert’s Point piers. It also denies that the barge did not follow the tug, or that it headed in the direction of tire launch, or that the' launch was drifting under the influence of a strong flood tide, and alleges that the tug, proceeding down the channel on her usual and proper course, with the barge following in her wake, passed the launch starboard to starboard, when about opposite the merchandise piers at Lambert’s Point, the launch at that time being several hundred feet to the eastward of the tug, and well over on the eastern side .of the main ship channel, the launch and tug having interchanged “salute” whistles, when about abreast of each other. Shortly after-wards the tug heard distress signals from the barge, and then observed that the launch had suddenly and unexpectedly and yvithout warning changed her course in the wake of the tug; that the bow of the launch struck the forward end of the barge and immediately sank; that nothing could have been done, either on the part of the tug or, the barge to avoid the collision, and no other maneuver was possible, save to stop the tug’s engine, which was done. *
Respondent also charges that the launch was at no time on ihe port side of the tug or barge, but, on the contrary, that she was far to starboard; that the launch was navigated by unskillful, unlicensed, and negligent navigators; that she was not in charge of an experienced and careful master; that she had no efficient lookout properly stationed; and, further, that the decedent, Wilkins, being master of and in charge of the launch’s navigation, was guilty of negligence contributing to the collision, which is a bar to a recovery by his administratrix herein.
The court below entered a decree awarding $7,500 damages for the loss of the life, of Wilkins, $600 for the loss of the launch. $4,500 for the loss of the life of Edward Bishop, and $1,500 each for the loss of the lives of Elizabeth H. Simmons and Lubertia Howell. The court below, among other things, found as a fact that—
“The tow, as well as the hawser in use at the time of the collision, were both greater in length than prescribed by the state and federal statutes. Th'e tug was 129 feet long, the hawser 90 fathoms, or 540 feet, and the barge 340 feet, making more than 1,000 feet for the entire tow, which exceeded the local regulations by 300 feet, and the hawser 15 fathoms, or 90 feet, longer than allowed by the federal statutes.”
It appears that the waters between the port of Norfolk and the terminal at Cape Charles consist of narrow channels and anchorages, more or less dangerous at all times, and extremely so when a tug with a tow leaves either one or the other of the terminals mentioned with a 540-foot tow line, and required to traverse a circuitous course.
Counsel for tire appellant insist that this rule only applies-to seagoing barges—
“and the department that promulgated these regulations ruled on January 25, 1909, six days prior to the regulations taking effect, that these barges were not seagoing barges subject to such regulation, a fact which has been before the court in all the cases in which these car floats have been involved.”
Regulations promulgated pursuant to Act Cong. May 28, 1908, c. 212, 35 Stat. 428, require hawsers or tows of seagoing barges navigating the inland waters of the United States to be limited in length to 75 fathoms, and should in all cases be as much shorter as the weather or sea will permit. Section 18 of the harbor regulations also provides that “no tows exceeding 700 feet in length shall cuter or depart from the harbor.” It is probable that these regulations were adopted in view of the fact that only seagoing barges under the act of Congress were affected thereby. The act of Congress, standing alone, could not be invoked in a case like the one at bar. Hence we have the harbor regulations which apply to tows, either seagoing or otherwise, and prohibit any tow exceeding 700 feet in length to enter or depart from the harbor.
Indeed, the contention of counsel for appellant is based upon the theory that vessels passing through these dangerous channels may do so at will with any length of hawser, without considering any risk that may be incurred thereby. The master of the Delmar, who was a witness in the court below, clearly indicated as much by the following question and answer:
“Q. Don’t you pay any attention to the regulations of the harbor master, which provide you shall not proceed south of Sewall’s Point, with a tow exceeding 700 feet in length? A. We always go out longer than that I suppose.”
This condition, if conceded, does not relieve the tows entering the harbor from the duty of conforming to the rules, and the court below having found as a fact that the tow exceeded the length prescribed by the port rules casts upon the tow the burden of showing that such violation did not contribute to the injury, and this has not been done in this instance. In the case of The Pennsylvania, 19 Wall. 125-136 (22 L. Ed. 148), the court, in referring to this point, said:
“But when, as in this case, a ship at the time of a collision is in actual violation of a statutory rule intended to prevent collisions, it is no more than reasonable presumption that the fault, if not the sole cause, was at least a contributory cause of the disaster. In such a case the burden rests upon the ship of showing, not merely that her fault, might not have been one of the causes, or that it probably was not, but that it could not have been. Such a rule is necessary to enforce obedience to the'mandate of the statute. In Iho case of The Fenham, 23 Daw Times, 329, the Lords of the Privy Council said: ‘It is of the greatest possible importance, having regard to the admiralty regulations, and to the necessity of enforcing obedience to them, to lay down this rule: that if it is proved that any vessel has not shown lights, the burden lies on her to show that her noncompliance with the regulations was not the cause of the collision.’ ”
Also in the case of Lie v. San Francisco & Portland S. S. Co., 243 U. S. 291-298, 37 Sup. Ct. 270, 61 L. E. 726, the Supreme Court quotes with approval the foregoing.
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4315116-15809 | PER CURIAM:
Frank Davis Moore, Jr. appeals his conviction for conspiracy to possess with intent to distribute 280 grams or more of cocaine base, in violation of 21 U.S.C. §§ 841(a)(1), 846. Moore’s conviction stems from his alleged participation in a drug conspiracy in Palm Beach County, Florida. His involvement was ascertained from numerous government-intercepted phone calls, wherein Moore repeatedly purchased or attempted to purchase cocaine from one of his co-conspirators, George Bivins, Jr.
After a federal grand jury issued an indictment charging Moore and 29 other individuals with multiple counts pertaining to schemes to distribute powder cocaine and crack cocaine, Moore and codefendant Jerriek Bartee, who faced charges pertaining to a conspiracy to distribute powder cocaine, proceeded to a joint jury trial. The remaining 28 codefendants entered guilty pleas. On the fifth day of a six-day trial, Bartee also pled guilty and left the trial proceeding. Moore moved for a mistrial but the motion was denied.
The jury subsequently convicted Moore of the one count with which he was charged, conspiracy to possess with intent to distribute 280 grams or more of cocaine base. Moore moved for a new trial, which the district court denied, and this appeal ensued. Moore raises several issues on appeal, which we address in turn. After considering the briefs of the parties and reviewing the record on appeal, we affirm.
I.
A. Motion to Compel Disclosure
On appeal, Moore argues that the district court abused its discretion by denying his motion to compel the government to disclose the identity of the confidential informants (CIs) whom investigators utilized during their investigations into the underlying drug conspiracies. Moore contends that the court improperly disregarded his argument that an “independent defense investigation” had uncovered that one of the CIs had a significant criminal history, which suggested that this Cl or other CIs may have falsely implicated Moore in the crack-cocaine conspiracy. Moore also contends that, although protection for the Cl must be considered in any request to disclose a confidential source’s identity, that factor should have been weighed against the right to confrontation.
We apply an abuse of discretion standard when reviewing the district court’s denial of a motion to disclose the identity of a confidential informant. United States v. Gutierrez, 931 F.2d 1482, 1490 (11th Cir.1991). In determining whether the government must disclose an informant’s identity, a court must conduct a balancing test, focusing particularly on three factors: (1) “the extent of the informant’s participation in the criminal activity;” (2) “the directness of the relationship between the defendant’s asserted defense and the probable testimony of the informant;” and (3) “the government’s interest in nondisclosure.” United States v. Tenorio-Angel, 756 F.2d 1505, 1509 (11th Cir.1985). The defendant has the burden of showing that a Cl’s testimony “would significantly aid in establishing an asserted defense.” Gutierrez, 931 F.2d at 1491 (internal quotation marks omitted).
Here, Moore fails to demonstrate how disclosure of the CIs’ identities would “significantly aid in establishing [his] asserted defense.” See id. (internal quotation marks omitted). Instead, in his motion to -compel disclosure, Moore only made the conclusory statement that the disclosure would be relevant to his defense. See id. (“Mere conjecture about the possible relevance of [the Cl’s] testimony is insufficient to compel disclosure.”).
As for his argument that the Cl’s criminal history suggests that a Cl falsely implicated him in the underlying crack-cocaine conspiracy, this claim also does not rise above “[m]ere conjecture” that the CIs have been untruthful. See id. Further, there is no blanket requirement for the defendant to confront every Cl utilized in an underlying investigation; this is not one of the three factors that courts balance in deciding whether to override the government’s privilege to keep sources confidential. See Tenorio-Angel, 756 F.2d at 1509.
Also, Moore’s right to confrontation under the Sixth Amendment refers to confronting witnesses against him, and thus would apply to CIs only if the government presented them as witnesses or otherwise presented their testimony. See U.S. Const, amend. VI; McAllister v. Brown, 555 F.2d 1277, 1278 (5th Cir.1977) (per curiam) (rejecting the argument that the state’s failure to disclose an informant’s identity violated the defendant’s Sixth Amendment right to confront the witnesses against him). Here, the Cl statements were used by the government for the limited purpose of demonstrating why investigators believed they had established probable cause in order to apply for a Title III wiretap. Thus, we do not find that the district court abused its discretion in denying Moore’s motion to disclose the identity of confidential informants.
B. Sufficiency of the Evidence
Moore next argues that there was insufficient evidence to support his conviction for conspiring to possess with intent to distribute crack cocaine. He contends that evidence of the mere existence of a “buyer-seller” relationship with codefendant Bivins does not prove that he conspired to sell crack cocaine. Moore also avers that the government failed to show that he had possessed large quantities of money, crack cocaine, or other items related to the conspiracy.
We review de novo a verdict challenged for sufficiency of the evidence, “resolving all reasonable inferences in favor of the verdict.” United States v. Farley, 607 F.3d 1294, 1333 (11th Cir.2010). If there is a reasonable basis in the record for the verdict, we must sustain it. Id. To convict a defendant of conspiracy under 21 U.S.C. § 846, the government must prove beyond a reasonable doubt that there was (1) an agreement between the defendant and at least one other person, (2) the object of which was to violate the narcotics laws. United States v. Toler, 144 F.3d 1423, 1426 (11th Cir.1998). The government may prove these elements by circumstantial evidence, and need not demonstrate the existence of a formal agreement. Id. An “agreement may be inferred when the evidence shows a continuing relationship that results in the repeated transfer of illegal drugs to the purchaser.” United States v. Mercer, 165 F.3d 1331, 1335 (11th Cir.1999) (per curiam).
Here, there was sufficient evidence to support Moore’s conviction for conspiracy to possess with intent to distribute crack cocaine. The jury reasonably could have inferred that Moore and codefendant Bivins had an ongoing relationship to distribute crack cocaine, based on testimony and wiretap records detailing that Moore purchased or sought to purchase from Bivins a total of 20 ounces, or 560 grams, of crack cocaine over less than two months. The volume and frequency of sales imply that Moore and Bivins had an ongoing agreement to further distribute crack cocaine. See id. Additionally, testimony from investigating agents placed Moore multiple times at locations where Bivins was known to sell crack cocaine and testimony that Bivins entered Moore’s vehicle with an unidentified package.
Finally, even assuming that the lack of evidence showing that Moore physically possessed large amounts of drugs or money reasonably suggests that he was not involved in an agreement to distribute crack cocaine, the jury was free to choose the other reasonable hypothesis that the volume and frequency of sales implicated a broader conspiracy. See Farley, 607 F.3d at 1333; see also Toler, 144 F.3d at 1430.
C. Admissibility of Testimony
Moore argues that the district court “committed plain error” in admitting certain portions of testimony by lead investigating agent Charles Ferry, on the grounds that the testimony’s admission violated the Sixth Amendment’s Confrontation Clause as well as evidentiary rules against inadmissible hearsay.
With regard to testimony about wiretap communications, Moore contends that Ferry improperly interpreted certain intercepted conversations. Moore also argues that this portion of Ferry’s testimony was composed exclusively of out-of-court statements that did not qualify for the co-conspirator hearsay exemption under Federal Rule of Evidence 801(d)(2)(E). Further, with regard to out-of-court statements by a Cl — which concerned controlled buys the Cl made while investigators tried to establish probable cause for a wiretap — Moore avers those statements were impermissible because the Cl’s statements were unnecessary for the government’s case. Moore also argues in the alternative that, even if Ferry’s recounting of the Cl’s statements did not constitute inadmissible hearsay, its “probative value” was greatly outweighed by its prejudicial effect.
We normally review a district court’s evidentiary rulings for abuse of discretion and the factual findings underlying those rulings for clear error. See United States v. Lebowitz, 676 F.3d 1000, 1009 (11th Cir.2012) (per curiam). However, plain-error rule applies where, as here, a defendant fails to contemporaneously object to an evidentiary ruling. See United States v. Turner, 474 F.3d 1265, 1275 (11th Cir.2007).
Hearsay evidence is inadmissible unless the statement is deemed not hearsay under Federal Rule of Evidence 801(d), or it falls within a hearsay exception. United States v. Baker, 482 F.3d 1189, 1203 (11th Cir.2005). Statements made by a co-conspirator “during and in furtherance of the conspiracy” are not hearsay. Fed.R.Evid. 801(d)(2)(E). We apply a liberal standard in determining whether a statement is made in furtherance of a conspiracy. United States v. Santiago, 837 F.2d 1545, 1549 (11th Cir.1988).
The Confrontation Clause.of the Sixth Amendment prohibits only statements that constitute impermissible hearsay; it “does not bar the use of testimonial statements for purposes other than establishing the truth of the matter asserted.” United States v. Jiminez, 564 F.3d 1280, 1286-87 (11th Cir.2009) (internal quotation marks omitted).
(1) Wiretap Communications
Moore has not demonstrated that the district court erred, plainly or otherwise, in admitting Agent Ferry’s testimony about the wiretap communications. Agent Ferry’s testimony regarding the intercepted conversations in the wiretap communications does not constitute hearsay. First, any out-of-court statements made by Moore himself in the intercepted phone calls and text messages constitute prior party admissions. See Fed.R.Evid. 801(d)(2)(A) (statements made by and offered against an opposing party are not hearsay).
Second, out-of-court statements by declarant Bivins fall under Rule 801’s co-conspirator exception, because they were made in furtherance of the conspiracy to distribute crack cocaine. See Fed.R.Evid. 801(d)(2)(E); Bourjaily v. United States, 483 U.S. 171, 175, 107 S.Ct. 2775, 2778, 97 L.Ed.2d 144 (1987). Additionally, because Ferry’s testimony about the wiretap’s intercepted communications does not constitute hearsay and instead meets the requirements for admissibility under Rule 801(d)(2)(E), there are no grounds for a claim that the Confrontation Clause was violated. See United States v. Cross, 928 F.2d 1030, 1051-52 (11th Cir.1991).
Moore also raises arguments regarding Agent Ferry’s interpretation of testimony. ' However, “[a] witness [may be] qualified as an expert by knowledge, skill, experience, training, or education.” Fed.R.Evid. 702. We have held that “[t]he operations of narcotics dealers are a proper subject for expert testimony under Rule 702,” and it is a “well-established rule that an experienced narcotics agent may testify as an expert to help a jury understand the significance of certain conduct or methods of operation unique to the drug distribution business.” United States v. Garcia, 447 F.3d 1327, 1335 (11th Cir.2006) (internal quotation marks omitted). Thus, because Agent Ferry qualified as an expert in street-level narcotics, his testimony providing definitions for alleged “code words” and other drug jargon such as “circle” or “chips” was admissible. See id. (affirming “the admission under Rule 702 of the expert testimony of a police officer interpreting drug codes and jargon”.(internal quotation marks omitted)).
(2) Cl’s Out-of-Court Statements
Moore has not demonstrated that the district court erred, plainly or other wise, in admitting Agent Ferry’s testimony about the Cl’s out-of-court statements. Agent Ferry’s testimony regarding the Cl’s statements does not constitute hearsay, because the testimony was not admitted to prove the truth of the matter asserted. See Fed.R.Evid. 801(c). Instead, it was received for the limited purpose of showing the reason why investigators believed they had established probable cause in order to apply for a Title III wiretap. Hence, because this testimony does not constitute hearsay, there are no grounds for a claim that the Confrontation Clause was violated. See Jiminez, 564 F.3d at 1286-87. Nor was this testimony unnecessary and highly prejudicial. Agent Ferry’s account of the Cl’s actions and out-of-court statements did not implicate Moore, but were restricted to the Cl’s dealings with codefendant George Bivins during controlled buys. Any potential for prejudice against Moore, therefore, was negligible.
D. Motion for Mistrial
Additionally, Moore argues that the district court erred in denying his motion for a mistrial. He contends that he suffered “irreparable prejudice” when his codefen-dant, Bartee, entered a guilty plea while their joint trial was ongoing, at which point the majority of evidence presented by the government had concerned Bartee and the powder-cocaine conspiracy with which he was charged. Moore, however, had been charged with participating in a conspiracy to distribute crack cocaine, and he avers he had no connection to the powder-cocaine conspiracy. Moore contends that, as a result of Bartee’s departure from the trial, the jury’s perception of him became prejudicially skewed.
We review a district court’s denial of a motion for a mistrial for abuse of discretion. United States v. Trujillo, 146 F.3d 838, 845 (11th Cir.1998). “When a district court issues a curative instruction, we will reverse only if the evidence is so highly prejudicial as to be incurable by the trial court’s admonition.” Id. (internal quotation marks omitted).
Here, the mere fact that a majority of the evidence supported a guilty plea for codefendant Bartee does not result in compelling prejudice against Moore. See United States v. Walker, 720 F.2d 1527, 1533 (11th Cir.1983) (noting that compelling prejudice does not result “simply because much of the evidence presented at trial is applicable only to [the defendant’s] codefendants”). Furthermore, the court provided instructions to the jury to counter any effect rendered by Bartee’s absence. The court instructed the jury prior to trial to give each defendant’s case separate consideration. After Bartee departed the trial proceedings, the court told the jury to refrain from drawing any conclusions about his absence. Further, in charging the jury, the court stated that Moore should be judged only for the specific crime charged against him. See Trujillo, 146 F.3d at 845. Thus, the district court did not abuse its discretion by denying Moore’s motion for a mistrial.
E. Motion for a New Trial
Lastly, Moore argues that the district court abused its discretion by denying his motion for a new trial pursuant to Federal Rule of Criminal Procedure 33. Several of his arguments in this respect are reiterations of previous arguments addressed, including that the evidence was insufficient to support conviction and that Moore suffered prejudice before the jury on account of codefendant Bartee’s departure during the joint trial.
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8940765-21735 | MEMORANDUM ORDER AND OPINION GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO SUPPRESS
ROBINSON, District Judge.
This matter comes before the Court on defendant Zeferino Olivas Ortega, Jr.’s Motion to Suppress. In his motion, defendant moves to suppress evidence obtained after a traffic stop and subsequent search of his vehicle on October 30, 2004. The Court held a hearing on defendant’s motion on May 11, 2005. After reviewing the parties’ filings and the evidence adduced at the hearing, the Court is now prepared to rule. For the reasons stated below, defendant’s motion to suppress is granted in part and denied in part.
Background
On October 30, 2004, Trooper Clint Ep-perly was patrolling a stretch of Interstate 35 near Emporia, Kansas for which he had deployed a false “drug check lane.” The false drug checkpoint uses two signs: (1) a sign reading “drug checkpoint ahead 1 mile,” which is placed 1 mile ahead of an exit; and (2) a sign reading “canine in use 1/2 mile.” Epperly also left an unmanned police vehicle on the shoulder of Interstate 35. The ruse drug checkpoint signs are placed to make it convenient for an individual to take the exit for County Road U to avoid the supposed drug checkpoint. Although County Road U leads to an Antique Mall, there are no other facilities, such as restrooms, service stations, restaurants, or stores located off the exit. Indeed, Epperly testified that there was no reason for an individual to use this particular exit unless the individual lived in the area or was visiting the Antique Mall, as the road is not a well-known shortcut to Emporia and only leads to homes and farms.
Epperly, who is a drug interdiction trooper, testified that he does not stop individuals for merely taking the County Road U exit. Rather, he stops individuals when he believes he develops probable cause for a stop. He stated that it is not his practice to stop individuals when he merely possesses reasonable suspicion.
On October 30, 2004, defendant Zeferino Olivas Ortega was traveling on Interstate 35 in a truck towing a horse trailer. Defendant took the County Road U exit, but did not turn- onto. County Road U after exiting. Instead he exited Interstate 35, proceeded to the stop sign and then drove across County Road U and took the entrance ramp back onto Interstate 35. Ep-perly testified that a horse trailer exiting at County Road U was not unusual, but that the fact that the vehicle did not turn onto the County Road and immediately got back on the Interstate caught his attention.
Epperly stopped defendant on the shoulder of Interstate 35 after his vehicle returned to the Interstate. According to the videotape recording the stop, defendant was stopped at 8:24 p.m. Epperly testified on direct examination at the suppression hearing that Defendant was stopped not for taking the County Road U exit, but rather for three traffic infractions: (1) failure to use his turn signal as he merged onto Interstate 35; (2) no license plate light; and (3) no identification lights on the horse trailer. On cross-examination, Ep-perly admitted that he was only aware of one of the traffic violations, the failure to use a turn signal, when he stopped defendant.
After pulling defendant over, Epperly requested proof of registration and insurance. Epperly also asked defendant about his travel itinerary. Defendant stated that he was traveling from Odessa, Texas and that he was getting paid $1000 dollars to haul horses to Kansas City. Defendant also told Epperly that the horses were not his, but belonged to someone else. According to defendant, he accidentally got off at the wrong exit on his way to Kansas City. During this conversation, Epperly noticed that defendant’s hands were visibly shaking. He also noted that there was a radar detector in the truck, which was unusual given that trucks towing horse trailers rarely speed. Finally, he noted that there was a cooler and hang-up clothes in the truck, giving it a “lived-in” appearance.
Three minutes after pulling defendant over, Epperly took defendant’s license and registration back to his patrol vehicle, which was parked behind defendant’s trailer, to check their validity. In addition, he ran a criminal history check on defendant. While Epperly was waiting for dispatch to inform him whether defendant’s tags and license were valid and for the results of the criminal history check, he summoned Trooper Corey Doudican. Trooper Doudi-can has been a K-9 deputy with the Lyon County Sheriffs Office for three years. His K-9 partner, Sarge, is a certified drug detection dog. Sarge has been certified as a drug detection dog since October 2002.
Doudican and Epperly work “in pairs” meaning that Doudican remains within a mile or two of Epperly’s location. Upon Epperly stopping defendant, Doudican “immediately” drove to the area where the trailer was stopped. Doudican estimated that he arrived at the site of the traffic stop two to three minutes after Defendant was first stopped. The videotape recording the stop confirms this testimony. As Epperly was writing the warning citation and waiting for the results of the checks from his dispatch, he told Doudican to deploy Sarge to sniff defendant’s horse trailer.
Doudican removed Sarge from his patrol car and exercised him for about a minute before deploying him at 8:29, a mere five minutes after defendant was stopped. Doudican testified that Sarge, who is an aggressive alert dog, alerted to the front of the horse trailer within one minute of being deployed. Sarge indicated that he sniffed drugs by wagging his tail and then scratching and barking near the front of the trailer. Doudican testified that Sarge was in good health and operating in his normal capacity on the day of defendant’s stop.
Doudiean then informed Epperly that Sarge alerted to the scent of drugs. Subsequently, Epperly received confirmation from dispatch that defendant’s license and registration were valid. Epperly then asked defendant whether he had anything illegal in the car such as drugs or weapons. Defendant replied negatively. Epperly told defendant that the drug dog had alerted to the scent of drugs and asked for consent to search the trailer. Defendant replied that it was okay to look.
Epperly and defendant then had a conversation about off-loading the horses from the trailer. Defendant thought off-loading the horses was unnecessary because the horses were tied to the trailer and would not escape if the trailer door was opened. Epperly then asked defendant for permission to crawl under the horses to search the trailer and defendant agreed. Epperly, Doudiean, and someone named “Kenny” who was a “ ride-a-long” in Epperly’s vehicle, proceeded to search the trailer. The videotape recording the stop reveals that this search was quite extensive and lasted approximately thirty-five minutes. The three searched the floor of the trailer, the front of the trailer, a gas tank in the trailer and the air bags in the truck. At one point, Epperly thought that he had discovered a compartment for secreting drugs in the truck’s airbags. The airbags appeared to be replacements so Epperly questioned defendant about whether he purchased the truck new, whether the truck had been wrecked, and whether the airbags had ever deployed. Epperly also asked defendant why he left the interstate.
Shortly after this conversation Epperly decided that the drugs must be in the trailer. At around 9:00 p.m., Epperly asked Kenny to crawl under the horses to the front of the trailer because Epperly knew that it was a common practice to build false compartments in the front portion of trailers and then place horses behind the compartment. Kenny pounded on the front wall of the trailer and Epperly stood outside to see if he could feel the vibrations from the pounding. Epperly could not feel the pounding on the outside of the trailer. This indicated to Epperly that there was a “huge” false compartment in the front of the trailer. Kenny could not, however, find the compartment so Ep-perly crawled inside the horse trailer to look for the compartment. Once inside, Epperly saw that the carpet in the front of the trailer had been glued and that the coping around a compartment in the front portion of the trailer had been hand cut around the hinges and was jagged, such that it did not appear to be factory installed. Epperly pried open the compartment with a crow bar and found approximately 1000 pounds of marijuana in the horse trailer at around 9:01 p.m.
Epperly then read defendant his Miranda rights. Defendant waived his Miranda warnings, had no questions for Ep-perly, and never indicated that he did not want to talk. Nor did defendant indicate that he wanted an attorney. Epperly testified that defendant appeared to have no problems with the English language and never said that he did not understand his Miranda warnings. Epperly then asked defendant whether he would agree to do a controlled delivery and defendant replied that he was just supposed to take the horses to Kansas City.
On November 3, 2004, the Grand Jury returned a one count Indictment charging defendant with knowingly and intentionally possessing with the intent to distribute approximately 1000 pounds of a mixture or substance containing a detectable quantity of marijuana in violation of 21 U.S.C. § 841(a)(1).
Analysis
“ ‘A traffic stop is a “seizure” within the meaning of the Fourth Amendment, even though the purpose of the stop is limited and the resulting detention quite brief.’ ” The principles of Terry v. Ohio apply to such traffic stops. Thus, the reasonableness of a stop depends on “whether the officer’s action was justified at its inception, and whether it was reasonably related in scope to the circumstances which justified the interference in the first place.”
1. The Validity of the Initial Stop
Tenth Circuit cases establish that “ ‘a detaining officer must have an objectively reasonable articulable suspicion that a traffic violation has occurred or is occurring before stopping [an] automobile.’ ” Reasonable suspicion requires that an officer provide “some minimal level of objective justification.” However, an officer with reasonable suspicion need not “rule out the possibility of innocent conduct as long as the totality of the circumstances suffices to form a particularized and objective basis for a traffic stop.” Furthermore, reasonable suspicion may be supported by an “objectively reasonable” good faith belief even if premised on factual error.
Epperly testified that he stopped defendant for re-entering Interstate 35 and merging into the right lane without using his turn signal. K.S.A. 8-1548 governs turning movements in Kansas and provides:
(a) No person shall turn a vehicle or move right or left upon a roadway unless and until such movement can be made with reasonable safety, nor without giving an appropriate signal in the manner hereinafter provided.
(b) A signal of intention to turn or move right or left when required shall be given continuously during not less than the last one hundred (100) feet traveled by the vehicle before turning.
“Roadway” is further defined by Kansas statute as “that portion of a highway improved, designed, or ordinarily used for vehicular travel, exclusive of the berm or shoulder.”
Defendant argues that he was not required to use his turn signal when merging onto the interstate pursuant to K.S.A. 8-1548, such that Epperly lacked reasonable suspicion to stop him. Defendant avers that because he was not turning or changing lanes as he entered the interstate, no traffic violation occurred. The Court has performed exhaustive research,
but has been unable to find any conclusive authority directly on this issue. The Court finds, however, that defendant’s failure to signal when moving from the on-ramp onto the interstate raises reasonable suspicion that a violation of K.S.A. 8-1548 occurred. The plain language of K.S.A. 8-1548 governs not only turning and changing lanes as defendant avers, but also moving left or right upon a roadway. When defendant merged onto the interstate, he moved right upon a roadway from the on-ramp onto the interstate. Moreover, the on-ramp is clearly part of the “roadway” contemplated by Kansas statutes as it is a “portion of a highway ... ordinarily used for vehicular travel.”
In addition, the Court notes that when presented with an opportunity to limit K.S.A. 8-1548 beyond its express language, the Kansas Supreme Court has declined to do so. In State v. DeMarco, the defendant argued that he did not violate K.S.A. 8-1548 because there was no moving traffic either in front or behind him. Accordingly, defendant urged that a turn signal was not required for his lane change. The Kansas Supreme Court disagreed, noting that “K.S.A. 8-1548 requires a lane change signal within 100 feet of the point where the vehicle makes the lane change, regardless of whether there is any traffic moving in front of or behind the vehicle.” Just as in DeMarco, this Court declines to read additional limits into the plain language into K.S.A. 8-1548.
Moreover, the purpose of K.S.A. 8-1548 applies equally to a merging vehicle as it does to a vehicle changing lanes on the roadway. The use of a signal before changing lanes alerts other motorists to a vehicle’s movements. Indeed, in DeMar-co, the Court explained that the driver of a vehicle parked on the shoulder is entitled to a lane change signal to safely time reentry onto the roadway. Similarly, the drivers on Interstate-35 were entitled to a lane change signal to alert them that defendant was merging onto the roadway. For all these reasons, the Court concludes that Epperly had reasonable suspicion to stop defendant for violating K.S.A. 8-1548.
2. Roadside Detention
Even if the initial stop of defendant’s vehicle was legitimate, the detention must be • “reasonably related in scope to the circumstances which justified the interference in the first place,” as required under Terry. “Generally, an investigative detention must last no longer than is necessary to effectuate the purpose of the stop.” The detention must be temporary and its scope must be carefully and narrowly tailored to its underlying justification. “Under ordinary circumstances, this limits the officer to a request for the driver’s license and registration, a computer check on the car and driver, an inquiry about the driver’s travel plans, and the issuance of a citation.” Upon issuing the citation or warning and determining the validity of the driver’s license and right to operate the vehicle, the officer usually must allow the driver to proceed without further delay or additional questioning.
A longer detention for additional questioning is permissible under two circumstances: (1) the officer has an objectively reasonable and articulable suspicion that illegal activity has occurred or is occurring; or (2) the initial detention changes to a consensual encounter. If the officer continues to question the driver in the absence of either these two circumstances, then “any evidence derived from that questioning (or a resulting search) is impermissibly tainted in Fourth Amendment terms.” But, if an encounter between a police officer and a motorist is
consensual, the Fourth Amendment ban on unreasonable searches and seizures does not come into play.
Defendant argues that he was unlawfully detained because “[everything checked out as being valid.” According to defendant, once the facts surrounding the traffic stop were complete, he should have been allowed to leave. Defendant neglects to mention, however, that during the short period Epperly waited for defendant’s license and registration results, the drug dog positively alerted to the scent of drugs. After the drug dog alerted, officers had probable cause to arrest defendant. At this point, Epperly possessed even more than “an objectively reasonable and articulable suspicion that illegal activity had occurred or was occurring,” such that an additional detention was not unlawful.
3. Drug Dog Sniff & Subsequent Search
Defendant additionally argues that the search of his horse trailer was unlawful because he did not give specific consent to search the trailer. The government, however, does not claim that the search was consensual. Nor is consent to search the only basis upon which an officer may conduct a search; officers may also search a vehicle when they have probable cause to believe that contraband is present.
In this case, no Fourth Amendment violation occurred because Epperly possessed probable cause to search the vehicle. The troopers searched the horse trailer after Sarge gave a positive alert to the odor of narcotics. A dog alert is generally at least as reliable as many other sources of probable cause and “is certainly reliable enough to create a fair probability that there is contraband [present].” Thus, “when a dog alerts to a vehicle, probable cause arises allowing a search of the vehicle.” For these reasons, the Court concludes that the search of Ortega’s horse trailer was lawful.
4. Statements Made Prior to Miranda Warnings
Finally, defendant argues that he should have been read his Miranda rights immediately after the drug dog indication because, at this point, the encounter became “accusatory.” “[T]wo requirements must be met before Miranda is applicable: the suspect must be in ‘custody,’ and the questioning must meet the legal definition of ‘interrogation.’ ” A person is “in custody” when he has been arrested or his freedom is curtailed to a degree associated with a formal arrest. The relevant inquiry for determining whether an individual is “in custody” is whether a reasonable person in that position would “believe her freedom of action had been curtailed to a ‘degree associated with formal arrest.’ ” A suspect can be placed in police “custody” for purposes of Miranda before he has been “arrested” in the Fourth Amendment sense. Consequently, Miranda warnings might be implicated in certain highly intrusive “non-arrest” encounters.
Generally, the questioning that occurs during a traffic stop requires no Miranda warnings because such police-citizen encounters are brief, non-threatening, and conducted in the presence of others. During a traffic stop, however, law enforcement officials may create the custodial interrogation that Miranda contemplates “by employing an amount of force that reaehe[s] the boundary line between a permissible Terry stop and an unconstitutional arrest.” The totality of the cir- cumstanees must be considered to determine whether the force employed during the traffic stop and prior to formal arrest created a “custody” situation under Miranda..
While the Tenth Circuit has avoided hard line rules to govern this analysis, several factors have been useful in testing the “atmosphere of custody.” First, the court must consider the circumstances relating to the questioning process, such as whether a suspect is informed that he or she may refuse to answer questions or terminate the encounter A second factor indicative of a custodial setting is the tone and manner of the questioning, and the separation of an individual from sources of moral support during questioning While Terry type investigations allow for limited questioning to confirm an officer’s suspicions, prolonged accusatory questioning is likely to create a “coercive environment from which an individual would not feel free to leave.” “Police and suspects should not have to guess as to when custody arises after a temporary stop.” Where the nature of the police/citizen encounter progresses beyond a short investigatory stop, a custodial environment is more likely.
A final factor commonly examined is the circumstances showing a “police dominated” atmosphere. Where police are in full control of the questioning environment, custody is more easily found. Circumstances might include: the degree of restraint placed upon the suspect being questioned, including whether the suspect is physically restrained or coerced, threatening presence of several officers, whether the suspect’s driver’s license or automobile registration is retained, and whether there is a threat of physical restraint created by the officer’s display of a weapon.
Under the totality of the circumstances, the Court concludes that defendant was in custody at the time Epperly informed him that the drug dog alerted to the scent of drugs in the trailer. A reasonable person would likely not have felt free to leave after being told that a drug dog alerted to the scent of drugs in his vehicle. Indeed, a reasonable person might have considered himself under arrest at this time.
In addition to concluding that defendant was “in custody,” the Court must also find that defendant was subjected to “interrogation” before Miranda is applicable. Not all statements obtained by the police after a person has been taken into custody are the product of interrogation. Miranda safeguards do come into play, however, when a person in custody is subjected to either express questioning or its functional equivalent. Here, defendant was clearly subject to express questioning concerning the reasons he exited the highway and the condition of the truck’s airbags after he came into custody, but before being advised of his rights. Thus, any statements made by defendant in response to questions asked by Epperly after he was informed that the drug dog alerted, but prior to being read his Miranda rights must be suppressed.
IT IS THEREFORE ORDERED BY THE COURT that defendant’s Motion to Suppress Stop, Search and Statement (Doc. 12) is granted in part and denied in part.
IT IS SO ORDERED.
. Epperly testified that coping is a strip of metal used for beautification.
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4340728-18573 | Petition for review granted; reversed and remanded with instructions by published opinion. Judge FLOYD wrote the opinion, in which Judge NIEMEYER and Judge WYNN joined. Judge NIEMEYER wrote a separate concurring opinion.
FLOYD, Circuit Judge:
In this appeal, we consider whether Sayed Gad Omargharib’s conviction under Virginia’s grand larceny statute, Va.Code Ann. § 18.2-95, constitutes an “aggravated felony” under the Immigration and Nationality Act (INA) § 101, 8 U.S.C. § 1101(a)(43). The Board of Immigration Appeals (BIA) answered this question-in the affirmative using the so-called modified categorical approach, as clarified by Descamps v. United States, — U.S. -, 133 S.Ct. 2276, 186 L.Ed.2d 438 (2013). Under Descamps, the modified categorical approach applies only if Virginia’s definition of “larceny” is “divisible”—that is, if it lists potential offense elements in the alternative, thus creating multiple versions of the crime. The BIA concluded that Virginia larceny is divisible because Virginia state courts have defined it to include either theft or fraud.
Consistent with our prior precedent on this issue, however, we conclude that mere use of the disjunctive “or” in the definition of a crime does not automatically render it divisible. We further hold that, under our recent decisions construing Descamps, the Virginia crime of larceny is indivisible as a matter of law. As such, we agree with Omargharib that the modified categorical approach has no role to play in this case. Instead, the categorical approach applies, and under that approach Omargharib’s grand larceny conviction does not constitute an aggravated felony under the INA. We therefore grant Omargharib’s petition for review, reverse the BIA’s ruling, and remand with instructions to vacate the order of removal.
I.
Omargharib, an Egyptian native and citizen, entered the United States in 1985 and became a lawful permanent resident in 1990. In 2011, he was convicted in Virginia state court of grand larceny under Va.Code Ann. § 18.2-95 for “tak[ing], stealing], and carry[ing] away” two pool cues valued in excess of $200 following a dispute with his opponent in a local pool league. J.A. 452. Omargharib received a suspended sentence of twelve months.
Following his conviction, the Department of Homeland Security sought Omar-gharib’s removal, contending that his conviction constituted an “aggravated felony” under the INA—namely, “a theft offense ... for which the term of imprisonment [is] at least one year.” 8 U.S.C. § 1101(a)(43)(G); see 8 U.S.C. § 1227(a)(2)(A)(iii) (rendering deportable an alien who is convicted of an aggravated felony). Before an immigration judge (IJ), Omargharib denied that his conviction made him removable. Omargharib argued that, under the categorical approach set forth in Taylor v. United States, 495 U.S. 575, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990), the IJ could only compare the elements of larceny under Virginia law with the generic elements of a “theft offense” in the INA and determine whether they match. According to Omargharib, the elements do not match because Virginia law broadly defines larceny to include both theft and fraud, whereas the INA’s aggravated felony statute distinguishes between theft and fraud. Compare 8 U.S.C. § 1101(a)(43)(G) (theft) with id. § 1101(a)(43)(M)(i) (fraud).
Under the categorical approach, it is thus possible that Omargharib’s grand larceny conviction rested on facts amounting to fraud, not theft. It is undisputed that Omargharib’s conviction does not constitute a fraud, offense under the INA. And under the categorical approach, the IJ was not free to review the record to determine whether Omargharib’s grand larceny conviction was based on theft, not fraud.
The IJ agreed that Virginia’s definition of larceny is broader than the INA’s corresponding “theft offense” crime and thus that the two crimes are not a categorical match. But the IJ proceeded to employ the modified categorical approach, which the IJ held permits consideration of the underlying facts surrounding Omargharib’s conviction. Applying that approach, the IJ concluded that Omargharib’s larceny conviction rested on facts amounting to theft, not fraud. As such, the IJ held that Omargharib’s conviction constituted a theft offense under the INA, making Omargharib removable and ineligible for all forms of discretionary relief.
Omargharib appealed the IJ’s decision to the BIA. On September 6, 2013, the BIA dismissed Omargharib’s appeal and affirmed the IJ’s decision in all respects. Like the IJ, the BIA concluded that the modified categorical approach applied because Virginia law defines larceny in the disjunctive to include “wrongful or fraudulent” takings. J.A. 3. Omargharib then timely petitioned this Court for review. We have jurisdiction pursuant to 8 U.S.C. § 1252.
II.
The central issue before us is whether Omargharib’s 2011 grand larceny convic tion in Virginia constitutes a “theft offense” as defined by 8 U.S.C. § 1101(a)(43)(G), and thus an aggravated felony under the INA that is grounds for removal.
We review the BIA’s determination on this issue de novo. Karimi v. Holder, 715 F.3d 561, 566 (4th Cir.2013). “Although we generally defer to the BIA’s interpretations of the INA, where, as here, the BIA construes statutes [and state law] over which it has no particular expertise, its interpretations are not entitled to deference.” Id.; see also Matter of Chairez-Castrejon, 26 I. & N. Dec. 349, 353 (BIA 2014) (recognizing that the BIA is bound by this Court’s “interpretation of divisibility under Descamps ”). The government has the burden of proving that Omargharib committed an aggravated felony by clear and convincing evidence. Karimi, 715 F.3d at 566.
To qualify as an aggravated felony, Om-argharib’s conviction must have been “a theft offense (including receipt of stolen property) or burglary offense for which the term of imprisonment [is] at least one year.” 8 U.S.C. § 1101(a)(43)(G). Because we conclude that his crime of conviction did not constitute a “theft offense” under the INA, we reverse without reaching Omargharib’s alternative argument that his term of imprisonment was for less than one year.
A.
In order to determine whether a state law conviction qualifies as an aggravated felony for removal purposes, we use the categorical approach set forth in Taylor v. United States, 495 U.S. 575, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990), and recently clarified in Descamps. See United States v. Aparicio-Soria, 740 F.3d 152, 160-61 (4th Cir.2014) (en banc). Under that approach, we consider only the elements of the statute of conviction rather than the defendant’s conduct underlying the offense. Descamps, 133 S.Ct. at 2285 (stating that the categorical approach’s “central feature” is “a focus on the elements, rather than the facts, of a crime”). If the state offense has the same elements as the generic INA crime, then the prior conviction constitutes an aggravated felony. See id., 133 S.Ct. at 2283. But, if the state law crime “sweeps more broadly” and criminalizes more conduct than the generic federal crime, the prior conviction cannot count as an aggravated felony. Id. This is true “even if the defendant actually committed the offense in its generic form.” Id.
Like the BIA, we conclude that the Virginia crime of larceny does not categorically match the INA’s theft offense crime because Virginia larceny punishes a broader range of conduct than that federal offense. Specifically, Virginia law defines larceny to include both fraud and theft crimes. See Britt v. Commonwealth, 276 Va. 569, 667 S.E.2d 763, 765 (2008) (Keenan, J.) (defining larceny as “the wrongful or fraudulent taking of another’s property without his permission and with the intent to permanently deprive the owner of that property” .(emphasis added)); see also Stokes v. Commonwealth, 49 Va.App. 401, 641 S.E.2d 780, 782, 784 (2007) (upholding a conviction for grand larceny when the defendant was indicted for defrauding a bank). Indeed, the Supreme Court of Virginia has repeatedly sustained larceny convictions when the property at issue was obtained through fraudulently obtained consent. See, e.g., Skeeter v. Commonwealth, 217 Va. 722, 232 S.E.2d 756, 758 (1977); Bourgeois v. Commonwealth, 217 Va. 268, 227 S.E.2d 714, 717 (1976).
By contrast, the INA expressly distinguishes between theft and fraud offenses. Unlike the INA’s theft offense, which is not tied to any dollar threshold, the INA’s fraud offense only applies if the loss to the victim exceeds $10,000. Compare 8 U.S.C. § 1101(a)(43)(G) (theft) with id. § 1101(a)(43)(M)(i) (fraud). Consistent with this distinction, we have previously held that a conviction for credit card fraud for less than $10,000 under Virginia law does not amount to a “theft offense” or “fraud offense” for purposes of the INA. Soliman, 419 F.3d at 282-83 (noting that any other result would transform all fraud offenses into theft offenses, thus rendering the $10,000 threshold for fraud offenses “superfluous”).
In short, Virginia law treats fraud and theft as the same for larceny purposes, but the INA treats them differently. As such, Virginia larceny “sweeps more broadly” than the INA’s theft offense. Descamps, 133 S.Ct. at 2283. We therefore conclude that Omargharib’s Virginia larceny conviction does not constitute an aggravated felony for purposes of the INA under the categorical approach.
B.
The government claims a different result is warranted under the modified categorical approach. As Descamps recently clarified, the modified categorical approach applies only if a state crime consists of “multiple, alternative elements” creating “several different crimes,” some of which would match the generic federal offense and others that would not. 133 S.Ct. at 2284-85. Under this approach, courts may look beyond the statutory text and consult a limited set of documents in the record—so-called Shepard documents —to .determine which crime the defendant was convicted of committing. Id. at 2283-84. In this way, the modified approach is a tool for implementing the categorical approach. Id. at 2284.
According to the government, the BIA correctly applied the modified categorical approach and so properly examined the underlying facts of Omargharib’s conviction to determine that he was convicted of theft, not fraud. For the following reasons, we disagree.
After Descamps, we may apply the modified categorical approach only if the state crime at issue is divisible. Id. at 2283. A crime is divisible only if it is defined to include “potential offense elements in the alternative,” thus rendering “opaque which element played a part in the defendant’s conviction.” Id. Stated differently, crimes are divisible only if they “set out elements in the alternative and thus create multiple versions of the crime.” United States v. Montes-Flores, 736 F.3d 357, 365 (4th Cir.2013).
The government asserts that the Virginia common-law crime of larceny is divisible because it purportedly lists the elements of theft and fraud in the altérna-tive. See Britt, 667 S.E.2d at 765 (defining “larceny” as a “wrongful or fraudulent taking” (emphasis added)). In the government’s view, the use of the word “or” creates two different versions of the crime of larceny: one involving wrongful takings (theft), and one involving fraudulent takings (fraud). In this view, the Virginia larceny would be divisible under Descamps and so the modified categorical approach would apply.
As we have previously held, however, use of the word “or” in the definition of a crime does not automatically render the crime divisible. See United States v. Royal, 731 F.3d 333, 341-42 (4th Cir.2013); see also Rendon v. Holder, 764 F.3d 1077, 1086-87 (9th Cir.2014) (reasoning that when a state criminal law “is written in the disjunctive ..., that fact alone cannot end the divisibility inquiry”). As these cases recognize, a crime is divisible under Des-camps only if it is defined to include multiple alternative elements (thus creating multiple versions of a crime), as opposed to multiple alternative means (of committing the same crime). Royal, 731 F.3d at 341; United States v. Cabrera-Umanzor, 728 F.3d 347, 353 (4th Cir.2013); see also Rendon, 764 F.3d at 1086. Elements, as distinguished from means, are factual circumstances of the offense the jury must find “unanimously and beyond a reasonable doubt.” Royal, 731 F.3d at 341 (quoting Descamps, 133 S.Ct. at 2288). In analyzing this distinction, we must consider how Virginia courts generally instruct juries with respect to larceny. See id.
Our decision in Royal is particularly instructive. In that case we addressed a crime defined in the alternative—assault under Maryland law—and held that it was indivisible under Descamps. 731 F.3d at 340-341. Like here, the government argued that use of the disjunctive “or” in the definition of assault made the crime divisible, thus warranting application of the modified approach. Id. at 341. But we rejected that argument, holding that the requirements on either side of the “or” were “merely alternative means of satisfying a single element” of assault, rather than alternative elements. Id. at 341. This was true because “Maryland juries are not instructed that they must agree ‘unanimously and beyond a reasonable doubt’ on whether the defendant caused either ‘offensive physical contact’ or ‘physical harm’ to the victim; rather, it is enough that each juror agree only that one of the two occurred, without settling on which.” Id.
We likewise conclude here that Virginia juries are not instructed to agree “unanimously and beyond a reasonable doubt” on whether defendants charged with larceny took property “wrongfully” or “fraudulently.” Rather, as in Royal, it is enough for a larceny conviction that each juror agrees only that either a “wrongful or fraudulent” taking occurred, without settling on which. By way of example, the Virginia model jury instruction for grand larceny requires only a finding that “the taking was against the will and without the consent of the owner.” 2-36 Virginia Model Jury Instructions—Criminal G36.100 (2014). The model instruction does not tell the jury to distinguish between wrongful and fraudulent takings—rather, it only requires a finding of a taking “without the consent of the owner.” Id. Moreover, Virginia law has long used the “wrongful” versus “fraudulent” distinction as two different means of satisfying the “without consent” element:
The common law had substantial difficulty with cases in which the thief, intending permanently to deprive the possessor of his chattel, obtained possession of it with the apparent consent of the possessor by use of some fraud. Such conduct, called larceny by trick, was assimilated into larceny on the theory that consent obtained by fraud was not true consent and hence that the taker had trespassed upon the chattel without consent of the possessor. The Virginia definition [of larceny], by use of the word “fraudulent” has adopted this doctrine and often applied it. This is the theory upon which cashing a forged check becomes larceny.
Ronald J. Bacigal, Larceny and Receiving, in Virginia Practice Series, Va. Prac. Criminal Offenses & Defenses L3 (2014); see also John Wesley Bartram, Note, Pleading for Theft Consolidation in Virginia: Larceny, Embezzlement, False Pretenses and § 19.2-28b, 56 Wash. & Lee L.Rev. 249, 260-61 (1999) (noting that Virginia incorporates larceny by trick into its common law larceny definition through the use of the word “fraudulent”); Skeeter, 232 S.E.2d at 758 (holding that personal property acquired with fraudulently obtained consent will sustain a larceny conviction); United States v. Argumedo-Perez, 326 Fed.Appx. 293, 295-98 (5th Cir.2009) (per curiam) (holding that the “without consent” element of Virginia larceny includes “fraudulently obtained consent” and so a Virginia larceny conviction does not consti tute a generic federal theft crime). Put simply, wrongful or fraudulent takings are alternative means of committing larceny, not alternative elements.
In summary, we conclude that larceny in Virginia law is indivisible as a matter of law. That means only the categorical approach applies. And as established above, Omargharib’s larceny conviction is not categorically an INA-theft offense. The government makes no meaningful argument to rebut this analysis other than pointing to the disjunctive “or” in Virginia’s definition of larceny. As such, it has not satisfied its burden to establish removability by clear and convincing evidence. See Karimi 715 F.3d at 566.
III.
Because Omargharib’s 2011 conviction for grand larceny, in violation of Va.Code Ann. § 18.2-95, was not a “theft offense” under the INA, the BIA erred as a matter of law in relying on that conviction as a basis to order his removal under 8 U.S.C. § 1227(a)(2)(A)(iii). Accordingly, we grant Omargharib’s petition for review, reverse the BIA’s decision, and remand the action with instructions to vacate Omargharib’s order of removal.
PETITION FOR REVIEW GRANTED; REVERSED AND REMANDED WITH INSTRUCTIONS.
. Omargharib later filed a motion to reconsider his sentence (which the trial court denied), but did not appeal his conviction. He also-filed habeas motions in both state and federal court, all of which were likewise denied.
. The INA’s theft offense is not tied to any dollar threshold—a theft of even one penny will suffice as long as the term of imprisonment is at least one year. In contrast, the INA’s fraud offense only applies if the loss to the victim exceeds $10,000.
. The record reflects that the two pool cues were together valued between $525 and $800—well below the INA's $10,000 fraud threshold. Accordingly, the government does not argue that Omargharib's conviction constitutes a fraud offense under the INA.
. At the hearing, the IJ first issued an oral decision devoid of any legal analysis. Omar-gharib appealed the oral decision to the BIA, which remanded back to the IJ to explain his reasoning. The IJ issued a written order on December 26, 2012.
.If Omargharib’s state law conviction had been classified as a crime under the INA other than an aggravated felony he could have sought certain discretionary relief from removal, such as asylum or cancellation of removal. See Moncrieffe v. Holder, - U.S. -, 133 S.Ct. 1678, 1682, 185 L.Ed.2d 727 (2013) (citing 8 U.S.C. §§ 1158, 1229b). Because the IJ found he committed an aggravated felony, however, he was ineligible for these forms of discretionary relief. See id.
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367756-16250 | KRAFT, District Judge.
On October 31, 1963, shortly before 2 P.M., an armed man entered the office of the Almond Savings and Loan Association, Philadephia, an insured institution, and robbed it of $1,346 in currency.
Defendant was arrested two days later, and was subsequently charged with the offense in a 4-count indictment under 18 U.S.C. § 2113. Following his conviction by a jury on 3 counts, defendant filed the present motion for a new trial.
The defense was denial and an alibi. Defendant claimed that he was confined to his home with a cold during the entire day in question. The case against defendant thus turned on the issue of identification.
Mrs. Finch, an employe of the Association, was an important witness for the Government. She was positive in her identification of the defendant as the robber, and gave a lucid account of the occurrence: She was seated at a desk in the rear of the office when defendant, wearing a pair of sunglasses, entered the front door. At this time a customer left the oifice and she was alone with defendant. Defendant paused momentarily, looked about and advanced towards her. She became frightened, laid the telephone transmitter on the desk and pushed a button which caused it to buzz in a nearby office. Defendant threw down a paper bag and told her not to be “smart”. She saw a gun in his hand. Defendant ordered her to return the telephone to its place. She picked up the paper bag and went behind the counter to the teller’s station. Defendant stood in front of the counter and ordered “All the bills.” She removed the currency from the cash drawer and put it into the bag. About this time, Mr. LaSota, the Association’s treasurer, came into the office. Defendant took the bag and fled. Mrs. Finch estimated that defendant was in the office for “approximately three minutes.” Mrs. Finch identified defendant in a line-up three days after the robbery, and again at the magistrate’s hearing the day following the line-up.
Mrs. Fair, another Government witness, positively identified defendant‘as the man she saw walking toward the Association at the time in question, as she was standing on the sidewalk in front of a luncheonette, about “six doors away.” She noted him particularly, she said, because “it was drizzling rain and he was wearing sunglasses and it seems odd to see somebody with sunglasses when it rains.” She testified that she again saw defendant as she was emerging from the luncheonette a few minutes later, and that he was running “in the opposite direction.”
Mrs. Fair first identified defendant early in November, when she picked him out of a group of nine or ten men at a police station.
Defendant now contends that the trial judge erred in failing to caution the jury as to the unreliability of identification testimony, and in refusing certain of defendant’s points with respect thereto.
The charge relating to identification testimony was based substantially on the holding in Commonwealth v. Kloiber, 378 Pa. 412, at p. 424, 106 A.2d 820, at p. 826 (1954).
“Where the opportunity for positive identification is good and the witness is positive in his identification and his identification is not weakened by prior failure to identify, but remains, even after cross-examination, positive and unqualified, the testimony as to identification need not be received with caution — indeed the cases say that ' “his [positive] testimony as to identity may be treated as the statement of a fact” ’. Commonwealth v. Ricci, 161 Pa.Super. 193, 195, 54 A.2d 51, 52, Commonwealth v. Sharpe, 138 Pa.Super. 156, 159, 10 A.2d 120.
X X X * X •»
“On the other hand, where the witness is not in a position to clearly observe the assailant, or he is not positive as to identity, or his positive statements as to identity are weakened by qualification or by failure to identify defendant on one or more prior occasions, the accuracy of the identification is so doubtful that the Court should warn the jury that the testimony as to identity must be received with caution.”
Defendant urges that Mrs. Fair’s opportunity “for positive identification” was not good, and that Mrs. Finch’s testimony fails to meet “all four of the required criteria announced in Kloiber,” and that therefore he was entitled to a cautionary instruction in the charge. Defendant relies strongly on Commonwealth v. Wilkerson, 204 Pa.Super. 213, 203 A.2d 235 (1964).
We disagree completely with defendant’s position. We believed at trial, and still believe, that the testimony of the two witnesses amply meets all of the criteria laid down in the first paragraph of Kloiber, as dispensing with the need for cautionary instruction. The question whether the identification testimony should be received with caution was clearly for the jury, and we so charged:
“Whether or not you do receive it under those circumstances with caution is entirely for you under all the circumstances and the evidence, as is the degree of caution, if any, which you employ.”
Wilkerson, supra, is inapposite. In that case, the identification testimony very clearly failed to meet two of the Kloiber criteria, and, accordingly, the Superior Court held that the trial judge should have warned the jury that such testimony must be received with caution.
Certainly we cannot say as a matter of law that Mrs. Fair’s opportunity for positive identification was not good. Defendant, when first observed by her, walked directly in front of her on the sidewalk shortly after high noon. It may be noted, too, that defendant’s light skin and regularity of features were not usual in a Negro. Her attention was particularly attracted, as already stated, by the incongruity of sunglasses worn in a drizzling rain. Mrs. Finch had three minutes to observe defendant’s appearance, characteristics, manner and bearing under circumstances likely to impress her. Both witnesses were positive in their identification of defendant at trial, and their identification, even after cross-examination, remained positive and unqualified. Defendant can point to no occasion before trial when either witness failed to identify defendant in personal confrontation. Defendant lays great stress on the fact that Mrs. Finch, from hundreds of photographs shown her, picked out not only the defendant’s picture, but also “picked out another man’s photograph” as resembling the robber. We do not regard this as a “prior failure to identify.”
We hold, therefore, that defendant’s complaint on this ground is without merit.
Defendant’s next complaint is that the trial judge erred in admitting evidence obtained as the result of an “unlawful lineup.”
The robbery here involved occurred on Thursday, October 31, 1963. Defendant was arrested the following Saturday evening. He was scheduled for hearing on an entirely unrelated charge the next morning (Sunday). Contrary to counsel’s statement that defendant “was given a hearing” on the other charge, there was no hearing then. The scheduled hearing was continued. On that same Sunday afternoon, Mrs. Finch identified defendant in a line-up as the man who had robbed the Association. At the time of this identification, defendant had had no hearing either on the other or the instant charge.
Mrs. Finch, over defendant’s objection, was permitted to testify to her identification of defendant in the lineup. Defendant claims that placing him in a line-up for identification, in the circumstances described, was “improper police procedure, the fruits of which should have been excluded at trial.” Those fruits, he asserts, “are Mrs. Finch’s testimony concerning the line-up as well as subsequent identifications by Mrs. Finch, where she identified the same man she saw in the line-up.” Sole reliance is placed upon Butler v. Crum-lish, 229 F.Supp. 565 (E.D.Pa.1964), in which Judge Freedman enjoined the placing of a suspect in a lineup while in involuntary custody for want of bail, on the ground that such procedure violated the constitutional rights of the accused.
Defendant’s contention here lacks merit. Butler is wholly inapposite. There, the accused were in custody “for want of bail.” The heart of Judge Freedman’s ruling is as follows (pp. 567, 568):
“The compulsory ‘line-up’ of the unbailed defendant thus amounts to a material distinction between those who enter bail and those — equally presumed to be innocent — who do not. It is, moreover, unrelated to the purpose for which an unbailed defendant is confined — to insure his appearance at trial. * * *
“It is clear, therefore, that there is substantial merit in the plaintiffs’ claim that their involuntary ‘line-up’ would constitute an invidious discrimination depriving them of the equal protection of the laws guaranteed by the Fourteenth Amendment.”
Defendant, here, was placed in a lineup while in custody awaiting hearings on two separate charges. Bail had not been fixed. Defendant was not subjected to invidious discrimination as between those at large on bail and those held in custody for want of bail. So far as the evidence discloses, he was accorded the same treatment as all others in similar circumstances. Judge Freedman did not hold that the placing of a suspect in a line-up, or otherwise making him available for identification, was per se a violation of constitutional rights; and we know of no authority, so holding. On the other hand, as recently as in Escobedo v. State of Illinois, 378 U.S. 478, 84 S.Ct. 1758, 12 L.Ed.2d 977 (1964), the Supreme Court expressly recognized the power of the police to investigate an unsolved crime by gathering information from witnesses and by other proper investigative efforts.
Defendant next asserts that the trial judge erred in sustaining the Government’s objections to the following questions directed to Mrs. Fair on cross-examination :
“Q Did you ever approach anyone and say to them, ‘Hello, Joe,’ or ‘Hello, Mary,’ or whatever name you used and found out that it was not the person that you thought it was?”
-* «• * « * *
“Q You said that you had a conversation with a representative of the FBI and you gave him a statement?
“A Yes.
“Q Now, will you describe that man to us.”
We think the ruling was correct. Defendant was, of course, entitled to cross-examine the witness to test her credibility, her powers of observation and the accuracy of her recollection. However, the questions propounded involved identification of other persons, under vastly different circumstances and conditions than those prevailing in the instant case. Moreover, if the witness had answered the first question in the affirmative, she should have been permitted to detail the facts and circumstances attending the mistaken identification. The cross-examination could thus have branched out into numerous collateral matters, serving only to confuse the jury and distract their attention from the real issues in the case. As stated in United States v. Augustine, 189 F.2d 587, 590 (3rd Cir.1951):
“The credibility of a witness is of course a proper subject of cross-examination. But there are limits to the extent of the excursions to be allowed on such a voyage of discovery and a trial judge must have considerable discretion in setting them.”
We think the ruling was well within the bounds of judicial discretion.
The court’s refusal to charge as requested in defendant’s sixth point is next assigned as error:
“6. If the jury find that any circumstance relied upon which may be incriminating is equally susceptible of two interpretations, each of which appears to be reasonable and one of which points to the defendant’s guilt and the other to his innocence, it is your duty to accept that of innocence and reject that which points of (sic) guilt.”
The point was properly refused. We think it neither reasonable nor proper for the jury to isolate each circumstance appearing in evidence and to evaluate it in complete detachment from all others. A particular circumstance may, and often does, take on color, character and significance from other circumstances. We think the evidence must be considered and weighed in context and as a whole. See Holland v. United States, 348 U.S. 121, 75 S.Ct. 127, 99 L.Ed. 150.
The authorities relied on do not support defendant’s contention, but sustain our view. In Commonwealth v. McSor-ley, 189 Pa.Super. 223, 150 A.2d 570 (1959), a prosecution for malfeasance, etc., in office, the controlling issue was defendant’s motive. Quoting from Commonwealth v. Woong Knee New, 354 Pa. 188, 221, 47 A.2d 450, the Court stated (189 Pa.Super. p. 233, 150 A.2d p. 575):
“[W]hen two equally reasonable and mutually inconsistent inferences can be drawn from the same set of circumstances, a jury must not be permitted to guess which inference it will adopt, especially when one of the two guesses will result in depriving a defendant of his life or his liberty. When a party on whom rests the burden of proof in either a criminal or a civil case offers evidence consistent with two opposing propositions, he proves neither.”
The Manual on Uniform Jury Instructions in Federal Criminal Cases, 33 F.R.D. 523, 567 states:
“If two conclusions can reasonably be drawn from the evidence, one of innocence, and one of guilt, the jury should adopt the one of innocence.”
It follows that defendant’s sixth point did not correctly apply the law and was properly refused. Moreover, circumstantial evidence played but little part in the proofs in the instant case. The vital evidence was the direct testimony of Mrs. Finch and Mrs. Fair.
Defendant complains, too, that on redirect examination the Government’s attorney was permitted, over objection, to interrogate Mrs. Finch concerning her testimony against defendant at a preliminary hearing.
In the course of a searching cross-examination, Mrs. Finch was questioned regarding her testimony at the preliminary hearing with respect to photographs shown her and her identification of defendant from these photographs. Parts of that testimony were read to her, and she indicated she had so testified. On redirect examination, the Government also questioned the witness on her testimony at the preliminary hearing. The Government’s interrogation, in the main, dealt with the general matter of identification, including identification from photographs. In a few instances where it did not, the trial judge sustained defendant’s objections. While some of the redirect examination may seem repetitious of the prior cross-examination, some repetition was inevitable because of the necessity to preserve continuity in the witness’ testimony at the earlier hearing, and to place it in proper context.
After careful review, we are persuaded that the testimony was properly admitted under the general rule in such cases. See 98 C.J.S. Witnesses § 422, p. 229:
“Where a witness has been cross-examined as to a part of a conversation, statement, transaction, or occurrence, the whole thereof, to the extent that it relates to the same subject matter and concerns the specific matter opened up, may be elicited on redirect examination.”
See, to the same general effect, Cafasso v. Pennsylvania R. Co., 169 F.2d 451, 453 (3rd Cir.1948).
Defendant, finally, alleges error in the refusal of his fifth point for charge:
“5. The state of mind described by the phrase ‘reasonable doubt’ is one of indecision or hesitation to reach the conclusion of guilt, and necessarily implies that the juror may be unable to give ‘some proper reason for entertaining it’; reasonable doubt may exist without his being able to formulate any reason for it. It is sufficient if the conscientious mind of reasonable firmness and judgment is unable to from the evidence find the facts involving guilt. A reasonable doubt exists in any case when, after careful and impartial consideration of all the evidence, the jurors do not feel convinced to a moral certainty that a defendant is guilty of the charge.”
The point was properly refused. The first two sentences of the point were taken bodily from the opinion in Commonwealth v. Baker, 93 Pa.Super. 360, 362 (1928). The Court held, not that the trial judge should have so charged, but that it was error to instruct the jury that a reasonable doubt “must be the kind of doubt that an intelligent man or woman can give some reason for entertaining.”
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4218014-7220 | MEMORANDUM OPINION
LEWIS A. KAPLAN, District Judge.
Plaintiff charges defendants with infringing its patent for the synthesis of a chemical compound used in the manufacture of certain pharmaceuticals by selling in the United States the antidepressant drug citalopram, which defendants allegedly made in part by using plaintiffs patented process. The matter is before the Court on defendant Forest Laboratories, Inc. and defendant Forest Pharmaceuticals, Inc.’s motion for partial summary judgment.
Background
Plaintiff Infosint, S.A. (“Infosint”) owns U.S. Patent 6,458,973 (the “'973 patent”), which claims an improved process for making the compound 5-carboxyphthalide, an intermediate product in the synthesis of citalopram. Citalopram is a well-known antidepressant marketed in the United States under the names Celexa and Lexapro.
Defendant H. Lundbeck A/S (“Lundbeck”), a Danish corporation, manufactures citalopram outside of the United States. Forest Laboratories, Inc. and Forest Pharmaceuticals, Inc., both Delaware corporations, (collectively “Forest”), market and sell citalopram in the United States pursuant to license and supply agreements with Lundbeck. Infosint does not allege that Forest manufactures citalopram. According to Lundbeck’s 1998 annual report, Forest is Lundbeck’s “strategic partner in the USA” and “is responsible for the introduction and sale of [citalopram] in the American market.”
Forest now moves for partial summary judgment determining that it is not liable for damages resulting from any alleged infringement of the '973 patent prior to April 12, 2006, the date Infosint filed the complaint in this case. Forest bases its argument on 35 U.S.C. § 287(b), which protects certain so-called “innocent infringers” — those who possess or import into the United States products made by processes patented in the United States before they had notice of the infringement.
Discussion
A. Legal Standard
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. The Court must view the facts in the light most favorable to the nonmoving party and the moving party has the burden of demonstrating the absence of a genuine issue of material fact. Where the burden of proof at trial would fall on the nonmoving party, however, it ordinarily is sufficient for the movant to point to a lack of evidence on an essential element of the nonmovant’s claim. In that event, the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial or suffer an adverse judgment.
B. Analysis
Forest contends it is entitled to a limitation of its damages pursuant to 35 U.S.C. § 287(b). That section applies to a patent infringer who “without authority imports into the United States or offers to sell, sells, or uses within the United States a product which is made by a process patented in the United States.” It provides a safe harbor from the remedies for infringement imposed by 35 U.S.C. § 271(g) with respect to “any product in the possession of, or in transit to, the person subject to liability ... before that person had notice of infringement with respect to that product.”
Forest argues that Infosint cannot recover any damages that accrued prior to the date that Infosint first provided Forest notice of its infringement allegations, even assuming it infringed the '973 patent. The parties agree that Infosint’s first such communication was the complaint in this action. However, as Infosint correctly notes, the plain language of Section 287(b)(2) does not require the party alleging infringement to provide the notice. That section defines “notice” as “actual knowledge, or receipt by a person of a written notification, or a combination thereof, of information sufficient to persuade a reasonable person that it is likely that a product was made by a process patented in the United States.” Thus the fact that Infosint did not provide notice of the alleged infringement prior to filing its complaint does not establish the absence of a genuine issue of material fact as to whether Forest knew it was likely that products in its possession were made by a process patented here.
As the language of the statute is unambiguous, the Court regards it as conclusive. However, the legislative history of Section 287(b) clearly supports the interpretation that notice may come from sources other than the plaintiff. The Senate committee report explained that:
“Notice of infringement occurs when the alleged infringer has a combination of information sufficient to persuade a reasonable person that it is likely that a product was made by a patented process. This combination of information will include actual knowledge ..., the information contained in the notification from the patent holder and any other information known to the accused relevant to the issue of infringement.”
The drafters thus contemplated that “any” information, not just information from the patent holder, could provide sufficient notice. Additionally, the Committee Report explained that the rationale behind the safe harbor provision was “to shelter only purchasers who are remote from the manufacturer and not in the position to protect themselves in contracts with the party who is actually using the [patented] process.” The provision was not intended to protect retailers with the “resources to send agents to other countries to seek suppli ers,” who “should be able and willing to exercise more vigilance” in avoiding infringement.
Forest was not a “remote” seller with little bargaining power. It negotiated a multi-year supply and license agreement with Lundbeck, a Dutch corporation, to market and sell in the United States citalopram tablets manufactured by Lundbeck. Their relationship was close enough for Lundbeck to describe Forest as its “strategic partner.” Forest is precisely the sort of retailer Congress did not intend to shelter from liability.
Forest points to no other undisputed facts in support of its motion for summary judgment. Indeed, it is significant that Forest does not argue that it lacked notice. It argues only that Infosint did not provide notice prior to April 12, 2006. As Forest could have received notice that processes used by Lundbeck in manufacturing citalopram infringed the '973 patent by means other than communication from Infosint, Forest has failed to demonstrate there is no genuine issue of material fact as to whether Forest had notice of infringement.
Conclusion
Forest’s motion for partial summary judgment [docket item 77] is denied.
SO ORDERED.
. Pl. Ex. 13 at 2-3; Pl. Ex. 24 at 60
. Ans. ¶ 2.
. Ans. ¶ 4; Am. Ans. ¶ 5; Def. Ex. 11; Pl. Ex. 16 at 10.
. Cpt.
. Pl. Ex. 5 at 70.
. Def. Rule 56.1 ¶ 7.
. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); White v. ABCO Eng’g Corp., 221 F.3d 293, 300 (2d Cir.2000).
. See United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Hetchkop v. Woodlawn at Grassmere, Inc., 116 F.3d 28, 33 (2d Cir.1997).
. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).
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11103191-11091 | MEMORANDUM RULING
STAGG, District Judge.
I. INTRODUCTION
This is an action by Lifecare Hospitals (“Lifecare”) to collect $210,362.00 from Ochsner Health Plan, Inc. (“OHP”) for hospital services rendered to three (3) pa tients enrolled in OHP’s “Total Health 65 Medicare + Choice” plan, late charges, legal interest, and costs. Lifecare owns and operates a long-term acute care facility in Shreveport, Louisiana which provides acute care and rehabilitative services to its patients, most of whom are seriously ill when admitted. OHP is a health maintenance organization headquartered in Me-tairie, Louisiana, which serves as a fiscal intermediary under the Medicare Act, administering funds under the authority of the Secretary of the Department of Health and Human Services through its “Total Heath 65 Medicare + Choice” plan (hereinafter, “plan”).
On May 5,1999, Anthony Sanangelo was admitted to Lifecare where he remained hospitalized until February 16, 2000 — a period of two hundred eighty-seven (287) days. During that time, Mr. Sanangelo was enrolled as a member of OHP’s plan. Although a substantial portion of Life-care’s claims for services rendered to Mr. Sanangelo were paid, Lifecare has not received payment for $185,000 worth of services. On June 11, 1999, Murphy Williams was admitted to Lifecare where he remained hospitalized until June 25, 1999 — a period of fourteen (14) days. During that time, Mr. Williams was enrolled as a member of OHP’s plan. The total amount of Lifecare’s claim for services rendered to Mr. Williams was $11,200, none of which has been paid. On September 29, 1999, Milton Smith was admitted to Lifecare where he remained hospitalized until October 17, 1999' — a period of eighteen (18) days. During that time, Mr. Smith was enrolled as a member of OHP’s plan. The total amount of Lifecare’s claim for services rendered to Mr. Smith was $14,400, none of which has been paid.
On April 27, 2000, Lifecare filed suit against OHP in the First Judicial District Court of Caddo Parish to recover the amounts owed for hospital services rendered to the plan enrollees, late charges, legal interest, and costs. On June 2, 2000, OHP removed the case to the Western District of Louisiana pursuant to 28 U.S.C. § 1331, 28 U.S.C. § 1441, 28 U.S.C. § 1442(a)(1), and 42 U.S.C. § 405(h). See Record Document 3. In its notice of removal, OHP expressly reserved the right to seek dismissal of the action based on Lifecare’s failure to exhaust administrative remedies pursuant to section 405(g) of the Medicare Act. See 42 U.S.C. § 405(g). On November 24, 2000, OHP filed the instant motion for summary judgment, seeking, inter alia, dismissal of Lifecare’s case for lack of subject matter jurisdiction. See Record Document 14. In light of the arguments made therein, and the court’s review of the relevant statutory and jurisprudential authority, OHP’s motion for summary judgment is DENIED AS MOOT and this action is DISMISSED for lack of subject matter jurisdiction.
II. DISCUSSION
A. Subject Matter Jurisdiction.
Federal Rule of Civil Procedure 12(h)(3) dictates that “[wjhenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.” OHP has suggested that this court lacks subject matter jurisdiction, arguing that Lifeeare’s claims, though styled as purely contractual, “arise under” the Medicare Act and are subject to the mandatory exhaustion requirements of 42 U.S.C. § 405(g). Specifically, OHP contends that because Lifecare seeks payment for services provided to enrollees in OHP’s Medicare plan, its claims are “inextricably intertwined” with claims for medical benefits under the Medicare Act. Accordingly, argues OHP, Lifecare must exhaust the administrative remedies provided for under the Medicare Act and the Code of Federal Regulations before seeking judicial review of its claims. Until all the levels of administrative review have been exhausted, asserts OHP, this court lacks subject matter jurisdiction over Lifecare’s claims. The court agrees.
B. Claims “Arising Under” the Medicare Act.
Whether a claim “arises under” the Medicare Act is determined by either one of two tests articulated by the Supreme Court. First, a claim arises under the Medicare Act if “both the standing and the substantive basis for the presentation” of the claim are the Medicare Act. See Heckler v. Ringer, 466 U.S. 602, 615, 104 S.Ct. 2013, 2022, 80 L.Ed.2d 622 (1984). Second, a claim arises under the Medicare Act if it is “inextricably intertwined” with a claim for medical benefits. See Ringer, 466 U.S. at 623, 104 S.Ct. at 2026. Pursuing a claim through administrative channels is not necessary when a claim is “wholly collateral” to a claim for benefits, and a colorable showing has been made that the claimant’s injury cannot be remedied by the retroactive payment of benefits after exhaustion of his administrative remedies. See Ringer, 466 U.S. at 617, 104 S.Ct. at 2023. A court should construe the “arising under” standard broadly. See Ardary v. Aetna Health Plans of California, 98 F.3d 496, 500 (9th Cir.1996); Bodimetric Health Services, Inc. v. Aetna Life & Casualty, 903 F.2d 480, 483 (7th Cir.1990) (observing that the Supreme Court instructed the lower courts to read the term “arising under” broadly in Ringer).
Lifecare’s complaint does not state the legal grounds upon which it seeks relief, but in its opposition to OHP’s motion for summary judgment, Lifecare contends that it is seeking recovery of the amounts OHP agreed to pay to Lifecare under contract. The court agrees that the most accurate characterization of Lifecare’s claims is that they are contractual in nature. Under this reading of the complaint, Lifecare’s claims do not satisfy the first Ringer “arising under” test, as both the standing and the substantive basis for the presentation of Lifecare’s claims are not the Medicare Act, but the Louisiana law of contracts. However, Lifecare’s claims do satisfy the second Ringer test.
In Ringer, the plaintiffs sought a declaration that the Secretary’s refusal to cover a particular procedure under Medicare was unlawful, an injunction requiring the Secretary to pay claims for the procedure, and an injunction eliminating the need for each plaintiff to pursue an administrative appeal. See Ringer, 466 U.S. at 611, 104 S.Ct. at 2019. The Supreme Court held that the plaintiffs’ claims were inextricably intertwined with claims for benefits because the plaintiffs’ asserted claims were, “at bottom,” claims for reimbursement for a medical procedure. See Ringer, 466 U.S. at 614, 104 S.Ct. at 2021. In this case, Lifecare alleges that it provided medical services to three enrollees in OHP’s Medicare plan, and that, under its contract with the Northern Louisiana Physician Hospital Organization (“NLPHO”), OHP’s agent, it is entitled to payment from OHP for the cost of those treatments. Thus, there is no doubt that Lifecare’s claims are, at bottom, claims for reimbursement for benefits provided to enroll-ees in OHP’s plan. Moreover, Lifecare’s claims cannot be defined as “wholly collateral” to a claim for benefits because Life-care’s injury can be remedied by the retroactive payment of benefits after exhaustion of its administrative remedies. Because Lifecare’s claims are inextricably intertwined with claims for benefits, the court holds that they arise under the Medicare Act. See Ringer, 466 U.S. at 614, 104 S.Ct. at 2021; Jamaica Hospital Nursing Home v. Oxford Health Plans, 2000 WL 1404930 (S.D.N.Y.) (holding that nursing home’s claims for reimbursement of benefits provided to Medicare recipient enrolled in private insurance plan arose under Medicare Act, even though claims were interpreted as contractual); Redmond v. Secure Horizons, Pacificare, Inc., 60 Cal.App.4th 96, 101-02, 70 Cal.Rptr.2d 174 (1997) (finding that claims for denied and delayed reimbursement arose under Medicare Act even though they were presented as contract claims). Because Lifecare’s claims arise under the Medicare Act, Lifecare must exhaust the mandatory administrative remedies prescribed by the Act before seeking judicial review of its claims.
C. Exhaustion of Administrative Remedies.
The administrative remedy procedure for a Medicare participant enrolled in a “Medicare + Choice” plan, such as the OHP plan, is delineated at 42 C.F.R. § 422.560 et seq. Under section 422.562(b)(2), enrollees in Medicare + Choice (“M + C”) plans have the right to a timely “organization determination” by their M + C organization, and if they are dissatisfied with that determination, they may seek, in order, the following remedies: (1) a reconsideration of the determination by the Medicare + Choice organization; (2) a hearing before an Administrative Law Judge if they are dissatisfied with the reconsidered determination by the organization; (3) a request for review by the Departmental Appeals Board of the ALJ hearing decision, if they are dissatisfied with that decision; and finally (4) judicial review of the ALJ’s decision if the Board denies the party’s request for review, or judicial review of the Board’s decision if it is the final decision of the Health Care Financing Administration and the amount in controversy exceeds $1,000. See 42 C.F.R. § 422.560 et seq.
Lifecare argues that it is not required to exhaust the administrative remedies detailed above because it received an informal advisory letter from a “Medicare Managed Care Specialist” at HCFA’s Division of Beneficiaries, Health Plans and Providers, Region VI, in Dallas, Texas, stating that the dispute in this case involved no “organization determination” by OHP “because the basis for OHP’s refusal to pay is that it has already paid for the services [rendered by Lifecare].” The court is not persuaded by Lifecare’s argument. 42 C.F.R. § 422.566(b) provides that “[a]n organization determination is any determination made by an M + C organization [viz. OHP] with respect to any of the following: ... (3) The M+C organization’s refusal to provide or pay for services, in whole or in part, including the type or level of services, that the enrollee believes should be furnished or arranged for by the M + C organization.” See id. (emphasis added). OHP made an organization determination as defined by section 422.566(b) when it refused to pay, in part, for services rendered by Lifecare to Mr. Sanangelo, and when it refused to pay, in whole, for services rendered by Lifecare to Mr. Williams and Mr. Smith.
Regardless of what the Medicare Managed Care Specialist at HCFA may have been told about this case by Lifecare, OHP contends that it is not required to pay for the services rendered by Lifecare because of contractual arrangements with Lifecare and NLPHO, not because it has already paid for the services. Indeed, OHP has not paid for any services rendered by Lifecare to Mr. Williams or Mr. Smith, and allegedly still owes Lifecare $185,000 for services rendered to Mr. Sanangelo. Thus, the court finds HCFA’s advisory letter to Lifecare to be unpersuasive.
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6470273-8579 | OPINION
MUIR, District Judge.
On May 18, 1973, a hearing was held to consider the motions of Defendants Copeland, Gibney and Harbold to set aside the entry of default against them. At the close of the hearing, the Court issued an order granting the motions. This Opinion sets forth the reasons for that Order.
The Plaintiff, a prisoner at the State Correctional. Institution, Huntingdon, Pennsylvania, was permitted to file this pro se civil rights action in forma pau-peris on May 3, 1972. The complaint charged that the six Defendants conspired to convict the Plaintiff by perjured testimony. The alleged perjured testimony took place on October 6, 1966, and the Defendant was convicted on October 10, 1966. The United States Marshal made service upon all of the Defendants during May and June, 1972. Three of the Defendants, Coons, Halke and Reneker, answered the complaint by filing a motion for summary judgment. The summary judgment motion was granted on November 14, 1972. Defendants Copeland, Gibney and Harbold never filed an answer to the complaint, and on April 6, 1973, the Clerk entered default against them pursuant to F.R.Civ. P. 56(a). Motions under F.R.Civ.P. 55(c) to set aside the entry of default were filed by Defendant Harbold on April 25, 1973, and by Defendants Gib-ney and Copeland on May 1,1973.
The May 18, 1973 hearing on Defendants’ motions to set aside the entry of default revealed the following facts. The three Defendants were prosecution witnesses at Plaintiff Schartner’s October, 1966 trial for armed robbery of a supermarket. In addition, the Defendants testified at the trial and two retrials of Donald Allen, Plaintiff’s accomplice in the robbery. Defendants Copeland and Gibney, members of the Harrisburg Police Department, had investigated the robbery by Plaintiff and Allen. Defendant Harbold was a private citizen who witnessed the crime. Each of the Defendants had frequently been subpoenaed to appear at the several trials.
Defendant Gibney has been a member of the Harrisburg Police Department for 17 years. On May 10, 1972, the United States Marshal served a copy of the complaint in this case upon G.L. Houck, clerk to the Harrisburg Chief of Police. The complaint was forwarded to Gibney shortly thereafter. He scanned the contents of the papers, but did not take the matter seriously. The complaint was a fourteen-page document, handwritten on yellow legal paper. Gib-ney thought that it was a “crank” letter, as he had often in the past received letters and threats from criminals whom he had helped to convict. At some point, Gibney mentioned to the Chief of Police that Schartner was trying to sue him. The Chief told him not to worry about it because the Department “law bureau” would handle the matter. With this assurance, Gibney disregarded the complaint and subsequent motions and briefs, also handwritten, which he received periodically in the mail. Only when he was notified by the Court Clerk on April 5, 1973, that a default had been entered against him did Gibney realize the gravity of his inaction.
Defendant Copeland retired from his position as detective on the Harrisburg Police Department on January 1, 1972, because of heart trouble. On May 11, 1972 the U. S. Marshal served him with a copy of the complaint. Like Gibney, Copeland did not realize that he had been made a party to a legal proceeding because the complaint did not look “official.” He examined the attached summons, but could find no seal. Copeland called Defendant Gibney at the Police Station concerning the “communication” from Schartner. Gibney, apparently resting upon the assurances of the Chief of Police, told him that everything would be taken care of by the Department. Copeland took no action until notified of the entry of his default.
The U.S. Marshal made 8 unsuccessful attempts to serve the complaint upon Defendant Harbold. Finally, on June 29, 1972, service was made upon Mrs. Harbold. She has no recollection of this event. This is understandable, since Mrs. Harbold had just recovered from a serious illness, and since service was made during the flooding and subsequent confusion in Harrisburg produced by Hurricane Agnes in late June, 1972. The Harbold residence was practically isolated and without electricity for several days. Defendant Harbold never saw the complaint and summons. Later, he began receiving other documents filed in the case but did not comprehend their import. Harbold called the District Attorney who had participated in the Schartner criminal trial. The D.A. told him that the documents were of no consequence and that no action was necessary. A similar message was conveyed to Harbold by Defendant Copeland when the two met on the street one day. Like the other two Defendants, Harbold felt compelled to act only upon notification that a default had been entered against him on April 5,1973.
Courts look upon default judgments with disfavor, and therefore, motions to set aside default judgments are considered liberally. Tozer v. Charles A. Krause Milling Co., 189 F.2d 242 (3d Cir. 1951); Residential Reroofing Union Local 30-B v. Mezicco, 55 F.R.D. 516 (E.D.Pa.1972). Where default has been entered, but default judgment not yet granted, an even more liberal standard is applied to a motion to set aside the entry of default. See generally Wright and Miller, Federal Practice and Procedure, § 2694. F.R.Civ.P. 55(c) provides that an entry of default may be set aside “for good cause shown.” This provision vests in the Court a broad discretion to set aside an entry of default in order to accomplish justice. Stuski v. United States Lines, 31 F.R.D. 188 (E.D.Pa.1962). Cf. Klapprott v. United States, 335 U.S. 601, 614, 69 S.Ct. 384, 93 L.Ed. 266 (1949). In particular, a Rule 55(c) motion may be granted whenever the court finds (1) that the nondefaulting party will not be prejudiced by the reopening, (2) that the defaulting party has a meritorious defense, and (3) that the default was not the result of inexcusable neglect or a willful act. Tozer v. Charles A. Krause Milling Co., supra. See generally Wright and Miller, Federal Practice and Procedure, § 2696.
The Court has no difficulty in finding the existence of the first two factors. The record discloses no special harm to Plaintiff which would result from the reopening of this action. There would be no unreasonable delay in the consummation of this action which was started on May 3, 1972 and is set for trial in June, 1973. Nor has Plaintiff shown that during the time within which Defendants failed to answer that he has lost available evidence, incurred greater costs, or that the opportunity for fraud and collusion has increased. See Titus v. Smith, 51 F.R.D. 224 (E.D.Pa.1970). Likewise, there is no doubt that the Defendants have a meritorious defense. Not only have they filed proposed answers asserting facts which, if true, would be a complete defense to liability, but they have the defense of the statute of limitations which has been successfully asserted by the three co-defendants who were granted summary judgment.
The crux of this Rule 55(c) motion is whether the default of the Defendants resulted from inexcusable neglect. Certainly the failure to take any action whatsoever until approximately 10 months after service of the complaint, and only upon receipt of notice of the Clerk’s entry of default, is evidence of neglect. Under normal circumstances, it would probably be considered inexcusable neglect. Cf. Titus v. Smith, 51 F.R.D. (E.D.Pa.1970). However, there are mitigating factors apparent in this case. Plaintiff’s complaint was a rambling fourteen-page document, handwritten on yellow paper. While courts have become increasingly familiar with, and tolerant of, pro se documents such as this, laymen still equate “legal matters” with formal, official-looking documents. The Court admits to a doubt as to how to treat some of the documents filed in prisoner civil rights actions. These three Defendants can hardly be blamed for misunderstanding the import of Plaintiff’s complaint and the Court summons attached thereto. Also, each of the Defendants relied on advice from persons in positions of authority that the matter would be taken care of, or that the “correspondence” from Plaintiff was of no consequence. Whether the Defendants’ neglect was inexcusable is a close question. Any doubt should be resolved in favor of setting aside the entry of default. Tozer v. Charles A. Krause Milling Co., supra. Therefore, I find that the default of the Defendants was not the result of inexcusable neglect.
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4124792-20087 | CLAY, Circuit Judge.
Defendant Cecelia Nieto appeals her conviction for conspiracy to possess with the intent to distribute more than 500 grams of cocaine hydrochloride, aiding and abetting the possession of cocaine hydrochloride with the intent to distribute, and aiding and abetting the possession of a firearm in furtherance of a drug trafficking offense. Defendant argues that the evidence was insufficient to sustain her conviction with respect to all counts, that the district court’s alleged admission of hearsay evidence requires a new trial, and that the district court committed plain error by failing to hold a sidebar conference to discuss her objection to hearsay evidence. For the reasons that follow, we AFFIRM Defendant’s conviction.
BACKGROUND
On January 25, 2005, Defendant was charged in a five-count indictment. The indictment alleged that Defendant joined a conspiracy to possess with the intent to distribute more than 500 grams of cocaine in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(B), and 21 U.S.C. § 846; that Defen dant distributed, attempted to distribute, and possessed with the intent to distribute cocaine in violation of 21 U.S.C. §§ 841(a)(1) and (b)(1)(C), and 18 U.S.C. § 2; and that Defendant aided and abetted the knowing possession of a Raven Arms .25 caliber handgun in violation of 18 U.S.C. §§ 924(c) and 2. On January 31, 2005, Defendant entered a plea of not guilty to all charges.
A jury trial was held on May 9 and 10, 2005. The government attempted to prove at trial that Defendant and Miguel Garcia entered into a conspiracy to distribute cocaine hydrochloride in December of 2004, which lasted until January of 2005. The government produced evidence of two specific drug deals where Garcia and Defendant cooperated to sell or attempt to sell cocaine. Additionally, Garcia and his girlfriend, Rebecca Sparks, testified that an ongoing drug distribution relationship existed between Garcia and Defendant.
The two specific drug deals occurred on December 29, 2004 and January 6, 2005. On December 29, 2004, Garcia called Defendant, and after that conversation, Garcia and Sparks went to Defendant’s house. Defendant was going to sell two ounces of cocaine, in cooperation with Garcia, who would meet the buyer and conduct the transaction. Defendant, Garcia, and Sparks drove to the parking lot of a local restaurant in order to meet the buyer. Defendant handed Garcia the cocaine and a gun. Sparks attempted to talk Garcia out of carrying the firearm, but Garcia insisted upon carrying the weapon. Defendant drove from the restaurant to a nearby hotel, where Garcia left Defendant’s car and walked to a carwash located in the immediate vicinity of the hotel. At the carwash, Garcia briefly visited the car of another individual, to whom he sold two ounces of cocaine. After the drug deal, Garcia gave Defendant the money he had received from the drug deal, and he returned the gun to her. Defendant paid Garcia $300 for conducting the transaction. Unbeknownst to Garcia, Sparks, or Defendant, the buyer worked with the government as a confidential informant, and he turned the drugs over to the police. The substance that the confidential informant had purchased was confirmed to be a mixture containing cocaine, which weighed 48.2 grams.
On January 6, 2005, Garcia went to a bar where Defendant was working, and Defendant gave him five ounces of cocaine. Garcia and Defendant then went to Defendant’s house, where they picked up a gun. Garcia and Defendant returned to the same carwash, although this time they caravanned in separate cars. At the carwash, Garcia met the buyer, who was a confidential informant working with the government. Before Garcia learned that the buyer was a confidential informant, he and the buyer talked about a drug deal involving a greater quantity of drugs, and Garcia told the buyer that he and Defendant in the future would sell him a kilogram of cocaine. Garcia was planning to meet Defendant at the carwash and give her the money received from the sale of the five ounces of cocaine and return the gun to her, but he was arrested before this rendevous could occur. Defendant was arrested at approximately the same time three hundred years away from the carwash. She had intended to give Garcia $400 for transacting this drug deal.
In addition to these two specific drug transactions, the testimony from Garcia and Sparks at trial suggested that Defendant was engaged in the business of selling cocaine. Sparks testified that she had seen Defendant with drugs on numerous occasions, and that everyone knew that Defendant dealt drugs. Garcia testified that prior to the drug deal on December 29, 2004, he had engaged in other drug deals -with Defendant. He stated that he would get drugs from Defendant every two to three weeks, in a half-ounce quantity, and that he would only pay for the drugs after he had sold them.
On May 10, 2005, the jury returned a verdict of guilty as to all counts. The jury found, by way of a special verdict form, that the government had proven beyond a reasonable doubt that Defendant was responsible for more than 500 grams of cocaine as alleged in Count One of the indictment. After a hearing on August 18, 2005, Defendant was sentenced to seventy-eight months imprisonment on Counts One through Four, to be served concurrently, and sixty months imprisonment on Count Five, to be served consecutively to the other sentences, for a total sentence of one hundred and thirty-eight months incarceration, to be followed by four years of supervised release. On August 23, 2005, Defendant filed a timely notice of appeal
DISCUSSION
A. SUFFICIENCY OF THE EVIDENCE
Defendant contends that the evidence adduced at trial was insufficient to support her conviction with respect to all counts. Whether the evidence at trial was sufficient to support the jury’s verdict is an issue that we review de novo. United States v. Kelley, 461 F.3d 817, 825 (6th Cir.2006). Where a defendant makes a motion for a judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29, as Defendant did in this case, we ask “whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” United States v. Paige, 470 F.3d 603, 608 (6th Cir.2006) (quoting Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979)). “When reviewing for the sufficiency of evidence in support of a jury verdict, this Court views the evidence in the light most favorable to the prosecution and gives the prosecution the benefit of all reasonable inferences from the testimony.” United States v. Caver, 470 F.3d 220, 232 (6th Cir.2006) (quoting United States v. Abboud, 438 F.3d 554, 589 (6th Cir.2006)), petition for cert, filed, (U.S. Feb. 28, 2007) (No. 06-9796).
1. Conspiracy
Defendant argues that the evidence was insufficient for the jury to find the necessary elements of conspiracy. “The elements of conspiracy are (1) an object to be accomplished. (2) A plan or scheme embodying the means to accomplish that object. (3) An agreement or understanding between two or more of the defendants whereby they become definitely committed to cooperate for the accomplishment of the object by the means embodied in the agreement, or by any effectual means.” Id. (quoting United States v. Gibbs, 182 F.3d 408, 420 (6th Cir.1999)) (internal quotation marks and brackets omitted). In order to prove a conspiracy to violate the drug laws, the government must establish the following elements beyond a reasonable doubt: “(1) an agreement to violate drug laws, (2) knowledge and intent to join the conspiracy, and (3) participation in the conspiracy.” Id. (quoting Gibbs, 182 F.3d at 420). A conspiracy to violate the drug laws does not require a formal contract; “[a] tacit or mutual understanding among the parties is sufficient.” Id. at 233.
There was ample evidence from which a jury could conclude that Defendant knowingly entered into an agreement with Garcia to violate the drug laws, and that Defendant actively participated in the conspiracy. The evidence demonstrated that Defendant and Garcia engaged in a partnership to sell drugs. Sparks testified that, after Garcia received a call from a potential customer, he contacted Defendant, and they drove to complete the drug transaction together. Sparks also stated that Defendant supplied Garcia with the drugs and a gun. Garcia’s testimony reinforced Sparks’ testimony, and Garcia additionally testified that after he completed the drug transaction, he surrendered the money he received for the drugs to Defendant, and was paid for his services. This business relationship is relevant evidence which tended to show the existence of an agreement. See id. at 235 (evidence that defendant hired coconspirator to hold drugs for him was relevant to the existence of a conspiracy).
Garcia’s testimony at trial also evidenced a cooperative relationship between himself and Defendant. Garcia testified that he and Defendant engaged in regular drug transactions, whereby he would purchase approximately a half-ounce of cocaine from Defendant every two to three weeks. See United States v. Brown, 332 F.3d 363, 373 (6th Cir.2003) (evidence of repeated drug deals tends to show conspiracy). Garcia also stated that Defendant would provide him with drugs on credit, which suggests the existence of a conspiracy. See United States v. Henley, 360 F.3d 509, 514 (6th Cir.2004) (selling drugs on credit tends to show conspiracy). In sum, there was no shortage of evidence at trial from which a jury could conclude that Defendant knowingly conspired with Garcia to violate the drug laws.
Defendant argues that “[t]he only evidence for distribution other than co-defendant testimony was that [Defendant] was at the place where Mr. Garcia began to go to his drug transaction and was 300 yards away from where Mr. Garcia was arrested.” Defendant’s Br. at 10 (emphasis added). According to Defendant, neither Sparks nor Garcia gave credible testimony. Defendant avers that Sparks could not be believed because she was offered immunity in exchange for her testimony and because she was Garcia’s girlfriend; Garcia was incredible because he made potentially inconsistent statements about whether he was offered a reduction in his sentence in exchange for his plea, and because his testimony was clouded by his hope of obtaining a lighter sentence. Defendant’s arguments ignore the well-settled principle that credibility determinations are the jury’s job, and do not present a basis for overturning a conviction for insufficient evidence. Paige, 470 F.3d at 608 (“ ‘Attacks on witness credibility are simple challenges to the quality of the government’s evidence and not the sufficiency of the evidence.’ ”)(quoting United States v. Sanchez, 928 F.2d 1450, 1457 (6th Cir.1991) (brackets omitted)). Drawing all credibility determinations in favor of the government, as we must, see id., the testimony of the government’s witnesses furnishes a sufficient basis for upholding the jury’s verdict.
Defendant also challenges the jury’s finding that she was responsible for more than 500 grams of cocaine. Generally speaking, a defendant is responsible for the drug quantities for which she is directly involved, and any quantity that is a reasonably foreseeable consequence of the conspiracy. See Caver, 470 F.3d at 246-47 (upholding jury instruction to this effect); United States v. Bartholomew, 310 F.3d 912, 923 (6th Cir.2002) (noting that under the United States Sentencing Guidelines “a participant is responsible for other conspirators’ conduct only if that conduct was reasonably foreseeable to him and in furtherance of the execution of the jointly undertaken criminal activity” (quoting United States v. Jenkins, 4 F.3d 1338, 1346 (6th Cir.1993))); see also Pinkerton v. United States, 328 U.S. 640, 646-48, 66 S.Ct. 1180, 90 L.Ed. 1489 (1946).
It was not necessary for the government to prove that Defendant or Garcia actually delivered a kilogram of cocaine to the confidential informant in order for the jury to convict Defendant of conspiracy to distribute more than 500 grams of cocaine; if Defendant knowingly joined and participated in an agreement to sell more than 500 grams of cocaine then her conviction was proper. Garcia testified that Defendant said that she and Garcia would be able to get a kilogram of cocaine to deliver to the confidential informant. The jury could have believed Garcia, whose testimony was sufficient to establish a conspiracy to distribute more than 500 grams of cocaine. Any attack on Garcia’s credibility is an inappropriate basis for a challenge to the sufficiency of the evidence. Paige, 470 F.3d at 608.
2. Possession with the Intent to Distribute
Defendant next challenges the sufficiency of the evidence with respect to her convictions for aiding and abetting the possession of cocaine with the intent to distribute. Under 21 U.S.C. §§ 841(a) and (b)(1)(C) (which requires no minimum quantity of cocaine), the elements of the offense are that “(1) the defendant knowingly; (2) possessed a controlled substance; (3) with intent to distribute.” United States v. Jackson, 55 F.3d 1219, 1225 (6th Cir.1995). “[T]he essential elements of aiding and abetting are (1) an act by the defendant that contributes to the commission of the crime, and (2) an intention to aid in the commission of the crime.” United States v. Davis, 306 F.3d 398, 412 (6th Cir.2002).
A reasonable jury could find that Defendant aided and abetted the possession of cocaine with the intent to distribute on December 29, 2004. Sparks testified that, on December 29, 2004, Defendant drove Garcia to the place where the drug transaction occurred, and that Defendant handed Garcia the drugs. Garcia testified to the same, and also stated that he remitted the money received from the buyer to Defendant. From this evidence, the jury could find that Defendant contributed to the commission of the crime of possession of cocaine with the intent to distribute, and that she had the specific intent to facilitate the crime of possession of cocaine with the intent to distribute.
Likewise, a reasonable jury could find that Defendant satisfied the elements of aiding and abetting the possession of cocaine with the intent to distribute on January 6, 2005. Garcia testified that it was Defendant who gave him the drugs, and that Defendant followed him to the place where the drug transaction was to occur. Garcia also stated that he planned to remit the money from the drug sale to Defendant, who would pay him for his efforts. From this evidence, the jury could find that the elements of aiding and abetting the possession of cocaine with the intent to distribute were satisfied.
3. Possession of a Firearm in Furtherance of a Drug Trafficking Crime
Defendant also contends that the evidence was insufficient for the jury to find that she aided and abetted the possession of a firearm in furtherance of a drug trafficking crime. A defendant is guilty of possessing a firearm in furtherance of a drug trafficking crime if the defendant “during and in relation to any ... drug trafficking crime ..., in furtherance of any such crime, possesses a firearm.” 18 U.S.C. § 924(c)(1). The government must demonstrate that the defendant intended to use the firearm to “advance, promote, or facilitate” the drug crime. Paige, 470 F.3d at 609 (citing United States v. Mackey, 265 F.3d 457, 461-62 (6th Cir.2001)); United States v. Rios, 449 F.3d 1009, 1012 (9th Cir.2006). A firearm is used “in furtherance of’ a drug crime when it is “strategically located so that it is quickly and easily available for use.” Mackey, 265 F.3d at 462 (holding that “an illegally possessed, loaded, short-barreled shotgun in the living room of the crack house, easily accessible to the defendant and located near the scales and razor blades” was possessed “in furtherance of’ a drug transaction).
In the present case, the evidence was sufficient for a reasonable jury to find that Defendant aided and abetted the possession of a firearm in furtherance of a drug trafficking crime. Garcia testified that on January 6, 2005 he and Defendant went to Defendant’s house to pick up the Raven Arms .25 caliber semiautomatic handgun before engaging in a drug transaction. The fact that Defendant provided the gun to Garcia so that he could arm himself in preparation for the drug deal is sufficient for a jury to find that Defendant aided and abetted a violation of § 924(c). Defendant again argues that the evidence adduced at trial was insufficient to support her conviction because Garcia was allegedly incredible. As discussed above, however, credibility challenges cannot render otherwise sufficient evidence legally infirm. See Paige, 470 F.3d at 608.
B. HEARSAY TESTIMONY
Defendant argues that a new trial is required because the district court improperly admitted hearsay testimony. Defendant has waived this argument. “[I]s-sues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived.” United States v. Layne, 192 F.3d 556, 566 (6th Cir.1999). Defendant cites only a single case, Crawford v. Washington, 541 U.S. 36, 124 S.Ct. 1354, 158 L.Ed.2d 177 (2004), and her application of law to facts consists of a single sentence: “In the instant case, the agent for the Government was testifying to was [sic] a Confidential Informant had told him.” Defendant’s Br. at 12. This cursory treatment of the hearsay issue is insufficient to preserve the argument on appeal.
C. REFUSAL TO CONDUCT A SIDEBAR CONFERENCE
Defendant argues that the district court committed plain error by failing to hold a sidebar conference to discuss her hearsay objection. We generally review the district court’s conduct during trial for abuse of discretion. United States v. Hynes, 467 F.3d 951, 957 (6th Cir.2006) (citing McMillan v. Castro, 405 F.3d 405, 409 (6th Cir. 2005)). Where the defendant fails to object to the district court’s conduct at trial, however, our review is limited to plain error. Id. at 957-58 (citing United States v. Owens, 159 F.3d 221, 227 (6th Cir.1998)). In order to demonstrate plain error, a defendant must show: “(1) error, (2) that is plain, and (3) that affects substantial rights. If all three conditions are met, [the Court] may then exercise [its] discretion to notice a forfeited error, but only if (4) the error seriously affects the fairness, integrity, or public reputation of judicial proceedings.” United States v. Baker, 458 F.3d 513, 517 (6th Cir.2006) (quoting Johnson v. United States, 520 U.S. 461, 466-67, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997)) (internal citations, quotations marks and brackets omitted).
We conclude that Defendant has again waived her argument on appeal. We reiterate that “issues adverted to in a perfunctory manner, unaccompanied by some effort at developed argumentation, are deemed waived.” Layne, 192 F.3d at 566. Defendant again relies upon a single case, United States v. Day, 956 F.2d 124,124-25 (6th Cir.1992), where the court held that a new trial was not warranted by the fact that the district court “scathing[ly]” criticized the defendant’s counsel at a sidebar conference because the record demonstrated that the sidebar conference occurred outside the jury’s hearing. Defendant’s application of law to facts is also perfunctory. She states that “[s]ince the District Court does not allow sidebars, the [hearsay evidence referenced above] came in anyway.... In the instant case, the attorney for Appellant had to argue his objection before the jury. The case should be remanded for re-trial and [sic] allow for sidebars.” Defendant’s Br. at 12-13. This argument fails to address any element of the plain-error standard (or identify that standard itself), and cites only a single case of tangential relevance. Lacking both persuasive legal authority and developed argumentation, Defendant’s argument fails to clear even the low threshold of waiver.
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901967-21288 | MARKEY, Chief Judge.
Appeal from an order of the United States District Court for the Eastern Dis trict of Missouri, 432 F.Supp. 694 (E.D.Mo. 1977), denying defendants’ motion to disqualify plaintiff’s counsel. We affirm.
Background
Among the defendants in the present civil antitrust suit are Shell Oil Company (Shell) and American Oil Company (Amoco), which seek the disqualification of Lashly, Caruthers, Thies, Rava & Hamel (the Lashly firm) as counsel for plaintiff Fred Weber, Inc. (Weber).
The Lashly firm was counsel for some of Shell and Amoco’s codefendants in a prior criminal antitrust suit, United States v. American Oil Co., 65 C.R. 150(3), brought in 1965. Shell and Amoco are represented here by the attorneys who represented them in the prior suit. That suit terminated in November 1965 when Judge Regan accepted pleas of nolo contendere from all defendants.
Judge Regan, the judge in American Oil, recused himself from the present suit on his own motion, in accord with the ABA Code of Judicial Conduct, Canon 3C(1) and 28 U.S.C. § 455. Order of December 10,1976. One month later, and eight months after being sued for conspiracy to violate the antitrust laws in the present suit, Shell and Amoco filed their motion to disqualify the Lashly firm in view of Canons 4, 5, and 9 of the ABA Code of Professional Responsibility.
Shell and Amoco allege that members of the Lashly firm, by reason of their representation in American Oil, had access to confidential information (debriefing memo-randa of grand jury testimony) in the files of Amoco’s counsel, and were present at meetings of counsel for all defendants at which defense strategy was discussed. The Lashly firm contends that it never represented Shell or Amoco in the criminal suit; that it never received confidential information; that, absent proof of receipt of confidential information, disqualification is not warranted; that there is no appearance of impropriety; and that the motion is one of a series of delaying tactics.
Judge Nangle, to whom the case was reassigned, ordered Shell and Amoco to file in camera “any and all material in their possession which support[s] the allegations made in their motion to disqualify plaintiff’s attorney . . . [and] written affidavits setting out all confidences which were exchanged during the pendency of United States v. American Oil Company ...” Order of April 20, 1977.
After a hearing, Judge Nangle held that the evidence, including the in camera submissions, testimony, affidavits of counsel, and other submissions, established that counsel for the criminal defendants did agree to work together in their defense of the indictment, but that no member of the Lashly firm had represented Shell or Amoco or had received any confidential information. 432 F.Supp. at 696. The motion to disqualify was therefore denied.
Scope of Review
We apply the scope of review in disqualification cases described in Hull v. Celanese Corp., 513 F.2d 568 (2d Cir. 1975): “The district court bears the responsibility for the supervision of the members of its bar. [Citing authorities.] The dispatch of this duty is discretionary in nature and the finding of the district court will be upset only upon a showing that an abuse of discretion has taken place. [Citing authorities.]” 513 F.2d at 571.
Issues
The dispositive issues on appeal are: (1\) whether the order denying the motion is separately appealable, and (2) whether the district court abused its discretion in refusing the disqualification of the Lashly firm in view of Canon 4, 5, or 9 of the Code of Professional Responsibility.
OPINION
The question before us is one of first recorded impression: Does a lawyer’s representation of A, codefendant with B in a prior suit, disqualify the lawyer as representative of C against B in a subsequent, related suit?
(1) The order denying the motion to disqualify is immediately appealable.
Appeals in federal cases being governed by 28 U.S.C. § 1291 (1958) and 28 U.S.C. § 1292 (1958), appeals prior to final judgment below are commonly sought through the “collateral order” exception to the § 1291 “finality” requirement, created by the Supreme Court in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). An order is appealable under Cohen when: (1) it is a “final determination of a claim of right ‘separable from, and collateral to,’ the rights asserted in the main action;” (2) it presents “ ‘a serious and unsettled question,’ rendering it ‘too important to be denied review’ ”; and (3) an immediate appeal is “necessary to preserve rights that would otherwise be lost on review from final judgment.” Community Broadcasting of Boston, Inc. v. Federal Communications Commission, 178 U.S.App.D.C. 256, at 259, 546 F.2d 1022 at 1025 (1976).
Courts have distinguished between the granting and denying of motions to disqualify counsel. Orders granting such motions have long been considered immediately appealable under Cohen. Schloetter v. Railoc of Indiana, Inc., 546 F.2d 706 (7th Cir. 1976). The circuits disagree on appeal-ability of orders denying motions. The Second, Third, Fifth, Sixth, Seventh and Tenth Circuits have held that orders denying motions to disqualify meet the requirements of Cohen. Silver Chrysler I, supra note 6 (overruling prior contrary decisions); Greene v. Singer Co., 509 F.2d 750 (3rd Cir. 1971); Tomlinson v. Florida Iron & Metal, Inc., 291 F.2d 333 (5th Cir. 1961); Melamed v. ITT Continental Baking Co., 534 F.2d 82 (6th Cir. 1976); Schloetter, supra; Fullmer v. Harper, 517 F.2d 20 (10th Cir. 1975). The D.C. Circuit has held the contrary. Community Broadcasting, supra. The Ninth Circuit, with no mention of Cohen, has held denial of the motion reviewable by writ of mandamus, but not appealable. Cord, supra.
The disagreement is over the adequacy of review after final judgment, Community Broadcasting, supra, and Silver Chrysler I, supra note 6, are representative. In Community Broadcasting, the court said: “Although ‘collateral’ to the main proceeding, an order denying a motion to disqualify does not, in most cases, implicate any claim of right that will be irreparably lost on appeal from final judgment.” 178 U.S.App. D.C. at 262, 546 F.2d at 1028. The D.C. Circuit also expressed the view that “[a] rule allowing interlocutory appeals here would provide litigants with yet another device by which to delay final determination on the merits, and would lead the court to divert its attention from the central issues in the case.” 178 U.S.App.D.C. at 261, 546 F.2d at 1027 (footnote omitted). The court in Silver Chrysler I adopted the language and decision of the Supreme Court in Cohen: “ ‘We hold this order appealable because it is a final disposition of a claimed right which is not an ingredient of the cause of action and does not require consideration with it.’ 337 U.S. at 547, 69 S.Ct. 1221.” 496 F.2d at 805-06. The Second Circuit was influenced by its feeling that “[t]here is no sufficient basis for distinguishing between . . . [orders granting and denying disqualification]. In both situations the order is collateral to the main proceeding yet has grave consequences to the losing party, and it is fatuous to suppose that review of the final judgment will provide adequate relief.” 496 F.2d at 805.
We hold that the order denying disqualification is final under Cohen and therefore appealable. The question involved is separable from and collateral to the main action; it is serious, and too important to await review in conjunction with the appeal from a final judgment. We recognize the obvious risk that an immediate appeal may be used for delay and diversion. On balance, however, we consider the risk insufficient to warrant an insistence that trials be conducted under a cloud of potential disqualification. Moreover, disciplinary powers of courts are available to deal with unfounded motions to disqualify and frivolous appeals from their denial.
(2) Disqualification is not required by Canons 4, 5 or 9.
Canon 4
Though Canon 4 is an exemplary rule dealing with a particular relationship, the lawyer’s personal relationships to others are incapable of comprehensive codification. The broad commitment of the lawyer to respect confidences reposed in him is his talisman. Touching the very soul of lawyering, it rests upon a “privilege” which is that of the client, not that of the lawyer. Inaccurately-described as the “lawyer’s privilege against testifying,” the privilege of clients to bind their lawyers to secrecy is universally honored and enforced as productive of social values more important than the search for truth. Canon 4 is designed to preserve the trust of the client in his lawyer, without which the practice of law, whatever else it might become, would cease to be a profession.
Because Canon 4 is limited by its language to the duty of the lawyer to his client, International Electronics Corp. v. Flanzer, 527 F.2d 1288 (2d Cir. 1975), one who seeks to employ Canon 4 to disqualify opposing counsel must show that counsel to have, or to have had, an attorney-client relationship with an adverse party in the present suit.
The movants in In re Yarn Processing Patent Validity Litigation, 530 F.2d 83 (5th Cir. 1976), established an attorney-client relationship by proving they had engaged the attorney whose disqualification was sought. The court in Continental Oil Co. v. United States, 330 F.2d 347 (9th Cir. 1964), found an attorney-client relationship in the advice and representation provided certain parties. It is not here contended or shown that members of the Lashly firm were engaged by, or advised or represented, Shell or Amoco in the prior antitrust suit. The evidence supports the finding of the district court that neither Shell nor Amoco was ever a client of the Lashly firm. Canon 4 is therefore inapplicable.
In reliance on Canon 4, Shell and Amoco argue unnecessarily that the Lashly firm had “access” to confidential information. The attorney-client relationship raises an irrefutable presumption that confidences were disclosed. In re Yarn Processing, 530 F.2d at 89. Further, the presumed access of a partner to confidential information results in imputation of that information to others in his firm. Laskey Bros, of W. Va., Inc. v. Warner Bros. Pictures, Inc., 224 F.2d 824 at 827 (2nd Cir. 1955). The presump tion is an absolute necessity if the goal sought by Canon 4 is to be achieved. Indeed, a failure to apply the presumption in attempted disqualification cases would impinge upon, if not destroy, the underlying client’s privilege against disclosure of the information imparted in confidence to his lawyer:
[T]he court need not, indeed cannot, inquire whether the lawyer did, in fact, receive confidential information during his previous employment which might be used to the client’s disadvantage. Such an inquiry would prove destructive of the weighty policy considerations that serve as the pillars of Canon 4 of the Code, for the client’s ultimate and compelled response to an attorney’s claim of non-access would necessarily be to describe in detail the confidential information previously disclosed and now sought to be preserved. [Emle Industries, Inc. v. Paten-tex, Inc., 478 F.2d 562 at 571 (2 Cir. 1973).]
Absent an attorney-client relationship, no court has applied the presumption inherent in Canon 4. Shell and Amoco’s reliance on NCK Organization Ltd. v. Bregman, 542 F.2d 128 (2nd Cir. 1976) and Hull, supra, for the proposition that an attorney-client relationship is not required for application of Canon 4, is unavailing. In those cases, in-house counsel for the corporate defendants switched sides; in the former by becoming co-counsel of plaintiff’s attorney; in the latter by becoming a plaintiff in the suit and retaining the original plaintiff’s attorneys. In-house counsel in both cases were presumed to have received information from their former corporate clients, and that information was imputed to the attorneys with whom in-house counsel became associated.
Canon 5
Canon 5 deals with professional zeal. The term “client” in Canon 5 identifies the beneficiary of that zeal. The Canon is broad enough to preclude simultaneous representation of conflicting interests (Ethical Consideration 5-14 of Canon 5) and the use of information against someone who, reposing confidence in the lawyer, supplied that information to the lawyer’s client, and to encompass similar ethical considerations involved in the lawyer’s exercise of his professional judgment.
The evidence here reflects no failure of compliance with Canon 5, or potential for such failure, on the part of the Lashly firm. Nothing of record indicates an impediment to the exercise of independent professional judgment by the Lashly firm on behalf of its present client, Weber; nothing indicates the presence of conflicting interests; nothing indicates that Shell or Amoco, or anyone else, supplied information to Weber, whether in confidential reliance on the Lashly firm or otherwise.
Canon 9
Unlike those of Canons 4 and 5, the broad injunction of Canon 9 against the “appearance of impropriety” relates to the entire spectrum of lawyer conduct. That no unethical or untoward act may have occurred is implicit in the canon’s emphasis on “appearance.” The conduct under scrutiny must therefore be evaluated in an “eye of the beholder” context, and the lawyer must be disqualified when an actual appearance of evil exists, though there be no proof of actual evil.
Would a member of the public, or of the bar, see an “impropriety” in the mere representation of C against B by a lawyer who had represented B’s codefendant in a related prior suit? We think not. The public and the bar are aware that particular lawyers have specialized in certain areas of the law and that their number is limited within specific geographical limits. It would be neither surprising nor unexpected that the same lawyer would appear for plaintiffs and defendants, and that a present adverse party may have been on the other side in a prior case. To hold that every representation against a former client’s codefendant in a related matter raises an appearance of impropriety would unnecessarily restrict the choice of counsel available to litigants.
Nor will we presume the lack of integrity involved in a knowing acceptance of representation against a party from whom, or about whom, confidential information had been obtained. If a presumption of integrity, which should be the proud and earned possession of every lawyer, has been destroyed by recent renowned conduct of some members of the bar, it is neither yet necessary, nor socially advantageous, to substitute a presumption of non-integrity.
As was said in Woods v. Covington County Bank, 537 F.2d 804 (5th Cir. 1976):
It does not follow, however, that an attorney’s conduct must be governed by standards which can be imputed only to the most cynical members of the public. Inasmuch as attorneys now commonly use disqualification motions for purely strategic purposes, such an extreme approach would often unfairly deny a litigant the counsel of his choosing. Indeed, the more frequently a litigant is delayed or otherwise disadvantaged by the unnecessary disqualification of his lawyer under the appearance of impropriety doctrine, the greater the likelihood of public suspicion of both the bar and the judiciary. . Consequently, while Canon 9 does imply that there need be no proof of actual wrongdoing, we conclude that there must be at least a reasonable possibility that some specifically identifiable impropriety did in fact occur. [537 F.2d at 813 (footnotes omitted).]
Of itself, representation of a codefendant of B raises no presumption that the lawyer obtained confidential information detrimental to B’s interests. Nor may confidential information which B may have imparted to its counsel be imputed to the lawyer. The relationship between individual counsel for separate codefendants differs in structure and function from the relationship between partners in a law firm and from the relationship between co-counsel for a single party. Applicability of Canon 9 thus turns on a fact question: Did the Lashly firm obtain confidential information in the course of representing a codefendant of Shell and Amoco in the prior suit?
The prior criminal action never went to trial. The joint application of all codefendants for change of plea to nolo contendere was filed one month after arraignment, with no intervening motions. The record here reflects no preparation of a substantive defense. Discussions among counsel, in which members of the Lashly firm participated, concerned only procedural matters. The memorandum in support of the change of plea was based on legal, not factual matters. Our study of the record, including the in camera submissions, persuades us that the Lashly firm obtained no confidential information in the course of representing the former codefendant of Shell and Amoco. The prompt disposal of the earlier suit on a purely procedural basis and the limited discussions among counsel for the defendants convinces us that no basis exists for presuming that confidential information was obtained which presumption would in turn serve as the genesis of an appearance of impropriety. Absent such presumption, the burden of showing an actual imparting of confidential information was upon Shell and Amoco, which have not met that burden on this record.
In the circumstances of this case, refusal to disqualify the Lashly firm is not seen as giving scandal to the profession; or as risking injury to its integrity and honor; or as discouraging public respect for the law or the courts; or as disabling the confidence, respect and trust which underpin the profession; or as limiting the public thrust of Canon 9 or its guardianship over the reputation of the lawyer and his profession.
Conclusion
The district court’s findings of fact were not clearly erroneous, and its refusal to disqualify the Lashly firm was not an abuse of discretion. Accordingly, the order of the district court is affirmed.
Affirmed.
. Canon 3C(1) A judge should disqualify himself in a proceeding in which his impartiality might reasonably be questioned .
. 28 U.S.C. § 455(a) Any justice, judge, magistrate, or referee in bankruptcy of the United States shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.
. Canon 4. A lawyer should preserve the confidences and secrets of a client.
Canon 5. A lawyer should exercise independent professional judgment on behalf of a client.
Canon 9. A lawyer should avoid even the appearance of professional impropriety.
. Judge Nangle found it “beyond dispute” that the prior criminal suit and the present civil litigation are substantially related, and denied appellants’ request to revise that finding to merely state that appellee “claimed” such relationship. What appellee claims is irrelevant. That the matters be related is a necessary element of appellants’ position on the motion to disqualify, as stated in opinions quoted in appellants’ brief. Appellants have not requested that this court hold the finding clearly erroneous (nor could they), but only that we refrain from adjudicating the issue. There is no such “issue” before us. Either the matters are related or they are not. If they are not, the motion is and was groundless. It would be an abuse of the judicial process if counsel were to get his adversary disqualified because of representation in a related matter, and then deny that the matter was in fact related.
. § 1291. Final decisions of district courts The courts of appeals shall have jurisdiction of appeals from all final decisions of the district courts of the United States, the United States District Court for the District of the Canal Zone, the District Court of Guam, and the District Court of the Virgin Islands, except where a direct review may be had in the Supreme Court.
§ 1292. Interlocutory decisions.
(a) The courts of appeals shall have jurisdiction of appeals from:
(1) Interlocutory orders of the district courts of the United States, the United States District Court for the District of the Canal Zone, the District Court of Guam, and the District Court of the Virgin Islands, or of the judges thereof, granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions, except where a direct review may be had in the Supreme Court;
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(b) When a district judge, in making in a civil action an order not otherwise 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.
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12127849-10883 | MEMORANDUM AND ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT (DOC. 24).
AVERN COHN, UNITED STATES DISTRICT JUDGE
I. INTRODUCTION
This is a 42 U.S.C. § 1983 case with pendent state law claims resulting from a fatal police shooting. Plaintiff Rachel Tompkins (Tompkins), personal representative of the estate of Charles Brown, Jr. (Brown), is suing the City of Woodhaven (the City) and Woodhaven police officers Dennis DeWeese (DeWeese) and Frank Zdankiewicz (Zdankiewicz).
The complaint (Doc. 1) is in three counts:
Count I Constitutional Deprivation—42 U.S.C. § 1988
Count II Liability as to Defendant City of Woodhaven—42 U.S.C. § 1983
Count III Gross Negligence, Willful and Wanton Misconduct, Assault, Battery, Intentional Infliction of Emotional Distress—All Defendants.
Tompkins concedes that Count II should be dismissed. (Doc. 26 at 9). The Court previously declined to exercise supplemental jurisdiction over the state law claims and dismissed Count III without prejudice. (Doc. ¾;
Now before the Court is Defendants’ Motion for.Summary Judgment on Count I, the sole remaining claim, on the grounds that there is a lack of a genuine issue of material fact over whether or not DeW-eese and Zdankiewicz acted reasonably based on the totality of the circumstances. (Doc. 24). For the reasons that follow, the motion will be granted and the case dismissed.
II. BACKGROUND
A.
On June 19, 2012, City of Woodhaven police officers DeWeese and Zdankiewicz were dispatched to a Wal-Mart to investigate a complaint of a male and a female attempting to shoplift. The male suspect was later identified as Brown. The dispatcher advised the officers that the female suspect had fled the store and the male suspect had entered a stolen, red Oldsmobile.
Upon entering the Wal-Mart parking lot, DeWeese was directed by a Wal-Mart employee to a vehicle matching the given description which was headed toward a parking lot exit. DeWeese activated the overhead lights on his vehicle and parked on an angle across the lane of traffic exiting the parking lot. Brown pulled to within approximately 10 feet of the front of DeW-eese’s vehicle and stopped. DeWeese exited his vehicle with his service weapon drawn and pointed at Brown. DeWeese could see that Brown was holding an object in his right hand, but he could not determine what it was because of the position of Brown’s hands. DeWeese repeatedly yelled loudly at Brown to show his hands.
Meanwhile, on his arrival from a different entrance into the Wal-Mart parking lot, Zdankiewicz activated the lights on his police vehicle, located the now stopped Oldsmobile and observed DeWeese outside his police vehicle standing between it and the open driver side door. Zdankiewicz parked behind Brown, exited his vehicle, pulled out his service weapon, and pointed it at Brown.
Once stopped, Brown initially shrugged his shoulders and made non-verbal movements like he was going to comply with DeWeese’s orders. At that point, Brown began to open his driver side door as DeWeese began to walk around the front of his own vehicle to affect an arrest. DeWeese continued to order Brown to show his hands.
In DeWeese’s words, the following then occurred:
As I was in front of his vehicle and in between his vehicle and mine, the driver abruptly closed his door and squealed his tires accelerating backwards and rammed into Officer Zdankiewicz’s vehicle, which had been pulled in behind the suspect vehicle. This put Officer Zdank-iewicz in eminent danger for his life. Upon ramming Officer Zdankiewicz’s vehicle I observed the vehicle accelerate forward toward me, putting me in eminent danger. I ordered the driver to stop but he did not comply. The driver was looking directly at me and made eye contact with me and continued to drive directly toward me. Feeling an immediate threat for my life and believing there was no other reasonable means to avoid being struck by the vehicle, I began moving to my right to avoid a crossfire situation with Officer Zdankiewicz and fired my weapon at the driver in an attempt to stop the deadly threat.
(Doc. 24, Ex. 1). At the same moment, Zdankiewicz fired his weapon, pointing toward Brown as well. The defendants’ shots fatally wounded Brown.
The depositions of Zdankiewicz and DeWeese and multiple statements taken from on-scene witnesses confirmed the above description of events. (Doc. 24, Ex. 3; Doc 26, Exs. A & B).
Following a review by the Wayne County Prosecutor’s Office’s Public Integrity Unit, the City was notified “[i]t is the conclusion of the Public Integrity Unit that [Officers DeWeese’s and Zdankiewicz’s] actions constituted self-defense and/or the defense of others involving a fleeing felon.” (Doc. 24, Ex. 4). No criminal charges were filed against the defendants. Id.
B.
Zdankiewicz and DeWeese each signed a form certifying that prior to June 19, 2012, they had read and understood the Police Department’s policy regarding the use of force. According to the policy, “lethal force” is defined as “any force used by an officer that has a reasonable probability to cause death or serious physical injury.” (Doc. 24, Ex. 2). “The policy also defines Last Resort situations in part as situations wherein certain immediate and drastic measures must be undertaken by an officer in order to protect human life.” Id. According to department policy, officers are trained to “stop the threat” and to “shoot at center mass.” (Doc. 26, Ex. A at 21).
C.
Tompkins’ sole claim at this point in the case is that DeWeese and Zdankiewicz each used excessive force against Brown (Count I). (Doc. 1).
Defendants have filed a motion for summary judgment (Doc. 24) and a brief statement of material facts (Doc. 26). Tompkins has filed a response arguing that genuine issues of material fact preclude summary judgment against the defendants individually. Tompkins has conceded that Count II against the City should be dismissed. (Doc. 26). Defendants have filed a reply. (Doc. 27).
III. LEGAL STANDARD
The standard for summary judgment is well known and is not repeated in detail. “The 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.” Fed. R. Civ. P. 56(a). Ultimately a district court must determine whether the record as a whole presents a genuine issue of material fact drawing “all justifiable inferences in the light most favorable to the non-moving party.” Hager v. Pike Cnty. Bd. of Ed., 286 F.3d 366, 370 (6th Cir.2002).
IV. DISCUSSION
A.
When analyzing a section 1983 claim, a two-step inquiry is made. First, “the court must determine whether the facts alleged show the officer’s conduct violated a constitutional right.” Cass v. City of Dayton, 770 F.3d 368, 374 (6th Cir.2014)(citations omitted). Second, the court must determine “whether that right was clearly established” at the time of the violation. Id. (citation omitted).
Here, Tompkins says that DeW-eese and Zdankiewicz violated Brown’s Fourth Amendment rights through the use of excessive force. “[A]ll claims that law enforcement officers have used excessive force.. .in the course of an arrest, investigatory stop, or other ‘seizure’ of a free citizen should be analyzed under the Fourth Amendment and its ‘reasonableness’ standard...” Schreiber v. Moe, 596 F.3d 323, 331-32 (6th Cir.2010) (quoting Graham v. Connor, 490 U.S. 386, 395, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989)). The Supreme Court has summarized the reasonableness standard as follows:
The “reasonableness” of a particular use of force must be judged from the perspective of a reasonable officer on the scene, rather than with the 20/20 vision of hindsight...With respect to a claim of excessive force, the same standard of reasonableness at the moment applies: “Not every push or shove, even if it may later seem unnecessary in the peace of a judge’s chambers,” violates the Fourth Amendment. The calculus of reasonableness must embody allowance for the fact that police officers are often forced to make split-second judgments—in circumstances that are tense, uncertain, and rapidly evolving—about the amount of force that is necessary in a particular situation.
Graham, 490 U.S. at 396-97, 109 S.Ct. 1865 (citations omitted). The Sixth Circuit “has noted that Graham’s prohibition on using 20/20 hindsight carries great weight when all parties agree that the events in question happened very quickly, as here.” Untalan, 430 F.3d at 315 (citation omitted).
Graham calls for balancing “the severity of the crime at issue, whether the suspect poses an immediate threat to the safety of the officers or others, and whether he is actively resisting arrest or attempting to evade arrest by flight” when determining whether the use of deadly force violates a plaintiffs Fourth Amendment rights. Graham, 490 U.S. at 396, 109 S.Ct. 1865. The Sixth Circuit “has made the threat factor from Graham a minimum requirement for the use of deadly force: such force may be used only if the officer has probable cause to believe that the suspect poses a threat of severe physical harm, either to the officer or others.” Untalan v. City of Lorain, 430 F.3d 312, 314 (6th Cir.2005)
B.
In support of their motion, Defendants say there is a lack of a genuine issue of material fact over whether DeWeese and Zdankiewicz violated Brown’s constitutional rights under the Fourth Amendment. They say that the use of force was not excessive and that DeWeese and Zdankiewicz acted objectively reasonably based on the totality of the circumstances. The Court agrees.
In response to the motion, Tompkins raises two meritless arguments. First, Tompkins contends that there is a genuine issue of material fact as to whether Brown was attempting to comply with the officers’ commands. This is a misrepresentation of the undisputed facts. According to the defendants’ reports as well as multiple witness statements at the scene, Brown ignored commands to stop and purposely drove his vehicle backward into Zdankiew-icz’s vehicle and forward toward DeWeese.
Alternatively, Tompkins says that the defendants’ use of force exceeded what was reasonable and necessary under the circumstances. In support, Tompkins says that Brown made no threatening gestures when he initially started to get out of his vehicle, he was unarmed' at the time he was shot, and he was driving at a slow rate when he drove forward toward DeWeese.
Tompkins’ argument is directly contradicted by Sixth Circuit law and the facts of record. First, while Brown made no overt threatening gestures while initially getting out of his vehicle, he failed to comply with the defendants’ commands to show his hands or stop his vehicle.
Second, both defendants’ statements and the accounts of witnesses say that Brown drove his vehicle rapidly—not slowly— backward toward Zdankiewicz and forward toward DeWeese.
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8926507-27970 | RULING ON DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT [DOC. #20]
ARTERTON, District Judge.
Plaintiff Charles Stevens, Jr., a bus driver, has brought this action against his former employer, Coach USA, and affiliated entities, under the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq. (“FMLA”). He alleges that the company retaliated against him for taking a period of medical leave in May 2002. Defendants now move for summary judgment, see [Doc. # 20], and for the reasons that follow, their motion will be denied.
I. FACTUAL BACKGROUND
Stevens has worked as a bus driver since 1987, and he was hired as a charter bus driver by Arrow Line, a Coach USA subsidiary, in 2000. Stevens Dep., PI. L.R. 56(a)2 Stmt. [Doc. # 29], Ex. 2, at 12, 14. After working for Arrow for approximately two years, Stevens was earning $11.25 per hour. Id. at 118. He was a member of the Amalgamated Transit Union Local 1348, whose collective bargaining agreement set the terms and conditions of his employment. See Agreement, Def. L.R. 56(a)l Stmt. [Doc. # 21], Ex. C.
In May 2002, Stevens requested approximately a one month leave of absence to recover from fatigue related to chronic Hepatitis C. Stevens Dep. at 19-20. Stevens was under the care of Woong B. Lee, M.D., an internist in Norwich, Connecticut. On June 6, 2002, Dr. Lee wrote a note certifying that Stevens was able to return to work; the note did not specify why Stevens had been absent or what treatment he had undergone. That same day, Stevens brought Dr. Lee’s note to Arrow Lines and presented it to Philip Andrews, the company’s director of safety. Andrews testified that he informed Stevens that the company headquarters would require more detailed documentation about Stevens’ medical condition, see Andrews Dep., Def. L.R. 56(a) 1 Stmt., Ex. D, at 15-16, but Stevens testified that all Andrews said to him was, “welcome back.” Stevens Dep. at 27. Andrews asked Stevens to fill out a “Return to Duty Questionnaire.” See Def. L.R. 56(a)l Stmt., Ex. I.
The Questionnaire instructed, “Questions/Answers should only pertain to employee’s most recent illness/injury.” Id., Ex. I. Plaintiff circled “yes” on the two following questions: “Do you have or are you being treated for any mental, nervous disease or psychiatric disorder?” and “Are you taking any medication? (Prescription or over-the-counter).” Id. Plaintiff circled “no” to the question, “Do you have or are you being treated for any condition that would preclude safe operation of a [commercial motor vehicle] or cause sudden incapacitation?” Id.
Plaintiff testified that he answered “yes” to the first question regarding psychiatric conditions because he had undergone marital counseling with his wife in Spring 2002. Stevens Dep. at 32-34. He further testified that Arrow was aware of this marriage counseling because Stevens had had to request time off to attend. Id. at 35-36. Stevens stated that when he was filling out the Return to Duty form, “where I had circled No. 8 [the question regarding psychiatric disorders] I told Phil [Andrews], I said, ‘You know, the only reason I’m checking this is because ... you know I went to marriage counseling.’ And he nodded, he knew that. That’s the only reason that [answer] was there.” Id. at 30. Thus Stevens believed that Coach knew that his marital counseling was the reason for his affirmative answer to the question.
Plaintiff testified that he circled “yes” regarding medications because he was taking Procardia for a heart condition. Stevens testified that Arrow had known about this medication from the time he underwent his pre-employment physical examination, id. at 50, and Arrow’s personnel file shows that plaintiffs Procardia prescription was noted on his re-certification physical on January 23, 2002, connected with a self-reported diagnosis of high blood pressure. PI. L.R. 56(a)2 Stmt., Ex. 1.
A medical firm, Liva and Nassetta, LLC, functioned as Coach’s medical director. Dr. Jeffrey Liva or his partner made all final decisions regarding Coach employees’ medical qualifications under Department of Transportation Regulations. See PI. Responses to Def. Req. for Admission, Def. L.R. 56(a)l Stmt., Ex. E, at 1. Plaintiffs Return to Duty Questionnaire was forwarded to Dr. Liva’s office, and Dr. Liva refused to certify Stevens as fit to return to work without further information. Id. at 2. Dr. Liva testified that he was concerned about plaintiffs answers to both the question about psychiatric disorders and the question about medications:
What we needed was information on— first of all, we needed his diagnosis, description of the illness or injury with respect to any mental, nervous disease or psychiatric disorder, and we needed to know what kind of medication the individual was taking to determine whether the medication would interfere with his abilities to drive a commercial motor vehicle.
Liva Dep. at 17-18.
Plaintiff, however, testified that nobody from Dr. Liva’s office or from Arrow Lines ever mentioned a need for documentation concerning a purported mental disorder until October 2002. Rather, plaintiff testified that he was only asked for more specific documentation of his physical condition. Stevens Dep. at 47.
On June 7, 2002, Stevens provided another note from Dr. Lee, which read:
Mr. Charles Stevens has been under my care for his Coronary Insufficiency which requires Procardia, and also, intermittent flare ups of Hepatitis.
Mr. Stevens may return to work on June 8, 2002.
If you have any questions, please do not hesitate to contact me.
Def. L.R. 56(a)2 Stmt., Ex. N.
Coach informed Stevens that this note also was insufficient, and on July 17, Dr. Lee provided a third work release letter, which stated, “Mr. Charles Stevens has been under my care for his Hepatitis for which he has been followed very closely. There are no medical contraindications for his work.” Id. at Ex. O. Dr. Liva testified that Dr. Lee’s third note settled any uncertainty regarding whether plaintiffs hepatitis would inhibit his ability to work. Liva Dep. at 26.
However, Dr. Liva stated that there was still a “conflict” between Dr. Lee’s second note concerning Procardia and the plaintiffs medical history, because Dr. Lee stated that the medication was prescribed to treat coronary insufficiency while Stevens had told his medical evaluator in January 2002 that he took the medication for hypertension. Id. at 29. Plaintiff testified that he telephoned Dr. Liva to ask what further information needed to be provided. According to Stevens, Dr. Liva requested further documentation of his heart condition and his need for Procardia. Stevens Dep. at 51-52. In August 2003, Dr. Liva and Arrow Lines personnel informed Stevens that if he passed an exercise stress test he could be certified as fit for duty. See Def. Interrogatory Responses, 9/13/04, PI. L.R. 56(a)2 Stmt., Ex. 14, at 9. This is corroborated by Garfield Rucker, plaintiffs union representative, who by this point had become involved to advocate for plaintiffs right to return to work, and who understood Arrow’s position to be that the only step plaintiff needed to complete in order to return to work was to pass the exercise stress test. See Rucker Dep. at 30. Plaintiff took the stress test at a Rhode Island hospital on September 24, 2002, and the result showed no cardiac problems preventing his return to work. Def. L.R. 56(a)l Stmt., Ex. S; Liva Dep. at 35.
