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10528147-14542 | WALLACE, Circuit Judge:
Attwood appeals from the district court’s dismissal of her action arising from her termination by Mendocino Coast District Hospital (the Hospital). Relying on Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976) (Colorado River), the district court declined to exercise its jurisdiction because of ongoing duplica-tive state court litigation. Attwood does not contest the district court’s deference to the state proceedings, but does challenge the decision to dismiss rather than stay her action. We have jurisdiction over this timely appeal pursuant to 28 U.S.C. § 1291. We reverse the order of dismissal, and remand to the district court with instructions to enter an order staying further proceedings pending completion of the state lawsuit.
I
While on disability leave for a high-risk pregnancy, Attwood resigned from her job as director of the Hospital’s Human Resources Department. Both her state and federal actions arise from this “resignation.” Attwood alleges that Freeman, the Hospital administrator, threatened to fire her and terminate all medical benefits immediately if she did not resign within 24 hours. If she agreed to resign, she would receive medical benefits for six months. Attwood submitted a letter of resignation stating that she had no choice but to resign due to the threatened loss of benefits. The letter expressly reserved her “right to due process.”
After exhausting her administrative remedies, Attwood filed a complaint in state court against the Hospital, Freeman, and Doe defendants. The complaint contained claims for tort and contract relief as well as a claim for deprivation of property without due process in violation of the United States and California Constitutions.
Shortly before the expiration of the one year limitations period following her “resignation,” Attwood decided to name the Hospital’s board members as defendants, and to add a 42 U.S.C. § 1983 claim premised on the deprivation of her property interest in her job without due process. The defendants refused Attwood’s request for a stipulation permitting these amendments to her state court complaint. Att-wood then pursued two courses of action. In the state court, she filed motions to substitute the board members’ names for Doe defendants in her original complaint and to file an amended complaint containing the new section 1983 claim. Attwood also filed, but did not serve, an action in federal court naming as defendants the Hospital, Freeman, and the individual board members. The federal complaint contained the same tort, contract, and due process claims as the state court complaint, and added the section 1983 claim.
The state court denied Attwood’s motions to substitute the board members for the Doe defendants and to add the section 1983 claim. The court held that the request was tardy pursuant to California Code of Civil Procedure section 474 and that the proposed section 1983 claim “fails to state a claim against the Defendants and is a sham.” After the state court denied her motions, Attwood then served her federal complaint on the defendants, including the board members. Citing Colorado River, the defendants then moved to dismiss or stay the federal court action pending resolution of the state court action. The district court dismissed Attwood’s action without prejudice. This appeal followed.
The notice of appeal was filed prematurely. While the district court entered its “Memorandum and Order” dismissing the action on April 27, 1988, it did not enter its judgment on a separate paper pursuant to Fed.R.Civ.P. 58 until December 20, 1988. Attwood filed her notice of appeal nearly seven months before on May 27, 1988. However, Fed.R.App.P. 4(a)(2) provides that with certain exceptions not applicable here, we must treat a notice of appeal “filed after the announcement of a decision or order but before the entry of the judgment or order” as timely. We thus have jurisdiction to consider Attwood’s premature but timely appeal.
II
The issue before us is narrow, but a question of first impression in this circuit: when a district court declines to exercise its jurisdiction under Colorado River, may it dismiss the action without prejudice or must the court merely stay it? The Supreme Court has twice reserved this question. Arizona v. San Carlos Apache Tribe, 463 U.S. 545, 570 n. 21, 103 S.Ct. 3201, 3215 n. 21, 77 L.Ed.2d 837 (1983) (San Carlos Apache Tribe); Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 28, 103 S.Ct. 927, 943, 74 L.Ed.2d 765 (1983) (Cone).
We review as a matter of law the question whether the district court must stay or may dismiss an action when it declines to exercise its jurisdiction under Colorado River. Matters of law are reviewed independently. 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).
The Colorado River doctrine is an exception to “the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.” Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246. Thus, it should be invoked only in exceptional circumstances. Cone, 460 U.S. at 19, 103 S.Ct. at 938-39; Colorado River, 424 U.S. at 818, 96 S.Ct. at 1246-47. Although this doctrine is sometimes referred to as an abstention doctrine, the Supreme Court has rejected this categorization. See Cone, 460 U.S. at 14-15, 103 S.Ct. at 936-37; Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246; Nakash v. Marciano, 882 F.2d 1411, 1415 n. 5 (9th Cir.1989) (amended Aug. 23, 1989) (Nakash) (“the Supreme Court has flatly rejected this [abstention] categorization”); 17A C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure § 4247 at 150-51 (2d ed. 1988). Unlike abstention, which rests on “regard for federal-state relations” and “considerations of proper constitutional adjudication,” Colorado River rests on “considerations of ‘[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.’ ” Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246, quoting Kerotest Manufacturing Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952) {Kerotest)] see also Cone, 460 U.S. at 14-15, 103 S.Ct. at 936-37. The Supreme Court and this circuit have identified and explained how to apply a nonexclusive list of relevant criteria for determining whether exceptional circumstances exist to justify invoking Colorado River. See Cone, 460 U.S. at 15-16, 19-27,103 S.Ct. at 936-37, 938-43; Nakash, 882 F.2d at 1415-16; American International Underwriters (Philippines), Inc. v. Continental Insurance Co., 843 F.2d 1253, 1257 (9th Cir. 1988).
In a ease where a district court invokes Colorado River, it makes no difference to the state proceeding whether the federal action is stayed or dismissed.
[A] stay is as much a refusal to exercise federal jurisdiction as a dismissal. When a district court decides to dismiss or stay under Colorado River, it presumably concludes that the parallel state-court litigation will be an adequate vehicle for the complete and prompt resolution of the issues between the parties. If there is any substantial doubt as to this, it would be a serious abuse of discretion to grant the stay or dismissal at all. Thus, the decision to invoke Colorado River necessarily contemplates that the federal court will have nothing further to do in resolving any substantive part of the case, whether it stays or dismisses.
Cone, 460 U.S. at 28, 103 S.Ct. at 943. (citations omitted). For purposes of appellate jurisdiction, a stay under Colorado River is as much a final, appealable order as a dismissal under that doctrine. See id. at 8-10, 103 S.Ct. at 932-34.
By conceding that the district court correctly invoked Colorado River, Attwood has agreed that beyond “any substantial doubt,” the parallel state court proceedings will provide complete and prompt resolution of the issues in her case. See id. at 28, 103 S.Ct. at 943. The purpose of her appeal is to ensure that if for some reason the state forum turns out to be inadequate, the federal court will remain open to her. Otherwise, she fears, expiration of the statute of limitations may bar her return to federal court, and thus neither the state court nor the federal court will reach the merits of all her claims.
We hold that the district court should have stayed rather than dismissed Att-wood’s action. This holding ensures that the federal forum will remain open if “for some unexpected reason the state forum does turn out to be inadequate.” Cone, 460 U.S. at 28, 103 S.Ct. at 943.
The Supreme Court has strongly hinted that invocation of Colorado River is contingent on keeping the federal forum open if necessary. See San Carlos Apache Tribe, 463 U.S. at 570 n. 21, 103 S.Ct. at 3215 n. 21 (“resort to the federal forum should remain available if warranted”); Cone, 460 U.S. at 28, 103 S.Ct. at 943 (“It is highly questionable whether this Court would have approved a dismissal of a federal suit in Colorado River (or in any of the abstention cases) if the federal courts did not remain open to a dismissed plaintiff who later demonstrated the inadequacy of the state forum.”) (citation omitted). The Court has never approved a dismissal under Colorado River where plaintiffs were foreclosed from returning if necessary to federal court. Cf San Carlos Apache Tribe, 463 U.S. at 570 n. 21, 103 S.Ct. at 3215 n. 21. We have, on at least one occasion, affirmed a dismissal under Colorado River, but this decision predated Cone and San Carlos Apache Tribe; in addition, the issue of whether a stay would have been preferable apparently was never raised. See State of Idaho ex rel. Moon v. State Board of Examiners, 567 F.2d 858, 859-60 (9th Cir.), cert. denied, 438 U.S. 915, 98 S.Ct. 3144, 57 L.Ed.2d 1160 (1978); see also Tovar v. Billmeyer, 609 F.2d 1291, 1293 (9th Cir.1980) {Tovar) (pre-Cone decision stating in dictum that dismissal properly considered when Colorado River test met).
Ninth Circuit cases predating Colorado River are consistent with our view. See Weiner v. Shearson, Hammill & Co., 521 F.2d 817, 820-21 (9th Cir.1975) (Weiner); Shareholders Management Co. v. Gregory, 449 F.2d 326, 327 (9th Cir.1971). The Seventh and District of Columbia Circuits’ cases are also consistent with our holding. See Rosser v. Chrysler Corp., 864 F.2d 1299, 1308-09 (7th Cir.1988) (Rosser); Ma-haffey v. Bechtel Associates Professional Corp., 699 F.2d 545, 546-47 (D.C.Cir.1983) (Mahaffey); Evans Transportation Co. v. Scullin Steel Co., 693 F.2d 715, 717-18 (7th Cir.1982) (Evans).
Our conclusion is supported by the “considerations of ‘[wjise judicial administration’ ” which underlie the Colorado River doctrine, Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246; quoting Kerotest, 342 U.S. at 183, 72 S.Ct. at 221, as well as “the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.” Id. A stay, like a dismissal, avoids the waste of judicial resources from duplicative litigation in two courts. See Weiner, 521 F.2d at 820; see also Rosser, 864 F.2d at 1309; Mahaffey, 699 F.2d at 546-47; Evans, 693 F.2d at 718. Indeed, the choice of a stay rather than a dismissal will have no practical effect if all issues are in fact resolved by the state proceeding. See Board of Education of Valley View v. Bosworth, 713 F.2d 1316, 1322 (7th Cir. 1983) (Bosworth). Where those issues are not resolved, however, only a stay ensures that the federal court will meet its “unflagging duty” to exercise its jurisdiction, see Colorado River, 424 U.S. at 817, 96 S.Ct. at 1246, in case the state proceedings do not reach the expected resolution. Lumen Construction, Inc. v. Brant Construction Co., 780 F.2d 691, 698 (7th Cir.1985). Thus, unlike a dismissal, a stay avoids the risk that the federal plaintiff will be time-barred from reinstating the federal suit. Id.; Bosworth, 713 F.2d at 1322; Evans, 693 F.2d at 717-18. In this way, a stay “will effectively conserve court resources while avoiding premature rejection of the litigants’ access ... to a federal forum.” Mahaffey, 699 F.2d at 546-47.
A stay may be especially appropriate in cases involving section 1983 claims. When rights are asserted under section 1983, federal courts’ “unflagging obligation” to exercise their jurisdiction is “particularly weighty.” Tovar, 609 F.2d at 1293.
A stay also makes it unnecessary to predict how the course of the state proceeding will interact with the federal dismissal to affect the statute of limitations in federal court. This avoids unnecessarily or prematurely reaching speculative and difficult questions of state preclusion and limitations law. By using a stay, a district court invoking Colorado River will not need to make premature and speculative legal findings about the preclusive effect of various possible state judgments in choosing between a stay and a dismissal. Reviewing courts, meanwhile, will likewise avoid such issues in reviewing the district court’s decision to invoke Colorado River.
Attwood is particularly concerned with the section 1983 claim which she attempted to add to her state court complaint. The state court appears to have rejected her section 1983 claim on procedural grounds and on the merits — a decision whose preclu-sive effect in federal court would be determined under California preclusion law. Mi-gra v. Warren City School District Board of Education, 465 U.S. 75, 81, 85, 104 S.Ct. 892, 898, 79 L.Ed.2d 56 (1984). At oral argument, the parties informed us that Att-wood’s remaining state court claims have not yet even come to trial. Attwood points out that the state court section 1983 decision could be reversed before trial and is subject to review in the state appellate courts, and is therefore subject to change. Hypothetically, Attwood suggests, the state appellate court could decide that the trial court erred as a matter of law in rejecting her section 1983 claim on the merits, but acted within its discretion in denying the motion to add the section 1983 claim to her complaint.
Attwood’s hypothetical suggestion raises difficult questions of state procedural law, res judicata, and statute of limitations. Neither party has a clear idea whether, should this hypothetical situation come to pass, Attwood would be time-barred (or otherwise barred) from presenting her section 1983 claim in federal court.
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7853209-11042 | MEMORANDUM and ORDER
WEINSTEIN, Chief Judge:
Defendant chemical companies have appealed from the Magistrate’s Order that defendants produce Drs. Emil J. Bardana, Rolf Hartung and James S. Taylor for deposition by plaintiffs in the Lilley and Hogan cases, part of the complex “Agent Orange” multidistrict litigation. Lilley v. Dow Chemical Co., CV-80-2284 (E.D.N.Y.); Hogan v. Dow Chemical Co., CV-81-0991 (E.D.N.Y.). For the reasons indicated below, the Magistrate’s Order is affirmed as modified; discovery is conditioned on plaintiffs’ payment of reasonable experts’ fees and expenses incurred in discovery.
The three doctors previously examined two of the class representatives in the class action certified in Ryan v. Dow Chemical Co., 79-C-747 (E.D.N.Y.). That action has been settled. See In re “Agent Orange" Product Liability Litigation, M.D.L. No. 381, slip op. (E.D.N.Y. Jan. 7, 1985); 597 F.Supp. 740 (E.D.N.Y.1984). The experts have not examined the plaintiffs in either Lilley or Hogan or in any of the many other individual opt-out and civilian actions still pending before the court in the M.D.L. proceedings. Nor have any of the three physicians been consulted by the defendants in connection with any of the pending individual suits.
Rule 26(b)(4)(A) of the Federal Rules of Civil Procedure governs discovery of an expert who will testify at trial. Rule 26(b)(4)(B) covers an expert “retained or specially employed” by a party “in anticipation of litigation or preparation for trial” but who is not expected to testify at trial. Rule 26(b)(4)(C) provides for assessment of fees and expenses incurred in discovery under Rule 26(b)(4)(A) and (B). Rules 30 and 45 govern discovery by deposition that falls outside the scope of Rule 26(b)(4).
None of the doctors has been involved in pretrial preparation in the Lilley and Hogan cases. It does not necessarily follow, however, that Rule 26(b)(4) does not control discovery of these experts. These three experts were retained by defendants “in anticipation of litigation or [preparation] for trial” in Ryan, a companion case in this multidistrict litigation that raised nearly identical legal and factual issues. See In re “Agent Orange”Product Liability Litigation, 597 F.Supp. 740 (E.D.N.Y.1984). The defendants in the Lilley and Hogan actions are also defendants in the Ryan class action; the plaintiff in Lilley is a Ryan class member who opted out of the class.
One “purpose of the M.D.L. process is to assemble data through discovery that can be used in any related litigation without the need for duplicative efforts.” Id., 597 F.Supp. at 770. The Lilley and Hogan plaintiffs learned of the identity of these experts and their role in defendants’ trial preparation through the M.D.L. discovery mechanism. None of the three experts was previously deposed.
Given the legal and factual similarities, the involvement of many of the same parties, and the procedural realities of the M.D.L. process, it is reasonable to interpret Rule 26(b)(4) to reach experts retained by a party for trial preparation in a closely related case that is before the court as part of the same multidistrict litigation. Cf. Hermsdorfer v. American Motors Corp., 96 F.R.D. 13, 15 (W.D.N.Y.1982) (“applying Rule 26(b)(4)(B) to expert information obtained for the purpose of preparing for numerous lawsuits, some perhaps already filed”) (emphasis in original); In re Sinking of Barge “Ranger I”, 92 F.R.D. 486, 489 (S.D.Tex.1981) (“The test to be applied is whether, in light of the nature of the [information] and factual situation in a particular case, the experts and their information can fairly be said to have been obtained or acquired because of the prospect of litigation.”). But cf. Grinnell Corp. v. Hackett, 70 F.R.D. 326, 333 (D.R.I.1976) (Rule 26(b)(4) applies when “information sought was obtained for the very purpose of preparing for the litigation in question”).
The defendants apparently have not yet decided whether they will call these three doctors at trial in either Lilley v. Dow or Hogan v. Dow. No trial date has been set and no pretrial order has been issued in either case. In light of serious summary judgment motions pending in both cases, it cannot even be said at this time that there will be a trial.
A party “is permitted to execute the trial strategy it deems appropriate to defend its case.” Mantolete v. Bolger, 96 F.R.D. 179, 182 n. 2 (D.Ariz.1982). This discretion “extends to changing the status of an expert,” id., within the limits of good faith and the scheduling orders of the court. Because these experts at this time are not “expected to testify at trial,” Rule 26(b)(4)(B) applies rather than Rule 26(b)(4)(A).
Rule 26(b)(4)(B) requires plaintiffs to make “a showing of exceptional circumstances under which it is impracticable for the party seeking discovery to obtain facts or opinions on the same subject by other means.” Compare Roesberg v. Johns-Manville Corp., 85 F.R.D. 292, 299 (E.D.Pa.1980) and Pearl Brewing Co. v. Joseph Schlitz Brewing Co., 415 F.Supp. 1122, 1138-40 (S.D.Tex.1976) with Marine Petroleum Co. v. Champlin Petroleum Co., 641 F.2d 984, 993-97 (D.C.Cir.1980).
As already observed, the Ryan, Lilley, and Hogan cases all are part of the same multidistrict litigation. A primary purpose of the M.D.L. process is to facilitate discovery and avoid wasted effort. Discovery of the experts retained in Ryan therefore should be permitted in companion cases like Lilley and Hogan when those plaintiffs would have to devote such enormous time and resources to duplicating the experts’ efforts that obtaining the information by other means is “impracticable.”
Dr. Bardana’s deposition is sought for two reasons. First, plaintiffs seek to elicit his testimony on the existence of immunological effects of dioxin exposure in persons exposed at Seveso, Italy. This aspect of their request is denied to the extent that it falls within Rule 26(b)(4), see infra, because plaintiffs have not shown a practical inability to obtain facts and opinions on the subject by other means. Discussion of the Seveso experience is available in the literature. See Fed.R.Evid. 803(18) (material from scientific literature admissible as exception to hearsay rule).
Second, plaintiffs seek to question Dr. Bardana on his evaluation of a class representative who allegedly suffered from an immune system deficiency similar to a disease from which the plaintiff in Hogan allegedly suffers. Because this information is not readily available from any other source, discovery on this issue is permitted.
Dr. Hartung, a toxicologist, developed a detailed exposure profile for each class representative. Plaintiffs seek his opinion on the existence of causation for the class representatives’ alleged medical problems. This information cannot be obtained readily through other means. Plaintiffs may depose this expert for this purpose.
Plaintiffs seek to depose Dr. Hartung on the issue of causation in general. Disclosure is denied. Plaintiffs have not demonstrated a practical inability to obtain information on this issue by other means including the extensive literature on the subject.
Plaintiffs seek Dr. Taylor’s testimony on the causal relationship between exposure and chloracne. Disclosure is denied. Plaintiffs have not shown a practical inability to obtain facts and opinions on this subject by other means. There is extensive literature on this subject.
Rule 26(b)(4) applies only to “[discovery of facts known and opinions held by experts, otherwise discoverable under the provisions of subdivision (b)(1) of this rule and acquired or developed in anticipation of litigation or preparation for trial * * *.” (Emphasis supplied.) Some of the information sought by plaintiffs from Drs. Bardana, Hartung and Taylor and available pursuant to the Magistrate’s order as now modified apparently consists of “facts known and opinions held by” them prior to their initial consultation or employment by defendants in the “Agent Orange” litigation. Discovery of such prior knowledge may be obtained under Rules 30 and 45 of the Federal Rules of Civil Procedure. Norfin v. International Business Machines Corp., 74 F.R.D. 529, 532-34 (D.Colo.1977).
Because plaintiffs’ discovery request is covered in large part by Rule 26(b)(4)(B), they are required by that Rule to pay reasonable fees and expenses. See Fed.R.Civ.P. 26(b)(4)(C); Bosse v. Litton Unit Handling Systems, 646 F.2d 689, 695 (1st Cir.1981); Marine Petroleum Co. v. Champlin Petroleum Co., 641 F.2d 984, 989-90 (D.C.Cir.1980); Cotton v. Consolidation Coal Co., 457 F.2d 641, 646-47 (6th Cir.1972); Keith v. Van Dorn Plastic Machinery Co., 86 F.R.D. 458, 460 (E.D.Pa. 1980).
To the extent that plaintiffs’ request for depositions falls outside Rule 26(b)(4) and is covered under Rule 30, the expert’s entitlement to a reasonable expert’s fee arises under common law precedent and the court’s authority under Rule 1 of the Federal Rules of Civil Procedure. Cf. Fed.R.Civ.P. 26(c), 30(d), 45(b). The expert not only suffers a loss of time from his or her job, like an ordinary witness; he or she also suffers a loss in divulging dearly won expertise. An expert’s knowledge is his or her stock in trade and the expert has a property right to that knowledge. If a litigant seeks to obtain facts or opinions acquired by the expert in furtherance of his or her expertise, as distinct from knowledge possessed by that person as an ordinary actor in or viewer of events pertinent to the case, then the litigant must pay the expert a reasonable expert’s fee. See, e.g., Wright v. Jeep Corp., 547 F.Supp. 871, 877 (E.D.Mich.1982); United States v. Certain Parcels of Land, 15 F.R.D. 224, 235 (S.D. Cal.1953); Walsh v. Reynolds Metals Co., 15 F.R.D. 376, 378 (D.N.J.1954); Lynette D. v. Carlton W., 112 Misc.2d 738, 447 N.Y.S.2d 365 (N.Y.Fam.Ct.1982); Graham, Discovery of Experts Under Rule 26(b)(4) of the Federal Rules of Civil Procedure: Part Two, An Empirical Study and a Proposal, 1977 Ul.L.Forum 169, 200; Maurer, Compelling the Expert Witness: Fairness and Utility Under the Federal Rules of Civil Procedure, 19 Ga.L.Rev. 71, 112-18 (1984); Meyer, Some Problems Concerning Expert Witnesses, 42 St. John’s L.Rev. 317, 325 (1968). Cf., e.g., CF & I Steel Corp. v. Mitsui & Co. (U.S.A.), Inc., 713 F.2d 494 (9th Cir.1983) (requiring tender of fee with subpoena under Fed.R.Civ.P. 45(c) but leaving issue of fee amount open); United States v. Columbia Broadcasting System, Inc., 666 F.2d 364 (9th Cir.) (litigant can be ordered to reimburse nonparty witness for costs of discovery under Fed.R.Civ.P. 26(c) and 45(b)), cert. denied, 457 U.S. 1118, 102 S.Ct. 2929, 73 L.Ed.2d 1329 (1982); Kaufman v. Edelstein, 539 F.2d 811, 817, 821 n. 15 (2d Cir.1976) (affirming court’s power to compel expert witness’s testimony on previously acquired facts and opinions but leaving compensation issue open). See generally Friedenthal, Discovery and Use of an Adverse Party’s Expert Information, 14 Stan.L.Rev. 455, 479-81 (1962).
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3741567-10347 | OPINION
PER CURIAM:
This is a class action filed on behalf of Negro citizens residing in what is called the “predominantly Negro ghetto area” in the three most populous counties of Alabama — Montgomery County, Mobile County and Jefferson County. The plaintiffs seek a preliminary and permanent injunction against the election of legislators, both Senators and Representatives, from these three counties on a county-at-large basis, because they claim that multi-member districting operates to minimize and cancel out the voting strength of Negroes residing in the predominantly Negro ghettos in said counties to the extent that they are deprived of equal protection of the laws under the Fourteenth Amendment to the Constitution of the United States and also in violation of the Fifteenth Amendment. The complaint further seeks a declaration of the unconstitutionality of Section 200 of the Constitution of Alabama requiring that no county be divided to create a legislative district; of the statute providing for the multi-member senatorial districts of the three counties; and of the decree of this Court providing for the multi-mem ber house of representatives districts, and approving and adopting the multimember senatorial districts of the three counties.
All of the plaintiffs to the present action and the classes which they represent are within the broader class bound by the opinion and decree in Sims v. Baggett, n. 2, supra. That case undertook to completely reapportion the Alabama Legislature, both the House of Representatives and the Senate, effective with the term of office of the new legislative seats therein created to commence on the day after the General Election to be held in November 1966 and to remain in effect until after the next decennial census.
At two places in the opinion it requires that “representation in each House be divided according to county lines and that no county be subdivided to create a legislative district.” (247 F.Supp. 103, repeated at 105.) Thus the opinion forbids the kind of redistricting sought by the plaintiffs.
Insofar as the complaint attacks the reapportionment or redistricting for the period covered by the opinion and decree of this Court, the complaint must be treated as an independent action seeking relief from a judgment under Rule 60(b), Fed.R.Civ.P. So treated, we think that the preliminary injunction should be denied for several reasons. The relief is not sought on the basis of newly discovered evidence or changed conditions since the date of the decree. While there have been further important developments in the applicable law, basically the plaintiffs are undertaking to present the question which the Court held was not presented by the record in Fortson v. Dorsey, 1965, 379 U.S. 433, 439, 85 S.Ct. 498, 501, 13 L.Ed.2d 401:
“It might well be that, designedly or otherwise, a multi-member constituency apportionment scheme, under the circumstances of a particular case, would operate to minimize or cancel out the voting strength of racial or political elements of the voting population. When this is demonstrated it will be time enough to consider whether the system still passes constitutional muster. This question, however, is not presented by the record before us.”
As to other aspects of the legislative reapportionment plan for the House of Representatives, that question was not only presented but was sustained in Sims v. Baggett.
The present plaintiffs had an opportunity in Sims v. Baggett to raise the questions now presented but failed to do so. There was no objection at that time to this Court’s holding “that no county be subdivided to create a legislative district” (247 F.Supp. 103, repeated at 105). The complaint in the present action was filed on January 13, 1970, more than four years after the judgment was entered in Sims v. Baggett, swpra, and at such time that a three-judge district court could not be convened for the hearing of the application for preliminary injunction until February 25, 1970, only three days before the expiration of the date for filing notice of candidacy for nomination to office by the Democratic Party of Alabama, the predominant political party in said State. In our opinion the complaint was not filed “within a reasonable time” within the meaning of Rule 60(b), Fed.R.Civ.P.
The plaintiffs urge that by the use of the words “except by order of this Court” in the judgment or decree of Sims v. Baggett, supra, this Court reserved jurisdiction to change the judgment or decree. Assuming that we have such a discretion, we do not think that it should be exercised. Clearly, this Court should not itself subdivide a county for legislative representation during the period of time that it has enjoined the Legislature from so doing, because any such subdivision is, of course, primarily a legislative function.
Nor do we think that a proper case has been made for this Court to compel legislative action. The Supreme Court has recognized that “limitations on the frequency of reapportionment are justified by the need for stability and continuity in the organization of the legislative system.” Reynolds v. Sims, 1964, 377 U.S. 533, 583, 84 S.Ct. 1362, 1393, 12 L.Ed.2d 506. The Supreme Court has further held that decennial reapportionment “would clearly meet the minimal requirements for maintaining a reasonably current scheme of legislative representation.” Id., 377 U.S. at 583, 584, 84 S.Ct. at 1393. The present reapportionment has remained in effect for less than half of the minimal ten-year period. After the completion of the 1970 census the Legislature can be expected with reasonable dispatch to reapportion both the House and the Senate in such a manner as will not deprive any voter of the equal protection of the laws as guaranteed by the Fourteenth Amendment. The earlier action here sought would necessarily be hasty and incomplete, as well as being based upon inadequate and uncertain factual evidence. Since the Legislature has complied with this Court’s decree in Sims v. Baggett, supra, and has been enjoined by this Court from making any changes in the reapportionment therein ordered, we think it would be unreasonable and unwise to require any legislative reapportionment prior to the time fixed in that decree, that is, prior to the first legislative session following the completion of the 1970 decennial census. In our opinion this Court should deny the plaintiffs’ motion for preliminary injunction.
However, we should also deny the defendants’ motion to dismiss the complaint, retain jurisdiction of the complaint, and postpone a hearing on the merits, if any hearing should be necessary, until the Alabama Legislature has reapportioned the two Houses of the Legislature or has unreasonably failed in its duty so to do.
It would, of course, be premature for this Court to pass upon the factual or legal merits of the plaintiffs’ complaint. In our opinion, however, the evidence offered in support of the plaintiffs’ claims, if such evidence is substantiated by the 1970 decennial census and by the further evidence then available, makes out a strong case for the consideration of the Legislature of Alabama. Indeed, in all probability, this Court would grant some relief to the plaintiffs at this time but for the existence of the reasons heretofore stated for denial of the plaintiffs’ motion for preliminary injunction.
If the multi-member election of legislators to the Alabama Legislature from any county on a county-at-large basis operates to minimize or dilute the voting strength of Negroes in said county to the extent that they are deprived of equal protection of the laws under the Fourteenth Amendment to the Constitution of the United States, then, of course, Section 200 of the Constitution of Alabama would in no way prevent the Legislature of Alabama from dividing the county into such separate legislative districts as might be needed to effect compliance with the Constitution of the United States. That is true because of the principle stated in Reynolds v. Sims, 1964, 377 U.S. 533, 584, 84 S.Ct. 1362, 1393, 12 L.Ed.2d 506, that “when there is an unavoidable conflict between the Federal and a State Constitution, the Supremacy Clause of course controls.” Similarly, nothing said in this Court’s opinion in Sims v. Baggett, supra, could prevent a county from being subdivided into separate legislative districts in order to effect compliance with the Constitution of the United States.
It would be premature for this Court to rule upon the plaintiffs’ claims until after the 1970 decennial census and until after appropriate action by the Legislature of Alabama. If further action by this Court then appears appropriate, more exact factual information will be available and the legal and constitutional issues will-be more sharply defined.
ORDER
It is ordered and adjudged by this Court:
1. That the plaintiffs’ motion for preliminary injunction be and the same is hereby denied;
2. That the defendants’ motion to dismiss the complaint be and the same is hereby denied;
3. That the hearing on the merits of the case be postponed until the further order of this Court.
. Title 32, §§ 2 and 2(1) Code of Alabama (recompiled 1958), 1967 Supp.
. Sims, et al. v. Baggett, et al., decided on the 2nd day of October 1965, reported in 247 F.Supp. 96.
. The Court’s decree provides that
“ * * * the apportionment of the Alabama Legislature as herein ordered remain in effect without change, except by order of this Court, until the Legislature of the State of Alabama reapportions itself in accordance with the equal protection provisions of the Fourteenth Amendment to the Constitution of the United States, after the next decennial census to be conducted in 1970, which nothing in this decree shall prevent it from doing; the apportionment of the Alabama Legislature as herein ordered shall remain in effect without any change until such action by the Legislature which shall not occur prior to the next decennial census to be conducted in 1970.”
. See particularly Burns v. Richardson, 1966, 384 U.S. 73, 86 S.Ct. 1286, 16 L.Ed.2d 376 and Chavis v. Whitcomb, S.D. Ind., decided July 28, 1969, 305 F.Supp. 1364, appeal to the Supreme Court of the United States now being sought. [396 U.S. 1055, 90 S.Ct. 748, 24 L.Ed.2d 757, 396 U.S. 1064, 90 S.Ct. 761, 25 L.Ed.2d 82].
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3663766-12891 | Foley, Judge:
The issue for decision is whether petitioners are liable for section 6662(a) accuracy-related penalties relating to tax years ending in 2000, 2001, 2002, 2003, and 2004 (years in issue).
FINDINGS OF FACT
The Weder family controlled two closely held businesses: Highland Supply Corporation (HSC) and Seven W. Enterprises, Inc. (7W). HSC was the parent of a group of corporations (collectively, HSC Group) which filed a consolidated Federal income tax return and manufactured floral, packaging, and industrial wire products. HSC Group included Highland Southern Wire, Inc., and Weder Investment, Inc. (WI). 7W, a corporation principally engaged in leasing nonresidential buildings, was the parent of a group of entities (collectively, 7W Group), which filed a consolidated Federal income tax return. 7W owned an 89-percent interest in Weder Agricultural Limited (WAL), a limited partnership.
In 1990, HSC Group and 7W Group (collectively, petitioners) hired William Mués, a certified public accountant, to serve as their tax manager. Mues had experience relating to personal holding company tax matters and had previously worked at Deloitte Haskins & Sells, preparing tax returns for individuals, corporations, partnerships, and trusts, and at Peabody Coal Co., preparing consolidated returns. In 1991, petitioners promoted Mues to vice president of taxes. While employed by petitioners, Mues drafted documents, performed general legal work, and prepared returns for petitioners and petitioners’ shareholders. Petitioners provided Mues with full access to all resources necessary to handle petitioners’ tax matters (i.e., access to corporate and accounting personnel, corporate records, research databases, and outside professionals). In addition, petitioners authorized Mues to sign, on their behalf, Internal Revenue Service (IRS) documents.
On December 12, 1995, Southpac Trust International, Inc., as trustee of the Family Trust (STl), an entity unrelated to petitioners, executed a $4,062,000 interest-bearing promissory note (the promissory note) for the benefit of HSC. In 1996, HSC assigned the promissory note to WI.
In 1997, the IRS began auditing HSC Group’s 1995 return and eventually expanded the audit to include HSC Group’s 1996 and 1997 returns. On April 2, 1999, the IRS and HSC Group reached a settlement with respect to the audit relating to HSC Group’s 1995, 1996, and 1997 returns. The agreed adjustments were in excess of $2.2 million and included the disallowance of more than $450,000 of deductions relating to HSC’s president’s personal expenses. These adjustments were set forth on Form CG-4549, Income Tax Examination Changes, which required HSC Group’s signature. Mues signed his name on the line labeled “Signature of Taxpayer”. The IRS and petitioners also reached settlements relating to HSC Group’s and 7W Group’s 1998 and 1999 returns. HSC Group had recurring adjustments relating to research and development expenses.
While an employee of petitioners and prior to 2001, Mues obtained a master’s degree in business administration and began law school as a part-time student. In January 2001, Mues resigned as vice president of taxes and continued his legal studies as a full-time student. After resigning, Mues, pursuant to an agreement, provided petitioners with consulting services concerning tax matters and was not subject to petitioners’ supervision or direction. As a consultant, Mues prepared 7W Group’s 2000 return and HSC Group’s 2001 return. In March 2002, after Mues completed law school, petitioners hired him to serve as their vice president of taxes. In accordance with his responsibilities, Mues prepared and signed, on behalf of petitioners, 7W Group’s 2001, 2002, and 2003 returns and HSC Group’s 2002, 2003, and 2004 returns.
With respect to the years in issue, Mues incorrectly characterized petitioners’ income and concluded that petitioners were not liable for personal holding company taxes. The personal holding company tax is a penalty tax on undistributed income and is designed to discourage individuals from using closely held corporations to defer taxation on dividends, interest, rents, and other forms of passive income. See secs. 541, 543; Fulman v. United States, 434 U.S. 528, 530-531 (1978); H. Rept. 704, 73d Cong., 2d Sess. (1934), 1939-1 C.B. (Part 2) 554, 562-563; S. Rept. 558, 73d Cong., 2d Sess. (1934), 1939-1 C.B (Part 2) 586, 596-598. On HSC Group’s 2003 and 2004 returns, Mues incorrectly concluded that interest income, relating to the promissory note held by WI, was income from a source within HSC Group and that WI was not liable for the personal holding company tax. As a result, HSC Group, whose consolidated return included WI, understated its 2003 and 2004 tax liabilities. On 7W Group’s 2000, 2001, 2002, and 2003 returns, Mues made a similar mistake with respect to interest income received by wal. During 2000, 2001, 2002, and 2003, WAL received interest income relating to an installment note issued by an entity outside 7W Group, and each year 7W, in determining its income, took into account a portion of that interest income equal to 7W’s distributive share. For purposes of calculating the personal holding company tax, however, Mues did not take this income into account. In addition, Mues misapplied the personal holding company tax rules relating to rental income and, in doing so, incorrectly concluded that 7W’s rental income was not subject to the personal holding company tax. As a result, 7W Group understated its 2000 through 2003 tax liabilities.
On March 7, 2008, respondent issued 7W Group a notice of deficiency relating to 2000, 2001, 2002, and 2003 and HSC Group a notice of deficiency relating to 2003 and 2004 (collectively, notices). In the notices, respondent determined that petitioners were liable for section 6662(a) accuracy-related penalties. On June 4, 2008, petitioners, whose principal place of business was Highland, Illinois, timely filed petitions with the Court seeking redetermination of the penalties set forth in the notices.
OPINION
Section 6662(a) and (b)(2) imposes a 20-percent penalty on the portion of an underpayment of tax attributable to any substantial understatement of income tax. The parties agree that petitioners’ incorrect reporting of personal holding company tax on their returns relating to the years in issue resulted in substantial understatements of income tax as defined in section 6662(d). See sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). Section 6664(c)(1), however, provides that no penalty shall be imposed if a taxpayer demonstrates that there was reasonable cause for the underpayment and that the taxpayer acted in good faith. See also sec. 7491(c); Higbee v. Commissioner, supra. The determination of whether a taxpayer acted with reasonable cause and in good faith depends upon the facts and circumstances, including the taxpayer’s efforts to assess his or her proper tax liability; experience, knowledge, and education; and reliance on the advice of a professional tax advisor. Sec. 1.6664-4(b)(l), Income Tax Regs.
I. 7W Group's 2000 Return
With respect to its 2000 return, 7W Group contends that it is entitled to relief from the accuracy-related penalty because it relied in good faith on the advice of Mues, an independent, competent tax advisor. Indeed, when he prepared 7W Group’s 2000 return, Mues, having resigned from his position as petitioners’ vice president of taxes, was working for petitioners pursuant to a consulting agreement. Respondent emphasizes that Mues continued to perform the same activities before and after his resignation; requests, in essence, that we ignore the consulting agreement; and urges us to hold that Mues was not sufficiently independent for petitioners to avail themselves of relief pursuant to section 6664(c).
We reject respondent’s contention. Mues resigned, signed a valid consulting agreement, and served as petitioners’ inde pendent contractor. See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-325 (1992); Weber v. Commissioner, 103 T.C. 378, 387-390 (1994) (delineating factors to be considered when determining an employment relationship between parties), affd. 60 F.3d 1104 (4th Cir. 1995). In addition, Mues signed 7W Group’s 2000 return as a paid preparer and the consulting agreement specifically provided that he was not subject to petitioners’ supervision. 7W Group provided Mues, an experienced and knowledgeable tax professional, with all of the relevant information necessary to prepare the return and relied, in good faith, on Mues to accurately and correctly prepare 7W Group’s 2000 return. Therefore, it was reasonable for 7W Group to rely on Mues to prepare its 2000 return. See sec. 6664(c); Montgomery v. Commissioner, 127 T.C. 43, 67 (2006) (stating that it is reasonable to rely on an advisor’s professional judgment if the taxpayer “selects a competent tax adviser and supplies him or her with all relevant information” and that “a taxpayer who seeks the advice of an adviser does not have to challenge the adviser’s conclusions, seek a second opinion, or try to check the advice by reviewing the tax code himself or herself.” (citing United States v. Boyle, 469 U.S. 241, 250-251 (1985))); sec. 1.6664-4(b)(1), (c)(1), Income Tax Regs. Accordingly, 7W Group is not liable for the section 6662(a) accuracy-related penalty relating to 2000.
II. Petitioners’ 2001 Through 2004 Returns
Petitioners contend that they exercised ordinary business care and prudence relating to their 2001 through 2004 returns. We disagree. It is unclear whether petitioners’ myriad of mistakes was the result of confusion, inattention to detail, or pure laziness, but we are convinced that petitioners and Mues failed to exercise the requisite due care. See United States v. Boyle, supra at 250-251; Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43, 98 (2000), affd. 299 F.3d 221 (3d Cir. 2002).
Petitioners are sophisticated taxpayers. See Campbell v. Commissioner, 134 T.C. 20, 33 (2010); sec. 1.6664-4(b)(1), Income Tax Regs. Indeed, Mues was a well-educated and experienced tax professional with full access to petitioners’ records and personnel. Petitioners readily acknowledge that Mues was familiar with the personal holding company tax rules, yet emphasize that these rules are complex and that Mues’ mistakes were reasonable. The personal holding company tax rules certainly are complex, but Mues failed to apply some of the most basic provisions of those rules. In fact, Mues conceded that in applying the section 543(a)(2) test he “truncated the test” and “misapplied the second prong”. He simply did not read the entire test. Moreover, he did not understand or do the requisite work to ascertain the basic facts relating to petitioners’ income items. For example, the applicability of the personal holding company tax rules to HSC Group (or any member of the affiliated group) depended in part on the determination of whether income items were from inside or outside the affiliated group. See sec. 542(b). Mues failed to recognize that STI (i.e., the debtor on the note held by WI) was an entity outside the HSC Group. Mues was petitioners’ vice president of taxes both when the note was executed and when it was assigned. Furthermore, Mues testified that he knew at the time he prepared HSC Group’s returns that the note’s debtor was outside the group, yet he inexplicably treated the interest income as if it was derived from within HSC Group and not subject to the personal holding company tax. When asked by the Court whether this was reasonable, Mues stated: “it seemed reasonable at the time. It seems less reasonable now in hindsight.” Petitioners’ repeated audit adjustments relating to multiple IRS audits coupled with Mues’ experience, expertise, and education further bolster our conclusion that petitioners failed to exercise ordinary business care and prudence as to the disputed items. See Cobb v. Commissioner, 77 T.C. 1096, 1101-1102 (1981), affd. without published opinion 680 F.2d 1388 (5th Cir. 1982).
Petitioners further contend that the accuracy-related penalties should not apply because they relied on the advice of Mues — a competent tax advisor. Again, we disagree. As previously discussed, good-faith reliance on the advice of an independent, competent tax advisor may constitute reasonable cause and good faith. Sec. 1.6664-4(b)(l), (c)(1), Income Tax Regs.; see also Neonatology Associates, P.A. v. Commissioner, supra at 98. The right to rely on professional tax advice, however, is subject to certain restrictions. See United States v. Boyle, supra at 250-251; sec. 1.6664-4(b), (c), Income Tax Regs. Pursuant to section 1.6664-4(c)(2), Income Tax Regs., “advice” is “any communication * * * setting forth the analysis or conclusion of a person, other than the taxpayer”. (Emphasis added.)
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3802772-10996 | MEMORANDUM OPINION
WILL, District Judge.
Before the Court are defendants’ motion to enforce the settlement agreement reached in this case, and plaintiffs’ motion to amend their third verified complaint purportedly to conform the pleadings to the evidence adduced at trial. Plaintiffs seek to amend their complaint, pursuant to Fed. R.Civ.P. 15(b), by adding claims under 42 U.S.C. §§ 1983 and 1988. For the reasons stated below, we grant defendants’ motion to enforce the settlement agreement, and deny plaintiffs’ motion to amend the complaint.
The Settlement
In their third verified complaint, plaintiffs sought a finding that the defendants were in contempt of this Court for violating the terms of the consent decree of May 5, 1982, entered in Shakman v. Democratic Organization of Cook County, 69 C 2145. The complaint alleged that three individual defendants, Porche, Miller, and Esteban, were promoted to supervisory positions instead of any of the plaintiffs, due to political considerations. At the close of trial, after a conference in chambers, the Court decided to issue a memorandum opinion holding that the Shakman consent decree prohibited patronage promotions, but that individual city employees seeking a promotion did not violate the decree by solicit ing or receiving the help and recommendations of political or other sponsors. Thus, we dismissed the case against the three individual defendants who received promotions which were allegedly based on patronage considerations. See Herron v. City of Chicago, Mem. op. (N.D.Ill. October 3, 1985). The remaining parties and the Court then had extended settlement discussions at the conclusion of which a settlement was reached. The Court then summarized, for the record, the terms of the settlement agreement which had been reached by the remaining parties. Tr. at 429-34.
The terms of that settlement are as follows. The City agreed to pay $70,000 to plaintiffs “in the near future.” That amount explicitly included attorneys’ fees, and any costs or other expenses. Other than the $70,000 payment, each party was to bear its own costs and expenses, including attorneys’ fees. The City also agreed that the next three promotions from Water Rate Taker to Supervisor of Water Rate Takers would be made from the current eligibility list of qualified applicants which includes the six plaintiffs and one other individual. The parties understood that the Court was to enter an opinion making it clear that patronage promotions are prohibited by the Shakman consent decree, that individual employees do not violate the decree by seeking and receiving help in attaining promotions, and that, accordingly, defendants Miller, Esteban, and Porche were dismissed as defendants. Plaintiffs agreed not to appeal the dismissal of those three defendants.
All six plaintiffs were in court when the terms of the settlement were summarized by the Court, and none objected when their attorney, O’Laughlin, agreed to the settlement. Nor did plaintiffs’ co-counsel, MacArthur, object to the settlement. In fact, she thanked the Court for its careful consideration of the case. Now, some of plaintiffs’ attorneys seek to repudiate the settlement. Attorneys Joyce and MacArthur evidently seek an additional $23,000 in fees. Because the City of Chicago refused to acceed to the demand for more money, plaintiffs seek to amend the complaint allegedly to conform the pleadings to the evidence adduced at trial by adding section 1983 and 1988 claims so that they can attempt to recover statutory attorney fees. The relief in the case would not be altered by adding section 1983 and 1988 claims.
Amending the Complaint
Plaintiffs’ attorneys argue that (1) during the course of the trial the nature of the suit changed from one vindicating the rights of the individual plaintiffs to one vindicating the rights of all city employees; (2) the settlement agreement included fees only for the work done on behalf of the individual plaintiffs, and did not encompass fees for the work allegedly done on behalf of all city employees; (3) evidence was adduced at trial proving a violation of sections 1983 and 1988, and that those claims were tried by implicit agreement of the parties so that plaintiffs have a right to amend their complaint under Fed.R.Civ.P. 15(b) to conform the pleadings to the evidence. Finally, attorneys for plaintiffs argue that (4) they should be compensated as private attorneys general due to the alleged benefit they bestowed on all city employees by getting the Court to clarify that patronage promotions are covered by the Shakman decree.
Plaintiffs’ attorneys are wrong on all four counts. First, what became clear during the course of trial was that at most two defendants were promoted based on political considerations, and that at best only two of the six plaintiffs could get any relief if the case were decided by the Court. Furthermore, since the promoted defendants did not violate the decree, they would not be removed from the supervisor jobs and the plaintiffs would get no immediate promotions. Finally, it appeared that the defendants had a potentially strong legal defense to a finding of contempt, i.e., ambiguity in the decree. For these reasons, plaintiffs’ expectations changed, but the nature of the suit did not.
Second, the settlement agreement encompassed the complete agreement of the parties and no further fees were contemplated. It is absolutely clear that no one in court at the time the settlement agreement was entered contemplated that plaintiffs’ attorneys would seek further attorneys’ fees under any guise. As the Supreme Court recently reiterated in the context of Fed.R.Civ.P. 68 offers of judgment, “[i]f defendants are not allowed to make lump sum offers that would, if accepted, represent their total liability, they would understandably be reluctant to make settlement offers.” Marek v. Chesny, — U.S. -, 105 S.Ct. 3012, 3016, 87 Ed.2d 1 (1985). It is clear that defendants can cut off their liability for section 1988 attorney fees with a successful Rule 68 offer. It ought to be equally clear that defendants can cut off all liability, including attorneys’ fees, by settling a case.
This case would not have been settled if open-ended liability for attorneys’ fees under section 1988 had been contemplated. It was not contemplated, and plaintiffs’ attorneys’ attempt to extract more money from the City by amending the complaint to add a claim that neither the parties, nor the Court, thought was being tried during the trial is a transparent effort to get around the valid and final settlement entered on behalf of their clients.
Third, plaintiffs did not try section 1983 and 1988 claims at all, much less by agreement, explicit or implicit. All of the evidence introduced at trial went to the issues raised in the complaint. Plaintiffs claim that Commissioner Corey’s testimony proves a violation of section 1983. Corey testified that calls from the Mayor’s Office 'were the motivating factor in his decision to promote the two defendants, Miller and Esteban, rather than any of the plaintiffs or other eligible candidates.
This evidence was essential to proving one element of a Shakman decree violation. Plaintiffs had to show that political considerations were a substantial or motivating factor in the decision to promote. Whether Corey’s testimony also goes to prove a violation of section 1983 is irrelevant under Fed.R.Civ.P. 15(b). The situation we are presented with here is summed up very succinctly in 3 Moore’s Federal Practice ¶ 15.13[2] at 15-171:
The purpose of an amendment to conform to proof is to bring the pleadings in line with the actual issues upon which the case was tried; therefore, an amendment after judgment is not permissible which brings in some entirely extrinsic issue or changes the theory on which the case was actually tried, even though there is evidence in the record — introduced as relevant to some other issue— which would support the amendment. This principle is sound since it cannot be fairly stated that there is any implied consent to try an issue where the parties do not squarely recognize it as an issue in the trial.
Plaintiffs point to no evidence which is relevant to their section 1983 claim which is not relevant to another issue in the case. In fact, when they did try to introduce evidence of the number of black supervisors, which was only relevant to a charge of racial discrimination, the evidence was excluded as not relevant to any issue in the case.
More importantly, Rule 15(b) does not provide for amending a complaint after settlement. Plaintiffs cite cases which hold that pleadings can be amended to conform to the evidence by adding related causes of action after judgment on the merits of the ease has been entered. See, e.g., Trapnell v. Riggsby, 622 F.2d 290, 294 (7th Cir.1980). They also cite cases which hold that plaintiffs can be considered to be prevailing parties even though the case was settled, and thus can be entitled to statutory attorney’s fees. See, e.g., Brown v. Culpepper, 559 F.2d 274, 277 (5th Cir.1977). However, plaintiffs cite no cases which hold that Rule 15(b) permits adding a claim for statutory attorneys’ fees after a settlement which explicitly included attorneys’ fees. Apparently, until now, no one has had the requisite chutzpah to urge such contention. At least, no case involving an attempt to collect additional fees after settlement has been brought to the Court’s attention.
Enforcing the Settlement Agreement
Voluntary resolution of litigation, through settlement, is favored by the courts. Victory Beauty Supply Co. v. Lus-ter-oil Beauty Products Co., 562 F.Supp. 786, 789 (N.D.Ill.1983). A settlement agreement is a contract, Reichelt v. Urban Investment and Development Co., 611 F.Supp. 952 (N.D.Ill.1985), which cannot be unilaterally repudiated by any of the parties. Debose v. Mueller, 552 F.Supp. 307, 308 (N.D.Ill.1982); see also Village of Kaktovik v. Watt, 689 F.2d 222, 230 (D.C.Cir.1982). The interpretation of a settlement agreement is controlled by state law governing contracts generally. Air line Stewards & Stewardesses Ass’n Local 550 v. American Airlines Inc., 763 F.2d 875, 877 (7th Cir.1985). The primary objective of construing a contract is to give effect to the intent of the parties. Id. citing Schek v. Chicago Transit Authority, 42 Ill.2d 362, 364, 247 N.E.2d 886, 888 (1969). Here, since the agreement is unambiguous, we need look no further. See J.R. Watkins Co. v. Salyers, 384 Ill. 369, 373, 51 N.E.2d 574, 576 (1943). The settlement agreement was intended by all of the parties, and understood by the Court (which participated in settlement discussions) to be a final and complete resolution of the entire case. Attorneys’ fees were included in the amount the City of Chicago agreed to pay to the plaintiffs. Plaintiffs cannot now seek additional fees based on a theory which was neither tried, nor contemplated during the settlement negotiations.
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547988-11441 | Mr. Justice Stone
delivered the opinion of the Court.
The question for decision is whether the petitioners, testamentary trustees, who have paid a tax on the income of the trust estate, which should have been paid by the beneficiary, are entitled to recover the tax, although the government’s claim against the beneficiary has been barred by the statute of limitations. The present suit to recover the tax, brought by petitioners against respondent, the Collector, in the District Court for Massachusetts, resulted in a judgment for petitioners, 8 F. Supp. 354, which was reversed by the Court of Appeals for the First Circuit, 78 F. (2d) 136. We granted certiorari because of the conflict of the decision below with that of the Court of Appeals for the Third Circuit, United States v. Arnold, 89 F. (2d) 246.
Testator, by his will, left property in trust, to pay over the net income to his wife as sole beneficiary, at such times and in such amounts as she should deem best, during her natural life. She elected to take the bequest under the will in lieu of her dower or statutory interest. At that time several circuit courts of appeals had held that in these circumstances, the income payments to the widow are annuities purchased by surrender of the dower interest and not taxable as income to her, until they equal the value of the dower interest. Warner v. Walsh, 15 F. (2d) 367; United States v. Bolster, 26 F. (2d) 760; Allen v. Brandeis, 29 F. (2d) 363. In conformity to the ruling of these decisions, the beneficiary did not include, in her 1928 tax return, any portion of the income received by her from the trust. A deficiency against the trustees was assessed by the Commissioner before, and was paid by them, under protest, from income of the trust, after collection from the beneficiary had been barred by the statute of limitations. After the statute had run, this Court held in Helvering v. Butterworth, 290 U. S. 365 (interpreting § 219, Revenue Act of 1924, c. 234, 43 Stat. 253, 275, corresponding to §§ 161, 162 of the Revenue Act of 1928, c. 852, 45 Stat. 791, 838, under which the present tax was assessed) that the income was taxable to the beneficiary and not to the trustees.
In the present suit, brought by the trustees to recover the tax as erroneously collected, the Collector interposed the defense, sustained by the court below, that the tax which should have been paid by the beneficiary exceeded that paid by petitioners, and that, as any recovery would inure to the advantage of the beneficiary, the defendant could set off the tax debt due from her. One judge concurred, denying the right of set off in view of the bar of the statute, but holding the petitioners not entitled, in equity and good conscience, to recover.
The action, brought to recover a tax erroneously paid, although an action at law, is equitable in its function. It is the lineal successor of the common count in indebitatus assumpsit for money had and received. Originally an action for the recovery of debt, favored because more convenient and flexible than the common law action of debt, it has been gradually expanded as a medium for recovery upon every form of quasi-contractual obligation in which the duty to pay money is imposed by law, independently of contract, express or implied in fact. Ames, The History of Assumpsit, 2 Harv. L. Rev. 53; Woodward, Law of Quasi-Contracts, § 2.
Its use to recover upon rights equitable in nature to avoid unjust enrichment by the defendant at the expense of the plaintiff, and its control in every case by equitable principles, established by Lord Mansfield in Moses v. Macferlan, 2 Burr. 1005 (K. B. 1750), have long been recognized in this Court. See Nash v. Towne, 5 Wall. 689, 702; Gaines v. Miller, 111 U. S. 395, 397; Atlantic Coast Line R. Co. v. Florida, 295 U. S. 301, 309. It is an appropriate remedy for the recovery of taxes erroneously collected, Elliott v. Swartwout, 10 Pet. 137, 156; Cary v. Curtis, 3 How. 236, 246-250. The statutes authorizing tax refunds and suits for their recovery are predicated upon the same equitable principles that underlie an action in assumpsit for money had and received. United States v. Jefferson Electric Co., 291 U. S. 386, 402. Since, in this type of action, the plaintiff must recover by virtue of a right measured by equitable standards, it follows that it is open to the defendant to show any state of facts which, according to those standards, would deny the right, Moses v. Macferlan, supra, at 1010; Myers v. Hurley Motor Co., 273 U. S. 18, 24; cf. Winchester v. Hackley, 2 Cranch 342, even without resort to the modern statutory authority for pleading equitable defenses in actions which are more strictly legal, Jud. Code, § 274b; 28 U. S. C. § 398.
In the present case it is evident that but a single tax was due upon the particular income assessed and that petitioners’ demand arises from the circumstance that the tax was paid from the income by the trustees when it should have been paid by the beneficiary. If the court may have regard to the fact that so far as the equitable rights of the parties are concerned petitioners, in seeking recovery of the tax, are acting for the account of the beneficiary, it would seem clear that the case is not one in which the petitioners are éntitled to recover ex aequo et bono; for under the construction of the will by the court below, which we adopt, any recovery in this action will be income to the beneficiary, and will deprive the government of a tax to which it is justly entitled and enable the beneficiary to escape a tax which she should have paid.
It is said that as the revenue laws treat the trustee and the beneficiary as distinct tax-paying entities, a court of equity must shut its eyes to the fact that in the realm of reality it was the beneficiary’s money which paid the tax and it is her money which the petitioners ask the government to return. Formerly, trustee and cestui que trust were likewise distinct in the eyes of the law, as they are today for many purposes. But whenever the trustee brings suit in a court which is free to consider equitable rights and duties, his right to maintain the suit may be enlarged or diminished by reference to the fact that the suit, though maintained in the name of the trustee alone, is for the benefit and in the equitable interest of the cestui.
He can sue to set aside his own voluntary conveyance and impeach it as a breach of trust known to the transferee, because the action, brought to recover property for the trust estate, will inure to the advantage of the innocent beneficiary. Wetmore v. Porter, 92 N. Y. 76; Zimmerman v. Kinkle, 108 N. Y. 282, 15 N. E. 407; Atwood v. Lester, 20 R. I. 660, 665, particularly at 669; 40 Atl. 866, 868, 870; Franco v. Franco, 3 Ves. Jr. 75; American Law Institute, Restatement of the Law of Trusts, § 294. His suit to recover a debt due him as trustee, and payable by him over to the cestui, is subject to the equitable defense that the cestui has discharged the claim, McBride v. Wright, 46 Mich. 265 (Cooley, J.); 9 N. W. 275; Smith v. Brown, 5 Rich. Eq. (S. C.) 291; American Law Institute, Restatement of the Law of Trusts, § 328. That the cestui owes a like amount can be shown by way of equitable plea in set-off, Campbell v. Hamilton, Fed. Cas. No. 2,359; Waddle v. Harbeck, 33 Ind. 231, 234; Ward v. Martin, 3 T. B. Mon. (19 Ky.) 18; Driggs v. Rockwell, 11 Wend. (N. Y.) 504, 508; Wolf v. Beales, 6 Serg. & R. (Pa.) 242, 243; Agra & Masterman’s Bank v. Leighton, L. R. 2 Ex. 56, 65; American Law Institute, Restatement of the Law of Trusts, § 329. In an action in general assumpsit, this defense may be shown under the plea of non-assumpsit, compare Winchester v. Hackley, supra.
In such cases equity does not countenance the idle ceremony of allowing recovery by the trustee only to compel him to account to the beneficiary who would then have to pay the proceeds to the original defendant. To avoid this circuity of action a court of equity takes cognizance of the identity in interest of trustee and cestui que trust. Likewise here, the fact that the petitioners and their beneficiary must be regarded as distinct legal entities for purposes of the assessment and collection of taxes does not deprive the court of its equity powers or alter the equitable principles which govern the type of action which petitioners have chosen for the assertion of their claim.
Equitable conceptions of justice compel the conclusion that the retention of the tax money would not result in any unjust enrichment of the government. All agree that a tax on the income should be paid, and that if the trustees are permitted to recover no one will pay it. It is in the public interest that no one should be permitted to avoid his just share of the tax burden except by positive command of law, which is lacking here. No injustice is done to the trustees or the beneficiary by withholding from the trustees money which in equity is the beneficiary’s, and which the government received in payment of a tax which was hers to pay. A single error on the part of the taxing authorities, excusable in view of persistent judicial declarations, has caused both the underassessmeht of one taxpayer and the overassessment of the other. But the error has not increased the tax burden of either, for whether the tax is paid by one or the other, its source is the fund which should pay the tax, and only the equitable owner of the fund is ultimately burdened. Cf. United States Paper Assn. v. Bowers, 80 F. (2d) 82. Since in equity the one taxpayer represents and acts for the other, it is not for either to complain that the government has taken from one with its right hand, when it has, because of the same error, given to the other with its left.
Petitioners contend that recovery is precluded by § 275 (a) of the Revenue Act of 1928, which bars a “proceeding in court ... for the collection” of a tax after the prescribed period, and by §§ 607, 609, which are said to prohibit “credit of an overpayment against a barred deficiency.” Section 607 provides that any tax assessed or paid after the expiration of the period of limitation shall be considered an overpayment, and § 609 declares that a credit against a liability, in respect of any taxable year, shall be void “if any payment in respect of such liability would be considered an overpayment under section 607.”
These provisions limit the collection of a tax, and prevent the retention of one paid after it is barred by the statute. They preclude, in a suit by the taxpayer against the collector or the government, reliance on a claim against the taxpayer, barred by statute, as a set-off, or counterclaim. But the demand made upon the trustees was not barred by limitation and it would be an unreasonable construction of the statute, not called for by its words, to hold that it is intended to deprive the government of defenses based on special equities establishing its right to withhold a refund from the demanding taxpayer. The statute does not override a defense based op the estoppel of the taxpayer. R. H. Stearns Co. v. United States, 291 U. S. 54, 61, 62. The statutory bar to the right of action for the collection of the tax does not prevent reliance upon a defense which is not a set-off or a counterclaim, but is an equitable reason, growing out of the circumstances of the erroneous payment, why petitioners ought not to recover.
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1575294-21629 | MEMORANDUM
JUNE L. GREEN, District Judge.
Before the Court are Defendants Eugene A. Ludwig (“Comptroller”) and the Office of the Comptroller of the Currency’s (“OCC”) motion to dismiss on the pleadings or in the alternative, for summary judgment; the opposition and reply thereto; a statement of points and authorities by amicus curiae, American Bankers Association, Bankers Roundtable, Association of Banks and Missouri Bankers, and the response thereto. In-tervenor/Defendant Magna Bank, N.A., has filed its own motion for dismissal or for summary judgment, which is opposed by the Plaintiff.
For the reasons that follow, Defendants’ motions to dismiss are denied, but their alternative motions for summary judgment are granted.
I. BACKGROUND
The Plaintiff in this case is a non-profit trade association representing 577 insurance companies. Plaintiff filed this action in response to a decision made by the Comptroller of the Currency concerning the Interve-nor/Defendant, Magna Bank.
On September 21, 1995, Magna Bank of Missouri and Magna Bank of Illinois, two state-chartered banks, each sent a Letter of Intent to the OCC seeking to convert from state to national bank status, pursuant to 12 U.S.C. § 35 (1994). Magna Bank of Missouri requested to retain ownership in certain corporate assets, which included two subsidiaries: MGI Insurance Agency, Inc. (“MGI Insurance”), and Inbank Insurance Agency, Inc. (“Inbank Insurance”). These subsidiaries act as agents for the sale of annuities, term, universal and whole life insurance, health insurance, disability insurance and long-term care insurance. (A.R. I at 189-92; AR II at 375.) On November 15, 1995, the Comptroller of the Currency issued opinions approving of the conversion of the two banks and granting permission for the merger of Magna Bank of Illinois into Magna Bank of Missouri (collectively “Magna”). The Comptroller also authorized Magna’s retention of ownership of the stock of the corporation engaged in insurance agency activities (MGI Insurance and Inbank Insurance). The Comptroller approved Magna’s retention of this stock pursuant to 12 U.S.C. § 35, which ostensibly gives him the discretion to permit a state bank converting into a national bank to “retain and carry” certain nonconforming assets.
Plaintiff challenges the Comptroller’s interpretation of this provision of the statute and states that it is contrary to the National Banking Act (“NBA”), 12 U.S.C. § 1 et. seq. (1994), which limits the authority of national banks to engage in a wide range of activities. Plaintiffs point specifically to 12 U.S.C. § 92 (1994), which permits national banks to sell insurance, but only if the bank is “located and doing business in any place the population of which does not exceed five thousand inhabitants.” 12 U.S.C. § 92. The insurance agencies in this case operate in part in offices situated in communities with populations that exceed 5,000. (A.R. I at 12.)
In its complaint, Plaintiff seeks a declaration that the OCC exceeded the statutory grant of authority in 12 U.S.C. § 35, and in so doing violated the Administrative Procedure Act (“APA”), 5 U.S.C. § 552(a)(1)(D), and the Federal Register Act (“FRA”), 44 U.S.C. § 1505(a)(3). Plaintiff also seeks a permanent injunction prohibiting the OCC from allowing Magna or any other national bank from engaging in insurance activities in violation of the NBA.
II. DISCUSSION
The Defendants’ motion, in the first instance, is made pursuant to Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when the Complaint fails to state a claim upon which relief can be granted. When assessing the adequacy of a Complaint under Federal Rule of Civil Procedure 12(b)(6), the Court must accept the Plaintiffs allegations as true and construe those allegations in a light most favorable to the Plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). Moreover, “a motion to dismiss should be granted only when it appears beyond doubt that, under any reasonable reading of the complaint, the Plaintiff will be unable to prove any set of facts that would justify relief.” Haynesworth v. Miller, 820 F.2d 1245, 1254 (D.C.Cir.1987).
A. Reviewability Under the Administrative Procedure Act
The OCC seeks dismissal on the basis that the Comptroller’s decision to allow Magna Bank to retain its nonconforming assets following conversion, is discretionary and therefore not judicially reviewable.
The APA sets forth provisions for judicial review of agency actions, 5 U.S.C. §§ 701-706, with a strong presumption toward judicial reviewability. See Dickson v. Secretary of Defense, 68 F.3d 1396 (D.C.Cir.1995). That presumption, however, is limited by 5 U.S.C. § 701(a)(2), which prevents judicial review of agency decisions “to the extent that ... [the] agency action [at issue] is committed to agency discretion by law.” The reasoning behind section 701(a)(2) is that judicial review should not be available in those instances where a court would have no meaningful standard against which to judge the agency’s exercise of discretion. Heckler v. Chaney, 470 U.S. 821, 830, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985). In other words, in such situations, discretion really does mean absolute discretion.
While determining which eases warrant such treatment has been the subject of some interpretation, authority is in general agreement that such unreviewability is a narrowly drawn exception. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). In Chaney, for instance, the Supreme Court, while finding unreviewable the Food and Drug Administration’s decision not to undertake certain enforcement action, also reaffirmed the narrowness of this exception. 470 U.S. at 837. Six months after the Supreme Court decided Chaney, the Court of Appeals for this circuit analyzed the reviewability issue in Robbins v. Reagan, 780 F.2d 37 (D.C.Cir.1985). In Robbins, the Court of Appeals viewed the Chaney decision simply as adding agency non-enforcement decisions to the small list of presumptively non-reviewable agency action, along with State Department action in foreign affairs and Federal Reserve Board decisions setting interest rates. 780 F.2d at 45 quoting (Cardoza v. Commodity Futures Trading Comm’n, 768 F.2d 1542, 1549 (7th Cir.1985)). More important, however, Robbins provides a framework for measuring suitability of judicial review for discretionary agency actions taken pursuant to 5 U.S.C. § 701(a)(2). That framework permits courts, even in the absence of statutory guidelines, to look not only to agency policy statements, but also to the statutory scheme by which congressional intent of a general goal might be inferred. 780 F.2d at 45.
The Plaintiffs position is that the discretionary language of 12 U.S.C. § 35 does not give the Comptroller the authority permanently to override statutory limitations on national bank activities as set forth in the NBA, and that this conflict provides a meaningful standard for judicial review. PI. Opp. at 16. As a further standard, Plaintiff points to .section 35 itself which states that converting banks “shall have the same powers and privileges” as originally organized national banks.
With regard to any policy statements, Plaintiff cites the OCC’s own policy manual issued to its field examiners which states “[g]enerally, converting institutions must dispose of ineligible assets within a reasonable time after conversion.” (A.R. II at 561, (Corporate Reference Manual/Conversion Examinations ).)
Finally, the Plaintiff argues that the Comptroller’s longstanding prior practice of requiring converting banks to divest themselves of nonconforming assets, is a standard by which to measure the Comptroller’s discretion here. The OCC does not dispute that this has been its practice. (Pl.’s Opp. to Def.’s motion at 16.)
The Court agrees with the Plaintiff. Given the presumption of judicial review and insofar as the Robbins case allows the Court to look toward such factors as a statutory scheme and/or policy statements, there are standards here by which this Court can measure the discretionary activity of the Comptroller. The existence of the NBA and its provisions limiting the very activities the Comptroller has granted, as well as the Comptroller’s own policy statements and longstanding practices concerning that discretion, indicate to the Court that such discretion was not intended to be absolute, but subject to judicial review.
Having found that such review is available, the motion to dismiss on the pleadings must be denied. The remaining issues, whether the Comptroller properly exercised his discretion, are fact-dependent and, although there does not appear to be any factual dispute, are more appropriately analyzed under the OCC’s alternative motion for summary judgment.
B. Summary Judgment Standard
Unlike a motion to dismiss, which is made pursuant to Rule 12 of the Federal Rules of Civil Procedure, a motion for summary judgment is made pursuant to Fed.R.Civ.P. 56(e). Rule 56(c) provides that summary judgment “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.” In deciding a motion for summary judgment, the material before the Court “must be viewed in the light most favorable to the [nonmoving] party.” Adickes v. S.H. Kress and Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).
C. Standard of Review Under the APA
Finding that the Comptroller’s actions are reviewable, the Court must next determine whether the Comptroller’s interpretation of Section 12 U.S.C. § 35 is proper.
The Supreme Court, in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), set forth a multi-step analysis for making such a review. The Court must first look at the statute and/or its legislative history and decide “... whether Congress has spoken directly to the precise question at issue. If the intent of Congress is clear, that is the end of the matter.” Id. at 842. If it is not clear or there is some ambiguity or if Congress was silent, “the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. at 843. Whether it is permissible depends upon the reasonableness of the agency’s interpretation. The Supreme Court concluded that the interpretation should be given “considerable weight” and “deference.” Id. at 844.
Here, the dispute is over the meaning of 12 U.S.C. § 35 and whether it grants the Comptroller the authority to allow a state chartered bank, converting to a national bank, indefinitely to retain its nonconforming assets.
That section provides:
The Comptroller of the Currency may, in his discretion and subject to such conditions as he may prescribe, permit such converting bank to retain and carry at a value determined by the Comptroller such of the assets of such converting bank as do not conform to the legal requirements relative to assets acquired and held by national banking associations.
Id.
The Plaintiff argues that this section is silent on the issue of whether a converting bank must eventually divest itself of nonconforming assets and, in any event, that interpreting section 35 to allow banks to retain such assets indefinitely would give them privileges beyond other nationally chartered banks. Plaintiff argues that such a result could not have been intended by Congress and cites the first part of section 35 and the NBA in support.
The Plaintiffs interpretation is not correct. There is nothing on the face of the statute or in its legislative history that requires such a narrow reading as Plaintiff suggests. The terms “retain and carry,” are plain enough, and given their ordinary meaning, do not suggest to the Court that ultimate divesture of nonconforming assets is a built in, yet unstated component of section 35. The legislative history also supports the Comptroller’s interpretation, showing that the purpose of section 35 was to remove impediments from state banks seeking to convert to national bank status by allowing them to retain their nonconforming assets. In fact, the legisla- five history suggests that encouraging banks to convert (while keeping them financially sound by avoiding divestiture) appears to be an important purpose of section 35.
The Plaintiff makes much of a preceding paragraph of section 35, which states:
When the Comptroller has given to such bank or banking association a certificate that the provisions of this Act have been complied with, such bank or banking association ... shall have the same powers and privileges, and shall be subject to the same duties, liabilities, and regulations, in all respects, as shall have been prescribed by the Federal Reserve Act and the National Bank Act for institutions originally organized as national banking associations.
12 U.S.C. § 35. A full reading of the statute, however, makes it clear to the Court that this portion of section 35 is meant to set the baseline for how converting banks are to be regarded once they have completed the conversion process. It comes at the end of a long paragraph on what the bank must do in order to convert. It is compelling to the Court that the “retain and carry” paragraph, by its placement at the' end of the section, was intended to modify the earlier stated provisions by giving the Comptroller the broad discretion to make exceptions with regard to retention of nonconforming assets. To find otherwise would be to imply limitations on section 35 that are not stated on its face. The Court can not do that.
Under section 35, the Comptroller has the express authority to permit a converting bank to retain its nonconforming assets “subject to such conditions as he may prescribe ...” Id. If he so chose, the Comptroller, under this provision, could properly decide that those “conditions” would be the permanent retention of the nonconforming assets.
The language of 12 U.S.C. § 35 is clear to the Court and under the Chevron analysis, this ends further judicial inquiry on statutory interpretation.
Even if this were not the ease, the Court would still find the Comptroller’s interpretation to be proper insofar as it was reasonable. As part of its decision, the Comptroller relied on a 17-page legal memorandum, prepared by two counsel for the OCC, interpreting section 35. (A.R. I at 26.) That interpretation, like the Court’s, relies upon the plain language of section 35 and its legislative history, and concludes that retention of nonconforming assets is at the broad discretion of the Comptroller. (A.R. 1 at 27.) Such a construction is permissible and should be given controlling weight.
D. Review of the Comptroller’s Decision Concerning Magna
In reviewing whether the Comptroller applied section 35 properly to Magna’s application, the Court must decide whether the activity was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706(2)(A). That review is guided by Motor Vehicle Mfrs. Ass’n. of the United States v. State Farm Mutual Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983), which states:
The scope of review under the ‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment for that of the agency. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’ ... Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Con gress has not intended 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 inoview or the product of agency expertise.
[citations omitted]
That case also states that a reviewing court should “uphold a decision of less than ideal clarity if the agency’s path may be reasonably discerned.” Id. The Comptroller points to its own policy statements made in 1993 to explain its decision to allow Magna to retain the nonconforming insurance subsidiaries. See Remarks by Eugene A. Ludwig, Comptroller of the Currency, Merrill Lynch Financial Services Conference, New York, New York, September 12, 1993, reprinted in Office of the Comptroller of the Currency Quarterly Journal (“OCC Quarterly Journal”), December 1993, at 23, 25. In these statements, the Comptroller related the disadvantages of reducing the range of products and services of a financial institution as impoverishing the marketplace and the economy by reducing competitiveness and soundness of financial institutions. Id. The Comptroller stated,
I believe new bank products and services should be presumed permissible if they satisfy two tests:
• First, they must not cause material safety and soundness problems.
• Second, adding the new product or service should, on balance, benefit customers of financial services — and here I mean consumers in the broadest sense, large and small, businesses as well as individuals.
Win, lose or draw, where a new power or innovation meets these tests, I will approve it — if I have the authority to do so. Where I do not have that authority, I will support — and where appropriate seek — legislative change to permit the expansion.
Id.
In 1994, the Comptroller reinforced this policy in testimony before Congress. The Comptroller explained the need for the OCC’s policy to allow banks to participate in providing financial services to the fullest extent permissible under the banking laws: “We must allow banks to evolve so that they are more diversified, can earn adequate returns, and thus can continue to attract new investment.” Statement of Eugene A. Ludwig, Comptroller of the Currency, before the Senate Comm, on Banking, Housing, and Urban Affairs, Washington, D.C., September 22, 1994, reprinted in OCC Quarterly Journal, December 1994, at 60. The OCC also proposed rulemaking in 1994 stating the agency’s intent to permit converting banks to retain nonconforming assets, including subsidiary corporations, to the full extent permitted by 12 U.S.C. Section 35. See 59 Fed.Reg. 61,034 (1994) (proposed rule) (codified at 12 C.F.R. § 5.24).
The Court considers the Comptroller’s interpretation of the last provision in 12 U.S.C. § 35 as reasonable, in light of the language of the statute and the aforementioned evidence of the OCC’s policy to approve, where possible, banks’ participation in financial services activities. While this policy was not iterated by the Comptroller with specific regard to Magna Bank, the Court can reasonably discern the agency’s path toward the Magna Bank decision by looking to the evidence of this policy.
The Plaintiff relies on the Comptroller’s decisions in the past 60 years regarding converted banks’ retention of nonconforming assets in arguing that the provision in section 35 is intended only for transitional purposes during conversion. In light of the OCC’s more recent policy to allow banks to participate in providing financial services to the fullest extent possible, the Court rejects this argument. This change of policy distinguishes the circumstances of the Magna decision from prior OCC decisions that had required converting banks to divest their nonconforming assets.
In addition to this policy to permit banks to engage in the broadest range of services permissible, the record shows that the OCC, in applying section 35, considered whether retention of the nonconforming assets would present any safety and soundness problems, and concluded that it would not. (A.R. I at 1, 24, 196-97, A.R. at 29, n. 9.) Moreover, it appears that the OCC considered the role the subsidiaries played in Magna’s operations and took into account Magna’s request to retain them. (AR II at 374-75, 383-88, 397.) Finally, the OCC considered whether it had the resources to supervise the retained subsidiaries, and concluded that it had the necessary staff with technical expertise. (A.R. II at 394, 401.)
This analysis, along with the framework of OCC’s publicly articulated policy to permit the expansion of bank activities, convinces the Court that the Comptroller’s decision to allow Magna Bank to retain its insurance subsidiaries was neither arbitrary, capricious nor an abuse of discretion.
E. Rule Making Versus Adjudication Under the APA
The Plaintiff claims that the OCC’s decision to permit Magna Bank to retain its insurance subsidiaries following conversion constitutes rulemaking under the APA and that such rulemaking is subject to the APA’s notice and comment requirements. Plaintiff argues that the OCC faded to fulfill these procedural requirements, and therefore, the Comptroller’s decision must be set aside because it was administered “without observance of procedure required by law.” 5 U.S.C. § 706(2)(D).
Plaintiff emphasizes a portion of the definition of a “rule” in the APA, specifically:
‘[R]ule’ means the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency and includes the approval for ... financial structures or reorganizations thereof.
5 U.S.C. § 551(4).
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4249160-26772 | FORMAN, Chief Judge.
Plaintiff, The International Plainfield Motor Co., has filed an amended complaint herein in two counts against the defendant, Local No. 343 International Union, United Automobile, Aircraft and Agricultural Implement Workers of America, C.I.O., (hereinafter known as the Local) and against the defendant, International Union, United Automobile, Aircraft and Agricultural Implement Workers of America, (hereinafter known as the International). In the First Count the plaintiff, among other things, alleges its engagement in the manufacture of trucks and the sale thereof in interstate and foreign commerce as a New Jersey corporation with its principal plant and offices in Plainfield, New Jersey; that the defendant Local is a voluntary unincorporated labor organization representing employees in industry affecting commerce with offices and agents engaged in such representation within the jurisdiction of this court; that the defendant International is a voluntary unincorporated international labor organization engaged in the supervision, representation, guidance and control of subordinate labor organizations affiliated with it, including the defendant Local within the jurisdiction of this court; that the action arises under Section 301 of Title 3 of the Labor Management Relations Act of 1947, 29 U.S.C.A. § 185.
The first count of the complaint further alleges that on October 15, 1948, October 15, 1949 and October 18, 1950, respectively, the plaintiff entered into written agreements with the Local and the International, copies of which are annexed to the complaint and which plaintiff alleges, taken together, constitute the collective bargaining agreement currently in effect between plaintiff and defendants, and that together they have jointly reproduced the form and text of the understanding existing between them by virtue of the said agreements in a printed booklet also annexed to the complaint.
It is further alleged by the plaintiff in the first count that in the said combination of written agreements, plaintiff recognized defendant Local among other Locals, as the sole and exclusive bargaining agents for all of its production and maintenance employees and the said defendants, Local and International, agreed among other things not to engage in strikes at plaintiff’s plant; that beginning on November 13, 1953 both defendants breached the agreement by engaging in strikes, concerted work stoppages, slowdowns, refusals to perform and other interruptions in the services regularly and usually performed which resulted in breakdowns and disruptions in the operation of plaintiff’s business.
The second count of the amended complaint is the same as the first count except that it charges that commencing November 13, 1953, plaintiff’s employees engaged in strikes, concerted work stoppages, slowdowns and other refusals to perform regular and usual services resulting in breakdowns and disruptions in the operation of plaintiff's plant; that both defendants breached their agreement by failing to take appropriate action to end the strikes and other interruptions and by failing to instruct the said employees to return to their normal and usual work.
The plaintiff demanded both compensatory and punitive damages.
The defendants made the following motion addressed to the complaint:
1. To dismiss the complaint as it fails to state a claim against each defendant upon which relief can be granted.
2. For summary judgment in favor of each defendant.
3. To dismiss the action because the complaint fails to state a claim against each defendant upon which relief can be granted in that § 301 of the Labor Management Relations Act of 1947, upon which the action is based, is unconstitutional and invalid.
4. To dismiss the action because of plaintiff’s suit in the Superior Court of New Jersey, Law Division, Union County (Docket No. L 2849-53, The International Plainfield Motor Co., a corporation of the State of New Jersey v. Martin et al.) for the same alleged breach of the agreement which is the subject matter of this action. The defendants in that suit are the individual members of the Union here involved and therefore plaintiff has split its cause of action to unlawfully harass these defendants, and since it has elected to proceed in the New Jersey Superior Court, it has waived its right to sue these defendants in this court.
5. To require the plaintiff to file a more definite statement of its cause of action because the complaint is so vague and ambiguous that the defendants cannot reasonably be required to frame a defensive pleading.
The agreement of October 15, 1948 purports to have been made between the plaintiff and “International Union, United Automobile, Aircraft and Agricultural Implement Workers, Local 343 (an unincorporated association)”, contains the following provision:
“24. The Union agrees that there will be no authorized strikes during the time of this agreement except in the event that subsequent to March 19, 1949 the parties have been unable to agree upon new wage rates and the agreement between the Company and the Union dated July 24, 1948 has expired and, in such event, the rights of the parties shall be the same with respect to the issue of wages as if no contract existed between the parties. The Union agrees not to ratify any unauthorized strike. It further agrees that if an unauthorized strike occurs, the Local and International Union officials will immediately meet with the Company and take appropriate action to end the strike, including, but not limited to, public renunciation of the strike and instructions to employees to return to work. The Union further agrees that in the event of a strike in violation of this agreement, the Company may take disciplinary action against those workers who take part in the strike. The Company, for its part, agrees that there shall be no lockouts during the life of this agreement. As long as the Union, its officers, agents and employees comply with the above provisions the Company agrees not to bring any court action for damages or take other action which is not provided for in this contract, against the Union, its officers, agents and employees for breach of this Section. (Emphasis supplied). Exhibit A to Complaint, paragraph 24, pages 14-15.”
The agreement is executed with the following signatures:
“International-Plainfield Motor Co. By Dwight R. Collin
“International Union, United Automobile, Aircraft and Agricultural Implement Workers of America, C.I.O., Local 343 By George W. Kampf, Jr.
Walter T. Pritchard
Louis T. Fischer
Michael J. Mauro.”
The agreement of October 15, 1949 purports to have been made severally “between Mack Manufacturing Corporation and International-Plainfield Motor Company, hereinafter referred to as the ‘Company’ and Locals 824, 343, 229 and 677, UAW-CIO.” It contained the following provision:
“11. Except as hereinafter expressly specified, the Contracts dated October 15, 1948 between the Company and Locals No. 824, 343, 229 and 677 are each hereby extended for a period of one (1) year from the date hereof. It is understood that the ‘no strike’ paragraphs of said Contracts are subject to the provisions of Paragraph 7 of the Wage Agreement dated September 16, 1949 between the parties.”
The agreement was executed by the following signatories:
“Local 229 “Mack Manufacturing Corporation
F. Klemser, Jr. International-Plainfield Motor
Walter A. Richards Company
Louis H. Arnold By Dwight R. Collin
“Local 343 “U.A.W.-C.I.O.
Walter T. Pritchard W.
Otis M. Webber, Jr. International
De
“Local 677
Warner Sensinger
Ralph Lambert
Robert J. McHugh
Walter Huhn
“Local 824
Charles Boll
Joseph Hohn
Lorenzo Oakley
The agreement of October 18, 1950 purported to have been made “between Mack Manufacturing Corporation, International-Plainfield Motor Company and Locals 229, 343, 677 and 824, International Union, United Automobile, Aircraft and Agricultural Implement Workers of America, C.I.O.” The following provision is contained in this agreement:
“21. Except as it may be modified or amended by. the provisions of this memo, the Agreement dated October 15, 1949, shall be continued in effect for a period of five (5) years from the date hereof”.
The signatories who executed this agreement appear as follows:
“Local 229 “MACK MANUFACTURING CORP.
Henry S. Gildersleeve Dwight R. Collin
Frank Klemser Jr. T. Miller
“Local 343 C. F. Larsen
Percy E. Gill A. C. Schliemer
J. M. Alberti Louis T. Fischer “INTERNATIONAU-PLFD, MOTOR CO.
“Local 677 Warner Sensinger Roy Glendenmeyer . Dwight R. Collin A. C. Schliemer”
Robert J. McHugh
Walter Huhn
“Local 824
Joseph Hahn
George W. Kampf, Jr.
International Representative — UAW-CIO-Region 9
The printed booklet referred to in the complaint bears the following legend on its front cover:
Mack Trucks Plainfield Plant Agreement between INTERNATIONAL-PLAINFIELD MOTOR CO. and the INTERNATIONAL UNION UNITED AUTOMOBILE AIRCRAFT AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA LOCAL No. 343
(Affiliated with the Congress of Industrial Organizations)
October 18,1950.
It contains the same introductory paragraph as is set forth above in the agreement of October 18, 1950. It is to be noted that on page 87 of the booklet, what purport to be the printed signatures of the parties are headed under the sentence, “Executed this 15th day of October 1949 (sic) at New York, N. Y.” Then the signatures are printed as they .appear in the agreement of October 15, 1949 and not as they appear in the agreement of October 18, 1950. Other agreements follow in the booklet.
The defendants supported their motion with the affidavits of Martin Gerber, a member of the Executive Board of the ■defendant International, also known as “Regional Director”. Among other things, he averred that under the constitution of the defendant International .an international representative worked under the direct supervision of the member of the International Executive Board •of the region to which he is assigned; that he was without authority to negotiate the terms of a contract without first ■obtaining approval of the local union, whereupon he is required to refer it to the Regional Director for his recommendation to the International Executive Board for its approval or rejection; ■that the member of the Executive Board shall examine all contracts within the region before they are signed and submit them to the Executive Board with his recommendation; that in the event that he recommends approval, the contract becomes operative until the final action is taken by the Executive Board; and that “no local or other subordinate body, no officer, agent, representative or member thereof shall have the power or authority to represent, act for, commit or bind the International Union in any matter except upon express authority having been granted therefor in writing by the International Executive Board or the International President.”
In his affidavits, Mr. Gerber denied that the defendant, International; was party to any of the agreements; that on their face they do not purport to be made between the plaintiff and the defendant, International, but solely with the locals; that the agreements of October 15, 1948 and 1949 had expired and the signature of George W. Kampf, Jr., as International Representative, on the contract of October 18, 1950, was placed thereon either to identify the document or in his capacity as a witness to the signatures of the officers or negotiating committee of the local or as a method of recommending the contract to the regional director to whom it was his duty to report the contract, but in no case did Mr. Kampf as International Representative have any authority to bind the defendant International.
Mr. Gerber likewise averred that he had not recommended the contract of October 18, 1950 to the Executive Board for its approval, and that neither it nor the International Convention, the highest body of authority of the International Union, had ever approved or ratified the said contract, that the defendant International was not a party to the contract so as to be bound by paragraph 24 of the agreement of October 15, 1948, since it was not named in the introductory paragraph thereof, and its duly authorized signature does not appear thereon; and that to his knowledge no contract exists, as is set out in the print ed booklet attached to the amended complaint.
The motion of the defendants was also supported by the affidavit of George W. Kampf, Jr., for nine years an International Representative of the defendant International, who averred among other things that he corroborated the statements of Mr. Gerber concerning his lack of authority to bind the defendant International ; that he had no general or special authority to bind the defendant, International, by the signature he appended to the agreement of October 18, 1950, the only allegedly subsisting agreement, and that he did not intend to do so when he signed his name to the agreement.
There was also presented on behalf of the defendants, affidavits by Frank Moore, President of the defendant Local in which he, among other things, denied that the defendant Local had ever authorized a strike as alleged by the plaintiff, or ratified any unauthorized strike, or that any strike had in fact occurred during November, 1953, at the plaintiff’s Plainfield plant; that upon receiving notification on November 19, 1953 from plaintiff’s plant manager that certain employees had taken action concerning which he wished a discussion, he and other officials of the defendant Local conferred wtih him; that while he does not concede that any strike was in progress, officials of the local notified employees to terminate an interruption of work which had occurred in a few of the departments and that when, on November 20, 1953, these employees reported for work, they were prevented from returning to work by the action of the plaintiff itself.
On plaintiff’s side, there are affidavits of Dwight W. Collin to show that in 1948 he was Vice President in charge of labor relations and personnel of the Mack Manufacturing Corporation and its wholly owned subsidiary, the plaintiff; that he executed the contract of February 28, 1949 effective as of October 15, 1948 and that it was signed by George W. Kampf, Jr., on behalf of the defendant, International; that this was followed by another agreement dated October 15, 1949, also signed by George W. Kampf, Jr., in the same way that the basic agreement of October 15, 1948 was extended by the agreement of October 18, 1950 for a period of five years, was also signed by the said George W. Kampf, Jr., as International Representative of the defendant, International; that the agreement dated October 15, 1948, as amended and modified by the agreements of October 15, 1949 and October 18, 1950 has been the document covering all collective bargaining relationships between the plaintiff and its employees ever since that date and in accordance with the grievance procedures contained within the said contract, the defendant Local and George W. Kampf, Jr., as the defendant International and its Assistant Director of the Mack Truck Department, has presented 9 disputes for arbitration covering 73 grievances; that in accordance with the terms of the said agreement the plaintiff has paid wages, operated a union shop, checked off union dues and transmitted the same to the defendant Local and has set up an insurance pension fund and paid large sums; that in addition plaintiff has operated its plant in accordance with the contractual provisions involving seniority, layoffs, transfers and all other terms and conditions, and the defendant and employees have accepted benefits in all instances; that the said George W. Kampf, Jr., filed an affidavit in the suit in the Superior Court of New Jersey, Chancery Division, Middlesex County, of H. Russell Reilley et als., Plaintiffs v. Brunswick Ordnance Corporation et als., C-149-51, in which he made reference to the agreements in this suit and to the preparation of a printed contract available for distribution; that paragraph 24 of the contract of October 15, 1948 as extended by the contracts of 1949 and 1950 contains an assumption of obligation on the part of the defendant International with regard to strikes and lockouts; that by virtue of the constitution of the defendant International, international representatives work under the direction of the International President and copies of all contracts are on file with the Secretary-Treasurer of the International; that said George W. Kampf, Jr. has administered the terms and conditions of the contract with the express authorization and under the direct supervision of the defendant International as its International Representative and as a member of the Mack Truck Council, a subsidiary branch of the defendant International ; that the occurrences set forth in the complaint happened since November 13, 1953 and that on that day he demanded that the defendants take appropriate steps to stop the strikes, work stoppages, slowdowns, and other concerted interruptions, but that the defendants failed to do so.
Edward Dinkel also supplied an affidavit on plaintiff’s behalf stating that he is the Secretary of the Mack Truck Corporation and its affiliates including the plaintiff; that in October of 1950 he was Field Personnel Director and charged with the responsibility on behalf of plaintiff for the printing of the collective bargaining agreement between plaintiff and Local 343; that commencing on January 2, 1951 he met with a Committee of the Mack Truck Council and that the representative of Local 343 on the Committee was J. M. Alberti, who was also one of its representatives on the Negotiating Committee; that the Union Committee was headed by George W. Kampf, Jr., the International Representative of the defendant Internationa] and its Assistant Director of the Mack Truck Department; that as a result of the said meetings, printed proofs of the agreement were prepared, copies of which were examined and accepted by the Union; that after the signing of the agreement on October 18, 1950, copies were prominently posted in plaintiff’s Plainfield plant for many months until a printed contract was prepared and available for distribution to the employees, since which time the printed copy has been the working operative agreement used in the daily relations between the plaintiff and the Union.
I
In the case of Frederick Hart & Co. v. Recordgraph Corporation, 3 Cir., 1948, 169 F.2d 580, 581, it was held that
“It is well-settled that on motions to dismiss and for summary judgment, affidavits filed in their support may be considered for the purpose of ascertaining whether an issue of fact is presented, but they cannot be used as a basis for deciding the fact issue. An affidavit cannot be treated, for purposes of the motion to dismiss, as proof contradictory to well-pleaded facts in the complaint.
“It is also well-settled that on a motion to dismiss the complaint must be viewed in the light most favorable to the plaintiff and that the complaint should not be dismissed unless it appears to a certainty that the plaintiff would not be entitled to relief under any state of facts which could be proved in support of his claim; further, no matter how likely it may seem that the pleader will be unable to prove his case, he is entitled, upon averring a claim, to an opportunity to try to prove it. We so held in Continental Collieries v. Shober, 3 Cir., 1942, 130 F.2d 631, 635.”
The defendant International contends that the complaint fails to state a cause of action upon which relief can be granted because examination of the printed booklet alleged to contain the contract between plaintiff and it contains neither reference to it in its introductory clause nor its signature at the end. There is a sufficient showing by plaintiff to create a controversy at this stage of the proceedings as to whether or not defendant International entered into a contractual relationship with plaintiff.
The amended complaint alleging directly a strike by plaintiff’s employees and the agreement of defendants not to engage in a strike and their subsequent engagement therein overcomes the de fendants’ objections voiced to deficiencies in the original complaint.
Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. under which defendants seek to enter summary judgment in their favor provides that a motion for summary judgment “shall be rendered forthwith if the pleadings, depositions, 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. * * * ” (Italics supplied.)
From the affidavits submitted on behalf of the defendants, it appears that there never has been a collective bargaining contract between the plaintiff and the International; that although the contracts were signed by Mr. Kampf as International Representative, his signature was not appended to the contract with the intention of binding the International to the contract, but merely to identify the contract or as a means of recommending it to the regional director for his consideration; that the International representative cannot bind the International Union to anything; that the International did not instruct the members to engage in a strike at the Company; that no such strike occurred; that Article 24 of the 1948 contract does not bind the International Union to anything and that when any unauthorized strike occurred at the Company the International took appropriate steps to end it.
The defendant Local maintains that its proofs show there was never any such contract in the alleged form of the printed booklet; that no strike was ever authorized by the defendant local and no strike in fact occurred.
The plaintiff, on the other hand, contends its proofs show that there were collective bargaining agreements between it and the defendant International and Local 343 covering the period from 1948; that the said contracts were signed by the International Representative of the defendant International, George W. Kampf, Jr., in accordance with the authority conferred upon him to negotiate such a contract on behalf of the defendant International; that the defendants issued instructions to their members to engage in a strike; that such a strike occurred on or about November 13, 1953; that the officials of the plaintiff demanded of the defendants that they take appropriate action to end the strike and that the defendants refused to take such steps.
It is apparent that the affidavits of the parties set up assertions that are diametrically opposed, and taken together with the well pleaded allegations contained in the complaint, create a genuine issue as to material facts.
II
The defendants next contend that they are entitled to have the complaint dismissed because Section 301 of the Labor Management Relations Act of 1947, 29 U.S.C.A. § 185, on which it is based is unconstitutional and invalid because (a) it attempts to extend the jurisdiction of the United States District Court beyond the limits prescribed by Article III, Section 2 of the United States Constitution and purports to confer jurisdiction without regard to diversity of citizenship; (b) for the same reason it is said that Section 301 violates the rights reserved to the states under the Tenth Amendment and (c) it deprives unions of the defense that an alleged agent for whose acts they are being sued was never authorized to act nor were his actions ratified, and, in consequence, deprives unions of their property without due process of law under the Fifth Amendment.
Section 301 provides,
“(a) Suits for violation of contracts between an employer and a labor organization * * * may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.
“(c) For the purposes of actions and proceedings by or against labor organizations in the district courts ' of the United States, district courts shall be deemed to have jurisdiction of a labor organization (1) in the district in which such organization maintains its principal office, or .(2) in any district in which its duly authorized officers or agents are engaged in representing or acting for . employee members.
“(e) For the purposes of this section, in determining whether any person is acting as an ‘agent’ of another person so as to make such other person responsible for his acts, the question of whether the specific acts performed were, actually authorized or subsequently ratified shall not be controlling.”
The questions raised by defendants in (a) - and ■ (b) have been tested in the lower courts with adverse results to the precise contentions they make here. Among other cases, they were discussed in Colonial Hardwood Flooring Co., Inc., v. International Union United Furniture Workers of America, D.C.Md.1948, 76 F.Supp. 493 and the constitutionality of Section 301 was upheld. In 1950 the Court of Appeals of the Second Circuit affirmed a judgment against the Union under this section in the case of Shirley-Herman Company, Inc., v. International Hod Carriers, Building and Common Laborers Union of America, Local Union No. 210, 182 F.2d 806. Relying on Colonial Hardwood Flooring Co., supra, and other decisions the Court said,
“Thus the section imposes liability - despite the lack of actual authoriza- ' tion or ratification of the acts of union agents. It makes unions suable as entities. It provides for judgments to be recoverable from the union’s assets. And the report of the Senate Committee on Labor ■ and Public Welfare, which considered this bill', noted that ‘to encourage the making of agreements and to promote industrial peace through faithful performance by the parties, collective agreements affecting interstate commerce should be enforceable in the Federal courts.’ The Committee then said that the difficulty at that time was that ‘there are no Federal laws giving either an employer or even the Government itself . any right of action against a union for any breach of contract. Thus there is no “substantive right” to enforce, in order to make the union suable as such in Federal courts.’ Sen.Rep. No. 105, 80th Cong., 1st Sess., 15-17. From this language it must be supposed that the Committee intended its legislation to supply the substantive remedy which it thought needed. And the report of the House Committee on Education and Labor also seems to contemplate a generally applicable and uniform federal substantive right. H.R.Rep. No. 245, 80th Cong., 1st Sess., 46.
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813649-10257 | SETH, Circuit Judge.
The United States has taken this appeal from an order entered by the United States District Court for the District of New Mexico which granted the defendant’s motion to suppress certain evidence seized during the course of the defendant’s arrest. The motion was made prior to trial and was directed to a large number of pills or tablets which the Government asserts contained LSD or mescaline.
The record on this appeal shows that a special agent for the Bureau of Narcotics and Dangerous Drugs, Amadeo Medina, posing as a prospective purchaser of drugs, had been in communication with the defendant. At the time of the incident here in question the defendant had come to Albuquerque, New Mexico, and was met by Agent Medina at the airport. The defendant was carrying a brown leatherlike suitcase at the time. He and Agent Medina proceeded from the Albuquerque Airport to a motel room which had been engaged in the name of the defendant by a third party.
On the arrival of the defendant and Agent Medina at the motel room the defendant opened the suitcase, and showed its contents, a large number of pills, to the agent. The agent then advised the defendant that he wished to have his personal chemist test the tablets before a purchase was made. This appears to have been in accordance with a previous understanding that this would be done. The agent called his “chemist,” who was in fact Special Agent Charles Ray. Agent Ray came to the motel room, was admitted, and the defendant thereupon reached under one of the beds and withdrew the brown leatherlike suitcase, opened it, showing the contents to Ray, and permitted Agent Medina to take sample pills therefrom to give to Agent Ray for testing. When Agent Ray had the samples in hand, which consisted of some sixteen tablets, he advised the defendant and Agent Medina that he would depart to make the chemical tests and would return in some fifteen or twenty minutes.
Agent Ray, upon leaving the motel room, took the sample tablets to a nearby location where he and another agent performed a field-test on them for the presence of LSD and mescaline. Their testimony was that the test was positive in that it indicated the possibility that LSD and mescaline were present in the tablets. The test having been completed, Agent Ray, together with some additional special agents, returned immediately to the motel room for the purpose of arresting the defendant. Upon their arrival, some twenty minutes after Agent Ray’s departure from it, they knocked on the door and were prepared to force it open but Agent Medina opened it from the inside. The Special Agents who then accompanied Ray thereupon arrested the defendant, and at about the same time Agent Ray reached down and removed the suitcase from underneath the bed. This suitcase was in the same place at which it had been located when he had previously been shown it by Welsch. The agents had no warrant for the arrest of Welsch nor did they have a search warrant. It was estimated by the agents that the suitcase contained approximately 75,000 tablets or pills of LSD and mescaline.
The trial court found there was probable cause for the arrest of the defend ant, and we agree. The trial court in response to defendant’s motion suppressed the contents of the suitcase but denied the defendant’s motion to suppress as evidence the sixteen pills which had been taken for analysis by Agent Ray on his first visit to the motel room. The Government contends that the trial court was in error in suppressing the contents of the suitcase seized as above described.
As indicated above, we agree with the trial court that there was probable cause for the arrest of Welsch without a warrant and the entry into the motel room for this purpose was permissible. The Supreme Court has not directly decided the propriety of such an entry but has assumed it to be permissible under the circumstances here present. Jones v. United States, 357 U.S. 493, 78 S.Ct. 1253, 2 L.Ed.2d 1514; Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685.
In the case as it reaches us on this appeal, we are not concerned with a general search of the motel room in which the defendant was properly arrested, but with a seizure alone. The same Fourth Amendment protections of course are applicable. At the time the arrest was made, Agent Ray seized the suitcase containing the tablets at the place from which he had seen it removed by the defendant about twenty minutes previously for the purpose of providing him with samples. When seized, the suitcase could not actually be seen from the place of arrest, but the agent upon his return to the motel room for the purpose of arresting Welsch knew its location and what it contained. We hold that it is not significant in what capacity he had obtained this information a few minutes before as he was lawfully on the premises. See Stoner v. California, 376 U.S. 483, 84 S.Ct. 889, 11 L.Ed.2d 856.
Under these facts, and considering the time interval, we must regard the suitcase as if it had been in “plain sight” at the time of the defendant’s arrest. The reasons for the existence of the “plain sight” exception, which need not be here related, are applicable, are persuasive under these circumstances, and convince us to apply the “plain sight” doctrine.
In considering the time Agent Ray had to act, and in view of the fact that he had told the defendant that the test would take some twenty minutes, the record shows that there was not time to perform the tests within this period and to secure a warrant for the arrest of the defendant or a warrant for the search of the premises. The agents so indicated in their testimony. It is apparent under these conditions that Agent Ray could not have stayed away any extended time from the motel room. We hold that there was not time after testing the pills for the agents to apply for, have issued, and serve warrants for arrest or for search;
The Supreme Court, in Coolidge v. New Hampshire, 403 U.S. 443, 91 S.Ct. 2022, 29 L.Ed.2d 564, considered the plain sight doctrine under somewhat comparable circumstances. The opinion of the Court, insofar as it was concurred in by a majority, and as initially published, indicates that in Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685, the Court attempted to confine the exceptions to the warrant requirements “to their appropriate scope.” The opinion of the Court in Section II D states: “The ‘plain view’ exception is intimately linked with the search incident exception * * and it also said: “To permit warrantless plain-view seizures without limit would be to undo much of what was decided in Chimel, * * ” The majority opinion in the same section also states:
“To begin with, in Chimel v. California, supra, we held that a search of the person of an arrestee and of the area under his immediate control could be carried out without a warrant. We did not indicate there, and do not suggest here, that the police must obtain a warrant if they anticipate that they will find specific evidence during the course of such a search. See n. 24 supra.”
The note 24 in the above quotation refers to a footnote in the opinion of the Court under Section II C thereof which will be hereinafter referred to. Again the opinion of the Court in Coolidge in the concluding paragraph of Section II D says in part:
“We are convinced that the result reached in this case is correct, and that the principle it reflects — that the police must obtain a warrant when they intend to seize an object outside the scope of a valid search incident to arrest — can be easily understood and applied by courts and law enforcement officers alike.”
We consider that the portions of the opinion of the Court in Coolidge which are above referred to are applicable to the case before us in ruling on this appeal from disposition of a pretrial motion. In reference to the last quotation in the above paragraph, the Court refers to items which the officers “intend to seize.” We take this to mean preexisting knowledge of the identity and location of an item sufficiently in advance of the seizure to permit the warrant to be applied for and issued. In the case before us, as indicated above, there was no such time interval and we are thus placed within what was in “plain sight” and within the limitations of a Chirnel rule “search.” Applying these standards, we reach the conclusion that the seizure was within such limitations. It is apparent that when an object is in “plain sight,” under the definition we have used in this appeal, its location relative to the place of arrest may become of less significance. But in any event, and under the facts before us, the suitcase in question was located at a place within the motel room and close to the point where the arrest was made. It was within the Coolidge-Chimel “plain sight” space limitations although only in constructive sight.
In the opinion of the Court in the Coolidge case in Section II C thereof, there appears a footnote 24 which considers in some detail the relationship of the plain view doctrine to Chirnel. This is the section of the opinion of the Court which announces the “inadvertency” condition to the plain sight rule, and it does not appear from the several opinions announced by the Court that this section was concurred in by a majority. It is however significant even if the inadvertent reference is ignored. The writer of the opinion of the Court in this footnote states there is no conflict between the plain view doctrine and Chirnel, and says in part:
“Where, however, the arresting officer inadvertently comes within plain view of a piece of evidence, not concealed, although outside of the area under the immediate control of the ar-restee, the officer may seize it, so long as the plain view was obtained in the course of an appropriately limited search of the arrestee.”
The several opinions in Coolidge v. New Hampshire make reference to the seizure of “contraband,” but also to Warden v. Hayden, 387 U.S. 294, 87 S.Ct. 1642, 18 L.Ed.2d 782. Contraband was seized in the ease before us and we are not concerned with the question of whether or not a distinction between contraband and other evidence has really survived Warden v. Hayden.
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12522559-15165 | TASHIMA, Circuit Judge:
In order to facilitate the enforcement of federal judgments, 28 U.S.C. § 1963 provides that a judgment entered in a federal court may be registered in any other federal district by "filing a certified copy of the judgment" in that district. In this case we address, as a matter of first impression in our Circuit, whether personal jurisdiction over the judgment debtors in the district of registration is required for such registration of a judgment. We hold that it is not, because neither § 1963 nor due process imposes such a personal jurisdiction requirement. We therefore reverse the order and judgment of the district court, and remand.
BACKGROUND
In 2002, Plaintiffs-Appellants Fidelity National Financial, Inc., and Fidelity Express Network, Inc. (collectively, "Fidelity"), obtained a multimillion dollar civil fraud judgment (the "California Judgment") against Defendants-Appellees the Friedmans and Meshkatais (collectively, "Defendants") in the U.S. District Court for the Central District of California. This judgment became final on May 15, 2003, after this Court dismissed Defendants' appeal from the judgment.
While Defendants' appeal in the original case was pending, Fidelity registered the California Judgment in the District of Arizona pursuant to the federal registration statute, 28 U.S.C. § 1963. In 2007, Fidelity attempted to renew the Arizona judgment. However, on March 2, 2012, the District Court of Arizona ruled that Fidelity's 2007 renewal or re-registration of the Arizona registered judgment were void as untimely, because the judgment had already expired under Arizona's five-year statute of limitations for the enforcement of judgments.
Unable to enforce the Arizona registered judgment or re-register the original California Judgment in Arizona, Fidelity came up with a creative alternative. Fidelity registered the California Judgment in the Western District of Washington (the "Washington Judgment") Fidelity then registered the newly-obtained Washington Judgment in the District of Arizona (the "Second Arizona Judgment").
Several months later, Defendants moved the Arizona District Court under Federal Rule of Civil Procedure 60(b) to vacate the newly-registered Second Arizona Judgment as void, arguing that § 1963 did not allow successive registration of federal judgments. That is, Defendants argued that registering the California Judgment in Washington did not create a new Washington judgment that could then be registered in Arizona under § 1963. Defendants also argued that, in any case, the Washington Judgment was invalid for lack of personal jurisdiction over Defendants. The Arizona district court granted Defendants' motion and vacated the Second Arizona Judgment, holding that § 1963 did not allow successive registration of judgments-in other words, that only an original judgment, such as the California Judgment in this case, may be registered in another district under § 1963. See Fid. Nat'l Fin., Inc. v. Friedman , 939 F. Supp. 2d 974, 979-87 (D. Ariz. 2013). The district court did not reach Defendants' second argument regarding lack of due process and personal jurisdiction. Id. at 986-87.
Fidelity appealed, and this Court reversed. Fid. Nat'l Fin., Inc. v. Friedman , 803 F.3d 999 (9th Cir. 2015) (" Fidelity I "). We held that registering the California Judgment in Washington created a "new" Washington judgment that, like any other Washington judgment, could be re-registered in another state under the plain terms of § 1963. Id. at 1003. We remanded the case to the Arizona district court on that basis, without reaching Defendants' alternative argument that the Washington Judgment was void for lack of jurisdiction over Defendants. See id. at 1003 n.3.
On remand, the district court again granted Defendants' Rule 60(b) motion for relief from judgment, after allowing supplemental briefing on Defendants' contention that the Washington Judgment was void because the Western District of Washington lacked personal jurisdiction over Defendants at the time of registration. See Fid. Nat'l Fin. Inc. v. Friedman , No. CV-15-2288-PHX-DJH, 2017 WL 6049376 (D. Ariz. May 1, 2017). The district court held that registration of a judgment pursuant to § 1963 requires that the court of registration have personal jurisdiction over the judgment debtors. See id. at *6-7. In reaching this conclusion, the district court first noted that a judgment is void if the court that "rendered" the judgment lacked jurisdiction over the parties. Id. at *5. It then reasoned that because we suggested in Fidelity I that registering a judgment under § 1963 creates a "new" judgment, the court of registration can be said to have "rendered" a judgment such that the normal jurisdictional requirements apply. See id. at *5-7. Because Defendants had no assets or other contacts in Washington, the district court concluded that the Washington court lacked personal jurisdiction over Defendants; consequently, that the Washington Judgment was void and could not have been validly registered in Arizona. Id. at *4, *7. As a result, the district court vacated the Second Arizona Judgment. Fidelity again appealed.
STANDARD OF REVIEW
This Court "review[s] de novo ... a district court's ruling upon a Rule 60(b)(4) motion ... because the question of the validity of a judgment is a legal one." Export Grp. v. Reef Indus., Inc. , 54 F.3d 1466, 1469 (9th Cir. 1995) ; see also Fidelity I , 803 F.3d at 1001.
DISCUSSION
On appeal, Fidelity asserts that the district court improperly granted relief from judgment because a court need not have personal jurisdiction over a judgment debtor in order to "merely register" a previously obtained judgment pursuant to § 1963. For the reasons explained below, we agree.
First, neither the relevant statute's plain language nor its purpose supports a personal jurisdiction requirement for registration of a judgment. Section 1963 provides:
A judgment in an action for the recovery of money or property entered in any court of appeals, district court, bankruptcy court, or in the Court of International Trade may be registered by filing a certified copy of the judgment in any other district ... when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown. ... A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner.
28 U.S.C. § 1963. Nothing in this provision limits the district courts in which a judgment may be registered to only those that can assert personal jurisdiction over the judgment debtors. Instead, the provision's text is extremely broad, allowing a judgment entered in "any ... district court" to be registered "in any other district." Id. Furthermore, the fact that registering a judgment in another district simply requires "filing a certified copy of the judgment" suggests that the registration process is intended to be simple, essentially an administrative task that does not require any additional judicial action. See id.
Giving effect to this broad statutory language also accords with the provision's purpose, which is "to simplify and facilitate collection on valid judgments." Fidelity I , 803 F.3d at 1003 (citation omitted). Section 1963 aims to spare creditors and debtors "the additional cost and harassment of further litigation which would otherwise be required by way of an action on the judgment in a district court other than that where the judgment was originally obtained." S. Rep. No. 83-1917 (1954), as reprinted in 1954 U.S.C.C.A.N. 3142; see also Stanford v. Utley , 341 F. 2d 265, 270 (8th Cir. 1965) ("[T]he purposes of § 1963 were to simplify and facilitate the enforcement of federal judgments, ... to eliminate the necessity and expense of a second lawsuit, and to avoid the impediments, such as diversity of citizenship, which new and distinct federal litigation might otherwise encounter."). Adhering to the statutory text's expansive license to register judgments in other districts effectuates those purposes; reading a non-existent jurisdictional requirement into the statute would contravene Congress' intent by placing limits on registration that would make the process more onerous and potentially require additional litigation regarding jurisdiction. Thus, we hold that § 1963 itself does not require that a court have personal jurisdiction over a judgment debtor in order to register an existing judgment.
We next turn to the due process basis of the district court's ruling. The district court noted that under this Court's ruling in Fidelity I , registering a judgment in another district pursuant to § 1963 creates a "new judgment" that is treated as if it had been rendered in the new district and that "[a] judgment is void 'if the court that rendered the judgment lacked jurisdiction over the parties ....' " Fid. Nat'l Fin. Inc. , 2017 WL 6049376, at *5 (quoting In re Ctr. Wholesale , 759 F.2d 1440, 1448 (9th Cir. 1985) ). This reasoning, however, is flawed because it incorrectly presumes that constitutional due process protections in the form of a personal jurisdiction requirement attach based on the appearance of a judgment, rather than based on the characteristics of the process that results in that judgment. We must therefore ask this crucial constitutional question: does the Due Process Clause require that a court in which a judgment creditor registers a pre-existing federal judgment have personal jurisdiction over judgment debtors at the time of registration? We hold in the negative.
A long line of Supreme Court cases reflects that the personal jurisdiction requirement of due process is grounded in protecting litigants from being unfairly dragged into a faraway court to defend a suit. See, e.g. , World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 291-92, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980) ("The concept of minimum contacts ... protects the defendant against the burdens of litigating in a distant or inconvenient forum."). The constitutional standard focuses on "whether the 'quality and nature' of the defendant's activity is such that it is 'reasonable' and 'fair' to require him to conduct his defense in that State," i.e., whether the defendant has sufficient "contacts with the forum state such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " Kulko v. Superior Court , 436 U.S. 84, 92, 98 S.Ct. 1690, 56 L.Ed.2d 132 (1978) (quoting Int'l Shoe Co. v. Washington , 326 U.S. 310, 316-17, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ).
A key distinction here, however, is that the process of registering a federal judgment in another federal district pursuant to § 1963 does not involve "maintenance of a suit" or "[conducting a] defense." See id. Instead, registration simply requires "filing a certified copy of the judgment." See 28 U.S.C. § 1963. Defendants make no substantive argument about why, even in the absence of the central concern animating the due-process-based personal jurisdiction requirement, courts must nonetheless have personal jurisdiction to register judgments under 28 U.S.C. § 1963. Constitutional due process requirements depend on the procedures at issue, not semantics-just because a court might be said to "render" a "new" judgment pursuant to registration does not mean that no meaningful distinction exists between, on the one hand, subjecting a person to a lawsuit in which claims are litigated in an ongoing proceeding before a court that may determine or alter substantive rights when it renders a final judgment, and, on the other hand, registering a pre-existing judgment, a process which does not require any party to appear in court and in which no judicial action is taken. See Shaffer , 433 U.S. at 210 n.36, 97 S.Ct. 2569 (holding that, once a judgment is validly rendered against a debtor, the judgment creditor may sue to satisfy the debt with property in a state that lacks personal jurisdiction over the judgment debtor).
Registration of a judgment pursuant to § 1963 can only occur after a court of competent jurisdiction has rendered the original judgment (otherwise there would be no judgment to register). Of course, the court that adjudicated the parties' claims and issued the original judgment must of course satisfy due process requirements such as ensuring personal jurisdiction. Thus, registration will only happen after full due process has been provided during the original adjudication on the merits that determined the parties' substantive rights and obligations. We see no reason why-based on case law, policy, or otherwise-why the simple act of subsequently registering a judgment alters a debtor's substantive rights such that a due process right is triggered. To the contrary, registration itself does not change the amount of money or property owed; it only facilitates collection of a pre-existing judgment.
We therefore hold that once a federal court of competent jurisdiction has determined the parties' substantive rights and entered a judgment following a proceeding that accords with due process, that federal judgment should be enforceable in any other federal district by way of the federal judgment registration statute.
CONCLUSION
For the foregoing reasons, we hold that valid registration of a federal judgment under § 1963 does not require that the court of registration have personal jurisdiction over the judgment debtors. The statute permits a judgment creditor to register a federal judgment "in any other district." 28 U.S.C. § 1963 (emphasis added). Because the Due Process Clause does not require that this broad statutory language be cabined by a jurisdictional limitation, "any ... district" includes districts in which personal jurisdiction over judgment debtors may be lacking. As a result, the Washington Judgment was not void for lack of jurisdiction, and the district court erred by vacating the Second Arizona Judgment on that basis.
REVERSED and REMANDED .
Defendants point out that Fidelity's registration of the California Judgment in Washington was not for the purpose of enforcing the judgment in Washington, but rather for the purpose of creating a new judgment that could subsequently be registered in Arizona and thus provide an end-run around Arizona's statute of limitations on the enforcement of judgments. Defendants' argument that imposing a jurisdictional requirement for registration under § 1963 is appropriate simply because, as applied to the facts of this case, such a requirement would not contravene the statute's underlying purpose of facilitating enforcement in the state of registration and would close a seeming loophole, is unpersuasive. In Fidelity I , this Court rejected Defendants' invitation to "refuse to give effect to Congress' chosen words" simply because doing so "potentially allows plaintiffs to register a judgment that has previously expired under a state's statute of limitations," noting that such an effect is "irrelevant in view of the plain language of § 1963." 803 F.3d at 1003.
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10566-13567 | PATRICK E. HIGGINBOTHAM, Circuit Judge:
This is a dispute over attorney’s fees in a social security case. We adopt the lodestar method for determining the amount of fees, specifying that the preexisting contingency fee agreement is relevant to the reasonableness of the fee but the percentage contracted for is not binding on the Secretary or district court. We also decide that the Secretary and district court may each award fees only for work before them.
I.'
In 1985 Luke Brown retained a New Orleans law firm to represent him in his claim for past-due social security benefits. Brown contracted for a contingency fee of 25 percent of any past-due benefits. Brown’s application for benefits was denied at all administrative levels within the Social Security Administration. Brown thereafter sought review in the United States District Court for the Eastern District of Louisiana; and, on remand from the district court, the administrative law judge recommended a favorable decision. Brown ultimately recovered over $55,000 in past-due benefits.
Counsel documented a total of thirty-nine hours in prosecuting Brown’s claim. Of those hours, twenty-five were spent before the agency, and fourteen were spent before the district court. The Secretary of Health and Human Services approved $4,500 in attorneys’ fees for time counsel spent representing Brown before the agency. Counsel then submitted a fee petition to the district court seeking approval of attorneys’ fees for both administrative and judicial representation in the amount of the balance of 25 percent of Brown’s total recovery. That amount would have been $13,867. The district court, however, observing that it was not authorized by law to award attorneys’ fees for representation during the administrative phase of a social security benefits claim, awarded counsel only $1,680 in fees. Combining this amount with the fee it obtained from the agency, counsel received a total fee equal to 11 percent of Brown’s recovery.
On appeal, counsel argues that the district court abused its discretion by not awarding a fee based on the contingency fee contract. At the very least, counsel contends, the district court should have used the 25 percent contingency fee as a benchmark.
We do not find that the district court abused its discretion in computing counsel’s allowable fee; however, because the district court failed to specify the criteria for its fee determination, we remand for clarification, and if necessary recalculation, consistent with the fee-setting method outlined below.
II.
In petitioning the district court for approval of fees equalling 25 percent of Brown’s total past-due benefits recovery, counsel sought compensation for time spent preparing and conducting Brown’s representation both in the administrative proceeding as well as the court. Whether the district court had jurisdiction to authorize legal fees for work in the administrative proceeding is a question of first impression in this circuit. We are persuaded, however, that under section 206(b)(1) of the Social Security Act, 42 U.S.C. § 406(b)(1), a court has authority to approve attorneys’ fees only when a claimant “represented before the court” has obtained a favorable judgment. The district court, therefore, may consider only court-related services in setting allowable fees for representation before it. On the other hand, Congress has made it equally clear that the authority for setting fees for representation in agency proceedings rests exclusively with the Secretary.
In adopting this interpretation of the Act, we note that we are joined by the First, Third, Fourth, Eighth, Ninth and Tenth Circuits. It follows that the district court did not abuse its discretion by refusing to consider time spent by counsel representing Brown before the agency. However, our review of the district court’s judgment does not end here; we must also determine whether the district court properly exercised its discretion in calculating the fees counsel would be allowed for judicial representation of Brown’s claim.
III.
After computing the total number of court-related hours spent litigating Brown’s claim, the district court arrived at counsel’s allowable fee by multiplying that number by $120, an hourly rate the district court determined was “fair and reasonable compensation.” Brown v. Bowen, No. 85-3449, order at 2 (E.D.La. Nov. 20, 1989). The court gave no explanation why this amount was in its judgment reasonable, neither did the court mention whether the existence of the 25 percent contingency fee contract factored at all in its determination. We do not find that the district court abused its discretion by awarding a fee amounting to less than 25 percent of the recovered benefits. Nevertheless, because today we adopt the so-called “lodestar” approach used by several other circuits in calculating reasonable attorneys’ fees, we remand to the district court for clarification, and if necessary recalculation, of its fee determination consistent with the considerations outlined below.
In the Social Security Act Congress provided that an attorney representing a claimant in a successful past-due benefits claim was entitled to “a reasonable fee to compensate such attorney for the services performed by him in connection with such claim,” not to exceed “25 percent of the total of the past-due benefits” recovered. 42 U.S.C. §§ 406(a), (b)(1). Beyond this, Congress offered no guidance to the courts concerning the method to be used in determining what fee is reasonable in a given case. Contingency fee contracts are limited by the 25 percent ceiling, but are not forbidden by the Act. The weight of such contracts is left unspecified. Counsel urges us to adopt a rule affording contingency fee contracts presumptive reasonableness, or at least a rule that would use the contracts’ terms as a benchmark from which to assess a reasonable fee. While we acknowledge the virtues of contingency fee agreements, in particular, the incentives they create for lawyers to represent claimants that otherwise lack the resources to hire an attorney, they do not inevitably produce a “reasonable” fee. Implicit in this statement is the reality that the statute does not accept the amount contracted for as necessarily determinative of reasonableness. As we have observed in the past, with respect to judicial determination of “reasonable” attorneys’ fees,
Whether or not [the prevailing party] agreed to pay a fee and in what amount is not decisive. Conceivably, a litigant might agree to pay his counsel a fixed dollar fee. This might even be more than the fee eventually allowed by the court. Or he might agree to pay his lawyer a percentage contingent fee that would be greater than the fee the court might ultimately set. Such arrangements should not determine the court’s decision. The criterion for the court is not what the parties agreed but what is reasonable.
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 718 (5th Cir.1974) (citations omitted; emphasis added).
By specifying that a reasonable fee should be allowed, the Act intrudes upon the contractual relationship between the attorney and his client. See Coup v. Hecklar, 834 F.2d 313, 324 (3d Cir.1987). Irrespective of the contract, the responsibility remains on the court to allow a reasonable fee. Craig v. Secretary, Dept. of Health & Human Serv., 864 F.2d 324, 327 (4th Cir.1989). We then focus our fee-setting inquiry on determining what fee would be reasonable under the circumstances. However, in doing so we will require that due consideration be given to the contingency fee agreement.
The “lodestar” fee-setting method has been fashioned to take into consideration the unique circumstances that can affect the value of legal services to a given claimant in a particular case, as well as the varying degrees of risk incurred by attorneys in accepting certain cases. The starting point under this approach is “the number of attorney hours reasonably expended on litigation multiplied by a reasonable hourly rate.” Hensely v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983). The attorney’s usual non-contingent hourly rate or the prevailing market rate charged in the relevant community for similar legal services are measures typically used as a first approximation of the reasonable hourly rate.
Once determined, the product of this calculation, or the “lodestar,” may be adjusted upward or downward based on the court's consideration of the circumstances surrounding the case. This process is guided by the twelve factors set forth by this court in Johnson, 488 F.2d at 717-19. These factors include:
(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the “undesireability” of the ease; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.
Johnson, 488 F.2d at 717-19. The novelty and complexity of the litigated issues may be reflected in adjustments to the billable hours, while the quality of the legal representation may warrant adjustments in the hourly rate. Ultimately, the district court has broad discretion to value services and weigh risks assumed by the attorney; but the court must, where a contingent fee agreement is involved, articulate the weight of contingency. See Cotter v. Bowen, 879 F.2d 359, 363 (8th Cir.1989).
The fee-setting method we adopt today is consistent with the approach of the Supreme Court in Blanchard v. Bergeron [489 U.S. 87, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989)] involving the fee-shifting provision of Section 1988 of the Civil Rights Act, 42 U.S.C. § 1988 (1982). There the Court stated,
Johnson’s ‘List of 12’ ... provides a useful catalog of the many factors to be considered in assessing the reasonableness of an award of attorney’s fees; but ... the attorney’s private fee arrangement, standing alone, is not dispositive. The Johnson contingency fee factor is simply that, a factor. The presence of a pre-existing fee agreement may aid in determining reasonableness. ‘The fee quoted the client or the percentage of the recovery agreed to is helpful in demonstrating the attorney’s fee expectations when he accepted the case.’
Blanchard, 109 S.Ct. at 944. Like the Court in Blanchard, we view the contingency fee contract as merely one factor. We do, however, require district courts to indicate the weight of contingency fee contract in setting a reasonable fee.
In the record before us the district court gave no indication of the factors it considered in arriving at its reasonable fee. We REMAND to the district court, therefore, for its fee determination using the foregoing method, including the weight of the contingency fee agreement.
VACATED and REMANDED.
. In taking this position, the district court explicitly adopted the majority view that a court has statutory authority to award fees only for representation in the judicial proceedings conducted before it. Brown v. Bowen, No. 85-3449, order at 2, 1989 WL 145977 (E.D.La. Nov. 20, 1989) (citing Guido v. Schweiker, 775 F.2d 107 (3d Cir.1985)).
. 42 U.S.C. section 406(b)(1) provides in relevant part:
Whenever a court renders a judgment favorable to a claimant under this title who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled by reason of such judgment.
. The question arises whether, under 42 U.S.C. § 406(b)(1), there has been a “favorable judgment” in Brown’s case. Technically, the district court rendered no judgment, but rather remanded to the agency where the administrative law judge reached a favorable decision. Apparently assuming that the agency’s action on remand did constitute a favorable judgment in the district court, neither of the parties has raised this issue on appeal. Noting this, today we do not reach this question. We do acknowledge, however, that other circuits have found that a remand from the district court is considered a favorable judgment when the claimant receives a subsequent administrative or judicial award of benefits. See Rohrich v. Bowen, 796 F.2d 1030, 1031 (8th Cir.1986); Ray v. Gardner, 387 F.2d 162, 165 (4th Cir.1967).
. 42 U.S.C. section 406(a) provides in relevant part:
Whenever the Secretary, in any claim before him for benefits under this title, makes a determination favorable to the claimant, he shall, if the claimant was represented by an attorney in connection with such claim, fix (in accordance with the regulations prescribed pursuant to the preceding sentence) a reasonable fee to compensate such attorney for the services performed by him in connection with such claim.
. See Gardner v. Menendez, 373 F.2d 488, 490 (1st Cir.1967); Guido v. Schweiker, 775 F.2d 107, 109 (3d Cir.1985); Morris v. Social Sec. Admin., 689 F.2d 495, 496-97 (4th Cir.1982); Gowen v. Bowen, 855 F.2d 613, 618 (8th Cir.1988); MacDonald v. Weinberger, 512 F.2d 144, 147 (9th Cir.1975); Harris v. Secretary of Health and Human Services, 836 F.2d 496, 497 (10th Cir.1987).
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2254811-12238 | VAN OOSTERHOUT, Chief Judge.
This is a timely appeal by defendant Earl Russell Bonds from his conviction and resulting sentence on an indictment charging possession of a short-barreled shotgun in violation of 26 U.S.C.A. § 5841.
Defendant made a motion to suppress a gun taken from a second floor bedroom in his home as evidence upon the ground that it was illegally seized in violation of his Fourth Amendment rights. Such motion was overruled. Defendant waived trial to a jury and was tried to the court. He renewed his motion to suppress and objected to the reception of the gun in evidence upon Fourth Amendment grounds. His objection was overruled. He was convicted.
The only issue presented by this appeal is whether the court erred in refusing to suppress the gun as evidence. It is the Government’s contention that the gun was seized incident to a lawful arrest of the defendant. Defendant’s primary contention is that the arrest was not lawful because probable cause for the arrest has not been shown. We find no substantial evidence of probable cause for arrest and reverse.
At the hearing on the motion to suppress, only defendant and his wife testified. Both testified the shooting was accidental and that the law enforcement officers were so advised. There was no evidence offered to establish the existence of probable cause for arrest. At the trial, officer Dominick testified. The ruling on the motion to suppress was an interlocutory order subject to change before final judgment. We must look to all the evidence in the record to determine whether probable cause for arrest is established.
On January 9, Mrs. Bonds was shot in the left hand when a shotgun belonging to her husband accidentally discharged while she was handing the gun to defendant to put in a bag. Defendant placed his wife in a cab with directions to take her to the hospital and at his wife’s direction went back to the house to take care of their three-year old child.
Mrs. Bonds was hysterical. The taxi driver became frightened and took Mrs. Bonds to a fire station about a block from her home and she was shortly taken to the hospital by ambulance. Mr. Bonds promptly phoned the police and reported the accidental shooting. Policemen in response to a call arrived at the fire station.
Mrs. Bonds testified that she told the officers when they arrived that she had been accidentally shot by her husband and gave her home address and stated her baby was there.
Officer Dominick, accompanied by other officers, went from the fire station to the defendant’s residence, displayed their guns, knocked at the door and ordered the defendant to step outside and immediately arrested him for assault. He was not questioned prior to his arrest about the shooting. Shortly thereafter, he was taken to the police station where he was charged with discharging of firearms within the city limits.
The officers immediately after the arrest searched the house and found the gun here involved in an upstairs bedroom on a bed, hidden under bed covers. Two or three of the Bonds children were found in the house and were. taken to the station. There is no evidence that the gun was found as an incident to looking after the children.
Officer Dominick in his official report of the incident, which was filed within a few hours thereafter and which is in evidence, stated:
“The undersigned was dispatched to Engine Company No. 2 at Pennsylvania and Olive, where the above victim had gone for help. Upon arrival, it was learned from the victim that she was handing a shotgun to her husband when it accidentally went off. The victim further stated that their children were still at home with her husband. The victim was conveyed to St. Louis County Hospital in City Ambulance No. 1, manned by fireman Karas and Linnemeyer, accompanied by Patrolman Gleason. The undersigned proceeded to 1099 Pennsylvania, where Earl R. Bonds was taken into custody for further investigation.
“A check of the house by the undersigned for the weapon used revealed a sawed-off shotgun covered up on a bed in the second floor southwest bedroom, and also a Mossberg .22 caliber rifle in the second floor center bedroom.”
As a witness, Dominick testified that he responded to a call about the shooting by going to the fire station and that he there found an hysterical woman who said her husband shot her with a shotgun and that she wanted her children taken out of the house. On cross-examination, he testified as follows:
“Q Did you, in that report, quote Mrs. Bonds as stating that the shooting was accidental?
A I believe I did.
Q And did you hear her tell you that?
A No. She did say it was accidental after- — -she was pretty hysterical at the time also.
Q But before you went to the home on Pennsylvania Avenue, did you get that ultimate fact, that she did say it was accidental?
A We weren’t positive that it was purely accidental.
Q Well, that is your conclusion, and I mean what did she say? That is what I want to get clear.
A What did she say? She said her husband shot her with a shotgun.
Q And did you ask whether it was deliberate or—
A No.
Q-or whether there was a fight?
A No.
Q Wouldn’t that be a matter of curiosity to you?
A She also-
MR. SHOEMAKE: I object to it as being argumentative.
THE COURT: All right. I will sustain it as to form.
Q (By Mr. Packman) When did she mention it was accidental?
A She mentioned this at the hospital after talking with an officer. She mentioned it, I believe while she was in the ambulance too.”
Both Mr. and Mrs. Bonds have consistently stated that the shooting was accidental and there is no evidence to the contrary.
There is no question that there was a search made and that defendant is entitled to Fourth Amendment protection. See Katz v. United States, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576. It is undisputed that the officers had no warrant for the arrest of Bonds or for the search of his home at the time the search was made. The question presented is whether under the facts above related the search of the upstairs bedroom which produced the gun was unreasonable under the Fourth Amendment.
As a general rule, a warrantless “search” is “unreasonable” under the Fourth Amendment unless the search is within an exception to the warrant requirement. Camara v. Municipal Court, 387 U.S. 523, 528-529, 87 S.Ct. 1727, 18 L.Ed.2d 930; See v. City of Seattle, 387 U.S. 541, 543, 87 S.Ct. 1737, 18 L.Ed.2d 943; Stoner v. California, 376 U.S. 483, 486, 84 S.Ct. 889, 11 L.Ed.2d 856: Jones v. United States, 357 U.S. 493, 499, 78 S.Ct. 1253, 2 L.Ed.2d 1514.
As recognized by the trial court one such exception to the warrant requirement is a search incident to arrest. Weeks v. United States, 232 U.S. 383, 34 S.Ct. 341, 58 L.Ed. 652. See cases discussed in Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685. In order for a search incident to arrest to be recognized as an exception to the warrant requirement, two factors must be present: (1) The arrest must be valid under the authority giving the officer power to arrest. United States v. Di Re, 332 U.S. 581, 589, 68 S.Ct. 222, 92 L.Ed. 210. (2) The arrest must be based upon “probable cause.” Brinegar v. United States, 338 U.S. 160, 69 S.Ct. 1302, 93 L.Ed. 1879; Sibron v. New York, 392 U.S. 40, 88 S.Ct. 1889, 20 L.Ed.2d 917.
The first factor for determination under the circumstances of this case is whether the police could validly arrest appellant under state law. At the appellant’s trial, the court held that the search of his home was justified as incident to his arrest for discharging a firearm within the city limits. This offense is a misdemeanor under Missouri law.
Under Missouri law, a law enforcement officer does not have authority to arrest a person for a misdemeanor not committed in his presence unless the officer possesses a warrant. State v. Parker, Mo.App., 378 S.W.2d 274, 281; Independence v. Stewart, Mo.App., 397 S.W.2d 765, 767; Jackson v. United States, 8 Cir., 408 F.2d 1165, 1169. Since the arrest for discharging a firearm was for a misdemeanor without a warrant, the trial court erred in upholding a search incident to such arrest. The arrest for this offense was invalid under state law.
Under Fourth Amendment theory, however, a reviewing court must make an objective evaluation of the facts and circumstances surrounding the arrest of an individual. See Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889. Thus, if probable cause exists for the arrest of a person for a felony at the time of the arrest, the search incident to the arrest will be upheld if reasonable in scope, although the officer did not accurately name the offense for which the arrest was made. McNeely v. United States, 8 Cir., 353 F.2d 913, 918; Klingler v. United States, 8 Cir., 409 F.2d 299, 305-306. See also In re Kiser, 8 Cir., 419 F.2d 1134; United States v. Skinner, 8 Cir., 412 F.2d 98, 102.
Missouri law does authorize an arrest without a warrant of any person whom the arresting officer has probable cause to believe committed a felony, even if the felony is not committed in his presence. Nash v. United States, 8 Cir., 405 F.2d 1047, 1050; Mueller v. Powell, 8 Cir., 203 F.2d 797, 800. The concept of probable cause under Missouri law is synonymous with the Fourth Amendment concept of probable cause and therefore, if the police officers had probable cause to arrest appellant for a felony, a search incident to the arrest could be upheld.
The Government urges that the police had probable cause to believe that appellant had unlawfully assaulted his wife in violation of § 559.190 Mo.Ann.Stat., and therefore they had authority to arrest him. Section 559.190 of the Missouri Criminal Code provides:
“Every person who shall be convicted of assault with intent to kill or do great bodily harm * * * shall be punished by imprisonment in the penitentiary not exceeding five years, * * * ” (Emphasis added.)
We cannot agree that the police had probable cause to arrest defendant for this offense.
The Supreme Court in Beck v. Ohio, 379 U.S. 89, 85 S.Ct. 223, 13 L.Ed.2d 142, indicated that the question of probable cause for arrest turned upon whether:
“[T]he facts and circumstances within [the law enforcement officers’] knowledge and of which they had reasonably trustworthy information were sufficient to warrant a prudent man in believing that the petitioner had committed or was committing an offense.” 379 U.S. 89, 91, 85 S.Ct. 223, 225.
It is quite clear in this case that the officers knew that defendant shot his wife. The real question is whether they were reasonable in believing that he had unlawfully shot his wife.
Section 559.190 of the Missouri Criminal Code requires that the shooting be intentionally done before it is deemed unlawful. A mere accidental shooting is not enough.
In objectively evaluating the facts in this case, we find nothing in the record from which a reasonably prudent police officer could infer that the shooting of Mrs. Bonds was felonious. The testimony of Mrs. Bonds, that she told the officers who first appeared at the fire station that the shooting was accidental, when compared with the official statement in the officer’s report that it was learned from the victim that she was handing the shotgun to her husband when it accidentally went off, is very persuasive on the issue that the officer knew before the arrest that the victim considered the shooting accidental. Moreover, if the victim did not in fact then say the shooting was accidental, the officer admits that he made no inquiry as to the facts surrounding the shooting and no reason appears why such inquiry should not have been made. The arresting officer gave the defendant no opportunity to explain the circumstances before making the arrest.
The mere fact that a person is shot does not support an inference that the shooting was intentional and unlawful. We find no facts in the record to support a reasonable belief on the part of the arresting officer that the shooting of Mrs. Bonds was intentional. The fact that Mrs. Bonds told the police officers that she wanted her children taken from her home does not add a sufficient basis to raise the officers’ suspicions to probable cause that a felonious assault was made.
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5702370-23453 | ORDER ON MOTION TO DISMISS
PRATT, Chief Judge.
Before the Court is Defendant, Deloitte & Touche LLP’s (“Deloitte”), Motion to Dismiss, filed on June 29, 2007. Clerk’s No. 4. Plaintiffs, Herbert Thompson (“Thompson”), James Pinder (“Pinder”), Dorset Limited (“Dorset Ltd.”), and Sher-pam Investments Limited (“Sherpam Ltd.”) (collectively “Plaintiffs”), filed a resistance to the motion on July 17, 2007. Clerk’s No. 10. Deloitte filed a reply to Plaintiffs’ resistance on July 27, 2007. Clerk’s No. 15. Both parties requested oral argument, however, the Court finds that such argument would not materially aid in the resolution of this motion. Accordingly, the matter is fully submitted.
I. FACTS
This ease stems from an alleged faulty appraisal provided by Deloitte. On Febru-. ary 16, 2007, Plaintiffs filed this instant action against Deloitte alleging breach of contract, “violation of independence,” and negligence. Clerk’s No. 1. According to the Complaint, on or about June 1, 2001, Plaintiffs, as principle shareholders of Star Insurance Company (Bahamas) Limited (“Star”), entered Star into an “oral agreement pursuant to which the Des Moines, Iowa office of Deloitte would provide an appraisal of Star as of December 31, 2000.” Compl. at 1. On July 30, 2001, Deloitte issued an appraisal of Star. Id. Plaintiffs, relying on Deloitte’s appraisal of Star, entered Star into a written agreement with Family Guardian Insurance Company Limited (“Family Guardian”) (the “Merger Agreement”) on November 30, 2001, that effectively merged the two companies. Id. According to Plaintiffs, after signing the Merger Agreement, the liabilities on Star’s balance sheet as of December 31, 2000 were found to be incorrect and were adjusted upward to reflect this error, thereby causing the sale price to be adjusted downward by the amount of liability overlooked by Deloitte in its appraisal. See id. at 2, 6. Plaintiffs state that in entering into the Merger Agreement, they relied on De-loitte’s appraisal of Star to their detriment. Plaintiffs claim their decision to sign the Merger Agreement was based on two specific provisions in Deloitte’s appraisal: provision 3.02, captioned “Merger Closing Price,” and provision 4.05, captioned “No Undisclosed Liabilities.” Id. at 2.
To establish federal jurisdiction, Plaintiffs allege that “[t]he Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332 because this is an action between corporate citizens of different states and the amount in controversy exceeds the sum of $75,000.00, exclusive of interest and costs.” Id. Specifically, the Complaint states that Deloitte “is a subsidiary of Deloitte & Touche USA LLP,” which is in turn, “a member firm of Deloitte & Touche Tohmatsu, a Swiss Verein,” and that Plaintiffs Thompson and Pinder “are both citizens of the Bahamas,” Plaintiff Dorset Ltd. “is a corporate entity of Bermuda,” and Plaintiff Sherpam Ltd. is “a corporate entity of the Bahamas.” Id.
II. STANDARD FOR MOTION TO DISMISS
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges the federal court’s subject matter jurisdiction. “Federal courts are courts of limited jurisdiction. They possess only that power authorized by [the] Constitution and statute, which is not to be expanded by judicial decree.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (citations omitted). The courts presume that a suit lies outside this limited jurisdiction, and the burden of establishing the contrary rests on the party asserting jurisdiction. Id.; Sierra Club v. U.S. Army Corp. of Eng’rs, 446 F.3d 808, 815 (8th Cir.2006) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)). Thus, because Plaintiffs are asserting jurisdiction, they shoulder the burden of proving subject matter jurisdiction by a preponderance of the evidence. See Blakemore v. Mo. Pac. R. Co., 789 F.2d 616, 618 (8th Cir.1986) (stating that a party attempting to establish federal jurisdiction bears the burden of proof if diversity of citizenship is challenged).
To properly dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), Deloitte must successfully challenge Plaintiffs’ Complaint “on its face or the factual truthfulness of its averments.” Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir.1993). Facial challenges are limited to analyzing the face of the complaint. Biscanin v. Merrill Lynch & Co., Inc., 407 F.3d 905, 907 (8th Cir.2005). Under a facial challenge, each factual allegation concerning jurisdiction is presumed to be true. Titus, 4 F.3d at 593. Thus, the moving party’s motion can be “successful if the plaintiff fails to allege an element necessary for subject matter jurisdiction.” Id. Factual challenges invoke facts other than those pled in the complaint. Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir.1990). If a party mounts a factual challenge, “the Court may look outside the pleadings to determine whether jurisdiction exists, and the nonmoving party loses the benefit of favorable inferences from its factual statements.” Dolls, Inc. v. City of Coralville, 425 F.Supp.2d 958, 970 (S.D.Iowa 2006). Here, Deloitte’s motion to dismiss pursuant to Rule 12(b)(1) is based on a factual challenge.
III. LAW AND ANALYSIS
Deloitte presents two arguments in support of its motion to dismiss. First, De-loitte argues that complete diversity of citizenship is lacking because Deloitte is “stateless” for jurisdictional purposes. Next, Deloitte contends that complete diversity. is destroyed because there are aliens on both sides of the controversy. The Court will address each argument in turn.
A. Diversity of Citizenship Jurisdiction
The Constitution requires only minimal diversity, that is, diversity of citizenship between any two parties on opposite sides of an action. See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 530-31, 87 S.Ct. 1199, 18 L.Ed.2d 270 (1967). Congress, however, did not grant the district courts the full measure of diversity jurisdiction permitted by the Constitution. Saadeh v. Farouki, 107 F.3d 52, 54 (D.C.Cir.1997). The Supreme Court has interpreted the diversity statute to require “complete diversity” of citizenship. Carden v. Arkoma Assocs., 494 U.S. 185, 186, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990) (citing Strawbridge v. Curtiss, 3 Cranch 267, 7 U.S. 267, 2 L.Ed. 435 (1806)). Complete diversity, as opposed to minimal diversity, means that the parties on one side are different than each of the parties on the other side. See Strawbridge, 7 U.S. at 267, 3 Cranch 267. In its current form, the diversity statute provides:
The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds ... $75,000, exclusive of interest and costs, and is between—
(1) Citizens of different States;
(2) citizens of a State and citizens or subjects of a foreign state;
(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and
(4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States.
For the purposes of this section ... an alien admitted to the United States for permanent residence shall be deemed a citizen of the State in which such alien is domiciled.
28 U.S.C. § 1332(a). The current diversity statute retains the requirement of complete diversity. Saadeh, 107 F.3d at 54-55.
B. The “Stateless” Partner
As noted above, Plaintiffs assert the existence of subject matter jurisdiction pursuant to 28 U.S.C. § 1332. Deloitte, however, states that complete diversity is absent in this case because at least one Deloitte partner is “stateless” for diversity purposes. Deloitte is a limited liability partnership consisting, in pertinent part, of partners who are citizens of the United States, about twenty-nine partners who are aliens working and residing in the United States, and at least one partner who, although a United States citizen, is domiciled in Asia and has no domicile in the United States. Deloitte states that as a limited liability partnership, its citizenship is determined by the citizenship of all of its partners. See, e.g., Carden, 494 U.S. at 195-96, 110 S.Ct. 1015 (“We adhere to our oft-repeated rule that diversity jurisdiction in a suit by or against the entity depends on the citizenship of all the members, the several persons composing such association, each of its members.”) (internal citations and quotations omitted); Buckley v. Control Data Corp., 923 F.2d 96, 97 (8th Cir.1991) (explaining that citizenship of a limited partnership is the citizenship of each of its partners); Schindler v. Seiler, No. 05-C-0521, 2006 U.S. Dist. LEXIS 11750, at *1 (W.D.Wis. Mar. 20, 2006) (stating that limited liability partnerships have the same citizenship as each of their partners). Plaintiffs agree that as a limited liability partnership, Deloitte’s citizenship is determined by the citizenship of its partners. Plaintiffs, however, disagree that a stateless partner renders De-loitte stateless.
In Newman-Green, Inc. v. Alfonzo-Larrain, the Supreme Court explained that “[i]n order to be a citizen of a State within the meaning of the diversity statute, a natural person must be both a citizen of the United States and be domiciled within the State.” 490 U.S. 826, 828, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989). Thus, if a United States citizen has no domicile in the United States, he is “stateless” for purposes of diversity jurisdiction. Id. This is so because the “stateless” person is not a “citizen of a State” or a “citizen or subject of a foreign state.” Thus, the presence of such a “stateless” party on one side of a controversy would necessarily defeat diversity because the “stateless” party is neither a citizen of a State nor a subject of a foreign state. See id. at 828-29, 109 S.Ct. 2218; see also Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 68 (2d Cir.1990) (“[T]he language of 1332(a) is specific and requires the conclusion that a suit by or against United States citizens domiciled abroad may not be premised on diversity.”) (internal citation omitted). Here, Deloitte contends that one of its partners, John R. Cochrane (partner since 1979), is a citizen of the United States who is domiciled abroad. Specifically, Coch-rane declares that he has “[a]t all times from April 1996 to the present ... lived and worked in Asia” and presently intends to “continue living and working in Asia indefinitely” and does not “have a present intention of ... returning to the United States.” See John Randal Cochrane Aff. at ¶¶ 3, 9. Cochrane further states that he does not own or lease real property in the United States (except for a summer lake cottage used occasionally as vacation property), is not registered to vote in the United States, and does not have a resident status for state income tax purposes. See id. ¶¶ 6-8. Accordingly, Deloitte claims that because Cochrane is “stateless,” De-loitte too, is “stateless” for purposes of diversity jurisdiction.
Plaintiffs, however, contend that De-loitte’s theory “establishes a new entity previously unknown in the law — the stateless partnership — that would come into existence any time a United States citizen who is a member of a partnership establishes a domicile in a foreign country.” Pis.’ Resistance at 2. According to Plaintiffs, “it makes no sense to conclude that the partnership as a whole is a stateless entity [when] the citizenship of the partnership is capable of being determined by reference to the state citizenship of those partners who are not themselves stateless.” Id. at 3. Stated differently, it would be illogical to conclude that the stateless partner would “somehow wipe[] out or trump[ ] the citizenship of the rest, rendering the entire partnership jurisdictionally stateless.” Id. Plaintiffs maintain, without any legal support, that the better way to address the stateless partner is to consider him “as [a] jurisdictional ‘zero[],’ neither adding to nor subtracting from the citizenship of the partnership as a whole.” Id. at 4.
It appears the Eighth Circuit has not specifically addressed how a stateless partner would affect the citizenship of a limited liability partnership for diversity purposes. However, in applying the well established premise that a limited liability partnership has the citizenship of all of its partners, it would necessarily follow that one stateless partner would render the partnership to be stateless as well. See Cresswell, 922 F.2d at 69 (explaining that a suit against a partnership could not be premised on diversity if foreign-residing United States citizen partners are domiciled abroad since a partnership is deemed to take on the citizenship of each of its partners); ConnectU LLC v. Zuckerberg, 482 F.Supp.2d 3, 27 (D.Mass.2007) (stating that a limited liability company with no members effectively rendered it stateless). Plaintiffs, however, would have the Court ignore the stateless partner completely in determining Deloitte’s citizenship. The Court cannot accept such a proposal. See Carden, 494 U.S. at 192, 110 S.Ct. 1015 (explaining that an artificial entity cannot invoke citizenship of some, but not all, of its members).
The realm of federal jurisdiction is controlled by Congress and the Constitution, not the courts. See id. at 197, 110 S.Ct. 1015. Indeed, the Supreme Court itself noted that holding a limited partnership to be a citizen of every state in which one of its partners is a citizen “can validly be characterized as technical, precedent-bound, and unresponsive to policy considerations raised by the changing realities of business organization.” Id. at 196, 110 5.Ct. 1015. Nevertheless, in following precedent, the Supreme Court stated:
The 50 States have created, and will continue to create, a wide assortment of artificial entities possessing different powers and characteristics, and composed of various classes of members with varying degrees of interest and control. Which of them is entitled to be considered a “citizen” for diversity purposes, and which of their members’ citizenship is to be consulted, are questions more readily resolved by legislative prescription than by legal reasoning, and questions whose complexity is particularly unwelcome at the threshold stage of determining whether a court has jurisdiction.
Id. at 197, 110 S.Ct. 1015. Likewise, this Court must yield to precedent, and until Congress addresses business entities with foreign domiciled partners and/or members, this Court can reach no other result.
Plaintiffs further argue that even if Cochrane must be considered jurisdiction-ally, he should be disregarded in this instance because he is not a “real party in interest,” since only the partners who worked in the United States could have substantially contributed to the alleged faulty appraisal at issue in this litigation. This argument, too, must fail. In Carden, the Supreme Court expressly rejected an analogous argument that the citizenship of a limited partnership should be determined solely by reference to the citizenship of its general partners, not limited partners, because only the general partners managed the assets and were subject to the risk of liability. See id. at 192, 110 S.Ct. 1015. In rejecting the argument, the Carden court reiterated, “[w]e have never held that an artificial entity, suing or being sued in its own name, can invoke the diversity jurisdiction of the federal courts based on the citizenship of some but not all of its members.” Id. Accordingly, because De-loitte is a limited liability partnership, Cochrane’s State citizenship, or lack thereof, must be considered for purposes of diversity jurisdiction. Moreover, as discussed more fully below, even if Cochrane is excluded jurisdictionally, Plaintiffs still cannot establish diversity jurisdiction.
C. The Alien Partners
Deloitte further argues that, in addition to being stateless, diversity jurisdiction is lacking in another important respect. Deloitte states that at the time this case was filed, it had “at least 29 partners who [were] not United States citizens who [were] working and residing in the United States.” Gary Bottfeld Aff. ¶ 2. Deloitte, therefore, contends that diversity jurisdiction cannot be maintained because there are aliens on opposite sides of the action, i.e., alien Plaintiffs (citizens of Bahamas and Bermuda) verses alien Defendant (twenty-nine alien partners). See Kramer v. Caribbean Mills, Inc., 394 U.S. 823, 825 n. 2, 89 S.Ct. 1487, 23 L.Ed.2d 9 (1969) (stating that complete diversity is required of aliens even if they are citizens of different countries); see, e.g., Universal Licensing Corp. v. Paola del Lungo S.p.A., 293 F.3d 579, 581 (2d Cir.2002) (noting that when a citizen of a state is present on one side of the litigation only, and non-resident aliens are present on both sides of the litigation, diversity is lacking under subsection (a)(2)); Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 10 F.3d 425, 428 (7th Cir.1993) (noting that courts have rejected jurisdiction in suits where “one side of the litigation had only foreign parties and the other had a mixture of foreign and domestic parties,” because such a case does not fit within any of the jurisdictional pigeonholes); Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1557 (11th Cir.1989) (explaining that the presence of at least one alien on both sides of an action precludes diversity jurisdiction).
Plaintiffs, however, argue that the twenty-nine alien partners (“alien partners”) should be considered citizens of the State of their domicile under section 1332(a). The relevant portion of section 1332, however, only applies to “aliens admitted to the United States for permanent residence.” The Bottfeld affidavit only states that the alien partners are “working and residing in the United States.” Bott-feld Aff. ¶ 3. Thus, there is no indication in the record that the alien partners are permanent residents of the United States, much less domiciled in the states in which they are “working and residing.” Here, Plaintiffs offer nothing to support their contention that the alien partners are permanent residents of the United States. Regardless, even if Plaintiffs could demonstrate that the alien partners were, in fact, permanent residents, section 1332(a) still would not confer jurisdiction in this case because it does not extend diversity jurisdiction between permanent resident aliens and aliens.
“The Supreme Court has never addressed the scope of the complete diversity rule in cases involving alien parties.” Saadeh, 107 F.3d at 55. Prior to 1988, it was settled law that “the diversity statute did not confer jurisdiction over a lawsuit involving an alien on one side, and an alien and a citizen on the other side.” See id. (cases cited therein). In 1988, Congress amended the diversity statute to include the last sentence (noted in footnote 10). Id. Under the amendment, diversity of citizenship no longer existed in an action between a citizen of State A and an alien admitted to the United States for permanent residence who resides in State A. Id. Read literally, however, the amended statute would appear to partially abrogate “the rule of complete diversity by permitting a non-resident alien and a resident alien to be present on opposite sides of the law suit.” Id. The Eighth Circuit has not had occasion to address this issue; however, circuits have sharply disagreed as to whether the 1988 amendment created diversity jurisdiction in suits in which a permanent resident alien appears opposite another alien. Compare Singh v. Daimler-Benz AG, 9 F.3d 303 (3d Cir.1993) (holding that resident alien can properly sue nonresident alien under the 1988 amendment), with Saadeh, 107 F.3d at 52 (concluding that the amendment did not expand diversity jurisdiction to encompass suits in which a permanent resident alien appears opposite another alien).
Here, Plaintiffs urge the Court to adopt Singh. In Singh, plaintiff, a citizen of India, admitted to the United States for permanent residence and domiciled in Virginia, brought a products liability action against defendants, a German corporation (German citizen) and its American distributor (citizen of Delaware and New Jersey). 9 F.3d at 304. Singh argued that the court lacked jurisdiction because the 1988 amendment was “intended only to bar suits where a permanent resident alien sues a citizen of the same state, and did not establish a new definition of citizenship for permanent resident aliens in all cases.” Id. at 306. Singh contended that applying the plain language of the amended statute was “contrary to legislative intent” to limit diversity jurisdiction and “would lead to an unconstitutional result.” Id. The court explained, however, that because the statutory language was plain, legislative history was not relevant. Nonetheless, the court briefly addressed the legislative history to provide some insight to the court’s statutory construction. Id. The legislative history recounts:
28 U.S.C. 1332(a)(2) currently gives the district court diversity jurisdiction over actions between citizens of a State and citizens or subjects of a foreign state. Section 1332(a)(3) covers actions between citizens of different States in which citizens or subjects of a foreign State are parties. Diversity jurisdiction exists under these provisions even though the alien may have been admitted to the United States as a permanent resident. Review of immigration statistics indicates that a large number of persons falls within this category.
There seems to be no reason why actions involving persons who are permanent residents of the United States should be heard by Federal courts merely because one of them remains a citizen or subject of a foreign state or has not yet become a citizen of the United States.
Id. at 308 (quoting Report of the Judicial Conference Committee on Federal-State Jurisdiction 6-7 (Sept.1988)). The Senate’s consideration of the resident alien provision “focused on the incongruity of permitting a permanent resident alien living next door to a citizen to invoke federal jurisdiction for a dispute between them while denying a citizen living across the street the same privilege.” Id. at 309 (citing 134 Cong. Rec. 31,055 (1988)).
Although the Singh court acknowledged that there was “ample basis” in the legislative history to “support Singh’s view that the reduction of diversity caseload was a factor in the proposed change as to the treatment of permanent resident aliens[,]” “there [was] also nothing to support Singh’s view that the entire 1988 Act was characterized by a ‘clarity of purpose’ to reduce diversity jurisdiction.” Id. at 308, 309. The Singh court recognized that Congress may not have intended to enlarge diversity jurisdiction, “but the possible unintended effect of permitting a permanent resident alien to invoke diversity jurisdiction when the party could not have done so before the amendment [was] not sufficient reason for [the court] to ... limit the statutory language.” Id. at 309. Thus, the Singh court applied the plain language of the statute and held that for diversity purposes, permanent residents would be considered citizens of their State of domicile. As a result, a resident alien was able to maintain a cause of action against a non-resident alien in federal court.
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11102488-18618 | ORDER
EDENFIELD, District Judge.
I. INTRODUCTION
This case recounts the nightmare that can occur when a criminal steals another’s identity and causes the identity-theft victim to be repeatedly arrested and incarcerated. Plaintiff Sheila Elaine Neville brings this wrongful arrest/incarceration action against that criminal, doc. # 73, who is now under F.R.Civ.P. 55(a) default. Doc. # 89.
Neville also contends that Savannah, Georgia area merchants negligently caused her to be re-arrested. Id. She further seeks redress from defense counsel who, through alleged ineffectiveness, contributed to her travails. Doc. # 73 ¶¶ 96-120. Chatham County, she maintains, denied her “certain protected rights” by failing to furnish her with competent counsel. Id. ¶¶ 121-22. And the County’s prosecutor, she asserts, violated her rights by delaying her release in bad faith. Id. ¶¶ 73-95.
Claiming, inter alia, absolute immunity, prosecutor/defendant Melanie Higgins moves under F.R.Civ.P. 12(b)(6) to dismiss plaintiffs Complaint against her. Doc. #4. Since Neville also brings this action against Higgins in her official capacity, she by definition is suing Chatham County, Georgia. See Owens v. Fulton County, 877 F.2d 947, 951 (11th Cir.1989) (for liability purposes, suit against public official in his or her official capacity is considered suit against local government entity he or she represents); 17 MooRe’s Fed.Prac. § 123.40[2] (3rd ed.2000).
Chatham County, then, also moves to dismiss all claims against it, contending that Higgins and its district attorney’s office acted on behalf of the State so it (a) is not a “person” within the meaning of 42 U.S.C. § 1983; (b) therefore is entitled to Eleventh Amendment immunity; and in any event (c) enjoys sovereign immunity against Neville’s State law claims. Doc. # 4; see also doc. # 22.
II. BACKGROUND
Lucille Butler stole Sheila Elaine Ne-ville’s identity and used it to write bad checks. Doc. #73 ¶¶21-71. “Stiffed” merchants sought Neville’s arrest for the bad checks. Id. If those merchants had taken reasonable steps, Neville contends, they would have determined that there was no probable cause to arrest her. Id.
So, she has sued them for, inter alia, false arrest and wrongful incarceration. See, e.g., id. ¶¶ 57-58. Prosecutor Higgins, plaintiff alleges, failed to timely dismiss the charges, then timely communicate the dismissal to Neville’s jailers. Id. ¶¶ 76-79. The District Attorney’s office dismissed some warrants on 3/19/99, for example, but then failed to communicate that fact to Neville’s jailers until 5/18/99. Id. ¶¶ 80-81.
In fact, from 10/7/97-3/13/99, “the District Attorney’s office did not take any steps to prosecute [plaintiff] for the warrants issued by [a local municipality]. Instead, the District Attorney’s office dragged along the investigation of the claims against [her].” Id. ¶ 82. From [1/8/99] until [5/18/99], the [County] Sheriffs Department wrongfully held [Neville] and failed to take steps to release her from incarceration. Id. ¶ 83.
Higgins, Neville claims, had primary responsibility for the cases against her. Id. ¶¶ 77, 85. By failing to communicate the truth (that Neville was being victimized by Butler’s theft of her identity), especially to Neville’s attorneys, Higgins caused needless further arrests and incarcerations. Id. ¶ 87-93. On top of all that, plaintiffs defense counsel mishandled her case, also causing needless jail time. Id. ¶¶ 96-121. She blames Chatham County for knowingly appointing demonstrably incompetent counsel to represent her. Id. ¶ 121-22.
All the defendants, plaintiff concludes, “are jointly and separately liable” for the damages she suffered. Id. ¶¶ 123. And some, she contends, also are liable for punitive damages. Id. ¶¶ 124-126.
III. ANALYSIS
A.Malicious Prosecution
Suppose a prosecutor, with knowledge that the police have arrested and detained the wrong person for a crime, does nothing for months, even though a simple notice to jailers would have freed the arrestee? Does absolute prosecutorial immunity, as illuminated by Imbler v. Pachtman, 424 U.S. 409, 96 S.Ct. 984, 47 L.Ed.2d 128 (1976), apply? How might the arrestee otherwise recover? Cf. Brady v. Dill, 24 F.Supp.2d 129, 134-35 (D.Mass.1998) (“Brady I”) (fact issue existed as to whether State troopers knew that the arrestee was not the person named in an arrest warrant, thus precluding summary judgment in their favor in arrestee’s § 1983 damages action for his pretrial detention based on claim that the troopers knew he was not the person wanted by the warrant, yet persisted in detaining him).
Correspondingly, what defenses would then exist? Cf. Brady v. Dill, 187 F.3d 104, 115-17 (1st Cir.1999) (reversing Brady I, holding, inter alia, that State troopers were qualifiedly immune from arres-tee’s claim that they violated his right against unreasonable seizure and his due process rights by detaining him despite coming to believe his protestations of innocence after having arrested him on facially valid warrant; troopers were objectively reasonable in relying on warrant and in failing to release arrestee once they began to believe he was innocent, and only one case of suspect precedential value seemed to support assertion of post-arrest right to be released by law enforcement officials who have come to believe arrestee is innocent).
B. Abandonment Issue
A more preliminary issue emerges, however: whether Neville is even advancing a § 1983 claim. Her initial Complaint made no mention of § 1983, doc. # 1 exh. 1, but she raised it in her 6/30/00 amendment. Id. exh. 3. Yet, she referenced only her initial Complaint in her latest Amended Complaint. See doc. # 73 ¶ 1 (“The Plaintiff incorporates in its entirety along with attachments her complaint filed on April 21, 2000, in the above-styled matter”).
One would think that Neville would expressly incorporate her 6/30/00 (“§ 1983”) amendment if she wished to preserve her § 1983 claim. For that matter, she conspicuously avoids mention of any constitutional rights deprivations in her latest amendment, but instead references only “certain protected rights.” Doc. # 73 ¶¶ 121-22.
This suggests claim abandonment. Cf. Road Sprinkler Fitters Local Union No. 669 v. Indep. Sprinkler Corp., 10 F.3d 1563, 1568 (11th Cir.1994) (a district court “could properly treat as abandoned a claim alleged in the complaint but not even raised as a ground for summary judgment”), quoted in Coalition for the Abolition of Marijuana Prohibition v. City of Atlanta, 219 F.3d 1301, 1326 (11th Cir.2000). Nevertheless, the parties’ briefs treat the § 1983 claim as extant; therefore, so will the Court.
