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5691183-22445 | OPINION
MAYER, Judge.
This case involves reissue patent claims pertaining to a process for making disposable plastic slippers used extensively and primarily in hospitals. Also at issue is the design patent for the slippers covered by the reissue patent. The slippers have been sold under the trademark “Pillow Paws” since 1962 and have enjoyed considerable commercial success. This suit arose when plaintiffs accused third-party defendant, American Sealcut Corp., of making convalescent patient slippers under Defense Department contracts using the process and design disclosed by the patents. Plaintiffs filed suit under 28 U.S.C. § 1498 and the case is before the court on cross-motions for summary judgment after argument.
Reissue Patent
Background
The original process patent, United States Patent No. 3,238,079 (original patent) was issued on March 1, 1966, pursuant to plaintiffs’ application filed November 13, 1962. Approximately seven years and nine months later, they filed a reissue application on November 27, 1973. The reissue patent, Re. 28,563 (reissue patent), was granted on December 30, 1975. The subject of the original patent is a process, a series of steps for making a disposable slipper from plastic materials. It discloses and claims two separate methods. The first consists of manual steps with hand operated tools; the second involves the steps in a mechanized process. Only the first method concerns us, and only two claims of the original patent were directed to that method, claim 9 and dependent claim 10. The claims of the reissue patent involved here similarly pertain to the first method.
The first method was summarized in the specification of the original patent.
Generally speaking, the first method we have invented involves a series of steps, including; forming a foot opening in a first sheet of plastic material; bringing said first sheet and a second sheet of said material into face to face contact with one another; uniting said sheets in any suitable manner in a narrow region spaced outwardly from said foot opening, said region having an outline generally conformable to the human foot; and separating a slipper from the material lying outside the region.
This was essentially restated in original claim 9 (Appendix A) and illustrated by figure 4 (Appendix B) which is the same in both the original and reissue patents.
In November of 1963, while their original application was pending, plaintiffs had applied to the German Patent Office for a patent covering the same subject as the original in the United States. That office rejected all of their claims on prior art in 1966 and again upon reconsideration in 1969. Plaintiffs abandoned the German application. Almost seven years after they learned of the “primary reference relied upon by the [German] Patent Office,” which was Austrian Patent No. 129,014, and more than seven years after issuance of the original patent, they filed the application which resulted in this reissue patent. The asserted basis for the reissue was that the cited art could raise a question about the patentability of at least one of their claims.
When plaintiffs had applied for the original patent, they had included process claims, product claims and an indefinite claim. In a requirement for restriction, however, they elected to prosecute only the process claims and that patent issued with ten of them. We are concerned only with claims 9 and 10.
The reissue application had 36 claims, the 10 process claims of the original patent and 26 new process claims. Plaintiffs canceled claim 9, identical to claim 9 in the original, and claim 11 in response to the examiner’s rejection. But they developed a new independent claim, 37, which was essentially the same as canceled 9, except that it added a “searing” step to the process. Application claim 19 also mentioned searing.
Essentially, searing is a method of forming the edge around the foot opening of the slipper by, in the words of the specification, “collapsing a narrow portion ... of the material surrounding the opening and heating it while under compression. When the pressure and heat are removed, this narrow portion remains in a collapsed condition. It is believed to contribute to the appearance and strength of the finished article.”
The examiner rejected all of the claims pertaining to the first method we are interested in because they were broader than the original patent. They therefore violated 35 U.S.C. § 251 because the application was filed more than two years after issuance of the original. Plaintiffs responded by submitting a detailed comparison between original patent claim 9 and reissue application claim 37, to show that 37 is actually narrower than 9. They apparently were persuasive, for a notice of allowance followed.
The reissue patent has 34 process claims. However, the specification and drawings did not change from those in the original patent. Reissue application claim 37 is now reissue patent claim 11, contested here, which describes “[a] method of manufacturing slippers of a heat sealable polymeric sheeting material____” (Appendix C). The other independent claim we are concerned with is reissue 31, formerly reissue application claim 19, which differs from 11 by calling for polyurethane foam, specifying that the foot opening be “punched”, and calling for heat sealing with a heated die in the shape of the outline of the slipper.
In response to plaintiffs’ allegations of infringement of the reissue patent by third-party defendant, and perhaps others, defendant on this motion for summary judgment has raised a series of alternative defenses. It says the reissue patent is not valid because it violated 35 U.S.C. § 251 by failure of the reissue application to set out any error in the prosecution of the original patent. Again in violation of section 251, the reissue claims are not for the same invention as was disclosed in the original patent. In any event, the reissue claims are invalid if broader than the originals because they were not filed within two years from the issuance of the original patent. If the new claims are narrower, they are barred by laches because the reissue application was filed more than seven years after plaintiffs were aware of the alleged errors surrounding the original. Defendant also says the claims are invalid for overclaiming and for obviousness in light of a series of other patents which it has provided.
Discussion
The court is of the view that plaintiffs cannot prevail because of the most obvious of the reasons set out by defendant. Un der the pertinent provision of 35 U.S.C. § 251,
Whenever any patent is, through error without any deceptive intention, deemed wholly or partly inoperative or invalid, by reason of a defective specification or drawing, or by reason of the patentee claiming more or less than he had a right to claim in the patent, the Commissioner shall, on the surrender of such patent and the payment of the fee required by law, reissue the patent for the invention disclosed in the original patent, and in accordance with a new and amended application, for the unexpired part of the term of the original patent. No new matter shall be introduced into the application for reissue.... No reissued patent shall be granted enlarging the scope of the claims of the original patent unless applied for within two years from the grant of the original.
A reissue patent and the original patent must be for the same invention. This is as true today, as plaintiffs concede, as it was before the Patent Act of 1952 changed the language but not the meaning of the predecessor of section 251. In re Rowand, 526 F.2d 558, 559 (C.C.P.A.1975); In re Handel, 312 F.2d 943, 948, 50 CCPA 918 (C.C.P.A.1963); In re DeJarlais, 233 F.2d 323, 326, 43 CCPA 900 (C.C.P.A. 1956). As far back as Parker and Whipple Co. v. Yale Clock Co., 123 U.S. 87, 99, 8 S.Ct. 38, 44, 31 L.Ed. 100 (1887), and reaffirmed in U.S. Industrial Chemicals, Inc. v. Carbide and Carbon Chemicals Corp., 315 U.S. 668, 676, 62 S.Ct. 839, 843, 86 L.Ed. 1105 (1942), the Supreme Court has held that inventions are the same only when a reissue describes and claims that which was embraced by the invention intended to have been secured by the original patent. “[I]t does not follow that what was indicated in the original specification, drawings or patent office model is to be considered as a part of the invention, unless the court can see, from a comparison of the two patents, that the original embodied, as the invention intended to be secured by it, what the claims of the reissue are intended to cover.” Parker and Whipple Co., 123 U.S. at 99, 8 S.Ct. at 44.
The Patent and Trademark Office has no authority to cover by reissue a different invention from that apparent in the original patent. “And it is not enough that an invention might have been claimed in the original patent because it was suggested or indicated in the specification. It must appear from the face of the instrument that what is covered by the reissue was intended to have been covered and secured by the original.” U.S. Industrial Chemicals, Inc., 315 U.S. at 676, 62 S.Ct. at 843. What plaintiffs intended to claim in the original patent is not assessed through a subjective inquiry, In re Mead, 581 F.2d 251, 255 (C.C.P.A.1978), but requires “an essentially factual inquiry confined to the objective intent manifested by the original patent.” In re Rowand, 526 F.2d at 560. “[I]t is the claims that measure and define the invention.” W.L. Gore & Assoc., Inc. v. Garlock, Inc., 721 F.2d 1540, 1548 (Fed.Cir.1983). But everything disclosed in the original patent must be considered on this inquiry, not only the claims it listed. In re Handel, 312 F.2d at 948. “[T]he disclosure originally filed must convey to those skilled in the art that applicant had invented the subject matter later claimed.” In re Wilder, 736 F.2d 1516, 1520 (Fed.Cir.1984). With this in mind, the court has carefully examined and compared the entire disclosure and claims of both the original and reissue patents.
One of the “special concepts” highlighted in the reissue patent and said to have been covered by the original, is what is called “searing.” When the original patent application was filed, its claim 19 was a dependent product claim which called for a slipper on which “the edge of the foot-opening is seared.” All of the product claims, including that one, however, were surrendered in a requirement for restriction, and none of the method claims mentioned the searing concept. In the reissue application, on the other hand, searing was included in several of the claims.
In the first place, it is impermissible to claim in a reissue that which has been surrendered in a requirement for restriction. In re Orita, 550 F.2d 1277, 1280 (C.C.P.A.1977). That the claim surrendered was a product claim and we are concerned with the process is of no moment. It is the concept that matters.
More importantly, the original specification says in two different places that searing the edge of the foot-opening is “not essential” to the method. And this has been restated in the reissue specification. What this shows is that searing was never intended to be secured by the original method claims. The most that can be said is that it was shown in the surrendered product claim which, as defendant says, plaintiffs may have intended to or did include in a divisional application. But when one compares the specification common to both the original and reissue patents with reissue claim 11, one sees that the only item of any significance in claim 11 beyond the combination of canceled claim 9 is the searing step which is nonessential to the method. Therefore, claims to searing in the reissue, claim 11 and dependent claims 10, 13, 14 and 17, as well as independent claim 31, are invalid as attempts to patent a different invention from that covered by the original patent.
Plaintiffs’ attempt to focus the case on a burst resistant heat seam for polyurethane foam in the reissue which they say was suggested by the original patent suffers from the same disability. Reduced to its essentials, this expansive argument is an attempt to patent something other than what the original called for. When it is recalled that the combination of four steps in the first method is the invention, plaintiffs’ attempts to append a method for creating a burst resistant heat seam for polyurethane foam fail.
The four steps are (1) “forming” the foot opening in one sheet of “plastic,” (2) placing that sheet on top of another, (3) “uniting” the sheets in any suitable manner in a narrow region around the outer edge of the slipper, and (4) “separating” the slipper from the material lying outside the region. The specification defines the words of art plaintiffs believe justify the reissue as follows:
By “forming” is meant any effective step or steps capable of producing a sheet with an opening in it, such as cutting, molding, shearing, punching and the like____ By “uniting” is meant any fastening, sealing, sewing, cementing or other joining technique. [And earlier in the specification they say] any effective method of joinder can be utilized. Sewing, cementing,. thermal sealing and induction sealing are a few examples. With polyurethane foams, we prefer to use the thermal sealing method, which will be explained further below. [The specification subsequently explains that the invention may be practiced with “electronic” heat sealing as well as “thermal” heat sealing and suggests a number of prior patents as examples.]
Finally, plaintiffs’ specification has this to say about plastic:
By “plastic” is meant any material resembling a natural or synthetic rubber in its properties. It should be flexible, stretchy and preferably, though not necessarily, spongey. That is, the material preferably possesses a cell structure. A preferred example of such spongey materials having cell structure is polyurethane.
But the specification says that either sheet of material used in making the slipper may be non-cellular plastic or foam, or both may be of the same material and “the substitution of cellular material for non-cellular ... would not alter the sequence or relationship of the essential steps in our process____ [N]o intention to exclude any of the above modifications or others should be inferred.”
What this shows is that plaintiffs intended no limitation on the types of plastic materials or on the means of uniting them. The specification neither recognizes nor offers solutions to any problems that might be encountered with heat sealing or the use of foam. Therefore, the extensive battle of affidavits between the parties and experts about difficulties with heat sealing foam and the creation of a strong burst resistant perimetral heat seal are irrelevant. Expert scientific testimony cannot enlarge a patent. U.S. Chemicals Co., 315 U.S. at 678, 62 S.Ct. at 844; In re Vamco Machine & Tool, Inc., 752 F.2d 1564 at 1575, 1577 (Fed.Cir.1985). If those features are not disclosed or claimed in the patent, even if they are patentable inventions, they are not within the protection of the original much less the reissue patent. See Kemode Mfg. Co. v. United States, 347 F.2d 315, 318, 171 Ct.Cl. 698 (1965). The patent claims read in light of the specification, as they must be, Schriber-Schroth Co. v. Cleveland Trust Co., 311 U.S. 211, 217, 61 S.Ct. 235, 238, 85 L.Ed. 132 (1940), show no basis for patentability. See In re Lundberg, 253 F.2d 244, 247, 45 CCPA 838 (1958).
Plaintiffs’ special concept for “punching” is similarly deficient. The specification listed punching as only one of many ways of creating a foot opening in the slipper, along with “cutting, molding, shearing, ... and the like.” This does not suggest anything special about punching and detracts from plaintiffs’ assertion it was intended to be patented. The same is true of the special concept for “shearing” the excess material from around the finished slipper. The specification suggests this may be done not only by shearing, but by cutting, slicing or tearing, as well. The court concludes that none of the pertinent reissue concepts plaintiffs thought covered by the original can withstand comparison.
Even if the court were to assume for the argument, as defendant alternatively asks, that plaintiffs’ reissue was for the same invention, they could not prevail. If the reissue is broader than the original, as the Patent Office originally ruled, probably correctly, it runs afoul of section 251 because not filed within two years of the original. Ball Corp. v. United States, 729 F.2d 1429, 1438 (Fed.Cir.1984). If the reissue is narrower, as plaintiffs apparently persuaded the examiner, laches would apply. The delay of more than seven years after plaintiffs learned of the alleged error affecting their original patent is unreasonably long and not justified. For that period of time, they usurped “the right of the public to graze in the field erroneously claimed as a private preserve.” Better Packages, Inc. v. Derby Sealers, Inc., 43 F.Supp. 123, 126 (D.Conn.1941).
Plaintiffs say there is no diligence requirement for narrowing patents and the doctrine of intervening rights provides sufficient protection to one discomforted by delay. Even if diligence is relevant, prejudice from the delay must be shown.
The court disagrees. The doctrine of intervening rights provides relief for one practicing the narrowed aspects of the patent in the interim between issue and reissue, see 35 U.S.C. § 252, which is not our case, but does nothing to adjust the rights of others unknown who wrongfully may have been deterred because of the apparent expansiveness of the patent. See, e.g., General Radio Co. v. Allen B. DuMont Laboratories, 129 F.2d 608, 613 (3rd Cir.1942); Better Packages, Inc., 43 F.Supp. at 126, 127. The concept of prejudice does not apply on these facts because of the impossibility of finding those among the public who may have been discouraged and forsaken the opportunity to practice what they had a right to. In view of the court’s conclusions, however, it is unnecessary to develop this theme further or to address the remainder of defendant’s alternative defenses.
Design Patent
The contest over the validity of the design patent, Des. 200,897, held by plaintiff Winalee Mitchell, the drawing of which is partially reproduced at Appendix D, is considerably less vigorous. It appears that in the prosecution of a predecessor application to the one that resulted in this design patent, two embodiments of a design for a slipper were disclosed. The application was rejected on prior art. The examiner said,
[I]t now appears that applicant is relying for novelty upon the broad concept of a flat folded slipper having an oval-like foot inserting opening on the upper half. Such broad design is deemed unpatentable over LeDorf [Patent No. 1,830,471], and to make it of heavier or padded material is deemed to be obvious within the terms of 35 U.S.C. 103. Kane [D-136, 180] is cited as showing the stitched or welted effect employed while the Madamoiselle [not in the record] item is cited as cumulative art.
Plaintiff responded that the upper and lower portions of a slipper with the design called for in that application curved gradually downwards and upwards, respectively, creating a different appearance from that of a flat slipper shown in the cited prior art. She said, “When Applicant thinks of a flat slipper, she has in mind a slipper which has no upward or downward curving appearance when viewed from the side." (Plaintiffs emphasis.) The response also emphasized that the curving lines met along a rim of material protruding horizontally outward from where the upper and lower parts of the slipper met. Our design patent, consisting of one of the embodiments of the earlier application addressed by plaintiff and the examiner, thereafter was issued.
From this, defendant presumes the design was patented because of the curved lines and rim features. The file wrapper suggests nothing else. Plaintiff concedes she urged these features as novel. But she says this does not lead to the conclusion that those features were the only novel, nonobvious features on which she could rely, though no others are suggested.
Study of the patent and the affidavits of the parties’ experts, and inspection of the slipper, one of which is in the record, shows that the pertinent configuration results from the mechanical requirements of heat sealing around the outer edges of the two pieces of polyurethane foam which form the upper and lower parts of the slipper. The curved lines are the product of compression at the rim and the resiliency of polyurethane foam when subjected to heat sealing. See Appendix D, figure 4.
In spite of the counter arguments, the court sees no profound dispute about this. Plaintiff’s experts, for some reason assuming only use of synthetic polymeric film sheeting rather than also polyurethane foam, say that with heat sealing “the seam between the upper and lower portions may take a variety of ornamental exterior configurations [citing illustrations].... Thus, the exterior ornamental appearance of the seals may vary considerably while each seam serves the same physical function, that of holding the slipper together. The exterior appearance is not dictated solely by the function of the seal.” Defendant’s expert more comprehensively responded,
Design Patent No. 200,897 depicts a necessary, functional, and common flange-like seam area, extending outwardly from the body of the product and in a midline fashion relative thereto. Such flange serves a functional purpose, that of being the joining area for the two sheets. Patentee could have selected another functional seal, creating a different appearance. However, the patentee depicted a seal of the type shown, which seal evidences the exact and most common functional mode thin web seal elected by the patentee.
To the court, this is dispositive. Plaintiff says the seal function does not “solely” dictate the appearance, implying she might have chosen some more imaginative configuration before or during fusion of the two sheets by heat sealing, or perhaps even thereafter in the manner of trimming. Defendant’s point, however, is that she did not; she chose “the exact and most common functional mode thin web seal.” The function, not the artistry of the patentee, dictated the appearance.
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289988-19848 | MEMORANDUM AND ORDER
WAXSE, United States Magistrate Judge.
Pending before the Court is a Motion to Compel (doe. 98) filed by third party defendants and counterclaimants Excel Laminates and David Seitter (collectively “Excel”) seeking production of documents and answers to interrogatories from defendant and third party Plaintiff Lear Corporation (“Lear”). Excel also moves the Court to hear oral argument on its Motion (doc. 108). The Court does not believe that oral argument is necessary and therefore will deny the request.
Upon consideration of the arguments presented, and for the reasons stated below, Excel’s Motion to Compel will be granted.
Brief Factual Background
Among other issues, this case involves counterclaims - for breach of contract and fraud arising out of a business relationship between Excel and Lear. Excel maintains it contracted with Lear to supply Lear laminated body cloth. Lear disputes the existence of any enforceable contract with Excel in this regard.
Excel served its first set of Interrogatories and Requests for Production of Documents to Lear on January 17, 2003. Lear’s re sponses to the discovery originally were due on February 17, 2003. Lear obtained an extension of time to respond to the discovery requests until March 10, 2003 and subsequently served its responses on that date. Excel is dissatisfied with the responses submitted, asserting Lear lodged invalid objections to much of the discovery and, in many cases, failed to produce many documents or provide complete answers. As a result, Excel filed this motion in order to compel Lear to appropriately respond to the discovery requests at issue.
Discussion
Federal Rule of Civil Procedure 26(b)(1) provides that “[pjarties may obtain discovery regarding any matter ... that is relevant to the claim or defense of any party.” “Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence.”
When the discovery sought appears relevant, the party resisting the discovery has the burden to establish the lack of relevance by demonstrating that the requested discovery (1) does not come within the scope of relevance as defined under Fed.R.Civ.P. 26(b)(1), or (2) is of such marginal relevance that the potential harm occasioned by discovery would outweigh the ordinary presumption in favor of broad disclosure. Similarly, a party resisting discovery on the basis that a request is overly broad has the burden to support its objection, unless the request is overly broad on its face.
Conversely, when the request is overly broad on its face or when relevancy is not readily apparent, the party seeking the discovery has the burden to show the relevancy of the request. Relevancy is broadly construed, and a request for discovery should be considered relevant if there is “any possibility” that the information sought may be relevant to the claim or defense of any party-
With these standards in mind, the Court now will address each of the individual issues presented by Excel in its Motion.
I. Requests for Production of Documents
A. Exhaustive Search — Request for Documents 1-6, 8-11, 17, 23, 25 and 26
With regard to the referenced requests, Excel maintains Lear arbitrarily limited its search to files and documents within the custody and control of only three employees. Excel alleges Lear failed to search for documents created or received by all of the other Lear employees who had a business relationship with Excel or who were otherwise involved in the business relationship between Excel and Lear.
Lear denies it arbitrarily limited its search to three employees and argues Excel’s allegations are speculative and incorrect. Notwithstanding this argument, Lear goes on to state that it is contacting appropriate personnel at Lear to determine if additional responsive documents exist and is in the process of reviewing files and documents located at the Lear facility Mexico. Lear maintains these searches are ongoing and require a reasonable period of time to complete.
Given Lear’s response here, the Court will treat this aspect of Excel’s motion as uncontested and order Lear to search for responsive documents created or received by all Lear employees who had a business relationship with Excel or who were otherwise involved in the business relationship between Excel and Lear.
Lear will be ordered to produce responsive documents by May 30, 2003. Lear does not dispute that it first received these formal requests for production of documents in mid-January 2003. A May 30, 2003 deadline to complete the search and produce responsive documents provides Lear with a four and one-half month window for the task, a window of time the Court believes is reasonable.
B. Overbroad Objections — Request for Documents 1-6, 8-11, 15-20, 22-23
Excel maintains Lear’s objections based on the overly broad nature of these requests is without merit. More specifically, Excel states this case involves a claim that Excel gave Lear a “rock bottom price” to purchase laminate based on an agreement that Lear would purchase all laminate it needed from Excel. Excel alleges Lear then shopped competitors using Excel’s rock bottom price. Based on these facts, Excel argues the referenced requests are not overly broad, but are appropriately limited to Lear’s internal and external communications regarding Lear’s solicitation and/or purchase of laminates from Excel and other companies during the relevant time period.
In response to Excel’s argument, Lear states as follows:
Although Lear raised an overbroad objection to several document requests, Lear provided available documents. However, the objection is required because of the wording used by Excel. Lear has over approximately 160,000 employees located in several regions of the United States, as well as in Mexico. Accordingly, ... when Excel requests “all documents,” ... [i]t would be impossible to ensure that all documents evidencing any communication over a three-year period will be located. Notwithstanding the objection, Lear attempted in good faith to supply the requested documents and agreed in good faith to contact appropriate Lear personnel a second time.
The federal discovery rules provide that “requests] shall set forth, either by individual item or by category, the items to be inspected, and describe each with reasonable particularity.” Moreover, “[r]equests should be reasonably specific, allowing the respondent to readily identify what is wanted.” Courts may find requests overly broad when they are “couched in such broad language as to make arduous the task of deciding which of numerous documents may conceivably fall within [their] scope.”
Lear does not argue in its brief that it is not able to readily identify the documents requested. Neither does Lear argue that it would be unduly difficult to determine which documents fall within the scope of the request. Accordingly, Lear’s objections based on overbreadth are without merit.
Lear also asserts, however, that searching for and locating “all” documents in the identified categories is a monumental task based on the number of employees that work for Lear. The Court construes this argument to be one based on undue burden. As the party resisting discovery, Lear has the burden to show facts demonstrating that the time or expense involved in responding to requested discovery is unduly burdensome. Horizon Holdings, L.L.C. v. Genmar Holdings, Inc., 209 F.R.D. 208, 213 (D.Kan.2002) (citation omitted). This imposes an obligation to provide sufficient detail and explanation about the nature of the burden in terms of time, money and procedure required to produce the requested documents.
Beyond noting the number of persons employed by the company, Lear has submitted no explanation, let alone an affidavit or other proof, demonstrating that responding to the referenced discovery requests would impose an undue burden. The Court will not speculate that the requested discovery causes un due burden; therefore, Lear’s argument in this regard is without merit.
For this reason, and based on Lear’s assertion that — notwithstanding any objections lodged — it provided available documents and is contacting employees a second time and attempting in good faith to search for and produce the requested documents, the Court will order Lear to complete its search and produce all responsive documents by May 30, 2003.
C. Producing Documents Upon Execution of a Protective Order
Excel asserts that in response to Request Nos. 7, 12, 15, 21, 22, Lear indicates it will produce the various documents upon entry of a protective order. Excel maintains that although the protective order subsequently was transmitted to Lear for execution, the documents have yet to be produced.
In response to this argument, Lear notes that on April 4, 2003 — one day after Excel filed this motion to compel — it executed the protective order and produced the requested documents. Given Lear’s response, the Court will treat this aspect of Excel’s motion as uncontested and will grant Excel’s motion to compel the referenced documents.
D. 1998 and 1999 Documents
Excel maintains the documents produced by Lear primarily were from the 2000-2001 time frame. Excel argues the parties’ business relationship and many of the key events and circumstances giving rise to the litigation occurred in 1998 and 1999. For these reasons, Excel alleges Lear did not make a good faith search of documents.
Lear denies it did not make a good faith search for the documents requested and argues Excel’s allegations are speculative and incorrect. Notwithstanding this argument, Lear goes on to state that it is contacting appropriate personnel at Lear to determine if additional responsive documents exist and is in the process of reviewing files and documents located at the Lear facility Mexico. Lear maintains these searches are ongoing and require a reasonable period of time to complete. Given Lear’s response, the Court will treat this aspect of Excel’s motion as uncontested and will grant Excel’s motion to compel the referenced documents.
E. Requests 7,18-22
Excel asserts the referenced requests ask for documents showing the quantity of laminates purchased from Excel, payments by Lear for those purchases, and the quantity and dollar volume of Lear purchases from other laminate suppliers for 1998, 1999 and 2000. Excel maintains Lear failed to produce any documents showing this information.
In response to Excel’s argument, Lear asserts it produced the responsive documents it had available and is searching again for responsive documents. Once again, the Court will treat this aspect of Excel’s motion as uncontested and order Lear to complete its search and produce responsive documents by May 30, 2003.
F. Specific Requests
1. Request 6: Purchasing Department Files
Excel contends Lear failed to produce any documents in response to this request. Lear disagrees, stating it produced Guillermo Zubieta’s Excel Binder, Mike Duross’ Excel file, Jerry Cave’s Excel file and Guillermo Zubieta’s Excel e-mails and attachments. Lear argues these documents are from the Purchasing Department and goes on to state that if Excel will narrow its request, a further search will be made.
The Court construes Lear’s objection to Request 6 as one based on the overly broad nature of the request. Given the Court’s finding above that Lear’s objection to Request 6 based on overbreadth is without merit, the Court will grant Excel’s motion to compel with respect to Request 6 and order Lear to produce all responsive documents by May 30, 2003.
2. Request 15: Personnel Files
Excel seeks the production of personnel files for fifty-one current or former Lear employees who were in some way involved in the business relationship with Excel, or Excel’s competitors, concerning the purchase of laminates. Two of the employees are Ed Mahon, Lear in-house General Counsel and Chris Koch, Lear in-house Assistant Counsel and co-counsel in this litigation. Excel argues that information in the personnel files likely will contain information that is relevant on issues such as the employee’s position, job responsibility, and bias. Excel also argues the personnel files will contain information that will assist Excel in determining who to depose and will expedite the depositions that are taken.
Lear initially objected to producing these files on grounds that the requests were over-broad and that the request sought documents that were confidential and privileged. Notwithstanding these objections, Lear suggested that if Excel would narrow its request to a particular category of documents within the files, Lear would respond. The parties later conferred regarding this discovery dispute and Lear states that during this conference it offered to have Lear’s Human Resources department provide the position and job responsibility of each of the fifty-one identified employees and produce non-privileged documents in their personnel files relating to Excel. Lear noted that it would provide a privilege log for those documents within any of the files for which it claimed privilege. Lear alleges Excel has not responded to this offer.
The Court construes Lear’s objection to Request 15 as one based on the overly broad nature of the request. Given the Court’s finding above that Lear’s objection to Request 15 based on overbreadth is without merit, the Court will address only the confidentiality and privilege arguments asserted by Lear.
As a preliminary matter, the Court notes that confidentiality does not equate to privilege. Although information is not shielded from discovery on the sole basis that the information is confidential, a party may request the court enter a protective order pursuant to Fed.R.Civ.P. 26(c) as a means to protect such confidential information. It appears from Lear’s brief that a stipulated order protecting the confidentiality of documents produced already is in place. Accordingly, the Court, overrules Lear’s objections based on confidentiality.
As to Lear’s privilege objections, “[p]arties objecting to discovery on the basis of the attorney-client privilege bear the burden of establishing that it applies.” “To carry the burden, they must describe in detail the documents or information to be protected and provide precise reasons for the objection to discovery.” “A ‘blanket claim’ as to the applicability of a privilege does not satisfy the burden of proof.”
Lear has failed to satisfy the requirements cited above with respect to the privilege objections asserted. Thus, if Lear intends to withhold any of the materials requested here based on a claim of privilege, it must provide Excel with a “detailed description of the materials in dispute and ... specific and precise reasons for [its] claim of protection from disclosure.” The description should include at least the following information for each such document:
a. A description of the document (i.e. correspondence, memorandum, etc.);
b. Date prepared or date notations made;
c. Date of document (if different from #2);
d. Who prepared the document or made notations on the document;
e. For whom the document was prepared and to whom the document was directed;
f. Purpose of preparing the document or making the notations;
g. Number of pages of each document; and
h. Basis for withholding discovery.
Based on this discussion, Lear will be ordered to produce the personnel files requested and provide a detailed log for any documents withheld based on claims of privilege.
3. Request 16
This request seeks documents concerning Excel retained by several people identified by name who dealt with Excel on behalf of Lear. Based on the limited number of documents produced in response to this request, Excel alleges Lear did not make a good faith search of documents.
Lear denies it did not make a good faith search for the documents requested and argues Excel’s allegations are speculative and incorrect. Notwithstanding this argument, Lear goes on to state that it is conducting a second search to determine if additional responsive documents exist. Lear further states that a privilege log is being prepared for responsive documents withheld based on claims of privilege.
Given Lear’s response here, the Court will treat this aspect of Excel’s motion as uncontested and order Lear to complete its search and produce responsive documents and/or a privilege log by May 30, 2003.
J. Request 18
Lear agreed to produce the purchase orders requested here but states that a reasonable amount of time is needed to complete a search and print and/or copy what is estimated to be several thousand documents from an approximately five year time period.
Given Lear’s response here, the Court will treat this aspect of Excel’s motion as uncontested and order Lear to complete its search and produce responsive documents by May 30,2003.
5. Request 24
Excel contends Lear did award or would be awarded Lear’s laminate business. In this request, Excel seeks documents evidencing that Lear communicated that fact internally or outside the company. Lear objects to this request “as calling for a legal conclusion and assuming facts in dispute.” Excel contends this objection is invalid.
In support of its objection, Lear argues the request inappropriately seeks an admission from Lear. Notwithstanding this argument, Lear states it provided responsive documents to the request and is in the process of searching for additional documents responsive to the request.
Given Lear’s response here, the Court will order Lear to complete its search and produce responsive documents by May 30, 2003.
II. Interrogatories
Excel is dissatisfied with the answers to Interrogatories 1-3, 5, 6(c), 6(d), 8-10, asserting Lear lodged groundless objections and failed to provide complete answers. In its responsive briefing, Lear repeatedly states it is still in the process of looking for answers and will provide supplemental responses to all the referenced interrogatories as soon as such answers are found.
Given this responses, the Court will order Lear to complete its search and fully answer the interrogatories by May 30, 2003. Again, Lear does not dispute that it first received these interrogatories in mid-January 2003. Thus, a May 30, 2003 deadline to find information and answer the interrogatories provides a four and one-half months window for the task, a window of time the Court believes is more than reasonable.
Based on the discussion above,
(1) Excel’s Request for Hearing (doc. 108) is denied; and
(2) Excel’s Motion to Compel (doc. 98) is granted in its entirety and Lear is hereby ordered to complete its search for information, documents and tangible things, answer the referenced in terrogatories and produce responsive documents and/or a privilege log by May 30,2003.
IT IS SO ORDERED.
. See D. Kan. Rule 7.2 (requests for oral argument on motions are granted “at the discretion of the court”).
. Although Excel maintains it attached as Exhibit A copies of all relevant discovery requests and Lear’s responses, there were no attachments to Excel’s pleadings.
. Fed.R.Civ.P. 26(b)(1).
. Scott v. Leavenworth Unified Sch. Dist. No. 453, 190 F.R.D. 583, 585 (D.Kan.1999).
. McCoo v. Denny’s, Inc., 192 F.R.D. 675, 686 (D.Kan.2000).
. Steil v. Humana Kansas City, Inc., 197 F.R.D. 442, 445 (D.Kan.2000).
. Sheldon v. Vermonty, 204 F.R.D. 679, 689-90 (D.Kan.2001) (citations omitted).
. Lear’s Memorandum in Opposition to Excel’s Motion to Compel (doc. 101) at pp. 3-4.
. Fed.R.Civ.P. 34(b).
. Western Resources, Inc. v. Union Pacific Railroad, No. 00-2043-CM, 2001 WL 1718368, *3 (D.Kan. Dec.5, 2001) (quoting Audiotext Communications v. U.S. Telecom, Inc., No. 94-2395-GTV, 1995 WL 18759, at * 1 (D.Kan. Jan. 17, 1995)).
. Id.
. See, supra, Section 1(B).
. See, supra, Section 1(B).
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4182541-19786 | EDITH BROWN CLEMENT, Circuit Judge:
Defendant-appellant Patrick Nguyen (“Nguyen”) appeals from the district court’s order granting summary judgment in favor of plaintiff-appellee Humana Health Plan, Inc. (“Humana”). For- the reasons explained below, we REVERSE the judgment of the district court and REMAND for further proceedings consistent with this opinion.
Facts and Proceedings
Nguyen is a participant in the API Enterprises Employee Benefits Plan (the “Plan”), an ERISA-governed employee welfare plan established by API Enterprises, Inc. (“API”). API entered into a Plan Management Agreement (“PMA”) with Humana, through which Humana agreed to serve as “Plan Manager” and to provide various administrative services to the Plan. Two features of the PMA are particularly relevant here.
First, the PMA made clear that API or the Plan’s administrator would make all discretionary decisions about the Plan’s administration and management, and that Humana “act[ed] as an agent of [API] authorized to perform specific actions or conduct specified transactions only as provided in this Agreement.” API agreed to give Humana written notice of “the Plan’s management policies and practices,” and. Humana agreed that it “operat[ed] within a framework of the Plan’s management policies and practices authorized or established by the Plan Administrator, in accordance with the provisions of the Plan.” While the PMA authorized Humana to conduct its affairs according to its normal operating procedures, it stated that Humana must abandon its normal procedures if “they are inconsistent with the Plan’s management policies or practices.” The PMA authorized Humana to hire “subcontractors and/or counsel” of its choosing to perform certain services. But the parties agreed that API would reimburse Humana for fees paid to outside counsel only if the “legal fees incurred by [Humana] [were] attributable to a request, direction, or demand by [API], the Plan Administrator, or the Employer.”
Second, the PMA stated that Humana would provide “ ‘Subrogation/Recovery’ services ... [for] identifying and obtaining recovery of claims payments from all appropriate parties through operation of the subrogation or recovery provisions of the Plan.” The PMA defined subrogation and recovery services to include: “(1) Investigation of claims and obtaining additional information to determine if a person or entity may be the appropriate party for payment”; “(2) Presentation of appropriate claims and demands for payment to parties determined to be liable”; “(3) Notification to Participants that recovery or subrogation rights will be exercised with respect to a claim”; and “(4) Filing and/ prosecution of legal proceedings against any appropriate party for determination of liability and collection of any payments for which such appropriate party may be liable.” API agreed to pay Humana “30% of all amounts recovered” under the subrogation and recovery services provision.
According to the district court’s opinion, Nguyen was injured in an automobile accident in April 2012. Between April 2012 and April 2013, the Plan paid $274,607.84 to cover Nguyen’s resulting medical expenses. Nguyen “recovered from a third party settlement funds of $255,000 for damages sustained in the accident.” Nguyen argued, the district court accepted, and Humana does not contest that the third party settlement funds were paid by Nguyen’s own insurance provider.
The Plan notified Humana that it did not intend to seek reimbursement from Nguyen, because the Plan’s governing documents did not allow recovery from a beneficiary’s uninsured motorist policy payout. Humana determined that it was free to disregard the Plan’s instruction. It sued Nguyen in district court, seeking, inter alia, an injunction prohibiting Nguyen from disposing of the insurance payout and an “equitable lien to enforce ERISA and the terms of the Plan.” Nguyen deposited the disputed funds into the court registry and filed a counterclaim against Humana. The parties then filed cross-motions for summary judgment. The district court granted Humana’s motion, denied Nguyen’s motion, and entered judgment in favor of Humana. Nguyen appeals the district court’s order and judgment.
Standard of Review
“Standard summary judgment rules control in ERISA cases.” Green v. Life Ins. Co. of N. Am., 754 F.3d 324, 329 (5th Cir.2014) (internal quotation marks omitted). “We review a district court’s grant of summary judgment de novo, applying the same standards as the district court.” Id. (internal quotation marks omitted). “Summary judgment is appropriate when ‘there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ ” Id. (quoting Fed.R.Civ.P. 56(a)).
The decision below turned in part on the district court’s interpretation of the PMA. “[W]e review de novo the interpretation of a contract, including any questions about whether the contract is ambiguous.” Pioneer Exploration, L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 511-12 (5th Cir.2014).
Discussion
The district court held that Humana was an ERISA fiduciary as a matter of law. In its appeal, Nguyen argues that Humana is not an ERISA fiduciary, and thus, that Humana does not have the statutory right to seek relief under 29 U.S.C. § 1132(a)(3).
I.
Section 1132(a)(3) provides that any “participant, beneficiary, or fiduciary” has the right to seek an injunction and other “appropriate equitable relief’ when necessary to stop violations of ERISA’s regulatory provisions or the terms of the ERISA plan. As relevant here, a third party service provider is an ERISA fiduciary “to the extent ... [it] exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of [the plan’s] assets,” or it “has any discretionary authority or. discretionary responsibility in the administration of such plan.” 29 U.S.C. § 1002(21)(A)(i), (iii). In short, “[a] fiduciary within the meaning of ERISA must be someone acting in the capacity of manager [or] administrator.” Pegram, 530 U.S. at 222,120 S.Ct. 2143.
“We give the term fiduciary a liberal construction in keeping with the remedial purpose of ERISA.” Reich v. Lancaster, 55 F.3d 1034, 1046 (5th Cir. 1995) (internal quotation marks and alteration omitted). But the broad definition of fiduciary is still constrained in at least two ways. First, third-party service providers can serve as ERISA fiduciaries in one capacity and non-fiduciaries in another. See Pegram, 530 U.S. at 225-26, 120 S.Ct. 2143 (explaining that “persons who provide services to an ERISA plan” may operate with a conflict of interest, so long as they comply with fiduciary duties while acting in fiduciary capacity). Thus, when courts evaluate whether a party is an ERISA fiduciary, they must focus on the specific role the purported fiduciary played, as relevant to the claim at hand. See id. at 226, 120 S.Ct. 2143 (holding that, “[i]n every case charging breach of ERISA fiduciary duty, ... the threshold question is ... whether that person was acting as a fiduciary ... when taking the action subject to complaint”).
Second, not every act that could be described as “discretionary” in the general sense makes the actor a fiduciary under ERISA. For almost forty years, the Department of Labor has maintained that “a person who performs purely ministerial functions,” such as the “[pjreparation of reports concerning participants’ benefits” or “[mjaking recommendations to others for decisions with respect to plan administration,” is not an ERISA fiduciary. 29 C.F.R. § 2509.75-8, at D-2. This is because
a person who performs purely ministerial functions ... for an employee benefit plan within a framework of policies, interpretations, rules, practices and procedures made by other persons ... does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of the assets of the plan, ... and has no authority or responsibility to do so.
Id. The distinction between fiduciaries and ministerial agents applies even to “an attorney, accountant, actuary or consultant who renders legal, accounting, actuarial or consulting services to an employee benefit plan,” even though these parties exercise independent, professional judgment when acting on behalf of an ERISA plan. Id. § 2509.75-5, at D-l; see also Reich, 55 F.3d at 1049 (stating that “professionals ... who provide necessary services to ERISA plans” do not become fiduciaries simply by “play[ing] influential roles by virtue of the expertise that they possess or the capacities in which they act”). “[A]ttorneys, accountants, actuaries and consultants performing their usual professional functions will ordinarily not be considered fiduciaries, [unless] the factual situation in a particular case” shows that the professional serves as a manager or administrator of the plan. 29 C.F.R. § 2509.75-5, at D-l.
The Department of Labor’s interpretations of § 1002(21)(A) are even more persuasive when one considers their similarity to the common law of trusts, which is the “source” of ERISA’s fiduciary duty provisions. See Pegram, 530 U.S. at 224, 120 S.Ct. 2143. Under the common law of trusts, a trustee can delegate ministerial acts to third-parties. George Gleason Bogert & George Taylor Bogert, The Law of Trusts & Tmstees § 555, at 114-15 (rev.2d ed.1980). If a reasonable businessperson would “employ an outside expert” to perform a given function, the courts treats those functions as ministerial. Id. at 116— 17: “[E]mploy[ing] an attorney to collect choses in action running to the trust,” id. § 556, at 142, is viewed as a ministerial function. See id. § 555-56. The trustee may entrust such duties “to realtors, lawyers, brokers, and others, not because there is a total lack of discretion and judgment involved but because such entrustment is common business practice in similar nontrust affairs.” Bogert, supra, § 555, at 117.
Under the Department of Labor’s interpretations — as under the common law of trusts — the power to collect claims on behalf of the ERISA plan is not discretionary per se. There are at least two relevant factors that tip the scales between a ministerial employee and a fiduciary. First, the court must consider whether the plan administrator has set up “a framework of policies, interpretations, rules, practices and procedures” for the third-party to follow.. See 29 C.F.R. § 2509.75-8, at D-2; see also Bogert, supra, § 556, at 142. If the plan administrator has established such a framework, the court must consider whether the plan administrator is actively supervising the agent’s performance of the assigned task. See 29 C.F.R. § 2509.75-8, at D-2; see also Bogert, supra, § 556, at 142. One hallmark of active supervision is a requirement that the third-party submit a recommendation to the plan administrator for approval before the third-party takes further action. If the plan administrator is actively supervising the claims agent, then the fact that the agent is empowered to initiate legal action for the plan does not prove the agent is a fiduciary. See 29 C.F.R. § 2509.75-5, at D-l.
Accordingly, in considering whether the district court erred when it determined as a matter of law that Humana is an ERISA fiduciary under § 1132(a)(3), we focus on the specific role that Humana undertook regarding subrogation and recovery services. And we ask whether API provided a framework of policies and procedures to guide Humana, and supervised Humana as it executed its task.
II.
A.
The district court erred in determining that Humana is an ERISA fiduciary for two reasons. First, the district court’s interpretation of the PMA is not persuasive. The district court focused on the subrogation and recovery clause and determined that its broad language gave Humana independent power to investigate and prosecute claims, even over the Plan’s objections. But the relevant language merely defines the range of potential disputes covered by the contract; it says nothing about who has the right to finally decide whether to investigate or pursue a claim. Thus, even considered in isolation, the subrogation and recovery services clause does not show that Humana had discretion over the Plan or its assets. Reading the subrogation and recovery clause as part of the entire PMA raises additional questions about the district court’s interpretation. See Indent. Ins. Co. of N. Ant. v.W & T Offshore, Inc., 756 F.3d 347, 351 (5th Cir.2014) (explaining that courts “examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless”). For example, the district' court failed to explain how the PMA’s various provisions describing Humana as the Plan’s agent, operating under the Plan’s policies and procedures, informed its interpretation of the subrogation and recovery services clause.
Second, even if we interpreted the PMA to give Humana broad power, the district court failed to explain why Humana is not a ministerial agent. Humana’s various duties outlined in the subrogation and recovery clause describe the tasks-performed by many law firms and collections agencies. And the mere fact that Humana serves as the Plan’s legal or collections agent is insufficient to show that Humana was the Plan’s fiduciary, unless specific facts show that Humana exercised discretion as described in § 1002(21)(A)(i) and (iii). See 29 C.F.R. § 2509.75-5, at D-l; see also, Nieto v. Ecker, 845 F.2d 868, 870 (9th Cir.1988), cited with approval in Reich, 55 F.3d at 1049-50 (explaining that “attorney was not fiduciary absent evidence that he exercised authority over plan other than by usual professional functions”); cf. Health Cost Controls of Ill., Inc. v. Washington, 187 F.3d 703, 709 (7th Cir.1999) (holding that person was ERISA fiduciary because plan had assigned legal right to reimbursement, and “[b]y virtue of the assignment,” the attorney obtained “broader power than that of a lawyer hired to handle a claim, or of an ordinary collection agent”).
We hold that the subrogation and recovery clause does not show that Humana is an ERISA fiduciary. Accordingly, we hold that the district court erred when it determined that Humana was an ERISA fiduciary based on the language of that clause. Because the district court based its decision on its interpretation of the subrogation and recovery clause, we have not had to consider other evidence that might show whether Humana exercised actual, decision-making authority over the Plan or its assets. Cf. Musmeci v. Schwegmann Giant Super Mkts., Inc., 332 F.3d 339, 351 (5th Cir.2003) (explaining that this court uses “functional approach” to determine whether purported fiduciaries exercise discretionary control over ERISA plans); Hatteberg v. Red Adair Co. Emps. ’ Profit Sharing Plan, 79 Fed.Appx. 709, 716 (5th Cir.2003) (per curiam) (explaining that “factual matter” showing alleged fiduciary’s actual role are “key”). Because we reverse and remand on statutory standing grounds, we do not decide whether the district court erred on the merits.
B.
We agree with the dissent that a third-party service provider may be an ERISA fiduciary even if the service provider possesses only “some discretionary authority.” But we disagree with the dissent’s suggestion that Reich somehow limited the definition of ministerial activities to include only benefits determinations. As we noted above, the Department of Labor has stated that attorneys “performing their usual professional functions” are not fiduciaries, and has described persons “[m]aking recommendations to others for decisions with respect to plan administration,” who operate “within a framework of policies, interpretations, rules, practices and procedures made by other persons,” as “ministerial” employees. 29 C.F.R. § 2509.75-5, at D-l; id. § 2509.75-8, at D-2. Reading these interpretive guidelines together, we see no reason why collections agents cannot be ministerial employees, so long as they operate under an ERISA plan’s framework of policies and procedures, and the plan administrator supervises the agent’s activities.
We do not hold, as the dissent suggests, that a third-party service provider must have final decision-making authority to be an ERISA fiduciary. We focused on final decision-making authority because that was a factor the district court considered below. Questioning whether a party has final decision-making authority is simply one way of asking whether the Plan administrator was actively supervising Humana.
We also disagree with the dissent that our reasoning is circular. It is of course true that, by holding that Humana was the Plan’s fiduciary, the district court impliedly held that Humana was not a ministerial employee. Our point is that, even if the district court interpreted the PMA to give Humana fairly broad powers, the proper analysis was not at an end without considering the factors, discussed above, which the Department of Labor has stated are relevant in determining whether third-party agents are ministerial employees. Nothing in the district court’s opinion suggests that the court considered those factors.
Humana may be able to adduce facts showing that API never set out a framework of policies and procedures as promised, or that it did not supervise Humana’s collection activities. But the PMA alone does not show either failure. Until Humana adduces at least some evidence showing that API failed to guide and supervise its operations, Humana cannot show that it has the right to seek relief under § 1132(a)(3).
III.
In his notice of appeal, Nguyen stated that he was appealing both the district court’s grant of summary judgment in Humana’s favor, and the district court’s denial of summary judgment in his favor. But Nguyen does not sufficiently address the district court’s failure to grant his motion for summary judgment in his appellate brief. Accordingly, Nguyen has waived that issue.. See, e.g., Heimlich v. First Bank N.A., 80 Fed.Appx. 947, 949 (5th Cir.2003) (per curiam).
Conclusion
For the reasons explained, we REVERSE the judgment of the district court and REMAND for further proceedings consistent with this opinion, beginning with a reexamination of the issue of Humana’s standing.
. The dissent states that the PMA authorized Humana to follow its own procedures when performing subrogation and recovery services. Article II of the PMA expressly stated that where API and Humana's policies and procedures conflicted, API’s policies and procedures controlled. Unlike the other articles containing general terms, Article II did not contain a clause stating that later, specific terms controlled more general terms. Thus even the provision cited by the dissent does not show that API relinquished control over Humana when Humana performed subrogation and recovery services.
. Humana also brought conversion and tortious interference claims, but these claims are not before us on appeal.
. The provisions of the PMA are not the terms of the Plan per se, but it may "provide elements of a plan by setting out rules” through which the Plan will be administered. Pegram v. Herdrich, 530 U.S. 211, 223, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000).
. We recognize that Pegram addressed whether a defendant was an ERISA fiduciary. But ERISA only contains one definition of fiduciary, and nothing in ERISA’s civil enforcement provisions suggests that we should apply one fiduciary test when determining whether a party is a proper fiduciary-plaintiff, and another when determining whether a party is a proper fiduciary-defendant.
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7833901-25514 | OPINION
HINES, United States Magistrate Judge.
Plaintiff Benny Frank Nettles sues Carl R. Griffith, Jr., Sheriff of Jefferson County, Texas, and Jeanne Simon, an official of the Jefferson County Detention Center, in their individual and official capacities, pursuant to Title 42 U.S.C. § 1983. Plaintiff asserts claims for denial of due process of law under the Fourteenth Amendment and for failure to protect under the Eighth Amendment.
The parties consented to trial and entry of judgment by a United States magistrate judge. On October 12, 1994, a bench trial was conducted in Beaumont, Texas. Due to a party’s illness, the court ordered a recess and re-convened testimony on November 21, 1994.
Jurisdiction is based on Title 42 U.S.C. § 1983. Because Jefferson County is within the geographic confines of the Eastern District of Texas, Beaumont Division, venue is proper. See 28 U.S.C. § 1491.
I. Facts
On November 28, 1992, plaintiff was a prisoner at the Jefferson County Detention Center in Beaumont. Plaintiffs parole had been revoked. He was awaiting transfer to the Texas Department of Criminal Justice— Institutional Division. He had been incarcerated in Jefferson County for approximately two months but spent the last seven days at the “new Jail.”
Following the evening meal, Jesus To-mayo, a correctional officer, turned off the television set in the prisoners’ day room. Tomayo stated the inmates had failed to properly clean the room after the meal, and are not permitted to watch television until clean-up is complete.
Plaintiff approached Tomayo and asked why he had turned off the television. To-mayo perceived Nettles as threatening and belligerent. Nettles testified he was neither, but agreed that Tomayo was incensed.
Plaintiff requested to see an official of higher rank. He returned to his cell to await an appointment with another official. After about thirty minutes, he was brought to see Lt. Jeanne Simon. Plaintiff testified he spoke with Lt. Simon for thirty to forty-five minutes.
During this time, Lt. Simon testified they discussed the incident. Lieutenant Simon testified plaintiff told her “he would not remain at the jail.” She “took this to mean he was an escape risk.” Because the facility still was under construction, Lt. Simon thought the ability to thwart an escape plan might be diminished.
Lieutenant Simon concluded plaintiff should be returned to the old Jail, which had heightened security facilities. She also was of the opinion plaintiff should be placed in administrative segregation (“ad-seg”). However, she did not mention a rule violation and did not tell plaintiff he would be subject to discipline for any infraction. She stated that she did not characterize this consultation as a “hearing.”
The new Jail did not have any ad-seg facilities at this time. Lieutenant Simon testified that she did not refer plaintiff to ad-seg, nor did she tell the old Jail officials to place him in ad-seg. She remarked, however, that she “recommended” that a placement in ad-seg would be appropriate and old Jail officials should “talk” to plaintiff before a placement.
Plaintiff returned to his cell. Fifteen to twenty minutes later, six officers arrived, told plaintiff to gather his belongings, and transported him to the old Jail.
Officials at the old Jail immediately processed plaintiff upon his arrival and assigned him to ad-seg. Lieutenant Daniel Duhon processed plaintiffs return into the old Jail facility. Lieutenant Duhon did not give plaintiff any sort of hearing prior to placing him in ad-seg. Rather, Duhon told plaintiff he was being placed in ad-seg on orders of Lt. Simon.
Disciplinary segregation cells are located in the jail’s third floor, B wing, upper level (“3B Upper”). However, upon plaintiffs arrival at the old Jail, 3B Upper was completely occupied. Officials took plaintiff to the lower level (“3B Lower”). This level housed prisoners with psychological deficiencies and therefore had acquired the nickname “the nut run.”
Plaintiff testified he and his cellmate were the only disciplinary prisoners on 3B Lower. 3B Lower inmates taunted plaintiff and his cellmate. These prisoners “roamed” the run, causing plaintiff and his cellmate to avoid the front end of the cell closest to the bars. Feces, urine, water, and lighted matches were hurled into plaintiffs cell.
Plaintiff was unaware of why he was in ad-seg and why he was housed in the “nut run.” He submitted several complaint forms, or “cop-outs,” requesting assistance from or a consultation with officials. Plaintiff testified he witnessed guards destroying several of the cop-out forms. Lieutenant Mark Frederick corroborated that he occasionally has “problems with cop-outs not getting where they are supposed to be.” All prisoners enjoyed unimpeded access to cigarettes and matches. On December 6,1992, plaintiff testified he completed a cop-out that complained of fires on the run and requested smoking materials be taken from the other 3B Lower inmates.
On December 7, 1992, several inmates ignited newspapers and toilet paper on the run during the day. Other prisoners smothered the flames. Later that night, extreme heat awakened plaintiff. His laundry hung on the bars of the cell for pickup, including a mattress cover, several jumpsuits, towels, uniforms, and blankets, was in flames and emanating thick smoke. Fire consumed the trash strewn in front of the bars.
Plaintiff and his cellmate pressed the call button in their cell, but it was inoperative. They yelled for help. Officer Jeff Safar responded and used a water propelled extinguisher to douse the flames.
The bars of the cell opened and plaintiff exited the cell. He slipped on the water emitted from the fire extinguisher, fell, suffered an incarcerated hernia, and underwent immediate emergency surgery at St. Elizabeth Hospital in Beaumont.
After surgery, plaintiff spent four days in the jail infirmary. He then returned to 3B Lower. He remained in ad-seg at this location until December 16, 1992, a total of fourteen days.
In addition to the hernia, plaintiff claims to have sustained injury to his right elbow and forearm in the fall. These injuries continue to give plaintiff arthritic-like pains. He exhibited a burn on his forearm that healed with permanent discoloration, which he treated himself. He further testified he suffers from insomnia and nightmares due to the incident.
Plaintiff seeks $50,000 in compensatory damages and $200,000 in punitive damages.
II. The Due Process Claim
Plaintiff asserts that the summary process through which he was placed in disciplinary administrative segregation violated his right to due process of law under the Fourteenth Amendment.
а. The “Protected Liberty Interest” Standard
The Due Process Clause guards against arbitrary deprivation of protected liberty interests. See U.S. Const, amend. XIV (“No State shall ... deprive any person of life, liberty, or property, without due process of law....”). The Due Process Clause alone does not create liberty interests in and of itself. Hewitt v. Helms, 459 U.S. 460, 476, 103 S.Ct. 864, 874, 74 L.Ed.2d 675 (1983). If a protected interest has not been created in some other manner, the Due Process Clause is not implicated. Parker v. Cook, 642 F.2d 865, 867 (5th Cir.1981). A protected liberty interest arises when state or local rules and regulations sufficiently circumscribe a government official’s discretion as to make a course of action mandatory or expected. Hewitt, 459 U.S. at 476, 103 S.Ct. at 873-74; Green v. McKaskle, 788 F.2d 1116, 1125 (5th Cir.1986).
Plaintiff argues he had a protected liberty interest in remaining in the general jail population and as a consequence, the Constitution guaranteed him at least an informal hearing and notification of the charges against him before placement in adseg. He alleges he did not receive this process.
b. Protected Liberty Interests and Prison Discipline
Prisoners charged with rule violations are entitled to certain due process rights under the Fourteenth Amendment when the disciplinary action may result in a sanction that will impose upon a liberty interest. See Wolff v. McDonnell, 418 U.S. 539, 94 S.Ct. 2963, 41 L.Ed.2d 935 (1974). A prisoner facing a sanction such as solitary confinement is entitled to advance written notice of the claimed violation, a written statement of the fact-finders, and an opportunity to call witnesses and present documentary evidence in defense. See Smith v. Rabalais, 659 F.2d 539, 542 (5th Cir.1981), cert, denied, 455 U.S. 992, 102 S.Ct. 1619, 71 L.Ed.2d 853 (1982).
The standard is different for imposition of administrative segregation, because, generally, segregation is less restrictive than solitary and has no adverse effect on accumulated good-time credits or impending parole. See Hewitt, 459 U.S. at 476, 103 S.Ct. at 873-74.
An inmate must receive some notice of the charges against him and an opportunity to present his views to the prison official charged with deciding whether to transfer him to administrative segregation. Ordinarily a written statement will accomplish this purpose, although prison administrators may find it more useful to permit oral presentations in cases where they beheve a written statement would be ineffective. So long as this occurs, and the decision maker reviews the charges and then-available evidence against the prisoner, the Due Process Clause is satisfied.
Id. at 476-77, 103 S.Ct. at 874.
c. Application
1. Did Nettles have a Protected Liberty Interest?
The majority of jail officials who testified were in agreement that Jefferson County Detention Center inmates may be placed in segregation for punitive reasons only under very specific circumstances which include advance written notice, formally noticed hearing, post-hearing findings, and periodic review by a disinterested officer. Lieutenant Daniel Duhon testified that absent an emergency, a prisoner cannot be placed in ad-seg without notice, an opportunity to present witnesses, and a written order of findings informing the prisoner he would be placed in ad-seg. Officer Tomayo testified that a hearing is always conducted by a heutenant prior to an ad-seg referral, and three officers would act as a “jury”. Officer Tomayo was unaware of ad-seg ever being imposed without such a hearing. Finally, Lt. Simon concurred that a hearing precedes ad-seg disciplinary action.
Accepting this consensus, the court finds that jail rules, regulations, and practices sufficiently circumscribe corrections officers’ discretion as to make the above-described course of action mandatory or expected. Consequently, the court concludes a protected liberty interest existed with respect to removal of inmates from general population to administrative segregation.
2. Did Nettles Receive Due Process?
The next issue is whether plaintiffs consultation with Lt. Simon constituted a hearing comporting with Due Process requirements. For several reasons, it did not.
First, defendant Simon did not consider her discussion with Nettles to be a disciplinary hearing. Indeed, Lt. Simon insisted at trial she was not the person charged with determining whether plaintiff should be placed in administrative segregation. Second, Lts. Duhon and Frederick testified they did not arrange a healing for plaintiff. Lieutenant Duhon was laboring under the assumption that plaintiff received a hearing, and other appropriate procedures, at the new Jail.
Lastly, plaintiff never received even informal notification of the charges against him. The charges remained a murky issue even at the time of trial. Two jail officials testified plaintiffs verbal confrontation with Officer Tomayo more likely than not precipitated the referral to segregation, and plaintiff appeared to be under this belief as well. However, jail officials remarked one would not receive two weeks in administrative segregation for “back-talking” to an officer. Lieutenant Simon, who played the pivotal role, testified it was plaintiffs propensity as an “escape risk” that made her “recommend” administrative segregation.
Nettles was never given a hearing, notice of charges pending against him or a statement of reasons. His confinement to administrative segregation was not reviewed — or at least, not reviewed in a manner which would verify that proper initial procedure had been followed. As a result, plaintiffs constitutional right of due process was violated.
3. Defendants’ Personal Involvement
The next issue is whether plaintiff proved that either defendant, Sheriff Griffith or Lt. Simon, deprived him of due process. Personal involvement of a defendant is a necessary prerequisite to liability under section 1983. Lozano v. Smith, 718 F.2d 756, 768 (5th Cir.1983); Bowen v. Watkins, 669 F.2d 979, 988 (5th Cir.1982).
Sheriff Griffith is sued in his personal and official capacities. The evidence is devoid of any personal involvement by Sheriff Griffith. He cannot become liable personally on the basis of respondeat superior. Jacquez v. Procunier, 801 F.2d 789, 793 (5th Cir.1990). Therefore, plaintiffs personal capacity suit against Sheriff Griffith fails.
Suit against Sheriff Griffith in his official capacity is, in effect, a suit against the county. See Brandon v. Holt, 469 U.S. 464, 105 S.Ct. 873, 83 L.Ed.2d 878 (1985); Stem v. Ahearn, 908 F.2d 1, 4 (5th Cir.1990). As a municipality, however, the county is liable only if an unconstitutional policy, custom, or procedure causes injury. Monell v. Department of Social Servs., 436 U.S. 658, 692, 694, 98 S.Ct. 2018, 2036-37, 2037-38, 56 L.Ed.2d 611 (1978). No evidence suggests that plaintiffs treatment was pursuant to official policy, custom or procedure. Indeed, what happened to Nettles appears to violate official jail practices. Therefore, the official capacity suit against Sheriff Griffith also fails.
As to Lt. Simon, there is no doubt but that she had personal involvement in events which resulted in Nettles being placed in ad-seg. However, Lt. Simon’s testimony raises the issue that she did not intentionally deny Nettles due process. Indeed, at trial she insisted that she did not and could not put Nettles in ad-seg. She asserts she simply “recommended” that Nettles be in ad-seg at the new Jail.
Under Lt. Simon’s view, plaintiff simply fell between the cracks of the system. New Jail officials believed plaintiff would receive a hearing at the old Jail while old Jail officials believed plaintiff had received a hearing at the new Jail. While this might demonstrate negligence, it does not prove an intentional deprivation of due process.
Lieutenant Simon’s testimony that she did not order Nettles to ad-seg conflicts with Officer Tomayo’s testimony. Moreover, it conflicts with Lt. Simon’s earlier testimony submitted via affidavit in support of a motion for summary judgment. There, she stated,
“... I reassigned inmate Nettles to the downtown jail and had him placed on Administrative Segregation.”
Affidavit of Jeanne Simon, Affidavit in Support of Motion for Summary Judgment (filed May 2, 1994).
Finally, Lt. Duhon testified that he understood Nettles was being placed in ad-seg on orders of Lt. Simon.
The court concludes that the greater weight of the credible evidence supports a finding that Lt. Simon ordered Nettles to administrative segregation. A deliberate and intentional act precipitated the placement in ad-seg. As a result, Lt. Simon’s conduct was not mere negligence, and this action properly comes within the purview of section 1988. See Franklin v. Aycock, 795 F.2d 1253 (6th Cir.1986).
4. Damages
The issue remains as to recoverable damages. Plaintiff seeks both compensatory and punitive damages, plus attorney fees,
a. Compensatory Damages
With regard to compensatory damages, ‘“the basic purpose’ of § 1983 damages is ‘to compensate persons for injuries that are caused by the deprivation of constitutional rights.’ ” Memphis Community Sch. Dist. v. Stachura, 477 U.S. 299, 307 n. 9, 106 S.Ct. 2537, 2542-43 n. 9, 91 L.Ed.2d 249 (1986) (quoting Carey v. Piphus, 435 U.S. 247, 254, 98 S.Ct. 1042, 1047, 55 L.Ed.2d 252 (1978)). “Damages based on abstract ‘value’ or ‘importance’ of constitutional rights is not a permissible element of compensatory damages ...” Id. 477 U.S. at 310, 106 S.Ct. at 2545. However, “[a] violation of constitutional rights is never de minimis, a phrase meaning so small or trifling that the law takes no count of it.” Lewis v. Woods, 848 F.2d 649, 651 (5th Cir.1988). Nominal damages are the appropriate award where constitutional rights have been violated but the plaintiff has not sustained, or proven, actual damages. Carey, 435 U.S. at 266-67, 98 S.Ct. at 1053-54.
Quantifying plaintiffs actual damages presents a quandary. First, plaintiff was a convicted prisoner, so he lost no wages when isolated in administrative segregation. This avenue of measure therefore is foreclosed. In addition, no evidence was presented as to other traditional tort elements of damages except possibly for mental anguish, which the court believes to be subsumed in the ensuing discussion of damages for wrongful placement in administrative segregation.
The Fifth Circuit has not considered proper calculation of a prisoner’s damages in this situation. Other circuits, however, articulate the concept that a prisoner’s damages for wrongful placement in solitary confinement or administrative segregation are measurable. See, e.g., United States v. Standish, 3 F.3d 1207 (8th Cir.1993) (remanded for recalculation of damages, stating $500 per day in administrative segregation was excessive); Smith v. Rowe, 761 F.2d 360, 368 (7th Cir. 1985) ($119 per day awarded for wrongful segregation); Saxner v. Benson, 727 F.2d 669, 672 (7th Cir.1984) ($129 per day awarded for wrongful administrative segregation), aff'd on other grounds, 474 U.S. 193, 106 S.Ct. 496, 88 L.Ed.2d 507 (1985); King v. Higgins, 702 F.2d 18, 19-20 (1st Cir.1983), cert. denied, 464 U.S. 965, 104 S.Ct. 404, 78 L.Ed.2d 344 (1983) ($25 per day awarded for wrongful solitary confinement); Maxwell v. Mason, 668 F.2d 361, 366 (8th Cir.1981) ($100 per day awarded for solitary confinement).
In Smith v. Rowe, the Seventh Circuit enumerated factors to consider when assessing damages for wrongful placement in administrative segregation. These included “(1) the nature, extent, and duration of the injury to the plaintiff; (2) general pain and suffering; (3) humiliation; (4) mental dis tress, and (5) the violation of constitutional rights.” In Saxner v. Benson, it was noted that the trial court had credited plaintiffs testimony with establishing
mental and emotional distress injuries attributable to the due process violations. The trial court found that the “anguish and frustration which flowed from the patent unfairness of the hearings and the fear that such unfair treatment would continue in the future in their administrative review and appeals, at their parole hearings, and in their day to day existence in the segregation unit unrelated to the issue of the length (35 days) of time served in segregation” contributed to their actual injuries.
Saxner, 727 F.2d at 672.
There is evidence of actual injury in this case. Plaintiff was placed in a section of the jail designated primarily for the mentally imbalanced. He was subjected to conditions in this area which he would not normally have sustained, including the ultimate fire and dousing with hot water and other substances.
Plaintiff testified to the lingering results of his placement in segregation and Williams testified to plaintiffs confusion and fear during the segregation. Plaintiffs situation so moved Williams that he sought assistance for plaintiff from the chaplain. Furthermore, it appears plaintiff may have been panicked at certain times of his segregation, inquiring of Lee three or four times a shift for assistance from supervising officers.
Consequently, the court is presented with a panoply of damages considered reasonable by appellate courts. Inflationary adjustment, see United States Department of COMMERCE, 1993 Statistical Abstract of the United States 481, no. 755 (113th ed.) (purchasing power of the dollar), produces an acceptable range of approximately $30 to $154.
When compared to the facts of existing case law, plaintiff did not endure such egregious circumstances as to warrant an award on the higher end of the scale. For example, the plaintiff in Smith, who was awarded $119 per day (worth approximately $142 per day in 1992) stayed cloistered in segregation for twenty-two and a half months, without heat. Smith, 761 F.2d at 364. She was provided nothing except a bed, a dresser, a toilet, and a sink. She waited six weeks for a change of clothing. Id.