Thereafter, on October 10, 2002, Dr. Liva and Coach permitted plaintiff to return to work with a 30-day temporary medical certificate. See PI. L.R. 56(a)2 Stmt., Ex. 18. However, they required him to sign an agreement that:
... during [this] one (1) month period you are required to submit to Dr. Liva documentation from your doctor with respect to your psychiatric condition. You may have your doctor contact Dr. Liva for additional instructions on what information is needed. If you or your doctor fail to submit the required information to Dr. [L]iva within one (1) month, you will be removed from service until you or your doctor have provided the required information and medical determination has been made.
Id. Stevens testified that this was the first he had heard about a need for psychiatric documentation. Stevens Dep. at 143.
On October 23, 2002, Nurse Mary Ellen Bliss from Liva and Nassetta sent a fax to James Lindsay, the social worker who had seen plaintiff for marriage counseling, with a long checklist of psychiatric information. Def. L.R. 56(a)l Stmt., Ex. K., Ex. T. In response, Lindsay sent a note on his letterhead stating:
This will certify that Charles Stevens was seen by me at this office for six psychotherapy sessions. The focus was on marital issues.
The dates of attendance were: April 18, April 25, May 2, May 9, May 23 and June 6, 2002.
Yours truly,
James R. Lindsay, MSW, LCSW
Id. at Ex. J. According to plaintiff, Lindsay did not feel comfortable filling out the form because Bliss’s instructions were that it needed to be completed and signed “by a psychiatrist,” and Lindsay is not a psychiatrist. See id. at Ex. T. Dr. Liva’s office considered Lindsay’s note insufficient, however, and the next entry in their records indicates that they were “still waiting for Dr’s note” on October 31, 2002. Id. at Ex. K.
After unsuccessfully seeking psychiatric clearance from Lindsay, plaintiff returned to his internist, Dr. Lee, and asked him if he could fill out the form for Liva and Nassetta. Stevens Dep. at 144. Dr. Lee said he could not because he was not a psychiatrist. Id.
In March 2003, Coach’s Connecticut counsel, Peter A. Janus, set out Coach’s requirements in response to a request from plaintiffs attorney:
... Mr. Stevens will have to provide a medical release from a psychiatrist, verifying that Mr. Stevens is fit to return to duty.... Due to the fact that Mr. Stevens originally indicated on his ‘Return to Duty Questionnaire’ that he was being ‘treated for any mental, nervous disease or psychiatric disorder,’ and also because his counselor, Mr. Lindsey [sic] verified that Stevens had attended six (6) psychotherapy sessions, Dr. Liva requires certification at this time from a psychiatrist before Stevens will be cleared to resume his driving duties.
PI. L.R. 56(a)2 Stmt., Ex. 24. Plaintiff sought out a psychiatrist, Dr. Vipin Patel, on May 1, 2003, but Dr. Patel informed plaintiff that he could not fill out the required form without a long series of therapy sessions. On May 28, Stevens’s attorney requested through counsel that Dr. Liva provide the name of a psychiatrist who could perform the evaluation in one meeting. Id. at Ex. 25. The letter from plaintiffs counsel concluded, “Mr. Steven[s] has been cooperative to date, and I urge you to help him now. In the absence of a reasonable solution, Mr. Stevens will have no choice but to rely upon the legal remedies available.” Id. Defendants never responded.
Plaintiff filed the complaint in this case on November 12, 2003, see [Doc. # 1]; defendants Coach and KILT answered on January 19, 2004, see [Doc. # 8] and Peter Pan answered on February 10, 2004, see [Doc. # 11],
II. STANDARD
Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits ... show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R.Civ.P. 56(c). A party seeking summary judgment “bears the burden of establishing that no genuine issue of material fact exists and that the undisputed facts establish [its] right to judgment as a matter of law.” Rodriguez v. City of New York, 72 F.3d 1051, 1060-1061 (2d Cir.1995) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970)). “The duty of the court is to determine whether there are issues to be tried; in making that determination, the court is to draw all factual inferences in favor of the party against whom summary judgment is sought, viewing the factual assertions in materials such as affidavits, exhibits, and depositions in the light most favorable to the party opposing the motion.” Id. (citations omitted). “If reasonable minds could differ as to the import of the evidence ... and if there is any evidence in the record from any source from which a reasonable inference in the nonmoving party’s favor may be drawn, the moving party simply cannot obtain [ ] summary judgment.” R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 59 (2d Cir.1997) (internal citations, alterations and quotations omitted).
III. DISCUSSION
A. Burden-Shifting Framework
The FMLA provides that “an eligible employee shall be entitled to a total of 12 workweeks of leave during any 12-month period for one or more of the following: ... Because of a serious health condition that makes the employee unable to perform the functions of the position of such employee.” 29 U.S.C. § 2612(a)(1). The Act guarantees reinstatement of employment upon the end of an employee’s leave. See id. at § 2614(a). The statute further states that “[i]t shall be unlawful for any employer to interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under this subchapter.” Id. at § 2615(a)(1). A claim that an employee was “punished” or retaliated against for exercising his or her rights under the FMLA is cognizable as interference with his or her FMLA rights. Potenza v. City of N.Y., 365 F.3d 165, 167 (2d Cir.2004).
Because the intent of an employer is material in FMLA interference claims, “the retaliation analysis pursuant to McDonnell Douglas [Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973) ] is applicable.” Potenza, 365 F.3d at 168; Walker v. The Access Agency, No. 3:02CV199 (AHN), 2004 WL 2216526 at *8 (D.Conn., Aug.31, 2004). To make out a prima facie case, a plaintiff “must establish that: 1) he exercised rights protected under the FMLA; 2) he was qualified for his position; 3) he suffered an adverse employment action; and 4) the adverse employment action occurred under circumstances giving rise to an inference of retaliatory intent.” Potenza, 365 F.3d at 168. Once the plaintiff has made out a prima facie case, the burden shifts to the defendant to state a legitimate non-discriminatory reason for its action. If the defendant provides such a reason, the burden shifts back to the plaintiff to provide evidence from which a jury could conclude that the defendant’s articulated reason for its action is pretextual and that the real reason for its action was retaliation for plaintiffs exercise of rights protected under the FMLA. See McDonnell Douglas, 411 U.S. at 802-03, 93 S.Ct. 1817; Worster v. Carlson Wagon Lit Travel, 353 F.Supp.2d 257, 270 (D.Conn.2005).
B. Analysis
1. Prima Facie Case
Defendants do not dispute that Stevens exercised his right to take FMLA leave or that Stevens experienced an adverse employment action when Arrow Lines refused to schedule shifts for him upon his request to return from leave.
Defendants contend that Stevens was not qualified for the job under the second prong of the prima facie test because he lacked the necessary medical certification. This argument assumes the conclusion, however, as the central issue in this case is whether defendants retaliated against plaintiff by preventing him from obtaining his medical recertification. As discussed below, a genuine issue of materi al fact exists concerning defendants’ intent throughout the recertification process. “One cannot overlook the fact that at the heart of plaintiffs case is [his] charge that the evaluation scheme was itself biased and thus should not be used as a way to disprove [his] qualification for the job.” Hurd v. JCB Int’l Credit Card Co., 923 F.Supp. 492, 501 (S.D.N.Y.1996). Thus defendants’ proffer of Stevens’ lack of medical certification does not present undisputed facts defeating Stevens’ prima facie showing.
Defendants do not dispute that Stevens had driven a bus since 1987, was hired as a bus driver for Arrow Lines in 2000, and was recertified in 2001 and January 2002. Therefore Stevens has put forth sufficient evidence to show that he was qualified for the position of bus driver. See Tex. Dep’t of Cmty. Affairs v. Burdine, 450 U.S. 248, 250, 254, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981) (several years’ experience sufficient to meet qualification prong); Slattery v. Swiss Reins. Am. Corp., 248 F.3d 87, 92 (2d Cir.2001) (“[P]laintiff must show only that he possesses the basic skills necessary for performance of the job.”) (internal citation, quotation marks and alteration omitted).
The fourth element of plaintiffs prima facie case, an inference of discrimination, is established by proximity between plaintiffs exercise of his FMLA leave and the adverse employment action, which immediately followed. See Clark County Sch. Dist. v. Breeden, 532 U.S. 268, 273-74, 121 S.Ct. 1508, 149 L.Ed.2d 509 (2001) (to establish retaliation claim under Title VII, “temporal proximity must be ‘very close.’”) (quoting O’Neal v. Ferguson Constr. Co., 237 F.3d 1248, 1253 (10th Cir.2001)); Davis v. State Univ. of N.Y., 802 F.2d 638, 642 (2d Cir.1986) (protected activity must be “closely followed by adverse actions,” and one-month period was sufficient).
2. Legitimate Non-Discriminatory Reason
Defendants proffer as their legitimate non-discriminatory reason for refusing to schedule Stevens to work following his request to return to duty that “Coach was merely complying with DOT regulations concerning fitness for duty certification of a driver and relying upon the determinations of Dr. Liva, its medical director. Without Liva’s approval or certifications Coach could not reinstate Stevens as a charter bus driver.” Mem. in Supp. of Def. Mot. for Summary Judgment [Doc. # 22] at 11.
3. Pretext
Stevens argues that defendants’ proffered reason is pretextual and that rather than seeking answers to legitimate medical questions, defendants raised a series of obstacles to his return to work starting immediately after he tried to return from leave, by never telling him exactly what documentation was necessary for him to be recertified, and never being satisfied with what he submitted, in retaliation for exercising his FMLA rights.
First, Stevens offers evidence that his Procardia medication was documented in his medical file at Coach at least since January 2002, before he took medical leave. Thus, reasonable minds could infer that defendants’ demand for further documentation about his cardiac condition, and requirement of an exercise stress test, was unnecessary and a pretext to keep Stevens out of work.
Second, Stevens offers evidence that he was not informed until October 2003, more than four months after he requested reinstatement, that Coach and Dr. Liva required documentation regarding his “psychiatric condition.” Although Dr. Liva testified that as soon as he saw Stevens’ Return to Work Questionnaire he wanted information concerning plaintiffs “yes” answers to questions about psychiatric disorders and medication, the first reference in Dr. Liva’s office notes of a need for psychiatric documentation is in October 2003. As of August 2003, both Stevens and Rucker, his union representative, believed that the only remaining step was for plaintiff to pass an exercise stress test to rule out any disqualifying cardiac condition. After plaintiff passed the stress test, however, rather than putting him back to work, Coach demanded information from a psychiatrist regarding his mental condition, and then rejected the marriage counselor’s report. When Stevens could not readily obtain a psychiatrist to complete Coach’s form without undergoing lengthy therapy, defendant refused to provide plaintiff with an alternative psychiatric referral.
Moreover, by Stevens’ testimony, Coach knew that Stevens had attended marriage counseling and that that was the explanation for his “yes” answer to Question 8, raising the inference that Coach could have satisfied Dr. Liva’s purported concerns about “psychiatric problems” early on and reduced Stevens’ reinstatement ordeal.
A jury could reasonably infer from the chronology of events that defendants were making excuses to prevent Stevens from returning to work and their real motive was to retaliate for plaintiffs FMLA-cov-ered absence. Rucker testified that Coach “0]ust didn’t want him back, period.... I mean, we examined everything out there that’s possible to rectify the [situation]: We’ve been going to see your doctors, we’ve been going to see your stress test, we’ve given you everything that you wanted. And yet there is no end to this.” Rucker Dep. at 42. It is unclear whether Stevens specifically mentioned an FMLA lawsuit in June 2002, but drawing inferences in plaintiffs favor at this stage, a reasonable jury could find that after plaintiff took FMLA leave and, after Coach refused to accept his first two doctor’s notes, plaintiff threatened legal action and defendants retaliated against Stevens by inventing a series of documentation requirements that effectively prevented Stevens from ever returning to work for Coach.
Defendants argue that Liva, a contract employee who was not Stevens’ supervisor, had no motive or incentive to retaliate against Stevens for taking FMLA leave. However, this argument does not explain the chronology of events in this case, especially the lack of clarity concerning the information Dr. Liva required and the preexistence of information concerning Stevens’ Procardia prescription in Stevens’ medical file.
Defendants also argue that they are permitted under the FMLA and Department of Transportation regulations to request medical documentation before allowing plaintiff to drive a bus. In Cooke v. C. Bean Transport, Inc., 72 Fed.Appx. 740 (10th Cir.2003) (unpublished), cited by defendants, the plaintiff asserted that the defendant transport company’s requirement that he “submit to an additional medical exam prior to returning to work” was itself a violation of the FMLA. Id. at 743. The Tenth Circuit held that “employers may, in compliance with regulations issued by the DOT, impose more stringent requirements on certification of fitness.” Id. at 744. Plaintiff Stevens, however, does not challenge the requirement that he submit to a medical examination. Rather, his evidence supports his allegation that Coach never actually explained to him its exact medical requirements for returning to duty, and it continued to add new requirements as he satisfied Coach’s previous demands.
Therefore the record shows a material dispute of fact requiring jury determina tion of whether Coach acted with retaliatory intent or merely in compliance with DOT regulations. Defendants’ summary judgment motion on the grounds that they acted in good faith must be denied.
C. Exhaustion of Administrative Remedies
Defendants further argue that they are entitled to summary judgment because plaintiff has failed to exhaust his administrative remedies under the collective bargaining agreement and DOT regulations.
1. Collective Bargaining Agreement
The United States Supreme Court has ruled that a collective bargaining agreement without “a clear and unmistakable waiver of the covered employees’ right to a judicial forum for federal claims of employment discrimination” does not waive the employees’ right to have discrimination claims adjudicated in federal court. Wright v. Universal Maritime Serv. Corp., 525 U.S. 70, 82, 119 S.Ct. 391, 142 L.Ed.2d 361 (1998). Interpreting Wright, the Second Circuit held:
First, a waiver is sufficiently explicit if the arbitration clause contains a provision whereby employees specifically agree to submit all federal causes of action arising out of their employment to arbitration.... Second, a waiver may be sufficiently clear and unmistakable when the CBA contains an explicit incorporation of the statutory anti-discrimination requirements in addition to a broad and general arbitration clause.... Moreover, as the Supreme Court stated in Wright, the CBA should make compliance with the named or cited statute a contractual commitment that is subject to the arbitration clause.
Rogers v. N.Y. Univ., 220 F.3d 73, 76 (2d Cir.2000) (citations omitted).
In Wright, 525 U.S. at 80, 119 S.Ct. 391, the CBA’s “arbitration clause [was] very general, providing for arbitration of ‘[m]at-ters under dispute,’ which could be understood to mean matters in dispute under the contract. And the remainder of the contract contain[ed] no explicit incorporation of statutory antidiscrimination requirements.” Thus the Supreme Court held that the arbitration clause did not clearly and unmistakably provide for arbitration of plaintiffs claim under the Americans with Disabilities Act. Id. at 82, 119 S.Ct. 391. In Rogers, the applicable contract did contain a provision requiring the employer to comply with the FMLA, but that commitment was not explicitly incorporated into the general arbitration clause and therefore arbitration of plaintiffs FMLA claim was not required because “the collective bargaining agreement does not specifically make compliance with the FMLA a contractual commitment that is subject to the arbitration clause.” 220 F.3d at 76 (emphasis in original).
The collective bargaining agreement covering Stevens, like the contract at issue in Wright, contains no mention or incorporation of federal antidiscrimination laws. See Agreement, Def. L.R. 56(a)l Stmt., Ex. C, at 3. Compliance with the FMLA is not a term of the contract. The section of the agreement covering grievances provides: “Grievances involving a dispute or claim arising out of or relating to the interpretation or application of this agreement” shall be subject to arbitration. Id. at 4. Thus, by its terms, the contract provides for arbitration only of grievances arising out of the contract’s terms, not claims arising from federal statutes generally or from the FMLA in particular.
Absent a “a clear and unmistakable waiver,” Wright, 525 U.S. at 82, 119 S.Ct. 391, of Stevens’ right to adjudicate his FMLA complaint in a federal forum, Stevens is not required to arbitrate his claim under the collective bargaining agreement before pursuing his federal cause of action. Therefore defendants’ motion for summary judgment on the grounds of failure to follow the CBA’s grievance procedures is denied.
2. DOT Administrative Process
Defendants also seek summary judgment on the basis that plaintiff failed to exhaust his administrative remedies through the Department of Transportation regulations, which prescribe an administrative appeal procedure in eases of “disagreement between the physician for the driver and the physician for the motor carrier concerning the driver’s qualifications.” 49 C.F.R. § 391.47(b)(2). Even assuming that this procedure must be exhausted in an FMLA case, which is not at all clear, see 29 U.S.C.A. § 2617 (no exhaustion requirements specified in individual enforcement provision of FMLA), the regulation is inapplicable to Stevens because the crux of Stevens’ complaint is not a disagreement between Dr. Lee and Dr. Liva. Rather, Stevens argues that instead of actually obtaining a medical opinion from Dr. Liva, Coach sent him through a series of hurdles that prevented his medical fitness from ever being determined. This issue cannot be characterized as “a disagreement between the physician for the driver and the physician for the motor carrier.” 49 CFR § 391.47(b)(2). Therefore defendants’ motion for summary judgment on this basis will be denied.
C. Peter Pan
Defendants argue Peter Pan should be dismissed as a defendant in this action because plaintiff testified in his deposition that he had no contact with Peter Pan’s management concerning his FMLA leave. Def. Mem. of Law at 20-21 (citing Stevens Dep. at 136). Defendants also state that “Peter Pan acquired the Connecticut assets of Coach, which included The Arrow Line, the former employer of Stevens,” in 2003. Id. at 20.
|
3878684-15518 | Chief Judge EFFRON
delivered the opinion of the Court.
A general court-martial composed of a military judge sitting alone, convicted Appellant, contrary to his pleas, of two specifications of rape, two specifications of forcible sodomy, indecent acts with a child under the age of fourteen, and indecent acts with a child under the age of ten, in violation of Articles 120, 125, and 134, Uniform Code of Military Justice (UCMJ), 10 U.S.C. §§ 920, 925, 934 (2000). The adjudged and approved sentence included a dishonorable discharge, confinement for twenty-seven years, and reduction to the lowest enlisted grade.
The Army Court of Criminal Appeals reviewed the case on two separate occasions. In the initial review, the court determined that the staff judge advocate’s post-trial recommendation to the convening authority was defective, set aside the convening authority’s action, and returned the case for a new recommendation and action. United States v. Perez, No. ARMY 9900680, slip op. at 4 (A.Ct.Crim.App. Oct. 14, 2003); see Article 60, UCMJ, 10 U.S.C. § 860 (2000); Rules for Courts-Martial (R.C.M.) 1106, 1107.
Following preparation of a new recommendation, the convening authority approved the sentence adjudged at trial. In its second review of the case, the Court of Criminal Appeals affirmed the findings and sentence in an unpublished opinion. United States v. Perez, No. ARMY 9900680, slip op. at 4 (A.Ct.Crim.App. Apr. 25, 2005).
On Appellant’s petition, we granted review of the following issue:
WHETHER APPELLANT RECEIVED INEFFECTIVE ASSISTANCE OF COUNSEL IN THAT HIS DEFENSE COUNSEL CALLED THE VICTIM AS A WITNESS; ACKNOWLEDGED CREDIBILITY; CONCEDED THAT APPELLANT COMMITTED INTERCOURSE, INDECENT ACTS AND SODOMY; FAILED TO CALL FAVORABLE SENTENCING WITNESSES; AND FAILED TO OBTAIN FAVORABLE CLEMENCY MATTERS FOR PRESENTATION TO THE CONVENING AUTHORITY.
Appellant contends that his civilian defense counsel was ineffective in three respects: (1) calling the victim as a witness who provided damaging testimony; (2) failing to call additional witnesses during sentencing; and (3) failing to contact Appellant prior to making defense counsel’s post-trial clemency submission to the convening authority. For the reasons set forth below, we affirm.
I. BACKGROUND
A. STATEMENTS PRIOR TO TRIAL
When Appellant’s stepdaughter was a teenager, she told her mother that she had been abused sexually by Appellant. Her mother brought her to the Army’s Criminal Investigation Division (CID) at Fort Hood, Texas, where she provided a written statement describing sexual abuse over an eight-year period. In the statement, Appellant’s stepdaughter said that when she was five or six years old, Appellant engaged in various acts of oral sodomy and sexual abuse with her at Fort Leonard Wood, Missouri. The statement described further sexual abuse, including rape, at Fort Wainwright, Alaska, when she was between ten and twelve years old. Subsequently, the family moved to Fort Hood. According to the stepdaughter, Appellant engaged in multiple incidents of sexual abuse with her at Fort Hood, which eontinued into the month in which she made the statement. She estimated that Appellant had engaged in sexual activity with her several hundred times over the eight-year period, including sexual intercourse up to five times a week at Fort Hood.
During the ensuing investigation, Appellant provided a statement to the CID in which he admitted engaging in sexual intercourse with his stepdaughter on three occasions, one incident of oral sodomy, and several incidents of inappropriate touching. The investigation resulted in charges against Appellant consisting of three specifications of indecent acts with a child, three specifications of forcible sodomy on a child on multiple occasions, and two specifications of rape on multiple occasions.
B. CONSIDERATION OF THE CHARGED OFFENSES AT TRIAL
At trial, the prosecution called the stepdaughter as a witness during the Government’s case-in-chief. Under direct examination, she said that she could not remember providing a statement to the CID, and that she could not recall any of the events described in the statement. Over defense objections, the military judge admitted into evidence both the stepdaughter’s pretrial statement and Appellant’s incriminating statement to the CID. The prosecution also presented evidence that Appellant had admitted to a nurse that he had sexually abused his stepdaughter. The admissibility of these matters is not at issue under the grant of review in the present case.
During the defense case-in-chief, the stepdaughter testified as a defense witness. In contrast to her inability to recall information during her earlier appearance as a Government witness, she provided specific details as a defense witness. Her testimony as a defense witness at trial presented a significantly different picture of the scope of sexual activity than she presented in her pretrial statement.
In response to defense counsel’s questions, she disavowed significant portions of her pretrial statement. She testified that at Fort Leonard Wood there had been no sexual intercourse, although there had been other sexual touching and oral sodomy; that at Fort Hood, there had been only one instance of sexual intercourse, and no incidents of oral sodomy that she could recall; and that she had not told the CID that she and Appellant had engaged in sexual intercourse five times a week, as claimed in her written statement, but that the agents led her to those statements through their questioning.
Defense counsel’s closing argument focused on the contrast between the stepdaughter’s testimony in court and her pretrial statement. The argument sought to convince the military judge, as factfinder, that the sexual abuse was not as extensive as the Government alleged.
The military judge found Appellant not guilty of a number of the charged offenses, including the allegation of indecent acts with a child at Fort Hood and the allegation of forcible sodomy at Fort Hood. He found Appellant not guilty of committing rape at Fort Hood “on diverse occasions,” finding him guilty of only one incident of rape at Fort Hood. He convicted Appellant of the remaining charges and specifications, making minor modifications in the wording to conform to the testimony at trial.
C. SENTENCING
The defense sentencing ease consisted of Appellant’s unsworn statement and testimony from his stepdaughter and wife. After defense counsel told the military judge that he had no additional sentencing evidence, the military judge questioned Appellant as to whether there were any other matters that he should consider. Appellant confirmed that there were no other witnesses or documentary evidence that he wanted to bring before the military judge.
In the course of his closing statement on sentencing, defense counsel asked the military judge to consider the earlier testimony by First Sergeant KW, a Government witness during the findings portion of the trial. Defense counsel noted that First Sergeant KW had testified about Appellant “being a good soldier, one of the best he ever saw.”
During the Government’s case-in-chief, First Sergeant KW had testified that he considered Appellant “to be a top-notch non-commissioned officer, highly dedicated, strong, strong leadership style”; that Appellant was “ [outstanding” in terms of leadership, professionalism, and handling stress; and that on a scale of one to ten, he would rate Appellant at “a 9 and a half or 10.” The Government, in its closing argument, acknowledged that Appellant is “a good soldier” and that “he’s done magnificent things in his career.”
Appellant faced a maximum sentence that could have included life in prison. The sentence imposed by the military judge included twenty-seven years of confinement.
D. POST-TRIAL PROCEEDINGS
1. The first clemency request
Following trial, defense counsel requested deferral of forfeitures and reduction in grade pending the convening authority’s action so that Appellant could provide financial support for his family during that period. The convening authority granted the request, subject to Appellant providing the funds directly to his family. Defense counsel also provided a clemency submission to the convening authority, asking the convening authority to disapprove the punitive separation and limit confinement to no more than ten years. The convening authority did not grant clemency, and approved the sentence as adjudged.
2. The second clemency request
During the initial review of this case, the Army Court of Criminal Appeals set aside the convening authority’s action and ordered a new staff judge advocate’s post-trial recommendation and convening authority’s action, based upon errors not at issue in the present appeal. During the new proceedings before the convening authority, Appellant obtained representation by a new defense team, consisting of both civilian defense counsel and military defense counsel who had not participated in the original proceedings. Defense counsel submitted a new clemency packet to the convening authority, urging consideration of legal errors at trial as well as numerous clemency matters. The clemency request included, among other things, Appellant’s legal brief to the Army Court of Criminal Appeals, Appellant’s letter to the convening authority, ten award citations, twenty-one enlisted evaluation reports, twelve positive inmate evaluation reports, and numerous positive letters from various people, including the chaplain at the United States Disciplinary Barracks, his work supervisor in prison, and Appellant’s civilian pastor. The staff judge advocate prepared a new recommendation to the convening authority, recommending approval of the adjudged sentence without modification.
The convening authority approved the adjudged sentence without modification and the Court of Criminal Appeals affirmed the findings of guilty and the sentence.
II. INEFFECTIVE ASSISTANCE OF COUNSEL
A defendant who claims ineffective assistance of counsel “must surmount a very high hurdle.” United States v. Alves, 53 M.J. 286, 289 (C.A.A.F.2000) (citations and quotation marks omitted). Judicial scrutiny of a defense counsel’s performance must be “highly deferential and should not be colored by the distorting effects of hindsight.” Id. (citing Strickland v. Washington, 466 U.S. 668, 689, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984)). To overcome the presumption of competence, an appellant must satisfy the two-part test set forth in Strickland and demonstrate: (1) “a deficiency in counsel’s performance that is ‘so serious that counsel was not functioning as the “counsel” guaranteed the defendant by the Sixth Amendment’ and (2) that the deficient performance prejudiced the defense through errors “ ‘so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.’” United States v. Moulton, 47 M.J. 227, 229 (C.A.A.F.1997) (quoting Strickland, 466 U.S. at 687, 104 S.Ct. 2052). As a general matter, “ ‘[t]his Court will not second-guess the strategic or tactical decisions made at trial by defense counsel.’ ” United States v. Anderson, 55 M.J. 198, 202 (C.A.A.F.2001) (quoting United States v. Morgan, 37 M.J. 407, 410 (C.M.A.1993)).
[A] court must indulge a strong presumption that counsel’s conduct falls within the wide range of reasonable professional assistance; that is, the defendant must overcome the presumption that, under the circumstances, the challenged action might be considered sound trial strategy. There are countless ways to provide effective assistance in any given case. Even the best criminal defense attorneys would not defend a particular client in the same way.
Strickland, 466 U.S. at 689, 104 S.Ct. 2052 (citations and quotation marks omitted).
In cases involving attacks on defense counsel’s trial tactics, an appellant must show specific defects in counsel’s performance that were “unreasonable under prevailing professional norms.” United States v. Quick, 59 M.J. 383, 386 (C.A.A.F.2004) (citation and quotation marks omitted). An appellant must also show prejudice. Strickland, 466 U.S. at 687, 104 S.Ct. 2052. The test for prejudice is whether there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different. Id. We consider whether counsel was ineffective and whether any errors were prejudicial under a de novo standard of review. Anderson, 55 M.J. at 201.
III. DISCUSSION
A. TESTIMONY BY THE VICTIM
Appellant contends that his defense counsel’s decision to call the stepdaughter as a defense witness constituted ineffective assistance of counsel. A decision by trial defense counsel to call the victim as a witness entails risks that must be assessed under the particular circumstances of each case.
In the present case, defense counsel acted in light of a prosecution case that included: (1) the victim’s pretrial statement alleging extensive sexual misconduct; (2) Appellant’s statement to the CID that he had engaged in sexual misconduct with his stepdaughter; and (3) Appellant’s incriminating admissions to a nurse. Under defense counsel’s direct examination, the stepdaughter testified that the sexual activity was not as frequent or as extensive as described in her statement to the CID. See supra Part I.B. The decision by the military judge to find Appellant not guilty of certain offenses and to modify others directly reflects the testimony presented by the stepdaughter at trial. See id. Under these circumstances, we conclude that Appellant has not demonstrated that defense counsel was ineffective under the first prong of Strickland.
B. SENTENCING
Appellant contends that defense counsel was ineffective in not recalling First Sergeant KW to testify on his behalf during the sentencing hearing. He also contends that he provided defense counsel with a list of military officers, noncommissioned officers and members of his church who would have testified on his behalf on sentencing, and that defense counsel failed to contact any of these individuals.
With respect to First Sergeant KW, we note that defense counsel’s sentencing argument expressly referenced the “good soldier” testimony that the witness had provided during the findings portion of trial. Moreover, by referring to earlier testimony rather than recalling the witness, the defense was able to avoid the risk of cross-examination. Under the circumstances of this case, the decision to reference, rather than repeat, the earlier testimony was not ineffective.
We shall assume, without deciding, that Appellant provided defense counsel with the list of witnesses described in his affidavit, and that defense counsel was deficient for not contacting those witnesses. See Alves, 53 M.J. at 289-90. Appellant has not provided any specificity as to what those witnesses would have said if they had been called to testify at trial. In that posture, Appellant has not demonstrated prejudice under the second prong of Strickland. See Moulton, 47 M.J. at 229.
C. POST-TRIAL CLEMENCY MATTERS
Appellant contends that during the initial post-trial process, the defense counsel did not consult with him and did not return his phone calls. According to Appellant, he was attempting to contact defense counsel in order to put counsel in touch with individuals who would have submitted letters in support of his clemency request. Appellant further contends that the clemency request did not represent his views or desires.
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3899771-26290 | ADAMS, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
The first and second assignments of error arise from facts so interwoven that they may well be considered together. By the statutes of Nebraska in force at the time the transactions now under consideration were had the statute of limitations barred complainants’ right to foreclose the mortgage in question in 10 years after the maturity of the note. Section 5596, Comp. St. Neb. 1901. The noté was executed in 1887, payable July 1, 1892. On June 30, 1902, therefore, the right to foreclose the mortgage given to secure the payment of the note was barred. The suit instituted in 1896 by the English executors in their individual capacity was on the theory that, inasmuch as Walter Haworth died before the note matured, he having at the time of his death no cause of action against the defendants, no such cause of action descended to or was vested in his executors; that what was vested in them was the legal title to all chattels of the testator in trust for the purpose of administration under the law; and that as such legal owners they might, in their own names, sue to recover the same or to enforce any right, like that of foreclosure, incidental to the ownership of the chattels. This seems to have been a recognized theory of the common law. See Griffith v. Frazier, 8 Cranch, 9, 3 L. Ed. 471; Kane v. Paul, 14 Pet. 33, 10 L. Ed. 311; Giddings’ Executors v. Green (C. C.) 48 Fed. 489, and cases cited. But the learned trial judge ruled that this common-law right was superseded by sections 5618 and 5621 of the Compiled Statutes of Nebraska of 1901 relating to civil actions. He made this ruling on June 13,1902, and gave complainant 15 days within which to amend his bill. Complainant, instead of standing on his right io sue in his individual capacity, acquiesced in the ruling and availed himself of the leave to amend, and on June 28, 1902, two days before ithe statute of limitations had run, filed his last amended bill. In this he made substantially the same averments as were made in the prior original and amended bills concerning the execution of the note and mortgage and the breach of the condition of the mortgage and further made allegations showing the original appointment in Great Britain of himself and Isaac H. Morris, the death of Morris, and that he after-wards, on September 20, 1902, was duly appointed executor by tiie probate court of Harlan county, in Nebraska.
In this last-mentioned bill Haworth remained complainant as before, but in a new capacity; then as an individual, now as sole executor of the estate of Walter Haworth, deceased. The cause of action remained as it was from the beginning, a breach of condition in the mortgage, entitling complainant to foreclose the same, and the action remained the same as at the beginning, an action to foreclose the mortgage given to secure payment of a note for $3,000 held at all times by himself. Such being the case, the amendment, as we have heretofore held, was permissible practice, and related back to thS commencement of the suit. McDonald v. State of Nebraska, 41 C. C. A. 278, 101 Fed. 171, and cases cited. See, also, Herron v. Cole, 25 Neb. 692, 41 N. W. 765, and Hines v. Rutherford, 67 Ga. 606.
The next question for consideration is whether the filing of the last amended bill by complainant without having secured his appointment as executor in Nebraska until after the filing thereof is fatal to his right of recovery. In considering this question it should be borne in mind that complainant had an interest in the subject matter of foreclosing the mortgage in question even though he did not have a standing in court to do so. He was, by virtue of his appointment in Great Britain, the holder and owner of the note secured by the mortgage, and had a duty imposed upon him by law to collect it. No appointment as ancillary executor in Nebraska could add anything to his legal title or to his right to collect the same. Such ancillary administration is required as a matter of public policy to insure the satisfaction of local creditors out of local assets before they are withdrawn from the state or turned over to the domiciliary adminstrator for that purpose. This policy is equally subserved, whether the appointment as executor actually occurs before or after th'e institution of the suit, provided, only, that it shall be made before trial. From these considerations it is obvious that whether the appointment of an ancillary executor be made before the bringing of a suit or afterwards, but before the trial, is purely formal and technical.
In the case of Swatzel v. Arnold, 1 Woolw. 383, Fed. Cas. No. 13,682, Mr. Justice Miller, when presiding in this circuit, had before him a question similar to that which now confronts us. In his case the plaintiff brought in Nebraska his suit as administrator to foreclose a mortgage. His only right to sue as administrator rested upon his appointment by the probate court of a county in the state of Kansas in which decedent was domiciled at the time of his death. He held that the Kansas administrator might institute suit in the courts of Nebraska before taking out ancillary letters of administration in that state, and upon taking out such letters might by amendment show the fact. In that case he gives forcible reasons for the conclusion reached by him. He says:
“The present plaintiff as administrator of the domicile had a right to receive for final distribution, the sum due on the mortgage. He had an inchoate right to be appointed administrator here, and if any one else had been ap pointed, that person would have been liable to account to him for what was in hand after paying the debts in that jurisdiction. * * * The incapacity of the foreign administrator not being radical so as to entirely deprive him of power to proceed with his cause, the fact of his taking out letters in this state was matter which he might aver by amendment and maintain his suit thereon. * * * The impediment to the exercise of the full powers of an administrator in a jurisdiction foreign to that granting his letters is essentially technical and formal and should not be strained beyond its necessary application”—citing Yeaton v. Lynn, 5 Pet. 224, 8 L. Ed. 105.
Judge Shipman in Black v. Allen Co. (C. C.) 42 Fed. 618, 624, 9 L. R. A. 433, after quoting with approval some of Mr. Justice Miller’s remarks in Swatzel v. Arnold, supra, says:
“The court early found relief in cases of equity from too strict adherence to technicality upon thé ground that ‘in equity a plaintiff may file a bill as administrator before he has taken out letters of administration, and it will be sufficient to have them at the hearing, which is not the case at law.’ * * * Therefore in Humphreys v. Humphreys, 3 P. Wms. 349, where the next of kin had brought a bill without administering, and the defendant demurred, the Lord Chancellor allowed the demurrer and then permitted the complainants to take’ out letters of administration, which, when granted, he said, related to the time of the death of the intestate, and to allege the same by way of amendment or by supplemental bill.”
In the case of Humphreys v. Humphreys (supra); a bill was filed by an administratrix as such. To this a plea was filed alleging that the taking of administration was subsequent, to the filing of the bill.
“The Lord Chancellor [according to the report] with great clearness, and not without some warmth in respect of the delay, overruled the plea, observing that the mere right to have an account of the personal estate was in the plaintiff, * * * as she was the next of kin and it was sufficient that she had now taken out letters of administration, which, when granted, related to the time of the death of the intestate, like the case of an executor before his proving the will, brings a bill, yet his subsequent proving the will makes such bill a good one, though the probate be after the filing thereof.”
In 1 Daniell’s Chancery Pl & Pr. p. 318, it is said:
“If an executor, before probate, file a bill, alleging that he has proved the will, such allegation will obviate a demurrer. He must, however, prove the will before the hearing of the cause, and then the probate will be sufficient to support the bill, although it bear date subsequently to the filing of it. In like manner, a plaintiff may file a bill as administrator before he has taken out letters of administration, and it will be sufficient to have them at the hearing.”
Chancellor Kent, in Doolittle v. Lewis, 7 Johns. Ch. 45, 11 Am. Dec. 389, in discussing a kindred subject, says:
“If the party sues as executor or administrator, without probate, or taking out letters of administration, the taking them out, at any time before the hearing, will cure the defect, and relate back so as to make the bill good from the beginning. *' * * In a light so merely formal is that omission viewed.”
Bates, in his work on Federal Equity Procedure (volume 1, § 52), says:
“In equity a plaintiff may file his bill as administrator before he has taken out letters of administration, and it will be sufficient to have the letters at the hearing, which is not the case at law. It is a general rule in equity pleading and procedure that facts which have occurred after the filing of the bill must be brought before the court by supplemental bill and not by way of amendment; bnt, as an exception to that rule, an executor or administrator appointed in one state may sue as such in another state and subsequently take out letters testamentary or of administration in the latter state, and set up that fact by way of amendment”
In the case of Hodges v. Kimball, 91 Fed. 845, 34 C. C. A. 103, the Circuit Court of Appeals for the Fourth Circuit had before it the same question we are now considering, and after an exhaustive examination and citation of authorities announced the rule in harmony with that already stated, to the effect that domiciliary administrators might institute a suit at law in a foreign state without having first taken out letters of administration, and might afterwards secure letters of administration in that state and by amendment to their original cause of action make the same appear and proceed as if letters had been granted prior to the institution of the suit. The court in its opinion says:
“It was virtually conceded'in argument that in an equity suit an amendment showing the subsequent taking out of letters of administration could be made and the suit maintained, but it was strenuously insisted that a different rule existed in the courts of law.”
To the same effect is the case of Henry v. Roe and Burnside, 83 Tex. 446, 18 S. W. 806; Hatch v. Proctor, 102 Mass. 351; Goodrich v. Pendleton, 4 Johns. Ch. 549; Osgood v. Franklin, 2 Johns. Ch. 1, 7 Am. Dec. 513.
From the foregoing authorities, and many others cited and referred to in them, we think the rule is .well settled in equity practice, however it may be at law, that an executor named in a will may file a bill in his capacity as executor before probate of the will and maintain an action as such executor, provided he secures probate of the will before the hearing of the cause. Learned counsel for appellant have favored us with no authorities sustaining the opposite view; neither have we, in our examination found such. Accordingly we are constrained to hold that the fact that Haworth had not qualified as executor in Nebraska on June 28, 1902, the time he filed his last amended bill (he having so qualified later, on September 20, 1902) is not a defense to the present action. The qualification related back at least to the date of filing the amended bill. The amended bill was filed two days before the statute of limitations would have barred the action. Whether, therefore, the amended bill related back to the commencement of the action, which the authorities already cited indicate, is quite immaterial. The action in any event, was not barred by the statute of limitations.
A point is made in appellants’ brief that because complainant failed to take an oath to faithfully discharge his duties as executor he was never qualified as such, and accordingly was not entitled to recover in this action. An examination of the statutes of Nebraska discloses that no such oath is required in that state. Sections 2677 and 2678 of the Compiled Statutes of 1901, alone relate to the qualification of executors. They read as follows:
“Sec. 2677. Wben a will shall have been duly proved and allowed, the Probate Court shall issue letters testamentary thereon to the person named executor therein If he is legally competent and he shall accept the trust and give bond as required by law.
“Sec. 2678. Every executor, before he shall enter upon the execution of his trust and before letters testamentary shall issue, shall give bond to the judge of probate in such reasonable sum as he may direct, with one or more sufficient sureties with conditions as follows: * * * ”
No provision is here or elsewhere in the statutes found for the taking of an oath to faithfully discharge the duties of the office. The matter of qualification is purely statutory. The statutes of Nebraska require the executor to give bond and that is the only act of qualification contemplated by the statutes.
The remaining assignment of error relied on by defendants’ counsel relates to the transfer on the back of the note. It is claimed that it is not an indorsement within the meaning of the law merchant and that it did not pass the legal title to subsequent holders free from equities existing between the makers and payee. The facts of the case show that soon after the maturity of the note the makers paid the payee the full amount of the note. This note was payable “to the order of the Dakota Mortgage Doan Corporation,” and is conceded to be a negotiable instrument. At the time the makers paid it to that corporation under its new name of Globe Investment Company they necessarily knew the negotiable character of the note and the possibility of its having been negotiated. They nevertheless paid it without requiring the surrender of the note or the mortgage given to secure its payment. In these circumstances the payment was at their own risk. If the money found its way to the owner and holder of the note, if negotiated, it amounted to payment; otherwise not. Weldon v. Tollman, 15 C. C. A. 138, 67 Fed. 986; Swift v. Bank of Washington, 52 C. C. A. 339, 114 Fed. 643.
No legal justification of this payment is attempted in argument or brief by defendants’ counsel. Their reliance is upon the proposition, involved in this assignment of error, that the note was not so indorsed as to vest title in the indorsee so as to cut oif the equities existing between the makers and payee. The note and mortgage by express stipulation of the parties, is to be construed according to. laws of the state of Nebraska. We must therefore examine the transactions in the light of those laws.
Section 3380, Compiled Statutes of Nebraska of 1901, is as follows :
“All bonds, promissory notes, bills of exchange, foreign and inland, drawn for any sum or sums of money certain, and made payable to any person or order, or to any person or assigns, shall be negotiable by endorsement thereon, so as absolutely to transfer and vest the property thereof in each and every endorsee successively, but nothing in this section shall be construed to make negotiable any such bond, note or bill of exchange, drawn payable to any person or persons alone, and not drawn payable to order, bearer, or assigns: Provided, that all such bonds, promissory notes, and bills of exchange, made payable to bearer shall be transferable by delivery without endorsement thereon. * * * ”
From this statute it appears-that promissory notes, payable “to any person or order,” or “to any person or assigns,” are made negotiable by indorsement. This statute impresses us, -with a twofold meaning: First, as a modification of the law merchant concerning what is a negotiable instrument. By the law merchant, in order to be nego tiable, a note must be payable to the order of some person or to bearer. By the statute of Nebraska negotiability is extended to a note payable to some person or his assigns. And, second, in the event a note be payable as last stated, the assignment may be made by a blank indorsement. In other words, the indorsement of the name of the person to whose assigns the note is payable, on the' back of the note, operates to perform the function of the usual written assignment. It is apparent from these considerations that we are now dealing with a subject somewhat different from the accepted inland bill of exchange, or (since the statute of Anne) promissory note known in commerce or by the law merchant; so different, indeed, that the parties to the original transaction out of which the present suit arose saw fit to stipulate for the supposed different, if not greater, advantage found in the application of the laws of the state of Nebraska.
Tested, now, by these laws, as interpreted by the Supreme Court of Nebraska, how does the case stand? It is first strongly urged by counsel for complainant that the guaranty clause on the back of the note is in and of itself an indorsement by which the legal title of the note is divested from the payee and invested in the transferee upon delivery of the note to him. The payee’s contract of guaranty as found on the .note is perfect of its kind. It acknowledges receipt of the necessary consideration and (referring to the “note” and “interest” as “bond” and “coupons”) guaranties the payment of each coupon as it should mature and finally the collection of the bond itself. The fact that the payee reserved the right to repurchase the bond at any time providing for a release from its guaranty in case of refusal to sell the same to it, on demand, in no manner affects its primary obligation to guaranty the payment of the interest and the collection of the principal. It was on a contingency, which, in this case never.happened, that the guaranty became subject to defeasance. By this contract the payee for an acknowledged consideration obligated itself absolutely to pay the principal of the note, if payment could not be obtained from the maker by the exercise of due and reasonable care. Such is the accepted definition of a contract of guaranty. Brackett v. Rich. 23 Minn. 485, 23 Am. Rep. 703, and cases cited. This contract is more comprehensive aud unconditional than the contract of indorsement. By the latter the failure to present a note to a maker at its maturity and to demand payment thereof and notify the indorser of nonpayment are essential and necessary conditions to the creation of any liability against him by reason of his indorsement.
But we need not dwell on these elementary thoughts. The Supreme Court of Nebraska has frequently considered this question and pronounced upon it in no uncertain voice. Heard v. Dubuque County Bank, 8 Neb. 10, 30 Am. Rep. 811, was a suit upon a promissory note payable to the order of V. J. ’Williams & Co., and indorsed only as follows:
“For value received I hereby guarantee payment of the within note and waive presentation, protest, and notice. [Signed] Y. P. Williams & Co.”
The suit was in favor of the transferee of the note. Defendant’s-counsel contended that the note never was, in fact negotiated because the guaranty written upon the back did not amount to' an endorsement so as to transfer title. The court, speaking on this point, says as follows:
“We find some conflict of authorities, but we adopt the law and the language of Day, C. J., in Robinson v. Lair, 31 Iowa, 9: We confess ourselves unable to give effect to the contract of guaranty of payment and waiver of demand and notice, if the payees still intend to retain the title. The writing simply constitutes an indorsement with an enlarged liability’ ”•—citing many cases.
State National Bank v. Haylen, 14 Neb. 480, 16 N. W. 754, was an action for the foreclosure of a mortgage given to secure a negotiable promissory note signed by defendants, payable to the order of Thomas P. Kennard, and by him indorsed as follows:
“Collection guaranteed and notice of protest waived this 26th day of April, 1880. [Signed] Thomas P. Kennard.”
Defendants set up as their defense usury, fraud, etc., practiced upon them by the original payee. Plaintiff replies, alleging purchase in good faith, before maturity, for value and without notice of any equity. The court, in disposing of the case, uses the following language:
“There is no question made in the evidence of the plaintiff bank being the bona fide owner and holder of the note and mortgage, nor that it received the same before maturity in the ordinary course of business and without notice of any infirmity. * * * But the district court let in the defense of usury for the reason, as is stated in the judgment, ‘it [the plaintiff] holds the note as assignee, and not as indorsee.’ * * * This is exactly the form of indorsement which in Heard v. Dubuque County Bank, 8 Neb. 10, we held, following Robinson v. Lair, 31 Iowa, 9, to constitute an indorsement with an enlarged liability. * * * It will be admitted that the possession of the note, with the payee’s name written across the back, is evidence of ownership in the plaintiff. Yet it is claimed that while this would be the case if the payee’s name stood alone on the back of the note, that here there are other words over the payee’s signature to which it applies and upon which it has spent its force. Let us admit this, and then see whether the words taken together, including the signature, do not furnish still stronger evidence of a' transfer of title in the note from the payee to the holder. By virtue of these words the payee agrees that he will pay the note in 'case of the holders using due diligence and being unable to collect it from the makers. He furthermore agrees that his ultimate liability to pay the note shall not be affected by reason of the neglect or failure of the holder to present it to the maker at maturity for payment, or to notify him, the payee, in case of its nonpayment. Now what meaning could any of these words have except upon the proposition understood that the payee had disposed of the note, and parted with the title to it to some other person, to whom he guaranteed the payment and in whose favor he waived the duty of presentation and notice? * * * I therefore see no reason for departing from the doctrine of Heard v. Dubuque County Bank, and it will be adhered to. The note and mortgage having been indorsed and delivered to the plaintiff before maturity and received by it for value in the ordinary course of business, without notice of any infirmity, it holds the same free from the taint of usury.”
Weitz v. Wolfe, 28 Neb. 500, 44 N. W. 485, was a suit to recover the amount due on a promissory note made by one Jennings, and payable to the order of Weitz. Before maturity Weitz sold and transferred the note to Wolfe, making only the following endorsement upon the same:
“I guarantee the payment of within note, waiving demand and protest. [Signed] T. T. Weitz.”
Jennings and Weitz were both made defendants. The court says:
“The indorsement in this case being signed by the payee, operated as a transfer of the note. * * * The liability of Weitz was not lessened because the indorsement contained the word ‘guarantee.’ He is an indorser and was properly sued with the maker in the same action.”
Buck v. Savings Bank, 29 Neb. 407, 45 N. W. 776, 26 Am. St Rep. 392, was a suit in replevin for cattle mortgaged to secure the payment of a note payable to the order of one Mowry. He sold the note, placing on the back thereof, the following words only:
“Demand, notice, and protest waived, and payment guaranteed. [Signed] Welcome Mowry.”
The court says two questions are presented by record: First, is the writing on the back of the note an indorsement or merely a guaranty ?
In Heard v. Dubuque County Bank, 8 Neb. 10, the writing on the back of the note was as follows:
“For value received I hereby guarantee payment of the within note, and waive presentation, protest, and notice.”
This was held to be an indorsement with an enlarged liability. State National Bank v. Haylen, 14 Neb. 480, 16 N. W. 754. The writing on the back of the note in question, therefore, was a valid indorsement with an enlarged liability. To the same effect, also, is the case of Pollard v. Huff, 44 Neb. 892, 63 N. W. 58.
From the foregoing it appears that under the laws of Nebraska, as interpreted by its highest judicial tribunal, the guaranty written on the back of the note before maturity and at the time of its sale to John Stuart & Co. constitutes in and of itself a transfer of the legal title, equivalent to a blank indorsement, such a transfer as entitles the transferee or subsequent holder to maintain an action for its collection free from equities existing between the makers and payee. Possibly we might here appropriately end our consideration of this case, but as we find in the assignment, so called, written on the ba.ck of the note a very satisfactory solution of the question before us we proceed to its consideration.
It is conceded, of course, that the mere indorsement of the name of a payee on the back of a negotiable note, commonly called a “blank indorsement,” evidences a complete transfer of title, one recognized by the law merchant, and certainly good under the laws of Nebraska. Daniel on Negotiable Instruments, vol. 1, § 688c, says:
“Tbe mere signature of the payee indorsed on the paper expresses an executed contract of assignment with its implications, and also an executory contract of conditional liability with its implications. The assignment would be as complete by the mere signature, as with the words of assignment written over it.”
By this standard let us test the so-called assignment. It reads as follows:
“For value received the Dakota Mortgage Loan Corporation hereby assigns and transfers the within note and coupons, together with all its right, title and interest under the real estate mortgage securing the same, without recourse, to-. [Signed] The Dakota Mortgage Loan Corporation, by Allison Z. Mason, Treasurer.”
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2235914-10778 | MeENTEE, Circuit Judge.
Defendant appeals from his conviction in the district of Massachusetts for violation of the loan sharking provisions of the Consumer Credit Protection Act of 1968 — specifically, participation in the collection of extensions of credit by extortionate means. 18 U.S.C. § 894 (Supp. V, 1970). He argues, inter alia, that the indictment lacks the specificity required by Fed.R.Crim.P. 7(c) and that the statute is unconstitutional. We deal first with the question of the sufficiency of the indictment.
Defendant contends that the indictment is defective because it fails to name the victim of the alleged extortionate collection, to locate the offense with specificity, to describe in sufficient detail the extortionate means charged, and to allege federal jurisdiction. Since we hold that the failure to name the victim, under the circumstances, was fatal, we do not reach defendant’s other contentions.
A vital function of an indictment is to provide “such description of the particular act alleged to have been committed by the accused as will enable him properly to defend against the accusation * * This principle is derived directly from the Sixth Amendment’s guarantee of the right of an accused “to be informed of the nature and cause of the accusation * * * ” and is basic to the proper functioning of our adversary system of justice. Without sufficient information to identify that conduct which the grand jury has deemed adequate to support an indictment, an accused is at a material disadvantage in meeting the charge against him.
In applying these criteria to the case at bar we think it essential to bear two things in mind. First, what is a fair description of a crime for purposes of permitting an adequate defense necessarily varies with the nature of the offense and the peculiarities of defending against the kind of charge involved. People ex rel. Guido v. Calkins, 9 N.Y.2d 77, 211 N.Y.S.2d 166, 172 N.E.2d 549 (1961). Second, arbitrary rules as to the necessity, in the abstract, of a given averment have no place in the analysis, as the question is whether the indictment as a whole conveys sufficient information to properly identify the conduct relied upon by the grand jury in preferring the charge.
With the foregoing in mind, we have concluded that the indictment is deficient. The defendant is accused of making threats by an unstated means to an unnamed person on a particular day in a city of moderate size. He is presumed to be innocent of the charge. Consider, then, the course a defense in such a case might take given adequate information. A defendant might seek to show that at the time in question he was not at the scene of the crime, in short, to establish an alibi. But unless the defendant can demonstrate that he was not in the city of Worcester during the entire day in question this is impossible, as the precise time and place are not specified.
Another course open in a case such as this would be to demonstrate that the conduct which allegedly amounted to the communication of threats never took place, that a communication did take place but conveyed no threat, or that the meaning of an ambiguous communication has been misconstrued by the grand jury. This would ordinarily be done by seeking the writing at issue or witnesses to the conversation or incident in question. Moreover, as the crime is essentially a speaking offense it would be critical for a defendant to fix in his mind the substance of any conversation in issue as soon as possible. However, where the location, time, and object of the communication are specified only in the most general terms or not at all, we cannot see how this manner of defense could be undertaken. In sum, this defendant could not possibly have made an adequate preparation for trial on the basis of the information contained in this indictment.
A different approach to the problem yields the same result. The federal system views the grand jury as an important element of the criminal process. It, and it alone, is competent to charge an accused with a crime of this nature, as is most vividly illustrated by the rule barring substantive amendments to indictments without resubmission to the grand jury and the fact that a defective indictment is not cured by a bill of particulars. Russell v. United States, supra n. 2, 369 U.S. at 770-771, 82 S.Ct. 1038. On an indictment as vague as that at bar, it is possible, however unlikely, for a prosecutor to obtain a conviction based wholly on evidence of an incident completely divorced from that upon which the grand jury based its indictment. The prosecution may not have the power “to roam at large” in this fashion. Russell v. United States, supra n. 2, at 768-771, 82 S.Ct. 1038; United States v. Agone, 302 F. Supp. 1258, 1261 (S.D.N.Y.1969).
The government’s argument for withholding the name of the victim in this case is sophistical. At one point it claims that secrecy was necessary to ensure the safety of the victim. Whatever the bearing of the argument in an appropriate case, it is of no force here, for the government later claimed that the defendant was not prejudiced because he knew the identity of the government’s witness from the outset. The government may not have it both ways. Moreover, it is significant that, to our knowledge, no other indictment under this section has omitted the victim’s name.
In reaching this conclusion we stress that no one factor is determinative. The failure to specify the means by which the alleged threats were communicated need not, of itself, be fatal. United States v. Agone, supra n. 3, at 1259-1260. The failure to specify with greater precision the location of the alleged offense would surely not have given rise to this result were sufficient additional facts averred. See United States v. Bujese, 371 F.2d 120, 124 (3d Cir. 1967); Flores v. United States, 338 F.2d 966, 967 (10th Cir. 1964); 1 C. Wright, Federal Practice and Procedure: Criminal § 125, at 245 (1969); 4 Wharton’s supra n. 2, § 1777. And even the failure to name the victim, as serious a handicap to the defense as that on occasion may be, might not alone have led to this result. These factors, how ever, when taken together, made it unfair to require the defendant to answer this charge.
A final word should be said about the facially analogous situation arising in cases of transfers of narcotics without a written order in violation of 26 U.S.C. § 4705(a) (1964), where the name of the buyer is not alleged in the indictment. Our holding in Dario Sanchez v. United States, supra n. 2, that such an indictment is not invalid is in accord with every circuit which has considered the question, Lauer v. United States, 320 F. 2d 187 (7th Cir. 1963), having been overruled by Collins v. Markley, 346 F. 2d 230 (7th Cir.), cert. denied, 382 U.S. 946, 86 S.Ct. 408, 15 L.Ed.2d 355 (1965). The similarity lies in the fact that neither Sanchez nor Tomasetta was told the identity of the other person involved in the indictable event. But while Tomasetta was told only that he had threatened violence to “the person of certain persons” on a given day, Sanchez was told that he had made a sale of a specified quantity of a named narcotic on a given day. The differences are significant. Not only is the alleged quantity likely to be an identifying circumstance for what could be one of several transactions, but the allegation of a sale transaction is to be contrasted in its concreteness of reference to unspecified words, looks, and gestures, choate or inchoate, which could have been interpreted by anyone within sound or sight of Tomasetta as threats of violence. Such differences áre enough to place the present indictment beyond the pale. Accordingly, we hold that the district court erred in denying the defendant’s motion to dismiss the indictment.
In fairness to the parties, we feel that in dismissing the indictment, which presumably will lead to the government’s seeking a new one, we should make reference to the fact that the court is not presently of one mind on the question whether, had the indictment been sufficient, we would nevertheless have been obliged to sustain the defendant's motion for acquittal. The constitutionality of the statute is a subject of serious controversy. By failing to limit itself to transactions involving exorbitant interest charges, thereby probably justifying an assumption that the transaction involves organized crime and consequently affects interstate commerce, it reaches conduct which has no apparent effect on interstate commerce. On the other hand if it should be decided that the statute is unconstitutional only in that it is overbroad, it is debatable whether a defendant who allegedly charged an exorbitant interest rate has standing to complain. Since we are not in accord, we see no present need to resolve these difficult questions.
Reversed and remanded with instructions to dismiss the indictment.
. The relevant portion of the one count indictment is as follows: “That on or about June 10, 1969, at Worcester, in the District of Massachusetts. PHILLIP P. TOMASETTA, of Shrewsbury, in said District, did unlawfully, wilfully and knowingly participate in the use of extortionate means as defined in Title 18, United States Code, Section 891(7), namely, an express and implicit threat of use of violence to cause harm to the person of certain persons, to collect and attempt to collect extensions of credit; in violation of Title IS, United States Code, Section 894.”
. 4 Wharton’s Criminal Law and Procedure § 1760, at 553 (R. Anderson ed. 1957); accord, Russell v. United States, 369 U.S. 749, 764, 82 S.Ct. 1038. 8 L.Ed.2d 240 (1962); Ilagner v. United States, 285 U.S. 427, 431, 52 S.Ct. 417, 76 L.Ed. 861 (1932); Wong Tai v. United States, 273 U.S. 77, 80-81, 47 S.Ct. 300, 71 L.Ed. 545 (1927); Burton v. United States, 202 U.S. 344, 372, 26 S.Ct. 688, 50 L.Ed. 1057 (1906) ; United States v. Simmons, 96 U.S. 360, 362, 24 L.Ed. 819 (1878); United States v. Cruikshank, 92 U.S. 542, 557-558, 23 L.Ed. 588 (1875); Flying Eagle Publications, Inc. v. United States, 273 F.2d 799, 802 (1st Cir. 1960); cf. Dario Sanchez v. United States, 341 F.2d 379, 380 (1st Cir.), cert. denied, 381 U.S. 940, 85 S.Ct. 1775, 14 L.Ed.2d 704 (1965).
. See United States v. Agone, 302 F.Supp. 1258, 1261-1262 (S.D.N.Y.1969).
. See United States v. Biancofiori, 422 F. 2d 584 (7th Cir.), cert. denied, 398 U.S. 942, 90 S.Ct. 1857, 26 L.Ed.2d 277 (1970); United States v. Calegro de Lutro, 309 F.Supp. 462 (S.D.N.Y.1970); United States v. Antonelli, Ind.No. 7638 (D.R.I.1970).
. A most perceptive discussion of the need for the identity of the victim in a similar species of case appears in United States v. Agone, supra n. 3, 302 F.Supp. at 1260-1261.
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3968004-16105 | ORDER AND JUDGMENT
TERRENCE L. O’BRIEN, Circuit Judge.
After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed. RApp. P. 34(a)(2); 10th Cir. R. 34.1. The case is therefore ordered submitted without oral argument.
Gregory Goodloe, a former federal prisoner appearing pro se, appeals from the district court’s dismissal of his 28 U.S.C. § 2241 petition for writ of habeas corpus. The district court concluded Goodloe failed to exhaust administrative remedies and dismissed his petition. Because Goodloe has been mandatorily released from federal custody pursuant to 18 U.S.C. § 4163, we conclude this appeal is moot.
I. BACKGROUND
In 1986, Goodloe was convicted in federal court of rape and sodomy. He was sentenced to twenty years imprisonment for rape and a concurrent term of five years for sodomy. The conviction was affirmed on direct appeal. See United States v. Goodloe, 804 F.2d 678 (table), No. 86-5017, 1986 WL 17956 (4th Cir. Nov.6, 1986). Goodloe was paroled on May 22, 1993. His parole was revoked in July 1995. He was paroled again on August 3, 1995. That parole was revoked in October 1996. He was paroled for a third time on April 13,1998.
On October 18, 2002, the United States Parole Commission issued a warrant based on Goodloe’s failure to report a change of address. Goodloe surrendered on November 12, 2002. On December 6, 2002, the Parole Commission supplemented the warrant with a new administrative violation. On February 24, 2003, the Commission again supplemented the warrant based on a state court complaint charging Goodloe with fifteen counts of sexual assault on a child, fifteen counts of sexual assault on a child by one in a position of trust and fifteen counts of aggravated incest.
On May 13, 2003, a parole revocation heai’ing was held. The hearing examiner determined Goodloe committed the offense of sexual assault on a child.. He recommended Goodloe sexwe only the time remaining on his sentence. (Respondent’s Answer to Order Show Cause at 9.) The Parole Commission concurred with the hearing examiner and Goodloe received a Notice of Action dated May 29, 2003, advising him of the decision. Goodloe received credit for the time he was on parole (“street time”) and was ordered to continue incarceration to the expiration of his sentence, which was believed to be on or about June 3, 2005.
The Notice of Action informed Goodloe the revocation was appealable to the National Appeals Board pursuant to 28 C.F.R. § 2.26. It stated Goodloe could obtain appeal forms from his casewox'ker or supervising officer and the forms must be filed with the Parole Commission within thirty days of the date the Notice of Action was sent. Goodloe did not file an appeal.
On February 19, 2004, Goodloe pled guilty to criminal attempt to commit sexual assault on a child in state court and was sentenced to six years imprisonment to run concurrent with his federal sentence. Based on this plea, the Parole Commission issued a Notice of Action on February 16, 2005, reopening Goodloe’s case and scheduling a special reconsideration heaxing for February 28, 2006, to address forfeiture of the “street time” that had previously been credited towards his sentence. The Notice of Action stated the decision was not appealable. (Id. at 143.)
On February 7, 2006, Goodloe filed an application for writ of habeas corpus pursuant to 28 U.S.C. § 2241 arguing: (1) the Parole Commission violated his right to due process by conducting a parole revoeation hearing on May 13, 2003, and considering a criminal charge for which Goodloe had not been formally charged in state court; (2) the Parole Commission violated his right to equal protection; and (3) the Parole Commission’s decision to consider x’evocation of his parole was based on inaccurate information. Goodloe sought to enjoin the hearing scheduled for February 28, 2006.
The distxict court took no action on Goodloe’s request for an injunction and the hearing proceeded on February 28, 2006. Goodloe refused to participate in the hearing. The hearing examiner recommended “[njone of the time [Goodloe] spent on parole shall be credited from the date of his release (4/13/98) to the date the warrant was executed (11/12/2002).” (R. Vol. I at 146.) He further recommended Goodloe remain incarcei’ated until the expix'ation of his sentence. The Parole Commission concurred with the x’ecommendation. The Notice of Action, dated March 13, 2006, stated the decision was not appeal-able.
The Parole Commission filed an answer to Goodloe’s § 2241 petition. It argued the petition should be dismissed for failure to exhaust administrative remedies but also addressed the merits of Goodloe’s claims. The Commission recognized that because Goodloe sought to enjoin a heaxing that had already taken place, “Goodloe presumably wants some relief in the nature of being completely released from federal parole.” (R. Vol. I at 52.) The Commission intexpreted Goodloe’s third claim for relief as addressing the Febx-uary 16, 2005 Notice of Action. It argued it “acted lawfully in x-eopening Goodloe’s case to conduct a reconsideration hearing.” (Id. at 66.) It claimed “a parolee who has been convicted of a exime automatically forfeits the time he spent on parole [street time].” (Id. at 67.)
The magistrate judge interpreted all of Goodloe’s claims as challenging the May 2003 parole revocation. He recommended Goodloe’s petition be dismissed with prejudice for failure to exhaust administrative remedies because he did not appeal the May 2003 revocation to the National Appeals Board. The magistrate judge determined Goodloe’s claims were proeedurally barred because of his failure to exhaust and he neither demonstrated cause and prejudice for the default nor argued the court’s failure to consider the claims would result in a miscarriage of justice. Goodloe submitted written objections to the magistrate’s recommendation specifically referencing the February 28, 2006 hearing. The district court adopted the magistrate judge’s recommendation and dismissed Goodloe’s petition for failure to exhaust administrative remedies.
Goodloe filed a motion for a certificate of appealability (COA), which the district court denied. The district court also denied Goodloe’s motion for leave to proceed informa pauperis (ifp) finding the appeal “is not taken in good faith because [Goodloe] has not shown the existence of a reasoned, nonfrivolous argument on the law and facts in support of the issues raised on appeal.” (R. Vol. I at 189). Goodloe filed a request to proceed ifp with this Court. On May 13, 2009, we issued an order denying Goodloe’s request to proceed ijp. Goodloe paid the filing fee in full on June 8, 2009.
On July 20, 2009, we issued an Order requesting an answer brief from the Appellees and permitting Goodloe to file a reply brief. We stated:
It appears Goodloe has fully served and been released from his federal sentence. All parties are invited to address whether this appeal is moot. See Garlotte v. Fordice, 515 U.S. 39, 115 S.Ct. 1948, 132 L.Ed.2d 36 (1995); Aycox v. Lytle, 196 F.3d 1174, 1176 n. 2 (10th Cir.1999); see also DeFoy v. McCullough, 393 F.3d 439, 442 (3d Cir.2005). Appellees may do so in their response brief and Goodloe may do so in his reply brief.
(No. 09-1017 (10th Cir. July 20, 2009)).
II. DISCUSSION
Prior to seeking relief under § 2241, a federal prisoner must exhaust administrative remedies. See Williams v. O’Brien, 792 F.2d 986, 987 (10th Cir.1986); see also Dulworth v. Evans, 442 F.3d 1265, 1268-69 (10th Cir.2006) (“[T]he general requirement that a petitioner under § 2241 must exhaust available state remedies ... extends to the exhaustion of administrative remedies as well.”). The district court dismissed Goodloe’s petition because it determined he failed to exhaust administrative remedies, interpreting all of his claims as challenging the May 2003 parole revocation.
Goodloe’s third claim for relief appears to challenge the February 16, 2005 Notice of Action, which stated a special reconsideration hearing would be scheduled to address forfeiture of the time Goodloe spent on parole — his “street time.” The Febru ary 16, 2005 Notice of Action was not appealable; nor was the March 13, 2006 Notice of Action, which contained the Parole Commission’s decision resulting from the special reconsideration hearing. Thus, it appears Goodloe did not fail to exhaust his administrative remedies as to his third claim for relief.
Before considering the merits of Goodloe’s appeal, however, we must determine whether this appeal is moot. See Green v. Haskell County Bd. of Comm’rs, 568 F.3d 784, 794 (10th Cir.2009) (recognizing mootness as “a threshold inquiry”). Federal courts are authorized to review only actual cases or controversies. U.S. Const, art. Ill, § 2, cl. 1. Consequently, “an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed.” Arizonans for Official English v. Ariz., 520 U.S. 43, 67, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997) (quotations omitted). “If, during the pendency of the case, circumstances change such that [a party’s] legally cognizable interest in a case is extinguished, the case is moot, and dismissal may be required.” Green, 568 F.3d at 794 (quotations omitted).
Goodloe was released from federal custody on July 8, 2005. At the time he filed his application for writ of habeas corpus (February 7, 2006), he was incarcerated with the Colorado Department of Corrections and was on parole for the federal offense. In his habeas application, he stated he sought to enjoin the hearing scheduled for February 28, 2006. That hearing took place notwithstanding Goodloe’s request. On August 6, 2008, Goodloe was mandatorily released based on his good time credits even though his full term does not expire until April 4, 2011. See 18 U.S.C. § 4163 (“[A] prisoner shall be released at the expiration of his term of sentence less the time deducted for good conduct.”). Thus, he is deemed released on parole until October 6, 2010. See 18 U.S.C. § 4164 (“A prisoner having served his term ... less good-time deductions shall, upon release, be deemed as if released on parole until the expiration of the maximum term ... for which he was sentenced less one hundred and eighty days.”). On appeal, Goodloe does not challenge his underlying conviction; instead, he argues his sentence should have “expired [on] March 3, 2006 less 180 Days.” (Appellant’s Opening Br. at 4.) The only question remaining is whether Goodloe’s mandatory release renders his appeal moot.
“When an incarcerated criminal defendant appeals his conviction, the ongoing incarceration constitutes an injury from which the defendant seeks relief in satisfaction of Article III.” United States v. Meyers, 200 F.3d 715, 718 (10th Cir.2000). If the defendant completes his sentence prior to the appellate court decision, we will presume that sufficient collateral consequences follow the underlying judgment and the completed sentence to satisfy Article III. See id. That presumption does not apply, however, where a petitioner is appealing from a parole revocation. In Spencer v. Kemna, the Supreme Court “decline[d] to presume that collateral consequences adequate to meet Article Ill’s injury-in-fact requirement resulted from petitioner’s parole revocation.” 523 U.S. 1, 14, 118 S.Ct. 978, 140 L.Ed.2d 43 (1998). “[T]he [Spencer] Court held that when a defendant challenges a parole revocation but has completed the sentence imposed upon revocation, the defendant bears the burden of demonstrating the existence of actual collateral consequences resulting from the revocation.” Meyers, 200 F.3d at 719.
Goodloe has not met this burden. In his reply brief, he states he “BELIEVES THAT COLLATERAL CONSEQUENCES AN EXCEPTION TO THE MOOTNESS DOCTRINE SHOULD APPLY TO HIS HABEAS CORPUS PETITION.” (Appellant’s Reply Br. at 2.) He does not particularize this claim. He cites a number of cases which set forth the parameters of the collateral consequences exception but does not specifically state what collateral consequences he faces. The fact his parole may again be revoked if he violates the law upon his release from state confinement “does not constitute a sufficient collateral consequence to defeat mootness.” See Meyers, 200 F.3d at 722; Spencer, 523 U.S. at 15-16, 118 S.Ct. 978. Goodloe also claims his state conviction is “an illegal sentence” but, even if true, that would not be a collateral consequence of the allegedly wrongful revocation of his federal parole. (Appellant’s Reply Br. at 2.)
Additionally, Goodloe argues his case presents a situation that is capable of repetition yet evading review, an exception to the mootness doctrine which “applies only in exceptional circumstances.” Spencer, 523 U.S. at 17, 118 S.Ct. 978 (quotations omitted). This exception will rescue a moot controversy only if: “(1) the challenged action is in its duration too short to be fully litigated prior to cessation or expiration, and (2) there is a reasonable expectation that the same complaining party will be subject to the same action again.” Id. (quotations omitted). The present case satisfies neither of these conditions. Like the petitioner in Spencer, Goodloe “has not shown ... that the time between parole revocation and expiration of sentence is always too short as to evade review. Nor has he demonstrated a reasonable likelihood that he will once again be paroled and have the parole revoked.” See id. at 18,118 S.Ct. 978.
DISMISSED.
This order and judgment is not binding precedent. 10th Cir. R. 32.1(A). Citation to orders and judgments is not prohibited. Fed. R.App. 32.1. But it is discouraged, except when related to law of the case, issue preclusion or claim preclusion. Any citation to an order and judgment must be accompanied by an appropriate parenthetical notation — (unpublished). 10th Cir. R. 32.1(A).
. We liberally construe Goodloe's pro se filings. See Ledbetter v. City of Topeka, Kan., 318 F.3d 1183, 1187 (10th Cir.2003).
. Before November 1, 1987, the terms of federal sentences were governed by the Parole Commission and Reorganization Act of 1976 (PCRA), Pub.L. No. 94-233, 90 Stat. 219-231 (codified as amended at 18 U.S.C. §§ 4201-4218 (1982)). See Bledsoe v. United States, 384 F.3d 1232, 1233 (10th Cir.2004). On November 1, 1987, the Sentencing Reform Act of 1984(SRA), Pub.L. No. 98-473, 98 Stat. 1987 (1984), became effective, repealing and replacing the PCRA. See id. “Under the SRA, parole was to be abolished, the Parole Commission was to be phased out, and prisoners were to serve uniform sentences under sentencing guidelines.” Id.
. Goodloe filed an amended application on February 17, 2006.
. The district court's order denying Goodloe’s motion for a COA mistakenly refers to the underlying action as involving 28 U.S.C § 2254. A federal prisoner proceeding under 28 U.S.C. § 2241 is not required to obtain a COA to appeal from a district court's denial of his petition. See McIntosh v. United States Parole Comm'n, 115 F.3d 809, 810 n. 1 (10th Cir.1997).
. Notably, even the Parole Commission did not argue Goodloe failed to exhaust administrative remedies as to his third claim for relief.
. It appears Goodloe may be released from state custody on June 5, 2010. He will not be subject to further action by the Parole Commission unless he "get[s] into trouble again (presumably due to his own volitional actions)." (Appellee's Supp. Statement of Apparent Factual Error in Appellee’s Answer Br. at 2.)
. Spencer did not involve a pre-guidelines sentence. However, Spencer’s holding has been applied to cases arising under the pre-guide lines sentencing regime. See, e.g., Fletcher v. United States Parole Comm’n, 550 F.Supp.2d 30, 44 (D.D.C.Cir.2008) (stating "[the] conclusion is inescapable under Spencer ” that petitioner's case seeking a writ of habeas corpus relating to his 1978 rape conviction is moot because he has already obtained his objective of securing release on reparole).
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1326313-6539 | ENOCH, Senior Circuit Judge.
The petitioners, Alicia and Leonor Carino, are here seeking review of an order of the Board of Immigration Appeals, dated April 16, 1971, which dismissed their appeals from the special inquiry officer’s denial of their application for adjustment of status under § 245 of the Immigration and Naturalization Act, Title 8 U.S.C. § 1255. The special inquiry officer did grant their alternative request for the privilege of voluntary departure in lieu of deportation.
The petitioners are sisters, natives and citizens of the Philippines, who entered the United States at San Francisco on or about March 17, 1968 as visitors for pleasure. Alicia was authorized to remain until about June 17, 1968, and Leonor until about August 17, 1968.
Prior to coming to the United States, on August 17, 1967, each of the Misses Carino had filed a petition for a third-preference visa classification as a teacher, under § 203(a) (3) of the Act, Title 8 U.S.C. § 1153(a) (3), which was approved on, respectively, January 15, 1968, and February 11, 1968, by the District Director at Chicago.
On May 27, 1969, after these had expired on November 2, 1968, and February 4, 1969, the petitioners were notified and asked for information to enable determinations to be made respecting re-validation.
On June 7, 1969, each of the petitioners filed requests for such revalidation. On June 12, 1969, the respondent requested the Bureau of Employment Security of the Department of Labor to consider revalidation of petitioners’ expired labor certifications and notified petitioners of this action.
On March 12, 1970, the Secretary of Labor began to require that a job offer be submitted with applications for labor certification of immigrant teachers, U. S. Department of Labor, Manpower Administration, Washington, D. C., U.S. T. E.S. Regional Bulletin No. 13-70, because studies by the Bureau of Labor Statistics and state employment services led to a conclusion that (1) the supply of teachers in the United States was then generally in balance with demand and (2) if the trend continued could significantly exceed demand in the immediate future.
On August 12, 1970, the District Director wrote the petitioners that their lapsed third-preference visa petitions could not be validated unless prospective employers secured labor certifications for them as teachers. When these labor certifications were not obtained (and the petitioners conceded that they could not be obtained) revalidation was denied. Although counsel stated in oral argument that both of the petitioners had taught in the Philippines, evidently neither held a position as a teacher during their stay in the United States.
Meanwhile on January 6, 1969, both petitioners filed applications for adjustment of status as permanent residents under § 245 of the Act, Title 8 U.S.C. § 1255, which were denied by the exercise of administrative discretion, respectively on July 30, 1969, and August 19, 1969, according to stipulation at the hearings, with the privilege of voluntary departure permitted by September 1, 1969, for Alicia and September 28, 1969, for Leonor.
The petitioners assert now that as nothing was then said about their visa petitions, they, therefore, assumed that these had been validated.
On May 12, 1970, orders to show cause were served with charges that petitioners had overstayed their authorized time. At the hearings, after admitting the charge of deportability, both petitioners reapplied for change of status, or in the alternative for the privilege of voluntary departure. At that time Alicia was described by her counsel as having an approved third-preference visa petition which had been revalidated. Counsel also said that Leonor was the beneficiary of an approved third-preference petition, but did not mention revalidation.
The hearings were adjourned in part to secure the records on the petitioners’ various applications. At subsequent hearings on July 13 and September 8, these various records were introduced as exhibits.
In his decision, the special inquiry officer referred to the major point raised in the proceedings before us. Counsel argued that petitioners should not be required to secure labor certifications because the change in regulations had occurred after the petitioners filed their visa petitions. It was counsel’s position that had the petitions been processed more expeditiously they would have been granted under the former regulations and that the respondent was culpable in connection with the delay.
The special inquiry officer noted that he had no authority to adjudicate visa petitions or to direct revalidation of previously approved visa petitions, matters which were solely in the District Director’s jurisdiction. As immigrant visas were not immediately available (as required by § 245(a) (3) of the Act) application for adjustment of status was properly denied. Exercise of discretion is provided for in the Act only where the specific prerequisite conditions for its exercise, as set out in § 245, are met, including that of immediate availability of an immigrant visa.
The petitioners contend that the delay in process of their petitions, during which conditions changed markedly, constitutes a denial of due process. They would distinguish Guinto v. Rosenberg, 9 Cir., 1971, 446 F.2d 11, 12, on which respondent relies, on the ground that in that case the Court found no evidence that the change in circumstances (and regulations applicable) occurred during a willful or oppressive delay on the part of the government. Petitioners here argue that the respondent’s failure to proceed more rapidly was malfeasance amounting to a gross abuse of function and denial of due process of law. We cannot agree.
As indicated, although the petitioners acquired approved third-preference visa petitions prior to entry, they entered the United States on visitors’ visas and then worked in positions where they were employed otherwise than as teachers. Their third-preference visas expired. The Act, Title 8 U.S.C. § 1182 (a) (14), prohibits immigrants coming to perform labor, including third-preference immigrants, unless the Secretary of Labor certifies that there is a shortage of workers to perform such work and that employment of the alien will not adversely affect wages and working conditions of workers in the United States similarly employed. Current Department of Labor regulations are controlling. DeLucia v. I. N. S., 7 Cir., 1966, 370 F.2d 305, 309, cert. den. 386 U.S. 912, 89 S.Ct. 861, 17 L.Ed.2d 784.
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3550451-9154 | MEMORANDUM OPINION AND ORDER
KANE, District Judge.
Defendants have moved to quash service of process and to dismiss for lack of personal jurisdiction pursuant to F.R.Civ.P. 12(b)(2). Alternatively, defendants have moved to dismiss for improper venue pursuant to F.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406(a), or to transfer pursuant to 28 U.S.C. § 1406(a). Both plaintiff and defendants have submitted memorandum briefs with accompanying affidavits and the motions are now ripe for determination.
Combs Airways, Inc. is a Montana corporation with its principal place of business in Colorado. Trans-Air Supply is a Florida corporation with its principal place of business in Miami, Florida. Design Engineering Company (DECO) is a subsidiary of Trans-Air and also has its principal place of business in Miami. The amount in controversy exceeds $10,000 and jurisdiction is founded on 28 U.S.C. § 1332. In a diversity action the court is bound to use the applicable law of the forum state. Colorado’s long-arm statute, C.R.S. 13-1-124 (1973) provides the basis for Combs’ assertion of personal jurisdiction over both defendants. The long-arm statute states in pertinent part:
Engaging in any act enumerated in this section by any person, whether or not a resident of the state of Colorado, either in person or by an agent, submits such person ... to the jurisdiction of the courts of this state concerning any cause of action arising from:
(a) The transaction of any business within the state;
(b) The commission of a tortious act within the state.
Combs contends that jurisdiction is present through both the “doing business” and the “tortious act” clauses.
The instant suit was precipitated by the alleged premature failure of four Pratt and Whitney aircraft engines owned and operated by Combs, which were sent to the defendants in Florida for routine overhaul. Defendants returned each of the four engines to Combs in Colorado after the overhaul was completed, and they were installed in various aircraft for resumption of normal service. In each case the engine failed after accumulation of a minimum number of flying hours well below the approved FAA specifications which state an engine should operate properly for 2100 hours between overhauls. According to plaintiff’s complaint the engine failures were caused by the general negligence of Trans-Air and DECO during the overhaul, and their noncompliance with FAA regulations and directives. Combs is suing the defendants for negligence, breach of contract, breach of warranty and fraud.
In defending their positions for or against personal jurisdiction plaintiff and defendants rely on much of the same case authority. Not surprisingly, both sides cite a host of cases well known to both federal and state courts of Colorado, including among others International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945); Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); World-Wide Volkswagon Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 580, 62 L.Ed.2d 490 (1980); Ruggieri v. General Well Service, Inc., 535 F.Supp. 525 (D.Colo.1982); Texair Flyers, Inc. v. District Court, 180 Colo. 432, 506 P.2d 367 (1973); Le Manufacture Francaise Des Pneumatiques Michelin v. District Court, Colo., 620 P.2d 1040 (1980); and Fleet Leasing, Inc. v. District Court, Colo., 649 P.2d 1074 (1982). Case authority is helpful to set guidelines and boundaries for the “minimum contacts” concept, but as is evident from the plethora of identical citations to support opposing arguments, I must still weigh the various factors involved in a specific set of circumstances to determine whether the defendant has purposely availed itself of the privilege of conducting business in Colorado, whether defendant should reasonably anticipate being haled into court in Colorado and whether the maintenance of a suit here offends traditional notions of fair play and substantial justice.
After carefully evaluating the facts of this case, I find that jurisdiction is proper for the following reasons: Defendants actively solicited plaintiff’s business in Colorado and had an ongoing and continuous business relationship for a period of close to two years before suit was filed. This business included the overhaul of engines, other maintenance work and the purchase of tools and parts. In addition to regular phone calls and mail correspondence between the parties in Florida and Colorado, employees of the defendants have made business trips to Colorado on several occasions to visit plaintiff’s facilities and work on aircraft engines, including the engines which are the subject of this lawsuit. Defendants do not deny these facts, but insist that such does not constitute the transaction of business within the state. I conclude that under these circumstances defendants have purposely availed themselves of the privilege of conducting business in Colorado and certainly should have foreseen the possibility of being haled into court in this state.
Defendants also argue that no tortious act was committed in Colorado since the alleged negligent and fraudulent acts were done within the State of Florida. Colorado law is clear on this point, and has been most recently stated in Fleet Leasing Inc. v. District Court, Colo., 649 P.2d 1074 (1982):
Threshold jurisdiction exists when it is demonstrated that tortious conduct initiated in another state ultimately caused injury in Colorado and that requiring a defense to the tort action in this state would be consistent with due process of law. (Citations omitted).
Id. at 1078. See also Shon v. District Court, 199 Colo. 90, 605 P.2d 472 (1980) which states:
This court continues to adhere to the principles stated in the Restatement of Conflicts [section 377] that the place of the injury — that is, the place where the defect manifests itself — is the place of the commission of the tort referred to in our long arm statute.
Plaintiff’s complaint, to meet the burden imposed upon one seeking a remedy under the long arm statute, must allege sufficient facts to support a reasonable inference that defendants engaged in conduct described in the statute. This plaintiff has done. The motions to quash and dismiss for lack of personal jurisdiction are denied.
Defendants have also moved in the alternative to dismiss for improper venue. 28 U.S.C. § 1406(a) states:
The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.
Defendants allege improper venue pursuant to 28 U.S.C. § 1391(a) which directs that a civil action founded on diversity of citizenship may be brought only in the judicial district where all plaintiffs or all defendants reside or in which the claim arose. Reading further, Section 1391(c) states that “a corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.” Defendants argue that because plaintiff is incorporated in Montana, it cannot claim residency in Colorado. This argument is not persuasive.
Because of modern corporate practices, venue and jurisdictional concepts have been broadened to accommodate the realities of contemporary business. The principal place of business may be considerably more significant to jurisdiction and venue than the place of incorporation. While I am aware that courts are not in agreement on this issue, I hold that this broader interpretation should apply to a corporation which institutes a suit as well as to one subject to suit. Another district court came to the same conclusion in Munsingwear, Inc. v. Damon Coats, Inc., 449 F.Supp. 532 (D.Minn.1978).
Venue rules are intended to facilitate convenience of the parties, and the convenience of the plaintiff, who chose the forum, normally should be given deference. Given these principles, it makes little sense to adopt a rule whereby a plaintiff corporation is not considered a resident, for venue purposes, of the state where its principal place of business is located simply because it chose for business purposes to incorporate in a state other than the one where it in fact does most of its business.
Id. at 536-37.
The United States Supreme Court, in discussing the broadening effect of 1391(c) and the realities of modern venue concepts has also stated:
The redefinition of corporate residence clearly touches the general diversity and federal-question venue provisions of §§ 1391(a) and (b). Although there is no elucidation from statutory history as to the intended effect of § 1391(c) on special venue provisions, the liberalizing purpose underlying its enactment and the generality of its language support the view that it applies to all venue statutes using residence as a criterion, at least in the absence of contrary restrictive indications in any such statute.
Pure Oil Company v. Suarez, 384 U.S. 202, 204-05, 86 S.Ct. 1394, 1395-96, 16 L.Ed.2d 474 (1966).
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1376622-7488 | FRANK M. JOHNSON, Jr., Circuit Judge:
On March 27, 1979, the United States Attorney for the Middle District of Florida filed an information charging defendant Patrick T. Vanella with two counts of failure to file federal income tax returns in violation of 26 U.S.C. § 7203. At his arraignment on April 9, Vanella’s trial was set for June 26, 1979. On April 19, however, Vanella moved under 18 U.S.C. § 3237(b) to be tried in the district of his residence, the Southern District of Florida. Although the United States Magistrate ordered the case transferred the same day, the case was not filed in the Southern District until April 30. On June 7,1979, Judge Gonzalez of the Southern District recused himself from further participation in the matter and, on June 11, the case was reassigned to Judge Lawrence King. Notice sent by the clerk of court on June 26 informed Vanella that he would be tried on July 16.
Because of delay in receiving his trial, Vanella on July 13 filed a motion to dismiss the prosecution for failure to comply with the provisions of the Speedy Trial Act, 18 U.S.C. §§ 3161 et seq. The court denied the motion, however, and trial began on July 16. The next day Vanella’s jury found him guilty on both counts as charged. On September 12, Judge King sentenced Vanella for each count to four months’ incarceration and a fine of $10,000, the sentences to run concurrently. Vanella appeals.
Vanella’s trial followed by ninety-seven days his arraignment in the Middle District of Florida; transfer of the case to the Southern District of Florida preceded trial by eighty-eight days. The Speedy Trial Act requires that Vanella’s trial occur within eighty days of arraignment. See 18 U.S.C. § 3161(g). Moreover, effective July 1, 1979, 18 U.S.C. § 3163(c), the Act required, upon motion of the defendant, the dismissal of the prosecution where the applicable time limits of the statute have not been met. 18 U.S.C. § 3162(a)(2). Before the effective date of the dismissal sanction, however, Congress began reconsideration whether the federal courts were yet prepared for simultaneous imposition of the dismissal sanction and the permanent time limitations under the Speedy Trial Act. Concluding that the federal courts were not so prepared, the Senate, on June 19, 1979, and July 31, 1979, and the House, on July 31, 1979, passed legislation that would suspend the operation of the dismissal sanction. See [1979] U.S.Code Cong. & Admin.News, at 805. On August 2, the Speedy Trial Act Amendments of 1979, Pub.L. No. 96-13, 93 Stat. 327, 332, became law. The legislation suspends until July 1, 1980, the effectiveness of the dismissal sanction of 18 U.S.C. § 3162(a)(2). 93 Stat. 327, 328-29. The legislative history demonstrates that Congress determined that:
some temporary suspension of the dismissal sanction is justified. In retrospect, once the decision was made to have a phase-in period prior to imposition of the dismissal sanction, it appears that the wiser approach would have been to provide some time during which the permanent time limits would be in effect without the dismissal sanction. The suspension will provide that result.
H.R.Rep. No. 390, 96th Cong. 1st Sess. 8, reprinted in [1979] U.S.Code Cong. & Admin.News, pp. 805, 812.
Vanella contends that the 1979 amendments are prospectively applicable only and that, because he went to trial in July, 1979, the district court committed reversible error in denying the motion to dismissal under 18 U.S.C. § 3162(a)(2). We disagree.
It is true that “ ‘the first rule of construction is that legislation must be considered as addressed to the future, not to the past . [and] a retrospective operation will not be given to a statute which interferes with antecedent rights’ ” absent the clearly expressed intention of. Congress. Greene v. United States, 376 U.S. 149, 160, 84 S.Ct. 615, 621, 11 L.Ed.2d 576 (1964) [quoting Union Pac. R. Co. v. Laramie Stock Yards Co., 231 U.S. 190, 199, 34 S.Ct. 101, 102, 58 L.Ed. 179 (1939)]. Nevertheless, as this Court held in considering a change in the draft laws:
Granting [the application of the “first rule of construction,”] that canon of con struction must yield to the rule here controlling that changes in statute law relating only to procedure or remedy are usually held immediately applicable to pending cases, including those on appeal from a lower court. This last mentioned rule of statutory construction defers only to a contrary [Congressional intent].
Turner v. United States, 410 F.2d 837, 842 (5th Cir. 1969). The rule followed in Turner is well established — statutory changes that are procedural or remedial in nature apply retroactively. See e. g., Hallowed v. Commons, 239 U.S. 506, 508, 36 S.Ct. 202, 203, 60 L.Ed. 409 (1916); Bush v. State Indus., Inc., 599 F.2d 780, 786 n. 9 (6th Cir. 1979); Mahroom v. Hook, 563 F.2d 1369, 1373 (9th Cir. 1977), cert. denied, 436 U.S. 904, 98 S.Ct. 2234, 56 L.Ed.2d 402 (1978); United States v. Blue Sea Line, 553 F.2d 445, 448 (5th Cir. 1977); United States v. Mechem, 509 F.2d 1193, 1196 (10th Cir. 1975); Womack v. Lynn, 504 F.2d 267, 269 (D.C. Cir. 1974); Roger v. Bad, 497 F.2d 702, 706 (4th Cir. 1974); 2 Sutherland, Statutes & Statutory Construction § 41.04 (Sands rev. 1973), quoted in United States v. De Jesus Moran-Rojo, 478 F.Supp. 512, 513 (N.D.Ill.1979). That rule applies here.
In United States v. De Jesus Moran-Rojo, supra, the United States District Court for the Northern District of Illinois held the 1979 amendment to the Speedy Trial Act suspending imposition of the dismissal penalty to be procedural and, accordingly, applicable to pending cases. 478 F.Supp. at 513. We concur. The purpose of the 1974 Speedy Trial Act, as stated in its legislative history, is “to assist in reducing crime and the danger of recidivism by requiring speedy trials . . . H.R.Rep. No. 1508, 93d Cong., 2d Sess., reprinted in [1974] U.S.Code Cong. & Admin.News, pp. 7401, 7402. As an aid in the achievement of its purpose, the Speedy Trial Act provides for the “sanction” of dismissal for failure to comply with the time limits set by the statute. See id. at pp. 7403,7416 (emphasis added). We hold, as did the court in De Jesus Moran-Rojo, supra, that the amendment to the Speedy Trial Act deferring the dismissal sanction is a procedural change entitled to be given effect in pending cases. The legislative history of the 1979 amendments gives no indication of Congressional intent to the contrary. Congress determined that the federal judiciary was unprepared for application of both the dismissal sanction and the final Speedy Trial Act time limitations and accordingly acted to suspend, for one year only, the effective date of the dismissal sanction. Vanella is not entitled to dismissal of the prosecution under the Speedy Trial Act.
Absent a statutory right to dismissal of the prosecution, Vanella’s contentions must be examined to determine whether dismissal is constitutionally mandated. In considering whether Vanella’s Sixth Amendment right to speedy trial was abridged, the Court must scrutinize the length of delay, the reason for delay, the defendant’s assertion of his right to speedy trial, and the prejudice that may have resulted. Barker v. Wingo, 407 U.S. 514, 530, 92 S.Ct. 2182, 33 L.Ed.2d 101 (1970). If the Barker test is not met, dismissal is not required. United States v. Elorduy, 612 F.2d 986, 988 (5th Cir. 1980); see United States v. Novedi, 544 F.2d 800, 803 (5th Cir. 1977).
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7366035-23773 | DAWKINS, District Judge.
The plaintiffs, consisting of a number of corporations engaged in the laundry, dry cleaning, and dyeing business in Shreveport, have assailed certain provisions of the general license law of the state imposing occupation taxes (Act No. 190’ of 1982) in so far as it applies to their business, on the following grounds, to wit:
(1) That under section 8 of article 10 of the Constitution of the state, those engaged in mechanical pursuits, such as petitioners, are exempt from license taxes, but section 26 of the act attempts to impose the tax upon their business, based on the gross annual receipts.
(2) That the Supreme Court of the state, in State v. Up-To-Date Shoe Repairing Co., Inc., 175 La. 917, 144 So. 714, 716, has construed this exemption as applying only to “natural persons engaged in mechanical pursuits,” and as thus interpreted it violates the first section of Amendment 14 of the Constitution of the United States, in that it denies to the corporate petitioners the equal protection of the law.
(3) That said statute further discriminates as between them and Civil War veterans engaged in the same business who are exempted from the tax.
A further question was raised in oral argument and in brief, to the point that since the statute levies the license based upon gross receipts from both intra and interstate business, it is invalid under the commerce clause of the Federal Constitution (article 1, § 8, el. 3) giving to Congress the right to regulate interstate commerce, as a part of petitioners’ business comes from the state of Texas.
Defendants have moved to dismiss the bill (1) for want of jurisdiction in this court as to the amount involved, and (2) because it does not present a “substantial federal question.”
Motion to Dismiss.
It is true that as to none of the plaintiffs does the license tax, with penalties for any one year, amount to $3,000, but there is no law of the state which permits them to pay and sue to recover it back. The statute also, after certain delays and demands, authorizes procedure to prevent the carrying on of the business until the tax has been paid, under heavy penalties in the nature of moneyed recoveries for failure to display the license; and, taken altogether, we think this involves the right of the complainant to do business to such extent that the amount in controversy exceeds the sum of $3,000 in each instance. For these reasons, we find that the court has jurisdiction. The ease does involve a substantial question as to the equal protection of the law under the Federal Constitution, and the motion to dismiss should, therefore, be overruled.
On the Merits.
The facts are that originally two of the plaintiffs were individuals, operating under trade-names, and corporations engaged in the laundry, dry cleaning, and dyeing business in the city of Shreveport. Subsequently the individuals were permitted to withdraw. They solicit and receive clothing, hats, household supplies, etc., which are washed, cleaned, or dyed at fixed rates in the plants located in said city. The work is done both by machinery and by hand. The clothing, etc., are gathered upi by employees in wagons or trucks in most instances, but in others are delivered and called for by the owners in person. There are several unincorporated concerns engaged in the same business, the volume of some being larger and others smaller than that of the corporate petitioners. It was shown that the individual petitioners who withdrew would be compelled to pay the tax, to wit, White Cleaners & Dyers, owned by J. L. ■White, and Barrel Cleaners, owned by Don A. Rials. It was likewise shown that all individual operators are required to pay the tax except those who actually perforin manual labor themselves in the plants; and this is the real test applied, all others, whether conducted by individuals or corporations, being required to pay the license tax for the privilege of doing business.
There was also offered in evidence a certificate of the superintendent of public health of the city of New Orleans, to the effect that there are “436 steam laundries, steam cleaning and pressing plants in the City of New Orleans, of which number approximately 20 are corporations.”
A certificate of the state treasurer shows there are 2,348 veterans and widows of veterans of the Civil War on the state pension roll.
We do not deem it necessary to describe the operations of laundries, dry cleaning, and dyeing plants as the same are well known.
The Act No. 190 of 1932 is the general license law of the state. Section 2 requires the tax collector of the state to begin collecting the tax on the 2d day of January of each year and provides that the same “shall be due and collectible during the first two (2) months of each year, and all unpaid licenses shall become delinquent on the first day of March of each year. * * * ”
It then proceeds to classify and fix the amount of the license tax as to each kind of business, profession, or occupation, according to its nature, and as to the class in which plaintiffs fall, it provides as follows: “That for every individual, firm, association or corporation carrying on the profession or business of steam dyeing, steam cleaning, steam, pressing, or the business of steam or electric laundering, the license shall be based upon the gross annual receipts from such profession or business, and shall be fixed and graded as follows, to-wit.” Section 25.
The tax "begins at $2,009. Where the gross annual “receipts are $1,000,0W or more,” and is gradually reduced to a minimum of $15, where said “receipts are less than $5',000.”
Section 45 declares that the “annual receipts, * * * referred to as a basis of licenses, are those for the year for which the license is granted; the standard for their estimation shall be, prima facie, of the preceding year if the business has been conducted previously by the same party, or by parties to whom he claims to be successor. If the firm or company be new, the amount of gross sales for the first two months shall be considered the basis, and six times that amount shall be estimated as the annual receipts of business. * * * ”
Section 48 provides that if a business be conducted without the license required by the act, then the officers whose duty it is to issue the license shall, in the proper court, “sue out a rule on the party” to show cause on the fifth day after service, exclusive of holidays, why he should not pay the amount of the license tax claimed and penalties, “and be ordered to cease from further pursuit of said business until after having obtained a license.” If the rule is made absolute! it operates as a judgment in favor of the state, and “every violation of the order shall be considered as a contempt thereof, and punished according to law. * * * ” The section requires that the said license shall be kept posted in the place of business, “under a penalty of not less than ten nor more than one hundred dollars, recoverable by the tax collector before any court of competent jurisdiction. * * *”
Sections 56 and 58 are quoted, as follows:
“Sec. 56. That all gross receipts derived from any mercantile business or occupation whatsoever, as hereinbefore provided, whether earned within or without the State, shall form the proper basis upon which all licenses shall be assessed and collected by the tax collector.
“Sec. 58. That license taxes levied by this Act shall not apply to blind persons, who are exempted from license taxes by Act No. 130 of 1924, nor to- Confederate soldiers, their wives or widows, who are exempted from license taxes by Act No. 158 of 1916, as amended by Act No. 11 of 1932.”
Section 59, which immediately precedes the last and repealing section, declares that if “any clause, sentence, paragraph, or part of this Act” is declared invalid, it shall not affect any other provision.
Plaintiffs have been called upon by the proper authorities to pay the tax, which operates as a lien upon their property, in amounts as set out in' the petition and, for the failure to do so, may be proceeded against according to the provisions of the act.
Section 8 of article 10' of the present Constitution of the state, adopted in 1921, reads as follows: “Section 8. ■ License taxes may be levied on such classes of persons, associations of persons and corporations pursuing any trade, business, occupation, vocation or profession, as the Legislature may deem proper, except clerks, laborers, ministers of religion, school teachers, graduated trained nurses, those engaged in mechanical, agricultural, or horticultural pursuits or in operating saw mills. Such license taxes may be classified, graduated or progressive. * * * ”
We, of course, are bound by the construction placed upon the Constitution and laws of the state by its court of last resort. The real basis of attack upon the license law in' this case is the alleged discrimination resulting from the holding by the state Supreme Court in the ease of State v. Up-To-Date Shoe Repairing Company, Inc., 175 La. 917, 144 So. 714, 715, that the exception or exemption above quoted does not apply to corporations engaged in mechanical pursuits. In that case it was -decided, notwithstanding the express finding that the business of the alleged taxpayer was a mechanical pursuit within the meaning of the Constitution, the exemption did not apply to it as a corporate entity. The reason given was that the court had consistently held under the Constitutions of 1879, 1898', 1913, and 1921 that this exemption “applies only to a mechanic who performs his work with his own hands, although the exemption is not denied him because he may obtain the help of other mechanics,” citing the eases of Theobalds v. Conner, 42 La. Ann. 787, 7 So. 689; City of New Orleans v. O’Neil, 43 La. Ann. 1182; 10 So. 245; State v. NcNally, 45 La. Ann. 44, 12 So. 117; City of New Orleans v. Pohlmann, 45 La. Ann. 219, 12 So. 116; City of New Orleans v. Leibe, 45 La. Ann. 346; 12 So. 625. It quoted approvingly from the first of these cases, as follows: “ ‘A “mechanic,” according to Worcester, is one employed in mechanical or manual labor; and “mechanical” is defined to be “employment in manual labor.” Taking the phrase “engaged in mechanical pursuits” according to these definitions, and it is clear that the framers of the constitutional article intended to relieve from license those persons who are engaged, from dag to day, in the performance of manual labor in mechanical or agricultural pwsuits; and that the master builders and contractors, who employ others to do the work which they merely superintend, should, like other professional men, pay the license tax.’ ” (Italics by the Supreme Court.) See, also, City of New Orleans v. Robira, 42 La. Ann. 1099, 8 So. 402, 11 L. R. A. 141; City of New Orleans v. Lagman, 43 La. Ann. 1180, 10 So. 244; City of New Orleans v. Bayley, 35 La. Ann. 545; State v. Hirn, 46 La. Ann. 1443, 16 So. 403; State v. Dielenschneider, 44 La. Ann. 1116, 11 So. 823. In some of the cited eases it was pointed out that the persons denied the exemption, including individuals and corporations, employed others to do the labor under their supervision ór management but did not perform it themselves; and it was further said in the Up-To-Date Shoe Repairing Case:
“This jurisprudence seems to be fully warranted by the language of the exempting clause itself. It appears to us that the author when he wrote the clause had in mind natural persons and not artificial persons. The exemption is granted to clerks, laborers, ministers of religion, school teachers, and graduated trained nurses, all natural persons, and also to those (natural persons) engaged in mechanical pursuits.
“If, as the jurisprudence holds, master builders and other persons who employ mechanics to do their work are amenable to license taxes, we see no good reason why corporations who also employ mechanics to do their work should not likewise be amenable to such taxes.
“A corporation cannot possibly perform manual labor in mechanical pursuits. It may employ mechanics to do the work necessary for the transaction of its business, which may be of a mechanical nature; but, after all, it is the employer corporation and not the employee mechanics that is actually engaged in operating the corporate business. The corporation deals with the public and the public deals with the corporation; each being responsible to the other. No contractual relations whatever exist between the corporation’s mechanics and the corporation’s patrons. The corporation pays its employees the agreed wages, and, presumably, derives a profit from the difference between the amount of 'these wages, plus other operating expenses, and its receipts from the patrons of the enterprise in which it is engaged.
“The purpose' of the law, as we see it, is to exempt and encourage the mechanic who actually works at his trade with his own hands and not to exempt and protect an artificial being that merely profits by the use of the mechanic’s labor and skill in the conduct of its own business.”
Reference has been made by counsel for the petitioners in the present suit to the case of State v. Chicago Hat Works, 174 La. 814, 141 So. 844, 845, wherein the alleged tax debtor, an individual operating under a trade-name, was engaged in cleaning and blocking hats; and, notwithstanding the fact he employed others to assist therein, was held to be exempt from the tax. The opinion in that ease recites that the defendant worked “daily in his cleaning establishment, and uses his hands and machinery in the cleaning and blocking of hats; that he has two men at the bench working with him, and a- girl to help sew the bands on the hats; and that, if he is busy, he gets extra help.” It is further stated that the size of the income makes no difference. An examination of this ease and all of the cases cited shows that the distinction made between those who are held to owe the tax and those who do not is that the latter actually perform the manual labor themselves; whereas, the former carry on the business through persons who are hired to do the work. Before this court can say that this holding renders the act invalid under the Federal Constitution (Amendment 14) as denying the equal protection of the law, we must conclude that the distinction relied on by the state court is without substance and unreasonable. Stebbins v. Riley, 268 U. S. 137, 143, 45 S. Ct. 424, 69 L. Ed. 884, 44 A. L. R. 1454. Is it unreasonable to assume that natural persons engaged in such pursuits, even though they employ assistants, will not continue to work with their own hands when the business, through successful operation, acquires substantial proportions? Or that the excusing from the tax also of those who have a few persons to help in the small shop, when the business has grown to the point that it cannot be done by the proprietor alone, will not result in creating unfair competition with corporations, individual and contracting employers? In the present state of our economic and social development, amidst a world-wide depression, the press, magazines, and books are filled with discussions and arguments in support of one theory or another; some asserting that the machine age, mass production, and large corporate entities, with their stifling influence up on the small artisan or shop keeper, are converting the individual workers into automatons or mere cogs in a vast machine which will eventually prove a Frankenstein. On the other hand, we see the present national administration, pursuant to the most extraordinary powers ever granted to an executive in peace time, regimenting industry and business of all kinds, including agriculture, into great units, covered by codes and regulations to establish uniform prices and practices, including hours of labor. Contemporaneously, the situation is far more intense and the measures adopted far more drastic in other leading nations of the world. No man can say what the ultimate outcome will be. We have no doubt that the Supreme Court of the state, in the several decisions referred to in the case relied upon by the complainants as giving the law an unconstitutional meaning, was correct in the statement that the purpose of the exemption was to encourage and assist the man who labors with his own hands; and we also agree that the hiring of a few assistants, who likewise labor with their hands in carrying on the businesses or mechanical pursuits covered by the exemption, does not serve to remove the alleged tax debtor from the favored class. There appears to be a clear distinction, and one which is reasonably sufficient for the Legislature to act upon it without running afoul of the Federal Constitution, between the man who labors and earns his living by the sweat of his brow and a corporate entity or individual contractor or employer who makes its or his profits from the hired labor of others. In the former instance, the return is governed by the industry, skill, and effort of the individual ; whereas, in the latter, it is affected to some extent at least by the extent to which the wages of the workmen may be kept low, and the success of the corporate or individual employer in selecting agents and employees who may be capable or imbued with loyalty to the employer’s interest. It goes, without saying, that the corporate being cannot itself perform manual labor. It also enjoys certain advantages (or at least its stockholders do) of being protected from liability for its debts, as well as faults and mistakes beyond its capital and assets, as well as continuous existence, market value for and easy transfer of the stock, etc. See Flint v. Stone Tracy Co., 220 U. S. 107, 163, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312; Ft. Smith Lbr. Co. v. Arkansas, 251 U. S. 533, 534, 40 S. Ct. 304, 64 L. Ed. 396. While the tax in this ease cannot be denominated either a franchise or income tax, still it is a payment for the privilege of doing business, based upon volume, which smacks very strongly of the elements of both and as to which it is uniformly held a distinction may be made between corporations and individuals. In none of the decisions of the state Supreme Court has it been held that the business was exempt from the tax solely because it was owned by an individual. On the contrary, in every instance where he merely employed others to do the work the tax was sustained. Likewise a corporation is held not to be exempt for the simple reason that it, the imaginary being, cannot perform manual labor.
Plaintiff has cited the ease of Quaker City Cab Co. v. Pennsylvania, 277 U. S. 389, 48 S. Ct. 553, 554, 72 L. Ed. 927, to the point that a distinction cannot be made based solely upon the fact that the ownership of the thing taxed is in a corporation while exempting in dividuals in the same situation. In that case the state imposed a tax of eight mills “upon the dollar upon the gross receipts” of every corporation foreign or domestic “received from passengers and freight traffic transported wholly within this state. * ** * ” It did not require the payment of this tax by partnerships and individuals so engaged. The Supreme Court said: “It (the tax) is laid upon and is to be considered and tested as a tax on gross receipts; it is specifically that and nothing else.”
Three of the justices, Holmes, Brandéis, and Stone, dissented. Justice Brandéis delivered a very strong dissenting opinion, in which the other two concurred. The tax in the present case is not one upon gross receipts as such, but is a license tax in which the amount of gross receipts is used to determine the size of the tax. Clearly, therefore, it is a tax for the privilege of doing business as distinguished from either property tax or a tax upon the business or its receipts; and the classification by which one is exempt, and the other required to pay it, is based upon the fact that the former involves the performing of manual labor by the tax debtor himself.
In Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 3421, 55 L. Ed. 389; Ann. Cas. 1912B, 13121, the tax laid by Congress upon corporations (36 Stat. 11, 112, c. 6, § 38) was under attack. It imposed upon “every corporation, joint stock company or association, organized for profit, * * * a special excise tax with respect to the carrying on or doing business * * * equivalent to one per centum upon the entire net income. * * » jn almiyzing the statute, the court, through Justice Day, at pages 145, 146, of 220 U. S., 31 S. Ct. 342, 346, said: “While the mere declaration contained in a statute that it shall be regarded as a tax of a particular character does not make it such if it is apparent that it cannot be so designated consistently with the meaning and effect of the act, nevertheless the declaration of the lawmaking power is entitled to much weight, and in this statute the intention is expressly declared to impose a special excise tax with respect to the carrying on or doing business by such corporation, joint stock company or association, or company. It is therefore apparent, giving all the words of the statute effect, that the tax is imposed not upon the franchises of the corporation, irrespective of their use in business, nor upon the property of the corporation, but upon the doing of corporate or mswcmce business, and with respect to the carrying on thereof, in a sum equivalent to 1 per centum upon the entire net income over and above $5;000 received from all sources during the year; that is, when imposed in this manner it is a tax upon the doing of business, with the advantages which inhere m the peculiarities of corporate or joint stock organization of the character described.”
I quote further from this case as follows:
“Within the category of indirect taxation, as we shall have further occasion to show, is embraced a tax upon business done in a corporate capacity, which is the subject-matter of the tax imposed in the act under consideration. The Pollock Case [157 U. S. 429, 15 S. Ct. 673, 39 L. Ed. 759] construed the tax there levied as direct, because it was imposed upon property simply because of its ownership. In the present case the tax is not payable unless there be a carrying on or doing of business in the designated capacity, and this is made the occasion for the tax, measured by the standard prescribed. The difference between the acts is not merely nominal, but rests upon substantial differences between the mere ownership of property and the actual doing of business m a certain way.” Page 150 of 220 U. S., 31 S. Ct. 342, 348.
“ * * * The tax under consideration, as we have construed the statute, may be described as an excise upon the particular privilege of doing business in a corporate capacity, i. e., with the advantages which arise from corporate or quasi corporate organization; or, when applied to insurance companies, for doing the business of such companies. As was said in the Thomas Case, 192 U. S. 363 [24 S. Ct. 305, 48 L. Ed. 481], supra, the requirement to pay such taxes involves the exercise of privileges, and the element of absolute and unavoidable demand is lacking. If business is not done in the manner described in the statute, no tax is payable.” Page 151 of 220 U. S., 31 S. Ct. 342, 349.
“ * * * The thing taxed is not the mere dealing in merchandise, in which the actual transactions may be the same, whether conducted by individuals or corporations, but the tax is laid upon the privileges which exist in conducting business with the advantages which inhere in the corporate capacity of those taxed, and which owe not enjoyed by private firms or ’individuáis.” Page 161 of 220 U. S., 31 S. Ct. 342, 353. (Italicizing by the writer of this opinion.)
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3955845-26614 | MEMORANDUM DECISION REGARDING THE AMOUNT OF FIRST MANHATTAN’S CLAIM
STUART M. BERNSTEIN, Bankruptcy Judge.
The Debtor seeks to confirm its plan in this single asset real estate case, and First Manhattan Developments REIT (“First Manhattan” or “FM”), the principal secured creditor, has filed objections. The Court has already determined that First Manhattan’s collateral, the building owned by the Debtor and located at 48th Street and Eighth Avenue (the “Building”), has a market value of $91.7 million. (Memorandum Decision Regarding Value of Debtor’s Building, dated Mar. 20, 2012 (ECF Doc. # 164).)
The current dispute concerns the amount of First Manhattan’s claim, which the parties agreed to try on stipulated facts. For the reasons that follow, the Court concludes that First Manhattan held a claim, exclusive of attorneys’ fees, in the amount of $96,999,633.54 as of August 3, 2011 (the “Petition Date”). First Manhattan’s allowed claim also includes any subsequent protective advances. Finally, interest will continue to accrue on the principal balance of $81,212,506.00 and the protective advances at the Default Rate (as defined under the Loan Documents) to the extent permitted by 11 U.S.C. § 506(b).
BACKGROUND
In January 2007, the Debtor borrowed $84,212,506.00 to finance the construction of the Building from PB Capital Corporation (“PB Capital”) and Commerce Bank, N.A. (which was subsequently acquired by T.D. Bank, N.A. (“TD Bank”, and together with PB Capital, the “Original Lenders”)). CStipulation at ¶ 1.) The Loans are secured by first priority mortgages (the “Mortgages”, and together with the Notes and all other documents executed in connection therewith, the “Loan Documents”) on the Building and the Units (as defined in the Loan Documents). (Id. at ¶ 2.) The Original Lenders received additional security in the form of the pledge of certain contract deposits (see footnote 1) and a $3 million letter of credit. (See id. at ¶ 3.) First Manhattan is the assignee of the Original Lenders, and holds all of their rights under the Loan Documents. (Id. at ¶ 4.)
The Loans matured on August 7, 2009 (the “Maturity Date”). (Id. at ¶ 5.) In or around August 2009, the Original Lenders drew down the Letter of Credit, and as a result, the principal amount presently due on the Loans is $81,212,506. (Id. at ¶ 5.) The Debtor has not made or been credited with any payments after the Maturity Date, (id. at ¶ 9), except for the drawdown of the $3 million letter of credit. (Id. at ¶ 9 n. 4.)
A. The Effect of a Default
The provisions governing the accrual and obligation to pay interest (including regular and default interest and a late payment fee) on the Loans are found in the BLA (and incorporated by reference in all of the Notes). (Id. at ¶ 6.) Pursuant to Sections 2.12 and 2.13 of the BLA, prior to the occurrence of an Event of Default (as that term is defined in the BLA), the Debtor could select to have portions of the Loans bear interest based on the one-month London InterBank Offered Rate (“LIBOR”) for different amounts and different periods, essentially bearing interest at the one-month LIBOR plus 2.75% per annum (the “LIBOR Rate”). The Debtor could also select the prime rate as reported in the Wall Street Journal plus 1.75% per annum (the “Base Rate”). (Stipulation at ¶ 7.)
This option terminated once the Loans matured without payment or an Event of Default occurred. (See BLA § 2.15.) At that point, the interest rate on the Loans became fixed at the Rase Rate (prime plus 1.75%). (Stipulation at ¶ 8.) The Debtor’s default also triggered two additional categories of other costs. First, the Loans accrued interest at the Default Rate which consisted of the Base Rate plus 5%. (BLA § 2.12.) The Base Rate has been 5% at all relevant times since the Maturity Date, and consequently, the Default Rate has been 10% at all relevant times since the Maturity Date. (Stipulation at ¶ 13.)
Second, the BLA imposed a late payment fee of 5% (“Late Payment Premium”). Section 2.16 of the BLA provides, in pertinent part, as follows:
Borrower shall pay to Administrative Agent, for the account of Lenders, a late payment premium in the amount of 5% of any payments of regular principal, interest, fees or other amounts payable under the Loan Documents made more than five (5) days after the due date thereof, which late payment premium shall be due with any such late payment. The late payment premium is to cover administrative and related expenses incurred in handling delinquent payments.
The late payment provision does not contain an exception for the “balloon payment” of principal due on maturity. (Stipulation at ¶ 14.)
B. The Claim Asserted by First Manhattan
On or about July 11, 2011, PB Capital sent the Debtor a pay-off letter (the “PayOff Letter”) (JX 6), showing the amount that would be due as of August 3, 2011, which turned out to be the Petition Date. The Pay-Off Letter included the following items:
Principal amount due_81,212,506.00
Regular Interest (Base Rate = 5%) due_6,699,840.16
Default Interest (5%) due_8,024,785.13
Administrative Pees due ($6,000 per month)_138,000.00
Late Payment Premium due_3,845,369.25
Protective Advances and Enforcement Costs due_886,690.23
Protective Advances Default Interest due_38,312.02
Total amount due_100,845,002.80
(Stipulation at ¶ 15.)
Prior to entering the Stipulation, First Manhattan filed a timely proof of claim (No. 1-1) and an amended proof of claim (No. 1-2) in the amount of $105,747,439.56 as of January 2, 2012, further preserving the right to seek payment of all interest, legal fees, costs and charges that continue to accrue under the Loan Documents. (Id. at ¶ 22.)
C. The Parties’ Contentions
The Debtor does not challenge the vast majority of the First Manhattan claim. It acknowledges that First Manhattan is entitled to payment of its principal, the pre-petition interest at the non-Default Rate provided in the BLA and the monthly Administrative Fee. These total $89,800,332. (Debtor’s Reply to First Manhattan Developments REIT’s Memorandum of Law in Support of its Proof of Claim and in Support of the Allowance of Default Interest, dated Mar. 20, 2012, at 14 (EOF Doc. # 166).) The Debtor also concedes that the claim properly includes the protective advances by the Original Lenders and First Manhattan in the amount of $1,254,162.67 through February 29, 2012, not including interest or any legal fees. (Stipulation at ¶ 21.)
Instead, the dispute focuses on the allowance of the Default Rate (both pre-petition and post-petition) and the Late Payment Premium, and the amount of the attorneys’ fees, although the latter will be addressed in a separate opinion. In a nutshell, the Debtor contends that the Late Payment Premium is not recoverable under the terms of the BLA, and the Late Payment Premium and the Default Rate are unenforceable penalties, inequitable and unreasonable.
DISCUSSION
A. Pre-Petition Default Interest
“Prepetition interest is generally allowable to the extent and at the rate permitted under the applicable nonbank-ruptcy law, including the law of contracts.” In re Milham, 141 F.3d 420, 423 (2d Cir. 1998); accord In re Arcade Publ’g, Inc., 455 B.R. 373, 378 (Bankr.S.D.N.Y.2011) (quoting In re Milham, 141 F.3d at 423); see Vanston Bondholders Prot. Comm. v. Green, 329 U.S. 156, 161, 67 S.Ct. 237, 91 L.Ed. 162 (1946) (“What claims of creditors are valid and subsisting obligations against the bankrupt at the time a petition in bankruptcy is filed, is a question which, in the absence of overruling federal law, is to be determined by reference to state law.”) An event of default or the maturity of the debt will often trigger a higher interest rate, and “[i]t is well settled that an agreement to pay interest at a higher rate in the event of default or maturity is an agreement to pay interest and not a penalty.” Jamaica Sav. Bank, FSB v. Ascot Owners, Inc., 245 A.D.2d 20, 665 N.Y.S.2d 858, 858 (N.Y.App.Div.1997); accord Union Estates Co. v. Adlon Constr. Co., 221 N.Y. 183, 116 N.E. 984, 985 (1917) (“[A]n agreement to pay interest upon a loan from its date until its payment at a rate before and a differing rate after its maturity is an agreement to pay interest and not a penalty as to the latter rate.”) A higher default interest rate reflects the allocation of risk as part of the bargain struck between the parties, a bargain that benefits the obligor as well as the obligee:
A variable interest ... can be beneficial to a debtor in that it may enable him to obtain money at a lower rate of interest than he could otherwise obtain it, for if a creditor had to anticipate a possible loss in the value of the loan due to his debt- or’s bankruptcy or reorganization, he would need to exact a higher uniform interest rate for the full life of the loan. The debtor has the benefit of the lower rate until the crucial event occurs; he need not pay a higher rate throughout the life of the loan.
Ruskin v. Griffiths, 269 F.2d 827, 832 (2d Cir.1959), cert. denied, 361 U.S. 947, 8-S.Ct. 402, 403, 4 L.Ed.2d 381 (1960); accord Citibank, N.A. v. Nyland (CF8) Ltd., 878 F.2d 620, 625 (2d Cir.1989) (“[T]he Court observed [in Ruskin] that debtors might fare worse in the future if creditors were not allowed to impose variable rates, because creditors would then impose higher rates for the full life of the loan in order to reallocate the risk.”).
Even where the default rate strikes the judge as high, a court cannot rewrite the parties’ bargain based on its own notions of fairness and equity. Cruden v. Bank of N.Y., 957 F.2d 961, 976 (2d Cir.1992) (“A court may neither rewrite, under the guise of interpretation, a term of the contract when the term is clear and unambiguous ... nor redraft a contract to accord with its instinct for the dispensation of equity upon the facts of a given case.”) (citation omitted); In re Johns-Manville Corp., No. 11 Civ. 1312(JGK), 2012 WL 667084, at *10 (S.D.N.Y. Mar. 1, 2012) (“New York law is clear that subjective notions of fairness or equity are not a permissible basis for a court to rewrite a contract or to excuse compliance with conditions precedent.”); Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 750 N.Y.S.2d 565, 780 N.E.2d 166, 171 (2002) (“[I]f the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity.”); see In re Woodmere Invs. Ltd. P’ship, 178 B.R. 346, 355 (Bankr.S.D.N.Y.1995) (“[W]hen two sophisticated parties enter into a contract calling for an established rate on default, this Court will not disturb the agreement absent persuasive evidence of overreaching.”) The requirement that the agreement must be enforced in accordance with its terms “has even greater force in the context of real property transactions, where commercial certainty is a paramount concern and where, as here, the instrument was negotiated between sophisticated, counseled business people negotiating at arm’s length.” Wallace v. 600 Partners Co., 86 N.Y.2d 543, 634 N.Y.S.2d 669, 658 N.E.2d 715, 717 (1995) (internal quotation marks and citations omitted); accord Vermont Teddy Bear Co., Inc. v. 538 Madison Realty Co., 1 N.Y.3d 470, 775 N.Y.S.2d 765, 807 N.E.2d 876, 879 (2004).
Here, there is no basis in law to disturb the parties’ bargain. The Debtor and the Original Lenders were sophisticated parties that entered into an $84 million real estate loan agreement. Each was represented by counsel, and there is no evidence of overreaching. They agreed to allocate the risk of default by, among other things, including an unambiguous provision that increased the non-Default Rate by 5% in the event of a default. One can only speculate whether the non-Default Rate would have been greater if the parties had not included a separate default rate of interest.
The Debtor’s appeal to equitable considerations has no place under New York law. In any event, many of its arguments, including the penal nature of the Default Rate, also apply to the allowable amount of post-petition interest, and will be addressed in the next section. Nevertheless, certain of the Debtor’s points deserve comment at this time.
The debtor primarily relies on 400 Walnut Assocs., L.P v. 4th Walnut Assocs., L.P. (In re 400 Walnut Assocs., L.P.), 461 B.R. 308 (Bankr.E.D.Pa.2011) to support its argument that a bankruptcy court can reduce or nullify the Default Rate applicable to the pre-petition portion of the secured claim based on equitable considerations. There, the debtor in a single asset real estate case objected, inter alia, to the default rate of interest included by the secured creditor in the pre-petition and post-petition portions of its claim. The debtor acknowledged that the loan documents provided for the default rate of interest used by the secured creditor, but argued that it was inequitable to allow the secured creditor to recover default interest. Relying on the factors that a court generally considers in determining the appropriate interest rate under 11 U.S.C. § 506(b), the court disallowed the portion of the claim relating to default interest. Id. at 315-17.
Section 506(b), which is discussed in the next section of this opinion, gives a bankruptcy court limited discretion to modify the amount of post-petition interest that an oversecured creditor may collect as part of its claim. Section 506(b) does not apply to a creditor’s claim for pre-petition interest, a claim that must instead be determined under state law. In re Vanderveer Estates Holdings, Inc., 283 B.R. 122, 131 (Bankr.E.D.N.Y.2002); 4 Alan N. Resnick & Henry J. Sommer, Collier on BanKruptcy ¶ 506.04[1], at 506-95 (16th ed. 2012) (“Collier on Bankruptoy”). Furthermore, 100 Walnut dealt with Pennsylvania law. Accordingly, it is not persuasive.
In arguing the equities of the pre-petition claim, the Debtor also focuses improperly on what First Manhattan paid for the Loans in July 2011, the risks that it faced and the time and effort it has expended in enforcing the Loans. First Manhattan is the assignee of the Original Lenders. It stands in the shoes of its assignor, and takes neither more nor less than the assignor had. Trans-United Indus., Inc. v. Cohn, 351 F.2d 605, 606 (2d Cir.1965). That the Debtor’s existing default may have been factored into the price that First Manhattan paid to the Original Lenders is a matter between those parties. As between First Manhattan and the Debtor, First Manhattan stands in the shoes of the Original Lenders, and can assert the same rights subject to the same limitations that the Original Lenders could have asserted if they still owned the Loans. Making equitable determinations of claim allowance based on what an as-signee knew about and paid for a claim would require a court to examine the circumstances of every assignment to determine the allowed amount of the claim in the hands of the assignee.
B. Post-Petition Interest
Under general equitable principles of insolvency law, interest ceases to accrue at the beginning of the proceedings. Variston, 329 U.S. at 163, 67 S.Ct. 237. There are three reasons for the rule: (1) post-petition interest is a penalty imposed for a delay of payment required by law to allow the preservation and protection of the estate for the benefit of all interests, (2) the rule avoids the administrative inconvenience of continuously recomputing claims, and (3) it avoids the gain or loss as between creditors whose obligations bear different interest rates or who receive payment at different times. Id. at 163-64, 67 S.Ct. 237. This rule is currently embodied in 11 U.S.C. § 502(b)(2), which disallows a claim for unmatured interest.
The rule does not, however, apply to an oversecured creditor who is entitled to post-petition interest up to the value of its collateral. See Vanston, 329 U.S. at 164, 67 S.Ct. 287. This exception is now contained in 11 U.S.C. § 506(b), which states:
To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement or State statute under which such claim arose.
Section 506(b) does not state that the ov-ersecured creditor is entitled to collect post-petition, or pendency, interest at the contract rate. Milham, 141 F.3d at 423. Pendency interest is not based on contract and fixing the appropriate rate rests with the “limited discretion” of the bankruptcy court. Id.
There is nevertheless a rebut-table presumption that the oversecured creditor is entitled to default interest at the contract rate subject to adjustment based on equitable considerations. In re Terry Ltd. P’ship, 27 F.3d 241, 243 (7th Cir.1994), cert. denied sub nom., Invex Holdings, N.V. v. Equitable Life Ins. Co. of Iowa, 513 U.S. 948, 115 S.Ct. 360, 130 L.Ed.2d 313 (1994); Urban Communicators PCS Ltd. P’ship v. Gabriel Capital, L.P., 394 B.R. 325, 338 (S.D.N.Y.2008); In re General Growth Props., Inc., 451 B.R. 323, 326 (Bankr.S.D.N.Y.2011); In re Liberty Warehouse Assocs. Ltd. P’ship, 220 B.R. 546, 550 (Bankr.S.D.N.Y.1998); In re Vest Assocs., 217 B.R. 696, 702 (Bankr.S.D.N.Y.1998); see generally 4 CollieR on BANKRUPTCY ¶ 506.04[2][b], at 506-102 (collecting cases). The power to modify the contract rate based on notions of equity should be exercised sparingly and limited to situations where the secured creditor is guilty of misconduct, the application of the contractual interest rate would harm the unsecured creditors or impair the debtor’s fresh start or the contractual interest rate constitutes a penalty. Urban Communicators, 394 B.R. at 338; General Growth, 451 B.R. at 328; In re P.G. Realty Co., 220 B.R. 773, 780 (Bankr.E.D.N.Y.1998). The debtor bears the burden of rebutting the presumption that the contract rate of interest applies post-petition. See In re Southland Corp., 160 F.3d 1054, 1059-60 (5th Cir.1998); Urban Communicators, 394 B.R. at 338; Vest Assocs., 217 B.R. at 702.
The Debtor has failed to sustain this burden. There is no evidence of misconduct by First Manhattan. In addition, the Debtor has failed to offer proof that the application of the Default Rate will harm the unsecured creditors or impair its fresh start. To the contrary, the Debtor proposes to pay the unsecured creditors in full and permit equity to retain their interests. Thus, the Debtor is solvent, and the reluctance to modify the contract interest rate is especially strong where the debtor is solvent. Urban Communicators, 394 B.R. at 340 (citing Ruskin); In re 139-141 Owners Corp., 313 B.R. 364, 369 (S.D.N.Y. 2004) (“[I]t would be inequitable and inappropriate to deny a creditor’s right to interest at the default rate, particularly where the debtor was solvent and knowingly bargained for the terms of his contract.”) (citing Ruskin). Reducing the contract interest payable by a solvent debtor would unfairly grant a windfall to its equity. See Urban Communicators, 394 B.R. at 340 (“[I]t is not inequitable to cut down the interest of Debtors’ shareholders by interest payments at a default rate to which Debtors contractually agreed.”).
Nor has the Debtor offered proof that the allowance of interest at the Default Rate will impair its fresh start. While this may ultimately come down to a question of feasibility, the Debtor has not argued and certainly has not shown that it cannot confirm its plan and continue operating if First Manhattan’s claim includes post-petition interest at the Default Rate.
Finally, the Debtor has failed to show that the Default Rate constitutes a penalty. The Bankruptcy Code does not provide guidance regarding when a default interest rate will be deemed a penalty, and the issue should turn on applicable non-bankruptcy law. 4 COLLIER ON BANKRUPTCY ¶ 506.04[2][b], at 506-104. As noted earlier, under New York law, a variable interest rate that increases following a default is not a penalty. Ruskin, 269 F.2d at 832; Union Estates, 116 N.E. at 985.
The Debtor nonetheless analogizes the Default Rate to liquidated damages, and argues that it is so disproportionate to the damages suffered by either the Original Lenders or First Manhattan that it should be deemed an unenforceable penalty. The Debtor has not identified any authority that applies a liquidated damages analysis to a default interest clause in a loan negotiated by sophisticated parties. In any event, should the Court adopt the Debtor’s approach and treat the Default Rate as a form of liquidated damages, its challenge would still fail.
Under New York law, “[a] contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation.” Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 393 N.Y.S.2d 365, 361 N.E.2d 1015, 1018 (1977). “In determining whether the amount of the deposit is to be treated as liquidated damages or as a penalty, the agreement is to be interpreted as of its date, not as of its breach.” Seidlitz v. Auerbach, 230 N.Y. 167, 129 N.E. 461, 462 (1920); accord Truck Rent-A-Center, 393 N.Y.S.2d 365, 361 N.E.2d at 1019.
The Debtor’s arguments regarding the inequitable, unreasonable and penal nature of the Default Rate, and particularly, whether it covered the additional costs of administering a loan in default, is primarily based on hindsight. The Debtor devotes its discussion to the amount of time that the Original Lenders spent after the default dealing with the Loans, emphasizing First Manhattan’s inability to quantify these efforts due to the lack of time records. {See Stipulation at ¶¶ 16-20.) The Debtor has not offered any evidence regarding the parties’ intentions or the reason for the selection of the 5% Default Rate when they entered into the Loans, and the Debtor’s post hoc analysis of the time spent addressing the Loans after default sheds no light on this question. Moreover, under New York law, the 5% differential between the non-Default and Default Rates falls within the range of reasonableness. Vest Assocs., 217 B.R. at 703; see In re South Side House, LLC, 451 B.R. 248, 266 (Bankr.E.D.N.Y.2011) (“The Lender’s claim for prepetition interest at a default rate of five percent is a permissible charge under New York law.”).
The Debtor also relies on the deposition testimony of two representatives of the Original Lenders who described the Default Rate as a penalty. Brian Terry, TD Bank’s Rule 30(b)(6) designee, testified at his deposition that the Default Rate was put in “to control or to have assurances that things are abided” to the requirements of the BLA; i.e., “it would be a penalty if things are not adhered to in accordance with the building loan agreement.” (DX 32, at 27-28.) Robert Pérsi-co, the representative of PB Capital, characterized the default rate of interest as “a 5 percent penalty charged on the passed [sic] due interest amount.” (DX 39, at 20.) First Manhattan’s attorney objected to the form of the question that provoked Mr. Persico’s answer, and objected to both portions of testimony on the ground that the characterization of the Default Rate as penalty constituted a lay legal conclusion.
Although I overrule the objections, the testimony does not prove what the Debtor contends. All higher default rates of interest have some penal effect in that they compel the timely compliance with the payment requirements under a loan agreement; if you default you pay more. Both witnesses obviously viewed the Default Rate in this manner. In any event, their characterization does not bind the Court or undercut the conclusion that the Default Rate of interest was designed to compensate the Original Lenders for the increased risk of non-payment and the costs associated with the Debtor’s default.
C. Late Payment Premium
Although interest at the Default Rate is allowable, the Late Payment Premium is not. The BLA § 2.16 imposes an additional fee of 5% “of amounts payable under the Loan Documents” that are more than five days late, “which late payment premium shall be due with any such late payment. The late payment premium is to cover administrative and related expenses incurred in handling delinquent payments.” Thus, the Late Payment Premium relates to (1) late payments due under the Loan Documents, (2) payable at the time of the late payment, and (3) it is intended to cover the additional costs of handling the late payment.
Here, the Debtor will never make a late payment of an amount due under the Loan Documents, and First Manhattan will not, therefore, incur the additional costs of handling such a late payment. The confirmation of a plan of reorganiza tion binds all creditors and parties in interest. 11 U.S.C. § 1141(a). Upon confirmation, and unless the plan or confirmation order state otherwise, the property of the estate vests in the reorganized debtor free and clear of liens, claims and interests, and all debts are discharged. 11 U.S.C. § 1141(c), (d). As a consequence, all obligations and rights of the parties are extinguished and replaced by the plan. See Bennett v. Intermountain Fed. Land Bank Ass’n (In re Bennett), No. 98-16177, 2000 WL 123233, at *2 (9th Cir. Jan. 28, 2000); Lockheed Martin Corp. v. Singer, N.V., No. 02 Civ. 3374(TPG), 2006 WL 2548491, at *2 (S.D.N.Y. Sept. 1, 2006); FDIC v. Lewittes (In re Friedberg), 192 B.R. 338, 341 (S.D.N.Y.1996).
The Debtor’s plan (see Debtor’s Third Amended Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, dated Dec. 13, 2011 (“Plan”) (ECF Doc. # 107)) will extinguish First Manhattan’s rights under the Loans. In lieu of those rights, First Manhattan will receive an “Amended and Restated Note” and an “Amended and Restated Mortgage.” (See Plan at § 3.6(c).) All subsequent payments by the Debtor on account of First Manhattan’s secured claim will be made under the Plan and the new note and mortgage rather than the Loan Documents, and First Manhattan will not incur any costs handling late payments under the Loans Documents. Accordingly, the late payment charge will never become due and will never be earned. See Woodmere Invs. Ltd. P’ship, 178 B.R. at 355 (disallowing late payment charge where the debtor failed to make any payments to the secured creditor, and hence, the latter did not incur the additional expenses of handling delinquent payments).
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12517575-9391 | W. FLETCHER, Circuit Judge:
Defendant Jose Luis Buenrostro brings two appeals. First, in case number 16-10499, he appeals the district court's denial of his motion for a sentence modification under 18 U.S.C. § 3582(c)(2). Second, in case number 17-15453, he appeals the district court's denial of his motion to vacate his sentence under 28 U.S.C. § 2255. Both appeals turn on the effect of President Obama's commutation of Buenrostro's sentence in 2016 from life in prison without release to 360 months in prison. We have jurisdiction in the first appeal under 28 U.S.C. § 1291 and in the second appeal under 28 U.S.C. § 2253. We affirm in both.
I. Background
On June 26, 1996, Buenrostro was convicted of conspiracy to manufacture more than thirty-one kilograms of methamphetamine in violation of 21 U.S.C. §§ 846, 841(a)(1). See Buenrostro v. United States , 697 F.3d 1137, 1138 (9th Cir. 2012).
Before the conviction at issue in this case, Buenrostro had been convicted of, among other things, distribution of a controlled substance (cocaine) and possession of cocaine for sale. Both were felony convictions. On May 16, 1996, and June 6, 1996, the government filed informations pursuant to 21 U.S.C. § 851 charging Buenrostro's prior felony drug convictions as sentencing enhancements.
Because Buenrostro had "two or more prior convictions for a felony drug offense," he was subject to a "mandatory term of life imprisonment without release." See 21 U.S.C. § 841(b)(1)(A)(viii). The federal Sentencing Guidelines otherwise prescribed a sentencing range of 360 months to life. Buenrostro was sentenced to life in prison without release on January 8, 1997.
On September 13, 1999, Buenrostro filed a timely motion to vacate his sentence under 28 U.S.C. § 2255. The district court denied the motion, and we affirmed. See United States v. Buenrostro , 163 Fed. App'x 524, 525 (9th Cir. Jan. 17, 2006) (unpublished).
On December 18, 2006, Buenrostro learned that the government had made a plea offer that his attorney failed to communicate to him. On December 12, 2007, Buenrostro moved in the district court to reopen his § 2255 proceedings pursuant to Federal Rule of Civil Procedure 60(b) in order to make a claim of ineffective assistance of counsel. The court denied the motion as an impermissible second-or-successive motion under § 2255, and we affirmed. See United States v. Buenrostro , 638 F.3d 720, 721 (9th Cir. 2011) (per curiam). We held that Buenrostro's "new claim neither bears on his innocence of the underlying crime nor turns on a new rule of constitutional law," as required by 28 U.S.C. § 2255(h). Id. at 723.