C. Rule 12/56 Considerations
Plaintiffs brief reads as if the Court transformed the initial Rule 12(b)(6) motion to one sounding under F.R.Civ.P. 56. See doc. # 15 (plaintiffs brief citing to matters outside the Complaint); # 22 (defendants’ brief acknowledging, and not objecting to, same); # 29 (plaintiffs supplemental brief continuing to cite to extra-Complaint evidence). This beckons the Court to dispose of this matter under Rule 56, especially since the parties have had constructive notice. See 11 MooRe’s Fed. Prao. § 56.30[4] (3rd ed 2000); Bordeaux v. Lynch, 958 F.Supp. 77, 82 (N.D.N.Y.1997).
The Court nevertheless elects to reach this matter under Rule 12(b)(6) (no one has formally moved for Rule 56 conversion) because under it Neville is given the greater benefit of the doubt (i.e., the Court assumes arguendo that Higgins delayed plaintiffs release in bad faith).
D. Immunity Defenses
1. Absolute and Qualified Immunity
Higgins assumes arguendo that Neville states a § 1983 claim over Higgins’ actions/inactions, see doc. # 4 at 3-24, then raises various immunity defenses. Those include qualified and absolute immunity:
Qualified immunity is the defense ordinarily available to public officials who are sued under 42 U.S.C. § 1983. Absolute immunity, by contrast, is reserved for the special functions of certain officials that resemble functions that would have been immune at common law when § 1983 was enacted. In determining whether a particular act fits within the common-law tradition of absolute immunity, the Supreme Court takes a “functional approach,” examining the nature of the function performed, not the identity of the actor who performed it.
Guzman-Rivera v. Rivera-Cruz, 55 F.3d 26, 29 (1st Cir.1995) (quotes and cites omitted); see also Bolin v. Story, 225 F.3d 1234, 1242 (11th Cir.2000).
Under the functional approach, it is immaterial that ... defendant Higgins was a] proseeutor[ ] ex officio. Absolute immunity protects the prosecutor’s role as advocate for the State, and not his or her role as an administrator or investigative officer.
Id. (quotes and cites omitted); Zahrey v. Coffey, 221 F.3d 342, 346 (2nd Cir.2000) (only qualified immunity protects a prosecutor’s investigative, as opposed to prose-cutorial acts).
Under the “functional approach” to absolute prosecutorial immunity, even a wrongful act of a prosecutor — such as participating in a conspiracy to manufacture evidence — while not properly an aspect of a prosecutor’s duty, is immaterial. McKeon v. Daley, 101 F.Supp.2d 79, 87 (N.D.N.Y.2000). In other words, “the immunity attaches to [the prosecutor’s] function, not to the manner in which [s]he performed it. Accordingly, a prosecutor’s motivation, and whether preferable alternatives to the actions taken were available, are irrelevant.” Parkinson v. Cozzolino, 238 F.3d 145, 150 (2nd Cir.2001) (quotes and cites omitted).
2. Eleventh Amendment Immunity
The Eleventh Amendment protects States from § 1983 money damage claims in this context. Harbert Intern., Inc. v. James, 157 F.3d 1271, 1277-79 (11th Cir.1998). That amendment only applies if Higgins acted on behalf of the State rather than Chatham County. Owens, 877 F.2d at 952; see also McMillian v. Johnson, 88 F.3d 1554, 1568 (11th Cir.1996) (“[i]f the official’s actions do not fall within an area of the local government’s business, then the official’s actions are not acts of the local government”), aff'd, 520 U.S. 781, 117 S.Ct. 1734, 138 L.Ed.2d 1 (1997).
Hence, if she acted on behalf of the State, then she (actually the County, since she is sued in her official capacity) can invoke Georgia’s Eleventh Amendment immunity from § 1983 claims. Abiff v. Slaton, 806 F.Supp. 993, 996-97 (N.D.Ga.1992) (holding that county prosecutors enjoyed official capacity, Eleventh Amendment immunity from § 1983 claim without examining conduct for which they faced suit), aff'd, 3 F.3d 443 (11th Cir.1993).
Higgins clearly exercised prosecutorial functions when she delayed in deciding to drop charges, and further delayed in transmitting that decision to Neville’s jailers. Anderson v. Simon, 217 F.3d 472, 475-76 (7th Cir.2000) (prosecutor’s refusal to charge arrestee while awaiting further evidence was prosecutorial decision), cert. denied, — U.S.-, 121 S.Ct. 765, 148 L.Ed.2d 666 (2001); cf. Long v. Satz, 181 F.3d 1275, 1278-80 (11th Cir.1999) (prosecutors who learned of exculpatory evidence but failed to turn it over to defense, prolonging wrongfully convicted plaintiffs incarceration, were performing “prosecutorial functions”).
Deciding whether, when and how to go about dropping charges against someone is a prosecutorial function. Engaging in a prosecutorial function is the act of a State, not a county, official. Owens, 877 F.2d at 952. Thus, “to the degree that [Neville] seeks to hold [Higgins] liable in [her] official capacity] for acts within the realm of [her] prosecutorial discretion, [she is] considered [a][S]tate official ]cloaked in Eleventh Amendment Immunity.” McClendon v. May, 37 F.Supp.2d 1371, 1375-76 (S.D.Ga.1999), aff'd, 212 F.3d 599 (11th Cir.2000); accord Cook v. Ellison, 178 F.3d 1299, 1999 WL 311206 at * 2 (9th Cir.1999) (unpublished).
Accordingly, Neville’s claims against Higgins in her official capacity, and thus, the County, face dismissal. See Pitts v. County of Kern, 17 Cal.4th 340, 70 Cal.Rptr.2d 823, 949 P.2d 920, 923 (1998) (County was not liable under § 1983 for district attorney’s alleged misconduct in the prosecution of sex offense charges that were ultimately dismissed; district attorney acted on behalf of State in prosecuting charges and not as a policymaker for county).
That, in torn, sinks any official-capacity based State law claims: “The Eleventh Amendment bars federal courts from hearing pendant [S]tate [law] claims for damages brought against State officers who are sued in their official capacities. Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89, 106, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984).” Cook, 1999 WL 311206 at *2.
3. Individual Capacity Claims
The above rulings go to claims against Higgins in her official capacity (thus, claims against the County). But Neville also advances money-based § 1983 claims against Higgins in her individual capacity. Normally — at least when considering Higgins’s qualified immunity defense — the Court would first determine whether plaintiff has alleged the deprivation of a constitutional right at all. See Wilson v. Layne, 526 U.S. 603, 609, 119 S.Ct. 1692, 143 L.Ed.2d 818 (1999).
But Higgins doesn’t raise that point here; instead she again assumes that Ne-ville states a constitutional claim, then focuses on barring it with absolute and qualified immunity. See doc. # 4 at 8-14; # 22. Prosecutors, she contends, can exercise their prosecutorial powers in bad faith yet still be immune from § 1983 liability. See doc. #4 at 9. As the County points out, Higgins “may have performed less than admirabl[y],” id., doc. #5 at 9, but that does not strip her of absolute immunity. Id.
Defendants are correct. Even if Higgins intentionally acted in bad faith, she is still absolutely immune because she was still performing prosecutorial duties. See Guzman-Rivera, 55 F.3d at 31 (In civil rights action brought by arrestee wrongfully convicted and imprisoned for murder he did not commit, officials were absolutely immune for their postinvestigation failure to move for arrestee’s release, as such decision lay at the heart of their prosecutorial function; “Even if it were shown that [prosecutors] reviewed the evidence, found Guzman innocent, and did nothing, their decision withal not to dismiss his criminal case lies at the heart of the prosecutorial function”) (emphasis added).
Neville points this Court to no distinguishing precedent. Indeed, post Guzman-Rivera case law reinforces Higgins’s position. See Altman v. Kelly, 28 F.Supp.2d 50, 53 (D.Mass.1998) (individual assistant district attorneys were absolutely immune from liability under § 1983 for their failure to dismiss disorderly charge against arrestee, whatever their alleged motives may have been; prosecutors’ decision whether or not to dismiss charge was at the heart of the prosecutorial function, and allowing arrestee to sue prosecutors who were carrying out prosecutorial function would inhibit full and free exercise of governmental power to prosecute crime); Anderson, 217 F.3d at 475-76 (prosecutor’s refusal to charge arrestee while awaiting further evidence was prosecutorial decision, and, therefore, prosecutor is entitled to absolute immunity), both cases cited in Ann., When is prosecutor entitled to absolute immunity from civil suit for damages under 12 U.S.C.A. sec. 1983: post-Imbler cases, 67 A.L.R. Fed. 640 § 3 (1984).
Indeed, even if a prosecutor cynically extracts a release against her municipality in exchange for dropping criminal charges, she is absolutely immune. McKeon, 101 F.Supp.2d at 87-88. This does not mean that prosecutors can run wild; courts have drawn the line in prosecutorial abuse cases. But, as described infra, that line sits primarily in the pre-arrest phase of a criminal case. After an arrest, absolute immunity typically is stretched far into the case and even into its afterlife. See, e.g., Allen v. Thompson, 815 F.2d 1433, 1434 (11th Cir.1987) (extending absolute immunity to prosecutors’ alleged malicious letter to Parole Commission).
Absolute immunity gets downgraded to qualified immunity where a plaintiff traces her constitutional rights deprivation to a prosecutor’s pre-arrest phase (i.e., investigative/preparatory work) in a case. There courts reason that a prosecutor acts more like the police or a witness, and not as a prosecutor, if she engages in wrongdoing like fabricating or tampering with evidence, see Zahrey 221 F.3d at 349-55 (prosecutors cam be sued for fabricating evidence during an investigation, even though they ordinarily are immune from suits for their acts as advocates), or supplying false statements in an affidavit in support of an arrest warrant. Kalina v. Fletcher, 522 U.S. 118, 129-31, 118 S.Ct. 502, 139 L.Ed.2d 471 (1997); see also Holloway v. Brush, 220 F.3d 767, 774-75 (6th Cir.2000) (Prosecutors are not absolutely immune when they perform administrative, investigative, or other functions; for example, when they give legal advice to the police, hold a press conference, or fabricate evidence); Jones v. Cannon, 174 F.3d 1271, 1281-82, 1284-85 (11th Cir.1999).
There is one last general area not protected by absolute immunity: that involving acts which are "clearly beyond the proper exercise of [a prosecutor's] authority and exceed any possible construction of the power granted to [her] office." Romer v. Morgenthau, 119 F.Supp.2d 346, 354 (S.D.N.Y.2000) (quotes and cites omitted).
Plaintiff pleads no evidence-fabrication or tampering allegations against Higgins. And, she must concede that the decision and act of dismissing charges falls within the everyday activities of a prosecutor. "[A] prosecutor's decision whether or not to dismiss a charge, like a prosecutor's decision whether or not to prosecute, `lies at the heart of the prosecutorial function.'" Altman, 28 F.Supp.2d at 53 (quoting Guzman-Rivera, 55 F.3d at 31).
Higgins is absolutely immune for failing to timely dismiss charges and urge Ne-yule's release "whatever [her] alleged motives may have been." Id.; see also Romer, 119 F.Supp.2d at 354 (Absolute prosecutorial immunity from suit extends to litigation-related activities and decisions whether to prosecute, without regard to motive of prosecutor, bad faith, or presence of malice).
Finally, Neville makes much of the fact that Higgins' conduct, while post-arrest, was not in preparation for trial, but merely "administrative" or "investigative" in nature, and therefore should not be covered by absolute immunity. See doe. # 15 at 7. But merely labeling a phase of Higgins' activity as "not prosecutorial" is not controlling:
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1457870-4653 | RAYFIEL, District Judge.
The plaintiff commenced this action on November 5, 1958 by filing its complaint, under which it seeks to recover damages for the defendants’ breach of a written agreement for the lease of certain equipment, in failing to make payment of installments of rent provided for therein. Defendants’ answer does not deny the making of the agreement, but claims that the plaintiff failed to deliver the equipment leased, and, as a counterclaim, that by reason of such failure it breached the said agreement to the defendants’ damage in the sum of $36,000.
On April 27, 1959 the defendants commenced an action against the plaintiff in the United States District Court for the Northern District of Alabama, Southern Division, which is grounded on the same agreement involved in the instant casé. The complaint therein states two causes of action. The first, for breach by this plaintiff of the aforementioned agreement, is similar to that stated in their counterclaim in the instant action, while the second charges that the plaintiffs (the defendants herein) were induced to enter into said agreement by fraud on the part of this plaintiff, and that the receipt for the equipment delivered to them was signed by an agent or other representative of the plaintiff herein without their consent. The plaintiff in this action sought, without success, to quash the service of process upon it in the Alabama action and to dismiss the complaint therein, or, as an alternative for the latter, a stay of the Alabama action pending the determination of this action, or, failing that, the transfer of said Alabama action to this Court for trial with the action herein.
The plaintiff has now moved here for an order (1) enjoining the defendants from prosecuting their said action in Alabama and (2) removing the same to this Court for consolidation and trial with this action. It argues that since the Alabama action was brought under the same agreement as that involved in this action the defendants were obliged to assert as a counterclaim herein the claims which are the basis of the Alabama action. Its authority therefor is Rule 13 (a) of the Federal Rules of Civil Procedure, 28 U.S.C.A., which reads in part, as follows:
“Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim * * (Emphasis added).
The claim asserted against the plaintiff by the defendants herein in the Alabama action does not come within any of the exceptions provided for in Rule 13(a), supra.
Plaintiff claims, also, that since this action was commenced first it should have priority in trial, and, further, that it has caused a statement of readiness to be served and filed and this case is now on the calendar of this Court. In support of its argument respecting the “priority in action” claim it cites several authorities hereinafter set forth.
The defendants contend that this motion constitutes a collateral attack on the Alabama order denying a stay or the transfer to this Court of that action, and that the plaintiff, if aggrieved by the same, should have appealed therefrom. I disagree. Both rule 13(a), supra, and the “priority of action” principle enunciated by the authorities hereinafter referred to, support the plaintiff’s position.
In Brooks Transp. Co. v. McCutcheon, 80 U.S.App.D.C. 406, 154 F.2d 841, at. page 842, the Court said, “As we have-seen, his action here was first begun, and defendant duly appeared in the court below, admitted jurisdiction and pleaded. to the merits. In that state of affairs the universal rule is that the court here having assumed jurisdiction, all other courts should refrain from interference. It is well settled that as a matter of comity between Federal courts of equal jurisdiction, one district court will not go forward where proceedings have been begun previously on the same cause in another district court. Ryan v. Seaboard & R. Co., C.C., 89 F. 397. In such a situation the court which first has possession of the subject should decide it. Crosley Corp. v. Hazeltine Corp., 3 Cir., 122 F.2d 925, 929, 930; Carbide & Carbon Chemicals Corp. v. United States Industrial Chemicals, 4 Cir., 140 F.2d 47-49.”
In Barber-Greene Co. v. Blaw-Knox Co., 7 Cir., 239 F.2d 774, at page 778, the Court in transferring an action brought by the defendant against his plaintiff in an earlier suit, quoted from Penn General Casualty Co. v. Commonwealth of Pa., 294 U.S. 189, 55 S.Ct. 386, 79 L.Ed. 850, as follows:
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3412920-14054 | OPINION
FRYE, District Judge:
The plaintiff, Keith Wilson, filed this action against the United States under the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 2671 et seq., as conservator of the estate of his daughter, Crystal Wilson, who was injured at South Twin Lake located in the Deschutes National Forest. Before the court is the defendant’s motion for summary judgment (# 15).
UNDISPUTED FACTS
South Twin Lake is a natural lake located in the Bend Ranger District of the Deschutes National Forest in Deschutes County, Oregon. The area around South Twin Lake is managed by the United States Forest Service. A reservoir located behind the nearby Wickiup Dam was filled in 1946, thereby permanently increasing the water level in South Twin Lake. The increased water level in South Twin Lake caused many trees to become partially submerged and to die. Some of the dead trees have fallen over. The water level in South Twin Lake fluctuates by as much as six feet during the year. The result of these two conditions — the increased water level in the lake and the partially submerged trees — is that South Twin Lake contains many stumps and much wood debris, which are at times visible above the surface of the water and at other times partially submerged.
The Forest Service has developed South Twin Lake as a site for intensive recreation. There is a day-use area next to the lake which has picnic tables and toilets. While the Forest Service has never designated South Twin Lake as a swimming area, it does not prohibit swimming. The Forest Service is aware that people swim in South Twin Lake. No fee is charged for the use of the day-use area next to South Twin Lake.
On June 20, 1992, the Keith Wilson family, which includes a daughter, Crystal Wilson, went to South Twin Lake for the day. Upon arriving at the lake, Mrs. Wilson set up fishing poles near the edge of the lake, while Mr. Wilson parked their car. Crystal, who was almost five years old, and her older brother played in the water. Crystal climbed onto a large, flat tree stump sticking out of the water by several inches. She jumped from the stump into the water, landing on a piece of wood pointing upward with the tip of the wood just below the surface of the water. Crystal was seriously injured.
In November of 1992, the Forest Service improved the South Twin Lake recreational area by grinding out some of the stumps in the campground located adjacent to the day-use area and by pulling up some of the stumps on the beach. The Forest Service decided not to remove any of the stumps or debris from South Twin Lake because it did not want to disrupt the habitat of the life forms which lived in the lake. Furthermore, the Forest Service could not determine how to remove a part of the submerged debris without removing all of it, which the Forest Service was not prepared to do. Because of these concerns, the Forest Service did not remove any debris from the water.
CONTENTIONS OF THE PARTIES
The United States contends that it is immune from liability for two reasons: (1) the South Twin Lake recreational area is subject to the Public Recreational Use of Private Lands Act of the State of Oregon (Oregon’s Recreational Use Act), O.R.S. 105.655 et seq., which protects a landowner from liability for allowing the public on its land for recreational purposes; and (2) management by the Forest Service of the South Twin Lake recreational area is discretionary with the Forest Service and falls within the discretionary function exception to the FTCA
Wilson contends that Oregon’s Recreational Use Act does not apply to the South Twin Lake recreational area because the area is susceptible to adequate policing and correction of dangerous conditions by the Forest Service. Wilson contends that the discretionary function exception to the FTCA does not include operational decisions, and therefore does not include management by the Forest Service of this area.
LEGAL STANDARDS
Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed. R.Civ.P. 56(c). The initial burden is on the moving party to point out the absence of any genuine issue of material fact. Once the initial burden is satisfied, the burden shifts to the opponent to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). On a motion for summary judgment, all reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving party. T.W. Elec. Serv. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630-31 (9th Cir.1987).
ANALYSIS AND RULING
1. Recreational Use Act
The United States contends that as landowner of the South Twin Lake recreational area, it is immune from liability under Oregon’s Recreational Use Act for the injuries suffered by Crystal Wilson at South Twin Lake. Oregon’s Recreational Use Act provides:
Except as otherwise provided in ORS 105.675:
(1) An owner of land owes no duty of care to keep the land safe for entry or use by others for any recreational purpose or to give any warning of a dangerous condition, use, structure or activity on the land to persons entering thereon for any such purpose.
(2) An owner of land who either directly or indirectly invites or permits any person to use the land for any recreational purpose without charge does not thereby:
(a) Extend any assurance that the land is safe for any purpose;
(b) Confer upon such person the legal status of an invitee or licensee to whom a duty of care is owed; or
(c) Assume responsibility for or incur liability for any injury, death or loss to any person or property caused by an act or omission of that person.
O.R.S. 105.665.
Oregon’s Recreational Use Act applies to land defined as follows:
“Land” means agricultural land, range-land, forestland, and lands adjacent or contiguous to any bodies of water, watercourses or the ocean shore as defined by ORS 390.605, including roads, bodies of water, watercourses, private ways, private buildings and structures on such lands and machinery or equipment on the land when attached to the realty, but shall not include lands described in ORS 390.605 to 390.770 [ocean shores and state recreation areas]. “Land” also includes abandoned borrow pits, gravel or rock quarries not currently being used for commercial or industrial purposes, whether or not such pits or quarries are situated on agricultural land, rangeland, forestland or lands adjacent or contiguous to the ocean shore as defined in ORS 390.605.
O.R.S. 105.655(2).
Under Oregon’s Recreational Use Act, a landowner is not immune from liability for the willful, wanton and reckless failure to guard or warn against certain known dangers, or if the landowner charges the users of the recreational area a fee. O.R.S. 105.675. Wilson does not contend that either exception applies here.
The United States Court of Appeals for the Ninth Circuit has applied state recreational use statutes to federally owned lands. See O’Neal v. United States, 814 F.2d 1285, 1287 (9th Cir.1987) (applying Oregon’s Recreational Use Act to a logging road located on land controlled by the Bureau of Land Management). Oregon’s Recreational Use Act defines “land” covered by its protections to include forestland and bodies of water, and any land adjacent to or contiguous to any body of water. The South Twin Lake recreational area, located in the Deschutes National Forest, falls within this definition.
Wilson contends, however, that Tijerina v. Cornelius Christian Church, 273 Or. 58, 539 P.2d 634 (1975), dictates an exception to the statutory definition of “land.” In Tijerina, the court stated as follows: “The legislative history of ORS 105.655-105.680 leaves no doubt that the legislature intended by the restrictive definition of land in ORS 105.655(2) to limit its application to landholdings which tended to have recreational value but not be susceptible to adequate policing or correction of dangerous conditions.” Id. at 64, 539 P.2d 634. Wilson contends that there is at least a genuine issue of material fact as to whether the South Twin Lake recreational area was a landholding not susceptible to adequate policing or correction of dangerous conditions.
The Tijerina court made the statement quoted above before concluding that a field which had not been commercially farmed for three years was not agricultural land. Id. at 6U-65, 539 P.2d 634. The Tijerina court did not rely on evidence of susceptibility to policing or correction of dangers in making that determination. The quoted comment is dicta and is contrary to the plain words of the statute. Furthermore, well after Tijerina was decided, the Oregon Supreme Court applied Oregon’s Recreational Use Act to parks which appear to be as susceptible to policing or correction of dangers as the South Twin Lake recreational area. See Van Gordon v. PGE Co., 294 Or. 761, 662 P.2d 714 (1983) (privately owned park open to the public with toilets, picnic tables, fire pits, garbage and parking). Accordingly, the court concludes that Oregon’s Recreational Use Act applies to the South Twin Lake recreational area and grants immunity from liability to the United States.
2. Federal Tort Claims Act
As an alternate theory, the United States contends that it is immune from liability under the discretionary function exception to the FTCA for torts caused by its maintenance of the South Twin Lake recreational area.
The FTCA is a limited waiver of sovereign immunity. No liability attaches under the FTCA unless expressly authorized by Congress. United States v. Orleans, 425 U.S. 807, 813-14, 96 S.Ct. 1971, 1975-76, 48 L.Ed.2d 390 (1976). The discretionary function exception established by 28 U.S.C. § 2680(a) preserves the sovereign immunity of the United States with respect to “[a]ny claim ... based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused.”
Wilson contends that operational decisions, as opposed to policy decisions, do not fall within the discretionary function exception to the FTCA. Wilson claims that decisions by the United States concerning the South Twin Lake recreational area are operational decisions and, thus, are not immune from tort liability under the FTCA.
The United States Supreme Court rejected this argument in United States v. Gaubert, 499 U.S. 315, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991), in which it held that the discretionary function exception to the FTCA applied to day-to-day operational decisions made by federal regulators when supervising a savings and loan institution:
A discretionary act is one that involves choice or judgment; there is nothing in that description that refers exclusively to policymaking or planning functions. Day-to-day management of banking affairs, like the management of other businesses, regularly requires judgment as to which of a range of permissible courses is the wisest. Discretionary conduct is not confined to the policy or planning level.
Id. at 325, 111 S.Ct. at 1275.
In Kennewick Irrigation Dist. v. United States, 880 F.2d 1018 (9th Cir.1989), the court stated the test for applying the discretionary function exception to the FTCA:
Berkovitz [v. United States, 486 U.S. 531, 108 S.Ct. 1954, 100 L.Ed.2d 531 (1988)] directs us to apply a two-step test for determining whether the discretionary function exception applies. We must “first consider whether the action is a matter of choice for the acting employee____ [T]he discretionary function exception will not apply when a federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow.” If the challenged conduct does involve an element of judgment, our second step is to “determine whether that judgment is of the kind that the discretionary function exception was designed to shield.” To be shielded, the judgment must be “grounded in social, economic, and political policy.”
Id. at 1025 (citations and quotations omitted).
Neither party has cited a federal statute, regulation or policy mandating the Forest Service to clear all submerged woody debris from South Twin Lake. Although Forest Service Manual 2300 for Recreation, Wilderness and Related Resource Management does state that swimming sites should be developed only where it is possible to mitigate hazardous conditions, including submerged stumps and snags, the Forest Service never designated this area as a swimming site. Furthermore, there is no regulation requiring it to designate the area as a swimming site, even though it knew that some swimming took place at South Twin Lake. Thus, the first prong of the test is met.
The second prong of the test requires a determination of whether the judgment of the Forest Service was grounded in social, economic and political policy. The Forest Service had the discretion to clear submerged debris from South Twin Lake. This judgment exercised by the Forest Service is grounded in social, economic and political policy. To clear submerged debris from South Twin Lake would have required the Forest Service to reallocate some of its economic resources from another project to South Twin Lake. In addition, activity of this type in a national forest raises environmental concerns and concerns about the dis turbance of the natural state of South Twin Lake.
Wilson cites Summers v. United States, 905 F.2d 1212 (9th Cir.1990), in which the National Park Service did not erect signs to warn of danger from hot coals in fire rings in Golden Gate National Recreation Area, in spite of a policy regarding signs. The court held that this decision was more of a departure from safety considerations in established park policies than poor judgment in a matter involving choices among political, economic and social factors. Id. at 1216.
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11141702-18157 | EBEL, Circuit Judge.
Petitioner-Appellant Robert Allen Ward appeals the district court’s denial of his 28 U.S.C. § 2254 habeas petition alleging that his state court sentence violated the Double Jeopardy Clause of the Fifth Amendment of the United States Constitution. This is the second appeal we have heard regarding Ward’s § 2254 petition. ' We remanded the first appeal to the district court so that it could clarify the uncertainty as to “the exact parameters of the sentences imposed by the state district court.” Ward v. Williams, No. 97-2041, 1998 WL 94608, at *3 (10th Cir. Mar. 5, 1998) [hereinafter Ward /]• On remand, the magistrate judge wrote a detailed, well-documented opinion, recommending that Ward’s habeas petition be dismissed with prejudice [hereinafter 1999 Magistrate’s Recommendation]. The district court adopted the magistrate’s recommendation. Additionally, while on appeal to this court, the state trial court clarified one of its rulings, and this clarification moots one of the issues presented to us. See Order Clarifying Corrected Judgment, Sentence, and Commitment to the Corrections Department as to CR 92-i8í-3 and Order Revoking Probation as to CR 91-103-3, et al, No. CR 91-103-3, 91-326-3, 91-327-3, 91-328-3, 91-329-3, 91-330-3, 91-331-3, 91-198-3, & 92-484-3, at 2 (August 9, 2000) [hereinafter 2000 Clarifying Order ]. We exercise jurisdiction pursuant to 28 U.S.C. § 2253 and AFFIRM.
BACKGROUND
A. 1991 State Court Sentence
From about November 1990 through February 1991, Robert Ward committed numerous felonies under New Mexico law. In July 1991, Ward pled guilty to a number of these felonies. On September 13, 1991, a New Mexico court sentenced Ward on eight different criminal cases: CR-91- 103-1 (commercial burglary et al.), CR-91-326-1 (commercial burglary), CR-91-327-1 (residential burglary), CR-91-328-1 (receiving stolen property), CR-91-329-1 (escape from jail), CR-91-330-1 (auto burglary), CR-91-331-1 (residential burglary), and CR-91-198-3 (trafficking in controlled substances) [hereinafter 1991 Sentence]. Two of the eight cases, CR-91-103 and CR-91-326, contained multiple counts— CR-91-103 had eight counts and CR-91-326 had three counts.
The court sentenced Ward to eighteen months imprisonment on each of the eight counts contained in CR-91-103, and ordered that the eight counts be served concurrently. Thus, the total sentence under CR-91-103 was eighteen months. The judge ordered that each of the sentences from the seven remaining cases be served consecutively. All told, the 1991 Sentence provided for a maximum exposure of 22.5 years, 364 days. The 1991 Sentence was silent as to any period of parole. The court suspended all the sentences and placed Ward on probation for five years.
B. 1992 State Court Sentence
While on probation, Ward committed more crimes. Again, he pled guilty. On November 2, 1992, the state court held a sentencing hearing, at which it sentenced Ward on two counts (count 1 and count 3) in a new criminal case (CR-92-484) and also sentenced him for violating the conditions of probation from the 1991 sentence. The written sentencing order was filed December 14, 1992 [hereinafter 1992 Sentence ].
For CR-92-484, the court sentenced Ward as follows: On count 1 (distribution of marijuana to a minor), Ward received three years imprisonment, enhanced by one year for being an habitual offender, for a total of four years in prison. Imprisonment was to be followed by one year of parole. On count 3 (felon in possession of a firearm), Ward was sentenced to eighteen months imprisonment, followed by one year of parole. From the bench, the court (orally) ordered that the sentences on these two counts were to run consecutively. The (written) 1992 Sentence, however, did not mention whether the sentences on these two counts were to run consecutively or concurrently. On August 9, 2000, the state court clarified this arguable discrepancy, explaining that the two counts were to run concurrently. See 2000 Clarifying Order ¶ 5. Thus, the total sentence on CR-92-484 is four years imprisonment, followed by one year of parole.
In the second half of the 1992 sentencing, the state court revoked Ward’s suspended sentence and probation from the 1991 sentencing. It ordered Ward to serve twelve years imprisonment, to be followed by two years of parole. The order provided that “the sentence imposed herein as to cause number CR-91-103-1 shall be served consecutively to the sentence imposed as to cause number CR-42-484^-1, with the sentence imposed in cause number CR-92-484-1 to be served first.” 1992 Sentence at 3. The court erred, however, in treating the eighteen month sentences for each of the eight counts in CR-91-103 as consecutive rather than concurrent to each other. Thus, the court gave Ward twelve years attributed solely to the convictions in CR-91-103, which was not consistent with the 1991 sentence for CR-91-103. The 1992 Sentence further provided that the sentences imposed in the remaining seven cases from the 1991 Sen- fence “shall remain the same.” The meaning of that reference is unclear since no additional prison time was apparently attributed to the violation of probation as it pertained to those other seven 1991 criminal sentences.
We pause to summarize. First, the two sentences from the 1992 Sentence (the sentence from CR-92^484 and the sentence for violating the terms of the 1991 probation) are to run consecutively, with the sentence from CR-92-484 running first. Second, the total sentence from CR-92-484^ as recently clarified, is four years in prison, followed by one year of parole. Third, for violating probation from the 1991 sentences, the court intended to sentence Ward to twelve years in prison, followed by two years of parole. Fourth, the state court erred in the 1992 Sentence by drawing the sentence for violating probation from the 1991 sentence (12 years imprisonment plus 2 years of parole) strictly from the convictions in CR-91-103; as noted above, the sentences in CR-91-103 had initially been imposed to run concurrently with each other, for a maximum total of eighteen months. In the 1992 probation sentence, the court erroneously • treated those sentences in CR-91-103 as consecutive.
C. 1995 State Court Corrected Sentence
In 1994 and 1995, Ward filed two pro se habeas petitions in the state district court seeking to correct alleged sentencing errors from the 1992 sentence and one petition for a writ of mandamus in the New Mexico Supreme Court seeking to compel the state district court to rule on his habe-as petitions. On October 13, 1995, the state district court filed an order to correct the alleged errors from the 1992 Sentence [hereinafter 1995 Sentence ].
In the 1995 Sentence, the court retained the twelve year sentence for violating probation issued from the 1991 sentence but instead of attributing the twelve years entirely to CR-91-103, it allocated the twelve years over all eight separate criminal cases that comprised the 1991 sentence. The remaining eleven and one-half years from the 1991 Sentence were suspended in favor of five years probation. The 1995 Sentence repeated that the sentence under CR-92-484 was to be served prior, and consecutively, to the sentence imposed for violating probation from the 1991 Sentence. Synthesizing foregoing, Ward’s sentence is: four years imprisonment plus one year of parole (CR-92-484) to be followed by eleven years and 364 days of imprisonment plus five years probation (CR-91-103, CR-91-326, CR-91-327, CR-91-328, CR-91-329, CR-91-330, CR-91-331, and CR-91-198).
D. Ward’s Habeas Petitions
On April 9, 1996, Ward filed a petition in federal district court for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. His initial habeas petition was denied by the district court and appealed to us. In our disposition of that appeal, we stated,
Mr. Ward’s petition appears facially to raise a claim under the Double Jeopardy Clause of the United States Constitution. While the federal district court appears to have found Mr. Ward’s sentences have not been impermissibly lengthened, we are unsure of the record source of this finding. Given our uneer- tainty, we decline to resolve this case on-the merits at this stage. We would prefer that the federal district court conduct an evidentiary hearing to determine the exact parameters of the sentences imposed by the state district court. Accordingly, we VACATE the judgment of the district court and REMAND for further proceedings.
Ward I, 1998 WL 94608 at *3 (citation omitted). On remand, the magistrate judge found that the Double Jeopardy Clause had not been violated and that an evidentiary hearing was not required. See 1999 Magistrate’s Recommendation at 10-13, 17-18. As to the latter issue, the magistrate (i) characterized Ward I as expressing only a “preference” for an eviden-tiary hearing and (ii) found Ward’s petition did not qualify for such a hearing based upon the Tenth Circuit’s test in Lucero v. Kerby, 7 F.3d 1520, 1522 (10th Cir.1993). See 1999 Magistrate’s Recommendation at 10,17.
The district court adopted the magistrate judge’s findings and recommended disposition, thus denying the petition. Ward appealed. We granted a certificate of appealability on April 26, 2000. We exercise jurisdiction pursuant to 28 U.S.C. § 2253.
DISCUSSION
Two issues remain in this appeal: (1) Did the state court violate the Double Jeopardy Clause in the 1995 Sentence when it corrected its 1992 ruling and drew its twelve year sentence for violating probation from CR-91-103 and six remaining criminal cases? and (2) Did the federal district court on remand err by failing to hold an evidentiary hearing as this court had directed in Ward I? We answer both questions in the negative.
A. Double Jeopardy
We review de novo a claim by a habeas corpus petitioner that his sentence violates the Double Jeopardy Clause. See Miranda v. Cooper, 967 F.2d 392, 403 (10th Cir.1992). The Fifth Amendment provides: “[N]or shall any person be subject for the same offence to be twice put in jeopardy of life or limb.... ” This Clause “protects against multiple punishments for the same offense.” United States v. DiFrancesco, 449 U.S. 117, 129, 101 S.Ct. 426, 66 L.Ed.2d 328 (1980). Among other things, this prevents a court from increasing a defendant’s sentence once he has a “legitimate expectation of finality in his original sentence.” United States v. Rourke, 984 F.2d 1063, 1066 (10th Cir.1992).
Ward presents two arguments as to why his corrected sentence violates double jeopardy. First, he argues that he “had a legitimate expectation of finality in the manner in which his original sentence was structured.” Second, he contends that he obtained a legitimate expectation of finality in the structure of the 1992 Sentence because, between 1992 (when he was sentenced for violating probation) and 1995 (when the court corrected his illegal sentence) he had served “a portion” of this sentence.
Both these arguments fail for the same reasons: Ward successfully chal lenged the illegal sentence imposed in 1992. Illegal sentences do not confer legitimate expectations of finality because they are subject to change. Furthermore, a defendant cannot gain a legitimate expectation of finality in a sentence that he challenged.
1. Illegal Sentence
The state court’s error in the 1992 Sentence of drawing the twelve years of imprisonment from CR-91-103 alone was an illegal sentence because in the 1991 Sentence the court had run the eight counts covered by CR-91-103 concurrently. As an illegal sentence, it could not have created a legitimate expectation of finality. See Rourke, 984 F.2d at 1066 (“A defendant cannot acquire a legitimate expectation of finality in a sentence which is illegal, because such a sentence remains subject to modification.”). Indeed, Ward objected to the sentence as incorrect and the state court, upon realizing its mistake, fixed its error in the 1995 Sentence.
The sentencing package doctrine is an application of this rule that illegal sentences do not create a legitimate expectation of finality. The sentencing package doctrine provides,
A sentence under the U.S. Sentencing Guidelines constitutes a sentencing package which takes into account all counts upon which the defendant has been convicted. When one of these counts is set aside or vacated, the district court is free to reconsider the sentencing package de novo unless the appellate court specifically limited the district court’s discretion on remand.
United States v. Smith, 116 F.3d 857, 859 (10th Cir.1997). We have acknowledged that other circuit courts have applied the doctrine not only on direct appeal, as we have, but also on collateral attack under 28 U.S.C. § 2255. See United States v. Hicks, 146 F.3d 1198, 1202 n. 5 (10th Cir.1998) (citing cases). While we acknowledge the difference between our application of this doctrine in previous cases and this case — this case involves a collateral attack under § 2254 after an illegal sentence has been corrected by means of a state post-conviction proceeding, rather than a direct appeal after a count is set aside or vacated — we see no reason not to apply it to these facts. In Hicks we continued, “Other circuits similarly have emphasized the importance of allowing district courts to resentence in order to carry out the original sentencing intent, recognizing that resentencing on remaining convictions after vacation of one count may be necessary in order to ensure that the punishment still fits both the crime and criminal.” Id. at 1202. Likewise, here, the state court in 1995 was permitted to re-sentence Ward after it realized that its 1992 sentence was illegal in order to carry out its original sentencing intent and to ensure that Ward received the appropriate punishment for violating the terms of his 1991 probation.
As we said in Hicks, “Hicks would have us place him in a better position by allowing him to escape the consequences of using the weapon in the commission of the offense. This we refuse to do.” Id. at 1203. Similarly, here, Ward would have us place him in a better position by allowing him to reap the benefit of the state court illegally (and it seems, inadvertently) drawing twelve years from one case (CR-91-103) which originally carried only an eighteen month sentence, rather than legally drawing it collectively from all eight cases comprising the 1991 sentence (CR-91-103, CR-91-326, CR-91-327, CR-91-328, CR-91-329, CR-91-330, CR-91-331, CR-91-198) which originally carried a collective sentence of almost 23.5 years, and hence could easily support a twelve year sentence for probation violation. This we refuse to do.
All of the cases on which Ward relies for his second argument that he acquired a legitimate expectation of finality by serving a portion of his sentence are distinguishable. None of them involve an illegal sentence which was then corrected, as here.
In sum, Ward is incorrect to assert that he had a legitimate expectation of finality in the structure of his 1992 sentence. The state court did not violate double jeopardy in 1995 by correcting its illegal sentence and drawing the term of twelve years imprisonment from seven of Ward’s eight criminal cases, rather than from CR-91-103 alone.
2. Ward’s Challenge
The second, and related, reason to reject Ward’s arguments is that the sentence was corrected because of Ward’s own post-conviction petitions.
Any expectation of finality in a sentence is wholly absent where the defendant requests that his prior sentence be nullified. The defendant has, by his own hand, defeated his expectation of finality and the Double Jeopardy Clause, which guards against Government oppression, does not relieve a defendant from the consequences of his voluntary choice. Given that sentencing is often a “package deal,” we have noted that the appealing defendant cannot claim an expectation that the sentence on any particular count is irrevocably final.
United States v. Welch, 928 F.2d 915, 917 (10th Cir.1991) (quotation marks, altéra-tions, and citations omitted). Thus, a court may reimpose the same -total sentence after an appeal by increasing the sentence on a different count upon which sentence was imposed in conjunction with the sentence successfully challenged.
We have also held that after a successful post-conviction attack on a sentence, the court may reconsider the sentence imposed on related counts. See United States v. Mendoza, 118 F.3d 707, 709 (10th Cir.1997). In Mendoza, the defendant originally had been sentenced on a drug count and for carrying a firearm while trafficking. See id. at 708. His firearm conviction was vacated on habeas, but the district court then enhanced his drug sentence for possessing a weapon, and we affirmed. See id. at 708-09. Although Mendoza involved a habeas petition by a federal prisoner, we see no reason that the same rule should not apply to state prisoners and state post-conviction procedures.
Therefore, we hold that the state court did not violate double jeopardy by re-sentencing Ward using seven of the eight criminal cases from his 1991 suspended sentence, instead of improperly drawing the twelve-year term from CR-91-103 alone.
B. Evidentiary Hearing
In our disposition of Ward I, we instructed the district court to hold an evidentiary hearing “to determine the exact parameters of the sentences imposed by the state district court.” Ward I, 1998 WL 94608 at *3. We did this because we were “unsure of the record source” for the district court’s finding that Ward’s sentences had not been impermissibly lengthened. Id. This finding undergirded the district court’s dismissal of Ward’s habeas petition.
On remand, the magistrate judge concluded, and we agree, that “[t]he ‘exact parameters’ of the sentences are clear from the record, and there is no other factual issue for determination. Moreover, this court, on this review, has delineated the record references that substantiate the court’s findings.” 1999 Magistrate’s Recommendation at 17. Thus, from the record, without holding an evidentiary hearing, the magistrate judge was able to provide us with all we asked.
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3969851-29264 | Judge BAKER
delivered the opinion of the Court.
A general court-martial composed of members convicted Appellant, contrary to his pleas, of one specification of violating a lawful general order, one specification of conduct unbecoming an officer and a gentleman, one specification of communicating classified information, and one specification of removing classified material, in violation of Articles 92, 133, and 134, Uniform Code of Military Justice (UCMJ), 10 U.S.C. §§ 892, 933, 934 (2000). The members sentenced Appellant to six months confinement and dismissal from the Navy. The convening authority approved the findings and the sentence as adjudged. The United States Navy-Marine Corps Court of Criminal Appeals (CCA) affirmed. United States v. Diaz, No. NMCCA 200700970, 2009 CCA LEXIS 79, at *16, 2009 WL 690614, at *6 (N.M.Ct.Crim.App. Feb. 19, 2009).
On Appellant’s petition, we granted review of the following issues:
I.WHETHER THE LOWER COURTS MISREAD THE SCIEN-TER AND NATIONAL SECURITY ELEMENTS OF THE ESPIONAGE ACT.
II.WHETHER THE MILITARY JUDGE ABUSED HIS DISCRETION IN REJECTING AS IRREGULAR APPELLANT’S PROFFERED GUILTY PLEA TO A VIOLATION OF ARTICLE 133.
III.WHETHER THE EVIDENCE OF THE CIRCUMSTANCES UNDER WHICH AN ACCUSED ACTED, INCLUDING HIS MOTIVE, IS RELEVANT TO A CHARGE UNDER ARTICLE 133.
For the reasons set forth below, we conclude that the lower courts did not misread the elements of the Espionage Act and that the military judge did not abuse his discretion in rejecting Appellant’s proffered guilty plea to a violation of Article 133, UCMJ. We further conclude that the military judge erred by denying Appellant the opportunity to introduce motive evidence to defend against the charge under Article 133, UCMJ. We find, however, that any error was harmless. Therefore, the decision of the court below is affirmed.
BACKGROUND
From July 6, 2004, to January 15, 2005, Appellant was assigned to Joint Task Force Guantanamo Bay (GTMO) as a Deputy Staff Judge Advocate (SJA). Upon arriving at GTMO Appellant received an initial security briefing and signed an acknowledgment of that briefing. He also received a security memorandum addressing prohibited activities, which included “[ejommunicating, discussing or disseminating classified information” relating to any operations at GTMO and “[ujsing non-secure means to discuss classified information” regarding such operations.
When Appellant arrived at GTMO most of the Guantanamo detainees had been held at GTMO for two years or more. See Rasul v. Bush, 542 U.S. 466, 471, 124 S.Ct. 2686, 159 L.Ed.2d 548 (2004) (“Since early 2002, the U.S. military has held [the petitioners in this case] -along with, according to the Government’s estimate, approximately 640 other non-Americans captured abroad -at the naval base at Guantanamo Bay.”). On June 28, 2004, the Supreme Court of the United States released its opinion in Rasul, holding that the United States District Court for the District of Columbia has “jurisdiction to hear petitioners’ habeas corpus challenges to the legality of their detention” at GTMO. Id. at 483, 124 S.Ct. 2686. The Court reasoned that “[n]o party questions the District Court’s jurisdiction over petitioners’ custodians. [The federal habeas statute], by its terms, requires nothing more.” Id. at 483-84, 124 S.Ct. 2686 (citation omitted).
On October 20, 2004, the United States District Court for the District of Columbia, the federal district court supervising detainee habeas proceedings, held that the petitioners, detainees at GTMO, were entitled to legal counsel. Al Odah v. United States, 346 F.Supp.2d 1, 14-15 (D.D.C.2004). Looking at the Supreme Court’s holding in Rasul, the District Court reasoned:
The Supreme Court has found that Petitioners have the right to bring their claims before this Court, and this Court finds that Petitioners cannot be expected to exercise this right without the assistance of counsel.... Therefore ... Petitioners are entitled to counsel, in order to properly litigate the habeas petitions presently before the Court and in the interest of justice.
Id. at 8. The District Court further stated that “[t]he federal habeas statute, the Criminal Justice Act, and the All Writs Act, operate together to create this entitlement.” Id. at 14-15 (citations omitted).
On December 17, 2004, Barbara Olshan-sky, an attorney working for the Center for Constitutional Rights (OCR) in New York City, wrote letters to the Secretary of Defense, the Secretary of the Navy, and senior Department of Justice attorneys seeking names and information regarding detainees held at GTMO. Appellant was the point of contact for such correspondence at GTMO. In January 2005, the judge advocates at GTMO, after consulting with leadership in the Department of Defense and Southern Command, agreed to a response rejecting Ms. Olshansky’s request.
On January 2, 2005, Appellant used his computer to run a search on the Joint Detainee Information Management System (JDIMS), seeking a list of detainees. The military judge found that JDIMS is a web-based repository of sources in which detainee information and intelligence is collected and stored. To access JDIMS one must first log onto SIPR, which is a SECRET level computer system. The majority of information in the JDIMS system is considered classified. Colonel (COL) Randall Keys, a judge advocate in the Army, was stationed at GTMO from May 2004 to May 2005 and was one of Appellant’s superior officers. COL Keys testified that in the absence of a security banner stating “SECRET” or some other overtly stated classification level, the default level of information on JDIMS would be considered classified. At trial he testified to the following: .
Q: If [information on JDIMS] didn’t [have classification markings on it] and you had to print it out for any reason, how would you have treated that information?
A: As classified.
Q: Why would you do that?
A: Because the database — I mean the database was on a secured server ... — it didn’t necessarily have a classification mark on every page, but ... the assumption was ... if it was on the SIPR computer in a — in a classified database, you would start with the assumption it was classified, unless, applying the classification guidance somehow, you decided that it wasn’t.
While logged onto JDIMS Appellant printed out the list of names of detainees then being held at GTMO. The printout included each detainee’s full name, “Internment Serial Number,” country of origin, country of citizenship, and other identifying information, including ethnicity, source identification number, and information regarding the detention or interrogation team assigned to each detainee. The printouts themselves were not marked with a classification label.
Two weeks later, on January 14, 2005, Appellant transmitted the list of names of detainees to Ms. Olshansky in New York City. He did so by cutting the printout into more than twenty pieces of paper, placing them in a Valentine’s Day card, and mailing them to Ms. Olshansky. Ms. Olshansky did not have a security clearance and was not authorized by the government to access detainee information in the JDIMS system. She did not read the entire list of names contained in the document in the card. Ms. Olshansky and her colleagues at OCR discussed the card and its contents, holding them for approximately two weeks, during which time the card and its contents were kept locked in a file cabinet drawer. Recognizing that the document probably should not have been sent to her, she also consulted an attorney. She then contacted the judge handling the GTMO detainee habeas case she had recently filed on behalf of her organization. A court security officer retrieved the documents and accompanying Valentine’s Day card.
DISCUSSION
Issue I: The Espionage Act
We review a military judge’s decision to exclude evidence for an abuse of discretion. United States v. Barnett, 63 M. J. 388, 394 (C.A.A.F.2006). “[A] military judge abuses his discretion if his findings of fact are clearly erroneous or his conclusions of law are incorrect.” United States v. Ayala, 43 M.J. 296, 298 (C.A.A.F.1995). A question of statutory interpretation is a question of law subject to de novo review. United States v. Martinelli, 62 M.J. 52, 56 (C.A.A.F.2005).
Sections 793 and 794 of Title 18 of the U.S.Code, as amended, popularly titled the Espionage Act, include eight subsections proscribing in some manner the transfer and/or disclosure of certain national security information. 18 U.S.C. §§ 793-794 (2000). Appellant was charged with violating § 793(b) and § 793(e) of the Act. He was acquitted of Charge III, Specification 1, the § 793(b) charge; he was found guilty of Specification 2, the charge under § 793(e). That section states:
Whoever having unauthorized possession of, access to, or control over any document, writing, code book, signal book, sketch, photograph, photographic negative, blueprint, plan, map, model, instrument, appliance, or note relating to the national defense, or information relating to the national defense which information the possessor has reason to believe could be used to the injury of the United States or to the advantage of any foreign nation, willfully communicates, delivers, transmits or causes to be communicated, delivered, or transmitted or attempts to communicate, deliver, transmit or cause to be communicated, delivered, or transmitted the same to any person not entitled to receive it, or willfully retains the same and fails to deliver it to the officer or employee of the United States entitled to receive it ... [sjhall be fined under this title or imprisoned not more than ten years, or both.
18 U.S.C. § 793(e).
Before trial, the Government filed a motion in limine to exclude certain evidence, which Appellant might have offered to negate his intent to distribute classified information. Among other things, the Government sought to prevent Appellant from introducing: (1) whether or not the release of the information was consistent with the sworn oath of a commissioned officer; (2) the ethical obligations of a judge advocate or a practicing attorney; (3) the Supreme Court decision in Rasul-, and (4) the legality or illegality of United States Government policies on detainees. Regarding the evidence of Appellant’s oath as an officer and any ethical obligations he may have had, the military judge concluded as follows:
Though the defense has proffered those as the elements of the defense of justification, the court finds that there is no evidence on the record of which ethical obligation is at issue with respect to a Judge Advocate or the obligation of an attorney, or why it would apply to this particular accused under these circumstances.
In addition, the same is true with respect to consistency or non-consistency of action with the sworn oath of a commissioned officer.
The military judge then granted the Government’s motion, stating:
[T]he Government’s Motion in Limine to exclude the testimony is granted as to whether the information was consistent with the oath of a sworn commissioned officer, the ethical obligations of a Judge Advocate, the ethical obligations of an attorney, and ... consistent with any mandate from Rasul v. Bush.
Appellant argues that the military judge abused his discretion in granting the Government’s motion because the proffered evidence could have, and in his view would have, negated the “mens rea requirement” of the Espionage Act. Had he been allowed to present this evidence, Appellant would have sought to demonstrate that he intended no harm to the United States and acted only to uphold the Constitution as interpreted by the Supreme Court in Rasul.
The hinge of Appellant’s argument is that the Espionage Act has a heightened mens rea requirement, which he alternatively describes as an “intent to do harm” or “bad faith.” Thus, his proffered evidence, which he argues showed good faith, would negate his criminal intent. Appellant finds this heightened mens rea requirement in Gorin v. United States, in which the Supreme Court stated:
The obvious delimiting words in the statute are those requiring “intent or reason to believe that the information to be obtained is to be used to the injury of the United States, or to the advantage of any foreign nation.” This requires those prosecuted to have acted in bad faith. The sanctions apply only when scienter is established. Where there is no occasion for secrecy ... there can, of course, in all likelihood be no reasonable intent to give an advantage to a foreign government.
312 U.S. 19, 27-28, 61 S.Ct. 429, 85 L.Ed. 488 (1941). He also finds support for his position in subsequent federal courts of appeals cases, including United States v. Morison, 844 F.2d 1057 (4th Cir.1988). In that ease, a judge on the United States Court of Appeals for the Fourth Circuit stated in a concurring opinion, “the espionage statute has no applicability to the multitude of leaks that pose no conceivable threat to national security.” Id. at 1085 (Wilkinson, J., concurring). Another judge on the panel in Morison, writing in a separate concurring opinion, stated: “[Notwithstanding information may have been classified, the government must still be required to prove that it was in fact potentially damaging ... or useful.” Id. at 1086 (Phillips, J., concurring specially) (ellipsis in original) (quotation marks omitted).
There are two problems with Appellant’s mens rea analysis. First, Appellant was convicted of violating § 793(e) rather than being convicted under § 793(a) or § 793(b), both of which require a higher measure of mens rea, as did the antecedent § 2(a) that was at issue in Gorin. The mens rea requirement contained in § 793(e) is clear: it does not include an element of bad faith or ill intent. The mens rea prescription in § 793(e) pertains to “[w]hoever having ... information relating to national defense which information the possessor has reason to believe could be used to the injury of the United States or to the advantage of any foreign nation, willfully ... communicated, delivered, or transmitted ... the same to any person not entitled to receive it.” The critical language is, of course, that the accused “has reason to believe could be used to the injury of the United States or to the advantage of any foreign nation” (emphasis added). This contrasts with § 793(a), which requires an “intent or reason to believe that the information is to be used to the injury of the United States” (emphasis added). ‘Willfulness,” in the context of § 793(e), arises not in the context of bad intent, but in the conscious choice to communicate covered information. In short, the military judge and Court of Criminal Appeals got it right in this case.
Second, the law in the military justice system is well-settled on this point. In United States v. McGuinness, the appellant argued that the term “willfulness” in § 793(e) “includes an element of bad faith, evidenced by a sinister purpose to injure the interests of the United States.” 35 M.J. 149, 153 (C.M.A.1992). This Court disagreed. It held that the military judge was correct to instruct that § 793(e) does not require proof of a defendant’s bad faith. Id. The Court explained its reasoning as follows:
The statute in question is part of the Espionage Act of 1917, as amended by the Internal Security Act of 1950. When a statute is a part of a larger Act ... the starting point for ascertaining legislative intent is to look to other sections of the Act in pari materia with the statute under review. Sections 793(a) and 794(a) require that the act be done, with intent or reason to believe that the information is to be used to the injury of the United States, or to the advantage of any foreign nation. Sections 793(d) and (e), however, require only that the accused act “willfully.” The current version of § 793(e), as amended in 1950, criminalizes willful retention of classified materials by someone not authorized to retain them. Section 793(f) has an even lower threshold, punishing loss of classified materials through “gross negligence” and punishing failing to promptly report a loss of classified materials. While § 794 covers “classic spying,” § 793(e) covers a much lesser offense than that of “spying.”
Based on our analysis of the statute in question and a review of its legislative history, we conclude that there is no basis in the legislative record for finding that Congress intended to limit prosecutions for violation of § 793(e) to classic spying. To the contrary, it is clear that Congress intended to create a hierarchy of offenses against national security, ranging from “classic spying” to mere losing classified materials through gross negligence.
Id. (citation and quotation marks omitted).
Returning to the facts of this case, Appellant is correct that classification alone does not satisfy the mens rea requirement of § 793(e). Surely classification may demonstrate that an accused has reason to believe that information relates to national defense and could cause harm to the United States. However, not all information that is contained on a classified or closed computer system pertains to national defense. Likewise not all information that is marked as classified, in part or in whole, may in fact meet the criteria for classification. Conversely, information that is not so marked may meet the standards for classification and protection. This is evident enough with respect to information received through oral means or information the recipient should have reason to believe warrants protection. Indeed, the military judge in this ease found that “the JDIMS system itself does not bear security classification banners and that the ... document at issue in this case ... was printed from the JDIMS system without a security classification marking on it.”
The record further indicates that the names of GTMO detainees, their citizenship, and their nationality had been declassified at the time of trial. However, other information, according to trial testimony, could reveal sources and methods of intelligence gathering and remained classified. Among other things, the internment serial numbers of the detainees remained classified. The unclassified record also indicates that “[t]he column regarding what Detention Team — or what Interrogation Team is assigned to that detainee has never been declassified.” Further, the “source identification number is still a classified piece of evidence.” If publicly disclosed, the classified and unclassified testimony indicates this information could be used to the injury of the United States.
The evidence indicates that Appellant should have been aware of this fact. He was an officer in the Navy. He knew he was dealing with sensitive material derived from a classified computer system: he received an initial security briefing upon arriving at Joint Task Force GTMO; signed an acknowledgment of the briefing; and received a pocket guide that explained what types of information were sensitive and .prohibited from disclosure, as well as the rules governing communication about detainees. He intentionally revealed this sensitive material to Ms. Olshansky, an employee of an outside organization and an individual not authorized to receive it. Importantly, Appellant’s awareness of the potential for harm through the unauthorized release of the data is evidenced by the clandestine manner in which he distributed this classified information. Appellant’s conduct therefore satisfies the mens rea requirement of § 793(e), as that element is correctly defined in law. He knew or should have known that the information “could be used to the injury of the United States or to the advantage of any foreign nation.” Evidence of motive derived from the proffered evidence would not have negated this element. The record therefore supports the military judge’s conclusions.
With respect to Appellant’s first issue, the evidence Appellant sought to introduce at trial does not refute the requisite mens rea, as interpreted by this Court and virtually every other court that has construed § 793(e). It is also notable that, when asked at oral argument, appellate defense counsel stated that the military judge instructed the members “satisfactorily” regarding the elements other than what Appellant calls the “bad faith” requirement. Finally, proof of Appellant’s motive is irrelevant on this issue. Although motive evidence may be relevant where it is circumstantial evidence of intent, in this case Appellant’s motive was unrelated to his intent. Any noble motives Appellant might have harbored, including what he may have thought was in compliance with a Supreme Court ruling, were irrelevant to his intentional act of physically mailing the names of detainees and coding information related to these names. Accordingly, the military judge did not abuse his discretion when he granted the Government’s motion in limine or in his reading of the Espionage Act.
Issue II: Appellant’s Attempted Guilty Plea
We review a military judge’s decision to accept or reject a guilty plea as “irregular” for an abuse of discretion. United States v. Inabinette, 66 M.J. 320, 322 (C.A.A.F.2008). Military judges are afforded “broad discretion” in deciding whether or not to accept such a plea. Id. When an accused enters a guilty plea, the military judge is required to make “such inquiry of the accused as shall satisfy the military judge that there is a factual basis for the plea.” Rule for Courts-Martial (R.C.M.) 910(e).
R.C.M. 910(a)(1) allows an accused to plead guilty to a specification with exceptions and substitutions to the initial charge. R.C.M. 910(b), on the other hand, permits a military judge to reject such pleas if the exceptions and substitutions render it “irregular.” The Discussion to R.C.M. 910(b) explains that an irregular plea “includes pleas such as guilty without criminality or guilty to a charge but not guilty to all specifications thereunder.”
At trial, Appellant sought to plead guilty to Charge II and its Speeifica tion by exceptions. Charge II presented a violation of Article 133, UCMJ. This offense has only two elements: (1) that the accused did or omitted to do certain acts; and (2) that, under the circumstances, these acts or omissions constituted conduct unbecoming an officer and gentleman. Manual for Courts-Martial, United States pt. IV, para. 59.b(2) (2005 ed.) (MCM). The focus of Article 133, UCMJ, is the effect of the accused’s conduct on his status as an officer. United States v. Conliffe, 67 M.J. 127, 132 (C.A.A.F.2009). The test for a violation of Article 133, UCMJ, is “ ‘whether the conduct has fallen below the standards established for officers.’ ” Id. (quoting United States v. Taylor, 23 M.J. 314, 318 (C.M.A.1987)).
In his guilty plea Appellant attempted to substitute for the words “classified documents” the phrase “government information not for release.” The military judge determined that the guilty plea as submitted was irregular. In particular, he concluded:
The tendered plea by exceptions and substitutions alters not just a factor in aggravation, but the very nature of the information at issue and the gravaman of the charge. Classified information is not a variety of fruit which can be alternately pled as a different apple or orange.... It cannot be re-described and maintain the same offense.
On appeal, Appellant argues that the military judge abused his discretion in misconstruing the elements of a “regular plea” when he rejected Appellant’s attempt to plead guilty through exceptions and substitutions to the charge alleging conduct unbecoming an officer and gentleman in violation of Article 133, UCMJ. Appellant points out that the nature of information as “classified” or “not for release” is not an element of an Article 133, UCMJ offense. Rather, he argues that the appropriate question under Article 133, UCMJ, is whether a reasonable military officer would have no doubt that his activities constituted conduct unbecoming an officer. United States v. Hartwig, 39 M.J. 125, 130 (C.M.A.1994); see also Parker v. Levy, 417 U.S. 733, 754, 94 S.Ct. 2547, 41 L.Ed.2d 439 (1974) (stating that to constitute an offense under Article 133, UCMJ, the inappropriate behavior “must offend so seriously against law, justice, morality or decorum as to expose to disgrace, socially or as a man, the offender, and at the same time must be of such a nature or committed under such circumstances as to bring dishonor or disrepute upon the military profession”).
An accused is free to proffer an alternative plea, but he is not entitled to design his own offense. We agree with the CCA that “the military judge accurately understood the breadth and scope of Article 133, UCMJ. He did not act in an arbitrary manner or otherwise abuse his discretion.... [Ajppellant’s proffered plea substituting ‘government information not for release’ was qualitatively distinct from the charged offense.” Diaz, 2009 CCA LEXIS 79, at *10-*11, 2009 WL 690614, at *4. In this case, Appellant’s amended plea changed the nature of the conduct that the Government charged as unbecoming. The military judge considered Appellant’s amended guilty plea, determined that the plea altered the gravamen of the charge, and rejected it, which on these facts was within his discretion to do. Accordingly, the military judge did not abuse his discretion by rejecting Appellant’s amended guilty plea.
Issue III: Exclusion of Motive Evidence
As already stated, a military judge’s decision to exclude evidence is reviewed for an abuse of discretion. Barnett, 63 M.J. at 394. “[A] military judge abuses his discretion if his findings of fact are clearly erroneous or his conclusions of law are incorrect.” Ayala, 43 M. J. at 298.
Article 133, UCMJ, has two elements: (1) that the accused did or omitted to do certain acts; and (2) that, under the circumstances, these acts or omissions constituted conduct unbecoming an officer and gentleman. MCM pt. IV, para. 59.b(2).
As we discussed above in the section on Issue I, Appellant sought at trial to introduce evidence of his ethical duties as a judge advocate, among other proffers. Appellant sought to argue that, under the circumstances, he:
was caught between what he reasonably believed to be conflicting duties: on the one hand, his duty as a naval officer and an officer of the court to uphold the Constitution and the rulings of the Supreme Court and the district court in the habeas cases, and on the other hand, his duty as a Naval officer to maintain the confidentiality of information that his superiors should have authorized for release but did not.
The military judge concluded that none of the evidence proffered by Appellant supported his argument that he was required to release classified information based on his duties as a commissioned officer, his ethical obligations as a judge advocate, or his ethical obligations as a licensed attorney.
Appellant did not appeal the military judge’s determination that no legal justification was raised by the evidence. Appellant does argue that the subjective motivation of an accused is relevant to a charge under Article 133, UCMJ. Appellant claims the military judge prevented him from putting on an adequate defense by excluding evidence of the circumstances under which he acted, including his motive. Appellant argues that this evidence would have supported what he viewed as his struggle between conflicting legal duties to the Constitution and the rulings of the Supreme Court on the one hand, and to maintain the confidentiality of information unauthorized for release on the other. In such a context, members might have found Appellant’s conduct foolish or inappropriate, but, given Appellant’s motive, not necessarily unbecoming or dishonorable. He further asserts that with the benefit of such evidence he would have been able to contradict the Government’s ease, but instead was left to present his “motive” evidence at sentencing.
In our view, Appellant’s general point is well-founded. A determination as to whether conduct charged under Article 133, UCMJ, is unbecoming of an officer and gentleman includes “taking all the circumstances into consideration.” MCM pt. IV, para. 59.c(2). Such circumstances incorporate the concept of honor. Thus, in contrast to § 793(e), Appellant’s view of what those circumstances entailed, and what was “honorable,” is therefore relevant to his charge under Article 133, UCMJ. In short, evidence of honorable motive may inform a factfinder’s judgment as to whether conduct is unbecoming an office!’. This is possible even where the conduct itself amounts to a delict; this might be the case, for example, where an accused drives under the influence of alcohol in order to rush a gravely injured person to an emergency room.
We therefore conclude that the military judge abused his discretion when he prohibited Appellant from presenting motive evidence on the Article 133, UCMJ, charge, without first evaluating Appellant’s specific proffers for factual and legal relevance under M.R.E. 401, M.R.E. 402, and M.R.E. 403 in the context of the Article 133, UCMJ, charge.
Whether the Prohibition of Motive Evidence was Harmless Error
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4257977-7252 | ROBERT L. TAYLOR, District Judge.
Defendant has moved for summary judgment of dismissal, and the parties have stipulated that the judgment rendered pursuant to the motion may be one on the merits, as well.
This is an action to recover $9,587.50, represented in the complaint as funds stolen from Clark & Jones by Neil God-win, an employee of plaintiff in its Knoxville store. Clark & Jones is a dealer in musical instruments and related goods, including music books and sheet music. Defendant was the insurer against such loss as that charged against Godwin. Decisive parts of the record are the insurance policy, stipulations filed by the parties, and answers to interrogatories.
A requirement placed upon the insured by policy provision was that the “insured shall keep verifiable records of all property covered by this policy.” It has been stipulated that on June 30 of each of the years 1946, 1947, 1948, 1949, 1950, and 1951, plaintiff took inventory of such items as sheet music and music books by stacking them according to kind and price and measuring each stack in feet and inches, and that all other items were counted; that inventories thus kept disclosed no shortage of merchandise during the five-year period immediately prior to November 17, 1951. In answer to interrogatories plaintiff has admitted that it did not claim to have any evidence establishing that on November 17, 1951, there was any merchandise, inventory or cash shortage in its store in Knoxville, Tennessee, other than the confession of Neil Godwin. Plaintiff and the corporation of which it is a subsidiary have stipulated that they are unable to find any claim which defendant insurer has paid to either of them without being supported by the insured’s records; also, that though it is highly impractical and contrary to custom to keep detailed records of sheet music bought and sold, such records could be maintained. It has further been stipulated by Clark & Jones and by defendant that records were kept of the identity and quantity of musical instruments, radios and other large items of merchandise during the period in question and that those records, coupled with the aforesaid inventories, do not disclose any shortage in those items during that period. Hence, the shortage, if any occurred, was in music books and sheet music. But it has been stipulated, despite the stack and measurement inventories made during the relevant five-year period, that “plaintiff has no records by which it can establish that any shortage ■ existed in said sheet music, music books or other items,” or in its securities or cash during that period.
The confession of Neil Godwin is pleaded as follows:
“On November 17, 1951, and at the time of the discovery above referred to, the said Neil Godwin stated both orally and in writing, voluntarily and in the presence of witnesses, that during the five year period immediately prior thereto that he had taken from the plaintiff’s funds and appropriated for his own use approximately Six Dollars and Fifty Cents ($6.50) per day. The said Neil Godwin died on or about December 11, 1951.”
As heretofore mentioned, plaintiff Clark & Jones has admitted in response to interrogatories that the confession of Neil Godwin is the only proof this plaintiff has of default on the part of Godwin. Opportunity has been afforded plaintiff to furnish additional evidence, but by stipulation it is now agreed that plaintiff has no additional evidence and for that reason agrees that the case may be disposed of as the record stands.
From careful study of the record and briefs of counsel, the Court is of the opinion that the motion of defendant for summary judgment should be sustained and the case dismissed on the merits.
The requirement that the insured keep verifiable records has an obvious purpose, namely, discovery of defaults insured against. Primarily its purpose from the insured’s viewpoint was to lessen the risk, and a verifiable record, supported by periodic inventories, should have disclosed cumulative thefts of any substantial volume. Records were kept of instruments and no shortage existed there. The confession indicates that any theft which occurred consisted of taking money from the cash register or in failing to register cash receipts for articles sold. The cash register would have disclosed its own shortage, had money been taken from it after being placed therein in the regular manner. If sales were made and receipts not put in the cash register in the regular manner, decline of inventory as compared with periodic receipts should have disclosed the thefts. As there was no decline of inventory in the instrument department, and as the misappropriations were daily affairs and in relatively small sums, theft from small-article sales is indicated.
It is alleged in the complaint and not controverted that Neil Godwin “was employed by the plaintiff in regular service as a retail sheet music sales person” in plaintiff’s Knoxville store. If the alleged confession of Godwin was true, his misappropriations would have been reflected in a decline in sheet music inventory. In the absence of exact proof on the subject, let it be assumed conservatively that sheet music sold of $1 per copy, that it stacked 100 copies per inch, and that $6.-50 of misappropriation per day amounted to $1,950 per year. In one year, on that basis, the stack measure would have diminished by 19% inches. In five years the diminution would have been 97% inches, or 8 feet and one and one-half inches, a decline that even a most perfunctory inventory would have disclosed. These figures, of course, are subject to variation as prices varied, and as stacks varied as between sheet music and music books, a variation, however, that would have been subject to compensation by increase in thickness along with increase of price of an article. This observation as to decline of inventory indicates either that little attempt was made to keep any check on sheet music and related inventory, or that the confession of Godwin is largely, if not wholly, devoid of any reliability. The Court has judicial knowledge that plaintiff’s store is a small one, and that space for inventory is quite limited. Such a relatively large decline of inventory as that estimated above would certainly have been discovered as a result of any serious measure. If the decline existed in fact, the insurer was greatly prejudiced by its lack of discovery.
Though the inventory could have been kept at normal level by new purchases, a verifiable record of inventory would have disclosed this turnover in stock, for which there should have been corresponding sales receipts. A verifiable record of loss would include such records as would disclose a loss, had one occurred.
As applied to fire policies, the clause requiring inventories and safekeeping of records of the same, is commonly referred to as the “iron safe clause.” In this state it is an enforceable clause. Kustoff v. Stuyvesant Ins. Co., 160 Tenn. 208, 212, 22 S.W.2d 356. Absolute accuracy in compliance is not required, but there must be substantial compliance. Niagara Fire Ins. Co. v. Bryan & Hewgley, Inc., 6 Cir., 195 F.2d 154; Accident & Casualty Ins. Co. v. Lasater, 32 Tenn.App. 161, 222 S.W.2d 202.
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3222347-7250 | RULING
NAUMAN S. SCOTT, District Judge:
Oliver Lavergne filed an application for a writ of habeas corpus with this Court, alleging that he is illegally and unconstitutionally detained in the Louisiana State Penitentiary at Angola, Louisiana, under a ten (10) year sentence imposed on November 9, 1966, after his plea of guilty to the charge of simple rape. The guilty plea was entered to the lesser offense after closing arguments in a jury trial for aggravated rape.
An evidentiary hearing subsequent to petitioner’s application for writ of habeas corpus in the courts of Louisiana was held in the Twenty-Seventh Judicial District, St. Landry Parish. A certified copy of the transcript of this hearing has been filed with these proceedings and reviewed by this Court. There appears to be substantial evidence to support the State Court’s finding that the guilty plea was voluntarily entered. There are no facts at issue material and necessary for this ruling which would require an evidentiary hearing before this Court.
Petitioner contends that his detention is unconstitutional and illegal in that: (1) his constitutional rights were violated in the State Court evidentiary hearing on application for a writ of habeas corpus in that Court; (2) that his guilty plea was not voluntarily entered; and (3) that the sentencing Court failed to advise him of the nature and consequences of his plea.
If there were irregularities in the State Court habeas corpus proceeding, a point which is not conceded, they would not affect the validity of a prior sentence and detention. Petitioner reapplied to the State Court after the evidentiary hearing in question. The reapplication was denied and the Louisiana Supreme Court refused to review this denial. Therefore, Lavergne’s first contention goes only to the question of whether State Court remedies have been exhausted and they have.
The primary issue raised by this application is whether the plea of guilty was knowingly and intelligently made. To support his contention that the plea was not voluntary petitioner alleges: (a) he did not have benefit of competent counsel; (b) the possibility of being sentenced to death by a jury upon trial for aggravated rape coerced his guilty plea to the lesser included offense; and further that (e) certain illegally obtained admissions were used to coerce his plea.
Counsel for petitioner in the pretrial and trial stages was retained rather than Court appointed. Lavergne con tends that since he contacted this attorney after arrest, while the attorney was visiting another criminal defendant, and since the attorney was just beginning the practice of law, that he was not competent to properly advise him.
A defendant is clearly entitled to effective assistance of counsel in determining how he should plead, and can collaterally attack his conviction if not afforded opportunity to exercise this right. 1 C. A. Wright, Federal Practice and Procedure § 171 (1969); Davis v. United States, 5 Cir. 1967, 376 F.2d 535. This right is no less momentous to an accused who must decide whether to plead guilty than to an accused who stands trial. Von Moltke v. Gillies, 332 U.S. 708, 721, 68 S.Ct. 316, 322, 92 L.Ed. 309 (1948). The test used to determine effectiveness of counsel is however different where there is a guilty plea. In such instance counsel must only insure that the plea is voluntarily and understanding^ made to be adequately effective. Lamb v. Beto, 5 Cir. 1970, 423 F.2d 85; Colson v. Smith, 438 F.2d 1075, 5 Cir. 1971; see also Kress v. United States, 8 Cir. 1969, 411 F.2d 16; Alaway v. United States, D.C.Cal.1968, 280 F.Supp. 326.
In the instant case Lavergne had the benefit of retained counsel’s advice after a full jury trial save the instructions. There is no evidence indicating that counsel failed to ascertain the voluntariness of petitioner’s plea or was ineffective in assisting in arriving at a proper decision. Counsel conferred with petitioner on repeated occasions and the decision to change the plea was based upon informed deliberation.
Under Louisiana Law a death sentence can be imposed only upon a finding by a jury of guilty with capital punishment. No capital sentence is allowed where a defendant is tried by a Judge alone or enters a plea of guilty. A similar penalty provision under 18 U.S.C. § 1201(a), Federal Kidnapping Act, was held to be unconstitutional in United States v. Jackson, 390 U.S. 570, 88 S.Ct. 1209, 20 L.Ed.2d 138, as imposing an impermissible burden upon the accused's exercise of his Fifth Amendment right not to plead guilty and a Sixth Amendment right to demand trial by jury. The fact that Louisiana’s procedure for rendering verdicts with capital punishment may be unconstitutional does not mean that all guilty pleas entered by persons charged with capital offenses in Louisiana are involuntary. The identical question was considered in Brady v. United States, 397 U.S. 742, 90 S.Ct. 1463, 25 L.Ed.2d 747 (1970), as to a guilty plea under the Federal Kidnapping Act. The Supreme Court in Brady reiterated the position it had stated in Jackson that the penalty portion of the Federal Kidnapping Act was not inherently coercive of guilty pleas notwithstanding the fact that it tended to discourage defendants from insisting upon their right to trial by jury.
As the Supreme Court said in Brady.
“The voluntariness of Brady’s plea can be determined only by considering all of the relevant circumstances surrounding it. Cf. Haynes v. [State of] Washington, 373 U.S. 503, 513, 83 S.Ct. 1336, 1343, 10 L.Ed.2d 513, 520 (1963); Leyra v. Denno, 347 U.S. 556, 558, 74 S.Ct. 716, 717, 98 L.Ed. 948, 950 (1954) * * * But even if we assume that Brady would not have pleaded guilty except for the death penalty provision of § 1201(a), this assumption merely identifies the penalty provision as a “but for” cause of his plea. That the statute caused the plea in this sense does not necessarily prove that the plea was coerced and invalid as an involuntary act.” Brady v. United States, supra.
The relevant circumstances surrounding Lavergne’s guilty plea clearly indicate that it was knowingly and intelligently made. Lavergne was arrested in June of 1966 and did not enter a plea of guilty until November 9 of that year. During this time he had benefit of advice from family and friends as well as competent counsel. In addition to this assistance petitioner also had the added knowledge gained by viewing a two day jury trial including final arguments. It is apparent that Lavergne expected his plea to be taken as a judicial confession of guilt and an acceptance of the fact that legal sanctions would be imposed as a result thereof.
Again quoting the Supreme Court in Brady, supra:
“The fact that Brady did not anticipate United States v. Jackson, supra, does not impugn the truth or reliability of his plea. We find no requirement in the Constitution that a defendant must be permitted to disown his solemn admissions in open court that he committed the act with which he is charged simply because it later develops that the State would have had a weaker case than the defendant had thought or that the maximum penalty then assumed applicable has been held inapplicable in subsequent judicial decisions.”
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1404559-23364 | THOMAS, Circuit Judge.
This is a suit by Rebecca G. Springer as plaintiff against The J. R. Clark Company as defendant for an accounting for royalties on patented ironing boards manufactured and sold by the defendant during the period from November 15, 1934, to March 1, 1938. Judgment was rendered for the defendant and the plaintiff appeals. The opinion of the trial court is reported in Springer v. J. R. Clark Co., D.C., 46 F.Supp. 54. Jurisdiction is predicated upon diversity of citizenship and the requisite amount in controversy.
The plaintiff is the beneficiary of'royalties reserved by the inventor in a contract for an assignment of his interest in the patents. The defendant is a licensee under a remote assignee of the patents. The plaintiff does not claim under a recorded lien nor upon an express contract with the defendant. She bases her claim against the defendant upon (1) an equitable right in the nature of (a) an equitable assignment or of (b) an equitable lien, or upon (2) a novation resulting from the circumstances and the relations of the parties. The defendant denies the existence of such a right or of any obligation on its part. None of the material evidentiary facts are in dispute. Most of them were stipulated. The controversy concerns the proper inferences and the legal conclusions to be drawn from conceded facts.
The adverse determination of the trial court in respect of each element of the plaintiff’s claim can not be reversed unless the evidence clearly establishes one or more of plaintiff’s alleged contentions. The nature of the issue makes necessary a review of the pertinent facts.
The plaintiff is the surviving widow of the inventor, Aaron M. Springer. Prior to 1918 Springer had devised and applied for patents for certain improvements in ironing tables or boards. On February 28, 1918, he executed two instruments in writing in favor of Oregon Woodenware Mfg. Co., an Illinois corporation, herein called Oregon. The first of such instruments was an agreement to transfer to Oregon his “entire right, title and interest in and to” three inventions for improvements in ironing boards and his applications for patents thereon. The contract then provided: “In consideration whereof, the said party of the first part [Oregon] hereby agrees for itself, its successors and assigns, to pay to Rebecca G. Springer, the wife of Aaron M. Springer, * * * her heirs or assigns, a royalty of two cents (2<£) for each and every ironing board or folding ironing table, which the said party of the first part may hereafter manufacture and sell, or cause or permit to be manufactured or sold * * * under any Springer patents owned or controlled * * * by said party of the first part, * * * said royalty shall be paid during the life or lives of each and every patent * * * to be issued or heretofore issued * * * aiid assigned or agreed to be assigned to said party of the first part.” The contract provided that payments were to be made monthly on the 10th of each month.
This contract was not recorded in the Patent Office.
The second instrument executed by Springer on February 28, 1918, was an assignment to Oregon of the three applications for patents referred to in the first instrument, transferring to Oregon “the entire' undivided and unincumbered right to said inventions.” This instrument was recorded in the Patent Office, and two patents were thereafter issued to Oregon upon two of the applications.
One George H. Kleinsorge owned all of Oregon’s stock; and some time after February, 1918, he began the manufacture of the patented articles in the state of Oregon. In 1920 he moved the business to Waukegan, Illinois, where he organized under Illinois law the Rid-Jid Products Corporation (hereinafter called Illinois), and caused the patents to be assigned to it on July 14, 1920. Such assignments were recorded in the Patent Office. The new corporation took over Oregon’s assets and assumed its liabilities. Thereafter the new corporation manufactured the patented articles.
On March 5, 1921, Illinois entered into a manufacturing and marketing contract with the defendant, The J. R. Clark Company. This contract was cancelled, and a new contract between the same parties was entered into on September 15, 1921, by the terms of which the defendant was granted an exclusive ten-year license to manufacture and sell ironing tables under the patents in consideration of the monthly payment to Illinois of a royalty of two dollars per dozen ironing tables. In this contract title to the patents was warranted to be absolute and unencumbered. The business was then moved to Minneapolis, Minnesota.
On January 20, 1922; Illinois, to secure a $6,000 loan, mortgaged to the defendant all of its interest in two of the Springer patents. The mortgage was made subject “to a certain royalty agreement between Aaron R. Springer and Oregon Woodenware Manufacturing Company, dated February 28, 1918, which shall likewise at all times hereafter remain in full force and effect.” The mortgage provided further, that in case of default “this conveyance shall become absolute * * * subject only to said Springer royalty agreement.”
From September 15, 1921, the date of the contract between Illinois and the defendant, until April 15, 1922, the defendant paid the $2 per dozen royalty to Illinois. During this period Illinois failed to pay the reserved royalty to the plaintiff under the contract of February 28, 1918. Beginning in October, 1921, the Springers without success made demand through the defendant Clark Company upon Illinois for payment of the delinquent royalties. In February, 1922, the claim was placed in the hands of a Minneapolis lawyer for collection. He contacted both Kleinsorge, own er of Illinois, and the Clark Company in an effort to collect for the Springers. Failing to obtain payment he brought suit against Illinois in the state court in April, 1922, and garnished the Clark Company. On April 29, 1922, Illinois made a proposal of settlement to the Springers’ attorney as follows: “The Rid Jid Products Company, a corporation, will authorize in writing the J. R. Clark Company of Minneapolis, to pay to Mrs. Springer 24$S for every dozen boards sold from April 1st, 1922, and thereafter. This money will be sent direct by the Clark Company to Mrs. Springer, each month, together with a statement showing the number of boards manufactured.”
This proposal was accepted, and on May 15, 1922, Illinois sent the following letter to the Clark Company:
“J. R. Clark Company,
“Minneapolis, Minn.
■“Gentlemen:
“You have been authorized by the Board of Directors of the Rid-Jid Products Corporation to pay to Aaron M. Springer and Rebecca Springer, his wife, a royalty of two cents (2f) per board on each and every Rid-Jid or Springer ironing board sold by your Company, which sum shall be deducted from the amount of royalty due our Company under its contract with you. Receipts evidencing the amount of royalties paid should be taken from the Springers.
“This communication is your authority for making the payments as above set forth.
“Very truly yours,
“Rid-Jid Products Corporation,
“By G. H. Kleinsorge, President, “Leonard L. Cowan, Secretary.”
Before accepting the proposal of settlement of April 29, 1922, Springers’ attorney testified that he talked to Mr. Clark of the Clark Company and that “they accepted the proposals.” This testimony does not appear to have been denied. The suit in the state court seems never to have been dismissed of record. Plaintiff claims that the authorization in the letter of May 15, 1922, was never revoked. Th.e defendant •continued to pay the royalties to the plaintiff, or to her husband, until November, 1934.
The contract of February 28, 1918, by the terms of which Oregon agreed to pay the royalties reserved “to Rebecca G. Springer, wife of Aaron M. Springer”, has not been modified or amended; but upon request of the Springers the royalties were paid sometimes to the husband and other times to Mrs. Springer.
In 1930, Illinois was succeeded by a new corporation, Rid-Jid Products, Inc., a Delaware corporation (hereinafter called Delaware), owned by the same party who owned its predecessors. The new corporation took over the assets of Illinois and assumed its liabilities. The defendant continued to pay the royalties to plaintiff, as stated above; and it was stipulated that Delaware “has never instructed defendant not to pay directly to plaintiff 24^ per dozen boards."
On June 1, 1922, Illinois and the defendant modified their contract of September 15, 1921. On March 1, 1924, Illinois wrote the following letter to the defendant :
“The J. R. Clark Co.,
“Minneapolis, Minn.
“Gentlemen:
“On and after this date, you will please mail Royalties of $.24 per dozen to Aaron M. Springer direct on all Rid Jid and Springer Ironing Tables, as per our contract with you, and mail the balance of $1.76 per dozen to Rid-Jid Products Corporation, 1309 Kesner Building, Chicago, Ill.
“This cancels all previous instructions to you covering payment and distribution of Royalties.
“Yours truly,
“The Rid Jid Products Corporation,
“By G. H. Kleinsorge, President.”
On July 12, 1928, Illinois and defendant entered into a contract providing that upon the expiration of the ten-year contract of September 15, 1921, the license under said contract should remain operative until the end of the life of any letters patent owned or controlled by the corporation, but changing the royalty to be paid during the extended period from $2 per dozen boards to $1.50 per dozen.
On June 1, 1931, the Delaware corporation, successor of the Illinois corporation, as owner of the patents, and the defendant entered into a new contract, cancelling the former license contracts and changing their terms in several respects, but continuing the exclusive license to defendant to manufacture and sell the patented articles, for a percentage of the net returns instead of for $1.50 per dozen tables. Paragraph 9 of this contract provided: “Hitherto, under the instructions from Rid-Jid Products, Clark Company have paid directly to Rebecca Springer part of the accruing royalties to the extent of Twenty-Four cents (24^) per dozen boards, and Clark Company is hereby authorized to make such payments, under the present contract, until otherwise instructed by Rid Jid Products.”
At the time defendant ceased making monthly payments to plaintiff in November, 1934, it notified plaintiff that it could no longer pay her because it had received notices from the Collector of Internal Revenue of large federal tax liens imposed against the Illinois and Delaware corporations, and that “We are expected and required under the circumstances to pay all royalties accruing direct to the Internal Revenue Department, St. Paul, Minn.” - In 1935 the Internal Revenue Service Department notified the defendant that, in its opinion, the tax lien was not effective as against the royalties due Mrs. Springer.
The defendant has not paid the royalties claimed by plaintiff to any one, and refuses to pay her for the alleged reason that it has claims against the Illinois and Delaware corporations which can be recovered only by offsets against accruing royalties. The trial court did not, however, adjudicate the validity of this claim to a right of set-off because it was not put in issue.
The plaintiff’s contention that there was a novation of the contract of February 28, 1918, pursuant to which the defendant became bound to pay the royalties reserved in that contract and which Oregon ag'-eed “for itself, its successors and assigns to pay to Rebecca G. Springer” is not supported by sufficient evidence to overcome the adverse finding of the court. Such contention is accordingly without merit.
The important question for determination is whether plaintiff has established against the defendant an equitable right in the nature of an equitable assignment of, or an equitable lien upon, the fund admittedly in the possession of defendant. If such an equitable right attached to that fund on May 15, 1922, and it has not since expired, been revoked, or lost in some other way, then plaintiff should be granted recovery.
In considering this matter three questions, the answers to which are in dispute, must be determined. They are: 1. Did the arrangement, among - the parties culminating in the letter of May 15, 1922, from Illinois, licensor, to the defendant, licensee, constitute an equitable right in the nature of an equitable assignment to the plaintiff or of an equitable lien upon a portion of the royalty accruing to the corporation under the license contract of September 15, 1921 ? 2. If so, was such equitable right subsequently revoked by the parties? And 3. If such equitable right was so created and not subsequently revoked, was it effective beyond the expiration of the September 15, 1921, ten-year license contract, that is, did it continue in force under the license agreement of June 1, 1931, between Delaware and the defendant.
The defendant contends that no such equitable right was created because the parties did not so intend and because the authorization contained in the letter of May 15, 1922, was revocable.
The rules of law applicable to these contentions and necessary in testing the facts have been set out and discussed by this court in State Central Sav. Bank v. Hemmy, 8 Cir., 77 F.2d 458; Tobin v. Insurance Agency Co., 8 Cir., 80 F.2d 241; and Theatre Realty Co. v. Aronberg-Fried Co., Inc., 8 Cir., 85 F.2d 383. So far as pertinent these rules are as follows:
A mere promise by a debtor to pay his debt out of a specified fund belonging to him or coming to him is not an, equitable assignment of such fund. For that purpose there must be a distinct appropriation of the fund which must amount to a transfer of title and the establishment of a right in rem.
No particular form or language is necessary to create an equitable assignment provided there is shown an intention, to appropriate on the one hand and to receive on the other.
A lien is distinguished from an assignment in that it is a charge upon property, while an assignment creates an interest in property.
If the intention of the parties to» make an equitable assignment or to create an equitable lien arises by necessary-implication from the terms of the agreement, construed with reference to the situation of the parties at the time of the.contract, and by the attendant circum» ■ stances, such equitable right will be enforced by a court of equity against thee fund.
The conduct of the parties should be construed as adopting whatever method consistent with the facts and with the rights reserved is most fitted to accomplish the result intended.
The assent of the holder of a fund belonging to another is not essential to the establishment of a lien or an assignment by the owner.
An equitable right will be enforced against third parties who have notice of it.
We think that when the plaintiff accepted Illinois’ proposal of April 29, 1922, a contract was consummated appropriating a portion of the royalties accruing to the corporation to the payment of the royalties accruing to Mrs. Springer under the contract of February 28, 1918. The language was suitable to warrant that understanding on the part of Mrs. Springer. The proposal read in part: “The Rid Jid Products Company * * * will authorize in writing the J. R. Clark Company * * * to pay to Mrs. Springer 240 for every dozen boards sold from April 1, 1922, and thereafter.” The word “thereafter” could only be construed in connection with the obligation of the contract of February 28, 1918, saying the royalties due Mrs. Springer “shall be paid during the life or lives of each and every patent * * * to be issued or heretofore issued * * * and assigned * * * to said party of the first part.” Further, the proposal and its acceptance were made in connection with a suit between the parties then pending in the state court. This contract contained no provision for revocation or modification whatever.
The notice or letter of May 15, 1922, to the defendant, given pursuant to the contract was equally unqualified. It provided for the payment of the royalties due Mrs. Springer “on each and every * * * ironing board sold by your Company, which sum shall be deducted from the amount of royalty due our Company under its contract with you.” There was no reservation of a right to revoke or modify this authorization.
The defendant argues that the parties did not intend that the agreement to appropriate a portion of the royalties due the Illinois corporation from the defendant to the payment of royalties due Mrs. Springer should be irrevocable, and that this is shown by the words “This cancels all previous instructions to you Covering payment and distribution of royalties” in the letter of March 1, 1924, from the Illinois corporation to the defendant, and the provision in paragraph 9 of the contract of June 1, 1931, between Delaware and the defendant for the continued payment of royalties to Mrs. Springer, ending in the words, “Clark Company is hereby authorized to make such payments, under the present contract, until otherwise instructed by Rid Jid Products.”
Of this contention it may be said, first, that when this letter was written .and this contract executed Mrs. Springer, the record shows, lived in the state of Oregon, while the parties to the correspondence and the contract were in Minnesota or Illinois. There is no showing that Mrs. Springer knew anything about these statements or that she acquiesced in them. The statements could not be binding upon her.
Also, it is said that these statements indicate the construction which the parties placed upon the contract after it had been entered into. There is a rule, of course, that where in the performance of an ambiguous contract the contracting parties place a construction upon its terms, the presumption is that such construction is a correct statement of their original intent. This rule can have no application here, however, because, as shown above, it does not appear that Mrs. Springer had any knowledge of such construction by the li-censor. She was not a party to the letter of March 1, 1924, nor to the contract of June 1, 1931.
These ex parte instructions, given years after the letter of May 15, 1922, was written, do not even tend to prove intent at the time the original arrangement was made in the settlement of the suit for royalties. In view of the nature of the evidence relating to the subsequent statements and conduct of the parties, intent as of May 15, 1922, must be determined by the facts and circumstances then existing.
Apparently to show that certain intervening rights now bar the plaintiff’s right to the royalties,' it is argued that the defendant, at the time of the events or occurrences which gave rise to the equitable assignment, did not know of the provision of the contract of February 28, 1918, reserving a royalty to the plaintiff until the end of the life of the patents. While a contrary inference might be drawn from the attendant circumstances alone, it is unneces sary to conjecture. On January 22, 1922, less than four months before the letter of May 15, 1922, was sent and received, the defendant had taken a mortgage from Illinois covering the patents, and specifically made subject “to a certain royalty agreement between Aaron R. Springer and Oregon Woodenware Manufacturing Company, dated February 28th, 1918, which shall likewise at all times hereafter remain in full force and effect.” The mortgage was in defendant’s possession for five years before it was released. This fact coupled with defendant’s knowledge of the suit brought by the Springers against the Illinois corporation in April, 1922, and with knowledge of the settlement of that suit compel the conclusion that the defendant was familiar with the terms of the contract of February 28, 1918.
The facts clearly establish an equitable assignment, irrevocable without the consent of Mrs. Springer. Compare Tobin v. Insurance Agency Co., supra; Theatre Realty Co. v. Aronberg-Fried Co., supra, 85 F.2d at page 387; and 6 C.J.S. Assignments § 79. They show an intention by the parties to transfer an interest in a fund in existence and to come into existence under a valid contract. That being so, the particular language used to create an equitable assignment is immaterial, and the words “you have been authorized to pay” having been acted upon by the parties, were sufficient to create such an assignment. Metcalf v. Kincaid, 87 Iowa 443, 54 N.W. 867, 868, 869, 43 Am.St.Rep. 391, and cases cited. See, also, State Central Sav. Bank v. Hemmy, supra; Tobin v. Insurance Agency Co., supra; Los Angeles City School Dist. v. Tucker, 99 Cal.App. 390, 278 P. 507; and Laclede Bank v. Schuler, 120 U.S. 511, 516, 7 S.Ct. 644, 30 L.Ed. 704. There was an appropriation to the plaintiff of a portion of the royalties that were to accrue to Illinois from the defendant. There was no reservation by the assignor Illinois of a power to revoke or modify. The words “until otherwise instructed” in the license contract of June 1, 1931, were without significance for two reasons: (1) Neither Kleinsorge and his corporations nor the Clark Company could destroy the latter’s equitable obligation without the consent of Mrs. Springer. Grier v. Baynes, C.C. N.Y., 46 F. 523, 525. See, also, 6 C.J.S. Assignments, § 79. (2) A direction in an order to pay “until further notice” does not affect the . obligation where, as here, the order is accepted and payments are made thereunder, and no notice to stop payment has been given. Samstag v. Orr, 101 Ark. 582, 142 S.W. 1127, 1128.
But the defendant contends that if such an ■ equitable right existed in Mrs. Springer it terminated when the ten-year license contract of September 15, 1921, between Illinois and the defendant expired. We do not agree with this legal conclusion. In this connection it will be remembered that Illinois was succeeded in 1930 by Delaware. On June 1, 1931, prior to the expiration of the ten-year license, Delaware and the defendant entered into a license contract, cancelling the 1921 contract but continuing the license to the end of the life of the patents and providing for the payment of royalties beyond that date. That contract provided in paragraph 9 for continuing payment of “part of the accruing royalties” to Mrs. Springer “until otherwise instructed”, and no different instruction was ever given. Neither was the instruction revoked. Payments continued until November, 1934.
Another fact of importance is that Oregon was succeeded by Illinois and Illinois by Delaware. In each instance the patents were assigned to the successor and the liabilities of the predecessor were assumed. In each change of corporate name Klein-sorge continued to own the capital stock and to hold the office of president. As president and owner of Delaware he knew all the transactions of his corporation with the Springers and with the defendant. He was familiar, and, therefore, Delaware was familiar, with the royalty contract of February 28, 1918, between Oregon and the Springers. The defendant continuing as licensee under its contract of June 1, 1931, had complete knowledge of the facts regarding the February 28, 1918, contract, which it learned during the operation of the 1921 ten-year license.
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1478029-25469 | HARRISON L. WINTER, Chief Judge:
This case requires us to rule on the constitutionality of an aspect of the Speedy Trial Act of 1972, as amended, 18 U.S.C. §§ 3161 et seq. The district court held the Act invalid as “an unconstitutional en croachment upon the Judiciary.” United States v. Brainer, 515 F.Supp. 627, 630 (D.Md.1981). It therefore refused to dismiss the indictment against defendant even though trial was delayed beyond the period permitted by the Act. Having been convicted, defendant appeals. Because we find that the Act is constitutional and defendant’s trial was in violation thereof, we reverse and remand for further proceedings.
I.
On July 2, 1980, defendant William Brainer and three other persons were indicted for conspiracy to possess with intent to distribute marijuana and methaqualone in violation of 21 U.S.C. § 846. His codefendants were also charged with other offenses; one was convicted of a substantive offense on a plea of guilty, and the other two were acquitted.
At the time of disposition of the codefendants’ cases, Brainer was a fugitive from justice. He was arrested in the State of Washington on January 19, 1981, and brought before the district court in the District of Maryland on January 30,1981. The latest date on which Brainer could have been tried consistently with the Speedy Trial Act was April 10, 1981 (assuming the absence of excludable time). Although apprised of this deadline, the district court scheduled the trial for April 20, 1981.
Before the trial began, Brainer moved to dismiss his indictment for lack of a speedy trial. Encouraged perhaps by the district court’s expressed view in an earlier opinion, the government then took the position that the Act was unconstitutional. Upholding that position, the district court denied defendant’s motion and held that the strict time limits and mandatory dismissal sanction of the Act infringe on the constitutionally autonomous power of the federal judiciary and offend the constitutional doctrine of the separation of powers. Defendant was then convicted in a bench trial on a stipulated statement of facts and sentenced to two years’ probation pursuant to the Federal Youth Correction Act as extended by the Young Adult Offenders Act, 18 U.S.C. §§ 5010(a) and 4216. This appeal ensued.
On appeal, the government joined defendant in urging that the Act is constitutional. Confronted with this anomaly, we appointed an amicus curiae to argue in support of the district court’s judgment. The amicus briefed the case and appeared at a second oral argument, at which the government and defendant were also heard.
II.
Before reaching the constitutional question at hand, we must consider jurisdictional issues raised by the government’s change of position on appeal: namely, whether that development moots the case or whether the lack of adversariness in the parties’ legal arguments on appeal deprives this suit of the status of a case or controversy within the meaning of Article III of the Constitution. Although neither the parties nor the amicus question our power to decide this case, we must make an independent determination of our jurisdiction whenever its existence may be in doubt.
There is no question but that the parties litigated a case or controversy as adversaries in the district court. Defendant sought to avoid an adjudication of guilt and imposition of sentence by having his indictment dismissed for violation of the Act, and the government sought to hold him to the charges by asserting the invalidity of the statute on which he relied. The district court decided the issue on the merits, struck down the Act, and proceeded to convict and sentence defendant in spite of the fact that the Act mandated dismissal.
We acquired jurisdiction when Brainer filed his notice of appeal. At that critical juncture, the parties were definitely embroiled in a pressing controversy which in no sense had become moot: defendant was still opposing criminal charges, and the government was resting on its victory. It had taken no steps to relieve defendant of the judgment of conviction or of the restrictions imposed on him by the sentence of probation.
Under the circumstances, we think it clear that the government’s subsequent change of position neither mooted the case nor otherwise transformed it into something less than a case or controversy. To be sure, the arguments of counsel are no longer mutually adverse; the government now concedes the correctness of defendant’s view of the law and unites in his request that the judgment against him be reversed. But the Supreme Court has said that no confession of error by the government respecting a criminal conviction shall “relieve this Court of the performance of the judicial function ... to examine independently the errors confessed.” Young v. United States, 315 U.S. 257, 258-59, 62 S.Ct. 510, 511-512, 86 L.Ed. 832 (1941). See also Casey v. United States, 343 U.S. 808, 809-10, 72 S.Ct. 999, 1000, 96 L.Ed. 1317 (1952) (Douglas, J., dissenting); Senior v. Braden, 295 U.S. 422, 440, 55 S.Ct. 800, 806, 79 L.Ed. 1520 (1935) (Stone, J.,'dissenting).
When the government confesses error in the Supreme Court, and thus abandons a position taken in a lower court, the Court commonly appoints an amicus to assert the abandoned cause. See, e.g., Goldsboro Christian Schools v. United States, 456 U.S. 922, 102 S.Ct. 1964, 72 L.Ed.2d 437 (1982); Brown v. Hartlage, 454 U.S. 936, 102 S.Ct. 471, 70 L.Ed.2d 245 (1981); Granville-Smith v. Granville-Smith, 349 U.S. 1, 4, 75 S.Ct. 553, 555, 99 L.Ed. 773 (1955). We have followed that procedure here. The necessary implication of the Supreme Court’s practice is that a lawsuit neither becomes moot nor loses the adversariness essential to a case or controversy merely because one party, on appeal, endorses its adversary’s view of the law.
Having determined that we have jurisdiction to proceed, we see no way of avoiding the constitutional issue on which this case turns. The district court, at the government’s urging, squarely ruled the Act unconstitutional. The judge who so ruled can be expected to adhere to that ruling in future cases unless we instruct otherwise. See note 1 supra. Apparently, however, his view has not been endorsed by other judges of his district. As a result, there is a serious risk of inconsistency in the administration of criminal justice in that district. Future cases, however, are unlikely to present the issue in a better posture because, unless the government reverses its position a second time, it will always find itself in agreement with those defendants who argue that the Act is constitutional and that trials held in clear violation of the Act are invalid. In our view, a constitutional determination is necessary to the disposition of the present case and the ends of justice would not be served by deferring the issue for another day.
We, of course, take notice that our brother who concurs specially would decide the case on the very narrow ground that dismissal of the indictment is required because of the violation of Local Rule 30(4)(a) of the District of Maryland which, with exceptions inapplicable here, sets a seventy-day limit to commence the trial of criminal cases. He is of the view that the Maryland district judges have independently concluded to set trial time limits for the administration of criminal justice in the District of Maryland which are in concordance with the standards of the Speedy Trial Act; Although fully cognizant of our obligation not to reach out to decide constitutional questions when cases can be terminated on non-constitutional grounds, we are unable to accept his thesis. Maryland’s Local Rule 30 recites that it is adopted “[pjursuant to the requirements of Rule 50(b) of the Federal Rules of Criminal Procedure, the Speedy Trial Act ... and the Federal Juvenile Delinquency Act .... ” Since Rule 50(b) is merely a directive to conduct studies for improvement in the administration of criminal justice and to comply with the Speedy Trial Act and since defendant in this case is not a juvenile, it is manifest that Local Rule 30, so far as it applies to defendant, is one which was adopted by the district court under the authority of the Act. If the rule was violated it is equally clear that the question of the constitutional validity of the Act is raised.
The clearest indication of the necessity of deciding the constitutional issue is found in the sanctions provisions of Local Rule 30. Section 10(a) states:
Dismissal. Failure to comply with the time limits prescribed herein shall not require dismissal of the prosecution, except as required by 18 U.S.C. sections 3162, 3164, 5036, or the Interstate Agreement on Detainers. The court retains the power to dismiss a case for unnecessary delay pursuant to Rule 48(b) of the Federal Rules of Criminal Procedure.
From this language we think it apparent that the only mandatory sanction for violation of the time limitation requirements of the rule is that contained in the Act, thus again bringing into issue the constitutional validity of the Act. An examination of the antecedents of present Local Rule 30 supports this view. In the version adopted June 20, 1973 before enactment of the Act (January 3, 1975), the rule fixed a maximum ninety-day period between arraignment and trial but provided that “failure to conform with the time limits herein prescribed shall not require dismissal of the prosecution.” The rule was amended May 26, 1976, and again it provided that “[ejxcept as required by 18 U.S.C. § 5036 [relating to juveniles] or the Interstate Agreement on Detainers, failure to comply with the time limits prescribed herein shall not require dismissal of the prosecution.” That version was repealed on November 27, 1979 and the present rule, adopted June 30, 1980, became effective July 1, 1980. The history thus demonstrates that, while the judges of the District Court of Maryland have repeatedly set time limits on the trial of criminal cases, they adopted the sanction of dismissal for violation of the limits only under the compulsion of the Act and in the exercise of the authority vested in them by the Act.
In sum, we conclude that the constitutional issue is before us and it is our duty to decide it.
III.
We turn now to the merits. In striking down the Act, the district court relied on two distinct arguments: (1) that the Act’s mandatory dismissal sanction for violation of its deadline determines “the actual substantive outcome of individual criminal cases” and thereby usurps the adjudicative role which the Constitution assigns to the judiciary; and (2) that the Act is “an unwarranted intrusion into the administration of the judicial system.” 515 F.Supp. at 636. We find neither argument persuasive.
A. Claimed Determination of Outcome.
The district court supported its first argument by reference to United States v. Klein, 80 U.S. (13 Wall.) 128, 20 L.Ed. 519 (1871). There the Supreme Court struck down a federal statute providing that no Presidential pardon accorded former noncombatant rebels should be admitted as evidence of loyalty to the United States, and, further, that a person’s acceptance of such a pardon without written protest should be conclusive evidence of disloyalty. The statute also purported to deprive the Supreme Court of jurisdiction over pending claims based on such pardons. The Court held that the statute violated the separation of powers in that it “inadvertently passed the limit which separates the legislative from the judicial power” by “forbiddpng] [the Court] to give an effect to evidence which, in its own judgment, such evidence should have, and [by directing the Court] to give it an effect precisely contrary.” The Court also noted that that statute “impair[ed] the effect of a pardon, and thus infringed] the constitutional power of the Executive.” Id. at 146-47.
Klein includes sweeping dicta casting doubt on Congress’ power to “prescribe rules of decision to the judicial department of the government in cases pending before it.” Id. at 146. Such dicta, however, are troublesome inasmuch as the prescription of general rules of substantive law lies at the heart of the legislative function, and courts are obliged to apply the positive law in effect at the time of the judgment. See P. Bator, D. Shapiro, P. Mishkin & H. Wechsler, Hart & Wechsler’s The Federal Courts and the Federal System, 316 n.4 (2d ed. 1973). Hence the better reading of Klein is quite narrow and construes the case as holding only that Congress violates the separation of powers when it presumes to dictate “how the Court should decide an issue of fact (under threat of loss of jurisdiction)” and purports “to bind the Court to decide a case in accordance with a rule of law independently unconstitutional on other grounds.” Id. at 316. Thus confined, Klein does not support the district court’s decision in the instant case.
We assume that the application of existing law to the facts of a case properly before the courts is a judicial function which the legislature may not constitutionally usurp. Klein is nevertheless inapposite, since the Speedy Trial Act lays down no “rules of decision,” but only rules of practice and procedure. Many cases have upheld the power of Congress to prescribe rules of practice and procedure for the federal courts. See Hanna v. Plumer, 380 U.S. 460,472, 85 S.Ct. 1136, 1144, 14 L.Ed.2d 8 (1965); Palermo v. United States, 360 U.S. 343, 353 n.11, 79 S.Ct. 1217, 1225 n.11, 3 L.Ed.2d 1287 (1959); Tot v. United States, 319 U.S. 463, 467, 63 S.Ct. 1241, 1244, 87 L.Ed. 1519 (1943); Sibbach v. Wilson & Co., 312 U.S. 1, 9, 61 S.Ct. 422, 424, 85 L.Ed. 479 (1941); Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 43, 6 L.Ed. 253 (1825). As a matter of facial constitutionality, we see no difference between the time constraints and dismissal sanction of the Speedy Trial Act and the host of other procedural requirements of unquestioned validity by which Congress regulates the courts of its creation — such measures as the Federal Rules of Civil Procedure, the Federal Rules of Criminal Procedure, the Federal Rules of Appellate Procedure, the Federal Rules of Evidence, and statutes prescribing who may sue and where and for what.
The district court’s characterization of the Act as arrogating “the judicial function of determining guilt or innocence,” 515 F.Supp. at 636, simply cannot be sustained. Statutes of limitation provide perhaps the closest analogy. Few would suggest that such statutes intrude upon the judiciary’s substantive decisional role. The suggestion rings just as hollow when applied to the time limits and dismissal sanction of the Speedy Trial Act, which dispose of cases solely on the procedural ground of undue delay and without regard to the guilt or innocence of the accused.
B. Claimed Violation of Separation of Powers.
The district court’s second ground of decision was that the Speedy Trial Act violates the separation of powers by abridging the courts’ inherent power to administer their dockets. See 515 F.Supp. at 631. In support of this argument, the district court marshaled a line of state court decisions invalidating efforts by state legislatures to fix mandatory deadlines for the disposition of pending cases. See Resolute Insurance Co. v. Seventh Judicial District Court of Oklahoma County, 336 F.Supp. 497, 503 (W.D.Okl.1971) (construing Oklahoma constitution); Sands v. Albert Pike Motor Hotel, 245 Ark. 755, 434 S.W.2d 288 (1968); Holliman v. State, 175 Ga. 232, 165 S.E. 11, 14-15 (1932); State ex rel. Kotsas v. Johnson, 224 Ind. 540, 69 N.E.2d 592, 595 (1946); Riglander v. Star Construction Co., 98 App. Div. 101, 90 N.Y.S. 772 (1905); Atchison, Topeka & Santa Fe Railway Co. v. Long, 122 Okl. 86, 251 P. 486 (1926). See also Lindauer v. Allen, 85 Nev. 430, 456 P.2d 851 (1969).
Representative of these cases is Schario v. State, 105 Ohio St 535, 138 N.E. 63 (1922). The Ohio legislature enacted a statute providing that convictions for a certain criminal offense could be appealed only within thirty days of judgment, and then only if the appellate court heard the appeal within thirty days of its filing. The Supreme Court of Ohio struck down the statute on the ground that “the legislative branch of the government is without constitutional authority to limit the judicial branch of the government in respect to when it shall hear or determine any cause of action within its lawful jurisdiction.” 138 N.E. at 64. The court said:
Whether or not justice is administered without “denial or delay” is a matter for which the judges are answerable to the people, and not to the General Assembly of Ohio. Manifestly, when a case can be heard and determined by a court must necessarily depend very largely upon the court docket, the gravity of business submitted to the court, the nature, the importance, and the difficulties attending the just and legal solution of matters involved. It would be obviously unfair to the court, as well as to other parties interested in the early and expeditious determination of their causes, to require a court to suspend or delay equally important matters therefore submitted to the court for its consideration and determination in order to give preference to some particular case or character of cases. At least, that is a matter that should be most properly and wisely left to the sound discretion of the court.
Whether or to what extent the federal courts possess a power of self-administration which invokes the separation of powers doctrine is apparently a question of first impression. Federal cases have sometimes recognized that a federal trial court possesses “inherent power to control its own docket to ensure that cases proceed before it in a timely and orderly fashion.” United States v. Correia, 531 F.2d 1095, 1098 (1 Cir. 1976). See Landis v. North American Co., 299 U.S. 248, 254, 57 S.Ct. 163,165, 81 L.Ed. 153 (1936). Such references, however, merely underscore a federal trial court’s discretion in the issuance of stays and continuances and the limited scope of appellate review of such decisions. It is another matter altogether to argue that federal courts possess inherent power over their dockets to the exclusion of direct congressional efforts to improve the administration of justice.
Arguably, whatever control federal courts wield over their dockets is merely a power to make procedural rules in the absence of congressional directives. Cf. Palermo v. United States, 360 U.S. 343, 353 n.11, 79 S.Ct. 1217, 1225 n.11, 3 L.Ed.2d 1287 (1959) (“The power of this Court to prescribe rules of procedure exists only in the absence of a relevant Act of Congress”). If so, the time limits and dismissal sanction of the Speedy Trial Act assuredly constitute a valid procedural directive which preempt any contrary assertion of inherent power by the court. As such, they must be obeyed.
There may be grounds, however, for distinguishing between procedure and administration and recognizing a limited power of institutional self-administration in the federal judiciary. See generally Levin & Amsterdam, Legislative Control over Judicial Rulemaking: A Problem in Constitutional Revision, 107 U.Pa.L.Rev. 1 (1958). For present purposes, we assume without deciding that federal courts possess some measure of administrative independence such that congressional intervention would, at some extreme point, “pass[ ] the limit which separates the legislative from the judicial power.” Klein, 80 U.S. (13 Wall.) at 147. It does not follow, however, that the Speedy Trial Act represents such an extreme. See Comment, 91 Harv.L.Rev. 1925 (1978).
The principle of the separation of powers does not set the three branches of government apart in absolute isolation. United States v. Nixon, 418 U.S. 683, 707, 94 S.Ct. 3090, 3107, 41 L.Ed.2d 1039 (1974). As Justice Jackson wrote in Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 72 S.Ct. 863, 96 L.Ed. 1153 (1952): “While the Constitution diffuses power the better to secure liberty, it also contemplates that practice will integrate the dispersed powers into a workable government. It enjoins upon the branches separateness but interdependence, autonomy but reciprocity.” Id. at 635, 72 S.Ct. at 870 (concurring opinion).
Because the separation of powers is not an absolute, but a working principle of government, the Supreme Court takes “a pragmatic, flexible approach” when called upon to adjudicate clashes between coordinate branches. Nixon v. Administrator of General Services, 433 U.S. 425, 442, 97 S.Ct. 2777, 2789, 53 L.Ed.2d 867 (1977). In determining whether the Speedy Trial Act disrupts the constitutional balance between Congress and the courts, “the proper inquiry focuses on the extent to which [the Act] prevents the [judiciary] from accomplishing its constitutionally assigned functions.” Id. at 443, 97 S.Ct. at 2790. A considerable degree of congressional intervention in judicial administration is constitutionally permissible if such intervention is “justified by an overriding need to promote objectives within the constitutional authority of Congress.” Id. (citation omitted).
While the district court purported to apply the mode of analysis prescribed in Nixon v. Administrator, see 515 F.Supp. at 635, we think that its discussion merely assailed the wisdom of the Speedy Trial Act. Its opinion criticizes the “premise that the Legislature is better suited to regulating judicial procedure than the courts themselves.” Id. at 636-37. It argues that Congress, in passing the Act, accorded too much weight to speedy criminal trials and too little weight to the burden which the Act’s time limits place upon the courts and the resulting disruption of their civil dockets. See id. at 637-38. By way of example, the opinion notes that if the Act had been given effect in this case, a long-scheduled civil antitrust case would necessarily have been rescheduled — a result which the court deemed “the height of judicial inefficiency and inequity.” Id. at 640.
Under Nixon v. Administrator, the first question should be whether the prescription of speedy trial deadlines is “within the constitutional authority of Congress.” The district court implied that since the Sixth Amendment protects the right to a speedy trial in inexact terms, Congress may not properly fix definite time limits for trial. 515 F.Supp. at 639. The Sixth Amendment, however, merely secures certain minimal trial rights against encroachment by government. In no way does it prevent Congress from according the accused more protection than the Constitution requires, nor does it preclude Congress from acting on the public’s interest in speedy justice. See Barker v. Wingo, 407 U.S. 514, 523, 92 S.Ct. 2182, 2188, 33 L.Ed.2d 101 (1972). Both the power of Congress to constitute inferior federal courts in which may be vested some or all of the judicial power of the United States, U.S.Const.Art. I, § 8, cl. 9, and the power to make laws deemed “necessary and proper” to the execution of § 8 powers vested in Congress, id. Art. I, § 8, cl. 18, would appear to authorize Congress to enact laws, such as the dismissal sanction, to enforce the time limits of the Speedy Trial Act.
Once it is established that trial rights are a proper subject of legislation, the question becomes whether the particular provisions of the Speedy Trial Act intrude upon the zone of judicial self-administration to such a degree as to “preventf ] the [judiciary] from accomplishing its constitutionally assigned functions.” We do not think that the Act’s impact upon the courts can fairly be described in such extreme terms. First, the Act qualifies its mandatory dismissal sanction for untimeliness by providing that the court may dismiss without prejudice, subject to certain criteria specified in the Act. 18 U.S.C. § 3162(a)(2). Second, the Act excludes certain unavoidable delays from computation in the determination of speedy trial deadlines. Id. § 3161(h). Third, the Act excludes from the statutory periods delay resulting from a continuance granted by the trial court upon a finding “that the ends of justice served by [the continuance] outweigh the best interests of the public and the defendant in a speedy trial.” Id. § 3161(h)(8)(A). To be sure, the latter authority cannot be exercised “because of general congestion of the court’s calendar,” id. § 3161(h)(8)(C) (emphasis added), but arguably it is available for resolving specific, temporary scheduling conflicts if the ends of justice so require. Finally, the Act permits the judicial council of a circuit to suspend the time limits imposed by the Act when a district court, “due to the status of its court calendars,” cannot meet the time constraints by the efficient use of existing resources. Id. § 3174.
As noted above, the district court indicated that it could not meet the time limits prescribed by the Act without rescheduling a complex antitrust suit, at great inconvenience to the parties, the witnesses, and the court. The record, however, does not indicate when the antitrust case began or ended. Defendant in the instant case was tried without a jury on a stipulation of facts. The trial was over in a matter of minutes, and the record does not exclude the possibility that it could have been held during a regular or special recess in the antitrust suit without unduly disrupting that trial or violating the requirements of the Speedy Trial Act.
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12393020-13479 | OPINION
PER CURIAM
Love Altonio Brooks, a federal inmate confined at USP-Lewisburg when the relevant events occurred, appeals the District Court’s order granting judgment to the defendants on all but one of his constitutional tort and negligence claims. We will affirm.
I.
Because we write primarily for the parties, who are familiar with the case, we discuss the background only briefly. In January 2012, Brooks filed a pro se complaint bringing constitutional tort claims under Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), and negligence claims under the Federal Tort Claims Act (“FTCA”), 28 U.S.C. §§ 2671-80. Brooks asserted, among other things, that: a prison employee stole and damaged his personal property; he was denied recreation on April 14, 2011; Officer Kepner shuffled “around [his] recreation group” and orchestrated a “planned attack” on May 13, 2011, wherein another prisoner immediately attacked him when he entered his recreation cage; and he was denied medical care arising from the May 13, 2011 incident. He also raised several conditions of confinement claims and challenges to USP-Lewisburg’s policy prohibiting inmates from possessing “plain nudity material and [Uniform Commercial Code] material.” Brooks named the United States and several Bureau of Prisons (“BOP”) employees as defendants.
In May 2012, the defendants filed a motion to dismiss Brooks’ complaint. The Magistrate Judge recommended that the motion be granted in part and denied in part. Brooks then filed a motion for leave to file an amended complaint, which the defendants did not oppose. On September 6, 2012, the District Court granted Brooks’ motion, and vacated the Magistrate Judge’s Report and Recommendation. The District Court referred the case to a different Magistrate Judge, who recommended that the amended complaint be dismissed in part and permitted to proceed in part. Over Brooks’ objections, the District Court adopted that recommendation, and the case proceeded through discovery.
Thereafter, defendants filed a motion to dismiss and for summary judgment, and Brooks filed a motion for summary judgment. On August 24, 2015, the District Court denied Brooks’ motion and granted in part and denied in part the defendants’ motion. ■ Brooks’ remaining retaliation claim—that a BOP employee stole and damaged Brooks’ personal property in violation of the Due Process Clause— was settled.
On appeal, Brooks takes issue with four aspects of the August 24, 2015 ruling: (1) the finding that the discretionary function exception barred his FTCA claims regarding the May 13, 2011 “planned attack” in the recreation cage; (2) the conclusion that he failed to exhaust several FTCA claims arising from the alleged “planned attack”; (3) the conclusion that the BOP’s ban on nude and sexually explicit materials was constitutional; and (4) the dismissal of his conditions of confinement claims. Brooks also claims error in the District Court’s September 6, 2012 order which allowed him to amend his complaint, and he asks that his initial complaint be reinstated.
II.
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291, and exercise plenary review over the district court’s decisions granting motions to dismiss and for summary judgment. See Kaymark v. Bank of Am., N.A., 783 F.3d 168, 174 (3d Cir. 2015); McGreevy v. Stroup, 413 F.3d 359, 363 (3d Cir. 2005). In reviewing the dismissal under Rule 12(b)(6), “we accept all factual allegations as true [and] construe the complaint in the light most favorable to the plaintiff.” Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002). A court may grant a motion to dismiss under Rule 12(b)(6) “only if, accepting all well-pleaded allegations in the complaint as true and viewing them in the light most favorable to the plaintiff, [it] finds that [the] plaintiffs claims lack facial plausibility.” Warren Gen. Hosp. v. Amgen Inc., 643 F.3d 77, 84 (3d Cir. 2011). Summary judgment is appropriate “if the mov-ant 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). We may affirm on any basis supported by the record. Murray v. Bledsoe, 650 F.3d 246, 247 (3d Cir.2011) (per curiam).
III.
Brooks first argues that the District Court erred in holding that the discretionary function exception barred his FTCA claims regarding the May 13, 2011 “planned attack” in the recreation cage. We disagree. The United States has sovereign immunity from civil liability, except in cases where it consents to be sued. See United States v. Bormes, 568 U.S. 6, 133 S.Ct. 12, 16, 184 L.Ed.2d 317 (2012). The FTCA provides a limited waiver of sovereign immunity as to the negligent acts of government employees acting within the scope of their employment. 28 U.S.C. §§ 2671-80. However, the waiver is subject to exceptions, such as the discretionary function exception, which provides that no liability shall lie for claims “based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty ... whether or not the discretion involved be abused.” See 28 U.S.C. § 2680(a).
To determine whether the discretionary function exception to the waiver of immunity applies, a court must assess (1) whether the act involves an “element of judgment or choice,” rather than a course of action prescribed by a federal statute, regulation, or policy; and (2) even if the challenged conduct involves an element of judgment, “whether that judgment is of the kind that the discretionary function exception was designed to shield.” Mitchell v. U.S., 225 F.3d 361, 363-64 (3d Cir. 2000) (quoting United States v. Gaubert, 499 U.S. 315, 322, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991)).
The BOP conduct at issue in this case— changing the composition of the inmates who were in the recreation cage with Brooks and thus failing to protect Brooks from his assailants—is governed by a federal statute which requires the BOP to provide for the “safekeeping” and “protection” of inmates in its care. See 18 U.S.C. § 4042(a)(2), (3). As the District Court explained, this statute leaves the implementation of these duties to the discretion of BOP officials. Moreover, there is no federal statute, regulation, or policy that requires the BOP to take a particular course of action to ensure an inmate’s safety from attacks by other inmates. Accordingly, we agree with the District Court that the acts of the BOP officials in this case involved an element of judgment or choice, thereby satisfying the first prong of the Mitchell analysis. See Cohen v. United States, 151 F.3d 1338, 1342 (11th Cir. 1998) (explaining that “even if § 4042 imposes on the BOP a general duty of care to safeguard prisoners, the BOP retains sufficient discretion in the means it may use to fulfill that duty to trigger the discretionary function exception”).
As to the second prong of Mitchell, a judgment as to how best to protect one prisoner from attack by another “is of the kind that the discretionary function exception was designed to shield.” Mitchell, 225 F.3d at 363 (quotation omitted); see, e.g., Bell v. Wolfish, 441 U.S. 520, 547-48, 99 S.Ct. 1861, 60 L.Ed.2d 447 (1979) (holding that prison administrators should be afforded wide-ranging deference in implementing and executing policies because discretion is needed to preserve internal discipline and maintain institutional security); Cohen, 151 F.3d at 1340-45. As a result, we conclude that the District Court correctly determined that Brooks’ claim was barred by the discretionary function exception to the FTCA.
IV.
We also agree with the District Court that Brooks failed to exhaust several additional FTCA claims arising from the alleged attack. To file an FTCA action, a plaintiff must complete a two-step process. First he must “present ... the claim to the appropriate federal agency” in writing within two years after the claim accrues. 28 U.S.C. § 2675(a); 28 U.S.C. § 2401(b). Second, he must file a complaint in federal court “within six months after the date of mailing ... of notice of final denial” of the administrative claim. 28 U.S.C. 2401(b). “[T]he requirement that the appropriate federal agency act on a claim before suit can be brought is jurisdictional and cannot be waived.” Roma v. United States, 344 F.3d 352, 362 (3d Cir. 2003).
Here, the undisputed record establishes that on May 19, 2011, Brooks filed one administrative tort claim remedy resulting from his May 13, 2011 altercation, complaining that Officer Kepner shuffled “around [his] recreation group” and added a prisoner who “immediately attacked” him when he entered his recreation cage. Brooks also alleged that USP-Lewisburg issued him an incident report resulting from the altercation “which may thwart my advancement in the [Special Management Unit] Program and set me back to the beginning.” Brooks’ remedy was denied on July 29, 2011, because he did not state a claim or provide a description of his actual injuries. Brooks’ administrative tort remedy made no assertions regarding an improper response or delay in coming to his rescue or the denial of medical treatment-claims he raised for the first time in his motion for summary judgment.
Brooks alleges that he filed a request for reconsideration of the July 29, 2011 denial of his remedy in which he referenced the medical and other claims for the first time, which was received by the Regional Office on September 15, 2011. It does not appear from the record that the Government ever responded to these claims, despite Brooks’ assertion that his request for reconsideration was ultimately denied. As a result, these claims were unexhausted, and the District Court properly dismissed them. See Booth v. Churner, 532 U.S. 731, 739-41, 121 S.Ct. 1819, 149 L.Ed.2d 958 (2001).
V.
Five publications which Brooks arranged to have mailed to him were rejected by the prison on the basis of the BOP’s ban on pictorial depictions of nude and sexually explicit materials, and two additional publications were rejected as running afoul of the BOP’s ban on written materials of a sexual nature. According to Brooks, the ban violates his First Amendment rights.
To evaluate whether a prison regulation violates an inmate’s First Amendment right to possess publications or legal materials, the Supreme Court has outlined four factors that are relevant in determining the reasonableness of the regulation: (1) there must be “‘a valid, rational connection between the prison regulation and the legitimate governmental interest’ put forward to justify it”; (2) whether the inmate has an “alternative means of exercising the right” at issue; (3) the burden that the accommodation would impose on prison resources; and (4) whether “ready alternatives for furthering the governmental interest [are] available.” Beard v. Banks, 548 U.S. 521, 529, 126 S.Ct. 2572, 165 L.Ed.2d 697 (2006) (quoting Turner v. Safley, 482 U.S. 78, 89-91, 107 S.Ct. 2254, 96 L.Ed.2d 64 (1987)).
As for the first factor, the defendants argued that the BOP regulation that prohibits pictorial depictions of nude and sexually explicit materials and the regulation that prohibits written material of a sexual nature were necessary to maintain prison security and to further rehabilitative goals. We concur with the District Court that the prison met its slight burden here to show that there was a rational connection between the prison regulation and the Ensign Amendment, 28 U.S.C. § 5300(b)(6), and 28 C.F.R. § 540.71(b)(7).
With respect to the other factors, the District Court found that Brooks “failed to refute that he ha[d] alternative means of exercising his First Amendment rights to receive a broad range of publications that do not depict nudity” and “aré not written materials of a sexual nature,” and that he “pointed to no alternative to the regulation[s], which would fully accommodate his rights at de minimis cost to valid penological objectives.” We concur.
VI.
In his amended complaint, Brooks raises several conditions of confinement claims, alleging that Captain Snyder, Captain Trate, Associate Warden Hudson, and Warden Bledsoe “are jointly responsible” because they “were aware of the foul conditions and allowed them to persist.” To the extent that Brooks is suing the BOP employees in their official capacities, his claim fails as actions against prison officials in their official capacities are considered actions against the United States, and Bivens claims against the United States are barred by sovereign immunity, absent an explicit waiver. Corr. Servs. Corp. v. Malesko, 534 U.S. 61, 72, 122 S.Ct. 515, 151 L.Ed.2d 456 (2001).
Brooks’ supervisory claim against Warden Bledsoe also fails because “Government officials may not be held liable for the unconstitutional conduct of their subordinates under a theory of respondeat superior.” Ashcroft v. Iqbal, 556 U.S. 662, 676, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). To be personally liable under Bivens, “a plaintiff must plead that each Government-official defendant, through the official’s own actions, has violated the Constitution.” Id. Brooks fails to allege any personal involvement of the BOP employees other than that they were “aware” of the conditions. Regardless, even if Brooks properly alleged personal liability, he does not adequately individually or collectively allege any constitutional violations.
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7399077-8271 | MEMORANDUM AND ORDER
YOUNG, District Judge.
This matter is before the Court on the petitioner’s petition for the writ of habeas corpus and a sundry list of alleged torts including libel, slander, and medical malpractice. This Court addresses his petition as one seeking the relief of the Great Writ. The petitioner, Vetter G. Moore (“Moore”), is currently incarcerated at the Massachusetts Correctional Institution in Concord, Massachusetts, apparently due to a violation of the conditions of his parole.
I.
Moore is a familiar figure to the courts of this district. His previous petitions for the relief requested herein total at least six in number, all of which have been denied. Case Nos. 76-706-M, 80-1295-G, 83-2802-K, 83-2926-G, and 85-3202-G were all dismissed for failure to exhaust state remedies. Case No. 85-1960-S was dismissed pursuant to 28 U.S.C. § 1915(d) as frivolous. A detailed account of Moore’s alleged deprivations, which do not seem to have changed in the intervening years save new allegations of “judicial abuse” by the judges of this district court, is set forth by Judge Murray in his memorandum of November 14, 1978 in Case No. 76-706 (referring to Memorandum, Finding, and Recommendation of United States Magistrate Princi dated September 13,1977). His allegations include that there was no indictment at his arrest, the charges were false, there was no evidence against him, the parole board has engaged in a conspiracy against him, and numerous judicial officers have abused their positions by not granting his release. After conducting a hearing at which Moore was present, Magistrate Prin-ci concluded that Moore’s petition did not state a claim and that it was
replete with unfounded accusations; there is no factual basis for any of his contentions.... [It is necessary] [t]hat some action be taken by this court ordering the defendant to file no further petitions without specific authorization. He is inundating the court with paper and has refused to have counsel; his petitions and his claims are totally and continually repetitious. The court has gone far beyond any requirement or rule in assisting and helping the petitioner present his claim, and he has, notwithstanding the admonitions made by the court to him that he be more specific and less repetitious, failed to comply with the court’s request.
Moore v. Meachum, et al, No. 76-706-M (D.Mass. Sept. 13,1977) (Magistrate memorandum, finding, and recommendation). Judge Murray dismissed the action for failure to satisfy the exhaustion requirements of 28 U.S.C. § 2254(b). In passing over the merits of the claim he nonetheless noted that “the several petitions are deficient in the statement of circumstances, occurrences and events in support of petitioner’s claim.” Moore v. Meachum, et al., No. 76-706-M, slip op. at 7 (D.Mass. Nov. 14, 1978).
Moore continues, it appears, to fail to allege any exhaustion of his state remedies. Specifically, he has never sought any post-conviction relief in the Massachusetts courts, nor has he appealed Mr. Justice Quirico’s dismissal of his petition. Moore v. Commonwealth of Massachusetts, No. J-74-44, slip op. (Mass. July 27, 1976) (Single Justice Order) (Judgment entered on Oct. 21, 1976). At that time, Mr. Justice Quirico, who exhibited great patience in sifting through 263 pages of filed documents, made it explicit that Moore was not to file any new documents except those necessary to perfect an appeal from the judgment of the single justice. Moore chose not to appeal.
A recent order by another Single Justice of the Massachusetts Supreme Judicial Court for the County of Suffolk adds a new layer of complexity to the procedural posture of this case. On June 16, 1987, Mr. Justice Lynch ordered that one of Moore’s recent filings before the Supreme Judicial Court was to be construed as a notice of appeal from Mr. Justice Quirico’s judgment of October 21, 1976. Mr. Justice Lynch ordered that the notice of appeal not be entered since the “time within which a notice of appeal may be filed has long since passed.” Thus, when Moore filed his present petition on April 15, 1987, he still had not exhausted his state remedies, but the recent single justice order of June 16, 1987 has now'foreclosed his opportunity to exhaust state remedies on the merits.
II.
The unique circumstances presented in this case appear to be of first impression in this circuit. At least three United States Courts of Appeals, however, have already addressed habeas petitions presented in this posture. In the most recent case, Hughes v. Idaho State Board of Corrections, 800 F.2d 905 (9th Cir.1986), the Ninth Circuit Court of Appeals held that a petitioner waived his constitutional claim by failing to appeal the denial of post-conviction relief to the Idaho Supreme Court. The court relied upon the cause and prejudice standard of Wainwright v. Sykes, 433 U.S. 72, 87, 97 S.Ct. 2497, 2507, 53 L.Ed.2d 594 (1977) and its progeny. In so doing, the court followed Nutall v. Greer, 764 F.2d 462 (7th Cir.1985) and Clark v. Texas, 788 F.2d 309 (5th Cir.1986). As in those cases, Moore has failed to point out any cause for his non-compliance with the state’s procedural requirements. As noted by the Seventh Circuit Court of Appeals, defendants who fail to appeal to the highest state court, even if only due to inexcusable neglect, “bear the responsibility for their own default and do not present a compelling case for overriding the principle that a federal court should not intrude in a state’s criminal process when the state’s highest court has had no opportunity to rule on the constitutional issues presented.” Nutall, 764 F.2d at 464. More troubling for this Court is the application of this standard to a pro se petitioner.
In Hughes, the Ninth Circuit, faced with a pro se petition, explicitly addressed the issue holding that the Sykes’ standard should be applied to pro se petitioners. 800 F.2d at 908. In Nutall, the court also applied the standard, noting that, although represented at the earlier stages of trial by counsel, the petitioner was now proceeding pro se. This Court expresses no view as to the general propriety of such an application of the standard. Under the present circumstances, however, the Court rules that the standard is properly applied to Moore. Moore was apprised fully of the right to appeal the denial of relief in the courts of the Commonwealth as early as July, 1976, in the order of Mr. Justice Quirico. He chose to ignore the state procedures for over a decade. His conduct is inexcusable and amounts to a forfeiture of his right to habeas relief. Nutall, 764 F.2d at 464.
III.
The Court has an additional ground for dismissing this action. This action was permitted to go forward in forma pauperis. Pursuant to 28 U.S.C. § 1915(d) the Court is satisfied that the action is frivolous and, while possibly not malicious, certainly scandalous. Cf. Welsh v. Steinmetz, No. 84-1846, slip op. (D.N.M. Dec. 20, 1984) (barring frivolous, scandalous filings submitted by pro se litigant unless filings were signed by an attorney). In accordance with this opinion, any papers filed by petitioner, Mr. Moore, without the aid and signature of counsel, shall be held but not docketed by the clerk’s office. Twice yearly this Court will review the filings to determine if they present any new, non-frivolous, discernable legal claim. If so, they will at that time be docketed by the clerk and acted upon.
SO ORDERED.
. As best this Court can- comprehend from Moore’s essentially incomprehensible filings, he also seeks recovery in the amount of $3,350,-000.00 for a judgment allegedly past due in a matter decided by the United States Court of Claims. Moore states that "[t]he abuse of the US Judges beforementioned has created multiple quash in rem suits an a final judgment against the United States at the US Court of Claims No 78-401 Moore v. US America. Plaintiff won 3 million 3500000 because of the deprivation an abuse of judicial misconduct an misff-esance." (unedited). As a matter of fact, Moore lost his claim before the Court of Claims on the grounds that he failed to state a claim. Moore v. United States, 618 F.2d 119, 219 Ct.Cl. 585 (1979) (slip op. dated October 26,1979 available on Lexis).
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12519566-22644 | WOLLMAN, Circuit Judge.
Park Irmat Drug Corporation (Irmat) brought suit against Express Scripts Holding Company and Express Scripts, Inc. (Express Scripts), alleging various contract claims, a promissory estoppel claim, and violations of federal antitrust laws and state Any Willing Provider laws. The district court dismissed Irmat's complaint for failure to state a claim. We affirm.
I.
Express Scripts is the largest pharmacy benefits manager (PBM) in the United States. A PBM is a third-party administrator of prescription drug programs. PBMs process and pay prescription drug claims made by pharmacies and patients. PBMs also negotiate drug discounts with pharmaceutical manufacturers, handle pharmacy benefits for health plans and self-insured entities, and develop lists of drugs that are approved for reimbursement. A patient's health insurance plan chooses which PBM covers their drug-related expenses. Express Scripts and another PBM, CVS Health (CVS), account for 65% of the PBM market.
PBMs create networks of pharmacies in which PBM members can receive their prescription pharmaceuticals at covered, discounted rates. To be successful, independent pharmacies must participate in the largest PBM networks. These independent pharmacies contract with PBMs either directly or through an agent such as a Pharmacy Services Administrative Organization (PSAO). Ninety-seven percent of retail pharmacies in the United States participate in Express Scripts's pharmacy network.
Express Scripts also operates a mail-order pharmacy that fills prescriptions by mail nationwide. It is the only mail-order pharmacy allowed in Express Scripts's PBM network. According to Irmat, PBMs that own mail-order pharmacies dominate the mail-order pharmacy service industry. Nevertheless, independent pharmacies, like Irmat, have been able to successfully provide mail-order pharmacy services to customers in the United States.
Irmat is a New York-based, independent pharmacy located in midtown Manhattan. It opened in 1978. For many years, Irmat was a successful retail pharmacy that filled and sold prescriptions via its storefront location. In 2013, Irmat began focusing on dermatological pharmaceuticals. It entered into a patient assistance program with dermatological drug manufacturers for pharmaceuticals that often had no generic equivalent. Under the programs, the manufacturers would pay a portion of a patient's insurance co-payment to Irmat. Because of its participation in these programs, Irmat expanded its business into a nationwide mail-order pharmacy and increased its staff from twenty employees to 208 employees.
Irmat joined Express Scripts's PBM network in 2012 through AccessHealth, a PSAO, and gained access to more than 100 other PBMs. In October 2014, Express Scripts sent Irmat a Network Provider Agreement (the agreement) requiring that Irmat sign or risk termination from its network. The agreement required Irmat to meet the definition of a "retail provider," which was defined as a pharmacy "that primarily fills and sells prescriptions via a retail, storefront location" and that "shall not include mail order" pharmacies. The agreement also included recredentialing requirements whereby a retail provider must disclose updated information to Express Scripts. Failure to comply with the recredentialing requirements constituted a breach of the agreement and was cause for termination from Express Scripts's network. Finally, the agreement allowed Express Scripts to unilaterally terminate the contract without cause upon thirty days written notice. Irmat signed the agreement.
Express Scripts required Irmat to submit a recredentialing application in July 2015. Irmat disclosed that 35% of its business came from its retail pharmacy and that 65% of its business came from its mail-order pharmacy. On August 7, 2015, Express Scripts sent Irmat an e-mail, the subject line of which read "Express Scripts credentials approved," and the text of which stated:
We are pleased to inform you that your recently submitted credentials have been reviewed and you are approved to continue in the Express Scripts Holding Company pharmacy networks.
Irmat then hired more employees, constructed a multi-million dollar facility in New York, and spent time and money acquiring mail-order accreditations. In May 2016, Express Scripts sent Irmat a letter demanding Irmat cease and desist its mail-order operations because they were in violation of the agreement. Irmat responded with a letter referring to the August 2015 e-mail. On July 15, 2016, Express Scripts replied that Irmat would be terminated from the network in sixty-one days, primarily because of Irmat's mail-order business. Irmat appealed the termination through Express Scripts's internal appeal process. Express Scripts affirmed its decision in a letter dated August 22, 2016, which added that it was also terminating Irmat without cause. Express Scripts terminated Irmat from its network on or about September 30, 2016.
II.
We review de novo the grant of a motion to dismiss. Christiansen v. W. Branch Cmty. Sch. Dist., 674 F.3d 927, 933-34 (8th Cir. 2012). We accept "as true the complaint's factual allegations and grant[ ] all reasonable inferences to the non-moving party." Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 591 (8th Cir. 2009).
"To survive a 12(b)(6) motion to dismiss, 'a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.' " McShane Constr. Co. v. Gotham Ins. Co., 867 F.3d 923, 927 (8th Cir. 2017) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). "We assess plausibility considering only the materials that are 'necessarily embraced by the pleadings and exhibits attached to the complaint.' " Whitney v. Guys, Inc., 700 F.3d 1118, 1128 (8th Cir. 2012) (quoting Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003) ). "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 Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ).
A.
1.
Irmat argues that the agreement is unconscionable because it allowed Express Scripts, but not Irmat, to terminate the agreement without cause. We have held that "[a] bilateral contract is not rendered invalid and unenforceable merely because one party has the right to cancellation while the other does not. There is no necessity 'that for each stipulation in a contract binding the one party there must be a corresponding stipulation binding the other.' " Laclede Gas Co. v. Amoco Oil Co., 522 F.2d 33, 36 (8th Cir. 1975) (quoting James B. Berry's Sons Co. v. Monark Gasoline & Oil Co., 32 F.2d 74, 75 (8th Cir. 1929) ). Thus, the inclusion of Express Scripts's unilateral right to terminate the agreement upon thirty days written notice is, by itself, insufficient to support a claim of unconscionability. Id. at 37 (determining that a cancellation clause will invalidate a contract only if its exercise is unrestricted).
Irmat further contends, however, that the agreement is also unconscionable because it was a non-negotiable form contract, i.e. , a contract of adhesion. "In Missouri, an adhesion contract, as opposed to a negotiated contract, has been described as a form contract created and imposed by a stronger party upon a weaker party on a 'take this or nothing basis,' the terms of which unexpectedly or unconscionably limit the obligations of the drafting party." Fuller v. TLC Prop. Mgmt., LLC, 402 S.W.3d 101, 112 (Mo. Ct. App. 2013) (en banc) (internal quotation marks and citations omitted). "Under Missouri law, however, the fact that a contract is one of adhesion does not necessarily make it invalid." Eaton v. CMH Homes, Inc., 461 S.W.3d 426, 438 (Mo. 2015). Missouri has "identified a number of factors indicating unconscionability [including] high pressure sales tactics ... or unequal bargaining positions." Brewer v. Mo. Title Loans, 364 S.W.3d 486, 489 n.1 (Mo. 2012).
Irmat argues that the contract of adhesion is unconscionable because Express Scripts exerted significant pressure on Irmat to enter into the agreement and had greater bargaining power than Irmat. Specifically, Express Scripts threatened that if Irmat did not complete and return the agreement, Irmat would be in breach of their original network contract and suffer patient disruption. Irmat also cites its allegation that more than 97% of all U.S. retail pharmacies participate in Express Scripts's network and that participating in Express Scripts's network was a matter of business necessity for Irmat.
Irmat argues that this case is analogous to Brewer, in which the Missouri Supreme Court found the contract at issue was unconscionable. In Brewer, the plaintiff, an average consumer, contracted for a secured loan bearing an annual interest rate of 300%. Id. at 487. The agreement required the plaintiff to submit any claims against the defendant to individual arbitration, leaving the defendant free to utilize the courts, id., a provision not present in this case. Furthermore, Irmat is a sophisticated consumer that had operated successfully outside Express Scripts's network prior to 2012. Finally, as the district court properly noted, Irmat had access to more than 100 PBM networks when it joined AccessHealth. See Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp., 748 F.3d 249, 264 (5th Cir. 2014) (noting there was no contract of adhesion wherein "[t]he Plaintiffs have failed to present any evidence that they were prevented from contracting with another PBM"). Irmat has thus failed to plausibly plead that the agreement was unconscionable.
2.
Irmat next argues that Express Scripts violated its duty of good faith and fair dealing when it terminated Irmat from its network. "Missouri law implies a covenant of good faith and fair dealing in every contract." Farmers' Elec. Coop., Inc. v. Mo. Dep't of Corr., 977 S.W.2d 266, 271 (Mo. 1998). Under Missouri law, generally, "there can be no breach of the implied promise or covenant of good faith and fair dealing where the contract expressly permits the actions being challenged, and the defendant acts in accordance with the express terms of the contract."
Arbors at Sugar Creek Homeowners Ass'n v. Jefferson Bank & Tr. Co., 464 S.W.3d 177, 185 (Mo. 2015) (internal quotation marks and citations omitted). A party exercising its express contract rights, however, may still breach the covenant if it does so "in a manner that evades the spirit of the agreement and denies the movant the expected benefit of the agreement." Glenn v. HealthLink HMO, Inc., 360 S.W.3d 866, 877 (Mo. Ct. App. 2012).
Irmat does not deny that it violated the contract and that Express Scripts was thus entitled to terminate Irmat from its network for cause. Irmat argues instead that Express Scripts acted in bad faith by terminating Irmat on the basis of its anticompetitive motives when exercising its right to terminate Irmat without cause. Irmat cites BJC Health System v. Columbia Casualty Co., 478 F.3d 908 (8th Cir. 2007), which we conclude is inapposite. We held in that case that under Missouri law a jury could find that a party to a contract acted in bad faith when making a subjective decision regarding the contract that may have been unreasonable and intentionally designed to trigger a termination provision. Id. at 916 ; see also Martin v. Prier Brass Mfg. Co., 710 S.W.2d 466, 472-73 (Mo. Ct. App. 1986) (determining that defendant acted in bad faith when it subjectively read contract terms to allow for termination of benefits at will and without notice). Here, however, Express Scripts did not make a discretionary decision in either defining the terms of the agreement or in exercising its rights under the agreement. The Missouri Supreme Court has explicitly held that a defendant does not act in bad faith when it acts in accordance with express contractual rights that allow it to terminate the agreement without cause upon thirty days notice. Bishop & Assocs. v. Ameren Corp., 520 S.W.3d 463, 471-72 (Mo. 2017) ; see also Amecks, Inc. v. Sw. Bell Tel. Co., 937 S.W.2d 240, 242-43 (Mo. Ct. App. 1996) (concluding that defendant did not act in bad faith when it exercised its contractual right to terminate the contract at any time with at least thirty days notice); Martin v. Am. Family Mut. Ins. Co., 157 F.3d 580, 582 (8th Cir. 1998) (per curiam) ("Because the agency contract unambiguously permitted termination of the agencies at will ... the covenant of good faith and fair dealing cannot give rise to a right against termination.") (internal citations omitted). Irmat does not dispute that Express Scripts gave the proper notice required by the agreement, and thus it cannot claim bad faith.
3.
Irmat next argues that Express Scripts's August 2015 e-mail constituted a novation of the agreement. It contends that the e-mail excised the prohibition against operating a mail-order pharmacy from the agreement and abrogated Express Scripts's contractual rights to terminate Irmat for and without cause. Irmat argues that Express Scripts thus breached this new contract when it terminated Irmat from the network. Express Scripts responds that because the e-mail was not a novation but merely a contractually obligated step in the recredentialing process, there was no new contract and thus no breach. See D.R. Sherry Constr., Ltd. v. Am. Family Mut. Ins. Co., 316 S.W.3d 899, 904 (Mo. 2010) (concluding that a breach of contract claim requires "a contract between ... the parties").
Under Missouri law, "[a] novation is a substitution of a new contract obligation for an old one." Health Related Servs., Inc. v. Golden Plains Convalescent Ctr., Inc., 705 S.W.2d 499, 510 (Mo. Ct. App. 1985). The four elements needed for a novation include: "(1) a previous valid obligation;
(2) agreement of all parties to a new contract; (3) extinguishment of an old contract; and (4) validity of a new contract." State ex rel. Premier Mktg., Inc. v. Kramer, 2 S.W.3d 118, 122 (Mo. Ct. App. 1999). "In addition to these requirements, there must be evidence that the parties intended to enter into a novation." Id. The new contract must include "[t]he essential elements of an enforceable contract [such as] parties competent to contract, [the existence of] proper subject matter, legal consideration, mutuality of agreement, and mutuality of obligation." L.B. v. State Comm. of Psychologists, 912 S.W.2d 611, 617 (Mo. Ct. App. 1995).
Irmat argues that the e-mail's language constitutes evidence of Express Scripts's intent to abrogate the agreement and form a new contract. We conclude that the e-mail was instead part of the recredentialing process required by the agreement. At most, the e-mail and the later cease-and-desist request suggest that Express Scripts delayed its recredentialing process. But any delay did not preclude Express Scripts from denying credentials to Irmat under the agreement's no-waiver provision, which provides:
No waiver of a breach of any covenant or condition shall be construed to be a waiver of any subsequent breach. No act, delay, or omission done, suffered, or permitted by the parties shall be deemed to exhaust or impair any right, remedy, or power of the parties hereunder.
Moreover, the e-mail lacks the essential elements of a contract and thus cannot be construed as a lawful novation. See Premier Mktg., 2 S.W.3d at 122-23 ("A novation ... must be sufficiently definite to allow the court to determine its exact meaning and to definitely measure the extent of the promisor's liability."). The e-mail contains no material terms, no expiration date, no mention of the services Express Scripts would be providing, and no explanation of the rights and obligations of each party. Lacking these essential contractual provisions, there thus was no novation of the agreement.
B.
Alternatively, Irmat alleges that Express Scripts's e-mail promised that Irmat could continue in the network as a mail-order pharmacy. Irmat then relied on that promise by building a multi-million dollar complex, hiring additional employees, and spending resources to obtain accreditations. Under Missouri law, promissory estoppel requires: "(1) a promise, (2) on which the party seeking to recover relied to his or her detriment, (3) in a way the person making the promise expected or should have expected, and (4) the reliance results in an injustice which can be cured only by enforcement of the promise." Hamra v. Magna Grp., Inc., 956 S.W.2d 934, 939 (Mo. Ct. App. 1997). "In Missouri, promissory estoppel is not a favorite of the law, and each element must clearly appear and be proven by the party seeking its enforcement." Glenn, 360 S.W.3d at 877 (internal quotation marks and citations omitted).
Irmat fails to plausibly plead promissory estoppel. First, Express Scripts's e-mail does not explicitly state that Irmat could operate a mail-order pharmacy and remain in Express Scripts's network, thereby extinguishing the agreement's restriction on mail-order pharmacies. See Prenger v. Baumhoer, 939 S.W.2d 23, 26 (Mo. Ct. App. 1997) (explaining that "[t]he promise giving rise to the cause of action must be definite"). Even if the e-mail were considered to be a promise, Irmat could not have reasonably relied on it because the agreement unambiguously allows termination without cause. We have held that when a contract unambiguously permits termination at will, "promissory estoppel cannot be used to create a right preventing termination." Martin, 157 F.3d at 582 (citing Hamra, 956 S.W.2d at 939 ); see also Clearly Canadian Beverage Corp. v. Am. Winery, Inc., 257 F.3d 880, 890 (8th Cir. 2001) ("[P]romissory estoppel cannot be used to create rights not included in the contract." (citing Halls Ferry Invs., Inc. v. Smith, 985 S.W.2d 848, 853 (Mo. Ct. App. 1998) ) ). The e-mail, then, could not prevent Express Scripts's termination of Irmat. The district court thus did not err in dismissing Irmat's promissory estoppel claim.
C.
1.
Irmat argues that Express Scripts violated Section 1 of the Sherman Act by conspiring with other PBM-owned, mail-order pharmacies to boycott independent mail-order pharmacies. "Liability under § 1 of the Sherman Act, 15 U.S.C. § 1, requires a 'contract, combination ... , or conspiracy, in restraint of trade or commerce.' " Bell Atl. Corp. v. Twombly, 550 U.S. 544, 548, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). " '[T]he crucial question' is whether the challenged anticompetitive conduct 'stem[s] from independent decision or from an agreement, tacit or express.' " Id. at 553, 127 S.Ct. 1955 (second alteration in original) (quoting Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540, 74 S.Ct. 257, 98 L.Ed. 273 (1954) ). To survive a Rule 12(b)(6) motion to dismiss, "an allegation of parallel conduct and a bare assertion of conspiracy will not suffice." Id. at 556, 127 S.Ct. 1955. "However, [a]n allegation of parallel conduct ... gets the complaint close to stating a claim," and "[w]ith 'further factual enhancement,' plaintiffs can 'nudge[ ] their claims across the line from conceivable to plausible.' " In re Pre-Filled Propane Tank Antitrust Litig., 860 F.3d 1059, 1069 (8th Cir. 2017) (alterations in original) (quoting Twombly, 550 U.S. at 557, 570, 127 S.Ct. 1955 ).
Irmat fails to plausibly plead parallel conduct. It claims that CVS and Express Scripts conspired to terminate Irmat from their PBM networks because it operated a mail-order pharmacy that competed with Express Scripts's and CVS's mail-order pharmacies. Irmat had been a member of CVS's pharmacy networks since 2012. In August 2016, CVS required Irmat to participate in its mail-order network, three months after Express Scripts sent Irmat a letter demanding that Irmat abandon its mail-order pharmacy operations. Although CVS later terminated Irmat from its pharmacy networks on February 3, 2017, the fact that CVS allowed Irmat to join in its mail-order network at all suggests that CVS and Express Scripts did not conspire to boycott Irmat. Irmat contends, however, that the August 2016 requirement to participate in CVS's mail-order pharmacy network was a veiled plan to reimburse Irmat at lower rates than it had paid in the past. Irmat also claims that CVS subjected Irmat to abusive audits throughout the years. Even assuming the truth of those allegations, there is no evidence that Express Scripts joined in CVS's conduct. Express Scripts never required Irmat to enter into a mail-order network so that it could reimburse prescriptions at lower rates, nor does Irmat contend that Express Scripts ever subjected Irmat to abusive audits.
The only allegation that hints at parallel conduct is that both CVS and Express Scripts terminated Irmat from their networks. But the terminations lack temporal proximity. Express Scripts notified Irmat of termination in July 2016, six months before CVS notified Irmat of termination. In determining whether six months was too long of a time frame to suggest parallel activity, the district court looked to In re Graphics Processing Units Antitrust Litigation, 527 F.Supp.2d 1011, 1022 (N.D. Cal. 2007), in which the court found that three months between actions fell "short of unusual, lockstep ... behavior." We do not hold that actions taken within six months of each other can never constitute parallel conduct, but only that the terminations here, executed under dissimilar circumstances and separated by six months, did not constitute parallel conduct. See Burtch v. Milberg Factors, Inc., 662 F.3d 212, 228-29 (3d Cir. 2011) (dismissing group boycott claim partly because the conduct of the defendants was not similar). Because Irmat fails to plausibly plead parallel conduct, no discussion of any "plus factors" is necessary. The district court correctly dismissed Irmat's Section 1 claim.
2.
Irmat alleges that Express Scripts violated Section 2 of the Sherman Act because it leveraged its power as a PBM to exclude mail-order pharmacies from its PBM network. This led to Express Scripts's having a monopoly power in the submarket for mail-order services to Express Scripts members. Section 2 makes it unlawful to "monopolize, or attempt to monopolize ... any part of the trade or commerce among the several States." 15 U.S.C. § 2. To state a monopoly claim, Irmat must plead a plausible relevant market and that Express Scripts engaged in anticompetitive conduct. Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004).
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3851551-18685 | Vacated and remanded by published opinion. Judge AGEE wrote the majority opinion, in which Senior Judge HAMILTON joined. Senior Judge HAMILTON wrote a concurring opinion. Judge WYNN wrote a dissenting opinion.
OPINION
AGEE, Circuit Judge:
Under the Armed Career Criminal Act (“ACCA”), a defendant may be sentenced as an Armed Career Criminal (and thus subject to a fifteen-year mandatory minimum sentence) if he violates 18 U.S.C. § 922(g) and has at least three prior convictions for violent felonies or serious drug offenses. 18 U.S.C. § 924(e)(1). Though burglary is an enumerated “violent felony” under § 924(e)(2)(B)(ii), not all burglary convictions qualify for ACCA purposes. The Supreme Court has defined burglary as a violent felony under the ACCA only if the breaking and entering was what it terms generic burglary: “any crime, regardless of its exact definition or label, having the basic elements of unlawful or unprivileged entry into, or remaining in, a building or structure, with intent to commit a crime.” Taylor v. United States, 495 U.S. 575, 599, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990). Where a burglary statute is non-generic — that is, defines burglary more broadly than a burglary of a building or structure — a conviction under such a statute qualifies as a violent felony only if the defendant violated that portion of the statute which proscribes entry into a building or structure.
We address in this case whether John Joel Foster’s prior convictions for breaking and entering the “Sunrise-Sunset Restaurant” and the “Corner Market” under Virginia’s non-generic burglary statute qualify as violent felonies under the ACCA. The district court found that they do not. We disagree and find that the language of the relevant indictments mandates that the prior convictions were based on entries into buildings or structures. We therefore vacate Foster’s sentence and remand this case for resentencing.
I.
After a jury found Foster guilty of being a felon in possession of a firearm under 18 U.S.C. § 922(g)(1), Foster’s pre-sentence investigation report (“PSR”) reflected he was subject to the fifteen-year mandatory minimum punishment of the ACCA. Foster’s predicate offenses, the PSR indicated, were three prior convictions for breaking and entering under Virginia’s non-generic breaking and entering statute. Foster objected to the PSR, arguing that those convictions referred not to burglaries of a building or structure — as required by the Supreme Court to qualify as a violent felony — but were ambiguous as to the “Corner Market,” “Sunrise-Sunset Restaurant,” and “blacksmith shop.”
The district court found that Foster’s conviction for breaking and entering the blacksmith shop qualified as a crime of violence under the ACCA based on the word “shop.” As for the remaining convictions, the district court concluded that the “Sunrise-Sunset Restaurant” and the “Corner Market” were proper, rather than descriptive, names and that restaurants and markets are sometimes conducted in places other than buildings. The district court reasoned that because the convictions could not be found to have taken place in buildings or structures, those convictions did not qualify as violent felony offenses under the ACCA. Determining that the ACCA did not apply, the district court sentenced Foster to twenty-seven months’ imprisonment as opposed to an ACCA-mandated sentence.
The government filed a timely notice of appeal, and this Court has jurisdiction pursuant to 28 U.S.C. § 1291.
II.
We consider de novo whether an offense qualifies as a violent felony under the ACCA. United States v. Thompson, 421 F.3d 278, 280-81 (4th Cir.2005). As the Court recently explained:
To determine whether an offense under state law falls within the definition of a violent felony, courts generally employ a categorical approach, under which consideration is given only to the essential elements of the offense and the fact of conviction. See United States v. White, 571 F.3d 365, 368 (4th Cir.2009). Burglary is a “violent felony” under the ACCA. 18 U.S.C. § 924(e)(l)(B)(ii). Interpreting the ACCA, the Supreme Court has held that “a person has been convicted of burglary ... if he is convicted of any crime, regardless of its exact definition or label, having the basic elements of unlawful or unprivileged entry into, or remaining in, a building or structure, with intent to commit a crime.” Taylor v. United States, 495 U.S. 575, 599, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990).
While a sentencing court normally may look only to the statutory elements of an offense and the fact of the conviction, because some statutes (like the Virginia provisions at issue here) define burglary broadly to encompass enclosures other than “a building or structure,” the categorical approach “may permit the sentencing court to go beyond the mere fact of conviction” in certain cases. Id. at 602 [110 S.Ct. 2143]. Thus, an offense will constitute burglary if the jury was required “to find all the elements of generic burglary in order to convict the defendant,” and “the indictment or information and jury instructions show that the defendant was charged only with a burglary of a building,” so “the jury necessarily had to find an entry of a building to convict.” Id. In cases where, as here, the defendant pled guilty to the prior offense, a federal sentencing court may consider certain court documents, including but not limited to the indictment, a transcript of the plea colloquy and/or the written plea agreement. Shepard v. United States, 544 U.S. 13, 20-21, 125 S.Ct. 1254, 161 L.Ed.2d 205 (2005).
United States v. Baxter, 642 F.3d 475, 476-77 (4th Cir.2011).
The parties agree that because the applicable Virginia statute is broader than “generic burglary” as defined by the Supreme Court in Taylor, we should review Shepard-approved documents “to determine whether a plea of guilty to burglary defined by a non-generic statute necessarily admitted elements of the generic offense.” Shepard, 544 U.S. at 26, 125 S.Ct. 1254.
III.
The relevant Virginia statute defined breaking and entering as a crime under three separate clauses: (1) an “office, shop ... storehouse, warehouse, banking house, or other house”; (2) a “ship, vessel, or river craft or any railroad car”; or (3) “any automobile, truck, or trailer ... [being] used as a dwelling or place of human habitation.” Va.Code § 18.2-90 (1992) (amended 2004). For the reasons that follow, only the first category, which consists entirely of buildings and structures, could have applied to breaking and entering the Sunrise-Sunset Restaurant and the Corner Market.
Taking the clauses in reverse order, the Supreme Court of Virginia provided some guidance as to the “automobile, truck, or trailer” clause in Graybeal v. Commonwealth, 228 Va. 736, 324 S.E.2d 698, 700 (1985), where it reversed a conviction under Va.Code § 18.2-91 because the proof at trial established at most that the defendant had robbed a trailer. In the court’s view,
[s]ince the structures broken and entered into were trailers, and since there was no proof that the trailers were used as dwellings or places of human habitation, then [the defendant] did not commit statutory burglary by breaking and entering them.
Id. at 700. Importantly, in rejecting the prosecution’s alternative argument that a trailer might be characterized as an “other house” under the statute, the court reasoned:
The Commonwealth argues that even if the convictions cannot be upheld on the basis of breaking and entering twelve trailers, they can be upheld because the structures fall under the category “other house” that is set forth in Code § 18.2-90. We find no merit in this argument. The phrase “other house” is a general phrase placed at the end of a list of specific references to various structures. Those specific structures share the common element of being improvements affixed to the ground, that is, they are realty. Under the doctrine ejusdem generis, the general phrase “other house” must look for its meaning to the specific items which precede it. See Martin v. Commonwealth [224 Va. 298], 295 S.E.2d 890 (Va.1982). The structures into which Graybeal entered were not realty. Thus, they do not fall within the scope of “other house.” In our opinion, it would violate sound principles of statutory construction and strain the clear intendment of the statute to hold that a trailer not used as a dwelling nevertheless falls under the definition of “other house.”
Id.
Hence, to sustain a conviction of Foster under the Virginia statute for burglary of an automobile, truck, or trailer, the indictments necessarily would have been required to allege that such automobile, truck, or trailer was “a dwelling or place of human habitation.” We agree with the government that as none of the pertinent state indictments contained such a charge the third clause of Virginia Code § 18.2-90 could not have applied to Foster’s prior convictions. Accordingly, we next determine whether the only possible basis for Foster’s convictions was the first clause of § 18.2-90, or whether the convictions could have been based on the second clause.
Courts are, of course, permitted to draw reasonable inferences from the underlying state charging documents. Here, given their names and locations — as well as what Foster removed from the Corner Market — it is reasonable to infer that the Sunrise-Sunset Restaurant and the Corner Market are buildings or structures.
With respect to the second clause, Foster abandoned at oral argument the contention that the Corner Market or Sunrise-Sunset Restaurant might have been located on a ship or vessel when his counsel conceded that the sole navigable river in Lee County, Virginia “might [only] accommodate a small boat.” Hence, the only remaining possibility that Foster’s convictions were non-generic under the Virginia statute’s second clause is that the restaurant or market was located on a small river craft or in a railroad car.
The more-than-remote possibility that a restaurant or Corner Market could be conducted in a railroad car or on a river craft does not undermine the compelling conclusion that Foster’s convictions were for the burglaries of buildings or structures. As the First and Eleventh Circuits have recognized, courts are not required to abandon logic and embrace the absurd in conducting an ACCA analysis. See United States v. Miller, 478 F.3d 48, 52 (1st Cir.2007) (holding that “given the references to Trader Jack’s as a store containing a safe, we believe that the district court drew a reasonable inference and rendered a logical conclusion: that Trader Jack’s was a store and, thus, a building”); United States v. Rainer, 616 F.3d 1212, 1216 (11th Cir.2010) (finding that although it was “theoretically” possible for a shoe store to be “operated out of a vehicle, that possibility is too farfetched to undermine our conviction that Rainer’s two previous convictions were for burglary of a building in the generic burglary sense of the word”).
This conclusion is augmented by our prior decision in United States v. Shelton, 196 Fed.Appx. 220 (4th Cir.2006) (unpublished). In Shelton, we concluded that an indictment charging the defendant with breaking and entering “the business of All American Car Wash” established that the prior conviction was for a generic burglary: “[w]e believe the reference to ‘the business’ necessarily ensures that Shelton sought to enter ‘a building or structure.’ ” Id. at 222. If the broad term “business” in Shelton sufficiently defined a generic burglary, so too should the more explicitly named businesses in the case at bar.