Testimony was presented showing plaintiffs segregation resulted in diminished privileges, including loss of ability to attend church services and the day room area. Coupled with the mental and emotional toll, a reasonable amount in this case is $50.00 per day in administrative segregation.
The causation standard in section 1983 actions generally is proximate cause. See, e.g., Gonzalez v. Ysleta Indep. Sch. Dist., 996 F.2d 745, 753 (5th Cir.1993); Edward J. Devitt, et al., Federal Jury Practice and Instructions § 103.03 (3d ed. 1987 & Supp. 1994). Plaintiff may be awarded only such damages as the evidence shows to have been proximately caused by the defendant’s wrongful conduct. Devitt, supra, § 103.03. Proximate cause includes components of cause in fact and foreseeability. See, e.g., Reimer v. Smith, 663 F.2d 1316, 1322 (5th Cir.1981); LaPoint v. Shirley, 409 F.Supp. 118, 120 (W.D.Tex.1976); McClure v. Allied Stores of Texas, Inc., 608 S.W.2d 901 (Tex. 1980).
The court has concluded earlier that Lt. Simon’s conduct was a cause in fact of the unlawful placement of Nettles in ad-seg. The court must next determine whether it was foreseeable to a person of ordinary prudence that Nettles might remain in ad-seg for a total of fourteen days before receiving review by a disinterested officer.
The only evidence submitted to the court on this issue was testimony from Lts. Duhon and Frederick. Duhon stated that ordinary ad-seg review occurs at intervals of fifteen to thirty days, Frederick from seven to fourteen days. Therefore, it was foreseeable that Nettles might remain in ad-seg for fourteen days.
Given these findings, the court concludes an appropriate compensatory damage award to Nettles is $700.
b. Punitive Damages
Punitive damages are designed to punish a wrongdoer for “willful and malicious conduct and to deter others from similar behavior.” Stachura, 477 U.S. at 307 n. 9, 106 S.Ct. at 2543 n. 9. Thus, plaintiff must prove that the defendants’ acts were “maliciously, wantonly, or oppressively done.” No facts presented with regard to his due process claim indicate willfulness, except for the wilful decision to place him in administrative segregation. Franklin, 795 F.2d at 1262. Plaintiff was deprived of the process to which he was entitled, but the lack of procedure was more the result of misstatement and miscommunication than malice. Consequently, plaintiff may recover no punitive damages.
III. The Claim for Failure to Protect
a. The Contentions
Plaintiff contends that jail officials have a constitutional duty to protect prisoners from violence at the hands of other prisoners. He argues that his ad-seg cell assignment in “the nut run,” where he was subject to taunts, personal indignities, uncollected garbage, and eventual injury while evacuating his cell during an inmate-induced fire, violated the Eighth Amendment’s guarantee of freedom from cruel and unusual punishment.
Defendants deny plaintiffs averments and assert that while assigned to 3B Lower, plaintiff was subjected to no more danger from taunts, garbage, and fires than inmates housed on other floors and wings in the old Jail. Defendants acknowledge that inmate-induced fires were persistent, but contend they were a non-injury-producing phenomenon remedied before trial by implementation of a new policy prohibiting possession of smoking materials by inmates.
b. The Evidence
There is little dispute in the evidence concerning operative facts. Plaintiffs injury-sustained while exiting his cell during a fire is uncontroverted. It is conceded that inmate-induced fires occurred frequently and that jail officials were aware of their occurrence.
Several witnesses testified concerning jail fires. Plaintiff testified and tendered in addition two jail trusty inmates, Troy Anthony Williams and Billy Lee. Defendants presented testimony of Lieutenant Frederick and Officer Safar, both jail officials. While accounts varied in detail, they were consistent in confirming the astonishing fact that inmate-induced fires were common. The fires occurred at least once per shift and as often as three or four times an hour. Typically, inmates started fires by flicking lighted matches or other material already aflame out of their cells onto the run when trash or other flammables were present.
These fires were set for various reasons. Sometimes they were started as an amusement or to relieve boredom. Sometimes they were intended to aggravate staff or vex other inmates. A common reason was to achieve better ventilation, as jail officials would be forced to open outside vents to clear the smoke. The fires were not expected to cause injury, nor did they before plaintiff, other than the occasional minor smoke inhalation which was treated in the jail infirmary.
c. Safekeeping and Deliberate Indifference
|
3792672-17685 | OWENS, District Judge:
Appellants R. W. Steltemeier, Jr. (Steltemeier) and J. Clyde Alley (Alley) have appealed to this court pursuant to Rule 801, Rules of Bankruptcy Procedure, the turnover order of the bankruptcy judge dated August 9, 1974, directing Steltemeier to pay over to the trustee of the bankrupt, Kirk Kabinets, Inc. (Kirk), the sum of $14,112.00.
I. BACKGROUND.
Kirk was adjudged a bankrupt on October 15, 1973, subsequent to the creditors’ filing of an involuntary petition on September 28, 1973. The funds which are the subject of the turnover order were paid to Novice Cole (Cole) by Alley pursuant to an agreement and were deposited to the account of Aleo Cabinets, Inc. (Aleo). Thereafter, Alley received $34,000 from this account on or about August 10, 1973. Of these funds, $25,799.00 were transferred to appellant Steltemeier’s law firm. The bankruptcy court issued the turnover order after finding, inter alia, that Alley, as sole shareholder and personal guarantor of Kirk’s indebtedness totaling $300,000.00, transferred $150,000.00 derived from an assignment of Kirk’s accounts receivable to Aleo. Aleo and Kirk were found to be indistinguishable entities, said deposit being a contribution to Kirk’s capital structure. These funds were to be used to revitalize Kirk and were carried under Alco’s name to avoid garnishment and attachment by Kirk’s creditors. The subsequent transfer of these funds resulted in their possession by Kirk’s agents, the Steltemeier firm being determined by the court to be Kirk’s attorney. Upon the Steltemeier firm’s inability to consistently establish disbursements of the funds and because the court awarded no attorneys’ fees, the court thereafter entered its order.
Appellants pray that this court reverse the bankruptcy court, contending that the court’s finding that the trustee established a prima facie case for issuance of a turnover order is contrary to the law and the evidence.
II. THE PRIMA FACIE CASE.
An appropriate point of beginning for consideration of appellants’ contention is the United States Supreme Court decision in Maggio v. Zeitz, 333 U.S. 56, 68 S.Ct. 401, 92 L.Ed. 476 (1948), wherein the Court stated:
“The turnover procedure is one not expressly created or regulated by the Bankruptcy Act. It is a judicial innovation by which the court seeks efficiently and expeditiously to accomplish ends prescribed by the statute, which, however, left the means largely to judicial ingenuity.
“The courts of bankruptcy are invested ‘with such jurisdiction at law and in equity as will enable them’ to ‘cause the estates of bankrupts to be collected, reduced to money and distributed, and determine controversies in relation thereto . . . .’ Title 11 USCA § 11(a)(7), [3 FCA title 11,] § 11(a)(7) and the function to ‘collect and reduce to money the property of the estates’ is also laid upon the trustee.
“11 USCA § 75(a)(1), [3 FCA title 11,] § 75(a)(1). A correlative duty is imposed upon the bankrupt fully and effectually to turn over all of this property and interests, and in case of a corporation the duty rests upon its officers, directors or stockholders. 11 USCA § 25, [3 FCA title 11,] § 25. * * * * * *
“[T]he trustee, as well as the Court, is commanded to collect the property. The Act vests title to all property of the bankrupt, including any transferred in fraud of creditors, in the trustee, as of the date of filing the petition in bankruptcy, 11 USCA § 110, [3 FCA title 11,] § 110, which puts him in position to pursue all plenary or summary remedies to obtain possession.
“To entertain the petitions of the trustee the bankruptcy court not only is vested with ‘jurisdiction of all controversies at law and in equity’ between trustees and adverse claimants concerning property acquired or claimed by the trustee, 11 USCA § 46, [3 FCA title 11,] § 46, but it also is given a wide discretionary jurisdiction to accomplish the ends of the Act, or in the words of the statute to ‘make such orders, issue such process, and enter such judgments, in addition to those specifically provided for, as may be necessary for the enforcement of the provisions of this title.’ 11 USCA § 11(a) (15), [3 FCA title 11,] § 11(a)(15).
“In applying these grants of power, courts of bankruptcy have fashioned the summary turnover procedure as one necessary to accomplish their function of administration. It enables the court summarily to retrieve concealed and diverted assets or secreted books of account the withholding of which, pending the outcome of plenary suits, would intolerably obstruct and delay administration. When supported by ‘clear and convincing evidence,’ the turnover order has been sustained as an appropriate and necessary step in enforcing the Bankruptcy Act. (citations omitted)
“But this procedure is one primarily to get at property rather than to get at a debtor. Without pushing the analogy too far, it may be said that the theoretical basis for this remedy is found in the common law actions to recover possession — detinue for unlawful detention of chattels and replevin for their unlawful taking — as distinguished from actions in trespass or trover to recover damages for the withholding or for the value of the property. Of course the modern remedy does not exactly follow any of these ancient and often overlapping procedures, but the object — possession of specific property- — is the same. The order for possession may extend to proceeds of property that has been disposed of, if they are sufficiently identified as such. But it is essentially a proceeding for restitution rather then indemnification, with some characteristics of a proceeding in rem; the primary condition of relief is possession of existing chattels or their proceeds capable of being surrendered by the person ordered to do so. It is in no sense based on a cause of action for damages for tortious conduct such as embezzlement, misappropriation or improvident dissipation of assets.
“The nature and derivation of the remedy make clear that it is appropriate only when the evidence satisfactorily establishes the existence of the property or its proceeds, and possession thereof by the defendant at the time of the proceeding.
******
“It is evident that the real issue as to turnover orders concerns the burden of proof that will be put on the trustee and how he can meet it.
“This Court has said that the turnover order must be supported by ‘clear and convincing evidence,’ Oriel v. Russell, 278 U.S. 358, 49 S.Ct. 173, 174, 73 L.Ed. 419, [13 Am Bankr NS 121], and that includes proof that the property has been abstracted from the bankrupt estate and is in the possession of the party proceeded against. It is the burden of the trustee to produce this evidence, however difficult his task may be.” 333 U.S. at 61-64, 92 L.Ed. at 482-484, 68 S.Ct. at 404. (emphasis added).
From the foregoing, it is evident that the trustee must prove the existence of three conditions for issuance of a turnover order:
(1) the property in question is in the actual or constructive possession of the bankruptcy court, thereby invoking its summary jurisdiction;
(2) the property in question is such property as vests in the trustee by virtue of section 70a of the Bankruptcy Act; and
(3) the property in question was and has continued to be in the possession and control of the defendant up to and including the time of the order. See 2 J. Moore, Collier on Bankruptcy ¶ 23.-10 [2] (14th ed. 1972).
A. Summary Jurisdiction.
Generally the trustee must establish summary jurisdiction by showing that the property was actually held in possession by or for the bankrupt at the time of bankruptcy, or was held by one under a claim which is merely colorable and not adverse. Where an adverse claim is asserted in good faith, the trustee must seek relief by plenary action. See Nicholas v. Peter Pan Snack Shop, 256 F.2d 349 (5th Cir. 1958); B. F. Avery & Sons v. Davis, 192 F.2d 255 (5th Cir. 1951), cert. denied, 342 U.S. 945, 72 S.Ct. 559, 96 L.Ed. 703.
In the case sub judice, no objection was raised by appellants to the bankruptcy court’s exercise of summary jurisdiction. Because of the appellants’ failure to interpose objection to the summary jurisdiction of the court below either by answer or by motion, appellants consented to the bankruptcy court’s exercise of summary jurisdiction. Accordingly, appellants cannot by their belated objection raise this contention on appeal.
B. Property of the Bankrupt.
It appears that the crux of appellants’ appeal rests upon the allegedly erroneous determination by the bankruptcy court that the funds in question constituted a part of Kirk’s estate. Appellants assert that the bankruptcy court erroneously determined that the funds were derived from assignment of Kirk’s accounts receivable and that the Steltemeier firm was attorney for Kirk. The appellants maintain that the funds were Alley’s personal funds, paid to Cole pursuant to a trust agreement, and returned to Alley upon Cole’s breach. Appellants further assert that the bankruptcy court erred in determining Aleo and Kirk to be one and the same entity. It is the appellants’ contention that these funds were never part of Kirk’s assets and therefore were not subject to the court’s turnover order.
In reviewing findings, this court is bound by the bankruptcy court’s determinations unless they are clearly erroneous. Rule 810, Rules of Bankruptcy Procedure. A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. United States v. United States Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746 (1947). This court finds that on the basis of the record before it, the court’s finding that the funds were derived from a sale of Kirk’s accounts receivable is clearly erroneous. However, the court’s finding that the Steltemeier firm represented Kirk is not clearly erroneous. While the record reveals that at some later point in time the Steltemeier firm did represent Alley personally, there is substantial evidence to support the court’s findings. In reviewing this finding, due deference must be given to the court’s opportunity to consider the credibility of witnesses. Rule 810, Rules of Bankruptcy Procedure.
The appellants next contend that these funds were Alley’s personal funds, paid to Cole pursuant to a trust agreement, and accordingly, never became a part of Kirk’s assets. While the record reveals that the funds came from Alley’s personal account, this court finds that upon payment to Cole these funds ceased being the personal property of Alley. No valid trust was established by the exchange. An express trust is defined by the Restatement (Second) of Trusts § 2 (1959), as a “fiduciary relationship with respect to property, subjecting the person by whom the title to the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it.” This is the common definition.
The indicia of such a trust relationship are not present in this case. There is no indication that Cole assumed any equitable duties to handle any trust funds for Alley’s benefit, that is to deal with the property for the benefit of Alley as the authorities define the relationship. The agreement was essentially a contract whereunder Cole assumed certain of Kirk’s indebtedness in return for a stated consideration, leaving Cole to use the funds as he wished. There is thus no indication that Alley intended to impose, or that Cole intended to assume the fiduciary relationship. Cole’s obligation under the contract was to hold Alley harmless from any of Alley’s personal guaranty agreements. Accordingly, this court is convinced that these funds became the personal property of Cole to be used as he wished. Whether Cole’s employment of these funds resulted in their becoming a part of Kirk’s assets is another issue for consideration.
The bankruptcy court concluded and appellants agree that the funds were deposited to Alco’s account in the First State Bank in Albany, Georgia. The bankruptcy court concluded that Aleo and Kirk were inseparable entities, which conclusion the appellants challenge. To the extent the bankruptcy court rested this determination on the basis of the court’s amendment to the bankrupt’s caption to read “Kirk Kabinets, Inc. d/b/a Aleo Cabinets, Inc.,” such basis is utterly without foundation in law, and accordingly lends no support to the court’s determination.
The recognized standard for “piercing the corporate veil” was set forth in Maule Industries v. Gerstel, 232 F.2d 294 (5th Cir. 1956), wherein the court stated:
“Courts are reluctant to pierce the corporate veil and destroy the important fiction under which so much of the business of the country is conducted, and will do so only under such compelling circumstances as require such action to avoid protecting fraud, or defeating public or private rights.” (citations omitted).
“[4,5] The burden in this case is upon Maulé to establish by pleadings and proof that Ludwig Bros., Inc. is ‘an artifice and a sham designed to execute illegitimate purposes in abuse of the corporate fiction and the immunity that it carries.’ Coryell v. Phipps, 5 Cir., 1942, 128 F.2d 702, 704. Mere identity of corporate names, stockholders and officers of [sic] the fact of ownership of capital stock in one corporation by another are not sufficient to justify disregarding the corporate fiction.” (citations omitted).
“[6] The factors commonly considered as requisite to establish that one corporation is an instrumentality of another for purpose of a turnover of its assets to the trustee in bankruptcy are well expressed in Fish v. East, 10 Cir. 1940, 114 F.2d 177, 191. Moreover, the petition and the proof must show that the corporation whose property is sought to be brought into the bankruptcy proceeding was organized or used to hinder, delay or defraud the creditors of the bankrupt, and constitutes mere ‘legal paraphernalia’ observing form only and not existing in substance or reality as a separate entity.” Id. at 297.
Though cognizant of the court’s hesitancy to disregard the corporate fiction, application of the above-cited principles to the facts in this ease convinces this court that Aleo and Kirk were not separate and distinct legal entities, but rather were inseparable. Aleo was a sham organized when Kirk was deeply insolvent by Novice Cole who was Kirk’s manager and who held an option to purchase Kirk. Alco’s exclusive aim was the ’maintenance of Kirk’s operations— completion of Kirk’s unfinished cabinet contracts then in default — in an effort to alleviate Kirk’s dire financial situation and thus avoid bankruptcy. Approximately $120,000 of the funds were used to pay certain contractors doing business with Kirk. Collections received from these contracts were applied to Kirk’s secured creditors. Aleo assumed those facilities which had been previously utilized by the then defunct Kirk including Kirk’s building, machinery, inventory, and employees. By continuing Kirk’s business through the guise of Aleo, Cole immunized the funds from the legitimate claims of Kirk’s creditors. On the basis of the record, this court is left with the inescapable conclusion that Aleo had. no separate identity apart from Kirk, but rather the two were indistinguishable. Moreover, Aleo was created and used for the purpose of delaying, hindering, and defrauding Kirk’s creditors. In short, the record clearly reflects that Aleo was the agency, instrumentality, adjunct, or alter ego of Kirk. Aleo and Kirk being indistinguishable entities, the funds deposited to Aleo’s account were properly determined by the bankruptcy court to be a part of Kirk’s assets. The subsequent transfer of $34,000 of these funds to Alley did not alter the fact that these funds were assets of Kirk. Accordingly, these funds "sought by the trustee were the proper object of the bankruptcy court’s turnover order.
C. Possession of the Bankrupt’s Property.
Appellants contend that the trustee failed to establish possession of the property in appellants. The United States Supreme Court in Maggio, supra-, acknowledged that the trustee initially may be aided by a presumption or inference of present possession arising from proof of actual possession at an earlier time. However, the Court stated that a turnover order should not issue based upon a presumption of possession “unless the time element and other factors make it a fair and reasonable inference.”
The record in the instant case amply supports the conclusion that the property in question was in the appellants’ possession during the months of June, July and August, 1973. The crucial question is whether this possession can support a finding of possession on August 9, 1974, the date of the turnover order.
Looking to the record as a whole, the court finds the inference of possession on August 9, 1974, to be warranted not merely by prior possession. Less than one year has lapsed since the funds came into appellants’ possession. The appellants emphatically deny that any of said funds remain in their possession, yet in explaining that all of these funds have been disbursed, they either intentionally or by inexcusable neglect failed to consistently show that these funds were expended. Different sets of figures representing disbursements were presented, and appellants left unexplained and unaccounted for the sum of $14,112.00. Under these circumstances this court finds that the inference of present possession is fair and reasonable.
|
935753-5843 | OPINION
RICHARD MILLS, District Judge.
“Of all debts, men are least willing to pay the taxes.”
Ralph Waldo Emerson
I. BACKGROUND
On April 10, 1996, the Internal Revenue Service (“IRS”) levied $10,976.71 from an account at Ayars State Bank in Moweaqua, Illinois. Said monies were in the ‘WTP Group” account at Ayars State Bank. The IRS levied the $10,976.71 from the WTP Group account in an attempt to collect unpaid taxes -from Herman Wesselman. The IRS states that the WTP Group is the “nominee” of Herman Wesselman, and therefore, it was proper for them to levy the account in order to retrieve Herman Wesselman’s unpaid taxes.
Plaintiff Fred Schuppert filed the instant suit alleging that the WTP Group is not the “nominee” of Herman Wesselman. On the contrary, Schuppert alleges that Herman Wesselman had no interest whatsoever in the account at the time when the lien arose. Schuppert asserts that the money belongs to Louise B. Powers, not Herman Wesselman. Accordingly, Schuppert argues that the IRS should return the money because it was unlawfully levied.
Pursuant to Federal Rule of Civil Procedure 56, the IRS has moved for summary judgment arguing that Schuppert lacks standing to bring this suit under 26 U.S.C. § 7426. Due to Sehuppert’s lack of standing, the IRS asserts that the United States is entitled to summary judgment as a matter of law. Along with its motion for summary judgment, the IRS filed a statement of undisputed facts pursuant to Local Rule 7.1(D)(1). However, Schuppert has failed to file a timely response to the IRS’s statement as required by Local Rule 7.1(D)(2).
On May 23, 1997, the Court made Schuppert aware of his failure to comply with Local Rule 7.1(D)(2), sent him a copy of Local Rule 7.1, and ordered him to file his response to the IRS’s statement of undisputed facts by June 6, 1997. The Court also informed Schuppert that his failure to comply with Local Rule 7.1(D)(2) would result in the IRS’s statement being deemed to have been admitted by him in accordance with Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 922-23 (7th Cir.1994). As of today, Schuppert has not filed a response to the IRS’s statement of undisputed facts. Therefore, the Court will deem the IRS’s statement as being admitted by Schuppert.
II. STANDARD FOR SUMMARY JUDGMENT
Federal Rule of Civil Procedure 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 judgment as a matter of law.” Fed. R. Civ. Pro. 56(e); see Ruiz-Rivera v. Moyer, 70 F.3d 498, 500-01 (7th Cir.1995). The moving party has the burden of providing proper documentary evidence to show the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when “there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).
In determining whether a genuine issue of material fact exists, the Court must consider the evidence in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Once the moving party has met its burden, the opposing party must come forward with specific evidence, not mere allegations or denials of the pleadings, which demonstrates that there is a genuine issue for trial. Howland v. Kilquist, 833 F.2d 639 (7th Cir.1987).
III. ANALYSIS
Title 26 U.S.C. § 7426(a)(1) permits a civil action against the United States for a wrongful levy of property. “Section 7426 contains two prerequisites: (1) that the plaintiff have an interest in or hen on the property at issue, and (2) that the levy be wrongful (i.e., that the property not belong to the taxpayer against whom the levy is directed).” Security Counselors, Inc. v. United States, 860 F.2d 867, 869 (8th Cir.1988). Thus, in order to have standing, a would-be plaintiff must make an initial showing of some interest in the funds or the property levied. Century Hotels v. United States, 952 F.2d 107, 109 (5th Cir.1992). As long as the would-be plaintiff has an interest in or a hen on the funds or the property levied, he has standing to sue. Security Counselors, Inc., 860 F.2d at 869. “The common theme is the desirability of confining the right to sue to the person who has the greatest interest in the outcome of the suit, rather than allowing someone with a tenuous interest to gum up the works by suing also or instead.” Frierdich v. United States, 985 F.2d 379, 382 (7th Cir.1993).
In the instant case, Plaintiff has admitted that $10,380.00 of the $10,976.71 levied does not belong to him but rather belongs to Louise B. Powers. While Plaintiff asserts that he had a “moral obligation” (if not a legal one) to return the funds to Louise B. Powers, such an obligation is an insufficient basis upon which to bring a suit under 26 U.S.C. § 7426. Frierdich, 985 F.2d at 380-81. Therefore, it is clear that Plaintiff has no standing to bring a suit under 26 U.S.C. § 7426 as to $10,380.00 of the $10,976.71 levied by the IRS.
Accordingly, this leaves $201.71 upon which Plaintiff could base his standing to sue under 26 U.S.C. § 7426. Initially, the Court notes that Plaintiff has made no specific ownership claim in the $201.71. Plaintiff does, however, point to a $395.00 check which was made payable to him from Sharon Spence which was deposited into the WTP Group account at the Ayars State Bank. From this check, Plaintiff argues that he had an ownership interest in the funds in the WTP Group account levied by the IRS.
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9061432-15284 | AMENDED MEMORANDUM OF DECISION
ROBERT L. KRECHEVSKY, Bankruptcy Judge.
I.
Carolyn S. Schwartz, United States Trustee for Region 2 (“the UST”), on February 10, 2003, filed a motion to dismiss the Chapter 7 bankruptcy case of Dennis Jay Marcoux (“the debtor”) pursuant to Code § 707(b) alleging that granting the debtor relief under Chapter 7 would be a “substantial abuse” of that chapter. The debtor objected to the motion. The court held a hearing on September 18, 2003, when the UST supported her motion by introducing the debtor’s original and amended schedules, the answer he filed to the motion, and rested. The debtor presented his testimony, that of his wife and that of a real estate broker. Following the hearing, the debtor and the UST filed briefs in support of their positions.
II.
BACKGROUND
The debtor, a resident of Danielson, Connecticut, who filed a Chapter 7 petition on November 15, 2002, was then a 29 year old warehouse supervisor earning about $45,000 per year. The debtor’s present financial difficulties resulted largely from debts incurred prior to his divorce in May, 2001, from Katherine Marcoux (“Katherine”) who, during the marriage had been a non-working, full-time college student. Under the terms of the divorce decree (Exh. A), the debtor received the couple’s house, subject to two undersecured mortgages thereon, and became solely responsible for credit card debt of $26,000. Katherine retained her car, a Kia.
Katherine defaulted on her car payments and the Kia was repossessed. A deficiency of $6,877.15 remains on the car loan for which the debtor and Katherine were jointly responsible. The debtor testified that Katherine had moved “out west,” and that neither he nor any of his creditors know her whereabouts. (Tr. at 14, 39.)
The debtor, in June, 2002, with the mortgagee’s consent, sold his house at a “short sale” for $158,000 which, after payment of associated expenses, was just sufficient to repay the first mortgage of $135,000. The debtor received no cash from the sale (Tr. at 30), and a deficiency of $28,074.80 remains outstanding on the second mortgage.
The debtor, in July, 2002, married his present wife, Doris Marcoux (“Doris”). The debtor, Doris, and Doris’ two daughters, ages 5 and 8, from her previous marriage presently live with Doris’ parents and pay them $450 monthly as rent. Living with the parents is a temporary accommodation and the debtor and Doris hope to move to an apartment of their own as soon as they are financially able to do so. (Tr. at 21, 59.) A real estate broker testified that the monthly rent for an apartment in the Danielson area ranges between $800 and $1500. (Tr. at 48.)
Doris, who had been earning about $23,000 per year, was recently terminated by her employer and has been looking for employment. (Tr. at 33, 36.) As a result of Doris’ unemployment, the debtor pays the $426 monthly payment for Doris’ minivan, a 2001 Chevrolet Venture. (Tr. at 25.) The expenses shown in the debtor’s amended schedule include the $348 payment for the debtor’s fully encumbered pickup truck and the transportation expenses for both vehicles. (Tr. at 24.) The schedule does not include a reserve for unanticipated expenses.
III.
ARGUMENTS
The UST argues that granting the debt- or a discharge would be a “substantial abuse” of Chapter 7, warranting dismissal of the case under § 707(b). She contends that the debtor should reduce his scheduled monthly expenditures for food ($650) and transportation ($300); that Doris should immediately find employment, and rely on relatives for free daycare; that the debtor’s family should continue to reside with his in-laws and not move; and that Doris use a portion of the $700 monthly child support from her ex-husband “towards the family’s monthly food expense ... thus freeing up money for the Debtor to use to pay for [his] wife’s car payment ... [and] transportation expense.” (UST’s Brief at 13.) If all of these proposals are followed, the UST contends that the debt- or would be able to fund 31% of his debt over three years under a hypothetical Chapter 13 plan.
The debtor argues that his use of Chapter 7 is not a “substantial abuse” of that chapter; that the debtor has tried repeatedly, without success, to repay the debts incurred during his prior marriage; that he would not be able to fund a hypothetical Chapter 13 plan that would repay a significant portion of the debt; that his lifestyle is not at all extravagant; that his expenses are modest and are based on his family living with his wife’s parents; that his divorce and his wife’s present unemployment are mitigating factors; and that the UST has not presented any evidence sufficient to rebut the § 707(b) presumption in favor of the debtor.
IV.
DISCUSSION
Section 707(b) of the Bankruptcy Code provides:
(b) After notice and a hearing, the court, on its own motion or on a motion by the United States trustee, but not at the request or suggestion of any party in interest, may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter. There shall be a presumption in favor of granting the relief requested by the debtor. In making a determination whether to dismiss a case under this section, the court may not take into consideration whether a debtor has made, or continues to make, charitable contributions (that meet the definition of “charitable contribution” under section 548(d)(3)) to any qualified religious or charitable entity or organization (as that term is defined in section 548(d)(4)).
Since the debtor does not dispute that he is an individual in a Chapter 7 case he voluntarily filed and whose debts are primarily consumer debts, the issue that remains is whether granting the debtor relief would be a “substantial abuse” of Chapter 7.
A. Statutory Presumption
In considering the UST’s motion, the statute mandates that “there shall be a presumption in favor of granting the relief requested by the debtor.” 11 U.S.C. § 707(b). In light of this presumption, the UST bears not only the burden of proving, by a preponderance of the evidence, that the debtor is not entitled to relief under Chapter 7, but also the burden of going forward with evidence to rebut or meet the presumption. See Fed.R.Evid. 301. Fur ther, “the determination of abuse must be based on factual findings supported by admissible evidence, and not by what amounts to inappropriate judicial notice of the court’s own value judgments.” In re Harris, 279 B.R. 254, 261 (9th Cir. BAP 2002).
“The statutory presumption is obviously meant to be something more than simply a rule about the burden of proof, since that burden would already have been on the party seeking to dismiss the case_It appears that the presumption is an indication that in deciding the issue, the court should give the benefit of any doubt to the debtor and dismiss a case only when a substantial abuse is clearly present.” In re Harris, 279 B.R. at 259 (citing Collier on Bankruptcy ¶ 707.04[5][a]). Generally, the court should consider the debtor’s expenses excessive only if they support a luxury lifestyle not enjoyed by most families. 6 Collier on Bankruptcy ¶ 707.04[2] (Alan N. Resnick et al, eds., 15th ed. rev.2008).
B. “Substantial Abuse”
“Courts have been grappling with the issue of what constitutes ‘substantial abuse’ for purposes of Section 707(b) of the Bankruptcy Code since 1984 .... Congress did not define the term ‘substantial abuse’ in the text of the 1984 amendments to the Code,” In re Green, 934 F.2d 568, 570 (4th Cir.1991); and “there is little in the way of legislative history to shed light on the question.” In re Moreland, 284 B.R. 825, 828 (Bankr.W.D.Va.2002) (citing In re Green).
Section 707(b) reflects the tension between the fundamental policy concern of the Bankruptcy Code, granting the debt- or an opportunity for a fresh start, and the interest of creditors in stemming abuse of consumer credit. The ambiguity of the statutory language is no doubt a reflection of Congress’s inability to agree on a definition of substantial abuse which would encompass these countervailing considerations in all situations. Nevertheless, in unsuccessfully attempting to carve out such a definition, Congress considered and rejected the use of a threshold future income or ability to repay test (known as “mandatory Chapter 13”) as a qualification for Chapter 7 relief for consumer debtors.
In re Green, 934 F.2d at 571 (citing rejection of such a bill by the Senate in 1982).
The Second Circuit, in In re Kornfield, 164 F.3d 778, 783 (2d Cir.1999), adopted a “totality of circumstances” approach in determining whether to dismiss a case under § 707(b) for substantial abuse.. Noting that “a division among courts exists over the degree of emphasis to be placed on the ability of the debtor to repay debts out of future income,” the Second Circuit declined to “spell out in greater detail the precise content of the proper totality of circumstances test in this circuit.” Id. at 783. It is fair to say, however, that Kom-field not only explicitly rejected a per se test, based solely on a debtor’s gross income, then advanced by the U.S. Trustee, but Kornfield did not adopt, although it noted, the per se test employed by the Eighth and Ninth Circuits, that a debtor’s ability to pay his or her debt, standing alone, supports a conclusion of substantial abuse. Id. at 783.
“A totality of circumstances inquiry is equitable in nature .... ” Id. at 784. Such an inquiry cannot be reduced to the mechanical application of mathematical formulae, but requires consideration of all the relevant circumstances, such as:
(1) Whether the bankruptcy petition was filed because of sudden illness, calamity, disability, or unemployment;
(2) Whether the debtor incurred cash advances and made consumer purchases far in excess of his ability to repay;
(3) Whether the debtor’s proposed family budget is excessive or unreasonable;
(4) Whether the debtor’s schedules and statement of current income and expenses reasonably and accurately reflect the true financial condition; and
(5) Whether the petition was filed in good faith.
In re Green, 934 F.2d at 572.
The Second Circuit Court of Appeals described Kornfield as “a paradigm of the case that Section 707(b) was designed for: debtors enjoying a substantial income but seeking to transfer the cost of an unnecessarily extravagant lifestyle to creditors.” In re Kornfield 164 F.3d at 784.
C. Totality of Circumstances
The debtor’s schedules indicate that he has a gross monthly income of $3,900.06 (Ex. 4, amended Schedule I); that, after the payroll deductions indicated, his monthly take-home pay is $2,792.27 (Ex. 4, amended Schedule I); and that his monthly expenses are $2,307.00 (Ex. 4, amended Schedule J). Solely on the basis of the schedules submitted by the debtor, his disposable income is $485.27. Taking into account the additional $426 the debtor will need for Doris’ car payment, to which the UST has not objected, reduces the debtor’s disposable income to $59.27 per month. As noted, the debtor’s expense schedule includes no reserve for unanticipated expenses.
The UST argues that the debtor could reduce food expense of $650 per month by excluding food for the debtor’s stepchildren, whom the debtor is not legally obligated to support. The court does not accept the UST’s position and finds untenable and undue the proposition that providing food for one’s stepchildren is indicative of the kind of extravagant lifestyle that the substantial abuse provision of § 707(b) was intended to curb. The court also finds the UST’s argument that the debtor could reduce the $300 scheduled for gas and maintenance of the debt- or’s and Doris’ vehicles not persuasive. The UST urges the court to assume that Doris’ present unemployment will be short-lived and that she will shortly be earning in the neighborhood of $20,000 per year. Doris has testified that she is mak ing an effort to find employment and that one of the children has medical problems for which the ex-husband provides no assistance.
The debtor established that his bankruptcy was precipitated by his unfortunate divorce; that he had made several attempts to repay the debts accrued during his prior marriage (Tr. at 13, 18); that he sold his first marital home and repaid the first mortgage, but the selling price was insufficient to repay the second mortgage or the credit card debt (Tr. at 30); that he sold most of the household furnishings acquired during his first marriage so that he could afford the gas to drive to work (Tr. at 39); and that he, Doris and his two stepchildren are presently residing with Doris’ parents because they cannot afford housing of their own (Tr. at 21).
The UST does not dispute any of these assertions. The only extenuating circumstances she raises are the cryptic comment that “divorce is not a calamitous event,” and that the debtor’s misstatement of his marital status in his original schedules, prepared prior to his remarriage, should weigh against granting him a discharge, despite her acknowledgement that, “The U.S. Trustee believes that the debtor’s lack of candor was in part accidental.” (UST’s Brief at 8,11.)
V CONCLUSION
While acknowledging the UST’s unique role mandated by Congress in § 707(b), the court considers the UST’s motion clearly unsupported under the totality of circumstances approach and concludes that the UST has failed to rebut the statutory presumption in favor of granting the relief requested by the debtor. The debtor has only minimal exempt assets; he earns an unexceptional wage; the major debt arose prior to his divorce, not from luxury purchases or cash advances on the eve of bankruptcy; the debtor has made attempts to manage his debt; and he appears to be living quite frugally. Cf. In re Green, 934 F.2d at 572. In short, the debtor appears to be in precisely the kind of unfortunate predicament that Chapter 7’s fresh start policy was designed to alleviate. Accordingly, the UST’s motion to dismiss the debtor’s bankruptcy case, under § 707(b), for “substantial abuse” of Chapter 7 is denied. It is
SO ORDERED.
Typographical errors corrected on page 386.
. The first and second mortgages were held by the same mortgagee.
.The UST questions the validity of certain debts, arguing that if the debt were lower, the percentage of debt the debtor could repay might be more significant. Objections to claims, however, are not presently before the court.
. Responding to a § 707(b) motion can appreciably raise a debtor's cost of filing a bankruptcy petition, and Congress has thus limited the filing of such motions to the court and the neutral United States Trustee.
. Fed.R.Evid. 301, Presumptions in General in Civil Actions and Proceedings, states:
In all civil actions and proceedings not otherwise provided for by Act of Congress or by these rules, a presumption imposes on the party against whom it is directed the burden of going forward with evidence to rebut or meet the presumption, but does not shift to such party the burden of proof in the sense of the risk of nonpersuasion, which remains throughout the trial upon the party on whom it was originally cast.
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9297209-24543 | OPINION & ORDER
KIMBA M. WOOD, District Judge.
Ricky Martin Lloyd Walters (“Petitioner”) seeks a writ of habeas corpus, pursuant to 28 U.S.C. § 2241, to vacate a final order of deportation entered by the Board of Immigration Appeals (“BIA”) on March 26, 1997, and to reinstate a November 7, 1995 order of the BIA granting Petitioner relief from deportation under former section 212(c) of the Immigration and Nationality Act (“INA”) (8 U.S.C. § 1182(c)) (repealed 1996). Petitioner raises constitutional and statutory challenges to the March 26, 1997 BIA decision, which (1) granted a motion to reconsider filed by the INS, (2) vacated the November 7, 1995 BIA decision, and (3) ordered Petitioner deported. Respondents argue that the Court lacks personal jurisdiction over all Respondents, and that the petition is meritless. For the reasons set forth below, the Court finds that it has personal jurisdiction over Respondent John Ashcroft, and that Petitioner was denied due process by the BIA’s March 26, 1997 order granting the INS’ motion to reconsider and vacating the BIA’s prior decision without proper authority. Petitioner’s application for a writ of habeas corpus is granted.
1. Background
Petitioner is a citizen of the United Kingdom. He was admitted to the United States as a lawful permanent resident (“LPR”) on April 16, 1976. On March 22, 1991, in the Supreme Court of the State of New York, Petitioner pled guilty to, and was convicted of, two counts of attempted murder in the second degree and eight counts involving firearms violations. Petitioner was sentenced to an indeterminate term of imprisonment with a maximum term of ten years imprisonment and a minimum term of three and one-third years imprisonment. On November 29, 1993, the Immigration and Naturalization Service (“INS”) issued an Order to Show Cause and Notice of Hearing, charging Petitioner with deportability for having been convicted of a firearms offense, INA § 241(a)(2)(C), and an aggravated felony (crime of violence), INA § 241(a)(2)(A)(iii). Petitioner’s removal hearing took place in New York before Immigration Judge Alan Vomacka (“IJ”) on five dates between March 1 and June 19,1995.
Petitioner contested deportability before the IJ, but was found deportable on the basis of having been convicted of (1) at least one firearms offense, and (2) an aggravated felony. See June 19, 1995 Oral Decision of the Immigration Judge (“IJ Decision”) at 3 (Return at 142). Petitioner applied for two forms of discretionary relief from deportation: a waiver pursuant to § 212(c) and a waiver pursuant to § 212(h). In order to be statutorily eligible for § 212(c) relief, an alien must dem onstrate that he (1) is a lawful permanent resident of the United States, (2) has maintained an unrelinquished domicile in the United States of seven consecutive years, and (3) has not served a term of five years in prison. On June 19, 1995, the IJ found Petitioner eligible for, and deserving of, relief under INA § 212(c), and identified “unusual and outstanding equities ...” in Petitioner’s case. See IJ Decision at 28 (Return at 167). The IJ granted Petitioner a waiver of excludability along with adjustment of status, allowing Petitioner to retain his status as a lawful permanent resident until such time as a final order of deportation was entered against him. The INS filed a timely appeal of the IJ’s decision, and argued to the BIA that the IJ erred in finding Petitioner deserving of discretionary relief under § 212(c). The INS did not at that time argue that Petitioner was not eligible for relief, because it remained undisputed that Petitioner had been eligible at the time that the IJ made his decision. Sometime after the parties submitted briefing to the BIA, and certainly by the time the BIA ruled on the INS appeal, Petitioner had served five years in prison. Addressing the sole question before it on appeal (that is, the question of whether Petitioner was deserving of § 212(c) relief), the BIA dismissed the INS appeal on November 7, 1995, finding that “the granting of section 212(c) relief appears to be in the best interest of the country.” See November 7, 1995 BIA Decision at 9 (Return at 60).
On December 8,1995, the INS filed with the BIA a Motion to Reopen Deportation Proceedings and to Reconsider. The INS argued in the motion that the BIA “should have denied the respondent’s request for § 212(c) relief because he was not statutorily eligible for § 212(c) relief by the date of the Board’s decision in that he had served a term of imprisonment of at least 5 years.” See Government’s Motion to Reopen Deportation Proceedings and to Reconsider, (“INS Motion to Reconsider”) at ¶ 8 (Return at 41). In support of this argument, the INS attached a letter that INS Trial Attorney Suzanne McGregor received on October 23, 1995. Id. at ¶ 6 (Return at 41-42). The letter was sent by John R. O’Keefe, Superintendent of Gou-verneur Correctional Facility in Gouvern- eur, New York, and stated, inter alia: “We are in receipt of your request dated October 13, 1995 regarding the above-noted individual who is presently in our custody.” See Letter to INS Trial Attorney Suzanne McGregor, dated October 19, 1995 (Return at 43). Superintendent O’Keefe informed Ms. McGregor that as of the date of his letter, October 19, 1995, Petitioner had served 5 years, 14 days in prison. Id. Although it was received two weeks before the BIA ruled, the government concedes that it did not present this evidence of Petitioner’s time spent in prison to the BIA’s attention prior to the November 7 ruling.
On March 26, 1997, the BIA issued a decision granting the INS Motion to Reconsider and vacating the BIA’s November 7,1995 decision. The BIA held that “as of October 19, 1995, the respondent had served a total of 5 years, 14 days in prison, and therefore was ineligible for a section 212(c) waiver.” See March 26, 1997 BIA Decision (Return at 6).
On April 25,1997, Petitioner filed, in the United States Court of Appeals for the Second Circuit, a petition for review of the March 26, 1997 BIA decision. On June 12, 1998, the Second Circuit dismissed the petition for lack of jurisdiction, finding that “[bjecause Walters was found deportable based on aggravated felony and firearms convictions,” the court was barred from reviewing his final order of removal. Walters v. INS, 159 F.3d 1349 (table), 1998 WL 537197 (2d Cir. June 12, 1998) (unpub-fished). It appears that sometime thereafter, Petitioner departed the country.
On June 1, 2002, INS officers in Braden-ton, Florida detained Petitioner when he attempted to re-enter the country. The INS again served Petitioner with an Order to Show Cause and Notice to Appear, charging him with being inadmissible for (1) his prior crimes, and (2) his post-removal re-entry. On July 12, 2002, an IJ in Florida found Petitioner inadmissible on both grounds and ineligible for any form of relief, and ordered that he be removed to the United Kingdom. Petitioner appealed the IJ’s decision to the BIA. Before the BIA ruled on that appeal, Petitioner filed a petition for habeas corpus in the Middle District of Florida on August 13, 2002. This petition was denied on September 10, 2002 because the Petitioner had not yet exhausted his administrative remedies. On November 25, 2002, the BIA summarily affirmed the IJ’s decision. On December 3, 2002, Petitioner filed a petition for review in the United States Court of Appeals for the Eleventh Circuit. The Eleventh Circuit dismissed the petition for lack of jurisdiction on January 30, 2003.
The instant petition and motion for a stay of removal were filed with this Court on December 2, 2002. On December 27, 2002, this Court granted a stay of removal. The Court now addresses the merits of the petition.
II. Personal Jurisdiction
The Court must decide, as a threshold matter, whether it has personal jurisdiction over the Respondents. 28 U.S.C. § 2243 states that “the writ ... shall be directed to the person having custody of the person detained.” The government argues that the only proper respondent in this case is the INS Miami District Director, due to the fact that the Petitioner is currently detained in Bradenton, Florida, where his most recent removal hearings were held. Because this Court would apparently not have personal jurisdiction over the Miami District Director, the Respondents argue that the petition must be dismissed. Petitioner argues, however, that Attorney General John Ashcroft is a proper respondent in a habeas petition brought by an alien challenging a final order of removal.
The Court notes that the Supreme Court and the Second Circuit have both reserved judgment on this precise question. See Ahrens v. Clark, 335 U.S. 188, 193, 68 S.Ct. 1443, 92 L.Ed. 1898 (1948) (stating “we do not reach the question whether the Attorney General is the proper respondent”); Henderson v. INS, 157 F.3d 106, 130 (2d Cir.1998) (“We decline at this time to resolve the issue of whether the Attorney General is a proper respondent for habeas actions brought by aliens facing deportation.”). The circuit courts that have addressed this issue have split. Two circuits have held that although courts should generally apply the “immediate custodian” rule and assert ha-beas jurisdiction only over the person who exercises “day-to-day control” over the detainee, “extraordinary circumstances” may justify exceptions to the immediate custodian rule. See Vasquez v. Reno, 233 F.3d 688, 696 (1st Cir.2000) (suggesting that extraordinary circumstances might include a situation in which the location of the detainee is undisclosed, or where the INS has “spirited an alien from one site to another in an attempt to manipulate jurisdiction.”); Roman v. Ashcroft, 340 F.3d 314, 325-26 (6th Cir.2003) (same). However, the Ninth Circuit recently held that strictly adhering to the immediate custodian rule “does not make sense in the immigration context[,]” and that “the most appropriate respondent to petitions brought by immigration detainees is the individual in charge of the national government agency under whose auspices the alien is detained.” Armentero v. INS, 340 F.3d 1058, 1071 (9th Cir.2003).
The courts of the Southern District of New York and the Eastern District of New York are similarly divided with respect to this issue. Compare Torres-Nevas v. Ashcroft, No. 02CV1745, 2003 WL 21143067, at *2 (E.D.N.Y. Apr.27, 2003) (Johnson, J.) (Attorney General is proper respondent); Small v. Ashcroft, 209 F.Supp.2d 294, 296 (S.D.N.Y.2002) (Rakoff, J.) (same); Cinquemani v. Ashcroft, No. 00-CV-1460, 2001 WL 939664, at *3 (E.D.N.Y. Aug.16, 2001) (Dearie, J.) (same); Arias-Agramonte v. Commissioner of INS, No. 00 CIV. 2412, 2000 WL 1617999, at *4-9 (S.D.N.Y. Oct. 30, 2000) (Sweet, J.) (same); Alcaide-Zelaya v. McElroy, Nos. 99Civ.5102, 99Civ.9999, 2000 WL 1616981, at *3-5 (S.D.N.Y. Oct. 27, 2000) (Chin, J.) (same); Penar-Rosario v. Reno, 83 F.Supp.2d 349, 362 (E.D.N.Y.2000) (Gleeson, J.) (same); Pottinger v. Reno, 51 F.Supp.2d 349, 357 (E.D.N.Y. 1999) (Weinstein, J.) (same); Nwankwo v. Reno, 828 F.Supp. 171, 176 (E.D.N.Y.1993) (Korman, J.) (same) with Belvett v. Ashcroft, No. 00 Civ. 2463, 2002 WL 287839, at *1 (S.D.N.Y. Feb. 27, 2002) (McKenna, J.) (Attorney General is not a proper respondent); Guerrero-Musla v. Reno, No. 98 Civ. 2779, 1998 WL 273038, at *2 (S.D.N.Y. May 28, 1998) (Baer, J.) (same); Wang v. Reno, 862 F.Supp. 801, 812-13 (E.D.N.Y. 1994) (Sifton, J.) (same); Peon v. Thornburgh, 765 F.Supp. 155, 156 (S.D.N.Y.1991) (Stanton, J.) (same).
The question of whether a court has personal jurisdiction over the Attorney General, when the Attorney General is named in § 2241 petitions, comes down to whether the Attorney General is a custodian for these purposes. This question concerns the relationship between the Attorney General and the aliens over whose circumstances the Attorney General has been delegated virtually total control. See Henderson, 157 F.3d at 125-26. The Court is persuaded that the Attorney General is a custodian of all aliens seeking review of final orders of removal, given the need for a flexible, practical approach to determining the proper custodian for habe-as petitions, see id. at 124, and the “unique role” that the Attorney General plays in matters involving aliens. Id. at 125-26 (reviewing the many powers granted to the Attorney General with respect to aliens including, but not limited to, the authority to detain and produce aliens, to order aliens deported, to grant or deny discretionary relief from deportation, and to temporarily parole aliens into the country for humanitarian or other reasons). Indeed, the Attorney General is designated by statute to be the proper respondent in petitions for review brought by aliens challenging their orders of deportation, see 8 U.S.C. § 1252(b)(3)(A), and commonly concedes personal jurisdiction in habeas petitions such as this one. See Henderson, 157 F.3d at 126 n. 21. The Court is guided by the reasoning of two decisions in particular, Alcaide-Zelaya v. McElroy and Arias-Agramonte v. Commissioner of INS.
In adopting this reasoning, the Court rejects the approach taken by those courts that find the Attorney General to be the appropriate custodian only where there exist “extraordinary circumstances.” Adoption of that test would sow confusion in habeas cases, and serves no practical purpose. No rationale has been offered for holding that the Attorney General’s custodial relationship with aliens challenging final orders of removal hinges upon such facts as how often an alien is transferred from one detention center to another, or whether there are so many aliens seeking habeas corpus relief in one district that habeas review is no longer available within a reasonable amount of time. See Nwankwo v. Reno, 828 F.Supp. 171, 174 (E.D.N.Y.1993) (referring to the immense backlog in habeas petitions found in the Western District of Louisiana, which prevents the Western District of Louisiana from handling habeas petitions filed by detained aliens in a timely manner).
The Court also concludes that the proper venue for this petition is the Southern District of New York. Traditional principles of venue apply in habeas petitions. See Braden v. 30th Judicial Circuit Court of Kentucky, 410 U.S. 484, 500, 93 S.Ct. 1123, 35 L.Ed.2d 443 (1973). The three factors to be considered in determining venue are (1) “where all the material events took place”; (2) where “the records and witnesses pertinent to petitioner’s claim are likely to be found”; and (3) the relative convenience of the forum for the parties. Henderson, 157 F.3d at 127 n. 25 (quoting Braden, 410 U.S. at 493-94, 93 S.Ct. 1123). In the present case, the crimes for which Petitioner was ordered deported were committed in New York, and he served his sentence in New York. Petitioner’s first set of deportation proceedings were conducted here, including the proceeding in which the IJ decided to grant Petitioner a § 212(c) waiver and adjustment of status. Following his incarceration, Petitioner was paroled by the New York Department of Corrections, and reported to a parole officer in the Southern District of New York. See Petitioner’s Response at 4. Although Petitioner is presently detained in Florida, the nature of his challenge to the most recent order of removal is based on the propriety of his original order of removal. Given Petitioner’s choice of forum, and the fact that Respondents never claim, or plausibly could claim, that New York is an inconvenient location for the Attorney General, the Court finds venue in the Southern District of New York to be appropriate.
III. Subject Matter Jurisdiction
Habeas corpus jurisdiction, pursuant to 28 U.S.C. § 2241, extends to final orders of deportation, despite the substantial changes in immigration law enacted in 1996. See INS v. St. Cyr, 533 U.S. 289, 314, 121 S.Ct. 2271, 150 L.Ed.2d 347 (2001) (holding that “habeas jurisdiction under § 2241 was not repealed by [the Antiter-rorism and Effective Death Penalty Act of 1996] and IIRIRA.”); Jean-Baptiste v. Reno, 144 F.3d 212, 220 (2d Cir.1998) (same).
Section 2241 grants courts power over prisoners “in custody in violation of the Constitution or laws or treaties of the United States.... ” The scope of review does not extend to “review of discretionary determinations by the IJ and the BIA.” Sol v. INS, 274 F.3d 648, 651 (2d Cir.2001). Insofar as Petitioner asks the Court to decide whether the BIA abused its decision when it granted the INS’ Motion to Reconsider, this Court has no jurisdiction to consider such a claim. See 8 C.F.R. § 3.2(a) (1997) (“The decision to grant or deny a motion to reopen or reconsider is within the discretion of the Board.... ”). This Court retains jurisdiction over only “purely legal statutory and constitutional claims.” See Sol, 274 F.3d at 651 (citing Calcano-Martinez v. INS, 232 F.3d 328, 342 (2d Cir.2000), aff'd 533 U.S. 348, 121 S.Ct. 2268, 150 L.Ed.2d 392 (2001)).
IV. Discussion
Petitioner raises two cognizable claims for habeas corpus relief. First, Petitioner argues that the BIA, in granting the motion to reconsider based upon “new evidence” that he was statutorily ineligible, denied Mm due process. Second, Petitioner argues that § 212(c)’s five year incarceration bar to eligibility for § 212(c) applies only where the Petitioner has served, five years in prison by the time the IJ determines eligibility.
It is well-settled that “the liberty of an individual is at stake” when the government seeks to deport an alien. Bridges v. Wixon, 326 U.S. 135, 154, 65 S.Ct. 1443, 89 L.Ed. 2103 (1945). See Ng Fung Ho v. White, 259 U.S. 276, 284, 42 S.Ct. 492, 66 L.Ed. 938 (1922) (deportation can strip one “of all that makes life worth living”). Because of this, “the Fifth Amendment entitles aliens to due process of law in deportation proceedings.” See Reno v. Flores, 507 U.S. 292, 307, 113 S.Ct. 1439, 123 L.Ed.2d 1 (1993) (citing The Japanese Immigrant Case, 189 U.S. 86, 100-01, 23 S.Ct. 611, 47 L.Ed. 721 (1903)). Aliens are entitled to a “full and fair hearing” that accords with the principles of due process. See Michel v. INS, 206 F.3d 253, 259 (2d Cir.2000); Bridges, 326 U.S. at 154, 65 S.Ct. 1443 (“Meticulous care must be exercised lest the procedures by which [an alien] is deprived of that liberty not meet the essential standards of fairness.”).
Petitioner argues that his right to procedural due process was violated when the BIA granted the INS Motion to Reconsider on March 26, 1997. Petitioner argues that the BIA cannot grant a motion to reconsider based on “new” evidence, particularly when that same evidence was in the hands of the INS Trial Attorney two weeks before the original BIA decision and would therefore not even be proper grounds for a motion to reopen. In this case, the claimed “new” evidence was a letter that was received by the INS Trial Attorney two weeks before the November 7,1995 BIA ruling; the letter informed the INS that the Petitioner had spent 5 years, 14 days in prison as of October 19, 1995. The BIA accepted the “new” evidence withqut having given Petitioner an opportunity to argue its inadmissibility, and then moved on to what it assumed to be the only outstanding issue-the issue of whether the time spent in prison is ever tolled for purposes of determining eligibility for 212(c) relief; the BIA asked the parties to brief that issue. See BIA Letter Requesting Briefing, dated February 14, 1996 (Return at 37-38). Petitioner argues that when the BIA considered the “new” evidence in ordering briefing on the five year issue, this resulted in a fundamentally unfair hearing on the INS Motion to Reconsider in that it afforded the INS a second bite at the apple, denied Petitioner finality, and provided him with no meaningful opportunity to respond.
Petitioner’s argument has merit. Although the March 26, 1997 BIA decision does not refer specifically to the letter included in the INS Motion to Reconsider, there is no question that the BIA decision relies entirely upon the information contained in the letter. Compare March 26, 1997 BIA decision (stating “as of October 19,1995, the respondent had served a total of 5 years, 14 days in prison, and therefore was ineligible for a section 212(c) waiver.”) with INS Motion to Reconsider (stating that as of October 19, 1995, the “Total Time Served” was “5 years, 14 days”). There is no reason to believe that, had the BIA not considered that evidence, the BIA would have changed its original decision, particularly because it had just found, in agreement with the IJ, that the granting of relief was “in the best interest of the country.” See November 7, 1995 BIA Decision at 9 (Return at 60).
Although it is true that the BIA has discretion over whether or not to grant a motion to reconsider, that discretion is “subject to the restrictions” set forth in regulations. 8 C.F.R. § 3.2(a). A motion to reconsider can be based only on “errors of fact or law in the prior Board decision.” 8 C.F.R. § 3.2(b)(1). The BIA cannot consider new facts through a motion to reconsider; upon a motion to reconsider, the factual record is the original record at the time the original decision was rendered. See Zhao v. U.S. DOJ, 265 F.3d 83, 91 (2d Cir.2001) (“a motion for reconsideration asks the Board to reevaluate its decision on the existing factual record”) (citing Matter of Cerna, 20 I. & N. Dec. 399, 402, 1991 WL 353528 (BIA 1991)); Iturribarria v. INS, 321 F.3d 889, 895 (9th Cir.2003) (“It is implicit in [the regulation governing motions to reconsider] that the BIA will reconsider the party’s case using the same record evidence used in making its prior decision.”).
The Court finds that the BIA’s consideration of the “new” evidence contained in the letter, which the INS had failed to offer in a timely fashion, violated the restrictions placed by regulation on the BIA’s authority to grant motions to reconsider. Just as an alien must present his case in full before the BIA for its review, the INS must be expected to do so. See Matter of Guevara, 20 I. & N. Dec. 238, 249, 1990 WL 385763 (BIA 1991) (denying an INS motion to reconsider based on new evidence, because the INS consciously chose not to offer the new evidence when it first became available). The BIA is not permitted to admit new evidence in connection with a motion to reconsider. When the INS fails present all available evidence to the BIA for inclusion in the record on review, the BIA must abide by regulations and disregard new evidence from being considered in a motion to reconsider.
Respondents argue that because briefing was complete before the INS received the letter, the INS followed the proper course in presenting the letter through a motion to reconsider. Respondents are incorrect. A motion to reconsider can never be the appropriate course for introducing new evidence into the record. The only vehicle for introducing new evidence post-decision is a motion to reopen. See 8 C.F.R. § 3.2(c)(1). To admit new evidence through a motion to reopen, the BIA must be satisfied that the “new facts” were “unavailable or could not have been discovered or presented at the former hearing.” Id. The INS concedes that the letter was available to the INS Trial Attorney two weeks before the original decision. The fact that briefing was complete at the time the INS obtained the letter does not render the letter “unavailable” to the INS at the time of the original BIA decision. The INS had the option of sending the letter to the BIA to be added to the record. Had it done so, the BIA could have added the letter to the record and either decided the case itself on the basis of the facts then before it, see Matter of S-H-, 23 I. & N. Dec. 462, 463-64, 2002 WL 31173153 (BIA 2002), or the BIA could have treated the INS submission as a motion to reopen/remand to the IJ and directed the IJ to reconsider Petitioner’s eligibility. See 8 C.F.R. § 3.2(c)(4).
It would be fundamentally unfair for either party to be able to add new facts to the record on a motion to reconsider, especially when those facts were available to the INS prior to the original BIA decision, and would not therefore even be admissible through a motion to reopen. Because the BIA supplemented the record in violation of 8 C.F.R. § 3.2(b)(1), and in violation of fundamental fairness, the Court holds that Petitioner was denied a hearing on the Motion to Reconsider that comported with due process and the principles of fundamental fairness.
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2129383-8254 | KERNER, Circuit Judge.
Petitioner Rini appeals from the denial of his motion under 28 U.S.C. § 2255, after a hearing was held on remand in accordance with this court’s decision in Rini v. Katzenbach, 374 F.2d 836 (7th Cir. 1967). The purpose of the hearing on remand was to ascertain whether or not Rini was advised of his right to counsel and whether he knowingly waived that right. Id. at 839.
The facts, as developed by the hearing on remand, are more complete than those originally before this court. Rini was suspected by the Federal Bureau of Investigation (FBI) of being a participant in the armed robbery of the First State Savings and Loan Association at Gary, Indiana, on September 4, 1958. Shortly after the robbery, he was imprisoned on unrelated state convictions in the Stateville Penitentiary near Joliet, Illinois. He previously had served three state sentences for armed robbery or burglary. These sentences were the results of approximately nine prior trials at which he had always been represented by counsel.
While in Stateville, Rini was visited on various occasions by FBI Special Agent Shanahan, alone or in the company of other agents. At the hearing on remand, Agent Shanahan testified that on each occasion, prior to commencing conversation with Rini, he warned Rini of his rights saying:
I was introduced to Mr. Rini as a special agent of the FBI, and my name and then told Mr. Rini that I wanted to speak to him. He did not have to say anything to me or make any statements. If he did say anything to me, it could be used against him possibly in court. He could have an attorney or consult with an attorney before he spoke to me. [Emphasis added.]
Shanahan further testified that he explained to Rini the operation of Federal Rule of Criminal Procedure 20 whereby Rini could plead guilty In the Northern District of Illinois and the case would not be transferred to the Northern District of Indiana; but that if he did not plead guilty under Rule 20, it would be transferred.
At no time did Shanahan testify that he warned Rini of the right to counsel in connection with the Rule 20 proceedings nor did he ever advise him that counsel could be appointed for him if he could not afford to employ counsel of his own choice. Without benefit of counsel, Rini signed a plea of guilty under Rule 20 while in Stateville. Shanahan was the only witness who testified for the government at the hearing on remand.
On July 26, 1960, Rini was brought from Stateville to the district court on a writ of habeas corpus ad prosequendum. He appeared before the Honorable J. Sam Perry, without counsel. After the clerk announced the case, the following colloquy took place between the court and Mr. Monaghan, counsel for the government, in Rini’s presence (Record on remand 77-78) :
The Court: Well, it is down here on a Rule 20 ?
Mr. Monaghan: Yes.
The Court: And what is the nature of the charge ?
Mr. Monaghan: Bank robbery. Savings & Loan Association, down in Indiana.
The Court: Well, when he comes here on Rule 20 disposition, if he wants to do that, I will warn him in open court that I do not require a lawyer to be appointed, if he is coming on Rule 20.
Speaking to the defendant, you have probably been informed, and if not now I inform you that no matter what you signed or promised or stated you are not required to go through with a Rule 20 plea unless you desire at this time. Under Rule 20 this court has no jurisdiction to dispose of your matter, to take any plea except a guilty plea. I cannot give you a contested trial, you cannot have a jury and a hearing here, and you could not waive a jury and have a hearing. I can only dispose of it under the rules of the court if you plead guilty. I know you have been informed of that but I am informing you of that now in the record, and you are now not required, no matter what you said, to go through the Rule 20. [Emphasis added.]
Thus, the court not only did not advise Rini of his right to counsel, it clearly indicated that counsel was not needed in a Rule 20 proceeding.
Moreover, Rini was never advised that he had the right to counsel during the sentencing hearing which immediately followed the judgment of conviction. Sentencing is a crucial point in the criminal process at which counsel should be present, if the right is not waived. Mempa v. Rhay, 389 U.S. 128, 133-134, 88 S.Ct. 254, 19 L.Ed.2d 336 (1967). This is especially so where, as here, there is an attempt to withdraw the plea of guilty. Id. at 136, 88 S.Ct. 254. After the sentence here was pronounced, the following colloquy took place (Record 84):
The Defendant: I will have nothing to live for.
The Court: That is the only way to protect society against this type of violence. I give more probation probably than any other judge around, but that is the order.
The defendant: Your Honor, can I withdraw my plea of guilty?
The Court: No, no.
The Defendant: Well, I might as well have a jury find me guilty, the same thing, because I’m not getting no leniency with the cooperation I have given to the FBI, they don’t mention those things.
Mr. Monaghan: If it please the Court, if we are going to get down to brass tacks—
The Court: We are not going to bargain here. I have entered my sentence, and that’s it. All right. [Emphasis added.]
The absence of counsel was crucial, not only because of the attempt to withdraw the plea, but because counsel could have more expertly and eloquently raised facts in mitigation which Rini unsuccessfully tried to bring to the court’s attention.
The government does not dispute that Rini was entitled to counsel at all crucial stages of the proceedings against him. That this right extended to the Rule 20 proceeding was the substance of our original holding. Rini v. Katzenbach, 374 F.2d at 838. The right also extended to the sentencing proceeding. Mempa v. Rhay, supra. While it is true that this trial took place in 1960, prior to the Supreme Court’s important recent decisions regarding the right to counsel, the right has been held to be applicable retroactively. In McConnell v. Rhay, 393 U.S. 2, 89 S.Ct. 32, 21 L.Ed.2d 2 (Per Curiam, October 14, 1968) the court applied Mempa v. Rhay retroactively, holding (89 S.Ct. at):
This Court’s decisions on a criminal defendant’s right to counsel at trial, Gideon v. Wainwright, 372 U.S. 335, 83 S.Ct. 792, 9 L.Ed.2d 799, 93 A.L.R.2d 733 (1963), at certain arraignments, Hamilton v. State of Alabama, 368 U.S. 52, 82 S.Ct. 157, 7 L.Ed.2d 114 (1961), and on appeal, Douglas v. People of State of California, 372 U.S. 353, 83 S.Ct. 814, 9 L.Ed.2d 811 (1963), have been applied retroactively. The right to counsel at sentencing is no different. As in these other cases, the right being asserted relates to ‘.‘the integrity of the fact-finding process.” Linkletter v. Walker, 381 U.S. 618, 639, 85 S.Ct. 1731, 14 L.Ed.2d 601 (1965); cf. Roberts v. Russell, 392 U.S. 293, 88 S.Ct. 1921, 20 L.Ed.2d 1100 (1968). As we said in Mempa, “the necessity for the aid of counsel in marshaling the facts, introducing evidence of mitigating circumstances and in general aiding and assisting the defendant to present his case as to sentence is apparent.” 389 U.S. at 135, 88 S.Ct. at 257. The right to counsel at sentencing must, therefore, be treated like the right to counsel at other stages of adjudication.
See also' Arsenault v. Commonwealth of Massachusetts, 393 U.S. 5, 89 S.Ct. 35, 21 L.Ed.2d 5 (Per Curiam, October 14, 1968).
The only issue left for determination on remand was whether Rini knowingly waived his right to counsel. In order for there to be a knowing waiver, the government must show that Rini knew of his right to counsel at each critical stage in the proceedings. As this court held in Tobin v. United States, 402 F.2d 307 (7th Cir. October 29, 1968):
In a criminal case, the defendant is entitled to be notified of his rights which include the assistance of coun sel at every critical stage of a criminal proceeding. Johnson v. Zerbst, 304 U.S. 458, 463, 58 S.Ct. 1019, 82 L.Ed. 1461, 146 A.L.R. 357; Gideon v. Wainwright, 372 U.S. 335, 343, 83 S.Ct. 792, 9 L.Ed.2d 799, 93 A.L.R.2d 733; Hamilton v. State of Alabama, 368 U.S. 52, 54, 82 S.Ct. 157, 7 L.Ed.2d 114, Rule 44(a), Federal Rules of Criminal Procedure.
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3995596-18078 | MEMORANDUM
A. RICHARD CAPUTO, District Judge.
Presently before the Court is Petitioner Robert A. Bautista’s Emergency Petition for a Writ of Habeas Corpus Pursuant to 28 U.S.C. § 2241(c)(3). Bautista, formerly a Lawful Permanent Resident of the United States, was taken into custody by U.S. Immigration and Customs Enforcement (“ICE”) following his return from a trip abroad. While ICE contends that Bautista was convicted of an aggravated felony years earlier, this conviction had not been raised by ICE until Bautista’s encounter with the customs agent at the airport. Today, Bautista has been detained by ICE for approximately twenty-six months while the merits of his case are on appeal before the Third Circuit Court of Appeals. Because their period of detention falls within the category of “prolonged, unreasonable, detention without a bond hearing” the Circuit Court cautioned against in Diop v. ICE/Homeland Security, 656 F.3d 221, 235 (3d Cir.2011), Bautista’s Petition will be granted insofar as he seeks an individualized bond hearing.