Next, Buenrostro sought leave from this court to file a second or successive motion under § 2255(h)(2) in light of Martinez v. Ryan , 566 U.S. 1, 132 S.Ct. 1309, 182 L.Ed.2d 272 (2012), Missouri v. Frye , 566 U.S. 134, 132 S.Ct. 1399, 182 L.Ed.2d 379 (2012), and Lafler v. Cooper , 566 U.S. 156, 132 S.Ct. 1376, 182 L.Ed.2d 398 (2012). See Buenrostro , 697 F.3d at 1139. We denied leave, concluding that none of these cases announced a "new rule of constitutional law." Id. at 1140. We also noted that Martinez "is inapplicable to federal convictions and thus inapplicable to Buenrostro's application." Id.
On August 3, 2016, President Obama commuted Buenrostro's sentence to 360 months in prison.
In light of the commutation, Buenrostro sought a modification of his sentence under 18 U.S.C. § 3582(c)(2). To be eligible, Buenrostro must have been sentenced "based on a sentencing range that has subsequently been lowered." 18 U.S.C. § 3582(c)(2). He argued that the commutation nullified the mandatory minimum sentence he received, such that he was, in effect, newly sentenced "based on a sentencing range." He further argued that his sentencing range had been lowered by the federal Sentencing Commission pursuant to Amendment 782, which modified the offense levels in the Guidelines' drug quantity table. The district court denied the motion, concluding that regardless of President Obama's commutation, Buenrostro was not sentenced "based on a sentencing range," as required by Section 3582(c)(2). Buenrostro timely appealed in case number 16-10499.
Separately, Buenrostro brought a motion under § 2255, contending that he could raise his ineffective assistance of counsel claim in a motion to vacate the "new judgment" created by the commutation, citing Magwood v. Patterson , 561 U.S. 320, 130 S.Ct. 2788, 177 L.Ed.2d 592 (2010). The district court concluded that a "commutation is not a new sentence or judgment." The court denied the motion as an impermissible second-or-successive motion under § 2255. Buenrostro timely appealed in case number 17-15453.
II. Standard of Review
We review de novo whether the district court has jurisdiction to modify Buenrostro's sentence under 18 U.S.C. § 3582(c)(2). United States v. Mercado-Moreno , 869 F.3d 942, 953 (9th Cir. 2017). We review de novo the district court's determination that the Section 2255 motion is "second or successive." United States v. Lopez , 577 F.3d 1053, 1059 (9th Cir. 2009).
III. Discussion
A. No. 16-10499: Modification of Sentence
A court may modify a criminal sentence "in the case of a defendant who has been sentenced ... based on a sentencing range that has subsequently been lowered by the Sentencing Commission." 18 U.S.C. § 3582(c)(2). A defendant is sentenced "based on a sentencing range" if "the range was a basis for the court's exercise of discretion in imposing a sentence. To 'base' means '[t]o make, form, or serve as a foundation for,' or '[t]o use (something) as the thing from which something else is developed.' " Hughes v. United States , --- U.S. ----, 138 S.Ct. 1765, 1775, --- L.Ed.2d ---- (2018) (quoting Black's Law Dictionary 180 (10th ed. 2014) ).
If a defendant was not originally sentenced "based on a sentencing range," he is not eligible for a sentence modification under Section 3582(c)(2). See United States v. Paulk , 569 F.3d 1094, 1095 (9th Cir. 2009) (per curiam). A sentence is not "based on a sentencing range" when it is based instead on a statutory mandatory minimum that exceeds the otherwise applicable Guidelines range. See Koons v. United States , --- U.S. ----, 138 S.Ct. 1783, 1788, --- L.Ed.2d ---- (2018). In such a case, the sentencing court must "discard" the Guidelines range "in favor of the mandatory minimum sentence[ ]," id. at 1790, and the range "play[s] no relevant part in the judge's determination of the defendant's ultimate sentence," id. at 1788.
The same is true even if a statutory mandatory minimum falls within the otherwise applicable Guidelines range. In United States v. Mullanix , 99 F.3d 323 (9th Cir. 1996), we held that a defendant was ineligible for a sentence modification because he was subject to a "statutorily required minimum of sixty months." Id. at 324. Although the statutory minimum fell within the Guidelines range of fifty-seven to seventy-one months, we nevertheless held that "he was sentenced pursuant to the statutorily required minimum, which was not affected by the change in the marijuana equivalency tables. Therefore, the district court had no authority to reduce Mullanix's sentence under § 3582(c)(2)." Id.
Buenrostro was originally sentenced "based on" a statutory mandatory minimum. His original sentence was not based on a sentencing range, nor indeed was President Obama's commutation based on a recalculation of that range. Like a full pardon, a presidential commutation does not overturn the sentence imposed by the sentencing court. It simply "mitigates or sets aside punishment." Nixon v. United States , 506 U.S. 224, 232, 113 S.Ct. 732, 122 L.Ed.2d 1 (1993) (quoting Black's Law Dictionary 1113 (6th ed. 1990) ) (emphasis removed).
Buenrostro is therefore ineligible for a sentence modification, and the district court properly denied his motion.
B. No. 17-15453: Commutation Is Not a "New Judgment"
Section 2255 authorizes a "prisoner in custody under sentence of a court established by Act of Congress" to "move the court which imposed the sentence to vacate, set aside or correct the sentence" based on a violation of federal law. 28 U.S.C. § 2255(a). However, the statute places restrictions on "second or successive" motions. 28 U.S.C. § 2255(h). A "second or successive" motion may not be brought unless it relies on "(1) newly discovered evidence that, if proven and viewed in light of the evidence as a whole, would be sufficient to establish by clear and convincing evidence that no reasonable factfinder would have found the movant guilty of the offense; or (2) a new rule of constitutional law, made retroactive to cases on collateral review by the Supreme Court, that was previously unavailable." Id.
However, not all second-in-time motions qualify under § 2255 as "second or successive" motions that must satisfy the criteria of § 2255(h). Magwood , 561 U.S. at 332, 130 S.Ct. 2788 (describing "second or successive" as a "term of art" (quoting Slack v. McDaniel , 529 U.S. 473, 486, 120 S.Ct. 1595, 146 L.Ed.2d 542 (2000) ) ). To be "second or successive," the second-in-time motion must challenge the same judgment as the earlier motion. Id. at 341-42, 130 S.Ct. 2788. Thus, a second-in-time motion challenging a "new or intervening judgment[ ]" is not second or successive within the meaning of § 2255(h). Clayton v. Biter , 868 F.3d 840, 843 (9th Cir. 2017).
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12701998-15008 | Justice SCALIA delivered the opinion of the Court.
The Bankruptcy Code provides that a debtor may exempt certain assets from the bankruptcy estate. It further provides that exempt assets generally are not liable for any expenses associated with administering the estate. In this case, we consider whether a bankruptcy court nonetheless may order that a debtor's exempt assets be used to pay administrative expenses incurred as a result of the debtor's misconduct.
I. Background
A
Chapter 7 of the Bankruptcy Code gives an insolvent debtor the opportunity to discharge his debts by liquidating his assets to pay his creditors. 11 U.S.C. §§ 704(a)(1), 726, 727. The filing of a bankruptcy petition under Chapter 7 creates a bankruptcy "estate" generally comprising all of the debtor's property. § 541(a)(1). The estate is placed under the control of a trustee, who is responsible for managing liquidation of the estate's assets and distribution of the proceeds. § 704(a)(1). The Code authorizes the debtor to "exempt," however, certain kinds of property from the estate, enabling him to retain those assets post-bankruptcy. § 522(b)(1). Except in particular situations specified in the Code, exempt property "is not liable" for the payment of "any [prepetition] debt" or "any administrative expense." § 522(c), (k).
Section 522(d) of the Code provides a number of exemptions unless they are specifically prohibited by state law. § 522(b)(2), (d). One, commonly known as the "homestead exemption," protects up to $22,975 in equity in the debtor's residence. § 522(d)(1) and note following § 522 ; see Owen v. Owen, 500 U.S. 305, 310, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991). The debtor may elect, however, to forgo the § 522(d) exemptions and instead claim whatever exemptions are available under applicable state or local law. § 522(b)(3)(A). Some States provide homestead exemptions that are more generous than the federal exemption; some provide less generous versions; but nearly every State provides some type of homestead exemption. See López, State Homestead Exemptions and Bankruptcy Law: Is It Time for Congress To Close the Loophole? 7 Rutgers Bus. L.J. 143, 149-165 (2010) (listing state exemptions).
B
Petitioner, Stephen Law, filed for Chapter 7 bankruptcy in 2004, and respondent, Alfred H. Siegel, was appointed to serve as trustee. The estate's only significant asset was Law's house in Hacienda Heights, California. On a schedule filed with the Bankruptcy Court, Law valued the house at $363,348 and claimed that $75,000 of its value was covered by California's homestead exemption. See Cal. Civ. Proc. Code Ann. § 704.730(a)(1) (West Supp. 2014). He also reported that the house was subject to two voluntary liens: a note and deed of trust for $147,156.52 in favor of Washington Mutual Bank, and a second note and deed of trust for $156,929.04 in favor of "Lin's Mortgage & Associates." Law thus represented that there was no equity in the house that could be recovered for his other creditors, because the sum of the two liens exceeded the house's nonexempt value.
If Law's representations had been accurate, he presumably would have been able to retain the house, since Siegel would have had no reason to pursue its sale. Instead, a few months after Law's petition was filed, Siegel initiated an adversary proceeding alleging that the lien in favor of "Lin's Mortgage & Associates" was fraudulent. The deed of trust supporting that lien had been recorded by Law in 1999 and reflected a debt to someone named "Lili Lin." Not one but two individuals claiming to be Lili Lin ultimately responded to Siegel's complaint. One, Lili Lin of Artesia, California, was a former acquaintance of Law's who denied ever having loaned him money and described his repeated efforts to involve her in various sham transactions relating to the disputed deed of trust. That Lili Lin promptly entered into a stipulated judgment disclaiming any interest in the house. But that was not the end of the matter, because the second "Lili Lin" claimed to be the true beneficiary of the disputed deed of trust. Over the next five years, this "Lili Lin" managed-despite supposedly living in China and speaking no English-to engage in extensive and costly litigation, including several appeals, contesting the avoidance of the deed of trust and Siegel's subsequent sale of the house.
Finally, in 2009, the Bankruptcy Court entered an order concluding that "no person named Lili Lin ever made a loan to [Law] in exchange for the disputed deed of trust." In re Law, 401 B.R. 447, 453 (Bkrtcy.Ct.C.D.Cal.). The court found that "the loan was a fiction, meant to preserve [Law's] equity in his residence beyond what he was entitled to exempt" by perpetrating "a fraud on his creditors and the court." Ibid. With regard to the second "Lili Lin," the court declared itself "unpersuaded that Lili Lin of China signed or approved any declaration or pleading purporting to come from her." Ibid. Rather, it said, the "most plausible conclusion" was that Law himself had "authored, signed, and filed some or all of these papers." Ibid. It also found that Law had submitted false evidence "in an effort to persuade the court that Lili Lin of China-rather than Lili Lin of Artesia-was the true holder of the lien on his residence."
Id., at 452. The court determined that Siegel had incurred more than $500,000 in attorney's fees overcoming Law's fraudulent misrepresentations. It therefore granted Siegel's motion to " surcharge" the entirety of Law's $75,000 homestead exemption, making those funds available to defray Siegel's attorney's fees.
The Ninth Circuit Bankruptcy Appellate Panel affirmed.
BAP No. CC-09-1077-PaMkH, 2009 WL 7751415 (Oct. 22, 2009) (per curiam ). It held that the Bankruptcy Court's factual findings regarding Law's fraud were not clearly erroneous and that the court had not abused its discretion by surcharging Law's exempt assets. It explained that in Latman v. Burdette, 366 F.3d 774 (2004), the Ninth Circuit had recognized a bankruptcy court's power to "equitably surcharge a debtor's statutory exemptions" in exceptional circumstances, such as "when a debtor engages in inequitable or fraudulent conduct." 2009 WL 7751415, at *5, *7. The Bankruptcy Appellate Panel acknowledged that the Tenth Circuit had disagreed with Latman, see In re Scrivner, 535 F.3d 1258, 1263-1265 (2008), but the panel affirmed that Latman was correct. 2009 WL 7751415, at *7, n. 10. Judge Markell filed a concurring opinion agreeing with the panel's application of Latman but questioning "whether Latman remains good policy." 2009 WL 7751415, at *10.
The Ninth Circuit affirmed. In re Law, 435 Fed.Appx. 697 (2011) (per curiam ). It held that the surcharge was proper because it was "calculated to compensate the estate for the actual monetary costs imposed by the debtor's misconduct, and was warranted to protect the integrity of the bankruptcy process." Id., at 698. We granted certiorari. 570 U.S. ----, 133 S.Ct. 2824, 186 L.Ed.2d 883 (2013).
II. Analysis
A
A bankruptcy court has statutory authority to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of" the Bankruptcy Code.
11 U.S.C. § 105(a). And it may also possess "inherent power ... to sanction 'abusive litigation practices.' " Marrama v. Citizens Bank of Mass., 549 U.S. 365, 375-376, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007). But in exercising those statutory and inherent powers, a bankruptcy court may not contravene specific statutory provisions.
It is hornbook law that § 105(a)"does not allow the bankruptcy court to override explicit mandates of other sections of the Bankruptcy Code." 2 Collier on Bankruptcy ¶ 105.01[2], p. 105-6 (16th ed. 2013). Section 105(a) confers authority to "carry out" the provisions of the Code, but it is quite impossible to do that by taking action that the Code prohibits. That is simply an application of the axiom that a statute's general permission to take actions of a certain type must yield to a specific prohibition found elsewhere. See Morton v. Mancari, 417 U.S. 535, 550-551, 94 S.Ct. 2474, 41 L.Ed.2d 290 (1974) ; D. Ginsberg & Sons, Inc. v. Popkin, 285 U.S. 204, 206-208, 52 S.Ct. 322, 76 L.Ed. 704 (1932). Courts' inherent sanctioning powers are likewise subordinate to valid statutory directives and prohibitions. Degen v. United States, 517 U.S. 820, 823, 116 S.Ct. 1777, 135 L.Ed.2d 102 (1996) ; Chambers v. NASCO, Inc., 501 U.S. 32, 47, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991). We have long held that "whatever equitable powers remain in the bankruptcy courts must and can only be exercised within the confines of" the Bankruptcy Code.
Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206, 108 S.Ct. 963, 99 L.Ed.2d 169 (1988) ; see, e.g., Raleigh v. Illinois Dept. of Revenue, 530 U.S. 15, 24-25, 120 S.Ct. 1951, 147 L.Ed.2d 13 (2000) ; United States v. Noland, 517 U.S. 535, 543, 116 S.Ct. 1524, 134 L.Ed.2d 748 (1996) ; SEC v. United States Realty & Improvement Co., 310 U.S. 434, 455, 60 S.Ct. 1044, 84 L.Ed. 1293 (1940).
Thus, the Bankruptcy Court's "surcharge" was unauthorized if it contravened a specific provision of the Code. We conclude that it did. Section 522 (by reference to California law) entitled Law to exempt $75,000 of equity in his home from the bankruptcy estate. § 522(b) (3)(A). And it made that $75,000 "not liable for payment of any administrative expense." § 522(k). The reasonable attorney's fees Siegel incurred defeating the "Lili Lin" lien were indubitably an administrative expense, as a short march through a few statutory cross-references makes plain: Section 503(b)(2) provides that administrative expenses include "compensation ... awarded under" § 330(a) ; § 330(a)(1) authorizes "reasonable compensation for actual, necessary services rendered" by a "professional person employed under" § 327 ; and § 327(a) authorizes the trustee to "employ one or more attorneys ... to represent or assist the trustee in carrying out the trustee's duties under this title." Siegel argues that even though attorney's fees incurred responding to a debtor's fraud qualify as " administrative expenses" for purposes of determining the trustee's right to reimbursement under § 503(b), they do not so qualify for purposes of § 522(k) ; but he gives us no reason to depart from the " 'normal rule of statutory construction' " that words repeated in different parts of the same statute generally have the same meaning. See Department of Revenue of Ore. v. ACF Industries, Inc., 510 U.S. 332, 342, 114 S.Ct. 843, 127 L.Ed.2d 165 (1994) (quoting Sorenson v. Secretary of Treasury, 475 U.S. 851, 860, 106 S.Ct. 1600, 89 L.Ed.2d 855 (1986) ).
The Bankruptcy Court thus violated § 522's express terms when it ordered that the $75,000 protected by Law's homestead exemption be made available to pay Siegel's attorney's fees, an administrative expense. In doing so, the court exceeded the limits of its authority under § 105(a) and its inherent powers.
B
Siegel does not dispute the premise that a bankruptcy court's § 105(a) and inherent powers may not be exercised in contravention of the Code. Instead, his main argument is that the Bankruptcy Court's surcharge did not contravene § 522. That statute, Siegel contends, "establish[es] the procedure by which a debtor may seek to claim exemptions" but "contains no directive requiring [courts] to allow [an exemption] regardless of the circumstances." Brief for Respondent 35. Thus, he says, recognition of an equitable power in the Bankruptcy Court to deny an exemption by "surcharging" the exempt property in response to the debtor's misconduct can coexist comfortably with § 522. The United States, appearing in support of Siegel, agrees, arguing that § 522"neither gives debtors an absolute right to retain exempt property nor limits a court's authority to impose an equitable surcharge on such property." Brief for United States as Amicus Curiae 23.
Insofar as Siegel and the United States equate the Bankruptcy Court's surcharge with an outright denial of Law's homestead exemption, their arguments founder upon this case's procedural history. The Bankruptcy Appellate Panel stated that because no one "timely oppose[d] [Law]'s homestead exemption claim," the exemption "became final" before the Bankruptcy Court imposed the surcharge. 2009 WL 7751415, at *2. We have held that a trustee's failure to make a timely objection prevents him from challenging an exemption. Taylor v. Freeland & Kronz, 503 U.S. 638, 643-644, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992).
But even assuming the Bankruptcy Court could have revisited Law's entitlement to the exemption, § 522 does not give courts discretion to grant or withhold exemptions based on whatever considerations they deem appropriate. Rather, the statute exhaustively specifies the criteria that will render property exempt. See § 522(b), (d). Siegel insists that because § 522(b) says that the debtor "may exempt" certain property, rather than that he "shall be entitled" to do so, the court retains discretion to grant or deny exemptions even when the statutory criteria are met. But the subject of "may exempt" in § 522(b) is the debtor, not the court, so it is the debtor in whom the statute vests discretion. A debtor need not invoke an exemption to which the statute entitles him; but if he does, the court may not refuse to honor the exemption absent a valid statutory basis for doing so.
Moreover, § 522 sets forth a number of carefully calibrated exceptions and limitations, some of which relate to the debtor's misconduct. For example, § 522(c) makes exempt property liable for certain kinds of prepetition debts, including debts arising from tax fraud, fraud in connection with student loans, and other specified types of wrongdoing. Section 522(o ) prevents a debtor from claiming a homestead exemption to the extent he acquired the homestead with nonexempt property in the previous 10 years "with the intent to hinder, delay, or defraud a creditor." And § 522(q) caps a debtor's homestead exemption at approximately $150,000 (but does not eliminate it entirely) where the debtor has been convicted of a felony that shows "that the filing of the case was an abuse of the provisions of" the Code, or where the debtor owes a debt arising from specified wrongful acts-such as securities fraud, civil violations of the Racketeer Influenced and Corrupt Organizations Act, or "any criminal act, intentional tort, or willful or reckless misconduct that caused serious physical injury or death to another individual in the preceding 5 years." § 522(q) and note following § 522. The Code's meticulous-not to say mind-numbingly detailed-enumeration of exemptions and exceptions to those exemptions confirms that courts are not authorized to create additional exceptions. See Hillman v. Maretta, 569 U.S. ----, ----, 133 S.Ct. 1943, 1953, 186 L.Ed.2d 43 (2013); TRW Inc. v. Andrews, 534 U.S. 19, 28-29, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001).
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760135-6108 | PER CURIAM:
Appellant was convicted by a jury of two counts of armed robbery (22 D.C. Code §§ 2901, 3202), two counts of assault with a dangerous weapon (22 D.C. Code § 502), and one count of carrying a dangerous weapon (22 D.C.Code § 3204).
On October 19, 1968, at approximately 12:30 p. m., two officers on patrol in their scout car received a radio dispatch informing them that a robbery was in progress at a nearby liquor store. The officers quickly drove to the store and, as they approached it, they observed appellant and two other men coming out of the front door. Their attention was drawn to appellant, who was wielding a pistol and carrying a large paper bag. Appellant and his two companions fled in opposite directions upon spotting the policemen. The officers went after appellant and noticed that, as he was running, he tossed the pistol and paper bag into a bush. They managed to catch appellant; and they retrieved the pistol and the paper bag, the latter containing $475 in cash. Appellant was immediately returned to the store where he was positively identified by the co-owners and by one of the customers who was present at the time of the robbery.
Appellant now raises a number of points, but we believe only a few merit extensive discussion.
Appellant argues that the trial judge erred in denying his motion for a new trial, made eight days after conviction, on the ground of newly-discovered evidence. At sentencing, appellant submitted two affidavits by his co-defendants, each of which proclaimed his innocence. The trial judge held a hearing on this matter, and one of the co-defendants, upon being apprised of the penalty for perjury, refused to testify on the basis that his statement might incriminate him. The other co-defendant took the stand. He pointed out that, at the time he entered his plea of guilty, he had implicated appellant in the commission of this crime. However, he stated that he had lied at that time and that he was now suffering from pangs of conscience.
Rule 33, Fed.R.Crim.P., provides that “the court on motion of a defendant may grant a new trial to him if required in the interests of justice.” When such a motion is based on newly-discovered evidence, it has been considered to be addressed to the sound discretion of the trial court. See United States v. Johnson, 327 U.S. 106, 66 S.Ct. 464, 90 L.Ed. 562 (1946) ; Blackburn v. United States, 97 U.S.App.D.C. 62, 228 F.2d 33 (1955). Moreover, one of the guiding criteria by which the exercise of that discretion has been judged is the determination of whether the newly discovered evidence would lead to a different result in the case. See Thompson v. United States, 88 U.S.App.D.C. 235, 188 F.2d 652 (1951). Given the fact that appellant was practically caught in the commission of the crime, and given the strength of the identifications by the eyewitnesses, it is highly unlikely that the introduction of an exculpatory statement of this nature would change the result herein.
Appellant also argues that the trial court committed various errors in its instructions to the jury. He claims that the trial judge should not have informed the jury that they have a right to take into consideration the defendant’s interest in the outcome of the case when he takes the stand. Without suggesting that the use of this instruction is a practice to be preferred, we note that it is a standard one, and its propriety has been upheld on several occasions in this jurisdiction. See United States v. McCleary (No. 23,142, decided June 30, 1970) (without opinion); Fisher v. United States, 80 U.S.App.D.C. 96, 98, 149 F.2d 28, 30 (1945), aff’d, 328 U.S. 463, 66 S.Ct. 1318, 90 L.Ed. 1382 (1946).
In addition, appellant urges that the trial court misinformed the jury as to the meaning of specific intent by instructing them in the following manner:
You may infer that a person ordinarily intends the natural and probable consequences of acts knowingly done or knowingly omitted.
An act is done knowingly if done voluntarily and not because of mistake, inadvertence, or accident.
It is certainly true that the above is not a proper instruction on specific intent, although no objection was made to it at trial. It is also true that this court has placed great importance upon the manner in which a jury is instructed as to the elements of a crime. We have held that any omission of an element of a crime in the instructions to the jury is plain error under Rule 52(b) of the Fed.R.Crim.P. See Byrd v. United States, 119 U.S.App.D.C. 360, 342 F.2d 939 (1965); Jackson v. United States, 121 U.S.App.D.C. 160, 348 F.2d 772 (1965). However, upon viewing the trial court’s charge in its entirety, it is quite clear that the trial court did not omit an instruction on specific intent. The instruction began in the following manner:
To establish the fifth essential element of the offense, it is necessary that the property was so taken and carried away by the defendant without right to do so and with specific intent to steal it. * * *
Specific intent requires more than a mere general intent to engage in certain conduct or to do certain acts.
A person who knowingly does an act which the law forbids, intending with bad purpose either to disobey or disregard the law, may be found to act with specific intent.
The above portion of the instruction, then, was a standard instruction which is often given on specific intent.
Appellant’s final claim is that the Government erroneously exercised unsupervised discretion in deciding whether certain of its materials which were sought by appellant at the trial properly fell within the Jencks Act (18 U.S.C. § 3500). This court has held that it is the function of the trial judge to be the mediator in such disputes. See Saunders v. United States, 114 U.S.App.D.C. 345, 316 F.2d 346 (1963). However, the record discloses that the material in question was in fact turned over to the trial court by the Government for an independent determination of its relevance to the Jencks Act.
Affirmed.
VAN PELT, Senior District Judge, did not participate in the foregoing disposition.
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958602-26343 | MEMORANDUM AND ORDER
LUNGSTRUM, District Judge.
Plaintiff Robert L. Ferluga filed this lawsuit based on allegations that city officials conspired to impose arbitrary and bogus requirements on his intended use of a particular parcel of land, to delay and escalate his costs by means of fraudulent practices, and to stonewall his attempts to comply with the city’s requirements, thus preventing him from resuming his excavation operations, all in a common scheme to attempt to force him and other low income people to liquidate their property through infliction of financial loss and fear. He asserts one claim under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961 et seq., against a myriad of individuals allegedly associated with the City of Edwardsville, Kansas. This matter is before the court on defendants’ motions to dismiss plaintiffs complaint (Docs. 6, 26 & 31) and plaintiffs motion to amend his complaint (Doc. 23). For the reasons explained below, the court will grant defendants’ motions to dismiss and deny plaintiffs motion to amend, but grant plaintiff leave to file an amended complaint under the terms and conditions set forth below on or before January 20, 2006.
FACTUAL AND PROCEDURAL BACKGROUND
The allegations in Mr. Ferluga’s complaint arise from his ownership of a parcel of land in or near Edwardsville, Kansas. In March of 2003, he acquired the parcel of land which has more than five hundred feet of frontage on K-32 (a four-lane divided highway) near Interstate 435. The land is located adjacent to property that was at that time owned by Donna and Ralph Trout, and a third parcel owned by James Eickhoff and defendant Stephanie Eickhoff, who is the mayor of Edwards-ville. When Mr. Ferluga purchased the land it contained a high mound of dirt containing “Rock Flower,” which Mr. Ferluga alleges is a choice fill material. Mr. Ferluga began excavating the land by selling off the top soil and the fill material. He alleges that he “graded without incident for about one year.” (Civil Compl. (Doc. 1), ¶ 5, at 7.)
Shortly before April 4, 2004, defendant Douglas Spangler, Edwardsville’s city administrator, contacted Mr. Ferluga and instructed him to sell his property to defendant John Strand Thurston. Mr. Spangler “recruited” the Edwardsville chief of police to be present at the meeting. Based on the nature of the allegations in plaintiffs complaint, it appears that at the time Mr. Thurston was in some way associated with the business of real estate development in and around Edwardsville.
With respect to the neighboring property owned by the Trouts, Mr. Ferluga alleges that Ms. Eickhoff “used her position to conduct a campaign of hatred and villainization toward Mr. and Mrs. Trout and frequently deployed the city police to then-home, instilling humiliation and fear.” (Id. ¶ 4, at 6.) On July 1, 2004, Mr. and Mrs. Trout were “arrested by municipal officers on highly suspect charges.” (Id.) Ultimately, the expenses that they incurred associated with their arrest caused them to liquidate their property. The property is now owned by Czar Properties, LLC.
On July 27, 2004, an entourage of city officials visited Mr. Ferluga. They included Mr. Spangler; defendant Patrick Isenhour, who is a member of Edwardsville’s city council; defendant John Bayless, a “Contract City Engineer” who was allegedly acting for the benefit of defendant Cook, Flatt & Strobel, Engineers; defendant Daniel Van Patten, a “Contract City Planner” who was allegedly acting for the benefit of defendant HNTB Corporation; and defendant John W. Peters, a “Codes Officer,” again presumably for the City of Edwardsville. According to Mr. Ferluga, they “shut down excavation and sales by Oral Decree” and subsequently prevented Mr. Ferluga from achieving code compli anee by dictating arbitrary requirements that they said were required in order for him to resume operations.
Mr. Ferluga alleges that various city officials engaged in a common scheme to force low income people, presumably such as himself, to liquidate their property through infliction of financial loss and fear. Their motive was to “acquire prime location property from low income people at fire sale prices,” (id. ¶ 8, at 9), in order to further Ms. Eickhoffs negotiating position with developers who were wishing to acquire the strip of land. He alleges that a real estate project by defendant John Strand Thurston, who is now in federal prison, “appears to have been more or less exempted from City regulation and ... was not sanctioned for documented felonies.” (Id. ¶ 9, at 9.) He alleges that defendant Murray Rhodes, a surveyor, acted in a symbiotic role with the other defendants to delay and escalate the costs of his project by means of fraudulent pretenses. He alleges that defendant H. Reed Walker, the “Contract City Attorney,” played a deliberate role in the scheme by engineering the stonewalling of his attempts to gain compliance and resume operations. And he alleges that defendant Phyllis Freeman, the “City Clerk,” stonewalled his attempts to view a full set of required exhibits on one of Mr. Thurston’s excavation projects.
Mr. Ferluga alleges that in 2003 and 2004, David Wilson sought to split acreage north of Mayor Eickhoffs land. At that time, Mr. Spangler called in Messrs. Van Petten and Bayless and they confronted Mr. Wilson with a host of expensive and time consuming surveys, studies, etc., similar to the manner in which they treated Mr. Ferluga. Mr. Rhodes was Mr. Wilson’s surveyor, and he allegedly “delayed [the] project and tendered unwarranted, excessive billings.” (Id. ¶ 12, at 10.) Mr. Ferluga alleges that this maltreatment was intended to “create an expectation of future similar treatment for those not tendering ‘The Envelope,’ ” (id.), or to encourage Mr. Wilson to abandon his project, which ultimately he did.
Based on these allegations, plaintiffs complaint asserts a single RICO claim against what he refers to as the “[g]overnment structure of City of Edwardsville,” (id. ¶ 13, at 11), which includes Mayor Eickhoff; Mr. Spangler; city council persons John H. Broman, Jennifer Burnett, Mr. Isenhour, Timothy Kelly, and Bob Lane; “Public Officer” James W. Befort; Ms. Freeman; Mr. Peters; “City Maintenance” John Sower; Mr. Walker; Mr. Van Petten and HNTB Corporation; Mr. Bay-less and Cook, Flatt & Strobel; Mr. Rhodes; and Mr. Thurston. The following three groups of defendants have now filed motions to dismiss: (1) defendants Eickhoff, Spangler, Broman, Burnett, Isenhour, Kelly, Lane, Befort, Freeman, Peters, Sower and Walker; (2) defendants Van Petten, HNTB Corporation, Bayless, and Cook, Flatt & Strobel; and (3) defendant Rhodes. All of these defendants seek dismissal on essentially the same grounds. First, they contend that plaintiff has failed to allege fraud and conspiracy with sufficient particularity as required by Fed. R.Civ.P. 9(b). Second, they argue that plaintiffs complaint fails to state a claim upon which relief can be granted.
Plaintiff has responded to these arguments and, more importantly, has filed a motion for leave to file an amended complaint containing more detailed factual allegations. In his proposed amended complaint he alleges, for example, that before he purchased his property he contacted Mr. Spangler, explained his plans for the property, and acquired the property after “receiving encouragement.” (Proposed Civil Compl. ¶ 9, at 10.) When he contacted the City in March of 2003 regarding his proposed plans for the property, the city clerk “only cite[d] the need for a Demolition Permit and the need to gain State Hwy. Dept, approval of access to K-32.” (Id. ¶ 10, at 10.) Then, shortly after he moved into the old house on his site, May- or Eickhoff asked him, “If a developer wanted to buy this strip of land would you be willing to sell?” He alleges that Mayor Eickhoff had a “dream of a developer assembling a strip along the north side of K-32 that would include taking the Trout and Ferluga properties.” (Id. ¶ 6, at 6-7.) When the entourage of city officials visited Mr. Ferluga’s property on July 27, 2004, they referenced “issues” and “mud on the street,” told him that he lacked a grading permit, and Mr. Bayless told him that to obtain such a permit he would need to commission a drainage study, which Mr. Ferluga later learned was untrue. That same day, Mr. Van Petten told him that the city’s review process could not begin without prior approval by the Kansas Department of Health and Environment of an “NOI” permit. Mr. Ferluga alleges that Messrs. Walker, Befort, Broman and Ms. Freeman have required of him “expensive services of no value to Plaintiff not required of others, escalating ‘requirements,’ bogus requirements, refusing to clearly define details of the complex requirements, refusing to cooperate with professionals who needed more specific details to be able to supply the City with data the City would find to be acceptable, and refusing to meet with Plaintiffs attorney to work out this situation.” (Id. ¶ 13, at 14.) Then, Mr. Ferluga was charged with a violation of city ordinance when he was unable to cleanup the site because city officials had left him with his property “frozen.” This charge against Mr. Ferluga was dismissed at an informal hearing. The amended complaint further alleges suspicious circumstances associated with the property formerly owned by the Trouts and now owned by Czar Properties. It also contains factual allegations which suggest that city officials have not imposed similar requirements on at least some of Mr. Thurston’s development projects.
Defendants ask the court to deny plaintiffs motion to amend because, defendants contend, the amendment would be futile. Defendants argue that the facts contained in the proposed amended complaint do not remedy the inherent failure to state a RICO claim.
STANDARD FOR A MOTION TO DISMISS AND FOR EVALUATING A MOTION TO AMEND ON GROUNDS OF FUTILITY
With respect to plaintiffs motion to amend, the Federal Rules of Civil Procedure provide that a party may amend his or her pleading once as a matter of course or, after a responsive pleading has been filed, “only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.” Fed.R.Civ.P. 15(a). The decision whether to grant leave to amend is within the discretion of the district court. Hayes v. Whitman, 264 F.3d 1017, 1026 (10th Cir.2001). The court may justifiably refuse leave to amend on the grounds of undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, or futility of the proposed amendment. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir.1993). A motion to amend may be denied as futile “if the proposed amendment could not have withstood a motion to dismiss or otherwise failed to state a claim.” Schepp v. Fremont County, 900 F.2d 1448, 1451 (10th Cir.1990). Both plaintiffs motion to amend and defendants’ motions to dismiss, then, are governed by the standard for a motion to dismiss for failure to state a claim upon which relief can be granted.
The court will dismiss a cause of action for failure to state a claim only when “ ‘it appears beyond a doubt that the plaintiff can prove no set of facts in support of his [or her] claims which would entitle him [or her] to relief,’ ” Beedle v. Wilson, 422 F.3d 1059, 1063 (10th Cir.2005) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)), or when an issue of law is dispositive, Neitzke v. Williams, 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). The court accepts as true all well-pleaded facts, as distinguished from conclusory allegations, and all reasonable inferences from those facts are viewed in favor of the plaintiff. Beedle, 422 F.3d at 1063. The issue in resolving such a motion is “not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quotation omitted); accord Beedle, 422 F.3d at 1063.
When, as here, a plaintiff is proceeding pro se, the court construes his or her pleadings liberally and holds the pleadings to a less stringent standard than formal pleadings drafted by lawyers. McBride v. Deer, 240 F.3d 1287, 1290 (10th Cir.2001); accord Shaffer v. Saffle, 148 F.3d 1180, 1181 (10th Cir.1998) (quoting Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir.1991)). In other words, “[n]ot every fact must be described in specific detail, ... and the plaintiff whose factual allegations are close to stating a claim but are missing some important element that may not have occurred to him should be allowed to amend his complaint.” Riddle v. Mondragon, 83 F.3d 1197, 1202 (10th Cir.1996) (quotation omitted). The liberal construction of the plaintiffs complaint, however, “does not relieve the plaintiff of the burden of alleging sufficient facts on which a recognized legal claim could be based.” Id. (same). “[C]onelusory allegations without supporting factual averments are insufficient to state a claim on which relief can be based.” Id. (same).
DISCUSSION
The court has carefully reviewed the allegations in plaintiffs complaint and his proposed amended complaint. For the reasons explained below the court concludes that his original complaint fails to state a claim upon which relief can be granted. Defendants’ futility arguments, however, do not delve deeply enough into the more detailed factual allegations contained in plaintiffs proposed amended complaint and, consequently, the court is not persuaded that the proposed amendment is necessarily futile. For that reason, the court is inclined to allow plaintiff to amend his complaint. But, although plaintiff has done an admirable job as a pro se litigant thus far, his proposed amended complaint still remains sufficiently unstructured in terms of clarifying which specific acts he is alleging constitute the predicate acts of racketeering activity, the manner in which those acts form a pattern of racketeering activity, the scope of the alleged enterprise, and the manner in which some of the defendants participated in the conduct of the organization such that it is difficult for the court to perform a thorough and meaningful analysis of his RICO claim. For that reason, and mindful of plaintiffs status as a pro se litigant, the court believes that the most efficient manner to proceed is to deny his current motion to amend but nonetheless allow him to have an opportunity to review the court’s ruling on the existing motions, revise his complaint if he wishes to do so, and file an amended complaint no later than January 20, 2006. Defendants may then test the sufficiency of plaintiffs amended complaint, if they wish to do so, by filing new motions to dismiss. If no such amended complaint is filed by that date, this action will be dismissed with prejudice.
A. Pleading With Particularity
Defendants’ threshold argument is that plaintiffs fraud and conspiracy allegations are not pleaded ' with sufficient particularity. Defendants are correct that a plaintiff must plead the predicate acts of fraud in a RICO claim with particularity. See Farlow v. Peat, Marwick, Mitchell & Co., 956 F.2d 982, 989 (10th Cir.1992) (holding predicate acts of mail fraud in a RICO claim must be pleaded with particularity); Cayman Exploration Corp. v. United Gas Pipe Line Co., 873 F.2d 1357, 1362 (10th Cir.1989) (same, mail fraud and wire fraud). But in this case plaintiff alleges predicate acts of extortion, not fraud, and therefore no such heightened pleading standard applies. See Robbins v. Wilkie, 300 F.3d 1208, 1211 (10th Cir.2002) (clarifying that Farlow and Cayman Exploration Corp. only require that RICO predicate acts of fraud be pleaded with particularity); see, e.g., Welch v. Centex Home Equity Co., L.L.C., 323 F.Supp.2d 1087, 1094-95 (D.Kan.2004) (holding the plaintiff failed to plead predicate acts of mail fraud, wire fraud, and bank fraud with the required degree of particularity). Defendants’ argument that plaintiffs allegations of conspiracy are not pleaded with sufficient particularity is without merit for the simple reason that plaintiff is not alleging a conspiracy. Rather, plaintiff is asserting a RICO claim and that claim is governed by the elements set forth below.
Although the court is rejecting defendants’ argument on this point, the court nonetheless wishes to emphasize that plaintiff bears the burden of alleging facts, not conclusory allegations, in support of his RICO claim. The Federal Rules of Civil Procedure require that the complaint include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). This must “give the defendant fair notice of what the plaintiffs claim is and the grounds upon which it rests.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (quotation omitted). Plaintiffs allegations with respect to some of the RICO elements are a bit suspect in terms of providing some of the defendants with fair notice of the basis for plaintiffs claim against them. Thus, in filing his amended complaint, plaintiff should focus on outlining in clear, direct, and understandable terms the precise factual allegations (as opposed to conclusory allegations that simply parrot the applicable legal standards) which he believes support each essential element of his RICO claim against each of the defendants.
B. Failure to State a RICO Claim
In order to state a RICO claim under 18 U.S.C. § 1962(c), a plaintiff must set forth four elements: (1) participation in conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Garrett v. Selby Connor Maddux & Janer, 425 F.3d 836, 838 (10th Cir.2005); BancOklahoma Mortgage Corp. v. Capital Title Co., 194 F.3d 1089, 1100 (10th Cir.1999). These elements are most logically discussed in reverse order, and therefore the court will proceed accordingly.
1. Racketeering Activity
Racketeering activity is frequently described as a “predicate act” or “predicate acts” which consist of the federal and state crimes identified in 18 U.S.C. § 1961(1). United States v. Smith, 413 F.3d 1253, 1268-69 (10th Cir.2005), petition for cert. filed, — U.S. -, — S.Ct. -, — L.Ed.2d - (2005). Plaintiffs original complaint specifically alleges three predicate acts of extortion in violation of the Hobbs Act, 18 U.S.C. § 1951. Cf. Deck v. Eng’rd Laminates, 349 F.3d 1253, 1257-58 (10th Cir.2003) (discussing allegations of extortion as a RICO predicate act, al though finding that the conduct alleged in that case did not constitute extortion). The Hobbs Act makes it a crime to obstruct, delay, or affect commerce “by robbery or extortion or attempts ... to do so.” § 1951(a). It defines extortion, in turn, as obtaining “property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” § 1951(b)(2).
Liberally construing the allegations in plaintiffs original complaint, he has alleged the factual basis for three predicate acts of extortion. First, defendants allegedly extorted property from the Trouts by improperly harassing them in such a manner that they ultimately were forced to sell their property to another entity to further the goal of assembling the strip of land so that Mr. Thurston could develop it. Second, they allegedly attempted to extort Mr. Ferluga’s property from him by impeding him from being able to use it so that he would likewise sell his adjacent tract of land for development. Third, they treated Mr. Wilson similarly with respect to his land and arguably attempted to extort money from him. Accepting these allegations as true, as the court must in evaluating the sufficiency of plaintiffs complaint, the court cannot find that it appears beyond a doubt that these actions do not constitute extortion and attempted extortion for the reasons advanced by the defendants. In this regard, the court wishes to emphasize that defendants do not discuss the legal contours of the crime of extortion. They also do not discuss whether each of these alleged predicate acts constitutes extortion, albeit perhaps because the nature of the alleged predicate acts is not crystal clear from plaintiffs complaint. Rather, they argue that plaintiffs vague allegations of extortion are insufficient to state a claim. Ultimately, in order to dismiss, plaintiffs RICO claim on this basis, the court must be persuaded that plaintiff can prove no set of facts in suppprt of his claim which would entitle him to relief. Here, defendants simply have not advanced any meaningful argument to persuade the court that the alleged acts necessarily did not constitute extortion, particularly in light of case law suggesting to the contrary. See, e.g., United States v. Panaro, 266 F.3d 939, 948 (9th Cir.2001) (noting that extortion can occur when either the extortioner or a third person receives the property of which the victim is deprived); United States v. Tuchow, 768 F.2d 855, 872-73 (7th Cir.1985) (evidence was sufficient to sustain extortion conviction where city alderman attempted to extort money in exchange for a building permit). Thus, the court does not foreclose defendants from raising this issue again, but the court is not willing to grant defendants’ motions to dismiss, based merely on the argument that they have advanced thus far.
The extent to which plaintiff might be alleging that other conduct constitutes additional predicate acts of racketeering activity is unclear. For example, he seems to be asserting vague allegations and suspicions that Mr. Thurston was perhaps bribing city officials, although he does not specifically allege this conduct as another predicate act. In filing his amended complaint, if plaintiff wishes for this other conduct to be considered as additional predicate acts that form the basis of his RICO claim, he should specifically allege this, but of course in doing so he should be mindful of his obligations under Rule 11 of the Federal Rules of Civil Procedure (discussed bqlow). Otherwise, the court will not consider this alleged conduct as other predicate acts for purposes of evaluating plaintiffs RICO claim.
2. Pattern
“A pattern of racketeering activity must include commission of at least two predicate acts.” Garrett, 425 F.3d at 838; see also 18 U.S.C. § 1961(f). As just explained, plaintiff has already alleged two predicate acts. But the existence of two predicate acts is not sufficient to establish a pattern of racketeering activity. Smith, 413 F.3d at 1269. In order to satisfy RICO’s “pattern” requirement, the Supreme Court has focused on two elements: (1) relationship; and (2) continuity. SIL-FLO, Inc. v. SFHC, Inc., 917 F.2d 1507, 1516 (10th Cir.1990). Specifically, the plaintiff must show “ ‘a relationship between the predicates’ and ‘the threat of continuing activity.’ ” Duran v. Carris, 238 F.3d 1268, 1271 (10th Cir.2001) (quoting H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239, 109 S.Ct. 2893, 106 L.Ed.2d 195 (1989)). “Thus, to properly allege a pattern of racketeering activity as required by RICO, [plaintiff] must identify a minimum of two instances of racketeering activity as defined in § 1961(1) which amount to, or otherwise constitute a threat of continuing racketeering activity by the enterprise.” Bacchus Indus. v. Arvin Indus., 939 F.2d 887, 891 (10th Cir.1991).
The allegations in plaintiff’s original complaint fall short of this requirement, and for that reason defendants’ motions to dismiss are granted. Plaintiffs complaint alleges a single scheme (to harass property owners near Mayor Eickhoffs land) to accomplish a discrete goal (to make them amenable to selling their land so that all of the parcels could be assembled and sold for development) directed at a finite group of individuals (the adjacent landowners) with no potential to extend to other persons or entities. These allegations do not involve “the type of long-term criminal activity envisioned by Congress when it enacted RICO.” Duran, 238 F.3d at 1271 (affirming the district court’s dismissal of plaintiffs RICO claim where the defendant engaged in a single scheme of conduct to accomplish a discrete goal directed at a finite group of individuals with no potential to extend to other persons or entities); Boone v. Carlsbad Bancorporation, Inc., 972 F.2d 1545, 1556 (10th Cir.1992) (same); see also SIL-FLO, Inc., 917 F.2d at 1516 (affirming the district court’s grant of summary judgment under similar circumstances). Thus, plaintiffs original complaint fails to state a claim for a RICO violation.
But, nevertheless, the expanded factual allegations in plaintiffs proposed amended complaint arguábly make some progress on this element. Suffice it to say at this procedural juncture that defendants have not advanced any argument in opposition to plaintiffs motion to amend that persuades the court that the amendment would necessarily be futile with respect to this element. Accordingly, the court will allow plaintiff to file an amended complaint to attempt to correct this pleading deficiency to the extent that he can do so consistent with his Rule 11 obligations.
3. Enterprise
A RICO enterprise “includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). The existence of an enterprise requires proof (1) of an ongoing organization with a decision-making frame work or mechanism for controlling the group, (2) that the various associates function as a continuing unit, and (3) that the enterprise exists separate and apart from the pattern of racketeering activity. Smith, 413 F.3d at 1266-67. With respect to this last element, “it is not necessary to show that the enterprise has some function wholly unrelated to the racketeering activity, but rather that it has an existence beyond that which is necessary merely to commit each of the acts charged as predicate racketeering offenses.” Id. at 1267 (quotation omitted).
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4030953-11727 | MEMORANDUM
BLAIR, District Judge.
This is an action to set aside an allegedly preferential transfer under section 60 of the Bankruptcy Act, 11 U.S.C. § 96. Trial before the court was held on June 26, 1978. The court’s findings of fact and conclusions of law are intended to be contained herein even though not expressly so designated. Fed.R.Civ.P. 52.
Plaintiff, Eugene M. Feinblatt, is the duly appointed and qualified trustee of the bankruptcy estate of Joel Kline. Kline, whose securities and land transactions gained him a measure of notoriety in the Baltimore-Washington area in the early 1970’s, was adjudicated a bankrupt on October 9, 1973 upon a creditors’ petition filed September 21, 1973.
In early 1972 defendant, Samuel Block, entered into negotiations with Kline for the purchase of certain properties for $100,000. After initially depositing $100,000 in a checking account at Citizens National Bank in Laurel, Maryland, Block, at Kline’s request, transmitted a check for $100,000 to City Title and Escrow Company, Inc. (City Title). The check, made payable to City Title, was deposited into an escrow account. The funds were to be released to Kline only after Block’s attorney approved certain documents relating to the proposed real estate transaction.
Despite the fact that such approval never occurred, Kline obtained the funds deposited by Block in the City Title escrow account shortly after their deposit in November 1972. Kline and Richard Sugarman, president of City Title, had a unique arrangement under which Kline was permitted upon request to withdraw funds deposited by third parties at City Title. Kline made a request for the Block $100,000 deposit, and City Title voluntarily disbursed the funds to Kline. Block was unaware of this transaction at that time.
In early 1973 Kline offered to substitute certain apartment rental properties (the “Carroll Avenue properties”) for the warehouse properties that had previously been discussed for sale to Block. Block found this proposed substitution unacceptable. In the spring of 1973, Block and/or his attorney, Edgar B. May, Esq., demanded that the $100,000 deposited with City Title be returned. Richard Sugarman advised them that the money would be returned only if City Title received authorization from both Kline and Block. Thereafter, on July 24, 1973, Block filed suit against City Title in the United States District Court for the District of Columbia. City Title filed a third party claim against Fredmont Investment Corporation, a corporation substantially, if not wholly, controlled by Kline, and the actual owner of the Carroll Avenue properties; Joel Kline; and Block’s, Inc., a corporation wholly owned by Block.
On September 11, 1973, a settlement agreement was executed by Block, Sugar-man, and the attorney for Fredmont and Kline, settling all disputes related to the District of Columbia litigation. The agreement contained a mutual release of all parties to the suit. The major provision of the agreement required that City Title pay $100,000 to Block and/or Block’s, Inc. A check for $100,000, dated September 11, 1973, was drawn on a City Title checking account, signed by Sugarman, and made payable to Leonard Collins, an attorney representing City Title. Collins then endorsed it to Edgar May, the attorney for Block and Block’s, Inc.
The $100,000 thereby paid to Block constituted the proceeds of the September 7, 1973 transfer of real property, a tract of land called the “Indianhead property,” from Kline and his wife to Sugarman. Record title to the property was held by Kline and his wife as tenants by the entireties. On June 29, 1973, however, Kline and his wife had entered into a Voluntary Separation and Maintenance Agreement, whereby Mrs. Kline agreed that she held no beneficial ownership in the Indianhead property and agreed to convey title to any person designated by Mr. Kline. Sugarman obtained a $100,000 mortgage to finance purchase of the Indianhead property. This $100,000 was then paid to Block by means of the check described above.
Elements of a Preference
In order to establish a voidable preference under the Bankruptcy Act, the trustee must establish a transfer of the bankrupt’s property, to or for the benefit of a creditor for or on account of an antecedent debt, made or suffered while the bankrupt was insolvent and within four months of the initiation of bankruptcy proceedings, and such that the transfer enabled the creditor to obtain a greater percentage of his debt than some other creditor of the same class. 11 U.S.C. § 96(a)(1). A further requirement is that the creditor or his agent at the time of the transfer had reasonable cause to believe that the bankrupt was insolvent. 11 U.S.C. § 96(b).
The parties have stipulated that Kline was insolvent at the time of the transfer, that the transfer was made within four months of the filing of a bankruptcy petition, and that Block received a greater percentage of his claim than did creditors of Kline having claims existing and provable against Kline on September 11, 1973, the date of the payment to Block. Thus, in order to prevail, plaintiff must have proved: (1) that a transfer of property belonging to Kline was made to Block; (2) that Kline was a debtor of Block on account of an antecedent debt; and (3) that at the time of the transfer Block or his agent had reasonable cause to believe that Kline was insolvent.
Transfer of Kline’s Property
It is elementary, of course, that a transfer of property may be set aside as a preference only if the property transferred belonged to the bankrupt. The nature of Kline’s ownership interest in the Indian-head property and the proceeds of its sale is determined by state law. See 4A Collier, Bankruptcy ¶ 70.17[7], at 179 (14th ed. 1976). As noted previously, the Indianhead property was held by Kline and his wife as tenants by the entireties. In the absence of an agreement to the Contrary, the proceeds of the sale of the property would have continued to have been held by the entire-ties. See Eastern Shore Bldg. & Loan Corp. v. Bank of Somerset, 253 Md. 525, 253 A.2d 367, 371 (1969); Brell v. Brell, 143 Md. 443, 122 A. 635, 637 (1923). The court concludes, however, that the separation agreement entered into between Kline and his wife operated to destroy the tenancy by the entireties in the proceeds of the sale of the Indianhead property.
The court has found that the source of the $100,000 check drawn on the City Title account and ultimately paid to Block consisted of the proceeds of the sale of the Indianhead property. At the time, for the reason just stated, the proceeds belonged solely to Kline. Thus, the transfer was of property belonging to the bankrupt, and therefore depleted the bankrupt’s estate. The fact that the payment to Block was made not directly by Kline but through City Title does not save the transfer from being a preference. See National Bank of Newport v. National Herkimer County Bank, 225 U.S. 178, 184, 32 S.Ct. 633, 56 L.Ed. 1042 (1912); Aulick v. Largent, 295 F.2d 41, 48-50 (4th Cir. 1961). Further, a transfer can constitute a voidable preference regardless of whether the transferee knew that the property transferred was part of the bankrupt’s estate. Aulick v. Largent, supra, 295 F.2d at 52.
Antecedent Debt
Quite clearly, no contractual or other formal debtor-creditor relationship existed between Kline and Block. Block’s funds, deposited in a City Title escrow account, were misappropriated by Kline. The defendant contends that this appropriation did not serve to make Kline his debtor. Rather, he maintains, it was City Title, not Kline, which had an obligation to repay him the $100,000 deposit.
Defendant, however, misconceives the applicable law. “[A] willing extension of credit is not necessary in order to create an antecedent debt under the preference provision of the [Bankruptcy] Act.” Engelkes v. Farmers Co-operative Co., 194 F.Supp. 319, 326 (N.D.Iowa 1961). To the contrary, it is a “well settled rule that property converted, embezzled, or otherwise taken by the bankrupt, or obtained by him by fraud, can be claimed from the bankrupt estate only so long as it can be definitely traced, with the consequence that an attempted repayment by the bankrupt prior to bankruptcy is a preference, except where made from the very property taken.” Morris Plan Industrial Bank of New York v. Schorn, 135 F.2d 538, 539 (2d Cir. 1943); accord, Atherton v. Green, 179 F. 806, 808 (7th Cir. 1910); Malone v. Gimpel, 151 F.Supp. 549, 554 (N.D.N.Y.1956), aff’d, 244 F.2d 954 (2d Cir. 1957); Dinkelspiel v. Garrett, 96 F.Supp. 800, 804-05 (W.D.Ark. 1951); see Cunningham v. Brown, 265 U.S. 1, 11-12, 44 S.Ct. 424, 68 L.Ed. 873 (1924).
It is undisputed that the $100,000 deposited with City Title belonged to Block. The court has found that Kline, while withdrawing other funds from City Title, specifically misappropriated the money deposited by Block. In such a case, although Block may have had a cause of action against City Title for allowing Kline to withdraw his money,' see 30A C.J.S. Escrows § 11, at 1004, he certainly had a claim against Kline as well for conversion. See generally W. Prosser, Torts § 15 (4th ed. 1971). Kline’s misappropriation of Block’s money made him Block’s debtor at the time of the misappropriation. Because Block was repaid with funds other than those taken by Kline, the payment constituted a voidable preference, provided the other elements have been proved.
Reasonable Cause to Believe
The final element required to be proved to establish a voidable preference under the Act is that Block or his agent had reasonable cause to believe at the time of the transfer that Kline was insolvent. “A creditor has reasonable cause to believe that a debtor is insolvent when such a state of facts is brought to the creditor’s notice, respecting the affairs and pecuniary conditions of the debtor, as would lead a prudent business person to the conclusion that the debtor is insolvent.” 3 Collier, supra, ¶ 60.-53, at 1057-58. Although a mere suspicion does not constitute reasonable cause to believe, if a creditor or his agent is presented with or aware of facts and circumstances that would lead a person of ordinary prudence to make further inquiry into the bankrupt’s solvency, then the creditor is charged with knowledge of the facts that an inquiry would have revealed. In re PRS Products, Inc., 574 F.2d 414, 417 (8th Cir. 1978); Clower v. First State Bank of San Diego, Texas, 343 F.2d 808, 810 (5th Cir. 1965); 3 Collier, supra, ¶ 60.53[2], at 1069. The evidence at trial demonstrated that Washington, D. C. area news media carried extensive news coverage of Kline’s investigation by the Securities and Exchange Commission and a federal grand jury and of his subsequent indictment and conviction for perjury. Edgar May, Block’s attorney, practiced in Washington. During 1973, numerous creditors of Kline made demands upon him for payment. In early 1973, Block demanded return of his $100,000 deposit. The testimony at trial further indicated that May took pains to attempt to isolate Block from Kline at the time repayment was made. The court finds it probable from these facts and circumstances that Block and/or his agent May knew that Kline was insolvent. At the very least, one or both of them must have known by September 11,1973 that Kline was in some sort of difficulty. The court finds that reasonable inquiry prompted by this knowledge would have revealed Kline’s insolvency.
Alternatively, the court concludes that plaintiff is entitled to recover even absent a showing that Block or his agent had reasonable cause to believe Kline was insolvent. See note 2, supra.
Defendant’s Counterclaim
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4219047-24060 | MEMORANDUM OPINION
ROSEMARY M. COLLYER, United States District Judge
Who was Peter Knowland? It depends on whom you ask. According to Michelle Van Beneden, who claims to be Mr. Know-land’s sole heir, Mr. Knowland was an American national injured in an horrific Syrian-sponsored terrorist attack on the Schwechat Airport in Vienna, Austria in 1985 for which his estate may recover damages. Ms. Van Beneden claims that Mr. Knowland, who was formerly named Peter Lesley but changed his last name one year before the attack, died decades later outside the United States after executing a Will that left his estate to her rather than to his wife. Ms. Van Beneden further contends that a Belgian court has appointed her administrator of Mr. Know-land’s estate. The Syrian Arab Republic disagrees. It contends that the only American man injured in the attack was an individual named Peter Lesley, who was not Mr. Knowland, and that regardless of Mr. Knowland’s true identity, Ms. Van Be-neden has no legal claim to his estate. Accordingly, Syria moves for summary judgment for lack of standing. This Court need not square these competing contentions, however, because the Foreign Claims Settlement Commission has found that not only is Ms. Van Beneden not the proper representative of Mr. Knowland’s estate, but also that Mr. Knowland’s estate does not exist as a legal entity. Collaterally estopped from contesting these findings, Ms. Van Beneden is without standing to pursue the instant litigation. Consequently, the Court will grant summary judgment to Syria.
I. FACTS
On December 27, 1985, two teams of terrorists associated with the Abu Nidal Organization (ANO) simultaneously attacked the Schwechat Airport in Vienna, Austria, and the Fiumicino Airport in Rome, Italy. Compl. [Dkt. 1] ¶¶ 18, 22; Van Beneden, 709 F.3d at 1167. The twin attacks resulted in the deaths of sixteen people and the wounding of 105. Id. ¶¶ 21-22. ANO claimed responsibility for the attacks. Id. ¶23. Later, two of the attackers corroborated ANO’s involvement and revealed that the terrorists were trained by Syrians at ANO camps in Syrian-controlled Lebanon. See id. ¶¶ 24-36, 61-64. The instant litigation stems from these attacks.
Nearly twenty-three years after the attacks, Peter Knowland sued Syria, the State of Libya, and several Syrian and Libyan organizations and individuals pursuant to the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. §§ 1602 et seq. The Complaint alleges that Mr. Knowland was injured during the attack at the Schwechat Airport, and that he “was, at the time of the acts alleged, an American citizen[,] .... [and] is a permanent resident of the State of Florida.” Compl. ¶ 7. Unmentioned in the Complaint, however, is that Mr. Knowland had not always been an American citizen, a resident of Florida, or for that matter, sported the surname Knowland. Thus, the Court is tasked with patching together Mr. Know-land’s life from documents in the record.
A. The Life of Mr. Knowland
According to his Certificate of Naturalization, Mr. Knowland was born in Hungary on July 14, 1944. Opp’n to Syria’s Mot. for Summ. J. (Opp’n) [Dkt. 32], Ex. A (Certificate of Naturalization) [Dkt. 32-1], Under the name Peter Lesley, he became a U.S. citizen on May 19, 1969. Id. In 1984, Mr. Knowland successfully petitioned a California state court to change his legal name from Peter Lesley to Peter Lesley Knowland. Id., Ex. D (Decree Changing Name) [Dkt. 32-4]. Presumably, at that time, Mr. Knowland lived in California.
At some point, Mr. Knowland moved abroad; when and where is unclear. Also uncertain is how Mr. Knowland came to be in Austria at the time of the Schwechat Airport attack. However, a Will that Mr. Knowland executed in Monaco on September 7, 2009, in anticipation of a surgical procedure, fills in a few gaps. Id., Ex. E (Translated Will) [Dkt. 32-5] at 7. According to that Will, Mr. Knowland married Decia Knowland shortly after the attack on the Schwechat Airport. Id. at 6. The pair wed in Austria but “established [their] first matrimonial residence” in Belgium, where, at an unspecified time, Mr. Knowland became a citizen (in addition to his earlier U.S. citizenship). Id. The marriage evidently soured. At the time of the Will, Mr. Knowland lived apart from his wife: she in Switzerland and he in Monaco. Id. By the terms of the Will, Mr. Knowland expressly “deprive[d] [his] wife of all rights to [his] inheritance_” Id. Mr. Knowland “established] Mrs. Michele Marie Frangoise Van Benden [sic] as [his] sole legatee .... [,]” and directed that she “receive the net proceeds that [he] will receive from the liquidation [of certain marital property]_[as well as] all assets that [he] own[ed] on the day of [his] death.” Id.
Mr. Knowland survived his surgery, but died on January 20, 2010, in Belgium. At the time of his death, he possessed a U.S. passport that had been issued by the U.S. Embassy in Brussels, and had an expiration date in October 2010. Id., Ex. B (U.S.Passport) [Dkt. 32-2], According to a death notice issued by the U.S. Department of State, Mr. Knowland died of unspecified causes. The death notice, which recorded Monaco as Mr. Knowland’s permanent or temporary residence, identified two aliases for him: Peter Lesley and Laszlo Peter Takascs. Id., Ex. C (Amended Report of Death of an American Citizen Abroad) [Dkt. 32-3].
B. Mr. Knowland’s Quest for Damages
Shortly before his death and more than twenty years after the ANO attacks, Mr. Knowland began seeking compensation for the injuries he suffered during the attack on the Schwechat Airport. In so doing, he instituted parallel proceedings before the U.S. Department of Justice’s Foreign Claims Settlement Commission (FCSC) and this Court.
1. Structure of FCSC
FCSC is a product of the International Claims Settlement Act, 22 U.S.C. §§ 1621, et seq., and the War Claims Act, 50 U.S.C.App. §§ 2001-2007. The Commission “is a quasijudicial, independent agency within the Department of Justice which adjudicates claims of U.S. nationals against foreign governments, under specific jurisdiction conferred by Congress, pursuant to international claims settlement agreements, or at the request of the Secretary of State.” History and Overview of FCSC, U.S. Dep’t of Justice, http://www.justiee. gov/fese/about-comm.html/ (last visited January 22, 2014).
FCSC receives claim applications and makes an initial determination. If FCSC denies the claim, in whole or in part, then the claimant may request a hearing. 45 C.F.R. § 508.1. At that hearing, the claimant may appear and may be represented by an attorney. Id. § 500.1(a). FCSC is permitted to designate counsel to represent “the public interest opposed to the allowance of an unjust or unfounded claim or portion thereof....” Id. § 508.5(a). FCSC has subpoena power, see id. § 501.2, may receive oral testimony and documentary evidence, and claimants or counsel for FCSC may cross-examine such evidence, id. § 508.5(a). After such a hearing, FCSC may affirm, modify, or reverse its initial decision. All of its findings “concerning the persons to whom compensation is payable, and the amounts thereof, are conclusive and not reviewable by any court.” Id. § 508.7.
2. Proceedings Before this Court and FCSC
On July 30, 2008, Mr. Knowland filed the instant FSIA lawsuit. The next year, the U.S. Department of State referred certain claims of U.S. nationals against Libya to FCSC, pursuant to the claims settlement agreement, Claims Settlement Agreement, U.S.-Libya, Aug. 14, 2008, 2008 U.S.T. 72, which the United States had reached with Libya and implemented through the Libyan Claims Resolution Act, see Pub.L. No. 110-801, 122 Stat. 2999 (codified at 28 U.S.C. § 1605A), and Executive Order 13,477, 73 Fed.Reg. 65,965 (Oct. 31, 2008). Estate of Peter Lesley Knowland v. Great Socialist People’s Libya Arab Jamahiriya (Knowland II), Foreign Claims Settlement Comm’n, Claim No. LIB-II-166, Decision No. LIB-II-172, at 2-3 (Sept. 13, 2012) (Proposed Decision). Mr. Knowland subsequently dismissed Libya from this lawsuit, see Notice of Voluntary Dismissal [Dkt. 6], and filed a claim with FCSC. Although FCSC awarded him three million dollars ($3,000,000.00) for the physical injuries he suffered due to the attack on Schwechat Airport, see Peter Lesley Knowland v. Great Socialist People’s Libya Arab Jamahiriya (Knowland I), Foreign Claims Settlement Comm’n, Claim No. LIB-1048, Decision No. LIB-I-018 (Oct. 23, 2009) (Final Decision), he was eligible to submit an additional claim for compensation no later than July 7, 2010, Knowland II, Claim No. LIB-II-166 at 3 (Feb. 15, 2013) (Final Decision).
Before he could file an additional claim, Mr. Knowland died in January 2010. One day before the deadline for filing the additional claim, attorney Richard Heideman submitted a follow-on claim as Mr. Know-land’s representative. Id. Mr. Heideman, of the firm Heideman Nudelman & Kalik, P.C., told FCSC that “we just learned of Mr. Knowland’s passing” and were “in the process of trying to identify next of kin and determine whether an estate has been opened.” Id. (internal quotations omitted).
In the interim, this Court dismissed Mr. Knowland’s FSIA lawsuit on October 8, 2010, finding it untimely under FSIA’s statute of limitations, 28 U.S.C. § 1605A. See Mem. Op. [Dkt. 20]. On November 4, 2010, Tracy Kalik of Heideman Nudelman & Kalik, Steven Perles and Edward Ma-cAllister of The Perles Law Firm, PC, and F.R. Jenkins of Meridian 361 International Law Group, PLLC, asked this Court to reconsider its dismissal. See Mot. to Reconsider [Dkt. 22]. These attorneys informed the Court for the first time that Mr. Knowland had died in Belgium on January 20, 2010. Id. at 1 n.l. Citing Haase v. Sessions, 835 F.2d 902, 906 (D.C.Cir.1987), the Court directed counsel to substitute for Mr. Knowland a legal representative of his estate no later than April 15, 2011, or else the suit would be dismissed for lack of standing, Mar. 16, 2011 Minute Order. On April 7, 2011, counsel requested additional time to file a substitute legal representative for Mr. Knowland. See Mot. for Extension of Time [Dkt. 23]. Two weeks later, the Court denied the reconsideration and the request for additional time. See Apr. 21, 2011 Order [Dkt. 24]. Even though counsel had not substituted a legal representative for Mr. Knowland by April 15, the Court did not dismiss the case. It explained that it was “satisfied the [e]state of Peter Knowland exists as some legal entity, though an heir is not named,” adding that “[w]ere the Court not satisfied that the [e]state of Peter Knowland exists as some legal entity, the court would have denied the motion for extension and dismissed] [the] suit for lack of jurisdiction.” Id. at 2 n.l. On May 20, 2011, more than a month after the deadline for substitution that the Court had imposed, counsel filed a consent motion to substitute Ms. Van Be-neden for Mr. Knowland. See Consent Substitution Mot. [Dkt. 25]. The Court granted the request on February 1, 2012. See Feb. 1, 2012 Order [Dkt. 28].
Meanwhile, before FCSC, counsel continued to pursue Mr. Knowland’s second claim for compensation. On June 24, 2011, Heideman Nudelman & Kalik obtained an Order from the President of the Belgian Court of First Instance which recognized Ms. Van Beneden as Mr. Knowland’s “universal legatee” and appointed her “an ad hoc administrator ... solely for the purpose of representing the interests of the late Mr. Knowland and his universal legatee in procedures in the United States against the [S]tates of Libya and Syria as part of compensation following the terrorist attack of 27 December 1985.” Opp’n, Ex. F (Belgian Order) [Dkt. 32-6] at 8. The next month, counsel updated the form for the claim before FCSC, submitting a new signature page with Ms. Van Bene-den’s signature and a letter stating that the Belgian court had appointed her “Administrator of Mr. Knowland’s estate,” and that Mr. Knowland’s estate was “being handled in Belgium.” Knowland II, Claim No. LIB-II-166 at 3 (Final Decision).
On September 13, 2012, FCSC rendered its preliminary decision on the second claim for Mr. Knowland. It denied the claim on the grounds that Ms. Van Bene-den lacked standing. As described in its Final Decision, FCSC concluded that:
(1) the Belgian court’s order does not show that Ms. Van Beneden represents the [e]state of Mr. Knowland; (2) the application for the order makes representations that raise unanswered questions about the case; and (3) it is un clear from the evidence in the record whether the Belgian court has jurisdiction to appoint an administrator for Mr. Knowland’s estate.
Id. at 4 (internal quotations omitted). Counsel objected to the ruling, and an oral hearing followed in January 2013.
FCSC affirmed its Proposed Decision on February 15, 2013. It again found that Ms. Van Beneden lacked standing, focusing on the deficiencies in her appointment as “ad hoc [ajdministrator” of Mr. Know-land’s estate. FCSC stressed that not only did the Belgian Order not appoint Ms. Van Beneden as representative of Mr. Knowland’s estate, but also that there was no evidence that any court in any country had recognized or organized such an estate. FCSC found that “significant questions” existed as to how and whether an estate had been established in Belgium. Knowland II, Claim No. LIB-II-166 at 7 (Final Decision). FCSC noted that “[Counsel’s own Belgian-law expert opined that Monégasque law would apply” rather than Belgian law, and FCSC “questioned why Florida law would not apply, since the payment of the [original three million dollar] award ... was made to Mr. Knowland at a Florida address.” Id. (emphasis added). Moreover, counsel representing Ms. Van Beneden had admitted “that the estate, if it ever existed, [was] ... in disarray,” id. at 4, and produced no evidence that the lawyers ever had been retained by the estate, id. at 5. FCSC concluded that “there [were], essentially, only attorneys before the Commission, and no client, claim or claimant in relation to which an award may be made.” Id. at 4. Thus ended the pursuit for additional compensation from FCSC.
C. The Instant Litigation
In the meantime, this Court’s October 2010 decision was appealed. See Notice of Appeal [Dkt. 26]. Counsel for Ms. Van Beneden argued before the Circuit that Mr. Knowland’s suit related to Estate of Buonocore v. Great Socialist People's Libyan Arab Jamahiriya, Civ. Action No. 1:06-00727 (D.D.C. filed Apr. 21, 2006), and should be permitted to proceed as a timely “related action” under 28 U.S.C. § 1605A(b), Van Beneden, 709 F.3d at 1166-67. The D.C. Circuit agreed that the twin ANO attacks in Vienna and Rome constituted a single event, reversed, and remanded. See id. at 1168-69.
On remand, Syria moves for summary judgment for lack of subject matter jurisdiction. See Mot. for Summ. J. [Dkt. 30]. Mr. Knowland opposes, see Opp’n, and Syria has replied, see Reply [Dkt. 33].
II. LEGAL STANDARDS
This case arises at the intersection of three familiar concepts: summary judgment; standing; and collateral estoppel. In the context of a motion for summary judgment, the burden is on Ms. Van Bene-den to produce evidence sufficient for a reasonable jury to find that she has standing to bring this suit. There is another dimension to this case, however. Ms. Van Beneden already has litigated, and lost, on the exact same question of standing before FCSC.
A.The Summary Judgment Standard
Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Moreover, summary judgment is properly granted against a party who “after adequate time for discovery and upon motion ... 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, 91 L.Ed.2d 265 (1986). In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party’s favor and accept the nonmoving party’s evidence as true. Anderson, 477 U.S. at 255,106 S.Ct. 2505. A nonmoving party, however, must establish more than “the mere existence of a scintilla of evidence” in support of its position. Id. at 252, 106 S.Ct. 2505. The nonmoving party may not rely solely on allegations or conclusory statements. Greene v. Dalton, 164 F.3d 671, 675 (D.C.Cir.1999). Rather, the nonmoving party must “go beyond the pleadings and by her own affidavits, or by the depositions, answer to interrogatories, and admissions on file,” Celotex Corp., 477 U.S. at 324, 106 S.Ct. 2548 (internal quotations omitted), present specific facts that would enable a reasonable jury to find in its favor, Greene, 164 F.3d at 675. If the evidence “is merely colorable, or is not significantly probative, summary judgment may be granted.” Anderson, All U.S. at 249-50, 106 S.Ct. 2505 (internal citations omitted).
B. Standing
Article III of the U.S. Constitution limits the jurisdiction of the federal courts. U.S. Const. Art. Ill, § 2. As relevant here, federal courts have jurisdiction over cases involving a federal statute, 28 U.S.C. § 1331, or a nonjury civil action against a foreign state, 28 U.S.C. § 1330, and where, in the Constitution’s words, there also is a “Case[ ]” or “Controversy],” id., art. Ill, § 2, cl. 1. No action of the litigators can confer subject matter jurisdiction on a federal court. Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C.Cir.2003). “Every plaintiff in federal court bears the burden of establishing the three elements that make up the ‘irreducible constitutional minimum’ of Article III standing: injury-in-fact, causation, and redressability.” Dominguez v. UAL Corp., 666 F.3d 1359, 1362 (D.C.Cir.2012) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)).
At the summary judgment stage, a plaintiff cannot “rest on ... mere allegations, but must set forth by affidavit or other evidence specific facts, which for purposes of the summary judgment motion will be taken to be true.” Lujan, 504 U.S. at 561, 112 S.Ct. 2130 (internal quotations and citation omitted). In other words, “[a]t summary judgment, [the plaintiffs] burden is to show that a reasonable juror could find he has standing.” Dominguez, 666 F.3d at 1362 (citing Meijer, Inc. v. Biovail Corp., 533 F.3d 857, 862 (D.C.Cir.2008)).
C. Collateral Estoppel
Under the doctrine of collateral estoppel, or issue preclusion, “once a court has decided an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first case.” Novak v. World Bank, 703 F.2d 1305, 1309 (D.C.Cir.1983) (citing Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980)). Collateral estoppel applies when:
First, the same issue now being raised must have been contested by the parties and submitted for judicial determination in the prior case. Second, the issue must have been actually and necessarily determined by a court of competent jurisdiction in that prior case. Third, preclusion in the second case must not work a basic unfairness to the party bound by the first determination. An example of such unfairness would be when the losing party clearly lacked any incentive to litigate the point in the first trial, but the stakes of the second trial are of a vastly greater magnitude.
Yamaha Corp. of Am. v. United States, 961 F.2d 245, 254 (D.C.Cir.1992).
Collateral estoppel can be invoked by a stranger to the prior action against a party to that prior action, as the Supreme Court “has virtually eliminated the mutuality requirement for collateral estoppel.” Novak, 703 F.2d at 1309 (citing Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326-28, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) and Blonder-Tongue Labs. v. Univ. of Ill. Found., 402 U.S. 313, 320-27, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971)). The doctrine “precludes a plaintiff from relitigat-ing identical issues by merely switching adversaries.” Parklane, 439 U.S. at 329, 99 S.Ct. 645 (internal quotations and citation omitted). “To preclude parties from contesting matters that they have had a full and fair opportunity to litigate protects their adversaries from the expense and vexation attending multiple [lawsuits], conserves judicial resources and fosters reliance on judicial action by minimizing the possibility of inconsistent decisions.” Cutler v. Hayes, 818 F.2d 879, 888 (D.C.Cir.1987).
III. ANALYSIS
To bring a lawsuit against a foreign state for injuries arising from an act of terror, FSIA requires that the claimant show he “was, at the time the act [of terror] ... occurred ... a national of the United States; ... a member of the armed forces; or ... otherwise an employee of the Government of the United States.... ” 28 U.S.C. § 1605A(a)(2)(A)(ii). Syria argues that the instant litigation does not satisfy this statutory prerequisite. It contends that the person known as Peter Knowland was not a national of the United States at the time of the Schwechat attack, and even if he were, he was not actually injured in the attack. Syria claims that press reports at the time of the incident identified the sole American male wounded during the attack as Dr. Peter Lesley, not Peter Knowland, although it does not submit any evidence to support the contention.
In addition, Syria argues Ms. Van Beneden is not a legitimate representative of the estate of Peter Knowland. Represented by former U.S. Attorney General Ramsey Clark, Syria supports its argument by submitting the FCSC Proposed and Final Decisions that held that Ms. Van Beneden had no standing to pursue a second claim for compensation on behalf of Mr. Knowland’s estate. Syria contends that FCSC’s Final and Proposed Decisions establish that, at most, Ms. Van Beneden is an “administrator ad hoc,” which FCSC determined “is meaningless,” and “[n]o one has been able to show that there is now or ever has been an estate of Peter Knowland as a legal entity.” Reply at 2.
Ms. Van Beneden advances two arguments to support her standing. First, she submits numerous documents to establish the identity of the deceased Mr. Knowland and her claim to his estate. Second, she contends that Syria’s reliance on FCSC’s decisions is misplaced. She faults Syria for attaching the decisions “without citing to any specific pages or quoting any relevant passages.” Opp’n at 10. She also contends that FCSC’s findings “hold[ ] no bearing ... [or] weight in this Court.” Id. at 6. Thus, she contends, “[e]ven if [FCSC] had reached conclusions that were relevant to the issue Syria is arguing in its motion, a decision by [FCSC] is not binding on a U.S. district court.” Id. at 10.
Ms. Van Beneden, however, misper-ceives this case and the law. In the context of other state-sponsored terrorism suits, this Court has held that “an estate’s standing to maintain a cause of action seeking damages for injuries suffered during the decedent’s lifetime is ... a threshold question concerning the power of the estate to bring and maintain legal claims. Such questions are governed by the law of the state which also governs the creation of the estate.” Taylor v. Islamic Republic of Iran, 811 F.Supp.2d 1, 12 (D.D.C.2011). Further, the “party invoking federal jurisdiction bears the burden of establishing” standing. Lujan, 504 U.S. at 555, 112 S.Ct. 2130. Therefore, the question remains whether Ms. Van Beneden has produced sufficient evidence for a reasonable jury to find that Mr. Knowland’s estate exists in some jurisdiction and that, under the law of that jurisdiction, she has authority to bring and maintain its legal claims. The answers are clearly in the negative.
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3851004-14288 | ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT
CLAUDIA WILKEN, District Judge.
Moving Defendants Merchant Services, Inc., Universal Card, Inc., National Payment Processing, Inc., Universal Merchant Services, LLC, Jason Moore, Eric Madura, Nathan Jurczyk, Robert Parisi and Alicyn Roy (hereinafter, Movants) move for partial summary judgment on the claims brought against them by Plaintiff Volker Von Glasenapp. Plaintiffs oppose the motion. The Court took the motion under submission on the papers. Having considered the papers filed by both parties, the Court DENIES the motion for partial summary judgment.
BACKGROUND
The parties do not dispute the facts material to this motion.
On March 26, 2010, Yon Glasenapp, among others, instituted this putative class action lawsuit, bringing claims against numerous Defendants, including Movants, for violations of the Racketeer Influenced and Corrupt Organizations Act, the Fair Credit Reporting Act, the Unfair Competition Law and the False Advertising Law, and for common law fraud, misrepresentation, breach of contract and conversion.
On August 31, 2010, Von Glasenapp filed an individual Chapter 7 bankruptcy petition. Chapter 7 Voluntary Petition, In re von Glasenapp, Case No. 10-13389 (Bankr.N.D.Cal.), Docket No. I. While Von Glasenapp informed the attorney who prepared the bankruptcy petition of the case before this Court, the attorney failed to include any reference to it in Von Glasenapp’s bankruptcy filing. Id.; Von Glasenapp Deck ¶¶ 5-6. Von Glasenapp “did not notice or understand the oversight.” Von Glasenapp Deck ¶ 6.
On October 6, 2010, Von Glasenapp attended the Initial Meeting of Creditors in the bankruptcy proceeding. Id. at ¶ 7. At the meeting, he orally informed the trustee’s representative of this litigation. Id.
On December 7, 2010, the Bankruptcy Court granted the bankruptcy petition and discharged Von Glasenapp’s debts. Order Discharging Debtor and Final Decree, In re von Glasenapp, Case No. 10-13389 (Bankr.N.D.Cal.), Docket No. 7.
On February 8, 2012, Movants wrote to Plaintiffs, requesting dismissal of Von Glasenapp’s claims as a named plaintiff in this action because of the failure to include this case in his bankruptcy petition. Sullivan Deck ¶ 3, Ex. 2, at 2.
On February 14, 2012, Von Glasenapp’s bankruptcy attorney filed a motion to reopen his bankruptcy case. Mot. to Reopen, In re von Glasenapp, Case No. 10-13389 (Bankr.N.D.Cal.), Docket No. 9. The Bankruptcy Court granted the petition on February 15, 2012 and appointed a trustee. Order Granting Mot. to Reopen, In re von Glasenapp, Case No. 10-13389 (Bankr.N.D.Cal.), Docket No. 10. On February 16, 2012, Von Glasenapp filed corrected schedules for his bankruptcy petition, disclosing the instant case, claims made and requests for various types of damages and awards. Amended Schedules B and C and Statement of Financial Affairs, In re von Glasenapp, Case No. 10-13389 (Bankr.N.D.Cal.), Docket Nos. 13, 15, 16.
On March 5, 2012, the bankruptcy trustee filed a trustee’s report stating that he had “made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law.” Chapter 7 Trustee’s Report of No Distribution, In re von Glasenapp, Case No. 10-13389 (Bankr.N.D.Cal.). He certified “that the estate of the above-named debtor(s) has been fully administered” and requested that he “be discharged from any further duties as trustee.” Id. The trustee took no action regarding the claims in this case before filing his report.
On March 8, 2012, the Bankruptcy Court found that Von Glasenapp’s estate had been fully administered, discharged the trustee and closed the bankruptcy case. Final Decree, In re von Glasenapp, Case No. 10-13389 (Bankr.N.D.Cal.), Docket No. 17.
LEGAL STANDARD
Summary judgment is properly granted when no genuine and disputed issues of material fact remain, and when, viewing the evidence most favorably to the non-moving party, the movant is clearly entitled to prevail as a matter of law. Fed. R. Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.1987).
The moving party bears the burden of showing that there is no material factual dispute. Therefore, the court must regard as true the opposing party’s evidence, if supported by affidavits or other evidentiary material. Celotex, 477 U.S. at 324, 106 S. Ct. 2548; Eisenberg, 815 F.2d at 1289. The court must draw all reasonable inferences in favor of the party against whom summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th Cir.1991). Material facts which would preclude entry of summary judgment are those which, under applicable substantive law, may affect the outcome of the case. The substantive law will identify which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Where the moving party does not bear the burden of proof on an issue at trial, the moving party may discharge its burden of production by either of two methods:
The moving party may produce evidence negating an essential element of the nonmoving party’s case, or, after suitable discovery, the moving party may show that the nonmoving party does not have enough evidence of an essential element of its claim or defense to carry its ultimate burden of persuasion at trial.
Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1106 (9th Cir.2000).
If the moving party discharges its burden by showing an absence of evidence to support an essential element of a claim or defense, it is not required to produce evidence showing the absence of a material fact on such issues, or to support its motion with evidence negating the non-moving party’s claim. Id.; see also Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 885, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990); Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir.1991). If the moving party shows an absence of evidence to support the non-moving party’s case, the burden then shifts to the non-moving party to produce “specific evidence, through affidavits or admissible discovery material, to show that the dispute exists.” Bhan, 929 F.2d at 1409.
DISCUSSION
Movants move for summary judgment on Von Glasenapp’s claims, arguing that he lacks standing to pursue his claims in this case and that, even if he has standing, he should be judicially estopped from doing so.
I. Standing
Movants argue that Von Glasenapp lost standing to pursue these claims by filing the bankruptcy petition. Plaintiffs respond that the trustee has abandoned any interest in the claims and has been discharged, so the claims have reverted back to Von Glasenapp.
“Upon a declaration of bankruptcy, all of a petitioner’s property becomes the property of the bankruptcy estate,” including “ ‘all legal or equitable interests of the debtor in property,’ which has been interpreted to include causes of action.” Flowers v. Wells Fargo Bank, N.A., 2011 WL 2748650, at *3, 2011 U.S. Dist. LEXIS 75429, at *7-8 (N.D.Cal.) (citing, among other authority, 11 U.S.C. § 541(a); Sierra Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705, 707 (9th Cir.1986)). “Accordingly, a bankruptcy petitioner loses standing for any causes of action and the estate becomes the only real party in interest unless the bankruptcy trustee abandons the claims.” Id. at *3, 2011 U.S. Dist. LEXIS 75429, at *8 (citing In re Lopez, 283 B.R. 22, 28-32 (9th Cir. BAP 2002); In re Pace, 146 B.R. 562, 565-66 (9th Cir.1992)).
The petitioner may re-gain standing if the bankruptcy trustee abandons the claims. See, e.g., Rowland v. Novus Fin. Corp., 949 F.Supp. 1447, 1454 (D.Haw.1996). “Property of a bankruptcy estate can be abandoned by three methods: (1) after notice and hearing, the trustee may unilaterally abandon property that is ‘burdensome ... or ... of inconsequential value’ (11 U.S.C. § 554(a)); (2) after notice and hearing, the court may order the trustee to abandon such property (11 U.S.C. § 554(b)); (3) any property which has been scheduled, but which has not been administered by the trustee at the time of closing of a case, is abandoned by operation of law. (11 U.S.C. § 554(c).)” Cloud v. Northrop Grumman Corp., 67 Cal.App.4th 995, 1003, 79 Cal.Rptr.2d 544 (1998).
“Abandonment under section 554(c), commonly referred to as ‘technical abandonment,’ occurs automatically.” Sandres v. Corr. Corp. of Am., 2010 WL 4321587, at *3, 2010 U.S. Dist. LEXIS 113959, at *6 (E.D.Cal.) (citing In re DeVore, 223 B.R. 193, 197 (9th Cir. BAP 1998)); see also 11 U.S.C. § 554(c) (“Unless the court orders otherwise, any property scheduled under section 521(a)(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor ... ”).
Movants argue that Von Glasenapp cannot establish that the -claims have been abandoned, because the bankruptcy trustee did not take an affirmative act to abandon the claims in this lawsuit and the Bankruptcy Court did not issue an order indicating that they were. While this may be true, Von Glasenapp has established that the claims were abandoned as a matter of law under 11 U.S.C. § 554(c). Von Glasenapp’s claims were properly scheduled in the re-opened bankruptcy case, the trustee did not administer them, and the Bankruptcy Court subsequently closed the bankruptcy case, without ordering that the claims were not thereby deemed abandoned. Accordingly, by operation of law, the bankruptcy trustee technically abandoned these claims and Von Glasenapp has standing to pursue them.
II. Judicial Estoppel
Movants argue that, even if Von Glasenapp has standing to pursue his claims, he should be judicially estopped from doing so, because of his failure to include them in his original bankruptcy filing.
“Judicial estoppel is an equitable doctrine that precludes a party from gaining an advantage by asserting one position, and then later seeking an advantage by taking a clearly inconsistent position.” Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir.2001) (citing Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 600-601 (9th Cir.1996); Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir.1990)). Courts also evoke this doctrine out of “ ‘general considerations of the orderly administration of justice and regard for the dignity of judicial proceedings,’ and to ‘protect against a litigant playing fast and loose with the courts.’ ” Id. (quoting Russell, 893 F.2d at 1037). Because, in either situation, “the purpose of the doctrine is to protect the integrity of the judicial process,” the “doctrine of judicial estoppel ‘is an equitable doctrine invoked by a court at its discretion.’ ” Morris v. California, 966 F.2d 448, 453 (9th Cir.1992) (quoting Russell, 893 F.2d at 1037).
The Ninth Circuit has stated that, under this doctrine, “in the bankruptcy context, a party is judicially estopped from asserting a cause of action not raised in a reorganization plan or otherwise mentioned in the debtor’s schedules or disclosure statements.” Hamilton, 270 F.3d at 783. “[T]he invocation of the doctrine serves to protect the bankruptcy system, which depends on full and honest disclosure by debtors of all their assets.” Yoshimoto v. O'Reilly Auto., Inc., 2011 WL 2197697, at *3, 2011 U.S. Dist. LEXIS 60598, at *10 (N.D.Cal.) (citing Hamilton, 270 F.3d at 785). “When a debtor’s disclosures are incomplete, they impair the interests of the creditors (who plan their actions in the bankruptcy proceeding based on information in the disclosures) and the bankruptcy court (which decides to approve a plan based on the information).” Id. (citing Hamilton, 270 F.3d at 785).
“[T]hree factors that courts may consider in determining whether to apply the doctrine” are (1) whether the party’s current position is “clearly inconsistent” with its earlier position; (2) whether the party “succeeded in persuading a court to accept that party’s earlier position;” and (3) whether the party “would derive an unfair advantage or impose an unfair detriment on the opposing party if not es-topped.” Id. at 782-83 (citing New Hampshire v. Maine, 532 U.S. 742, 750-51, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001)). The Ninth Circuit and the Supreme Court have both emphasized that these factors are not “ ‘inflexible prerequisites or an exhaustive formula,’ ” and “ ‘[additional considerations may inform the doctrine’s application in specific factual contexts.’ ” Id. at 782 (quoting New Hampshire v. Maine, 532 U.S. at 751, 121 S.Ct. 1808).
Plaintiffs argue that judicial estoppel should not be applied here, because no advantage was gained through the initial error, because Von Glasenapp did not act in bad faith and because the application of judicial estoppel would result in injustice.
Plaintiffs argue that judicial estoppel should not prevent Von Glasenapp from seeking injunctive relief and serving as a representative on the class claims, because “none of these amounts or remedies are [sic] subject to distribution to his creditors.” Opp. at 7. Movants do not respond to or dispute these arguments, and instead contend that Von Glasenapp’s individual recovery on his monetary claims should at least be capped at the amount of his remaining personal exemption.
The parties dispute whether the reopening of the bankruptcy estate and subsequent discharge remedies Von Glasenapp’s omission. Plaintiffs argue that the eventual discharge demonstrates that Von Glasenapp did not gain an unfair advantage, because the outcome would have been the same even if he had initially made the appropriate disclosures. Movants respond that this is irrelevant. While Movants are correct that some courts have found that a late amendment did not remedy the initial failure to disclose, see, e.g., Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282, 1288 (11th Cir.2002); Ortiz v. Sodexho Operations, LLC, 2011 WL 4499050, at *5 (S.D.Cal.), they are not correct that this is an absolute bar.
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3927022-13007 | OPINION OF THE COURT
FISHER, Circuit Judge.
Alvin George, Jr. was charged by a superceding indictment with five counts of sexual exploitation of a minor, in violation of 18 U.S.C. § 2252(a). Following a four-day jury trial, George was convicted on all five counts of the indictment. After the District Court denied his motion for a new trial, he was sentenced to 60 months in prison. He now appeals his conviction. We have jurisdiction pursuant to 28 U.S.C. § 1291. For the reasons below, we will affirm his conviction.
I.
As we write only for the parties, who are familiar with the factual context and the procedural history of the case, we will set forth only those facts necessary to our analysis. In July 2003, authorities were alerted by Yahoo!, an internet service provider, that an individual using the screen name “tinylittlepus” was downloading child pornography. A follow-up investigation revealed that the account owner was listed as a “Ms. A George,” who resided in Lock Haven, Pennsylvania, and was born on July 21, 1977, the same place of residence and date of birth as the defendant. After obtaining a search warrant for the George residence, federal investigators searched the house and discovered a computer containing images of child pornography. George was arrested and charged for possessing the illegal images.
Evidence at trial indicated that George lived at the address in Lock Haven during the time the pornography was downloaded and shared the household with only one other adult, Brenda Smartwood. In addition, George’s teenaged cousin, Nicole Vincent, had lived at George’s house for part of the summer of 2003. Vincent testified that she and her friends used the computer, but she did not download or access child pornography nor did her friends download it in her presence. Smartwood likewise testified that she never downloaded child pornography.
Evidence at trial also indicated that George utilized a Yahoo! account, “alvingeorgel,” for regular email activity. After midnight on September 25, 2003, shortly before several pornographic images were downloaded, George updated the profile of his Yahoo! account registered under alvingeorgel. Further, emails were received by [email protected] from an e-mail address registered to Mvin George, [email protected]. Three days before the emails were sent, George used the Adelphia email account to seek work doing odd jobs from another individual.
At trial, George testified that he knew little about computers, that Smartwood used the computer more often, and that she often organized his email for him. Additionally, he claimed that he had an alibi for some of the times at which child pornography was downloaded to his computer. To support that contention, he introduced into evidence yellow pay-stubs that included the words “Mvin’s hrs.” or “Mvin” at the top. Each receipt contained the days and hours George allegedly worked for John Cebulka, who owned and operated an asphalt paving operation. George admitted that he was the person who filled out the days and times on each receipt. When he testified, Cebulka supported George’s contention that George had worked for him, but indicated that George only worked for him a few times during 2003 and did not work for him the number of hours he claimed. Cebulka also testified that he had never used pay stubs like the ones George had produced, nor was the handwriting on those stubs his.
George also claimed that on a day that an image was downloaded he was in court for a contempt proceeding. However, evidence indicated that, while he was in court at 3:25, he lived close enough to the courthouse to have walked home and used his computer at 3:47, the time at which the image was downloaded.
At the beginning of George’s trial testimony, his attorney attempted to bolster George’s claim that he did not know the password to the “tinylittlepus” account by introducing a handwritten note George had left on the computer in February of 2003. The note was addressed to “Nicki and Friends,” and requested that they take cups and dishes down with them after using the computer and put his screen name and password back into Yahoo! when they were done as he had struggled to sign on to his account after one of them had used his computer. The government objected to the evidence as self-serving, inadmissible hearsay. Defense counsel responded by telling the District Court that the note was the original, but never asserted a non-hearsay purpose for the note. The District Court sustained the objection and excluded the evidence.
At the close of evidence, the prosecutor began his closing statement by defining voyeur and indicating that George was a voyeur; he then indicated that George’s motive for downloading the images was sexual gratification. Shortly thereafter, the prosecutor indicated that this was “an excellent investigation,” “one of the finest investigations in a case like this that I have seen.” There was no objection. The prosecutor then stated that Agent Kyle, one of the federal investigators, “did an incredible job in this case.” At this point, George’s attorney objected. The District Court sustained the objection and directed the prosecutor to refrain from any other personal evaluations of the agents’ work or testimony. The District Court instructed the jury that the prosecutor’s opinions were not to be considered when weighing the evidence. George’s counsel requested no further relief.
Later in his closing remarks, the prosecutor told the jury that the images presented at trial were only a representative sample of what was found on George’s computer. George’s counsel objected on the ground that the government’s statement was based on facts not in evidence. The District Court overruled the objection, finding that there was testimony that more photos were uncovered than those presented at trial and that the photographs presented at trial were a mere sample. After defense counsel stated in his closing that the prosecution had chosen to show the worst photographs, the prosecutor stated during his rebuttal that what the jury was shown were not the worst photos. The District Court sustained the defense’s objection and stated the jury was to decide the case only on the evidence before it.
The prosecutor also stated that he “felt sorry” for George’s father and stated that a defense witness who had testified to George’s character was a “sweet,” “entertaining lady,” and that he wouldn’t have expected anything else out of her but to say that she knew nothing bad about George. George’s counsel objected. The District Court sustained the objection and again instructed the jury not to take into consideration the prosecutor’s personal opinions about the evidence presented. George’s counsel requested no further re-
George raises four points of error on appeal. George first contends that there was insufficient evidence on which a jury could have found that he was the person who downloaded the pornographic images. “We apply a particularly deferential standard of review when deciding whether a jury verdict rests on legally sufficient evidence.” United States v. Dent, 149 F.3d 180, 187 (3d Cir.1998). In conducting such a review, we must view the evidence in the light most favorable to the government and uphold a jury’s verdict if any rational juror could have found the elements of the crime beyond a reasonable doubt. Id.; United States v. McBane, 433 F.3d 344, 348 (3d Cir.2005).
George contends both that he had an alibi at the time several of the images were downloaded and that, even if he did not have an alibi, because the computer was in a common area of his home, the government failed to prove beyond a reasonable doubt that he was the person who downloaded the images. As to George’s first contention, while the jury could have chosen to believe his alibis, they were not required to do so. The government presented witnesses that contradicted George’s testimony as to his whereabouts. George’s employer testified that the time sheets George presented at trial were not written or signed by him and that George worked considerably fewer hours than he claimed during his testimony. The government also presented evidence that rebuffed George’s contention that he was at a contempt hearing when one of the images was downloaded. Based on this evidence, a reasonable juror could have chosen to disbelieve George’s alibis. It is the jury’s duty to weigh the evidence and judge the credibility of the witnesses presented to it. A jury is free to believe or disbelieve the testimony of any witness that appears at trial. United States v. Boone, 279 F.3d 163, 189 (3d Cir.2002). When reviewing credibility determinations by the jury, we must be careful not to usurp its role. United States v. Flores, 454 F.3d 149, 154 (3d Cir.2006). Therefore where, as here, there is substantial evidence upon which a jury could base its conclusion, we will not disturb that determination. United States v. Iafelice, 978 F.2d 92, 94 (3d Cir.1992).
George’s second contention, that because there were other people in the home the government could not prove he was the person who downloaded the images, is equally without merit. At trial, the government produced evidence that showed George had updated his regular user profile shortly before several pornographic images were downloaded, and that the user profile for “tinylittlepus” included the name “Ms. A1 George” and George’s birthday. In addition, the government produced testimony indicating that at the time several of the images were downloaded, George was the only person home. Finally, both Smartwood and Vincent testified that they had not downloaded any pornographic images. From this evidence, the jury was able to draw the reasonable inference that George was the person downloading the images onto his computer. United States v. Knox, 32 F.3d 733, 753 (3d Cir.1994) (“A trier of fact, however, may consider direct and circumstantial evidence and the reasonable inferences to be drawn therefrom.”).
III.
George next contends that the District Court erred in failing to admit the note he addressed to Vincent and her friends. At trial, the government objected to the note as hearsay. Defense counsel responded that the note was “the original.” George now contends that the note was offered for non-hearsay purpose. As the proponent of the evidence, George’s counsel bore the burden of proving that the evidence was offered for a non-hearsay purpose. See Lippay v. Christos, 996 F.2d 1490, 1497 (3d Cir.1993) (holding that proponent of hearsay bears the burden of proving why it is admissible). Because George’s counsel did not satisfy this burden and, in fact, did not even suggest that the evidence would be used for non-hearsay purposes, the District Court did not abuse its discretion in excluding the evidence. In re Flat Glass Antitrust Litigation, 385 F.3d 350, 372 (3d Cir.2004) (we review district court’s decision to admit or exclude based on hearsay for abuse of discretion).
Even if George’s counsel had appi-opriately responded to the government’s objection, the District Court did not abuse its discretion in excluding the evidence. The inference George wanted to draw from the note, that he did not know the password, was dependent upon the truth of the statement in the note that he had struggled to get back online after Vincent or her Mends had removed his password. The note was offered for the truth of statements it contained and, therefore, was classic hearsay. See Mahone v. Lehman, 347 F.3d 1170, 1173 (9th Cir.2003).
III.
George also appeals several statements made by the prosecutor during closing arguments, including that the investigation was well conducted, that the agent in charge of the investigation had done a very good job, that the prosecution had not shown the “worst of the worst” of the pornographic images, and that a defense witness would say nothing other than that George was a good man. In essence, George contends that the prosecutor vouched for his own witnesses while attacking the credibility of one of George’s character witnesses and referred to facts not in evidence.
George is requesting a new trial on appeal; however, it is important to note that George’s counsel did not move for a mistrial at any point during closing arguments. While we generally review a district court’s refusal to grant a mistrial for abuse of discretion, in this particular circumstance there was no ruling on a mistrial because defense counsel did not request one. While no other court of appeals appears to have addressed this precise issue, in other contexts where defense counsel objects but fails to request a mistrial, we review failure to grant a mistrial for plain error only. See United States v. Richards, 241 F.3d 335, 341 (3d Cir.2001) (where defendant objected to Jenks Act violation but did not request mistrial we review for plain error). However, even if we were to review for abuse of discretion, our conclusion would be the same.
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12155628-27663 | ORDER AND JUDGMENT
Gregory A. Phillips, Circuit Judge
James Goad sued the Town of Meeker and Meeker Police Chief Samuel D. Byrd (the Defendants), asserting federal-civil-rights and state-law claims after Chief Byrd obtained an arrest warrant based on Goad’s allegedly making a false statement to Meeker police. The district court granted summary judgment to the Defendants, and Goad appeals. We first conclude that Goad has waived review of some of his claims. For Goad’s other claims, we conclude that the district court did not err in considering information outside Chief Byrd’s arrest-warrant application in its probable-cause determination. We hold that, with that information, probable cause supported the charge against Goad and the resulting seizure. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
BACKGROUND
A. Goad and the Meeker Police Department
Even before a dispute with police in which Goad claimed ownership of a pawnshop—which was the false statement underlying his charged crime—Goad had a history of conflict with the Meeker Police Department. On June 4, 2012, Goad had a dispute with Meeker Police Officer Sean Sugrue. While on traffic patrol, Officer Sugrue had parked his police car in front of Meeker Supply and Pawn—a pawnshop that Goad operated with his brother, Gerald Goad. Officer Sugrue’s car was blocking the pawnshop’s entrance when Goad arrived. Although the pawnshop was then closed, Goad told Officer Sugrue that he owned the pawnshop and that the officer needed to move the police car because Goad was expecting a delivery. Officer Sugrue refused to move, and Goad told Officer Sugrue that he was going to raise the issue with the city manager. Soon after this, Goad drove to Meeker City Hall to voice his grievances. When Officer Sugrue saw Goad heading toward City Hall, Officer Sugrue decided to follow so that he could meet with the town manager to explain his side of the story. Two days later, on June 6, 2012, Goad filed a citizen’s complaint against Officer Sugrue. Chief Byrd, who was then Meeker’s Assistant Chief of Police, investigated the complaint and issued verbal and written warnings to Officer Sugrue.
On February 16, 2013, eight months later, Officer Sugrue stopped Goad for driving 45 mph in a 35-mph zone. Goad hired an attorney to defend him, and, on March 6, 2013, Goad’s attorney requested Officer Sugrue’s personnel files.
B. The Arrest-Warrant Application and Criminal Charge
On March 7, 2013, a local prosecutor working for Lincoln County (where Meeker is located) filed a criminal complaint against Goad for making a false statement, which was accompanied by Chief Byrd’s arrest-warrant application. In the application, Chief Byrd declared that Goad had falsely sworn in an earlier citizen’s complaint against Officer Sugrue' that Goad owned the pawnshop. Chief Byrd found Goad’s claim inconsistent with Goad’s status as a convicted felon. Based on the arrest-warrant application, a Lincoln County District Court judge found probable cause to issue the arrest warrant. When Goad learned about the arrest warrant, he turned himself in at the Lincoln County Jail and was booked and released. On August 7, 2013, the local prosecutor moved to dismiss the charge, simply deeming dismissal to be “in the best interest of justice.” Appellant’s App. vol. 3 ’ at 570. That same day, the state court granted the motion and dismissed the case without prejudice.
C. Goad’s Lawsuit
On January 6, 2015, Goad filed a federal lawsuit against the Defendants, alleging five claims for relief: (1) various civil-rights violations under 42 U.S.C. § 1983, (2) First Amendment retaliation, (3) malicious prosecution and abuse of process, (4) false arrest and unreasonable seizure, and (5) intentional infliction of emotional distress.
The Defendants moved for summary judgment. Addressing Goad’s first four claims, the Defendants argued that Goad had failed to present any evidence to support those claims. The Defendants also contended that Chief Byrd had probable cause to obtain the arrest _ warrant. In doing so, the Defendants relied on information beyond that which Chief Byrd had included in the arrest-warrant application.
In response, Goad disputed that probable cause supported the arrest warrant and contended that, in arguing for probable cause, the Defendants were limited to the information contained within the four corners of the arrest-warrant application. Goad then recited the allegations Chief Byrd made in the arrest-warrant application, argued that some of Chief Byrd’s statements were false, argued that those statements should be removed from consideration, and argued that the remaining facts failed to support a probable-cause finding that he had committed a crime. This being so, Goad argued that his seizure resulting from the arrest warrant was unreasonable under the Fourth Amendment.
The district court granted summary judgment for the .Defendants on 'all of Goad’s claims. In its order, the district court noted that “the question is not whether Byrd’s written [arrest-warrant] application was sufficient to support a finding of probable cause, but is rather whether Byrd had probable cause for the charge at all.” Appellant’s App. vol. 3 at 807 n.9 (emphasis in original). Considering all of the information that Chief Byrd knew when he applied for the arrest warrant, the district court concluded that there was probable cause to believe that Goad had violated Okla. Stat. tit. 21, § 453 (2015), by making a false statement to law enforcement. Goad now appeals.
DISCUSSION
On appeal, Goad argues that the district court erred in its probable-cause analysis by considering information beyond what Chief Byrd included within the four corners of the arrest-warrant application. In addition, Goad argues that the district court erred by concluding that he had confessed three of the First Amendment civil-rights violations in his first claim for relief (including his rights to free speech and to petition the government for redress of grievances).
For the following reasons, we conclude that Goad has waived some of his claims. For Goad’s other claims, we conclude that, in evaluating whether Goad’s voluntary surrender was an unreasonable seizure, the district court was free to consider in its probable-cause analysis all of the information that Chief Byrd knew, and not just the information in Chief Byrd’s arrest-warrant application. We also conclude that probable cause supported the false-statement charge against Goad.
A. Standard of Review
We review de novo a district court’s grant of summary judgment. Baca v. Sklar, 398 F.3d 1210, 1216 (10th Cir. 2005). Summary judgment is appropriate where the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “To avoid summary judgment, the nonmovant must make a showing sufficient to establish an inference of the existence of each element essential to the case.” Hulsey v. Kmart, Inc., 43 F.3d 555, 557 (10th Cir. 1994) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The nonmovant “may not rest upon mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
B. Waiver
Before considering the merits, we address whether Goad has preserved all of his claims by raising them in the district court and to us. .In response to the Defendants’ summary-judgment motion, Goad argued that Chief Byrd’s arrest-warrant application failed to establish probable cause that he had committed the charged crime. And after limiting the available facts to those within the four corners of the arrest-warrant application, Goad argued that two of Chief Byrd’s statements were false, warranting their removal from the probable-cause determination. See Taylor v. Meacham, 82 F.3d 1556, 1562 (10th Cir. 1996) (noting that probable cause must support an arrest warrant and determining probable cause by setting aside false information from an affidavit and including material, omitted information in the affidavit). Similarly, Goad argued that the Defendants had not met the Rule 56 standard for summary judgment for Goad’s First Amendment-retaliation claim.
An appellant waives a claim if he fails to raise it in the district court and then fails “to argue for plain error and its application on appeal.” Campbell v. City of Spencer, 777 F.3d 1073, 1080 (10th Cir. 2014). And even for claims raised in the district court, a party waives a claim if he does not raise it in his opening brief—even if he later raises it in his reply brief. Reedy v. Werholtz, 660 F.3d 1270, 1274 (10th Cir. 2011). Under this rule, Goad has not waived his unreasonable-seizure, malicious-prosecution, abuse-of-process, false-arrest, and First Amendment-retaliation claims. By arguing against the district court’s probable-cause determination, Goad has preserved review of those claims on appeal.
But Goad has waived his claims unrelated to probable cause. First, Goad has not addressed on appeal his intentional-infliction-of-emotional-distress or substantive-due-process claims. Because he has failed to mention those two claims in his opening brief, we will not consider them. See Becker v. Kroll, 494 F.3d 904, 913 n.6 (10th Cir. 2007) (concluding that an appellant waived claims that she did not address in her opening brief). Goad has also failed to argue against the district court’s dismissal of his municipal-liability claims against the Town of Meeker. Thus, we decline to consider those claims. Id.
We also conclude that Goad has waived consideration of his First Amendment claims based on his rights to free speech and to petition for redress. True, Goad mentions in his brief that the district court concluded that he had confessed these First Amendment claims and disputes this- as “simply not the case.” Appellant’s Opening Br. at 21. But Goad’s First Amendment argument solely concerns his retaliation claim, ignoring any violation of his rights to free speech and to petition for redress. Nowhere does Goad say that he even argued those claims in his summary-judgment response. We affirm the district court’s dismissal of these claims, noting that Goad has cited no legal authority in support of them. See Champagne Metals v. Ken-Mac Metals, Inc., 458 F.3d 1073, 1092 (10th Cir. 2006) (citing Rios v. Ziglar, 398 F.3d 1201, 1206 n.3 (10th Cir. 2005) (“To make a sufficient argument on appeal, a party must advance a reasoned argument concerning each ground of the appeal, and it must support its argument with legal authority.” (citation omitted))).
C. Voluntary Surrenders and Fourth Amendment Seizures
At oral argument, Goad conceded that he was not arrested. But that does not mean that Goad was not seized. When Goad learned of the arrest warrant, he turned himself in to the Lincoln County Jail and was released after booking. Goad’s “surrender to the State’s show of authority constituted a seizure for purposes of the Fourth Amendment.” Albright v. Oliver, 510 U.S. 266, 271, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994) (plurality opinion); see Cummisky v. Mines, 248 Fed.Appx. 962, 965 n.1 (10th Cir. 2007) (unpublished) (noting that “a person’s ‘surrender to the State’s show of authority’ by reporting, to police after learning of an outstanding warrant ‘constitute^] a seizure for purposes of the Fourth Amendment’ ” (alteration in original) (quoting Albright, 510 U.S. at 271, 114 S.Ct. 807)).
D. Considering Information Outside of the Arrest-Warrant Application
Goad first argues that the district court erred in its probable-cause analysis by considering information from outside of Chief Byrd’s arrest-warrant application. Put another way, Goad contends that the district court should have determined whether there was probable cause for issuing the arrest warrant, not whether there was probable cause for the criminal charge against him in the complaint.
We disagree with Goad. To succeed on each of the remaining claims he raises, Goad must show the absence of probable cause for the criminal charge, not, as Goad argues, for issuance of the arrest warrant.
1. Fourth Amendment Unreasonable Seizure
To prevail on his Fourth Amendment unreasonable-seizure claim, Goad would have to show that the Defendants lacked probable cause to support the charged crime against him. Specifically, Goad must show a violation not of the Fourth Amendment’s Warrant Clause but of the Reasonableness Clause. “[F]or § 1983 liability” in Fourth Amendment claims, “the seizure must be unreasonable.” Brower v. Cty. of Inyo, 489 U.S. 593, 599, 109 S.Ct. 1378, 103 L.Ed.2d 628 (1989) (quotation marks omitted). Put another way, even if Goad had been arrested rather than self-surrendering after learning of the arrest warrant, he could not “prevail merely by showing that [he was] arrested with a defective warrant; [he] must show that [he was] unreasonably seized.” Graves v. Mahoning Cty., 821 F.3d 772, 775 (6th Cir. 2016) (emphasis in original); see Molina v. Spanos, No. 98-1499, 208 F.3d 226, 1999 WL 626126, at *5-6 (10th Cir. Aug. 18, 1999) (unpublished) (noting that the Warrant Clause “has no application” to the constitutionality of the arrest, which considers whether there was probable cause “that a crime has been committed and that a specific individual committed the crime”).
In Graves, the plaintiffs in a § 1983 action claimed that officers had seized and arrested them -with illegal arrest warrants. Graves, 821 F.3d at 774-75. The Sixth Circuit agreed with the plaintiffs that the arrest warrants had been “issued without any independent probable cause determination.” Id. But the Sixth Circuit still affirmed because the plaintiffs did not establish a violation of the Fourth Amendment’s Reasonableness Clause. Id. at 775. The court was concerned not with whether the warrant was invalid, but whether the seizure (there, an arrest) was reasonable. Id. For support, the Sixth Circuit stated as “the general rule: ‘[E]ven [when] the arrest warrant is invalid,’ probable cause is ‘sufficient to justify arrest.’ ” Id. (alteration in original) (quoting United States v. Fachini, 466 F.2d 53, 57 (6th Cir. 1972)).
Just as the Sixth Circuit noted in Graves, seizures resulting from actual arrests do not require a warrant. See Virginia v. Moore, 553 U.S. 164, 170, 128 S.Ct. 1598, 170 L.Ed.2d 559 (2008) (noting that “warrantless arrests ... were ... taken for granted at the founding”) (citation and quotation marks omitted). And in cases involving arrests, courts ask not whether the warrant was valid, but whether the seizure was reasonable. See, e.g., United States v. Watson, 423 U.S. 411, 414-24, 96 S.Ct. 820, 46 L.Ed.2d 598 (1976) (listing cases and considering whether there was probable cause for an arrest). Similarly, a “seizure having the essential attributes of a formal arrest” is reasonable only if probable cause supports it. United States v. Ritchie, 35 F.3d 1477, 1481 (10th Cir. 1994) (quoting Michigan v. Summers, 452 U.S. 692, 700, 101 S.Ct. 2587, 69 L.Ed.2d 340 (1981)); see Fuerschbach v. Sw. Airlines Co., 439 F.3d 1197, 1203 (10th Cir. 2006) (“A ... seizure generally requires either a warrant or probable cause.” (emphasis added)).
Goad contends that Whiteley v. Warden, Wyoming State Penitentiary, 401 U.S. 560, 91 S.Ct. 1031, 28 L.Ed.2d 306 (1971), confines our evaluation of probable cause to the facts in the arrest-warrant application. There, the Supreme Court held that a conclusory complaint rendered an arrest warrant defective under the Fourth Amendment. Whiteley, 401 U.S. at 564-65, 91 S.Ct. 1031. But in that case, the Supreme Court concluded that the officer lacked “probable cause for arrest without a warrant,” id. at 566, 91 S.Ct. 1031, and did not possess “any factual data tending to corroborate” that Whiteley and his code-fendant had committed a crime, id. at 568, 91 S.Ct. 1031. Only the latter deficiency established a violation of Whiteley’s rights under the Fourth and Fourteenth Amendments. See id. at 568-69, 91 S.Ct. 1031; see also Graves, 821 F.3d at 775 (holding that plaintiffs can prevail only by showing that they were, unreasonably seized).
In short, the district court was free to look beyond the arrest-warrant application to determine if probable cause supported the criminal charge against him (which in turn led to the seizure).
2. Malicious Prosecution and Abuse of Process
We next consider Goad’s malicious-prosecution and abuse-of-process claims. Although the common-law elements of malicious prosecution are the “starting point” for analyzing Goad’s § 1983 claim, “‘the ultimate question’ in such a case ‘is whether plaintiff has proven the deprivation of a constitutional right.’” Wilkins v. DeReyes, 528 F.3d 790, 797 (10th Cir. 2008) (quoting Novitsky v. City of Aurora, 491 F.3d 1244, 1257-58 (10th Cir. 2007)). In Wilkins, the plaintiffs “premised their § 1983 malicious prosecution claim on a violation of the Fourth Amendment right to be free from unreasonable seizures, [so] we analyze[d] the elements of their claim in light of Fourth Amendment guarantees.” Id. Similarly (although not expressly invoking it), Goad roots his malicious-prosecution claim in the Fourth Amendment. In asserting this claim in his complaint, Goad repeatedly alleges that Chief Byrd lacked probable cause to seek an arrest warrant.
Because Goad’s malicious-prosecution claim is based on the Fourth Amendment’s right to be free from unreasonable seizure, we conclude that we can look beyond the arrest-warrant application to determine probable cause (which is one of the elements of a malicious-prosecution claim). See Pitt v. District of Columbia, 491 F.3d 494, 502 (D.C. Cir. 2007) (“The issue in a malicious prosecution case is not whether there was probable cause for the initial arrest, but whether there was probable cause for the underlying suit.” (quotation marks omitted)).
3. False Arrest
To prevail on a false-arrest claim, Goad must establish a lack of probable cause supporting the charged crime. See Kerns v. Bader, 663 F.3d 1173, 1187 (10th Cir. 2011) (noting that the plaintiff must establish that his arrest was without probable cause); Gouskos v. Griffith, 122 Fed.Appx. 965, 970 (10th Cir. 2005) (unpublished) (“The common-law tort of false arrest has a single element in Oklahoma: that the defendant-officer arrested the plaintiff without probable cause.”). In Kerns, we reversed the denial of qualified immunity for the defendant officers because, notwithstanding “whatever mistakes, omissions, or misstatements, they may have made in connection with the arrest warrant affidavit or in grand jury proceedings, there was still probable cause to arrest and detain [Kerns] during the period of his prosecution.” Kerns, 663 F.3d at 1187. At least two other circuits have considered “the facts and circumstances within the defendant’s knowledge” to answer the probable-cause question. Lawson v. Veruchi, 637 F.3d 699, 703 (7th Cir. 2011); see Wesley v. Campbell, 779 F.3d 421, 428 (6th Cir. 2015) (“An officer possesses probable cause when, at the moment the officer seeks the arrest, ‘the facts and circumstances within [the officer’s] knowledge and of which [she] had reasonably trustworthy information [are] sufficient to warrant a prudent man in believing that the [plaintiff] had committed or was committing an offense.’ ” (alterations in original) (quoting Beck v. Ohio, 379 U.S. 89, 91, 85 S.Ct. 223, 13 L.Ed.2d 142 (1964))). We do the same here.
4. First Amendment Retaliation
Similarly, we need not constrain our probable-cause analysis to the arrest warrant for Goad’s First Amendment-retaliation claim. Among other elements, Goad must “plead and prove the absence of probable cause for the prosecution” in order to succeed on this claim. Becker, 494 F.3d at 925 (emphasis added). Because we consider whether probable cause supported the prosecution—and not just the arrest—we can look beyond the arrest-warrant application to resolve Goad’s First Amendment-retaliation claim.
E. Probable Cause for the Charge Against Goad
We now consider whether probable cause supported the charge filed against Goad. Probable cause is a “common-sensical standard” that is “not reducible to precise definition or quantification.” Florida v. Harris, — U.S. -, 133 S.Ct. 1050, 1055, 185 L.Ed.2d 61 (2013) (quotation marks omitted). Rather, to establish probable cause, an officer must show “a substantial probability that a crime has been committed and that a specific individual committed the crime.” Wolford v. Lasater, 78 F.3d 484, 489 (10th Cir. 1996). A “bare suspicion” is not enough. Kerns, 663 F.3d at 1188.
In the arrest-warrant application, Chief Byrd swore as follows: (1) Goad filed a notarized citizen’s complaint “based upon the conversation he had ... with Meeker Policé Officer Sean Sugrue”; (2) in the written complaint, Goad identified himself as the owner of Meeker Supply and Pawn; (3) “Goad is a convicted felon in the State of Oklahoma with a lengthy criminal record”; and (4) “[u]nder Oklahoma [s]tate [l]aw, Goad is not allowed to ... conduct business or otherwise have any dealings with a pawn shop.” Appellant’s App. vol. 3 at 575. Based on this, Chief Byrd declared that “a false sworn declaration was given to [him] by Goad that was to be used in a personnel proceeding authorized ... by law, [in violation of] Title 21 section 453.” Id. Under section 453, it is a felony offense to “falsely prepar[e] any book, paper, record, instrument in writing, or other matter or thing, with intent to produce it, or allow it to be produced as genuine upon any trial, proceeding or inquiry whatever, authorized by law—” Okla. Stat. tit. 21, § 453.
If we constricted our review to Chief Byrd’s application, we would struggle to find probable cause for a violation of section 453. But two additional facts outside the arrest-warrant application support our conclusion that probable cause supported the charge against Goad. First, the prosecutor filed a Supplemental Information (on the same day she filed with the county court both the criminal complaint against Goad and the arrest-warrant application), stating that one of Goad’s felony convictions was for knowingly concealing stolen property—a felony that we believe “substantially relates to the occupation of a pawnbroker or poses a reasonable threat to public safety.” Okla. Stat. tit. 59, § 1503A(B).
Second, Chief Byrd knew from consumer-affairs officials that Goad was not listed as the owner of Meeker Supply and Pawn and that Goad’s name was not listed on any of the pawnshop’s information. The district court found that:
Defendant Byrd knew plaintiff stated in a sworn statement that he was the owner of Meeker Supply and Pawn. It is undisputed that he also had been told by the Oklahoma Department of Consumer Credit, the agency that licensed and regulated pawnshops in Oklahoma, that plaintiffs name did not appear on any of' the documents associated with Meeker Supply and Pawn and that Gerald Goad, not plaintiff, was the owner of the pawnshop. The court concludes defendant Byrd could presume the information provided by the Department of Consumer Credit was reliable and he therefore had reasonable grounds for believing plaintiff had violated [Okla. Stat. tit. 21, § 453], by making a false sworn declaration in his citizen’s complaint that he owned Meeker Supply and Pawn. He also had a reasonable basis for believing plaintiff had violated [Okla. Stat. tit. 59, §§ 1503A and 1512(C)] by operating a pawnshop after a felony conviction and without a [license].
Appellant’s App. vol. 3 at 813-14 (footnotes omitted). Based on this knowledge, the court explained that “the undisputed facts show probable cause to have existed for the arrest warrant and plaintiffs prosecution.” Id. at 814.
Based on these facts and the information that Chief Byrd included in the arrest-warrant application, we agree that probable cause supported the charge of falsely preparing a writing for any legally authorized inquiry, a violation of section 453. And because probable cause supported the charge, Goad cannot succeed on his unreasonable-seizure, malicious-prosecution, abuse-of-process, false-arrest, and First Amendment-retaliation claims.
Before concluding, we note that Goad attempts to raise an issue that he failed to brief adequately in the district court. Goad attempts to argue that his alleged conduct does not fit within any prohibition in section 453. Specifically, Goad contends that what Chief Byrd alleged in the arrest-warrant application was not a violation of section 453, because Goad did not file a non-genuine citizen’s complaint. Rather, Goad asserts that Defendants are relying on an allegedly untrue, nonmaterial fact in a genuine citizen’s complaint to support an alleged violation of section 453 (Goad contends that he did in fact own the pawnshop with his brother).
For good reason, the district court did not decide Goad’s argument about the scope of section 453 in its summary-judgment order:
Plaintiff did not raise any other defense to the applicability of [Okla. Stat. tit. 21, § 453] other than that he did not make a false statement. He states in his response to defendants’ factual statement that “the charge does not fit the actual criminal statute,” but does not develop the argument in his brief. Doc. #63, p. 20, ¶43. While there may be some basis for questioning the applicability of the statute, the court will not attempt to resolve an argument that was not adequately briefed. See Rieck v. Jensen, 651 F.3d 1188, 1191 n.1 (10th Cir. 2011) (“But an argument is not preserved by merely alluding to it in a statement of facts.”).
Appellant’s App. vol. 3 at 814 n.19. Goad has waived any argument about the scope of section 453 because he failed to raise it sufficiently in the district court and then failed to argue for plain error and its application on appeal. Campbell, 777 F.3d at 1080.
CONCLUSION
We conclude that, for some of his claims, Goad has waived appellate review. For Goad’s remaining claims, we conclude that probable cause supported the charge against Goad. We affirm the district court.
This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
.In reviewing this matter, the federal district court concluded that "Officer Sugrue did not know the identity of the person he was pulling over when he initiated the traffic stop,” because it was dark at the time of the incident and Goad was driving a different car from the one he had been driving during his June 4, 2012 encounter with Officer Sugrue. Appellant's App. vol. 3 at 805.
. Goad asserted municipal liability against the Town of Meeker.
. Goad pleaded the fifth claim for relief against only Chief Byrd.
. Specifically, Goad asserted that Chief Byrd falsely claimed that Goad was not allowed under Oklahoma law to conduct business or have any dealings with pawnshops, and that Goad was operating a pawnshop .without a license. The first fact is not a fact at all, but a legal conclusion. The second fact would support Goad’s maldng a false statement in his complaint. But Chief Byrd started investigating because Goad had mentioned Aat he had spent time in prison, causing Chief Byrd to wonder whether Goad was a felon who could not operate a pawnshop. The second fact has little relevance here.
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10511262-8036 | POLITZ,- Chief Judge:
Hans Construction Company, Inc. appeals an adverse summary judgment. Finding no error, wé affirm.
Background
On June 17, 1987 a crane owned by Hans Construction Co. was damaged in the process of dismantling an asphalt plant. Hans’ equipment, including the crane, was covered under an Inland Marine Transit Floater Policy issued by Phoenix Assurance Company of New York. The policy did not cover damage caused by overloading the equipment.
Upon receiving notice of the accident, Phoenix assigned Adjusting Services Unlimited to investigate the claim. John Dominick, an ASU adjuster, interviewed the Hans crane operator, Mike Greer. Greer stated that the crane was lifting a bucket conveyor weighing about 52,000 pounds at the time of the accident. Considering the extent of the boom, the angle, and the radius of the load, the maximum load should have been about 50,000 pounds. Neither Dominick, nor any other adjuster, ever independently determined the actual weight of the bucket conveyor when the crane failed.
ASU requested and was granted authority by Phoenix to hire an engineer to inspect the crane and determine the cause of the accident. Two experts, Dr. Courtney Busch and Robert Fleishmann, examined the crane; both determined that the damage was caused by an overload. In addition, at Hans’ request, a representative of the manufacturer examined the crane and also opined that the damage was caused by an overload. He concluded that the crane could not be repaired — the boom and outrigger sections would have to be completely replaced.
Disagreeing with the conclusions of the experts, Hans hired John Taylor of NonDestructive Testing Services to examine the crane. Taylor found imperfections in the welds. Taylor’s report was sent to Busch whose opinion remained the same. Busch noted that Taylor did not address the fact that the primary failure of the crane was in the base metal, not the welds. Based upon the experts’ opinions that the crane was overloaded, Phoenix invoked the policy exclusion and denied Hans’ claim.
Hans sued Phoenix under the policy, alleging denial of the claim in bad faith. Hans sought contract, extra-contractual, and punitive damages. The district court granted summary judgment in favor of Phoenix on all claims except the claim for coverage under the policy. The parties consented to trial of the remaining claim before a magistrate judge.
Prior to trial, the Mississippi Supreme Court announced its decision in Universal Life Insurance Co. v. Veasley, in which the plaintiff was permitted to recover mental anguish damages resulting from the insurance company’s failure to pay a claim, even though the failure was the result of simple negligence, not conduct warranting punitive damages. Hans moved the district court for reconsideration of its prior summary judgment on the extra-contractual damages claim in light of Veasley; the district court found that because the insurance company had an arguable basis for denying the claim, the extra-contractual damages claim was properly denied. The parties settled the policy coverage claim and final judgment was entered dismissing the case.
Hans timely appealed. He argues that the district court erred in granting summary judgment in favor of Phoenix on the claim for punitive damages and the claim for other extra-contractual damages.
Analysis
Standard of Review
We review summary judgment de novo, considering the evidence and inferences therefrom in the light most favorable to the nonmoving party. “[T]he 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.” In addition, the district court’s interpretations of applicable Mississippi law are reviewed by this court de novo. In this diversity case, “we must do that which we think that the Mississippi Supreme Court would deem best.”
I. Punitive Damages
It is well-settled under Mississippi law that “before punitive damages may be recovered from an insurer, the insured must prove by a preponderance of the evidence that the insurer acted with (1) malice, or (2) gross negligence or reckless disregard for the rights of others.” If the insurer has a legitimate or arguable reason for denying coverage, punitive damages are unavailable.
The district court found that because Phoenix hired independent experts to determine the cause of the crane failure, it had, at the very least, an arguable basis for denying the claim. We agree. Hans contends that Phoenix “manufactured” the expert opinions by providing the experts with an inaccurate estimate of the weight of the crane’s load. If the expert reports indicated that they were based solely on calculations using such a weight, we might be inclined to accept Hans’ argument. Both experts, however, personally inspected the crane, viewed the damage to the boom and outrigger, reviewed various records and charts and determined that the damage was consistent with an overload. In addition, the manufacturer’s representative, at Hans’ request, inspected the crane and opined that the damage was caused by an overload. Phoenix’s reliance on the results of these inspections was reasonable and manifestly does not warrant punitive damages.
II. Extra-contractual Damages
As to Hans’ claim for extra-contractual damages, Mississippi law is somewhat less settled. In Veasley, the plaintiff was permitted to recover damages for mental anguish because of the insurance company’s failure to pay a life insurance claim following the death of her daughter, even though the failure was the result of simple negligence. The court found, however, that the insurer did not have an arguable basis for denying her claim. The court reasoned as follows:
Applying the familiar tort law principle that one is liable for the full measure of the reasonably foreseeable consequences of her actions, it is entirely foreseeable by an insurer that the failure to pay a valid claim through the negligence of its employees should cause some adverse result to the one entitled to payment.... Additional inconvenience and expense, attorneys fees and the like should be expected in an effort to have the oversight corrected. It is no more than just that the injured party be compensated for these injuries.
The holding in Veasley appears to be limited to damages for mental anguish occasioned by failure to pay an insurance claim in those instances when the insurer lacks even an arguable basis for denial. The Veasley majority noted that “[sjome justices on this court have suggested that extra-contractual damages ought to be awarded in cases involving a failure to pay on an insurance contract without an arguable reason even where the circumstances are not such that punitive damages are proper.” In summarizing the results of the opinion, the court held: “the assessment of actual damages caused by the anxiety resulting from delay without an arguable reason is ... af firmed.”
Making our best Erie prognostication, we conclude in light of Veasley that Mississippi will allow extra-contractual damages for failure to pay on an insurance policy only when there is no arguable reason for such failure. An arguable reason, therefore, shields the insurance company from liability for both punitive damages and extra-contractual damages. As we noted earlier, Phoenix had an arguable basis for denying Hans’ claim. Accordingly, The district court properly granted summary judgment in favor of Phoenix on both the punitive damages and extra-contractual damages claims.
AFFIRMED.
. Hans seeks the following extra-contractual damages: company president Joe Hans’ mental anguish, loss of income, depreciation of the crane caused by being forced to repair rather than replace its damaged parts, attorneys’ fees, and costs of litigation.
. 610 So.2d 290 (Miss.1992), reh'g denied, January 8, 1993.
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2209870-25515 | BAZELON, Chief Judge:
Appellant Leon A. Tashof is engaged in the retail trade as New York Jewelry Co. (NYJC). His store is located in an area that serves low-income consumers, many of whom hold low-paying jobs, and have no bank or charge accounts. About 85 percent of NYJC’s sales are made on credit. The Commission found, after a Hearing Examiner had dismissed the charges as unsubstantiated, that NYJC falsely advertised the availability of discount eyeglasses, and misrepresented its prices and credit practices. NYJC claims that the evidence is insufficient to support the Commission’s findings, and that in any event the findings do not justify the order entered against it. We affirm the findings, and enforce the order.
I. The Findings
The Commission’s findings fall into four categories: (A) those with respect to false advertising of eyeglasses; (B) those with respect to false advertising of discount prices; (C) those with respect to misrepresenting credit charges; and (D) those with respect to misrepresenting “easy credit.”
A. False Advertising of Eyeglasses: The Commission first found that NYJC employed a “bait and switch” maneuver with respect to sales of eyeglasses. The evidence showed that NYJC advertised eyeglasses “from $7.50 complete,” including “lenses, frames and ease.” The newspaper advertisements, but not the radio advertisements, mentioned a “moderate examining fee.” During this period, NYJC offered free eye examinations by a sign posted in its store, and through cards it mailed out and distributed on the street. NYJC claimed that it offered $7.50 eyeglasses only to persons with their own prescriptions. But we have no doubt that the record amply supports the Commission’s finding that the advertising campaign taken as a whole offered complete eyeglass service for $7.-50.
That much shows “bait.” There was no direct evidence of “switch” — no direct evidence, that is, that NYJC disparaged or discouraged the purchase of the $7.50 eyeglasses, or that the glasses were unavailable on demand, or unsuited for their purpose. The evidence on which the Commission rested its finding was a stipulation that out of 1,400 pairs of eyeglasses sold each year by NYJC, less than 10 were sold for $7.50 with or without a prescription. NYJC claims that this evidence does not support the finding. We disagree.
It seems plain to us that the Commission drew a permissible inference of “switch” from the evidence of bait advertising and minimal sales of the advertised product. At best only nine sales — 64/100 of one percent of NYJC’s eyeglass sales — were made at $7.50. The record leaves unexplained why NYJC’s customers, presumably anxious to purchase at as low a price as possible, would so consistently have bought more expensive glasses if suitable glasses at $7.50 were available. Further, NYJC continued to advertise the $7.50 glasses for a year and a half despite the scarcity of sales, a fact which tends to support a finding of a purpose to bring customers into the store for other reasons.® This evidence, we think, was sufficient to shift the burden of coming forward to the respondent. But NYJC offered no evidence to negate the inference of “switch.” The relevant facts are in NYJC's possession, and it was in the best position to show, if it could be shown at all that the $7.50 glasses were actually available in the store. Yet the most NYJC could produce was its sales manager's denial that the $7.50 glasses were disparaged. NYJC never did point to even a single sale of the advertised product.
B. False Advertising of Discount Prices: There is no dispute that NYJC claimed to be a discount seller of eyeglasses. Nor is there any question that the sales slips introduced by the FTC were sufficient to show NYJC’s actual prices. NYJC’s claim is that the Commission erred in relying on expert testimony of prevailing prices, and in computing the prices against which NYJC’s were compared.
The Commission’s staff presented the only evidence of prevailing prices: the testimony of Dr. Zachary Ephraim, an optometrist. Since optometrists are a major retail outlet for eyeglasses, and perform a service closely comparable to that provided by NYJC— examining eyes and filling prescriptions —Dr. Ephraim was well qualified to testify about prevailing prices. We hold that his uncontradicted testimony was a sufficient basis for the Commission’s findings.
The Commission determined the generally prevailing prices of eyeglasses on the basis of Dr. Ephraim’s testimony of the usual price charged by most optometrists in the trade area. NYJC first claims that the Commission erroneously ignored the expert’s statements that some sellers might charge higher prices. We disagree, because Dr. Ephraim referred only to some extremely high prices that a relatively few sellers might charge. Thus the record as a whole supports the Commission’s finding of generally prevailing eyeglass prices, i: e., the prices to which NYJC’s must be compared in considering the charge that its representations of discount prices were false. NYJC’s second claim concerns the Commission’s refusal to include in the prevailing price the amount which the consumer would have had to pay for an eye examination. Since NYJC offered “free” eye examinations, it could be argued that no adjustment for examinations was required. But the Commission did make allowance for NYJC’s actual cost of the examination. We cannot say that this treatment was unreasonable. It is worth noting that even if the prevailing prices were computed as NYJC has urged, NYJC’s customers still paid a higher than prevailing price more often than not.
C. Failure to Disclose Credit Charges: Nearly all the evidence regarding NYJC’s failure to inform its customers fully and adequately of all credit charges was documentary. It showed that NYJC used three different contract forms during the time in question. All three were materially deficient in one respect or another. The first form failed to disclose the annual percentage charge on the unpaid balance, the dollar amount of the credit charge, and the cash price of the item. The second form failed to show either a monthly or annual percentage interest rate. The third form failed to reveal the total obligation, the finance charge in dollars, and the annual percentage interest rate. Moreover, there was substantial evidence that NYJC often failed even to provide all the information contemplated by the contract form. Also, the evidence revealed unexplained discrepancies among NYJC’s contract forms, its own internal records, and the “customer cards” it handed to credit clients.
We think the record amply supports the Commission’s finding that NYJC’s credit practices were deceptive. The offer of credit without disclosure of the charges therefor in an understandable fashion is, of course, likely to prevent the customer from learning about the cost of credit. This is particularly true for NYJC’s customers, many of whom both lack the sophistication to make the complex calculation of credit costs for themselves, and must depend to a large extent on credit for their purchases.
D. False Representation of “Easy CreditNYJC’s advertising was permeated with references to “easy credit.” The complaint charged that the credit was not easy for two reasons: first because NYJC sought “often with success, to obtain garnishments against [customer’s] wages,” after having extended credit “without determining [the customer’s] credit rating or financial ability to meet payments and second because NYJC sold goods “at unconscionably high prices that greatly exceeded the prices charged for like or similar merchandise by other retail establishments.” We hold that the record supports the Commission’s finding that NYJC’s representations of easy credit were misleading because of its rigorous collection policy. Consequently, there is no need to decide whether the Commission’s finding that the representations were misleading because of the store’s “greatly excessive prices” is adequately supported.
1. Rigorous Collection Policy — The Commission found that NYJC’s collection policies were rigorous indeed, and therefore its representation of easy credit was misleading. The record supports this finding.