In sum, we agree with the First and Eleventh Circuits that when considering the ACCA we are not required to “wear blinders” or to cast logic aside “merely because [a defendant] conjure[s] up a speculative possibility.” Miller, 478 F.3d at 52. Rather, “[t]he ACCA is part of the real world, and courts should not refuse to apply it because of divorced-from-reality, law-school-professor-type hypotheticals that bear no resemblance to what actually goes on.” Rainer, 616 F.3d at 1216. As we concluded with respect to the “business” in Shelton, we find that the indictments’ references to the “Sunrise-Sunset Restaurant” and the “Corner Market,” in the context of the applicable Virginia statute, ensure that Foster entered buildings or structures and was thus convicted of generic burglary for purposes of the ACCA.
IV.
The dissenting opinion inaccurately portrays the analysis we perform in this case. Rather than “considering extrinsic ‘evidence’ that the Government ... was actually prohibited under Shepard from offering,” see post at 300, we have simply looked to the terms of the relevant state court indictments, which unequivocally indicate that Foster was charged with burglary of the “Sunrise-Sunset Restaurant” and the “Corner Market.” Our analysis stops there. We have not looked beyond the indictments for the actual facts of Foster’s crimes. As noted earlier, given the burglary options under the Virginia statute, the only logical conclusion from the stated business establishments in the indictments themselves is that those establishments were located in buildings or structures. Although “[w]e may inquire into the facts necessary to a conviction only to the extent they are discernable from the limited set of documents approved in Shepard .... we need not ignore such facts when they are available in those documents.” United States v. Aguila-Montes de Oca, 655 F.3d 915, 937 (9th Cir.2011) (en banc).
Under the approach outlined in the dissenting opinion, an indictment returned in Virginia that charged the burglary of a “McDonald’s Restaurant” would not qualify as a violent felony conviction under the ACCA. However, such a burglary should qualify as a violent felony not just because common sense tells us so, but because the actual words on the page of the Shepard-approved document do as well: A defendant who pleads guilty to the burglary of a McDonald’s Restaurant, under similar circumstances to this case, necessarily pleads guilty to the burglary of a building or structure. This is the “actual evidence” we require the government to show in order to prove a predicate conviction under Shepard-approved documents. It appears that under the logic of the dissenting opinion, without the magical words “building” or “structure” stated in the indictment, or added by the defendant, no amount of “actual evidence” would be enough.
Additionally, while pointing out that the government’s burden in this case is “not particularly high,” the dissenting opinion suggests that “the Government may easily draft burglary indictments to refer to ‘buildings or structures’ or otherwise ensure that a defendant admits during his plea colloquy that he did in fact burglarize buildings or structures.” See post at 300. With respect for the dissent’s position, it is neither realistic nor required by the terms of the ACCA. First and foremost, the dis sent’s position ignores the reality that the vast bulk of ACCA predicate convictions are state convictions. Those state prosecutors and judges rightfully apply the elements of the crime under that state’s law for the crime charged, not the ever-changing vagaries of a federal sentencing statute. This point is well illustrated by the facts of this case where Virginia charged Foster with the burglaries in 1992, thirteen years before the Supreme Court decided Shepard. When the facts for the predicate state convictions are evident on the face of the indictments and indicate that the defendant violated the portion of the relevant statute that proscribes entry into a building or structure, that is all that is required for ACCA purposes. That requirement was met in this case for the reasons stated above.
V.
Contrary to the dissenting opinion’s suggestion, the record here is not “silent.” Cf. post at 298. The terms of the Shepard-approved documents verify that the fact-finder was required to find that Foster committed generic burglary of the Corner Market and the Sunrise-Sunset Restaurant based on the logical options under the Virginia statute. Rather than on a small river craft or in a railroad car, corner markets that sell cigarettes, food, and beer, and restaurants are operated in buildings or structures. Foster’s prior convictions therefore necessarily occurred under the first clause of the Virginia statute, which proscribes breaking and entering buildings or structures, and thus qualify as violent felonies under the ACCA. For these reasons, we vacate Foster’s sentence and remand the case to the district court for resentencing.
VACATED AND REMANDED
. At the time of the convictions, which were obtained via guilty pleas, the Virginia breaking and entering statute read:
If any person in the nighttime enters without breaking or at any time breaks and enters or enters and conceals himself in any office, shop ... storehouse, warehouse, banking house, or other house, or any ship, vessel, or river craft or any railroad car, or any automobile, truck or trailer, if such automobile, truck or trailer is used as a dwelling or place of human habitation, with intent to commit murder, rape or robbery, he shall be deemed guilty of statutory burglary—
Va.Code § 18.2-90 (1992) (amended 2004). As discussed in greater detail below, because the statute "encompasses not only unlawful entry into 'a building or structure,' but, under some circumstances, an automobile, truck, ship, or railroad car, as well,” the parties correctly agree that this definition is broader than the definition of generic burglary as set forth in Taylor v. United States, 495 U.S. 575, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990). United States v. Baxter, 642 F.3d 475, 477 (4th Cir.2011). See also Shepard v. United States, 544 U.S. 13, 17, 125 S.Ct. 1254, 161 L.Ed.2d 205 (2005) (defining "generic burglary” as the "unlawful or unprivileged entry into, or remaining in, a building or structure, with intent to commit a crime”) (quotation marks omitted).
. Foster does not challenge this finding of the district court on appeal.
. At the time Graybeal was decided, Va.Code § 18.2-91 read in pertinent part: “[i]f any person do any of the acts mentioned in § 18.2-90 with intent to commit larceny, or any felony other than murder, rape or robbery, he shall be deemed guilty of statutory burglary....” 324 S.E.2d at 699 (ellipsis in original).
. Thus, because an indictment for breaking and entering a vehicle would have been required to state that it was a place of human habitation, the statute leaves no room for Foster’s argument that the Sunrise-Sunset Restaurant might have been a food truck.
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3724177-13468 | ORDER
LEW, District Judge.
Defendants in the above captioned action have moved to dismiss for failure to state a claim upon which relief can be granted. Plaintiffs timely opposed the motion. The matter was set for oral argument on January 14, 1991 at 9:00 a.m. After review of the papers filed, the Court determined that all of the issues had been adequately briefed and removed the matter from the Court’s law and motion calendar pursuant to Fed.R.Civ.P. 78. Now having again reviewed all of the papers filed in support of and in opposition to the motion, the Court hereby issues the following order:
Defendants’ motion to dismiss is GRANTED. The First Amended Consolidated Class Action Complaint is DISMISSED WITH PREJUDICE.
I. Background
This is a class action brought on behalf of all current owners in the United States of three-wheel all terrain vehicles (“ATV’s”) manufactured or distributed by Defendants. Plaintiffs assert that through their advertising campaigns, Defendants created and cultivated the false impression that ATV’s were safe for recreational use by entire families.
On February 28, 1990, Plaintiffs filed a consolidated class action complaint, alleging inter alia, violations of RICO, (18 U.S.C. §§ 1961, et seq.) violations of the Consumer Product Safety Act (CPSA), fraud, negligent misrepresentation and breach of warranties. This is not an action for personal injury; rather, it is for economic injury Plaintiffs allegedly suffered as a result of paying more for the ATV’s than they were worth.
On July 19, 1990, the Court granted Defendants’ motion to dismiss the entire consolidated complaint on grounds that the complaint failed to adequately allege claims for relief under RICO and the CPSA, and exercise of pendent jurisdiction was not proper over the remaining claims, which were all based on state law.
On September 10, 1990, Plaintiff’s filed an amended consolidated complaint (“the Amended Complaint”), alleging violations of RICO (Counts One through Five), violations of the CPSA (Count Six), fraud (Count Seven), misrepresentation and nondisclosure (Count Eight), negligent misrepresentation (Count Nine), breach of express warranties (Count Ten), breach of implied warranties of merchantibility (Count Eleven), breach of implied warranties of fitness for particular purpose (Count Twelve), and violation of state consumer protection statutes (Count Thirteen).
All Defendants now move to dismiss the Amended Complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Defendants ask that after four attempts at pleading, Plaintiffs still have failed to state a federal claim for relief.
II. Standard: Federal Rule of Civil Procedure 12(b)(6)
In considering a motion under Federal Rule of Civil Procedure 12(b)(6), the trial court is required to accept as true all material factual allegations of the party opposing the motion and to view the facts presented in the pleadings in the light most favorable to the nonmovant. North Star International v. Arizona Corporation Commission, 720 F.2d 578, 580 (9th Cir. 1983).
III. Counts One through Five: Violations of RICO
The Amended Complaint alleges that Defendants are liable to Plaintiffs for violations of RICO sections 1962(a), (c) and (d). The principal basis for Defendants’ motion to dismiss is Defendants’ contention that Plaintiffs have done nothing of substance to remedy the two fundamental deficiencies identified by the Court in their RICO counts.
To allege a RICO violation, a plaintiff must allege a pattern of racketeering activity, which is defined at 18 U.S.C. section 1961(5) as at least two acts of racketeering activity, commonly referred to as “predicate acts.” Section 1961(1) of RICO defines racketeering activity as any of the crimes enumerated thereunder, including mail fraud (indictable under 18 U.S.C. section 1341), wire fraud (indictable under 18 U.S.C. section 1343) and interstate transportation of stolen property (indictable under 18 U.S.C. sections 2314 and 2315). Defendants contend the Amended Complaint fails to adequately allege that Defendants committed acts constituting mail or wire fraud or any other RICO predicate act listed in section 1961.
A. Pleading Requirements of Rule 9(b)
Defendants seek dismissal of the RICO claims on grounds that the Amended Complaint fails to plead facts constituting violations of RICO with sufficient specificity.
To allege a RICO violation under section 1962(a) or (c), a plaintiff must allege a pattern of racketeering activity, which is defined as “at least two acts of racketeering activity____ 18 U.S.C. § 1961(5). Racketeering activity is defined as any of the acts enumerated in section 1961(1), including mail fraud (indictable under 18 U.S.C. § 1341), wire fraud (indictable under 18 U.S.C. § 1343, and interstate transportation of stolen property (indictable under 18 U.S.C. §§ 2314 and 2315).
Federal Rule of Civil Procedure 9(b) provides that “[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.” The pleading requirements of Rule 9(b) apply to RICO actions which rely on predicate acts involving fraud. See e.g., Moore v. Kayport Package Express, 885 F.2d 531 (9th Cir.1989); Schreiber Distrib. v. Serv-Well Furniture Co., 806 F.2d 1393 (9th Cir.1986). Because all of the predicate acts Plaintiffs seek to allege involve fraud, the pleading requirements of Rule 9(b) apply-
The Court’s dismissal of the First Consolidated Complaint was based in large part upon Plaintiffs’ failure to meet the requirements of Rule 9(b). The Court ruled that Plaintiffs had failed to allege the time, place or manner of the alleged misrepresentations as required by Ninth Circuit case law.
Plaintiffs now argue that the Ninth Circuit’s time, place and manner allegation requirements are not applicable. Plaintiffs contend that compliance with Rule 9(b) cannot be reduced to a formula to be mechanically applied regardless of the nature of the fraud or the circumstances under which it arose. Plaintiffs further argue that the allegations in the Amended Complaint are sufficiently specific because the alleged fraud involves a course of conduct over an extended period of time and a series of transactions. Plaintiffs point to the Amended Complaint’s allegations regarding the “deceptive language of particular advertisements and marketing literature of various manufacturing and distributing [Defendants” as providing the requisite specificity.
Plaintiffs’ argument is without merit. As discussed below, each example of “deceptive language of particular advertisements and marketing literature” upon which Plaintiffs rely to provide the specificity required under Rule 9(b) is “mere puffery” and fails to state a claim for fraud. The remaining allegations in the Amended Complaint fail to plead fraud with the specificity required under Rule 9(b) regardless of whether time, place or manner allegations are required. The Amended Complaint alleges that Defendants, through their nationwide advertising campaigns conducted over approximately eighteen years, created and cultivated the false impression that ATV’s were suitable and safe for recreational use. -The allegations fail to identify the circumstances constituting fraud with sufficient specificity to enable Defendants to prepare an adequate answer. Accordingly, these allegations fail to meet the requirements of Rule 9(b). See Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir.1987); Semegen v. Weidner, 780 F.2d 727, 734-35 (9th Cir. 1977).
B. Rule 9(b) as Applied to Defendant Polaris Industries L.P.
Defendant Polaris filed a separate memorandum of points and authorities in support of Defendants’ motion to dismiss. In its memorandum, Polaris contends that the Amended Complaint should be dismissed for failure to meet the pleading requirements of Rule 9(b). The Court’s previous analysis regarding Rule 9(b) is equally applicable to the allegations against Polaris. Thus, the Amended Complaint is dismissed as to Polaris.
In addition, Polaris asks for sanctions pursuant to Federal Rule of Civil Procedure 11 on grounds that Plaintiffs’ allegations regarding Polaris are not well grounded in fact. Because the Court is not able to determine whether Plaintiffs had a basis in fact for naming Polaris as a defendant, the Court exercises its discretion and denies Polaris’ request for sanctions.
C. “Mere Puffery"
Defendants contend the Court should dismiss the Amended Complaint, as it dismissed the First Consolidated Complaint, on grounds that Plaintiffs allegations of “fraud” are in fact allegations of nonactionable puffery. Plaintiffs contend that rather than alleging mere puffery, they have alleged that Defendants’ entire marketing scheme was deceptive, including offering ATV’s for sale, using the name “all terrain vehicle,” and “the full panoply of advertising and promotions to which [Defendants resorted.” Opp. at 17:16-18.
The Ninth Circuit recently held that the question of whether an alleged misrepresentation is a statement of fact or mere puffery is appropriate for determination on a Rule 12(b)(6) motion to dismiss. Cook, Perkiss, Liehe v. Northern California Collection Service, Inc., 911 F.2d 242, 245 (9th Cir.1990). The Court’s decision to dismiss the First Consolidated Complaint in this action was based in large part on Plaintiffs’ reliance on puffery rather than statements of fact in attempting to allege Defendants engaged in acts of fraud.
Plaintiffs apparently do not dispute the contention that mere puffing is not actionable under the mail fraud, wire fraud and interstate stolen property statutes. Rather, Plaintiffs argue that the “puffing doctrine” is limited in the realm of mail fraud and that they have plead more than mere puffing. As an example, Plaintiffs state that “Defendants’ exhortations that their ATV’s could take riders ‘up mountains, down valleys, across streams [, e]ven through swamps, if that’s your idea of a good time,” amounts to a false representation that ATV’s were safe for use under a reasonable range of off road terrains. Opp. at 18.
Puffing has been described as making generalized or exaggerated statements such that a reasonable consumer would not interpret the statement as a factual claim upon which he or she could rely. See Cook, Perkiss & Liehe, 911 F.2d at 246. The “common theme that seems to run through the cases consider puffery in a variety of contexts is that consumer reliance will be induced by specific rather than general assertions.” Id. Misdescriptions of “ ‘specific or absolute characteristics of a product’ ” are not puffery. Id. (quoting Smith-Victor Corp. v. Sylvania Electric Products, Inc., 242 F.Supp. 302, 308-309 (N.D.Ill.1965).
Defendants argue that most of the allegations in the Amended Complaint are the same as those which the Court found were nonactionable puffery in the First Consolidated Complaint. Defendants contend the few additional slogans that Plaintiffs included for the first time in the Amended Complaint are no different in substance from those that the Court rejected in the earlier motion to dismiss. Defendants cite numerous examples of advertising which courts have characterized as nonactionable puffing.
The Court agrees that the allegations in the Amended Complaint are substantively indistinguishable from those rejected by the Court in the Defendants’ motion to dismiss the First Consolidated Complaint. Each specific allegation in the Amended Complaint describes general or exaggerated assertions about characteristics of Defendants’ product which a reasonable consumer would not interpret as a factual claim upon which he or she could rely. For example, use of the name “all terrain vehicle” is no more fraudulent than is use of the name “all-weather tires.” Other examples of puffing alleged include the Amended Complaint’s allegations that ATV’s were advertised as ‘precisely balanced in the frame for superb handling,’ ‘the ultimate recreational vehicle,’ and that ATV’s ‘will embarrass the wind.’ Most of these slogans do not make representations capable of being classified as true or false. To the extent that the slogans do make affirmative representations, the representations are mere sales puffing and, therefore, are not actionable RICO mail or wire fraud. Reynolds v. East Dyer Development Co., 882 F.2d 1249, 1252 (7th Cir.1989).
D. Sale of the ATV’s as “Fraud”
Plaintiffs contend that Defendants’ “very sale of ATV’s amounts to [mail or wire] fraud.” Citing inapposite authority, Plaintiffs attempt to reason that sale of the ATV’s amounted to fraud because knowing sale of an unsafe product can constitute violation of the wire and mail fraud statutes. In making their argument, Plaintiffs apparently attempt to assert that a breach of the UCC implied warranty of merchantibility is also a violation of the federal mail and wire fraud statutes. The Court is puzzled by Plaintiffs’ logic on this point and, therefore, rejects Plaintiffs’ theory that allegations concerning the sale of ATV’s states a claim for violation of the federal mail or wire fraud statutes.
E. Failure to Disclose
Plaintiffs contend that even if the Amended Complaint fails to state a claim for affirmative acts of fraud, the Amended Complaint should survive because it adequately alleges deceitful concealment of material facts which may constitute the fraud that is an essential element of mail or wire fraud.
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10526791-12911 | VAN GRAAFEILAND, Circuit Judge:
Charles Agee Atkins and William S. Hack appeal from judgments convicting them of violating and conspiring to violate 26 U.S.C. § 7206(1) and (2) and 18 U.S.C. § 371, following a jury trial before Judges Weinfeld and Lasker in the United States District Court for the Southern District of New York. The charges included the willful making and subscribing of false individual and partnership tax returns, § 7206(1), and aiding and assisting in the filing of false individual and partnership returns, § 7206(2). See United States v. Atkins, 661 F.Supp. 491 (S.D.N.Y.1987). We affirm.
Appellant Atkins was the founder and principal owner of a limited partnership called The Securities Groups, one of whose functions was the creation of tax write-offs for investors in money market instruments, primarily United States government securities. Appellant Hack controlled a similarly occupied company called Mountain Associates. The word “securities” may be somewhat misleading because, in the main, no physical certificates changed hands in the transactions involved herein. As one witness explained it:
Well, there are no physical certificates. The treasury stopped issuing the physical certificates a number of years ago. And when we refer to deliveries, what we are referring to are book entries done on the Federal Reserve system comput ers. So that the computer in fact keeps track of where the securities are versus where cash is. So that all of these transfers are actually electronic transfers of treasury bills versus fed funds.
Indeed, as another witness pointed out, artificial transactions in treasury bills or notes could be conducted without first purchasing anything from the treasury:
But with these so-called artifical [sic] transactions, they didn’t require one having to actually go out and buy anything from the treasury. A dealer would just put something on his books indicating a purchase of transactions or purchase of some volume of securities as of day one in a sale as of some later day and then have corresponding transactions with some other party that also is self-reversing in that way. And that could be done without any transactions actually having to exist or be delivered over the delivery network in the government securities market. It didn’t require that treasury securities actually exist.
At one point The Securities Groups’ balance sheet showed it with $24 billion of assets and liabilities, with less than a $100 million of capital.
Although the Groups’ offering memoran-da represented that the Groups intended to handle clients’ investments for the primary purpose of realizing economic gains, its real purpose was to generate tax losses for investors who needed them to offset unrelated gains. Such investors were promised 4 to 1 tax write-offs based on an investment consisting of 25 percent cash and 75 percent notes.
Because there is little dispute as to the facts, we need not recount in detail the evidence produced at trial. The Government proved beyond a reasonable doubt that Atkins, with the conniving assistance of Hack and other unindicted accomplices, created, purchased, and sold millions of dollars in fraudulent tax losses for his companies and his customers. Appellants used two basic schemes in creating the fraudulent losses — rigged straddles and rigged repurchase agreements.
A straddle in the securities industry is the concurrent establishment of “long” and “short” positions in a security or securities. A person is “long” if he has contracted to buy a quantity of securities for future delivery, speculating on an advance in the market; he is “short” if he has contracted to sell securities that he may not yet own, speculating on a decline in the market. Prior to the enactment of the Economic Recovery Tax Act of 1981, Pub.L. No. 97-34, 95 Stat. 172, 323-26, dealers such as appellants, by going long and short at the same time, i.e., “straddling”, could close out in one year the leg of the straddle that showed a loss and close out in the succeeding year the other leg showing the gain, thus deferring for one year the tax on the offsetting gain.
However, the ordinary straddle is not risk free because there is no assurance that the gain on the second leg will be equal in amount to the loss on the first leg. One witness described a straddle as the “simultaneous purchase and sale of similar but different instruments such that if the market interest rates moved, one side of the position would be profitable, while the other side would automatically lose money.” See Lasker v. Bear, Stearns & Co., 757 F.2d 15, 16-17 (2d Cir.1985). Because The Securities Groups was engaging in transactions involving billions of dollars, it proposed to eliminate the possibility of what could be extremely large losses resulting from such market fluctuations.
To accomplish this, it found accomplices such as Hack who, for a fee, were willing to enter into “paper” or computer transactions giving the Groups substantial first leg losses and then, by means of additional “paper” transactions, adjusting the second leg so as to eliminate any gains or losses that otherwise might result from market fluctuations. As one witness described the process, “the entire transaction from start to finish would be arranged, we’d know the end result going into it, and the only economic risk would be the fee paid for the loss.”
Another witness, describing a deal between the Groups and appellant Hack, testified as follows:
Q. In this particular transaction between The Securities Groups and Mountain Associates, was there any market risk?
A. No.
Q. And again, could you explain to the jury why that was the case?
A. Because I had told Mr. Hack that we were going to be putting these on for tax purposes, and that there was no intention on our part to either make or lose money, and that as the market moved before year-end, I would realize the losing portion and put the straddle back on, and basically end up the trade when all was said and done with zero profitability.
In general, the process thus briefly described works as follows: After the dealer puts the straddle back on, he enters into a new futures contract, the second leg of which would be the exact opposite of the second leg of the original straddle. In other words, if the second leg of the original straddle called for a long position, the second leg of the new straddle would call for a short one, and vice versa. This would insure that, no matter which way the market moved, the deferred gain on the original straddle would not be affected. See Sochin v. Commissioner, 843 F.2d 351, 352-53 (9th Cir.), cert. denied, — U.S. -, 109 S.Ct. 72, 102 L.Ed.2d 49 (1988); Lasker v. Bear, Stearns & Co., supra, 757 F.2d at 16-17.
There was no expectation of profit in the transactions above described, their sole purpose being the creation of artificial tax losses.
Repurchase agreements (“repos”) are devices for financing the purchase or sale of securities. The securities form the collateral for the loan, and the interest on the loan may be either pegged to the interest rate to maturity of the underlying security (“repo to maturity”) or permitted to float according to the prevailing market rate at any given time (“open” or “term” repo). In a repo to maturity transaction, there can be no profit or loss in connection with interest charges, since they coincide with the interest payable on the collateral security. In an open or term repo, there can be profit or loss, because the interest charges on the loan can be lower or higher than the interest payable on the collateral. The Groups eliminated the possibility of such profit or loss on transactions carried on its books as open or term repos by secretly using repo to maturity rates. They used the undisclosed repo to maturity agreements to purchase treasury bills maturing in the year following purchase, but redeemed them in December of the purchase year as if the financing was an open or term repo. The interest expense payable under these term or open repos generated the desired tax losses. At the same time, the secret repo to maturity agreements insured that no profit or loss due to market fluctuations would occur. Again, we use the words of one of the Groups’ employees to describe how this fraudulent procedure worked:
Q. Could you describe for the jury what was said during that conversation and who was speaking?
A. Mr. Gubitosi said that he had come up with a plan to generate tax losses without using straddle situations.
Q. Could you describe what was said about that.
A. He described a method by which we were going to be, we being The Securities Groups were going to go long treasury bill securities and have a financing agreement against it. In fact, the financing agreement would be written on an open basis when in fact it would actually be a repurchase agreement to maturity taking out the risk.
Mr. Gubitosi was very happy that he had come up with this and said, “I don’t know why we ever did straddle transactions to begin with, we never had to, we only needed a one side transaction.”
Q. Do you recall how he described what you were going to do?
A. He basically said, “Here we have the traditional straddle transaction, we will take the short side, roll it up in a ball and throw it away, we don’t need it any more,” meaning by that we could have the long position which would generate the gain the following year and we would have the financing agreements which would generate the loss in the current year.
Q. Would there be any risk in these transactions?
A. No.
Q. Why not?
A. The transactions when they are put on are basically financed to maturity even though the transaction would be listed as an open trade.
Q. Would it still appear as a transaction that had economic risk?
A. Yes.
Appellants used both of above-described devices, or variations of them, to create hundreds of millions of dollars in apparent losses. They also backdated or caused to be backdated a large number of documents in order to increase the amount of their fraudulent claims. For example, the backdating of a purchase or sale by six months would permit the creation of a half year of phantom interest expense. Appellants also falsified other documents that were needed to carry out their schemes, such as disguising kickback payments as trading losses; and they lied to their lawyers, their accountants, and their customers concerning the true nature of their machinations.
Although appellants do not, indeed cannot, contend seriously that the Government did not prove beyond a reasonable doubt their participation in the above described schemes, they contend that they were deprived of due process because they did not know in advance that their conduct was unlawful. In view of the proven falsification and backdating of documents, the secret oral agreements, the lies and the concealment of facts, this argument borders on the specious. See United States v. Ingredient Technology Corp., 698 F.2d 88, 96 (2d Cir.), cert. denied, 462 U.S. 1131, 103 S.Ct. 3111, 77 L.Ed.2d 1366 (1983); United States v. Carruth, 699 F.2d 1017, 1021 (9th Cir.1983), cert. denied, 464 U.S. 1038, 104 S.Ct. 698, 79 L.Ed.2d 164 (1984); United States v. Winograd, 656 F.2d 279, 282-83 (7th Cir.1981), cert. denied, 455 U.S. 989, 102 S.Ct. 1612, 71 L.Ed.2d 848 (1982); United States v. Fruehauf Corp., 577 F.2d 1038, 1067-68 (6th Cir.), cert. denied, 439 U.S. 953, 99 S.Ct. 349, 58 L.Ed.2d 344 (1978). “A mind intent upon willful evasion is inconsistent with surprised innocence.” United States v. MacKenzie, 777 F.2d 811, 816 (2d Cir.1985), cert. denied, 476 U.S. 1169, 106 S.Ct. 2889, 90 L.Ed.2d 977 (1986) (quoting United States v. Ragen, 314 U.S. 513, 524, 62 S.Ct. 374, 378, 86 L.Ed. 383 (1942)). Moreover, “[t]he doctrine of substance versus form is well ensconced in tax law.” United States v. Crooks, 804 F.2d 1441, 1449 (9th Cir.1986), modified on other grounds, 826 F.2d 4 (9th Cir.1987).
Appellants’ reliance on 26 U.S.C. § 165(c)(1) (losses allowed if incurred in a trade or business); § 108(a) of the Tax Reform Act of 1984, Pub.L. No. 98-369, 98 Stat. 494, 630 (losses from pre-1982 straddle positions allowed if entered into for profit); and § 1808(d) of the Tax Reform Act of 1986, Pub.L. No. 99-514, 100 Stat. 2085, 2817-18 (losses from pre-1982 straddles allowed when incurred in trade or business or in transaction entered into for profit), is misplaced. As former Judge Wein-feld correctly held in denying appellants’ pretrial motion to dismiss, 661 F.Supp. at 495-96, none of these statutes has been applied to sham transactions such as are involved herein. See Forseth v. Commissioner, 845 F.2d 746, 748-49 (7th Cir.1988); Enrici v. Commissioner, 813 F.2d 293, 296 (9th Cir.1987) (per curiam); Mahoney v. Commissioner, 808 F.2d 1219, 1219-20 (6th Cir.1987); United States v. Winograd, supra, 656 F.2d at 282-83.
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6072269-15526 | Fat, Judge*:
Respondent determined deficiencies in petitioners’ income tax for the years 1958 and 1959 in the amounts of $12,048.58 and $6,400.30, respectively. By an amendment to his answer, respondent claimed an additional deficiency for the year 1958 in the amount of $3,454.59.
The issues are (1) whether petitioners owned more than 80 percent in value of the 'outstanding stock of Trotz Construction, Inc., within the meaning of section 1239 at the time they sold construction equipment to the corporation, and (2) whether petitioners are entitled to the depreciation deductions claimed in 1958 on various items of construction equipment sold by them in that year at prices in excess of their undepreciated basis therein at the beginning of the year.
FINDINGS OF FACT
Some of the facts were stipulated and they are found accordingly.
Harry and Camille Trotz were at all times relevant hereto husband and wife. They filed their joint Federal income tax returns for the taxable years 1958 and 1959 with the district director of internal revenue, Albuquerque, N. Mex. Harry Trotz will hereinafter be referred to as petitioner.
Prior to February 1958 petitioner was owner of Trotz Construction Co., a sole proprietorship (hereinafter referred to as the proprietorship) engaged in road construction in New Mexico. At that time the proprietorship had just finished a job in a joint venture with Miller, Smith & O’Hara, Inc. During the prosecution of this contract, petitioner became acquainted with Ben F. Kelly, Jr., then a grade foreman. Kelly was not related to petitioner by blood or marriage. Petitioner proposed to Kelly that the two of them join forces in the construction business.
On February 3, 1958, petitioner, his wife, and Kelly caused Trotz Construction, Inc. (hereinafter referred to as the corporation), to be incorporated under tlie laws of the State of New Mexico. Pursuant to the corporate charter, 400 shares of authorized common stock, each having a par value of $100 per share, were issued on March 1,1958, as follows:
Also on March 1, 1958, the above officers adopted the bylaws of the corporation which contained the usual clauses with respect to the conduct of the corporate business. Article IV, section (7), of these bylaws provided: “Any Director or Officer may be removed from Ms office or position at any time with or without cause ‘by the affirmative vote of a maj ority of the stockholders of the corporation.” Petitioner turned over to the corporation $40,000 cash for the 400 shares of stock being issued. He purportedly loaned Kelly the $8,400 required for Kelly’s purchase of 84 shares of stock of the newly formed corporation. The loan was evidenced by a promissory note. In order to secure the payment of the purported indebtedness, Kelly pledged Ms stock and assigned any bonus and dividend he might receive from the corporation to petitioner by a document entitled “Pledge of Stock and Collateral Agreement.” Kelly delivered the endorsed certificate evidencing his 84 shares of stock to petitioner, pursuant to the “Pledge of Stock and Collateral Agreement.” Petitioner retained the Kelly certificate from that time. As a further part of the same transaction Kelly, petitioner, and petitioner’s wife executed on March 1, 1958, a document entitled “Option to Purchase Stock.”
The document provides, in part, as follows:
1. First party [Kelly] does hereby agree that in the event he shall for any reason cease to be an officer and/or director of [the corporation] or shall die, second parties, [petitioners] or either of them, their respective heirs, executors, administrators and assigns, shall have and are hereby given an option to purchase the stock now held by first party and any further shares of [the corporation] which first party shall hold or acquire by any increase in the capital stock of the company, or otherwise, at the book value of said stock as determined by the Board of Directors of said company. In computing such book value, it is understood and agreed that no value shall be estimated for the good will, trade names, trade marks or other intangible assets.
2. It is understood and agreed that if second parties, or either of them, their respective heirs, administrators or assigns, shall not exercise within thirty (30) days after written demand from first party, their option to purchase said stock, at the book value of said stock, in cash, then first party ‘shall have the right to sell or transfer his shares of stock to any other party, free from any of the obligations of this Agreement.
3. First party agrees that Re will make no sale, transfer or pledge of said stock except subject to the option and rights herein given to second parties.
This Option Agreement Shall be binding upon the parties hereto and upon their respective heirs, executors and assigns.
Immediately following the incorporation on March 1, 1958, petitioner sold substantially all of his construction equipment to the corporation for $183,153.33, which was the median market value as determined by three independent appraisers. As payment for the equipment the corporation assumed $22,933.55 of purchase money indebtedness against the equipment, paid $35,219.78 in cash, and issued to petitioner a $125,000 promissory note secured by a chattel mortgage on the equipment sold. The bill of sale that effected the transfer listed each item of equipment and the price the purchaser paid for each item. In each instance, the purchase price was in excess of petitioner’s January 1, 1958, basis, with the single exception of one 12-ton Gabon tandem roller. In that case the purchase price was less than the January 1,1958, basis.
On their 1958 income tax return petitioners reflected the cost to them of the equipment sold to the corporation as $275,031.11, the accwnwlated depreciation as $196,088.^0, and their adjusted basis as $78,942.71. The resultant gain of $104,210.62 was reported as long-term capital gain arising from the sale of property used in trade or business. The gain on the sale was reported on the installment basis, the gain for 1958 being listed as $22,892.86 and the gain for 1959 as $27,300. Respondent determined that the gain on the sale of this equipment was includable in full as ordinary income in each of the years involved.
At the first meeting of the stockholders and board of directors of the corporation, the following were elected as officers and directors of the corporation, with salary and bonuses as indicated:
Kelly’s employment with the corporation commenced in March 1958 and lasted until the latter part of December 1958, at which time a disagreement arose between petitioner and Kelly. Kelly, on his own volition, submitted his resignation as vice president and director of the corporation effective December 29, 1958. On January 15, 1959, petitioner wrote Kelly concerning the transfer of Kelly’s 84 shares of stock and the cancellation of Kelly’s promissory note in the amount of $8,400. On January 17, 1959, petitioner wrote Kelly acknowledging receipt of the certificate for 84 shares of stock, canceling the $8,400 note, and indicating return of tbe note to Kelly. At tbe time of tbe surrender Kelly bad made no payments on tbe note.
OPINION
Tbe first question for decision is whether petitioner is entitled to have bis profits from tbe sale of bis depreciable property to tbe corporation taxed as capital gain rather than as ordinary income. Section 1239 denies capital gains treatment for such profits when an individual sells depreciable property used in his trade or business to a corporation more than 80 percent in value of tbe outstanding stock of which is owned by such individual, bis spouse, his minor children, and minor grandchildren.
Petitioner argues that be and his wife owned only 79 percent of tbe corporation’s outstanding stock on March 1,1958, tbe date of tbe sale, and therefore capital gains treatment is not denied by section 1239. Respondent points to the following facts: (1) That petitioner’s funds were used to purchase tbe stock certificate issued in Kelly’s name; (2) that said stock certificate, at all times relevant hereto, has been endorsed to petitioner and has been in his possession; and (3) that by virtue of the option granted to him by Kelly and the provision in the bylaws, petitioner could, at any time he pleased, have acquired legal title to the stock merely by canceling the debt purportedly owed to him by Kelly for the original purchase price of the stock. Respondent then argues that by reason of these facts petitioner, in substance, was the owner of the stock which had been issued in Kelly’s name and that petitioner, therefore, is not entitled to report the gain realized as capital gain.
All of the significant events and transactions seem to have taken place on March 1, 1958, in the office of petitioner’s attorney. On that date the corporation was activated by petitioner turning over to it $40,000 cash and the corporation issuing 400 shares of stock — 216 shares made out to himself, 100 shares made out to his wife, and 84 shares made out to Kelly. Kelly signed a note to petitioner for $8,400 payable in 2 years from date at 6-percent interest, endorsed the stock certificate for 84 shares, and turned it over to petitioner, together with his (Kelly’s) written pledge and collateral agreement as security for the note. As the same time Kelly also executed an instrument entitled “Option to Purchase Stock.” That instrument provided that, for a consideration of $10 and other valuable consideration, petitioner, upon the happening of a certain contingency, would have the right to buy Kelly’s 84 shares at book value, with no value ascribed to goodwill or other possible intangible assets. That instrument, together with the corporation’s bylaws (also adopted Mar. 1,1958), presented petitioner with the following choice, exercisable at will: Petitioner could leave the 84 shares in Kelly’s name or he could terminate Kelly’s negligible link or vestige of ownership to or in the stock by returning Kelly’s note. The reason petitioner was in this position is that the contingency referred to in the so-called Option to Purchase instrument was Kelly’s failure to remain as an officer and/or director of the corporation; and petitioner had the absolute right to terminate Kelly’s employment as such at will. For the bylaws authorized a majority stockholder, which petitioner was at all times relevant hereto, to remove a director or officer from his office or position “at any time with or without cause.” Thus, in the March 1, 1958, transactions, petitioner first acquired the right to all 400 shares of the corporation by his contribution of $40,000 cash. He then relinquished the right to have 84 of the shares issued in his name, but he did not relinquish his control over or, in effect, his actual ownership of the stock which had been issued in Kelly’s name. He was in a position to, and did in fact, exercise complete and absolute control over these shares on the very day he sold his depreciable assets to the corporation.
Section 1239 was designed to cover situations such as occurred in the instant proceeding where low-basis property is sold by a stockholder to his controlled corporation. It is designed to operate in such a way that it will deprive a seller of the advantage of capital gains treatment when the seller is a stockholder who is dealing with a corporation in which he owns more than 80 percent of the outstanding stock in value.
Petitioner’s rights with respect to the stock issued to Kelly were so complete that they were tantamount to ownership by petitioner for purposes of section 1239. This result is indicated by the provisions of the statute which attribute to a taxpayer ownership of stock held by his wife, minor children, and minor grandchildren. Obviously Congress, in enacting this provision, presumed that a taxpayer would control such stock held by others by virtue of the family relationship. It necessarily follows that where the taxpayer’s control of stock standing in another’s name is created by a contractual relationship such as the one involved herein (as revealed by the terms of the apposite agreements), petitioner is given a more absolute and complete control than might be presumed to arise from the particular familial relationships mentioned in the statute. To hold otherwise would completely destroy the statute. It could not be effective if an individual could avoid the tax by restricting issuance of stock in his name to 79 percent, but retaining the strings of ownership over the other 21 percent issued in another’s name. The document which Kelly executed is in form an option but in reality, when considered together with the bylaws, it amounted to a contract by Kelly to turn over the stock, issued in his name, to petitioner whenever petitioner wanted him to do so. Therefore, at the time of his sale of depreciable assets to the corporation on March 1, 1958, petitioner and his wife, in substance, owned 100 percent of the stock although legal title to 21 percent of the stock was in Kelly. Petitioner could acquire title to these shares at will. We hold under the facts here that petitioner owned more than 80 percent in value of the corporation’s outstanding stock on March 1, 1958. Therefore, the gain petitioner realized upon the sale of his assets that day to the corporation should be taxed as ordinary income.
Petitioner relies heavily upon Mitchell v. Commissioner, 300 F. 2d 533 (1962), reversing our decision in 35 T.C. 550 (1960). There on the date the taxpayer sold his depreciable property to the corporation he, and his spouse, and his minor children, owned directly 79.54 percent of the stock, and irrevocable trusts created for two minor children owned 12.21 percent of the outstanding stock. The Court of Appeals held that the stock owned by the bank as trustee for the children was not owned by the children. However, the opinion in that case recognized the word “owned” in the statute should be defined in terms of control and the court reasoned stock held by a trustee would not be under the taxpayer’s control. See Mitchell v. Commissioner, supra at 537. Our opinion here is well within the rationale of Mitchell v. Commissioner, supra. There the opinion indicates the control was based only upon “a spirit of confidence and cooperation, [which] does not fit into the scheme of section 1239.” Here the control over the minority stock-holding, as established by the signed contract, virtually amounted to complete control and, therefore, was tantamount to ownership for purposes of section 1239.
Despite the fact that we have concluded that all of petitioner’s gain on the sale of the assets constitutes ordinary income, it will be necessary for us to consider the depreciation issue because petitioner elected to report his gain on the installment method. Kespondent, by way of amended answer, raised an affirmative issue whereby he disallowed the depreciation claimed by petitioner on the equipment sold by his proprietorship to the corporation. The burden of proof therefor is on respondent.
Respondent’s sole reason for disallowing the depreciation plaimed is that the amount received by petitioner for the equipment on March 1, 1958, the date of the sale, was in excess of petitioner’s undepreciated or adjusted basis in the equipment as of the beginning of the year of sale. It is respondent’s position that, under such circumstances, no deduction for depreciation is allowable as a matter of law.
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3064161-8067 | MEMORANDUM
FRANKEL, District Judge.
This petition for review of a referee’s order in a Chapter XI proceeding presents a neat question of law arising from stipulated facts.
The debtors were (and, since confirmation of the arrangement, continue to be) dealers, jobbers and distributors of phonograph records. Columbia Broadcasting System, Inc. (CBS), manufactured and sold such records to the debtors. Until June 22, 1965, CBS and other manufacturers were subject to an excise tax measured by the sales price of the records, 26 U.S.C. § 4141 (1964). Under the statutory scheme the manufacturer was to exact the tax from his wholesalers who, in turn, passed it along to their purchasers and, ultimately, to the consuming public.
The excise tax was repealed effective June 22,1965. Pub.L. No. 89-44, 79 Stat. 136. The repealer provided for refunds by the government of taxes which had been paid upon items remaining in the hands of distributors and retailers. Under the statute and implementing regulations, the refund could be claimed and obtained only by the manufacturer, who was required to file claim therefor on or before February 10, 1966, based upon a request from his purchaser-dealers made before January 1, 1966. In order to obtain the refund the manufacturer was required either to have made reimbursement to the dealer or to have obtained the dealer’s written consent to the government’s payment of the refund to the manufacturer. Detailing the procedure after the manufacturer’s receipt of the refund, the pertinent Treasury Regulation, 26 C.F.R. § 145.2-1 (c), says:
“Payment shall be made, at the manufacturer’s option, in cash, by check, or by credit to the dealer’s account as maintained by the claimant. The amount of the payment which may be made by crediting such account may not exceed the undisputed debit balance due at the time the credit is made.”
Pursuant to the foregoing statute and regulation, the debtors on December 23, 1965, filed with CBS requests for refunds supported by certifications of their inventories as of June 22, 1965. The forms used for this purpose, evidently created by CBS, contained, inter alia, the following language, which has been deemed significant by the debtors and by the learned referee:
“The undersigned consents to the allowance to the manufacturer of the floor stock credit or refund of the excise tax imposed by the Internal Revenue Code of 1954 with respect to the phonograph records included in the inventory set forth herein, with the understanding that such tax refunded by the Federal Government shall be refunded to the undersigned.”
On February 5, 1966, four days or so before it filed its claim for refund with the Internal Revenue Service, CBS issued to one of the debtors its credit memorandum for $17,020.03, about 85% of the total tax refunds due. In the meantime, on January 18, 1966, the Chapter XI petitions had been filed.
CBS received a portion of the claimed refund on March 15, 1966, and took the balance as a credit in its final excise tax report for the year ending June 30, 1965. On March 20, 1966, it issued further credit memoranda to the debtors for the balance of the refund due them, making a total thus credited of $19,534.-85. This is the amount now in dispute.
By motion dated September 22, 1966, the debtors sought an order requiring that CBS pay this sum over to them as debtors in possession. Opposing the application, CBS, which had filed unsecured claims in the proceeding totalling over $80,000, contended that the refund should properly be retained by it as a set-off under § 68(a) of the Bankruptcy Act, 11 U.S.C. § 108(a). With the issue thus posed still unresolved (and, apparently, with the required schedule of assets containing no indication of the debtors’ claim against CBS), the plan of arrangement was confirmed by order of the referee dated November 4, 1966. The approved plan provided that unsecured creditors (including CBS) would be paid 12%% of their scheduled unsecured claims. Thereafter, of course, the contest involved only the respective pleas of the sometime debtors (now out of Chapter XI) for recovery of 100% from CBS as against the latter’s fractional realization on its larger claims.
In this posture, the debtors’ motion was decided by the order of the referee dated September 24, 1969. He determined that a tax refund of the kind in question “comes into existence when and to the extent that the application therefor is allowed by the Internal Revenue Service.” He concluded that this “was not payment of a debt due either Columbia or the debtors;” that CBS “had no proprietary interest in the tax refund;” that the refund, when allowed, “constitute[d] property of the debtors;” that the consent form, quoted earlier herein, “reposed in [CBS] the obligation to pay over the refund to the debtors upon its receipt;” that “[t]he relationship between Columbia and the debtors precluded Columbia from exercising the right of setoff;” and that there were, in sum, “no mutual debts or credits between Columbia and the debtors.” Accordingly, the debtors’ motion was granted, bringing CBS here as petitioner for review.
While the question is close, and the learning of the able referee gives pause, the court concludes that his ruling must be reversed. The heavy weight of precedent and the business sense of the matter support the contention of CBS that it was entitled to set off the tax refund against its much larger claims upon the debtors. It is not in the end a guide to decision to say that CBS lacked a “proprietary interest” in the refund. In terms of the bankruptcy law, it would be equally possible, but equally without significance, to speak this way of a carrier’s hold upon C.O.D. receipts of his bankrupt shipper, In re W. & A. Bacon Co., 261 F. 109 (D.Mass.1919), the government’s possession of taxes admittedly overpaid and due for refund, Luther v. United States, 225 F.2d 495 (10th Cir. 1954), cert. denied, 350 U.S. 947, 76 S.Ct. 321, 100 L.Ed. 825 (1956), or a consignee’s “interest” in the proceeds of sale of consigned goods, Half Moon Fruit & Produce Co. v. Floyd, 60 F.2d 799 (9th Cir. 1932). Yet the cited situations were held proper for set-off under § 68(a).
It is suggested that CBS, was a “trustee,” not a mere debtor. But the label does not fit. Nothing the parties said or did indicated the requisite intent to create a trust. As held in a thorough opinion precisely apposite here, the “fact that one person has collected for, and has in his possession, money belonging to another does not, without more, establish the relationship of trustee and cestui que trust.” Wolf v. Aero Factors Corp., 126 F.Supp. 872, 883 (S.D.N.Y.1954), aff’d, 221 F.2d 291 (2d Cir. 1955). For whatever light it casts, the setting of the tax statute, as construed in the Treasury Regulation, fails to support the trust theory; the Regulation contemplates explicitly the alternative of a “credit” by the manufacturer against the dealer’s “debit balance.”
Seeking positive support from this aspect of the Regulation, the debtors point out that the consent form drafted by CBS failed to embody such a crediting arrangement, but announced the claimant-dealer’s “understanding that such tax refunded by the Federal Government shall be refunded to the undersigned.” The quoted words do not carry the weight this argument would place upon them. The reference to “refund” in this fashion is no more effective in terms of Bankruptcy Act § 68(a) than would be a carrier’s natural reference to an obligation to “pay over” C.O.D. proceeds, In re W. & A. Bacon Co., supra, or a con signee’s description of its duty, in normal parlance, to “remit” proceeds, Half Moon Fruit & Produce Co. v. Floyd, supra, or, indeed, of the government’s own obligation to make a payment known exactly as a “refund,” Luther v. United States, supra. There was obviously no duty to make a “refund” “in specie, whatever the effect of that might have been,” In re W. & A. Bacon Co., supra, 261 F. at 110 — in short no duty of a relevant kind beyond that of an admitted debtor.
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4132309-5125 | Affirmed by unpublished PER CURIAM opinion.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Raymond T. Holloway entered a conditional guilty plea, pursuant to Fed. R.Crim.P. 11(a)(2), to possession with intent to distribute cocaine base in violation of 21 U.S.C. § 841(a)(1) (2006), and possession of a firearm in furtherance of a drug trafficking crime in violation of 18 U.S.C. § 922(g)(1) (2006). He was sentenced to 130 months of imprisonment. Holloway preserved his right to appeal the district court’s denial of his motion to suppress evidence from a traffic stop. Having reviewed the record and the parties’ arguments, we affirm.
On March 20, 2008, Richmond, Virginia Police Officer A.J. Catoggio heard loud music emanating from a Ford Expedition driving in a high-drug, high-crime area of Richmond. Officer Catoggio conducted a traffic stop for loud music. The driver, Raymond T. Holloway, rolled down his window and appeared “a little nervous.” Holloway produced a restricted license allowing him to travel to and from work. When Officer Catoggio questioned Holloway about his reasons for being in the high-crime area with a restricted license, Holloway responded that he owned an auto shop and was dropping off one of his employees.
While Officer Catoggio was talking with Holloway, two more officers arrived. After Officer Catoggio ran Holloway’s license and decided not to issue a summons, all three officers approached Holloway’s vehicle. Holloway again “appeared to get a little nervous” and “kept taking his hands, kind of putting them on his lap.” Officer Catoggio noticed that Holloway’s “breath was increasing,” raising the officer’s “sus- . picion ... a little bit more.” However, Catoggio informed Holloway that he was not going to issue a summons, returned Holloway’s license, and began to step away from the vehicle.
On further considering Holloway’s suspicious behavior, however, Officer Catoggio turned back and asked Holloway to tell him again why he was in a high-drug, high-crime area of Richmond, and whether he had anything illegal in the vehicle. Holloway responded, “There is nothing illegal'in this car.” When Officer Catoggio asked permission to search the vehicle, Holloway repeated, “There is nothing illegal in this car.” Officer Catoggio again asked to search the vehicle, and after Ca-toggio responded affirmatively to Holloway’s question about whether he was free to leave, Holloway granted permission to search the car.
Holloway stepped out of the vehicle and “immediately turned his back to the interi- or of the car door,” his arms “kind of tense to the side ... as if protecting something.” In Officer Catoggio’s experience as a police officer, the behavior seemed furtive and strange. Officer Catoggio told Holloway that he intended to pat him down. Holloway refused to be patted down and moved into the traffic lane. Officer Catog-gio grabbed Holloway’s arm and pulled him out of the roadway. When he reached the side of the road, Holloway told Officer Catoggio that he had a gun. Officer Ca-toggio handcuffed Holloway and proceeded to pat him down. A .357 caliber revolver, a baggie containing approximately thirty individually wrapped pieces of cocaine base, and $1327 in cash were recovered from Holloway.
Holloway now contends that the seizure and search of his person violated his Fourth Amendment rights. We review the factual findings underlying a district court’s ruling on a motion to suppress for clear error and the legal conclusions de novo. United States v. Neely, 564 F.3d 346, 349 (4th Cir.2009).
The district court found that Holloway consented to Officer Catoggio’s search of his vehicle. The court also found that Officer Catoggio grabbed Holloway’s arm and pulled him from the roadway for safety reasons, not as a seizure. Finally, the district court concluded that the pat-down search of Holloway was justified based on reasonable suspicion of criminal activity and for officer safety because Holloway had been acting suspiciously and admitted he possessed a firearm.
We agree with the district court’s conclusion that Officer Catoggio did not “seize” Holloway. The district court credited Officer Catoggio’s testimony that Holloway was stepping into a traffic lane and he grabbed Holloway’s arm to protect him from moving vehicles. Given this evidence, the district court did not clearly err when it determined that Holloway was not “seized” at that juncture.
Holloway’s second argument is that the pat-down search violated his Fourth Amendment rights. As a general rule, a search or seizure without probable cause is unreasonable, and thus unconstitutional. See Kyllo v. United States, 533 U.S. 27, 32, 121 S.Ct. 2038, 150 L.Ed.2d 94 (2001) (noting that searches without probable cause are “presumptively unconstitutional”). This general rule, however, is “subject to certain exceptions,” Brigham City v. Stuart, 547 U.S. 398, 403, 126 S.Ct. 1943, 164 L.Ed.2d 650 (2006), and “[w]e are to approach the Fourth Amendment ... with at least some measure of pragmatism,” Mora v. City of Gaithersburg, 519 F.3d 216, 222 (4th Cir.2008).
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3803555-9248 | OPINION
MURRAY M. SCHWARTZ, Senior District Judge.
Currently before the Court is the defendant’s motion for judgment on the pleadings. According to the complaint, the plaintiff, David G. Finch (“Finch”), was discriminated against by defendant, Hercules Incorporated (“Hercules”), because of his age. Docket Item (“D.I.”) 1. Within his complaint, Finch has alleged two counts. His first count arises under the Age Discrimination in Employment Act. 29 U.S.C. §§ 621-634 (1990 & Supp.1992). His second count, a vaguely asserted state law pendent count, is based on an alleged public policy of the State of Delaware. Defendant’s motion is directed to the second count. For the reasons which follow defendant’s motion will be granted.
I.
Because the motion was filed after the close of the pleadings, the motion is properly a motion for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure. Fed.R.Civ.P. 12(c). In the motion itself, however, the defendant has argued that the plaintiff has failed to state a claim upon which relief can be granted. While such a motion may be brought before the close of the pleadings as a Rule 12(b)(6) motion, Rule 12(h)(2) allows a party to bring “[a] defense of failure to state a claim upon which relief can be granted ... by motion for judgment on the pleadings....” Fed.R.Civ.P. 12(h)(2). Whether the motion is before the court as a 12(b)(6) motion or a 12(c) motion, “[t]he same standards will apply to the resolution ... regardless of which type of motion is used.” Miller v. Indiana Hosp., 562 F.Supp. 1259, 1266 (W.D.Pa.1983).
“[A] count of a complaint may be dismissed for failure to state a claim only if, when accepting all factual allegations as true and drawing all reasonable inferences from these facts, no relief would be granted under any set of facts that could be proved.” In re Delmarva Sec. Litig., 794 F.Supp. 1293, 1298 (D.Del.1992) (applying Rule 12(b)(6)). Compare Revis v. Slocomb, 765 F.Supp. 1212, 1213 (D.Del.1991) (applying Rule 12(c) and finding a court may not dismiss complaint unless it appears beyond doubt plaintiff can prove no set of facts entitling him to relief). In applying this standard, the burden to show a failure of the claim rests with the moving party. Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir.1980).
II.
The plaintiff recites the heart of the second count in paragraph 23 of his complaint. Paragraph 23 reads, in total, “Hercules, motivated by bad faith and malice, wrongfully discharged the Plaintiff in violation of the public policy against employment discrimination based on age, as codified in the ADEA and the Delaware Fair Employment Practices Act, 19 Del.C. §§ 710-718.” D.I. 1 at fl 23.
This paragraph could be read to state one of two claims, both of which would be governed by the substantive law of the State of Delaware. First, it could be a claim for discharge of an at-will employee in violation of public policy. Second, it could be read as alleging a common law tort claim of malicious discharge. As the Delaware Supreme Court has not directly addressed the issues presented in this motion, this Court must predict what action that court would take. “In attempting to forecast state law, [a court] must ‘consider relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data tending convincingly to show how the highest court in the state would decide the issue at hand.’ ” Nationwide Ins. Co. v. Resseguie, 980 F.2d 226, 230 (3d Cir.1992) (quoting McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 663 (3d Cir.) cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237 (1980)).
A. The At-Will Doctrine
The Delaware Supreme Court has never recognized a public policy' exception to an employer’s ability to dismiss an at-will employee. However, in Merrill v. Crothall-American, Inc., 606 A.2d 96 (Del.1992), the Delaware Supreme Court recognized that an implied covenant of good faith and fair dealing may be breached in some circumstances by termination of an at-will employee. The court there stated:
Finally, we do not rest our holding on, nor do we consider, what constitutes justification for termination of an at-will employment contract. Although the implied covenant of good faith and fair dealing may be breached by termination in some circumstances, see, e.g. Magnan [v. Anaconda Industries, Inc.] [37 Conn. Supp. 38], 429 A.2d [492] at 494 [(1980)]; Fortune [v. National Cash Register Co.] [373 Mass. 96], 364 N.E.2d [1251] at 1255-6 [1977]; Monge [v. Beebe Rubber Co.] [114 N.H. 130], 316 A.2d [549] at 551 [1974], or some other public policy implicated by such a termination, we have not addressed such concerns. This case involves a claim that the employer deceptively induced the employee to enter into an employment contract. The termination of .employment merely gave effect to the deception. The asserted bad faith is therefore more analogous to a charge of fraud in the inducement than one of wrongful discharge. Nothing said here is to be construed as limiting an employer’s freedom to terminate an at-will employment contract for its legitimate business, or even highly subjective, reasons. Such a contract is still terminable by either party for any reason not motivated by bad faith. -
Id. at 102-03. In at least two instances, however, the Delaware Superior Court has recognized exceptions, albeit not public policy exceptions.
In Heller v. Dover Warehouse Mkt, Inc., the Delaware Superior Court found a “statutory exception to the at-will employee doctrine.” Heller, 515 A.2d 178, 181 (Del.Super.Ct.1986). In Heller, the employee had been forced to undergo a polygraph test, despite a statutory prohibition of such a practice. The analysis in the case, however, did not focus on gleaning public policy from Delaware statutes. Instead, the court found an implied right of action under the statute upon which plaintiff could sue. Because this implied right allowed an at-will employee to sue for wrongful discharge, the implied right by necessity formed an exception to the at-will employee doctrine.
In a second case, Henze v. Alloy Surfaces Co., the employer had allegedly directed the plaintiff to “set prices on the government contracts in excess of that provided for in the federal regulations.” Henze, CA No. 91C-06-20, slip op. at 1, 1992 WL 51861 (Del.Super.Ct. March 16, 1992). Referring to the growing number of states which recognize a public policy exception to the at-will doctrine, the court found a valid cause of action. Id. at 4. In so doing the Superior Court effectively identified a second exception to the at-will employee doctrine.
Turning to the instant case, the State of Delaware has in place a statutory scheme governing matters related to employment discrimination. Del.Code Ann. tit 19 §§ 710-718 (1985 & Supp.1992). The administrative scheme has been accurately described by plaintiff as follows:
The FEPA parallels Title VII and the ADEA in many respects. It contains no exclusive remedy provision. Even if it did, however, Plaintiff did not seek to invoke it.
The FEPA allows claims to be filed at the Delaware Department of Labor (the “Department”). 19 Del. C. § 712(d). After a charge is filed, the Department will send the employer the Charge of Discrimination, a No Fault Settlement Invitation, a Fact Finding Conference Form, and a questionnaire. If the parties cannot negotiate a settlement, the Department will proceed with its investigation. 19 Del.C. § 712(b). The Department usually holds a fact finding conference as part of its investigation, and the parties are required to attend. After completing its investigation, if no “reasonable cause” is found to believe that the charging party’s allegations of discrimination were correct, the charge will be dismissed. If “reasonable cause” is found, the Department will attempt to reach a conciliation agreement with the employer. 19 Del.C. § 712(c).
In the event that no agreement can be reached, the Department will prepare a Complaint for a hearing before the Equal Employment Review Board. 19 Del.C. § 712(e). The parties are permitted to submit briefs up to five days before the hearing. The Board will conduct a hearing on the record in which each side may present its case. If the Board finds discrimination it will also prescribe a remedy. 19 Del. C. § 712(g).
Either party may appeal the decision of the Board to the Superior Court. The court’s only function is to determine whether there is “substantial evidence” in the record to support the Board’s findings of fact and determinations of law. 19 Del.C. § 712(k); Giles v. Family Court, 411 A.2d 599 (Del.1980). In addition, the Attorney General may file suit in the Court of Chancery when he or she has reasonable cause to believe an employer or group of employers is engaged in a pattern or practice of violation the Act. 19 Del.C. § 713.
D.I. 12, pp. 6-7.
Given that only careful incursions have thus far been made upon the employment at-will doctrine, the Court is convinced the Delaware Supreme Court would not create a common law public policy exception to the employment at-will doctrine where there is in place an elaborate statutory scheme addressing the same public policy concerns.
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12122414-25768 | MEMORANDUM OPINION AND ORDER
RANDOLPH D. MOSS, United States District Judge
Ricardo Malloy, proceeding pro se, brings -this suit against his former employer, Washington Metropolitan Area Transit Authority (“WMATA”), and his former union, Amalgamated Transit Union Local 689 (“Union”). The complaint includes allegations of conspiracy, treason, slavery, and numerology, but at its core it alleges a dispute over Malloy’s termination from WMATA and the alleged failure of his union to represent him adequately during that process. Both WMATA and the Union have moved to dismiss. As explained be low, the Court concludes that Malloy’s most substantial claims are barred by the statute of limitations and that his remaining claims are unsupported by plausible, factual allegations. The Court will, accordingly, GRANT the Defendants’ motions and dismiss the complaint.
I. BACKGROUND
For purposes of resolving Defendants’ motions to dismiss, the Court accepts the following allegations contained in the complaint as true. See, e.g., Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). Malloy 'was employed by WMATA as a train operator for fifteen years. Compl. ¶ 1. On January 5, 2013, he was operating a train that closed its doors on the arm of one of Malloy’s supervisors, Rachael Corbie. Id. ¶26. According to a report Corbie filed, which Malloy quotes in his complaint, Corbie immediately contacted Malloy, on the train’s emergency intercom, identified herself, asked that Malloy - identify himself, and asked if Malloy “realized that he held [Corbie] in the door?’’ Id. ¶27. The incident rapidly degenerated into a verbal and physical confrontation. Rather than respond to his supervisor’s question, Malloy asked Corbie whether she had heard the “chimes,” indicating that the doors were about to close. Id. When Corbie indicated that she was not given ample time to avoid the doors, Malloy “cut [her] off,” and once again asked, “did you or did you not hear the door chimes!” Id. Corbie then informed Malloy that she was taking him “out of service,” and, at the next stop, she walked down the platform and entered the “operating cab.” Id. ¶ 28. As Malloy was leaving the cab, Corbie instructed him not to leave. Id. Disregarding Corbie, Malloy left the cab, “bumping the right side of [Corbie’s] body,” and told Corbie that he was “out of service” and that she should operate the train. Id. After the train arrived at the Greenbelt Terminal, Malloy once again approached Corbie and again-asked whether she “did not hear the door announcement.” Id. ¶29. Corbie asked Mallory “to leave [her] alone.” Id. The transit police were summoned and took statements from both Malloy and Corbie. Id. ¶ 30.
Six days after this incident, WMATA superintendent Edwin Harris emailed Lisa Cooper-Lucas, who was apparently the point of contact for WMATA’s Employee Assistance Program, and asked how he “could get [Malloy] ... some type of (mental) fitness for duty evaluation.” Compl. ¶43. Harris described Malloy as “an employee who has been displaying some very erratic and irrational behavior” and recounted two incidents in the recent past. Id. ¶ 42. One was the episode with Corbie; the other occurred several weeks earlier when Malloy was also “taken out of service,” this time for “operating his train with a safety switch unsealed.” Id. ¶42. The email further explained that following the incident involving the safety switch, Malloy became irate .and began “screaming in the hallway and the office of [Harris’s] assistant and demanded a letter” addressing certain problems with Metro. Id. Harris added that “[t]hese are just two in a string of incidents with [Malloy] and each time there is [an] event, he always writes long reports describing a conspiracy theory that the Authority/Union is out to get him.” Id. ¶ 43. Finally, Harris wrote that he did not believe that Malloy could “operate a train safely.” Id.
Although the complaint does not recount Cooper-Lucas’s response, Harris told Mal-loy to report to the Employee Assistance Program for a medical exam on January 15, 2013. Compl. ¶ 44. When Malloy asked why this was necessary, Harris allegedly stated that he was “not going to argue with” Malloy and that “because of his relationship with the Freemasons,” neither “the arbitrator[-] nor the public would hear of [Malloy’s] grievance.” Id.- ¶ 44. Malloy then contacted a uiiion officer and explained that he had been instructed to undergo, a medical examination and that Harris had refused to provide any reason for this direction. Id. ¶ 45, In response, the union officer allegedly told Malloy that Harris could indeed require him to undergo a medical exam without offering an explanation. Id. Malloy then signed a form acknowledging that he. had to submit to the exam but wrote on the form that he did “not understand the purpose or the goal of this examination,” but he was complying because he had “been instructed to make the appointment o[r] lose [his] position as a train operator.” Id.
Malloy arrived for . his evaluation . the next day and began by filling out a questionnaire. Compl. ¶48. At that point, he alleges, “Dr. Thomas, whom [Malloy] had never met, led [him],to her office wearing an inappropriately tight, fuchsia, or light purple dress.” Id. Malloy then began, to record their conversation with a mini-recorder, Id. The contents' of that recording are not part of the record. Malloy alleges that Dr. Thomas explained that he had been referred to her for evaluation because of his aggressive behavior during the two incidents mentioned in Harris’s email. Id. Malloy allegés that he “answered all of Dr. Thomas’s questions” and provided “full explanations.” Id.
According to theeomplaint, WMATA exr tensively investigated the incident involving Corbie. Corbie and others submitted reports to WMATA, as did the transit police. Compl. ¶¶ 37-40, 58. Following this investigation, Malloy received a letter from Harris recounting WMATA’s findings and its conclusion that Malloy was “disrespectful, rude and threatening” in his encounter with Corbie. Id. ¶58. Based on this “deplorable” conduct, Malloy was suspended for 22 days without pay and was directed “to attend a Workplace Violence class and anger Management counseling.” Id. Malloy wa's further informed that “[a]ny future serious operational violations of the rules or policy will result in your immediate termination from WMATA.” Id. ¶ 59.
Malloy filed a grievance regarding this suspension on February 22, 2013. Compl. ¶ 66. The following day, he received a letter from Dr. Thomas explaining that she was recommending that he “seek treatment with a licensed psychologist, therapist, and/or psychiatrist” due to the “significant concerns” she had regarding “the escalation of [Malloy’s] aggressive behaviors at work.” Id. ¶ 67. The letter further informed Malloy that he would remain on medical leave “during this phase of [his] treatment” and that he would not be allowed to return to work. until (1) Dr. Thomas was provided with a letter from Malloy’s “treatment provider(s)” detailing his “diagnosis, ... treatment, prognosis [and] any [appropriate work] limitations and/or medication regimens,” and (2) Dr. Thomas approved his return to work. Id. ¶¶ 68-69. Malloy was permitted to use his “paid -time off’ during this period, and was informed that other options, including short-term disability, might be available after Malloy exhausted his paid time off. Id. ¶ 69.
Over the next several months,- there was a constant back-and-forth among Malloy, the Union, and WMATA concerning his grievances and various other issues. See, e.g., Compl. ¶¶ 70-154. In the meantime, WMATA sent Malloy a letter on June 10, 2013, reminding him that he would remain on medical leave while he obtained the treatment that Dr. Thomas recommended and that he was required to submit a letter from his “treatment provider(s)” describing his “diagnosis, • .,. treatment, and prognosis” before he could return to work. Id. ,¶¶ 167-t68. WMATA then wrote to Mal-loy again on September 5; 2013, noting that he had yet “to provide the requested information” and that, if he failed to do so by September 16, 2013, WMATA would “begin administrative action to discharge” him. Id. ¶ 168-69. Although Malloy did provide some documents to the WMATA medical office, WMATA concluded that those documents failed to comply with the request contained in Dr. Thomas’s letter. Id. ¶ 169. WMATA, accordingly, concluded that Malloy had failed to timely provide the requested medical information and fired him on that basis on September 19, 2013. Id. ¶¶ Í70-71.
Malloy filed a grievance on October 4, 2013, contesting his termination. Compl. ¶ 177. After WMATA denied that grievance, the Union agreed to arbitrate it on his behalf. Id. ¶265. The Union hired Douglas Taylor of Gromfine, Taylor, and Tyler, P.C., to represent it (and thus to advance Malloy’s interests) in the arbitration proceeding. Id. ¶¶ 276, 279. Dr. Thomas was the lone witness at the November 19, 2014, arbitration hearing. Id. ¶ 280. She testified' about her evaluation of Malloy and that she never received the verification of treatment she had directed he undergo. Id. She also appears to have offered a diagnosis of Malloy, id. ¶¶ 280, 284, although the complaint does not specify that diagnosis. At some point, it appears that Malloy revealed that he had recorded the session with Dr. Thomas and asserted that the recording would prove that her testimony was false. Id. ¶¶ 281, 283-84. It also appears—although the complaint is vague on this point—that the arbitration proceeding was scheduled to continue on a future day so that Malloy could produce the recording. Id. ¶ 284, 286-88.
Taylor emailed Malloy on December 10, 2014, to go over the status of the arbitration proceeding. Compl. ¶284. He explained that Malloy’s case came down to attacking Dr. Thomas’s diagnosis, which Malloy alleged was based on false reports about his work and a false account of what happened at his medical evaluation. Id. Taylor continued that the Union “need[ed] to use [Malloy’s recording] to prevail” in the proceeding and that the arbitrator was prepared to exclude the recording altogether because the Unión had still not produced it despite an apparent promise to do so. Id. As a result, Taylor instructed Malloy that he “must produce a copy of the tape” before the second arbitration hearing" and that if he did not, Taylor would “conclude that [he was] not cooperating” and would “recommend that the Union cease arbitrating] [the] case.” Id. ¶ 286.
Based on what appears to be a transcript that Malloy personally prepared of the second arbitration hearing and attached to his opposition to the motions to dismiss, Malloy argued at the second session of the hearing that the tape was unnecessary because he was not fired based on his diagnosis but based on his failure to provide the necessary paperwork to Dr. Thomas. See Dkt. 15 at 21-24. That hearing concluded with Malloy refusing to produce the tape and Taylor stating he would have to consult with the Union about how to proceed. Id. at 23-24. A couple of weeks later, Malloy emailed Taylor to ask if the Union had dropped his grievance from arbitration. Compl. ¶289. Taylor responded that his “advice to the local and their direction to me are confidential, privileged communications,” that he understood that Malloy was no longer a “qualified” member of the Union, and that his grievance had been dropped. Id. ¶290. In light of Malloy’s stated intention to sue the Union, Taylor also explained that his communications with Malloy were now “adversarial” and that he “must preserve the intents and confidentiality of [his] client.” Id.
Malloy then sued WMATA and Local 689. At the time he originally attempted to file suit, Malloy sought leave to proceed without paying the filing fee—known- as proceeding in forma pauperis. See Case No. 15-mc-1112, Dkt. 1-1. That application, which was dated July 19, 2015, id. at 2, was denied by Judge Jackson on August 21, 2015. See Case No. 15-mc-1112, Dkt. 1. Malloy paid the filing fee on September 15, 2015, and his original complaint was docketed at that time. See id. After the Union moved to dismiss, see Dkt. 2 (Case No. 15-cv-1499), Malloy filed an amended complaint, see Dkt. 3. WMATA filed a motion to dismiss two days later, see Dkt. 6,'but that motion was in response to the original complaint, which had been superseded by that time. Both WMATA and the Unión have now moved to dismiss the amended complaint. See Dkts.- 8, 9.
Malloy’s complaint is 79 pages and 301 paragraphs long. It -contains 'multiple accounts of the incidents in this case, including what appears to be language taken verbatim from various documents submitted as part of the grievance and arbitration processes. Many of the allegations in the complaint, for example, use the first person but are from the perspective of someone other than Málloy. The complaint also contains a great deal of material that does not bear a clear connection to Mal-loy’s suspension, termination, or grievance, including references to numerology, the Masons, the Illuminati, conspiracies, treason, and slavery. Compl. ¶¶ 24-25.
Omitting repetition, the complaint asserts ten counts. The first is against WMATA for breach of the collective bargaining agreement between the Union and WMATA. Compl. at 75. The second is against Local 689 for breach of the duty of fair representation, taking issue with how the Union represented him in the arbitration process. Id. These same claims are then repeated as counts eight and nine, respectively. Id. at 76. Other counts allege “police misconduct,” wire and mail fraud, due process violations, intentional infliction of emotional distress, defamation, and mental health malpractice. Id. at 75-77.
Before the Court now are Defendants’ motions to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). Malloy responded to those motions with a “motion to deny” them, Dkt. 15, which the Court will construe as his opposition. He has also filed a motion to disqualify the Union as opposing counsel. See Dkt. 13.
II. STANDARD OF REVIEW
A party moving to dismiss a complaint under Rule 12(b)(6) bears the burden of showing that the complaint “fail[s] to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6); see also Cohen v. Bd. of Trs. of Univ. of D.C., No. 15-7005, 819 F.3d 476, 2016 WL 1612810 (D.C.Cir.2016). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ 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.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citation omitted)). The Court need not accept as true any legal conclusions disguised as factual allegations, “‘naked assertions’ devoid of ‘further factual development,’ ” or a “ ‘formulaic recitation of the elements of a cause of action.’ ” Id. (quoting Twombly, 550 U.S. at 555, 557, 127 S.Ct. 1955). The plaintiff, however, is entitled to “the benefit of all inferences that can be derived from the facts alleged.” See Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C.Cir.2011).
III. DISCUSSION
A. Breach of Collective Bargaining Agreement and Duty of Fair Representation Claims
Malloy’s first two claims are closely related. The first count alleges that WMATA breached the collective bargaining agreement it had with the Union by suspending and eventually firing him “without cause,” and the second count alleges that the Union breached its duty of fair representation stemming from the arbitration process. Compl. at 75-76.
The Supreme Court addressed claims of this type in DelCostello v. Int’l Bhd. of Teamsters, 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983). There, the Court ■ explained that in the ordinary course a union member who wants to sue his union or his employer must exhaust “any grievance or arbitration remedies provided in the collective bargaining agreement.” Id. at 163, 103 S.Ct. 2281. The employee is then typically “bound by the result according to the finality provisions of the agreement”- and entitled to only “very limited” judicial review.- Id. at 164, 103 S.Ct. 2281. Review is available, however, “when the union representing the employee in the grievance/arbitration procedure acts in such a discriminatory, dishonest, arbitrary, or perfunctory fashion as to breach its duty of fair representation.” Id. In those circumstances, the employee “may bring suit against both the employer and the union, notwithstanding the outcome or finality of the grievance or arbitration proceeding.” Id. Claims of this type, which are known as a “hybrid § 301/ fair representation claims,” thus involve two distinct causes of action—one against the employer under § 301 of the Labor Management Relations Act, the other against the union for breach of the duty of fair representation, which is implied under the .National Labor Relations Act. Id. But “the two [claims] are inextricably related,” because.“to prevail against .either” defendant, the employee “must not only show that [his] discharge was contrary to the contract but must also carry the burden of demonstrating a breach of duty by the Union.” Id. at 165, 103 S.Ct. 2281 (internal quotation marks omitted).
In addition to describing the requirements for alleging hybrid claims, like those alleged, here, DelCostello also addressed the statute of limitations applicable to such claims. While stressing that it was not abandoning its “prior practice [of] borrow*-ing limitations periods for federal causes of action”- from analogous state-law provisions, the Court concluded that the six-month statute of limitations “for making charges of unfair labor practices to the NLRB” provided “a closer analogy than available in state statutes.” Id. at 169,171-72, 103 S.Ct. 2281. The Court, accordingly, adopted from the National Labor Relations Act a six-month statute of limitations for hybrid § 301/fair representation claims. Id. at 172,103 S.Ct. 2281. It is thus clear that Malloy had six months to bring a suit on his hybrid claims.
What is less clear is when that clock began to run. Had Malloy received a final determination from the arbitrator, his time to bring suit would have run from that adverse decision.. See DelCostello, 462 U.S. at 172, 103 S.Ct. 2281. Here, however, his grievance never made it that far because the Union concluded that it could not proceed without the tape recording of Dr. Thomas’s evaluation, which Malloy declined to provide. Like an adverse decision, the Union’s decision to drop Malloy’s grievance effectively ended his bid for administrative relief and triggered the time to bring suit. The relevant question, then, is when Malloy “knew or should have known,” Emory v. United Air Lines, Inc., 720 F.3d 915, 930 n. 29 (D.C.Cir.2013), that his grievance-had been withdrawn.
According to the Union, the grievance was withdrawn on January 6, 2015. See Dkt. 2-1 at 3. The complaint, however, alleges that Malloy was not informed of this fact until January 20, 2015, when he emailed Taylor to ask whether the Union had made a decision whether to “pull” the grievance, and Taylor responded that the grievance “has been dropped.” Compl. ¶¶ 289-90. Taking the allegations of the complaint as true, and assuming that Mal-loy’s original complaint was filed on the day that it is dated, see Malloy v. WMA-TA, 15-mc-1112 (complaint dated July 19, 2015), Malloy would have met the statute of limitations—if only by a day. The problem he faces, however, is that his original complaint was not filed-because, in lieu of paying- the filing fee, he 'moved to proceed in forma pauperis, and that motion was denied on the ground that he earned in excess of $41,000 a year and reported no debt or. inordinate expenses. See id. at Dkt. 1. Although the Court did not deny Malloy’s in forma pauperis motion until August 21, 2015, moreover, Malloy then waited until September 15, 2015, to refile his complaint with the required fee. By that time, he was well beyond -the six-month statute of limitations.
This does not end the inquiry, however, because the statute of limitations does not pose a jurisdictional hurdle, and it is thus subject to equitable- doctrines, irt-cluding tolling. See Norman v. United States, 467 F.3d 773, 775 (D.C.Cir.2006); see also Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 395 n. 11, 102 S.Ct. 1127, 71 L.Ed.2d 234 (1982); cf. Arbaugh v. Y&H Corp., 546 U.S. 500, 516, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (holding that a statute is not jurisdictional unless the “Legislature clearly -states” so). The lone equitable consideration that Malloy raises is a contention that the Union never gave him “actual notice of the status of his grievance.” Dkt. 15 at 5. But Malloy’s complaint alleges that Taylor emailed him on January 20, 2015, and, told him, among other things, that his “grievance has been dropped.” Compl; ¶290, The Union has also provided a copy of this email, see Dkt. 2-5, which the Court may consider because Malloy’s complaint incorporated it by reference, see EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C.Cir. 1997). As a result, the Court cannot credit Malloy’s argument that he did not receive notice of the withdrawal of his grievance and must conclude that he “either knew or should have known,” Emory, 720 F.3d at 930 n. 29, that the time to file his claim began no later than January 20, 2015.
Although Malloy has not asserted any other basis for seeking to toll the statute of limitations, see Dkt. 15, the Court deems it appropriate—particularly in light of Malloy’s pro se status—to consider how his initial efforts to file a timely complaint bear on the statute of limitations defense. In particular, courts often toll statutes of limitations during the period of time an application for leave to proceed in forma pauperis is pending. See, e.g., Johnson v. Interstate Mgmt. Co., 871 F.Supp.2d 1, 4 (D.D.C.2012); Kone v. District of Columbia, 808 F.Supp.2d 80, 83 (D.D.C.2011). Some decisions, moreover, go a step further and accord applicants an additional grace period to ensure that they have received actual notice of the denial of their applications. As Chief Judge Howell explained in Nkengfack v. Am. Ass’n of Retired Persons, 818 F.Supp.2d 178, 182 (D.D.C.2011), “the weight of authority supports tolling the statute of limitations not only for the pendency of an [in forma pauperis] application, but also for a reasonable period thereafter to account for receipt of notice of the court’s decision.” Id. at 183. Based on that precedent and on notions of “basic fairness,” Chief Judge Howell concluded that the statute of limitations at issue in that case should be tolled for “an additional five-day presumptive notice period to account for notice of the Court’s ruling on the plaintiffs [in forma pauperis] application.” Id. at 184.
Even granting Malloy all of these allowances, his complaint is still untimely. At best, he filed his in forma pauperis application with just one day left on the statute of limitations. After the Court denied that application, another twenty-five days passed before Malloy actually filed his complaint with the required fee. Because Malloy has failed to offer any justification for this significant delay—which was far longer than necessary to ensure that he received notice of the Court’s denial of his in forma pauperis application— and because the Court can discern none, Defendants’ motions to dismiss Malloy’s claims for breach of the collective bargaining agreement and the duty of fair representation are GRANTED.
B. Remaining Claims
The remaining claims in Malloy’s complaint fail as well. He alleges claims for “police misconduct,” wire fraud, mail fraud, extortion and violations of his right to due process. See Compl. at 75. As an initial matter, the Court notes that it is unclear whether these claims were included by error. The first four of these claims include no substantive allegations but merely cross-reference other allegations in the complaint, none of which bears a discernible relationship to the alleged torts. Id. And the last of these claims is followed by allegations, including a fragment of a sentence, that have nothing to do with due process and appear to have been misplaced under that count. Id. at 75-76. In addition, after reciting these claims, the complaint repeats the first two counts and labels the last five counts as counts “one” to “five.” Id. at 76. But even assuming that Malloy intends to allege claims- for police misconduct, wire and mail fraud, extortion, and violations of his right to due process, the complaint fails “to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955. Stripped of “labels and conclusions,” each of these counts lack's any factual allegations that would permit “the [C]ourt to draw the reasonable inference that the defendants] [are] liable for the misconduct alleged.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. To the contrary, the Court cannot even discern the legal theory upon which Malloy seeks to proceed with respect to these claims.
Malloy also alleges claims against WMA-TA for intentional infliction of emotional distress, defamation and mental health malpractice. Compl. at 76-77. In response, WMATA argues that it is immune from suit under Section 80 of the' WMATA Compact. See Dkt. 9 at 10. The Court agrees.
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1743260-27599 | GARWOOD, Circuit Judge:
Javier Orozco-Ramirez (Orozco-Ra-mirez), currently confined in a federal correctional institute in El Reno, Oklahoma, filed this federal habeas corpus motion in the United States District Court for the Northern District of Texas pursuant to 28 U.S.C. § 2255. The district court dismissed his motion as “second or successive” under the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA). Orozco-Ramirez appeals. We affirm in part and reverse in part.
Facts and Proceedings Below
On December 16, 1992, Orozco-Ramirez pleaded guilty to distribution of heroin and conspiracy to distribute heroin in the United States District Court for the Northern District of Texas. On April 14, 1993, he was sentenced to 180 months’ imprisonment and a four-year term of supervised release. No notice of appeal was filed.
On January 30, 1995, Orozco-Ramirez filed a federal habeas corpus motion pursuant to section 2255 as to his 1993 conviction and sentence. In that motion, Or-ozco-Ramirez asserted only one ground for relief: that he received ineffective assistance of counsel in that his attorney did not file a notice of appeal despite having been asked to do so. Following an eviden-tiary hearing, the magistrate court recommended that Orozco-Ramirez be allowed an out-of-time appeal. The district court adopted this recommendation and on January 22, 1996, ordered an out-of-time appeal. Pursuant to that order, on January 24, 1996, Orozco-Ramirez filed his notice of appeal from the 1993 conviction and sentence. Represented by new counsel, Orozco-Ramirez raised on that direct appeal two issues relating to the quantity of drugs forming the basis of his 1993 sentence. This Court affirmed Orozco-Ra-mirez’s sentence in an unpublished opinion. United States v. Orozco-Ramirez, 101 F.3d 701, No. 96-10120 (5th Cir. Oct. 25, 1996).
On November 3, 1997, Orozco-Ramirez, proceeding pro se and in forma pauperis, filed the instant section 2255 motion to vacate his 1993 conviction and sentence, asserting numerous errors including ineffective assistance of counsel at his sentencing, ineffective assistance of counsel rendering his guilty plea involuntary, and ineffective assistance of counsel in the course of his out-of-time direct appeal. The magistrate court recommended that Orozco-Ramirez’s motion be unfiled, because it was “second or successive” and was tendered without authorization from a court of appeals. Adopting the findings and recommendation of the magistrate court, the district court ordered that Or-ozco-Ramirez’s section 2255 motion not be filed. Orozco-Ramirez filed a timely notice of appeal, and this Court granted a certificate of appealability (COA) permitting Orozco-Ramirez’s appeal. We now affirm in part and reverse in part.
Discussion
Enacted on April 24, 1996, AED-PA made it significantly harder for prisoners filing second or successive federal habeas corpus motions to obtain hearings on the merits of their claims. See Graham v. Johnson, 168 F.3d 762, 772 (5th Cir.1999), cert. denied, — U.S. -, 120 S.Ct. 1830, — L.Ed.2d-(2000). As amended by AEDPA, section 2255 provides in relevant part as follows:
“A second or successive motion must be certified as provided in section 2244 by a panel of the appropriate court of appeals to contain—
(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 fact-finder 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.” 28 U.S.C. § 2255.
As amended by AEDPA, section 2244 reads in pertinent part as follows:
“(b)(1) A claim presented in a second or successive habeas corpus application under section 2254 that was presented in a prior application shall be dismissed.
(2) A claim presented in a second or successive habeas corpus application under section 2254 that was not presented in a prior application shall be dismissed unless—
(A) the applicant shows that the claim relies on a new rule of constitutional law, made retroactive to cases on collateral review by the Supreme Court, that was previously unavailable; or
(B)(i) the factual predicate for the claim could not have been discovered previously through the exercise of due diligence; and
(ii) the facts underlying the claim, if proven and viewed in fight of the evidence as a whole, would be sufficient to establish by clear and convincing evidence that, but for constitutional error, no reasonable factfinder would have found the applicant guilty of the underlying offense.
(3)(A) Before a second or successive application permitted by this section is filed in the district court, the applicant shall move in the appropriate court of appeals for an order authorizing the district court to consider the application.
(B) A motion in the court of appeals for an order authorizing the district court to consider a second or successive application shall be determined by a three-judge panel of the court of appeals.
(C) The court of appeals may authorize the filing of a second or successive application only if it determines that the application makes a prima facie showing that the application satisfies the requirements of this subsection.
(D) The court of appeals shall grant or deny the authorization to file a second or successive application not later than 30 days after the fifing of the motion.
(E) The grant or denial of an authorization by a court of appeals to file a second or successive application shall not be appealable and shall not be the subject of a petition for rehearing or for a writ of certiorari.
(4)A district court shall dismiss any claim presented in a second or successive application that the court of appeals has authorized to be filed unless the applicant shows that the claim satisfies the requirements of this section.” 28 U.S.C. § 2244(b).
Orozco-Ramirez does not seek certification of his 1997 section 2255 motion by this Court. Rather, he asserts that his 1997 motion is not subject to AEDPA, and, even if it is, the motion is not “second or successive.” We review de novo whether AED-PA applies to Orozco-Ramirez’s current habeas motion and whether his motion is “second or successive” under AEDPA. See Graham, 168 F.3d at 772.
A. Impermissible Retroactivity of AEDPA
Orozco-Ramirez first contends that the district court erred in applying AED-PA’s more stringent standards to his motion. Orozco-Ramirez argues that because his only prior habeas motion was filed before April 24,1996 (AEDPA’s enactment date) it would be impermissible to apply AEDPA’s restrictions on “second or sue- cessive” applications to his present post-AEDPA. motion. We disagree.
In Graham, we stated that Congress intended for AEDPA to govern applications filed after April 24, 1996. See id. at 782. Several circuits agree with our conclusion. See Trice v. Ward, 196 F.3d 1151, 1158 (10th Cir.1999) (“We have repeatedly held that the ‘AEDPA applies to cases filed after its effective date, regardless of when state court proceedings occurred.’ ”) (quoting Moore v. Gibson, 195 F.3d 1152, 1162 (10th Cir.1999)); Taylor v. Lee, 186 F.3d 557, 559-60 (4th Cir.1999) (“[A]ny federal petition for a writ of habeas corpus filed after the signing of the AEDPA on April 24, 1996 is governed by the AEDPA.”), cert. denied, — U.S.-, 120 S.Ct. 1262, 146 L.Ed.2d 117 (2000); Mancuso v. Herbert, 166 F.3d 97, 101 (2d Cir.), cert. denied, 527 U.S. 1026, 119 S.Ct. 2376, 144 L.Ed.2d 779 (1999) (‘We conclude that the AEDPA applies to a habeas petition filed after the AEDPA’s effective date, regardless of when the petitioner filed his or her initial habeas petition.... [T]his holding comports both with the statute’s plain meaning and with congressional intent.”) (footnote omitted); Pratt v. United States, 129 F.3d 54, 58 (1st Cir.1997), cert. denied, 523 U.S. 1123, 118 S.Ct. 1807, 140 L.Ed.2d 945 (1998) (applying AEDPA to Pratt’s second section 2255 motion filed in 1997 after an initial habeas motion was filed in 1995). Orozco-Ramirez filed his current 2255 motion on November 3, 1997. Therefore, AEDPA applies.
B. “Second or Successive” under AED-PA
Orozco-Ramirez next contends that the district court erred in finding his present motion “second or successive” under AEDPA. As the Supreme Court noted in Lindh, AEDPA is unclear in a number of important respects, including what “constitutes a ‘second or successive’ application.” In re Cain, 137 F.3d 234, 235 (5th Cir.1998) (per curiam); see also Pratt, 129 F.3d at 60 (“AEDPA does not define the mantra ‘second or successive.’ ”). Whether a habeas motion, filed after an initial habeas motion that alleged only ineffective assistance of counsel by failing to file notice of appeal as requested and resulted only in an out-of-time appeal, is “second or successive” under AEDPA presents a question of first impression in this Court. Those of our sister circuits that have considered the issue have not reached a uniform conclusion. Compare In re Goddard, 170 F.3d 435 (4th Cir.1999), Shepeck v. United States, 150 F.3d 800 (7th Cir.1998) (per curiam), and United States v. Scott, 124 F.3d 1328 (10th Cir.1997) (per cu-riam ) (all holding a second habeas motion, filed after an initial motion upon which an out-of-time appeal was granted,.was not “second or successive” under AEDPA), with Pratt v. United States, 129 F.3d 54 (1st Cir.1997) (ruling that AEDPA barred Pratt’s second habeas motion as “second or successive” where it was filed after an initial motion which sought only an out-of-time appeal), cert. denied, 523 U.S. 1123, 118 S.Ct. 1807, 140 L.Ed.2d 945 (1998). We now weigh in on this issue.
As noted above, AEDPA does not define “second or successive.” We have, however, held that “a prisoner’s application is not second or successive simply because it follows an earlier federal petition.” In re Cain, 137 F.3d at 235. Rather, a subsequent motion is ‘ second or successive” when it: “1) raises a claim challenging the petitioner’s conviction or sentence that was or could have been raised in an earlier petition; or 2) otherwise constitutes an abuse of the writ.” Id. We find these standards consistent with the Supreme Court’s views as expressed in Stewart v. Martinez-Villareal, 523 U.S. 637, 118 S.Ct. 1618, 140 L.Ed.2d 849 (1998), and Slack v. McDaniel, — U.S. -, 120 S.Ct. 1595, — L.Ed.2d -(2000).
In Stewart, the Court held that a motion is not “second or successive” under AED-PA merely because it is numerically a second (or subsequent) motion. See id. at 1621-22. Martinez-Villareal filed a federal habeas petition, raising several claims including a Ford claim. See id. at 1620. The Ford claim was dismissed without prejudice as premature, because an execution date had not yet been set. See id. After his other grounds for habeas relief were adjudicated and denied, Martinez-Villareal later refiled the Ford claim. See id. The Court held the refiled motion was not “second or successive” under AEDPA, because “[t]o hold otherwise would mean the dismissal of a first habeas petition for technical procedural reasons would bar the prisoner from ever obtaining federal habe-as review.” Id. at 1622. The Court noted that AEDPA’s “ ‘restrictions on successive petitions constitute a modified res judicata rule, a restraint on what used to be called in habeas corpus practice “abuse of the writ.” ’ ” Id. (quoting Felker v. Turpin, 518 U.S. 651, 116 S.Ct. 2333, 2340, 135 L.Ed.2d 827 (1996)). See also United States v. Barrett, 178 F.3d 34, 44 (1st Cir.1999), cert. denied, — U.S.-, 120 S.Ct. 1208, 145 L.Ed.2d 1110 (2000) (“The core of AEDPA restrictions on second or successive § 2255 petitions is related to the longstanding judicial and statutory restrictions embodied in the form of res judi-cata known as the ‘abuse of the writ’ doctrine.”). Because Martinez-Villareal’s Ford claim was not ripe for disposition until his most recent motion was filed, the Court ruled that the claim “would not be barred under any form of res judicata” and, therefore, was not “second or successive” under AEDPA. Id.
In Slack, the petitioner, Slack, after his 1990 state conviction had been affirmed on direct appeal, filed his first federal habeas in 1991 raising various claims including some not previously presented to any state court. He filed a motion seeking to hold his federal petition in abeyance while he returned to state court to exhaust those claims. Thereafter, the district court dismissed the entire habeas petition “without prejudice” for failure to exhaust state remedies. After an unsuccessful round of state postconviction proceedings, Slack in May 1995 filed his second federal habeas, which included some claims Slack had not raised in his 1991 federal habeas. The state filed a motion to dismiss, in response to which the district court in March 1998 dismissed with prejudice as an abuse of the writ all claims not included in the 1991 petition, and dismissed (presumably, without prejudice) the remaining claims, which had been included in the 1991 petition, because state remedies had not been exhausted as to one of them. The Supreme Court ultimately held that the district court erred in dismissing as an abuse of the writ so much of Slack’s second federal habeas as included claims not raised in his first federal habeas. In so holding the Court relied on Rose v. Lundy, 455 U.S. 509, 102 S.Ct. 1198, 71 L.Ed.2d 379 (1982), observing that “Rose v. Lundy held that a federal district court must dismiss habeas corpus petitions containing both exhausted and unexhausted claims. The opinion, however, contemplated that the prisoner could return to federal court after the requisite exhaustion.” Slack, 120 S.Ct. at 1605 (emphasis added). Slack also relied on the statement in Stewart that “ ‘[n]one of our cases ... have ever suggested that a prisoner whose habeas petition was dismissed for failure to exhaust state remedies, and who then did exhaust those remedies and returned to federal court, was by such action filing a successive petition. A court where such a petition was filed could adjudicate these claims under the same standard as would govern those made in any other first petition.’ ” Slack, 120 S.Ct. at 1605, quoting Stewart, 118 S.Ct. at 1622. The Slack Court then stated its holding as follows: “A petition filed after a mixed petition has been dismissed under Rose v. Lundy before the district court adjudicated any claims is to be treated as ‘any other first petition’ and is not a second or successive petition.” Id. (emphasis added). Slack goes on to reiterate that “Rose v. Lundy dictated that, whatever particular claims the [first] petition contained, none could be considered by the federal court” and that “[no] claim made in Slack’s 1991 petition was adjudicated during the three months it was pending in federal court.” Id., 120 S.Ct. at 1606 (emphasis added).
Here, in contrast to Stewart and Slack, there is nothing about or related to any of the claims raised in Orozco-Ramirez’s 1997 habeas, except his claim respecting ineffective assistance of counsel on his out-of-time appeal, which prevented Orozco-Ramirez from properly alleging those claims in his 1995 habeas along with his claim that counsel was ineffective for failing to give notice of appeal as requested; nor did the presence in the 1995 habeas of a claim that counsel was ineffective for failure to give notice of appeal in any way dictate or require that the 1995 habeas, had it also contained the claims later included in the 1997 habeas (other than that related to ineffective assistance of counsel during the out-of-time appeal), be dismissed without any merits determination merely because of the presence therein of the former claim or any one or more of the latter claims. Further, in contrast to Slack, the 1995 habeas was adjudicated on the merits as to the only claim alleged therein.
Orozco-Ramirez presents, in essence, two types of claims in his 1997 habeas: (1) ineffective assistance of trial counsel, and (2) ineffective assistance of counsel during the out-of-time appeal. We consider each claim independently in deciding whether it is “second or successive” under AEDPA. The facts underlying Orozco-Ramirez’s claims relating to his counsel’s performance at trial occurred before he filed his initial habeas motion in 1995; he could have alleged those claims in that 1995 motion, but failed to do so. OrozcoRamirez does not argue to the contrary; instead, he contends only that his initial 1995 motion does not render the present 1997 motion “second or successive.” Therefore, we conclude that Orozco-Ra-mirez’s claims of ineffective assistance of counsel at trial were available to him and could have been asserted by him in his initial habeas motion. See In re Cain, 137 F.3d at 235. Accordingly, they are “second or successive” under AEDPA, and the district court properly dismissed them.
We next turn to Orozco-Ramirez’s claim of ineffective assistance of counsel during the out-of-time appeal. The facts underlying this claim did not occur until after Orozco-Ramirez filed his initial habeas motion and the district court granted the relief requested in the motion. Therefore, his claim relating to his counsel’s performance during his out-of-time appeal accrued after his initial habeas motion was adjudicated and could not have been raised in that motion. See id.; see also Shepeck, 150 F.3d at 801 (“[I]f Shepeck’s appellate lawyer furnished ineffective assistance of counsel, that constitutional violation occurred after the grant of his first petition under § 2255” which sought only to permit an out-of-time appeal.); Scott, 124 F.3d at 1330 (“Mr. Scott’s ineffective assistance of appellate counsel claim did not even exist until the direct appeal process concluded.”). We conclude then that this claim is not “second or successive” under AEDPA, because “[t]o hold otherwise ... would bar the prisoner from ever obtaining federal habeas review” on this ground. Stewart, 118 S.Ct. at 1622. Accordingly, we reverse the district court’s dismissal of OrozcoRamirez’s claim of ineffective assistance of counsel during the out-of-time appeal and remand that claim for consideration on its merits.
As Orozco-Ramirez points out, and the government concedes, the Fourth Circuit’s decision in In re Goddard, 170 F.3d 435 (4th Cir.1999) is almost directly on point with this case. The Fourth Circuit would hold that none of Orozco-Ramirez’s claims are barred by AEDPA’s restrictions on “second or successive” motions. See id. (“Because Goddard used his first § 2255 motion solely to reinstate his right to direct appeal, that motion does not count against him.”). We respectfully disagree with that holding.
In reaching its conclusion that God'dard’s later motion was not “second or successive” under AEDPA, the Fourth Circuit reasoned that “[t]he only purpose of the reentered judgment, prompted by the first § 2255 motion, was to put [Goddard] back in the position he would have been in had his lawyer filed a timely notice of appeal.” Id. at 437. To deny him another 2255 motion would deprive him of “one full and fair opportunity to wage a collateral attack” on his conviction and sentence. Id.
Instead of applying res judicata principles as dictated by the Supreme Court in Stewart, the Fourth Circuit in Goddard focused on what it perceived to be the unfairness in requiring a prisoner in Goddard’s (and Orozco-Ramirez’s) position to present all claims that could be asserted in an initial habeas motion, including a claim that he has been deprived of a direct appeal by ineffective assistance of counsel. The First Circuit and Judge Wilkins’s dissent in Goddard contest the notion that a prisoner suffers unfairness from a requirement that he present all collateral claims in an initial 2255 motion. See In re Goddard, 170 F.3d 435, 441 (4th Cir.1999) (Wilkins, J., dissenting) (“[A] § 2255 mov-ant suffers no. unfairness from a requirement that he pursue all of his collateral issues in his first § 2255 motion, including a claim that he has been deprived of a direct appeal by ineffective assistance of counsel.”); Pratt, 129 F.3d at 61 (“We discern no unfairness in holding Pratt to this regimen.”). As both opinions explain, a prisoner in Orozco-Ramirez’s position is always properly motivated to present all his collateral attacks in his initial motion, because when filing the motion he cannot know whether or not his claim seeking an out-of-time appeal will be successful. See id. If such a claim is not successful, then a subsequent motion would be “second or successive”; and all grounds for habeas relief that could have been asserted in the initial motion would be dismissed in the subsequent motion. Under the majority’s view in In re Goddard, whether a subsequent motion would be “second or successive” would depend upon the success of the motion to permit an out-of-time appeal. We find the First Circuit’s approach in Pratt follows our precedent as set forth in In re Cain and the standards set forth by the Supreme Court in Felker and Stewart.
“The requirement that all available claims be presented in a prisoner’s first habeas petition is consistent not only with the spirit of AEDPA’s restrictions on second and successive habeas petitions, but also with the preexisting abuse of the writ principle. The requirement serves the singularly salutary purpose of forcing federal habeas petitioners to think through all potential post-conviction claims and to consolidate them for a unitary presentation to the district court.” Id. (emphasis added). Pratt, 129 F.3d at 61.
Applying res judicata principles to this appeal, we hold that Orozco-Ramirez’s claims regarding his trial counsel were available to him when he filed his initial habeas motion and are, therefore, “second or successive” under AEDPA. His claim of ineffective assistance of counsel during the out-of-time appeal, however, could not have been raised in the prior proceeding and, thus, is not “second or successive.”
Conclusion
We reverse the dismissal of Orozco-Ra-mirez’s claim for collateral relief based on alleged ineffective assistance of counsel during the out-of-time appeal and remand that claim for consideration on its merits. We affirm the dismissal of all other claims raised by Orozco-Ramirez. AFFIRMED in part; REVERSED and REMANDED in part.
. This Court issued its mandate affirming Or-ozco-Ramirez's conviction and sentence on November 20, 1996. Therefore, his November 3, 1997 § 2255 motion was timely under AEDPA. See 28 U.S.C. § 2255 ("A 1-year period of limitation shall apply to a motion under this section.”).
. In his motion, Orozco-Ramirez raised the following allegations: (1) ineffective assistance by trial counsel in failing to litigate a Fourth Amendment claim; (2) ineffective assistance of trial counsel in failing to advise him properly about the drug quantity and its sentencing implications, rendering his guilty plea involuntary; (3) ineffective assistance of trial counsel in not properly objecting to the quantity of drugs for sentencing purposes; (4) ineffective assistance of trial counsel in not objecting to the district court’s alleged failure to make a specific finding as to Orozco-Ramirez’s ability and intent to distribute additional quantities of heroin; (5) ineffective assistance of trial counsel in not objecting to consideration of Orozco-Ramirez's wife’s testimony (apparently at another trial) as privileged; (6) ineffective assistance of trial counsel in not objecting to an adjustment for Orozco-Ra-mirez’s role in the conspiracy; (7) ineffective assistance of trial counsel in not objecting to the district court’s attributing to Orozco-Ramirez two criminal history points for a federal case where he was not represented by counsel; (8) ineffective assistance of trial counsel in not enforcing his right to allocution at sentencing; and (9) ineffective assistance of appellate counsel by not raising on the out-of-time appeal the sentencing court’s failure to state its reasons for imposing a sentence in the middle of the guideline range found applicable.
. The COA authorized appeal only as to whether "the district court erred in treating [Orozco-Ramirez’s] § 2255 motion as successive under AEDPA.”
. AEDPA contains two nearly identical provisions. Section 105(2) amends 28 U.S.C. § 2255, which governs collateral attacks of federal court convictions or sentences and is the provision at issue in this appeal. Section 101 amends 28 U.S.C. § 2244, which relates to attacks on state court convictions or sentences under 28 U.S.C. § 2254. "Because of the similarity of the actions under sections 2254 and 2255, they have traditionally been read in pari materia where the context does not indicate that would be improper.” United States v. Flores, 135 F.3d 1000, 1002 n. 7 (5th Cir.1998), cert. denied, 525 U.S. 1091, 119 S.Ct. 846, 142 L.Ed.2d 700 (1999). Therefore, although the application of "second or successive” in section 2255 is in question in the case sub judice, we will refer to cases involving section 2254 as relevant to our analysis. Similarly, we "do not adhere to the linguistic 'motion/petition’ distinction in referring to the filing that a prisoner makes to begin proceedings under sections 2255 and 2254 (technically, a pleading filed under section 2255 is referred to as a ‘motion,’ while one filed under section 2254 is a petition’).” Id.
. This view, however, is not universal. See United States v. Roberson, 194 F.3d 408, 412 (3d Cir.1999) ("Congress did not provide unambiguous evidence of its intent to apply AEDPA's chapter 153 amendments to cases in which a prisoner filed his first § 2255 or § 2254 motion prior to AEDPA's effective date.”); United States v. Ortiz, 136 F.3d 161, 165 (D.C.Cir.1998) ("Congress did not expressly indicate whether the AEDPA amendments to the procedures and standards for filing second § 2255 motions are to be applied in cases where the first § 2255 motion was filed before the enactment of AEDPA.”); In re Hanserd, 123 F.3d 922, 924 (6th Cir.1997) (finding no clear congressional intent as to whether AEDPA’s restrictions on multiple motions applied to Hanserd’s second motion, when his first was filed pre-AEDPA). Nevertheless, even if we were to conclude that Congress’s intent was not clear, we would still find that AEDPA is not impermissi-bly retroactive as applied to Orozco-Ramirez. As in Graham, we conclude that Orozco-Ra-mirez could not show that he might have reasonably relied on pre-AEDPA law in filing his previous habeas motion. See Graham, 168 F.3d at 786. Orozco-Ramirez has not alleged detrimental reliance on pre-AEDPA law when he filed his initial motion in 1995, and he cannot reasonably contend that he would have acted differently had he known AEDPA later would bar his claims. Even under pre-AEDPA law, a prisoner was required to present all the claims he could assert in his first application. See McCleskey v. Zant, 499 U.S. 467, 111 S.Ct. 1454, 1470-71, 113 L.Ed.2d 517 (1989) (holding that a prisoner seeking to bring a new claim in a second or successive motion must show either that the motion was not an "abuse of the writ” or that he had made a "colorable showing of factual innocence”). Because Orozco-Ra-mirez defied pre-AEDPA law by not asserting discoverable claims in his first habeas motion, see section B, infra, a retroactive application of AEDPA rendering his present motion “second or successive” would not be impermissible.
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4280776-10931 | LEVET, District Judge.
Both plaintiffs and defendant have moved for summary judgment. The action is brought to recover alleged over-payments of income taxes which plaintiffs contend were erroneously and illegally assessed and collected for the calendar years 1946 to 1951 inclusive. The issues involve the receipt of money by plaintiff Doris B. Harte. Income tax returns were made on payments received by Doris B. Harte for the years in question, separate returns having been made by her for the years 1946 and 1947 and joint returns having been filed for the years 1948, 1949, 1950 and 1951. The facts, many of which have been stipulated, are as follows:
1. Samuel M. Braunstein, a resident of Atlantic City, New Jersey, died on November 14, 1928, leaving an estate then valued at $3,000,000.
2. Decedent's only living descendant was his grandchild Doris Adele Braunstein, now the plaintiff Doris B. Harte. At the time of decedent’s death, Doris B. Harte was about 13 years of age. She and decedent’s wife were his only surviving heirs and next of kin.
3. Had Samuel M. Braunstein died intestate, Doris B. Harte would have inherited all of his real property, subject to his widow’s dower rights therein, and she would also have inherited two-thirds of his personal property.
4. Under the will of the said decedent, plaintiff, Doris B. Harte, was the beneficiary only to the extent of a trust fund of $5,000, from which she was to receive income until the age of 40, when she was to acquire one-half of the fund, and thereafter she was to receive income until the age of 50, when the balance of the fund was to be paid to her.
5. Objections to the will were filed by Doris B. Harte through her mother, Rose Richman, acting as her guardian. The New Jersey Orphans Court ruled that Doris B. Harte had reasonable cause to contest the probate and the order of that court was eventually affirmed by the highest court of the State of New Jersey.
6. Thereafter, Doris B. Harte’s objections to the probate of the will were settled by an agreement dated November 26, 1934, between Doris B. Harte, acting through her mother, Rose Richman, the Guarantee Trust Company as an executor and sole trustee under the will, and those persons who took the entire income and corpus of a trust created under Paragraph Seventh of Samuel M. Braunstein’s will, as well as almost all of the residuary estate.
7. The settlement agreement provided, among other things, that the “390 shares of the capital stock of the Boardwalk Realty Co. * * * and the dividends received thereon to October 1, 1934, shall be held by the Executors or the Trustee for the benefit of the Contestant [Doris B. Harte] * * * ”
8. It is further specified in the agreement that in such event, at the sole discretion of the benficiaries, the said 390 shares of stock of the Boardwalk Realty Company shall revert back to the beneficiaries free of the obligation of the contestant (Doris B. Harte) and be dealt with in accordance with the direction of Paragraph Seventh of the will (the trust provision).
9. The dividends mentioned above, amounting to $92,690, had been com mingled with miscellaneous receipts of the estate. By the settlement agreement it was understood that they were to be repaid to the trust fund described in Paragraph Seventh of the will of Samuel M. Braunstein. The aforementioned sum was subsequently paid into the trust fund — $60,000 in cash and $32,690 in securities. The cash was subsequently invested. At the present time the trust fund, exclusive of the shares of Boardwalk Realty Company, has a value of $83,971.09.
10. The settlement agreement also provided for monthly payments of $208.-33 to Doris B. Harte for the period of her natural life. Since the making of the settlement agreement, these monthly payments have in fact been made to her.
11. Doris B. Harte filed individual income tax returns for the years 1946 and 1947 with the Collector of Internal Revenue for the First District, Brooklyn, New York. The plaintiffs Doris B. Harte and her husband, Stanley J. Harte, filed joint income tax returns with the same Collector for the year 1948, and for the years 1949, 1950 and 1951 with the Collector of Internal Revenue for the Third District, New York, N.Y.
12. The income tax returns referred to above were thereafter audited by the said Collectors who asserted deficiencies against plaintiff Doris B. Harte as follows:
Year Tax Interest Total
1946 $1,541.71 $587.88 $2,129.59
1947 287.71 92.44 380.15
$1,829.42 $680.32 $2,509.74
And against both the plaintiffs as follows:
Year Tax Interest Total
1948 $ 810.54 $ 211.81 $1,022.35
1949 748.00 158.18 906.18
1950 850.00 128.75 978.75
1951 1,275.00 116.66 1,391.66
Total $3,683.54 $615.40 $4,298.94
Grand Totals $5,512.96 $1,295.72 $6,808.68
13. Following payment of the taxes aforementioned, plaintiffs filed timely claims for refund of said taxes and interest paid thereon. Each of the claims for refund has been disallowed and two years have not elapsed since the disallowance of any of the refund claims.
14. The agreement provides that the executors and/or trustee and the beneficiaries shall have and do have the right to sell said stock as in the will authorized, provided that the executors and/or trustee retain in their or its possession a sum in cash, which, if invested in United States Government securities, will provide an income, after the trustee’s fees and expenses have been paid, of $2,500 per annum, sufficient to pay the annuity payable monthly as hereinabove stipulated and have the right to invest said sum in bonds of the United States Government.
The taxpayer, Doris B. Harte, has taken the position that the payments received in the years 1946 to 1951 are properly construed as received by way of an inheritance and so are not includable in gross income. The government argues that these payments are includable in gross income under the express provisions of the 1942 amendment to Section 22(b) (3) of the Internal Revenue Code of 1939, which section, as amended, 26 U.S.C.A. § 22(b) (3), provides in part as follows:
“(b) Exclusions from gross income. The following items shall not be included in gross income and shall be exempt from taxation under this chapter:
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“(3) Gifts, bequests, devises, and inheritances. — The value of property-acquired by gift, bequest, devise, or inheritance. There shall not be excluded from gross income under this paragraph, the income from such property, or, in case the gift, bequest, devise, or inheritance is of income from property, the amount of such income. For the purposes of this paragraph, if under the terms of the gift, bequest, devise, or inheritance, payment, crediting, or distribution thereof is to be made at intervals, to the extent that it is paid or credited or to be distributed out of income from property, it shall be considered a gift, bequest, devise, or inheritance of income from property.”
Section 22(b) (3) of the Internal Revenue Code of 1932, 26 U.S.C.A. Int.Rev. Acts, page 487 provided as follows:
“(b) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this title:
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“(3) Gifts, bequests, and devises. The value of property acquired by gift, bequest, devise, or inheritance (but the income from such property shall be included in. gross income).”
Under Section 22(b) (3) as amended in 1942, it is specifically specified that “[T]here shall not be excluded from gross income under this paragraph, the income from such property, or, in case the gift, bequest, devise, or inheritance is of income from property, the amount of such income.” It appears, therefore, that the income receivable by Doris B. Harte constitutes taxable income under the 1942 amendment of the Code. Although the fund may be construed to have been received by way of inheritance (see Lyeth v. Hoey, 305 U.S. 188, 59 S.Ct. 155, 83 L.Ed. 119), the payments set up pursuant to the agreement settling the will contest were paid out of income. The statute as applied by the courts makes inheritances payable at intervals taxable to the extent paid out of income. See Townsend v. Commissioner of Internal Revenue, 1949, 12 T.C. 692, affirmed 6 Cir., 1950, 181 F.2d 502; Lindau v. Commissioner of Internal Revenue, 1954, 21 T.C. 911; Copeland v. Commissioner of Internal Revenue, 1949, 12 T.C. 1020.
The taxpayer contends that as the law existed in 1934, at the time of the execution of the agreement, the payments, would not have been taxable and, secondly, that the change in the law affected by the 1942 amendment cannot be constitutionally applied to make these payments taxable. Actually, Section 22(b) (3) of' the 1932 Code (as effective in 1934) made-income from property acquired by gift, bequest, devise or inheritance taxable. Prior to 1942 and under provisions similar to those of the 1932 Code, the Supreme-Court of the United States determined that payments made periodically by the-terms of an inheritance were taxable if they were payable out of income only. See Irwin v. Gavit, 1925, 268 U.S. 161, 45 S.Ct. 475, 69 L.Ed. 897. On the other hand, periodic payments which were to. be made regardless of income, that is, out of the corpus or out of the income, were-held not to be taxable even though made from income. Burnet v. Whitehouse, 1931, 283 U.S. 148, 51 S.Ct. 374, 75 L.Ed. 916; Chase National Bank of City of New York v. Commissioner of Internal Revenue, 1939, 40 B.T.A. 44.
It appears that the 1942 amendment of' Section 22(b) (3) was intended by Congress to make periodic payments, even-though payable in any event, taxable to-the extent actually paid out of income. H.R.Rept. No. 2333, 77th Cong., 1st Sess. 66 (1942) (1942-2 Cum.Bull. pp. 424, 425). See also Coleman v. Commissioner of Internal Revenue, 3 Cir., 1945, 151 F. 2d 235; Lindau v. Commissioner of Internal Revenue, 1954, 21 T.C. 911.
The periodic payments made to Doris B. Harte were not, in fact, only paid out of income, but, according to the terms of the settlement agreement, could only be made from income. The agreement itself authorizes the executors and trustee to hold the stock and the dividends received thereon for the benefit of Doris B. Harte, and to use the dividends to make the monthly payments. See Paragraph 1 of the Agreement.
Paragraph 2 of the agreement authorizes the executors and/or trustee “to set aside so much of the dividends received after October 1, 1934 for the benefit of the Contestant as may be necessary to make the payment of said sums to and for Contestant.” Furthermore, the sale or reversion of the stock is authorized only if the funds remaining in the hands of the executors or trustee which, if invested in United States Government securities, would produce sufficient income to meet the contestant’s “annuity.” Other paragraphs of the agreement indicate that the contestant is entitled to payment out of income only.
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8948382-24391 | LUCERO, Circuit Judge.
In this direct criminal appeal, Wilma Clark argues that the Supreme Court’s decision in Blakely v. Washington, 542 U.S. 296, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004), renders unconstitutional her sentence for drug distribution. We consider her argument in light of the Supreme Court’s recent decision in United States v. Booker, — U.S.-, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). Because the court below increased Clark’s term of imprisonment based on facts that it found by a preponderance of the evidence, constitutional error plagues Clark’s sentence. Applying plain error review, we conclude that the sentence imposed affects Clark’s substantial rights and seriously affects the fairness, integrity, and public reputation of judicial proceedings. We therefore REMAND for resentencing.
I
Clark pled guilty to knowingly and intentionally distributing more than five grams of a mixture containing cocaine base, in violation of 21 U.S.C. § 841(a)(1). At the change of plea hearing, she admitted to selling 5.48 grams of crack cocaine on June 28, 2000. Based solely on the facts to which she pled, Clark faced an offense level of 26 and a Guideline range of 110-137 months’ incarceration. U.S.S.G. § 2Dl.l(c)(7).
Additional conduct was detailed in tbe pre-sentence. report (“PSR”). According to the PSR, state law enforcement officials discovered Clark either distributing or possessing crack cocaine on six separate occasions in 2003. The U.S. Probation Office recommended that the district court find Clark “responsible for” 25.45 grams of crack cocaine, which is the sum of the 5.48 grams that she distributed on June 28, 2000 and the amounts that she either possessed or distributed in 2008. Additionally, the PSR reported that on October 4, 2001, officers discovered a pistol and ammunition for various firearms in Clark’s purse while executing a search warrant at her residence. Clark stated that she was holding the gun for a man who had gone to purchase cocaine, and she admitted to having sold cocaine herself two days earlier, but officers did not discover cocaine in the home. The PSR recommended enhancing Clark’s base offense level for possession of a firearm pursuant to U.S.S.G. § 2Dl.l(b)(l).
Clark objected to using the 2003 drug-related incidents to calculate her base offense level, arguing that the span of time between the offense of conviction and the 2003 events precluded considering the latter as relevant conduct for the former. Similarly, she argued that insufficient evidence linked the offense of conviction to her possession of a firearm fifteen months later, and therefore objected to an enhancement of her offense level for firearm possession. Overruling Clark’s objections, the district court adopted the PSR’s findings.
Because it found that Clark possessed at least 20 grams of cocaine base, the district court used a base offense level of 28. The court then enhanced the offense level to 30 because Clark possessed a firearm, and ultimately settled’on an offense level of 27 after including an adjustment for acceptance of responsibility. At offense level 27, and with a criminal history category of five, Clark faced a sentencing range of 120-150 months. The district court accepted the government’s recommendation and sentenced her at the bottom of the range to 120 months’ incarceration.
II
Clark argues that the district court violated her Sixth Amendment rights by imposing a sentence based on facts that it found by a preponderance of the evidence pursuant to the then-mandatory Sentencing Guidelines. Specifically, she asserts that, in light of the Supreme Court’s decision in Blakely, it was constitutional error to use uncharged drug-related conduct to calculate her base offense level and to thén enhance the offense level by finding that she possessed a firearm. We construe Clark’s argument as a challenge to her sentence under Booker. See United States v. Clifton, 406 F.3d 1173, 1175 n. 1 (10th Cir.2005) (this court “must apply the holdings in Blakely and Booker to all cases in which a defendant properly raised an issue under either case.”). Clark did not raise a Booker challenge below. Consequently, we review the district court’s sentencing decision for plain error under the four-part test articulated in United States v. Olano, 507 U.S. 725, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993), which asks (1) is there error; (2) is the error plain; (3) does it affect substantial rights; and (4) does it seriously affect the fairness, integrity, or public reputation of judicial proceedings. United States v. Gonzalez-Huerta, 403 F.3d 727, 732 (10th Cir.2005) (en banc).
A district court commits constitutional Booker error when it “applies the Guidelines in a mandatory fashion, makes factual findings (other than the fact of prior convictions), and imposes a sentence above the maximum that would apply in the absence of such findings.” United States v. Yazzie, 407 F.3d 1139, 1144 (10th Cir.2005) (emphasis added). Clark pled guilty pursuant to a plea agreement to possession with intent to distribute more than 5 grams of cocaine base. In exchange for her plea, the government agreed to recommend a three-level downward adjustment for acceptance of responsibility under U.S.S.G. § 3E1.1. At her plea hearing, Clark admitted to possessing 5.48 grams of cocaine base, a drug quantity which corresponds to a base offense level of 26 under U.S.S.G. § 2Dl.l(c)(7). When combined with Clark’s criminal history category, an offense level of 26 exposed her to a guidelines range of 110-137 months. After subtracting three levels for acceptance of responsibility, however, Clark’s maximum sentencing range based solely on facts to which she pled was 84-105 months.
Clark’s acceptance of responsibility adjustment must be included in our calculation of her sentencing range to comport with the Sixth Amendment. This is so because under the pr e-Booker mandatory guidelines regime, as the court explained in United States v. Colussi, 22 F.3d 218, 219 (9th Cir.1994):
Unlike departures under the Sentencing Guidelines, adjustments to the offense level are characteristically mandatory. The Guidelines use permissive language (i.e. “may”) in the context of departures. See U.S.S.G. § 5K2.0. In the context of adjustments, the Guidelines use mandatory language. See, e.g., U.S.S.G. § 3A1, U.S.S.G. § 3B1, U.S.S.G. § 3C1; see also United States v. Mariano, 983 F.2d 1150, 1157 (1st Cir.1993).
Section 3E1.1 thus states
(a) If the defendant clearly demonstrates acceptance of responsibility for his offense, decrease the offense level by 2 levels.
(b) If the defendant qualifies for a decrease under subsection (a), the offense level determined prior to the operation of subsection (a) is level 16 or greater, and upon motion of the government stating that the defendant has assisted authorities in the investigation or prosecution of his own misconduct by timely notifying authorities of his intention to enter a plea of guilty, thereby permitting the government to avoid preparing for trial and permitting the government and the court to allocate their resources efficiently, decrease the offense level by 1 additional level.
U.S.S.G. § 3El.l(emphasis added).
Although “[a] defendant who enters a guilty plea is not entitled to an- adjustment under this section as a matter of right,” § 3E1.1. cmt. n. 3, a defendant who pleads guilty and clearly accepts responsibility under the pr e-Booker mandatory sentencing regime most certainly was -so entitled. Once a district court has found as a matter of fact that a defendant has accepted responsibility within the meaning of § 3E1.1, the court has no discretion to withhold the sentencing adjustment. See United States v. Marquez, 337 F.3d 1203, 1210 (10th Cir.2003) (reversing district court’s denial of one-level reduction under § 3El.l(b) and stating that “a defendant who ‘clearly demonstrates acceptance of responsibility for his offense’ is entitled to a ... reduction in his offense level.”). As the Fifth Circuit has unequivocally asserted, once an affirmative determination of acceptance of responsibility has been made, “no sentencing discretion remains.” United States v. Tello, 9 F.3d 1119, 1124 (5th Cir.1993); see also United States v. Rice, 184 F.3d 740, 742 (8th Cir.1999) (“[I]f the sentencing court finds that the defendant accepted responsibility for his or her offense and entered a timely guilty plea, then the defendant is automatically entitled to the full three-level reduction available under § 3E1.1.”); United States v. Townsend, 73 F.3d 747, 755 (7th Cir.1996) (“The language of § 3E1.1 is mandatory, not permissive: When a defendant demonstrates that he is qualified for the decrease, the guideline orders the decrease.”); United States v. Talladino, 38 F.3d 1255, 1264 (1st Cir.1994) (“The language of [§ 3El.l(b) ] is absolute on its face. It simply does not confer any discretion on the sentencing judge to deny the ... reduction so long. as the [section’s] stated requirements are satisfied.”). Thus, when analyzing Booker error, “the maximum [sentence] that would apply in the absence of [impermissible factfind-ing],” Yazzie, 407 F.3d at 1144, is the guideline range supported by the facts the defendant admitted reduced by his or her acceptance of responsibility.
This makes sense because for purposes-of judicial and prosecutorial efficiency, the Sentencing Commission made the manner of conviction a factor in determining punishment by offering a defendant who pleads guilty a sentencing “discount.” As the court recognized in United States v. Bonanno, 146 F.3d 502, 512-13 (7th Cir.1998), the purpose of § 3E1.1 is “to reward those who plead guilty — saving the judiciary and Government from the time, expense and effort of trial — or who take some other equivalently concrete act, such as pretrial payment of full restitution.” (quotations omitted). It goes without saying that one of the primary reasons a defendant pleads guilty is to obtain the acceptance of responsibility reduction. Where the court finds a defendant has clearly accepted responsibility in a timely fashion, therefore, the maximum guidelines sentence authorized by the defendant’s guilty plea necessarily includes the three-point reduction.
In the present case, Clark pled guilty pursuant to a plea agreement in which the government agreed to recommend to the district court that Clark be given a three-point reduction for acceptance of responsibility. In other words, the acceptance of responsibility reduction was Clark’s to lose. See § 3E1.1. cmt. n. 3 (“Entry of a plea of guilty prior to the commencement of trial combined with truthfully admitting the conduct comprising the offense of conviction ... will constitute significant evidence of acceptance of responsibility”). The PSR mirrored the government’s recommendation and, in fashioning a sentence, the district court accepted these recommendations. Without the sentencing enhancements based on judge-found facts, but with the acceptance of responsibility adjustment, Ms. Clark faced an offense level of 23 with a mandatory guidelines range of 84-105 months. We therefore conclude that Clark received a sentence exceeding the maximum that would have applied had the district court not made findings with respect to the quantity of drugs or possession of a firearm.
In Yazzie, we held that constitutional error does not occur when the sentencing court increases the sentencing range by way of judge-found facts coupled with the mandatory application of the Guidelines but the actual sentence imposed is within the non-enhanced range. Yazzie, 407 F.3d at 1145. We did not have occasion in Yazzie, however, to fully discuss what constitutes the non-enhanced range. In Yaz-zie, the district court rejected a three-level acceptance of responsibility reduction similar to the one issued in this case. Thus, in Yazzie, the PSR-reeommended range constituted the enhanced range, and the non-enhanced range was simply the range that would have applied absent adoption of the PSR’s recommended enhancements.
Here we face a very different scenario. The Government and the PSR both recommended, and the district court accepted, a three-level acceptance of responsibility reduction. This reduced sentencing range constitutes the non-enhanced range in this case. Because it is clear that the district court would have applied the three-level reduction even in the absence of the enhancements, it would be inequitable to exclude it from the non-enhanced sentence. Moreover, excluding the recommended reduction from the non-enhanced sentence, in light of the district court’s determination to apply the reduction regardless of the applicability of the enhancements, simply misreads the record. Therefore, we conclude the non-enhanced range in this case is 84-110 months’ incarceration.
Constitutional Booker error plagues Clark’s sentence, and all constitutional Booker errors satisfy the first two prongs of plain error review. To meet her burden on the third prong, Clark must show “a reasonable probability that, but for the error claimed, the result of the proceeding would have been different.” United States v. Dazey, 403 F.3d 1147 (10th Cir.2005). Our recent jurisprudence provides at least two ways that a defendant may demonstrate such a reasonable probability. First, a defendant may show that, when viewing the facts of her case in light of 18 U.S.C. § 3553(a)’s sentencing factors, the district court “would reasonably impose a sentence outside the Guidelines range.” Dazey, 403 F.3d at 1175. Second, a defendant aggrieved by constitutional Booker error may show that her substantial rights were affected if she establishes a “reasonable probability that a jury applying a reasonable doubt standard would not have found the same material facts that a judge found by a preponderance of the evidence.” Id.
There is a reasonable probability that a jury would not find beyond a reasonable doubt that Clark was responsible for at least 20 grams of crack cocaine. Under the Guidelines, a sentencing court in calculating the quantity of drugs involved in an offense should consider all quantities stemming from a defendant’s “relevant conduct.” U.S.S.G. § 2D1.1, cmt. n. 12 (“Types and quantities of drugs not specified in the count of conviction may be considered in determining the offense level. See § lB1.3(a)(2) (Relevant conduct).”). Whether a specific offense constitutes relevant conduct to the offense of conviction depends in substantial part on whether the offenses form the “same course of conduct,” which in turn depends on “the degree of similarity of the offenses, the regularity (repetitions) of the offenses, and the time interval between the offenses.” U.S.S.G. § 1B1.3, cmt. 9(B).
Clark argues that the time interval separating the offenses alone — approximately three years — -justifies the conclusion that the offenses were not part of the same course of conduct. She also argues that her alleged offenses did not become “regular” until the spring of 2003. Clark’s offense of conviction occurred on June 28, 2000, when she sold 5.48 grams of crack cocaine. The PSR did not report, and the district court did not find, that Clark sold any quantity of any drug in either 2001 or 2002. The court did find that Clark sold 19.97 grams of crack cocaine on five separate occasions between May 20, 2003 and September 23, 2003. Although the offense of conviction and the 2003 events all involved sales of small user amounts of crack cocaine, and therefore are quite similar, there is a reasonable probability that a jury would not find the showing of similarity sufficiently strong to compensate for the absence of temporal proximity or regularity. See § 1B1.3, cmt. 9(B). (“When one of the above factors is absent, a stronger presence of at least one of the other factors is required.”). Consequently, there is a reasonable probability that a jury would not find beyond a reasonable doubt that Clark is responsible for over 20 grams of crack cocaine, leading us to conclude that the district court’s drug quantity finding affected Clark’s substantiál rights.
The district court also found that Clark possessed a firearm in relation to her offense, and enhanced her sentence two levels under U.S.S.G. § 2Dl.l(b)(l). When seeking an enhancement under that Guideline provision, the government bears the burden of proving “that a temporal and spatial relation existed between the weapon, the drug trafficking activity, and the defendant.” United States v. Roederer, 11 F.3d 973, 982 (10th Cir.1993). At first glance, it may appear that the government must show proximity between possession of -a firearm and the offense of conviction to support a § 2Dl.l(b)(l) enhancement. However, courts may apply the firearm-possession adjustment if the government proves that a close nexus exists between possession of a firearm and any drug offense, provided that the drug offense constitutes “relevant conduct” with regard to the offense of conviction. See id. (“Even when a guilty plea is entered on a single count of possession, the court must nevertheless look to the entire relevant conduct in determining the sentence. That conduct ... includes possession of a gun while engaging in drug sales related to, though distinct from, the crime of conviction'.”). Thus, the questions for the fact finder in this case are whether Clark’s possession of a weapon and ammunition on October 4, 2001 was closely related to a drug offense, and whether that drug offense is relevant conduct with respect to the offense of conviction on June 28, 2000.
In support of its argument that Clark possessed a weapon in relation to a drug offense, the government points to Clark’s admissions to the investigating officers that she was holding the gun until its owner returned from purchasing crack co caine and that Clark herself had sold cocaine two days earlier. Clark counters that even if she possessed a gun in relation to a drug offense, that offense is dissimilar from the offense of conviction, the two offenses are insufficiently regular, and they occurred over a year apart from each other; therefore, she argues, they do not constitute the same course of conduct. As to similarity, she states that the offense of conviction involved the sale of cocaine whereas officers did not discover any cocaine in her residence when they discovered the firearm. Furthermore, two isolated events fifteen months apart, she argues, are not sufficiently regular or temporally proximate to justify the enhancement.
We conclude that there exists a reasonable probability that a jury would find that the fifteen month interval between the offenses renders them temporally distant, and that under the facts of this case Clark’s drug-related activity was insufficiently regular. Pursuant to the Guidelines, then, a jury finding that the offense of conviction and Clark’s possession of a firearm in relation to drug trafficking were part of the same course of conduct would require a strong showing of similarity between the two offenses. Clark’s admission to selling cocaine two days before officers found her in possession of the firearm, and the fact that the weapon belonged to a man who was in the course of purchasing cocaine, would not have persuaded a jury that the two offenses were sufficiently similar to overcome the temporal distance between, and irregularity of, the two offenses. Moreover, applying the third Olano factor less rigidly, as we must, we are confident that there is a reasonable probability that a jury would not have found that Clark’s possession of the firearm was part of the same course of conduct as her offense of conviction. See Dazey, 403 F.3d at 1174 (“We conduct this analysis less rigidly when reviewing a potential constitutional error.”). Thus, the district court’s decision to adjust Clark’s sentence pursuant to § 2Dl.l(b)(l) affected her substantial rights.
Having concluded that Clark has met her burden under the third factor of the plain error test, we now determine whether, under the fourth factor, the error seriously affected the fairness, integrity, or public reputation of judicial proceedings. Gonzalez-Huerta, 403 F.3d at 736. Because this case involves constitutional Booker error, we apply the fourth prong standard less rigidly. Clifton, 406 F.3d at 1182. To determine whether to exercise our discretion and notice the error, we consider “the strength or lack of evidence supporting the defendant’s sentence under the Guidelines.” Id. We also consider whether “evidence in the record demonstrates that the district court would impose the same sentence even under an advisory Guidelines system.” United States v. Lawrence, 405 F.3d 888, 908 (10th Cir.2005).
In the sentencing proceedings below, Clark forcefully disputed the court’s find ings with respect to the amount of drugs and possession of a firearm. See Dazey, 403 F.3d at 1178 (concluding that fourth prong is met, in part, because “Mr. Dazey vigorously contested the judge-found facts that enhanced his sentence.”). Moreover, the evidence in the record by no means leads ineluctably to the conclusion that either the drug sales in 2003 or the drug activity associated with possession of a weapon in October 2001 constitute relevant conduct with respect to the offense of conviction; rather, the evidence is easily susceptible to differing interpretations by a fact finder. Furthermore, we conclude that there is a reasonable likelihood that the court would impose a lower sentence on remand. The court imposed sentence at the very bottom of the Guidelines range, suggesting that if initially afforded discretion, the court may have imposed a lower sentence. Additionally, counsel argued at the sentencing hearing that Clark “was involved in these incidents because of her addiction. She doesn’t move drugs.... She owns up to what she does better than almost any client I think I’ve ever seen.” On that basis, and the fact that Clark has “serious medical problems,” Clark sought placement at the Fort Worth Medical Center, and the district court made that recommendation. Such arguments would be relevant to the district court’s exercise of discretion when imposing sentence in light of the § 3553(a) factors.
Our final inquiry under the fourth prong is “whether the Booker error substantially increased the defendant’s sentence.” Clifton, 406 F.3d at 1182. Had the district court not increased Clark’s sentence based on its unconstitutional findings, Clark likely would have received a sentence of 84 months. This 84-month sentence is based on the facts to which Clark pled, and accounts for the government’s recommendations of an acceptance of responsibility reduction and a sentence at the bottom of the applicable range, which the district court accepted. Clark’s 120-month sentence represents a substantial increase from what she likely would have received had the district court not committed Booker error.
The fourth prong of Olano speaks in the disjunctive: Our inquiry is (1) does the gulf between the constitutional sentence and the unconstitutional sentence undermine the fairness of the proceedings below; (2) does it impact the overall integrity of the sentencing process; or (3) does it implicate the public reputation of judicial proceedings. See Olano, 507 U.S. at 732, 113 S.Ct. 1770 (“the court should not exercise that discretion unless the error seriously affect[s] the fairness, integrity or public reputation of judicial proceedings.”) (emphasis added); Gonzalez-Huerta, 403 F.3d at 736. We are not prepared to say that an unconstitutionally imposed sentence leading to three years’ additional incarceration is fair; nor are we prepared to say that consigning someone to three years in prison on an unlawful basis does not impact the integrity of the process; finally, we doubt that the public would retain confidence in a system that would countenance such an unconstitutional sentence — thus the public reputation of judicial proceedings is implicated.
Defendants are not required to prove all three elements of the fourth prong. Even though one element would suffice, we conclude that Clark has met her burden under all three, requiring us to remand.
Ill
We REMAND this matter to the district court with instructions to vacate defen dant’s sentence imposed in this case and resentence defendant in accordance with Booker.
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1141428-11273 | ORDER AND JUDGMENT
EBEL, Circuit Judge.
Robert Stewart Silcock appeals to this court challenging his conviction for conspiracy to distribute methamphetamine in violation of 21 U.S.C. §§ 841(a)(1) and 846. Because there is sufficient evidence to support Silcock’s conviction, we exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm. Silcock also challenges his sentence, arguing that the district court erred in determining that he was more than a minor participant in the conspiracy, and thus that he was not entitled to an offense level reduction. Because the district court’s conclusion that Silcock played more than a minor role is not clearly erroneous, we also affirm his sentence.
I. BACKGROUND
Silcock was indicted with eighteen other defendants for a conspiracy to distribute methamphetamine in Ouray County, Colorado. Perry Wherley was the ringleader of this conspiracy, traveling from Colorado to California on the weekends to obtain methamphetamine for distribution. The defendant Silcock, a California resident, helped Wherley and others obtain methamphetamine for several months in 1998.
The conspiracy began in 1996 when Wherley and his aunt, Brenda Paul, started traveling to California every other weekend to purchase methamphetamine for approximately ten regular customers in Ouray County. Because of a falling out, Wherley eventually replaced Brenda Paul as his traveling companion with Michael Sullings. After Sullings was arrested, Wherley replaced him with a friend and customer, Eric Avril.
In April 1998, Wherley and Avril began traveling to California every few weeks to buy methamphetamine. On their first trip, they discovered that Wherley’s previous methamphetamine supplier was no longer available. Avril, however, knew of another supplier in California named “Roy.” To locate Roy, Avril recommended that they contact Silcock, who was Avril’s old family friend and a fellow methamphetamine user. Upon their arrival at Silcock’s house, Silcock called Roy, who came to the house and sold methamphetamine to Wherley and Avril. Wherley and Avril left some of the purchased methamphetamine with Silcock for his personal use and returned to Colorado.
This pattern was repeated approximately every three weeks over the next four months. Wherley and Avril would drive to California to stay with Silcock. They would alert Silcock that they were en route, and Silcock would arrange a meeting with Roy or other methamphetamine dealers.
On each trip, Wherley and Avril purchased two to three ounces of methamphetamine, and on their final trip they purchased four ounces. The drug transactions occurred at Silcock’s house, and Avril and Wherley always compensated Silcock with methamphetamine for his own use. Wherley and Avril did not know any other source for methamphetamine in California and depended on Silcock to initiate contact with Roy or other dealers.
After these trips to California ceased in July 1998, Avril continued to obtain methamphetamine through Silcock. In August 1998, Avril and some friends pooled ap proximately $1,200 to purchase methamphetamine through Silcock. One of the friends, Liz Light, sent the money to Silcock via Federal Express. A few weeks later, federal agents intercepted a phone call between Wherley and Avril. Avril reported that he had just talked to “B in Cali” and “it’s on its way.” Shortly thereafter Light received a package of methamphetamine and delivered some to Avril. A second phone conversation was then intercepted, in which Avril told Wherley that “Bob took care of me,” referring to this package of methamphetamine.
Finally, in October and November 1998, law enforcement recorded Avril, Silcock, and Wherley discussing suppliers and prices of methamphetamine in Ouray County. Silcock discussed the price per ounce of methamphetamine and indicated that his sources in California were dwindling.
On March 25, 1999, Silcock, Wherley, Avril, and sixteen others were indicted for conspiracy to possess with intent to distribute methamphetamine. At the close of the Government’s case, Silcock moved for a judgment of acquittal. The motion was denied by the district court, and Silcock was thereafter convicted by the jury and sentenced to 51 months of imprisonment. At the sentencing hearing, Silcock requested a two-level reduction pursuant to Sentencing Guideline § 8B1.2 based on the minor role he played in the conspiracy. The district court denied this request.
II. SUFFICIENCY OF THE EVIDENCE
Silcock first argues that the evidence was insufficient to support his conspiracy conviction. Because we find that a reasonable jury could find sufficient evidence to convict, we affirm.
Silcock moved for a judgment of acquittal at the close of the Government’s case. Typically, a defendant must renew this motion at the close of all of the evidence to obtain de novo review on appeal. United States v. Lopez, 576 F.2d 840, 842 (10th Cir.1978). In this case, however, Silcock did not introduce any evidence after making his motion and thus did not need to renew his motion at the close of all of the evidence. Id. at 843.
Thus, we review de novo Silcock’s claim that the evidence was insufficient to support the jury’s verdict, viewing the evidence and all reasonable inferences to be drawn therefrom in the light most favorable to the government. United States v. Heckard, 238 F.3d 1222, 1228 (10th Cir.2001). The evidence is sufficient if any reasonable jury could have found the defendant guilty beyond a reasonable doubt. Id.
To prove a conspiracy in violation of 21 U.S.C. § 846, the evidence must establish: “(1) an agreement with another person to violate the law, (2) knowledge of the essential objectives of the conspiracy, (3) knowing and voluntary involvement, and (4) interdependence among the alleged conspirators.” United States v. Carter, 130 F.3d 1432, 1439 (10th Cir.1997). Silcock argues that the Government’s evidence was insufficient to prove: 1) that Silcock knew the essential objectives of the conspiracy and 2) that Silcock was interdependent with the other conspirators.
A. Essential Objectives of the Conspiracy
Silcock first argues that the evidence was insufficient to show that he knew the essential objectives of the conspiracy. We find, however, that a reasonable jury could infer from the evidence that Silcock knew that Wherley and Avril were purchasing methamphetamine for distribution in Colorado.
Silcock knew that two methamphetamine users were driving from Colorado to California every few weeks to purchase methamphetamine. He hosted these two Colorado residents, one of whom was his long-time friend, overnight in his home as many as eight times in four months. He contacted their drug supplier each time and hosted the drug transaction in his house. In return, he was compensated with some of the purchased methamphetamine. Although there is no direct evidence that Silcock knew the specific amounts purchased by Wherley and Avril, the jury could infer from the foregoing facts that he knew they were purchasing distribution quantities.
Silcock argues that even if he had known the amount purchased, such knowledge would not establish an inference that Wherley and Avril were purchasing methamphetamine for distribution. He contends they were such heavy users that they could personally consume two to four ounces over the course of a few weeks. Wherley testified, however, that even for a heavy user such as himself, one ounce of methamphetamine could be shared among four or five people for a week, or sold to ten customers. Thus, a reasonable jury could infer that Silcock knew Wherley and Avril were not the exclusive consumers of the purchased methamphetamine.
This inference is bolstered by the fact that Silcock later mailed $1,200 of methamphetamine to Avril and his friends in Colorado. Sileock’s later conversations with Avril and Wherley regarding the price of methamphetamine further indicate that Silcock knew that the drugs purchased by Wherley and Avril in California were intended for distribution in Colorado.
A defendant need not “know all the details or all the members of a conspiracy” to sustain a conspiracy conviction. United States v. Caro, 965 F.2d 1548, 1556 (10th Cir.1992). The evidence here is sufficient to show that Silcock knew Wherley and Avril were purchasing methamphetamine for further distribution.
B. Interdependence
Silcock next argues that the evidence was insufficient to show that he was interdependent with the other members of the conspiracy. “A defendant’s activities are interdependent if they facilitated the endeavors of other alleged conspirators or facilitated the venture as a whole.” Heckard, 238 F.3d at 1230 (internal quotations and citations omitted).
The evidence shows that Avril, Wherley, and all of their customers were dependent on Silcock. Avril and Wherley initially contacted Silcock when they discovered they had no source for methamphetamine. They continued to call Silcock each and every time they went to California so that he could arrange their drug purchases, and they never failed to compensate him for his services. Silcock was likewise dependent on the distribution of the drugs in Colorado, because the funds raised therefrom facilitated further trips by Wherley and Avril, which resulted in greater compensation for Silcock. From these facts, any reasonable jury could infer that Silcock “facilitated the endeavors of other alleged conspirators or facilitated the venture as a whole.” Heckard, 238 F.3d at 1230 (quotations omitted).
Because the evidence and inferences therefrom support the jury’s conclusion that Silcock knew the essential objectives of the conspiracy and that his activities were interdependent with those of the other conspirators, we affirm his conviction.
III. MINOR ROLE
Silcock finally argues that he is entitled to a two-point reduction in his total offense level pursuant to Sentencing Guideline § 3B1.2 because of his minor role in the conspiracy. Any defendant receiving a reduction under this section must have played “a part in committing the offense that makes him substantially less culpable than the average participant.” U.S. Sentencing Guidelines Manual § 3B1.2, cmt. 3(A) (2001) (emphasis added). A defendant may be designated a minor participant when he is “less culpable than most other participants” but his “role could not be described as minimal.” Id. cmt. 5.
The decision to reduce a defendant’s base offense level because of the role he played in the crime “involves a determination that is heavily dependent upon the facts of the particular case.” U.S. Sentencing Guidelines Manual § 3B1.2, cmt. 3(C) (2001). The defendant must prove that he is entitled to the reduction by a preponderance of the evidence. United States v. Onheiber, 173 F.3d 1254, 1258 (10th Cir.1999). As with any issue of fact, we review the district court’s determination for clear error. Id.
The district court denied Silcock’s request for a reduction based on his role as a minor participant. It reasoned that Silcock knew that the transactions were happening, facilitated the transactions by contacting the supplier each time, and was compensated for these services. Thus, it found that Silcock’s role was not substantially less culpable than Wherley’s or Avril’s.
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5747033-11268 | TRIEBER, District Judge
(after stating the facts as above). It is undisputed that the appellee and its predecessors have used the name “Stark” in their ’nursery business for a century and that its products have an established reputation for quality. On June 24, 1913, it was granted a registration of the trade-mark “Stark Trees” under the 10-year clause of section 5 of the Trade-Mark Act of Congress of February 20, 1905 (33 Stat. 725, c. 592), as amended by the Act of February 18, 1911 (36 Stat. 918, c. 113; section 9490, U. S. Comp. Stat. 1916). That trade-mark consisted of the two words “Stark Trees,” as shown by this photographic copy: ,
The appellants’ device, charged as the infringement, is on a narrow tag of wood, as shown by this photographic copy:
The word “Stark” is in white letters, across the dark bushy tree; the other words are in black, on white ground. It will be noticed that the word “Stark,” across the bushy tree, is in larger letters than any of the other words, which are in smaller type. We concur in the finding of the learned trial judge that “in this manner the word “Stark” is given special emphasis, and from its position the term ‘Stark Trees’ is vividly suggested.”
To justify a finding of infringement of a trade-mark, it is not necessary that the similitude should be exact. It is sufficient if, taking into account resemblance and conditions, the former are so marked that an ordinary purchaser is likely to be deceived thereby. McLean v. Fleming, 96 U. S. 245, 251, 24 L. Ed. 828; Layton Pure Food Co. v. Church & Dwight Co., 182 Fed. 24, 34, 104 C. C. A. 464, 474; McDonald & Morrison Mfg. Co. v. Mueller Mfg. Co., 183 Fed. 972, 974, 106 C. C. A. 312; Heileman Brewing Co. v. Independent Brewing Co., 191 Fed. 489, 494, 112 C. C. A. 133, 138; De Voe Snuff Co. v. Wolff, 206 Fed. 420, 423, 124 C. C. A. 302, 305; O. & W. Thum Co. v. Dickinson, 245 Fed. 609, 614, 158 C. C. A. 37, 42. In Thaddeus Davids Co. v. Davids, 233 U. S. 461, 469, 34 Sup. Ct. 648, 651 (58 L. Ed. 1046, Ann. Cas. 1915B, 322), it was claimed that “the protection is limited to its use when standing alone * * * and that there can be no infringement unless it is used in this precise manner.” The court, in denying this contention, said:
“The statutory right cannot be so narrowly limited. Not only exact reproduction, but a ‘colorable imitation,’ is within the statute; otherwise, the trademark would be of little avail, as by shrewd simulation it could be appropriated with impunity.”
In McDonald & Morrison Mfg. Co. v. Mueller, supra, this court held:
“The test is not whether, when goods are placed side by side, a difference can be recognized in the labels or marks; but the test is, when such goods are not placed side by side, would an ordinarily prudent purchaser be liable ro purchase the one, believing that he was purchasing the other.''
See, also, Gordon’s Dry Gin Co. v. Eddy & Fisher Co. (D. C.) 246 Fed. 954.
There can be no doubt that an ordinarily prudent person, knowing of the reputation of the “Stark Trees,” which for many years have been known as superior trees, would easily be induced to 'purchase the trees of appellants, in view of the advertisements, the statements in their catalogues, and their trade-mark, in the belief that they came from the orchard nurseries of appellee. The catalogues and advertisements of appellants, which do not appear in the printed record, hut were by order of the trial court transmitted to this court as a part of the record, and have been carefully examined, indiscriminately describe their trees and nurseries as “Stark Nurseries,” “Stark Brothers,” “Stark Trees,” and use the word “Stark” in connection with their nurseries and alleged location. The representation that the business is located at “Stark City,” although they admit that only their nurseries are at Stark City, while the business itself is conducted at Ncoslio, the change of the name of the place where their nurseries are located from Chester to Stark City, the attempt to establish offices, at first, at Eouisiana, Mo., all tend to impress one that there was an intention to add to the confusion and mislead purchasers of trees into the belief that their trees are those of appellee.
Nor does it matter that appellants were using their own surnames as their trade-mark. While it is true that a person has a right to use his surname as a mark, without being guilty of an infringement, there is a limitation to that right. As stated in the Davids Case, “provided that the name was not used in a manner tending to mislead, and it was clearly made to appear that the goods were his own, and not those of the registrant.” The decree complained of only enjoined appellants from using labels with their name “Stark” in such a manner “as will not unmistakably differentiate their goods and advertisements from those of complainant.” There is nothing in Stix, Baer & Fuller Dry Goods Co. v. American Piano Co., 211 Fed. 271, 127 C. C. A. 639, which in any wise conflicts with this. Although that was not a registered trade-mark case, it was held:
“If, however, the name has previously become well-known in trade, the second comer uses it subject to three important restrictions: (1) He may not affirmatively do anything to cause the public to believe that his article is made by the first manufacturer. (2) He must exercise reasonable care to prevent the public from so believing. (3) He must exercise reasonable care to prevent the public from believing that he is the successor in business of the first manufacturer.”
There is nothing in the decree to prevent appellants from using their surnames, nor from publishing in their catalogues and advertisements the training and knowledge of appellant William P. Stark in the nursery business. But the language employed in this part of the decree is in such general terms that appellants may he at a loss how to comply with the terms of the decree in every respect, and thus maj*- inadvertently violate the injunction. To avoid this we deem it best, following the rule in the Hall Safe Case, 208 U. S. 560, 28 Sup. Ct. 350, 52 L. Ed. 616, and the Knabe Piano Case, 211 Fed. 271, 127 C. C. A. 639, to indicate in this opinion the decree to be entered on this branch of the case.
Nor is it material that appellants do not use appellee’s trade-mark in its entirety, if what they do use is misleading and likely to cause confusion, whether the goods offered under this trade-mark are or are not those of the registrant. In Saxlehner v. Eisner & Mendelson Co., 179 U. S. 19, 33, 21 Sup. Ct. 7, 12 (45 L. Ed. 60), it was held:
“It Is not necessary, to constitute an Infringement, that every word of a trade-mark should be appropriated. It is sufficient that enough be taken to deceive the public in the purchase of a protected article.”
In Ammon & Person v. Narragansett Dairy Co. (D. C.) 252 Fed. 276, 278, the registered trade-mark of plaintiff was “Queen of the West,” and that of the defendant “Queen.” The court in granting an injunction against the defendant, from using the trade-mark “Queen” said:
“The unnecessary adoption of a part of a plaintiff’s trade-mark—a part so substantial as to have become a trade-name or nickname for the goods—is generally regarded as an infringement. The use by a defendant of a trademark identical with the name which has been derived from a plaintiff’s trade-mark proper, and has become sufficiently descriptive of plaintiff’s goods, is the adoption of a mark which will cause its goods to bear the same name in the market. Neither subtractions from nor additions to a trade-mark proper will avoid infringement, when such imitation as is likely to lead to confusion still remains despite the changes”
—and authorities cited. The same principle was announced by this court in Rossman v. Garnier, 211 Fed. 401, 406, 128 C. C. A. 73, 78.
The use of “Stark City” as their address, when their business is conducted at another city, Neosho, Mo., is misleading, and, owing tq, the name, likely to cause confusion. This is true, not merely owing to the name “Stark” being used, but also for the reason that appellee and its predecessors have frequently advertised their business as at “Stark,” “Starkdale,” and “Stark Station,” Mo., having at some time maintained nurseries at some of these places.
The court committed no error in granting the injunction, but, in order to avoid any misapprehension, there should be added to that part of the decree granting the perpetual injunction the following words':
“That tbe defendants may use their surnames in circulars, catalogues, or advertisements, but they must be accompanied by information that they are not of the original William Stark Nurseries, nor in any wise connected with the Stark Bros. Nurseries & Orchards Company, or any of its predecessors under whatsoever name their business was conducted, and that their trees are not the product of any of these concerns, nor their successors. It is further ordered and decreed that, for the purpose of distinguishing defendants’ trees from those of the complainant, the defendants shall insert in their circulars, catalogues, and advertisements a notice substantially as follows, and in form as conspicuous as the body of such circulars, catalogues, or advertisements:
“Notice.
“The ‘Stark Trees’ have been the product ot the nursery business of the Stark family since the year 1816, and this nursery is still carried on by successors of the original Stark family at Louisiana, Missouri; that William P. Stark, is a member of that family and was connected for over twenty-five years with, and learned the business from, successors of the original Starks ■ that our business is conducted at Neosho, Missouri, and has no connection whatever with the nursery business of the Stark Bros. Nurseries & Orchards Company, at Louisiana, Missouri.”
But we are of the opinion that there was error in decreeing that appellee recover all gains and profits which appellants have derived or received by reason of the infringement of appellee’s trademark, beginning March 11, 1914.
Section 28 of the Trade-Mark Act of February 20, 1905, 33 Stat. 730 (section 9514, U. S. Comp. St. 1916), after prescribing that notice of the registration of the mark be given by affixing on the mark or label the words “Reg. U. S. Pat. Off.” which was not done by appellee, provides:
“And in any suit for infringement by a party failing so to give notice of registration no damages shall be recovered, except on proof that the defendant, was daily notified of infringement, and continued the same after such notice.”
As no notice was given by appellee to appellants of infringement of the registered trade-mark, although the words required by the statute were not printed on its trade-mark labels, until a few days before the institution of this action, no damages under this act can be recovered for an infringement of the registered trade-mark before that time in this action. The trial court in its decree limited the damages for infringing the trade-mark to that time, but as to the gains and profits held that the appellants are chargeable for unfair competition from March 11, 1914, when appellee had first complained that appellants’ advertising matter constituted unfair competition.
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8453373-29378 | CLAY, Circuit Judge.
Plaintiff, Stella Turner, appeals the magistrate judge’s grant of Defendant, City of Englewood’s, motion for summary judgment dismissing Plaintiffs Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12132, and Rehabilitation Act, 29 U.S.C. § 794, claims; and which also dismissed Plaintiffs constitutional claim alleging a denial of substantive due process. Plaintiffs claims arose out of an action taken by Defendant in which it rezoned Plaintiffs property in Englewood, Ohio to residential-use only.
After reviewing the parties’ briefs and the relevant evidence, we conclude that summary judgment was appropriate, and AFFIRM the magistrate judge’s Order dismissing Plaintiffs complaint.
I.
On February 3, 1999, Plaintiff and her now-deceased husband purchased the property located at 20 North Union Boulevard in Englewood, Ohio, which is commonly known both as “Turner Villa” and “Englewood Manor.” Turner Villa had previously been operated as a nursing home. On July 12, 1999, Plaintiff and her husband leased Turner Villa to Adult Care Operations Management, Inc. (“ACOM”), operated by Ernie Lawson, for a ten year period. ACOM applied to Defendant for an occupancy permit to operate a “rest home” at Turner Villa, but actually operated a “group home” that housed “mentally retarded individuals and/or drug addicts.” ACOM ran the group home for approximately eighteen months, during which time the Defendant city received over one hundred emergency calls to the property, including calls reporting violence.
ACOM was apparently not making timely rental payments to Plaintiff, and in September 2001, Plaintiff barricaded herself inside the offices at Turner Villa, in an effort to evict ACOM from the premises. The police responded to the incident, along with several state and local agencies who were concerned with the safety and welfare of the residents. A temporary resolution was reached, whereby the residents were allowed to remain until December 31, 2000, at which time Defendant evicted ACOM and its clients. Just prior to ACOM’s departure, Defendant issued a letter to Plaintiff on December 21, 2000, revoking the “Certificate of Use and Occupancy Permit” for Turner Villa. The revocation letter stated that Plaintiff could reapply for a permit “by filing an application explaining precisely what uses are proposed for the premises.” (J.A. at 1031.)
Defendant issued a Notice of Public Hearing scheduled for January 11, 2001, to consider a change in zoning classification for the property at 20 North Union Boulevard from “R-5 Residential (multi-family)” to “R-l Residential (single family).” (J.A. at 1158.) Plaintiffs attorney spoke on Plaintiffs behalf at the January 11, 2001 meeting, indicating that Plaintiff had another possible tenant interested in using the building. (J.A. at 1159.)
On January 25, 2002, the Englewood City Manager swore out an affidavit stating that the property was a present danger to the health, safety and welfare of the citizens of the city and that he would characterize the property as a “community nuisance when vacated by the former occupants.” (J.A. at 1161.) Plaintiff filed an initial application for a new occupancy permit on January 26, 2001, in which she stated that the property would be used as a “group home for people capable of some aspects of independent living, but requiring adult supervision in other aspects.” (J.A. at 1109.) In response to the application, Defendant imposed some conditions on Plaintiff and requested a $75 filing fee, but Plaintiff never actually submitted the fee or completed the filing.
On February 21, 2001, at the recommendation of its Planning and Zoning Boards, the Englewood City Council rezoned Turner Villa from R-5 to R-l (single family home use). Defendant indicated in a letter dated February 13, 2001, that it was rezon ing the property because of substantial changes in area conditions and for “more appropriate conformance to the adopted Englewood land use plan and its relative priorities.” (J.A. at 1095.)
Meanwhile, on March 7, 2001, Dorothy Asher of Angels Sent Nursing, filed an application for a certificate of occupancy, proposing to run a group home at the property. According to the affidavit of Jeffrey Bothwell, that application was rejected as being inadequate to achieve occupancy of the property because it referenced a group home and failed to sufficiently state the breadth of the proposed operation. Furthermore, it was “filed subsequent to a city-initiated rezoning of the Property.” (J.A. at 1124.)
On March 9, 2001, Plaintiff appealed to the Montgomery County Court of Common Pleas, challenging Defendant’s action in rezoning her property. The state court dismissed the ease on the grounds that Defendant’s actions were legislative.
Plaintiff filed suit on March 19, 2002, in the United States District Court for the Western District of Ohio, against Defendant City and various city officials, alleging that Defendant had violated her Fifth and Fourteenth Amendment rights by depriving her of property without due process of law or just compensation; that Defendant violated her Fourteenth Amendment right to equal protection under the law by treating her differently from similarly situated property owners in rezoning her property; and that Defendant violated 42 U.S.C. § 1985 by conspiring against Plaintiff to deprive her of her constitutional rights. Plaintiff further claimed intentional infliction of emotional distress.
On February 28, 2003, the magistrate judge issued an Order granting in part and denying in part Defendant’s motion to dismiss. The magistrate judge dismissed with prejudice all of the following claims: Fifth Amendment takings, Equal Protection, public policy, substantive due process for water disconnection, and intentional infliction of emotional distress. The magistrate judge further ordered Plaintiff to file a second amended complaint by March 14, 2003, eliminating all defendants and claims that were voluntarily conceded or dismissed pursuant to Defendant’s motion.
Plaintiff filed a second amended complaint on March 24, 2003, and later filed a third amended complaint on May 12, 2003, naming only the City of Englewood as a defendant. In that complaint, Plaintiff requested a restraining order pursuant to Fed.R.Civ.P. 65(B) to prohibit Defendant from enforcing the rezoning, alleged violations of the ADA and the Rehabilitation Act of 1973, claimed that she was denied substantive due process, and sought declaratory judgment. On February 5, 2004, Defendant filed a motion for summary judgment, which was granted by the magistrate judge on May 3, 2004. Plaintiff filed this timely appeal on May 25, 2004.
II.
We review a district court’s grant of summary judgment de novo. Gerbec v. United States, 164 F.3d 1015, 1018 (6th Cir.1999). “Summary judgment is appropriate so long as ‘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 judgment as a matter of law.’ ” Williams v. Int'l Paper Co., 227 F.3d 706, 710 (6th Cir.2000) (quoting Smith v. Ameritech, 129 F.3d 857, 863 (6th Cir.1997)). When determining whether to reach this conclusion, this Court views the evidence and draws all reasonable inferences in the light most favorable to the non-moving party. Id.; see also Smith v. Thornburg, 136 F.3d 1070, 1074 (6th Cir.1998).
III.
The magistrate judge granted Defendant’s motion for summary judgment as to Plaintiffs ADA and Rehabilitation Act claims on two alternative grounds. The magistrate judge found that Plaintiff did not have standing to bring suit under the two statutes, but also held that both claims should fail on the merits. For the reasons discussed herein, we find that the magistrate judge erred in finding that Plaintiff did not have standing to bring these claims, but properly granted Defendant’s motion for summary judgment on the merits.
1. Plaintiffs Standing to Bring Suit On Her Own Behalf
Under Article III of the Constitution, “[sjtanding is a threshold inquiry in every federal case and it involves an inquiry into whether ‘a plaintiff has alleged such a personal stake in the outcome of the controversy as to warrant his invocation of federal-court jurisdiction to justify exercise of the court’s remedial powers on his behalf.’ ” MX Group, Inc. v. City of Covington, 293 F.3d 326, 332 (6th Cir.2002) (quoting Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)). The standing inquiry “involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise.” Warth, 422 U.S. at 498, 95 S.Ct. 2197; see also Village of Arlington Heights v. Metropolitan Housing Dev. Corp., 429 U.S. 252, 261, 97 S.Ct. 555, 50 L.Ed.2d 450 (1977) (finding that the plaintiff housing developer met the constitutional standing requirements for a racial discrimination suit because the challenged actions of the village’s housing authority stood as an absolute barrier to constructing the housing that Plaintiff had contracted to place on the site). Under the constitutional requirement, “the plaintiff must show that he himself is injured by the challenged action of the defendant.” Arlington Heights, 429 U.S. at 261, 97 S.Ct. 555. “The injury may be indirect, but the complaint must indicate that the injury is indeed fairly traceable to the defendant’s acts or omissions.” Id. (citations omitted). On the other hand, prudential rules of standing serve to limit the role of the courts in resolving public disputes. Warth, 422 U.S. at 500, 95 S.Ct. 2197. “Essentially, the standing question in such cases is whether the constitutional or statutory provision on which the claim rests properly can be understood as granting persons in the plaintiffs position a right to judicial relief.” Id.
Plaintiff brought her claim under Title II of the ADA, which provides that “no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity.” 42 U.S.C. § 12132. The ADA’s public enforcement provision, § 12133, extends the statute’s remedies to “any person alleging discrimination on the basis of disability.” The regulations implementing Title II further provide that “[a] public entity shall not exclude or otherwise deny equal services, programs, or activities to an individual or entity because of the known disability of an individual with whom the individual or entity is known to have a relationship or association.” 28 C.F.R. § 35.130(g). The Rehabilitation Act similarly states that “[n]o otherwise qualified individual with a disability ... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.... ” 29 U.S.C. § 794(a). The Rehabilitation Act protects “any person aggrieved” by the discrimination of a person on the basis of his or her disability. 29 U.S.C. § 794a(a)(2).
The standing question in this case is whether the ADA and the Rehabilitation Act confer standing on a person in Plaintiffs position. We believe that this question has already been answered in the affirmative by the MX Group case. 293 F.3d 326. In MX Group, the plaintiff, a provider of methadone drug treatment who sought to open a methadone clinic in Covington, Kentucky, was denied a zoning permit and sued the city for discrimination under the ADA and the Rehabilitation Act. This Court held that the plaintiff had “presented evidence that it was denied a zoning permit because it cares for and/or associates with individuals who have disabilities,” and thus had standing to bring suit on its own behalf. Id. at 335 (internal citation omitted).
Relying on what it considered to be the importance of the fact that the MX Group plaintiff was a provider of services to disabled persons, unlike Plaintiff in the instant case, who is merely the property owner, the magistrate judge found that Plaintiff does not have standing to bring suit under the ADA or Rehabilitation Act. According to the magistrate judge, ACOM, “a service provider like MX Group ... would have had standing to bring an ADA and Rehabilitation Act claim on behalf of its patients/residents if [Defendant] had acted to terminate its operation at the property in discrimination against them for being disabled.” (J.A. at 147.) The magistrate judge mistakenly concluded that this “is the holding of MX Group,” and that Plaintiff does not have standing because she “does not stand in the same relationship to disabled people as the plaintiff in MX Group ... she is not a service provider dedicated to providing services to the disabled.” (J.A. at 147.)