BACKGROUND
Petitioner Robert A. Bautista puts forth the following in his Petition. Bautista was born in the Dominican Republic on August 11, 1974, but was admitted to the United States as a Lawful Permanent Resident in 1984. He has three young children and his wife, Yenny Bautista, is a Lawful Permanent Resident. Together, they lived in Easton, Pennsylvania where they started a successful transmission repair business. In 2003, the Supreme Court of New York convicted Bautista of Attempted Arson in the Third Degree. This conviction was based on Bautista being discovered next to his own vehicle with a gas tank in his hand. He was sentenced to five years probation which he successfully completed, although he is currently challenging this conviction. Prior to that, Bautista pleaded guilty to a violation of the “forged writing” provision of New Jersey’s criminal code for possession of a fake identification. For that, Bautista was sentenced to, and successfully completed, a one-year probation term. Aside from those two incidents, Bautista has been a law-abiding, productive member of society. However, since his detention, his previously lucrative business has gone into bankruptcy and his family has lost their home, which was nearly paid off.
In 2009, Bautista made two trips back to the Dominican Republic. On the first trip, he easily reentered the United States with his Permanent Resident Card. Upon return from the second trip, he was detained at John F. Kennedy airport. Although he was ultimately permitted to enter, he was instructed to make contact with the Philadelphia Customs and Border Patrol Office for a deferred inspection. Eventually, Bautista was told to report to the Philadelphia Customs and Border Patrol Office on March 25, 2010. Bautista was informed that he had nothing to worry about. However, at that inspection, Bautista was entered into mandatory immigration detention and has been there ever since. He was first taken to Lackawanna County Prison in Scranton, Pennsylvania, but was transferred to the York County Correctional Facility in York, Pennsylvania, where he remains today.
On April 8, 2010, Bautista appeared before Judge Walter Durling of the York Immigration Court where he entered a plea after his motions to terminate were denied. The United States charged Bautista as inadmissible, and Bautista sought to cancel his removal pursuant to 8 U.S.C. § 1229b(a). On February 8, 2011, Judge Durling determined that Bautista, having “already been convicted of an aggravated felony,” was not eligible for cancellation of removal and ordered him removed from the United States. (Resp’ts’ Ex. 3 at 2.) Bautista appealed this decision to the Board of Immigration Appeals, which, after argument, dismissed the appeal on Oc tober 13, 2011. (Resp’ts’ Ex. 4.) Bautista has petitioned the Third Circuit Court of Appeals for further review of this determination, which is currently pending.
Judge Munley dismissed Bautista’s previous Emergency Petition for a Writ of Habeas Corpus, determining that because he had not sought parole, Bautista had failed to properly exhaust with respect to his constitutional claims. Bautista v. Sabol, No. 3:11 cv1611, 2011 WL 5040894, at *3-4 (M.D.Pa. Oct. 24, 2011). Subsequent to that Memorandum, on November 1, 2011, Bautista sought parole under 8 C.F.R. 235.3(c), which was denied in a January 24, 2012 letter. (Pet’r’s Exs. B, C, & D.) In the present Motion, there is no argument that Bautista has not exhausted his administrative remedies as required by 8 U.S.C. § 1252(d)(1).
At the date of the instant Petition, Bautista had been in DHS custody for over twenty-four months. Bautista now brings this Habeas Motion pursuant to 28 U.S.C. § 2241 seeking an immediate release and an individualized bond hearing. The Respondents to the instant Petition include: (1) Mary E. Sabol, the Warden of the York County Correctional Facility; (2) the Department of Homeland Security (“DHS”); (3) Immigration and Customs Enforcement (“ICE”), the investigatory branch of the DHS; (4) Janet Napolitano, the Secretary of the Department of Homeland Security; (5) Thomas Decker, the Philadelphia Director for ICE; (6) David Clark, the director of ICE Detention Operations who oversees Petitioner’s detention; and (7) John Morton, a Deputy Secretary of DHS who leads ICE. Although Bautista failed to submit a reply brief in support of his position, this matter is now ripe for the Court’s review.
DISCUSSION
Generally, “when an alien is ordered removed, the Attorney General shall remove the alien from the United States within a period of 90 days.” 8 U.S.C. § 1231(a)(1)(A). Throughout this so-called removal period, “the Attorney General shall detain the alien.” Id. at § 1231(a)(2) (emphasis added). Where, as here, the administrative removal order is judicially reviewed, the removal period begins to run with the “date of the court’s final order.” Id. at § 1231(a)(l)(B)(ii). Furthermore, § 1231(a)(6) allows an alien who, among other things, has been convicted of an aggravated felony, to be detained for a removal period greater than 90-days. This does not allow for indefinite detention, however, and the Supreme Court has recognized a six-month period as presumptively reasonable. Zadvydas v. Davis, 533 U.S. 678, 701, 121 S.Ct. 2491, 150 L.Ed.2d 653 (2001). At the conclusion of this 6-month period, “once the alien provides good reason to believe that there is no significant likelihood of removal in the reasonably foreseeable future, the Government must respond with evidence sufficient to rebut that showing.” Id. The Supreme Court has since expanded this six-month rule to cover aliens deemed stat utorily “inadmissable.” Clark v. Suarez Martinez, 543 U.S. 371, 386, 125 S.Ct. 716, 160 L.Ed.2d 734 (2005).
Contrary to both the Petitioner’s and Respondents’ assertions, § 1231 is inapplicable to the instant matter. This is because the Court of Appeals has determined that an alien does not fall within § 1231’s “removal period” until the occurrence of the latest statutorily-prescribed triggering event. Leslie v. Attorney Gen. of U.S., 678 F.3d 265, 270-71 (3d Cir.2012) (finding, pertinent to the matter sub judice, that “there can be little doubt that an alien, subject to and within a stay of removal, cannot yet be in the ‘removal period’ for § 1231 purposes.”). Instead, when a removal order is on appeal, a petitioner is still “considered in ‘pre-removal order’ detention, and the protections afforded by Clark ... do not yet apply to [his] situation.” Codina v. Chertojf, Civ. Act. No. 06-105(MLC), 2006 WL 2177673, at *2 (D.N.J. July 31, 2006). Therefore, as the reviewing court has not yet issued its final order, the authority to detain Bautista does not derive from § 1231.
In his October 24, 2011 Order, Judge Munley correctly concluded that Bautista’s detention was founded on 8 U.S.C. § 1225(b)(2)(A). Bautista, 2011 WL 5040894, at *3. Section 1225(b)(2)(A) applies where “the examining immigration officer determines that an alien seeking admission is not clearly and beyond a doubt entitled to be admitted.” When a lawful permanent resident seeks to re-enter the United States, he will be considered . an alien “seeking admission” if it appears that he has committed a crime involving moral turpitude. Bautista, 2011 WL 5040894, at *3 (citing Tineo v. Ashcroft, 350 F.3d 382, 390 (3d Cir.2003)). Bautista admits, for the purposes of the instant motion, that he has been convicted of a crime described within 8 U.S.C. § 1182(a), characterizing him an alien “seeking admission.” (Pet’r’s Br. at 17, Doc. 1.) Thus, Bautista’s confinement is properly evaluated in light of § 1225(b)(2)(A).
In Diop v. ICE/Homeland Security, 656 F.3d 221, 235 (3d Cir.2011),. the Court of Appeals evaluated the case of a petitioner who was detained for almost three years under 8 U.S.C. § 1226(c), a similar provision providing for mandatory detention of aliens who have also committed an offense covered by § 1182(a)(2). Specifically, while § 1225(b)(2)(A) requires detention of Lawful Permanent Residents seeking readmission with records indicating an offense enumerated within § 1182(a)(2), § 1226(c) requires detention of Lawful Permanent Residents taken into custody directly following their sentence for the same list of offenses. See Nunez v. El wood, Civ. Act. No. 12-1488(PGS), 2012 WL 1183701, at *3 (D.N.J. Apr. 09, 2012) (defining “upon release”). In any event, Diop determined that, even though the statute seemingly dictated such custody, Congress could not have “intended to authorize prolonged, unreasonable, detention without a bond hearing.” In particular, § 1226(c) only:
authorizes detention for a reasonable amount of time, after which the authorities must make an individualized inquiry into whether detention is still necessary to fulfill the statute’s purposes of ensuring that an alien attends removal proceedings and that his release will not pose a danger to the community.
Id. at 231. Though an alien does not require an initial, individualized bond hearing, there will come a point at which the period of detention becomes “unconstitutional unless the Government has justified its actions at a hearing inquiring into whether continued detention is consistent with the law’s purposes of preventing flight and dangers to the community.” Id. at 232. The length of this period is a “fact-dependent inquiry that will vary depending on individual circumstances.” Id. at 233. Moreover, because the Supreme Court suggested that the core purposes of such pre-removal detention would generally be achieved within one and one-half and up to five months depending on complexity, “the constitutional case for continued detention without inquiry into its necessity becomes more and more suspect as detention continues past those thresholds.” Id. at 234 (citing Demore v. Hyung Joon Kim, 538 U.S. 510, 530, 123 S.Ct. 1708, 155 L.Ed.2d 724 (2003)). As the petitioner in Diop had been detained for thirty-five months, his detention was deemed unreasonable and an individualized hearing was ordered. Id.
Following Diop, Judge Conner ruled that a petitioner who had been detained for nearly twenty months under § 1226(c) while the merits of his removal bounced between the Immigration Judge and the Board of Immigration Appeals was entitled to release. Gupta v. Sobol, et al., Civ. Act. No. 1:11-cv-1081, 2011 WL 3897964, at *1 (M.D.Pa. Sept. 6, 2011). This decision was part of “a growing consensus within this district and throughout the federal courts!] that prolonged detention of aliens under § 1226(c) raises serious constitutional concerns.” Id. at *2 (citations omitted). Judge Conner further indicated that ICE had relied excessively on the mandatory nature of the detention provision, and that the petitioner was not himself responsible for the time consumed by the appeals process. Id. at *3. As such, that petitioner’s detention was also unreasonable and he was ordered released. Id.; see also Wilks v. U.S. Dept. of Homeland Sec., CIV. 1:CV-07-2171, 2008 WL 4820654, at *3 (M.D.Pa. Nov. 3, 2008) (finding a “prolonged detention” and granting a bond hearing to a petitioner detained under § 1226(c) “for about two and one-half years while his immigration proceedings have made their way through the agency and the court of appeals.”); but see Hernandez v. Sabol, 828 F.Supp.2d 266, 272 (M.D.Pa.2011) (denying a habeas petition where the petitioner’s detention under 8 U.S.C. § 1226(c) was, at seven months duration, not unreasonable).
Finally, although not binding on the Court, the Ninth Circuit has taken this growing consensus even further and has applied express limits to the exact sort of detention at issue in this case. Nadarajah v. Gonzales, 448 F.3d 1069, 1078 (9th Cir. 2006). Specifically, in light of the Supreme Court’s holding in Zadvydas, the Ninth Circuit held that aliens detained under § 1225(b)(2)(A) may only be detained “while removal remains reasonably foreseeable,” which is presumptively a six-month period. Id. at 1078. After that six-month period, or “ ‘once the alien provides good reason to believe that there is no significant likelihood of removal in the reasonably foreseeable future, the Government must respond with evidence sufficient to rebut that showing.’ ” Id. (quoting Zadvydas, 533 U.S. at 701, 121 S.Ct. 2491.).
In light of the foregoing, the Court will grant Bautista’s Habeas Petition insofar as he requests a bail hearing. While courts have declined to establish concrete rules for appropriate detention periods, there exists a point — somewhere around the seven-month mark — where pre-removal detention becomes universally questionable. Bautista’s detention, today nearing twenty-six months, has exceeded by an order of magnitude even the tentative guidelines set by the Supreme Court in Demore. While Bautista’s mandatory detention is predicated on a different statutory provision than the mandatory provision cited in the above cases falling within this Circuit, the Court rejects the Respondents’ notion that Bautista is owed no due process. .And, like § 1226(c), there is no indication in this context that “Congress intended to authorize prolonged, unreasonable, detention without a bond hearing.” Diop, 656 F.3d at 235. In fact, that parole may be granted to such aliens in mandatory detention “whose continued detention is not in the public interest,” 8 C.F.R. § 212.5(b)(5), strongly suggests a lack of congressional intent to authorize unreasonable detention.
As a further matter, the Court is skeptical that Bautista’s continued detention serves the public interest. According to Respondent’s own statement, approximately five years had elapsed between Bautista’s latest conviction and his order to appear for a deferred inspection. (Pet’r’s Ex. D). And, since initially being intercepted at the airport, Bautista was allowed to remain free and at large until being finally directed to report. (Id.) This undermines Respondents’ eonclusory assertion that Bautista “poses a threat to society.” (Reid Deck at ¶4, Resp’ts’ Ex. 6.) Conversely, Bautista represents that his detention has forced the sale of the family home, caused his lucrative business to go into bankruptcy, and has required that his family — including three young children— seek government assistance to make ends meet. (Pet’r’s Br. at 15, Doc. 1.) Due process has been long overdue to Bautista, and the considerations listed above are among those properly considered at the bond hearing which he is entitled to.
CONCLUSION
Bautista has been detained for almost twenty-six months without an individualized bond hearing. As this is in violation of the due process protections set out in Diop v. ICE/Homeland Security, 656 F.3d 221, 235 (3d Cir.2011), the Court will grant Bautista’s habeas petition and order a bond hearing. An appropriate order follows.
ORDER
NOW, this 24th day of May, 2012, it hereby ordered that Petitioner Robert A. Bautista’s Emergency Petition for a Writ of Habeas Corpus Pursuant to 28 U.S.C. § 2241(c)(3) is GRANTED as follows:
1. Within twenty-one days of the date of this order, Respondents shall provide Petitioner with a bond hearing before an immigration judge where if the government wishes to detain Petitioner during the course of his removal proceedings, it shall have the burden of proving that Petitioner is a flight risk or a danger to the community.
2. If a hearing is not held within twenty-one (21) days, Respondents shall release Petitioner under reasonable supervision conditions.
. In his second letter requesting parole, Bautista proposed that he would: (1) execute a $25,000 bond; (2) not be allowed to leave the Commonwealth of Pennsylvania; (3) wear a monitoring device; and (4) place daily calls to and make weekly appearances at the Philadelphia Detention & Removal Office — as well as any other conditions deemed appropriate. (Pet'r’s Ex. C at 4.)
. In pertinent part, 8 U.S.C. § 1231(a)(6) provides that: "An alien ordered removed who is inadmissible under section 1182 of this title, removable under section 1227(a)(1)(C), 1227(a)(2), or 1227(a)(4) of this title or who has been determined by the Attorney General to be a risk to the community or unlikely to comply with the order of removal, may be detained beyond the removal period .... ”
. In addition to arguing that § 1231 guides Bautista's detention, the Respondents aver that Bautista is in an indefinite state of mandatory detention under § 1231 since the 90-day removal period has not yet begun to run as there has been no final order in his case. (Resp’ts’ Br. at 6, Doc. 5.)
. Section 1101(a)(13)(C)(v) provides for this categorization, stating that "[a]n alien lawfully admitted for permanent residence in the United States shall not be regarded as seeking an admission into the United States for purposes of the immigration laws unless the alien ... has committed an offense identified in ection 1182(a)(2) of this title____” This includes crimes "involving moral turpitude.” Id. at § 1182(a)(2)(A)(i)(I).
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1171191-9389 | JAMES C. HILL, Circuit Judge:
On May 4, 1979, appellant Lloyd Jones stood before the United States District Court, Northern District of Georgia, for sentencing in connection with his conviction for murder committed at the Atlanta Federal Penitentiary. Judge William C. O’Kelley addressed Jones, who appeared with counsel, to determine whether Jones wished to be heard on matters bearing upon his sentence. Jones responded:
Yes, sir. I’d like to say that, I’d like to say that I don’t think you passed sentence on me, you know, like, I think, during the process of the trial that I was totally insane, you know, which I also think that you should have looked over into the matter when I told you that them people out there was threatening me and stuff, which you said you would but you never have. But now today you bring me down here to pass sentence on me. It’s nothing really too much I could do about it. When you can’t beat them you join them. So, Judge O’Kelley, U. S. Attorney, Mr. Bostic, I pass sentence on you, the sentence would be death, you and all your relatives. Now you can pass your sentence. It is death to you, you, and you, and all your relatives by gunshot wound. Now do as you please. I don’t give a fuck if you throw the whole Empire State building at me, the whole State of Georgia.
Record, Vol. I, at 98-99 (emphasis added). For threatening the lives of Judge O’Kelley and the prosecutor, Jones was indicted and convicted under 18 U.S.C. § 1503 (1976), and sentenced to five years in prison. Jones has raised six points on appeal; they range from colorable to frivolous. None is persuasive. We affirm the conviction.
II.
Jones first asserts that his motion to dismiss the indictment should have been granted since 18 U.S.C. § 1503 does not reach in-court conduct, generally punishable as contempt under 18 U.S.C. § 401 (1976). Section 1503 was enacted in original form by the Twenty First Congress, Act of March 2, 1831, § 2, 4 Stat. 487, in an effort to curb the power of federal courts to punish contempts summarily. Nye v. United States, 313 U.S. 33, 47, 61 S.Ct. 810, 815, 85 L.Ed. 1172 (1941); see Frankfurter and Landis, Power of Congress over Procedure in Criminal Contempts in “Inferior” Federal Courts — A Study in Separation of Powers, 37 Harv.L.Rev. 1010, 1027 & n.76 (1924). Appellant distorts this perspective by arguing that section 1503 applies exclusively to extrajudicial threats and conduct. Ostensibly then, Jones would prefer to have been adjudged guilty of contempt summarily. Curious as this preference is, it belongs to the prosecutor. Our cases hold that sections 1503 and 401 “often overlap,” and that “there is no reason to require summary contempt proceedings [under § 401] when the government wishes to proceed by indictment [under § 1503] . . .. ” United States v. Howard, 569 F.2d 1331, 1336 n.8 (5th Cir.), cert. denied sub nom. Ritter v. United States, 439 U.S. 834, 99 S.Ct. 116, 58 L.Ed.2d 130 (1978). The indictment challenge was properly overruled.
Appellant next contends that the district court committed prejudicial error by not questioning jurors concerning remarks they may have overheard from a “sidebar” bench conference. Defense counsel at trial notified the district court of potential prejudice flowing from these conferences, and introduced two trial spectators who testified that they heard various parts of the conference, including use of the word “contempt.”
To be sure, “[a] trial judge has an ever present duty to ascertain whether a jury has been affected” by matters outside the record submitted to it. United States v. Martinez, 604 F.2d 361, 364-65 (5th Cir. 1979), cert. denied, 444 U.S. 1034, 100 S.Ct. 708, 62 L.Ed.2d 671 (1980). We cannot say that the district court in this case failed to discharge that duty. The court permitted defense counsel, who moved for mistrial on this basis, to call the two spectators to testify and to present argument to the court on this point. Both spectators ex- plained the extent of their familiarity with the case. One spectator had heard pretrial motions made outside the jury’s presence, dealing with issues similar to those covered in the sidebar conferences. The other spectator, defense counsel’s wife, had discussed the case with her husband. Both spectators — unlike jurors in the case — were capable of identifying key words used in the sidebar, such as “contempt,” from prior experiences with the facts. We cannot say that the district court erred to defendant’s prejudice by failing to interview the jurors.
Jones’ third contention is that the prosecutor, in closing argument twice said, “There is a presumption that people intend to do the things that they do.” In a colloquy in open court before the jury, discussing appellant’s objections to the first such statement, the trial judge obtained the prosecutor’s agreement that no irrebutable presumption was suggested, and the prosecutor made it clear that he was not suggesting a rule of law but merely urging, “that is how human beings and courts and juries decide what people intend, by their actions.”
This incident draws our attention to the long history, recounted in United States v. Chiantese, 560 F.2d 1244 (5th Cir. 1977), of burden shifting instructions by trial courts to juries. While we shall not repeat the discussion there, we commend a careful reading of Chiantese to government’s counsel. In that case, as in this, specific intent to bring about a certain result was in issue. Neither the acts done nor intent to do them was in dispute. That they had been done with intent to bring about a certain consequence — here intimidation of the trial judge — was disputed.
In Chiantese, we repeated the court’s oft-stated condemnation of trial judge instructions which raised an inference which a jury might draw (of intent to produce consequences) to a presumption of such intent unless the defendant proved otherwise. We found such an instruction to have unlawfully shifted the burden of proof from the prosecution to the defense.
Here, the prosecutor’s remarks did not deal with intent to intimidate. He had reached only the point of arguing that appellant intended to do the act (make the statement) which he admittedly had done. It was improper for government counsel to couch his argument in terms of a presumption, but he urged only that the jury find, by presuming, that which was not in any event disputed. While improper, therefore, the remark was harmless.
Later, in argument, the prosecutor did urge the jury to find that appellant had acted with specific intent to intimidate the judge, and this argument did not contain any objectionable remarks.
Thus, at the point counsel was interrupted by objection he had not urged any burden-shifting proposition of law as to any issue in dispute. His use of the word “presumption” in stating a proposition against the defendant is fraught with danger of reversible error, for the defendant is presumed innocent and that presumption remains with him. Counsel is permitted to urge the jury to draw an inference from proven facts and, when the argument reached the point of discussing the crucial issue — intent to intimidate — no more than this was urged. Therefore, we find the careless use of the word “presumption” as to acts done and not disputed to have been at worst, harmless. The court’s instructions to the jury properly submitted the issue of specific intent to the jury for its determination from all the evidence, unaided by any presumption.
Defendant’s fourth contention is that the district court erred by not admitting into evidence the entire transcript of the sentencing hearing before Judge O’Kelley. The district court permitted the transcript of the hearing, save certain prejudicial portions and a short final section, to be read to the jury. Only the language containing the actual threats, see p. [1] supra, was admitted into evidence as an exhibit for the jury during its deliberation. Jones characterizes the transcript as either a “recorded recollection” governed by Fed.R. Evid. 803(5), or a “public record and report” governed by id. 803(8).. This characterization is patently incorrect. Rule 803 deals with exceptions to the hearsay rule. The statement at issue is paradigmatic nonhearsay; it was offered because it contains threats made against officers of the federal courts, i. e., it contains the operative words of this criminal action. It was not “offered in evidence to prove the truth of the matter asserted,” id. 801(c). Thus, the limitation upon Rule 803(5) is inapposite.
Far more relevant to this point, however, is Fed.R.Evid. 106, which guards against admission into evidence of truncated statements likely to present an out-of-context picture to the jury. That rule, however, calls for a determination of “fairness.” We decline to find an abuse of discretion in admitting as an exhibit only one portion of the sentencing transcript.
The fifth assertion of prejudice by Jones stems from the district court’s instruction on reasonable doubt, which was:
I charge you that a reasonable doubt is a real doubt based upon reason and common sense after careful and impartial consideration of all of the evidence.
Proof beyond a reasonable doubt, therefore, is proof of such a convincing character that you would be willing to rely and act upon it without hesitation in the most important of your own affairs.
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3641814-30194 | COLLOTON, Circuit Judge.
Thirteen African-Americans appeal the decisions of the district court dismissing their claims against Dillard’s, Inc., based on alleged race discrimination at the Dillard’s department store in Columbia, Missouri. We affirm the district court’s dismissal of the plaintiffs’ claims under 42 U.S.C. § 1981, and remand with directions to modify the final judgment so as to dismiss the plaintiffs’ claims under the Missouri Human Rights Act without prejudice.
I.
In July 2002, plaintiffs Crystal Gregory, Alberta Turner, and Carla Turner filed their original complaint, alleging that Dillard’s violated 42 U.S.C. § 1981 by discriminating on the basis of race in the making and enforcement of contracts on specific occasions in 2001 and 2002. The complaint alleged that Dillard’s actions also constituted discrimination on the basis of race in a place of public accommodation, in violation of the Missouri Human Rights Act (“MHRA”), Mo.Rev.Stat. § 213.065. The complaint was amended three times, once for the purpose of asserting allegations on behalf of a class, and later to add fourteen more individual plaintiffs, for a total of seventeen. In October 2004, the district court denied the plaintiffs’ request to certify a class pursuant to Federal Rule of Civil Procedure 23.
In January 2005, the district court granted Dillard’s motion to dismiss the claims of eleven plaintiffs under § 1981. The court observed that these plaintiffs “tersely allege” that they “have each experienced, within the time period of 1998 to the present, instances at Dillard’s Columbia, Missouri, store in which they were followed and/or otherwise subjected to surveillance based upon their race.” Order, R. Doc. 159, at 2. Relying on Garrett v. Tandy Corp., 295 F.3d 94 (1st Cir.2002), where the court held that “[s]o long as watchfulness neither crosses the line into harassment nor impairs a shopper’s ability to make and complete purchases, it is not actionable under section 1981,” id. at 101, the district court ruled that the failure of the eleven plaintiffs to allege “that they were questioned, searched, detained, or subjected to any physical activity other than being followed or subjected to surveillance” was fatal to their claims. Order, R. Doc. 159, at 3-4. The court reasoned that “[b]ecause Section 1981 requires a per se interference with plaintiffs’ ability to contract, and because plaintiffs have failed to allege facts demonstrating a per se interference,” the motion to dismiss should be granted. Id.
In July 2005, the district court considered motions for summary judgment with respect to the remaining plaintiffs, including Gregory, the Turners, and Jeff McKinney. As to Gregory and the Turners, the court concluded that except for one claim raised by Gregory, all of the claims asserted by these plaintiffs amounted to “dis criminatory surveillance.” Gregory v. Dillard’s, Inc., No. 02-04157, 2005 WL 1719960, at *8 (W.D.Mo. July 22, 2005). Citing authority that “[discriminatory surveillance ... on its own [is] not actionable under § 1981,” Hampton v. Dillard’s, Inc., 247 F.3d 1091, 1109 (10th Cir.2001), the court granted summary judgment for Dillard’s on these claims. The district court opined that “[a]llowing the Turners and Gregory to proceed on a theory of discriminatory surveillance ‘would come close to nullifying the contract requirement of Section 1981 altogether, thereby transforming the statute into a general cause of action for race discrimination in all contexts.’ ” Gregory, 2005 WL 1719960, at *8 (quoting Lewis v. J.C. Penney Co., 948 F.Supp. 367, 371-72 (D.Del.1996)). On Gregory’s remaining claim that a Dillard’s employee once refused to let Gregory walk through the store while carrying a bedding set that she had purchased on an earlier date, the court concluded that Gregory presented no evidence that she intended or attempted to purchase merchandise on the day of the incident, and that she therefore failed to demonstrate an interference with an actual contractual interest or relationship.
The district court granted summary judgment in favor of Dillard’s on McKinney’s claim under § 1981. Observing that McKinney made no attempt to purchase merchandise, and that he left the store voluntarily after being subjected to what he believed to be rude behavior, the court ruled that because McKinney chose to leave the store of his own accord, Dillard’s could not be liable under § 1981. Gregory, 2005 WL 1719960, at *8 (citing Bagley v. Ameritech Corp., 220 F.3d 518, 521-22 (7th Cir.2000)). The court further held that a 15-minute delay endured by McKinney while waiting for service from a Dillard’s store clerk was insufficient to sustain a § 1981 claim.
As to the state-law claims under the MHRA, the district court observed that the Missouri statute prohibits discrimination on the basis of race in “any place of public accommodation.” Mo.Rev.Stat. § 213.065. After analyzing the statutory definition of “places of public accommodation,” id. § 213.010(15), the district court concluded that the phrase does not include retail establishments. On that basis, the court dismissed the plaintiffs’ claims against Dillard’s under the MHRA.
II.
We first consider the claims arising under federal law. Section 1981 provides that all persons within the jurisdiction of the United States shall have “the same right ... to make and enforce contracts ... as is enjoyed by white citizens.” 42 U.S.C. § 1981(a). First enacted in 1866, the statute was amended in 1991 to define “make and enforce contracts” to include “the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” Id. § 1981(b).
While § 1981 prohibits racial discrimination in “all phases and incidents” of a contractual relationship, Rivers v. Roadway Express, Inc., 511 U.S. 298, 302, 114 S.Ct. 1510, 128 L.Ed.2d 274 (1994), the statute “does not provide a general cause of action for race discrimination.” Youngblood v. Hy-Vee Food Stores, Inc., 266 F.3d 851, 855 (8th Cir.2001). Rather, the 1991 amendments retained the statute’s focus on contractual obligations. Id. Congress “positively reinforced that element by including in the new § 1981(b) reference to a ‘contractual relationship.’ ” Domino’s Pizza, Inc. v. McDonald, 546 U.S. 470, 477, 126 S.Ct. 1246, 163 L.Ed.2d 1069 (2006) (emphasis in original). “Any claim brought under § 1981, therefore, must initially identify an impaired ‘contractual relationship’ under which the plaintiff has rights.” Id. at 476, 126 S.Ct. 1246; accord Youngblood, 266 F.3d at 855. Section 1981 is not, however, limited to existing contractual relationships. The statute “protects the would-be contractor along with those who already have made contracts,” Domino’s Pizza, 546 U.S. at 476, 126 S.Ct. 1246, and it thus applies to discrimination that “blocks the creation of a contractual relationship” that does not yet exist. Id.; see Runyon v. McCrary, 427 U.S. 160, 172, 96 S.Ct. 2586, 49 L.Ed.2d 415 (1976).
Our court has identified several elements to a claim under § 1981, which we divide into four parts for analysis: (1) membership in a protected class, (2) discriminatory intent on the part of the defendant, (3) engagement in a protected activity, and (4) interference with that activity by the defendant. See Green v. Dillard’s, Inc., 483 F.3d 533, 538 (8th Cir.2007); Bediako v. Stein Mart, Inc., 354 F.3d 835, 839 (8th Cir.2004). The disputed issues in this appeal are elements (3) and (4). There is no dispute that the plaintiffs are members of a protected class, and while Dillard’s disputes that it acted with any racial animus, it does not urge dismissal of the claims on the ground that the plaintiffs failed to allege or present a disputed issue of fact concerning discriminatory intent. We focus, therefore, on whether each plaintiff engaged in protected activity and whether Dillard’s interfered with such activity.
To show protected activity, the third element, a plaintiff alleging interference with the creation of a contractual relationship in the retail context must demonstrate that he or she “actively sought to enter into a contract with the retailer,” and made a “tangible attempt to contract.” Green, 483 F.3d at 538 (quoting Morris v. Dillard Dep’t Stores, Inc., 277 F.3d 743, 752 (5th Cir.2001)). In view of the statute’s focus on protecting a contractual relationship, a shopper advancing a claim under § 1981 must show an attempt to purchase, involving a specific intent to purchase an item, and a step toward completing that- purchase. See Green, 483 F.3d at 538 (holding that shopper satisfied third element by selecting a specific item in display case and communicating to sales clerk her desire to purchase that item); Denny v. Elizabeth Arden Salons, Inc., 456 F.3d 427, 435 (4th Cir.2006) (holding that plaintiffs who had purchased and received a gift package entitling the recipient to a variety of salon services had demonstrated a contractual relationship); Williams v. Staples, Inc., 372 F.3d 662, 668 (4th Cir.2004) (holding that the plaintiff sought to enter a contractual relationship when he offered payment by check); Christian v. Wal-Mart Stores, Inc., 252 F.3d 862, 874 (6th Cir.2001) (holding that a plaintiff who had selected merchandise for purchase by placing it in her cart, had the means to purchase, and would have purchased the merchandise had she not been asked to leave the store had shown a sufficient contractual relationship to bring a § 1981 claim); cf. McQuiston v. K-Mart Corp., 796 F.2d 1346, 1348 (11th Cir.1986) (holding that-when a customer lifts an item from a shelf or rack to determine its price, there is no contractual relationship with the seller).
To the extent that the plaintiffs urge us to expand our interpretation of the statute beyond the elements stated in Green, and to declare that a shopper need only enter a retail establishment to engage in protected activity under § 1981, we decline to do so. The Tenth Circuit in Hampton addressed a comparable contention that § 1981 “protects customers from harassment upon entering a retail establishment.” 247 F.3d at 1118. Stating that it could not “extend § 1981 beyond the contours of a contract,” the Hampton court rejected the claim of a plaintiff who failed “to make or attempt to make a purchase” at a department store. Id. In reaching this conclusion, the court found itself “aligned with all the courts that have addressed the issue” in requiring that “there must have been interference with a contract beyond the mere expectation of being treated without discrimination while shopping.” Id. (citing Wesley v. Don Stein Buick, Inc., 42 F.Supp.2d 1192, 1201 (D.Kan.1999); Sterling v. Kazmierczak, 983 F.Supp. 1186, 1192 (N.D.Ill.1997); Lewis v. J.C. Penney Co., 948 F.Supp. 367, 371 (D.Del.1996)); see also Morris v. Office Max, Inc., 89 F.3d 411, 413-15 (7th Cir.1996) (upholding dismissal of a claim brought by two shoppers who were exam ining time stamps and discussing the advantages and disadvantages of three or four models when they were approached by police, because interference with “prospective contractual relations” was insufficient to state a claim under § 1982, which is “construed in tandem” with § 1981). We agree with this analysis.
To demonstrate unlawful interference by a merchant under § 1981, the fourth element, a plaintiff must show that the retailer “thwarted” the shopper’s attempt to make a contract. Green, 483 F.3d at 539. By “thwart,” we mean that interference is established where a merchant “blocks” the creation of a contractual relationship. Domino’s Pizza, 546 U.S. at 476, 126 S.Ct. 1246. This element is satisfied, for example, where a retailer asks a customer to leave a retail establishment in order to prevent the customer from making a purchase. Christian, 252 F.3d at 873. In Green, our court held that where a sales clerk “explicitly refused service” to two shoppers based on race, “treated them at all times with pronounced hostility,” “discouraged her coworker from assisting them by questioning their ability to pay,” directed “a most egregious racial slur” and “forceful racial insult” at the shoppers, and “actively hindered” the efforts of another sales clerk to serve the customers, the plaintiffs had shown conduct sufficiently severe to constitute actionable interference. 483 F.3d at 539.
Several courts have concluded, however, that not all conduct of a merchant that offends a customer is sufficient to constitute actionable interference with a contractual relationship for purposes of § 1981. The Fifth Circuit, for example, has held that where a shopper abandoned his purchase due to a merchant’s mistreatment of the shopper’s daughter, the merchant did not “actually interfere” with or “thwart” an attempted purchase in a manher that violated § 1981. Arguello v. Conoco, Inc., 330 F.3d 355, 358-59 (5th Cir.2003). In that circuit, “a § 1981 claim must allege that the plaintiff was actually prevented, and not merely deterred, from making a purchase or receiving a service after attempting to do so.” Id. (emphasis in original) (internal quotations omitted); accord Morris v. Dillard Dep’t Stores, Inc., 277 F.3d at 752-53; see Henderson v. Jewel Food Stores, Inc., No. 96 C 3666, 1996 WL 617165, at *3-4 (N.D.Ill. Oct.23, 1996).
The Seventh Circuit similarly has held that where a shopper opts not to contract with a merchant because the shopper is offended by certain racially motivated activity of an employee of the store, there is no claim under § 1981. In Bagley v. Ameritech Corp., 220 F.3d 518 (7th Cir.2000), a customer left a store after he was offended by the behavior of an assistant sales manager, who said she “would not serve” the customer and “gave him the finger.” Id. at 520. The court held that while it could not fault the customer for taking offense, this offensive conduct was insufficient to state a claim under § 1981, because the merchant was “not responsible for terminating the transaction.” Id. at 522.
In particular, we agree with two other circuits that discriminatory surveillance by a retailer is insufficient to establish interference with protected activity under § 1981. The First Circuit, observing that “[i]n a society in which shoplifting and vandalism are rife, merchants have a legitimate interest in observing customers’ movement,” held that an allegation of dis criminatory surveillance is insufficient to state a claim under § 1981. See Garrett, 295 F.3d at 101. The Tenth Circuit reached the same conclusion, stating that “discriminatory surveillance” is “not actionable under § 1981.” Hampton, 247 F.3d at 1108. Racially biased watchfulness, however reprehensible, does not “block” a shopper’s attempt to contract.
Judge Murphy’s dissent, by contrast, advocates an expansive interpretation of § 1981 that acknowledges no limiting principle on actionable interference in the retail shopping context, such that virtually any case in which there is a disputed issue regarding the merchant’s motivation would be submitted to a jury. Indeed, the dissent’s rationale does not exclude the possibility that even surveillance unknown to a shopper constitutes actionable interference. Post, at 491 n. 18. This approach not only conflicts with the decisions of several circuits, but it is inconsistent with the dissent’s own purported adherence to the standard established in Green.
III.
A.
Turning to the specific claims at issue in this appeal, the district court resolved nine of them on a motion to dismiss, holding that an allegation of discriminatory surveillance alone was insufficient to state a claim under § 1981. We review the district court’s decision de novo. Carter v. Arkansas, 392 F.3d 965, 968 (8th Cir.2004).
The complaint in this case involved seventeen plaintiffs, thirteen of whom have appealed. In the complaint, each plaintiff made a summary allegation that he or she had “sought to make and enforce a contract for services ordinarily provided by Dillard’s,” and had been “deprived of services” while similarly-situated white persons were not, or had received services “in a markedly hostile manner and in a manner which a reasonable person would find objectively discriminatory.” Appellants’ App. 50-85. To explain the grounds on which their claims rested, plaintiffs Crystal Gregory, Alberta Turner, and Carla Turner included factual allegations concerning their shopping experiences at Dillard’s, and alleged that employees of Dillard’s had taken certain actions based on race in those instances that gave rise to liability under § 1981. In sharp contrast to Gregory and the Turners, the nine appellants considered on the motion to dismiss alleged in their factual section of the complaint only that “each experienced ... instances at Dillard’s Columbia, Missouri store in which they were followed and/or otherwise subjected to surveillance based upon their race.” Appellants’ App. 50.
Even before the Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), we held that a civil rights complaint “must contain facts which state a claim as a matter of law and must not be conclusory.” Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir.1995); see also Nickens v. White, 536 F.2d 802, 803 (8th Cir.1976). Twombly confirmed this approach by overruling Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), and establishing a plausibility standard for motions to dismiss. 127 S.Ct. at 1966. After Twombly, we have said that a plaintiff “must assert facts that affirmatively and plausibly suggest that the pleader has the right he claims ..., rather than facts that are merely consistent with such a right.” Stalley v. Catholic Health Initiatives, 509 F.3d 517, 521 (8th Cir.2007); see Wilkerson v. New Media Tech. Charter Sch., 522 F.3d 315, 321-22 (3d Cir.2008). While a plaintiff need not set forth “detailed factual allegations,” Twombly, 127 S.Ct. at 1964, or “specific facts” that describe the evidence to be presented, Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (per curiam), the complaint must include sufficient factual allegations to provide the grounds on which the claim rests. Twombly, 127 S.Ct. at 1965 n. 3. A district court, therefore, is not required “to divine the litigant’s intent and create claims that are not clearly raised,” Bediako, 354 F.3d at 840, and it need not “conjure up unpled allegations” to save a complaint. Rios v. City of Del Rio, 444 F.3d 417, 421 (5th Cir.2006) (internal quotation omitted).
In this case, the nine motion-to-dismiss appellants did spell out the limited factual basis for their claims. The grounds upon which their claims rest is an assertion that Dillard’s caused them to be followed and surveilled while they were in the store. Appellants’ App. 50. This factual allegation fails to state a claim. Absent an allegation that the plaintiffs attempted to purchase merchandise, the complaint fails to meet the foundational pleading requirements for a suit under § 1981, because it does not satisfy the third element that the plaintiffs attempted to make a contract. Protected activity under the statute does not extend to “the mere expectation of being treated without discrimination while shopping.” Hampton, 247 F.3d at 1118; accord Garrett, 295 F.3d at 101.
Nor does the complaint allege sufficient interference with asserted protected activity to state a claim under the fourth element. An allegation of discriminatory surveillance is insufficient to state a claim under § 1981. See Garrett, 295 F.3d at 101; Hampton, 247 F.3d at 1108. We believe that the district court’s reference to “per se interference” — made when applying Garrett and discussing the claims of plaintiffs who had not alleged anything “other than being followed or subjected to surveillance” — was simply another way of expressing the same conclusion. We thus agree with the district court that these claims must be dismissed.
B.
The § 1981 claims of four other appellants were dismissed on a motion for summary judgment. We review the district court’s decision de novo, drawing all reasonable inferences in favor of the plaintiffs without resort to speculation. Johnson v. Ready Mixed Concrete Co., 424 F.3d 806, 810 (8th Cir.2005). We conclude that the district court properly applied the law to the applicable facts, and that the grant of summary judgment should be affirmed.
As to appellant Jeff McKinney, we adopt the rationale of the three-judge panel that previously considered this claim. See Gregory v. Dillard’s, Inc., 494 F.3d 694, 708 (8th Cir.2007) (Murphy, J.). McKinney and his cousins had sampled cologne testers while waiting for sales assistance. Although McKinney believed he had previously made eye contact with the sales associate who subsequently moved the cologne testers, there is no evidence that McKinney ever communicated a desire to make a purchase as opposed to testing samples, cf. Green, 483 F.3d at 538-39, spoke to the sales associate about any merchandise when she came to the counter where he and his cousins were standing, or had more than a “general interest” in the cologne. Morris v. Office Max, Inc., 89 F.3d at 414: McKinney thus failed to present sufficient evidence of interference with a protected contract interest, and the district court correctly granted summary judgment for Dillard’s on this claim. The expansive interpretation of § 1981 now advocated by the principal dissenting opinion leads Judge Murphy and Judge Melloy to dissent from their own panel opinion, post, at 488-89, but we adhere to their previous views.
Appellant Crystal Gregory presented evidence that a sales associate followed her as she selected a couple pairs of pants from a rack and took them to a fitting room at Dillard’s. Gregory testified that when she came out of the fitting room, the sales associate had a “little smirk on her face,” and that two officers were right outside the fitting room leaning on clothing racks. Appellants’ App. 286. Gregory saifi she returned to the fitting room, removed the pants, and then took the pants to the counter, where the sales clerk was “getting ready to ring me up.” Id. at 287. Gregory, however, was offended by the conduct of the sales associate, and she told the sales clerk that she was not buying the pants. Gregory testified that she then spoke with a manager, but concluded that “she was not of much help, almost as if she did not care, and so I left and I left very upset.” Id. at 288. The record does not disclose what Gregory asked the manager to do, or what the manager offered to do.
The district court correctly concluded that this evidence does not establish interference with protected activity sufficient to prove the fourth element of a claim under § 1981. As discussed, evidence of surveillance or watchfulness is insufficient to state a claim. Garrett, 295 F.3d at 101; Hampton, 247 F.3d at 1108. In Garrett, for example, three employees monitored the plaintiff throughout his visit to a store, and “at least one of them accompanied him throughout his visit.” 295 F.3d at 96. When the, plaintiff later complained to a store manager about racially discriminato ry treatment, the manager responded with “patently false” information. Id. at 97. Nonetheless, the Garrett court held that this active trailing of a minority shopper in the store amounted to no more than an “unadorned” — and legally insufficient— claim that the plaintiff was carefully watched while on the premises. Id. at 101. The addition of an inconsiderate smirk on the face of a Dillard’s sales clerk, or Ms. Gregory’s subjective belief that the store manager was “not of much help,” does not meaningfully distinguish this case from Garrett, particularly where Gregory admits that Dillard’s did not refuse to contract, but rather that a sales clerk was “getting ready to ring [her] up” when Gregory herself declared that she would not make a purchase. Appellant’s App. 287.
The claims of Alberta and Carla Turner were properly dismissed for similar reasons. The Turners presented evidence that after Alberta purchased several pairs of shoes at the Dillard’s store, she, Carla, and Carla’s children began to examine clothing in the children’s department. Carla took her daughter to a fitting room, and when she exited the room, a sales associate and a security guard were outside looking at them. Carla asked the security guard why he was following them, but received no answer. The security guard then followed Carla as she walked through the store to rejoin Alberta. As the two women approached the cash register, Alberta asked whether they really wanted to buy the clothes. Carla said that it was Alberta’s decision, and Alberta said that she really did not think that she wanted to make the purchase. Upset by the surveillance, Alberta took the clothing items to the sales counter and told the clerk that she would not make a purchase. She then approached the first sales associate and told her “you just made someone lose a sale,” at which time the sales associate allegedly snickered and said, “So?” Appellants’ App. 260a; Appellee’s App. 170, 185. The Turners then left the store. Alberta returned shortly thereafter and told a manager that Dillard’s management needed to let the employees know that “everybody who comes in here is not out to ... take things from them.” When the manager asked what had happened, Alberta said that she did not want to discuss it. Appellants’ App. 260a.
As with Ms. Gregory’s claim, the evidence presented by the Turners shows at most discriminatory surveillance and watchfulness, which is not actionable interference under § 1981. Dillard’s also demonstrated its willingness to contract by selling shoes to Alberta Turner on the same visit, but the Turners nonetheless abandoned their effort to purchase children’s clothing. On this record, the district court properly dismissed the claims. See Arguello, 330 F.3d at 358-59; Garrett, 295 F.3d at 101; Bagley, 220 F.3d at 521-22; Morris v. Office Max, Inc., 89 F.3d at 414-15.
We recognize that the plaintiffs were offended by the alleged conduct of Dillard’s employees, but we do not believe the facts asserted here are sufficient to establish interference under § 1981. As noted, several courts have concluded that not all offensive conduct of a merchant constitutes actionable interference. See Arguello, 330 F.3d at 358-59 (holding no actionable interference where plaintiff voluntarily set product on counter and left without trying to buy it after sales clerk made racially derogatory remarks and mistreated plaintiffs daughter); Garrett, 295 F.3d at 101 (holding no actionable interference where plaintiff alleged that three employees monitored him throughout his visit to the store because of his race); Bagley, 220 F.3d at 519-22 (holding no actionable interference where plaintiff left store after customer was “offended” by sales clerk who refused to serve him, made obscene gesture, and previously stated that “I hate fucking Mexicans”); Morris v. Office Max, Inc., 89 F.3d at 415 (holding no actionable interference under § 1982, although store’s conduct was “undoubtedly disconcerting and humiliating” and may have “discouraged” plaintiffs from patronizing the store); see also Hampton, 247 F.3d at 1108 (stating that “discriminatory surveillance” is not actionable under § 1981) (citing Lewis, 948 F.Supp. at 371); cf. Elmahdi v. Marriott Hotel Servs., Inc., 339 F.3d 645, 652-53 (8th Cir.2003) (holding that “offensive” racial comments in the workplace fell short of the “severe and pervasive” harassment required to establish a legally cognizable claim of racial harassment under § 1981).
The Green decision goes as far as any in declaring that offensive conduct of a retailer amounts to interference, and we decline here to extend it. To recognize a § 1981 claim on the facts in this case, we believe, would dilute the requirement that a defendant “block” or “thwart” the creation of a contractual relationship. Domino’s Pizza, 546 U.S. at 476, 126 S.Ct. 1246; Green, 483 F.3d at 539.
By affirming Judge Wright’s dismissal of these claims, however, we do not express the view (as suggested by plaintiffs’ counsel at oral argument) that a certain level of race discrimination in retail establishments is “acceptable.” Private parties engage in a variety of behavior that individual federal judges may deem unacceptable, but not all of it is unlawful. Whether and how federal law should regulate particular activity that is considered morally or socially unacceptable is a policy judgment made by Congress and the President. That judgment presumably involves inquiry into such matters as the scope and severity of the problem, the potential that private industry or decentralized regulators will address the problem, see post, at 477-78 (opinion of Benton, J.) (concluding that the plaintiffs have a cause of action under Missouri law); post, at 480 n. 14 (opinion of Murphy, J.) (same), the likely effectiveness of federal legislation in solving the problem, and the collateral costs to the national economy of additional federal regulation. In a significant economic sector such as retail shopping, the potential benefits of sanctioning and deterring offensive and undesirable conduct through federal legislation likely must be weighed against the costs of litigation (including non-meritorious claims) that may be gen erated by expanded regulation, the potential costs of different retail security measures that may be necessitated by such legislation, and the potential increase in shoplifting (presently estimated to be a $13 billion annual drain on retailers) . if merchants are discouraged from conducting legitimate security activity for fear of triggering additional lawsuits. We make no judgment about the wisdom of any policy option, but we conclude that § 1981 as presently drawn does not regulate the retail shopping environment to the extent urged by the plaintiffs in this case. Accordingly, we affirm the judgment of the district court with respect to § 1981.
C.
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3887254-7257 | MEMORANDUM AND ORDER
DENNEY, District Judge.
This matter comes before the Court upon the motion of the defendant, Transcon Lines, Inc., to dismiss the portion of the plaintiff’s complaint based on Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq., as amended, or in the alternative for partial summary judgment. The motion asserts that the Court lacks jurisdiction of the subject matter because the plaintiff failed to file written charges with the Equal Employment Opportunity Commission [EEOC] within 180 days after the allegedly discriminatory conduct occurred, as required by 42 U.S.C. § 2000e-5(e).
The timely filing of a charge with the EEOC is a jurisdictional prerequisite to commencement of a Title VII suit. See Smith v. Office of Economic Opportunity, 538 F.2d 226, 228 (8th Cir. 1976); Olson v. Rembrandt Printing Co., 511 F.2d 1228, 1231 (8th Cir. 1975). The statute as amended, effective March 24, 1972, increased the filing period from 90 to 180 days after the occurrence of the alleged unlawful employment practice. Greene v. Carter Carburetor Co., 532 F.2d 125, 127 (8th Cir. 1976).
The burden of pleading and proving that his cause of action is within the jurisdiction of the Court rests with the plaintiff. Id., citing United States v. Mississippi Barge Line Co., 285 F.2d 381, 387 (8th Cir. 1960). The plaintiff invokes the provision in 42 U.S.C. § 2000e-5(e) which extends the filing period if the aggrieved party has instituted proceedings with a state or local agency which has authority to grant or seek relief from the unlawful practice. In this event, the charge must be filed with the EEOC within 300 days of the unlawful practice or within 30 days after the aggrieved person has received notice that the state or local agency has terminated proceedings, whichever is earlier.
The plaintiff, Ralph St. Aubin, filed a complaint with this Court on June 19, 1975 stating that during his employment with the defendant as a dispatcher, he was repeatedly harassed and insulted for associating with a black employee. In addition, the plaintiff attributes the termination of his employment on February 28, 1974 to retaliation for his friendship with black employees.
Plaintiff waited over eight months from the date of his discharge before filing charges with the EEOC on December 3, 1974. However, during that period, he submitted a complaint, subsequently amended on April 11, 1974, to the Human Relations Department of the city of Omaha on March 22, 1974. Therefore, the issue before the Court for purposes of the motion to dismiss is whether the Omaha Human Relations Department was “a State or local agency with authority to grant or seek relief” from an alleged unlawful employment practice within the meaning of 42 U.S.C. § 2000e-5(e) in March or April, 1974, so as to extend the period within which the plaintiff was required to file with the EEOC.
The Court has granted a motion filed by the EEOC to participate in this action as amicus curiae in opposition to the defendant’s motion to dismiss. The defendant would restrict the meaning of “state or local agency with authority to grant or seek relief” to those agencies which have been officially designated by the EEOC as “deferral” or “706” agencies within 42 U.S.C. § 2000e-5(a)-(e) and which have been identified as such by publication in the Federal Register pursuant to 29 C.F.R. § 1601.-12(i)(1). Therefore, as published notice that the Omaha Human Relations Department and the Nebraska Equal Opportunity Commission were to be considered “deferral” agencies did not appear in the Federal Register until 1975, the defendant concludes that instituting proceedings with these agencies prior to 1975 could not operate to extend the deadline for notifying the EEOC of a claim.
The EEOC argues that the origin of “deferral” agencies and their purpose is to be traced to the restriction in 42 U.S.C. § 2000e-5(c) that charges are not to be filed with the EEOC until 60 days after an aggrieved person has instituted proceedings before state or local authorities in those states in which agencies have been established by state or local law to afford redress for unfair employment practices. The purpose of 42 U.S.C. § 2000e-5(c) is “to give state agencies a prior opportunity to consider discrimination complaints . . . Love v. Pullman Co., 404 U.S. 522, 526, 92 S.Ct. 616, 618, 30 L.Ed.2d 679 (1972).
In addition, the Commission is required by 42 U.S.C. § 2000e-5(b) to accord substantial weight to state or local agency findings in determining whether there is reasonable cause to believe that a charge is true. As a result, the EEOC has, in its words, “adopted an elaborate procedure for designating state and local agencies whose findings it would give due weight.” The Commission argues that such designation of state and local “deferral” agencies has no other purpose and was not intended to limit or define the agencies with which a charge could be filed to comply with 42 U.S.C. § 2000e-5(c) and (e).
The Commission reasons that it has no power unilaterally to decide which agencies do or do not meet the statutory definition in 42 U.S.C. § 2000e-5(a)-(e). As a result, the EEOC asks the Court to make an independent assessment whether the Omaha Human Relations Department was a local agency with authority to grant or seek relief from the employment practices of which Ralph St. Aubin complained in 1974.
Title 14, Chapter 14.04, of the Omaha, Nebraska, Municipal Code contains the Fair Employment Practices Ordinance, parts of which were enacted from 1971 to 1974. Ordinance number 26217 was in effect when Mr. St. Aubin filed charges with the Human Relations Department in 1974. That ordinance defined certain prohibited employment practices including racial discrimination in any aspect of employment, Section 14.04.020; conferred authority on the Omaha Human Relations Department to administer the law, Section 14.04.060; empowered the Department to receive and investigate complaints, to seek elimination of unfair practices by conference, conciliation and persuasion, and to issue cease and desist orders, Section 14.04.080; and authorized the Department to seek enforcement in the District Court of Douglas County, Nebraska, Section 14.04.100. The provisions continue in effect. See Omaha, Nebraska, Municipal Code §§ 14.04.010 et seq. (June, 1976 Ed.). Thus the Omaha Human Relations Department was a local agency authorized by local law to grant or seek relief from unfair employment practices of the kind alleged by Mr. St. Aubin in 1974.
In addition, interpretations of the procedural requirements of Title VII by the EEOC, as the agency primarily responsible for enforcement of the Act, are to be accorded “considerable deference.” Egelston v. State Univ. College at Geneseo, 535 F.2d 752, 755 n. 4 (2nd Cir. 1976); Ashworth v. Eastern Airlines, Inc., 389 F.Supp. 597, 600 (E.D.Va.1975). The EEOC contends that by prior resort to the Omaha Human Relations Department, Mr. St. Aubin became entitled to the statutory extension in which to file with the federal commission. Acting in accordance with that position, the EEOC issued a “right to sue” letter to Mr. St. Aubin on June 9, 1975, and within ten days he sought relief in this Court.
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11991451-25092 | PATRICK E. HIGGINBOTHAM, Circuit Judge:
This is an appeal of convictions for violating RICO, conspiracy, interstate travel in aid of racketeering, and wire fraud. It centers on an alleged scheme to defraud the President Casino gambling boat in Biloxi, Mississippi. The indictment alleged that an organized group of casino employees and co-conspirators used marked cards to cheat and illegally “win” more than $500,000 at the blackjack tables. The jury was presented with a large cast, including characters with varying levels of responsibility in the casino and others with ties to organized crime. Defendant Joseph Jackson was an assistant shift manager in the casino “pit,” the location of the blackjack games. John Grittini was the operations manager on another shift. Defendant Victor Heackley was the casino’s pit administrator. Jackson, Grittini, and Heackley all worked for Gary Carroll. There was evidence that defendant Samuel Matrana, a reputed “associate” of a New Orleans organized crime family, arranged the cheating “crews” and sent the playing cards from Mississippi to Florida to be “marked,” and that Robert Asiel and Emory Etheridge, professional gamblers, were part of the “crew.” The jury also heard testimony about Joe Gagliano, Anthony Carroll, and Frank Gagliano, reputed members of the New Orleans crime family, and Mike Kenny, who was the General Manager of the President. Grittini and Asiel were fugitives at the time of trial. The jury acquitted Ether-idge, Joe Gagliano pled guilty, and Carroll testified under a grant of immunity.
Decks of playing cards used at the President’s blackjack tables were stored in a locked cabinet or “stand” to which Jackson, Grittini, Heaekley, and Carroll all had access. They were also responsible for blackjack operations at the casino. Carroll, the government’s prime witness at trial, detailed the workings of the scheme. Carroll said he was first introduced to the scheme in June of 1993, when Grittini gave him several hundred dollars; Grittini explained that the money was for Carroll’s help in putting marked cards into the blackjack games. Carroll testified that he did not, at that time, know what Grittini was talking about and in fact thought Grittini was lying.
Carroll later realized that the money had come from cheating the casino and learned that the source of the money was Joe Gagli-ano. Carroll later accompanied Grittini to Slidell, Louisiana, where he met with Vacca-ro. Grittini introduced Vaecaro as a friend who had once saved Grittini’s life.
A week after the Vaecaro meeting, Carroll traveled with Grittini to New Orleans to meet Frank Gagliano and Anthony Carroll. After the meeting, Grittini described the cheating operation to Carroll. The operation was to be a joint venture between the New Orleans crime family and another on the west coast. Gagliano, Matrana, and Asiel would assemble “cheating crews” to play blackjack at the President, and all Carroll had to do was help transport the marked cards to the blackjack tables. Grittini would get the unmarked cards, and Matrana would get them to Florida to be marked with “invisible” dye and return them to the casino. Matrana and Grittini would get the cards back into the locked stand. Carroll, Heack-ley, or Jackson would then put the cards in play when and where Grittini ordered. A “crew” would show up, with one person “reading” the marked cards using special glasses and signaling to a player in a “cheating crew.” Winnings would be divided among card players, the participating President employees, and the crime families.
The government introduced taped conversations of Grittini, taped conversations from Gagliano’s deli in New Orleans, taped conversations from the Instant Replay lounge in Nevada, Grittini’s journal allegedly detailing the scheme’s profits, testimony from FBI agents that staked out the operation, and the results from FBI lab tests on the foreign substance found on some President playing cards.
The jury ultimately found Matrana guilty of the RICO charge, conspiracy to commit RICO violations, ITAR, and wire fraud charges. Heaekley was found guilty on RICO, conspiracy, and wire fraud charges. The jury convicted Vaecaro and Jackson of the conspiracy and wire fraud charges and acquitted Etheridge.
I
Defendants contend that eight separate remarks of the prosecutor during trial were, at least cumulatively, so inflammatory and prejudicial as to require a reversal. A prosecutor’s argument is reversible error only when so improper as to affect a defendant’s substantial rights. United States v. Lowenberg, 853 F.2d 295, 301 (5th Cir.1988), cert. denied, 489 U.S. 1032, 109 S.Ct. 1170, 103 L.Ed.2d 228 (1989). To determine whether substantial rights were affected we consider the following factors: (1) the magnitude of the prejudicial effect of the statements; (2) the efficacy of any cautionary instruction; and (3) the strength of the evidence of the defendant’s guilt. Id.; United States v. McPhee, 731 F.2d 1150, 1152 (5th Cir.1984). Where the prosecutor’s conduct cannot be said to have contributed to the guilty verdict, it is legally harmless. Lowenberg, 853 F.2d at 301; United States v. Beckett, 706 F.2d 519, 520 (5th Cir.1983). “The prosecutor should and must perform his duties vigorously, and may, at times, do so even zealously; what he may not do is permit his ambitious desire to obtain a conviction to impinge upon the integrity he must maintain as a representative of the United States.” Id. Finally, we assume that a jury has the common sense to discount the hyperbole of an advocate, discounting the force of the argument.
A
Defendant Heackley, joined by defendant Jackson, challenges the prosecutor’s reference to the defendants as “criminals.” In rebutting Etheridge’s attorney’s closing argument, the prosecutor argued that physical evidence linked Etheridge to the rest of the defendants:
[On December 14, 1993,] there’s a picture of him with his old 365,000 deep brown Nissan. Okay. He’s in the picture, it’s got a Georgia tag, it’s Emory Etheridge. Who’s he with? Who’s he with? He’s with Joe Gagliano. John Grittini’s over there. What do you think they’re doing over there? [Do] you think that these guys all got together and said, “I’ll tell you what, let’s have this big meeting, let’s tell everybody about it, let’s get the FBI here, let them record it, then we can come into this courtroom in the Southern District of Mississippi ... and we’ll let them play that tape of this meeting that we’re going to tell everybody about, and then they can go convict us?” Do you think they got together and said that? No. They said we’re going to do this in secret like conspirators.... You know why we [the government] conduct surveillance? We conduct surveillance — the government conducts surveillance of criminals like Emory Etheridge and the rest of these criminals over here. They do that so they can catch them doing something because these guys aren’t going to tell us.
The defense did not object at trial to this argument.
We review for plain error. Lowenberg, 853 F.2d at 302. The prosecution’s main thrust with this statement was to persuade the jury to convict Etheridge — the only defendant acquitted on all charges by the jury. First, the argument has foundation in the record. The government did use surveillance to observe criminal activity among these defendants and others that, but for the surveillance tapes and photographs, would have been secret. Second, the prosecutor’s statement responded to the argument of several defendants, including Etheridge, that the meetings among the defendants were innocent business encounters or chance meetings. It is true that “two wrongs [do] not make a right.” Id. (citing United States v. Young, 470 U.S. 1, 11-12, 105 S.Ct. 1038, 1044-45, 84 L.Ed.2d 1 (1985)). At the same time, we may consider the “invitation” in judging whether the prosecutor’s “invited response” unfairly prejudiced the defendants. Id.
There was strong evidence that Etheridge and all four appellants here participated in a RICO conspiracy to defraud the President. As is so often the case, the argument was unnecessary to the government’s case, and possibly improper. But it was not reversible error.
B
Defendant Vacearo, joined by defendants Heackley and Jackson, objects to the prosecutor’s implication that a cooperating witness had to be protected from the defendants. “Why in the world would a witness in a RICO case need to have relocation expense? Why would a witness against members of the New Orleans crime family need to have relocation?” Again, this statement responded to the defendants’ closing arguments that the government’s star witness, Carroll, lied in return for money. The evidence at trial showed that the FBI spent approximately $40,000 on Carroll over a 15-month period, including Carroll’s living expenses and several relocations for Carroll and his family. “The prosecution [is] entitled to make a fair response in rebuttal” to the arguments of defense counsel. United States v. Williams, 822 F.2d 512, 518 (5th Cir.1987). The response accurately reflected the record in the ease and the evidence already before the jury; the jury had heard Carroll accuse numerous people (including some of the defendants at trial) of being members of a New Orleans crime family, the jury knew the case was a RICO case, and the jury had heard evidence that the $40,000 referred to by the defendants’ lawyers was for relocation. We find no error.
Relatedly, Jackson and Heackley contend that the prosecutor vouched for Carroll’s truthfulness. The prosecutor explained to the jury:
They [defendants and their attorneys] were really upset at the government for using Gary Carroll. I mean, and that’s too bad but, you know, that’s the breaks guys. That’s the way things happen in the courtroom. You know, we’ll — we’ll take the heat for the deal that was made with Gary Carroll_ You get to judge his credibility, you get to make all of those calls.
Mr. Vaccaro’s attorney objected later. It is not proper for a government attorney personally to vouch for the credibility of a witness. Defendants argue that there is no way to interpret “taking the heat” for a witness other than to describe it as vouching for the witness. We find the meaning of the statement less clear. The remark responded to the allegation that the government’s witness had been paid to give false testimony. The prosecutor did not try to usurp the jury’s role of assigning credibility; he clearly told the jurors that they would “get to judge his credibility.” We find no error. Regardless, the prosecutor’s statement that ‘You [the jury] get to judge his credibility, you get to make all of those calls,” combined with the court’s instructions that the jury need not “accept all of the evidence as true or accurate” and that “you are the sole judges of the credibility or the believability of each witness, and the weight to be given to the witness’s testimony” served to alleviate the prejudice from any error.
C
Heackley, joined by Jackson, objects that the prosecutor told the jury that the money stolen from the casino was important because “when we allowed the gambling in the state, you all know it was also to help school districts_” Although the government’s brief does not address the issue, at oral argument the government’s lawyer also characterized this as an “invited response” to defendants’ arguments. We are hard-pressed to see what, if any, comments made by the defendants’ attorneys formed the “invitation”; regardless, there are some “invita- tLons” that a prosecutor must and should decline. The district court agreed and sustained Etheridge’s objection.
This is the only mention of school districts to which defendants point; there are no other government attempts to draw in emotion-evoking victims in the entire twenty-one-volume record. When the prosecutor tried this route, near the end of trial, the court sustained defense counsel’s objection, cutting off further discussion. Given the length of this trial, the amount of evidence against the defendants, and the court’s cautionary instructions that “statements of lawyers are not evidence” and “to base your verdict solely upon the evidence, without prejudice or sympathy,” we find that defendants were not unfairly prejudiced by the prosecutor’s statement. “Inappropriate prosecutorial comments, standing alone, [do] not justify a reviewing court to reverse a criminal conviction obtained in an otherwise fair proceeding.” Young, 470 U.S. at 11, 105 S.Ct. at 1044.
D
Defendants Jackson and Vaccaro object to statements made by the prosecutor regarding the defense’s failure to call the FBI’s case agent, Peralta, to the stand to buttress their case. Jackson objects to the prosecution’s inference that there was an “easy” procedure that the defendants could use to call Peralta, while Vaccaro objects to the burden-shifting effect of asking the jury why the defense didn’t call a witness. The issue arose when Jackson’s attorney told the jury that “Mr. Peralta, the lead FBI agent on this case, present each and every day of this trial, sat only and sits only at the counsel table. Never on the witness stand.” He then recited a series, of questions he would have asked the agent had Peralta been called. Vaccaro’s attorney also argued to the jury that “[t]hey didn’t bring you Mr. Peralta,” and that Mr. Peralta’s testimony would have been helpful to his client. The prosecutor did not attempt to shift the burden to the defendants, but pointed out that a procedure was available to call the witness. Furthermore, the district court specifically instructed the jury that the “defendants are not obligated to put on any proof ... o[r] to present any evidence at all” in direct response to the prosecutor’s Peralta argument. We find no error.
E
Defendants Jackson and Vaccaro object that the prosecutor impugned their attorneys during closing argument. Referring to the defendant’s arguments about the absent defendant Grittini and the use of Carroll as a witness, the prosecutor referred to an “empty chair defense,” and told the jury that “[tjhat’s what defense lawyers do.... They earn their living trying to muddle the issues. Trying to make it as fuzzy as possible. That’s their job — I try to make it — ” Defense counsel objected, cutting off the rest of the prosecutor’s sentence, and the court immediately sustained. The district court then instructed the jury that “the attorneys are obligated to represent their clients_ I caution you, as I have before, statements of attorneys are not evidence.... ”
The prosecutor’s statement that defense lawyers “muddle the issues” was clearly improper. The prosecutor was seeking to “draw the cloak of righteousness around the prosecutor in his personal status as government attorney and impugn[ ] the integrity of defense counsel.” United States v. Frascone, 747 F.2d 953, 957-58 (5th Cir.1984). This court has been clear that “[n]o prosecutor ... may impugn the integrity of a particular lawyer or that of lawyers in general, without basis in fact, as a means of imputing guilt to a defendant.” United States v. McDonald, 620 F.2d 559 (5th Cir.1980). Nevertheless, where such an excessive statement comes in the heat of a closing argument in a hard-fought case, is objected to and immediately sustained, and subjected to an instant cautionary instruction to disregard it, it does not warrant reversal. Frascone, 747 F.2d at 958.