We have no doubt that the Commission was within its discretion in interpreting “easy credit” to refer not only to easy availability but also to easy terms and leniency with respect to repayment and collection. The Commission noted the oppressive effect of wage garnishments on persons who, like many of NYJC’s customers, have low paying jobs, and found that NYJC regularly garnished its customers’ wages. In one year, for example, it sued some 1600 customers — about one out of every three. Firms with many more customers than NYJC used the garnishment process much less often. NYJC, which possessed all the relevant facts, offered nothing to negate the Commission’s finding that it pursued a rigorous collection program, and, indeed, in this court did not challenge the Commission’s opinion on this point.
NYJC does claim, however, that the complaint did not fairly apprise it of the charge that its easy credit representations might be found misleading on the basis of its collection policy. Although the complaint is hardly a model of clarity, we think that a fair reading provides sufficient notice. It is clear that the main charge is misrepresentation by use of the term “easy credit,” not, as NYJC has urged throughout the course of proceedings, unconscionably high prices per se. High prices were but one of the two independent grounds said to make the representation deceptive. The other was NYJC’s collection policies. Moreover, NYJC has claimed no prejudice from the alleged vagueness of the complaint. It has pointed to no evidence it might have introduced if it had been given clearer notice of the charge. And by the time of the hearing it must have known that its collection policies were under attack, for it agreed to a stipulation about the number of garnishments it, and other stores, filed each year.
2. Greatly Excessive Prices — The other ground for the Commission’s ultimate conclusion that NYJC’s representations of “easy credit” were misleading was its finding that NYJC charged “greatly excessive prices.” We need not decide whether this finding is adequately supported, however, for, even if it is not, we have no “substantial doubt [that] the administrative agency would have made the same ultimate finding [i. e., that NYJC’s representations of “easy credit” were misleading] with the erroneous findings or inferences out of the picture.” In this case it is clear from the structure of the Commission’s opinion and the reasons it gave in support of its order that NYJC’s representations of “easy credit” were considered misleading on two separate grounds, to wit, the store’s rigorous collection practices and its greatly excessive prices.
II. The Order
NYJC attacks only two parts of the Commission’s order — one paragraph which orders it to disclose certain credit information, and one paragraph which forbids it to advertise discount prices without having taken a survey of comparative prices.
A. Disclosure of Credit Terms: To combat NYJC’s failure to reveal its credit terms (see part I (C) ), the Commission ordered it to disclose, both orally and in writing, a variety of factors relating to credit charges in its installment contracts. NYJC argues that the enactment of the new Truth in Lending Act shows that the Commission had theretofore lacked the power to order affirmative disclosures of credit information. The argument is without merit. The Act establishes minimum standards of disclosure which the Commission may enforce without proving unfairness and deception on a ease by case basis. It was not intended to cure a previous deficiency in Commission power to deal with individual cases, and to shape its remedies to the facts of these cases.
Equally unpersuasive is NYJC’s contention that the Truth in Lending Act sets the bounds of an affirmative disclosure order. NYJC has pointed to nothing in the terms of the Act or its legislative history which supports this view. The sole question for us is whether the remedy chosen by the Commission bears a reasonable relationship to the violations uncovered. Viewed in this light, NYJC’s attacks on the disclosure order are unavailing. The Commission’s demand that NYJC disclose credit terms in all transactions, for example, is reasonably related to its finding that many of NYJC’s sales involved a small dollar credit charge, but a high percentage rate, and that credit information is crucial to NYJC's low-income customers. Thus the fact that the Truth in Lending Act exempts sales involving minimal dollar charges is not controlling. Similarly, the Commission’s order that NYJC disclose its credit terms orally is reasonably related to the finding that many of NYJC’s customers are unsophisticated consumers who would not benefit from written disclosure alone. That the Truth in Lending Act has no such requirement does not invalidate this portion of the order.
B. Advertising Discount Prices: The Commission ordered NYJC to cease and desist from representing that it sells “any article of merchandise” at a discount price (see part I (B) ), unless it first takes a “statistically significant survey” which shows that the prevailing price is “substantially” above NYJC’s. The order apparently subjects NYJC to civil penalties if it advertises discount prices without having taken the survey, even if the advertisement is true.
The Commission claims that this remedy constitutes “reasonable action * * * calculated to preclude the revival of the illegal practices.” We agree. NYJC was shown to have taken little account of the true level of prices in the trade area. We think the FTC may enter an order to ensure that this is not repeated in the future, without having to determine whether respondent’s previous conduct was due to inadvertence, bad faith, or a kind of inattention or negligence involving some intermediate culpability. Where a businessman has wrought a wrong on the public, he may be held to a reasonable business procedure that will prevent repetition of that wrong, and in view of his past record he will not be permitted to object that his own approaches might also avoid this wrong in the future, perhaps by happenstance and perhaps only on occasion.
NYJC has offered nothing either here or before the Commission to support its assertion that the statistical survey requirement is unduly burdensome. The requirement does not appear onerous on its face. Thus the order must be enforced.
Enforced.
. The Commission made this finding on the basis of expert testimony. See Commission Opinion at 3. See generally FTC Economic Report on Installment Credit and Retail Sales Practices of District of Columbia Retailers 2-5 (1968) ; FTC Report on District of Columbia Consumer Protection Program (1968).
. See Appendix A to Commission Opinion (profiles of NYJC’s customers).
. “Bait and switch” describes an offer which is made not in order to sell the advertised product at the advertised price, but rather to draw a customer to the store to sell him another similar product which is more profitable to the advertiser. See generally Guides Against Bait Advertising, 16 C.F.R. § 238 (1970).
. NYJC introduced evidence that it actually gave free eye examinations on request.
. See, e. g., Mytinger & Casselberry, Inc. v. FTC, 112 U.S.App.D.C. 210, 217, 301 F.2d 534, 541 (1982).
. With the permission of NYJC, the Commission also projected figures from the first six months of 1966 back to annual figures for 1964 and 1965. These figures showed that no eyeglasses were sold for less than $15. The average price per pair was $41.70; only two pairs were sold for as low as $15, and 90 per cent of the sales were over $23.
. See National Lead Co. v. FTC, 227 F.2d 825, 832 (7th Cir. 1955), rev’d on other grounds, 352 U.S. 419, 77 S.Ct. 502, 1 L.Ed.2d 438 (1957); of. Giant Food Inc. v. FTC, 116 U.S.App.D.C. 227, 322 F.2d 977 (1963), cert. dismissed, 376 U.S. 967, 84 S.Ct. 1121, 12 L.Ed.2d 82 (1964); NLRB v. Clement Bros. Co., 407 F.2d 1027, 1029 (5th Cir. 1969).
. Cf. Note to Guides Against Bait Advertising, supra note 3:
“Sales of the advertised merchandise do not preclude the existence of a bait and switch scheme. It has been determined that, on occasions, this is a mere incidental byproduct of the fundamental plan and is intended to provide an aura of legitimacy to the overall operation.
. The customer profiles and affidavits before the Commission showed that NYJC often used high pressure techniques to sell its eyeglasses. On occasion, for example, persons who accepted free eye examinations stated they were told they had to purchase glasses prepared for them after the examination, although they had not ordered the glasses.
. Compare Midwest Sewing Center, Inc., CCI-I Transfer Binder 1 17,143 (Dec. 3, 1964), where the respondent introduced evidence which tended to negate the inference of bait and switch, and the Commission dismissed the complaint.
. Notwithstanding the fact that the Hearing Examiner might have credited the sales manager’s story, we believe the record as a whole supports the Commission’s findings, because the stipulated evidence combined with NYJC’s evident inability to contradict its implications outweigh the manager’s ambiguous denial of the charge. See Universal Camera Corp. v. NLRB, 340 U.S. 474, 487-488, 492-496, 71 S.Ct. 456, 95 L.Ed. 456 (1951); Mannis v. FTC, 293 F.2d 774, 776 (9th Cir. 1961).
. Dr. Ephraim qualified as an expert because he had practiced optometry in the District for 18 years, was President of the Board of Examiners of Optometry, and Vice President of the District of Columbia Optometric Society.
. The Hearing Examiner, for no apparent reason, failed to make findings on this charge. With respect to the issue of unconscionably high prices, see section 1(D) (2), -infra, however, he found, after adjusting the prevailing price as NYJC urged, that the store’s eyeglass prices “are well within normally encountered limits.” This is no support for the view that NYJC sold at discount prices.
. Dr. Ephraim based his testimony on the prices that members of the Optometric Society would charge. This group included some 52 percent of the practicing optometrists in the District, according to the expert. He also stated that nonmembers would generally charge less for glasses than would members.
. Cf. FTC v. Standard Education Society, 302 U.S. 112, 58 S.Ct. 113, 82 L.Ed. 141 (1937); Niresk Industries v. FTC, 278 F.2d 337 (7th Cir. 1960); Guides Against Deceptive Pricing, 16 C.F.R. § 232 (1970). On the basis of the Commission’s calculations, NYJC’s eyeglass prices averaged 202 percent of the trade area prices.
. The expert witness had testified to prices whicli did not include eye examinations. The Commission subtracted $5.00 from NYJC’s price — the actual cost of an eye examination to NYJC — before comparing it to the prevailing price. NYJC claims that the proper adjustment would have been to increase the prevailing price by $15.00, the amount a customer would usually pay for an examination. Even if we were to accept this contention, the evidence would show that NYJC’s prices for the glasses in evidence were from three to 72 percent higher than the prevailing prices.
. See Table 3 of NYJC’s Brief.
. Since the Hearing Examiner’s dismissal of the charge did not rest on his determination of the credibility of witnesses, nothing prevented the Commission from inspecting the evidence and drawing its own conclusions. See Universal Camera Corp. v. NLRB, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951).
. See Appendix A to Commission Opinion (profiles of NYJC’s customers).
. One of NYJC’s radio advertisements, for example, ended as follows (capitalization in the original copy) :
Now a message from that GRAND GENTLEMAN MR. TASH, THE MANAGER OF NEW YORK JEWELRY CO. * * *, “I’ll help you enjoy the GOOD THINGS OF LIFE. I’ll give you ee-asy CREDIT TERMS.”
. Paragraph 8(1) of the Complaint.
. Paragraph 7(2) of the Complaint.
. The Hearing Examiner made no finding on this charge.
. See Commission Opinion at 33, 42^43. In some contracts, NYJC was empowered to declare the entire amount due and payable on any default in payment, to take immediate possession without demand or notice (even entering the purchaser’s property for that purpose), and to have the customer pay collection agency and attorney’s fees.
. See id. at 41. Apparently NYJC extended credit to any person who had a job, and whose wages were not being garnished. Expert testimony confirmed that this was not the usual practice.
. See id.
. See 5 U.S.C. § 554(b) (1964); of. Bodale Press Inc. v. FTC, 132 U.S.App.D.C. 317, 407 F.2d 1252 (1968).
. See the portions of the complaint quoted at the beginning of section I (D). Cf. Federated Nat’l Wholesalers Serv. v. FTC, 398 F.2d 253, 258 (2d Cir. 1968); Armand Co. v. FTC, 84 F.2d 973, 974-975 (2d Cir.), cert. denied, 299 U.S. 597, 57 S.Ct. 189, 81 L.Ed. 440 (1936).
. See J. B. Williams Co. v. FTC, 381 F.2d 884, 888 (6th Cir. 1967).
. The Commission apparently developed two theories to explain why high prices made a representation of “easy credit” misleading. One theory seems to be that “easy credit” represented to the customer that NYJC’s cash price for its merchandise was “not substantially higher than prices generally prevailing in the trade area for the product.” Commission Opinion at 33. Evidence of NYJC’s high prices, then, was said to show the falsity of NYJC’s representation. The other theory is that while “easy credit” represented that “the charge imposed for credit will be reasonable,” NYJC hid a credit charge in its high prices so that “in fact the credit might be costing [the customer] dearly.” Id. at 32; of. FTC Economic Beport, supra note 1, at 18-20. These theories were mixed together in such a way that it is not clear which one is the basis of the Commission’s conclusion that NYJC’s high prices made its representations of “easy credit” misleading.
. NLRB v. Reed & Price Mfg. Co., 205 F.2d 131, 139 (1st Cir.), cert. denied, 346 U.S. 887, 74 S.Ct. 139, 98 L.Ed. 391 (1953); of. Massachusetts Trustees of Eastern Gas and Fuel Associates v. United States, 377 U.S. 235, 84 S.Ct. 1236, 12 L.Ed.2d 268 (1964). See generally Braniff Airways, Inc. v. CAB, 126 U.S.App.D.C. 399, 379 F.2d 453 (1967).
. See Commission Opinion at 40 — 44.
. Id. at 47-48.
. NYJC also claims that the Commission was too vague in ordering it to cease and desist from representing that its “terms of credit are lenient, including but not limited to representations that respondent offers ‘easy credit’. * * * ” (Emphasis added.) In the context of this case, we think the word “lenient” describes precisely the deceptive practice the Commission has barred, see part I (D) (1), supra. See Giant Foods Inc. v. FTC, 116 U.S.App.D.C. 227, 237, 322 F.2d 977, 987 (1967) (“usual and customary” upheld against attack as too vague).
. The order requires NYJC to disclose the following information before a customer obligates himself to make a credit purchase : (a) the cash price; (b) the amount of any down-payment or trade-in ; (c) the net cash price; (d) all other charges included in the amount of credit extended, but not part of the finance charge; (g) the annual percentage finance charge; (h) the total credit price, and the due dates of payments; (i) the consequences of late payments; (j) the security interest retained by NYJC.
NYJC is also required to disclose some of this information if it advertises its credit practices.
. 15 U.S.C. §§ 1601 ei seq. (Supp. V, 1970).
. NYJC also claims that the Commission is without power to order affirmative disclosure of credit information unless the original representation was misleading. It says its representations were not misleading, but at worst incomplete. But we have long since passed the point where the power of the Commission to reach statements that are deceptive because they contain less than the whole truth can be doubted. E. g., Ward Laboratories, Inc. v. FTC, 276 F.2d 952, 954 (2d Cir.), cert. denied, 364 U.S. 827, 81 S.Ct. 65, 5 L.Ed.2d 55 (1960).
. See Ilearings Before A Subcommittee of the Senate Committee on Banking and Currency on S. 1740, 87th Cong., 2d Sess. 154, 158 (testimony of Commissioner Dixon). See also, as examples of the Commission’s prior dealings with credit transactions, General Motors Corp., 30 F.T.C. 34 (1939), aff’d, 114 F.2d 33 (2d Cir. 1940); World Wide Television Corp., f 17,087 CCH Trade Reg.Rptr. (1963-65 Transfer Binder), aff’d, 352 F.2d 303 (3d Cir. 1965) (per curiam).
. E. g., Jacob Siegel Co. v. FTC, 327 U.S. 608, 66 S.Ct. 758, 90 L.Ed. 888 (1946); Consumers Products of America, Inc. v. FTC, 400 F.2d 930 (3d Cir. 1968), cert. denied, 393 U.S. 374, 89 S.Ct. 575, 21 L.Ed.2d 607 (1969).
This same test applies, of course, to those parts of the order which duplicate the requirements of the Truth in Lending Act. For example, both the order, see note 35 supra, and Regulation Z interpreting the Truth in Lending Act, see 12 C.F.R. § 226.8(b) (3) (1970), require NYJC to disclose the total price including credit charges, and the number and due dates of payments, and the amount of each payment. Since this part of the Commission’s order is reasonably related to its findings, see part I (C), supra, we enforce it.
. 15 U.S.C. § 1638(a) (7) (Supp. V, 1970).
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12395604-4491 | MEMORANDUM
Defendants Sharetta Wallace, Emilia “Mila” Zverev, and Yaroslav “Steven” Proshak appeal from their convictions and sentences for one count of conspiracy to commit healthcare fraud, in violation of 18 U.S.C. § 1349, and five counts of healthcare fraud, in violation of 18 U.S.C. § 1347. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
1. We review defendants’ sufficiency of the evidence claim to determine “whether, ‘after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.’” United States v. Rios, 449 F.3d 1009, 1011 (9th Cir. 2006) (quoting Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979)). The government introduced ample evidence that the subject ambulance company, ProMed Medical Transportation, Inc., transported Medicare beneficiaries for whom ambulance transport was not medically necessary. The government also introduced testimony from several witnesses that defendants instructed ProMed employees to falsify ambulance “run sheets.” This evidence was sufficient for reasonable jurors to find defendants guilty of conspiracy to commit healthcare fraud and substantive healthcare fraud. See United States v. Rutgard, 116 F.3d 1270, 1280-81 (9th Cir. 1997) (describing sufficiency of the evidence standards for healthcare fraud).
2. Defendants argue that the district court erred by excluding evidence concerning the “special rule” in Medicare ambulance regulations, 42 C.F.R. § 410.40(d)(2), and declining to issue a jury instruction about the rule. See United States v. McGeshick, 41 F.3d 419, 421 (9th Cir. 1994) (“Failure to instruct the jury on an appropriate defense theory is a question of law reviewed de novo.”).
The district court prevented defendants from misstating the law concerning Medicare regulations, but the district court allowed defendants to present evidence that they relied on the special rule and physician statements of medical necessity in support of their argument that they lacked the requisite mental state to commit fraud. The court’s order did not prevent defendants from reading the text of the rule to the jury during testimony. Additionally, the district court accurately instructed the jury on one of the theories behind defendants’ special rule argument: that if defendants had a good faith belief that a physician certification was sufficient to establish medical necessity and allowed the ambulance transports in question, they lacked the intent to defraud the government. The district court did not improperly deny defendants the opportunity to present a full defense or err in its instructions to the jury.
3. Defendants challenge numerous evi-dentiary rulings. “A district court’s eviden-tiary rulings should not be reversed absent clear abuse of discretion and some prejudice.” Estate of Barabin v. AstenJohnson, Inc., 740 F.3d 457, 462 (9th Cir. 2014) (en banc) (citation omitted). Having reviewed each of defendants’ evidentiary challenges, we find no error. The district court’s rulings did not constitute an abuse of discretion, nor did defendants show prejudice.
4. Defendants argue that the government engaged in misconduct by: 1) interfering with Dr. Firooz Pak’s choice to testify; 2) making improper statements in the presence of the jury about a witness working a “graveyard shift”; and 3) making improper statements in the presence of the jury that led jurors to ask to rehear excerpts of defendants’ interviews with government agents. We review de novo the district court’s refusal to dismiss an indictment for prosecutorial misconduct. United States v. Spillone, 879 F.2d 514, 520 (9th Cir. 1989).
Defendants’ first allegation of misconduct is most serious. The government’s actions regarding Dr. Pak deeply concerned the district court, and we assume without deciding that the government engaged in misconduct by substantially interfering with Dr. Pak’s choice to testify. Nevertheless, the district court presented defendants with the option of ordering the government to give Dr. Pak immunity, and they did not call him to testify. Any misconduct by the government did not prejudice defendants. The evidence of defendants’ guilt was overwhelming. Cf. United States v. Vavages, 151 F.3d 1185, 1189-93 (9th Cir. 1998).
5. Finding no error, defendants’ cumulative error argument fails. See United States v. Wilkes, 662 F.3d 524, 543 (9th Cir. 2011).
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9508376-10425 | ORDER
MURGUIA, District Judge.
Pending before the Court is Defendant’s motion to dismiss. [Doc. # 6].
I. BACKGROUND
Plaintiff has commenced the current action alleging that the Internal Revenue Service (“IRS”) violated his due process rights in the collection of approximately $30,000 in taxes and interest from the Plaintiffs assets. Plaintiff alleges that the IRS violated his rights by failing to reasonably notify him of the pending collection. Plaintiff has also brought a claim under the Freedom of Information Act (FOIA), alleging that the IRS has refused to provide him with records concerning the seizure of his assets. In their answer, the IRS denies that they violated Plaintiffs due process rights in the collection of back taxes, and assert that they have provided Plaintiff with all of the records he requested that still exist.
On December 12, 2000 the IRS filed its motion to dismiss Plaintiffs complaint. In that motion the IRS asserts that this Court does not have subject matter jurisdiction over Plaintiffs complaint, because the United States has not waived sovereign immunity in regard to tax refund suits and because Plaintiff has not sought relief in the United States Tax Court. Additionally, the IRS asserts that this Court does not have jurisdiction over the Plaintiffs FOIA claim, because the IRS has taken all reasonable steps to comply and has in fact complied with Plaintiffs request.
Plaintiff counters by asserting that the IRS has misconstrued his complaint, as he is not seeking relief from the taxes levied against him, but is instead seeking damages for the acts of the IRS that he believes violated his due process rights. Additionally, Plaintiff asserts that this Court has jurisdiction over his FOIA claim, because in fact the IRS has not complied with his request and has acted unreasom ably in their efforts to do so.
II. LEGAL STANDARDS AND ANALYSIS
A. Due Process Claim
Where there is no waiver of sovereign immunity, it is appropriate for the Court to dismiss an action for lack of subject matter jurisdiction. Gilbert v. Da Grosso, 756 F.2d 1455, 1458 (9th Cir.1985).
Defendant correctly states that the United States may not be sued unless it consents to being sued by statute. See, West v. Gibson, 525 U.S. 1097, 119 S.Ct. 863, 142 L.Ed.2d 716 (1999); Nevada v. Hall, 440 U.S. 410, 414, 99 S.Ct. 1182, 59 L.Ed.2d 416 (1979) (“[t]he immunity of a truly independent sovereign from suit in its own courts has been enjoyed as a matter of absolute right for centuries. Only the sovereign’s own consent could qualify the absolute character of that immunity.”); and Alden v. Maine, 527 U.S. 706, 751, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999) (J. Souter, dissenting) (“[a] sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends.”)! quoting Kawananakoa v. Polyblank, 205 U.S. 349, 353, 27 S.Ct. 526, 51 L.Ed. 834 (1907) (citations omitted)).
Plaintiffs claims against the United States must therefore be dismissed if the Defendant has not explicitly consented to be sued under the cause of action brought by Plaintiff.
In its motion to dismiss Defendant argues that it has not consented to suit in this Court. Instead, a taxpayer who wishes to challenge a decision of the IRS must proceed with an administrative hearing in the IRS’ Office of Appeals. Thereafter, if the taxpayer’s grievance is not resolved he may appeal to United States Tax Court.
In his responsive pleading, Plaintiff admits that a taxpayer wishing to contest the assessment or collection of taxes must proceed administratively rather than in district court. However, Plaintiff asserts that he is not challenging the assessment and collection of taxes against him, but is instead alleging that the IRS violated his due process rights by failing to reasonably notify him of the pending seizure of his assets. For support Plaintiff relies on Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), and its progeny. In order to state a cause of action under Bivens a plaintiff must demonstrate that the defendant has violated his constitutional rights which were “clearly established.” Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). Defendants, however, will be immune from suit if their actions were ones that they could “reasonably have believed ... [were] lawful.” Anderson v. Creighton, 483 U.S. 635, 642, 107 S.Ct. 3034, 97 L.Ed.2d 523 (1987).
The Ninth Circuit, however, has never explicitly recognized a Bivens cause of action based on due process violations of IRS employees engaging in tax collection work. Wages v. Internal Revenue Service, 915 F.2d 1230, 1235 (9th Cir.1990), cert. denied, 498 U.S. 1096, 111 S.Ct. 986, 112 L.Ed.2d 1071 (1991) (“we have never recognized a constitutional violation arising from the collection of taxes”); and Hollett v. Browning, 711 F.Supp. 1009, 1012-13 (E.D.Cal.1988) (a Bivens action for alleged violations of constitutional rights in the collection of federal taxes is not available). In Hollett, the court, in dismissing plaintiffs Bivens cause of action, stated that “Congress has given taxpayers all sorts of rights against an overzealous officialdom, including, most fundamentally, the right to sue the government for a refund if forced to overpay taxes, and it would make the collection of taxes chaotic if a taxpayer could bypass the remedies provided by Congress simply by bringing a damage action against Treasury employees.” Id. at 1012-13. Similarly, in Wages, the Ninth Circuit said that “the remedies provided by Congress, particularly the right to sue the government for a refund of taxes improperly collected, foreclose a damage action under Bivens in this situation.” See also, Schweiker v. Chilicky, 487 U.S. 412, 423, 108 S.Ct. 2460, 101 L.Ed.2d 370 (1988) (“When the design of a Government program suggests that Congress has provided what it considers adequate remedial mechanisms for constitutional violations that may occur in the course of its administration, we have not created additional Bivens remedies.”); and Stonecipher v. Bray, 653 F.2d 398, 403 (9th Cir.1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982) (the taxpayer’s due process rights are adequately protected by the statutory scheme which allows him to contest his tax liability in the Tax Court or in the federal district court or the court of claims).
Accordingly, as Plaintiff may not sustain a Bivens cause of action against the Defendant for violations of his substantive due process rights and as Plaintiff admits that were he challenging the assessment of back taxes against him he must proceed in the United States Tax Court, Defendant’s motion will be granted as to Plaintiffs first cause of action.
B. FOIA CLAIM
An action to compel the production of documents under the FOIA is mooted, and appropriately dismissed, when the agency in control of the requested documents delivers them to the plaintiff. Carter v. Veterans Administration, 780 F.2d 1479,1481 (9th Cir.1986).
On August 11, 1999, pursuant to the FOIA, Plaintiff requested that the IRS deliver copies of:
1) All documents that form the basis for the assessment of Plaintiffs 1989 tax liability;
2) A copy of the initial 1989 tax liability notice sent to Plaintiff;
3) All documents regarding the amounts paid to the IRS on Plaintiffs behalf in 1989 and 1992; and
4) All records that demonstrate how the IRS applied those amounts received on behalf of Plaintiff to his tax liability.
When a plaintiff makes a claim under FOIA “federal jurisdiction is dependent upon a showing that an agency has (1) ‘improperly’; (2) ‘withheld’; (3) ‘agency records.’ ” Kissinger v. Reporters of Comm. for Freedom of the Press, 445 U.S. 136, 150, 100 S.Ct. 960, 63 L.Ed.2d 267 (1980). “[Jjudicial authority to devise remedies and enjoin agencies can only be invoked... if the agency has contravened all three components of this obligation.” Id.
When a party attacks the asserted basis of jurisdiction as a question of fact, the Court may consider evidence presented on the jurisdictional issue, and resolve factual disputes where necessary. Thorn hill Pub. Co. v. General Tel. & Electronics, 594 F.2d 730, 733 (9th Cir.1979).
In the current matter, Defendant asserts that they have delivered all of the requested documents to the Plaintiff. For support, Defendant has provided the affidavit of disclosure specialist Elizabeth Kuffel, who extensively details the Defendant’s efforts to comply with the Plaintiffs FOIA request, and states that the records provided to the Plaintiff are fully responsive of his request. See, Exhibit I attached to Defendant’s Motion to Dismiss.
While the Plaintiff states that he disagrees with the Defendant’s contention that all records have been provided, the Plaintiff fails to identify what specific documents he claims to have not received. Instead, Plaintiff details the rather slow manner in which the IRS has made its disclosures to Plaintiff, and indicates that he is hopeful that discovery can continue in case there are any other “newly discovered” records that have yet to be disclosed. While the Court is sympathetic to the Plaintiffs complaints as to the pace of the IRS’ disclosures, once the requested disclosures have been made Plaintiffs FOIA claim is moot. Carter, 780 F.2d, at Id. See also, Fish v. I.R.S., 2001 WL 505307, *3 (D.Cal.2001), and Baker v. I.R.S., 2000 WL 1479156, *3 (D.Cal.2000). Further, Plaintiffs purely speculative claim regarding the possible existence of still outstanding documents can not support a cause of action, partieulary in light of the compelling and credible affidavit and exhibits detailing the search and disclosure of the records requested by Plaintiff provided by the Defendant. SafeCard Svcs., Inc. v. S.E.C., 926 F.2d 1197, 1200 (C.A.D.C.1991) “Agency affidavits are accorded a presumption of good faith, which cannot be rebutted by ‘purely speculative claims about the existence and discoverability of other documents.’ ”).
Accordingly, the Court finds that Defendant has provided Plaintiff with the records requested in his August, 1999 FOIA request. Plaintiffs claim is thus moot, and should be dismissed for lack of subject matter jurisdiction.
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4039844-21600 | ORDER ACCEPTING REPORT & RECOMMENDATION OF MAGISTRATE JUDGE JOHNSTON
GLORIA M. NAVARRO, District Judge.
Before the Court for consideration is the Amended Report and Recommendation (ECF No. 28) of the Honorable Robert J. Johnston, United States Magistrate Judge, entered October 26, 2012. No objections have been filed. The Court has conducted a de novo review of the record in this case in accordance with 28 U.S.C. § 636(b)(1) and Local Rule IB 1-4, and determines that Magistrate Judge Johnston’s Recommendation should be ACCEPTED.
IT IS THEREFORE ORDERED that Petitioner’s Petition for Judicial Review (ECF No. 1) is denied. The Clerk is directed to enter judgment accordingly.
AMENDED REPORT & RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
(Petition for Judicial Review (# 1))
ROBERT J. JOHNSTON, United States Magistrate Judge.
This matter came before the Court on Petitioner Charlen Smith’s Motion for Judicial Review of Final Agency Decision (# 1). The Court has reviewed Petitioner’s Opening Brief (# 17), Respondent’s Response (# 18), and Petitioner’s Reply (# 20), as well as the administrative record (# 10).
BACKGROUND
Petitioner Charlen Smith seeks judicial review of a final decision of the Department of Labor denying her claim for survivor benefits under Parts B and E of the Energy Employees Occupational Illness Compensation Program Act of 2000, 42 U.S.C. §§ 7384-7385s-15. On April 27, 2005, Smith filed a claim as the surviving spouse of Floyd Smith, alleging that her husband’s metastatic lung cancer and prostate cancer resulted from his work at the Nevada Test Site, a Department of Energy facility.
A. Administration of the Energy Employees Occupational Illness Compensation Program Act of 2000
The Energy Employees Occupational Illness Compensation Program Act of 2000 establishes a federal compensation program to “provide for timely, uniform, and adequate compensation of covered employ ees and, where applicable, survivors of such employees, suffering from illnesses incurred by such employees in the performance of duty for the Department of Energy and certain of its contractors and subcontractors.” 42 U.S.C. § 7384d. Part B of the Act provides lump sum benefits up to $150,000, as well as related medical expenses, to workers who contracted certain diseases (e.g. cancer) as a result of exposure to radiation and other toxic substances while working for Department of Energy, its contractors, or subcontractors. 42 U.S.C. § 7384, 7384d. Part E of the Act provides compensation to covered employees based on the level of impairment and/or wage loss if they develop an occupational illness as a result of exposure to toxic substances at a Department of Energy facility. 42 U.S.C. § 7385s-2. Survivors of deceased workers may also be eligible to receive compensation. 42 U.S.C. § 7385s-l.
1. Claims under Part B
For claims of cancer caused by exposure to radiation during employment at a Department of Energy facility an individual must file a claim with the Department of Labor’s Office of Workers’ Compensation Programs. The individual may qualify for compensation under Part B of the Act by demonstrating that his or her cancer is “at least as likely as not” caused by exposure to hazardous materials while working on federal nuclear activities. An individual or survivor’s claim with the Department of Labor’s Office of Workers’ Compensation Programs will be forwarded to the National Institute for Occupational Safety and Health for a reconstruction or estimation of the amount of radiation exposure during employment. See 20 C.F.R. §§ 30.100, 30.101, 30.115, 30.210. The dose reconstruction takes into account a number of factors, including duration of employment. Subject to any additional information provided by the claimant and revision of the report following the closing interview, the claimant is required to return a signed statement to National Institute for Occupational Safety and Health certifying that he or she has no further information to provide and that the record for dose reconstruction should be closed. 42 C.F.R. § 82.10(m).
Causation of the cancer is statutorily presumed if the claimant qualifies as a member of the Special Exposure Cohort as defined under the Act. 42 U.S.C. § 7384Í (14). The President may designate new classes of workers for addition to the Special Exposure Cohort with the assistance of the Advisory Board on Radiation and Worker Health. 42 U.S.C. §§ 7384o, 7384q. If a claimant falls within the Special Exposure Cohort and has a specified cancer, a recommended decision awarding benefits will issue without requiring any further development of the claim. In 2006, a new class of workers was added to the Special Exposure Cohort. This class is comprised of Department of Energy employees, or Department of Energy contractor or subcontractor employees, who worked at the Nevada Test Site from January 27, 1951, through December 31, 1962 for at least 250 days. Petitioner Smith claims that her husband would fall into this category. In filing her initial claim, Smith indicated that her husband had been employed by Reynolds Electric and Engineering Company (REECo), a Department of Energy contractor, at the Nevada Test Site for an unspecified time period. (AR 581).
2. Claims under Part E
Under Part E of the Act, an employee of a Department of Energy facility including a worker employed by a Department of Energy contractor or subcontractor is eligible for compensation if he develops a “covered illness” as a result of work-relat ed exposure to a toxic substance. 42 U.S.C. §§ 7385S-1, 7385s-2. The Act defines the term “covered illness” to mean “an illness or death resulting from exposure to a toxic substance.” 42 U.S.C. § 7385s(2). A “toxic substance” is “any material that has the potential to cause illness or death because of its radioactive, chemical, or biological nature.” 20 C.F.R. § 30.5(h).
A claimant must show by a preponderance of the evidence that: (1) he was a Department of Energy contractor or subcontractor employee; (2) he contracted a covered illness; and (3) he contracted the covered illness through exposure to a toxic substance at a Department of Energy facility. 20 C.F.R. §§ 30.5, 30.110, 30.111. A claimant will be determined to have contracted a covered illness through exposure to a toxic substance at a Department of Energy facility if: “(A) it is at least as likely as not that exposure to a toxic substance at a Department of Energy facility was a significant factor in aggravating, contributing to, or causing the illness; and (B) it is at least as likely as not that the exposure to such toxic substance was related to employment at a Department of Energy facility.” See 42 U.S.C. § 7385s-4(c)(1).
The district Department of Labor’s Office of Workers’ Compensation Programs office is charged with making an initial determination whether the claimant is entitled to benefits. 20 C.F.R. § 30.300. The Department of Labor’s Office of Workers’ Compensation Programs then forwards its recommendation to the Final Adjudication Branch at which point the claimant is given an opportunity to file an objection to the Department of Labor’s Office of Workers’ Compensation Programs recommendation. 20 C.F.R. § 30.300. If a claimant objects, he may request a hearing or may request review of the recommendation on the written record. 20 C.F.R. §§ 30.310, 30.312. In either case, the Final Adjudication Branch will allow the claimant to submit additional evidence supporting his claim before issuing its final decision. 20 C.F.R. §§ 30.313, 30.314, 30.316. Claimants are given an additional opportunity to request reconsideration of the Final Adjudication Branch’s final decision. 20 C.F.R. § 30.319. Claimants must make the request in writing within thirty days of the date of decision, and are not entitled to a hearing. 20 C.F.R. § 30.319. If the Final Adjudication Branch determines on reconsideration that additional factual development is necessary, the Final Adjudication Branch may return the claim to the Department of Labor’s Office of Workers’ Compensation Programs district office for further evaluation. 20 C.F.R. §§ 30.317, 30.319.
B. Facts
On April 27, 2005, Smith filed a claim as the surviving spouse of Floyd Smith, alleging that her husband’s metastatic lung cancer and prostate cancer resulted from his work at the Nevada Test Site, a Department of Energy facility. Petitioner Smith claims that her husband is a member of the Special Exposure Cohort, indicating on the employment history form submitted with her claim that Floyd Smith had been employed by REECo, a Department of Energy contractor, at the Nevada Test Site for an unspecified time period. (AR 581). Department of Labor’s Office of Workers’ Compensation Programs requested verification of Floyd Smith’s employment from Department of Energy, which verified that he was employed at the Nevada Test Site by REECo from January 10, 1955 to March 14, 1955, and by Ute, a Department of Energy subcontractor, for one day on July 11, 1967. (AR 566-568). Petitioner Smith contacted Department of Labor’s Office of Workers’ Compensation Programs, stating that she disagreed with the verified employment history and that she had a friend “who knew for a fact” that Floyd Smith worked at Nevada Test Site from 1955 to 1959. (AR 534). Petitioner Smith later provided evidence from her friend, Myrtle Green, concerning Floyd Smith’s employment history.
On September 12, 2007, Department of Labor’s Office of Workers’ Compensation Programs received National Institute for Occupational Safety and Health’s final dose reconstruction report completed on July 18, 2007, and a signed affirmation by Smith that she had no further information that had not already been provided to National Institute for Occupational Safety and Health. (AR 151-169). Based upon the dose estimates provided by National Institute for Occupational Safety and Health in its dose reconstruction report, Department of Labor’s Office of Workers’ Compensation Programs calculated a 34.90% probability of causation. (AR 139-150).
On September 24, 2008, Department of Labor’s Office of Workers’ Compensation Programs issued a notice of recommended decision in which it recommended the denial of Smith’s claim under Part B and Part E. (AR 84-91). The recommended decision found that, because the probability of causation calculation was less than 50%, Floyd Smith’s lung and prostate cancers did not meet the “at least as likely as not” threshold. As a result, Petitioner Smith was not entitled to compensation as Floyd Smith’s survivor under 42 U.S.C. §§ 7384s(a)(l) and 7384n(b).
On October 14, 2008, Final Adjudication Branch received a letter from Smith objecting to the recommended decision and requesting a hearing. (AR 79-81). A hearing was held on January 14, 2009, at which both Petitioner Smith and Ms. Green testified. (AR 47-63). Smith was subsequently provided with a transcript of the hearing and given 30 days from the date of the hearing to submit any additional evidence or argument. (AR 46).
On April 10, 2009, Final Adjudication Branch issued a final decision denying Smith’s claim under Part B and Part E. (AR 32-40). By letter dated April 24, 2009, counsel for Smith requested reconsideration. (AR 28-30). On June 12, 2009, Final Adjudication Branch issued an order granting Smith’s request for reconsideration of its April 10, 2009, final decision, finding, in part, that the decision had not adequately addressed Smith’s objections to Department of Labor’s Office of Workers’ Compensation Programs’s findings regarding Floyd Smith’s dates of employment at the Nevada Test Site. (AR 25-26).
On July 27, 2009, Final Adjudication Branch issued a new Final Decision Following a Hearing in which it denied Smith’s claim under Parts B and E and specifically addressed Petitioner Smith’s objections from the January 14, 2009 hearing (AR 3-12). Petitioner Smith filed this petition for judicial review on September 28, 2009.
DISCUSSION
Petitioner Smith argues that the proper standard of review of the final agency decision in this case is de novo. The Respondent argues that the court has jurisdiction to review DOL’s final decision denying Smith’s claim under Part B only and that under the Administrative Procedure Act 5 U.S.C. §§ 701-706, the correct standard of review is the “arbitrary or capricious” standard. As for the denial of Smith’s claim under Part E, the Respondent argues that the court lacks jurisdiction to review it because Smith failed to file her petition within the time period set forth in 42 U.S.C. § 7385s-6(a). § 7385s-6(a) states that a “person adversely affected or aggrieved by a final decision” may file a petition for judicial review “within 60 days after the date on which that final decision was issued.” While Smith acknowledges that her petition was not filed within 60 days of the final decision, she argues that the deadline should be tolled in her favor because the final decision was not served on her attorney.
A. Standard of Review for Decisions under Part B
The Administrative Procedures Act sets forth standards governing judicial review of decisions made by federal administrative agencies. Mountain Rhythm Res. v. FERC, 302 F.3d 958, 963 (9th Cir.2002). § 706(2)(A) of the Administrative Procedure Act provides that a reviewing court may set aside agency decisions found to be “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). The standard allows for a very narrow review. The reviewing court may not substitute its own judgment for that of the agency. U.S. Postal Serv. v. Gregory, 534 U.S. 1, 6-7, 122 S.Ct. 431, 151 L.Ed.2d 323 (2001); Arrington v. Daniels, 516 F.3d 1106, 1112 (9th Cir.2008). However, the agency must have articulated a rational connection between the facts found and the conclusions made. Kern County Farm Bureau v. Allen, 450 F.3d 1072, 1076 (9th Cir.2006) (internal quotations and citations omitted).
Under this standard the court may only reverse if the agency “relied on factors that Congress did not intend for it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Jordan v. U.S. Dept. of Labor, 2008 WL 4181377 (E.D.Wash. 2008) (applying the arbitrary and capricious standard to the DOL’s denial of a petitioner’s claim under Part B of the Energy Employees Occupational Illness Compensation Program Act of 2000).
B. Employment History
Petitioner Smith’s claim under Part B of the Act was denied for two reasons. First, it could not be determined that Floyd Smith’s cancer was “at least as likely as not” caused by exposure to hazardous materials while working on federal nuclear activities. Second, Floyd Smith was not deemed to be a member of the Special Exposure Cohort, whereby causation would have been statutorily presumed. An important element of both of these inquiries relies on the duration of Floyd Smith’s work history with the Department of Energy.
The Department of Labor’s Office of Workers’ Compensation Programs determined that Floyd Smith had been employed at the Nevada Test Site by REE-Co, a Department of Energy contractor, from January 10, 1955 to March 14, 1955, and by Ute, a Department of Energy subcontractor, for one day on July 11, 1967. (AR 566-568). Petitioner Smith argues that Department of Labor’s Office of Workers’ Compensation Programs’s finding of covered employment was based only upon records from the Social Security Administration and that those records were incomplete. Petitioner Floyd Smith claims he actually worked at the Nevada Test Site for a number of years in the 1950s and 1960s. Smith argues that rejecting the evidence supplied by Ms. Green regarding Floyd Smith’s work history was contrary to the Federal Regulations governing the implementation of the Energy Employees Occupational Illness Compensation Program Act of 2000.
Generally, “the claimant bears the burden of proving by a preponderance of the evidence the existence of each and every criterion necessary to establish eligibility....” 20 C.F.R. § 30.111(a). Petitioner Smith erroneously asserts that “[i]n a situation where non-self serving testimony goes up against an absence of record from an agency, the claimant’s testimony is to be accepted under agency evidentiary rules.” Opening Brief, pg. 9:1 — 3(# 17) (citing 20 C.F.R. §§ 30.111 et seq.). The Respondent correctly points out the Petitioner’s misreading of the regulations as follows:
Although Smith cites 20 C.F.R. § 30.112 for this assertion, that provision states only that “[i]f the only evidence of covered employment is a self-serving affidavit and Department of Energy or another entity either disagrees with the assertion of covered employment or cannot concur or disagree with the assertion ..., then Department of Labor’s Office of Workers’ Compensation Programs may reject the claim based upon a lack of evidence of covered employment.” 20 C.F.R. § 30.112(b)(3). It does not logically follow from 20 C.F.R. § 30.112(b)(3) that the Department of Labor’s Office of Workers’ Compensation Programs must accept a claim if the only evidence of covered employment is a non-self-serving affidavit. DOL’s regulations instead make clear that, while affidavits will be accepted as evidence of employment history, it is entirely within Department of Labor’s Office of Workers’ Compensation Programs’s discretion whether or not to rely on submitted affidavits — whether self-serving or not — in adjudicating a claim for benefits.
Response, pg. 17:3-12(# 18) (citing 20 C.F.R. § 30.111(c)).
The evidence regarding Floyd Smith’s employment history proffered by Ms. Green is anecdotal and contradictory at best. At one point Ms. Green stated that Floyd Smith worked for Department of Energy contractors from September 1955 to July 1960. Later, the purported dates of employment changed to 1959 to 1967. (AR 215-18). Still later, Ms. Green orally testified that Floyd Smith worked for the Department of Energy “in '63,” and “maybe in '64,” and that he had also worked “in '50” and possibly “in '51.” Ms. Green’s assertions could not be confirmed or supported by any other evidence. It does not appear that the DOL completely disregarded Ms. Green’s evidence. Rather, the DOL weighed all the evidence and found Ms. Green’s affidavits and testimony uncompelling. The DOL’s decision to deny Petitioner Smith’s claim under Part B of the Act was neither arbitrary nor capricious and will not be overturned by this court.
C. Court’s Lack of Jurisdiction to Review DOL’s Denial of Benefits to Smith Under Part E of Energy Employees Occupational Illness Compensation Program Act of 2000.
Energy Employees Occupational Illness Compensation Program Act of 2000 allows for judicial review of final DOL decisions under Part E as follows:
A person adversely affected by a final decision of the Secretary under [Part E] may review that order in the United States district court ... by filing in such court within 60 days after the date on which that final decision was issued a written petition praying that such decision be modified or set aside.... Upon such filing, the court shall have jurisdiction over the proceeding and shall have the power to affirm, modify, or set aside, in whole or in part, such decision....
42 U.S.C. § 7385s-6(a). The final decision denying Smith’s claim under Part B and E of the Act was issued on July 27, 2009. In order for Smith’s petition for review of the final Part E denial to be timely under 42 U.S.C. § 7385s-6(a) it needed to be filed by September 25, 2009. Smith’s petition was filed on September 28, 2009. Smith argues that Final Adjudication Branch’s July 27, 2009 final decision was not served on her attorney. DOL’s regulations provide that “[a] copy of the final decision of the Final Adjudication Branch will be mailed to the claimant’s last known address and to the claimant’s designated representative before Department of Labor’s Office of Workers’ Compensation Programs, if any. Notification to either the claimant or the representative will be considered notification to both parties.” 20 C.F.R. § 30.316(e) (emphasis added). Smith does not allege that she did not receive the July 29, 2009 final decision. Thus, the allegation that her attorney did not receive a copy bears no significance. Therefore, the Court lacks jurisdiction to review the denial of Smith’s Part E claim. See Bowles v. Russell, 551 U.S. 205, 127 S.Ct. 2360, 168 L.Ed.2d 96 (2007) (statutory deadline for filing notice of appeal is jurisdictional and cannot be equitably tolled).
Though denying Petitioner Smith the opportunity for judicial review may seem harsh, Petitioner Smith’s failure to timely file her petition defeats jurisdiction in this matter and the court “may not apply equitable doctrines in circumvention of this express Congressional limitation on [the court’s] jurisdiction.” See Barrie v. U.S. Dept. of Labor, 2011 WL 3625076 (D.Colo. 2011) (holding that the Energy Employees Occupational Illness Compensation Program Act of 2000’s 60 day limitations period for seeking judicial review of final DOL decision was jurisdictional and did not allow for equitable tolling).
RECOMMENDATION
Based on the foregoing and good cause appearing therefore,
IT IS THE RECOMMENDATION of the undersigned Magistrate Judge that the Petitioner’s Petition for Judicial Review (# 1) be DENIED.
NOTICE
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3626634-27135 | OPINION OF THE COURT
BECKER, Judge:
Today we address, among other issues, an allegation of unlawful command influence, presented in the context of a conversation between court members allegedly overheard during a trial recess, and the scope of a military judge’s discretion in ruling on a challenge for cause. The command influence issue is before us in our Article 66 review of the appellant’s case, and also by way of a petition for new trial referred to us under Article 73, UCMJ. We hold the appellant’s allegations are insufficient to raise an issue of unlawful command influence, and reject his other assertions of error. We also deny his petition for new trial.
I. BACKGROUND
A military judge accepted the appellant’s guilty plea to one specification of conduct unbecoming an officer in violation of Article 133, UCMJ. A general court-martial composed of officer members then convicted the appellant, contrary to his pleas, of one specification of distributing cocaine in violation of Article 112a, UCMJ. His approved sentence is a dismissal, confinement for two years, and forfeiture of $2000 per month for two years.
Appellant was a married emergency room physician at Seymour Johnson Air Force Base, North Carolina. He has prior active duty service as an Army physician. Mrs. G is the young wife of an Air Force enlisted man, Airman First Class G. Appellant saw Mrs. G as a patient, treating her for a variety of medical problems. Appellant used this professional contact as a springboard for a personal relationship, which included drinks at a bar, rides in his sports car, and discussion of a motel room rendezvous. Appellant admitted this unbecoming conduct, which formed the basis for his guilty plea to the Article 133 offense. At the appellant’s request, the military judge informed the court members of his guilty plea before they heard evidence on the contested cocaine distribution charge.
The remaining facts are in dispute. According to Mrs. G, she admitted past use of cocaine during one of her conversations with the appellant. Subsequently, the appellant told Mrs. G that he could supply her with some. Mrs. G told her husband about her relationship with the appellant, including his cocaine offer. Airman G was irate, and reported the matter to the Air Force Office of Special Investigations (AFOSI) at Seymour Johnson. AFOSI agents contacted Mrs. G and she agreed to help them. AFOSI agents monitored a telephone conversation between the appellant and Mrs. G, and set up a “sting” operation in a Seymour Johnson billeting room.
AFOSI installed a video camera (picture only, no sound) in the billeting room. Mrs. G knew there was a camera, but the agents did not tell her where it was. By happenstance, the appellant put several bottles in front of the camera, obscuring the view of the appellant and Mrs. G much of the time. As a result, we never see cocaine produced by either the appellant or Mrs. G. However, while the appellant is out of the room getting ice, we have an unobstructed view of Mrs. G, and she does not take anything from her body or clothing. Upon Mrs. G’s signal that cocaine had been passed, agents entered the room, discovered cocaine spread out on a table, and apprehended the appellant. AFO-SI also seized a razor blade and a straw cut in two pieces from the appellant’s briefcase.
Appellant testified he was the victim of an extortion scheme cooked up by Airman and Mrs. G. According to the appellant, Mrs. G must have secreted the cocaine in her clothes or a body cavity, taken it out while he was out of the billeting room getting ice, and signaled AFOSI agents to enter. Appellant explained he used the razor blade to cut up his own prescription medication into smaller doses, and cut the straw so Mrs. G could play with the pieces. He then described receiving “anonymous” letters — but written in such a way to obviously imply that the author was Airman G — demanding money in exchange for dropping the charges. Appellant’s civilian lawyer submitted these letters to a private forensic consultant, who discovered a hidden, indented writing on one letter. This hidden writing purported to be the full signature of Airman G.
II. UNLAWFUL COMMAND INFLUENCE
Appellant’s trial lasted six days. On day four, a Mr. Farrell attended the trial as a potential sentencing witness for the appellant. Mr. Farrell is a retired Army major now working in Georgia as a sheriffs officer. Mr. Farrell was the appellant’s commander during the appellant’s prior Army service, and has remained his friend. As a potential witness, Mr. Farrell was not present during the proceedings, but remained in the immediate area of the courtroom. By the fourth day of the trial, the members had known of the appellant’s guilty plea to conduct unbecoming an officer for three days, and had been hearing evidence on the contested cocaine distribution charge for most of that time.
About two weeks after the trial, Mr. Farrell sent a letter to the Secretary of the Air Force decrying the results of the trial, and describing a conversation he overheard between two officers he believed were members of the appellant’s “jury.” According to the letter, Mr. Farrell was seated in the stall of a men’s room near the courtroom. He overheard two men talking about the case. The gist of one man’s comments was that, but for the “ ‘fuck up’ at tail hook and the command interest, this guy would get off with a slap on the wrist.” His companion replied, “‘Shit happens, as long as it’s not us.’ ” Mr. Farrell then rose in his stall, saw the men were Air Force lieutenant colonels wearing “Blue [service dress] uniforms.” Both wore aviator wings, and one also wore “jump wings” (i.e., a parachutist badge). Six male lieutenant colonels served on the appellant’s court-martial. Four were aviators, and two of these also wore jump wings. Court-martial participants all wore service dress uniform.
Because of this letter, the military judge convened a posttrial Article 39(a) session, according to Rule for Courts-Martial 1102(b)(2). He took testimony from Mr. Farrell and considered, without defense objection, affidavits from all court members. Mr. Farrell repeated under oath the allegations in his letter to the Secretary. In addition, he said one speaker referred to the female trial counsel using a crude, anatomic metaphor. Mr. Farrell said he could not identify any court member as either speaker because he had not seen the speakers’ faces. He explained his failure to bring the conversation to the attention of the court, the appellant, or the defense counsel as the product of his desire to avoid getting anyone in trouble. According to Mr. Farrell, he changed his mind and wrote the Secretary only after learning the trial results, which he considered unjust. Each court member’s affidavit averred that he was “absolutely certain” he never overheard, participated in, or was aware of any such conversation.
In his posttrial ruling, the military judge was skeptical of Mr. Farrell’s testimony. However, he found that Mr. Farrell “sincerely believes” the conversation took place, but that the conversation “is now being filtered through the emotionally charged memory of an individual who has seen a close friend, of whose innocence he remains absolutely convinced, convicted of felony charges.” The military judge denied relief, ruling “[t]here is no evidence that any unlawful command influence, direct or indirect, was brought to bear upon the members in this case.”
General Rules and Standards of Review
“No person subject to [the Code] may attempt to coerce or, by any unauthorized means, influence the action of a court-martial____” Article 37(a), UCMJ. It is an axiom that unlawful command influence is the mortal enemy of military justice. United States v. Thomas, 22 M.J. 388, 393 (C.M.A. 1986), cert, denied, 479 U.S. 1085, 107 S.Ct. 1289, 94 L.Ed.2d 146 (1987). Military courts have addressed issues of unlawful command influence allegedly occurring in a variety of contexts, during both the pretrial and adjudicative stages of courts-martial. See United States v. Weasler, 43 M.J. 15, 17 (1995) and cases cited therein; see also United States v. Washington, 42 M.J. 547, 554-57 (A.F.Ct. Crim.App.1995).
In any situation, however, the burden of producing evidence of unlawful command influence is on the appellant. United States v. Stombaugh, 40 M.J. 208, 213 (C.M.A.1994), cerf. denied, — U.S.-, 115 S.Ct. 1113, 130 L.Ed.2d 1077 (1995). The issue is not raised until the appellant meets this burden. United States v. Ayala, 43 M. J. 296, 300 (1995). Once an appellant satisfies his burden of production, the burden of proof is on the government to disprove the allegation. Stombaugh, 40 M.J. at 213-14. If unlawful command influence is present, that fact alone does not mean corrective action must follow. United States v. Gleason, 43 M.J. 69, 73 (1995). We may still affirm trial results if we conclude beyond a reasonable doubt that any unlawful command influence did not affect a conviction or sentence. Id.; Stombaugh, 40 M.J. at 214; Thomas, 22 M.J. at 394.
Concerning the appellant’s initial burden of production, “the threshold triggering further inquiry should be low, but it must be more than a bare allegation or mere speculation.” United States v. Johnston, 39 M.J. 242, 244 (C.M.A.1994). “[T]here must be something more than an appearance of evil to justify action by an appellate court in a particular case. ‘Proof of [command influence] in the air, so to speak, will not do.’ ” United States v. Allen, 33 M.J. 209, 212 (1991), cert, denied, 503 U.S. 936, 112 S.Ct. 1473, 117 L.Ed.2d 617 (1992). To carry his burden of production,
... an appellant must (1) “allege[ ] sufficient facts which, if true, constitute unlawful command influence”; (2) show that the proceedings were unfair; and (3) show that
the unlawful command influence was the proximate cause of that unfairness____
Stombaugh, 40 M.J. at 213 (quoting United States v. Levite, 25 M.J. 334, 341 (C.M.A. 1987) (Cox, J., concurring)) (emphasis added). To meet the first prong of this test, an appellant must do more than submit generalized, unsupported claims that persons felt affected by command influence. There must be evidence that someone “acting with the ‘mantle of command authority unlawfully coerced or influenced” the court-martial. Ayah, 43 M.J. at 300; see also Stombaugh, 40 M.J. at 211.
If a command influence issue has been addressed at trial, we will defer to the military judge’s findings of fact, unless they are clearly erroneous. United States v. Wallace, 39 M.J. 284, 286 (C.M.A.1994); Washington, 42 M.J. at 556. However, whether “unlawful command influence” flows from those facts is a question of law, which we review de novo. Id.
Decision
Our review of the military judge’s posttrial ruling is hampered somewhat by his imprecise findings of fact. The key factual issues before the military judge were plain: Did the conversation described by Mr. Farrell take place and, if so, were the speakers court members? If the military judge’s findings had directly addressed these issues, under the clearly erroneous standard we would have likely accepted them whichever way they had gone. However, the military judge did not make a finding that the conversation did or did not happen, only that Mr. Farrell “sincerely believes” that it happened. This neat sidestep may have avoided a tough credibility call, but it is of little help to us.
However, we believe the military judge’s doubts about Mr. Farrell’s testimony are well founded. There is much here that does not ring true. Mr. Farrell is a friend of the appellant, quick to condemn the conviction even though he heard none of the evidence. His account has a burlesque quality that invites skepticism. We are not naive about either command influence or the often limited vocabularies of military members. How ever, the heavy-handed references to the “fuck up at tail hook” and “command interest,” plus the touch of vulgarity directed at the trial counsel, all while Mr. Farrell — apparently functioning in full “stealth” mode— conveniently eavesdropped from the stall, add up to something that is a bit too good to be true. Moreover, it does not make sense that this “Tailhook”-related conversation would take place three days after the members had been told the appellant had pleaded guilty to conduct unbecoming an officer with Mrs. G, and in the middle of trial on the contested cocaine distribution charge. We also wonder how Mr. Farrell could identify the badges on the speakers’ chests without seeing either man’s face. Finally, we find it incongruous that Mr. Farrell was so incensed that he wrote the Secretary of the Air Force, but did not immediately tell his friend, the man on trial.
Despite these dubious aspects of Mr. Farrell’s story, the military judge’s finding that Mr. Farrell sincerely believed his.account to be true is not clearly erroneous, and we accept it. From there, we will assume — but do not find — that Mr. Farrell’s testimony is substantially accurate. However, even with that assumption, we agree with the military judge that the appellant still has not presented sufficient evidence to raise the issue of unlawful command influence.
Appellant has presented no evidence that anyone “acting with the mantle of command authority” attempted to influence this court-martial. In Ayala, the Court of Appeals for the Armed Forces made clear that this is the foundation element for any claim of unlawful command influence. Without evidence showing action with the mantle of command authority, all the subjective perceptions in the world add up to nothing more than proof of command influence “in the air, so to speak.” As we all well know, this will not do.
We hold that the appellant has presented only a generalized, unsupported claim of unlawful command influence. This is insufficient to meet the first prong of the Stombaugh-Levite production test (to “allege[] sufficient facts which, if true, constitute unlawful command influence”). Therefore, he has failed to carry his burden of production. We need go no further to reject this assignment of error.
Petition for New Trial
After the military judge denied his command influence claim in the posttrial Article 39(a) session, the appellant submitted a petition for new trial under Article 73, asserting Mr. Farrell’s story as “newly discovered evidence.” We reject his arguments here as well.
In the usual case, “newly discovered evidence” comes to light after authentication of the record of trial, and we act on petitions for new trial without benefit of a ruling below. See, e.g., United States v. Sztuka, 43 M.J. 261 (1995). In such cases, we naturally apply a de novo standard in deciding if the petition meets Article 73 criteria, although we may need to order a DuBay factfinding hearing. R.C.M. 1210(g)(1); United States v. Giambra, 33 M.J. 331, 335 (C.M.A.1991); see also Sztuka, 43 M.J. at 267-68.
Here, however, the underlying basis for the appellant’s petition has been addressed by the trial judge. A posttrial Article 39(a) session is the approved procedure for addressing issues of juror misconduct which come to the attention of the military judge after adjournment but before he authenticates the record of trial. See R.C.M. 1102(b)(2) (Discussion); United States v. Stone, 26 M.J. 401, 403 (C.M.A.1988). If the military judge had found merit in the appellant’s allegations, he had the power to set aside the findings and sentence. United States v. Scoff 29 M.J. 60, 65 (C.M.A.1989).
A petition for new trial is not intended as a means to relitigate issues raised and adversely decided below. United States v. Bacon, 12 M.J. 489, 492 (C.M.A. 1982). Because the appellant litigated this issue below, we apply a different standard when passing on this petition. We review the military judge’s decision using an abuse of discretion standard, although the appellant has now packaged his arguments as an Article 73 “petition for new trial.” United States v. Williams, 37 M.J. 352, 355-56 (C.M.A. 1993).
In light of our previous de novo Article 66 review of the appellant’s command influence allegations, our decision on his petition for new trial is obvious. The military judge did not abuse his discretion in ruling Mr. Farrell’s testimony insufficient to raise an issue of unlawful command influence. The petition for new trial is denied.
III. CHALLENGE FOR CAUSE
During individual voir dire, a court member (Lieutenant Colonel M) revealed his daughter was a recovering cocaine addict. When asked by the defense counsel if this experience “would even enter so slightly into the back of your mind while you are listening to the facts and circumstances of this case,” Colonel M replied:
In trying to be as open and honest as I can, I would like to think it would not effect [sic] me, I can’t guarantee that. Drugs [are] a part of our society. The users of drugs and the distributors of drugs are the two ends of the same equation. I don’t like either one, but I don’t think that this ... It’s my duty to determine guilt and innocence. What happens to impact that and what happens beyond that ... No, I don’t see the impact____ I guess that’s about as honest as I can be. What happened to my daughter happened to my daughter---- I don’t even think about the other end of it.
(Emphasis added). Then came the following exchange:
CDC: Sir, you told us, and again, I am trying to repeat what I thought you said, and that was that you felt you would try hard if it were your duty to do that, but that you could not guarantee that you would be able to do that. Is that fair for the court to understand that that’s your feeling right now?
MEM: Right. It was my daughter. I mean, it’s going to effect [sic] me some. [----] Intellectually I don’t think it will.
(Emphasis added). The trial counsel then asked Colonel M if he “could tell [the appellant] that you would decide his case fairly?” Colonel M replied ‘Yes. In fact, if I had a choice I would want someone who knows a little bit more than just what he reads in the paper.” He also responded affirmatively to the trial counsel’s request for his assurance to the appellant that he had “no predisposition towards him, [regarding] either guilt or innocence, or sentencing or anything.”
The defense challenged Colonel M for cause based on his daughter’s experience and his inability to guarantee it would not enter his mind during deliberations. The trial counsel opposed. The military judge denied the challenge, explaining his ruling as follows:
I have certainly had plenty of opportunity to observe Colonel [M], and he struck me as being very objective even though he has had an experience that has been unpleasant for him. I think he was being quite candid in the fact that in many ways having been exposed to some real life problems, that that makes him much more objective in some ways rather than the other way around____
Appellant then exercised his peremptory challenge against another court member, thus preserving this issue for review. See R.C.M. 912(f)(4).
General Rules and Standard for Review
A military judge must grant a challenge for cause against anyone who “[s]hould not sit as a member in the interest of having the court-martial free from substantial doubt as to legality, fairness, and impartiality.” R.C.M. 912(f)(1)(N). As we explained in United States v. Barrow, 42 M.J. 655 (A.F.Ct.Crim.App.1995), court member bias takes two general forms. “Actual bias” is present when a member has personal beliefs or attitudes that will not yield to the evidence or the law. In contrast, “implied bias” exists when — applying an objective standard — the member’s continued presence casts substantial doubt on the legality, fairness, and impartiality of the trial. Id. at 660 (citing United States v. Reynolds, 23 M.J. 292 (C.M.A.1987) and United States v. Moyar, 24 M.J. 635 (A.C.M.R.1987)).
When an “actual bias” has been disclaimed by a member, the military judge concentrates on the reliability of the disclaimer. The issue “is essentially one of credibility, and therefore largely one of [the member’s] demeanor.” Patton v. Yount, 467 U.S. 1025, 1038, 104 S.Ct. 2885, 2892, 81 L. Ed.2d 847 (1984), quoted in Barrow, 42 M. J. at 660.
For “implied bias,” however, the military judge’s focus is not on the member’s disclaimer, but on “the system’s appearance of fairness” to those observing the process. Barrow, 42 M.J. at 660. “Thus, the military judge should grant a challenge for cause if necessary to preserve the appearance of fairness in the trial, even if the judge believes the challenged member will be impartial.” Id. at 661. The importance of an objective appearance of fairness was recently reinforced by the Court of Appeals for the Armed Forces in United States v. Dale, 42 M.J. 384 (1995). In Dale, the court held that the military judge erred in denying a challenge for cause of a security police officer who “[f]or all intents and purposes ... was the embodiment of law enforcement and crime prevention at [the base],” despite the member’s apparently sincere assurances of impartiality. Id. at 386. (quoting United States v. Dale, 39 M.J. 503, 508 (A.F.C.M.R. 1993) (Pearson, J., dissenting)).
A military judge should apply a liberal standard in granting challenges for cause. United States v. White, 36 M.J. 284, 287 (C.M.A.1993), cert denied, — U.S.-, 114 S.Ct. 918, 127 L.Ed.2d 212 (1994). However, we give great deference to a military judge’s rulings on challenges, and will not overturn a denial of a challenge for cause except for a clear abuse of discretion in applying the “liberal-grant mandate.” Id. In reviewing such rulings, we consider a member’s voir dire responses as a whole, and not just isolated portions. United States v. Purdy, 42 M.J. 666 (Army Ct.Crim.App. 1995); United States v. Hutchinson, 15 M.J. 1056, 1062 (N.M.C.M.R.1983), rev’d on other grounds, 18 M.J. 281 (C.M.A.), cert, denied, 469 U.S. 981, 105 S.Ct. 384, 83 L.Ed.2d 319 (1984).
Decision
This was a close call for the military judge. The challenge for cause against Colonel M was the only one the defense made. We have little doubt that many military trial judges would have granted the challenge. We also believe many trial counsel would have joined the challenge, thus ensuring an appearance of fairness and avoiding a gratuitous appellate issue. Notwithstanding, we are unwilling to conclude that the military judge clearly abused his discretion in allowing Colonel M to remain on the court.
We have little difficulty upholding the military judge’s decision in regard to Colonel M’s alleged “actual bias.” Appellant bores in on the isolated snatches of Colonel M’s voir dire responses emphasized above, arguing these clearly show his inability to set aside his daughter’s experience and judge the appellant fairly. Taken as a whole, however, Colonel M’s responses paint a different picture. Colonel M was a first-time court member. In all likelihood, this was the only time anyone had asked him how his daughter’s cocaine addiction would affect his ability to impartially judge a fellow officer accused of cocaine distribution. Colonel M verbally debated the issue with himself — “thinking out loud” — before deciding in his own mind that he would be fair. The military judge, who observed Colonel M’s demeanor, was in the best position to evaluate Colonel M’s responses. Barrow, 42 M.J. at 660. He found Colonel M’s disclaimer credible, and we have no reason to dispute his conclusion.
It is the “implied bias” issue which gives us pause. Any time a court panel includes someone who has suffered, either personally or through the pain of a close family member, the effects of a crime closely associated with a charged offense, the system’s appearance of fairness is necessarily implicated. See United States v. Reichardt, 28 M.J. 113 (C.M.A.1989); United States v. Smart, 21 M.J. 15 (C.M.A.1985); United States v. Porter, 17 M.J. 377 (C.M.A.1984); Barrow; United States v. Campbell, 26 M.J. 970 (A.C.M.R.1988); Moyar. However, military precedent is quite clear that a member is not disqualified solely because he or she, or a family member, has been the victim of a crime similar to one charged. Reichardt, 28 M.J. at 116; Smart, 21 M.J. at 19; Barrow, 42 M.J. at 660. Colonel M not only disclaimed actual bias, but also assured the appellant of his lack of predisposition. The military judge found Colonel M’s “real life” experience “makes him much more objective in some ways rather than the other way around----” We find this to be a fair reading of Colonel M’s voir dire responses.
Although this may be a close call, Judge Pearson has observed that “after all, close calls are what exercising discretion is all about.” Barrow, 42 M.J. at 661. We hold the military judge did not clearly abuse his discretion in denying the challenge for cause against Colonel M.
IV. FACTUAL SUFFICIENCY OF THE EVIDENCE: COCAINE DISTRIBUTION
Before we may affirm the appellant’s conviction for cocaine distribution, the evidence must convince us of his guilt beyond a reasonable doubt. Article 66(c), UCMJ; United States v. Turner, 25 M.J. 324, 325 (C.M.A.1987). Appellant contends Mrs. G’s poor credibility, flaws in AFOSI’s “sting” operation, his sworn denial, and the evidence of Airman and Mrs. G’s alleged extortion plot add up to a reasonable doubt. We disagree.
Mrs. G had no credible motive to falsely accuse the appellant. She did not know where the video camera was in the billeting room. From the appellant’s standpoint, he made a fortuitous choice in putting his beverage bottles down in front of the camera, but Mrs. G could not have knowingly taken advantage of this. Moreover, the appellant was not as lucky in his timing. If Mrs. G had secreted the cocaine somewhere in her body or clothing, the obvious opportunity to take it out was when the appellant was out getting ice — before he blocked the camera with the bottles. During this unobstructed view of Mrs. G, the camera records her sitting quietly and doing nothing. Mrs. G’s testimony is further corroborated by the monitored telephone call, where the appellant told Mrs. G he had her “stuff,” and the paraphernalia seized from the appellant’s briefcase. We accord little weight to the appellant’s explanations for this evidence.
We also find the “extortion plot” to be incredible. Trial counsel’s cross-examinations and rebuttal case effectively exposed this as a fabrication, concocted by the appellant and sprung on the prosecution at the last minute. Indeed, the trial counsel so effectively undermined the forensic evidence offered to support the “plot” that the appellant now asserts his trial defense counsel was ineffective in his selection of the defense’s expert witness.
The court members saw and heard the witnesses, including Mrs. G and the appellant, and had the best opportunity to assess their credibility. See Article 66(c), UCMJ. The members rejected the appellant’s testimony and were convinced beyond a reasonable doubt that he distributed cocaine as alleged. We reach the same conclusion.
V. REMAINING ISSUES AND CONCLUSION
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10518375-21689 | LEVIN H. CAMPBELL, Senior Circuit Judge.
Robert L. Hoffman, a former corrections officer at a Rhode Island prison, sued Luigi A. Reali, a Rhode Island state police officer, in the United States District Court for the District of Rhode Island under the provisions of 42 U.S.C. § 1983. He complained that Reali had obtained a warrant for his arrest, and caused him to be arrested, without probable cause, in violation of the United States and Rhode Island constitutions, and state law. The district court granted Reali’s motion for summary judgment, holding that he was protected by qualified immunity. Finding no reversible error, we affirm.
I. Background
Hoffman was employed by the State of Rhode Island as a correctional officer at the Adult Correctional Institution (ACI) in Cranston, Rhode Island. On July 5, 1986, he was injured when assaulted by an inmate and became disabled. He was out of work and received workers’ compensation through August 31, 1987.
Roughly two months after the assault upon Hoffman, on September 4,1986, when Hoffman was no longer working there, a convicted murderer, James Silvia, escaped from ACI. The Rhode Island State Police began an investigation, and came to suspect Hoffman of aiding and abetting Silvia’s escape. Almost two years later, on June 2, 1988, Reali sought a warrant for Hoffman’s arrest from Chief Judge Albert DeRobbio of the Rhode Island state district court. In applying for the warrant, Reali tendered his own affidavit which stated in relevant part,
Since June of 1987 your affiant [Reali] has been conducting an extensive investigation regarding the criminal activities of one particular criminal entity. As a result of this investigation your affiant has developed a number of informants who for the purposes of this affidavit will remain unnamed. These informants however have been placed in R.I. State Police custody either by their own volition or by an act of their own volition and pursuant to court order. Each of these informants referred to in this affidavit have indicated that they will testify in court or in any other legal proceeding which requires their testimony. As a result of de-briefing sessions with three of the aforementioned informants information and statements have been obtained regarding the escape of inmate James Silvia from Supermax/A.C.I. which took place on September 4th, 1986.
Statements taken from the aforementioned informants/witnesses by your af-fiant and other members of the R.I. State Police Intelligence Unit directly link co-rectinal [sic] officer Robert L. Hoffman, DOB: 11/8/45 of 43 New Britain Drive, Warwick, R.I. as aiding and abetting and assisting in the escape of inmate James Silvia on Sept. 4th, 1986. Correctional officer Robert L. Hoffman while dressed in his uniform picked up and later delivered several hacksaw blades and cold chisels which were later used by Silvia to make good his escape from Supermax on Sept. 4, 1986.
In a statement taken from one of the aforementioned informants/witnesses Hoffman’s payment for conveying the hacksaw blades and cold chisels into the A.C.I. was V2 gram of cocaine which was placed in the same bag containing the above items and later given to Hoffman by said informants/witness. Your affi-ant informant/witness has positively identified Hoffman from a photo line-up as being the same individual who received said hacksaw blades and cold chisels from her/him which were later smuggled into the High Security Center (Supermax) of the A.C.I. Evidence obtained at the scene of the escape on 9/4/86 was consistent with the use of hacksaw blades and/or chisels being used to make good the escape. Accordingly your affiant requests that arrest warrant/s issue for Robert L. Hoffman ...
Based upon the above, Judge DeRobbio issued the warrant for Hoffman’s arrest. The next day, Hoffman was arrested, booked, and detained for several hours. Subsequently, he was charged with four felony counts, namely, accessory before the fact in violation of R.I.G.L. 11-1-3; conspiracy to aid and abet the escape of an inmate in violation of R.I.G.L. 11-1-6; acceptance of a bribe by a public official in violation of R.I.G.L. 11-7-3 and conveyance of instruments for escape in violation of R.I.G.L. 11-25-8. The Rhode Island attorney general, thereafter, declined to prosecute for lack of corroborating evidence, and the charges were thrown out by a Rhode Island judge on July 14, 1988.
On April 6, 1990, Hoffman brought the present federal action alleging deprivation of rights, privileges and immunities secured to him by the First, Fourth, Fifth, Sixth, Eighth and Fourteenth Amendments to the United States Constitution and by Article I, Sections 2, 3, 8, 10, 14, and 21 of the Constitution of the State of Rhode Island. He invoked jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1343; 42 U.S.C. §§ 1983, 1985 and 1988; and pendent and ancillary jurisdiction of the federal court over the state claims. Named defendants were Luigi A. Reali, individually and in his capacity as a state police officer; Walter E. Stone, individually and in his capacity as Superintendent of the Rhode Island State Police; John Does 1-10, individually and in their capacity as Rhode Island state police officers; and the state of Rhode Island.
On September 11, 1990, Hoffman voluntarily dismissed the complaint against Stone in his individual capacity. On January 24, 1991, after a hearing, the district court dismissed all claims against the state of Rhode Island, and against Stone and Reali in their official capacities. The district court also dismissed various other counts. What remained were claims against Reali individually under 42 U.S.C. § 1983 for alleged violations of Hoffman’s Fourth Amendment rights, and state law claims of false arrest, malicious prosecution, and infliction of emotional distress.
In the meantime, the parties had engaged in discovery. Hoffman sought production of state police records and to depose the police informants mentioned in Reali’s affidavit. In addition, Hoffman sought to compel Reali to answer several questions he had asked during his deposition concerning the identity of the police informants and the contents of their statements. Reali was instructed by his attorney not to answer any questions which might identify the informants. Reali, in turn, filed motions for protective orders allowing him to produce documents or answer deposition questions that would not disclose the identities of the police informants. The district court did not rule on these motions prior to granting of summary judgment. However, at the hearing to consider defendant’s motion to dismiss on January 24, 1991, the district court requested defendants to produce for in camera inspection all the documents which defendants contended identified the informants. Also on that day, Hoffman filed a motion to compel deposition answers from Reali. The district court granted this motion for Reali’s failure to timely object. Believing he had objected, Reali moved to vacate the order compelling deposition answers. The district court did not rule on this motion prior to its grant of summary judgment. Discovery was closed as of January 31, 1991.
On January 31, 1991, Reali moved for summary judgment on the § 1983 claim, accompanying his motion with the same affidavit he had submitted to the state judge to obtain the arrest warrant. In addition, he submitted two other affidavits. An affidavit from Detective John M. La-Cross confirmed that LaCross and others in the Rhode Island State Police Intelligence Unit had been investigating Hoffman’s connection with Silvia’s escape, and that they had taken statements from informant witnesses implicating Hoffman in the escape. LaCross identified these statements “as the basis of the probable cause used which subsequently led” to Hoffman’s arrest. LaCross also stated that these “informants/witnesses have provided other information and statements pertaining to various crimes, some of which have been disposed of with the convictions of various people along with other criminal cases presently being investigated....”
The movant’s remaining affidavit was from the Chief of the Criminal Division for the Department of the Attorney General for the State of Rhode Island, James W. Ryan. Ryan swore to having reviewed Hoffman’s arrest file and the informants’ statements referred to in Reali’s affidavit. Ryan declared that these witnesses “have provided information relating to other crimes which ultimately led to several arrests and guilty pleas.” He opined that there existed probable cause to arrest Hoffman for participating in Silvia’s escape and that “it was reasonable for Detective Reali or any other law enforcement officer to believe there existed probable cause to arrest Mr. Hoffman.” Ryan asserted, however, that his office “chose not to seek an indictment due to lack of corroborating evidence.”
Hoffman submitted an objection to Rea-li’s motion for summary judgment on February 19, 1991 but offered no affidavits, depositions or other materials in support of his objection. Hoffman also failed to submit a statement of disputed facts as required by Local Rule 12.1. Several weeks later, on March 11, 1991, Hoffman filed a motion to correct typographical errors, a revised memorandum of law, and his own affidavit in support of his objection to Rea-li’s motion for summary judgment. Hoffman’s affidavit was accompanied by copies of newspaper articles in which Rhode Island Attorney General James O’Neil was quoted as declining to prosecute Hoffman and various others who were accused by four persons named in the articles as informants. O’Neil said there was insufficient independent corroboration of these informants, three of whom had extensive criminal records. The articles described a dispute between O’Neil and the state police over the former’s purported unwillingness to prosecute. The four informants were three imprisoned felons identified by name in the articles, and a former ACI guard, also named.
Upon consideration of the parties’ motions, the district court determined that no genuine issues of material fact existed and that Reali’s qualified immunity clearly provided the legal basis for granting summary judgment in his favor. It is from this grant of summary judgment that Hoffman now appeals.
II. Standard of Review
Our review of a district court’s grant of summary judgment is plenary. See Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.1990); Garside v. Osco Drug, Inc., 895 F.2d 46, 48 (1st Cir.1990). Summary judgment is only appropriate when the pleadings and other submissions show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Prokey v. Watkins, 942 F.2d 67, 72 (1st Cir.1991). The party opposing a motion for summary judgment must establish the existence of a genuine issue for trial by setting forth specific facts which, if established at trial as true, would entitle him to prevail on his claim. He may not rely on mere allegations to defeat such motion. Floyd v. Farrell, 765 F.2d 1, 5 (1st Cir.1985).
Absent dispute over essential underlying facts, a defendant’s entitlement to qualified immunity is a question of law and is reserved for the court. Whiting v. Kirk, 960 F.2d 248, 251 (1st Cir.1992) (citing Lewis v. Kendrick, 944 F.2d 949, 953 (1st Cir.1991); Hall v. Ochs, 817 F.2d 920, 924 (1st Cir.1987)). Thus, our review is plenary. Albert v. Maine Central Railroad Co., 905 F.2d 541, 543 (1st Cir.1990).
Hoffman’s theory in his § 1983 action was that Reali violated his rights under the Fourth Amendment because he submitted an affidavit to obtain a warrant for his arrest without probable cause. According to Hoffman, the information contained in Reali’s affidavit lacked probable cause because it was not corroborated by additional, independent evidence and it failed to mention when the informants made their statements or when Hoffman • conveyed the blades in exchange for cocaine. Hoffman also argues that there had been no demonstrated prior use of the informants and that their reliability and credibility was suspect because of their criminal backgrounds and motives to curry favor.
An arrest warrant complies with the Fourth Amendment if, under the totality of circumstances, there is probable cause to believe the suspect committed the offense. Illinois v. Gates, 462 U.S. 213, 238, 103 S.Ct. 2317, 2332, 76 L.Ed.2d 527 (1983). In Gates, the Court abandoned the strict requirements in Spinelli v. United States, 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969), focusing on proof of an informant’s veracity or, alternatively, his reliability, favoring instead a “totality-of-the-eircumstanees” approach. 462 U.S. at 230-31, 103 S.Ct. at 2328-29. Probable cause to make an arrest exists where the facts and circumstances of which the arresting officer has knowledge would be sufficient to permit a reasonably prudent person to conclude that an offense has been committed by the person arrested. United States v. Cruz Jiménez, 894 F.2d 1, 4-5 (1st Cir.1990). In reviewing a trial court’s determination of probable cause, our duty is simply to ensure that the judge had a substantial basis for concluding that probable cause existed. Illinois v. Gates, 462 U.S. at 238, 103 S.Ct. at 2332. The issue in this case, moreover, is not whether Reali in fact had probable cause but whether his conclusion to that effect was sufficiently reasonable to afford him the protection of qualified immunity.
III. Qualified Immunity
The general rule of qualified immunity, as set out by the Supreme Court in Harlow v. Fitzgerald, 457 U.S. 800, 812, 102 S.Ct. 2727, 2735, 73 L.Ed.2d 396 (1982), is that:
government officials performing discretionary functions, generally are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.
See also Mitchell v. Forsyth, 472 U.S. 511, 517, 105 S.Ct. 2806, 2811, 86 L.Ed.2d 411 (1985). This doctrine “... is intended to provide government officials with the ability reasonably to anticipate when their conduct may give rise to liability for damages.” Anderson v. Creighton, 483 U.S. 635, 646, 107 S.Ct. 3034, 3042, 97 L.Ed.2d 523 (1987). Unless the plaintiff’s allegations state a claim of violation of clearly established law, a defendant pleading qualified immunity is entitled to dismissal before the commencement of discovery, because qualified immunity is immunity from suit rather than a mere defense to liability. Mitchell 472 U.S. at 526, 105 S.Ct. at 2815; Harlow 457 U.S. at 817, 102 S.Ct. at 2737. Under the standard enunciated in Harlow, an “allegation of malice is not sufficient to defeat [qualified] immunity if the defendant acted in an objectively reasonable manner.” Malley v. Briggs, 475 U.S. 335, 341, 106 S.Ct. 1092, 1096, 89 L.Ed.2d 271 (1986) (emphasis added).
Applying this standard we have held that it is “objectively reasonable” for a police officer to seek an arrest warrant so long as the presence of probable cause is at least arguable. Floyd v. Farrell, 765 F.2d at 5. In securing an arrest warrant, a police officer will not be immune if, on an objective basis, “it is obvious that no reasonably competent officer would have concluded that a warrant should issue; but if officers of reasonable competence could disagree on this issue[,] immunity should be recognized.” Malley, 475 U.S. at 341, 106 S.Ct. at 1096. Under Harlow’s objective test, the question a court must ask is whether another officer, standing in Reali’s shoes and having the same information Reali had, might reasonably have come to the conclusion that he had probable cause to apply for the arrest warrant. See e.g., Malley v. Briggs, 475 U.S. at 345, 106 S.Ct. at 1098; Floyd v. Farrell, 765 F.2d at 5.
In his affidavit Reali stated that three informants, who had provided other reliable information, had indicated that Hoffman conveyed tools to an inmate which he later used to escape in exchange for cocaine. A state chief judge examined the affidavit and issued an arrest warrant reflecting his own determination that the information therein afforded probable cause to believe that Hoffman had aided and abetted Silvia’s escape, as stated. Although judicial approval of a warrant does not serve as an absolute bar to the § 1983 liability of the officer who obtained the warrant, see Briggs v. Malley, 748 F.2d 715, 721 (1st Cir.1984), affirmed 475 U.S. 335, 345, 106 S.Ct. 1092, 1098, 89 L.Ed.2d 271 (1986), deference must be given to a judge’s determination of probable cause if there is substantial basis for the finding. United States v. Cruz Jiménez, 894 F.2d at 4; see also Illinois v. Gates, 462 U.S. at 236, 103 S.Ct. at 2331.
Hoffman argues that Reali acted unreasonably by relying on the uncorroborated statements of prisoners. He points to the Rhode Island attorney general’s unwillingness to prosecute because of the lack of independent corroboration. A probable cause finding, however, does not require as high a quantum of proof as evidence which would justify condemnation. Illinois v. Gates, 462 U.S. at 235, 103 S.Ct. at 2330. “Only the probability, and not a prima facie showing, of criminal activity is the standard of probable cause,” id., quoting Spinelli, 393 U.S. at 419, 89 S.Ct. at 590. In Rhode Island, uncorroborated accomplice testimony is sufficient to sustain a conviction. State v. DeMasi, 413 A.2d 99, 100 (R.I.1980); State v. Pella, 101 R.I. 62, 220 A.2d 226, 231 (1966). Given the specific information set out in the affidavit from informants who were in a position to know, we cannot say that no reasonable police officer would have thought there was probable cause here.
Hoffman contends that the district court erred in allowing summary judgment without granting him an opportunity to discover the informants’ identities and read their statements. According to Hoffman, without such discovery he lacked the ability to supply a competent opposing affidavit.
This argument might have merit if the record suggested a credible basis to doubt that the informants mentioned in the affidavit actually existed, or that they had actually advised Reali of Hoffman’s purported criminal participation in Silvia’s escape, as represented in the affidavit. For a police officer to fabricate an affidavit would obviously raise an issue of utmost gravity. But no such issue has been raised here. Not only were the matters sworn to in the affidavit supported by the uncontested affidavits of LaCross and James Ryan, the affidavit was supported in large measure by the newspaper clippings Hoffman himself submitted. These clippings reported that certain named individuals had informed against Hoffman regarding Silvia’s escape. While the ultimate truth of the informants’ story remains an open question, the existence of the informants and the fact of their having informed against Hoffman are not in serious contention. To be sure, Hoffman has insinuated in argument that the informants possibly did not exist or that Reali may have fabricated their information, but no coherent or supported argument to this effect was developed either at trial or on appeal. Matters not made the subject of argument are not issues on appeal. United States v. Zannino, 895 F.2d 1, 17 (1st Cir.1990), cert. denied, 494 U.S. 1082, 110 S.Ct. 1814, 108 L.Ed.2d 944 (1990).
Had Hoffman been given access to the informant’s original statements, he might, to be sure, have been able to find weaknesses in them. By the same token, had he been able to interrogate the police about the informants, he might conceivably have been able to show that they had not been proven reliable in other cases. It might well have been prudent had the district court actually reviewed, in camera, the confidential informants’ files which were delivered to it by the Rhode Island state police, in order to satisfy itself that there were no serious discrepancies between the informants’ statements and the representations contained in the affidavit. Nonetheless, on this record, we find no abuse of discretion by the district court in proceeding as it did.
“[A] plaintiff’s entitlement to discovery before a ruling on summary judgment is not unlimited and may be cut off when the record shows that the requested discovery will not be likely to produce facts he needs to withstand a summary judgment motion.” Netto v. Amtrak, 863 F.2d 1210, 1216 (5th Cir.1989). In opposing Reali’s supported motion for summary judgment, Hoffman offered nothing more than bare-bone allegations of lack of probable cause for his arrest, with no additional facts to support his allegations. That he had not received complete production from Reali does not change his burden of making some showing that discovery was likely to produce probative evidence in his behalf. Taylor v. Gallagher, 737 F.2d 134, 137 (1st Cir.1984). Hoffman may not rest merely on a bare hope that discovery will provide evidence to create an issue of fact. “Discovery is not a ‘fishing expedition’; parties must disclose some relevant factual basis for their claim before requested discovery will be allowed.” Milazzo v. Sentry Ins., 856 F.2d 321, 322 (1st Cir.1988).
Reali’s position is strengthened by the “informant’s privilege” under which the state is normally entitled to refuse to disclose the identity of a person who has furnished information relating to an investigation of a possible violation of law. See J. Weinstein and M. Berger, Weinstein’s Evidence 11510 at 510-1 (1991); 8 Wigmore, Evidence § 2374(f) at 761 (McNaughton rev. 1961).
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440065-11024 | MEMORANDUM DECISION AND ORDER DETERMINING CREDITORS’ AND CREDITORS’ COMMITTEE’S APPLICATION TO RESOLVE CHAPTER 7 TRUSTEE ELECTION CONTROVERSY
BURTON R. LIFLAND, Bankruptcy Judge.
At the 341 meeting following the conversion of these jointly-administered (but not substantively consolidated) cases from Chapter 11 to Chapter 7, the Unsecured Creditors’ Committee (the “Committee”), together with three creditors, Reeves Brothers (“Reeves”), Heller Financial (“Heller”), and Bank of New York (“BNY”), requested the election of a Chapter 7 trustee. These creditors voted their claims for Robert M. Fisher (“Fisher”). Due to questions concerning the qualifications of these creditors to vote, the United States Trustee was unable to certify the election, and filed a Report of Election Controversy pursuant to Fed. R. Bankr.P. (“FRBP”) 2003(d). The Committee, Reeves, Heller, and BNY timely requested this Court’s determination of the election controversy pursuant to FRBP 2003(d).
Under section 702 of the Bankruptcy Code (the “Code”) in order for a creditor’s request for an election to qualify to meet the 20% threshold of claims requesting an election, and in order for that creditor’s vote to be counted in such election, a creditor must hold “an allowable, undisputed, fixed, liquidated, unsecured claim.” In addition, the creditor must not hold an interest materially adverse to creditors entitled to distribution from the estate, and may not be an insider.
The U.S. Trustee reported that because various claims may be considered unliquidated or disputed, or because creditors may hold interests materially adverse to the interests of other creditors, it was unable to certify the election in these cases.
CENTENNIAL ELECTION
Reeves Brothers Claim
The Reeves claim was filed against Centennial only. Prior to the 341 meeting and election, the Interim Trustee filed an adversary complaint against Reeves alleging receipt of preferential transfers. Reeves’ answer denies that the alleged transfers were preferential within the meaning of 11 U.S.C. section 547, and raises various affirmative defenses. In determining whether the allegedly preferential transfer renders Reeves’ claim disputed for the purposes of section 702, the court should only look at the contested claim to ascertain whether there are genuine issues of law or fact. If so, the claim is disputed, and cannot be included within the 20% threshold of claims requesting an election, and cannot be counted in such election. See In re Lough, 57 B.R. 993 (Bankr. E.D.Mich.1986).
Further, it must appear that the dispute is grounded on more than a mere suspicion. “The cases which have addressed the issue as to whether a creditor who has received a preference, for instance ‘generally assume that such creditor’s interest will be materially adverse to other creditors, provided that the claim of preference is based on more than mere suspicion.’” In re New York Produce American & Korean Auction Corp., 106 B.R. 42, 47 (Bankr.S.D.N.Y.1989) (quoting In re NNLC Corp., 96 B.R. 7, 10 (Bankr.D.Conn.1989)). The claim of a creditor who has received a preference is subject to disallowance under section 502(d), unless that creditor returns the preferential transfer. A claim subject to disallowance is therefore not an “allowable” claim under section 702(a). In addition, a creditor who has received a preference has been held to have an interest “materially adverse to the interests of other creditors whose claims are entitled to participate in any distribution from the bankruptcy estate.” In re Lang Cartage Corp., 20 B.R. 534, 536 (Bankr.D.Wis.1982).
It appears from a review of the complaint and answer that the Interim Trustee’s allegations that Reeves received a preference is based on more than mere suspicion. It may be that Reeves has valid defenses to the preference action, but that is not to be determined in the context of resolving an election controversy. See Lough, supra. For the purposes of qualifying the 20% threshold of claims which must request the election of a trustee, and for counting such claims in the trustee election, Reeves’ claim is both “materially adverse” and not “allowable” within the meaning of section 702(a), and cannot be counted.
The Application in Support of Motion for Order Resolving Election Controversy in Favor of Appointment of Robert M. Fisher as Chapter 7 Trustee (the “Creditors’ Application”) filed by the Committee and the creditors states that under FRBP 2003(b)(3), “even if a claim is disputed, and indeed, even if an objection to a claim has been filed, this Court has the authority to make a provisional allowance of a claim for voting purposes.” See Creditors’ Application, paras. 23, 34. Counsel for these creditors has apparently not read the rule to which he cites in the last six years. This provision of Rule 2003(b)(3) was deleted in the 1991 amendments to the Rules. In In re San Diego Symphony Orchestra Assoc., 201 B.R. 978 (Bankr.S.D.Cal. 1996), Judge Bowie noted that section 702 of the Code
does not authorize temporary allowance of otherwise disputed claims____ [T]o the extent that the prior version of Rule 2003(b) actually granted authority to temporarily allow claims (as distinct from appearing to do so in derogation of the controlling statute), that authority was withdrawn by amendment. Accordingly, and in light of the express language of section 702(a), the Court has no authority to temporarily allow otherwise disputed claims for voting purposes.
Id., at 981.
In its Reply in Further Support of Order Resolving Election Controversy in Favor of the Appointment of Robert M. Fisher as Chapter 7 Trustee (the “Creditors’ Reply”), the attorneys for the Committee and the creditors again
urge[] this Court to provisionally allow Reeves’ claim for voting purposes in an amount less the dollar amount asserted in the preference action as suggested by the Court in In re Metro Shippers, Inc., 63 B.R. 593 (Bankr.E.D.Pa.1986); see also In re Klein, 110 B.R. 862, 876 (Bankr.N.D.Ill. 1990); aff'd in part, rev’d in part, 119 B.R. 971 (N.D.Ill.1990) appeal den. [sic] 940 F.2d 1075 (7th Cir.1991)(referring to process utilized by the Court in Metro Shippers to eliminate the adversity).
Creditors’ Reply, at 7. Surprisingly, the attorneys refer to cases decided under the former version of FRBP 2003(b), entirely without acknowledging the deletion of the language in Rule 2003(b) which purportedly authorized the courts to. estimate such claims for voting purposes, even though the attorneys presumably read the Interim Trustee’s Report and the cases cited therein. In the absence of such authority, and particularly in view of the deletion of that portion of FRBP 2003(b), this Court will not estimate creditors’ claims for the purposes of qualifying a request for a trustee election or for counting such votes in any election.
Heller Financial Claim
Heller Financial filed claims against both debtors. The U.S. Trustee’s Report states that Steven J. Brown, Vice President of Heller Financial, attended the 341 meeting on behalf of Heller. At the 341 meeting, Brown stated that of the total Heller claim of $3,690,005.30 asserted against Centennial, $3,410,138.02 was unsecured and $279,867.28 was secured, of which $228,438.75 was in dispute. The U.S. Trustee’s Report states that counsel to the Debtors and the Interim Trustee alleged that there was a dispute of approximately $600,000 regarding the Heller claim. However, as of the date of the 341 meeting, no objection to the claim had been filed, either by the Debtors during the Chapter 11 phase, or by the Interim Trustee following the conversion. An unsupported allegation of a dispute regarding a claim is insufficient to disqualify a creditor’s claim for qualifying a request for an election, or for voting. See In re DB Drilling, Inc., 73 B.R. 953, 955-956 (Bankr.N.D.Tex.1987). Similarly, the Debtors’ and Interim Trustee’s unsubstantiated allegations of a dispute with regard to the Heller claim are insufficient, in themselves, to disqualify Heller from qualifying or voting.
However, the $228,438.75 which the U.S. Trustee’s report indicates as being in dispute arises from an adversary proceeding which was filed by the Chapter 11 debtor-in-possession against Sykel, Inc. (“Sykel”) and Duro Finishing (“Duro”). The basis for the alleged dispute is Centennial’s sale of goods to Sykel which were held by Duro. The receivable in favor of Centennial arising out of this transaction was factored by Heller. Duro refused to release the goods to Sykel, asserting a spinner’s lien. Sykel thereafter refused to pay Heller on the invoices assigned to Heller from Centennial. Heller did not indicate whether it waived any right under the factoring arrangement to charge back any uncollected receivable. Whether this makes the Heller claim “disputed” as between Heller and Centennial within the meaning of section 702 is immaterial; it is clear that Heller’s claim is unliquidated while the adversary proceeding is pending, absent an unequivocal statement by Heller that its claim against the debtor cannot and will not change as a consequence of any inability to collect on any receivable of Centennial, which had not been given as of the time of the election.
A debt is liquidated within the meaning of section 702 if the amount due and the date on which it was due are fixed or certain, or when they are ascertainable by reference to (1) an agreement or (2) a simple formula. See In re Potenza, 75 B.R. 17, 19 (Bankr.D.Nev.1987); In re Poage, 92 B.R. 659, 665 (Bankr.N.D.Tex.1988). The existence of the dispute between the Debtor, Duro, Sykel, and Heller renders Heller’s unsecured claim incapable of being ascertainable under this standard, and thus unliquidated for purposes of section 702.
Moreover, Heller’s claim is apparently subject to cross-guarantees in both cases. The existence of secured cross-guarantees on debts owed by two debtors to one creditor in jointly-administered cases which have not been substantively consolidated ren ders the claims in both cases unliquidated in both cases. To the extent Heller is able or unable to realize the collateral on its secured claim in either case, its claim against the estate in the other case will decrease or increase. Accordingly, Heller’s claim is unliquidated due to these secured cross-guarantees. The claims against two related debtors in jointly-administered but not substantively consolidated eases based on secured cross-guarantees distinguishes this case from In re Poage, supra. There, the claim of a creditor voting for a permanent trustee was objected to because the creditor had recourse to a non-debtor, which was alleged to render the claim unliquidated. The court held that the claim was not unliquidated “since the promissory note provides that [the debtor’s husband] is jointly and severally liable for full payment.” 92 B.R. at 665. Here, however, the creditor’s resort is not to non-debtors, but to separate debtors’ estates being jointly administered.
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12523557-19864 | RICHARD J. LEON, United States District Judge
On June 20, 2017-following years of unnecessarily protracted litigation, distinguished, at times, by the parties' use of dilatory tactics rather than their commitment to "the just, speedy, and inexpensive determination of every action and proceeding," Fed. R. Civ. P. 1 -I granted summary judgment for defendants. The cornerstone of my ruling was the determination that plaintiffs lacked sufficient admissible evidence to prove the essential elements of their claims. Before the Court is plaintiffs' Motion to Alter or Amend Judgment ("Pls.' Mot.") [Dkt. # 354], through which plaintiffs seek to introduce new evidence and alter that ruling. Upon consideration of the pleadings, relevant law, and the entire record herein, the Court will DENY plaintiffs' motion.
BACKGROUND
The Court presumes familiarity with its prior opinions and will not belabor the facts. See, e.g. , Shatsky v. Palestine Liberation Org. , Civil Case No. 02-2280 (RJL), 2017 WL 2666111 (D.D.C. June 20, 2017) (" Shatsky III "); Shatsky v. Syrian Arab Republic , 312 F.R.D. 219 (D.D.C. 2015) (" Shatsky II "); Shatsky v. Syrian Arab Republic , 795 F.Supp.2d 79 (D.D.C. 2011) (" Shatsky I "). On February 16, 2002, a suicide bomber detonated an explosive device inside a crowded pizzeria in the West Bank village of Karnei Shomron. The blast killed two people, both U.S. nationals, and wounded thirty others, including four U.S. nationals. The U.S. victims and their personal representatives initiated the instant suit against the Palestinian Authority ("PA") and the Palestine Liberation Organization ("PLO") (collectively, "defendants"), alleging that the bombing was enabled by those entities. Plaintiffs asserted violations of the Anti-Terrorism Act ("ATA"), 18 U.S.C. §§ 2331 - 2339D, and related common law torts. As relevant here, plaintiffs' theory of liability posits that defendants proximately caused the bombing by paying a salary to Ra'ed Nazal, a Captain in the Palestinian Preventative Security Services, while structuring his no-show job in a manner that left him free to plan the Karnei Shomron bombing and recruit the suicide bomber. See Shatsky III , 2017 WL 2666111, at *2.
On June 20, 2017, I granted summary judgment for defendants. As stated above, the cornerstone of my ruling was the determination that plaintiffs lacked sufficient admissible evidence to prove the essential elements of their claims. I found, among other things, that "no reasonable jury could conclude that the PA proximately caused the bombing by paying Nazal a salary" because plaintiffs had "identified no admissible evidence supporting their theory that Nazal planned the bombing." Id. at *9. The instant Motion seeks to remedy this evidentiary deficiency by propounding new evidence which, in plaintiffs' view, "establish[es] proof of Ra'ed Nazal's involvement in the Karnei Shomron bombing." Pls.' Mem. Supp. Mot. to Alter or Amend J. 4 ("Pls. Mem.") [Dkt. # 354-1].
Plaintiffs' new evidence consists of statements made by an individual named Allam Kaabi during an audiovisual interview he gave on December 17, 2016. Kaabi is a member of the Central Committee for the Popular Front for the Liberation of Palestine ("PFLP"), a faction within the PLO that has been designated by the United States as a Foreign Terrorist Organization. See Shatsky III , 2017 WL 2666111, at *1. According to plaintiffs, Kaabi has a decades-long history of personal involvement in violent extremist and terrorist activities. See Pls.' Mem. 8-13. The interview, which the Court has viewed in full, together with its English-language translation, see Pls.' Mot., Exs. 7 & 7A, Certified Translation and Video File [Dkt. # 354-9], was streamed live on Facebook by the PFLP, see Pls.' Mot., Ex. 10, PFLP Facebook Page [Dkt. # 354-12], and maintained in a video archive on that site, Pls.' Mot., Ex. 11, PFLP Facebook Page [Dkt. # 354-13]. It is unclear from the exhibits and briefs whether Kaabi's interviewer was "in-house" with the PFLP or just a friendly member of the Palestinian press.
In the interview, Kaabi recounts events occurring in 2001 and 2002 during the Second Intifada. Kaabi's narrative begins with the death of Abu Ali Mustafa, then Secretary General of the PFLP. According to Kaabi, Mustafa "planted a bomb inside a watermelon" that an unnamed individual then placed "on a Zionist bus in Jerusalem." Pls.' Mot., Ex. 7, Certified Translation, at 4. Israeli intelligence discovered the booby-trapped watermelon and killed Mustafa. Id. at 4-5. Within hours of Mustafa's death, members of the PFLP retaliated by killing a rabbi. Id. at 5. After that, the PFLP renamed its militant elements as the "Abu Ali Mustafa Brigades" and launched a campaign of terror attacks where, in Kaabi's words, "the cells fired at bypass roads, at vehicles of settlers, at settlements, at military posts and bases." Id. at 7-8. According to Kaabi, "[t]he most significant operation carried out by the Front was the assassination of Rehavam Ze'evi," Israel's Minister of Tourism. Id. at 8.
Kaabi also reports in his interview that PFLP cells began using suicide bombers in the wake of Mustafa's death. Kaabi's narrative describes three such attacks, including, of most relevance here, the bombing of the pizzeria in Karnei Shomron:
The first suicide attack was carried out in the settlement of Ariel by istish'hadi [suicide attacker] Shadi Nassar, a resident of Madama village in Nablus. He was recruited and prepared by Comrade Yamin Faraj. I think that he had been in jail and was a member of the Yamin Faraj cell. A lot of people were killed and injured in that operation, but the occupation chose not to reveal the number of those killed and injured in that operation.
After that, the Karnei Shomron operation was executed by comrade Raed Nazal from Qalqilya in coordination with the comrades in the Brigades in Nablus. It was a joint, distinguished effort. I think it was carried out by istish'hadi [suicide attacker] Sadeq Abd al-Hai. Many settlers were killed inside the settlement. After the operation the Israeli army attacked several Front headquarters in Nablus with aircraft and artillery fire.
The Brigades in Nablus was the first organization to carry out a suicide attack within the '48 borders-in Netanya's city market-after Operation Defensive Shield and after Sharon boasted that he had destroyed the resistance and that the resistance would not be heard of anymore, telling the Zionists to enjoy a long, undisturbed sleep.
The now-liberated comrade Duaa al-Jayyousi participated in the operation. I was among the members of the cell....
Id. at 9 (bold emphasis added). Not surprisingly, plaintiffs seek to introduce the statement attributing the Karnei Shomron bombing to Ra'ed Nazal. They contend, naturally, that the admission of this statement would enable them to overcome the evidentiary deficiency identified in my prior opinion granting summary judgment for defendants.
Plaintiffs are less than forthcoming, however, about the circumstances surrounding their discovery of the Kaabi interview. In their memorandum, they state that it was "recently discovered" by counsel. Pls.' Mem. 3. In response to questions raised by defendants, plaintiffs report that they "stumbl[ed] upon" the interview "shortly before the release of this Court's June 20, 2017 Memorandum Opinion." Pls.' Reply to Defs.' Opp'n to Pls.' Mot. to Alter or Amend J. 1 ("Pls.' Reply") [Dkt. # 356]. In a footnote, they clarify that counsel "became aware" of the interview on May 22, 2017. Id. at 10-11 n.3. They also state that a rough draft of a translation was completed by May 25, 2017, and that counsel "was in the midst of determining whether the evidence would be admissible and therefore could and should be brought to the Court's attention" when my summary judgment opinion issued. Id. Unfortunately, plaintiffs do not describe how they "stumbled upon" or "became aware" of the interview, or what steps they took, if any, that could have allowed them to discover it sooner.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 59(e) permits "motion[s] to alter or amend a judgment [that are] filed no later than 28 days after the entry of the judgment." Fed. R. Civ. P. 59(e). " Rule 59(e) motions are disfavored[.]" SEC v. Bilzerian , 729 F.Supp.2d 9, 13 (D.D.C. 2010). "A district court need not grant a Rule 59(e) motion unless there is an 'intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Mohammadi v. Islamic Republic of Iran , 782 F.3d 9, 17 (D.C. Cir. 2015) (quoting Patton Boggs LLP v. Chevron Corp. , 683 F.3d 397, 403 (D.C. Cir. 2012) ). Even then, "[r]econsideration of a judgment after its entry is an extraordinary remedy which should be used sparingly." Id. (quoting 11 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2810.1 (3d ed. 2012) ).
The instant Motion is premised on discovery of new evidence. " Rule 59(e) motions on the basis of new evidence are restricted to evidence that is 'newly discovered or previously unavailable despite the exercise of due diligence.' " Johnson v. District of Columbia , Civil Case No. 14-677 (JDB), 266 F.Supp.3d 206, 211, 2017 WL 3084378, at *3 (D.D.C. July 19, 2017) (quoting Niedermeier v. Office of Baucus , 153 F.Supp.2d 23, 29 (D.D.C. 2001) ). They "may not be used to ... present evidence that could have been raised prior to the entry of judgment." Exxon Shipping Co. v. Baker , 554 U.S. 471, 485 n.5, 128 S.Ct. 2605, 171 L.Ed.2d 570 (2008) (quoting 11 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2810.1 (2d ed. 1995) ). "Courts routinely deny Rule 59(e) motions where all relevant facts were known or should have been known by the party prior to the entry of judgment[.]" Johnson , 266 F.Supp.3d at 211, 2017 WL 3084378, at *3 (collecting cases).
ANALYSIS
Plaintiffs' motion seeks to present additional evidence that was not before me when I granted defendants' motion for summary judgment. Specifically, plaintiffs seek to introduce the statement in Allam Kaabi's interview linking Ra'ed Nazal to the Karnei Shomron bombing. Although plaintiffs concede that this out-of-court statement is hearsay, they argue that it is admissible as a statement against interest pursuant to Federal Rule of Evidence 804(b)(3).
Before reaching the issue of admissibility, I must pause briefly to address the timing of plaintiffs' Motion. Kaabi's Facebook interview was given on December 17, 2016-six months prior to entry of summary judgment. Plaintiffs' failure to bring this evidence to the Court's attention sooner raises a serious concern that they may be using Rule 59(e) to "present evidence that could have been raised prior to the entry of judgment." Exxon Shipping , 554 U.S. at 485 n.5, 128 S.Ct. 2605. Oddly, plaintiffs make little effort to assuage that concern. They report that they "became aware" of the Kaabi interview on May 22, 2017. Pls.' Reply 10-11 n.3. But, as noted previously, they never recount how they became aware of the interview, or what steps they took, if any, that could have allowed them to become aware of it sooner. Plaintiffs' decision to omit that information, even when pressed by defendants, makes it difficult for the Court to conclude, as I must under Rule 59(e), that plaintiffs' late-produced evidence "is newly discovered or previously unavailable despite the exercise of due diligences. " Niedermeier , 153 F.Supp.2d at 29 (emphasis added).
Putting aside the difficulties imposed by plaintiffs' delay, it is clear that Kaabi's statement about Nazal is not admissible. Assuming, without deciding, that Kaabi is in fact "unavailable" as Rule 804(b)(3) requires, plaintiffs must still demonstrate that a "reasonable person in the declarant's position" would think the statement was "contrary to the declarant's proprietary or pecuniary interest," or likely to "expose the declarant to civil or criminal liability." Fed. R. Evid. 804(b)(3). "The rationale of the statement against interest exception," as our Circuit recently explained in Gilmore v. Palestinian Interim Self-Government Authority , 843 F.3d 958 (D.C. Cir. 2016) (" Gilmore II "), "is that a reasonable person will not make a damaging statement against himself or herself unless it is true," id. at 971 (quoting 5 Jack B. Weinstein & Margaret A. Berger, Weinstein's Federal Evidence § 804.06[4][c] (Joseph M. McLaughlin ed., 2d ed. 2013)), cert. denied , No. 16-1359, --- U.S. ----, 138 S.Ct. 88, 199 L.Ed.2d 26, 2017 WL 1955929 (U.S. Oct. 2, 2017). Bearing that rationale in mind, it is clear that Rule 804(b)(3) does not permit admission of the statement identifying Nazal.
Kaabi asserts that "the Karnei Shomron operation was executed by comrade Ra[']ed Nazal from Qalqilya in coordination with the comrades in the Brigades in Nablus" and then "carried out by ... Sadeq Abd al-Hai." Pls.' Mot., Ex. 7, Certified Translation, at 9. He reports that "[m]any settlers were killed" and that Israel responded "with aircraft and artillery fire" against PFLP targets. Id. Plaintiffs contend that these statements reveal Kaabi's "inside knowledge," Pls.' Mem. 16, and show that Kaabi and Nazal "were both members of the same conspiracy," id. at 18, thereby exposing Kaabi to liability. I disagree.
To begin, it is not at all clear that Kaabi's statements regarding the Karnei Shomron bombing reveal the type of inside knowledge or association with a conspiracy that plaintiffs seek to impute. After all, many innocent people who were living in the West Bank or Gaza Strip during the Second Intifada are likely familiar, fifteen years later, with the names of individuals or groups believed responsible for various attacks. Knowledge, or repetition of such information, does not necessarily indicate their involvement in the attacks.
More fundamentally, Kaabi's statement about Nazal is not so self-inculpatory that a reasonable person would have made it only if he believed it to be true. " Rule 804(b)(3) 'does not allow admission of non-self-inculpatory statements, even it they are made within a broader narrative that is generally self-inculpatory.' " Gilmore II , 843 F.3d at 971 (quoting Williamson v. United States , 512 U.S. 594, 600-01, 114 S.Ct. 2431, 129 L.Ed.2d 476 (1994) ). In other words, as the leading commentator on our Rules of Evidence has helpfully explained, "a statement which shifts a greater share of the blame to another person (self-serving) or which simply adds the name of a partner in crime (neutral) should be excluded even when closely connected to a statement that assigns criminality to the defendant." 5 Jack B. Weinstein & Margaret A. Berger, Weinstein's Federal Evidence § 804.06[4][d][iii] (Joseph M. McLaughlin ed., 2d ed. 2013); accord Williamson , 512 U.S. at 600, 114 S.Ct. 2431 ("[T]he fact that a statement is collateral to a self-inculpatory statement says nothing at all about the collateral statement's reliability."). Thus, even if Kaabi's narrative about the Karnei Shomron bombing is generally self-inculpatory, the collateral statement identifying Nazal cannot be admitted to prove Nazal had a role in the bombing because that statement does not inculpate Kaabi in anything.
In addition, even if the statement identifying Nazal did inculpate Kaabi, there is much reason to doubt whether Kaabi would have perceived that inculpation as "contrary to ... [his] interest." Fed. R. Evid. 804(b)(3) ; see 5 Jack B. Weinstein & Margaret A. Berger, Weinstein's Federal Evidence § 804.06[4][d][i] (Joseph M. McLaughlin ed., 2d ed. 2013) ("At the moment the statement is made the declarant must believe that the statement is against the declarant's interest."). As other courts have observed, " 'under the perverse assumptions of terrorists, an armed attack on civilians reflects glory. Taking "credit" for such an attack is deemed a benefit, not a detriment.' " Gilmore v. Palestinian Interim Self-Gov't Auth. , 53 F.Supp.3d 191, 205 (D.D.C. 2014) (" Gilmore I ") (brackets omitted) (quoting Gill v. Arab Bank, PLC , 893 F.Supp.2d 542, 569 (E.D.N.Y. 2012) (Weinstein, J.)), aff'd on other grounds , 843 F.3d 958 (D.C. Cir. 2016) ; see also Strauss v. Credit Lyonnais, S.A. , 925 F.Supp.2d 414, 449 (E.D.N.Y. 2013) ("While admitting to a violent attack on innocents typically is detrimental to a declarant's interests, the interests and motives of terrorists are far from typical."). The record in this case confirms that warped reality. Kaabi's interviewer treated him like a heroic celebrity. See, e.g., Pls.' Mot., Ex. 7, Certified Translation, at 2 ("You mobilized the furious youth to confront the enemy. Please tell us about that role ...."). And viewers of the program responded with praise for the PFLP's terror campaign. See Pls.' Mot., Ex. 10, PFLP Facebook Page ("Well done," "Well done, Allam," and "Allah will make your evening happy, comrades"). In such a morally-twisted environment, Kaabi likely expected that any apparent insider-knowledge of recent terrorist attacks would help, not hurt, his proprietary and pecuniary interests, not to mention the cause to which he is so dearly committed. That expectation created an incentive to lie, thus undermining "the commonsense notion" of reliability on which Rule 804(b)(3) is founded. Williamson , 512 U.S. at 599, 114 S.Ct. 2431.
Compounding this problem further is the likelihood that Kaabi would not have perceived any risk of increased "expos[ure] to ... liability" flowing from the Facebook interview. Fed. R. Evid. 804(b)(3). Kaabi resides in the Gaza Strip, an area the parties agree is outside the subpoena power of the U.S. courts. Pls.' Reply 11-12; see Defs.' Opp'n to Pls.' Mot. to Alter or Amend J. 9-10 [Dkt. # 355]. Moreover, as plaintiffs explain, at the time Kaabi gave the interview, he had already been sentenced by Israel for the role he played in the Second Intifada and subsequently released through a prisoner exchange program. Pls.' Reply 11-12. On this record, then, it appears there was no reason for Kaabi to believe that associating himself with the terrorist attacks discussed in his interview, including the Karnei Shomron bombing, exposed him to any additional liability. Cf. United States v. Slatten , 865 F.3d 767, 805-06 (D.C. Cir. 2017) (affirming district court's determination that immunized statements against co-conspirator were not admissible as statements against interest). As such, any presumption that Kaabi would not have made the statement identifying Nazal unless it was truthful, is further undermined.
To summarize, I conclude that Kaabi's statement identifying Nazal is not admissible because that particular statement does not inculpate Kaabi. In the alternative, if the statement were found to inculpate Kaabi, I would join with the district courts that have found that the ulterior motives at work in a claim of "credit" for a terrorist attack undermine that claim's trustworthiness and prevent admission under Rule 804(b)(3), see, e.g. , Gilmore I , 53 F.Supp.3d at 205 ; Strauss , 925 F.Supp.2d at 449 ; Gill , 893 F.Supp.2d at 569 -at least on the facts presented here. Either way, Kaabi's statement identifying Nazal must be excluded, and plaintiffs' Motion must be DENIED.
CONCLUSION
For the reasons set forth above, the Court will DENY the extraordinary post-judgment relief sought by plaintiffs. An Order consistent with this decision accompanies this Memorandum Opinion.
Plaintiffs also sued various Syrian entities and individuals. As I have previously explained, see Mem. Order 2 & n.4 (Oct. 31, 2013) [Dkt. # 249], plaintiffs voluntarily dismissed the Syrian defendants and refiled those claims in a separate action that remains pending before the Court as Shatsky v. Syrian Arab Republic , Civil Case No. 08-0496 (D.D.C).
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6740281-13637 | WOODS, Circuit Judge.
This action is for damages caused by the death of J. D. Ross, an employé who was killed in defendant’s coal mine. There were two main ways into the mine, the drift mouth and the entrance at the tipple. These intersected at a point about 800 feet from the drift mouth and about 300 feet from the tipple entrance. From the tipple to a point about 800 feet inside, the main entry was double-tracked, the track on the right going into the mine being used for empty cars and that on the left for loaded cars. The cars were moved by an electric motor within the mine, and by a chain hoist or “creeper” from the foot of the incline to the tipple. In the movement •of these loaded cars from within it was necessary to uncouple the electric motor from the cars at a point about 300 'feet from the tipple. The motor then crossed over a switch to the track for empty cars, ran back into the mine to the point where the empty and loaded car tracks joined, then forward on the loaded car track, coupled to the cars from die rear, and pushed them forward to the foot of the incline, where they were connected to the creeper, which carried them to the tipple. After being unloaded the cars then drifted back into the mine on the track for unloaded cars.
Ross, a mine engineer, together with two helpers, Herrold and Murray> entered the drift mouth and walked in as far as the intersection of the two entries. Upon reaching the intersection, which was only a few feet from the cross-over which the motor took to change from the front to the rear of the cars, he found the motor was then making the change so as to run down and get behind the loaded cars and push them to the creeper. Ross started to follow the motor then backing down the track which was used for empty cars, "when the motorman told him not to follow but to wait until a train of empties came by going into the mine. Murray asked the motorman whether the empties were to be pulled or pushed into the mine, and the motorman replied that they were to be pushed in. Ross, Herrold, and Murray stopped and stepped back on the track for loaded cars and stood there waiting for the empty cars to pass. The reason for not going in on the motor pushing cars into the mine seems to have been that it was dangerous to do so, while it was comparatively safe to go in on a motor pulling the cars. While a train of empties was passing them, making a loud rumbling noise, the train of loaded cars, to which the motor had in the meantime coupled in the rear, struck and injured Herrold and ran over and killed Ross. The train of loaded cars had no light on the front end, the motor with a light being at the rear. The nearest light to the scene of the accident was a 32 candle-power electric lamp attached to a post about 30 feet away. Each of the men had a cap with a carbide light used by mining engineers.
The court below entered judgment upon a verdict found in favor of the plaintiff for $5,083 and costs. The charge of negligence, the basis of the verdict, was the failure of defendant to have a light on the front of the train of cars, the allegation being that the light on the car would have warned Ross and his companions of its approach.
Among other precautions for the safety of miners, the Virginia statute, under penalty for disobedience, requires the following:
“On all haulways where hauling is done by machinery of any kind, the mine foreman shall provide a proper system of signals and for the carrying of a conspicuous light on the front, and a light or flag on the rear, of every trip or train of cars when'in motion, provided that this shall not apply to trips being hauled by gathering motors or mule teams when operating on other than main headings, and when hoisting or lowering men occur before daylight in the morning or at evenings after darkness.” Virginia Mining Act,§ 13 (Pollard’s Supplement 1916, p. 298).
The accident did not occur while cars were being hauled, by gathering motors or mule teams at a place other than a main heading, and therefore the defendant’s contention that there was no duty to provide a light on the front of the moving cars is without merit. No place in a mine would fall more clearly within the letter of the statute and the protection it was designed to afford than that where the accident occurred. Without artificial light, the place was absolutely dark and there was much movement of cars.
Under the circumstances stated, evidently the breach of the imperative statutory duty to give warning of the approach of the cars by a light in front was such a probable, proximate cause of the accident as to afford suiEcient support for the judgment, unless there was such assumption of risk or contributory negligence by Ross as to defeat the action. Minneapolis, etc., R. Co. v. Gotschall, 244 U. S. 66, 37 Sup. Ct. 598, 61 L. Ed. 995 (May 21, 1917). Any one of a class for whose special benefit a penal statute is enacted has a right of action for injuries resulting to him from its violation. Texas, etc., R. Co. v. Rigsby, 241 U. S. 33, 36 Sup. Ct. 482, 60 L. Ed. 874.
There is no doubt that Ross knew that the defendant’s method of work was to push the loaded cars to the tipple without a light in front; and the court was requested, but refused, to charge that if lie had that knowledge he assumed all risk incident to the absence of the light. Thus arises the'question whether an employe assumes the risk of known violation by the employer of a penal statute requiring a specific appliance deemed by the Legislature necessary for the safety of employés. Our conviction, supported by the great and growing current of authority, is clear that he does not, though the decisions are in hopeless conflict on the subject. The arguments in favor of the opposing views are stated by Judge Taft in Narramore v. Cleveland, etc., R. Co., 96 Fed. 298, 37 C. C. A. 499, 48 L. R. A. 68, and by Judge Garland in Denver, etc., R. Co. v. Norgate, 141 Fed. 247, 72 C. C. A. 365, 6 L. R. A. (N. S.) 981, 5 Ann. Cas. 448. Neither the Supreme Court of the United States nor the Supreme Court of Appeals of Virginia have directly passed on the question. The cases are collated in 5 Labatt on Master and Servant, 5061, 6 L. R. A. (N. S.) 981, 26 Cyc. 1181, and annotations of 1914-1917, and other text-books and annotated cases.
Assumption of the risk of a business inherently dangerous, but conducted with due care, is a doctrine evidently fair and just. But the doctrine of assumption of risk by the servant of the continued negligence of the master, because such negligence was known to the servant, is a hard one and all statutes looking to relief from it should be liberally construed against it. Penal statutes requiring safeguards for laborers rest on the care of the slate for the employé for the sake of himself, of the persons dependent on him, and of the community. The primary and insistent necessity for their enactment is that men will work in mines and other dangerous places at the constant risk of death or injury whether such precautions are taken for their safety or not. The Legislature assumed that men will work in the mines without the protection of the required lights; otherwise the enactment would not have been necessary. In this case it is probable there was not a man less in the mine because of defendant’s failure to provide the safeguard of a light on the front of moving cars. Hence the precautions which the Legislature regards obviously necessary to safety it places out of the domain of waiver by the employé or of contract, either express or implied, between the parties, and requires such precautions as a matter of public policy, under the sanction of penalties inflicted for failure to provide them.
The proposition that the violation by the master of a penal statute intended for the protection of the servant as a matter of public policy is nothing more than ordinary negligence, and stands on the same legal footing as common-law negligence, seems to us obviously and fundamentally unsound.
Assumption of risk arises either out of the contract of employment, as an incident of it, or out of ^ the status or relation voluntarily assumed and continued by the employé towards the instrumentalities of the employer. In the one view the statute, with its requirements and penalties, attaches to the contract as a part of it; and in the other view it becomes an element of the 'status or relation. Assumption of risk is an affirmative defense. Baltimore, etc., R. Co. v. Taylor, 186 Fed. 828, 109 C. C. A. 172. In this case its two elements would be violation of a penal statute by the employer, and waiver or acceptance of the violation without objection by the employé. Hence, to make out its defense of assumption of risk the defendant must assert, as one of its elements, its own violation of a penal statute. No one can assert an affirmative claim of any kind when one of its essential elements is his own violation of a criminal statute.
From this the conclusion follows that it would-have been tautological for the statute to abolish in express language the defense of assumption of risk as to the absence of lights, since in making their absence criminal it did that and more. The doctrine has been applied to usury statutes and many others. A penal statute against usury makes waiver of its provisions ineffectual, without any express enactment that it should be so. We conclude that the District Judge was right in refusing to instruct the jury that the deceased assumed the risk of defendant’s violation of a. penal statute requiring lights on the approaching car.
Error is next assigned in the refusal to instruct the jury that Ross was guilty of contributory negligence and could not recover. Assumption of risk and contributory negligence stand in a different legal relation to the violation of a penal statute.. Assumption of risk imports no delict on the part of an employé, and hence-it may well be held inapplicable when an employé is injured in consequence of the violation by his employer of a penal statute. Contributory negligence, on the contrary, is a delict or neglect of duty by the employé, and hence he cannot recover for the delict of the employer, even in violation of a statute, if his own delict has contributed to his injury as a proximate cause.
The first alleged act of negligence attributed to the deceased was going into the mine through the drift mouth when he should have entered through a manway provided for all employés. Section 8, Virginia Mining Statute; enacts under penalty that “no person shall travel on foot to and from his work upon any slope, engine plane or motor road when other good roads are provided for that purpose.” If Ross entered the mine in violation of this statute, there would be ground to say that he was guilty of contributory negligence per se. Southern R. Co. v. Rice, 115 Va. 235, 78 S. E. 592. More accurately, there could be no recovery, because Ross would have lost his life in consequence of his own violation of a criminal statute. But the court could not say as a matter of law that another “good road” was provided, for there was evidence for the jury tending to show that the roof of the manway was not safe. Besides, Ross did not go into the drift mouth with the intention of traveling on foot. The evidence tended to prove a custom for the engineers to go where Ross was and ride in on the cars, and that therefore Ross was not in the position of a person who traveled on foot. In addition it was for the jury to say whether this method of entering by riding on the cars was so near the tipple and practiced so obviously and constantly as to warrant the inference that it was authorized and sanctioned by the defendant. If it was, then neither the above-cited statute nor the defendant’s rule against riding on cars without authority would apply.
The five and a half foot space between the tracks was sufficient for Ross and his party to stand between the tracks in safety. But the empty cars were passing rapidly on the-other track, and it was a natural impulse, even of a prudent man, to stand away from them. If the defendant had warned Ross of the approach of the cars by a light on the front car, as it was its statutory duty to do, the argument that he was guilty of contributory negligence as a conclusion of law, in being on the track, would be very strong. But to hold that without such warning it is contributory negligence per se to stand on a track in the narrow spaces of a coal mine because there is another place to stand would be to exact as a matter of law perfection of care. Even on surface roads, the question is usually one for the jury whether an employe is guilty of contributory negligence in standing or walking on a railroad track. Erie R. Co. v. Purucker, 244 U. S. 320, 37 Sup. Ct. 629, 61 L. Ed. 1166 (June 4, 1917). There was no error in refusing to direct a verdict for the defendant.
The following requested instruction was refused:
“The court instructs the jury that when deceased, Ross, took a position on the loaded track to wait for the passing of the cars on the empty tracks (whether the taking of such position was negligent or not), it was the duty of the deceased to look and listen for the approach of cars on the loaded track on which he was standing; and if he failed to so look and listen, and by either looking or listening he could have discovered the approach of the cars on the loaded track in time to have gotten out of the way and prevented said accident, then he was guilty of such negligence as bars any recovery in this case, and the jury shall find for the defendant.”
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5775701-22499 | GILBERT, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
It is assigned as error that the court overruled the motion of the plaintiff in error to require the district attor ney to furnish him a list of all the witnesses to be produced against him on the trial in accordance with the provisions of section 1033 of the Revised Statutes. [18 U.S. C.A. § 562], That statute applies only to the trial of treason and capital cases in the courts of the United States. The present case was tried in a territorial court under the Penal Code and Code of Criminal Procedure of Alaska. Those Codes contain no requirement that a list of witnesses be furnished the accused upon demand or otherwise. In Thiede v. Utah Territory, 159 U.S. 510 — 515, 16 S.Ct. 62, 40 L.Ed. 237, it was held that section 1033 does not control practice and procedure in territorial courts. The court said: “In the absence of some statutory provision, there is no irregularity in calling a witness whose name does not appear on the back of the indictment or has not been furnished to the defendant before the trial.”
It is contended that the court erred in sustaining the objection of the district attorney to questions propounded to the witness Noble as to certain conversations which he had with Dackins and with the plaintiff in error on the day of the homicide. The witness testified that he had a conversation with Dackins in the afternoon of that day. He was asked: “Q. In that conversation did he say to you that the next time these men met one of them would be killed? A. No, sir. Q. Did he make any declaration in substance anything like that? (To which objection was made by the district attorney, and the objection was sustained by the court.)”
The witness was then asked: “Q. Did you say to Mr. Ball, after your conversation with Dackins, that one of these two men would get hurt the first time they came together? (To which an objection was also sustained.)”
It is claimed that the purpose of these questions was to show threats made by the deceased against the accused. We do not see how the testimony which was sought to be elicited can be said to indicate that threats were made. The questions called for no testimony as to what the deceased had said. They referred to conversations only between the witness and Dackins, and the witness and the accused, and called for testimony as to what opinion Dackins had expressed concerning the probability of trouble between the deceased and the accused, and as to what opinion on that subject the witness had expressed to the accused. Such testimony was not admissible under any rule of evidence. It was not admissible as part of the res gesta, nor as the declaration of a co-conspirator. There is nothing in the record to indicate that Dackins was unfriendly to the plaintiff in error or wished him harm. There is nothing to show that he ever made any threat against him. At the time when Deppe was killed, Dackins was sitting in the cabin of the plaintiff- in error in conversation with Noble, and was unarmed. There is nothing to show that he knew or supposed that the deceased was coming to the cabin that night. We find no error in the exclusion of the proffered testimony.
Error is assigned to the introduction in evidence of minutes of the election of officers of the marble company and a letter of the secretary of that company to Noble, which was taken by Deppe when he went to Fox Island and there delivered to Noble. The objection made to the admission of this evidence is that the election of officers referred to in the minutes was absolutely void, and that said officers had no authority to direct Deppe to do the assessment work. The testimony was introduced for the purpose of showing the good faith of Deppe in going upon the property of the company to do the assessment work. We think it was admissible for that purpose. The homicide was not the result of any controversy over the possession of the property, and the evidence did not go to the jury for the purpose of showing that the plaintiff in error was not rightfully there. The court was careful to .instruct the jury that if they believed from all the evidence that the plaintiff in error, in good faith and in the honest belief that he had the legal right so to do, entered upon the company’s property for an honest purpose, he had the right to retain such possession, and it could not be forcibly interfered with or taken from him, except by due process of law, and that to defend such possession he had the same right as though he were legally the possessor thereof and in his own house.
It is contended that the court erred in striking out testimony given by the plaintiff in error as to what occurred when Deppe, Dackins, and Weir arrived on the property. He said: “Apparently by arrangement they all rushed in there together.” This was clearly not competent testimony. It was evidence only of a deduction which the witness drew from the appearance of things. If there were facts or circumstances which indicated that the men rushed in there by arrangement, it was competent to prove them; but it was not competent to prove the impression made upon the mind of the witness.
It is assigned as error that the district attorney was permitted to ask the plaintiff in error on cross-examination whether he had not formerly, and under the name of Charles R. Mains, been convicted in the Northern District of California of the crime of using the United States mails in a scheme to defraud. To this it is sufficient to say, for reasons stated below, that the district attorney clearly had the right to ask the question. Under the ruling of the court the witness was not required to answer the question, and did not answer it.
The trial court,-over the objection of the plaintiff in error, admitted the record of the District CouT of the United States for the Northern District of California of the conviction of the plaintiff in error of said offense. It is contended that this was error on two grounds: First, that to admit in the trial court, for the purpose of impeaching or affecting the credibility of a witness therein, the record of his conviction in the United States court for the District of California, was to give extraterritorial effect and force to a judgment of that court, the effect of which is necessarily limited to the jurisdiction in which the offense was committed, and in which the judgment was rendered. To this proposition Commonwealth v. Green, 17 Mass. 515-536, is cited. What the court held in that case was that a witness was not rendered incompetent to testify in the courts of Massachusetts by proof of his conviction of a felony in the state of New York, the effect of which, under the law of New York, was to render him infamous and incompetent there to be sworn as. a witness, and that the judgment of conviction in that state had no extra-territorial effect. But that decision did not deny the admissibility in evidence of such testimony to affect the credibility of the witness. On the contrary, the court took pains to say of such witnesses: “Their for iner condition and character may be made known to the jury to enable them to judge of their credibility, and this without depriving them of any valuable personal right by reason of their conviction abroad.”
The second ground of objection to the record is that it proved a conviction, not of a felony, but of a misdemeanor, and that it was therefore not admissible under the Code of Alaska. Section 669, p. 4, of Carter’s Codes of Alaska provides: “It may be shown by the examination of the witness or the record of the judgment that he has been convicted of a crime.”
Section 67S provides: “But a witness must answer as to the fact of his previous conviction of a félony.”
These sections were taken from the statutes of Oregon, Sections 852, 859, B. & C. Comp. Before they were adopted for Alaska, the Supreme Court of Oregon had in State v. Bacon, 13 Or. 143, 9 P. 393, 57 Am.Rep. 8, so construed these provisions as to sanction the admission in evidence, for the purpose of impeaching a witness, proof of his prior conviction of a misdemeanor. It is true that in Oregon a defendant in a criminal • case, who testifies in his own behalf, may not be asked whether he has been convicted of a crime, but that is because the statute which permits him so to testify expressly restricts cross-examination to the testimony which he has given on direct examination. State v. Lurch, 12 Or. 99, 6 P. 408; State v. Saunders, 14 Or. 300, 12 P. 441; State v. Bartmess, 33 Or. 110, 54 P. 167. In that respect the statute of Oregon differs from that of Alaska, as section 148 of the Penal and Criminal Code of that territory gives to the prosecution, without express restriction, the right to cross-examine a defendant who offers himself as a witness. We find no error in the admission of the record in evidence.
The further objection is made that the indictment was included in the judgment roll, which was admitted in evidence to prove the prior conviction of the plaintiff in error. It is a sufficient answer to this to point to the fact that the objection was not made in the court below. But, if timely objection had been made, we see no ground upon which it should have been sustained. The indictment is properly part of a judgment roll to prove a former conviction. Kirby v. People, 123 Ill. 436, 15 N.E. 33.
It is urged that the trial court erred in permitting the district attorney to take from the plaintiff in error a newspaper clipping which he held in his hand while testifying. The district attorney, while cross-examining the plaintiff in error, said: “I see you hold in your hand a paper to which you have referred. Do you refer to that for the purpose of refreshing your memory? A. I am referring to this because to my recollection that scandal originated with Allan Weir. Q. Then you do refer to it to refresh your memory? A. Yes, sir; I do on that point.”
The district attorney then requested permission to see the paper and took it from the hand of the witness. Objection was made, on the ground that the district attorney had no right to look at it. The objection was overruled. The district attorney thereafter propounded this question. “The article referred to in this paper is headed, ‘Deppe’s Slayer Said to be an Ex-Convict.’ Is that true? (Objection was made to the question, the objection was overruled, and the witness answered:) Yes, sir; that is true.”
Conceding that it was error to read in the presence of the jury the heading of the newspaper clipping, that error was cured by the proof which was made by the record which was admitted in evidence of the former conviction. . The heading of the newspaper clipping went no further than did the record proof which imported verity, of the fact that the plaintiff in error had been so convicted.
It is contended that the trial court erred in permitting the district attorney to ask the plaintiff in error on his cross-examination if it was not a fact that Deppe had told him that he would bring forward his record in Michigan and California and that he wanted to take a snapshot or kodak picture of him for the purpose of identifying him. It is argued that this question could have been asked only for the purpose of degrading the plaintiff in error, and that it had that tendency. The question was propounded after the plaintiff in error had testified that, while he and Deppe were both at Seattle, the latter was constantly lurking around his offices, invading the same, and daring him to come out; that he encountered Deppe at many times and places, and that when he met Deppe the latter would assume a threatening attitude, and have his hand in his coat pocket; that Deppe would follow him on the street as he was going home, and would follow him to the public parks of the city, and was “trailing” him wherever he went. In addition to this testimony, the plaintiff in error testified as to threats of personal injury made to him by Deppe during that period. It was the theory of the prosecution that the acts of Deppe, in hanging around the office of the plaintiff in error and dogging his footsteps on the street, were for the purpose of taking a snap-shot picture of him, to be used for identification in looking up his record, and not for the purpose of doing him bodily harm. We do not see that it was reversible error to endeavor to obtain an admission from the plaintiff in error that such was the fact. The record shows, moreover, that the plaintiff in error introduced in his defense evidence that Deppe, during that period of time, was making inquiries concerning his record in Michigan and California.
It is contended that the failure of the trial court to instruct the jury that the evidence of the prior conviction of the plaintiff in error was to be considered only as tending to affect the credibility of his testimony was error. There was no request for such an instruction, nor was any objection made to the omission of the court so to instruct, nor is the failure of the court so to instruct assigned as error. In Kentucky, Tennessee, and Missouri it is held, contrary to the general rule, that in criminal cases the omission of the court to charge the jury fully as to any branch of the law of the case, though not requested, is ground for reversal, unless it is clear that no injury could have resulted therefrom. Potter v. State, 85 Tenn. 88, 1 S.W. 614; Heilman v. Commonwealth, 84 Ky. 457, 1 S.W. 731, 4 Am.St.Rep. 207; State v. Banks,, 73 Mo. 592. These and other decisions are cited by the plaintiff in error. Among the cases cited are State v. Cody, 18 Or. 506, 23 P. 891, 24 P. 895, and Winchester & Partridge Mfg. Co. v. Creary, 116 U.S. 161, 6 S.Ct. 369, 29 L.Ed. 591. In State v. Cody, the majority of the court held with the rule of the states above mentioned, and thereby overruled prior decisions of that court; but State v. Cody was itself overruled in State v. Foot You, 24 Or. 61, 32 P. 1031, 33 P. 537. In Winchester & Partridge Mfg. Co. v. Creary, it was held that, in an action by the vendee of personal property against an officer attaching it as property of the vendor, declarations made by the vendor to a third party after delivery of the property are inadmissible to show fraud or conspiracy to defraud in the sale. In the course of the opinion the court used the following language, which is relied upon by the plaintiff in error: “It is argued that these subsequent declarations of Webb were competent for the purpose of contradicting him as a witness in behalf of the plaintiff by showing that he had made statements out of court different from those made as a witness in behalf of the plaintiff. No foundation was laid for any such use of those declarations. Besides, if any such foundation had existed, the court should have instructed the jury that in determining between the parties to the record the true character of the sale, the subsequent declarations of Webb were competent only as impeaching his credibility as a witness.”