The magistrate judge’s reasoning on this matter must fail for a number of reasons. First of all, it must fail because this was not, in fact, the holding of MX Group. As stated above, the holding of that case was that plaintiff had standing to sue under the ADA and Rehabilitation Act because “it cares for and/or associates with individuals who have disabilities.” MX Group, 293 F.3d at 335 (emphasis added). "While the MX Group Court did focus heavily on the fact that the plaintiff was a provider of services to the disabled, neither that Court, nor the court in Innovative Health Sys., Inc. v. City of White Plains, 117 F.3d 37 (2d Cir.1997), upon which the MX Group Court relied, limited the holding to those who provide services to the disabled. See Innovative Health Sys., 117 F.3d at 47 (finding that both Title II of the ADA and the Rehabilitation Act extend their remedies to “any person” alleging discrimination on the basis of a disability (ADA), or “any person aggrieved by” the discrimination against a person on the basis of his or her disability (Rehabilitation Act), thereby evincing a congressional intent to not limit standing to just the disabled person). Therefore, the magistrate judge’s conclusion that Plaintiff cannot have standing because she was not providing services to disabled persons is erroneous.
The magistrate judge’s reasoning also must fail because it misapprehends Plaintiffs argument to the court. The substance of Plaintiffs claim is that she herself suffered an injury when Defendant changed the zoning of her property to single-family residential use because of her association with disabled persons who would be the residents of a new group home that Plaintiff sought to establish on the property. The magistrate judge’s conclusion that Plaintiff does not have standing to bring suit on behalf of the former ACOM residents misses the point because Plaintiff is not suing on behalf of her former residents, but rather on her own behalf.
Moreover, the magistrate judge was also incorrect in reasoning that Plaintiff does not have standing because she never actually applied for a certificate of occupancy for other companies or individuals to establish a group home on the premises after ACOM left. The magistrate judge concluded that absent such applications and a denial of the permit by Defendant, Plaintiff does not have standing. Again, this misses the point. Plaintiff does not have to show that she applied for and was denied a certificate of occupancy after the building was rezoned, because the rezoning itself is the injury about which she is complaining. Plaintiff has already suffered the injury that forms the basis for the complaint. Defendant’s action in rezoning the property effectively prohibits Plaintiff from leasing it to individuals who would provide services to disabled persons. The rezoning is the injury, and the right alleged is Plaintiffs right to associate with disabled persons.
It should also be noted that federal courts have, on several occasions, found that landowners claiming injury as a result of discriminatory city zoning and building laws, had standing to bring suit in their own behalf. See, e.g. Village of Arlington Heights, 429 U.S. at 263, 97 S.Ct. 555 (holding that plaintiff real estate developer denied zoning permits to build low cost housing units had standing in his own right to bring suit against the city to redress defendant city’s alleged racially discriminatory purpose in denying the permits because the plaintiff had a right to “be free of arbitrary or irrational zoning ordinances.”); RK Ventures, Inc. v. City of Seattle, 307 F.3d 1045, 1055 (9th Cir.2002) (finding that former owners of a night club who brought § 1983 and First Amendment claims against the City of Seattle, challenging the city’s public nuisance ordinance, had standing in their own right under the Equal Protection clause because of the personal injury they suffered as a result of their “association with members of a protected class,” the African American patrons of the club); McElroy v. City of Corvallis, 67 Fed.Appx. 420, 422 (9th Cir.2003) (unpublished) (finding that the defendant property owner and investor had standing to sue the city because he was injured as a result of the city’s discriminatory denial of certificates of occupancy).
We therefore conclude that both Title II and the Rehabilitation Act, as interpreted by the MX Group decision, are broad enough to allow Plaintiff to bring this action on her own behalf as a property owner who wishes to lease the property to service providers in order to house and service disabled persons.
2. The Merits of Plaintiffs ADA and Rehabilitation Act Claims
Having determined that Plaintiff has standing to bring these claims, we now address the magistrate judge’s dismissal of these claims on the merits. We agree with the magistrate judge that both claims should be dismissed, although we employ a different analysis for doing so. As discussed above, both Title II of the ADA and Section 508 of the Rehabilitation Act prohibit disability discrimination by a public entity, Innovative Health Sys., 117 F.3d at 44, and Plaintiff here claims that Defendant rezoned her property to single family residential use only because it harbored the unlawful discriminatory purpose of keeping out disabled persons.
In order to state a claim under the two statutes, Plaintiff must first establish that at least some of her future tenants would in fact meet the statutory definition of disabled individuals. To demonstrate a disability under each of these statutes, Plaintiff must show that one or more of her potential residents: (1) have a physical or mental impairment which substantially limits one or more major life activities; (2) a record of having such an impairment; or (3) that they are regarded as having such an impairment. Reg’l Econ. Cmty. Action Program v. City of Middletown, 294 F.3d 35, 46 (2d Cir.2002). In the present case, however, because it involves a motion for summary judgment and Plaintiffs allegations are taken as true, we will assume for the purpose of this discussion that Plaintiffs potential tenants may be considered disabled under the ADA and proceed to the next stage of the analysis.
We analyze claims of intentional discrimination brought pursuant to the ADA and the Rehabilitation Act under the familiar burden-shifting analysis established by McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). See also Hedrick v. Western Reserve Care Sys., 355 F.3d 444, 453 (6th Cir.2004). Under McDonnell Douglas, Plaintiff must first establish a prima facie case of discrimination. McDonnell Douglas, 411 U.S. at 802, 93 S.Ct. 1817. To establish a prima facie case of discrimination under the ADA, Plaintiff must present evidence that “animus against the protected group was a significant factor in the position taken by the municipal decision-makers themselves or by those to whom the decision-makers were knowingly responsive.” Reg’l Econ., 294 F.3d at 49 (emphasis in the original); Smith & Lee Assocs., Inc. v. City of Taylor, Mich., 102 F.3d 781, 790 (6th Cir.1996) (citing Village of Arlington Heights, 429 U.S. at 270, 97 S.Ct. 555) (stating that the plaintiff must show that “discriminatory purpose was a motivating factor in the City’s decision” to rezone her property). Plaintiff need not establish that Defendant’s actions were based solely on a discriminatory purpose or even that a discriminatory purpose was the dominant or primary one for rezoning the property. See Arlington Heights, 429 U.S. at 265, 97 S.Ct. 555; Smith & Lee Associates, 102 F.3d at 791; United States v. City of Parma, Ohio, 661 F.2d 562, 575 (6th Cir.1981) (“There is no requirement that such [discriminatory] intent be the sole basis of official action, if it is a motivating factor.”). In contrast, to establish a prima facie case of discrimination under the Rehabilitation Act, Plaintiff “must show that [Defendant rezoned her property] solely because of the disability.” Reg’l Econ., 294 F.3d at 49 (citations and quotations omitted) (emphasis added).
Discriminatory intent may be inferred from the totality of circumstances and a number of sources, including the historical background of the decision; the specific sequence of events leading up to the challenged decision; departures from the normal procedural sequence; and the legislative history and contemporary statements by members of the decision-making body. Arlington Heights, 429 U.S. at 267-68, 97 S.Ct. 555; Reg’l Econ., 294 F.3d at 49. We pay particular attention to legislative or administrative history, “especially where there are contemporary statements by members of the decisionmaking body, minutes of meetings, or reports.” Arlington Heights, 429 U.S. at 268, 97 S.Ct. 555.
Once a plaintiff establishes that the defendant’s “decision was motivated at least in part by discriminatory animus, the burden shifts to the defendant to prove that it would have made the same decision even if it had not been motivated by an unlawful purpose.” Smith & Lee Assocs., 102 F.3d at 791 (citations omitted); Reg’l Econ., 294 F.3d at 49 (“If the plaintiffs make out a prima facie case, then the burden of production shifts to the defendants to provide a legitimate, nondiscriminatory reason for their decision.”). Proof that the decisions were motivated in part by a discriminatory purpose will not necessarily require invalidation of the challenged legislative action. Smith & Lee Assocs., 102 F.3d at 791. If the defendant meets its burden of showing that it would have made the same decision even if not motivated by an unlawful purpose, then the plaintiff must introduce evidence showing that the proffered reason is pretextual. See Hedrick, 355 F.3d at 453. “Under this scheme, the plaintiff retains the ultimate burden of persuasion at all times.” Id.; see also Reg’l Econ., 294 F.3d at 49 (“The plaintiffs must then prove that the defendants intentionally discriminated against them on a prohibited ground.”).
First of all, Plaintiff cannot make out a prima facie case of discrimination under the Rehabilitation Act because she cannot prove that discrimination was the sole motivation for Defendant’s rezoning of her property. On the contrary, there is ample evidence in the record that Defendant’s decision to rezone Plaintiffs property was motivated by other factors including concern for the safety and welfare of the residents of the facility and the community. Our analysis of the Rehabilitation Act claim thus concludes here.
On the other hand, we will assume, without deciding, that Plaintiffs allegations make out a prima facie case of discrimination on the ADA claim. It is undisputed that mentally disabled persons resided at the property while ACOM was present and that these disabled persons, under ACOM’s care, caused some problems for Defendant such that Defendant may not have wanted the property to continue to house disabled residents. Therefore, we take Plaintiffs allegations as true in this regard and proceed to a discussion of the pretext prong of the analysis.
Under McDonnell Douglas, the burden now shifts to Defendant to proffer a legitimate, non-diseriminatory reason for the rezoning, and to establish that it would have made the same decision even if not motivated by discriminatory animus. Defendant meets that burden here. See Smith & Lee Assocs., 102 F.3d at 794 (finding that the defendant was entitled to summary judgment where defendant had proven by a preponderance of the evidence that it would have denied plaintiffs zoning petition anyway because the members of the city council were all on record as being opposed to spot zoning). Defendant offers two non-discriminatory reasons for its decision to rezone Plaintiffs property to single family use only. First, Defendant argues that the decision was motivated in party by a land use plan for the neighborhood that called for residential use only in the area. Defendant claims that the area had become increasingly residential and that the new land use plan did not allow for the operation of group homes like that run by Plaintiff in the area. Defendant secondly claims that it rezoned the property out of concern for the safety and welfare of the community and the potential residents of the building. We believe that Defendant’s stated non-discriminatory reasons, particularly the second explanation, are supported by the record.
It is undisputed that there were over one hundred emergency calls to the property during the time that Plaintiff allowed the former tenant, ACOM, to operate its adult group home at Turner Villa. There were numerous injuries to residents, violent attacks, fires, and incidents of the ACOM residents panhandling in the neighborhood and trespassing on other properties in the neighborhood. There was even a disturbance in which Plaintiff barricaded herself inside the offices of the building and refused to give the ACOM staff access to their records and files. The police, along with various other state and local agencies responded to the incident, in an effort to ensure the safety of the ACOM residents. Under these circumstances, we cannot say that Defendant would not have made the same decision to rezone Plaintiffs property even if it were not partially motivated by discriminatory animus.
Once Defendant presented to the court its non-discriminatory reasons for the zoning action, the burden then shifted back to Plaintiff to present evidence that Defendant’s proffered reasons are pretextual. Plaintiff failed to meet this burden, and as a result, summary judgment was appropriate. Plaintiff did not offer in the district court, nor does she present on appeal, sufficient evidence to dispute Defendant’s claim that it would have made the same zoning decision absent discriminatory animus. Instead, Plaintiff concedes that there were numerous problems at the building, but merely contends that Defendant should be well-equipped and capable of handling such emergencies. Plaintiff also does not offer any evidence that Defendant’s statements about the land use plan for the neighborhood are pretextual. Presented with such evidence from Plaintiff, we may have been inclined to reverse the district court’s grant of summary judgment as being premature; however, under McDonnell Douglas, we cannot do so unless Plaintiff rebuts Defendant’s proffered explanation, which she has failed to do.
We are not able to conclude from the evidence presented, that Defendant’s animus was directed at Plaintiff because of her association with disabled persons, rather than because of Plaintiffs poor management and supervision of her property. Plaintiffs only evidence that Defendant might harbor some discriminatory animus towards the disabled is a February 9, 2001 letter in the form of a staff report from the Director of Community Development addressed to the mayor and city council. The letter stated in relevant part that “[t]he City was ecstatic when a new proposal was presented to replace the former nursing home use by a licensed rest home ... What we got instead was an adult group home and disturbed clients with personality profiles in no way similar to those of a nursing home.” (J.A. at 1127.) The letter then goes on point out that the city has no way of knowing who the next residents may be, and to suggest that it might be in the public interest to rezone the property to single family use only.
While we believe that the February 9, 2001 letter may have helped Plaintiff establish a prima facie case of discrimination (although we still decline to decide the matter here), we do not believe that the letter is enough to rebut Defendant’s explanation that it would have made the same decision even if not motivated by discriminatory animus, particularly as the letter specifically refers to ACOM’s misrepresentations about the nature of the facility that it intended to run. Plaintiff presents no other evidence of discrimination on the part of Defendant towards disabled persons, or discriminatory statements made by members of the city council or zoning board; nor does she offer evidence that would lead us to conclude that Defendant treated Plaintiff differently from other similarly situated property owners in the area. As a result, we decline to find that the magistrate judge erred in granting Defendant’s motion for summary judgment.
IV.
|
4160930-6725 | OPINION
PER CURIAM.
In June 2012, Wayne Prater filed suit, pro se and in forma pauperis, against the Philadelphia Family Court, two of its judges and their secretaries, and two custody masters. He alleged that the Family Court refused to give him access to his children and violated his parental rights and his rights under the Sixth' and Fourteenth Amendments. Prater asserted that he sought custody of his children beginning in April 2011, but the date for a custody hearing had been delayed repeatedly because he had conflicts, a custody master did not call his prison to set up a videoconference, and the Family Court set new hearing dates months in advance. Also, he claimed that the judges’ secretaries never forwarded to the judges his letters requesting a sooner hearing date. Prater additionally alleged that, during the time period when he was seeking custody, his child was given a medication without his consent.
Prater sought an injunction “to get in Family Court for [his] custody rights and stop the continuous violation of [his] constitutional and parental rights by the Philadelphia Family Court.” He explained that he needed a hearing date in Family Court before his scheduled date of November 19, 2012. He further requested that if an injunction could not be issued, he would like an unspecified damages award.
The District Court immediately dismissed part of Prater’s complaint under 28 U.S.C. § 1915(e)(2)(iii). Specifically, the District Court ruled that the Philadelphia Family Court was entitled to sovereign immunity, and that the Family Court judges were entitled to absolute immunity. After the complaint was served, the remaining four defendants filed a motion to dismiss, asserting that Prater had described no claim that sounded in the Sixth Amendment and had not alleged their personal involvement in any actions that had allegedly wronged him. The defendants additionally argued that even if he succeeded in alleging they were involved, they were entitled to qualified immunity because they could have reasonably believed their actions were lawful. Prater opposed the motion and sought the appointment of counsel. Six months later, in August 2013, he also requested leave to amend his complaint, seeking to add the custody master who had terminated his parental rights after the filing of his complaint. He stated that the decision was not based on evidence and that the custody master showed “bias, ill will, and prejudice, in violation of constitutional and state laws” and caused irreparable harm to his son’s health in terminating his parental rights without evidence to warrant termination.
The District Court granted the defendants’ motion and denied Prater’s. The District Court explained that the Rooker-Feldman doctrine prohibited suits to challenge the judgments of state family courts. Putting aside the Family Court judgment, the District Court ruled that the custody masters and judicial secretaries were also immune from suit. The District Court further held that Prater’s request for relief in securing a hearing date to stop the violation of his rights was moot. Lastly, the District Court concluded that amendment was futile. Prater appeals.
We have jurisdiction pursuant to 28 U.S.C. § 1291, and we may affirm on any basis supported by the record, see Erie Telecomms., Inc. v. City of Erie, 853 F.2d 1084, 1089 n. 10 (3d Cir.1988). We exercise plenary review over the orders dismissing Prater’s complaint. See Allah v. Seiverling, 229 F.3d 220, 223 (3d Cir.2000); McGovern v. City of Phila., 554 F.3d 114, 115 (3d Cir.2009); Turner v. Crawford Square Apts. III, L.P., 449 F.3d 542, 547 (3d Cir.2006) (“Our review of the district court’s application of the Rooker-Feldman doctrine is plenary.”). We review the denial of leave to amend and the denial of appointment of counsel for abuse of discretion. See Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir.2004); Tabron v. Grace, 6 F.3d 147, 157-58 (3d Cir.1993). Upon review, because no substantial issue is presented on appeal, we will summarily affirm the District Court’s judgment. See 3d Cir. L.A.R. 27.4; 3d Cir. I.O.P. 10.6.
To the extent that Prater sought injunctive relief, essentially, an order for a hearing date in Family Court before the scheduled date in November 2012, his complaint was mooted by the passage of time. A federal court does not have the power to decide moot questions. See North Carolina v. Rice, 404 U.S. 244, 246, 92 S.Ct. 402, 30 L.Ed.2d 413 (1971). Article III requires a live case or controversy throughout the entire litigation; if no live controversy exists, the court must dismiss the case for lack of jurisdiction. See Lusardi v. Xerox Corp., 975 F.2d 964, 974 (3d Cir.1992). Accordingly, the District Court appropriately dismissed Prater’s complaint as moot to the extent it sought injunctive relief.
Furthermore, the Family Court was entitled to sovereign immunity from suit, as the District Court concluded. See Benn v. First Judicial Dist. of Pa., 426 F.3d 233, 235 n. 1 & 241 (3d Cir.2005). The two judges named as defendants were immune to suit for damages for the alleged actions in their judicial capacity, even if any action taken “was in error, was done maliciously, or was in excess of [ ] authority.” Stump v. Sparkman, 435 U.S. 349, 356, 98 S.Ct. 1099, 55 L.Ed.2d 331 (1978). Likewise, the custody masters, acting on a judicial matter in a capacity functionally equivalent to judges, were immune from suit. See Forrester v. White 484 U.S. 219, 225-26, 108 S.Ct. 538, 98 L.Ed.2d 555 (1988) (describing the extension of judicial immunity to others who perform judicial, quasi-judicial, and prosecutorial functions); Gallas v. Supreme Ct., 211 F.3d 760, 772-73 (3d Cir.2000) (explaining that judicial employees acting as intermediaries for judges or “functioning as an arm of the court” are protected by judicial immunity). To the extent the judicial secretaries were acting on their judges’ instructions, they were entitled to immunity as well. See Gallas, 211 F.3d at 772-73. To the extent that Prater included allegations of secretarial actions beyond that role, we conclude that he failed to state a Sixth or Fourteenth Amendment claim upon which relief can be granted.
Also, it cannot be said that the District Court abused its discretion in denying Prater leave to amend his complaint. Rule 15 of the Federal Rules of Civil Procedure
provides that leave to amend should “be freely given when justice so requires.” However, a district court may exercise its discretion and deny leave to amend on the basis of undue delay, bad faith, dilatory motive, prejudice, or futility. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir.1997) (citations omitted).
|
6083399-16640 | Market, Chief Judge.
This is an appeal by the Government from a judgment of Abe United States Customs Court, 76 Cust. Ct. 70, C.D. 4637, 411 F. Supp. 779 (1975), sustaining Ataka's protest of the classification of imported goods known as fiberscopes under item 709.05, Tariff Schedules of the United States (TSUS), as “Other” optical instruments. Ataka claimed, and the Customs Court held, classification to be proper under item 709.17, TSUS, as “Other” electro-medical apparatus. We reverse.
The involved TSUS provisions are:
Medical, dental, surgical and veterinary instruments and apparatus (including electro-medical apparatus and ophthalmic instruments), and parts thereof:
Optical instruments and appliances, and parts thereof:
*******
709.05 Other_ 25% ad vaL
*******
Other:
* * * * * * *
Electro-medical apparatus, and parts thereof:
*******
709.17 Other_ 6% ad val.
Description of the Goods
The imported goods were invoiced as “Olympus Upper GI Photo fiberscopes, Model GIF-D, without. CLE and FIT,” that is, direct vision (-D) gastrointestinal fiberscopes without accessory fight source-power supply or medical camera.
We reproduce the accurate and concise description of the goods which appears in the Customs Court opinion, with the addition of an illustrative figure taken from Ataka’s catalog:
From the exhibits and the testimony introduced, it appears that the instrument in question, commonly referred to as a fiber-scope, consists of three major parts: a flexible insertion tube, a control unit, and a fight guide portion. The tube portion of the instrument, designed to be inserted through the mouth and throat of the individual for the purpose of examining the esophagus, stomach and gastrointestinal areas of the body, consists of six channels: (1) a channel for suction, biopsy and cytology purposes; (2) a channel for visual observation consisting of the lens and a bundle of glass fibers; (3) and (4) channels for fight illumination; (5) a channel for water, and (6) a channel for air.
The second portion of the instrument, referred to as a control unit, possesses an angle control mechanism which directs the tip of the fiberscope and also includes a mechanism for the control of air, water and suction, a biopsy port or opening and an eyepiece lens. The third portion of the instrument, a light guide portion, can be attached to a light source and power supply — a separate instrument described as model CLE. The power supply unit, although not a part of the imported merchandise in question, is suitable only for use with the fiberscope and provides the electricity required for the production of light and the operation of the instrument. The medical camera, referred to as FIT, although not a part of the imported merchandise in question, likewise is suitable only for use with the fiberscope. The light which is produced initially in the power supply unit is transmitted through the bundle of glass fibers within the fiberscope providing the illumination necessary for visual observation as well as the utilization of the other capabilities of the instrument hereinbefore described.
From the expert medical testimony presented at the trial of the within action, all witnesses agreed that the extent of use of the additional capabilities of the instrument in question depended in large part upon the custom and practice in each individual hospital. Although the defendant’s medical witness indicated that in the New York Veterans Administration Hospital the use of the biopsy and photographic capabilities of the instrument was not as extensive as elsewhere, the medical testimony of the plaintiff supports the finding that in all instances in which the fiberscope is used for diagnostic purposes by that witness, the biopsy, cytology, suction and photographic capabilities of the instrument in question, are utilized from 80% to 100% of the time it is in operation.
It was further pointed out in the medical testimony presented that whereas the single function of an instrument such as an endoscope permits only a direct observation of the stomach and gastrointestinal areas, the added functions and capabilities of the fiberscope have caused an advancement in medical techniques which previously had been unknown and unavailable and which ultimately will permit further advanced techniques — not only diagnostic but also therapeutic in character. [76 Cust. Ct. at 70, 411 F. Supp. at 780-81].
The Customs Court
The Customs Court, relying upon our opinion in United States v. Oxford International Corp., 62 CCPA 102, C.A.D. 1154, 517 F. 2d 1374 (1975), framed the determinative question to be: “does the article possess ‘a second significant function * * * justifying the application of the “more than” doctrine.’ ” Noting that the subject fiberscopes, in addition to their optical function, possessed the additional functions of enabling the performance of biopsies, cytologies, and photography, the court held the fiberscopes to be “more than” medical-optical instruments:
Having determined tbe liquidation classification to bave been improper, tbe court beld that tbe Government bad admitted tbe correctness of Ataka’s claimed classification in its pleadings. Both portions of Ataka’s dual burden of proof were thus found to bave been satisfied.
Arguments
Tbe Government argues that tbe Customs Court ignored botb statutorily and judicially stated law in fading to sustain tbe classification of tbe subject fiberscopes as “Other” optical instruments. It urges that tbe fiberscopes fulfill tbe statutory definition of optical instruments in beadnote 3 and tbe judicial definition thereof in Engis Equipment Co. v. United States, 62 Cust. Ct. 29, C.D. 3670, 294 F. Supp. 964 (1969). Moreover, tbe Government argues, tbe •Customs Court failed to consider General Interpretative Hule 10(c) (ii) in its application of tbe “more than” doctrine. Tbe Government’s position is that because Buie 10(c) (ii) requires a comparison between tariff provisions of equal status, tbe Customs Court should bave compared tbe immediately preceding superior headings to items 709.05 and 709.17. Such a comparison would have resulted in •comparing “Optical instruments * * *: * * * Other” with “Other * * * Electro-medical apparatus:” i.e., non-optical instruments. Tbe Government argues that a fiberscope “cannot be botb 'more than’ •optical, i.e., containing at least one optical feature, and 'other’ than optical, i.e., containing no optical feature.” Accordingly, tbe Government contends that tbe Customs Court failed to perceive the correct legal issue herein.
In support of tbe Government’s position, American Cystoscope Makers, Inc., as amicus curiae, points out that tbe superior beading to items 709.05 and 709.17, TSUS, is virtually identical to Section ■90.17, Brussels Nomenclature (1955), and that tbe Explanatory Notes to the Brussels Nomenclature distinguish between optical medical instruments and electro-medical apparatus.
Ataka argues that beadnote 3 (see infra) specifically excludes from the definition of optical instruments those devices in which optical features perform a subsidiary function. Ataka describes tbe primary function of the imported fiberscopes as the taking of biopsies, cytologies and photographs and the optical function as subsidiary thereto. Because the taking of biopsies, cytologies and photographs are significant non-optical functions facilitated by the fiberscope, Ataka urges that the Customs Court was correct in applying the “more than” doctrine. Additionally, Ataka argues that Congress intended that optical instruments which depend upon electricity for their operation be classified as electro-medical apparatus under item 709.17, HSUS, relying upon a statement by the Tariff Commission (Tariff Classification Study, Second Supplemental Report (1962) at 5) as indicating that otoscopes, the subject of Empire Findings Co. v. United States, 44 Cust. Ct. 21, C.D. 2148 (1960), are to be classified under item 709.17, TSUS.
OPINION
Congress, in headnote 3, Schedule 7, Part 2, has defined the term -“optical instruments”:
Part 2 headnotes:
**%%%%*
3. The term “optical instruments”, as used in this part, embraces only instruments which incorporate one or more optical elements, but does not include any instrument in which the incorporated optical element or elements are solely for viewing a scale or for some other subsidiary purpose.
Respecting headnote 3, the Tariff Glassification Study, Schedule 7 (1960) at 140 explains that:
Headnote 3 includes a definition of the term “optical instruments”. This definition was not in the draft published for public hearings. It is believed that this definition substantially conforms with existing customs practice.
“Existing customs practice” was summarized by the Customs Court in Engis, supra. Therein, the Customs Court found the following characteristics necessary to qualify a device as an “optical measuring instrument” ;
First, the device must function in such manner that employment of its optical features is dominant or primary, as compared to the role of its other components.
% * ^ sfc & #
Second, the device’s optical elements must be essential to its operation; that is, to be considered an optical measuring instru ment, the device cannot be operated in its intended manner without the optical components.
$ * * * * * *
Third, optical measuring instruments must, in performing their intended function of measurement, act upon, deal with, or route rays of light. This interaction between light and such optical elements as lenses, prisms and mirrors normally manifests itself in divergence, convergence, reflection, polarization, or merely conveyance of light rays.
íjí vj. ^5 ^ ^5
Finally, the optical system of the instrument must aid human vision or create for inspection a picture or image of some object. [62 Cust. Ct. at 32, 294 F. Supp. at 966-67, citations omitted].
None of the foregoing criteria is determinative in every case, but they are useful in determining the statutory meaning of “optical instrument (s) ” [2] Broadly, therefore we conclude that the term “optical instrument(s)” encompasses devices which act upon or interact with light, which permit or enhance human vision through the use of one or more optical elements, and, in light of headnote 3, which utilize the optical properties of the device in something beyond a “subsidiary” capacity. See United States v. American Machine & Metals, Inc., 29 CCPA 137, C.A.D. 183 (1941).
Considering first the insertion tube, it is clear that five of its six channels, interact with light or function solely or primarily to permit or enhance human vision. One channel, the viewing channel, functions solely to provide a visual image of the viscus under examination, permitting visualization of an area otherwise impossible to view with the naked eye. Two other channels function solely to introduce light without which vision would be impossible. A fourth channel operates to direct water across the objective lens of the viewing channel to maintain freedom from vision-obstructing matter. A fifth channel, the air channel, operates to insufflate the viscus during examination and to keep the wall of the organ from pressing against the lens and destroying vision.
The sixth channel, the suction channel, also aids the viewing function. In addition to providing a passageway for biopsies and cytologies, the suction channel is used for extracting fluid from the organ which would otherwise impair vision.
A control unit operates to position the distal tip of the insertion tube, allowing the viewer to observe the desired portion of the viscus under examination. The control unit also regulates water, air and suction which, as above indicated, aid the viewing lunction. Though tbe suction control permits biopsy and cytology samples to be taken, tbe control unit, in major part, operates as an integrant to tbe viewing function of tbe device.
Similarly, tbe light guide portion, designed to be attached to a light source — power supply, directs tbe light essentially to aid tbe viewing function.
It remains to be determined whether, as Ataka argues, tbe optical features of tbe instrument act in a subsidiary capacity to tbe biopsy-cytology functions, thereby excluding tbe fiberscopes from classification as “optical instruments,” pursuant to headnote 3.
Testimony adduced at trial established that visualization is essential in tbe performance of biopsies and cytologies with tbe imported fiberscope. Ataka’s argument that, in tbe performance of biopsies and cytologies, tbe optical function is subsidiary to tbe biopsy-cytology operation, though supported in part by tbe opinion testimony of one witness, is without merit. Tbe imported device must be considered as a whole. Whether a feature be dominant or subsidiary cannot be determined by isolating a particular employment of tbe device. Tbe use frequency of the biopsy and cytology capabilities of tbe fiberscopes varied from physician to physician and from hospital to hospital. It was undisputed, however, that all who used tbe instrument, for any purpose, used it to view tbe interior of a body organ. Depending upon tbe situation, that visual operation may be all that is performed. It is only after visual examination that a decision to take a biopsy or cytology specimen can be made.
To term optical features merely subsidiary to biopsy-cytology features, when tbe latter require tbe former, and when tbe latter are not always used and tbe former are always used, would be contrary to reason. Accordingly, we bold tbe imported fiberscopes meet tbe definition of “optical instruments” in headnote 3. Ataka, however, urges that tbe imported fiberscopes are “more than” optical instruments.
In resolving questions of classification, tbe primary inquiry is focused on tbe competing tariff provisions. General Interpretative Rule 10(c) (ii) requires a comparison between tariff provisions of coordinate or equal status. Tbe main superior provision, “Medical * * * instruments and apparatus,” is modified by two co-equal provisions: “Optical instruments * * *” and “Other”. Tbe first comparable provision, “Optical instruments” culminates in an all-inclusive provision “Optical instruments * * *: * * * Other”. Consequently, tbe structure of tbe statute reveals that tbe provision “Optical instruments * * *: * * * Other” is exhaustive; that is, it embraces all other optical medical instruments and apparatus not specifically provided for. The second comparable provision, “Other” embraces non-optical medical instruments and apparatus. Thus, the question is not whether the imported fiberscopes are “more than” optical instruments but, rather, whether the imported fiberscopes are “Other” than optical instruments. See also Friedman v. United States, 50 CCPA 53, C.A.D. 819 (1963), and Nevco Furniture Corp. v. United States, 76 Cust. Ct. 75, C.D. 4638 (1976).
The resolution of that issue is clear from its mere statement. As pointed out supra, the subject fiberscopes fulfill the Congressional definition of “optical instruments” contained in headnote 3. The subject fiberscopes cannot be both “Optical instruments,” as defined by Congress, and something “Other” than “Optical instruments.” We conclude, therefore, that the subject fiberscopes were properly classified under item 709.05, TSUS, as “Optical instruments * * *: * * * Other.”
Appellee having failed to sustain its burden of overcoming the presumption of correctness of the original classification, its arguments in support of the claimed classification need not be discussed.
The judgment of the Customs Court is reversed.
Baldwin, Judge, dissents.
Though the Government argues strongly against the presence of any binding admission, we need not and do not reach that issue herein.
The Rule provides:
10. General Interpretative Rules. — Ror the purposes of these schedules—
(c) an imported article which is described in two or more provisions of the schedules Is classifiable In the provision which most specifically describes it; but, in applying this rule of interpretation, the following considerations shall govern:
(ii) comparisons are to be made only between provisions of coordinate or equal status, i.e., between the primary or main superior headings of the schedules or between coordinate inferior headings which are subordinate to the same superior heading;
Ataba presented an additional argument to the effect that item 709.05, TSUS, was not intended to cover instruments which depend upon electricity for their operation. The opinion of the Customs Court mates no reference to this argument. We find it without merit.
|
29496-20157 | HARLINGTON WOOD, Jr., Circuit Judge.
Plaintiff-appellant Alex Benson, an inmate at Waupun Correctional Institution [WCI] in Waupun, Wisconsin, appeals from the district court’s dismissal pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure of his eighth amendment claim that defendants were deliberately indifferent to his physical safety needs and serious medical needs and his pendent state claims arising out of the same facts. Named as defendants were Cady, then Administrator of the Division of Corrections for the State of Wisconsin; Israel, then Warden at WCI; Manthe, Director of Treatment at WCI; Whitmore, Director of the Bureau of Institutional Health Services for the State of Wisconsin; and Mokrohiski, MacLean, Ka-yute, Bergen, Blevins, and Kliese, physicians at WCI and Dodge Correctional Institution [DCI] at all times relevant to Benson’s claim.
I.
The allegations of Benson’s amended complaint in support of his eighth amendment claim of deliberate indifference to his safety and serious medical needs are as follows. Sometime between February 22 and February 25, 1981, one of the weights on the barbell exercise equipment that Benson was using at the institution slipped off and struck him in the neck, head, and shoulder area of his body. The lock and screw designed to hold the weight on the equipment were missing. Defendants Cady, Manthe, and Israel failed to have the equipment inspected and repaired. Although Benson filed a request for medical attention on the same day he sustained this injury to his neck, he did not see a physician until two days later.
Benson further alleged that he was assigned to a double cell pursuant to a policy promulgated by defendants Cady and Israel and implemented by defendant Manthe. The conditions in the cell were such that Benson’s living space during the day consisted of the area normally occupied by his bed, which was held in its daytime vertical position by two large hooks. One of these hooks was missing. Sometime between March 14 and March 18, 1981, the remaining hook failed, and the bed fell from its vertical position and struck Benson in the neck. Defendants Cady, Israel, and Manthe failed to have the bed inspected and repaired. Again, Benson filed a request for medical attention on the day of the accident but did not receive that attention until two days later. Benson’s neck was not X-rayed until one year after this accident. These delays in treatment were alleged to be attributable to the failure of defendants Israel, Cady, and Whitmore to implement an emergency health care system for the efficient and speedy diagnosis and treatment of injuries. Additionally, de fendants Cady, Israel, and Manthe instituted a policy of handcuffing inmates during medical examinations. The implementation of this policy in Benson’s case interfered with the evaluation and treatment of his injury.
Defendants Whitmore, Mokrohiski, and MacLean allegedly failed to ensure that Benson received all medication prescribed for him by physicians at the University of Wisconsin Hospital in February, 1981 and in May, 1981, and by physicians at the institution in March, 1981 and April, 1981. These defendants further failed to ensure that Benson received all traction prescribed for him in March, August, and November of 1981 and in February of 1982. Defendants Whitmore, Kayute, Bergen, and Blevins did not ensure that Benson received all medication prescribed for him by University of Wisconsin Hospital physicians in November, 1981, and did not ensure that he received the cervical collar prescribed in February, 1981. Defendant Kliese prescribed a psychiatric drug rather than the muscle relaxant and pain reliever Benson needed.
Additionally, Benson alleged that defendant Israel failed to authorize visits to Wau-pun Memorial Hospital for prescribed physical therapy on ten of the twenty days in March and April of 1981 for which it was scheduled. And, although Israel authorized Benson’s visits to Waupun Memorial Hospital for physical therapy on ten days in March and April of 1981, he refused to permit Benson to stay for both scheduled therapy sessions. Finally, on May 6, 1982, Benson was returned to a double cell pursuant to the policy of defendants Cady and Israel, a move that further aggravated his injuries.
As a result of the acts and omissions of defendants, Benson allegedly sustained injuries to his neck, right shoulder and right arm, some of which are permanent and will require further treatment. These injuries allegedly have restricted his ability to function in his trade as a tailor and precluded his enjoyment of certain enumerated activities.
Benson’s second claim is that defendants Cady and Israel have promulgated a racially discriminatory double celling policy. This discrimination claim, the claim against Israel for refusing to authorize Benson’s visits to a local hospital for prescribed physical therapy, and a pendent state claim based upon this conduct by Israel survived the motion to dismiss. The eighth amendment claims against all other defendants and the remaining pendent state claims were dismissed, erroneously Benson argues.
II.-
We pause for a moment to articulate our standard of review and some general principles applicable to eighth amendment tort actions. Benson’s amended complaint, which was drafted by an attorney, is not entitled to the protection afforded pro se complaints under Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972). Rather, the sufficiency of the amended complaint is to be appraised under the standard set forth in Conley v. Gibson, 355 U.S. 41, 42, 45-46, 78 S.Ct. 99, 100, 101-102, 2 L.Ed.2d 80 (1957):
[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.
Although the Federal Rules of Civil Procedure do not require a plaintiff “to set out in detail the facts upon which he bases his claim,” id. at 47, 78 S.Ct. at 102, he must “set out sufficient factual matter to outline the elements of his cause of action or claim, proof of which is essential to his recovery.” Daves v. Hawaiian Dredging Co., 114 F.Supp. 643, 645 (D.Haw.1953) (quoted in Sutliff, Inc. v. Donovan Companies, Inc., 727 F.2d 648, 654 (7th Cir. 1984)). If the factual allegations narrated in the complaint are insufficient to outline an eighth amendment violation, attaching to these facts the bare legal conclusion that defendants were deliberately indifferent will not save the complaint. Id.
A section 1983 action is a tort damage action even though the duty the defendant is alleged to have breached is created by the Constitution or federal law. Lossman v. Pekarske, 707 F.2d 288, 290 (7th Cir.1983). The elements of a cause of action under section 1983 are (1) a constitutionally recognized duty on the part of the state to conform to a certain standard of conduct for the protection of others against an unreasonable risk of harm; (2) a failure to conform to that standard; (3) a causal connection between the state’s failure and the plaintiff’s injury; and (4) actual damage. Jackson v. Byrne, 738 F.2d 1443, 1446 (7th Cir.1983) (duty); Parrett v. City of Connersville, Ind., 737 F.2d 690, 695 (7th Cir.1984) (causal connection); Lossman, 707 F.2d at 290-91 (actual damage).
It is axiomatic that a plaintiff can prove no deprivation of his constitutional rights under section 1983 unless the state has a constitutionally recognized duty to protect the plaintiff. Jackson, 738 F.2d at 1446. We have stated that, as a general rule, the Constitution, which is a “charter of negative liberties,” does not require the state to provide even elementary protective services to its citizens. Bowers v. DeVito, 686 F.2d 616, 618 (7th Cir.1982). See also Beard v. O’Neal, 728 F.2d 894, 899 (7th Cir.1984). But if the state has created a custodial or other special relationship with a particular class of individuals, courts have recognized that the state may have a constitutionally recognized “affirmative duty” to provide certain “elementary protective services.” Jackson, 738 F.2d at 1446-47. Prison inmates represent one such class. In Estelle v. Gamble, 429 U.S. 97, 104-06, 97 S.Ct. 285, 291-92, 50 L.Ed.2d 251 (1976), the Supreme Court recognized a constitutional duty on the part of the state not to be deliberately indifferent to the medical needs of its prison inmates. Although this eighth amendment duty has been phrased negatively by the Supreme Court, we have stated that the state has an affirmative obligation “to provide persons in its custody with a medical care system that meets minimal standards of adequacy.” Wellman v. Faulkner, 715 F.2d 269, 271 (7th Cir.1983).
The eighth amendment duty articulated in Estelle has not been limited to elementary services necessary to protect inmates’ health. The state also has a duty to protect inmates from unwarranted physical injury. Deliberate indifference on the part of prison officials to violent attacks and sexual assaults by other inmates is proscribed by the eighth amendment. Walsh v. Brewer, 733 F.2d 473, 476 (7th Cir.1984); Ramos v. Lamm, 639 F.2d 559, 572 (10th Cir.1980), cert. denied, 450 U.S. 1041, 101 S.Ct. 1759, 68 L.Ed.2d 239 (1981); Little v. Walker, 552 F.2d 193, 197 (7th Cir.1977), cert. denied, 435 U.S. 932, 98 S.Ct. 1507, 55 L.Ed.2d 530 (1978).
It has long been established, however, that negligence, evidenced by, inter alia, simple inattention or inadvertence, may not form the basis for an eighth amendment claim. See, e.g., Estate of Davis v. Johnson, 745 F.2d 1066, 1070 (7th Cir.1984); United States ex rel. Miller v. Twomey, 479 F.2d 701, 719-21 (7th Cir. 1973), cert. denied, 414 U.S. 1146, 94 S.Ct. 900, 39 L.Ed.2d 102 (1974). A plaintiff must- prove deliberate indifference, evidenced by either actual intent or reckless disregard. Little, 552 F.2d at 197. Although the term “actual intent” is self-explanatory, reckless disregard is not. A defendant acts recklessly when he disregards a substantial risk of danger that either is known to him or would be apparent to a reasonable person in his position. Recklessness is characterized by highly unreasonable conduct or a gross departure from ordinary care in a situation where a high degree of danger is apparent. Prosser, Law of Torts § 34, at 185 (4th ed. 1971). The standard is an objective one. Little, 552 F.2d at 197. Although subjective unawareness of the risk is no defense, the risk must be foreseeable. Indeed, risk is defined as a recognizable danger of injury. Prosser, § 31, at 145. The risk also must be substantial.
Accordingly, we have held, in the context of an alleged failure by correctional offi- ciáis to protect a prisoner from the risk of attack, that the plaintiff must prove that the officials knew or had reason to know there was a “strong likelihood” that violence would occur. Estate of Davis, 745 F.2d at 1071. Where assaults occur so frequently as to be “pervasive,” a substantial risk of violence is apparent. Walsh, 733 F.2d at 476. Conversely, random acts of violence provide no basis for a finding of a substantial, foreseeable risk of harm.
The principles we have set forth provide the basis for determining whether a plaintiff has suffered a deprivation of his eighth amendment right to be free from cruel and unusual punishment. Of course, if no deprivation has occurred, the issues of causation and actual damage need not be addressed.
The theory behind the “bed and barbell” portion of Benson’s eighth amendment claim is that he has a right to be protected from physical injury caused by dangerous and defective physical objects in the prison environment. Assuming arguendo that the state’s deliberate indifference to unreasonable risks of harm posed by an inmate’s physical environment violates the eighth amendment, Benson’s complaint is insufficient to state such a claim.
Benson contends that he adequately alleged that defendants were deliberately indifferent to his physical safety needs. We agree with the district court that the allegation that defendants failed to inspect and maintain the beds and exercise equipment is merely an allegation that defendants did not exercise due care. In other words, they were negligent. A mere failure to inspect and repair periodically defective items in the prison environment does not evidence deliberate indifference. Conversely, the knowing maintenance of a dangerous condition or the disregard of a substantial risk of danger that would be apparent to a reasonable person evidences recklessness. Benson contends that we may infer defendants’ actual or constructive knowledge of the dangerous conditions of the bed and barbells from the allegations that they “negligently permitted” one of the bed’s hooks to remain missing for seven weeks and “permitted” the defective barbells to remain unrepaired and to be used by inmates.
It is difficult to reconcile the allegation that defendants failed to inspect these items with the contention that defendants had actual knowledge of their dangerously defective conditions. Benson has not alleged that he alerted defendants to the danger or that defendants, high-ranking prison officials, observed the dangerous conditions of these items. The question remains whether Benson has adequately alleged that defendants had reason to know of the danger, i.e., whether a high degree of danger would have been apparent to reasonable persons in defendants’ positions. Although Benson contends on appeal that the defective conditions of these items were patent, he did not so allege in his complaint. Nor did he allege a pattern of injuries from similar defective items that would permit us to find that the risk of harm was foreseeable. In sum, we conclude that Benson, who has failed to allege that defendants knew or had reason to know of the risk posed by the defective bed and barbells, has failed to state a claim of deliberate indifference to his physical safety.
We turn to Benson’s eighth amendment claim that defendants were deliberately indifferent to his serious medical needs. To state a cognizable claim of cruel and unusual punishment, “a prisoner must allege acts or omissions sufficiently harmful to evidence deliberate indifference to serious medical needs.” Estelle, 429 U.S. at 106, 97 S.Ct. at 292. Deliberate indifference may be “manifested by prison doctors in their response to the prisoner’s needs or by prison guards in intentionally denying or delaying access to medical care or intentionally interfering with treatment once prescribed.” Id. at 104-05, 97 S.Ct. at 291. “Inadvertent failures to provide adequate medical care” or “negligence in diagnosing or treating a medical condition” do not rise to the level of an eighth amendment violation. Id. at 105, 97 S.Ct. at 291.
Benson alleges that, despite his immediate request for medical attention, he did not see a doctor for at least two days after each accident. Benson does not allege that the defendants named with respect to this claim — Israel, Manthe, and Whitmore — intentionally delayed his access to or refused his request for treatment. Bather, he alleges that they failed to implement an adequate system for the speedy diagnosis and treatment of injuries. Deliberate indifference “can be demonstrated by ‘proving there are such systemic and gross deficiencies in staffing, facilities, equipment, or procedures that the inmate population is effectively denied access to adequate medical care.’ ” Wellman, 715 F.2d at 272 (quoting Ramos, 639 F.2d at 575). Benson’s conclusory allegation fails to state such a claim. He has alleged no specific deficiencies in the health care system from which deliberate indifference can be inferred.
Nor has Benson stated a claim against defendant Whitmore and defendant physicians Mokrohiski, MacLean, Kayute, Bergen, and Blevins for intentionally interfering with prescribed treatment. In essence, he alleges that defendants failed in their duties to ensure that he received prescribed medications and a cervical collar. There is no allegation that defendants refused to provide prescribed treatment or in any other way deliberately interfered with prescribed treatment. Benson has stated a claim for mere negligence, which is not actionable under the eighth amendment.
Benson also alleges that defendant Kliese prescribed a psychiatric drug for him instead of a pain reliever-muscle relaxant, and that he suffered adverse side effects from the drug. Although this court has found that an allegation that the plaintiff inmate was administered penicillin despite his known allergy to that drug stated an eighth amendment claim, Thomas v. Pate, 493 F.2d 151, 158 (7th Cir.), cert. denied sub nom. Thomas v. Cannon, 419 U.S. 879, 95 S.Ct. 143, 42 L.Ed.2d 119 (1974), Benson’s allegation does not rise to a constitutional level. Benson does not allege that Kliese intentionally prescribed the incorrect medication or that he did so with the knowledge that it would harm Benson. At best, he has stated a claim for medical malpractice. Negligence in treating a medical condition is not actionable under the eighth amendment. Estelle, 429 U.S. at 105, 97 S.Ct. at 291.
Finally, Benson alleges that his neck injury was aggravated when he was returned to a cramped double cell pursuant to a policy instituted by defendants Cady and Israel and implemented by defendant Manthe. In his brief, Benson cites a number of cases in which acts or omissions by defendants that aggravated existing injuries or illnesses were held to be actionable under the eighth amendment. See, e.g., Martinez v. Mancusi, 443 F.2d 921, 924 (2d Cir.1970), cert. denied, 401 U.S. 983, 91 S.Ct. 1202, 28 L.Ed.2d 335 (1971) (guards forced inmate to walk from hospital after leg surgery in defiance of physician’s contrary instructions); Campbell v. Beto, 460 F.2d 765, 766-67 (5th Cir.1972) (prison officials refused to provide inmate with medication for known heart condition and ordered that he do hard labor, resulting in heart attack). In these cases, the plaintiffs alleged that defendants were aware of the seriousness of plaintiffs’ medical conditions and were guilty of willful and malicious acts or omissions designed to aggravate these conditions. Even if we assume that defendants Cady, Israel, and Manthe were aware of his condition, Benson has not alleged that they willfully and maliciously returned him to a double cell with the knowledge that such confinement would aggravate his injury. Benson contends that even if defendants had not specifically intended to aggravate his injuries, they nevertheless acted in reckless disregard of his well-being. As we previously discussed, a defendant acts recklessly when he disregards a substantial risk of danger that either is known to him or would be apparent to a reasonable person in his position. Benson’s complaint is devoid of allegations from which such reckless disregard may be inferred.
III.
Benson devotes a portion of his brief on appeal to a claim that defendants retaliated against him for exercising his constitutionally guaranteed right to seek judicial relief. Bounds v. Smith, 430 U.S. 817, 821, 97 S.Ct. 1491, 1494, 52 L.Ed.2d 72 (1977). The sole allegation in the amended complaint relevant to this claim was made in the context of Benson’s eighth amendment claim that, in returning him to a double cell after his neck injury, defendants aggravated that injury. This action by defendants was alleged to evidence deliberate indifference to his serious medical needs and to be “in retaliation for his lawsuit.” Noting that it did not appear that Benson wished to pursue' a retaliation claim because the allegation was included in the eighth amendment claim, the district court stated that if Benson did want to do so, he should amend his complaint or file a separate lawsuit. Benson apparently has chosen to stand on the allegation of the first amended complaint. We agree with the district court that the alleged retaliation should have been the subject of a separate claim that adequately set forth the factual allegations in its support.
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611335-7065 | WHITAKER, Judge.
The plaintiff’s suit is based upon the allegation that the Commissioner of Internal Revenue erroneously included within its in come for the year 1936 the sum of $105,600. This resulted in additional incoine and excess profits taxes and interest thereon of $27,332.71. This additional amount was paid in installments during the years 1938 to 1944. Claims for refund of these payments were duly made, each alleging the same grounds.
The first claim was rejected on September 12, 1941. The other claims have not been acted upon, but more than six months have elapsed since the dates they were filed.
The amount of $105,600 included in plaintiff’s 1936 income is the difference between the face amount of some of its bonds and the amount at which plaintiff purchased them. The Commissioner of Internal Revenue held that this difference constituted income to the plaintiff.
In 1904 plaintiff purchased a piece of property in Detroit, Michigan, which is referred to in the record as Parcel A. On January 12, 1920 it bought another piece of property in Detroit for $121,139.82, which is referred to as Parcel B, and on May 13, 1920, it purchased another piece of property in Detroit, for $45,000, which is referred to as Parcel C. It constructed a building on Parcel C during the years 1924 to 1926 at a cost of $150,033.41, and during the years 1925 to 1926 it constructed a building on Parcel B at a cost of $152,-136.18. The total amount invested in the three Parcels was $497,809.41. On November 17, 1926, plaintiff issued $500,000 of first mortgage serial bonds bearing 5% percent interest, secured by mortgages on the above property.
In the year 1932 plaintiff’s financial condition was bad. In the latter part of that year it defaulted as to a part of the sinking fund requirements on its bonds, and on May 1st of the following year it defaulted in the payment of interest thereon, and on November 1, 1933, it defaulted in the payment of the principal then due.
A bondholders’ protective committee was appointed. This committee communicated from time to time with the holders of the bonds advising them of steps which had been taken and which were in contemplation for the protection of their interests. Finally, on April 28, 1936, plaintiff wrote the holders of its bonds offering to purchase them at 60 cents on the dollar. This letter went into some detail as to the financial condition of the company. It was stated that the value of the properties securing the bonds had declined to $262,500, which was said to be 62.8 per cent of the value of the outstanding bonds. At the time there were $373,500 of bonds outstanding. A condensed balance sheet was enclosed with the letter. Two days later the bondholders’ protective committee told the bondholders that they thought the company’s offer was advantageous and advised acceptance.
By the end of September 1936 the company had purchased for $158,400 bonds of a face value of $264,000. This left outstanding bonds totalling $109,500, with accrued interest thereon in the sum of $21,081.25. The original mortgage on Parcels A, B, and C, continued as security for the bonds not purchased.
1. Plaintiff in its original petition, filed September 2, 1943, asked a judgment for the amounts paid during the -years 1937 to 1940 on account of the additional assessment. An amended petition was filed on July 3, 1945, asking a judgment for all payments made from 1938 to 1944. In its amended petition plaintiff alleges that it filed claims for refund based “on the grounds that the said sum of $105,600 * * * was erroneously included in plaintiff’s income for 1936 by the Commissioner.” In its brief plaintiff says that this amount was a gift from the bondholders to it and, therefore, was not income, under the authority of Helvering v. American Dental Co., 318 U.S. 322, 63 S.Ct. 577, 87 L.Ed. 785.
In this position plaintiff is apparently correct. In that case the court differentiated between a purchase of its bonds by a corporation on the open market and the purchase of them from the bondholders direct. In the latter case the Supreme Court held that the forgiveness of any part of a debt by a bondholder, without any consideration to him, was, of course, gratuitous and, therefore, a gift within the meaning of the statute, whether or not the motives leading to the forgiveness were of a business nature or selfish. We see no distinction between the case at bar and the case cited.
However, the defendant says that plaintiff is not entitled to rely on this ground because its claims for refund were not based thereon. Plaintiff says both in its petition and in its brief that its claims for refund were based on the broad unrestricted ground that it had realized no income in the year 1936 in connection with the reorganization of its first mortgage bond issue. We regret that we are unable to agree with plaintiff. Its claims for refund were based on the ground that it realized no income in connection with the reorganization of its bond issue, it is true, but the reason it assigned for this statement was not that its bondholders had forgiven a part of the debt it owed them.
Plaintiff’s claims for refund were on the regular form of the Bureau of Internal Revenue. Its reasons for the allowance were contained in a statement attached thereto. This was based on grounds numbered 1 and 2. The first ground read as follows:
“There was no income properly credited to taxpayer in the calendar year 1936 in connection with the reorganization of its first mortgage bond issue, effective November 1, 1936.”
Following this statement, and in explanation thereof, the claims set out there had been a shrinkage in value of the property securing these bonds of $220,309.41, and that there had been “a reduction or scaling down of indebtedness in the amount of $105,600,” resulting from the purchase of these bonds at 60 cents on the dollar. As a conclusion from these facts the refund states:
“It is believed, therefore, that since the loss of $220,309.41 is greater than the scaling down of the $105,600 in the indebtedness, there is actually a loss instead of a gain, in connection with the closed transaction arising in 1936 from a reorganization of capital structure.”
Obviously there is no suggestion therein that the $105,600 was a gift to it by its bondholders and, therefore, was not income. Nor is there any such suggestion in the alternative ground set out in the claim for refund. This ground reads as follows:
“In the alternative, should it be held that income did accrue to the taxpayer by reason of the reorganization of its first mortgage bond issue effective as of November 1, 1936, then the taxpayer realized no income in 1936 by reason of said transaction because any profit or loss realized by reason thereof would be , properly includable in the year and in the amount determined by the actual cancellation of the bonds retired by the Trustee for the bondholders in accordance with the requirements of the Michigan Public Trust Commission. No bonds were retired or can-celled in 1936.”
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1969940-7531 | TUTTLE, Circuit Judge.
This is an appeal from an interlocutory decree of the trial court sustaining the validity of claims 5 through 11 of Patent No. 2,698,761, and finding that all tools in suit made by appellants constituted infringement.
The findings of fact and conclusions of law, which set out the nature of the patent and the need sought to be filled by the alleged invention are reported at 166 F.Supp. 173, sub nom. Claypool v. Houston Oil Field Machinery Co. We shall therefore not repeat the findings and conclusions; nor is it necessary to discuss in detail the minute structural features of the devices of the parties. Briefly, the patent relates to a safety joint to be inserted in a string of production tubing in a gas or oil well, which is so constructed that it may be taken apart while thousands of feet below the surface of the ground by manipulation at the surface. This permits a skilled operator to disconnect and withdraw the tubing above such safety joint in the event such removal becomes desirable.
A safety joint that can operate only by the unscrewing of the threads by which it is connected to the tubing above or below it is unsatisfactory, and the court’s finding that there was need for a different disconnecting means is fully supported by the evidence.
Appellee’s device is designed to permit the upper part to be disconnected from the lower by the arrangement of a lug on the innerside of the lower part in juxtaposition with a corresponding slot on the surface of the upper member. This method of connecting and disconnecting pipes or tubing by use of a “<T” slot, as it is known, is not new. It in volves the movement of one part relative to the other until the lug on the one is opposite a cross-groove of the other, followed by a turn or twist until the lug is opposite a longitudinal groove extending the length of the joints to be separated. A sufficient pull will then separate the upper and lower members and complete the disconnection.
The patentees here claim to have devised a safety joint embodying this general principle which was a new and useful improvement over the prior art and which was the product of inventive genius rather than of mere skilled workmanship. They also contend that their device was wilfully copied by the alleged infringer who obtained knowledge of it before it was submitted to the patent office by devious methods involving a confidential relationship. The trial court found for the patentees on these issues as well as on the matter of infringement.
The appellant says the patent is void for want of invention and also because the patentees themselves described it publicly more than a year before filing their application by inserting a picture and description of it in a catalogue. They also deny infringement.
This is a hard fought, even a bitterly fought, suit in a crowded art. The circumstances under which the trial court, with ample basis in the record, found the appellant took advantage of the pat-entees’ design and skill, not unnaturally resulted in bitter feelings between the parties. Much of the briefs is devoted to charges of bad faith and recriminations between counsel. The parties have thus made it more difficult than usual for the court to sift out the real issues from the assertions and counter-assertions of overstatement by the parties.
Were we to determine this case solely as one between the parties, overlooking the essential fact that in patent litigation there is a public interest to be served, Long v. Arkansas Foundry Co., 8 Cir., 247 F.2d 366; Hycon Manufacturing Co. v. H. Koch & Sons, 9 Cir., 219 F.2d 353; we might be constrained to affirm the decision of the trial court. For in substantially every essential particular the court could find that appellants have taken positions somewhat contradictory to that in which they are now cast. The court found that appellants caused application for a patent to be made on this same device after learning of it from patentees; that they did not consider the prior catalogue publication sufficient disclosure to defeat their claim; they solemnly claimed that what they now say is not invention was then, in their opinion, patentable.
To the extent that such prior inconsistent conduct is relevant to issues existing solely between the parties, it gives strong support to fact findings of the trial court. Such conduct is, of course, important evidence in attacking the testimony of such an inconsistent actor himself. Where, however, the court is faced with the problem of deciding whether the requirements of the statute have been met for the granting of a patent, the conduct of the parties to the particular litigation cannot control.
Principal reliance is placed by appellants, in attacking the validity of the patent, on three patents which do not appear to have been considered by the patent office in the course of the proceedings there. These three patents have been put in tangible form for the purpose of this litigation in that working models of them are before us.
We have carefully studied the contentions of appellees as to the manner in which they claim the patented device meets the need for a safety joint in a better or more economical Waggener #2 (Waggener #1 was before the patent office). We have also carefully considered the answer to these contentions by appellants. Moreover, we have examined and re-examined the models themselves. We have activated the disengaging mechanisms. We understand fully, both from the testimony in the record, from the contentions of the parties and from working the devices themselves what it is that they accomplish. With this understanding, we are clearly of the view that claims 5-11 of the patent in issue do not disclose any invention.
It is true that we have said that “an improvement combination is patentable even though its constituent elements are singly revealed by the prior art, where * * * it produces an old result in a cheaper and otherwise more advantageous way.” Jeoffroy Mfg. Co., Inc., v. Graham, 5 Cir., 219 F.2d 511, 519. However, to be patentable, the combination of such known elements must involve something more than the skill of a trained mechanic. See Fluor Corp. v. Gulf Interstate Gas Co., 5 Cir., 259 F.2d 405, 408.
It is true that no one of the three mentioned patents combines all the features of the patentees’ tool, but together they embody all the essential features of it except such as for instance, as the use of shear pins as a locking device.
Moreover, the patentees fail to make clear to us what advantage inheres in each of the differences between the device in suit and the one covered by the prior patents. For instance, it is not shown that the use of two sealing rings rather than one is of significance, nor is it shown that it is essential or even markedly valuable for the parts to be “interlocked,” when assembled, so long as they are prevented from premature disengagement by the arrangement of the grooves and lugs (as is the case with Waggener).
Even though we could find that there was true invention in the development of this safety joint, we would also have to conclude that a patent could not issue because of the publication by patentees some eighteen months prior to filing this application for a patent. They published in the Composite Catalogue Oil Field and Pipeline Equipment in October, 1949, a line drawing of their safety joint accompanied by a description which it seems clear to us brings it within the language of 35 U.S.C.A. § 102 and § 103, supra.
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6453109-29325 | MEMORANDUM DECISION RE: ORDER TO SHOW CAUSE
LINDA B. RIEGLE, Chief Judge.
On September 5, 1995, Ibolya Rausch filed a Chapter 7 petition pro se. On her “Statement of Assistance by Non-Attorney”, she disclosed that she had paid $150 to “Jack Ferm” for assistance in filing the petition. A “Statement of Assistance by Non-Attorney Re: Filing The Bankruptcy Petition” was signed by Ferm. It failed to state his Social Security Number (“SSN”). Instead, Ferm provided his SSN to the bankruptcy court’s intake supervisor, and in the place provided for disclosure of the SSN, stated: “See Gail Intake Supervisor.” Ferm did not place his SSN on the petition, the schedules, the statement of financial affairs, or the “Chapter 7 Individual Debtor’s Statement of Intention.” Ferm also failed to provide his name, address and signature on the schedules, the statement of financial affairs, and the “Chapter 7 Individual Debtor’s Statement of Intention.” Earlier, on August 30, 1995, this Court had entered an order denying Ferm’s motion to use an identifying number other than his SSN on petitions prepared by him.
Upon a motion by the United States Trustee (“UST”) this Court ordered Ferm to show cause why he (1) should not disgorge the fee paid to him by the Debtor; and (2) should not be fined for violation of 11 U.S.C. § 110(c); and (3) should not be held in contempt of the Court’s August 30, 1995 order denying Ferm’s motion to use an identifying number other than his SSN.
The UST argued in its show cause motion that Ferm failed to provide his SSN on 17 “documents”, that he failed to state his name and address on 15 “documents”, and that failed to sign 16 “documents.” The UST argues that each failure by Ferm to provide his name, address, signature and SSN constitutes a separate violation of 11 U.S.C. §§ 110(b)(1) and (c)(1). The UST asks that Ferm be fined $24,000 ($500 for each of the 48 “documents” filed), that he be required to disgorge his fee, and that he be found in contempt of the Court’s order of August 30, 1995 denying Ferm’s motion to use an identifying number other than his SSN.
Ferm argues that he has “reasonable cause” for not placing his SSN on the documents for filing, in that public disclosure of his SSN would leave him vulnerable to SSN-related fraud and “credit theft.” He contends that disclosure of his SSN to the bankruptcy court’s intake supervisor satisfies 11 U.S.C. § 110(c), and that Congress cannot require him to make his SSN “known to the general public.” Ferm challenges § 110(c)(2) on a number of constitutional grounds, arguing that it violates his fundamental rights “to choose a calling or profession”, “to personal security” and his “right to privacy”, the Fourth, Fifth and Ninth Amendments and the “penumbral guarantees.” He contends that a heightened standard of review applies, in that public disclosure of his SSN isn’t “necessary [for] a compelling governmental interest.” Ferm also challenges § 110(c)(2) on equal protection grounds, arguing that it establishes a “class within a class” because attorneys and their employees are also “document preparers” but aren’t required to supply their SSNs. Finally, Ferm argues that § 110(c)(2) violates the Privacy Act.
Legal Discussion
A. The Right To Privacy.
There is no “right of privacy” expressly guaranteed by the U.S. Constitution. Grummett v. Rushen, 779 F.2d 491 (9th Cir.1985). The United States Supreme Court has recognized that “zones of privacy” may be created by specific constitutional guarantees which impose limits upon governmental power. Grummett, 779 F.2d at 491; Paul v. Davis, 424 U.S. 693, 712-13, 96 S.Ct. 1155, 1165-66, 47 L.Ed.2d 405 (1976).
Rights found in the “zones of privacy” are limited to those which are “fundamental” or “implicit in the concept of ordered liberty.” Roe v. Wade, 410 U.S. 113, 152, 93 S.Ct. 705, 726, 35 L.Ed.2d 147 (1973) (citations omitted). The activities related to these “zones” pertain to the intimate facets of an individual’s life in the areas of marriage, procreation, contraception, family relationships, child rearing and education. Paul v. Davis, 424 U.S. 693, 713, 96 S.Ct. 1155, 1166, 47 L.Ed.2d 405 (1976). “The Supreme Court has limited the constitutional right to privacy to interferences with a ‘person’s most basic decisions about family and parenthood ... as well as bodily integrity.’” People of State of Calif. v. F.C.C., 75 F.3d 1350, 1361 (9th Cir.1996), citing, Planned Parenthood v. Casey, 505 U.S. 833, 849, 112 S.Ct. 2791, 2806, 120 L.Ed.2d 674 (1992) (telephone number is not among the select privacy interests protected by a federal right to privacy).
The Ninth Circuit has held that the Constitution protects two types of privacy interests. “One is the individual interest in avoiding disclosure of personal matters, and another is the interest in independence in making certain kinds of important decisions.” Doe v. Attorney Gen. of the United States, 941 F.2d 780, 795 (9th Cir.1991), citing, Whalen v. Roe, 429 U.S. 589, 599, 97 S.Ct. 869, 876, 51 L.Ed.2d 64 (1977).
Privacy interests which relate to disclosure of personal matters (“informational privacy”) encompasses two areas. The first is the government’s collection and storing of information about citizens. See Whalen v. Roe, 429 U.S. 589, 605, 97 S.Ct. 869, 879, 51 L.Ed.2d 64 (1977) (State recordation in a centralized computer file of the names and addresses of persons who have obtained certain drugs). The second area is the release of information to the public or another government agency (the “public dissemination of information”). Nixon v. Adm’r of Gen. Serv., 433 U.S. 425, 97 S.Ct. 2777, 53 L.Ed.2d 867 (1977) (disclosure of private papers concerning private communications between Nixon and his family and physician); Doe v. Attorney Gen. of United States, 941 F.2d 780 (9th Cir.1991) (disclosure of medical information); United States v. Westinghouse Elec. Corp., 638 F.2d 570 (3rd Cir.1980) (disclosure of medical records). Ferm complains about the public disclosure of his SSN, and thus his arguments relate to the second area.
A SSN is not within one of the “zones of privacy” recognized as “fundamental” or “implicit in the concept of ordered liberty.” In re Turner, 193 B.R. 548 (Bankr.N.D.Calif.1996) (disclosure of SSN by document preparer does not violate preparer’s constitutional right to privacy). A SSN has nothing to do with a person’s most basic decisions about family, parenthood, or bodily integrity. [MJandatory disclosure of “one’s social security number does not so threaten the sanctity of individual privacy as to- require constitutional protection.” Doyle v. Wilson, 529 F.Supp. 1343, 1348 (D.Del.1982). See also McElrath v. Califano, 615 F.2d 434, 441 (7th Cir.1980). Not every government disclosure of personal information invokes constitutional protection. See, e.g., See People of State of Calif. v. F.C.C., 75 F.3d 1350, 1361 (9th Cir.1996) (disclosure of telephone number is not protected by the federal constitution; it is “not among the select privacy interests protected by a federal constitutional right to privacy”), citing, Planned Parenthood v. Casey, 505 U.S. 833, 849, 112 S.Ct. 2791, 2805-06, 120 L.Ed.2d 674 (1992); St. Michael’s Convalescent v. State of Calif, 643 F.2d 1369 (9th Cir.1981) (health care provider’s disclosure of cost information to public did not implicate a constitutional right of privacy).
Even where information involving a fundamental right is disclosed, however, pri vacy protection is not absolute. The right of privacy is “a conditional right which may be infringed upon a showing of proper governmental interest.” Doe v. Attorney General of U.S., 941 F.2d 780, 796 (9th Cir.1991). In determining whether the government may seek or use private information, courts balance the government’s interest in having or using the information against the individual’s interest in denying access. Id. The factors which must be considered in reaching a fair balance of the competing interests include (1) the type of information requested; (2) the potential for harm in any subsequent noncon-sensual disclosure; (3) the adequacy of safeguards to prevent unauthorized disclosure; (4) the degree of need for access; and (5) whether there is an express statutory mandate, articulated public policy, or other recognizable public interest militating toward access. Id.
Applying these factors, overall, the balance weighs on the side of permitting the public disclosure of a document preparer’s SSN under § 110. While there may be a risk that a SSN will be used fraudulently, the government’s interest in policing widespread fraud and abuse by petition preparers outweighs the preparer’s interest in denying public access to his SSN, and implicates no “fundamental” right.
The need for public access to a document preparer’s SSN is compelling, given the serious nature of the conduct to be prevented and the widespread corruption associated with document preparers. See In re Turner, 193 B.R. 548, 556 (Bankr.N.D.Calif.1996) (government has compelling interest in disclosure of petition preparer’s SSN in order to police fraud and abuse by preparers); Bowen v. Roy, 476 U.S. 693, 709, 106 S.Ct. 2147, 2157, 90 L.Ed.2d 735 (1986) (prevention of fraud is compelling interest). Requiring public disclosure of SSNs furthers the public interest by identifying unscrupulous preparers and by detecting and tracking their activities in the bankruptcy system. Alternatives to public disclosure are inadequate in that § 110(c) is not amenable to the kind of “private disclosure” sought by Ferm. Use of an alternative number such as a local driver’s license number, or private disclosure of a SSN to court personnel, would be less effective for tracking the identities of petition preparers in the nation-wide bankruptcy system.
Section 110(c) is an express statutory requirement that a petition preparer’s SSN be placed upon the document prepared for filing. Section 110(c) was enacted to “address the growing problem of bankruptcy preparers who abuse the system” and “is intended to police fraud and abuse by such preparers.” S.Rep. No. 168, 103d Cong., 1st Sess. 51 (1993). The legislative history describes § 110 as “critically needed to confront the large scale fraudulent conduct of [bankruptcy petition preparers] who prey on the poor and unsophisticated.” 140 Cong.Rec. § 14, 597-98 (daily ed. October 7,1994).
Congress has prohibited the disclosure of SSNs in select areas. For example, the use and disclosure of SSNs by state and federal agencies is limited by statute, pursuant to 42 U.S.C. § 405(c)(2)(C). And 18 U.S.C. § 2721 prohibits a State department of motor vehicles from disclosing any personal information obtained by the department, which information includes a SSN under 18 U.S.C. § 2725(3). The Internal Revenue Code, pursuant to 26 U.S.C. § 7431, allows for damage claims against the United States for disclosure of “return information” with respect to a taxpayer. And under 5 U.S.C. § 552(b)(6) (the Freedom of Information Act or “FOIA”), a government agency is permitted to withhold information in a personnel or medical file which would constitute a “clearly unwarranted invasion of personal privacy.”
Congress has chosen not to enact legislation which permits document preparers to use an alternative to the SSN, and this Court should not limit disclosure where the statute calls for none. “[W]here, as here, the statute’s language is plain, ‘the sole function of the courts is to enforce it according to its terms.’” U.S. v. Ron Pair Enter., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989), citing, Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917).
Ferm’s argument that his failure to comply with § 110 is due to “reasonable cause” is not persuasive. “Reasonable cause” to violate a statutory requirement has been found in cases where the violation is unavoidable through no fault of the violator. See, e.g.; United States v. Boyle, 469 U.S. 241, 243 n. 1, 105 S.Ct. 687, 689 n. 1, 83 L.Ed.2d 622 (1985) (stating that the IRS has recognized that “reasonable cause” for untimely filing of tax return includes unavoidable postal delays, filing return at wrong office, serious illness of the taxpayer, etc.)
Here, Ferm’s failure to comply with § 110 is not unavoidable through no fault of Ferm’s. Instead, his failure to comply with § 110 is willful, in that it is based upon his stated belief that placing his SSN on documents leaves him vulnerable to SSN-related fraud. Congress has provided protection in this area, in that 42 U.S.C. § 408(a)(7)(B) makes it a crime to use another’s SSN with the intent to deceive.
Whether or not a right is “fundamental” determines the appropriate level of constitutional scrutiny in determining whether a statute infringes upon that right. If the statute significantly infringes upon a fundamental right, the justifications for the statute are strictly scrutinized. Zablocki v. Redhail, 434 U.S. 374, 383, 98 S.Ct. 673, 679, 54 L.Ed.2d 618 (1978); Munoz v. Sullivan, 930 F.2d 1400, 1404 (9th Cir.1991). Otherwise, a statute is analyzed under the highly deferential “rational basis” standard of review applicable to most economic and social legislation. See Williamson v. Lee Optical, Inc., 348 U.S. 483, 486-88, 75 S.Ct. 461, 463-65, 99 L.Ed. 563 (1955). Under that standard, the statute is constitutional if it bears a rational relationship to a legitimate state interest. Jackson Water Works, Inc. v. Public Utilities Comm’n of State of California, 793 F.2d 1090, 1093-94 (9th Cir.1986), cert. denied, 479 U.S. 1102, 107 S.Ct. 1334, 94 L.Ed.2d 184 (1987). The party challenging the statute has the burden of proving that it is unconstitutional. Jackson, 793 F.2d at 1094. See also, Jones v. Reagan, 748 F.2d 1331 (9th Cir.1984) (legislation is presumed to be rational), cert. denied, 472 U.S. 1029, 105 S.Ct. 3505, 87 L.Ed.2d 636 (1985).
Between these two extremes, an intermediate level of scrutiny applies when a right impinged is important though not protected by the Constitution. See generally, City of Cleburne v. Cleburne Living Center, 473 U.S. 432, 440-42, 105 S.Ct. 3249, 3254-55, 87 L.Ed.2d 313 (1985). Intermediate scrutiny is used to determine the validity of laws that classify according to gender and other criteria. See, e.g., Craig v. Boren, 429 U.S. 190, 97 S.Ct. 451, 50 L.Ed.2d 397 (1976) (gender); Plyler v. Doe, 457 U.S. 202, 102 S.Ct. 2382, 72 L.Ed.2d 786 (1982) (alienage); Lalli v. Lalli 439 U.S. 259, 99 S.Ct. 518, 58 L.Ed.2d 503 (1978) (illegitimacy). A law will be struck down under intermediate scrutiny unless it can be shown that it is substantially related to an important government purpose. Stop H-3 Ass’n v. Dole, 870 F.2d 1419, 1429 n. 20 (9th Cir.1989).
The public disclosure of a SSN does not involve a “fundamental” right, and thus strict scrutiny does not apply. None of the constitutional guarantees of privacy in the recognized “zones of interest” bear any resemblance to the claimed constitutional right not to publicly disclose one’s SSN. Ferm has argued no connection between family, marriage, procreation or bodily integrity on the one hand and disclosure of a SSN on the other.
An intermediate level of scrutiny has been applied in cases involving financial disclosure laws. Court have held that such laws which require officials and candidates for office to publicly disclose their assets, liabilities and other personal financial information implicate privacy concerns. See, e.g., Barry v. City of New York, 712 F.2d 1554 (2d Cir.1983); Plante v. Gonzalez, 575 F.2d 1119 (5th Cir.1978), cert. denied, 439 U.S. 1129, 99 S.Ct. 1047, 59 L.Ed.2d 90 (1979). The majority of those courts have applied an intermediate level of scrutiny when such laws have been challenged. Barry, 712 F.2d at 1559.
Unlike financial disclosure laws, the disclosure of a SSN directly reveals nothing personal or private about its holder. Any disclosure of financial information is only potential, and can come about only through additional acts.
An intermediate level of scrutiny is only employed when “concerns sufficiently absolute and enduring can be clearly ascertained from Constitution and Supreme Court cases.” Stop H-3 Ass’n v. Dole, 870 F.2d 1419, 1430 (9th Cir.1989), quoting Plyler v. Doe, 457 U.S. at 218 n. 16, 102 S.Ct. at 2395 n. 16. While disclosure of a SSN could leave an individual at some risk of injury due to the unauthorized use of the number, this Court does not have to decide whether the public disclosure of a SSN entitles document preparers to something more than the minimal “rational basis” scrutiny. Even assuming, arguendo, that a purported right not to disclose a SSN is an important right giving rise to intermediate level of review, § 110(c) satisfies the requirements for that level of scrutiny.
Congress explained that the purpose of § 110(c) is to police fraud and abuse by petition preparers, and that it is “critically needed” to confront the large scale fraudulent conduct of those preparers “who prey on the poor and unsophisticated.” 140 Cong. Rec. § 14, 597-98 (daily ed. October 7, 1995). Section 110 is substantially and directly related to the achievement of Congress’ objective. The public disclosure of a document preparer’s SSN is a legitimate means of furthering that objective in that it significantly helps the public identify unscrupulous preparers, and serves to deter and track their activities. The private disclosure of a SSN to court personnel would not assist the public in identifying unscrupulous document preparers.
Because § 110 would survive the intermediate level of scrutiny, it would a for-tiorari be upheld under a “rational basis” review. Section 110(c) serves a legitimate governmental purpose, and is rationally related to the achievement of that purpose.
Accordingly, § 110(c) does not unconstitutionally invade Ferm’s right of privacy. It serves a legitimate and important government purpose and is rationally and substantially related to the achievement of that purpose. Furthermore, the government’s interest in disclosing the SSN outweighs Ferm’s interest in denying such disclosure.
B. Equal Protection.
Ferm contends that § 110(c) violates the equal protection clause. He argues that petition preparers are similarly situated to attorneys and their employees, and that § 110 “impermissibly discriminates against members of the same class.”
The Due Process Clause of the Fifth Amendment, which is applicable to the federal government, incorporates the Fourteenth Amendment’s right to equal protection. United States v. Lopez-Flores, 63 F.3d 1468, 1472 (9th Cir.1995), cert. denied, — U.S. -, 116 S.Ct. 794, 133 L.Ed.2d 743 (1996). Analysis of an equal protection claim alleging an improper statutory classification involves two steps. First, there must be a showing that the statute, either on its face or in the manner of its enforcement, results in members of a certain group being treated differently from other persons based on membership in that group. Id. Ferm has established that element. Second, if it is demonstrated that a cognizable class is treated differently, the court must analyze under the appropriate level of scrutiny whether the distinction made between the groups is justified. Id.
When the government utilizes a “suspect or quasi-suspect” classification or draws distinctions among individuals that bear on the exercise of a fundamental right, the challenged statute will be subject to heightened scrutiny. Munoz v. Sullivan, 930 F.2d 1400, 1404 (9th Cir.1991). Otherwise, the distinctions that the government draws among persons need only be rationally related to a legitimate governmental purpose. Id. Unless a statute employs a classification that is inherently invidious (such as race or gender), or that impinges on fundamental rights, the court exercises only limited review. Navarro v. Block, 72 F.3d 712, 717 (9th Cir.1995). Under the rational basis test, the burden of proof is on the party who is attempting to disprove the existence of a rational relationship between a statutory classification and a government objective. McQueary v. Blodgett, 924 F.2d 829 (9th Cir.1991).
There is no fundamental right not to publicly disclose a SSN. Nor is there any allegation that § 110(c) targets document preparers on the basis of any “suspect or quasi-suspect” classification. Thus, Ferm can state an equal protection challenge only if there is no legitimate grounds to support the classification.
The distinction between bankruptcy petition preparers and attorneys and their employees is neither arbitrary nor irrational. Attorneys are subject to malpractice actions, rules of ethical conduct, disciplinary proceedings and continuing legal education requirements. Bankruptcy petition preparers are not. Attorneys are also held responsible for their employees, such as secretaries, law clerks, and other assistants.
The government has a legitimate interest in the prevention of fraud perpetrated on the public by petition preparers. Requiring public disclosure of a petition preparer’s SSN on the documents which they prepare is rationally related to that purpose. Thus, § 110(c) does not violate the Equal Protection Clause. Because the legislative classification here is supported by a rational basis, Ferm’s equal protection challenge fails. See Chambers v. Klein, 419 F.Supp. 569, 583-84 (D.N.J.1976) (SSNs only required for children whose parents received federal aid, and not from other children whose parents did not receive aid, did not violate the equal protection clause), aff'd, 564 F.2d 89 (3rd Cir.1977). For the reasons discussed above, even if an intermediate level of scrutiny was applicable, § 110(c) serves an important governmental purpose in policing fraud and abuse by document preparers. Section 110 is substantially related to the achievement of that purpose, in that public disclosure of a document preparer’s SSN helps the public identify unscrupulous preparers, and serves to deter and track then’ activities.
C. Privacy Act.
Disclosure of social security numbers is the subject of Section 7 of the Privacy Act of 1974, Public Law 93-579 (“Privacy Act”), which states that a government agency may not lawfully deprive any individual of a legal right, benefit or privilege because of such person’s refusal to disclose his or her social security number. Section 7 does not apply to “any disclosure which is required by Federal statute.” Privacy Act § 7(a)(2)(A). Given that 11 U.S.C. § 110 is a federal statute which requires placing the SSN upon “documents for filing”, the Privacy Act is inapplicable here.
D. Penalty.
The fines provided for in § 110 apply to any “document for filing” prepared by a petition preparer. The UST argues that the summary of schedules, the declaration concerning debtor’s schedules, and each schedule (A-J) is a separate “document for filing.” Each relevant Advisory Committee Note to the 1995 amendment to the Official Forms state, however, that the schedules, the statement of financial affairs, and the “Chapter 7 Individual Debtor’s Statement of Intention” are each a “document for filing.” A petition is also a “document for filing” requiring a preparer’s name, address, signature and SSN. See Advisory Committee Note to Official Form 1. Indeed, the Official Forms for the petition, the schedules, the statement of financial affairs, and the statement of intention have specific sections which provide space for the disclosure of the petition preparer’s name, address, signature, and SSN.
Accordingly, Ferm shall be fined $200 for each “document for filing” in violation of § 110(b)(1) which does not contain his name, address, and signature ($600). Furthermore, Ferm shall be fined $100 for violation of § 110(c)(1) for each “document for filing” that does not have his SSN ($400).
Ferm’s total fine is $1,000, which shall be payable to Patricia Gray, Clerk of the Bankruptcy Court, Foley Federal Courthouse, 300 Las Vegas Boulevard South, Las Vegas, Nevada 89101, within sixty (60) days of the entry of this Order.
The UST’s request that Ferm be ordered to disgorge his fee is denied, given that the UST presented no evidence that the fee was in excess of the value of the services provided. Furthermore, the UST’s request that Ferm be found in contempt is denied, given that the prior order of August 30, 1995 prohibited Ferm from using an alternative number, and did not prohibit him from supplying his SSN to the intake supervisor only.
IT IS SO ORDERED.
. All Chapter, section and Rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330 and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036.
. Ferm did provide his name, address and signature on a "Statement of Assistance By Non-Attorney Re: Filing The Bankruptcy Petition.”
. The UST defines each of the following as a "document for filing" under 11 U.S.C. § 110: the petition, the summary of schedules, schedules A through J, the "Declaration Concerning Debt- or's Schedules”, the "Chapter 7 Individual Debt- or's Statement of Intention”, the "Statement of Financial Affairs”, the "Statement of Assistance by Non-Attorney In Regards To Filing This Petition”, and the "Statement of Assistance By Non-Attorney Re: Filing the Bankruptcy Petition."
. The sources relied on by the Supreme Court or individual Justices for a right of privacy have included the Fourth and Fifth Amendments. Terry v. Ohio, 392 U.S. 1, 8-9, 88 S.Ct. 1868, 1873-74, 20 L.Ed.2d 889 (1968); Katz v. United States, 389 U.S. 347, 350, 88 S.Ct. 507, 510-11, 19 L.Ed.2d 576 (1967); Boyd v. United States, 116 U.S. 616, 630, 6 S.Ct. 524, 532, 29 L.Ed. 746 (1886); the penumbra of the Bill of Rights, Griswold v. Connecticut, 381 U.S. 479, 484, 85 S.Ct. 1678, 1681, 14 L.Ed.2d 510 and the Ninth Amendment, id. “These decisions make it clear that only personal rights that can be deemed ‘fundamental’ or 'implicit in the concept of ordered liberty' are included in this guarantee of personal privacy.” Roe v. Wade, 410 U.S. 113, 152, 93 S.Ct. 705, 726, 35 L.Ed.2d 147 (1973).
Ferm argues that there is a right to be free from “compulsion to make public a social security number” which stems from the Fourth Amendment's prohibition against unreasonable searches and seizures and the Fifth Amendment’s "concerns for the right of each individual to a private enclave where he may lead a private life.” While the Supreme Court has acknowledged that the involuntary disclosure of private information can implicate Fourth Amendment interests, Boyd v. United States, 116 U.S. 616, 6 S.Ct. 524, 29 L.Ed. 746 (1886); Davis v. United States, 328 U.S. 582, 587, 66 S.Ct. 1256, 1258, 90 L.Ed. 1453 (1946), it is unclear how § 110(c) compels disclosure. Ferm is under no compulsion to prepare documents for filing, and is free to refuse to do so. See, Wyman v. James, 400 U.S. 309, 317-18, 91 S.Ct. 381, 385-86, 27 L.Ed.2d 408 (1971) (home visitation as a condition for financial assistance is not a Fourth Amendment violation). Furthermore, the Supreme Court has limited the scope of Fifth Amendment protection to compelled self-incrimination, not the disclosure of private information. Fisher v. United States, 425 U.S. 391, 401, 96 S.Ct. 1569, 1576, 48 L.Ed.2d 39 (1976).
. The Supreme Court has indicated an unwillingness to find new, privacy-type fundamental rights. See Reno v. Flores, 507 U.S. 292, 113 S.Ct. 1439, 123 L.Ed.2d 1 (1993) (Court refused to expand list of fundamental rights to include right of juveniles to be released into a noncustodial setting); Bowers v. Hardwick, 478 U.S. 186, 195, 106 S.Ct. 2841, 2846, 92 L.Ed.2d 140 (1986) (advising against expanding the list of fundamental rights).
. The right to pursue a calling or profession is not a fundamental right. Madarang v. Bermudes, 889 F.2d 251, 253 (9th Cir.1989), cert. denied, 498 U.S. 814, 111 S.Ct. 54, 112 L.Ed.2d 29 (1990).
. "Return information” includes a SSN under 26 U.S.C. §§ 6103(b)(2) and 6109(d).
.The FOIA does not apply in this case. There is no "agency” here which has been asked to disclose a "personnel” or "medical file.” In the context of the FOIA, SSNs have been withheld from disclosure where the public interest in "knowing what their government is up to” is outweighed by the privacy interest that would be harmed. See Painting Indus. of Hawaii v. Dept. of Air Force, 26 F.3d 1479 (9th Cir.1994) (payroll information containing name, address, SSN, and rate of pay redacted where employee's privacy interests were not outweighed by public's interest); Int'l Bhd of Elec. Workers Local Union No. 5 v. United States Dept. of Housing and Urban Dev., 852 F.2d 87, 89 (3rd Cir.1988) (release of SSN was unwarranted invasion of privacy where there was no countervailing public interest in disclosure). Compare, Dobronski v. F.C.C., 17 F.3d 275 (9th Cir.1994) (sick leave slips which contained SSN were properly disclosed to pub-lie, where public interest in uncovering alleged abuse of public monies outweighed the "minimal” privacy interests involved).
. Section 110 provides for fines against a petition preparer who fails to place his name, address, signature, and SSN on a "document for filing" unless the failure is due to "reasonable cause." "Reasonable cause” is not defined in the Code.
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3537926-11348 | OPINION
WEBER, District Judge.
On June 26, 1971, Theodore Koenig was involved in an accident in his neighbor’s above-ground pool and suffered severe and permanent injuries. A suit was filed by Koenig in the Court of Common Pleas of Erie County against the manufacturer of the pool, Muskin Manufacturing Corp., and the retailer, W.T. Grant Co. Trial of that action was recently completed in Common Pleas resulting in a verdict for the plaintiff.
The matter before this court is a declaratory judgment action instituted to deter mine which of three insurers has the responsibility for the defense and verdict in the underlying civil action. The instant case has been stayed for some time awaiting disposition of the personal injury suit in Common Pleas. With the completion of the trial of Koenig’s claims and the special interrogatories answered by the jury, we can now move to address the summary judgment motion before us.
Defendant Pacific Indemnity Company (Pacific) has filed a motion for Summary Judgment seeking determination of its liability for the cost of defense of W.T. Grant and for any portion of the verdict against W.T. Grant. We herein address only those issues raised by Pacific’s motion. Any remaining questions of the other parties’ liability for the cost of the defense or the verdict may be raised by appropriate motions for summary judgment.
Although Pacific’s motion argues that California law is applicable it has not brought to our attention any difference between the substantive law of California and that of the law of the forum state, or between California law and the ruling law of general application in the United States. Therefore, to the extent available, we will look to Pennsylvania law.
We have examined the evidentiary material of record and find no genuine material issue of fact which would preclude summary judgment. Accordingly a review of the facts of record is in order.
Each of the parties to this suit had issued an insurance policy to W.T. Grant which was in effect on the date of Koenig’s injury, June 26, 1971. The relevant policies are:
1) Policy No. R61-621-004235-061 issued by Liberty Mutual to W.T. Grant. This is a Blanket Public Liability Policy covering the period of June 1,1971 to June 1,1972.
2) Policy No. LE2-621-004236-120 issued by Liberty Mutual to W.T. Grant. This is an Umbrella Excess Liability Policy covering the period of June 1,1970 to June 1, 1972, with policy limits of $10,000,000.
3) Policy No. LAC 202492 issued by Pacific to American Cement Corp. This is a Comprehensive General Liability Policy covering the period of May 1,1969 to July 1, 1972. Muskin Corp. is included in the policy’s coverage as a subsidiary of American Cement. W.T. Grant was made an additional insured under this policy as to products manufactured by Muskin by an endorsement dated June 19, 1969. The endorsement specifically excludes coverage for liability of W.T. Grant on any express warranty or sale for a purpose not authorized by Muskin. The policy has a liability limitation of $100,000.
4) Policy No. CE 35-07-98 issued by American Home to American Cement Corp. This is an Excess Third Party Liability Policy covering the period of May 1, 1969 to July 1, 1972, with policy limits of $5,000,000. Muskin as a subsidiary of American Cement, is insured under the policy against claims arising from the manufacture, sale or distribution of Mus-kin products.
By communications of October 12, 1972, October 31, 1972, and February 22, 1974, Grant requested that Muskin’s insurers assume the defense of Koenig’s claims against Grant. These requests were refused. Liberty Mutual has borne the costs of W.T. Grant’s defense, while Pacific and American Home have defended Muskin.
Pacific seeks summary judgment on plaintiff’s claim for contribution or indemnity on Grant’s liability on the grounds that payments under the policy have reached policy limits. Pacific’s policy provides:
4. Limits of Liability
It is understood and agreed that this company shall not be liable for more than:
$100,000.00 any one occurrence ... [or] ... an aggregate of $100,-000.00 in any one policy year.
Pacific has submitted the affidavit of its Vice-President, William Daugherty, in which he asserts that as of May 24, 1976 Pacific has paid claims of $100,000.00 under the policy for the relevant policy year. The parties do not dispute this figure or its computation. By the unambiguous language of the policy and the undisputed facts presented in the affidavit, Pacific’s policy limits have been exhausted. Pacific therefor cannot be liable for any portion of the verdict and summary judgment in its favor will be entered on this point.
Liberty Mutual by its complaint also seeks reimbursement from Pacific for the costs of the defense of W.T. Grant. Pacific by its motion for summary judgment seeks a determination that it is not liable for the costs of W.T. Grant’s defense.
Pacific’s policy No. LAC 202492 provides:
6. Defense, Settlement, Supplementary Payments — The company shall:
(A) Defend in his name and behalf any suit against the insured alleging injury or property damage and seeking damages on account thereof, even if such suit is groundless, false or fraudulent,
Liberty Mutual’s Blanket Public Liability Policy No. R61-621-004235-061 also contains a defense clause:
II Defense, Settlement, Supplementary Payments — With respect to such insurance as is afforded by this policy for " personal injury liability, this company shall:
(a) Defend any suit against the insured alleging such injury sickness or disease and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; ...
Pacific contends, for a variety of reasons, that Liberty Mutual alone has the duty to defend W.T. Grant and bear the cost of that defense.
Pacific has raised the possibility that the jury’s answers to special interrogatories in the underlying civil action may be determinative of Pacific’s duty to defend. However, the Supreme Court of Pennsylvania has clearly stated that a liability insurer’s duty to defend a suit against the insured is determined by the allegations of the complaint in the underlying action. Wilson v. Maryland Casualty Co., 377 Pa. 588, 594, 105 A.2d 304 (1954); Cadwallader v. New Amsterdam Casualty Co., 396 Pa. 582, 590, 152 A.2d 484 (1959). Further, the insurer has the duty to defend all claims against the insured, until it can confine the claims to those which its policy does not cover. Id. Various allegations of Koenig’s complaint in Common Pleas Court come within the scope of Pacific’s policy with Muskin and Grant, thereby invoking Pacific’s duty to defend. Because the duty to defend is invoked by the allegations of the complaint, the decision of a jury on these claims is irrelevant to this issue.
Pacific further argues that exhaustion of its policy limits on liability also extinguishes its duty to defend. Various courts have determined that certain policy language not present here may make the insurer’s duty to defend dependent on the policy’s liability limitations. E.g. Denham v. LaSalle-Madison Hotel Co., 168 F.2d 576 (7th Cir.1948) (applying Illinois law); Liberty Mutual Insurance Co. v. Mead Corp., 219 Ga. 6, 131 S.E.2d 534 (1963); Aetna Casualty Co. v. Certain Underwriters at Lloyds of London, 56 Cal.App.3d 791, 129 Cal.Rptr. 47 (1976); 7C Appleman, Insurance Law and Practice § 4682 (1979); see also cases collected at 27 A.L.R.3d 1057. However, absent such language, the insurer’s duty to defend is independent of the limitation on liability. Simmons v. Jeffords, 260 F.Supp. 641 (E.D.Pa.1966); and see Gedeon v. State Farm Mutual Automobile Insurance Co., 410 Pa. 55, 188 A.2d 320 (1963); Weinberg v. State Workmen’s Insurance Fund, 368 Pa. 76, 81 A.2d 906 (1951); Kocse v. Liberty Mutual Insurance Co., 159 N.J.Super. 340, 387 A.2d 1259 (1978); 7C Appleman, Insurance Law and Practice § 4682 (1979); 27 A.L.R.3d 1057. Pacific’s policy provision, quoted above, is unqualified. Nor does that section of the policy on limitation of liability make any reference to Pacific’s duty to defend. The language of the policy being unambiguous, the duty of Pacific to defend any suit against its insured survives the exhaustion of the policy’s liability limits.
Pacific’s principal argument is that Liberty Mutual is the primary carrier and therefore has the duty to defend W.T. Grant. Pacific points to its policy provision titled (G) Other Insurance:
(1) If there be any other insurance against a claim or loss covered by this policy, the insurance under this policy shall be deemed excess insurance over and above and not contributing with such other insurance.
However, Liberty Mutual’s policy contains a similar provision:
9. Other Insurance. If the insured has other valid collectible insurance, in another company against a loss covered by this policy, this policy shall be excess insurance with respect to such loss.
Both parties seek to place primary responsibility for Grant’s defense upon the other by virtue of their respective “excess” clauses.
Pacific contends, however, that Liberty Mutual’s “excess” clause does not apply in this situation because the Liberty Mutual policy provides the only coverage for Grant on certain claims included in the Koenig complaint. Specifically, Liberty Mutual’s policy covers those bases of liability which are excluded from Pacific’s coverage by the terms of Pacific’s endorsement to Grant.
1. The insurance with respect to the vendor does not apply to:
(a) Any express warranty, or any distribution or sale for a purpose, unauthorized by the named insured.
This exclusion, it is argued, makes Liberty Mutual the primary carrier with the duty to defend all claims against Grant.
Pacific’s policy does cover Grant for claims not within the endorsement exclusion but included in the Koenig complaint. If it were the primary insurer, Pacific’s duty to defend would extend to all claims and not just those within its policy. Cadwallader v. New Amsterdam Casualty Co., 396 Pa. 582, 152 A.2d 484 (1959). It would then be under a duty to defend all claims including those within the endorsement exclusion. The only factors preventing Pacific from being the primary carrier with the duty to defend all claims are its “excess” clause and the existence of the Liberty Mutual policy, which in turn has its “excess” clause. Thus, despite the endorsement exclusions, we are faced with the dilemma of competing “excess” clauses.
This is a diversity case where we must look to the state courts for resolution of this issue. We have found no controlling decision from the Supreme Court of Pennsylvania on this question, but three decisions of Pennsylvania lower courts have addressed the issue. In Jett v. Hill, 10 D & C 3d 734 (Phila.Co.1978) a defendant in a personal injury action had two insurers. Each policy purported to be primary insurance, but each contained a clause making its coverage excess insurance in the event of other insurance. The court held that incompatible “excess” clauses would cancel each other and expose each insurer to primary liability. The same result has been reached in other Common Pleas Courts: Continental Casualty Co. v. Aetna Casualty and Surety Co., 33 D & C 2d 293 (Allegheny Co.1963); Harleysville Mutual v. U.S. Fidelity & Guaranty Co., 27 D & C 2d 544 (York Co.1961).
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10523833-11911 | PER CURIAM.
Defendant Daniel R. Martin was convicted, along with co-defendants, James Gish, James Waggoner, and Thomas Evans, of conspiring to possess, with intent to distribute, 500 pounds of marijuana in violation of 21 U.S.C. §§ 846, 841(a)(1), and 18 U.S.C. § 2. Defendant’s conviction was affirmed on appeal, see United States v. Gish, Nos. 89-3006, 89-3007, and 89-3008 (10th Cir. Feb. 28, 1990) (unpublished order and judgment), and his petition for certiorari to the United States Supreme Court was denied. Defendant filed a Motion to Vacate and Set Aside Sentence or, in the Alternative, for a New Trial and Motion for Additional Relief pursuant to 28 U.S.C. § 2255, claiming ineffective assistance of counsel due to a conflict of interest. Following an evidentiary hearing, the district court determined that counsel’s dual representation of Defendant and James Gish created an actual conflict of interest which affected counsel’s representation of Defendant. The court further concluded that its advisement of Defendant pursuant to Fed.R.Crim.P. 44(c) was inadequate, thereby rendering Defendant’s waiver ineffective. In a thorough and well- reasoned Memorandum and Order, the district court vacated Defendant’s conviction and granted him a new trial. We affirm.
FACTS
In April 1988, undercover Drug Enforcement Agency (DEA) Agents, Robert Benton and James Woods, met with Defendant, Mr. Evans, and Mr. Gish, in a motel room in Manhattan, Kansas, to discuss the purchase of a large amount of marijuana. During this meeting, which was videotaped, Defendant sampled the marijuana and indicated an interest in making the purchase, but stated he would need to talk to some other people in order to arrange for the money. Defendant does not appear to deny his involvement up to this point.
During the next several weeks, discussions continued between Agent Benton and Mr. Evans regarding the efforts to raise the money. Finally, Mr. Evans indicated to Agent Benton that another man, co-defendant James Waggoner, was interested in the purchase. Telephone records introduced at trial indicate several telephone calls from Mr. Gish to Defendant during this period of time. There was also testimony from the DEA agents implicating someone named “Dan” in the continuing negotiations regarding the drug transaction.
On May 12, 1988, Agent Benton met with Mr. Gish, Mr. Evans, and Mr. Waggoner at a Bennigan’s restaurant in Topeka, Kansas, to consummate the deal. Immediately following the exchange of money and drugs, Mr. Gish, Mr. Evans, and Mr. Wag-goner were arrested. Defendant voluntarily surrendered after learning that he was included in the indictment.
At trial, Defendant and Mr. Gish were represented by John Humpage. Mr. Wag-goner and Mr. Evans each had independent counsel, although it appears to be undisputed that Mr. Humpage was lead counsel and primarily orchestrated the defense. See Appellant’s App. B at 68 and 82. At the first pretrial motions’ hearing, the district court informed the defendants of the possibility of a conflict of interest emanating from the dual representation. At that time, Defendant, after a short conference with Mr. Humpage, informed the court that the dual representation would be “no problem.”
Mr. Humpage testified that he discussed with the defendants the possibility that a conflict could arise if the government offered one of the defendants a “deal” or if one of the defendants insisted on testifying. Id. at 83-85. Defendant contends that because of the conflict created by the dual representation, he was precluded from testifying in his own behalf. See id. at 13-21. He also testified that Mr. Humpage unilaterally refused an offer of plea negotiation from the DEA. Id. at 27. Defendant states that he did not challenge these decisions because Mr. Humpage told him that, if these conflicts arose, he would have to withdraw from the case. In that event, Defendant was afraid he would have to proceed to trial without benefit of counsel. Id. at 21.
STANDARD OF REVIEW
“While we review de novo the district court’s determination of whether an actual conflict existed, the court’s resolution of the underlying facts giving rise to its conclusion is subject to a clearly erroneous standard of review.” United States v. Suntar Roofing, Inc., 897 F.2d 469, 480 (10th Cir.1990) (citing United States v. Soto Hernandez, 849 F.2d 1325, 1328-29 (10th Cir.1988)). Because Defendant failed to raise a Sixth Amendment objection at trial, his conviction can only be disturbed upon a showing that an “ ‘actual conflict of interest adversely affected his lawyer’s performance.’ ” United States v. Bowie, 892 F.2d 1494, 1500 (10th Cir.1990) (quoting Cuyler v. Sullivan, 446 U.S. 335, 350, 100 S.Ct. 1708, 1719, 64 L.Ed.2d 333 (1980)).
CONFLICT OF INTEREST
In order to establish ineffective assistance of counsel, a defendant must show (1) that his counsel’s performance was deficient, and (2) that the deficiencies prejudiced the defense. Strickland v. Washington, 466 U.S. 668, 687, 104 S.Ct. 2052, 2064, 80 L.Ed.2d 674 (1984). However, where it is alleged that ineffective assistance was the result of a conflict of interest, there are special considerations that apply. United States v. Winkle, 722 F.2d 605, 609 (10th Cir.1983). “ ‘[A] defendant who shows that a conflict of interest actually affected the adequacy of his representation need not demonstrate prejudice in order to obtain relief.’ ” Id. (quoting Cuyler, 446 U.S. at 349-50, 100 S.Ct. at 1719). In order to establish “ ‘the constitutional predicate’ ” for a claim of ineffective assistance of counsel, Defendant must “ ‘show[ ] that his counsel actively represented conflicting interests.’ ” Soto Hernandez, 849 F.2d at 1329 (quoting Cuyler, 446 U.S. at 350, 100 S.Ct. at 1719) (emphasis added in Soto Hernandez). Once such a showing is made, prejudice will be presumed, and Defendant will be entitled to relief. See Cuyler, 446 U.S. at 349-50, 100 S.Ct. at 1718-19.
Joint representation of conflicting interests is suspect because of what it tends to prevent the attorney from doing.... [A] conflict may ... prevent an attorney from challenging the admission of evidence prejudicial to one client but perhaps favorable to another, or from arguing at the sentencing hearing the relative involvement and culpability of his clients in order to minimize the culpability of one by emphasizing that of another.
Holloway v. Arkansas, 435 U.S. 475, 489-90, 98 S.Ct. 1173, 1181, 55 L.Ed.2d 426 (1978). In defining what constitutes a “conflict of interests,” the Supreme Court stated that “an actual, relevant conflict of interests [exists] if, during the course of the representation, the defendants’ interests do diverge with respect to a material factual or legal issue or to a course of action.” Cuyler, 446 U.S. at 356 n. 3, 100 S.Ct. at 1722 n. 3. The facts indicate that Defendant found himself in just such a situation as that contemplated by the Supreme Court.
“Although multiple representation of co-defendants is not a per se violation of the Sixth Amendment, it does contain great potential for conflicts of interest.” United States v. Burney, 756 F.2d 787, 790 (10th Cir.1985) (citations omitted). Defendant contends that had he been allowed to testify, he would have testified that he withdrew from the conspiracy immediately following the initial meeting in Manhattan. Defendant claims that his testimony would have established that Mr. Gish’s telephone calls to Defendant were answered by his answering machine; that Defendant talked to Mr. Gish only once following the Manhattan meeting for the purpose of informing Mr. Gish that he wanted nothing more to do with the drug transaction; and that the DEA agents’ reference to the continuing involvement of someone named “Dan” did not refer to Defendant. However, Defendant claims that because of Mr. Hum-page’s “united we stand, divided we fall” philosophy of defense, see Appellant’s App. B at 18 and 85, and his insistence on a joint defense claiming that no conspiracy existed, Defendant was not allowed to testify under threat of standing alone at trial without counsel.
Under the Supreme Court’s standard set forth in Cuyler, in order to establish an actual conflict, Defendant has the burden of showing specific instances to support his contention of an actual conflict adverse to his interests. See Burney, 756 F.2d at 792. Defendant has presented the classic conflict situation in which, in order to reduce the degree of his own culpability, he would have to testify in contravention of his co-defendants’ theory of defense. Defendant claims that he had less culpability than the other defendants because he withdrew from the conspiracy. He further contends that Mr. Humpage vehemently opposed his desire to testify because to do so would have negated the remaining defendants’ theory of defense that no conspiracy existed. Defendant maintains that Mr. Hum-page did not inform him that this created a conflict, or that he could exact his right to have separate counsel.
At the hearing on Defendant’s habeas corpus motion, the district court heard tes timony of Defendant regarding his discussions with Mr. Humpage, the envisioned substance of his trial testimony, had he been allowed to testify, and his understanding and dread of the consequences of his insistence upon testifying. In addition, the court heard the testimony of Mr. Hum-page who maintains that Defendant’s testimony was an unnecessary risk because he was able to adequately impeach the testimony of Agent Benton on cross-examination. Mr. Gish and Mr. Rork, trial counsel for Mr. Waggoner, also testified. See Burger v. Kemp, 483 U.S. 776, 785, 107 S.Ct. 3114, 3121, 97 L.Ed.2d 638 (1987) (district judge who is familiar with the local bar, and who heard the testimony of the witnesses, is in best position to evaluate charge of conflict of interest).
It appears clear from the record that Defendant may have been a less culpable participant in the illegal activity. It also appears clear that, had Defendant been able to testify, he may have been able to exculpate himself to some degree. This possibility creates an actual conflict of interest.
Although, once Defendant has established the existence of an actual conflict, prejudice is presumed, the possibility exists that, given an opportunity to present an independent defense, the verdict as to Defendant may have been different. We agree with the district court that Defendant met his burden of establishing the existence of an actual conflict which affected his attorney’s performance.
FED.R.CRIM.P 44(c)
In its Memorandum and Order, the district court concluded that it had not fully complied with the requirements of Fed. R.Crim.P. 44(c), by failing to advise Defendant of his right to separate counsel, and by failing to afford Defendant an opportunity to pose questions regarding the possible consequences of the dual representation. Based upon a scrutiny of its own compliance, the district court found its pretrial advisement to be “cursory in nature and ... not adequate[ ] [to] address many of the concerns caused by dual representation.” Appellant’s App. A at 11. The court further expressed its regret for these omissions. Id.
We have agreed with other courts’ decisions that “a trial court’s failure to comply with Rule 44(c) does not, of itself, require reversal of a conviction,” and, in order to constitute reversible error, the failure to comply must translate into a denial of the defendant’s Sixth Amendment right. Bur-ney, 756 F.2d at 791. In light of our determination that an actual conflict existed during trial, and that Defendant’s Sixth Amendment right to effective assistance of counsel was vitiated by that conflict, we will give deference to the district court’s determination of the inadequacy of its own inquiry and advisement of Defendant prior to trial. See Appellant’s App. A at 11-12.
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558915-7464 | MEMORANDUM OPINION AND DECISION
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court upon Debtor’s Motion to Disqualify Barry E. Savage, Esq., as counsel for certain creditors in this bankruptcy case. This Court has reviewed the arguments of counsel, exhibits as well as the entire record in the case. Based upon that review, and for the following reasons, the Court finds that the Debtor’s Motion shall be denied.
FACTS
Debtor seeks to disqualify Barry E. Savage, Esq. from representing GRC or any other person or entity associated with GRC or a certain Huntington National Bank (hereafter “Huntington”) loan transaction. In the Debtor’s Memorandum in Support of his Motion to Disqualify, the Debtor recounts certain facts: GRC is an Ohio partnership formed on or about January 22, 1987. The partnership was formed for the purpose of purchasing and redeveloping a property known as the Gardner Building. The original partners of GRC consisted of The Collaborative Gardner Building Investors, Gemerchak Partner, North Shore Development Company, Noel S. Romanoff, Westwood Properties, and Sunforest Investment Corporation. Debtor, William G. Sheehan, is a director, officer and shareholder of Sunforest Investment Corporation (hereafter “SIC”).
In or about June, 1987, GRC negotiated a construction loan to finance the purchase and renovation of the Gardner Building. The Huntington loan was secured by a first mortgage on the Gardner Building as well as the personal guarantees of the Debtor and a number of creditors in the present bankruptcy case. The terms of the financing provided, in part, that the obligation would become due and payable in approximately eighteen months.
The Debtor negotiated several extensions of the obligation after the expiration of the initial eighteen month period. In or about the summer of 1990, attorney Barry Savage began attending the GRC partnership meetings at the request of Westwood Properties and an individual guarantor. The individual guarantor requested that Mr. Savage represent GRC partnership and the individual guarantors in further negotiations with Huntington to refinance the outstanding loan obligation. About this time, GRC formed a negotiating committee to meet with representatives of Huntington concerning the refinancing of the outstanding obligation. The negotiating committee consisted of all partners of GRC and all personal guarantors of the obligation except SIC, the Debtor, and one Stephen H. Weiner.
Debtor states throughout the course of the negotiations with Huntington, Mr. Savage represented that he was counsel for GRC and the individual guarantors, including Debtor. Debtor further states that during the course of negotiations, he had conversations with Mr. Savage concerning the negotiations and refinancing and received correspondence from Mr. Savage concerning the status of negotiations.
On or about July 6, 1993, GRC and other guarantors of the Huntington loan filed suit against SIC, and the Debtor and Mr. Weiner individually, in the matter captioned GRC, et al., v. SIC, et al., Case no. 93-1898, in the Lucas County Court of Common Pleas. The matter was initially filed by Mr. Savage. However, on or about April 28, 1994, the Complaint was amended by another attorney who replaced Mr. Savage. The amended Complaint identified only the individual investors and guarantors as plaintiffs, and only Debtor and Mr. Weiner as defendants. The basis for the suit involved the Huntington loan. The claims giving rise to the above referenced lawsuit were submitted to binding arbitration. On or about August, 1995, an arbitration award was issued. The arbitrators held that Debtor and Mr. Weiner were jointly and severally liable to the plaintiffs in the case.
On September 21, 1995, Debtor filed a Chapter 13 bankruptcy petition. On October 23, 1995, Debtor moved to convert his Chapter 13 bankruptcy to Chapter 7. The Motion was granted on October 25, 1995. On November 17,1995, Debtor filed his bankruptcy schedules in accordance with the applicable rules. The schedules identify the prevailing parties in the arbitration as creditors. GRC, the purported creditor represented by Mr. Savage, had not been identified as a creditor. Mr. Savage now claims to represent not only GRC, but also the individual partners.
On November 16, 1995, Mr. Savage, purportedly on behalf of GRC Partnership, filed a Motion seeking to conduct a 2004 examination of the Debtor. On December 8, 1995, the Debtor filed a Memorandum in Opposition to Mr. Savage’s Motion for 2004 exam and further moved for a Protective Order. Debtor now seeks an Order from the Court disqualifying Mr. Savage from representing GRC or any other person or entity associated with GRC or the Huntington loan in this matter.
DISCUSSION
In support of his Motion to Disqualify Attorney Barry E. Savage from representing any creditor associated with the Huntington loan in this case, the Debtor cites only one ease to epitomize the law regarding disqualifications of counsel. In re Crabtree, 126 B.R. 540 (Bankr.S.D.Ohio 1991). In Crabtree, the Court cites the following test for disqualification:
As a moving party seeking to disqualify an attorney for a conflict of interest, [the movant] must show:
1. the moving party is a former client of the adverse party’s counsel;
2. there is a substantial relationship between the subject matter of the counsel’s prior representation of the moving party and the issues in the present lawsuit.
3. the attorney whose disqualification is sought had access to, or was likely to have access to, relevant privileged information in the course of his prior representation of the client.
Evans v. Artek Systems Corp., 715 F.2d 788 (2nd Cir.1983).
Crabtree, 126 B.R. at 541. The Crabtree Court also stated:
The primary purpose for disqualification, if all tests are met, is to protect the confidentiality of information received from the former client, even if such information is only potentially involved in the current action. In re Dayco Corp. Derivative Securities Litigation, 102 F.R.D. 624 (S.D.Ohio 1984). Another purpose is to protect the integrity of the adversarial process. Board of Educ. of New York City v. Nyquist, 590 F.2d 1241 (2nd Cir.1979).
Crabtree, 126 B.R. at 541.
In Crabtree, the Court cited In re Evans, a Second Circuit Court of Appeals case. The Court in Evans also elaborated:
[W]hile we have not hesitated to disqualify counsel when the circumstances warranted it, we also noted that, ‘there is a particularly trenchant reason for requiring a high standard of proof on the part of one who seeks to disqualify his former counsel, for in disqualification matters we must be solicitous of a client’s right freely to chose his counsel — a right which of course must be balanced against the need to maintain the highest standards of the profession.’ Government of India v. Cook Industries, Inc., 569 F.2d 737, 739 (2nd Cir.1978). We have also noted that disqualification motions ‘are often interposed for tactical reasons,’ and that ‘even when made in the best of faith, such motions inevitably cause delay.’ Board of Education v. Nyquist, supra, 590 F.2d at 1246 (2nd Cir.1979); see Allegaert v. Perot, 565 F.2d 246, 251 (2nd Cir.1977).
Evans, 715 F.2d 788, 791-792.
These sentiments were shared by the District Court for the Northern District of Ohio. Baker, et al. v. BP America, Inc., et al., 768 F.Supp. 208, 213 (N.D.Ohio 1991). In Baker, the Court explained:
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5742008-7833 | PER CURIAM:
Larry Darnell Forrester appeals pro se the denial of his motion to vacate his sentence for using a means of interstate commerce to entice a child younger than 18 years old to engage in sexual activity. 18 U.S.C. § 2422(b); 28 U.S.C. § 2255. Forrester argues that his trial counsel was ineffective because he failed to object to the calculation of Forrester’s base offense level. See United States Sentencing Guidelines §§ 2A3.1, 2G1.1(c)(2) (Nov. 2003). Because Forrester failed to prove that he was prejudiced by counsel’s failure to object, we affirm.
I. BACKGROUND
Agents of the Federal Bureau of Investigation arrested Forrester in the parking lot of a restaurant in Atlanta, Georgia, after he arrived from Greenville, South Carolina, expecting to meet Kate, a woman he had met on the internet, and her seven-year-old daughter, Kelly. When interviewed, Forrester first told agents that he had arranged to meet Kate and he was unaware that she had a child, but when agents confronted Forrester with evidence that he had chatted online with Kate about engaging in sexual activity with Kelly, Forrester asserted that he had traveled to Atlanta to protect Kelly. An agent asked Forrester if he would have engaged in sexual activity with Kelly, and Forrester responded that it was “[djoubtful” and that he would not engage in an activity with a child if it was hurtful.
Forrester was charged in a two-count indictment for using a means of interstate commerce to entice a child younger than 18 years old to engage in sexual activity, 18 U.S.C. § 2422(b), and traveling in interstate commerce to engage in a sexual act with a child younger than 12 years old, id. § 2241(c). Forrester entered a change of plea to guilty to the enticement charge in exchange for the dismissal of his remaining charge. The plea agreement stated that Forrester waived his right to challenge his sentence “in any post-conviction proceeding on any ground,” but the government has not relied on that agreement in this appeal.
The presentence investigation report stated that Forrester had initiated an online conversation with Kate, an agent of the Federal Bureau of Investigation, in an internet chat room dedicated to adult-child sex. For three days, the two discussed in detail Forrester’s plans to engage in oral sex and sexual intercourse with Kelly. Forrester assured Kate that he “wanted to do this” and offered to come to Atlanta. When Kate suggested that they meet for lunch, Forrester responded, “Kate, if I drive to Atlanta, it won’t be for lunch ... I won’t lie. If that is what you want ... I won’t be there.” On the day Forrester drove to Atlanta, he asked Kate to bring Kelly to South Carolina, but after she refused, he responded that he “really want[ed] to do this with you two, very much,” and he made arrangements to meet Kate and Kelly for dinner in Atlanta. Forrester gave Kate specific instructions about how to dress Kelly and said that he expected Kate to fondle Kelly at dinner to prove she would be amenable to sexual activity.
The presentence report listed Forres-ter’s base offense level at 27. The report identified the Sentencing Guideline applicable to Forrester’s offense as section 2G1.1 and cross-referenced that provision to section 2A3.1 because the offense involved attempted criminal sexual abuse. The report increased the base offense level by six points because Forrester’s offense involved a victim under 12 years old and use of a computer, and the report decreased the base level by two points for acceptance of responsibility. With a criminal history of I, the report listed a sentencing range between 108 and 135 months of imprisonment.
The district court adopted the calculations in the presentence report. Forrester asked the district court for a downward variance based on several problems in his personal life, but the court denied the request. The district court sentenced For-rester to 108 months of imprisonment. Forrester did not appeal his conviction or sentence.
Forrester moved to vacate his sentence. 28 U.S.C. § 2255. In a brief attached to the motion, Forrester argued that his trial counsel was ineffective because he failed to object when the court used the cross-reference in section 2G1.1 to increase Forres-ter’s base offense level. Forrester argued that he was prejudiced by counsel’s conduct because he received a longer sentence than warranted.
The district court denied Forrester’s motion to vacate. The court ruled that section 2G1.1(c)(2) applied because Forrester was guilty of attempted sexual abuse when he crossed a state line intending to engage in sexual activity with Kelly, who was younger than 12 years old. 18 U.S.C. § 2241(c). The court also ruled that Forrester’s trip to Atlanta was relevant conduct. U.S.S.G. § 1B1.3(a)(3). The court concluded that Forrester was sentenced correctly and he was not denied effective assistance of counsel.
II. STANDARD OF REVIEW
“In a 28 U.S.C. § 2255 proceeding, we review a district court’s legal conclusions de novo and factual findings for clear error.” Devine v. United States, 520 F.3d 1286, 1287 (11th Cir.2008).
III. DISCUSSION
Forrester contends that his trial counsel was ineffective for failing to object when the district court applied the cross-reference in section 2Gl.l(c)(2) and that error prejudiced the outcome of his case. For-rester contends that counsel should have challenged use of the cross-reference on two grounds: Forrester’s conversations with Kate could not amount to attempted criminal sexual abuse as defined in section 2241(c); and his trip to Atlanta was not relevant conduct under section 1B1.3. Forrester’s argument fails.
The district court correctly applied the cross-reference in section 2Gl.l(c)(2) to increase Forrester’s base offense level. Because Forrester pleaded guilty to using a means of interstate commerce to entice child to engage in sexual activity, 18 U.S.C. § 2422(b), the district court was required to apply the Guideline for prohibited sexual conduct, U.S.S.G. § 2G1.1. See id. App. A (2003). Section 2G1.1 directed the district court to apply the Guideline for criminal sexual abuse if the offense involved “criminal sexual abuse, attempted criminal sexual abuse, or assault with intent to commit criminal sexual abuse,” id. § 2G1.1(c)(2), “as defined in 18 U.S.C. § 2241 or § 2242,” id. cmt. n. 10. Section 2241(c) provides that “whoever crosses a State line with the intent to engage in a sexual act with a person who has not attained the age of twelve years” is guilty of aggravated sexual abuse.
Although he was not convicted of the crime, the district court could reasonably find that Forrester committed aggravated sexual abuse. Aggravated sexual abuse requires proof of the following two elements: (1) interstate travel (2) with the intent to engage in a sexual act with a minor. See Eleventh Circuit Criminal Pattern Jury Instruction 11. The record established that Forrester discussed with Kate in graphic detail acts of oral sex and sexual intercourse he desired to perpetrate on Kelly, Forrester coordinated his travel plans with Kate, and Forrester drove from Greenville to Atlanta and arrived at the time and place he had designated. See United States v. Yost, 479 F.3d 815, 819 (11th Cir.2007).
The district court was entitled to find that Forrester’s trip to Atlanta was relevant to his offense of enticement. Forrester’s stated purpose for the travel was to engage in sexual activity with Kelly. See U.S.S.G. § 1B1.3(a)(1), (a)(3) (including as relevant conduct “all acts ... committed ... counseled, commanded, induced, procured or willfully caused by the defendant ... that occurred during the commission of ... [or] in preparation for that offense ... and all harm that was the object of such acts and omissions)”. For-rester’s travel was relevant conduct.
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6123953-8949 | FINDINGS OF FACT, CONCLUSIONS OF LAW, MEMORANDUM OF LAW
ALEXANDER L. PASKAY, Chief Judge.
THIS IS a Chapter 7 case and the matter under consideration is a claim asserted by George Hadley, the Trustee of the estate, against the several defendants named in the above captioned adversary proceeding. The Trustee’s claim for relief is based on Sec. 544(b) of the Bankruptcy Code. The complaint asserts that Vincent Acquafredda and Joan B. Acquafredda, his wife, (the Debtors) fraudulently transferred certain assets to Gulf Coast Sanitation, Inc. (Sanitation) and Gulf Coast Disposal, Inc. (Disposal). The Debtors were principals of Sanitation and Disposal, Florida corporations which were dissolved in 1977 and 1979, respectively. Defendant Michael Acquafred- da is the son of the Debtors and sole stockholder of Gulf Coast Carting, Inc. (Carting), a Florida corporation which was dissolved in 1980. While Industrial Waste Service, Inc. (Industrial) was originally named a Defendant, a Motion to Dismiss was granted as to this corporation on the condition that all payments owed by Industrial to any other Defendants would be paid into the Court registry pending final disposition of this proceeding.
From the evidence adduced at trial, the Court finds and concludes as follows:
In July of 1974, the Debtors purchased certain assets from Community Disposal, Inc., including at least two trucks and commercial trash accounts producing revenues of $8,000 to $9,000 per month. The Debtors made a down payment in the amount of $10,000 and executed a promissory note in the principal amount of $70,000. This obligation earns interest at an annual rate of 7%. The promissory note was ultimately assigned to Joseph Messina by Community Disposal, Inc., the previous owner of the assets involved. The Debtors paid only $800 on this note, and there is no dispute that the Debtors remain indebted to Mr. Messina, to the extent of the remaining balance.
It further appears that the Debtors transferred all the assets acquired from Community Disposal, Inc. to Sanitation and Disposal. These two newly formed corporations, in which the Debtors were the sole stockholders, paid no consideration to the Debtors for the transfer. Michael Acquafredda, the son of the Debtors, was employed by these two corporations until they were dissolved. In 1979, Michael Acquafredda formed Carting and commenced doing business with the assets used in the business previously conducted by Sanitation and Disposal. There was no consideration furnished by Carting either to Sanitation or to Disposal, or to the Debtors for the assets transferred to Carting. The assets included approximately 300 trash containers, commonly known as dumpsters; the business routes, i.e., customer lists, which consisted of between 200 and 300 stops. The business income at that time was between $9,000 and $12,000 per month.
In July of 1981, Carting sold substantially the same assets to Industrial Waste Service, Inc. (Industrial) for $200,000. Industrial paid $50,000 in cash and gave a promissory note for the balance. The note is to be paid in installments of $2,500 per month. It is unclear whether the note was made payable to Gulf Coast Carting or Michael Ac-quafredda or both, but it is clear that Carting is no longer in business having been dissolved in December of 1980.
The Debtors filed their petitions for relief under Chapter 7 of the Bankruptcy Code on February 14, 1982. The Trustee instituted this adversary proceeding pursuant to Sec. 544(b), based on the contention that the transfers by the Debtors were in fraud of their creditors. He does not seek to set aside the transfers, but seeks a judgment against Michael Acquafredda for $50,000 (the amount received in cash from Industrial), assignment to the Trustee of the note executed by Industrial Waste and turnover of all monies already received on the installment payments on the note.
Section 544(b) provides that a Trustee in Bankruptcy may avoid any transfer of an interest of the Debtor in property that is voidable under applicable non-bankruptcy laws by a creditor holding an allowable unsecured claim. In order to prevail under this Section, the Trustee must establish first that, at the time that the transaction under attack occurred, there was, in fact, a creditor in existence who was holding an unsecured claim which is allowable under Section 502 of the Code. Second, the Trustee must establish that the transaction could have been avoided' by such creditor under the applicable local law, in this instance, under the laws of the State of Florida.
There is no serious dispute that there were, in fact, creditors who held unsecured claims against the Debtors at the time relevant. Joseph Messina was holding and still holds the promissory note executed by the Debtor in connection with the acquisition of the assets from Community Disposal. Tan ner and Associates, Inc., also held a claim which was reduced to judgment in the amount of $14,831.92 on April 26, 1978. This leaves for consideration whether the transfers of the assets by the Debtors to the various defendants were voidable under the laws of Florida.
The transfer under attack is the initial transfer by the Debtors to Disposal and Sanitation, the corporations formed by them and in which they were the sole stockholders. These two corporate entities continued to operate the business in the same manner in which it was operated by the Debtors as sole proprietors. While it is true that this transfer of assets by the Debtors to the newly formed corporation was not supported by any consideration whatsoever, it ostensibly was a transfer in exchange for all the outstanding stock in these two corporations. However, unless the Trustee’s right of recovery under Section 544 is not limited to recovery against the immediate transferees, in this case, against Disposal and Sanitation, the Trustee’s right to prevail cannot be recognized. This result is inevitable because all subsequent transfers, i.e., the transfers by Sanitation and Disposal to Carting, were transfers by two non-debtor entities of property in which these Debtors ostensibly no longer had any interest. Of course, the same conclusion is equally applicable to the ultimate transfer, that is, the transfer by Carting to Industrial, the transfer proceeds of which the Trustee now seeks to recover.
Thus, the extent of the Trustee’s rights of recovery under Section 544 must be determined before one can address the question of a fraudulent transfer. The answer to this initial issue is found in Section 550(a) of the Code which provides inter alia that
... to the extent that a transfer is voided under Sections 544, 545, 547, 548, 549, or 724(a) of this title, the Trustee may recover for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from
(2) any immediate or mediate transferee of such initial transferee.
This leaves for consideration the true character of these transfers. The several transactions involved here were not transactions commonly recognized as ones conducted at arms length. In each instance, with the exception of the transfer to Industrial, both the transferors and the transferees, although operating under a corporate name, were corporate entities that were family-owned and controlled by either the trans-ferors or transferees. There is hardly any question that the very same assets changed hands as a result of each exchange, but all assets remained within the same family and were controlled by the same family members.
Fla.Stat.Sec. 726.01 provides, inter alia, that every conveyance or transfer of property made with intent to delay, hinder or defraud creditors is void and of no effect. Intent to defraud within the meaning of the statute is the Debtor’s intention to prevent his creditors from satisfying their debts. Wimmers v. Blackburn, 151 Fla. 236, 9 So.2d 505 (1942). The intent must exist at the time'of the transfer which is under attack. Bay View Estates Corp. v. Southerland, 114 Fla. 635, 154 So. 894 (1934). However, when the legal effect of the conveyance is to delay or hinder creditors, it is fraud in law regardless of the actual motives of the Debtor. Whetstone v. Coslick, 117 Fla. 203, 157 So. 666 (1934); Livesay Industries, Inc. v. Window Co., 305 F.2d 934 (5th Cir.1962).
Certain facts and circumstances have been recognized as indicia or “badges” of fraud. The Florida Supreme Court in Cleveland Trust Company v. Foster, 93 So.2d 112 (Fla.1957) listed the most important indicators of fraud as follows:
(a) Relationship between the debtor and the transferee.
(b) Lack of consideration for the conveyance.
(c) Insolvency or indebtedness of the debtor.
(d) The transfer of the debtor’s entire estate.
(e) Reservation of benefits, control or dominion by the Debtor.
(f) Secrecy or concealment of the transaction.
(g) Pendency or threat of litigation at the time of the transfer.
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4241654-23192 | JUDGMENT
ROBERT G. JAMES, District Judge.
For the reasons stated in the Report and Recommendation of the Magistrate Judge previously filed herein, determining that the findings are correct under the applicable law, and noting the absence of objections to the Report and Recommendation in the record,
IT IS ORDERED, ADJUDGED, AND DECREED that this petition for habeas corpus be DISMISSED WITH PREJUDICE.
REPORT AND RECOMMENDATION
KAREN L. HAYES, United States Magistrate Judge.
Pro se petitioner Duncan E. Hicks filed the instant petition for writ of habeas corpus pursuant to 28 U.S.C. § 2254 on January 20, 2011. Petitioner is an inmate in the custody of Louisiana’s Department of Public Safety and Corrections. He is incarcerated at the Winn Correctional Center, Winnfield, Louisiana. Petitioner attacks his 1998 armed robbery conviction and the hard labor sentence imposed in December 2008 by the Fourth Judicial District Court, Ouachita Parish. This matter has been referred to the undersigned for review, report, and recommendation in accordance with the provisions of 28 U.S.C. § 636 and the standing orders of the Court. For the following reasons it is recommended that the petition be DISMISSED WITH PREJUDICE.
Background
Petitioner was arrested and charged with armed robbery of the Central Bank in Monroe on October 3, 1997. Sometime in September 1998 petitioner pled guilty pursuant to a plea agreement which set a sentencing cap of 20 years and provided for a recommendation of leniency conditioned upon petitioner’s cooperation with the police and the Federal Bureau of Investigation regarding the prosecution of his co-defendants. A pre-sentence investigation was ordered and sentencing was scheduled for February 9,1999.
However, on January 19, 1999, petitioner escaped from jail. He fled Louisiana and was arrested on January 27, 1999, in Nashville, Tennessee, following another bank robbery in that city. Petitioner was charged in federal court with aiding and abetting armed bank robbery and using a firearm during a crime of violence. On July 13, 1999, petitioner pled guilty to those charges in the United States District Court for the Middle District of Tennessee. Consecutive sentences of 46 and 84 months were imposed on December 1, 1999. United States of America v. Duncan Edward Hicks, No. 3:99-cr-00016 (M.D.Tenn.). Petitioner did not appeal or collaterally attack these convictions and sentences.
Petitioner served his federal sentence in the custody of the Bureau of Prisons. Sometime in October 2008 he completed his federal sentence and was transported back to Louisiana. On December 10, 2008, a sentencing proceeding was convened; counsel for the petitioner objected to the imposition of sentence based on untimeliness. The objection was overruled and petitioner was ordered to serve ten years at hard labor with credit for time served from the date of his arrest until the date of his escape. The charge of simple escape which had been lodged against petitioner was dismissed. [Doc. # 1-3, pp. 18-19] On January 6, 2009, petitioner filed a motion to reconsider and a motion to quash the sentence; a supplemental motion was filed on January 30, 2009. Petitioner argued that the delay in sentencing caused him injury, was unjustified, unreasonable, and unconstitutional. On May 21, 2009, a hearing on petitioner’s motion was convened and denied. [See Statement of the Case and Action of the Trial Court, Petitioner’s Brief on Appeal, at Doc. # 1-3, pp. 5-7]
Counsel was appointed and petitioner appealed to the Second Circuit Court of Appeals arguing two Assignments of Error—
(1) “The lengthy delay in sentencing is unreasonable, unjustified, and unconstitutional.
(2) The Trial Court erred by imposing an excessive sentence ...” [Doc. # 1-3, p. 7]
On appeal, petitioner argued that he was “statutorily entitled to the imposition of sentence without unreasonable delay ...” as provided by La.C.Cr. P. art. 874 as interpreted by Louisiana jurisprudence.
Other than a fleeting reference to Fourteenth Amendment, petitioner cited only Louisiana law and jurisprudence in support of his first assignment of error. According to petitioner’s appeal brief, petitioner “... made early attempts to have these proceedings in Ouachita Parish disposed of ...” [Id.] Apparently, these attempts consisted of letters written to the Court or the Clerk of Court in May 2004 and April 2005. [Id., pp. 9-10] It does not appear from the appellate brief and other exhibits submitted by the petitioner that he filed any motions or other pleadings in the Louisiana courts seeking to enforce his right to a “speedy sentencing.” The available evidence also establishes that he did not seek to enforce his “speedy sentencing” right in federal court.
With regard to the prejudice suffered by petitioner, counsel argued that the detainer placed by Ouachita Parish made petitioner ineligible for community confinement and precluded his eligibility for parole from federal prison to a half-way house and interfered with his ability to participate in “other programs at federal facilities, such as drug abuse ...” Petitioner also argued, “It is also possible that Mr. Hicks would have received a concurrent prison sentence in the federal system.” He also argued that “... witnesses that could have explained more factors in mitigation of sentence were no longer available. Finally, petitioner claimed that the “unreasonable delay in sentencing” resulted in the divestiture of the trial court’s jurisdiction to sentence the defendant.” He argued that he was entitled to discharge from custody. [Id., pp. 10-11]
On January 27, 2010 the Second Circuit Court of Appeals affirmed petitioner’s conviction and sentence. That Court recited the relevant facts of the case as follows:
Soon after his escape, the defendant was involved in another bank robbery and arrested in Nashville, Tennessee on January 27, 1999. He was subsequently sentenced to 10 years in federal prison. The Ouachita Parish Sheriffs Office received detainer action letters from the Federal Bureau of Prisons on May 8, 2000, May 21, 2003, and June 2, 2003, stating where the defendant was being housed and his projected release date. The defendant wrote to the Fourth Judicial District Court in May 2004, complaining of ‘insufficient counseling’ and requesting appointment of a public defender.
He wrote again in April 2005, making the same request and advising that he was trying to get concurrent sentences. A response in May 2005, from Judge Benjamin Jones informed the defendant that his information was being provided to the district attorney.
No action was taken to sentence the defendant until his release from federal prison in October 2008, when he was transferred to Louisiana. Sentencing occurred on December 10, 2008. The district court imposed a sentence of 10 years at hard labor without the benefits of probation, parole, or suspension of sentence. The defendant was given credit for time served prior to his escape, and the state did not pursue the escape charge.
State of Louisiana v. Duncan Hicks, 45,-001 (La.App. 2 Cir. 1/27/2010), 30 So.3d 1081, 1082-83.
In rejecting petitioner’s argument concerning the delay in sentencing, the Court observed,
The defendant argues that the delay in sentencing was unreasonable, unjustified and prejudicial considering that he was available for sentencing from the date of his arrest in Tennessee on January 27, 1999. He asserts that he did not conceal his whereabouts and even wrote to Ouachita Parish officials to seek disposition of his case. He also claims that he was prejudiced by the detainer placed on him by the state, which caused him to be ineligible for community confinement while in federal prison and to be deprived of having his federal and state sentences run concurrently.
La. C. Cr. P. art. 874 states:
Sentences shall be imposed without unreasonable delay. If a defendant claims that the sentence has been unreasonably delayed, he may invoke the supervisory jurisdiction of the appellate court.
Even when a delay in sentencing may be unreasonable, the defendant is not entitled to have his conviction and sentence set aside unless he has been prejudiced by the delay. La. C. Cr. P. art. 921; State v. Johnson, 363 So.2d 458 (La. 1978); City of Winnfield v. Weems, 545 So.2d 717 (La.App. 2d Cir.1989), unit denied, 551 So.2d 1319 (La.1989). The mere passage of time while a defendant is serving a subsequent sentence does not automatically render a delay unreasonable or prejudicial. State v. Hancock, 1999-293 (La.App. 3d Cir.11/24/99), 748 So.2d 549. Rather, the burden is on the defendant to prove he was prejudiced by the delay. Id.
In order to determine whether a delay was unreasonable or prejudicial, a flexible approach is used in which all the circumstances are evaluated on a case-by-case basis. State v. Duncan, 396 So.2d 297 (La.1981); City of Baton Rouge v. Bourgeois, 380 So.2d 63 (La. 1980).
The record shows that the defendant pled guilty on September 25, 1998, but was not sentenced until December 10, 2008. The delay was in part caused by the defendant escaping from jail in Qua chita Parish and then committing another bank robbery and being arrested in Tennessee. However, the state had notice of his whereabouts possibly as early as his arrest in Tennessee on January 27, 1999, and certainly as early as May 2000, through a detainer action notice from the U.S. Bureau of Prisons. The defendant also wrote letters in May 2004, and April 2005, seeking appointment of counsel and sentencing. Yet no attempt was made by the state to initiate sentencing until the defendant’s release from federal prison in 2008.
Even if we consider this delay of approximately 10 years, though partly the fault of the defendant, to be unreasonable on the facts of this matter, an unreasonable delay in sentencing does not justify reversal of the conviction and sentence unless the defendant was prejudiced by the delay. The defendant argues that he was prejudiced because the detainer placed on him, in lieu of bringing him back for sentencing, caused him to receive a higher security designation which made him ineligible for a community placement. In Hancock, supra, the Third Circuit concluded that the defendant was prejudiced by an eight-year delay in sentencing because the detainer placed against him while in federal prison prevented him from being eligible for parole to a halfway house. The defendant relies on Hancock, supra, and a letter from Candace Girouard, a federal employee with the Dallas Community Corrections Office, stating that her office ‘will not place inmates in a Residential Re-entry Center if he/she has unresolved pending charges, or detainers, which will likely lead to arrest, conviction, or confinement.’ The defendant also argues that he was prejudiced because he did not have the opportunity to have his federal and state sentences run concurrently.
Neither the defendant’s evidence nor arguments about the potential prejudice that may have resulted from the delay in sentencing prove that he suffered any actual prejudice. The defendant offered no evidence of what his security designation would have been if he had been sentenced earlier on the armed robbery charge in Louisiana. There is no evidence that this defendant, an escapee found guilty of two armed robberies, would have been given a lower security designation in the absence of a detainer or if he had been sentenced sooner by the state. We are not persuaded to follow the third circuit’s finding of prejudice in Hancock, supra.
With regard to the possibility of concurrent sentences, this is merely conjecture by the defendant rather than proof of prejudice. While there may have been the possibility of having the federal and state sentences run concurrently, neither the federal court nor the state district court would have been required to order its sentence to run concurrently with the other. See 18 U.S.C. § 3584 and La. C. Cr. P. art. 883.1
The defendant has not met the burden of proving that he was prejudiced by the delay of approximately 10 years between his plea and the sentencing. Thus, reversal of his conviction and sentence is not warranted.
Hicks, 30 So.3d at 1082-83.
On February 26, 2010, petitioner filed a pro se writ application in the Louisiana Supreme Court. In his writ application he argued, “The lengthy delay in sentencing is unreasonable, unjustified, and unconstitutional.” Petitioner again claimed a violation of La.C.Cr.P. art. 874 as interpreted by the Louisiana jurisprudence, and again, he made only a fleeting reference to federal Constitutional law by arguing, “Principals of fundamental fairness dictated by the due process clause of the Fourteenth Amendment to the United States Constitution prohibit inordinate delays in post-conviction proceedings such as the imposition of sentence when the delays prejudice the defendant.” [Doc. # 1-3, pp. 33-39] Petitioner’s writ application was denied without comment by the Louisiana Supreme Court on September 24, 2010. State of Louisiana v. Duncan E. Hicks, 2010-0459 (La.9/24/10), 45 So.3d 1071.
Petitioner filed the instant petition for habeas corpus on January 20, 2011. He argues three interrelated claims for relief:
(1) “The State of Louisiana violated the petitioner’s constitutional right to Due Process. With full knowledge of his whereabouts and unrestricted access to obtain him for sentencing, the State neglected to employ any methods of obtaining the Petitioner for sentencing and ignored all of his requests for the final disposition of the case until after his federal sentence had expired. The 10-year delay disabled the petitioner from petitioning the federal court to run his state and federal sentences concurrently while he was still in federal custody and while the prescriptive period was still running.
(2) The State of Louisiana has denied the Petitioner his constitutional right to sentencing without unreasonable, purposeful, and oppressive delay. The petitioner asserted his right to speedy trial by requesting final disposition of the detainer lodged against him numerous times. The State of Louisiana neglected to obtain him for sentencing until a full 10 years after the institution of prosecution. The record does not reflect any justification for the delay or reason for ignoring the Petitioner’s requests.
(3) The unreasonable and unjustified 10-year delay in sentencing has caused and subjected the petitioner to many prejudices. The 10-year delay in sentencing prevented the petitioner from: receiving concurrent sentences (mitigating factors show highly likely), enrolling in any educational/vocational courses programs, partaking in re-entry programs or be assigned to a half-way house, avoiding prejudicial sentencing process, and avoiding the prejudicial denial of his right to speedy sentencing.” [Doc. 1, pp. 2-3]
Law and Analysis
1. Rule 4 Considerations
Rule 4 of the Rules Governing Section 2254 Cases in the United States District Courts provides that following examination of the pleadings by the court, “If it plainly appears from the face of the petition and any exhibits annexed to it that the petitioner is not entitled to relief in the district court, the judge shall make an order for its summary dismissal and cause the petitioner to be notified.” (See also Kiser v. Johnson, 163 F.3d 326, 328 (5th Cir.1999), “The district court has the power under Rule 4 to examine and dismiss frivolous habeas petitions prior to any answer or other pleading by the state. This power is rooted in ‘the duty of the court to screen out frivolous applications and eliminate the burden that would be placed on the respondent by ordering an unnecessary answer.’ 28 U.S.C. foil. § 2254 Rule 4 Advisory committee Notes.”)
Petitioner’s pleadings and exhibits establish that he is not entitled to relief and his habeas petition should therefore be dismissed with prejudice in accordance with Rule 4.
2. Violations of State Law and the Exhaustion of State Court Remedies
As shown above, petitioner made only vague and fleeting references to the violation of his right to fundamental fairness as secured by the Due Process clause of the Fourteenth Amendment when he presented his sentencing claims to the Court of Appeals and the Louisiana Supreme Court. The main thrust of his argument was that the delay in sentencing violated Louisiana law as codified in La.C.Cr.P. art. 874 and the jurisprudence which interprets that statute.
Before seeking federal habeas corpus relief, state prisoners must first exhaust available state court remedies, by fairly presenting their federal Constitutional claims to the state’s courts thereby giving those courts an opportunity to pass upon and correct any Constitutional violations. 28 U.S.C. § 2254(b)(1). The prisoner must fairly present all of his claims in each appropriate state court, including the state supreme court with the power of discretionary review. Baldwin v. Reese, 541 U.S. 27, 124 S.Ct. 1347, 158 L.Ed.2d 64 (2004). Habeas petitions presenting unexhausted claims must ordinarily be dismissed. Rose v. Lundy, 455 U.S. 509, 102 S.Ct. 1198, 71 L.Ed.2d 379 (1982). “A fleeting reference to the federal constitution, tacked onto the end of a lengthy, purely state-law evidentiary argument, does not sufficiently alert and afford a state court the opportunity to address an alleged violation of federal rights.” Wilder v. Cockrell, 274 F.3d 255, 260 (5th Cir.2004). To have “fairly presented” the Supreme Court with his federal due process claims, the petitioner must have reasonably alerted the Louisiana Supreme Court to the federal nature of his complaint. Baldwin v. Reese, 541 U.S. at 29-33, 124 S.Ct. at 1349-51; Wilder v. Cockrell, 274 F.3d at 260.
A claim is “fairly presented” to the state courts if there has been, for example, (1) reliance on pertinent federal cases employing relevant constitutional analysis, see Gartrell v. Lynaugh, 833 F.2d 527, 529 (5th Cir.1987); Williams v. Lord, 996 F.2d 1481, 1483 (2d Cir.1993); (2) assertion of the claim in terms sufficiently particular as to “call to mind” a specific right protected by the Constitution, see Evans v. Court of Common Pleas, 959 F.2d 1227, 1231-33 (3d Cir.1992); or (3) allegations of a pattern of facts that is well within the mainstream of constitutional litigation, see United States ex rel. Sullivan v. Fairman, 731 F.2d 450, 454 n. 8 (7th Cir.1984).
Petitioner has essentially repackaged that argument in his federal habeas proceeding, but again, argues no specific violation of the Constitution or laws of the United States. Indeed, he once again claims only, “Principles of fundamental fairness dictated by the due process clause of the Fourteenth Amendment of the United States Constitution prohibits inordinate delay in post-conviction proceedings such as the imposition of sentence.” [Doc. # 1-2, p. 4] Further, for the first time, petitioner argues that the delay in sentencing is in violation of his right to a “speedy trial.” [Doc. # 1-2, pp. 6-8] Of course, to the extent that he now presents a federal claim, since that claim was not properly presented to the Louisiana courts, state court remedies remain unexhausted and the petition is subject to dismissal on that basis.
To the extent that petitioner contends that his custody is in violation of Louisiana law — the claim he raised in the Louisiana courts — such claim must be dismissed. Federal habeas courts will not review a state court’s interpretation of its own law in a federal habeas proceeding. See Dickerson v. Guste, 932 F.2d 1142, 1145 (5th Cir.1991); Malchi v. Thaler, 211 F.3d 953, 957 (5th Cir.2000) (observing that federal habeas relief is reserved for the deprivation of rights that are secured by the United States Constitutions or the laws of the United States).
In other words, this petition is subject to dismissal either because petitioner failed to exhaust state court remedies with respect to his federal claims or because he has raised on state law violations in his federal petition.
3. AEDPA Standards for Review
Assuming, however, for the sake of argument, that petitioner’s federal habeas corpus claims have been properly exhausted, and, that petitioner has throughout alleged violations of the Constitution and laws of the United States with respect to his present custody, his claim fares no better.
Petitioner’s delayed sentencing claim, whether asserted under state or federal law or both, was adjudicated on the merits. Since his petition was filed after the effective date of the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), federal habeas corpus review of the instant petition is governed by the provisions of the AEDPA, specifically 28 U.S.C. § 2254(d)(1) and (2) which define the standard for review.
Under the AEDPA, habeas relief is not available to a state prisoner on a claim which was adjudicated on the merits in State court proceedings unless the adjudication of the claim—
(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)(1) and (2).
Questions of law and mixed questions of law and fact are reviewed under § 2254(d)(1), while pure questions of fact are reviewed under § 2254(d)(2). Hill v. Johnson, 210 F.3d 481, 485 (5th Cir. 2000), cert. denied, 532 U.S. 1039, 121 S.Ct. 2001, 149 L.Ed.2d 1004 (2001). The state court’s decision is contrary to federal law within the meaning of § 2254(d)(1) if the state court applies a rule contradicting the governing law set forth in the Supreme Court’s cases, or the state court “confronts a set of facts that are materially indistinguishable from a decision of [the Supreme] Court and nevertheless arrives at a result different from [Supreme Court] precedent.” Williams v. Taylor, 529 U.S. 362, 405-06, 120 S.Ct. 1495, 146 L.Ed.2d 389 (2000). A state court’s factual findings constitute “an unreasonable application of clearly established” Supreme Court precedent if the state court “correctly identifies the governing legal rule but applies it unreasonably to the facts of a particular prisoner’s case.” Id. at 407-08,120 S.Ct. 1495. The inquiry into the issue of “unreasonableness” is objective. Id. at 409-10, 120 S.Ct. 1495. A state court’s incorrect application of clearly established Supreme Court precedent is not enough to warrant federal habeas relief — the application must also be unreasonable. Id. at 410-12, 120 S.Ct. 1495 (emphasis supplied).
The state court’s factual findings are presumed to be correct. 28 U.S.C. § 2254(e)(1). In order to obtain habeas relief on the ground that the state court’s decision was based on an “unreasonable determination of the facts in light of the evidence presented in the State court proceeding,” the petitioner must rebut by clear and convincing evidence the presumption that the state court’s factual findings are correct. See Dowthitt v. Johnson, 230 F.3d 733, 741 (5th Cir.2000).
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11422323-10655 | HEANEY, Circuit Judge.
Andre Tyrone Griffith appeals his convictions for possession of stolen firearms and being a felon in possession of firearms. He argues that he was denied a fair trial because of improper questions and remarks made by the prosecutor. Griffith also appeals his sentence, alleging that the district court erred when it determined that his prior felony conviction for conspiracy to commit theft in the second degree constituted a violent felony pursuant to 18 U.S.C. § 924(e). We affirm.
I. BACKGROUND
Griffith was charged with possessing stolen firearms and being a felon in possession of a firearm as a result of events which took place in October of 2000. On the evenings of October 16 and 17, 2000, Ross Hrycyshyn, Jason Schmidlen, Ron-dell Cropp, Adam Langer, Shannon Kies, and Sara Berry assisted in the burglary of the Taylor Gun Store in Marion, Iowa. Twenty-six handguns and three long guns were reported stolen.
The next day, Schmidlen, Hrycyshyn, and an acquaintance named Rod Schneider agreed to try to sell the guns to friends of Schneider, including Bob Knight. Schmid-len, Hrycyshyn, and Schneider traveled to Knight’s apartment. While they were there, Griffith arrived and expressed an interest in acquiring and selling the guns. Later, Griffith and others traveled fo Schneider’s house to retrieve approximately twenty guns. Together, these individuals traveled to several apartments to meet individuals who were interested in purchasing the guns. Griffith then traveled with others to a nearby convenience store to meet another potential buyer, while Schneider and an acquaintance returned to Knight’s apartment. After Griffith’s party arrived at the convenience store, Griffith called his friend Tommy Thomas to arrange for a ride. When Thomas arrived, Griffith informed his party that Thomas was a potential buyer, and took the guns into Thomas’s vehicle. Thomas and Griffith then fled with the guns, which were never retrieved.
On January 12, 2001, a two-count indictment was filed charging Griffith with possessing firearms as a felon and with possessing stolen firearms. On June 20, 2001, following a one and one-half day jury trial, a jury found Griffith guilty of both counts. The district court sentenced Griffith to 120 months imprisonment on count one and 240 months imprisonment on count two, with the terms to run concurrently. This appeal followed.
II. DISCUSSION
A.
Griffith argues that prosecutorial misconduct occurred on seven separate occasions during the prosecutor’s questioning of witnesses and during his closing argument. Because Griffith did not object to the prosecutor’s conduct at trial, we review for plain error. “Under plain error, the question for determination is whether the argument was so prejudicial as to have affected substantial rights resulting in a miscarriage of justice.” United States v. Mora-Higuera, 269 F.3d 905, 912 (8th Cir.2001) (quoting United States v. Segal, 649 F.2d 599, 604 n. 10 (8th Cir.1981)). “Plain error review is extremely narrow and is limited to those errors which are so obvious or otherwise flawed as to seriously undermine the fairness, integrity, or public reputation of judicial proceedings.” United States v. Beck, 250 F.3d 1163, 1166 (8th Cir.2001).
Griffith claims that the district court committed plain error by not granting a mistrial when Hrycyshyn testified that Griffith had threatened him while they were in jail together. We find no such error. Although Griffith may have preferred that the jury remain unaware of his incarceration, this disclosure was not so egregious as to warrant a new. trial. Moreover, Griffith’s alleged threat towards Hrycyshyn was admissible to show consciousness of guilt. See United States v. DeAngelo, 13 F.3d 1228, 1232 (8th Cir.1994) (noting that this court has ruled a number of times that evidence of death threats against witnesses or other parties cooperating with the government is generally admissible against a criminal defendant to show consciousness of guilt of the crime charged).
Next, Griffith contends that the government improperly requested that Hrycyshyn vouch for the veracity of Schneider by asking Hrycyshyn: “[I]f [Schneider] says he gave you a gun — sold you a gun, he’s telling the truth?” Trial Transcript at 260. The district court did not commit plain error by allowing this question. “It is fundamental that where the defendant ‘opened the door’ and ‘invited error’ ” there is ordinarily no reversible error. United States v. Beason, 220 F.3d 964, 968 (8th Cir.2000) (quoting United States v. Steele, 610 F.2d 504, 505 (8th Cir.1979)). In the present case, Griffith’s attorney opened the door to the prosecutor’s line of questioning during Hrycyshyn’s cross-examination when he asked: “[I]f Ross [sic] Schneider says you did not have a handgun, he’s lying?” Id. The government reasonably responded to this question in order to clarify whether Schneider was lying when he testified that he gave Hrycyshyn a gun. We find that the reference to Schneider’s truthfulness did not undermine the fairness of Griffith’s trial.
Griffith also argues that the prosecutor made several improper comments during his closing argument.
This circuit has set forth a two-part test for reversible prosecutorial misconduct: 1) the prosecutor’s remarks or conduct must have been improper; and 2) such remarks or conduct must have prejudi-cially affected defendant’s substantial rights so as to deprive him of a fair trial. If this court reaches the second step, the factors we consider are: 1) the cumulative effect of the misconduct; 2) the strength of the properly admitted evidence of the defendant’s guilt; and 3) any curative actions taken by the trial court.
United States v. Beckman, 222 F.3d 512, 526 (8th Cir.2000).
In the present case, Griffith’s attorney did not object to the comments that form the basis for his current contentions. This makes it difficult to determine whether the district court allowed the comments because he considered them to be proper or because he concluded that prejudice simply did not attach. Nevertheless, for purposes of our review, the critical question remains whether the argument of which Griffith complains was so offensive as to deprive him of a fair trial. See id.
A review of the record in this case reveals that the evidence submitted by the government was sufficiently strong to warrant conviction, regardless of the alleged impropriety of the prosecutor’s remarks. Approximately seven witnesses offered testimony which demonstrated that Griffith was in possession of stolen guns on October 17, 2001. Several of the witnesses had not met each other, or Griffith, until the trial, and despite the numerous attempts of Griffith’s attorney to discredit these witnesses, their testimony was accepted by the jury. Griffith has failed to demonstrate that his rights to a fair trial were prejudicially affected by the prosecutor’s comments.
B.
Griffith also argues that the district court erred in finding that he was an armed career criminal for purposes of a sentence enhancement. Under U.S.S.G. § 4B 1.4(a), a defendant who is subject to an enhanced sentence under § 924(e) is an armed career criminal. In the present case, Griffith was convicted for being a felon in possession of one or more firearms, in violation of 18 U.S.C. § 922(g). Section 924(e) provides a term of imprisonment of “not less than fifteen years” for any person convicted under § 922(g) who has three previous convictions for “a violent felony or a serious drug offense.” The district court determined that Griffith qualified for a sentence enhancement under § 924(e), in part, because he was convicted in an Iowa court for conspiring to take property valued in excess of $1,000 from two individuals. In determining that this was a violent felony, the district court looked at the original criminal complaint, which charged Griffith with both conspiracy to commit theft in the second degree, and robbery in the second degree, instead of relying solely on Griffith’s conspiracy conviction and the statutory definition of that offense. Griffith contends that the district court erred in this respect. Griffith also contends that the district court improperly found conspiracy to commit theft to be a crime of violence. We disagree.
We review de novo a district court’s determination that a prior offense constitutes a crime of violence under § 924(e). See U.S. v. Abernathy, 277 F.3d 1048, 1051 (8th Cir.2002). In determining whether a prior conviction is a violent felony for purposes of sentence enhancement under § 924(e), a sentencing court may look beyond the fact of conviction and the statutory definition of the offense to other sources such as the charging documents. See United States v. Maddix, 96 F.3d 311, 314 (1996). In the present case, the district court looked to the charging documents from the Iowa state court, which charged Griffith with robbery in the second degree, and conspiracy “to take property from Christy Jackson and [C]asey Waddell.” Government Sentencing Exhibit 66, at 6. Griffith contends that the district court erred by considering the documents detailing the charge of robbery in the second degree, because he was not convicted for this offense. We need not address this argument, because we conclude that Griffith’s conviction for conspiracy to commit theft is sufficient to trigger § 924(e)’s sentence enhancement.
Under 18 U.S.C. § 924(e)(2)(B), a “violent felony” is defined, in part, as conduct “that presents a serious potential risk of physical injury to another.... ” See also U.S.S.G. 4B1.2(1) (defining “crime of violence” as “any offense ... [that] involves conduct that presents a serious risk of physical injury to another”). In United States v. Payne, 163 F.3d 371, 374-375 (6th Cir.1998), a panel of the Sixth Circuit Court of Appeals concluded that the offense of larceny from a person fell within this definition. The Court reasoned as follows:
Michigan law interprets “from the person” narrowly to require that the property be taken from the possession of the victim or be taken from within the immediate presence or area of control of the victim. This is clearly the type of situation that could result in violence. Any person falling victim to a crime involving such an invasion of personal space would likely resist or defend in a manner that could lead to immediate violence. Whether or not violence or harm actually results in any given instance is not relevant. We agree with the First Circuit that “although larceny from the person ‘typically involves no threat of violence,’ the risk of ensuing struggle is omnipresent.”
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9094484-10881 | ORDER DENYING PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
ZIMMERMAN, United States Magistrate Judge.
Plaintiff Apex Bulk Commodities, a bulk transfer operator, subleases a portion of property located within defendant City of American Canyon (the City) from plaintiff CFNR Operating Company, a common carrier that has lease rights from and operates on lines owned by Union Pacific Railroad Company. Apex operates a bulk transfer facility on the property to transfer pumice and cement, which CFNR delivers to the property by rail, from railcars to Apex’s trucks. Apex then delivers the materials to a local customer, Cultured Stone.
Concerned that Apex’s operations posed possible environmental hazards, including dust, traffic and water run-off, and that Apex had not obtained a city business license or responded to prior citations based on violations of the Municipal Code, the City filed a state court action against Apex on April 22, 2002 seeking abatement of a public nuisance and compliance with the Municipal Code. On September 24, 2002, a superior court judge issued a preliminary injunction requiring Apex to “contain all materials which allow airborne debris to escape the property located at the terminus of Napa Junction Road,” and “comply with all land use and business license regulations of the City.” The City voluntarily dismissed the state court action on January 14, 2003.
Subsequently, Apex applied for a conditional land use permit, which was denied by the City Planning Commission. On July 17, 2003, the City Council adopted Resolution 2003-22, which affirmed the denial of Apex’s application for a conditional land use permit for the subject property. Apex continued its operations and on July 22, 2003, the City issued three citations to Apex for operating in violation of City law. The citations levied a fine of $100 per day, per violation. The fines could escalate to $500 per day, per violation.
On July 23, 2003, Apex and CFNR filed this action seeking declaratory and injunc-tive relief to prevent the City from regulating plaintiffs’ operations and activities through Resolution 2003-22 on the grounds that the Interstate Commerce Commission Termination Act (ICCTA), 49 U.S.C. §§ 701, et seq., 10101, et seq., preempts the City’s regulation. Plaintiffs also applied for a temporary restraining order. After a hearing, the parties resolved the issues that caused plaintiffs to seek that emergency order. Now before the Court is plaintiffs’ motion for preliminary injunction to restrain the City from enforcing Resolution 2003-22 by issuing citations and fines pending a final determination of the underlying action or a transfer to the Surface Transportation Board for review.
Preliminarily, the City argues that the Younger abstention requires me to deny plaintiffs’ motion. See Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971) (holding that absent extraordinary circumstances, federal courts may not enjoin or otherwise interfere with pending state judicial proceedings). Before the Younger abstention can be applied, three requirements must be met: (1) there must be ongoing state judicial proceedings at the time the federal action was filed; (2) the state judicial proceedings must implicate important state interests; and (3) the state judicial proceedings must afford the federal plaintiff an adequate opportunity to raise constitutional claims. Id.; Green v. City of Tucson, 255 F.3d 1086, 1091 (9th Cir.2001); Beltran v. State of California, 871 F.2d 777, 782 (9th Cir.1988). Because the first element is not satisfied in this case, abstention is not required.
The City voluntarily dismissed the state court proceedings in January 2003. The City’s argument that issuance of the citations to Apex constitutes commencement of an administrative process that represents state judicial proceedings and requires abstention under Younger is not persuasive. Although the Younger doctrine can be applicable to administrative proceedings, (see Ohio Civil Rights Comm’n v. Dayton Christian Schools, Inc., 477 U.S. 619, 627, 106 S.Ct. 2718, 91 L.Ed.2d 512 (1986)), neither Apex nor CFNR availed itself of the City’s administrative review process following receipt of the citations. Mere issuance of the citations was not a judicial act and there is no pending proceeding that is adjudicative in nature relating to the citations. See Agriesti v. MGM Grand Hotels, Inc., 53 F.3d 1000, 1001 (9th Cir.1995) (finding that issuance of misdemeanor citations was executive, not judicial in nature, and therefore did not mark the commencement of judicial proceedings for purposes of the Younger abstention). This ease, like Agriesti involves only a potential for future judicial proceedings.
Turning to plaintiffs’ request, “ [preliminary injunctive relief is available to a party who demonstrates either: (1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) that serious questions are raised and the balance of hardships tips in its favor.... These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases.” A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir.2001) (citing Prudential Real Estate Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867, 874 (9th Cir.2000)); see also Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush and Co., Inc., 240 F.3d 832, 839-40 (9th Cir.2001); Arcamuzi v. Continental Air Lines, Inc., 819 F.2d 935, 937 (9th Cir.1987).
On this record, plaintiffs have not established probable success on the merits or serious questions. Plaintiffs argue that the City’s enforcement of the Resolution is improper because the ICCTA preempts local regulation of rail facilities. The preemption provision of the ICCTA is:
(b) The jurisdiction of the [Surface Transportation] Board over—
(1) transportation by rail carriers, and the remedies provided in this part with respect to rates, classifications, rules (including car service, interchange, and other operating rules), practices, routes, services, and facilities of such carriers; and
(2) the construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks, or facilities, even if the tracks are located, or intended to be located, entirely in one State, is exclusive. Except as otherwise provided in this part, the remedies provided under this part with respect to regulation of rail transportation are exclusive and preempt the remedies provided under Federal and State law.
49 U.S.C. § 10501(b); see also City of Auburn v. United States Government, 154 F.3d 1025, 1030 (9th Cir.1998) (finding that ICCTA preemption is not limited to economic regulation and upholding the Surface Transportation Board’s finding that local environmental regulation of a railroad project aimed at repairing and reopening a rail line was preempted). This preemption language, however, does not reach local regulation of activities not integrally related to rail service. See, e.g., Florida East Coast Railway Co. v. City of West Palm Beach, 266 F.3d 1324 (11th Cir.2001) (holding in virtually identical circumstances that application of local zoning and occupational license ordinances against a company leasing property from a railroad does not constitute “regulation of rail transportation” and is not preempted by the ICCTA); Flynn v. Burlington Northern Santa Fe Corporation, 98 F.Supp.2d 1186, 1189-90 (E.D.Wash.2000) (noting that “ancillary railroad operations” such as “truck transfer facilities” are not subject to federal preemption) (citing Borough of River-dale — Petition for Declaratory Order—The New York Susquehanna & Western Railway Corp., 1999 WL 715272, STB Finance Docket No. 33466 at 10 (9/9/99)); In re Appeal of Vermont Railway, 171 Vt. 496, 769 A.2d 648, 654-55 (2001) (finding that local zoning regulations of railroad’s salt shed operation were not preempted to the extent that they concerned traffic issues and potential environmental contamination).
Without ruling on the merits, it appears that the City’s Resolution is aimed not at CFNR or at rail operations, but is focused on Apex’s non-railroad business activities on the property. The Resolution is in the nature of a generally applicable exercise of the City’s police powers to safeguard the health and safety of its citizens. See Flynn, 98 F.Supp.2d 1186, 1189. The City simply denied Apex’s conditional use permit to run its bulk materials transfer facility because of the problems it had experienced with Apex, and did not prevent anyone from running a rail operation or otherwise interfere with or attempt to regulate rail operations.