F
Finally, defendant Vaccaro objects to the prosecutor’s reference to his parole status, and to a statement at closing that Vaccaro claims inaccurately attributed a taped state ment between Joe Gagliano and Sydney Callahan to him. We find no error.
1
During the testimony of FBI agent Metz, the government played a tape of a conversation at Frank’s Deli in New Orleans, suggesting that Vaccaro had been in New Orleans, met with Gagliano and other members of the New Orleans “family,” and came to apologize for Grittini’s attempts to set up a gaming school in New Orleans without “permission” from the Marcello “family.” After part of the tape was played (the tape’s transcript is 23 pages), the defense objected, pointing out that the tape contained references to Vaccaro’s parole status. The district court overruled defendants’ motion for a mistrial, but told the government’s attorneys to “move away from that.”
Vaccaro argues that although the district court correctly determined that the evidence of Vaccaro’s parole status was inadmissible, and although the prosecutor did not ask the witness any questions about Vaccaro’s parole comments, the prosecutor “made sure that the jury would not forget when he reminded the jury” during closing argument. Vaccaro refers to a statement by the prosecutor during closing argument that “That’s John Vac-caro — he’s been doing it all his life.” However, the prosecutor’s comments came during a review of the tapes of telephone conversations from the Instant Replay Lounge in Nevada. On the Instant Replay tape, Vacca-ro complains to a coeonspirator that “They want to argue with people that’s been doin’ it all their lives. See?” The prosecutor’s quote that Vaccaro has been “doing it all his life” was a direct quote from Vaccaro about his experience with cheating schemes, which the prosecutor properly used to underscore the unlikelihood of Vacearo’s “innocent” association with the card scheme conspirators.
2
In his closing argument, the prosecutor argued:
The comment, the particular comment that I think Mr. Metz described to you [from a microphone recording in Frank’s Deli] was that — had the most visceral gut-wrenching effect on me sitting at the table, and I think you also must have sensed it somewhat, was the comment about the Christmas tree. Do you remember that one? The Christmas tree and how everybody wants a present, and Mr. Metz had to explain that after the Brilab situation and the Marcello family had been a little bit dormant, and with the advent of gaming, this whole thing began to grow again and there was like a Christmas tree and everybody wanted a present. And that whole analogy was somewhat disturbing. There’s another comment that Mr. Vac-caro makes which is his apologies which fits in well with Gary Carroll and the rest of the witnesses who testified about this joint venture.
Vaccaro argues that he never made the “Christmas tree” statement; the reference to a Christmas tree came from a tape-recorded conversation between Joe Gagliano and Sidney Callahan, but the prosecutor deliberately implied that the statement was uttered by Vaccaro. We find no error. The prosecutor stated “There’s another comment that Mr. Vaccaro makes.... ” Furthermore, the jury had heard both the tapes and had the transcripts for both the tapes; the record is clear that the “Christmas tree” conversation came from Government Exhibit 48, while the “apologies” evidence came from Government Exhibit 44. While the argument was a confusing one to make (Agent Metz testified about both recordings at trial), the prosecutor’s closing arguments are a fair representation of both pieces of evidence.
G
We find misconduct in the prosecutor’s arguments to the jury that the Mississippi gaming statutes were intended to fund school districts, and that defense counsel tried to “muddle the issues.” We do not find prejudice sufficient to warrant reversal. The cumulative effect of these prosecutorial statements, both quickly halted by sustained objections and partially cured with instructions from the court, was harmless; we are not convinced that different actions by the district court would have produced “a very different trial.” See United States v. Riddle, 103 F.3d 423, 434 (5th Cir.1997). The jury was not given “hours” of testimony that it would otherwise not have heard, nor was its focus significantly redirected. See id.
II
Defendants challenge the sufficiency of the evidence to support their convictions. The measure is whether a reasonable trier of fact could have found that the evidence established guilt beyond a reasonable doubt. We review the evidence and construe all reasonable inferences arising from the evidence in the light most favorable to the jury’s verdict. United States v. Pedroza, 78 F.3d 179 (5th Cir.1996).
A
Matrana and Heackley were found guilty of substantive RICO violations. The elements of a RICO violation under § 1962(e) are: (1) the existence of an enterprise that affects interstate or foreign commerce; (2) the defendant’s association with the enterprise; (3) the defendant’s participation in the conduct of the enterprise’s affairs; and (4) at least two predicate acts of racketeering activity designated in 18 U.S.C. § 1961(1). United States v. Elliott, 571 F.2d 880, 897-99 (5th Cir.), cert. denied, 439 U.S. 953, 99 S.Ct. 349, 58 L.Ed.2d 344 (1978). There is sufficient evidence in the record to support Matrana’s and Heackley’s involvement in an enterprise that also included Grittini and others. There is abundant evidence that this enterprise operated a cheating scheme at the President. The casino manager testified that he noticed certain players’ activities that indicated cheating; they took hits when they should not have and stayed when they should have taken hits. The “winnings” or profits from this scheme were reflected in Grittini’s journal, which was admitted into evidence. There was testimony that Heackley facilitated the cheating by placing the marked cards on the table for play and that Matrana organized the cheating “crews.” A recorded conversation between Grittini and Heackley was introduced by the government. In it, Heackley says: “Our golfing ... buddy, yeah but our golfing buddy is coming in today_” The conversation continued:
Grittini: “[Y]ou know the dozen golf balls I’m talking about ... the bogus ones? The ones that they altered to work in our favor.”
Heackley: “Yeah, is there fifty-two balls in a box?”
Grittini: “Right.”
Heackley: “We gotta find somebody to play with them.”
FBI surveillance of Matrana traveling from Louisiana to Mississippi to meet Grittini and receiving a package was also introduced.
B
Mississippi Code Ann. § 75-76-307 states that “[i]t is unlawful for any person, whether he is an owner or employee of or a player in an establishment, to cheat at any gambling game.” Section 309 states that “[i]t is unlawful to mark, alter, or otherwise modify any associated equipment or gaming device in any manner_” These code sections were enacted on April 20,1993. Defendant Vaccaro, joined by Jackson and Heack-ley, argues that the evidence was insufficient to show a violation of Mississippi Code sections 307 or 309, or alternatively that his RICO conspiracy conviction violated the ex post facto clause to the extent that the offenses occurred prior to April 20,1993.
We disagree. The reference to state law in a RICO indictment serves a “definitional purpose.” United States v. Welch, 656 F.2d 1039, 1058 (5th Cir.1981), cert. denied, 456 U.S. 915, 102 S.Ct. 1767, 72 L.Ed.2d 173 (1982). “The reference to state law in the federal statute is for the purpose of defining the conduct prohibited and for the purpose of supplementing, rather than preempting, state gambling laws.” Id. (internal quotation omitted). Defendants have put forward nothing to suggest that cheating at gambling was legal in Mississippi before the Code sections at issue were enacted. See, e.g., Miss.Code Ann. § 97-19-39 (obtaining signature or thing of value with intent to defraud — the so-called “false pretenses” statute). We have explained that the evidence was sufficient to support RICO convictions for cheating at cards in violation of Mississippi law.
C
Appellants were found guilty of conspiracy to commit a RICO offense. They argue that the government must prove that a defendant agreed to commit personally two or more predicate acts. The circuits are split on this issue although the law of this circuit is settled. To be guilty of a RICO conspiracy, the conspirator “must simply agree ‘to the objective of a violation of RICO; he need not agree personally to violate the statute.’ ” United States v. Marmolejo, 89 F.3d 1185, 1196 (5th Cir.1996) (internal quotation omitted) (gathering cases), cert. granted in part, — U.S. -, 117 S.Ct. 1079, 137 L.Ed.2d 214 (1997). Marmolejo is binding on this panel. This issue is now before the Supreme Court and will be argued this fall.
More than adequate evidence was introduced at trial showing that each of these defendants “simply agreed” to engage in the President cheating scheme. Evidence at trial demonstrated that Vaccaro met with his coconspirators and talked to them by telephone. The jury was entitled to conclude that the substance of these conversations related directly to the racketeering acts charged in the indictment. The jury was free to infer that Vaccaro actively directed, sponsored, and monitored the progress of the scheme. His meetings with his coconspira-tors could be viewed by the jury as evidence that he agreed to the President scheme. Similar evidence connects Heackley, Jackson, and Matrana to the agreement.
D
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4329111-28620 | OPINION
Mary P. Gorman, United States Chief Bankruptcy Judge
The Debtor’s First Amended Chapter 13 Plan is before the Court for confirmation. The Chapter 13 Trustee has objected to confirmation, asserting that because the Debtor is not proposing to pay her unsecured creditors in full, she must devote all disposable income she expects to receive during the plan term to the payment of her unsecured creditors. The Chapter 13 Trustee claims that the Debtor has miscalculated her disposable income because she has taken a deduction in her calculation for a housing allowance to which she is not entitled. Both the Debtor and the United States Trustee argue, to the contrary, that the Debtor is entitled to the housing deduction included in her disposable income calculation. Because this Court finds that the Debtor is entitled to the deduction, the Trustee’s objection to confirmation will be overruled.
I. Factual and Procedural Background
Patricia A. Currie (“Debtor”) filed her voluntary petition under Chapter 13 on July 22, 2014. On her Schedule A — Real Property, she disclosed ownership of a modest home in which she resides in Decatur, Illinois, valued at $16,000. On her Schedule J — Expenses, she listed monthly expenses related to her home of $48.33 for insurance, $50 for maintenance and repairs, and a combined $252 for electricity, heat, natural gas, water, sewer, and garbage. The Debtor has no mortgage indebtedness associated with her home.
On her initial Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income (“B22C”), the Debtor deducted $437 at line 25A for Local Standards: Housing and Utilities;' non-mortgage expense. She also deducted $651 on line 25B for Local Standards: Housing and Utilities; mortgage/rent expense. The Debtor’s disposable income shown on line 59 of her B22C was negative $146.85.
The Debtor’s initial Chapter 13 Plan (“Plan”) proposed that she would make $176 per month payments for sixty months for a total of $10,560. From that amount, the Chapter 13 Trustee (“Trustee”) was directed to pay his own commission, fees to the Debtor’s attorney of $2929, and a priority claim of the Internal Revenue Service (“IRS”) in the amount of $6451. The Plan provided that any funds remaining after the specifically identified payments were made should be distributed to unsecured creditors pro rata.
The IRS objected to the Plan asserting that its priority claim should be paid in the amount of $11,133.87 rather than the lower sum suggested by the Debtor. Although the Debtor initially objected to the IRS’s claim, she later withdrew the objection and filed an Amended Plan. In her Amended Plan, the Debtor proposed payments of $176 for four months and $267 for an additional fifty-six months for a total of $15,656. The Amended Plan increased the proposed distribution to the IRS to $11,133.87 but in other respects is virtually identical to the original Plan.
After the Amended Plan was filed, the Trustee filed an objection to the Debtor’s B22C. The Trustee claimed that the Debtor had improperly deducted the $651 Local Standard for mortgage/rent expense and he asserted that she was not entitled to the deduction because she had no mortgage indebtedness related to her home. The Trustee also asserted that there were other errors on the B22C — some of which, if corrected, would actually work to the Debtor’s benefit — and calculated that the Debtor’s monthly disposable income was actually $572.95 rather than the negative $146.85 she had calculated. The Trustee also filed an objection to confirmation of the Amended Plan and, relying on his objection to the B22C, argued that confirmation should be denied because the Debtor was not committing all of her projected disposable income to the payment of her unsecured creditors.
The Debtor subsequently filed an Amended Schedule J adding a $50.33 per ■month expense for real estate taxes and reducing her combined utilities to $234 per month. The Debtor’s expenses for insurance and repairs and maintenance remained the same. The Debtor also filed an Amended B22C incorporating some of the changes suggested by the Trustee but continuing to claim the $651 mortgage/rent deduction. On her Amended B22C, the Debtor calculated her disposable income as negative $78.05.
At an initial hearing, the parties agreed that the issue of applicability of the mortgage/rent deduction was a legal issue and a briefing schedule was set. After the initial briefs were filed, this Court decided that further briefing would be helpful on the issue of whether the division of the IRS Local Standard for Housing and Utilities on the B22C form into two subcategories when the IRS Local Standard itself makes no such division was consistent with the Code. The Debtor had raised the issue in her final brief but the Trustee had not fully addressed the issue in his brief. In an order requesting supplemental briefing, the Court invited the United States Trustee (“UST”) to participate in addressing the pending issues.
The UST filed a brief on the issue joining the Debtor in arguing that the mortgage/rent deduction was properly taken by the Debtor on her B22C. The Trustee filed a supplemental brief maintaining that the deduction should not be allowed. The issue is ready for decision.
II. Jurisdiction
This Court has jurisdiction over the issues before it pursuant to 28 U.S.C. § 1334. All bankruptcy cases and proceedings filed in the Central District of Illinois have been referred by the District Court to the bankruptcy judges. CDIL- LR 4.1; 28 U.S.C. § 157(a). Determination of whether a plan should be confirmed is a core proceeding. 28 U.S.C. § 157(b)(2)(L). The issue of plan confirmation also “stems from the bankruptcy itself’ and arises specifically under the provisions of the Code and therefore may be constitutionally decided by a bankruptcy judge. Stern v. Marshall, — U.S. —, 131 S.Ct. 2594, 2618, 180 L.Ed.2d 475 (2011).
III. Legal Analysis
Generally, if an objection has been filed, a Chapter 13 plan must provide for contribution of all of a debtor’s projected disposable income for the applicable commitment period to the payment of unsecured creditors. See 11 U.S.C. § 1325(b)(1)(B). The term “disposable income” is defined, in part, as a debtor’s current monthly income “less amounts reasonably necessary to be expended” for the current maintenance and support of the debtor and the debtor’s dependents. 11 U.S.C. § 1325(b)(2)(A)®. For above-median income debtors, the “amounts reasonably necessary to be expended” are “determined in accordance with subparagraphs (A) and (B) of section 707(b)(2).” 11 U.S.C. § 1325(b)(3). There is apparently no dispute here that the Debtor has above-median income and is subject to the statutory formula for calculation of her allowable expenses.
The provisions of § 707(b) are commonly known as the “means test” and are also used to determine a debtor’s eligibility for Chapter 7 relief. Section 707(b)(2)(A)(ii) provides, in part:
(ii) (I) The debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of a debtor in a joint case, if the spouse is not otherwise a dependent.... Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts.
11 U.S.C. § 707(b)(2)(A)(ii)(I).
According to the IRS’s website, the Local Standards: Housing and Utilities are derived from data from the U.S. Census Bureau to create a single standard deduction for individuals, based on their county of residence and household size. IRS Collection Financial Standards, http://www.irs.gov/Individuals/Colleetion-Financial-Standards (last visited Sept. 15, 2015). Taking the Debtor’s circumstances here as an example, the allowance for housing and utilities for a household of one in Macon County, Illinois, at the time of the case filing was $1088. Illinois — Local Standards: Housing and Utilities, http:// www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Illinois-Local-Standards-Housing-and-Utilities (last visited Sept. 15, 2015). According to the IRS, the Local Standards: Housing and Utilities “include mortgage or rent, property taxes, interest, insurance, maintenance, repairs, gas, electric, water, heating oil, garbage collection, residential telephone service, cell phone service, cable television, and internet service.” IRS Collection Financial Standards, http:// www.irs.gov/Individuals/Collection-Financial-Standards (last visited Sept. 15, 2015).
Notwithstanding the IRS’s issuance of one Local Standard for Housing and Utilities, the Official Forms required for calculating a Chapter 13 debtor’s disposable income draw a distinction between mortgage/rent expenses and other housing re lated expenses. The B22C, completed by the Debtor at the time she filed her petition, separates Local Standards: Housing and Utilities into “non-mortgage expenses” on line 25A and a “mortgage/rent expense” on line 25B. Official Form 22C-2, implemented later in 2014 and completed by the Debtor in amending her disposable income calculation, separates the Local Standard: Housing and Utilities into “Insurance and operating expenses” on line 8 and “Mortgage or rent expenses” on line 9. Neither form provides an explanation of the specific expenses intended to be included on each line, but both forms refer debtors to the U.S. Trustee Program’s website for more information.
In the Bankruptcy Abuse Prevention and Consumer Protection ■ Act of 2005 (“BAPCPA”), Congress expressly acknowledged the authority of the Secretary of the Treasury to “alter the [IRS] standards established to set guidelines for repayment plans as needed to accommodate their use under Section 707(b)[.]” BAPCPA, Pub.L. No. 109-8, 119 Stat. 23, at § 103. The Trustee claims that the Secretary of the Treasury made the division of the Local Standards: Housing and Utilities into the two separate line-items at issue here. The historical record regarding the creation of the initial B22C form and the breakdown of housing expenses into two line-items does not, however, support the Trustee’s position.
According to the minutes, of the August 2005 meeting of the Judicial Conference Advisory Committee on Bankruptcy Rules (“Rules Committee”), concern existed that use of the IRS Local Standards did not adequately address the treatment of a debtor’s secured debt for the Chapter 7 means test and Chapter 13 disposable income calculations required by the Code. Advisory Committee on Bankruptcy Rules, August 2005 Meeting Minutes, p. 7-8, http://www.uscourts.gov/rules-policies/ archives/meeting-minutes/advisory-eommittee-rules-bankruptey-procedure-august-2005 (last visited Sept. 15, 2015).
Because the Code also allows the deduction of secured debt payments associated with real estate in the calculations, concern was expressed that debtors would get a double, dip by deducting both a full Local Standard and a mortgage payment. Id.; 11 U.S.C. § 707(b)(2)(A)(ii). The proposed work-around for that problem was a requirement that any secured debt payment associated with housing be deducted from the Local Standard resulting in a debtor then receiving a deduction for only the greater of the Local Standard or the mortgage payment. But if a debtor had a mortgage payment greater than the amount of the Local Standard, no amount of the Local Standard would remain available for the payment of utilities, maintenance, and other such expenses after subtracting the debt payment. Thus, as a practical matter, the drafters of the initial B22C thought it prudent to mitigate the effect- of deducting the mortgage payment from the Local Standard by dividing the Local Standard into two separate line-items. By allocating some amount of the Local Standard specifically for utilities, maintenance, and the like, a debtor was assured of receiving a deduction for those expenses regardless of the amount of the mortgage payment. Because the IRS had not separated ownership costs from other housing expenses, however, the Rules Committee itself drafted and circulated alternate versions of the initially proposed form B22C to separate housing expenses into two distinct line-items. Id.
At a September 2005 meeting of the Rules Committee, a representative of the Executive Office of the United States Trustees (“EOUST”) reported that the IRS had separated the Local Standards for housing and utilities for bankruptcy purposes, dividing the standard into “mortgage/rent expenses” and “non-mortgage expenses.” Advisory Committee on Bankruptcy Rules, September 2005 Meeting Minutes, p. 4, http://www.uscourts.gov/ rules-policies/archives/meeting-minutes/ advisory-committee-rules-bankruptcy-procedure-September-2005 (last visited Sept. 15, 2015). According to the record of that meeting, however, “[t]he IRS ha[d] declined to post the separate standards on its own website ... but the standards [would] be posted on the EOUST website.” Id. Notwithstanding the report from the EOUST, it appears that neither the Secretary of the Treasury nor the IRS formally modified the Local Standards: Housing And Utilities. Rather, the record suggests the EOUST was provided with information about the expenses included in the Local Standards in order for the EOUST and the Rules Committee to make their desired practical modification to the B22C.
The IRS has never differentiated between mortgage and non-mortgage expenses in the Local Standards: Housing and Utilities, but at all times has provided a single amount that is inclusive of all housing expenses and dependent only upon a debtor’s county of residence and household size. The IRS website does provide a disclaimer, however, stating that the information provided is intended for tax purposes and that “[e]xpense information for use in bankruptcy calculations can be found on the website for the U.S. Trustee Program.” Illinois — Looal Standards: Housing and Utilities, http://www.irs.gov/ Businesses/SmallBusinesses-&-Self-Employed/IllinoisLocal-Standards-Housing-and-Utilities (last visited Sept. 15, 2015). And the new form 22C-2— breaking down the housing and utilities standards into categories albeit using different terminology than previously used on the B22C — states that “[biased on information from the IRS, the U.S. Trustee Program has divided the IRS Local Standard for housing for bankruptcy purposes into two parts” (emphasis added), identifying them as “Insurance and operating expenses” and “Mortgage or rent expenses.” Official Form B 22C-2.
This clear acknowledgment of the role of the EOUST in the breakdown of the line-items undercuts the Trustee’s assertion that it was the Secretary of the Treasury who formally modified the Local Standards. The historical record makes clear ■ that it was the EOUST and the Rules Committee that modified the B22C and separated the Local Standards: Housing and Utilities into two line-items. Most importantly, the record demonstrates that none of those involved in the creation of the two lines items, regardless of the role they played, acted with the intent that any portion of the Local Standards: Housing and Utilities would be disallowed for any debtor with housing expenses. To the contrary, the only expressed intent was to make sure that the use of the Local Standard by debtors was properly coordinated with the additional allowed deduction for secured mortgage debt.
The Official Bankruptcy Forms and the Federal Rules of Bankruptcy Procedure are intended to govern procedures in cases under the Code, and they enjoy a presumption of validity. See Fed. R. Bankr. P. 1001; In re Trimarchi, 421 B.R. 914, 920 (Bankr.N.D.Ill.2010). But as the UST points out, “forms, rules, treatise excerpts, and policy considerations ... must be read in light of the Bankruptcy Code provisions that govern [a] case, and must yield to those provisions in the event of a conflict.” Schwab v. Reilly, 560 U.S. 770, 779 n. 5, 130 S.Ct. 2652, 177 L.Ed.2d 234 (2010); see also In re Wiegand, 386 B.R. 238, 241 (9th Cir. BAP 2008) (“[W]hen an Official Bankruptcy Form conflicts with the Code, the Code always wins.”); Fed. R. Bankr. P. 9009 (forms shall be construed to be consistent with the Code).
In support of his objection, the Trustee relies heavily on Ransom v. FIA Card Services, N.A., 562 U.S. 61, 131 S.Ct. 716, 178 L.Ed.2d 603 (2011). In Ransom, the Supreme Court analyzed § 707(b)(2)(A)(ii) in the context of the IRS’s Local Standards for Transportation. Focusing on the use of the term “applicable,” which it defined as “appropriate, relevant, suitable, or fit,” the Court held that the deduction for transportation ownership costs only applies to individuals who have the costs of a car loan or lease. Id. at 69-71, 131 S.Ct. 716. Significantly, the Court noted that the IRS’s Local Standards for Transportation “explicitly recognize [a] distinction between ownership and operating costs, making clear that individuals who have a car but make no loan or lease payments may claim only the operating allowance.” Id. at 72, 131 S.Ct. 716. According to the IRS website, individuals who own a car are entitled to the full amount of the Local Standard for operating costs. IRS COLLECTION FINANCIAL StandaRds, http://www.irs.gov/IndMduals/ Collection-Financial-Standards (last visited Sept. 15, 2015). Individuals who own a vehicle are also generally entitled to actual ownership costs up to the amount of the Local Standard. Id. But the IRS website makes clear that if an individual has a vehicle, but makes no payments thereon, then such individual is not entitled to take any amount for ownership costs under the Local Standards for Transportation. Id. And the IRS Collection Financial Standards specifically provide separate and fixed amounts for ownership and operating costs. LOCAL STANDARDS: TRANSPORTATION, http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Local Standards-Transportation (last visited Sept. 15, 2015). Because the debtor in Ransom owned a car but did not make payments on it, he was only entitled to a deduction for operating costs and not for ownership costs. Ransom, 562 U.S. at 72, 80, 131 S.Ct. 716.
Here, it is the IRS’s Local Standards: Housing and Utilities that are at issue. And unlike the Transportation Standards, the Local Standards: Housing and Utilities are not divided into two separate categories by the IRS. Although the Trustee argues that Ransom is controlling in the present case, it is easily distinguished. In Ransom, the Court looked at the plain language of § 707(b)(2)(A)(ii)(I), which references the IRS Local Standards. Id. at 69, 131 S.Ct. 716. Under a plain reading of the Local Standards and the Collection Financial Standards — the latter the Court viewed as explanatory guidelines to the National and Local Standards — one of the designated categories of expenses was applicable to the debtor in Ransom and the other was not. Id. at 72-73, 131 S.Ct. 716. While the Court cautioned that the explanatory guidelines provided by the IRS are not incorporated into the Code and cannot be controlling if they aré at odds with it, the Local Standards: Transportation themselves supported application of one expense and not another. Id. at 72-74, 131 S.Ct. 716. Applying the analysis of Ransom to the Local Standards: Housing and Utilities in this case creates a different result. The Local Standards: Housing and Utilities provide only one category of expenses upon which a determination of applicability need be made — if a debtor has any expenses related to “housing and utilities” then the Local Standards apply.
Despite the plain language of the § 707(b)(2)(A)(ii)(I), the Trustee relies on the division of the housing-related Local Standards on old B22C and current form 22C-2 for his argument that two distinct Local Standards exist and should be applied based on the Ransom criteria. Both the old and new forms, however, reference the U.S. Trustee Program website which provides links to tables that give a breakdown of the portions of the Local Standards attributable to “mortgage/rent” and to “non-mortgage” expenses. And although the tables do not indicate the specific expenses included in each line-item, also available on the EOUST’s website is a Statement of the U.S. Trustee Program’s Position on Legal Issues Arising Under the Chapter 13 Disposable Income Test. http://www.justice.gov/ust/eo/bapcpa/docs/ chapterl3_analysis.pdf (last visited Sept. 15, 2015). In that document which indicates it was last revised in April 2010, the EOUST identifies the “non-mortgage” expenses included in Line 25A of the old B22C as maintenance and repair, homeowner association dues, condominium fees, various utilities, and basic telephone and cell phone service. Id. And the EOUST identifies the “mortgage/rent” expenses as principal and interest on mortgage loans, rent, homeowners/renters insurance, and local property taxes. Id. Thus, under the EOUST’s breakdown, the Debtor here has expenses for insurance and property taxes which are part of the “mortgage/ rent” deduction, making that portion of the Local Standards applicable even under a Ransom analysis.
Notwithstanding the statement on the 22C-2 form that the division of the Local Standards: Housing and Utilities was made by the UST and the direct acknowledgment in this case by the UST that the Debtor is entitled to the deductions she claims, the Trustee persists in his objection. In support of his objection, he cites several cases which, as the Debtor and the UST point out, do not actually provide authority for his position.
Several of the cases relied on by the Trustee involve the interplay between the so-called “marital adjustment” made on the income side of the disposable income or means test calculation and the applicability of either National or Local Standards on the expense side of the calculation. In determining a debtor’s “current monthly income” for either calculation, amounts “paid by any entity other than the debtor on a regular basis for the household expenses of the debtor or the debtor’s dependents” must be included. 11 U.S.C. § 101(10A)(B). This generally results in all of the income of a non-filing spouse of a debtor being included in the initial calculation with any amounts of that income not used to pay household expenses then being deducted out as a marital adjustment. See Trimarchi, 421 B.R. at 917-18.
In Trimarchi, a case not relied on by the Trustee, the court found that even though a Chapter 13 debtor was not liable on the mortgage note for the home in which she resided with her non-filing spouse, she was entitled to take the full Local Standards: Housing and Utilities deduction. Id. at 921. The court disallowed, however, the deduction of the mortgage payment made by the non-filing spouse as a marital adjustment on the income side of the debtor’s calculation. Id. at 920. The court reasoned that the most accurate way to complete the disposable income calculation using the B22C form was to include the non-filing spouse’s payment of the mortgage as part of the debt- or’s income and then to allow., the full deduction for housing expenses. Id. Regardless of whether the debtor was liable for the mortgage payment, the court found that she benefited from the regular payment of that debt by her spouse. Id. at 922.
The Trustee relies on several cases with similar facts as Trimarchi but which deny the full housing deduction to debtors who are not liable on the mortgages secured by the homes in which they reside. E.g., In re Petry, No. 12-51016, 2013 WL 1286197, at *1 (Bankr.W.D.La. Mar. 26, 2013); In re Toxvard, 485 B.R. 423, 438-39 (Bankr.D.Colo.2013). In each of these cases, however, the court’s analysis was strongly influenced by the marital adjustment issue, and both courts allowed a marital adjustment deduction on the income side of the calculations for a non-filing spouse’s payment of housing-related expenses. Petry, 2013 WL 1286197, at *1; Toxvard, 485 B.R. at 438-39. Thus, although the housing deduction was denied in each case, neither debtor was required to include the contribution of housing expenses by a non-filing spouse in their “current monthly income.” Petry, 2013 WL 1286197, at *1; Toxvard, 485 B.R. at 438-39.
Although all of these cases involving the marital adjustment issue also discuss the Local Standards: Housing and Utilities, none provide guidance on the issues in this case. Each of the cases involves situations where the debtor’s residence was, in fact, encumbered by a mortgage but the mortgage note was being paid by a non-filing spouse rather than the debtor. Such cases, regardless of the outcome, provide no guidance on the applicability of the Local Standards: Housing and Utilities in this case where there is no mortgage indebtedness and no contribution from a non-filing spouse. The cases are simply not on point with the facts and legal issues here.
Other cases cited by the Trustee also provide little authority for his position. For example, the Trustee relies on In re Wilson, 454 B.R. 155 (Bankr.D.Colo.2011), for the proposition that Ransom should apply here and require a denial of a portion of the Local Standards: Housing and Utilities to the Debtor. And Wilson certainly contains language which says just that. Id. at 156-57. But Wilson comes to that conclusion by first discussing the fact that the IRS Local Standards control the decision and then by finding that “[t]he IRS Local Standards contain two housing-related ‘monthly expense amounts,’ one for ‘mortgage/rent’ expense and one for ‘non-mortgage’ expenses.” Id. at 156. That is, of course, not entirely accurate. The IRS Local Standards do not now, and did not at the time Wilson was decided, contain two housing-related expense categories. The IRS Local Standards provide one amount for all housing costs depending on a debtor’s county of residence and the number of people in the debtor’s household. Because Wilson ignores the fact that the breakdown of the housing expenses into two line-items came from the UST and the Rules Committee, it provides no analysis of how that fact impacts the applicability of the Local Standards in the particular case. The issue before this Court was never raised in Wilson, and Wilson, therefore, provides no guidance on its resolution.
Likewise, the Trustee relies on In re Fields, 534 B.R. 126 (Bankr.E.D.N.C.2015), for the proposition that all of the Debtor’s expenses related to her home including both insurance and property taxes are included in the “non-mortgage” line-item. And, in fact, Fields says exactly that. Id. at 136. But as authority for-that proposition, Fields cites to the Internal Revenue Manual (“IRM”) and specifically “IRM 5.15.1.9 (Nov. 17, 2014).” Id. A review of that citation discloses, however, that because the IRS has only one Local Standard: Housing and Utilities, the IRM lists all housing-related expenses in the one cited provision; it does not break those expenses down into “mortgage” and “non-mortgage” expenses as Fields suggests that it does. To the contrary, the full sentence in the IRM, of which only a portion is quoted in Fields, also includes mortgage and rent payments in the expenses covered by the Local Standard. IRM 5.15.1.9 http://www.irs.gov/irm/part5/ irm_05-015-001.html (last visited Sept. 15, 2015). Fields provides no support for the Trustee’s position that all of the Debtor’s housing expenses are covered by the “non-mortgage” line-item.
The UST describes the Trustee’s objection as “not well taken” and asserts that the objection is “contrary to the language of the Bankruptcy Code, impermissibly elevates a form over substantive law, relies on language from that form that is irrelevant to the Debtor’s factual situation, and ignores the undisputed faet[s]” of the case. Specifically, the UST notes that the Trustee ignores the fact that “the Debtor actually incurs applicable expenses for property taxes and homeowners insurance— which is all that the Supreme Court has stated section 707(b)(2)(A)(ii)(I) requires.” This is strong criticism of the Trustee by the UST who appoints the Trustee to his position and retains supervisory authority over the Trustee and all Chapter 13 cases. See 28 U.S.C. § 586(a)(3)(B). The criticism is, however, warranted here.
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10545059-7716 | FLETCHER, Circuit Judge:
The government appeals an order by the district court exempting “reasonable attorneys’ fees” from those assets which may be seized by the government pursuant to the civil forfeiture provisions of 21 U.S.C. § 881. The district court held the statute unconstitutional as applied to reasonable attorneys’ fees. For the reasons set forth below, we dismiss this appeal.
BACKGROUND
On May 31, 1987, defendant Rudolph Henderson was arrested with several others on allegations of participation in an extensive conspiracy to distribute cocaine. Henderson was arraigned on June 8, 1987, and is currently being detained. At the time of the defendants’ arrest, the government served a number of search and seizure warrants throughout the San Francisco Bay Area. Three residences, 25 vehicles, and $325,000 in cash have since been seized. On June 12, 1987, the government filed complaints for forfeiture under 21 U.S.C. § 881(a)(6) and (7), asserting that the seized assets are traceable to Rudolph Henderson’s alleged drug trafficking activities.
Defendant moved for the exemption of reasonable attorneys’ fees from the seized assets. The district court agreed with defendant’s contention that the forfeiture statute was unconstitutional as applied to reasonable attorneys’ fees. The court determined that reasonable, bona fide attorneys fees of $500,000 for pretrial work would be exempted from defendants’ assets, and that an additional $17,500 would be exempted for each week of trial.
The Government filed its notice of appeal to this court on October 7, 1987. Although we do not disagree with the government that the district court’s order is an appealable “collateral order,” see Flanagan v. United States, 465 U.S. 259, 265 & n. 3, 104 S.Ct. 1051, 1054-55 & n. 3, 79 L.Ed.2d 288 (1984), we conclude that we nevertheless lack jurisdiction over this appeal, for reasons that were not brought to the court’s attention until after the case was submitted for decision.
DISCUSSION
28 U.S.C. § 1252 provides:
Any party may appeal to the Supreme Court from an interlocutory or final judgment, decree or order of any court of the United States ... holding an Act of Congress unconstitutional in any civil action, suit or proceeding to which the United States ... is a party.
Despite the permissive phrasing, the Supreme Court has held that § 1252 is mandatory. Donovan v. Richland Co. Ass’n for Retarded Citizens, 454 U.S. 389, 390, 102 S.Ct. 713, 714, 70 L.Ed.2d 570 (1982) (per curiam). Under 28 U.S.C. § 1291, the courts of appeals have jurisdiction over appeals from final decisions “except where a direct review may be had in the Supreme Court.” Where § 1252 applies, the appeal from the district court’s order must be taken directly to the Supreme Court, and the court of appeals lacks jurisdiction. Id.
The district court order from which the government appeals held 21 U.S.C. § 881 unconstitutional as applied to reasonable attorneys’ fees. The question before this court, then, is whether a civil forfeiture action under 21 U.S.C. § 881 is a “civil action, suit or proceeding” within the meaning of § 1252. The government argues that, notwithstanding the “civil” characterization of 21 U.S.C. § 881, the action before us is not civil in nature because (1) the civil forfeiture was undertaken in connection with a criminal case; and (2) civil forfeitures are “quasi-criminal” in nature. Thus, the government argues, § 1252 should not apply. We are not persuaded by either argument.
Although the civil forfeiture provision of § 881 may be used, as in this case, in conjunction with a criminal prosecution, there is no requirement that the government do so. See United States v. Dunn, 802 F.2d 646, 647 (2nd Cir.1986), cert. denied, — U.S. —, 107 S.Ct. 1568, 94 L.Ed.2d 760 (1987) (civil forfeiture may be sought after unsuccessful criminal prosecution). Congress, in enacting the Comprehensive Forfeiture Act of 1984, Pub.L. 98-473, 98 Stat. 2050, intended to retain civil forfeiture as- an alternative available to prosecutors that is procedurally independent of the criminal action. See S.Rep. No. 225, 98th Cong., 1st Sess. 191, reprinted in 1984 U.S.Code Cong. & Admin.News 3182, 3374, 3376, 3381; see also Dunn, 802 F.2d at 647. Because the civil forfeiture is a procedure independent from the criminal prosecution, it should not be considered a criminal action simply because there is a pending, related prosecution. The fact that only the civil forfeiture exemption order is before us on appeal lends support to this conclusion. Indeed, as the Government has forcefully argued to us, a civil forfeiture is an in rem action, giving the court jurisdiction only over the res, and not over the defendant personally. See United States v. $57,480.05, 722 F.2d 1457, 1458 (9th Cir.1984) (once the res of a civil forfeiture action is distributed or paid out, district court loses jurisdiction).
We conclude that a civil forfeiture action is civil in nature for purposes of § 1252. Cf. United States v. One Assortment of 89 Firearms, 465 U.S. 354, 363, 104 S.Ct. 1099, 1105, 79 L.Ed.2d 361 (1984) (“In contrast to the in personam nature of criminal actions, actions in rem have traditionally been viewed as civil proceedings ... ”). Although civil forfeiture actions have been held “quasi-criminal” insofar as certain fourth and fifth amendment safeguards for the accused apply, see Plymouth Sedan v. Pennsylvania, 380 U.S. 693, 697, 85 S.Ct. 1246, 1249, 14 L.Ed.2d 170 (1965); United States v. One Mercedes Benz, 708 F.2d 444, 448 (9th Cir.1983), this characterization of a civil forfeiture is the exception, rather than the rule. The Supreme Court has refused to broaden the criminal characterization of civil forfeiture to encompass a wider range of constitutional protections. See One Assortment of 89 Firearms, 465 U.S. at 362-63,104 S.Ct. at 1104-05 (civil forfeiture not deemed criminal action for double jeopardy purposes); Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 686-87, 94 S.Ct. 2080, 2093-94, 40 L.Ed.2d 452 (1974) (civil forfeiture scheme not unconstitutional because of its applicability to property interest of innocents). This court has characterized 21 U.S.C. § 881 as “predominantly civil,” so that Congress could constitutionally impose the civil “preponderance” burden of proof on the claimant in civil forfeitures. United States v. One 1970 Pontiac GTO 2-Door Hardtop, 529 F.2d 65, 66 (9th Cir.1976).
No policy reasons have been suggested to us and we see none to characterize a civil forfeiture proceeding under 21 U.S.C. § 881 as quasi-criminal in order to exempt a constitutional challenge to the statute from mandatory Supreme Court review under 28 U.S.C. § 1252. Our conclusion that a civil forfeiture proceeding is a “civil action, suit or proceeding” within the meaning of § 1252 is strengthened by cases which have applied § 1252 to nominally civil actions attacking the constitutionality of criminal prosecutions or convictions. See McLucas v. DeChamplain, 421 U.S. 21, 30-31, 95 S.Ct. 1365, 1371, 43 L.Ed.2d 699 (1975) (finding jurisdiction under § 1252 to hear appeal from district court injunction against criminal court-martial prosecution); Parker v. Levy, 417 U.S. 733, 742 & n. 10, 94 S.Ct. 2547, 2555 & n. 10, 41 L.Ed.2d 439 (1973) (§ 1252 applied to habeas appeal from court-martial conviction); Reid v. Covert, 351 U.S. 487, 489, 76 S.Ct. 880, 881, 100 L.Ed. 1352 (1956) rev’d on other grounds on reh’g, 354 U.S. 1, 77 S.Ct. 1222, 1 L.Ed.2d 1148 (1957) (same).
CONCLUSION
Because the district court’s order should have been appealed directly to the Supreme Court, 28 U.S.C. § 1252, we dismiss the government’s appeal for lack of jurisdiction.
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3648181-25597 | MEMORANDUM
HANNUM, District Judge.
This is an action brought by Plaintiff Yancoski to recover damages based on allegations of fraud relating to transactions in securities. The Complaint sets forth ten counts. The Court will rule on the Motion Of Defendants To Dismiss The Complaint in which defendants seek dismissal, on various grounds, of all counts.
Summary Of Allegations
The allegations of the Complaint must be accepted as being true. Accordingly, a distillation of the allegations is presented below.
Lorraine Yancoski received a large sum of money in July of 1979 by means of the satisfaction of a judgment in her favor based on her husband’s death. Yancoski sought prudent and safe investments for her funds in order to provide income and capital growth potential.
At her request, plaintiff’s attorney introduced her to some stockbrokers, including defendant Krakovitz. Krakovitz worked for the brokerage house of E.F. Hutton & Company, Inc., [hereinafter referred to as “E.F. Hutton”]. Plaintiff was told by Krakovitz that he could invest her money in a manner that was both safe and would lead to income and capital growth. Krakovitz emphasized that the vast research and informational resources of E.F. Hutton would be used to guide her investments.
Based on Krakovitz’s statements, plaintiff opened a discretionary account at E.F. Hutton with Krakovitz as the broker in charge of the account. Yancoski placed $100,000.00, the vast majority of her assets, in the account. Before opening her account with E.F. Hutton, plaintiff had not traded in securities and informed Krakovitz of her lack of knowledge of the stock market.
Although plaintiff’s objective of safe and prudent investments was known to him, Krakovitz immediately began purchasing stocks for the account which were highly speculative. Krakovitz represented to-plaintiff that the stocks purchased for the account were cautious and safe investments. During late 1979 and early 1980, Krakovitz engaged the account in a large amount of trading. In December, 1979 and January, 1980, trading totals were close to the entire value of the account.
In February of 1980, Krakovitz persuaded Yancoski to convert to a margin account by misrepresenting the risks of margin accounts and the suitability of a margin account to plaintiff’s investment objectives. Krakovitz is alleged to have induced the conversion to a margin account and subsequently to have used the account solely for the purpose of generating commissions and not to serve Yancoski’s interest. The Complaint sets forth a sequence of heavy trading through which the bulk of the account’s value was lost while payments for commissions and interest on indebtedness to E.F. Hutton grew.
Plaintiff eventually closed her account with E.F. Hutton and sought relief in this Court based on the heavy trading and misrepresentation by Krakovitz and a failure to supervise the account by E.F. Hutton.
Count I: The Securities Exchange Act Section 10(b) and Rule 10b-5
Plaintiff’s first count alleges violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and the Securities and Exchange Commission’s Rule 10b-5, 17 C.F.R. § 240.10b-5 (1982). In effect, Count I of the Complaint sets forth two challenged theories of liability: (1) Krakovitz violated Rule 10b-5 by engaging the account in excessive trading for the purpose of generating commissions or, in other words, that Krakovitz “churned” the account; and (2) Krakovitz violated Rule 10b-5 by making material misrepresentations concerning and omitting to state material facts regarding the securities transactions.
Defendants properly recognize that Count I complains of “churning” the account. Defendants contend, however, that churning is not a cognizable violation of either the Act or Rule 10b-5. Instead, maintain Krakovitz and E.F. Hutton, the churning of the account represents a mere breach of a fiduciary relationship and not a manipulative or deceptive act proscribed by federal law.
If churning constitutes only a breach of fiduciary relations, then federal securities law does not cover the activity. See Santa Fe Industries, Inc. v. Green, 430 U.S. 462, 476, 97 S.Ct. 1292, 1302, 51 L.Ed.2d 480 (1977). Churning is, however, more than defendants claim. The cases recognize churning as a deceptive practice which constitutes a violation of Section 10(b) of the Act and Rule 10b-5. E.g., Carras v. Burns, 516 F.2d 251, 258 (4th Cir.1975) (collecting eases); McNeal v. Paine, Webber, Jackson & Curtis, Inc., 598 F.2d 888, 890 n. 1 (5th Cir.1979) (collecting cases). Cf. 17 C.F.R. § 240.15clT7 (1982) (expressly defining churning as a violation of Section 15(c) of the Act).
Contrary to defendants’ contentions, under the circumstances of this case, plaintiff is not required to allege misrepresentations in addition to the excessive trading in order to state a claim under Rule 10b-5. There fore, this Court finds that the Complaint does state a claim based on churning.
Defendants also challenge Count I on the ground that it fails to state a claim based solely on misrepresentations by Krakovitz. It is asserted by defendants that plaintiff fails to allege any misrepresentations and, even if misrepresentations are alleged, that there were no misrepresentations made in connection with the purchase or sale of a security. On both grounds, the Court finds defendants’ contentions to be without merit.
As the factual background provided earlier indicates, Krakovitz allegedly made several misrepresentations to Yancoski. “Krakovitz represented that he could invest her money in a manner that was completely safe but that would provide income and lead to significant capital appreciation.” Complaint at ¶ 11. After purchasing highly speculative stocks for her account, Krakovitz continued to tell Yancoski that only safe and prudent investments were being made. Complaint at ¶ 15. Yancoski was also told that the high volume of trading in her account was normal. Complaint at ¶ 17. When he induced the conversion of the account to a margin account, Krakovitz purportedly misrepresented the risks and appropriateness of the margin-type account. Complaint at 1118. There are other allegations which may be construed as charging misrepresentations, but the Court finds those already stated suffice to demonstrate the propriety of its ruling.
Additionally, the misrepresentations are alleged to be in connection with the purchase or sale of a security. Some misrepresentations were made both before and after the opening of the accounts regarding the prudence of the investments. This Court views those representations as ones “touching” the purchase or sale of securities and, therefore, the. “in connection with” requirement is satisfied by the Complaint. See Superintendent of Ins. v. Bankers Life and Cas. Co., 404 U.S. 6, 13, 92 S.Ct. 165, 169, 30 L.Ed.2d 128 (1971); Arrington v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 651 F.2d 615, 619 (9th Cir.1981).
As a result of the foregoing analysis, this Court finds that Count I of the Complaint survives the motion to dismiss.
Count II: Section 12(2) Of The Securities Act
Plaintiff’s second count alleges a cause of action under Section 12(2) of the Securities Act of 1933, 15 U.S.C. § 77/(2). Count II charges misrepresentations by Krakovitz and E.F. Hutton as sellers of securities.
Because matters outside the pleadings were introduced by the parties on this portion of defendants’ motion to dismiss pursuant to FED.R.CIV.P. 12(b)(6), the Court will treat the challenge to Count II as a motion for summary judgment. In this situation, the Court must still accept all of plaintiff’s allegations as true and grant judgment only if no genuine issue of material fact is present. Mortensen v. First Federal Sav. & Loan Ass’n, 549 F.2d 884, 891 (3d Cir.1977).
For the purposes of its ruling, the Court will accept defendants’ assertion that an action under Section 12(2) will lie only against the purchaser’s immediate seller. See Memorandum Of Law In Support Of Defendants’ Motion To Dismiss The Complaint, at 10-13.
Plaintiff has submitted to the Court several confirmation slips sent to Yancoski by defendants. The confirmation slips carry a designation under “Code C” of “2.” See Plaintiffs Memorandum In Opposition To Defendants’ Motion To Dismiss, Exhibit A. The reverse side of the confirmation slips explain the entry of “2” in this manner: “AS PRINCIPAL WE HAVE BOUGHT FROM YOU OR SOLD TO YOU FOR YOUR ACCOUNT.” Additionally, at oral argument on this motion, defendants’ counsel conceded that E.F. Hutton was the immediate seller in some of the transactions for the Yancoski account. Consequently, defendants are not entitled to judgment as a matter of law and the motion for summary judgment on Count II is denied.
Count III: “Controlling” Liability Of E.F. Hutton
Plaintiff’s third count consists of claims under 15 U.S.C. § 77o and 15 U.S.C. § 78t(a). Both sections provide for joint and several liability of a “controlling person” for violations of the securities laws by a “controlled person.”
Defendants assert that Count III fails to state a claim for “controlling person” liability against E.F. Hutton on the basis that no claim for the underlying liability of Krakovitz has been stated. As a result of the Court’s disposition of the earlier counts, defendants’ position becomes untenable. Accordingly, defendants’ motion to dismiss Count III of the Complaint is denied.
Count TV: Civil Liability Under RICO
Plaintiff’s fourth count asserts a claim for treble damages under the civil liability provisions of the Racketeer Influenced and Corrupt Organizations Act, [hereinafter referred to as “RICO”]. This claim rests on the same set of facts which form the basis of the securities law counts and is asserted against both Krakovitz and E.F. Hutton.
RICO declares:
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.
(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsections (a), (b), or (c) of this section.
18 U.S.C. § 1962(c), (d).
Yancoski alleges violation of both subsections quoted above. In particular, the Complaint contends that Krakovitz, an employee of E.F. Hutton, and E.F. Hutton did “conduct or participate,..., in the conduct” of E.F. Hutton’s affairs through a “pattern of racketeering activity,” and that both defendants conspired to violate section 1962(c). Plaintiff claims that the requisite “pattern of racketeering activity,” see 18 U.S.C. § 1961(1), (5), was comprised by numerous acts of mail fraud and wire fraud. Also the Complaint expressly alleges the charged acts of securities fraud as a pattern since multiple acts of fraud in securities transactions can constitute the pattern of activity needed for a RICO claim. See 18 U.S.C. § 1961(1).
Plaintiff’s RICO claim presents this Court with several questions regarding the construction of the statute. First, the Court must determine if the injury alleged by Yancoski is redressed by RICO’s civil provision. Second, the Court must decide whether E.F. Hutton can violate 18 U.S.C. § 1962(c) by participating in its own affairs. Finally, it must be resolved whether a claim for conspiracy to violate the interdicts of RICO can be stated under the facts of this case.
1. —Is The Injury Within Civil RICO?
Yancoski alleges a loss of personal funds through the activities of defendants. Defendants maintain that the Complaint fails to allege the needed pattern of racketeering and that, even if a pattern was alleged, the loss suffered by Yancoski is not within the purview of RICO.
Due to the earlier resolutions of Counts I and II, it becomes clear that a pattern of racketeering has been pleaded. In the earlier counts, plaintiff states claims for several acts of fraud in the sale of securities. RICO only requires two acts of racketeering activity within ten years to establish a pattern, see 18 U.S.C. § 1961(5), and fraud in the sale of securities qualifies as racketeering activity, see 18 U.S.C. § 1961(1). The third count of the Complaint incorporates all prior allegations and then proceeds to allege the pattern of racketeering, based on the earlier counts, expressly. Consequently, defendants’ contention that a pattern is not pleaded is futile.
A more substantial question is raised by the nature of the injury required to state a civil RICO claim. Federal courts have expressed divergent opinions on this issue. The kernel of the debate is whether the federal courts should import a standing requirement into RICO in order to prevent the federalization of a large body of state law fraud.
Some courts have refused to impose any standing requirement on the civil RICO, claimant. See, e.g., Bennett v. Berg, 685 F.2d 1053, 1059 (8th Cir.1982), aff’d on rehearing en banc 710 F.2d 1361 (8th Cir. 1983); Eisenberg v. Gagnon, 564 F.Supp. 1347 at 1352 (E.D.Pa.1983); Kimmel v. Peterson, 565 F.Supp. 476, 493-95 (E.D.Pa. 1983). Other courts have insisted that the plaintiff must show a competitive injury, analogous to that needed to state an antitrust claim, in order to satisfy RICO. See, e.g., Van Schaick v. Church of Scientology, 535 F.Supp. 1125, 1137 (D.Mass.1982); North Barrington Dev., Inc. v. Fanslow, 547 F.Supp. 207, 210-11 (N.D.Ill.1980). Still other courts have purportedly eschewed the competitive injury requirement while demanding that the RICO claimant show a racketeering injury. Smith v. Nationwide Mutual Fire Ins. Co., 564 F.Supp. 350, 358 (N.D.Fla.1983); Harper v. New Japan Securities International, Inc., 545 F.Supp. 1002, 1007-08 (C.D.Cal.1982); Landmark Savings & Loan v. Loeb Rhoades, Hornblower & Co., 527 F.Supp. 206, 208 (E.D.Mieh.1981). All of these cases arrive at their respective results by interpreting the same statutory language: “Any person injured in his business or property by reason of a violation of section 1962 of this chapter [proscribing certain activities involving racketeering,] may sue therefor____” 18 U.S.C. § 1964(c) (emphasis added).
RICO was originally designed and drafted in the image of the federal antitrust laws. Blakely, The RICO Civil Fraud Action in Context: Reflections on Bennett v. Berg, 58 Notre Dame L.Rev. 237, 249-56 (1982). In fact, some of RICO’s predecessor bills were drafted as amendments to the Sherman Act. The Antitrust Section of The American Bar Association submitted a report to Congress commenting on the propriety of using the antitrust laws to combat organized crime — the objective of RICO. See 115 Cong.Rec. 6994-95 (1969). Based on the concerns that private litigants would have to contend with the concepts of “standing” and “proximate cause” developed under the antitrust laws, the report recommended, “that any such legislation be enacted as an independent statute and not be included in the Sherman Act, or any other antitrust law.” Id. at 6995. Congress heeded the report’s warning and RICO was enacted as a separate statute.
As a result of its consideration of the legislative history of RICO, this Court concurs in the conclusion of Professor Blakely that “any suggestion that RICO actions be limited by antitrust-type limitations — ‘competitive,’ ‘commercial,’ or ‘direct/indirect’ injuries — flies in the face of the very consideration that led to the drafting of RICO as a separate statute from the antitrust statutes that are so limited.” Blakely, The RICO Civil Fraud Action in Context: Reflections on Bennett v. Berg, 58 Notre Dame L.Rev. 237, 255 (1982). Consequently, this Court will not require a showing of competitive injury before a claim under 18 U.S.C. § 1964(c) can be stated.
Whether some middle ground between no standing requirement and an antitrust standing requirement should be used in civil RICO eases is best addressed by considering the purpose of RICO.
It is the purpose of this Act to seek the eradication of organized crime in the United States by strengthening the legal tools in the evidence-gathering process, by establishing new penal prohibitions, and by providing enhanced sanctions and new remedies to deal with the unlawful activities of those engaged in organized crime.
Pub.L. 91-452, § 1 (1970) (emphasis added). Additionally, the Court heeds the Congressional exhortation that “[t]he provisions of this title shall be liberally construed to effectuate its remedial purposes." Id. at § 904.
RICO’s provisions are aimed at behavior that is characteristic of organized crime, but its applicability extends beyond persons who can be shown to be involved in organized crime. See United States v. Cauble, 706 F.2d 1322, 1330 & n. 7 (5th Cir.1983). The Act seeks to protect interstate and foreign commerce from activities that are characteristic of organized crime even when they are engaged in by a single individual. United States v. Aleman, 609 F.2d 298, 303 (7th Cir.1979), cert. denied, 445 U.S. 946,100 S.Ct. 1345, 63 L.Ed.2d 780 (1980). Its civil and criminal provisions, therefore, seek to protect both “innocent investors and competing organizations.” Pub.L. 91-452, § 1 (1970).
These courts which have imposed a requirement of racketeering injury have done so in order to prevent federalization of state law fraud. First, this concern is unwarranted because RICO addresses only offenses which have an effect on interstate or foreign commerce. Second, the requirement of showing racketeering-type injury is meaningless in light of the manner in which the statute was drafted. The statute provides its own standing requirement for civil plaintiffs in 18 U.S.C. § 1964(c).
RICO provides a civil action only to persons “injured in [their] business or property by reason of a violation of section 1962 ____” Section 1962(c), upon which plaintiff predicates liability, requires that a “pattern of racketeering” be involved. The pattern can only be established by the commission of two or more of the predicate acts of racketeering activity listed in 18 U.S.C. § 1961(1). The requirement of injury by reason of a violation of section 1962 should therefore be read as simply requiring that the plaintiff was injured by at least two acts of racketeering activity — a pattern— charged to the defendant. This interpretation provides a meaningful standing requirement by preventing an individual who was injured by one act of the type listed in 18 U.S.C. § 1961(1) from making out a RICO claim by alleging other unrelated acts of racketeering activity committed by the same defendant.
By construing the statute in this manner, the Court gives recognition and effect to the fact that “Congress deliberately redrafted RICO outside of the antitrust statutes, so that it would not be limited by antitrust concepts like ‘competitive,’ ‘commercial,’ or ‘direct or indirect’ injury;” and “[bfoth immediate victims of racketeering activity and competing organizations were contemplated as civil plaintiffs for injunction, damage and other relief,____” Blakely, The RICO Civil Fraud Action In Context, Reflections on Bennett v. Berg, 58 Notre Dame L.Rev. 237, 280 (1982). Under the allegations of the Complaint, plaintiff has met the standing requirement just stated and, therefore, defendants’ contentions on this ground are dismissed.
2. Can Hutton Be Both “Person” and Enterprise” Under Section 1962(c)?
[13] Plaintiff claims E.F. Hutton violated 18 U.S.C. § 1962(c) through the events alleged. Section 1962(c) prohibits “a person employed by or associated with any enterprise engaged in, ..., interstate or foreign commerce,” from participating in the enterprise’s activities through racketeering. 18 U.S.C. § 1962(c). While E.F. Hutton is an entity capable of fitting the statutory definition of either “person” or “enterprise,” 18 U.S.C. § 1961(3), (4), in any given situation, it may not be used in the same case to fit both. United States v. Computer Sciences Corp., 689 F.2d 1181, 1190 (4th Cir.1982), cert. denied — U.S. —, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983).
“RICO quite clearly envisions a relationship between a ‘person’ and an ‘enterprise’ as an element of the offense which 1962(c) proscribes and for which 1964(c) would subject the ‘person’ to treble damages.” Van Schaick v. Church of Scientology, 535 F.Supp. 1125, 1135-36 (D.Mass.1982). In this case, the Court concludes that the only possible relationship of person and enterprise possible is the one where Krakovitz is the person and E.F. Hutton is the enterprise. Since the enterprise cannot be liable to the plaintiff in a civil RICO claim predicated on a violation of 18 U.S.C. § 1962(c), Parnes v. Heinold Commodities, Inc., 548 F.Supp. 20, 23-24 (N.D.Ill.1982); Van Schaick, 535 F.Supp. at 1135-36; see United States v. Computer Sciences Corp., 689 F.2d at 1190, plaintiff fails to state a civil RICO claim against E.F. Hutton based on 18 U.S.C. § 1962(c).
3. Is Conspiracy a Possible Claim?
[14,15] Plaintiff alleges a conspiracy between Krakovitz and E.F. Hutton to violate RICO. The Court deals with this allegation briefly by noting that a corporation and its employees are not capable of a civil conspiracy. “[A] corporation and its employee do not constitute the ‘two or more persons’ required for a civil conspiracy. Other courts have also held that a conspiracy cannot exist involving only a corporation and its officers or employees.” Zelinger v. Uvalde Rock Asphalt Co., 316 F.2d 47, 52 (10th Cir.1963). See Jagielski v. Package Machine Co., 489 F.Supp. 232, 233-34 (E.D.Pa.1980).
Consequently, plaintiffs claim' for civil conspiracy under 18 U.S.C. §§ 1962(d), 1964(c) is dismissed as to both Krakovitz and E.F. Hutton.
Pendent Jurisdiction
Counts V — X are state law claims. Defendants seek dismissal of these counts on the assumption that Counts I — IV, the only bases of federal jurisdiction, will be dismissed. Since at least one of the earlier counts has survived defendants’ motion to dismiss, pendent jurisdiction is still applicable as a proper basis of jurisdiction for the claims of Counts V — X.
. Docket Entry No. 15.
. For the purposes of ruling on defendants' motion, which is based in part on FED.R.CIV.P. 12(b)(6) (failure to state a claim upon which relief can be granted), the Court must accept the allegations of the complaint as being true. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957).
. Section 10(b) of the Securities Exchange Act of 1934 reads as follows:
It shall be unlawful for any person, directly or indirectly, by use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
******
(b) to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [Securities and Exchange] Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j(b).
. Rule 10b-5 reads as follows:
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 (1982).
. Although neither creates a private right of action for violations,
a private right of action under Section 10(b) of the 1934 Act and Rule 10b-5 has been consistently recognized for more than 35 years. The existence of this implied remedy is simply beyond peradventure. Herman & MacLean v. Huddleston, —— U.S. -, -, 103 S.Ct. 683, 687, 74 L.Ed.2d 548 (1983) (note omitted).
. Churning occurs when a broker, exercising control over the volume and frequency of trading, abuses his customer's confidence for personal gain by initiating transactions that are excessive in view of the character of the account. Its hallmarks are disproportionate turnover, frequent in and out trading, and large brokerage commissions. Carras v. Burns, 516 F.2d 251, 258 (4th Cir. 1975).
. When a securities broker engages in excessive trading in disregard of his customer’s investment objectives for the purpose of generating commission business, the customer may hold the broker liable for churning in violation of Rule 10b-5. Hecht v. Harris Upham & Company, 430 F.2d 1202 (9th Cir. 1970). In order to establish a claim of churning, a plaintiff must show (1) that the trading in his account was excessive in light of his investment objectives; (2) that the broker in question exercised control over the trading in the account; and (3) that the broker acted with the intent to defraud or with the wilful and reckless disregard for the interests of his client. Rolf v. Blyth, Eastman, Dillon & Company, Inc., 424 F.Supp. 1021, 1039-1040 (S.D. N.Y.1977) aff’d at 570 F.2d 38 ([2nd Cir.] 1978), cert. denied, 439 U.S. 1039, 99 S.Ct. 642, 58 L.Ed.2d 698 (1978).
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4340910-13770 | PER CURIAM:
Harry Clinton Carter appeals his 24 month sentence, imposed after the district court revoked his supervised release, pursuant to 18 U.S.C. § 3583(e)(3). He argues that the district court issued a procedurally and substantively unreasonable sentence. After a thorough review of the record and the parties’ briefs, we affirm Carter’s sentence.
I. BACKGROUND
Carter pled guilty to one count of possession of crack cocaine with intent to distribute and was sentenced to 43 months’ imprisonment and three years’ supervised release. The conditions of his supervised release required him to participate in a drug treatment program, submit to drug tests, refrain from using controlled substances, and refrain from associating with anyone engaging in criminal conduct.
Carter commenced his supervised release in 2011. In March 2012, Carter tested positive for cocaine and marijuana and admitted to using those drugs. His probation officer placed him in group counseling as a result. The following September, Carter was charged with criminal mischief and domestic violence after getting into an argument with his girlfriend. Consequents ly, the district court ordered that Carter submit to electronic location monitoring. One month after that, Carter again tested positive for cocaine, and his probation officer placed him in a residential drug treatment program.
Unfortunately, Carter continued to struggle with his drug addiction. Around the end of March 2013, he left the area monitored by his electronic monitoring device and tested positive for cocaine once more. After Carter waived his right to a revocation hearing and admitted to having violated the terms of his supervised release on numerous occasions, the district court revoked his supervised release and sentenced him to eight months’ imprisonment followed by 28 months’ supervised release.
After being released, Carter once again tested positive for cocaine in January 2015, but he denied having used any illegal drugs. The district court nevertheless allowed him to remain on supervised release, and his probation officer referred him to an outpatient substance abuse treatment program. Carter’s probation officer warned him that this was his final opportunity to receive substance abuse treatment.
The treatment was, regrettably, unsuccessful. In April 2015, Carter tested positive for cocaine and failed to attend his outpatient treatment sessions. He also failed to report to, and ignored calls and messages from, his probation officer. The outpatient substance abuse program eventually discharged him for failing to attend treatment sessions. Carter’s probation officer reported Carter’s violations to the district court and asked the court to revoke his supervised release. Considering the nature of Carter’s violation and his criminal history, Carter’s Violation Worksheet calculated a Sentencing Guidelines range of four to 10 months’ imprisonment. The statutory maximum sentence was 24 months’ imprisonment.
Carter waived his right to a revocation hearing and admitted to the probation officer’s allegations. At his sentencing hearing, Carter described how he lost his job and consequently became unable to afford to pay for his car, housing, or phone. He explained that he failed to attend his treatment sessions because he was attempting to find a new job and lacked a means of transportation. He asked for a sentence within the range established by the Sentencing Guidelines.
The district court revoked Carter’s supervised release. The court stated that Carter had exhibited a pattern of supervised release violations and that, despite his probation officer’s repeated attempts to assist him in treating his addiction, Carter had failed to complete his drug treatment program and to report to the probation officer. As a result, the court determined that a sentence within the range indicated by the “chapter seven provisions” of the Sentencing Guidelines was inappropriate because Carter was exhibiting the “same conduct” he had exhibited before his previous revocation. Revocation Hr’g Tr. at 6 (Doc. 278). The district court sentenced Carter to 24 months’ imprisonment, the statutory maximum. Carter objected that the court’s upward variance was unreasonable and filed a timely appeal.
II. DISCUSSION
“Pursuant to 18 U.S.C. § 3583(e), upon finding that a defendant violated a condition of supervised release, a district court may revoke the term of supervised release and impose a term of imprisonment” after considering certain factors set forth in 18 U.S.C. § 3553(a). United States v. Velasquez Velasquez, 524 F.3d 1248, 1252 (11th Cir.2008). These factors include the nature and circumstances of the offense, the history and characteristics of the defendant, the need to afford adequate deterrence to criminal conduct, the need to protect the public from further crimes, the pertinent policy statements of the Sentencing Commission, the need to avoid unwarranted sentencing disparities, and the need to provide restitution to victims. 18 U.S.C. § 3583(e), 3553(a). When the district court determines that a variance from the guidelines range is appropriate, it must then consider the extent of the variance and ensure that there is a sufficiently compelling justification for it. United States v. Tome, 611 F.3d 1371, 1378 (11th Cir.2010).
Reviewing the reasonableness of a sentence is a two-step process. “We look first at whether the district court committed any significant procedural error and then at whether the sentence is substantively reasonable under the totality of the circumstances.” Id. The party challenging the sentence bears the burden of showing it is unreasonable in the light of the record and the relevant factors. Id. Carter contends that his sentence is both procedurally and substantively unreasonable. We address these arguments in turn.
A. Procedural Reasonableness
“A sentence may be procedurally unreasonable if the district court improperly calculates the Guidelines range, treats the Guidelines as mandatory rather than advisory, fails to consider the appropriate statutory factors, selects a sentence based on clearly erroneous facts, or fails to adequately explain the chosen sentence.” United States v. Gonzalez, 550 F.3d 1319, 1323 (11th Cir.2008). Carter contends that the district court committed two procedur al errors. First, he argues that the district court failed to explain adequately the basis of his sentence. Second, he argues that the district court failed.to calculate or otherwise explicitly reference the applicable Sentencing Guidelines range during his sentencing hearing. Neither argument merits relief.
Carter is correct that a district court must explain its reasons for imposing a particular sentence. Rita v. United States, 551 U.S. 338, 356, 127 S.Ct. 2456, 168 L.Ed.2d 203 (2007); 18 U.S.C. § 3553(c)(1). This explanation, however, need not be exhaustive. Rather, an ac-knowledgement by the court that it has considered the defendant’s arguments and the factors listed in § 3553(a) will satisfy this requirement. United States v. Dorman, 488 F.3d 936, 938 (11th Cir.2007). Moreover, “[t]he district court need not state on the record that it has explicitly considered each factor and need not discuss each factor.” Id. We typically conclude that a district court failed to adequately explain a sentencing decision only “when the record contain[s] no evidence that the district court had considered, or the defendant had even raised, the applicability of any of the § 3553(a) factors.” United States v. Smith, 568 F.3d 923, 928 (11th Cir.2009). We conduct a de novo review of the sufficiency of a district court’s explanation of a defendant’s sentence, even if the defendant did not object before the district judge. United States v. Bonilla, 463 F.3d 1176, 1181 (11th Cir.2006).