We understand this expression of the court to mean that, if there had been proper foundation for 'the admis°sion of the declarations, it would have been the duty of the court, in instructing the jury in connection therewith, to limit such declarations to their proper use. This is far from saying that the mere -omission of the court so to instruct the jury, in the absence of a request for such an instruction, would have been reversible error. We think it may be said to be the general rule that the mere omission of the court, in the absence of a specific request, to limit the effect of evidence admitted only for a certain purpose, is not error. People v. Ah Yute, 53 Cal. 613; People v. Collins, 48 Cal. 277;. Dow v. Merrill, 65 N.H. 107, 18 A. 317; Roebke v. Andrews,'26 Wis. 312.
It is contended that the court erred in modifying the instruction requested by the plaintiff in error on the subject of self-defense by adding thereto the following: “The court charges you that in order to justify the homicide it must have appeared to the defendant’s apprehension that he was actually in danger of his life or of receiving great bodily harm, and to avoid such danger or harm it appeared necessary to him to take the life of the deceased.”
It is objected to this instruction that it conveyed the idea that the danger must be actual and positive, and that it excluded the consideration of the appearances of danger, which under the law would justify homicide in self-defense. We do not so read the instruction. It expressly authorized the jury to acquit the plaintiff in error if they found that it appeared to his apprehension that he was actually in danger. It authorized the jury to consider apparent actual danger, and the court immediately thereafter properly charged the jury on the subject of the appearance of danger to the plaintiff in error.
It is assigned that the court erred in giving an instruction requested by the plaintiff in error by omitting the following portion thereof: “Any demonstration with a deadly weapon which puts another in fear is an assault. Any act done which constitutes menace and the beginning of violence toward another is an assault.”
The court charged the jury that: “An assault is an unlawful physical force partially or fully put in motion creating a reasonable apprehension of immediate physical injury to a human being.”
No fault is' found with that instruction, but it is contended that the requested instruction should have been given. We do not think the court erred in refusing it. It is not true that any demonstration with a deadly weapon which puts another in fear is an assault. A careless demonstration with a deadly weapon might put another in fear, and yet it would not be an assault, and the same is true of other demonstrations that might be suggested.
Error is assigned to the refusal to give an instruction to the effect that if the jury believed from the evidence that Deppe was a man of violent or vicious character, and this was known to the defendant, that fact, taken together with threats against the life of the defendant, if any were proved, would give him the right to act in self-defense upon a less aggressive act indicating apparent danger to life than if his assailant was a man of ordinarily well-disposed character for peace. In that connection the plaintiff in error cites the case of Roberts v. State, 68 Ala. 166, in which it was said: “Where the character of a man is notoriously turbulent and bloodthirsty, and his threats are brutal, ferocious, and recently made, his armed entry upon the premises of his assailant might readily be inferred by a jury as being of so hostile a character as to place such assailant in imminent danger.”
We think the court was justified in refusing the instruction, for the reason that it included the word “vicious.” Whatever may be the rule as to the threats of a man of violent character, there is certainly no ground for instructing the jury that the threats of a man of vicious character are to give any greater right to a defendant to kill in self-defense than would the threats of a virtuous man. A man of vicious character may be as peaceable as another. We find no ground of reversal in the-refusal of the court to give the requested instruction, especially in view of the fact that the court gave correct and ample instruction on the subject of the law of self-defense.
It is contended that the court erred in giving an instruction defining manslaughter. This is said to be error for the reason that the evidence, if it proved the plaintiff in error to be guilty at all, proved him to be guilty of murder in the first degree, and that there was no evidence upon which to find him guilty of a different offense. It is contended, further, that, if the evidence authorized the court to instruct the jury on the subject of manslaughter, the instruction which the court gave by reading the statute of Alaska was wholly insufficient. We find it unnecessary to consider the merits of these contentions, for the reason that no objection was made to the instruction when given, and no request was proffered for further instructions.
It is contended that the court erred in charging the jury that no mere threats made by the deceased before or at the time of the killing, unaccompanied at the time of the killing with any intent to carry them into execution, are sufficient to justify the killing, or to reduce it to a lower degree of homicide than murder. It is said that this instruction is contrary to the rule announced in Thompson v. United States, 155 U.S. 271, 15 S.Ct. 73, 39 L.Ed. 146, in which the court said: “An instruction that former threats to kill defendant cannot excuse' him if there was nothing indicating a deadly design against the defendant at the time of the killing is erroneous in omitting all reference to deceased’s conduct showing a present intention' to carry out the previous threats.”
But the charge as given by the trial court did not omit, all reference to deceased’s conduct. It expressly referred to the conduct of the deceased and correctly announced the rule that threats unaccompanied at the time of the killing with any attempt to carry them into execution are insufficient to justify homicide. As applied to the facts of the case, we think the instruction given was correct. If the evidence had been that the deceased came into the cabin where the plaintiff in error was, holding a pistol or other weapon in his hand, a different instruction might have been called for; but the evidence all is that he came empty-handed, and that if he made any attempt, as to which the evidence was conflicting, it was an attempt to reach for his pistol after he observed the threatening acts of the plaintiff in error.
It is earnestly insisted that the court erred in giving the following instruction: “You are instructed that the law of self-defense was as much the right of the deceased, William Deppe, as it was that of the defendant; and if you shall find and believe from the evidence in this case, beyond all reasonable doubt, that the deceased, William Deppe, was attacked by the defendant when deceased was attempting to retreat through the door of the house where the homicide happened, and that he would have withdrawn or retreated if given a reasonable opportunity to do so, then you are instructed that the defendant is not entitled to be acquitted on the ground of self-defense.”
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4340416-7987 | PER CURIAM: ,
William Cardona-Castillo appeals his conviction and 71-month prison sentence for one count of illegal reentry after being convicted of an aggravated felony, in violation of 8 U.S.C. §§ 1326(a) and (b)(2). Cardona-Castillo advances four arguments on appeal. First, he argues that the district court erred by denying his motion to suppress all evidence obtained as a result of an illegal stop and show-up. Second, he argues that the district court abused its discretion by overruling five of his eviden-tiary objections at trial. Third, he argues that the district court erred by denying his motion for judgment of acquittal. Finally, he argues that the district court erred by applying two additional points to his criminal history based on its finding that he was on probation at the time of the offense. For the reasons that follow, we affirm.
I.
Cardona-Castillo first argues that the district court erred by denying his motion to suppress all evidence from a stop and show-up. He alleges that the officers lacked reasonable suspicion to detain him because his detention was based on an overly broad and vague description of a suspect and that the show-up was unduly suggestive and prejudicial. A motion to suppress evidence presents a mixed question of law and fact. United States v. Lewis, 674 F.3d 1298, 1302 (11th Cir.2012). We review the district court’s rulings of law de novo and its findings of fact for clear error. Id. at 1302-03. We construe all facts in the light most favorable to the party that prevailed below. Id. at 1303.
The Supreme Court has held that the exclusionary rule does not apply in civil deportation proceedings where the evidence of an individual’s unlawful presence in the United States was derived from an unlawful arrest. INS v. Lopez-Mendoza, 468 U.S. 1032, 1034, 104 S.Ct. 3479, 3481, 82 L.Ed.2d 778 (1984). The Court found that “application of the exclusionary rule in [these] cases ... would compel the courts to release from custody persons who would then immediately resume their commission of a crime through their continuing, unlaw ful presence in this country.” Id. at 1050, 104 S.Ct. at 3489. Our Court has expanded this holding to criminal proceedings when the evidence sought to be suppressed is “offered in a criminal prosecution only to prove who the defendant is.” United States v. Farias-Gonzalez, 556 F.3d 1181, 1182 (11th Cir.2009). This evidence of identity includes a defendant’s fingerprints and alien file. Id. at 1189.
The district court did not err by denying Cardona-Castillo’s motion to suppress his fingerprints and alien file. The government used Cardona-Castillo’s fingerprints and alien file for the sole purpose of establishing his identity. Even if they were obtained as the result of an unlawful search or seizure, the fingerprints and alien file were not due to be suppressed when used only to prove Cardona-Castil-lo’s identity. See id.
II.
Cardona-Castillo also argues that the district court abused its discretion by overruling five of his evidentiary objections at trial. He claims that the district court should not have allowed the admission of: (1) a sworn statement made by Cardona-Castillo in January 2011 regarding his original means of entry into the United States, (2) his alien file, (3) a warrant of deportation, (4) a “warning to alien removed or deported” notice, and (5) a flight manifest to Cardona-Castillo’s home country showing his name on the passenger list. Cardona-Castillo alleges that the sworn statement was made in violation of his Miranda rights, and that the various pieces of evidence were unfairly prejudicial or improperly authenticated under Federal Rules of Evidence 403 and 901.
A.
We review the district court’s evidentiary rulings for abuse of discretion. United States v. Caraballo, 595 F.3d 1214, 1226 (11th Cir.2010). “We will reverse a district court’s evidentiary rulings only if the resulting error affected the defendant’s substantial rights.” United States v. Dodds, 347 F.3d 893, 897 (11th Cir.2003).
The government cannot introduce statements stemming from a custodial interrogation unless certain procedural protections were provided. Miranda v. Arizona, 384 U.S. 436, 444, 86 S.Ct. 1602, 1612, 16 L.Ed.2d 694 (1966). Custodial interrogation “mean[s] questioning initiated by law enforcement officers after a person has been taken into custody or otherwise deprived of his freedom of action in any significant way.” Id. “[A] term of imprisonment, without more, is not enough to constitute Miranda custody.” Howes v. Fields, 565 U.S. —, —, 132 S.Ct. 1181, 1191, 182 L.Ed.2d 17 (2012). In deciding whether a prisoner is in custody for Miranda purposes, we “focus on all of the features of the interrogation,” which “include the language that is used in Summoning the prisoner to the interview and the manner in which the interrogation is conducted.” Id. at 1192.
Under Federal Rule of Evidence 901, in order to “authenticate or identify[] an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is.” Fed.R.Evid. 901(a). Public records may be authenticated by showing that the document “was recorded or filed in a public office as authorized by law” or was “from the office where items of this kind are kept.” Id. 901(b)(7).
Under Federal Rule of Evidence 403, “[t]he court may exclude relevant evidence if its probative value is substantially outweighed by a danger of ... unfair prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly presenting cumulative evidence.” Fed.R.Evid. 403. “The district court possesses broad discretion to admit evidenceif it has any tendency to prove or disprove a fact in issue,” but “the court’s discretion to exclude evidence under Rule 403 is limited.” United States v. Terzado-Madruga, 897 F.2d 1099, 1117 (11th Cir.1990). “[T]he application of Rule 403 must be cautious and sparing.” United States v. Mills, 704 F.2d 1553, 1560 (11th Cir.1983) (quotation omitted).
B.
The district court did not abuse its discretion in any of the five evidentiary rulings Cardona-Castillo appeals. First, Cardona-Castillo’s sworn statement was not made in violation of his Miranda rights. Though he was in prison when he made the statement, Cardona-Castillo did not assert that he was in custody for the purposes of Miranda and the fact of his imprisonment does not establish custody on its own, without evidence that other features of the interrogation demonstrated custody. See Howes, 565 U.S. at —, 132 S.Ct. at 1191-92. Further, the statement was not needlessly cumulative under Rule 403 simply because another individual’s testimony could have proved the same fact. The “warning to alien removed or deported” document was also not unfairly prejudicial under Rule 403 because the document had probative value in establishing the fact of Cardona-Castillo’s deportation.
Neither did the district court err in admitting Cardona-Castillo’s alien file, warrant of deportation, and flight manifest. These documents were properly authenticated under Rule 901 because they were “from the office where items of [these] kind[s] are kept,” with the U.S. Immigration and Customs Enforcement office. Fed.R.Evid. 901(b)(7). The documents were not unfairly prejudicial under Rule 403 because they had probative value in establishing the fact of Cardona-Castillo’s deportation. The district court did not abuse its discretion in admitting the evidence.
III.
Cardona-Castillo next argues that the district court erred by denying his motion for judgment of acquittal because the government did not present sufficient evidence of his prior deportation. To prove the offense of unlawful entry after deportation, the government must show that (1) the alien had been deported, (2) he entered, attempted to enter, or was found in the United States after deportation, and (3) he had not obtained permission to reenter. 8 U.S.C. § 1326(a).
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3984694-8322 | OPINION OF THE COURT
HARDIMAN, Circuit Judge.
Daryl Mills appeals the District Court’s grant of summary judgment in favor of the City of Harrisburg (City) and officers of the Harrisburg Police Department on his federal civil rights and pendent state law claims. We will affirm, largely for the reasons outlined in the District Court’s thorough and cogent memorandum opinion.
I.
Because we write for the parties, we recount only those facts necessary to our decision. On the evening of April 30, 2004, Officer Annemarie Bair, Investigator Stephen Blasko, and several other members of the Harrisburg Police Department were conducting an undercover prostitution “sting” near several bars in Harrisburg, Pennsylvania. The operation required Bair to pose as a female prostitute and wear a hidden microphone which enabled Blasko, who was positioned nearby in a surveillance vehicle, to monitor her conversations with potential customers. From his location, Blasko could maintain visual contact with Bair.
Midway through her shift, Bair encountered Mills and his friend Phillip Brooks as they left a local bar and engaged them in a seven-minute conversation. Initially, Bair told the men that she was trying to “mak[e] some money.” Mills responded: “how much you trying to work?” After learning that Mills had only seventeen dollars with him, Bair offered to perform oral sex on Mills for fifteen dollars. Mills— who had not yet expressly requested sexual services from Bair — declined this offer. Despite Mills’s initial refusal, negotiations among the three continued, and both men subsequently arranged a deal whereby Mills and Brooks would pay Bair twenty-five dollars. In return, Bair agreed to perform oral sex on Mills while Brooks simultaneously performed oral sex on Bair. Mills confirmed this arrangement with Bair, stating: ‘You’re going to give me head and he’s going to give you head.” When Brooks told Bair, “I’m gonna pay you,” Mills interjected, “Right. And I’m going to pay you — while I’m paying you and he’s going to pay you.” Throughout their discussion with Bair, both Mills and Brooks openly discussed the exchange of money for various sexual services.
During the conversation, the microphone worn by Bair allowed Blasko and other Harrisburg police officers to monitor the situation from a nearby vehicle. Though Blasko could not determine which specific statements were attributable to which man, Bair’s microphone did permit Blasko to hear two distinct male voices agree to exchange various sex acts for payment throughout the conversation. Additionally, Blasko was able to observe Bair speaking with the two men. At the conclusion of the negotiations, Blasko approached the group and placed both Mills and Brooks under arrest for patronizing a prostitute. See 18 Pa. Cons.Stat. § 5902(e).
The charges against both Mills and Brooks were subsequently dismissed by the district attorney following a preliminary hearing. Mills then filed suit pursuant to 42 U.S.C. § 1983, claiming that Bair, Blasko, and the City of Harrisburg violated his constitutional rights by unlawfully arresting and falsely imprisoning him. Mills further alleged the existence of a civil conspiracy to deprive him of his civil rights in violation of 42 U.S.C. § 1985(3) and also brought several related state law claims. Following discovery, the defendants moved for summary judgment, which the District Court granted. Mills now appeals and we have jurisdiction pursuant to 28 U.S.C. § 1291.
II.
We exercise de novo review over the District Court’s grant of summary judgment and view the facts in the light most favorable to the nonmoving party. Kopec v. Tate, 361 F.3d 772, 775 (3d Cir.2004).
A.
The District Court’s grant of summary judgment was based largely on a determination that no Fourth Amendment violation occurred because Mills’s arrest was supported by probable cause. The principal argument now raised by Mills on appeal is that the officers lacked probable cause to arrest him because Blasko had no way to determine which man made which statements to Bair prior to Mills’s arrest.
This argument might be persuasive if only one of the two men had propositioned Bair. Unfortunately for Mills, Officer Blasko heard two distinct male voices actively negotiating the exchange of money for a sexual act that involved participation by both men. Blasko also was able to confirm visually that Bah* was, in fact, speaking with two men. Accordingly, it is immaterial that Blasko could not identify which man made which specific statements at the time of arrest because he had probable cause to believe that both were actively involved in soliciting sex from Bair. For that reason, the District Court correctly granted summary judgment on Mills’s Fourth Amendment claim because the arrest of both Mills and Brooks was supported by probable cause.
B.
Mills next contends that the District Court erred in dismissing his claims under 42 U.S.C. § 1983 alleging violations of his First, Fifth, and Fourteenth Amendment rights. As to his First Amendment claim, the record does not indicate that he was pursuing any activity protected thereunder at the time of his arrest. See Roberts v. United States Jaycees, 468 U.S. 609, 619-20, 622, 104 S.Ct. 3244, 82 L.Ed.2d 462 (1984) (outlining activities typically protected by the First Amendment). As for his Fourteenth Amendment claim, it is true that the absence of a Fourth Amendment violation is not necessarily fatal to Mills’s equal protection claim if he can show that he was targeted by the defendants on the basis of his race. Bradley v. United States, 299 F.3d 197, 205 (3d Cir.2002). Mills, however, cites no evidence that could support a finding that the defendants’ actions in this case either had a discriminatory effect or were motivated by a discriminatory purpose. See id. (requiring plaintiff making “an equal protection claim in the profiling context” to demonstrate that the actions of law enforcement “(1) had a discriminatory effect and (2) were motivated by a discriminatory purpose.”). His vague, unsupported assertion that the Harrisburg Police Department “targeted a black community as a matter of policy” cannot, without more, establish a violation of the Fourteenth Amendment’s guarantee of equal protection. Olympic Junior, Inc. v. David Crystal, Inc., 463 F.2d 1141, 1146 (3d Cir.1972) (noting that “Conclusory statements ... and factual allegations not based on personal knowledge” are “insufficient to avoid summary judgment.”). Accordingly, we find no error in the District Court’s grant of summary judgment on Mills’s equal protection claim.
C.
Mills next contends that the District Court erred in granting summary judgment on his claims against Blasko and Bair under 42 U.S.C. § 1985(3), which imposes civil liability on individuals who conspire to deprive “any person ... of the equal protection of the laws, or of equal privileges and immunities under the laws.” 42 U.S.C. § 1985(3). To establish liability under § 1985(3), Mills was required to demonstrate that “some racial, or perhaps otherwise class-based, invidiously discriminatory animus [motivated] the conspirators’ action.” Griffin v. Breckenridge, 403 U.S. 88, 102, 91 S.Ct. 1790, 29 L.Ed.2d 338 (1971). As the District Court correctly observed, however, the record in this case is devoid of any indication that Blasko or Bair acted with discriminatory intent or otherwise targeted Mills and Brooks because of their race. Mills’s conclusory allegation that Blasko and Bair conspired to “falsely arrest and convict black men without regard to the existence of probable cause” cannot withstand a motion for summary judgment. See D.R. v. Middle Bucks Area Vocational Tech. Sch., 972 F.2d 1364, 1377 (3d Cir.1992) (citing Robinson v. McCorkle, 462 F.2d 111, 113 (3d Cir.1972)). Further, to recover under § 1985(3), Mills was also required to demonstrate that he was “injured in his person or property or deprived of any right or privilege of a citizen of the United States” as a result of the officers’ alleged conspiracy. Farber v. City of Paterson, 440 F.3d 131, 134 (3d Cir.2006). As discussed previously, Mills suffered no injury to his constitutional rights. See Part II.A-B, supra. Accordingly, the District Court did not err in granting summary judgment on Mills’s claims under § 1985(3).
D.
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6113362-9427 | MEMORANDUM OPINION
LETITIA Z. CLARK, Bankruptcy Judge.
Came on for hearing on May 23, 1989 the Application for Order Authorizing Retention of Crain, Catón & James for Debtor-in-Possession. After considering the pleadings, evidence, memoranda, and arguments of counsel, the court makes the following findings of fact and conclusions of law and enters a separate Judgment in conjunction herewith. To the extent any findings of fact herein are construed to be conclusions of law, they are hereby adopted as such. To the extent any conclusions of law herein are construed to be findings of fact, they are hereby adopted as such.
Findings of Fact
Kuykendahl Place Associates, Ltd., a limited partnership, (“KPA”) filed its voluntary Chapter 11 petition on April 4, 1989, and subsequently filed its Application for Order Authorizing Retention of Crain, Ca-tón & James for Debtor-in-Possession on April 6, 1989 in compliance with Bankruptcy Rule 2014(a). The Application was signed by David R. Murphy, the general partner of KPA. On April 7, 1989 the petitioning attorney, Murphy Harmon, of Crain, Catón & James filed a Statement of Crain, Catón & James and Disclosure Statement Pursuant to 11 U.S.C. § 329, and in compliance with the disclosure requirements of 11 U.S.C. § 329(a) and the verified statement requisite of Bankruptcy Rule 2014(a). (See Docket #4.)
In the Application for Retention and the Statement of Crain, Catón & James, Mr. Harmon properly disclosed that the firm of Crain, Catón & James has from time to time represented the Debtor, and/or principals of the Debtor on past unrelated matters. Further, Mr. Harmon disclosed that the firm had from time to time represented Marc S. Geller, the general partner of the limited partner of the Debtor, in his individual capacity. Statement of Crain, Catón & James and Disclosure Statement Pursuant to 11 U.S.C. § 329 (See Docket # 4); Application for Order Authorizing Retention of Crain, Catón & James for Debtor-in-Possession. (See Docket # 3.) Thereafter, objections to the Application were filed by Old Stone Bank (“the Bank”) and a hearing was held on May 23, 1989. The court took the matter under advisement.
The basis of the Bank’s objection to the application to employ is that the firm of Crain, Catón & James had represented Marc S. Geller, an individual who is the general partner of Kuykendahl Place Associates, Ltd., a partnership, which partnership is the sole limited partner of the Debt- or. Marc S. Geller also is one of two individual guarantors of an indebtedness owed to the Debtor. The Bank claims that this results in a conflict of interest which would preclude Crain, Catón & James from representing the Debtor in its Chapter 11 proceeding.
This court finds that the firm of Crain, Catón & James properly disclosed the previous representations in their Statement of Disinterest as required by § 329(a) and B.R. 2014(a). However, while the question on the facts herein is a close one, the court is of the opinion that the cumulative effect of the evidence submitted at the hearing results in an actual conflict of interest.
Mr. Harmon testified that he represents the interest of the Debtor and thereby the interests of the partners of the Debtor. Mr. Geller testified that Mr. Harmon has represented his partnership interests and himself individually in the past. Mr. Geller testified that, if the property of the Debtors were foreclosed on, the money invested by both partners would be lost. (Testimony of Murphy Harmon; Testimony of Marc S. Geller; Hearing held May 23, 1989.)
Conclusions of Law
11 U.S.C. § 327, § 328, and § 329 along with Bankruptcy Rules 2014 and 2016, set forth the Bankruptcy Code and Rules requirements for the employment of professionals. A debtor-in-possession, through the rights granted under 11 U.S.C. § 1107, may employ, with court approval, an attorney pursuant to § 327(a) and B.R. 2014 by filing an application with the court setting forth specific facts as to the proposed employment relationship. The attorney to be employed must not hold or represent an interest adverse to the estate and must be a disinterested person. 11 U.S.C. § 327(a). Bankruptcy Rule 2014 requires a verified statement to accompany the application setting forth the attorney’s connections with the debtors, creditors, or any other party in interest, and their respective attorneys and accountants.
It is the duty of the attorney to reveal all connections. In re Whitman, 51 B.R. 502, 507 (Bankr.D.Mass.1985), citing In re Coastal Equities, Inc., 39 B.R. 304, 308 (Bankr.S.D.Cal.1984). Full disclosure requires disclosure of any connection which may have a bearing on the attorney’s or law firm’s ability to represent the trustee or debtor free of any conflict or adverse interest. In re Roger J. Au & Son, Inc., 71 B.R. 238, 242 (Bankr.N.D.Ohio 1986) citing In re Thompson, 54 B.R. 311 (Bankr.N. D.Ohio 1985) aff’d 77 B.R. 113 (N.D.Ohio 1987) citing In re Futuronics Corp., 655 F.2d 463, 469 (2nd Cir.1981) cert. denied 455 U.S. 941, 102 S.Ct. 1435, 71 L.Ed.2d 653 (1982). Crain, Catón & James properly disclosed all relevant connections with the Debtor and its principals and has complied with the demands of B.R. 2014.
11 U.S.C. § 327(a) establishes the following two-pronged test which the professional must meet to be employed by the trustee or debtor-in-possession:
(1) The professional may not hold or represent an interest adverse to the estate; and
(2) The professional must be a disinterested person.
In re O’Connor, 52 B.R. 892, 875 (Bankr. W.D.Okla.1985).
To hold an adverse interest is to: (1) possess or assert any economic interest that would tend to lessen the value of the bankruptcy estate or that would create either an actual or potential dispute in which the estate is a rival claimant; or (2) possess a predisposition under circumstances that render such a bias against the estate. In re Glenn Electronic Sales Corp., 89 B.R. 410, 413 (Bankr.N.J.1988) aff'd 99 B.R. 596 (D.N.J.1988); In re Star Broadcasting, Inc., 81 B.R. 835, 838 (Bankr.N.J.1988); In re Roberts, 46 B.R. 815, 827 (Bankr.Utah 1985) aff’d in relevant part, 75 B.R. 402 (Dist. Utah 1987). To represent an adverse interest means to serve as an agent or attorney for any individual or entity holding such adverse interest. The firm of Crain, Catón & James has represented Marc S. Geller individually. Mr. Geller is the general partner of Debtor’s sole limited partner which is itself a limited partnership. Marc S. Geller has individually guaranteed an indebtedness of the Debtor-in-Possession. The guarantee, by its nature, establishes that Mr. Geller holds an interest which may be adverse to that of the Debtor-in-Possession.
11 U.S.C. § 101(13)(E) defines “disinterested person” as one who does not have a materially adverse interest to the estate by reason of any direct or indirect relationship to or connection with the debtor. The definition of a disinterested person promotes the policy that professionals should be free of the slightest personal interest which might be reflected in their decisions concerning matters of the debtor’s estate. In re Philadelphia Athletic Club, Inc., 20 B.R. 328, 334 (E.D.Penn.1982) citing 1 Collier Bankruptcy Manual § 101.13 (1981). A limited partner, by definition, is an owner of an interest in the partnership. 11 U.S.C. § 101(43)(A)(xiii) defines that interest as a security in the limited partnership, which in this case is the Debtor.
Multiple representation of related entities causes serious concern for the loyalties of debtor’s counsel. A law firm must exercise impartial and undivided loyalty to its client. In re Kendavis Industries International, Inc., 91 B.R. 742 (Bankr.N.D. Tex.1988). An attorney is required, under Canon Five of the ABA Model and Texas Codes of Professional Responsibility, to exercise independant professional judgment free of compromising influences and loyalties on behalf of a client. A firm's acting in the best interest of the principals of a debtor during the time they were appointed by the court as attorneys for the debtor, raises serious issues of conflict of interest and benefit to the estate. In re Kendavis Industries International, Inc., 91 B.R. 742, 751, citing In re Coral Petroleum, Inc., No. 83-02460-H2-5, slip op. (Bankr.S. D.Tex. January 30, 1988), decision stated as moot on appeal as parties accepted prior decision. In re Coral Petroleum, Inc., 88-1527, slip op. (S.D.Tex. July 7, 1988).
Where a firm represented a debtor and concurrently followed the recommendations of the debtor’s principal in proceeding with its representation, the court found serious conflicts of interest. See In re Kendavis Industries International, Inc., 91 B.R. 742, 751 (Bankr.N.D.Tex.1988). Mr. Harmon of Crain, Catón & James has stated that even if there were dual representation, the interests of the limited part ner and that partner s general partner are the same as, or are mutually beneficial to, the interests of KPA. However, the dual interests do not necessarily coincide. Where a corporation is the debtor, the attorney’s duties and loyalties are to the corporation, not to individual employees, officers or directors of the corporation. In re Hoffman, 53 B.R. 564 (Bankr.W.D.Ark. 1985). This is analogous to the case at hand. The duty and loyalty of the attorney is to the debtor and not to the partners or individuals that control the partners of the Debtor.
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11363301-15523 | PREGERSON, Circuit Judge:
Alfredo Equihua-Juarez appeals his conviction, following a jury trial, for making a false material statement to a United States Border Patrol agent in violation of 18 U.S. C. § 1001. Equihua-Juarez made the false statement when he gave a false name, i.e., “Martin Ramirez-Estrada,” in response to a question asked by Border Patrol Agent Spruance during a postarrest interview. Equihua-Juarez contends that his false statement falls within the “exculpatory no” exception to section 1001. Specifically, Equihua-Juarez argues that stating his true name would have potentially incriminated him because Border Patrol Agency files on “Alfredo Equihua-Juarez” would have revealed prior convictions for illegal entry.
Because proof of such a prior conviction is an element of felony illegal entry, had Equihua-Juarez given his true name, he would have furnished a link in the chain of evidence leading to his prosecution and conviction for felony illegal entry. We reverse the § 1001 conviction.
FACTS AND PROCEEDINGS
On January 28, 1987, Equihua-Juarez was arrested by United States Border Patrol Agents Spruance and Steiner for having entered the United States illegally. Equihua-Juarez was taken to a Border Patrol station for processing. Before Equi-hua-Juarez was questioned, he was advised of his Miranda rights. After Equihua-Juarez stated that he understood his rights, Agent Spruance asked him for certain biographical information including his name, his place and date of birth and his parents’ names. Equihua-Juarez falsely stated that his name was “Martin Ramirez-Estrada.” Agent Spruance entered this biographical information on a “Record of Deportable Alien,” a form that the Immigration and Naturalization Service (INS) requires Border Patrol agents to prepare for every suspected illegal alien held in detention. A further records’ check based on fingerprint analysis revealed that Equihua-Juarez had previously been convicted of illegal entry under the name of “Alfredo Soto-Torres.” Immigration files listed the name of “Alfredo Equihua-Juarez” as one of the aliases for this same individual.
On February 13, 1987, Equihua-Juarez was indicted. The indictment charged violations of 8 U.S.C. § 1325 (felony illegal entry) and 18 U.S.C. § 1001 (false material statement). On May 11, 1987, Equihua-Juarez filed a motion to dismiss the § 1001 charge. He asserted that his statement of a false name to Agent Spruance fell within the “exculpatory no” exception to section 1001. The district court denied the motion.
A jury trial began on May 12, 1987. At the close of the government’s case and again after the defense rested, Equihua-Juarez made motions for acquittal on the § 1001 charge based on the “exculpatory no” exception. The court denied both motions. On May 13, 1987, the jury returned guilty verdicts. Judgment of conviction was entered and Equihua-Juarez was sentenced to two years’ imprisonment for violating § 1325 and one year's imprisonment for violating § 1001, the sentences to be served consecutively.
DISCUSSION
[1] The application of the “exculpatory no” exception to liability under 18 U.S.C. § 1001 is a legal question reviewed de novo. See United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied, 469 U.S. 824, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).
Section 1001 prohibits knowingly and willfully making a false statement that is material to any matter within the jurisdiction of a federal government department or agency. 18 U.S.C. § 1001. Section 1001, however, was not intended to apply to all false statements made to government agencies. See United States v. Medina de Perez, 799 F.2d 540, 543-44 (9th Cir.1986); United States v. Bedore, 455 F.2d 1109, 1111 (9th Cir.1972). The “exculpatory no” doctrine provides an exception to § 1001. If certain requirements are met, a person may not be prosecuted under § 1001 for making a false exculpatory response to government investigators. See United States v. Olsowy, 836 F.2d 439, 441 (9th Cir.1987), cert. denied, — U.S. —, 108 S.Ct. 1299, 99 L.Ed.2d 509 (1988), Medina de Perez, 799 F.2d at 544-46. See also United States v. Gonzalez-Mares, 752 F.2d 1485, 1492 (9th Cir.), cert. denied, 473 U.S. 913, 105 S.Ct. 3540, 87 L.Ed.2d 663 (1985); United States v. Rose, 570 F.2d 1358, 1364 (9th Cir.1978); Bedore, 455 F.2d at 1111. In Medina de Perez, combining elements drawn from Bedore and Rose, we discussed five factors that should be satisfied to apply the “exculpatory no” doctrine:
(1) the false statement must be unrelated to a claim to a privilege or a claim against the government;
(2) the declarant must be responding to inquiries initiated by a federal agency or department;
(3) the false statement must not impair the basic functions entrusted by law to the agency;
(4) the government’s inquiries must not constitute a routine exercise of administrative responsibility; and
(5) a truthful answer would have incriminated the declarant.
Medina de Perez, 799 F.2d at 544 and n. 5.
Equihua-Juarez falsely stated his name in response to a question asked by Border Patrol Agent Spruance. This false statement clearly meets the first two requirements of the “exculpatory no” exception. First, Equihua-Juarez did not give a- false name to gain the privilege of entry into the United States. He was already present in the United States when questioned by Agent Spruance and admitted that he had entered the country illegally. Second, Equihua-Juarez gave his false statement in response to an inquiry initiated by Agent Spruance. The dispute in this appeal focuses on the final three factors of the “exculpatory no” doctrine.
A. False Statement Does Not Impair Agency’s Basic Function
Initially, Equihua-Juarez contends that by giving a false name to Agent Spruance, he did not impair the basic functions entrusted by law to the Border Patrol Agency because trained Border Patrol agents anticipate that apprehended aliens will give false names and thus rely on other means to check on an arrestee’s identity.
In Medina de Perez, we concluded that “[i]n a post-arrest criminal investigative setting, a competent government investigator will anticipate that the defendant will make exculpatory statements.” We further noted that “[a] defendant who meets this expectation cannot possibly pervert the investigator’s police function” because “a thorough agent would continue vigorous investigation of all leads until satisfied that he has obtained the truth.” 799 F.2d at 546.
Here, Agent Spruance admitted at Equi-hua-Juarez’s trial that he does not automatically believe the names given by apprehended aliens because they frequently give false names, and the Border Patrol relies on numerous other means to identify apprehended aliens including files indexed by family name and files of photographs and fingerprints. Equihua-Juarez could not have impaired the function of the Border Patrol because determining the correct identity of aliens is one of the agency’s primary responsibilities, and Border Patrol agents are aware that apprehended aliens often give aliases. Equihua-Juarez’s false statement of identity did not pervert the agency’s function. See Medina de Perez, 799 F.2d at 546.
B. Inquiries Not Routine Exercise of Administrative Responsibility
Equihua-Juarez next contends that when Border Patrol Agent Spruance asked his name and other biographical questions during a post-arrest interview, the agent was not discharging a routine administrative responsibility but was acting as a police investigator conducting an interrogation. The. government contends that Agent Spruance’s solicitation of Equihua-Juarez’s name was for INS administrative record-keeping purposes, and that the district court correctly found that Agent Spruance’s biographical questions did not constitute interrogation.
In Medina de Perez, this court held that the “exculpatory no” exception applies when the inquiring government agent acts as a police investigator and not when the agent’s questions constitute a routine exercise of administrative responsibility. Medina de Perez, 799 F.2d at 544-45. The court noted that:
Although the line between “administration” and “investigation” cannot be sharply drawn, the argument has been made that this statute was intended to apply only to federal government “administration” and not intended to compel citizens to answer truthfully every question put to them in the course of a federal police or federal criminal investigation.
Medina de Perez, 799 F.2d at 545 (quoting United States v. Bush, 503 F.2d 813, 815 (5th Cir.1974)). In Medina de Perez, the defendant made false statements regarding her possession of a camper truck that had been searched at the border and found to contain marijuana. The defendant made the statements, charged as violations of § 1001, to a United States Customs agent and a Drug Enforcement Administration (DEA) agent when they questioned her after she had been arrested and advised of her Miranda rights. The court held that “during the post-arrest interrogation, [the DEA agent] was acting as a police investigator and not as a program administrator, and therefore his inquiries could not constitute a ‘routine exercise of administrative responsibility.’ ” Medina de Perez, 799 F.2d at 545-46.
In Rhode Island v. Innis, 446 U.S. 291, 100 S.Ct. 1682, 64 L.Ed.2d 297 (1980), the Court defined interrogation as “any words or actions on the part of the police that the police should know are reasonably likely to elicit an incriminating response from the subject.” 446 U.S. at 301, 100 S.Ct., at 1689. The Court further noted that in determining whether questioning is interrogation, courts should “focus primarily upon the perceptions of the suspect, rather than the intent of the police.” Innis, 446 U.S. at 301, 100 S.Ct., at 1690. See also United States v. Booth, 669 F.2d 1231, 1237-38 (9th Cir.1981). We have held that seemingly neutral questions constitute interrogation when they are reasonably likely to elicit incriminating information relevant to establishing elements necessary for conviction of the charged offense. See United States v. Mata-Abundiz, 717 F.2d 1277, 1280 (9th Cir.1983); United States v. Disla, 805 F.2d 1340, 1347 (9th Cir.1986).
Here, after Equihua-Juarez was arrested for illegal entry, taken into custody and advised of his Miranda rights, Agent Spruance asked him questions to elicit certain biographical information including his name, his place and date of birth and his parents’ names to complete a “Record of Deportable Alien.” This record is prepared for every suspected alien held in detention. The INS uses this form to identify the alien and determine if the alien has a prior record. The form is also used to determine whether the alien should be returned to the country of origin, deported, or criminally prosecuted, and if prosecuted, whether for a misdemeanor or a felony. Thus, Agent Spruance’s questions were directed at eliciting information which could be used in a criminal investigation and potential prosecution of Equihua-Juarez on charges of felony illegal entry. Specifically, Agent Spruance was attempting to ascertain Equihua-Juarez’s identity to determine if he had a prior record of illegal entry. Proof of such a prior illegal entry conviction is an element of felony illegal entry, the crime for which Equihua-Juarez was prosecuted and convicted. See 8 U.S.C. § 1325; U.S. v. Arambula-Alvarado, 677 F.2d 51, 52 (9th Cir.1982). Thus, under the circumstances, the questioning regarding Equihua-Juarez’s identity was reasonably likely to elicit incriminating information relevant to establishing an element necessary for conviction of felony illegal entry. Such questioning thus constituted interrogation. See Innis, 446 U.S. at 301, 100 S.Ct. at 1689; Mata-Abundiz, 717 F.2d at 1280.
C. Potentially Incriminating Response
Equihua-Juarez finally contends that had he stated his true name to Agent Spruance, he would have potentially incriminated himself because his true name would have facilitated the discovery of his prior convictions for illegal entry.
The “exculpatory no” exception applies when giving a truthful answer would have incriminated the declarant. Medina de Perez, 799 F.2d at 544. An incriminating response is any disclosure that the declar-ant reasonably believes could be used by the government in a criminal prosecution or could lead to other evidence that might be so used. Kastigar v. United States, 406 U.S. 441, 444-45, 92 S.Ct. 1653, 1656-57, 32 L.Ed.2d 212, reh’g. denied, 408 U.S. 931, 92 S.Ct. 2478, 33 L.Ed.2d 345 (1972). Moreover, the privilege against self-incrimination does not merely encompass evidence that may lead to criminal conviction, but includes information which would furnish “a link in the chain of evidence” that could lead to prosecution. Hoffman v. United States, 341 U.S. 479, 486, 71 S.Ct. 814, 818, 95 L.Ed. 1118 (1951).
Here, Equihua-Juarez asserts that if he had given his true name to Agent Spruance, the Border Patrol, through a search of their files on “Alfredo Equihua-Juarez,” would have discovered his prior illegal entry convictions. Proof of a prior conviction for illegal entry is one element necessary for a felony illegal entry conviction. 8 U.S.C. § 1325; see United States v. Arambula-Alvarado, 677 F.2d at 52. Equihua-Juarez could have reasonably believed that giving his true name to Agent Spruance would have led to the discovery of his prior convictions, proof that could be used against him in a prosecution for felony illegal entry. See Kastigar 406 U.S. at 444-45, 92 S.Ct., at 1656. Thus, by giving a truthful answer, Equihua-Juarez would have furnished a link in the chain of evidence that could have led to his prosecution and conviction for felony illegal entry. See Hoffman, 341 U.S. at 486, 71 S.Ct., at 818.
In short, Equihua-Juarez meets all five requirements of the “exculpatory no” exception to § 1001. See Medina de Perez, 799 F.2d at 544-45.
The § 1001 conviction is REVERSED.
. Equihua-Juarez was also convicted of felony illegal entry in violation of 8 U.S.C. § 1325. He does not appeal that conviction.
. The information on this form is used to identify the apprehended alien and determine whether the alien should be returned to the country of origin, deported, or prosecuted for a felony or for a misdemeanor.
. During later questioning by Agent Spruance, Equihua-Juarez admitted that he had entered the country illegally on January 28, 1987.
. The indictment was returned in the name of "Alfredo Soto-Torres." During trial, the parties stipulated that the defendant’s true name is "Alfredo Equihua-Juarez."
. Both parties cite a statement from United States v. Olsowy wherein we interpreted Medina de Perez as additionally requiring that the suspect be in custody when he or she made the charged false statement: “The [exculpatory no] exception allows a suspect who is in custody to deny involvement in the crime for which he was arrested without incurring additional penalties." United States v. Olsowy, 819 F.2d 930, 932 (9th Cir.1987) (emphasis added). On January 4, 1988, Olsowy was amended; we deleted language that required the suspect to be in custody for the exception to apply. The pertinent sentence now reads: "The exception allows a suspect to deny involvement in a crime without incurring additional penalties.” Olsowy, 836 F.2d at 441. Nevertheless, here, it is undisputed that Equihua-Juarez was in custody when he made the false statement charged as a violation of § 1001.
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12266211-12858 | TARANTO, Circuit Judge.
Fast Felt Corporation owns U.S. Patent No. 8,137,757, which describes and claims methods for printing nail tabs or reinforcement strips on roofing or building cover material. Fast Felt sued Owens Corning for infringement, and Owens Corning then filed a petition with the Patent and Trademark Office (PTO) seeking 'an inter partes review of claims 1, 2, 4, 6, and 7 under 35 U.S.C. §§ 311-19. The Patent Trial and Appeal Board, acting as the delegate of the PTO’s Director under 37 C.F.R. § 42.4(a), instituted a review of all of the challenged claims on grounds of obviousness. Institution of Inter Partes Review at 26, Owens Corning v. Fast Felt Corp., No. IPR2015-00650 (P.T.A.B. Aug. 13, 2015), Paper No. 9 (Institution Decision). After conducting the review, the Board concluded that Owens Corning had failed to show obviousness of any of the challenged claims. Final Written Decision, Owens Corning v. Fast Felt Corp., No. IPR2015-00650, 2016 WL 8999740, at *23 (P.T.A.B. Aug. 11, 2016) (Final Decision).
Owens Corning appeals from the Board’s decision. It contends that, once the key claim term is given its broadest reasonable interpretation, the record conclusively establishes obviousness. We agree, and we reverse the Board’s decision.
I
A
The ’757 patent addresses applying polymer “nail tabs” on “roofing and building cover material.” ’757 patent, abstract; id., col. 1, lines 29-34 (“The.invention relates generally to roofing materials or other building materials normally employed as cover materials over a wood roof deck or stud wall and more specifically to such cover materials and methods for incorporating therein a plurality of integrally formed nail tabs or a continuous reinforcing strip.”). The specification explains that nail tabs have been used to reinforce specific locations on roofing or building cover material at which nails will be driven through the material to attach it to a wood roof, deck or a building stud. wall. See id., col. 1, lines 29-34, Such reinforcement helps prevent the nails from tearing through the cover material. See id., col. 2, lines 20-26. Commonly, the specification observes, separate washers or tabs are applied with every nail to provide reinforcement, but that practice is expensive, inefficient, and dangerous. Id., col. 2, lines 44-63.
The ’757 patent proposes an asserted improvement: use of an “automated” process to “permanently and reliably” affix or bond “tab material that quickly solidifies and adheres or bonds to the surface.” Id., col. 5, line 63-col. 6, line 2. The surface to which the tab material, is affixed or bonded can be “either dry felt, saturated felt, a fiberglass, .polyester or other inorganic substrate roofing material whether or not coated with asphalt or an asphalt mix, or roll roofing material or shingles.” Id., col. 5, lines 64-67. The automated process can be “gravure, rotogravure or gravure-like transfer printing (the ‘gravure process’) or offset printing.” Id., col. 3, lines 24-26.
Claim 1 is one of two independent claims. It reads: ;
A method of making a roofing or building cover material, which comprises treating an extended length of substrate, comprising the steps of:
depositing tab material onto 'the surface of said roofing or building cover material at a plurality of nail tabs from a lamination roll, said tab material bonding to the surface of said roofing or building cover material by. pressure between said roll and' said surface.
Id., col. 13, lines 13-20. All of the challenged claims contain the claim term “roofing or building cover material.” Id., col. 13, line 13-col. 14, line 17. Claim 7, the second independent claim, is similar to claim 1 but does not require a lamination roll. Id., col. 14, lines 11-17. On appeal, the parties treat independent claims 1 and 7 as substantively equivalent. Several dependent claims add narrowing limitations, but Fast Felt does not argue them separately here.
B
The Board instituted review on three grounds, all under 35 U.S.C. § 103 (2006). Institution Decision at 26. Owens Corning does not press one of those grounds on appeal, so we discuss only two of the grounds. U.S. Patent No, 6,451,409 (Lassi-ter) is the key piece of prior art. It specifically teaches a process of using' nozzles to deposit polymer nail tabs on roofing and building cover materials to solve some of the same industry problems as are identified in the ’757 patent. Lassiter, abstract, col. 1, lines 10-15, col. 2, lines 3-18/ .
The first ground of asserted unpatenta-bility, applicable to claims 1, 2, 4, 6, and 7, is obviousness over a combination of Lassi-ter and U.S. Patent No. 5,101,759 (Hefele). Institution Decision at 26. Hefele discloses an offset-gravure printing process using a pressure roller to form “grid-like coatings” on a variety of “web-like flexible planar” materials. Hefele, abstract. The other asserted ground of unpatentability that is presented to us, applicable to claims 1, 2, 4, 6, and 7, is obviousness over a combination of Lassiter and U.S. Patent No. 6,875,710 (Eaton). Institution Decision at 26. Eaton discloses a process of using a transfer roll to apply “discrete polymeric regions” to reinforce various substrates' and a process for laminating two substrates together. Eaton, col. 2, lines 16-29, col. 3, linés 6-22.
In its Final Written Decision, the Board found that, contrary to Fast Felt’s contentions, all of the elements of the independent claims are disclosed in Lassiter when combined with either Hefele or Eaton. See Final Decision, 2016 WL 8999740, at *12-13, *20-21. Fast Felt has not meaningfully argued to this court that those findings are unsupported by substantial evidence. The Board further found that Owens Corning had failed to show that a skilled artisan would have combined Lassiter with Hefele or Eaton. Id. at *13-15, *21-22. On that basis, the Board rejected Owens Coming’s challenges to claim 1. Id. Finding no material difference between claim 1 and either claim 7 or the dependent claims 2, 4, and 6, the Board also rejected the challenges to those claims for the same reasons. Id. at *16, *22.
Owens Corning appeals the Board’s decision. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A).
II
A
Owens Corning first argues that the Board, when evaluating obviousness in light of the prior art, at least implicitly adopted an erroneous claim construction. Specifically, it contends that the Board effectively treated the “roofing or building cover material” as limited to material that either has been or would be coated or saturated with asphalt or asphalt mix. And it contends that such a construction is legally incorrect under the broadest-reasonable-interpretation standard applicable in the IPR. We agree as to both parts of this contention.
In the claim-construction portion of its opinion, the Board construed the claim term “roofing or building cover material” to mean “base substrate materials such as dry felt, fiberglass mat, and/or polyester mat, before coating or saturation with asphalt or asphalt mix, and asphalt coated or saturated substrates such as tar paper and saturated felt.” Final Decision, 2016 WL 8999740, at *4. It later noted, correctly, that this construction “does not require an asphalt-coated substrate.” Id. at *14. But when evaluating Owens Coming’s arguments regarding motivation to combine and reasonable expectation of success, the Board made clear its understanding of its construction, and hence of the claims, as requiring materials that would eventually be coated with asphalt even if they had not already been coated before printing. Id. at *13-16, *21-22.
That is evident in the Board’s determination, based on a statement in Lassiter and certain expert testimony, that Lassiter would discourage a skilled artisan from using “high temperatures and roller pressure” to apply nail tabs to a base substrate. Id. at *14, *21. The cited statement in Lassiter refers only to problems during an asphalt coating process after nail tabs have been applied. Lassiter, col. 2, lines 32-40. And both of Fast Felt’s experts, Dr. Bohan and Mr. Todd, testified that they considered only “heavily saturated asphalt” materials in their analyses. Bohan Dep. J.A. 1436-37, Todd Dep. J.A. 1542-43.
The same understanding of the claims is evident in the Board’s rejection of Owens Coming’s argument that the gravure-based methods in Hefele and Eaton were interchangeable with Lassiter’s nozzle-based method. The Board reasoned that Owens Corning had not accounted for the differences in materials. Final Decision, 2016 WL 8999740, at *15, *22. In doing so, the Board relied on the testimony of Fast Felt’s expert, Mr. Todd, that Hefele and Eaton do not “address utilizing anything even remotely resembling a heavily asphalt saturated substrate,” and “[wjithout this link there does not seem to be any reason someone manufacturing a roofing product would ever look to a common printing or coating process.” Id. The Board simply did not address roofing or building cover materials that would never be coated in asphalt.
The exclusion of such materials from the scope of the claims is mistaken. In an inter partes review proceeding, the Board is to give a claim “its broadest reasonable construction in light of the specification of the patent in which it appears.” 37 C.F.R. § 42.100(b). “We review underlying factual determinations concerning extrinsic evidence for substantial evidence and the ultimate construction of the claim de novo.” In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1280 (Fed. Cir. 2016), aff'd sub nom. Cuozzo Speed Techs., LLC v. Lee, — U.S. -, 136 S.Ct. 2131, 195 L.Ed.2d 423 (2016). It is not reasonable to read the claims as limited to materials that either have been or are to be coated or saturated with asphalt or asphalt mix.
It is true that the preferred embodiments in the ’757 patent focus on roofing materials that are or will be coated or saturated with asphalt or asphalt mix. See, e.g., ’757 patent, col. 7, lines 27-54. But that is not enough to narrow the claim scope in the IPR. The claims are plainly not so limited. Indeed, they are not even limited to “roofing materials,” as they all expressly include “building cover material” as well as roofing material. Id., col. 13, line 13-col. 14, line 25. Moreover, even the specification, when not discussing preferred embodiments, is not limited to roofing materials: it speaks of “roofing materials or other building materials normally employed as cover materials over a wood roof deck or stud wall.” Id., col. 1, lines 29-31. And Fast Felt has not disputed, or pointed to any evidence disputing, that some building cover materials (like the common Tyvek wrap referred to in the Board oral argument) is commonly installed without ever being coated or saturated with asphalt or asphalt mix.
In these circumstances, the broadest reasonable construction of “roofing or building cover material” would include materials that neither have been nor are to be coated or saturated with asphalt or asphalt mix. We conclude that the Board erred in effectively construing the claims to exclude such materials.
B
In this case, it is not necessary or appropriate to remand for the Board to reassess the evidence in light of the correct claim construction. On the evidence and arguments presented to the Board, there is only one possible evidence-supported finding: the Board’s rejection of Owens Coming’s challenge, when the correct construction is employed, is not supported by substantial evidence. See, e.g., Belden Inc. v. Berk-Tek LLC, 805 F.3d 1064, 1077, 1082 (Fed. Cir. 2015) (reversing rejection of IPR challenge). Moreover, in this court, after Owens Coming sought outright reversal on this ground in its opening brief, Fast Felt in its responsive brief did not ask for a remand if this court adopted a claim interpretation not limited by any requirement of asphalt coating or saturation. In particular, Fast Felt did not respond that this was a late-arising interpretation and it had lacked an opportunity in the Board proceedings to introduce evidence relevant under this interpretation. Nor do we see a basis for such an argument. Owens Coming’s petition did not restrict the claim scope based on coating or saturation; the Institution Decision did not adopt such a limiting construction, Institution Decision at 5; and when Fast Felt relied on a limitation based on asphalt coating or saturation in its Patent Owner’s Response, Owens Corning clearly asserted in its Reply that “Asphalt Saturated Substrates Cannot Be Used To Distinguish The Prior Art Because No Such Limitation Is Recited In The Claims,” J.A. 339. In these circumstances, where only one answer is supported by substantial evidence and there is neither a request nor an apparent reason to grant a second record-making opportunity, reversal is warranted.
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4055036-27361 | OPINION
HELENE N. WHITE, Circuit Judge.
Johnny S. Parks appeals the denial of his application for disability insurance and supplemental security income benefits. After suffering a heart attack and undergoing coronary bypass surgery in early June 2005, when he was 53 years old, Parks was unable to continue working as a truck driver and heavy equipment operator and sought benefits. Parks’s claim was heard by an administrative law judge, who concluded that Parks became disabled when he turned 55 years old in February 2007, but that he was not disabled prior to this time. The district court upheld this decision. We AFFIRM.
I.
A.
Plaintiff Johnny S. Parks has spent most of his career working as a coal-truck driver and heavy equipment operator in the coal-mining industry. He was first examined by a physician for heart-related medical problems on August 19, 2003. On this occasion, he was treated by Dr. Stuart J. Bresee at the University of Tennessee Memorial Hospital. Parks underwent heart catheterization, coronary angiography, and left ventriculography. He was diagnosed with mild coronary-artery disease, but no limitations were placed on his level of physical exertion and he continued to work after undergoing this examination.
Parks claims that he became disabled as of March 31, 2005. On this date, Parks experienced chest pain, shortness of breath, and weakness while at work. He was evaluated by Dr. Bruce Woodall and stayed overnight at Jellieo Community Hospital. Parks was discharged with the following diagnosis: “(1) chest pain, myocardial infarction excluded, suspicious for angina; (2) mild coronary artery disease; (3) gastroesophogeal reflux disease; (4) hyperlipidemia; and (5) mild obesity.” The discharge report stated that Parks’s prognosis was good and did not suggest that he would be limited with respect to his work abilities. Parks returned to work following his brief hospital stay.
On June 3, 2005, Parks was admitted to Jellico Memorial Hospital complaining of chest pain and discomfort that arose while he was resting. Dr. Clint Doiron performed a cardiac catheterization and recommended that Parks undergo coronary-artery bypass surgery. Parks was then transferred to the Baptist Hospital of East Tennessee where he was seen by Dr. Lacy Harville. Dr. Harville performed coronary bypass surgery on June 7, 2005. On June 11, 2005, Parks was discharged from the hospital with the following instructions: “no smoking and avoid second-hand smoke. No heavy lifting over 10 pounds or driving at this time. Call the office for temperatures greater than 101.” Ten days after being discharged, Parks first applied for disability status with the Department of Disability Determination in Frankfort, Kentucky.
On June 27, 2005, Dr. Harville sent a letter to Dr. Doiron with an update on Parks’s status. Dr. Harville stated that Parks was “doing remarkably well” and that, as of the date of the communication, he was permitted to resume driving, but was “cautioned ... to avoid lifting anything heavier than 15 pounds for the first three months after his surgery.”
Approximately two months later, on August 26, 2005, Dr. John N. Boll, Parks’s primary-care physician, conducted a follow-up examination and observed that 'Parks’s
cardiologist has noted that he does not want [Parks] to return to his job at the present time; he works as a heavy machine operator. There is really no light duty at his occupation. The possibility of returning there in the future may be, however he’ll most likely be off several months, at least until he sees the cardiologist.
Following an October 18, 2005 examination, Dr. Boll noted that Parks’s chest pain was almost gone, that he was feeling well, and that he “was wondering about going back to work.” Dr. Boll further stated that he encouraged Parks to call him “if he were to find a job that he would be able to perform. At which point we could discuss with cardiology about releasing him to go back.”
Parks attempted to return to his job as a heavy equipment operator at some point between October and November 2005. In a letter dated November 2, 2005 from Dr. Doiron to Parks, Dr. Doiron reported that Parks had “attempted to go back to work and found that [he] was unable to do this.” Dr. Doiron also opined that Parks had “not really recovered yet from the surgery” and that he exhibited chest pains and pain in the muscles and joints. Dr. Doiron ultimately recommended that Parks continue his cardiac rehabilitation, stating:
You have attempted to go back to work and found that you are unable to do this. This has been documented. I would say that we do not have all of the answers yet. We just need to back off on your Crestor which could be causing some of these symptoms.... Obviously you will not be able to work for an indeterminate amount of time until we ascertain the exact etiology of your problems.
On December 16, 2005, Dr. Boll conducted a follow-up examination and reported that Parks returned to work “for a day and a half but ended up having significant [chest pain], got hospitalized and ended up being put off work until February by his cardiologist. He has been frustrated by this.”
A myocardial perfusion scan done on February 9, 2006 was abnormal, revealing anterior wall ischemia and an ejection fraction of 55%. Based on an examination conducted the same day, Dr. Doiron observed that Parks had “chest discomfort and shortness of breath when he trie[d] to exert himself.” As a result, on March 16, 2006, Dr. Doiron performed a percutaneous transluminal coronary-angioplasty with stenting of the left main coronary artery. Dr. Doiron reported that Parks “had an excellent result” from the stenting. On May 4, 2006, Parks returned to Dr. Doiron’s office for a follow-up examination and saw Physician’s Assistant Eric Dickenson. Parks reported that in general he was feeling fairly well despite the fact that he still had some chest wall soreness and musculoskeletal-type discomfort. Erickson saw no changes from Parks’s July 2005 electrocardiogram. He noted that Parks was walking thirty-five minutes a day.
On October 24, 2006, Parks saw Dr. Boll and complained of mild shortness of breath during exercise. Dr. Boll said that this could be bronchospasm and recommended some medication. He asked that Parks come in for a follow-up visit in three months. Parks also told Dr. Boll that he had difficulty with his hands and neck. Dr. Boll recommended pain medication and noted that Parks would wait to decide whether he wanted to be referred to a specialist to address this issue.
On June 6, 2007, Dr. Boll wrote in a letter that Parks had “ongoing issues in relationship to his coronary artery disease,” which had “made it very difficult [for Parks] to perform tasks around his house ... [and] in a work environment.” Although he stated that he did not conduct disability exams in the office, Dr. Boll recommended that Parks be restricted to walking for only one hour, standing for fifteen to twenty minutes, and sitting for thirty minutes at a time.
Several doctors evaluated Parks in connection with his request for disability benefits. On October 4, 2005, Dr. Jorge Baez-Garcia reviewed Parks’s earlier treatment records on behalf of the Social Security Administration (SSA) and found Parks’s allegation of a heart attack to be credible. Dr. Baez-Garcia determined, based on the fact that Parks was doing very well after his surgery, that Parks could occasionally lift and/or carry fifty pounds, frequently lift and/or carry twenty-five pounds, stand and/or walk for about six hours in an eight-hour workday with normal breaks, sit for about six hours in an eight-hour workday with normal breaks, and push and/or pull without any restrictions. These determinations were consistent with an ability to perform medium work. See 20 C.F.R. § 404.1567(c).
On July 13, 2006, Dr. Timothy Gregg assessed Parks’s physical residual functional capacity for the SSA. Dr. Gregg solely reviewed Dr. Baez-Gareia’s opinions and affirmed the results of the evaluation conducted on October 4, 2005 by Dr. Baez-Garcia. Dr. Gregg’s single independent finding was that Parks should avoid concentrated exposure to extreme heat and cold.
On July 27, 2006, Dr. Gary Wortz conducted a consultative examination of Parks on behalf of the SSA. At the in-person exam, Parks stated that “his chest pain [was] getting more frequent and more severe and being brought on with less exertion ... [and] ... that his chest pain limit[ed] his activities that require endurance.” He also reported that he could walk for one block, stand for one half-hour, sit for one hour, lift one gallon of milk, and do most of his activities of daily living. Dr. Wortz concluded that there existed “[n]o physical evidence for significant restriction in the patient’s tolerance for stooping, bending, sitting, standing, moving about, or ability to travel [although there was] ... .some evidence for restriction of the patient’s tolerance for reaching, lifting, carrying and handling objects.” He found “mild-to-moderate impairment secondary to [Parks’s] angina.” Dr. Wortz also noted that Parks had carpal tunnel syndrome and therefore he would be “limited in his activities requiring repetitive motion of the bilateral hands and would have a mild impairment secondary to his condition.” Dr. Wortz found that Parks’s “gross manipulation [was] within normal limits.” He also stated that Parks did not “have any restriction in his daily activities, interest, ability to relate!,] memory and concentration.”
In addition to undergoing physical examinations, Parks was also evaluated for possible mental impairments. On November 5, 2005, Parks met with Dr. Robert Spangler, a licensed psychologist who was assigned by the SSA to conduct the initial in-person consultative examination in connection with Parks’s application for disability status. Dr. Spangler assessed Parks’s mental functioning and medical history and noted that Parks was alert, was “oriented by four,” had “adequate recall of remote events, but inadequate recall of recent events,” was “pleasant and forthcoming,” and was “mildly anxious.” Dr. Spangler diagnosed Parks with “[adjustment disorder with anxious mood, mild secondary to medical condition.” He further noted that Parks had “[l]ow average intelligence” and “[l]imited' education.” Finally, Dr. Spangler opined that Parks’s
ability to understand and remember is limited due to long-term memory and impairment recent events, moderate, and limited education academic skills. His ability to sustain concentration and persistence is not significantly limited. His social interaction is limited due to an adjustment disorder with anxious mood, mild. His ability to adapt is not significantly limited.
On November, 18, 2005, Dr. Edward Stodola reviewed the medical evaluations submitted in connection with Parks’ application for disability status, specifically Dr. Spangler’s evaluation, and determined that Parks suffered from an anxiety-related disorder and medical impairments, not severe. Dr. Stodola concluded that Parks had mild limitations on his daily living, social functioning, concentration, persistence and pace, and suffered no limitations from decompensation. On July 31, 2006, Dr. Lea Perritt examined Parks’s records and agreed with Dr. Stodola’s determinations.
B.
Parks first applied for disability status on June 21, 2005. His application was denied initially on December 5, 2005 and upon reconsideration on August 9, 2006. In the reconsideration notice, the Regional Commissioner of the SSA stated that “due to your overall condition, you would have some work-related limitations. However these limitations would not prevent you from performing all types of jobs. Based on your description of your past work as a highlift operator, we have concluded that you have the ability to perform this job.”
On September 5, 2006, Parks timely requested a hearing before an administrative law judge (ALJ). The hearing took place on April 16, 2007. Parks, who was represented by an attorney, testified at the hearing. Vocational expert Anne Thomas also testified at the hearing.
Thomas first stated that Parks’s work as a truck driver was considered medium, semi-skilled work and his work as a coal miner was very heavy, skilled work. She testified that Parks did not acquire any skills from his previous jobs that could be transferred to other light or sedentary work. The ALJ then asked Thomas the following hypothetical question,
assume the claimant is capable of performing a range of light exertion. Assume he could be capable of sitting or standing, each 30 minutes at a time uninterrupted before having to change positions. No climbing of ladders, ropes, or scaffolds. No crawling. No more than occasional use of climbing of ramps or stairs. No more than occasional bending or stooping or crouching or balancing. No work at unprotected heights, around hazardous machinery, in temperature extremes and the claimant referred to 40 to 80 degree Fahrenheit temperatures.... No excessive levels of humidity. No more than frequent reaching, handling, or fine manipulation with the upper extremities. No more than simple instructions.
Taking into account Parks’s age, limited education, and work experience, Thomas testified that Parks could hold the following light and unskilled jobs: production laborer, hand packer, and production inspector. Parks’s attorney asked Thomas whether Parks would have to work at a fast pace at any of these positions. Thomas answered that production inspectors work on a line and must meet quotas, while hand packers and production laborers do not do production rate or quota work. Parks’s attorney also asked whether Parks would be permitted to take more than three breaks per day (two breaks and a lunch period) because he had difficulty walking for more than five or six minutes at a time. Thomas said that taking more than the allotted amount of breaks would eliminate all potential jobs.
On July 25, 2007, the ALJ issued a partially-favorable decision, finding that Parks was disabled as of February 13, 2007, the date he turned 55 years old, but that he was not disabled prior to this time. After reviewing the entire record, the ALJ went through the first three steps of the evaluation process designed to determine whether Parks was disabled. At step three, the ALJ determined that Parks did not have an impairment or combination of impairments that met or medically equaled one of the listed impairments in 20 C.F.R. pt. 404, subpt. P, app. 1 (20 C.F.R. §§ 404.1520(d) and 416.920(d)). He rated Parks’s “limitations with regard to restriction of activities of daily living as mild; difficulties in maintaining social functioning as mild to moderate; difficulties in maintaining concentration,' persistence, or pace as mild to moderate; and repeated episodes of decompensation, each of ex-tencléd duration as none.”
Prior to considering step four, the ALJ determined that Parks had
the residual functional capacity to perform a range of light exertion that allows a sit/stand option every 30 minutes. [Parks] cannot climb ladders, ropes, or scaffolds and cannot crawl. He can climb ramps and stairs on an occasional basis. He should avoid balancing, crouching, temperature and humidity extremes and hazardous machinery. [Parks] can perform no more than frequent reaching, handling, or fine manipulation with the upper extremities. [Parks] is limited to work that involves no more than simple instructions.
At step four, the ALJ determined that Parks was unable to perform any past relevant work. Finally, at step five, the ALJ determined that considering Parks’s age, education, work experience, and residual functional capacity, there were a significant number of jobs in the national economy that he could have performed prior to February 13, 2007.
Parks requested a review of the ALJ’s partially-favorable decision, which was denied by the Appeals Council. Parks then filed an action in the United States District Court for the Eastern District of Kentucky, arguing that the SSA’s decision was not supported by sufficient evidence, was contrary to the applicable law, and evidenced the incorrect application of certain standards. The district court affirmed the denial of benefits, finding that the ALJ’s determination was supported by substantial evidence. Parks timely appealed.
II.
Parks raises three issues on appeal. He argues that the ALJ’s decision was not supported by sufficient evidence because the ALJ (1) rejected the opinions of two treating sources without providing good reasons for doing so; (2) made no reference to 20 C.F.R. § 404.1562, which directs a finding of disability if a claimant has a marginal educational level, has done arduous unskilled physical labor for 35 years or more, and is no longer able to do this kind of work because of a severe impairment; and (3) asked the vocational expert a hypothetical question that did not accurately portray Parks’s physical and mental impairments.
The Social Security Act (the Act) defines disability as the inability “to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” 42 U.S.C. § 423(d)(1)(A). An individual is disabled under the Act “only if his physical or mental impairment or impairments are of such severity that he is' not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy.” Id. § 423(d)(2)(A).
To determine if a claimant is disabled within the meaning of the Act, the ALJ must follow a five-step analysis, as set forth in 20 C.F.R. § 404.1520. Pursuant to this five-step inquiry: (1) a claimant who is engaging in substantial gainful activity will not be found to be disabled regardless of medical findings; (2) a claimant who does not have a severe impairment will not be found to be disabled; (3) a finding of disability will be made without consideration of vocational factors if a claimant is not working and is suffering from a severe impairment which meets the duration requirement and which meets or equals a listed impairment in Appendix 1 to Sub-part P of the Regulations. Claimants with lesser impairments proceed to step four; (4) a claimant who can perform work that he has done in the past will not be found to be disabled; and (5) if a claimant cannot perform his past work, other factors including age, education, past work experience and residual functional capacity must be considered to determine if other work can be performed. Cruse v. Comm’r of Soc. Sec., 502 F.3d 532, 539 (6th Cir.2007) (citing Wyatt v. Sec’y of Health & Human Servs., 974 F.2d 680, 683-84 (6th Cir.1992)).
The claimant bears the burden of proof at steps one through four. Warner v. Comm’r of Soc. Sec., 375 F.3d 387, 390 (6th Cir.2004). At step five, however, the burden shifts to the Commissioner to identify “a significant number of jobs in the economy that accommodate the claimant’s residual functional capacity (determined at step four) and vocational profile.” Jones v. Comm’r of Soc. Sec., 336 F.3d 469, 474 (6th Cir.2003). In this case, it is undisputed that Parks can no longer perform his past work. Thus, we must determine whether substantial evidence supports the ALJ’s determination that, based on Parks’s residual functional capacity, age, education, and work experience, he was, prior to February 13, 2007, able to make an adjustment to other work available in the national economy. See 20 C.F.R. § 404.1520(a)(4)(v); see also 20 C.F.R. § 416.920(a)(4)(v).
The Commissioner’s conclusion will be affirmed absent a determination that the ALJ failed to apply the correct legal standard or made fact findings unsupported by substantial evidence in the record. White v. Comm’r of Soc. Sec., 572 F.3d 272, 281 (6th Cir.2009) (citing 42 U.S.C. § 405(g)). Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Lindsley v. Comm’r of Soc. Sec., 560 F.3d 601, 604 (6th Cir.2009) (citing Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971)). In order to affirm the Commissioner’s decision, we need not “agree with the Commissioner’s finding, as long as it is substantially supported in the record.” Kyle v. Comm’r of Soc. Sec., 609 F.3d 847, 854 (6th Cir.2010) (citations omitted).
A.
Parks first challenges the ALJ’s decision by arguing that the ALJ improperly rejected the opinion of Parks’s treating physicians. In assessing the medical evidence supporting a claim for disability benefits, the ALJ must adhere to certain standards such as the “treating physician rule.” Blakley v. Comm’r of Soc. Sec., 581 F.3d 399, 406 (6th Cir.2009). This rule “requires the ALJ to generally give greater deference to the opinions of treating physicians than to the opinions of non-treating physicians,” id., because “these sources are likely to be the medical professionals most able to provide a detailed, longitudinal picture of [the claimant’s] medical impairment(s) and may bring a unique perspective to the medical evidence that cannot be obtained from the objective medical findings alone.” Wilson v. Comm’r of Soc. Sec., 378 F.3d 541, 544 (6th Cir.2004) (quoting 20 C.F.R. § 404.1527(d)(2)).
The ALJ must afford a treating source opinion controlling weight if the treating source opinion is “well-supported by medically acceptable clinical and laboratory diagnostic techniques” and is “not inconsistent with the other substantial evidence in [the] case record.” Id. (quoting 20 C.F.R. § 404.1527(d)(2)). If the ALJ does not accord controlling weight to a treating physician, the ALJ must still determine how much weight is appropriate by considering a number of factors, including the length of the treatment relationship and the frequency of examination, the nature and extent of the treatment relationship, any specialization of the treating physician, and whether the treating source opinion is supported by the record and is consistent with the record as a whole. See Blakley, 581 F.3d at 406; Wilson, 378 F.3d at 544; see also 20 C.F.R. § 404.1527(d)(2).
Further, the regulations require the ALJ to “always give good reasons in [the] notice of determination or decision for the weight” given to the claimant’s treating source’s opinion. 20 C.F.R. § 404.1527(d)(2). These good reasons must be “supported by the evidence in the case record, and must be sufficiently specific to make clear to any subsequent reviewers the weight the adjudicator gave to the treating source’s medical opinion and the reasons for that weight.” Blakley, 581 F.3d at 407 (citations omitted). We have held that an ALJ’s “failure to follow the procedural requirement of identifying the reasons for discounting the opinions and for explaining precisely how those reasons affected the weight” given “denotes a lack of substantial evidence, even where the conclusion of the ALJ may be justified based upon the . record.” Rogers v. Comm'r of Soc. Sec., 486 F.3d 234, 243 (6th Cir.2007).
Parks’s three treating physicians were Dr. Harville, Dr. Doiron, and Dr. Boll. Parks specifically argues that the ALJ improperly rejected the opinions of Dr. Harville and Dr. Doiron. We disagree. The ALJ referred to Dr. Harville’s recommendation that Parks should lift no more than fifteen pounds for three months after his surgery. Additionally, the ALJ correctly observed that “no treating source has described the claimant as unable to perform even light exertion for at least twelve months prior to his 55th birthday.”
Dr. Doiron did tell Parks in November 2005 that he would “not be able to work for an indeterminate amount of time until we ascertain the exact etiology of your problems.” This statement, however, does not suggest that Dr. Doiron adjudged Parks to be disabled. Although Dr. Doiron may have been suggesting that Parks could not return to his previous job, for Parks to be considered disabled he would have to have been unable to perform not just his past work, but also any other substantial gainful work that exists in the national economy. 20 C.F.R. § 404.1505; see also 20 C.F.R. § 416.909. Further, Dr. Boll noted in December 2005 that after his unsuccessful return to work, Parks’s cardiologist (presumably Dr. Doiron) “put off work until February [2006.]” This comment does not suggest that Dr. Doiron determined that Parks was disabled. Instead, it suggests that Dr. Doiron was considering permitting Parks to return to work at some point following Parks’s unsuccessful attempt to resume his previous job.
The ALJ also ruled in Parks’s favor with respect to the reports of the non-treating, reviewing physicians. Dr. Wortz found that Parks had mild to moderate impairment in activities requiring endurance while Dr. Gregg opined that Parks could perform work requiring medium exertion. The ALJ, however, gave Parks’s “testimony partial credibility and [found] that he [was] limited to light exertion, based on his testimony and the prior opinions of treat ing physicians.” None of the treating physicians’ opinions are inconsistent with this finding. Because the ALJ did not reject the opinions of Parks’s treating physicians, the ALJ’s decision is supported by substantial evidence.
B.
Next, Park argues that the ALJ erred by failing to apply 20 C.F.R. § 404.1562 to resolve Parks’s claim. Pursuant to this provision, a claimant is considered disabled if he (1) has done only arduous unskilled physical labor; (2) has no more than a marginal education; (3) has work experience of thirty-five years or more; and (4) is not working and is no longer able to do this kind of work because of severe impairment(s).
Parks has previously performed skilled and semi-skilled work and therefore he cannot satisfy the first requirement of 20 C.F.R. § 404.1562. Additionally, to fulfill the requirement of having no more than a marginal education, Parks would have had to attend school for six grades or less. 20 C.F.R. § 404.1564(b)(2). Because he attended school for ten grades, Parks is considered to have a limited education. Id. § 404.1564(b)(3). Evidence outside the numerical grade level that the claimant completed in school may be used to determine the claimant’s educational abilities. However, “if there is no other evidence to contradict it, [the SSA] will use [the claimant’s] numerical grade level to determine [the claimant’s] educational abilities.” Id. § 404.1564(b). Parks’s argument that he was unable to perform “serial 7s or serial 3s” when asked to do so by Dr. Spangler does not contradict that he has a limited (and not a marginal) education. Despite Parks’s failure to complete some tests, Dr. Spangler ultimately opined that Parks had a limited education.
Moreover, it is unclear whether Parks has thirty-five years of work experience (not to mention arduous, unskilled work experience), as required by the statute, because his listed work experience begins in 1984, or twenty-six years ago, and the work record appended to his disability application dates back to 1980. Thus, the ALJ did not err by declining to apply 20 C.F.R. § 404.1562.
C.
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3718156-20909 | Opinion for the Court filed by Senior Circuit Judge RANDOLPH.
RANDOLPH, Senior Circuit Judge:
In August 2012, the Postal Regulatory Commission issued an order approving a negotiated service agreement for the sale of postage between the United States Postal Service and Valassis Direct Mail, Inc., a national marketing company. Under the agreement, Valassis receives discounted postage for some of its advertisement mailers once its mail volume hits a predetermined threshold. Petitioner Newspaper Association of America, with the support of three intervenors, challenges the Commission’s order approving the deal.
I
The Postal Service is empowered to set “reasonable and equitable” postal “rates” subject to the approval of the Postal Regulatory Commission. See 39 U.S.C. §§ 404(b), 3622(a), (d)(1). “Rates” include not only those for the familiar first-class and priority mail, but also “negotiated service agreements,” that is, contracts between the Postal Service and individual mailers for customized — and generally discounted — rates of postage. See 39 C.F.R. §§ S001.5(r), 3010.6.
The statutory system governing rates depends on whether the rate is for a “market-dominant” or a “competitive” service. 39 U.S.C. § 3642(b). A service is “market-dominant” if either (1) the Postal Service has achieved a level of market power in providing that service that would allow it to raise prices without losing “a significant level of business,” id. § 3642(b)(1), or (2) it is a service covered by the statutory postal monopoly, id. § 3642(b)(2). Because the negotiated service agreement in this ease is for the purchase of standard mail products, it is subject to the postal monopoly, see 18 U.S.C. § 1696(a); 39 C.F.R. § 310.2(a), and thus the rules governing rates for market-dominant products apply.
In reviewing rates for market-dominant products, the Commission must consider the statutory factors set out in 39 U.S.C. § 3622(c). That subsection establishes rate- requirements for all market-dominant products, see id. § 3622(c)(1)-(9) & (11)-(14), as well as particular requirements for negotiated agreements, see id. § 3622(c)(10).
As relevant here, a negotiated service agreement must meet the following requirements: (1) it must improve the net financial position of the Postal Service, id. § 3622(c) (10) (A) (i); (2) it may not cause “unreasonable harm to the marketplace,” id. § 3622(c)(10)(B); (3) it must be “available on public and reasonable terms to similarly situated mailers,” id. § 3622(c)(10); (4) it must comport with “the policies of [Title 39],” id.; and (5) the Commission, before approving the agreement, must give “due regard” to its impact on “small business concerns,” id. § 3642(b)(3)(C).
. Once,the Postal Service has negotiated terms with a particular mailer, it must notify the public and the Commission of its intention to implement a rate adjustment. 39 C.F.R. § 3010.41. The Commission then initiates proceedings to determine whether the agreement complies with the statutory requirements. Id. § 3010.44. Comments from the Postal Service, its partner in the deal, and the public are welcome. See id. If the agreement is lawful, the Commission issues an order and the agreement may take effect. Id.
The Postal Service proposed the negotiated service agreement in this case- in April 2012, and the public proceeding commenced that May. The structure of the Agreement is fairly simple. For three years, Valassis agrees to maintain its current levels of “standard mail saturation flats” — that is, advertising circulars deliv ered to at least 75 percent of potential addresses on a standard mail carrier route. In return, the Postal Service offers Valas-sis a discount on new mailing programs of that same type initiated in excess of current levels. The discount is limited in a few ways. It applies only to mailings carrying advertisements for retailers that deal in durable and semi-durable goods and that have a physical retail presence in 30 or more states. It also applies only to new mailing programs initiated in markets in which Valassis has an existing program. And the discount on that new program remains in force only if the corresponding existing program continues to operate at or above current levels.
The Commission received dozens of submissions from, among others, individual newspapers, two U.S. Senators, petitioner Newspaper Association of America, inter-venor National Newspaper Association, and intervenors Valpak Direct Marketing Systems and Valpak Dealers Association (collectively, “Valpak”). The comments were overwhelmingly against the Agreement and, taken together, argued that the Agreement failed to satisfy any of the statutory criteria discussed above. The Commission disagreed and issued its final order approving the Agreement on August 23, 2012. It denied a motion to stay the order one week later. This petition for judicial review followed.
II
Intervenors Valpak and the National Newspaper Association argue that the Agreement was not properly before the Commission because the Governors of the Postal Service never approved it. This, they say, rendered the Commission’s order void.
Establishing new rates, which includes proposing negotiated service agreements, is the job of the Governors of the Postal Service. 39 U.S.C. § 404(b). The Governors are appointed by the President, confirmed by the Senate, and constitute nine of the eleven members of the “Board of Governors.” Id. § 202. The Board of Governors comprises the nine Governors plus the Postmaster General and the Deputy Postmaster General. And the two bodies — the nine Governors as distinguished from the full Board — have independent statutory responsibilities. While the Board exercises the general “power of the Postal Service,” 39 U.S.C. § 202(a)(1), only the Governors are specifically authorized to “establish ... equitable rates of postage.” Id. § 404(b).
“Except for those powers, duties, or obligations specifically vested in the Governors, as distinguished from the Board of Governors, the Board may delegate the authority vested in it....” Id. § 402. In other words, while the Board may delegate its duties, the Governors may not. And since “rates of postage” includes negotiated service agreements, § 402 means that the Governors cannot delegate the job of executing such agreements and bringing them before the Commission — which is what the intervenors claim the Governors did here.
The intervenors’ claim rests on the Governors’ Resolution 11-4, signed in March 2011. The Resolution authorizes Postal Service “management” to negotiate service agreements with postal customers and propose those agreements to the Postal Regulatory Commission. The Resolution declares all rates proposed under it “hereby established” in advance, provided the rates comply with the statutory requirements-&emdash;• and the Resolution instructs the Postal Service’s chief financial officer to ensure that they do. Furthermore, it instructs management to provide the Governors with quarterly “report[s]” on new initiatives and to “furnish ... information ... regarding any significant, new program, policy, major modification, or initiative.” On its face the Resolution does not seem to require the Governors to approve each new rate.
In April 2012, citing Resolution 11-4, Postal Service management submitted the Agreement to the Postal Regulatory Commission. In response, Valpak submitted comments to the Commission arguing that the Agreement was the result of an unlawful delegation by the Governors. It claimed that Resolution 11-4, by allowing Postal Service management to negotiate service agreements, delegates the Governors’ statutory responsibility to set rates in violation of 39 U.S.C. § 402. Thus, according to Valpak, the Agreement was not properly before the Commission. The Postal Service replied that, notwithstanding Resolution 11-4, the Governors had in fact approved the Agreement before it was submitted. In this court, the intervenors once again raised the argument challenging Resolution 11&emdash;4, and the Postal Service reasserted that the Agreement had been pre-approved.
There is no reason for us to decide whether Resolution 11-4 unlawfully delegates authority to the Postal Service. According to the Postal Service, the Governors in fact reviewed and approved the Agreement before it was submitted to the Commission. That assertion was not challenged in the administrative proceeding, and we understand the Commission to have accepted it as fact. The intervenors challenge it for the first time in their reply brief to this court, but we have repeatedly held that we do not consider arguments raised only in a reply brief. See Rollins Envtl. Servs. (NJ), Inc. v. EPA, 937 F.2d 649, 652 n. 2 (D.C.Cir.1991); McBride v. Merrell Dow & Pharms., Inc., 800 F.2d 1208, 1210-11 (D.C.Cir.1986). We thus accept the Postal Service’s assertion as true.
At oral argument, counsel for interve-nors questioned whether pre-approval by the Governors was even enough-;§ 402, counsel suggested, requires a more “formal” approval. But this argument, made at that point for the first time, comes much too late. See United States v. Southerland, 486 F.3d 1355, 1360 (D.C.Cir.2007). We therefore assume that the Governors’ level of involvement in this case — approving the deal, if not actually submitting the paperwork — satisfies the requirements of § 402. As a result, we need not consider whether Resolution 11-4 violates § 402. See Fried v. Hinson, 78 F.3d 688, 692 (D.C.Cir.1996).
We now proceed to the merits of the order.
Ill
In approving the Agreement, the Commission concluded that the Agreement would not cause “unreasonable harm to the marketplace.” See 39 U.S.C. § 3622(e)(10)(B). To do so, the Commission first had to interpret that statutory phrase. Typically, an administrative agency is entitled to a degree of deference in interpreting “the statute which it administers.” Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842, 104 5.Ct. 2778, 81 L.Ed.2d 694 (1984). But petitioner Newspaper Association of America argues that the meaning of “unreasonable harm to the marketplace” had been settled before Congress codified the standard in the 2006 Postal Accountability and Enhancement Act, Pub. L. No. 109-435 § 201, 120 Stat. 3198, that when Congress enacted the statute using this language it adopted the earlier interpretation, and that the Commission was not free to depart from that interpretation.
To be more specific, before passage of the 2006 Act the Postal Rate Commission — the current Commission’s predecessor — promulgated regulations governing negotiated service agreements. See Negotiated Service Agreements, 69 Fed.Reg. 7574 (Feb. 18, 2004) (codified at 39 C.F.R. subpt. L, later removed as obsolete). One of the regulations provided that negotiated service agreements were acceptable so long as they were “consistent with statutory criteria,” “benefit[ted] the Postal Service,” and did not cause “unreasonable harm to the marketplace.” 39 C.F.R. § 3001.190(b) (2004). Another regulation required “an analysis of the impact” of such an agreement on competitors of the parties to the agreement. Id. § 3001.193(f)(1)(i). According to the Newspapers, the Postal Rate Commission understood § 3001.193(f)(1)(i)’s impact-analysis requirement to give content to § 3001.190(b)’s “unreasonable harm to the marketplace” standard. It follows, the Newspapers say, that Congress incorporated the definition of “unreasonable harm to the marketplace” in the 2006 Act as the regulations and decisions of the Postal Rate Commission had interpreted the phrase.
The argument cannot survive close inspection. Its premise is incorrect. There is no reason to suppose, that the Postal Rate Commission thought § 3001.193(f)(1)(i)’s direction to consider harm to competitors embodied a definition of § 3001.190(b)’s “unreasonable harm to the marketplace.” Federal regulations, like federal statutes, may contain one pro vision that is meant to give more content to another. For instance, 39 C.F.R. § 3010.1, entitled “Definitions in this sub-part,” gives meaning to terms used in the postal regulations using .the unmistakable language, “Annual limitation means.... ” 39 C.F.R. § 3010.1(a); see also, e.g., 8 C.F.R. § 1.2 (“Definitions”); 26 C.F.R. § 2.1-1 (“Definitions”). So when other regulations refer to “the annual limitation,” § 3010.1(a)’s definition clearly applies. See, e.g., 39 C.F.R. § 3010.4(a). Sections 3001.190(b) and 3001.193(f)(1)(i) were not of that sort. They simply coexisted, sections apart. And at the end of the day, Congress codified but one of them.
Postal Rate Commission precedents likewise contain nothing to indicate that “unreasonable harm to the marketplace” had become infused with the meaning the Newspapers detect. Early decisions of the Postal Rate Commission considered harm to competitors — § 3001-.193(f)(l)(i) had required as much. But the Postal Rate Commission did not tie that inquiry to the “unreasonable harm” standard. See, e.g., HSBC N. Am. Holdings Inc., Dkt. MC2005-2, at 37 (Postal Rate Comm’n May 20, 2005) (op. and recommended decision), available at http://www. prc.gov/Docs/44/44289/OpinionMC2005-2 Finahpdf; Bank One Corp., Dkt. MC2004-3, at 17 (Postal Rate Comm’n Apr. 21, 2006) (op. and recommended decision), available at http://www.prc.gov/Docs/48/ 48385/DeeisionMC2004-3Final.pdf. The current Commission’s other post-Act negotiated service agreement proceeding considered the newly codified “unreasonable harm to the marketplace” factor but provided no content to it because there was no dispute about its meaning. See Discover Fin. Servs,, Dkt. MC2011-19, at 21 (Postal Regulatory Comm’n Mar. 15, 2011) (order), available at http://www.prc.gov/Docs/72/ 72262/Order_N o_694.pdf.
In this case the Commission was thus interpreting “unreasonable harm to the marketplace” for the first time. And because “unreasonable” is an amorphous term, we must give the nod to the agency in determining its meaning, so long as that meaning is rational and one the statutory language can bear. See, e.g., Capital Network Sys., Inc. v. FCC, 28 F.3d 201, 204 (D.C.Cir.1994). That test is satisfied here.
The Commission looked to antitrust law and concluded that harm to the marketplace was “unreasonable” only if it was the result of anticompetitive pricing — that is, pricing below cost. The Commission decided further that it was not obligated to protect individual competitors of the parties to the Agreement from the harms of fair competition. To the Commission, “as long as the Postal Service is not pricing its products below costs to drive its competitors out of the business, it is not creating an unreasonable level of harm in the marketplace.” Valassis Direct Mail, Inc., Dkt. MC2012-14, at 27 (Postal Regulatory Comm’n Aug. 23, 2012) (order) [hereinafter “Valassis Order”], available at http:// www.prc.gov/Docs/85/85014/Order_No_ 1448.pdf. Since the terms of the Agreement price all postage above cost, the Commission did not find the rates to be anticompetitive and therefore concluded that the Agreement was not unreasonably harmful to the marketplace.
In giving content to ambiguous statutory phrases, an administrative agency is at liberty to look to other bodies of law, such as antitrust. See N. Natural Gas Co. v. Fed. Power Comm’n, 399 F.2d 953, 961 (D.C.Cir.1968). Here, the Commission drew on a basic tenet of antitrust law: fair competition is good for consumers even when it leads to “injury inflicted upon rivals.” RobeRt H. BoRk, The Antitrust Paradox 136-44 (1978). The Newspapers say the Commission’s antitrust analysis was “cramped.” Pet’r Br. 35. They correctly remind us that, generally speaking, predatory pricing is just one of many ways to cause harm in a marketplace. But here it was precisely the “aggressive price reductions” for Valassis that the Newspapers found objectionable. Opp’n of Newspaper Ass’n of Am., Valassis NSA, Dkt. MC2012-14, at 3 (Postal Regulatory Comm’n May 23, 2012). It was sensible for the Commission to address itself to potential anticompetitive harms risked by that specific aspect of the deal. The question whether “unreasonable harm to the marketplace” under § 3622(c)(10)(B) encompasses other anticompetitive tactics is not now before us.
In any event, in looking to the antitrust laws to inform its own statutory interpretation, the Commission is not “strictly bound by the dictates of th[o]se laws.” N. Natural Gas Co., 399 F.2d at 961. Rather, the nature of the agency’s interpretive discretion is that it may employ those concepts “to a greater or lesser degree” in order to set sound policy. Id.
Agency policy judgments still must be adequately explained. See 5 U.S.C. § 706(2)(A); Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42-43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). On that score, the Newspapers argue that the Commission’s application of the “unreasonable harm to the marketplace” standard was arbitrary and capricious.
They cite Professor John Panzar, an economist who, in prepared testimony in 2003, advised the old Postal Rate Commission on how to regulate negotiated service agreements. Professor Panzar believed that the concerns of “[cjompetitors of the Postal Service” should not be considered in evaluating a negotiated service agreement, so long as the Postal Service’s pricing was not anticompetitive. Official Transcript of Postal Rate Commission at 1637, Capital One Servs., Inc., Dkt. MC2002-2 (Feb. 7, 2003), available at http://www.prc.gov/ Docs/37/37064/08-02-0703.pdf. But Professor Panzar also advised that “[cjompetitors of the firm receiving the [negotiated service agreement] ... may be adversely affected” and that “their concerns are an important part of the evaluation process.” Id. at 1595 (emphasis added). The Commission cited Professor Panzar in its analysis of the term “unreasonable harm to the marketplace” but declined to analyze the Agreement’s effects on anyone other than the Postal Service’s competitors. The Newspapers challenge what they perceive as a misguided application of Professor Panzar’s approach.
The Newspapers are correct that the Commission did not meaningfully consider the impact the Agreement would have on Yalassis’s competitors. But we do not believe this diversion from Professor Panzar was arbitrary and capricious. The Commission derived its primary rationale for interpreting “unreasonable harm” from antitrust law. It said as much and cited two Supreme Court cases for support. See Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993) (“The [antitrust] law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”); Brown Shoe Co. v. United States, 370 U.S. 294, 344, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962) (“It is competition, not competitors, which the [Sherman] Act protects.”). On that basis, the Commission interpreted “unreasonable harm” to mean anticompetitive behavior. And under that interpretation, the Agreement was lawful because the postage was priced above cost.
The Commission cited Professor Panzar for additional support, but it did not entirely embrace his testimony. We do not think an agency decision can rise or fall with its faithfulness to every authority it cites but does not entirely rely upon. See Kennecott Greens Creek Mining Co. v. Mine Safety & Health Admin., 476 F.3d 946, 954 (D.C.Cir.2007). Here, the Commission relied on antitrust law and, on that basis, rationally explained the interpretation it applied.
The Commission also concluded that, as the statute required, the Agreement would result in a net benefit to the Postal Service. See 39 U.S.C. § 3622(c)(10)(A). The Commission first explained that the Agreement’s discounts apply only to postage purchased in excess of Valassis’s current mailing volumes. In that way, the Agreement was specifically designed to offer discounted postage for “volumes generated in response to the discount” and not for “volume that would have been mailed” anyway. Valassis Order 17.
The Newspapers accept this logic. But they claim that gains from Valassis’s expenditures will be more than offset by reduced postage expenditures by mailers not party to the Agreement. See 39 C.F.R. § 3010.42(f)(3) (requiring the Commission to consider this effect). They argue that if Valassis can send advertising through the mail more cheaply, then it can charge less to its advertisers and thereby cause its competitors (chiefly, newspapers) to lose market share. Less market share means less mail to send and less money spent on postage. The Newspapers estimated that this effect would lead newspapers to reduce postage expenditures by $199 million annually over the three-year life of the Agreement. The Commission found that projection to be unsupported.
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4212233-12104 | PER CURIAM:
Elvin Ernest Sanchez appeals the thirty-three-month sentence he received after pleading guilty to a charge of being found unlawfully in the United States following deportation in violation of 8 U.S.C. § 1326. Sanchez argues that the district court reversibly erred by concluding that his prior conviction for possession of a firearm by a felon under Florida Statutes § 790.23(1) was an aggravated felony within the meaning of § 2L1.2(b)(l)(C) of the United States Sentencing Guidelines. We affirm Sanchez’s sentence.
I.
On April 3, 2009, Ernest Elvin Sanchez, a citizen of Honduras, was removed from the United States, from Miami, Florida. On July 16, 2010, he was found in Laredo, Texas. He had no documents allowing him to enter, travel through, or remain in the United States. He never applied or received permission to reenter the United States or to reapply for admission to the United States after his removal. The government charged him with illegally reentering the United States following deportation in violation of 8 U.S.C. § 1326(a). Under the statute’s corresponding Sentencing Guidelines provision, § 2L1.2, the offense of illegal reentry carries a base offense level of eight. Because, prior to his removal, the State of Florida had convicted Sanchez of possession of a firearm by a felon, the government sought an enhanced penalty.
The district court concluded that Sanchez’s felon-in-possession-of-a-firearm conviction was a conviction for an “aggravated felony” within the meaning of § 2L1.2(b)(l)(C) and increased his base offense level by eight levels. This enhanced base offense level combined with Sanchez’s acceptance of responsibility and criminal history score to yield an advisory sentencing range under the Guidelines of thirty-three to forty-one months.
Sanchez objected to the application of the aggravated felony enhancement on the basis that his Florida felon-in-possession conviction was not an offense described in 18 U.S.C. § 922(g), the “aggravated felony” identified as the basis for the eight-level enhancement, because the Florida felon-in-possession statute is broader than its federal analogue. Specifically, he argued that the Florida law prohibits the custody, possession, or control of electric weapons or devices. Sanchez maintained that the government had not met its burden of proving the enhancement with appropriate documentation. The district court rejected Sanchez’s argument, noting that the Florida judgment specified that Sanchez was convicted of possession of a firearm, and not, for example, possession of an electric device. The district court sentenced Sanchez to a term of thirty-three months imprisonment and three years of supervised release. Sanchez timely appealed.
II.
The Application Note to § 2L1.2(b)(1)(C) states that for the purposes of that subsection, “ ‘aggravated felony has the meaning given that term in section 101(a)(43) of the Immigration and Nationality Act (8 U.S.C. § 1101(a)(43)).” Section 101(a)(43) defines “aggravated felony” to include, among other offenses, “an offense described in ... [18 U.S.C. § 922(g)(1) ].” Under § 922(g)(1) it is unlawful for anyone who has been convicted of “a crime punishable by imprisonment for a term exceeding one year ... to possess in or affecting commerce, any firearm or ammunition.” As used in § 922, the term “firearm” includes “any weapon (including a starter gun) which will or is designed to or may readily be converted to expel a projectile by the action of an explo sive,” as well as “any destructive device,” but does not include “an antique firearm.”
On appeal, Sanchez again asserts that his Florida felon-in-possession conviction does not support an enhancement under § 2L1.2(b)(l)(C), but he offers the new argument that his Florida conviction for possession of a firearm by a felon is not an “aggravated felony” for the purposes of the enhancement because it is possible to commit the Florida offense by possessing an “antique firearm.” Sanchez’s argument is based not on the text of Florida Statutes § 790.23 but rather on the definition of “firearm” in § 790.001. That definition provides:
“Firearm” means any weapon (including a starter gun) which will, is designed to, or may readily be converted to expel a projectile by the action of an explosive; the frame or receiver of any such weapon; any firearm muffler or firearm silencer; any destructive device; or any machine gun. The term “firearm” does not include an antique firearm unless the antique firearm is used in the commission of a crime.
According to Sanchez, when read in conjunction with § 790.23, this definition of “firearm” establishes that Florida law prohibits felons from possessing antique firearms, albeit only antique firearms used in the commission of a crime. Thus, Sanchez argues, the Florida statute criminalizes conduct that falls outside the scope of § 922(g)(1).
III.
A.
Before turning to the merits of Sanchez’s argument, we must identify the standard of review that applies to his claim. This court reviews a district court’s interpretation and application of the Sentencing Guidelines de novo and its factual findings for clear error, provided that the error has been properly preserved. “To preserve error, an objection must be sufficiently specific to alert the district court to the nature of the alleged error and to provide an opportunity for correction.” If a defendant fails to preserve an error in the district court, this court will review the district court’s actions for plain error only. On plain error review, a defendant must demonstrate a clear or obvious error that affected his substantial rights. If the defendant does so, we may exercise our discretion to correct the error only if the error seriously affects the fairness, integrity, or public reputation of judicial proceedings.
Here, both parties assume that, because Sanchez’s claim involves application of § 2L1.2(b)(l)(C), de novo review applies. However, this court is not bound by the parties’ beliefs about the proper standard of review and “must determine the proper standard on its own.” In the district court, Sanchez did object to the § 2L1.2(b)(l)(C) adjustment on the ground that his Florida conviction did not qualify as an aggravated felony because the Flori da statute is broader in scope than 18 U.S.C. § 922(g)(1). But he did not specifically argue that the Florida statute was broader than § 922(g)(1) because it criminalized a felon’s possession of an antique firearm that was used in the commission of a crime. Indeed, at sentencing, defense counsel paraphrased Florida’s statutory definition of “firearm” as excluding antique firearms. Sanchez’s objections to the Pre-Sentence Report focused on the Florida statute’s applicability to non-firearms such as electric weapons or devices and did not mention antique firearms.
Because Sanchez’s objection and argument focused on other types of weapons and devices explicitly included in Florida Statutes § 790.28 — the section defining the Florida offense — and not on the statutory definition of firearm in § 790.001, the district court apparently found it conclusive that the judgment listed Sanchez’s crime as involving a “firearm.” Sanchez’s arguments below could not have been reasonably expected to alert the district court to the nature of the error he now alleges. Sanchez thus did not preserve his claim, and we review for plain error.
B.
To determine whether Sanchez’s Florida conviction constituted an offense described in § 922(g) for the purposes of the aggravated felony enhancement, this court first applies a categorical approach. The categorical approach “focuses on the statutory elements of the prior offense, including any judicial gloss that the courts charged with interpreting the statute have placed on those elements.” If it is possible to identify the crime for which the defendant was previously convicted based on the language of the statute, we do so. However, if the statute of conviction identifies several offenses, some falling within the scope of the federal predicate and some not, we apply a “modified categorical approach,” in which we may consider not only the language of the statute of conviction but also the “charging document, written plea agreement, transcript of plea colloquy, and any explicit factual finding by the trial judge to which the defendant assented.”
Sanchez maintains that Florida Statutes § 790.23 includes an offense not described in 18 U.S.C. § 922(g) because the federal felon-in-possession offense excludes possession of an antique firearm, while the Florida felon-in-possession statute criminalizes possession of an antique firearm in some instances. Sanchez presumes that the exception-to-the-exception in the definition of “firearm” in Florida Statutes § 790.001 — the statement that “[t]he term ‘firearm’ does not include an antique firearm unless the antique firearm is used in the commission of a crime” — establishes that a felon may be convicted based on mere possession of an antique firearm under § 790.23. We do not believe that the relationship between the offense defined in § 790.23 and the limit on the antique firearm exception to the definition of “firearm” in § 790.001 is so clear.
Section 790.23 itself does not identify possession of an antique firearm by a felon as an offense. The allowance in § 790.001(6) that the term “firearm” includes “an antique firearm” when the antique firearm is used in the commission of a crime could mean simply that when a chapter 790 offense by definition includes the use of a “firearm” to commit a crime, the term “firearm” encompasses an antique firearm. Section 790.07, for example, specifically prohibits use of a firearm during commission of or attempt to commit a felony. Sanchez has pointed to no precedent in which this court or any other court has held that § 790.23 encompasses conduct beyond the scope of the offenses described in 18 U.S.C. § 922(g), or even that § 790.23 criminalizes possession of an antique firearm by a felon in some instances. Indeed, in Bostic v. State, a Florida District Court of Appeal quoted in full the § 790.001(6) definition of “firearm” before stating, without qualification: “On its face, [§ 790.23] provides that the firearm a convicted felon is prohibited from possessing excludes an ‘antique firearm.’ ” Because no precedent directly supports Sanchez’s claim regarding the scope of Florida’s felon-in-possession statute, “it cannot be said that the district court’s alleged error was ‘plain’ for purposes of our review.”
IY.
The district court made no clear or obvious error in its application of the aggravated felony enhancement. Sanchez’s sentence is AFFIRMED.
Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.
. See 8 U.S.C. § 1326(a) ("[A]ny alien who ... has been ... removed ... while an order of exclusion, deportation, or removal is outstanding, and thereafter ... enters, attempts to enter, or is at any time found in the United States ... shall be fined under Title 18, or imprisoned not more than 2 years, or both.”).
. See U.S. Sentencing Guidelines Manual § 2L1.2(a) (2009)
. See 8 U.S.C. § 1326(b)(2) (‘‘Notwithstanding subsection (a) of this section, in the case of any alien described in such subsection — ... whose removal was subsequent to a conviction for commission of an aggravated felony, such alien shall be fined under such title, imprisoned not more than 20 years, or both.”).
. 8 U.S.C. § 1101(a)(43)(E)(ii).
. 18 U.S.C. § 922(g).
. Id. § 921(3).
. Fla. Stat § 790.001(6).
. United States v. Cisneros-Gutierrez, 517 F.3d 751, 764 (5th Cir.2008).
. United States v. Neal, 578 F.3d 270, 272 (5th Cir.2009).
. Puckett v. United States, 556 U.S. 129, 129 S.Ct. 1423, 1428-29, 173 L.Ed.2d 266 (2009).
. Id. at 1429.
. Id.
. United States v. Vontsteen, 950 F.2d 1086, 1091 (5th Cir.1992) (en banc).
. See United States v. Echeverria-Gomez, 627 F.3d 971, 974 (5th Cir.2010).
. Id. at 974-75.
. Id. at 975.
. Id.
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9239902-16972 | MEMORANDUM AND ORDER
DAMRELL, District Judge.
This matter is before the court on motion by defendant Winco Foods, Inc. (“defendant”) for attorney’s fees. Plaintiff Jo Ann Peters (“Plaintiff’) disputes that she is liable for attorneys fees, but does not specifically challenge the reasonableness of defendant’s request for $62,605.00 in fees and $3,353.00 in court costs.
BACKGROUND
Plaintiff Jo Ann Peters (“plaintiff’), an amputee who requires use of a wheelchair for mobility, filed suit against defendant, the owner/operator of WineCo Foods, a grocery store of recent construction located near plaintiffs residence. The complaint alleged numerous violations of the Americans with Disabilities Act, 42 U.S.C. 12200 et seq, and state law.
On November 14, 2003, defendant filed a motion for summary judgment. By order dated December 18, 2003, the court grant ed defendant’s motion for summary judgment as to all federal causes of action and declined to exercise supplemental jurisdiction over plaintiffs state law claims. Defendant subsequently filed the instant motion seeking $62,605.00 in attorneys fees and $3,353.00 in court costs.
STANDARD
While attorney’s fees generally are not recoverable, such fees may be awarded if authorized by enforceable contract or by applicable statute. Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 257, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). The Americans with Disabilities Act provides that “the court in its discretion, may allow the prevailing party ... a reasonable attorney’s fee, including litigation expenses and costs.” 42 U.S.C. § 12205.
In the context of the ADA and other civil rights statutes, strong policy considerations support awarding attorney’s fees to prevailing plaintiffs. Plaintiffs play an integral role in enforcement of the statute through private litigation, and the award of attorneys fees provides an incentive to file such suits, applying rationale of Christianburg Garment Co. v. Equal Employment Opportunity Commission, 434 U.S. 412, 418, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978).
However, the “policy considerations which support the award of attorneys fees to a prevailing plaintiff are not present in the case of a prevailing defendant.” Id. at 418-419, 98 S.Ct. 694. To the contrary, awards to prevailing defendants could have a chilling effect on the filing of ADA lawsuits by plaintiffs. For this reason, fees are not awarded as a matter of course to prevailing defendants, and should only be awarded under exceptional circumstances, “upon a finding that the plaintiffs action was frivolous, unreasonable, or without foundation.” Summers v. Teichert & Son, Inc., 127 F.3d 1150, 1154 (9th Cir.1997) (adopting Christiansburg standard for Title I ADA cases). An action is frivolous if it lacks an arguable basis in law or in fact, though it need not be brought in bad faith. Schutts v. Bently Nevada Corp., 966 F.Supp. 1549, 1557 (D.Nev.1997). Even where plaintiff is unaware at the commencement of the suit that the claim is frivolous, he may be liable for attorneys fees if he continues to litigate after it becomes clear that the action lacks factual substance. Id.
ANALYSIS
Defendant seeks an award of attorney’s fees expended to defend this litigation, asserting that plaintiffs claims were frivolous and without any basis in law or fact. (Defendant’s Motion for Attorney’s Fees (“Mot.”) at 1.)
At first glance, this claim appears to fall squarely within the category of exceptional cases meriting an award of attorney’s fees. Plaintiff filed a form complaint against defendants, identical to thirty other complaints filed by plaintiff in this court. The complaint alleged a host of violations of the ADA and state law:
(1) Defendants failed to provide access to the store from public sidewalks, parking or transportation. This failure may include, but is not limited to, installing an entrance ramp, widening entrances, reducing door pressure, and providing accessible parking spaces ...
(2) Defendants failed to provide access to those areas of the store where goods and services are made available to the public. This failure may include, but is not limited to, adjusting the layout of display racks, widening doors, rearranging furniture, providing Brailled and raised character signage, providing visual alarms, adding an accessible check-out counter, and installing ramps...
(3) Defendants failed to provide access to restroom facilities at the store. This failure may include, but is not limited to removal of obstructing furniture or vending machines, widening of doors, installation of ramps, providing accessible signage, widening or toilet stalls and installation of grab bars.
(Complaint ¶¶ 28-30.)
The vast majority of these allegations appear to have been factually unsupported because they were almost entirely abandoned after plaintiffs expert visited the store. Gone were allegations of significant barriers to access, such as inadequate accessible parking, missing wheelchair ramps, obstructed entrances and aisles, and inaccessible products. Instead, plaintiffs expert identified five potential violations: 1) absence of detectable warnings before wheelchair ramps, 2) absence of required TDD signage at the public telephone, 3) height of the produce scales, 4) height of the meat and deli counter, and 5) absence of required “tow away” signage in the parking lot. The court granted summary judgment as to all five claims.
Three of plaintiffs claims were frivolous ab initio. Plaintiff alleged that the wheelchair ramps lacked detectable warnings and the telephone did not have required TDD signage. Based on clear Ninth Circuit precedent, plaintiff only has standing to assert claims for barriers related to her disability. Detectable warnings are designed to assist the visually impaired and TDD signage is designed to assist the hearing impaired. Plaintiff does not allege she has either visual and hearing impairment, and consequently she did not have standing to assert these claims. Further, ADAAG regulations and advisory notes make clear that meat counters are outside the scope of the ADA. Given the volume of disabilities litigation filed by plaintiffs counsel, the court must assume a passing familiarity with the law in this area. A cursory review of the regulations and applicable case law would have revealed that these claims wholly lacked merit.
However, plaintiff did assert a single non-frivolous claim, that the produce scale at Winco violated the ADA. While the court ultimately granted summary judgment in favor of defendant on this claim, neither the ADA nor its implementing regulations specifically addressed the issue presented. Defendant persuasively argued that the court should find the scale to be outside the scope of the ADA by drawing analogy to merchandise shelves and displays, which are not covered by the ADA. Plaintiffs counsel made little effort to support his position with relevant legal authority. Nonetheless, the law on this point was unclear, and as a result the claim was not frivolous. See, e.g., Int’l Bhd. of Teamsters Chauffeurs, Warehousemen and Helpers of America, AFL-CIO, Local 631 v. Silver State Disposal Service, Inc., 109 F.3d 1409, 1412 (9th Cir.1997) (refusing to award fees and costs because of the lack of case law defining the precise contours of the issue); Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1489 (9th Cir.1995) (holding that the prevailing defendant was not entitled to attorney fees under § 1988 because there “was very little case law directly apposite.”).
In cases where some of plaintiffs losing claims are frivolous but others are not, some Circuits have applied the Supreme Court’s reasoning from Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), to conclude that, where plaintiffs frivolous and nonfrivolous claims are interrelated, the defendant may not recover attorney’s fees for time spent defending the frivolous claims. Tarter v. Raybuck, 742 F.2d 977 (6th Cir.1984) (finding district court abused its discretion in awarding attorneys’ fees to defendant because action that included one non-frivolous Fourth Amendment claim was not wholly meritless or without foundation); Colombrito v. Kelly, 764 F.2d 122, 132 (2d Cir.1985) (reversing district court’s award of attorneys’ fees where plaintiffs claims were closely intertwined and continuation of the meritless claim past discovery had only scant effect on the time and other resource costs of the litigation); See also Conte, Alba, Attorney Fee Awards 2d Ed. (2003).
However, other Circuits have permitted an award of attorneys fees for costs of defending the frivolous claims even where they are interrelated with non-frivolous claims. See Ward v. Hickey, 996 F.2d 448 (1st Cir.1993) (stating that “a district court should not deny fees for defending frivolous claims merely because calculation would be difficult”); Curry v. A.H. Robins Co., 775 F.2d 212 (7th Cir.1985) (holding that a prevailing defendant may be awarded fees incurred in defending against a frivolous claim or portion thereof, even if other claims asserted by the plaintiff were not frivolous); Head v. Medford, 62 F.3d 351 (11th Cir.1995) (reversing district court’s denial of attorneys’ fees for frivolous federal due process claims even though no finding had been made regarding merit of state law claims over which court declined to exercise supplemental jurisdiction).
The Ninth Circuit has not addressed this question, although two reported cases offer some guidance. In Jensen v. Stangel, 762 F.2d 815, 818 (9th Cir.1985), the Court appeared to apply Hensley to deny a prevailing defendant attorneys fees. See Conte, Alba, Attorney Fee Awards § 5.03 (2d ed.2003) (citing Jensen for the proposition that “courts have applied the Hensley analysis in determining that if the frivolous and non frivolous claims are interrelated the defendant may not recover attorneys’ fees... for time spend defending the frivolous claims.”) In Jensen, the Ninth Circuit reversed the lower court’s award of attorneys fees to defendants in a civil rights action against the City of San Jose and individual police officers. The Court found that the plaintiffs claim against the individual officer was not frivolous and reversed the fee award as to that officer. However, the Court also reversed the award to the City of San Jose, even though plaintiffs claim against the City may have become frivolous after discovery failed to produce evidence supporting plaintiffs claims. Without citing Hensley, the court noted that the attorney “spent the bulk of his time defending [the nonfrivolous claim]” and counsel conceded the “city’s fee claim would rise and fall with the [officer’s] claim.” Id. at 819.
However, in Saman v. Robbins, 173 F.3d 1150, the Ninth Circuit reached a contrary result. In that case, the district court had denied attorneys fees to all defendants in a civil rights action, concluding that, “although several of plaintiffs’ claims may have been groundless, those claims were related to plaintiffs’ nonfrivolous claims.” Id. at 1157. The Ninth Circuit held that the district court abused its discretion in denying attorneys’ fees to one of the defendants, against whom all claims were groundless. Thus, Saman approved the award of attorneys fees to one defendant where some of plaintiffs claims against other defendants were not frivolous.
While neither Jensen nor Saman addresses the precise situation before the court, they do suggest that this Circuit affords the district court discretion to award attorneys fees, even where plaintiffs action is not wholly frivolous. However, the court recognizes that such awards will rarely be appropriate where plaintiff has asserted significant meritorious claims. See Summers v. Teichert & Son, Inc., 127 F.3d at 1154 (“Attorneys fees should only be awarded to prevailing defendants in exceptional circumstances.”). However, where the action viewed as a whole lacks merit despite the presence of one or more legally tenable claims, attorneys fees may be appropriate.
The court finds that attorney’s fees are warranted under the circumstances of this case. The sweeping allegations of ADA violations contained in plaintiffs form complaint stated only one legally and factually tenable claim regarding the height of a produce scale. Moreover, the circumstances of this case suggest that it was filed for the purpose of obtaining a quick settlement, rather than remedying barriers to access for the disabled.
This is particularly troubling in light of plaintiffs remarkable litigiousness. Plaintiff has initiated no less than thirty separate lawsuits in this court, filing form complaints which stretch the meaning of notice pleading by alleging boilerplate violations of the ADA and state law. Such multi-plicitous “off the shelf’ filings of questionable merit divert judicial resources away from cases alleging specific, legitimate and substantial violations of the rights of disabled persons. Further, such litigation “brings into disrepute” the important objectives of the ADA by instead focusing public attention on the injustices suffered by defendants forced to expend large sums to mount defenses to groundless or hyper-technical claims. See Wrenn v. Gould, 808 F.2d 493, 504-505 (6th Cir.1987) (raising concerns regarding the effect of groundless actions brought by a plaintiff under 28 U.S.C. § 1988.)
In opposition to defendant’s motion for attorneys fees, plaintiff asserts that the Ninth Circuit has declined to award attorneys fees “under circumstances far more egregious than these”. (Plaintiffs Opposition to Attorneys Fees (“Opp’n”) at 6). However, the case relied on by plaintiff, Summers v. A. Teichert & Son, Inc., 127 F.3d 1150 (9th Cir.1997), is distinguishable. Summers involved a truck driver who was injured during a workplace accident. Plaintiff alleged that, when he returned to work after a year of recuperation, his employer failed to accommodate his injury by providing him work that he could perform in spite of his injuries. The Ninth Circuit affirmed, on alternate grounds, the district court’s grant of summary judgment in favor of defendant. Id. at 1154. Noting that plaintiff did not contact his employer to request work, the Court held that plaintiff had not demonstrated there was a triable issue as to whether defendant reasonably accommodated plaintiffs alleged disability. Summers, 127 F.3d at 1153. In addressing defendant’s anticipated motion for attorney’s fees, the Ninth Circuit stated that, under the Christiansburg standard “we belief a grant of attorney’s fees would be inappropriate in this case.” In stark contrast to Summers, this case involves claims that, from the outset, plaintiff lacked standing to assert and claims that were legally unsupportable under existing ADAAG regulations.
Accordingly, the court grants defendant’s motion for attorneys fees under 42 U.S.C. § 12205.
II. Attorneys Fees Under 28 U.S.C. § 1927
Defendant also requests attorneys fees under 28 U.S.C. § 1927, which provides that “[a]ny 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.” 28 U.S.C. § 1927. In order to impose sanctions under section 1927, the court must make a finding that the attorney acted in bad faith. West Coast Theater Corp. v. City of Portland, 897 F.2d 1519, 1528 (9th Cir.1990). Bad faith is present when an attorney knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for the purpose of harassing an opponent. Id.
Defendant asserts that attorneys fees are warranted under section 1927 because plaintiff’s counsel “treated this case like a ‘mill operation’ rather than a genuine effort to prosecute the rights of his client.” (Motion at 8.) While the court finds plaintiffs counsel’s conduct troubling, there is not sufficient evidence of bad faith to warrant attorney’s fees under section 1927. Accordingly defendant’s motion for attorneys fees under section 1927 is DENIED.
III. Attorneys Fees under California Law
Defendant asserts that it is entitled to attorneys fees under California law for claims that the court dismissed on jurisdictional grounds. After granting summary judgment as to all federal claims, the court declined to exercise supplemental jurisdiction over plaintiffs remaining state law claims. An award of attorneys fees for these claims would be inappropriate because they were not adjudicated on the merits. Accordingly, defendant’s request for attorneys fees under California law is DENIED.
IV. Reasonable Fee Award
The district court exercises its discretion in determining the reasonableness of the fee claimed by the prevailing party. Hensley, 461 U.S. at 437, 103 S.Ct. 1933; Chalmers v. City of Los Angeles, 796 F.2d 1205, 1213 (9th Cir.1986), amended at 808 F.2d 1373 (9th Cir.1987).
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1890759-7994 | ALBERT Y. BRYAN, Senior Circuit Judge:
Indicted for bank robbery, appellant Ne-ville Bruce Thompson was found guilty by a jury in the Federal Court for the Eastern District of North Carolina and sentenced to imprisonment for sixteen years. He now appeals, primarily asserting that certain testimony allowed at trial violated his privilege against disclosure of marital communications. Although we conclude that the trial court erred in permitting the Government to introduce this evidence, we see the error as harmless and so affirm.
I
On November 4, 1981, at about 11:30 a.m., a man driving a silver-colored Capri automobile stopped at the drive-in window of the Planters National Bank in Rocky Mount, North Carolina. The driver, a black male, placed a note in the teller’s drawer reading, “Don’t do anything stupid. I know where you live. Anything go wrong, my friend will get you. I want cash.” The teller, Shirlee Evans, put $1,230 in the drawer and asked a colleague to activate a silent alarm. The driver then grabbed the money and sped out of the parking lot while Evans recorded his license plate number.
Within the hour, local police identified the license as that of a silver Ford Capri belonging to Thompson. At approximately 2 p.m. the same day, F.B.I. agents visited Thompson’s home in Rocky Mount. Thompson’s wife told the agents that her husband had left home that morning but had neither returned nor since been in touch with her.
Despite the initial failure of the F.B.I. to locate Thompson, a complaint accusing him of the robbery was filed in January of 1982. Subsequent conversations with his wife convinced the F.B.I. that Thompson was living in New York City and using the name “Bruce Mugabe.” Further investigation traced him to the Bronx, New York, where he was arrested on March 23, 1982.
Prior to trial, the F.B.I. displayed an array of photographs of seven black males to the teller, Evans, and asked her to identify the robber. On the first occasion she failed to identify Thompson’s picture, but positively identified him in her second attempt, thirteen days before trial. On the date of trial, June 25, 1982, the Court denied the defendant’s request for a lineup.
Thompson testified that on the morning of the robbery he had driven to a local shopping mall. After shopping and eating lunch, he discovered that his car had been taken from the parking lot. He maintained that at approximately 11:15 a.m. he telephoned his wife who told him the police wanted to question him in connection with a bank robbery. Thompson said that because he believed he could not receive a fair trial in North Carolina, he fled to New York. He used the alias “Mugabe” for “tax reasons.”
Among the prosecution’s witnesses was the bank teller, Evans, who was asked if the robber was in the courtroom. She pointed to Thompson and said “I believe it’s [the defendant] but I’m not positive.” She explained that while the defendant had a beard and wore glasses the robber had been clean shaven and was without glasses.
His wife, however, exercised her spousal privilege and declined to testify on behalf of the Government. This refusal prompted the Court to rule that the wife was unavailable as a witness. It then allowed an F.B.I. agent, Thomas, to testify about his conversations with her. In particular, the agent said that when he asked her about her husband’s whereabouts in January 1982, she described a conversation in which the defendant had become irritated and blamed his dilemma on her “because she kept pressuring him to get a job.”
II
In adopting the Federal Rules of Evidence, Congress eliminated all proposed rules governing the nonconstitutional privileges of witnesses. S.Rep. No. 1277, 93rd Cong., 2d Sess., reprinted in 1974 U.S.Code Cong. & Ad.News 7051, 7058. Rather, it chose to leave to the Federal courts the task of interpreting the standards for privileges from the principles of the common law “in the light of reason and experience.” Fed.R. Evid. 501.
At common law, the Federal courts extended immunity to confidential communications between husband and wife. Stein v. Bowman, 38 U.S. (13 Pet.) 207, 222, 10 L.Ed. 129 (1839). They deemed this privilege to be so indispensable to the preservation of the marriage relationship that it outweighed any consequent disadvantages to the administration of justice. Wolfle v. United States, 291 U.S. 7, 14, 54 S.Ct. 279, 280, 78 L.Ed. 617 (1934). The doctrine remained distinct from the rule that enabled one spouse to prevent the other from testifying. Trammel v. United States, 445 U.S. 40, 51, 100 S.Ct. 906, 912, 63 L.Ed.2d 186 (1980); United States v. Lefkowitz, 618 F.2d 1313, 1317 (9th Cir.1980); 8 J. Wig-more, Evidence in Trials at Common Law, § 2333 (McNaughton rev. ed. 1961).
In its present form, the privilege dictates that “marital communications are presumptively confidential.” Blau v. United States, 340 U.S. 332, 333, 71 S.Ct. 301, 302, 95 L.Ed. 306 (1951). The party seeking to avoid the privilege bears the burden of overriding this presumption. Id.; Hipes v. United States, 603 F.2d 786, 788 (9th Cir. 1979). Proof of either the presence of a third party at the time of the communication, or of the intention that the information conveyed be transmitted to a third person, will negate the presumption of privacy. Pereira v. United States, 347 U.S. 1, 6, 74 S.Ct. 358, 361, 98 L.Ed. 435 (1954).
Although the Government in the instant case adduced no evidence that dispelled the assumption of confidentiality, the Court permitted Agent Thomas to testify about statements the defendant made in confidence to his wife. The Court consequently committed error in allowing Thomas to testify about the defendant’s comment that his wife was to blame for his predicament.
Nevertheless, this Court must ascertain whether the error affected the substantial rights of the defendant. 28 U.S.C. § 2111; Fed.R.Crim.P. 52(a). The appropriate test for determining the harmlessness of nonconstitutional error is whether it can be said “with fair assurance, after pon dering all that happened without stripping the erroneous action from the whole, that the judgment was not substantially swayed by the error.... ” Kotteakos v. United States, 328 U.S. 750, 765, 66 S.Ct. 1239, 1248, 90 L.Ed. 1557 (1946);- United States v. Nyman, 649 F.2d 208, 211-12 (4th Cir.1980). This exaction necessitates an examination of the probability that the error “could have affected the verdict reached by the particular jury in the particular circumstances of the trial.” United States v. Davis, 657 F.2d 637, 640 (4th Cir.1981). During the course of this inquiry, the court may consider other evidence of the defendant’s guilt, id., the steps taken to mitigate the error, Nyman, 649 F.2d at 212, and the centrality of the issue affected by the error. Id.
Presently, the evidence upholding Thompson’s conviction was so conclusive “that it is altogether unlikely that the error affected the verdict.” Davis, 657 F.2d at 640. The evidence adduced at trial identified Thompson’s car as the one used in the robbery and proved that upon learning of the crime he fled to New York where he employed an alias for several months. Although the error here involved an issue of importance, the prosecutor did not highlight the flawed testimony by repeated questioning nor did he refer to it in closing argument. See United States v. Espinosa — Cerpa, 630 F.2d 328, 335 (5th Cir.1980). Thus, we conclude that the error did not affect the judgment of the jury.
Ill
Thompson also maintains that the Court erroneously denied his motion for a lineup. Nonetheless, the defendant made this request on the morning of trial and the Court noted that the defendant had altered his appearance since the crime. In denying the motion, the Court did not abuse its discretion. See United States v. Bennett, 675 F.2d 596, 598 (4th Cir.), cert, denied, 456 U.S. 1011, 102 S.Ct. 2306, 73 L.Ed.2d 1307 (1982); United States v. Ravich, 421 F.2d 1196, 1203 (2d Cir.1970).
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3758291-4706 | MEMORANDUM ORDER
FACCIOLA, United States Magistrate Judge.
I have reviewed Defendants’ Evidentiary Objections to Plaintiffs’ and Plaintiff Inter-venor’s Exhibits in Support of Their Respec tive Proposed Findings of Fact and, as I read them, the defendants object to nearly all of the exhibits on the same grounds, ie., on the basis of Federal Rules of Evidence 802, 402, 805 and 701-705. I am sensitive to how little time the parties have to be ready for the hearing and that the parties are engaged in discovery. So that time can be used as efficiently as possible, I have decided to use this Memorandum Order to overrule the District’s objections.
First, Rule 402 simply states that relevant evidence is admissible and irrelevant evidence is not. The exhibits plaintiffs and the United States, plaintiff-intervenor, offers are each offered in support of a proposed finding of fact. I have reviewed those findings of fact and they certainly appear to be directed to the issues Judge Huvelle must resolve. Whether the exhibits in fact support the proposed finding of fact made is an open question but if they do they unquestionably have a tendency to “make the existence of any fact that is of consequence to the determination of the action more probable” and are relevant under Federal Rule of Evidence 401. Thus, they are legitimately tendered in support of the proposed findings and are unquestionably relevant. Whether they prove what plaintiffs claim they prove is a different question that goes to weight, not admissibility.
Second, Rules 701-705 are the sections of the Federal Rules of Evidence pertaining to opinion testimony by lay witnesses and experts. The reports may contain opinions that fall within these Rules but the District does not identify what portions of the Reports offend these rules. Surely, the portion of the reports that detail facts found or that make recommendations cannot possibly be subject to these rules and the District cannot reasonably expect either me or Judge Huvelle to go through each report guessing what portion the District finds to be objectionable opinion testimony. Rule 103(a)(1) of the Federal Rules of Evidence requires the District to state the specific ground of its objection and the District’s objection to an entire report because the District contends that some unspecified portion of it offends one of the Rules on opinion testimony hardly meets this requirement.
Third, Federal Rule of Evidence 802 indicates that hearsay is not admissible while 805 indicates that hearsay within hearsay is not excluded under the hearsay rule “if each part or the combined statements conforms with an exception to the hearsay rule provided in these rules.” Most of the exhibits, however, are reports and their admissibility would be guided by additional principles that the District ignores.
First, insofar as those reports were created by the District or its agents, to include entities retained by it for a specific purpose, the reports are admissions of a party opponent and not hearsay. Federal Rules of Evidence 801(d)(2)(C) & (D). Second, even if not admissions, they may be admissible under Federal Rules of Evidence 803(8)(B) & (C) as (1) matters observed pursuant to duty imposed by law as to which matters there was a duty to report or (2) factual findings resulting from an investigation made pursuant to authority granted by law. Under the latter exception, the report would be admissible unless the District carried its burden of showing why the report was untrustworthy even if the report contains conclusions or opinions. Federal Rule of Evidence 803(6); Beech Aircraft Corp. v. Rainey, 488 U.S. 153, 170, 109 S.Ct. 439, 102 L.Ed.2d 445 (1988).
Finally, the District objects particularly to certain reports because they “were prepared for a remedial purpose, to identify problems and improve services and agency procedures.” Obj. at 3. Thus, the District argues that they should be privileged, like peer review reports, and not admitted to prove the truth of the statements within them. Id.
But, the statute on which the District relies, D.C.Code § 44-805, does not apply here because this case is based on the court’s federal question jurisdiction and a state statute does supply the “rule of decision.” Federal Rule of Evidence 501.
Moreover, Rule 501 requires the court, upon a claim of privilege, to “determine how the issue would have been resolved under the ‘common law.’ ” 23 Charles Alan Wright & Kenneth W. Graham, Jr., Federal Practice and Procedure § 5425 (1980). See Swidler & Berlin v. United States, 524 U.S. 399, 118 S.Ct. 2081, 141 L.Ed.2d 379 (1998). The District does not cite any common law precedents supporting its position.
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10541262-23418 | BOWMAN, Circuit Judge.
Frank J. Guinan appeals from the District Court’s denial of his petition for Writ of Habeas Corpus pursuant to 28 U.S.C. § 2254 (1982). Guinan was convicted by a jury of capital murder in connection with the murder of a fellow inmate at the Missouri State Penitentiary. Guinan and another inmate entered the victim’s cell and repeatedly stabbed him with “knives” fashioned out of one half of a pair of scissors. The jury sentenced Guinan to death. Gui-nan’s conviction and sentence were affirmed on appeal, State v. Guinan, 665 S.W.2d 325 (Mo.) (en banc), cert. denied, 469 U.S. 873, 105 S.Ct. 227, 83 L.Ed.2d 156 (1984), and his motion for post-conviction relief pursuant to Missouri Supreme Court Rule 27.26 was denied. Guinan v. State, 726 S.W.2d 754 (Mo.Ct.App.1986), cert. denied, 484 U.S. 873, 108 S.Ct. 210, 98 L.Ed.2d 161 (1987). In the present appeal Guinan argues: (1) the trial court’s denial of his pretrial motion for a state-sponsored psychiatric evaluation resulted in a denial of due process; (2) his trial counsel was ineffective in failing adequately to investigate possible mitigating evidence, specifically Guinan’s mental state and the testimony of family members; (3) the penalty-phase jury instruction concerning mitigating factors violated his Eighth Amendment rights as it did not comport with Mills v. Maryland, 486 U.S. 367, 108 S.Ct. 1860, 100 L.Ed.2d 384 (1988); and (4) improper remarks by the prosecutor during closing argument violated his Eighth Amendment rights. We affirm the District Court’s denial of habeas relief.
I.
Guinan’s first ground for habeas relief alleges that the trial court committed plain error in denying Guinan’s pretrial motion for a psychiatric evaluation in violation of his due process rights. We do not agree.
At the outset, we note that the state argues vigorously that this issue is proeedurally barred because it was not properly presented to the state courts and, accordingly, must be dismissed unless Guinan can demonstrate both adequate cause excusing his failure to raise the claim in state court and actual prejudice resulting from a federal court’s refusal to address the merits of the claim. See Wainwright v. Sykes, 433 U.S. 72, 87, 97 S.Ct. 2497, 2506-07, 53 L.Ed.2d 594 (1977). The state separates Guinan’s claim of trial court error into three discrete claims: the “insanity claim,” alleging that the denial of a psychiatric examination violated due process as it deprived Guinan of a possible insanity defense; the “competency claim,” alleging that the mental exam was necessary to determine whether Guinan was competent to stand trial; and the “mitigation claim,” alleging a due process violation because Guinan was deprived of possible mitigating evidence relating to his mental state at the time of the murder. The record indicates that the insanity and mitigation claims were raised by Guinan in his initial Rule 27.26 motion and were found to be without merit. On appeal of his 27.26 motion, Gui-nan seems to have advanced only the competency claim. The state appellate court noted the discrepancy, but because evidence regarding the competency claim was introduced at the hearing on the 27.26 motion and the hearing court addressed the issue in its findings and conclusions, the appellate court treated the 27.26 motion as amended to conform to the evidence and addressed the competency issue. Guinan, 726 S.W.2d at 756-57. In his habeas petition, Guinan raised the insanity and mitigation aspects of his due process claim and the District Court addressed both issues despite the state’s contention that they were procedurally barred because they were allegedly abandoned in the state court. Based on this record, the state urges us to hold that the insanity and mitigation claims are procedurally barred from federal review. We decline to do so.
A federal court may consider the merits of a claim made in a habeas corpus petition if the petitioner has fairly presented to the state courts the substance of his claim. Buckley v. Lockhart, 892 F.2d 715, 718 (8th Cir.1989) (citing Anderson v. Harless, 459 U.S. 4, 6, 103 S.Ct. 276, 277, 74 L.Ed.2d 3 (1982)), cert. denied,—U.S. -, 110 S.Ct. 3243, 111 L.Ed.2d 753 (1990). In substance the three claims are obviously closely related and evidence concerning all three of them was presented to the Rule 27.26 trial court. Significantly, the legal analysis to be applied by this Court to Guinan’s due process claim is the same regardless of which of the discrete aspects of the claim we address. See Buckley, 892 F.2d at 719 (holding that petitioner’s federal habeas claims of ineffective assistance of counsel were procedurally barred because “the same facts and legal theories are not at issue in [petitioner’s] various petitions”). Because of the serious nature of the penalty imposed in this case and the obvious interrelation of each aspect of Guinan’s asserted due process violation, we conclude that the due process claim as a whole was adequately presented to the state courts and we shall address the mitigation and insanity aspects of this claim as necessary for a resolution of the issue.
In Ake v. Oklahoma, 470 U.S. 68, 83, 105 S.Ct. 1087, 1096, 84 L.Ed.2d 53 (1985), the Supreme Court held that the denial of an indigent defendant’s request for a psychiatric evaluation violates due process “when a defendant demonstrates to the trial judge that his sanity at the time of the offense is to be a significant factor at trial.” This Court has held that in order to establish that an expert is necessary, a defendant must demonstrate a reasonable probability that the requested expert would aid in the defendant’s defense and that the denial of expert assistance would result in an unfair trial. United States v. Saint John, 851 F.2d 1096, 1098 (8th Cir.1988); Little v. Armontrout, 835 F.2d 1240, 1244 (8th Cir.1987) (en banc), cert. denied, 487 U.S. 1210, 108 S.Ct. 2857, 101 L.Ed.2d 894 (1988). We assume arguendo, without deciding, that a defendant charged with capital murder has a similar due process right to expert assistance if his mental state is to be a “significant factor” at the sentencing phase of trial.
Applying the above standard to the facts of this case, we conclude, as did the District Court, that this claim provides Guinan with no basis for habeas relief. Guinan did not demonstrate to the trial judge that his mental state was likely to be a significant factor at trial or at sentencing. In support of his pretrial motion for a mental examination, counsel for Guinan presented three factors: Guinan's history of violent crime, the brutality of the crime with which he was charged, and counsel’s belief that Gui-nan suffered from a mental disease — a belief trial counsel explained at the Rule 27.-26 hearing was based on the above two factors and the difficulty counsel experienced communicating with Guinan. Trial Transcript at 6-7; Transcript of Rule 27.26 Hearing at 34. These factors alone clearly do not establish that Guinan’s mental state was likely to be a significant issue in his case. The first two factors essentially argue for a per se rule requiring a mental evaluation in any case involving a defendant with a history of violent crime charged with yet another violent crime. Our cases have not adopted such a per se rule and we categorically decline to do so here. The third basis, not supported by example or more detailed explanation, cannot be said to have demonstrated to the trial judge that Guinan’s mental state was to be a significant issue at trial or at sentencing. We conclude that the trial court’s denial of Guinan’s pretrial motion for a state-sponsored psychiatric evaluation did not deprive Guinan of due process.
II.
Guinan next argues that his retained trial counsel was ineffective in not introducing evidence of Guinan’s mental state or the testimony of family members as mitigating evidence at the sentencing phase of trial. These claims were raised in Guinan’s 27.26 motion and Guinan’s counsel testified at the hearing held on the motion. Both the hearing and appellate courts found the claims of ineffectiveness to be without merit. See Guinan v. State, 726 S.W.2d at 758. The District Court ordered a psychiatric evaluation of Guinan and heard considerable testimony at the habeas hearing from the doctors who conducted the exam. The court also heard testimony from Guinan’s mother and sister regarding their discussions with Guinan’s counsel prior to the trial and the content of their potential mitigating testimony. After considering this evidence and the trial record, the District Court concluded that Guinan’s counsel was not constitutionally ineffective. We agree with the District Court’s conclusion.
The issue of ineffective assistance of counsel presents a mixed question of law and fact, and as such this Court may conduct its own independent review of the District Court’s conclusions. Laws v. Armontrout, 863 F.2d 1377, 1381 (8th Cir.1988), cert. denied,—U.S.-, 109 S.Ct. 1944, 104 L.Ed.2d 415 (1989). Any factual findings rendered by the state court are presumed to be correct “unless conditions exist which cast those findings into doubt.” Id.; 28 U.S.C. § 2254(d). As always, we review the District Court’s findings of fact under the clearly erroneous standard.
The now familiar two-part test of Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984), governs claims of ineffective assistance of counsel. A defendant must show both that his counsel was deficient in that he “made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment,” id. at 687, 104 S.Ct. at 2064, and that counsel’s errors so prejudiced defendant “that there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different.” Id. at 694, 104 S.Ct. at 2068. This Court’s review of counsel’s performance is “highly deferential,” and we “must indulge a strong presumption that counsel’s conduct falls within the wide range of reasonable professional assistance.” Id. at 689, 104 S.Ct. at 2065. With these considerations in mind, we turn to Guinan’s claim of ineffectiveness at the sentencing phase, addressing first his contention that evidence regarding his mental state ought to have been investigated and introduced, and then his claim that counsel should have called family members to testify.
A.
Guinan argues that his trial counsel was ineffective both in not adequately investigating and supporting his pretrial motion for a mental evaluation and in not introducing mitigating evidence regarding Guinan’s mental state at the sentencing phase of trial.