In fact, Apex does not appear to be involved in activities integrally related to rail transportation at the subject property. At the hearing, plaintiffs argued that because Apex hauls goods from its facility at the railroad terminal to the customer who ordered the goods, it completes the process of transporting goods by rail and so is subject only to ICCTA regulation. Taken to its logical conclusion, plaintiffs’ argument would mean that any trucking company who picks up goods from a railroad terminal for delivery to a customer would be free from local regulation. Congress, however, could not have intended such an expansive interpretation of the ICCTA’s reach. See, e.g., Florida East Coast Railway Co., 266 F.3d at 1328-31.
Nor does CFNR claim that it cannot continue to use the rail tracks. It can even continue to deliver to Apex so long as Apex complies with the City’s regulations. There is no claim that the City is trying to prevent CFNR from transporting the cement and pumice to American Canyon. Further, there does not appear to be a business relationship between Apex and CFNR beyond the fact that Apex subleases property from CFNR.
Apex urges reliance on Union Stock Yard & Transit Co. of Chicago v. United States, 308 U.S. 213, 60 S.Ct. 193, 84 L.Ed. 198 (1939) to find that its operations, consisting of unloading materials from rail cars and loading trucks, are common carrier activities that fall within the authority of the ICCTA. Union Stock Yard, however, is neither dispositive nor factually on point. That case involved the Interstate Commerce Commission’s (ICC) effort to regulate a common carrier that shipped livestock. The carrier tried to avoid ICC rate regulation of the loading and unloading of the livestock by transferring those services and facilities to one company and the operation of the railroad to another. That case did not involve preemption of state or local regulations and was decided prior to the ICCTA, which “changed significantly” the pre-ICCTA regulatory scheme. See Flynn, 98 F.Supp.2d at 1188. Moreover, Apex is not a common carrier subject to the ICC, like the railroad in Union Stock Yard.
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4185020-25547 | OPINION
SUTTON, Circuit Judge.
Three decades ago, Gregory Esparza murdered Melanie Gerschultz for just over a hundred dollars in cash. An Ohio jury sentenced him to death. After the Ohio state courts refused to alter his sentence, Esparza unsuccessfully sought habeas relief in federal district court. Because the Ohio courts reasonably rejected his claims, we affirm.
I.
On February 12, 1988, Melanie Ger-schultz and James Barailloux were work ing the night shift at a Toledo restaurant when Gregory Esparza walked inside. Wearing a ski mask and brandishing a gun, he ordered someone to open the register. Melanie complied, but James escaped through the back door and found help. When he returned, Esparza had fled, $110 was missing from the register’s cash drawer, and Melanie lay dying on the floor from a bullet wound in her neck.
In October 1983, an Ohio grand jury indicted Esparza on one count of aggravated robbery and one count of aggravated murder with a capital specification. The trial court appointed Thomas Stebbins and Norman Zemmelman as Esparza’s lawyers and scheduled trial for January 23, 1984. When his lawyers asked for more time to interview potential witnesses, the court delayed the trial until March 5. And when both of them withdrew — Zemmelman citing a conflict of interest, Stebbins a dearth of experience — the court again delayed the trial until replacement counsel could familiarize themselves with the case. Jury selection eventually started on April 30, 1984, and opening arguments began four days later. After hearing that Esparza had confessed to a fellow inmate and to one of his siblings, among other evidence, the jury convicted on both counts.
In connection with the penalty phase of the trial, Esparza’s lawyers moved for an “independent expert at state expense.” J.A. 270. They invoked two state statutes: Ohio Rev.Code § 2929.024, which provides independent expert services to indigent defendants, and Ohio Rev.Code § 2929.03(D)(1), which provides court-appointed expert services to capital defendants. The court denied the first request but granted the second, appointing the Court Diagnostic and Treatment Center. Upon reading the Center’s report and finding it wanting, Esparza’s lawyers asked the court to undo their § 2929.03 request, to keep its results from the jury, to appoint an independent expert, and to grant a continuance of unspecified duration. The court granted a one-day continuance to permit argument over the motion but ultimately denied all four requests.
During the penalty phase, Esparza’s lawyers focused the jury’s attention on his troubled youth. Esparza’s grandfather, Richard DeLa Rosa, testified that Espar-za’s father Frank deserted his mother Beatrice and “all the[ir eight] kids” when Esparza was young. J.A. 7450. Beatrice started “going out again” shortly after-wards, often abandoning her children and leaving them in her ten-year-old daughter’s care. Id. at 7453. The family “didn’t have no food,” “money,” or “shoes to go to school,” and the children were sometimes sent home “because their hair was full of lice.” Id. at 7450. Eventually, the police “load[ed] the whole bunch” into a “paddy wagon” and placed them in a Children’s Home. Id. at 7454. DeLa Rosa took in most of Beatrice’s children, but he left Esparza behind.
Esparza’s aunt, Virginia Gonzales, testified that Beatrice died when Esparza was young. She reported that Frank would whip Esparza with a wire hanger and would force his children to sit outside in a bitterly cold hallway when he wanted to be alone.
Esparza’s brother Peter testified that, as children, the two of them would steal food from a corner store because “[t]here wasn’t nothing to eat in the house.” Id. at 7473. Frank came home drunk “all the time” and “smack[ed] [the children] around.” Id. at 7474. Making matters worse, Esparza “never really got too much attention with the family,” as evinced by the fact that DeLa Rosa “left him in the Children’s Home” but took care of the others. Id. at 7477. Esparza’s grandmother doted on Peter but ignored Espar- za himself. Bounced from foster home to foster home, Esparza had trouble keeping in touch with his relatives.
Finally, Ralph Grennay, one of Espar-za’s foster fathers, testified that he “enjoyed” Esparza’s company and that Espar-za “got along fine” with his family. Id. at 7494. Under his tutelage, Esparza improved his grades, joined the Boy Scouts and a Youth for Christ church group, and played middle school football. After two years, however, Esparza’s counselors, psychiatrists and psychologists recommended — against Grennay’s wishes — that Esparza begin visiting his blood relatives more frequently. Id. at 7505. Grennay feared, with some foresight, that removing Esparza would “take away everything we tried to work with him for.” Id. at 7510.
To bolster their mitigation theory, Es-parza’s lawyers also introduced more than two hundred pages of records depicting his childhood in horrific terms. This “Family File” contained psychological evaluations, his juvenile record and summaries of his troubled social history. One entry reported that, when Esparza was two or three, “one of his brothers poured Drano on the other children and they were all burned over their bodies.” R. 193-1 at 4. When he was five, he “got his hand caught in a car” and was “dragged by his knees.” Id. A second entry set forth the verbal and physical abuse, financial difficulties and pending divorce action that culminated in a “[cjomplete family breakdown ... in the early 1970’s.” R. 185-1 at 21. A third entry explained why Esparza ended up in the Grennays’ care. On a routine home visit, a social worker discovered Esparza bleeding from the nose; his step-mother had beat him after an argument. A fourth entry connected Esparza’s “deep-seated feelings of rejection” to his pattern of “delinquent activity,” which it described as a “means of achieving peer acceptance.” R. 198-1 at 33.
Despite his lawyers’ efforts, the jury sentenced Esparza to death, and the trial court accepted its recommendation. The Ohio Court of Appeals and the Ohio Supreme Court affirmed that sentence on direct appeal. When his attempts to secure state post-conviction relief failed, Es-parza filed a habeas petition in federal district court in 1996.
The district court found four of Espar-za’s fifty-six claims to be well-taken: (1) a defective indictment, (2) ineffective assistance of counsel at the penalty phase, (3) an improper denial of a continuance request, and (4) cumulative error. We affirmed on the first ground without reaching the others. Esparza v. Mitchell, 310 F.3d 414, 422 (6th Cir.2002). But the Supreme Court reversed the decision. Mitchell v. Esparza, 540 U.S. 12, 124 S.Ct. 7, 157 L.Ed.2d 263 (2003) (per curiam). On remand, the district court reconsidered and then rejected Esparza’s remaining grounds for relief, see Esparza v. Anderson, 2012 WL 2872149 (N.D.Ohio July 12, 2012), amended by 2013 WL 774155 (N.D.Ohio Feb. 27, 2013), and granted him a certificate of appealability on the ineffective-assistance and continuance claims, id. at *54.
II.
Two sets of rules govern Espar-za’s claim that his lawyers provided constitutionally ineffective assistance of counsel at the penalty phase of his trial. The first: He must establish the prerequisites of an ineffective-assistance claim — that his lawyers provided deficient counsel and that this defective representation prejudiced the outcome of the penalty-phase proceedings. See Strickland v. Washington, 466 U.S. 668, 687, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). The second: He must sur mount the Antiterrorism and Effective Death Penalty Act (AEDPA), which bars us from overriding a state court’s ruling on the merits unless it unreasonably applied Supreme Court precedent. 28 U.S.C. § 2254(d). Through it all, he must establish that the state courts unreasonably departed from Supreme Court precedent based on the record they had before them. Cullen v. Pinholster, — U.S. —, 131 S.Ct. 1388, 1398, 179 L.Ed.2d 557 (2011). New evidence developed during federal ha-beas proceedings, generally speaking, is off limits. See Moore v. Mitchell, 708 F.3d 760, 784 & n. 11 (6th Cir.2013). Esparza cannot meet these requirements.
Reduced to its essence, Esparza’s theory is that his lawyers developed too much bad evidence at the penalty phase of his trial and not enough good. We need not decide whether “there is any reasonable argument that [Esparza’s] counsel satisfied Strickland’s deferential standard” of performance, Harrington v. Richter, 562 U.S. 86, 131 S.Ct. 770, 788, 178 L.Ed.2d 624 (2011), or indeed whether Esparza has accurately described his lawyers’ conduct. The Ohio courts rejected all of his ineffective-assistance arguments for lack of prejudice. Because their decisions were not unreasonable, we must do the same.
A.
Esparza blames trial counsel for not preparing for the penalty phase until a “mere five days before [it] actually began.” Appellant Br. at 46. True or not, this allegation did not lead to an investigation that produced little or no mitigation evidence. E.g., Wiggins v. Smith, 539 U.S. 510, 515-16, 123 S.Ct. 2527, 156 L.Ed.2d 471 (2003). His lawyers put on four witnesses who described Esparza’s youth in graphic detail. They also introduced more than two hundred pages of records that reinforced this theory of leniency. On direct appeal, the Ohio Supreme Court described those records as Esparza’s “most persuasive argument against ... the death penalty.” State v. Esparza, 39 Ohio St.3d 8, 529 N.E.2d 192, 199 (1988). The trial judge’s sentencing opinion underlines the force of counsel’s presentation. It highlighted the “lamentable conditions [Espar-za] endured throughout his babyhood, childhood and adolescence” and referenced specific incidents discussed by defense witnesses and the Family File alike. J.A. 180. “This court has encountered cases of more miserable upbringing,” it continued, “but, praise God, not often.” Id. at 181.
The existence of “some mitigation evidence,” true enough, does not “foreclose an inquiry into whether a facially deficient ... investigation might have prejudiced the defendant.” Sears v. Upton, 561 U.S. 945, 130 S.Ct. 3259, 3266, 177 L.Ed.2d 1025 (2010). But there is no prejudice under Strickland when a thorough investigation “would barely have altered the sentencing profile presented” to the jury. Id. Esparza can prevail only by pointing to new evidence that “differ[s] in a substantial way — in strength and subject matter — from the evidence actually presented at sentencing.” Hill v. Mitchell, 400 F.3d 308, 319 (6th Cir.2005). That simply is not the case here.
Esparza’s new evidence consists of eighteen affidavits submitted to the Ohio Court of Common Pleas during state post-conviction review. The first fourteen were prepared by his relatives and friends. From these he derives twenty-eight facts allegedly never presented to the jury. In truth, his counsel did present many of these facts to the jury, including Fact 2 (“There was never any food in the house for the Esparza children”) and Facts 3 and 4 (Frank drank heavily and abused his family). And the others embellish themes already found in the trial-court record. Consider, for example, Fact 1 (“There were rats and cockroaches in the house [where] the Esparza children were raised”), Facts 15,16,17 and 18 (Esparza’s grandparents hated him and refused to raise him in their home), and Fact 21 (Frank would beat Esparza “in the area of his genitals”). None of the facts, whether these or the others, sufficiently differs in degree or kind to meet Strickland’s high bar. The same holds true for the facts set forth in the three affidavits from witnesses counsel did call: his brother Peter, his aunt Virginia, and his foster father Ralph.
The last affidavit, prepared by independent expert Dr. Julia Hawgood, does not introduce new facts at all. It instead explains “the connection between [Esparza’s] childhood experiences” and his crime, an explanation Esparza argues his lawyers never gave. Appellant Br. at 56-57. The record contradicts this claim twice over. Lead counsel Keithley Sparrow made this connection the centerpiece of his closing argument. Sparrow reiterated Esparza’s “chaotic and disruptive childhood, the fact that he was constantly moved from place to place, the removal from his family when he was 7 years old, the death of his mother when he was 8,” and the abuse inflicted on him by his father. R. 189-1 at 49. He asked the jury to “[r]ead ... th[e] family file. Read about Greg Esparza.... There is a lot of information for you.” Id. at 50. And he explicitly refracted Esparza’s actions through the lens of “what happened to him at age 7,” noting that Esparza “didn’t have any control over what was happening to him, and he was removed from a home which, while it wasn’t a nurturing home, was a family setting.... [W]hen you weigh all of those factors, when you weigh his life, you will determine that mercy requires ... that your decision be a recommendation of life, not death.” Id. at 50-51.
The record echoes Hawgood’s statements, making it difficult to conclude that this expert testimony could have made a difference. Hawgood observed that Es-parza’s experiences “formed him into [a] person ... who covered his vulnerability and sense of inadequacy with a tough, hard-shelled, often callous ‘machismo’ ” characteristic of “Hispanic ... street subculture[ ].” J.A. 2180-81. So did the Family File. See R. 193-1 at 22 (“[Esparza] portrays himself as a ‘tuff guy’ who is not going to be pushed around. Perhaps his defiant resentment toward authority ... has to do with the fact that he has been placed in so many different living conditions in the last five years.”); R. 185-1 at 11 (“His behavior and attitude can be directly attributed to his father and the Mexican concept of ‘machismo.’ ”). Haw-good observed that Esparza lacked positive role models and “long-term, consistent structure and guidance,” which intensified his “rebelliousness, his anger, and his hardshell survival tactics.” J.A. 2179. So did the Family File. See R. 193-1 at 13 (“[Esparza] is in bad need of a very structured, stable environment ... to learn a better way of ... ventilating aggression more appropriately.”). Hawgood observed that Esparza’s behavior took a turn for the worse when he left the Grennays’ household, in whose care he had experienced “relative success interpersonally” and “academic[ally].” J.A. 2180. So did the Family File. See R. 185-1 at 8 (“[Esparza] seems to be adjusting quite well in this well organized loving family.... Hopefully it will continue.”). And so indeed did Ralph Grennay’s testimony at trial. See J.A. 7509-10. Because Hawgood’s affidavit added little to the trial court record that was not already there, any omission of this kind of argument and evidence had no cognizable prejudicial effect.
Precedent buttresses this conclusion. This case is not like Porter v. McCollum, 558 U.S. 30, 33, 130 S.Ct. 447, 175 L.Ed.2d 398 (2009), where counsel’s mitigation theory made no reference to Porter’s “abusive childhood, his heroic military service ..., his long-term substance abuse, and his impaired mental health and mental capacity.” Nor is it like Sears, where counsel failed to uncover evidence of physical abuse and “significant frontal lobe abnormalities” in the course of his investigation. 130 S.Ct. at 3262. Nor, contrary to Esparza’s claim at oral argument, is it like Glenn v. Tate, 71 F.3d 1204 (6th Cir.1995), a pre-AEDPA case where counsel failed to uncover evidence of organic brain damage. But it is like Strickland. There, counsel focused on Washington’s “extreme emotional distress” and his decision to “aecept[ ] ... responsibility for his crimes.” 466 U.S. at 699, 104 S.Ct. 2052. Subsequent investigation revealed merely that “numerous people” thought Washington “was generally a good person,” and that “a psychiatrist and a psychologist believed he was under considerable emotional stress.” Id. at 700, 104 S.Ct. 2052. The Supreme Court turned Washington’s prejudice argument aside.
Esparza’s rejoinders to this conclusion fall short. Esparza argues that, had his lawyers investigated more thoroughly, they would not have put his grandfather— who allegedly despised him — on the stand. Appellant Br. at 49. But he does not clothe this bare assertion of prejudice with evidence from the record. Nor do we see how he could, given that the new affidavits confirm DeLa Rosa’s testimony.
Esparza faults his lawyers for failing to retain an independent psychologist, forcing him to rely on the Center’s experts instead. See Reply Br. at 22-23. But Es-parza’s lawyers correctly invoked Ohio’s indigent-expert statute at trial. See Appellant Br. at 7,12-13. Their only mistake was to treat the indigent-expert statute as “intertwined” with Ohio’s capital-expert statute (Ohio Rev.Code § 2929.03), which led them to believe that they were entitled to an independent (and not a court-appointed) expert under the latter’s terms. Esparza, 529 N.E.2d at 194. Esparza does not explain how that mistake could have affected the trial court’s decision to deny his request under the former. Nor can he argue that, in denying his request, the trial court acted unreasonably. See Miller v. Colson, 694 F.3d 691, 699 (6th Cir.2012) (holding that the right to an independent psychiatrist is not a “clearly established federal law” under AEDPA).
Esparza adds that the Ohio Court of Appeals never mentioned Hawgood’s affidavit on post-conviction review. Maybe so. But this fact does him no good. AEDPA deference applies even when “the state court’s reasoning is flawed or abbreviated.” Holder v. Palmer, 588 F.3d 328, 341 (6th Cir.2009).
Because Esparza’s new evidence does not differ in “strength” or “subject matter” from the evidence he submitted at trial, we must defer to the Ohio courts’ reasonable refusal to find prejudice here. See Hill, 400 F.3d at 319.
B.
Esparza separately criticizes trial counsel for seeking a psychological evaluation under Ohio’s capital-expert statute. See Ohio Rev.Code § 2929.03(D)(1). Court-appointed experts from the Court Diagnostic and Treatment Center conducted the examination, and the statute required Esparza’s lawyers to disclose its results to the jury. After reading the report, his lawyers tried — unsuccessfully— to take back their request. See R. 188-1 at 4-20. As Esparza sees it, “The prejudice that flowed from the[ ] report[ ] is self-evident.” Appellant Br. at 62. The Ohio courts, however, reasonably held otherwise.
We begin by observing that the Center’s report reinforces the mitigation theory his lawyers presented at trial. It emphasizes Esparza’s “extremely chaotic and disruptive childhood” and supplies anecdotes that confirm his witnesses’ testimony and the information in his Family File. See R. 186-1 at 67-68, 71. In many respects, then, the report bolsters his case.
The report, it is true, also contains additional potentially damaging information. The Center’s psychologist diagnosed Es-parza with antisocial personality disorder, a personality type predisposed to “drug and alcohol abuse,” “poor judgment,” and “encounters with the law.” R. 186-1 at 70. She added that “Esparza was the principal offender” in the “present offense.” Id. at 71. But Esparza’s attempts to show that this other information made a difference in his sentence are not convincing.
First, Esparza attacks the Center’s report for discussing all seven of Ohio’s statutory mitigating factors, see Ohio Rev. Code § 2929.04(B), including ones his trial attorneys did not raise. In effect, the report converted the absence of mitigation, he says, into the presence of aggravation in contravention of Ohio law. See Appellant Br. at 12. But the trial judge cured any potential prejudice by instructing the jury to consider only one aggravating circumstance: the fact that Esparza “committed the offense of Aggravated Murder while committing Aggravated Robbery.” R. 189-1 at 81-82. Esparza offers no bases for overcoming the presumption that juries “follow their instructions.” Richardson v. Marsh, 481 U.S. 200, 211, 107 S.Ct. 1702, 95 L.Ed.2d 176 (1987):
Second, Esparza argues that an antisocial personality disorder diagnosis is categorically prejudicial. See Reply Br. at 27-30. That is not the case. Ohio state law, for one, recognizes the disorder as a statutory mitigating factor. See State v. Seiber, 56 Ohio St.3d 4, 564 N.E.2d 408, 416 (1990). And, for another, we have held— under AEDPA’s deferential standard, no less-that the failure to introduce evidence of a similar disorder caused prejudice. Williams v. Anderson, 460 F.3d 789, 805 (6th Cir.2006). Although Esparza correctly observes that the diagnosis can harm as much as it helps, its double-edged nature cuts against the categorical rule he espouses.
Third, Esparza advances the more modest argument that the antisocial personality disorder diagnosis prejudiced him in this instance, pointing to the featured role the State gave it in its closing statement. See Appellant Br. at 58. But the Family File, submitted by his lawyers, is replete with references to the disorder, its symptoms and Esparza’s lifelong pattern of antisocial behavior. See R. 193-1 at 7, 8, 13, 20. It is difficult to see how the diagnosis could have prejudiced Esparza when his own lawyers placed most of its constituent parts before the jury.
Even if the Family File had said nothing at all on this score, Esparza would face another problem. At trial, his lawyers undercut the report’s credibility by impeaching the psychologists responsible for it. The last defense witness, indeed, was Dr. William Seman, who supervised the diagnosis. Through him they established that the Center had conducted only two evaluations before Esparza’s, R. 188-1 at 102; that Esparza’s evaluation “deviate[d] ... from the procedure” the Center typically would have used, id. at 103; that the diagnosis took only two days from start to finish, id. at 104, 110; and that antisocial personality disorder could “often” be treated in the right setting and might even “spontaneously]” enter “remission,” id. at 115. Dr. Charlene Cassel, the diagnosing psychologist and the prosecution’s sole mitigation witness, admitted much the same on cross-examination. R. 189-1 at 33-34, 38-39. Hawgood’s affidavit relies on these very admissions to question whether Esparza suffered from antisocial personality disorder to begin with. J.A. 2184-85. So do Esparza’s own briefs. See Appellant Br. at 46-48; Reply Br. at 25-27.
Our precedent forecloses Esparza’s response: that his lawyers’ decision to introduce the Family File was ineffective assistance too. See Appellant Br. at 75. As the Ohio courts recognized, the File contained his best arguments for mercy. Without it, he would have been forced to rely on his witnesses’ testimony alone. Having rejected a prejudice claim on nearly identical facts before, see Keith v. Mitchell, 455 F.3d 662, 671-72 (6th Cir.2006), we refuse Esparza’s invitation to reconsider that result.
It likewise is no answer to suggest that counsel could have impeached the diagnosis more effectively by calling an expert such as Hawgood. Appellant Br. at 63. This is precisely the sort of tactical judgment Strickland counsels against second-guessing, see 466 U.S. at 689, 104 S.Ct. 2052, as the Ohio Supreme Court has repeatedly held. E.g., State v. Thompson, 33 Ohio St.3d 1, 514 N.E.2d 407, 417 (1987) (holding that a lawyer’s decision to rely on cross-examination in lieu of an expert is not ineffective assistance). The Ohio courts reasonably concluded that Espar-za’s lawyers neutralized any prejudice the diagnosis might have caused. See Esparza, 529 N.E.2d at 196.
Finally, Esparza proposes that, had the Center had time to review his full file, it would never have diagnosed him with antisocial personality disorder in the first place. Maybe so. But no cognizable prejudice occurred, or at least the state courts could have reasonably so concluded. We have already explained why such a diagnosis is not categorically prejudicial. Indeed, there often will be cases where its mitigation value exceeds its harmful effects. This case illustrates the point: Unlike Hawgood’s explanation, an antisocial personality disorder diagnosis potentially helps diminish Esparza’s moral responsibility for his actions. More, even if the diagnosis was prejudicial, there is no guarantee that it would have stayed out of the trial. For any attempt by defense counsel to introduce psychological evidence would have opened the door to a rebuttal expert from the State. Pinholster, 131 S.Ct. at 1410. In sum, the Ohio courts did not unreasonably apply established Supreme Court precedent when they determined that Esparza was not prejudiced by the Center’s report.
C.
Esparza blames trial counsel for requesting a presentence investigation using the same statute — and under the same terms — as they requested the Center’s report. See Ohio Rev.Code § 2929.03(D)(1). That investigation set forth his extensive criminal record (juvenile and adult), R. 186-1 at 62-63, his addiction to painkillers, id. at 64, and his history of alcohol abuse, id. And it described him as “at least a moderate physical threat to the community,” id. at 65, because his criminal record “ha[d] escalated rapidly both in frequency and [aggressiveness],” id. However, Es-parza was not prejudiced by the investigation because the Family File had already put each of these factors on full display.
III.
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11344679-21297 | HENLEY, Senior Circuit Judge.
The United States appeals from an order of the district court suppressing physical evidence and incriminating statements obtained from defendant/appellee Terry Gene Carter, who stands accused of possessing stolen mail in violation of 18 U.S.C. § 1708.
During the course of an investigation into the disappearance of various pieces of mail, postal inspectors placed several marked bills and a bearer check in the mail trays at First City Bank of Sioux Falls, South Dakota. The inspectors interviewed Russell Corner, a mailroom clerk, after discovering that he had endorsed three stolen bearer checks. Corner stated that he had received the checks from Carter, another mailroom employee of the bank, and had cashed them at Carter’s request. At approximately 4:00 p.m. the same day, Carter was summoned to the office of the bank president, where he was interviewed by the inspectors for approximately an hour and a half. The bank’s security manager also was present.
After the interview had proceeded for approximately fifty-five minutes, the inspectors told Carter that they were investigating the disappearance of Canadian money and asked if they could look into his wallet. Carter complied with this request, and the agents discovered $63.00 in cash and a bearer check. These were the marked items that the inspectors had placed in the mail trays. After explaining this to Carter, the agents obtained from him various incriminating statements. The inspectors then warned Carter of his rights under Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966). Carter acknowledged that he understood those rights and signed a waiver form; he then wrote out a handwritten statement admitting his guilt. Carter was not arrested, and was allowed to go home after the interview.
Carter moved the district court to suppress his statements and the bait money as having been improperly obtained before he was given Miranda warnings. The district court granted the motion and suppressed the statements and the physical evidence. The court found that the interrogation occurred in a custodial setting and that Miranda warnings therefore should have been given. The court further found that the totality of the circumstances indicated that defendant’s consent to the search of his wallet was not freely and voluntarily given inasmuch as it occurred in a coercive atmosphere, no Miranda warnings were given, the inspectors made a misrepresentation to Carter to induce his consent, and Carter was not informed that he was not required to produce his wallet. The United States appeals from the district court’s orders.
We agree with Carter’s contention that Miranda warnings should have been given earlier in the questioning than they were. The warnings must be given before interrogation begins when a suspect is taken into custody or otherwise significantly deprived of his freedom of action. Miranda, 384 U.S. at 444, 467, 86 S.Ct. at 1624; Berkemer v. McCarty, 468 U.S. 420, 429, 104 S.Ct. 3138, 3144-45, 82 L.Ed.2d 317 (1984). In determining whether a suspect is “in custody,” the “relevant inquiry is how a reasonable man in the suspect’s position would have understood his situation.” Berkemer, 468 U.S. at 442, 104 S.Ct. at 3151. The test is not merely whether Carter believed he was free to leave; rather, we must determine whether he reasonably believed that his “freedom of action [was] curtailed to a ‘degree associated with formal arrest.’ ” Id. at 440, 104 S.Ct. at 3150 (quoting California v. Beheler, 463 U.S. 1121, 1125, 103 S.Ct. 3517, 3520, 77 L.Ed.2d 1275 (1983) (per curiam)); United States v. Streifel, 781 F.2d 953, 961 (1st Cir.1986); W.R. LaFave & J.H. Israel, 1 Criminal Procedure § 6.6, at 75 (Supp.1989). Our conclusion concerning custody must arise from an examination of the totality of the circumstances. United States v. Lanier, 838 F.2d 281, 285 (8th Cir.1988) (per curiam). We review the district court’s determination on this issue under the “clearly erroneous” test, and “must affirm unless the decision of the district court is unsupported by substantial evidence, based on an erroneous interpretation of applicable law, or, in light of the entire record, we are left with a firm and definite conviction that a mistake has been made.” United States v. Jorgensen, 871 F.2d 725, 728 (8th Cir.1989) (clearly erroneous standard applies to motions to suppress; custody issue reviewed along with other issues).
The government first argues that the district court improperly considered testimony by one of the inspectors that the investigation had focused on Carter, citing United States v. Wallraff 705 F.2d 980 (8th Cir.1983). In that case we stated, “the fact that the investigation ... may be said to have focused on the defendant is insufficient to render an interrogation custodial, and ‘does not weigh heavily in that analysis.’ ” Id. at 991 (citation omitted) (quoting United States v. Jimenez, 602 F.2d 139, 145 (7th Cir.1979)). The rationale for this statement is that the investigation’s focus proceeds from the officer’s subjective intentions, and thus has little bearing on the suspect’s reasonable belief about his situation except to the extent that the suspect is aware of the evidence against him and is aware that the investigation has in fact focused on him. Jimenez, 602 F.2d at 145-46. Here, there is little if anything in the record to suggest that Carter knew of the evidence against him or that he was the focus of the investigation, although the length, place, and manner of the interrogation might have given him some indication. See id. at 145 (focus must be considered in light of other relevant circumstances).
However, we do not find, as the government contends, that the district court’s decision “placed considerable weight” on the focus of the investigation. The court mentioned focus in its analysis of the custody question only once, stating, “The purpose of the interview was not simply investigatory because the detectives, through previous interviews of others, had focused their investigation toward Carter.” The judge made no particular finding that this had an effect on Carter’s understanding of his situation. Since focus alone is insufficient to establish a custodial situation, officers could obviously focus an investigation on a suspect without taking him into custody or significantly restraining his freedom of movement. Therefore, the district court’s statement may be read as merely negating a “simply investigatory” interview without concluding that that fact alone influenced or contributed to Car ter’s belief about his situation. It would then be incumbent on the court to proceed to a consideration of factors having more of a direct bearing on the suspect’s subjective understanding, which is precisely what the district court did here. Accordingly, we do not find that the district court’s mention of focus impermissibly skewed its analysis of the totality of the circumstances. We also reject the government’s alternative argument that the evidence did not show that the investigation was focused on Carter, as one of the inspectors clearly testified that it had, although, as already noted, this has little if any bearing on the ultimate outcome.
The government next draws our attention to cases in which questioning at a suspect’s place of employment was held to be noncustodial. E.g., United States v. Venerable, 807 F.2d 745, 747 (8th Cir.1986); United States v. Rorex, 737 F.2d 753, 756 (8th Cir.1984); United States v. Dockery, 736 F.2d 1232, 1234 (8th Cir.) (en banc), cert. denied, 469 U.S. 862, 105 S.Ct. 197, 83 L.Ed.2d 129 (1984). We have discussed the relative significance of the place in which an interrogation occurs in the following terms:
The place where an interrogation takes place does not conclusively establish the presence or absence of custody. A deprivation of freedom may take place at one’s home as well as at the police station. Orozco v. Texas, 394 U.S. 324, 89 S.Ct. 1095, 22 L.Ed.2d 311 (1969). By the same token, an interrogation at the police station may be noncustodial. Oregon v. Mathiason, 429 U.S. 492, 97 S.Ct. 711, 50 L.Ed.2d 714 (1977); Iverson v. North Dakota, 480 F.2d 414, 423 n. 10 (8th Cir.[), cert. denied, 414 U.S. 1044, 94 S.Ct. 549, 38 L.Ed.2d 335 (1973) ]. Determining if there has been a deprivation of freedom entails something more than simply identifying the place of interrogation.
United States v. Jones, 630 F.2d 613, 615 (8th Cir.1980). Thus, in acknowledging that custodial situations occur not only in the police station, we cited with approval a case from the Fifth Circuit finding a custodial setting at the suspect’s place of business in South Dakota v. Long, 465 F.2d 65, 69 (8th Cir.1972), cert. denied, 409 U.S. 1130, 93 S.Ct. 951, 35 L.Ed.2d 263 (1973) (citing United States v. Phelps, 443 F.2d 246, 247 (5th Cir.1971)). See also United States v. Beraun-Panez, 812 F.2d 578, 582, as amended, 830 F.2d 127, 127-28 (9th Cir.1987) (questioning of suspect near where he was herding cattle held custodial); United States v. Mahar, 801 F.2d 1477, 1500 (6th Cir.1986) (suspect questioned at place of employment held to be in custody); 1 LaFave & Israel, supra § 6.6, at 496 (“questioning has been held to be noncustodial where it occurred at ... a place of employment ... however, it must be emphasized that the circumstances of the particular case need to be carefully assessed”).
Each of the cases that the government relies upon with regard to the employment setting contains significant circumstances obviating a custodial situation, circumstances which are not present here. In Dockery, the suspect was advised that she did not have to answer any questions, that she was free to go, and that she was neither under arrest nor was she going to be arrested; moreover, she voluntarily initiated a second interview with the federal agents. 736 F.2d at 1233, 1234. See Jones, 630 F.2d at 616 (“absence of a formal arrest and the advice of freedom to decline to answer, while not conclusive, are indicative of noncustodial interrogation”). In Venerable, this court found not clearly erroneous the district court’s conclusion that interrogation was noncustodial. 807 F.2d at 747. During “two relatively brief and noncoercive interviews ... Venerable made and received telephone calls and spoke during the interviews with other employees, and left one interview for a period of time.” Id. In Rorex, a federal agent questioned the suspect in his own office, “merely asked a few non-threatening questions ... [and] made no attempt to restrict Rorex’s freedom of action.” 737 F.2d at 757.
This case presents a different picture, however. Carter was not questioned at his workstation, but in the bank presi dent’s office. While the government asserts that these were familiar surroundings, the district court found otherwise, and we cannot say that finding is clearly erroneous. During questioning he was isolated from others who might lend moral support. See United States v. Beraun-Panez, 812 F.2d at 581, 830 F.2d at 127-28; cf. United States v. Jorgensen, 871 F.2d at 727, 729. At one point he offered to show the inspectors the equipment he used in his work, but they declined. While this in itself is insignificant, Carter testified that the inspectors coupled their response to his offer with the words, “no, just stay here.” Moreover, Carter was seated between the two inspectors, facing the president’s desk at which the bank security officer was sitting. He was not told that he was free to leave or that he did not have to answer questions. See Lanier, 838 F.2d at 285 (freedom to leave the scene a relevant factor in assessing totality of the circumstances); see also United States v. Goudreau, 854 F.2d 1097 (8th Cir.1988) (finding of noncustodial setting where suspect informed that interview was voluntary). This was the first time Carter had been detained or questioned by law enforcement officials. Cf. United States v. Jorgensen, 871 F.2d at 730. One of the inspectors took a “hard” approach, while the other was friendly toward Carter. See Miranda, 384 U.S. at 452, 455, 86 S.Ct. at 1616, 1617 (“Mutt and Jeff” technique indicative of coercive, police-dominated atmosphere). Although one of the inspectors denied this was intentional, the relevant inquiry is the effect on the suspect. See Berkemer, 468 U.S. at 422, 104 S.Ct. at 3141. A security officer was present in the room. Cf. United States v. Jorgensen, 871 F.2d at 727. Carter was questioned for nearly an hour before he confessed. Finally, he was confronted with damning evidence of guilt. United States v. Wauneka, 770 F.2d 1434, 1438 (9th Cir.1985). In these circumstances we discern no clear error in the district court’s conclusion that Carter could have reasonably believed that the interrogation was custodial in nature. Consequently, we hold that the statements Carter made prior to receiving Miranda warnings must be suppressed.
This does not end our inquiry, however. The government argues that, even if the unwarned statement must be suppressed, Carter’s written confession, which he executed after receiving Miranda warnings, should be admitted under Oregon v. Elstad, 470 U.S. 298, 105 S.Ct. 1285, 84 L.Ed.2d 222 (1985). From the record on appeal we cannot ascertain that the Elstad argument was raised in the district court; apparently it was not, as the district court did not address the issue in its opinion. In any event, we conclude that in the circumstances of this case Elstad does not require reversal.
The Elstad opinion rejected the “fruit of the poisonous tree” and “cat out of the bag” analogies with respect to Miranda violations, id. at 305-12, 105 S.Ct. at 1290-95, and held that “[a] suspect who has once responded to unwarned yet uncoercive questioning is not thereby disabled from waiving his rights and confessing after he has been given the requisite Miranda warnings.” Id. at 318, 105 S.Ct. at 1298; see United States v. Richmann, 860 F.2d 837, 841 (8th Cir.1988), cert. denied, — U.S. -, 109 S.Ct. 2429, 104 L.Ed.2d 986 (1989). The Court distinguished presumptive coercion resulting from the absence of Miranda warnings from actual coercion through the use of coercive or improper methods by the police. Id. 470 U.S. at 307-08, 105 S.Ct. at 1292-93. Thus, statements obtained in violation of Miranda, although they must be suppressed as presumptively coercive, may yet be deemed voluntary in fact. Id. at 307, 105 S.Ct. at 1292. If the unwarned statement is voluntary, then a subsequent warned confession may be admissible if the prior statement is not the result of “deliberately coercive or improper tactics.” Id. at 314, 105 S.Ct. at 1296. Of course, the second statement must be voluntary as well before it may be admitted. Id. at 318, 105 S.Ct. at 1297-98; United States v. Wauneka, 770 F.2d at 1440.
Assuming arguendo that the first, unwarned, confession was voluntary, we find that the circumstances of this case do not warrant admission of the second, warned, confession. We begin by noting some important differences in the facts of this case and those in Elstad. In Elstad, an 18-year old burglary suspect was first questioned by the police in his own home. 470 U.S. at 300-01, 105 S.Ct. at 1288-89. Elstad made an inculpatory statement during that initial questioning. He was then transported to the police station; approximately one hour later he was advised of his Miranda rights. He waived those rights and made a full statement implicating himself in the burglary. Id. at 301, 105 S.Ct. at 1288-89. In this case, there was no passage of time to speak of between the unwarned confession and the subsequent warnings and confession, all of which occurred as part and parcel of a continuous process. Thus, the second confession came almost directly on the heels of the first. Although Elstad precludes the formulation of a “rigid rule” in determining the admissibility of the second confession, id. at 318, 105 S.Ct. at 1298, our review of “the surrounding circumstances and the entire course of police conduct with respect to the suspect,” id., convinces us that the second confession cannot be allowed into evidence.
Worth noting at this juncture is the Supreme Court’s concern in Elstad that technical violations of Miranda may arise from errors by the police in determining when a suspect is in custody or has had his freedom of movement significantly restrained. Id. at 309, 105 S.Ct. at 1293. Here, on the other hand, the custodial nature of Carter’s interrogation was not unclear to the officers. As mentioned, one officer testified that the investigation had indeed focused on Carter. The inspectors themselves told Carter not to leave. They persistently interrogated him for nearly an hour, and after inducing him to show them the contents of his wallet, confronted him with the information that it contained the bait money. By this point, at the very latest, they surely should have realized that Carter reasonably could regard himself as being in custody, and that the Miranda warnings were in order. Although this alone does not determine the admissibility of Carter’s statement, it does demonstrate that an underlying concern of the Elstad opinion is largely absent here.
Moreover, the court in Elstad seemed chiefly concerned by the notion that a suspect is incapable of making a “subsequent voluntary and informed waiver ... for some indefinite period” once Miranda has been violated. Id. On the other hand, the Court gave no indication that it intended to give a green light to law enforcement officers to ignore the requirements of Miranda until after such time as they are able to secure a confession. While we do not intimate that the inspector’s state of mind establishes the existence of custody, we agree with the district court’s concern about
get[ting] practically all that you want out of a person before you ever give them the Miranda rights.... I don’t really think that there is [a] very good excuse for a person who concedes that he was a target — and that’s what [Inspector] O’Donnell says — but they don’t tell him about his rights until they have gotten everything out of him that they want.
Motion Hearing Transcript at 64.
We think Elstad did not go so far as to fashion a rule permitting this sort of end run around Miranda. In fact, the majority expressly rejected Justice Brennan’s “apocalyptic” dissenting remonstration that the Court’s holding dealt a “crippling blow” to Miranda by permitting the police to withhold warnings until the end of interrogation, and abjured what it viewed as Justice Brennan’s invitation to trial courts and prosecutors to distort the reasoning and holding of the Court’s opinion. 470 U.S. at 318 n. 5, 105 S.Ct. at 1298 n. 5; see id. at 319, 330, 105 S.Ct. at 1298, 1304 (Brennan, J., dissenting).
Moreover, the Miranda decision was prompted in large measure by judicial dissatisfaction with the difficulties and uncertainties inherent in case-by-case voluntariness determinations. 1 LaFave & Israel, supra § 6.3, at 451. The Supreme Court has recently reiterated the value of Miranda’s bright-line qualities: “A major purpose of the Court’s opinion in Miranda ... was to give concrete constitutional guidelines for law enforcement agencies to follow. As we have stressed on numerous occasions, one of the principal advantages” of Miranda is the ease and clarity of its application. Arizona v. Roberson, 486 U.S. 675, 108 S.Ct. 2093, 2097, 100 L.Ed.2d 704 (1988) (citation and internal quotations omitted). The specificity of the Miranda rules “benefits the accused and the State alike ...” as well as the courts. Berkemer v. McCarty, 468 U.S. at 430, 104 S.Ct. at 3145 (quoting Fare v. Michael C., 442 U.S. 707, 718, 99 S.Ct. 2560, 2568, 61 L.Ed.2d 197 (1979)). If the police are permitted, on the other hand, to ignore Miranda until after they obtain a confession, the courts will once again be embroiled in the endless case-by-case voluntariness inquiries Miranda was designed to prevent, and the ease-of-application rationale enunciated by the Supreme Court will be largely nullified.
Even assuming, however, that Elstad permits the second confession’s admission, we hold alternatively that the confession was the fruit of an unconstitutional search. See Wong Sun v. United States, 371 U.S. 471, 484-87, 83 S.Ct. 407, 415-17, 9 L.Ed.2d 441 (1962); Fahy v. Connecticut, 375 U.S. 85, 90-91, 84 S.Ct. 229, 232-33, 11 L.Ed.2d 171 (1963); McCloud v. Bounds, 474 F.2d 968, 969-70 (4th Cir.1973). Although Carter does not raise this issue on appeal, the record and legal arguments concerning the voluntariness of the search of Carter’s wallet are well developed, and we may affirm “on any grounds supported by the record, whether or not raised, argued, decided, or relied upon by the district court.” United States v. Wood, 834 F.2d 1382, 1389 n. 4 (8th Cir.1987). Carter’s confession came as a direct result of the search of his wallet and discovery of the bait money and bearer checks. As we affirm in the remaining portion of this opinion the district court’s conclusion that Carter’s consent to the search was not obtained voluntarily, we conclude that his confession must be suppressed as the fruit of the fourth amendment violation.
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9297672-28580 | ORDER
ALAIMO, District Judge.
Plaintiff, Patricia D. Wynn, filed the captioned case against Defendant, Paragon Systems, Inc. (“Paragon”), on January 28, 2003. Wynn sued Paragon for discrimination based on sex and retaliation, in violation of her rights under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e-2000e-17. (“Title VII”).
Presently before the Court is Defendant’s motion for summary judgment. After summarizing the facts of the case, the Court will review Defendant’s motion and brief, along with Wynn’s responsive brief, and all the supporting documents in the record, to determine that Defendant’s motion will be GRANTED.
BACKGROUND
Paragon is a security management company providing law enforcement services, surveillance, identification and authorization checks, and perimeter, building, and vehicle security checks for the Federal Law Enforcement Training Center (“FLETC”) in Brunswick, Georgia. FLETC operates as a training facility for law enforcement personnel of numerous federal agencies. Paragon has held a government contract to provide security services to FLETC since October 1, 2000. At FLETC, Paragon operates three continuous shifts, twenty-four hours a day, seven days a week. Under its contract with the government, Paragon is required to employ a Project Manager, Assistant Project Manager, and three Safety Officers. The Project Manager supervises all security personnel. Paragon’s security personnel must carry pistols while on duty. Security personnel include Shift Supervisors, or “Sergeants,” and security officers. Sergeants supervise security officers assigned to their shift. Paragon has three full-time Shift Supervisors. During the relevant time period, Jason Wilkes was the Project Manager, and the Shift Supervisors were Sergeants Wynn, Robinson, and Saddler.
At FLETC, Paragon communicates with its employees on a daily basis using a “Pass Down Log” (“PDL”). The PDL consists of a series of memoranda giving instructions from management to security personnel. It contains information about specific Paragon policies and procedures. Shift Supervisors are responsible for reading any new entries in the PDL at the beginning of each shift to the officers they supervise, and enforcing the rules set out in the PDL.
Any Paragon employee may issue a “Statement.” A Statement describes a workplace incident, and may be used to support disciplinary action by the company. Only the Project Manager is authorized to discipline employees.
When Paragon obtained the government contract at FLETC, it hired Wynn as the Night Shift Supervisor. For the ten years prior to Paragon’s obtaining the FLETC contract, Wynn served as a security officer and supervisor for two other security contractors at FLETC. Wynn served as Paragon’s Night Shift Supervisor until June 1, 2001, in total, a period of eight months. During Wynn’s employ, John Robinson was the Day Shift Supervisor, and Sergeant Saddler was the Evening Shift Supervisor. Robinson was also a Paragon Safety Officer, which required additional responsibilities regarding workplace safety-
At 8:00 A.M., on April 20, 2001, Project Manager Wilkes held a Sergeants’ meeting, immediately following Plaintiffs shift. Wynn and Robinson attended, but Saddler was not required to attend. Instead, Saddler was given a handout the night before, describing the purpose of the meeting. Saddler was excused from attending the meeting because he held another job. Wynn complained to Wilkes that she was required to attend the meeting, while Saddler was not.
On April 10, 2001, Paragon issued a Gun Clearing Procedure PDL. On April 22, 2001, Richie Jones, a male Paragon security officer, violated this policy, and Wilkes disciplined him. On April 24, 2001, Paragon issued another PDL indicating that all security personnel must have a co-worker observe the loading and unloading of their weapons. On May 7, 2001, Robinson reported Wynn for violating this latter Gun Clearing Procedure PDL. On that day, following her normal shift, Wynn unloaded her gun without a co-worker present. Robinson, in an adjoining area, observed and heard the circumstances surrounding the violation and issued a Statement. Wynn admitted that she violated the procedures, but complained that Robinson’s reporting of the incident was harassing and disrespectful. Wynn believed that Robinson was monitoring her activities more closely than he monitored the officers he was responsible for supervising. Wilkes disciplined Wynn for her violation, issuing a written reprimand. This was the only time Paragon disciplined Wynn.
Wynn and Robinson had difficulty getting along during most of Plaintiffs employment with Paragon. Paragon had another PDL explaining that the security vehicles had to be turned over to the next shift in a clean and serviceable manner (“Shift Turnover Protocol”). Paragon issued Shift Turnover Protocols related to vehicle cleanliness on February 21, 2001, April 9, 2001, and April 20, 2001. When the vehicles were turned over to the next shift, all trash was to be removed and the floor mats were to be taken out of the car to shake off any loose dirt that may have accumulated during the previous shift. Because Robinson’s shift followed Wynn’s, they had regular altercations about the cleanliness of the vehicles that Wynn turned over to Robinson. Wynn testified that she and Robinson would regularly get into yelling altercations regarding the vehicles’ cleanliness. According to Wynn, these incidents lasted ten to fifteen minutes each, and occurred two or three times per week, from February through May of 2001,
On May 11, 2001, Wynn complained to Wilkes about her disputes with Robinson concerning the Shift Turnover Protocol and the gun clearing incident. Wilkes explained that all Shift Supervisors were required by company policy to turn over clean vehicles on change of shift, and that Robinson, as a Safety Officer, was required to report all safety violations. On May 16, 2001, Wynn requested that Wilkes demote her to the Day Shift Gate 4 Officer position, knowing that Robinson supervised that shift. Wilkes asked her why she would request a demotion to this position. Wynn’s explanation did not clearly address why she would ask to work under the direct supervision of a co-worker with whom she had admitted personality conflicts. Following this discussion, Wynn requested a meeting with Charlie Allbritten, Paragon’s Director of Security Operations.
Wynn met with Allbritten on May 30, 2001. Wynn accused Robinson of harassing her during this meeting, citing Robinson’s demand that Wynn clean the vehicle floor mats at the end of her shift, and his act of reporting her violation of the Gun Clearing Procedure PDL. Wynn again requested a demotion to the Gate 4 Officer position. When Allbritten asked for an explanation, she stated that she wanted to apply for that position because of the emotional stress she was under in her current position. Allbritten asked Wynn why she would want to work directly under the person whom she felt was harassing her. Again, her explanation was not clear: she stated that although she had never worked a day shift at the gate, she believed that Robinson did not supervise employees under his authority at the gate closely. All-britten informed Wynn that Paragon would consider demoting her if she were having trouble handling her responsibilities as a Shift Supervisor, but would not demote her for the reasons that she had stated.
Wynn also claims that discrimination occurred when Paragon Assistant Project Manager Adam Austin rejected ■ her requested vacation dates. This May 29, 2001, request for time off from June 15-24, 2001, was rejected because two other security personnel would be off at that time. Wynn was told to choose vacation days that were not already full.
Plaintiff also alleges that she attempted to speak with Allbritten about her problems with Robinson by phoning Allbritten in April and May of 2001, but that Allbrit-ten did not return Plaintiffs calls. Plaintiff does not explain how this alleged failure to return her phone calls or meet with her until May 30, 2001, constituted discrimination against her.
On May 31, 2001, after seeing her name on the work schedule still as a Shift Supervisor, Plaintiff decided to resign. On June 1, 2001, Wynn tendered a letter of resignation to Paragon, effective June 15, 2001. Paragon decided not to allow her to work out her requested notice period, and instead determined that the termination of employment should take effect immediately. However, Paragon did pay Wynn through June 10, 2001. Wynn asserts that Paragon’s decision to not allow her to work out this two week notice period constituted an unjust termination, in retaliation for her complaints about Robinson.
In September 2001, Wynn filed a charge of discrimination against Paragon with the EEOC. In her charge, she alleged that Paragon discriminated against her based on her sex and in retaliation for statutorily protected activity.
On January 28, 2003, Wynn filed the present action. Wynn sued for sex discrimination, retaliation, negligent hiring and retention, negligent failure to train and supervise, and attorney’s fees. On October 21, 2003, Wynn voluntarily dismissed her negligent hiring claim. The claims before the Court on Paragon’s motion for summary judgment, then, are the Title VII discrimination claims based on sex and retaliation, and the derivative state law tort claim for negligent retention of Robinson after it had knowledge of Wynn’s complaints against him.
Having set forth the facts and procedural history of the case, the Court will now address the application of those facts to the law. The Court will begin by setting forth the standard for granting a motion for summary judgment.
DISCUSSION
I. THE SUMMARY JUDGMENT STANDARD
Federal Rule of Civil Procedure 56(c) provides for summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Facts are “material” if they could affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must view the facts in the light most favorable to the non-moving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), and must draw “all justifiable inferences in [its] favor .... ” United States v. Four Parcels of Real Property, 941 F.2d 1428, 1437 (11th Cir.1991) (en banc) (internal quotation marks omitted). However, “[i]f the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (internal citations omitted). At the summary judgment stage, the Court may not weigh the evidence or make credibility determinations. Chapman v. American Cyanamid Co., 861 F.2d 1515 (11th Cir.1988).
The moving party has the initial burden of showing the Court, by reference to materials on file, the basis for the motion. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). How to carry this burden depends on who bears the burden of proof at trial. Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.1993). If the non-movant has the burden of proof at trial, the mov-ant may carry the initial burden in one of two ways — by either (1) negating an essential element of the non-movant’s case or (2) by showing that there is no evidence to prove a fact necessary to the non-movant’s case. See Clark v. Coats & Clark, Inc., 929 F.2d 604, 606-08 (11th Cir.1991) (discussing Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) and Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Before the Court can evaluate the non-movant’s response in opposition, it must first consider whether the movant has met its initial burden of showing that there aré no genuine issues of material fact and that it is entitled to judgment as a matter of law. Jones v. City of Columbus, 120 F.3d 248, 254 (11th Cir.1997) (per curiam). A mere conclusory statement that the non-movant cannot meet the burden at trial is insufficient. Clark, 929 F.2d at 608.
If the movant carries its initial burden, the non-movant may avoid summary judgment only by “demonstrating] that there is indeed a material issue of fact that precludes summary judgment.” Id. Again, how to carry this burden depends on who bears the burden of proof at trial. If the non-movant bears the burden of proof at trial, the non-movant- must tailor its response to the method by which the movant carries its initial burden. If the movant shows an absence of evidence on á material fact, the non-movant must show either that the record contains evidence that was “overlooked or ignored” by the movant or “come forward with additional evidence sufficient to withstand a directed verdict motion at trial based on the alleged evidentiary deficiency.” Fitzpatrick, 2 F.3d at 1116-17. The non-movant cannot carry its burden by relying on the pleadings or by repeating conclusory allegations contained in the complaint. See Morris v. Ross, 663 F.2d 1032, 1033-34 (11th Cir.1981). Rather, the non-movant must respond by affidavits or as otherwise provided by Federal Rule of Civil Procedure 56.
The Court will now address Wynn’s claims of discrimination under Title VII, beginning with Wynn’s claim of sex discrimination. In the next section, the Court will focus first on the applicable law in Title VII sex discrimination cases. The Court will then treat Wynn’s assertion that Robinson’s actions amounted to creating a hostile work environment. Next, it will address Wynn’s other allegations of sex discrimination by Paragon.' In Section III, the Court will resolve Wynn’s claim of retaliation under Title VII. Finally, in Section IV, the Court will discuss Wynn’s state law negligent retention claim.
II. WYNN’S SEX DISCRIMINATION CLAIM UNDER TITLE VII
Title VII makes it an “unlawful employment practice for an employer ... to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin[.]” 42 U.S.C. § 2000e-2(a)(1).
Because Wynn relies on circumstantial evidence of discrimination, the burden shifting approach of McDonnell Douglas is applicable. In McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), the Supreme Court explained
the basic allocation of burdens and order of presentation of proof in a Title VII case alleging discriminatory treatment. First, the plaintiff has the burden of proving by the preponderance of the evidence a prima facie case of discrimination. Second, if the plaintiff succeeds in proving the prima facie case, the burden shifts to .the defendant ‘to articulate some legitimate, nondiscriminatory rea son for the employee’s rejection.’ Third, should the defendant carry this burden, the plaintiff must then have an opportunity to prove by a preponderance of the evidence that the légitimate reasons offered by the defendant were not its true reasons, but were a'pretext for discrimination.
Texas Dept. of Cmty. Affairs v. Burdine, 450 U.S. 248, 252-53, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981) (internal citations omitted). In the instant case, the Court need only to address the first stage; i.e., whether Wynn can prove a prima facie case of sex discrimination.
A prima facie case of disparate treatment sex discrimination involves proving four elements. The plaintiff must show that (1) she is a member of a protected class, (2) she was subjected to adverse employment action, (3) she was qualified to do the job, and (4) her employer treated similarly situated employees outside the protected class more favorably. Maniccia v. Brown, 171 F.3d 1364, 1368 (11th Cir.1999). There is no dispute that Wynn is a member of a protected class .or regarding her qualifications. Rather, the dispute centers on whether Wynn was subjected to any adverse employment action and whether similarly situated males at Paragon received better treatment than Wynn.
The term “adverse employment action” is “broadly defined and as a matter of law includes not only discharges, but also demotions, refusals to hire, refusals to promote, and reprimands.” Boothe v. Henderson, 31 F.Supp.2d 988, 996 (S.D.Ga.1998). However the employer’s alleged actions must meet a “threshold level of substantiality ... to be cognizable.” Wideman v. Wal-Mart Stores, Inc., 141 F.3d 1453, 1456 (11th Cir.1998). A case-by-case review is necessary to determine whether an employer’s conduct rises to the level of constituting an adverse employment action. Gupta v. Fla. Bd. of Regents, 212 F.3d 571, 587 (11th Cir.2000).
In this Circuit, an employee must show a serious and material change in the terms, conditions, or privileges of employment, and the employee’s subjective view of the significance of the employer’s action is not controlling; rather, the employment action must be materially adverse to a reasonable person' under the circumstances.
MacLean v. City of St. Petersburg, 194 F.Supp.2d 1290, 1298 (M.D.Fla.2002) (citing Davis v. Town of Lake Park, 245 F.3d 1232, 1239 (11th Cir.2001)).
“Title VII[ ] is neither ‘a general civility code’ nor a statute making actionable the ‘ordinary tribulations of the workplace.’ ” Gupta, 212 F.3d at 587 (quoting Anderson v. Coors Brewing Co., 181 F.3d 1171, 1178 (10th Cir.1999)).
Plaintiff alleges that Paragon took adverse employment action against her on several separate occasions.- The heart of her claim, however, focuses on what she describes as “verbal assaults” from her coworker, John Robinson. In addition to this hostile work environment claim, 'she alleges that Paragon’s refusal to demote her was based on animus directed at her because she is female. Additionally, Wynn has made tangential accusations that other actions by Paragon constituted workplace discrimination-based on her sex. Although she' does not argue these points in her brief as supporting her claim of sex discrimination, for the sake of completeness, the Court will address these allegations of conduct allegedly motivated by sex discrimination as well: Wynn received a written reprimand for her violation of the Gun Clearing Protocol PDL; in response to her complaints about Robinson, her supervisors verbally reinforced the company’s policy regarding cleaning the security vehicles upon completion of a shift; and Wynn was required to attend a Sergeants’ meeting immediately after her shift that a male employee was excused from attending. With these several allegations in mind, the Court will focus first on Wynn’s complaints regarding her frequent disputes with Robinson.
To establish a claim of discrimination based on a hostile work environment, a plaintiff must show that “the workplace is permeated with ‘discriminatory intimidation, ridicule, and insult,’ ... that is ‘sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment.’ ” Harris v. Forklift Sys., Inc., 510 U.S. 17, 21, 114 S.Ct. 367, 126 L.Ed.2d 295 (1993). The factors to consider are “the frequency of the discriminatory conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee’s work performance.” Id. at 23.
Plaintiff alleges that she engaged in mutual yelling altercations with Robinson, from February through May of 2001, two to three times per week, for about ten to fifteen minutes per occasion. These arguments were invariably about cleaning trash out of the security vehicles and shaking loose dirt and dust off the vehicles’ floor mats. Wynn testified that she did not remember if she told Paragon management that she considered these arguments to be instigated by Robinson’s dislike of her based on the fact that she is a woman. Instead, she testified that she found the fights generally distressing and disrespectful.
Because Wynn has presented no evidence, including her own testimony, that her sex was the motivating factor behind her altercations with Robinson, the Court need not decide whether her arguments with a co-worker about shaking dirt from a floor mat are significantly severe or humiliating so as to rise to the. level of creating a hostile workplace. The regular encounters with Robinson were no doubt subjectively frustrating to Wynn, and the Court does not doubt that she found the situation unpleasant. However, she cannot sustain a Title VII case based on that harm. As mentioned, the most important factor leading to this conclusion is the complete lack of evidence in the record that the hostility she experienced had anything to do with her sex. Title VII does not outlaw all personal animosity in the workplace. As the cases say, it is not a general civility code. It was incumbent on Wynn to provide evidence of a bias based on her sex, if she could do so. The Court is led to the conclusion that there is no genuine issue of material fact with respect to this point. Thus, summary judgment is appropriate as to Plaintiffs claim based on a hostile work environment.
Wynn further asserts that she was denied her request for a demotion because of Paragon’s anti-woman bias. Likewise, this claim is insufficient as a matter of law. An employer’s failure to demote an employee does not qualify as an adverse employment action. The case law indicates that the failure to promote an employee can qualify as an adverse employment action. Wideman, 141 F.3d at 1456. However, Plaintiff points to no authority indicating the failure to demote can constitute an adverse employment action, nor is the Court aware of any case so holding. Instead, case law indicates that such a finding, in this case, would be an inappropriate reading of Title VIPs protections. As discussed, the employer’s action, or inaction, must significantly impact the employee’s terms or conditions of employment. Judged using an objective standard, the action must be serious, and materially adverse. An individualized review of the employer’s refusal to demote Wynn to a position under the direct supervision of a co-worker with whom she has had personality conflicts reveals that this circumstance does not qualify as an adverse employment action.
Finally, the Court can dispose of Wynn’s additional complaints of unfair treatment based on her sex with minimal analysis. As for Wynn’s claim that she was required to attend a meeting that Sergeant Saddler was excused from attending, this is a trifling complaint that does not come anywhere hear constituting an adverse employment action. Being required to attend one short meeting does not seriously impact the terms, conditions, or privileges of her employment.
Likewise, Wynn’s complaint that her supervisors verbally reinforced the Shift Turnover Protocol PDF when she complained about Robinson does not constitute any form of discipline that properly can be construed as adverse to her employment situation. Obviously, in the face of an employee^ complaint, the employer may state and explain company policy. Such an explanation does not constitute discipline. Rather, the only instance of discipline meted out by Paragon to Wynn was relatively mild: she received a written reprimand for unloading her pistol outside the presence of one of her co-workers. Wynn admits to violating this policy, and there is uncontradicted evidence that Paragon has similarly disciplined male employees for failure to maintain proper gun safety. As in Davis, it is clear that Wynn did not “suffer any tangible consequence from this memo, in the form of a loss in pay or benefits or further discipline.” 245 F.3d at 1240.
Wynn has offered no evidence demonstrating that similarly situated males escaped from punishment for Gun Clearing Protocol violations. Instead, Wynn apparently presumes that the lack of evidence that male co-workers were disciplined suffices to show that she was discriminated against on the basis of her sex. As Defendant notes, however, Plaintiff must present evidence indicating that similarly situated males were treated differently than Wynn. See, e.g., Holifield v. Reno, 115 F.3d 1555, 1562 (11th Cir.1997) (a plaintiff cannot establish prima facie case of discrimination without identifying “employees [who] are involved in or accused of the same or similar conduct and are disciplined in different ways.”). Thus, the discipline cannot constitute unlawful sex discrimination.
Plaintiffs many claims of adverse employment actions based on her sex must be rejected by the Court. Having shown no genuine issue of material fact relating to the dearth of evidence supporting Wynn’s claims that she was discriminated based on her sex, summary judgment in Paragon’s favor is appropriate. The Court will proceed to discuss Wynn’s retaliation claim.
III. WYNN’S RETALIATION CLAIM UNDER TITLE VII
Title VII makes it an “unlawful employment practice for an employer ... to discriminate against any individual ... because he has opposed any practice made an unlawful employment practice by this subehapter[.]” 42 U.S.C. § 2000e-3(a).
As above, because Wynn relies on circumstantial evidence of discrimination, the burden shifting approach of McDonnell Douglas is applicable. Again, as above, the Court need only address McDonnell Douglas’s first stage, the employee’s prima facie case, to resolve Paragon’s motion for summary judgment.
To establish a prima facie case of retaliation under Title VII, the plaintiff must show that “(1) she engaged in statutorily protected expression; (2) she suffered an adverse employment action; and (3) the adverse action was casually related to the protected expression.” Wideman, 141 F.3d at 1454.
Wynn’s allegations of retaliation are three-fold. Subsequent to complaining about Robinson to Paragon management, she alleges that she was denied a vacation request, she was not demoted to the Gate 4 Officer position under Robinson’s supervision, and that she was unjustly terminated (after submitting her resignation giving the customary two weeks notice). Wynn’s claims of retaliation are without merit because she fails to meet either of the required substantive elements listed above (and, therefore, the causation element is irrelevant).
As a threshold matter that applies to each of Wynn’s complaints of retaliation, the Court will first discuss whether Plaintiffs activity, complaining about Robinson, was protected by statute. Regarding this first element, the Court finds that Wynn did not oppose an unlawful employment practice, so she has not engaged in a statutorily protected activity. It is clear that Wynn complained about Robinson’s behavior to both Wilkes and Allbritten: the record demonstrates that she thought he was disrespectful, harassing, and causing her stress in her current position. However, she testified that she could not recall telling either Wilkes or Allbritten that she thought that Robinson’s antics were motivated by her sex. As a result, her complaint is not protected by Title VII.
Even assuming Plaintiff could establish that she engaged in statutorily protected activity, Wynn cannot demonstrate that any of Paragon’s alleged retaliatory conduct qualified as an adverse employment action. A one-time denial of Wynn’s vacation request does not qualify as a serious and materially adverse change in the terms and conditions of her employment. As explained above, applying the required individualized inquiry, the failure to demote Wynn to a position supervised by Robinson does not constitute an adverse employment action.
Obviously, firing an employee is the ultimate adverse employment action. However, because Wynn voluntarily terminated the employment relationship, she cannot show that she suffered an adverse employment action in this instance. Wynn submitted her resignation on June 1, 2001, to be effective June 15, 2001. The customary two weeks notice period is a traditional courtesy the employee extends to the employer. Here, Paragon informed Wynn that it did not need Wynn to serve out this two week period. Instead, it directed her to turn over the employer’s property on the day she resigned.
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3862679-24483 | RULING ON PLAINTIFF’S MOTION FOR ATTORNEY’S FEES & COSTS
WILLIAM I. GARFINKEL, United States Magistrate Judge.
The Individuals with Disabilities Education Act (“IDEA”), 20 U.S.C. § 1415(f)(3)(B), provides that “the court, in its discretion, may award reasonable attorneys’ fees as part of the costs to the parents of a child with a disability who is the prevailing party.” In the Court’s June 9, 2008 ruling on plaintiffs’ motion for partial summary judgment, M.K v. Sergi, 554 F.Supp.2d 233 (D.Conn.2008), the Court found that plaintiffs as “prevailing parties” were entitled to an award of costs, including reasonable attorney’s fees, under the IDEA against defendant Putnam Board of Education. The Court invited the parties to submit supplemental briefs addressed primarily to plaintiffs’ degree of success. In response, plaintiffs have filed a supplemental brief. Defendant Putnam chose to rely on its original submissions. Having considered plaintiffs’ supplemental submission along with the original briefs, the Court now renders this ruling on the amount of costs, including reasonable attorney’s fees, to be awarded pursuant to § 1415(i)(3)(B).
Prevailing Market Rate
The Court begins its analysis by determining the hourly rate to be applied. As the Second Circuit instructed in Arbor Hill Concerned Citizens Neighborhood Association v. County of Albany, 522 F.3d 182, 192 (2d Cir.2008), “[t]he focus of the district court is no longer on calculating a reasonable fee, but rather on setting a reasonable hourly rate, taking account of all case-specific variables.” (Emphasis in original). See Lillbask v. State of Connecticut Department of Education, No. 3:97cv1202, 2006 WL 752872, at *5 (D.Conn. Mar. 17, 2006). Under the IDEA, 20 U.S.C. § 1415(i)(3)(C), the hourly rates to be used in calculating a fee award are the “rates prevailing in the community in which the action or proceeding arose for the kind and quality of services furnished.” By statute, no bonus or multiplier may be applied in calculating the fees awarded under this subsection. Id.
The determination of a prevailing rate requires a “case-specific inquiry into the prevailing market rates for counsel of similar experience and skill to the fee applicant’s counsel.” Farbotko v. Clinton County of New York, 433 F.3d 204, 209 (2d Cir.2005). This inquiry may include taking judicial notice of the rates awarded in prior cases and the court’s own familiarity with the rates prevailing in the district, but it also requires evaluating the evidence proffered by the parties. Id.
Plaintiffs have submitted the affidavits of lead counsel David Shaw, who describes his 34 years of experience litigating IDEA cases and other cases involving the rights of disabled persons in Connecticut, for which work he presently charges an hourly rate of $400. They have also provided an affidavit dated June 25, 2008, of Attorney John Yavis, a 1961 Yale Law School graduate who has been practicing in Connecticut for 47 years, principally in the area of complex litigation. Attorney Yavis states that the prevailing rates charged by Connecticut law firms in complex civil litigation and related administrative proceedings for attorneys with more than thirty years of experience range from $400 to $450 per hour. Plaintiffs had previously submitted affidavits from Attorney Francis J. Brady, a 1973 graduate from George Washington University Law School, who has been practicing in Connecticut for 34 years, and who states that, as of January 2006, the prevailing hourly rates charged by Connecticut-based law firms for complex litigation for an attorney with thirty years of experience ranged from $385 to $415. Putnam has not provided any evidence to counter these affidavits.
Additionally, the Court has reviewed fee awards in other recently reported cases in this district. In 2005, Judge Arterton awarded attorney’s fees at the rate of $400 per hour to an experienced attorney with substantial experience in antitrust and patent litigation, noting that prior thereto, in 2000, 2003, and 2005, judges in this district had awarded fees at hourly rates of $350 to $375 to experienced lawyers in complex civil litigation cases. Sony Electronics, Inc. v. Soundview Technologies, Inc., 389 F.Supp.2d 443, 448 (D.Conn.2005). In 2006, Magistrate Judge Fitzsimmons awarded fees based on rates as high as $391.48/hour for an experienced litigation partner in a complex breach of contract action. Rand-Whitney Containerboard v. Town of Montville, No. 3:96cv413, 2006 WL 2839236, at *11 (D.Conn. Sept. 5, 2006). That same month, Judge Chatigny awarded fees in an IDEA case at the rate of $315/hour for Attorney Shaw, noting that this rate was in accord with other fee awards in IDEA cases in the Second Circuit. C.C. v. Granby Board of Educ., 453 F.Supp.2d 569, 574 (D.Conn.2006) (citing A.R. v. New York City Dep’t of Educ., 407 F.3d 65, 82 (2d Cir.2005) (approving a 2002 fee award in an IDEA case in the Southern District of New York at rates of $300 to $350/hour)). More recently, Judge Thompson awarded fees in another IDEA case, P. v. Newington Board of Education, 512 F.Supp.2d 89, 116 (D.Conn.2007), also at the rate of $315/hour for Attorney Shaw. Judge Nevas, in Connecticut Housing Finance Authority v. Eno Farms Limited Partnership, No. 3:07cv319, 2007 WL 1670130, at *5 (D.Conn. June 6, 2007), approved an award of fees at a rate of $350/hour for an attorney with fifteen years experience. In Tolnay v. Wearing, No. 3:02cv1514, 2007 WL 2727543, at *2 (D.Conn. Sept. 19, 2007), Judge Burns used a rate of $350/hour for a fee award for two experienced civil rights attorneys, and in Mikrut v. Unum Life Ins. Co. of Am., 3:03cv1714, 2007 WL 2874801, at *4 (D.Conn. Sept. 28, 2007), Judge Underhill awarded fees at the same rate of $350/hour to an experienced litigator in a case that he described as “not complex, novel or intellectually difficult.” In 2008, in Pappas v. Watson Wyatt & Co., 3:04cv304, 2008 WL 45385, at *3 (D.Conn. Jan. 2, 2008), Judge Burns based her fee award for a civil rights attorney with over twenty years of experience on the rate of $400/ hour. And, in an IDEA case, Bolling v. Board of Education of Ansonia, No. 3:07cv1593, 2008 WL 349765, at *3 (D.Conn. Feb. 6, 2008), Judge Hall used an hourly rate of $350 for an attorney whom she described as not an expert in civil rights litigation and, therefore, someone who should not command a fee at the highest end of the spectrum for experienced civil rights attorneys in Connecticut.
Having reviewed the affidavits submitted by plaintiffs, as well as the trend in hourly rates awarded in this district particularly in IDEA cases, and taking into account the novelty and complexity of IDEA litigation, the length of Attorney Shaw’s involvement in this case, his undisputed expertise in this area of practice, and heeding the admonition of the Second Circuit that attorney’s fees are to be awarded with an “eye to moderation,” New York State Assoc. for Retarded Children v. Carey, 711 F.2d 1136, 1139 (2d Cir.1983), the Court finds that a reasonable, prevailing market rate in this district for the kind and quality of services provided by Attorney Shaw is $375/hour. See M.K. v. Sergi, 554 F.Supp.2d at 246-47 & n. 5 (discussing the factors that should be considered and citing Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974), abrogated on other grounds by Blanchard v. Bergeron, 489 U.S. 87, 92-93, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989)).
Additionally, plaintiffs seek to recover fees for a portion of the work performed by a paralegal at the rate of $100/ hour. Attorney Yavis has testified in his affidavit that the prevailing rates in Connecticut for paralegal assistants range from $100 to $250 per hour. Plaintiffs’ requested fee falls at the bottom of this range. Defendant has not provided any counter affidavits. The Court finds that $100/hour for paralegal work is a reasonable prevailing rate in this district. See Mikrut, 2007 WL 2874801, at *5 (awarding fees with a paralegal rate of $100/hour).
Reasonable Hours
The Court must next determine the number of hours for which fees will be awarded. In that regard, the Court has carefully scrutinized the time records submitted to insure that the time was “usefully and reasonably expended,” see Lunday v. City of Albany, 42 F.3d 131, 134 (2d Cir.1994), and to eliminate hours that appear excessive, redundant, or otherwise unnecessary. See Kirsch v. Fleet Street, Ltd., 148 F.3d 149, 173 (2d Cir.1998). Where appropriate, the Court has also reduced the requested hours to reflect plaintiffs’ degree of success. As the Supreme Court held in Hensley v. Eckerhart, 461 U.S. 424, 435, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), it is not necessary for a plaintiff to have prevailed on every contention raised in a lawsuit to receive a fully compensatory fee. But, if the plaintiff has achieved only partial or limited success, as in this case, even where the claims are interrelated, non-frivolous, and raised in good faith, the Court has the discretion to reduce the award to account for the plaintiff’s limited success. Id. at 436-37, 103 S.Ct. 1933.
Additionally, the IDEA provides, in relevant part, that the court must reduce the amount of attorney’s fees awarded if it finds that the parent unreasonably protracted the final resolution of the controversy, 20 U.S.C. § 1415(i)(3)(F)(i); the amount of attorney’s fees otherwise authorized to be awarded unreasonably exceeds the hourly rate prevailing in the community for similar services by attorneys of reasonably comparable skill, reputation, and experience, 20 U.S.C. § 1415(i)(3)(F)(ii); the time spent and legal services furnished were excessive considering the nature of the action, 20 U.S.C. § 1415(i) (3) (F) (iii); or the attorney representing the parent did not provide to the school district the appropriate information in the due process complaint. 20 U.S.C. § 1415(i)(3)(F)(iv).
Plaintiffs’ counsel originally requested a fee award for 1341.9 hours of work. He has now reduced the number of requested hours to 753.9 (a reduction of approximately 44%), resulting in a total fee request of $301,560.00, plus paralegal fees of $350.00. His requested hours are broken down into the following categories:
1. The First Administrative Hearing (1/1/95 — 2/29/96)
Plaintiffs seek full compensation for the 116.9 hours spent by counsel preparing for and litigating the first IDEA administrative hearing and providing advice to the client. Putnam responds that plaintiffs did not prevail on any significant issue in Case No. 95-353 as to the Putnam defendants and, therefore, they are not entitled to any fees with respect to that hearing.
As the Court discussed in its earlier ruling, although plaintiffs did not prevail on every issue, they did prevail on a substantial number of substantive issues as a result of the first administrative hearing, which success effected a significant alteration in their relationship with Putnam. M.K., 554 F.Supp.2d at 244-45. At the first administrative hearing, the issues presented were:
(1) Is Putnam and/or the Department of Children and Families (“DCF”) responsible for providing services to M.K. in the home, school, and community such as (although not limited to) an in-home mentor, 24-hour on-call crisis response personnel and crisis plan, case manage ment, inter-agency family team, respite care, and individual and family therapy?
(2) Does a hearing officer have jurisdiction over DCF with respect to the provision of such services?
(3) Did Putnam provide M.K. with a free appropriate public education (“FAPE”) in the least restrictive environment?
(Final Decision and Order in Case No. 95-353 at 1.) The Hearing Officer found that Putnam did not supply sufficient supplementary aids and services with regard to M.K.’s behavior to consistently maintain him in the least restrictive environment. (Concl. of Law ¶ 3.) She found that Putnam did not always follow the expert advice that it received (id. at ¶ 5), and that the time-out room was over-used, which did not deter poor conduct by M.K. (Id. at ¶ 6.) The Hearing Officer ordered a consultant, Dr. Williams, to develop a behavioral management plan to be implemented at home and at school and to provide training to M.K.’s teachers, paraprofessionals, and his family. (Id. at ¶ 7; Decision & Order at ¶ 3.) She found that Putnam never implemented any parent counseling and/or training. (Concl. of Law at ¶ 8.) She further found that M.K.’s individualized education program (“IEP”), except for the addition of a paraprofessional to provide behavioral support in the regular classroom, never changed to address his deteriorating behavior. (Id. at ¶ 9.) She ordered Putnam to re-assign a full-time paraprofessional to M.K.’s classroom upon his return to provide behavioral support, and to hire an educational consultant to assist the Planning and Placement Team (“PPT”) in developing an appropriate IEP and to provide training and consultation to staff and to monitor the implementation of all components of M.K.’s educational program. (Decision & Order at ¶¶ 5 & 6.) She found that the PPT never received any ongoing expert advice as to M.K.’s medications and psychiatric condition, and ordered M.K’s psychiatrist to serve as a clinical advisor to the PPT. (Concl. of Law at ¶ 10; Decision & Order ¶ 4.)
On the other hand, she found that a 24-hour crisis plan with an on-call person for family support, respite care for the family, and an in-home mentor, requested by plaintiffs, were not “related services” for which Putnam bore responsibility. (Id. at ¶ 23.) She also found that she had limited jurisdiction over DCF, but since DCF was acting as M.K’s local education agency (“LEA”) at the time of the hearing, she ordered DCF to cooperate and provide input to the PPT in planning for M.K.’s transition back into the Putnam schools. (Id. at ¶¶ 24-26; Decision & Order at ¶ 1.)
The Court finds that, based on their degree of success, plaintiffs are entitled to an award of 80% of the requested hours for this period of time, or 93.52 hours. The Court has reviewed the time entries and, while they do not provide significant detail concerning the specific work performed, given the Court’s familiarity with this case and the administrative proceedings, the Court is convinced that all of the services and time expended were reasonable and necessary.
2. Time Spent Implementing the Hearing Officer’s Decision & Providing Advice to the Family (3/7/96 — 3/8/96, 3/21/96 — 3/28/96, 5/22/96)
In March and May, 1996, Attorney Shaw spent 7.00 hours providing advice to the family and attempting to secure implementation of the Hearing Officer’s decision. Since virtually all of the relief ordered by the Hearing Officer pertained to Putnam, the Court finds that these hours are fully compensable.
3. Initial Federal Court Litigation (318/96 — .S/19/96)
Plaintiffs next seek to recover for 66.5 hours spent preparing a complaint, application for temporary restraining order (“TRO”), motion for preliminary injunction and supporting memorandum. As plaintiffs note, their degree of success on this first federal complaint was limited, but the filing of the complaint was necessary to pursue their claim for costs and fees. Plaintiffs did not prevail on their motion for a TRO or preliminary injunction. While the filing of the complaint may have been essential to the recovery of fees and costs, that claim was only one of many counts, and plaintiffs were unsuccessful on almost every other claim. Accordingly, the Court will disallow the time spent on the TRO and preliminary injunction (28.5), but will allow 50% of the time spent on the federal complaint (38.0), or 19.00 hours.
A Advice to M.K. and Their Advocate (8/29/96 — 8/27/02)
Plaintiffs’ counsel concedes that during the period May 15, 1996 through March 13, 2003, he spent a significant amount of time pursuing claims that were not successful and he has eliminated over 430 hours from his fee request. He seeks to recover for 97.70 hours for providing advice to the family and their advocate, Mr. Garrison, regarding M.K’s placement, his transfer back to Putnam, and for some of his work on the federal lawsuit, including preparing the 26(f) Report, participating in and preparing reports relating to status and pretrial conferences with the Court, participating in a settlement agreement and preparing related documents, and preparing the amended complaint and related motions. It appears that plaintiffs’ counsel has been very fair in cutting his requested hours during this six-year time period and is now seeking to recover for only 18.5% of his time during this period, or an average of approximately 16 hours per year. The Court finds that this time was reasonable and necessary and will award fees for the requested hours, 97.70.
5. Second IDEA Hearing (3/13/03— 8/27/03)
Plaintiffs next seek an award of fees for the 195.2 hours that Attorney Shaw spent litigating the second IDEA hearing. Again, this is an issue that the Court has addressed at some length in its earlier ruling. M.K., 554 F.Supp.2d at 245-46.
Plaintiffs were less successful at the second administrative hearing. Nevertheless, they prevailed on a substantial number of issues, particularly with respect to those involving transition services. The issues before the Hearing Officer were:
(1) Is M.K. eligible for services under the IDEA?
(2) Did the May 11, 2001 IEP provide M.K. with a FAPE?
(3) Did Putnam provide M.K. with appropriate transition services?
(4) Is Putnam responsible for paying for M.K.’s foster placement, therapy, and other support services provided by DCF?
(Final Decision & Order, Case No. 03-087, at 1.)
As the Hearing Officer’s decision reflects, on the opening day of the hearing, Putnam reported that it was no longer contesting M.K.’s eligibility to receive special education services under the IDEA, thus rendering moot the first issue. However, that does not diminish plaintiffs’ entitlement to recover for a substantial portion of the time spent by their attorney prior to the hearing, which was 91.9 hours.
With respect to the other issues, the Hearing Officer found that Putnam had not provided the appropriate transition services that M.K. required to move from high school to post-high school life and ordered Putnam to provide these services for a period of time to be determined by an independent consultant hired by Putnam, but at least through the 2003-04 school year. (Concl. of Law at ¶ 8; Final Decision & Order at ¶ 7.) She further held that the May 11, 2001 IEP was incomplete both as to his goals and his transition needs. (Concl. of Law at ¶ 10; Final Decision & Order at ¶ 2.) She ordered Putnam to provide psychiatric support for M.K.’s medication regime (which decision this Court has overruled), to pay for ongoing therapy, and to hire an independent consultant to oversee the creation and implementation of an IEP that contained appropriate transition plans and goals. (Concl. of Law at ¶¶ 11 & 12; Final Decision & Order at ¶¶ 3-5.)
On the other hand, plaintiffs were not successful on some fairly significant issues. The Hearing Officer denied plaintiffs’ request for Putnam to pay for M.K’s foster home, which finding this Court has affirmed. (Id. at ¶ 13.) She also denied the parents’ request that she order Putnam to hold them harmless from any claim asserted by the State for services provided by DCF, which decision this Court also upheld. (Id. at ¶ 19.) Lastly, she declined to issue an order prohibiting DCF from terminating services that it was providing to M.K., except as otherwise set forth in her order. (Id. at ¶ 20.)
Based on their degree of success at the administrative hearing, the Court will award fees for 75% of the hours spent prior to the hearing (91.9 hours x .75 = 68.925 hours) and 50% of the hours spent during and after the hearing (103.3 hours x .50 = 51.65 hours), which results in an award of 120.575. hours. Again, the Court has carefully reviewed Attorney Shaw’s billing entries and, although they do not provide the detailed explanation that the Court would like to see, based on the extensive chronology of M.K.’s special education services that has been presented repeatedly to the Court in the motions for summary judgment, the Court has no difficulty in concluding that all of this time (as reduced to reflect plaintiffs’ degree of success) was reasonable and necessary to the prosecution of plaintiffs’ claims at the administrative level.
6. Federal Litigation (8/27/03 — 7/20/01)
From August 2003 to July 2004, plaintiffs’ counsel spent 29.30 hours preparing a complaint, which included a claim for attorney’s fees and costs related to the second administrative hearing, filing a complaint with the Connecticut State Department of Education regarding enforcement of the hearing decision, participating in status conferences, preparing various motions, and providing advice to the client. While not all of these time entries relate wholly to the matters on which plaintiffs were successful, notably plaintiffs’ counsel has deleted approximately 37 hours, some of which appear to be partially related to the matters on which plaintiffs were successful. The Court finds that the overall division of hours is a fan-allocation of time spent relating to matters on which plaintiffs were successful and will allow plaintiffs to recover fees for the 29.30 hours of work performed during this period.
7. Plaintiffs’ Motion for Summary Judgment (7/22/01 — 8117101)
Plaintiffs next seek an award of fees for a “reasonable portion” of the 93.10 hours spent preparing the motion for summary judgment against the Putnam defendants. Based on plaintiffs’ limited success on this motion, the Court will allow plaintiffs to recover for 33% of this time, or 30.72 hours.
8. Plaintiffs’ Response to Putnam’s Motion for Summary Judgment (8/25/04 — 11/12/04)
Plaintiffs’ counsel spent 109.30 hours responding to Putnam’s motion for summary-judgment and related motions. Time spent responding to other defendants’ motions has been eliminated. They argue that “a portion” of this effort should be compensated, as well as the 3.50 hours spent by the paralegal. The Court will again allow recovery for 33% of this time based upon plaintiffs’ limited success, or 36.07 hours for Attorney Shaw and 1.20 hours for his paralegal.
9. Plaintiffs’ Reply Brief (11/17/04— 7/8/05)
Plaintiffs seek to recover for the 22.70 hours that their counsel spent preparing a reply brief, as well as three supplemental motions updating their fee request. The Court will allow 80% of the requested hours or 18.16 hours.
10. Supplemental Memorandum (6/9/08 — 6/26/08)
Most recently, plaintiffs’ counsel spent 16.20 hours preparing a supplemental memorandum. These hours are fully com-pensable.
Total Fee Award
The total hours which the Court finds to have reasonably expended by Attorney Shaw over the twelve-year course of this litigation, including the two administrative hearings and filing two separate federal lawsuits, adjusted for plaintiffs’ degree of success, is 468.245 hours. Applying the rate of $375/hour, yields a total fee award for Attorney Shaw of $175,591.88. Plaintiffs may also recover for 1.2 hours of paralegal time at $100/hour or $120. Thus the total fee award is $175,711.88.
Costs
Additionally, plaintiffs seek to recover $11,248.29 in costs. They have deducted from their original request $6,250.00 in expert witness fees. See Arlington Central School District Board of Educ. v. Murphy, 548 U.S. 291, 126 S.Ct. 2455, 165 L.Ed.2d 526 (2006) (holding that non-attorney expert’s fees are not recoverable “costs” under the IDEA’S fee-shifting provision, 20 U.S.C. § 1415(i)(3)(B)). Putnam has objected only to the requested costs for electronic research.
In the Arlington Central School District case, the Supreme Court held that the term “costs,” as used in 20 U.S.C. § 1415(i)(3)(B), refers to the list of costs set forth in 28 U.S.C. § 1920, the general statute governing the taxation of costs in federal court. 548 U.S. at 297-98, 126 S.Ct. 2455. The Court cited its earlier decision in Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 439, 107 S.Ct. 2494, 96 L.Ed.2d 385 (1987), for the proposition that Fed.R.Civ.P. 54(d) does not give a district judge the “discretion to tax whatever costs may seem appropriate.” Rather, the Court held, the term “costs” is defined by the list set forth in § 1920. Id.
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4240641-12789 | MELLOY, Circuit Judge.
A jury found Michael Glover guilty of possession of a firearm in furtherance of a drug trafficking crime, possession of heroin with intent to distribute, and being a felon in possession of a firearm. Before trial, Glover moved to suppress evidence that was collected at the time of his arrest. He contended that the evidence was obtained unconstitutionally because an officer pressed his face against a tinted window to see inside a home. The district court denied the motion and, following trial, sentenced Glover to 360 months’ imprisonment. Glover appeals, arguing that the district court erred in denying his motion to suppress the evidence. Because the officer had a valid arrest warrant and a reasonable belief that Glover resided in the home, we need not address the Fourth Amendment challenge related to the tinted window. We affirm the judgment of the district court.
I.
On May 22, 2012 at 9:30 a.m., the St. Louis Metropolitan Police Department received an anonymous 911 call alerting them that Michael Glover was inside a residence located at 5347 Enright Avenue in St. Louis. The caller provided Glover’s date of birth, which was verified, and notified officers that Glover was a wanted felon. Acting on the tip, police discovered Glover had active arrest warrants for probation violations, assault of a law enforcement officer, and possession of a firearm. The anonymous caller refused to give her name, but she left a callback number.
Officers proceeded to the Enright Avenue address. The property is a two-story, single family brick home, and the windows on the first floor are tinted. The home is located within a gated community with three other houses, and a code is required to gain access to the community. Officers obtained the code from the anonymous caller. A black Cadillac Escalade with a flat tire was parked in the home’s driveway. Officers knocked on the front door, but no one answered. The officers then walked around the house, looking for any signs that Glover may be inside. They continued to knock on the door and call for Glover, but no one responded.
Officers then called back the anonymous caller and told her that Glover was either not inside the home or .was not responding to their calls. The caller told police that Glover was still inside the home. She reported that Glover was watching the officers from an upstairs window and then described the actions of the officers in the preceding few minutes when the officers had walked around the house. She told the officers that Glover was planning his escape and that he was purchasing plane tickets to leave the area.
With this information, officers retreated from the home, set up surveillance along the perimeter of the residence, and called in the Violent Offender Unit. When the Violent Offender Unit arrived, officers in that unit provided a fugitive profile for Glover. The profile had been created in March 2012, following an encounter with Glover in September 2011. The profile was compiled to assist officers in locating Glover and included information such as his photograph, active arrest warrants, and a description of the vehicles linked to him.
One of those vehicles was a black Cadillac Escalade, which seemed to match the vehicle parked in the driveway. In September 2011, Glover had led St. Louis County police on a chase in a black Cadillac Escalade during which Glover fired shots at the officers after fleeing from the vehicle on foot. The vehicle involved in the chase had dealer plates, and the vehicle in the driveway also had dealer plates. While the officers continued surveillance on the house, a car and pickup truck entered through the gate and arrived at the home. The people in the truck exited the vehicle and repaired the Escalade’s flat tire. The driver of the car exited the vehicle and paced up and down the street while speaking to someone on a cell phone. After the tire was repaired, the people left in the car and pickup truck.
Fearing that Glover may try to flee now that the Escalade’s tire had been repaired, two detectives from the Violent Offender Unit, Joseph Kuster and Marc Wasem, approached the home. There is a sidewalk in front of the home and a walkway connecting the sidewalk to the front steps. A set of stairs leads to a porch that runs along the front of the house. Several feet to the left of the front door is the living room window, also located at the porch level. Wasem and Kuster identified themselves as police and called to Glover to surrender himself. They received no response. They continued to call for Glover for approximately ten minutes.
Officers then heard movement inside the house. While still on the front porch, Wasem walked to the living room window. The window was tinted, so Wasem pressed his face against the glass in order to see into the house. Upon pressing his face against the glass, Wasem observed Glover inside the living room. Wasem recognized Glover from photographs the officers had been shown earlier that day in Glover’s fugitive profile. Glover had a gun in his hand and fled into the next room after observing Wasem looking in the window.
Wasem reported what he observed to a sergeant, who ordered the officers to breach the door. Officers broke open the front door and entered the home. The officers announced themselves as police and called for Glover to surrender. Glover was apprehended in a back bedroom, where officers arrested him. Officers then performed a protective sweep of the room, finding two assault rifles. Officers secured the premises and applied for a search warrant, which was granted. The resulting search turned up numerous guns, bulletproof vests, and a hidden dresser compartment containing $197,833 in cash, digital scales, and 1.7 kilograms of heroin.
II.
Glover was charged with possession with intent to distribute more than one kilogram of heroin (Count II), possession of a firearm in furtherance of a drug trafficking crime (Count III), felon in possession of a firearm (Count IV), as well as a criminal forfeiture allegation for the $197,833 seized on May 22, 2012. Glover was also charged with an additional felon in possession of a firearm charge (Count I) for events that occurred on September 29, 2011.
Glover filed a motion to suppress the evidence found inside the home. A hearing was held before a magistrate judge, who recommended that Glover’s motion be denied. The magistrate judge found that the active arrest warrants justified entry into the residence because officers had a reasonable belief that Glover was inside. On February 21, 2013, the district court adopted the magistrate’s report and recommendation denying Glover’s motion to suppress in its entirety. The matter proceeded to trial, and a jury convicted Glover of all four counts on February 27, 2013. On June 5, 2013, the district court sentenced Glover to 360 months’ imprisonment. The $197,833 was also forfeited. Glover appeals the denial of his motion to suppress the evidence found inside the home on May 22, 2012.
III.
On appeal, Glover asks this court to grant his motion to suppress, reverse his convictions on Counts II, III, and IV, and remand to the district court. Glover argues that Officer Wasem’s act of pressing his face against the tinted windows to see into the house was an impermissible search that violated Glover’s Fourth Amendment rights because the officers did not have a search warrant. We conclude that the officers’ entry into the home was justified because they possessed multiple arrest warrants and reasonably believed that Glover resided at and was present in the house before Officer Wasem observed Glover through the tinted window. As such, we need not address Glover’s Fourth Amendment claim.
‘We review the denial of a motion to suppress de novo but review underlying factual determinations for clear error, giving due weight to the inferences of the district court and law enforcement officials.” United States v. Robbins, 682 F.3d 1111, 1115 (8th Cir.2012) (internal quotation marks and citations omitted). Whether an officer’s belief is reasonable is a “mixed question of fact and law,” and “the ultimate conclusion ... is subject to de novo review.” United States v. Risse, 83 F.3d 212, 215 (8th Cir.1996).
The Supreme Court has stated that, “for Fourth Amendment purposes, an arrest warrant founded on probable cause implicitly carries with it the limited authority to enter a dwelling in which the suspect lives when there is reason to believe the suspect is within.” Payton v. New York, 445 U.S. 573, 603, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980). If officers wish to execute an arrest warrant not at the person’s home, but at a different person’s home, a different standard applies. Officers must either obtain a search warrant for the other person’s home or have exigent circumstances or consent to enter without a search warrant. Steagald v. United States, 451 U.S. 204, 215-16, 101 S.Ct. 1642, 68 L.Ed.2d 38 (1981); United States v. Davis, 288 F.3d 359, 362 (8th Cir.2002). If officers are unsure if the subject of the arrest warrant resides in the home, our court allows “police entry if the arresting officers executing the arrest warrant at [a] third person’s home have a reasonable belief that the suspect resides at the place to be entered and have reason to believe that the suspect is present at the time the warrant is executed.” United States v. Powell, 379 F.3d 520, 523 (8th Cir.2004); see United States v. Collins, 699 F.3d 1039, 1042 (8th Cir.2012). Whether the officers had reasonable belief is based upon the “totality of the circumstances” known to the officers prior to entry. See United States v. Junkman, 160 F.3d 1191,1193 (8th Cir.1998).
Glover’s counsel is careful to avoid resolving the factual question of whether Glover actually resided in the home, arguing only that the officers did not have enough information to make that determination prior to entering the home. The government, understandably, has consistently argued that Glover lived in the home and argues that if Glover did not live there, then he lacks standing to bring a Fourth Amendment claim. See United States v. Kaylor, 877 F.2d 658, 663 (8th Cir.1989) (“[T]he police could have entered [the defendant’s] own home without a search warrant to execute a warrant for his arrest if they had reason to believe he was inside.... [The defendant] cannot claim any greater Fourth Amendment protection in the [third party’s] home than he possessed in his own home.”). Ultimately, whether or not Glover actually resided at the Enright Avenue home is not material because based on the totality of the circumstances, enough evidence existed at the time the decision was made to enter to support the officers’ reasonable belief that Glover resided at the home and was present in the home. See Risse, 83 F.3d at 216 (“[T]he officers’ assessment need not in fact be correct; rather, they need only ‘reasonably believe’ that the suspect resides at the dwelling to be searched and is currently present at the dwelling.”).
The 911 caller, while choosing to remain anonymous, provided consistently accurate and detailed information about Glover. The 911 caller knew Glover’s name, the address where he could be located, his date of birth, and the fact that he had outstanding warrants for his arrest. Importantly, she knew the entrance gate code, which suggests she had a close relationship with Glover or the property. While “[a]nonymous tips as the bases for searches are treated with some mistrust by the courts,” United States v. Anderson, 339 F.3d 720, 723 (8th Cir.2003), “[i]f information from an informant is shown to be reliable because of independent corroboration, then it is a permissible inference that the informant is reliable and that therefore other information that the informant provides, though uncorroborated, is also reliable,” United States v. Williams, 10 F.3d 590, 593 (8th Cir.1993). After the officers verified the caller’s information and proceeded to the Enright Avenue property, they observed a vehicle in the driveway that matched the description of one of the vehicles associated with Glover in his fugitive profile. When the officers contacted the anonymous caller using her call-back number, she said Glover had been watching the officers from inside the home and then described to the officers everything that they had been doing outside. This, in effect, verified to the officers that the anonymous caller had been communicating with someone inside the house, and the officers had reason to believe that person was Glover. In addition, officers had been looking for Glover for several months. Glover had no known address, and the officers had no indication that anyone instead of Glover resided at the Enright Avenue address.
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3576311-9402 | MICHAEL, Judge:
At a special court-martial, military judge alone, appellant pleaded guilty to two specifications alleging violations of Article 92, Uniform Code of Military Justice (UCMJ), 10 U.S.C. § 892, for possession and sale of marijuana. The military judge accepted the pleas and sentenced appellant to confinement at hard labor for five months, forfeiture of $100 pay per month for three months, reduction to pay grade E-3, and a bad-conduct discharge. The convening authority, in accordance with the pretrial agreement, suspended the confinement in excess of three months for nine months from the date of trial. The supervisory authority suspended the bad-conduct discharge for six months from the date of his action. The reviewing authorities otherwise approved the findings and sentence as adjudged.
Appellant asserts that his plea of guilty to the specification alleging sale of marijuana was improvident because the military judge failed to establish adequately a factual basis for the acceptance of the plea in light of statements made by appellant which raised the defense of entrapment. We disagree and affirm.
During the providence inquiry, appellant admitted that he sold marijuana to a government informant, but stated that the informant initiated the transaction. Appellant further claimed that he, at first, told the informant that he could not locate any of the drug, but after repeated requests by the informant, appellant acquired approximately one pound of marijuana, most of which he sold to the informant. (R. 10.) Appellant likewise related the following in his unsworn statement:
While working the ABC Lab at SIMA I was approached several times by a supposed friend from my previous command . . . and asked if I knew where he could buy some marijuana. I told him no on many occasions but he persisted for a couple of weeks. So, I asked around and a person that I knew said that he could get some, so I made the arrangements.
(R.20.) These statements, in part, caused the military judge to reopen the providence inquiry. (R.24.) During this later questioning, the military judge elicited responses from appellant indicating that appellant had discussed the possibility of raising an entrapment defense with trial defense counsel and that appellant did not believe the defense was available to him. (R. 24-25.) Appellant also informed the military judge that he received, as profit for his part in the sale, the small quantity of marijuana (13 grams) which formed the basis of the possession specification to which he pleaded guilty. (R.25.)
It is well-established that, in a situation where an accused alleges that he initially refused requests by an agent or informant to sell drugs — but later agreed to the sale after the repeated insistence or inducement of the agent or informant — the potential defense of entrapment is raised. See, e.g., United States v. Suter, 21 U.S.C.M.A. 510, 45 C.M.R. 284 (1972); United States v. McGlenn, 8 U.S.C.M.A. 286, 24 C.M.R. 96 (1957). “[A]n officer ought not to lure a man who is not criminal-minded into committing a crime for the sake of punishing somebody. The courts will not, as a matter of good policy, sanction a con viction where a person not justly an object of suspicion is through undue temptation or pressure by an officer influenced to become a criminal.” United States v. McGlenn, supra at 291, 24 C.M.R. at 101, citing Sorrells v. United States, 287 U.S. 435, 53 S.Ct. 210, 77 L.Ed. 413 (1932).
A mere invitation not amounting to an inducement on the part of a government agent to commit the crime, however, is not entrapment. United States v. Suter, supra at 516, 45 C.M.R. at 290. Thus, the defense of entrapment
is rooted in the concept that Government officers cannot instigate the commission of a crime by one who would otherwise remain law abiding. Consequently, the focus of the defense is not upon the Government agent but upon the accused, and the essential inquiry is upon the accused’s “intent or predisposition ... to commit the crime.”
United States v. Garcia, 1 M.J. 26,29 (C.M.A.1975), citing United States v. Russell, 411 U.S. 423, 429, 93 S.Ct. 1637, 1641, 36 L.Ed.2d 366 (1973). Accord, United States v. Hebert, 1 M.J. 84 (C.M.A.1975); paragraph 216e, Manual for Courts-Martial, 1969 (Rev.).
The above statements by appellant properly alerted the military judge to the possibility that the defense of entrapment was available to appellant. In such a situation the judge is required to discover from the accused his attitude regarding the potential defense, United States v. Timmins, 21 U.S.C.M.A. 475, 45 C.M.R. 249 (1972); United States v. McCann, 11 M.J. 506 (N.C.M.R.1981), in order to assure that the record of trial supports the plea of guilty. See United States v. Parker, 10 M.J. 849, 851 (N.C.M.R.1981). We agree, also, with the following rationale provided by the Court of Military Appeals in United States v. Hinton, 8 U.S.C.M.A. 39, 23 C.M.R. 263 (1957):
In a guilty plea case we cannot disregard the probability that the accused and his counsel weighed the evidence and determined that it was inadequate for an effective legal defense or to negate the existence of a specific intent. As a result, they could well have decided to disregard the evidence in favor of the possible advantage of a guilty plea, [citations omitted] The critical question, therefore, is whether the accused and his counsel were aware of the legal effect of the evidence claimed to be inconsistent with the plea of guilty.
Id. at 41, 23 C.M.R. at 265.
The quoted language from Hinton, however, does not support the proposition urged by appellate government counsel that, when a potential defense is interposed during or after providency, it is sufficient for the military judge merely to inquire from the accused whether he discussed the potential defense with counsel and whether he believed the defense was available to him. More is required to fulfill the spirit of United States v. Care, 18 U.S.C.M.A. 535, 40 C.M.R. 247 (1969), and the mandate of Timmins, supra, that the military judge discover a factual basis for the attitude of the accused regarding the nonavailability of the defense. United States v. Jemmings, 1 M.J. 414, 418 (C.M.A.1976); United States v. McCann, supra at 508. Although it was not done in the instant case, it is also advisable — but not required — that the judge explain the elements of the interposed defense to prevent the possibility “that the questioning does not sufficiently elicit the responses necessary to conclude that the plea is provident.” United States v. Jemmings, supra at 418; Accord, United States v. Green, 9 M.J. 637 (C.G.C.M.R.1980).
In the instant case the inquiry by the military judge adequately established a factual basis sufficient to assure that the defense of entrapment was not available to appellant. After reopening the providence inquiry, the judge elicited from appellant an admission that he entered into the drug transaction, at least in part, for the purpose of realizing a profit or payment on the sale. The appellant’s “profit motive foreclosed the defense of entrapment absent evidence of conduct by Government agents which violates ‘fundamental fairness, shocking to the universal sense of justice.’ ” United States v. Hebert, supra at 86, quoting United States v. Russell, supra at 432, 93 S.Ct. at 1637. Accord, United States v. Shults, 7 M.J. 524 (A.C.M.R.1979); United States v. Young, 2 M.J. 472 (A.C.M.R.1975).
Additionally, we are not disposed to “second guess” the strategy of trial defense counsel, a qualified lawyer certified in accordance with Article 27(b), UCMJ, 10 U.S.C. § 827(b). Absent a demonstration of negligence or incompetence on his part— which we do not have here — we are satisfied that counsel’s analysis of all the objective factual matters known to him and his client properly persuaded him that the defense of entrapment would not prevail in this case. This conclusion may have been founded on a number of reasons, including possible rebuttal evidence which might have been adduced by the government. It is apparent from the colloquy between the military judge and the accused that the defense of entrapment had been discussed by the accused with his counsel and that the accused understood that his plea of guilty waived the defense. (R. 25.) The accused is not compelled on his own motion to introduce matters he does not consider to be in his interest in order to contradict the existence of every possible defense to a charge to which he elects to plead guilty. United States v. Logan, 22 U.S.C.M.A. 349, 47 C.M.R. 1 (1973); United States v. Tichy, 50 C.M.R. 526 (N.C.M.R.1975).
Accordingly, we find appellant’s pleas to have been provident and affirm the findings and sentence as approved on review below.
Senior Judge SANDERS and Judge BOHLEN concur.
. The military judge was also concerned with statements by appellant that suggested the availability of an agency defense. Appellant initially insisted that he derived no profit from the drug transaction, but after the military judge reopened the providence inquiry, appellant admitted that he received a portion of the marijuana as payment for his part in the sale. Receipt of the drug was profit which made it clear to the military judge that the agency defense was unavailable to appellant. See United States v. Martinez, 3 M.J. 600, 602 (N.C.M.R.1977).
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12516842-15527 | BERZON, Circuit Judge:
To qualify for special rule cancellation of removal under the Nicaraguan Adjustment and Central American Relief Act (NACARA), an undocumented immigrant must show he has been "physically present in the United States for a continuous period of not less than 10 years immediately following the commission of an act, or the assumption of a status, constituting a ground for removal." NACARA § 203(b); see 8 C.F.R. § 1240.66(c)(2). When Manuel Campos-Hernandez applied for NACARA special rule cancellation, the BIA interpreted the physical presence requirement as running from Campos-Hernandez's most recent disqualifying conviction, rather than his earliest, and so held him ineligible for NACARA cancellation of removal. We conclude that the BIA's interpretation of NACARA is reasonable and is therefore entitled to deference. Accordingly, we deny the petition.
I
Campos-Hernandez, a citizen and native of El Salvador, entered the United States in 1990 or 1991 without being admitted or paroled after inspection by an immigration officer. He is 41 years old and married to a U.S. citizen. Since 2009, he has worked as a mechanic. Campos-Hernandez was convicted of drug-related offenses in California in 2003, 2005, and 2008.
In 2008, the Department of Homeland Security (DHS) served Campos-Hernandez with a Notice to Appear (NTA) at a removal hearing. The NTA alleged that Campos-Hernandez arrived in the United States without being admitted or paroled after inspection, and charged him with removability both on that basis and on the basis of his drug convictions. Campos-Hernandez admitted the allegations against him and conceded his removability.
On February 10, 2012, Campos-Hernandez filed a NACARA application. That same day, an immigration judge (IJ) found that Campos-Hernandez was ineligible for NACARA special rule cancellation of removal and denied his application for relief. Specifically, the IJ determined that, because the drug convictions rendering him inadmissible occurred within the previous ten years, Campos-Hernandez could not satisfy NACARA's requirement of "10 years [of continuous physical presence] immediately following the commission of an act, or the assumption of a status constituting a ground for removal." 8 C.F.R. § 1240.66(c)(2).
The BIA dismissed Campos-Hernandez's appeal in a non-precedential, single-member opinion. The opinion held that Campos-Hernandez's 2008 conviction was "a ground for removal" under 8 C.F.R. § 1240.66(c)(2), and because ten years had not elapsed between 2008 and the decision of the BIA, he was not eligible for cancellation of removal under NACARA. Campos-Hernandez timely filed a petition for review.
After the briefing of this appeal, a three-member panel of the BIA held, in a precedential opinion in a different immigration appeal, that "for purposes of special rule cancellation of removal under the NACARA, ... continuous physical presence should be measured from the alien's most recently incurred ground of removal." Matter of Castro-Lopez , 26 I. & N. Dec. 693, 696 (BIA 2015) (emphasis added). We ordered the parties to submit supplement briefing addressing Matter of Castro-Lopez , and they did so.
II
A. Applicable law
NACARA was enacted in 1997 to provide immigration benefits to nationals from certain Central American and Eastern European countries, including El Salvador. See NACARA § 203(b); 8 C.F.R. § 1240.61(a) ; Barrios v. Holder , 581 F.3d 849, 857 (9th Cir. 2009). In particular, "[s]ection 203 of NACARA allows qualified individuals to apply for special rule cancellation under the more lenient standards that existed before the passage of [IIRIRA]." Barrios , 581 F.3d at 857.
Most applicants for cancellation of removal under NACARA must establish physical presence in the United States for "a continuous period of 7 years immediately preceding" the filing of an application for cancellation of removal. NACARA § 203(b); 8 C.F.R. § 1240.66(b)(2). An applicant for cancellation of removal under NACARA who is inadmissible under 8 U.S.C. § 1182(a)(2), however, is subject to a heightened physical presence requirement. Such an applicant, like Campos-Hernandez, must establish that he "has been physically present in the United States for a continuous period of not less than 10 years immediately following the commission of an act, or the assumption of a status, constituting a ground for removal." NACARA § 203(b); 8 C.F.R. § 1240.66(c)(2).
"Agency regulations interpreting special rule cancellation"-particularly the continuous physical presence requirements-"closely track the text of ... NACARA." Barrios , 581 F.3d at 857 ; see 8 C.F.R. § 1240.66(b)(2), (c)(2). In turn, the language of NACARA's continuous physical presence requirements-both the "heightened" ten-year requirement and the regular seven-year one-is copied from an older statute governing suspension of deportation, a now-superseded form of immigration relief. See 8 U.S.C. § 1254 (1996) (repealed); Fong v. INS , 308 F.2d 191 (9th Cir. 1962) (construing identical language from the now-superseded suspension of deportation statute).
An agency's formal interpretation of its governing statutes may be entitled, when appropriate, to deference under Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Chevron deference is appropriate when "it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and ... the agency interpretation claiming deference was promulgated in the exercise of that authority." United States v. Mead Corp. , 533 U.S. 218, 226-27, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001) ; see Marmolejo-Campos v. Holder , 558 F.3d 903, 908 (9th Cir. 2009) (en banc). When applying Chevron , a court "is confronted with two questions. First ... is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter." Chevron , 467 U.S. at 842, 104 S.Ct. 2778. However, "if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843, 104 S.Ct. 2778. An agency's interpretation that conflicts with earlier binding authority of this court is entitled to deference unless the court's earlier interpretation "follows from the unambiguous terms of the statute and thus leaves no room for agency discretion." Nat'l Cable & Telecommc'ns Ass'n v. Brand X Internet Servs. , 545 U.S. 967, 982, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005) ; see also Garfias-Rodriguez v. Holder , 702 F.3d 504, 512-13 (9th Cir. 2012) (en banc).
B. Discussion
1. Conflicting authority and Brand X
Before determining whether the BIA's interpretation in Matter of Castro-Lopez merits deference, we confront a threshold issue: whether we are bound by our contrary interpretation of the now-superseded suspension of deportation statute. See Fong , 308 F.2d 191. Fong addressed a continuous physical presence provision identical to the one we here examine.
In Fong , Louie King Fong's eligibility for suspension of deportation hinged, as does Campos-Hernandez's, on whether the ten-year physical presence requirement ran from when he first became deportable in 1944, or from the last act or status making him deportable, which occurred in 1953. Id. at 193. If the former, Fong "ha[d] been physically present in the United States for a continuous period of not less than ten years immediately following ... the assumption of a status ... constituting a ground for deportation." Id. at 194 (quoting 8 U.S.C. § 1254(a) (1952) ). If the latter, he had not. Finding the provision "open to two possible constructions," id. , the court likened the provision to a penal statute, and resolved the ambiguity by strictly construing the statute in favor of Fong. Id. at 194-95 (citing Barber v. Gonzales , 347 U.S. 637, 642-43, 74 S.Ct. 822, 98 L.Ed. 1009 (1954) ). Accordingly, the court held that Fong's residence in the United States, dating from his first deportable act or status in 1944, satisfied the ten-year continuous physical presence requirement, notwithstanding his later-incurred grounds for deportation. Id. at 195-96.
NACARA-the statute we address today-is not the same suspension of deportation statute construed in Fong . In enacting NACARA, however, Congress purposely used language identical to that in the suspension of deportation statute, as it intended to preserve the remedy from that statute for NACARA beneficiaries. See Munoz v. Ashcroft , 339 F.3d 950, 955 (9th Cir. 2003). For that reason, our interpretation of the provision in Fong would arguably still bind us, notwithstanding the formal non-identity of the two statutes, but for the BIA's recent precedential interpretation of the provision in Matter of Castro-Lopez .
Fong does not, however, prevent us from deferring to Matter of Castro-Lopez . "Only a judicial precedent holding that the statute unambiguously forecloses the agency's interpretation, and therefore contains no gap for the agency to fill, displaces a conflicting agency construction." Brand X , 545 U.S. at 982-83, 125 S.Ct. 2688. Fong expressly determined that the ten-year physical presence requirement was "open to two possible constructions." Fong , 308 F.2d at 194 ; see id. at 195-96 ("[W]e will not assume that Congress meant to trench on [Fong's] freedom beyond that which is required by the narrowest of several possible meanings of the words used.") (emphasis added) (quoting Fong Haw Tan v. Phelan , 333 U.S. 6, 10, 68 S.Ct. 374, 92 L.Ed. 433 (1948) ). As Fong did not hold that the Immigration and Nationality Act "unambiguously foreclose[d]" a contrary interpretation, our decision in that case may not "displace[ ] a conflicting agency construction" otherwise entitled to deference. Brand X , 545 U.S. at 983, 125 S.Ct. 2688.
2. Matter of Castro-Lopez
We next determine whether the BIA's interpretation of the ten-year continuous physical presence requirement in Matter of Castro-Lopez is entitled to deference.
As a preliminary matter, we conclude that Matter of Castro-Lopez involved the interpretation of a statute, not a regulation. In Matter of Castro-Lopez , the BIA said that it was interpreting 8 C.F.R. § 1240.66(c)(2), a regulation implementing NACARA § 203(b), rather than § 203(b) itself. See 26 I. & N. Dec. at 696 (citing Auer v. Robbins , 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997) ). In general, an agency's interpretation of its own ambiguous regulation is subject to " Auer deference." See Price v. Stevedoring Servs. of Am., Inc. , 697 F.3d 820, 828-29 (9th Cir. 2012) (en banc). When, however, "the underlying regulation at issue [does] 'little more than restate the terms of the statute itself[,]' ... the question [is] really one of statutory interpretation." Id. at 829 (quoting Gonzales v. Oregon , 546 U.S. 243, 257, 126 S.Ct. 904, 163 L.Ed.2d 748 (2006) ).
The language of 8 C.F.R. § 1240.66(c)(2) copies verbatim the relevant statutory text of NACARA § 203(b). Rather than specifying whether the ten-year period begins with the first qualifying act or status or the last one, the regulation "incorporates the very [gap] ... the [agency] seeks to clarify."
Christopher v. SmithKline Beecham Corp. , 635 F.3d 383, 394 (9th Cir. 2011).
The language of § 1240.66(c)(2) thus "comes [directly] from Congress, not the Attorney General," so "the question ... is not the meaning of the regulation but the meaning of the statute." Gonzales , 546 U.S. at 257, 126 S.Ct. 904. The regulation's "parroting" of the statute, id. , is all the more conspicuous given that NACARA § 203(b) itself borrowed the precise language from statutes dating back at least to 1952. See 8 U.S.C. § 1254(a) (1952) (repealed). Accordingly, we assess whether Matter of Castro-Lopez is a permissible interpretation of the statutory text of NACARA § 203(b), rather than the regulatory text of 8 C.F.R. § 1240.66(c)(2).
The BIA's interpretation of the ten-year physical presence requirement in Matter of Castro-Lopez merits deference under Chevron . First, as noted above, § 203(b) of NACARA is "silent or ambiguous with respect to" the issue presented here: which act or status constituting a ground for removal-the first, last, or any other-starts the clock for the ten-year "heightened" physical presence requirement. Anaya-Ortiz v. Holder , 594 F.3d 673, 677 (9th Cir. 2010) (quoting Chevron , 467 U.S. at 842, 104 S.Ct. 2778 ).
Next, Matter of Castro-Lopez is a "published BIA case" that constitutes "binding agency precedent on-point" that fills the interpretive gap. See id. (quoting Park v. Holder , 572 F.3d 619, 623-24 (9th Cir.2009) ); Matter of Castro-Lopez , 26 I. & N. Dec. at 696.
Finally, the BIA's interpretation of the ten-year physical presence requirement is reasonable. See Garfias-Rodriguez , 702 F.3d at 513. The statute requires ten years' continuous physical presence immediately following "the commission of an act, or the assumption of a status, constituting a ground for removal," NACARA § 203(b) (emphasis added), not "the act," or "the status," that constitutes a ground for removal. The indefinite article grants the words "act" and "status" an "indefinite or generalizing force," rather than "particulariz[ing]" them, Gale v. First Franklin Loan Servs. , 701 F.3d 1240, 1246 (9th Cir. 2012), as use of the definite article would have, to denote a specific act or status constituting a ground for removal. See also Black's Law Dictionary 1 (6th ed. 1990) ("The article 'a' is not necessarily a singular term; it is often used in the sense of 'any'...."). It is thus reasonable to interpret the requisite ten-year period to immediately follow each disqualifying act or status, rather than to follow a single particularized act or status-the first one, as Campos-Hernandez would read the statute.
Reading the continuous physical presence requirement to run from the last act or status, rather than the first, avoids consequences that would frustrate the evident policy behind the requirement. For example, under the opposite reading, an applicant who was convicted of a drug offense in 2000, but not again until 2010, could thereafter accumulate any number of disqualifying convictions and statuses while still remaining eligible for cancellation of removal under NACARA. The ten-year crime-free requirement would then serve a perverse purpose, as the individuals most likely to continue committing crimes, as evidenced by their very recent behavior, would be eligible to stay in the country, but individuals who had not committed any crime for eight or nine years would not. Such a result would severely undermine the "testing" or "qualifying" role of the physical presence provision. Patsis v. INS , 337 F.2d 733, 740 (8th Cir. 1964) (Blackmun, J.); Matter of V-R- , 9 I. & N. Dec. 340, 344 (BIA 1961), rule reinstated by Matter of Wong , 13 I. & N. Dec. 427 (BIA 1969).
Bolstering our conclusion, several circuits (and the BIA) have interpreted the same phrase in the suspension of deportation statute, 8 U.S.C. § 1254(a) (1952) (repealed), to date from the last deportable offense or status. See, e.g. , Patsis , 337 F.2d at 740-42 ; Matter of Wong , 13 I. & N. Dec. at 430. Fong itself recognized that the BIA's construction of the phrase "might find support in logic," 308 F.2d at 195, even though it ultimately resolved the ambiguity in favor of the petitioner.
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148241-5424 | Squire Isabell, Jr., a Michigan prisoner proceeding pro se, appeals a district court order and judgment denying his petition for a writ of habeas corpus, filed under 28 U.S.C. § 2254. This case has been referred to a panel of the court pursuant to Rule 34(j)(1), Rules of the Sixth Circuit. Upon examination, this panel unanimously agrees that oral argument is not needed. Fed. R.App. P. 34(a).
A jury convicted Isabell in December 1995 of possession with intent to distribute less than 50 grams of heroin, possession of less than 25 grams of cocaine, and possession of a firearm during the commission of a felony. On January 18, 1996, he was sentenced as a habitual offender to consecutive prison terms of 5 to 20 years (heroin), 5 to 15 years (cocaine), and 2 years (firearm). The Michigan Court of Appeals affirmed Isabell’s conviction and sentence on October 28, 1997, and the Michigan Supreme Court denied leave to appeal.
In his timely federal habeas corpus petition, Isabell presented the following grounds for relief: (1) there was insufficient evidence to convict him on any of the three counts; (2) the trial court abused its discretion by admitting irrelevant and prejudicial evidence and by permitting police witnesses to speculate without foundation that Isabell was a drug trafficker; (3) the trial court improperly admitted evidence obtained as a result of an unconstitutional search; (4) the trial court denied Isabell a fair trial by denying his motion to adjourn pending a Michigan Supreme Court decision so that the parties could negotiate a plea agreement; (5) the trial court erroneously scored two sentencing guideline variables; (6) the prosecutor withheld exculpatory evidence; and (7) officers conducted an unconstitutional search of a person found on the premises and not mentioned in the search warrant.
The district court denied Isabell’s § 2254 petition in an opinion and order filed on May 31 and entered on June 1, 2001. A separate judgment was entered the same day. The district court found that sufficient evidence was presented so that a reasonable factfinder could find Isa-bell guilty beyond a reasonable doubt of each charged offense, although the court acknowledged that the element of intent to distribute in the heroin count was a close question. The district court further found that Isabell’s evidentiary issues were barred from federal habeas review by procedural default, that his Fourth Amendment issues and his sentencing issues were not cognizable on federal habeas review, that the trial court’s refusal to postpone the trial for a third time did not violate Isabell’s constitutional rights, and that the alleged “exculpatory evidence” was not exculpatory at all and was disclosed to the jury.
On appeal, Isabell argues that: (1) there was insufficient evidence to convict him on any count; and (2) the trial court improperly admitted certain evidence.
Upon review, we affirm the district court’s judgment because it properly concludes that the state courts’ determination of the issues did not result in a decision that was contrary to or involved an unreasonable application of clearly established federal law as determined by the United States Supreme Court. See Doan v. Bri-gano, 287 F.3d 722, 729 (6th Cir.2001). This court reviews de novo the district court’s legal conclusions regarding the disposition of a § 2254 petition. Id.
Isabell did not raise his issues numbered (3) through (7) on appeal. Therefore, they are considered to be abandoned and are not reviewable. See Enertech Elec., Inc. v. Mahoning County Comm’rs, 85 F.3d 257, 259 (6th Cir.1996). In any event, they do not merit habeas relief for the reasons stated by the district court.
Federal habeas corpus relief may be granted “if it is found that upon the record evidence adduced at the trial no rational trier of fact could have found proof of guilt beyond a reasonable doubt.” Jackson v. Virginia, 443 U.S. 307, 324, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979); see also Scott v. Mitchell, 209 F.3d 854, 863 (6th Cir.), cert. denied, 531 U.S. 1021, 121 S.Ct. 588, 148 L.Ed.2d 503 (2000). This standard reserves to the trier of fact the responsibility to resolve conflicts in testimony, to weigh the evidence, and to draw reasonable inferences from the basic facts to the ultimate facts. See Herrera v. Collins, 506 U.S. 390, 401-02, 113 S.Ct. 853, 122 L.Ed.2d 203 (1993); Neal v. Morris, 972 F.2d 675, 678 (6th Cir.1992). Circumstantial evidence may be sufficient to support a conviction and such evidence need not remove every reasonable hypothesis except that of guilt. Walker v. Russell, 57 F.3d 472, 475 (6th Cir.1995); Tilley v. McMackin, 989 F.2d 222, 225 (6th Cir.1993). We agree with the state and district courts that sufficient evidence was presented by which a reasonable juror could find Isabell guilty of all three crimes with which he was charged.
In addition, the district court did not err in determining that Isabell’s evidentiary issues are barred from federal habeas review due to his procedural default in the state courts.
When a state prisoner defaults on his “federal claims in state court pursuant to an independent and adequate state procedural rule, federal habeas review of the claim is barred unless the prisoner can demonstrate cause for the default and actual prejudice ... or demonstrate that failure to consider the claims will result in a fundamental miscarriage of justice.”
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3829646-18018 | PER CURIAM:
Tunde A. Ajao appeals an adverse summary judgment against his race-discrimination and retaliation claims. AFFIRMED.
I.
Ajao, whose national origin is Nigerian, is a black employee of Bed Bath and Beyond (BB & B). He was hired as a department manager for its Meyerland, Texas, store on 27 September 1999, after interviewing with, among others, Doug Baumann, the store’s manager. Ajao was informed he could, contingent upon his performance, be promoted to assistant store manager within three months. For the Houston, Texas, area, the Meyerland location functions as a training store, from which employees are transferred to other stores when positions become available.
There is no formal process to apply for a promotion; an employee simply expresses interest to a supervisor and is considered by the store manager, Baumann. Baumann then makes a recommendation to the district manager, who makes the final decision but generally follows Baumann’s recommendations. Ajao was not promoted before his last day of work, 7 July 2001 (as discussed infra he is still an employee), despite expressing interest and being told he was under consideration. Unless otherwise noted, the following facts are from Ajao’s sworn declaration and deposition.
At BB & B, Ajao stocked his department and helped customers, reporting to assistant store managers, operations managers, and the store manager, Baumann. He began in the customer-sendee department, but, over time, was transferred by Baumann to other departments in order to learn about the store and gain experience. Upon Ajao’s first transfer from customer service, Baumann told him he had done a good job and would be transferred to the housewares department and a “software” department, like linens, before he would be promoted to assistant store manager.
After being transferred from housewares to linens, Ajao expected next to be promoted; instead, Baumann transferred him to the bath department. Ajao worked in each of the three departments “some months”, and admits he could have been working at BB & B for less than a year when he was transferred to the bath department. More transfers followed every few months: the seasonal department, the receiving department for a week or two, back to housewares, and finally back to linens.
The possibility of Ajao’s promotion was discussed with almost every transfer; Baumann assured Ajao he was being considered and would be promoted. Upon his transfer back to housewares, Ajao asked what he needed to do to be promoted. Baumann responded: whining and crying too much for a promotion would not do him any good.
Ajao contends: when he was transferred from housewares to linens, Baumann told him he was not up for promotion and would not be promoted. Baumann stated in his deposition that he provided Ajao with a list of areas, including attendance, in which he needed improvement; Ajao denied receiving the list.
For this action, BB & B produced the following July 2000 disciplinary notice: “This year, [Ajao] has called out sick on the following dates: 1/5, 1/6, 4/22, 6/7, 6/17, 6/18, 7/9 and 7/10. This is excessive absenteeism”. Ajao does not dispute the notice’s authenticity or accuracy. When presented with it during his deposition, Ajao asserted he had never seen the document before and was not spoken to about his absenteeism; instead, Baumann held a meeting, during which he told all the managers to be on time and not to call in sick. Baumann stated in his deposition he would not promote an employee with poor attendance to an assistant-store-manager position, because they are responsible for unlocking the store in the morning.
Ajao maintains Baumann made the following inappropriate and offensive comment to him about a year into his employment (began in September 1999). While Ajao was folding and stocking towels in the bath department, he began having an allergic reaction to the lint and asked Baumann for a nasal guard; Baumann, however, denied his request, telling Ajao: he, of all people, should know how to deal naturally with cotton. Ajao does not know whether the comment referred to his race or national origin, but contends it shows Baumann actively considered Ajao’s race in the workplace.
In March 2001, Ajao filed a complaint with the Equal Employment Opportunity Commission (EEOC), charging BB & B with race discrimination for its failure to promote him. His EEOC complaint asserted white applicants and employees were treated more favorably at BB & B: white applicants are usually interviewed on the spot when they come into the store; black store associates were not promoted to department manager positions as were white store associates; injured or pregnant black employees were not treated as favorably as injured or pregnant white employees; black employees are not promoted to assistant store manager (or higher) positions; and, specifically, Baumann told Ajao he would not be promoted to assistant store manager but promoted white department managers with less tenure to assistant-store-manager positions.
Ajao admitted in his deposition that black department managers were promoted, but contends this occurred only after employees threatened to, or did, make complaints to the EEOC. He cannot say he was better qualified than, or attest to the qualifications of, the white department managers who were promoted.
In July 2001, after Ajao suffered a back injury while working in the linens department, he consulted with a doctor and went on medical leave. He received a medical release to return to work, but it imposed restrictions on how much weight he could lift. A worker’s compensation work-status report presented by Ajao to BB & B, from a 6 August 2001 doctor’s visit (which was presented to Ajao during his deposition) stated Ajao could return to work as of 11 August 2001 if he did not lift or carry objects weighing more than five pounds until later that month (the precise date is undecipherable). Ajao’s other restriction was “work bordering light duty for 2 wks”.
Ajao recounted that, as a department manager in the linens department, he was required very often to climb ladders, lift more than five pounds, and lift items from the floor or above his head. Baumann admitted BB & B has given light-duty assignments to employees for medical reasons. BB & B submitted a list of them.
Ajao stated: he was released for work only two weeks after his injury, at which time he called Baumann to inform him of his intent to return, and faxed a copy of his doctor’s release—with lifting restrictions—in accordance with Baumann’s request; the next day, when Ajao reported to BB & B, however, Baumann called him into his office and told him he could not return to work until he was 100% recovered; Ajao asked Baumann to accommodate the restrictions his doctor imposed, to allow him to return to work and have other employees lift and stock items for him; but Baumann refused. Ajao does not contend he told BB & B how long he would need light-duty work assignments; indeed, he has not been released for work without lifting restrictions. Ajao has neither returned to work nor been terminated by BB & B.
In April 2003, the EEOC issued a determination letter following its investigation of Ajao’s discrimination charge, stating it had found “reasonable cause to believe [BB & B] discriminated against [Ajao] by not promoting him to the position of assistant store manager because of his race”. The EEOC notified Ajao in March 2004 of his right to file an action under Title VII. Four other BB & B employees had also filed complaints and received similar determination letters.
That June, Ajao (and four other BB & B employees) filed this action. They claimed, inter alia: race discrimination (as evidenced by the failure to promote Ajao) and retaliation (against Ajao for his EEOC complaint, by not granting his request to accommodate his lifting restrictions so he could return to work), in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and state law.
BB & B moved for summary judgment in June 2006, attaching excerpts from depositions of Ajao and two of his former BB & B managers, Baumann and Russell. Plaintiffs responded that July, including a declaration by Ajao, certified copies of documents from the EEOC’s investigation of the four BB & B employees’ complaints, and excerpts from Baumann’s and Ajao’s depositions. BB & B replied that August with objections to Ajao’s summary-judgment evidence.
In late October 2006, a joint stipulation was granted, dismissing the claims of all plaintiffs except Ajao. That month, the district court granted summary judgment to BB & B, ruling, inter alia, Ajao failed: to provide evidence rebutting the legitimate, nondiscriminatory reasons proffered by BB & B in response to his failure-to-promote race-discrimination claim; or to demonstrate, for his retaliation claim, BB & B’s refusal to accommodate his lifting restrictions to allow him to work was a materially adverse employment action.
II.
A summary judgment is reviewed de novo, applying the same standard as did the district court. E.g., Wheeler v. BL Dev. Corp., 415 F.3d 399, 401 (5th Cir.2005) . Such judgment is appropriate if there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed.R.CivP. 56(c). “We resolve doubts in favor of the nonmoving party and make all reasonable inferences in favor of that party.” Dean v. City of Shreveport, 438 F.3d 448, 454 (5th Cir.2006) . No genuine issue of material fact exists if, pursuant to the summary-judgment evidence, no reasonable juror could find in favor of the nonmovant. E.g., Jenkins v. Methodist Hosps. of Dallas, Inc., 478 F.3d 255, 260 (5th Cir.), cert. denied, — U.S. -, 128 S.Ct. 181, 169 L.Ed.2d 35 (2007).
Ajao appeals only the dismissal of his discrimination and retaliation claims. Each claim fails.
A.
Title VII prohibits an employer from, inter alia, failing to promote an employee on the basis of his race. 42 U.S.C. § 2000e-2(a)(l). Ajao contends he created a genuine issue of material fact on whether BB & B’s failure to promote him to assistant store manager was for that proscribed reason. Accordingly, the .proper “inquiry is whether [BB & B] intentionally discriminated against [Ajao]”. Alvarado v. Tex. Rangers, 492 F.3d 605, 611 (5th Cir.2007) (quoting Roberson v. Alltel Info. Servs., 373 F.3d 647, 651 (5th Cir.2004)). Because Ajao relies only upon circumstantial evidence of discrimination to prove this claim, it is analyzed under the McDonnell-Douglas burden-shifting framework. Id. (citation omitted).
Under this framework, [Ajao] must first create a presumption of intentional discrimination by establishing a prima facie case. The burden then shifts to [BB & B] to articulate a legitimate, nondiscriminatory reason for its actions.... If [BB & B] sustains its burden, the prima facie case is dissolved, and the burden shifts back to [Ajao] to establish either: (1) that [BB & B’s] proffered reason is not true but is instead a pretext for discrimination; or (2) that [BB & B’s] reason, while true, is not the only reason for its conduct, and another “motivating factor” is [Ajao’s] protected characteristic.
Id. (citations omitted); see also Machinchick v. PB Power, Inc., 398 F.3d 345, 352 (5th Cir.2005). Ajao established his prima facie case; the balance of the burden-shifting process is in dispute.
1.
The next step is BB & B’s burden to present a legitimate, non-discriminatory reason for not promoting Ajao. He maintains it failed to do so for two reasons.
a.
As a threshold matter, Ajao contends the district court improperly credited Baumann’s testimony because he is an interested witness. The court “should consider and give weight to ‘evidence supporting the moving party that is uncontradicted and unimpeaehed, at least to the extent that that evidence comes from disinterested witnesses’ ”. Roberson, 373 F.3d at 653 (quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 151, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000)). Ajao asserts Baumann, the decision-maker who failed to promote him, is not a disinterested witness because his statements are self-serving. But, obviously, ‘“[t]he definition of an interested witness cannot be so broad as to require us to disregard testimony from a company’s agents regarding the company’s reasons for [failing to promote] an employee’ ”. Id. (quoting Sandstad v. CB Richard Ellis, Inc., 309 F.3d 893, 898 (5th Cir.2002)). Further, as stated above, BB & B’s burden is merely one of production; as such, “it ‘can involve no credibility assessment’ ”. Reeves, 530 U.S. at 142, 120 S.Ct. 2097 (quoting St. Mary’s Honor Ctr. v. Hicks, 509 U.S. 502, 509, 113 S.Ct. 2742, 125 L.Ed.2d 407 (1993)).
b.
In contending BB & B failed to adequately articulate a legitimate, non-discriminatory reason for not promoting him to an assistant-store-manager position, Ajao concedes Baumann “offered four reasons[,] ... attendance, inadequate follow through on projects, poor communication with associates, and lack of initiative”. He maintains this is not sufficient evidence because few details were given to support those reasons. Again, BB & B bears only the burden of production to articulate a clear, reasonably specific, legitimate, nondiscriminatory reason. E.g. Rachid v. Jack in the Box, Inc., 376 F.3d 305, 312 (5th Cir.2004); Okoye v. Univ. of Tex. Houston Health Sci. Ctr., 245 F.3d 507, 513 (5th Cir.2001).
Baumann’s deposition, describing examples of Ajao’s poor work performance (including attendance, follow through, communication, and initiative) is admissible summary-judgment evidence regarding Ajao’s not being promoted because of his poor work performance. The district court correctly concluded BB & B met its burden. See, e.g., Crawford v. Formosa Plastics Corp., La., 234 F.3d 899, 902 (5th Cir.2000) (finding “unsatisfactory performance as a manager” sufficient to meet burden of production).
2.
Accordingly, the burden shifts back to Ajao to show BB & B’s proffered legitimate, non-discriminatory reason was simply pretext. He contests it on two bases.
a.
First, Ajao contends summary judgment against his discrimination claim was improper because he created a genuine issue of material fact on whether the true reason he was not promoted is his race. He contends BB & B’s proffered legitimate, non-discriminatory reason for not promoting him—his poor performance—is false. A plaintiff relying on pretext must “produce evidence rebutting all of a defendant’s proffered nondiscriminatory reasons”. Machinchick, 398 F.3d at 351 & n. 16. Ajao maintains BB & B produced no documentation to support his alleged poor performance, and denies Baumann gave him a list of needed improvements. Ajao, however, does not attempt to refute BB & B’s evidence that he performed poorly. He provided no evidence of his own attendance, follow-through on projects, communication, or initiative, thereby failing to rebut any of BB & B’s reasons for not promoting him. Accordingly, he failed to create a genuine issue of material fact on whether the poor-performance reason given by BB & B was mere pretext for discrimination. See id. at 354-55 (finding plaintiff failed to raise a fact issue as to his willingness and ability to adapt).
b.
As discussed swpra, Title YII is also violated when race “ ‘actually played a role in [the employer’s decisionmaking] process and had a determinative influence on the outcome’ ”. Reeves, 530 U.S. at 141, 120 S.Ct. 2097 (alteration in original); see also 42 U.S.C. § 2000e-2(m). Ajao maintains he provided sufficient evidence to create a genuine issue of material fact on whether his poor performance was only one of the reasons he was not promoted, with another reason being Baumann’s discriminatory intent.
“Tf [Ajao] demonstrates [race] was a motivating factor in the employment decision, it then falls to [BB & B] to prove that the same adverse employment decision would have been made regardless of discriminatory animus.’” Machinchick, 398 F.3d at 352 (quoting Rachid, 376 F.3d at 312). Although Ajao has produced circumstantial evidence of discrimination, he has not created a genuine issue of material fact on whether his non-promotion was due to race. BB & B’s undisputed evidence establishes: Ajao had a poor attendance record; and poor attendance alone was enough to prevent his being promoted to assistant store manager. Because Ajao has not attempted to dispute his poor attendance or the necessity of a good attendance record for promotion to assistant store manager, he did not create a genuine issue of material fact on whether BB & B’s failure to promote him was motivated by discrimination rather than by his poor performance.
B.
Title VII prohibits an employer from discriminating against an employee because, inter alia, he filed a discrimination charge. LeMaire v. La. Dept. of Transp. & Dev., 480 F.3d 383, 388 (5th Cir.2007) (quoting 42 U.S.C. § 2000e-3). For his other basis for appeal, Ajao maintains summary judgment was improper against his retaliation claims under federal and state law because Baumann’s refusal to give him light-duty assignments to allow him to return to work was in retaliation for his EEOC complaint. Once again, the burden-shifting process is involved.
First, Ajao must produce evidence of a prima facie case of retaliation by demonstrating: “(1) he engaged in an activity that Title VII protects; (2) he was subjected to an adverse employment action; and (3) a causal connection exists between the protected activity and the adverse employment action”. Id. (citation omitted). If he does so, “the burden shifts to [BB & B] to state a legitimate, non-retaliatory reason for its decision”. Id. (citation omitted). Once stated, “the burden shifts back to [Ajao] to demonstrate [BB & B’s] reason is actually a pretext for retaliation”. Id. at 388-89 (citation omitted). He fails, however, to create a genuine issue of material fact on whether he establishes his prima facie case.
a.
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3610886-11939 | Opinion of the Court
COX, Judge:
Appellant was tried by a general court-martial with members at Nellis Air Force Base, Nevada. Contrary to her pleas, she was convicted of two specifications of distributing methamphetamine and one specification of possessing methamphetamine, in violation of Article 112a, Uniform Code of Military Justice, 10 USC § 912a. She was sentenced to a bad-conduct discharge and reduction to E-l. The convening authority approved the sentence, and the Court of Military Review affirmed in an unpublished opinion.
We granted review of the following issue:
WHETHER APPELLANT WAS DENIED HER RIGHT TO EFFECTIVE ASSISTANCE OF COUNSEL WHEN CIVILIAN COUNSEL FAILED TO RAISE THE ISSUE OF UNLAWFUL ARREST OF APPELLANT AS A BASIS FOR SUPPRESSING PROSECUTION EXHIBIT 3.
Finding no denial of effective assistance of counsel, we affirm.
As is often true when adequacy of counsel is questioned, this case involves issues within the issue. Appellant’s contention is that trial defense counsel erred when he failed to challenge the lawfulness of appellant’s apprehension at her on-base trailer and the subsequent search of the trailer. This search netted the drugs which were the basis of the possession specification. Even if successful, the claim would affect only the possession specification, leaving appellant guilty of the two more serious distribution specifications.
The facts of the case are not complicated. A servicemember who was working as an undercover informant for the Office of Special Investigations (OSI) allegedly ascertained that appellant was a drug user and willing to sell drugs. Two controlled purchases were effected at appellant’s on-base trailer. Immediately after the second buy, OSI agents feigned apprehending the informant just outside the trailer; then the agents went to the trailer. With weapons drawn, they apprehended appellant and entered the trailer when she answered the door. They also apprehended a civilian male visitor (presumably appellant’s source). In the trailer, the agents confiscated additional drugs and drug paraphernalia.
At the court-martial, civilian defense counsel made several motions. First, he asked the judge to sever the possession specification from the distribution specifications. Counsel explained that he intended to defend the distribution specifications primarily on the ground of entrapment. See United States v. Dayton, 29 MJ 6 (CMA 1989); United States v. Clark, 28 MJ 401 (CMA 1989); United States v. Vanzandt, 14 MJ 332 (CMA 1982). He reasoned that, if the members knew of the drugs and paraphernalia in the trailer, they might infer that appellant was extensively involved in drugs and, thus, predisposed to distribute them (a not irrational concern). Further, counsel suggested that, if the entrapment defense failed and appellant was convicted of distribution, the Government was unlikely to proceed with a separate court-martial for only the possession specification. The military judge properly denied the motion to sever. See RCM 906(b)(10), Manual for Courts-Martial, United States, 1984.
Next, counsel moved in limine to dismiss the possession specification on the ground of entrapment. However, to establish the basis for this motion, counsel felt it necessary for the judge to hear substantially all of the evidence regarding the entrapment defense as to the distribution specifications. Therefore, rather than having the entire case put on twice — once before the judge on the motion and again before the members on the merits — defense counsel proposed that the case proceed to the merits and that the judge simply rule on the entrapment motion after all the evidence was in. As the judge and prosecution were agreeable, the case proceeded on that basis.
The evidentiary basis of the agents’ entry into the trailer was not well developed at trial. The prosecution simply offered the fruits of the search. Except for the motion to suppress based on entrapment, the defense made no objection. Specifically, there was no objection based on the lawfulness of the apprehension or the seizure of evidence. It is this failure to object broadly that is now cited as defense counsel’s inadequacy.
However, as was mentioned on several occasions by defense counsel outside the presence of the members, the Article 32, UCMJ, 10 USC § 832, investigation revealed that the agents were in possession of a “contingent” search authorization. Apparently, this authorization (given by the acting base commander) was obtained just prior to the second controlled buy and was based on the fact of the first controlled purchase; the informant’s report that appellant had said she would be receiving another quantity of drugs soon and would sell him more drugs; and the informant’s report that appellant had said she then had drugs available for purchase. Evidently, the authorization permitted the agents to search appellant’s trailer and seize any contraband — if they could confirm that drugs were present. After the second controlled purchase was accomplished, the informant duly reported seeing additional drugs in appellant’s trailer, and the agents made their move without further approval. As indicated, the prosecution did not attempt at trial to justify the search on the basis of the contingent authorization.
On appeal, appellant contends she was denied effective representation by counsel because the validity of this “warrant” was not challenged. Further, she complains that the lawfulness of the apprehension and search were not challenged on the basis of Payton v. New York, 445 U.S. 573, 100 S.Ct. 1371, 63 L.Ed.2d 639 (1980) (Fourth Amendment prohibits police from making warrantless, nonconsensual entry into suspect’s home in order to make routine felony arrest).
In evaluating adequacy-of-representation claims, we have adopted the standards established in Strickland v. Washington, 466 U.S. 668, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). See United States v. Griffith, 27 MJ 42 (CMA 1988); United States v. Scott, 24 MJ 186 (CMA 1987). Initially, the standards involve this two-part determination:
Not only must the defendant demonstrate that his attorney’s “acts or omissions were outside the wide range of professionally competent assistance,” [Strickland v. Washington,] 466 U.S. at 690, 104 S.Ct. at 2066, but he also “must show 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.
United States v. Griffith, supra 27 MJ at 43.
Further, counsel’s conduct is to be evaluated from counsel’s own perspective. Thus, the Supreme Court emphasized:
Judicial scrutiny of counsel’s performance must be highly deferential. It is all too tempting for a defendant to second-guess counsel's assistance after conviction or adverse sentence, and it is all too easy for a court, examining counsel’s defense after it has proved unsuccessful, to conclude that a particular act or omission of counsel was unreasonable. Cf. Engle v. Isaac, 456 U.S. 107, 133-134, 102 S.Ct. 1558, 1574-75, 71 L.Ed.2d 783 (1982). A fair assessment of attorney performance requires that every effort be made to eliminate the distorting effects of hindsight, to reconstruct the circumstances of counsel’s challenged conduct, and to evaluate the conduct from counsel’s perspective at the time. Because of the difficulties inherent in making the evaluation, 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.” See Michel v. Louisiana, supra, [350 U.S. 91] at 101 [76 S.Ct. 158 at 164, 100 L.Ed. 83 (1955)]. 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. See Goodpaster, The Trial for Life: Effective Assistance of Counsel in Death Penalty Cases, 58 N.Y.U.L.Rev. 299, 343 (1983).
466 U.S. at 689-90, 104 S.Ct. at 2065-66.
We disagree that defense counsel’s failure to contest the search on the grounds now asserted rendered his performance ineffective.
In the first place, Payton v. New York, supra, involved quite different scenarios. That opinion was a consolidation of two separate appeals, Payton’s and Riddick’s. Payton was suspected of a murder at a gas station several days earlier, and the police had probable cause to believe he had committed the crime. Acting pursuant to a state statute, the police went to his apartment to arrest him. Using crowbars, they broke open the door; but Payton was not there. Inside the apartment, the officers found, “[i]n plain view, ... a .30-caliber shell casing” which was later introduced in evidence in Payton’s trial for the murder. 445 U.S. at 576-77, 100 S.Ct. at 1374-75.
Riddick was wanted for two armed robberies that had occurred several years earlier. Acting without a warrant, the police went to his residence to arrest him. When Riddick’s young son answered the door, the police entered the house, found Riddick in bed, and arrested him. In a search of a nearby chest of drawers, they found narcotics and related paraphernalia, which became the basis for Riddick’s subsequent conviction for drug offenses. Id. at 578, 100 S.Ct. at 1376.
In these circumstances, the Court held: The Fourth Amendment protects the individual’s privacy in a variety of settings. In none is the zone of privacy more clearly defined than when bounded by the unambiguous physical dimensions of an individual’s home — a zone that finds its roots in clear and specific constitutional terms: “The right of the people to be secure in their ... houses ... shall not be violated.” That language unequivocally establishes the proposition that “[a]t the very core [of the Fourth Amendment] stands the right of a man to retreat into his own home and there be free from unreasonable government intrusion.” Silverman v. United States, 365 U.S. 505, 511 [81 S.Ct. 679, 683, 5 L.Ed.2d 734]. In terms that apply equally to seizures of property and to seizures of persons, the Fourth Amendment has drawn a firm line at the entrance to the house. Absent exigent circumstances, that threshold may not reasonably be crossed without a warrant.
Id. at 589-90, 100 S.Ct. at 1381-82. Because arrest warrants were not obtained for Riddick and Payton, the judgments were reversed. Id. at 603, 100 S.Ct. at 1388.
However, the facts of the instant case were quite different. Here the informant was invited into appellant’s home and the offense occurred therein. In Lewis v. United States, 385 U.S. 206, 211-12, 87 S.Ct. 424, 427-28, 17 L.Ed.2d 312 (1966), the Supreme Court made it clear that when an accused invites an undercover agent into his home for the purpose of selling drugs, the agent is on the premises with the accused’s valid consent. The agent’s presence “presents no question of the invasion of the privacy of a dwelling.” Id. at 212, 87 S.Ct. at 428 (quoting Government’s brief). In addition, there is authority that, after a consensual entry of the premises has been made by an undercover agent (be he a law-enforcement officer or merely an informant) for the purpose of buying drugs, the agent may reenter with law-enforcement assistance. This has been termed “ ‘consent once removed.’ ” United States v. Diaz, 814 F.2d 454, 459 (7th Cir.), cert. denied, 484 U.S. 857, 108 S.Ct. 166, 98 L.Ed.2d 120 (1987). See also United States v. Paul, 808 F.2d 645, 648 (7th Cir.1986). We need not decide the correctness of these latter decisions here. Suffice it to say, defense counsel’s representation was not inadequate because he elected not to obscure the primary thrust of the defense (which went to all the charges) with a tenuous theory which went only to the least significant of the charges.
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4237688-18337 | OPINION
FISHER, Circuit Judge:
Addressing an issue of first impression in this circuit, we hold that the term “costs” under Rule 39 of the Federal Rules of Appellate Procedure does not include attorney’s fees recoverable as part of costs under 42 U.S.C. § 1988 and similar statutes. The district court therefore properly concluded that the statement in our previous opinion that “[ejach party shall bear its own costs of appeal,” Family PAC v. McKenna, 685 F.3d 800, 814 (9th Cir.2012), did not preclude Family PAC, as prevailing party, from obtaining an award of appellate attorney’s fees under § 1988.
BACKGROUND
Family PAC is a continuing political committee organized under Washington law. See id. at 803. In its 2009 federal lawsuit, Family PAC alleged that three provisions of Washington election law violated the First Amendment as applied to ballot measure committees: a provision requiring a political committee to report the name and address of each person contributing more than $25 to the committee, a provision requiring a political committee to report the occupation and employer of each person contributing more than $100 to the committee and a provision barring a political committee from accepting from any one person contributions exceeding $5,000 within 21 days of a general election. See id. The defendants are the Washington State Attorney General and the members of the Washington State Public Disclosure Commission, which administers and enforces the challenged provisions. See id. at 804. Family PAC moved for summary judgment, which the district court granted in part and denied in part. See id. at 804-05. The court held that the $25 and $100 disclosure requirements survived exacting scrutiny but struck down the 21-day contribution limit as a violation of the First Amendment. See id.
After both sides appealed, we affirmed on all issues. We agreed with the district court that the $25 and $100 disclosure requirements survived exacting scrutiny, but held that the 21-day contribution limit was unconstitutional. See id. at 805-14. Given that each side had been partly successful on appeal, our opinion stated that “[e]ach party shall bear its own costs of appeal.” Id. at 814; see Fed. R.App. P. 39(a).
Shortly thereafter, Family PAC asked us to transfer consideration of attorney’s fees on appeal to the district court. See 9th Cir. R. 39-1.8. The defendants (collectively, “the state”) opposed the motion, arguing that we had already precluded an award of attorney’s fees by stating that each party would bear its own costs. In a January 2012 order, we granted Family PAC’s motion to transfer consideration of attorney’s fees on appeal to the district court. We “expressed] no opinion as to whether an award of fees to any party is warranted” but expressly noted that “[o]ur instruction that each party shall bear its own costs on appeal did not address whether any party is entitled to attorney’s fees under 42 U.S.C. § 1988.”
On remand, Family PAC moved for an award of $148,987.62 in attorney’s fees and expenses, including fees and costs on appeal, under 42 U.S.C. § 1988. Family PAC excluded from its request attorney’s fees incurred solely on its unsuccessful claim challenging the $25 and $100 disclosure requirements. The state opposed the motion, arguing once again that appellate attorney’s fees were not available because this court already had ordered the parties to bear their own costs.
With minor adjustments, the district court granted Family PAC’s motion for fees. The court specifically rejected the state’s argument that our allocation of costs under Federal Rule of Appellate Procedure 39 barred Family PAC from recovering appellate attorney’s fees. Although the court recognized that this was an issue of first impression in this circuit, it noted that the Third, Fifth, Seventh and Eleventh Circuits had all rejected the proposition that “costs” under Rule 39 includes attorney’s fees under § 1988. After addressing the state’s remaining arguments, the court awarded fees and expenses of $146,073.12. The state timely appealed.
DISCUSSION
Federal Rule of Appellate Procedure 39 governs the taxation of costs on appeal. The rule does not define the term “costs,” but Rule 39(e) specifically enumerates the costs on appeal that may be taxed in the district court, and the advisory committee’s note cites 28 U.S.C. § 1920 as the statutory authority for the rule. Section 1920, in turn, contains a specific definition of costs. The Civil Rights Attorney’s Fees Awards Act of 1976, meanwhile, is one of a number of federal fee shifting statutes that allow a prevailing party to recover “a reasonable attorney’s fee as part of the costs.” 42 U.S.C. § 1988(b). The question presented here is how these two provisions— Rule 39 and § 1988 — interact. Relying on Marek v. Chesny, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985), and Azizian v. Federated Department Stores, Inc., 499 F.3d 950 (9th Cir.2007), the state argues that, because Rule 39 does not define costs, the term must be understood as encompassing all “costs” defined by federal law, including appellate attorney’s fees recoverable as part of costs under § 1988 and similar statutes. The state contends that, because appellate fees under § 1988 are “costs” under Rule 39, this court’s previous direction that “[e]ach party shall bear its own costs of appeal” precludes Family PAC from recovering appellate attorney’s fees. We disagree.
The Supreme Court first considered the relationship between § 1988 and another statute allowing for the recovery of “costs” in Roadway Express, Inc. v. Piper, 447 U.S. 752, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980), superseded by statute as stated in G.J.B. & Assocs., Inc. v. Singleton, 913 F.2d 824, 830 (10th Cir.1990). Roadway Express involved a former version of 28 U.S.C. § 1927, a statute providing that lawyers who multiply court proceedings vexatiously may be assessed the excess “costs” they create. See id. at 757, 100 S.Ct. 2455. Although § 1927 did not define “costs,” the Court concluded that it excluded attorney’s fees. The Court reasoned, first, that when Congress enacted the original version of § 1927 in 1813, the United States adhered more closely than it does today to the American Rule, under which “attorney’s fees ordinarily are not among the costs that a winning party may recover.” Id. at 759, 100 S.Ct. 2455. The Court “assume[d] that Congress followed that rule when it approved the 1813 Act.” Id. Second, the Court noted that Congress had “approved a comprehensive measure setting the fees and costs for all federal actions” in 1853. See id. This measure enacted the predecessors of both § 1927 and 28 U.S.C. § 1920, and § 1920 includes its own express definition of costs. In light of this history, the Court reasoned that “ § 1920 and § 1927 should be read together as part of the integrated statute approved in § 1853,” and, hence, § 1927 should be understood as incorporating § 1920’s specific definition of costs. Id. at 760, 100 S.Ct. 2455. As this definition did not include attorney’s fees recoverable as part of costs, the Court concluded that the term “costs” under § 1927 also excluded such fees.
The Supreme Court returned to the interplay between § 1988 and another statute allowing the recovery of costs in Marek v. Chesny, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985). Marek involved Federal Rule of Civil Procedure 68. Rule 68 shifts to the offeree the “costs” incurred subsequent to an offer of judgment if the judgment finally obtained is not more favorable than the offer. Like former § 1927, at issue in Roadway Express, Rule 68 did not define the term “costs.” In contrast to Roadway Express, however, the Court concluded that “costs” under Rule 68 includes attorney’s fees recoverable as part of costs. The Court observed that by the time Rule 68 was adopted in the late 1930s, a number of federal statutes provided for an award of attorney’s fees as part of costs. See id. at 7-8, 105 S.Ct. 3012. Because “[t]he authors of Federal Rule of Civil Procedure 68 were fully aware of these exceptions to the American Rule,” the “most reasonable inference” was that “the term ‘costs’ in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority.” Id. at 8-9, 105 S.Ct. 3012. The court concluded that, “absent congressional expressions to the contrary, where the underlying statute defines ‘costs’ to include attorney’s fees, we are satisfied such fees are to be included as costs for purposes of Rule 68.” Id. at 9, 105 S.Ct. 3012. The Court distinguished Roadway Express, stating:
We held in Roadway Express that § 1927 came with its own statutory definition of costs, and that this definition did not include attorney’s fees. The critical distinction here is that Rule 68 does not come with a definition of costs; rather, it incorporates the definition of costs that otherwise applies to the case.
Id. at 9 n. 2, 105 S.Ct. 3012.
We applied these Supreme Court precedents in Azizian v. Federated Department Stores, Inc., 499 F.3d 950 (9th Cir.2007). The issue there was whether the term “costs” in Federal Rule of Appellate Procedure 7, which permits a district court to require an appellant to file a bond to ensure payment of “costs” on appeal, includes attorney’s fees recoverable as part of costs. Like former § 1927 and Rule 68, Rule 7 does not define costs. Following Marek, we observed that, at the time of Rule 7’s adoption in 1968, “a number of federal statutes ... had departed from the American rule by defining ‘costs’ to include attorney’s fees.” Id. at 958. “Because against this background of varying definitions of costs, Rule 7’s drafters did not define the term,” we concluded that the drafters “likely intended it to refer to all costs properly awardable at the conclusion of the appeal, including attorney’s fees authorized by relevant statutory authority.” Id. (alterations and internal quotation marks omitted). We therefore held that “costs” under Rule 7 include attorney’s fees recoverable as part of costs.
Roadway Express, Marek and Azizian guide our analysis here, but none of those decisions is squarely on point. Rather, Rule 39 falls between Roadway Express on the one hand and Marek and Azizian on the other.
In one respect, this case is analogous to Marek and Azizian. When Rule 39 was adopted in the late 1960s, a number of federal statutes provided for an award of attorney’s fees as part of costs. Because the authors of Rule 39 undoubtedly were aware of these exceptions to the American Rule, we could reasonably infer that they intended the term “costs” in Rule 39 to refer to all costs properly awardable under federal law, including attorney’s fees recoverable as part of costs. See Marek, 473 U.S. at 8-9, 105 S.Ct. 3012; Azizian, 499 F.3d at 958.
In another respect, however, Roadway Express supplies the stronger analogy. There is an essential difference between Rules 7 and 68, which are silent as to the types of costs contemplated, and Rule 39, which is not. Unlike Rules 7 and 68, the language and context of Rule 39 offer insight into the meaning of the term “costs” under the rule. First, Rule 39(e) specifically enumerates the costs on appeal that may be awarded in the district court:
The following costs on appeal are taxable in the district court for the benefit of the party entitled to costs under this rule:
(1) the preparation and transmission of the record;
(2) the reporter’s transcript, if needed to determine the appeal;
(3) premiums paid for a supersedeas bond or other bond to preserve rights pending appeal; and
(4) the fee for filing the notice of appeal. Fed. R.App. P. 39(e). These are all administrative costs, not attorney’s fees. Second, although Rule 39 — like former § 1927 — does not include a definition of costs in its text, the advisory committee’s note accompanying the adoption of Rule 39 makes plain that the rule is premised on § 1920. See Fed. R.App. P. 39 advisory committee’s note (“Statutory authorization for taxation of costs is found in 28 U.S.C. § 1920.”). Like Rule 39(e), § 1920 enumerates a set of uniformly administrative costs, not including attorney’s fees:
A judge or clerk of any court of the United States may tax as costs the following:
(1) Fees of the clerk and marshal;
(2) Fees for printed or electronically recorded transcripts necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and the costs of making copies of any materials where the copies are necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this title;
(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title.
A bill of costs shall be filed in the case and, upon allowance, included in the judgment or decree.
28 U.S.C. § 1920. Taken together, Rule 39(e) and the drafter’s invocation of § 1920 lead us to conclude that the drafters intended “costs” under Rule 39 to refer narrowly to administrative costs, not to attorney’s fees.
This interpretation finds support in several other ways. First, it is consistent with the weight of authority from other circuits. Although one circuit has held that “costs” under Rule 39 include attorney’s fees recoverable as part of costs, see Montgomery & Assocs., Inc. v. Commodity Futures Trading Comm’n, 816 F.2d 783, 784-85 (D.C.Cir.1987), five other circuits have rejected that proposition, see Pedraza v. United Guaranty Corp., 313 F.3d 1323, 1330 n. 12 (11th Cir.2002) (citing McDonald, infra, for the “undoubtedly” correct and “uneontroversial conclusion that attorneys’ fees are not included among the ‘costs’ contemplated by Rule 39”); McDonald v. McCarthy, 966 F.2d 112, 118 (3d Cir.1992) (“[W]e conclude that an order from this court pursuant to Rule 39 that each party bear its own costs does not foreclose the ‘prevailing part/ from recovering attorneys’ fees under section 1988.”); Chem. Mfrs. Ass’n v. EPA, 885 F.2d 1276, 1278 (5th Cir.1989) (holding that Rule 39 covers the “more routine allocations of costs,” not recovery of attorney’s fees); Kelley v. Metro. Cnty. Bd. of Educ., 773 F.2d 677, 681 (5th Cir.1985) (en banc) (holding that “an award of costs pursuant to Fed. R.App. P. 39(a) is separate and distinct from and totally unrelated to an award of attorney’s fees pursuant to the directions of § 1988” (footnote omitted)), disapproved of on other grounds by Pennsylvania v. Del. Valley Citizens’ Council for Clean Air, 483 U.S. 711, 718 n. 4, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987); Robinson v. Kimbrough, 652 F.2d 458, 463 (5th Cir.1981) (holding that an order to pay costs “cannot be construed as a judicial directive pertaining to attorneys’ fees” under § 1988 and noting that Rule 39 “refers only to the usual costs of appeal,” not to attorney’s fees); Terket v. Lund, 623 F.2d 29, 33 (7th Cir.1980) (holding that, although § 1988 states that attorney’s fees may be awarded as part of costs, “the award of attorneys’ fees under § 1988 is a decision distinct from the decision on the merits and from the normal taxing of costs”); Farmington Dowel Prods. Co. v. Forster Mfg. Co., 421 F.2d 61, 91 (1st Cir.1969) (“We have already disposed of the ‘cost of suit’ contention by our prior order that ‘no costs’ are to be awarded for these cross appeals. However, we did not intend by that order to preclude a motion for plaintiffs reasonable attorney’s fee under section 4 [of the Clayton Act, 15 U.S.C. § 15,] arising from these cross appeals.”). Several of these decisions postdate Marek, and these courts have distinguished Marek on the ground that, whereas Rule 68 is silent as to the type of costs it covers, Rule 39 is not. As the Fifth Circuit explained en banc in Kelley:
In determining that the cost-shifting provision of Rule 68 encompasses an award of attorneys fees under § 1988, the Marek Court, in footnote 2, distinguished its prior opinion in Roadway Express, Inc. v. Piper, 447 U.S. 752 [100 S.Ct. 2455, 65 L.Ed.2d 488] (1980). The Court observed that, unlike Rule 68, the cost provision at issue in Roadway (28 U.S.C. §§ 1920 and 1927) specifically enumerated the type of costs awardable as sanctions under certain circumstances, thus making it inappropriate for the Court to interpret “costs” as including § 1988 attorney’s fees. In other words, the Marek Court recognized a critical distinction between interpretation of “costs” where the relevant statute sets forth its own definition of the term, as opposed to situations where “costs” are undefined. As appellate Rule 39 specifically * delineates the “costs” to which it applies, i.e. the “traditional” costs of printing briefs, appendices, records, etc., the pronouncements of Marek render it inappropriate for this court to judicially-amend Rule 39’s cost provisions to include § 1988 attorney’s fees.
Kelley, 773 F.2d at 681 n. 5. The Third Circuit employed similar reasoning:
The Marek Court’s distinction regarding Roadway Express is particularly important in this case because Rule 39, like section 1927 which was at issue in Roadway Express, is not silent as to the definition of “costs.” Rule 39 defines costs as including normal administrative costs such as those incurred in preparing the record, filing fees, and the cost of the reporter’s transcript.
McDonald, 966 F.2d at 116. The rule proposed by the state is against this great weight of authority.
Second, that “costs” under Rule 39 do not include attorney’s fees is consistent with our own analysis in Azizian. Although we held that attorney’s fees may be considered part of costs under Appellate Rule 7, we assumed that attorney’s fees were not costs under Rule 39, noting that there was “no indication” that Rule 7 and Rule 39 shared a common definition of costs, and citing Singer v. Shannon & Lucks Co., 868 F.2d 1306, 1307 (D.C.Cir.1989) (per curiam), for the proposition that “the term ‘costs’ in Rule 39 excludes attorneys’ fees.” Azizian, 499 F.3d at 958-59 (emphasis added). In short, the conclusion that “costs” under Rule 39 do not include attorney’s fees is consistent not only with the weight of authority from other circuits but also with our own understanding of Rule 39 in Azizian.