We are satisfied that the district court’s explanation of its sentencing decision, although undeniably terse, fulfills this minimal requirement. The court heard and considered Carter’s arguments for why he should receive a sentence within the guidelines range. Carter’s counsel explained that Carter’s violations of his supervised release conditions largely stemmed from his loss of employment and his consequent inability to make car, rent,, or phone payments. Carter himself expressed remorse and apologized for his conduct.
Apart from considering Carter’s and his counsel’s presentations, the court also noted that Carter’s probation officer “did everything [he] could to help [Carter] get off ... drugs” and that, while Carter “took advantage of that for a little while,” he eventually “went off the deep end” and not only “fail[ed] to participate with the drug treatment program” but “fell out of contact with probation” as well. Revocation Hr’g Tr. at 6 (Doc. 278). The court then considered the advisory sentencing range, referencing the policy statements in the “chapter seven provisions” of the Sentencing Guidelines, and found the guidelines range inappropriate because Carter was exhibiting “the same conduct” he had exhibited when the court revoked his supervised release two years earlier. Id.
Although the district court never explicitly referenced the § 3553(a) factors, the record clearly demonstrates that the court weighed them, both in considering Carter’s arguments and in deciding that a variance was appropriate. Carter’s failure to attend his treatment program, inability or refusal to remain in contact with his probation officer, and consistent pattern of noncompliance with the terms of his supervised release all concern the nature and circumstances of his offenses, his personal history and characteristics, and the likelihood he would commit additional violations in the future. In other words, although the district court “fail[ed] to articulate specifically the applicability ... of each of the section 3553(a) factors, ... the record demonstrates that the pertinent factors were taken into account.” Smith, 568 F.3d at 927. That is all the law requires. See Tome, 611 F.3d at 1378-79 (affirming as sufficient a district court’s explanation that it was imposing an upward variance based on the defendant’s admission to repeated violations of his supervised release).
We also reject Carter’s second procedural unreasonableness argument, that the district court failed to calculate any guidelines range. At sentencing, Carter objected that the district court’s “upward departure from the guideline range [was] unreasonable.” Revocation Hr’g Tr. at 7 (Doc. 278). This objection failed to challenge the procedural unreasonableness of Carter’s sentence. As a result, we review for plain error. United States v. Vandergrift, 754 F.3d 1303, 1307 (11th Cir.2014). To prevail on plain error review, Carter must demonstrate “(1) that the district court erred; (2) that the error was plain; and (3) that the error affected his substantial rights.” Id: (alterations and internal quotation marks omitted). “An error that affects substantial rights is one that affected the outcome of the district court proceedings.” United States v. Henderson, 409 F.3d 1293, 1308 (11th Cir.2005) (internal quotation marks omitted). “If all three conditions are met, [we then decide whether] the error seriously affected] the fairness, integrity, or public reputation of judicial proceedings.” United States v. Cotton, 535 U.S. 625, 631, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002) (internal quotation marks omitted).
“[A] district court should begin all sentencing proceedings by correctly calculating the applicable Guidelines range.” Gall v. United States, 552 U.S. 38, 49, 128 S.Ct. 586, 169 L.Ed.2d 445 (2007). Although we have held in several unpublished decisions that a district court’s failure to state the applicable guidelines range at sentencing constitutes procedural error, we have never addressed the issue in a published decision. Thus, even if we assume that there was error here, Carter cannot demonstrate that the error was plain. See Vandergrift, 754 F.3d at 1309.
Significantly, even were we to determine that the district court committed plain error, Carter failed to establish that the error affected his substantial rights or “the fairness, integrity, or public reputation of judicial proceedings.” Cotton, 535 U.S. at 631, 122 S.Ct. 1781 (internal quotation mark omitted). Carter does not ar,gue that the probation office miscalculated his guidelines range, that he and his counsel were unaware of the applicable guidelines range, or that the district court was unaware it was applying a significant upward variance when sentencing him. To the contrary, it is clear from the record that defense counsel argued for and the court considered and rejected the applicable guidelines range, even though the court never expressly stated what the range was. The court stated, “I therefore find that the chapter seven provisions, which I have considered, are inappropriate because this is the same conduct that we went through two years ago,” Revocation Hr’g Tr. at 6 (Doc. 278). Indeed, Carter’s counsel asked for “a sentence within the guideline range,” which further demonstrates that both counsel and the court knew the court was considering applying a variance. Id. at 4. And given Carter’s history of drug abuse and repeated noncompliance with the terms of his supervised release, it is hard to imagine that the resulting sentence would have been any different had the district court stated the guidelines range on the record. See Henderson, 409 F.3d at 1308. In sum, because Carter has failed to demonstrate the existence of any plain error that affected his substantial rights or the reputation of the judicial system, his procedural unreasonableness challenge cannot survive plain error review.
B. Substantive Reasonableness
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4337814-31281 | ORDER APPROVING MODIFIED RESERVED PROVISIONS TO THE CONFIRMED PLAN OF REORGANIZATION
Sidney B. Brooks, United States Bankruptcy Court Judge
THIS MATTER came before the Court on October 16, 2014 for an evidentiary hearing on confirmation of the Second Amended Plan of Reorganization Proposed by the Unofficial Mechanics Lienholder Committee (the “Committee”) filed on August 28, 2014 [Docket # 1158], as modified by the Modification thereto (the “First Plan Modification”) filed on October 6, 2014 [Docket # 1195] and the Second Modification thereto (the “Second Plan Modification”) filed on October 15, 2014 [Docket #1203] (collectively, the “Plan”) and the only Objection to the Plan filed by Jannie Richardson on October 1, 2014 [Docket # 1194].
On October 20, 2014, the Court entered its Findings of Fact, Conclusions of Law, and Order Confirming the Plan (the “Confirmation Order”) [Docket No. 1209], Paragraph XX of the Confirmation Order reserved two Plan Provisions concerning 1) the request for a permanent injunction against interference by Janie Richardson, as set forth in Section V.G of Second Plan Modification, and (2) the retention of jurisdiction post-petition, as set forth in Section VI.P.13 of the Second Plan Modification for later determination by this Court (the “Reserved Provisions”).
This Court, having considered the Plan and the Objections to the Reserved Provi sions, the testimony at the evidentiary hearing, the arguments of counsel, the bankruptcy case files for the Debtor and Jannie Richardson, and applicable legal authority, hereby enters the following Order approving the Reserved Provisions in modified forms, as provided herein.
A. FACTUAL BACKGROUND
The SRKO Bankruptcy Case
1. On February 19, 2010, Debtor SRKO Family Limited Partnership (“SRKO”) filed the within Chapter 11 Bankruptcy case (the “SRKO Case”).
2. At the time of the filing of the case, SRKO was the owner and developer of the project known as Colorado Crossing.
3. SRKO was owned by three separate trusts originally established by Jannie Richardson.
4. The SRKO Bankruptcy Case was authorized by Ms. Richardson in her capacity as a general partner and the authorized agent of SRKO.
The Jannie Richardson Bankruptcy Case
5. On March 25, 2010, Ms. Richardson filed her individual Chapter 11 bankruptcy case, Case No. 10-16450-SBB (the “Richardson Case”).
6. In Ms. Richardson’s case, the United States Trustee filed a Motion to Dismiss the Case for her various failures to disclose information on the bankruptcy schedules and statement of financial affairs; failure to file Monthly Operating Reports; and failure to file a report pursuant to Fed. R. Bankr.P. 2015.3. [See Docket # 81, “United States Trustee’s Motion to Dismiss or Convert Chapter 11 Case Pursuant to 11 U.S.C. § 1112(B)” (the “Motion to Dismiss”) ].
7. Following an evidentiary hearing on the Motion to Dismiss, C. Randel Lewis was appointed the trustee in Ms. Richardson’s bankruptcy case. [See Docket # 247 in Richardson Bankruptcy Case, “Order Regarding United States Trustee’s Motion to Dismiss or Convert Chapter 11 Case and Directing United States Trustee to Appoint Chapter 11 Trustee”; see also Docket #265, “Order Approving United States Trustee’s Appointment of Chapter 11 Trustee”].
8. Accordingly, pursuant to this Court’s Order, Mr. Lewis became the manager of the limited liability company that served as the general partner to SRKO. [Id.]
Motions For Sanctions ayainst Ms. Richardson fíled in the SRKO and Richardson Cases
9. On or around February 15, 2013, Mr. Lewis and Counsel for SRKO filed in both the SRKO and Richardson Case a Combined Motion seeking, inter alia, sanctions against Ms. Richardson for Civil Contempt of Court. [See Combined Motion Docket # 901 in SRKO Case and Docket # 814 in Richardson Case].
10. The Combined Motion alleged that Ms. Richardson, her friends and family members, and other affiliated companies controlled by Ms. Richardson had committed numerous willful violations of the automatic stay by taking various actions to obtain and/or control property of the SRKO and the Richardson bankruptcy estates. [See id, pp. 10-14, ¶¶ 36-43].
11. On June 14, 2013, upon stipulation of the parties, this Court issued a Final Agreed Order on the Combined Motion (the “Agreed Order”). [See Docket # 968, SRKO Case and Docket # 923, Richardson Case,].
12.Paragraph 4 of the Agreed Order provides a permanent injunction against Ms. Richardson and others, as follows:
IT IS FURTHER ORDERED that Jannie Richardson, by her approval of this Order, acknowledges and agrees that she has no authority to act on behalf of the SRKO bankruptcy estate or the Jannie Richardson bankruptcy estate, or any other related entities controlled by the Trustee pursuant to this Court’s stipulated order designating the Trustee to manage and control the Debtor’s affiliated entities dated June 7, 2011 (Richardson Docket No. 367), and any other entities or organizations in which the Richardson bankruptcy estate or the SRKO bankruptcy estate have a legal or equitable interest or a direct or indirect economic interest, including, but not limited to, the Colorado Crossing Metropolitan Districts, and that she and her agents, servants, employees, and attorneys, and those persons in active concert or participation with her who receive actual notice of this Order by personal service or otherwise, and each of them, are permanently enjoined and restrained from directly or indirectly (a) holding themselves out or purporting to act as authorized agents of either the SRKO bankruptcy estate or the Jannie Richardson bankruptcy estate, (b) interfering with the conduct or activities of either the SRKO bankruptcy estate or the Jannie Richardson bankruptcy estate, and (c) using, dealing with or transferring any property of the SRKO bankruptcy estate or the Jannie Richardson bankruptcy estate without the express written consent of the Trustee or an order from this Court, (d) provided, however, nothing herein shall prohibit (i) the filing of pleadings with this Court or (n) Jannie Richardson’s use or dealing with property brought into Jannie Richardson’s estate under § 1115, but the Trustee does not waive any rights relating to such property.
[Id., ¶ 4, emphasis added].
13. Six months after this Court issued the Agreed Order, on December 13, 2013, Mr. Lewis filed a Motion to Enforce the Agreed Order and Request for Sanctions and an Emergency Hearing in the Richardson Case (the “Motion for Enforcement”). [Docket # 973, Richardson Case].
14. The Trustee alleged in his Motion for Enforcement that Ms. Richardson had refused to comply with a different paragraph of the Agreed Order directing her to “resign from said boards when requested in writing by the Trustee or SRKO[.]” [Id. at 2, ¶ 4],
15. On December 16, 2013, Mr. Lewis withdrew his Motion for Enforcement stating that the “after the filing of [the] Motion [for Enforcement], and apparently prompted by said filing, Ms. Richardson signed the letter of resignation.... ” [Docket # 975, Richardson Case at 1].
Committee’s Chapter 11 Plan in the SRKO Bankruptcy Case
16. On August 28, 2014, in the SRKO case, the Informal Lienholder Committee (the “Committee”) filed with the Court a proposed Second Amended Plan of Reorganization (the “Committee’s Plan”). [Docket # 1158]. The same day, the Committee filed a Supplement to the Committee’s Plan. [Docket # 1159, SRKO Case].
17. On October 6, 2014, the Committee filed a Modification to the Committee’s Plan (the “First Plan Modification”). [Docket # 1195, SRKO Case].
18. The only objection to confirmation of the Committee’s Plan was filed by Ms. Richardson on October 1, 2014 (the “Rich ardson Objection”). [Docket No. 1194, SRKO Case],
19. Initially, Ms. Richardson filed objections to following two provisions of the Committee’s Plan: (1) the Exculpation Relief Relating to Claims and Releases set forth in Sections V.E. and F. of the Plan; and (2) the Injunctive Relief Provision set forth in Section V.G. of the Plan. [Id.].
20. In Response to Ms. Richardson’s objection, on October 15, 2014, the Committee filed a Second Modification to the Committee’s Plan (the “Second Modification”), amending the provision on V.G. of the Plain to apply only to Ms. Richardson. [Docket # 1203, SRKO Case at 3, ¶ V.G.].
21. Provision V.G. under the Second Modification reads as follows:
ARTICLE V EFFECT OF CONFIRMATION OF THE PLAN
G. Injunction Against Interference by Jannie Richardson. JANNIE RICHARDSON IS PERMANENTLY ENJOINED FROM, DIRECTLY OR INDIRECTLY, HOLDING HERSELF OUT AS, OR PURPORTING TO ACT AS, AN AUTHORIZED AGENT OF REORGANIZED SRKO, AND FROM ENTERING ANY PROPERTY OWNED BY REORGANIZED SRKO WITHOUT THE PRIOR WRITTEN CONSENT OF AN AUTHORIZED AGENT OF REORGANIZED SRKO.
[Id., emphasis in original].
22. Additionally, the Second Modification added a new paragraph VI.P.13 to the Committee’s Plan, which provision proposed for this Court to retain jurisdiction in certain matters arising post-confirmation. [Id. at 4].
23. New Provision VI.P.13. reads as follows:
ARTICLE VI. OTHER PLAN PROVISIONS
P. Retention of Jurisdiction
13.. Hear any claims or causes of action asserted by the Plan Proponents or REORGANIZED SRKO against any Richardson Party arising after the Effective Date involving Colorado Crossing.
[Id., emphasis in original and supplied].
24. The Confirmed Plan defines “Richardson Party” to include—
... any Insider or Affiliate of the Debt- or, including, but not limited to, Jannie Richardson, Duk, LLC, Moon, LLC, The Allen Richardson Dynasty Trust; Allen Richardson; The Jessica Stinson' Dynasty Trust; Jessica Stinson; The Jeffrey Stinson Dynasty Trust; Jeffrey Stinson; Da Nam Ko; Sunshine Home Development, Inc.; Sunshine Home Management, LLC; Sunshine Development, LLC; Sunshine Development; JRKO, LLC; Geosun, LLC; Jannie Richardson, LLC; Spring Water Loft, LLC; Ho, LLC; Jessica, LLC; JR Movie, LLC; and any individuals or entities who are Affiliates or Insiders of the foregoing; and any entities that may be formed in the future which are Affiliates or Insiders of the foregoing, but excluding the Trustee.
[Docket # 1158, SRKO Case, pp. 12-13, ¶ 86].
25. At the Confirmation Hearing on October 16, 2014, Ms. Richardson withdrew her objection to the Exculpation Relief Relating to Claims and Releases set forth in Sections V.E. and F. of the Plan.
26. However, Ms. Richardson renewed her objection to the modified Injunction Against Interference by Ms. Richardson set forth in Section V.G of the Plan, and raised an objection to the additional provision providing for the retention of jurisdiction set forth in Section VI.P.13 of the Plan.
B. JURISDICTION
This Bankruptcy Court has jurisdiction over this Chapter 11 Case pursuant to 28 U.S.C. §§ 157 and 1334. Whether the Court should approve the Reserved Provisions set forth in the Plan is a “core proceeding” pursuant to 28 U.S.C. §§ 157(b)(2)(L) and (0).
C. DISCUSSION
I. Injunction against Ms. Richardson
. As noted above, here the Committee seeks to include in the Plan a permanent injunction against Ms. Richardson, prohibiting her from holding herself out as an authorized agent of New Crossings, Inc., the Reorganized Debtor (“New Crossings”), and from entering any property owned by New Crossings, without the pri- or written consent of New Crossings.
It is undisputed by the parties that Ms. Richardson has no legal right to take either of these actions, and that, were she to do either, her actions would be wrongful. However, the Committee has argued that based on Ms. Richardson’s prior conduct of running interference in the SRKO and Richardson Cases, the narrowly tailored permanent injunction being sought against her is necessary and appropriate to allow a successful consummation of the Plan.
The United States Supreme Court has held that—
[ajccording to the well-established rules of equity, [a party] ... must satisfy a four-factor test before a court may grant such relief[ ] ... [by] demonstrate[ing]: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
(a) Irreparable Harm
Under the four-factor test established by the Supreme Court, the Committee must first establish that absent an' injunction imposed against Ms. Richardson, New Crossings would suffer irreparable harm. Irreparable injury often derives from the nature of the violation.
Here, at the hearing on October 16, 2014, the Committee presented the testimony of C. Randel Lewis, the Chapter 11 trustee in the companion Chapter 11 case of Ms. Richardson, and James Sorenson, the President of Stresscon, one of the members of the Committee and the proposed Chief Executive Officer of New Crossings regarding Ms. Richardson’s past conduct and the potential harm from similar conduct in the future.
Mr. Lewis’ testimony
During the October 16, 2014 hearing, Mr. Lewis testified that due to Ms. Richardson’s consistent interference in the SRKO and Richardson bankruptcy cases, the Colorado Crossing project has a reputation in the marketplace as a troubled project and that there remained confusion in the marketplace as to who was in control of the Colorado Crossing real estate development.
Mr. Lewis further testified as to the actions that he has been required to take since his appointment as the Chapter 11 trustee to secure control over the assets of the estate, as Ms. Richardson continued to attempt to exercise control over them. In particular, Mr. Lewis testified that, shortly after his appointment, he learned that Ms. Richardson had modified the operating agreement of Duk, LLC, which was then the managing general partner of the Debt- or in this case, to substitute her sister for herself as the manager. Thus, Mr. Lewis was compelled to commence proceedings in this Court to secure control over the Debt- or and its estate.
Similarly, in late 2013, over two and a half years after the appointment of Mr. Lewis as trustee of Ms. Richardson’s bankruptcy estate, Ms. Richardson directed the assignment of certain purchase contracts in order to change the composition of the board of directors of the metropolitan districts formed in connection with the planned development of Colorado Crossing, and caused the metropolitan districts to enter into an acquisition agreement designed to reimburse one of Ms. Richardson’s affiliate entities for claimed expenses it allegedly incurred in the development of Colorado Crossing. When Mr. Lewis learned of these actions, he attended the noticed metro district board meeting, only to discover that neither district counsel, nor the independent member of the board, had a full understanding of the impact of the Debtor’s bankruptcy filing on the operations of the districts, nor did they understand or appreciate that only the trustee, as the party in control of all the real estate within the districts, had authority to elect board members and direct the action of the districts.
Mr. Lewis was once again compelled to commence proceedings against Ms. Richardson to obtain her compliance, to secure control of the boards of the metro districts, and to cancel the proposed reimbursement agreement by filing a Combined Motion in the SRKO and Richardson Cases. In the Agreed Order resolving the Combined Motion, Ms. Richardson agreed to entry of a permanent injunction against her and certain affiliates, which injunction, inter alia, prohibited Ms. Richardson from holding herself out as an authorized agent of the Debtor, interfering with the conduct or activities of the Debtor’s bankruptcy estate.
Further, Mr. Lewis testified that he and Ms. Richardson agreed to a protocol by which she would secure prior advance consent of the Trustee if she wished to visit the Colorado Crossing project, or to arrange to have contractors, investors, or other third parties inspect the project; but that Ms. Richardson repeatedly and regularly violated the agreed protocol. Mr. Lewis would receive calls, on average every two months, from security guards advising him that either Ms. Richardson, or someone acting on her behalf, was on the property. Since security guards were not present at times, Mr. Lewis did not know how many additional violations of the protocol occurred that he never learned of. Mr. Sorensen’s testimony
Additionally, Mr. Sorensen, appearing for the Committee, testified that prior to the filing of the SRKO and Richardson bankruptcy cases, he had dozens of conversations with Ms. Richardson where he tried to come up with a solution for the troubled Colorado Crossing project, and was therefore very familiar with the intense and tenacious nature of Ms. Richardson. Specifically, Mr. Sorenson described Ms. Richardson as “an extraordinary” and “aggressive” person.
Mr. Sorensen further testified that should Ms. Richardson access the New Crossings’ property without its prior written consent, such actions would give the impression of a level of control by Ms. Richardson of New Crossings that could create confusion in the marketplace. Mr. Soresen further testified that such confusion in the marketplace over control of Colorado Crossing could be devastating to its successful development.
Mr. Soresen further testified that similarly, should Ms. Richardson hold herself out to potential developers, investors or purchasers, as someone in control of the project, those actions could directly interfere with future development and lot sales. Any potential developer, purchaser or investor who is dissuaded from contacting the proper owner, New Crossings, as a result of the actions Ms. Richardson, is a potential lost transaction.
This Court finds the testimony of Mr. Lewis and Mr. Sorensen to be credible. The Case Record
Moreover, this Court itself has on numerous occasions in open court and in orders issued in the SRKO Case and the Richardson Case advised and ordered Ms. Richardson that she is not authorized to act on behalf of SRKO or the Richardson estate; that she is not authorized to exercise control over the Colorado Crossing property; and that she is prohibited and enjoined from taking any actions to interfere with the Ms. Lewis’ control and management of SRKO and Colorado Crossing. Furthermore, the Court has on numerous other occasions admonished Ms. Richardson to cooperate with the Mr. Lewis.
Based on the testimony presentéd, in conjunction with this Court’s own observations of Ms. Richardson over the past two and a half years, the Court finds that Ms. Richardson’s repeated actions in attempting to exert control over property of the SRKO estate; her trespassing on the Colorado Crossing property; her demonstrated disdain for the people and procedures that are part of this bankruptcy case; her resistance to respect the authority of the Court and the Trustee, appointed in her case are evidence of her propensity to continue to engage in such violative acts in the future. More specifically, the Court finds that as previously demonstrated by Ms. Richardson, absent an injunction, there is a real and imminent likelihood that she will continue to engage in conduct that she has repeatedly undertaken during this bankruptcy case, with the ultimate intent of attempting to regain control of the Colorado Crossing project, despite the confirmation of the Plan.
Indeed, insofar as this Court is advised, Ms. Richardson’s obstinate conduct during the pendency of the SRKO and Richardson Cases relented only after the Mr. Lewis and Counsel for SRKO sought and obtained a permanent injunction against Ms. Richardson in the form of the Agreed Order. Even then, the record reflects that Ms. Richardson’s compliance with certain terms of the Agreed Order was not obtained until after Mr. Lewis filed a subsequent Motion for Enforcement in the Richardson Case.
Future interference by Ms. Richardson in the operations and functioning of New Crossings will likely perpetuate the confusion that has existed in the marketplace over ownership and control of the New Crossing project and development. The potential loss of sales or development partners would result in irreparable harm to New Crossings.
Therefore, based on the testimony provided to this Court and this Court’s own experience with Ms. Richardson, the Court concludes that factor one favors the Committee.
b. Remedies at Law
Next, the Committee must show that remedies available at law are inadequate to compensate for the injury New Crossings may suffer as a result of Ms. Richardson’s continuing interference.
The Committee asserts that New Crossings has no adequate remedy at law and a suit for damages cannot adequately compensate New Crossings for' the harm it may suffer because (a) Ms. Richardson is a debtor in her own bankruptcy case and thus her ability to satisfy any award of damages is doubtful; and (b) having to establish damages under these circumstances would place an unreasonable burden on New Crossings as it is likely impossible to quantify the damages suffered as a result of the loss of a potential transaction or from confusion in the marketplace regarding Ms. Richardson’s on-going role in the project.
Ms. Richardson proposes that adequate remedies exist under state law to prohibit Ms. Richardson from engaging in ongoing misconduct concerning New Crossings. Ms. Richardson cites legal causes of action for criminal trespass or tort actions for intentional interference with contract and interference with prospective business advantage as examples of such remedies.
However, Ms. Richardson has previously demonstrated an unyielding attitude of defiance against this Court’s various orders concerning her improper interference in the administration of the SRKO and Richardson Bankruptcy estates. This Court is not convinced that the mere possibility of criminal prosecution for trespass or potential lawsuits for tortious interference with the operations of a business would sufficiently dissuade Ms. Richardson from repeating her historical patterns of interfering with the new project of the Reorganized Debtor.
. For these reasons, factor two weighs in favor of the Committee.
c. Balancing of Harms
Ms. Richardson argues that because she is in the real estate business, having a permanent injunction placed against her would unduly affect her reputation in the real estate business community. Ms. Richardson concedes however that any such harm to her would be slight in nature.
Conversely, the Committee argues that Ms. Richardson suffers no harm as a result of an injunction from being prohibited from engaging in actions which she has no legal right to take. The Committee further argues that in the event Ms. Richardson continues with her historic pattern of interfering with the Colorado Crossing project, New Crossings may suffer irreparable and incalculable harm.
This Court finds both arguments to be persuasive.
As an initial matter, the Court finds that the fact that the language of the injunctive provision itself provides for a narrow and qualified prohibition against Ms. Richardson in that she is allowed to be present on the property of the reorganized Debtor with prior written permission of the Reorganized Debtor, makes said injunction less burdensome and less harmful to Ms. Richardson.
Nonetheless, the Court finds that a permanent and perpetual injunction against Ms. Richardson will cease to provide any benefit to New Crossings after the Confirmed Plan has been successfully launched and partially, if not substantially consummated, but that such an indefinite, ongoing injunction may potentially have a negative impact, however slight, upon Ms. Richardson’s future in the real estate industry. Therefore, the third factor weighs in favor of the Committee, but only in terms of a temporary injunction, in order to allow the reorganized Debtor the time to successfully undertake its Plan.
d. Public Interest
Issuing the permanent injunction against Ms. Richardson will not adversely affect the public's interest. The Court finds that the fourth factor does not apply to the facts of this case.
For reasons stated above, the Bankruptcy Court finds that under the four-factor test established by the Supreme Court, applicable legal standards strongly support and equity demands the entry of an injunction against Ms. Richardson in order to protect the interests and to advance the likelihood of success of New Crossings under the terms of the Confirmed Plan.
Important to this Court’s conclusion is the fact Ms. Richardson herself has previously consented to such a permanent injunction in the Agreed Order issued by this Court. This Court believes that the previous injunction has, to a large extent, been effective in obtaining Ms. Richardson’s compliance.
However, this Court is aware that “an injunction must be narrowly tailored to remedy the harm shown.” Furthermore, “the decision to grant or deny permanent injunctive relief is an act of equitable discretion by the [ ] court.”
While the Court finds that an injunction against interference by Ms. Richardson set forth in Section V.G. of the Plan is fair and necessary to the success of the Debtor’s reorganization in light of the circumstances presented, it also finds that the scales tip against the perpetual continuation of such an injunction against her after the Confirmed Plan has been successfully launched and partially, if not substantially, consummated. Therefore, the Court finds that a temporary, eighteen month injunction, with the possibility of further extensions of the injunction, if cause is shown, is the most equitable, balanced and appropriate remedy to ensure Ms. Richardson’s compliance during the implementation of the provisions of the Confirmed Plan.
II. Retention of Jurisdiction
The Second Reserved Provision seeks to have this Court retain jurisdiction regarding any claims or causes of action asserted by the Committee or New Crossings against any Richardson Party involving Colorado Crossing that arises post-confirmation.
A plan of reorganization may provide for the retention of jurisdiction over post-confirmation acts as appropriate and necessary for the consummation, implementation and enforcement of the plan. Post-confirmation jurisdiction may be exercised even after entry of a final decree closing the case.
Here, Ms. Richardson is a debtor in her own Chapter 11 bankruptcy case pending before this Court. Her estate will receive 35% of the stock in the Reorganized Debt- or under the Committee’s Plan. That stock is the single most valuable asset of Ms. Richardson’s estate. Ms. Richardson has a statutory duty to cooperate with the Trustee in her case regarding the administration of her estate, and this Court retains jurisdiction over her actions to ensure such compliance.
Nonetheless, it is appropriate and proper for the Court to retain jurisdiction, as provided for in Article VI.P.13. of the Plan, against any causes of action and against any Richardson Party, as defined by the Confirmed Plan, that may arise post-petition to the extent that such causes of action involve Colorado Crossings.
However, the Court believes that such a proceeding is a matter “arising in” or “related to” this bankruptcy ease, and thus this Court’s jurisdiction is not exclusive. Rather, its jurisdiction is concurrent with the jurisdiction of other courts of competent jurisdiction.
Ms. Richardson has argued that this Court’s jurisdiction is circumscribed by the Supreme Court’s ruling in Stem v. Marshall. The Court notes however, that to the extent that a matter under provision VI.P.13 of the Plan implicates a Stem issue and the Court is constitutionally barred from deciding and entering final orders in the matter, this Court is nonetheless not prohibited from holding a hearing on such claims and issuing proposed findings of fact and conclusions of law for purposes of a final judgment to be entered by the district court.
For these reasons, the Bankruptcy Court finds that it may properly retain jurisdiction over the matters set forth in Provision VI.P.13 of the Plan, but that such jurisdiction is concurrent with the jurisdiction of other courts of competent jurisdiction.
D. CONCLUSION AND ORDER
Accordingly, it is hereby ORDERED, ADJUDGED AND DECREED that the Reserved Provisions are APPROVED in their modified form, as provided herein, and as outlined below in bold (together (“Modified Reserved Provisions”).
I. Provision V.G: Injunction Against Interference by Jannie Richardson.
(a) Jannie Richardson is temporarily enjoined, for a period of eighteen months following the date of the issuance of this Order, from, directly or indirectly, holding herself out as, or purporting to act as, an authorized agent of Reorganized SRKO, and from entering any property owned by Reorganized SRKO without the prior written consent of an authorized agent of Reorganized SRKO.
(b) The eighteen month injunction against Ms. Richardson may be extended for good cause, if proven after notice and hearing. If warranted, a Motion may be filed with the Court by the Committee, New Crossings, Ltd., the Trustee in the Jannie Richardson’s Chapter 11 Case, or any other interested party for purposes of allowing the Debtor more time to fully and effectively consummate the Plan of reorganization.
II. Provision VI.P: Retention of Jurisdiction.
13. (a) Hear any claims or causes of action asserted by the Plan Proponents or REORGANIZED SRKO against any Richardson Party arising after the Effective Date involving Colorado Crossing.
(b) The Court’s jurisdiction under subparagraph (a) is not exclusive, but rather concurrent with the jurisdiction of other courts of competent jurisdiction.
IT IS FURTHER ORDERED that the Modified Reserved Provisions are hereby incorporated, in their entirety, into the Confirmed Plan and Confirmation Order, SRKO Case, Docket # 1158 and Docket # 1209, respectively.
. The Court hereby takes judicial notice of the entire case record for the bankruptcy cases of the Debtor (10-13186-SBB) and Jannie Richardson (10-16450-SBB).
. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006). Prior to the Supreme Court's opinion in eBay Inc. v. MercExchange, L.L.C., courts in the Tenth Circuit had applied similar standards in considering permanent injunctions. See Hackwell v. United States, 2008 WL 2900933, 2008 U.S. Dist. LEXIS 56641 (D.Colo. July 23, 2008) (Footnote # 2); see also Lakeside at Pole Creek, LLC v. Tabernash Meadows LLC (In re Tabernash Meadows, LLC), 2005 WL 375660, 2005 Bankr.LEXIS 210 (Bankr.D.Colo.2005, Judge Tallman) ("In the state of Colorado ‘generally, a party seeking a permanent injunction must show that [a] the party has achieved actual success on the merits; [b] irreparable harm will result unless the injunction is issued; [c] the threatened injury outweighs the harm that the injunction may cause to the opposing party; and [d] the injunction, if issued, will not adversely affect the public interest.’ ”) (internal citations omitted).
. Nat'l Ski Areas Ass’n v. United States Forest Serv., 910 F.Supp.2d 1269, 1289 (D.Colo.2012).
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5711704-24949 | ORDER
The petition for panel rehearing is GRANTED. The opinion filed on August 8, 2006, is withdrawn. The superseding opinion will be filed concurrently with this order. Further petitions for rehearing or rehearing en banc may be filed.
OPINION
O’SCANNLAIN, Circuit Judge:
We must determine whether an employee has an expectation of privacy in his workplace computer sufficient to suppress images of child pornography sought to be admitted into evidence in a criminal prosecution. If there is such an expectation, we must determine whether the search in this case was reasonable under the narrow exceptions to the Fourth Amendment’s warrant requirement.
I
A
Frontline Processing (“Frontline”), a company that services Internet merchants by processing on-line electronic payments, is located in Bozeman, Montana. On January 30, 2001, Anthony Cochenour, the owner of Frontline’s Internet-service provider and the fiancé of a Frontline employee, contacted Special Agent James A. Kennedy, Jr. of the FBI with, a tip that a Frontline employee had accessed child-pornographic websites from a workplace computer.
Agent Kennedy pursued the report that day, first contacting Frontline’s Internet Technology (“IT”) Administrator, John Softich. One of Softich’s duties at Front-line was to monitor employee use of the workplace computers including their Internet access. He informed Kennedy that the company had in place a firewall, which permitted constant monitoring of the employees’ Internet activities.
During the interview, Softich confirmed Cochenour’s report that a Frontline employee had accessed child pornography via the Internet. Softich also reported that he had personally viewed the sites and confirmed that they depicted “very, very young girls in various states of undress.” Softich further informed Kennedy that, according to the Internet Protocol address and log-in information, the offending sites were accessed from a computer in the office of Appellant Jeffrey Brian Ziegler, who had been employed by Frontline as director of operations since August 2000. Softich also informed Kennedy that the IT department had already placed a monitor on Ziegler’s computer to record its Internet traffic by copying its cache files.
Agent Kennedy next interviewed William Schneider, Softich’s subordinate in Frontline’s IT department. Schneider confirmed that the IT department had placed a device in Ziegler’s computer that would record his Internet activity. He reported that he had “spot checked” Ziegler’s cache files and uncovered several images of child pornography. A review of Ziegler’s “search engine cache information” also disclosed that he had searched for “things like ‘preteen girls’ and ‘underage girls.’ ” Furthermore, according to Schneider, Frontline owned and routinely monitored all workplace computers. The employees were aware of the IT department’s monitoring capabilities.
B
The parties dispute what happened next. According to testimony that Softich and Schneider provided to a federal grand jury, Agent Kennedy instructed them to make a copy of Ziegler’s hard drive because he feared it might be tampered with before the FBI could make an arrest. Agent Kennedy, however, denied that he directed the Frontline employees to do anything. According to his testimony, his understanding was that the IT department had already made a backup copy of Ziegler’s hard drive. As the government points out, his notes from the Softich interview say, “IT Dept has backed up JZ’s hard drive to protect info.” Thinking that the copy had already been made, Kennedy testified that he instructed Softich only to ensure that no one could tamper with the backup copy.
Whatever Agent Kennedy’s actual instructions, the Frontline IT employees’ subjective understanding of that conversation seems evident from their actions during the late evening of January 30, 2001. Around 10:00 p.m., Softich and Schneider obtained a key to Ziegler’s private office from Ronald Reavis, the chief financial officer of Frontline, entered Ziegler’s office, opened his computer’s outer casing, and made two copies of the hard drive.
Shortly thereafter, Michael Freeman, Frontline’s corporate counsel, contacted Agent Kennedy and informed him that Frontline would cooperate fully in the investigation. Freeman indicated that the company would voluntarily turn over Ziegler’s computer to the FBI and thus explicitly suggested that a search warrant would be unnecessary. On February 5, 2001, Reavis delivered to Agent Kennedy Ziegler’s computer tower (containing the original hard drive) and one of the hard drive copies made by Schneider and Sof-tich. Schneider delivered the second copy sometime later. Forensic examiners at the FBI discovered many images of child pornography.
C
On May 23, 2003, a federal grand jury handed down a three-count indictment charging Ziegler with receipt of child pornography, in violation of 18 U.S.C. § 2252A(a)(2); possession of child pornography, in violation of 18 U.S.C. § 2252A(a)(5)(B); and receipt of obscene material, in violation of 18 U.S.C. § 1462. At arraignment, Ziegler entered a plea of not guilty. ’'
Ziegler filed several pretrial motions. At issue here is Ziegler’s April 23, 2004, motion to suppress the evidence obtained from the search of Ziegler’s workplace computer. Ziegler argued that Agent Kennedy, lacking a warrant, violated the Fourth Amendment by directing the Frontline employees to enter his private office and to search his computer. The government argued that the search was voluntary and therefore private in nature.
On August 10, 2004, the district court held a suppression hearing at which Agent Kennedy and Schneider testified. Agent Kennedy, several times, denied that he instructed Softich and Schneider to make a copy of Ziegler’s hard drive or to undertake any search in addition to what the employees had already done. Schneider, however, again testified that Kennedy directed him to make a copy, of the hard drive. Schneider’s account was also reflected in a time-line he had prepared for Kennedy.
On September 8, 2004, the district court entered a written order denying Ziegler’s motion to suppress. Importantly, the court made the factual finding that “Agent Kennedy contacted Softich and Schneider on January 30, 2001 and directed them to make a back-up of Defendant’s computer files.” (emphasis added). However, citing United States v. Simons, 206 F.3d 392 (4th Cir.2000), the court ultimately held that Ziegler had no reasonable expectation of privacy in “the files he accessed on the Internet” and therefore denied Ziegler’s motion.
Ziegler subsequently entered into a written plea agreement with the government. Pursuant to the agreement, the government agreed to dismiss the child pornography counts in exchange for Ziegler’s agreement to plead guilty to the receipt of obscene material. The parties conditioned the plea agreement on Ziegler’s ability to appeal the district court’s denial of the pretrial motions, including the motion to suppress. A change of plea hearing occurred on September 24, 2004.
On March 4, 2005, the district court sentenced Ziegler to a two-year term of probation and imposed a fine of $1,000. Ziegler timely filed a notice of appeal.
II
Ziegler’s sole contention on appeal is that the January 30, 2001, entry into his private office to search his workplace computer violated the Fourth Amendment and, as such, the evidence contained on the computer’s hard drive must be suppressed.
A
Ziegler argues that “[t]he district court erred in its finding that Ziegler did not have a legitimate expectation of privacy in his office and computer.” He likens the workplace computer to the desk drawer or file cabinet given Fourth Amendment protection in cases such as O’Connor v. Ortega, 480 U.S. 709, 107 S.Ct. 1492, 94 L.Ed.2d 714 (1987). Ziegler further contends that the Fourth Circuit’s Simons case is inapposite. Whereas in Simons “the person conducting the search was a network administrator whose purpose was to search for evidence of employee misconduct,” in this case “the search was conducted at the behest of Agent Kennedy who was undeniably seeking evidence of a crime.”
The government, of course, views the matter quite differently. It contends that the district court’s ruling was correct— Ziegler did not have an objectively reasonable expectation of privacy in his workplace computer. The government argues in its brief:
Society could not deem objectively reasonable that privacy interest where an employee uses a computer paid for by the company; [sic] Internet access paid for by the company, in the company office where the company pays the rent.... This is certainly even more so true where the company has installed a firewall and a whole department of people whose job it was to monitor their employee’s Internet activity.
As we know, the Fourth Amendment protects people, not places. Katz v. United States, 389 U.S. 347, 351, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967). Although it is often true that “for most people, their computers are their most private spaces,” United States v. Gourde, 440 F.3d 1065, 1077 (9th Cir.2006) (en banc) (Kleinfeld, J., dissenting), the validity of that expectation depends entirely on its context. Cf. Ortega, 480 U.S. at 715, 107 S.Ct. 1492 (“We have no talisman that determines in all cases those privacy expectations that society is prepared to accept as reasonable.”).
In that vein, a criminal defendant may invoke the protections of the Fourth Amendment only if he can show that he had a legitimate expectation of privacy in the place searched or the item seized. Smith v. Maryland, 442 U.S. 735, 740, 99 S.Ct. 2577, 61 L.Ed.2d 220 (1979). This expectation is established where the claimant can show: (1) a subjective expectation of privacy; and (2) an objectively reasonable expectation of privacy. See id. (citing Katz, 389 U.S. at 351, 361, 88 S.Ct. 507); United States v. Shryock, 342 F.3d 948, 978 (9th Cir.2003). It is Ziegler’s burden to prove both elements. United States v. Caymen, 404 F.3d 1196, 1199 (9th Cir.2005) (citation omitted).
The threshold question then is whether Ziegler had a legitimate expectation of privacy in the area searched or the object seized. If he had no such expectation, we need not consider whether the search was reasonable.
1
The government does not contest Ziegler’s claim that he had a subjective expectation of privacy in his office and the computer. The use of a password on his computer and the lock on his private office door are sufficient evidence of such expectation. See United States v. Bailey, 272 F.Supp.2d 822, 835 (D.Neb.2003) (citation omitted).
2
But Ziegler’s expectation of privacy in his office and workplace computer must also have been objectively reasonable. The seminal case addressing the reasonable expectations of private employees in the workplace is Mancusi v. DeFOrte, 392 U.S. 364, 88 S.Ct. 2120, 20 L.Ed.2d 1154 (1968). In Mancusi, the Supreme Court addressed whether a union employee had a legitimate expectation of privacy, and therefore Fourth Amendment standing, in the contents of records that he stored in an office that he shared with several other unión officials. The Court held that De-Forte had standing to object to the search and that the search was unreasonable, noting that it was clear that “if DeForte had occupied a ‘private’ office in the union headquarters, and union records had been seized from a desk or a filing cabinet - in that office, he would have had standing.” Id. at 369, 88 S.Ct. 2120. That was so because he could expect that he would not be disturbed except by business or personal invitees and that the records would not be taken except with the permission of his supervisors. Id. The Court thought the fact that the office was shared with a few other individuals to be of no constitutional distinction.
Mancusi compels us to recognize that in the private employer context, employees retain at least some expectation of privacy in their offices. Id.See also O’Con-nor v. Ortega, 480 U.S. 709, 716, 107 S.Ct. 1492, 94 L.Ed.2d 714 (1987) (noting that in Mancusi “this Court ... recognized that employees may have a reasonable expectation of privacy against intrusions by police.”); id. at 730, 107 S.Ct. 1492 (Scalia, J., concurring) (“In Mancusi v. DeForte, we held that a union employee had Fourth Amendment rights with regard to an office at union headquarters that he shared with two other employees, even though we acknowledged that those other employees, their personal or business guests, and (implicitly) ‘union higher-ups’ could enter the office.”) (internal citations omitted).
Furthermore, Ziegler’s expectation of privacy in his office was reasonable on the facts of this case. His office was not shared by co-workers, and kept locked. See Schowengerdt v. United States, 944 F.2d 483, 487 (9th Cir.1991) (“Schowen-gerdt would enjoy a reasonable expectation of privacy in areas given over to his exclusive use, unless he was on notice from his [government] employer that searches of the type to which he was subjected might occur from time to time for work-related purposes.”); United States v. Taketa, 923 F.2d 665, 672-73 (9th Cir.1991). And while there was a master key, the existence of such will not necessarily defeat a reasonable expectation of privacy in an office given over for personal use. See Taketa, 923 F.2d at 673 (noting that allowing the existence of a master key to overcome the expectation of privacy would defeat the legitimate privacy interest of any hotel, office, or apartment occupant).
Because Ziegler had a reasonable expectation of privacy in his office, any search of that space and the items located therein must comply with the Fourth Amendment.
Ill
The next step is to inquire whether there was a search or seizure by the government. We need not dwell upon this matter too long. Given the district court’s factual findings, we treat Softich and Schneider as de facto government agents. See United States v. Reed, 15 F.3d 928, 931 (9th Cir.1994). While the two Frontline employees may not have scoured the desk drawers and cabinets for evidence, as the agents did in Mancusi, 392 U.S. at 365, 88 S.Ct. 2120, they undoubtedly “searched” Ziegler’s office when they entered to make a copy of the hard drive of his computer. See 1 WAYNE R. LAFAVE, SEARCH AND SEIZURE: A TREATISE ON THE FOURTH AMENDMENT, § 2.1(a) (4th ed. 2004) (“Under the traditional approach, the term ‘search’ is said to imply some exploratory investigation, or an invasion and quest, a looking for or seeking out.”) (internal quotation omitted). The employees obtained a key in order to unlock the office, entered the office, copied Ziegler’s hard drive, and left.
IV
A
The remaining question is whether the search of Ziegler’s office and the copying of his hard drive were “unreasonable” within the meaning of the Fourth Amendment. As in Mancusi, the government does not deny that the search and seizure were without a warrant, and “it is settled for purposes of the Amendment that ‘except in certain carefully defined classes of cases, a search of private property without proper consent is ‘unreasonable’ unless it has been authorized by a valid search warrant.’ ” Mancusi, 392 U.S. at 370, 88 S.Ct. 2120 (quoting Camara v. Municipal Court, 387 U.S. 523, 528-529, 87 S.Ct. 1727, 18 L.Ed.2d 930 (1967)).
One well-settled exception is where valid consent is obtained by the government. Davis v. United States, 328 U.S. 582, 593-594, 66 S.Ct. 1256, 90 L.Ed. 1453 (1946); Schneckloth v. Bustamonte, 412 U.S. 218, 219, 93 S.Ct. 2041, 36 L.Ed.2d 854 (1973). In proving voluntary consent, the government “is not limited to proof that consent was given by the defendant, but may show that permission to search was obtained from a third party who possessed common authority over or other sufficient relationship to the premises or effects sought to be inspected.” United States v. Matlock, 415 U.S. 164, 171, 94 S.Ct. 988, 39 L.Ed.2d 242 (1974); see also United States v. Davis, 332 F.3d 1163, 1168-69 (9th Cir.2003). Common authority to authorize a search rests upon the premise that one “[has] assumed the risk that one of [his] number might permit the common area to be searched.” Matlock, 415 U.S. at 171, 94 S.Ct. 988 n. 7.
B
We first consider whether Front-line exercised common authority over the office and the workplace computer such that it could validly consent to a search. Mancusi is again instructive. In Mancu-si, the Supreme Court recognized that in his office, DeForte retained an expectation “that records would not be taken [by the police] except with his permission or that of his union superiors.” 392 U.S. at 369, 88 S.Ct. 2120. The Court continued: “It is, of course, irrelevant that the Union or some of its officials might validly have consented to a search of the area where the records were kept, regardless of De-Forte’s wishes, for it is not claimed that any such consent was given, either expressly or by implication.” Id. at 369-70, 88 S.Ct. 2120; see also United States v. Carter, 569 F.2d 801, 804 (4th Cir.1977), cert. denied 435 U.S. 973, 98 S.Ct. 1618, 56 L.Ed.2d 66 (1978). Mancusi thus establishes that even where a private employee retains an expectation that his private office will not be the subject of an unreasonable government search, such interest may be subject to the possibility of an employer’s consent to a search of the premises which it owns.
We are also convinced that Frontline could give valid consent to a search of the contents of the hard drive of Ziegler’s workplace computer because the computer is the type of workplace property that remains within the control of the employer “even if the employee has placed personal items in [it].” Ortega, 480 U.S. at 716, 107 S.Ct. 1492. In Ortega, the Supreme Court offered an analogy that is helpful to our resolution of this question. Ortega, 480 U.S. at 716, 107 S.Ct. 1492. The Court posited a situation where an employee brings a piece of personal luggage to work and places it within his office. The Court noted that “[w]hile ... the outward appearance of the luggage is affected by its presence in the workplace, the employee’s expectation of privacy in the contents of the luggage is not affected in the same way.” Id. (emphasis in original). The Court further explained that “[t]he appropriate standard for a workplace search does not necessarily apply to a piece of closed personal luggage, a handbag or a briefcase that happens to be within the employer’s business address.” Id.
The workplace computer, however, is quite different from the piece of personal luggage which the Court described in Ortega. Although use of each Frontline computer was subject to an individual log-in, Schneider and other IT-department employees “had complete administrative access to anybody’s machine.” The company had also installed a firewall, which, according to Schneider, is “a program that monitors Internet traffic ... from within the organization to make sure nobody is visiting any sites that might be unprofession al.” Monitoring was routine, and the IT department reviewed the log .created by the firewall “[o]n a regular basis,” sometimes daily if Internet traffic was. high enough to warrant it. Finally, upon their hiring, Frontline employees were apprised of the company’s monitoring efforts through training and an employment manual, and they were told that the computers were company-owned and not to be used for activities of a personal nature.
In this context, Ziegler could not reasonably have expected that the computer was his personal property, free from any type of control by his employer. The contents of his hard drive, like the files in Mancusi, 392 U.S. at 369, 88 S.Ct. 2120, were work-related items that contained business information and which were provided to, or created by, the employee in the context of the business relationship. Ziegler’s downloading of personal items to the computer did not destroy the employer’s common authority. Ortega, 480 U.S. at 716, 107 S.Ct. 1492. Thus, Frontline, as the employer, could consent to a search of the office and the computer that it provided to Ziegler for his work.
C
The remaining question is, given Frontline’s ability to consent to a search, did it consent to a search of the office and the computer. We conclude that it did. The exact type of employer consent that was absent in Mancusi clearly exists in this case. While the district court found that Softich and Schneider acted at the direction of Agent Kennedy, the record shows that Softich and Schneider received consent to search the office and the keys to the office from the Chief Financial Officer of Frontline Ronald Reavis. Schneider testified:
[W]hen I returned from the meeting with Agent Kennedy, I spoke to John Softich, and then we, in turn, both went up and spoke to Ronald Reavis. Explained the situation to him. Said that, you know, [the FBI] wanted a backup made of this information, that we were going to do it sometime at night to make sure that we were undisturbed. And he said that as an officer of the company, he was okay with that, and he said that we could go forward and do that. He gave me his-a key to the building and to the offices, and then I came in sometime after 10 o’clock and did the copy.
In addition, Softich testified that Reavis had authorized them to make the copy of the hard drive. Softich was asked, “So Ron [Reavis] gave [Schneider] the key and said, Go do this?” Softich answered in the affirmative.
This testimony makes clear that Ziegler’s superiors at Frontline, in particular Reavis, an officer of the company, gave consent to a search of the property that the company owned and which was not of a personal nature. See United States v. Gargiso, 456 F.2d 584, 586-87 (2d Cir.1972) (upholding search where FBI agent received consent of highest-ranking corporate officer on the scene).
V
Although Ziegler retained a legitimate expectation of privacy in his workplace office, Frontline retained the ability to con sent to a search of Ziegler’s office and his business computer. And because valid third party consent to search the office and computer located therein was given by his employer, the district court’s order denying suppression of the evidence of child pornography existing on Ziegler’s computer is
AFFIRMED.
. Although the district court referred to the company as "Front Line,” we use the single-word formulation which more frequently appears in the record.
. A firewall is a piece of "computer hardware or software that prevents unauthorized access to private data (as on a company’s local area network or intranet) by outsider computer users (as of the Internet).” MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY 471 (11th ed.2003). It can also be "programmed to analyze the network traffic flowing between [a] computer and the Internet”; it then "compares the information it monitors with a set of rules in its database,” and "[i]f it sees something not allowed ... the firewall can block and prevent the action.” NEWTON’S TELECOM DICTIONARY 392 (22nd ed.2006). Further, "[m]ost firewall programs let you adjust the rules to allow certain types of data to flow freely back and forth without interference.” Id.
. A cache is "a computer memory with very short access time used for storage of frequently or recently used instructions or data.” MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY 171 (11th ed.2003). "[I]nformation is cached by placing it closer to the user or user application in order to make it more readily and speedily available....” NEWTON’S TELECOM DICTIONARY 189 (22nd ed.2006).
. Agent Kennedy explained that this cooperation was the reason he did not pursue a search warrant. He testified, "At this point, counselor, everybody at Frontline Processing is telling me they’re going to cooperate, so I’m not going to go in and start serving search warrants on a company if they're going to cooperate. I have no desire to do that.”
. No explanation appears in the record for the two year, three month interval between delivery of the computer to the FBI and issuance of the indictment. In any event, Ziegler does not raise any issue regarding such delay.
. The defense also offered the testimony of a computer forensics expert, but that testimony was not relevant to the motion to suppress.
. On appeal, the government attempts to reconcile the contradictory accounts of the January 30, 2001, interview as a case of simple miscommunication. It explains that confusion ensued when Schneider told Agent Kennedy that they were Copying Ziegler's cache files onto a second hard drive. Kennedy, whom the government characterizes as not particularly tech-sawy, allegedly understood Schneider to mean that the IT department had already made a copy of Ziegler’s entire hard drive. Thus, it suggests that Agent Kennedy's instructions were only that the IT employees should secure the copy he thought had already been made.
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12523878-24412 | S. MAURICE HICKS, JR., UNITED STATES DISTRICT JUDGE
United States Magistrate Judge Patrick J. Hanna's Orders (Record Document 156, 170, and 172) were converted to Reports and Recommendations. After independent review of the record, and consideration of the objections filed, this Court concludes that the Magistrate Judge's Reports and Recommendations (Record Document 156, 170, and 172) are correct and adopts the findings and conclusions therein as its own. Accordingly,
IT IS ORDERED, by agreement of counsel, the procedural arguments asserted in the Motion to Dismiss (Record Document 123), namely, whether Plaintiff, Cormier ("Cormier"), can maintain a direct action against Scottsdale Insurance Co. ("Scottsdale") because the Fair Labor Standards Act ("FLSA") preempts the Louisiana Direct Action statute, and whether the FLSA claim is a contract claim which falls outside the purview of the Louisiana direct action statute, are WITHDRAWN. Accordingly, the sole issue before the Court is whether Scottsdale's policy excludes coverage for the FLSA wage and hour claims brought by the Plaintiffs herein.
IT IS FURTHER ORDEREDthat given the Court will consider the Scottsdale policy with respect to the sole remaining issue before this Court, the Motion to Dismiss (Record Document 123) is hereby converted to a Motion for Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. See Rule 12(d), Fed. R. Civ. P.
IT IS FURTHER ORDEREDthat Scottsdale's Motion to Reconsider (Record Document 157), which seek reconsideration of the Magistrate Judge's Order entered September 28, 2016 (Record Document 156), is DENIED.
IT IS FURTHER ORDEREDthat the Order (Record Document 172) outlining the discovery the Magistrate Judge deemed necessary in deciding the pending Motion for Summary Judgment (Record Document 123) is ADOPTED.
THUS DONE AND SIGNEDin Shreveport, Louisiana, this 8th day of November, 2017.
ORDER
PATRICK J. HANNA, UNITED STATES MAGISTRATE JUDGE
Before the Court is the Motion to Reconsider filed by the defendant Scottsdale Insurance Company ("Scottsdale"), which seeks reconsideration of this Court's September 28, 2016 Order entered following the September 27, 2016 hearing of Scottsdale's Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. [rec. doc. 157]. Plaintiff, Justin Cormier ("Cormier"), and defendant, Dale P. Martin, Jr. ("Martin"), have filed Opposition, to which Scottsdale filed a Reply. [rec. docs. 163, 164 and 165].
The Court's September 28, 2016 Order memorialized the agreement of counsel, entered during the September 27, 2016 hearing of Scottsdale's Rule 12(b)(6) Motion to Dismiss that the procedural arguments asserted in the Motion to Dismiss, namely, whether Cormier can maintain a direct action against Scottsdale because the FLSA preempts the Louisiana direct action statute, and whether an FLSA claim is a contract claim which falls outside the purview of the Louisiana direct action statute, were withdrawn, and accordingly, the sole issue remaining before the Court for disposition is whether the Scottsdale policy excludes coverage for the FLSA wage and hour claims brought by the plaintiffs. The September 28, 2016 Order additionally memorialized the Court's conversion of Scottsdale's Rule 12(b)(6) Motion to Dismiss to a Motion for Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. [rec. doc. 156].
By this Motion, Scottsdale seeks reinstatement of its procedural arguments on grounds that it did not intend to withdraw its procedural arguments, and to the extent the counsel withdrew those arguments, counsel was without authority to do so. Scottsdale additionally seeks reversal of this Court's conversion of its Motion to Dismiss to a Motion for Summary Judgment. Alternatively, in the event the Court maintains its prior conversion of the Motion to Dismiss to a Motion for Summary Judgment, Scottsdale seeks clarification of the scope of discovery permitted by the Court.
For the following reasons, the Motion to Reconsider [rec. doc. 157] is denied .
The Federal Rules of Civil Procedure do not recognize a motion for reconsideration per se. Shield Pack, LLC v. CDF Corp. , 2010 WL 4719431, *1 (W.D. La. 2010). Nevertheless, motions requesting reconsideration of court orders have been construed as falling under Rule 54(b), Rule 59(e), or Rule 60(b) of the Federal Rules of Civil Procedure. Collins v. Brice Building Co., LLC , 2013 WL 121655, *2 (E.D. La. 2013) (and cases cited therein). Rules 59 and 60 apply only to final judgments. Id. When a party seeks to revise an order that adjudicates fewer than all the claims among all of the parties, then Rule 54(b) controls. Id . Under Rule 54(b), the district court possesses the inherent power to reconsider, rescind, or modify an interlocutory order for cause seen by it to be sufficient. Id . citing Fed.R.Civ.P. 54(b) . Because the Court's September 28, 2016 Order is not a final judgment, but rather an interlocutory order that addresses the rights of fewer than all parties to this suit, Rule 54(b) governs. Rule 54(b) motions are construed under the same standards that govern Rule 59(e) motions to alter or amend a final judgment. Id. (and cases cited therein); Hearne v. Kansas City Southern R. Co. , 2015 WL 5708291, *2 (W.D. La. 2015) ; see also Leong v. Cellco P'ship , 2013 WL 4009320, at *3 (W.D. La. 2013).
"A Rule 59(e) motion 'calls into question the correctness of a judgment.' " Templet v. HydroChem Inc. , 367 F.3d 473, 478 (5th Cir. 2004), quoting In re Transtexas Gas Corp. , 303 F.3d 571, 581 (5th Cir. 2002) ; Shield Pack , 2010 WL 4719431, at *1. To prevail on a Rule 59(e) motion, the moving party must "clearly establish either a manifest error of law or fact or must present newly discovered evidence." Simon v. United States , 891 F.2d 1154, 1159 (5th Cir. 1990). When a party contends there has been a clear error of law or manifest injustice, "courts caution 'that any litigant considering bringing a motion on that ground should evaluate whether what may seem to be a clear error of law is in fact simply a point of disagreement between the Court and the litigant.' " Arena v. Graybar Electric Company, Inc. , 2010 WL 3944942, *1 (W.D. La. 2010), reversed on other grounds, 669 F.3d 214 (5th Cir. 2012)quoting Atkins v. Marathon LeTourneau, Co., 130 F.R.D. 625, 627 (S.D. Miss. 1990) and Durkin v. Taylor , 444 F.Supp. 879, 889 (E.D. Va. 1977)"A party seeking reconsideration must show more than disagreement with the court's decision....." Sundaram v. Flagstar Bank FSB , 2012 WL 5336209, *2 (S.D. Tex. 2012), citing Texaco Exploration & Prod., Inc. v. Smackco, Ltd. , 1999 WL 539548, *1 (E.D. La. 1999). "Whatever may be the purpose of Rule 59(e) it should not be supposed that it is intended to give an unhappy litigant one additional chance to sway the judge." Id. quoting Atkins, 130 F.R.D. at 626. Moreover, Rule 59 motions should not be used to relitigate old matters, raise new arguments, or submit evidence that could have been presented earlier in the proceedings. Templet , 367 F.3d at 479 ; Rosenblatt v. United Way of Greater Houston , 607 F.3d 413, 419 (5th Cir. 2010) ; Shield Pack , 2010 WL 4719431 at *1, citing Templet.
In considering a Rule 59(e) motion, Courts must attempt to strike the proper balance between two competing imperatives: (1) finality, and (2) the need to render a just decision. Edward H. Bohlin Co., Inc. v. Banning Co., Inc. , 6 F.3d 350, 355 (5th Cir. 1993). In general, reconsideration of a judgment "is an extraordinary remedy that should be used sparingly." Templet , 367 F.3d at 479citing Clancy v. Employers Health Ins. Co. , 101 F.Supp.2d 463, 465 (E.D. La. 2000) (citing 11 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 2810.1, at 124 (2d ed. 1995)); Shield Pack , 2010 WL 4719431 at *1citing Templet. Accordingly, the standards which apply to Rule 59(e) Motions favor denial of such a Motion. Southern Constructors Group, Inc. v. Dynalectric Co. , 2 F.3d 606, 611 (5th Cir. 1993).
Scottsdale fails to satisfy this stringent standard. Accordingly, Scottsdale's Motion to Reconsider is denied. This Court's September 28, 2016 Order will remain in effect without reversal, modification, or clarification.
Withdrawal of Procedural Arguments by Counsel
Scottsdale argues that "there may have been a miscommunication with respect to the withdrawal of [its direct action and preemption] arguments" and that it "did not intend to withdraw these arguments...." [rec. doc. 157-1, pg. 2 and 10]. Scottsdale further argues that if the arguments were withdrawn by counsel, Mr. West, it "did not authorize counsel to withdraw them." Id.
The Court has examined the transcript of the September 27, 2016 hearing and finds that there was no miscommunication. During Mr. West's argument, the Court initially advised that it "was not running with [Scottsdale]" with respect to its preemption argument as the case relied upon by Scottsdale "was a different kind of case." [rec. doc. 159, pg. 8]. The Court then went on to explain how the direct action statute applies in a "garden variety direct action claim." [Id. ] However, if the direct action statute does not apply, as argued by Scottsdale in their Motion, and the case proceeded to trial solely against an insolvent defendant and a judgment was rendered against Turnkey, then Turnkey would seek coverage under the policy and the parties would "all be back here again arguing about policy defenses." [Id . at pg. 8-9]. Therefore, the Court proposed the following:
So kind of from a judicial efficiency standpoint-and I believe there is case law, and I'm sure the plaintiffs are going to tell me about it, that says that an FLSA case does have a tort element to it, albeit an intentional tort. So, I'll tell you that my inclination at this point, unless you want to persuade me otherwise, is that there is enough authority to say they can bring the claim, which allows me to address the policy language itself. And I don't think preemption applies. That was a different context.
[Id . at pg. 9].
The Court then expressly asked Mr. West, "Do you have a big problem with that result, Mr. West?" [Id. ]. Mr. West responded clearly and without hesitation, "I do not, Your Honor." [Id. ].
The Court then expressly asked plaintiffs' counsel, "Well, you heard what I just said to Mr. West. Do you agree with that?" [Id. at 10]. Plaintiffs' counsel likewise agreed. [Id. ].
The Court then re-confirmed:
I think I can justify it with the jurisprudence, but if everybody is kind of okay with that-I mean, we might as well get to the meat of the coconut instead of go have a trial against an insolvent defendant and come back here and argue the same thing.
[Id. ].
During this entire colloquy, Mr. West voiced no objection. To the contrary, he expressly agreed with the Court's proposal thereby waiving Scottsdale's procedural arguments, which were unique to the procedural posture of this case given that the plaintiffs and not Turnkey had sued Scottsdale, so that the Court could resolve the ultimate question, that is, whether the Scottsdale policy excludes coverage for wage and hour claims. Indeed, had counsel not waived Scottsdale's procedural claims, the Court would have, as advised, simply rejected those arguments for the reasons stated by the Court on the record.
Further, although Scottsdale now argues that its counsel, Mr. West, was without authority to waive its procedural claims, that argument fails to meet the stringent standard required for this Court to reconsider its September 28, 2016 Order. More specifically, Scottsdale fails to demonstrate that this Court has committed a manifest error of law or fact, or that there has been any manifest injustice. Insurers, like other corporate and business entities, must appear in court through counsel. See Rule 83.2.5 of the Local Rules of the United States District Court for the Western District of Louisiana ("[i]n all cases before this court, any party who does not appear in proper person must be represented by a member of the bar of this court...."); 28 U.S.C. § 1654 ("In all courts of the United States the parties may plead and conduct their own cases personally or by counsel...."); see also Rowland v. California Men's Colony, Unit II Men's Advisory Council, 506 U.S. 194, 202-203, 113 S.Ct. 716, 121 L.Ed.2d 656 (1993) ("It has been the law for the better part of two centuries... that a corporation may appear in the federal courts only through licensed counsel... the rationale for that rule applies equally to all artificial entities."). Accordingly, this Court must be able to rely on the representations of counsel appearing in open court on behalf of such clients. See Davidson v. Georgia Pacific, LLC, 2014 WL 801342, * 5 (W.D. La. 2014), citing Police Jury of Tangipahoa Parish v. Begnaud , 200 La. 1020, 9 So.2d 399, 401 (1942) ("It is not to be presumed that an attorney at law who appears in court as the representative of a client is acting without authority."). This aspect of Scottsdale's motion is therefore denied.
Conversion of Scottsdale's Motion to Dismiss
Scottsdale argues that this Court was not required to convert its Motion to Dismiss to a Motion for Summary Judgment as this Court may consider the policy on a Motion to Dismiss because the policy is referred to in the plaintiffs' second amended complaint and is central to their claim. See Collins v. Morgan Stanley Dean Witter , 224 F.3d 496, 498-499 (5th Cir. 2000). Accordingly, because this Court has the authority to resolve this dispute on a Motion to Dismiss, Scottsdale argues that it should exercise that authority. Nevertheless, as acknowledged by Scottsdale in its Reply, under Rule 12(d) this Court has complete discretion to determine whether or not to accept any material beyond the pleadings and thereby convert a Motion to Dismiss to a Motion for Summary Judgment. See Isquith ex rel. Isquith v. Middle S. Utils., Inc. , 847 F.2d 186, 194 n. 3 (5th Cir. 1988) ; Ware v. Associated Milk Producers, Inc. , 614 F.2d 413, 414-15 (5th Cir. 1980) ; see also Crowe v. Hoffman , 2013 WL 357006, *1 (E.D. La. 2013).
Scottsdale essentially now argues, as it did in its Motion to Dismiss, that its policy language is clear and unambiguous and unequivocally excludes coverage for the plaintiffs' claims. Thus, extrinsic evidence was unnecessary to resolve the coverage issue. Cormier and Martin disagree. In their Opposition to both the original Motion and the instant Motion for reconsideration, both Cormier and Martin argue that the policy language is ambiguous and leads to absurd results. Both requested reasonable discovery to resolve these ambiguities.
The Louisiana Supreme Court long ago succinctly set forth the obligation of this Court:
The purpose of liability insurance is to afford the insured protection from damage claims. Insurance contracts, therefore, should be interpreted to effect, not deny, coverage... The extent of coverage is determined from the intent of the parties as reflected by the words of the insurance policy. The role of the judiciary in interpreting insurance contracts is to ascertain the common intent of the insured and insurer as reflected by the words in the policy... When the words of an insurance contract are clear and explicit and lead to no absurd consequences, courts must enforce the contract as written and may make no further interpretation in search of the parties' intent.
Words in an insurance contract are to be given their generally prevailing and ordinary meaning, unless they have acquired a technical meaning... Courts lack the authority to alter the terms of insurance contracts under the guise of contractual interpretation when the policy's provisions are couched in unambiguous terms.... An insurance contract is construed as a whole and each provision in the policy must be interpreted in light of the other provisions so that each is given meaning. One portion of the policy should not be construed separately at the expense of disregarding other provisions.... An insurance contract, however, should not be interpreted in an unreasonable or strained manner under the guise of contractual interpretation to enlarge or to restrict its provisions beyond what is reasonably contemplated by unambiguous terms or achieve an absurd conclusion.... That is, the rules of construction do not authorize a perversion of the words or the exercise of inventive powers to create an ambiguity where none exists or the making of a new contract when the terms express with sufficient clearness the parties' intent... If, after applying the other general rules of construction, an ambiguity remains, the ambiguous contractual provision is to be construed against the insurer who furnished the policy's text and in favor of the insured finding coverage.