With regard to the first contention, we have already mentioned the factors presented to the trial court in support of counsel’s motion for mental evaluation: Guinan’s history of serious violent crime, the seriousness of the crime with which he was charged, and the fact that counsel “questioned] his competency.” Trial Transcript at 6-7. At the hearing on Guinan’s 27.26 motion, Guinan’s counsel elaborated and explained that he moved for the examination because he knew of Guinan’s considerable history of alcohol and narcotic abuse and because he was having trouble eliciting specific responses from Guinan in his discussions with him. Transcript of Rule 27.-26 Hearing at 22, 34. Counsel also testified that in addition to the statements on the record, there was discussion between counsel and the trial judge in which counsel made it clear he “was certain about the motion” and “thought it should be granted.” Id. at 24. While we concede that counsel could have been more forceful or specific in detailing the factors underlying his motion for a state-sponsored mental exam, we do not believe that counsel’s actions can be termed constitutionally deficient. Guinan’s counsel informed the judge that he felt a mental evaluation was warranted and necessary due to Guinan’s violent and sometimes erratic behavior; the judge in his discretion denied the motion. Counsel’s actions were well within the parameters of reasonable professional assistance guaranteed by the Sixth Amendment.
A more difficult question is presented regarding Guinan’s claim that counsel was ineffective for not investigating or presenting potentially mitigating evidence concerning Guinan’s mental state. Counsel testified that he did not seek a privately funded psychiatric evaluation because Guinan was indigent and his family could not afford to have the examination performed. At the habeas hearing held by the District Court, however, Guinan’s mother testified that counsel never mentioned the possibility of hiring a psychiatric expert and that if he had she “guessed” she would have been willing to pay for it. Transcript of Eviden-tiary Hearing at 74. The specific factual questions of whether money was available to fund a psychiatric examination and whether Guinan’s counsel ever discussed this issue with Guinan’s family never has been answered by a state court or the District Court and we do not attempt to resolve these issues. We assume for the purposes of this discussion that Guinan’s counsel knew there were funds available for a psychiatric evaluation and yet did not discuss the possibility of hiring this type of expert assistance with Guinan or Guinan’s family. ■ Assuming, without deciding, that this conduct was deficient, we conclude that Guinan was not prejudiced by the omission of evidence regarding his mental state. To establish prejudice at the sentencing phase of trial, Guinan must demonstrate a “reasonable probability” that the jury would not have imposed the death sentence if evidence of his mental state had been introduced. Strickland, 466 U.S. at 694, 104 S.Ct. at 2068. Our review of the record convinces us that Guinan cannot meet this burden:
The District Court ordered a psychiatric evaluation of Guinan and heard considerable testimony from the psychiatrist and psychologist who conducted the examination. The experts were asked to render an opinion regarding Guinan’s present mental state as of June 1988 — the date of the evaluation, some seven years after the commission of the murder — and his past mental state, both at the time of the crime and at trial. As part of the evaluation process, the doctors interviewed Guinan on several occasions, reviewed the transcript of trial and sentencing, and examined Gui-nan’s medical records from the penitentiary. The forensic evaluation diagnosed Gui-nan as having an antisocial personality disorder and the psychiatrist explained this diagnosis at the habeas hearing.
This is a diagnosis that does not infer a severe mental disease. It’s really personality characteristics that meet certain criteria_ And the antisocial personality is dependent on a number of factors including such things as difficulty with the law at a fairly early age; being sometimes aggressive, impulsive, unreliable in maintaining employment; getting in trouble with the law again at early age.
Transcript of Evidentiary Hearing at 18. The witness described this disorder as “a persistent condition that usually is quite resistent to any type of treatment,” and noted that it was probably present at the time of the murder. Id. at 19. The evaluation also characterized Guinan as an over- controlled individual and the psychologist testified this meant Guinan “may bottle up his frustrations rather than finding some way of dispelling them and then after they have kind of accumulated for a period of time, they burst forth in an overly aggressive an inappropriate way.” Id. at 41. The examiners noted that Guinan’s history indicated he had a problem with alcohol abuse both in and out of prison. The evaluation concluded that Guinan currently was not suffering from any major mental illness or defect. Forensic Evaluation at 6.
While conceding that retrospective opinions cannot be rendered with the same degree of certainty, the examiners stated that “the available background records provide no basis for inferring that at the time of the murder in January, 1981, Mr. Guinan was suffering from a mental illness,” and in their opinion, “no mental illness or defect prevented Mr. Guinan from appreciating the wrongfulness of his conduct.” Forensic Evaluation at 5. Based on Guinan’s rational and relevant — albeit minimal — ver-balizations at trial and sentencing, and their discussions with Guinan in which he was able to recall the circumstances of his trial and what transpired, the examiners also concluded that Guinan was competent at the time of his trial and was not suffering from any mental disease or defect at that time. Id. at 5-6. The psychologist explained that it was unlikely that Guinan ever was psychotic because
if a person has a psychotic tendency in the past you’re likely to see some residual symptoms or some residual signs of vulnerability to psychosis and they just weren’t there. Mr. Guinan was quite appropriate in his inneractions [sic] with us. There was no inability for him to understand or to communicate. His sentences and his speech were rational and relevant. There was no suggestion of thought disorder or possible schizophrenia. Many times if you have a schizophrenic person who is in what we can say remission there are some residual signs that they have a major underlying mental illness and none of that was present with Mr. Guinan when he spoke to us.
Transcript of Evidentiary Hearing at 50.
In sum, there is simply no evidence in the record or the psychiatric evaluation to suggest that Guinan’s mental problems can be characterized as anything more than personality disorders evidenced by violent and inappropriately aggressive behavior. We suspect that most capital murder defendants are likely to fit this personality profile. Whether evidence of this type would be considered mitigating by a jury is highly doubtful. The psychiatric evaluation portrays Guinan as an individual prone to violent outbursts due to an aggressive personality disorder which is extremely resistant to treatment. The jury was aware of Gui-nan’s extensive history of violent criminal episodes. Evidence of an antisocial personality disorder might very well have reinforced the state’s position that Guinan was a dangerous individual, incapable of rehabilitation in the prison system.
Even if we view the psychiatric evaluation as mitigating evidence, we must view it in the context of Guinan’s sentencing as a whole. The jury returned the death sentence after finding three statutory aggravating circumstances: (1) Guinan had “a substantial history of serious assaultive criminal convictions,” Mo.Rev.Stat. § 565.012.2(1) (1980 Supp.); (2) the murder “was outrageously or wantonly vile, horrible or inhuman in that it involved torture, or depravity of mind,” id. at § 565.012.2(7); and (3) that at the time of the murder, Guinan was in lawful custody, id. at § 565.012.2(9). After carefully reviewing the record and the psychiatric evaluation, we cannot say that the lack of evidence regarding Guinan’s mental state undermines our confidence in the outcome of the sentencing determination.
B.
Guinan also contends his counsel was ineffective for failing to call certain family members to testify concerning his difficult childhood and his history of problems with alcohol. This claim was raised in Guinan’s 27.26 motion and found to be without merit. The state court found that Guinan’s counsel made a strategic decision not to offer any evidence at the sentencing phase.
Movant’s counsel conferred with mov-ant’s family at length about appearing at the punishment phase of trial ... Counsel determined that to put on any witness during the ■ punishment phase would be detrimental to movant’s case. He said that he could not figure a way to put on any witnesses without the details of mov-ant’s twelve prior felony convictions, and in particular one assault, coming out.
Guinan v. State, 726 S.W.2d at 758. Gui-nan argues that we should ignore this finding because it is refuted by the evidence adduced by the District Court. We disagree.
No member of Guinan’s family testified at the 27.26 hearing. The transcript of the hearing indicates that Guinan was granted several continuances, partly to enable him to contact his family and bring them to the hearing, but they were not there on the day of the hearing. Guinan’s sister and mother testified at the habeas hearing in the District Court. Guinan’s sister testified that she spoke to Guinan’s attorney when she retained him and on at least one other occasion at which she told him she would be willing to testify for Guinan. Guinan’s mother testified as follows:
Q. Ms. Guinan, did you have very many conversations with [Guinan’s attorney] while you were — before the trial—
A. Yes.
Q. —and at the trial?
A. Like, you know, he’d call me once in a while to find out something maybe that he didn’t know about Frankie or, you know, like — or tell me when he went to see him or.
Q. Ms. Guinan, during those conversations did he ever ask you whether you would be willing to testify?
A. He didn’t want us to.
Q. Would you have been willing—
A. Sure I would, yes.
Transcript of Evidentiary Hearing at 67. Guinan’s mother also testified that Gui-nan’s counsel was aware of Guinan’s difficulty with sickness as a child and his problems with alcohol in and out of prison. Id. at 68, 70.
The evidence adduced in the District Court did not lead it, and it does not now lead us, to discount the factual finding of the state courts. Guinan’s counsel made a strategic decision after reasonable investigation that any favorable testimony given by a family member would be outweighed by the harmful effects of giving the state the opportunity to elicit the details surrounding Guinan’s previous violent offenses. As the Court explained in Strickland:
[Strategic choices made after a thorough investigation of law and facts relevant to plausible options are virtually unchallengeable; and strategic choices made after less than complete investigation are reasonable precisely to the extent that reasonable professional judgments support the limitations on investigation.
Strickland, 466 U.S. at 690-91, 104 S.Ct. at 2066. We believe counsel’s decision was entirely reasonable and made after a reasonable investigation of the facts. Counsel’s decision not to call family members to testify was not constitutionally deficient representation.
For the reasons stated, we reject Gui-nan’s claim that his counsel was ineffective both in not presenting evidence as to Gui-nan’s mental state and in not calling family members to.testify at the sentencing phase.
III.
Guinan next challenges, under Mills v. Maryland, 486 U.S. 367, 108 S.Ct. 1860, 100 L.Ed.2d 384 (1988), a jury instruction given during the penalty phase of trial. Mills held that an instruction that leaves a reasonable juror with the impression that a mitigating factor may not be considered unless the jurors unanimously find that it exists violates a defendant’s Eighth Amendment rights. Mills, 486 U.S. at 384, 108.S.Ct. at 1870. Guinan did not raise this issue in any of his state court proceedings nor did he argue it to the District Court in his petition for habeas relief. Because the record reveals no justification for failing to press this issue in a previous proceeding, Guinan is precluded from arguing the Mills claim to this Court.
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941771-13983 | HANEY, Circuit Judge.
Appellants urge that the trial court erred in sustaining appellee’s motion to dismiss their second amended complaint with prejudice.
By that amended complaint appellants sought to recover from appellee corporation the amount to them due upon a judgment theretofore obtained against a corporation, all of whose assets were conveyed to appellee under a reorganization plan.
It appears that plaintiffs are residents of Washington, and that defendant is a Delaware corporation, authorized to engage in business in Washington. Hans Lindh was injured on August 16, 1930, by reason of the negligence of Booth Fisheries Company, also a Delaware corporation engaged in business in Washington, and on April 9, 1932, sued that corporation in the state court to recover for the injuries sustained.
On petition of that company, the action was removed to the District Court about a month thereafter.
On October IS, 1932, the company, defendant in said action, filed its petition in bankruptcy and was adjudicated a bankrupt, and a receiver was appointed to take over the assets and continue the business until a trustee was elected. The trustee was elected and qualified, and it is alleged that “the stockholders, bond-holders, and creditors, secured and unsecured, acting in concert and through various committees representing the different classes theretofore appointed by such classes for the purpose, devised a scheme or plan for the re organization of said bankrupt and its business, whereby said classes agreed between and among themselves to form -a new corporation under the laws of the State of Delaware to be known as Booth Fisheries Corporation to which corporation should be transferred all the assets of said bankrupt Booth Fisheries Company and for which assets compensation should be given to the stockholders of said bankrupt in the form of stock in new Booth Fisheries Corporation in amount determined by and satisfactory to all parties to said scheme or plan or reorganization.”
It is also alleged that appellee-was organized, and stock issued as set forth above; that the value of the assets at the time of the transfer amounted to approximately sixteen millions of dollars. The details of the exchange of stock are alleged, as also are the facts, that because plaintiffs’ claim was unliquidated, they had no standing in the bankruptcy proceedings, were unable to and did not take part therein. It is further alleged that in the reorganization plan there was no provision made for the payment of plaintiffs’ claim, and the judgment debtor had left remaining no assets from which plaintiffs’ claim could be satisfied.
Plaintiffs also allege that they recovered judgment in said action for personal injuries for $1,750 and costs amounting to $48.75 on May 1, 1933, which was some time after the transfer of the assets from the judgment debtor to appellee. It is also alleged that execution was issued and 'returned unsatisfied.
Plaintiffs instituted this cause, originally to impress a lien on the assets transferred, but by the second amended complaint, it is alleged that the identity of the assets was not known to plaintiffs, that they were unable to follow the same, and that “because thereof, they have elected to ask for a money judgment herein.”
The last two paragraphs of the second amended complaint are as follows:
“That by the acts of the defendant as hereinbefore alleged, plaintiffs have been damaged by said defendant in the amount of their said judgment against the Booth Fisheries Company, to-wit: in the sum of $1,798.75 and interest thereon at the legal rate from the 1st day of May, 1933.
“Wherefore plaintiffs pray that they have judgment against the defendant, Booth Fisheries Corporation in the sum of $1,798.75 and interest thereon at the legal rate from the first day of May, 1933, and for their costs herein expended.”
The second amended complaint was dismissed by the lower court for the reasons that the said complaint failed to state facts sufficient to constitute a cause of action or suit, and that it was a fatal departure from the cause set forth in the original complaint.
Although the “matter in controversy” in the case at bar does not exceed $3,-000, even including interest and costs, as required by 28 U.S.C.A. § 41 (1), the lower court took jurisdiction, apparently, and we believe correctly, considering that this cause was ancillary to the one in which judgment was rendered.
Before considering specific claims of the insufficiency of the complaint, it is necessary to discuss the general principles upon which the theory of the complaint is based.
In Louisville Trust Co. v. Louisville, N. A. & C. Ry. Co., 174 U.S. 674, 683, 19 S.Ct. 827, 830, 43 L.Ed. 1130, it is said: “Assuming that foreclosure proceedings may be carried on to some extent at least in the interests and for the benefit of both mortgagee and mortgagor (that is, bondholder and stockholder), we observe that no such proceedings can be rightfully carried to consummation which recognize and preserve any interest in the stockholders without also recognizing and preserving the interests, not merely of the mortgagee, but of every creditor of the corporation. In other words, if the bondholder wishes, to foreclose and exclude inferior lienholders or general unsecured creditors and stockholders, he may do so; but a foreclosure which attempts to preserve any interest or right of mortgagor in the property after the sale must necessarily secure and preserve the prior rights of general creditors thereof. This is based upon the familiar rule that the stockholder’s interest in the property is subordinate .to the rights of creditors. First, of secured, and then of unsecured, creditors. And any arrangement of the parties by which the subordinate rights and interests of the stockholders are attempted to be secured at the expense of the prior rights of either class of creditors comes within judicial denunciation.”
In Northern P. R. Co. v. Boyd, 228 U.S. 482, 502, 33 S.Ct. 554, 559, 57 L.Ed. 931, it is said:
“Corporations, insolvent or financially embarrassed, often find it necessary to scale their debts and readjust stock issues with an agreement to conduct the same business with the same property under a reorganization. This may be done in pursuance of a private contract between bondholders and stockholders. And though the corporate property is thereby transferred to a new company, having the same shareholders, the transaction would be binding between the parties. But, of course, such a transfer by stockholders from themselves to themselves cannot defeat the claim of a nonassenting creditor. As against him the sale is void in equity, regardless of the motive with which it was made. For if such contract reorganization was consummated in good faith and in ignorance of the existence of the creditor, yet when he appeared and established his debt, the subordinate interest of the old stockholders would still be subject to his claim in the hands of the reorganized company. * * * There is no difference in principle if the contract reorganization, instead of being effectuated by private sale, is consummated by a master’s deed under a consent decree. * * *
“For, if purposely or unintentionally a single creditor was not paid, or provided for in the reorganization, he could assert his superior rights against the subordinate interests of the old stockholders in the property transferred to the new company. They were in the position of insolvent debtors who could not reserve an interest as against creditors. Their original contribution to the capital stock was subject to the payment of debts. The property was a trust fund charged primarily with the payment of corporate liabilities. Any device, whether by private contract or judicial sale under consent decree, whereby stockholders were preferred before the creditor, was invalid.”
See, also, Oehring v. Fox Typewriter Co. (C.C.A. 6) 272 F. 833; Phipps v. Chicago, R. I. & P. Ry. Co. (C.C.A. 8) 284 F. 945, 28 A.L.R. 1184; Kansas City Terminal Ry. Co. v. Central Union Trust Co. (C.C.A. 8) 28 F.(2d) 177; Howard v. Maxwell Motor Co. (D.C.N.Y.) 269 F. 292; First Trust Co. v. Crooked Creek R. & Coal Co. (D.C.Iowa) 243 F. 450; Guaranty Trust Co. v. Missouri Pac. Ry. Co. (D.C.Mo.) 238 F. 812.
Appellee contends that the above rule has no application to the instant 'case for several reasons. One reason claimed is that the rule is stated in cases where there was a suit to foreclose a mortgage and that the reorganization in said cases was completed by a “consent decree.” The principle is controlling, however, regardless of the nature of the device used. The controlling feature of such rule is that stockholders have obtained an interest in the reorganized concern, without first using such interest in the extinguishment of creditors’ claims. It cannot he said that the prohibition of the principle is effective when one device is nsed, but is ineffective or nullified when a different device is used. Other reasons urged by appellee in connection with this contention are disposed of in the consideration of other points raised.
Appellee contends that the complaint should have contained allegations showing that there was fraud, collusion, misrepresentation, or imposition inducing the bankruptcy court to permit transfer of the assets. Such allegations as well as allegations of irregularity or illegality in the proceedings arc not essential as shown by the above quotations.
Allegations that appellants had acquired a lien on the assets transferred are likewise unimportant because such lien arises as a conclusion of law from the existence of certain facts.
Appellee urges that there is no allegation to the effect that it assumed, as a condition of the transfer or otherwise, any obligation to pay appellants’ claim. Recovery on such a theory is distinct in itself, and therefore such allegation is unnecessary under the theory pursued here.
It is alleged in the second amended complaint that the “stockholders, bondholders and creditors, secured and unsecured” of the bankrupt devised the scheme of reorganization and that the value of the assets “was upward of” $16,000,000. Having alleged that there were bondholders, which ordinarily implies that there are holders of obligations secured by a lien on property, and that there were secured creditors, which would ordinarily mean that such creditor by reason of his security held a lien on property, we think it was incumbent on appellants to allege, at least, how much the value of the property exceeded the amount of the liens on such property. Regardless of the value of the property, if the amount of the liens exceed the value, the stockholders have received no interest or value, and therefore the unsecured creditors have been deprived of nothing.
In Kansas City S. Ry. Co. v. Guardian Trust Co., 240 U.S. 166, 176, 36 S.Ct. 334, 336, 60 L.Ed. 579, it is said: “As the claim of the Trust Company was put by the court of appeals upon the equitable right of creditors to be preferred to stockholders against the property of a debtor corporation, it is essential to inquire whether the appellant received any such property, —that is, whether it got by the foreclosure more than enough to satisfy the mortgage, which was a paramount lien.”
In Kansas City Terminal Ry. Co. v. Central Union Trust Co., 271 U.S. 445, 455, 46 S.Ct. 549, 551, 70 L.Ed. 1028, it is said: “Unsecured creditors of insolvent corporations are entitled to the benefit of the values which remain after lienholders are satisfied, whether this is present or prospective, for dividends or only for purposes of control.”
In Western Union Telegraph Co. v. United States & M. T. Co. (C.C.A. 8) 221 F. 545, 549, it is said: “Any plan or scheme threatened or executed whereby the holders of the bonds secured by the mortgage and the stockholders secure, or intend or undertake to secure, to the stockholders, by contract, foreclosure sale, or other device, an equal or a greater benefit from the property than is thereby secured to, or offered to and rejected by the general creditors, is such a breach or threatened breach of trust as entitles any complaining creditor to relief in a court of equity. A purchase through a foreclosure sale, or otherwise, of the property of an insolvent corporation by a new corporation, pursuant to a plan or scheme of the bondholders and stockholders of the insolvent company, whereby the stockholders thereof derive, by receipt of stock or bonds of the new company, or otherwise, benefits equal to or greater than those received by, or openly offered to and rejected by, its general creditors, is fraudulent in law as to the latter, and renders the new corporation and the property it purchased at such sale liable for the claims of such creditors against the old company, at least to the extent of the value of the interest secured by the stockholders of the old company in excess of the value of the interest secured by, or openly offered to and rejected by, the unsecured creditors.”
In Okmulgee Window Glass Co. v. Frink (C.C.A. 8) 260 F. 159, 161, it is said: “We have carefully examined the entire evidence, and are 'convinced that the Coffeyville Company was merged in and absorbed by appellant, which is really nothing more than a continuation of the Coffeyville Company. The arrangement was as follows: The organization by the same individuals of a new company (appellant), with the same amount of capital stock, to be paid for by the assets of the old company (Coffeyville Company), for the sole purpose of continuing the same character of business with the assets of the old company; a transfer to the appellant of the assets of the old company; assumption of the indebtedness of that company by appellant; exchange of stock, share for share. The legal result of such transactions is to impose upon appellant liability, up to the value of such assets, to the creditors of the Coffeyville Company.”
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3908041-25893 | EDWARD WEINFELD, District Judge.
Plaintiff, a physician licensed to practice in the State of New' York, was a provider of professional medical services under the Medicaid program. His practice consisted largely of treating Medicaid patients, which provided his principal source of income. The defendants are thirteen state and city officials charged with the administration of the Medicaid program in New York City, where plaintiff practiced. On January 29, 1976, plaintiff was notified by letter that effective February 16, 1976, he would be disqualified from statewide participation in the Medicaid program for alleged violations of the rules and regulations of the program. Plaintiff then commenced this action under the Civil Rights Act, alleging various violations of his federally protected constitutional rights. He seeks a declaratory judgment annulling all proceedings taken against him to date and an injunction against any further proceedings; he also seeks three million dollars compensatory and eight million dollars punitive damages from the defendants. Before the Court now are plaintiff’s motions for the convening, of a three-judge court to consider one of his claims, for a preliminary injunction and for partial summary judgment, and defendants’ cross-motions that the Court abstain from asserting jurisdiction or that it dismiss the complaint.
The focus of the controversy is Item 35 of the New York State Medical Handbook, comprising regulations prepared by the New York State Department of Health ap plieable to the Medicaid program. Item 35 is entitled “Unacceptable Practices and Fraud by Providers.” Under Item 35, when a physician is suspected of engaging in “unacceptable practices” he is called to a conference with a representative of the State Department of Health at which an effort is made to resolve the matter. If no informal resolution is reached at this conference the representative, in consultation with the official in charge of the local Medicaid program, may decide upon some administrative action ranging from censure' or audit, through denial of payment on disputed claims, to suspension or permanent disqualification from the program. The physician must be notified in writing of any administrative action and of his right to a hearing to appeal the decision. If he requests a hearing he is entitled to notice of the charges, to be represented by counsel, to cross-examine witnesses and to present evidence on his behalf. ■ Implementation of any decision must be delayed until after the determination of his appeal.
The events that triggered this litigation commenced on November 19, 1975, when plaintiff was called to a conference with the Deputy Executive Medical Director of the New York City Medicaid program pursuant to Item 35. He was advised that an audit of the invoices he had submitted to the Medicaid program revealed an excessive number of prescriptions for Valium and Elavil, two mood-altering drugs; that his records were inadequately kept and did not indicate sufficient basis for the prescriptions which had been written; and that plaintiff had received Medicaid payments for services and consultations that were not medically justified. Plaintiff was further told that the City Department of Social Services, the agency in charge of administering the Medicaid program within New York City, would withhold payment of approximately $25,000 in invoices previously submitted by plaintiff pending a determination of what amount would be sought as restitution for plaintiff’s alleged overbillings during his entire participation in the Medicaid program, and that further administrative action might be taken against him.
Plaintiff subsequently abandoned his medical practice in New York and moved to Florida, where he is also admitted to practice. He also retained an attorney and on December 29, 1975 commenced an action in the Supreme Court of the State of New York seeking to compel immediate payment of the $25,000 in withheld invoices. That action was dismissed on September 9, 1976, as prematurely brought since plaintiff had not exhausted his administrative remedies. The state court specifically held that state law authorized the defendants to withhold payments pending an investigation and possible administrative action; that issue is not before the Court in this case.
Meanwhile plaintiff received the letter of January 29, 1976, previously referred to, informing him of his disqualification from participation in New York State’s Medicaid program. Plaintiff’s disqualification was stated to be due to allegedly “improper practices,” including (1) keeping improper and incomplete medical records; (2) improper prescribing of Valium and Elavil; (3) submitting invoices for first visits when “proper first visit care” was not rendered; and (4) submitting invoices for “follow-up visits of undocumented medical necessity.” The letter also informed plaintiff of his right to a hearing at which he could be represented by counsel, could cross-examine witnesses, and could present evidence on his behalf. The letter further stated that if plaintiff requested a hearing “all administrative action will be held in abeyance until a final decision is reached.”
Upon receipt of the letter plaintiff’s attorney promptly requested a hearing and demanded that he be given detailed notice of the specific charges against plaintiff and that the hearing be delayed “pending a determination of the Constitutionality of Item 35 and all other regulations permitting you to proceed as you are doing.” The hearing was convened on April 5, 1976, at which time plaintiff placed his constitutional objections on the record. The hearing was thereupon adjourned. The administrative proceeding has been held in abeyance pending this Court’s determination of the pending motions.
The main thrust of plaintiff’s claims appears to be that (1) Item 35 of the New York State Medical Handbook is a “nullity” because of failure to comply with provisions of the New York State Constitution requiring filing of regulations with the Secretary of State; (2) even if Item. 35 is not a nullity, it is unconstitutionally vague in many respects; (3) defendants have conspired to deny plaintiff due process of law with respect to the hearing; and (4) defendants have also conspired to deprive him of equal protection of the laws and such other rights as he may have as a provider of services.
Plaintiff’s most vigorously pressed claim is that proceedings against him under Item 35 deny him due process of law because the definition of “unacceptable practices” contained therein is so vague as to be unconstitutional. Even if it is not a formally promulgated regulation of the state, Item 35 is “an order made by an administrative board or commission acting under State statutes” intended to effectuate a statewide policy. Plaintiff’s claim that Item 35 is unconstitutionally vague is thus within the category of cases for which a statutory three-judge court is required if a substantial issue is presented. However, after careful consideration the Court has concluded that plaintiff’s claim is so insubstantial that a three-judge court need not be convened to consider it.
A statute or regulation is unconstitutionally vague only if its meaning is so ambiguous or unclear that the persons affected must guess at its meaning. Plaintiff’s claim of vagueness must be considered in light of the purposes and effects of this particular regulation. First, since Item 35 does not inhibit the exercise of any First Amendment freedoms, the strict scrutiny appropriate when such fundamental liberties are at stake is not appropriate here. Moreover, Item 35 does not carry such severe sanctions as criminal penalties or total denial of the right to practice medicine. Rather, this case concerns the state’s enumeration of conditions under which it will maintain contractual relations with a doctor who has freely chosen to participate in the Medicaid program. Such a regulation calls for less exacting review than a criminal or licensing statute.
While the wording of Item 35, as is true of most regulations, could be improved, it is difficult to believe that a physician of average intelligence would not understand what is meant, for example, by “care of poor and unacceptable quality” or “provision of excessive, unnecessary, professionally unacceptable, unproven or experimental care.” Instead of attempting to compile a lengthy list defining every conceivable form of “unacceptable practice” — an approach which might unduly fetter the exercise of a doctor’s professional judgment— the state has chosen to give general notice of the categories of activity it will not tolerate. This alternative is not unconstitutional.
Moreover, plaintiff cannot seriously contend that he was not aware that the practices with which he is charged — including unwarranted and excessive prescriptions of potentially dangerous drugs, one of which is a controlled substance under New York law, and billing for services which were unnecessary or not actually performed — were improper and that even apart from the proscriptions of Item 35 the state might be under no obligation to pay for such practices. “[E]ven if the outermost boundaries of [the regulation] may be imprecise, any such uncertainty has little relevance here, where [plaintiff’s] conduct falls squarely within the ‘hard core’ of the statute’s proscriptions . . . .”
Of controlling importance, however, is the Supreme Court’s affirmance, in Association of American Physicians and Surgeons v. Weinberger, of a lower court decision, rejecting a vagueness challenge to a strikingly similar federal statutory scheme. The purpose of the federal law there under consideration, like that of Item 35, is to limit the unnecessary and improper use of medical facilities and medical care under, inter alia, the Medicaid program. To achieve this goal Congress provided in that statute that physicians operating under the Medicaid program had the obligation to ensure that medical care
(A) will be provided only when,, and to the extent, medically necessary; and
(B) will be of a quality which meets professionally recognized standards of health care; and
(C) will be supported by evidence of such medical necessity and quality in such form and fashion and at such time as may reasonably be required . . .
If a physician does not meet these standards, federally funded Medicaid payments cannot be made for the services in question, and if the abuse is flagrant or repeated, the physician can be permanently disqualified from the program. The three-judge district court, in language equally applicable to Item 35, rejected the claim that this federal statute is unconstitutionally vague;
The test in determining whether or not a statute is unconstitutionally vague is whether men of common intelligence must necessarily guess at its meaning. Due to the particular application of this statute to physicians and other practition ers, the Court must also consider whether members of the medical profession must necessarily guess at the meaning of phrases set forth in the statute, such as “medically necessary,” “professionally recognized health care standards,” and “proper care.”
Although the Court recognizes that these phrases are not highly specific, the Court believes that the language of the challenged legislation is not impermissibly vague or uncertain. As the Supreme Court stated in United States v. Petrillo, 332 U.S. 1, 7-8, 67 S.Ct. 1538, 91 L.Ed. 1877 (1947):
. the Constitution does not require impossible standards. The language here challenged conveys sufficiently definite warning when measured by common understanding and practices. The Constitution requires no more.
Plaintiffs’ reliance on numerous decisions invalidating various criminal statutes on the grounds of vagueness is misplaced. The present statutory scheme does not impose criminal sanctions. Nor does it provide for severance from the medical profession for non-compliance. . Rather the instant legislation only sets forth conditions for being compensated by federal funds under the Medicare and Medicaid programs. . . . Congress faced a difficult task in drafting this statute with sufficient specificity to give the physicians, practitioners and providers of health care service adequate notice of the new requirements of the law and at the same time to maintain enough flexibility to cover a variety of medical cases. In accomplishing this task Congress did not stray beyond the permissible boundaries of the Constitution.
On direct appeal to the Supreme Court, Weinberger was affirmed summarily. This affirmance is a decision on the merits for the purpose of determining whether a substantial constitutional question exists that requires the convocation of a three-judge court. The difference between the legislation under consideration in Weinberger and Item 35 in this case is so slight that the Court has no doubt that the Weinberger decision “leave[s] no room for the inference that the questions sought to be raised can be the subject of controversy.” Accordingly, the Court declines to convene a three-judge court to consider plaintiff’s claim that Item 35 is unconstitutionally vague. This decision, of course, necessarily disposes of so much of plaintiff’s motions for a preliminary injunction and summary judgment as rest on the grounds of vagueness.
Plaintiff’s other grounds for seeking to enjoin the administrative hearing can be dealt with in fairly short order. It is well established that a preliminary injunction should not issue except
upon a clear showing of either (1) probable success on the merits and possible irreparable injury, or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and'a balance of hardships tipping decidedly toward the party requesting the preliminary relief.
Plaintiff has failed to show a probability of success on the merits on any of his claims. First, he claims that the scheduled hearing would deny him due process of law because he has not received adequate notice of the charges against him and is therefore unable to prepare an adequate defense. However, what kind of notice is required to comport with due process of law depends upon the facts and circumstances of the particular case. In this ease plaintiff had a thorough discussion of the matter, and an examination of the challenged records, with the Deputy Executive Medical Director; he later received a letter, referred to above, setting forth the charges against him. In addition, since the institution of this suit he has received a 106-page bill of particulars identifying the patients with respect to whom unacceptable practices are alleged. Moreover, it' is clear from the correspondence between plaintiff’s attorney and the defendants that plaintiff is well aware of what he is charged with and is able to defend himself; his grievance is actually that he does not feel that his actions constitute unacceptable practices. Under the facts of this case the requirement of due process of law is fulfilled.
Plaintiff further claims that the hearing should be enjoined because Item 35, under which he alleges the defendants are proceeding against him, is void since it has not been properly filed with the Secretary of the State as required by the New York State Constitution. Item 35 was superseded, before plaintiff was notified of his disqualification from Medicaid, by validly promulgated regulations. Thus, insofar as plaintiff objects that the procedures followed in his case are illegal because of the lack of filing of Item 35 his claim is moot, since the notice of disqualification and abortive hearing all were authorized by the new regulation. And, since the courts of New York State have held that the state has the inherent power, apart from any regulation, to police “the quality and the value of the services rendered” by physicians providing services under the Medicaid program, the filing of Item 35 was irrelevant to defendants’ authority to proceed against plaintiff. Plaintiff in fact concedes in his brief that he does not dispute defendants’ “authority to investigate alleged improper practices under Medicaid.” Thus regardless of whether Item 35 was properly filed, the actions of defendants were not illegal. Finally, plaintiff’s charges that he has been unfairly singled out for punishment are made in the most conclusory terms; he has not adduced a shred of evidence to support them. Thus, plaintiff has shown no probability of success on the merits.
Nor has plaintiff shown any irreparable injury, which is a prerequisite to the grant of injunctive relief under either prong of the Sonesta standard. Plaintiff is to be afforded a hearing on the charges; as noted above, the hearing provides all the procedural protections of a full adversary trial. All of the claims he advances in this action can be raised before the administrative hearing officer and upon judicial review after the administrative procedure is completed. Because he has requested a hearing; plaintiff’s disqualification has not yet become effective; depending upon the decision of the hearing examiner it may never become effective. Nor will an adverse decision deprive plaintiff of the right to earn a living by the practice of medicine. Moreover, although plaintiff will have to return to New York to attend the hearing this is because of his voluntary action in moving to Florida. Finally, his charges that he will suffer irreparable injury because of the alleged bias of the hearing examiner are frivolous. The mere fact that the examiner was ready to proceed with the hearing despite plaintiff’s jurisdictional attack does not demonstrate bias, nor does the fact that he is named as a defendant in this case. In short, plaintiff has not pointed to the possibility of any injury other than that normally associated with prosecuting an administrative appeal such as this one, which does not entitle him to injunctive relief.
Apart from the above, there is another reason to deny the requested injunctive relief altogether. Our Court of Appeals has recently suggested, in McCune v. Frank; that state administrative proceedings are entitled to the same respect from federal courts as state judicial proceedings, and should therefore not be enjoined in the absence of a showing of “bad faith, harassment, or any other unusual circumstance that would call for equitable relief.” This is especially true where, as here, plaintiff himself requested the very administrative hearing he now seeks to enjoin. Certainly the state’s interest in this proceeding, which affects the health and safety of its citizens as well as the public fisc, is at least as great as its interest in the length of a policeman’s hair, which was at issue in MeCune v. Frank. By its regulations and by the procedures followed in this case the state is attempting to protect its citizens while at the same time affording plaintiff due process of law. To this date its efforts have been frustrated by this litigation. The simple fact is that all plaintiff’s constitutional and statutory claims can be presented in the administrative proceeding. Plaintiff has made no showing of any extraordinary circumstances that require a court of equity to intervene on his behalf and abort the state’s attempts to resolve these matters in an orderly and expeditious fashion. Thus, plaintiff’s claim for injunctive relief should be dismissed altogether.
Finally, plaintiff’s claim for damages must be dismissed without prejudice as premature. Until the administrative proceedings are concluded it is “simply impossible to make any reasoned evaluation” of plaintiff’s claim that he will be denied due process, or to calculate the damage he will suffer thereby.
Accordingly, the complaint is dismissed in its entirety without prejudice.
. 42 U.S.C. § 1983.
. Since this action was commenced prior to the recent repeal of 28 U.S.C. § 2281, its provisions remain applicable here. P.L. 94-381, 90 Stat. 1119, § 7 (1976).
. New York State’s Medicaid program is' administered by local public welfare districts under the supervision of the State Department of Social Services. N.Y.Soc.Serv.L. § 365(1) (McKinney 1976). The State Department of Health is responsible for setting and enforcing standards for medical care. Id. § 364(2).
. According to defendants, an audit of their records revealed that during the month of August 1975 alone, one pharmacy submitted invoices for 250 prescriptions written by plaintiff in which both Valium and Elavil were prescribed. A review of the charts of 25 of those patients, chosen at random, showed that plaintiff had written them over 750 prescriptions for Valium and Elavil over the course of about one year. Many of these patients were drug addicts or former drug addicts; defendants have adduced evidence that the prescription of Valium and Elavil to persons with a history of drug addiction can be dangerous.
. Defendants contend that plaintiff had previously intended to move to Florida.
. “Unacceptable practices by providers may include,' but are not limited to provision of care of poor and unacceptable quality; flagrant and continuing disregard of established policies, standards, fees and procedures; provision of excessive, unnecessary, professionally unacceptable, unproven or experimental care.” § 35.1.B.2.
. Plaintiff also claims that Item 35 is unconstitutionally vague because it allows a variety of punishments to be imposed upon a physician found guilty of unacceptable practices without enumerating the conditions under which each will be invoked. However, the mere presence of some discretion does not make a regulation unconstitutionally vague, as long as the regulation provides fair notice of the prohibited conduct. See cases cited n. 12 infra; Snell v. Wyman, 281 F.Supp. 853, 863-65 (S.D.N.Y.1968), aff’d, 393 U.S. 323, 89 S.Ct. 553, 21 L.Ed.2d 511 (1969); cf. United States ex rel. Shell Oil Co. v. Barco Corp., 430 F.2d 998, 1000-01 (8th Cir. 1970).
. See pp. 213-214 infra.
. 28 U.S.C. § 2281 (1970).
. Maggett v. Norton, 519 F.2d 599, 602-03 (2d Cir. 1975); see Board of Regents v. New Left Educ. Project, 404 U.S. 541, 542, 92 S.Ct. 652, 30 L.Ed.2d 697 (1972); King v. Smith, 392 U.S. 309, 312 n. 3, 88 S.Ct. 2128, 20 L.Ed.2d 1118 (1968); Wisdom v. Norton, 507 F.2d 750, 757-58 (2d Cir. 1974). A three-judge court is required even to consider the appropriateness of abstention or of dismissal pursuant to Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). See Steffel v. Thompson, 415 U.S. 452, 457 n. 7, 94 S.Ct. 1209, 39 L.Ed.2d 505 (1974); McRedmond v. Wilson, 533 F.2d 757, 764 (2d Cir. 1976); Abele v. Markle, 452 F.2d 1121, 1125 (2d Cir. 1971), vacated, 410 U.S. 951, 93 S.Ct. 1412, 35 L.Ed.2d 683 (1973). Cf. Idlewild Bon Voyage Liquor Corp. v. Epstein, 370 U.S. 713, 82 S.Ct. 1294, 8 L.Ed.2d 794 (1962). But cf. Shelton v. Smith, 547 F.2d 768, 769-770 (2d Cir. 1976).
. See Hagans v. Lavine, 415 U.S. 528, 534-43, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974); Goosby v. Osser, 409 U.S. 512, 518-19, 93 S.Ct. 854, 35 L.Ed.2d 36 (1973); Idlewild Bon Voyage Liquor Corp. v. Epstein, 370 U.S. 713, 715, 82 S.Ct. 1294, 8 L.Ed.2d 794 (1962); Ex parte Poresky, 290 U.S. 30, 32, 54 S.Ct. 3, 78 L.Ed. 152 (1933); Wisdom v. Norton, 507 F.2d 750, 758 (2d Cir. 1974).
. E. g., Broadrick v. Oklahoma, 413 U.S. 601, 607, 93 S.Ct. 2908, 37 L.Ed.2d 830 (1973); Grayned v. City of Rockford, 408 U.S. 104, 108-09, 92 S.Ct. 2294, 33 L.Ed.2d 222 (1972); Cameron v. Johnson, 390 U.S. 611, 615-16, 88 S.Ct. 1335, 20 L.Ed.2d 182 (1968); Cramp v. Board of Public Instruction, 368 U.S. 278, 287, 82 S.Ct. 275, 7 L.Ed.2d 285 (1961); Connally v. General Constr. Co., 269 U.S. 385, 391, 46 S.Ct. 126, 70 L.Ed. 322 (1926).
. See American Communications Ass’n v. Douds, 339 U.S. 382, 412, 70 S.Ct. 674, 691, 94 L.Ed. 925 (1950):
“The applicable standard, however, is not one of wholly consistent academic definition of abstract terms. It is, rather, the practical criterion of fair notice to those to whom the statute is directed. The particular context is all important.”
. Rose v. Locke, 423 U.S. 48, 50 n. 3, 96 S.Ct. 243, 46 L.Ed.2d 185 (1975); Smith v. Goguen, 415 U.S. 566, 573 & n. 10, 94 S.Ct. 1242, 39 L.Ed.2d 605 (1974); Papachristou v. City of Jacksonville, 405 U.S. 156, 162, 92 S.Ct. 839, 31 L.Ed.2d 110 (1972); United States v. National Dairy Prods. Corp., 372 U.S. 29, 36, 83 S.Ct. 594, 9 L.Ed.2d 561 (1963). See Hynes v. Mayor of Oradell, 425 U.S. 610, 620, 96 S.Ct. 1755, 48 L.Ed.2d 243 (1976); Cramp v. Board of Public Instruction, 368 U.S. 278, 287-88, 82 S.Ct. 275, 7 L.Ed.2d 285 (1963); United States v. Chestnut, 394 F.Supp. 581, 588 (S.D.N.Y.1975).
. See Horvath v. City of Chicago, 510 F.2d 594, 596 (7th Cir. 1975); Brennan v. Occupational Safety & Health Review Comm'n, 505 F.2d 869, 872 (10th Cir. 1974); Massachusetts Welfare Rights Org. v. Ott, 421 F.2d 525, 527 (1st Cir. 1969); Henkes v. Fisher, 314 F.Supp. 101, 107-08 (D.Mass.1970), aff’d, 400 U.S. 985, 91 S.Ct. 462, 27 L.Ed.2d 436 (1971); Snell v. Wyman, 281 F.Supp. 853, 863-65 (S.D.N.Y.1968), aff’d, 393 U.S. 323, 89 S.Ct. 553, 21 L.Ed.2d 511 (1969).
. See Civil Service Comm’n v. Letter Carriers, 413 U.S. 548, 578-79, 93 S.Ct. 2880, 2897, 37 L.Ed.2d 796 (1973):
“[T]here are limitations in the English language with respect to being both specific and manageably brief, and it seems to us that although the prohibitions may not satisfy those intent on finding fault at any cost, they are set out in terms that the ordinary person exercising ordinary common sense can sufficiently understand and comply with, without sacrifice to the public interest.”
See also Rose v. Locke, 423 U.S. 48, 49-50, 96 S.Ct. 243, 46 L.Ed.2d 185 (1975); United States v. Petrillo, 332 U.S. 1, 7, 67 S.Ct. 1538, 91 L.Ed. 1877 (1947).
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4011349-27071 | ORDER & OPINION
JOE BILLY McDADE, Senior District Judge.
This matter is before the Court on Defendants’ Motions to Dismiss. (Docs. 55, 60, 61, 58). Plaintiff has responded in opposition to each of the Motions to Dismiss. (Docs. 64, 65, 66, 67). For the reasons stated below, the East Peoria De fendants’ and the Peoria County Defendants’ Motions to Dismiss are denied, and the Tazewell County Defendants’ and the Pekin Defendants’ Motions to Dismiss are granted.
Legal Standard
“In ruling on Rule 12(b)(6) motions, the court must treat all well-pleaded allegations as true and draw all inferences in favor of the non-moving party.” In re marchFIRST Inc., 589 F.3d 901, 904 (7th Cir.2009) (citing Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir.2008)). To survive a motion to dismiss under 12(b)(6), a plaintiffs complaint must “plead some facts that suggest a right to relief that is beyond the ‘speculative level.’ ” EEOC v. Concentra Health Svcs., Inc., 496 F.3d 773, 776-77 (7th Cir.2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 560-63, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Though detailed factual allegations are not needed, a “formulaic recitation of a cause of action’s elements will not do.” Twombly, 550 U.S. at 547, 127 S.Ct. 1955. “The complaint must contain ‘enough facts to state a claim to relief that is plausible on its face.’ ” Bissessur v. Indiana University Bd. of Trustees, 581 F.3d 599, 602 (7th Cir.2009) (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955; Tamayo, 526 F.3d at 1084). “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.’ ” Id. (quoting Ashcroft v. Iqbal, - U.S. -, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009)).
The Court may strike “any redundant, immaterial, impertinent, or scandalous matter” from a pleading under Federal Rule of Civil Procedure 12(f).
Background
This matter arises from an incident on May 24, 2007, in which Brian Pitzer, Plaintiffs decedent, was killed. On that date, Pitzer was at his home in Creve Coeur, Illinois. He suffered from severe depression and was on anti-depression medication. Plaintiff, Pitzer’s wife, found Plaintiff at home the afternoon of May 24, 2007, intoxicated and holding a shotgun, which he refused to relinquish. Plaintiff had to leave to attend to their daughter, but contacted an East Peoria auxiliary police officer, Jeff Hall, for assistance with Pitzer. Members of the Creve Coeur police department arrived at the Pitzer home and attempted to get Pitzer to come outside without his gun.
Following Pitzer’s refusal to put down the gun and come out, the Creve Coeur police called the Central Illinois Emergency Response Team (“CIERT”), which is made up of officers from several local governmental entities in the Peoria, Illinois area, including Chad LaCost, James Pearson, Jeffrey Stolz, Todd Mutchler, and Chris McKinney. The CIERT team joined the Creve Coeur police officers at the Pitzer home, where they placed an armored vehicle in the street to block access to the residence, and instructed neighbors to stay indoors.
Pitzer remained in his home for the next five hours, during which he left the house on one or two occasions, carrying his shotgun over his arm; Pitzer informed the police that he intended to commit “suicide by police.” The officers surrounded the house, and attempted to convince Pitzer to come out unarmed. Pitzer spoke with his father at some point, and told him that he would give the gun to his father. Pitzer’s parents, who lived a three-hour drive away in Missouri, therefore began to drive to Creve Coeur to assist the police in disarming Pitzer. Pitzer’s father told the police that Pitzer had stated he would relinquish the gun to his father and that he was on his way to the area.
At the time when Pitzer’s parents were in Pekin, Illinois, a short distance from Pitzer’s residence, Pitzer came out of his home with his shotgun pointed upward. Pearson directed Stolz, Mutchler, and McKinney to enter the Pitzer home, and directed Stolz and another group to set up the SL 6 Multi-Launcher, a “less lethal” force option, and to release a police dog after using the Launcher. Pitzer’s pet dog left the house after Pitzer while the officers were entering it. Stolz released the police dog, which, instead of biting Pitzer as commanded, bit Pitzer’s dog. At that point, officers shot Pitzer with a taser, causing him to drop the shotgun. While Pitzer was unarmed, LaCost shot Pitzer in the back, fatally wounding him. Pitzer died on May 25, 2007.
Plaintiffs Second Amended Complaint alleges, pursuant to 42 U.S.C. § 1983, violations of the Fourth Amendments by each of the officers. (Doc. 49 at 10-12). In addition, Plaintiff alleges a common law claim for battery under Illinois law against LaCost. (Doc. 49 at 12). Plaintiff also alleges, under the Illinois Local Governmental Tort Immunity Act, that East Peoria, Peoria County, Pekin, and Tazewell County are each “responsible for the payment of any settlement or judgment of the federal civil rights claim” against their respective officers, and that East Peoria is also liable under the Act for the “payment of any settlement or judgment of the ... common law battery claim against” La-Cost. (Doc. 49 at 12-13).
Discussion
I. East Peoria and Peoria County Defendants’ Motions to Dismiss or Strike
The East Peoria Defendants argue that the damages alleged by Plaintiff in paragraph 38 of the Second Amended Complaint are not recoverable under § 1983, and argue that the paragraph be stricken or that the Complaint be dismissed. (Doc. 55). The Peoria County Defendants join in this Motion. (Doc. 60). These Defendants argue that Plaintiff cannot recover Wrongful Death Act-type damages under § 1983, but that Plaintiff, as administrator of Pitzer’s estate, can recover only damages that Pitzer would have been able to recover (survival damages).
Section 1983 does not address the types of damages available to the estate when an individual is killed by unconstitutional state action; instead, a federal court may look to state law under 42 U.S.C. § 1988, so long as it is not inconsistent with § 1983’s policies, to determine whether the appropriate measure of damages. Bass by Lewis v. Wallenstein, 769 F.2d 1173, 1188 (7th Cir.1985). Illinois provides two potentially analogous measures of damages: the Wrongful Death Act and the Survival Act. The Wrongful Death Act allows the decedent’s estate to recover “pecuniary” damages for injuries incurred by a surviving spouse and next of kin. 740 ILCS 180/1 et seq. The Survival Act allows the decedent’s estate to continue a decedent’s own cause of action to recover for conscious pain and suffering, as well as medical expenses incurred before death. 755 ILCS 5/27-6 et seq. Defendants argue that Russ v. Watts precludes recovery by Plaintiff of the Wrongful Death Act-type damages alleged in paragraph 38. 414 F.3d 783 (7th Cir.2005). In Russ, the parents of the adult decedent sued on their own behalf, and the Seventh Circuit held that the parents, individually, had no standing to assert a § 1983 claim on their own behalf. Id. at 790-91. The parents had claimed a “due process right to associate with” the decedent, but the court found that there was no “constitutional right to recover for the loss of the companionship of an adult child when that relationship is terminated as an incidental result of state action.” Id. at 785, 791. In this case, though, as noted above, Plaintiff is suing as administrator of Pitzer’s estate; she does not assert a constitutional right to associate with Pitzer on her own behalf, but rather Pitzer’s own right against violations of the Fourth Amendment.
The Seventh Circuit has addressed the interplay of the Illinois Wrongful Death and Survival Acts with § 1983 where the estate administrator is the plaintiff. In Spence v. Staras, the Seventh Circuit held that the estate administrator of a man whose death had allegedly been caused by unconstitutional state action was eligible to recover pecuniary losses under the Wrongful Death Act for the decedent’s next of kin, damages resulting from the decedent’s pain and suffering prior to death, and punitive damages. 507 F.2d 554, 558 (7th Cir.1974). In Bass, the Seventh Circuit, noting that Illinois law would otherwise preclude recovery by the estate for loss of life itself, held that this limitation would conflict with the deterrent policy of § 1983, and permitted recovery by the estate for “loss of life,” in addition to “conscious pain and suffering experienced by the decedent prior to death, and punitive damages” in appropriate cases. Bass, 769 F.2d at 1190.
This issue was decided in this case by the Court on February 11, 2009. (597 F.Supp.2d 806, 812-13 (C.D.Ill.2009)). In ruling on the East Peoria Defendants’ Motion to Dismiss or Strike the damages allegations of Plaintiffs first Amended Complaint, the Court held that it
would not conflict with federal law to incorporate the damages and survivor-ship provisions of the Illinois Wrongful Death Act into the instant section 1983 claim, and thereby, potentially allow Brian Pitzer’s estate to recover for the loss of consortium, society, and companionship by his wife and minor children as the result of his death.
(597 F.Supp.2d at 812-13). The damages paragraph addressed by the Court in that Opinion made the same claims relative to decedent’s widow and children as does paragraph 38 of the Second Amended Complaint. (Doc. 1 at 7-8; Doc. 49 at 14). In this case, the Court has already determined that damages for “loss of life” that are recoverable by the estate under § 1983 include the types of pecuniary damages listed in the Wrongful Death Act. The Court has considered and rejected the argument the Russ forecloses Wrongful Death Act-type damages for Plaintiff as administrator of Pitzer’s estate. (597 F.Supp.2d at 810-11).
The law of the case doctrine thus precludes relitigation of this issue, especially as Defendants have not asked for reconsideration of the February 11, 2009 decision, and have not provided any compelling reason for reconsideration. “[T]he law of the case doctrine embodies the notion that a court ought not to re-visit an earlier ruling in a case absent a compelling reason, such as manifest error or a change in the law, that warrants re-examination.” Minch v. City of Chicago, 486 F.3d 294, 301 (7th Cir.2007) (citing Santamarina v. Sears, Roebuck & Co., 466 F.3d 570, 572 (7th Cir.2006); Starcon Int'l, Inc. v. N.L.R.B., 450 F.3d 276, 278 (7th Cir.2006); Best v. Shell Oil Co., 107 F.3d 544, 546 (7th Cir.1997)). The Court has reviewed the February 11, 2009 Opinion, as well as the relevant caselaw, and finds no indication that the determination that Plaintiff, as administrator, may recover the type of damages alleged in paragraph 38 of the Second Amended Complaint was erroneous. Defendants rely primarily on Russ and on other cases holding that family members have no standing to bring individual actions under § 1983 for the deaths of their relatives, which are not applicable to this case. These cases do not compel the Court to reconsider its earlier ruling, since Plaintiff sues as administrator; she does not assert her own individual cause of action. The law of this case establishes that the estate is eligible to recover for decedent’s “loss of life” by collecting pecuniary damages analogous to those listed in the Wrongful Death Act.
As the issue presented by the East Peoria and Peoria County Defendants in their Motions to Dismiss has already been decided by the Court in Plaintiffs favor, the Motions to Dismiss are denied. The Court notes that the Peoria County Defendants made no independent arguments in their Motion to Dismiss challenging the existence of a plausible claim having been pled against them. Therefore, denial of the Peoria County Defendants’ instant Motion to Dismiss does not address that issue, which remains open and undecided.
II. Tazewell County Defendants’ Motion to Dismiss
Tazewell County, Mutchler, and McKinney argue that Plaintiff has failed to allege facts showing that the deputies engaged in an unreasonable search or seizure, and that the deputies’ actions did not cause the shooting of Pitzer or any other compensable injury. (Doc. 62 at 4-9). In order to state a claim for damages under § 1983, a plaintiff must allege “(1) a deprivation of a right secured by the constitution or laws of the United States (2) caused by an action taken under color of state law.” Hernandez v. City of Goshen, Indiana, 324 F.3d 535, 537 (7th Cir.2003) (citing Baker v. McCollan, 443 U.S. 137, 140, 99 S.Ct. 2689, 61 L.Ed.2d 433 (1979)).
Plaintiff alleges that, once Pitzer walked out of his home for the last time, the deputies entered the Pitzer home. She alleges that this was an unconstitutional search of the home. (Doc. 49 at 11). Further, Plaintiff alleges that, following Stolz’s tasering of Pitzer, the deputies’ failure to inform their fellow officers that Pitzer was disarmed was “immediately connected to Officer LaCost’s shooting of Pitzer and deprived Pitzer of his right to bodily integrity in violation of the Fourth Amendment.” (Doc. 49 at 11). Even assuming, as the Court must, that Plaintiffs factual allegations are true, Plaintiff has failed to plausibly allege that Mutchler’s or McKinney’s actions caused any injury to Pitzer.
The only injury alleged by Plaintiff is Pitzer’s death. Therefore, she must allege that each of the purported constitutional violations have contributed to his death, which she has not done. There is absolutely no connection between the “search” of Pitzer’s home and LaCost’s shooting of Pitzer. Whether or not the decision to enter the home was wise, or in accordance with best practices, or even a Fourth Amendment violation, there is no plausible indication that the deputies’ entry of the home caused LaCost to shoot Pitzer, or increased the likelihood that he would shoot him.
Likewise, there is no plausible allegation that the deputies’ failure to inform their fellow officers that Pitzer had been disarmed caused the shooting-indeed, Plaintiffs Complaint establishes that LaCost already had that information when he shot Pitzer. (Doc. 49 at 9). Plaintiff does not explain how the deputies’ additional statement of this known fact would have prevented LaCost’s shooting of Pitzer. Plaintiff instead chooses to argue that Mutchler and McKinney somehow escalated the situation such that LaCost was more likely to shoot Pitzer, citing to Estate of Starks v. Enyart, 5 F.3d 230, 233-34 (7th Cir.1993), and Allen v. Muskogee, Oklahoma, 119 F.3d 837, 840 (10th Cir.1997). (Doc. 65 at 15-16). In Starks, the defendant police officer had stepped in front of a fleeihg suspect’s moving car without giving the suspect time to stop the car — the officer and others then shot the suspect in order to protect himself. Starks, 5 F.3d at 233-34. The Court of Appeals held that it was unreasonable for the officer to step in front of the moving car, and therefore that action could not “support a reasonable officer’s belief that it was permissible to use deadly force to seize” the suspect. Id. at 234. In Allen, another excessive force case, summary judgment was overturned where a genuine issue of material fact existed as to whether an officer had run, screaming, to the car door of an armed suicidal man. Allen, 119 F.3d at 840. The man then aimed his gun at the officers, who shot him. Id. The lower court found that the decision to shoot the man was reasonable, as he threatened the officers, but the appellate court found that the reasonableness of their conduct had to be evaluated in light of the officer’s previous conduct possibly triggering the threat where it was “ ‘immediately connected’ to the suspect’s threat of force.” Id.
This case is not like Starks and Allen, where the officers, at least in part, may have created or exacerbated the threat posed by the individual who was killed by police. In both Starks and Allen, the officers were alleged to have engaged in conduct that created an increased risk that the suspect would threaten an officer’s life such that deadly force would be used against him. Here, Plaintiffs allegations show that Mutchler and McKinney did nothing that triggered Pitzer to increase the threat he posed to the officers; indeed, Plaintiff alleges that Pitzer posed no threat to the officers. According to Plaintiffs own allegations, all of the relevant officers knew that Pitzer had been disarmed when LaCost shot him. Mutchler’s and McKinney’s conduct in failing to notify LaCost of that fact did not create or escalate any threat posed by Pitzer such that LaCost was more likely to shoot him, as LaCost already knew that Pitzer was disarmed. In addition, their entering the house while Pitzer was outside has no plausible causal connection to the shooting under this argument, as nothing about their entry increased the level of threat posed by Pitzer or the chances of Pitzer’s being shot by an officer outside.
Plaintiff has failed to allege sufficient facts to raise her claims against the Tazewell County Defendants above the speculative level, as she has not alleged any conduct by Mutchler or McKinney that allows the Court to draw the reasonable inference that they are liable for the injury suffered by Pitzer. Therefore, the Tazewell County Defendants’ Motion to Dismiss is granted.
III. Pekin Defendants’ Motion to Dismiss
The City of Pekin and Stolz argue that Plaintiff has failed to allege that Stolz engaged in any action making him personally responsible for the shooting, and that his actions were reasonable. (Doc. 59 at 4-5). As she did in response to the Tazewell County Defendants’ Motion to Dismiss, Plaintiff cites to Starks and Allen in arguing that Stolz created or escalated the danger of the situation such that deadly force was used against Pitzer. Again, however, Plaintiff has failed to allege sufficient facts to render such a claim plausible.
The only conduct by Stolz that Plaintiff alleges is that he entered the Pitzer home with Mutchler and McKinney while Pitzer was outside, that he released his K-9 dog (which bit Pitzer’s pet dog), that he tasered Pitzer, disarming him, and that he failed to inform the other officers that Pitzer had been disarmed. As discussed above, Plaintiff has alleged nothing about the entry of the officers into Pitzer’s home that contributed to Pitzer’s death. Further, Plaintiff does not allege or argue that the release of the K-9 dog or the tasering of Pitzer contributed to LaCost’s decision to shoot Pitzer-indeed, Plaintiff points out that the tasering disarmed Pitzer.
Therefore, as with Mutchler and McKinney, Plaintiffs allegations against Stolz turn on his failure to inform the other officers that Pitzer had been disarmed. As discussed above, such conduct cannot be a cause of Pitzer’s injury where Plaintiff admits that LaCost already knew that Pitzer had been disarmed when he shot him. Plaintiff does not allege any conduct by Stolz that escalated the danger posed by Pitzer to the officers such that the likelihood that deadly force would be used increased, as in Starks and Allen. In addition, Plaintiff does not allege that Stolz directly caused LaCost to shoot Pitzer. Plaintiff has failed to allege any conduct by Stolz that could plausibly have caused or contributed to LaCost’s shooting of Pitzer.
Plaintiff notes that in most Fourth Amendment excessive force claims, a defendant’s motion to dismiss is denied. (Doc. 67 at 6). This is true, because most excessive force claims are made against the officer who actually inflicted the force or ordered the force to be used, and the courts have determined that the necessary reasonableness inquiry cannot usually be conducted at the motion to dismiss stage. See Lanigan v. Village of East Hazel Crest, Ill., 110 F.3d 467, 476 (7th Cir.1997) (“Determining whether [the officers] actions were reasonable, in light of the totality of the circumstances, is a task the district court should perform with the benefit of statements from the witnesses.”). Here, the Court’s analysis does not turn on whether the officers’ conduct was reasonable, but on whether it has any plausible connection, under the facts alleged by Plaintiff, to the injury suffered by Pitzer. This inquiry does not require evidence or witness statements in this case, as Plaintiff has failed to make any allegations allowing the Court to draw the inference that Stolz (or Mutchler or McKinney) engaged in any conduct that contributed to Pitzer’s injury.
Plaintiff, though focusing almost exclusively on the claim that Stolz actually caused the shooting of Pitzer, briefly mentions “failure to intervene” in her brief. (Doc. 67 at 4). In order to make a “failure to intervene” claim under § 1983 against an officer who was present when his constitutional rights were being violated by a fellow officer, a plaintiff must show that the officer had reason to know that excessive force was being used, and that the “officer had a realistic opportunity to intervene to prevent the harm from occurring.” Abdullahi v. City of Madison, 423 F.3d 763, 774 (7th Cir.2005) (quoting Yang v. Hardin, 37 F.3d 282, 285 (7th Cir.1994)). Here, Plaintiff has alleged that LaCost fired only one shot, which hit and fatally wounded Pitzer with two bullets. (Doc. 49 at 9). She has not alleged that any of the other officers knew in advance that LaCost intended to shoot Pitzer. Therefore, the Court cannot find that Stolz “had reason to know,” until it had already happened, that allegedly excessive force would be used against Pitzer by LaCost. See Lanigan, 110 F.3d at 478 (“we do not find the contact [a ‘poke and push’] between Sergeant Krane and Lanigan to be so prolonged that Chief Robertson could know or be deliberately indifferent to Sergeant Krane’s actions. Chief Robertson could not have undertaken any action to ‘un-do’ any alleged constitutional violation by Sergeant Krane”).
In addition, as a matter of law there was no realistic opportunity to intervene to prevent the shooting. There is a realistic opportunity to intervene if an officer could have “called for a backup, called for help, or at least cautioned [the other officer] to stop” using excessive force. Abdullahi, 423 F.3d at 774 (7th Cir.2005) (quoting Yang, 37 F.3d at 285). Though the Seventh Circuit has noted that this inquiry typically presents a jury question, it can be decided by the Court where “a reasonable jury could not possibly conclude otherwise.” Id. (quoting Lanigan, 110 F.3d at 478 (emphasis added by Abdullahi court)). The Court finds that this case presents timing circumstances similar to those of Lanigan, where Seventh Circuit held that the plaintiff had failed to state a claim for failure to intervene because the onlooking officer “did not have a realistic opportunity to intervene in any situation between Lanigan and Sergeant Krane,” where the alleged excessive force was a single, quick, “poke and push.” Though the onlooking officer could have acted to stop further violence, none was alleged, and so the plaintiff had failed to state a claim for failure to intervene. Likewise, a single gunshot is nearly instantaneous, even faster than a “poke and push” — Stolz might have intervened if LaCost had continued to use force against Pitzer, but there was nothing he could do to prevent the single shot where it is not alleged that he knew LaCost was going to shoot the disarmed Pitzer.
Plaintiff has failed to allege sufficient facts to raise her claim that Stolz’s actions contributed to Pitzer’s injury to the level of plausibility, and, as a matter of law, cannot make out a claim that Stolz unconstitutionally failed to intervene to prevent Pitzer’s injury. Therefore, the Pekin Defendants’ Motion to Dismiss is granted.
Conclusion
For the foregoing reasons, the East Peoria Defendants’ and the Peoria County Defendants’ Motions to Dismiss (Docs. 55 & 60) are DENIED, and the Tazewell County Defendants’ and the Pekin Defendants’ Motions to Dismiss (Docs. 61 & 58) are GRANTED.
IT IS SO ORDERED.
. There are four groups of defendants in this case: the City of East Peoria, Illinois, and Chad LaCost, an East Peoria police officer ("East Peoria Defendants”); Peoria County, Illinois, and James Pearson, a lieutenant of the Peoria County Sherriff's Department ("Peoria County Defendants”); Tazewell County, Illinois and Todd Mutchler and Chris McKinney, Tazewell County Sherriff's Deputies ("Tazewell County Defendants”); and the City of Pekin, Illinois, and Jeffrey Stolz (“Pekin Defendants”).
. The background facts given here are drawn from Plaintiff’s Second Amended Complaint, since the Court must, as discussed above, treat all well-pleaded allegations in it as true on a Motion to Dismiss.
. Paragraph 38:
Brian Pitzer left surviving his spouse, Corine Pitzer, and his two minor children, Shanen Pitzer and Kylie Pitzer, who suffered the grief of the loss of their husband and father, the loss of his society and companionship, and the loss of his support from his annual income as a tug boat captain of $57,000 for the remaining 33 years of his work life from 32 years of age until 65, a total of $1,881,000 the discount rate from monies earned on that sum offset by the decline in purchasing power of the monies as they would be earned during that 33 years. The derivative claims for Brian Pitzer’s wife and children for their loss of Brian Pitzer's loss of society, companionship, and support are limited to the federal civil rights claims against the defendants including Officer LaCost and do not include damages from the common law battery to Brian Pitzer by Officer LaCost which were stricken from the original complaint by the February 11, 2009 Order of court.
. The Tazewell County Defendants also join in this motion, but, as discussed below, their Motion to Dismiss will be granted on other grounds. (Doc. 62 at 9).
. Neither of the parents was the administrator of the estate; the decedent's child's mother was named as administrator and pursued a separate action in that capacity. Russ, 414 F.3d at 784-85.
. “Pecuniary losses” include "loss of money, benefits, goods, services, society and sexual relations.” III. Pattern Jury Instr.-Civ. 31.04 (2009 ed.).
. Similarly, in Thomas ex rel. Smith v. Cook County Sheriff, the Northern District of Illinois held that Russ did not foreclose the ability of the estate administrator to recover for Wrongful Death Act-type damages that would benefit the decedent's spouse and children. 401 F.Supp.2d 867, 872 (N.D.Ill.2005).
. The Court notes that Magistrate Judge Bernthal of the Central District of Illinois has agreed with its analysis in the February 11, 2009 Opinion, and allowed a plaintiff to maintain a loss of consortium claim in a § 1983 action; his Report & Recommendation to this effect was adopted over objections by Chief Judge McCuskey. Hahn v. Walsh, 09-cv-2145, 2009 WL 5215599, *12, 15-16 (C.D.Ill. Dec. 29, 2009).
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1357453-27703 | JAMES C. HILL, Circuit Judge:
These efforts to rectify the racially separate and unequal employment system at the massive Fairfield Works of the United States Steel Corporation began in the mid-1960s, shortly after the enactment of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. Significant progress has been made, yet the litigation continues. Liability is no longer questioned, but issues of relief — specifically issues concerning the class status of some of those seeking relief — remain unresolved. This latest twist in the somewhat convoluted history of the class action aspects of this case arises from the district court’s decertification, after an earlier remand, of a class which it had certified sua sponte at the conclusion of the trial. Explaining that the new “class had been formed with insufficient attention paid to the strictures of Fed.R.Civ.P. Rule 23,” the district court dismissed the case. Although we agree that the requirements of Rule 23 may have been strained by the district court’s certification of this class, we believe that the decertification of the class and dismissal of the case may work an injustice on those who may have relied on that certification. Consequently, we vacate the order decertifying the class and dismissing the case, and instruct the district court: (1) to determine whether there is a class of persons who were encompassed by the “new” class and whose claims have not been litigated; (2) to determine whether or not the class includes persons who have a genuine controversy with defendants; (3) to indicate the scope of that class; and (4) if necessary, to name an appropriate class representative to supplant named plaintiff and class representative Ford.
I.
When John Ford first filed race discrimination charges against the United States Steel Corporation, he purported to represent all “persons similarly situated who are employed by the United States Steel Corporation and its mills, plants, and/or other facilities located in the State of Alabama and in and around the City of Birmingham, and who are members of the United Steel Workers of America, AFL-CIO, and Local 1733 of the United Steel Workers of America, AFL-CIO .... ” October 7, 1966 Complaint; Record at 2. Ford’s complaint was one of three filed in 1966 against United States Steel alleging race discrimination at the Fairfield Works; each complaint was brought on behalf of a class. The district court, however, found that the complaints did “not sufficiently or properly define” the classes and required that the complaints be amended. Consequently, the original Ford class was modified and restricted to “Negro persons similarly situated, who are employed in the Rail Transportation Department of the United States Steel Corporation .... ” Amendment to the Complaint, September 29,1967; Record at 13. These suits, along with a number of others including a government “pattern or practice” suit directed against the entire Fairfield Works, were consoli dated for trial. United States Steel was adjudged liable and injunctive relief was granted, but only three of the back pay claims, including Ford’s, were successful. Appeals were filed by the government and the other unsuccessful claimants.
Meanwhile, the government was in the process of negotiating a nation-wide employment discrimination consent decree with the steel industry. See United States v. Allegheny-Ludlum Industries, Inc., 517 F.2d 826 (5th Cir. 1975). The plaintiffs in the consent decree — the Equal Employment Opportunity Commission and the United States — stipulated that the settlements reached were remedially adequate to bring the steel industry into compliance with federal antidiscrimination law and to compensate individual employees for the past and continuing effects of the industry’s discriminatory practices. The government also agreed to proceed within the mechanics of the consent decree in lieu of seeking additional judgments. Id. at 838.
The district court correctly predicted that the government, in light of the nation-wide settlement, would withdraw its appeal from the district court’s judgment in the pattern or practice suit. Recognizing that the vast majority of the black employees at Fairfield would thus be left without a representative, the district court decided sua sponte to create a new class including those employees; this, the district court reasoned, would assure that the order denying back pay would be reviewed by the court of appeals. The creation of this new class was accomplished as a part of the final judgment in the consolidated cases. The district court named Ford class representative, despite the fact that Ford was, in the same judgment, found to have been successful in his claim for back pay. The court defined the new class as “all black persons who have at any time prior to January 1, 1973, been employed at the Fairfield Works (except to the extent they may be otherwise included as a class member [in one of the classes already certified]).” May 2, 1973 Decree; Record at 128.
Ford, as representative of the new class, succeeded in having the adverse back pay ruling reversed. The appellate court, however, instructed the district court to “carefully redetermine the propriety of the amorphous ‘new’ Ford class in light of the consequences of binding such a group to a final judgment.” United States v. United States Steel Corp., 520 F.2d at 1048. Thus, while it acted on the appeal by vacating the order denying back pay, the appellate court was uncomfortable with the “new” Ford class. Additionally, it instructed the district court to address issues concerning the scope of Ford’s standing.
The district court, interpreting these instructions, stated that its “first task” was “to determine anew the extent, if any, to which [Ford] should, with respect to back pay claims, represent other blacks employed at Fairfield prior to January 1, 1973, who were not represented in other private class actions when the cases were tried in 1972.” District Court’s Memorandum Opinion, October 13, 1977; Record at 53. Conceding that its sua sponte class certification was an “expediency” accomplished “with insufficient attention paid to the strictures of Fed.R.Civ.P. 23” and declaring that “the appellate court, in relieving the ‘new’ Ford class of the binding effect of a judgment adverse to it, also relieved this court from being bound by its certification of that class,” id. at 55-56, the district concluded, “with some trepidation,” that the class had been improperly formed and that Ford was an inappropriate class representative, even though it recognized that its refusal “to accord class action status to any part of the ‘new’ Ford class would have the effect of terminating the action as a whole.” Id. at 53. Final judgment dismissing the suit was entered on October 13, 1977.
The dismissal prompted a flurry of legal activity; motions to intervene and to alter or amend the judgment were filed with the court. Ford’s motion to alter or amend was denied because no new significant evidence was brought to the district court’s attention. The motion to intervene was denied because (1) the district court ruled it untimely under Stallworth v. Monsanto Co., 558 F.2d 257 (5th Cir. 1977) and (2) intervention would have been denied by the district court under Fed.R.Civ.P. 24(b)(2) even if it had been timely.
The present appeal is from the district court’s dismissal of the suit. Although only Ford has appealed, we have been asked to consider issues concerning the would-be intervenors as well.
II.
Recently we have received considerable instruction from the Supreme Court relevant to class actions and the Article III sase or controversy” jurisdictional requirement. Of particular interest is United States Parole Comm’n v. Geraghty, 445 U.S. 388, 100 S.Ct. 388, 63 L.Ed.2d 479 (1980). Geraghty does not answer all our questions — in fact, the single question Geraghty clearly answers is not at issue here — but it does give us direction. Geraghty, a federal prisoner whose parole application had been denied, challenged recently promulgated parole release guidelines on behalf of “all federal prisoners who are or will become eligible for release on parole.” Id. at 393, 100 S.Ct. at 1206. The district court denied class certification and ruled against Geraghty on his individual claims. Geraghty appealed. Meanwhile, another prisoner who, like Geraghty, had been denied parole through application of the guidelines sought to intervene “to ensure that the legal issue raised by Geraghty on behalf of the class ‘[would] not escape review ....’” Id. at 394, 100 S.Ct. at 1207. Intervention too was denied, and all appeals were consolidated. Before appellate briefs were filed, however, Geraghty completed his sentence and was mandatorily released. The Parole Commissioner moved to dismiss the appeals as moot.
Earlier cases had permitted a named plaintiff to continue to represent a class even though he had lost on individual claims, as long as the class had been certified. See, e.g., Franks v. Bowman Transportation Co., Inc., 424 U.S. 747, 96 S.Ct. 1251, 47 L.Ed.2d 444 (1976); see also Board of School Comm’rs v. Jacobs, 420 U.S. 128, 95 S.Ct. 848, 43 L.Ed.2d 74 (1975); Sosna v. Iowa, 419 U.S. 393, 95 S.Ct. 553, 42 L.Ed.2d 532 (1975). In Geraghty the Court took another step and held that Geraghty “was a proper representative for the purpose of appealing the ruling denying certification of the class ...,” Geraghty, 445 U.S. at 407, 100 S.Ct. at 1214, despite the fact that no class had been certified and that Geraghty had been released and was no longer subject to the challenged parole release guidelines.
In the present case, Ford’s capacity to appeal the class decertification is not at issue; thus the narrow holding in Geraghty is not germane. Nevertheless, the Supreme Court’s rationale leading to the Geraghty holding is instructive. The “case or controversy” requirement, the Court reasoned, has two facets: there must be (1) a continuing “live” controversy and (2) a presence in any party of some legally cognizable interest in the outcome of the case (the “personal stake” requirement). The Court found evidence of a “live” controversy between the Parole Commission “and at least some members of the class [Geraghty] seeks to represent” in “the fact that prisoners currently affected by the guidelines have moved to be substituted, or to intervene, as ‘named’ respondents in this Court.” Id. 445 U.S. at 396, 100 S.Ct. at 1208. The same situation exists in the present case: members of the class certified by the district court in its May 2, 1973 Decree sought to intervene, or to be substituted, when the district court adjudged Ford an improper class representative and decertified the class in its October 13, 1977 Order. The district court denied those motions to intervene, as did the district court in Geraghty, and we do not intend to reverse that order as such; indeed, the intervenors themselves have not appealed. However, in determining whether there is a class of persons whose claims have not been litigated and who have a genuine controversy with the defendants, the district court should not overlook the fact that, in response to its order dismissing the class because it found Ford himself an inappropriate class representative, others did come forward.
We recognize that the district court dismissed this action not because Ford’s claim had expired, see United States Parole Comm’n v. Geraghty, 445 U.S. at 404, 100 S.Ct. at 1212, had become moot, see generally Board of School Comm’rs v. Jacobs, 420 U.S. at 129, 95 S.Ct. at 849, or had been adjudicated, see Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 100 S.Ct. 1166, 63 L.Ed.2d 427 (1980). Rather, the district court decertified this class and dismissed this case because it found that Ford lacked the proper nexus with the class to be its representative. In essence, then, this case was dismissed because the district court concluded that its sua sponte class certification itself had been improper, that the “class had been formed with insufficient attention paid to the strictures of Fed.R. Civ.P. Rule 23.” October 13, 1977 Memorandum of Opinion; Record at 56. Nevertheless, the fatal defect, according to the district court, was in the naming of the class representative; the district court did not suggest that there was not at least a potentially proper class. This leads us to a discussion of the second part of the district court’s task on remand: if the district court concludes that the “new” class encompassed persons whose claims have not been litigated and who have a genuine controversy with the defendants, the district court must determine the scope of that class. Of central concern are those who may have relied on the district court’s certification of the new class in May, 1973; some may not have acted to protect their interests, believing that they were properly and adequately represented by Ford.
The district court is in the best position to determine who, if anyone, may have been adversely affected by the certification and the decertification of the class. We are admittedly confused by the various assertions of the parties before us regarding those who may yet have an interest in this litigation. The class certified in May, 1973 embraced all black employees at the Fair-field Works, except those included in the already certified classes, who had been employed prior to January 1, 1973. Prior to that, only the government, in its practice or pattern suit, purported to present back pay claims on behalf of black employees generally throughout the Fairfield Works. The government suit was neither designated nor certified a class action, and thus it would have had none of the binding affects of a class action. Yet it seems to us that only after the government withdrew its appeal in that suit — after the nation-wide settlement — were black employees generally left without representation at all. The prospect of this discontinuance of representation was the reason behind the court’s certification of the class in May, 1973.
The nation-wide settlement itself must' be taken into consideration. It appears that the interests of those who have accepted the tender and signed releases have been satisfied. There are some, however, such as the would-be intervenors, who had not, when they moved to intervene, chosen to accept the tender but rather chose to advance their claims in court. More importantly, it is apparent that there may be some who were ostensible members of the class certified in May, 1973 who are not eligible for tender under the settlement. Such factors, we think, merit consideration.
Even then the district court’s task will not be finished. If the district court determines that there is an appropriate class with a “live” controversy, one question remains: who should litigate it? The district court has concluded that Ford should not. We do not overrule that conclusion, but suggest that dismissal of the case may nevertheless have been inappropriate. Geraghty at least implies that if a “live” controversy exists, the district court has the responsibility of determining who is an appropriate representative. See United States Parole Comm’n v. Geraghty, 445 U.S. at 407, 100 S.Ct. at 1214 (“Upon remand, the District Court can determine whether Geraghty may continue to press the class claims or whether another representative would be appropriate.”) Our instructions echo the order entered in Armour v. City of Anniston, 622 F.2d 1226 (5th Cir. 1980), after that case had been vacated and remanded for further consideration in light of, inter alia, Geraghty (see Armour v. City of Anniston, 445 U.S. 940, 100 S.Ct. 1334, 63 L.Ed.2d 774 (1980)):
[T]he case is remanded to the district court to determine, after such hearing or hearings as it may see fit, whether or not there is still a live controversy involving the proposed class, and, if so, whether or not Mrs. Armour is a proper class representative, and, if she is not, to substitute an appropriate class representative should one desire to be appointed.
In conclusion, we emphasize that the task of the district court on remand is not one which courts must always undertake when confronted with potential class actions. The unusual procedural history of the class action aspects of this case — marked most notably by the district court’s sua sponte certification of a class it saw fit to decertify over four years later — dictates further consideration to ensure that those, if any, who are entitled to relief receive it. Accordingly, the district court’s order is
VACATED and the case is REMANDED for further consideration consistent with this opinion.
. There were in fact seven named plaintiffs; for convenience in this opinion, these plaintiffs will be referred to collectively as Ford.
. Also named as defendants were the United Steelworkers of America, AFL-CIO, Local 1733 of that union, and Local 1733’s president. Collective bargaining between United States Steel and the United Steelworkers produced the employment system challenged by Ford. Although the union represented employees throughout the Fairfield Works, fifteen separate locals represented employees in the nine divisions comprising the Works. See United States v. United States Steel Corp., 371 F.Supp. 1045, 1049-50 (N.D.Ala.1973). Ford originally sought only injunctive relief, but his complaint was later amended to include a claim for back pay.
. The other two complaints were styled Hardy v. United States Steel Corp. and McKinstry v. United States Steel Corp. A short time later a fourth complaint was filed, Brown v. United States Steel Corp.
. The Hardy, Ford, and McKinstry complaints were drafted by the same attorneys, and the class definitions in those complaints were similarly drawn. Paragraph II of the Hardy complaint, for example, stated that the action was being brought on behalf of all similarly situated persons employed by United States Steel at its Fairfield Works and who were members of Local 1489. Paragraph III(B) of the same complaint stated that class embraced only employees of the Stock House Department in the North Plant of the Fairfield Works. See Hardy v. United States Steel Corp., 289 F.Supp. 200, 202 (N.D.Ala. 1967). It was not clear, then, whether the Hardy class included all similarly situated employees at the Fairfield Works or only those who worked in the Stock House Department. The Ford, McKinstry, and Brown complaints were likewise ambiguous. See id. at 202-203. The class actions were brought pursuant to Fed.R.Civ.P. 23(b)(2).
. See id. The district court’s opinions in Ford, McKinstry, and Brown are not reported but apparently echo the Hardy opinion. In fact, after recommending an appropriate class definition in Hardy, the district court said: “A class defined in such a manner in each of the four pending cases against the same employer will simplify and expedite the trial of these suits.” Id. at 203.
. In all, eight private actions were brought; six had been certified as class actions and involved 464 black production and maintenance employees at the Fairfield Works. The government “pattern or practice” suit, see 42 U.S.C. § 2000e-6, while not purporting to be a class action under Fed.R.Civ.P. 23, sought back pay for the approximately 2700 remaining black production and maintenance employees. See United States v. United States Steel Corp., 520 F.2d at 1047.
. Thus only 61 employees, those included in the Hardy, Ford, and McKinstry classes, were awarded back pay; the denial of back pay in the other suits affected over 3000 black employees. The district court explained:
The ultimate conclusion, simply, is that in the particular context of this case the assessment of back pay for the pre-1963 discrimination . .. would be fraught with speculation and guess-work. What were problems in assessing back pay in the three situations in which the same was awarded are unsurmounted obstacles to the across-the-board claims for back pay generally. United States v. United States Steel Corp., 571 F.Supp. 1061 (footnote omitted). There were additional reasons why the district court denied back pay, including United States Steel’s lack of bad faith, absence of unjust enrichment to the company, and the scope of the injunctive relief.
. United States Steel and the United Steelworkers participated in the negotiations and settlement.
. The consent decree required the steel industry to tender back pay to all minority employees in production and maintenance units who were employed prior to January 1, 1968. Because no private individual as such was a party to the consent decree, individuals were not bound, by way of res judicata or estoppel by judgment, to its terms. Individuals could compromise their potential rights only by accepting the back pay tender and executing a release. United States v. Allegheny-Ludlum Industries, Inc., 517 F.2d at 837-38.
. Essentially, the appellate court held that the district court’s reasons for denying back pay, see note 7 supra, were not valid under “a recent series of binding case law developments in this circuit and in the Supreme Court,” United States v. United States Steel Corp., 520 F.2d at 1048, which was not available to the district court at the time of the May 2, 1973 decree.
. The appellate court was sensitive to both the reasons for creating the class and the problems caused by its creation:
In a conscientious effort to eliminate multiplicitous litigation by binding the otherwise unrepresented employees to a Rule 23(a)(2) class judgment in which able counsel on both sides had vigorously and thoroughly litigated the issues, the district court created a class which it found in essence to be so diverse and unmanageable that the effects of unlawful discrimination could not be separated from other plausible, but not demonstrably unlawful, causes of members’ reduced earnings.
Id. at 1050-51. The appellate court instructed the district court to “take evidence as to the propriety of the ‘new’ Ford class, its scope in terms of the ingredients of the judgment, if any, by which it ought to be bound, and its size and membership.” Id. at 1051. Furthermore, the district court was to determine “the extent to which the ‘new’ Ford class is maintainable in a ‘meaningful and manageable’ sense as a class action seeking monetary relief.” Id. (citing Huff v. N.D. Cass Co., 485 F.2d 710 (5th Cir. 1973)). The appellate court provided the district court with additional instructions to be followed “[i]f the district court again concludes that the ‘new’ Ford class action should go forward . . .. ” Id.
. Although the appellate court stated that it rejected the argument “that appellant Ford lacks standing as a matter of law to represent any class of black employees broader than the ‘original’ Ford class, in which his personal back pay claim has been satisfied . . .,” id. at 1052, it did instruct the district court to reexamine Ford’s status as representative of the new class and to address matters concerning the “scope of Mr. Ford’s standing” and “the adequacy of the representation . . ..” Id. at 1051-52.
. The district court considered a number of arguments against maintaining the class action. For example, it rejected the argument, made by both United States Steel and the United Steelworkers, that Ford could not be an adequate class representative under Fed.R.Civ.P. 23(a)(4) because he had already obtained relief on all personal claims. Additionally, although the district court agreed with the defendants’ contention that Ford was never a member of the new class — because the new class was defined in such a manner as to exclude those who were members of the original class — it felt that was not dispositive of the class action issue, “for it would be but a simple matter to redefine the class so that it was composed of both the ‘original’ and the ‘new’ Ford classes.” District Court’s Memorandum of Opinion, October 13, 1977; Record at 57. The district court based its decision that the class was improper upon its conclusion that Ford lacked the necessary nexus with the new class to be included as one of its members. In support of this conclusion, the district court pointed out (1) that Ford was an employee of one of three departments in one of nine plants of the company and his complaint was limited to specific employment practices at that department, while the members of the new class were employed at the eight other plants and were represented by eleven other local unions, and (2) that Ford never purported to be a member of such a class, never complained about practices affecting such a class, and never named as defendants the other local unions. The district court stated that even though all of the persons involved “are of the same race, are employees of the same company, are members of the same international union, have complained of discrimination in connection with seniority systems, and are — or may be — sympathetic to each others’ cause, [this] is simply not sufficient to constitute a rational class nexus ... . ” Id. at 59.
. Although the district court apparently did not consider the issue dispositive, it did maintain that
a small percentage of the ‘new’ Ford class are putative class members at this date, over 95% having accepted back pay and signed releases under the consent decree involving the steel industry .... Even so, there remain many who, no doubt, have been anticipating a favorable ruling from this court and who may, indeed, have declined back pay under the industry settlement based on such anticipation .... Whether, in the interest of justice, this court, in its capacity as overseer of the steel industry settlement, should on motion require a re-tender as a result of this decision need not be answered now.
Id. at 59-60 & n.9.
. Thirty-four persons sought to intervene “on behalf of themselves and others similarly situated, members of the ‘new’ Ford class .. .. ” Motion for Leave to Intervene, October 25, 1977; Record at 64. They asserted
that they have an interest in the transactions which are the subject of this action; and that they are so situated that the disposition of the action may as a practical matter impair or impede their ability to protect that interest. Based on this Court’s final judgment herein dated October 13, 1977, the interests of these applicants are not adequately represented by the existing parties to the litigation.
Id. These interveners were among those who had not accepted the back pay tender provided under the nation-wide settlement.
. Stallworth identified four factors for consideration: (1) the length of time during which the would-be intervenors actually knew or reasonably should have known of their interest in the case before they petitioned for leave to intervene; (2) the extent of prejudice to the existing parties if intervention is allowed; (3) the extent of prejudice which the would-be intervenors may suffer if intervention is denied; and (4) the existence of unusual circumstances militating either for or against a determination that intervention is timely. The district court found that factors 1, 3, and 4 weighed against intervention. Memorandum of Opinion, December 20, 1977; Record at 73-81.
. The district court concluded that, while the threshold requirement for intervention under Fed.R.Civ.P. 24(b)(2) — that there be a common question of law or fact — would have been satisfied, such intervention was nevertheless discretionary, and the court would have denied intervention because it would have unduly delayed the adjudication of the rights of the original parties. Id.
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11124787-25324 | RODRIGUEZ, District Judge.
This matter having come before the Court pursuant to Rule 72(b) of the Federal Rules of Civil Procedure; and
It appearing that on December 15, 1999, United States Magistrate Judge Robert B. Kugler filed a Report and Recommendation in the above-captioned adversary proceeding recommending that the settlement proposed by the bankruptcy trustee be approved; and
The Court having reviewed the Report and Recommendation as well as the transcript of the November 12, 1999 hearing, the briefs and supplemental briefs filed in connection with the motion to approve a settlement of the controversy and the Written Objections to the Report and Recommendation filed by Irving Mangel and Samuel Mangel and Summit Bank, and the Responses thereto filed by the trustee and Aetna Casualty & Surety Company;
The Court finding that it should adopt the Report and Recommendation without modification;
IT IS ORDERED on this 19th day of June, 2000 that the Report and Recom mendation filed on December 15, 1999 is hereby ADOPTED and ENTERED.
Dec. 15, 1999
Order Denying Reconsideration of Report and Recommendation Jan. 6, 2000
REPORT and RECOMMENDATION
KUGLER, United States Magistrate Judge:
This matter is before the Court on the motion of the bankruptcy trustee, James J. Cain, to approve a settlement between the debtor, Jasmine, Ltd., and Travelers Casualty and Surety Company, fik/a Aetna Casualty and Surety Company [hereinafter referred to as “Aetna”], in Aetna’s adversary proceeding. Both the trustee and Aetna submitted briefs in support of the trustee’s motion. Briefs in opposition to the motion were filed by the following directors and officers of Jasmine: (1) Irving Mangel and Samuel Mangel; (2) Edward Maskaly; (3) Steven B. Sands, Lloyd Saunders, III, and Sherman Henderson, Ltd.; and (4) Thomas Ciocco. A Jasmine creditor, Summit Bancorp, fk/a United Jersey Bank, also submitted a brief in opposition .to the motion. This Court held a hearing on the motion on November 12, 1999, and the parties submitted supplemental legal briefs on or about November 30,1999.
For the reasons stated below, and because the proposed settlement represents the maximum value that the estate can realize, it is my recommendation pursuant to 28 U.S.C. § 636(b)(1)(C), Rule 72(b) of the Federal Rules of Civil Procedure, and Rule 72.1(c)(2) of the Local Civil Rules of the United States District Court for the District of New Jersey, that the settlement proposed by the trustee be APPROVED.
I. FINDINGS OF FACT
1. Aetna issued a “claims-made” Designated Insured Persons and Company Reimbursement Policy, commonly known as a directors’ and officers’ liability insurance policy [hereinafter referred to as “the D & O Policy”], to Jasmine, Ltd. for the policy period from December 15, 1994, to December 15, 1995. (See D & O Policy No. 095 LB 100 849 117 BCA, attached as Ex. “A” to Brief of Trustee James J. Cain). The D & O Policy, like most standard D & O policies, offered two types of insurance coverage: (1) reimbursement to Jasmine of amounts (in excess of the $100,000 deductible) that Jasmine indemnified its officers and directors for losses resulting from any claims against them during the policy period for wrongful acts, as that term is defined by the Policy; and (2) reimbursement directly to the officers and directors for losses incurred as a result of any claims made against them during the policy period for wrongful acts. Jasmine paid the $110,000 annual premium. The Policy had a limit of liability of $2 million.
2. An application for the Policy, which was actually a renewal application, was dated October 31, 1994, and appears to be signed by Sam Mangel, an officer and director of Jasmine, Ltd., although that fact was not confirmed by any party. (See Policy Renewal Application, attached as Ex. “B” to Brief of Trustee James J. Cain). The Policy Renewal Application contained the following provision which obligated Jasmine to notify Aetna of any material changes in the information supplied on the Policy application from the date of the application through the effective date of the Policy:
IT IS AGREED THAT IN THE EVENT THERE IS A MATERIAL CHANGE IN THE ANSWERS TO THE QUESTIONS CONTAINED HEREIN PRIOR TO THE EFFECTIVE DATE OF THE POLICY, THE APPLICANT WILL NOTIFY THE UNDERWRITER AND, AT THE SOLE DISCRETION OF THE UNDERWRITER, ANY OUTSTANDING QUOTATIONS MAY BE MODIFIED OR WITHDRAWN.
(Policy Renewal Application, at 5, Ex. “B,” Brief of Trustee James Cain).
3. On or about November 21, 1994, Jasmine was served with a complaint seeking $14 million in damages by McKowan Lowe & Co., Ltd., its former Hong Kong agent. That complaint was docketed in this Court as McKowan Lowe & Co., Ltd. v. Jasmine, Ltd., Civil Action No. 94-5522(JHR). A related shareholder action, Berger v. Jasmine, Ltd., Civil Action No. 96-2318(JEI), was consolidated with the McKowan Lowe action.
5. Jasmine filed for bankruptcy in the United States Bankruptcy Court for the District of New Jersey under Chapter 11, which subsequently was converted to Chapter 7. In re Jasmine, Ltd., Case No. 96-101-29. James J. Cain was appointed as trustee of Jasmine’s bankruptcy estate.
6. On or about April 29, 1997, Aetna filed this declaratory judgment action as an adversary proceeding in the bankruptcy case, claiming that the D & 0 Policy should be rescinded because of misrepresentations on the Policy Renewal Application. Aetna Casualty & Surety Co. v. Jasmine, Ltd., Adversary Proceeding No. 97-1132. Reference of the adversary proceeding was withdrawn from the bankruptcy court, and it was consolidated with the McKowan Lowe action for all purposes, including trial. The consolidated action is now pending before the Honorable Joseph H. Rodriguez.
7. Aetna claims that the Policy should be rescinded because Jasmine failed to advise Aetna of certain material changes in the information provided in the Policy Renewal Application. The two primary alleged misrepresentations are:
(a) Jasmine represented in the application that it was not a party to any “material litigation.” Aetna points out that on November 21, 1994, Jasmine was served with the McKowan Lowe complaint seeking $14 million in damages, which was an amount that approximated more than half the reported value of Jasmine’s assets, and that Jasmine did not notify Aetna of this information prior to the effective date of the Policy.
(b) In response to the question: “Has the Applicant changed its outside auditors within the last 12 months?”, Jasmine answered, “Yes, in relation to initial public offering.” (Policy Renewal Application, Question No. A.5, Ex. “B,” Brief of Trustee James J. Cain). Aetna points out that contrary to this representation, on December 9, 1994, Jasmine and its outside auditor, Arthur Anderson, terminated their relationship. According to a Form 8-K that Jasmine filed with the SEC, dated December 9, 1994, Jasmine and Arthur Anderson terminated their relationship in large part because of disagreements that arose as a result of the McKowan Lowe lawsuit. (SEC Form 8-K, December 9, 1994, attached as Ex. “E” to Brief of Trustee James J. Cain).
8.Aetna seeks to settle the adversary proceeding with Jasmine for $125,000, which represents the return of the $110,000 premium that Jasmine paid, plus $15,000 in interest. The bankruptcy trustee seeks Court approval for this settlement, claiming that $125,000 is the maximum value that the bankruptcy estate can realize from the Policy, and, therefore, the settlement is in the best interests of the estate.
II. CONCLUSIONS OF LAW
A. Standard for Approving Settlement under B.R. 9019
1. To minimize litigation and expedite the administration of a bankruptcy estate, “compromises are favored in bankruptcy.” In re Martin, 91 F.3d 389, 393 (3d Cir.1996). Under Bankruptcy Rule 9019, the court has the authority to approve a compromise of a claim, provided that the debtor, trustee and creditors are given twenty days’ notice of the hearing on approval of compromise or settlement by the trustee. Id. The process of court approval requires the court “to assess and balance the value of the claim that is being compromised against the value to the estate of the acceptance of the compromise proposal.” Id. The court should consider four criteria in striking this balance: (1) the probability of success in the litigation; (2) the likely difficulties in collection of any judgment; (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (4) the paramount interests of the creditors. Id. (citing Protective Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424-25, 88 S.Ct. 1157, 20 L.Ed.2d 1 (1968)); see also In re Mavrode, 205 B.R. 716, 721 (Bankr.D.N.J.1997) (Gindin, Chief J.) (considering four factors listed above in determining whether settlement is “fair and equitable”).
The court is not supposed to have a “mini-trial” on the merits, but should “canvass the issues to see whether the settlement falls below the lowest point in the range of reasonableness.” In re Neshaminy Office Building Assocs., 62 B.R. 798, 803 (E.D.Pa.1986); see also In re Pennsylvania Truck Lines, Inc., 150 B.R. 595, 598 (E.D.Pa.1992), aff'd, 8 F.3d 812 (3d Cir.1993).
It is the trustee’s duty to “collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest.” 11 U.S.C. § 704(1). The trustee has a fiduciary relationship with all creditors of the estate, and it is the trustee’s duty to “maximize the value of the estate” for these creditors. In re Martin, 91 F.3d at 394.
The Third Circuit has noted that a court deciding whether to approve a settlement in bankruptcy “relies heavily on the trustee,” and “under normal circumstances the court would defer to the trustee’s judgment so long as there is a legitimate business justification.” In re Martin, 91 F.3d at 395.
Trustee James Cain claims that the proposed settlement with Aetna maximizes the value of the estate and is otherwise fair and equitable and in the best interests of the estate because Aetna is likely to succeed on the merits, continuing the litigation will only result in an unnecessary and expensive drain on limited estate resources, and the return of premiums is the largest benefit the estate could hope to receive. The objectors maintain that none of the factors supports approval of the settlement in this case. This Court agrees with the trustee that given Aetna’s likelihood of success, the proposed settlement represents a fair and equitable resolution.
B. LIKELIHOOD OF SUCCESS Standard for Recission: “Knowing” Misrepresentation and Materiality
2. In order to succeed in its lawsuit, Aetna must prove that Jasmine made material misrepresentations of fact on the Policy application upon which Aetna relied in determining the insurable risk. Federal Deposit Insurance Corp. v. Moskowitz, 946 F.Supp. 322, 329 (D.N.J.1996); Ledley v. William Penn Life Ins. Co., 138 N.J. 627, 637-38, 651 A.2d 92 (1995). A material misrepresentation includes a failure to inform an insurer of a change of conditions between the application of the policy and its effective date that are material to the risk. Moskowitz, 946 F.Supp. at 331.
The trustee claims that in order to be entitled to rescission, Aetna need only prove that a misrepresentation was made; whether it was innocent or purposeful is not an element of proof. The objectors disagree with the trustee’s interpretation of New Jersey law, claiming instead that an insurer must show that the misrepresentation was made “knowingly.” Regardless of the outcome of New Jersey law on this issue, there appears to be a provision of the Policy which itself injects a “knowing” standard for recission and which all parties apparently agree is part of the insurance agreement by which they are bound:
In consideration of the premium charged, this Policy shall not be avoided as to any Insured Person on account of the untruth of the particulars and statements contained in the Application for this Policy unless:
(a) that Insured Person knew of such statement’s untruth, in which event such knowledge shall be imputed to that Insured Person only; or
(b) the person making such statement in the Application knew of its untruth, in which event such knowledge shall be imputed to all Insured Persons and the Company.
(D & 0 Policy, Endorsement No. 5, Ex. “A,” Brief of Trustee James J. Cain) (emphasis added). According to this endorsement, if the person completing the application had knowledge of the falsity of the misrepresentations, that knowledge will be imputed to all the insured directors and officers, and the Policy can be rescinded as to all of them.
The objectors claim that the trustee has no basis whatsoever for concluding that Aetna could demonstrate that the misrepresentations were “knowingly” made, primarily because Aetna has taken no discovery from the Mangels. The objectors contend that by failing to conduct any discovery as to Sam Mangel’s “knowledge”— a crucial element of Aetna’s claim — the Trustee could not have reasonably evaluated Aetna’s likelihood of success. The objectors also claim that discovery is necessary to determine if and when notice of the changed information may have been made to Aetna.
The trustee points out, though, that two Form 8-Ks that Jasmine filed with the SEC during the relevant time period squarely contradict the information in the Policy Renewal Application and that Sam Mangel’s knowledge can be demonstrated through those documents. Jasmine’s SEC Form 8-K, dated November 21, 1994, references the McKowan Lowe lawsuit seeking $14.7 million that was served on Jasmine on November 21, 1994. (SEC Form 8-K, 11/21/94, Item 5, attached as Ex. “C,” Brief of Aetna). Another Form 8-K that Jasmine filed with the SEC, dated December 9, 1994, states that Jasmine and Arthur Andersen mutually agreed to terminate their relationship, in large part because of disagreements that arose as a result of Arthur Andersen’s discovery of the McKowan Lowe lawsuit. (SEC Form 8-K, 12/9/94, Item 4(a)(1), Ex. “E,” Brief of Trustee James J. Cain). The trustee concludes from a comparison of these two SEC Form 8-Ks with the Policy Renewal Application that contradictory information was supplied by Jasmine and that Aetna will be able to show that the failure to notify Aetna of material changes in the Policy Renewal Application information was done “knowingly.”
While the objectors maintain that this proof is not enough and that more discovery is necessary to get to the crucial facts- — which include the respective knowledge of Sam and Irving Mangel and whether notice of the changed information was in fact made to Aetna by the Mangels or any of Jasmine’s other directors and officers — they themselves would be in possession of such facts, but have failed to come forward with any evidence to contradict Aetna’s proffer. Moreover, this Court takes notice that discovery from the Man-gels would be futile, because they have refused to appear for depositions, citing their Fifth Amendment rights. The state of the record might well result in summary judgment for Aetna if this case was positioned at that stage.
3. The objectors further argue that Aetna must prove that the misrepresentations were “material,” and Aetna has made no showing of materiality, nor can the issue of materiality be determined on these facts. They point out that Aetna, with knowledge of the same facts it claims would have affected their insuring decision, extended the same insurance to Jasmine for the subsequent policy period, which demonstrates that Aetna would not have considered the information “material” to its risk analysis.
This Court finds, however, that the representations at issue were material as a matter of law. A provision of the Policy expressly states that all statements made in the Policy application are deemed material:
The Company and the Insured Persons agree that the statements made in the Application are the representations and warranties of the Company and the Insured Persons and that they shall he deemed material to the acceptance of the risk or the hazard assumed by the Underwriter under this Policy and that this Policy is issued in reliance upon the truth of such representations.
(D & 0 Policy, at 111(A)(2), Ex. “A,” Brief of Trustee James J. Cain) (emphasis added).
Even in the absence of this express manifestation of the parties’ intent, there can be no reasonable dispute that a lawsuit seeking damages in an amount approximately equal to more than half of a corpo ration’s assets — whether the lawsuit ultimately proved meritorious or not — along with a sudden change in financial auditors, are material facts upon which an insurer bases a risk. Thus, on the record before it, this Court agrees with the trustee that it is likely that Aetna can prove that Jasmine knowingly failed to notify Aetna of material changes in the representations made in the Policy Renewal Application. See Moskowitz, 946 F.Supp. at 325-33 (granting summary judgment to insurer and rescinding policy on grounds that corporate insured made misrepresentations on application that were material as a matter of law).
Rights of Third-Party Benefíciaries
4. The objectors further argue that they are third-party beneficiaries to the D & 0 Policy whose rights cannot be unilaterally extinguished by the proposed settlement. There is no question that the directors and officers covered under the Policy are third-party beneficiaries; however, the rights of third-party beneficiaries typically are subject to the same defenses that the promisor (ie., Aetna) could assert against a claim for coverage by the prom-isee (ie., Jasmine). See Agathos v. Starlite Motel, 977 F.2d 1500, 1505 (3d Cir.1992) (citing Calamari & J. Perillo, The Law of Contracts § 17-10 (3d ed.1987)). The scope of third-party beneficiary rights is ultimately established by the manifest intent of the contracting parties as expressed in the body of the instrument.
Significantly, the Aetna D & O Policy contains Endorsement No. 5, which imputes a knowingly made false statement on the policy application to all insureds. This endorsement distinguishes this policy from the one in Wedtech Corp. v. Federal Insurance Co., 740 F.Supp. 214 (S.D.N.Y.1990), which the Mangels cite as “the benchmark case on this issue” (Mangel Supp. Brief, at 8). The policy in Wedtech contained a severability provision stating that “no statement in the application or knowledge on the part of one insured is to be imputed to another insured in determining the availability of coverage.” 740 F.Supp. at 219. It was on this basis that the Wedtech court found that a purportedly fraudulent statement in the policy application did not operate to rescind the policy as to all directors and officers. Id. Thus, Wed-tech does not provide the appropriate analysis here. In Wedtech, because of the severability provision, the insurer was required to prove its case for rescission separately against each director and officer. Here, by contrast, because of Endorsement No. 5, if Aetna can prove that the alleged misrepresentations in the policy application were knowingly made, then the policy may be rescinded as to all insureds, including the purportedly innocent third-party beneficiaries. Accord Bird v. Penn Central Co., 341 F.Supp. 291 (E.D.Pa.1972) (finding that fraudulent misrepresentation by corporate officer on application for D & O insurance policy voided that policy as to all other directors and officers, regardless of whether they were innocent third-party beneficiaries); Shapiro v. American-Home Assur. Co., 584 F.Supp. 1245, 1251-52 (D.Mass.1984) (holding that the parties could have negotiated, but did not, a provision of the D & O policy to protect “innocent” insureds); INA Underwriters Ins. Co. v. D.H. Forde & Co., 630 F.Supp. 76 (W.D.N.Y.1985) (finding no coverage for innocent insureds because misrepresentations on policy application rendered policy void ab initio).
Accordingly, while keeping in mind that under the rules of bankruptcy I need not and should not hold a “mini-trial” on the merits of all the factual and legal issues, I conclude on the basis of the record before me that Aetna’s likelihood of success weighs strongly in favor of approving the proposed settlement.
C. COMPLEXITY, EXPENSE and DELAY TO ESTATE
5. I further conclude that given the likelihood of success, continuing to litigate this action would only result in an unnecessary drain of estate resources. The objectors argue that Aetna is reaping the benefit of the work that the creditors and shareholders are doing, by virtue of the consolidation of Aetna’s action with the creditor and shareholder actions, and that, therefore, there is no cost to the estate of waiting out the resolution of the other claims. They contend that discovery and motion practice in the other actions are coming to a close, and the cases are due to be resolved soon.
The trustee and Aetna claim, on the other hand, that the consolidated Jasmine litigation is complex and time-consuming. Discovery disputes have arisen with relative frequency and contention. Moreover, the trustee is not a party to the other aspects of the consolidated action, and Aet-na’s declaratory judgment action is one of the last steps towards final distribution of the estate.
The Court agrees with the trustee that estate funds would be unnecessarily expended by continuing to litigate Aetna’s claim. While some of the factual and legal issues in this action may overlap with those in the creditor and shareholder actions, Aetna’s claim of equitable fraud in the information that was provided to Aetna and its sought-after relief of rescission are very different from the issues raised in the other actions. The trustee would be obligated to spend costs and counsel fees on behalf of Jasmine in conducting discovery, filing and responding to motions, and trial, regardless of what the creditors and shareholders are doing. And, the objectors’ contention that little work remains to be done is not borne out by the current state of discovery and motion practice. Under these circumstances, the attorneys’ fees and costs paid by the estate would very soon reach the value of the proposed settlement itself. Since the trustee is not a party to the remainder of the consolidated action, early resolution of this declaratory judgment action serves the statutory purpose of closing the estate and distributing its assets as expeditiously as possible. Thus, the complexity and delay occasioned by continuing this litigation also weigh in favor of approving the proposed settlement.
D. PARAMOUNT INTEREST OF CREDITORS
6. According to the trustee, the $125,000 settlement is the best that Jasmine’s more than 200 creditors can hope for, since Jasmine does not stand to gain any of the $2 million in proceeds, and there is no reason to wait any longer to realize that amount. He estimates that approximately $80,000 will be available to be distributed to Jasmine’s priority unsecured creditors after administrative costs are paid.
The objectors argue that they, as directors and officers, are also creditors of Jasmine because they have contribution and indemnity rights against Jasmine under the Policy and the certificate of incorporation, and they also have indemnification and contribution claims against Jasmine in the consolidated actions and the state action. They contend that the Trustee has unreasonably failed to give any consideration to their status as creditors. They also claim that Summit Ban-corp, as a direct creditor of Jasmine, will be prejudiced by the settlement because if Aetna lost its case, Summit may be able to collect on any judgment it obtains against the directors and officers in the state case.
While the objectors’ status as creditors is to be taken into consideration, it is not, by itself, determinative of the fairness of the proposed settlement. Because of Aetna’s likelihood of success, the chance that the directors’ and officers’ claims for indemnification and contribution will be satisfied from the insurance proceeds, or that Summit Bancorp’s claims against the directors and officers will be satisfied from the insurance proceeds, is largely speculative. The trustee has a fiduciary duty towards all creditors of the estate, not just the limited class of creditors comprising the objectors herein. See In re Martin, 91 F.3d at 394. The trustee has submitted that in his business judgment, the creditor body as a whole will stand to gain the most from the proposed settlement.
E. TRUSTEE’S AUTHORITY TO SETTLE WITH AETNA
7. The objectors claim that since the proceeds of the Policy belong to the directors and officers, and not Jasmine, the trustee has no authority to extinguish their rights to proceeds that are not property of the bankruptcy estate. Several cases do hold that D & 0 policy proceeds are not property of the debtor corporation’s bankruptcy estate. See, e.g., In re Louisiana World Exposition, Inc., 832 F.2d 1391 (5th Cir.1987); In re First Central Financial Corp., 238 B.R. 9 (Bankr.E.D.N.Y.1999); In re Daisy Systems Securities Litig., 132 B.R. 752 (N.D.Cal.1991).
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724476-26540 | COLEMAN, Circuit Judge:
This is a case in which a former employee of the Texas State Employment Commission attacked the employer’s longstanding policy of terminating employment of pregnant female employees two months prior to expected delivery ^date.. It was alleged that the policy violated the Civil Rights Act of 1964 and the Equal Protection Clause of the Fourteenth Amendment. The District V Court so held, 330 F.Supp. 328 (W.D., Texas, 1971). We reverse.
I
Since 1956 the Employment Commission has maintained the following policy with reference to female employees from and after the seventh month of pregnancy :
“No employee anticipating maternity confinement may remain in active service with the commission later than two months before the expected delivery date. An earlier separation will be required if the employee’s physical condition interferes with satisfactory performance of her normal and customary work assignments.
“Each employee anticipating maternity confinement shall, at the earliest practicable time, inform her immediate supervisor of the expected date of confinement and the name of her attending physician. This information, along with a specific description of the employee’s work assignments, will be transmitted through channels to the Personnel Office. The appropriate Department Head or District Director shall thereafter, as circumstances warrant, make recommendations consistent with the purposes of this policy.
“An employee separated from the payroll in good standing under this policy, may, upon written application, be granted maternity leave without pay for a period not to exceed six months. If, at the end of that time, she has neither resigned nor been reinstated, she may request in writing one extension of not more than six months. Failure to apply for reinstatement or refusal of reinstatement offered before the expiration of an approved leave of absence will be treated as voluntary resignation.
“Reinstatement following maternity leave is not automatic. Each request for reinstatement will be reviewed and .acted upon after consideration of current personnel needs and the employees’ previous work record with the commission.”
In April, 1969, Mrs. Schattman was employed by the Texas Employment Commission as an employment interviewer, with the understanding that she would be trained to be a labor market analyst. In December, 1969, after the completion of the necessary courses of instruction, Mrs. Schattman was promoted to the position of Labor Market Analyst I. Her duties as a labor market analyst involved essentially desk work. Her work station consisted of two desks, one where she wrote and the other, containing a calculator and an adding machine, where she worked up computations. None of her duties required public contact, and the only physical exertion involved in her job was the lifting of file folders. It was stipulated by the appellants that Mrs. Schattman was a qualified employee and that her services as an employee were satisfactory.
In December, 1969, Mrs. Schattman advised her immediate supervisor, Mrs. Ivy Maude Smith, that she was pregnant and that the expected date of birth was around August 1, 1970. Thereafter, Mrs. Smith gave Mrs. Schattman a copy of the Texas Employment Commission’s maternity leave policy. Notwithstanding this maternity leave policy Mrs. Schattman expressed her desire to continue working until two weeks before the expected date of delivery. Previously, she had been advised by her obstetrician that no reason existed to prevent her from working until two weeks before her expected date of delivery.
Anticipating a total absence from her job of six weeks — two weeks before delivery and four weeks after birth — Mrs. Schattman also discussed with Mrs. Smith an arrangement whereby she would complete much of her work in advance of her confinement, whereby she would train a clerk to do the necessary posting during her anticipated absence.
On April 22, 1970, Mrs. Smith sent the following interoffice memorandum to E. C. Logsdon, District Director of the Texas Employment Commission, relative to Mrs. Schattman:
“Reference is made to my memo of 12-4-69 notifying you of the subject employee’s expected maternity confinement.
“A month ago, her physician told her he saw no reason why she could not work up to two weeks before expected confinement. She plans to seek temporary work elsewhere after TEC’s seven month requirement.
“In view of the fact our maternity leave policy is some 14 years old, is it possible that this restriction has been relaxed ?
“Mary Ellen does not work with the public, but is an analyst in the District Office working at a desk. The work is not of a nature to appear that it would harmful to her to continue' past seven months. Once a month she prepares a report and makes one count in the local office, but this is done in the closing hours of the day, 4 P.M., or early in the morning in a booth. We are now training the clerk to do this work as a back up to the analyst during absence, even though the analyst will continue to prepare on regular basis because of information we are able to pick up which is helpful in analysis.”
Thereafter, Mrs. Schattman was advised that the maternity leave policy of the Texas Employment Commission would be strictly enforced and that her active employment with the Commission would be closed on June 1, 1970. The Personnel Director of the Commission testified that Mrs. Schattman’s employment termination was occasioned simply by the automatic application of the maternity leave policy of the Commission, that no medical opinions were considered, and that the requirements of her job as Labor Market Analyst I were likewise deemed immaterial.
On April 29, 1970, Mrs. Schattman filed her complaint with the Equal Employment Opportunity Commission.
On May 10, 1970, Mrs. Schattman wrote to Mrs. Nancy Sayers, Chairman and Executive Director of the Texas Employment Commission:
“I am a labor market analyst in the Austin District Office. On April 24, 1970, I was informed by my supervisor that May 29, 1970, would be my last day active duty under the TEC maternity leave policy. My expected date of confinement is August 1, 1970, and the doctor anticipates no reason why I could not work until two weeks prior to that date. Attempts were made through channels to secure a regular leave without pay which would allow me to continue until mid-July. Mr. Speer made the final decision on April 23, that the policy would be observed.
“I have filed a charge with the Equal Employment Commission protesting the TEC’s maternity leave policy as violative of the 1964 Civil Rights Act, Title VII, prohibitions against discrimination according to sex.
“I will not voluntarily sign the separation report. Nevertheless, I wish to preserve my rights to reinstatement, and I will therefore sign the form only if ordered to do so.
“I regret that my action is necessary, but I wish to be a career employee and I do not feel that my condition warrants such a long disruption of my work.”
Mrs. Sayers replied on May 14, 1970:
“You (sic) letter of May 10, 1970, indicates you may have some misunderstanding of the Commission’s maternity leave policy on two points. First, the policy stipulates that no employee anticipating maternity confinement may remain in active service with the Commission later than two months before the expected delivery date. Second, reemployment is not automatic. Each request for reemployment is received and acted upon after consideration of current personnel needs and the employee’s previous record with the Commission. Reemployment after separation from the payroll for any reason, including maternity, is at the discretion of the Commission in accordance with the Merit System Regulation.
“The Commission’s maternity leave policy was adopted in 1956 after consideration of many factors including medical opinion, employee welfare, employee efficiency, and practices of other organizations, both public and private. The Commission believes it to be in the best interest of the employee and the agency. I am sorry that you do not agree.
“Please do not be concerned about having to sign a ' separation report. Employees are not required to sign these reports.”
Being unsuccessful in her efforts to maintain her employment past the seventh month termination date, Mrs. Sehattman’s employment was terminated on May 29, 1970, pursuant to the maternity leave policy. The position remained vacant for over five weeks before another employee was permanently assigned to her job. After being discharged, and before the birth of her child on July 20, 1970, Mrs. Schattman unsuccessfully sought temporary employment and, failing to find employment, she thereafter enrolled in a real estate course at the University of Texas.
Mrs. Schattman received notice on July 28, 1970, from the Equal Employment Opportunity Commission of her right to institute suit in Federal District Court against the Texas Employment Commission.
The next day suit was filed against the appellants in the United States District Court, claiming that the termination of her employment violated Title VII of the Civil Rights Act of 1964, the requirements of merit employment upon the Texas Employment Commission by federal statute, and the Fourteenth Amendment to the United States Constitution. Specifically, in terms of relief, Mrs. Schattman sought a preliminary or permanent injunction, restraining the appellants from maintaining any policy, practice, custom or usage of discrimination against her and other females similarly situated because of sex with respect to hiring, terms, conditions, and privileges of employment; declaratory relief declaring the maternity leave policy of the Texas Employment Commission to be in violation of Title VII of the Civil Rights Act of 1964; furthermore, damages for loss of earnings and injunctive relief requiring her reinstatement to employment with the Texas Employment Commission.
Within a month after the delivery of her child, Mrs. Schattman was offered employment at the same salary in San Antonio, Dallas, and five other places, but she declined because she did not wish to leave Austin. However, in January, 1971, she accepted an offered position of “employment interviewer” with the Texas Employment Commission in Houston at the same salary she was receiving when she took her leave of absence less than two months before her baby was born. The Houston job necessitated that Mrs. Sehattman’s husband secure permission to complete his final semester of law school out of residence, which required him to enroll in both the University of Texas and the University of Houston and to complete his final courses by correspondence.
II
On February 25, 1971, the District Court decided the case. We quote from the reported decision, 330 F.Supp. at 329:
"By virtue of female physiology, the Defendants’ policy applies solely to women. Women are terminated not because of their unwillingness to continue work, their poor performance, or their need for personal medical safety, but because of a condition attendant to their sex. This is the very type of discriminatory regulation condemned by the interpretive regulations of the Equal Employment Opportunity Commission. 29 C.F.R. § 1604.1(a) provides in partrthat
The principle of non-discrimination requires that individuals be considered on the basis of individual capacities and not on the basis of any characteristics generally attributed to the group.
/In view of this provision, Richards v. Griffith Rubber Mills, 300 F.Supp. 338, 340 (D.Or.1969), concluded that ‘the law no longer permits either employers or the states to deal with | women as a class in relation to employment to their disadvantage’.
“Although Defendants’ policy is thus violative of 42 U.S.C. § 2000e-2 (a), it can be sustained by showing under 2000e-2(e) that it ‘is a bona fide occupational qualification reasonably necessary to the normal operation of that particular business or enterprise’. To prevail under this exception, according to Weeks v. Southern Bell Telephone & Telegraph, 408 F.2d 228, 235 (5th Cir. 1969),
* * * an employer has the burden of proving that he had reasonable cause to believe, that is, a factual basis for believing, that all or substantially all women would be unable to perform safely and efficiently the duties of the job involved.
Defendants clearly did not sustain their burden under this exception. They based their policy on mere historical reasons, which have not been reexamined for fourteen years. This Court is convinced that there was not such an impairment of efficiency, if any, as to justify TEC’s outmoded policy. Indeed, defendants took almost as much time to replace Mrs. Schattman as would have been required by her doctor for the childbirth and recovery.
“For the foregoing reasons, plaintiff’s request for relief declaring the defendants’ maternity leave policy invalid is accordingly granted, and defendants are permanently enjoined from maintaining this policy. This is not to say that TEC or any other employer cannot have such a policy based on individual medical or job characteristics, but it does mean that broad policies not so justified are contrary to law.”
Mrs. Schattman was awarded judgment for $1,103.72 back pay and attorney’s fees in the sum of $500.
Subsequently, 330 F.Supp. at 330, the ourt rejected the contention of the /Texas Employment Commission that as I to its own employees it was not covered \by the Act because of the terms of 42 U.S.C. § 2000e(b).
This Court is accordingly confronted with two questions: (1) Is the Texas Employment Commission an employer subject to the sex discrimination provisions of Title VII of the Civil Rights Act of 1964; (2) Is the regulation in question reasonable within the requirements of the Equal Protection Clause of the Fourteenth Amendment?
By this time, we are well aware of the proscriptions of Title VII of the Civil Rights Act of 1964.
“Title VII generally forbids in the context of employment, discrimination against any individual ‘because of such individual’s race, color, religion, sex, or national origin’. The Act’s proscriptions are directed at employers, employment agencies, and labor organizations, each of which is forbidden to engage in certain defined ‘unlawful employment practices’. See Title 42, U.S.C.A. §§ 2000e-2, 2000e-3.” Sanchez v. Standard Brands, Inc., 5 Cir., 1970, 431 F.2d 455, 457.
Title 42, U.S.C. § 2000e-2(a), provides :
“It shall be an unlawful employment practice for an employer — (1) 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; or (2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.”
Nevertheless, Title 42, U.S.C. § 2000e (b) (1) defines an employer as any person engaged in an industry affecting commerce who has twenty-five or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year, and any agent of such a person, but such term does not include the United States, a corporation wholly owned by the Government of the United States, an Indian Tribe, or a state or political subdivision thereof (emphasis added).
Counsel for the Equal Employment Opportunity Commission, amicus curiae, stated on oral argument that there is no “satisfactory” legislative history as to the exclusion of states and political subdivisions from employer status. We can only deduce from this that there was no dispute about this exclusion as the proposed legislation coursed its way toward enactment. Everyone must have understood what it meant for the exclusion is stated in clear and unmistakable terms.
It is conceded that the Texas Employment Commission is an agency of the State of Texas. It necessarilW follows that under the plain terms of the foregoing exemption the Commisjsion is not an employer covered by the Act.
But it is argued that the Texas Employment Commission is an employment agency, which it undoubtedly is under the terms of 42 U.S.C. § 2000e, and that 42 U.S.C. § 2000e-2(b) shears the Commission of the exclusion otherwise prescribed for other state agencies in that the section provides:
“It shall be an unlawful employment practice for an employment agency to fail or refuse to refer for employment, or otherwise to discriminate against, any individual because of his race, color, religion, sex, or national origin, or to classify or refer for employment any individual on the basis of his race, color, religion, sex, or national origin.”
In its amicus curiae brief the Equal Employment Opportunity Commission concedes that “The legislative history is silent on the meaning of the statutory phrase ‘or otherwise to discriminate against any individual’ as used in § 703 (b) of the Act”. The Commission argues, nevertheless, that this language re- , moves the Employment Commission from ithe exclusion of state agencies as employers.
We cannot escape the fact that Congress in 42 U.S.C. § 2000e(b) (1) unequivocally declares that a state or subdivision thereof is not an employer within the meaning of the Act-
Does the language of § 2000e-2(b) destroy the exclusion? It does not say so. The key words in the section deal with “reference for employment” and “individuals”. Employees are not mentioned. Had an exception to the exclusion been desired or intended it would have been an easy matter to use clarifying language such as “notwithstanding the provisions of § 2000e(b) (1)”, or it could have included the word “employees” in addition to “individuals”.
After granting in plain and unmistakable terms an exclusion to all state agencies, did Congress withdraw it from one agency by the language here under consideration? With no legislative history to support such a result, does an ambiguity extinguish provisions already plainly expressed? The Supreme Court has given some guidance for statutory construction under such circumstances.
Bouie v. City of Columbia, 1964, 378 U.S. 347, 84 S.Ct. 1697, 12 L.Ed.2d 894, was a Civil Rights case involving criminal trespass but the Court quoted Mr. Chief Justice Marshal:
“The case must be a strong one indeed, which would justify a Court in departing from the plain meaning of words, especially in a penal act, in search of an intention which the words themselves did not suggest. To determine that a case is within the intention of a statute, its language must authorize us to say so [United States v. Wiltberger, 5 Wheat. 76, 96, 5 L.Ed. 37].’’
While the case before us is not a criminal case, the construction sought by Mrs. Schattman would have us hold that although it did not say so Congress intended the Act to cover one very small group of state employees while leaving out the others, that is, treating a small group one way and the others differently, all within the mutual framework of an Act designed to secure equality. This within itself would be a patent inequality, a contradiction, the very thing that Congress set out to correct where it thought corrective action should be exercised.
In another case where the United States unsuccessfully sought to condemn jam as misbranded, it was held that m construing an Act of Congress Courts must construe what Congress has written and cannot add, subtract, delete, or distort the words Congress chose to use, 62 Cases More or Less, Each Containing Six Jars of Jam v. United States, 1951, 340 U.S. 593, 71 S.Ct. 515, 95 L.Ed. 566.
Again, the Court has stated that a suggested implication cannot be allowed to prevail against the express words of a statute, Wright v. Blakeslee, 1879, 101 U.S. 174, 25 L.Ed. 1048.
In the absence of any legislative history to the contrary, we look to the plain language of Congress and hold that the State of Texas is not an employer whose employees are covered by the Act and this includes all employees alike. The Texas Employment Commission as a state agency was excluded from coverage, § 2000e(b) (1), and the District Court was without jurisdiction of this complaint as a purported violation of the Civil Rights Act of 1964.
III
A woman, like any other person, is entitled to the Equal Protection of the law and Due Process of law. There is no necessity to repeat here the splendid passages written in numerous decisions for the purpose of making these principles crystal clear.
The question is: How does Equal Protection or Due Process apply to Mrs. Schattman’s situation?
It must initially be observed that the Texas Employment Commission hired Mrs. Schattman regardless of her sex and trained her. After she had recovered from her pregnancy and confinement, and although she had a suit pending against it, the Commission again offered her employment at the same salary, although in other Texas cities where there was an available opening. It did not terminate her employment because she was a woman or because she became pregnant but only because her pregnancy was far advanced. Mrs. Schattman says the Constitution requires that a state agency with many female employees shall treat every woman on an individual basis even after seven months of pregnancy. She contended before the Commission and she argues here that she could work up until two weeks prior to her expected confinement but the record shows that she was actually delivered of her child ten days before the expected date. Is it constitutionally required of a state agency or any other employer of many females that they shall make a daily, or even momentary, evaluation of the condition and hazards of its pregnant female employees after they reach the far advanced stage?
Is it conducive to the reasonably efficient operation of a state agency that it should involve itself in strife, discord, unhappiness, jealousies, and recriminations caused by allowing one woman to work through the eighth or ninth month of pregnancy as a matter of opinion on the part of some supervisor while requiring another to stop at the end of the seventh ?
The record shows that the Commission has 3,600 employees, although the numerical division between male and female was not stated. ,
Dr. Emerson K. Blewett testified below that he was Mrs. Schattman’s doctor, that it would be “physically possible” for her to continue her employment until within two weeks of confinement; that a woman seven months pregnant can do as much work as one who is not preg-i nant; that, in fact, Mrs. Schattman! could work until the day of her de- \ livery; and that it would present no '■ problem.
On the other hand, the Court also heard the testimony of Dr. M. D. Mc-Cauley, an obstetrician and gynecologist, a graduate of the University of Michigan, who was then fifty-eight years old and had practiced medicine thirty-four years. He had presided at the delivery of over 10,000 babies. For eighteen years he had been Chief of the Obstetrical Division at Seton Hospital.
Dr. McCauley said:
“We have some thirty-two susceptible young women there who are a constant problem in all phases of their work, starting in the last trimester of pregnancy.”
Dr. McCauley further testified that there is a change in the efficiency of a working woman after the sixth or seventh month of pregnancy; that, in his opinion, a regulation releasing women from their employment after the sixth or seventh month of pregnancy was reasonable; that in a woman after reaching the seventh month swelling o,f the limbs is very prevalent, especially in the summer; their ability to get around necessitates help and assistance from other employees; jobs they had been able to do themselves they now require help with, or they are unable to do them; they are frequently given to headaches, little irritable things; their personalities change quite a bit; and they are not only hard to live with but they are hard to employ. He further testified that women in that condition are frequently running to the bathroom or after a small bite of food or to loosen their garments because they are too tight.
The District Court made no findings as between the testimony of Dr. Blewett and Dr. McCauley. He held that “by virtue of female physiology the Defendants’ policy applies solely to women”. This is no doubt true but the fact that only a woman can be pregnant does not nullify the pregnancy nor the ensuing physical conditions.
The record further shows that one Texas agency terminates its women employees at the end of the fifth month of pregnancy and others at the end of six months. Still others terminate at the end of the seventh month.
The most recent case before the Supreme Court on State classification by sex is Reed v. Reed, decided November 22, 1971, 404 U.S. 71, 92 S.Ct. 251, 30 L.Ed.2d 225.
It was there stated, 92 S.Ct. at 251, that in applying the Equal Protection Clause the Supreme Court has consistently recognized that the Fourteenth Amendment does not deny the States the power to treat different classes of persons in different ways. The Clause does prohibit the States from placing people in different classes “on the basis of criteria wholly unrelated to the objective of that statute” [in our case, a regulation] . Additionally, the Supreme Court said, “A classification ‘must be reasonable, not arbitrary, and must rest on some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike’ ”. The conclusion was that dissimilar treatment for men and women who are similarly situated violates the Equal Protection Clause.
We are also aware that the Supreme Court has said in comparatively recent times (1960) that “a statutory [regulatory] discrimination will not be set aside if any facts reasonably may be conceived to justify it”, McGowan v. Maryland, 366 U.S. 420, 425, 81 S.Ct. 1101, 1105, 6 L.Ed.2d 393.
See, also, an older case, Lindsley v. National Carbonic Gas Co., 1911, 220 U.S. 61, 78-79, 31 S.Ct. 337, 55 L.Ed. 369, cited in Reed, supra, and the decision of the Three Judge Court, 316 F.Supp. 134, 136 [Judges Haynesworth, Hemp-hill, and Russell] dealing with a man claiming that he had a constitutional right to gain admission to a college maintained exclusively for girls:
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5896634-8009 | OPINION OF THE COURT
NYGAARD, Circuit Judge.
Ford appeals the District Court’s order granting a preliminary injunction in favor of a group of New Jersey franchise dealerships. The order prohibited Ford from assessing a surcharge to its New Jersey franchisees to recoup costs arising from a New Jersey statute that allowed franchisees to request a higher rate of reimbursement from Ford for warranty work. Ford also appeals the District Court’s underlying partial summary judgment. For the reasons that follow, we will reverse the District Court’s preliminary injunction order and remand for further proceedings consistent with this opinion. The partial summary judgment is neither a final nor appealable order and we will not review it.
I.
As part of their agreement with Ford, franchised dealers are required to perform repair work on Ford brand vehicles, regardless of whether the franchisee sold the vehicle. Ford reimburses the dealers for work performed under both limited and extended service warranty plans, and for work that must be performed on recalled Ford vehicles. Under some circumstances where Ford determines that it is necessary to maintain customer satisfaction, Ford pays part of the cost of non-warranty repair work.
The New Jersey Franchise Practices Act provides that a “motor vehicle franchisor shall reimburse” its franchisee for parts used in warranty repairs at the franchisee’s “prevailing retail price,” provided that the retail price is not unreasonable. N.J.S.A. § 56:10-15(a). The prevailing reimbursement rate prior to the statute was approximately 40% above the dealer cost. The dispute began in 1991 when one dealer, Liberty Lincoln-Mercury, Inc. asked Ford for a warranty part reimbursement at its retail rate, which was 77% above costs. Ford paid the higher rate, but it also began to add a fee to the wholesale price of cars that it delivered to Liberty. The fee varied month to month, depending on the reimbursement amounts claimed by Liberty. Liberty filed suit challenging the fee, and we affirmed the decision of the District Court that Ford’s surcharge violated the warranty reimbursement statute. Liberty Lincoln-Mercury, Inc. v. Ford Motor Co., 134 F.3d 557 (3d Cir.1998).
In 2002, Ford imposed a restructured surcharge program to recoup increased costs incurred from its compliance with the warranty reimbursement statute. The second fee program applied to the wholesale price of all vehicles delivered to Ford franchisees in New Jersey. Liberty, along with other Ford franchisees in New Jersey, sued Ford asserting that the second surcharge program also violated the warranty reimbursement statute. Ford countered that it designed the second program to be a wholesale vehicle price term, a type of fee that we expressly stated in the first lawsuit was outside of the scope of the New Jersey statute. Regardless, in a partial summary judgment, the District Court ruled that Ford’s reconstituted fee program violated the New Jersey statute.
The District Court also issued a preliminary injunction, prohibiting Ford from imposing the surcharge while the remaining issues are litigated. In granting the preliminary injunction the District Court noted that the partial summary judgment in favor of the franchisees resolved whether they were likely to succeed on the merits. The District Court did not make any other specific findings, but stated generally that the other requirements for a preliminary injunction “have been satisfied.”
II.
28 U.S.C. § 1292(a)(1) provides us with appellate jurisdiction to entertain interlocutory appeals from orders that grant, deny, or modify injunctions. On appeal, the standard of review of a preliminary injunction issued by a district court is narrow. Unless an abuse of discretion is “clearly established, or an obvious error has ocurred [sic] in the application of the law, or a serious and important mistake has been made in the consideration of the proof, the judgment of the trial court must be taken as presumptively correct.” Premier Dental Products Co. v. Darby Dental Supply Co., Inc., 794 F.2d 850, 852 (3d Cir.1986), quoting Stokes v. Williams, 226 F. 148, 156 (3d Cir.1915).
We must consider the following factors in determining whether a preliminary injunction should be issued:
(1) the likelihood that the moving party will succeed on the merits; (2) the extent to which the moving party will suffer irreparable harm without injunctive relief; (3) the extent to which the non-moving party will suffer irreparable harm if the injunction is issued; and (4) the public interest.
McNeil Nutritionals, LLC v. Heartland Sweeteners, LLC, 511 F.3d 350, 356-357 (3d Cir.2007). The franchisees assert that the preliminary injunction was a consent order. There is no evidence of such consent. In fact, the District Court’s order expressly reserved Ford’s right to appeal the order.
Ford argues that the District Court erred by finding that the franchisees are likely to succeed on the merits. In reality, Ford is attempting to appeal the partial summary judgment order that declared the surcharge program was a violation of New Jersey’s warranty reimbursement statute. Where a preliminary injunction has been appealed under the collateral order doctrine we have, in some cases, exercised pendant jurisdiction to review an inextricably intertwined partial summary judgment order. Kos Pharmaceuticals v. Andrx Corp., 369 F.3d 700, 708 (3d Cir.2004). Citing Kos Pharmaceuticals, however, Ford takes it one step further by arguing that we must review the partial summary judgment in this case. Ford is mistaken that we are under any such requirement. 28 U.S.C. § 1291.
Ford’s citation to Kos Pharmaceuticals glosses over a critical distinction between that case and this one. That case focused upon an alleged trademark infringement in which the plaintiff claimed non-monetary injury. Kos Pharmaceuticals, 369 F.3d at 708. In fact, non-mone tary damages were at issue in the entire line of cases from our court leading up to Kos Pharmaceuticals, except where a statute specifically authorized a preliminary injunction under other criteria. This is also true of decisions from Courts of Appeal in other circuits. We reaffirm that we have pendant jurisdiction to review underlying orders that are inextricably intertwined with a preliminary injunction, and that in such a review it may be necessary to consider whether the movant is likely to succeed on the merits. In this case, however, we do not need to reach the issue of whether the franchisees are likely to succeed on the merits, making the exercise of pendant jurisdiction unnecessary.
We have repeatedly insisted that “the preliminary injunction device should not be exercised unless the moving party shows that it specifically and personally risks irreparable harm.” Adams v. Freedom Forge Corp., 204 F.3d 475, 487 (3d Cir.2000). We have also stressed that “[bjefore granting a preliminary injunction, a district court must consider the extent to which the moving party will suffer irreparable harm without injunctive relief.” (Emphasis added.) Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharmaceuticals Co., 290 F.3d 578, 595 (3d Cir.2002).
Here, the District Court made no finding of irreparable harm, stating only that all of the requirements for a preliminary injunction have been satisfied. We have long held that an injury measured in solely monetary terms cannot constitute irreparable harm. Bennington Foods LLC v. St. Croix Renaissance, Group, LLP., 528 F.3d 176, 179 (3d Cir.2008); see also In re Arthur Treacher’s Franchisee Litigation, 689 F.2d 1137, 1145 (3d Cir.1982) (“[W]e have never upheld an injunction where the claimed injury constituted a loss of money, a loss capable of recoupment in a proper action at law.”). We do not see in the record before us any evidence of a non-monetary injury and we conclude that the District Court was wrong when it stated that all of the requirements for a preliminary injunction have been met.
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11180086-27903 | Cohen, Judge:
Respondent determined the following deficiencies in the Federal income tax of MidAmerican Energy Co. (petitioner):
TYE Deficiency
Dec. 31, 1984 $698,682
Dec. 31, 1987 171,396
Dec. 31, 1988 994.913
Dec. 31, 1989 1,457,191
Dec. 31, 1989 715,208
Nov. 7, 1990 391.914
Dec. 31, 1990 5,121,384
On November 7, 1990, a merger took place, resulting in a short tax year.