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3819998-22356 | MEMORANDUM OPINION AND ORDER
THOMAS B. RUSSELL, Chief Judge.
Defendant, Darnell Allen, has filed a Motion to Suppress Evidence (DN 36). Plaintiff, United States of America, has filed a response (DN 38). A suppression hearing was held on July 20, 2010. Post hearing briefs were filed by both parties (DN 45, 51). Defendant has filed a reply to Plaintiffs brief (DN 53). This matter has now been fully briefed and is ripe for review.
Plaintiff has also filed a motion for an extension of time (DN 50). Defendant had no objections (DN 52). Accordingly, that Motion is GRANTED. For the reasons that follow, Defendant’s Motion to Suppress is DENIED.
BACKGROUND
Defendant operates a commercial motor vehicle for a living. Suppression Hearing Transcript, DN 43, pg. 84. On January 22, 2010, Defendant left Carson, California for Plainfield, Indiana. Id. at 93. On January 25, 2010, Defendant entered Kentucky on 1-65 near Bowling Green where there was a weigh station. Id. at 94. Because the station was open at the time, Defendant exited the interstate and drove across the scales. Id. Before he was able to return to the interstate, Officer Duvall, working at the station, displayed a red signal to Defendant, indicating that he needed to pull over. Id. Defendant pulled his truck over, and Officer Duvall initiated a Level II inspection. Id. at 95. First, Officer Duvall checked Defendant’s paperwork and the functionality of various mechanical devices. Id. After finishing that portion of the inspection, Defendant was asked to leave his truck and was escorted into the weigh station office. Id. at 97. Officer Duvall then returned to the truck and began doing a walk-around inspection of the truck and trailer. Id. Upon arriving at the rear of the trailer, Officer Duvall noticed that the doors were sealed with a bolt lock. Id. at 16. Officer Duvall also noticed that there was some damage to the rear doors of the trailer. Id. at 83. To inspect whether the cargo in the truck was properly secured, Officer Duvall retrieved a set of police issue bolt cutters and removed the bolt lock. Id. After opening the trailer doors, Officer Duvall saw some boxes that had fallen off their pallets. Id. Because this indicated that the load was not properly secured, Officer Duvall entered the trailer and inspected other pallets. Id. at 17. At that time, he saw multiple black garbage bags hidden between some of the pallets. Id. Upon seeing the garbage bags, Officer Duvall left the trailer and reentered the weigh station. Id. at 18.
At this point, the testimony at the suppression hearing sharply diverged.
SUPPRESSION HEARING TESTIMONY
Jeremy Duvall, Joey Conn, Brad Harper and Darnell Allen testified at the suppression hearing.
1. Jeremy Duvall
On January 25, 2010, Mr. Duvall was an officer with the Kentucky Vehicle Enforcement Department. His sole responsibility was to conduct commercial motor vehicle inspections. On that date, he was working at a fixed operating facility known as the Simpson County weigh station. These are the truck inspection stations that we all are familiar with that are stationed on many interstates in Kentucky.
He conducted a number of random inspections daily. Mr. Allen’s was probably the first of the day and he was chosen randomly. Sergeant Conn was present with him at the weigh station. Mr. Duvall had Allen park his vehicle. Allen came to the scale facility with some paperwork, and Duvall reviewed a number of documents. Allen was asked to drive his vehicle from the parking lot to the inspection lane, which he did. Mr. Duvall was performing a Level II inspection. He noticed Allen’s shipping papers were very vague, as it did not give a clear description of what he was hauling. He asked Allen about it but did not believe he received a “straight” answer.
Duvall stated the second half of the Level II inspection is a walk-around checking the exterior of the tractor and trailer. He testified that load securement was a part of a Level II inspection. Improper securement can affect vehicle stability.
Duvall informed Allen he was going to perform the inspection. Allen did not object. His testimony was not clear that he told him he would perform an interior inspection of the trailer. The trailer had a bolt-style seal. He secured a bolt cutter and removed the seal.
He opened the doors and, before entering, he observed that several medium (12" square) boxes on the right side had fallen and there was unrestrained cargo that could be damaged or possibly cause other problems.
He entered the trailer and climbed on top of the first pallet from which the cargo had fallen to check for other securement problems. Between pallets, he observed black trash bags with an unknown substance in them. He believed it was contraband as the shipping papers did not document anything being transported in black garbage bags.
Duvall returned to the scale facility. Allen and Conn were there. He asked for consent to search the vehicle. Allen responded, ‘You’re already in the trailer.” Duvall responded, “I’m asking to consent for your entire truck and trailer.” He testified that Allen eventually gave consent, which was witnessed by Conn.
Duvall testified that “Whatever is going to be on your shipping papers is what should be in your vehicle.” It was not industry standard to transport any common commodity in black trash bags. He felt it was some type of contraband. His search produced several large bags which contained marijuana. He was only there for a few minutes. He returned and placed Allen under arrest and gave him his Miranda warning.
Duvall stated Allen’s trip originated in Los Angeles and was to terminate just outside of Indianapolis. He was approximately 300 miles further south than he should have been. Allen was an owner-operator of the company. Such a deviation was unusual as it would cut into his profits.
Duvall stated such an initial in-trailer inspection was very common. He admitted the various manuals made no mention that he could conduct cargo inspections as part of any walk-around inspection. However, his training taught him he could break the seal to check cargo seeurement and he and other officers did it routinely. He admitted he never asked if he could break the seal.
He testified that after his initial securement inspection and seeing the garbage bags, he returned to talk to Allen, with Conn present. At that time, Allen granted consent. Duvall never personally told Allen he could refuse to consent. However, he felt Allen granted it voluntarily.
The testimony reveals:
“Q. Is there anything that went on that evening up to you cutting the bolt seal, all right, that gave you a reasonable suspicion to believe there was something improper with the way the cargo was being stored?
A. No.”
2. Joey Conn
Joey Conn is a sergeant with the Kentucky State Police, Division of Commercial Vehicle Enforcement, a certified trainer in drug interdiction through the United States Department of Transportation and Duvall’s supervisor. It is common practice to perform cargo seeurement inspections. They customarily break the seal and replace it with a seal bearing the markings of the Kentucky State Police. At least 30% of the random inspections have the seal broken and the cargo inspected for seeurement. He was present January 25, 2010.
He was sitting close to Allen and Duvall. He heard the conversation of where the load originated and its destination. Allen explained he deviated because of too many hills and weather concerns. He heard questions about Allen’s log book and talk about why Allen would be off work for weeks at a time. He felt all of this was suspicious. Trucks take the best and cheapest route and if the truck is not moving, it does not make money. All of these issues were inconsistent with normal profitable trucking operations. He saw Duvall go to the trailer to check the cargo seeurement. He was gone a couple of minutes.
Duvall returned and asked for consent to conduct a search of the trailer. Allen responded, “You’re going to search it, anyway. Go ahead.” Conn intervened stating they were not going to search it anyway. He advised Allen he had a right to refuse the search, but he needed a yes or no as to whether they could or could not search the trailer. Allen responded, “fine, so go ahead.”
After that conversation, Allen was handcuffed for officer safety and he and Duvall went to search the trailer where they found the bags of marijuana.
Conn further testified:
“A. If he had said no, I would have talked to Officer Duvall, find out exactly what he had seen in the back of that trailer, not to mention the totality of the circumstances of what — the objectives of his trip. We would have got a canine. And at that point, he would have been detained until a canine had arrived and done a search.
Q. So you would have continued your investigation?
A. Absolutely, yes, sir.
Q. At some point in time — let’s assume again, hypothetically, that you brought the canine out and the canine did not alert but you knew everything that you knew. What would you have done?
A. He says no, the canine does not alert, I’m not going to be able to obtain a search warrant, and Mr. Allen goes up the road.
Q. All right. And I know I’ve asked you this, but did you specifically tell Mr. Allen that he had the right to refuse consent?
A. He made the statement that we had already searched the truck, so go ahead. And I said, “No, we have not searched the truck.”
Q. Okay.
A. We want to search the truck. Yes or no?’ ”
Conn did not document any of the statements or consent to search in any of his reports. A written consent was not obtained.
3. Brad Harper
He is employed by Kentucky State Police, Drug Enforcement Special Investigations. He was present and investigated the incident on January 25, 2010. He obtained a statement from Duvall. In the report, it stated:
“During the walk around, he (Duvall) noticed the right rear trailer door had been damaged or the lock had been tampered with. He removed the bolt seal and checked for proper load securement.”
No mention in the report was made of conversations with Allen.
4. Darnell Allen
Darnell Allen has been an over the road commercial owner truck driver for four years. He was familiar with Level I, II and III inspections. He has been randomly inspected over ten times. This was the first time an inspector had broken the seal and climbed into the interior of the trailer. He never consented to an inspection or search.
This trip originated in Carson, California. The bolt seal was installed there by Schenker Logistics. He was instructed not to open it under any circumstances. He was going to Indiana.
After he was stopped for a random inspection in Kentucky, he gave Duvall his paperwork. They did a walk around and checked wipers, signals, etc. Allen went back inside the scale house and Conn was there. During the entire event, Allen had no conversations with Conn.
He saw Duvall cut the bolt seal. He was inside the trailer 20-25 minutes. Du-vall returned and asked Allen for permission to search the trailer. Allen told Du-vall that he was just in the back of the truck and asked why are you asking now. Duvall stated he did not need his permission and went back out to conduct the search. Allen testified that he would have given permission if asked. However, he stated that he never consented and had no conversation with Conn and Conn’s previous statements were false. He also testified that he was handcuffed before Duvall asked permission to inspect the truck. He indicated that he did not specifically refuse permission but he did not consent either. He stated, “I didn’t say anything or do anything to indicate permission to search the truck.” He testified that he was handcuffed when this discussion occurred.
DISCUSSION
The parties are in agreement that all of the actions engaged in by Officer Duvall were lawful until he cut the bolt lock from the trailer. The parties disagree as to whether there was a lawful basis for (1) cutting the bolt lock and conducting a cargo securement inspection or (2) the full search of the trailer following the cargo securement inspection.
1. Cargo Securement Inspection
The first issue is whether Officer Duvall could lawfully conduct a cargo securement inspection of a locked trailer. Commercial trucking inspections are governed by Ky. Rev.Stat. § 281.755, which states:
(1) The Department of Kentucky State Police or any other peace officer designated by the department may at any time or place make an inspection of any motor vehicle operating under the provisions of this chapter. They may enter into and upon any such motor vehicle for the purpose of ascertaining whether or not any provision of this chapter or any order or rule or regulation of the department relating to such motor vehicles has been violated. Willful refusal to stop any such motor vehicle, when ordered to do so by any representative of the Department of Kentucky State Police, or to permit the representative to enter into or upon the motor vehicle for the purpose of inspection, shall be sufficient ground for the revocation or suspension of the certifícate or permit of the motor carrier.
Because, on its face, the statute does not seem to place any limitation on the discretion of the inspecting officer, some case law has suggested that it may run afoul of New York v. Burger, 482 U.S. 691, 107 S.Ct. 2636, 96 L.Ed.2d 601 (1987). United States v. Garrido, 467 F.3d 971, 980-81 (6th Cir.2006); cf. United States v. Dominguez-Prieto, 923 F.2d 464 (6th Cir.1991) (finding a statute that required “reasonable belief’ of a violation prior to a war-rantless stop and inspection constitutional). Defendant contends the statute is constitutional because a “reasonable belief’ requirement should be read into the statute. The government contends that, regardless of the constitutionality of the statute, Allen does not have appropriate standing for a facial challenge because Officer Duvall had a reasonable belief that the law was being violated at the time he opened the trailer. See Garrido, 467 F.3d at 981-82.
Looking to Burger, three requirements must be met to conduct warrantless inspections. First, “there must be a ‘substantial’ government interest that informs the regulatory scheme pursuant to which the inspection is made.” Burger, 482 U.S. at 702, 107 S.Ct. 2636. The Sixth Circuit has already determined that this requirement is met in the commercial trucking industry. Dominguez-Prieto, 923 F.2d at 468. Second, “the warrantless inspections must be necessary to further the regulatory scheme.” Burger, 482 U.S. at 702, 107 S.Ct. 2636 (internal quotations and edits omitted). As above, the Sixth Circuit has already determined that this requirement is met in commercial trucking. Dominguez-Prieto, 923 F.2d at 469. Finally, “the statute’s inspection program, in terms of the certainty and regularity of its application, must provide a constitutionally adequate substitute for a warrant.” Burger, 482 U.S. at 703, 107 S.Ct. 2636 (internal quotations and edits omitted). Because the Sixth Circuit has not addressed the Kentucky statute in a factually analogous situation, this Court must conduct the appropriate analysis for the final requirement.
To meet the third requirement under Burger, “the regulatory statute must perform the two basic functions of a warrant: it must advise the owner of the commercial premises that the search is being made pursuant to the law and has a properly defined scope, and it must limit the discretion of the inspecting officers.” Id. “To perform this first function, the statute must be sufficiently comprehensive and defined that the owner of commercial property cannot help but be aware that his property will be subject to periodic inspections undertaken for specific purposes.” Id. (internal quotations omitted). The Kentucky statute clearly meets this requirement — commercial truck drivers licensed to operate in Kentucky are aware that they could be subject to inspections for the purpose of verifying compliance with Kentucky commercial trucking regulations.
The next requirement, however, is that the inspection “must be carefully limited in time, place and scope.” Id. (internal quotations omitted). This Court “need not resolve the question of whether Ky. Rev.Stat. § 281.755 would constitutionally permit inspection ‘at any time or place,’ however,” because, similar to Garrido, the discretion of the inspecting officer was limited. 467 F.3d at 980-81. In Garrido the court avoided examining the constitutionality of the statute because the officers conducting a roadside inspection along with a traffic stop actually had reasonable belief of a violation regardless of whether the statute required such, limiting their official discretion. In this case, Officer Duvall directly testified that he did not have a reasonable belief of a violation of the commercial trucking regulations at the time he conducted the cargo securement inspection. Nonetheless, in the current case, Officer Duvall could only conduct random inspections of trucks passing through the weigh station, limiting the place of inspection. By limiting the place of inspection, the discretion of the inspecting officer is limited in a way similar to Garrido.
Random safety and cargo securement inspections conducted at a weigh station also set forth a very clear scope of inspection. First, “[t]he inspections can be made only of [commercial trucking vehicles.]” Burger, 482 U.S. at 711, 107 S.Ct. 2636. Second, “the permissible scope of these searches is narrowly defined:” the inspector may only enter into a vehicle to ensure compliance with Kentucky commercial trucking regulations. Id. Limiting the type of vehicle that can be inspected and the scope of the inspection narrowly defines the permissible scope of the inspections. Finally, while there is no limitation on time, “[t]rucks operate twenty-four hours a day and the officers must, necessarily, have the authority to conduct these administrative inspections at any time.” Dominguez-Prieto, 923 F.2d at 470. With appropriate limits on time, place and scope, the third requirement of Burger is met when random inspections are performed at a weigh station.
Since the three Burger requirements are met under the facts of the current case, Officer Duvall was lawfully allowed to perform a warrantless inspection to verify compliance with Kentucky commercial trucking regulations while the truck was at a weigh station. Accord United States v. Ruiz, 569 F.3d 355 (8th Cir.2009); United States v. Burch, 153 F.3d 1140 (10th Cir. 1998).
2. Search of the Trailer
After the completion of the safety inspection, the officers had a “reasonable suspicion justifying further detention.” United States v. Perez, 440 F.3d 363, 370 (6th Cir.2006). Officer Duvall had lawfully-observed black garbage bags in the truck that did not likely hold any of Defendant’s stated cargo. In addition, it is undisputed that Defendant was off the most direct route between his start and end point, which Officer Conn said he considered when deciding to continue investigating after the safety inspection. Officer Duvall thought that the shipping papers and Defendant’s answers were vague as to what was being hauled. Finally, Officer Conn noticed that the truck had long periods of down time, which was indicative of unlawful activity to Officer Conn.
While the continued detention was lawful under a reasonable suspicion standard, reasonable suspicious does not justify a full lawful search of the trailer at the time of detention by the officers. There is a dispute as to whether Defendant gave consent to the search, which would have made the search lawful. The government obtained no warrant in the current case. Finally, since a cargo securement inspection does not involve investigating the contents of bags stored in a truck, the government cannot justify the search under Burger as discussed above.
Before deciding whether consent was valid, this Court will first consider any potential applicable exceptions to the warrant requirement of the Fourth Amendment. The exception most likely to apply in the current case is the so-called “automobile exception” established in Carroll v. United States, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543 (1925). This exception allows officers to search an ‘automobile’ without a warrant if there is probable cause to believe that the vehicle contains contraband. Id. at 147, 45 S.Ct. 280. The Supreme Court has “consistently recognized ready mobility as one of the principal bases of the automobile exception.” California v. Carney, 471 U.S. 386, 390, 105 S.Ct. 2066, 85 L.Ed.2d 406 (1985). In this case, the trailer was hooked to a tractor and was being moved along the interstate. Accordingly, the ready mobility requirement is met. A more recent rationale behind the automobile exception is the “lesser expectation of privacy” associated with “pervasive regulation of vehicles capable of traveling on the public highways.” Id. at 391, 105 S.Ct. 2066. As discussed above, this is particularly true for a commercial tractor-trailer when compared to a standard passenger car. As a result, Defendant’s trailer is an automobile for the purposes of the automobile exception. Accord, e.g., United States v. Navas, 597 F.3d 492 (2d Cir. 2010); United States v. Diaz, 356 Fed.Appx. 117 (10th Cir.2009); United States v. Steed, 548 F.3d 961 (11th Cir.2008); United States v. Ibarra, 493 F.3d 526 (5th Cir.2007); United States v. Forrest, 620 F.2d 446, 453 (5th Cir.1980).
The final requirement necessary to apply the automobile exception is probable cause. As discussed above, the officers were aware of the following facts: (1) Defendant was 300 miles off route, which is generally associated with drug activity; (2) Defendant claimed to be off route because of “weather and hills,” which Officer Conn testified was an excuse used in connection with drug activity; (3) Officer Duvall had trouble establishing what Defendant had in his trailer after inspecting Defendant’s papers and orally questioning Defendant; (4) Defendant had long periods of down time, which Officer Conn testified was consistent with drug activity; and (5) Officer Duvall observed black plastic bags during a lawful cargo securement inspection and those bags were inconsistent with the shipping papers and the rest of the cargo.
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3916049-30558 | MEMORANDUM OPINION
O’KELLEY, District Judge.
On February 1, 1977, the plaintiff, Southern Airways, Inc., filed this action seeking to enjoin the defendant City of Atlanta from leasing facilities in the proposed midfield terminal at the Hartsfield Atlanta International Airport to the plaintiff under the terms and conditions contained in the lease agreement which was presented to the plaintiff and the other carriers serving the airport on December 17, 1976. The defendants, representing that the mere pendency of this action prevented their making bid awards which were to expire on March 20, 1977, and,-therefore, expoáted'them' to-'substantial delays in the completion of the project as well as enormously increased costs of construction and financing, requested an expedited hearing on the merits of the case. The request was granted, and the case was tried before the court on February 28-March 2 and March 7-9, at which time the parties introduced testimonial and documentary evidence concerning the merits of the action.
As a result of the rapid growth of passenger traffic, both local and connecting, at its airport, the City of Atlanta has worked for a number of years on proposals for the expansion of its facilities for air travel. In recent years, these proposals have centered around the construction of a new passenger terminal in the mid-field area at the Harts-field Atlanta International Airport. The preliminary discussions and proposals culminated in the City Council of Atlanta’s adoption in November, 1974, of a resolution authorizing the Mayor, the Commissioner of Aviation, and the Commissioner of Finance to negotiate with the airline companies for the construction, phasing, and financing of a mid-field terminal facility.
On January 6,1975, Southern, along with Delta Air Lines and United Air Lines, tendered to the City of Atlanta a letter of intent committing it to proceed with the mid-field project. Eastern Air Lines, on the other hand, had informed the interested parties of its intention to remain in the existing terminal. On February 25, 1975, however, Eastern advised the city that in light of Delta, United and Southern’s commitments, it had reevaluated its decision and now desired to relocate in the mid-field terminal.
Under the present proposal, the mid-field terminal complex consists of a main terminal building which is connected to four rectangular concourses by an underground tunnel. The concourses, which contain the loading gates of the various carriers, are parallel to each other and connected only by the tunnel. This underground connecting tunnel is carefully designed to allow passengers to move efficiently from place to place within the terminal complex and contains a vehicle known as the “people mover” as well as a pedestrian walkway.
Under the gate allocation plan as it existed in the summer of 1975, Delta’s gates were located on concourses A and B, Southern was assigned 12 gates on concourse C, and Eastern’s gates were located on the D concourse. This gate allocation was made on a “first come, first served” basis. Eastern was extremely dissatisfied with the location of its gates, and in March, 1976, a revised plan for a 104 gate mid-field terminal complex was proposed. Under this plan, Eastern was assigned 16 gates on concourse B and 17 gates on concourse C. The number of gates assigned to Southern on concourse C was reduced to 9. Obviously, Southern was unhappy with the new arrangement and sought through negotiations with Eastern to regain its original allocation of 12 gates on concourse C. When these discussions proved fruitless, Southern requested the City to rule upon the matter. The City refused to do so, stating that “gate allocations is a matter for the airlines to agree upon among themselves.”
Subsequently, in May, 1976, Southern, in order to obtain the 12 gates which it believed necessary to support its future operations at the Hartsfield Airport, exchanged gate locations with United, thereby obtaining the necessary gate allotment on concourse D.
In August, 1976, Southern, and most of the other airline companies involved, executed an agreement with the City of Atlanta referred to as the “Phase II Agreement.” The Phase II Agreement reaffirmed that substantial agreement had been reached on certain general terms, conditions, and provisions which would govern the financing, design, construction, use, and occupancy of the proposed mid-field terminal complex. It also provided, however, that those general provisions “do not represent all of the terms, conditions, and provisions which must necessarily be included in the lease agreement,” but only that such conditions accurately reflect the intent of the parties, subject to mutually agreed upon modifications. The Phase II Agreement did not provide for any method of either determining the amount of lease payments to be charged to each airline company for their use and occupancy of the proposed central terminal complex or allocating to the vari ous airline companies the costs of maintenance and operation of the complex. With respect to the latter costs, however, the agreement did provide that they would be allocated in the lease agreement in such a way that each contracting airline company would pay a fair and equitable pro rata share.
Subsequent to the execution of the Phase II Agreement, representatives of the airline companies and the City of Atlanta engaged in extensive discussions and negotiations concerning the preparation of various formulas to be incorporated in the lease agreement for allocating the rental charges and the costs of maintenance and operation of the mid-field terminal project among the several carriers. On September 24, 1976, Southern presented to the City of Atlanta its proposal for the allocation of rentals and costs, the pertinent provisions of which are as follows: (1) The cost of the space leased exclusively by an airline in the terminal building would be equal regardless of the location in the terminal. (2) The cost of the common space in the terminal building would be allocated among the airlines on the basis of the number of enplaned passengers. (3) The rate charged an airline for the rental of a gate would be based upon the location of that gate, with gates- on concourses closest to the terminal building rented at a premium rate while a lower rental rate would be charged for gates located on concourses farthest from the terminal building. (4) The annual maintenance and operation costs of the people mover and pedestrian mall would be allocated on the basis of enplaned passengers. On October 15, 1976, Delta Air Lines submitted to the City an analysis of the Southern proposal, to which Southern responded on November 6, 1976. Without belaboring the point, suffice it to say that during the months of October, November, and December, 1976, numerous meetings were held and correspondence exchanged between representatives of the airline companies and the City regarding the rent allocation question. Finally, on December 17, 1976, the City of Atlanta sent out a proposed lease agreement to the carriers serving the Hartsfield Atlanta International Airport and notified them that due to time restraints imposed by the construction schedules, the lease agreement would have to be executed by December 22,1976. The notice also informed the carriers that the City would assume that those companies which did not execute the lease on that date were not accepting the proposed lease agreement and did not desire to lease space in the mid-field terminal complex.
The evidence shows that the City, in devising the manner in which it would lease space at the mid-field terminal complex and the manner in which it would allocate the costs of maintenance and operation thereof, generally considered traditional concepts of airport rental practices as well as concepts developed through negotiations with the airlines, including some of the concepts suggested in the Southern proposal. The following is. a comparison of the proposed formulas for allocating rentals contained in the Southern proposal to those finally adopted by the City and included in the lease agreement which was forwarded to each of the carriers.
1. Under the City’s plan, the rental payment for terminal exclusive space is determined by multiplying the average cost per square foot of the terminal building by the number of square feet which a particular carrier occupies exclusively.
Southern’s proposal is identical to the City’s plan.
2. Under the City’s plan, the rental payment for terminal joint leased space is determined by multiplying the cost of the joint leased space by the relative percentage of a carrier’s exclusive space located on the upper terminal level.
Southern’s proposal is that such costs be allocated on the basis of a carrier’s relative percentage of éhplaned passengers.
3. The rental payment for concourse exclusive space is determined under the City’s lease by multiplying the average cost per square foot of all the concours es by the number of square feet occupied exclusively by a particular airline.
Under the Southern proposal, the rent would be determined by the same basic formula except that, depending on the location of the exclusive space, the average cost per square foot would be either increased by the addition of a premium or reduced by a discount. The premiums or discounts associated with each of the concourses is as follows: concourse A — 25% premium; concourse B — 8.3% premium; concourse C — 8.3% discount; and concourse D— 25% discount.
4. Under the City’s plan, the rental payment for joint leased space on the concourse is determined by multiplying the following elements: the average cost per square foot of all the concourses; the square footage of joint leased space in a particular concourse; and the carrier’s relative percentage of the exclusive space located in the upper level of the particular concourse.
Southern’s proposal varied in two respects. First, the premium and discount system was injected into the formula in a manner identical to that outlined above. Second, the final element in Southern’s proposal was the carrier’s percentage of total exclusive space on a particular concourse, rather than its percentage of exclusive space on the upper concourse level.
5. Under the City’s plan, the rental payment for the apron area, both exclusive and joint leased space, is determined by multiplying the average cost per square foot of aircraft parking and ramp area by the square footage of a carrier’s exclusive aircraft parking and ramp area.
Under the Southern proposal, the rent would be determined by the same basic formula except for the injection of the premium and discount system.
Turning to an examination of the formulas to be used in allocating the costs of maintenance and operation, it should be emphasized initially that Southern’s proposal included an estimate of maintenance and operation costs, along with project costs, in arriving at annual rental figures for the purposes of the allocation methods it proposed. It is obvious, therefore, that Southern had proposed that these costs be allocated in the same fashion and by the same formulas as the project costs. The City lease agreement, however, provides for allocation as follows:
1. Each airline would be responsible for its own maintenance and operation costs within its exclusive area in the terminal and concourses.
2. As to the maintenance and operation costs associated with the common space in the terminal, pedestrian mall, and moving sidewalk, the City proposal is that 20% of these costs would be divided equally among all airline companies, 40% would be allocated on the basis of each airline’s relative percentage of exclusive apron area, and 40% of the costs would be allocated based on the relative percentages of enplaned passengers.
3. Maintenance and operation costs relative to the concourse common area would be apportioned based on the airline’s exclusive space in the upper level of the concourse relative to all airlines’ exclusive lease space in the upper level of that particular concourse.
4. The costs of operation and maintenance of apron areas would be allocated based on the airline’s exclusive apron area relative to the total exclusive apron area for all airlines.
5. While the Southern proposal advocated that the maintenance and operation costs associated with the people mover be apportioned solely on the basis of relative percentages of passengers, the City’s formula allocates 20% of such costs equally among the airlines and apportions the remaining 80% based on relative percentages of enplaned passengers.
6. The cost of fire protection as well as the costs associated with the temporary roads and fencing are allocated pursuant to the 20/40/40 formula described above.
7. The cost of police protection, like the cost of maintenance and operation of the people mover, is allocated pursuant to the 20/80 formula.
On December 21 and 22, 1976, Eastern, Delta and Piedmont executed copies of the lease agreement. On that same day United and Northwest gave written indications of intent to execute the agreement. Southern did not execute the lease agreement but, rather, on February 1, 1977, filed this lawsuit seeking a declaration of its rights and an injunction restraining the defendant City from requiring it to execute the lease agreement and accept the cost allocations used in fixing the rentals thereunder or excluding it from the mid-field terminal complex.
The plaintiff’s amended complaint consists of six counts. In count one the plaintiff alleges that the City has violated section 18(a)(1) of the Airport and Airway Development Act, 49 U.S.C. § 1718(a)(1), by requiring Southern to execute a lease agreement which provides for rates, rentals, and other charges which are allegedly discriminatory and not substantially comparable to the rates, rentals, and charges applicable “to all such air carriers which make similar use of the Atlanta airport and which utilize similar facilities at such airport.” In count two the plaintiff alleges that by requiring it to execute the lease agreement and accept the cost allocations used in fixing the rentals thereunder or be excluded from the mid-field terminal complex, the City has imposed an impermissible burden on interstate commerce in violation of article I, section 8, paragraph 3 of the Constitution of the United States. The plaintiff alleges in count three that the City’s actions have denied it equal protection of the laws as guaranteed by the fourteenth amendment. In count four the plaintiff alleges that since the lease agreement and the rentals thereunder deprive it of the uniform use of the facilities at the Atlanta airport, the City, by requiring the plaintiff to execute the lease agreement, has violated the Uniform Airports Law of Georgia, Ga.Code Ann. § 11-201 et seq. Count five alleges a breach of the Phase I and Phase II Agreements, which imposed upon the City the duty of good faith and fair dealing in the performance of those agreements, as well as the obligation to tender to the plaintiff a lease agreement covering the facilities at the mid-field terminal complex which contained just and reasonable terms. Finally, in count six of the complaint, as amended on the day the trial commenced, the plaintiff alleges that certain defendant airlines engaged in an unlawful combination and conspiracy to unreasonably restrain trade and commerce in passenger air transportation in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. By agreement, defendants National and Northwest have been dismissed from count six.
Section 18(a)(1) of the Airport and Airway Development Act, 49 U.S.C. § 1718(a)(1), requires each city sponsor of a grant under that act to make its airport
available for public use on fair and reasonable terms and without unjust discrimination, including the requirement that (A) each air carrier . . . using such airport shall be subject to nondiscriminatory and substantially comparable rates, fees, rentals, and other charges and nondiscriminatory and substantially comparable rules, regulations, and conditions as are applicable to all such air carriers which make similar use of such airport and which utilize similar facilities ....
In support of its claim under this section, the plaintiff contends that since the rental formulas contained in the City lease agreement take into account neither the differences in value of rental locations nor the fact that the cost of maintenance and operation of the various facilities provided at the complex is principally determined by the large number of passengers brought into the complex by the major carriers, the rental rate charged plaintiff under those formulas is discriminatory and is not substantially comparable to that charged other airlines. In addition to their contention that the rental rate charged the plaintiff under the City lease agreement is nondiscriminatory and is substantially comparable to that charged the other airlines, the defendants advance two preliminary arguments in opposition to the plaintiff’s position.
First, the defendants argue that section 18(a)(1) of the Airport and Airway Development Act applies only to discrimination between classes of carriers, and since the parties to this lawsuit are all in the same class, that section is inapplicable. In support of their position, the defendants rely upon the remarks of Senator Cannon, the proponent of the 1976 amendment to this section. 122 Cong.Rec. 4306-07 (daily ed. Mar. 25, 1976). Admittedly, Senator Cannon did state that the primary evil at which the amendment was directed was discrimination against the supplemental or charter carriers. He did not state, however, that the amendment was limited to that type of discrimination. In fact, in light of the amendment’s wording, it is inconceivable that he could have made such a statement. After careful consideration, this court concludes that the 1976 amendment to section 18(a)(1) clearly extends its prohibi-. tion to the type of discrimination alleged in this case.
Second, the defendants, citing Aircraft Owners & Pilots Association v. Port Authority of New York, 305 F.Supp. 93 (E.D.N.Y.1969), argue that there is a distinction between statutory standards and the standards of judicial review and that even though section 18(a)(1) may require the terms of the City lease agreement to be “nondiscriminatory” and “substantially comparable,” the court’s inquiry in reviewing the lease agreement should be limited to the question of whether there is a rational basis for such terms. It is unnecessary for the court to address the legal questions presented by the defendants’ argument, however, because, as will be developed later, the court concludes- that except for the “20% equal” provision in a number of the cost allocation formulas, the charges levied pursuant to the lease satisfy both standards. As to the “20% equal” provision, the court finds it to be invalid, regardless of which standard is employed.
Before examining the rates and charges established by the City lease agreement, it is necessary to briefly comment on the “nondiscriminatory” and “substantially comparable” standards added by the 1976 amendment to section 18(a)(1). These standards do not require identical treatment. Cf. Wheeler v. Barrera, 417 U.S. 402, 94 S.Ct. 2274, 41 L.Ed.2d 159 (1974). They do require, however, substantially similar treatment. Obviously, the degree of similarity which is feasible will vary with the circumstances of each case.
Applying these standards to the lease agreement challenged in the instant case, this court concludes that the City’s failure to incorporate into the formulas employed in determining the rental rate of space located on the concourses the differences in the value of the various concourses is not unreasonable or discriminatory and does not result in Southern’s being charged a rental rate which is not substantially comparable to that charged the other airlines. In arriving at this conclusion, the court considered numerous factors. First, while the concept of rent differentials based on gate location has been debated for a number of years, no other airport in the nation has adopted such a proposal. Therefore, in considering Southern’s proposal, neither the City nor the airline companies had the benefit of any precedent in the establishment and administration of such a plan. This lack of guidance is compounded by the extreme difficulty, if not impossibility, of evaluating a particular location. While Southern’s proposal assigned the same value for all gates located on a particular concourse, it could be successfully argued that a gate located on the end of a particular concourse is less valuable than one located near the spine. In fact, a gate located near the spine on concourse D could be said to be more valuable than a gate located at the end of concourse A. The essence of the court’s observation is relatively simple. If the City were to adopt the concept of rate differentials for different locations, it would then be faced with the Herculean task of evaluating each of the 104 gates at the mid-field terminal separately. To do otherwise might subject the City to additional charges of discrimination.
Turning to an examination of the specific elements which allegedly contribute to the difference in value between the concourses, this court finds that each concourse possesses advantages and disadvantages and that an attempt to quantify any difference in value between the concourses would be difficult if not impossible. In fact, after carefully sifting and examining the various elements, this court has grave reservations as to whether it can unequivocally be stated that there is, in fact, any difference in value. The evidence reveals that the cost of moving baggage to a gate location on concourse D will be a minimum of $16,000 a year more than the same cost associated with a gate location on concourse A. Such a differential is offset, however, by the savings of a minimum of $100,000 a year in taxi costs associated with a location on concourse D.
The plaintiff has also raised the question of the effect of a location on concourse D on the public image of the airline company. This court finds that a carrier’s location at the airport terminal is a minor consideration of originating passengers in choosing an airline. It should also be observed at this point that this case does not present a situation in which an originating passenger must resort to the people mover to go the plaintiff’s gates while he is not required to do so to go to the gates of other airlines. Rather, the originating passenger at the Atlanta mid-field terminal must resort to the people mover as a source of transportation to the gates of all airlines. Once that passenger is required to board the people mover, it will make little difference whether he is required to travel to concourse A, B, C, or D. In any event, whatever the effect of gate location on the originating passenger’s choice of airline, it has even less of an effect on the decisions made by the. transferring passengers who constitute approximately 79% of Southern’s Atlanta enplanements.
One further disadvantage to a gate location on concourse D is the additional time necessary to accomplish the transfer of baggage to the airplane and the consequential potential for flight delay. The court concludes, however, that this additional time is insignificant, especially for a carrier like Southern which has a lower volume of traffic. In any event, any passenger inconvenience which may result from the delay of flights leaving from gates located on concourse D is somewhat offset by the distinct advantage enjoyed by the incoming traffic on concourse D relative to the boarding of the people mover. Since the passengers on concourse D are accorded the first opportunity to board the people mover, they are assured that there will be sufficient space in that vehicle to accommodate them. The passengers on the other three concourses, however, do not have that assurance. Also, concourse D possesses the advantage of providing the best location for future expansion. An airline located on that concourse can expand without destroying the contiguity of its facilities.
One final point should be noted concerning the differential in value of the various concourses. In order to reduce its amount of exclusive space and thereby its payments under the lease, Southern was permitted to change the configuration of the southern portion of concourse D. While the other concourses are rectangular in shape, the southern portion of concourse D is irregular. This fact, of course,' resulted in a higher cost of construction per square foot in concourse D. Under the City’s lease agreement, however, Southern does not bear the increased cost but, rather, it is distributed among all of the airlines. This fact alone accords Southern preferential treatment.
Turning now to the formulas employed to allocate the rental associated with the common space in the terminal and the cost of maintenance and operation, the court concludes that except for that part of those formulas which allocates 20% of the cost of maintenance and operation equally among the airlines, those formulas do not violate section 18(a)(1) of the Airport and Airway Development Act. As to the “20% equal” provision, however, this court concludes that in the circumstances of this case that provision is patently discriminatory and results in the small carriers, including Southern, being charged a rate not substantially comparable to that charged the two major airlines. The defendants attempt to support this part of the formula by asserting that it is a provision traditionally employed to charge to the various carrier tenants the cost of the privileges of use and availability. The court will agree with the defendants that a charge for such privileges is appropriate. The use of the “20% equal” provision, however, is unreasonable in the circumstances as they exist at the Atlanta airport.
The court’s conclusion is compelled by a consideration of the interaction of the substantial dollar amount which will be allocated pursuant to the “20% equal” provision and the extreme disparity in the ratio of passengers and exclusive space which exists between the two major carriers and the other carriers servicing the Atlanta airport. The evidence reveals that an initial projection of $1,300,000 in costs will be allocated equally among the airlines by virtue of the “20% equal” provision. By rough approximation, this allocation results in a $200,000 per year charge to each carrier. Of course, since the cost of maintenance and operation of the mid-field terminal facilities will escalate with time, so will the charges allocated on the basis of the “20% equal” provision.
The second factor considered by the court in reaching its conclusion is the extreme disparity in the percentage of passengers and the percentage. of exclusive space accorded the two major airlines and that accorded the other carriers at the Atlanta airport. The evidence establishes that based upon 1975 figures, Delta and Eastern. accounted for 86% of the traffic at the Atlanta airport. Not one of the other airlines had greater than 5% of the total 1975 Atlanta enplanements, and two of those carriers, Northwest and TWA, had less than 1% of those enplanements. In the proposed mid-field terminal complex, the two major carriers will occupy approximately 69% of the total exclusively leased area. With the exception of Southern, which will occupy approximately 11V2% of the total exclusively leased area, each of the other airlines occupy less than 8%-of the area. Again, two airlines, National and TWA, each occupy less than 2% of the total exclusively leased area. In view of these circumstances, the court concludes that the equal allocation of as high as 20% of certain costs of maintenance and operation is discriminatory and unreasonable and, therefore, violative of section 18(a)(1) of the Airport and Airway Development Act.
The court’s resolution of count one renders consideration of counts three, four, and five unnecessary. Count two, however, presents issues which, although somewhat similar to those presented by counts one, three, four, and five, require separate discussion. In count two plaintiff alleges that by requiring it to execute the lease agreement and accept the cost allocations used in fixing the rentals thereunder or be excluded from the mid-field terminal complex, the City has imposed an impermissible burden upon interstate commerce in violation of article I, section 8, paragraph 3 of the Constitution. In order to establish that a charge levied against an interstate carrier imposes such a burden, however, the plaintiff must show that it (1) discriminates against interstate commerce in favor of intrastate commerce, (2) is imposed on the privilege of doing interstate business as distinguished from being imposed for the use of facilities provided by the state, or (3) exceeds fair compensation to the state. Capitol Greyhound Lines v. Brice, 339 U.S. 542, 70 S.Ct. 806, 94 L.Ed. 1053 (1950). The only question presented by the case sub judice is whether the charges established in the City lease agreement are excessive in comparison with the governmental benefit conferred. It is well settled that in order to resolve this question, one must focus on the amount of the charge rather than its formula. Evansville-Vanderburgh Airport Authority District v. Delta Airlines, Inc., 405 U.S. 707, 92 S.Ct. 1349, 31 L.Ed.2d 620 (1972). If the amount of the charge “is based on some fair approximation of use or privilege for use,” it does not impose an impermissible burden upon interstate commerce. Id. at 716-17, 92 S.Ct. at 1355. After careful consideration, the court concludes that the charges levied in the instant case under the City’s lease agreement satisfy the Evansville Airport standard.
Much of the argument relating to the antitrust claim contained in count six of the amended complaint has centered on the relative applicability of the Noerr-Pennington doctrine and the state action immunity established in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). Since the court concludes that the plaintiff has failed to establish a conspiracy in restraint of trade, however, this court finds it unnecessary to consider the applicability of those principles to the circumstances presented in this case.
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6747920-26293 | SANBORN, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
A surety who guaranties by his bond the performance by his principal of the latter’s contract with the obligee is bound for the fulfillment of no new or modified agreement, and any material alteration of the bonded contract without his consent releases him from liability for its fulfillment. The wrongful surrender by the obligee in the bond of security for the performances of the guarantied obligation, without the knowledge of the surety, discharges him from liabilty therefor entirely or pro tanto, according to the value of the security thus surrendered. Brown v. First National Bank, 66 C. C. A. 293, 298, 132 Fed. 450, 455; Brown v. First National Bank, 112 Fed. 901, 904, 50 C. C. A. 602, 605, 56 L. R. A. 876; Bank v. Colcord, 15 N. H. 119, 41 Am. Dec. 685; Rogers v. School Trustees, 46 Ill. 428; Colebrooke on Collateral Securities (2d Ed.) § 239; Hays v. Ward, 4 Johns. Ch. (N. Y.) 123, 130.
By the terms of the lease, whose performance by the lessees was warranted by the bond in suit, the obligee in the latter granted to the tenants, the principals in the bond, the option to purchase the leased' premises for $120,000 at any time during the lifetime of the lease. The surety in the bond had the right to acquire and to exercise this option by discharging the obligations of the lessees to the investment company, the lessor, and by invoking the principle of subrogation. The surrender of leased premises by the tenants during the term of the lease and the acceptance of the property by the landlord, without a notice that the latter takes it and will hold and use it during the remainder of the term for the use and benefit of the tenants exclusively, closes the term of the lease, and destroys all rights conditioned upon its subsequent continuance. Prout v. Roby, 15 Wall. 471, 476, 21 L. Ed. 58; Watson v. Merrill, 136 Fed. 359, 362, 69 C. C. A. 185, 188, 69 L. R. A. 719. The term specified in the lease was to expire on September 12, 1905, and the lessees and their surety, if they fulfilled their covenants, had the right to purchase the property for $120,000 on or before that date. The surrender of the hotel by the tenants and its acceptance by the landlord on December 27, 1904, closed the term of the lease on that day, and deprived the lessees and the surety of the right to make that purchase thereafter.
The first and the chief complaint of counsel for the surety is that the court below refused to hold that this surrender, which was made and accepted without notice to the surety, discharged it from all liability under its bond. They argue with commanding ability and great force, and ingenuity that this surrender modified the terms of the lease and deprived the surety of the security of the right to purchase between December 27, 1904, and September 13, 1905, and that either effect was sufficient to release it. In support of this position they cite authorities which sustain the general rules of law which have already been stated, and Stern v. Sawyer (Vt.) 61 Atl. 36, where, without notice to the surety of the tenant, the landlord accepted a release of part of the leased premises which he sold for $2,250 and the lessee waived the performance of the lessor’s covenant to repair, Holme v. Brunskill, Daw Rep. 3 Q. B. D. 495, in which, without notice to the surety, the principal released a part of the demised premises to the lessor in consideration of a reduction of the rent ten pounds annually, Brandt on Suretyship & Guaranty, § 429, where a case is cited in which a yard, shed, and frame dwelling house were rented for $375 per month, and, without notice to the surety for the lessee, the latter surrendered the dwelling house to the landlord in consideration of a reduction of the rent for the remainder of the premises to $300 per month (Penn v. Collins, 5 Rob. [La.] 213), and Warren v. Lyons, 152 Mass. 310, 25 N. E. 721, 9 L. R. A. 353, in which there was a lease for a specified term for a rental of $108.30 per month, and a covenant by the lessee to pay the same rent as long as he held the premises after the expiration of the term, and before the term lapsed the lessor and the lessee, without notice to the surety of the latter, made a contract that after the expiration of the term the lessee should pay $100 per month while he occupied the property. In the case last cited the court held that the surety was not liable for the defaults of the lessee subsequent to the expiration of the term, because thereafter he was in possession under a new lease, and in the other cases the courts held that the sureties were discharged from liability. The case of Warren v. Lyons is not in point because there is no attempt to charge the defendants here with liability for any default under any new lease or under any contract different from that specified in their bond. All the breaches of covenant for which it is liable here occurred before the surrender of the premises. The other authorities cited fail to control this case because it falls without the rule of law which governs them. That rule is not that an enforcement, but that an alteration of the terms of a guarantied contract, without notice to the surety, discharges him. The case at bar is one of enforcement of the contract assured. Those cited are cases of material alteration of the terms of the guarantied agreements. In the three cases of partial release the lessees were not in default, and the lessors had no right to the releases. The lessees surrendered property which they had the undisputed right to hold during the term in violation of the terms of the original contracts. They modified the terms of the.leases by agreements with their lessors, and thereby made new leases without notice to the sureties. The sureties were discharged because the lessors and the principals made new contracts, not in the performance of the terms of the original agreements, but in conflict with them. It was not so in the case at bar. The lease guarantied by the surety here provided that, if the lessees made default in the performance of any of their covenants or agreements, the lessor might lawfully declare the term of the lease ended and repossess and enter the premises as in its first and former estate. On December 27, 1904, when the surrender was made, the lessees were in default in the fulfillment of their covenant to pay taxes, of their covenant to pay premiums on insurance, of their covenant to recarpet, and of their covenant to pay for the heating plant and the plumbing, so that the lessor had the undoubted right under the provisions of the lease to declare its term ended and to take possession of the property for itself. The fact that it exercised this right with the consent and at the request of the lessees, instead of forcibly and against their protest, cannot change its character or its effect. The surrender of the premises by the lessees and the acceptance of the property by the lessor, after the defaults of the former, were acts in exact accordance with, and in the performance of the terms of the guarantied lease. They worked no alteration or modification of that contract, and for that reason they did not release the surety.
And here is the answer, also, to the contention that this surrender deprived the sureties of the option to purchase after December 27, 1904. The right to exercise this option was by the express provisions of the contract limited-by the condition that the lessees should fulfill their covenants. It was granted during the lifetime of the lease only. The lifetime of the lease was conditioned, as we have seen, by the right of the lessor to end it whenever the lessees were in default in the per formance of any of their covenants. When the surrender occurred they had made defaults, the surety had been notified thereof more than four months before the surrender, and neither the lessees nor the surety had removed them. The only right of the surety to exercise the option was by subrogation to the rights of the lessees, and it could fise no higher than theirs. The lease expressly provided that after the default of the lessees the lessor might terminate it, and might thereby end the right of the lessees and of the surety to purchase. By the acceptance of the surrender it effected this termination. But this act deprived neither the lessee nor the surety of the security of any right to purchase, because that right was expressly limited by the condition that it should end whenever the lease terminated by reason of the default of the lessees and the retaking of the premises by the plaintiff.
There is another reason why this surrender faiied to discharge the surety. Its principals had failed to perform covenants of- the lease whose fulfillment it had warranted. It had received notice.of this fact four months before the surrender, and it had not discharged the broken obligations of the principals. The investment company had fulfilled all the terms of the contract which it had undertaken to perform. The principals in the bond and the surety had broken their covenants and the obligee had not, and the surety was aware of these facts. Now, although a surety is a favorite of the law and his liability may not be enlarged by construction nor extended without his consent by modifications of the guarantied contract, yet he, and not the obligee, covenants to pay and must respond for the damages caused by the defaults of his principals for which he promises indemnity. The contract of suretyship is not that the obligee will see that the principal pays his debt or fulfills his contract, but that the surety will see that the principal pavs or performs. Nelson v. First National Bank, 16 C. C. A. 425, 435, 69 Fed. 798, 807; Williams v. Lyman, 31 C. C. A. 511, 514, 88 Fed. 237, 241. The obligee does not represent to the surety that the principal will keep his covenants, but the* surety holds his principal out to the obligee, and represents and promises to him that the principal will perform his agreements. The surrender was the natural and lawful effect of the failure of the principals in this bond to keep the covenants which the surety warranted that they would fulfill and of the failure of the surety after notice to perform them for the principals. Even where one of two innocent parties must suffer from the wrongful act or default of a third, that one must bear the loss who intentionally or negligently enables the third party to cause it. The surety in the case in hand by the execution of its bond to the plaintiff gave a credit to the principals thereto and enabled them to hold the possession of this hotel for nearly two years and to incur the liabilities upon which this action is based, and to the amount of its bond it ought to bear the burden of the loss its action has occasioned, even if it had been innocent of default or wrong. A fortiori is it liable when it was itself in default for more than four months before the surrender occurred. “Where one of two innocent parties must lose, and one of them is in fault, the law throws the burden of the loss upon him.” Magee v. Manhattan Life Ins. Co., 92 U. S. 93, 98, 23 L. Ed. 699; Hearne v. Nichols, 1 Salk. 289. The result is that the surrender of the premises and the termination of the lease on December 27, 1904, when both the principals and the surety were in default in the performance of their covenants, did not discharge the surety from the obligation of the bond.
The lessees made agreements with a contractor, a corporation, for the heating plant and the plumbing specified in the lease. The contractor completed the improvements by September 22, 1903, but the lessees did not pay it for them, and on January 3, 1905, it recovered a judgment against them for $8,795.93, and á decree against them and the lessor to the effect that it held a lien upon the leased premises for $5,175 and interest from the date of the decree. The lessor paid the latter amount to the contractor on January 20, 1905, in order to discharge its property from the lien, and the court below held that it was entitled to recover this amount from the surety on the bond. Counsel for the defendant contend that this was an erroneous ruling, and insist that the surety is not liable for this amount (1) because there was no express agreement in the lease that the lessees would pay for the heating plant and the plumbing which they agreed to furnish as part of their rent; (2) because the lease contained their express promise to give a bond with a surety conditioned to pay for the material and labor used in these improvements, and this. stipulation excludes any implication of any other'contract to pay for them (Hawkins v. U. S., 96 U. S. 689, 698, 24 L. Ed. 607); and (3) because the contract of the surety must be strictly construed, and may not be enlarged by construction or implication (U. S. v. National Surety Co., 92 Fed. 549, 550, 34 C. C. A. 526, 527).
The legal effect of the contract between the plaintiff, on the -one hand, and the lessees and their surety, on .the other, that the latter will pay for the labor done and the material furnished in making the improvements, is the same as the legal effect of a contract between them that the latter will indemnify the former against liens for such labor and materia!, or that they will pay for them, to the end that no liens shall be placed upon the property. The only damages which the plaintiff could recover under the first contract are those which it might sustain by the fastening of liens upon its property, and'no one who performed work or furnished material could recover of the surety under either becaus.e he would be a stranger to each and would have no interest therein. As the distinction between contracts with owners of property to pay for work done and materials furnished to improve,,it and contracts to protect them against liens upon it is not material in the case in hand, it will not be further noticed in the discussion which is to follow.
A surety is never liable beyond the strict terms of his contract. His obligation may not be extended by construction or by implication. On^ the other hand, it may not be reduced or destroyed thereby. His agreement, like other contracts, must have a rational .construction, an interpretation which, while it carefully restricts his liability to that which he agreed to undertake, does not fail to hold him to that liability which, by the plain terms of his agreement, he promised to assume. Written language has the same significance, and its meaning must be ascertained by the same rules of law when it is found in the contract of a surety as when it appears in other agreements. National Surety Co. v. U. S., 63 C. C. A. 512, 514, 129 Fed. 70, 72; U. S. Fidelity & Guaranty Co. v. Board of Commissioners of Woodson County, 145 Fed. (C. C. A.) 141, 148; Stearns on Law of Suretyship, p. 18; Belloni v. Freeborn, 63 N. Y. 388; Wills v. Ross, 77 Ind. 1, 40 Am. Rep. 279.
This bond recites the fact that the lease has been made, and that the lessees “in lieu of a fixed rental for the said property are to do and perform certain things in the way of putting the said hotel in first class repair, adding steam heating and electric light plant thereto, and make certain payment of taxes and insurance, to which said lease reference is hereby made for the purpose of ascertaining in detail the exact obligations assumed by the said lessees thereunder”; and it is conditioned that the lessees shall “well and truly perform the obligations by them assumed under the said lease to the true intent and meaning thereof.” The legal effect of these terms of the bond is to embody the entire lease therein to the same extent as if it had been literally written into it and to bind the surety not by implication, but, by the express terms of the bond, to indemnify the lessor against all loss it sustains by the failure of the lessees to perform any of the obligations which they assumed under the true intent and meaning of the lease. This conclusion is not inconsistent with the excerpt cited by counsel from Stearns on Law of Suretyship (section 143), that, “if the main contract is broader in its scope than the limits fixed in the bond, a reference to the contract will only incorporate so much of the same as is within the limits of the terms of the bond,” because Ac main contract is not broader in its scope than the limits fixed by this bond which by its plain terms guaranties the performance of every obligation assumed by the lessees by means of the lease. The question then becomes: Was it the true intent and meaning of the lease that the lessees should pay to their lessor their rent for the hotel by putting new plumbing and a new heating plant therein at their own expense or at the expense of the lessor? Was it that they should pay the rent they agreed to give to their lessor or that the latter should pay this rent to itself? The question seems to admit of but one answer. But counsel for the surety present ingenious arguments and persuasive authorities in support of their contention that the effect of the contract was that the lessor must pay for these improvements. Electric Appliance Co. v. U. S. Fidelity & G. Co. (Wis.) 85 N. W. 648, 53 L. R. A. 609; Dunlap v. Eden (Ind. App.) 44 N. E. 560; City v. Wolf (Ill.) 45 N. E. 218; Boas v. Maloney (Cal.) 70 Pac. 1004; Gato v. Warrington (Fla.) 19 South. 883. The crucial question in the first three cases was whether or not a laborer or materialman could recover upon a bond given to the owner of the property conditioned for the faithful performance by the contractor of his agreement to furnish the necessary labor and material for the improvement, and it was answered in the negative, as it -would be if such a plaintiff bought an action of this character upon the bond in suit upon the ground that the bond was not given for the benefit of the laborer or materialman, and that he had no interest in it. This question is not presented in the case at bar, and these authorities do not rule this case. In the last two cases the Supreme Courts of California and Florida decided that the owner of property who had made a contract with a builder to furnish the necessary work and material to erect and to complete a structure according to plans and specifications could not recover of a surety upon a bond for the performance of the obligations of the contractor the amounts which he was compelled to pay to discharge liens upon his property for the work and material which the contractor had agreed to furnish, upon the ground that, while the contractor agreed to furnish, he did not agree to pay for this work and material, notwithstanding the fact that the owner contracted to pay, and did pay to the builder a price commensurate with the value of the finished structure and of all the work and material therein. The effect of these decisions is that an agreement to furnish work and material to the owner of property for a price paid which is commensurate with the full value thereof is performed when the contractor furnishes the work and material at the expense of the owner, so that the latter is compelled to pay for them twice while the former gets the price for little or nothing. This view failed to commend itself to the Supreme Courts of Indiana and Kentucky, and they held that an agreement to furnish was an agreement to pay for such work and material, and that the owner of the property was entitled to recover of the surety the moneys paid to discharge liens there for under a similar contract and bond. Mackenzie v. Board of School Trustees, 72 Ind. 189, 196; Mayes v. Lane (Ky.) 76 S. W. 399, 400. Which is the true construction?
Counsel call attention to the stipulations in the lease to the effect that the lessees would give a bond with a satisfactory surety for the performance of their obligations, and that they should pay for the work and material employed in the improvements they agreed to furnish, and to the fact that the bond in suit is conditioned for the performance of all the obligations of the lessees only, and does not contain the additional condition that they shall pay for the work and material. They invoke the rules that an express agreement relative to-a subject-matter excludes any implied contract concerning it, and that every contract is presumed to contain the entire agreement of the parties, and from these premises they argue that no agreement by the lessees to pay for the work and labor other than the bond may be deduced from the lease, and that, inasmuch as the condition that the lessees shall pay for the work and labor is not found in the bond, the surety is not bound to indemnify against the failure of the lessees to-make such payments. But the stipulation for the bond is a mere contract for additional security for the performance of obligations assumed by the lessees by the other terms of the contract. One who makes a written contract to pay money or to perform any act does not revoke his agreement or renounce his obligations thereunder by inserting in the contract a further agreement to give security for its performance. Moreover, the omission from the bond of the condition that the lessees should pay for the work and material is of no importance, because by the express terms inserted in the bond the surety guarantied the performance of every obligation which the lessees assumed under the lease. If one of their obligations thereunder was to pay for the work and material, the surety agreed to indemnify the lessor for a failure of the lessees to perform this obligation. If this was not one of their obligations, the surety is not liable for their failure to perform. If no bond whatever had been given, and if the surety had merely indorsed upon the lease for a valuable consideration its guaranty of the performance by the lessees of their obligations thereunder, it would certainly have been liable for a default in the performance of any one of them, and this is the exact liability which it agreed to assume by the plain terms of its bond. The decisive question then recurs — did the lessees agree by the express terms of their lease to pay for the labor and material employed in the construction of the heating plant and in the renewing of the plumbing which they undertook to furnish as a part of their rent? The soundness of the rules of construction and of law which counsel for the surety cite is not denied. But the only purpose of rules of interpretation is to ascertain the intention which the parties to an agreement expressed by their writing, and, when that intention shines forth from the words of the agreement or is lawfully ascertained therefrom, rules of construction are unavailing to defeat its proper enforcement. The purpose of every agreement is to record the intention of the parties. The object of all construction is to ascertain that intention from the writing and to enforce it. Rules of construction more fundamental, more general in their application, and not less authoritative than those cited by counsel for the defendant are:
The court should so far as possible put itself in the place of the parties when their minds met upon the terms of the agreement, and then from a consideration of the writing itself, of its purpose and of the circumstances which conditioned its making, endeavor to ascertain what they intended to agree to do, upon what sense and meaning of the terms thev used their minds actually met. Accumulator Co. v. Dubuque St. Ry. Co., 12 C. C. A. 37, 41, 42, 64 Fed. 70, 74; Salt Lake City v. Smith, 104 Fed. 457, 462, 43 C. C. A. 637, 643; Fitzgerald v. First National Bank, 52 C. C. A. 276, 284, 114 Fed. 474, 482.
That intention must be deduced, not from specific provisions or fragmentary parts of the instrument, but from the entire agreement, because the intent is not evidenced by any part or stipulation of it, nor by the instrument without any part or provision, but by every part and term so construed, if possible, as to be consistent with every other part and with the entire agreement. Jacobs v. Spalding, 71 Wis. 177, 188, 36 N. W. 608; Boardman v. Reed, 6 Pet. 328, 8 L. Ed. 415; Canal Co. v. Hill, 15 Wall. 94, 21 L. Ed. 64; O’Brien v. Miller, 168 U. S. 287, 297, 18 Sup. Ct. 140, 42 L. Ed. 469; Pressed Steel Car Co. v. Eastern Ry. Co., 57 C. C. A. 635, 637, 121 Fed. 609, 611; Uinta Tunnel, etc., Co. v. Ajax Gold Min. Co., 141 Fed. 563, 73 C. C. A. 35; U. S. Fidelity & G. Co. v. Board of Com’rs (C. C. A.) 145 Fed. 144, 148.
Where the language of an agreement is contradictory, obscure, or ambiguous, or where its meaning is doubtful, so that the contract is fairly susceptible of two constructions, one of which makes it fair, customary, and such as prudent men would naturally execute, while the other makes it inequitable, unusual, or such as reasonable men would not be likely to enter into, the interpretation which makes it a rational and probable agreement must be preferred to that which makes it an unusual, unfair, or improbable contract. Pressed Steel Car Co. v. Eastern Ry. Co., 57 C. C. A. 635, 637, 121 Fed. 609, 611; Coghlan v. Stetson (C. C.) 19 Fed. 727, 729; Jacobs v. Spalding, 71 Wis. 177, 186, 36 N. W. 608; Russell v. Allerton, 108 N. Y. 288, 292, 15 N. E. 391.
The intention of the parties when manifest, or when ascertained from the written agreement in accordance with the basic rules of interpretation, must control and be enforced without regard to inapt expressions and technical rules of interpretation, unless that intention is directly contrary to the plain sense of the binding words of the agreement. Prentice v. Duluth, etc., Forwarding Co., 7 C. C. A. 293, 298, 58 Fed. 437, 443; Westervelt v. Mohrenstecher, 22 C. C. A. 93, 95, 76 Fed. 118, 121; Tillitt v. Mann, 104 Fed. 421, 424, 43 C. C. A. 617, 619; Salt Lake City v. Smith, 43 C. C. A. 637, 643, 644, 104 Fed. 457, 462; Uinta Tunnel, etc., Co. v. Ajax Gold Min. Co., 141 Fed. 563, 567, 73 C. C. A. 35; U. S. Fidelity & G. Co. v. Board of Com’rs (C. C. A.) 145 Fed. 144, 148; Witt v. Railway Co., 38 Minn. 122, 127, 35 N. W. 862; Driscoll v. Green, 59 N. H. 101; Johnson v. Simpson, 36 N. H. 91; Walsh v. Hill, 38 Cal. 481, 486, 487.
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479337-8142 | PER CURIAM:
While a pre-trial detainee, John H. Gordon filed this action under 42 U.S.C. § 1983 against Jack Watson, III, a Florida assistant state attorney, and George Cansler, the Director of the Volusia County Jail Department of Corrections. Gordon’s complaint and amended complaint alleged that he was subjected to punitive confinement after complaining to a judge that Watson and Cansler had denied him telephone privileges. The district court granted summary judgment for the defendants, ruling that “there is no issue of fact as to punitive confinement” and that the denial of Gordon’s access to the telephone did not violate his constitutional rights. Because we find that the proffered materials are insufficient to support the grant of summary judgment, we vacate and remand.
Gordon had been in custody at the Volusia County Jail since February 1978, when he failed to post bond on an arrest for possession of a controlled substance. On March 4 or 5, according to Gordon’s allegations, Gordon was denied visitors and perhaps telephone privileges. On April 5, 1978, the Volusia County grand jury returned a four-count indictment against Gordon for first degree murder, conspiracy to commit murder, possession of a firearm by a convicted felon, and use of a firearm in the commission of a felony. On April 6, Gordon was brought before a judge to be formally arrested on the above charges. At that hearing, he complained to the judge that Cansler, under the direction of Watson, had denied him telephone privileges.
When Gordon returned to the Volusia County Jail that day, Cansler, at Watson’s request, moved Gordon to the Volusia County Annex facility and limited Gordon’s access to the telephone, allowing him to call only his attorney. The next day (April 7), Cansler, again at Watson’s direction, moved Gordon from the annex back to the main facility of the Volusia County Jail, where he once again had access to the telephone.
On April 13 Gordon filed this complaint. Pursuant to court order, he amended his complaint on May 12 to allege that he had been “subjected to punitive confinement and isolation confinement and [had been] placed in the hole after telling Judge Griffin of the denial of phone call [sic] by officers under George Cansler by order of Jack Watson.” He sought release from maximum security confinement, some contact visits, rules to protect other prisoners, and $300,000.00 in damages. By the time of the amended complaint (and perhaps as early as April 7) and until August 18, Gordon was incarcerated in a number of one-man cells. Over the next several months he was transferred several times back and forth between the Volusia County Jail and a state correctional facility, where he now remains. He was confined at various times in both one-man cells and so-called “population” cells during his remaining confinement at the Volusia County Jail.
After he had filed the amended complaint, Gordon moved for an order seeking his release from maximum security. The defendants filed a response to the motion, verified by Edward Froman, a Lieutenant in the Volusia County Jail and acting Chief Correctional Officer, which stated that Gordon was being held in one-man cells “due to the seriousness of the convictions and the pending charges.” Before the court ruled on the motion, Watson and Cansler moved for summary judgment, attaching affidavits of Watson and Froman. Watson’s affidavit stated that he had restricted Gordon’s telephone privileges because he was afraid that Gordon would call certain persons in possession of, or with access to, instrumentalities of the first-degree murder charge, which they might then destroy or conceal. On April 6, the affidavit continued, Watson believed he would be able to get an immediate court order restricting Gordon’s phone calls to his attorney. The next day, after researching the issue, Watson determined that such an order was unlikely and he ordered that Gordon be moved back into the county jail facilities, with telephone privileges restored. Froman’s affidavit purported to incorporate his earlier verified response to Gordon’s motion, in which he had stated that Gordon was incarcerated in one-man cells due to the seriousness of his crimes. It also recited the frequency of the telephone calls Gordon was allowed to make.
The court did not rule on the summary judgment motion but ordered the defendants to file an answer to Gordon’s amended complaint. In their answers, defendants renewed their motions for summary judgment, attaching Cansler’s affidavit stating that the entire jail is a maximum security institution, enumerating the cells in which Gordon was housed during his incarceration there, and averring that no cell in the institution is known as “the hole.”
Gordon filed no responsive affidavits. Instead, he filed an unsworn, unverified document styled “Answer to defendants Motion for Summary Judgment and Answer to Amended Civil Rights Complaint.” He asserted that Watson never sought to obtain the order restricting Gordon’s phone calls and as a skilled prosecutor knew that he had no grounds to obtain one. He also stated that Watson’s conjecture that Gordon’s friends would destroy or conceal evidence was totally without merit because Gordon’s house had already been searched. The answer further contended that the defendants had not shown that Gordon was the only one in jail charged with so serious a crime or that he had broken any rule of the facility. In particular, he objected to being placed in one-man cells, in which he was confined from March until August 1978.
In granting the defendants’ motions for summary judgment, the district court relied on the affidavits of Watson and Cansler to conclude that there was no issue of fact as to punitive confinement. The court further found that the curtailment of Gordon’s access to the telephone for two days was not a constitutional violation because “plaintiff was then represented by counsel, the restriction was for a short period of time, and the plaintiff had ample access to the telephone prior to and subsequent to the brief period of restricted access.” In view of the further fact that Gordon was never denied telephone access to his counsel we agree that any deprivation was slight indeed. However, the unresolved factual basis for the constitutional issue is not the extent of deprivation, but whether the slight was deliberately imposed as punishment for bringing his condition to the attention of the court. This is not addressed by the affidavits supporting summary judgment.
The punitive confinement issue has two parts: Gordon’s transfer to the annex on April 6 and 7, and his confinement in one-man cells from April 7 to August 18. Watson’s affidavit responded to Gordon’s allegation that the transfer was for punitive reasons by demonstrating the legitimate administrative reasons for the transfer. Froman’s affidavit, on the other hand, establishes that the defendants had legitimate, non-punitive reasons for confining Gordon in one-man cells rather than populated cells only to the extent that it incorporates his earlier verified response. Under the provisions of Rule 56, however, “[s]worn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith.” No such copy was attached to Froman’s affidavit, so the materials that may permissibly have been considered on summary judgment did not resolve the issue of the motive for Gordon’s confinement in one-man cells. In certain circumstances a verified pleading may itself be treated as an affidavit in support of a motion for summary judgment, but only if it satisfies the standards for affidavits set out in Rule 56(e). Fowler v. Southern Bell Tel. & Tel. Co., 343 F.2d 150, 154 (5th Cir. 1965). Froman’s verified response would not satisfy those requirements because it does not affirmatively show that he is competent to testify to the matters stated therein or that the facts are based on Froman’s personal knowledge. It was therefore error for the district court to grant summary judgment for the plaintiffs on the punitive confinement issue.
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1365994-12291 | ALVIN B. RUBIN, Circuit Judge:
The suit of a former Internal Revenue Service employee who contends that the government discriminated against him based on his Mexican national origin was dismissed for lack of subject matter jurisdiction on the ground that the employee failed to bring his complaint to the attention of the Equal Employment Opportunity [EEO] counselor within thirty calendar days as required by the federal nondiscrimination regulations. Concluding that the failure to give timely notice does not deprive the court of subject matter jurisdiction, but raises instead issues that the parties should be given an additional opportunity to address, we reverse the dismissal and remand for further proceedings.
In McArthur v. Southern Airways, Inc., 569 F.2d 276 (5th Cir. 1978) (en banc), we stated that the failure timely to file an administrative complaint with the Equal Employment Opportunity Commission [EEOC] deprives the court of subject matter jurisdiction. The trial court and the parties understandably followed that statement. However, we have now rejected this doctrine and overruled any inference in McArthur that the Title VII time period for filing a discrimination charge with the EEOC implicates the subject matter jurisdiction of the court. Coke v. General Adjustment Bureau, Inc., 640 F.2d 584, 591 n.14 (5th Cir. 1981) (en banc) [case involving the Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621 et seq. (1975)]. See McArthur v. Southern Airways, Inc., 569 F.2d 276, 278-81 (5th Cir. 1978) (Rubin, J. & Vance, J., dissenting).
Although the failure timely to notify the appropriate administrative authority of a discrimination complaint against a federal agency may bar the claim, tardy notification does not deprive the court of jurisdiction of the subject matter, Coke v. General Adjustment Bureau, Inc., 640 F.2d 584 (5th Cir. 1981) (en banc), but instead results in dismissal because the claim lacks merit. Lack of timeliness in notifying the EEO counselor or in filing a written administrative complaint may be waived, 29 C.F.R. § 1613.214(a)(4) (1980), formerly 5 C.F.R. § 713.214(a)(4) (1978), or the commencement of the running of the time period may be subject to equitable delay until the claimant knew or should have known the facts that would give rise to his Title VII claim. Chappell v. Emco Machine Works Co., 601 F.2d 1295, 1303 (5th Cir. 1979); Bickham v. Miller, 584 F.2d 736 (5th Cir. 1978) (federal employee case); Reeb v. Economic Opportunity Atlanta, Inc., 516 F.2d 924 (5th Cir. 1975). See also Cooper v. Bell, 628 F.2d 1208, 1212-14 (9th Cir. 1980) (federal employee case). We apply these principles to the facts that the employee, Mr. Oaxaca, might have proved as shown by the pleadings and Oaxaca’s affidavit without at this time attempting to determine the merits of Oaxaca’s claim.
Oaxaca, a Mexican-American, had been a GS-9 Auditor with the Army Audit Agency when he resigned that position to enter law school. He sought nighttime employment with the IRS by telephone, but was told he would.have to take an examination. Both on the phone and at the time Oaxaca took the examination he explained to the IRS representatives that he was a former Civil Service employee with reinstatement rights, but he was informed that he was nevertheless required to take the examination. He passed the examination and was employed part-time by the IRS with a GS-2 classification from March 21, 1977, through May 1, 1977. He applied for a tax examiner’s position with a GS-6 rating but limited his application to a position on the four hour night shift. No positions were filled for that shift during the next filing season. On July 25, 1977, Oaxaca’s IRS supervisor prepared a performance evaluation giving him a composite score of eighty-four. The supervisor gave him no credit for his prior Civil Service experience because the IRS Service Center gave credit only for prior experience at the Service Center. Although Oaxaca had moved to a new address and had informed the IRS of his change of address, notice of the evaluation was mailed to his old address. Oaxaca contends that he did not receive it.
On April 10, 1978, Oaxaca returned to work at the IRS in his former GS-2 position. That same day he inquired about his performance evaluation and his application for the tax examiner’s position. He was informed of his performance evaluation score and that he had not been promoted to the higher rated GS-6 position, but was not informed that the IRS had not filled any positions on the shift he had requested. On April 18, within thirty days of the date he returned to work, Oaxaca notified the EEO counselor that he thought the supervisor discriminated against him in failing to give him the credit due him for his prior Civil Service experience and that the failure of the agency to place him initially in a position with a higher rating as well as the failure to promote him to such a position resulted from discrimination against Oaxaca due to his national origin. Thereafter, he timely filed a formal administrative complaint. Because 180 days had elapsed since Oaxaca filed his administrative complaint and no final agency decision had been rendered, Oaxaca filed this suit in district court. See Section 717(c) of Title VII, 42 U.S.C. § 2000e-16(c) (1972), and 29 C.F.R. § 1613.281 (1980), formerly 5 C.F.R. § 713.-281 (1978). After the district court made its determination that subject matter jurisdiction was lacking and dismissed the claim, Oaxaca was notified that the final agency action on his administrative claim was a finding of no discrimination.
Federal law forbids discrimination in all personnel actions affecting federal employees or applicants for employment. Section 717(a) of Title VII, 42 U.S.C. § 2000e-16(a) (1972). The Civil Service Commission previously had the authority, now vested in the EEOC, to enforce the statute and to issue rules and regulations necessary and appropriate to carry out its responsibilities. Section 717(b) of Title VII, 42 U.S.C. § 2000e-16(b) (1972). The regulations require complaints to be submitted in writing and permit an agency to “accept the complaint for processing ... only if ... [t]he complainant brought to the attention of the Equal Employment Opportunity Counselor the matter causing him to believe he had been discriminated against within 30 calendar days of the date of that matter.... ” 29 C.F.R. § 1613.214(a)(1) (1980), formerly 5 C.F.R. § 713.214(a)(1) (1978).
Although Oaxaca did not comply with the thirty-day notice requirement, in other respects he has complied with the regulatory and statutory procedures. He contends that, by accepting and processing his complaint, the agency defendant waived its objection to his failure timely to give notice.
The regulations allow the government agency to extend the thirty-day limit for notification under certain circumstances. 29 C.F.R. § 1613.214(a)(4) (1980), formerly 5 C.F.R. § 713.214(a)(4) (1978), provides:
The agency shall extend the time limits in this section : (i) When the complainant shows that he was not notified of the time limits and was not otherwise aware of them, or that he was prevented by circumstances beyond his control from submitting the matter within the time limits; or (ii) for other reasons considered sufficient by the agency, (emphasis added.)
Based on this regulation, we concluded in Huntley v. Department of HEW, 550 F.2d 290, 295 (5th Cir. 1977), that, once the government agency accepts a complaint and acts on it, the time limit mentioned in the regulation for making a complaint to the EEO office of that agency is not mandatory. While this statement in Huntley is unqualified, the agency in that case had not only investigated the complaint but had determined that the complainant had been the victim of discrimination. We think that the Huntley holding is limited to the situation in which the agency has in fact made a finding of discrimination, and we reject Oaxaca’s contention that the federal agency, by merely accepting and investigating a tardy complaint, automatically waives its objection to the complainant’s failure to comply with the prescribed time delays.
In Bickham v. Miller, 584 F.2d 736 (5th Cir. 1978), we again considered the thirty-day limitation applicable to federal employee administrative complaints. The district court had granted the defendant’s motion to dismiss because plaintiff did not submit an administrative complaint within thirty days of the alleged discriminatory promotion denial. The opinion in Bickham does not indicate whether the agency had in fact processed the tardy complaint. Therefore, this court’s affirmance of the district court’s dismissal for what it called “lack of jurisdiction” in Bickham is not necessarily inconsistent with the Huntley holding, although Bickham does not cite Huntley.
Bickham also discusses the possibility of an equitable delay in the commencement of the running of the thirty-day period, applying the principle adopted in Reeb v. Economic Opportunity Atlanta, Inc., 516 F.2d 924 (5th Cir. 1975). Reeb involved a private sector employee who failed timely to file a charge with the EEOC. Reeb holds that the time period for filing an EEOC complaint does not begin to run until the facts that would support a charge of discrimination would have been apparent to a person with a reasonably prudent regard for his rights, situated similarly to the plaintiff. Reeb v. Economic Opportunity Atlanta, Inc., 516 F.2d at 931. Applying the Reeb rule, the Bickham court held that the employee should have investigated the cause of the denial of promotion and thus the thirty-day time period began to run at the time she learned of the denial of her application for promotion, not five months later when she discovered that no woman had served on the promotion evaluation committee. Bickham v. Miller, 584 F.2d at 738. See Cooper v. Bell, 628 F.2d 1208, 1213 (9th Cir. 1980) (applying equitable tolling for federal employee filing period).
The district court in this case did not cite Huntley but did apply .the Bickham-Reeb test. It determined that Oaxaca “should have investigated the cause of his being assigned a lower Civil Service rating than he felt he was entitled to and the cause of his nonpromotion at the time those events occurred.” This determination was, how ever, reached based on allegations in the pleadings and Oaxaca’s affidavit without taking testimony.
We have held that the time limits in Title VII for giving notice or filing an administrative complaint are subject to equitable tolling. Chappell v. Emco Machine Works Co., 601 F.2d 1295 (5th Cir. 1979); Reeb v. Economic Opportunity Atlanta, Inc., 516 F.2d 924 (5th Cir. 1975). In Bickham v. Miller, 584 F.2d 736 (5th Cir. 1978), we applied the Reeb holding, which permits an equitable delay in the commencement of the running of the time period under certain circumstances, to a case involving a federal agency employee. See Cooper v. Bell, 628 F.2d 1208, 1213 (9th Cir. 1980) (equitable delay theory applied in ease involving federal employee). We have made it clear in Coke that it is a misnomer to consider these time limits, even when applicable, as involving the subject matter jurisdiction of the court. Coke v. General Adjustment Bureau, Inc., 640 F.2d at 591 n.14. Properly evaluated, they relate to the merits .of the complaint. McArthur v. Southern Airways, Inc., 569 F.2d 276, 278-81 (5th Cir. 1978) (Rubin, J. & Vance, J., dissenting).
The regulation, moreover, requires that the agency “shall” extend the time.limits when the complainant shows that he was not notified of them and was not aware of them. See Bragg v. Reed, 592 F.2d 1136 (10th Cir. 1979); Ettinger v. Johnson, 518 F.2d 648 (3d Cir. 1975), 556 F.2d 692 (3d Cir. 1977). The government concedes in oral argument that the IRS did not notify Oaxaca of the time limits. He should be given the opportunity to show that he was not aware of them, despite his government employment and his education, and the government should be given an opportunity to prove his awareness. Similarly, Oaxaca should be given a chance to establish facts that may entitle him to an equitable tolling or delay in the commencement of the running of the thirty-day time period.
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3587257-9043 | OPINION & ORDER
AQUILINO, Senior Judge:
U.S. Customs and Border Protection (“CBP”) classified certain merchandise derived from veal, chicken, duck, lamb, beef, fish, lobster, mushroom or vegetable stock under subheading 2104.10.00 (“Soups and broths and preparations therefor . . . Other”) of the Harmonized Tariff Schedule of the United States (“HTSUS”) (2001) arid imported from France by Aromont USA, Inc., which protested that classification, taking the position that those goods should have been classified under subheading 2106.90.99, covering “Food preparations not elsewhere specified or included . . . Other”. Upon denial of the protest after liquidation of duties , the plaintiff commenced this case, and, following joinder of issue, the defendant interposed a motion for summary judgment of dismissal. The plaintiff has responded with a cross-motion for summary judgment on its behalf.
Jurisdiction of the court is pursuant to 19 U.S.C. §1581(a) and 28 U.S.C. §2631(a).
I
The import, of course, of a motion for summary judgment is that there is no genuine issue of material fact that requires trial within the meaning of USCIT Rule 56 and teaching of Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Here, the parties’ papers in support of their cross-motions do not lead this court to conclude otherwise. Indeed, the plaintiff admits defendant’s description of the preparation if not nature of the products at issue, which are listed in its Exhibit A , to wit:
(a) First, Aromont ran the bones through the “guillotine” to cut them into small sizes.
(b) Next, Aromont fe0.d the bones directly into cookers, or the bones were roasted.
(c) The bones were then simmered for a long period of time.
(d) The resulting “classical stock” had the fat skimmed off and the bones and other sediment removed. The resulting mixture was a “clear richly flavored broth that [was] then reduced to a rich honey like consistency.”
(e) The honey paste was then pumped into mixing and packing machines.
16. There is no difference between the merchandise Aromont marketed as “demiglaces” and those it marketed as “stocks.”
17. With the exception of the vegetable varieties, Aromont’s “stocks” were prepared in the exact same manner.
A
The primary thrust of plaintiff’s protest to CBP, and now on appeal to this court, is that two rulings it obtained earlier from Customs, namely NY800645 (Aug. 26, 1994) and HQ957024 (March 3, 1995) , should have led the agency to the classification preferred herein. They did not. Nor can this court conclude otherwise now. The Service’s ruling practice and procedure published at the time of entry were in pertinent part:
Tariff classification rulings. Each ruling letter setting forth the proper classification of an article under the provisions of the [HTSUS] will be applied only with respect to transactions involving articles identical to the sample submitted with the ruling request or to articles whose description is identical to the description set forth in the ruling letter.
19 C.F.R. §177.9(b)(2) (2001). NY800645 describes one of Aromont’s proffered substances as a beef flavoring in powder form without the use of beef extract. As for the other substances referred for ruling, all liquids, Customs found:
1) Veal flavoring - contains veal extract, veal fat, concentrates of carrot, onion, leek, tomato, garlic and mushroom, olive oil, sunflower oil, glucose, dextrine and other ingredients.
2) Chicken flavoring - contains chicken extract, chicken fat, duck extract, egg yolk, concentrates of carrot, onion and leek, olive oil, sunflower oil, glucose, dextrine and other ingredients.
3) Duck flavoring - contains duck extract, duck fat, sunflower oil, glucose, dextrine, and other ingredients.
4) Lamb flavoring - contains lamb extract, lamb fat, concentrates of carrot, onion, leek and garlic, olive oil, sunflower oil, glucose, dex-trine, and other ingredients.
5) Fish flavoring - contains fish extract, chicken fat, seafood extract, concentrates of carrot, onion and shallot, sunflower oil, glucose, dextrine, and other ingredients.
6) Lobster flavoring - contains fish extract, lobster extract, chicken fat, seafood extract, concentrates of carrot, onion, tomato and shallot, sunflower oil, glucose, dextrin and other ingredients.
7) Beef flavoring - contains glucose, dextrine, autolysed yeast, soya lecithin, salt and other ingredients.
On its face, this description is not “identical” to the description of plaintiff’s merchandise currently at bar, either as admitted by it with regard to defendant’s statement of undisputed material facts, supra, or in its own statement or pleadings. Cf. Plaintiff’s Complaint passim and its Counter Statement of Undisputed Facts, paras. 3-8. Hence, the requirement of section 177.9(b)(2) is not satisfied, nor is the other requirement of that section met in the papers before this court. That is, they do not show that plaintiff’s present products are “identical” to the samples upon which Customs made its findings in NY800645 and recited above.
B
The first general rule of interpretation of the HTSUS is that classification shall be determined according to the terms of its headings and any relative section or chapter notes. In this case, the defendant stands by CBP’s classification of plaintiff’s goods as “broth” eo nominee heading 2104., But it correctly notes that that term is not defined in the HTSUS. Hence, the common and commercial meaning is presumed. See, e.g., Brookside Veneers, Ltd. v. United States, 847 F.2d 786, 789 (Fed.Cir. 1988). See also E.M. Chemicals v. United States, 920 F.2d 910, 913 (Fed.Cir. 1990) (“[t]ariff terms are to be construed in accordance with their common and popular meaning, in the absence of a contrary legislative intent”).
The defendant relies on a dictionary definition of “broth”, to wit, a “liquid in which meat, fish, cereal grains, or vegetables have been cooked”. Defendant’s Memorandum, p. 11, quoting from Webster’s Third New International Dictionary, Unabridged (1981 ed.). While obviously broad, this definition does not capture the essence of plaintiff’s “concentrated” products, the processing of which results in “a rich honey like consistency” or “honey paste”. CPB’s National Import Specialist refers to “reduction] to 70% solids.” Defendant’s Exhibit I, para. 7. Whatever the precise percentage, it does not connote the degree of liquidity or fluidity forever expected of a broth. To quote the paragon American lexicon, broth is
[l]iquid in which meat, and often barley, rice, vegetables, or the like, have been gently boiled; thin or simple soup.
Webster’s New International Dictionary of the English Language, Unabridged, p. 343 (2d ed. 1934). See also Plaintiff’s Reply Memorandum, Exhibit B, first page. To recite from Plaintiff’s Counter Statement of Undisputed Facts:
11. Aromont stocks are made from roasting bones; whereas broths are made from cooking meat in water.
12. The Aromont flavorings are physically different from broths in that they contain much less salt and are much more gelatinous.
13. The Aromont flavorings are not finished products, whereas broths are capable of being consumed.
14. Aromont is not aware of any of its customers using the products at issue as a finished soup or finished broth.
15. The largest customers of the Aromont flavorings at issue use the products as ingredients for gravies, sauces and salad dressings.
Defendant’s classification under HTSUS subheading 2104.10.00 (“Soups and broths and preparations therefor”) encompasses not only elements eo nominee but also use. And,
in the absence of legislative intent to the contrary, a product described by both a use provision and an eo nominee provision is generally more specifically provided for under the use provision.
United States v. Siemens Am., Inc., 653 F.2d 471, 478 (CCPA 1981). The latter such provision in 2104.10.00, as well as in plaintiff’s preferred 2106.90.99, is “preparations”, which is not defined in the HTSUS. However, inherent in the term is an expectation of specific use. See, e.g., Orlando Food Corp. v. United States, 140 F.3d 1437, 1441 (Fed.Cir. 1998), citing the definition of “preparation” in 12 The Oxford English Dictionary, p. 374 (2d ed. 1989), namely, “a substance specially prepared, or made up for its appropriate use or application, e.g. as food or medicine”.
Proper classification turns on the principal use of subject merchandise. See, e.g., Clarendon Mktg., Inc. v. United States, 144 F.3d 1464, 1467 (Fed.Cir. 1998) (holding the principal use of the class is controlling, not the principal use of the specific import). Additional U.S. Rule of Interpretation 1(a) of the HTSUS provides that, in
the absence of special language or context which otherwise requires — a tariff classification controlled by use ... is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use.
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3586177-25726 | OPINION
L
Introduction
WALLACH, Judge:
This action involves classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) of certain thermal cyclers and thermal cycler parts. U.S. Customs and Border Protection (“Customs”) classified these goods under HTSUS Heading 8419, which includes “machinery, plant or laboratory equipment . . . for the treatment of materials by a process involving a change of temperature” as well as “parts thereof.” Plaintiff Applied Biosystems (A Division of Applera Corporation) (“Plaintiff’) argues that these goods should instead be classified under HTSUS Heading 9032, which includes “[a]utomatic regulating or controlling instruments and apparatus” as well as “parts and accessories thereof.”
The court has jurisdiction under 28 U.S.C. § 1581(a). Defendant United States (“Defendant”) seeks summary judgment in its favor. See Defendant’s Motion for Summary Judgment (“Defendant’s Motion”). Plaintiff opposes summary judgment and seeks trial. See Plaintiff’s Motion for Denial of Defendant’s Motion for Summary Judgment and to Fix a Date and Place for Trial (“Plaintiff’s Motion”). The parties have stipulated that the thermal cycler parts at issue are of a kind that should be classified under the same HTSUS heading as the thermal cyclers. See infra Part IV.C.
Defendant’s Motion is GRANTED, and Plaintiff’s Motion is DENIED. HTSUS Heading 8419 accurately describes the function of a thermal cycler, namely “treatment of materials by a process involving a change of temperature.” In contrast, HTSUS Heading 9032 describes only those elements of a thermal cycler that regulate heating and cooling and does not describe those elements that actually heat and cool.
II.
Background
A
Procedural History
This action covers certain thermal cyclers and thermal cycler parts imported by Plaintiff between March 2000 and July 2002. See Summons. Customs classified the thermal cyclers under HTSUS Subheadings 8419.89.90 (2000-2001) and 8419.89.95 (2002) and assessed duties at some rate between 4.2 percent ad valorem and 4.7 percent ad valorem. See id.; Complaint ¶ 11; Answer to Complaint (“Answer”¶ 11. It classified the parts under HTSUS Subheadings 8419.90.80 (2000-2001) and 8419.90.95 (2002) and assessed duties at the 4 percent ad valorem rate applicable to these subheadings. See Complaint ¶ 12; Answer ¶ 12.
In nine protests that were timely as to the 162 entries that remain part of this action, Plaintiff asked Customs to reclassify the thermal cyclers under HTSUS Subheading 9032.89.60 (2000-2002) and the parts under HTSUS Subheading 9032.90.60 (2000-2002). See Summons; Plaintiff’s Response to Defendant’s Statement of Material Facts As to Which There Are No Genuine Issues to Be Tried (“Plaintiff’s Response to Defendant’s Fact Statement”) ¶ 2. The duty rate applicable to these subheadings is 1.7 percent ad valorem. See HT-SUS Subheading 9032.89.60 (2000-2002); HTSUS Subheading 9032.90.60 (2000-2002).
After Customs denied those protests, Plaintiff initiated the instant action. See Summons. The court designated this action as a test case and suspended under it nine additional actions initiated by Plaintiff. See June 1, 2005 Order. Defendant then moved for summary judgment in its favor, see Defendant’s Motion, and Plaintiff moved for denial of Defendant’s Motion and “to set a date and place for the trial of this action,” Plaintiff’s Motion at 1.
B
Description Of The Imported Goods
A thermal cycler is an apparatus for “controlled automated performance of polymerase chain reactions.” U.S. Patent No. 5,475,610 (December 12, 1995) at 243 ¶ 1, cited in Plaintiff’s Statement of Material Facts Supplemental to Defendant’s Statement of Material Facts (“Plaintiff’s Fact Statement”) ¶ 37. A polymerase chain reaction (“PCR”) amplifies — that is, massively replicates — certain deox-yribonucleic acid (“DNA”) sequences over multiple cycles. See Plaintiff’s Fact Statement ¶ 10. These reactions occur in a liquid mixture comprising the subject DNA, primers, an enzyme known as DNA polymerase, nucleotide precursors, and a buffer solution. See id. ¶ 21. In the first step (denaturation), the mixture is initially heated (typically to 94°C) so that the single strands of each DNA double helix unwind. See id. ¶ 22. In the second step (annealing), the mixture is then rapidly cooled so that a primer binds to the target segment of each strand. See id. In the third step (synthesis), the mixture is again heated (typically to 72°C) so that the DNA polymerase forms a new complementary DNA segment for each target segment. See id. These three steps are repeated for each cycle. See id. ¶ 23. If the subject DNA contains the target segment and each reaction is perfect, then 20 cycles will produce more than a million copies of each such segment and 30 cycles will produce more than a billion copies. See id. ¶ 28.
As its name suggests, a thermal cycler automates this thermal cycling. See id. ¶ 42. The apparatus fits on a countertop and has four pertinent elements:
1) A sample block into which tubes containing the reaction mixture are inserted;
2) A means of heating and cooling the sample block;
3) Sensors that measure the temperature of the sample block; and
4) A computer that calculates temperatures and directs the heating and cooling.
See U.S. Patent No. 5,475,610 at 243 ¶ 1; Plaintiff’s Fact Statement ¶¶ 45, 66, 86-92, 95, 108, 112 — 13; Exhibits 2-7, Deposition of Douglas Grünewald (April 30, 2009) Confidential Exs. 2-6, Annex E, Plaintiff’s Motion; see also U.S. Patent No. 5,038,852 (August 13, 1991) at 38 ¶ 1; U.S. Patent No. 5,333,675 (August 2, 1994) at 60-61 ¶ 1; U.S. Patent No. 5,656,493 (August 12, 1997) at 55-56 ¶¶ 1-4; U.S. Patent No. 7,133,726 B1 (November 7, 2006) at 14 ¶ 1. The thermal cyclers at issue in the instant action incorporate either solid state thermoelectric devices for both heating and cooling or a combination of resistance heaters for heating and chillers for cooling. See Plaintiff’s Fact Statement ¶¶ 95, 108, 112-13.
Ill
Standard of Review
In a classification case, “the court construes the relevant (competing) classification headings, a question of law; determines what the merchandise at issue is, a question of fact; and then” determines “the proper classification under which [the merchandise] falls, the ultimate question in every classification case and one that has always been treated as a question of law.” Bausch & Lomb, Inc. v. United States, 148 F.3d 1363, 1366 (Fed. Cir. 1998).
The court will grant a motion for summary judgment “if the pleadings, discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” USCIT R. 56(c); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Accordingly, summary judgment in a classification case is appropriate only if “the material facts of what the merchandise is and what it does are not at issue.” Diachem Indus. Ltd. v. United States, 22 CIT 889, 892 (1998) (citation omitted).
The court determines the proper classification de novo by applying the HTSUS General Rules of Interpretation (“GRIs”) and the HTSUS Additional U.S. Rules of Interpretation (“ARIs”) in numerical order. See Faus Group, Inc. v. United States, 581 F.3d 1369, 1372 (Fed. Cir. 2009); Carl Zeiss, Inc. v. United States, 195 F.3d 1375, 1379 (Fed. Cir. 1999); Rollerblade, Inc. v. United States, 112 F.3d 481, 483-84 (Fed. Cir. 1997). GRI1 provides in relevant part that “classification shall be determined according to the terms of the [HTSUS] headings and any relative section or chapter notes.” GRI 1 (2000-2002). “Absent contrary legislative intent, HTSUS terms are to be construed according to their common and commercial meanings, which are presumed to be the same.” Carl Zeiss, 195 F.3d at 1379 (citing Simod Am. Corp. v. United States, 872 F.2d 1572, 1576 (Fed. Cir. 1989)).
“To assist it in ascertaining the common meaning of a tariff term, the court may rely on its own understanding of the terms used and may consult lexicographic and scientific authorities, dictionaries, and other reliable information sources.” Baxter Healthcare Corp. v. United States, 182 F.3d 1333, 1337-38 (Fed. Cir. 1999) (citation omitted). Although not dispositive, the Explanatory Notes maintained by the Harmonized System Committee of the World Customs Organization do “clarify the scope of the HTSUS subheadings and offer guidance in their interpretation.” Franklin v. United States, 289 F.3d 753, 758 (Fed. Cir. 2002) (citation omitted); see H.R. Conf. Rep. No. 100-576, 100th Cong., 2d Sess. 549 (1988) at 26-27, reprinted in 1988 U.S.C.C.A.N. 1547, 1582.
IV
Discussion
Jurisdiction is available under 28 U.S.C. § 1581(a). See 28 U.S.C. § 1581(a); June 14, 2005 Joint Statement of Jurisdiction. There is no genuine issue as to any material fact concerning the thermal cyclers. See infra Part IV.A. Customs properly classified the thermal cyclers under HTSUS Heading 8419. See infra Part IV.B. The thermal cyclers are completely described by this heading, see infra Part IV.B.l, but incompletely described by the competing HTSUS Heading 9032, see infra Part IV.B.2. Defendant’s Motion does not address the thermal cycler parts that are also included in this action. See infra Part IV.C.
A
There Is No Genuine Issue As To Any Material Fact Concerning The Thermal Cyclers
Although Plaintiff and Defendant disagree on the proper classification of the thermal cyclers at issue, they do not disagree materially on the nature of these goods. Defendant has accepted certain factual corrections related to jurisdiction that Plaintiff provided to Defendant’s Statement of Material Facts As to Which There Are No Genuine Issues to Be Tried (“Defendant’s Fact Statement”). See Defendant’s Reply to Plaintiff’s Response to Defendant’s Motion for Summary Judgment (“Defendant’s Reply”) at 1; Plaintiff’s Response to Defendant’s Fact Statement ¶¶ 1-4, 6-7. As Defendant notes, “while [Plaintiff] takes issue with the scope, precision, tone or phrasing of some” of the nonjurisdictional statements contained in Defendant’s Fact Statement, Plaintiff “does not actually deny any of them.” Defendant’s Reply at 1-2; see Plaintiff’s Response to Defendant’s Fact Statement ¶¶ 5, 8-36. Moreover, for the purpose of deciding Defendant’s Motion, Defendant has accepted as true all but two of the statements in Plaintiff’s Fact Statement. See Defendant’s Reply at 4. These two disagreements are immaterial, as Defendant “still agree [s] with [Plaintiff’s] description of the PCR process and how the goods function.” Id. at 5.
B
Customs Properly Classified The Thermal Cyclers Under HTSUS Heading 8419
1
HTSUS Heading 8419 Completely Describes A Thermal Cycler
HTSUS Heading 8419 (2000-2001) provides in relevant part:
8419 Machinery, plant or laboratory equipment, whether or not electrically heated, for the treatment of materials by a process involving a change of temperature such as heating, cooldng, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof:
8419.89 Other:
8419.89.90 Other_
HTSUS Heading 8419 (2000-2001).
Similarly, HTSUS Heading 8419 (2002) provides in relevant part:
8419 Machinery, plant or laboratory equipment, whether or not electrically heated (excluding furnaces, ovens and other equipment of heading 8514), for the treatment of materials by a process involving a change of temperature such as heating, cooking, roasting, distilling, rectifying, sterilizing, pasteurizing, steaming, drying, evaporating, vaporizing, condensing or cooling, other than machinery or plant of a kind used for domestic purposes; instantaneous or storage water heaters, nonelectric; parts thereof:
8419.89 Other:
8419.89.95 Other_
HTSUS Heading 8419 (2002).
The section that includes HTSUS Heading 8419 “does not cover . . . [articles of chapter 90.” HTSUS Section XVI Note l(m). However, “[w]here a machine ... consists of individual components ... intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function.” HTSUS Section XVI Note 4.
A thermal cycler qualifies as both “machinery” and “laboratory equipment.” “Machinery” means “machines as a functioning unit.” Webster’s Third New International Dictionary (2002). A “machine” is, inter alia, “an assemblage of parts that are usufally] solid bodies but include in some cases fluid bodies or electricity in conductors and that transmit forces, motion, and energy one to another in some predetermined manner and to some desired end.” Id. A “laboratory” is “a place devoted to experimental study in any branch of natural science or to the application of scientific principles in testing and analysis or in the preparation usufally] on a small scale of drugs, chemical, explosives, or other products or substances.” Id. “Equipment” refers to “the implements (as machinery or tools) used in an operation or activity.” Id.
The task, operation, or activity performed by a thermal cycler is “the treatment of materials by a process involving a change of temperature,” HTSUS Heading 8419 (2000-2002). The PCR method of amplification described by Plaintiff necessarily involves temperature change. See supra Part II.B. More specifically, denaturation of the DNA involves heating, annealing of the primers to their complementary DNA segments involves cooling, and synthesis of the new strands may involve reheating. See id.
A thermal cycler effects these precise temperature changes. See id. It does nothing more. See id. Plaintiff has not suggested, and it is not reasonable to infer, that a thermal cycler as imported contains any of the reagents necessary for a PCR to occur. See Complaint; Plaintiff’s Memorandum in Opposition to Defendant’s Motion for Summary Judgment and in Support of Plaintiff’s Motion to Deny Defendant’s Motion and Set a Date for Trial (“Plaintiff’s Memo”). A thermal cycler does not add these reagents to the reaction mixture, it does not stir that mixture, and it does not analyze that mixture for any purpose other than achieving and verifying the target temperature. See supra Part II.B; Plaintiffs Fact Statement. Indeed, if an efficient PCR could occur regardless of temperature, a thermal cycler would have no utility other than as an overly complex receptacle for sample tubes.
The specialized nature of a thermal cycler does not preclude its classification under HTSUS Heading 8419. The language of this heading includes examples of specialized processes, “such as . . . distilling, rectifying, sterilizing, [and] pasteurizing.” HTSUS Heading 8419 (2000-20002). The Explanatory Notes also support such a classification:
Machinery and apparatus of a kind covered by [Chapters 84 and 85] remain classified in the Section even if specialised for use in laboratories or in connection with scientific and measuring instruments, provided they do not constitute nonindustrial dem-onstrational apparatus of heading 90.23 nor measuring, checking, etc., instruments of Chapter 90. For example, small furnaces, distillation apparatus, grinders, mixers, electrical transformers ■ and capacitors, for use in laboratories, remain classified in this Section.
Explanatory Note IV to Section XVI (unchanged from 2000-2002) (emphasis modified). Moreover:
[Heading 8419] further includes specially designed laboratory apparatus and equipment, generally small in size (autoclaves, distilling, sterilising or steaming apparatus, dryers, etc.), but it excludes demonstrational apparatus of heading 90.23, and measuring, checking, etc.,' apparatus more specifically covered by Chapter 90.
Explanatory Note VII to Heading 84.19 (unchanged from 2000-2002) (emphasis modified). A thermal cycler qualifies as “specially designed laboratory apparatus and equipment,” id. (emphasis omitted), for “the treatment of materials by a process involving a change of tem perature,” HTSUS Heading 8419 (2000-2002). As discussed below, a thermal cycler is neither “more specifically covered by” nor an “[a]r-ticleO of’ HTSUS Heading 9032.
Explanatory Note VII to Heading 84.19 (unchanged from 2000-2002); HTSUS Section XVI Note l(m); see infra Part IV.B.2. Accordingly, HTSUS Heading 8419 accurately and completely describes a thermal cycler.
2
HTSUS Heading 9032 Incompletely Describes A Thermal Cycler
HTSUS Heading 9032 (2000-2002) provides in relevant part:
9032 Automatic regulating or controlling instruments and apparatus; parts and accessories thereof:
Other instruments and apparatus:
9032.89 Other:
9032.89.60 Other_
HTSUS Heading 9032 (2000-2002). This heading “applies only to:”
(a) Instruments and apparatus for automatically controlling the flow, level, pressure or other variables of liquids or gases, or for automatically controlling temperature . . . ; and
(b) Automatic regulators of electrical quantities, and instruments or apparatus for automatically controlling non-electrical quantities the operation of which depends on an electrical phenomenon varying according to the factor to be controlled.
HTSUS Chapter 90 Note 6 (2000-2001). Included among the subheadings are thermostats, manostats, “[ijndustrial process control instruments and apparatus,” automatic voltage regulators, “[c]ontrol instruments for air conditioning, refrigeration or heating systems,” and other “[p]rocess control instruments and apparatus.” HTSUS Heading 9032 (2000-2002).
The field of control systems encompasses the terms “automatic control” and “automatic regulation” as well as the specific instruments included among the subheadings. See McGraw-Hill Dictionary of Scientific and Technical Terms, Sixth Ed. (2002) (“McGraw-Hill Scientific Dictionary”) at xi (defining “control systems”); Van Nos-trand’s Scientific Encyclopedia, Ninth Ed. (2002) Vol. 1 at 935-38 (explaining “control system”). Automatic controllers and regulators “continuously measure 0 the value of a variable quantity or condition and then automatically actO on the controlled equipment to correct any deviation from a desired preset value.” McGraw-Hill Scientific Dictionary at 169 (defining “automatic controller”), 171 (defining “automatic regulator”); see also Van Nostrand’s Scientific Encyclopedia, Ninth Ed. (2002) Vol. 1 at 934-38 (explaining “controller (automatic)” and “control system”).
Controllers are therefore conceptually distinct from the equipment that’they control. For example, a thermostat controls, but does not encompass, the mechanical equipment that actually heats or cools. See McGraw-Hill Scientific Dictionary (defining “thermostat” as “[a]n instrument which measures changes in temperatures and directly or indirectly controls sources of heating and cooling to maintain a desired temperature”).
The Explanatory Notes support the conclusion that HTSIJS Heading 9032 refers to the apparatus that determines and issues directions but not to the complementary apparatus that actually carries out those directions:
Automatic control apparatus for liquids or gases and apparatus for automatically controlling temperature form part of complete automatic control systems and consist essentially of the following devices:
(a) A device for measuring the variable to be controlled (pressure or level in a tank, temperature in a room, etc.). . . .
(b) A control device which compares the measured value with the desired value and actuates the device described in (C) below accordingly.
(c) A starting, stopping or operating device. . . .
[Such] [instruments and apparatus . . . are connected to an appliance which carries out the orders (pump, compressor, valve, furnace burner, etc.) which restores the variable (e.g., liquid measured in a tank or temperature measured in a room) to the prescribed value, or which, in the case of a safety system, for instance, stops the operation of the machine or apparatus controlled. This appliance, generally remote controlled by a me chanical, hydraulic, pneumatic or electric control, is to be classified in its own appropriate heading .... If the automatic control apparatus is combined with the appliance which carries out the orders, the classification of the whole is to be determined under either Interpretative Rule 1 or Interpretative Rule 3 (b).
Explanatory Note 90.32(1) (unchanged from 2000 to 2002) (emphasis modified).
A thermal cycler combines “the automatic control apparatus . . . with the appliance which carries out the orders.” Id. The automatic controller includes the sensors that measure the temperature of the sample block and the computer that calculates temperatures and directs the heating and cooling. See supra Part II.B. The controlled equipment includes the sample block into which tubes containing the reaction mixture are inserted and the means of heating and cooling that sample block. See id.
By its terms, HTSUS Heading 9032 describes the elements of a thermal cycler that direct heating and cooling but does not describe the elements that actually heat and cool. This heading therefore provides an incomplete description of a thermal cycler under GRI 1. Conversely, HTSUS Heading 8419 provides a complete description of a thermal cycler under GRI 1. See supra Part IV.B.l.
Accordingly, recourse to GRI 3(b) or to any other GRI or ARI is neither necessary nor proper. See GRI 1; HTSUS Section XVI Note 4; cf. Wagner Spray Tech Corp. v. United States, 31 CIT 676, 681-84, 493 F. Supp. 2d 1265 (2007) (rejecting a classification that incompletely described the goods at issue in favor of a classification that completely described those goods). Customs properly classified the thermal cy-clers under HTSUS Heading 8419.
C
The Parties Have Stipulated To The Nature Of The Thermal Cycler Parts
This action also includes certain thermal cycler parts imported by Plaintiff. See Complaint ¶¶ 5, 12, 15-16; Plaintiff’s Response to Defendant’s Fact Statement ¶ 6. Defendant’s Motion does not address these parts. See Defendant’s Fact Statement ¶ 6; Defendant’s Memorandum in Support of Its Motion for Summary Judgment at 1 n.l; Defendant’s Reply at 3, (“This case involves a single question — the proper classification of thermal cyclers.”). However, the parties stipulated at oral argument that these parts are of a kind that should be classified under the same HTSUS heading as the thermal cyclers. See June 22, 2010 Oral Argument at 00:5:20-30 (Defendant: “I think we can actually stipulate that whatever parts are at issue should follow the classification of the machines.”), 00:05:30-35 (Plaintiff: “We do stipulate that.”). Accordingly, because Customs properly classified the thermal cyclers under HTSUS Heading 8419, it properly classified the thermal cycler parts under this heading as well.
V
Conclusion
For the reasons stated above, Defendant’s Motion is GRANTED, Plaintiff’s Motion is DENIED, and the classification by Customs of the thermal cyclers and thermal cycler parts is AFFIRMED.
Part II.A, infra, identifies the precise subheadings at issue.
The court commends both parties on the quality of their briefs and on the cooperation they have demonstrated.
These thermal cyclers are marketed as GeneAmp® PCR Systems 2400, 2700, 9600, and 9700. See Plaintiff’s Response to Defendant’s Statement of Material Facts As to Which There Are No Genuine Issues to Be Tried (“Plaintiff’s Response to Defendant’s Fact Statement”) ¶ 7. Plaintiff does not challenge the classification of the thermal cyclers marketed as GeneAmp® Insitu PCR 1000. See id.
The 2002 edition of HTSUS renumbered to 8419.89.95 what had been Subheading 8419.89.90 in the 2000-2001 editions. See Answer ¶ 11. Although the duty rate applicable to these subheadings is 4.2 percent ad valorem, this rate is identified in the Complaint as 4.5 percent ad valorem and in the Summons as 4.7 percent ad valorem. See HTSUS Subheading 8419.89.90 (2000-2001); HTSUS Subheading 8419.89.95 (2002); Complaint ¶ 11; Summons.
The 2002 edition of HTSUS renumbered to 8419.90.95 what had been Subheading 8419.90.80 in the 2000-2001 editions. See Answer ¶ 12.
In some of the protests, Plaintiff may have sought classification of the thermal cyclers and parts under subheadings other than HTSUS Subheadings 9032.89.60 and 9032.90.60 (2000-2002). See Summons.
Plaintiff’s Statement of Material Facts Supplemental to Defendant’s Statement of Material Facts (“Plaintiff’s Fact Statement”) is a source for some of the facts in this Part II.B. For the purpose of deciding Defendant’s Motion, Defendant accepts as true those portions of Plaintiff’s Fact Statement that are cited in this Opinion. See Defendant’s Reply to Plaintiff’s Response to Defendant’s Motion for Summary Judgment (“Defendant’s Reply”) at 4; see also infra Part IV.A.
Thermal cyclers are also referred to as, inter alia, “PCR systems,” “PCR machines,” “PCR instruments,” and “thermocyclers.” See, e.g., Complaint ¶[ 5; Headquarters Ruling No. 965366 (September 24, 2002) (“HQ 965366”) at 1; Defendant’s Statement of Material Facts As to Which There Are No Genuine Issues to Be Tried (“Defendant’s Fact Statement”) ¶ 5; Plaintiff’s Fact Statement ¶¶ 6, 36. This Opinion adopts the general term used by Plaintiff on its website. See Applied Biosystems, Thermal Cyclers, http://www.appliedbiosystems.com/absite/us/enyhome/applications-technologies/pcr/ thermal-cyclers.html.
“[S]ome more recent protocols” combine the second and third steps. Plaintiff’s Fact Statement ¶[ 29.
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534023-14753 | PER CURIAM.
One of the issues presented in these federal criminal appeals concerns a situation in which the trial judge, in response to a request from the jury for a supplementary instruction, entered the jury room during deliberations without advance notice to the defense and gave the jurors an oral definition of an element of one of the offenses charged in the indictment. Because of our concern for the orderly conduct of a trial by jury in a federal criminal case, we reverse and remand defendants’ convictions as to the count which was the subject of the supplementary instruction. Finding no reversible error pertinent to the other counts of which defendants were convicted, we affirm the convictions on those counts and remand for resentencing in accordance with this decision.
I
Between 1974 and 1980, several high-ranking employees of the Cook County (Illinois) Board of Appeals effectuated thousands of unlawful property tax reductions by covertly circumventing the Board’s procedures concerning applications for assessment reductions. They relied on others, known as “runners,” to contact taxpayers and solicit payments from them in exchange for arranging reduced property tax assessments. The runners collected payments from the taxpayers concerned and divided the proceeds with the Board employees who participated in the scheme. Defendants Bartley Burns and Lawrence Kelly were accused of serving as “runners.” They maintain that they had no knowledge of the unlawful nature of the scheme in question. In a multiple count indictment, they were both charged with several counts of mail fraud and one count of conspiracy to violate the mail fraud and antiraeketeering laws. Kelly was also charged with tax evasion and obstruction of a criminal investigation. The jury acquitted Burns on three mail fraud counts (counts 24, 26 and 30) but found him guilty on the conspiracy charge (count 1) and on seven mail fraud counts (counts 22, 23, 25, 27, 28, 29 and 31). His disposition as to count 1 involved a 3 month sentence and a $10,000.00 fine; as to counts 22, 23, 25, 27, 28, 29 and 31, he received concurrent sentences of three years probation, consecutive to the sentence on count 1. Kelly was found guilty on the conspiracy charge (count 1), the tax evasion and obstruction charges (counts 41 and 90) and on nine mail fraud counts (counts 32 through 40). Kelly received a sentence of fifteen months on count 1, he was fined a total of $5,000 on counts 32 through 40, and he received concurrent sentences of 3 years probation on counts 41 and 90, to run consecutively to the sentence on count 1.
In addition to their challenge to the judge’s private contact with the jury, defendants argue as to the conspiracy charge (count 1) that the antiracketeering statute does not apply to corruption within the Cook County Board of Appeals and that there was a prejudicial variance between the conspiracy charged in the indictment and the evidence adduced at trial. Defendants also attack a jury instruction concerning the issue of guilty knowledge.
II
After the jury had been fully instructed by the court and had been engaged in deliberations for several hours, one juror apparently encountered some difficulty as to the meaning of the term “overt acts” with reference to the conspiracy count. Although the record does not indicate how the matter was brought to the court's attention, it is clear that the trial judge responded by entering the jury room accompanied only by the court reporter, whereupon he voiced a supplementary instruction defining an “overt act.” The resulting colloquy in the jury room, which occurred without advance notice to defendants or defense counsel, was transcribed by the court reporter as follows:
The Court: Good afternoon.
You asked what the definition of an overt act is.
A Juror: Yes.
The Court: An overt act is an open or manifest act. It is not what somebody thinks or plans; it is what somebody does.
In this case, it is charged that one or more of the things happened in paragraphs 12 through 17 or paragraphs 22 through 41, and these were done in furtherance of, according to the Government, the conspiracy.
So, an overt act in that context is one of those active type actions, if proved, in furtherance of the conspiracy, if proved, as distinguished from something that somebody just planned or thought about but didn’t take any action on.
A Juror: Something actually happened?
The Court: Something that actually happened.
Does that help?
A Juror: Okay.
The Court: So, what the Government is charging is that certain things happened or at least one of them happened, and that what that was was in furtherance of the conspiracy as defined in the instructions.
A Juror: Everybody understand?
A Juror: Yes.
A Juror: I think so.
A Juror: That clears it up. Thank you.
Defendants raise three challenges to this conversation. They argue that it was a violation of their Sixth Amendment right to be present at all stages of the proceedings; they argue that it was a violation of Rule 43(a), Federal Rules of Criminal Procedure; and they argue that the supplementary instruction was a misleading statement of the law. Since we sustain their contention under Rule 43(a), we need not address the constitutional issue and we likewise decline to evaluate the legal soundness of the supplementary definition.
Rule 43(a) provides as follows:
The defendant shall be present at the arraignment, at the time of the plea, at every stage of the trial including the impaneling of the jury and the return of the verdict, and at the imposition of sentence, except as otherwise provided by this rule.
While we are certain that the trial judge was acting with the best of intentions, we are equally convinced that his action was a serious violation of Rule 43(a). The Supreme Court has clearly prescribed the procedures mandated by the Rule in the context of questions emanating from the jury room: “Cases interpreting [Rule 43(a)] make it clear, if our decisions prior to the promulgation of the Rule left any doubt, that the jury’s [question] should have been answered in open court and that [defendants’] counsel should have been given an opportunity to be heard before the trial judge responded.” Rogers v. United States, 422 U.S. 35, 39, 95 S.Ct. 2091, 2094, 45 L.Ed.2d 1 (1975) (Burger, C. J.) (emphasis added). Although this brief reference to the Rogers opinion is perhaps sufficient to reveal the error inherent in the trial court’s conduct, we feel constrained to emphasize our condemnation of this practice.
Two important interests are undermined by private discourse between judge and •jury during deliberations. First, it gives rise to “Star Chamber” implications which detract from the appearance of justice. Second, it absolutely precludes the parties from making a record as to the context in which the judge’s remarks were made, thereby thwarting appellate review; the parties and this court must remain forever in the dark as to the judge’s tone of voice and physical demeanor while he was in the jury room. An additional concern implicat ed in this particular case is the risk that the judge will be drawn into an extended discourse with the jury, thereby disturbing the delicate balance of legal principles set forth in the original instructions. Although we find it unnecessary to consider whether the judge’s statements in the jury room, standing alone, would constitute a sound definition of an “overt act,” we are concerned that the discussion of the overt act requirement may have diverted the jury’s attention from other essential elements of the conspiracy offense. In a recent appeal from a civil jury trial, the United States Court of Appeals for the Third Circuit stressed that when a supplemental instruction is given,
trial courts should avoid prejudicial emphasis on part of the case by carefully reminding the jury of other aspects of the original charge and cautioning them that the segment of the charge which is amplified or explained should be considered in the light of the other instructions and is not to be given undue weight.
Beardshall v. Minuteman Press International, Inc., 664 F.2d 23, 29 (3d Cir. 1981).
In some circumstances a violation of Rule 43(a) may be harmless error. Rogers, supra, 422 U.S. at 40, 95 S.Ct. at 2095. However, in the factual context of this case, and considering the extended nature of the discussion between the court and the jury, we are unable to say that the defendants were not prejudiced by the error of the court. We reverse the convictions of both defendants as to the conspiracy count (count 1) and remand for further proceedings if the government desires to pursue this count.
On the other hand, we reject defendants’ argument that the discussion in the jury room deprived them of a fair trial altogether, thus mandating reversal of all counts of which they were convicted. The jury was selective in its approach to the case, and did not convict the defendants on all the counts charged. The nature of the verdicts that were returned in this case makes it clear that the jury separately analyzed the law and the evidence applicable to each count. Moreover, it should be evident from our analysis of the implications of the contact between judge and jury that the potential prejudice, if any, relates exclusively to the jury’s disposition of the conspiracy count. There is no basis for concluding that the jury’s disposition of the other counts in the indictment might have been influenced in any manner by a discussion which was confined by its terms to an issue relating exclusively to the conspiracy count.
Ill
The trial court gave the following instruction concerning the issue of defendants’ knowledge:
When the word “knowingly” is used in these instructions, it means that the defendant realized what he was doing and was aware of the nature of this conduct and did not act through ignorance, mistake or accident. Knowledge may be proven by [the] defendant’s conduct and by all the facts and circumstances surrounding the case. No person can intentionally avoid knowledge by closing his eyes to facts which should prompt him to investigate.
(emphasis added). The final sentence of the instruction, which we render in italics, was the subject of a timely defense objection at trial. Having preserved their objection, defendants argue on appeal that the sentence violates the rule in Sandstrom v. Montana, 442 U.S. 510, 99 S.Ct. 2450, 61 L.Ed.2d 39 (1979), and that it permits a jury to find criminal culpability on the basis of mere negligence. We reject both contentions.
Although we have approved the challenged sentence several times in the past, e.g., United States v. Gabriel, 597 F.2d 95, 100 (7th Cir.), cert. denied, 444 U.S. 858, 100 S.Ct. 120, 62 L.Ed.2d 78 (1979); United States v. Prewitt, 553 F.2d 1082, 1087 (7th Cir.), cert. denied, 434 U.S. 840, 98 S.Ct. 135, 54 L.Ed.2d 104 (1977); United States v. Joyce, 499 F.2d 9, 23 (7th Cir.), cert. denied, 419 U.S. 1031, 95 S.Ct. 512, 42 L.Ed.2d 306 (1974); this appears to be the first occasion this court has had to reevaluate it in light of the Supreme Court’s decision in Sandstrom v. Montana, supra. In a case in which intent was an essential element of the crime charged, the Sandstrom decision held that the instruction, “the law presumes that a person intends the ordinary consequences of his voluntary acts,” violated the requirement that the government prove every element of the offense beyond a reasonable doubt.
The general inquiry in Sandstrom was whether the language of the challenged sentence was such that the jury could have interpreted the instruction in a way that would impermissibly “reliev[e] the State of the burden of proof ... on the critical question of [the defendant’s] state of mind.” 442 U.S. at 521, 99 S.Ct. at 2457. The Sandstrom analysis condemns instructions which could be interpreted as imposing conclusive presumptions of intent or rebuttable presumptions which shift to the defendant the burden of persuasion concerning the mental element. See id. at 522-23, 99 S.Ct. at 2458. On the other hand, Sandstrom does not necessarily condemn an instruction which merely describes a rationally-based permissive inference: for example, one that allows but does not require the jury to infer knowledge from a defendant’s exposure to information capable of engendering the knowledge. See 442 U.S. at 514, 99 S.Ct. at 2454; id. at 527, 99 S.Ct. at 2460 (Rehnquist, J., concurring).
Analysis of the challenged sentence in the context of the “knowledge” instruction as a whole shows that it merely operates as an illustration of a rational permissive inference. The notion that no person can intentionally avoid knowledge is little more than a truism. This part of the sentence simply says that once the defendant has received and comprehended a message he is powerless to banish it from his mind. The remainder of the sentence illustrates how the cognitive process operates. Since this part of the sentence refers to “facts which should prompt [the defendant] to investigate,” it advances the idea that one’s ability to acquire knowledge depends upon the strength of the message and one’s subjective capacity to comprehend it. Moreover, the challenged sentence follows immediately after the sentence which apprises the jury that knowledge may be inferred from salient facts and circumstances. In such a context, it functions as an illustration of how knowledge may be inferred from a defendant’s exposure to information. Finally, the sentence challenged in this case is not expressly labeled as a legal presumption, whereas the jury in Sandstrom had been instructed that the law presumes a person intends the ordinary consequences of his voluntary acts. Since the sentence lacks the express mandate of a legal presumption and follows immediately after a statement that knowledge “may be proved” by circumstantial evidence, we are satisfied that no juror could have understood it to impose a presumption of the ultimate fact of knowledge upon proof of an elemental fact of exposure to information. We also note that the Sandstrom holding was buttressed by the fact that “[t]he standard reference work for federal instructions, 1 E. Devitt & C. Blackmar, Federal Jury Practice and Instructions 405 (3d ed. 1977) describes the instruction [in Sandstrom ] ... as constituting ‘reversible error’ .... ” 442 U.S. at 514 n.3, 99 S.Ct. at 2454 n.3. Even in the aftermath of Sandstrom, the “standard reference work” does not attach such a label to the instruction challenged in this case. See 1 E. Devitt & C. Blackmar, Federal Jury Practice and Instructions § 14.09 (3d ed. 1977 & Supp.1981). It harbors none of the prejudicial ambiguities condemned in Sandstrom.
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4129203-16269 | American Recovery and Reinvestment Tax Act; Subject matter jurisdiction; RCFC 12(b)(1); Consequential damages; Lost profits; Tucker Act; “Money-mandating” source of law
OPINION AND ORDER
Block, Judge.
Section 1603 of the American Recovery and Reinvestment Tax Act of 2009 (ARRTA), Pub.L. 111-5, 123 Stat. 115, provides, “Upon application, the Secretary of the Treasury shall, subject to the requirements of this section, provide a grant to each person who places in service specified energy property to reimburse such person” in an amount equal to “the applicable percentage basis of such property.” Put simply, when certain “energy property” is put to use to produce clean energy, § 1603(a) requires the federal government to reimburse a portion of the cost of such property.
This case arises because plaintiff, a developer of biodiesel platforms, sought to take advantage of § 1603(a). For reasons not relevant here, the Treasury Department found that it was not required to give plaintiff the requested reimbursement grants. Plaintiff brought this suit to recover the amount of the grants, as well as “consequential damages, special damages, or other damages that resulted] as a consequence! ] of the Government’s violation of its statutory and regulatory mandates.”
This court has had occasion before to consider § 1603(a). In AARA Energy Co. v. United States, 97 Fed.Cl. 12 (2011), this court held that § 1603(a) was a “money-mandating” statute that could give rise to a claim in this court under the Tucker Act. ARRA Energy, 97 Fed.Cl. at 19-22. The court based its conclusion primarily on the fact that the statute required the payment of grants subject only to the ministerial discretion involved in determining whether the statutory scheme’s other requirements were met. Id. at 20.
Neither party questions that decision in this case. Instead, defendant has filed a motion for partial dismissal, see Rule 12(b)(1) of the Rules of the United States Court of Federal Claims (RFCF), on the ground that this court has no jurisdiction over plaintiffs claims insofar as they request consequential damages. Defendant argues that although § 1603(a) is money-mandating, consequential damages are not within the mandate, and thus the statute cannot serve as the substantive law necessary to invoke the Tucker Act with respect to consequential damages.
Plaintiff disagrees. It argues that because § 1603(a) is money-mandating, the court has jurisdiction. In plaintiffs view, whether the court may award consequential damages is an issue to be decided on the merits. Essentially, plaintiff argues that if, as AARA Energy held, § 1603(a) is money-mandating, then it does not matter whether the money it mandates includes all the money plaintiff requests.
Thus, the question this motion presents is whether § 1603(a), which requires partial reimbursement for certain “energy property,” can give rise to a claim for consequential damages resulting from the denial of such reimbursement. As explained below, because consequential damages are not included within the compensation § 1603(a) mandates, that statute cannot serve as the source of substantive law required for this court to exercise jurisdiction over claims for consequential damages. Accordingly, the court must grant defendant’s motion.
I. Facts
Plaintiff is a developer of biodiesel platforms. Compl. ¶ 25. On April 15, 2009, plaintiff purchased new and used assets for the purpose of creating biodiesel fuel. Id. ¶26. Using these assets, plaintiff created one renewable energy facility in Lakeland, Florida, and another one in Groveland, Florida. Id. ¶27. In December 2009, plaintiff purchased a generator set for each facility. Id. ¶¶ 30, 31, 47. The generator sets were placed in service in May 2010. Id. ¶¶ 33, 50.
In purchasing these generator sets and placing them into service, plaintiff expected to take advantage of ARRTA’s “grant program” for renewable energy. As mentioned above, ARRTA’s § 1603(a) requires the Secretary of the Treasury to provide “a grant to each person who places in service specified energy property to reimburse such person” in an amount equal to “the applicable percentage basis of such property.” Plaintiff believes that the generator sets qualified as “specified energy property” under the complex statutory scheme. Accordingly, upon placing the generator sets in service, plaintiff submitted the required applications for reimbursement. Compl. ¶¶ 35-42, 52-59. But it was not to be. On January 6, 2011, the Department of the Treasury notified plaintiff that it had denied the Lakeland application. Id. ¶ 63. The other shoe fell just over two months later on March 12, 2011, when the Department notified plaintiff that it had also denied the Groveland application. Id. ¶ 64.
Plaintiff filed its complaint in this court of February 3, 2012. In each of its two counts (one for each denied application) plaintiff requests monetary relief in the amount of the reimbursement it claims to have been entitled to under § 1603. Plaintiff also requests “consequential damages, special damages, or other damages that result[ed] as a consequence[ ] of the Government’s violation of its statutory and regulatory mandates.” Specifically, plaintiff argues that as a result of the denial of its applications, it was unable to operate either facility in 2011, thus forfeiting the net income that each facility would have generated that year ($8,977,251, in the ease of the Lakeland facility). Compl. ¶¶ 72, 78.
II. Motion to Dismiss
Defendant answered plaintiffs complaint and filed this motion for partial dismissal under RCFC 12(b)(1). In its motion, defendant asks the court to dismiss plaintiffs claims insofar as those claims request the award of “consequential damages, special damages, or other damages that resulted] as a consequence[ ] of the Government’s violation of its statutory and regulatory mandates.” Defi’s Mot. at 4. Defendant claims that such damages are not authorized by § 1603 and that therefore this court lacks jurisdiction to award them. Id. at 4-7.
Plaintiff asks the court to deny defendant’s motion. PL’s Opp. at 13. Plaintiff argues that § 1603 is a money-mandating statute and has been held to be such by this court. Id. at 6-7 (citing ARRA Energy, 97 Fed.Cl. at 16, 17, 28). Plaintiff also argues that whether consequential damages can be awarded in this case is irrelevant to the threshold jurisdictional question and ought instead to be determined on the merits. Id. at 7-11.
In reply, defendant acknowledges that § 1603 is a money-mandating statute but denies that the compensation the statute mandates includes consequential damages. Def.’s Reply at 1-2. Defendant argues that plaintiff cannot “shoehorn its consequential damages claim into its claim for a specifically defined, statutorily mandated payment.” Id. at 3.
For reasons explained more fully below, defendant is correct. The obligation to identify a money-mandating statute is an obligation to identify a statute that mandates the form of monetary compensation a plaintiff requests. When a plaintiff requests more than one form of damages, the court has jurisdiction with respect only to those claims for damages covered by the money-mandating statute. Because § 1603 cannot “fairly be interpreted” to mandate lost profits or other consequential damages, the court must grant defendant’s motion.
III. Discussion
The Tucker Act confers on this court jurisdiction of claims for damages not sounding in tort and arising out of, inter alia, federal statutes. 28 U.S.C. § 1491(a)(1). But to invoke Tucker Act jurisdiction, a plaintiff must identify the “money-mandating” statute under which his claim arises. Fisher v. United States, 402 F.3d 1167, 1172 (Fed.Cir.2005) (en banc). And a statute is “money-mandating” if it can “fairly be interpreted” as mandating the compensation the plaintiff seeks. United States v. Mitchell, 463 U.S. 206, 216-17, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983) (Mitchell I); United States v. Testan, 424 U.S. 392, 400, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976).
For purposes of this case, the key point is that the compensation the statute can “fairly be interpreted” as mandating must be the kind of compensation the plaintiff seeks. This court has no jurisdiction over a claim for one type of money damages if the “money-mandating” statute the plaintiff cites pertains only to a different type of money damages. “The crucial question is whether, and to what extent, Congress has consented to a monetary claim in this court.” Mitchell v. United States, 664 F.2d 265, 270 (Ct.Cl.1981) (en banc) (Mitchell II) (emphasis added), aff'd, 463 U.S. 206, 103 S.Ct. 2961, 77 L.Ed.2d 580.
The Court of Claims decision in Mitchell II illustrates this. The ease was on remand from the Supreme Court, which had held in Mitchell I that the trust established by the General Allotment Act, 25 U.S.C. §§ 331-54, did not give rise to a suit for mismanagement of Indian lands. See United States v. Mitchell, 445 U.S. 535, 546, 100 S.Ct. 1349, 63 L.Ed.2d 607 (1980) (Mitchell III). In remanding the case, the Supreme Court had instructed the Court of Claims to consider other jurisdictional arguments. Id. at 546, 100 S.Ct. 1349 n.7. Carefully considering the relevant statutes, the Court of Claims found that Congress had mandated “a restricted degree of compensation” for breach of trust duties. Mitchell II, 664 F.2d at 270-71. Specifically, the court found that it had jurisdiction to consider claims for (1) fall-off from income the Indian plaintiffs would have received but for the alleged breaches of trust, and (2) the value of property lost through the federal government’s improper actions. Id. at 271.
However, the court also held that it lacked jurisdiction of claims for “other, consequential, indirect damages.” Id. Specifically, the plaintiffs could not sue for “other types of damages or compensation: indirect or consequential business, economic, or personal damages due to the loss ... of their property, or personal, psychological, or social harm experienced by the Indian owners or the tribe as a consequence of federal mismanagement of their property.” Id. at 273-74. The court reasoned that such damages were not “included within the legislation [the] plaintiffs invoke.” Id. at 274. Thus, while denying most of the defendant’s motion to dismiss, the court did grant the motion in part. The money-mandating sources of law permit ted jurisdiction not of claims for all money damages, but only of claims for “a restricted degree of compensation.” Id. at 270-71.
A few years later, in Anderson v. United States, 5 Cl.Ct. 573 (1984), the Court of Claims granted a partial motion to dismiss for lack of subject matter jurisdiction where some of the damages sought were not authorized by the money-mandating source of law. In that case, construction workers employed by the Department of Health and Human Services sought monetary damages for sick and annual leave, health and life insurance benefits, per diem allowances, and the rates of pay they would be entitled to as prevailing rate employees. 5 Cl.Ct. at 575. The defendant moved to dismiss the claims for leave and insurance benefits on the ground that such damages were not covered by the money mandating law the plaintiffs invoked. The court found that although such benefits were mandated for another type of worker, the plaintiffs could not claim that the law mandated such benefits for them. Accordingly, the court found that it was “without authority” to consider the plaintiffs’ claims for those damages. Id. at 581.
Here, as in Mitchell II and Anderson, some of the damages plaintiff seeks are not “included within the legislation” plaintiff invokes. See Mitchell II, 664 F.2d at 274. Although money-mandating, 1603(a) mandates only “a restricted degree of compensation” — namely “a grant ... to reimburse” the cost of certain “energy property.” The amount of that grant is to be equal to “the applicable percentage basis of such property.” There is no provision, explicit or implicit, for any kind of consequential damages. In short, § 1603(a) cannot “fairly be interpreted” as mandating consequential damages. LCM Energy Solutions v. United States, 107 Fed.Cl. 770, 773-74 (2012) (holding that § 1603(a) cannot be “fairly interpreted” as mandating consequential damages).
Plaintiff does not argue otherwise, but instead contends ARRA Energy found jurisdiction even though the complaint in that case contained a request for consequential damages in addition to a request for the reimbursement grant. Pl.’s Opp. at 6 & n.1. But the ARRA Energy court simply noted the request for consequential damages in passing. See ARRA Energy, 97 Fed.Cl. at 16. It did not actually consider the jurisdictional issue raised by that request. The oversight is entirely understandable because the government did not move for dismissal based on the request for consequential damages. Nor, as best this court can tell, did the parties argue the point. This court does not construe the oversight in ARRA Energy as somehow trumping Mitchell II or Anderson. Nor does the court construe the oversight to mean that a statute mandating only reimbursement for the cost of property somehow also mandates consequential damages for failure to grant that reimbursement.
Apparently sensing that § 1603(a) cannot “fairly be interpreted” as mandating consequential damages, plaintiff argues that whether consequential damages can be proven (i.e., whether or not they are too speculative) goes to the merits, rather than to jurisdiction. Pl.’s Opp. at 8-11. That is true, but it misses the point. Regardless of how speculative consequential damages would be if this court were authorized to calculate them, the real problem for plaintiff is that the money-mandating source of law plaintiff invokes does not authorize any consequential damages. Such damages are simply not within the “restricted degree of compensation” the money-mandating statute contemplates. See Mitchell II, 664 F.2d at 270-71. This, unlike the provability of consequential damages, goes to jurisdiction. LCM Energy Solutions, 107 Fed.Cl. at 773-74; see also id.; Anderson, 5 Ct.Cl. at 581.
Because the only money-mandating source of law plaintiff cites does not mandate consequential damages, this court has no jurisdiction to consider plaintiffs claims for consequential damages. Insofar as plaintiff requests such damages, the court must grant defendant’s motion for partial dismissal.
IV. Conclusion
For the foregoing reasons, defendant’s MOTION for partial dismissal for lack of subject matter jurisdiction is GRANTED.
IT IS SO ORDERED.
. "The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliq-uidated damages in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1) (emphasis added).
. Defendant wrongly asserts that, in assessing whether a statute is money-mandating, this court must construe the statute "strictly.” The court must strictly construe the waiver of sovereign immunity itself (in this case, the Tucker Act), but the question with respect to the substantive source of law is whether it can "fairly be interpreted” as mandating compensation. See United States v. White Mountain Apache Tribe, 537 U.S. 465, 472-73, 123 S.Ct. 1126, 155 L.Ed.2d 40 (noting that the Tucker Act provides an "unequivocally expressed” waiver of sovereign immunity and that the “ ‘fair interpretation’ rule” governing money-mandating statutes "demands a showing demonstrably lower than the standard for the initial waiver of sovereign immunity”). In this case, defendant’s mistake makes no difference because, as explained below, § 1603(a) cannot “fairly be interpreted” as mandating consequential damages.
. In Mitchell IT, the government appealed the portion of the Court of Claims decision finding jurisdiction, and the Supreme Court affirmed. See Mitchell I, 463 U.S. 206 103 S.Ct. 2961. The Supreme Court did not review the Court of Claims’ decision insofar as it found no jurisdiction over certain claims for damages.
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11572736-13989 | Opinion for the Court filed by Circuit Judge SILBERMAN.
SILBERMAN, Circuit Judge:
Petitioners claim that respondent Federal Aviation Administration violated the Administrative Procedure Act by issuing a purported policy statement without notice and comment rulemaking and that the FAA’s issuance of a “type certificate” for the Boeing 777-300 pursuant to the newly adopted policy was an abuse of discretion. We conclude that notice and comment rulemaking was not required nor was the issuance of the type certificate illegal.
I.
The administrator of the FAA is responsible for prescribing the minimum standards required in the interest of safety for the design of aircraft, and may establish tests to ensure compliance with the standards. See 49 U.S.C. § 44701 et seq. If the administrator is satisfied that the design of an aircraft meets these standards, the FAA issues the manufacturer a so-called type certificate allowing it to begin production of such aircraft.
The FAA has promulgated a rule with respect to emergency evacuation of aircraft that requires manufacturers to demonstrate that:
For airplanes having a seating capacity of more than 44 passengers ... the maximum seating capacity, including the number of crewmembers required ... can be evacuated from the airplane to the ground under simulated emergency conditions within ninety seconds. Compliance with this requirement must be shown by actual demonstration ... unless the Administrator finds that a combination of analysis and testing will provide data equivalent to that which would be obtained by actual demonstration.
14 C.F.R. § 25.803(c) (emphasis added).
The regulation as originally promulgated in 1967 required an actual demonstration when the design of an aircraft was altered to allow a passenger capacity increase of greater than five percent. In 1978, the regulation was amended to eliminate the five-percent provision, so that it assumed its current, discretionary, form. Then in 1989, the FAA released an “advisory circular” that again called for demonstrations if the five-percent benchmark was reached. See Advisory Circular 25.803-1, 55 Fed. Reg. 4,934 (Feb. 12, 1990). But the circular cautioned that it “provides guidance on a means, but not the only means, of compliance with the Federal Aviation Regulations” concerning emergency evacuations, id. at 1, and it stated only that “a full-scale demonstration shoidd be conducted when ... [t]he proposed passenger seating configuration is an increase of more than five percent above that which has been previously demonstrated on an airplane ... with an identical ... exit configuration.” Id. at 4 (emphasis added).
This case arises from the FAA’s change in its position in 1998, following a reconsideration of the use of full-scale demonstrations sparked by injuries among demonstration participants. On March 17 of that year, the FAA issued a new policy statement — ANM-98-2—which announced that:
The FAA has now determined that standardized methodologies have been developed and there are sufficient data now available, such that a limitation on the use of analysis based only on an increase in passenger capacity is no longer necessary .... The FAA has determined that ... where sufficient data are available, analysis is an option.... Full-scale demonstrations will still be required when sufficient data are not available to support a combination of analysis and test [sic].
See 63 Fed.Reg. 13,095, 13,096 (March 17, 1998).
Besides altering the agency’s general policy by allowing manufacturers to demonstrate compliance with the regulation through analysis whatever the percentage increase in seating capacity, the statement also foreshadowed the FAA’s decision to act in accordance with this policy in two pending certification applications:
It is the FAA position that for the Boeing 777-300 and the Airbus A330/340, there are currently sufficient evacuation data available to support analysis.... In both these cases, a wealth of full-scale evacuation data are available to support analysis and the FAA is confident that the use of analysis is well within the intent of the regulation. Therefore, in accordance with the regulation, conduct of additional full-scale evacuation demonstrations is not required to demonstrate compliance, if a satisfactory analysis is produced.
Id.
In a rather unorthodox manner the policy statement also invited public comment, stating that “Resolution of the public comment will be considered in determining whether the policy should be refined for future projects, and so reflected in [a new] advisory circular.” Id. at 13,095-96. The FAA received 23 responses prior to May, several of which were critical of the FAA’s decision to allow analysis in lieu of full-scale demonstrations.
Boeing transmitted to the FAA its evacuation analysis for the 777-300, and the FAA informed Boeing that the analysis demonstrated compliance with 14 C.F.R. § 25.803. The FAA consequently on May 4,1998, issued Boeing a type certificate for the 777-300. It simply states that “[t]his certificate ... certifies that the type design ... meets the airworthiness requirements of Part 25 of the Federal Aviation Regulations.”
Petitioners, who represent an international group of air travelers, airline pilots, and flight attendants, filed this petition for review. They allege that policy statement ANM-98-2 could not be adopted by the FAA without the agency undertaking notice and comment rulemaking, and, in any event, issuance of the 777-300 type certificate was an abuse of discretion because the FAA failed to explain both its underlying change in policy and the reasons 777-300 type certification complied with regulatory standards. The FAA counters that petitioners cannot challenge the policy statement since it was issued more than 60 days before petitioners filed their petition, see 49 U.S.C. § 46110(a), and defends its substantive decision to issue Boeing a type certificate for the 777-300.
II.
As noted, petitioners’ main challenge is an APA procedural one — that the FAA’s policy statement was in effect a regulatory amendment that had to be preceded, not followed, by a notice and comment procedure. See 5 U.S.C. §§ 551(5), 553(b)-(c); National Family Planning & Reprod. Health Ass’n, Inc. v. Sullivan, 979 F.2d 227, 240 (D.C.Cir.1992). The government, although tacitly admitting that the reasoning used in the new policy statement explains the subsequent administrative action (which was an informal adjudication) and is therefore a legitimate target of petitioners’ attack, contends that the procedural claim comes too late — that it had to be raised within 60 days of the issuance of the policy statement.
The difficulty with the government’s argument inheres in the peculiar position any petitioner is in when he or she claims that an ostensible policy statement is in actuality a regulation. A pure policy statement under the APA, as we have often explained, is not an attempt to make substantive law. See, e.g., Pacific Gas & Elec. Co. v. Federal Power Comm’n, 506 F.2d 33, 38 (D.C.Cir.1974). It is only supposed to indicate an agency’s inclination or leaning, not in any way binding on the agency. See United States Tel. Ass’n v. FCC, 28 F.3d 1232, 1234 (D.C.Cir.1994). Sometimes, to be sure, the purported policy statement on its face carries the character of a substantive regulation, see, e.g., Better Gov’t Ass’n v. Department of State, 780 F.2d 86 (D.C.Cir.1986), but more often it will not and will only reveal itself as something more than a policy statement when the agency subsequently relies on it as if it were binding law. If a petitioner could not challenge the issuance of the policy statement at that point, because it was too late to bring the procedural challenge, a loophole in the APA’s notice and comment requirements would be created.
Accordingly, we have often held that an early procedural challenge to a purported policy statement is not ripe because it is not yet demonstrable that the agency intends to treat it as having the characteris tics of a rule. See, e.g., Public Citizen, Inc. v. Nuclear Regulatory Comm’n, 940 F.2d 679, 681-83 (D.C.Cir.1991); Natural Resources Defense Council, Inc. v. EPA, 859 F.2d 156, 191 (D.C.Cir.1988). Typically the substance of a true policy statement could not be contested then either because it would be regarded as not ripe until it was reflected in subsequent agency actions (indeed, theoretically a pure policy statement might not even be final agency action). See Pacific Gas & Elec., 506 F.2d at 45, 48-49. It seems to us that as a practical matter a procedural challenge to a policy statement, claiming it to be a de facto rule, cannot be brought until a substantive challenge to the policy would be ripe. Cf. Clean Air Implementation Project v. EPA, 150 F.3d 1200, 1204-05 (D.C.Cir.1998). In this case the policy statement indicated that the agency was taking a different approach to be applied first in the upcoming Boeing certification. As such, the policy statement not only signaled a general shift; it discussed two specific eases that were about to be decided. It would have been somewhat artificial then to review the policy statement independent of those decisions. Accordingly, we would likely have regarded petitioners’ APA challenge as premature if it had been brought before the issuance of the certificate, and so we do not agree that petitioners’ subsequent challenge is too late. See id. at 1204.
Turning then to petitioners’ procedural challenge, we do not agree that the FAA was obliged to follow APA notice and comment procedures prior to issuance of ANM-98-2. It appears on its face to be just a policy statement. It limits itself to situations “where sufficient data are available,” states only that “analysis in such cases may be acceptable,” and cautions that “[f]ull-scale demonstrations will still be required when sufficient data are not available to support a combination of analysis and test [sic].” 63 Fed.Reg. at 13,096 (emphasis added). Moreover, as noted, it calls for public comments on the policy, and indicates that there will be a determination of whether “the policy should be refined for future projects.” Id. With respect to the 777-300, it states that the type certificate will be approved only “if a satisfactory analysis is produced.” Id. Since the statement does not cabin agency discretion, even as to the 777-300, it has the characteristics of a policy statement. See Pacific Gas & Elec., 506 F.2d at 38-39; see also Chamber of Commerce v. Department of Labor, 174 F.3d 206, 212 (D.C.Cir.1999). To be sure, the government relies on the reasoning expressed in the policy statement to support its subsequent administrative decision, but that is not surprising because the policy statement, as we noted, came only a short time before the decision and explicitly contemplated the decision. Furthermore, although the statement purported to abandon the prior practice whereby the agency invariably required a demonstration if the five-percent threshold was reached, nothing prevented the agency from changing its enforcement policy again without notice, or requiring a full demonstration for the 777-300.
Petitioners argue that notice and comment rulemaking was nonetheless required because ANM-98-2 is actually an interpretation of the governing regulation that is at variance with the FAN’S prior “interpretation” embodied in the 1989 advisory circular. They rely on Alaska Professional Hunters Ass’n, Inc. v. FAA, 177 F.3d 1030 (D.C.Cir.1999), and Paralyzed Veterans of Am. v. D.C. Arena L.P., 117 F.3d 579 (D.C.Cir.1997). In these cases, we said that “[o]nce an agency gives its regulation an interpretation, it can only change that interpretation as it would formally modify the regulation itself: through the process of notice and comment rulemaking.” Paralyzed Veterans, 117 F.3d at 586. The instant case, however, does not fit within the Paralyzed Veterans/Alaska Professional Hunters line for the simple reason that it does not involve an interpretation of a regulation. As we stated in Syncor Int’l Corp. v. Shalala, 127 F.3d 90, 94 (D.C.Cir.1997), “[interpretative rules and policy statements are quite different agency instruments. An agency policy statement does not seek to impose or elaborate or interpret a legal norm. It merely represents an agency position with respect to how it will treat — typically enforce — the governing legal norm.” Although petitioners argue that Alaska Professional Hunters is pertinent because it, like this case, involved a long-term agency practice which constituted an implicit interpretation or application of the relevant regulation, that is not so. In that case, a formal adjudication by an associate agency had adopted an interpretation of the regulation in accord with the informal practice. See Alaska Professional Hunters, 177 F.3d at 1031.
In the instant case there is no dispute as to the regulation’s meaning. The regulation states that where the Administrator finds that a combination of analysis and testing provides data equivalent to an actual evacuation, the former may be used in place of the latter. Whether this test is met requires a factual determination by the FAA, and clearly, as methods of analysis and other considerations develop over time, the FAA’s response to the test can also. In 1989 the FAA did not believe that analysis would provide equivalent data when seating capacity changed by over five percent, but in 1998, spurred on by injuries to demonstration participants, it reviewed its policy and concluded that the situation had changed such that analysis and testing were now sufficient. See 63 Fed.Reg. at 13,096 (“The FAA has now determined that standardized methodologies have been developed and there are sufficient data now available” (emphasis added)). This is not a different interpretation of the regulation, just an application of the regulation to a changed situation which calls for a different policy.
III.
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565422-14996 | MEMORANDUM DECISION
URBOM, District Judge.
A nonjury trial was held on April 17-18, 1986. The following uncontroverted facts are set out in the pretrial order. The plaintiff, Donald Eugene Belsky, had worked for the Bank of Cody from July of 1971 until it was closed by the Nebraska Department of Banking and Finance on October 24, 1984. Belsky became President of the Bank in 1975, a director in about 1977, and remained in those positions until the closing of the Bank. See Filing 24. On February 1, 1982, Belsky signed and submitted an application to the First National Life Insurance Company of the U.S.A. for life insurance in the amount of $250,000. Exhibit 3. On March 2, 1982, First National Life issued policy number 20030 on the life of Belsky. Exhibit 4. On or about that date, the Bank paid the initial premium on that policy. The coverage of this policy was increased to $350,000 in September of 1983 and increased to $525,000 in May of 1984. The Bank paid the increased premiums for these increases. On March 2, 1982, and May 8, 1984, Belsky signed salary continuance agreements with the Bank. Exhibits 1 and 11.
The FDIC, as receiver, sold some of the assets of the closed Bank to Guardian State Bank and Trust. The assets not purchased by Guardian were acquired by the FDIC in its corporate capacity as authorized by 12 U.S.C. § 1823(c)(2)(A). Among the assets so acquired were whatever rights, title or interest the Bank of Cody had in the insurance policy mentioned above. The policy itself provides that the owner of the policy is the Bank and that the beneficiary is named in the application. Exhibit 4. The application states that the beneficiary of the policy is the Bank. Exhibit 3.
Paragraph three of the salary continuance agreement provides that if Belsky worked continuously for the Bank until after his 55th birthday, and if the agreement was still in effect, the Bank would pay monthly retirement benefits to him. Paragraph 10 concerns the creditor status of Belsky. It states:
“The rights of the Executive or any beneficiary of the Executive shall be solely those of an unsecured creditor of the Bank. If the Bank shall acquire an insurance policy or any other asset in connection with the liabilities assumed by it hereunder, then, except as otherwise expressly provided, such policy or other asset shall not be deemed to be held under any trust for the benefit of the Executive or his/her beneficiary or to be collateral security for the performance of the obligations of the Bank, but shall be, and remain, a general, unpledged, unrestricted asset of the Bank.”
Exhibits 1 and 11.
According to the evidence, salary continuance agreements were signed with most, if not all, of the Bank’s officers and life insurance policies were purchased by the Bank on the officers’ lives. The Bank was the owner, beneficiary and payor of all premiums on the policies.
James C. Bishop is the person within First National Life Insurance Company who was primarily responsible for the Bank’s account up through obtaining the initial applications for life insurance and presenting sample salary continuance agreements to the parties to the agreements. Bishop testified that the Bank would purchase and own the life insurance polices on various individuals. The Bank would then enter into side-agreements (the salary continuance agreements) with the officers for future payments. Exhibit 16, the Executive Compensation Plan for the Bank of Cody, was prepared by First National Life. According to the plan, the expense of benefits paid by the Bank pursuant to the salary continuance agreements could be recouped from the cash value of the policies. The policies were set up to cover the entire cost of the salary continuance agreement. Bishop never inquired whether the Bank had other resources to fund the salary continuance agreements.
Bishop also testified that he told Belsky before accepting his application for insurance that the Bank had a liability to Belsky under the salary continuance agreement, that the Bank would be obligated to pay Belsky upon retirement, and that death benefits would be paid by the Bank. It was within the discretion of the Bank to decide whether withdrawals were to be made from the cash value of the policy to recoup the expense of making the retirement payments. The Bank could pay the benefits without calling on the cash value of the policies. Both Bishop and Wayne Wilson, Vice President of First National Life, testified that if the Bank had requested the cash surrender value of the policy First National Life would have paid it.
Raymond Weilage testified that he and others purchased the Bank in 1977 and that he also had an interest in the holding company of the Bank. In 1981 and 1982 he was a director of the Bank and president of the holding company. He was at a bank managers’ meeting in Denver when representatives of First National Life presented its executive compensation plan. Weilage recalled that the plan presented called for the Bank to purchase life insurance policies on its covered employees. There would be separate agreements between the Bank and the employees which would obligate the Bank to make retirement payments to eligible employees. He understood that the Bank could make withdrawals from the cash surrender value of the policies. He stated that he thought the retirement plan for the employees was irrevocable. He knew that neither the salary continuance agreement with Belsky nor the insurance policy stated they were irrevocable but maintains that it was the expressed oral intention of the owners that it be irrevocable. He stated that he understood that the insurance policies were to be used only for retirement or death benefits for the employees.
First National Life’s Executive Compensation Plan was presented at the Denver bank managers’ meeting in the form of a pamphlet. Exhibit 15. Exhibit 16 contains the identical information plus two examples of benefits for Belsky. James Bishop presented this exhibit to Belsky at the Bank in January of 1982. In both exhibits, the operation of the plan is described as follows:
“The Bank will enter into an Agreement with each selected Employee. This agreement will provide that retirement benefits will be paid to the Employee. Should the Employee die prematurely, the Employee’s family will receive certain payments. To informally fund the benefits, the Bank will be the owner, applicant, premium payor and beneficiary of a life insurance contract.”
Both exhibits also provide that upon retirement, “[t]he retired Employee will be paid benefits out of the operating income of the Bank which are tax deductible.” Exhibits 15 and 16. Belsky stated that Bishop did not discuss how he could lose such benefits. Janice Lallman, another Bank employee, stated that Bishop told her the only way she could lose her similar retirement benefits was to quit working for the Bank.
FUNDING
The plaintiff states in his brief that the plan in this case may be an “excess benefit plan.” Excess benefit plans as defined by 29 U.S.C. § 1002(36) are exempted from ERISA coverage if they are unfunded. 29 U.S.C. § 1003. Unfunded plans which are “maintained by an employer primarily for the purpose of providing deferred compensation for a select group of highly compensated employees” are also exempt from ERISA coverage concerning participation and vesting, funding and fiduciary responsibility. 29 U.S.C. §§ 1051, 1081 and 1101. The FDIC argues that First National Life’s Executive Compensation Plan is unfunded and ERISA does not apply even if it is a plan as defined by ERISA. Two cases are pivotal in determining whether the plan is funded, Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8th Cir.), cert, denied, 454 U.S. 968, 102 S.Ct. 512, 70 L.Ed.2d 384 (1981); and Belka v. Rowe Furniture Corp., 571 F.Supp. 1249 (D.Md.1983). In Dependahl, Falstaff instituted a Contractual Benefit Plan for Survivors of Selected Executives, under the terms of which the named beneficiaries of an executive were to receive an annuity upon the executive’s death. Falstaff purchased whole life insurance policies on approximately one dozen high ranking executives to fund the plan. The Eighth Circuit agreed that the plan was funded under ERISA.
“Funding implies the existence of a res separate from the ordinary assets of the corporation. All whole life insurance policies which have a cash value with premiums paid in part by corporate contributions to an insurance firm are funded plans. The employee may look to a res separate from the corporation in the event the contingency occurs which triggers the liability of the plan.”
Dependahl v. Falstaff Brewing Corp., supra, at 1214.
The FDIC argues that the factual situation in Belka is much closer to the factual situation of the plaintiff and should control on the determination of funding. In Belka, the plan provided that an employee “shall have ‘no rights with respect to, or claim against, such policy,’ except as provided in the insurance policy itself.” Belka v. Rowe Furniture Corp., supra, at 1252. The Bel-ka court found this provision distinguished the case from Dependahl where the employee’s estate could look to a res separate from the company in the event that the company would not pay the benefits. Id. In Belka the life insurance policies purchased by the company would fund the payments to the employees only in rare instances, when the employee died. Upon retirement or discharge, the company would pay covered employees “out of the company’s general revenues, at least until the employee’s death.” Id., at 1252.
The FDIC interprets paragraph ten of of the salary continuance agreement as showing that neither Belsky nor the Bank contemplated that the insurance policy constituted a separate res to which Belsky could look if the Bank failed to fulfill its obligations to him under the salary continu-anee agreement. The Eleventh Circuit has stated that the purchase of insurance does not necessarily establish a funded plan; it is merely evidence that a plan, fund, or program has been established. Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir.1982) (en banc).
“In summary, a ‘plan, fund, or program’ under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits.”
Id.
Joseph A. Kertchmark, a field office supervisor and bank examiner for the Department of Bank Supervision of the FDIC, participated in the March 1984 examination of the Bank and was the examiner in charge of the August 1984 examination. He became aware of the salary continuance agreements and insurance policies during the March examination. Kertchmark found no documentation tying the two together. He stated that the FDIC viewed the policies as general assets of the Bank and the salary continuance agreements as liabilities of the Bank.
Belsky points out that death benefits in the case sub judice are funded in the same way as death benefits in the Dependahl case. The employer purchased and owned life insurance policies on the employees. Death benefits payable to the employer were then available to pay death benefits under separate agreements with the employee. The fact that retirement benefits in the instant case were intended to be financed by withdrawals from the cash value of the policies does not, in Belsky’s opinion, distinguish the plan from the funded plan in Dependahl. According to Belsky, the Belka court misunderstood Dependahl when attempting to distinguish the plans based upon the provision in the Belka agreement that the employee shall have no right or claim against the policy except as provided in the insurance policy itself. I disagree, paragraph 10 does distinguish the salary continuance agreement from the Dependahl case. Paragraph 10 shows that the parties did not interpret the policy as creating a separate res to which Belsky could look if the Bank failed to pay the promised retirement benefits. The executive compensation plan in the case sub judice is unfunded and ERISA does not apply. Belka v. Rowe Furniture Corp., supra.
Belsky also argues that exclusionary language in an agreement should not be determinative of whether a plan is funded since such language may be unenforceable under ERISA. Bruchac v. Universal Cab Co., 580 F.Supp. 295 (N.D.Ohio 1984); Winer v. Edison Brothers Stores Pension Plan, 593 F.2d 307 (8th Cir.1979). These cases are inapposite in that they do not deal with the issue of funding of a plan. The first concerns the nonforfeitability of vested benefits under 29 U.S.C. § 1053 and the second the enforceability of “bad boy” clauses after the enactment of ERISA.
12 U.S.C. § 1823(e)
Section 1823(e) of Title 12 of the United States Code provides that agreements which tend to diminish or defeat the right, title, or interest of the FDIC, in its corporate capacity, in any of the assets that it has acquired by purchase must meet four conditions. The third requirement is that the agreement “shall have been approved by the Board of Directors of the Bank or its loan committee, which approval shall be reflected in the minutes of said Board or committee.” If Belsky were awarded the policy it would diminish the FDIC’s corporate interest in that asset. The salary continuance agreement falls within § 1823(e). The minutes of the Board of Directors of the Bank do not reflect that the salary continuance agreement of Belsky was approved by the Board. The agreement is therefore not enforceable against the FDIC in its corporate capacity.
Only two references to an employee benefit plan are contained in the minutes of the meetings of the board of directors of the Bank. The August 20, 1983, minutes state: “A motion by D.E. Belsky and seconded by Raymond L. Weilage, Jr. to increase the asset account of Employee Benefit Fund by $90,000 to $100,000. Motion carried.” Exhibit 20. The May 25, 1984, minutes state:
“A motion by Janice M. Lallman and seconded by Delbert D. Fullerton to delete Raymond L. Weilage, Jr. and James D. Peters from the Employee Benefit Program through First National Life Insurance Company of USA. The adjusted balance is $12,730.37 and represents the adjusted difference between the current program and the deletion of Mr. Peters and Mr. Weilage. The motion carried on a unanimous ballot, with Mr. Weilage abstaining from the voting.”
In interpreting the approval requirement, one court has stated that: “[t]he side agreement itself must be referenced or its existence must be affirmatively and directly acknowledged by the Bank’s board of directors or loan committee, and such reference to, or acknowledgement of the side agreement must be specifically reflected in the minutes of the board or committee.” FDIC v. Gardner, 606 F.Supp. 1484, 1488 (S.D.Miss.1985). This requirement has not been met. Approval of the salary continuance agreement is not reflected in the entries quoted above.
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9316166-11730 | KANNE, Circuit Judge.
A jury convicted Tyrone Wallace of being a felon in possession of a firearm while having three prior violent felony convictions. The district court sentenced him to 300 months imprisonment for the offense. In this appeal he raises three issues: (1) that the district court erred in ordering him to turn over to the government a prior statement of a defense witness, (2) that his Sixth Amendment right to a speedy trial was violated, and (3) that the district court wrongly applied the armed-career-criminal statute to enhance his sentence. We reject each claim and affirm both his conviction and sentence.
I. History
The charge in this case arose out of an incident that occurred at the Chicago apartment of Carolyn Kirkman on the night of April 26, 1999. Wallace spent much of that day in and around Kirkman’s apartment. The two had four children together, and Wallace made frequent visits to the apartment, but he did not five there. Around 10:00 p.m. on the evening of the 26th, Kirkman left the apartment for work and Wallace stayed behind. At some point after Kirkman left, Wallace went on a walk through the neighborhood and encountered Ruby West, who was pregnant at the time. He invited West back to Kirkman’s apartment to watch videotapes.
When they reached the back porch of the Kirkman’s apartment, Wallace retrieved a gun from above the door and pointed it at West’s head. He threatened to shoot her in the abdomen and kill her baby unless she performed oral sex on him. West began to comply with the demand, when one of Kirkman’s children, from inside the apartment, told Wallace that he was wanted on the telephone.
Wallace ordered West to go with him into the apartment. While Wallace was on the phone, or soon after, West was able to escape. When she got out of the apartment, she spotted two police officers and ran toward them yelling that Wallace had a gun. Officers Grassi and Dougherty spoke briefly with West and then went to the apartment and knocked on the door." Wallace opened the door and let them inside. Once the officers were inside the apartment, Wallace became belligerent, and the police were forced to place him in handcuffs. After restraining Wallace, Officer Dougherty conducted a visual sweep of the apartment. He noticed a gun holster on the kitchen window sill, and while going to retrieve the holster, he spotted a nine-millimeter pistol lying on the kitchen floor. Both items were seized, and the officers placed Wallace under arrest. He was charged by the State of Illinois for possession of the pistol, but the State did not proceed with that charge.
Nearly a year later, on March 6, 2001, a federal grand jury returned a one-count indictment charging Wallace with being a felon in possession of a firearm at a time when he had three previous convictions for violent felonies, in violation of 18 U.S.C. §§ 922(g) and 924(e)(1) (2003). On October 11, 2001, following a two-day trial, the jury convicted him, and he was sentenced to 300 months imprisonment.
II. Analysis
A. Disclosure of Defense Investigator’s Report
Before trial, Wallace moved to suppress the admission of the pistol into evidence on the ground that the warrantless search of the apartment violated the Fourth Amendment. The government argued that Wallace lacked a reasonable expectation of privacy in the apartment because it was Kirkman’s residence, not his. At the beginning of the suppression hearing, the government informed the district court that if the defendant called Kirkman to testify as a witness, it would request a copy of a defense investigator’s report of a prior interview with Kirkman in which she discussed, among other things, the frequency of Wallace’s visits to the apartment. Wallace objected, arguing only that there was no rule requiring reciprocal discovery or disclosure of witness statements by the defense in a criminal case. The court disagreed and ordered that after Kirkman testified, the investigator’s report must be turned over to the government. The government did not use the report at the suppression hearing. At trial, however, the government did use it to impeach Kirkman when her testimony conflicted with statements recorded in the investigator’s report.
Wallace now contends that the district court erred in ordering him to disclose the investigator’s report and that this error denied him a fair trial. As he did in the district court, Wallace insists that there is no rule of reciprocal discovery of defense witness statements in criminal cases. He is wrong, of course. Federal Rule of Criminal Procedure 26.2(a) provides:
After a witness other than the defendant has testified on direct examination, the court, on motion of a party who did not call the witness, must order an attorney for the government or the defendant and the defendant’s attorney to produce, for the examination and use of the moving party, any statement of the witness that is in their possession and that relates to the subject matter of the witness’s testimony.
Fed. R. CRIM. P. 26.2(a) (emphasis added).
Wallace does not argue that Rule 26.2 is inapplicable to this case; indeed, he does not cite or even mention Rule 26.2 at all. In reviewing the record, we find no reason why Rule 26.2 would not require Wallace to disclose the report. Subsection (g) of the rule makes clear that it applies in suppression hearings. Fed. R. Crim. P. 26.2(g). Further, it is apparent that the defense investigator’s report qualifies as a “statement” of the witness under the definition of that term provided in subsection (f)(2) of the rule.
Instead of discussing Rule 26.2, Wallace contends that requiring reciprocal discovery of defense witness statements violates his Fifth and Sixth Amendment rights. But he fails to acknowledge that this argument was rejected by a unanimous Supreme Court in United States v. Nobles, 422 U.S. 225, 234, 240, 95 S.Ct. 2160, 45 L.Ed.2d 141 (1975). In Nobles, the Court held that ordering a defendant to turn over a defense investigator’s report of interviews with witnesses did not violate the Fifth Amendment because it was not equivalent to compelling information from the defendant. Id. at 234, 95 S.Ct. 2160. And the Court held that such an order did not violate the Sixth Amendment because there was no intrusion on the attorney-client relationship that impaired counsel’s ability to provide effective representation. Id. at 240, 95 S.Ct. 2160. Indeed, Nobles was a basis on which Rule 26.2 was added to the Federal Rules of Criminal Procedure. See Fed R. CRIM. P. 26.2 advisory committee’s note.