Peterson v. Schimek, 729 So.2d 1024, 1028-1029 (La. 1999) (citations omitted)
During the September 27, 2016 hearing, the Court examined the policy language including the definitions. Specifically, the definitions contained in the "Employment Practices Coverage Section" of Scottsdale's Business and Management Indemnity Policy are as follows:
4. Employees means any person who was, now is or shall become:
a. a full-time or part-time employee of the Company , including interns, voluntary seasonal and temporary employees;
b. any individual who applies for employment with the Company ; and c. any natural person who is a leased employee or is contracted to perform work for the Company , or are independent contractors of the Company , but only to the extent such individual performs work or services for or on behalf of the Company .
* * * *
7. Insured Persons means all persons who were, now are or shall become:
a. a director or officer of the Company ;
b. any Employee ; and
c. the functional equivalent of a director, officer or Employee in the event the Company is incorporated or domiciled outside the United States.
8. Insureds means the Company and any Insured Persons .
The insuring clause found in Endorsement 36 provides coverage for "Costs, Charges and Expenses of the Insureds which the Insureds have become legally obligated to pay by reason of a Wage and Hour Claim ... for a Wage and Hour Wrongful Act ..."
Applying these definitions to the insuring clause, Scottsdale would be required to pay costs, charges, and expenses to the Company (Turnkey) and any persons who "were, now are or shall become" directors, officers, full or part-time employees, interns, voluntary and seasonal and temporary employees, as well as any person "who was, now are or shall become an individual who applies for employment" if the costs, charges, and expenses were incurred by reason of a Wage and Hour Claim for a Wage and Hour Wrongful Act. In short, every person who ever was a company employee or officer-or ever was to apply to become an employee or a director or officer-could be an "Insured" under this section of the policy-even people not normally considered "employees" when the term is given its usual meaning, rendering the definitions capable of multiple meanings.
The "Directors and Officers and Company Coverage Section" of the same policy, contains the following definitions:
4. Directors and Officers means any person who was, now is, or shall become:
a. a duly elected or appointed director, officer or similar executive of the Company , or any member of the management board of the Company ;
b. a person who was, is or shall become a full-time or part-time employee of the Company ; and
c. the functional equivalent of directors or officers of a Company incorporated or domiciled outside the United States of America.
5. Insured means the Company and the Directors and Officers .
Thus, every person who "was, is or shall become a full-time or part-time employee" of the Company is not only a Director or Officer, but an Insured. If Directors and Officers were intended to include every past and future and possible full or part-time employee, then the generally recognized and accepted need for Directors and Officers insurance coverage would be rendered meaningless. Further, since the "Insured" purportedly agreed to this policy language, then the insured would include every past and future employee, i.e. all the plaintiffs in this collective action, and all would have had to agree-a point this Court finds highly unlikely as to Scottsdale's intent.
At the September 27, 2016 hearing, this Court stated that it "found it puzzling that a D & O policy would include every employee that there is as a D & O." The Court had "never seen a definition like this and it troubles me" and that the Court was therefore "in unchartered waters." [rec, doc. 159, pg. 11 and 23].
The Court thus preliminarily suggested that the policy could be construed as ambiguous and could be read to lead to absurd results. Since by Scottsdale's interpretation of its own definition, every past or future employee could be an "Insured," whether under the Employment Practices section or the Directors and Officers section, this Court determined that it would accept matters outside the pleadings of this collective action and determine the issues under the rules applicable to summary judgment motions. [See Id. at pg. 22].
By this Motion, without providing anything which was not available prior to this Court's September 28, 2016 Order, Scottsdale merely reasserts its prior arguments that the policy clearly and unequivocally excludes coverage and that extrinsic evidence is unnecessary, arguments which were previously considered and rejected by this Court. Although Scottsdale disagrees with this Court's determination that the Motion will be converted and determined under the standards applicable to summary judgment motions after an adequate opportunity for discovery, such disagreement does not present a clear error of law or fact, nor manifest injustice. Scottsdale's request for an additional chance to sway the Court is simply not appropriate. See Arena quoting Atkins and Durkin ; Sundaram citing Texaco Exploration & Prod., Inc. and Atkins, supra.
Request for Clarification
The Court also need not clarify the scope of discovery which will be permitted in the context of this Motion to reconsider. As previously stated during the September 27, 2016 hearing, the Court will address the nature and scope of the discovery which will be permitted after considering the Rule 56(d) and Rule 12(d) submissions of the parties. Since the Court has not yet had sufficient opportunity to consider the submissions of the parties, Scottsdale's request for clarification is premature.
Signed this 14th day of November 2016, at Lafayette, Louisiana.
Federal Rule of Civil Procedure 54(b) provides that an order that adjudicates fewer than all the claims among all the parties "may be revised at any time" before the entry of a final judgment.
In the current motion, Scottsdale points out that the contemplated discovery by the plaintiffs would needlessly erode the policy limits leaving less potential benefits to the class members. If this case proceeded against an insolvent defendant through trial and then through a subsequent garnishment action on the policy in the event an adverse judgment was rendered against Turnkey, no doubt the policy limits would be far more significantly eroded than they would should limited discovery take place on the policy defenses themselves at this stage of the litigation.
Interestingly, by Reply Scottsdale's counsel states that he was acknowledging the Court's rejection of Scottsdale's procedural arguments rather than agreeing to withdrawal of same. [rec. doc. 165-1, ¶ 5].
Scottsdale has likewise not demonstrated that there been an intervening change in the law to justify reconsideration, nor does the Court consider Mr. West's affidavit as new evidence contemplated by the Rules necessitating reconsideration.
See rec. doc. 165, pg. 2 "This Court undoubtedly has the discretion to convert Scottsdale's Motion under Rule 12(d)...."
This definition is contained in Endorsement No. 3. of Scottsdale's policy and alters the original definition to include interns.
Endorsement 4 of Scottsdale's policy adds members of the management board and management committee.
Endorsement 19 expands this definition to include other persons not pertinent to this Court's analysis at this point.
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4245862-23257 | COLEMAN, Chief Judge.
This is a suit for infringement of a patent to Oscar L. Vines, No. 2,643,813. issued June 30, 1953, on application of August 24, 1951, for a folding paperboard carton adapted to contain fruit, more commonly known as a tomato tray.
The plaintiff, Alford Cartons, hereinafter referred to as Alford, to which the Vines patent was assigned on June 30, 1953, is a New Jersey corporation with its principal place of business at Ridge-field Park, in that State, where it manufactures and sells many types of paperboard folding cartons and boxes. One of the defendants, Gordon Cartons, Inc., hereinafter referred to as Gordon Baltimore, is a Maryland corporation with its principal place of business in Baltimore. The other defendant, Gordon Cartons of Michigan, Inc., hereinafter referred to as Gordon Michigan, is also a Maryland corporation with its principal place of business at the same address as that of defendant Gordon Baltimore, where both are engaged in the manufacture and sale of paper-board folding cartons and boxes. The defendant companies derive their name from one Allen A. Gordon who originated the business of the two defendants. Upon the death of Allen A. Gordon, Gordon Michigan became a wholly owned subsidiary of Gordon Baltimore.
To the present complaint, which was filed on August 18, 1953, both defendants filed a motion for summary judgment on the ground that the Vines patent was anticipated by the prior art. The motions, after full argument were denied; the defendants admitted infringement, and trial was had in due course upon the sole issue of the validity of the Vines patent which embraces five claims, all of which are in suit. Defendants have not emphasized any distinction between the claims as respects their validity, it being asserted that all are equally invalid for the reason: (1) what is claimed is per se lacking in invention; (2) the claims are anticipated by prior art patents; (3) also by prior use; and (4) there has been no commercial use of the patent. It is deemed sufficient to quote merely the first of the five claims, which is as follows: “1. A carton blank of substantially rectangular shape provided with two parallel fold lines extending longitudinally the full length of the blank, each of said longitudinal fold lines being disposed substantially the same distance from and parallel to the longitudinal sides of the blank, the blank being further provided with a first pair of parallel fold lines each of which extends transversely across a separate end portion of the blank at substantially the same spaced distance inwardly therefrom and with a second pair of parallel fold lines each of which extends transversely across a separate end portion of the blank at substantially the same distance inwardly from the proximate fold line of the first pair as the distance between the said proximate fold line and the proximate end of the blank, the blank further having four separate fold lines extending diagonally outwardly to the two sides of the blank at an angle of about forty-five degrees thereto from each of the four intersections of the two longitudinal fold lines and the two transverse fold lines of said second pair thereof, the portion of each end of the blank defined by the two longitudinal fold lines, the end of the blank and the transverse fold line proximate thereto being provided with an outwardly arched cut line having its ends positioned adjacent the intersections of said longitudinal fold lines with said proximate transverse fold line, the ends of the blank being provided with an outwardly projecting tongue portion, and the body of the blank being provided with a substantially centrally disposed transverse cut line adjacent the inboard side of each of the transverse fold lines of said second pair thereof.”
Vines, in his introduction to the specifications of his patent, after stating that his folding carton “is of the knockdown, set-up type such that the carton in its knocked-down condition can be set up by a bending motion applied to the end portions of the carton”, thus summarizes recent developments in this art: “There has been extensive development in recent years of folding cartons suitable for use in the packaging of fruit such as tomatoes and the like. These tomato trays, as they are generally referred to, are commonly provided with an open top so that the filled tray can be subsequently wrapped with a transparent material which will leave the contents of the tray exposed to view. A particularly successful form of tomato tray has thus been developed in which the tray is composed of a blank having two side panels folded' over and inwardly on top of a central panel about two fold lines extending longitudinally of the blank so as to form a substantially fiat structure in the knocked-down condition. For erection of the folded tray, each end portion of the flat structure is folded upwardly about an inner transverse fold line so that a folding web, defined in each of the two side panels adjacent the transverse fold line, causes the side walls to assume an upstanding position. In the resulting structure it is particularly important that the end walls of the erected tray stand straight and provide strength for not only the ends of the carton but also for the adjoining portions of the side walls of the carton. An additional feature which is generally required in such structures is a flap at each end of the carton adapted to project inwardly a short distance from the upper edge of each end portion. The purpose of these inwardly projecting flaps is to provide a horizontal platform upon which another filled tray can be supported when a plurality of the filled trays are stacked for shipment or display.”
Following this introductory statement Tines gives a recital of what he claims to be the features of his folding carton, when read in the light of the specifications and the drawings of the patent, involving novelty in construction, greater economy in production and increased utility over anything in the prior art. 'These features, summarized, are eight in number, as follows: (1) the scoring or perforated line for folding extends the full length of the blank form; (2) the arched shape cut in the end of the bottom of the blank form extends in the direction of the extreme end of the form; (3) the extensions of the two side walls are folded so as to form a double thickness end wall structure; (4) when this double thickness end wall is first raised to its vertical position, outward distortion of the side walls causes the end wall structure to open; (5) as the upper half of the double thickness end wall is folded forward, even though slightly, any tendency to support the end walls outwardly is resisted because such folding of the double thickness end wall locks in place the remaining inner portion of the end wall structure; (6) the particular portion of the double end wall structure which is folded forwardly and inwardly is locked in its upright final position by the tongue at the extreme end of the blank form, which fits into a slot in the bottom panel of the form; (7) the arched shape cut in the extension of the bottom of the blank form is fashioned from the innermost surface of the double thickness wall section that is folded into the tray; and (8) the structure of double thickness remaining after the arched shape flap has been cut out of the ultimate extension of the bottom of the blank, this double thickness structure being along both side edges of that portion of the end structure which fits into the interior of it, causes the two webs at the ends of the side walls to be hugged or pressed closely, both on their outer and inner surfaces, by the double thickness of the end wall, thus giving to both the end and side wall structure rigidity that counteracts buckling or breaking.
The testimony discloses that the folding carton industry, while of comparatively recent origin, is, nevertheless, one crowded with many types of cartons and that the competition is very great. It also discloses that the more recent modern merchandising methods, particularly of the so-called super-markets, have greatly increased the use of all sorts of containers, especially paper-board cartons. The testimony further indicates that sales of tomatoes in cartons of one form or another have become increasingly great each year, reaching at the present time sales of billions of tomatoes in such containers; that about 90% of the tomatoes thus sold in approximately the past ten years has been in cartons made by the Standard Folding Tray Company of Brooklyn, and that the next largest producer of cartons used in the tomato trade has been the Associated Folding Box Company of Boston. It is asserted on behalf of the plaintiff company that carton manufacturers generally have long endeavored to design and manufacture a tomato tray that could economically compete with that of the Standard Folding Tray Company, but have been un successful until the advent of the Vines invention.
In this crowded and highly competitive field involving the art of making knockdown paper-board cartons, considerable litigation naturally occurred. Three patents to Ralph A. Gross, Nos. 1,690,109, 1,758,510 and 1,940,213, respectively, are the earliest litigated patents to which we have been referred. See Simplex Paper Box Corp. v. Rosenthal Paper Co., 8 Cir., 104 F.2d 349, and Simplex Paper Box Corp. v. Boxmakers, Inc., 7 Cir., 116 F.2d 914. All three Gross patents were held invalid in these decisions on the ground of anticipation by the prior art. They are not among the references cited in the file of the Vines patent in the Patent Office. But we do not feel that it is necessary to analyze these patents or the above mentioned decisions which held them invalid, because the cartons covered by these patents were of an extremely simple, and different character from the Vines carton. A mere glance at their construction as shown by the drawings attached to these patents shows that they bear such little resemblance to the Vines carton as to have no relevancy to the present litigation except to show the early state of the art.
The next stage in the litigation to which we have been referred, as reported in published decisions, involved the patent No. 2,342,551 to David Levkoff, issued February 22, 1944. In Associated Folding Box Co. v. Levkoff, 194 F.2d 252, the first Circuit Court of Appeals held this patent invalid for lack of invention. The Court in its opinion stated, 194 F.2d 252, 257: “The specific problem to which Levkoff addressed himself, that of providing stiff ends for a collapsible box or tray which could be cheaply stamped out of a single sheet of cardboard and quickly erected, was not particularly old, and it would not seem to be especially baffling. So far as we can tell from the record the problem was not one which had gravely perplexed the trade for years, or one that had been given lengthy and exhaustive study by numerous experts. Levkoff’s solution was ingenious, and no doubt it was welcome, but on the record we cannot say that it was startling or revolutionary. In short, we think he did not make an inventive contribution to his art, but merely accomplished an ingenious perhaps, but still minor improvement in it, and that his commercial success, such as it was, cannot save his patent, for the issue of invention is not here in doubt.
“The Court below, therefore, erred in using a less exacting standard of invention for judging the validity of the claim for a combination made up entirely of old components than that required by the Great Atlantic & Pacific Tea Co. case, supra, [Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Co., 340 U.S. 147, 71 S.Ct. 127, 95 L.Ed. 162], and in consequence its judgment cannot stand.”
This Levkoff patent is cited in the file of the Vines patent in the Patent Office, but we consider it unnecessary to analyze it because the construction involved in the Levkoff carton is materially different from that of the Vines carton, and does not anticipate the development in the art reflected in the Vines patent with which we are concerned.
The last step in the reported litigation is found in the case of Himes v. Chadwick, 199 F.2d 100, a decision of the Ninth Circuit Court of Appeals, in 1952, involving patent No. 2,011,232, issued to Parks on July 26, 1948, and patent No. 2,243,421, issued to Ross A. Himes on May 21, 1941. These patents were likewise found invalid for want of invention over the prior art. They were not cited as references in the file of the Vines patent in the Patent Office, and we do not find such similarity between the carton covered by either of these patents to warrant detailed consideration of them. They do not anticipate the development in the art reflected in the Vines patent in suit.
In addition to the six patents declared invalid in the decisions to which we have just referred, namely, three patents to Gross, one to Levkoff, one to Parks and one to Himes, the defendants rely upon seven other patents as supporting their contention that the Vines patent is an ticipated by the prior art, five of which were cited as references in the file of the Vines patent in the Patent Office. These five are as follows: No. 991,052 to Draper, issued May 2, 1911; No. 1,471,478 to Feigelman, issued November 23, 1923; No. 2,136,797 to Lee, issued November 15, 1938, No. 2,274,714, being another patent to Levkoff issued February 22, 1944, that is, earlier than the one adjudicated in Associated Folding Box Co. v. Levkoff, supra; and No. 2,532,808 to Grinnell, issued December 5, 1950. The two remaining patents relied upon, not cited as references to Vines, are No. 2,563,145 to Winkler, issued August 7, 1951, and No. 2,573,379 to Acker, issued October 30, 1951.
In addition to the Levkoff patent No. 2,342,551 to which we have referred, the following seven United States patents and one Canadian are cited as references in the file of this patent as issued by the Patent Office: patent to Draper, No. 991,052, issued May 2, 1911; to Feigelman, No. 1,471,478, issued October 23, 1923; to Lee, No. 2,136,797, issued November 15, 1938, to Levkoff, No. 2,274,-714, issued March 3, 1942; to Williams, No. 2,385,363, issued February 19, 1946; to Grinnell, No. 2,532,808, issued December 5, 1950; to Painter, No. 244,544, issued June 5, 1951; and Canadian patent No. 473,462, issued May 8, 1951.
The file wrapper with respect to the Vines patent is relatively brief and contains practically nothing which this Court has found of any real aid in relation to the question of validity of the Vines patent. Following its usual practice, which this Court deplores and has criticized in previous opinions, the Patent Office held all of the five claims of the patent valid without indicating wherein the invention was found to lie. The examiner twice rejected the claims on prior patents, especially those to Draper, Feigelman, Lee, Levkoff and Grinnell. In his first official action, the examiner found no invention involved in providing the end of the blank of Draper with an arched cut line as taught by Lee; or in providing the ends of Draper’s blank with tongues, or in having a cut adjacent to the inner transverse fold lines, as taught by Levkoff No. 2,274,714. In his second official action, the examiner again rejected the claims on Feigelman. Thereupon, after various amendments, counsel for applicant argued to the examiner that the Vines invention was characterized by an end structure composed of two sections of double thickness, the edges of each section being formed by a fold line which has great rigidity, with the result that the end structure held erect by the webs stands rigidly upright, which it was alleged is not true with respect to the cartons covered by the prior art, because there the inner section of the end wall structure is composed of only a single strip of paperboard. Finally, as already stated, the examiner allowed all of the claims in suit without any further explanation.
In presenting defendants’ case to this Court, defendants’ counsel relied primarily, first, upon the Draper patent, because of its having both inner and outer end walls of double thickness; second, upon Feigelman, as disclosing the arc-shaped cut in the ultimate extension of the bottom of the blank, beginning at the fold line and extending outwardly to the blank’s extremity; and they also relied upon Levkoff and Grinnell, as disclosing the tongue or tab and slot to receive it. Thus, in summary, it is the defendants’ contention that combining the disclosures of these four prior patents in the Vines carton is all that Vines did, and that, therefore, this was not invention since it merely amounts to combining old elements without producing a new result or an old result in a simpler, more efficient or more economical manner.
In order to determine whether there is merit in this contention of defendants, it is necessary to analyze more completely just what the art prior to the issuance of the patent in suit to Vines did, in fact disclose. Chronologically, the disclosures are as follows: Draper, as early as 1911, disclosed both inner and outer end walls of double thickness. However, Draper failed to disclose anchoring the end walls inside of the structure so as to keep them in position. Such anchoring or securing was done by Draper by putting another Draper carton inside or outside of the first one. Next, Feigelman, in 1923, disclosed an arc-shaped flap cut from the inner end wall structure. However, Feigelman’s inner wall has only a single thickness both as respects the outer and inner end walls. Also, the arc-shaped flap in Vines is cut not from a single thickness inner end wall structure as in Feigelman but from an end structure which, when in position, has a double thickness of both its inner and outer walls. Next, in 1942, and in 1950, Levkoff and Grinnell disclosed the tongue or tab with slot for its insertion, Levkoff being embodied in the carton of the Standard Folding Trays Corporation and Grinnell in those of the Associated Folding Box Company, which, as previeusly stated, are the most successful in the market today.
Thus, by embodying in Draper the disclosures of Feigelman, Levkoff and Grinnell, defendants assert that Draper becomes the equivalent of Vines. Cartons embodying this combination were introduced as eshibits at the hearing with the assertion that to make such combination required no special skill or invention, and it was no real novelty but was merely the normal product of what anyone might do, having before him these patents that succeeded Draper in a crowded art. It is to be noted, however, that unlike Draper, Grinnell and Levkoff embody only a single inner wall end structure and also that defendants’ modification of Draper, in order to embody the additional disclosures of Feigelman, Levkoff and Grinnell, was not put into actual commercial use prior to the Vines disclosure. On behalf of Vines, it is contended that the aforegoing modifications of Draper, in order to defeat the validity of Vines, embody a “jump” ahead, so to speak, in the art, which was never conceived until the Vines patent issued.
Plaintiff also contends that a second “jump” is made by defendants before they accomplish what has been accomplished by Vines, and that this “jump” is not disclosed by the prior art, namely, that Draper, when modified as explained above, in order to copy Vines, has no provision for an end flap. It is true that the patents both to Lee and Feigelman do so provide, but both Lee and Feigelman have single thickness of both inner and outer end walls. Lee cuts the flap out of the outer single thickness end wall. Feigelman cuts it out of the inner single thickness end wall. Thus, as is contended on behalf of Vines, defendants make a so-called second “jump” which is not disclosed or suggested in the prior art, by cutting out a flap from the inside single thickness wall of Feigelman. This is designated by plaintiff as the third phase of the evolution of Draper which defendants are forced to make in order to produce a carton corresponding, in basic features of construction, to the Vines carton. It is to be noted that this last combination in the evolution that defendants use to reproduce Vines was never manufactured or used commercially until defendants became aware of the issuance of the Vines patent and copied the structure thereby disclosed. Not until Vines was there any carton that had the support or tie-up between the side and end walls, whereby the former are prevented from spreading and pulling out from the latter'by having the webs on the ends of the side walls made snug, on both their inner and outer surfaces, against a double thickness of both the inner and outer end walls.
The defendants admit infringement. They make no contention that the claims are not responsive to the specifications, or that there are involved in this proceeding any issues respecting the breadth of any of the claims. Furthermore, this is not a case of an infringer who, prior to having seen a plaintiff’s patent, has pieced together what the prior art has disclosed in various patents. But it is a case of an infringer who has done this piecing together only after he has seen the patentee’s invention as disclosed by the patent. The imitation by another who denies invention of a patented device is strong evidence of what the imitator himself thinks of the patented device, and of what should be thought of it generally. See Kurtz v. Belle Hat Lining Co., 2 Cir., 280 F. 277; Black & Decker Mfg. Co. v. Baltimore Truck Tire Service Corp., 4 Cir., 40 F.2d 910; Ackermans v. General Motors Corp., 4 Cir., 202 F.2d 642; Enterprise Mfg. Co. v. Shakespeare Co., 6 Cir., 141 F.2d 916.
The testimony of defendants that they have had difficulty in selling cartons that admittedly infringe the Vines patent has little probative value on the question of the latter’s validity, in view of what has just been stated. Furthermore, such failure appears to have been due, as claimed by counsel for plaintiff, primarily to the fact that defendants have had to sell their carton blanks flat-folded for setting up machines already built for producing a different type of carton, namely, the Standard and Associated cartons. Also, while the absence of any proof of plaintiff’s commercial success with the patented device is one of the factors to be taken into account as bearing upon the patent’s validity, nevertheless, such is not conclusive against validity. It is admitted that the Vines structure has not as yet been produced commercially by plaintiff as a tomato tray, or as a tray or carton for any other perishable commodity. However, it has been manufactured and sold in reduced size as cartons for glass cutters, and the plaintiff company has received numerous applications for licenses under the Vines patent, which have been temporarily refused until the plaintiff company could supply prospective licensees with what it considers completely acceptable machines for setting up the Vines cartons,- — machines to which the plaintiff company is still devoting much attention. The Vines patent was issued less than ten months ago.
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662521-26867 | PER CURIAM.
Defendants appeal their convictions for conspiring to distribute and distributing methamphetamine. John Vanaman, Enrique Ochoa, and Lois Jochinto Orta, challenge the denial of their motions to suppress. Wayne McIntosh contests his sentence. McIntosh, Jon Hambrick, and Orta claim they should have had separate trials. Orta also claims that counts in the indictment were misjoined. Vanaman, Orta, Hambrick, and McIntosh also argue that the evidence was insufficient to convict. We AFFIRM.
I. Background
Vanaman and Hambrick were truck drivers from Northern Kentucky. Mary Worley, a Government witness, met Vana-man in June 1997 through Hambrick. She became Vanaman’s girlfriend and moved in with him at 140 Melinda Lane in Florence, Kentucky. She also became his partner in the drug trade. Vanaman routinely bought methamphetamine from William Gesell, and Ochoa in Riverside, California. Worley went with Vanaman to California in June 1997. On their first joint trip, they brought back two pounds to Kentucky, and distributed it to McIntosh and Hambrick.
In late June 1997, Worley, Vanaman, and McIntosh went to Decatur, Alabama, where they met with Ochoa, Gesell, and Howard Alexander. Ochoa and Gesell agreed to transport methamphetamine from California for Alexander, who redistributed it to Vanaman and Worley. Wor-ley also met Lois Orta at this meeting. Worley testified that Orta helped transport and guard the methamphetamine. Worley and Vanaman returned to Kentucky with one and a half pounds of methamphetamine. They distributed the drugs to Hambrick and McIntosh.
In early July 1997, Worley and Vanaman returned to Alabama. During this trip, Vanaman met with Ochoa, Gesell, McIntosh, and Alexander at a Comfort Inn in Athens, Alabama. Vanaman bought between three and five pounds of methamphetamine. Worley and Vanaman then distributed these drugs to McIntosh and Hambrick back in Kentucky.
Sometime in July, Vanaman convinced Gesell and Ochoa to end their arrangement with Alexander and move to northern Kentucky. Gesell testified that Vanaman told him that he was selling methamphetamine to McIntosh and Hambrick. Vanaman helped Gesell and Ochoa move into a trailer next to him at 144 Melinda Lane.
Also in early July, Vanaman hired Roy Taylor to transport methamphetamine from California. Vanaman, Gesell, and Ochoa agreed to pay Taylor $700 a week. In mid to late July, Taylor went to California to pick up fourteen and a half pounds of methamphetamine. Taylor flew to California and met Ochoa and Orta. Taylor and Orta used Ochoa’s truck to drive the drugs back to northern Kentucky. Taylor was unable to complete the trip, so Vanaman finished the trip with Orta.
Worley helped unload the drugs, which were hidden in a speaker in Ochoa’s truck. The methamphetamine was packaged in pound-size parcels, wrapped in Saran wrap, and covered in duct tape. Worley and Vanaman again distributed the drugs to McIntosh and Hambrick.
On August 6, 1997, McIntosh and Vana-man had a fight and ended their business relationship.
Around August 15, 1997, Taylor went to California to pick up another shipment of methamphetamine. Taylor’s truck broke down and he rented a car.
On August 25, 1997, McIntosh’s roommate, Greg Harney, agreed to wear a wire and contact Vanaman at 140 Melinda Lane. Vanaman was not at home so Har-ney went next door to Gesell’s and Ochoa’s trailer. During a recorded conversation, Gesell and Ochoa laughed that Vanaman thought he was a “big ... narcotics dealer.” They complained about how slow Va-naman had been selling their dope. That same day, officers saw Taylor’s rental car in the driveway.
On August 25 or 26, 1997, Worley saw Gesell and Ochoa unloading methamphetamine from the rental car at 144 Melinda Lane. After it was unloaded, Ochoa took the drugs to the Super 8 Motel. Worley and Vanaman contacted Orta when they needed to obtain methamphetamine from Ochoa and Gesell.
On or about August 27, 1997, fearful that the police were on their trail, Worley and Vanaman hid their drug records in their house and rented a motel room at the Ramada Inn in Florence. Gesell went on vacation. Worley and Vanaman contacted Ochoa for more dope. Orta picked it up and delivered it to Vanaman and Worley, who then distributed two pounds to Ham-brick on August 27 and another two pounds to him on August 28.
On August 28, 1997, Harney contacted Vanaman. During a taped conversation, Harney gave Worley and Vanaman money for two ounces of methamphetamine. Va-naman agreed to deliver the methamphet amine to Hambriek later that night. At the Burns Brothers Truck Stop in Florence, police saw Vanaman hand Harney the drugs.
The next morning, the police obtained search warrants for Room 137 of the Ramada Inn. Room 206 of the Super 8 Motel, 140 Melinda Lane, 144 Melinda Lane, and Hambrick’s house in Walton, Kentucky. Jim Daley, the executive director of the Northern Kentucky Strike Force, testified that these warrants, which were to be executed simultaneously, were part of an ongoing investigation into methamphetamine trafficking in Northern Kentucky. The warrants were based in part on the information received the previous day that thirty to fifty pounds of methamphetamine had arrived in the area. Daley was responsible for coordinating and overseeing this operation. Daley stated that it was important to execute the warrants simultaneously because the officers were worried that some of the dealers, including Vana-man, were armed. They were also concerned that the dealers could warn each other and jeopardize the execution of the warrants and recovery of the contraband.
At approximately 4:00 a.m. on August 29,1997, Detective Scott Lay, a member of the Northern Kentucky Strike Force, took five search warrants to Boone County, Kentucky, District Court Judge Charles Moore in Ft. Mitchell, Kentucky. Lay swore to the accuracy of the information affidavit attached to each warrant, which were identical. Lay inadvertently failed to sign two of the affidavits for the Super 8 Motel and the Ramada Inn, however.
When Lay presented the warrant applications to Judge Moore, he had not yet identified the room numbers for the two hotel rooms. Judge Moore testified that although he had decided to issue them, he would not sign the warrants for the two hotel rooms until the room numbers could be supplied. At 4:20 a.m., Judge Moore executed the remaining search warrants.
Lay told Daley that the judge would not sign the warrants for the two hotel rooms. At that time, Lay and Daley did not realize that Lay had not signed the affidavits for the two hotel rooms. They also thought that Judge Moore had signed the affidavit portion of the warrant applications. Daley also thought that once the room numbers were provided, Judge Moore would sign the warrants.
Daley sent Officer Ben Booher to the judge’s house to wait for this information. When Booher left, he was aware of the Super 8 Motel room number. Meanwhile, efforts were made to coordinate the roughly thirty policemen involved in the investigation. At approximately 7:00 a.m., five search teams assembled near their respective search locations.
At approximately 7:00 a.m., Judge Moore advised Booher that Lay needed to sign the affidavits for the Ramada Inn and Super 8 hotel warrants. Between 7:12 a.m. and 7:15 a.m., Daley told Lay to return to Judge Moore’s house. Daley also told Lay to call as soon as he had signed the affidavits because the search teams could not to wait for Lay to return.
At approximately 7:30 a.m., Lay signed the remaining affidavits in the judge’s presence and supplied the room number on the warrant for the Super 8 Motel. Booher remained outside. Judge Moore did not notarize Lay’s signature until 8:00 a.m., however.
At 7:31 a.m. Lay called Daley and mistakenly advised Daley that the warrants were ready to be executed. Because the room number for the Super 8 Motel had been inserted into the warrant and Lay had signed the affidavit, Daley thought the warrant was complete.
At 7:43 a.m., Detective Ellis, who was part of the team at Hambriek’s residence, gave the “ready to go” signal and each team entered their respective properties. At that time, Daley believed Judge Moore had signed and authorized the Ramada Inn warrant.
At 7:46 a.m., Daley advised the search teams that the subject in Super 8 motel room. Ochoa, was armed. Ochoa was advised of his Miranda rights. Ochoa stated that Orta had rented the room, but had left the day before. Ochoa admitted that the firearm belonged to him. Officers also found twenty-eight pounds of methamphetamine and currency. Lay noted on the warrant that it was executed at 8:05 a.m., which reflected his estimate of the time they had finished securing the room and interviewing Ochoa.
Meanwhile, Booher waited at Judge Moore’s residence. As soon as the signal was given, the Ramada Inn team approached the front desk. The desk clerk stated that Vanaman had not registered but eventually indicated that the customer in Room 137 had paid in cash. Within three to five minutes, Darren Smith and FBI Agent Carrell of the Ramada Team were in front of Room 137. Smith knocked and identified himself. Vanaman opened the door. As soon as he did, Carrell recognized Vanaman and confirmed the room number. The officers entered and secured the room.
At 7:56 a.m., Smith advised Booher of the room number. Booher relayed the number to Judge Moore and watched him sign the warrants for the Super 8 Motel and the Ramada Inn. Judge Moore noted the time as 8:00 a.m.
At 7:57 a.m., Smith asked Booher whether the “paperwork had a signature.” Boo-her responded that “[yjou’re set for to go,” which meant that Judge Moore had signed the warrant and it was ready to be executed. Booher then delivered the Ramada Inn and Super 8 search warrants.
Booher arrived at the Ramada Inn between 8:20 and 8:30 a.m. Smith and the Ramada Inn team did not begin to search until the warrant was delivered. When Smith received the warrant, he noted the time of execution on the warrant as 7:50 a.m. Smith testified that this was the time he knocked on the door and advised Vana-man of the warrant. The officers did not actually begin the search until 8:40 a.m., as reflected on their collection log.
The police found Worley at the Ramada Inn and seized numerous items, including paperwork labeled “Expenses,” which referenced Orta. Several receipts with McIntosh’s, Vanaman’s and Taylor’s names were also found. In the bathroom police discovered drug records, and one-half pound of methamphetamine. The officers recovered $14,000, and a roll of film which showed Worley, Hambrick and Vanaman in the motel room the night before. One picture showed Hambrick stuffing methamphetamine into his boot.
According to Worley and the drug records seized from the Ramada Inn, Ham-brick bought two pounds of methamphetamine on August 28, for which he paid $12,000, leaving a $12,000 balance. Ham-brick later bought another pound, leaving him a $24,000 balance.
Ochoa was found at the Super 8 Motel with a 10 mm semi-automatic weapon, fully loaded and cocked. In the nightstand officers found records referencing drug sales. They found $10,000 and twenty-seven pounds of methamphetamine. Orta had rented the room.
At the same time, officers entered Ochoa’s, Gesell’s, and Orta’s trailer at 144 Melinda Lane. -They found Orta in the living room with a business card from the Super 8 Motel. In Gesell’s room, officers found receipts representing payments for drugs purchased in California. Gesell’s records showed that $30,040 had been sent to California to pay for methamphetamine. Officers also found airline receipts for travel from California to Cincinnati on August 23, 1997, note paper from the Days Inn Motel with Hambrick’s phone numbers and directions to his house. In Ochoa’s room, officers found a 9 mm pistol and a Western Union receipt dated August 22, 1997, reflecting a payment by Gesell to Ochoa for $1,500. Ochoa’s day planner contained notes reflecting various amounts of money and details of travel expenses and drug debts. Many of the numbers recorded in these notes were identical to numbers found on notes in Gesell’s room. Ochoa also had records that reflected payments for Taylor’s trip to California.
At Hambrick’s house, officers found McIntosh’s address and phone number, electronic scales and baggies. Hambrick’s stepson, Tim Carnes, who lived with Ham-brick in the summer of 1997, testified that he saw Hambrick with ten to fifteen thousand dollars. Shortly before the warrant was executed, Carnes overheard Hambrick talking about a large quantity of drugs that was to be delivered. Hambrick also asked Carnes to help dismantle the vehicle that carried the drugs.
Vanaman, Ochoa, and Orta were arrested. Worley was released. Four days later, officers returned to 140 Melinda Lane. Worley had decided to cooperate and gave the officers drug records hidden there. These records, which Worley kept at Va-naman’s direction, detailed methamphetamine purchases and sales, buyers, and payments and debts. These documents also recorded how much money was paid to Gesell and Ochoa for the fourteen and a half pound deal and the amount they owed. The numbers mirrored the numbers in the records found in Gesell’s and Ochoa’s rooms.
According to Worley’s records, Vanaman sold pound quantities of methamphetamine to McIntosh on July 22, 1997 (3 pounds), August 4, 1997 (2 pounds), and August 6, 1997 (1 pound). Vanaman made similar sales to Hambrick on July 22, 1997 (2 pounds), July 27,1997 (1 pound), August 3, 1997 (1 pound), and August 6, 1997 (1 pound).
On September 8, 1997, Officer Brian Kane stopped a 1976 Ford truck driven by Hambrick. Jack Gillen was riding with Hambrick. Gillen testified that when Hambrick was producing his driver’s license, Gillen saw the butt of a handgun on the seat and observed Hambrick move towards it. Officer Kane saw Hambrick do the same. Hambrick consented to a search. Officer Kane found $11,000 on Hambrick and a box containing boots in the truck. Inside one of the boots he discovered two separately wrapped balls of methamphetamine. According to lab tests, this dope was cut with dimesthylsul-phone, the same cutting agent found in the methamphetamine seized from the Ramada Inn and the Super 8 Motel. The officers also found a .38 pistol, and a small quantity of marijuana. Gillen denied owning the methamphetamine, the marijuana, or the gun.
On September 11, 1997, Vanaman, Ochoa, and Orta were charged with conspiring to traffic and trafficking in methamphetamine. On March 11, 1998, a second superseding indictment was returned adding five defendants, including Ham-brick and McIntosh to the conspiracy charge. Vanaman, Ochoa and Orta moved to suppress. A magistrate judge recommended that the motions be denied. The district court adopted the magistrate judge’s recommendations and the motions to suppress were denied. A jury convicted the defendants. At sentencing, McIntosh received one hundred eighty-eight months imprisonment, Vanaman received three hundred sixty months; Ochoa received four hundred months; Orta received life imprisonment; and Hambrick received three hundred twenty-two months.
These consolidated appeals follow.
II. Analysis
A. Validity of Searches
Vanaman, Ochoa, and Orta appeal the denials of their motions to suppress. We review a district court’s legal conclusions de novo. United States v. Spikes, 158 F.3d 913, 922 (6th Cir.1998). Factual findings are reviewed for clear error. Id.
1. 140 Melinda Lane
Vanaman argues that the district court erred in finding sufficient probable cause to search 140 Melinda Lane. Vanaman claims that the facts detailed in Lay’s affidavit do not connect his illegal activities to his private residence. We reject this argument. As the magistrate judge held
1) First, sources informed the police that Defendant Vanaman lived at this address;
2) Independent investigation verified this as Vanaman’s address; his driver’s license showed this address, as did his vehicle registration;
3) Two sources identified a supplier of methamphetamine, and independent investigation showed the supplier’s vehicle at the 140 Melinda Lane address on at least one occasion;
4) The affiant noted that “routine practice” for drug traffickers is to have “telephone numbers, records of sales (coded and not coded), banking records, various types of reciepts [sic], various types of paraphernalia and case proceeds ... in their residence”; and,
5) The affiant finally noted that he had learned from one source that “Vanaman keeps detailed records of his involvement with the sale and distribution of methamphetamine at his residence.”
Moreover, as the magistrate judge further noted, the affidavit indicated that two sources were “ ‘credible and reliable confidential sources.’ ” He further stated that, although the two sources did not know each other, “ ‘their information was essentially the same.’ ” The affiant also conducted an independent investigation, thereby buttressing the information provided by the unidentified confidential informants. See United States v. King, 227 F.3d 732, 742 (6th Cir.2000) (finding probable cause where the informant’s tip was corroborated by the affiant’s own investigation (citing Illinois v. Gates, 462 U.S. 213, 244, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983)). Vanaman’s reliance on United States v. Leake, 998 F.2d 1359 (6th Cir.1993), is therefore misplaced. Cf. United States v. Leake, 998 F.2d 1359, 1365 (6th Cir.1993) (upholding a district court’s finding of no probable cause where the affidavit was based on an anonymous tip, and police investigation revealed nothing suspicious).
In short, the affidavit supplied probable cause to support the search warrant. The district court did not err in concluding that, under the totality of the circumstances, there was a fair probability that contraband or evidence of a crime would be found at Vanaman’s home. See Gates, 462 U.S. at 238, 103 S.Ct. 2317. See generally United States v. Allen, 211 F.3d 970, 975 (6th Cir.) (en banc) (“The affidavit is judged on the adequacy of what it does contain, not on what it lacks, or on what a critic might say should have been added.”), cert. denied, — U.S. —, 121 S.Ct. 251, 148 L.Ed.2d 181 (2000).
2. Ramada Inn
Vanaman also contends that the police began searching his motel room at the Ramada Inn before the warrant had been executed. In support, Vanaman points to the notations on the warrant indicated that Judge Moore signed it at 8:00 a.m., while Smith executed it at 7:50 a.m., ten minutes earlier. Vanaman therefore argues that the search of Room 137 is valid only if the Government can establish exigent circumstances. Vanaman claims that, although the Government had a reasonable belief that a third party was inside Room 137, it lacked a reasonable belief that the loss or destruction of evidence was imminent. See United States v. Gaitan-Acevedo, 148 F.3d 577, 585 (6th Cir.1998).
The general rule is that warrant-less entries are presumptively unreasonable. Id. However, a warrantless entry to prevent the destruction of evidence is justified if the Government demonstrates (1) a reasonable belief that third parties are inside the dwelling; and (2) a reasonable belief that loss or destruction of evidence is imminent. Id.; see also United States v. Ukomadu, 236 F.3d 333, 337 (6th Cir.2001); United States v. Sangineto-Miranda, 859 F.2d 1501, 1512 (6th Cir.1988).
Vanaman concedes that the police had a reasonable belief that he was staying at the Ramada Inn because the Strike Force had kept him under surveillance throughout the night of August 28-29, 1997. He argues that the second prong is not met. Specifically, Vanaman notes that after Smith found out that the occupant in Room 137 paid in cash, he did not attempt to prevent the clerk from calling Vanaman, despite the fact that the officers suspected that someone at the front desk had ties to Vanaman.
The motion was properly denied as to the search of Room 137. The initial entry into Vanaman’s motel room and protective sweep were justified by exigent circumstances. Daley testified that simultaneity was essential to prevent the suspects at one location from alerting targets at other spots who could then destroy the evidence. The officers also knew that some of the suspects, including Vanaman, carried a firearm, and had used methamphetamine, which causes paranoia.
Further, when the “go” signal was given the police believed that all the warrants were in order and that only the Ramada Inn room number was missing. Upon entering the hotel lobby, they quickly identified Vanaman’s room and announced their presence. Once Vanaman was aware of their presence, the officers had to do a protective sweep and prevent any evidence from being destroyed.
In short, the officers had a reasonable belief that Vanaman was in the room, and that he would destroy the evidence once he knew the officers were there.
As the magistrate judge noted, the circumstances here were unique. Although Judge Moore had already decided that probable cause existed to search, he would not sign the search warrant until he had a room number. Thus, to obtain the room number, the officers had to knock on the door of Room 137 (which they suspected was Vanaman’s room because it was paid for in cash), and confirm that Vanaman was inside.
Furthermore, the officers did not actually search Vanaman’s room until after they had the search warrant in hand. The uncontested testimony of the officers showed that they did not search the room before the warrant was signed. The evidence log confirms that the first item was not seized until 8:40 a.m.. Although Smith wrote 7:50 a.m. as the time of execution (and ten minutes before Judge Moore signed the warrant), he testified that it was actually the time the officers knocked on the door. Vanaman offered no testimony to refute this. Thus, the evidence gathered as a result of the Ramada Room search was properly admitted.
Even if the evidence was illegally gathered at 7:50 a.m., it did not need to be suppressed because it would have been inevitably discovered when the signed warrant arrived shortly thereafter. See United States v. Leake, 95 F.3d 409, 412 (6th Cir.1996).
For the first time on appeal, Orta also challenges the search at the Ramada Inn. Even if he had not waived the argument, we would not entertain it, because he lacks standing or a privacy right. See Rakas v. Illinois, 439 U.S. 128, 133-34, 99 S.Ct. 421, 58 L.Ed.2d 387 (1978). The room was not registered in his name and there was no evidence that he stayed there.
3. Super 8 Motel
Ochoa and Orta claim that their Fourth Amendment rights were violated when the officers executed the warrant. Although the warrant had not been signed when the officers entered the motel room, the officers had a reasonable belief that it had been signed. As the magistrate judge held:
Certainly the belief of the officers in this case fits within the language of the good-faith exception established in [U.S. v.] Leon, 468 U.S. [897]at 917[104 S.Ct. 3405, 82 L.Ed.2d 677 (1984)], in that the officers were acting “in the objectively reasonable belief that their conduct did not violate the Fourth Amendment.” In Leon, the warrant under which police were operating was later found to be defective; here, the officers were operating under the belief that a warrant had been signed when it had not. Although the circumstances differ somewhat, the reasons behind the exception apply. No deterrent effect can be obtained when the police were acting under objectively reasonable belief that their behavior did not violate the defendant’s Fourth Amendment rights. See id. As discussed above, the officers here did have the necessary objectively reasonable belief that Judge Moore had signed the warrant.
(J.A. 115-16.)
The officers had a good faith belief that Judge Moore had signed the Super 8 motel warrant at 7:30 a.m. when they entered the room at 7:46 a.m. Lay returned to the Judge’s residence at 7:30 a.m., signed the affidavit, and wrote the room number on the face of the warrant. Lay then told Daley the paperwork had been signed. Daley testified that he thought that the judge had signed the warrant. Thus, although the officers’ initial entry of the room was illegal, it is undisputed that the warrant was signed within fifteen minutes of the illegal entry. As the magistrate judge found, the officers’ belief was reasonable under the circumstances.
In addition, the evidence seized from the Super 8 Motel room was admissible under the inevitable discovery doctrine. See Murray v. United States, 487 U.S. 533, 537, 108 S.Ct. 2529, 101 L.Ed.2d 472 (1988) (holding that evidence discovered during a police officer’s illegal search need not be suppressed if that evidence is also discovered during a later search pursuant to a valid warrant that is wholly independent of the illegal search); United States v. Kennedy, 61 F.3d 494, 497-98 (6th Cir.1995); Leake, 95 F.3d at 412. Here, it is undisputed that the warrant was signed fifteen minutes after the officers entered the room. The warrant is based upon information wholly independent of anything ob served during the initial entry. As the magistrate judge observed: “Where, as here, the mechanism to obtain the search warrant was begun before the alleged police misconduct, and the search warrant was obtained without the use of any information obtained through the misconduct, no deterrence rationale supports the exclusion of the evidence.”
B. Sentencing Reduction
McIntosh argues that the district court erred in denying him a sentencing “minor role” reduction. Under § 3B1.2 of the Sentencing Guidelines, a “minor participant” is “any participant who is less culpable than most other participants, but whose role could not be described as minimal.” U.S. Sentencing Guidelines Manual, 3B1.2(b), cmt. n. 3 (1998). This determination is “heavily dependent upon the facts of the particular case.” U.S.S.G. § 3B1.2, cmt. background (1998).
Although McIntosh was charged with only a single crime, it was conspiracy, and the proof at trial showed that he was buying pound quantities of methamphetamine from Yanaman as early as mid-June 1997. Further, the record established that McIntosh and Hambrick were the two main methamphetamine distributors in the Northern Kentucky area during this conspiracy. McIntosh sold the methamphetamine for profit. McIntosh also accompanied Vanaman and Worley on a buying trip to Alabama. This evidence clearly shows that he played an integral role in the overall conspiracy. Furthermore, a buyer and seller of drugs for profit is not a minor player. See, e.g., United States v. Malisz-ewski, 161 F.3d 992, 1022 (6th Cir.1998) (holding that the defendant was not entitled to a minor role reduction when “[s]he did what everyone else did: bought and sold [drugs]”).
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247761-15192 | ORDER OF REMAND
GOLD, District Judge.
Montgomery & Larmoyeux, a Florida law firm, asks the Court to deny removal, and remand this case to the Fifteenth Judicial Circuit, in and for Palm Beach County, Florida, for lack of subject -matter jurisdiction. The issue before the Court is whether plaintiffs claim against defendant Michael Maher, a citizen of Florida, is so utterly devoid of merit as to be considered frivolous.
I. FACTS
In February, 1995, the State of Florida and thirteen private law firms entered into an agreement to prosecute a claim against several tobacco companies to recover medicaid funds expended by the State for the treatment of alleged smoking-related illnesses suffered by Florida medicaid recipients. The thirteen law firms and the State executed a contingency-fee agreement entitled “Standard contract — State of Florida, Agency for Health Care Administration.” The introductory paragraph states that the Con tract is entered into by the State of Florida and the “independent law firms” identified on the signature pages, hereinafter referred to as the “Provider or Providers.” Section II, paragraph B, provides “This contract may be terminated by the State of Florida or Provider, or individual Providers may unilaterally withdraw, upon no less than thirty (30) calendar days notice.... ” The law firm of Montgomery & Larmoyeux, as well as the law firm of defendant, Michael Maher, signed the contingency-fee agreement. Defendant Maher and the plaintiff, Montgomery & Larmoyeux, (hereinafter Montgomery) are both Florida citizens.
On August 25,1997, the State and some of the tobacco companies entered into a settlement agreement. Subsequently, a dispute arose between the State and some of the independent law firms, including Montgomery, over the amount of attorneys’ fees owed to the law firms. As a result of the fee dispute, there are several lawsuits and at least six appeals related to the attorney-fee issue presently pending in state court. Montgomery filed this lawsuit against Mahler, Philip Morris Inc., and RJ Reynolds Tobacco Company in state court alleging claims for tortious interference with a contract and/or business relationship. Philip Morris Inc. and RJ Reynolds Tobacco Company removed the case to federal court. Removal is grounded on diversity jurisdiction.
Plaintiff claims the ease should be remanded to state court because defendant Mahler and the plaintiff are Florida citizens, thus there is no diversity jurisdiction. Philip Morris Inc. and RJ Reynolds Tobacco Company argue that Maher’s citizenship should not deprive them of diversity jurisdiction. Relying on the doctrine of fraudulent joinder, defendants argue that the case should not be remanded to state court because there is no possibility that plaintiff can establish a cause of action against Maher for tortious interference with a contract or advantageous business relationship because Mahler was a party to the contract allegedly interfered with. Under Florida law, the general rule is . that no such action may be maintained against a party to the contract. See Ethyl Corp. v. Balter, 386 So.2d 1220 (Fla. 3d DCA 1980). But the burden on the party asserting fraudulent joinder is a heavy one. Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir.1997). If there is even a possibility that a state court would find that the complaint states a cause of action against the resident defendant, the federal court must find that joinder was proper and remand the case to state court. Id. Thus the issue before the Court is a narrow one: whether state law might recognize a cause of action for tortious interference in light of the factual circumstances of the case. Crowe, 113 F.3d at 1541-42.
II. STANDARD FOR REMOVAL
Philip Morris Inc. and RJ Reynolds Tobacco Company’s right to remove this case to federal court is conferred by statute. Gould v. Mutual Life Ins. Co., 790 F.2d 769 (9th Cir.1986). Construction of removal statutes is governed by federal law. Brown v. Demco, Inc., 792 F.2d 478 (5th Cir.1986). Federal courts have uniformly held that removal statutes must be strictly construed against removal in order to “prevent encroachment on the state court’s right to decide cases properly brought before it.” Harris v. Huffco Petroleum Corp., 633 F.Supp. 250, 253 (S.D.Ala.1986). Strict construction is particularly important in cases removed on diversity grounds. Id.
In accordance with the law respecting the rights of state courts, a party seeking to remove a case from state court on the basis of fraudulent joinder must show: (1) that there is no possibility that plaintiff could prove a cause of action against the resident defendant; or (2) that the plaintiff fraudulently plead jurisdictional facts in order to subject that resident defendant to the jurisdiction of-the state court. Crowe, 113 F.3d at 1538 (citing Cabalceta v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir.1989)). In this case, defendants rely on the first theory. To determine whether, the case should be remanded, the district court must evaluate the factual allegations in the light most favorable to the plaintiff and must resolve any uncertainties about state substantive law in favor of the plaintiff. Crowe, 113 F.3d at 1538. The court must be certain it has jurisdiction before it can consider a case on its merits. Therefore, a plaintiff need not show that he can survive a motion for summary judgment; the standard is much lighter. In deciding whether a case should be remanded for improper joinder the Court’s role is “limited to checking for obviously fraudulent or frivolous claims.” Crowe, 113 F.3d at 1542. If there is even a possibility that a state court would find that plaintiff has stated a cause of action, the federal court must find that joinder was proper and remand the case to state court. Id. at 1538.
III. PLAINTIFF’S ACTION AGAINST MAHLER IS NOT FRIVOLOUS
In this case, the Court cannot say that plaintiffs claim is obviously fraudulent or frivolous. “Frivolous pleas are those which are so clearly and palpably bad as- to require no argument to convince the court thereof, and which would be pronounced by the court indicative of bad faith in the pleader on mere inspection.” Black’s Law Dictionary, 796 (4th ed.1968). Under Florida law, a lawsuit is frivolous only if there is a complete lack of justiciable issue which renders the action completely untenable. Bronson v. Bronson, 685 So.2d 994, 995 (Fla. 5th DCA 1997); section 57.105 Fla.Stat. The Court also recognizes that the Florida Rules of Professional Conduct provide that it is not “frivolous” for an attorney to seek in good faith an extension, reversal or modification of existing law. Rule 4-3.1.
Philip Morris Inc. and RJ Reynolds Tobacco Company argue that it is clear under Florida law that a claim for tortious interference with a contract or advantageous business relationship cannot be maintained against Maher because he is a party to the contract and the business relationship with which he is accused of interfering. In support of this proposition, defendants cite a number of Florida cases from the intermediate appellate courts which stand for the general proposition that a cause of action for tortious interference cannot exist against one who is himself a party to the contract. Cedar Hills Props, v. Eastern Fed. Corp., 575 So.2d 673 (Fla. 1st DCA 1991); Genet Co. v. Annheuser-Busch, 498 So.2d 683, 684 (Fla. 3d DCA 1986); United of Omaha Life Ins. Co. v. Nob Hill Assoc., 450 So.2d 536, 539 (Fla. 3d DCA 1984); Buckner v. Lower Florida Keys Hosp. Distr., 403 So.2d 1025, 1028 (Fla. 3d DCA 1981); Ethyl Corp. v. Balter, 386 So.2d 1220, 1224 (Fla. 3d DCA 1980); Mitchell v. Dade County School Board, 566 So.2d 2 (Fla. 3d DCA 1980).
But Montgomery argues, persuasively, that the cases cited by defendants are factually distinguishable from this case. Each of those cases involved a plaintiff who was suing the party on the opposite side of the contract or business relationship. In contrast, Montgomery and Maher signed the contingency-' fee contract as independent law firms. Montgomery and Maher were on the same side of the contingency-fee agreement. Significantly, plaintiff argues that as parties on the same side of the contract, neither law firm was the source of the other’s business opportunity and neither law firm was liable for the other’s breach. Cf. Hall v. Burger King Corp., 912 F.Supp. 1509, 1538 (S.D.Fla.1995) (finding that Hall had no claim against Burger King because Burger King itself was “the source of the business opportunity [it] allegedly interfered -with.”) According to plaintiff, a different rule applies where, as here, the-party alleging interference with the contract is on the same side as the party it is suing.
At the hearing on Plaintiff’s Motion for Remand, the defendants conceded that they could find only one Florida case dealing with tortious interference in which the parties were apparently on the same side of the contract, citing Schramek v. Jones, 161 F.R.D. 119 (M.D.Fla.1995). In Schramek the plaintiffs sued Paula Jones alleging that she “maliciously and tortiously interfered with an alleged contract between the President and the citizens of the United States for effective governance.” Id. at 121. The issue in Schramek was whether Rule 11 sanctions should be imposed against the pro se plaintiffs where the lawsuit was filed solely to punish Jones for exercising her right to file a tort action. In reaching its decision with respect to the imposition of sanctions, the court included a brief one-paragraph statement of the general rule that á party to a contract cannot be sued for tortious interference and, because Paula Jones would have been a party to any alleged contract the citizens of the United States had with the president, she was immune from suit. Id. at 121. The Court finds that Schramek is not persuasive authority for the defendants’ position. First, the facts are clearly distinguishable; Schramek involved a contract which allegedly existed between the President of the United States and its citizens. It is not clear from the court’s opinion which side of the alleged contract the parties in the tortious interference case would have been on or what their obligations would have been under the contract. Here the existence of a contract is not in dispute; it is a concrete contingent-fee contract which clearly sets forth the parties’ rights and obligations. Second, the issue whether parties on the same side of a contract could sue for tortious interference was not addressed by the court. In fact there was no discussion or analysis of any kind concerning the tort of tortious interference. For these reasons, the case is not persuasive support for the defendants’ position.
After extensive research, neither of the parties to this case, nor this Court, have been able to find a - Florida case addressing a factual situation similar to the one presented here. Because no Florida court has decided whether parties on the same side of a contract may sue for tortious interference, it cannot be said that plaintiff’s claim against Mahler is frivolous. Furthermore, as explained below, plaintiff’s position has support from the Seventh Circuit.
In support of its argument that it can state a claim for tortious interference against Mahler, Montgomery cites the Florida ease of Williams v. Goldsmith, 619 So.2d 330 (Fla. 3d DCA 1993), in which one partner in a law firm sued this former partner for interference with a contract to which both lawyers were parties, on the same side. Although the issue whether one lawyer who was party to a contract could maintain an action for tortious interference with a contract against another lawyer who was on the same side of the contract, was not specifically decided in Williams, the Seventh Circuit recently addressed this issue in Sufrin v. Hosier, 128 F.3d 594 (7th Cir.1997).
Sufrin and Hosier were law partners who practiced together between 1984 and 1989. In 1986, the firm was hired to represent Telesonics Systems Inc. in a patent claim on a contingent-fee basis. Hosier negotiated a settlement of the claim. Sufrin was to receive 1 percent of the settlement. The firm broke up and a dispute arose between the lawyers over Suftin’s fee. Sufran filed an action for tortious interference with a contract. The court determined that Sufrin was a party to the contract with Telesonics with which Hosier had interfered. Hosier argued that under Illinois law, it is impossible to interfere tortiously with a contract to which you are a party. The court agreed that as a general rule, if you break a contract, you cannot be sued for tortiously interfering with that contract. The injured party is limited to an action for breach of contract. If that were not the case, every breach of contract would be turned into a tort action for interference with a contract. According to the Seventh Circuit, however, the general rule does not apply where one lawyer is suing another lawyer who was party to the contract allegedly interfered with.
This case is different. Telesonics had independent contractual obligations to Hosier and to Sufrin, and Hosier had no greater right to interfere with the obligation to Sufrin than he would have had if that obligation had been set forth on a separate piece of paper.
Sufrin v. Hosier, 128 F.3d at 598. Thus a reasonable argument could be made that in this case, as in Sufrin, the client, State of Florida, had independent obligations to each of the law firms with which it had contracted. Likewise, under the terms of the contract, each law firm had independent obligations to the State. Thus the contractual obligations ran from each law firm to the client and from the client to each law firm. No contractual obligations existed between the independent law firms. Unlike parties on opposite sides of a contract, parties on the same side of a contract do not have a breach of contract remedy for controversies arising between them. Thus, the rationale for not permitting a tortious interference cause of action between parties on the opposite side of the contract does not apply to parties who share the same side and the same obligations.
Because no Florida court has addressed the viability of plaintiffs claim against Maher under the factual circumstances of this case, the Court finds that it is not unreasonable for the plaintiff to argue, as it did at the hearing on this motion, that the State’s obligation to pay a contingency fee to each law firm was the same as it would have been had the State entered into separate contracts with each law firm, and, therefore, an individual law firm had no more right to interfere with the State’s obligation to another law firm than it would have had if the agreements were separately made. For this reason, there is a possibility that Florida law may recognize a cause of action for this alleged tort.
By this ruling the Court is not stating that the plaintiff has a strong chance of succeeding on the merits. It finds merely that plaintiffs argument is not baseless or frivolous. Accordingly, the Court lacks jurisdiction to hear the case. Plaintiffs Motion for Remand is GRANTED.
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7654334-9619 | MEMORANDUM OF DECISION
O’TOOLE, District Judge.
The plaintiff Leejay, Inc. (“Leejay”) has brought this action against the defendant Bed Bath & Beyond, Inc. (“Bed Bath & Beyond”), claiming that Bed Bath & Beyond is infringing its trademark and misleading potential customers into thinking that its re cently opened store in Burlington, Massachusetts, is affiliated with Leejay’s “Bed & Bath” stores. The complaint asserts claims under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), the Massachusetts trademark and unfair competition statutes, Mass. Gen.L. chs. 93A and 110B, and the common law of trademark infringement. Leejay has moved for a preliminary injunction to enjoin Bed Bath & Beyond from using the name “BB & BEYOND: Bed, Bath & Housewares” for its Burlington store. For the reasons set forth below, the motion is denied.
I.
Since 1971, Leejay has operated retail stores in Massachusetts and other New England states under the name “Bed & Bath.” Currently, there are thirty-six “Bed & Bath” stores in New England. The stores principally sell “domestics merchandise,” such as sheets, towels, blankets, comforters, pillows, table linens, curtains and drapes, and bathroom accessories. Complaint ¶ 1. Leejay employs a mark having a distinctive presentation of the words “BED & BATH” in blue rounded block letters. In 1980, Leejay registered its “Bed & Bath” trademark in Massachusetts, New Hampshire, Rhode Island, and subsequently in Vermont. Rogers Aff. ¶ ll. In addition to obtaining these state registrations, Leejay has attempted to defend against use by competitors of marks confusingly similar to its “Bed & Bath” mark. Id. ¶ 12.
For many years as well, the defendant Bed Bath & Beyond has operated retail stores that sell a similar range of domestics merchandise throughout the United States. The stores operated under the name “bed n bath.” In 1985, Bed Bath & Beyond adopted a “superstore” format, offering a wider range of domestics merchandise, furnishings and housewares in addition to bed and bath items. Consistent with the new format and expanded offerings, in 1987 the defendant changed its store names to BED BATH & BEYOND. It subsequently obtained four service mark registrations with the United States Patent and Trademark Office covering variations of its BED BATH & BEYOND mark. Eisenberg Decl. ¶ 3, Ex. I. Presently, Bed Bath & Beyond operates eighty-six stores in twenty-two different states. Until 1994, it had no store in Massachusetts.
In November 1994, Bed Bath & Beyond opened a store in Worcester, Massachusetts. To avoid any potential dispute with Leejay, Bed Bath & Beyond decided to use the store name “BB & BEYOND.” However, its shopping bags, shopping carts and hand baskets also bore the phrase “A Bed Bath & Beyond Store.” Complaint ¶ 21. Leejay objected to the use of the words “Bed Bath & Beyond” on the ground of their similarity to Leejay’s “Bed & Bath” mark. After negotiations, Bed Bath & Beyond decided “that the matter [was] simply not worth litigating” and agreed to discontinue all uses of the phrase “Bed Bath & Beyond” in its Worcester store. Eisenberg Deck, Ex. L. Bed Bath & Beyond further agreed not to use the name BED BATH & BEYOND in juxtaposition with the store name BB & BEYOND. Id., Ex. M.
In April 1996, Bed Bath & Beyond opened a store in Burlington, Massachusetts. The store’s exterior features a large sign in bold red capital letters with the store title “BB & BEYOND.” A smaller sign, located immediately below the storefront sign, reads “Bed Bath & Housewares.” Doherty Deck, Ex. D. Leejay complained to Bed Bath & Beyond about the use of the words “Bed” and “Bath” below the words “BB & Beyond” on the exterior sign of the Burlington store. Eisen-berg -Deck, Ex. P. Leejay asserts that such use of the words “bed” and “bath” invites potential customers to read “BB & Beyond” as simply an abbreviation for “Bed Bath & Beyond” and inevitably leads to confusion damaging to Leejay’s business goodwill.
II.
A party seeking a preliminary injunction must establish that its claims are likely to succeed on the merits; that the movant will suffer irreparable harm if the injunction is not granted; that the movant’s injury out weighs any injury the nonmovant would suffer as a result of the injunction; and that the public interest would not be adversely affected by the granting of an injunction. Keds Corp. v. Renee Int’l Trading Corp., 888 F.2d 215, 220 (1st Cir.1989); Planned Parenthood League of Mass. v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981). “In a trademark case, the key issue is the likelihood of success on the merits because the other decisions will flow from that ruling.” Keds Corp., 888 F.2d at 220; see also Trak, Inc. v. Benner Ski KG, 475 F.Supp. 1076, 1078 (D.Mass.1979).
In order to demonstrate a likelihood of success on the merits, Leejay must establish that it owns a mark entitled to protection, and that Bed Bath & Beyond has used or appropriated its trademark in a manner likely to cause consumer confusion. See Boston Beer Co. v. Slesar Bros. Brewing Co., 9 F.3d 175, 180 (1st Cir.1993); Panel v. Reebok Int’l, Ltd., 774 F.Supp. 49, 51-56 (D.Mass.1990).
Whether a particular term' is entitled to trademark protection depends on the classification of that term along the spectrum of “distinctiveness.” Boston Beer, 9 F.3d at 180. In ascending order of eligibility for protection, marks can be categorized as generic, as descriptive, or as suggestive, arbitrary or fanciful. Id. at 180. Terms classified as generic “have passed into common usage to identify a product, ... and can never be protected.” Id. A descriptive mark conveys an immediate idea of the ingredients, qualities, or characteristics of the article or service to which it refers. Id.; see also Calamari Fisheries, Inc. v. The Village Catch, Inc., 698 F.Supp. 994, 1006-07 (D.Mass.1988). Descriptive marks are entitled to protection only upon a showing that they have acquired “secondary meaning.” See Boston Beer, 9 F.3d at 180; Calamari Fisheries, 698 F.Supp. at 1007.
The defendant’s submissions reveal that “bed and bath” is a phrase commonly used to refer to a particular category of items generally sold together either in a separate specialty store or in a specific section of a department store (often denominated the “bed and bath department”). See Chhugani Deck, Ex. U. Bed Bath & Beyond has submitted a number of examples of retail stores’ advertisements where the phrase “bed and bath” or “bed & bath” is used to refer to bedroom and bathroom items. See Eisenberg Deck ¶ 9, Ex. Kl-14. For instance, a January 31, 1996 Boston Globe advertisement for Filene’s features a headline which announces a discount of “20%-50% OFF ENTIRE STOCK OF BED & BATH.” Id., Ex. K6. Similarly, a March 19, 1995, Jordan Marsh advertisement announces a discount of “25%-50% off/Everything for bed & bath.” Id., Ex. K7. The Jordan Marsh ad lists a series of articles which fall within the “bed & bath” category: towels, sheets, comforters, pillows — not coincidentally, the same items sold in Leejay’s “Bed & Bath” stores. It is quite clear that the phrase “bed and bath” is widely used to identify a category of bedroom and bathroom items carried by retail stores.
There is some question whether the phrase is more properly characterized as a “generic” or a “descriptive” term. Bed Bath & Beyond has made a strong argument that it amounts to a generic term for a class of retail merchandise, much like “hardware.” See Chhu-gani Deck, Ex.U. If it is a generic phrase, it is not entitled to trademark protection. Park ’N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 194, 105 S.Ct. 658, 661-62, 83 L.Ed.2d 582 (1985).