After concessions by the parties, the issues for decision in these consolidated cases are whether petitioner’s accrual of income from furnishing utility services was in accordance with section 451(f), whether the amount reported by petitioner pursuant to section 481 for 1986 adequately reflects the change in accounting method under section 451(f) (the unbilled revenue issues), and whether petitioner is entitled to relief under section 1341 for its reduction in utility rates from 1987 through 1990 to compensate for excess deferred Federal income tax.
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated facts are incorporated in our findings by this reference.
Petitioner, a public utility, is a subsidiary of MidAmerican Energy Holding Co. and is the successor in interest to Midwest Resources, Inc. (Midwest Resources), a corporation formed under the laws of Iowa. At the time the petitions in these cases were filed, petitioner’s principal place of business was in Des Moines, Iowa. Predecessors in interest of Midwest Resources whose Federal income tax returns are in issue in these cases include Iowa Resources, Inc., and Midwest Energy Co. Any reference to petitioner herein includes its predecessors.
Petitioner engages in the retail distribution of natural gas (gas), electricity, and related services to residential, commercial, and industrial customers in Minnesota, Iowa, Nebraska, and South Dakota. In the ordinary course of business, petitioner purchases gas and either resells it to its customers or consumes it to generate electricity for its customers. During the years in issue, petitioner was an accrual method taxpayer reporting, except for 1990, on a calendar year basis.
Petitioner’s operations are subject to the rules and regulations of Federal and State agencies, including the Federal Energy Regulatory Commission (ferc), the Iowa Utilities Board (iub), the Minnesota Public Utility Commission, the South Dakota Public Utility Commission, and certain municipal governments in Nebraska (regulatory agencies). Under established procedures, these regulatory agencies prescribe the rates at which petitioner may sell gas and electricity (approved tariff rates), the accounting methods and practices that petitioner may adopt for regulatory and financial accounting purposes, the billing practices, the payment practices, and other terms and conditions for the sale of gas and electricity to its customers. The approved tariff rates for gas are generally made up of gas costs and the nongas margin. The nongas margin represents the recovery of all costs other than gas costs, including physical plant costs, meter-reading expenses, and labor and other nongas related expenses, as well as overhead and a reasonable rate of return. The approved tariff rates for electricity include several components in addition to costs incurred to supply energy.
Purchased Gas Adjustment
Petitioner implements approved tariff rates for gas using the purchased gas adjustment (PGA) mechanism. Once rate schedules and procedures are approved by the regulatory agencies, the PGA mechanism allows petitioner to recognize fluctuations in gas costs quickly and to incorporate those changes in its customers’ bills without formal rate-setting procedures. Accordingly, petitioner can recover its gas costs on a timely basis throughout the year.
The period that the PGA mechanism covers runs from September 1 of the first year to August 31 of the following year (the PGA year). As part of the PGA mechanism, certain disclosures are required throughout the year, including an annual PGA filing, monthly PGA filings, and an annual PGA reconciliation filing. The annual PGA filing is made prior to August 1 of each year and estimates anticipated sales and expenses for the upcoming PGA year. In the annual PGA filing, projected gas costs are established and incorporated into the approved tariff rates. This projection is based on gas actually used and actually billed during the previous year with adjustments for weather normalization.
Periodic PGA filings are made throughout the calendar year at the end of each calendar month to adjust the billing rate to reflect near-concurrent gas costs, as the price of gas fluctuates. Accordingly, each month, rates that are set forth in the annual PGA filing are increased or decreased without normal rate-setting procedures by a pricing adjustment factor (PGA factor). The PGA factor is calculated based upon the weighted average per unit price of gas for the upcoming month, using sales volume that was ■ established in the annual PGA filing. Each month, the PGA factor, together with the approved tariff rate, is applied to the gas usage to determine how much is billed to each customer.
The final filing requirement of the PGA mechanism is the PGA reconciliation filing. This filing is made by October 1 and compares estimated gas costs with actual gas revenues that are billed through the PGA mechanism during the year, net of the prior year’s PGA reconciliation. Negative differences in the reconciliation are underbillings, and positive differences are overbillings. Petitioner internally tracks over and/or underbillings for each month of the PGA year. The cumulative annual over or undercollection is recorded in the. annual PGA reconciliation. Underbillings are recouped through 10-month adjustments to the PGA factor from which the underbilling was generated. Overbillings are returned to the customer class from which they were generated either by bill credit, check, or 10-month adjustments to the PGA factor from which the overbillings were generated. If, however, the overcollection exceeds 5 percent of the annual cost of gas subject to recovery for a specific PGA grouping, the amount overbilled is refunded by bill credit or check. If a discrepancy between estimated nongas margin and actual nongas costs exists, petitioner is not entitled to use the PGA mechanism, as described above, to adjust its anticipated nongas margin revenues.
Energy Adjustment Clause
Petitioner adjusts approved tariff rates for electricity using • the energy adjustment clause (EAC), a mechanism similar to the PGA mechanism. Approved tariff rates for electricity are set at the beginning of each year, and the EAC mechanism allows petitioner to adjust periodically the approved tariff rates for electricity to recover increases in the costs of supplying energy, including fluctuations in gas costs that are used to generate electricity. The cost adjustments are determined on a monthly basis and are applied to meter readings made during the month. Yearly and monthly filings are required as part of the EAC mechanism, but reconcilia* :ons are incorporated on a monthly basis, alleviating the nee*. ”or a yearly reconciliation.
Petitioner’s Accounting Method
In order to balance its workload each month, petitioner reads meters and bills customers for gas and electricity based on 21 billing cycles. Accordingly, petitioner reads its customers’ meters every month on 21 different schedules and, on that basis, submits bills for the price of gas actually consumed by each customer from the last meter reading to the current meter reading. The amount of utility service that is provided from meter reading to meter reading is the revenue month usage.
Prior to 1982, petitioner reported income for financial, regulatory, and tax accounting purposes on the cycle meter-reading method. Under this method, if the meter-reading date fell within the current taxable year, the income attributable to utility services provided on or before the reading date was included in gross income in that taxable year. Any utility service provided to customers within the current taxable year but after the last meter-reading date of such year was not recognized as income until the following taxable year.
In 1982, petitioner changed its method of accounting for financial and regulatory accounting purposes from the cycle meter-reading method to the accrual method of accounting. Under the accrual method of accounting, the sales price of gas and electricity consumed after each customer’s last meter-reading date to December 31 (unbilled period) was recorded as . unbilled revenue. Unbilled revenue consists of two components: (1) Nongas margin and (2) gas costs of utility services provided to customers during the unbilled period (unbilled gas costs). However, on December 31, an adjustment was made to reduce unbilled revenue by the amount of unbilled gas costs. For tax purposes, petitioner continued to report taxable income on the cycle meter-reading method, making adjustments on Schedule M-l on its Federal income tax returns to reflect the difference between tax and financial accounting for unbilled revenue.
In 1987, petitioner changed its method of accounting for Federal income tax purposes and began including unbilled revenue in taxable income. Consistent with its financial and regulatory accounting method, petitioner reduced unbilled revenue by the amount of unbilled gas costs, leaving only the nongas margin as part of taxable income. As part of its change in method of accounting, petitioner made a section 481 adjustment to include in income the amount of revenue attributable to the unbilled period as of December 31, 1986. This adjustment was reduced by unbilled gas costs as of December 31, 1986. In years thereafter, petitioner made Schedule M-l adjustments to reflect the reduction in unbilled revenue by the unbilled gas costs amounts.
Deferred Tax Expense
Federal income tax is also a component of the approved tariff rates that petitioner charges its customers. However, the Federal income tax that petitioner uses in determining approved tariff rates is generally different from actual Federal income tax currently owed to the Government. This is attributable to timing differences of recognizing items of income and expense. For example, straight-line depreciation is used for rate-making purposes, while accelerated depreciation is used to calculate current Federal income tax. In earlier years, when accelerated depreciation exceeds straight-line depreciation, the timing difference causes a utility to collect more than the utility currently owes to the Government. This excess of Federal income tax collected is referred to as the deferred Federal income tax expense and represents Federal income tax to be paid by petitioner in subsequent years when depreciation for rate-making purposes exceeds depreciation for Federal income tax purposes. The utility uses amounts it overcollected in earlier years to pay Federal income tax it owes in later years. Deferred tax expense is tracked using a deferred Federal income tax account. If Federal income tax rates remain constant, the deferred Federal income tax account will zero out over the useful life of the underlying assets.
In years prior to 1987, petitioner collected revenues based on a 46-percent Federal income tax rate and increased the deferred Federal income tax account by the amount that collections exceeded the current Federal income tax. The Tax Reform Act of 1986 (tra), Pub. L. 99-514, sec. 821, 100 Stat. 2372, effective for 1987 and years thereafter, reduced corporate Federal income tax rates from 46 percent to 39.95 percent in 1987 and to 34 percent in 1988. As a result, petitioner’s accumulated deferred Federal income tax as of December 31, 1986, exceeded the amount of Federal income tax that petitioner would be expected to pay in future years.
The regulatory agencies had the authority to require petitioner to adjust rates to reflect such an excess, but TRA section 203(e), 100 Stat. 2146, provided that the normalization provisions of sections 167 and 168 would be violated if a utility reduced its excess deferred Federal income tax reserve more rapidly than as provided under the average rate assumption method (ARAM). This TRA provision generally applies to those excess deferred Federal income taxes attributable to timing differences relating to depreciation and property classifications described in sections 167(a)(1) and 168(e)(3) (protected excess deferred Federal income tax). Under ARAM, the protected excess deferred Federal income tax can be reversed only through rate adjustments as the timing differences that created them reverse. Accordingly, the protected excess deferred Federal income tax is reduced ratably over the underlying asset’s remaining useful life, consistent with normalization, by reducing future utility rates.
Consistent with these provisions, petitioner began reducing its protected excess deferred Federal income tax account in November 1987 by reducing utility rates. This continued through 1990. The rate reductions were allocated to each customer class based on each customer class’s contribution to the excess deferred Federal income tax, but rate reductions were not specifically allocated to customers who paid pre-1987 utility fees. None of petitioner’s customers who paid pre-1987 utility rates and subsequently left petitioner’s service asserted claims against petitioner for repayment or refund of the excess deferred Federal income tax. Petitioner was not required to nor did it issue refund checks or billing credits to its customers, and the regulatory agencies also did not require petitioner to pay interest on amounts returned through rate reductions.
Petitioner’s 1987, 1988, 1989, and 1990 Federal income tax returns used the method of accruing unbilled revenue, as set forth above, in calculating taxable income. Also for those years, petitioner claimed section 1341 relief for the amount by which it reduced utility rates to compensate for excess deferred Federal income tax. Respondent audited petitioner’s 1987, 1988, 1989, and 1990 Federal income tax returns. Upon review, respondent rejected petitioner’s method of accruing unbilled revenue (unbilled revenue issue) and denied petitioner’s claims for relief under section 1341 for rate reductions associated with excess deferred tax (section 1341 issue).
OPINION
Unbilled Revenue Issue
The unbilled revenue issue is essentially an accounting dispute. Petitioner maintains that its regular method of accounting, which uses the PGA and EAC mechanisms to recover gas costs, already includes December gas costs in the taxable year and that to accrue revenue from gas costs for the period following the December meter-reading date to December 31 (unbilled period) results in double counting. Respondent contends that petitioner’s method of accounting fails the requirements of section 451(f) and that petitioner must include in taxable income amounts attributable to utility services, gas costs, and nongas margin provided during the taxable year, including the unbilled period.
Section 446(a) generally provides that taxable income shall be computed under the method of accounting that the tax payer regularly uses to compute income for financial accounting purposes. If such method of accounting does not clearly reflect income, “the computation of taxable income shall be made under such method as, in the opinion of the Secretary, does clearly reflect income.” Sec. 446(b).
Prior to the passage of section 451(f) in the Tax Reform Act of 1986, Pub. L. 99-514 sec. 821, 100 Stat. 2372, petitioner recognized taxable income from utility services based on the taxable year in which its customers’ utility meters were read (the cycle meter-reading method). See Rev. Rui. 72-114, 1972-1 C.B. 124. Under the cycle meter-reading method, utility services provided to customers during the unbilled period were not recognized as income until thé following taxable year. See id. Recognizing that the cycle meter-reading method allowed utilities to defer yearend income, S. Rept. 99-313, 1986-3 C.B. (Vol. 3), 120-121, Congress passed section 451(f).
Section 451(f)(1) provides:
In the case of a taxpayer the taxable income of which is computed under an accrual method of accounting, any income attributable to the sale or furnishing of utility services to customers shall be included in gross income not later than the taxable year in which such services are provided to such customers.
This section effectively requires taxpayers to discontinue using the cycle meter-reading method of accounting and adopt a method of accounting that includes taxable income from utility service provided during the taxable year, including the unbilled period.
Effective for 1987 and years thereafter, petitioner changed its method of accounting for tax purposes and began accruing utility fees attributable to nongas margin from the unbilled period. Petitioner did not, however, make an accrual for utility fees attributable to gas costs from the unbilled period. Consistent with this change in method of accounting, petitioner made a section 481 adjustment, including in taxable income that portion of utility fees from the unbilled period attributable to the nongas margin, as of December 31, 1986.
Petitioner’s method of accounting violates the literal requirements of section 451(f) because it does not accrue utility fees attributable to gas costs from the unbilled period. In practice, petitioner calculates taxable income using meter readings as a proxy for actual utility services provided during the calendar year and makes an accrual for nongas margin from the unbilled period. According to section 451(f), a utility must include in taxable income the revenue attributable to utility services provided during the taxable year. See S. Rept. 99-313, supra, 1986-3 C.B. (Vol. 3) at 120-121. Utility services are “provided” when such services are made available to, and used by, the customer. Id. “The taxable year in which services are treated as provided to customers shall not, in any manner, be determined by reference to (i) the period in which the customers’ meters are read, or (ii) the period in which the taxpayer bills (or may bill) the customers for such service.” Sec. 451(f)(2)(B). On average, petitioner’s method of accounting includes in taxable income utility services provided from December 15 of the prior year to December 15 of the current year. With respect to the unbilled period, we see no difference in petitioner’s treatment of revenue from gas costs under its current method of accounting and the cycle meter-reading method of accounting that section 451(f) was intended to eliminate. While it is true that a full year’s worth of income from utility service is included in determining taxable income, the included year is not the same as the yqar intended by section 451(f). Congress there specified that the income attributable to utility services must be reported for the same year in which the services were provided.
Petitioner contends that its agency-imposed accounting method, which uses the PGA and EAC mechanisms to recover current gas costs, allows petitioner to recover December gas costs and alleviates the need to accrue gas costs from the unbilled period. We disagree. Section 451(f) focuses on the inclusion of income from utility services actually provided during the taxable year, and the PGA and EAC mechanisms address only the pricing of utility services billed. Irrespective of its pricing mechanisms, petitioner is still using meter readings as a proxy for utility services actually provided during the taxable year in direct contravention of section 451(f). It is also well settled that consistency with agency-imposed accounting practices is not determinative of the adequacy of petitioner’s accounting method for tax purposes. See Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 542-543 (1979) (there are “vastly different objectives that financial and tax accounting have”, and “any presumptive equivalency between tax and financial accounting would be unacceptable”). Accordingly, we conclude that petitioner’s accounting method violates the requirements of section 451(f).
To reflect properly the requirements of section 451(f) and prevent double counting, petitioner’s section 481 adjustment in 1986 should have also included the unbilled revenue attributable to gas costs from the unbilled period as of December 31, 1986. In years thereafter, an adjustment should have been made to January bills removing revenues from the unbilled period of the prior taxable year, and a corresponding adjustment should have been made to include revenue from the unbilled period for the current year for both gas costs and nongas margin. The relevant legislative history suggests:
where it is not practical for the utility to determine the actual amount of services provided through the end of the current year, this estimate may be made by assigning a pro rata portion of the revenues determined as of the first meter reading date or billing date of the following taxable year. [See S. Rept. 99-313, supra at 121, 1986-3 C.B. (Vol. 3) at 121.]
Respondent has made the necessary adjustment in the statutory notice, and respondent’s determination of this issue is sustained.
Section 1341 Issue
Petitioner also argues that it is entitled to section 1341 treatment for the amount by which it reduced utility rates from 1987 to 1990 to compensate for excess deferred Federal income taxes.
Section 1341(a) provides in pertinent part:
SEC. 1341(a). In General. — If—
(1) an item was included in gross income for a prior taxable year (or years) because it appeared that the taxpayer had an unrestricted right to such item;
(2) a deduction is allowable for the taxable year because it was established after the close of such prior taxable year (or years) that the taxpayer did not have an unrestricted right to such item or to a portion of such item; and
(3) the amount of such deduction exceeds $3,000,
then the tax imposed by this chapter for the taxable year shall be the lesser of the following:
(4) the tax for the taxable year computed with such deduction; or
(5) an amount equal to— •
(A) the tax for the taxable year computed without such deduction, minus
(B) the decrease in tax under this chapter * * * for the prior taxable year (or years) which would result solely from the exclusion of such item (or portion thereof) from gross income for such prior taxable year (or years).
Section 1341 was enacted by Congress to mitigate the sometimes harsh results of the application of the claim of right doctrine. See United States v. Shelly Oil Co., 394 U.S. 678, 681 (1969). Under that doctrine, a taxpayer must recognize income for an item in the year it is received under a claim of right even if. it is later determined that the right of the taxpayer to the item was not absolute and it is returned in a subsequent year. See North Am. Oil Consol. v. Burnet, 286 U.S. 417, 424 (1932). Although the taxpayer is allowed to take a deduction in the year of return for the amount of the item, the deduction would fail to make the taxpayer whole if the applicable tax rate was higher in the year of recognition than it was in the year of return. See United States v. Shelly Oil Co., supra. Section 1341 makes the taxpayer whole by reducing taxable income in the year of return by the amount of the allowable deduction or by giving a credit in the year of return for the hypothetical decrease in tax that would have occurred in the year of recognition had the item been excluded from income in that year. The taxpayer may use whichever method is most.beneficial. See sec. 1.1341-1(i), Income Tax Regs.
Prior to 1987, the payments that petitioner received from its customers for utility services included a deferred Federal income tax component attributable to accelerated depreciation. Petitioner paid Federal income tax on those amounts at a rate of 46 percent. Federal income tax rates were reduced in 1986 to 39.95 percent for 1987 and to 34 percent for 1988 and years thereafter, creating an excess in petitioner’s deferred Federal income tax account. Petitioner corrected this excess by reducing utility rates that were charged to its customers from 1987 through 1990. However, due to the reduction in rates, petitioner paid a greater amount of tax in years prior to 1987 than the tax benefit it received from 1987 to 1990 when it reduced its utility rates. Accordingly, on its Federal income tax returns for 1987 through 1990, petitioner claimed section 1341 relief.
The first requirement of section 1341(a)(1) is that the item in question be included in taxable income by the taxpayer because it appeared that the taxpayer had an unrestricted right to the item. Respondent argues that petitioner fails to meet this requirement because it had an actual, and not an apparent, unrestricted right to income from utility fees that it collected prior to 1987. See, e.g., Kraft v. United States, 991 F.2d 292, 299 (6th Cir. 1993); Bailey v. Commissioner, 756 F.2d 44, 47 (6th Cir. 1985); Van Cleave v. United States, 718 F.2d 193, 196-197 (6th Cir. 1983); Prince v. United States, 610 F.2d 350, 352 (5th Cir. 1980). Petitioner asks us to adopt the substantial nexus test recently adopted in two separate Federal District Court opinions on fact patterns nearly identical to the one at hand. See Dominion Resources, Inc. v. United States, 48 F. Supp. 2d 527 (E.D. Va. 1999); WICOR, Inc. v. United States, 84 AFTR 2d 99-6905, 99-2 USTC par. 50,951 (E.D. Wis. 1999). We do not resolve this dispute over the proper test, however, because of our conclusion that petitioner does not satisfy another requirement for relief under section 1341.
The second requirement that petitioner must satisfy, in order to qualify for relief under section 1341, is that a deduction must be allowable in the year of return for the refunds that were made. Respondent argues that petitioner fails to meet this requirement because petitioner’s rate reductions from 1987 to 1990 do not qualify as deductible expenses within the meaning of section 1341(a)(2). Petitioner maintains that the right to claim a deduction under section 162 for funds or property returned after a taxpayer has previously included such funds or property in income rests in the claim of right doctrine itself. United States v. Skelly Oil Co., supra at 680-681; North Am. Oil Consol, v. Burnet, supra at 424 (stating that, if the taxpayer were obliged to refund amounts previously included under the claim of right doctrine, it would be entitled to a deduction when the amount was returned).
This issue was recently addressed in both Dominion Resources, Inc. v. United States, supra, and WICOR, Inc. v. United States, supra, with the courts reaching different conclusions. The court in Dominion Resources held that the return of excess deferred Federal income tax is a deductible expense, whereas, in WICOR, Inc., the court distinguished Dominion Resources and decided that a mere reduction of future utility rates did not constitute a deductible business expense. See also Florida Progress Corp. & Subs. v. Commissioner, 114 T.C. 587 (2000) (also filed this date).
The use of the word “deduction” in section 1341(a)(2) limits section 1341 applicability to refunds or returns that would otherwise be deductible under another section of the Internal Revenue Code. United States v. Skelly Oil Co., supra at 683. Therefore, the decision on this issue depends upon whether the return of excess deferred Federal income tax by petitioner is an ordinary and necessary business expense deductible under section 162.
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1301911-13566 | INCH, District Judge.
This is a motion by plaintiff to strike out the defendant’s answer, in an equity suit, commenced by plaintiff against defendants, having for its object the restraining of the defendants (who are the board of trustees and the clerk of the village of the Great Neck Estates) from interfering with the construction by plaintiff of a number of buildings, proposed to be constructed by her, in said village, and that the clerk of said village be enjoined from enforcing a certain zoning ordinance of said village, which affects the construction and occupancy of said buildings.
The bill of complaint was filed in the clerk’s office of this court May 27,1926. The defendants filed their verified answer on June 16, 1926. The answer contains denials and certain defenses. It appears, from the papers submitted, that in 1923 the Legislature of the state of New York duly passed a law by which, among other things, a grant of power was given to villages in the state of New York, such as the village of Great Neck Estates. This grant of power was substantially as follows:
“Sec. 175. Grant of Power. For the purpose of promoting the health, safety, morals, or the general welfare of the community, the board of trustees of a village is hereby empowered, by ordinance, to regulate and restrict the height, number of stories and size of buildings and other structures, the percentage of lot that may be occupied, the size of yards, courts and other open spaces, the density of population, and the location and use of buildings, structures and land for trade, industry, residence or other purposes. Such regulations may provide that a board of appeals may determine and vary their application in harmony with their general purpose and intent, and in accordance with general or specific rules therein contained.
“Sec. 176. Districts. For any or all of said purposes the board of trustees may divide the village into districts of such number, shape and area as may be deemed best suited to carry out the purposes of this act; and within such districts it may regulate and restrict the erection, construction, reconstruction, alteration, repair or use of buildings, structures or land. All such regulations shall be uniform for each class or kind of buildings throughout each district but the regula tions in one district may differ from those in other districts.
“See. 177. Purposes in View. Such regulations shall be made in accordance with a comprehensive plan and designed to lessen congestion in the streets; to secure safety from fire, panic and other dangers; to promote health and the general welfare; to provide adequate light and air; to prevent the overcrowding of land; to avoid undue concentration of population; to facilitate the adequate provision of transportation, water, sewerage, schools,. parks and other public requirements. Such regulations shall be made with reasonable consideration, among other things, as to the character of the district and its peculiar suitability for particular uses, and with a view to conserving the value of buildings and encouraging the most appropriate use of land throughout such municipality.”
Article VI-A of the Village Law (Consol. Laws, e. 64), entitled “Building Zones,” as added by chapter 564 of the Laws of 1923, McKinney’s Village Law, vol. 63, Supplement 1925, page 29.
The real purpose of this suit, and the sole basis of jurisdiction claimed to be in this court, is the claim that this ordinance of the board of trustees of said village, passed' pursuant to their understanding of this granted power by the state of New York, as well as the statute, offends the Constitution of the United States, in that either the ordinance represents a misconception of this granted power, and is thus ultra vires, or, if such ordinance is within said grant of power, the said statute then so offends.
There is no diversity of citizenship. While the real estate is within the Eastern' district, it is also within the state of New York, and governed by its laws, and the said state of New York has- apparently provided ample statutory procedure to prevent injustice caused by arbitrary and Unlawful ordinances (see Village Law, supra), including the opportunity to apply to a state court, and, of course, the door is open to apply from such state court to the Supreme Court of the United States, should a proper ease be found by the latter court requiring such step.
At the outset, therefore, it appears that the plaintiff does not desire to test this village ordinance and state statute in the state courts, and, in case she is aggrieved, then apply to said.federal court, but prefers, in the first instance, to commence her suit in a federal court. The excellent and thoughtful argument made by the counsel for plaintiff, as well as the equally able argument made by counsel for defendant, present a number of points which, in view of my decision, it is unnecessary tó go into at this time. They may or may not arise at the trial.
I agree with counsel for the plaintiff that, where such a suit is brought,'this court has jurisdiction, not only to decide the question of jurisdiction (Flanders v. Coleman, 250 U. S. 223, 39 S. Ct. 472, 63 L. Ed. 948), but also this motion (New Orleans M. & T. R. Co. v. Mississippi, 102 U. S. 135, 26 L. Ed. 96). However, it should not be overlooked that this is a motion to “strike out,” and is not a trial of the issues.
The complaint would seem to set up allegations based on important facts, which, with the inferences therefrom, may become very material to a proper decision of the issues. The answer, by denials, etc., makes it equally important that these facts be decided at a trial. The plaintiff contends, however, that this answer is insufficient, to such an extent, as a matter of law, that it should be stricken' out.
The undisputed facts are that in the months of April and June, 1925, plaintiff purchased some real estate in the village of Great Neck Estates suitable for residential purpose. One plot is said to have 22,000 square feet; the other plot 5,500 square feet. About a year later, to wit, March, 1926, the board of trustees and the clerk of the said village (the defendants, who appear to be named individually, but no point is made of that by defendants) passed a “zoning” ordinance, which plaintiff claims not only restricts or regulates the use to be made by her of this property, but constitutes a “taking” without due process of law.
The use of the words “square feet” would impress one, at first, in a large sense. If one realizes, however, that this may be a plot 220 feet front, along a street, with a depth of 100 feet, the size of the plot does not remain so impressive, especially in a village, and adjoining a golf links. The same reasoning applies to the smaller plot of 5,000 feet. I do not mean by this to even remotely intimate that the size of a plot has anything to do with the rights of its owner to object to an unlawful taking, by the village, of even a foot of her ground; but I do mean to indicate that very possibly the actual use by plaintiff, and the regulation thereof by the village, of such a sized plot, may on a trial be shown to be, not only an ordinary, but exceedingly sensible, one. Whether or not this is so would seem to be something that should be left to the trial.
The fact is, and I mention it, not because such may be found to be the ease here, but simply as a matter of which this court can take judicial notice in this Eastern district, in which the said village is, that the growth of this great city and the activity of those interested in real estate development has brought about a situation, in all towns and villages reasonably near the city proper, whereby a condition has arisen, and is facing those, such as these defendants, charged as they are with the duty of seeing that proper provisions are wisely and legally taken, requiring protective steps to guard those living in the village against the hazards of fire, lack of water, and general conditions associated with “living” dangers of every kind.
Unfortunately, in more than a few instances, speculators in real estate, having no other aim but to build as quickly and as cheaply as possible, and to sell and start another so-called “development,” buy, at what seems a large price for vacant land to be reasonably and safely used, and then proceed to “rush up,” as close to each other as possible,-frame dwellings, whose deterioration starts at once, in order to make the investment “pay”; the result being the necessity for cesspools, far outnumbering the proper amount in such a space, the inability of that particular section to safely, reasonably, and properly “digest” this sudden influx of home owners, the presence of a great fire hazard, and the presence of other evils, which menace, not only the lives of those who have thus come into the neighborhood, but of the very town itself.
Large growth is and should be welcome, and the ownership of a home makes better citizens; but where there are so many builders, who do build properly, it would seem to b‘e an absolute necessity for the village trustees to protect the town against such dangers as I have mentioned, and those easily suggested by them. Proper regulation of such matters protects everybody.
Accordingly, if the Legislature of the state of New York has been made aware of such conditions, and has granted power, as it must, to enforce this state protection, to the various towns and villages, for the benefit of the citizens thereof, and the board of trustees of such village can show, when called upon in the proper forum, that it has not acted capriciously, or unreasonably, or partially, but has acted with the best interests -of that village at heart, and with a distinct, reasonable, and proper purpose, that such exercise of the state power is a proper one, by whatever name it is called. Some may prefer to call it “police power.” Some may prefer to call it “governmental regulation.” It is all confined to the same purpose, to wit, the promoting of the health, safety, morals, and general welfare of the community.
To be sure, it must be regulation. It must not be an exercise of eminent domain. Forster v. Scott, 136 N. Y. 577, 32 N. E. 976, 18 L. R. A. 543. If the proper and lawful regulation interferes with some right to use or enjoy, it is the “purpose” of the regulation, which compels the rights of the individual to yield to the general health, safety, and welfare. Chicago v. People, 200 U. S. 561, 26 S. Ct. 341, 50 L. Ed. 596, 4 Ann. Cas. 1175.
It is not necessary to discuss the cases which distinguish between what constitutes a “taking” and the lawful exercise of this “power.” There is a difference. This difference depends upon facts. The facts depend on a trial, unless plainly conceded and undisputed, together with all the inferences to be drawn therefrom. Such questions should not be disposed of upon affidavits, but should await a trial.
The above indicates to me sufficient to warrant the denial of this motion, provided any proper “regulation,” in the shape of a “zoning” law, is constitutional. There is no presumption that such state statute or ordinance is unconstitutional. Thomas Cusack v. City, 242 U. S. 526, 37 S. Ct. 190, 61 L. Ed. 472, L. R. A. 1918A, 136, Ann. Cas. 1917C, 594.
“But in all the cases there is the constant admonition, both in their rule and examples, that when a statute is assailed as offending against the higher guaranties of the Constitution it must clearly do so, to justify the courts in declaring it invalid.” Eubank v. Richmond, 226 U. S. 137, 143, 33 S. Ct. 76, 77 (57 L. Ed. 156, 42 L. R. A. [N. S.] 1123, Ann. Cas. 1914B, 192).
“A zone is a belt. Medieval walled towns in Europe were somewhat circular in form. When they outgrew their walls, especially in the ease of large cities, the location of the walls would be made into public parks or circular boulevards, and outside of the former walls the land would be laid out in belts, sometimes restricted to different classes of residences. These were called belts or zones. The term ‘zoning,’ therefore, does not apply strictly in our cities, where the different districts assume all sorts of forms, although in general there is a recognition of intensive use in the center of the city, surrounded by belts of greater distribution as one goes toward the edge of a city. The creation of different districts, accompanied by the application of different regulations, was five years ago (1915) called districting, but this word was so apt to be confused with political districts that public favor caught and used the word zoning.” Page 318.
“ * * * Police power zoning can be altered to fit the changing needs of a growing city, but zoning by condemnation would ossify a city. Some cities, after making a mistake in zoning and receiving a setback from the courts, think they must have a constitutional amendment permitting zoning. Constitutional amendments regarding the police power should be avoided, unless they are absolutely necessary.' The police power residing in the state Legislature should be ample for zoning, if zoning is done wisely.” Pages 320, 321.
“Zoning looks mainly to the future. The zoning of built-up localities must recognize actual conditions and make the best of mistakes of the past. But' the zoning of open areas, while following desirable natural tendencies, must check the undesirable tendencies.” Page 328.
See interesting and instructive article by Edward M. Bassett, National Municipal Review, vol. IX, No. 5, May, 1920.
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12406071-26656 | ON PETITION FOR REHEARING
PER CURIAM:
Petitioner Chadwick Willacy moved for panel rehearing and rehearing en banc of an opinion originally filed on March 30, 2017. We grant the motion for panel rehearing, vacate our prior opinion, and sub stitute the following opinion. In this opinion, we add footnote 7 to address Willacy’s argument that the panel opinion misapplied Estelle v. McGuire, 502 U.S. 62, 112 S.Ct. 475, 116 L.Ed.2d 385 (1991). We do not alter the opinion in any other respect.
In this capital case, Chadwick Willacy appeals the district court’s denial of his federal habeas petition. Willacy was convicted and sentenced to death for the brutal murder of his next door neighbor, which he carried out to cover up the fact that he had robbed her. After the Florida Supreme Court vacated his first death sentence on an issue unrelated to this appeal, Willacy received a new sentencing phase and again received a death sentence. Following an unsuccessful direct appeal from that sentence and collateral proceedings in the Florida state courts, Willacy filed a federal habeas petition in the United States District Court for the Middle District of Florida, which the district court denied.
Willacy appeals the rejection of his petition on three grounds. First, he contends that he was denied-the right to a fair trial because the State failed to inform the trial court of the fact that the jury foreman, Edward Clark, was under prosecution during the trial and therefore ineligible for jury service. Second, he asserts that his trial counsel was constitutionally ineffective because counsel failed to inquire adequately during voir dire into juror Clark’s status. Third, Willacy contends that his trial counsel rendered ineffective ássis-tance in investigating and presenting to the jury a case in mitigation of the death penalty.
After a thorough review of the briefing and the record, and with the benefit of oral argument, we affirm the denial of Willacy’s petition. With regard to both claims based on juror Clark’s alleged prosecution, the Florida Supreme Court held that Clark’s participation in a pretrial intervention program did not amount to a prosecution under state law, and we cannot disturb that finding. Thus, Willacy’s claims that he was denied a fair trial due to Clark’s status and that trial counsel rendered ineffective assistance in failing to inquire further into Clark’s status necessarily must fail. As regards the claim that trial counsel rendered ineffective assistance at the penalty phase, we conclude that Willacy has failed to demonstrate that his counsel’s performance prejudiced his proceedings.
I. FACTUAL BACKGROUND
Willacy was convicted in Florida of first degree premeditated murder, burglary, robbery, and arson. A jury initially recommended a death sentence by a vote of 9 to 3, which the trial court accepted. Willacy appealed, and the Florida Supreme Court affirmed his conviction but vacated his death sentence due to a problem involving a prospective juror not relevant to this appeal. See Willacy v. State (“Willacy I”), 640 So.2d 1079 (Fla. 1994). On remand, a jury voted 11 to 1 to recommend a death sentence, and the trial court again accepted the recommendation. The Florida Supreme Court upheld this second death sentence, see Willacy v. State (“Willacy II”), 696 So.2d 693 (Fla. 1997), which is the sentence relevant to the instant proceedings. Below we recount the events that led to Willacy’s conviction and sentence, evidence adduced at his state postconviction proceedings, and the course of his federal habeas proceedings.
A. Facts Elicited at Trial
Marlys Sather, the victim in this case, returned home from work around lunch time unexpectedly and found Willacy, her next door neighbor, burglarizing her house. Willacy II, 696 So.2d at 694; see also Willacy v. State (“Willacy III”), 967 So.2d 131, 135 (Fla. 2007) (affirming the denial of postconviction relief). Willacy bludgeoned Sather, bound her ankles with wire and duct tape, and “choked and strangled her with a cord with a force so intense that a portion of her skull was dislodged.” Willacy III, 967 So.2d at 135. Willacy obtained Sather’s car keys and ATM pin number and card, drove her car to her bank, and withdrew money out of her bank account. Id. He then drove back to Sather’s house, hid her car around the block, and made several trips from Sather’s house to her car with stolen items in tow. Id. After taking “a significant amount of property” from Sather’s house, Willacy drove the car to a nearby plaza, left it, and jogged back to Sather’s house. Id.
Willacy went back inside and, apparently to conceal evidence of his crimes, set Sather’s body on fire. He disabled the house’s smoke detectors, doused Sather with gasoline he found in the garage, placed a fan from Sather’s guest room at her feet to provide oxygen for the fire, and struck several matches to set her body ablaze. Id. According to the medical examiner’s testimony at trial, Sather was alive when Willacy set her body on fire; her death was caused by inhalation of smoke from her burning body. Id. The State also entered into evidence for the jury’s review several photographs law enforcement took of Sather’s body after the murder.
At trial, the State offered ample evidence that Willacy was the perpetrator of Sather’s murder. Witnesses reported seeing a man matching Willacy’s description near Sather’s house and driving her car on the day of the murder. Id. Investigators found Willacy’s fingerprints on several items at Sather’s house, including the fan at Sather’s feet and the gas can. Id. Willa-cy’s girlfriend contacted the police when she discovered a woman’s check register in Willacy’s wastebasket, and police identified the register as belonging to Sather. Id. When police obtained a search warrant on Willacy’s home, they, recovered some of Sather’s property and several articles of clothing containing blood consistent with Sather’s blood type. Id.
Based on this evidence, the jury found Willacy guilty of first degree premeditated murder, burglary, robbery, and arson.
B. Motion for New Trial
Following his conviction and first death sentence, Willacy moved for a new trial. As relevant to this appeal, Willacy asserted that he was denied a fair trial because the State failed to disclose that jury foreman Clark was at the time of the trial under prosecution. Testimony adduced at an evi-dentiary hearing showed that Clark had been arrested approximately eight months before trial and charged with grand theft. His case was submitted for a pretrial intervention program (“PTI”) coordinated by Christopher White, the lead prosecutor on Willacy’s case. Clark was accepted into PTI five days before jury selection began in Willacy’s case but did not receive notice of his acceptance into PTI until after he was seated as a juror. White had knowledge of Clark’s participation in the pro gram during Willacy’s trial but failed to inform the trial judge.-
Florida law at the time of Willacy’s trial provided that “[n]o person who is under prosecution for any crime ... shall be qualified to serve as a juror.” Fla. Stat. § 40.013(1) (1991). Willacy argued:
[T]he state had a legal obligation to inform the court as well as the defense upon learning this information. However, the state only made a half-hearted and ineffective effort to inform the defense, they failed to follow up on the information to confirm it, and they totally failed to inform, the court. The result of these defaults was to deprive defendant of a lawfully constituted jury, requiring a new trial.
Memorandum of Law in Support of Defendant’s Motion for New Trial, R. 3656 (emphasis added). In support, Willacy cited several cases concerning a party’s right to a fair trial, including three addressing a criminal defendant’s Sixth Amendment fair trial right. The trial court denied the motion for new trial.
C. First Direct Appeal
The Florida Supreme Court affirmed the denial of Willacy’s motion for new trial, concluding, as to juror Clark: “Willacy mistakenly equates Clark’s placement in the Pretrial Intervention Program with prosecution. Pretrial intervention is merely an alternative to prosecution. Since Clark was not under prosecution, Willacy’s motion for a new trial was properly denied.” Willacy I, 640 So.2d at 1082-83 (citation and internal quotation marks omitted). Nevertheless, because the trial court erroneously denied the defense an opportunity to rehabilitate a prospective juror when the juror expressed concern about recommending the death penalty, the Florida Supreme Court vacated Willacy’s death sentence and remanded for a new sentencing hearing. Id. at 1082.
D. Resentencing Proceedings
At the sentencing phase at issue here, the State called a number of witnesses to testify to explain to the new jury the crime and the evidence linking Willacy to it. See Willacy II, 696 So.2d at 694. The State also presented the testimony of Sather’s son and two daughters to illustrate for the jury the impact of her death. Each of Sather’s adult children testified to the close relationship Sather shared with her children and grandchildren and to the grief and loss they had experienced as a result of the murder.
Defense counsel presented nine witnesses in mitigation, all friends and family of Willacy’s. The witnesses, who all knew Willacy as a child, testified to his positive traits — namely, that he was a considerate, respectful, thoughtful, and well-liked child and adolescent. Several of these witnesses also testified that Willacy had a drug problem: he became addicted to crack cocaine in high school and sought treatment, although he later relapsed. Willacy’s younger sister Heather and two of his childhood friends testified that Willacy enjoyed a strong relationship with his family. But Willacy’s mother and father told the jury that his father, Colin Willacy, was “very hard” on his children. Ex. G-19 at 2826 (testimony of Audrey Willacy); id. at 2836 (testimony of Colin Willacy). Colin testified that he “inflicted corporal punishment if .,, Chad were to do anything, and never once would Chad in any way respond ... in a violent way,” Id. at 2837.
After hearing this testimony, the jury recommended a death sentence by a vote of 11 to 1. Willacy III, 967 So.2d at 136. The trial judge found five aggravating circumstances: the homicide was (1) committed in the course of a felony; (2) committed to avoid lawful arrest; (3) committed for pecuniary gain; (4) especially heinous, atrocious, or cruel (“HAC”); and (5) committed in a cold, calculated, and premeditated manner without any pretense of moral or legal justification (“CCP”). See id. at 136 n.4. The judge found no statutory mitigating factors and 31 nonstatutory mitigating factors, all of which it found carried little weight. See id. at 136 & n.5 (listing nonstatutory mitigating factors). After weighing these factors, the judge adopted the jury’s recommendation and imposed a death sentence.
E. Second Direct Appeal and State Postconviction Proceedings
The Florida Supreme Court affirmed Willacy’s death sentence on direct appeal. Willacy II, 696 So.2d 693 (Fla. 1997), cert. denied, 622 U.S. 970, 118 S.Ct. 419, 139 L.Ed.2d 321 (1997). Willacy then initiated state postconviction proceedings, in which, as relevant here, he asserted that counsel from the guilt phase of his trial, Kurt Erlenbach, rendered ineffective assistance in failing to conduct adequate voir dire of jury foreman Clark; and counsel from the guilt phase of his trial, James Kontos, rendered ineffective assistance in failing to investigate and present an adequate case in mitigation of the death penalty. The trial court conducted an evidentiary hear ing on both of these claims. We recount the testimony relevant to Willacy’s penalty phase ineffective assistance claim below. With respect to his guilt phase ineffective assistance claim, however, we need not recount the testimony adduced because, as we discuss in Part III.A, the Florida Supreme Court’s determination that Clark was not under prosecution within the meaning of state law forecloses this claim entirely. See Bolender v. Singletary, 16 F.3d 1547, 1573 (11th Cir. 1994) (“[T]he failure to raise nonmeritorious issues does not constitute ineffective assistance.”).
As we detail below, we assume for purposes of analyzing Willacy’s penalty phase ineffective assistance claim under the test set forth in Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984), that trial counsel performed defi-ciently. Thus, we do not recount Kontos’s testimony. Rather, we focus on the evidence adduced at the postconviction evi-dentiary hearing and whether that evidence, when combined with the mitigation Kontos presented and reweighed against the evidence in aggravation, would have led to a reasonable probability of a different outcome. See id. at 695, 104 S.Ct. 2052.
Postconviction counsel introduced roughly two types of evidence at Willacy’s evidentiary hearing: evidence of (1) childhood physical abuse; and (2) mental health problems, including substance abuse in adolescence and adulthood. We discuss these in turn.
Willacy’s three family members who testified during the penalty phase — his sister Heather and his parents, Audrey and Colin — testified at the postconviction eviden-tiary hearing about Colin’s physical abuse of his wife and children. Heather and Audrey recounted that Colin often drank to excess, and when he did, he would become physically violent with his wife and children. Heather testified that she and her brother would cry together when they witnessed their father hit their mother. Both Heather and Audrey testified that Willacy bore the brunt of his father’s abuse, often for little reason or none at all, beginning when he was eight years old and continuing until his mid to late teens. Some of the beatings were severe: on one occasion that all three family members recounted, Colin beat Willacy with a broken chair leg. Colin admitted that his beatings of Willacy worsened as Willacy grew older, recalled threatening to kill Willacy, and testified that he once broke a broomstick on Willa-cy while beating him. The family testified that Willacy’s parents kicked him out of the house when he was a teenager and that he was homeless for a time.
Postconviction counsel called a licensed psychologist, Dr. William Riebsame, to testify about Willacy’s drug abuse and mental illness, as well as the impact of the abuse he suffered at the hands of his father. Dr. Riebsame had performed an initial competency evaluation on Willacy before trial, but he conducted a more extensive evaluation in preparation for post-conviction proceedings. In addition to corroborating the testimony of Willacy’s family members regarding the physical abuse Willacy suffered, Dr. Riebsame testified that Willacy met the diagnosis for cocaine abuse, cannabis abuse, alcohol abuse, Attention Deficit Hyperactive Disorder (“ADHD”) and Antisocial Personality Disorder. Dr. Riebsame acknowledged that as a child Willacy had threatened to kill someone, started a fire at school, and killed small animals, reporting that such behavior is common in children who suffer chronic and severe physical abuse. Dr. Riebsame also noted a “significant correlation” between this kind of childhood abuse and an Antisocial Personality' Disorder diagnosis in adulthood.
In addition to these diagnoses, Dr. Rieb-same opined that, at the time of the offense, Willacy likely met the criteria for cocaine intoxication and cocaine withdrawal. In his view, Willacy met the statutory mitigator of having committed the offense while under the influence of extreme mental or emotional disturbance, citing Willa-cy’s crack cocaine binge and ADHD symptoms.
The State called psychiatrist Dr. Jeffrey Danziger, who evaluated Willacy and reviewed Dr. Riebsame’s conclusions. Dr. Danziger did not dispute Willacy’s history of child abuse (which he acknowledged could be mitigating), nor did he disagree with Dr. Riebsame’s conclusions that Wil-lacy met the diagnoses for cannabis abuse, cocaine abuse, and alcohol abuse. Dr. Dan-ziger did, however, disagree with Dr. Rieb-same’s assessment that Willacy was under extreme mental or emotional disturbance at the time of the offense. He also expressed doubt that Willacy suffered from ADHD. Other than the abuse Willacy endured as a child, Dr. Danziger found nothing mitigating in his background.
Dr. Danziger, like Dr. Riebsame, diagnosed Willacy with Antisocial Personality Disorder. He testified to “reports of torture of animals including ... burying animals up to their necks and running them over with lawnmowers as a child.” Dr. Danziger agreed with Dr. Riebsame that child abuse and Antisocial Personality Disorder were correlated.
The trial court rejected Willacy’s ineffective assistance claim, the Florida Supreme Court affirmed, and the Supreme Court of the United States denied Willa-cy’s petition for writ of certiorari. See Willacy III, 967 So.2d at 142-44, cert. denied sub. nom., Willacy v. Florida, 552 U.S. 1265, 128 S.Ct. 1665, 170 L.Ed.2d 368 (2008). Based on the evidence adduced at the state postconviction evidentiary hearing, the Florida Supreme Court concluded that Willacy failed to show counsel performed deficiently or that any deficiency prejudiced him. Id.; see Strickland, 466 U.S. at 687, 104 S.Ct. 2052 (explaining that, to establish ineffective assistance of counsel, the defendant “must show that counsel’s performance was deficient” and “that the deficient performance prejudiced the defense”).
The Florida Supreme Court held that counsel was not deficient in choosing to present Willacy’s positive attributes, rather than negative qualities, in an attempt to present him as a life worth saving. Willacy III, 967 So.2d at 143-44. With respect to prejudice, the Florida Supreme Court opined that “presenting this mitigating evidence would likely have been more harmful than helpful,” acknowledging “that antisocial personality disorder is a trait most jurors tend to look disfavorably upon.” Id. at 144 (internal quotation marks omitted); see also id. (“An ineffective assistance claim does not arise from the failure to present mitigating evidence where that evidence presents a double-edged sword.”). “Thus, there is no reasonable probability that the outcome of the proceeding would have been different if Kontos had chosen to focus on Willacy’s abuse and mental health issues rather than on the positive aspects of Willacy’s life.” Id.
F. Federal Habeas Proceeding
After he had exhausted his state appeals, Willacy filed a petition for a writ of habeas corpus in federal district court, raising several claims including his fair trial and ineffective assistance of counsel claims. The district court denied Willacy relief and denied him a certificate of ap-pealability. We granted Willacy a certificate of appealability on his claims that his right to a fair trial was violated when the State failed to inform the trial court of Clark’s ineligibility to serve as a juror, trial counsel rendered ineffective assistance in failing to conduct adequate voir dire of Clark to discover his ineligibility, and trial counsel’s investigation and presentation of mitigating evidence at Willacy’s penalty phase was constitutionally deficient.
II. STANDARD OF REVIEW
“When reviewing a district court’s grant or denial of habeas relief, we review questions of law and mixed questions of law and fact de novo, and findings of fact for clear error.” Reaves v. Sec’y, Fla. Dep’t of Corr., 717 F.3d 886, 899 (11th Cir. 2013) (internal quotation marks omitted). An ineffective assistance of counsel claim “presents a mixed question of law and fact that we review de novo.” Pope v. Sec’y, Fla. Dep’t of Corr., 752 F.3d 1254, 1261 (11th Cir. 2014). So too does a claim that a juror’s potential bias violated a petitioner’s right to a fair trial. See Irvin v. Dowd, 366 U.S. 717, 723, 81 S.Ct. 1639, 6 L.Ed.2d 751 (1961).
Because the Florida state courts decided each of Willacy’s three claims on the merits, we must review these claims under the standards set by the Antiterrorism and Effective Death Penalty Act of 1996 (“AEDPA”). See Williams v. Taylor, 529 U.S. 362, 402-03, 120 S.Ct. 1495, 146 L.Ed.2d 389 (2000). AEDPA bars federal courts from granting habeas relief to a petitioner on a claim that was adjudicated on the merits in state court unless the state court’s adjudication:
(1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States; or
(2) resulted in a decision that was based on an unreasonable determination of the facts in light of the evidence presented in the State court proceeding.
28 U.S.C. § 2254(d). “ ‘[Cjlearly established Federal law’ under § 2254(d)(1) is the governing legal principle or principles set forth by- the Supreme Court at the time the state court renders its decision.” Lockyer v. Andrade, 538 U.S. 63, 71-72, 123 S.Ct. 1166, 155 L.Ed.2d 144 (2003). With respect to § 2254(d)(2), “[sjtate court fact-findings are entitled to a presumption of correctness unless the petitioner rebuts that presumption by clear and convincing evidence.” Conner v. GDCP Warden, 784 F.3d 752, 761 (11th Cir. 2015).
III. DISCUSSION
A. Fair Trial and Guilt Phase Ineffective Assistance of Counsel Claims
Two of the claims in Willacy’s certificate of appealability — his fair trial claim and his guilt phase ineffective assistance of counsel claim — are founded on the same assertion: that jury foreman Clark was under prosecution during Willacy’s trial and therefore was ineligible to serve as a juror under Florida law. See Fla. Stat. § 40.013(1) (1991). Based on this assertion, Willacy contends that the State’s failure to bring the fact of Clark’s prosecution to the attention of the trial court resulted in the deprivation of his right to a fair trial. And, Willacy argues, in failing to question Clark effectively during voir dire to reveal this pending prosecution, trial counsel rendered ineffective assistance in violation of Willacy’s right to counsel. Both of these claims must fail: the Florida Supreme Court determined that Clark was not under prosecution within the meaning of Florida law, and “[w]e are not at liberty to challenge” that conclusion. Cargill v. Turpin, 120 F.3d 1366, 1381 (11th Cir. 1997).
The Supreme Court has warned that “it is not the province of a federal habeas court to reexamine state court determinations on state law questions. In conducting habeas review, a federal court is limited to deciding whether a conviction violated the Constitution, laws, or treaties of the United States.” Estelle v. McGuire, 502 U.S. 62, 67-70, 112 S.Ct. 475, 116 L.Ed.2d 385 (1991) (concluding that a federal due process claim based on the alleged improper admission of evidence must fail when that evidence was in fact properly admitted under state law). Here, the Florida Supreme Court dismissed Willacy’s argument that Clark’s placement in PTI was equivalent to prosecution under Florida law, holding that “[p]retrial intervention is merely an alternative to prosecution,” and “Clark was not under prosecution.” Willacy I, 640 So.2d at 1082-83 (internal quotation marks omitted). Under Estelle, we cannot disturb the Florida Supreme Court’s determination.
The Florida Supreme Court’s conclusion that Clark was not under prosecution precludes relief on Willacy’s fair trial and guilt phase ineffective assistance of counsel claims. Willacy’s fair trial claim based on Clark’s status is foreclosed because under Florida law Clark was eligible to serve on the jury (and not considered to harbor a potential for bias). Willacy’s ineffective assistance of counsel claim based on Clark’s status also fails because more effective voir dire would not have revealed Clark’s ineligibility to serve as a juror. See Bolender, 16 F.3d at 1573 (“[T]he failure to raise nonmeritorious issues does not constitute ineffective assistance.”).
Accordingly, we affirm the denial of relief on both of these claims.
B. Penalty Phase Ineffective Assistance of Counsel Claim
Willacy asserts that his trial counsel was ineffective in failing to investigate and present evidence about his history of childhood physical abuse and mental health problems during the penalty phase and that there is a reasonable probability that, had the jury heard that evidence, it would have recommended a sentence other than death. Under Strickland, a defendant has a Sixth Amendment right to effective assistance of trial counsel. 466 U.S. at 686, 104 S.Ct. 2052. Counsel renders ineffective assistance, warranting vacatur of a conviction or sentence, when his performance falls “below an objective standard of reasonableness,” taking into account prevailing professional norms, and when “there is a reasonable probability that, but for counsel’s unprofessional errors, the result of the proceeding would have been different.” Id. at 688, 694, 104 S.Ct. 2062. “A reasonable probability is a probability sufficient to undermine confidence in the outcome.” Id. at 694, 104 S.Ct. 2052.
We assume for present purposes that Willacy’s trial counsel rendered deficient performance in failing to investigate and present a sufficient case in mitigation. See Castillo v. Fla., Sec’y of DOC, 722 F.3d 1281, 1283-84 (11th Cir. 2013) (making “simplifying assumptions in favor of the petitioner” to facilitate the Court’s analysis, including assuming deficient performance and addressing Strickland’s prejudice prong only), Thus, we must decide whether counsel’s deficient performance prejudiced Willacy in the penalty phase of his trial, considering in addition to the testimony counsel actually elicited at the penalty phase the childhood abuse and mental health evidence adduced at the postconvietion evidentiary hearing.
Applying AEDPA’s deferential standard of review, we conclude that the Florida Supreme Court reasonably determined that Willacy suffered no prejudice from his counsel’s failure to present mitigation testimony regarding his history of physical abuse, substance abuse, and other mental health problems. The physical abuse Willa-cy witnessed and suffered indisputably is mitigating. See Wiggins v. Smith, 539 U.S. 510, 534-35, 123 S.Ct. 2527, 156 L.Ed.2d 471 (2003) (considering evidence of physical abuse petitioner suffered to be mitigating). But the mental health evidence adduced at Willacy’s postconviction hearing presented a double-edged sword that could have harmed Willacy’s case for a life sentence as much or more than it would have helped.
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5723668-14189 | SUHRHEINRICH, Circuit Judge.
In this criminal appeal Defendant Andre Jones (“Defendant”) challenges his sentence, arguing that the district court erred in applying a four-level enhancement for possession of a firearm in connection with another felony under U.S. S.G. § 2K2.1(b)(6). We AFFIRM.
I. Background
On July 17, 2010, two women flagged down a Detroit Police patrol vehicle and informed the officers that a man was shooting an “AK-47” in the Sojourner Truth Homes, a housing project in Detroit. As the officers approached the housing complex, they heard several shots. The officers parked their vehicle and approached on foot.
The parties disagree as to what happened next. In its sentencing memorandum, consistent with the Police Investigator’s Report, the United States represented that as the officers approached 18081 Fenelon Drive, Defendant appeared at the front door holding an AK-47 assault rifle and walked out of the house onto the front porch. Defendant shouted at the other residents and waived the AK-47 in the air. One of the officers immediately ordered Defendant to drop his weapon and step away from the house, but Defendant ignored the order and went back inside, shutting and locking the door behind him. The police reported to dispatch that they had “a barricaded gunman.” The police learned that the owner of the house, Michelle Harris, was inside, along with several children.
Defendant remained downstairs alone while the police told him to come out with the weapon. According to both the Police Investigator and Harris, after roughly twenty minutes, one of the officers convinced Defendant to exit the house unarmed. Defendant was immediately arrested. Inside the house, the officers recovered Defendant’s loaded AK-47, underneath a bed, as well as a .22-caliber rifle that belonged to him, in the lower hallway closet. Thus, according to the United States, Defendant disobeyed the police by retreating into the home with a loaded firearm.
Defendant, on the other hand, claimed that he was already inside the home when the police arrived. In support, he relied on statements made by Harris to police the day after the incident. Harris told police that after Defendant finished firing, he walked back into the house and slammed the door shut. Harris stated that the officers did not arrive until five minutes after the shots. Thus, Defendant claimed that, because he was already inside the home, his only act of resistance was a brief two — to five — minute delay in exiting the home at the officers’ orders.
Defendant pleaded guilty to one count of felon in possession of a firearm, in violation of 18 U.S.C. § 922(g)(1). This gave Defendant a base offense level of 20. The presentence report recommended a four-level sentencing enhancement under U.S.S.G. § 2K2.1(b)(6), for use of a firearm in connection with the commission of another felony offense, namely using an AK-47 to resist arrest. The presentence report found that Defendant had violated Mich. Comp. Laws Ann. § 750.81d(l), which makes it a felony to assault, batter, wound, resist, obstruct, or endanger a police officer. The presentence report also recommended a three-point reduction for acceptance of responsibility. This resulted in a total offense level of 21. Defendant’s criminal history category was IV. Without the section 2K2.1(b)(6) enhancement, the sentencing guidelines range would have been 37 to 46 months. With the enhancement, the recommended sentencing guidelines range was 57 to 71 months.
Defendant objected to the section 2K2.1(b)(6) enhancement on the ground that he “did not resist and obstruct the police department,” relying on Harris’s statement that he had re-entered the home before the police arrived. The United States countered that the factual dispute was irrelevant because even if Defendant’s version of events were credited, the fact that he barricaded himself was also “resisting, obstructing, and impeding.” R. 23 at 5. Defendant responded that “[t]he most you can say is it took him a couple of minutes, two to five minutes to come out of the house, and I don’t see that as resisting or obstructing.” R. 23 at 6.
The district court determined that:
It’s a long two to five minutes when you see someone, they have a high-power weapon and they’re behind the door, it’s a pretty long time for police officers to be standing there and to — I just don’t buy your argument. He came out. He had the weapon, the police gave him a direction. He didn’t follow the direction. And more importantly, did he not follow the direction he went inside and whether he locked the door, didn’t lock the door, I don’t think is the issue, the issue is he restricted them from doing their duty. Even if it took ten seconds, somebody could get hurt and potentially the police officers. So I think that your objection to — the report as written by Probation is correct and your objections are noted, but I don’t think they apply in this case.
R. 23 at 6-7. The court found that “the situation here was very, very extreme,” R. 23 at 13, and sentenced Defendant to 71 months in prison at the highest end of the guidelines range. Defendant appeals.
II. Analysis
We review the application of a section 2K2.1(b)(6) enhancement under a specific standard. See United States v. Taylor, 648 F.3d 417, 431-32 (6th Cir.2011). Factual findings are reviewed for clear error, and due deference is given to the district court’s determination that the firearm was used or possessed in connection with another felony. Id. To the extent a challenge to the application of the section 2K2.1(b)(6) enhancement presents strictly a question of law, de novo review applies. Id. at 431.
The advisory guidelines provide for a four-level enhancement to the defendant’s base offense level “[i]f the defendant used or possessed any firearm or ammunition in connection with another felony offense.” U.S.S.G. § 2K2.1(b)(6) (2009). To apply the section 2K2.1(b)(6) enhancement, the district court must find that the government has established by a preponderance of the evidence that the defendant (1) committed another felony, and (2) used or possessed a firearm in connection with that offense. United States v. Mojica, 429 Fed.Appx. 592, 594 (6th Cir.2011).
According to the application notes, the “in connection with” element of U.S.S.G. § 2K2.1(b)(6) requires that the firearm “facilitated, or had the potential of facilitating, another felony offense.” Id. cmt. n. 14(A). “Another felony offense” is defined as “any federal, state, or local offense, other than the explosive or firearms possession or trafficking offense, punishable by imprisonment for a term exceeding one year, regardless of whether a criminal charge was brought, or a conviction obtained.” Id. § 2K2.1(b)(6) cmt. n. 14(C).
This court has held that section 2K2.1(b)(6) requires the government to establish, by a preponderance of the evidence, a nexus between the firearm and an independent felony. United States v. Burns, 498 F.3d 578, 580 (6th Cir.2007) (internal citations omitted). In other words, the government must prove that “the connection between the firearm and the other felony was not merely coincidental, that the firearm served some purpose in relation to the other offense, such as emboldening] the defendant in committing it.” United States v. Berkey, 406 Fed.Appx. 938, 939 (6th Cir.2011) (internal quotation marks and citations omitted). See also United States v. Coleman, 627 F.3d 205, 212 (6th Cir.2010) (holding that a firearm or ammunition facilitates the commission of a felony if it makes it “easier or less difficult,” or if it serves “some emboldening role in a defendant’s felonious conduct” (internal quotation marks, alteration, and citation omitted)), cert. denied, — U.S. -, 131 S.Ct. 2473, 179 L.Ed.2d 1231 (2011). The firearm “need not be actively used” in the other offense. United States v. Angel, 576 F.3d 318, 320 (6th Cir.2009) (internal quotation marks and citation omitted). This court has also recognized that “demonstrating this nexus is not a particularly onerous burden.” United States v. Davis, 372 Fed.Appx. 628, 629 (6th Cir.2010).
Here, the “other felony” is resisting arrest under Michigan law, which states that “an individual who assaults, batters, wounds, resists, obstructs, opposes, or endangers a person who the individual knows or has reason to know is performing his or her duties is guilty of a felony.” Mich. Comp. Laws § 750.81d(l). The act of obstructing an officer from performing his or her duties “includes the use or threatened' use of physical interference or force or a knowing failure to comply with a lawful command.” Id. § 750.81d(7)(a) (emphasis added). See also United States v. Mosley, 575 F.3d 603, 607 (6th Cir.2009) (holding that Mich. Comp. Laws § 750.81(d)(1) contains “at least two categories” of violations, including violations “involving an individual who ‘obstructs’ an officer through ‘a know ing failure to comply with a lawful command’ ”).
Defendant argues on appeal that:
Without making clear whether it believed that Mr. Jones had actively resisted arrest by fleeing the police while armed as the Government maintained, or merely passively resisted arrest by hesitating to exit the Fenelon house as the defense argued, the district court determined that Mr. Jones’s possession of a firearm facilitated the offense of resisting arrest. Because it appears to have been based on the legal conclusion that the form of resistance was immaterial — ie., that the firearm facilitated even the passive resistance in the form of Mr. Jones delaying his exit from the house — the district court’s finding was in error.
Appellant’s Br. at 11. He asserts that “[e]ven assuming that Mr. Jones’s passive failure to exit the Fenelon house immediately constituted a violation of M.C.L. § 750.81(d)(1) — a premise he disputed below but will not reargue for purposes of this appeal — that particular crime was not furthered by the presence of a firearm.” Id. at 9. He asks this court to remand for resentencing, “making clear that Mr. Jones’s possession of a firearm was merely coincidental to his brief delay in following police orders to exit a home and did not ‘further’ that conduct.” Id.
No matter how he paints the district court’s ruling, Defendant’s variegated argument fails. First of all, contrary to Defendant’s assertion, the district court actually found as a matter of fact that Defendant was outside when the police order was issued: “He came out. He had the weapon, the police gave him a direction. He didn’t follow the direction. And more importantly, did he not follow the direction he went inside.” R. 28 at 6-7. Later, in exercising its authority to apply the advisory guideline, the court specifically found that “he didn’t respond to the police officers’ lawful request, that he went back into the house which again created a horrible situation for both the police officers.” Id. at 13.
Second, the district court found that even at “two to five minutes” Defendant “knowingly fail[ed] to comply with a lawful command,” Mich. Comp. Laws § 750.81d(7)(a), which is what the “other felony” statute at issue in this case requires. In other words, the district court was not obliged to characterize Defendant’s resistance as either “active” or “passive.” See also Angel, 576 F.3d at 320 (stating that the firearm “need not be actively used” in the other felony offense for purposes of a section 2K2.1(b)(6) enhancement (internal quotation marks and citation omitted)).
Third, the record supports the conclusion that the firearm “facilitated, or had the potential of facilitating” the other felony. Defendant never disputed he had easy access to the weapon and the district court clearly found that even with a brief delay the police officers could potentially get hurt. Cf. id. at 321-22 (noting that the defendant’s objection did not specifically address the finding that the firearms were possessed “in connection with” another felony, but that under either a preserved or unpreserved error standard, the district court did not err in applying the section 2K2.1(b)(6) standard). Defendant had a loaded AK-47 with him in a locked house. The residents of the home (as well as his own children) were hiding from him upstairs. Whether he received an order to drop the weapon before he retreated into the house or merely heard the police order him to immediately exit the house, as the district court found, Defendant admittedly “neglected to exit a home immediately when police ordered him to do so.” Appellant’s Br. at 14. As the United States points out, if Defendant had been unarmed, the police could have entered the house and arrested him. However, “because Jones was armed with a high-power assault rifle, the police were constrained to surround the house and attempt to coax Jones to surrender before he used his weapon to injure himself, the police, or the woman and children barricaded inside.” Appellee’s Br. at 9-10. Therefore, possessing the AK-47 facilitated Jones in resisting arrest by making it easier for him to avoid coming out of the house.
Moreover, the AK-47 “emboldened” Defendant in resisting arrest. As noted, the AK-47 was loaded and operational. Defendant knew the officers knew he had it because they had ordered him to drop it. The gun’s presence put the police on notice that he was armed and dangerous. The weapon made it easier for Defendant to “delay” complying with a direct police order. It prevented the officers from storming the house to rescue the women and children and increased the risk of violence by heightening the potential need for the police to use force if Defendant did not ultimately surrender. Cf. Coleman, 627 F.3d at 212 (applying the enhancement where “the ammunition emboldened [the defendant] in the knowledge that he was one step closer to having a fully-loaded firearm to protect himself and his illegal drugs, and the ammunition potentially served notice to potential buyers that [the defendant] was a step closer to having a fully-loaded firearm”). Like the district court, we think that two to five minutes is a long time to “hesitate to obey” a police order to drop an AK-47 and submit to arrest.
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276442-11048 | PER CURIAM.
Petitioner William Allen Simpson appeals pro se the tax court’s determination of a deficiency in income tax and penalties due for the taxable year 1994. For the following reasons, we affirm.
BACKGROUND
Simpson, a self-employed computer engineer, failed to file a 1994 federal income tax return. The Commissioner issued a notice of deficiency to Simpson proposing a tax deficiency of $43,858, computed without regard to any itemized deductions, and penalties under I.R.C. §§ 6651(a) and 6654(a) of $6,840 and $2,227, respectively. Simpson filed a petition with the tax court for a redetermination of the deficiency, claiming that he was entitled to deductions and other adjustments.
At trial, the parties filed a stipulation resolving a number of the items at issue and identified the remaining disputed issues as: (1) a net operating loss deduction, (2) a deduction for flying lesson expenses, and (3) deductions for payments to third parties. Simpson presented only his own testimony in support of the claimed deductions. At the conclusion of the trial testimony, the tax court ordered the parties to file briefs. The Commissioner filed a brief; Simpson did not.
Holding that Simpson’s uncorroborated testimony was insufficient to meet his burden of proof to substantiate the disputed items, the tax court sustained the Commissioner’s determinations. The tax court then ordered the parties to file their computations under Tax Ct. R. 155 on or before December 2, 1999. On November 30, 1999, the tax court entered its decision determining a 1994 income tax deficiency of $28, 207, a penalty under I.R.C. § 6651(a)(1) of $2,927, and a penalty under I.R.C. § 6654(a) of $509.
Simpson filed a motion for reconsideration of the tax court’s opinion and decision, arguing, inter alia, that the tax court entered its decision of November 30, 1999, before the December 2 due date for the submission of computations. Simpson filed the affidavits of Ruth Simpson and Elizabeth Helmbold in support of his motion.
The tax court entered an order directing Simpson to file his computation on or before January 21, 2000. Simpson failed to file a computation. Thereafter, the tax court denied Simpson’s motion for reconsideration without comment.
STANDARD OF REVIEW
The Commissioner’s determination of a tax deficiency is presumptively correct, and the taxpayer has the burden of proving that the determination is erroneous or arbitrary. Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed. 212 (1933); Kearns v. Commissioner, 979 F.2d 1176, 1178 (6th Cir.1992). This court reviews the tax court’s findings of fact for clear error. Estate of Quirk v. Commissioner, 928 F.2d 751, 759 (6th Cir.1991). The tax court’s application of the law is reviewed de novo. Kearns, 979 F.2d at 1178.
DISCUSSION
A. Whether the tax court erred in disallowing the claimed deductions.
“[D]eductions are a matter of legislative grace and should therefore be narrowly construed; only as there is a clear provision therefore can any particular deduction be allowed.” Nichols v. United States, 260 F.3d 637, 653 (6th Cir.2001) (internal quotation marks omitted). A taxpayer seeking a deduction must point to an, applicable statute and demonstrate that he or she comes within the statute’s terms. Bishop v. Commissioner, 342 F.2d 757, 759 (6th Cir.1965). The taxpayer bears the burden of proving a deduction and the amount of it. Id. The tax court “may disregard uncontradicted testimony by a taxpayer where it finds that testimony lacking in credibility, or finds the testimony to be improbable, unreasonable or questionable.” Conti v. Commissioner, 39 F.3d 658, 664 (6th Cir.1994) (internal citations and quotation marks omitted).
1. Net operating loss deduction
Simpson contends that he is entitled to a net operating loss deduction for net operating losses carried forward up to fifteen prior years and carried back up to three subsequent years pursuant to I.R.C. § 172. If a taxpayer’s deductions exceed gross income for the year, the excess of deductions over income may constitute a net operating loss for the year. I.R.C. § 172. Generally, a net operating loss is carried back to each of the three years preceding the year of the loss and then carried forward to each of the fifteen years following the loss. I.R.C. § 172(b)(1). A net operating loss must be carried to the earliest of the taxable years to which it may be carried until either the loss is fully absorbed or it expires. I.R.C. §§ 172(b)(1), 172(b)(2).
At trial, Simpson orally moved “that the years 1987 through 1993 be carried forward, and the years 1995 through 1997 be carried back.” Simpson asserted that net operating losses otherwise would be carried back first, resulting in a complicated and prohibitively expensive procedure. Simpson requested sixty days to compile his records and asserted that the Commissioner had stipulated to carry forward net operating losses in a previous case. Simpson, however, did not present any evidence at trial that he had net operating losses for those tax year's or that any net operating losses were not absorbed by income in intervening tax years, and he did not submit a brief on the issue. The tax court’s opinion did not specifically address this issue but stated that “[b]ecause the record is devoid of evidence disproving any of respondent’s determinations, we sustain those determinations in full.” In his motion for reconsideration, Simpson again referred to his oral motion and asserted that this issue must be resolved before a proper computation may be made. The tax court denied Simpson’s motion for reconsideration without comment.
Although the tax court did not specifically address Simpson’s oral motion, it did not err in upholding the Commissioner’s disallowance of the net operating loss deduction. Simpson failed to present any evidence regarding net operating losses from other tax years despite opportunities to present such evidence at trial and by brief. Therefore, Simpson failed to satisfy his burden of demonstrating his entitlement to a net operating loss deduction.
2. Deductions for payments to third parties
Simpson asserts that he is entitled to business expense deductions for payments to third parties pursuant to I.R.C. § 162. Section 162(a) allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. To qualify as an allowable deduction under § 162(a), “an item must (1) be ‘paid or incurred during the taxable year,’ (2) be for ‘carrying on any trade or business,’ (3) be an ‘expense,’ (4) be a ‘necessary1 expense, and (5) be an ‘ordinary’ expense.” Commissioner v. Lincoln Sav. & Loan Ass’n, 403 U.S. 345, 352, 91 S.Ct. 1893, 29 L.Ed.2d 519 (1971). Section 162(a)(1) allows a business expense deduction for “a reasonable allowance for salaries or other compensation for personal services actually rendered.”
At trial, Simpson testified that he paid $3,600 to Elizabeth Helmbold, a librarian, for her organizational services in connection with a tax audit and to reimburse her for office supplies purchased on his behalf. Simpson testified that Helmbold never submitted a bill but gave him her credit card statement on various occasions. Simpson did not introduce these credit card statements or any other records into evidence to corroborate his claim.
Simpson also testified that he paid $10,000 to Ruth Simpson, his sister, to reimburse her for paying his telephone bills and other computer expenses. In support of his claim, Simpson offered into evidence a list of telephone records and “who paid them by category.” Simpson presented no other exhibits or testimony to substantiate the deduction.
The only testimony offered by Simpson at trial in support of his claim for business expense deductions for payments made to third parties was his own. The tax court specifically advised Simpson that his failure to present the testimony of Helmbold and Ruth Simpson gave rise to the inference that their testimony would not be helpful to him, yet Simpson offered no reason why these witnesses were not present to testify, other than he did not ask them. See Shaw v. Commissioner, 27 T.C. 561, 573, 1956 WL 605 (1957), aff'd, 252 F.2d 681 (6th Cir.1958) (“The failure of petitioner to introduce evidence solely within his possession, which, if trae, would be favorable to him, gives rise to a presumption that if produced it would be unfavorable and becomes, itself, ‘evidence of the most convincing character.’ ”). In light of Simpson’s failure to call Helmbold and Ruth Simpson as witnesses and his failure to provide any documentary evidence to corroborate his own testimony, the tax court did not clearly err in finding that his testimony was “unpersuasive and incomplete.”
After the tax court issued its opinion, Simpson submitted the affidavits of Helm-bold and Ruth Simpson in support of his motion for reconsideration pursuant to Tax Ct. R. 161. Decisions interpreting Fed. R.Civ.P. 59 and 60 apply to motions for reconsideration under Rule 161. Estate of Kraus v. Commissioner, 875 F.2d 597, 602 (7th Cir.1989). Under Rule 60, a motion for reconsideration based on newly discovered evidence should be granted when: (1) the evidence was discovered following trial; (2) due diligence on the movant’s part to discover the new evidence is shown or may be inferred; (8) the evidence is not merely cumulative or impeaching; (4) the evidence is material; (5) the evidence is such that a new trial would probably produce a new result. Id.
Simpson fails to meet the requirements of “newly discovered” evidence. With due diligence, Simpson could have obtained the affidavits of Helmbold and Ruth Simpson prior to trial. Further, the affidavits are not such that a different outcome would result. The affidavits present, without any supporting documentation, the same vague story offered by Simpson at trial. Accordingly, the tax court did not abuse its discretion in denying Simpson’s motion for reconsideration as to business expense deductions for payments to third parties.
3. Deduction for Keogh payments and credits for estimated tax payments
While Simpson claims that the Commissioner’s calculations do not “correctly reflect allowable Keogh deductions” in the amount of $9,757.17, the computation submitted by the Commissioner and incorporated in the tax court’s decision expressly includes a $9,757.17 Keogh deduction. Similarly, Simpson asserts that the tax court’s deficiency determination fails to reflect estimated tax payments of $1,500 and $15,000 for the third and fourth quarters, respectively, of 1994. An income tax deficiency is determined without regard to estimated tax payments. I.R.C. § 6211(a), (b)(1). Accordingly, the deficiency determined by the tax court properly does not reflect Simpson’s estimated tax payments. Simpson did receive credit for those payments as the Commissioner’s computation reflects $16,500 in estimated tax payments.
B. Whether the tax court correctly upheld the penalties against Simpson.
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3623212-7118 | DeCICCO, Senior Judge:
We hold in this case that trial counsel’s references to the Navy’s zero-tolerance policy toward drug abuse that were made during voir dire and his argument on sentence were improper, and that such comments constituted error, but that in light of the lack of objection by defense counsel, we must examine the case for plain error. Under the circumstances of this case, we do not find plain error and affirm.
Facts
The appellant pled guilty to an unauthorized absence of about 17 months and the wrongful use of marijuana in violation of Articles 86 and 112a, Uniform Code of Military Justice [UCMJ], 10 U.S.C. §§ 886, 912a. At this special court-martial, he elected to have members determine his sentence. During voir dire, the trial counsel introduced himself to the members, explained that there were two offenses before the court, and immediately launched into the Navy’s policy on drug abuse:
TC: The second offense, as you noticed, is a marijuana offense, use of marijuana. Is everyone familiar with the CNO’s policy on drug use?
[The members indicated affirmatively.]
TC: Does anyone disagree with the zero tolerance approach that the CNO has taken regarding drug use?
[The members indicated negatively.]
TC: Finally, there’s a lot of talk about marijuana as related to other drugs. Does anyone believe that a marijuana user should be treated differently than any other drug user?
[The members indicated negatively.]
Record at 30. These three questions constituted all of trial counsel’s voir dire. Defense counsel did not object to the questions, and the military judge did not intervene sua sponte.
Following the presentation of evidence on sentencing, the trial counsel argued to the members on an appropriate sentence. His argument was relatively brief, encompassing only about a page and a half of the record, but he stated:
Let’s look at the drug use first. As you know from reading the paper and things like that, drug use is a very big problem in society today. In fact, the CNO puts it in such high regard that he has a zero tolerance policy for anyone who uses any kinds [sic] of drugs. By [sic] the accused here, although he gave you the reason why he used the marijuana, he just assists and facilitates drug usage out there. He went and bought drugs or got drugs from someone and that just contributes to that. He used drugs, and that’s against the rules— zero tolerance there.
Record at 57-58 (emphasis added). Once again, the defense did not object and the military judge did not intervene. No cura tive instruction was given to the members. Following a period of deliberations, the members returned to the courtroom and the president asked whether they could adjudge a discharge other than a bad-conduct discharge and whether they could suspend punishment. Record at 69. After receiving a negative reply from the military judge to both inquiries, and following additional deliberations, the members sentenced the appellant to be discharged with a bad-conduct discharge, to be confined for 45 days, and to be reduced to pay grade E-l. The convening authority approved the sentence.
Discussion
In his initial pleading to this Court, the appellant submitted a single assignment of error alleging that his sentence was inappropriately severe. We specified the issue of whether trial counsel’s references to the CNO’s zero tolerance policy toward drug offenses constituted plain error.
In United States v. Grady, 15 M.J. 275 (C.M.A.1983), the Court was confronted with a situation in which both counsel referred to the Strategic Air Command [SAC] drug rehabilitation program, followed by these comments from the prosecutor to the court members: “You all, though, in this court, at this base, are members of SAC. You know what the SAC policies are, and I think you are somewhat bound to adhere to those policies in deciding on a sentence.” Grady, 15 M.J. at 276. There was no objection to these comments and no action by the military judge. In condemning such references to departmental or command policies before members charged with sentencing responsibilities, the Court held that the military judge has a sua sponte duty to restrict arguments of counsel that involve command policy, and it set aside the sentence. The holding in Grady has been incorporated into Rule for Courts-Martial [R.C.M.] 1001(g), Manual for Courts-Martial, United States (1995 ed.); see also United States v. Reitz, 17 M.J. 51 (C.M.A.1983) (summary disposition setting aside the sentence where trial counsel referred to CNO’s policy as to drugs during sentencing argument); United States v. Schomaker, 17 M.J. 1122 (N.M.C.M.R.1984).
In United States v. Kropf, 39 M.J. 107 (C.M.A.1994), trial counsel argued that the accused was a “drug dealing, drug using, thug,” that he was a “blight upon the naval service and he must be removed,” and that the Navy “has a zero tolerance policy towards drugs for a reason, a very good reason,” and that the accused, a veteran of 18 years service, well knew of the policy. Kropf, 39 M.J. at 108. Again, there was neither defense objection nor curative instruction. After analyzing the prior case law, the Court found no plain error because it was “neither ‘clear’ nor ‘obvious’ that the argument infected the members’ deliberations with Navy policy or that it affected a substantial right of appellant.” Kropf, 39 M.J. at 109.
In the case at bar, we find the trial counsel’s references to the CNO’s policy during voir dire and argument on sentence improper. He was in effect telling the members right from the beginning of voir dire that the Navy’s zero tolerance policy dictated that the appellant should be separated with a punitive discharge. We view the entire scope of his questioning in voir dire as directed toward “poisoning the well” by injecting an improper and irrelevant policy into their minds rather than obtaining information for use in the intelligent exercise of challenges. See R.C.M. 912 discussion.
The irrelevance of such questioning can easily be seen when one considers the following. What if one of the members had answered “no” to the question as to whether he was familiar with the CNO’s policy on drug abuse? Would that provide a basis for challenge? What if a member answered that he did not agree with the policy of zero tolerance, and that there could be cases where an accused, convicted of a drug offense, might merit another chance? Would this provide trial counsel with any basis whatsoever to challenge the member?
For many years, appellate military courts have been counseEing Etigators to “tread Eghtly” in this area. See, e.g., Kropf, 39 M.J. at 109. We wiE state once more: references to command, or departmental policies have no place in the determination of an appropriate sentence in a trial by court-martial. We also find that the military judge erred in not giving a sua sponte curative instruction to the members in this case. Grady. MEitary judges must remain alert to correct such blunders by counsel, for we “must look to the mEitary judge to assure that the accused receives a fair trial.” Kropf; Grady, 15 M.J. at 277.
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3877065-7313 | FINDINGS OF FACT AND CONCLUSIONS OF LAW
MALONEY, District Judge.
This matter came on before the Court on a bench trial. After considering all testimony, documentary evidence, and arguments of counsel, the Court is of the opinion that, pursuant to the following findings of fact and conclusions of law, judgment should be entered in Defendant’s favor.
Background
On July 30, 1987, Plaintiff Rufus Young, Jr., a black male, was terminated from his position as Assistant Health System Administrator with the Federal Bureau of Prisons. On August 11, 1987, Plaintiff filed an appeal with the Merit Systems Protection Board contending that (1) his removal was based on his race; and (2) he was subjected to harsher discipline than employees of other races. After an evidentiary hearing, the Board found that discrimination against Plaintiff had not occurred.
On February 11,1988, Plaintiff timely filed this action, asserting a claim under 42 U.S.C. § 2000e et seq., and appealing the decision of the Merit System Protection Board. Plaintiff seeks reinstatement, reimbursement for lost wages, and other relief on his discrimination claim.
Defendant denies Plaintiff’s allegations and responds that Plaintiff was removed for a legitimate, non-discriminatory reason. Specifically, Defendant contends that Plaintiff was removed because he (1) used sexually abusive language and (2) conducted himself in an unprofessional and improper manner with respect to a subordinate white female employee, Jana Anderson.
Findings of Fact
1. Plaintiff Rufus Young, Jr., is a Black American Citizen of the United States. At all times relevant to this action, Plaintiff resided in Dallas, Dallas County, Texas.
2. At the time this suit was instituted, Defendant Edwin Meese was Attorney General and head of the Department of Justice.
3. In May, 1985, Plaintiff became employed by the Federal Bureau of Prisons at the Federal Correctional Institution, Fort Worth, Texas. On February 16, 1986, Plaintiff was transferred and reassigned to the Bureau of Prisons South Central Regional Office, Dallas, Texas. Plaintiff held a variety of positions at these institutions. On June 7, 1986, Plaintiff was transferred and reassigned to the Federal Correctional Institution, Seagoville, Texas, to fill the position of Assistant Hospital Administrator.
4. On December 7, 1986, Plaintiff began supervising Jana Anderson, a newly hired probationary employee.
5. While he was Ms. Anderson’s supervisor, Plaintiff admits that he engaged in the following acts concerning Ms. Anderson:
(a) On April 22, 1987, Plaintiff stated to Ms. Anderson that several employees at FCI, Seagoville, including himself, would “like to get in her pants”;
(b) On April 29,1987, Plaintiff approached Ms. Anderson from behind while she was standing in front of a supply cabinet and touched her breast. When Ms. Anderson confronted Plaintiff about the incident, Plaintiff responded, “nobody was watching”;
(c) On April 30, 1987, Plaintiff made a kissing gesture toward Ms. Anderson while at work;
(d) On May 7, 1987, Plaintiff handed a note to Ms. Anderson and told her to shred it after reading it. The note contained the following message:
There is an answer to every problem, sometime it is necessary to wait awhile to find it, but, there is another answer somewhere. Please don’t ever state again that you are going to quit. You serve a very useful purpose here. Everybody, likes you (loves) and we want you here. Keep coming to work and think positive and every-thing will be alright. This-note comes from a very selfish person;
(e) On several occasions, Plaintiff held Ms. Anderson’s hand while passing her a computer key; and
(f) On several occasions, Plaintiff told Ms. Anderson that she had pretty eyes.
6. Plaintiff frequently made sexual comments to other female employees while he was employed as Assistant Hospital Administrator.
7. After an investigation concerning Plaintiffs conduct toward Ms. Anderson, Plaintiff was terminated on July 30, 1987. Defendant’s proffered reason for Plaintiffs discharge was that Plaintiff engaged in (1) sexually abusive language and conduct; and (2) unprofessional and inappropriate conduct with Jana Anderson.
8. Plaintiff appealed the Bureau of Prison’s decision to the Merit Systems Protection Board on August 11,1987. On December 10, 1987, Administrative Law Judge Sharon Fonsworth Jackson issued an initial decision affirming the Bureau of Prisons’ decision. The Administrative Law Judge found that Plaintiffs conduct toward Ms. Anderson was sufficiently egregious to warrant termination, and that Plaintiff had not established discrimination on account of his race.
9. Plaintiffs conduct with respect to Jana Anderson was inappropriate and constituted good cause for Plaintiffs termination. The Court finds that Defendant’s stated reasons for termination of Plaintiffs employment were not a pretext for unlawful discrimination or reprisal against him.
10. Plaintiff has failed to demonstrate by any credible evidence that Plaintiffs race was a factor in Defendant’s motivation to terminate Plaintiff.
11. The Court finds that more white males were faced with termination than were blacks during the period May 1, 1985, through September, 1988, and therefore Plaintiff did not suffer from disparate treatment on account of his race.
12.The Court, having reviewed the matter de novo, further finds that the decision of the Merit Systems Protection Board is correct in all respects and is supported by substantial evidence.
Conclusions of Law
1. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 and 5 U.S.C.A. 7703.
2. When a plaintiff brings a Title VII claim, and also seeks review of a Merit System Protection Board decision, the complaint is a “mixed case,” and the plaintiff is entitled to have facts concerning his allegations of discriminatory acts tried de novo by the district judge. 5 U.S.C. §§ 7702 & 7703(b)(2); Morales v. Merit System Protection Board, 932 F.2d 800, 802 (9th Cir.1991).
3. A three-part analysis is applied in a cause of action alleging racial discrimination in employment, under Title VII of the Civil Rights Act of 1964, as amended 42 U.S.C. § 2000e. Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981). The plaintiff must first prove a prima facie case of discrimination against his employer by a preponderance of the evidence. Id. The plaintiff must establish the following four elements: 1) that he belongs to a group protected by the statute; 2) that he was qualified for the job; 3) that despite his qualifications, his employment situation was adversely affected; and 4) that the employer filled his position with someone outside of that protected class. Young v. City of Houston, Tex., 906 F.2d 177 (5th Cir.1990). Once the plaintiff succeeds in proving a prima facie case, the burden next shifts to the defendant to establish some legitimate, nondiscriminatory reason for the employee’s discharge. Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981). If the defendant meets this burden, the plaintiff must then prove by a preponderance of the evidence that the legitimate reasons offered by the defendant were not true reasons, but a mere pretext for discrimination. Id.
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3648372-7565 | GINSBURG, Circuit Judge:
PAZ Securities, Inc. and its president, Joseph Mizrachi, petition for review of an order of the Securities and Exchange Commission sustaining sanctions imposed upon them by the National Association of Securities Dealers (NASD). Because the Commission did not abuse its discretion, we deny the petition.
I. Background
The facts underlying the petition are detailed in our earlier opinion and we review them only briefly here. For a more complete account, see PAZ Sec., Inc. v. SEC, 494 F.3d 1059, 1061-63 (2007) (PAZ I).
The NASD repeatedly requested information from PAZ and, having received no response, filed a complaint alleging Mizrachi and PAZ violated NASD Conduct Rule 2110 and NASD Procedural Rule 8210. Mizrachi filed no answer and the NASD issued a default judgment expelling PAZ and barring Mizrachi from ever associating with a NASD member. The petitioners appealed to the Commission, which sustained the sanctions over the objection they were “excessive or oppressive” and therefore subject to remission under 15 U.S.C. § 78s(e)(2).
We reversed and remanded. 494 F.3d at 1061. We held the Commission had abused its discretion in two ways. First, it had mischaracterized, and therefore failed properly to address, the petitioners’ arguments regarding mitigation. Id. at 1065. Second, it had not identified “any remedial — as opposed to punitive — purpose for the sanctions.” Id. at 1061. On remand, the Commission again sustained the sanctions and the petitioners again seek review.
II. Analysis
We review for abuse of discretion a decision of the Commission regarding sanctions imposed by the NASD. Stoiber v. SEC, 161 F.3d 745, 753 (D.C.Cir.1998). The agency’s choice of remedy is “peculiarly a matter for administrative competence,” and we will reverse it “only if the remedy chosen is unwarranted in law or is without justification in fact.” Am. Power & Light Co. v. SEC, 329 U.S. 90, 112-13, 67 S.Ct. 133, 91 L.Ed. 103 (1946).
The petitioners first contend the Commission violated the letter and the spirit of this court’s mandate by giving insufficient weight to the factors they raised in mitigation. In PAZ I, we directed the Commission to consider on remand whether the sanctions were excessive in light of three arguments: that the petitioners’ failure to respond “(1) was of no potential monetary benefit to them and (2) did not result in any injury to the investing public, and that (3) the information requested did not relate to injurious conduct or conduct of potential monetary benefit to them.” 494 F.3d at 1065. The petitioners argue the Commission gave “short shrift” to those factors, but we conclude the Commission reasonably decided no mitigation was warranted.
The Commission pointed out that a violation of Procedural Rule 8210 would rarely, in itself, result in direct injury to a customer or direct monetary gain for a violator. PAZ Sec., Inc., Exchange Act Release No. 57,656, 2008 SEC LEXIS 820 at *17 (PAZ II). It determined that failure to respond is nevertheless a significant harm to the self-regulatory system because it “undermines NASD’s ability to detect misconduct”; therefore the lack of direct harm to customers or benefit to violators does not mitigate a Rule 8210 violation. Id. at *17-18. The Commission further held that, contrary to the petitioners’ argument, the requested information did relate to potentially injurious conduct because the responses could have revealed improper expense sharing and unreported securities transactions. Id. at *18-19.
We hold the Commission did not abuse its discretion in determining the lack of direct harm or benefit does not mitigate a complete failure to respond in violation of Procedural Rule 8210. See Stoiber, 161 F.3d at 753 (“We will not lightly disturb the findings of an agency in its area of expertise.... [T]he Commission is better equipped to judge [the significance of certain violations] than this Court.”) (quoting Seaton v. SEC, 670 F.2d 309, 311 (D.C.Cir.1982)). The Commission also reasonably determined the requested information related to potentially injurious conduct. In sum, the Commission complied with our mandate, which did not prejudge whether the factors raised by the petitioners were necessarily mitigating.
The petitioners next argue the Commission abused its discretion by determining the sanctions imposed by the NASD were remedial. As we noted in PAZ I, a sanction may be used to protect investors but not to punish a regulated person or firm. 494 F.3d at 1065. We directed the Commission to “explain why imposing the most severe, and therefore apparently punitive sanction is, in fact, remedial.” Id. at 1066. The petitioners contend the Commission’s explanation is inadequate because the agency failed to consider the factors outlined in Steadman v. SEC, 603 F.2d 1126, 1140 (5th Cir.1979), aff'd on other grounds, 450 U.S. 91, 101 S.Ct. 999, 67 L.Ed.2d 69 (1981), or to say why no lesser sanctions would suffice to protect investors. We disagree.
We cited Steadman in PAZ I for the proposition that the Commission must be “particularly careful to address potentially mitigating factors” when it affirms an order to expel a firm from the NASD. 494 F.3d at 1065. We did not, however, direct the Commission to follow the Steadman analysis in every case. Although the factors listed in Steadman will often be relevant — and the Commission did consider several of them without adverting eo no-mine to Steadman — we do not require the Commission to explain itself by reference to “some mechanical formula.” Blinder, Robinson & Co. v. SEC, 837 F.2d 1099, 1113 (D.C.Cir.1988) (“Commission’s broad discretion in fashioning sanctions in the public interest cannot be strictly cabined according to some mechanical formula”).
Here, the Commission made the necessary “findings regarding the protec tive interests to be served” by expulsion. See McCarthy v. SEC, 406 F.3d 179, 189 (2d Cir.2005). The Commission first explained the harm to investors when a member firm fails to respond to a request for information. PAZ II, 2008 SEC LEXIS 820 at *10-13. The Commission then found Mizrachi posed “a clear risk of future misconduct” because of his “cavalier disregard” for his obligation to provide information, particularly while traveling, and his business would often take him abroad in the future. Id. at *28-29. Thus, the Commission reasonably determined the sanctions were necessary to protect investors.
Furthermore, the petitioners err in arguing the Commission must, in order to justify expulsion as remedial, state why a lesser sanction would be insufficient. We require the Commission to explain its reasoning in order to ensure it reviewed the sanction with “due regard for the public interest and the protection of investors.” 15 U.S.C. § 78s(e)(2). We do not limit the discretion of the Commission to choose an appropriate sanction so long as its choice meets the statutory requirements that a sanction be remedial and not “excessive or oppressive.” Id. Accordingly, we will not require the Commission to choose the least onerous of the sanctions meeting those requirements. See O’Leary v. SEC, 424 F.2d 908, 912 (D.C.Cir.1970) (“While these [mitigating] factors might have warranted a lighter sanction [than debarment], they did not require one”) (quoting Tager v. SEC, 344 F.2d 5, 8 (2d Cir.1965)); McCarthy, 406 F.3d at 188 (noting the Exchange Act authorizes expulsion “as a means of protecting investors, if ... necessary or appropriate to that end”) (quoting Wright v. SEC, 112 F.2d 89, 94 (2d Cir.1940)).
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113095-5324 | OPINION OF THE COURT
FUENTES, Circuit Judge.
John Hancock Mutual Life Insurance Company (“John Hancock”) and Legion Insurance Company (“Legion”) are parties to an arbitration being conducted in Philadelphia. John Hancock petitioned the United States District Court for the Eastern District of Pennsylvania to enforce a subpoena issued by the arbitration panel to a third party, Stirling Cooke Insurance Services (“SCIS”), which is based in Florida. On October 23, 2001, the District Court denied that petition. John Hancock now appeals.
Because we find that the District Court properly denied John Hancock’s motion to enforce a subpoena issued to a nonparty located in the State of Florida, we will affirm.
I.
The arbitration proceeding between Legion and John Hancock began in June of 1999. Legion sought to recover amounts allegedly owed by John Hancock under various reinsurance treaties. The Arbitration Panel bifurcated the arbitration into two phases. Phase I covered John Hancock’s claim for rescission. Phase II covered Legion’s damages and' John Hancock’s contract defenses, in the event that John Hancock was unable to establish its rescission claim.
On August 8, 2001, the Arbitration Panel, at John Hancock’s request, issued a deposition subpoena duces tecum for Russell Abernathy, an employee of SCIS. The subpoena required him to appear for deposition in Florida and to bring with him certain documents and papers. After Abernathy’s counsel informed John Hancock that Abernathy would not appear for the deposition, John Hancock filed a mo tion to enforce the subpoena in the District Court. Finding that it lacked personal jurisdiction over Abernathy, the court denied the motion on September 5, 2001.
On August 23, 2001, the Arbitration Panel had issued a subpoena duces tecum directed to the records custodian of SCIS (the “August 23rd SCIS Subpoena”). SCIS subsequently informed John Hancock that it would not comply with the August 23rd SCIS Subpoena. On October 5, 2001, John Hancock requested the Arbitration Panel to issue a new subpoena to SCIS (the “October 5th SCIS Subpoena”).
On October 11, 2001, the Arbitration Panel issued its Final Order for Phase I of the arbitration, finding that the treaties at issue in the arbitration are not rescinded. The next day, the Arbitration Panel advised the parties that it would not issue the October 5th SCIS subpoena “at this late date.”
On October 12, 2001, John Hancock filed a motion with the District Court to enforce the August 23rd SCIS Subpoena, which is the subject of the present appeal. The court denied the motion on October 23, 2001, referencing its previous order denying John Hancock’s motion for enforcement in the Abernathy matter based on a lack of personal jurisdiction. John Hancock filed a motion for reconsideration, which was denied on November 5, 2001. John Hancock now appeals from the District Court’s order denying John Hancock’s motion for enforcement of the August 23rd SCIS Subpoena.
II.
The District Court had jurisdiction over this case under the Federal Arbitration Act, 9 U.S.C. § 7. We have appellate jurisdiction pursuant to 28 U.S.C. § 1291. At issue is whether the District Court properly interpreted the subpoena service requirements of the Federal Arbitration Act (“FAA”). We exercise de novo review of a district court’s interpretation of statutes or other legal standards. See Idahoan Fresh v. Advantage Produce, Inc., 157 F.3d 197 (3d Cir.1998).
III.
This case requires that we consider whether the District Court for the Eastern District of Pennsylvania has the power to enforce an arbitration subpoena directed to a nonparty located in Florida. The parties agree that the FAA controls the issuance and service of arbitration subpoenas. Legion contends that the District Court does not have the power to enforce the arbitration subpoena against SCIS because its power is geographically limited. John Hancock, in contrast, maintains that no territorial boundaries restrict the service of arbitration subpoenas, citing to language in the FAA which states that arbitrators “may summon in writing any person to attend before them.” 9 U.S.C. § 7 (emphasis added).
In addition to the language relied upon by John Hancock, the FAA provides that arbitration subpoenas “shall be served in the same manner as subpoenas to appear and testify before the court[.]” Id. Rule 45 governs the issuance and service of subpoenas in federal district court. Thus, under the FAA, Rule 45 also governs the service of arbitration subpoenas.
Rule 45 directs that “a subpoena for production or inspection shall issue from the court for the district in which the production or inspection is to be made.” Fed.R.Civ.P. 45(a)(2). It also imposes territorial limits upon the area in which a subpoena may be served, directing that:
a subpoena may be served at any place within the district of the court by which it is issued, or at any place without the district that is within 100 miles of the place of the deposition, hearing, trial, production, or inspection specified in the subpoena or at any place within the state where a state statute or rule of court permits service of a subpoena issued by a state court of general jurisdiction sitting in the place of the deposition, hearing, trial, production, or inspection specified in the subpoena.
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11561588-25480 | McMAHON, District Judge:
Defendant-Appellants Allstate Interior Demolition Corporation and HRH Construction Interiors, Inc. appeal from a decision of Judge Robert L. Carter, dated April 2, 1998, that sua sponte granted summary judgment for plaintiff-appellee First Financial Insurance Company on its claim for declaratory judgment. They also appeal from a second decision, dated September 3, 1998, denying their motions for reconsideration of the April 2nd decision. We conclude that the district court’s sua sponte grant of summary judgment for First Financial was both procedurally and substantively erroneous, and accordingly we vacate the judgment and remand for further appropriate proceedings.
BACKGROUND
Defendant-Appellant Allstate Interior Demolition Corporation is a New York corporation with its principal place of business in Maspeth, New York. Allstate, as its name suggests, engages in the demolition of building interiors and the removal of debris therefrom. It does this work, often as a subcontractor, in Manhattan and the surrounding metropolitan area.
Plaintiff-Appellee First Financial Insurance Company (FFIC) is an insurance company incorporated in Illinois and licensed by the state of New York to do business there.
FFIC issued Commercial Lines Policy Number F 0227 G 410187 to Allstate Interior Demolition Corporation for a one-year period beginning March 14, 1996, for an annual premium of $10,122. The policy covered all of Allstate’s operations as an “Interior Demolition and Debris Removal Contractor.” The policy was not taken out in contemplation of any specific demolition job.
The application for insurance included several questions related to the nature of the applicant’s work. One section asked the applicant for its “Nature of Business/Description of Operations,” which Allstate described as “Interior Demolition & Debris Removal Contractor.” Another section, entitled “Schedule of Hazards,” asked the applicant to designate classifications and corresponding classification codes, presumably from an insurance underwriters’ manual. Allstate’s application listed the hazard classifications and classification codes for “Carpentry — Interior” and “Garbage & Refuse Collection.” The last section of the insurance application asked specific questions pertaining to specific risks, such as: “Any exposure to radioactive materials?,” “Machinery or equipment loaned or rented to others?,” and “Any watercraft, docks, floats owned, hired or leased?” Two of the questions are pertinent to the present controversy: “Any structural alterations contemplated?,” and “Any demolition exposure contemplated?” Allstate answered “Yes” to both.
FFIC approved the application and issued the policy under the risk classification codes Allstate had designated.
Approximately two months after taking out the insurance policy, Allstate entered into a contract with HRH Construction Interiors, which was under contract to do extensive renovation work at the Plaza Hotel. HRH subcontracted with Allstate to remove and dispose of two freight elevator cars, pulleys, cable weights, machines and motors, beams, doors and frames. Allstate began its work under the subcontract in June 1996.
On June 28, 1996, while Allstate employees were removing the elevator cars from the Plaza, the cable weights fell approximately sixteen floors, causing damage to the floors and walls of the first floor, basement and sub-basement, as well as to electrical wires and water pipes in the hotel. As a result of the accident, HRH and the Plaza Hotel asserted claims against Allstate for repair costs, lost revenues and other damages, in the amount of $402,981 plus interest. Allstate in turn filed an insurance claim with FFIC to cover the costs associated with the accident.
On October 16, 1996, FFIC disclaimed coverage for the claims resulting from the accident. It also notified Allstate — and HRH and the Plaza — that it was rescinding Allstate’s insurance policy, and returned its check for payment of the policy premium. FFIC claimed that Allstate had made material misrepresentations in its application for insurance by describing its business as “interior carpentry” and “refuse removal” and by failing to state explicitly that its work included elevator removal.
On November 1, 1996, FFIC commenced this action for a declaratory judgment that it was entitled to rescind its insurance policy with Allstate on the ground of material misrepresentation. FFIC asserted that the insurance policy it had issued to Allstate, under which HRH was an additional insured, was void ab initio because Allstate had misrepresented the nature of its business in two ways: first, by failing to give a complete and accurate description of its work, and second, by failing to disclose affirmatively to First Financial that it sometimes engaged in elevator removal. FFIC asserted that it did not issue insurance policies for the removal of elevators, or for any other work involving elevators, and claimed that it would not have issued the policy to Allstate if it had known that Allstate would be removing elevators as part of its demolition work. In addition to Allstate, FFIC’s Complaint named HRH Construction Interiors and various Plaza Hotel entities as defendants. HRH is a New York corporation. The Plaza Hotel, Plaza Operating Partners Ltd., Fairmont Hotel Management, L.P. and New Plaza Associates, L.L-.C. are all business entities organized and existing under the laws of the State of New York.
Allstate responded to the Complaint with eight counterclaims, including breach of contract, breach of covenant- of good faith and fair dealing, libel, misrepresentation, tortious interference with contract, tortious interference with business relations and deceptive acts or practices in violation of New York General Business Law § 349. For its libel claim, Allstate asserted the following:
37. “On October 16, 1996, plaintiff [FFIC] maliciously published the following statements about ALLSTATE-:”
PLEASE BE ADVISED THAT FIRST FINANCIAL INSURANCE COMPANY HEREBY DISCLAIMS COVERAGE FOR THE ABOVE CAPTIONED CASUALTY AND, FURTHER, HEREBY DECLARES THE POLICY NUMBER F 0227 G 410187 TO BE VOID AS INITIO, BASED UPON MATERIAL MISREPRESENTATIONS MADE BY ALLSTATE INTERIOR DEMOLITION CORP. IN ITS APPLICATION FOR THE ISSUANCE OF THE POLICY, AS MORE FULLY ADDRESSED BELOW.
:ji % jfi %
NOWHERE IN THE APPLICATION DID ALLSTATE DISCLOSE THAT IT WOULD BE ENGAGED IN ELEVATOR DEMOLITION OR, INDEED, WORK IN ANY WAY RELATED TO ' ELEVATORS. TO THE CONTRARY, ALLSTATE REPRESENTED THAT ITS WORK RELATED TO INTERIOR CARPENTRY AND TO GARBAGE AND REFUSE COLLECTION.
THIS IS A MATERIAL MISREPRESENTATION OF THE NATURE OF ALLSTATE’S WORK....
THE COMPANY ALSO BELIEVES THAT ALLSTATE MISREPRESENTED ITS PAYROLL, FOR PREMIUM BASIS PURPOSES.
FIRST FINANCIAL INSURANCE COMPANY HAS DETERMINED THAT MATERIAL MISREPRESENTATIONS WERE KNOWINGLY MADE IN THE APPLICATION OF ALLSTATE INTERIOR DEMOLITION CORP. FOR ISSUANCE OF POLICY NUMBER F 0227 G 410187, AS SPECIFIED ABOVE.
Allstate contended that this statement was sent to HRH and to the Plaza Hotel, that the accusation about, misrepresentation was false and that FFIC knew at the time it published the statement that it was false. It claimed damages for injury to its good business name and reputation.
HRH asserted one counterclaim against FFIC, seeking a declaration that it was insured under the policy and that, as an innocent insured, FFIC was obligated to defend and indemnify it with respect to any claim or action arising out of the accident at the Plaza. HRH also cross-claimed against Allstate for breach of contract to procure insurance, and for a declaration that Allstate was obligated to indemnify and hold HRH harmless with respect to any liability arising out of the work at the Plaza. The various Plaza Hotel entities named as. defendants did not appear.
On February 10, 1997, FFIC made a motion, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss four of Allstate’s counterclaims. FFIC argued that each of the challenged counterclaims failed to state a cause of action. With regard to the counterclaim for libel, FFIC argued that Allstate had admitted in its Answer the truth of the very statement alleged to be defamatory' — namely, that Allstate did elevator removal work from time to time and that it did not disclose that work when it applied for insurance.
In response to FFIC’s motion to dismiss its libel counterclaim, Allstate contended that it had accurately described the nature of its business (as “Interior Demolition & Debris Removal Contractor”). It further stated that not specifically mentioning elevator removal work was not a misrepresentation, because the industry understood the term “Interior Demolition” to encompass removal of any items from a building’s interior. Allstate also argued that it had selected appropriate risk classification codes, namely “Carpentry — Interior” and “Garbage & Refuse Collection,” from among those listed in the Commercial General Liability (CGL) underwriting manual used by insurance brokers. Allstate noted that there was no specific risk classification for interior demolition, and claimed that evidence would show that insurance brokers routinely used “Carpentry — Interior” to classify such work. While the CGL manual (like FFIC’s own Commercial Underwriting Manual) contained a classification for “elevator work,” that classification specified only elevator/escalator inspection, installation, servicing or repair. It made no mention of elevator demolition or removal. Allstate argued that it had correctly used the “Interior Demolition” description and the “Carpentry — Interior” risk classification.
At the time FFIC made its Rule 12(b)(6) motion, the parties had not commenced discovery. Allstate offered no evidence in support of its contentions that the insurance application was filled out accurately and that “Interior Demolition” was understood in the industry to encompass all types of demolition, including elevator removal. Allstate did not believe it was required to do so; as stated in its memorandum of law, “As the Court is aware, on a Rule 12(b)(6) motion, the factual allegations of the [C]omplaint [or, in this case, the Answer, which contained .the counterclaims] must be presumed to be true, ... and the motion should be denied ‘unless it appears beyond doubt that the [claimant] can prove no set to facts in support of his claim which .would entitled [sic] him to relief.’ ”
On April 2, 1998, the district court issued a decision in response to FFIC’s Rule 12(b)(6) motion to dismiss the counterclaims. However, that decision did not directly address the merits of the motion that had been submitted to the court. Instead, the district court granted what it called “the insurer’s motion for declaratory judgment.” First Fin. Ins. Co. v. Allstate Interior Demolition Corp., 14 F.Supp.2d 302, 303 (S.D.N.Y.1998). After effectively converting FFIC’s motion to dismiss counterclaims, into a motion for summary judg7. ment on the Complaint, the court concluded as follows: “Allstate’s admission that it engages in elevator removal work settles the question of whether its application [for insurance] contained a misrepresentation.” Id. at 304. The district court ruled that this misrepresentation was material because FFIC had represented that it did not issue insurance policies for elevator removal work. Id. at 306. Thus, the court voided the insurance policy ab initio and held that FFIC was not obligated to defend ór indemnify Allstate. Id. at 306.
Having declared the insurance policy invalid, the court ruled that all of Allstate’s counterclaims and HRH’s counterclaim were without merit — even though FFIC had not moved to dismiss all of Allstate’s counterclaims or HRH’s counterclaim.
Believing that the district court had misunderstood the nature of First Financial’s motion, Allstate moved for an amendment of the court’s opinion pursuant to Federal Rule 69(e), and for reconsideration pursuant to Rule 6,3 of the Local Civil Rules. Arguing that it had evidence to support its position that “Interior Demolition” includes the removal of anything within the four walls of a building, including elevators, Allstate submitted the testimony of its insurance broker, Neil Wallach, who had been deposed while FFIC’s Rule 12(b)(6) motion was pending. Mr. Wallach testified that the term “interior demolition,” which Allstate had used on the application to describe its business, is understood in the insurance business to include the removal of anything within the four walls of a building. Allstate also attached excerpts from FFIC’s Commercial Underwriting Manual to its motion. The excerpts showed that the manual contained no risk classification code for “elevator removal;” nor did it contain a risk classification code for “interior demolition.” Allstate contended that it had been effectively prevented from submitting this evidence because the district court decided the case on the merits without first notifying defendants of its intention.
HRH also moved for reconsideration; it asked the court to issue a new opinion, pursuant to Federal Rule 60(b), limited to the specific counterclaims that were the subject of the plaintiffs original motion.
The motions for reconsideration were denied. The district court found that the standards for relief from a judgment under Rule 60(b) or for reconsideration under Rule 59(e) and Local Rule 6.3.had not been met, and that the defendants had had “ample notice and opportunity to counter the evidence upon which plaintiff based its motion for declaratory judgment.” First Fin. Ins. Co. v. Allstate Interior Demolition Corp., No. 96-CIV-8243, 1998 WL 567900, at *2 (S.D.N.Y. Sept. 3, 1998).
This appeal followed.
DISCUSSION
We review the district court’s grant of summary judgment de novo. See Gummo v. Village of Depew, 75 F.3d 98, 107 (2d Cir.1996); Ramsey v. Coughlin, 94 F.3d 71, 74 (2d Cir.1996).
Appellants Allstate and HRH argue that the district court erred in granting summary judgment because the only motion before the court was a pre-discov-ery motion to dismiss four counterclaims made pursuant to Federal Rule of Civil Procedure 12(b)(6) — not a “motion for declaratory relief,” as stated by the court— and Allstate, the losing party, was not afforded the opportunity to show that there were material issues of fact in dispute, since the parties were given no notice that the court would be deciding the case on the merits. Appellants further argue that the district court committed a substantive error, both in concluding that Allstate’s non-disclosure that it sometimes removes elevators in the course of its interior demolition work constituted a misrepresentation on its application for insurance, and in ruling that FFIC had shown that such misrepresentation was material.
We agree that the district court’s sua sponte grant of summary judgment was improper. We therefore vacate that order and remand so that discovery may continue and the action be adjudicated in due course.
District courts are widely acknowledged to possess the power to enter summary judgment sua sponte. See Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). However, this is true only “... so long as the losing party was on notice that [it] had to come forward with all of [its] evidence.” Celotex, 477 U.S. at 326, 106 S.Ct. 2548; see also Hispanics for Fair and Equitable Reapportionment v. Griffin, 958 F.2d 24, 25 (2d Cir.1992) (per curiam) (“[s]ummary judgment should not be granted ... unless the losing party has been given an opportunity to demonstrate that there are genuine material issues for trial”); accord Vitello v. Ambrogio, 130 F.3d 59, 60 (2d Cir.1997); Ramsey, 94 F.3d at 73-74; Herzog & Straus v. GRT Corp., 553 F.2d 789, 791-92 (2d Cir.1977). ‘Where it appears clearly upon the record that all of the evidentiary materials that a party might submit in response to a motion for summary judgment are before the court, a sua sponte grant of summary judgment against that party may be appropriate if those materials show that no material dispute of fact exists and that the other party is entitled to judgment as a matter of law.” Ramsey, 94 F.3d at 74 (citing Coach Leatherware Co. v. AnnTaylor, Inc., 933 F.2d 162, 167 (2d Cir.1991)).
In Ramsey, supra, this Court reversed a sua sponte award of summary judgment to non-moving defendants in response to plaintiffs motion for summary judgment. We reversed because we did not know whether all materials obtained in discovery were before the Court. The Court recognized that, if a motion for summary judgment has been made, a district court may grant summary judgment to any party— including a non-movant. But we said that “care should, of course, be taken by the district court to determine that the party against whom summary judgment is rendered has had a full and fair opportunity to meet the proposition that there is no genuine issue of material fact to be tried, and that the party for whom summary judgment is rendered is entitled thereto as a matter of law.” Ramsey, 94 F.3d at 73-74 (quoting 6 James W. Moore, Moore’s Federal Practice ¶ 56.12, at 56-165 (2d ed.1995)). The Court went on to state that:
Before granting summary judgment sua sponte, the district court must assure itself that following the procedures set out in Rule 56 would not alter the outcome. Discovery must either have been completed, or it must be clear that further discovery would be of no benefit. The record must, therefore, reflect the losing party’s inability to enhance the evidence supporting its position and the winning party’s entitlement to judgment.
Ramsey, 94 F.3d at 74.
In this case, the procedural safeguards that should attend an award of summary judgment were not offered to Appellants. See, e.g., Ramsey, 94 F.3d at 74; Vitello v. Ambrogio, 130 F.3d at 60. The motion before the district court was not a motion for summary judgment addressed to the merits of FFIC’s claim. It was a motion to dismiss selected counterclaims. At some point,, the district court deemed it appropriate to convert the motion to one for summary judgment on the underlying claim, but he gave the parties no notice of that fact-and, thus, no opportunity to supplement the record with evidence that might create an issue of fact.
FFIC cites this Court’s decision in Coach Leatherware, supra, for the proposition that a court need not give notice of its intention to enter summary judgment against a non-moving party. This statement is true when a. summary judgment motion has in fact been made, because the parties are then on notice that ultimate issues are before the court. Thus, as long as some party has made a motion for summary judgment, a court may grant summary judgment to a non-moving party, provided that party has had a full and fair opportunity to meet the proposition that there is no genuine issue of material fact to be tried. The following cases, all of which were cited by the district court, so hold: Coach Leatherware, supra, Ramsey, supra, and Goldstein v. Fidelity & Guaranty Ins. Underwriters, Inc., 86 F.3d 749, 750-51 (7th Cir.1996). See First Fin. Ins. Co. v. Allstate Interior Demolition Corp., 1998 WL 567900, at * 1.
Here, however, no party had made a summary judgment motion. The motion that FFIC had made was addressed to the pleadings. All that Allstate had to show to defeat that motion was that its Answer and counterclaims alleged facts to support one or more of those counterclaims — i.e, facts that, if proven, would allow it to recover under some theory. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). ‘“When such a limited adjudication is the order of the day, we cannot say with assurance that the parties will present everything they have. The very inti mation of mortality when summary judgment is at issue assures us that the motion will be rebutted with every factual and legal argument available.” Herzog & Straus, 553 F.2d at 792 (quoting Georgia, Southern & Florida Railway v. Atlantic Coast Line Railroad, 373 F.2d 493, 498 (5th Cir.), cert. denied, 389 U.S. 851, 88 S.Ct. 69, 19 L.Ed.2d 120 (1967)). As Allstate points out, “there is a huge difference between losing on a counterclaim and losing the whole case.” The district court’s failure to apprise the parties that it might dispose of the entire case prevented them from submitting all the evidence and arguments they could have and clearly would have.
FFIC argues that the misrepresentation issue at the heart of the case was in fact addressed by both sides- in their motion papers — in relation to Allstate’s libel counterclaim and FFIC’s truth defense— and that Allstate was not, therefore, prejudiced by the district court’s unannounced granting of summary judgment on that ground. As Allstate points out, however, it made a limited argument in response to FFIC’s motion to dismiss its libel counterclaim. Allstate represented that it would show, as discovery progressed, that its admitted non-disclosure of the fact that it occasionally removed elevators did not rise to the level of misrepresentation. Under the Federal Rules of Civil Procedure, Allstate was not required to offer evidence on that issue, because FFIC’s motion to dismiss the counterclaims was addressed to the sufficiency of the pleadings. Such a motion is ordinarily to be decided “on the four corners” of the pleadings, without reference to extraneous evidence. See, e.g., Newman & Schwartz v. Asplundh Tree Expert Co., 102 F.3d 660, 662-63 (2d Cir.1996).
In this particular case, the lack of opportunity for Allstate to present evidence outside the four corners of the pleadings before judgment was entered against it was highly prejudicial. Considerable evidence supporting Allstate’s position had come to light during the thirteen months between submission of FFIC’s motion to dismiss and the district court’s decision. Much of that evidence was eventually placed before the Court when the motions for reconsideration were made. It strongly suggests that FFIC was not entitled to summary judgment on any number of grounds.
First, Mr. Wallach, the agent who filled out the application, did in fact testify that the term “interior demolition” is understood in the insurance industry to mean the removal of anything within the four walls of a building, whether that be sheet-rock, plumbing fixtures, electrical wiring, or elevators. This testimony, had it been before the district court, would have sufficed to create a disputed issue of material fact concerning whether the statements in Allstate’s insurance application were misrepresentations. The district court concluded that Allstate’s failure to disclose that it removed elevators was a misrepresentation; Allstate argues that, in light of industry practice, its statement was factually correct. A jury could well see merit in Allstate’s argument.
Second, during discovery, FFIC produced its Commercial Underwriting Manual to defendants. The manual contained only two classifications pertaining to elevators. One classification was for elevator manufacturing, and the other was for “elevator or escalator inspecting, installation, servicing or repair.” Neither covered the removal of elevators. This evidence con firmed the existence of disputed issues of fact as to what the proper risk classifications were for interior demolition work, in light of the categories from which Allstate could have chosen. Moreover, in another portion of the application, the “Schedule of Hazards,” FFIC asked the applicant to supply risk classifications for the applicant’s business from a schedule of risk classifications contained in CGL manuals used by insurance brokers and insurance companies. Allstate’s application listed classifications for “Carpentry-Interior” and “Garbage & Refuse Collection.” An affidavit from Allstate’s attorney, submitted in opposition to FFIC’s motion to dismiss the counterclaims, stated that Allstate expected to show after discovery that these risk classifications were chosen because the manual used by insurance underwriters did not have a specific classification for interior demolition, and that the standard practice among underwriters was to use the risk classification “Carpentry-Interior” to cover interior demolition. At his deposition, Mr. Wallach confirmed this to be a fact. The broker stated, “[biased on my knowledge and understanding ... the classification code interior carpentry is used by insurance companies for pricing purposes based upon the insurance company’s knowledge and understanding that the insured engages in interior demolition.”
Furthermore, regardless of whether “Carpentry — Interior” or “Garbage & Refuse Collection” were appropriate classification codes for the work Allstate did, the broker’s testimony also indicated that “[t]he insured does not determine the classification code [that goes on the policy]. The insurance company determines the classification code and the rate that’s associated with that.” Mr. Wallach also stated, “[i]f an underwriter in my office or in any office is ... putting down a classification code, it is up to the insurance company to determine whether that code is appropriate based upon — this is my understanding-based upon a description of the operations. The insurance company has the final say as far as pricing, which is the code and the classification that’s used from the code.”
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9417760-20493 | Opinion for the Court filed by Circuit Judge SENTELLE.
SENTELLE, Circuit Judge:
This case is before us on appeal by the taxpayer from a decision of the Tax Court denying “innocent spouse” relief under 26 U.S.C. § 6015. We affirm that decision for the reasons that follow.
I. Background
The facts necessary to this decision are not in dispute. See Mitchell v. Commissioner, 80 T.C.M. (CCH) 590, 2000 WL 1595695 (2000). Appellant Ella Marie Mitchell was married to Herbert L. Mitchell for many years before his death in 1992. In 1991, Mr. Mitchell received a distribution from the Teacher’s Retirement System of the State of Maryland in two checks dated June 30, 1991 totaling $666,564.51. He also received two form 1099-R information returns aggregating the total and showing $629,083.14 of it as taxable, and the parties stipulated that amount was taxable. Mr. Mitchell did not roll over the distribution into an individual retirement account or other exempt trust or arrangement. He purchased Treasury securities with the distribution.
After Mr. Mitchell’s sudden death in March 1992, Mrs. Mitchell filed a joint return for 1991. The return as filed with the Internal Revenue Service (“IRS”) reported the entire $666,564.51 gross distribution to Mr. Mitchell accurately, but reported that only $1,083.14 was taxable. In explanation, an attachment claimed, accurately, $39,633.27 in employee contributions and, inaccurately, $628,000.00 as an excluded rollover into a qualified plan. As a matter of fact, there was no effective rollover. The IRS determined a deficiency, and in due course Mrs. Mitchell appeared in the Tax Court, seeking “innocent spouse” relief under 26 U.S.C. § 6015.
The Tax Court found as fact that Mrs. Mitchell did know of the receipt, amount, and nature of the distribution to Mr. Mitchell but that she did not know that its treatment on the 1991 return was incorrect. Relying upon his finding of Mrs. Mitchell’s knowledge and on the Tax Court’s decision in Cheshire v. Commissioner, 115 T.C. 183, 2000 WL 1227132 (2000), aff'd, 282 F.3d 326 (5th Cir.2002), the presiding judge held that Mrs. Mitchell was not entitled to relief under either of subsections (b) or (c) of 26 U.S.C. § 6015. Mitchell, 80 T.C.M. at 593. In addition, the judge held that the IRS had not abused its discretion in denying equitable relief under 26 U.S.C. § 6015(f). Mitchell, 80 T.C.M. at 594. Mrs. Mitchell, a resident of the District of Columbia, appealed to this court. 26 U.S.C. § 7482(a)(1).
II. Analysis
A. Subsection (b) Relief, 26 U.S.C. § 6015(b)
There are three grounds for relief under section 6015, set out respectively in subsections (b), (c), and (f) thereof. Mrs. Mitchell sought relief under each, and we address each in turn.
Subsection (b) provides in pertinent part:
Under procedures prescribed by the Secretary, if—
(A) a joint return has been made for a taxable year;
(B) on such return there is an understatement of tax attributable to erroneous items of one individual filing the joint return;
(C) the other individual filing the joint return establishes that in signing the return he or she did not know, and had no reason to know, that there was such understatement;
(D) taking into account all the facts and circumstances, it is inequitable to hold the other individual liable for the deficiency in tax for such taxable year attributable to such understatement; and
(E) the other individual elects (in such form as the Secretary may prescribe) the benefits of this subsection not later than the date which is 2 years after the date the Secretary has begun collection activities with respect to the individual making the election,
then the other individual shall be relieved of liability for tax (including interest, penalties, and other amounts) for such taxable year to the extent such liability is attributable to such understatement.
26 U.S.C. § 6015(b)(1). The parties agreed that subparagraphs (A) and (E) were satisfied, but the IRS contested (B), (C), and (D). The Tax Court decided the issue on the basis that subparagraph (C) was not satisfied because of Mrs. Mitchell’s knowledge of the facts, and therefore did not address subparagraphs (B) and (D).
We find no error in the Tax Court’s determination of this issue. The Tax Court found as fact that, although Mrs. Mitchell did not know the tax consequences, she did know that her husband had received the distribution from the retirement system, when he had received it, the amount of the distribution, and what he had done with it. It was she who informed the tax return preparer that Mr. Mitchell had not rolled over the funds and provided accurate forms 1099-R to the preparer. (There was some indication in the record that the distribution could not have been rolled over in any event, but that is irrelevant as neither Mr. Mitchell nor Mrs. Mitchell attempted a rollover within any otherwise applicable time period.) Accordingly, it is clear that she knew every fact necessary to determine that the distribution, less Mr. Mitchell’s investment, was fully taxable and not excludable. Thus, although the Tax Court found she did not know in fact of any understatement, the facts that she did know gave her “reason to know” of the understatement of tax on the 1991 joint return within the meaning of 26 U.S.C. § 6015(b)(1)(C).
Our holding on this point, although apparently one of first impression in this circuit, is consistent with the holdings of other circuits under current subparagraph (b)(1)(C), see Cheshire v. Commissioner, 282 F.3d 326, 332-35 (5th Cir.2002), and under its predecessor, 26 U.S.C. § 6013(e)(1)(C). See Buchine v. Commissioner, 20 F.3d 173, 180-81 (5th Cir.1994); Bokum v. Commissioner, 992 F.2d 1132, 1133-35 (11th Cir.1993); Clevenger v. Commissioner, 826 F.2d 1379, 1382 (4th Cir.1987); Shea v. Commissioner, 780 F.2d 561, 566-67 (6th Cir.1986). The current version differs from its predecessor only in the replacement of the former “spouse” by the current “individual filing the joint return” and of the former “substantial underpayment” by the current “underpayment” simpliciter. Accordingly, decisions interpreting the former subpara-graph 6013(e)(1)(C) that do not turn on these differences remain persuasive, if not controlling, under the current subpara-graph 6015(b)(1)(C). Butler v. Commissioner, 114 T.C. 276, 283, 2000 WL 502841 (2000). Cf. Madley v. U.S. Parole Comm’n, 278 F.3d 1306, 1309 (D.C.Cir. 2002) (same re: 28 U.S.C. § 2253).
Mrs. Mitchell observes that many of these cases are so-called omitted income cases applying what is called the “knowledge of the transaction” test. She contends that we should instead follow the Ninth Circuit’s decision in Price v. Commissioner, 887 F.2d 959 (9th Cir.1989), and its progeny, which she argues employ a different standard of knowledge in innocent spouse cases involving erroneous deductions. Fundamentally the standard for which Mrs. Mitchell argues is that her lack of knowledge of the tax consequences of the income received, or of its proper treatment on the return, establishes that she did not have reason to know of the underpayment. No decision, not even Price, has gone that far. Price itself expressly stated that it was not addressing an ignorance of law defense. The Price court opened its discussion of whether the claimant there “had reason to know” with the following:
Of itself, ignorance of the attendant legal or tax consequences of an item which gives rise to a deficiency is no defense for one seeking to obtain innocent spouse relief. In [Bernadette P. Price v. Commissioner, 53 T.C.M. (CCH) 1414, 1987 WL 40413 (1987)], for example, the tax court denied “innocent spouse” protection to a joint return taxpayer who admitted she knew about unreported funds her husband had embezzled despite the fact she did not know that embezzled funds constitute taxable income. [Bernadette P.] Price, 53 T.C.M. at 1416. Thus, if a spouse knows virtually all of the facts pertaining to the transaction which underlies the substan tial understatement, her defense in essence is premised solely on ignorance of law. Id. In such a scenario, regardless of whether the spouse possesses knowledge of the tax consequences of the item at issue, she is considered as a matter of law to have reason to know of the substantial understatement and thereby is effectively precluded from establishing to the contrary.
Here, while the tax court properly concluded that Patricia [Price, no relation to Bernadette] knew certain facts about the COM investment [for which her husband claimed an erroneous deduction], it cannot be said that Patricia was so intimately involved with the investment such that she knew virtually all of the facts of the transaction underlying the deduction, leaving her no option but to rely solely upon ignorance of law as a defense and therefore leaving us no option but to conclude that she had reason to know of the understatement. Because Patricia’s ignorance extends beyond the legal consequences of the deduction, we .proceed to determine on the facts before us whether Patricia had reason to know that the return contained a substantial understatement.
887 F.2d 959, 964-65 (9th Cir.1989) (citations omitted) (emphasis added). On the facts before us, however, it is perfectly clear that Mrs. Mitchell knew every fact necessary to determine the legal consequences of the income, and that her defense is simply that she did not know those consequences. We hold that Mrs. Mitchell’s complete factual knowledge gave her reason to know of the underpayment within the meaning of subparagraph 6015(b)(1)(C). Nothing in Price undermines our determination. Ignorance of the law, standing alone, as it does here, is not a defense under any test. Accord Cheshire, 282 F.3d at 335.
B. Subsection (c) Relief, 26 U.S.C. § 6015(c)
Unlike subsection (b), subsection (c) has no statutory antecedent. Together with the revisions of former subsection 6013(e) enacted as 6015(b) and new subsection (f), subsection (c) was enacted in 1998 to liberalize and expand innocent spouse relief. Cheshire, 115 T.C. at 189. Subsection (c) provides relief to eligible electing taxpayers by allocating any deficiency relating to the joint return between the spouses much as though they had filed separately. 26 U.S.C. ■ § 6015(c)(1), (d)(3)(A). The Tax Court did not consider this mechanism, however, because it determined that an exception barred such relief for Mrs. Mitchell. Mitchell, 80 T.C.M. at 593-94. That exception is as follows:
If the Secretary demonstrates that an individual making an election under this subsection had actual knowledge, at the time such individual signed the return, of any item giving rise to a deficiency (or portion thereof) which is not alloca-ble to such individual under subsection (d), such election shall not apply to such deficiency (or portion). This subpara-graph shall not apply where the individual with actual knowledge establishes that such individual signed the return under duress.
26 U.S.C. § 6015(c)(3)(C). The burden of proof under this subparagraph is on the IRS. 26 U.S.C. § 6015(c)(2). The distribution in question is “not allocable” to Mrs. Mitchell under subsection (d), and the parties stipulated that Mrs. Mitchell is deemed to have made any necessary elections. There is no question of duress involved. The only question is whether the IRS has shown that Mrs. Mitchell “had actual knowledge, at the time [she] signed the [1991] return, of any item giving rise to a deficiency.” 26 U.S.C. .§ 6015(c)(3)(C).
The Tax Court found as fact that Mrs. Mitchell knew that Mr. Mitchell had received the distribution, when he received it, its amount, and how he invested it. See Part II.A, supra. She also knew when she sold the Treasury.securities her husband had purchased with the distribution and deposited the proceeds in individual retirement and other accounts. As to her lack of knowledge, the Tax Court found only that she did not know the tax consequences of these acts. We hold that the knowledge that she had was actual knowledge of the “item giving rise to a deficiency,” within the meaning of the statute. 26 U.S.C. § 6015(c)(3)(C).
In so holding, we have considered and rejected Mrs. Mitchell’s argument that the proper interpretation of the statutory phrase “actual knowledge * * * of any item giving rise to a deficiency” is that knowledge is required, not just of the item, but of deficiency causation — knowledge that the item caused a deficiency in whole or in part. Mrs. Mitchell has not persuaded us that this is the interpretation Congress intended. First, it is a strained interpretation of the sentence read as a whole. It depends for its force on treating the entire phrase “any item giving rise to a deficiency” as the indivisible object of knowledge. The more natural reading of the sentence is that it refers to a person who has knowledge of an item, and that that item gives rise to a deficiency without regard to whether the person who knows of the item knows of that consequence. Not only is Mrs. Mitchell’s proposed interpretation semantically awkward, it is unlikely that Congress would have employed such subtle and ambiguous phrasing to overrule the well-established principle that ignorance of tax law is not a defense to liability. E.g., Hayman v. Commissioner, 992 F.2d 1256, 1261-63 (2d Cir.1993); Bokum, 992 F.2d at 1134-35; Price, 887 F.2d at 964-66 (finding of legal ignorance not sufficient for relief; other facts considered); Purcell v. Commissioner, 826 F.2d 470, 473-74 (6th Cir.1987), cert. denied, 485 U.S. 987, 108 S.Ct. 1290, 99 L.Ed.2d 500 (1988); McCoy v. Commissioner, 57 T.C. 732, 734, 1972 WL 2489 (1972).
‘Mrs. Mitchell protests that one can not know of an “item” unless one knows its tax treatment. Thus, by not knowing the tax consequences, she did not know the distribution was an “item” within the meaning of subsection 6015(c). Although the Internal Revenue Code is full of definitions, including definitions in subsection (c) itself, definitions that use the word item, and definitions of various types of items, what constitutes an item itself is nowhere defined. Mrs. Mitchell contends it is defined circumstantially by its consistent usage as something with tax consequences. This may well be true, but if so it- appears utterly unremarkable, given the generality of the term and the purposes of the Internal Revenue Code. What would be remarkable would be for Congress to rely upon such an obscure and imprecise device to .make ignorance of law a defense to voluntarily incurred joint and several liability. Cf. Cheshire, 282 F.3d at 335-37 (dismissing substantially similar argument). Nothing in the plaih language of the statute compels such a result, nor suggests that to know of an item, one must understand its legal significance.
Finally, in this regard, Mrs. Mitchell contends that Congress implied a requirement of knowledge of the tax consequences by referring to “knowledge, at the time such individual signed the return, of any item.” 26 U.S.C. § 6015(c)(3)(C) (emphasis added). Mrs. Mitchell submits, in effect, that the emphasized phrase, focusing as she believes it does on a particular time, and not before, shows congressional concern with the electing individual’s state of mind when it is likely most focused on the tax consequences of the return. Again, we conclude that Mrs. Mitchell has offered an implausible argument. We interpret the emphasized language as simply limiting the time after which acquisition of knowledge is irrelevant.
Our interpretation of the knowledge requirement of subparagraph (c)(3)(C) does not deprive this new provision of force. Mrs. Mitchell is correct that Congress intended to 'expand the scope of innocent spouse relief. Subsection (c) does so in several ways, including requiring proof of actual knowledge of an-item, not just reason to know, and putting that heavy burden on the IRS. Even as we interpret subsection (c), it is a material liberalization of the former subsection 6013(e) test, carried forward with its own lesser liberalizations in subsection (b).
For the reasons given, we hold that subparagraph 6015(c)(3)(C) does not require the IRS to show that an individual seeking subsection (c) relief had actual knowledge of the improper tax treatment of an item with respect to which the individual seeks relief, and that Mrs. Mitchell’s actual knowledge of the receipt, amount, timing, nature, and use of the distribution bars her from such relief notwithstanding her ignorance of its proper tax treatment.
C. Subsection (f) Relief, 26 U.S.C. § 6015(f)
Mrs. Mitchell also seeks the third and last form of relief under section 6015, subsection (f) equitable relief. Subsection (f) provides in full as follows:
Under procedures prescribed by the Secretary, if—
(1) taking into account all the facts and circumstances, it is inequitable to hold the individual liable for any unpaid tax or any deficiency (or any portion of either); and
(2) relief is not available to such individual under subsection (b) or (c), the Secretary may Relieve such individual of such liability. '
26 U.S.C. § 6015(f). Subsection (f) has no statutory antecedent as a stand alone provision, but has roots in the equity test of former subparagraph 6013(e)(1)(D) carried forward into subparagraph 6015(b)(1)(D). The roots of this provision also include a Treasury regulation promulgated in support of that subparagraph:
(b) Inequitable defined. Whether it is inequitable to hold a person hable for the deficiency in tax, within the meaning of paragraph (a)(4) of this section, is to be determined on the basis of ah the facts and circumstances. In making such a determination a factor to be considered is whether the person seeking relief significantly benefitted, directly or indirectly, from the items omitted from gross income. However, normal support is not a significant “benefit” for purposes of this determination. Evidence of direct or indirect benefit may consist of transfers of property,’ including transfers which may be received several years after the year in which the omitted item of income should have been included in gross income. Thus, for example, if a person seeking relief receives from his spouse an inheritance of property or life insurance proceeds which are traceable to items omitted from gross income by his spouse, that person will be considered to have benefitted from those items. Other factors which may also be taken into account, if the situation warrants, include the fact that the person seeking relief has been deserted by his spouse or the fact that he has been divorced or separated from such spouse.
Treas. Reg. § 1.6013 — 5(b) (promulgated 1974). (The referenced paragraph (a)(4) is simply a concise restatement of the statutory equity test.)’ The applicability of parts of the regulation have been eroded by subsequent statutory changes, particularly the 1984 expansion of innocent spouse relief to deduction items, but the regulation never has been withdrawn and this portion has provided some guidance to the IRS in using its discretion under subsection (f) pending development of newer resources. See I.R.S. Notice 98-61, 1998-2 C.B. 756, 757, 1998 WL 858240 (referencing quoted provision).
As the decision whether to grant this equitable relief is committed by its terms to the discretion of the Secretary, the Tax Court and this Court review such a decision for abuse of discretion. See Flores v. United States, 51 Fed.Cl. 49, 51 & n. 1 (2001); Butler, 114 T.C. at 291-92. We conclude that there was no such abuse, for the reasons given by the Tax Court in its decision:
In this case, petitioner significantly ben-efitted from the omitted income. Among other things, she made repairs and improvements to her residence; she paid down the mortgage; she paid her and Mr. Mitchell’s medical bills; and she paid her children’s loans and college expenses. She also established a trust for her children in the amount of $132,000. Her spending over the 3 years 1992 through 1994, including the trust fund, totaled more than $570,000. In short, she used the money from the transfer refund to the considerable benefit of herself and her family. These expenditures, while no doubt generous and well intentioned, nevertheless indicate the receipt of income far in excess of that previously available as normal support. We therefore conclude that respondent did not abuse his discretion in denying petitioner relief under section 6015(f).