Wallace’s argument that the district court’s order violated the work-product rule is equally , unpersuasive. Rule 26.2 contains no general work-product exception. See 2A Wright, Fedeeal Praotioe and Procedure § 437, at 217 (3d. ed.2000). Rather, 26.2(c) provides that if the party calling the witness claims that the prior witness statement contains privileged information, the district court shall review the statement in camera and excise any portions that are in fact privileged. Fed. R. Crim. P. 26.2(c) Wallace never requested that the district court review the statement and redact potentially privileged material; rather, he simply maintained that no reciprocal discovery was required. Rule 26.2 provides adequate safeguards to protect attorney work-product, see Goldberg v. United States, 425 U.S. 94, 106, 96 S.Ct. 1338, 47 L.Ed.2d 603 (1976) (noting that “the primary policy underlying the work-product doctrine ... is adequately safeguarded by the Jencks Act,” which was incorporated into Rule 26.2) but Wallace, for whatever reason, simply chose not to use those safeguarding procedures.
B. Sixth Amendment Right to a Speedy Trial
Wallace was arrested by state authorities on April 26, 1999. The federal indictment was returned on March 6, 2001, and the case went to trial on October 9, 2001. Wallace contends that the nearly two-year delay between his state arrest and the return of the federal indictment violated his Sixth Amendment right to a speedy trial.
The Sixth Amendment provides that “[i]n all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial.” U.S. Const, amend. VI. It is well settled that the Sixth Amendment speedy-trial right has no application prior to arrest or indictment. Doggett v. United States, 505 U.S. 647, 655, 112 S.Ct. 2686, 120 L.Ed.2d 520 (1992); United States v. MacDonald, 456 U.S. 1, 6, 102 S.Ct. 1497, 71 L.Ed.2d 696 (1982). Wallace’s claim is based on the assumption that his speedy-trial right was triggered when he was arrested on April 26, 1999. But that arrest was made by state authorities on a state charge, and therefore does not start the Sixth Amendment speedy trial clock for purposes of the subsequent federal charge. United States v. Dickerson, 975 F.2d 1245, 1252 (7th Cir.1992) (“The ... period between [defendant’s] arrest by state authorities on state charges and the return of the federal indictment cannot be the basis of a Sixth Amendment claim.”). Wallace’s right to a speedy trial on the federal charge did not arise until the federal indictment issued on March 6, 2001, when the formal prosecution of the federal charge began. See Doggett, 505 U.S. at 655, 112 S.Ct. 2686. Thus, we find no violation of Wallace’s Sixth Amendment rights.
It is of course true that, while not creating a Sixth Amendment issue, “delay prior to arrest or indictment may give rise to a due process claim under the Fifth Amendment.” MacDonald, 456 U.S. at 7, 102 S.Ct. 1497 (citation omitted). Wallace, however, has made no due process claim in this appeal. Even if he had, we doubt he would be entitled to relief. To have his indictment dismissed on due-process grounds, Wallace would have had to show that (1) the pre-indictment delay caused substantial prejudice, and (2) “the delay was an intentional device to gain tactical advantage over the accused.” Dickerson, 975 F.2d at 1252 (quoting United States v. Marion, 404 U.S. 307, 324, 92 S.Ct. 455, 30 L.Ed.2d 468 (1971)). We see no evidence that would lead us to believe he has suffered substantial prejudice or that the government used the delay to gain an advantage.
C. Sentence Enhancement
At sentencing, the district court determined that Wallace was eligible for the armed-career-criminal sentence enhancement provided in 18 U.S.C. § 924(e). Under this provision, a defendant who violates 18 U.S.C. § 922(g), and who has at least three prior convictions for violent felonies or serious drug offenses, is subject to a mandatory minimum sentence of fifteen years and an elevated offense level for the § 922(g) conviction. 18 U.S.C. § 924(e) (2003); U.S.S.G. § 4B1.4 (2003). The district court held that Wallace qualified for the enhancement based on three prior violent felony convictions: a 1990 Illinois aggravated-battery conviction, a 1993 Illinois second-degree-murder conviction, and a 1993 Illinois unlawful-restraint conviction. On appeal, Wallace concedes that aggravated battery and second-degree murder qualify as violent felonies, but he maintains that the district court erred in classifying unlawful restraint as a violent felony.
Whether a prior offense qualifies as a “violent felony” is a question of law that we review de novo. United States v. Bryant, 310 F.3d 550, 552 (7th Cir.2002). Under the armed-career-criminal statute, “violent felony” includes any felony that “(i) has as an element the use, attempted use, or threatened use of physical force against the person of another; or (ii) is burglary, arson, or extortion, involves use of explosives, or otherwise involves conduct that presents a serious potential risk of physical injury to another.” 18 U.S.C. 924(e)(2)(B) (emphasis added).
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2076033-17556 | OPINION OF THE COURT
FREEDMAN, Circuit Judge:
The trustees of The United Mine Workers of America Welfare and Retirement Fund of 1950 brought this action against Seanor Coal Company, the appellant, for royalty payments of forty cents per ton as fixed by the National Bituminous Coal Wage Agreement as amended in 1964, on coal produced by the company between February 1 and June 30, 1965. They claimed also the balance on a promissory note which they alleged was accelerated because of the default in the payment of royalties. The company counterclaimed for payment it had made earlier into the welfare and retirement fund under the forty cents royalty provision of the agreement. The court below entered summary judgment in favor of the plaintiffs for the royalties, amounting to $38,110.93 with interest, and for the unpaid balance of the note in the amount of $52,441.82 with interest, and also entered summary judgment in favor of the plaintiffs on the company’s counterclaim. (256 F.Supp. 456 (W.D.Pa.1966)). The company presents a number of issues. It asserts that (1) the agreement requiring the payment of royalties violates the Sherman Antitrust Act; (2) it also violates § 8(e) of the National Labor Relations Act; and (3) the union did not fulfill an oral agreement made by the president of the local union on which the company relied in reopening its mine, which relieved it of its contractual obligation to pay royalties.
I.
In support of its contention that the provision for the payment of royalties under the agreement is illegal under the hot cargo prohibition of § 8(e) of the National Labor Relations Act, the company relies upon two decisions of the National Labor Relations Board. Raymond O. Lewis, 144 N.L.R.B. 228 (1963), held invalid under § 8(e) the subcontracting provision ,of the 1958 National Bituminous Coal Wage Agreement which required that the terms and conditions of employment for subcontracting operations be at least as favorable as those fixed for employees of signatories of the agreement. Later, the board dealt with the subsequent 1964 agreement, which discontinued this requirement but added a new provision which in addition to increasing from thirty to forty cents the royalty payments to the fund for every ton of coal produced by the operator for use or for resale, also required for the first time an eighty cent royalty on coal which an operator acquired from a non-signatory. The Board held that this new provision also violated § 8(e). Raymond O. Lewis, 148 N.L.R.B. 249 (1964). The first decision, dealing with the 1958 agreement, came before the Court of Appeals for the District of Columbia, which remanded the case to the Board for reconsideration in the light of recent decisions rejecting the Board’s interpretation of § 8(e). Lewis v. NLRB, 122 U.S. App.D.C. 18, 350 F.2d 801 (1965). The court noted that its action undermined the Board’s finding in the second case that the 1964 amendment violated § 8 (e). A trial examiner’s subsequent decision that the 1964 agreement violated § 8(e) has not yet been acted on by the Board.
The court below believed that the question whether the provision of the 1964 agreement was illegal as an unfair labor practice under § 8(e) was one for the exclusive jurisdiction of the Board. We believe it is unnecessary to decide this question. For even if the Board should again reach the same conclusion regarding the provision before it, the company would not thereby be relieved of its obligation to pay the royalties here involved. The Board dealt in the first case with an entirely different provision from that which is here involved; and in the second case it dealt not with the forty cent royalty which is here involved, but with the effect of that provision in relation to the establishment for the first time in the 1964 agreement of a difference in the royalties exacted from an operator if he purchasd from nonsignatory rather than from other signatory op-operator if he purchased from nonsignaroyalties where the purchase was from nonsignatory operators.
It is clear, therefore, that the Board has not decided or even cast any doubt on the validity of the basic royalty provision of forty cents per ton but instead has limited its inquiry to the effect under § 8(e) of the exaction from the coal operators of the doubled royalty where they purchased coal from outside, nonsignatory operators. The basic provision of forty cents royalty per ton for coal produced by the employer is radically different from the special provision requiring an eighty cents royalty on coal acquired from outside nonsignatory operators and standing alone is beyond the range of § 8(e). The essence of a proscribed “hot cargo” agreement is that it applies pressure on an employer, directly or indirectly, to require him to cease doing business with a third party in order to persuade the third party to accede to the union’s objectives. Its focus, therefore, is on the effect of the agreement upon the relationship of the employer who is a party to the collective bargaining agreement with an outside employer. The Board recognized this in its second decision in Raymond O. Lewis, supra, where it held that the requirement of an eighty cent royalty on coal acquired from nonsignatory operators was to restrain signatory operators from acquiring coal from nonsignatories and thus to limit the coal operators’ relationships to other operators who had signed a union contract. This element of discrimination is of course absent from that portion of the agreement which fixes the forty cent royalty, for that has no relation to purchases from nonsignatory operators, and indeed existed independently of it before 1964.
In these circumstances, any finding by the Board that the 1964 agreement is invalid under § 8(e) would not affect the severable basic royalty provision. Section 8(e) does not invalidate an entire collective bargaining agreement because it contains a “hot cargo” provision; the statute merely makes a contract with such a provision unenforceable and void to the extent that it contains the “hot cargo” provision. Indeed, it is particularly requisite in a case such as this not to allow the possible invalidity of a provision which is not operative as to these parties to afford a basis for noneompliance with a valid obligation, for the Supreme Court has pointed out that royalty payments into a welfare fund which are bargained for have the characteristics of compensation to the workers for their services.
II.
The company’s claim that the agreement violates the Sherman Antitrust Act is not a defense to the trustees’ action. It is now well established that the remedy for violation of the antitrust law is not avoidance of payments due under a contract, but rather the redress which the antitrust statute establishes, — a private treble damage action. Kelly v. Kosuga, 358 U.S. 516, 79 S.Ct. 429, 3 L.Ed.2d 475 (1959); Bruce’s Juices, Inc. v. American Can Co., 330 U.S. 743, 67 S.Ct. 1015, 91 L.Ed. 1219 (1947). See also Hanover Shoe, Inc. v. United Shoe Machinery Corp., 377 F.2d 776, 791 (3 Cir. 1967). To permit avoidance of payments required under the contract would go beyond the remedy prescribed by the antitrust statute and, as the Supreme Court has pointed out in Bruce’s Juices, Inc. v. American Can Co., supra, 330 U.S. at 756-757, 67 S.Ct. 1015, would have the incongruous effect of affording an injured party simple compensatory damages where he is a defendant while allowing him to treble the identical damages where he is a plaintiff. Moreover, the general rule is especially applicable here, where as we have already pointed out the payments required by the contract have the characteristics of compensation to the employees for services they have already rendered. The company claims, however, that the case falls within the exception prescribed where judicial recognition of the contract would work to enforce “the precise conduct made unlawful by the Act.” This exception is of no avail to the company, for it is directed to cases where the contract price itself has been inflated because of unlawful price fixing, whereas here there is involved a contract valid on its face and the fact that it provided the occasion for a restrictive agreement does not require that it should itself be invalidated.
III.
The company’s final defense is the alleged oral modification of the 1964 agreement. It asserts that shortly after it had terminated operation of its mine in February 1965 because of heavy losses, it reopened the mine in reliance upon the statement of the president of the local union that if it did so “the productivity per employee would increase sufficiently to enable the Defendant to meet its obligations under the labor contract.” The company alleges that this statement was intended to induce it to reopen the mine and to incur new and additional obligations including the royalties, and that in reliance on the representation it reopened the mine but that “the increase in productivity per employee promised and represented * * * has in fact not occurred.”
In its pleading the company presented these claims as establishing an estoppel against the plaintiffs from claiming that any royalties were due. In the court below and here, however, it has apparently abandoned this contention and instead relies upon the circumstances as creating an oral modification of the agreement to pay royalties.
We come then to the question whether there was a valid oral modification of the agreement which absolves the company of the requirement to pay the forty cents per ton royalty.
At the outset it may be observed that the alleged agreement might well be declared ineffective because it lacks definiteness and is vague and uncertain. There is, however, a more fundamental objection to the alleged oral modifica tion; this objection is based on § 302 (c) (5), 29 U.S.C. § 186(c) (5), of the Labor-Management Relations Act, the provision under which the fund was established. This provision was written into the statute because of the special concern of Congress over the welfare fund of the United Mine Workers of America, which already was in existence and which Senator Taft described as administered without restriction by the union so that “practically the fund became a war chest * * * for the union.” It was part of the larger congressional concern over corruption of union officials and coercion of employers, to the detriment of honest bargaining relationships. In § 302 of the Labor-Management Relations Act, 29 U.S.C. § 186, Congress therefore imposed a maximum penalty of imprisonment for one year and a fine of $10,000 for violation of its provisions, which prohibited in broad terms, with certain narrow exceptions, both the payment of anything of value by an employer and its receipt by a representative of any of his employees. One of the exceptions (§ 302(c) (5), 29 U.S.C. § 186(c) (5)) permitted employer contributions to welfare trust funds under rigid safeguards. It required that the fund be for the sole and exclusive benefit of the employees and their families and dependents, that all payments be held in trust to pay out only certain specified benefits, that “the detailed basis on which such payments are to be made is specified in a written agreement with the employer”, that the employees be equally represented with the employers in the administration of the fund, together with neutral persons, that there should be an annual audit of the fund and a statement of the audit be made available for inspection by interested persons and that payments intended for pensions and annuities be made to a separate trust to be used solely for that purpose.
The requirement that “the detailed basis on which such payments are to be made is specified in a written agreement with the employer * * * ” (§ 302(c) (5) (B), 29 U.S.C. § 186(e) (5) (B)) is not free from ambiguity. The same phrase, “such payments”, appears in the proviso in § 302(c) (5) (A), 29 U.S.C. § 186(c) (5) (A), where it clearly refers to payments made by the employer. In § 302(c) (5) (B), 29 U.S. C. § 186(c) (5) (B), however, the language seems to look to payments to be made out of the fund by the trustees to the employees. We may not, however, determine the meaning of the provision by a microscopic study of its language in order to decide whether “such payments” refers only to those made by the employer to the trust fund or only to those made by the trustees to the employees. We have recently been reminded of the particular emphasis which must be given to the legislative history of labor legislation, and the duty which rests on the federal courts to fashion a body of federal common law for the enforcement of collective bargaining agreements. It would be, at the least, incomplete to require for the benefit of the employees and to prevent collusive or fraudulent side arrangements between employers and union representatives that the benefits which the employees are to receive from union welfare funds shall be specified in a written agreement with the employer and yet to permit the written foundation on which the welfare fund rests, in this ease calling for the amount of the royalties payable on coal mined, to be the subject of oral modifications. It would expose employer and union representatives alike to the temptations of corrupt bargains, for it would permit the union to extract from an employer a secret promise to pay some other amount into the fund without requiring such payments to become a matter of record and thus would frustrate the purpose of § 302(c) (5). Moreover, the employees have a right to know if the obligation to make the payments into the fund is modified; otherwise they might be led to remain at their jobs in reliance on the benefits which the formal agreement has promised, after they have been eroded by oral modification of the obligation to make the payments supporting such benefits. Thus, the policy of § 302(c) (5) requires that any modification of the basis of both the payments into the fund and out of the fund be made in writing. Thereby, we also preserve the prophylactic effect of informing not only the employees, but all other employers similarly situated, who should know what the arrangement is without fear of surreptitious side agreements. Congress knew that agreements such as the National Bituminous Coal Wage Agreement were the result of industry-wide bargaining and were to bind numerous employers. It knew, of course, that the elaborate collective bargaining agreements which re-suited were reduced to writing; it could hardly have intended that individual operators should be permitted to enter into oral side agreements with local union officials cancelling out those provisions dealing with the significant subject of payments into the union welfare fund. Whatever ambiguity lurks in the phrase “such payments” does not justify a conclusion that the provision for payment contained in the written collective bargaining agreement may be removed by oral arrangement. On the contrary, it would take clear and unambiguous language to prescribe that in order to fall within the exceptions to the criminal sanctions of § 302 only the detailed basis for the payments by the welfare fund to the employees but not the payments by the employer into the fund must be specified in the written agreement with the employer.
We hold therefore that an oral modification which would have suspended the payment of the forty cents per ton royalty into the fund by the employer was ineffective because it violated § 302(c) (5) (B). Nothing in our decision in Lewis v. Mears, 297 F.2d 101 (3 Cir. 1961), cert. denied, 369 U.S. 873, 82 S. Ct. 1142, 8 L.Ed.2d 276 (1962), forecloses this conclusion. That case held only that parole evidence was admissible to show that the written agreement to make payments into a welfare trust never became effective because it was not fully executed and delivered. Here, on the other hand, it is agreed that a valid written contract existed which obligated the company to make royalty payments into the fund, under which the company in fact made substantial payments, but a claim is made of an oral arrangement which later suspended or modified it. Such an oral agreement to suspend or modify an existing written contract falling within § 302(c) (5) (B) is invalid and there can be no estoppel against the assertion of the public policy which condemns it.
The judgment of the district court will be affirmed.
. The counterclaim was in the amount of $88,322.20, representing payments made at forty cents per ton.
. The new addition, somewhat circumstantially phrased, reads: “On all bituminous coal procured or acquired by any signatory Operator for use or for sale there shall, during the life of this Agreement, be paid into such Fund by each such Operator signatory hereto or by any subsidiary or affiliate of such Operator signatory hereto the sum of eighty cents (800) per ton of two thousand (2,000) pounds on each ton of such bituminous coal so produced or acquired on which the aforesaid sum of forty cents (400) per ton has not been paid into said fund prior to such procurement or acquisition.”
. See 350 F.2d at 802, n. 12.
. Compare San Diego Bldg. Trades Council, etc. v. Garmon, 359 U.S. 236, 79 S. Ct. 773, 3 L.Ed.2d 775 (1959) with Vaca v. Sipes, 386 U.S. 171, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967) ; Linn v. United Plant Guard Workers of America, Local 114, 383 U.S. 53, 86 S.Ct. 657, 15 L.Ed. 2d 582 (1966) ; Comment, 113 U.Pa. L.Rev. 1104 (1965).
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9343930-14402 | CALABRESI, Circuit Judge.
John Powell appeals the district court’s denial of his motion to dismiss. See Fed. R.Civ.P. 12(b)(6). Among other things, the district court held that Powell did not enjoy qualified immunity from a suit under 42 U.S.C. § 1983. We affirm that decision and hold that qualified immunity does not protect a private defendant against § 1983 liability where that private defendant is alleged to have conspired with government officials to deprive another of federal rights. Since the other issues Powell raises on appeal are not inextricably intertwined with the question of qualified immunity or otherwise necessary to ensure meaningful review of that question, we do not have jurisdiction to consider them in this interlocutory appeal.
BACKGROUND
John Powell is a defendant in an action that claims violations of 42 U.S.C. § 1983. Powell moved, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the claims against him. He appeals the decision and order of the United States District Court for the Eastern District of New York (Hurley, J.) denying that motion.
Because on a 12(b)(6) motion a court must treat as true the pleading’s factual allegations, McCall v. Pataki, 232 F.3d 321, 322 (2d Cir.2000), we set forth the relevant facts as they are alleged in the complaint and assume for the purposes of our review that those assertions are true.
In the Spring of 1998, Robert Toussie and his company, David Park Estates, Inc., (collectively “Toussie”) obtained a variance from the Brookhaven Board of Zoning Appeals (“the Board”) and a build ing permit from the Town of Brookhaven, authorizing Toussie to build a single family home on property he owned. After Tous-sie began construction on the property, John Powell, then Chairman of the Republican Party of Brookhaven and Suffolk County, and Felix Grucci, the Supervisor of the Town of Brookhaven, separately demanded that Toussie stop all construction on the lot. When Toussie refused, Powell and Grucci successfully pressured the Board to rescind the variance.
Toussie then brought an action against the Board in the Suffolk County Supreme Court, which vacated and annulled the Board’s decision to deny Toussie the setback variance and directed the Board to reinstate the variance and issue a new building permit. The Board, however, did not immediately comply with this order, but delayed development of the property by filing a frivolous appeal, which the Board subsequently failed to perfect in a timely manner. As a result of the delay caused by these actions, the buyers of the home Toussie was building cancelled their contract and Toussie was prevented from selling or developing the property for more than two years.
Powell and Grucci then retaliated against Toussie by securing an amendment (informally known as the “Toussie Law”) to the Brookhaven Town Code that made it significantly more expensive for Toussie to develop his substantial land holdings.
Toussie brought this suit in the Eastern District for New York against a number of defendants, including Powell. Toussie claims violations of 42 U.S.C. § 1983 in that the defendants deprived him of his rights to due process and to the equal protection of the laws, and retaliated against him for having engaged in activities protected by the First Amendment.
Powell alone moved to dismiss the claims against him, arguing (1) that the complaint failed to state a § 1983 claim against Powell, since he was a private individual and did not act under color of state law, (2) that the complaint did not allege that Powell himself caused any constitutional violation, (3) that Powell was protected by qualified immunity, (4) that the action was time-barred, and (5) that Powell was not properly served with a summons and complaint. The district court rejected each of these contentions and denied Powell’s motion to dismiss. On appeal, Powell takes exception to the district court’s rulings on all of the above issues, except the matter of proper service.
DISCUSSION
Our review of the district court’s rejection of Powell’s Rule 12(b)(6) motion to dismiss is de novo. Conboy v. AT & T Corp., 241 F.3d 242, 246 (2d Cir.2001). As noted above, in determining whether the motion should have been granted, we assume that the factual allegations in the pleadings are true. McCall, 232 F.3d at 322.
I.
Toussie maintains that we do not have jurisdiction to hear this interlocutory appeal. He argues that Powell is a private person and hence that the recognized reasons for allowing interlocutory appeals of certain qualified immunity decisions — to prevent “the general costs of subjecting officials to the risks of trial,” Mitchell v. Forsyth, 472 U.S. 511, 526, 105 S.Ct. 2806, 86 L.Ed.2d 411 (1985) (internal quotation marks omitted) — do not apply. See Chicago & N.W. Transp. Co. v. Ulery, 787 F.2d 1239, 1240-41 (8th Cir.1986) (“[The Mitchell] rationale has no application ... where the defendants ... are not public officials but private parties.”); Lovell v. One Bancorp, 878 F.2d 10, 12-13 (1st Cir.1989). But cf. DeVargas v. Mason & Hanger-Silas Mason Co., 844 F.2d 714, 717 (10th Cir.1988) (“[W]e hold that private parties acting pursuant to contractual duties may bring interlocutory appeals from the denial of qualified immunity.”).
If private persons in Powell’s position might be entitled to qualified immunity, however, then they must be able to bring an interlocutory appeal on the issue, for qualified immunity “is an immunity from suit rather than a mere defense to liability; and like an absolute immunity, it is effectively lost if a case is erroneously permitted to go to trial.” Mitchell, 472 U.S. at 526, 105 S.Ct. 2806 (emphasis in original). To date, our cases have not decided whether a private defendant who is alleged to have conspired with government officials to deprive another of federal rights is entitled to qualified immunity. Because Powell has, under our prior cases, a colorable claim to qualified immunity, we have jurisdiction to consider his claim, since otherwise that claim would be “effectively lost.” See Felix E. Santana v. Valez, 956 F.2d 16, 19-20 (1st Cir.)(“To ascertain whether the appellants have a right to an interlocutory appeal requires that we determine whether they would be entiled to raise the defense of qualified immunity.” cert. denied 506 U.S. 817, 113 S.Ct. 59, 121 L.Ed.2d 28 (1992). Cf. Richardson v. McKnight, 521 U.S. 399, 402, 117 S.Ct. 2100, 138 L.Ed.2d 540 (1997) (suggesting that Mitchell authorized the Sixth Circuit to hear private defendants’ interlocutory appeal of the trial court’s determination that, as private persons, they could not claim qualified immunity). Whether after our holding in this case, which is that private defendants in Powell’s position are not entitled to qualified immunity, such a defendant may bring an interlocutory appeal of a denial of qualified immunity is a question that we need not and do not reach.
II.
Jurisdiction having been established, this appeal turns on Powell’s argument that, despite the fact that he is not a government official, he is entitled to qualified immunity. Our evaluation of that argument begins with the Supreme Court’s decision in Wyatt v. Cole, 504 U.S. 158, 112 S.Ct. 1827, 118 L.Ed.2d 504 (1992), which considered whether private defendants charged with § 1983 liability for invoking state replevin, garnishment, and attachment statutes later declared unconstitutional were entitled to qualified immunity from suit. The Wyatt Court first asked “whether there was an immunity at common law that Congress intended to incorporate in the Civil Rights Act” and found that private defendants enjoyed no such common law immunity from the closest analogous torts, malicious prosecution and abuse of process. Id. at 164, 112 S.Ct. 1827. It then examined policy considerations and stated that “we have recognized qualified immunity for government officials where it was necessary to preserve their ability to serve the public good or to ensure that talented candidates were not deterred by the threat of damages suits from entering public service.” Id. at 167. Wyatt observed that “[tjhese rationales are not transferable to private parties” and concluded that qualified immunity is not available for private defendants faced with § 1983 liability for invoking state replevin, garnishment, or attachment statutes. Id. at 168-69.
There is some question as to how broadly Wyatt should be read. Wyatt’s, holding is expressly limited to the question of qualified immunity and leaves open the possibility that a private defendant to a § 1983 action “could be entitled to an affirmative defense based on good faith and/or probable cause or that § 1983 suits against private, rather than governmental, parties could require plaintiffs to carry additional burdens.” Id. at 169,112 S.Ct. 1827. It is less clear whether the holding is also limited to private defendants who are alleged to have invoked state replevin, garnishment, or attachment statutes, or whether it applies more generally to all private defendants alleged to have “conspire[d] with state officials to violate constitutional rights” (the question on which certiorari was granted, id. at 168, 112 S.Ct. 1827). See Richardson, 521 U.S. at 404, 117 S.Ct. 2100 {“Wyatt explicitly limited its holding to what it called a ‘narrow’ question about ‘private persons ... who conspire with state officials,’ and it answered that question by stating that private defendants ‘faced with § 1983 liability for invoking a state replevin, garnishment, or attachment statute’ are not entitled to immunity.” (citations omitted, alteration in original)); Burrell v. Bd. of Trs. of Ga. Military Coll., 970 F.2d 785, 794-795 (11th Cir.1992) (“Although the Court [in Wyatt ] did not explicitly overrule decisions holding that qualified immunity is available to private defendants in other circumstances, the Court’s analysis does not bode well for the continued vitality of these decisions. Instead of restricting its holding to attachment cases, the [Wyatt ] Court merely left open ‘the possibility that private defendants ... could be entitled to an affirmative defense ....’” (quoting Wyatt, 504 U.S. at 169, 112 S.Ct. 1827)).
'Whatever the precise holding of Wyatt may be, its logic applies as much to allegations that a private defendant conspired to influence improperly governmental decision-making as it does to allegations that a private defendant invoked an unconstitutional state replevin, garnishment, or attachment statute. The Supreme Court has in fact applied Wyatt’s two-pronged approach to determine whether private defendants in a very different factual context are eligible for qualified immunity. Richardson, 521 U.S. at 404, 117 S.Ct. 2100 (concluding that Wyatt “tell[s] us ... to look both to history and to the purposes that underlie government employee immunity in order to find the answer” to the question whether private prison guards under contract with the federal government are eligible for qualified immunity). As in Wyatt, Powell can point to no immunity at common law that might be taken to shield him from such a conspiracy claim. And here, again as in Wyatt, “the public interest will not be unduly impaired if private individuals are required to proceed to trial to resolve their legal disputes.” Wyatt, 504 U.S. at 168, 112 S.Ct. 1827. Accordingly, we today hold that a private defendant faced with § 1983 liability for conspiring with state officials to violate federal rights is not protected by the doctrine of qualified immunity. Accord Kimes v. Stone, 84 F.3d 1121, 1128 (9th Cir.1996); Burrell, 970 F.2d at 796.
Powell argues that he is the type of private individual who is entitled to qualified immunity because, at the time of the alleged events, he was serving as Chairman of the Republican Party of Brookhaven and Suffolk County. The only allegations that Powell was acting in that capacity are that he pressured the Board to rescind Toussie’s variance and that he urged the Town of Brookhaven to pass the “Toussie Law.” Applying the Wyatt and Richardson analysis, we hold that a party chairman is not entitled to qualified immunity (a) on the basis of his position alone or (b) for advocating that local government take a particular legal or adjudicative action. We need not consider whether qualified immunity is applicable to a political party chairperson in regard to other conduct that falls within his or her job description.
This holding, like that in Wyatt, does “not foreclose the possibility that private defendants faced with § 1983 liability ... could be entitled to an affirmative defense based on good faith and/or probable cause or that § 1983 suits against private, rather than governmental, parties could require plaintiffs to carry additional burdens.” Wyatt, 504 U.S. at 169, 112 S.Ct. 1827. Nor does our decision today speak to the question of whether private defendants who are acting pursuant to a government contract or a court order can be shielded by qualified immunity. While the Supreme Court has held that such immunity is unavailable to some private defendants acting under a government contract, Richardson, 521 U.S. at 412, 117 S.Ct. 2100 (“[P]rivate prison guards, unlike those who work directly for the government, do not enjoy immunity from .suit in a § 1983 case.”), it has expressly declined to rule on whether “a private individual briefly associated with a government body, serving as an adjunct to government in an essential governmental activity, or acting under close official supervision” might enjoy such immunity, id. at 413, 117 S.Ct. 2100. We likewise express no opinion on that question.
III.
Powell also argues on appeal that the district court erred in rejecting his claims (1) that he did not act under color of state law, since he was a private individual, (2) that the complaint failed to allege that Powell himself caused the supposed constitutional deprivations, and (3) that the action was time-barred. As a general matter, courts of appeals have jurisdiction only to review “final decisions” of the district courts. 28 U.S.C. § 1291. “A denial of a motion to dismiss for failure to state a claim is neither a final decision, nor a basis for interlocutory review ..., and is not, standing alone, immediately appealable.” Hill v. City of New York, 45 F.3d 653, 663 (2d Cir.1995).
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4246806-25204 | ORDER
LOUISE W. FLANAGAN, Chief Judge.
This suit to enforce a federal tax lien comes now before the court upon motion of the government for relief from order and judgment pursuant to Rule 60 of the Federal Rules of Civil Procedure. For the reasons set forth below, the motion is denied.
STATEMENT OF THE CASE
On October 2, 2006, the United States of America, plaintiff herein, filed suit seeking to reduce to judgment federal income tax, penalty, and interest assessments against defendant Billy Lee Merrill of or relating to tax years 1993 and 1994 in the total amount of $169,989.91 as of June 15, 2006, plus interest and costs. This suit also was brought to foreclose related tax liens filed with the Pitt County Clerk of Court January 13, 1997, against real property in Pitt County, North Carolina, owned by the individual defendants. The bank defendants were named pursuant to complaint filed on behalf of plaintiff by Jonathan D. Carroll, of the Tax Division of the United States Department of Justice, because of potential interest in the subject real property pursuant to deeds of trust variously recorded in September 2003, on behalf of Wachovia Bank, and May 2005, on behalf of Bank of America.
The individual defendants, proceeding pro se, after securing several time extensions including for the stated purpose of furthering settlement efforts, timely filed answer May 7, 2007, admitting indebtedness of defendant Billy Lee Merrill. In the answer, the individual defendants made reference to several prior attempts to settle this indebtedness, but they protested the validity of any tax lien on the subject real property. It appears that in spring 2007, Anne E. Blaess, of the Tax Division of the United States Department of Justice, became involved and the government’s prior attorney removed himself. At least one of the motions for time extension was served upon her, as was the individual defendants’ answer. On May 23, 2007, the government accomplished a formal substitution of attorney on the record.
On June 15, 2007, the plaintiff requested entry of default against the bank defendants. The clerk of court entered defaults as requested on June 26, 2007. On June 20, 2007, the court entered an initial order regarding case planning and scheduling, requiring a Rule 26(f) conference between the parties within twenty-one days, the parties’ initial disclosures to be made not later than fourteen days thereafter or by July 25, 2007, and provision to the court also not later than July 25, 2007 of the parties’ joint report and plan. The parties timely filed their joint report, and the court adopted their proposed deadlines in the case management order entered July 31, 2007.
Among other things, discovery was asserted as necessary to determine the tax assessment dates and the priority of liens. In accordance with the parties’ proposed deadlines, the court ordered all discovery to be commenced or served in time to be completed by February 15, 2008, any motion for leave to join additional parties to be filed by August 10, 2007, and any motion for leave to amend the pleadings to be filed by September 14, 2007. Potentially dispositive motions were ordered to be filed by March 14, 2008. The court set the case for a non-jury trial on the court’s docket for that civil term of court beginning July 21, 2008, at the United States Courthouse, New Bern, North Carolina.
In the case management order, the court also noticed that pursuant to Federal Rule of Civil Procedure 16(d), a final pretrial conference would be scheduled before the undersigned at the United States Courthouse, New Bern, North Carolina at a date and time approximately two weeks in advance of trial pursuant to notice of the clerk of court which would issue approximately two months prior to the trial term. Its order included admonition that “[c]ounsel and/or any pro se litigant should plan to do the necessary pretrial work on a schedule which will insure its completion with time to spare before the final pretrial conference. Specifically, failure to complete discovery work is not a ground for a continuance.”
The court’s order previewed that at the final pretrial conference the court would, among other things, rule upon any dispute concerning the contents of the final pretrial order, and rule upon contested issues of law, anticipated evidentiary objections, and motions in limine, to the extent possible in advance of trial. Where these types of questions or issues reasonably could be anticipated, memoranda or motion as applicable, contemplated by Local Civil Rule 39.1(a), EDNC, was required to be filed fourteen days prior to the final pretrial conference. The court stated that it would also preview proposed findings of fact and conclusions of law, marked if possible to indicate matters in dispute, required to be filed seven days prior to the final pretrial conference, and that parties should include among their submissions to chambers seven days prior to the final pretrial conference copies of all exhibits, properly bound. The agenda for the final pretrial conference and associated deadlines stemmed in large part also from activities contemplated in the court’s local rules. To the extent there was some deviation from the deadlines, the parties were admonished about the necessity for adherence to the court’s time requirements as set forth in the case management order which also provided that the final pretrial conference presented “the final opportunity to prevent wasting trial time on pointless or undisputed matters,” where the court reiterated this as the focus for the conference before the undersigned.
Not later than seven days prior to the final pretrial conference, the parties were ordered to submit to chambers (but not file) the parties’ proposed pretrial order in accordance with Local Civil Rule 16.1, EDNC, which makes it the responsibility of plaintiffs counsel to arrange for the conference between the parties necessary for preparation of the final pretrial order. Local Civil Rule 16(b)(2), EDNC. It is the responsibility of all parties represented by counsel, unless otherwise ordered, to prepare and present the proposed order to the court. Specifically, this part of the Local Civil Rule 16, EDNC, concerning conduct of the final pretrial conference provides:
Conduct of the Final Pre-Trial Conference.
(1) Purpose. To resolve any disputes concerning the contents of the pre-trial order.
(2) Preparation. Counsel shall be fully prepared to present to the court all information and documentation necessary for completion of the pre-trial order. Failure to do so shall result in the sanctions provided by this local rule.
(3) Sanctions. Failure to comply with the provisions of Local Civil Rule 16.1(d)(2) may result in the imposition of a monetary fine not to exceed $250.00 against the offending counsel and may result in any other sanction allowable by the Federal Rules of Civil Procedure against the parties or their counsel.
(4) Counsel for all parties shall be responsible for preparing the final pre-trial order and presenting it to the court properly signed by all counsel at a time designated by the court. Upon approval by the court, the original shall be filed with the clerk. Failure to provide a unified pre-trial order may result in sanctions being imposed against all parties to the action.
The court’s case management order, it was provided, would not be modified except by leave of court upon a showing of good cause. Moreover, the court ordered that all requirements set forth in the court’s Local Rules governing pretrial and trial procedures not altered by the court were to be strictly observed.
The court’s docket is devoid of any recorded activity from date of entry of the case management order until January 8, 2008, when a document entitled “Disclosures” was filed by the individual defendants. The deadline for filing dispositive motions elapsed March 14, 2008, with no such motion being filed. On March 17, 2008, a late motion requesting time extension up to and until May 16, 2008 was filed. The motion filed by plaintiff was characterized as a joint one, and made mention of ongoing settlement activities. The court allowed the motion.
Four days before the extended period expired, the individual defendants filed motion to compel discovery responses with supporting memorandum and exhibits. The motion made reference to defendant Billy Lee Merrill’s January 8, 2008 written discovery requests and repeated efforts directed towards plaintiffs counsel, Anne E. Blaess, by certified mail, telephone, and through electronic mail (“e-mail”) to secure responses during the months of February, March, and April 2008.
By letter dated February 27, 2008, defendant Billy Lee Merrill noted the government’s failure to respond where “[a]s of the date of this letter I have not received neither [sic] the documents nor any explanation for there [sic] delay,” In their motion, the individual defendants detail the subject matter of a March 12, 2008 telephone conversation initiated by defendant Billy Lee Merrill it appears with the attorney, Anne E. Blaess, during which defendants agreed to support the time extension sought by plaintiff for the filing of any dispositive motion, due March 14, 2008. A copy of the attorney’s e-mail transmittal to defendant Billy Lee Merrill was included, reiterating a promise March 14, 2008, to “put the responses to your discovery request in the mail [on Monday, March 17, 2008].” This was followed by her e-mail dated March 17, 2008, wherein she commented “[o]nee you receive my discovery responses we will talk again and see what we might be able to work out.” Sixteen days after the attorney promised to mail the discovery responses, on April 2, 2008, defendant Billy Lee Merrill, still without any responses in discovery, made contact again via e-mail wherein he stated “[j]ust checking to see how far along you have gotten in securing the documents we requested in January? Please send us those that are available and a date we may expect the remainder.” He repeated similar request a week later it appears, met with a second apology and promise by the attorney, Anne E. Blaess, “to get everything to you early next week.” Again, no documents in discovery were forthcoming.
Throughout the period the defendants were attempting to work with the government, and repeatedly were reassured that answers in discovery would be forthcoming together with some effort on the part of the government to act to resolve issue or issues in dispute without resort to further litigation, counsel for the government, Anne E. Blaess, variously relied on her work load, office computer failure, delay of another (the Internal Revenue Service), her travel schedule, and family issue to excuse the government’s failure to comply with the Federal Rules of Civil Procedure and this court’s order. In March 2008, the attorney offered as excuse for her failure to respond to discovery requests propounded January 8, 2008, a court hearing “which took a much larger time that [sic] I had anticipated.” In April, her reason for delay was blamed on a “network crash [ ] last week and I haven’t been able to access my email or any documents [and] I was waiting on a further response from the Service to one of your requests ...” She referenced being out of the office for some brief time and that “[I] should get everything to you early next week. I will overnight it.” In May, her excuse was that she had been dealing with a family situation on the West Coast “for the past several weeks.” While she had secured her late requested time extension with consent of defendants during the same period, she offered her assurance “that I am not trying to take advantage of you or the situation to my benefit. I will get the documents to you as quickly as possible so that we can move forward with this case.”
Before the motion to compel filed May 12, 2008 ripened, of its own initiative the court took note that the extension of time request ed for filing any motion for summary judgment, up to and until May 16, 2008, necessitated trial extension, and the court set the case for bench trial at the term commencing September 22, 2008. On June 3, 2008, the government filed a late response to the defendants’ motion to compel, urging that the motion should be denied because it had responded to the discovery served in January “as of this date.” The undersigned referred the motion to the magistrate judge, who denied the motion. While rightly noting the delay by defendants in making the motion, the magistrate judge’s order neglected also to comment on the government’s repeated unfulfilled promises to provide the discovery. The time within which to file any dispositive motion ultimately passed with no motion being filed, and through notice issued July 23, 2008, the court set the case for final pretrial conference on September 17, 2008.
Disclosures previously noted as being due in advance of the final pretrial conference, pursuant to court order and the local rules, were not made. On September 17, 2008, the parties presented themselves for the final pretrial conference as noticed, with plaintiff appearing through counsel and the individual defendants in person. Counsel for the government was entirely unprepared, without reason, except to say she had been out of the office for some extended period. There appeared no effort by the government’s lawyer to initiate any conference with the individual defendants as required for the purpose of preparing a proposed final pretrial order. None of the submissions ordered by the court in its case management order were tendered to it. The record evidenced effort by defendants to advance the case but, besides the filing of the complaint October 2, 2006, little on the part of plaintiff to move the action towards a resolution on the schedule ordered by the court.
The time to move to amend the complaint or to name additional parties had long since expired, but at final pretrial conference, counsel for the government offered that maybe she did not name some necessary parties, and that someone in her office was researching now whether the trustees for the creditor defendants with secured interests in property sought to be foreclosed also should have been sued. The time for filing any dispositive motion after the government’s late request for time extension was allowed had expired four months earlier, in May. Remarkably, at the conference, a mere five days prior to the scheduled start of trial, the government stated through counsel that it would likely file a motion for summary judgment against defendant Billy Merrill if settlement efforts were not successful.
Among other things, the court noted that the government had been late even in responding to the defendants’ motion to compel, wherein defendants complained of the government’s repeated failure to respond to discovery requests propounded in early January. Cases are not managed in this district in the way the government sought to prosecute its claims. The court announced in order that followed, characterizing the government’s conduct as a disgrace, and in defiance of the court’s charge to secure the just, speedy, and inexpensive determination of every action before it, that having decided upon further and final reflection on the matters transpiring at conference and on the record of this case, dismissal was warranted. The government’s willful failure to comply with court orders and directives, with the disclosure requirements of the Federal Rules of Civil Procedure, and with the local rules of this district, compelled the result. It is this decision that plaintiff seeks to set aside under Rule 60(b) of the Federal Rules of Civil Procedure.
DISCUSSION
In order to obtain relief from a final judgment or order under Rule 60(b) of the Federal Rules of Civil Procedure, a moving party must first demonstrate that his motion is timely, that he has a meritorious argument to support his claim, that the opposing party would not be unfairly prejudiced by setting aside the judgment, and that exceptional circumstances justify relief. See, e.g., Werner v. Carbo, 731 F.2d 204, 206-07 (4th Cir.1984); Compton v. Alton Steamship Co., 608 F.2d 96, 102 (4th Cir.1979). Once a moving party makes this threshold showing, he must then satisfy one or more of the six grounds for relief set forth in Rule 60(b). Id.
While Rules 60(b)(l)-(5) enumerate five narrow circumstances in which relief may be appropriate, Rule 60(b)(6) is an open-ended provision that permits a court to grant relief from a judgment or order for “any other reason that justifies relief.” Fed. R.Civ.P. 60(b)(6). Courts in this circuit interpret Rule 60(b)(6) narrowly, granting relief only under “extraordinary circumstances.” See Valero Terrestrial Corp. v. Paige, 211 F.3d 112, 118 (4th Cir.2000); Neumann v. Prudential Ins. Co. of Am., 398 F.Supp.2d 489, 492 (E.D.Va.2005). “[T]he relief of vacatur is equitable in nature,” Valero, 211 F.3d at 118, and the decision to grant or deny a Rule 60(b)(6) motion, as with all Rule 60 motions, is committed to a district court’s sound discretion. See Nat’l Org. for Women v. Operation Rescue, 47 F.3d 667, 669 (4th Cir.1995) (per curiam); Neumann, 398 F.Supp.2d at 492.
In the instant case, the court need not decide whether the government has satisfied the threshold showings of timeliness, a meritorious argument to support its claim, and lack of unfair prejudice, because the government can not show that exceptional or extraordinary circumstances justify relief. The government argues that it is entitled to relief because the court’s order entered September 18, 2008 improperly dismissed the action under Federal Rule of Civil Procedure 41(b) , and that the applicable statute of limitations precludes the government from filing a new action to collect the tax liabilities at issue. Although the result of the court’s order and judgment is admittedly harsh, there are no extraordinary circumstances which justify setting them aside.
To the extent the court’s order dismissing the case failed to fully articulate its reasoning for doing so, the court does so now. Rule 41(b) provides that “[i]f the plaintiff fails to prosecute or to comply with these rules or a court order, a defendant may move to dismiss the action or any claim against it.” Fed.R.Civ.P. 41(b). Such a dismissal operates as an adjudication on the merits, unless, as here, the dismissal order states otherwise. Id. Although Rule 41(b) does not itself provide for sua sponte dismissal, a district court has the inherent power to dismiss a case for lack of prosecution or violation of a court order. Link v. Wabash R.R. Co., 370 U.S. 626, 631-33, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962); McCargo v. Hedrick, 545 F.2d 393 (4th Cir.1976). The court may dismiss an action under Rule 41(b) even without affording notice of its intention to do so or providing an adversarial hearing before acting. Link, 370 U.S. at 633, 82 S.Ct. 1386. Because dismissal is a severe sanction not to be lightly invoked, a court must consider four factors in determining whether to dismiss an action under Rule 41(b); “(1) the degree of personal responsibility on the part of the plaintiff; (2) the amount of prejudice to the defendant caused by the delay; (3) the presence or absence of a drawn out history of deliberately proceeding in a dilatory fashion; and (4) the effectiveness of sanctions less drastic than dismissal.” Davis v. Williams, 588 F.2d 69, 70 (4th Cir.1978) (citation and quotations omitted).
As for the first factor, the degree of personal responsibility on the part of the plaintiff, the court finds the government’s argument that it should not be held responsible for the failures of its attorney to be unavailing. Plaintiffs complaint was filed on October 2, 2006, by attorney Jonathan D. Carroll, of the United States Department of Justice. Thereafter, on May 23, 2007, attorney Anne E. Blaess formally noticed her appearance as counsel of record for the government. As discussed in detail above, the docket reflects virtually no case activity between the entry of the court’s case management order on July 31, 2007, and the final pretrial conference on September 17, 2008, except for motion to compel filed by defendants after the government’s repeated failure to respond to discovery requests throughout January, February, March, April, and May 2008, and the motion, filed late, to extend the deadline for filing of dispositive motions. Moreover, the government was entirely unprepared for the final pretrial conference, in defiance of this court’s order. Throughout this period, when failures by the government’s counsel should have been apparent, the United States of America made no effort to appoint a new attorney to handle the matter. The government has provided no basis for separating its culpability from that of the attorney representing it, and the court is unaware of any reason to do so. Indeed, were the court to fully credit the government’s argument, then the government would never be responsible for the neglect of its attorneys.
The court also finds that despite the government’s argument to the contrary, the individual defendants suffered prejudice due to the government’s delay and failure to adhere to the deadlines ordered by the court. The record reflects defendant Billy Lee Merrill’s repeated efforts to secure the government’s compliance with discovery requests, and his efforts to resolve the matter without resort to further litigation. Although defendants were proceeding pro se and therefore did not expend funds on an attorney, they nonetheless expended time and energy attempting to advance their interests in the litigation, all in the face of the government’s noncompliance and delay. The government’s delayed responses in discovery handicapped defendants’ ability to prepare for trial, and hindered their ability to make an informed choice about whether to risk trial or push, again, for settlement. The government’s failure to arrange for conference for purposes of preparing the final pretrial order, as required by Local Civil Rule 16.1, EDNC, also prejudiced defendants. Such behavior by the government can not be excused on the grounds that a litigant has been unable to obtain services of an attorney.
The third factor, the presence of a drawn out history of deliberately proceeding in a dilatory fashion, strongly supports the dismissal of this action. The court will not again summarize the government’s failures, but makes reference to the history outlined above, especially its repeated promises to the defendants to comply with discovery requests, followed by its failure to follow through, and the government’s complete lack of preparation for the final pretrial conference. The government willfully failed to comply with the deadlines set forth in the court’s case management order, and, on the eve of trial, indicated that it still intended to amend the pleadings, add additional parties, and perhaps file motion for summary judgment, even though the time for making such motions had long since expired. This con duct by the government was without excuse and defied this court’s charge to secure the just, speedy, and inexpensive determination of the action.
Finally, sanctions less severe than dismissal would not have been effective in assuring the prompt disposition of this case or in discouraging similar conduct in the future. Trial in this matter was set to commence on September 22, 2008, just five days after the pretrial conference at which the government indicated that it still might seek to amend its pleadings, perhaps naming a necessary party it had failed earlier to name, and that it still intended to seek summary judgment should settlement efforts prove unsuccessful. Sanctions or monetary fines against the government’s attorney would not, so close to trial, have cured the prejudice to defendants resulting from the government’s delay and noncompliance. In the court’s view, dismissal was the most appropriate response in this matter, which had been characterized by the government’s missteps and delay from its very inception. That the ten-year statute of limitations may now have run, precluding the government from filing a new action to collect the tax liabilities at issue, does not alter the court’s decision.
CONCLUSION
For the reasons set forth herein, the government’s motion for relief from the order and judgment entered September 18, 2008 is DENIED.
. Both the joint report and plan filed by the parties and the case management order contain typographical error naming March 14, 2007 as the deadline for filing dispositive motions.
. The order dismissing the case did not state explicitly that dismissal was without prejudice, but that any related case filed by the government in this district in the future should be assigned to a different district judge. The government apparently understood that the court intended the dismissal to he without prejudice, as it argues in the instant motion that only the expiration of the statute of limitations prevents the government from filing a new action to collect the tax liabilities at issue.
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4127790-19550 | OPINION
PER CURIAM.
Plaintiff-Appellant, Jose Davis (“Davis”), appeals the district court’s grant of summary judgment in favor of his for- raer employer, Defendant-Appellee Omni-Care, Inc. (“Omni-Care”), on his claim of retaliation pursuant to Title VII of the Civil Rights Act of 1964 et seq. (“Title VII”) and Ohio Revised Code Section 4112.01 et seq.
Because the district court properly concluded that Davis failed to demonstrate that Omni-Care’s legitimate, non-discriminatory reason for terminating him was pretextual, we AFFIRM.
I.
Davis, an African-American male, is a former employee of Omni-Care. Omni-Care is a leading provider of pharmaceutical care to the elderly, as well as a provider of professional pharmacy and related consulting and data management services for skilled nursing, assisted living and other institutional healthcare providers. (R. 30-1, Calhoun Deck, at ¶¶ 3, 5).
During his employment with Omni-Care, Davis worked as a driver technician, delivering pharmaceuticals and medical supplies to both private consumers and medical service providers. (R. 31-1, Davis Depo., at 31). Davis reported directly to Joe Havrilla (“Havrilla”), the Distribution Manager, who reported to the facility General Manager, Dana Iacovetta (“Iacovet-ta”). (R. 30-5, Havrilla Deck, at ¶¶ 3-4); (R. 30-3, Iacovetta Deck, at ¶¶ 2-3). Davis received his route information at the beginning of each day from his router, although deliveries were typically supplemented throughout the day. (R. 31-1, Davis Depo, at 123).
In January 2008, Davis noticed what he perceived to be a noose hanging on a coworker’s bulletin board. (R. 32-1, Davis Aff., at ¶ 3). The noose was a piece of string, approximately six inches in length, which was tied in a slip knot with a loop on the end. (R. 30-3, Iacovetta Deck, at ¶ 9). Davis interpreted the noose as a sign of racial animosity and was offended. (R. 32-1, Davis Aff., at ¶4). The first day that he noticed the noose, he verbally complained to the router who sat nearby, and that individual instructed Davis to speak with the person who put it up. (Id. at ¶ 6).
On January 31, 2008, Davis wrote a letter formally complaining about the noose. (R. 31-1, Davis Depo., at 139-40). He provided this letter to several of the facility managers, but did not give it to Havril-la. (Id. at 140). Iacovetta received a copy of the letter, and she immediately removed the noose from where it was hanging and informed Davis that she had “handled it.” (R. 30-3, Iacovetta Deck, at ¶¶ 6-8); (R. 32-1, Davis Aff., at ¶ 8).
Iacovetta also alerted her supervisor, Area Director Gloria Calhoun Lewis (“Calhoun”), and the facility Human Resources representative, Tom Masters (“Masters”), as to what had occurred. (R. 30-3, Iaco-vetta Deck, at ¶ 10). They discussed the situation, as well as how to respond further. (Id. at ¶ 11); (R. 30-1, Calhoun Deck, at ¶¶ 12-13). They agreed that, due to Davis’s indication that he was unhappy with the facility management for “allowing” the noose to be displayed at all, someone from outside the facility should be involved. (R. 30-3, Iacovetta Deck, at ¶ 11); (R. 30-1, Calhoun Deck, at ¶ 13). Calhoun was chosen to meet with Davis, and the group agreed that no one from the facility would approach Davis regarding the situation until Calhoun met with him. (R. 30-3, Iacovetta Deck, at ¶¶ 12-13); (R. 30-1, Calhoun Deck, at ¶¶ 14-15).
Havrilla also received a copy of Davis’s letter on the day it was initially circulated, although not from Davis. Havrilla sent Iacovetta an email indicating his concern with the letter’s effects, stating he felt that others were viewing him as a “monster.” (R. 32, Exhibit 15). He also expressed concern that he would be terminated. (R. 32, Exhibit 16). Iacovetta responded that the focus of the situation would be on Davis’s method of complaining outside the chain of command, not on the noose. (R. 33-2, Iacovetta Depo., at 30-31).
On February 1, 2008, a meeting was héld where, according to Davis, Havrilla slammed a copy of the policy and procedure handbook on a table, complained that he had been told that he did not follow it, and mandated that his drivers learn it. (R. 31-1, Davis Depo., at 160-61). Although Havrilla said nothing referencing Davis or the letter, Davis felt these comments were directed at him. (Id. at 162).
Calhoun ultimately visited the facility on February 21, 2008 and met with Davis the same day. (R. 31-1, Davis Depo., at 177-78); (R. 30-1, Calhoun Decl., at ¶ 17). During this meeting, they discussed what had occurred and Omni-Care’s potential responses. (R. 31-1, Davis Depo., at 184-85); (R. 30-1, Calhoun Decl., at ¶ 18). Calhoun eventually decided that sensitivity or diversity training should be provided, although Davis felt more serious measures were warranted, up to and including someone’s termination. (R. 31-1, Davis Depo., at 184-85); (R. 30-1, Calhoun Deck, at ¶¶ 18-20). Before the meeting ended, Calhoun provided Davis with her cell phone number, and encouraged him to contact her if he had any further issues. (R. 30-1, Calhoun Deck, at ¶ 22).
Davis called Calhoun later that evening. The parties dispute the tone, as well as the level of Davis’s agitation during the call, but Davis again conveyed his belief that this matter was serious and something more than diversity training should be done. (R. 31-1, Davis Depo., at 188-89). Calhoun reiterated her decision that she would not terminate anyone as a result of the incident, but confirmed that diversity training would occur. (R. 30-1, Calhoun Deck, at ¶¶ 23-24). Calhoun testified that while she found Davis’s behavior during the call to be insubordinate, she decided not to discipline him because of his good performance record and the fact that he was clearly upset about the incident. (Id. at ¶ 25).
On February 22, 2008, the day after Davis’s meeting with Calhoun, Omni-Care alleges, that Davis stopped answering or returning phone calls from his router and supervisor regarding deliveries. (R. 30-5, Havrilla Deck, at ¶¶ 5-8); (R. 30-2, Wilson Deck, at ¶ 6). Havrilla immediately informed Iacovetta of this “communication breakdown.” (R. 30-5, Havrilla Deck, at ¶ 11); (R. 30-3, Iacovetta Deck, at ¶¶ 16-17).
Iacovetta then alerted Calhoun and Masters to Davis’s lack of communication. (R. 30-3, Iacovetta Deck, at ¶ 18); (R. 30-1, Calhoun Deck, at ¶ 26). Omni-Care insists this was an issue of great concern, as it created a risk that medical equipment or supplies, which might be life sustaining, would not be delivered. (R. 30-1, Calhoun Deck, at ¶ 34).
Conversely, Davis contends that no communication breakdown occurred. He argues that his failure to respond to messages regarding deliveries was not a communication breakdown, but rather the usual course of business. Davis alleges that his practice had always been to respond to a message only if he had a question about the order. (R. 32-1, Davis Aff., ¶ 20).
Although Davis disputes the existence of a communication breakdown, he does not dispute that he received two voicemails from Havrilla, and one voicemail from Ia-covetta, and that he responded to none of them. (R. 31-1, Davis Depo., at 178-80, 198-200). Havrilla’s first voicemail set a meeting for February 25, and the other changed the date of the meeting to February 26. (Id. at 178-79).
On the morning of February 26, Davis saw Havrilla in the warehouse, but Havril-la did not initiate a meeting, so Davis left to make his deliveries. (Id. at 179-80). Davis then received a message from Iaco-vetta that if he wanted to discuss things, Havrilla and Iacovetta were willing to meet with him. (Id.).
Iacovetta, Calhoun, and Masters ultimately decided to hold a meeting with Davis on February 27, 2008, to discuss the communication issue, and Calhoun planned to participate via telephone. (R. 30-3, Ia-covetta Decl., at ¶¶ 19, 21); (R. 30-1, Calhoun Deck, at ¶¶ 27-28). Havrilla averred that he left Davis a message informing him of the date and time of the meeting, and he also placed a written note in Davis’s facility mailbox informing him that Havrilla needed to see him. (R. 30-5, Havrilla Deck, at ¶¶ 13-14).
Davis denies receiving any notification of the February 27 meeting prior to the morning of the meeting. (R. 31-1, Davis Depo., at 200-01).
Although the parties dispute whether Davis received prior notice of the meeting, the sequence of events that occurred that morning are not materially in dispute. Davis testified that while he was loading his truck that morning, Havrilla approached him and asked if he had time to talk with them. (Id. at 201-02); (R. 30-5, Havrilla Deck, at ¶ 16). Davis responded that he did not, and Havrilla responded “okay.” (R. 31-1, Davis Depo., at 202).
Thereafter, both Havrilla and Iacovetta returned, and Iacovetta stated that Calhoun was on the phone and wanted to speak with Davis. (Id. at 203); (R. 30-5, Havrilla Deck, at ¶¶ 19-20); (R. 30-3, Ia-covetta Deck, at ¶¶ 27-28). Iacovetta informed Davis that he did not get to choose. (R. 30-3, Iacovetta Deck, at ¶¶ 27-28). He could either talk with them or go home, and Davis chose to leave. (R. 31-1, Davis Depo., at 203-04). Davis testified that while on his way home, he received a voicemail telling him to report for work the next day at his usual time. (Id. at 206).
Accordingly, it is undisputed that Davis was informed that Havrilla, Iacovetta, and Calhoun wanted to meet with him, and specifically that Calhoun wanted to speak with him, and Davis refused to either meet with them or speak with Calhoun, and instead chose to go home.
On February 28, 2008, Iacovetta and Havrilla met Davis when he arrived for work and discharged him from his employment with Omni-Care. (R. 30-3, Iacovetta Deck, at ¶ 27); (R. 30-5, Havrilla Deck, at ¶ 23); (R. 31-1, Davis Depo., at 206). It is undisputed that Calhoun decided to terminate Davis, in consultation with Masters, after Davis refused to speak with her. (R. 81-1, Davis Depo., at 207); (R. 84-1, Calhoun Depo., at 60).
In response to a question as to whether her decision to terminate Davis was based upon the allegation that Davis was not communicating, Calhoun specifically responded that her reason for terminating him was “him not speaking with me and specifically not speaking with me, and I’m the Area Director, that’s direct insubordination. So at that point it really wasn’t not communicating. It was insubordination.” (R. 34-1, Calhoun Depo., at 60). According to Calhoun, if Davis had met with her to discuss the importance of communication, he likely would not have been disciplined, let alone terminated. (R. 30-1, Calhoun Deck, at ¶ 40).
On February 17, 2009, Davis filed his complaint in the Northern District of Ohio, alleging claims of a hostile work environment based on race and retaliation under both Title VII and Ohio Revised Code Section 4112.01, et seq. (R. 1, Complaint). Omni-Care filed its Motion for Summary Judgment on February 26, 2010, and in Davis’s Response in Opposition to Omni-Care’s motion, he withdrew his hostile work environment claims. (R. 32, at iv.). Accordingly, only the retaliation claims remained.
On June 1, 2010, the district court granted Omni-Care’s Motion for Summary Judgment. Davis filed a timely notice of appeal on June 29, 2010. (R. 40).
II.
This court reviews a district court’s grant of summary judgment de novo. See Wright v. Murray Guard, Inc., 455 F.3d 702, 706 (6th Cir.2006).
Rule 56(a) of the Federal Rules of Civil Procedure, as amended December 1, 2010, provides in relevant part that:
A party may move for summary judgment, identifying each claim or defense — or the part of each claim or defense — on which summary judgment is sought. 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).
Amended Rule 56(c)(1) further provides that:
A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:
(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.
Fed.R.Civ.P. 56(c)(1).
The Committee Notes explain that the “standard for granting summary judgment remains unchanged” and that amendment “will not affect continuing development of the decisional law construing and applying” the standard. Fed.R.Civ.P. 56, Committee Notes at 31.
Under Rule 56, the moving party bears the burden of proving that no genuine issue of material fact exists. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The court must construe the evidence and draw all reasonable inferences in favor of the nonmoving party. Id. at 587, 106 S.Ct. 1348. In reviewing a motion for summary judgment, a court must determine 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. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
III.
Davis’s unlawful retaliation claim is analyzed under the McDonnell Douglas burden-shifting analysis, as he offers only indirect evidence of his claim. See Ladd v. Grand Trunk Western R.R., Inc., 552 F.3d 495, 502 (6th Cir.2009). Under this scheme, a plaintiff must first establish the prima facie case of unlawful retaliation. See id. To establish this prima facie case, a plaintiff must demonstrate that: (1) he engaged in a protected activity; (2) this activity was known to the defendant; (3) the defendant took a materially adverse action against the plaintiff or subjected the plaintiff to retaliatory harassment; and (4) a causal connection existed between the protected activity and the materially adverse action. See id.
If a plaintiff successfully establishes a prima facie case, the burden of production then shifts to the defendant-employer to offer a legitimate, non-discriminatory reason for the employment action. Id. If the employer satisfies this burden, the plaintiff must then prove by a preponderance of the evidence that the proffered reason was pretextual. Id.
At summary judgment, the district court concluded that Davis established a prima facie case and that Omni-Care proffered a legitimate, non-discriminatory reason for discharging Davis. (R. 38, at 8-9). Neither of these findings is challenged on appeal. The district court, however, further found that Davis failed to demonstrate that Omni-Care’s legitimate, nondiscriminatory reason for terminating him was pretextual, which Davis contends was error. (Id. at 13). Davis asserts two primary arguments in support of his claim of pretext. First, he contends that his insubordination did not actually motivate his termination, and second, that Calhoun’s decision was tainted by the retaliatory motivations of Havrilla and Iacovetta.
A.
To establish that a defendant’s legitimate, non-discriminatory reason was pre- textual, a plaintiff must produce sufficient evidence to allow a jury to reject the employer’s proffered reason for the discharge. See Manzer v. Diamond Shamrock Chems. Co., 29 F.3d 1078, 1083 (6th Cir.1994), abrogated on other grounds by Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 129 S.Ct. 2343, 174 L.Ed.2d 119 (2009), as recognized in Geiger v. Tower Auto., 579 F.3d 614 (6th Cir.2009). Because the plaintiff retains the ultimate burden of persuading the jury that the defendant discriminated against him, this burden is one of both production and persuasion. See Ladd, 552 F.3d at 502.
A plaintiff can establish pretext by demonstrating the proffered reason was either: (1) factually false, (2) did not actually motivate the discharge, or (3) was insufficient to warrant the discharge. See Manzer, 29 F.3d at 1084. On appeal, Davis argues that Omni-Care’s legitimate, nondiscriminatory reason did not actually motivate the discharge.
Under this theory, “the plaintiff argues that the sheer weight of the circumstantial evidence of discrimination makes it ‘more likely than not’ that the employer’s explanation is a pretext, or coverup.” Id. Thus, Davis contends that the illegal motivation, which he argues is retaliation for his complaint about the noose, was more likely the cause of his termination than Omni-Care’s proffered reason of insubordination.
Davis points to several alleged retaliatory incidents in support of his contention that he was discharged in retaliation for his complaint about the noose. Specifically, Davis lists the allegedly retaliatory intent of both Havrilla and Iacovetta, as evidenced by the emails following circulation of Davis’s letter; their public display of anger and contempt towards Davis; the fact that Davis felt “shunned;” the false accusations of Davis’s failure to follow the communication policy, leading to allegations of a “communication breakdown;” and Havrilla and Iacovetta misleading Davis regarding a corporate representative’s desire to speak with him.
Assuming that these incidents are, in fact, retaliatory incidents, they in no way demonstrate that either Calhoun or Masters had retaliatory intent, as they only involve Havrilla or Iacovetta. Because Calhoun made the decision to terminate Davis, Davis’s alleged retaliatory incidents are relevant to the issue of pretext only to the extent that Calhoun was involved in some way with them, because only then could retaliation serve as a competing motive for the termination. See Roberts v. Principi, 283 Fed.Appx. 325, 332 (6th Cir.2008) (recognizing that whether some coworkers reacted to protected activity is irrelevant unless those individuals in some way caused the adverse employment action).
Examination of Davis’s cited incidents reveals that they do not demonstrate that Calhoun had retaliatory intent because she was not involved in any of the incidents. She was not involved with the emails between Havrilla and Iacovetta that allegedly demonstrate retaliatory intent. She also in no way publicly displayed anger or contempt for Davis, nor did she shun him. Quite the opposite, the record reflects that Calhoun went out of her way to be accessible to Davis to discuss any issues he might have. She traveled from Pittsburgh, Pennsylvania to meet with Davis and ensure that he felt comfortable at work. She discussed potential company responses to the situation and asked for his input, and she gave him her cellular telephone number so that he could have direct access to speak with her.
Calhoun also did not participate in creating an allegedly false “communication policy” or in fabricating the resulting “communication breakdown.” In fact, she repeatedly tried to set a meeting with Davis to discuss the communication situation. Therefore, the allegedly retaliatory events in no way involve Calhoun and do not demonstrate Calhoun had a retaliatory motive. Accordingly, Davis has failed to show that retaliation was more likely the reason for Davis’s discharge.
B.
To the extent that Davis attempts to argue the “cat’s paw” theory of liability— essentially that Havrilla and Iacovetta tainted Calhoun’s decision to terminate Davis through their retaliatory motives— this argument fails.
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1498628-4792 | PER CURIAM.
Jerome and Bernetta Hanson, husband and wife, appeal a judgment of unpaid taxes and penalties. We affirm, substantially for the reasons set forth in Schulz v. Com missioner of Internal Revenue, 686 F.2d 490 (7th Cir.1982).
Jerome worked as an independent contractor selling insurance for State Farm Insurance Companies, and Bernetta was an instructor at a community college. On January 10, 1977, Jerome executed a declaration of trust creating the J.D. Hanson Trust. He used a set of trust forms, including the declaration, introductory materials, and step-by-step instructions for creating and maintaining a trust which he purchased from the Institute for Individual Religious Studies.
The declaration included the following provisions: Jerome transferred the family residence to the trust. The trustees were empowered to pay reasonable compensation to officers, employees and agents of the trust and to themselves. The trust was divided into 100 beneficial interest units. The owner of a beneficial unit was entitled to a pro rata share of any distribution of income from the trust and to a pro rata share of the corpus upon liquidation, but was not entitled to participate in the management of the trust. The trust was to be liquidated in twenty-five years or sooner if the trustees unanimously determined upon an earlier date “because of threatened depreciation in values, or other good and sufficient reason necessary to protect or conserve trust assets” to liquidate the trust.
Jerome and Bernetta established the corpus of the trust in a series of conveyances. First, Bernetta conveyed all jointly-owned realty (the family residence plus business property used by Jerome in his insurance business) and personalty to Jerome in exchange for fifty of the trust’s 100 beneficial units. Jerome in turn conveyed all of this property to the trust. Jerome received all 100 units of the trust which he immediately caused to be reissued as two fifty-unit certificates, one for himself and one for Bernetta.
The units were ultimately redistributed with Bernetta holding seventy-eight, Dr. Frederick, a family friend, holding twenty, the Hanson’s two children holding one each, and Jerome with none. Originally there were two trustees, Bernetta and Dr. Frederick. Within a day or two of the creation of the trust, Jerome became a trustee, too.
In a document separate from the declaration of trust, Jerome and Bernetta each gave the trust the “right to manage, use, control or profit” from each of their services. The only apparent consideration was a recitation that “I do this for consideration by means of an exchange otherwise set forth in the [Declaration of Trust].” In addition, Jerome executed documents leasing two cars and a sailboat to the trust in exchange for a “normal maintenance fee.” No payment was ever made.
At the second meeting of the trustees, Jerome and Bernetta were named executive trustees. The trustees agreed to have the trust bear all trust-related, expenses of the executive trustees, buy them life insurance, and pay them a “reasonable, monthly consultant’s fee.”
Jerome and Bernetta continued to use and enjoy all the property conveyed or leased to the trust just as they had before the creation of the trust. All of their personal expenses were either paid out of a checking account opened in the name of the trust or were paid by them out of funds taken from that account but characterized at year’s end as consulting fees. The taxpayers did not inform their employers of the lifetime service contracts and did not notify the mortgagee of their residence of the conveyance to the trust. Dr. Frederick exercised no control over any aspect of the trust.
In June of the year in question, 1977, Jerome moved out of the family residence due to marital difficulties. In July of the following year, Jerome and Bernetta were divorced. They filed a “Marital Separation Agreement” which divided their personal effects in total disregard of the trust, and Bernetta was awarded the family residence. Under the agreement, Jerome received “all beneficial right, title and interest in and to the” trust, and Bernetta resigned as trustee. She was replaced shortly thereafter as a trustee by Jerome’s current wife.
In his notice of deficiency the Commissioner of Internal Revenue determined that all income, expenses, and deductions which Jerome and Bernetta had attributed to the trust were properly attributable directly to them under 26 U.S.C. § 61 relating to income and 26 U.S.C. §§ 671-678 relating to grantor trusts. The Commissioner also assessed an addition to tax under 26 U.S.C. § 6653(a) for negligent or intentional disregard of tax rules and regulations. The Tax Court correctly upheld the Commissioner. Schulz v. Commissioner of Internal Revenue, supra.
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33068-9428 | SEVERENS, Circuit Judge.
The bill in this case was filed for the purpose of removing a cloud upon the title to certain lands in the Eastern district of Kentucky of which the complainant claims to be the owner under a grant from that state. The state of Kentucky is joined as a complainant, suing for the use and benefit of the real complainant, but it has no other than a moral interest which it may have to vindi-, cate its own grant to the proper grantee. It has no real interest in the controversy. The defendant demurred to the bill upon the grounds that the claim made by the complainant was stale and was barred by the statute of limitations of the state. The demurrer was sustained by the court, and the bill v?as dismissed. We have therefore to ascertain whether a case was made by the allegations of the bill which, being taken as true, would entitle it to the relief prayed.
The bill avers that the complainant is the owner in fee simple of a certain described part of a tract of land of 154,800 acres sold and patented by the state of Kentucky on June 15, 1872, to Stephen G. Reid and deraigns the title of Reid to the complainant by certain mesne conveyances. It further alleges that the complainant “is in the constructive possession and entitled to the actual possession” of the lands in controversy; and, further, that its immediate grantee had likewise had the constructive possession before and at the time of its grant to the complainant. Without more particular detail, we have stated the substantive facts of the complainant’s title in sufficient form for the purposes of our decision.
The bill then proceeds to charge that the defendant is falsely and fraudulently setting up a claim of title superior to that of the complainant and founds its alleged superior title on a patent issued by the state of Kentucky on January 14, 1874, to one Thomas Manns, whose title the defendant claims to have acquired. And thereuoon it is alleged (and this is the pith of the matter) that this patent purports on its face to have been issued upon a survey made on the 18th day of October, 1871, a date prior to that of the survey on which the Reid patent was issued, whereas, in truth and in fact, the Manns survey was made October 18, 1873, and was originally so stated therein. We excerpt from the bill the allegations of the manner and circumstances of the change of the year in the date of the Manns survey from 1873 to 1871, as follows:
“Your orator says: That on the 18th day of October, 1873, the said Thomas Manns, procured one Preston Craft, then surveyor of Breathitt county, to survey for him the boundary of land described in said grant, the said Craft having in the meantime procured from the county court of Breathitt county six (6) orders of said court each of which authorized him to enter and survey 200 acres of vacant land in said county. That said Craft after making the survey above mentioned in the 18th day of October, 1873, deposited the said six copies of the orders of the court together with a plat and certificate of Ms survey with the register of the land office, but afterwards he and the said Manns discovered that the greater part of said tract of land of 5.078 acres was included within the exterior lines of the Ileid grant and for the wrongful and fraudulent purpose of obtaining the apparent elder survey to that part of said land that was included within the grant from the commonwealth of Kentucky to Stephen U. Reid they obtained permission from the register of the land office to withdraw the plat and certificate of survey from said oflice and changed the date October 18, 1873, to October 18, 1871. and returned it to the said register’s office, and in this way procured the patent above named to be issued to the said Thomas Manns upon a survey purporting to bear date October 18, 1871, when it should have been October 18, 1873.”
And it is claimed that, the recital in the Manns patent of the date of his survey being forged and erroneous, the patent itself was void. It is evident that, if the facts were as stated, Reid could not have been divested of his title by the subsequent grant to Manns. And if the falsitv of the dale in the survey and the patent to the latter was not known at the time of the perpetration of the fraud, and remained unknown to Reid and those succeeding to his title, and could not with due diligence have been ascertained, they might upon the principles of - equity be entitled to relief against the former; provided they proceeded without unreasonable delay after the discovery of it. But we are not required to pursue that subject.
The grounds of the defendant’s demurrer are thus stated:
“Anti It appears from said bill that the alleged change of date from October 18, 1873, to October IS, 1871, of the survey upon which such grant issued, was made on or prior to such 14th day of January, 1874, and the cause of action alleged in said bill of complaint is shown by said bill of complaint to have accrued more than thirty-five (35) years prior to the filing of the said bill of complaint, and is stale and is barred by (he statute of limitation.”
In the brief of the counsel for complainant it seems to be assumed that the demurrer really states but one ground; i. e., the bar of the statute of limitation of Kentucky. On the other hand, the counsel for complainant assume that the grounds of demurrer are twofold, the laches of complainant and its predecessor and also the statutes of limitations. We think the latter is the proper construction. The phrase “stale claims” is a familiar expression in courts of equity and has a well understood meaning'. It is not an apt expression to apply to the bar of a statute. The fair interpretation of the language seems to .intend both defenses.
The relevant statutes are these:
“Sec. 2515. * * * An action for relief on the ground of fraud or mistake, * * * shall be commenced within five years next after the cause of action accrued.” (Russell’s St. § 224.)
“•Sec. 2519. In actions for relief for fraud or mistake, or damages for either, the cause of action shall not be deemed to have accrued until the discovery of the fraud or mistake; but no such action shall be brought ten years after the time of making the contract or the perpetration of the fraud.” (Section 229.)
“Sec. 2523. The limitations prescribed in this chapter shall apply to actions brought by or in the name of the commonwealth, in the same manner as to actions by private persons, except where a different time is prescribed by some other chapter in this revision.” (Section 240.)
The effect of these statutes is discussed in the briefs of counsel. The result of the contention for the appellee may be summed up for the purposes of this case in the statement that all actions in the courts of Kentucky, whether brought by private parties or by the state, shall be brought within ten years after the cause of action accrues, and, after the lapse of that time, shall be barred. We are satisfied from an at- • tentive examination of the decisions of the Court of Appeals of the state that such is the effect which the court attributes to them.
It is contended for the appellee that the patent to Manns being founded upon a forged and false statement of the date of the survey on which it was issued is utterly void, that it had no effect on Reid’s title, and that his patent endured as if the Manns patent had never been granted. But, so long as the Manns patent was not impeached, it would stand as a valid grant, and would be superior to Reid’s title. In order to displace it, there was a necessity for invoking the jurisdiction of the court and obtaining a decree setting aside the patent such as is sought by the bill filed in the case before us. In prosecuting such a suit the complainant may be confronted by defenses arising from the lapse of time.
State statutes of limitation are prescribed for the tribunals of the state. They are not ex propria vigore, of any force in the courts of the United States. They may be, and in many instances have been, adopted by acts of Congress as laws of the United States.
There is no general statute of .limitations in the laws of the United States relating to suits in equity. But, speaking now of the equity courts of the United States, there has been for the sake of conformity a disposition to accept the statutory regulations of the states prescribing the time within which suits may be brought. And this practice has ripened into a rule which will be enforced whenever by-observing it the court is not required to abrogate its own principles, in which case it will protect its own jurisdiction. Alsop v. Riker, 155 U. S. 448, 460, 15 Sup. Ct. 162, 39 L. Ed. 218; Patterson v. Hewitt, 195 U. S. 309, 25 Sup. Ct. 35, 49 L. Ed. 214. Instances are found where those courts have enforced the doctrine of laches in favor of defendants where the lapse of time has been shorter than that prescribed by state laws, but where the peculiar circumstances gave rise to an equity which the court was bound to protect. By the same token . it would allow a longer period for bringing suit than that prescribed, when by fraud or concealment of the cause of action had not been discovered, or would not by reasonable diligence have been discovered. Such a case was presented in Eddy v. Eddy, 168 Fed. 590, 93 C. C. A. 586, a case decided by this court, where this subject was discussed at some length.
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4313729-19945 | PER CURIAM:
This capital case requires us to determine whether we must stay Petitioner’s execution, currently scheduled for May 12, 2015, to give effect to his right “meaningfully to research and present [his] habeas claims.” Because the district court did not abuse its discretion in determining that a mental health evaluation is not reasonably necessary to develop Petitioner’s underlying habeas claim, we AFFIRM.
I.
Petitioner, Derrick Dewayne Charles, was convicted and sentenced to death by a jury in 2003 after pleading guilty to murdering his fifteen-year-old girlfriend, her mother, and her grandfather during the same criminal transaction. On direct appeal, Charles challenged his sentence on the ground that the trial court improperly admitted victim character evidence, including evidence of his girlfriend’s hobbies and her grandfather’s history of military service. Charles v. State, AP-74694, 2005 WL 283598, at *1 (Tex.Crim.App. Feb. 2, 2005). He also challenged Texas’s capital-murder scheme as unconstitutional and his guilty plea as statutorily barred because of infirmities in the procedure used at the sentencing hearing. Id. at *2. The Texas Court of Criminal Appeals affirmed the conviction and sentence. Id. at *4. It held that the state trial court did not abuse its discretion in allowing the character evidence because the evidence provided only a brief glimpse into the victims’ backgrounds. Id. at *2. The Texas Court of Criminal Appeals further held that Charles’s constitutional challenge to Texas’s capital-murder scheme was foreclosed by precedent, and that he was estopped from challenging the sentencing hearing procedure because, as evidenced by the trial transcript, the trial court followed the procedure that Charles had requested. Id. at *2-4.
While his direct appeal was pending, Charles filed a state habeas application. The state habeas court held an evidentiary hearing and entered findings of fact and conclusions of law recommending that relief be denied. Ex parie Charles, WR-67171-01, 2008 WL 556015, at *1 (Tex. Crim.App. Feb. 27, 2008). The Texas Court of Criminal Appeals summarily affirmed. Id.
In February 2009, Charles filed a federal petition in the Southern District of Texas alleging ineffective assistance of trial counsel on the basis of his counsel’s purported failure to present mitigating evidence. Applying the deference required by the Antiterrorism and Effective Death Penalty Act, the district court denied relief. Charles v. Thaler, 4:09-CV-0592, 2011 WL 5040438, at *1 (S.D.Tex. Oct. 24, 2011), aff'd sub nom, Charles v. Stephens, 736 F.3d 380 (5th Cir.2013).
On appeal, we affirmed the district court’s judgment. Charles v. Stephens, 736 F.3d 380, 396 (5th Cir.2013). Examining applicable Supreme Court precedent, we explained that “the state habeas court did not unreasonably apply Strickland’s deficiency prong by concluding that Charles’s trial counsel performed an adequate mitigation investigation.” Id. at 390. Charles petitioned for rehearing en banc, which we denied, see Order on Pet. Reh’g En Banc, No. 12-70016, Doc. 74 (5th Cir. Jan. 8, 2014), and the Supreme Court denied Charles’s petition for a writ of certio-rari. Charles v. Stephens, — U.S.-, 135 S.Ct. 52,190 L.Ed.2d 55 (2014).
On November 10, 2014, the state trial court filed its execution order setting the execution date for May 12, 2015. On March 13, 2015, Charles filed motions to withdraw or modify the execution order, for appointment of counsel, and for funding for a mental health evaluation. After a hearing, the state court denied the motions on April 9, 2015. Charles did not appeal these denials to the Texas Court of Criminal Appeals, but instead filed three motions in the federal district court on April 17, 2015, twenty-five days before his scheduled execution.
Charles did not file a habeas application in the district court. He filed motions for authorization to hire a mental health expert, for appointment of counsel, and for stay of execution, all pursuant to 18 U.S.C. § 3599. In filing these motions, Charles sought time to “investigate, prepare, and present a claim that he is incompetent to be executed under Ford v. Waimoright, 477 U.S. 399 [106 S.Ct. 2595, 91 L.Ed.2d 335] (1986), and Panetti v. Quarterman, 551 U.S. 930 [127 S.Ct. 2842, 168 L.Ed.2d 662] (2007).”
Charles argued that he can “make a colorable showing” under Ford v. Wainwright, 477 U.S. 399, 106 S.Ct. 2595, 91 L.Ed.2d 335 (1986), “that he is not competent to be executed.” Citing several volumes of supporting evidence, Charles contended that he has “suffered from severe and debilitating mental illness since childhood” as a result of genetic inheritance and the environment in which, he was raised. He offered thirty-one exhibits, including the Gulf Pines Hospital records and several affidavits from doctors, attorneys, and family members. Of these exhibits, only two referred to information gathered after 2009. In addition, he argued that 28 U.S.C. § 2244(B) would not bar his Ford claim as a successive petition because, according to Panetti, 551 U.S. at 943, 127 S.Ct. 2842, his Ford claim was not ripe until the state trial court set his execution date.
The state filed its response to Charles’s motions on April 24, 2015. In its response, the state argued that Charles’s motions did not present a cognizable claim under § 2254, and to the extent they did, such a claim was unexhausted and procedurally barred. The state further argued that any underlying incompetency claim was ultimately meritless. Charles filed his reply on April 29, 2015, clarifying that he was not yet filing a habeas claim, only motions seeking authorization to develop his habe-as claim, pursuant to his rights under 18 U.S.C. § 3599.
On May 4, 2015, the district court filed its Memorandum and Order denying Charles’s motions for authorization to hire a mental health expert and for a stay of the execution. Acting sua sponte, the district court also denied a certificate of ap-pealability (COA). The district court carefully identified what was not at issue. Specifically, the district court explained that Charles’s motions did “not directly seek federal habeas relief from his conviction and sentence”; did “not challenge the reasonableness of any state-court determination about his competency to be executed”; did “not seek relief from constitu tional infirmities in the state process for obtaining experts or investigators to evaluate possible psychological claims”; and did “not seek leave to litigate a successive federal habeas petition based on Ford.”
What Charles did request was a stay of his execution so that he could exercise his right under 18 U.S.C. § 3599 “to meaningfully research and present [his] habeas claims.” See McFarland v. Scott, 512 U.S. 849, 858, 114 S.Ct. 2568, 129 L.Ed.2d 666 (1994). As the district court noted, “Charleses] theory is novel and limited.” His Ford claim was never actually before the state or district court. “Charles [ ]made it clear that he seeks rulings only on whether he is entitled to a stay of execution and the allocation of funds to develop a Ford claim.” In Charles’s words, the issue presented is “whether Mr. Charles’ Ford showing is sufficient to trigger counsel and resources under § 3599, and a stay of execution to permit him an opportunity to present his Ford claim.” He admitted that the merits of his Ford claim are relevant only to the extent that “the existing record is so devoid of evidence that it does not even constitute a colorable Ford claim.”
In denying Charles’s motion for stay, the district court applied the factors we typically consider for granting a stay, and it determined that Charles failed to show a substantial likelihood of • success on the merits of his underlying Ford claim. The district court also indicated that even if it applied the “colorable showing” standard, the stay would not be warranted. As for the § 3599(f) motion for authorization to hire a mental health expert, the district court determined that “[n]othing in the record before the Court has hinted that additional exploration of the Ford inquiry would result in a viable, or even colorable, Ford claim.”
II.
We have jurisdiction to consider Charles’s motions. A district court’s denial of a motion under 18 U.S.C. § 3599(f) is an appealable order, and “such an order ... is not subject to the COA requirement.” Harbison v. Bell, 556 U.S. 180, 183, 129 S.Ct. 1481, 173 L.Ed.2d 347 (2009); Smith v. Dretlce, 422 F.3d 269, 288 (5th Cir.2005) (“[A] COA is not necessary to appeal the denial of funds for expert assistance.”). The Supreme Court has held that the § 3599 right to expert assistance, like the right to counsel, “adheres prior to the filing of a formal, legally sufficient habeas corpus petition,” so the § 3599 motion itself commences a habeas proceeding and triggers federal jurisdiction. McFarland, 512 U.S. at 855-58, 114 S.Ct. 2568 (addressing initial habeas filings); In re Hearn, 376 F.3d 447, 452 (5th Cir.2004) (extending McFarland to § 3599 motions related to successive habeas claims). Likewise, “once a capital defendant, invokes his [§ 3599 right], a federal court also has jurisdiction under § 2251 to enter a stay of execution” to make the defendant’s § 3599 right effective. McFarland, 512 U.S. at 858, 114 S.Ct. 2568.
We review a district court’s denial of a § 3599(f) motion for abuse of discretion. Brown v. Stephens, 762 F.3d 454, 459 (5th Cir.2014); see also 18 U.S.C. § 3599(f) (stating that a district court “may authorize the defendant’s attorneys to obtain such services”) (emphasis added). Likewise, “the decision to grant [or deny] a stay ... is generally left to the sound discretion of district courts.” Ryan v. Gonzales,—U.S.—- 133 S.Ct. 696, 708, 184 L.Ed.2d 528 (2013).
Charles’ motion for authorization to hire a mental health expert hinges on whether he can show that the district court abused its discretion by determining that a mental health expert is not “reasonably necessary” to develop his Ford claim. See 18 U.S.C. § 3599(f) (permitting authorization of expert assistance “upon a finding that ... [it is] reasonably necessary for the representation of the defendant”). We have “interpreted ‘reasonably necessary’ [in § 3599(f) ] to mean that a prisoner must show that he has ‘a substantial need’ for the requested assistance.” Brown v. Stephens, 762 F.3d 454, 459 (5th Cir.2014) (quoting Riley v. Dretke, 362 F.3d 302, 307 (5th Cir.2004)). Under this standard, we have upheld district court decisions denying assistance where such assistance will be in support of a claim that is procedurally barred or “meritless,” or where the assistance would generate only supplementary evidence. Brown, 762 F.3d at 459.
Charles argues that to satisfy the “reasonably necessary” standard he need only show that he has a “colorable” Ford claim. He borrows this standard from Hearn, in which we reviewed whether a prisoner seeking to investigate a potential Atkins claim had made a showing sufficient for purposes of a § 3599 motion. 376 F.3d at 455 (holding that a § 3599 motion “need only be supported by a colorable showing of mental retardation”) (emphasis added), decision clarified on denial of reh’g, 389 F.3d 122 (5th Cir.2004). However, Charles admits in his brief that on rehearing we limited Hearn, including its color-able showing standard, to only those cases in which a prisoner has a potential claim based specifically on Atkins. 389 F.3d at 123. Nevertheless, he argues that we should now adopt the colorable showing standard in the context of Ford claims.
Normally, Ford claims raised in a habe-as application require a “substantial” showing in order to gain additional process for presenting evidence of incompetency. Panetti, 551 U.S. at 949, 127 S.Ct. 2842. Texas offers a similar procedural mechanism under which a prisoner must make a threshold showing that raises a “substantial doubt” regarding his competency to be executed. Tex.Code Crim. P. art. 46.05(d); see also Druery v. State, 412 S.W.3d 523, 540 (Tex.Crim.App.2013) (holding that state law initially requires a substantial showing to trigger more process). If a prisoner satisfies this requirement, the trial court must hold a hearing to determine a petitioner’s competency by a preponderance of the evidence. Id. art. 46.05(k).
Charles never filed an art. 46.05 motion in state court, or a habeas application in federal court, as to his Ford claim. Instead, Charles filed motions for appointment of counsel and for expert and investigative assistance in both courts, and both courts denied the motions. It is unnecessary for us to decide the issue of whether the proper test is a “colorable showing” or a “substantial showing” — neither is satisfied here. The district court determined that Charles had not made a colorable or substantial showing, and the district court’s decision was not an abuse of discretion.
“The Supreme Court has declined to set forth a specific standard for determining” ineompetency. Eldridge v. Stephens, 599 Fed.Appx. 123, 128 (5th Cir.2015). Generally, a prisoner is incompetent if he does not (1) “know the fact of [his] impending execution,” Ford, 477 U.S. at 422, 106 S.Ct. 2595 (Powell, J., concurring in part and concurring in the judgment), or does not (2) “ha[ve] a rational understanding of the reason for the execution,” Panetti, 551 U.S. at 958, 127 S.Ct. 2842. “Rational understanding” requires more than mere awareness of the facts about the execution. Panetti, 551 U.S. at 958, 127 S.Ct. 2842. The prisoner must understand, the reasons for his execution. Id. However, federal law distinguishes between an inmate who is mentally ill and one who is insane. Shislnday v. Quarterman, 511 F.3d 514, 521 (5th Cir.2007). If a prisoner “has a rational understanding of his crime, his impending death, and the causal relationship between the two,” then he is competent. Eldridge, 599 Fed.Appx. at 128.
As the district court carefully documented, Charles essentially relies on the very same evidence he marshalled in his initial state and federal habeas proceedings. The evidence includes his childhood hospital records; psychiatric records from the Texas Youth Commission; evidence of his turbulent home life; prior arrests and incarcerations; evidence of drug use; expert evaluations; and the trial transcript (in which Charles affirmed his understanding of the charges and denied having any delusions). Based on these records, he argues that he “has an. extensive and well-documented history of mental illness, including episodes of psychosis, and significant mental impairment that profoundly affects his functioning, even to the present day.” However, even assuming he has some form of mental illness, none of this evidence shows that he does not know about his execution or that he does not rationally understand the reason for it. See Martinez, 2009 WL 211489, at *1 (“[C]ounsel ... was able to develop an extensive history of mental' health that still falls short of any threshold showing of incompetency to be executed.”).
Moreover, the district court found that in 2005 and 2006, two experts evaluated Charles and determined that he was not mentally retarded or incompetent. They reported that he did not experience “active psychosis,” his hallucinations occurred over a short period of time, his negative behavior and low cognitive scores were consistent with his ADHD, he denied experiencing “symptoms that are compatible with a psychotic disorder,” and he was “lucid in his conversation and thought processes.” While there was evidence of some depression, low intelligence, and possible brain injury, the two experts “did not diagnose him with any mental illness.” “Nothing in the record ... indicates that Charles suffers from symptoms of ‘insanity’ as described by Ford.” There was no evidence of “pervasive and severely debilitating conditions ... that traditionally give rise to Ford claims.”
Much of the new evidence that Charles submitted with his § 3599 motion includes recent affidavits, mostly from his attorneys, but also one from a physician. The attorneys’ affidavits claim that Charles’s “affect was always very flat”; “he was completely unengaged with the legal discussion relating to his case”; he “expressed little understanding of the proceedings”; he exhibited “strange physical tics”; he was “uncomfortable making conversation”; he was “emotionless”; and he “struggled to understand the simplest of topics.” The physician stated in his affidavit that Charles “could be incompetent to be executed,” but this physician never met with Charles and only partially reviewed the record. None of these affiants asserted that Charles was unaware he was being executed or that he did not rationally understand why he was being executed. The state court aptly noted that “nothing like that exists [ ]because ... it would be unethical for [the affiants] to give such an affidavit because it [probably] wouldn’t be true.” “Most of this has been investigated and investigated and investigated for years,” and yet none of the affiants have been able to state that Charles did not know he was being executed or that he did not understand why.
As the district court explained, the record “simply does not contain any evidence in support [of] Charleses] allegations.” While a “colorable,” or even a “substantial,” showing may require little, it at least requires some competent evidence showing that a prisoner fails one or both of the elements for competency. Challenges lacking such evidence are precisely the kind of “[l]ast-minute filings that are frivolous[,] designed to delay executions[, and] can be dismissed in the regular course.” Panetti, 551 U.S. at 946, 127 S.Ct. 2842. Based on our review of the record in this case, the district court did not abuse its discretion in denying Charles’s § 8599(f) motion. “Charles’s long term mental health history, and the more recent observations by two affiants, does not justify a competency evaluation.”
Likewise, the district court did not abuse its discretion in denying his motion for stay of execution. It is not clear whether Charles’ motion for stay is governed by McFarland or by the Nken factors. Under McFarland, if a prisoner succeeds on his § 3599 motion but has insufficient time to meaningfully exercise that right because of an impending execu-' tion, the Supreme Court has instructed federal courts to grant,a stay. See 512 U.S. at 858, 114 S.Ct. 2568 (“[Approving the execution of a defendant before his [petition] is decided on the merits would clearly be improper.”) (internal quotation marks omitted). Of course, “if a dilatory capital defendant inexcusably ignores this opportunity and flouts the available processes, a federal court presumably would not abuse its discretion in denying a stay of execution.” McFarland v. Scott, 512 U.S. 849, 860-61, 114 S.Ct. 2568, 129 L.Ed.2d 666 (1994). Under the Nken factors, the movant must make a strong showing that he is likely to succeed on the merits of his underlying claim — in this case, Charles’s Ford claim.
As already explained, Charles cannot make the requisite showing under his § 3599 motion. Neither can he make a strong showing that he is likely to succeed on his Ford claim. See Nken, 556 U.S. at 425-26, 129 S.Ct. 1749. Therefore, regardless of which standard we apply, Charles’s is not entitled to relief on his motion for stay.
III.
Accordingly, we AFFIRM.
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.
. The facts of Charles’s crime are recounted in the Texas Court of Criminal Appeals’ opinion on direct appeal as well as in our habeas opinion. Charles v. State, No. AP-74694, 2005 WL 283598, at *1 & n. 1 (Tex.Crim.App. Feb. 2, 2005); Charles v. Stephens, 736 F.3d 380, 383-84 (2013). We need not recite them again here.
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509003-22552 | LEVIN H. CAMPBELL, Circuit Judge.
This appeal concerns the power of the district court to permit certain Puerto Rican residents, who have sued the United States for the alleged negligence of a Veterans Hospital, to add to their complaint a nonfederal tort claim against Hospital Mimiya, Inc., a private institution in Puerto Rico. By the time of the proposed amendment, Hospital Mimiya had been brought into the litigation as a third-party defendant by the United States, which claimed a right of indemnification from Mimiya should the United States be found liable. The district court refused to allow plaintiffs to amend their complaint so as to sue Hospital Mimiya directly, and denied their motion for reconsideration, stating that it lacked power to exercise either ancillary or pendent jurisdiction over the proposed non-federal claim against Hospital Mimiya. We hold that statutory considerations do not bar “the exercise of jurisdiction over the particular nonfederal claim” involved herein, see Owen Equipment and Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978) and remand to the district court with directions for it to follow in determining whether Article III of the Constitution bars such exercise.
I.
Upon exhausting their administrative remedies, 28 U.S.C. § 2675, Ramonita Ortiz, et al. (hereinafter appellants) sued the United States under the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671-80, alleging that on January 21, 1973 appel lants’ decedent was taken to the Veterans Hospital in San Juan where the employees and agents of that hospital, “failing to diagnose the seriousness of the condition, did not hospitalize or treat him, but at his wife’s insistence, referred him to Mimiya Clinic for hospitalization with a diagnosis of ‘malaria attack.’ ” Thereafter he allegedly was not given proper treatment and by the time, three days later, that he was returned to the V.A. Hospital he had allegedly sustained “permanent, irreparable damage.” Appellants also contend that the V.A. Hospital’s “referral [to Mimiya] was an authorization for admission under Veterans Administration’s instructions.” The decedent, in any event, steadily declined until he died one and one-half years later.
After suit was brought, the United States filed a third-party complaint against Hospital Mimiya seeking indemnification. This complaint, although it failed to make mention of the fact, was bottomed on an independent federal jurisdictional basis, 28 U.S.C. § 1345. Thereafter, appellants unsuccessfully sought leave of court to amend their own complaint to add a negligence claim directly against Mimiya. After denying the motions to amend and for reconsideration, the district court granted appellants permission, to which we assented, to bring an interlocutory appeal, 28 U.S.C. § 1292(b), from these orders. We stayed consideration of the appeal pending the United States Supreme Court’s decision in Qwen Equipment and Erection Co. v. Kroger, which issued last June, 437 U.S. 365, 98 S.Ct. 2391, 57 L.Ed.2d 274 (1978).
While when Kroger was first called to our attention it seemed as if it might be controlling, it is now clear that its underlying facts differ significantly from those before us. In Kroger, plaintiff, a citizen of Iowa, sued defendant, a citizen of Nebraska, under the diversity statute (there were no federal claims as such). After filing a third-party complaint against Owen Equipment and Erection Company, defendant moved for summary judgment on plaintiff’s claim against it. While this motion was pending, plaintiff successfully moved to amend its complaint to add a claim against Owen. Summary judgment was thereafter rendered in defendant’s favor on the original claims, leaving only plaintiff’s claim against Owen to proceed to trial. On the third day of trial, Owen moved to dismiss for lack of subject matter jurisdiction on the ground that it was a citizen of the same state as plaintiff. The district court denied the motion and was affirmed on appeal. The Eighth Circuit reasoned that in light of United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), because plaintiff’s claims against the defendant and Owen arose out of a common nucleus of operative fact, exercise of jurisdiction over the nonfederal claim was not barred by Article III of the Constitution which defines the scope of district court jurisdiction. The Supreme Court reversed, holding that it would conflict with the intent of Congress as manifested in the diversity statute for the district court to exercise jurisdiction over plaintiff’s claim against Owen.
The Court said that there are two “hurdle[s] that must be overcome in determining that a federal court has jurisdiction over a particular controversy. For the jurisdiction of the federal courts is limited not only by the provisions of Art. Ill of the Constitution, but by Acts of Congress.” Kroger, 437 U.S. at 372, 98 S.Ct. at 2402. The Court went on to rule that the history of the diversity of citizenship statute, 28 U.S.C. § 1332(a)(1), “clearly demonstrates a congressional mandate that diversity jurisdiction is not to be available when any plaintiff is a citizen of the same State as any defendant.” Id. at 374, 98 S.Ct. at 2403. Since the exercise of jurisdiction over plaintiff’s claim against Owen destroyed complete diversity between the plaintiff and defendants, the claim was outside the scope of the jurisdiction conferred on federal courts by Congress in enacting the diversity statute. Id. The Court never reached the issue whether jurisdiction would have existed under Article III.
The Kroger analysis is not dispositive here since the present case was not brought under the diversity statute but rather under the Federal Tort Claims Act. Furthermore, Hospital Mimiya’s status in the case is different from Owen’s, as it is a third-party defendant under a federal jurisdictional statute. These factors point to a different analysis and, ultimately we believe, a different result, from Kroger.
In deciding whether the district court erred in ruling that it lacked judicial power to hear appellants’ claim against Hospital Mimiya, we first consider whether jurisdiction is precluded by Article III. While this question was bypassed in Kroger, it remains — as the Kroger Court acknowledged — one of two fundamental “hurdles,” both of which must be cleared for jurisdiction to exist. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218, contains guidelines for delineating the scope of the constitutional limits to federal judicial power, at least where the federal claim to which a plaintiff seeks to append a nonfederal claim arises under the portion of Article III extending the judicial power to cases “ ‘arising under [the] Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their authority.” See note 5, supra ; Kroger, 437 U.S. at 371, 98 S.Ct. at 2401. In Gibbs plaintiff raised two claims arising out of the same incident against the defendant, one based on federal substantive law and the other on state law. The federal claim was founded upon a provision of the Labor Management Relations Act, 29 U.S.C. § 187(b), banning secondary boycotts and the state law claim was for intentional interference with employment and business contracts. At issue was whether the district court could exercise pendent jurisdiction over the state law claim. The Court held:
“Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim ‘arising under [the] Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority . . .,’ U.S.Const., Art. Ill, § 2, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional ‘case.’ The federal claim must have substance sufficient to confer subject matter jurisdiction on the court. Levering & Garrigues Co. v. Morrin, 289 U.S. 103, [53 S.Ct. 549, 77 L.Ed. 1062]. The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff’s claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole.”
383 U.S. at 725, 86 S.Ct. at 1138 (emphasis in original; footnotes omitted). Thus, where the federal claim “ ‘aris[es] under . the Laws of the United States,’ ” the exercise of judicial power over a non-federal claim is not barred by Article III when the federal claim raises a substantial question and the federal and nonfederal claims arise from a common nucleus of operative fact. Kroger, 437 U.S. at 378-79, 98 5. Ct. at 2401. (White, J., dissenting).
One possible distinction between Gibbs and the present case is that Gibbs involved a “[cjase . . . arising under the Laws of the United States.” It is by no means clear that Federal Tort Claims Act actions are “[c]ase[s] . . . arising under . the Laws of the United States.” More likely, they arise under the portion of Article III authorizing federal court jurisdiction in “[cjontroversies to which the United States shall be a Party.” See note 5, supra. Should the Gibbs standards for determining when pendent jurisdiction is barred by Article III be applied where the federal question raises a “controversy,” as opposed to a “case”? This question was left unanswered by the majority in Kroger, which stated with respect to the Eighth Circuit’s application of the Gibbs standards to the “controversy” (between citizens of different states; see note 5, supra) before it that “[w]e may assume without deciding that the Court of Appeals was correct in this regard.” 437 U.S. at 371 n.10, 98 S.Ct. at 2402.
There is some authority for the proposition that “[tjhe term ‘controversies,’ if distinguishable at all from ‘cases,’ is so in that it is less comprehensive that the latter, and includes only suits of a civil nature.” Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 239, 57 S.Ct. 667, 81 L.Ed. 889 (1937), quoting Justice Field in In Re Pacific Railway Commission, 32 F. 241, 255 (1887), who cites to Justice Iredell’s opinion in Chisholm v. Georgia, 2 U.S. (2 Dall.) 419, 430-31, 1 L.Ed. 440 (1793) as precedent; accord, Muskrat v. United States, 219 U.S. 346, 356-57, 31 S.Ct. 250, 55 L.Ed. 246 (1911). The description of “controversies” as being “less comprehensive” than “cases” might arguably mean that the scope of a “controversy” for pendent jurisdiction purposes is narrower than the scope of a “case” — and that, therefore, a stricter standard than is set forth in Gibbs should be applied in determining if Article III bars the exercise of pendent jurisdiction in a “controversy,” as opposed to a “case.”
But we see little merit in this approach. Justice Iredell’s opinion in Chisholm v. Georgia, 2 U.S. (2 Dall.) 419, 430-31, 1 L.Ed. 440 (1793) is the authority which is traditionally cited for the proposition that controversies are less comprehensive than cases. Yet, the only distinction Justice Ire-dell made between “cases” and “controversies” in Chisholm was that the latter referred to civil suits only. Chisholm, therefore, provides little support for the proposition that civil “controversies” are different from civil “cases.”
Commentators maintain that nothing has ever been made of the suggestion that controversies are less comprehensive than cases. 13 Wright, Miller & Cooper, Federal Practice & Procedure § 3529 at 147 (1975). In any event, the suggested distinction nei ther arose nor has been applied in analyzing the permissible scope of pendent jurisdiction, so even if for some purposes controversies should be viewed as being “less comprehensive” than cases, there is no precedent that they should be so viewed for pendent jurisdiction purposes. There is, moreover, some precedent for applying the Gibbs standards to “controversies.” The dissenters in Kroger did so, albeit without binding themselves to this approach in the future. 437 U.S. at 378-79, 98 S.Ct. 2396 (White, J., with whom Brennan, J. joined). A final consideration is that no reasons of policy or practicality have been advanced as to why standards other than Gibbs should be applied to the “controversy” before us. In sum, we think that although Gibbs involved a “case,” while Federal Tort Claims Act actions probably are “controversies,” the Gibbs standards are not on that account inapplicable to the latter.
A second difference between Gibbs and the present action is that plaintiff’s federal and nonfederal claims in Gibbs were both against the same party, while here plaintiffs’ federal claim is against the United States, and their nonfederal claim is against Hospital Mimiya. This difference could have been critical had Mimiya been brought into the case solely as a consequence of appellants’ nonfederal claim against it. Moor v. County of Alameda, 411 U.S. 693, 712-15, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973). Moor was a civil rights action against several deputy sheriffs, the sheriff of Alameda County, and the County itself, in which the claims against the County were nonfederal in character. Id. at 710, 93 S.Ct. 1785. Applying Gibbs, the Court found that plaintiff’s claims against the deputy sheriffs and sheriff stated substantial federal causes of action against them and that the nonfederal claims against the County derived from the same nucleus of operative fact as the federal claims against the other parties. Id. at 712, 93 S.Ct. 1785. The Court indicated, however, that merely because the Gibbs standards were met did not necessarily mean that Article III was not a bar to the exercise of pendent jurisdiction where that jurisdiction would extend over a nonfederal party as well as a nonfederal claim. The Court said that because the County was “implicated in the litigation only with respect to the pendent state law claim and not also with respect to any claim as to which there is an independent basis of federal jurisdiction,” id. at 713, 93 S.Ct. at 1797, “[wjhether there exists [constitutional] power to hear the state law claims against the County is, in short, a subtle and complex question with far-reaching implications.” Id. at 715, 93 S.Ct. at 1799. The Court declined to reach the issue because it concluded that assuming, arguendo, the existence of power to hear the nonfederal claims, the district court had not abused its discretion in declining to exercise that power. Id.
We, too, need not reach the difficult question whether the district court would have power under Article III to join a non-federal party as well as hear a nonfederal claim. See Aldinger, 427 U.S. at 14 — 15, 96 S.Ct. 2413. In the present case, the entity against which the nonfederal claim is raised is already a party as the result of the United States’ third-party complaint which was based upon an independent ground of federal jurisdiction, 28 U.S.C. § 1345 (quoted in note 4, supra). True, Hospital Mimiya is not the same party as the one against whom the anchoring federal claim was raised, but we do not think that this fact is by itself particularly significant. Mimiya is already in the case on the basis of independent federal jurisdiction so there is no need to decide whether pendent power can be stretched to the point of bringing a wholly new, nonfederal party into a lawsuit. In the present circumstances at least — and without purporting to decide what the outcome would be were Hospital Mimiya not already a party to the proceedings on a separate federal jurisdictional basis — we hold that the Gibbs standards are applicable here.
Having decided, despite differences between Gibbs and the present case, that Gibbs provides the correct measure for determining if Article III allows the district court to hear appellants’ nonfederal claim against Hospital Mimiya, we next turn to the application of the Gibbs standards. It was held in Gibbs that a district court has power under Article III to hear a nonfederal claim if that claim and the federal claim derive from a common nucleus of operative fact and if the federal claim is of sufficient substance to confer jurisdiction on the court. These are the tests that must be met here for Article III jurisdiction to exist. Whether appellants’ claim against the United States based on the purported negligence of personnel at the V.A. Hospital is of sufficient substance to confer jurisdiction under the Federal Tort Claims Act depends upon whether the conduct alleged is conduct for which “a private person, would be liable . in accordance with the law of the place where the act or omission occurred.” 28 U.S.C. § 1346(b). As that issue, which requires reference to the local law of Puerto Rico, has not been briefed or argued, we do not decide it, but refer it to the district court upon remand. The same is true of the interrelated question whether appellants’ claims derive from a common nucleus of operative fact. Both must be resolved in plaintiffs’ favor for the court to have jurisdiction under Article III. Should the court rule in plaintiffs’ favor on both questions, this will not end matters: the district court will still retain discretion to decide whether or not to exercise pendent jurisdiction over the nonfederal claim, see Gibbs, 383 U.S. at 726-29, 86 S.Ct. 1130.
Having gone as far as we can with respect to Article III, we now turn to the second hurdle which must be cleared in order to find pendent jurisdiction over the claim against Hospital Mimiya. The Supreme Court has said that beyond the “constitutional minimum,” i. e., compliance with Article III,
“there must be an examination of the posture in which the nonfederal claim is asserted and of the specific statute that confers jurisdiction over the federal claim [here, the Federal Tort Claims Act] in order to determine whether ‘Congress in [that statute] has . . . expressly or by implication negated’ the exercise of jurisdiction over the particular nonfederal claim.”
Kroger, 437 U.S. at 373, 78 S.Ct. at 2402, quoting Aldinger v. Howard, 427 U.S. at 18, 96 S.Ct. 2413.
The “posture” of appellants’ claim against Hospital Mimiya is as follows. As in Kroger, appellants’ claim against the third-party defendant, Hospital Mimiya, is not ancillary to their claim against the United States in the sense of being dependent upon the outcome of that claim. The claim against Hospital Mimiya is separate and independent. This fact distinguishes the instant case from the cases in which ancillary jurisdiction is most commonly exercised. See Kroger, 437 U.S. at 376, 98 S.Ct. 2396.
Unlike the situation in Kroger, however, appellants’ claim against the United States must be brought in a federal court. 28 U.S.C. § 1346(b). If appellants are barred from suing Hospital Mimiya in the instant suit, they will be forced to pursue their claims against the government and Hospital Mimiya in separate forums, one federal and one state. We are not faced with a situation where “ ‘the efficiency plaintiff seeks so avidly is available without question in the state courts.’ ” Kroger, 437 U.S. at 376, 98 S.Ct. at 2404, quoting Kenrose Manufacturing Co. v. Fred Whitaker Co., 512 F.2d 890, 894 (4th Cir. 1972). The majority in Aidinger indicated that their decision might have been different had a denial of pendent jurisdiction left plaintiff with no recourse but to pursue her case in two forums.
“When the grant of jurisdiction to a federal court is exclusive, for example, as in the prosecution of tort claims against the United States under 28 U.S.C. § 1346, the argument of judicial economy and convenience can be coupled with the additional argument that only in a federal court may all claims be tried together.”
Aldinger, 427 U.S. at 18, 96 S.Ct. at 2422 (emphasis in original; footnote omitted). See also Bowers v. Moreno, 520 F.2d 843, 847-48 (1st Cir. 1975); Musher Foundation v. Alba Trading Co., 127 F.2d 9, 11 (2d Cir. 1942) (dissenting opinion) (“If the roast must be reserved exclusively for the federal bench, it is anomalous to send the gravy across the street to the state courthouse.”).
A final point bearing on the “posture” of the nonfederal claim is that Hospital Mimi-ya is not being dragged into the case solely as a result of this claim. As we have already discussed, Hospital Mimiya is in the litigation because of the government’s third-party complaint, based upon an independent ground of federal jurisdiction, 28 U.S.C. § 1345. A nonfederal claim against a party who would not otherwise be in the action would present “a more serious obstacle to the exercise of pendent jurisdiction than if parties already before the court are required to litigate a state law claim.” Aldinger, 427 U.S. at 18, 96 S.Ct. at 2422. This is so because “the addition of a completely new party [runs] counter to the well-established principle that federal courts, as opposed to state trial courts of general jurisdiction, are courts of limited jurisdiction marked out by Congress.” 427 U.S. at 15, 96 S.Ct. at 2420.
Having described what Kroger calls the “posture” of appellants’ claim against Hospital Mimiya, we turn to an analysis of the “specific statute that confers jurisdiction,” namely the Federal Tort Claims Act, “to determine whether ‘Congress in [that statute] has . . . expressly or by implication negated’ the exercise of jurisdiction over the particular nonfederal claim” before us. Kroger, 437 U.S. at 373, 98 S.Ct. at 2402, quoting Aldinger, 427 U.S. at 18, 96 S.Ct. 2413. Congress has not expressly prohibited jurisdiction over claims of this type. So we need only consider whether Congress has “ ‘by implication negated’ the exercise of jurisdiction.” Id. We conclude that it has not.
Unlike the diversity statute, which has been construed restrictively, Kroger, 437 U.S. at 373-74, 98 S.Ct. 2396, the Federal Tort Claims Act, enacted in 1946, United States v. Muniz, 374 U.S. 150, 152, 83 S.Ct. 1850, 10 L.Ed.2d 805 (1963), has generally been liberally construed. Congress, moreover, has made no later enactments narrowing the scope of the statute nor taken any action inconsistent with the exercise of pendent jurisdiction here. Compare Kroger, 437 U.S. at 373-74, 98 S.Ct. 2396. Therefore, contrary to the situation in Kroger with respect to the diversity statute, exercise of pendent jurisdiction in the present case will not contravene any congressional mandate. See Kroger, supra.
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12520614-23946 | COOK, Circuit Judge.
John Roberts challenges several of the district court's decisions at trial and sentencing: an evidentiary ruling, the district court's refusal to authorize Criminal Justice Act (CJA) funds for a forensic accountant, its reliance on judge-found facts to calculate the appropriate Guidelines range, the application of six sentencing enhancements, and the substantive reasonableness of his sentence. We affirm in part and remand some issues for further proceedings.
I.
The facts of this case are not complicated. John Roberts and seven coconspirators worked together to steal millions of dollars' worth of sensitive military equipment from a local army base and sell it on eBay. Although Roberts took the stand and denied that he knowingly trafficked stolen goods, the jury convicted him on all thirteen counts in the indictment: one count of conspiracy to steal government property valued at over $1,000 ( 18 U.S.C. § 371 ); ten counts of wire fraud ( 18 U.S.C. § 1343 ); and two counts of unauthorized export of prohibited military equipment ( 22 U.S.C. § 2778(b)(2) ). The district court applied six enhancements to Roberts's sentence: eighteen offense levels for stealing more than $3.5 million of military equipment under USSG § 2B1.1(b)(1)(J), two levels for mass-marketing under USSG § 2B1.1(b)(2)(A)(ii), two levels as a "person in the business of receiving and selling stolen property" under USSG § 2B1.1(b)(4), two levels for committing a crime involving sophisticated means under USSG § 2B1.1(b)(10)(C), four levels for organizing or otherwise leading the criminal conspiracy under USSG § 3B1.1(a), and two levels for willfully obstructing justice under USSG § 3C1.1. Ultimately, the court sentenced Roberts to 180 months' imprisonment, varying downward from the 210- to 262-month range suggested by the Guidelines.
Roberts appeals, contesting several of the district court's decisions at trial and sentencing.
II.
A. Evidentiary ruling
Before trial, Roberts notified the government that he intended to introduce into evidence other, current eBay listings by different sellers to prove that he accidentally-rather than knowingly-committed a crime. These listings offered similar types of sensitive military equipment as those in the indictment: combat helmets, night vision goggles, body armor vests, and communication headsets. Roberts expected to tell the jury that he saw posts on eBay before he began selling on the internet, presumed that these military products freely circulated in the market, and concluded that he could have lawfully bought and sold them. He ended up selling stolen goods, he would have argued, but that doesn't mean that he did so knowingly. After reviewing the parties' motions in limine and discussing the issue during two bench conferences, the district court excluded the evidence.
Roberts argues that the district court abused its discretion in excluding evidence that would have critically undercut the government's case. The government, on the other hand, contends that it did not ask the jury to infer mens rea from the nature of the equipment Roberts sold on eBay. Instead, the government called three of Roberts's coconspirators to testify that he knew that he sold stolen goods. And it introduced several text messages between the coconspirators further substantiating that testimony. Thus, the government argues, the eBay listings had limited probative value, if any, and could have confused the jury into reasoning that Roberts ought not be convicted for a crime that others freely continue to commit. The government has the better of the argument.
An appellate court must be mindful of its limitations when reviewing evidentiary determinations. Unlike a district court, we rely on a record devoid of a trial's "nuances, dynamics, and atmosphere." United States v. Chambers , 441 F.3d 438, 456 (6th Cir. 2006). Thus, we review a district court's evidentiary rulings for abuse of discretion, deferring to the court's decision to admit or exclude evidence "unless we are left with the definite and firm conviction" that it clearly erred in weighing the relevant factors. United States v. Wagner , 382 F.3d 598, 616 (6th Cir. 2004) ; see also United States v. Weaver , 610 F. App'x 539, 543 (6th Cir. 2015).
Although the Federal Rules of Evidence favor admission, a trial court may exclude relevant evidence if the danger of unfair prejudice resulting from admitting it substantially outweighs its probative value. Fed. R. Evid. 403. We reject the trial court's balancing only when we are firmly convinced that the district court erred, and, even then, only if that error resulted in substantial injustice. United States v. Dixon , 413 F.3d 540, 544 (6th Cir. 2005) ; Kovacevich v. Kent State Univ. , 224 F.3d 806, 832 (6th Cir. 2000).
Viewing the evidence in the light most favorable to Roberts by maximizing its probative value and minimizing its prejudicial effect, as we must, United States v. Brady , 595 F.2d 359, 361 (6th Cir. 1979), we are not convinced that the district court abused its discretion. Even taken generously, the eBay evidence does little more than demonstrate that many users illicitly sell stolen goods over the internet. These listings not only postdate the indictment, but they also do not rebut the bevy of other evidence the government offered to prove that Roberts knew the goods were stolen-such as text messages discussing the conspiracy and other witness testimony. The evidence more likely would have confused the issues and convinced the jury to acquit "on [the] improper basis" that other users illicitly sell stolen goods with impunity. See United States v. Rey , 923 F.2d 1217, 1222 (6th Cir. 1991).
Moreover, even if we did conclude that the district court erred, any such error is harmless. The government offered abundant evidence that Roberts knew he trafficked stolen goods. Thus, excluding the eBay listings would not have had a "substantial and injurious effect or influence" on the jury's verdict. Brecht v. Abrahamson , 507 U.S. 619, 623, 113 S.Ct. 1710, 123 L.Ed.2d 353 (1993).
B. Violating CJA by denying funding for a forensic accountant
Under the CJA, attorneys for indigent defendants can petition a court for federal funds to retain an investigator, expert witness, or professional whose services the attorney needs to provide adequate representation. 18 U.S.C. § 3006A(e)(1). To obtain these funds, an indigent defendant must show that "(1) such services are necessary to mount a plausible defense, and (2) without such authorization, the defendant's case would be prejudiced." United States v. Gilmore , 282 F.3d 398, 406 (6th Cir. 2002).
Roberts argues that he did both. Before sentencing, he asked the court for $2,500 in CJA funds to cover the costs of a forensic accountant. He justified the expenditure by explaining that the presentence report did not explain the government's valuation method in calculating loss, and that "many of the items and pieces of equipment were 'used' so that full retail value may not be appropriate. Depreciation of the value of the property may or may not have been taken into account by the government when considering the amount of loss." R. 230, PageID 873-74. And the value of the stolen items directly enhanced his sentence. In a text-only order, the visiting judge from the Middle District of Georgia denied the motion. R. 232. Roberts appeals this decision, arguing that the district court abused its discretion.
When a district court gives no explanation of its reasoning in denying such a motion, we find ourselves at a loss. Reviewing for abuse of discretion does not mean that we substitute our judgment for the trial court's, affirming if we come to the same conclusions after reviewing the record. United States v. Mathis-Gardner , 783 F.3d 1286, 1288-89 (D.C. Cir. 2015). On the other hand, we don't require a district court to labor over detailed explanations for every ruling; sometimes, clear and compelling reasons warrant promptly denying relief. Id. at 1289. "[W]hen the reasons for denying a colorable motion are apparent on the record, or when granting relief was clearly appropriate from the face of the record, we can properly review whether the district court appropriately exercised its discretion, even without an explanation." Id. (internal quotations and citations omitted).
At the time the district judge denied Roberts CJA funds, no clear and compelling reason supported that conclusion. But we need not remand for the district court to explain why it denied the motion because sentencing made clear that a forensic accountant could not have helped Roberts's sentencing position.
During oral argument, counsel clarified that two sources of inventory drove the sentencing enhancement: the $4.1 million of items Roberts sold on eBay, and the $1.4 million of items seized in his warehouse. The value of the eBay items had been determined by the market prices they sold for-the only question for the judge was how many items had been stolen and illegally sold outside military channels. In contrast to the eBay inventory, the items seized at the warehouse had not yet been sold. The military valued those items at $1.4 million, but Roberts theorized that with a forensic accountant he could properly challenge that figure.
But challenging it would not have affected Roberts's sentence. The government's witness testified that between ninety and ninety-five percent (over the threshold $3.5 million ) of the items sold on eBay had been stolen. And that number alone drove the loss-value sentencing enhancement. Thus, even if we decided that the district court erred here, its error was harmless. See United States v. Clark , 385 F.3d 609, 618 (6th Cir. 2004) (employing the harmless error rule where district judge denied a defendant CJA funds).
C. Violating Sixth Amendment by denying funding for a forensic accountant
Roberts also claims that by denying him funding for a forensic accountant, the district court denied him effective assistance of counsel, violating his Sixth Amendment rights. But Roberts contends only that the district court denied his counsel the opportunity to challenge the loss valuation at sentencing, not that his counsel ineffectively represented him. See United States v. Thurmon , 413 F.3d 752, 755 (8th Cir. 2005) ; see also United States v. Osoba , 213 F.3d 913, 917 (6th Cir. 2000). This allegation is therefore more appropriately construed as an argument that the district court violated the CJA, see Thurmon , 413 F.3d at 755, and we have already found that contention meritless.
D. Relying on judge-found loss valuation to calculate the sentencing range
The district court questioned government witness Agent Perry at sentencing on the value of Roberts's theft to calculate the appropriate guideline range. Roberts did not object to the district court taking on this role. We thus review the judge's fact-finding at sentencing for plain error, reversing only if we find "(1) error (2) that 'was obvious or clear,' (3) that 'affected defendant's substantial rights' and (4) that 'affected the fairness, integrity, or public reputation of the judicial proceedings.' " United States v. Vonner , 516 F.3d 382, 386 (6th Cir. 2008) (en banc) (quoting United States v. Gardiner , 463 F.3d 445, 459 (6th Cir. 2006) ).
The Sixth Amendment includes no prohibition on district courts making factual findings or relying on those findings to impose a sentence below the statutory maximum. United States v. Bonick , 711 F. App'x 292, 299 (6th Cir. 2017). Although we concluded in Bonick that these practices will not "always result in a constitutional sentence," neither a majority of the Supreme Court nor a majority of this court has recognized an as-applied Sixth Amendment challenge to this fact-finding. Id. Thus, even if we credited Roberts's argument and found error, it would be neither obvious nor clear. Id. ; Vonner , 516 F.3d at 386.
E. Procedural reasonableness
Roberts also challenges the procedural reasonableness of his sentence, attacking the district court's application of six sentencing enhancements, and the adequacy of its explanations in choosing to apply them. Because Roberts again failed to object, we review for plain error. United States v. Penson , 526 F.3d 331, 337 (6th Cir. 2008).
Loss value . Roberts challenges the adequacy of the district court's ruling on the amount of loss attributable to his theft, see Fed. R. Crim. P. 32(i)(3)(B), specifically alleging that the court relied on an incorrect valuation of the loss amount, failed to distinguish between stolen army equipment and legally trafficked items, and mistakenly attributed some of the items to Roberts rather than his coconspirators.
When a defendant actively disputes a factual portion of the presentence report that might affect his sentence, the district court must affirmatively rule on the matter and "may not merely summarily adopt the factual findings in the presentence report or simply declare that the facts are supported by a preponderance of the evidence." United States v. White , 492 F.3d 380, 415 (6th Cir. 2007) ; Fed. R. Crim. P. 32(i)(3)(B). Our cases require "literal compliance" with Rule 32 and mandate that sentencing courts explain their calculation methods, id. , ensuring that "defendants are sentenced on the basis of accurate information and provid[ing] a clear record for appellate courts," United States v. Tackett , 113 F.3d 603, 613-14 (6th Cir. 1997). This calculation need only reasonably estimate the loss, but it must reflect the district court's work in arriving at it. USSG § 2B1.1 cmt. n.3(C); United States v. Poulsen , 655 F.3d 492, 513 (6th Cir. 2011).
Roberts challenged the presentence report's calculation of the loss amount. The government contends that the district court adequately explained its findings, but we disagree. At sentencing, the district judge repeatedly asked Perry to explain how she could assume that ninety percent of the items sold on eBay had been stolen, expressing discomposure when Perry replied that she had not itemized the stolen equipment and could not provide the court with any documentation supporting her testimony. R. 237, PageID 2142-44. "I'm just trying to find out how you arrived at these numbers," the judge repeated, "[a]nd you testify with great enthusiasm as to [these numbers], but if you go into much deeper than that, you hit a stump." Id. at 2144.
But the judge moved on almost immediately, accepting Perry's best guess at estimating the loss value: "The Court finds that 80 percent of Exhibit 1 was illegal; 80 percent of $1.4 million and 90 percent of the $3.5 million. Okay. Thank you." R. 327, PageID 2145. Quite plainly, "a district court implicitly adopt[ing] the United States' reasoning as part of its findings does not suffice" for the purpose of Rule 32. United States v. Griffin , 656 F. App'x 138, 142 (6th Cir. 2016) ; see also White , 492 F.3d at 418. In United States v. Nelson , for instance, we found that a district court's bare recitation that he "had an opportunity to review the submissions by both the defendant and the government and ... concluded that the government is correct and that it is no longer necessary to go through the exercise of doing further research," did not reveal how the district court determined the government accurately calculated the loss, nor did it respond to Nelson's specific objections. 356 F.3d 719, 723 (6th Cir. 2004).
"[I]t is not [a reviewing] court's duty to supply reasons for the district court's sentencing decision." United States v. Fowler , 819 F.3d 298, 306 (6th Cir. 2016). Because this error drove the court's enhancement of Roberts's sentence, it affected his substantial rights. See United States v. Cotton , 535 U.S. 625, 633, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002) ("affecting substantial rights" means that the error "affected the outcome of the district court proceedings" (internal citation omitted)). Thus, we vacate the loss value enhancement, and remand for resentencing consistent with this opinion.
Finally, should the district court find that the eBay portion of the loss amount is less than $3.5 million, it should reconsider any requests by Roberts for a forensic accountant to aid in determining the loss amount attributable to the other recovered goods.
Mass-marketing . Roberts also contends that the district court failed to make the necessary factual findings as to the applicability of a mass-marketing enhancement. But Roberts never challenged the factual foundation of the mass-marketing enhancement, and therefore never triggered Rule 32's affirmative ruling requirement. United States v. Lang , 333 F.3d 678, 681 (6th Cir. 2003). He did not specifically allege, for example, that the presentence report incorrectly identified the victim of his fraud. Instead he referenced the Second Circuit's reading of the mass-marketing enhancement as "properly appl[ying] only when the targets of the mass-marketing ... are also in some way victims of the scheme." United States v. Lacey , 699 F.3d 710, 714 (2d Cir. 2012). Though a novel question, it did not put any facts in dispute, and the district court therefore did not procedurally err by failing to address it.
A person in the business of selling and receiving stolen property . Here too, Roberts argues that the district court procedurally erred when it failed to resolve the factual dispute over whether Roberts derived income solely from selling stolen goods. But the presentence report left open the possibility that Roberts sometimes sold legitimately-purchased items. It explained that Roberts qualified for the USSG § 2B1.1(b)(4) enhancement because he trafficked volumes of stolen goods, maintained a large inventory in a storage unit, involved a number of coconspirators, and facilitated and encouraged other thefts from the military. USSG § 2B1.1 cmt. n.5. Thus, with no factual disagreement to resolve, nothing triggered the district court's responsibility under Rule 32 to adequately explain its findings. United States v. Treadway , 328 F.3d 878, 886 (6th Cir. 2003).
Leadership . Roberts contends that the district court again failed to make the required findings under Rule 32 that he organized or led "a criminal activity that involved five or more participants" sufficient to enhance his sentence under USSG § 3B1.1(a). As before, Roberts failed to raise a factual dispute below, and did not trigger Rule 32's requirements. To put a fact in dispute, a defendant must "produce more than a bare denial" or suggest a different enhancement. Lang , 333 F.3d at 681.
Sophisticated means . Next, Roberts asserts that the district court procedurally erred and violated Rule 32(h) when it imposed a two-level enhancement under USSG § 3B1.1(b)(10)(C) rather than (10)(B) without notifying counsel beforehand. Rule 32(h) requires that before a court departs from the applicable sentencing range on a ground that neither the presentence report nor the party's prehearing submissions raise, "the court must give the parties reasonable notice that it is contemplating such a departure." Our cases teach, however, that a district court's sua sponte decision to apply a Guidelines provision under one subsection rather than another does not qualify as a "departure" requiring notice. United States v. Bathily , 392 F. App'x 371, 375 (6th Cir. 2010) (collecting cases); see also United States v. Hayes , 171 F.3d 389, 393 (6th Cir. 1999) (the district court need not supply notice when it "plans to apply the Guidelines in a manner different from what is recommended in the presentence report"). We therefore find no error here.
Obstruction . Finally, Roberts challenges the district court's imposition of an obstruction of justice enhancement under USSG § 3C1.1. The district court, he claims, both failed to make necessary factual findings after Roberts challenged the enhancement, and incorrectly relied on the jury's verdict to determine that Roberts lied at trial.
Supreme Court strictures protect a defendant's right to testify by tightly circumscribing the circumstances under which a district court may enhance a sentence for willfully presenting false testimony at trial: "if a defendant objects to a sentence enhancement resulting from her trial testimony, a district court must review the evidence and make independent findings necessary to establish a willful impediment to or obstruction of justice, or an attempt to do the same, under the perjury definition we have set out." United States v. Dunnigan , 507 U.S. 87, 95, 113 S.Ct. 1111, 122 L.Ed.2d 445 (1993). Best practices would have a sentencing judge "address each element of the alleged perjury in a separate and clear finding." Id. Yet the Supreme Court confirmed that it would uphold applications of an obstruction enhancement if a court fulfills Dunnigan 's broad mandate and "makes a finding of an obstruction of, or impediment to, justice that encompasses all of the factual predicates for a finding of perjury." Id.
To fulfill Dunnigan 's directive, this circuit instituted two requirements for a district court imposing an obstruction enhancement for perjury: "first, it must identify those particular portions of the defendant's testimony that it considers to be perjurious, and second, it must either make specific findings for each element of perjury or at least make a finding that encompasses all of the factual predicates for a finding of perjury." United States v. Sassanelli , 118 F.3d 495, 501 (6th Cir. 1997) (internal quotations omitted).
Our cases recite firm rules, instructing that we will not "review [a] record independently to make our own findings and infer that the district court had the same statements in mind." United States v. Chance , 306 F.3d 356, 389-90 (6th Cir. 2002). Nor will we neglect Dunnigan 's independent-finding mandate, affirming "on an inference that [an enhancement] was based upon the government's arguments." United States v. McRae , 156 F.3d 708, 713 (6th Cir. 1998) ; see also United States v. Warner , 646 F. App'x 478, 480 (6th Cir. 2016). But while we sometimes insist on rigid adherence to these rules, see United States v. Macias-Farias , 706 F.3d 775, 783 (6th Cir. 2013), other times we've affirmed on less work, "so long as the record below is sufficiently clear to indicate those statements that the district court considered to be perjurious and that the district court found that those statements satisfied each element of perjury," Sassanelli , 118 F.3d at 501. We have even concluded that a colloquy or other contextual clues can satisfy the Dunnigan test. See United States v. Roman-Oliver , 564 F. App'x 156, 165 & n.2 (6th Cir. 2014).
In United States v. Clark , we held that "the better practice, and the requirement that should be followed hereafter , is that, when assigning points for obstruction of justice, the district court should identify specifically which statements or actions by a defendant constitute an obstruction of justice." 982 F.2d 965, 970 (6th Cir. 1993) (emphasis added). Regardless of interim cases that may lean a different way, we follow Clark 's binding precedent here. See Darrah v. City of Oak Park , 255 F.3d 301, 310 (6th Cir. 2001) ; see also Macias-Farias , 706 F.3d at 783.
The district court made no findings whatsoever. Roberts challenged the obstruction enhancement both before and during sentencing, triggering the judge's obligation to "make independent findings necessary to establish" that the defendant willfully and materially perjured himself. Dunnigan , 507 U.S. at 95, 113 S.Ct. 1111. But after hearing brief argument from both parties at sentencing-and in direct response to the government's admonishment that the Sixth Circuit requires a specific finding for an obstruction enhancement-the district judge uttered just eleven words: "The Court makes a specific finding that the defendant testified falsely." R. 327, PageID 2154.
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3871294-29057 | MEMORANDUM OPINION
SPENCER WILLIAMS, District Judge.
This case is presently before the court on three motions:
(1) Plaintiffs’ motion to certify the class denominated in the amended complaint, pursuant to F.R.Civ.P. 23;
(2) Plaintiffs’ motion to compel answers in oral examination, pursuant to F.R. Civ.P. 30(b)(6) and 37; and
(3) Defendant’s motions to dismiss and for summary judgment pursuant to F.R.Civ.P. 56.
The amended complaint in this case alleges liability on the part of the New York Stock Exchange (Exchange) for the failure and forced liquidation of the brokerage house of Blair after its merger with the brokerage house of Schwabacher in 1969, and for losses sustained by the plaintiffs, who were investors in Blair. Liability is claimed to arise under Sections 6, 10(b) and 20(a) of the Securities Exchange Act of 1934 (the Act) and the Rules of the Securities and Exchange Commission (SEC) and the Exchange promulgated thereunder.
I. DEFENDANT’S MOTION TO DISMISS
The amended complaint sets forth 12 counts of alleged violations of securities laws: Counts 1, 2, and 3 allege that the Exchange breached its contractual duties to the plaintiff investors under § 6 of the Act by permitting Blair to sell unregistered securities without a “knowledgeability letter” or full disclosure of Blair’s financial condition. Counts 4, 5, and 6 allege that the Exchange violated its own Rules under § 6 of the Act by allowing Schwabacher to continue operation and to merge with Blair after serious violations of Exchange Rules on recordkeeping, commingling, capital reserve ratios and Exchange audits. Count 7 relates further § 6 violations by the Exchange’s suppression of material information concerning these violations from the plaintiffs and the public. Count 8 alleges a violation of Exchange Rules under § 6 in the sale of unregistered securities in Blair. Counts 9, 10, and 11 allege that the Exchange violated § 10(b) and SEC Rule 10b-5 by fraudulently omitting disclosure of information material to the sale of securities in Blair, by aiding and abetting Blair in issuing securities without necessary disclosures, and by engaging in a conspiracy with Blair to defraud plaintiffs. Finally, in Count 12 plaintiffs allege that the Exchange is a “controlling person” within the meaning of § 20(a) of the Act and is thus jointly and severally liable for the securities violations of Schwabacher and Blair. Each of the allegations of the complaint will be considered in turn below.
The § 6 Claims
Plaintiffs’ claims arise out of two pertinent subsections of § 6: § 6(a) requires the execution of a contract between the SEC and any registered national securities exchange under which the exchange is bound to enforce “so far as is within its powers” compliance by its member firms with securities laws and SEC regulations; § 6(b) states that an exchange may not be registered and may not remain registered with the SEC unless its rules “include provision for the expulsion, suspension or disciplining of a member for conduct or proceeding inconsistent with just and equitable principles of trade.” There are two threshold issues in the application of these sections: First, do the plaintiffs have standing to assert an implied right of action either in tort or as third-party beneficiaries of the registration agreement between the SEC and the Exchange? Second, if they have standing, are their claims barred by the applicable statute of limitations? The court holds that plaintiff investors herein have standing under § 6 to pursue this action and that they are not barred by the applicable statute of limitations.
Defendants contend that by § 6 Congress intended to protect only the public customers of the Exchange and not private investors in the brokerage houses themselves. This contention is not without merit. There were no such investors in 1934 because brokerage houses were not permitted to incorporate until 1953. In addition, in 1970 Congress specifically excluded investors in brokerage houses from the protection afforded Exchange “customers” in the Securities Investors Protection Act. However, courts have properly held that the Congressional intent in enacting § 6 was to protect all parties likely to be harmed by a breach of an exchange’s self-regulation agreement with the SEC. The leading case of Baird v. Franklin, 141 F.2d 238, 239 (2d Cir.) cert. denied 323 U.S. 737, 65 S.Ct. 38, 89 L.Ed. 591 (1944) held that the New York Stock Exchange had a duty to public investors under § 6 to investigate Exchange members and to “suspend or expel members who it had reason to believe had been guilty of conduct inconsistent with just and equitable principles of trade.” The courts did not reach the question whether those protected by the SEC-Exchange agreement mandated by § 6(a)(1) had an implied private right of action as third-party beneficiaries of that agreement, but implied that they would have that right. Subsequent cases have extended the scope of the implied right of action beyond the public customers of an exchange. In Pettit v. American Stock Exchange, 217 F.Supp. 21 (S.D.N.Y.1973) the court held that a corporation sustaining losses in the value of its securities due to the exchange’s failure to regulate its member firms had an implied right of action under § 6. Recent cases have held that the implied right of action is vested in partners and investors in Exchange member firms as well. New York Stock Exchange v. Sloan, 394 F.Supp. 1303 (S.D.N.Y.1975), Weinberger v. New York Stock Exchange, 403 F.Supp. 1020, CCH Fed.Sec.L.Rep. 95, 348 (S.D.N.Y.1975). Sloan and Weinberger were cited approvingly by the Ninth Circuit in Hughes v. Dempsey-Tegeler & Co., Inc. 534 F.2d 156 (9th Cir. 1976) (at n. 4), which extended the implied right of action under § 6 to a subordinated lender to a brokerage house. Plaintiff investors in the present case are in substantially the same position as the plaintiff in Hughes and are also entitled to § 6 protections. Plaintiffs here are among those
members of the Exchange community who are intended to be benefited by such rules . . . and who stand in the kind of relationship to the firm which requires them to rely on its compliance with the rules. Sloan, supra 394 F.Supp. at 1310.
The gravamen of plaintiffs’ § 6 allegations is that the Exchange has breached its contractual obligations under the written registration agreement with the SEC. Weinberger, supra. The applicable statute of limitations is therefore Cal.Code Civ.Pro. § 337(1) governing third-party suits on a written contract. Under California law the beneficiary’s cause of action accrues when the obligation is breached, and the action is not barred until four years after that date. This action was filed on March 8, 1973. The court therefore finds that plaintiffs are not barred by the statute of limitations from asserting their § 6 claims for those breaches of the SEC-Exchange agreement occurring after March 8, 1969.
While the scope of the implied right of action under § 6 is to be interpreted broadly, the scope of the duty owed by the Exchange must be circumscribed. The Securities Exchange Act is grounded in the concept of Exchange self-regulation. The § 6 mandate “to enforce so far as is within its powers,” must be evaluated reasonably. Hughes, supra. While unfettered discretion on the part of the Exchange in the enforcement of its rules cannot be permitted under the Act, § 6 necessarily invests the Exchange with a great deal of discretion in the promulgation and enforcement of rules and in the supervision of Exchange members. See, e. g., Rich v. New York Stock Exchange, 379 F.Supp. 1122 (S.D.N.Y.1974).
In enforcing its rules and in making complex decisions on the suspension or forced liquidation of members, the Exchange must consider the often conflicting interests of the member firm, its partners, and investors, and the corporations whose securities are handled by the firm, as well as the Exchange’s public customers. Under these circumstances it cannot be said, as plaintiffs here seem to contend, that complete suspension should automatically follow a firm’s breach of Exchange rules. Nor does § 6 render the Exchange a guarantor of all its members’ mismanagement or fraudulent activities. Indeed, § 6 requires only that the Exchange rules provide for the expulsion, suspension, or disciplining of member firms that are in violation of the Exchange rules. Within this context plaintiffs have a considerable task in establishing a § 6 breach by the Exchange. In Hughes, supra, the Ninth Circuit held that:
As long as the Exchange takes prompt action to investigate alleged violations, and having ascertained that violations exist, takes action reasonably designed to restore compliance with the rules, courts should not substitute their retrospective judgment concerning the appropriate action. 534 F.2d 156, 170 (9th Cir. 1976).
Under this formulation of the duty, actual knowledge of a member firm’s misconduct is not a prerequisite to the Exchange’s § 6 liability. However, plaintiffs will have a heavy burden of proving that the Exchange failed to exercise reasonable diligence in its supervision of member firms, and that this failure was the cause of the injury complained of. Baird v. Franklin, 141 F.2d 238, 239 (2d Cir. 1944).
Of special importance in the case-by-case evaluation of these factors is the supervisory role of the SEC with regard to the alleged § 6 violations. Because the SEC is the governmental authority charged with the enforcement of the provisions of the Act, SEC endorsement of a particular regulatory action by an exchange should be given considerable weight by a court hearing a claim that the same action violates the Exchange’s § 6 duty. Hughes, supra, 534 F.2d 156, 170 (9th Cir. 1976).
Applying these elements to the facts of this case the court finds that a failure in the exercise of reasonable diligence may be found only if the Exchange knew or had reasonable cause to know of a violation or suspected violation of a securities law, regulation or rule, or Exchange rule, and failed to proceed with requisite due care in view of the seriousness of the violation, pertinent SEC policies, the rules and practices of the Exchange, and the interests of the member firms, their security holders and the public customers of the Exchange.
The standards set out above for evaluating the Exchange’s duties under § 6 must be tested on a case-by-case basis; the duties are not clear-cut and are not susceptible to resolution on a motion for summary judgment. This is particularly so where, as in this case, defendant’s only affidavit as to the pertinent disciplinary actions and regulatory standards of the Exchange is by an interested party, the Exchange officer in charge of member regulation. See Sartor v. Arkansas Natural Gas, 321 U.S. 620, 64 S.Ct. 724, 88 L.Ed. 967 (1944). Consequently, the motion for summary judgment on the § 6 causes of action is denied except as noted below.
With respect to the issues remaining for trial several conclusions may be drawn: First, the Exchange’s duties under § 6, both supervisory and disciplinary, pertain directly only to the SEC and the member firms. Plaintiffs’ right of action is dependent upon a breach of the primary duty. Plaintiffs must thus demonstrate with specificity how the Exchange’s regulation of Schwabacher and Blair violated the standard of due care stated herein and how such violations caused their injury. Furthermore, plaintiffs must show that such breaches occurred within the four-year statute of limitations applicable to this action. Finally, those portions of the complaint alleging a breach of the Exchange’s duty to promulgate rules to protect the plaintiffs and others must be dismissed, as the obligation falls outside the duty owed to plaintiffs. Courts have uniformly held that these causes of action must lie against the SEC pursuant to its authority under § 19(b) of the Act to “alter or supplement” the rules and practices of any securities exchange. 15 U.S.C. § 78s(b). Weinberger, supra, Gordon v. New York Stock Exchange, 422 U.S. 659, 95 S.Ct. 2598, 45 L.Ed.2d 463 (1975).
The § 10(b) and SEC Rule 10b-5 Claims
In their amended complaint plaintiffs abandon the allegation that the Exchange made material misrepresentations to them regarding Blair’s capital position and Schwabacher’s back office and capital accounts violations. The amended complaint alleges only that the Exchange failed to disclose material information to the Blair investors. Defendants contend that mere inaction does not give rise to 10b-5 liability, as omissions are actionable only if, in the context of material representations for which the Exchange was responsible, the omitted matter was necessary to make those representations not misleading. The Ninth Circuit in Wessel v. Buhler, 437 F.2d 279, 283 (9th Cir. 1971) seems to support this view:
We find nothing in Rule 10b-5 that purports to impose liability on anyone whose conduct consists solely of inaction. On the contrary, the only subsection that has any reference to an omission [refers to] an omission occurring as part of an affirmative statement. We perceive no reason, consonant with the congressional purpose ... . thus to expand Rule 10b-5 liability.
Wessel, however, must be interpreted in light of the Ninth Circuit’s later decision in White v. Abrams, 495 F.2d 724 (9th Cir. 1974), and in light of the Supreme Court’s recent ruling in Ernst & Ernst v. Hochfelder, 425 U.S. 185, 96 S.Ct. 1375, 47 L.Ed.2d 668, 44 U.S.L.W. 4451 (1976). White v. Abrams established a “flexible duty test” under which the courts are to evaluate a number of pertinent factors involved in a securities transaction in determining whether a representation or omission violated § 10(b) and Rule 10b-5. An action for fraud under § 10(b) will not lie unless a duty relationship has arisen. In addition, Hochfelder establishes that a private action under § 10(b) and Rule 10b-5 will not lie without scienter on the part of the party charged with the violations. 425 U.S. 194-206, 96 S.Ct. 1375, 1381-1387, 47 L.Ed.2d 668, 676-683, 44 U.S.L.W. 4451, 4454-4457 (1976).
Under these tests it appears that in certain circumstances a securities exchange could be held liable under § 10(b) for failure to inform investors in a member firm of material information concerning that firm’s financial and operating condition. It is also apparent that such a conclusion is not appropriate on a motion for summary judgment. We need not reach that point here, however, because we have concluded that plaintiffs’ § 10(b) and Rule 10b-5 causes of action are barred by the applicable statute of limitations.
In Holmberg v. Armbrecht, 327 U.S. 392, 66 S.Ct. 582, 90 L.Ed. 743 (1946), the Supreme Court held that in a federal securities action where the applicable federal securities statute is silent, the appropriate local law of limitation applies. It is well settled that in § 10(b) actions, the state law of the forum determines the applicable statute of limitations. See, e. g., Maine v. Leonard, 365 F.Supp. 1277 (W.D.Va.1973). In California, § 10(b) actions are governed by the general fraud statute, Cal.Code Civ. Pro. § 338, which permits suits for fraud or mistake for three years after discovery or constructive discovery of the fraud by plaintiff. United California Bank v. Salik, 481 F.2d 1012 (9th Cir.) cert. denied 414 U.S. 1004, 94 S.Ct. 361, 38 L.Ed.2d 240 (1973).
Plaintiffs here hopefully suggest that the New York statute of limitations for fraud should apply. That statute permits an action up to six years after the fraud or two years after its discovery, whichever is longer. We can discover no cases suggesting that such a rule would be appropriate. While it is theoretically arguable that the alleged fraudulent omissions occurred in New York, it is more plausible to say that they occurred in California, where plaintiff investors were employed, where they purchased their securities in Blair, and where they themselves chose to bring this action. Furthermore, the federal policy in this circuit is heavily weighted toward consistency in the application of limitation statutes to securities fraud actions, and the forum state rule serves this end. United California Bank, supra. Almost all federal securities actions can be factually related to the state of the securities exchange, but this does not change the federal rule that in the absence of a limitation section in the federal securities statute, the forum state limitation rules apply.
Because Cal.Code Civ.Pro. § 338(4) and the federal equitable tolling doctrine are practically identical, it is unnecessary for us to express an opinion as to whether the federal rule or the tolling doctrine of a forum state should govern in a federal securities fraud action. Although the Ninth Circuit applied the tolling rule of § 338(4) in Turner v. Lundquist, 377 F.2d 44 (9th Cir. 1967), that court stated in United California Bank, supra, that “the adopted state statute shall only run in accordance with the federal law which decrees that the statute does not begin to run until the fraud is, or should be, discovered.” 481 F.2d at 1014 n. 7. The application of the statute in this case thus turns on a determination of the date when the plaintiffs discovered, or should have discovered, the alleged fraud.
Defendant’s motion for summary judgment might be granted on the ground that the amended complaint does not relate with sufficient particularity the elements of fraud required by Fed.R.Civ.P. 9(b). The court has had, however, the benefit of extensive briefing and oral argument on the alleged § 10(b) violations on previous motions, and we conclude that plaintiffs’ § 10(b) claims are barred because each of the named plaintiffs had actual or presumptive knowledge of facts sufficient to put him on inquiry as to defendant’s alleged fraudulent activities prior to March 8, 1970, three years prior to the filing of this action.
Plaintiffs argue that questions relating to the quantum of knowledge necessary in a particular case to constitute “discovery” of a fraud are too factually-based to be determined on a motion for summary judgment. While that might often be true, this case is an exception to the general proposition. The issues and facts are easily identifiable and well developed in the record. Operative or presumed knowledge of the alleged fraud in this case requires knowledge of three distinct factual issues:
(1) Did the plaintiffs know about Schwabacher’s serious violations of SEC and Exchange rules and uncertain financial condition prior to March 8, 1970?
(2) Did the plaintiffs know before March 8, 1970 that the Exchange had any substantial role in the supervision and disciplining of member firms and the approval of the SehwabacherBlair merger? and
(3) Did the plaintiffs know before March 8, 1970 that their securities in Blair had been rendered virtually worthless by the demise of Schwabacher/Blair, contrary to their expectations at the time of purchase?
These questions must all be answered in the affirmative. The uneontroverted facts indicate that the plaintiffs knew or should have been put on inquiry before March 8, 1970 of all of the factors material to their § 10(b) claims: (1) that Schwabacher had experienced serious Exchange rule violations and financial problems prior to its merger with Blair; (2) that the Exchange had a substantial role in the regulations of Schwabacher, the approval of the Schwabacher/Blair merger and the approval of plaintiffs as investors in Blair; and (3) that plaintiffs’ investments in Blair were rendered virtually worthless as a result of Blair’s financial and record-keeping difficulties.
The named plaintiffs were all registered brokers employed by the firms of Schwabacher or Blair. They cannot claim ignorance as to the general affairs of their brokerage houses or as to the ongoing, statutorily-mandated role of the defendant Exchange in the supervision and regulation of its members. Plaintiffs knew or should have known at the time they purchased their securities in Blair that Schwabacher’s merger with Blair was occasioned by Schwabacher’s mismanagement and Exchange rule violations. These experienced investors must be presumed to have knowingly taken into account the risks attending such a merger.
Plaintiffs allege they did not know before March 8, 1970 of the role of the Exchange in the merger of Schwabacher and Blair or in the sale of Blair’s securities. Yet Count 9 of their amended complaint alleges that they were “induced and encouraged” to purchase the securities of Blair by the fact that they were required to obtain the ap proval of the. Exchange before being permitted to acquire those securities. They cannot claim that they were induced to invest in Blair in 1969 by reliance upon the Exchange’s oversight functions at the same time that they claim no knowledge of the Exchange’s involvement until April 1972 or December 1974 (Amended Complaint at 21, Opposition Memo at 27).
Plaintiffs’ statement that they did not know until December 1974 that signed “knowledgeability letters” were sometimes required by the Exchange from investors in member firms is not relevant to the discovery of the alleged fraud. These letters were not required pursuant to any Exchange rule or practice, and the fact that they were not used for the 1969 Blair investors is not relevant to the alleged fraud. When used, these letters do not contain any disclosures; in fact, they expressly provide acknowledgement by the investor that the Exchange has no duty to disclose information to the investor, and thus serve to release the Exchange from any liability concerning the securities of member firms.
Defendants have introduced evidence from deposition testimony that all of the nine named plaintiffs had substantial information prior to March 8, 1970 that their securities in Blair were worthless. (Memorandum in Support of Motion at 65-67). Since the essence of the fraud counts of the complaint is that plaintiffs were not informed at the time of purchase of the financial condition of Schwabacher/Blair, information that their securities have been rendered worthless (by Blair’s unexpected failure) should have put them on notice of possible wrongdoing. Letters from Blair on December 17, 1969 informed Blair subscription purchasers that a moratorium on payments was in effect. As of December 31, Blair officials publicly acknowledged that Blair stock had no book value.
Finally, with respect to the history of Schwabacher, its massive record-keeping violations and financial condition, plaintiffs must be charged with constructive knowledge of a detailed SEC Release dated August 28, 1969 which detailed these conditions, publicly censured the Schwabacher management, and outlined the disciplinary actions imposed upon the firm. In charging plaintiffs with this presumptive knowledge, the court is mindful of the plaintiffs’ employment as registered professional brokers of Schwabacher and Blair during the time period in question. Defendant’s motion for dismissal of Counts 9, 10 and 11 of the amended complaint on the ground that they are barred by the statute of limitations must therefore be granted.
The § 20(a) Claim
Plaintiffs contend that § 20(a) of the Securities Exchange Act should be applied against the Exchange as a “controlling person” in the sale of securities by Blair. In essence, § 20(a) provides for the joint and several liability of any person who, directly or indirectly “controls” any other person who is subject to liability under Chapter 2B of the Securities Exchange Act, unless such “controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.” 15 U.S.C. § 78t(a).
The reach of potential liability under this section is very broad. The broad treatment of the section is consistent with the liberal rules of construction afforded the Securities Exchange Act to achieve the Act’s remedial purpose. SEC v. First Securities of Chicago, 463 F.2d 981 (7th Cir. 1972). Section 20(a) “has been interpreted as requiring only some indirect means of discipline or influence short of actual correction to hold a ‘controlling person’ liable.” Myzel v. Fields, 386 F.2d 718, 738 (8th Cir. 1967), cert. denied 390 U.S. 951, 88 S.Ct. 1043, 19 L.Ed.2d 1143 (1968).
Despite the broad reach given § 20(a) however, the purpose of the statute is misinterpreted if the direct or indirect control which forms the basis of liability is extended to the institutions created by the Act itself to regulate the securities markets. The present case is a clear example of the impossible Exchange position suggested by the plaintiff’s interpretation of § 20(a). The Exchange is charged with a duty of regulating its member firms; the more closely it regulates, the more fully it becomes a “controlling person”, “directly or indirectly” inducing the acts complained of, and the more susceptible to liability under § 20(a) it becomes. Moreover, this liability would attach whether the Exchange took positive actions in furtherance of a fraudulent scheme, or merely failed to prevent a fraudulent scheme on the part of its member firms. Under § 20(a) mere good faith or lack of knowledge of the scheme is not enough to avoid liability. Moscarelli v. Stamm, 288 F.Supp. 453 (D.C.N.Y.1968); Myzel v. Fields, supra.
The court is aware of only one reported court decision holding that a national securities exchange is a controlling person under § 20(a). Hughes v. Dempsey-Tegeler & Co., Inc., [1973 Transfer Binder] CCH Fed. Sec.L.Rep. ¶ 94.133 (C.D.Cal. Sept. 4, 1973). The trial court found that the Exchange was not liable to a person who sustained losses on capital contributions to a member firm because the Exchange did take reasonable precautionary measures in supervision of that firm’s representations to the investor. In so holding, however, the court overlooked the “direct or indirect inducement” test for liability which is set out in § 20(a) and applied the test commonly used to govern actions under § 15 of the Securities Act, 15 U.S.C. 77o : “that the controlling person had no knowledge of or reasonable ground to believe in the existence of facts by reason of which the liability of the controlled person is alleged to exist.” While the court found the Exchange not liable under this misapplication of the statutory tests, it recognized the difficulties imposed by a possible finding of Exchange liability under the “controlling person” theory:
To conclude otherwise would create a foundation for liability of a ‘controlling person’ for conduct taking place beyond the very system of controls which were in fact established, and would again appear to border upon a theory of strict liability . ” CCH Fed.Sec.L.Rep. at p. 94.-551 [1973 Transfer Binder],
The novelty of plaintiffs’ § 20(a) allegation is underscored by the fact that, aside from the trial court decision in Hughes, there are no reported cases dealing with the possible role of a national securities exchange as a “controlling person.” The Ninth Circuit decision in Hughes did not reach this issue because it found the plaintiff’s claims barred by waiver, but the court’s reasoning with respect to the § 6 claims is applicable to § 20(a) as well:
Because the securities industry is a critical and sensitive part of our economic structure, the Exchange’s regulatory approach should properly include an overview of the potential effects of its action. Flexibility in regulatory response is critical if the response is to be appropriate to the situation. 534 F.2d 156, 169 (9th Cir. 1976).
A holding that a national securities exchange was a “controlling person” for the purposes of § 20(a) would inhibit regulatory flexibility, would be contrary to the congressional intent in establishing the self-regulatory exchange system in the Act and would place the Exchange in an untenable position of strict liability for the fraudulent acts of brokerage houses and their employees. Accordingly, the 12th cause of action must be dismissed on the ground that it does not state a claim on which relief can be granted.
II. PLAINTIFFS’ MOTION FOR CONDITIONAL CLASS CERTIFICATION PURSUANT TO FED.R.CIV.P. 23(c)(2) AND 23(b)(3).
Plaintiffs request conditional certification as a class under Fed.R.Civ.P. 23(b)(3). The issues on this motion have been simplified by the Court’s decisions on the motion for summary judgment. Because the § 10(b) and § 20(a) counts have been dismissed, the problems which may have been raised by individual issues of reliance and the dates of discovery of the fraud have been eliminated. However, even in its simplified form we find that this action does not meet the requirements of Rule 23(a) and (b). While the action in its present form presents questions of fact and law common to the class which predominate over the individual questions involved, we find that additional requirements of Rules 23(a) and 23(b)(3) have not been met.
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747081-10915 | SWYGERT, Chief Judge.
On June 5, 1968 two men at gunpoint robbed the First National Bank of Grand Ridge, Illinois. Norman Bayer and Allen Figge were charged with the commission of the crime under 18 U.S.C. § 2113(d). Defendant-appellant, James Grooms, was charged under the same statute with aiding the robbery. Upon their pleas of guilty Bayer and Figge received seven and ten year prison sentences respectively. After Grooms was found guilty by a jury, he was given a twelve year sentence. In seeking a reversal of his conviction Grooms assigns ,a number of alleged errors.
We deem it unnecessary to state the evidence in great detail since its sufficiency is not in question. After robbing the bank, the two robbers fled in a maroon Plymouth car. The police were called and set out in pursuit. While two of the officers were driving on a gravel road outside of Grand Ridge, they met a white Ford car traveling at a high rate of speed. A Plymouth, matching the description of the getaway car, was following the Ford. The police sought to set up a roadblock, but the Plymouth eluded them and sped away; however, they were able to stop the Ford. Figge, the driver, was arrested and the stolen money was found in the car.
About twenty-five minutes later the Plymouth approached another roadblock some distance from where it and the Ford had passed the two police officers. In an attempt to elude the roadblock, the Plymouth collided with another car and overturned. Bayer, the driver; was arrested. Later that day, Grooms presented himself to the local sheriff’s office upon learning that he was wanted by the authorities. After being questioned, he was released. Two days later he was rearrested for his alleged participation in the crime.
The evidence submitted to the jury as to Grooms was conflicting. The two officers first encountering the Plymouth on the gravel road positively identified Grooms, whom they had known for a long time, as the driver of the car. Other evidence showed that Bayer was the only person in the Plymouth when it crashed at the second roadblock and that Bayer’s fingerprints were the only ones found on the car. Moreover, agent Stratton of the Federal Bureau of Investigation admitted, on cross-examination, that Bayer and Figge had told him that, though they had met with Grooms before the robbery, he had not been with them that day, either before or after its commission. At the time the Ford was apprehended, an airline ticket covering a flight from Baltimore to Chicago which had been issued to Grooms’ wife on April 26, 1968 was found. As to this circumstance, Grooms testified that he and his wife had been in the car prior to the date of the robbery.
After his rearrest on June 7, 1968, Grooms was questioned by agent Strat-ton. The agent testified that on that occasion the defendant stated he had discussed the robbery and planned it with Bayer and Figge. According to the agent, Grooms also admitted that he had gone over with Figge the planned getaway route from the bank. The agent, on cross-examination, said that at the same interview Grooms denied that he had agreed to aid in the robbery.
Grooms, testifying on his own behalf, denied that he had helped plan the robbery or assisted in its commission, although he admitted that while riding with Figge two days before the robbery, Figge had said that he was thinking of robbing the Grand Ridge bank and that they had driven over the getaway route which Figge said he proposed to take.
I
During the Government’s presentation of its case, agent Stratton testified that at his interview with the defendant on June 7, he told Grooms that he had information indicating that the defendant had “gone over the get-away route” with Figge, to which Grooms responded: “Yeah, . . . but you [sic] blowing this all out of proportion.” The defendant contends that, indirectly at least, the Government in this fashion got before the jury the content of statements made by codefendants, Bayer and Figge, and that the admission of such hearsay violates Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968), particularly in light of defense counsel’s cross-examination of the witness which he thought must be undertaken and which brought out the fact that the information had indeed come from Bayer and Figge.
Defendant’s contention must be rejected. During his direct examination, agent Stratton did not indicate the source of his information nor did he attribute any statements to either Bayer or Figge. Clearly there was no admission by a codefendant implicating Grooms in the agent’s testimony. Only on cross-examination did the witness reveal the source of his information. Thus, a Bruton situation, if it can be said that one existed at all, was created by the defendant himself and not by the Government; this cannot form the basis of reversible error.
II
On July 16, 1968 Bayer and Figge entered pleas of guilty to the bank robbery charge. On September 10, 1968 they were sentenced and immediately transported to a federal penitentiary. Grooms’ trial started September 25. On the second day of the trial and after the Government had rested its case, the defendant filed a petition to require the production of Bayer and Figge as witnesses in his behalf. Further, he asked for a continuance until these witnesses could be returned from the penitentiary. The district court denied both the petition and the continuance. Under the circumstances we find no error.
Although different counsel represented Bayer and Figge, Grooms’ attorney was fully aware that Bayer and Figge had entered pleas of guilty and had been sentenced to prison. He was therefore chargeable with the knowledge that Bayer and Figge had been transported from Chicago to the federal penitentiary. In his petition defense counsel stated that “by reason of pretrial developments” he believed that Grooms’ co-defendants would be used by the Government as witnesses in its case. Yet there was no showing that the government made any representation that Bayer and Figge would be returned. The record provides no basis for any assumption by defense counsel that they would be pres-sent at the trial. Moreover it is clear that the defendant at no time prior to trial requested the Government that Bayer and Figge be produced or be kept available. A defendant is responsible for the production in court of the witnesses he desires to testify in his behalf. Thomas v. United States, 81 U.S.App. D.C. 314, 158 F.2d 97, 99 (1946). Conversely, the Government has no responsibility to call all witnesses who are competent to testify. Washington v. United States, 275 F.2d 687, 690 (5th Cir. 1960).
When all the relevant facts are considered, we are of the view that the district judge did not abuse his discretion in denying the petition since it was not filed until after the trial was in full progress. Litigants are charged with the responsibility of acting timely in obtaining witnesses. Gates v. United States, 122 F.2d 571, 579 (10th Cir. 1941).