Bed Bath & Beyond says that Lee-jay’s unsuccessful attempts to obtain federal registration of its mark in the past indicate that it is unprotectable. See Kennedy Deck ¶2. An abandoned trademark application, however, does not warrant the negative inference suggested by Bed Bath & Beyond. See Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 816 (1st Cir.1987); Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366, 372 (1st Cir.1980). Nonetheless, Leejay’s federal claim is based upon § 43(a) of the Lanham Act, pertaining to unregistered trademarks. 15 U.S.C. § 1125(a). The general principles qualifying a mark for registration under § 2 of the Lanham Act are applicable in determining whether an unregistered mark is entitled to protection under § 43(a). See Boston Beer, 9 F.3d at 180. So it is appropriate to consider whether the mark would qualify for registration.
Leejay uses the common phrase “bed & bath” in a distinctive logo. It is not the entire stylized presentation that is at issue here, however, because Bed Bath & Beyond does not mimic or copy the stylized logo. Rather, Leejay asserts that the defendant infringes by using the words “bed” and “bath” themselves in its store names and paraphernalia.
If they are just a generic term for a class of goods, the words themselves are not entitled to trademark protection. See In re K-T Zoe Furniture, Inc., 16 F.3d 390 (Fed. Cir.1994). In that case, K-T Zoe, a manufacturer and seller of custom upholstered furniture, applied for registration of a service mark consisting of the stylized presentation of the words “the sofa & chair company.” The Federal Circuit held that applicant had been properly required to limit the claim to the stylized presentation and to disclaim the phrase “the sofa & chair company” itself. The court noted that “a distinctive configuration of words does not of itself impart registrability to the words standing alone.” Id., at 394.
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3854070-7069 | OPINION
McKEE, Circuit Judge.
Wilbert Williams appeals the district court’s dismissal of his complaint pursuant to the abstention principles articulated in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), and its progeny. Williams filed the complaint against the Virgin Islands Board of Medical Examiners and three of its members (hereinafter the “Board”), after the Board suspended his license to practice medicine. For the reasons that follow, we will affirm the district court’s decision to abstain pursuant to Younger.
I.
Because we write primarily for the parties who are familiar with the underlying facts and procedural history, we need not recite either here.
“Abstention is a judicially created doctrine under which a federal court will decline to exercise its jurisdiction so that a state court or agency will have the opportunity to decide the matters at issue.” Kentucky West Virginia Gas Co. v. Pennsylvania Public Utility Commission, 791 F.2d 1111, 1114 (3d Cir.1986) (citation omitted). The doctrine is rooted in concerns for the maintenance of the federal system and “represents an extraordinary and narrow exception to the ‘virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.’ ” Id. (quoting Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976)). Consequently, abstention is justified “only in the exceptional circumstances where the order to the parties to repair to the State court would clearly serve an important countervailing interest.” Id. (citation omitted). In other words, “[ajbstention from the exercise of federal jurisdiction is appropriate only under certain limited circumstances.” Chez Sez III Corp. v. Township of Union, 945 F.2d 628, 630 (3d Cir.1991) (citation omitted). Those circumstances “are loosely gathered under discrete concepts of abstention named after leading Supreme Court cases,” Chiropractic America v. Lavecchia, 180 F.3d 99, 103 (3d Cir.1999), viz., “Pullman” (Railroad Comm’n of Texas v. Pullman, 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941)), “Burford” (Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943)), “Younger” (Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971)), and “Colorado River” (Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976)). As we have noted, this appeal involves Younger abstention.
In Younger, the district court enjoined the Los Angeles County District Attorney from prosecuting the defendant under a eonstitutionally-suspect state statute. The Supreme Court reversed, finding the injunction “a violation of the national policy forbidding federal courts [from] staying] or enjoin[ing] pending state court proceedings except under special circumstances.” Younger, 401 U.S. at 41, 91 S.Ct. 746. “Although Younger involved a state court criminal proceeding, the national policy against enjoining pending state court proceedings has since been extended to noncriminal proceedings,” including administrative proceedings. Zahl v. Harper, 282 F.3d 204, 208 (3d Cir.2002) (citations omitted). The Supreme Court has set out a three-part test for determining whether Younger abstention is appropriate. “Abstention is appropriate when: (1) there is a pending state judicial proceeding; (2) the proceeding implicates important state interests; and (3) the state proceeding affords an adequate opportunity to raise constitutional challenges.” Id. at 209 (citing Middlesex County Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 423, 432, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982)). However, even if the Younger test is met, abstention is not appropriate in all circumstances. A federal court may interfere with a state proceeding “in certain exceptional circumstances — where irreparable injury is ‘both great and immediate,’ where the state law is ‘flagrantly and patently violative of express constitutional prohibitions,’ or where there is a showing of ‘bad faith, harassment, or ... other unusual circumstances that would call for equitable relief.’ ” Mitchum v. Foster, 407 U.S. 225, 230, 92 S.Ct. 2151, 32 L.Ed.2d 705 (1972) (quoting Younger, 401 U.S. at 46-54, 91 S.Ct. 746).
II.
In holding that the Younger test was met, the district court found: (1) that the Board’s proceedings are ongoing and judicial in nature; (2) that the Board has a “significant interest ... in regulating the practice of medicine with an eye toward improving the public health;” and (3) that Williams has an adequate opportunity to raise his constitutional claims because he can assert his due process claims during the territorial forum’s review of the Board’s decision. 2008 WL 5142181 at *3-5. The district court also rejected William’s contention that abstention is not appropriate under the Younger bad faith and extraordinary circumstances exceptions. Id. at *5-10.
In his appeal, Williams does not challenge the district court’s holding that the Younger test was met. Instead, he contends that there are extraordinary circumstances present in his case that make abstention inappropriate. The extraordinary circumstances exception is part of the Younger “bad faith, harassment or any other unusual circumstance that would call for equitable relief’ exception. Diamond “D” Construction Corp. v. McGowan, 282 F.3d 191, 201 (2nd Cir.2002). In Kugler v. Helfant, 421 U.S. 117, 95 S.Ct. 1524, 44 L.Ed.2d 15 (1975), the Supreme Court explained the extraordinary circumstances exception:
Only if “extraordinary circumstances” render the state court incapable of fairly and fully adjudicating the federal issues before it, can there be any relaxation of the deference to be afforded to the state criminal process. The very nature of “extraordinary circumstances,” of course, makes it impossible to anticipate and define every situation that might create a sufficient threat of such great, immediate, and irreparable injury as to warrant intervention in state criminal proceedings. But whatever else is required, such circumstances must be “extraordinary” in the sense of creating an extraordinarily pressing need for immediate federal equitable relief, not merely in the sense of presenting a highly unusual factual situation.
Id. at 124-25, 95 S.Ct. 1524 (footnote omitted). Although Kugler spoke in the context of criminal prosecutions, the same standard applies in the civil context. Moore v. Sims, 442 U.S. 415, 433, 99 S.Ct. 2371, 60 L.Ed.2d 994 (1979).
As the Second Circuit noted in Diamond “D”, the Supreme Court has found extraordinary circumstances present on only two occasions: (1) “when a state statute is flagrantly and patently violative of express constitutional prohibitions in every clause, sentence and paragraph, and in whatever manner and against whomever an effort might be made to apply it”; and (2) “when the state administrative agency was incompetent by reason of bias to adjudicate the issues pending before it.” 282 F.3d at 201 (citations and internal quotations omitted).
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4360473-21237 | ORDER
CARLOS E. MENDOZA, District Judge.
THIS CAUSE is before the Court on Defendants’ — World Outreach Church of Murfreesboro, Tennessee, Inc. (“World Outreach”), Intend Ministries (“Intend”), Phillip Jackson, and G. Allen Jackson (collectively, “Defendants”) — Motion to Dis miss (Doc. 22), wherein Defendants seek to dismiss this case for lack of personal jurisdiction. Plaintiff, Mighty Men of God, Inc., has filed a Response. (Doc. 31). For the reasons set forth below, Defendants’ Motion to Dismiss will be denied.
I. Background
Organized in 2002, Plaintiff is a Florida corporation with its principle place of business in Orange County, Florida. (Compl., Doc. 1, ¶ 10). Plaintiff provides “Christian educational services to individuals throughout the United States.” (Id. ¶ 16). Particularly, “Plaintiff focuses its educational services on men ... through conferences it holds frequently in many states.” (Id.). Plaintiff claims to have hosted conferences in seventeen different states. (Id. ¶ 22). According to Plaintiff, the “conferences are held under the name ‘Mighty Men of God,’ and are marketed using that name and the name ‘Mighty Men.’ ” (Id. ¶ 17). Indeed, Plaintiff maintains registered trademarks for both terms — “Mighty Men of God” (the “MMOG Mark”) and “Mighty Men” (the “Mighty Men Mark”). (Exs. 1, 2 to Compl.,- Doc. 1). Both marks relate to “educational services, namely, conducting conferences in the field of men’s ministry.” (Id.). The Mighty Men Mark was registered on November 2, 2004, (Ex. 2 to Compl.), and Plaintiff alleges that its use “has been continuous and uninterrupted for over a decade[,] since at least' as early as October 30, 2002,” (Compl. ¶20). The MMOG Mark, which was registered on November 4, 2008, (Ex. 1 to Compl.), has purportedly been in use “since at least as early as February 17, 2003,” (Compl. ¶ 21). In addition to the conferences, Plaintiff has “distributed and sold CDs under the [Mighty Men Mark] since at least as early as the filing date of its trademark application.” (Hi 22).
Both Defendant World - Outreach and Defendant Intend are nonprofit corporations, which are incorporated in Tennessee and whose principal place, of business is located in Murfreesboro, Tennessee. (G. Allen Jackson Deck, Doc. 23-1, ¶¶ 4, 6; Phillip Jackson Deck, Doc. 23-2, ¶¶ 4, 6). Plaintiff alleges that-World Outreach offers “nearly identical services to those offered by Plaintiff’ by “conducting educational seminars-and conferences in the field of men’s ministry.” (Compl. ¶27). •Two such conferences took place in 2013, the first in Murfreesboro, Tennessee and the second in Nashville, Tennessee. (G. Allen Jackson Deck ¶ 14; Phillip Jackson Deck ¶ 14; Compl. ¶ 28). World Outreach and Intend also maintain a website — www. intendministries.org — through which they “permit visitors to sign up for email messages, listen to music or sermons, and ... purchase various products.” (G. Allen Jackson Deck ¶ 18; Phillip Jackson Deck ¶ 18; Compl. ¶¶ 29 — 31).
Defendant G. Allen Jackson has “served as the senior pastor and Vice President” of World Outreach, as well as the President of Intend. (G. Allen Jackson Deck ¶2). Defendant Phillip Jackson “serve[s] as an associate pastor and Assistant Secretary” of World Outreach, as well as Vice President of Intend. (Phillip Jackson Deck ¶ 2). Phillip Jackson is also the registrant of a website — www.mightymenusa.org— through which he “promotes] and advertises] .. services and products being offered by codefend'ants.” (Compl. ¶32). In addition, for both World Outreach and Intend, Phillip Jackson is the designated registered agent with the Tennessee Secretary of State. (Id.).
Plaintiff, contends that Defendants have marketed their. services and have organized their conferences using Plaintiffs Marks. (Id. ¶¶ 27-28). Plaintiff further maintains that, through their website, World Outreach and Intend are making and distributing products, including CDs and DVDs, using the Mighty Men Mark. (Id. ¶¶ 29-31). Moreover, according to Plaintiff, Phillip Jackson promotes products and ’services under the Mighty Men Mark dn his website. (Id. ¶ 32).
Thus, Plaintiff initiated this case- on Júne 18, • 2014 by filing the '• Complaint, wherein Plaintiff generally alleges- that “Defendants have willfully infringed Plaintiffs rights, and continue to infringe with no intention to discontinue their infringing use.” (Id. ¶ 38). ’ The Complaint includes six claims: (1) trademark infringement under 15 U.S.C. § 1114; (2)-false designation of origin under 15 U.S.C. § 1125(a); (3) unfair competition under 15 U.S.C. § 1125(a); (4) unfair competition under Fla-.- Stat. § 501.204; (5) violations , of the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d); and (6) further violations of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §§ 501.201-501.213, (Compl. ¶¶ 42-82). On September 5, 2014, Defendants moved to dismiss the Complaint for lack of personal jurisdiction.
II. Legal Standard ,
Through Federal Rule of Civil Procedure 12(b)(2), a party may move to' dismiss, based on lack of personal jurisdiction. “A plaintiff seeking to establish; personal jurisdiction over a nonresident defendant ‘bears the initial burden of alleging in the complaint sufficient facts to make out a prima facie case of jurisdiction.’” Louis Vuitton Malletier, S.A. v. Mosseri, 736 F.3d 1339, 1350 (11th Cir.2013) (quoting United Techs. Corp. v. Mazer, 556 F.3d 1260, 1274 (11th Cir.2009)). However, if “a defendant challenges personal jurisdiction ‘by submitting’affidavit evidence in support of its position,’” the plaintiff then bears the burden of producing evidence supporting jurisdiction. Id. (quoting United Techs., 556 F.3d at 1274). Nevertheless, “when ‘the defendant’s affidavits conitain only conclusory assertions that the defendant is not subject to jurisdiction,’ ” the plairitiff need not rebut those assertions with supporting evidence. Id. (quoting Stubbs v. Wyndham Nassau Resort & Crystal Palace Casino, 447 F.3d 1357, 1360 (11th Cir.2006)). When the plaintiffs complaint and the defendant’s evidence conflict, the court “construe[s] all reasonable inferences in favor of the plaintiff.” Stubbs, 447 F.3d at 1360.
III. Discussion
Defendants contend that-they are not subject to1 personal jurisdiction in Florida and that, therefore, this case should be dismissed. In response, Plaintiff argues that the exercise of personal jurisdiction over Defendants is proper because Defendants intentionally directed infringing conduct at Plaintiff, which is located within Florida.
“A federal district court.in Florida may exercise personal jurisdiction over a nonresident defendant to the same extent that a,Florida court may, so long as the exercise is consistent; with federal due process requirements.” Licciardello v. Lovelady, 544 F.3d 1280, 1283 (11th Cir.2008). In that vein, the dispute over personal jurisdiction begins with a two-part inquiry: “(1) whether personal jurisdiction exists-over the- nonresident defendant ... under Florida’s long-arm statute, and (2) if so, whether that exercise .of jurisdiction would violate the Due Process Clause of the Fourteenth ’ Amendment to the U.S. Constitution.” Louis Vuitton, 736 F.3d at 1350.
A. Florida’s Long-Arm Statute
Where, as here, “jurisdiction- is .based on a federal question arising under a statute that is silent regarding service of process, Rule 4(e) of the Federal Rules of Civil Procedure directs us to look to the state Tong-arm statute in order to determine the existence of personal jurisdic tion.” Sculptchair, Inc. v. Century Arts, Ltd., 94 F.3d 623, 626-27 (11th Cir.1996). Florida’s long-arm statute is codified at section 48.193 of the Florida Statutes; its interpretation “ ‘is a question of Florida law,’ and this Court is required to apply the statute ‘as would the Florida Supreme Court.’ ” Louis Vuitton, 736 F.3d at 1352 (quoting United Techs., 556 F.3d at 1274). Florida’s long-arm statute is to be strictly construed. Oriental Imps. & Exps., Inc. v. Maduro & Curiel’s Bank, N.V., 701 F.2d 889, 891 (11th Cir.1983) (interpreting Florida law).
As the statutory basis for personal jurisdiction, Plaintiff relies on subsection 48.193(l)(a)(2), which permits the exercise of specific personal jurisdiction over a nonresident defendant “for any cause of action arising from” that defendant’s “[c]ommi[ssion] [of] a tortious act within this state.” Under Florida law, “a nonresident defendant commits ‘a tortious act within [Florida]’ when he commits an act outside the state that causes injury within Florida.” Louis Vuitton, 736 F.3d at 1353 (alteration in original) (emphasis omitted) (quoting Lovelady, 544 F.3d at 1283). For purposes of the Florida long-arm statute, trademark infringement claims allege tortious acts. See id.
In the Motion to Dismiss, Defendants do not address whether Florida’s long-arm statute permits the exercise of personal jurisdiction in this case; rather, through that omission, Defendants seem to concede that it does. (See Mot. Dismiss at 4). Indeed, the Complaint includes allegations that Defendants infringed on Plaintiffs trademarks by holding conferences, maintaining websites, and marketing products that incorporate the Mighty Men Mark. Defendants neither rebut nor deny those contentions. As noted, such conduct is a “tortious act” within the meaning of subsection 48.193(l)(a)(2). Additionally, “by virtue of the website[s’] accessibility in Florida,” the infringement occurred in Florida. Lovelady, 544 F.3d at 1283; see also Louis Vuitton, 736 F.3d at 1353-54. Therefore, Defendants committed a tortious act within this state.
At any rate, Defendants also committed a tortious act within Florida by causing injury to Plaintiff, which is a Florida-based entity. See Posner v. Essex Ins. Co., 178 F.3d 1209, 1217 (11th Cir.1999) (holding that the Eleventh Circuit’s “firmly established precedent ... interprets subsection [48.193(l)(a)(2) ] to apply to defendants committing tortious acts outside the. state that cause injury in Florida”); Nida Corp. v. Nida, 118 F.Supp.2d 1223, 1228 (M.D.Fla.2000) (“Injury from trademark infringement occurs in the state where the trademark owner resides.”). Accordingly, the exercise of personal jurisdiction over Defendants is permitted under Florida’s long-arm statute.
B. The Due Process Clause
“The Due Process Clause protects an individual’s liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful ‘contacts, ties, or relations.’” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-72, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). Generally, the constitutional requirement is “satisfied when in personam jurisdiction is asserted over a nonresident corporate defendant that has ‘certain minimum contacts with [the forum] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.’ ” Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984) (alteration in original) (quoting Int’l Shoe, 326 U.S. at 316, 66 S.Ct. 154).
“In specific personal jurisdiction cases,” the Eleventh Circuit characterizes those requirements as a “three-part due process test, which examines” the following:
(1) whether the plaintiffs claims “arise out of or relate to” at least one of the defendant’s contacts with the forum; (2) whether the nonresident defendant “purposefully availed” himself of the privilege of conducting activities within the forum state, thus invoking the benefit of the forum state’s laws; and (3) whether the exercise of personal jurisdiction comports with “traditional notions of fair play and substantial justice.”
Louis Vuitton, 736 F.3d at 1355. “The plaintiff bears the burden of establishing the fust two prongs, and if the plaintiff does so, ‘a defendant must make a compelling case that the exercise of jurisdiction would violate traditional notions of fair play and substantial justice.’ ” Id. (quoting Diamond Crystal Brands, Inc. v. Food Movers Int’l, Inc., 593 F.3d 1249, 1267 (11th Cir.2010)).
1. Prong One: Relatedness
As noted, the first prong centers on whether a “plaintiffs claim ... arise[s] out of or relate[s] to at least one of defendant’s contacts with the forum.” Oldfield v. Pueblo De Bahia Lora, S.A., 558 F.3d 1210, 1222 (11th Cir.2009) (quotation omitted). The Eleventh Circuit has “not developed or adopted a specific approach to determining relatedness; instead, [the Eleventh Circuit has] heeded the Supreme Court’s warning against using mechanical or quantitative tests.” Oldfield, 558 F.3d at 1222 (quotation omitted). “Necessarily, the contact must be a ‘but-for’ cause of the tort, yet the causal nexus between the tortious conduct and the purposeful contact must be such that the out-of-state resident will have ‘fair warning that a particular activity will subject [it] to the jurisdiction of a foreign sovereign.’” Id. at 1222-23 (quoting Burger King, 471 U.S. at 472, 105 S.Ct. 2174).
Here, Plaintiff alleges that Defendants intentionally infringed Plaintiffs Marks by holding conferences, maintaining websites, and marketing products, all of which featured Plaintiffs Mighty Men Mark. That intentional conduct resulted in contact with the forum in the form of Plaintiffs injury. That contact, while minimal, is the direct cause of Plaintiffs claims. The evidence submitted in support of Defendants’ Motion to Dismiss does not refute the accuracy of such allegations. At least in the case of intentional torts, such claim-causing contact is sufficient to satisfy the first prong. See Commodores Entm’t Corp. v. McClary, No. 6:14-cv-1335-Orl-37GJK, 2015 WL 1242818, at *3 (M.D.Fla. Mar. 18, 2015) (addressing the relatedness prong and holding that forum-based injury suffices as the claim-causing contact).
2. Prong Two: Purposeful Availment
The second prong requires that “there ... exist ‘some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum ..., thus invoking the benefits and protections of its laws.’ ” Oldfield, 558 F.3d at 1220 (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)). “This purposeful availment requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts, or of the unilateral activity of another party or a third person.” Burger King, 471 U.S. at 475, 105 S.Ct. 2174 (quotations omitted). However, “[s]o long as it creates a ‘substantial connection’ with the forum, even a single act can support, jurisdiction.” Burger King, 471 U.S. at 475 n. 18, 105 S.Ct. 2174.
“Intentional torts are such acts, and may support the exercise of personal jurisdiction over the nonresident defendant who has no other contacts with the forum.” Lovelady, 544 F.3d at 1285. Where the underlying claims involve intentional torts, purposeful availment can be determined through application of the “effects test,” which was developed in Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). See Louis Vuitton, 736 F.3d at 1356-57 (holding that, in intentional tort cases, courts may apply either the effects test or the traditional minimum contacts test for determining whether personal jurisdiction satisfies the Due Process Clause). “Under the ‘effects test,’ a nonresident defendant’s single tortious act can establish purposeful availment, without regard to whether the defendant had any other contacts with the forum state.” Id. at 1356. To satisfy the effects test, the tort must have: “(1) [been] intentional; (2) [been] aimed at the forum state; and (3) caused harm that the defendant should have anticipated would be suffered in the forum state.” Lovelady, 544 F.3d at 1286.
Here, based on the Calder effects test, Defendants have purposefully availed themselves of the benefits of this forum. While Defendants fail to address the applicability of the effects test, Plaintiff relies on Licciardello v. Lovelady, 544 F.3d 1280 (11th Cir.2008), in which the Eleventh Circuit applied the effects test in a factually-similar scenario. In that case, a nonresident defendant, who was previously employed as the plaintiffs personal manager, allegedly posted the plaintiffs “trademarked name and ... picture” on the defendant’s website, thereby-“implying that [the plaintiff] endorsed [the defendants] skill as a personal manager.” Id. at 1282. The plaintiff sued the defendant in the Middle .District of Florida for trademark infringement, among other related claims. Id. The defendant, who resided in Tennessee, moved to dismiss for lack of personal jurisdiction; the district court granted the motion, and the plaintiff appealed that decision. Id.
On appeal, the Eleventh Circuit addressed purposeful availment through application of the effects test. Id. at 1285, 1287-88. In doing so, the court noted that the defendant’s infringement “was not negligent, but intentional.” Id. at11287. The court continued — “The purpose was to make money from [the plaintiffs] implied endorsement. The unauthorized use of [the plaintiffs] mark, therefore, individually targeted [the plaintiff] in order to misappropriate his name and -reputation for commercial gain.” Id. at 1287-88. Such allegations, as held by the Lovelady court, “satisfy the Calder effects test for personal jurisdiction,” and therefore, the “Constitution [was] not offended by thé exercise of Florida’s long-arm statute to effect personal jurisdiction over” the nonresident defendant. Id. at 1288.
Like Lovelady, this case involves allegations of intentional conduct, thereby satisfying the first requirement of the effects test. For example, the Complaint generally alleges that, through Defendants’ use of Plaintiffs Marks, “Defendants have willfully infringed Plaintiffs rights, and continue to infringe with no intention to discontinue their infringing use.” (Compl. ' ¶ 38). Counts One, Two, and Three state, in some fashion, that “Defendants committed the infringing acts with knowledge that their unauthorized use of Plaintiffs Marks was intended to cause confusion, mistake, and to deceive the public.”' (Id. ¶ 48; see also id. ¶¶ 57, 64). Both Counts Four and Five state that- “Defendants’ conduct is willful and intentional, and has caused and is continuing to' cause injury to- Plaintiff.” (Id. ¶¶70, 77). Count Five goes a step further and states that “Defendants have registered, trafficked in, and used the domain names with the bad faith intent to profit from Plaintiffs Marks.” (Id. ¶ 76). Lastly, Count Six provides that Defendants “intentionally engaged” in the infringing conduct, which was “calculated to deceive ... the public into mistakenly believing that Defendants are affiliated, connected, or associated with Plaintiffs goods and services.” (Id. ¶¶ 81-82).
Also like Lovelady, Defendants are alleged to have individually targeted Plaintiff, which is a Florida-based entity, thereby satisfying the second and third prongs of the effects test. Particularly, the Complaint alleges that “Plaintiff has provided Christian educational services” since 2002 and has held conferences in seventeen different states, one of which was Tennessee. (Id. ¶¶16, 22).. Over a decade later, Defendants organized similar conferences under Plaintiffs Mighty Men Mark, incorporated- Plaintiffs Marks into the domain names of Defendants’ websites, and sold products bearing Plaintiffs Marks on the websites. From those facts, Plaintiff concludes that such conduct was intentional and that the purpose 'of the infringement was to create the • impression either that Plaintiff and Defendants were related or that Plaintiff and Defendants were one in the same.
Of particular importance, Defendants have failed to rebut the relevant allegations of the Complaint. Through supporting evidence, Defendants do aver that they do not “direct any media advertising into the State of Florida[][or] engage in any other conduct to intentionally target the State of Florida.” (G. Allen Jackson Deck ¶ 11; Phillip Jackson Deck ¶ 11). Such a conclusory assertion, without more, is insufficient to refute the Complaint’s allegation that Defendants have intentionally targeted Plaintiff, which resides within the forum.
Thus, based on the unrebutted allegations of the Complaint, Defendants intentionally targeted. Plaintiff. The purpose of Defendants’- conduct was either to- benefit from or to usurp Plaintiffs.goodwill. By directly targeting Plaintiff, Defendants’ infringement was “aimed at the forum state,” and by virtue of that fact, Defendants “should have anticipated” that the injury to the Florida-based Plaintiff would be suffered in Florida. See Lovelady, 544 F.3d at 1286-88. Certainly, Defendants, whose self-proclaimed aspiration - is “to help[] people become more fully devoted followers of Jesus Christ, in Murfreesboro, Tennessee, and across the world,” (G. Allen Jackson Deck ¶5;, Phillip Jackson Deck ¶ 5 (emphasis added)), could foresee being haled into a Florida court based on their alleged intentional infringement.
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3518637-10019 | THOMPSON: Senior Circuit Judge:
The petitioner seeks review of the Board of Immigration Appeals’ (“BIA”) denial of his requests for cancellation of removal, adjustment of status and voluntary departure. We grant the petition for review of the denial of the request for cancellation of removal, and remand that request to the BIA for further consideration. We deny the petition for review of the denial of the requests for adjustment of status and for voluntary departure. In addition, we deny the petitioner’s ineffective assistance of counsel claim, as the petitioner can raise this issue in a motion to reopen.
BACKGROUND
The petitioner, a native and citizen of Mexico, was removable for having entered the United States without inspection on or about October 1, 1992. He conceded removability and applied for adjustment of status, cancellation of removal, and, in the alternative, voluntary departure.
At a 2004 hearing, an immigration judge (“IJ”) questioned the petitioner about a 1989 conviction. The record before the IJ indicated the petitioner had been convicted of possession of a controlled substance under California Health & Safety Code § 11350, but did not identify the substance. Under oath before the IJ, the petitioner testified:
IJ: ... [WJhat were you convicted of?
Petitioner:Possession of drugs.
IJ:Possession of drugs. What kind of
drugs?
Petitioner:In the house, the house where
I was (indiscernible).
IJ:What kind of drugs?
Petitioner:I think it was heroin.
Thereafter, the IJ pretermitted petitioner’s applications for cancellation of removal and adjustment of status. According to the IJ, the petitioner was statutorily ineligible for these forms of relief because the record and testimony established that the petitioner had been “convicted of violating a state law relating to a controlled substance,” a disqualifying offense under 8 U.S.C. § 1182(a)(2)(A)(i)(II) of the Immigration and Nationality Act (“INA”). The petitioner was discretionarily denied voluntary departure. The BIA affirmed in a three-paragraph order.
The petitioner timely filed, pro se, a petition for review by this court. We granted a stay of removal and appointed pro bono counsel, who filed a replacement opening brief.
DISCUSSION
I. Cancellation of Removal
The petitioner can only be eligible for cancellation of removal if he “has not been convicted of an offense under [§ 1182(a)(2)].” 8 U.S.C. § 1229b(b)(l)(C). Section 1182(a)(2) includes, as a disqualifying offense, a violation of “any [State] law ... relating to a controlled substance (as defined [by the federal Controlled Substances Act])”. 8 U.S.C. § 1182(a)(2)(A)(i)(II). Here, the IJ and BIA determined that the petitioner’s 1989 conviction under California Health & Safety Code § 11350 constituted a disqualifying controlled substance conviction. The petitioner concedes he suffered a controlled substance conviction, but he challenges the disqualifying nature of that offense.
We review de novo the question whether a conviction involves a controlled substance offense affecting removability. Cazarez-Gutierrez v. Ashcroft, 382 F.3d 905, 909 (9th Cir.2004).
To determine if the petitioner’s California Health & Safety Code § 11350 conviction constitutes a controlled substance offense under 8 U.S.C. § 1182(a)(2)(A)(i)(II), we apply the two-step analysis of Taylor v. United States, 495 U.S. 575, 110 S.Ct. 2143, 109 L.Ed.2d 607 (1990). The Taylor analysis requires us to determine whether the state statute of conviction is “categorically” a disqualifying controlled substance offense under the INA. Suazo Perez v. Mulcasey, 512 F.3d 1222, 1225 (9th Cir.2008). To make this determination, we ask whether the “full range of conduct” criminalized by the state statute falls within the disqualifying offense. Id.
The petitioner asserts that California Health & Safety Code § 11350 proscribes more substances than the disqualifying offense. Respondent does not disagree. Thus, we presume the statute is categorically overbroad and we proceed to the second step of Taylor—the modified categorical approach. See Suazo Perez v. Mukasey, 512 F.3d at 1226.
Under the modified categorical approach, we look beyond the statute of conviction to consider “a narrow, specified set of documents that are part of the record of conviction” to determine whether petitioner was convicted of the disqualifying offense. Tokatly v. Ashcroft, 371 F.3d 613, 620 (9th Cir.2004). In conducting this analysis, we are “generally limited to examining the statutory definition, charging document, written plea agreement, transcript of plea colloquy, and any explicit factual finding by the trial judge to which the defendant assented.” Shepard v. United States, 544 U.S. 13, 16, 125 S.Ct. 1254, 161 L.Ed.2d 205 (2005).
Here, both parties submitted a “Criminal History Transcript” describing petitioner’s 1989 conviction as: “11350 HS-POSSESS NARCOTIC CONTROL SUBSTANCE; -CONVICTED -PROB/JAIL; FELONY; SEN: 036 MONTHS PROBATION, 131 DAYS JAIL.” Even if this document is judicially noticeable under Shepard v. United States, the document fails to identify the controlled substance involved in the petitioner’s conviction. Thus, the record is inconclusive as to whether the petitioner’s conviction involved a relevant controlled substance.
Under our intervening decision in SandovaV-Ima v. Gonzales, 499 F.3d 1121, 1129-30 (9th Cir.2007), an alien who seeks to prove eligibility for cancellation of removal can meet his or her initial burden by pointing to an inconclusive record of conviction. The petitioner did that in this case. The record of conviction is inconclusive because it does not disclose the nature of the controlled substance, and the petitioner’s testimony that he thought the substance was heroin does not alter the record of conviction. Under our decision in Sandoval-Lua, the result of this is that the government has the burden of going forward to prove that the controlled substance the petitioner possessed was heroin or some other controlled substance under 8 U.S.C. § 1182(a)(2)(A)(i)(II). The government did not do this, because neither it, the IJ nor the BIA had the benefit of our decision in Sandoval-Lua, which we now have.
We thus remand to the BIA for further proceedings consistent with Sandoval-Lua to permit the government to put forth reliable evidence to show that the petitioner was convicted of a disqualifying controlled substance offense. See Cheuk Fung S-Yong v. Holder, 578 F.3d 1169, 1174, 1176 (9th Cir.2009) (“The government bears the burden of proving by ‘clear, unequivocal, and convincing evidence that the facts alleged as grounds for [removability] are true.’ ” (quoting Gameros-Hernandez v. INS, 883 F.2d 839, 841 (9th Cir.1989))).
II. Adjustment of Status
An alien who is “physically present in the United States,” but who “entered the United States without inspection,” may be eligible to apply to the Attorney General for an adjustment of status. 8 U.S.C. § 1255(i)(l). If this relief is granted, the alien need not leave the country, but rather his or her status is adjusted to that of a lawful permanent resident. Landin-Molina, 580 F.3d at 915.
Adjustment of status is a discretionary form of relief. See 8 U.S.C. § 1255(i)(2) (“[T]he Attorney General may adjust the status of [an otherwise eligible] alien.” (emphasis added)). However, an alien can only be eligible for adjustment of status if the alien is “admissible to the United States for permanent residence.” 8 U.S.C. § 1255(i)(2)(A) (emphasis added); but see 8 U.S.C. § 1182(h) (authorizing the Attorney General to waive certain bases of inadmissibility).
The INA renders inadmissible any alien (1) “convicted of,” or (2) “who admits having committed,” or (3) “who admits committing acts which constitute the essential elements of’ a violation of state law relating to a controlled substance offense under the federal Controlled Substances Act. 8 U.S.C. § 1182(a)(2)(A)(i)(II) (emphasis added). Compare Romero v. Holder, 568 F.3d 1054, 1057 (9th Cir.2009) (requiring a controlled substance conviction to establish ineligibility for cancellation of removal, although related admissions were relevant to moral character).
Thus, under 8 U.S.C. § 1182(a)(2)(A)(i)(II), admissions made by an alien to the IJ, enforcement officials, and third parties, apart from any conviction, may be considered to determine an alien’s admissibility when considering the question of adjustment of status. See, e.g., Pazcoguin v. Radcliffe, 292 F.3d 1209, 1218 (9th Cir.2002) (considering alien’s admissions to a doctor and immigration officers).
In this case, the petitioner established prima facie eligibility for an adjustment of status because he is the beneficiary of an 1-130 petition that was filed on or before April 30, 2001. See 8 U.S.C. § 1255(i)(l)(B)(i); Agyeman v. INS, 296 F.3d 871, 879 n. 2 (9th Cir.2002) (“The approved 1-130 provides prima facie evidence that the alien is eligible for adjustment as an immediate relative of a United States citizen.”). That caused the burden of production to be shifted to the government. See Pazcoguin v. Radcliffe, 292 F.3d at 1213. The government relies on proof of the petitioner’s 1989 guilty plea, his conviction, and his statement to the IJ as to the nature of the substance he pleaded guilty to possessing.
It is undisputed that the petitioner pleaded guilty to possession of a narcotic controlled substance under California law. The petitioner also told the IJ “I think[the possessed substance] was heroin.” The IJ found that this statement established that the controlled substance which the petitioner pleaded guilty to possessing was in fact heroin. The petitioner left this factual determination unchallenged. There was thus sufficient evidence to support the IJ’s finding that the petitioner had possessed a disqualifying controlled substance, and that precluded adjustment of status. We, therefore, deny the petition for review of the denial of such relief.
III. Voluntary Departure and Ineffective Assistance of Counsel
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10549674-26455 | DUBINA, Circuit Judge:
Appellant, Simon Gabay (“Gabay”) appeals his convictions by a jury of counterfeiting traveler’s checks (violation of 18 U.S.C. § 371 and § 513) and bond jumping (violation of 18 U.S.C. § 3146(a)(1) and § 401(3)). On appeal, Gabay asserts numerous challenges to his convictions including:- (1) the joinder of his two indictments for counterfeiting and bond jumping caused undue prejudice; (2) the admission of the transcript of the prior testimony of a deceased witness was improper since Ga-bay was unable to cross-examine; (3) a government witness’s improper reference to Gabay’s silence constituted reversible error; (4) an aura of prejudice denied him a fair trial; (5) the trial court erred in allowing deliberations and verdict by an eleven-member jury without full inquiry; and (6) a sentence of 60-months on the charge of criminal contempt was outside the bounds of the sentencing guidelines and unreasonable. We find these claims without merit, and, accordingly, affirm Gabay’s convictions and sentences.
I. BACKGROUND
Gabay was the coordinator of a group that manufactured and attempted to distribute nearly $40 million of counterfeit traveler’s checks. Gabay and nine others were arrested after selling over $1 million in counterfeit traveler’s checks to an undercover officer. Eight of the defendants pled guilty prior to trial and entered into cooperation agreements with the government. Gabay and codefendant, Lawrence Schmal-holz, were set to proceed to trial on February 21, 1989. Shortly before trial, Gabay fled. Gabay left behind a videotape explaining the reasons for his flight. On March 9, 1989, Gabay was found in a luxury apartment in Venezuela, hiding in a bookcase. Subsequently, he was indicted for bond jumping. On June 12, 1989, the district court joined the indictments and Gabay proceeded to trial on the counterfeiting and bond jumping charges.
Soon after jury deliberations commenced, the district court halted them and held a hearing regarding possible juror misconduct. Based on the evidence presented at the hearing, the district court concluded one juror had disobeyed the oath not to speak about the case or form an opinion regarding Gabay’s guilt. The district court, therefore, dismissed the juror and, over a defense objection, continued the deliberations with eleven jurors. A motion for a new trial on this issue was denied. Following the two-week jury trial, Gabay was found guilty of the counterfeiting and bond jumping charges. After a lengthy sentencing hearing, Gabay was sentenced to 111 months in prison, consisting of 51 months incarceration for the counterfeiting conviction, and 60 months incarceration for criminal contempt on the bond jumping conviction, to be served consecutively.
II. DISCUSSION
A. Joinder
Under Rule 13 of the Fed.R.Crim.P., the trial court may order two indictments tried together if the two offenses could have been joined in a single indictment. Whether substantive and bond jumping offenses may be joined is a question of first impression in this circuit. Those circuits which have addressed the question have held that those charges may be joined for trial under the proper circumstances. United States v. Peoples, 748 F.2d 934 (4th Cir.1984), cert. denied, 471 U.S. 1067, 105 S.Ct. 2143, 85 L.Ed.2d 500 (1985); United States v. Ritch, 583 F.2d 1179 (1st Cir.), cert. denied, 439 U.S. 970, 99 S.Ct. 463, 58 L.Ed.2d 430 (1978); United States v. Bourassa, 411 F.2d 69 (10th Cir.), cert. denied, 396 U.S. 915, 90 S.Ct. 235, 24 L.Ed.2d 192 (1969). We agree with these circuits, and find that joinder of Gabay’s counterfeiting and bond jumping indictments was permissible under the circumstances of this case.
This court undertakes a two-step inquiry to determine whether separate charges were properly tried at the same time. First, the government must demonstrate that the initial joinder of the offenses was proper under Fed.R.Crim.P.' 8. Next, we must determine whether the trial court abused its discretion by refusing to order a severance under Fed.R.Crim.P. 14. United States v. Montes-Cardenas, 746 F.2d 771, 776 (11th Cir.1984).
Offenses may be joined if they are based on “two or more acts or transactions connected together or constituting part of a common scheme or plan.” (Fed. R.Crim.P. 8(a)). Bond jumping and the underlying offense are “connected together” if they are related in time, the motive for flight was avoidance of prosecution of the underlying offense, and custody derived directly from the underlying offense. Ritch, 583 F.2d at 1181. Gabay absconded soon after his arrest for counterfeiting, the counterfeiting led directly to his custody, and by his own admissions (made in a videotape left behind for the court), his motive for flight was directly related to his impending prosecution for counterfeiting.
Gabay argues that while substantive offenses and flight offenses may be joined under some circumstances, severance was warranted in this case based upon Rule 14 considerations. He also argues that join-der of the substantive and flight offenses was unduly prejudicial.
Unfair prejudice does not result when two offenses are joined if evidence admissible to prove each offense is also admissible to prove the other offense. Peoples, 748 F.2d at 936. Gabay fails to establish unfair prejudice since evidence of flight is admissible to prove guilty conscience and evidence of the counterfeiting is admissible to prove the motive for the flight. Id.
B. Deceased Witness’s Testimony
A witness named Saul Rubin testified in February 1989 on behalf of the government at the trial of Gabay’s codefendant, Lawrence Schmalholz. Rubin then died in May of 1989. Rubin testified that he owned a book bindery and that he cut the sheets of traveler’s checks to check size and then stored them in his shop until Gabay picked them up. The transcript of Rubin’s testimony was admitted and read to the jury pursuant to Fed.R.Evid. 804(b)(3) & (5). Gabay contends that the admission of Rubin’s testimony was error. Determinations regarding the admissibility of evidence are within the discretion of the district court and should not be reversed absent an abuse of discretion. United States v. Collins, 779 F.2d 1520, 1531 (11th Cir.1986).
Fed.R.Evid. 804(b)(3) permits the introduction, upon demonstrating the unavailability of the declarant, of statements contrary to the penal interest of the declarant.
There is no question that the declarant was unavailable since the witness was dead. The statements of an unavailable declarant are deemed against penal interests under Rule 804(b)(3) where the statements so tend to subject the declarant to criminal liability “that a reasonable man in his position would not have made the statement unless he believed it to be true.” In applying this objective standard, the Advisory Committee Notes to Rule 804 instruct that whether “a statement is in fact against interest must be determined from the circumstances of each case.” 56 F.R.D. 183, 328 (1972).
Gabay suggests that the statements were not truly against Rubin’s interests because, by being granted immunity and cooperating with the investigation, Rubin avoided the filing of criminal charges against him. Precise examination of the content of Rubin’s statement and the circumstances leading to its making refutes Gabay's contention that the statement does not fit within the “against penal interest” exception to the hearsay rule.
Courts closely examine the circumstances under which statements are made by codefendants or accomplices to determine whether they are truly against penal interests. See, United States v. Gonzalez, 559 F.2d 1271, 1273 (5th Cir.1977). The rationale for this finer level of scrutiny in criminal cases is the fear that the declarant may be acting out of a strong motive to exonerate himself by misrepresenting his own role and degree of culpability and attempting to shift a portion of the blame upon the codefendant. Lee v. Illinois, 476 U.S. 530, 541, 106 S.Ct. 2056, 2062, 90 L.Ed.2d 514 (1986). Yet, the very content of Rubin’s statement repudiates any motive to shift blame or distort Gabay’s degree of culpability. The testimony read to the jury clearly and directly implicated the declar-ant in criminal conduct. Absent a showing of circumstances presenting obvious motives for falsification, the trial court’s decision to admit the testimony of a deceased witness will not be disturbed. We find no abuse of discretion by the district court in admitting Rubin’s transcript testimony.
C.Right To Silence
Gabay’s case agent testified at trial that shortly after Gabay’s arrest, Gabay was asked some questions which he agreed to answer. The case agent explained that after answering several questions, Gabay stated that he did not want to answer any more questions. A side-bar discussion immediately followed, and the jury was instructed to disregard the statement that Gabay did not want to speak further with the agent. Gabay moved for a mistrial and his motion was denied.
Gabay now argues that this reference to his silence, in front of the jury, entitles him to a new trial. He asserts it is fundamentally unfair to simultaneously afford a suspect a constitutional right to silence following arrest and yet allow implications of that silence to be used against him. Doyle v. Ohio, 426 U.S. 610, 96 S.Ct. 2240, 49 L.Ed.2d 91 (1976); United States v. Rosenthal, 793 F.2d 1214, 1243 (11th Cir.1986).
To warrant a new trial, an improper prosecutorial comment must be so pronounced as to permeate the entire atmosphere of the trial and not be cured by an instruction by the district judge. United States v. Creamer, 721 F.2d 342, 345 (11th Cir.1983); United States v. Reed, 887 F.2d 1398, 1402 (11th Cir.1989). The trial court’s prompt admonishment of the jury to disregard the improper testimony of the agent served to cure the error. United States v. Holman, 680 F.2d 1340, 1352 (11th Cir.1982). The strong evidence of Gabay’s guilt, combined with the trial court’s prompt curative instructions, reduced the agent’s testimony, even if improper, to harmless error. Creamer, 721 F.2d at 345.
D. Aura Of Prejudice
Gabay seeks reversal because he claims his trial was conducted in an aura of prejudice. The trial lasted a little more than two weeks and consisted of seventeen volumes of trial record, yet Gabay can point tó only one specific comment from the trial court which he says unduly prejudiced him.
This court held in United States v. So-rondo, 845 F.2d 945, 949 (11th Cir.1988), and United States v. Cox, 664 F.2d 257, 259 (11th Cir.1981), that the trial court cannot interject his or her opinion because a “jury has an obligation to ‘exercise its untrammeled judgment upon the worth and weight of testimony,’ and to ‘bring in its verdict and not someone else’s.’ ” Sorondo, 845 F.2d at 949, (quoting, United States v, Johnson, 319 U.S. 503, 519, 63 S.Ct. 1233, 1241, 87 L.Ed. 1546 (1943)). No opinion was expressed in this case by the trial court regarding any piece of evidence, nor was any comment made by the court about the testimony of any witness. There is nothing in the court’s comments from which a jury could substitute the court’s opinion for that of the jury’s.
A trial court has broad discretion in handling a trial and an appellate court will not intervene absent a clear showing of abuse. United States v. Gomez-Rojas, 507 F.2d 1213, 1223 (5th Cir.), cert. denied, 423 U.S. 826, 96 S.Ct. 41, 46 L.Ed.2d 42 (1975). We think it is clear from a review of the record in this case that there was nothing in the trial court’s comments that was so obtrusive or prejudicial that it denied Gabay a fair trial.
E. Eleven Jurors
At the close of the two-week trial, and approximately one hour after the jury began its deliberations, defense counsel was informed by a lawyer unrelated to the case that one of the jurors had expressed an opinion about Gabay’s guilt during a four-day hiatus in the trial. The juror’s opinions were rendered prior to the end of the government’s case and before the start of the jury’s deliberations.
As soon as the court was notified of the juror’s violation of her duty not to discuss the case with anyone, the court ordered the deliberations to cease. At that point, the jury had deliberated for less than two hours. The court held a hearing to make an inquiry into the possible juror misconduct. The juror’s work-place supervisor and two colleagues testified that during the break in the trial, the juror told them certain facts about- the case, including her feelings about Gabay's guilt.
After conducting this inquiry, the court requested the tainted juror, outside the presence of the other jurors, to answer certain questions about whether she discussed the case with anyone prior to the commencement of jury deliberations. She denied doing so.
The court, then concerned about whether the juror had expressed her opinion as to Gabay’s guilt, or any other matters, to any other juror prior to deliberations, made an inquiry of each juror. The jurors’ names were selected randomly and each was individually questioned in open court by the court, defense counsel, and the government while the other jurors waited in the jury room. The inquest consisted of asking each of the jurors whether or not he/she had any discussions with anyone concerning the case prior to the start of deliberations.
The jurors were also asked with which jurors they ate lunch or socialized during the trial. If any of the jurors replied that they ate lunch with or socialized with the tainted juror, the court further investigated whether or not the tainted juror had expressed to them any opinion as to the guilt or innocence of Gabay or whether they had discussed the case with her or anyone else prior to the beginning of deliberations. The court carefully inquired of each juror and made a determination that no juror had been influenced in any way in his or her deliberations by anything said by the tainted juror. The tainted juror was excused and jury deliberations continued with eleven jurors pursuant to Rule 23(b).
■ Gabay is essentially making two claims: 1) there was juror misconduct of such a prejudicial nature and of such magnitude that a new trial is warranted; and 2) the trial judge did not show good cause to continue the trial with only eleven jurors.
1. Juror Misconduct
Following the procedures outlined in United States v. Yonn, 702 F.2d 1341 (11th Cir.), cert. denied, 464 U.S. 917, 104 S.Ct. 283, 78 L.Ed.2d 261 (1983), the trial court interviewed each juror individually, reassured the jurors and refrained from commenting on the incidents in question, and requested that each juror refrain from discussing the court’s questions with anyone. The trial court obtained the pledges of those jurors who had spoken with the tainted juror, that none of her comments had interfered with their ability to render a fair and impartial verdict. Yonn, 702 F.2d at 1345. The trial court further instructed the jurors not to discuss' the voir dire among themselves. Finally, the trial court re-obtained pledges from the remaining jurors to deliberate and base their verdicts solely on the evidence, based on the court’s instructions of the law.
The district court found the jury able to deliberate fairly after its voir dire, its cura tive instructions, its daily observation of the jurors for several weeks, and the jurors’ unequivocal pledges to deliberate fairly. The “determination of impartiality, in which demeanor plays such an important part, is particularly within the province of the trial judge.” Ristaino v. Ross, 424 U.S. 589, 594-95, 96 S.Ct. 1017, 1020, 47 L.Ed.2d 258 (1976) (quoting, Rideau v. Louisiana, 373 U.S. 723, 733, 83 S.Ct. 1417, 1422, 10 L.Ed.2d 663 (1963)); Owens v. Wainwright, 698 F.2d 1111, 1113 (11th Cir.1983), cert. denied, 464 U.S. 834, 104 S.Ct. 117, 78 L.Ed.2d 116 (1984) (“Appellate courts reviewing a cold record give particular deference to credibility determinations of a fact finder who had the opportunity to see live testimony.”).
The trial court’s careful and lengthy investigation of the juror misconduct issue put that court in the best position to determine whether or not any juror misconduct deprived Gabay of his due process right to a fair trial. We are persuaded that the trial court properly exercised its discretion in finding that Gabay received a fair trial void of any prejudicial juror misconduct.
2. Eleven Jurors
Gabay argues that the trial court did not have “just cause” to continue the jury deliberations with only eleven jurors. Gabay misreads the standard enunciated by Rule 23(b). The rule explains that “if the court finds it necessary to excuse a jurOr for just cause after the jury has retired to consider a verdict, in the discretion of the court a verdict may be returned by the remaining 11 jurors.” (Emphasis added.) It is clear that there must be just cause to excuse the juror, but that issue does not need to be decided by this court. Neither party argues that the trial court did not have “just cause” to remove the juror, therefore, our review is limited to whether the trial court abused its discretion in continuing the deliberations with eleven jurors.
Rule 23(b) was amended in 1983 to remedy the problem we have here in which, “after the jury has retired to consider its verdict and any alternate jurors have been discharged, one of the jurors has been found to be seriously incapacitated or otherwise found to be unable to continue services upon the jury.” Notes of Committee on the Judiciary, Senate Report No. 95-354, U.S.Code Cong. & Admin.News 1977, p. 527. Amendments Proposed by the Supreme Court.
This court has not ruled on the constitutionality of the discretionary aspect of Rule 23(b). Those circuits that have ruled have' concluded that Rule 23(b) is constitutional. United States v. Stratton, 779 F.2d 820 (2nd Cir.1985), cert. denied, 476 U.S. 1162, 106 S.Ct. 2285, 90 L.Ed.2d 726 (1986); United States v. Smith, 789 F.2d 196 (3rd Cir.1986). We agree with these courts that Rule 23(b) is constitutional. It is clear that under appropriate circumstances twelve-member juries are not required. Williams v. Florida, 399 U.S. 78, 90 S.Ct. 1893, 26 L.Ed.2d 446 (1970).
It is not an abuse of discretion for the trial court to continue deliberations with eleven jurors when a juror becomes unavailable after a lengthy trial and a mistrial would be burdensome. In the present case, the trial court’s reasons for continuing the deliberations included a trial of long duration, numerous exhibits, and numerous witnesses. There is no question that a declaration of a mistrial would have necessitated a second expenditure of substantial prosecution, defense and court resources; the outcome Rule 23(b) was designed to alleviate. Accordingly, we conclude the district court was well within its discretion in allowing deliberations to continue with eleven jurors.
F. Sentencing
The district court sentenced Gabay to 51 months in prison for the counterfeit charges and 60 months for the criminal contempt charge. Gabay accepts the 51-month term for counterfeiting but objects to the 60-month term for criminal contempt on the grounds that it was outside the bounds established by the sentencing guidelines, and it was unreasonable.
Our review of the sentence imposed by the district court is governed by 18 U.S.C. § 3742(d) and (e):
(d) Consideration. — Upon review of the record, the court of appeals shall determine whether the sentence—
(1) was imposed in violation of law;
(2) was imposed as a result of an incorrect application of the sentencing guidelines;
(3) is outside the range of the applicable sentencing guideline, and is unreasonable, having regard for—
(A) the factors to be considered in imposing a sentence, as set forth in Chapter 227 of this title; and
(B) the reasons for the imposition of the particular sentence, as stated by the district court pursuant to the provision of section 3553(c); or
(4) was imposed for an offense for which there is no applicable sentencing guideline and is plainly unreasonable.
The court of appeals shall give due regard to the opportunity of the district court to judge the credibility of the witnesses, and shall accept the findings of fact of the district court unless they are clearly erroneous.
(e) Decision and disposition
If the court of appeals determines that the sentence—
(1)was imposed in violation of law or imposed as a result of an incorrect application of the sentencing guidelines, the court shall remand the case for further sentencing proceedings with such instructions as the court considers appropriate;
(2) is outside the range of the applicable sentencing guideline and is unreasonable or was imposed for an offense for which there is no applicable sentencing guideline and is plainly unreasonable for the conclusions and ...
it shall set aside the sentence and remand the case for further sentencing proceedings with such instructions as the court considers appropriate.
(3) is not described in paragraph (1) or (2), it shall affirm the sentence.
As the Fifth Circuit expressed, “Under these provisions, the characterization of the alleged sentencing error is critical.” United States v. Mejia-Orosco, 867 F.2d 216, 218 (5th Cir.1989), cert. denied, — U.S. -, 109 S.Ct. 3257, 106 L.Ed.2d 602 (1989). A sentence imposed “for which there is no applicable sentencing guideline” will be reversed only if it is plainly unreasonable. 18 U.S.C. § 3742(e)(2). On the other hand, a sentence “imposed as a result of an incorrect application of the sentencing guidelines” must be reversed even if reasonable. 18 U.S.C. § 3742(e)(2). Findings of fact that underlie the district court’s sentence are reviewed under a clearly erroneous standard. 18 U.S.C. § 3742(d).
In the case before us, Gabay was convicted of criminal contempt. Within the scope of the sentencing guidelines, the guideline applicable to criminal contempt (18 U.S.C. § 401) is § 2J1.1. That provision stated, “the court shall impose a sentence based on stated reasons and the purpose for sentencing set forth in 18 U.S.C. § 3553(a)(2).”
The Application Note to § 2J1.1 expounds:
Because misconduct constituting contempt varies significantly and the nature of the contemptuous conduct, the circumstances under which the contempt was committed, the effect the misconduct has on the administration of justice, and the need to vindicate the authority of the court are highly context-dependent, the commission has not provided a specific guideline for this offense. See, however, § 2X5.1.
Section 2X5.1 instructs the district court to look to analogous guidelines. The district court reported during the sentencing hearing that, “there is no analogous guideline and the court must base its sentence on the reasons and purposes as set forth in section 2(J)1.1 of the guidelines, and the court has considered the commission notes that misconduct constituting contempt varies significantly.” Gabay argues that § 2J1.6, Failure to Appear by Defendant, is an analogous guideline. Whether a guideline is or is not analogous to a defendant’s criminal activity is a question of law. Therefore, this court reviews the district court’s finding de novo. The trial court determined that Gabay’s actions were much more abhorrent than just failing to appear. We do not find the trial court’s determination to be erroneous. The videotape, the extensive effort required for recapture, and the fact that Gabay’s flight resulted in two trials, are sufficient aggravating circumstances to find that this was not a simple “failure to appear.”
The question still remains before this court whether the 60 months sentence for contempt was proper. Since there is no applicable sentencing guideline, we will only reverse the trial court if the sentence imposed is “plainly unreasonable.” 18 U.S.C. § 3742(e)(2). It is clear from the trial court’s finding of facts that Gabay displayed a tremendous level of contempt for the court and the federal criminal process. We are therefore persuaded that the sentence of 60 months for criminal contempt was not “plainly unreasonable.”
In conclusion, Gabay’s convictions and sentences are AFFIRMED.
. The indictment for bond jumping included a charge for bond jumping (violation of 18 U.S.C. § 3146(a)(1)) and a charge for criminal contempt (violation of 18 U.S.C. § 401(3)). Gabay was found guilty on both counts. The district court merged the two counts, so Gabay was sentenced only for criminal contempt.
. The trial of Mr. Schmalholz was conducted as scheduled and resulted in a verdict of not guilty. One of the government's witnesses was Saul Rubin, who died shortly after the trial.
. In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.1981) (en banc), the Eleventh Circuit adopted as binding precedent the decisions of the former Fifth Circuit issued before October 1, 1981.
. At one point in the trial the district court asked defense counsel, "Who is the next in the cast of character witnesses?” [R13-36],
. The work supervisor testified that the juror had said Gabay was guilty. The supervisor then brought these comments to the attention of the lawyer who contacted Gabay’s counsel. The juror’s colleagues testified that the juror told them someone in the case had a baby blue Rolls Royce and that she had learned the difference between real and counterfeit traveler’s checks because she had felt the counterfeit checks.
. The portrait of the juror which emerged from the inquest was of a person who appeared flighty and not taken seriously by her work colleagues or fellow jurors.
.Fed.R.Crim.P. 23(b) states:
Juries shall be of 12 but at any time before verdict the parties may stipulate in writing with the approval of the court that the jury shall consist of any number less than 12 or that a valid verdict may be returned by a jury of less than 12 should the court find it necessary to excuse one or more jurors for any just cause after trial commences. Even absent such stipulation, if the court finds it necessary to excuse a juror for just cause after the jury has retired to consider its verdict, in the discretion of the court a valid verdict may be returned by the remaining 11 jurors.
. When the court held its hearing to determine whether the tainted juror should be removed, counsel for Gabay insisted that there was just cause. He asserted, “We cannot leave that woman on the jury. You can’t its clear.” [R16-1623]
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6836238-20933 | MEMORANDUM OPINION
COLLEEN KOLLAR-KOTELLY, United States District Judge
Plaintiff Mark Greene is a performer, an original member of - the musical group known as “The Moments,” and the owner of the federally-registered trademark, “The Moments.” In this case," Plaintiff brings a claim for trademark infringement and counterfeiting under the Lanham Act against Defendant William “Billy” Brown, a member of the performing group “Ray, Goodman & Brown.” Plaintiff, seeks monetary and injunctive relief. Plaintiff alleges that Defendant wrongfully used the “Moments” trademark in advertising live performances of his performing group and in promoting the group Ray, Goodman & Brown on the Internet. Before the Court is Plaintiffs [36] Renewed Motion for Default Judgment. Upon consideration of the pleadings, the relevant legal authorities, and the record as a whole, the Court GRANTS IN PART and DENIES IN PART Plaintiffs [36] Renewed Motion for Default Júdgment. The Court will enter a default judgment in the amount of $83,606.60 in Plaintiffs favor,, including $82,500 in treble profits and $1,106.60 in costs, based on the allegations in the complaint and the documentation that Plaintiff submitted in support of the Renewed Motion for Default Judgment. The Court denies Plaintiffs request for a permanent injunction because Plaintiff has not shown a threat of continuing harm. The Court denies without prejudice Plaintiffs request for attorneys’ fees because Plaintiff has not provided the documentation necessary for the Court to issue such an award.
I. BACKGROUND
Plaintiff and Defendant are both recording and performing artists. Am. Compl. ¶¶ 3-4. Plaintiff was an original member of The Moments, a recording and performing musical group. Id. ¶ 6. Plaintiff is the owner of the federally-registered trademark for The Moments, Registration No. 2656413, Serial No. 76364446 (the “Moments Mark”). Id. ¶ 7. Plaintiff acquired the trademark on December 3, 2002, and renewed it for a second ten-year period on September 8, 2012. Id. ¶.¶ 8-9. Plaintiff uses the Moments Mark to promote his singing group, which he advertises as “The Moments, featuring Mark Greene.” Id. ¶ 10. Defendant is the last surviving original member of the performing group, Ray, Goodman & Brown. Id. ¶ 12.
Defendant has used the Moments Mark to advertise live performances of his singing group, Ray, Goodman & Brown, as “The Moments.” For example, Defendant used the Moments Mark to advertise live performances in San Diego, California, at the Cox Arena, on or about February 2010; live performances in Universal City, California, at the Gibson Amphitheatre, on or about April 2011; and a live performance at The Arc Theater in the District of Columbia on December 17, 2011. Id. ¶¶ 15, 17, 18. In addition, Defendant has used the Moments Mark on the internet, specifically on the Ray, Goodman & Brown MySpace and Facebook pages, as well as on YouTube, to advertise and promote Ray, Goodman &' Brown. Id. ¶ 16.
After Plaintiff discovered that Defendant was using the Moments Mark to advertise his performing group, Plaintiff, through counsel, sent Defendant several cease and desist notices requesting that Defendant cease using the Moments Mark. Id. ¶ 14. Specifically, Plaintiff sent cease and desists notices on April 12, 2010, and on April 19, 2011. Id., Ex. 1(b), ' Defendant continued to use the Moments Mark to advertise his group after Plaintiff sent these cease and desist notices. See id. ¶¶ 15-18.
Plaintiff filed this action on December 16, 2011. Defendant Brown was served personally in Washington, D.C., on December 17, 2011. Affidavit of Service by Private Process Server, ECF No. 3. After Defendant Brown failed to file a timely answer or otherwise respond to the complaint, Plaintiff moved for the entry of-default, see ECF No. 6, and the Clerk of the Court entered default as to Defendant Brown on April 4, 2012. On April 12, 2012, Plaintiff filed his first Motion for Entry of Default Judgement, ECF No. 9. The Court denied that motion without prejudice because it did not specify the damages sought, and it did not include any evidentiary support. See Order dated April 30, 2012, ECF No. 12, Plaintiff filed a [18] Revised Motion for Default Judgment, including evidentiary support, on October 15, 2013. The Court denied without prejudice that Revised Motion for Default Judgment, as well, due to a fundamental inconsistency between Plaintiffs Complaint and the Revised Motion for Default Judgment.. See Order dated May 27, 2014, ECF No. 24, at 2. Specifically, while Plaintiff sought damages in the Revised Motion for Default Judgment under 15 U.S.C. § 1114 of the Lanham Act, Plaintiff never cited this provision or asserted a claim under this provision in the original Complaint. See id. at 2. Pursuant to the Court’s orders, Plaintiff amended his Complaint and served the Amended Complaint on Defendant Brown on November 7, 2014. See Amended Affidavit of Service, ECF No. 32. Upon Plaintiffs request, the Clerk of the Court entered default as to Defendant Brown on January 13, 2015, and Plaintiffs filed the Renewed Motion for Default Judgment that is now before the Court.
II. LEGAL STANDARD
After a default has properly been entered by the Clerk, a party may move the court for a default judgment. Fed.R.Civ.P. 55(b)(2). “The determination of whether default judgment is appropriate is committed to the discretion of the trial court.” Int’l Painters & Allied Trades Indus. Pension Fund v. Auxier Drywall, LLC, 531 F.Supp.2d 56, 57 (D.D.C.2008) (citing Jackson v. Beech, 636 F.2d 831, 836 (D.C.Cir.1980)). Upon entry of default by the clerk of the court, the “defaulting defendant is deemed to admit every well-pleaded allegation in the complaint.” Int’l Painters & Allied Trades Indus. Pension Fund v. R.W. Amrine Drywall Co., Inc., 239 F.Supp.2d 26, 30 (D.D.C.2002) (internal citation omitted). “Although the default establishes a defendant’s liability, the court is required to make an independent determination of the sum to be awarded unless the amount of damages is certain.” Id. (citing Adkins v. Teseo, 180 F.Supp.2d 15, 17 (D.D.C.2001)). Accordingly, when moving for a default judgment, the plaintiff must prove its entitlement to the amount of monetary damages requested. Id. “In ruling on such a motion, the court may rely on detailed affidavits or documentary evidence to determine the appropriate sum for the default judgment.” Id.
III. DISCUSSION
In his Renewed Motion for Default Judgment, Plaintiff requests injunctive and monetary relief. The Court discusses, in turn, its jurisdiction over this action, Defendant’s liability, and the various forms of relief that Plaintiff requests.
A. Jurisdiction
Because Defendant has not responded or appeared, the Court will briefly address its jurisdiction. “[T]he procedural posture of a default does not relieve a federal court of its ‘affirmative obligation’ to determine whether it has subject-matter jurisdiction over the action.” Philadelphia Indem. Ins. Co. v. Emerson, No. CV 14-301(ESH), 2015 WL 1359681, at *2, 308 F.R.D. 16, 18 (D.D.C. Mar. 24, 2015) (quoting James Madison Ltd. v. Ludwig, 82 F.3d 1085, 1092 (D.C.Cir.1996)). Here, the Court has subject matter jurisdiction over the Lanham Act claim — the sole claim in this action — pursuant to 28 U.S.C. § 1338. In addition, “a court should satisfy itself that it has personal jurisdiction before entering judgment against an absent defendant.” Mwani v. Bin Laden, 417 F.3d 1, 6 (D.C.Cir.2005). Here, the Court is satisfied that it has personal jurisdiction over the Defendant because Defendant personally performed in a concert in the District of Columbia — on December 17, 2011 — that gave rise to this litigation. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (“[A] forum legitimately may exercise personal jurisdiction over a nonresident who purposefully directs his activities toward forum residents” where “the litigation results from alleged injuries that arise out of or relate to those activities.” (internal quotations and citations omitted)). The Court notes, as well, that Defendant Brown was served with the original Complaint while inside the District of Columbia for the purpose of performing the aforementioned December 2011 concert, which is the subject of this litigation. See Affidavit of Service by Private Process Server, ECF No. 3. Accordingly, the Court is satisfied that it has subject matter jurisdiction over this action and that it has personal jurisdiction over Defendant Brown.
B. Liability
Where, as here, there is a complete “absence of any request to set aside the default or suggestion by the defendant that it has a meritorious defense, it is clear that the standard for default judgment has been satisfied.” Auxier Drywall, LLC, 531 F.Supp.2d at 57 (internal quotation marks omitted). The Clerk of the Court has entered Defendant’s default, and the factual allegations in the Amended Complaint are therefore taken as true. R.W. Amrine Drywall Co., Inc., 239 F.Supp.2d at 30. The Court finds that Plaintiffs Amended Complaint sufficiently alleges facts to support Plaintiffs claim of trademark infringement and counterfeiting under the Lanham Act, 15 U.S.C. § 1051 et seq.
To prevail on a claim for federal trademark infringement, “the plaintiff must show (1) that it owns a valid trademark, (2) that its trademark is distinctive or has acquired a secondary meaning, and (3) that there is a substantial likelihood of confusion between the plaintiffs mark and the alleged infringer’s mark.” Globalaw Ltd. v. Carmon & Carmon Law Office, 452 F.Supp.2d 1, 26-27 (D.D.C.2006) (internal quotation marks omitted). By default, Defendant admits that Plaintiff has a valid mark that has a secondary meaning and that there is substantial likelihood of confusion between Plaintiffs valid mark and Defendant’s use of the Moments Mark. See Am. Compl. ¶¶ 7-9, 25-27.