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11470843-19765 | CARL E. STEWART, Circuit Judge:
Flora Alicia Ocana appeals the sentence she received after pleading guilty to conspiracy to possess with intent to distribute approximately 90 kilograms of marihuana, in violation of 21 U.S.C. §§ 846, 841(a)(1), and 841(b)(1)(c). Ocana challenges the district court’s enhancement of her sentence based on post-conviction conduct. This post-conviction conduct led to an increase in Ocana’s base level offense, and a sentence enhancement for role in the offense. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On April 19, 1997 Flora Alicia Ocana (“Ocana”) was arrested after a traffic stop and found to be in possession of 90 kilograms of marihuana. In May 1997, Ocana and her co-defendant Keenan Stroud Ben-net were indicted on one count of conspiracy to possess marihuana with intent to distribute, and a second count of possession of marihuana with intent to distribute. On July 25, 1997 Ocana plead guilty to the first count of the indictment. Ocana also agreed to provide a truthful rendition of the facts for the probation department in exchange for the government’s agreement to dismiss count two of the indictment and recommend a sentence at the low end of the applicable guideline range. The initial presentence report (“PSR”) was submitted September 26, 1997 and determined that the total offense level was 21, which was based on an offense level of 24 for possession of 90 kilograms of marihuana and a three-level decrease for acceptance of responsibility. This initial determination equaled a guideline range of 37-46 months imprisonment.
In November 1997, border patrol agents stopped Ricardo Flores (“Flores”), Norma Salina Cervantes (“Cervantes”), and Cervantes’s three sons. The border patrol discovered 48 kilograms of marihuana. Cervantes immediately informed the border patrol and FBI that the drugs belonged to Ocana, who had hired them to transport the marihuana (“November 1997 offense” or “post-conviction conduct”). On June 5, 1998 the government provided ex parte notice to the court concerning alleged misconduct of the defendant. Based on the information about the November 1997 offense the probation officer filed an addendum to the PSR (“second addendum”) recommending that Ocana be sentenced based on a total offense level of 28. This total offense level included a base offense level of 26, a figure that included the additional 48 kilograms of marihuana. In the second addendum the PSR also recommended a two-level upward adjustment for role in the offense and recommended denying the three-level decrease for acceptance of responsibility.
Ocana’s attorney filed objections to the second addendum to the PSR. Ocana argued that the November 1997 offense was not relevant to her sentencing, and she also denied ownership or responsibility for the marihuana that was found by the border patrol. The probation officer filed a third addendum to the PSR in response to Ocana’s objections. The third addendum to the PSR stated that pursuant to lB1.3(a)(2) the November 1997 offense was part of the same course of conduct as the offense for which Ocana plead guilty, and therefore was required to be considered in determining Ocana’s sentence.
At the sentencing hearing FBI Agent Rob Andrews (“Agent Andrews”), Flores, and Cervantes were called to testify. On the morning of the hearing Flores and Cervantes informed Agent Andrews, and testified that Ocana had recruited them to transport marihuana to Florida on at least two other occasions before they were apprehended by the border patrol in November 1997. Cervantes and Flores testified that Ocana told them to rent a van, and take their kids on the trip to make it look like a family vacation. They claimed that on all of these trips they drove the van to Winter Garden, Florida, found a hotel, and then contacted Ocana who would fly to Florida and meet them at the hotel. They stated that Ocana would pick up the van from them at the hotel and complete the final delivery of the drugs. After hearing this testimony the court overruled Ocana’s objections and adopted the findings of the second addendum to the PSR. The court accepted the inclusion of the 48 kilograms of cocaine in the determination of the base offense level, the two-level enhancement for Ocana’s role in the offense, and the rejection of the three-level reduction for acceptance of responsibility. The sentencing guideline range for a total offense level of 28 is 78 to 97 months. The court sentenced Ocana to a 90 month term of imprisonment and a three year term of supervised release.
DISCUSSION
Ocana raises three issues on appeal. First, Ocana argues that the district court erred in increasing her base offense level based on conduct that occurred after she was convicted. Second, Ocana challenges the district court’s finding of a two-level enhancement for role in the offense based upon evidence of Ocana’s alleged post-conviction conduct. Finally, Ocana contends that the district court erred in relying on her alleged co-conspirators testimony because it did not have a sufficient indicia of reliability.
A. Standard of Review
This court normally reviews the district court’s application of the Sentencing Guidelines de novo and its factual findings for clear error. A sentence will be upheld unless it was imposed in violation of law, was an incorrect application of the sentencing guidelines, or is outside the range of the applicable sentencing guideline. United States v. Hernandez-Guevara, 162 F.3d 863, 876 (5th Cir.1998). Failure to object to either the PSR or the district court’s sentence results in review for plain error. See United States v. Ruiz, 43 F.3d 985, 988 (5th Cir.1995).
In the present case, the Government urges this court to review the district court’s application of the sentencing guidelines for plain error because Ocana did not raise the same objections in the district court that she raises in this appeal. We find that Ocana did make written objections to the PSR. The thud addendum to the PSR acknowledges Ocana’s objections to the second addendum to the PSR regarding the increase in her base offense level and the adjustment for her role in the offense. Oeana’s objection to the second addendum’s recommendation on her base offense level was as follows:
“The defendant asserts that the information in the Second Addendum to the Presentence Report is not relevant conduct impacting her sentence of conviction. The defendant denies the ownership or any responsibility for the marihuana that Norma Cervantes and Ricardo Flores were caught transporting.”
Ocana’s objection to the PSR’s recommendation of an upward adjustment role in the offense was “that she did not have a role in the instant offense concerning Norma Cervantes and Ricardo Flores.”
The purpose of requiring defendants to make timely objections to the PSR and actual sentence is “founded upon considerations of fairness to the court and to the parties and of the public interest in bringing litigation to an end after fair opportunity has been afforded to present all issues of law and fact.” Ruiz, 43 F.3d at 988 (quoting United States v. Calverley, 37 F.3d 160 (5th Cir.1994) (en banc)). Ocana’s objections fulfill this stated purpose. While she did not specifically cite to the USSG section which the PSR applied, she did make a general objection that notified the court of her disagreement with the use of the November 1997 offense in her sentencing, and gave the district court the opportunity to address the relevance of the unadjudicated conduct. Ocana’s objections to the PSR were in writing, and there was a written response by the probation officer that referenced § 1B1.3(a)(2). The district court was clearly notified of the grounds upon which Ocana’s objections were being made. See Krout, 66 F.3d at 1434 (a party should raise a claim of error in a manner that allows the district court to correct itself). Therefore, we conclude that Ocana sufficiently raised the issues which she now appeals, and we will review her claims under the normal standard of review for Sentencing Guideline issues.
B. Base Offense Level
Ocana argues that the district court erred in considering the November 1997 offense in the calculation of her base offense level because this conduct occurred after her conviction. The PSR stated that Ocana’s base level offense was increased pursuant to USSG § 1B1.3. Under § 1B1.3 district courts are permitted to consider unadjudicated offenses which occur after the offense of conviction for sentencing purposes if the unadjudicated offense is “relevant conduct”. In order for an unad-judicated offense to be “relevant conduct” it must be part of the same course of conduct, common scheme or plan as the offense of conviction. United States v. Vital, 68 F.3d 114, 118 (5th Cir.1995). The district court found that the November 1997 offense was part of the same course of conduct as the April 1997 incident for which Ocana was convicted.
A finding by the district court that unadjudicated conduct is part of the same course of conduct or common scheme or plan is a factual determination subject to review by this court under the clearly erroneous standard. See Vital, 68 F.3d at 118. Therefore, in order for Ocana to demonstrate that the district court incorrectly applied the sentencing guidelines under § 1B1.3 she must show that the district court’s finding that the offenses involving Cervantes and Flores were part of the same course of conduct as the April 1997 offense was a clearly erroneous finding.
Offenses qualify as part of the same course of conduct if they are “sufficiently connected or related to each other to warrant a conclusion that they are part of a single episode, spree, or ongoing series of offenses.” U.S.S.G § 1B1.3 application note 9(b). The factors that are appropriate to weigh in making the determination as to whether the offenses are sufficiently connected or related include “the degree of similarity of the offenses, the regularity of the offenses, and the time interval between the offenses.” Id. When one of the factors is absent, a stronger presence of at least one of the other factors is required. Id.
In the present case, there is not a significant degree of similarity between the April 1997 offense and the post-conviction conduct involving Cervantes and Flores. The one major similarity is that the offenses all involved transporting marihuana to Florida. Other than the common drug and delivery location the April 1997 offense is significantly dissimilar from the offenses involving Cervantes and Flores. First, there is no evidence of similar accomplices, common source, or supplier. See United States v. Wall, 180 F.3d 641, 646 (5th Cir.1999) (common source, supplier and modus operandi considered by court in determining similarity of offenses). In the April 1997 offense Ocana claimed to be transporting drugs at the behest of Keenan Bennet, and informed the FBI that she had met Bennet through a lawyer named Bob Meier. In the Cervantes and Flores offenses they claim that Ocana recruited them to transport drugs and that the other person involved in the transaction was a car wash owner named Aaron Munoz. The modus operandi for the offenses is also different. In April 1997, Ocana drove a van and met Bennet at an airport. In the Cervantes and Flores offenses they drove a rented van to a hotel and Ocana flew and met them at the hotel in Florida. Based on all of these factors the April 1997 offense and the Cervantes/Flores offenses are not sufficiently similar.
Therefore, one of the other factors in determining same course of conduct; temporal proximity of the offenses, or regularity of the offenses must be stronger. In the present case, there is close temporal proximity of the offenses. Cervantes and Flores claim that they made their first trip transporting drugs for Ocana in July 1997, and that they made two other trips in September and November. Therefore these offenses took place only three months after Ocana’s offense of conviction. It appears that the only time there was no drug activity was the time between Oca-na’s arrest in April and her guilty plea in July. Even if we discount the testimony of Cervantes and Flores about the incidents that were not disclosed until the day of the sentencing hearing , and consider only the November 1997 offense, at the most only seven months elapsed between Ocana’s offense of conviction and this November 1997 offense.
It is well settled in this circuit that offenses which occur within one year of the offense of conviction may be considered relevant conduct for sentencing. See United States v. Bethley, 973 F.2d 396, 400-01 (5th Cir.1992) (finding drug transactions that occurred six months prior to the offense of conviction to be relevant conduct); United States v. Moore, 927 F.2d 825, 828 (5th Cir.1991) (drugs seized five months prior to conviction could be considered relevant conduct). In two recent cases this court has found that the time interval between offenses is too remote to consider the extraneous offense to be relevant conduct. In both of those cases the offense of conviction took place more than a year in time from the offense in question. See United States v. Miller, 179 F.3d 961, 966 n. 10 (5th Cir.1999) (finding that a drug offense that occurred 21 months prior to the offense of conviction was too remote in time to be considered a positive factor for same course of conduct); Wall, 180 F.3d 641, 645-46 (5th Cir.1999) (finding that drug offenses separated by four and five years lacked temporal proximity to the offense of conviction). In the present case, because the offense of conviction and the November 1997 offense took place within seven months of each other there is sufficient temporal proximity to find that the offenses were part of the same course of conduct.
Finally, the third factor of regularity of the offenses is also present. Cervantes and Flores testified that Ocana recruited them for trips in July, September and November. Therefore, Ocana was participating in drug transactions bimonthly. Based on the close temporal proximity and regularity of the offenses the district court did not clearly err in finding that the April 1997 offense and the offenses involving Cervantes and Flores were part of the same course of conduct.
Ocana relies on our decision in United States v. Lara, 975 F.2d 1120, 1128 (5th Cir.1992), for the proposition that a sentencing enhancement for post-conviction conduct should be applied to the crime committed while on release and not the original crime for which the defendant is currently being sentenced. However, in Lara the sentence enhancements were made by the district court pursuant to 18 U.S.C. § 3147 and USSG § 2J1.7, not under USSG § 1B1.3 which allows for adjustment of base offense level for post conviction conduct under certain circumstances.
At the sentencing hearing the district court heard and weighed the testimony of Agent Andrews, Cervantes, and Flores and concluded that Ocana’s alleged participation in drug transactions involving Cervantes and Flores were part of the same course of conduct as the offense of conviction. After a careful review of the record we conclude that the district court’s finding was not clearly erroneous. Thus, based on the finding that the post conviction conduct was relevant conduct under § 1B1.3 the district court properly applied the guidelines and adjusted Ocana’s base offense level upward to include the marihuana found in the possession of Cervantes and Flores in November 1997.
C. Role in the Offense
The district court also adopted the PSR’s recommendation that Ocana receive a two-level upward adjustment for role in the offense. The original PSR contained no adjustment for role in the offense. The probation officer added this recommendation for a two level enhancement based solely on Ocana’s post-conviction conduct. The appellant argues that the district court erred in determining her role in the offense based solely on the facts of the November 1997 offense which as post-conviction conduct had no connection to the offense for which she was convicted.
Sentencing guideline § 3B1.1 allows for a sentence enhancement based on the defendant’s role in the criminal activity. Contrary to the appellant’s argument, post-conviction conduct may be considered in determining a defendant’s role in the offense, if that post-conviction conduct is determined to be relevant conduct under the sentencing guidelines. The introductory commentary for section 3B1.1 instructs that “the determination of a defendant’s role in the offense is to be made on the basis of all conduct within the scope of 1B1.3 (Relevant Conduct) ... and not solely on the basis of elements and acts cited in the count of conviction.” U.S.S.G. § 3B1.1 introductory commentary. Also, this court has held that conduct which is the basis for an upward adjustment made pursuant to section 3B1.1 must be “anchored to the transaction, however we will take a common-sense view of just what the outline of that transaction is. It is not the contours of the offense charged that defines the outer limit of the transaction; rather it is the contours of the underlying scheme itself. All participation firmly based in that underlying transaction is ripe for consideration in adjudging leadership role.” United States v. Mir, 919 F.2d 940, 944 (5th Cir.1990). Mir points out that the introductory commentary of section 3B1.1 shows that section 3B1.1 is “intended to comport with other guideline sections allowing a sentencing judge to look beyond the narrow confines of the offense to consider all relevant conduct.” Id. at 945; see also, United States v. Montoya-Ortiz, 7 F.3d 1171, 1181 (5th Cir.1993).
Therefore, in determining Ocana’s role in the offense the district court properly considered all transactions that it determined to be relevant conduct under the sentencing guidelines. The district court made a determination that the relevant conduct in the present case included the offenses involving Cervantes and Flores. In Part B, we affirmed the district court’s ruling regarding relevant conduct. Thus, as a matter of law the district court properly considered the post-conviction conduct when determining Ocana’s role in the offense.
We review the district court’s fact-finding regarding role in the offense for clear error. See United States v. Rodriguez, 897 F.2d 1324, 1325 (5th Cir.1990), cert. denied, 498 U.S. 857, 111 S.Ct. 158, 112 L.Ed.2d 124 (1990). Cervantes and Flores both testified that Ocana recruited them to transport marihuana to Florida. They further testified that Ocana provided them money to rent a van, and paid them for their participation in the transactions. While there was no independent corroboration for any of the allegations made by Cervantes and Flores, the district court found their testimony reliable. In light of the introductory commentary to section 3B1.1 which allows the district court to consider all relevant conduct in its determination of role in the offense, and the testimony of Cervantes and Flores which clearly implicates Ocana as the leader, recruiter, and manager of their drug transactions we conclude that the district court did not err in its upward adjustment of Ocana’s sentence for role in the offense.
D. Co-Conspirator testimony
At the sentencing hearing the district court heard testimony from Cervantes and Flores, and used their testimony as a basis for determining Ocana’s base offense level and her role in the offense. Ocana argues that Cervantes and Flores testimony did not meet the standard for reliability as set forth in USSG § 6A1.3, because their testimony was inconsistent with their prior statements, and they both had motive to testify falsely.
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9483271-18795 | Affirmed by published opinion. Judge NIEMEYER wrote the opinion, in which Judge KING and Judge SEYMOUR joined.
OPINION
NIEMEYER, Circuit Judge:
On appeal from their convictions for conspiracy to traffic in illegal drugs and related offenses, the four appellants in this case assign numerous errors, the most significant of which is that they were entitled, pursuant to Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000), to have the jury find the drug quantities on which their sentences were based by proof beyond a reasonable doubt. For the reasons that follow, we find the appellants’ various arguments unpersuasive and affirm.
I
In April 1999, a grand jury in the Eastern District of Virginia returned a 64 count indictment that charged the appellants, Aaron Covington, Lucien Roberts, Darrell Gumbs, and Pedro Santos, as well as others, with conspiracy to traffic in illegal drugs and with substantive drug trafficking offenses. The indictment included allegations of the specific quantities of cocaine and cocaine base involved in each count.
During trial, the district court dismissed seven counts and submitted the remaining counts to the jury. The jury convicted all defendants on each count submitted. Almost all of the ten days of trial were consumed by the presentation of government witnesses, who offered extensive and unrebutted accounts as to the amounts of cocaine and cocaine base that the defendants possessed, distributed, and imported into the United States. The defendants called two witnesses, the first of whom was a psychologist whose testimony was offered to discredit a prosecution witness by describing his history of drug use and memory loss, and the second of whom was a police officer who had testified for the government earlier in the trial. As requested by the government, the jury was instructed that, in determining the defendants’ guilt or innocence, “it is not necessary for the government to prove the exact or precise amount of controlled substances alleged in the indictment.” The jury convicted Roberts of conspiracy to traffic in cocaine and cocaine base, in violation of 21 U.S.C. § 846; conspiracy to import cocaine, in violation of 21 U.S.C. § 963; and ten counts of distributing or possessing with intent to distribute cocaine or cocaine base, in violation of 21 U.S.C. § 841. It convicted Santos of conspiracy to traffic in cocaine and cocaine base, in violation of 21 U.S.C. § 846; and three counts of distributing or possessing with intent to distribute cocaine base, in violation of 21 U.S.C. § 841. It convicted Gumbs of conspiracy to traffic in cocaine and cocaine base, in violation of 21 U.S.C. § 846; conspiracy to import cocaine, in violation of 21 U.S.C. § 963; and three counts of distributing or possessing with intent to distribute cocaine, in violation of 21 U.S .C. § 841.
Finally, it convicted Covington of conspiracy to traffic in cocaine and cocaine base, in violation of 21 U.S.C. § 846; 18 counts of distributing or possessing with intent to distribute cocaine or cocaine base, in violation of 21 U.S.C. § 841; and one count of money laundering, in violation of 18 U.S.C. § 1966.
After conducting sentencing hearings, during which the district court made findings regarding the quantities of cocaine and cocaine base attributable to each defendant, the court sentenced Roberts to 10 life sentences and two 360 month sentences, all to run concurrently; Covington to 11 life sentences, eight 360 month sentences, and one 240 month sentence, all to run concurrently; Gumbs to two 151 month sentences and three 120 month sentences, all to run concurrently; and Santos to four 360 month sentences, all to run concurrently.
From the entry of judgments, these four defendants timely appealed.
II
For their most significant argument on appeal, the defendants contend that, under the Supreme Court’s decision in Apprendi v. New Jersey, 530 U.S. 466, 120 S.Ct. 2348, 147 L.Ed.2d 435 (2000), they were entitled to have drug quantities determined by the jury under the reasonable-doubt standard, instead of by the court at a sentencing hearing under the preponderance standard.
In Apprendi, the Supreme Court held that,”[o]ther than the fact of a prior conviction, any fact that increases the penalty for a crime beyond the prescribed statutory maximum must be submitted to a jury and proved beyond a reasonable doubt.” 120 S.Ct. at 2362-63. The defendants contend that unless the jury finds actual drug quantities to justify greater sentencing máximums, the statutory maximum term of imprisonment for each count of conviction under 21 U.S.C. § 841 and 21 U.S.C. § 960 is 20 years. See 21 U.S.C. §§ 841(b)(1)(C), 960(b)(3). Thus, they argue that in the absence of a jury finding as to quantities, any sentence imposed under § 841 and § 960, through the corresponding conspiracy statutes, § 846 and § 963, that exceeds 20 years runs afoul of the Apprendi holding.
Because the defendants did not raise the Apprendi objection below, we review their claims for plain error. See United States v. Kinter, 235 F.3d 192, 199 (4th Cir.2000). Under this standard of review, the defendants must establish an error that was plain and that affected their substantial rights. See Johnson v. United States, 520 U.S. 461, 468, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997); United States v. Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993). But even if these requirements are met, we may not exercise our discretion to notice and correct the plain error unless it “seriously affect[s] the fairness, integrity, or public reputation of judicial proceedings.” Olano, 507 U.S. at 732, 113 S.Ct. 1770.
First, as to Gumbs, because none of his concurrent sentences exceeds 240 months, he cannot assert an Apprendi error. See Kinter, 235 F.3d at 201-02 (holding that judicial factfinding relating to the imposition of a sentence within the statutory range specified by Congress does not violate the Apprendi rule); United States v. Angle, 254 F.3d 514, 518 (4th Cir.) (en banc) (holding that 240 months is generally the “maximum penalty authorized by the facts found by the jury” in cases where the jury did not find specific drug quantities). Similarly, Santos’ sentences do not raise an Apprendi error. Santos received four concurrent 360 month sentences, each of which is within the maximum sentence set forth in 21 U.S.C. § 841(b)(1)(C) for a defendant who has a prior felony drug offense, as long as notice of the prior conviction is given to the defendant pursuant to 21 U.S.C. § 851. In this case, the government provided such notice, and accordingly, the maximum term of imprisonment for Santos under § 841(b)(1)(C) was 360 months — the sentence that he received on each count. See United States v. Arias, 252 F.3d 973, 978 (8th Cir.2001).
Roberts and Covington, on the other hand, each received multiple life and 30-year sentences, which exceed the base 20-year statutory máximums under 21 U.S.C. § 841 and 21 U.S.C. § 960 for convictions in which the jury did not find specific drug quantities justifying a greater sentence and in which other aggravating factors are not applicable. Accordingly, these sentences were plain error. See United States v. Promise, 255 F.3d 150, 159-60 (4th Cir.2001) (en banc). We conclude nonetheless that these defendants have not met the final two prongs of the plain error analysis. They have shown neither that the error affected their substantial rights, nor that it “seriously affected] the fairness, integrity, or public reputation of judicial proceedings.” Olano, 507 U.S. at 732, 113 S.Ct. 1770. We reach this conclusion for the following reasons.
First, we held in United States v. White, 238 F.3d 537 (4th Cir.2001), that even if a defendant receives concurrent sentences of more than 20 years of imprisonment for multiple convictions under 21 U.S.C. § 841 without a jury determination of drug quantity, the asserted error does not affect the defendant’s substantial rights if the defendant’s term of imprisonment is no longer than the aggregate sentence to which the defendant would “otherwise be subject” under the Sentencing Guidelines. Id. at 542; see also Angle, 254 F.3d 514, 518-19. The Guidelines provide that in the case of multiple convictions, “if the total punishment mandated by the guidelines exceeds the highest statutory maximum, the district court must impose consecutive terms of imprisonment to the extent necessary to achieve the total punishment.” White, 238 F.3d at 543 (citing U.S.S.G. § 5G1.2(d)). In other words, the district court must “stack” multiple sentences consecutively — and thus not impose sentences concurrently — when the punishment required by the Sentencing Guidelines exceeds the highest “prescribed statutory maximum” for an indictment offense of conviction. And because the district court is required to engage in this stacking procedure, a sentence above the “prescribed statutory maximum” for a single offense does not affect the defendants’ substantial rights as long as the aggregate of the statutory maximum sentences for the offenses of conviction, when imposed consecutively, exceeds the punishment actually imposed upon the defendant asserting reversible error under the rule of Ap-prendi
Both Roberts and Covington received concurrent life sentences — Roberts received 10, and Covington 11. To be sure, the principle established in White may not always apply to a defendant with one or more life sentences, given that a calculation of the duration of those sentences in years may become a matter of speculation. Were we, for example, to address circumstances in which a defendant had received three concurrent life sentences under a statute with a 20-year statutory maximum, we would be much more hesitant to apply this rationale, as it is possible that a defendant could live for 60 more years. This case, however, does not present those circumstances. Roberts was found guilty on 12 separate drug trafficking counts and Covington 19. Even with the base 20-year maximum term of imprisonment for a single conviction under the statutes at issue (without considering other aggravating factors), the Sentencing Guidelines stacking rules would have required the district court to impose consecutive sentences upon these defendants that grossly exceeded, in the aggregate, the span of the concurrent life sentences that were actually imposed. In light of that reality, Roberts and Covington have not met their burden of showing that the asserted error affected their substantial rights.
Moreover, even were Roberts and Cov-ington able to show an effect on their substantial rights, they certainly have not shown that the imposition of concurrent life and 30-year sentences, rather than consecutive sentences totaling at least 240 years for Roberts and 380 for Covington, would “seriously affeet[ ] the fairness, integrity, or public reputation of judicial proceedings.” Olano, 507 U.S. at 732, 113 S.Ct. 1770.
Even if the rule in White did not apply, we would conclude with respect to Roberts that he failed to meet his burden under Olano for a second reason. We have previously noted that a district court’s failure to submit the question of drug quantity to the jury does not affect substantial rights when the quantities at issue are “uncontested and supported by overwhelming evidence, such that the jury verdict would have been the same absent the error.” United States v. Strickland, 245 F.3d 368, 380 (4th Cir.2001) (quoting Neder v. United States, 527 U.S. 1, 17, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999) (internal quotation marks omitted)). Because Roberts was convicted on multiple counts and given 10 concurrent life sentences, his burden under the plain error standard is even heavier than it would be if he had been convicted of only one count. Because any one conviction could justify a life sentence, he must demonstrate that reversible error occurred with regard to each life sentence that he received. Otherwise, he would fail to establish that his substantial rights were affected. See White, 238 F.3d at 542-43. Roberts has not carried this burden. The government presented uncontested evidence to the jury that, where relevant, the drug quantities at issue were as alleged in the indictment. Based on that same evidence, the jury convicted Roberts on every count. And Roberts has made no showing that he effectively contested, at trial or sentencing, the drug quantities to which the government’s witnesses testified — at least not to the extent that he would not have been exposed to a maximum of less than life on every count. For example, Roberts never contested the attribution of 127.58 grams of crack to him based upon an October 1996 incident — a quantity that, by itself, would have exposed him to a maximum of life imprisonment for his conspiracy conviction. See 21 U.S.C. § 841(b)(1)(C).
In sum, Roberts has not shown either here or below that the drug quantities attributed to him by the government’s witnesses with regard to every relevant count were significantly inaccurate, and the record contains no evidence that could “rationally lead to a contrary finding with respect to the omitted element” on each of those counts. Neder, 527 U.S. at 19, 119 S.Ct. 1827. Thus, Roberts has not shown that the district court’s failure to instruct the jury on the quantity issue prejudiced him, and therefore the purported error cannot be said to have affected his substantial rights under Olano.
Covington, on the other hand, did challenge all of the quantities at sentencing, the stage of the proceedings during which he would have, under then-existing law, challenged quantities. See United States v. Powell, 886 F.2d 81, 85 (4th Cir.1989) (holding that drug quantity is a sentencing factor). It is doubtful, however, that his conclusory argument at sentencing about the evidence of quantities — the solitary statement that “it is a question of credibility of the witnesses, and we would submit that they were not credible” — could be sufficient, in the absence of other argument or evidence, to establish prejudice under Neder. Cf. Johnson, 520 U.S. at 470 & n. 2, 117 S.Ct. 1544 (holding that the defendant had not met his burden under the fourth prong of Olano when the only argument contesting the omitted element was the statement of the trial counsel that “I would argue that the element of materiality has been insufficiently proven and that the Court ought to grant a judgment of acquittal”). But we need not resolve this issue because, as we noted above, Covington’s conviction for 19 drug trafficking counts, each of which has a maximum sentence of at least 20 years, precludes our finding that his substantial rights were affected under White.
Ill
Appellants’ additional arguments do not require significant discussion. We will, however, address two that were pressed at oral argument.
First, Roberts contends that the district court abused its discretion in denying his motion for a new trial following the alleged recantation of a government witness. After trial, Ronald Eudailey, who had offered important testimony against several of the defendants, told a private investigator that because of serious memory problems and prior drug use, he could not remember some of the events to which he had testified and that the government’s attorneys had “coached” many of his answers.
When a government witness recants his testimony after trial, the court may grant a motion for a new trial when it is “reasonably well satisfied” (1) that “the testimony given by a material witness is false,” (2) “[t]hat without it the jury might have reached a different conclusion,” and (3) “[t]hat the party seeking the new trial was taken by surprise when the false testimony was given and was unable to meet it or did not know of its falsity until after the trial.” United States v. Wallace, 528 F.2d 863, 866 (4th Cir.1976) (quoting Larrison v. United States, 24 F.2d 82, 87-88 (7th Cir.1928) (emphasis in original)). We review the denial of such motions for abuse of discretion. See Chesapeake Paper Prods. Co. v. Stone & Webster Eng’ring Corp., 51 F.3d 1229, 1237 (4th Cir.1995).
We do not believe that the district court abused its discretion when it denied Rob erts’ motion for a new trial. After observing Eudailey’s demeanor at trial and reviewing the transcript of his “recantation,” the district court indicated that it was not “reasonably well satisfied” that the original testimony was false. Indeed, the district court believed that Eudailey was “playing games with the court.” The so-called recantation was cryptic and contradictory. While Eudailey implied at points in his testimony that he had not told the truth on the stand, he expressly stated only that he had been coached, that he could remember nothing, and that he was not certain that his testimony had been truthful. He even said that he could no longer remember the substance of his testimony at trial — a proposition that makes it extremely unlikely that he could assess the truth or falsity of that testimony. He certainly did not identify any facts to which he had testified falsely. To the contrary, much of Eudailey’s testimony at trial had been corroborated by other government witnesses, and Eudailey himself had been rather candid on the stand at trial about his memory problems and the degree to which the government’s attorneys had jogged his memory with respect to details such as dates. In the totality of these circumstances, we do not believe that the district court abused its discretion in denying Roberts’ motion for a new trial.
Second, Santos contends that the evidence at trial was insufficient to support the jury’s finding that he was a member of a single conspiracy involving Roberts, Gumbs, and Covington. He argues that the evidence shows at most that he was merely a street dealer, engaged in a single, “retail” conspiracy with Covington. He maintains that because no evidence links him to the “wholesale” conspiracy conducted by Covington and the other two defendants, his conspiracy conviction must be reversed. Again, we disagree.
The government presented evidence that would satisfy its burden of proving a single conspiracy involving “one overall agreement” or “one general business venture.” United States v. Leavis, 853 F.2d 215, 218 (4th Cir.1988) (internal quotation marks and citations omitted). The evidence that Santos and Covington were engaged in a conspiracy was overwhelming, as was the evidence that Covington conspired with Gumbs and Roberts. A reasonable jury could very well have concluded from the evidence that Santos was linked to Gumbs and Roberts and thus that the government had proved that one conspiracy involving wholesale and retail distribution existed among all of the defendants.
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6116517-22734 | MEMORANDUM OPINION AND ORDER
JOEL PELOFSKY, Bankruptcy Judge.
Debtors are dairy farmers. Ozark Production Credit Association, hereinafter PCA, holds a security interest in some cattle. In early June of 1982, debtors obtained 200 dairy cattle, entering into what are denominated Cow Lease Agreements. First National Bank of Carrolton, hereinafter the Bank, claims an interest of some sort in the cattle subject to the lease. In early July of 1982, debtors filed for relief under Chapter 11 of the Bankruptcy Code. No plan of reorganization has been proposed.
PCA filed a Complaint against debtors and the Bank for a determination of lien priorities, to enjoin the use of cash collateral and for lift of the stay. PCA also filed a Motion to Dismiss. The Bank filed a Motion to Compel Assumption or Rejection of the Leases. Hearings were held on the various complaints and motions. Debtors appeared in person and by attorney. The creditors appeared by counsel and representatives. Evidence was heard and the matter taken under advisement. The parties have filed briefs.
I
Debtors assert that the cow leases are not true leases but security agreements and the Bank is not a creditor holding a perfected security interest. The evidence shows that the lease transaction occurred under somewhat unusual circumstances.
Cow lease 104 was executed on June 1, 1982 between Nu-Way Acceptance Corp. as lessor and debtors as lessee. On the same day Nu-Way wrote a check to Valley View Farmers for $105,000. The evidence shows that this check paid for the 105 cattle furnished under the June 1, 1982 lease. On June 7, 1982, lease 104 was assigned to the Bank.
Cow lease 105 was executed on June 3, 1982 between Nu-Way as lessor and debtors as lessee. On the same day Nu-Way wrote a check to Davis Bros. Dairy for $95,000. The evidence shows that this check paid for the 95 cattle furnished under the June 3, 1982 lease. On June 7, 1982, lease 105 was assigned to the Bank.
On June 5, 1982 the Bank filed a financing statement with the Dallas County Recorder of Deeds. The financing statement was filed with the Secretary of State on June 7, 1982. Hosea and Coleta Clemmons were shown as debtors and First National Bank was listed as the secured party. The statement covered “Two cow lease agreements covering -200- Holstein cows including cows, offspring and dairy products”. What appear to be the signatures of the debtors appears in the lower left hand part of the financing statement.
The evidence shows that the Bank advanced the funds to purchase the cattle before the leases were assigned to it. There is even some suggestion in the testimony that the funds were advanced even before the leases were signed. Certainly the financing statements were prepared and the local one filed before the assignments were made. But a “financing statement may be filed before a security agreement is made or a security interest otherwise attaches”. Section 400.9-402, R.S.Mo. 1969. The fact, therefore, that the financing statement was filed prior to the assignment being executed is of no significance.
Under Missouri law “an absolute assignment of an entire right or interest works a divestiture of all right of interest of the assignor” ... [and] a conditional assignment made as collateral security for a debt does not work a divestiture of all right or interest of the assignor ...” C & M Devel opers, Inc. v. Berbiglia, 585 S.W.2d 176, 181 (Mo.App.1979). The assignments appear to be absolute. The debtors had notice of those assignments, witness their execution of the financing statements naming the Bank and not Nu-Way as the party having an interest in the cattle.
Having notice the debtors are obligated to pay the assignee on the lease obligations. Even without notice, they could not avoid their duty to pay. They might only have a defense to payments received by the wrong party. Citizens & Southern National Bank v. Bruce, 420 F.Supp. 795 (D.C.E.D.MO.1976). Debtors may not challenge, therefore, the validity of the assignment as they are obligated to pay someone and had knowledge of the Bank’s interest.
The leases, which are on identical forms and vary only as to various items of information particular to the respective transactions, give debtors an option to purchase the leased cattle. Under lease 104 the option may be exercised if “said lease is not in then [sic] in default under the terms of said lease, and upon the following terms and conditions”.
The next paragraph of the option agreement sets out the following terms:
“The sum of Ten Thousand Six Hundred Twenty-Six Dollars ($10,626.00) received for said leased property shall be credited toward the purchase of said leased property, plus an amount equal to the rentals then unpaid under the terms of said lease all payable in cash, plus applicable taxes, if any on the above sum”.
The lease document shows that the option sum consisted of the initial payment called for in the lease ($5,250) and an additional sum of $5,376 payable on or before May 31, 1986. The lease is for 48 months beginning June 1, 1982 and terminating May 31, 1986. The first rent payment is $5,250 and, beginning in July 1982, the sum of $4,830 monthly. It is, therefore, unclear whether the amount set out in the option agreement is a price to be paid in addition to rent or a combination of a special payment and rent. It appears to be the latter. The ambiguity, however, need not be resolved.
The question of whether a transaction is a lease or a conditional sale is a matter of Missouri law. Section 400.1-201(37), R.S. Mo.1969, provides in part that:
“Whether a lease is intended as security is to be determined by the facts of each case; however, (a) the inclusion of an option to purchase does not of itself make the lease one intended for security, and (b) an agreement that upon compliance with the terms of the lease the lessee shall become or has the option to become the owner of the property for no additional consideration or for a nominal consideration does make the lease one intended for security”.
“The real character of the instrument is not determined from its technical form, but from the intention of the parties as gathered from the four corners of the contract ... A test usually applied ... is whether or not such instrument requires or permits the transferee to return the property in lieu of paying the purchase price”. Kolb v. Golden Rule Baking Co., 9 S.W.2d 840, 842 (Mo.App.1928); Commercial Credit Equipment Corp. v. Colley, 542 S.W.2d 329 (Mo.App.1976).
In these agreements title is reserved in the lessor but gives lessee the right to keep progeny. The agreements also provide that rent is not “abated or reduced for any reason whatsoever” including death. Thus, the entire herd could be destroyed but the lease would not terminate. Lessee is obligated to replace deceased cattle “at no cost to Lessor”. There is no express provision in the lease requiring return of the cattle to lessor upon termination of the lease.
The evidence shows that the cattle were purchased for about $1,000 each. There is no evidence as to the age of the cattle so that their condition at the termination of the term cannot be evaluated precisely. But the evidence shows, and the Court knows from the many dairy farmer cases pending in this judicial district, that these are high priced dairy cattle. In addition because of the breeding program the herd should number at least 300 head when the term expires. The original 200 head can be purchased for as little as $53 a head or at most $106 a head under lease 104. Obviously the cost per head of the herd, including calves, will be significantly less. The costs of purchase under lease 105 are comparable.
The Court finds that the agreements are not true leases but are security agreements. The option prices are nominal. Under any circumstances, the per head value of the herd at the end of the term will be substantially higher than the option price. The fact of the assignment also supports this conclusion. The Bank is not a lessor of cattle although it, rather than Nu-Way, took the security interest in the cattle. Also, the lease payments do not abate if the property is destroyed and lessee rather than lessor is obligated to provide replacements. Upon default lessee is obligated to pay any deficiency. All of these provisions support the conclusion that these agreements are not leases but are security agreements. In re Crown Cartridge Corporation, 220 F.Supp. 914 (D.C.S.D.N.Y.1962); In re Wheatland Electric Products Co., 237 F.Supp. 820 (D.C.W.D.Pa.1964).
II
In addition to debts owed PCA and the Bank, debtors owe Federal Land Bank and Farmers Home Administration. These creditors have filed Motions to Dismiss contending that there is no reasonable likelihood of reorganization. Debtors oppose the Motions saying that production from the larger herd will generate sufficient sums of money to fund the plan.
The evidence shows that the herd is in good condition and that the prior problems of disease are now pretty well under control. The evidence also shows that production is about 11,000 pounds of milk per animal per year. Debtors say that some of the leased animals are not producing and should be culled. They contend that these animals are not as represented when the leases were made. They also contend that there is sufficient equity in the land to protect adequately all of the creditors and that they should be given an opportunity to demonstrate an ability to reorganize.
The evidence and the schedules show the following secured debt service:
1. Federal Land Bank: $13,628.78 semiannual payments. Accrued interest not included.
2. Farmers Home Administration: $12,-468.00 annual payment. Accrued interest not included.
3. Farmers Home Administration: $3,870.00 annual payment. Accrued interest not included.
4. Mid-Am: $529.00 per month Accrued interest not included.
5. PCA: The entire balance is due. Interest alone is $2,859.00 per month.
The payments under the leases assigned to the Bank were $9,200.00 per month over four (4) years. Amortizing the principal figure of $200,000 over six years at 12% would require a monthly payment of $3,910.04. Six years is chosen as this is a purchase money security interest, tied to the animals purchased and the evidence shows that cows produce over an 8 year span. The cows were already producing when leased so a conservative estimate of their useful life is 6 years. Twelve percent is chosen as present prime.
Debtors monthly debt service looks about like the following:
As part of their evidence debtors introduced a projection of income and expenses beginning March of 1983. That projection is as follows:
1 — Per extensive projection based on existing lactation cycles and best estimate of continued lactation through next year.
2 — This assumes 50 additional animals being placed in the herd with an average production of 45 pounds a day and milk selling at $.12 per pound. The computation is 45 pounds per day times 31 days times .12 times 50 animals for a total of $8,370.00 per month.
The primary variable in dairy production is feed cost. This is set forth above. It is estimated that the balance of the operation of the farm should remain constant at approximately $5,000 per month. The net amount available for debt repayment may be figured by taking the last column and reducing it by $5,000.00 on a monthly basis.
Taking the deduction set out in note 2 of the projection from gross profit (column 4), there is only one month (August 1983) when the net approaches the amount needed for debt service and even then it is insufficient. Making the same computation in column 6 produces the same result. Based upon their own projections debtors cannot pay debt service.
The reality is worse. Debtors’ monthly operating reports show substantial variances from the projections. While some reports show income in excess of projections, they also show expenses equal to or in excess of income. In addition feed costs consume almost two-thirds of the gross each month. What the following chart shows is that there is no income available for debt service.
The evidence shows that milk production is not high enough, on a per animal basis. The addition of more animals, as debtors suggest, is not the answer. The evidence shows that production assumptions are not correct and that the expense projections after feed costs, are not correct. Before debt service debtors’ day to day costs use all available cash.
Under Section 1112 of the Code, Title 11, U.S.C., the Court may dismiss “on request of a party in interest, after notice and a hearing, ... for cause, including—
“(1) continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation;
(2) inability to effectuate a plan ...”
A Debtor must be given a reasonable opportunity to demonstrate his ability to reorganize. In re Heatron, 6 B.R. 493 (Bkrtcy.W.D.Mo.1980); In re American Mariner Industries, Inc., 10 B.R. 711 (Bkrtcy.C.D.Cal.1981). But after that reasonable opportunity has been given, and the evidence shows that rehabilitation is not feasible, the case should be converted or dismissed. In re L.S. Good & Co., 8 B.R. 310 (Bkrtcy.N.D.W.Va.1980); In re Larmar Estates, Inc., 6 B.R. 933 (Bkrtcy.W.D.N.Y. 1980); In re Tracey Service Go., Inc., 17 B.R. 405 (Bkrtcy.E.D.Pa.1982). This case has been pending 18 months. There is no evidence of an ability to reorganize. Because debtors are farmers the Court cannot order conversion, Section 1112(c) of the Code, but will order dismissal if debtors do not convert. The Court finds that there is no reasonable likelihood of rehabilitation here.
Debtors are granted to January 30, 1984 to convert this case to Chapter 7. In the absence of such conversion, the Court will enter an Order dismissing. On or before January 23,1984 PCA and Bank of Carroll-ton are to inspect the cattle and identify those subject to their respective security agreements. The Court holds that the Bank has a perfected security interest in the animals covered by the lease but not as to progeny because the purchase money security interest is a narrow exception to the “first to file” rule, which priority is held by PCA. In re Ingram, 11 UCC Reptng. Service 605 (5th Cir.1972); Index Store Fixtures Co. v. Farmers Trust Co., 536 S.W.2d 902 (Mo.App.1976).
The Court reserves ruling on the question of disposition of the insurance proceeds.
ON MOTION FOR RECONSIDERATION
In its Order of January 11, 1984, the Court held that debtors failed to show that they could reorganize based upon existing debt service obligations and funds from operations. The Court granted debtors thirty (30) days to convert or be dismissed. Debtors chose to file a Motion for Reconsideration urging a new proposal which would make reorganization feasible. First National Bank of Carrollton also moved for reconsideration.
A hearing was held on the Motion. The parties appeared in person, by counsel and representatives. Evidence was heard and the matter taken under advisement.
I
In its previous Order the Court had held that the relationship between First National Bank and debtors was a security agreement and not a true lease. The Bank asked for reconsideration of that part of the Order holding that the purchase money security interest did not reach progeny, contending that many of the purchased cattle were pregnant and that those progeny were subject to its security interest rather than to PCA’s security interest as created by the after-acquired clause of its security agreement.
Section 400.9-204, R.S.Mo.1969, provides, in part, that
“(1) A security interest cannot attach until there is agreement ... that it attach and value is given and the debtor has rights in the collateral.
“(2) For the purposes of this section the debtor has no rights
(a) ... in the young livestock until they are conceived; ...”
Thus Clemmons had a right at the time of the purchase to give a security interest in unborn but conceived progeny. If cows were pregnant when debtors took possession the Bank could have a security interest in those unborn young. Under Section 400.-9-312(4), R.S.Mo.1969, that purchase money security interest prevails over the after-acquired interest.
“A purchase money security interest in collateral other than inventory has priority over a conflicting security interest in the same collateral if the purchase money security interest is perfected at the time the debtor receives possession of the collateral or within ten days thereafter”.
The security interest was perfected when debtor took possession of the cattle. In the hands of the dairy farmer the cattle are not inventory. Compare In re Smith, 29 B.R. 690 (Bkrtcy.W.D.Mo.1983). See also Ingram v. Ozark Production Credit Association, 468 F.2d 564 (5th Cir.1972).
The lease in paragraph 2 provides that it covers “ninety-five cows, more particularly described in the schedule marked ‘A’ hereof ... and any and all offspring, progeny and replacements thereof. Said cows together with all female offspring, progeny and replacements are collectively referred to as ‘Cows’ and all references to ‘Cows’ shall be deemed to include the offspring, progeny and replacements unless the text otherwise precludes such inclusion”.
Under paragraph 3 of the lease Lessee is “entitled to retain ... all female progeny” and “proceeds from the unauthorized sale of females shall be remitted to Lessor”. Paragraph 12 of the lease requires Lessee to retain proceeds from the sale of Cows for the benefit of Lessor. Paragraph 13 deals with default and permits Lessor to “take possession of the Cows listed on the attached Schedule ‘A’ ”. In the event of “premature termination” of the lease, Lessee is obligated to deliver “the Cows then on hand”. On its financing statement filing, the Bank listed a security interest in cattle, progeny and proceeds.
The lease expresses a clear intention that the Lessor will retain an interest in mature cows and female progeny. The language of paragraph 13 is not consistent with that retention but the discrepancy is covered in the paragraph covering premature termination. This Court’s conclusion that the lease is in reality a security agreement also curtails the breadth of that interest. But the Court notes that the document was not drafted as a security agreement and that some inconsistencies might be expected. The Court holds, therefore, that the Bank had a security interest in conceived progeny of the herd, and that, upon default, it could repossess the cows identified in Schedule A and progeny or proceeds of female calves sold belonging to that group of animals which could be described as first generation calves. Calves not conceived as of the dates of the leases or proceeds of the sale of second generation calves are subject to the claim of PCA, the after-acquired secured creditor.
II
Debtors contend that their revised reorganization is feasible. The evidence shows that debtors have sold some cattle and have placed the proceeds in escrow pending further Order of the Court. Debtors propose to use the escrow funds together with the proceeds of sale of cull cattle to buy a better quality herd. Debtors also propose to enroll in the dairy PIK program and use those funds to purchase additional cattle. By April of 1985 they plan to own 348 mature animals which they propose to cull to 300 and use some of those proceeds for debt service. Except for nominal amounts, no debt service would be paid until April of 1985, when milk production would stabilize and finally generate sufficient money to fund the reorganization. PCA and the Bank contend that these are rose-colored projections and that the proposal is not feasible.
The key to debtors’ proposal is a herd of 300 animals will maintain and produce a rolling herd average of 40 pounds. The evidence shows that the average in Dallas County, Missouri, where debtors’ farm is located, is about 35 pounds. When debtors purchased the herd funded by the Bank, the animals were represented to be of high quality with high production capability, but they have been a dismal failure. Debtors’ rolling herd average at the time of the hearing was only about 24 pounds, due in large part to the high percentage of non-producing cows. When production was evaluated in terms of a normal amount of dry cows, the average rose to as much as 38.3 pounds but only for one month.
Milk production is an incredibly complicated task. Weather, the amount and nature of the feed and even the person handling the animal can make a difference. Disease is also a factor. A cow producing a certain amount of milk in Wisconsin will probably not produce the same amount in Missouri. A cow added to a herd will take months to adjust, to arrive at full production capability. At any given time, about 15% of the herd is not producing. There is constant pressure to drive milk support prices down. The cost of feed fluctuates constantly. The PIK wheat program, for example, makes the cost of grain more expensive to the dairy farmer at the same time that milk prices are going down. Feed costs range from 45 to 60% of the cost of a Dairy operation. Translated into production, that means that a cow must produce 25 pounds of milk per day simply to justify her feed.
In a 300 cow herd, 255 cows can be on line at one time. At 40 pounds, this results in gross milk production worth $38,556; at 35 pounds, gross monthly income would be $33,700. Debtors estimate a monthly cash flow of $32,000. In April of 1985, debtors will have the following secured debts, assuming their proposal is adopted:
This debt, amortized over 20 years at 12%, admittedly rough figures, requires monthly debt service of approximately $11,-550. Over 40 years, the monthly payment would be $10,504. The actual debt service would be slightly higher than the 20 year amortization because not all of the debt can be stretched over 40 years and because the interest rates are variable.
The income and expense projections based upon various assumptions set out are as follows:
(1) Forty pound average, $5,000 per month operating expenses:
While debtors maintain that monthly expenses are less than $5,000, the experience reflects the contrary. Even if those expenses were less, they could not be substantially so, as the category includes utility costs, ordinary living expenses, insurance, repairs and employees. The monthly report for February reflects expenses excluding feed at over $4,600 involving a herd of less than 200 animals. Milk production was $14,800 and feed costs were $9,400. Of course this reflects a substantial number of non-producing cattle which have to be fed but certainly suggests that feed costs of 50% would be difficult to attain.
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6109803-7122 | ORDER DENYING MOTION FOR LEAVE TO AMEND COMPLAINT IN ADVERSARY PROCEEDINGS
GREGORY F. KISHEL, Bankruptcy Judge.
This adversary proceeding came on before the undersigned United States Bankruptcy Judge on February 19, 1987, upon Plaintiff’s motion for leave to amend its Complaint. Plaintiff appeared by its attorney, Lee W. Mosher. Defendants (hereinafter “Debtors”) appeared by their attorney, David A. Joerg. Upon the moving and responsive documents, arguments of counsel, and all of the other files, records, and proceedings in this adversary proceeding, the Court determines that Plaintiff’s motion must be denied.
Debtors commenced a Chapter 7 bankruptcy case in this Court by filing a voluntary petition on March 22, 1985. On June 18, 1985, Plaintiff timely commenced this adversary proceeding, in which it objects to Debtors’ discharge in bankruptcy under 11 U.S.C. § 727(a). Plaintiff was then represented by counsel other than its present attorneys. Plaintiff’s Complaint alleges that it sold agricultural chemicals and products to Debtors on an open account basis during 1983-4, and that Debtors secured the balance on the account by granting Plaintiff a security interest in growing crops and a real estate mortgage in early May, 1984. Plaintiff alleges that at some point within the year immediately preceding their bankruptcy filing Debtors sold, transferred, or removed the secured crops in violation of 11 U.S.C. § 727(a)(2). It also alleges that Debtors failed to keep adequate books and records in contravention of 11 U.S.C. § 727(a)(3), and made false statements, oaths, or claims in their bankruptcy schedules and/or during the course of their bankruptcy case, in contravention of 11 U.S.C. § 727(a)(4). The Complaint does not set forth specific facts to support the latter two objections to discharge.
Debtors’ Answer specifically denies all of Plaintiff’s objections to discharge and joins by way of counterclaim and/or offset their claims that Plaintiff provided them with defective seed and herbicides and that Plaintiff’s employees negligently damaged Debtors’ farming equipment during the course of delivery of products. Debtors also allege Plaintiff “overcharged” for its products and that its credit practices violated Minnesota state usury statutes.
In its original Complaint, Plaintiff did not plead the nondischargeability of Debtors’ individual debt to it under 11 U.S.C. § 523(a). The Notice of Meeting of Creditors in Debtors’ case set July 15, 1985, as the last day to timely file complaints under 11 U.S.C. §§ 523(a) and 727(a). Plaintiff never moved for an extension of that deadline. It now moves for leave to amend its complaint to add a count based on 11 U.S.C. § 523(a)(6), arguing that the facts underlying its Complaint objecting to discharge would also support a dischargeability proceeding.
The resolution of Plaintiff’s motion requires the Court to consider the interaction and overlay of two procedural rules. FED. R.CIV.P. 15(a) is made applicable to this adversary proceeding by BANKR.R. 7015, and provides in pertinent part as follows:
A party may amend his pleading once as a matter of course at any time before a responsive pleading is served ... Otherwise a party may amend his pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.
The other applicable rule is BANKR.R. 4007(c), which provides in pertinent part as follows:
A complaint to determine the discharge-ability of any debt pursuant to § 523(c) of the Code shall be filed not later than 60 days following the first date first set for the meeting of creditors held pursuant to § 341(a).... On motion of any party in interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired.
Plaintiff argues that FED.R.CIV.P. 15(a) fully supports its motion, as it states that leave to amend “shall be freely given.” However, the mandate of liberality is qualified by the phrase “when justice so requires.” The qualification plainly requires a consideration of the equities in each proceeding. No consideration of the relevant equities in a discharge or dischargeability adversary proceeding can ignore the 60-day statute of limitations of BANKR.R. 4004(a) and 4007(c). This statute of limitations is among the very shortest under federal law. It is designed to further the “fresh start” goals of bankruptcy relief; it requires creditors to promptly join their exceptions to discharge of debt and objections to discharge, so a petitioning debtor will enjoy finality and certainty in relief from financial distress as quickly as possible. See, e.g., In re Figueroa, 33 B.R. 298, 303 (Bankr.S.D.N.Y.1983); In re Grant, 45 B.R. 262, 264 (Bankr.D.Me.1984); In re Shelton, 58 B.R. 746, 750 (Bankr.N.D.Ill. 1986); In re Klein, 64 B.R. 372, 375 (Bankr.E.D.N.Y.1986). The time bar under BANKR.R. 4004(a) and 4007(c) is strictly applied in this District. In re Neumann, 36 B.R. 58 (Bankr.D.Minn.1984).
A motion to amend the complaint in a private creditor’s adversary proceeding commenced under 11 U.S.C. § 727(a) to add a count under 11 U.S.C. § 523(a) is not merely an attempt to plead an alternative legal theory for a single, unitary injury to the plaintiff-creditor’s interests. There are substantial differences between proceedings under § 523(a) and proceedings under § 727(a), as to the necessary factual basis of the claims, the allegations which must be pleaded, the type, measure, and burdens of proof involved, and the ultimate effect of judgment in a plaintiff’s favor on the availability of bankruptcy relief to the debt- or. In re Channel, 29 B.R. 316, 318 (Bankr.W.D.Ky.1983); In re Fehrle, 34 B.R. 974, 975 (Bankr.W.D.Ky.1983); In re Hargis, 44 B.R. 225,227-28 (Bankr.W.D.Ky. 1984); In re McClellan, 60 B.R. 719, 720 (Bankr.E.D.Va.1986). In commencing a dischargeability proceeding under § 523(a), a creditor seeks to vindicate only its own debt. On the other hand, in joining an objection to discharge under § 727(a), a private creditor assumes something of the role of a trustee. Section 727(a) is directed toward protecting the integrity of the bankruptcy system by denying discharge to debtors who engaged in objectionable conduct that is of a magnitude and effect broader and more pervasive than a fraud on, or injury to, a single creditor. Because exceptions to discharge and objections to discharge are two completely distinct and radically-different causes of action, proceedings involving them are in essence separate lawsuits even though they may be pleaded jointly in the same complaint. As essentially separate lawsuits, each such proceeding must be brought within the statute of limitations prescribed by BANKR.R. 4004(a) and 4007(c), subject only to extension upon motion timely under those rules. Thus, any motion in an adversary proceeding initially based on one of these statutory provisions to join a new count based upon the other must be made prior to the bar date — initial or extended— of BANKR.R. 4004(a) and 4007(c).
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3476733-23256 | MEMORANDUM-DECISION AND ORDER
LAWRENCE E. KAHN, District Judge.
Defendant Rafael Pabon (“Pabon” or “Defendant”) is charged in a one count indictment with, having been previously convicted of crimes punishable by imprisonment for a term exceeding one year, knowingly and intentionally possessing in and affecting interstate commerce a firearm, in violation of 18 U.S.C. §§ 922(g)(1) and 924(a)(2). Indictment (Dkt. No. 1). Defendant was arraigned before U.S. Magistrate Judge David R. Homer on April 20, 2007. Defendant seeks to suppress statements made by him to police officers and evidence seized from his person pursuant to his arrest on January 19, 2007. Dkt. Nos. 19, 22. An evidentiary hearing was held on September 24, 2008, October 7, 2008, and December 17, 2008.
I. Background
On or about June 27, 2006, a New York State Parole Officer executed a document detailing behavior which violated the Defendant’s parole conditions and indicating that Defendant’s whereabouts were unknown and that efforts would be made to apprehend him. An arrest warrant was issued for Pabon on June 28, 2006 alleging a violation of parole. In January 2007, New York State Parole Officer Bob Georgia received information that Pabon was residing at the Yates Village Apartment complex in Apartment H-22. The police obtained written consent to search from the legal resident of Apartment H-22 (“Cl”). Cl then told Pabon via cell phone that she needed to get into Apartment H~ 22 but did not have a key. Pabon sent Cl the key via another individual, Toni Yager.
Following a search of Apartment H-22, a bag was located containing a handgun, clothing, and a Mid-State Correctional Facility ID Card. Cl then called Pabon’s cell phone again, and he instructed her to return the key to Apartment F-6, which belonged to Yager. Cl went to Apartment F-6, met with Pabon, and gave him the key. After she left, she contacted the officers and told them that Pabon was alone in Apartment F-6. The officers received written consent to enter Apartment F-6 from Yager, and found and arrested Pabon there. They seized from him his cell phone and the key to Apartment H-22. Following his arrest, Pabon made statements prior to being advised of his Miranda rights indicating, in sum and substance, that he was residing at Apartment H-22.
II. Analysis
A. Statement made to law enforcement regarding residence
1. Facts
Pabon was taken to police headquarters at approximately 11:40 a.m. on January 19, 2007. Mantei Test, at 100 (Dkt. No. 30). He was then placed in a holding cell while Detective David Mantei (“Mantei”) completed paperwork to process Pabon’s arrest. Id. at 41. The typical booking process involves the generation of paperwork while the individual is placed in a holding cell. Id. at 41. That paperwork consists of an incident report, a master name file, and other information, which is then taken to the desk sergeant so that he can begin the booking process. Id. After that, it is up to the detective or whoever is handling the case as to when or whether to bring the individual up for an interview. Id. Mantei testified that he always makes it a point to interview individuals. Id. at 42. In this case, Mantei had filled out the incident report and the advice of rights form when Pabon was brought up for his interview. Id. The advice of rights form is a standard form used within the department to give an individual their Miranda warnings prior to any interview. Id.
At approximately 3:00 or 3:30, Pabon was brought to an interview room. Id. at 43. On the top of the form is a section for pedigree information, including “name, birthdate, address, social security number, etcetera.” Id. at 45. That information was obtained from Pabon. Id. Mantei asked Pabon his name, and he said Rafael Pabon. Id. at 47. Mantei then asked about a middle initial, which Pabon provided. Id. Mantei then asked Pabon for his date of birth, which Pabon provided. Id. Mantei next asked Pabon what his address was, and Pabon stated F-6. Id. Mantei then asked if Pabon was also staying at El-22, and Pabon answered in the affirmative. Id., Id. at 110.
After asking the rest of the questions and filling out the pedigree information, Mantei advised Pabon of his Miranda rights. Id. at 48-50. After Pabon stated that he understood everything, Mantei asked Pabon if he wanted to give a statement and talk about the pending issues. Id. at 50. Pabon “said no. lie said something about, I have little time on parole and you guys can’t put that gun on me.” Id. at 51.
2. Relevant Law
A suspect in custody of the police must be advised of his basic constitutional rights before he is subjected to interrogation. Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). However, the Supreme Court has since stated that “interrogation” does not include actions or questions “normally attendant to arrest and custody ...” Rhode Island v. Innis, 446 U.S. 291, 301, 100 S.Ct. 1682, 64 L.Ed.2d 297 (1980). Accordingly, the Supreme Court has stated that the “ ‘routine booking question’ exception [ ] exempts from Miranda's coverage questions to secure the ‘biographical data necessary to complete booking or pretrial services.’ ” Pennsylvania v. Muniz, 496 U.S. 582, 601, 110 S.Ct. 2638, 110 L.Ed.2d 528 (1990) (citation omitted). Therefore, questions that are “requested for record-keeping purposes only” would “fall outside the protections of Miranda and the answers thereto need not be suppressed.” Id. at 601-02, 110 S.Ct. 2638 (quotations omitted). Permissible questions are those that “appear reasonably related to the police’s administrative concerns.” Id.
The Second Circuit has expanded on this law and permitted pedigree questions— those “normally and reasonably related to police administrative concerns” — even if the information gathered turns out to be incriminating, and added that if the officer perceives that a specific piece of information provided is incorrect, “then it is not only reasonable, but arguably the officer’s duty, to inquire further.” Rosa v. McCray, 396 F.3d 210, 221-22 (2d Cir.2005).
3. Analysis
The Defendant argues that this analysis is not relevant because the “booking” procedure ended when Mantei completed the Incident Report and the Master Name. Deft’s Reply to Govt’s Response at 1-2 (Dkt. No. 45). However, the distinction between a permissible and impermissible question does not depend on the filing of a piece of paper or some time-span the Defendant argues is sufficient for “booking.” This formalistic distinction would allow for too much discretion and abuse during the “booking” process. Rather, the Second Circuit has made clear that the exception (perhaps more accurately described as a pedigree question exception) “does not mean that any question asked during the booking process falls within that exception” and that “the police may not ask questions, even during booking, that are designed to elicit incriminatory admissions.” Rosa, 396 F.3d at 222 (citations and alterations omitted).
Therefore, the question before the Court is not whether the booking process was still going on, but whether the question constituted “interrogation” because it was designed to elicit an incriminatory admission or whether it was a pedigree question of the type “normally and reasonably related to police administrative concerns.” In Rosa v. McCray, the officer had asked the defendant his hair color, and when given the answer “blond,” asked “what is your real hair color?” 396 F.3d at 213. The state court found that the questions asked by the detective “were asked for legitimate processing purposes and that their intent was to obtain accurate information, as distinct from incriminating information” and noted that the question “clearly corresponded to portions of the form that were being filled out.” Id. at 215. The Second Circuit affirmed the appellate division, noting that the officer was engaged in a routine administrative process and that the questions were presented to the defendant in the exact order that the questions appeared on the form and without substantive deviation from the form of the questions presented. Id. at 222-23. The Second Circuit also noted that the question — “what is your real hair color?” — was narrowly crafted by the officer to obtain information necessary to complete the form, distinguishing it from “when did you dye your hair?” Id. at 223.
Similarly, the question in this case was narrowly tailored to clarifying whether Pa-bon’s address included Apartment H-22 and was not “but didn’t you have belongings at H-22 too?” In addition, the form was filled out as part of Mantei’s standard procedure and the questions were asked in order corresponding to the order in which the questions appeared on the form. Man-tei testified that he “always make[s] it a point to interview” an individual or defendant following the completion of the paperwork and that the “pedigree information” on the advice of rights form is obtained by asking the defendant. Id. at 42, 45. The Court further notes that Mantei similarly had to seek clarification or elaboration from Pabon when he failed to volunteer complete information regarding his name and had to be asked about his middle initial. Mantei testified regarding his intent that he was “[t]rying to be accurate. That’s how I try to do things.” Mantei Test, at 120.
The Court finds that the question was of the sort of questions “normally attendant to arrest and custody.” Innis, 446 U.S. at 301, 100 S.Ct. 1682. The Court further finds that the question asked by the detective was asked for legitimate processing purposes and that Mantei’s intent was to obtain accurate biographical information, as distinct from incriminating information. The question was a pedigree question intended to obtain basic identifying data rather than an interrogation of an investigative nature. Accordingly, the question was “requested for record-keeping purposes” and therefore “fall[s] outside the protections of Miranda and the answers thereto need not be suppressed.” Muniz, 496 U.S. at 601-02, 110 S.Ct. 2638. Man-tei’s knowledge that the address information initially provided was incorrect or incomplete and even the possibility that the complete information might prove to be incriminating is insufficient in this case to convert the pedigree question into the investigative sort of question which would require Miranda warnings. McCray, 396 F.3d at 221-22 (finding that if the officer perceives that a specific piece of information provided is incorrect, “then it is not only reasonable, but arguably the officer’s duty, to inquire further.”); see also U.S. v. Carmona, 873 F.2d 569, 573 (2d Cir.1989) (noting that “obtaining such pedigree information has not been viewed as unlawful custodial interrogation” despite the officer’s prior knowledge of the suspect’s pedigree information); United States v. Adegbite, 846 F.2d 834, 838 (2d Cir.1988) (“We have held, however, that the solicitation of information concerning a person’s identity and background does not amount to custodial interrogation prohibited by [Miranda], whether that solicitation occurs before or after Miranda warnings are given.”) (citations omitted); United States ex rel. Hines v. LaVallee, 521 F.2d 1109, 1112 (2d Cir.1975), cert. denied, 423 U.S. 1090, 96 S.Ct. 884, 47 L.Ed.2d 101 (1976) (even where answer to officer’s question about a suspect’s identity and background “may in a particular context provide the missing link required to convict,” the information is nevertheless admissible under Miranda).
B. Statement made to law enforcement regarding gun
1. Facts
After Pabon was informed of his Miranda rights by Mantei, he stated that he understood them, and signed the form indicating that he understood his rights. Mantei Test, at 50, 111. Mantei then asked Pabon if he wanted to give a statement, and Pabon replied “something to the effect, Pm not giving no statement, I don’t have much time left on parole and you guys can’t put that gun on me.” Id. at 112, 51.
2. Analysis
As Miranda itself recognized, “[v]olunteered statements of any kind are not barred by the Fifth Amendment” and, thus, do not require preliminary advice of rights. Miranda v. Arizona, 384 U.S. at 478, 86 S.Ct. 1602 (“There is no requirement that police stop a person who enters a police station and states that he wishes to confess to a crime, or a person who calls the police to offer a confession or any other statement he desires to make.” (footnote omitted)). In Edwards v. Arizona, the Supreme Court explained that, even if a defendant has asserted his Fifth Amendment right to counsel, if the defendant “himself initiates further communication” with law enforcement, “nothing in the Fifth and Fourteenth Amendments would prohibit the police from merely listening to his voluntary, volunteered statements and using them against him at the trial.” 451 U.S. 477, 485, 101 S.Ct. 1880, 68 L.Ed.2d 378 (1981).
In this case, Pabon’s statement regarding the police “putfting] that gun on me,” made after indicating that he did not want to make a statement, was a spontaneous voluntary statement, not made in response to any question or interrogation by the police. Accordingly, the statement is admissible.
C. Evidence seized from Pabon following his arrest
It is well settled that unless a carefully defined exception clearly applies, a warrantless search is “per se unreasonable.” Schneckloth v. Bustamonte, 412 U.S. 218, 219, 93 S.Ct. 2041, 36 L.Ed.2d 854 (1973) (citing Katz v. United States, 389 U.S. 347, 357, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967)). One recognized exception to the warrant requirement is a search that is conducted pursuant to consent. Schneckloth, 412 U.S. at 219, 93 S.Ct. 2041. “So long as the police do not coerce consent, a search conducted on the basis of consent is not an unreasonable search.” United States v. Garcia, 56 F.3d 418, 422 (2d Cir.1995). The prosecution bears the burden of proving that consent was voluntarily given. Schneckloth, 412 U.S. at 222, 93 S.Ct. 2041. In determining whether or not consent to a search was freely given, the Court must look at the totality of the circumstances surrounding the obtaining of the consent. Id. at 227, 93 S.Ct. 2041. While the government’s burden is not satisfied by showing a mere submission to a claim of lawful authority, Florida v. Royer, 460 U.S. 491, 497, 103 S.Ct. 1319, 75 L.Ed.2d 229 (1983), consent need not be expressed in a particular form but can be found from an individual’s words, actions or conduct. United States v. Deutsch, 987 F.2d 878, 883 (2d Cir.1993) (internal quotations and citations omitted).
Defendant here argues that the cell phone and key seized from his person dur ing his arrest must be suppressed because the police did not have the authority to enter Yager’s residence for the purpose of arresting him without a search warrant. Deft’s PosNHearing Memo, at 6 (Dkt. No. 37). Defendant claims, without legal citation, that because the consent to search was involuntary, the entrance into Apartment F-6 was illegal and the arrest was therefore illegal, making the search incident to arrest illegal and warranting suppression. Id. The government argues that the evidence should not be suppressed because (1) Pabon did not have a sufficient connection to Apartment F-6 to afford him standing to assert Fourth Amendment challenges to the search, (2) Pabon cannot vicariously assert Toni Yager’s rights, (3) Pabon, as a parolee, does not have a legitimate expectation of privacy, and (4) because Yager’s consent to search the apartment was valid. Gov’t Memo, in Response (Dkt. No. 42). Each of these arguments, although related to each other, will be considered below.
1. Pabon’s connection to Apartment F-6
“[T]o claim the protection of the Fourth Amendment, a defendant must demonstrate that he personally has an expectation of privacy in the place searched, and that his expectation is reasonable.” Minnesota v. Carter, 525 U.S. 83, 88, 119 S.Ct. 469, 142 L.Ed.2d 373 (1998). Thus, for example, an overnight guest may raise a Fourth Amendment objection to a war-rantless search of the host’s home. United States v. Osorio, 949 F.2d 38, 42 (2d Cir.1991). However, a defendant’s presence for the sole purpose of a business transaction, such as selling drugs, does not give rise to a Fourth Amendment interest. Carter, 525 U.S. at 86, 89, 119 S.Ct. 469.
The Government argues that no evidence was presented at the suppression hearing to establish that the Defendant was a resident, overnight guest, or otherwise had a sufficient connection to Apartment F-6 to afford him standing to contest the constitutionality of the search of the address for his person. Defendant counters the Government’s argument by stating that evidence existed to establish that Pabon “lived or was an overnight guest at apartment F-6.” Deft’s Reply to Govt’s Response at 4 (Dkt. No. 45). However, the evidence referred to by the Defendant as establishing his residence or guest-status in Apartment F-6 was all established after or because of his arrest there: (1) defendant was arrested in apartment F-6, (2) Mantei, as part of the booking process, filled out Pabon’s address on the Incident Report as including Apartment F-6, and (3) as part of the Miranda Advice of Rights form, Pabon stated that his address was F-6. Id. at 3.
Initially, the Court notes that if it were to credit this claim that Pabon lived or was an overnight guest in Apartment F-6, then the police’s entry into the Apartment in order to carry out the arrest warrant would have been proper. In Payton v. New York, the Supreme Court held that an arrest warrant alone was sufficient to authorize the entry into a person’s home to effect his arrest when there is reason to believe the suspect is within. 445 U.S. 573, 602-03, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980). Accordingly, if Pabon was living in Apartment F-6, as he later claimed to Mantei, then the arrest warrant alone was sufficient to authorize the police’s entry into Apartment F-6, since they were informed by an eye-witness that Pabon was in that Apartment immediately after she left the doorway of the apartment where she had returned to Pabon the key to Apartment H-22. Mantei Test, at 34-35.
In contrast, evidence presented at the hearing showed that Pabon was staying and sleeping in the second floor rear bedroom of Apartment H-22, Mantei Test, at 19 (“That was his room, so to speak.”), and Pabon’s clothing bag, clothing, identification, and firearm were found in the same bedroom. Mantei Test, at 29-32. The Court finds that Defendant’s presence in Apartment F-6 when he was arrested is insufficient to give rise to a Fourth Amendment interest. See Carter, 525 U.S. at 86, 89, 119 S.Ct. 469. In addition, the Court finds that the officer’s indication on the Incident Report that Defendant’s address included Apartment F-6 or Pabon’s statements to the police after his arrest stating that his address was at Apartment F-6 are also insufficient to give rise to a Fourth Amendment interest. As noted above, if they were sufficient, Pabon’s argument fails because the police would have been authorized under Payton to enter the apartment to carry out the arrest warrant. Because Pabon lacked a reasonable expectation of privacy in Apartment F-6, he is unable to claim the protection of the Fourth Amendment to challenge his seizure there.
2. Vicarious assertion of Toni Yager’s rights
Defendant relies on Steagald v. United States, 451 U.S. 204, 101 S.Ct. 1642, 68 L.Ed.2d 38 (1981) for the argument that the police did not have the authority to enter Apartment F-6 in order to arrest the Defendant. Deft’s Post-Hearing Memo, at 6. The Court in Steag-ald held that the Fourth Amendment protects a third party not named in an arrest warrant from intrusion into his home without a search warrant, but it declined to extend this protection to the person named in the arrest warrant who was apprehended in the third party’s home. 451 U.S. 204, 219, 101 S.Ct. 1642 (leaving open the question “whether the subject of an arrest warrant can object to the absence of a search warrant when he is apprehended in another person’s home.”). In addition, the Supreme Court had explicitly distinguished between the effect of the arrest warrant on the person being arrested— noting that the arrest warrant made his seizure reasonable — versus its effect on the person whose home was entered — noting that the arrest warrant did not permit the search of the home. 451 U.S. 204, 213, 101 S.Ct. 1642 (“while the warrant in this case may have protected [arrestee] from an unreasonable seizure, it did absolutely nothing to protect petitioner’s privacy interest in being free from an unreasonable invasion and search of his home.”).
Accordingly, other circuits have extended this reasoning to find that where a defendant was arrested pursuant to a valid arrest warrant while in the home of a third party without a search warrant for the third party’s home, the defendant’s Fourth Amendment rights were not violated. United States v. Agnew, 407 F.3d 193, 196-97 (3d Cir.2005); United States v. Kaylor, 877 F.2d 658, 663 n. 5 (8th Cir.1989); United States v. Underwood, 717 F.2d 482, 483-86 (9th Cir.1983) (en banc); United States v. Buckner, 717 F.2d 297, 299-300 (6th Cir.1983). But see United States v. Weems, 322 F.3d 18, 23 n. 3 (1st Cir.2003). Relying on Steagald, the Third Circuit explained that the lack of a search warrant violated the Fourth Amendment rights of the third party, “[b]ut this right is personal to the home owner and cannot be asserted vicariously by the person named in the arrest warrant.” Agnew, 407 F.3d at 196-97. The Second Circuit referred to this analysis favorably in United States v. Snype, 441 F.3d 119, 132 (2nd Cir.2006), explaining that the other circuits extended Steagald’s logic because:
(a) Fourth Amendment rights are personal and cannot be asserted vicariously, and
(b) requiring police who already hold an arrest warrant for a suspect to obtain a search warrant before they can pursue that suspect in a third party’s home would grant the suspect broader rights in the third party’s home than he would have in his own home under Payton.
441 F.3d at 133. The Court finds this reasoning persuasive. Yager’s Fourth Amendment rights are personal to her, and Pabon cannot assert them. If he were living in Apartment F-6 as he claimed after his arrest there, he would have had his own rights to be free from unreasonable search in the apartment, but the arrest warrant would have addressed those rights under Payton. Based on the Supreme Court’s discussion in Steagald, the arrest warrant addressed Pabon’s Fourth Amendment right to be free from unreasonable seizure. 451 U.S. at 213, 101 S.Ct. 1642. Although the arrest warrant did not address Yager’s right to be free from search in her home, Yager’s right to be free from unreasonable searches does not overcome the arrest warrant’s effect on Pabon’s Fourth Amendment rights. A contrary conclusion would indeed grant Pabon broader rights in a third person’s home than he would have had in his own home. Under this analysis, Pabon’s arrest in Yager’s apartment did not violate his Fourth Amendment rights.
3. Pabon’s status as a parolee
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3539004-9797 | MEMORANDUM OF DECISION AND ORDER
McMILLAN, District Judge.
Plaintiff Nancy Frykberg brought this Title VII action alleging that she was discriminated against, harassed, and constructively discharged by defendants on account of her sex. She also raises a pendent state law claim for intentional infliction of emotional distress for which she seeks compensatory and punitive damages. Defendants have moved to dismiss the state law claim. They argue that the court lacks subject matter jurisdiction over the claim, or, in the alternative, that if the court does have jurisdiction, it should decline to exercise it. [Defendants made several other motions to dismiss that have been resolved.]
In United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), a unanimous Court held that federal courts presented with substantial federal claims have power under the Constitution to hear related state claims if the state and federal claims “derive from a common nucleus of operative fact,” and are such that the plaintiff “would ordinarily be expected to try them in one judicial proceeding.” Id. at 725, 86 S.Ct. at 1138. The court held further that while the power to hear pendent claims might exist in a particular case, a court should hesitate to exercise its jurisdiction where to do so would not serve the interests of convenience, judicial economy, and fairness to the litigants. In addition, the Court said that
if it appears that the state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or the comprehensiveness of the remedy sought, the state claims may be dismissed without prejudice and left for resolution to state tribunals.
Id. at 726-27, 86 S.Ct. at 1139 (emphasis added).
Defendants do not seriously challenge this court’s power to hear plaintiff’s claim of intentional infliction of emotional distress. That claim arises from exactly the same conduct by defendants which forms the basis of plaintiff’s Title YII claim. It is hard to imagine a clearer example of state and federal claims which derive from a “common nucleus of operative fact” and which a plaintiff “would ordinarily be expected to try ... in one judicial proceeding.” This court, therefore, has jurisdiction over the state law claim.
Defendants, however, urge the court to decline to exercise its pendent jurisdiction in this case for several reasons. They claim that:
(1) The compensatory damages sought by plaintiff in connection with her emotional distress claim are not available to her under Title VII and are more comprehensive than the remedies provided under federal law;
(2) The state law claim involves different elements of proof; the issues associated with it would predominate over the issues related to the federal claim; and the state, but not the federal claim, may be tried to a jury;
(3) The law of emotional distress in North Carolina is greatly unsettled and claims of this sort should therefore be left to the state courts; and
(4) The court has no “pendent party jurisdiction” over the “principal” emotional distress defendant, Douglas Turner.
Defendants’ Memorandum at 7-20.
Defendants’ first two arguments raise the primary questions the court must consider in deciding under Gibbs whether to exercise its pendent jurisdiction:
First, will the interests of convenience, judicial economy, and fairness to the litigants be served? The convenience and economy of hearing the state and federal claims in one action rather than two is obvious. To send plaintiff to state court on her state claim would require duplication of effort by the parties and their attorneys and by the courts and their personnel. At a time when most state and federal courts are overloaded, two trials should not be conducted where one can fairly do the job.
Trying state claims to a jury and federal claims to the court makes no big deal of the case. Jury trials here frequently take less time and are cheaper than non-jury trials. Even purely federal actions frequently raise both jury and non-jury issues. (The court might decide to use the jury in an advisory capacity with respect to the non-jury claim. See Fed.R.Civ.P. 39(c).)
As to fairness, defendants have not suggested, and the court does not perceive, any unfairness in trying the various claims together.
The second question is whether the state issues substantially predominate over the federal issues. The bulk of the evidence in this case is likely to concern plaintiff’s employment history with State Farm, which bears more on the federal than on the state claim. While under the state claim some additional relief has been sought, and some additional issues will no doubt be raised and proof required, the court does not believe that the state issues predominate at all— certainly they do not substantially predominate over the federal issues.
Other courts have reached conflicting results in answering these questions. Compare Guyette v. Stauffer Chemical Co., 518 F.Supp. 521 (D.N.J.1981) (pendent jurisdiction in sex discrimination suit exercised over state claims including intentional infliction of emotional distress) with Kiss v. Tamarac Utilities, Inc., 463 F.Supp. 951 (S.D.Fla.1978) (pendent jurisdiction in sex discrimination suit declined). This court agrees with the well-reasoned opinion of Judge Debevoise in Guyette:
In this case, the interests of judicial economy, convenience and fairness to the litigants weigh heavily in favor of trying both state and federal claims in a single action. A sexual harassment theory of recovery under Title VII bears distinct similarities to, and to a large extent arises out of, common law torts such as assault and battery and intentional interference with contractual relations. See EEOC Guidelines on Sexual Harassment, 29 C.F.R. § 1604.11, promulgated June, 1980. Consequently the evidence necessary to prove a Title VII harassment violation overlaps that necessary to prove underlying state law torts to a significant degree. To require the state claims to be tried in a separate forum would be duplicative and wasteful of the time and resources of the courts and litigants alike.
Defendants argue that the remedies available under state law, particularly compensatory and punitive damages and the right to a jury trial, would circumvent and subvert the equitable and remedial purposes of Title VII. See Gerlach v. Michigan Bell Telephone Co., [448 F.Supp. 1168 (1978)] supra, at 1173. Since the doctrine of pendent jurisdiction, however, unlike that of federal pre-emption, determines not the scope of the remedies available but only the forum in which the claims are tried, it would seem a matter of indifference to the federal court whether the state law remedies complement those available under federal law. If the federal court were to decline pendent jurisdiction, the state law claims would presumably be litigated in the state courts, and the effect of the state law remedies upon Title VII policies would be the same. As long as other considerations of fairness and convenience weigh in favor of pendent jurisdiction, therefore, there is no reason why a federal court should refuse pendent jurisdiction simply because state law provides remedies above and beyond those provided by Congress.
Defendants further argue that the state law claims and remedies will predominate over the Title VII claims and remedies, and that the divergent legal theories will tend to confuse the jury. It does not appear, however, that the state issues here will “substantially” predominate over the federal issues. Plaintiffs’ Title VII claims are widespread and comprehensive, and clearly form the mainstay of the action.
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Because the advantages of trying all of plaintiffs’ claims in one action are great and the state law claims should neither unduly complicate the issues nor substantially predominate over the federal claims, I conclude that the exercise of pendent jurisdiction is appropriate in this case. Defendants’ motion to dismiss the state law claim as beyond the court’s pendent jurisdiction will therefore be denied.
518 F.Supp. at 524-525.
If the North Carolina law of emotional distress were, as defendants allege, “greatly unsettled,” this court might hesitate to exercise jurisdiction over the pendent claim. Cf., Financial General Bankshares, Inc. v. Metzger, 680 F.2d 768 (D.C.Cir.1982). However, the North Carolina Supreme Court has recently defined the scope and elements of the tort of intentional infliction of emotional distress. Dickens v. Puryear, 302 N.C. 437, 276 S.E.2d 325 (1981); Stanback v. Stanback, 297 N.C. 181, 254 S.E.2d 611 (1979). In light of the Court’s detailed discussion in Dickens, the law of North Carolina on the subject appears clear.
Finally, defendants argue that the “principal” defendant to the emotional distress claim is plaintiff’s former manager, Douglas Turner, that there is no independent basis of federal jurisdiction over him, and that the court should therefore dismiss the state claim altogether. There is no reason to consider Turner as the principal defendant to the state claim. Under North Carolina law, “a master is liable for the acts of his agent, whether malicious or negligent, which result in injury to third persons, when the servant or agent is acting within the line of his duty and exercising the functions of his employment.” King v. Motley, 233 N.C. 42, 45, 62 S.E.2d 540, 543 (1950). Given that the corporate defendant would be liable to plaintiff if she proves her case, it is more likely that it, rather than the individual defendant, would satisfy any award of damages that might be made. Thus Turner’s presence as party in the case is not critical to the decision whether to exercise jurisdiction over the state claim against State Farm.
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5893555-18843 | MEMORANDUM OPINION
ALAN KAY, United States Magistrate Judge.
Pending before the Court is Defendants’ Motion to Compel Discovery [59], Plaintiffs Opposition [61], and Defendants’ Reply [62]. Defendants request that the Court order Plaintiff to (1) provide more complete answers in response to Defendants’ First Set of Interrogatories, (2) produce additional documents in response to Defendants’ First Request for Document Production, and (3) provide a reasonable date for a 30(b)(6) deposition. For the reasons set forth below, Defendants’ Motion to Compel Discovery is GRANTED IN PART and DENIED IN PART.
I. Background
On November 21, 2006, Plaintiff Equal Rights Center (“ERC”) filed a Complaint alleging that Defendants (collectively “Post”) engaged in “ongoing and systematic violations” of the Fair Housing Act (“FHA”), 42 U.S.C. § 3601, et seq., and the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12181, et seq. (Compl. ¶ 2.) Specifically, ERC alleges that Post violated these civil rights statutes in the “design, construction and/or operation of covered multifamily dwellings, including residential complexes” in various states and the District of Columbia. (Id.) ERC, a non-profit organizations focusing on civil rights issues, asserts that it “tested” twenty-seven Post properties and discovered FHA and ADA violations in the properties’ construction and design. (Compl. ¶¶ 7, 18, 21.)
Fact discovery is currently set to terminate on October 31, 2007. (See Minute Order dated 3/15/07.) In furtherance of discovery, the trial court granted the parties’ Consent Motion for a Protective Order on September 24, 2007[60]. As stated by the parties, the purpose of this order is to “expedite the completion of discovery and reduce the number of discovery disputes” [58-2], Defendants filed the instant Motion to Compel on September 18, 2007, after the parties requested these confidentiality procedures but before the trial court signed the Protective Order.
II. Discussion
A. Local Civil Rule 7(m) and Federal Rule of Civil Procedure 37(a)(2)(A)
Prior to filing a motion to compel discovery, both the Local Rules of this Court and the Federal Rules of Civil Procedure impose upon the moving party a duty to confer with opposing counsel and make a good faith effort to resolve the dispute without judicial intervention. Specifically, the Local Rules provide:
Before filing any nondispositive motion in a civil action, counsel shall discuss the anticipated motion with opposing counsel, either in person or by telephone, in a good faith effort to determine whether there is any opposition to the relief sought and, if there is opposition, to narrow the areas of disagreement ... A party shall include in its motion a statement that the required discussion occurred, and a statement as to whether the motion is opposed.
LCvR 7(m) (emphasis added). See also Fed.R.Civ.P. 37(a)(2)(A) (A motion to compel “must include a certification that the movant has in good faith conferred or attempted to confer with the party not making the disclosure in an effort to secure the disclosure without court action.”).
Failure to comply with the duty to confer requirement set forth in these rules is grounds for dismissing a motion to compel. See, e.g., U.S. ex rel. Hockett v. Columbia/HCA Healthcare, Corp., 498 F.Supp.2d 25, 34 (D.D.C.2007) (counsel’s failure to attach a certification that she had conferred with opposing counsel before filing a motion seeking leave to file a surreply was grounds for denying the motion); Ellipso, Inc. v. Mann, 460 F.Supp.2d 99, 102 (D.D.C.2006) (denying discovery motions for failure to comply with LCvR 7(m)); U.S. ex rel Pogue v. Diabetes Treatment Centers of America, Inc., 235 F.R.D. 521, 528 (D.D.C.2006) (denying a motion to compel for failure to comply with FRCP 37(a)(2)(A) and LCvR 7(m)). The Local Rule is clear that compliance with the duty to confer requirement necessitates something more than an exchange of letters or a chain of e-mail correspondence; if the moving party does not discuss the anticipated motion with opposing counsel “in person or by telephone,” then she has not followed the rule and the court may dismiss her motion. See id. (holding that parties who generated “an abundance of paper in corresponding about the underlying discovery disputes” but did not “discuss[] the motions in person of by phone” did not comply with Local Civil Rule 7(m)).
Plaintiff argues that Defendants’ Motion to Compel must be dismissed because Defendants failed to comply with Local Civil Rule 7(m) and Federal Rule of Civil Procedure 37(a)(2)(A). (Pl.’s Opp’n at 1-2.) Specifically, Plaintiff submits that the parties never had a conversation about the alleged problems -with Plaintiffs responses to Defendants’ discovery requests. (Id. at 1.) Furthermore, Plaintiff asserts that defense counsel merely left a voicemail communicating their intent to file a motion to compel and failed to respond to a subsequent email from Plaintiffs counsel inquiring about the basis for the motion. (Id. at 2.) Accordingly, Plaintiff argues that the “Rule 37(a)(1)(B) certificate” appended to Defendants’ Motion, which states that “counsel for Post has in good faith conferred or attempted to confer with counsel for ERC” is erroneous. (Id.) Defendants respond to these allegations with a Declaration that details “multiple emails” and “at least one letter” demanding documents from Plaintiff and/or discussing Defendant’s contention that Plaintiffs responses were inadequate. (Def.’s Reply at 3; see also Decl. of Rafe Petersen.)
Even if this Court accepts as true Defendants’ assertion that they communicated about the motion with opposing counsel by emails and letters, the Court would still have a basis for dismissing Defendants’ Motion for failure to comply with the meet and confer requirement. As stated above, Local Rule 7(m) requires something more than an exchange of written correspondence. The rule anticipates that attorneys will, at a minimum, pick up the telephone and speak to their colleagues as problems arise in litigation. Perhaps if such a conversation occurred before Defendants filed their Motion to Compel, the issues now before the Court could have been narrowed in scope or eliminated altogether. Therefore while the Court will not dismiss Defendants’ Motion on these grounds, the Court admonishes the parties to be mindful of their meet and confer obligations as the litigation progresses and make a good faith effort to resolve disputes before requesting the assistance of the Court.
B. Plaintiffs Answers to Interrogatories
Federal Rule of Civil Procedure 33(b)(1) provides: “Each interrogatory shall be answered separately and fully in writing under oath, unless objected to, in which event the objecting party shall state the reasons for objection and shall answer to the extent the interrogatory is not objectionable.” If a party to whom an interrogatory was propounded fails to answer, the Rules provide that “the discovering party may move for an order compelling an answer.” Fed.R.Civ.P. 37(a)(2)(B). An “evasive or incomplete” answer is treated as a failure to answer when determining whether the discovering party is permitted to file a motion to compel. Fed.R.Civ.P. 37(a)(3). The party moving to compel discovery has the burden of proving that the opposing party’s answers were incomplete. Daiflon, Inc., v. Allied Chem. Corp., 534 F.2d 221, 227 (10th Cir.1976), cited in U.S. ex rel. El-Amin v. George Washington Univ., No. 1:95-cv-02000, 2000 WL 1763679, at *1 (D.D.C. Nov. 27, 2000).
Defendants find three major deficiencies in Plaintiffs Responses to Defendants’ First Set of Interrogatories. First, Defendants argue that Plaintiff did not provide complete responses to Interrogatories ## 3, 6, 7, 9-13, and 16-21. (Def.’s Mot. at 9.) Second, Defendants object to Plaintiffs answers to Interrogatories ## 3, 6, 10, 13, and 17 because they include references to documents that have not been produced. (Id.) Finally, Defendants assert that Plaintiff failed to meet its burden of establishing a privilege with respect to the answers to Interrogatories ## 1, 2, 4, 9, 13 and 15. (Id.)
1. Plaintiffs Answers to Interrogatories 3, 18, 19, and 21 are Incomplete
A party to whom an interrogatory is propounded “must provide true, explicit, responsive, complete, and candid answers.” Hansel v. Shell Oil Corp., 169 F.R.D. 303, 305 (E.D.Pa.1996). One of the primary “purpose[s] of discovery is to make a trial ‘less a game of blind man’s bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent possible’....” Id. (quoting United States v. Procter & Gamble, 356 U.S. 677, 683, 78 S.Ct. 983, 2 L.Ed.2d 1077 (1958)). A party frustrates this purpose when it refuses to answer proper interrogatories. Id. In this case, Defendants argue that Plaintiffs only provided partial answers to many of their interrogatories. (Def.’s Mot. at 3-4.) Each of the contested answers will be addressed in turn.
Interrogatory # 3. Defendants asked Plaintiff to provide the names and qualifications of any person who has served as a tester or performed investigative services for the ERC and to “describe the properties visited, the date of the visit or visits, [and] the reports created.” (Def.’s Ex. A at 4.) In response, Plaintiff provided the names of some of the testers and only provided the qualifications for one of them “[b]y way of example.” (Id.) This answer is similar to that provided by plaintiffs in Hansel to an interrogatory that asked them to provide, inter alia, “names of buyers receiving the favorable prices from Shell, products sold, amounts of those products, [and] prices charged the favorable buyers.” Hansel, 169 F.R.D. at 306. Plaintiffs in that ease responded with the names of four companies and only “limited information relating to sales of lubricants to them.” Id. The Court found that this answer was “inadequate, vague, cryptic, evasive, and completely lacking in the candid disclosure required of the parties.” Id. Similarly in the present case, Plaintiff, in answering Interrogatory # 3, fails to completely and fully address the question asked of it.
Interrogatory # 6. Defendants asked Plaintiff to “[s]tate and identify all documents that you claim support the allegations set forth in the complaint.” (Def.’s Ex. A at 7.) In response, Plaintiff provided a list of alleged FHA and ADA violations in four Post properties and indicated that ERC’s testing files support the allegations in the Complaint. (Id. at 7-9.) Plaintiff further stated that additional violations would be detailed in expert reports that were not yet completed. (Id.) Because a party has an ongoing duty to supplement its disclosures, see Fed.R.Civ.P. 26(e)(2), it is sufficient for a party to answer an interrogatory by stating that it is presently unable to provide the information sought. 7-33 Moore’s Federal Practice-Civil § 33.102. Therefore it was proper for Plaintiff to respond to this interrogatory by identifying known facts and documents and indicating that additional information would be forthcoming in compliance with its continuing duty to supplement prior disclosures.
Interrogatory #10. This question contained four sub-parts. First, Defendants asked Plaintiff to describe “how and when [ERC] first became aware of each of the allegations of discrimination against Post at each Subject Property.” (Def.’s Ex. A at 11.) Plaintiff responded by briefly describing the general study of accessibility ERC conducted at properties in the D.C. area and the systematic testing that ERC conducted at Post properties nationwide. (Id.) Second, Defendants asked Plaintiff to identify the nature of each alleged violation of the ADA and FHA by Post. (Id.) Plaintiff did not provide an answer, instead directing Defendants to the testing files. (Id. at 12.) In sub-parts (3) and (4) Defendants asked Plaintiff to identify persons who had complained of discrimination by Post to the ERC or communicated with ERC regarding the alleged discrimination. (Id. at 11.) Plaintiff responded that no such persons existed. (Id.) With the exception of Plaintiffs response to sub-part (2), which is incomplete and improper for the reasons discussed later in this Memorandum Opinion, Plaintiff’s answers to Interrogatory # 10 satisfy the standards for completeness set forth in Rule 33(b)(1).
Interrogatory # 11. Defendants asked Plaintiff to describe the ERC’s investigations “of alleged discrimination in the provision of accessible multifamily dwelling units since November 21, 2002” and to “identify and describe all relevant supporting documentation.” (Def.’s Ex. A at 12.) Plaintiff objected on relevance grounds to the extent that this questions inquires about developers other than Post. (Id.) With respect to investigations of Post, Plaintiff directed Defendants to outside documents and other interrogatory answers. (Id.) Under the Federal Rules, “[p]arties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party....” Fed.R.Civ.P. 26(b)(1). Information about ERC’s investigations of companies other than Post is not relevant to the claim that Post violated the ADA and FHA. On the other hand, information about ERC’s investigation of Post is clearly relevant to the allegations contained in the Complaint. However, to the extent that the information sought by this Interrogatory is a sub-set of the information sought by Interrogatory # 6, it was proper for Plaintiffs to answer this question by referring to its earlier answers.
Interrogatories ## 12 and IS. In Interrogatory # 12, Defendants requested that Plaintiff “[s]tate the dollar value of the resources utilized by the ERC to investigate Post’s activities” and in Interrogatory # 13 they asked Plaintiffs to “[s]tate the dollar value of resources utilized to date as well as the estimated amount of resources to be used in the future by the ERC in inspecting Post’s properties through the ERC’s discovery process.” (Def.’s Ex. A at 12-13.) Plaintiff responded that its damage analysis was preliminary and therefore Plaintiff would supplement its answers when the calculations were complete. (Id.) Plaintiff also.invoked the work product privilege with respect to Defendant’s question about future expenditures. (Id. at 13.) As discussed above, it is proper for a party to answer an interrogatory by stating that the required information is not presently available to it. See 7-33 Moore’s Federal Practice-Civil § 33.102. Whether Plaintiff properly and adequately invoked the work product privilege is discussed below. Overall, the Court rejects Defendants’ argument that Plaintiff’s answers to Interrogatories ## 12 and 13 are incomplete.
Interrogatories ## 16 and 17. These Interrogatories request that Plaintiff provide financial information about the ERC, including its net worth, operating budget, and sources of revenue. (Def.’s Ex. A at 14.) Plaintiff objected on various grounds, including privilege, but went on to state that it would provide financial documents disclosing the information sought upon the entry of a protective order. (Id.) Rule 33 does not allow a party to answer an interrogatory by providing a document; rather, the rule states that each question must be “answered separately and fully in writing under oath.” Fed.R.Civ.P. 33(b)(1). See Sempier v. Johnson & Higgins, 45 F.3d 724, 734 (3d Cir.1995) (finding that reference to party’s “position statement” was not sufficient to answer an interrogatory that sought the factual basis for plaintiffs termination). Despite this deficiency, the Court cannot discern, and Defendants have not attempted to explain, how ERC’s financial profile is relevant to any claim or defense in this lawsuit and therefore will not compel Plaintiff to provide a further response to these Interrogatories.
Interrogatories ## 18 and 19. These questions ask Plaintiff to provide the dollar value of resources expended by ERC to “identify and counteract the allegedly discriminatory practices of Post” and to “respond to community requests for assistance in investigating alleged discriminatory conduct by Post.” (Def.’s Ex. A at 14-15.) Plaintiff responded by referring to its answers to Interrogatories ## 12 and 13, which are similar—but not identical—to Interrogatories ## 18 and 19. Because each interrogatory must be answered separately and fully, it was improper for Plaintiff to answer in this manner. Therefore the Court finds that Plaintiffs response to Interrogatories ## 18 and 19 are incomplete and must be supplemented.
Interrogatory # 20. Defendant asked Plaintiff to identify each seminar or presentation that ERC conducted in a city where a subject property is located and identify each attendee of such a seminar or presentation who resides in a city where a subject property is located. (Def.’s Ex. A at 15.) Notwithstanding their objections on various grounds, Plaintiff submitted an attachment to its interrogatory responses that contained the names and dates of various seminars and presentations. (Id. at 15, Attach. A.) Plaintiff further stated that this list only represents those seminars or presentations for which ERC maintains records and that ERC does not routinely maintain records of attendees. (Id. at 15.) Because a party cannot be expected to supply information that it does not have, Plaintiffs response to Interrogatory 20, as supplemented by Attachment A, appears to be a sufficient answer to Defendant’s question.
Interrogatory # 21. In this Interrogatory, Defendants first asked Plaintiff to identify organizations and persons that have “requested] assistance from the ERC in investigating alleged discriminatory conduct by Post.” (Def.’s Ex. A at 15.) Plaintiff responded that no such organization or person exists. (Id.) Defendants then asked Plaintiff to “describe the services provided to assist persons with disabilities.” (Id.) Plaintiff answered with reference to ERC brochures that would be produced in response to Defendants’ First Document Requests. (Id. at 15-16) Finally Defendants asked Plaintiff to identify persons or entities outside of the Washington, D.C. area that receive ERC services and to identify facts and documents relating to communications with those persons or entities. (Id. at 15.) Plaintiff ac knowledged that such persons or entities exist, made a general description of services provided, and referred to documents Plaintiff produced in response to Interrogatories ## 16 and 20. Plaintiff’s answers to this Interrogatory are incomplete insofar as they refer to outside documents and do not provide full responses to the questions asked. Therefore Plaintiff will be ordered to supplement this answer.
2. Plaintiff’s Answers to Interrogatories 3, 6, 7, 10(2), 13, and 17 are Improper and Unresponsive
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1535767-10414 | MEMORANDUM OPINION
CLAYTON, Chief Judge.
This action was commenced by the filing of a complaint by International Chemical Workers Union, a labor organization, and five individual employees of the defendant, as plaintiffs. The action is predicated on Title VII of the Civil Rights Act of 1964, §§ 706(e)-(k), 42 U.S.C. 2000e-5(e)-(k). Jurisdiction of this court rests on § 706(f) of Title VII, 42 U.S.C. 2000e-5(f). Defendant moved to dismiss the complaint as to the plaintiff union. No such motion has been filed with respect to the five individual plaintiffs, who are employees of defendant. This motion to dismiss is before the court on briefs of the parties and upon a brief filed by leave of court for the United States Equal Employment Opportunity Commission as amicus curiae.
The principal point presented for this court’s determination is whether the union is a “person aggrieved” within the meaning of § 706(a) and (e) of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e-5(a) and (e), which defendant contends it is not. *
It is axiomatic that all allegations of the complaint must be taken as true upon consideration of such a motion. Plaintiff union is and has been the certified collective bargaining representative of the employees of the defendant company since May 14, 1965. On October 19, 1965, the union filed a charge with the EEOC alleging that the defendant had committed certain unlawful em ployment practices in violation of § 703 (a) of Title VII, 42 U.S.C. 2000e-2(a). On December 2, 1965, the individual plaintiffs herein filed identical charges with the Commission.
On February 17, 1966, the individual plaintiffs were informed by the Commission’s Director of Compliance that the Commission had thus far been unable to resolve the dispute and that sixty days had elapsed since the filing of the charge thereby allowing the institution of court proceedings.
On May 6, 1966, the Commission, by an opinion of its General Counsel reversing his prior view, held that the plaintiff union is a “person aggrieved” within the meaning of § 706(a) and (e).
Paragraph two of defendant’s motion to dismiss would require an interpretation of the statute which is contrary to the accepted meaning of the term “person aggrieved”, and to the meaning recognized by the Commission. For these reasons, this ground of the motion should be rejected.
It has long been settled that the practical interpretation of a statute by the executive agency charged with its administration or enforcement, although not conclusive on the courts, is entitled to the highest respect. Grand Trunk Western R. Co. v. United States, 252 U.S. 112, 40 S.Ct. 309, 64 L.Ed. 484 (1920) ; Blanset v. Cardin, 256 U.S. 319, 41 S.Ct. 519, 65 L.Ed. 950 (1921); Kern River Co. v. United States, 257 U.S. 147, 42 S.Ct. 60, 66 L.Ed. 175 (1921) ; United States v. American Trucking Associations, Inc., 310 U.S. 534, 60 S.Ct. 1059, 84 L.Ed. 1345 (1940). See also, Billings v. Truesdell, 321 U.S. 542, 552-553, 64 S.Ct. 737, 88 L.Ed. 917 (1944) (“persuasive weight”); Fawcus Machine Co. v. United States, 282 U.S. 375, 378, 51 S.Ct. 144, 75 L.Ed. 397 (1931) [“respectful consideration” to be overruled only for “weighty reasons”, quoted with approval in United States v. Atlantic Refining Co., 360 U.S. 19, 79 S.Ct. 944, 3 L.Ed.2d 1054 (1959)]; Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965) (“great deference”); F.T.C. v. Mandel Bros., Inc., 359 U.S. 385, 391, 79 S.Ct. 818, 3 L.Ed.2d 893 (1959) (“great weight”); Federal Trade Comm’n v. Colgate-Palmolive Co., 380 U.S. 374, 385, 85 S.Ct. 1035, 13 L.Ed.2d 904 (1965) (accord); Federal Housing Adm’n. v. Darlington, Inc., 358 U.S. 84, 90, 79 S.Ct. 141, 3 L.Ed.2d 132 (1958) (accord) (by implication) Great Northern R. Co. v. United States, 315 U.S. 262, 275, 62 S.Ct. 529, 86 L.Ed. 836 (1942); Mazer v. Stein, 347 U.S. 201, 211-214, 74 S.Ct. 460, 98 L.Ed. 630 (1953) (by implication). In Udall v. Tallman, supra, the court stated:
When faced with a problem of statutory construction, this Court shows great deference to the interpretation given the statute by the officers or agency charged with its administration.
Particularly apposite is the Supreme Court’s decision in the American Trucking Associations case. Questioned there was the Interstate Commerce Commission’s interpretation of the word “employees” as used in the Federal Motor Carrier Act. The Commission took the position that the term applied only to employees whose duties affected safety of operation. The court, after noting that “[i]n any case such interpretations are entitled to great weight” observed (310 U.S. at 549, 60 S.Ct. at 1067) that this is “peculiarly true here when the interpretations involve ‘contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion; of making the parts work efficiently and smoothly while they are yet untried and new’ [citing Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294, 53 S.Ct. 350, 77 L.Ed. 796 (1933)].” Accord Power Reactor Co. v. International Union of Electricians, 367 U.S. 396, 408, 81 S.Ct. 1529, 6 L.Ed.2d 924 (1961). The instant case is a clear example of what the court was referring to in the Trucking Associations case. Not only is the Commission’s interpretation of the phrase “aggrieved person” that of the agency responsible for administering the Act; it is also a contemporaneous construction of the statute by those responsible “for setting its machinery in motion” and for guaranteeing the efficient working of the statute’s machinery while it is “still untried and new.”
Moreover, recent court decisions have recognized the standing of group plaintiffs as a “person aggrieved” where the group, qua group, has an interest in the outcome of the administrative agency s determination although it might, incidentally, represent broader community interests as well. See Scenic Hudson Preservation Conference v. F.P.C., 354 F.2d 608 (2d Cir. 1965), cert. den. sub nom. Consolidated Edison Corp. v. Scenic Hudson Preservation Conference, 384 U.S. 941, 86 S.Ct. 1462, 16 L.Ed.2d 540 (No. 1159, May 16, 1966) (conference of conservationist organizations “aggrieved party” under the Federal Power Act, entitled to challenge approval of power plant site); Office of Communication of United Church of Christ v. F.C.C., 359 F.2d 994 (C.A.D.C., May 4, 1966) (church group’s interest as “audience” sufficient to make it “person aggrieved” under Communications Act to permit challenge to approval of radio license renewal). As the court said in the Scenic Hudson case (354 F.2d at 616):
In order to insure that the Federal Power Commission will adequately protect the public interest in the aesthetic, conservational, and recreational aspects of power development, those who by their activities and conduct have exhibited a special interest in such areas, must be held to be included in the class of “aggrieved” parties * * *
Thus, the Commission’s decision recognized both the union’s substantial interest in the instant case and the development of judicial doctrine on the notion of standing. As the General Counsel’s opinion stated:
[A] collective bargaining representative is hardly a volunteer with respect to its assertion of the rights of the members of the bargaining unit to be free of racial and other invidious discrimination in their employment. On the contrary, the duty of fair representation in effect forbids neutrality and compels the union to exert its bargaining efforts in behalf of the victims of discrimination.
At this point in time and in the development of law in this area, this court is bound to say that the plaintiff union is a “party aggrieved” within the meaning of the statute with which we are concerned.
In addition to questioning the capacity of the plaintiff union to join in this cause of action, defendant assigns as an additional ground for its motion to dismiss that the complaint fails to state a cause of action upon which relief can be granted. The thrust of defendant’s argument on this point is, however, directed to pointing out obvious differences between a union and an individual. Such arguments fall by the wayside in the light of the court’s views as heretofore expressed.
Additional argument made by defendant on this point is, in reality, addressed to the form of relief, if any, which might be proper for this court to grant after a full evidential hearing on the factual allegations made by the complaint. It would be inappropriate, at this stage of these proceedings, for this court to attempt to narrowly define its authority to act or to broadly construe its powers to fashion relief appropriate to deal with the facts as they may be developed.
It should also be said that materials outside the record have been furnished to the court by both parties, but these have not been considered beyond the level of factual agreement as expressed in briefs. Hence, it is not necessary for this court to consider this submission as a motion for summary judgment. Rule 12(b), Federal Rules of Civil Procedure.
It also seems proper to state that the questions raised with respect to this court’s jurisdiction over the subject matter of this suit which defendant has attempted to advance under its claim that the complaint of the plaintiff union fails to state a cause of action upon which relief can be granted are not, on the moving papers of defendant, properly before the court at this time. See defense numbered (1), Rule 12(b), Federal Rules of Civil Procedure.
An order will be entered in accordance with this opinion.
. The charges included, inter alia, use of abusive language against Negro employees, failure to list Negro employees in the top operating classifications, discriminatory wage rates, and discrimination in overtime pay and allowance of vacation time. Complaint, pp. 3-4.
. Complaint, p. 3.
. The union had been informed on January 12, 1966, that it had not shown that it was a “person aggrieved” within the meaning of § 706(a). However, the General Counsel indicated that, upon the receipt of additional argument, this position would be reconsidered.
. See, e. g., Stuart v. Laird, 1 Cranch 299, 2 L.Ed. 115 (1803); United States v. Vowell, 5 Cranch 368, 3 L.Ed. 128 (1809); Bank of United States v. Halstead, 10 Wheat. 51, 6 L.Ed. 264 (1825); Pennoyer v. McConnaughy, 140 U.S. 1, 35 L.Ed. 363 (1891).
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8455668-22182 | FLAUM, Chief Judge.
In 1949, Osyp Firishchak filed an application for a visa to the United States under the Displaced Persons Act (“DPA”). In November 1954, he became a naturalized United States citizen. Several decades later, the Department of Justice uncovered documents suggesting that Firishchak served in the Ukrainian Auxiliary Police (“UAP”) during World War II — a fact he did not disclose in his 1949 visa application. The discovery of these documents resulted in a trial, in which the district court ordered Firishc-hak denaturalized. Firishchak now appeals the judgment of the trial court. For the following reasons, we affirm that judgment.
I. Background
In December 2003, the government filed a four-count complaint against Osyp Fir-ishchak alleging that his citizenship was illegally procured and must be revoked according to § 340(a) of the Immigration and Naturalization Act of 1952, 8 U.S.C. § 1451(a) (2000). The government contended that Firishchak’s admission into the United States was unlawful on several grounds: 1) he assisted in the persecution of civilians during World War II; 2) he participated in a movement hostile to the United States; 3) he willfully misrepresented his wartime activities throughout his visa application process; and 4) he advocated or acquiesced in acts contrary to human decency.
In August 2005, the district judge conducted a four-day bench trial and granted judgment for the government on all four counts. United States v. Firishchak, 426 F.Supp.2d 780 (N.D.Ill.2005). The primary issue at trial was whether Firishchak had served in the UAP. The government offered documentary evidence linking Firishchak to the UAP, expert testimony from a World War II historian, and testimony about post-war visa application procedures, while Firishchak testified in his own defense, denying any involvement with the UAP. Instead, he testified that he drifted from place to place during the war, hiding from the Nazis in various coffee shops. The district court found Firishchak’s account of his war-time activities “incredible” and concluded that he had served in the UAP.
A. Firishchak’s Background Information
Osyp Firishchak was born on April 18, 1919 in Trebuszany, a town that became a part of Czechoslovakia after World War I and is now a part of Ukraine. No other persons bearing his name were born in Trebuszany on that date. His father was named Hryts Firishchak.
In his application under the DPA, Fir-ishchak described his employment and residences from 1941 to 1944, stating that he had worked as a laborer for a factory in Nitra, Slovakia, from 1939 to December 1941; a Ukrainian cooperative in “Lwow” (L’viv), Poland, from December 1941 to April 1944; and a building firm in Nitra, Slovakia, from April to October 1944. On his visa application, Firishchak described his residences from 1941 to 1944 as Nitra, Slovakia (1939 to December 1941); Lem-berg (L’viv), Poland (December 1941 to April 1944); and Nitra, Slovakia (April 1944 to October 1944). Firishchak swore to the truth of the information on his visa application. He was admitted to the United States and later became a naturalized United States citizen.
B. The Ukrainian Auxiliary Police and World War II
In August 1941, following Nazi Germany’s June 1941 invasion of then-Soviet territory, German authorities formed the UAP to aid in policing the newly-incorporated District Galicia. Throughout its existence, the UAP was financed, directed, and controlled by German authorities. Ukrainian Auxiliary policemen in the city of L’viv were uniformed, armed, salaried, and received various benefits, including leave and preferential access to scarce commodities.
The Nazi policy toward Jews in District Galicia had several components. First, the Nazis issued new identification papers to Jews that identified their religion, and oversaw their confinement in ghettos. Later, many of these Jews were forcibly removed and killed. The Nazis temporarily spared a limited number of Jews, whom the Germans considered “work capable,” transferring them to forced labor camps where many died from starvation, disease, and other inhumane conditions. These measures were implemented and enforced from 1941 to 1943 in Galicia. During this time, the UAP checked personal identification documents and arrested Jews who lacked special work passes. They also arrested any Jew who failed to wear an armband bearing the Star of David.
At the time that Firishchak was admitted into the United States, the UAP was not on the Inimical List of organizations hostile to the United States — a list maintained by the Displaced Persons Commission to assist with processing visa applications.
C. Stipulations and Evidence Presented at Trial
The parties stipulated to numerous facts and legal conclusions in the pre-trial order that greatly reduced Firishchak’s available defenses at trial. They stipulated, among other things, that the UAP “enforced Nazi persecutory measures against ... Jews in the city,” by checking personal identification documents and arresting Jews for various violations and that the UAP assisted the Nazis with the largest ghetto reduction action in L’viv, commonly known as the “Great Operation.” Pre-trial Order at 5-6.
As for legal conclusions, they stipulated if Firishchak “performed the routine duties of a Ukrainian Auxiliary policeman, he assisted in the persecution of civil populations.” Id. at 16. Moreover, the parties stipulated that if Firishchak served in the UAP during WWII, he “was a member of, or participated in, a hostile movement.” Id. at 18. In addition, the parties agreed that Firishchak’s wartime activities, and UAP membership in particular, “were material facts” and that if he actually served in the UAP during WWII, “he made a willful and material misrepresentation of his wartime activities for the purpose of gaining admission to the United States.” Id. at 19. Finally, the parties stipulated that if Firishchak served in the UAP, “which was subordinate to the Nazi security authorities and routinely assisted in implementing a range of Nazi anti-Jewish policies, he advocated or acquiesced in activities or conduct contrary to civilization and human decency.” Id. at 20. The end result of these stipulations was that Fir-ishchak could only be absolved if the government failed to prove his membership in the UAP altogether.
At trial, the government introduced twenty-one wartime documents related to Firishchak’s UAP service, including seven that bear his signature. Two of those documents identify Firishchak by name and birth date and state that he had been employed by the 1st Commissariat of the Ukrainian Police since October 1941. One of the documents lists the headquarters of the 1st Commissariat as Firishchak’s residence and lists his father’s name as Hryts. The signatures on the documents are spelled the same, and all of the documents identify Firishchak as a police private in the UAP. A few of the documents lacked specific dates.
During Firishchak’s trial, Dr. Dieter Pohl, a scholar who has done extensive archival research on the Nazi occupation of District Galicia and the UAP, testified generally about the German occupation of Ga-licia and the role of the UAP in implementing Nazi policy. In addition, Pohl testified that there was no suspicion regarding the authenticity of the twenty-one wartime documents and that they were all housed in a location where one would expected to find them — the L’viv State Regional Archive. He further testified that all of the documents dated from 1942 to 1944.
Robert Groner, a former Department of Justice trial attorney, testified regarding Firishchak’s sworn interview, in which Fir-ishchak identified seven signature samples (extracted from relevant UAP documents) as his own. Groner stated that Firishchak declined the services of an interpreter at the interview and was composed, lucid, and responsive until he was shown the documents regarding his UAP service, at which point he became nervous and agitated.
The government also offered testimony from William Weiss, a survivor of the L’viv Jewish ghetto. He did not specifically testify about Firishchak or identify him as a member of the UAP. Instead, Weiss testified about ghetto conditions as well as the abuse that occurred at the hands of both the Nazis and the UAP. Finally, the government entered the de bene esse depositions — depositions taken for use in the event of a witness’s absence at trial — of Mario DeCapua and Everett Coe, who testified generally about visa applications and procedures under the DPA, including security investigations into applicants’ backgrounds. No one with personal knowledge testified that Firishchak was a member of the UAP or performed the duties of a Ukrainian Auxiliary policeman in the streets of L’viv during World War II.
Firishchak testified in his own defense at trial, denying any service in the UAP. He admitted that the individual identified in the incriminating documents had the same name, the same birth date, the same father’s name, and came from the same village. Firishchak admitted that he resided in the same town during the war as the individual identified in the wartime documents. As to his wartime activities, Firishchak testified that he was homeless throughout the war and drifted from place to place, hiding out in coffee shops along the way. He testified that after leaving his factory job in Germany, he went with little money and without proper travel documents from town to town, en route to a town whose name he did not know, to go to school. He picked up occasional odd jobs along the way. The government highlighted various inconsistencies in Firishchak’s story. For example, he stated that he never slept in the same place and was always on the move, but later acknowledged that he had an address in L’viv for an extended period of time.
The district court found the government’s witnesses credible, but questioned both the substance of Firishchak’s testimony and his mannerisms on the stand. Taking the stipulations, the admitted documents, the admitted depositions, and the live testimony altogether, the district court ruled against Firishchak on all four counts of the complaint.
II. Discussion
Firishchak raises a number of issues on appeal. First, he contends that the wartime documents evidencing his UAP service were inadmissible. Second, he argues that the district court abused its discretion by permitting Dr. Pohl to testify on a subject that was not disclosed in his pretrial expert report. Third, Firishchak claims that the district court should have granted him a continuance because the government took two de bene esse depositions after the close of discovery. Fourth, Firishchak challenges the sufficiency of the evidence against him. Finally, he argues that he was denied a fair trial.
A. Admissibility of the Wartime Documents
As a threshold matter, Firishchak disputes the admissibility of the wartime documents, arguing that they were improperly authenticated as ancient documents or business records and that they constitute inadmissible hearsay. This Court reviews a district court’s determination regarding the admissibility of documents for an abuse of discretion. Cheme-tall GMBH v. ZR Energy, Inc., 320 F.3d 714, 722 (7th Cir.2003).
Documents are authenticated by evidence “sufficient to support a finding that the matter in question is what its proponent claims.” Fed.R.Evid. 901(a); Cheme-tall, 320 F.3d at 722. Federal Rule of Evidence 901(b)(8) identifies the means by which “ancient documents” are authenticated. An ancient document should be (A) in such condition as to create no suspicion concerning its authenticity; (B) in a place where it, if authentic, would likely be; and (C) in existence twenty years or more at the time it is offered. Fed.R.Evid. 901(b)(8); United States v. Kairys, 782 F.2d 1374, 1379 (7th Cir.1986). Whether the documents correctly identify the defendant goes to their weight and is a matter for the trier of fact; it is not relevant to the threshold determination of admissibility. See Kairys, 782 F.2d at 1379 (affirming the admission of wartime document).
In this case, Dr. Pohl, an expert who has done extensive archival research on the District Galicia, testified that there was no suspicion regarding the documents’ authenticity and that they were housed in a state regional archive where one would expect to find such documents. He also testified regarding the age of the documents, stating that each document dated from between 1942 and 1944.
Firishchak correctly notes that mere recitation of the contents of documents does not authenticate them or provide for their admissibility, United States v. Wittje, 333 F.Supp.2d 737, 743 (N.D.Ill.2004), but Dr. Pohl’s testimony was more than a mere recitation. Rather, he spoke of how historians relied on the documents and where they could be found in addition to their contents. Furthermore, Firishchak’s identification of his own signature on seven of the documents suggests that they are authentic.
Firishchak particularly questions the authentication of those documents that lacked specific dates. While it is true that several of the documents bear no specific date, their age can be proven by other means. For example, the appearance of the proffered evidence or even the contents of the material itself together with the surrounding circumstances can be used to determine a document’s age. See Fed. R.Evid. 901(b)(4). In addition, all but one of the documents contain information—either month and year or season and year— which permits their age to be determined. Finally, Firishchak did not cite any particular characteristics of the documents that raise doubts regarding their authenticity. Considering Dr. Pohl’s testimony in addition to the contents, location, and appearance of the documents themselves, the district court could reasonably determine the threshold question of the documents’ authenticity. Therefore, the district court’s decision to admit the wartime documents was not an abuse of discretion.
Firishchak also argues that the wartime documents were not admissible business records. This argument misses the point because the ancient documents rule and the business records exception are independent grounds for determining admissibility. Compare Fed.R.Evid. 803(6) with Fed.R.Evid. 901(b)(8); see also, e.g., George v. Celotex Corp., 914 F.2d 26, 30 (2d Cir.1990). Because the documents in question were admissible under the ancient documents rule, whether they were kept in the ordinary course of UAP business is irrelevant. Finally, Firishehak’s assertion that the documents constitute inadmissible hearsay is without merit. Under Federal Rule of Evidence 803(16), statements contained in authenticated ancient documents are not hearsay.
B. Pre-trial Discovery Issues
Firishchak has two complaints regarding the pre-trial discovery phase. First, he asserts that the government failed to disclose certain expert testimony in its required pre-trial report. Second, he believes that the taking of two de bene esse depositions after the close of discovery entitled him to a continuance. We review a district court’s discovery rulings for an abuse of discretion. Sims v. GC Servs. L.P., 445 F.3d 959, 963 (7th Cir.2006).
Firishchak contends that the government did not disclose in its pre-trial expert report that Dr. Pohl would testify regarding the authenticity of the wartime documents. As a result, Firishchak argues, any such testimony should have been excluded as a sanction for violating Federal Rule of Civil Procedure 26(a)(2)(B), which requires expert reports to “contain a complete statement of all opinions to be expressed and the basis and the reasons therefore.” Firishchak asserts that Dr. Pohl’s report did not disclose any opinions regarding the authenticity of the wartime documents. The government, on the other hand, argues that Firishchak waived this claim because he did not object to “Dr. Pohl’s qualification as an expert on the UAP and documents relating thereto, thereby acknowledging Dr. Pohl’s ability to authenticate UAP documents.” Gov. Br. at 44 (emphasis in original). Even if the claim was not waived, Firishchak cannot prevail. Dr. Pohl’s 148-page expert report discussed each historical exhibit that was subsequently introduced at trial, including its archival source and locator information. The report also contained passages about where the historical documents are kept and how historians rely on them. Therefore, the district court did not abuse its discretion by permitting Dr. Pohl to testify regarding the authenticity of the documents.
Firishchak also takes issue with the fact that the government took two de bene esse depositions in the week leading up to trial. Pursuant to a court order, all discovery in the case closed on March 11, 2005 and trial was scheduled to begin on August 1. According to Firishchak, on May 11, the government sent notice to the defendant of its intention to take the de bene esse depositions of Mario DeCapua and Everett Coe in July — less than 30 days prior to the trial date. Firishchak then filed a motion for a continuance, but his motion was denied. The government took Mario DeCapua’s deposition on July 20 and Everett Coe’s deposition on July 26.
The record reflects that more than ten weeks before trial, the government notified Firishchak that it would be taking videotaped de bene esse depositions of two elderly witnesses pursuant to Federal Rule of Civil Procedure 32(a)(3)(C), which permits the use of depositions “for any purpose” if the court finds a witness is unable to attend or testify because of age. Because the rule permits broad use of depositions in these circumstances, the court’s decision not to grant Firishchak a continuance due to a permitted use was not an abuse of discretion. See United States v. Egwaoje, 335 F.3d 579, 587-88 (7th Cir.2003) (noting that district courts have broad discretion to grant or deny continuances).
C. Sufficiency of the Evidence
Firishchak next argues that the evidence was insufficient to support the disti'ict court’s findings. Because the right to acquire American citizenship is a precious one, the government carries a heavy burden of proof when attempting to divest a naturalized citizen of his citizenship. Fedorenko v. United States, 449 U.S. 490, 505, 101 S.Ct. 737, 66 L.Ed.2d 686 (1981); Naujalis v. INS, 240 F.3d 642, 646 (7th Cir.2001). The evidence justifying revocation of citizenship must be clear, unequivocal and convincing, not leaving the issue in doubt. Fedorenko, 449 U.S. at 505, 101 S.Ct. 737. Even though the government’s burden at trial is heavy, this Court reviews the trial court’s findings of fact under a deferential clearly erroneous standard. Spurgin-Dienst v. United States, 359 F.3d 451, 453 (7th Cir.2004). We review the district court’s legal conclusions de novo. Id. In this case, the district court derived many of its findings of fact and conclusions of law from pre-trial stipulations. Ordinarily, stipulations of fact will obviate the need for appellate review of factual findings. TMF Tool Co. v. Siebengartner, 899 F.2d 584, 588 (7th Cir.1990). This Court will, however, review findings derived from stipulated facts for clear error. Id. In other words, where the district court adopts a stipulated fact wholesale, it is binding on the parties and thus waived, but where the court makes inferences or derives factual findings from other stipulated facts, the clear error standard of review applies.
1. Membership in UAP
As mentioned above, whether Firishchak was a member of the Ukrainian Auxiliary Police is the linchpin of this case because he stipulated to nearly all other relevant facts. Firishchak contends that the government failed to prove his membership in the UAP by clear and convincing evidence. Firishchak’s argument relies heavily on two facts: 1) that he denied UAP membership at all relevant times and 2) that the government produced no evidence from anyone with personal knowledge that Firishchak performed the duties of the UAP. The United States argues that testimony from people with personal knowledge is unnecessary, and cites cases in which citizens were denaturalized based on documentary evidence. See, e.g., United States v. Tittjung, 753 F.Supp. 251 (E.D.Wis.1990); United States v. Baumann, 764 F.Supp. 1335 (E.D.Wis.1991).
Without deciding whether documentary evidence alone is enough to revoke citizenship, we note that the district court based its decision on more than the twenty-one wartime documents. In addition to those documents, the district court based its findings on Firishchak’s own testimony and admissions. Firishchak identified seven signatures from UAP documents as his own, and the district court’s credibility determination that Firishchak was lying on the stand permitted it to conclude that the documents linking Firishchak to UAP service were accurate. Consequently, the evidence demonstrating Firishchak’s UAP membership was sufficient to support the trial court’s factual finding.
2. Count One—Assistance in Persecution
Firishchak next questions the district court’s conclusion that he assisted in the persecution of civil populations, which would have rendered him ineligible for a visa under § 2(b) of the DPA. Because of numerous pre-trial stipulations, which he did not mention in his brief, Firishchak is bound by the facts leading to the trial court’s conclusion. See, e.g., United States v. Flores-Sandoval, 94 F.3d 346, 349 (7th Cir.1996) (stipulating to conduct waives any claim that a defendant has not engaged in that conduct); Soo Line R.R. v. St. Louis Sw. Ry., 125 F.3d 481, 483 (7th Cir.1997) (stipulations are binding upon the party making them). Firishchak stipulated, for one, that the UAP enforced “per-secutory measures against Jews.” Pre-trial Order at 5. He also stipulated that the UAP assisted in checking the identification of Jews and arresting them for violating various rules. Id. In fact, Firishchak specifically stipulated that if he performed the routine duties of a Ukrainian Auxiliary policeman, he assisted in the persecution of civil populations.
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1557431-12845 | EDELSTEIN, District Judge.
The defendant, charged in a one-count indictment with violating 29 U.S.C. § 186(b) and (a) (2), moves to dismiss the indictment, or, in the alternative, for an order permitting him to inspect a transcript of the testimony given before the Grand Jury and for an order directing the government to provide a bill of particulars.
Defendant’s memorandum of law asserts ten separate arguments in support of his motion to dismiss the indictment. He first asserts that although 29 U.S.C. § 186(a) (2) proscribes payments by an employer to a labor organization or “employee thereof, which represents, seeks to represent, or would admit to membership, any of the employees of such employer who are employed in an industry affecting commerce;” (italics added), the indictment charges that the defendant was an employee of a labor organization “which represents, seeks to represent, and would admit to membership employees who are employed in industry affecting commerce.” (Italics added.) Defendant urges that by changing the italicized word “or” to “and” the indictment applies only if the union (of which the defendant is an employee) actually represents employees of the relevant employer. Defendant’s local, 32-E, it is argued, does not in fact represent any of the relevant employees and therefore the indictment has no application to him.
The significance of this argument is to raise the question of what the government may prove in order to show a violation of the statute and perhaps whether such proof, in its disjunctive, would constitute a permissible variance from the indictment. This need not be resolved now. Any failure of proof or improper variance may be raised at trial when appropriate. See Arellanes v. United States, 302 F.2d 603, 609 (9th Cir.), cert, denied, 371 U.S. 930, 83 S.Ct. 294, 9 L.Ed.2d 238 (1962) and cases cited therein.
Defendant’s second argument in support of his motion to dismiss the indictment is based on a similar departure in the indictment from the statutory language. Title 29 U.S.C. § 186(b) declares it unlawful “for any person to request, demand, receive, or accept, or agree to receive or accept * * * ” (italics added) any proscribed payment. The indictment, however, charges that the defendant did “request, demand, and receive and accept, and agreed to receive and accept” a proscribed payment. (Italics added). Defendant, in effect, urges that the statute creates at least two separate offenses making it unlawful either to request, demand, receive or accept a proscribed payment and also making it unlawful to agree to receive or accept such a payment. Defendant also urges that the statute should be read as creating a separate offense of requesting or demanding such a proscribed payment. Assuming arguendo that defendant’s reading of the statute is correct, see Burton v. United States, 202 U.S. 344, 377-378, 26 S.Ct. 688, 50 L.Ed. 1057 (1906), and therefore the three offenses charged might properly be the subject of three separate counts, this court does not agree that the indictment must therefore be dismissed as duplicitous. Having been charged with only one count of violating the statutory prohibition, the defendant, if found guilty, may be sentenced only once. If, on the other hand, the defendant is found innocent, then, for purposes of double jeopardy, he will have have been acquitted of all three offenses.. Crain v. United States, 162 U.S. 625, 636, 16 S.Ct. 952, 40 L.Ed. 1097 (1896); Turf Center, Inc. v. United States, 325 F.2d 793, 797 (9th Cir. 1963). There is, therefore, no possible prejudice to the defendant by including within the one-count indictment three separate offenses. See United States v. Ricciardi, 64 Crim. 863, S.D.N.Y. Jan. 6, 1965. The further contention raised in defendant’s supplemental memoranda that an indictment phrased in the conjunctive is inherently ambiguous, has no merit. See United States v. Ricciardi, 2d Cir., Feb. 4, 1966, 357 F.2d 91, at 99; Turf Center, Inc. v. United States, supra, 325 F.2d at 796-797; Arellanes v. United States, supra, 302 F.2d at 609.
The defendant's third argument is that the indictment should be dismissed because he was improperly subpoenaed before the Grand Jury, not warned that he was a prospective defendant, and, in effect, compelled to bear witness against himself. The Grand Jury transcript, which was not available to counsel making this motion, shows, however, that the defendant was informed of the nature of the Grand Jury investigation and advised that he was not required to make any statement before the Grand Jury but that any statement he did make could be used against him. He was also informed that he had a right to counsel and that the Grand Jury might indict him. It is clear from the transcript that the defendant’s statements were made voluntarily with an awareness of both his constitutional rights and the possible consequence of his statements. Accordingly, defendant’s appearance and statements before the Grand Jury afford no basis for dismissing this indictment. See United States v. Winter, 348 F.2d 204 (2d Cir.), cert, denied, 382 U.S. 955, 86 S.Ct. 429, 15 L.Ed.2d 360 (1965); United States v. Cleary, 265 F.2d 459 (2d Cir.), cert, denied, 360 U.S. 936, 79 S.Ct. 1458, 3 L.Ed.2d 1548 (1959).
Defendant’s fourth argument is that the indictment is deficient because it fails to allege what industry affecting commerce is involved or facts showing how the industry affected commerce. The Second Circuit has recently rejected that argument when it upheld a similarly worded indictment in United States v. Ricciardi, supra, 357 F.2d at 91.
The defendant’s fifth argument made on information and belief is that no evidence was presented to the Grand Jury from which it could infer that employees of the alleged lender were engaged in an industry affecting commerce. It is not necessary, however, for a court to look behind the face of an otherwise valid indictment in order to determine whether adequate or competent evidence was introduced before the Grand Jury. Lawn v. United States, 355 U.S. 339, 78 S.Ct. 311, 2 L.Ed.2d 321 (1958); Costello v. United States, 350 U.S. 359, 76 S.Ct. 406, 100 L.Ed. 397 (1956); see United States v. Tane, 329 F.2d 848, 853-854 (2d Cir. 1964).
The defendant’s sixth argument will be dealt with in conjunction with his ninth and tenth arguments, infra.
The defendant’s seventh argument, that the court lacks jurisdiction over the subject matter of this indictment because the nature of the industry-affecting commerce is not stated within the indictment, is without merit. In dealing with defendant’s fourth argument, supra, this court has found the indictment sufficient even though it does not specify the nature of the industry affecting commerce. The indictment charges an offense against the laws of the United States and therefore this court clearly has subject matter jurisdiction at this stage of the proceedings.
The defendant’s eighth argument is that the Grand Jury which returned the instant indictment was not properly selected in that its members were not drawn from a pool of those constituting a representative cross-section of the community. The defendant here expressly relies on the arguments and testimony adduced in United States v. Van Allen, 208 F.Supp. 331 (S.D.N.Y.1962), aff’d sub nom., United States v. Kelly, 349 F.2d 720 (2d Cir. 1965). Defendant’s Memorandum in Support of Motion to Dismiss Indictment at 25. On the day immediately preceding the filing of defendant’s brief in this case, however, the Second Circuit affirmed the conviction referred to in the Van Allen case expressly rejecting the arguments related to the Grand and Petit Jury selection procedures in this district. United States v. Kelly, supra at 777-79. See, e. g., United States v. Agueci, 310 F.2d 817, 833-834, 99 A.L.R.2d 478 (2d Cir. 1962), cert, denied, 372 U.S. 959, 83 S.Ct. 1016, 10 L.Ed.2d 12 (1963); United States v. Kenner, 36 F.R.D. 391, 392-93 (S.D.N.Y.1965); United States v. Greenberg, 200 F.Supp. 382 (S.D.N.Y. 1961).
The defendant in his sixth, ninth and tenth arguments urges that the indictment should be dismissed because the statute allegedly violated is unconstitutional. It is contended, in effect, that there is no rational connection between the congressional purpose of industrial peace and the conduct proscribed. Therefore, defendant reasons, the enactment is beyond the scope of the congressional power under the commerce clause. Defendant further contends that the statute lacks constitutionally required definiteness to assure him due process and the right to be informed of the charges against him. Finally defendant contends that the scope of proscribed conduct is so broad that it makes criminal a wide range of ordinary commercial transactions, such as bank mortgages and loans on insurance policies, when engaged in by any of the statute’s enumerated classes of persons. Defendant urges that this sweeping prohibition is not only outside of the scope of the commerce clause but also deprives broad classes of persons of property rights without compensation and without due process of law. Defendant’s first two contentions have been effectively dealt with by the Second Circuit in United States v. Ryan, 232 F.2d 481 (2d Cir. 1956) and by Judge Palmieri in the Ryan case’s findings of fact and conclusions of law. See United States v. Ryan, 128 F.Supp. 128, 134-136 (S.D.N.Y.1955), rev’d, 225 F.2d 417 (2d Cir. 1955), aff’d., 350 U.S. 299, 76 S.Ct. 400, 100 L.Ed. 335 (1956). The statute was amended subsequent to the Ryan cases to expressly include loans as a proscribed type of transaction. It was also amended to include employees of a labor organization which would “admit to membership” employees of the relevant employer. Although these changes broadened the scope of the statute, they did not render it vague. See United States v. Petrillo, 332 U.S. 1, 3-8, 67 S.Ct. 1538, 91 L.Ed. 1877 (1947); Robinson v. United States, 324 U.S. 282, 65 S.Ct. 666, 89 L.Ed. 944 (1945); cf. United States v. Irwin, 354 F.2d 192 (2d Cir. 1965). The statute presently in force retains the requirement that the employees of the relevant employer be “employed in an industry affecting commerce,” and to that extent its relation to the commerce clause is unchanged from the statute upon which the second Circuit passed, in Ryan, supra.
The defendant’s final contention is that the statute makes criminal a union employee’s obtaining an ordinary commercial loan from a bank or similar institution if his employer union “would admit to membership” any of the bank’s employees. Although 29 U.S.C. § 186(c) exempts transactions “(3) with respect to the sale or purchase of * * * [a] commodity at the prevailing market price in the regular course of business;” this court need not decide whether an arm’s length commercial transaction entered into in the regular course of the employer’s lending business was intended to be prohibited by the statute and whether that prohibition would be constitutional. The defendant does not urge that the loan, which is the subject of the instant indicment, involved such a transaction. Moreover, the indictment charges that the defendant “willfully and knowingly” committed the offense charged. Title 29 U.S.C. § 186(d) limits the entire section’s application to persons who “willfully” violate its restrictions. Although in United States v. Ricciardi, supra, the 2d Circuit has ruled that a loan need not be “made because the recipient was an employee representative,” Ricciardi, supra, 357 F.2d at 99 (italics in the original); see Id., 357 F.2d at 100, and that a defendant need not know that he is violating the law, Id. at 100, there is nothing in the holding of Ricciardi that would obviate the statutory requirement that the government prove sufficient knowledge to render the conduct wilful or intentional rather than merely negligent or inadvertent. Cf. United States v. Byrd, 352 F.2d 570, 571-574 (2d Cir. 1965); United States v. Irwin, supra. Thus it may well be that where a transaction was entered into in the regular course of the business of a lending institution, a jury might, depending on the facts, find that the defendant lacked sufficient knowledge of the employee relationships to make the conduct wilful. Courts should not reach out to decide constitutional issues. See Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 345-348, 56 S.Ct. 466, 482-484, 80 L.Ed. 688 (1936) (Brandeis, J. concurring). Moreover,
“one to whom application of a statute is constitutional will not be heard to attack the statute on the ground that impliedly it might also be taken as applying to other persons or other situations in which its application might be unconstitutional.” United States v. Raines, 362 U.S. 17, 21, 80 S.Ct. 519, 4 L.Ed.2d 524 (1960).
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