Ill
Grooms also claims that the closing argument of the prosecution was prejudicial and deprived him of his due process right to a fair trial. He first objects that the Government misstated the evidence on summation in stating that Grooms’ fingerprints were found in the Plymouth and in stating that Grooms confessed that he planned the robbery. Neither statement created error. Objection was promptly made to the statement regarding fingerprints after which the following exchange took place:
[Prosecutor]: If I said Grooms, your Honor, I misspoke. Ladies and gentlemen, I meant to say Bayer.
The Court: You did say Grooms.
[Prosecutor]: I apologize to the court and jury. I meant to say Bayer. Grooms’ prints were never found in the Plymouth. Let me say this now: If I say anything that you do not believe that you heard from that witness stand, there is only one me taking down the testimony, and there are twelve of you. Therefore, you are twelve times better than I am to remember what was said from that witness stand, so anything that I say that you twelve people disagree with you can completely throw out.
Grooms’ principal objection to the Government’s closing argument lies in statements which, he contends, convey the prosecutor’s personal belief as to the quality of the proof of certain elements of the case or misstate the evidence. The challenged statements were:
“Ladies and gentlemen, I submit to you that the defense has not presented one iota of believable evidence. We have a confession from this man that he planned the bank robbery, he went over the get-away route. I believe that he drove that change car — ” [interrupted by defense counsel’s objection] .
Defendant objects that the first and third sentences of the foregoing constituted an improper assertion of the beliefs of the prosecutor as to the quality and quantity of the evidence. He objects that the second sentence relating to Grooms’ “confession” that he “planned” the robbery sentence is not founded on the evidence. As to this second sentence, it is sufficient to note that agent Stratton testified of Grooms in rebuttal: “He said that he had discussed the robbery and planned it with Figge and Bayer.” The argument was thus proper as to the alleged confession since it urged a reasonable inference based upon evidence properly admitted.
The statements of the prosecutor challenged as improperly propounding his personal beliefs as to the quality of the evidence and the guilt of the defendant require closer examination, however. It should be clear by now that statements by counsel as to their belief or lack of belief in the veracity of evidence and in the culpability of a party have no place in the trial of cases. Not only do such comments fail to add anything in any way probative of the real issues confronting the trier of fact, but they also possess the seeds of reversible error in that they tend to amplify the possibility that lay jurors may be misdirected from properly weighing the evidence by the implicit invitation to adopt the evidentiary assessment of the attorney. Such assertions of belief have been condemned as improper conduct which may justify disciplinary action against the attorney indulging in them by Canon 15 of the old Canons of Professional Ethics of the American Bar Association and by Disciplinary Rule 7-106(C) (4) of that organization’s new Code of Professional Responsibility. Moreover, at least one of the federal circuits regards such statements as reversible error per se. Greenberg v. United States, 280 F.2d 472, 474-475 (1st Cir. 1960). Such a per se approach has not been followed in this circuit, United States v. D’Antonio, 362 F.2d 151, 155 (7th Cir. 1966), but we have recently restated the proposition, if ever it was doubted, that such personal opinions are not proper issues to present to a fact finder. United States v. Handman, 447 F.2d 853 (7th Cir. 1971).
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4112968-17564 | JULIA SMITH GIBBONS, Circuit Judge.
Tammy Russell appeals from the magistrate judge’s dismissal of her discrimination and retaliation claims. Russell, an Internal Revenue Service (IRS) employee, argues that her employer violated the Rehabilitation Act by discriminating against her because of her relationship to her disabled son. Proceeding by the consent of the parties, the magistrate judge granted summary judgment for the IRS on all claims. We agree that no issue of material fact exists and therefore affirm the judgment.
I.
Tammy Russell began working for the U.S. Department of the Treasury in November 2000 as a Contact Representative for the IRS in Nashville, Tennessee. While she was working at the Nashville office, Russell’s son, Dillon, began to have behavioral problems. He was later diagnosed with high functioning autism and/or Asperger’s Syndrome. Because of Dillon’s disability, Russell transferred to the IRS office in Covington, Kentucky, in 2002 so she could be closer to her family and have easier access to medical care. During her three years in Covington, Russell periodically submitted requests for intermittent leave under the Family Medical and Leave Act (FMLA) to care for Dillon, which were approved. Russell was also promoted and received positive performance evaluations.
In the spring of 2005, Russell transferred to the IRS office in Columbus, Ohio to accept a position as a Revenue Officer. The position required Russell to complete a one-year training program. Her immediate supervisor in Columbus was Paul Meyer. Her second-in-line supervisor (Meyer’s supervisor) was Anita Van Order.
Russell’s first few months in Columbus were uneventful. According to Russell, Meyer first discriminated against her in August 2005 when he denied her request for FMLA leave. Russell asked to be excused from a day of training in order to attend Dillon’s school orientation. In an email about the request, Meyer reminded Russell that all new Revenue Officers were required to attend training and were not allowed to miss class for any reason. Russell did not take leave.
The IRS argues that Meyer was following the IRS/Small Business/Self-Employed Business Unit Collection’s policy regarding leave use. According to the relevant policies, trainees in the one-year training program are only allowed to take annual leave and miss classroom training in “rare circumstances,” such as a personal emergency. Consistent with this policy, Meyer approved several of Russell’s other leave requests during her one-year training period. And Russell admits she was never denied leave in emergencies.
Russell’s performance evaluations show that she performed well throughout the fall of 2005. In Russell’s annual performance review, Meyer rated Russell’s performance as “fully successful” in all critical areas for the period of November 2004 to October 2005. By December 2005, however, Meyer began having concerns about Russell’s performance. He completed a Case Review, in which he noted that Russell “need[ed] to make immediate improvement” and that Russell had “significant[ly] decline[d] in work performance.” Russell claims she never received this review and alleges that the IRS fabricated it for the purposes of the lawsuit. But she admits that Meyer explicitly mentioned his concern with her time off in a conversation he had with her in December. During this conversation, Russell asked for permission to work credit hours to compensate for the missed time. Meyer initially told Russell that he would approve her request for credit hours, but he later retracted his approval because Russell was not allowed to work credit hours as a trainee according to IRS policy.
Meyer addressed Russell’s poor performance three more times in writing before completing a Formal Case Review on March B, 2006. In this review, Meyer notified Russell that she would not be receiving a promotion because she was not performing at a fully successful level. The Case Review indicated that Russell would be placed on a performance plan within the next 30 days. Russell testified that she was “shocked” by the review. She later signed the Case Review and submitted a written rebuttal. In the rebuttal, Russell admitted that her work had lapsed because she had taken time off to care for her son and to deal with several other personal issues. Russell also attributed her poor work performance to the fact that she was not allowed additional credit hours to catch up on her cases.
Believing that Meyer had discriminated against her by withholding her promotion, Russell submitted a complaint to the agency’s Equal Employment Opportunity (“EEO”) office on April 13, 2006. Russell, Meyer, and Van Order met about the EEO complaint a short time later. Russell claims that during this meeting, Van Order repeatedly referred to Russell’s “issues,” which Russell understood to mean her need to care for Dillon. According to Russell, Van Order also said that “someone with [Russell’s] issues should find another job.” Van Order testified that she was simply concerned about Russell’s stress levels in her personal life, including her autistic son, the death of a parent, and a bad car accident. The parties did not reach an agreement, and Russell filed a formal EEO complaint on August 15, 2006.
Russell claims she was “the target of harassment” after she initiated EEO proceedings. For example, Russell points to an e-mail from Meyer, in which he forwarded a recent decision in favor of the IRS on an FMLA claim to all members of his staff. Russell alleges that Meyer’s secretary changed Russell’s time sheets, refused to supply Russell with office supplies, and accessed Russell’s confidential taxpayer data base without authorization.
Meyer also asked Russell to obtain a medical certification to support her requests for FMLA leave. Before May 12, 2006, Russell’s FMLA requests had been approved without medical certification. Russell argues that this is evidence of Meyer’s retaliation after she filed EEO charges. The IRS contends that its policies require an employee to obtain certification from a healthcare provider that a serious health condition and/or a disability exists and to provide that certification to either the employee’s manager or the Federal Occupational Health unit for consideration. Further, the IRS claims that its management did not become aware of the paperwork issue until May 2006 because officials believed that Russell had completed the proper forms at her previous positions.
Also in May 2006, Meyer formally placed Russell on a 60-day performance plan. Russell’s performance began to improve as early as June 5, 2006, and Meyer released Russell from the plan a month later. In the letter notifying Russell of her release, Meyer remarked,
Your performance, of course, must continue to be acceptable. In accordance with Office of Personnel Management Regulations, if your performance again becomes unacceptable before May 8, 2007,1 may recommend your removal or reduction in grade without affording you an additional opportunity to improve your performance.
Meyer promoted Russell to the GS-9 level. Russell continued to perform well through the fall of 2006, at which time Jacqueline Stokes, acting in a temporary capacity, rated Russell’s performance as “fully successful.”
But Russell’s performance declined again in December 2006. Stokes, as Acting Group Manager for Meyer, conducted a review of Russell’s cases. The review showed that Russell needed immediate improvement in two areas because she was “failing in multiple aspects.” The review also noted that Russell had failed to take timely action on fourteen out of fifteen cases. In discussing the review, Meyer wrote an e-mail to Dobson Narkittia, an employee in the IRS’s HR office, about Russell. In the e-mail, Meyer commented, “[t]his looks like we are retaliating from her EEO and Grievance but [Stokes] was not a part of that. It is good that another manager was able to do a review.” Russell contends that this review is “suspect” because it includes several cases that had been closed by the time of the review. Russell filed a rebuttal noting this issue. In the rebuttal, she also admitted that she was not devoting enough time to her cases because she was dealing with FMLA issues.
Meyer wrote Russell another memorandum about her performance roughly a month later. Meyer noted that he still had serious concerns with Russell’s performance and that the next step would be to move forward with a recommendation of dismissal. Russell responded and acknowledged the fact that the time she spent on FMLA requests caused delays in her case management. Russell again asked for more credit hours to maintain her inventory in light of her need for time off to care for Dillon.
On May 11, 2007, Van Order recommended that Russell be terminated. Russell objected, and her termination was put on hold pending review and final decision from Van Order’s supervisor. After the termination notice was issued, Russell’s automatic within-grade pay raise was withheld and her promotion to GS-11 was denied twice. The IRS rejected Russell’s second application to GS-11 because an insufficient number of candidates had applied. Alleging that other single-applicant candidates had received promotions in the past, Russell “infers” she was not promoted due to the pending termination action. Russell also argues that Meyer and Van Order worked together with other staff members to damage her reputation while termination proceedings were ongoing. While the proposal was pending, Van Order e-mailed with Russell about a dress code violation. And, around the time of the rebuttal presentation, Meyer’s secretary called the EEO officer handling Russell’s charges and reported that Russell had bought her son a gun.
The Director of the Collection Central Area rejected Van Order’s termination proposal on February 26, 2008. The Director found that Van Order’s termination proposal was supported by Russell’s unacceptable performance; however, the Director decided not to take action in light of other mitigating factors. Four months later, Russell received a “fully successful” ranking and her within-grade pay raise.
In 2009, as part of an investigation into Meyer’s secretary’s unauthorized access to Russell’s confidential information, Meyer and Van Order submitted affidavits in support of the secretary. Both affidavits referenced Russell. Meyer attested that “Russell either filed or threatened to file numerous grievances, E.E.O. complaints, and threatened employees with filing personal law suits.” He went on to say that “[tjhis employee [Russell] created a hostile work environment which was recognized by most employees in the office and all levels of management.” Similarly, Van Order stated that “[although [Russell] was never actually denied use of time for her son’s needs she became very assertive ... almost obsessive and paranoid.” Van Order also stated that Russell was very vocal about her EEO case, which upset other employees. Russell contends that these affidavits demonstrate Van Order’s and Meyer’s discriminatory animus and retaliatory motives toward Russell.
Russell filed this action on October 29, 2009, asserting violations of the Americans with Disabilities Act (“ADA”), the Family and Medical Leave Act (“FMLA”), and the Rehabilitation Act. After the district court dismissed Russell’s ADA and FMLA claims, the IRS moved for summary judgment on Russell’s remaining claims for associational discrimination, retaliation, and hostile work environment under Section 501 of the Rehabilitation Act. Proceeding by consent of the parties, the magistrate judge granted the IRS’s motion in its entirety. Russell appealed, challenging the magistrate judge’s decision as to her claims of discrimination and retaliation.
II.
We review a magistrate judge’s decision to grant summary judgment de novo. Crocker v. Runyon, 207 F.3d 314, 318 (6th Cir.2000). Summary judgment is appropriate 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). The moving party bears the burden of showing that there is an absence of evidence to support the nonmoving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In deciding motions for summary judgment, we draw all reasonable inferences in favor of the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). “The ultimate inquiry 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.’ ” Phillips v. Roane Cnty., 534 F.3d 531, 538 (6th Cir.2008) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).
III.
Russell brings this action under the Rehabilitation Act of 1978, 29 U.S.C. §§ 701-797(b), which provides the exclusive remedy for federal employees alleging disability discrimination. Peltier v. United States, 388 F.3d 984, 989 (6th Cir.2004). In evaluating claims brought under the Rehabilitation Act, we generally apply the same standards that govern claims brought under the ADA. See 29 U.S.C. § 791(g) (2009); Andrews v. State of Ohio, 104 F.3d 803, 807 (6th Cir.1997).
A.
Russell alleges that the IRS discriminated against her because of her relationship with Dillon. We have recognized in another unpublished opinion that associational discrimination claims are viable under the Rehabilitation Act. See Popovich v. Cuyahoga Cnty. Court of Common Pleas, Domestic Relations Div., 150 Fed.Appx. 424, 427 (6th Cir.2005). This case does not require us to explore the issue further.
We analyze Russell’s claim through a burden-shifting test similar to the one set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-03, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). Russell must demonstrate the following elements to establish a prima facie case of associational discrimination under the Rehabilitation Act: (1) she was qualified for the position; (2) she was subject to an adverse employment action; (3) she was known to be associated with a disabled individual; and (4) the adverse employment action occurred under circumstances that raised a reasonable inference that the disability of the relative was a determining factor in the IRS’s decision. See Stansberry v. Air Wis. Airlines Corp., 651 F.3d 482, 487 (6th Cir.2011). If Russell can establish a pri-ma facie case, then the IRS must articulate a legitimate nondiscriminatory reason for the adverse action. See id. at 488; see also Upshaw v. Ford Motor Co., 576 F.3d 576, 584 (6th Cir.2009). The burden then shifts back to Russell to prove that the reasons offered by the IRS were pretextual. See Stansberry, 651 F.3d at 488; see also Upshaw, 576 F.3d at 584.
Assuming that Russell may assert a claim of associational discrimination, we will also assume that Russell has established a prima facie case of associational discrimination.
In response, the IRS has offered legitimate, nondiscriminatory reasons for the four alleged adverse employment actions. The IRS contends that it was following neutral IRS policies when it denied Russell’s 2005 request for FMLA leave and her requests to work credit hours. Russell concedes that this is a legitimate business justification. See Blackshear v. Interstate Brands Corp., 495 Fed.Appx. 613, 618 (6th Cir.2012) (finding that employer had presented a legitimate, nondiscriminatory reason when it terminated an employee according to company policy); Hollins v. Atl. Co., 188 F.3d 652, 661 (6th Cir.1999) (“[Employer] has, of course, offered its grooming policy as its legitimate nondiscriminatory reason for its treatment of [employee].”). Further, Russell’s poor performance is a legitimate, nondiserimi-natory reason for the 2006 failure to promote and the 2007 termination proposal. Russell argues that these actions technically violated union policy because Russell’s most recent annual performance evaluation reflected she was “fully successful.” It is not evident from the record before us that the IRS violated any policy. But, even if Russell is correct, the IRS has produced sufficient evidence to meet its low burden of production. See Tex. Dep’t of Cmty. Affairs v. Burdine, 450 U.S. 248, 256-57, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981). Although adherence to internal policies is one example of a legitimate, nondiscriminatory reason, it is not the only one. At this point in the McDonnell Douglas framework, we simply require that the reason for the action be legitimate. See Stansberry, 651 F.3d at 488.
We now turn to the issue of pretext, which provides a ready path for resolution of the case. See Martin v. Barnesville Exempted Vill. Sch. Dist. Bd. of Educ., 209 F.3d 931, 935 (6th Cir.2000). Russell has offered no evidence to show that the IRS’s reasons were pretextual. In order to establish pretext, Russell must demonstrate that the legitimate nondiscriminatory reason “(1) has no basis in fact, (2) did not actually motivate the defendant’s challenged conduct, or (3) was insufficient to warrant the challenged conduct.” Burks v. Yellow Transp., Inc., 258 Fed.Appx. 867, 874 (6th Cir.2008) (quoting Dews v. A.B. Dick Co., 231 F.3d 1016, 1021 (6th Cir.2000)). Here, Russell does not point to any evidence suggesting that the IRS’s denials of her requests for FMLA and credit hours were pretextual. Instead, she focuses on her performance.
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1165941-8989 | ORDER ON DEFENDANT’S MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS
KOVACHEVICH, Chief Judge.
This cause is before the Court on the following motions and responses:
Dkt. 19 Defendant’s Motion for Partial Judgment on the Pleadings and supporting memorandum;
Dkt. 26 Plaintiffs Memorandum of Law in Opposition to Motion for Partial Judgment on the Pleadings.
FACTUAL BACKGROUND
On or about September 6, 1994, Phillip Dickinson and Executive Business Group, Inc., executed a On-Hold International Franchise Dealer Agreement, pursuant to which Plaintiff became an On-Hold International franchisee. The products and services marketed by the franchisees consist of personalized information or commercial tapes that play over the telephone when a customer is on hold, and the electronic devices necessary to play the tapes.
The Franchise Agreement’s forum selection clause stipulates that any legal proceeding arising under the contract must be brought in «the Thirteenth Judicial Circuit Court of the State of Florida in Hillsborough County or the United States District Court for the Middle District. In addition, under the Governing Law, Revenue and Process provision on page eight of the contract, the contract states that “the validity, construction, interpretation, and enforceability of this agreement shall be determined and governed by the laws of the State of Florida.”
Plaintiff asserted four (4) separate causes of action against Defendant in his complaint: (1) violations of the Texas Deceptive Trade-Consumer Protection Act; (2) fraudulent misrepresentation; (3) negligence and gross negligence; and (4) breach of contract.
STANDARD OF REVIEW
Defendant Executive Business Group, Inc. brings this motion pursuant to Rule 12(e) of the Federal Rules of Civil Procedure, which, in pertinent part, states: “[a]fter the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings.” On a motion for judgment on the pleadings, the Court must review the pleadings in the light most favorable to the nonmovant. The Court may grant the motion only if it appears beyond a doubt that the nonmovant can prove no set of facts in support of his claim which would entitle him to relief, or if material facts are undisputed and judgment on the merits is possible by merely considering the contents of the pleadings. See Hallberg v. Pasco County, Fla., 1996 WL 153673 (M.D.Fla.1996).
DISCUSSION
I. TEXAS STATUTORY CLAIMS
Defendant contends that partial judgment on the pleadings as to the Texas Statutory claims should be granted since the choice of law provision executed in the contract requires any lawsuit arising out of the contract to be governed by the laws of the State of Florida. The contract specifically provides, “the validity, construction, interpretation and enforceability of this Agreement shall be determined and governed by the laws of the State of Florida.”
Defendant cites two cases in support of its contention of which each hold foreign statutory claims are inapplicable to a lawsuit construed in accordance with the laws of another state. See Scheck v. Burger King Corp., 756 F.Supp. 543, 550 (S.D.Fla.1991); Burger King Corp. v. Weaver, 798 F.Supp. 684, 690 (S.D.Fla.1992). In Scheck, the court held the Massachusetts Consumer Protection Act inapplicable to the claims of a franchisee since the parties agreed to a choice of law provision providing that Florida law governed the contract. Likewise in Weaver, the court held the Montana Unfair- Trade Practices Act inapplicable to a lawsuit construed in accordance with the laws of the State of Florida.
Plaintiff counters by stating that there is a genuine issue of material fact regarding the Texas Statutory Claims that precludes this Court from granting Defendant’s motion for partial judgment on the pleadings. The contract will be governed in accordance with the intent of the parties absent any evidence of fraud or unequal bargaining power that would undermine the validity of the choice of law provision, See Scheck, 756 F.Supp. at 546; Weaver, 798 F.Supp. at 687. Plaintiff argues that in the case at bar, unlike Scheck and Weaver, Plaintiff alleged negligent and fraudulent misrepresentation by Defendant. However, these allegations were not made regarding the choice of law provision.
In addition, Plaintiff asserts that in light of Burger King Corp. v. Austin, 805 F.Supp. 1007 (S.D.Fla.1992), Plaintiff would have a cause of action against Defendant under the Florida Franchise Act. In Austin, the court reasoned,
If we were now to state that- the Florida Franchise Act is inapplicable to a dispute between a Florida franchiser and a non-Florida resident franchisee, non-Florida resident franchisees would be afforded no protection beyond common law remedies, regardless of whether or not their home state or Florida provided such protection.
See Austin, 805 F.Supp. at 1023.
Conversely, in Barnes v. Burger King Corp., 932 F.Supp. 1441, 1442-43 (S.D.Fla.1996), the court held the Florida Franchise Act inapplicable to out-of-state franchises.
Plaintiff concludes by stating that if this Court finds Plaintiff does not have a claim under Texas law, but does under the Florida Franchise Act or other federal law provisions, then Plaintiff should be granted leave to amend its statutory claim. See Baird v. Continental Insurance Co., 237 So.2d 206 (Fla. 4th DCA 1970); Bradham v. Hayes Enterprises. Inc., 306 So.2d 568 (Fla. 1st DCA 1975).
This Court finds that the choice of law provision in the On-Hold International franchise agreement renders the franchisee’s home state franchise act inapplicable to the dispute between Plaintiff' and Defendant. This Court also finds that Plaintiff may have a valid claim under the Florida Franchise Act, and that leave to amend should be freely given when, as in the case at bar, justice so requires.
II. PLAINTIFFS TORT CLAIMS
Defendant contends that partial judgment on the pleadings should be granted as to Plaintiffs tort claims since both theories in tort fail to state a cause of action under Florida law. As to Plaintiffs negligence and gross negligence claims, Defendant argues that since Plaintiff alleges no tort independent, of the breach of contract claim, Florida’s economic loss rule bar’s Plaintiffs negligence claims. See AFM Corp. v. Southern Bell Telephone & Telegraph Co., 515 So.2d 180 (Fla.1987) (holding that a purchaser of services cannot recover purely economic damages in tort unless the other parties conduct establishes a tort independent from the breach of contract). Defendant further argues that Plaintiff alleges no personal injury or damage to other property, and only seeks economic damages. However, to state a cause of action for negligence Plaintiff must plead a tort independent of the contract. Defendant concludes stating that each of the duties Plaintiff asserts in support of its negligence claims are the duties specifically required by the Franchise Agreement.
As to Plaintiffs claim of fraudulent misrepresentation, Defendant contends that the economic loss rule bars the claim because it is premised on the Franchise Agreement. A claim for fraudulent misrepresentation inducement can be a independent tort and not be barred by the economic loss rule. See HTP, Ltd. v. Lineas Aereas Costarricenses, 685 So.2d 1238 (Fla.1996). However, the critical distinction lies between the alleged fraud in the inducement and alleged fraud in the performance of the contract. See id. at 1240. The Florida Supreme Court opined that the latter kind of fraudulent misrepresentation relates to performance of the contract and does not give rise to an independent cause of action. See id.
In Hotels of Key Largo, Inc. v. RHI Hotels, Inc., 694 So.2d 74 (Fla. 3d DCA 1997), the court held that the economic loss rule barred plaintiffs claim for fraudulent in ducement. In doing so, the court opined that plaintiffs fraud claim was related to performance of the contract and thus did not give rise to an independent cause of action. See id. The court noted that “a critical distinction must be made where the alleged fraudulent misrepresentations are inseparably embodied in the parties’ subsequent agreement.” See id. at 77. Defendant argues that, as in Hotels of Key Largo, Plaintiffs alleged fraudulent misrepresentations relate to performance of the contract and not to any extraneous, unrelated misrepresentations that could give rise to an independent tort.
Plaintiff counters by stating that its claims for negligence and gross negligence state a claim for negligent misrepresentation which is tantamount to actionable fraud. See Ostreyko v. B.C. Morton Organization, 310 So.2d 316, 318 (Fla. 3d DCA 1975). Therefore, Plaintiff contends its claims are not barred by the economic loss rule. In addition, Plaintiff argues that the issue of whether Florida or Texas law applies to Plaintiffs tort claims has not yet been decided and therefore Florida’s economic loss rule may not even apply:
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12131930-19964 | Affirmed by unpublished opinion. Judge Keenan wrote the opinion, in which Chief Judge Traxler and Judge Niemeyer joined.
Unpublished opinions are not binding precedent in this circuit.
BARBARA MILANO KEENAN, Circuit Judge:
Wenjing “Linda” Liu was convicted by a jury of attempted international parental kidnapping in violation of the International Parental Kidnapping Crime Act (IPKCA), 18 U.S.C. § 1204. On appeal, Liu contends that the district court erred: (1) in excluding certain witnesses’ testimony concerning Liu’s statements about her travel plans; and (2) by denying two requested jury instructions.
Upon our review, we are unable to consider the merits of the court’s exclusion of Liu’s statements to the various witnesses, because Liu failed to proffer the content of the excluded testimony. Additionally, we hold that Liu’s mother’s statements regarding her travel plans were inadmissible hearsay, and that the district court’s jury instructions substantially covered the content of the rejected instructions. There fore, we affirm the district court’s judgment.
I.
The relevant facts are largely undisputed. Liu was born in Tianjin, China, and she moved to the United States around 2000. In 2007, Liu married William Jerome Rui-frok III, a United States citizen, in Lou-doun County, Virginia. Ruifrok and Liu have a son, WLR, who was born in 2010 in Tianjin, China. WLR traveled between China and the United States several times between 2010 and 2014, and occasionally remained in China for months at a time under the care of Liu’s mother.
When the marriage between Liu and Ruifrok deteriorated, the couple separated in November 2013. After several months of negotiation about custody arrangements for WLR, Liu and Ruifrok reached an agreement, which was memorialized in a “Final Custody Order” entered in May 2014 by the Juvenile and Domestic Relations District Court of Loudoun County, Virginia. The Final Custody Order granted Liu primary physical custody and granted Ruifrok visitation rights every weekend. The Final Custody Order also required that either parent traveling with WLR outside the United States obtain “the express written and notarized consent of the other party, provided in advance [of] the trip.”
Soon after the Final Custody Order was entered in May 2014, Liu and Ruifrok had various disagreements regarding Ruifrok’s visitation with WLR. Ultimately, Liu stopped responding to Ruifrok’s requests in July 2014, and Ruifrok was unable to exercise his visitation rights in July or August 2014.
On August 28, 2014, Liu purchased tickets from United Airlines (United) for Liu, Liu’s mother, and WLR to travel from Washington Dulles International Airport (Dulles) to Beijing, China. They were scheduled to depart one week later, on September 4, 2014 at 12:20 p.m. Liu purchased a “round-trip” ticket for herself and “one-way” tickets for, WLR and Liu’s mother.
Liu did not notify Ruifrok about her travel plans with WLR until after arriving at Dulles on the morning of the scheduled flight. At 11:00 a.m. on September 4, 2014, Liu informed Ruifrok by email that she had learned “last midnight” that her grandmother was dying and, therefore, she and WLR needed to travel to China as soon as possible. Two minutes later, Rui-frok responded via email, “[WLR] is not going, u cant take him to school[.] I will pick him up.” An hour after Ruifrok responded, and 20 minutes before the plane departed, Liu replied:
I already booked the tickets for him. We have to leave today. It’s too urgent! I’ll notice you when I know when we can be back. Because I have to replace his birth certificate too.
Ruifrok notified the Dulles airport police that Liu was violating a court order by leaving the country with WLR. The airport police contacted the Federal Bureau of Investigation (FBI) and the Loudoun County prosecutor, obtained a copy of the Final Custody Order, and confirmed that Liu and WLR were on the flight that had departed to Beijing.
After being notified of the situation, United personnel ordered the airplane’s pilot to redirect the plane, which at that time was over Canadian airspace, back to Dulles. About 5:15 p.m., the flight landed at Dulles, where Liu, WLR, and Liu’s mother were escorted off the aircraft. The FBI arrested Liu as she disembarked. At the time of her arrest, Liu’s luggage contained a copy of the Final Custody Order, as well as WLR’s passport that bore a Chinese visa issued on August 27, 2014.
A federal grand jury in the Eastern District of Virginia indicted Liu on one count of attempted international parental kidnapping, in violation of 18 U.S.C. § 1204. The IPKCA prohibits, in relevant part, any attempt to “remove[] a child from the United States ... with intent to obstruct the lawful exercise of parental rights.” 18 U.S.C. § 1204(a).
At trial, the government argued that Liu intentionally violated the Final Custody Order with the purpose of obstructing Rui-frok’s parental rights. Liu presented evidence that she intended the trip to China to be a temporary visit, that the purpose of the trip was unrelated to Ruifrok’s parental rights, and that she did not understand her obligations under the Final Custody Order.
Liu also attempted to elicit testimony from friends and associates about the reasons she gave them for making the trip. When Liu’s counsel asked Janet Outtrim, Liu’s housemate, about Liu’s travel plans, the government objected on the ground that the statements were inadmissible hearsay. Liu’s counsel responded that these statements were admissible under the “state of mind” exception to the hearsay rule, but failed to proffer the substance of the testimony sought to be admitted. The district court ruled that Outtrim could testify about Liu’s actions but “not the reasoning behind [them].” In response, Liu’s counsel pursued a different line of questioning that permitted Outtrim- to testify that Liu had not made any effort to keep her travel plans a secret, and that she had left most of her personal property and WLR’s clothes at Outtrim’s home.
Liu’s counsel also asked Danica Hu, Liu’s real estate agent, about Liu’s expressed intent to buy a home and to enroll WLR in a school in northern Virginia. After the government objected to this question, Liu’s counsel rephrased the inquiry, eliciting testimony that Hu continued to assist Liu through September 4, 2014, to help Liu find a home near “a good school for the child.” However, Liu’s counsel did not proffer to the court the substance of the testimony excluded by the court’s ruling.
Ying Zhao, Liu’s work colleague, also testified. After the district court sustained the government’s objection to any statements Liu made to Zhao about her travel plans, Zhao testified that Liu had purchased a ticket to a business seminar to be held in Virginia on September 27, 2014, and that Liu’s job functions could not be performed from China. Again, Liu’s counsel did not proffer for the record the content of the excluded testimony.
Liu also attempted to elicit testimony from FBI Special Agent Tonya Sturgill, who spoke to Liu’s mother after the airplane returned to Dulles. At that time, Liu’s mother purportedly stated that she had intended to return to ’ the United States with WLR within a few months. The district court ruled that this statement was inadmissible hearsay.
In her proposed jury instructions submitted before trial, Liu asked the court to clarify for the jury that the government was required to prove that she “intended to obstruct Ruifrok’s lawful exercise of his visitation rights with WLR, not merely that [she] intended to travel internationally with WLR without William Ruifrok’s consent.” At the close of evidence, Liu accordingly requested an instruction stating that the government must prove that Liu’s “specific purpose” or a “significant” motivation for Liu’s actions was an intent to obstruct Ruifrok’s “exercise of physical custody.” In response, the government agreed that more than a de minimis showing of intent was required, but argued that inserting a “significant purpose” element of proof would overstate the statutory requirement.
The district court rejected Liu’s proposed jury instructions. As relevant to this appeal, the court instructed the jury that the government was required to prove: (1) that Liu knowingly attempted to remove her child from the United States; and (2) that she did so “with the intent to obstruct the lawful exercise of parental rights.” With respect to the first element, the district court explained that the term “knowingly” meant that Liu was “aware of her actions, realized what she was doing, and did not act because of ignorance, mistake, or accident.” Regarding the second element, the district court instructed that “parental rights” were rights to physical custody of the child, which “includes visitation rights.” Finally, the district court instructed the jury that the government was required to prove “that the defendant acted with the intent to obstruct the lawful exercise of parental rights,” and that she “acted deliberately with the purpose of interfering with parental rights of the other parent.”
During its deliberations, the jury submitted a question to the court, asking whether the government was required to prove that the defendant “knowingly ... broke the law.” The district court responded by reading again the language of the statute and the court’s previous definition of the term “knowingly,” and added that Liu did not have to know that “her actions may be in violation of a criminal law or that she intended to -violate a criminal law.” After ten minutes of additional deliberation, the jury returned a verdict of guilty.
The district court sentenced Liu to serve a term of six months’ imprisonment and a one-year term of supervised release. Liu filed a motion for a new trial, which the court denied. Liu later filed this timely appeal.
II.
A.
Liu first contends that the district court abused its discretion in excluding testimony from the various witnesses concerning statements she made about her travel plans. Liu argues that her statements to these witnesses were admissible under the state of mind hearsay exception in Rule 803(3) of the Federal Rules of Evidence. Similarly, Liu argues that her mother’s statements to FBI agents after disembarking from the plane at Dulles were admissible under the same hearsay exception as probative evidence of the mother’s intent.
We review a district court’s evidentiary rulings for abuse of discretion. United States v. McLean, 715 F.3d 129, 143 (4th Cir. 2013). Generally, the rule against admission of hearsay prohibits a witness from testifying about statements made by another when those statements are offered to prove the truth of the matter asserted. Fed. R. Evid. 801(c), 802. An exception to this general rule permits admission of a statement of a declarant’s then-existing state of mind for such purposes as showing her motive, intent, or plan. Fed. R. Evid. 803(3); see also Mut. Life Ins. Co. of N.Y. v. Hillmon, 145 U.S. 285, 296, 12 S.Ct. 909, 36 L.Ed. 706 (1892).
The determination whether a statement qualifies for admission under the state of mind exception involves a fact-sensitive inquiry. United States v. Rivera-Hernandez, 497 F.3d 71, 81 (1st Cir. 2007). Forward-looking statements of intent are admissible, but backward-looking statements of memory are not. Fed. R. Evid. 803(3); Shepard v. United States, 290 U.S. 96, 105-06, 54 S.Ct. 22, 78 L.Ed. 196 (1933). For this reason, statements describing a declarant’s then-existing state of mind are admissible, but statements about the de-clarant’s reasons for having that state of mind are inadmissible. 4 Stephen A. Saltz-burg et al., Federal Rules of Evidence Manual § 803.02[4][b] (11th ed. 2015). The state of mind described also must be shown to have been contemporaneous with the statement. See United States v. Hayat, 710 F.3d 875, 895-96 (9th Cir. 2013) (describing circumstances in which a description of past intent could also be understood as communicating present intent).
Given the “fact-sensitive” inquiry necessary for application of the state of mind exception, Rivera-Hernandez, 497 F.3d at 81, it is paramount that the proponent inform the court in an offer of proof the substance of the evidence sought to be admitted, unless that substance is apparent from the context of the request. Fed. R. Evid. 103(a)(2). The purpose behind this requirement is twofold. First, an offer of proof informs the trial court of the content of the evidence and of its relevance to the case, which enables the court to make an informed evidentiary ruling. See, e.g., Henry v. Wyeth Pharms., Inc., 616 F.3d 134, 151-52 (2d Cir. 2010); Perkins v. Silver Mountain Sports Club & Spa, LLC, 557 F.3d 1141, 1147 (10th Cir. 2009); Polack v. Comm’r of Internal Revenue, 366 F.3d 608, 612 (8th Cir. 2004). Second, the offer of proof permits the appellate court to evaluate whether the exclusion of evidence affected the substantial rights of the party seeking its admission. See, e.g., Perkins, 557 F.3d at 1147; Polack, 366 F.3d at 612.
In the present case, Liu failed to proffer the specific statements that she sought to introduce into evidence, and the context in which the statements arose did not render apparent the substance of the excluded evidence. Without offers of proof concerning the excluded testimony, the record does not provide sufficient detail to determine whether Liu’s statements to Outtrim, Hu, and Zhao were admissible under the state of mind exception. Liu did not proffer details about the substance of the excluded statements, or about the times or contexts in which the statements at issue were made. Therefore, we are unable to determine whether the statements described Liu’s “then-existing” state of mind. See Fed. R. Evid. 803(3). Nor are we able to determine whether the statements were cumulative or unfairly prejudicial, or whether an expressed intent to return WLR to the United States at an indefinite time had probative value with respect to the critical issue of Liu’s intent to obstruct Ruifrok’s parental rights. See Fed. R. Evid. 403. Accordingly, in the absence of the necessary proffers, we cannot determine whether the district court abused its discretion in excluding Liu’s statements regarding her intent and the purpose of her international travel.
Next, we disagree with Liu’s contention that the district court should have admitted her mother’s statements about their travel plans. After Liu was arrested, FBI Special Agent Tonya Sturgill ques tioned Liu’s mother, who explained that she intended to return to the United States with WLR “in just a few months.” Although proffered to the district court, the mother’s statements were inadmissible because they were statements about past intent or memories. Rule 803(3) explicitly excludes hearsay statements about memories offered “to prove the fact remembered.” Fed. R. Evid. 803(3); Shepard, 290 U.S. at 105-06, 54 S.Ct. 22. Liu’s mother’s statements were made after the aircraft returned to Dulles and after Liu was arrested. Any statements about Liu’s mother’s travel plans would have described her state of mind hours or days earlier, rather than a “then-existing” state of mind. See Fed. R. Evid. 803(3). Accordingly, we conclude that the district court did not abuse its discretion by excluding from evidence Liu’s mother’s statements.
B.
Liu also challenges the district court’s decision refusing two of her proposed jury instructions. We review the adequacy of the court’s jury instructions for abuse of discretion. United States v. Sonmez, 777 F.3d 684, 688 (4th Cir. 2015). In order to establish that a district court abused its discretion in rejecting proposed jury instructions, a defendant “must demonstrate that her proposed instructions (1) were correct, (2) were not substantially covered by the charge that the district court actually gave to the jury, and (3) involved some point so important that the failure to give the instructions seriously impaired the defendant’s defense.” Id. (internal quotation marks and brackets omitted).
According to Liu, the district court should have given the jury a separate explanation that the “parental rights” Liu was accused of obstructing included only physical custody rights, and did not include Liu’s failure to obtain Ruifrok’s consent to travel with WLR to China. Liu also argues that under the IPKCA, the obstruction of parental rights must have been the “principal, but-for, or driving reason” for her actions, and that the district court should have instructed the jury to this effect.
1.
We first address Liu’s argument that the district court abused its discretion by declining to give her preferred instruction regarding the IPKCA’s definition of “parental rights.” See 18 U.S.C. § 1204(b)(2). The term “parental rights” is defined in the statute as meaning “the right to physical custody of the child,” including “visiting rights,” and can be defined “by operation of law, court order, or legally binding agreement.” 18 U.S.C. § 1204(b)(2)(A); see also United States v. Fazal-Ur-Raheman-Fazal, 355 F.3d 40, 45 (1st Cir. 2004) (looking to Massachusetts law to define “parental rights” in the absence of any court orders or binding agreements).
In this case, both parties agree that the “parental rights” at issue included Rui-frok’s right, conferred by a court order and a legally binding agreement executed by Liu and Ruifrok, to visit WLR every weekend. Liu asked the district court to emphasize that the term “parental rights” in the IPKCA refers to only physical custody rights, and does not include non-custodial rights such as the right to notification before travel or the right to deny consent for international travel. The district court denied Liu’s request to give this additional jury instruction.
Instead, the district court instructed the jury that “parental rights” means “the right to physical custody, whether joint or sole, and includes visitation rights.” Thus, Liu’s proposed description of “parental rights” was “substantially covered” by the instructions given to the jury. Sonmez, 777 F.3d at 688. The district court’s jury instructions made clear to the jury that the parental rights at issue were only physical visitation rights. Accordingly, the district court did not abuse its discretion in declining to instruct the jury using Liu’s preferred definition.
2.
Liu also challenges the sufficiency of the district court’s jury instructions on the element of “intent to obstruct.” Liu argues that the government was required to prove that she acted with a “significant purpose” of obstructing Ruifrok’s visitation rights, and that the district court’s instructions did not address this concept.
Rather than giving Liu’s proposed jury instruction, the district court instructed the jury that the government must prove beyond a reasonable doubt that “the defendant [acted] with the intent to obstruct the lawful exercise of parental rights.” The district court elaborated that “you must find that the defendant acted deliberately with the purpose of interfering with the parental rights of the other parent.” By instructing the jury in this manner, the district court “substantially covered” the content of Liu’s proposed instruction that the government was required to prove that Liu intended by her actions to interfere with Ruifrok’s parental rights. See Sonmez, 777 F.3d at 688. Therefore, we hold that the district court did not abuse its discretion in refusing Liu’s “significant purpose” instruction.
III.
For these reasons, we do not reach the merits of the issue whether the district court abused its discretion in excluding testimony from the various witnesses about Liu’s stated travel plans. Further, we hold that the district court did not abuse its discretion in excluding Liu’s mother’s statements, or by denying Liu’s proposed jury instructions. We therefore affirm the district court’s judgment.
AFFIRMED.
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5626754-7811 | JUDGMENT AS A MATTER OF LAW IN FAVOR OF DEFENDANT
MORENO, District Judge.
This is a pregnancy discrimination case presented to a jury for its determination of whether the employee’s termination was the result of her pregnancy. Because the employee has failed to present sufficient evidence of intentional discrimination due to her pregnancy, the Court enters final judgment in favor of the employer pursuant to Fed. R.Civ.P. 50(a).
FACTUAL BACKGROUND
On. June 26,1992, the employer, The Flyer Publishing Company, advised the employee, Shari Weiner, that her employment had been terminated for absence without notice from June 19 to June 26, 1992. The employee claimed that her husband, Joseph Weiner, informed the director of sales, Joel Welker, that she had suffered a miscarriage and that Welker expressed sorrow at the loss. Welker denied being notified by Weiner’s husband of employee’s miscarriage and further testified that if he had known about the miscarriage he would not have issued the discharge letter.
Welker authored the termination letter upon becoming aware that Ms. Weiner had cleared out her desk before the weekend and had advised her friend and co-worker Catherine Stein Kleinrichter that she was leaving and never coming back. Ms. Stein (now Kleinrichter) testified at trial that she asked Ms. Weiner on Friday whether she had advised The Flyer that she was leaving and Weiner replied “they will figure it out when I don’t show up on Monday.” At trial Weiner disputed Stein’s version of the conversation.
As indicated by the Court in its written order denying the employer’s motion for summary judgment on the termination, while granting it on the demotion and failure to promote claims, there is a dispute as to whether notice was provided by the employee regarding, her unfortunate miscarriage. At a jury trial the Court is precluded from deciding that factual dispute, but rather must accept the employee’s version of the facts. The Court thereby found that Ms. Weiner had established a prima facie case of pregnancy discrimination.
On the other hand, the Court also found that the employer had presented, through witnesses Joel Welker, Catherine Stein Kleinrichter, James Hill and Theresa Taylor, a legitimate nondiscriminatory business reason for its action, i.e., formally terminating the employee’s job due to her failure to return to work.
Other than this factual dispute on the notice of the miscarriage, the plaintiff has presented no evidence, direct or circumstantial, indicating that the employer intentionally discharged her because of her pregnancy. Thus the Court held that a jury’s factual finding in favor of the employee on this sole factual dispute as to notice of the miscarriage is insufficient, without more, to sustain a verdict against the employer for intentional pregnancy discrimination. Judgment was accordingly entered in favor of defendant employer.
LEGAL ANALYSIS
Fed.R.Civ.P. 50(a) provides that:
If during a trial by jury a party has been fully heard on an issue and there is.no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the court may determine the issue against that party and may grant a motion for judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue.
The plaintiff has been fully heard. Plaintiff established through witnesses that she was an employee who was pregnant and eventually received a letter terminating her employment a few days after her unfortunate miscarriage. As the employee presented no direct evidence of discrimination based on pregnancy, the. circumstantial evidence test set out in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973) applies.
The plaintiff must show that she 1) is a member of a protected class (here pregnant woman), 2) was qualified for the job from which she was fired, 3) was discharged despite her qualifications, and 4) was replaced by someone not pregnant. This fourth element is not an indispensable requirement in all cases, particularly those involving termination of employment.
The McDonnell Douglas test recognizes that direct evidence of intentional discrimination is often difficult to obtain. Where the plaintiff seeks to prove her case with direct evidence, the McDonnell Douglas test does not apply. Here the plaintiff presented no direct evidence of discrimination. Nevertheless the Court found that she has established a prima facie case of discrimination.
The burden then shifts to the employer to rebut the presumption of discrimination that the employee was fired for a legitimate, nondiscriminatory reason. Here the employer clearly set forth its reasons for issuing the discharge letter: the employee abandoned her post; cleared all her belongings, including photographs from her desk; indicated to a co-worker that she would never return; and, in fact, never returned.
The Court found that the employer met its burden, and thus the burden shifts back to the employee to prove that the proffered reason for the firing (the abandonment) was not the true reason for the decision to discharge. Once this, burden of production shifts, the presumption analysis set out in McDonnell Douglas no longer -applies. In other words, the plaintiff must prove intentional discrimination. However it is here that the factual dispute arises as to whether notice of the pregnancy and miscarriage was indeed provided by the employee to the em ployer. . In addition, there may be a need to clarify the legal significance of an employee disproving an employer’s reason for the adverse employment action.
In Isenbergh v. Knight-Ridder, 97 F.3d 436 (11th Cir.1996), the court expressed legitimate concerns about apparent inconsistencies between Walker v. NationsBank of Florida, 53 F.3d 1548 (11th Cir.1995) and Howard v. BP Oil Company, 32 F.3d 520 (11th Cir.1994). In Howard, the court reversed a summary judgment ruling for the defendant where the record provided a basis to disbelieve the defendant’s reasons for choosing other applicants. The Howard court found that the inconsistencies in the distributor’s testimony for its decision to award a dealership to others rather than the black applicant precluded summary judgment.
The Isenbergh court was understandably troubled by the conclusion in Howard that “the fact finder’s rejection of defendant’s proffered reasons is sufficient circumstantial evidence upon which to base a judgment for the plaintiff.” The undersigned, as the author of Howard while sitting by designation, assumes responsibility for the imprecise language that could lead one to conclude that it is sufficient for a plaintiff to simply create a dispute as to the defendant’s reasons for its actions in order to allow a jury to reach a verdict. Such conclusion read in a vacuum could be perceived as inconsistent with NationsBank’s affirmance of a judgment as a matter of law despite plaintiff’s contention that the employer’s reasons were lies. However, Howard and NationsBank are neither inconsistent nor conflicting.
Howard’s reversal of the summary judgment was based on the inconsistencies in the defendant’s evidence “viewed in the context of unwritten criteria for the award of dealership and individualized rationale for individual decisions, articulated only after the fact.” 32 F.3d at 526. The Howard plaintiffs supported their rejection of the defendant’s proffered reasons by showing that these reasons were offered only after the adverse employment decision was rendered and were based on unwritten criteria. “We view these subjective and ad hoc criteria with greater scrutiny than we would if BP strictly followed written interview.” Id. at 526.
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10532295-22210 | OPINION OF THE COURT
STAPLETON, Circuit Judge:
This appeal is the third that we have faced within the past year arising out of challenges by appellant Railway Labor Executives’ Association (RLEA) to a proposed sale of assets by appellee Pittsburgh & Lake Erie Railroad Company (P & LE). In Railway Labor Executives’ Ass’n. v. Pittsburgh & Lake Erie R.R., 831 F.2d 1231 (3d Cir.1987), petition for cert. filed, 56 U.S.L.W. 3759 (U.S. Mar. 24, 1988) (No. 87-1589), we held that the district court had no jurisdiction to enjoin a strike by RLEA unions because Congress did not intend that the Norris-LaGuardia Act, 29 U.S.C. §§ 101-15, yield to the revised Interstate Commerce Act (ICA), 49 U.S.C. §§ 10101-11917. In Railway Labor Executives’ Ass’n v. Pittsburgh & Lake Erie R.R., 845 F.2d 420 (3d Cir.1988), petition for cert. filed, 56 U.S.L.W. 3839 (U.S. May 17, 1988) (No. 87-1888), we held that the expedited approval of the proposed sale by the Interstate Commerce Commission (ICC) under the ICA does not relieve P & LE from its duty to bargain under the Railway Labor Act (RLA), 45 U.S.C. §§ 151-188, over the effects of the proposed sale. In this case, RLEA contends that the proposed sale of assets would violate Pennsylvania’s version of the Uniform Fraudulent Conveyance Act (PFCA), Pa.Stat.Ann. tit. 39, §§ 351-363 (Purdon 1954). We agree with the district court conclusion that it lacked jurisdiction. We will reverse its order of dismissal, however, and remand to the district court with instructions that it in turn remand these proceedings to the state court.
I.
The factual background to this dispute is fully set out in our prior two opinions; we summarize here only the allegations of the complaint and the procedural history relevant to this appeal. P & LE has been experiencing financial difficulties over the last several years. As a result, P & LE entered into an agreement on July 8, 1987 to sell most of its assets, including its rail lines and operating properties, to P & LE Railco, Incorporated (Railco), a noncarrier, and a wholly owned subsidiary of appellee Chicago West Pullman Transportation Corporation (CWPT). P & LE notified its unions of the proposed sale.
RLEA, an unincorporated association of the chief executive officers of nineteen railway labor unions, including the unions that represent P & LE’s employees, took several actions to preserve the alleged rights of its members. One of the actions RLEA took was to file this suit in Pennsylvania state court in October, 1987, claiming that the proposed sale of assets would be a fraudulent conveyance in violation of the PFCA and was only the most recent in a continuing series of the transactions which violate that Act. Named as defendants in addition to P & LE, Railco and CWPT, were Pleco, Inc., P & LE’s parent, and several stockholders, officers and directors of Pleco. In its complaint, RLEA asserts that the employees are creditors within the meaning of the PFCA because of P & LE’s obligations to the employees for accrued but unpaid wages, vacation pay, labor protection pay, life, health and insurance premiums, pension plan premiums, and pending grievance claims. In addition, RLEA asserts that the unions are creditors because of the P & LE’s obligations to the unions for union dues. RLEA contends that the proposed sale would be a fraudulent conveyance, inter alia, because the transaction would not involve fair consideration and would render the P & LE insolvent, and because it is an intentional attempt to defraud creditors. RLEA further contends that the proposed sale has been arranged for the benefit of some creditors to the prejudice of employee and other creditors. RLEA seeks a declaration that all of the transactions described in the complaint violate the PFCA, a preliminary and permanent injunction barring distribution of the proceeds of the sale until RLEA’s claims are provided for, a receivership to administer and distribute those proceeds, damages arising from the PFCA violations, subordination to RLEA’s claims of creditors who were preferred under the fraudulent conveyances, and such other relief as the court may find appropriate.
Before answering the complaint, the defendants removed the case to the federal district court and then moved to dismiss on the ground that RLEA’s claim was preempted by the RLA and the ICA. RLEA opposed the motion to dismiss and moved to remand the case to the state court. The district court granted P & LE’s motion to dismiss and denied RLEA’s motion to remand. It found that RLEA’s claim involved a “minor dispute” under the RLA and that the only proper forum for resolving this dispute was arbitration culminating, if necessary, in a determination by the National Railway Adjustment Board (NRAB). As a result, the district court held 680 F.Supp. 192 that it and the state court lacked jurisdiction. This appeal was taken from the order of dismissal.
II.
The threshold issue is one of subject matter jurisdiction. There are several avenues of analysis in this setting that might lead to the conclusion that the district court had no jurisdiction. The district court concluded that the RLA made the NRAB the exclusive forum for resolving a dispute of this kind and, accordingly, that it and the state court lacked jurisdiction. Defendants also urge, in the alternative, that the ICA makes the ICC the exclusive forum for resolving a dispute of this kind. Wholly apart from these forum preemption issues, however, given the exclusive reliance of RLEA’s state court complaint on state law, the district court may have lacked jurisdiction under well established principles of removal law. More specifically, under the “well pleaded complaint” rule, there is no removal jurisdiction in this case and a remand is required unless it can be said that the RLA or the ICA “completely preempts” RLEA’s state cause of action. Although the defendants argued that the doctrine of complete preemption bestowed jurisdiction on the district court, that court did not address the issue.
We address the well pleaded complaint rule and the complete preemption doctrine in Section IIA. We conclude that the district court lacked jurisdiction under these applicable principles of removal law. As we explicate in Section IIB, we also conclude that the district court should have addressed the removal issue first and remanded to the state court, leaving the issues of forum preemption for determination by the state court. In Section IIC, we emphasize that our holding is a narrow one and identify the issues that we leave for resolution by the state court. Among those issues is the question of whether the rules of law provided by the PFCA are preempted by federal law. As we shall see, this “ordinary preemption” issue concerning the applicable principles of substantive law is distinct from the “complete preemption” issue discussed in Section IIA and the “forum preemption” issues discussed in Section IIB.
A.
RLEA’s complaint relies solely on state law. Under 28 U.S.C. § 1441, only state court actions over which “the district courts of the United States have original jurisdiction, may be removed by the defendant.” As the asserted basis of federal jurisdiction in this case is 28 U.S.C. § 1331 (“federal question” jurisdiction), the “well-pleaded complaint rule” applies. In order for a case to be removable under § 1441 and § 1331, the well-pleaded complaint rule requires the federal question be presented on the face of the plaintiff’s properly pleaded complaint. See Gully v. First National Bank, 299 U.S. 109, 112-13, 57 S.Ct. 96, 97-98, 81 L.Ed. 70 (1936). In addition, under this rule,
a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the complaint, and even if both parties concede that the federal defense is the only question truly at issue.
Caterpillar, Inc. v. Williams, — U.S. -, 107 S.Ct. 2425, 2426, 96 L.Ed.2d 318 (1987).
The Supreme Court, however, has fashioned an “independent corollary,” to the well-pleaded complaint rule, known as the “complete preemption doctrine.” The complete preemption doctrine holds that “Congress may so completely preempt a particular area, that any civil complaint raising this select group of claims is necessarily federal in character.” Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). In such cases, “any complaint that comes within the scope of the federal cause of action [created by the federal statute] necessarily ‘arises under’ federal law,” Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 24, 103 S.Ct. 2841, 2854, 77 L.Ed.2d 420 (1983), for purposes of removal based on federal question jurisdiction.
The complete preemption doctrine has its roots in Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968). In Avco, an employer, relying solely on state law, brought suit in a state court to enjoin a union from striking in violation of the “no-strike” clause in the collective bargaining agreement. After the state court issued a temporary injunction, the union removed the case to federal court and the district court dissolved the injunction. The Supreme Court held that the suit was removable because it arose under section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. § 185.
The Supreme Court first explicitly acknowledged the implications of the Avco holding in Franchise Tax Board. In Franchise Tax Board, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420, a state tax authority, pursuant to state statute, attempted to levy on funds held in trust for construction employees under a vacation benefit plan covered by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. When the fund trustees failed to comply, the tax authority filed suit in state court based on two state law causes of action, and the fund removed to federal court. Before holding that removal was improper, the Supreme Court first considered the argument based on Avco that the state’s cause of action was in substance a federal claim. The Court explained that the “necessary ground” of the Avco decision was that the “pre-emptive force of § 301 is so powerful as to displace entirely any state cause of action ‘for violation of contracts between an employer and a labor organization.’ ” Id. at 23, 103 S.Ct. at 2853.
The Court declined to apply the complete preemption doctrine to the facts present in Franchise Tax Board, however. First, the Court noted that ERISA creates express causes of action in section 502(a) that might, like section 301, completely preempt any state law cause of action coming within their scope. The tax authority’s claims, however, did not fall within the scope of these causes of action because section 502(a) “neither creates nor expressly denies any cause of action in favor of state governments, to enforce tax levies or for any other purpose. It does not purport to reach every question relating to plans covered by ERISA.” Id. at 25, 103 S.Ct. at 2854. The Court thus found significant the fact that “ERISA does not provide an alternative cause of action in favor of the State to enforce its rights, while § 301 expressly supplied the plaintiff in Avco with a federal cause of action to replace its pre-empted state contract claim.” Id. at 26, 103 S.Ct. at 2855.
Second, the Court found that “Congress did not intend to pre-empt entirely every state cause of action relating to [plans covered by ERISA],” id. at 25, 103 S.Ct. at 2854, because ERISA contains at least one provision that expressly preserves the effect of state laws in certain areas. Third, the Court stressed that “the State’s right to enforce its tax levies is not of central concern to the federal statute.” Id. at 25-26, 103 S.Ct. at 2854-55. Finally, the Court added that even though the enforcement of the state’s tax levy might eventually be found to be preempted by ERISA, the state’s cause of action to enforce the levy was not “completely” preempted. Id. at 26, 103 S.Ct. at 2855.
The Court returned to the application of the complete preemption doctrine to ERISA in Metropolitan Life, in which the plaintiffs filed state common law causes of action in a state court asserting improper processing of a claim for benefits under a plan regulated by ERISA. The Court framed the issue as
whether these state common law claims are not only pre-empted by ERISA, but also displaced by ERISA’s civil enforcement provision, § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), to the extent that complaints filed in state courts purporting to plead such state common law causes of action are removable to federal court under 28 U.S.C. § 1441(b).
107 S.Ct. at 1544-45. Deciding the question specifically reserved in Franchise Tax Board, the Court held that state law causes of action that came within the scope of section 502(a) of ERISA were removable.
At the same time, however, the Court made clear its determination to limit the application of the complete preemption doctrine. Even in the context of a statute like ERISA with its “unique preemptive force” and its civil enforcement provision creating a federal cause of action “that lies at the heart of the statute,” the Court declared itself “reluctant to find that extraordinary pre-emptive power” necessary for the complete preemption doctrine to apply “[i]n the absence of explicit direction from Congress.” Id. at 1547. This reluctance was overcome in Metropolitan Life only because Congress had manifested a “clear intention to make § 502(a)(1)(B) suits brought by [ERISA] participants or beneficiaries federal questions for purposes of federal court jurisdiction in like manner as § 301 of the 'LMRA.” Id. at 1547. The Court found such an explicit intention both from the fact that ERISA’s civil enforcement provisions closely parallel those of § 301 of the LMRA and from the following “specific reference to the Avco rule” in the ERISA Conference Report:
All such actions in Federal or State courts are to be regarded as arising under the laws of the United States in similar fashion to those brought under section 301 of the Labor-Management Relations Act of 1947. H.R.Conf.Rep. No. 93-1280, p. 327 (1974)
Id. at 1547 (emphasis in original).
The Court held as follows:
Congress has clearly manifested an intent to make causes of action within the scope of the civil enforcement provisions of § 502(a) removable to federal court. Since we have found Taylor’s cause of action to be within the scope of § 502(a), we must honor that intent whether preemption was obvious or not at the time this suit was filed.
Accordingly, this suit, though it purports to raise only state law claims, is necessarily federal in character by virtue of the clearly manifested intent of Congress.
Id. at 1548. Justice Brennan, joined by Justice Marshall, embraced the opinion of the Court but wrote separately to emphasize that the relevant congressional intent was not an intent that the statute should displace state law, but rather an intent that claims purportedly based on state law be removable:
While I join the Court’s opinion, I note that our decision should not be interpreted as adopting a broad rule that any defense premised on congressional intent to preempt state law is sufficient to establish removal jurisdiction. The Court holds only that removal jurisdiction exists when, as here, “Congress has clearly manifested an intent to make causes of action ... removable to federal court.” Ibid (emphasis added). In future cases involving other statutes, the prudent course for a federal court that does not find a clear congressional intent to create removal jurisdiction will be to remand the case to state court.
Id. at 1548 (Brennan, J., concurring) (emphasis in original).
In its most recent complete preemption ease, Caterpillar, Inc. v. Williams, the Court examined the scope of the doctrine as applied to Section 301 of the LMRA. In Caterpillar, an employer downgraded certain employees from managerial and salaried positions not covered by a collective bargaining agreement to hourly positions covered by the agreement. The employees sued in state court for breach of their individual employment contracts; and the employer removed to federal court. The Court held that the complete preemption doctrine did not apply because the rights asserted by the employees were neither created by nor “substantially dependent upon interpretation of,” 107 S.Ct. at 2431, the collective bargaining agreement. The Court also emphasized that complete preemption is a distinct concept from ordinary preemption: “The fact that a defendant might ultimately prove that a plaintiff’s claims are pre-empted under the NLRA does not establish that they are removable to federal court.” Id. at 2432.
Although, as Justice Brennan observed in Franchise Tax, the rules in this area “involve ... perhaps more history than logic,” 463 U.S. at 3, 103 S.Ct. at 2843, we believe analysis of the case law yields a number of clear teachings. The well pleaded complaint rule is alive and well and a plaintiff “may [in most instances] avoid federal jurisdiction by exclusive reliance on state law.” Caterpillar, 107 S.Ct. at 2429. This remains true whether or not the state law exclusively relied on is preempted by federal law. State courts are competent to determine whether state law has been preempted by federal law and they must be permitted to perform that function in cases brought before them, absent a Congressional intent to the contrary. Nevertheless, there is a very limited area in which a federal court in a case removed from a state court is authorized to recharacterize what purports to be a state law claim as a claim arising under a federal statute. In order to determine whether it possesses this authority to recharacterize, the federal court must first ask whether the statute relied upon by the defendant as preemptive contains civil enforcement provisions within the scope of which the plaintiff’s state claim falls. Franchise Tax, 463 U.S. at 24, 26, 103 S.Ct. at 2854-55. If the federal statute creates no federal cause of action vindicating the same interest the plaintiffs state cause of action seeks to vindicate, recharacterization as a federal claim is not possible and there is no claim arising under federal law to be removed and litigated in the federal court.
Even if there is a civil enforcement provision and the plaintiffs state claim falls within it, the federal court must further inquire whether there is a clear indication of a Congressional intention to permit removal despite the plaintiffs exclusive reliance on state law. See Metropolitan Life, 107 S.Ct. at 1547-48. If there is no affirmative indication of the requisite Congressional intent to permit removal, there can be no “complete preemption.” If there is no such intent, the district court need not and should not address the issue of whether the state substantive law relied upon by the plaintiff has been preempted by federal law. That issue must be left for determination by the state court on remand.
With this analysis in mind, we turn first to the RLA. The defendants have pointed to no federal cause of action created by the RLA which would have been referred to in RLEA’s complaint if it had been “well pleaded.” Since RLEA’s state claim cannot be recharacterized as a comparable claim arising under the RLA, we conclude that the doctrine of complete claim preemption does not operate to permit removal in the situation before us. In addition, as one would expect in light of Congress’ failure to create in the RLA a civil enforcement action comparable to RLEA’s claim under the PFCA, we find no evidence in the RLA or its legislative history of a Congressional intent to permit re-characterization and removal of what purports to be a state claim.
The ICA, like the RLA, contains no civil enforcement provisions creating a federal cause of action in favor of one in the position of RLE A or the employee creditors. Likewise, we find no affirmative evidence in the ICA or its legislative history that Congress intended state claims of this kind to be removable. Indeed, we have found no case or commentary even suggesting that there may be complete preemption under the ICA. For these reasons, we hold that the district court is without authority to recharacterize the state cause of action pleaded by RLEA as a federal cause of action arising under the ICA.
In summary, it is clear from the Supreme Court case law that the doctrine of complete preemption operates in a very narrow area. In particular, it has never been applied in a situation where there was no federal cause of action comparable to the state cause of action asserted by the plaintiff. Moreover, the Supreme Court has indicated that it should not be applied unless there is affirmative evidence of a Congressional intent to permit removal despite the plaintiff’s exclusive reliance on state law. Because there is no RLA or ICA cause of action within the scope of which RLEA’s state claim falls and because we do not find the requisite Congressional intent, we hold that there is no removal jurisdiction in this case.
B.
When Congress intends a particular forum to have exclusive jurisdiction to determine the rights of the parties in a particular situation, that policy decision deprives other fora of subject matter jurisdiction. This doctrine of “forum preemption” implements Congressional determinations that development of the substantive law in a particular area should be left to a particular administrative agency created for that purpose. Mack Trucks, Inc. v. International Union, U.A.W., 856 F.2d 579 (3d Cir.1988). The forum preemption doctrine was applied most recently in International Longshoremen’s v. Davis, 476 U.S. 380, 106 S.Ct. 1904, 90 L.Ed.2d 389 (1986). The Supreme Court there held that where conduct challenged in a state court suit is arguably an unfair labor practice within the scope of § 8 of the NLRA, the NLRB has exclusive jurisdiction and the state court has no subject matter jurisdiction to hear the claim even if it is purportedly based solely on state law.
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11524240-13905 | MEMORANDUM
NEALON, District Judge.
In this action to revoke the citizenship of defendant, Amarbir Singh, (Singh), the plaintiff, United States of America, (Government), filed a Motion for Summary Judgment on November 24, 1998, together with a brief in support of the Motion. The defendant has opposed the Motion, which has been extensively briefed by the parties and is now ripe for determination. For the following reasons, the Motion will be denied.
BACKGROUND
The Government brought this action under Section 340(a) of the Immigration and Naturalization Act of 1952, as amended by Title 8, United States Code, Section 1451(a), to revoke and set aside a grant of United States Citizenship to the defendant, and to cancel his Certificate of Naturalization, Number 20433299. This court has jurisdiction pursuant to 28 U.S.C. § 1345.
Singh was born in India on January 23, 1962, and was admitted to the United States as a lawful permanent resident on February 25, 1986. He is married to a naturalized American citizen and has three native born American children, ages 13,10, and 7. On August 19, 1993, he became a citizen and was issued a Certificate of Naturalization. Subsequently, on March 17, 1994, he pled guilty to knowingly, willfully and unlawfully conspiring to violate federal tax laws beginning on or about February 20, 1991, and continuing through November 1, 1992. The Government seeks to revoke his naturalized citizenship on the grounds that it was procured by misrepresentation and concealment of material facts when in both the Petition for Naturalization, filed on January 8, 1993, as well as in sworn testimony at the August 19, 1993, final naturalization hearing, Singh indicated that he had not committed any crime for which he had not been arrested. On November 24, 1998, plaintiff filed a Motion for Summary Judgment together with a brief in support of the Motion. Singh filed a brief in opposition on January 14, 1999, and a reply brief was filed by the plaintiff on January 28,1999.
DISCUSSION
I.
The Government argues that as a result of his guilty plea, Singh admitted that for at least a twenty month period, ending barely two months before he applied for naturalization, he knowingly and willfully engaged in fraudulent activity, devised and executed a scheme to defraud, and with others under his direction and control mailed false and fraudulent tax reports, all for the purpose of evading tax obligations. According to the Government, having committed these crimes and having pled guilty to knowingly and willfully engaging in these criminal activities, Singh is now collaterally estopped from claiming that he did not know that his actions exposed him to arrest.
In his brief in opposition to the summary judgment motion, Singh maintains that when he prepared his Petition and provided his testimony, he submitted that information believing that it was true and accurate without any intent to mislead or conceal. He further asserts that, even though he eventually pled guilty to knowingly and willfully participating in a scheme to avoid the payment of diesel fuel tax, he did not believe, at the time that he answered questions regarding his naturalization, that his actions constituted a crime. Specifically, that at the time that he answered the questions during the naturalization process, he believed that there may be some civil penalties for his actions, but that at no time did he believe that he had committed a crime. Consequently, it is his position that collateral estoppel does not apply here because he is not attempting to deny his guilt, i.e. the issue previously litigated by his guilty plea, but is attempting to show that he did not willfully misrepresent or conceal a material fact in the naturalization process. In short, that when he answered the questions posed, he did not know that he was committing a crime for which he could be arrested.
II.
Summary judgment is appropriate if “there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.” F.R.C.P. 56(c); see also Turner v. Schering-Plough Corp., 901 F.2d 335, 340 (3d Cir.1990). The party moving for summary judgment bears the burden of showing the absence of a genuine issue as to any material fact. Young v. Quinlan, 960 F.2d 351, 357 (3d Cir.1992). “Once the moving party has carried the initial burden of showing that no genuine issue of material fact exists, the non-moving 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.’ ” Pastore v. Bell Telephone Co. of Pennsylvania, 24 F.3d 508, 511 (3d Cir.1994) (citation omitted). All inferences, however, “ ‘should be drawn in the light most favorable to the non-moving party, and where the non-moving party’s evidence contradicts the movant’s, then the non-movant’s must be taken as true.’ ” Id. at 512. (citing Big Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1363 (3d Cir.1992), cert. denied, 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed.2d 659 (1993)). See also Betz Laboratories, Inc. v. Hines, 647 F.2d 402 (3d Cir.1981).
Furthermore, “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there -be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). With regard to whether a fact is material, “it is the substantive law’s identification of which facts are critical and which facts are irrelevant that governs.” Id. at 248, 106 S.Ct. 2505. A dispute is “genuine” only if “there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party.” Id. at 242, 106 S.Ct. 2505. If the Court determines that “the record taken as a whole could not lead a national trier of fact to find for the non-moving party, there is no genuine issue for trial.” Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
III.
It appears from the briefs in this case that, for the purposes of this summary judgment motion, there are no factual disputes between the parties. It has been stated by the defendant, that he has not attempted to withdraw his guilty plea nor has he denied that he committed the crime for which he pled guilty. The remaining issue for the court to determine is whether or not collateral estoppel bars the defendant from claiming that at the time of his naturalization he did not know that he had committed a crime.
Under the doctrine of collateral estoppel, once an issue is actually litigated and necessarily decided by a court, that determination is conclusive in a different cause of action that involves a party to the earlier litigation. State of Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979); see also Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 568, 71 S.Ct. 408, 95 L.Ed. 534 (1951) (noting that “[i]t is well established that a prior criminal conviction may work as estoppel in favor of the government in a subsequent civil proceeding”). Moreover, when an issue is resolved in favor of the government in a criminal prosecution, the defendant cannot contest that same issue in a subsequent civil suit brought by the government. United States v. Nardone, 782 F.Supp. 996, 998 (M.D.Pa.1990). This rule applies regardless of whether the defendant was found guilty either by a jury verdict or by a guilty plea. Id.
The defendant does not disagree with this rule of law but contends that the issue that he is raising has not been previously litigated and decided by his guilty plea and, therefore, is not barred by the doctrine. The issue, according to Singh, is whether he willfully and knowingly intended to misrepresent or conceal a material fact during the naturalization process and not whether he subsequently admitted to having committed a crime.
The Government has the heavy burden of proving by clear, unequivocal and convincing evidence, which does not leave the issue in doubt, that Singh obtained his naturalization certificate illegally. Schneiderman v. United States, 320 U.S. 118, 63 S.Ct. 1333, 87 L.Ed. 1796 (1943). This is so because denaturalization is an extraordinarily severe penalty with consequences that may even rest heavily upon the citizen’s children. Klapprott v. United States, 336 U.S. 949, 69 S.Ct. 877, 93 L.Ed. 1105 (1949). In fact, in this case, if Singh is denaturalized and deported, and the family remains intact, his wife and children would also be deprived of their priceless constitutional protections and economic advantages as American citizens. Thus, to warrant denaturalization, the Government must prove by the appropriate standard that Singh attempted to deceive the naturalization examiners by intentionally concealing or misrepresenting the fact that he had committed a crime or offense for which he had not been arrested. See, United States v. Kessler, 213 F.2d 53 (3d Cir.1954). But, as set forth in Knauer v. United States, 328 U.S. 654, 659, 66 S.Ct. 1304, 1307, 90 L.Ed. 1500 (1946), “(i)ntent is a subjective state, illusory and difficult to establish in absence of a voluntary confession. What may appear objectively to be false may still fall far short of establishing an intentional misrepresentation which is necessary in order to prove that the oath was perjurious.” Whether a defendant possessed the subjective intent to misrepresent a material fact is a matter usually to be resolved by the trier of fact. Kungys v. United States, 485 U.S. 759, 108 S.Ct. 1537, 99 L.Ed.2d 839 (1988). The question of intent is a distinct factual issue which would normally preclude summary judgment. United States v. Tuteur, 215 F.2d 415 (7th Cir.1954). It is true that Singh entered a guilty plea to the criminal offense but that does not resolve the question of whether he knew at the time of the naturalization proceeding that he had committed a crime for which he had not yet been arrested. He would have to possess this knowledge before he could be accused of deliberately intending to deceive by not revealing it during the examination process. Therefore, the factual background presented here distinguishes Witter v. INS, 113 F.3d 549 (5th Cir.1997) and Forbes v. INS, 48 F.3d 439 (9th Cir.1995).
While the Government insists that Singh’s guilty plea collaterally estops him from offering evidence and testimony to show that his responses were not made with the intent to conceal or willfully misrepresent, our attention must not be diverted from the specific question that forms the basis for the Government’s contention, viz., “have you ever (a) knowingly committed any crime or offense for which you have not been arrested?” Neither party has cited any legal authority interpreting that particular question. Implicit in this inquiry is whether the petitioner knew at the time he answered this question that he was committing a crime in avoiding payment of the diesel fuel tax by claiming that it was being sold for residential and not commercial use. Defendant argues that there is a factual dispute concerning his understanding of the precise question presented to him by the examiners and whether by his answer he possessed the requisite knowledge and intent to misrepresent or conceal a material fact.
It should be pointed out that even in cases involving prior arrests and convictions, the factual disputes were not decided by summary judgment but were resolved after trials. In Corrado v. United States, 221 F.2d 780 (6th Cir.1955), the defendant denied on his application that he had ever been arrested when, in fact, he had been arrested fifteen times and convicted twice. Corrado sought to avoid the revocation of his citizenship by contending that he had been informed that, because he had been convicted only for misdemeanors and his other arrests had not resulted in convictions, it was proper that he should answer “no” to the question. He was allowed to proceed to trial on the issue of whether his citizenship had been procured fraudulently and illegally. After considering the evidence presented, including Corrado’s testimony, the trial judge concluded that the certificate was obtained fraudulently. In Brenci v. United States, 175 F.2d 90 (1st Cir.1949), the issue of whether the applicant, because of his limited education, understood the question concerning his prior criminal record and willfully and knowingly concealed two felony convictions, was determined as a result of a trial after the government’s motion for summary judgment was denied. See also, United States v. Kessler, 213 F.2d 53 (3d Cir.1954); United States v. Oddo, 314 F.2d 115 (2d Cir.1963); United States v. Profaci, 274 F.2d 289 (2d Cir.1960); and Cufari v. United States 217 F.2d 404 (1st Cir.1954). An individual would know if he had actually been arrested for, or convicted of, a crime but whether one knew it was a crime prior to arrest or conviction presents a very different scenario. The realities of a criminal proceeding are that a defendant may not realize that he has committed a crime until he has been charged and receives legal advice concerning the elements of the crime. It is not uncommon for one to believe that his actions were not criminal at the time of their commission only to find out later that his conduct constituted a criminal offense. Upon receiving appropriate explanations and advice from counsel, he may realize or be persuaded that his actions could not be explained or defended at trial and that a guilty plea should be entered. It scarcely needs stating that the chances of a lesser sentence are greater when a defendant pleads guilty and spares the court and the government the expense and inconvenience of a trial.
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3928664-4330 | ORDER
McDONALD, District Judge.
Came on to be heard Defendant Air Line Pilots Association, International’s Motion to Dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. After careful consideration, the Court is of the opinion that the Motion should be denied.
This is a case in which the Plaintiffs, two pilots who are members of the Air Line Pilots Association, have filed against the Defendants, Air Line Pilots Association International (“ALPA”) and Continental Air Lines, Inc. (“CAL”), for breach of the duty of fair representation during an arbitration proceeding and to enforce an arbitration award issued by the TXI Pilots’ System Board of Adjustment. In deciding a Motion to Dismiss, the Court should not grant the motion unless it appears to a certainty that Plaintiff would not prevail on his claim under any set of facts which could be proven in support of his claim. Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Robinson v. Price, 553 F.2d 918 (5th Cir.1977).
I. Exclusive Jurisdiction
ALPA argues that the Civil Aeronautics Board (“CAB”) has exclusive jurisdiction over airline mergers and seniority list integration and therefore this Court lacks subject matter jurisdiction over the Plaintiffs’ claims.
The CAB/DOT does have exclusive jurisdiction over airline consolidation and airline mergers. Federal Aviation Act, 49 U.S.C. §§ 1378. Furthermore, an order by the CAB/DOT approving a merger is only reviewable in the court of appeals. 49 U.S.C. § 1486(a).
However, in this case the Plaintiffs are claiming that ALPA breached its duty of fair representation. The Fifth Circuit is silent on the question of whether a claim for breach of the duty of fair representation under the Federal Aviation Act is cognizable in the district courts. In an analogous case, the Fifth Circuit held that a claim for breach of the duty of fair representation is not under the exclusive jurisdiction of the National Labor Relations Board. Mumford v. Glover, 503 F.2d 878, 883 (5th Cir.1974); Smith v. Local No. 25, Sheet Metal Workers Int. Ass’n, 500 F.2d 741, 747 (5th Cir.1974). The Court in Mumford held that the implied statutory duty of fair representation is a claim arising under a statute regulating commerce within the confines of 28 U.S.C. § 1337. Id. at 883. The Mumford Court concluded that jurisdiction was present in the District Courts to hear claims of breach of the duty of fair representation because the cause of action was judicially created. Id. The Ninth Circuit has considered the precise issue before the Court and has held that a duty of fair representation claim was cognizable in the District Courts under the Federal Aviation Act upon the same basis formulated in Mumford. Clayton v. Republic Airlines, Inc., 716 F.2d 729, 731 (9th Cir.1983). This Court also concludes that the analogy with Mumford is so clear that the same result is called for and hereby finds that the Plaintiffs’ claims are sustainable in the District Court. See Clayton, 716 F.2d at 729. In addition, the Court finds that the Plaintiffs are not pursuing this action merely as a collateral attack on the integrated senority list. See Carey, et al. v. O’Donnell (Air Line Pilots Association), et al., 506 F.2d 107 (D.C.Cir.1974).
II. Exhaustion
ALPA asserts that even if the CAB does not have exclusive jurisdiction, the Plaintiffs’ claims should be dismissed because Plaintiffs have not exhausted their administrative remedies before the CAB. ALPA specifically relies upon Plaintiffs action in filing a complaint before the CAB as a grounds for requiring exhaustion. Although exhaustion of administrative remedies is a generally recognized rule, there is no language in the Federal Aviation Act that requires Plaintiffs to exhaust their administrative remedies before the CAB/DOT prior to filing a claim of unfair representation with the District Court. ALPA has not cited any authority to the contrary. Finding that the CAB/DOT has not rendered a decision on the merits; that the break up of the CAB raises serious questions about the adjudication of claims; and that the District Courts do have jurisdiction over unfair representation claims, the Court concludes that the Plaintiffs’ claims should not be dismissed for failure to exhaust administrative remedies.
III. Primary Jurisdiction
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1783412-24779 | Opinion for the Court filed by Senior Circuit Judge MacKINNON.
MacKINNON, Senior Circuit Judge:
Two classes of former enrollees in the Blue Cross and Blue Shield Association (“Blue Cross”) Government-Wide Service Benefit Plan, who withdrew from the Plan or changed plans prior to May 1, 1985, bring this action to compel their inclusion in a $784 million refund by Blue Cross of excess contingency reserve funds, which refund is presently limited to enrollees who were subscribers in a Blue Cross plan as of May 1, 1985. Plaintiffs contend that the decision of the Office of Personnel Management (“OPM”) to approve the refund proposal was “arbitrary, capricious and an abuse of discretion or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). The district court upheld the decision by OPM, concluding that limiting the refund to those enrolled in Blue Cross as of May 1, 1985 was rational and supported by the record. Bolden v. Blue Cross and Blue Shield Association, 669 F.Supp. 1096, 1106 (D.D.C.1986). We affirm.
I. Background
A. Statutory Framework
In 1959, Congress created a subsidized health insurance program as a benefit for civilian employees and annuitants of the federal government. Federal Employees Health Benefits Act of 1959, 5 U.S.C. §§ 8901 et seq. (“the Act”). With almost 300 plans participating the program is competitive. During a four week “open sea son” each year, federal employees and annuitants can compare and change plans. 5 U.S.C. § 8905(e); 5 C.F.R. § 890.301(d).
Under the Act, the Office of Personnel Management is given broad authority to administer the Federal Employees Health Benefits Program (“the Program”). OPM contracts with insurance carriers to provide health insurance benefits and each year renegotiates the coverage and rates based upon prior experience and insurance industry practice. 5 U.S.C. § 8902(i). OPM attempts to set the rates of the various plans so they will be sufficient to cover future claims and overhead costs and maintain surplus funds for unexpected costs. 5 U.S. C. §§ 8902(i), 8909(b).
“Reserves” are required to be established to meet anticipated claims. 5 U.S.C. § 8909(b); 5 C.F.R. § 890.503. Many uncertain factors affect program costs, such as the number of enrollees who will move in and out of a plan and the amount and cost of health care services that enrollees will require. GAO Report, App. 705; S.Rep. No. 468, 86th Cong., 1st Sess. 18 (1959). These uncertainties make it improbable that any premium rates negotiated by OPM will exactly equal future costs. The reserves can be drawn upon when health care claims exceed annual program income. Program reserves are held partly by the government in “contingency reserves” which are earmarked for each carrier, and partly by the participating carriers in a “special reserve.”
After the premium rates are set for the next contract year, OPM determines the amount of the government’s contributions. 5 U.S.C. § 8906. The part of the premium not paid by the government is withheld from the pay of each enrolled employee and from the annuity of each enrolled annuitant. 5 U.S.C. § 8906(d). The set premium may not be changed during the contract year. Employees and annuitants receive the contract benefits during the year at the contracted rate whether costs and claims are unexpectedly high, requiring a charge against reserves, or low, resulting in a surplus. 5 U.S.C. § 8902(i).
Government and enrollee contributions to the Employees Health Benefits Fund, which is controlled by OPM, 5 U.S.C. § 8909(a), may be used for three purposes. First, a percentage, not to exceed one percent of all contributions, determined by OPM, is used to pay OPM’s administrative expenses. 5 U.S.C. § 8909(b)(1).
Second, a percentage, not to exceed three percent of all contributions, determined by OPM, may be used to establish a contingency reserve for each plan. 5 U.S.C. § 8909(b)(2). Contingency reserve funds may be used to compensate for underestimates of claims costs and may be transferred to a plan’s special reserve if underestimated claims create a deficit in the special reserve. 5 C.F.R. § 890.503(c). Similarly, excess special reserves may be transferred to a plan’s contingency reserve. 5 U.S.C. § 8909(b); 5 C.F.R. § 890.503(c)(1)(v). Contingency reserves may be used, at OPM’s discretion, for three purposes: (1) to defray increases in future rates; (2) to reduce the contributions of the government and enroll-ees; or (3) to increase the benefits provided by a plan. 5 U.S.C. § 8909(b).
Third, the remaining contributions by en-rollees to each plan are paid into that plan’s special reserves, which are used to pay enrollees’ health insurance claims. Surplus or deficit special reserves are carried over each year and become a factor in determining the appropriate rate for the following year. 41 C.F.R. § 16-4.152-1(b)(2). OPM may lower enrollees’ premium rates to draw down a plan’s surplus special, or it may increase rates to recover from a deficit reserve balance. In both cases it is the subscribers who are enrolled for the current contract year that benefit or suffer.
B. Factual Background
Unanticipated large cost increases in the medical field and high use of health care services by enrollees created financial problems for health plans in the early 1980’s. Blue Cross had a $150 million deficit in its Federal Employee Health Benefit Plan (the “Plan”) special reserve by the end of 1981. In response to the deficits, OPM introduced major cost containment, benefit reduction and cost-sharing initiatives to encourage more responsible use of health care services by Program enrollees, doctors and hospitals. OPM also negotiated premiums to cover higher expected costs and to build up reserves. Nationwide reductions in medical care use and costs resulted in substantial surpluses in the Plans’ special reserve accounts. In May, 1985, Blue Cross estimated that its special reserve balance would be approximately $957 million by the end of 1985, of which $754 million was surplus not necessary to cover estimated future costs.
On May 20, 1985, while OPM was evaluating various ways to decrease excess reserves, Blue Cross announced a proposal for reducing its reserves. It proposed to send all persons enrolled as of May 1, 1985 a one time payment, a “refund,” which would effectively reduce their contributions toward 1985 premiums. Blue Cross also proposed to give the government a refund proportionate to the amount the government contributed toward the premiums.
OPM immediately began studying the Blue Cross proposal. On May 30, 1985, OPM conducted a public hearing to solicit comments on the Program’s reserve levels, the management of the reserves and the Blue Cross proposal. Five OPM officials conducted the meeting at which fourteen witnesses expressed many divergent views. At least one OPM official and two witnesses questioned whether former enrollees should receive refunds. App. 157, 192-93, 251. OPM also asked the Office of Legal Counsel (“OLC”) in the Department of Justice for its opinion as to the legality of a refund to enrollees as of May 1, 1985. App. 451-52. In a July 10, 1985 opinion, OLC concluded that the refund was legal, App. 453, reasoning that under section 8909(b), excess special reserves could be transferred to contingency reserves, and paid out as “reductions in contributions.” App. 470. OLC noted, however, that while refunds could be made to employees, the word “employees” in 5 U.S.C. § 8909(b) would have to be changed to “enrollees” before such refunds could legally be made to subscribing annuitants. App. 471. OLC did not discuss whether refunds could be paid to former enrollees.' On July 16,1985, OPM announced that President Reagan accepted “the essential elements” of the Blue Cross proposal. App. 473. OPM instructed the insurance carriers to decrease their special and contingency reserves to an amount equal to two months of premium income by the end of 1986. App. 505-507. All Plans had the option of reducing their reserves either by reducing 1986 contributions using refunds, or by reducing 1986 premium rates, or by a combination of both methods. App. 63, 505-507. Many Plans chose the refund option. App. 705.
OPM followed OLC’s recommendation and sought legislation that would allow subscribing annuitants to share in the proposed refunds. App. 474-77. In a letter to Speaker of the House Thomas P. O’Neill, Jr., OPM set forth the proposed language for the legislation and stated that OPM planned to use surplus reserves to reduce “current contributions” of those “enrolled” in a plan. App. 474. Congress adopted OPM’s proposed language in passing H.R. 3384 in December, 1985. H.R. 3384, § 101, 99th Cong., 1st Sess. (1985). President Reagan vetoed the bill due to unrelated provisions, however, the necessary legislation was subsequently passed by Congress and approved by the President on February 27, 1986. Federal Employees Benefits Improvement Act of 1986, Pub.L. No. 99-251, § 101, H.R. 4061 (1986), 100 Stat. 14. Eleven plans eventually sent refunds to persons who had been enrolled in their plans as of certain dates in 1985. App. 571, 736-62. Aside from $25 million set aside pending the outcome of this lawsuit, the Blue Cross refund is complete.
On August 20, 1985, plaintiffs brought this action seeking their inclusion in the refund. Plaintiffs claimed that the decision by OPM to adopt the eligibility date of May 1, 1985 as proposed by Blue Cross was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). The first class of plaintiffs are federal employees who were enrolled in a Blue Cross plan in 1983 and 1984, but left the plan prior to May 1, 1985, thereby placing themselves in a posi tion where they were ineligible for the Blue Cross refund. The second class of plaintiffs are federal employees who were in a Blue Cross high option or family plan during 1983 and 1984, but withdrew therefrom and were enrolled in a Blue Cross low option or single enrollment plan as of May 1, 1985. The second class of plaintiffs received a refund as low option or single enrollees, but seek a larger refund based on their enrollment in a high option or family plan during 1983 and 1984. To permit the refunds to go forward while this case was pending, the parties entered into a stipulation on February 7, 1986 pursuant to which $25 million of the refund amount was set aside in an escrow account, that would be sufficient to protect the two classes if plaintiffs were successful. The defendants agreed to the certification of the two classes and the plaintiffs agreed not to attempt to enjoin the distribution of the remaining $759 million.
The district court granted defendants’ motion for summary judgment, holding that OPM’s decision “is supported by the record, and is not arbitrary, capricious or an abuse of discretion.” Bolden v. Blue Cross and Blue Shield Association, 669 F.Supp. 1086, 1107 (D.D.C.1986). The plaintiffs contended that the court’s standard of review should not be deferential to OPM because OPM did not rely on its own judgment and that OPM relied on a misreading of a statute. The court disagreed, concluding that it should presume the agency’s action is valid and uphold the agency’s decision if a rational basis existed for its decision. Id. at 1101. The court emphasized that judicial review of an agency’s interpretation is particularly narrow where the challenged action involves the agency’s construction of the statute it is empowered to administer. Id. The plaintiffs contended that the court should not consider OPM’s March 31, 1986 Decisional Memorandum in evaluating the agency’s action. Plaintiffs characterized the Memorandum as “mere post hoc rationalizations,” but the court admitted it to “illuminate[ ] reasons obscured but implicit in the administrative record.” Id. at 1102. Additionally, the court found that Congress had implicitly approved OPM’s interpretation of the statute when it amended 5 U.S.C. § 8909(b), id. at 1103, and rejected plaintiffs’ argument that they had any equitable interest in the refund money. Id. at 1104. Finally, the court found that OPM’s decision to deny a share of the refund to former enrollees was consistent with insurance industry practice. Id. at 1105.
II. Analysis
We conclude that OPM’s decision was not arbitrary or capricious. OPM acted in conformance with congressional intent and insurance industry practice. Plaintiffs have no equitable interest in any portion of the Blue Cross refund money. We therefore affirm the decision of the district court upholding OPM’s approval of the May 1, 1985 eligibility date.
A. Standard of Review
The district court correctly applied a narrow standard of review to OPM’s action. Id. at 1101. A court should presume an agency’s action to be valid under the highly deferential “arbitrary and capricious” standard of 5 U.S.C. § 706(2)(A) (1976 and Supp. III 1979). Environmental Defense Fund, Inc. v. Costle, 657 F.2d 275, 283 (D.C.Cir.1981). A court cannot substitute its judgment for that of an agency, Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971), and must affirm if a rational basis for the agency’s decision exists. Environmental Defense Fund v. Costle, 657 F.2d at 283. OPM’s decision to accept the May 1, 1985 eligibility date should be upheld if it falls within the permissible range of interpretations. Office of Consumers’ Counsel, Ohio v. F.E.R.C., 783 F.2d 206, 218 (D.C.Cir.1986). As stated previously, judicial review is particularly limited in cases in which plaintiffs challenge an agency’s construction of the statute it is empowered to administer. Chemical Manufacturers Association v. N.R. DC., 470 U.S. 116, 105 S.Ct. 1102, 1108, 84 L.Ed.2d 90 (1985).
Plaintiffs contend that OPM’s decision is not entitled to deference because OPM did not rely on its own judgment, but rather on the OLC opinion, in deciding to accept the May 1, 1985 eligibility date. Brief of Plaintiffs at 19, 30. Plaintiffs also claim that OPM misinterpreted OLC’s construction of § 8909(b) to mean that only refunds to current or future employees were allowed. Id. This court has held that deference “is appropriate only when an agency has exercised its own judgment. When, instead, the agency’s decision is based on an erroneous view of the law, its decision cannot stand.” Phillips Petroleum Co. v. F.E.R.C., 792 F.2d 1165, 1169 (D.C.Cir.1986). See also Prill v. N.L.R.B., 755 F.2d 941 (D.C.Cir.1985).
There is no support for plaintiffs’ contention that OPM did not rely on its own judgment. Plaintiffs only rely on OPM’s Memorandum of Points and Authorities in support of its motion for summary judgment. Brief of Plaintiffs at 30. While OPM’s Memorandum does argue that “provisions in section 8909(b) reinforce OPM’s conclusion that a plan’s contingency reserves can only be used to benefit a current or future enrollee of that plan,” Memorandum at 21, plaintiffs never explain how that statement proves that OPM reached its conclusion based solely on an erroneous view of the OLC opinion. For three reasons, it is more consistent with OPM’s decision making process to assume that OPM took OLC’s opinion into account and then made its own decision. First, on the “Blue Cross and Blue Shield Refund Proposal,” App. 452, which Blue Cross originated (App. 63), OPM solicited comments from a number of sources both within the government, such as the Office of Management and Budget, App. 452, and from the public, not just from OLC. Second OPM did not seek OLC’s advice on whether former en-rollees could participate in the refund, which is the specific point at issue in this case. OPM only requested the opinion of OLC on whether a refund limited to “enrolled” subscribers was valid under existing statutes and regulations. App. 452. Third, OPM based its decision on many factors, such as the forward looking nature of the statutory scheme, the need for unencumbered reserves and general insurance principles, which the OLC opinion of July 9, 1985 did not discuss. App. 452. It is also significant that it was Blue Cross that first tentatively decided to make the refund to those who were enrolled on May 1, 1985 and then OPM requested comments from interested and knowledgeable sources. To find the Blue Cross proposed plan to be valid under these circumstances does not indicate such subservience to others as to constitute a surrender of its own original basic judgment. Parties are not to be determined to have surrendered their judgment when they seek a legal opinion as to the validity of a proposed plan.
Plaintiffs also contend that OPM’s decision is not entitled to deference because OPM relied on a misinterpretation of the relevant statute. Brief of Plaintiffs at 30-32. This contention is based on the assertion that because of OPM’s alleged misreading of the OLC opinion, OPM erroneously concluded that only current enroll-ees, not persons in plaintiffs’ positions, could be eligible for the refund. Memorandum of Points and Authorities at 19-20. The district court’s interpretation of the statute is discussed infra at 11-13. We conclude that OPM’s decision was rational, reasonable and in conformance with the statute.
B. OPM’s Decisional Memorandum
The district court correctly considered OPM’s March 31, 1986 Decisional Memorandum. The court found that the Memorandum “merely illuminates reasons obscured but implicit in the administrative record_ What the pre-decisional record suggests, the post-decisional Memorandum merely confirms.” Bolden, slip op. at 13. The Memorandum provides five reasons for excluding those enrolled in prior contract years from the refund: (1) consistency with the forward-looking nature of the Act, (2) consistency with the language and purpose of the statute, (3) avoidance of any suggestion of an equitable interest in the reserves, (4)administrative convenience, and (5) consistency with general insurance practice.
Plaintiffs contend that the Memorandum should not be considered because it constitutes post hoc rationalization. An agency may not assert post hoc reasoning as the basis for its decision. Burlington Truck Dines, Inc. v. United States, 371 U.S. 156, 168-69, 83 S.Ct. 239, 245-46, 9 L.Ed.2d 207 (1962); accord Citizens to Protect Overton Park, Inc. v. Volpe, 401 U.S. 402, 419, 91 S.Ct. 814, 825, 28 L.Ed.2d 136 (1971). This court has recently held that the record to be considered by the reviewing court “consists of the administrative record compiled by the agency in advance of litigation, not any record thereafter constructed in the reviewing court.” AT & T Information Systems, Inc. v. General Services Administration, 810 F.2d 1233, 1236 (D.C.Cir.1987). The AT & T court emphasized that its holding applied to informal agency proceedings, “bar[ring] introduction of litigation affidavits to supplement the administrative record.” Id.
AT & T is distinguishable from this case. In AT & T the court stressed that the declaration sought to be introduced contained only new explanations and that the agency had provided no rationalizations for its actions at the agency level. AT & T, 810 F.2d at 1236. The AT & T court recognized the “exception allowing agencies to supplement the record to provide ‘such additional explanations of the reasons for the agency decision as may prove necessary.’ ” Id. quoting. Camp v. Pitts, 411 U.S. 138, 142-43, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973). The district court concluded here that OPM had previously considered the reasons given in its decisional Memorandum, and therefore the Memorandum should be admitted to amplify the administrative record. Bolden, 1102 (citing the Administrative Record at 99, 131, 402, 405).
Plaintiffs filed their suit in August of 1985. Although it is unclear exactly when OPM made its final decision to approve the Blue Cross proposal, the annuitant legislation was not passed until February 27, 1986 (100 Stat. 14), and OPM’s approval was apparently contingent upon the amendment to section 8909(b). App. 636. (September 6, 1985 OPM letter to Blue Cross stating: “[i]f legislation authorizing the payments to annuitants is not enacted, this entire proposal to reduce the contributions of subscribers and the government will terminate.”); see also App. 471, 474; National Treasury Employees Union v. FLRA, 712 F.2d 669, 670-71 (D.C.Cir.1983) (agency decision is not final or effective “while it remains tentative, provisional, or contingent, subject to recall, revision or reconsideration by the issuing agency.”). Since plaintiffs filed this action before OPM had made a final decision, OPM was required to submit its decisional Memorandum after the suit had commenced.
Plaintiffs next contend that OPM’s decision to extend refunds to all who were enrolled in a Blue Cross Plan as of May 1, 1985 is inconsistent with its interpretation of § 8909(b) as limiting refunds to current enrollees. Not so; OPM’s reference to current enrollees was meant to contrast principally with prior subscribers who were enrolled during the periods when the surpluses accrued. The date set for determining eligibility properly preceded the date the refund was announced so as to avoid influencing choices of newly-hired employees by an inducement that was not likely to be repeated. App. 63.
OPM was acutely aware that announcing a proposal to refund excess funds to subscribers enrolled as of a predetermined future date would cause a sudden and counterproductive flood of enrollments. It thus applied the statute so as to define enrollees as subscribers enrolled on a specific recent date under the enrollment code for the contract year at the time the refund plan was announced. In addition to avoiding the creation of unusual enrollment incentives, the plan was consistent with OPM’s view that refunds should not be directly related to the period in which the surplus developed, in order to avoid suggesting the existence of a kind of equitable entitlement when in fact the reserves were completely unencumbered. App. 64. As these policy decisions conform to the intent of Congress as expressed in the statute, we find OPM’s approval of the plan to be reasonable.
C. The Statute
Section 8909(b) provides that “contingency reserves may be used to defray increases in future rates, ... to reduce the contributions of enrollees and the Government ... or to increase the benefits provided by the plan_” 5 U.S.C. § 8909(b). Plaintiffs claim that the phrase “contributions of enrollees” could include past as well as present contributions. The district court first looked to the common usage of the statutory terms, Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108-09, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980), and stated that “enrollee” means “a person who is enrolled,” thereby implying that “contributions of enrollees” refers to contributions by presently enrolled subscribers. Bolden, 1103. The court then asserted that the implication that 8909(b) only referred to present contributions was not sufficient to be a Congressional mandate, and that it “would not be a distortion of the language of 8909(b) to read ‘contributions of enroll-ees’ as also including ... past contributions.” Id. at 1103. The court concluded that the statute on its face provides some support for both plaintiffs’ and defendants’ positions, but ultimately held, as do we, that “OPM’s emphasis on ‘current’ contributions is more consistent with the forward-looking tone of the statutory scheme.” Id. at 1103. This interpretative choice is supported by the maxim noscitur a sociis, a word is known by the company it keeps. Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307, 81 S.Ct. 1579, 1582, 6 L.Ed.2d 859 (1961); Neal v. Clark, (5 Otto) 95 U.S. 704, 708-09, 24 L.Ed. 586 (1877). Simmons v. United States, 308 F.2d 938 (5th Cir.1962). Cf. Wong Kam Wo v. Dulles, 236 F.2d 622 (9th Cir.1956). The two other uses authorized by section 8909(b) refer to “future rates,” and “benefits” which could only come in the future. The court agreed with the defendant, Blue Cross, that “[e]ach one of the proper uses for contingency reserves are future-oriented,” and therefore “the legislative context ... supports use of the May 1, 1985 eligibility date.” Id. at 1103. It would be contrary to the statutory theme expressed in that section to construe the remaining single authorized use to relaté back and to create a new benefit out of surplus contributions for those enrolled in prior contract years when they incurred no liability to make up a deficit. It is clear that past enrollees have no obligation to make up a deficit had one occurred, nor any right, statutory or equitable, to participate in the refund.
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3407776-7692 | MEMORANDUM OPINION
PARKER, District Judge.
Plaintiff, Gulf Oil Corporation (Gulf), has filed a First Amended Original Complaint for Declaratory Judgment, Injunction, and Equitable Relief (Amended Complaint) alleging that certain regulations promulgated by the defendant, William E. Simon, as administrator of the Federal Energy Office (FEO), pursuant to the Emergency Petroleum Allocation Act of 1973 (Allocation Act), must be- set aside on the grounds that they violate the provisions of the National Environmental Policy Act (NEPA). Specifically, it is alleged that the defendant failed to prepare and consider an environmental impact statement in connection with the regulations.
Plaintiff has moved for summary judgment on this issue and defendant has countered with a motion to dismiss, or in the alternative, for summary judgment. For the reasons set forth below the Court denies the plaintiff’s motion and grants summary judgment in favor of the defendant.
In its original complaint, filed on February 14, 1974, Gulf contended that regulations issued by the FEO establishing mandatory crude oil allocation among refiners, and pursuant to which Gulf was required to sell crude oil to several of its competitors, were “unfair, inequitable, arbitrary, discriminatory” and therefore invalid. Plaintiff also challenged in the original complaint a ruling of the FEO relating to supplier-purchaser relationships for petroleum products, including motor gasoline, which allegedly resulted in improper interference with a dealer divestment program Gulf had undertaken. The ruling was claimed to be in excess of agency authority.
After full briéfing and oral argument by counsel for the parties on plaintiff’s motion for a preliminary injunction and cross motions for summary judgment a ruling was announced in open Court on March 14, 1974, denying plaintiff’s motions and granting summary judgment for the defendant on the original complaint. At that time plaintiff represented to the Court that it had filed an amended complaint introducing for the first time the NEPA issue. On March 19, 1974 the Court formally entered the Order of Partial Summary judgment denying relief to plaintiff which contained the findings, inter alia, that the challenged regulations were not in excess of agency authority and that Gulf had not exhausted its administrative remedies as to Ruling 1974-3.
In the amended Complaint the thrust of Gulf’s claim is that the oil allocation program represents major federal action which will necessarily have a significant effect upon the quality of the human environment “by shifting the refining of crude oil from larger and more complex and efficient refineries having the capability of refining a wide range of petroleum products, such as motor gasoline, jet fuel, petrochemical feedstocks, and other petroleum products, required to meet environmental standards and needs, to smaller, less efficient refineries not capable of refining such petroleum products, and further discourage the importation in the United States of crude oil required by major refiners such as Gulf to refine such petroleum products required to meet and maintain these environmental standards.”
Simply stated the government’s defense is that the urgent nature of the oil allocation system, as evidenced by the short time span within which the FEO was required to act, relieves the defendant from NEPA’s procedural obligations.
While it is widely acknowledged that the “action forcing” requirements of NEPA (lying at.the heart of which is the preparation, circulation and consideration of an impact statement) are generally mandatory in nature and are not easily avoided, the Court is nonetheless unpersuaded by plaintiff’s contentions.
Counsel for the parties have not furnished, and this Court has not found any case in which the precise question of NEPA applicability to emergency FEO action is specifically addressed. The case of Cohen v. Price Commission, 337 F.Supp. 1236 (S.D.N.Y.1972), however, offers considerable guidance. In that proceeding, NEPA was invoked to contest the validity of the authorization by the Price Commission, pursuant to the Economic Stabilization Act of 1970, of a fare increase on New York City subways and buses. The matter came before District Judge Weinfeld on plaintiffs’ application for a preliminary injunction, and although carefully ruling only that the heavy burden required for the granting of such temporary relief had not been satisfied, the Court’s analysis of one crucial criterion — likelihood of success on the merits — is extremely enlightening on the claim Gulf now pursues. Judge Weinfeld significantly acknowledged the urgent and pressing responsibilities fostered upon the Price Commission in its attempt to stabilize the economy:
“There can be no question that if the purposes of the Economic Stabilization Act are to be achieved, the President or his delegated representatives must be free to act with promptness and dispatch.” 337 F.Supp. at 1240.
After then noting that the requirements of NEPA called for more deliberate and time consuming action the Cohen Court expressed doubt that Congress could have intended the Price Commission to be bound and potentially stymied by the mandates of NEPA. It was cautioned that such compliance might “fender impossible the achievement of that program.” 337 F.Supp. at 1242.
The Cohen case is sufficiently analogous to the matter sub judice and this Court adopts its reasoning as the basis for a final determination. Section 4(a) of the Allocation Act obligated the FEO to promulgate mandatory oil allocation regulations within 15 days after the emergency legislation’s enactment. Fifteen days thereafter the regulations became effective. Establishment of such a deadline makes it abundantly clear that Congress had intended the FEO administrator to proceed expeditiously. Compliance with NEPA, on the other hand, would disarm the FEO of its ability and authority to take necessary action with the required degree of speed. In light of the Congressional demand that immediate measures be adopted the Court feels that the inherent tension between NEPA and the Allocation Act, at least as it involves the specific regulations here in issue, must be resolved on balance with a finding that the FEO was not required to draft an environmental impact statement. Gulf has sought much comfort in certain guidelines issued by the Council on Environmental Quality (CEQ) which require that when an agency finds it necessary to take action “without observing the provisions of these guidelines concerning minimum periods for agency review and advance availability of environmental statements, the Federal agency proposing to take the action should consult with the Council about alternative arrangements.” 38 Fed.Reg. 20566. This provision, how,ever, which pertains to the circulation of drafts, is apparently applicable to emergency action needed after an impact statement has been compiled. It does not affect time and effort expended in its actual preparation. In light of the exhaustive analytical content required of impact statements, it would be illogical, indeed virtually impossible, to demand a statement in this instance.
The Court will enter an Order denying plaintiff’s motion' for summary judgment, granting the government’s motion for summary judgment and dismissing the amended complaint.
. Pub.L. 93-159.
. 42 U.S.C.A. § 4321 et seq.
. 39 Fed.Reg. 1924 et seq. (Jan. 14, 1974).
. Complaint j[ 3.
. Ruling 1974-3.
. The Independent Refiners Association of America was granted leave to appear amicus curiae and filed a brief urging the Court to uphold the FEO regulations.
. Amended Complaint U 1.
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1292864-17118 | CHOY, Circuit Judge:
Appellants filed a complaint alleging violations of sections 10(b) and 14(e) of the Securities Exchange Act of 1934 (the Act), 15 U.S.C. §§ 78j(b), 78n(e), and Rule 10b-5 of the Securities and Exchange Commission (SEC) regulations, 17 C.F.R. § 240.10b-5; fraud; and breach of a fiduciary duty by Teledyne and several of its directors. The district court granted summary judgment in favor of appellees. We affirm.
I. Facts
In connection with Teledyne’s 1969 acquisition of Financial Indemnity Corporation and Foremost Insurance Service, appellant G. Kenneth Vaughn (Kenneth) received 39,-200 shares of $3.50 convertible stock of Teledyne. These shares were subject to redemption by Teledyne on or after June 30, 1971 for $100 a share or, at Kenneth’s option, the shares could be converted into Teledyne common stock at a ratio of four shares of Teledyne to one share of the convertible. Appellants allege that Kenneth was advised by appellee Henry E. Singleton, Chairman of the Board of Directors and Chief Executive Officer of Teledyne, that Teledyne would not call the stock in June 1971, when first possible under the contract.
On June 28, 1971 Teledyne called the $3.50 convertible stock, giving holders of the stock until July 28, 1971 to have the stock redeemed or to convert the stock. Kenneth allegedly attempted to contact Singleton, seeking advice as to which of the two options was better. Unable to reach Singleton, he spoke with a Themistocles Michos, then Secretary of Teledyne, who is not a party to this action. Michos allegedly told Kenneth that most of the holders of the convertible stock were “redeeming” it. He also allegedly told Kenneth that, if Kenneth “redeemed” the stock and later (after talking with Singleton) decided that he wanted to convert to Teledyne common stock, the redemption could be unwound.
Kenneth sold 18,100 shares of the convertible stock to Teledyne. He had transferred 18,900 other shares to his brother, appellant R. Eugene Vaughn (Richard). Richard sold 14,000 shares to Teledyne and converted the remaining 4,900 shares into common stock. Singleton allegedly later refused to unwind the redemptions though Kenneth repeatedly asked him to do so within the next two months.
In September 1972 Teledyne made a tender offer to purchase at least one million shares of its common stock at $20 per share; 8.9 million shares were tendered and accepted.
In December 1973 Teledyne made another tender offer for a minimum of four million shares at $14 per share; 1.6 million shares were accepted. On May 31, 1974 Teledyne offered to exchange 10% subordinated debentures in the face amount of $20 for at least one million of its shares; 3.8 million shares were offered and exchanged. A similar offer was made in December 1974; 1.9 million shares were offered and exchanged for 10% subordinated debentures in the face amount of $16.
In April 1975 Teledyne made a third tender offer for a minimum of one million shares; 3.6 million shares were offered and accepted at a price of $18 per share.
In February 1976 Teledyne made a fourth tender offer. 2.5 million shares of stock were offered and accepted at a price of $40 per share.
During the period from June 1971 to November 1976, the number of outstanding shares of Teledyne common stock decreased from 38 million to 11 million. Teledyne’s earnings, on the other hand, increased dramatically in 1975 and 1976. Other than appellee George A. Roberts who exercised an option to purchase 34,778 shares of Teledyne in 1975, none of the individual appellees purchased any Teledyne stock between 1971 and 1976. Nonetheless, the aggregate percentage of stock owned by these individuals increased from 3.94% in 1971 to 10.49% in 1975.
At various times between October 1971 and December 1973, Richard and appellant Marilyn Anne Swindall (Marilyn), Kenneth’s daughter, sold Teledyne common stock in the market. Marilyn sold 608 shares at prices not exceeding $26 per share. Richard sold 20,794 shares at an average price of $11 per share.
Kenneth tendered 352 shares, and his son, appellant Eugene W. Vaughn, tendered 1,134 shares in response to the April 1975 tender offer. In November 1975 appellant Glenn A. Vaughn (also Kenneth’s son) sold in the market 200 shares of Teledyne common stock at a price of approximately $21.75 per share.
In November 1976 appellants filed a complaint against appellees Teledyne, Singleton, Roberts, George Kozmetsky, Robert C. Jackson, Arthur Rock, and Claude E. Shannon. All of the individual appellees were members of the Board of Directors at Teledyne. The complaint was amended in February 1977. The complaint alleged violations of §§ 10(b) and 14(e) of the Act and Rule 10b-5; fraud; and breach of a fiduciary duty in furtherance of “a plan and conspiracy to obtain for [appellees] increased control of TELEDYNE, to exclude numerous of its public shareholders from participation in TELEDYNE’s future equity growth and profitability and to utilize the assets of TELEDYNE to accomplish their illegal goals.”
After substantial discovery, the district court granted summary judgment in favor of Teledyne and the directors, concluding that there had been no violation of the securities laws, that there was no breach of fiduciary duty, and that the statute of limitations barred recovery either from the alleged misrepresentations or from the failure to disclose the alleged plan or financial projections.
II. Summary Judgment
Summary judgment is properly awarded where there is no genuine issue of material fact or where, viewing the evidence and the inferences drawn therefrom in the light most favorable to the party opposing the motion, the moving party clearly is entitled to prevail as a matter of law. Smith v. Gross, 604 F.2d 639, 641 (9th Cir. 1979).
A. Statute of Limitations
As the parties state, the three-year statute of limitations of Cal.Code Civ.Proc. § 338(4) is applicable to this action. See Rochelle v. Marine Midland Grace Trust Co., 535 F.2d 523 (9th Cir. 1976); United California Bank v. Salik, 481 F.2d 1012 (9th Cir.), cert. denied, 414 U.S. 1004, 94 S.Ct. 361, 38 L.Ed.2d 240 (1973). Where more than three years have elapsed between the time that the wrong allegedly was perpetrated and the filing of the action, the plaintiff has the burden of proving facts that would toll the statute. Rochelle v. Marine Midland Grace Trust Co., 535 F.2d at 531-32.
1. Misrepresen ta tions
Appellants allege that sometime in July 1971, Michos, then Secretary of Teledyne, misrepresented to Kenneth and Richard that most of the holders of the convertible stock were “redeeming” it and that such a redemption later could be unwound and changed into a conversion to Teledyne common stock. Appellants did not file suit until November 1976, more than five years after the misrepresentations allegedly were made.
The district court concluded that Kenneth and Richard were barred from recovery for the alleged misrepresentations because, by July 30, 1971, they “had sufficient facts to know that Teledyne had breached representations allegedly made to them with respect to the redemption of the $3.50 Preferred Stock.” We agree that recovery is barred. Appellants admit that by September 1971 Singleton had refused to unwind the stock redemption at least twice, and they allege no facts that toll the statute of limitations. The latest possible date that the “misrepresentation” claim for relief could have accrued was in September 1971, more than three years before this action was filed. Thus, appellants cannot recover for any damages caused by the alleged misrepresentations regarding the redemption of the preferred stock.
2. Conspiracy
Appellants’ main contention is that appellees had a plan to reduce the number of outstanding shares of Teledyne common stock, thereby increasing their proportionate control of Teledyne and their earnings. As evidence of this scheme appellants point to the frequency of Teledyne’s tender offers and other acquisitions of its own stock, at a substantial cost; the reduction of outstanding shares from approximately 38 million shares in 1971 to less than 11 million shares in 1976; the increase in the net income per share from $1.48 in 1971 to $10.48 in 1976; and the increase in the percentage of stock owned by appellees from 3.94% in 1971 to 10.49% in 1975.
The district court found that by October 18, 1972 (after 8.9 million shares were accepted in the first tender offer) “plaintiffs had sufficient facts to determine that the defendants had purportedly failed to disclose certain facts to them with respect to [the] alleged scheme and conspiracy,” and concluded that recovery was barred by the statute of limitations. It is true that if the appellants knew sufficient facts to put them on inquiry notice before November 19, 1973, any claim for relief from stock transactions before that date would be barred by the statute of limitations. See Robuck v. Dean, Witter & Co., No. 77-1841 (9th Cir. March 7, 1980); Rochelle v. Marine Midland Grace Trust Co., 535 F.2d at 531. However, we cannot say as a matter of law that they had such facts. One tender offer in 1972, even though 8.9 million shares were offered and accepted, is insufficient to suggest that appellees had a plan to acquire control of Teledyne by a series of tender offers. Adding knowledge of the call of the convertible stock does not alter our conclusion. Appellants at least raised an issue of material fact as to when they were put on inquiry notice.
Thus, the district court should not have ruled, on summary judgment, that these claims were time barred. This error was harmless, however, because we agree that as a matter of law appellants had no valid claim. See Section B infra.
B. Issues of Material Fact
Appellants claim that appellees conspired to manipulate Teledyne stock through a series of tender offers and stock acquisitions. They contend that there are issues of material fact as to whether appellees had such a plan and whether appellees had any business or financial projections that they were under a duty to disclose.
The district court found that “[t]here was no plan or conspiracy between June 1971 and February 1976 to effect a decrease in the outstanding shares of Teledyne,” that “Teledyne did not prepare or possess any projections or forecasts of its consolidated earnings for the years 1971 through 1976,” and that none of the appellees had made any untrue statements, failed to disclose any material facts, engaged in any manipulative acts, or employed any scheme to defraud. Thus, the lower court concluded that appellees did not violate any securities law or breach any fiduciary duty. We agree that appellants have failed to raise any genuine issues of material fact on these questions and that appellees are entitled to prevail as a matter of law. Therefore, summary judgment was appropriate.
1. Securities Violations
Section 10(b) of the Act makes it unlawful “[t]o use or employ, in connection with the purchase or sale of any security . ., any manipulative or deceptive device or contrivance” in contravention of SEC rules and regulations. 15 U.S.C. § 78j(b). Rule 10b-5 states:
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
17 C.F.R. § 240.10b-5 (1979). Section 14(e) is generally the same as § 10(b) and Rule 10b-5, but is applicable specifically to tender offers rather than other purchases or sales of securities. Compare 15 U.S.C. § 78j(b) and 17 C.F.R., § 240.10b-5, with 15 U.S.C. § 78n(e); see Gulf & Western Industries, Inc. v. Great Atlantic & Pacific Tea Co., Inc., 476 F.2d 687, 696 (2nd Cir. 1973).
A 10b-5 action can be maintained only if the alleged conduct is “manipulative or deceptive” within the meaning of the statute. Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 474, 97 S.Ct. 1292, 1301, 51 L.Ed.2d 480 (1977). “Manipulative” has become almost a term of art when used in connection with securities markets and “refers generally to practices, such as wash sales, matched orders, or rigged prices, that are intended to mislead investors by artificially affecting market activity.” Id. at 476, 97 S.Ct. at 1302 (emphasis added).
Appellants argue that the frequency, number, and size of tender offers and stock acquisitions by Teledyne of its own stock and the resultant change in earnings and proportions of control evidenced a conspiracy, a plan to obtain for appellees increased control of Teledyne, in violation of the Act. Appellants further argue that such a plan is a material fact and that the mere failure to disclose the plan — and any financial or other projections made as part of the plan — violates the Act.
a. Scheme to Defraud
Cases where intent is a primary issue generally are inappropriate for summary judgment unless all reasonable inferences that could be drawn from the evidence defeat the plaintiff’s claims. Calnetics Corp. v. Volkswagen of America, Inc., 532 F.2d 674, 683-84 (9th Cir.), cert. denied, 429 U.S. 940, 97 S.Ct. 355, 50 L.Ed.2d 309 (1976). However, in opposing a motion for summary judgment the plaintiff must present significant probative evidence relevant to the issue of intent, e. g., the time, place, or nature of the alleged fraudulent activities; mere conclusory allegations are insufficient to require that the motion for summary judgment be denied. Bosse v. Crowell Collier and Macmillan, 565 F.2d 602, 611 (9th Cir. 1977); see Fed.R.Civ.P. 56(e).
Any tender offer or acquisition by a company of its own stock obviously would reduce the number of outstanding shares and increase the proportionate control and earnings of all shareholders who retained their stock (not just the control and earnings of the directors). It is not a violation of any securities law to fail to disclose a result that is obvious even to a person with only an elementary understanding of the stock market. Alabama Farm Bureau Mutual Casualty Co., Inc. v. American Fidelity Life Ins. Co., 606 F.2d 602, 611 (5th Cir. 1979). Nor is it necessarily a violation of the securities law to have a plan to make a stock acquisition with such a result, unless the plan includes practices that are intended to mislead or to defraud investors. Id. at 612-14; Nelson v. Serwold, 576 F.2d 1332 (9th Cir.), cert. denied, 439 U.S. 970, 99 S.Ct. 464, 58 L.Ed.2d 431 (1978).
The undisputed facts in this case establish that there was a series of six major stock acquisitions in less than four years, that more than 22 million shares of Teledyne common stock were purchased by the corporation, and that those shareholders retaining their stock have acquired a greater proportion of control of the corporation as well as higher per share earnings (a result that is obvious given the first two facts). Even if these facts alone were sufficient to raise an inference that appellants had a long-range plan, they do not raise the slightest inference that the plan was unlawful or in any way intended to defraud investors.
In fact, each of the individual appellees has denied the very existence of a plan, thus adequately rebutting the allegations of conspiracy. Appellants, on the other hand, have failed “to come forward with specific, factual support of [their] allegations of conspiracy,” ALW, Inc. v. United Air Lines, Inc., 510 F.2d 52, 55 (9th Cir. 1975). The mere fact that the stock transactions occurred cannot defeat a, motion for summary judgment in the absence of “any significant probative evidence tending to support the complaint.” First National Bank v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968); Mutual Fund Investors v. Putnam Management Co., 553 F.2d 620, 624 (9th Cir. 1977).
We agree with the district court that from the undisputed facts presented it would not be reasonable to find a scheme to defraud that violates § 10(b) or Rule 10b-5(a). Thus, summary judgment was appropriate on this claim for relief.
b. Nondisclosure
Material facts must be disclosed unless some doctrine limits the duty to disclose. Zweig v. Hearst Corp., 594 F.2d 1261, 1266 (9th Cir. 1979). The test for materiality is whether there is a substantial likelihood that a reasonable investor would consider the fact important in making an investment decision. Id. It is a violation of the securities law to omit to state a material fact if it is “necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.-10b-5(b) (1979); 15 U.S.C. § 78n(e).
(1) Purpose of Stock Acquisitions
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619713-8563 | LEDERLE, District Judge.
1. This trade mark infringement and unfair competition case is presently before the court for decision on the accounting under interlocutory judgment entered January 21, 1943, on Supreme Court mandate following an opinion reported in 316 U.S. 203, 62 S.Ct. 1022, 86 L.Ed. 1381, modifying, as to the form of provision governing accounting procedure, the interlocutory judgment affirmed in 6 Cir., 119 F.2d 316.
The said judgment on mandate required the defendant to account to the plaintiff for profits unlawfully derived from sales made directly or indirectly by the defendant after May 19, 1933, of rubber heels bearing a red or reddish circular mark appearing upon the face portion thereof, and such damages beyond the loss of profits as might be shown by plaintiff on the accounting, and continued in effect the provision of the judgment appealed from, to the effect that the matter of costs await the disposition of the accounting herein.
2. This case was instituted November 28, 1934, to restrain infringement and unfair competition of plaintiffs registered trade mark No. 36,471, and for the recovery of profits and damages resulting therefrom. Briefly, the plaintiff’s trade mark consists of a red circular mark embedded in the center of heels attached to footwear sold by plaintiff. On December 29, 1939, this court adjudged the trade mark valid and infringed by defendant’s sale of separate replacement heels bearing a red or reddish circular mark embedded upon the face portion of the heels, and ordered a restraint and accounting in connection with these sales. Plaintiff appealed from this adjudication, claiming error in the provision for accounting procedure, in the provision as to the matter of costs, and in the court’s refusal to sustain plaintiffs claims for relief on heels sold by defendant which bore other types of marks. This adjudication was affirmed on appeal; 6 Cir., 119 F.2d 316. In granting plaintiff’s request for certiorari as to the accounting procedure, the Supreme Court refused to review the question whether, in view of the restraint of further use of the infringing red or reddish mark, the defendant should be permitted to continue selling heels bearing marks of other types or colors, which plaintiff contended had acquired the same significance of origin because of defendant’s mixing and side by side association with goods bearing the infringing marks, plaintiff claiming error in the finding of the District Court, as affirmed by the Circuit Court of Appeals, that the only unlawful actions of defendant were its sales of “Red Crusader” and “Red Surefoof” heels, exemplified by plaintiff’s Exhibits 79 and 54, respectively.
3. At the time of entering judgment on the mandate, an order was entered requiring defendant to file with the court a verified statement of account in accordance with the judgment. Defendant filed a detailed statement on April 12, 1943, showing a net profit of $6,047.30 realized from the sale of “Red Crusader” and “Red Sure-foot” h-cels, exemplified by plaintiff’s Exhibits 79 and 54, respectively, which had been shipped to defendant between April 1, 1933 and June 30, 1933, and between July 1, 1934 arsd November 30, 1934, respectively. After hearing objections, and further time being granted for investigation, a supplemental statement was filed by defendant on March 31, 1945, showing a net profit of $912.98 realized from the sale of “Red Crusader” heels since defendant first started selling heels with red marks, namely, those shipped to defendant between January 20, 1933 and March 31, 1933. These statements have been accepted by plaintiff as the basis for its request for the award of profits in relation to its Exhibits 79 and 54.
Plaintiff also contended that it was entitled to a further recovery, and time was granted for further investigation and to permit the making of a further accounting record. ' During 1946, an accounting hearing lasting several days was held, and the accounting* was terminated on July 8, 1946. The matter has been exhaustively argued and briefed.
4. Plaintiff claims judgment in the amount of $141,558.76, plus interest and costs, as follows:
(a) Profits of $6,960.28 realized from defendant’s sale of “Red Crusader” and “Red Surefoot” heels, exemplified by plaintiff’s Exhibits 79 and 54, respectively, plus interest from date of notice of infringement;
(b) Profits of $12,460 realized from defendant’s sale of heels bearing orange inserts, plus interest from date of notice of infringement;
(c) Profits of $20,570 realized from defendant’s sale of heels bearing beige, yellow and green inserts, which were mixed with heels bearing red and orange inserts, plus interest from date of notice of infringement ;
(d) Damages of $101,568.48, being three times $33,856.16, the total litigation expense and counsel fees paid by plaintiff to its counsel from May 25, 1933 to November 25, 1945, plus interest from date of judgment.
(e) That plaintiff be allowed to tax against defendant costs which were not included in item (d).
5. Defendant contends that plaintiff is entitled to ho recovery.
6. There being no dispute between the parties as to defendant’s total selling prices of infringing heels nor as to items deductible as costs from defendant’s selling prices in arriving at profits, as shown by said statements filed by defendant, an analysis of these computations would serve no useful purpose.
The profits unlawfully derived by defendant from sales made directly or indirectly by defendant after May 19, 1933, of rubber heels bearing a red or reddish circular mark appearing on the face portion thereof was $6,960.28, which was realized from the sale of 43,670 dozen pairs of “Red Crusader” heels, exemplified by plaintiff’s Exhibit 79, manufactured and shipped to defendant by Essex Rubber Company between January 20, 1933 and June 30, 1933, and 19,445 dozen pairs of “Red Surefoot” heels, exemplified by plaintiff’s Exhibit 54, manufactured and shipped to defendant by O’Sullivan Rubber Company between July 1, 1934 and November 30, 1934.
7. Defendant has not shown that its infringement of plaintiff’s trade mark had no cash value to defendant in sales specified in finding 6.
8. It is the law of this case that heels sold by defendant of types other than those specified in finding 6 did not infringe or unfairly compete with plaintiff’s trade mark and business, and did not acquire the same significance of origin because of defendant’s mixing and side by side association for sale, with heels specified in finding 6. Sales of such other types of heels did not result directly or indirectly from defendant’s sale or offering for sale of heels specified in finding 6.
9. Defendant’s infringement was neither deliberately wilful nor in bad faith. The harshest characterization that can be placed on defendant’s actions prior to this suit is that it regarded plaintiff’s claim of infringement as lacking in merit, although upon plaintiff’s notice of claimed infringement in May, 1933, defendant offered for the sake of business amity to notify its supplier to use a color unlike red on the heel it was then selling, the Essex “Red Crusader” heel, exemplified by plaintiff’s Exhibit 79. Defendant so instructed its supplier of these heels, and within a month shipment of “Red Crusader” heels to defendant ceased. Plaintiff next complained in February, 1934, that other heels sold by defendant infringed its trade mark. Plaintiff instituted this action in November, 1934. Defendant contested in good faith all claims of infringement and unfair competition charged herein, its defense was sustained in part, and its defense on the limited relief granted to plaintiff was reasonably debatable.
10. There were no damages suffered by plaintiff from trade mark infringement or unfair competition beyond the loss of profits specified in finding 6.
Conclusions of Law
1. In case of trade mark infringement and unfair competition, the trade’ mark owner is entitled to recover the profits to be accounted for by the infringer, and in addition any damages sustained as a result of the defendant’s unlawful acts. 15 U.S.C.A. § 99.
2. Where, as here, it appears that a trade mark infringer has derived profits of $6,960.28 from the sale of goods bearing infringing marks after notice of infringement, and the infringer has not shown that his infringement had no cash value in sales made by it, the trade mark owner is entitled to such profits. Mishawaka Rubber etc. Mfg. Co. v. Kresge, 1942, 316 U.S. 203, 62 S.Ct. 1022, 86 L.Ed. 1381.
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378024-20042 | FLAUM, Circuit Judge.
Petitioner Jack Riner appeals from the district court’s denial of his petition for a writ of habeas corpus. Riner challenges his conviction for first degree murder on the ground that he was denied the right to confront and cross-examine witnesses against him. The state of Indiana contends that he waived his right to raise the confrontation issue on appeal as a result of his failure to raise the issue at trial or on direct appeal in the state courts. For the reasons set forth below, we reverse the denial of the writ of habeas corpus.
I.
The petitioner’s conviction for first degree murder and sentence of life imprisonment arose from the events that transpired in the early morning hours of August 10, 1970, during the course of a burglary at Gibson’s Trading Post near Belleville, Indiana. On that morning, Edward Gibson and his brother Harold Gibson, the co-owners of the trading post, drove to their store upon hearing an alarm in their homes, which was connected to the store’s burglar alarm. The brothers positioned themselves at opposite ends of the store. As Harold started walking toward the store, he was shot in the leg. He testified that he proceeded to shoot at a fleeing figure going over a fence. When Harold went to the front of the store, he found his brother Edward holding a gun and yelling that he had also been shot. Upon seeing a man or boy running across a neighboring yard, Harold fired a few shots at the person. Harold saw a figure running across the road, got back into his car, drove across the road, and caught another glimpse of the man running behind a house. Harold was unable, however, to identify the persons that he had seen that morning. Edward later died as a result of the shooting.
Petitioner Jack Riner, a fifteen-year-old, his older brother Ronald, and their uncle Wayne Evans were charged with first degree murder as a result of the killing, which occurred during the course of a felony. The charges against Ronald Riner were subsequently dismissed. The petitioner and Evans were represented by the same attorney at their joint trial. Ronald testified as a state’s witness at the trial, relating his version of the events on the morning of August 10, 1970, and recounting a conversation that he had had with Evans during their confinement in jail awaiting trial.
At the conclusion of the jury trial during which neither Evans nor the petitioner testified, both the petitioner and his uncle were convicted and sentenced to life imprisonment. The Indiana Supreme Court affirmed the petitioner’s conviction on direct appeal in Riner v. State, 258 Ind. 428, 281 N.E.2d 815 (1972). The petitioner was represented on this appeal by the same attorney who had represented him and his uncle at trial. On March 29, 1973, the petitioner filed his first petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 (1982) in the United States District Court for the Northern District of Indiana. This petition was denied on April 3, 1974. On March 1, 1976, the petitioner filed a petition for post-conviction relief in state court, raising for the first time his claim that he had been denied the right to confront and cross-examine witnesses against him. His petition was denied on September 24, 1976. The Indiana Supreme Court affirmed the denial of post-conviction relief in Riner v. State, 271 Ind. 578, 394 N.E.2d 140 (1979). On February 20, 1982, the petitioner filed his second petition for a writ of habeas corpus, in the United States District Court for the Southern District of Indiana, but that petition was dismissed without prejudice for want of jurisdiction and for failure to exhaust state remedies.
On April 15, 1982, the petitioner filed pro se the present petition for a writ of habeas corpus in the United States District Court for the Southern District of Indiana. In this petition, the petitioner alleges that: (1) he was denied his right to confront witnesses in state court, (2) the confrontation issue was not raised at trial or on direct appeal because the petitioner’s counsel had a conflict of interest due to his dual representation of the petitioner and Evans, and (3) the state waived its waiver defense by responding to the merits of the petitioner’s claim in the state post-conviction proceeding. The district court denied the petitioner’s request for relief on March 3, 1983. The district court held that while the petitioner had exhausted his state court remedies, he had failed to show the necessary cause and prejudice to overcome waiver of the confrontation claim by his failure to raise it at trial or on direct appeal.
On appeal, the petitioner asserts that his right to confront and cross-examine witnesses was denied in Indiana state court and that he has not waived his right to address the confrontation issue on appeal.
II.
A. Waiver of Right to Address Confrontation Issue on Appeal
According to 28 U.S.C. § 2254(a), a state prisoner is entitled to habeas corpus relief in a federal court only if he is being held “in custody in violation of the Constitution or laws or treaties of the United States.” Engle v. Isaac, 456 U.S. 107, 119, 102 S.Ct. 1558, 1567, 71 L.Ed.2d 783 (1982). Before determining whether a state prisoner’s rights have been violated, however, a court must decide whether the prisoner has waived his claim for federal habeas corpus relief by failing to comply with such state procedural rules as those requiring a defendant to object at trial or to raise an issue on direct appeal. Id. at 126 n. 28, 102 S.Ct. at n. 28; Williams v. Duckworth, 724 F.2d 1439, 1442 (7th Cir.1984), cert. denied, — U.S.-, 105 S.Ct. 143, 83 L.Ed.2d 82 (1984). The Supreme Court has observed that a federal court’s decision whether to examine a state prisoner’s constitutional claims when the prisoner has failed to abide by applicable state procedural rules implicates two types of concerns: (1) Congress’s interest in providing a federal forum for the vindication of state prisoners’ constitutional rights, and (2) the state’s interest in the integrity of its procedural rules and in the finality of its judgments. Reed v. Ross, — U.S.-, 104 S.Ct. 2901, 2907, 82 L.Ed.2d 1 (1984). The courts have noted that principles of comity require a state prisoner to present his claims to the appropriate state tribunal before seeking relief in federal court, thereby giving the state court the first opportunity to correct a constitutional violation. See, e.g., United States ex rel. Spurlark v. Wolff, 699 F.2d 354, 356 (7th Cir.1983).
Although recognizing the state’s interest in the integrity of its procedural rules, the Supreme Court has consistently held that federal courts have the power under 28 U.S.C. § 2254 to look beyond a state procedural forfeiture in order to examine a state prisoner’s claim that his constitutional rights have been violated. Reed v. Ross, 104 S.Ct. at 2907. The Court has held that when a procedural default by a state prisoner bars litigation of a constitutional claim in the state courts, the prisoner may obtain federal habeas corpus relief by showing cause for and actual prejudice from the default. Engle v. Isaac, 456 U.S. at 129, 102 S.Ct. at 1572; Wainwright v. Sykes, 433 U.S. 72, 87, 97 S.Ct. 2497, 2506, 53 L.Ed.2d 594 (1977). In formulating the cause and prejudice standard, the Court has declined to give the term “cause” precise content because of the numerous reasons for an attorney’s failure to comply with a procedural rule and the limitless array of contexts in which a procedural default could occur. Reed v. Ross, 104 S.Ct. at 2909. The Court has noted that the terms “cause” and “actual prejudice” are not rigid concepts, but rather take their meaning from principles of comity and finality. Engle v. Isaac, 456 U.S. at 135, 102 S.Ct. at 1575. Thus, these terms may yield in cases in which it is necessary for a court to correct a fundamentally unjust incarceration. Id.
In the present case, the respondent argues that the petitioner Jack Riner waived his Sixth Amendment confrontation claim by failing to make a contemporaneous objection during trial and by failing to raise the confrontation issue on direct appeal. The petitioner did not raise the confrontation issue until he filed his petition for post-conviction relief. In examining his pe tition, the state circuit court held that the petitioner had waived the confrontation issue by not raising it on direct appeal. The circuit court also concluded that if the confrontation issue had been raised on direct appeal, the Indiana Supreme Court would likely have granted the petitioner a new trial based on a violation of the petitioner’s Sixth Amendment right to confront witnesses under United States v. Bruton, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968). Upon petitioner’s appeal of the circuit court’s denial of post-conviction relief, the Indiana Supreme Court concluded that the petitioner had waived his right to raise the confrontation issue in his petition for post-conviction relief under the Indiana post-conviction relief statute by not raising the issue at the time of the original trial or on direct appeal. Riner v. State, 271 Ind. 578, 581-82, 394 N.E.2d 140, 143-44 (1979). Since the petitioner has therefore waived his right to raise the confrontation issue in the Indiana courts by failing to raise the issue at trial or on direct appeal, we must determine whether the petitioner has shown cause for and actual prejudice from the default, thereby permitting us to overcome the waiver argument and to examine the petitioner’s claim on the merits.
The petitioner claims that the confrontation issue was not raised at trial or on direct appeal because the same attorney represented him at both levels. We hold that dual representation of co-defendants at trial and representation of one or more of these defendants by that same attorney on direct appeal can meet the cause element of the cause and prejudice standard under certain circumstances. In a case where an individual is represented by the same counsel at both the trial and appellate levels, there exists the possibility that the attorney might be inhibited from raising on appeal issues stemming from the defendants’ conflicting defenses because to do so might cast doubt on the effectiveness or propriety of the attorney’s dual representation at trial. In several cases where a petitioner has been represented by different attorneys at trial and on appeal and where we have denied habeas corpus relief, we have hinted that the outcome of the case may have been different if the same attorney had represented the petitioner at both the trial and on direct appeal since the same attorney might be reluctant to raise issues on appeal that might suggest his ineffectiveness at trial. United States ex rel. Devine v. DeRobertis, 754 F.2d 764, 766-68 (7th Cir.1985); Dently v. Lane, 712 F.2d 1172, 1175-78 (7th Cir.1983); United States ex rel. Williams v. Franzen, 687 F.2d 944, 950 n. 11 (7th Cir.1982). Since it would be most difficult if not professionally awkward to require a lawyer to argue on appeal his own ineffectiveness in not raising at trial issues relating to his dual representation, such as the confrontation question presented here, we conclude that identity of trial and appellate counsel can constitute sufficient cause to meet the first element of the cause and prejudice standard.
In addition to showing cause for his failure to comply with state procedural rules, the petitioner must also show actual prejudice suffered as a result of his failure to raise an issue at trial or on direct appeal. Engle v. Isaac, 456 U.S. at 129, 102 S.Ct. at 1572; Wainwright v. Sykes, 433 U.S. at 87, 97 S.Ct. at 2506. Although noting that it would not precisely define the terms “cause” and “prejudice,” the Court in Wainwright v. Sykes held that the evidence presented at trial of the petitioner’s guilt in that case was so substantial as to negate any possibility of actual prejudice resulting to the petitioner from the admission of his inculpatory statement. Wainwright v. Sykes, 433 U.S. at 87, 91, 97 S.Ct. at 2506, 2508. In the present case, we must determine whether the petitioner was prejudiced as a result of his attorney’s failure to raise the confrontation issue at trial or on direct appeal, when the effect of that failure was the admission of Ronald’s testimony as to his conversation with Evans in jail.
Ronald Riner testified as a prosecution witness at the joint trial of his brother and uncle. Based on his personal knowledge, Ronald related that he had been driving around with his uncle and brother in Evans’s car in the early morning hours of August 10, 1970. Ronald stated that he had been sleeping in the back seat when the car stopped and Evans got out and walked back to the trunk. Ronald related that Evans removed a plastic bag from the trunk that had an object resembling the butt of a rifle sticking out of it and proceeded to ask Jack if he would go with him. Ronald stated that he lay back down in the back seat until he heard some shooting and saw several cars pulling up to a building. Ronald stated that he got out of the car and saw someone, whom he believed to be Evans, running first toward the car and then toward the town of Plainfield. Ronald testified that he became frightened and ran into a field.
In addition to his testimony based on his personal knowledge, Ronald testified to a conversation that he had had with his uncle while in jail awaiting trial. Ronald testified that his uncle had told him that he had instructed Jack to be a lookout on the morning of August 10 while Evans tried to force open the door of the trading post. Ronald also testified that his uncle said that he had been shot at by someone and had returned the fire. Evans also told Ronald that as he was running east, he was confronted by another man who fired at him, and that Evans shot this man. Before Ronald testified as to that conversation with Evans, the defendants’ attorney objected as to Jack Riner on unspecified grounds. The state trial court sustained the objection as to Jack Riner and admitted Ronald’s subsequent testimony only as to Evans.
We hold that the admission of Ronald’s testimony as to his conversation with Evans resulted in actual prejudice to the petitioner. The petitioner was prejudiced because the admission of this testimony was the only evidence before the jury of the petitioner’s involvement in aiding and abetting the burglary and murder. For example, Evans stated to Ronald that Jack had served as a lookout for Evans, thereby providing support for the charge that Jack had facilitated the burglary and murder. In contrast to this damaging testimony, Ronald’s personal testimony as to the events transpiring on August 10, 1970, merely revealed that Jack had been asked by his uncle to go with him, not that Jack had actively aided and abetted his uncle in the ensuing crimes. There was no direct evidence presented at trial that Jack was even aware of what his uncle was planning to do. Even Harold Gibson’s testimony that he had seen two persons fleeing the scene following the shooting did not establish that one of those persons was Jack. Since Ronald himself testified that he had become frightened when the shooting began and had fled the scene, the fleeing persons that Harold Gibson had seen might easily have been Ronald and his uncle.
Furthermore, the objection by defense counsel on unspecified grounds to the admission of Ronald’s testimony regarding his conversation with Evans was insufficient to reduce or eliminate the substantial prejudice that the petitioner suffered as a result of the admission of the testimony. As will be discussed below, the admission of this testimony was a clear Bruton violation. Thus, the judge’s statement to the jury to disregard the testimony as far as Jack was concerned could not erase the extremely prejudicial impact that the statement might have had on the jury. In cases such as the present one where there is not substantial evidence apart from the excludable testimony to implicate a petitioner in a crime, the negative effect on the jury of the admission of the testimony and the resultant prejudice suffered by a petitioner cannot be eradicated.
In sum, we hold that the petitioner has shown both the cause and actual prejudice elements necessary to overcome his waiver of the confrontation issue in the state courts.
B. Violation of Right to Confront and Cross-Examine Witnesses under the Sixth Amendment
Since we have concluded that the petitioner has met the cause and actual prejudice standard, we will proceed to determine on the merits whether the petitioner has shown that his Sixth Amendment right to confront and cross-examine witnesses was violated. The petitioner argues that this right was violated when a statement made by a nontestifying co-defendant, with whom the petitioner was being jointly tried, was revealed to the jury.
In Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968), the Supreme Court held that a defendant’s conviction in a joint trial should be set aside when a co-defendant’s confession inculpating the defendant is revealed through the testimony of a witness even though the trial court has instructed the jury to disregard the confession in determining the defendant’s guilt or innocence. In Bruton, a postal inspector testified at the joint trial of two defendants that one of the defendants had confessed orally that he and his co-defendant had committed a robbery. Id. at 124, 88 S.Ct. at 1621. Although noting that the oral confession was legitimate evidence against the defendant who made it, the Court held that the introduction of the confession posed a substantial threat to the other defendant’s Sixth Amendment right to confront witnesses against him, since the confessing defendant did not take the stand. Id. at 127-28, 137, 88 S.Ct. at 1623, 1628. The Court reasoned that an instruction by the trial court to disregard such a confession could not deflate the impact on the jury of such a powerfully incriminating extrajudicial statement. Id. at 135-36, 88 S.Ct. at 1627-28. The Court concluded that the unreliability of such a confession would be intolerably compounded if the alleged accomplice did not testify and thus become subject to cross-examination. Id. at 136, 88 S.Ct. at 1628.
In interpreting Bruton, we have held that the admission of a co-defendant’s out-of-court confession violates a defendant petitioner’s right of confrontation under the Sixth Amendment where the confession is vital to the government’s proof of its case and directly implicates the defendant. United States v. Key, 725 F.2d 1123, 1125-27 (1984). In the present case, we hold that Jack Riner’s right to confront and cross-examine witnesses against him was violated by the admission of Ronald’s testimony as to his conversation with Evans even though the judge sustained defense counsel’s objection to the testimony as to Jack. As in Bruton, the impact of the admission of the incriminating testimony on the jury could not be deflated by the trial court’s instruction to disregard the testimony as to Jack, especially when the testimony was the only evidence clearly implicating Jack as an aider and abettor of his uncle. Ronald’s testimony as to Evans’s statement was vital to the government’s case and directly implicated Jack in the murder. In such a case, the admission of the prejudicial testimony is not harmless. Cf. Harrington v. California, 395 U.S. 250, 89 S.Ct. 1726, 23 L.Ed.2d 284 (1969) (any violation of Bruton is harmless error where there is overwhelming evidence of the petitioner’s guilt and the prejudicial impact of the co-defendants’ statements is relatively insignificant). We hold that the admission of the testimony directly violated the petitioner’s right to confront and cross-examine witnesses against him guaranteed by the Sixth Amendment.
In conclusion, the district court’s denial of Jack Riner’s petition for a writ of habeas corpus is reversed.
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9444955-22874 | MEMORANDUM DECISION
CHIN, District Judge.
This is an appeal from an order of the Bankruptcy Court for the Southern District of New York granting the petition of the Board of Directors of Hopewell International Insurance Ltd. (“Hopewell”) pursuant to § 304 of the Bankruptcy Code for recognition of a “Scheme of Arrangement” entered into under Bermuda law. The Bankruptcy Court held that the scheme and an injunction issued by a Bermuda court to enforce the scheme were entitled to full force and credit in the United States. Two creditors, Gold Medal Insurance Company (“Gold Medal”) and General Mills, Inc. (“General Mills”) appeal. For the reasons set forth below, the order of the Bankruptcy Court is affirmed.
FACTS
A. Background
Hopewell is a Bermuda company that provides reinsurance for “captive insurers.” A captive insurer provides insurance only for its parent company and the parent’s other subsidiaries. Typically, a captive insurer has few assets and employees and reinsures its risks with a reinsurer.
Gold Medal is the captive insurer of General Mills. Gold Medal reinsured its risk with Hopewell pursuant to a reinsurance agreement dated November 16, 1992 (the “Reinsurance Agreement”). In turn, Hopewell limited its risk through a pool of reinsurance agreements (the “Hopewell Treaties”). The Reinsurance Agreement provided for the arbitration of all disputes in Minneapolis, Minnesota, under Minnesota substantive and procedural law.
B. The Pesticide Claims
In 1994, General Mills suffered extensive losses when certain oats were treated with a non-FDA approved pesticide. General Mills filed claims for insurance coverage with Gold Medal (the “Pesticide Claims”). Gold Medal initially denied coverage, but eventually submitted the claims to arbitration in Minnesota. Hopewell did not participate in the defense of the claims, and instead informed Gold Medal that it would not be bound by any settlement between General Mills and Gold Medal based on the arbitration.
In November 1999, a Minnesota arbitrator ruled in favor of General Mills and found that the Gold Medal policies covered almost all of the Pesticide Claims. If coverage exists, Gold Medal and General Mills agree that the amount of the loss would be $168 million.
C. The Scheme
Although Hopewell specialized in property reinsurance, it also provided casualty insurance in the 1970s. It incurred liability for substantial losses as a result. The 1987 Pampa vapor cloud explosion, for example, resulted in a $500 million loss. Hopewell began to have difficulty obtaining reinsurance. In 1994, Hopewell began to explore the possibility of a run-off— pursuant to which it would cease assuming new risks and it would wind-down existing business. Hopewell contends that it began considering a run-off before it learned of the Pesticide Claims, but Gold Medal contends otherwise. In late 1994 or early 1995, Hopewell decided to go into a runoff, even though it was still solvent.
In early 1995, Hopewell decided to adopt a “scheme of arrangement,” a procedure that would require its creditors to estimate and file claims. Under Bermuda law, a scheme of arrangement is a contractual adjustment of rights between a company and its creditors or shareholders; it is not a liquidation or reorganization. Although schemes of arrangement are most often used in conjunction with insolvent run-offs, Hopewell was solvent. Hopewell contemplated using a scheme not to distribute Hopewell’s assets to its creditors, but to pay creditors the amounts due from retrocessionaires. Hopewell’s board of directors approved the drafting of a scheme of arrangement on March 28, 1995.
On May 25, 1995, Hopewell, through its attorney, John Kawaley, initiated the scheme process by seeking leave of the Bermuda Supreme Court to convene the requisite creditors’ meeting for approval of a scheme of arrangement (the “Scheme”). After a presentation by counsel, the court signed an order approving the notices, proxy forms, claims valuation, and procedures for voting. Under Bermuda law, the Scheme had to be approved by a majority of the creditors representing more than 75% of the value of actual and contingent claims represented at a statutorily prescribed meeting.
Hopewell divided its creditors into two classes: creditors with liquidated claims who would be paid in full without delay, and creditors with unliquidated claims who would receive payment only to the extent of available assets. Despite their huge potential exposure, the Pesticide Claims were assigned a voting weight of zero because Gold Medal had not submitted a claim to Hopewell for that loss. Gold Medal received the Scheme Explanatory Statement on May 26, 1995, less than a month before the creditors meeting. Gold Medal claims that Walsh, the claims manager for Hopewell, assured Gold Medal that the enactment of the Scheme would not alter the handling of the Pesticide Claims. Although this is disputed, the Bankruptcy Court found that at the June 28, 1995 creditors’ meeting, Gold Medal voted to approve the Hopewell Scheme through its proxy John Deters. Gold Medal and General Mills claim that Deters abstained. No dissenting votes were recorded.
On June 23, 1995, the same day as the creditors’ meeting, counsel for Hopewell filed a petition with the Bermuda Supreme Court for approval of the Scheme. On June 29, 1995, the court held a hearing. Although creditors had the right to attend and object to the Scheme, no creditor objected. At the end of the hearing, the court signed an order approving the Scheme. On June 30, 1995, Hopewell stopped writing new agreements and began its run-off.
Under the Scheme, creditors had to give notice of all claims, whether liquidated or not, by June 30, 1999. The Scheme also provided that all disputes were to be submitted to binding arbitration in Bermuda under Bermuda law, notwithstanding any pre-existing arbitration provisions contained in Hopewell’s reinsurance agreements.
D. The Bermuda Injunction
At some point in 1998, Gold Medal threatened to sue Hopewell in Minnesota to compel Hopewell to abide by any settlement Gold Medal reached with General Mills. In response, Hopewell sought and obtained, on July 27, 1998, an ex parte order from the Bermuda court enjoining Gold Medal from commencing any action inconsistent with the scheme in any court throughout the world (the “Bermuda injunction”). The Bermuda injunction expressly permitted Gold Medal to challenge the injunction upon giving Hopewell seven days notice.
E. Hopewell’s Petition
On July 30, 1998, the Board of Directors (the “Board”) of Hopewell filed this petition under § 304 in the Bankruptcy Court, alleging that this case was ancillary to a foreign proceeding. The petition sought emergency relief enjoining Gold Medal and all other creditors from commencing any action or arbitration inconsistent with the Scheme in the United States. In addition, Hopewell sought an order granting comity to and enforcing the Bermuda injunction.
The Bankruptcy Court (Brozman, J.) held an eight-day trial. General Mills argued that venue in the Southern District of New York was improper. It argued that the court should allow Gold Medal to pursue its arbitration in Minnesota. General Mills further argued that if arbitration resulted in an award in favor of Gold Medal, the Scheme could govern the timing and amount of payment.
In a lengthy and thorough opinion, the Bankruptcy Court granted Hopewell’s petition. In re Hopewell Int’l Ins. Ltd., 238 B.R. 25 (Bankr.S.D.N.Y.1999). It entered an order giving full force and effect to the Scheme, permanently enjoining all creditors covered by the Scheme from taking action inconsistent with the Scheme, and giving full force and effect to the Bermuda injunction.
These appeals followed.
DISCUSSION
I address (a) the standard of review on appeal, (b) venue, and (c) the merits.
A. Standard of Review
On appeal from an order of the bankruptcy court, the district court reviews conclusions of law de novo. In re Manville Forest Prods. Corp., 896 F.2d 1384, 1388 (2d Cir.1990). This standard of review applies to matters of statutory interpretation. See In re Treco, 240 F.3d 148, 155 (2d Cir.2001). The bankruptcy court’s decision to defer to a foreign proceeding under § 304(c) is reviewed for abuse of discretion. See id.; see also Vesta Fire Ins. Corp. v. New Cap Reinsurance Corp., 244 B.R. 209, 212 (S.D.N.Y. 2000) (“The bankruptcy court’s decision under Section 304 to defer to [a foreign proceeding] shall be reviewed under an abuse-of-discretion standard.”), aff'd, In re McKenna, 238 F.3d 186 (2d Cir.2001); Allstate Life Ins. Co. v. Linter Group Ltd., 994 F.2d 996, 999 (2d Cir.) (“since the extension or denial of comity [to a foreign proceeding] is within the court’s discretion, [the Court of Appeals] will reverse the [district] court’s decision only when [it] fínd[s] an abuse of discretion”) (citations omitted), cert. denied, 510 U.S. 945, 114 S.Ct. 386, 126 L.Ed.2d 334 (1993).
The district court must accept the bankruptcy court’s findings of fact, unless such findings are clearly erroneous; “due regard must be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” Fed. R. Bankr.P. 8013.
B. Venue
The venue requirements for cases brought under 11 U.S.C. § 304 are set forth in 28 U.S.C. § 1410, which contains three subsections. Subsection (b) applies only to cases seeking to enjoin the enforcement of a lien or to require the turnover of property, and the parties agree it does not apply here. Hence, the relevant choices are subsections (a) and (c).
Subsection (a) provides in pertinent part:
A case under section 304 of title 11 to enjoin the commencement or continuation of an action or proceeding in a State or Federal court ... may be commenced only in the district court for the district where the State or Federal court sits in which is pending the action or proceeding against which the injunction is sought.
28 U.S.C. § 1410(a).
Subsection (c) provides:
A case under section 304 of title 11, other than a case specified in subsection (a) or (b) of this section, may be commenced only in the district court for the district in which is located the principal place of business in the United States, or the principal assets in the United States, of the estate that is the subject of such case.
28 U.S.C. § 1410(c). Hence, if subsection (a) does not apply in this case, subsection (c) controls.
Hopewell filed its petition in this District to enjoin Gold Medal and all other creditors from commencing or pursuing any actions or proceedings, including arbitrations, against it anywhere in the United States. No such action or proceeding had been commenced or was pending when Hopewell filed its § 304 petition. Hopewell contends that the case was properly filed in this District pursuant to § 1410(c) because Hopewell’s principal assets in the United States are located here.
Gold Medal and General Mills argue that subsection (a) applies and that the petition should have been filed in Minnesota, because that is where Gold Medal threatened to sue. Indeed, General Mills argues that § 1410(a) applies because Minnesota is the only jurisdiction where Gold Medal could have initiated an arbitration proceeding against Hopewell under the Reinsurance Agreement. (See General Mills Br. at 50).
The Bankruptcy Court rejected the arguments of General Mills and Gold Medal and held that subsection (c) controls. I affirm.
First, the venue statute is ambiguous. Subsection (a) is poorly worded and consequently is unclear. It consists of one long sentence and starts by referring to a case brought to enjoin the “commencement or continuation” of an “action or proceeding.” That language suggests that the subsection covers actions or proceedings that have not yet been commenced. Yet, the sentence concludes by referring to the dis trict “in which is pending the action or proceeding against which the injunction is sought.” (emphasis added). Hence, the latter part of the sentence appears to contemplate enjoining only actions or proceedings already “pending.” The problem, of course, is that it is impossible to file a petition to enjoin the commencement of an action in the district in which the action is already pending. See William Bassin, Comment, Where Do I Go for Help? The Debtor’s Plight for Proper Venue in Cases Ancillary to a Foreign Proceeding, 10 Bank. Dev. J. 171, 183-84 (1993) (pointing out the contradictory language of § 1410(a)); In re Officina Conti, S.R.L., 118 B.R. 392, 394 (Bankr.D.S.C.1989) (rejecting a “nonsensical construction” of § 1410(a) that “would require the action to be pending before the debtor could seek an injunction to prevent its commencement”).
Second, the Bankruptcy Court resolved the ambiguity in the statute by construing it in a logical, common sense manner. The Bankruptcy Court correctly rejected General Mills’s argument that subsection (a) must be read as requiring a party to seek an injunction in the district in which it anticipates the “action or proceeding” will be pending, i.e., where it will be filed. This interpretation would require re-writing the statute to replace the words “is pending” with the words “will be pending.” Moreover, it will not always be clear where a creditor might commence an action and thus a would-be § 304 petitioner would be left guessing where an action or proceeding might be brought. In addition, where a party faces multiple potential lawsuits by creditors in different jurisdictions, that party would have to file multiple petitions and “chase those creditors around the country.” 238 B.R. at 45. As the Bankruptcy Court concluded, such a result would “inhibit judicial economy, administrative efficiency, decisional consistency, and perhaps most important, comity.” Id.; see Collier on Bankruptcy ¶ 4.03[2] (15th ed. 2001) (“It would be absurd to force a foreign representative to file numerous section 304 petitions throughout the country, which would be a waste of judicial resources and could lead to inconsistent judgments.”); see also In re Saleh, 175 B.R. 422, 425 (Bankr.S.D.Fla.1994).
General Mills argues that Gold Medal was the only creditor to threaten suit and thus Hopewell was not faced with the possibility of multiple actions or proceedings. The Bankruptcy Court rejected this argument as a factual matter, accepting the testimony of Hopewell’s representative that other Hopewell creditors “[we]re waiting in the wings” to see what happened with Gold Medal. 238 B.R. at 45. The Bankruptcy Court’s factual determination is not clearly erroneous.
Accordingly, the Bankruptcy Court’s determination that venue lies in this District under § 1410(c) is affirmed.
C. The Merits
Section 304 of the Bankruptcy Code provides a mechanism by which bankruptcy courts in the United States can provide assistance — a “helping hand” — to foreign courts that are handling international insolvencies. See 238 B.R. at 54 (citing cases). It permits a party to bring an ancillary proceeding — not a “full-scale bankruptcy case” — in bankruptcy court to enjoin suits or actions in the United States against a debtor in insolvency proceedings in another country, to avoid piecemeal litigation and to encourage “deference to the country where the primary insolvency proceeding is located ... and flexible cooperation in administration of assets.” In re Simon, 153 F.3d 991, 998 (9th Cir.1998), cert. denied, 525 U.S. 1141, 119 S.Ct. 1032, 143 L.Ed.2d 41 (1999); see also Treco, 240 F.3d at 153-54; In re Koreag, Controle et Revision S.A., 961 F.2d 341, 348 (2d Cir.) (holding that bankruptcy court has broad latitude under § 304 to fashion appropriate remedy in ancillary proceedings and that “purpose of a § 304 petition is to prevent the piecemeal distribution of assets in the United States by means of legal proceedings initiated in domestic courts by local creditors”) (citations omitted), cert. denied, 506 U.S. 865, 113 S.Ct. 188, 121 L.Ed.2d 132 (1992); In re Caldas, 274 B.R. 583 (Bankr.S.D.N.Y.2002).
Section 304 provides in pertinent part as follows:
(a) A case ancillary to a foreign proceeding is commenced by the filing with the bankruptcy court of a petition under this section by a foreign representative.
(b) Subject to the provisions of subsection (c) of this section, if a party in interest does not timely controvert the petition, or after trial, the court may—
(1)enjoin the commencement or continuation of—
(A) any action against — (i) a debtor with respect to property involved in such foreign proceeding; or (ii) such property; or ...
(3) order other appropriate relief.
(c) In determining whether to grant relief under subsection (b) of this section, the court shall be guided by what will best assure an economical and expeditious administration of such estate, consistent with—
(1) just treatment of all holders of claims against or interests in such estate;
(2) protection of claim holders in the United States against prejudice and inconvenience in the processing of such claims in such foreign proceeding;
(3) prevention of preferential or fraudulent dispositions of property of such estate;
(4) distribution of proceeds of such estate substantially in accordance with the order prescribed by this title; [and]
(5) comity ....
11 U.S.C. § 304.
Three issues are presented: First, was the process by which the Scheme was adopted and approved in Bermuda a “foreign proceeding” within the meaning of § 304? Second, is the Board a “foreign representative” within the meaning of the statute? Third, did the Bankruptcy Court abuse its discretion in granting the petition here?
1. Foreign Proceeding
The Bankruptcy Code defines a “foreign proceeding” as:
[a] proceeding, whether judicial or administrative and whether or not under bankruptcy law, in a foreign country in which the debtor’s domicile, residence, principal place of business, or principal assets were located at the commencement of such proceeding, for the purpose of liquidating an estate, adjusting debts by composition, extension, or discharge, or effecting a reorganization.
11 U.S.C. § 101(23). Hence, a “foreign proceeding” must be conducted in a foreign country under judicial or administrative supervision for the specified purposes. See Collier ¶304.02[1]; In re Tam, 170 B.R. 838, 842-43 (Bankr.S.D.N.Y.1994). Here, the Bankruptcy Court held that the process by which the Scheme was adopted and approved was a “foreign proceeding” covered by § 304. I agree.
The proceeding was a judicial proceeding in Bermuda to adjust Hopewell’s assets and debts. Although the proceeding was a “stand-alone” scheme of arrange ment not implemented “in tandem with another statutory vehicle for debt manipulation such as a voluntary liquidation, administration or court-ordered winding up,” 238 B.R. at 48, it was nonetheless subject to court supervision. Hopewell had to petition the Bermuda Supreme Court for leave to convene the required creditors’ meeting. A hearing was held, after which the Bermuda court signed an order approving the notices, proxy forms, process for valuating claims, and procedures for voting, all of which had been submitted to the court for review.
Hopewell had to file a second petition with the Bermuda court for approval of the Scheme. Creditors had the right to object to the proposed scheme of arrangement. A second hearing was held, after which the Bermuda court issued an order approving the Scheme. Even thereafter, continued court involvement was required, as the Bermuda court issued the Bermuda injunction in 1998. Recently, during the pendency of this appeal, the parties were before the Bermuda court again. As the Bankruptcy Court noted, the Bermuda court remained available, even after the Scheme was approved, “to resolve classification disputes, enforce the provisions of the scheme and review actions by the scheme administrators.” 238 B.R. at 49. See In re Ward, 201 B.R. 357, 361 (Bankr.S.D.N.Y.1996).
The Bankruptcy Court’s determination that the Bermuda proceeding was a “foreign proceeding” within the meaning of § 304 is affirmed.
2. Foreign Representative
The second threshold issue is whether the Board is a “foreign representative” qualified to file a petition pursuant to § 304.
The Bankruptcy Code defines a “foreign representative” as a “duly selected trustee, administrator, or other representative of an estate in a foreign proceeding.” 11 U.S.C. § 101(24). Plainly, the Board fits within this definition.
Although General Mills and Gold Medal argue that the Board was not appointed by a court to act as a “foreign representative,” nothing in the statute requires a court appointment. Courts have recognized creditor-elected or creditor-appointed liquidators in foreign voluntary liquidations to be foreign representatives. See, e.g., In re Ward, 201 B.R. at 360. Moreover, no logical reason exists to prohibit a board of directors of a solvent debtor company from acting as a foreign representative for purposes of bringing an ancillary proceeding pursuant to § 304. Accordingly, the Bankruptcy Court is affirmed in this respect. See 238 B.R. at 53-54; see also Matter of Kingscroft Ins. Co., 138 B.R. 121, 124 (Bankr.S.D.Fla.1992) (boards of directors of insolvent British and Bermuda insurance companies held to qualify as “foreign representatives” under § 304).
3. The Bankruptcy Court’s Decision To Grant the Petition
Applying the five relevant factors set forth in § 304(c), the Bankruptcy Court granted Hopewell’s petition. It concluded initially that because Hopewell was solvent and there were sufficient funds to pay all creditors in full, “the goals of maximizing the estate for the benefit of all creditors and dividing up that estate so as to achieve equality among class members [were] much less strongly implicated.” 238 B.R. at 55. Hence, the Bankruptcy Court concluded .that “neither the omission of avoidance powers nor any deviation from the usual distributive provisions applicable in windings-up is cause for any concern.” Id. at 56.
The Bankruptcy Court also determined that creditors — including Gold Medal— were not unjustly treated under the Scheme. The Bankruptcy Court was not receptive to Gold Medal’s assertion that it was unfairly treated because Gold Medal had failed to take advantage of numerous opportunities to object in the Bermuda proceedings. As Judge Brozman noted, Gold Medal “accepted its class A claim for voting purposes; it voted in favor of the scheme; it did not object at the sanction hearing; it did not appeal the Sanction Order; and it did not seek to have the Bermuda Injunction altered or rescinded.” Id. at 60. Although Gold Medal argues that it did not vote in favor of the Scheme, the Bankruptcy Court held otherwise and this factual determination, which is supported by evidence in the record, see 238 B.R. at 40 — II, is entitled to deference on appeal.
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