To establish trademark counterfeiting, Plaintiff must show that Defendant infringed a registered trademark in violation of 15 U.S.C. § 1114(l)(a) and that Defendant “intentionally us[ed] a mark ..., knowing such mark ... is a counterfeit mark.” 15 U.S.C. § 1117(b); see also Lifted Research Group, Inc. v. Behdad, Inc., 591 F.Supp.2d 3, 7 (D.D.C.2008); Babbit Elec., Inc. v. Dynascan Corp., 38 F.3d 1161, 1181 (11th Cir.1994). As discussed above, Plaintiff has established that Defendant infringed Plaintiffs registered trademark. Through his default, Defendant has admitted the intentional use of Plaintiffs mark while knowing that mark is counterfeit with respect to his use of the Moments Mark after April 2010 — when Plaintiff first sent him a cease and desist letter. See Am. Compl. ¶ 14, Ex. 1(b). Defendant’s willfulness is demonstrated by the fact that he had knowledge of Plaintiffs trademark registration for the Moments Mark, and yet continued to use the Moments Mark to advertise his performing group after receiving a cease and desist letter from Plaintiff. Indeed, Defendant continued to use the Moments Mark after he was served with the original Complaint in this action: he was served on December 17, 2011, but advertised concerts that occurred in February 2012 as “Ray, Goodman & Brown” performing as “The Moments.” See Renewed Mot., Ex. 2, Affidavit of Alan Beck (“Beck Aff.”) ¶ 8. Accordingly, Defendant is liable for trademark infringement and counterfeiting.
C. Relief
Plaintiff requests relief in the form of injunctive relief and monetary damages, including attorneys’ fees and costs. The Court addresses, in turn, each of these requests.
1. Damages and Profits
The Lanham Act allows a Plaintiff to “recover (1) defendant’s profits” and “(2) any damages sustained by the plaintiff.” 15 U.S.C. § 1117(a). In addition, in a case involving a counterfeit mark, “the court shall, unless the court finds extenuating circumstances, enter judgment for three times such profits or damages, whichever amount is- greater” in circumstances when the “the violation consists of ... intentionally using such mark or designation, knowing such mark or designation is a counterfeit mark.” Id. § 1117(b). Plaintiff seeks treble profits in the amount of $192,000, and nominal damages in the amount of $5,000.
With respect to Plaintiffs request for nominal damages, the Plaintiff concedes that he has not suffered any actual, non-nominal damages as a result of Defendant’s violations. See Renewed Mot. at 16. The Court notes, first, that Plaint does not seek statutory damages, the alternative remedy provided pursuant to 15 U.S.C. § 1117(c), which allows statutory damages “instead of actual damages and profits.” Id. In contrast, the' provisions of section 1117(a) and (b), on which Plaintiff relies, do not provide for the recovery of nominal damages. The Lanham Act allows the Court to exercise its equitable discretion to enter judgment “for such sum as the court shall find to be just, according to the circumstances of the case” if the Court finds “that the amount of the recovery based on profits is either inadequate or excessive.” Id. § 1117(a). However, the Act caps the award of damages at three times the amount of the actual damages. Id. Because Plaintiff concedes that he suffered no actual damages, the Court is precluded from exercising its equitable discretion to award nominal damages. Plaintiff chose not rely on the statutory damages provision of the statute, which allows damages without proof'of damages or profits, and is; therefore, limited to the damages and profits provisions of section 1117(a) and (b). Accordingly, the Court shall not award Plaintiff nominal damages.
Profits are available as a remedy for trademark infringement upon a showing of willfulness or bad faith. See ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 966 (D.C.Cir.1990) (citing Foxtrap, Inc. v. Foxtrap, Inc., 671 F.2d 636, 641 (D.C.Cir.1982)). The Court concludes that, through Defendant’s default, Defendant has admitted -willfulness with respect to all occasions of trademark infringement that followed Plaintiffs initial cease-and-desist letter, sent in April 2010. See Am. Compl. ¶ 14, Ex. 1(b).
“In assessing profits the plaintiff shall be required- to prove defendant’s sales only; defendant must prove all elements of cost or deduction claimed.” 15 U.S.C. § 1117(a). Plaintiff provides evidence of $19,500 in profits by Defendant in the years 2011 and 2012. However, Plaintiff argues that this is an inadequate recovery because “Defendant would have performed an average of 8 times” in each of those years. Renewed Mot. at 16. Accordingly, Plaintiff seeks recovery for profits in the amount of $64,000 based on an estimate of 16 performances over the course of two years at a rate $4,000 in profit for each performance. Plaintiff bases his estimate of 8 performances per year on' his experience as a soul music artist. See Renewed Mot. at 9-10 (citing Greene Aff. ¶¶ 10-14). Notwithstanding Plaintiffs experience, the Court concludes that this is an inadequate basis for determining Defendant’s profits. The estimate of eight concert's per year is speculation as applied to these two specific years by this specific performer. While the Court agrees with Plaintiff that the evidence of profits per concert is substantially within Defendant’s control, evidence as to the total number of concerts is freely available to Plaintiff, whether through research on the Internet on the various websites that advertise musical performances-or by contacting concert venues individually. Accordingly, the Court will not award profits based on Plaintiffs estimate ' of 16, performances over the course of two years. However, the Court will consider profits from the concerts specifically described by Plaintiff.
The Court now addresses each concert occurring in 2011 and 2012 enumerated by Plaintiff. ■ Through the Amended Complaint and Plaintiffs Renewed Motion for Default Judgment, Plaintiff provides details about the following concerts:
• February 11-12, 2011. Defendant performed twice at the Gibson Am-phitheatre, in Universal City, California. Am. Compl., Ex. 1(d); id., Ex. 2, Beck Aff. ¶ 5. Defendant was paid $4,000 for the February 11 performance and was paid $4,000 for the February 12 performance. Beck Aff. ¶ 5.
• August 1, 2011. Defendant advertised a performance under the name “The Moments with Lavi,” at the Beechman Theatre,, in New York. . See Am Compl., Ex. 1(f). Plaintiff does not identify the amount of profits associated with this performance.
• October 22, 2011. A concert that was scheduled to occur in Providence was advertised online at song-kick.com. See Am. Compl., Ex. 1(f). However, that concert was canceled • before it occurred. See id. Plaintiff does not identify any profits associated with this concert.
• December 17, 2011. It was advertised that Defendant would perform at The Arc Theater as The Moments. Am. Compl. ¶ 15. Plaintiff was unable to identify profits associated with this concert. ‘
• February 10, 2012. Defendant performed as Ray, Goodman & Brown and as The Moments in Sacramento, California. Beck Aff; ¶ 9. Defendant was paid $4,000. Id.
• February 11, 2012. Defendant performed as Ray, Goodman & Brown and as The Moments in Fresno, California. Id. Defendant was paid $4,000. Id.
• February 11, 2012. Defendant performed as part of Ray, Goodman & Brown, performing also as “The Moments,” at the Orleans Hotel in Las Vegas, Nevada. Id. Defendant was paid $3,500. Id.
Plaintiff has identified $19,500 in profits, in total, from five of these concerts. The Court now considers whether it can impute profits .to the concerts where no profits were specifically identified. With respect to the October 22, 2011, concert, which was cancelled, the Court will not attribute any profits to a concert that did not occur without any indication that Plaintiff was paid for that cancelled event. With respect to Defendant’s August 1, 2011, and December 17, 2011, concerts, Plaintiff was also unable to identify Defendant’s actual profits. The Court recognizes that Defendant himself controls the best evidence of his profits, and the Court acknowledges that Plaintiff reported that it proved impossible to obtain this information from third parties. Given that the Court is charged with “entering] judgment for such sum as the court shall find to be just,” 15 U.S.C. § 1117(a), the Court will impute profits to those two concerts based on the other evidence submitted by Plaintiff. See Louis Vuitton S.A. v. Spencer Handbags Corp., 765 F.2d 966, 973 (2d Cir.1985) (where “the defendant controls the most satisfactory evidence of sales the plaintiff needs only establish a basis for a reasoned conclusion as to the extent of injury caused by the deliberate and wrongful infringement.”). As shown above, Plaintiff has provided evidence showing that Defendant was paid $4,000 for each of four concerts in 2011 and 2012 and was paid $3,500 for a fifth concert in that same time period. The Court finds that $4,000 is a reasonable estimate of the profits Defendant earned from each concert in which he performed in 2011 and 2012. Therefore, the Court imputes a profit of $4,000 to the August 1, 2011, concert and a profit of $4,000 to the December 17, 2011, concert. In sum, the Court finds that Plaintiff has provided sufficient support for $19,500 in profits that have been specifically enumerated by Plaintiff and for $8,000 in profits that the Court imputes to Defendant’s violations, for a total of $27,500 in profits.
The Court will award treble profits pursuant to section 1117(b) because Plaintiff has established Defendant’s liability for trademark counterfeiting. Specifically, Plaintiff has established, through Defendant’s default and through the information submitted in the record, that Defendant had been informed of his infringement on Plaintiffs trademark prior to the occurrence of any of the events that are the basis for this award of profits. Accordingly, the Court will award treble profits in the total amount of $82,500.
2. Injunctive Relief
Plaintiff requests the Court permanently enjoin Defendant from infringing Plaintiff’s mark. A district court has authority under the Lanham Act to grant injunctive relief “according to the principles of equity and upon such terms as the court may deem reasonable” to prevent further violation of Plaintiffs trademark rights and copyrights. 15 U.S.C. § 1116(a). “In determining whether to enter a permanent injunction, the Court considers a modified iteration of the factors it utilizes in assessing preliminaiy injunctions: (1) success on the merits, (2) whether the plaintiffs will suffer irreparable injury absent an injunction, (3) whether, balancing the hardships, there is harm to defendants or other interested parties, and (4) whether the public interest favors granting the injunction.” American Civil Liberties Union v. Mineta, 319 F.Supp.2d 69, 87 (D.D.C.2004).
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3715429-27894 | ORDER Re: JOINT STIPULATION
FERNANDO M. OLGUIN, United States Magistrate Judge.
PROCEEDINGS
Plaintiff filed a Complaint on July 26, 2006, seeking review of the denial by the Commissioner of the Social Security Administration (“Commissioner”) of her application for Supplemental Security Income (“SSI”) pursuant to Title XVI of the Social Security Act (“Act”). 42 U.S.C. § 405(g). On May 9, 2007, the parties submitted a Joint Stipulation (“Joint Stip.”). The court has taken the matter under submission without oral argument.
THE FTVE-STEP SEQUENTIAL EVALUATION PROCESS
To be eligible for disability benefits, a claimant must demonstrate a medically determinable impairment which prevents the claimant from engaging in substantial gainful activity and which is expected to result in death or to last for a continuous period of at least 12 months. 42 U.S.C. § 423(d)(1)(A); Tackett v. Apfel, 180 F.3d 1094, 1098 (9th Cir.1999).
Disability claims are evaluated using a five-step test:
Step one: Is the claimant engaging in substantial gainful activity? If so, the claimant is found not disabled. If not, proceed to step two.
Step two: Does the claimant have a “severe” impairment? If so, proceed to step three. If not, then a finding of not disabled is appropriate.
Step three: Does the claimant’s impairment or combination of impairments meet or equal an impairment listed in 20 C.F.R., Part 404, Subpart P, Appendix 1? If so, the claimant is automatically determined to be disabled. If not, proceed to step four.
Step four: Is the claimant capable of performing his past work? If so, the claimant is not disabled. If not, proceed to step five.
Step five: Does the claimant have the residual functional capacity to perform any other work? If so, the claimant is not disabled. If not, the claimant is disabled.
20 C.F.R. §§ 404.1520(a)(4) & 416.920(a)(4); Tackett, 180 F.3d at 1098-99. If a claimant is found “disabled” or “not disabled” at any step, there is no need to complete further steps. 20 C.F.R. §§ 404.1520(a)(4) & 416.920(a)(4); Tackett, 180 F.3d at 1098.
BACKGROUND AND SUMMARY OF ADMINISTRATIVE DECISION
Plaintiff, who was 61 years of age at the time of her last administrative hearing, obtained a fourth-grade education in Vietnam. (See Administrative Record (“AR”) at 16, 49 & 288). Her past work experience includes employment as a rice farmer and a sewing machine operator. (Id. at 16-17, 116 & 131).
Plaintiff protectively filed for SSI on March 30, 2001, alleging that she has been disabled since November 1, 1999, due to hypertension, headaches, dizziness, fainting, weakness, fatigue, and back and leg pain. (See AR at 15, 51, 97 & 102). Plaintiffs application was denied initially, on reconsideration, and by an Administrative Law Judge (“ALJ”) in a written decision issued on April 18, 2003. (See id. at 15, 51, 57 & 75-82). Thereafter, plaintiff filed a timely request for review of the ALJ’s decision by the Appeals Council (“AC”). (Id. at 83). On July 8, 2004, the AC vacated the ALJ’s decision and remanded the matter for further proceedings based upon the ALJ’s failure to share information with plaintiff and her counsel, the ALJ’s improper evaluation of the medical evidence, and the ALJ’s erroneous determination that plaintiffs past work as a sewing machine operator constituted substantial gainful activity. (See id.' at 15 & 93-95).
On October 20, 2004, plaintiff appeared and testified at a supplemental hearing before an ALJ. (AR at 15 & 288-97). The ALJ also heard testimony from Alan Bo-roskin, a vocational expert (“VE”). (Id. at 15 & 297-304).
The ALJ denied plaintiffs request for benefits on April 27, 2005. (AR at 15-22). Applying the five-step sequential evaluation process, the ALJ found, at step one, that plaintiff has not engaged in substantial gainful activity since her alleged onset date of disability. (Id. at 16 & 21). At step two, the ALJ found that plaintiff suffers from severe impairments consisting of “hypertension, obesity, and hyperlipide-mia.” (Id. at 17 & 21). At step three, the ALJ determined that the evidence does not demonstrate that plaintiffs impairments, either individually or in combination, meet or medically equal the severity of any listing set forth in the Social Security regulations. (Id.).
The ALJ then assessed plaintiffs residual functional capacity (“RFC”) and determined that she can perform a full range of medium work. (AR at 20). Specifically, the ALJ found that plaintiff can:
stand and/or walk, with normal breaks, for a total of about 6 hours during an 8-hour workday. She can sit, with normal breaks, for a total of about 6 hours during an 8-hour workday. She can lift and/or carry a maximum of 50 pounds occasionally and 25 pounds frequently.
(Id. at 20 & 21). Based on plaintiffs RFC, the ALJ determined, at step four, that “[b]ased on the [plaintiff]’s own description of her past relevant work as a rice farmer, this job did not require the performance of work-related activities precluded by her residual functional capacity.... Thus, the [plaintiff] could return to her past relevant work as a rice farmer as previously performed and as generally performed in the national economy.” (Id. at 20-21)(internal citation omitted). Accordingly, the ALJ concluded that plaintiff was not suffering from a disability as defined by the Act. (Id. at 21 & 22).
Plaintiff filed a timely request for review of the ALJ’s decision, which was denied by the Appeals Council. (See AR at 5-7 & 10). The ALJ’s decision stands as the final decision of the Commissioner.
STANDARD OF REVIEW
Under 42 U.S.C. § 405(g), a district court may review the Commissioner’s decision to deny benefits. The ALJ’s findings and decision must be upheld if they are free of legal error and supported by sub stantial evidence. Mayes v. Massanari, 276 F.3d 453, 458-59 (9th Cir.2001, as amended, Dec. 21, 2001). If the court, however, determines that the ALJ’s findings are based on legal error or are not supported by substantial evidence in the record, the court may reject- the findings and set aside the decision to deny benefits. Aukland v. Massanari, 257 F.3d 1033, 1035 (9th Cir.2001); Tonapetyan v. Halter, 242 F.3d 1144, 1147 (9th Cir.2001).
“Substantial evidence is more than a mere scintilla, but less than a preponderance.” Aukland, 257 F.3d at 1035. Substantial evidence is such “relevant evidence which a reasonable person might accept as adequate to support a conclusion.” Reddick v. Chater, 157 F.3d 715, 720 (9th Cir.1998); Mayes, 276 F.3d at 459. To determine whether substantial evidence supports the ALJ’s finding, the reviewing court must review the administrative record as a whole, “weighing both the evidence that supports and the evidence that detracts from the ALJ’s conclusion.” Mayes, 276 F.3d at 459. The ALJ’s decision “ ‘cannot be affirmed simply by isolating a specific quantum of supporting evidence.’ ” Aukland, 257 F.3d at 1035 (quoting Sousa v. Callahan, 143 F.3d 1240, 1243 (9th Cir.1998)). If the evidence can reasonably support either affirming or reversing the ALJ’s decision, the reviewing court “ ‘may not substitute its judgment for that of the ALJ.’ ” Id. (quoting Matney ex rel. Matney v. Sullivan, 981 F.2d 1016, 1018. (9th Cir.1992)).
DISCUSSION
I. THE ALJ IMPROPERLY DETERMINED THAT PLAINTIFF’S PAST WORK AS A RICE FARMER CONSTITUTED SUBSTANTIAL GAINFUL ACTIVITY.
Plaintiff contends that the ALJ erred in his step four determination that plaintiffs past employment as a rice farmer qualified as past relevant work. (See Joint Stip at 4-7 & 9-11). Specifically, plaintiff maintains that her work on a family farm in Vietnam where she grew rice and other produce for personal consumption, bartered a small portion for necessities, and was not paid a wage, does not satisfy the requirements for past relevant work because it did not constitute substantial gainful activity (“SGA”). (See id.). Further, plaintiff asserts that whether she was an employee or self-employed does not alter the determination that her work as a rice farmer does not constitute SGA. (See id.).
Past relevant work is defined as “work that you have done within the past 15 years, that was substantial gainful activity, and that lasted long enough for you to learn to do it.” 20 C.F.R. §§ 404.1560(b)(1) & 416.960(b)(1); see also id. at §§ 404.1565(a) (explaining the 15-year guide for determining SGA) & 416.965(a) (same). Thus, for a claimant’s past employment to be considered past relevant work, the work must constitute SGA. Lewis v. Apfel, 236 F.3d 503, 515 (9th Cir.2001) (“A job qualifies as past relevant work only if it involved substantial gainful activity.”).
SGA is “work activity that is both substantial and gainful[.]” 20 C.F.R. §§ 404.1572 & 416.972; see also Lewis, 236 F.3d at 515 (“Substantial gainful activity is work done for pay or profit that involves significant mental or physical activities.”). “Substantial work activity is work activity that involves doing significant physical or mental activities. [A claimant’s] work may be substantial even if it is done on a part-time basis or if [the claimant] do[es] less, get[s] paid less, or ha[s] less responsibility than when [the claimant] worked before.” 20 C.F.R. §§ 404.1572(a) & 416.972(a). “Gainful work activity is work activity that [a claimant] do[es] for pay or profit. Work activity is gainful if it is the kind of work usually done for pay or profit, whether or not a profit is realized.” Id. at §§ 404.1572(b) & 416.972(b).
In determining whether a particular job constitutes SGA, the Social Security regulations consider two employment categories: employee and self employed. See 20 C.F.R. §§ 404.1574; 404.1575; 416.974 & 416.975. For an employee, the primary factor in determining whether his or her past work is SGA “will be the earnings [the employee] derive[d] from the work activity.” Id. at §§ 404.1574(a)(1) & 416.974(a)(1). There is a rebuttable presumption that the employee either was or was not engaged in SGA if his or her average monthly earnings are above or below a certain amount established by the Commissioner’s Earnings Guidelines. See id. at §§ 404.1574(b)(2)-(3) & 416.974(b)(2)-(3); see also Lewis, 236 F.3d at 515 (“Earnings can be a presumptive, but not conclusive, sign of whether a job is substantial gainful activity.”).
Earnings, however, are not dispositive. For example, even where the employee’s wages are not substantial, if there is other evidence indicating that the claimant was engaged in SGA or that a claimant was in the position to control the amount of wages he or she was paid, the Commissioner may consider whether the work performed is “comparable to that of unimpaired people in [the employee’s] community who are doing the same or similar occupations as their means of livelihood, taking into account the time, energy, skill, and responsibility involved in the work[.]” 20 C.F.R. §§ 404.1574(b)(3)(ii)(A) & 416.974(b)(3)(ii)(A). The Commissioner may also rely upon evidence that the employee’s work is clearly worth more than the SGA amounts provided for the particular calendar year in the Commissioner’s Earning Guidelines based upon the prevailing pay scales in the employee’s community. Id. at §§ 404.1574(b)(3)(ii)(B) & 416.974(b)(3)(ii)(B).
If a claimant is self-employed, the Commissioner will consider the work activities he or she has performed and their value to the business to determine whether the individual engaged in SGA. 20 C.F.R. §§ 404.1575(a)(2) & 416.975(a)(2). The Social Security Regulations provide three tests for determining whether self-employment qualifies as SGA:
Test one: You have engaged in substantial gainful activity if you render services that are significant to the operation of the business and receive a substantial income from the business. ...
Test Two: You have engaged in substantial gainful activity if your work activity, in terms of factors such as hours, skills, energy output, efficiency, duties, and responsibilities, is comparable to that of unimpaired individuals in your community who are in the same or similar businesses as their means of livelihood.
Test Three: You have engaged in substantial gainful activity if your work activity, although not comparable to that of unimpaired individuals, is clearly worth the amount shown in [the Commissioner’s Earnings Guidelines] when considered in terms of its value to the business, or when compared to the salary that an owner would pay to an employee to do the work you are doing.
Id. at §§ 404.1575(a)(2)(i)-(iii) & 416.975(a)(2)(i)-(iii) (italics omitted). If the individual’s work is SGA under test one, the ALJ need not apply tests two and three. See Camper v. Sullivan, 1991 WL 352422, at *2 (N.D.Cal.1991). “If, on the other hand, it is clearly established that the self-employed person is not engaging in SGA on the basis of significant services and substantial income (i.e., the first test), both the second and third tests concerning comparability and worth of work must be considered.” Id. (italics in original).
Here, plaintiff described her past job as work in the fields growing rice and other produce, for which she was not paid a wage. (AR at 116 & 132). Her work consisted of farming with hand tools and lifting bundles of food onto a cart to be carried home. (See id.). It appears that plaintiff grew only enough food for personal consumption and to exchange for necessities. (See id.). Finally, plaintiff indicated that she did not lead or supervise any other farm laborers. (Id.).
The extent of the ALJ’s analysis of whether plaintiffs past work constituted SGA was his conclusory statement that plaintiff has “past relevant work as a rice farmer.” (AR at 20). In making this determination, the ALJ relied upon plaintiffs own description of her duties as a rice farmer. (See id.) (“Based on the [plain-tiffj’s own description of her past relevant work as a rice farmer, this job did not require the performance of the work-related activities precluded by her residual functional capacity.”) (internal citation omitted). In his decision, the ALJ did not specify whether plaintiffs past work on the family farm was done as an employee or a self-employed individual. (See, generally, id. at 15-22).
Irrespective of whether plaintiff was an employee or self-employed, however, the court is persuaded that her past work as a rice farmer does not constitute SGA. If plaintiff was an employee, because she earned no wages, a presumption arose that she was not engaged in SGA. See Lewis, 236 F.3d at 515; 20 C.F.R. §§ 404.1574(b)(3) & 416.974(b)(3). The burden then shifted to the Commissioner to point to other evidence in the record to establish that plaintiff was engaged in SGA. See Lewis, 236 F.3d at 515 (“With the presumption, the claimant has carried his or her burden [at step four] unless the ALJ points to substantial evidence, aside from earnings, that the claimant has engaged in substantial gainful activity.”) (italics in original). Other than his assertion that plaintiffs work as a rice farmer constituted past relevant work, (AR at 20), the ALJ made no effort to rebut the presumption that plaintiff was not engaged in SGA. See Lewis, 236 F.3d at 517 (ALJ erred in step four determination that plaintiff could perform his past relevant work because the ALJ “did not rebut the presumption that [plaintiff] had not engaged in substantial gainful activity, and thus had not engaged in past relevant work[ ]”). Finally, even if the earnings presumption did not apply, plaintiffs prior work would still not be considered SGA because there is no evidence of the prevailing pay scales for rice farmers in plaintiffs community or any evidence that unimpaired people in plaintiffs community performed comparable work as rice farmers for profit. See 20 C.F.R. §§ 404.1574(b)(3)(ii) & 416.974(b)(3)(H).
Although defendant concedes that plaintiff was not self-employed, (see Joint Stip. at 7) (“there is no evidence in the record that [p]laintiff was ‘self-employed’ nor did the ALJ so conclude[ ]”), it is worth noting that, even assuming plaintiff was self-em ployed as a rice farmer, her work nevertheless did not constitute SGA. Under test one, even if plaintiff provided significant services to the rice farm, she did not receive a substantial income and thus her work cannot be considered to be SGA. See 20 C.F.R. §§ 404.1575(a)(2)® & 416.975(a)(2)®. Nor is there any evidence in the record that the rice and produce plaintiff grew would amount to a substantial income. Under test two, there is no evidence that plaintiffs work was comparable (considering factors such as hours, skills, energy output, efficiency, duties and responsibilities) to that of unimpaired persons in her community who earned wages or other substantial income as rice farmers or from other similar occupations. See id. at §§ 404.1575(a)(2)(ii) & 416.975(a)(2)(a). Under test three, the record contains no evidence to support a finding that plaintiffs work was clearly worth wages amounting to SGA under the Commissioner’s Earning Guidelines, in terms of its value to the farm or based upon what an employer would ordinarily pay a rice farmer. See id. at §§ 404.1575(a)(2)(iii) & 416.975(a)(2)(iii). “The lack of conclusive evidence as to the comparability of the required factors” results in a finding that the work plaintiff performed was not SGA. Social Security Ruling (“SSR”)83-34, 1983 WL 31256, at *9. Further, “any doubt as to the comparability of the factors should be resolved in favor of’ plaintiff. Id.
In sum, whether plaintiff was an employee or self-employed, the subsistence farm work she performed in Vietnam did not constitute SGA as defined by the Social Security regulations. Thus, the ALJ’s determination, at step four, that plaintiff could perform her past relevant work as a rice farmer, is not supported by substantial evidence.
II. THE ALJ ERRED IN FINDING THAT PLAINTIFF IS NOT DISABLED.
Plaintiff asserts that the ALJ erred in finding her not disabled under the Medical-Vocational Guidelines (“Grids”). (See Joint Stip. at 17-18); see also 20 C.F.R. pt. 404, subpt. P. app. 2. Specifically, plaintiff contends that she meets the requirements of Grids Rule 203.01. (Joint Stip. at 18).
Once a plaintiff has established an inability to perform past relevant work, the burden shifts to the Commissioner, at step five, to show that the plaintiff “can perform other substantial gainful work that exists in the national economy.” Swenson v. Sullivan, 876 F.2d 683, 687 (9th Cir.1989). The Grids are applied at step five and “present, in table form, a short-hand method for determining the availability and numbers of suitable jobs for a claimant.” Lounsburry v. Barn hart, 468 F.3d 1111, 1114 (9th Cir.2006, as amended Nov. 7, 2006). Use of the Grids is appropriate only when a plaintiffs impairment “manifests itself by limitations in meeting the strength requirements of jobs (‘exertional limitations’); [the Grids] may not be fully applicable where the nature of a claimant’s impairment does not result in such limitations (‘non-exertional limitations’).” Id. at 1115. Thus, “[w]here a claimant suffers only exertional limitations, the ALJ must consult the grids.” Id.; see Tackett, 180 F.3d at 1102 (“The ALJ may rely on the grids alone ... only when the grids accurately and completely describe the claimant’s abilities and limitations.”) (internal quotation marks and citation omitted).
Application of the Grids is limited when, “despite having the residual functional capacity to perform a full range of unskilled occupations at a given exertional level, a claimant may not be able to adjust to these jobs because of non-exertional limitations.” Lounsburry, 468 F.3d at 1115. Nevertheless, the Grids are consulted first to determine if plaintiff is “disabled.” See id. “In other words, where a person with exertional and non-exertional limitations is ‘disabled’ under the grids, there is no need to examine the effect of the non-exertional limitations[, b]ut if the same person is not disabled under the grids, the non-exertional limitations must be examined separately.” Id. at 1116.
The Grids provide that an individual with the RFC for medium work is disabled if he or she is closely approaching retirement age, has no more than a marginal education and has only unskilled or no previous work experience. See Grids Rule 203.01. Persons between the ages of 60 and 64 are “closely approaching retirement age[.]” 20 C.F.R. § 404.1563(e). A marginal education is defined as an “ability in reasoning, arithmetic, and language skills which [is] needed to do simple, unskilled types of jobs. [The Commissioner] generally considers] that formal schooling at a 6th grade level or less is a marginal education.” Id. at § 404.1564(b)(2). For a claimant’s work experience to be considered under the Grids, it must constitute SGA and have been performed within the last 15 years for a long enough period for the worker to learn how to do the job. Id. at 404.1565(a) (“We consider that your work experience applies when it was done within the last 15 years, lasted long enough for you to learn to do it, and was substantial gainful activity.”).
Here, plaintiff meets the requirements of Grids Rule 203.01 because she was 62 years old on the date of the ALJ’s decision, has a 4th grade education, (see AR at 16, 49 & 288), and no relevant past work experience. See supra at § I. Thus, she is considered to be disabled. See Lounsburry, 468 F.3d at 1115-16 (“Where application of the grids directs a finding of disability, that finding must be accepted by the [Commissioner.]”) (internal quotation marks, brackets, italics and citation omitted).
III. AN AWARD OF BENEFITS IS APPROPRIATE.
The court has discretion to remand or reverse and award benefits. Harman v. Apfel, 211 F.3d 1172, 1179 (9th Cir.2000, as amended May 4, 2000), cert. denied, 531 U.S. 1038, 121 S.Ct. 628, 148 L.Ed.2d 537 (2000); McAllister v. Sullivan, 888 F.2d 599, 603 (9th Cir.1989, as amended Oct. 19, 1989). Where no useful purpose would be served by further proceedings, or where the record has been fully developed, it is appropriate to exercise this discretion to direct an immediate award of benefits. See Benecke v. Barnhart, 379 F.3d 587, 595-96 (9th Cir.2004); Varney v. Sec’y of H.H.S., 859 F.2d 1396, 1401 (9th Cir.1988); see also Harman, 211 F.3d at 1179 (“the decision of whether to remand for further proceedings turns upon the likely utility of such proceedings[ ]”).
Under the circumstances, the court is persuaded that benefits should be awarded. As the court concluded above, the record establishes that plaintiff meets the requirements for a finding of disability under the Grids. Moreover, under the circumstances, the court believes that a remand for benefits, instead of further proceedings, is necessary in this case to “improve the performance of the ALJs by discouraging them from reaching a conclusion first, and then attempting to justify it by ignoring competent evidence!)]” Varney, 859 F.2d at 1398 (internal quotation marks, brackets and citation omitted). The court is troubled by the ALJ’s conflicting and what appears to be result-oriented treatment of the vocational evidence in this matter. For example, in his first decision, the ALJ assigned plaintiff a more restrictive RFC than in the instant decision, (compare AR at 20 with id. at 80 & 81), and determined that plaintiff was unable to perform her past work as a rice farmer. (See id. at 80) (“[W]ith a residual functional capacity to perform light work, the ALJ finds that the [plaintiff] is capable of performing her past relevant work as a sewing machine operator but not her past work as a farmer.”). In the instant decision, the ALJ, inexplicably, imposed a less restrictive RFC and concluded that plaintiff was now- — two years later — capable of performing her past employment as a rice farmer. (See id. at 20). The ALJ made his determination without citing or mentioning any medical evidence establishing that plaintiffs impairments had improved to such an extent that instead of being able to perform only light work, she was now capable of medium work. (See, generally, id. at 15-22).
Aside from the fact that the ALJ failed to provide an adequate explanation for the change in plaintiffs RFC, the court is also troubled by the ALJ’s result-driven analysis relating to the hypothetical posed to the VE. The ALJ propounded four hypo-theticals to the VE with various RFCs, to which the VE responded that if plaintiff had any of those RFCs, she would be unable to perform her past work as a rice farmer. (See AR at 299-303). Yet, the ALJ, again inexplicably, assessed a less restrictive RFC than any of the four propounded to the VE and found that plaintiff could perform her past job as a rice farmer. (Compare id. at 20 & 21 with id. at 299-303).
Finally, as noted earlier, the AC vacated the ALJ’s prior decision and remanded the matter for further proceedings based, in part, on the ALJ’s error in determining that plaintiffs past work as a sewing machine operator — plaintiffs only other job apart from that as a rice farmer — constituted SGA. (See AR at 93-95). Yet, in the instant decision, the ALJ made a substantively similar error in his determination that plaintiffs past work as a rice farmer was SGA. (See id. at 20). Indeed, given the AC’S remand order, the ALJ should have been particularly careful in his analysis of whether plaintiffs past work as a rice farmer constituted SGA. Instead, on remand, the ALJ failed to adequately consider whether plaintiffs past work was SGA and provided only a conelusory statement that plaintiffs work as a rice farmer constituted past relevant work. (See id. at 20-21).
Where, as here, it is clear from the record that the ALJ reached a conclusion first and then attempted to justify it by ignoring competent evidence, see Varney, 859 F.2d at 1398, the court sees no need to return the case to the Commissioner to make another determination as to whether plaintiffs past work as a rice farmer constituted past relevant work. “Allowing the Commissioner to decide the issue again would create an unfair ‘heads we win; tails, let’s play again’ system of disability benefits adjudication.” Benecke, 379 F.3d at 595. Plaintiff has already waited nearly seven years from the filing date of her SSI application for a disability determination. (See AR at 15 & 98); see also Benecke, 379 F.3d at 595 (“Remanding a disability claim for further proceedings can delay much needed income for claimants who are unable to work and are entitled to benefits, often subjecting them to tremendous financial difficulties while awaiting the outcome of their appeals and proceedings on remand.”) (internal quotation marks and citation omitted). In short, a remand for the payment of benefits is warranted regardless of whether the ALJ might have (on remand) investigated vocational data regarding plaintiffs past work in Vietnam and articulated a valid basis for concluding that plaintiffs past work did constitute SGA based upon a comparison to other workers making a livelihood by performing similar work in plaintiffs community. See Varney, 859 F.2d at 1399 (“Certainly there may exist valid grounds on which to discredit a claimant’s pain testimony!)] ... But if grounds for such a finding exist, it is both reasonable and desirable to require the ALJ to articulate them in the original decision.”) (emphasis added).
Based on the foregoing, IT IS ORDERED THAT Judgment shall be entered reversing the decision of the Commissioner denying benefits and remanding this matter to the Commissioner for the awarding of benefits.
. The ALJ states in his decision that the supplemental hearing was held on October 26, 2004. (AR at 15). The hearing transcript, however, indicates that the hearing was held on October 20, 2004. (Id. at 288).
. See 20 C.F.R. pt. 404, subpt. P, app. 1.
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9507992-16983 | MEMORANDUM AND ORDER
VanBEBBER, Senior District Judge.
Plaintiff, Dora Swearingen, brings this action pursuant to the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”), and Kansas state law, alleging that Defendant, Honeywell, Inc. (“Honeywell”), is barred by the doctrine of estoppel from denying benefits to her under her deceased husband’s pension plan and that Defendant breached its fiduciary duty as administrator of the plan. The case is before the court on Motion of Defendant Honeywell to Dismiss with Prejudice (Doc. 20). For the reasons set forth below, Defendant’s motion is granted in part and denied in part.
I. FACTUAL BACKGROUND
Prior to his death at age forty-one, Plaintiffs common law husband, Steve Swearingen, was employed by Defendant at various locations across the United States. At the time of his death, Mr. Swearingen worked at Defendant’s Olathe, Kansas, facility. Following Mr. Swearin-gen’s death, Plaintiff requested payment of any benefits due to her under Defendant’s employee benefits plans.
On June 15, 1999, Patrick McGovern, one of Defendant’s in-house attorneys, sent a letter to Plaintiffs counsel informing him of the various benefits payable to Plaintiff under Defendant’s plans. Among the plans noted by Mr. McGovern was the Bendix Salaried Employee Retirement Pension Plan (“Bendix Plan”). According to Mr. McGovern, Plaintiff was eligible for a survivor income benefit under the Bendix Plan of $905.40 per month. Plaintiff claims that Mr. McGovern’s representation regarding the survivor income benefit prompted her to enter into a family settlement agreement with Mr. Swearingen’s parents by which she relinquished rights to benefits and funds to which she might have otherwise been entitled.
On May 15, 2000, Kevin Covert, another one of Defendant’s in-house attorneys, sent Plaintiffs counsel a letter informing him that Mr. McGovern’s representation in the June 15, 1999, letter was incorrect and that Plaintiff was in fact not eligible for the survivor income benefit under the Bendix Plan. Mr. Covert claimed that because Mr. Swearingen died prior to the age of fifty, he was required to be an active employee at a Bendix location in order for his beneficiary to recover under the Plan. According to Mr. Covert, Mr. Swearingen’s transfer from the Bendix facility in Redmond, Washington, to the non-Bendix facility in Olathe, coupled with his death prior to the age of fifty, negated any of Plaintiffs rights to recover as beneficiary under the Bendix Plan.
Although Defendant purportedly failed to provide Plaintiff with the Bendix Plan, the Bendix Plan summary documents or other related Bendix Plan documents, Plaintiff claims that, upon information and belief, the Plan is ambiguous as to whether Mr. Swearingen remained eligible for survivor income benefits following his transfer to the non-Bendix Olathe facility.
II. STANDARD OF REVIEW
Defendant moves to dismiss Plaintiffs complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. The court begins by noting that Defendant filed its motion to dismiss after submitting its answer in this case. Technically, it is impermissible under the Federal Rules to submit an answer and thereafter file a Rule 12(b)(6) motion to dismiss. See Fed. R.Civ.P. 12(b) (stating that a motion to dismiss under the rule “shall be made before pleading if further pleading is permitted”). “However, because Rule 12(h)(2) permits the court to consider ‘[a] defense of failure to state a claim upon which relief can be granted’ within a Rule 12(c) motion for judgment on the pleadings, the court will treat defendant’s motion as if it had been submitted under Rule 12(c).” Faulk v. Tiffany, No. 99-2354-GTV, 2000 WL 714336, at *1 (D.Kan. May 23, 2000) (citing Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir.1990); Aldabe v. Aldabe, 616 F.2d 1089, 1093 (9th Cir.1980)). The distinction between the two rules is purely one of procedural formality, however. The court will employ the same standard that it uses to analyze a Rule 12(b)(6) motion to dismiss to evaluate a Rule 12(c) motion for judgment on the pleadings. Ramirez v. Dep’t of Corr., 222 F.3d 1238, 1240 (10th Cir.2000) (citation omitted).
A Rule 12(b)(6) motion to dismiss will be granted only if it appears beyond a doubt that the plaintiff is unable to prove any set of facts entitling her to relief under her theory of recovery. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). “All well-pleaded facts, as distinguished from conclusory allegations, must be taken as true.” Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984) (citation omitted). The court must view all reasonable inferences in favor of the plaintiff, and the pleadings must be liberally construed. Id. (citation omitted). The issue in reviewing the sufficiency of a complaint is not whether the plaintiff will prevail, but whether the plaintiff is entitled to offer evidence to support her claims. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), overruled on other grounds by Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982).
Finally, the court notes Plaintiffs request for the court to review Defendant’s motion as a motion for summary judgment pursuant to Fed.R.Civ.P. 56. The court declines to do so. Specifically, the court disagrees with Plaintiffs contention that a Rule 12(b)(6), or in this case a Rule 12(c), motion must be converted into a motion for summary judgment when it involves “a fact not established by the pleadings.” Rules 12(b)(6) and 12(c) require that a motion be converted into one for summary judgment only when matters outside of the pleadings are presented to and considered by the court. See Fed. R.Civ.P. 12(b)(6), (c). Matters outside of the pleadings have not been presented to or considered by the court in this case. Accordingly, the court simply applies the Rule 12(b)(6) standard previously enunciated and takes any fact, assuming that it is well-pleaded by Plaintiff, as true. See Swanson, 750 F.2d at 813.
III. DISCUSSION
Defendant advances several arguments in support of its motion to dismiss. First, Defendant contends that Plaintiff lacks standing to pursue this action under ERISA because she cannot show that she was a beneficiary under the Bendix Plan. Second, Defendant argues that Count I of Plaintiffs complaint, which sounds in common law estoppel, is pre-empted by ERISA. Third, Defendant maintains that Count II of Plaintiffs complaint must be dismissed because estoppel under ERISA is not recognized by the Tenth Circuit, and even if it is, Plaintiff fails to satisfy the requisite elements to state such a claim. Finally, Defendant submits that Count III of Plaintiffs complaint, which alleges breach of fiduciary duty under ERISA, fails to state a claim. Defendant also requests that the court award Defendant its costs and attorney’s fees in this matter. Plaintiff requests that Defendant’s motion be denied or, in the alternative, requests that the court provide her with an opportunity to amend her complaint to address any deficiencies noted by Defendant.
A. Standing to Pursue ERISA Action
Defendant first contends that Plaintiff lacks standing to pursue an action under ERISA. ERISA permits participants, beneficiaries, fiduciaries, and the Secretary of Labor to file suit for the causes of action authorized under the statute. See 29 U.S.C. § 1132(a). In this case, Plaintiff claims that she is a beneficiary under the Bendix Plan. ERISA defines a “beneficiary” as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” Id. § 1002(8). Defendant argues that Mr. Swearingen was not a participant in the Bendix Plan when he died and that, therefore, Plaintiff cannot qualify as a beneficiary because she was never entitled or potentially entitled to any benefits under the Plan. The court disagrees.
The primary issue in this lawsuit appears to be whether Mr. Swearingen remained a participant in the Bendix Plan at the time of his death. Defendant contends that he was not. Plaintiff alleges that, upon information and belief, the Bendix Plan was ambiguous as to whether he was. Viewing all reasonable inferences in the light most favorable to Plaintiff, the court concludes that Plaintiff has satisfactorily alleged that Mr. Swearingen may have qualified as a participant under the Bendix Plan at the time of his death. Given this, the court holds that Plaintiff has standing to pursue her claims under ERISA as a beneficiary under the Bendix Plan.
B. Common Law Estoppel Claim
Defendant next argues that Count I of Plaintiffs complaint, which sounds in common law estoppel, is pre-empted by ERISA. ERISA pre-empts state law claims that “relate to” any employee benefit plan covered under ERISA. 29 U.S.C. § 1144(a); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). The United States Supreme Court has noted that “the express preemption provisions of ERISA are deliberately expansive, and designed to ‘establish pension plan regulation as exclusively a federal concern.’ ” Pilot Life, 481 U.S. at 45-46, 107 S.Ct. 1549 (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981)). Given the pre-emption clause’s broad scope, the Supreme Court has stated that a state law “relates to” a benefit plan “if it has a connection with or reference to such a plan.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (citations omitted).
According to Tenth Circuit jurisprudence, state common law claims based on the doctrine of promissory estoppel “relate to” a benefit plan and are, therefore, pre-empted by ERISA. See Peckham v. Gem State Mut. of Utah, 964 F.2d 1043, 1050-51 (10th Cir.1992); see also Kaus v. Standard Life Ins. Co., 176 F.Supp.2d 1193, 1198 (D.Kan.2001) (citations omitted) (concluding that the plaintiffs state law estoppel claim was pre-empted by ERISA). In light of this precedent, the court concludes that Plaintiffs state law estoppel claim is pre-empted by ERISA. The court is not persuaded by Plaintiffs argument that if, as Defendant claims, Mr. Swearingen was not a Bendix Plan participant, then Plaintiffs estoppel claim would not “relate to” the Plan but would merely be a common law claim against a Defendant that “coincidentally” had an ERISAcovered plan. To the contrary, the court finds that Plaintiffs estoppel claim relates directly to her efforts to secure payments under the Bendix Plan and is, therefore, pre-empted. For this reason, the court grants Defendant’s motion to dismiss Count I of Plaintiffs complaint.
C. ERISA Estoppel Claim
Defendant also contends that Count II of Plaintiffs complaint must be dismissed because estoppel under ERISA is not recognized by the Tenth Circuit, and even if it is, Plaintiff fails to satisfy the requisite elements to state such a claim. As Defendant correctly notes, the Tenth Circuit has never officially recognized a claim for equitable estoppel under ERISA. See Cannon v. Group Health Serv. of Okla., Inc., 77 F.3d 1270, 1277 (10th Cir.1996). Despite the lack of formal recognition, the Tenth Circuit has outlined a rudimentary framework of rules and elements to be followed when analyzing an equitable estoppel claim. See Kaferly v. U.S. West Techs., No. 98-1165, 1999 WL 679682, at *9-10 (10th Cir. Sept. 1, 1999); Cannon, 77 F.3d at 1276-77; Averhart v. U.S. WEST Mgmt. Pension Plan, 46 F.3d 1480, 1485-87 (10th Cir.1994); Miller v. Coastal Corp., 978 F.2d 622, 624-25 (10th Cir.1992); see also Kaus, 176 F.Supp.2d at 1198-99 (recognizing lack of formal recognition of ERISA estoppel claim but applying certain elements outlined by the Tenth Circuit); Arocho v. Goodyear Tire & Rubber Co., 88 F.Supp.2d 1175, 1183-84 (D.Kan.2000) (same).
In Miller v. Coastal Corporation, the Tenth Circuit refused to “import notions of promissory estoppel into ERISA” and held that the unambiguous terms of an employee benefit plan could not be modified by informal communications, regardless of whether the communications were written or oral. 978 F.2d at 624-25. The Miller court left open, however, the possibility that estoppel might be applied in “egregioqs” or “extraordinary” circumstances, such as when the evidence demonstrated “lies, fraud, or intent to deceive” on the part of the defendant. 978 F.2d at 625; Kaferly, 1999 WL 679682, at *10 n. 8 (citing Miller, 978 F.2d at 625) (“Miller left open the issue of whether estoppel might apply in limited, extraordinary circumstances .... ”). Two years after Miller, the Tenth Circuit indicated in Averhart v. U.S. WEST Management Pension Plan that if an ERISA estoppel claim would be available at all, it would only apply with respect to an employer’s representations that constituted an interpretation of an ambiguous term of an employee benefit plan. 46 F.3d at 1486 (citations omitted). Thus, the Tenth Circuit’s opinions appear to indicate that if the court were to uphold a claim for estoppel under ERISA, it would do so only if: (1) the challenged representation concerned an unambiguous term of an employee benefits plan but was based on lies, fraud, intent to deceive or other egregious or extraordinary circumstances; or (2) the representation constituted an interpretation of an ambiguous term of an employee benefits plan.
In this case, Defendant argues that Plaintiff has failed to allege any egregious or extraordinary circumstances sufficient to state a claim for estoppel under ERISA. The court agrees. Plaintiffs complaint contains no allegations that Defendant’s representations were based on lies, fraud, intent to deceive or other egregious or extraordinary circumstances. Accordingly, the court concludes that Plaintiff has failed to state a claim for estoppel under ERISA on that basis.
Defendant also argues that Plaintiff has failed to allege any ambiguity in the Bendix Plan and that she can, therefore, not claim that Defendant’s representations constituted an interpretation of an ambiguous term of the Plan. The court disagrees. Plaintiff alleges in her complaint that the Bendix Plan is ambiguous as to whether Mr. Swearingen was a participant in the Plan at the time of his death. Plaintiff also alleges that she relied on Mr. McGovern’s June 15, 1999, representation regarding that ambiguity — ie., that Mr. Swearingen was a participant in the Plan at the time of his death — to her substantial detriment. Given this, the court concludes that Plaintiff has adequately stated a claim for estoppel under ERISA based on Defendant’s representation that constituted an interpretation of an ambiguous term of the Bendix Plan. Accordingly, the court denies Defendant’s motion to dismiss Count II of Plaintiffs complaint.
D. Breach of Fiduciary Duty Claim
Finally, Defendant submits that Count III of Plaintiffs complaint, which alleges a breach of fiduciary duty under ERISA, fails to state a claim. Plaintiff does not specify in her complaint precisely which section or sections of ERISA she seeks relief under in Count III. Defendant argues in its motion to dismiss that Plaintiff fails to state a claim under any of the three primary causes of action that ERISA provides for participants or beneficiaries wishing to challenge denial of benefits claims by plan administrators. The court agrees that Plaintiff fails to state a claim under two of the three sections addressed by Defendant but concludes that Plaintiff has sufficiently stated a claim under the remaining section.
29 U.S.C. § 1132(a)(1)(B) provides a cause of action for a participant or beneficiary “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” Defendant argues that Plaintiff cannot recover under § 1132(a)(1)(B) because Mr. Swearingen was not a participant in the Bendix Plan at the time of his death, and, therefore, Plaintiff was not entitled to any benefits as Mr. Swearingen’s beneficiary. The court disagrees. As noted previously, Plaintiff alleges in her complaint that, upon information and belief, the Bendix Plan was ambiguous as to whether Mr. Swearingen was a participant in the Plan. Viewing all reasonable inferences in the light most favorable to Plaintiff, the court concludes that Plaintiff has satisfactorily alleged that Mr. Swearingen may have been a participant in the Bendix Plan at the time of his death, and that Plaintiff, therefore, may have qualified as Mr. Swearingen’s beneficiary. The court also concludes that Plaintiff has satisfactorily alleged that Defendant impermissibly denied her benefits under the Bendix Plan. Given this, the court holds that Plaintiff has stated a claim for denial of benefits under § 1132(a)(1)(B).
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5505132-9413 | MEMORANDUM DECISION and ORDER GRANTING SUMMARY JUDGMENT OF DISMISSAL
BOLDT, District Judge.
In this action plaintiff Kalin seeks recovery from defendants Fultz, Mills and Selene and Eros (S & E) for treble damages per Section 7 of the Clayton Act for alleged violation of Section 1 of the Sherman Act. Plaintiff alleges defendants have conspired among themselves and with others to monopolize mortuary business, i.e., preparation of the bodies of deceased persons for the purposes of funeral, burial or cremation, within Thurston County in the State of Washington. Plaintiff also alleges defendants have conspired to boycott plaintiff from participation in a rotation system whereby Fultz, Thurston County Coroner, in lieu of a County Morgue, rotates dead bodies that come within his jurisdiction between Mills and S & E for retention until mortician services are provided by the next of kin, or, in default thereof, pursuant to state statute.
Defendants deny jurisdiction in this court to hear and determine plaintiff's claims under the Sherman Act and on that ground have filed motions for summary judgment of dismissal.
Summary judgment may not be granted when any party either has not had a full and fair opportunity for complete discovery or where any genuine issue as to a material fact is presented. Therefore, all parties, and particularly plaintiff, have been given every opportunity over a period of many months for discovery and presentation of written and oral argument on the defendants’ motions. A final pretrial order has been entered as to jurisdiction and liability issues. Also, counsel have certified that discovery as to facts pertaining to jurisdiction has been fully completed and exhausted by all parties.
The court has fully examined and considered defendants’ motions, all contentions of plaintiff and defendants pertaining thereto and all depositions, affidavits, memoranda and authorities cited therein.
It is elemental that purely local commercial transactions and activities that do not directly and substantially affect interstate commerce do not establish jurisdiction in federal district courts to hear and determine treble damage claims pursuant to the Clayton Act amendment to the Sherman Act. United States v. Women’s Sportswear, supra; United States v. Yellow Cab Co., supra; Page v. Work, supra; Las Vegas Merchant Plumbers Assn., supra.
Plaintiff’s allegations of fact, which it contends support federal jurisdiction or, at a minimum, raise issues of fact for determination by jury, are stated under “Plaintiff’s Contentions on Disputed Facts,” beginning on page 13, of the Pre Trial Order. The allegations are summarized as follows: that plaintiff and defendants perform mortician services upon dead bodies that have come from outside the state or are shipped outside the state after such services are performed; that plaintiff and defendants regularly purchase mortuary supplies, including caskets, embalming fluid, equipment and other items from sources outside the state; that materials used in making caskets in this state come from outside the state; and that morticians in this state regularly and frequently conduct business correspondence by letter, telephone and telegram with persons outside the state.
Defendants contend the alleged activities complained of are wholly intrastate and local in nature and have no direct and substantial effect upon interstate commerce so as to bring them within the purview of the Sherman Act.
In considering all of the principal authorities (citations in footnote 1), two decisions of the Eighth Circuit Court of Appeals are most comparable in facts to the present case: Elizabeth Hospital v. Richardson, supra, and Riggall v. Washington County Medical Society, 249 F.2d 266 (1957), cert. den. 355 U.S. 954, 78 S.Ct. 540, 2 L.Ed.2d 530 (1958) [cited in Elizabeth], Plaintiff contends Washington State Bowling v. Pacific Lanes impairs the holding of Elizabeth, although Shepard’s discloses no decision to that effect. Analysis of the opinion in that case shows it does not directly or indirectly hold the principles of Elizabeth inapplicable to the particular facts and circumstances of the present case. Elizabeth is not referred to in the Bowling opinion.
In Elizabeth the Eighth Circuit said:
“We think that the plaintiff’s operation of a hospital, to include rendition of hospital services to some persons who came from outside the state, is no more engaging in interstate commerce than was Dr. Riggall in rendering medical services to persons who likewise came from other states. The fact that some of the plaintiff’s patients might travel in interstate commerce does not alter the local character of plaintiff's hospital. If the converse were true, every country store that obtains its goods from or serves customers residing outside the state would be selling in interstate com merce. Uniformly, the Courts have held to the contrary.” (269 F.2d at page 170)
In Riggall the Court stated:
“As has been observed, plaintiff’s complaint in substance is that the practice of his profession would have been more profitable to him had the defendants not deprived him of membership in the Washington County Medical Society. Plaintiff was not prevented from practicing his profession and the complaint, we think, is wholly lacking in allegations essential to a cause of action under the Sherman Anti-Trust Act.” (249 F.2d at page 270)
Both Elizabeth and Riggall were decisions affirming dismissals by the District Court upon jurisdictional grounds.
In the State of Washington a county coroner has jurisdiction over dead bodies in his county only in certain situations specified by state statute. Another recently enacted state statute provides that when a person dies without having made prior arrangements for his funeral and mortician services and no one is willing to make such arrangements, the county coroner is to assign the dead body on an equal rotational basis to funeral homes and mortuaries in the county where the body is found. The jurisdiction of Coroner Fultz over dead bodies is limited to Thurston County. The alleged conspiracy as to the statutory rotational system occurred in and necessarily was operative only in Thurston County. Thus, the alleged conspiracy to monopolize and boycott is directed solely at local activities within Thurston County, i.e., the rotation system and mortuary businesses conducted in Thurston County. No broader objectives of conspiracy are alleged, e.g., price fixing, rigged bidding, etc. Spears Free Clinic and Hospital for Poor Children v. Cleere, 197 F.2d 125 (10th Cir. 1952) . Clearly, the activities complained of are purely local and are not so related to interstate commerce as to be a part thereof within the Sherman Act.
The decision to ship dead bodies to or out of the state of Washington is vested in next of kin or in military authorities in certain instances. Kalin cannot make that decision, is not in the business of shipping dead bodies and, as to dead bodies shipped to or from this state, its only functions are incident to the preparation of dead bodies for funeral, burial or cremation purposes and are wholly performed in Thurston County. Kalin exercises no discretion as to matters pertaining to the shipment of bodies, excepting only to deliver bodies for shipment at the direction of those having control of the bodies. Kalin itself never crosses state lines in delivering bodies for shipment. United States v. Yellow Cab, supra. To this court it is inconceivable that functions limited to those Kalin has performed in the shipment of dead bodies can or should be held “trade or commerce” within the policy and meaning of the Sherman Act.
Plaintiff contends the purchase of mortuary supplies from outside this state and business communications to and from other states are sufficient to establish jurisdictional requirements under the Sherman Act. At most, the purchase of supplies by interstate shipment and the sending and receiving of interstate communications might be factors which, together with other factors, might support jurisdiction. Washington State Bowling v. Pacific Lanes, supra. However, in the present case all supplies were delivered to and came to rest in plaintiff’s establishment and were never resold as supplies, in original packages or otherwise. Lawson v. Woodmere, supra and Nothern California Pharmaceutical Assn. v. United States, supra. No authority has been cited or found directly or indirectly sustaining Sherman Act jurisdiction based merely upon interstate communications conducted in the regular course of an otherwise purely local business.
For the reasons stated and on all facts shown of record it is clear this court does not have jurisdiction of the controversy alleged in this action. Accordingly, it is ordered that defendants’ motions for summary judgment of dismissal should be and hereby are granted. Findings of Fact, Conclusions of Law and Judgment conforming to this order may be presented for entry at the early convenience of counsel.
. The decisions cited by the parties in their memoranda and principally relied upon are:
(a) For the plaintiff:
Klor's, Inc. v. Broadway-Hale Stores, 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959)
United States v. Women's Sportswear Assn., 336 U.S. 460, 69 S.Ct. 714, 93 L.Ed. 805 (1949)
United States v. Yellow Cab Co., 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947)
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958083-7019 | BELL, District Judge.
This is an action by appellant for a refund of income taxes paid for the years-1920 and 1921. In its income tax return appellant deducted as operating expenses-for 1920 the sum of $15,839.64 and for 1921 the sum of $11,592.59, which sums had been expended by it on newspaper subscription contests. The Commissioner disallowed the deductions and assessed additional taxes accordingly in the amounts of $6,022.16 for 1920 and $1,705.06 for 1921. Appellant appealed to the Board of Tax Appeals, which affirmed the Commissioner’s determination. 6 B. T. A. 1255. The deficiencies were paid; claims for refund were filed and rejected. Thereafter this suit was commenced; a jury was waived; the court found' for the ap- pellee; a judgment was entered; and this appeal taken.
The appellant owned and published the Public Opinion, a daily newspaper, at Wa-tertown, S. D. In 1920 it conducted a subscription contest at a cost of $15,839.64 and in 1921 another at a cost of $11,592.59. Before .these contests appellant had 5,214 subscriptions. It obtained 2,886 subscriptions in the first contest and 2,110 in the second. Some of these subscriptions were renewals, , and during the contests there were expira-tions, so that at the end of the last contest appellant had a circulation of 7,215, which was a net gain of 2,001.
It appears that the publication of the Daily News, another daily newspaper, was commenced in Watertown in 1918, and that in 1919 it inaugurated contests and conducted a vigorous campaign for subscriptions, and that it increased its circulation to approximately 4,000 by April, 1920.
Watertown, where these newspapers circulated, had a population of approximately 10,000, and was situated in an agricultural territory. .There was evidence on behalf of the appellant that its circulation of 5,214 properly served the territory as a news and advertising medium; that it would not have been good business policy before the advent of the Daily News to undertake to increase its circulation; that the territory properly could support only one daily newspaper; that, when its competitor entered the field and by means of contests and political agitation acquired a circulation of 4,000 in a comparatively short time, it became imperative for appellant to engage in similar contests to retain its circulation, prestige, and good will as a newspaper; that this was the sole purpose of expending the sum of $27,432.23 on the contests; and that the expenditures were not made to build a larger circulation.
The circulation campaigns were conducted in a similar manner by both papers. Professional managers and solicitors Were employed, prizes offered, and contests promoted. Subscriptions, paid in advance, new or renewal, from six months to three years, were solicited. In each instance the contests covered a period of several months.
The Revenue Act of 1918, c. 18, 40 Stat. 1057, 1077, is applicable to the income for 1920, and the Revenue Act of 1921, c. 136, 42 Stat. 227, 254, is applicable to the income for 1921. The provision involved is the same in both acts, and is as follows:
“Sec. 234. (a) That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions:
“(1) All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered, and including rentals or other payments required to be made as a condition to the continued use or possession of property to which the corporation has not taken or is not taking title, or in which it has no equity. * * * ”
The question presented is whether the expenditures by appellant in conducting the subscription contests in 1920 and 1921 were capital expenditures or constituted ordinary and' necessary expenses of doing business. The appellant contends that the expenditures were made for the purpose of defending and maintaining its existing circulation against encroachment by an active competitor, and therefore were deductible as ordinary and necessary expenses of doing business. The appellee contends that the expenditures were for the purpose of increasing the circulation and therefore were capital expenditures. The court below in its findings of fact decided in favor of the contention of the appellee. The deductions were disallowed by the Commissioner. The assessment of a Commissioner of Internal Revenue is prima facie correct, and the burden is on the taxpayer to overcome the presumption of its correctness. J. C. Blair Co. v. Commissioner of Internal Revenue (C. C. A.) 34 F.(2d) 861.
The trial court found that the expenditures involved “represented expense incurred and made by the plaintiff in conducting subscription contests for the purpose of increasing its subscription to its said newspaper; that prior to the said two contests so conducted by the plaintiff the circulation of said newspaper was 5,214, and that after the said two contests the subscription was 7,215 and that said expenditures were made for the sole purpose of building circulation, and that the tax payer by said subscription campaigns purchased an addition to its circulation structure, and that its earning capacity was increased thereby.” There is substantial evidence to sustain this finding. That this court will not disturb a finding of fact made by a lower court in an action at law, if there is substantial evidence to sustain it, is elementary. Brown Shoe Co. v. Cams (C .C. A.) 65 F.(2d) 294; Ætna Casualty & Surety Co. v. Reliable Auto Tire Co. (C. C. A.) 58 F.(2d) 100; Kingston v. American Car & Foundry Co. (C. C. A.) 55 F.(2d) 132; Exchange Trust Co. v. Capitol Life Insurance Co. (C. C. A.) 49 F.(2d) 133.
The circulation of a publication is a capital asset, and money expended in increasing it is a “capital expenditure” and is not deductible in determining the publisher’s taxable income. Meredith Publishing Co. v. Commissioner of Internal Revenue (C. C. A.) 64 F.(2d) 890, 891, certiorari denied, 290 U. S. 646, 54 S. Ct. 64, 78 L. Ed. 560; Strong Publishing Co. v. Commissioner (C. C. A.) 56 F.(2d) 550; News Publishing Co. v. Blair, Commissioner, 58 App. D. C. 295, 29 F.(2d) 955. In the Meredith Case this court said:
“That the circulation of a magazine or newspaper is an intangible capital asset does not admit of doubt. The Commissioner of Internal Revenue has consistently so held from his first consideration of the question, and his holding has been upheld and approved by the courts. Danville Press, Inc., 1 B. T. A. 1171; Gardner Printing Co., 4 B. T. A. 37; Herald-Despatch Co., 4 B. T. A. 1096; Walter S. Dickey, 14 B. T. A. 1295; Tulsa Tribune Co., 21 B. T. A. 1405; Public Opinion Publishing Co., 6 B. T. A. 1255; Commercial Nat. Ins. Co., 12 B. T. A. 655, 657; News Publishing Co. v. Blair, 58 App. D. C. 295, 29 F.(2d) 955; Strong Publishing Co. v. Commissioner (C. C. A. 7) 56 F.(2d) 550.
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11157658-19176 | MARCUS, Circuit Judge:
This appeal arises from the conviction of Defendant Carlos Albverto Prieto for crimes committed in connection with a conspiracy to rob a United Parcel Service (UPS) truck. Following a jury trial, Prieto was convicted of conspiracy to commit robbery, attempted robbery, and the use of a firearm during and in relation to a crime of violence, in violation of 18 U.S.C. §§ 1951(a), and 924(c)(1). Defendant attacks his convictions, alleging first that the district court abused its discretion in admitting the prior consistent statement of a witness made to a police officer following the witness’s arrest, and second, that the district court erred in giving the Eleventh Circuit Pattern Jury Instruction regarding codefendants’ guilty pleas. Because we can discern no reversible error, we AFFIRM.
I.
The relevant facts are straightforward. Beginning in May of 1996, and continuing until June 11, 1996, Prieto, Rodolfo Jose Palacios, and several other codefendants engaged in a conspiracy to rob a UPS truck. Prieto and his co-conspirators had inside information that a certain UPS truck route carried expensive computer equipment, and they schemed to rob a truck running that route. According to their plan, one car would block the path of the UPS truck, and the driver and passengers would then exit the car and abduct the UPS driver at gunpoint. The driver’s hands and feet would be bound with rope or duct tape, and a co-conspirator wearing a UPS uniform would replace the driver. Disguised as a UPS employee, the co-conspirator would drive the truck to an offloading site where the computer hardware would be removed.
Though the conspirators conducted several dry runs, the conspirators bungled their first attempted robbery, on June 4, 1996. Subsequently, there were problems with the van to be used in the robbery, and one of the conspirators was arrested on other charges. Then on June 11, 1996, the conspirators failed in their second attempted robbery. They successfully blocked the UPS truck with a Toyota Corolla, but aborted the robbery after they observed a car approaching. The UPS truck contained items that had been shipped in interstate commerce, including two boxes of computer chips with a combined cash delivery value of over $60,000.
On February 4, 1997, a grand jury sitting in the Southern District of Florida returned an eight-count indictment charging Prieto and nine codefendants with various conspiracy, robbery and firearms charges arising from the two failed episodes. All codefendants except for Prieto and two others pled guilty. Prieto was charged with conspiracy to commit robbery, two counts of attempt to commit robbery, and two counts of using a firearm during a crime of violence. A jury found Prieto guilty as charged.
II.
A district court is granted broad discretion in determining the admissibility of a prior consistent statement under Fed. R.Evid. 801(d)(1)(B) and will not be reversed absent a clear showing of abuse of discretion. See United States v. Reed, 887 F.2d 1398, 1405 (11th Cir.1989).
Where a party makes no objection in the trial court to the matter complained of on appeal, our review is for plain error. We find plain error only where (1) there is an error; (2) the error is plain; (3) the error affects the defendant’s substantial rights in that it was prejudicial and not harmless; and (4) the error seriously affects the fairness, integrity or public reputation of a judicial proceeding. See United States v. Olano, 507 U.S. 725, 730-32, 113 S.Ct. 1770, 1775-76, 123 L.Ed.2d 508, (1993). We therefore review the district court’s use of the Eleventh Circuit Pattern Jury Instruction for plain error.
A. Rule 801(d)(1)(B): Hearsay Exception
Palacios was arrested on October 24, 1996. He gave a statement on the evening of his arrest, signed a cooperation agreement with the Government in November of 1996, and ultimately pled guilty in April of 1997. Palacios became one of the government’s key witnesses against Prieto, testifying extensively concerning Prieto’s involvement in the attempted UPS truck robberies. To bolster Palacios’s testimony, the Government sought to offer the testimony of Metro-Dade Police Detective Joseph Gross, regarding prior consistent statements Palacios made on the evening of his arrest.
Though Palacios’s statements would ordinarily be inadmissible hearsay, the government sought to introduce them to rebut a charge of recent fabrication pursuant to Rule 801(d)(1)(B). Rule 801(d)(1)(B) provides, in pertinent part, that a prior consistent statement by a witness is not hearsay if (1) the declarant testifies at the trial or hearing and is subject to cross-examination concerning the statement, and (2) the statement is consistent with the declar-ant’s testimony and is offered to rebut an express or implied charge against the de-clarant of recent fabrication or improper influence or motive. Fed.R.Evid. 801(d)(1)(B). In Tome v. United States, 513 U.S. 150, 157-58, 115 S.Ct. 696, 701, 130 L.Ed.2d 574 (1995), the Supreme Court held that to be admissible pursuant to Rule 801(d)(1)(B), prior consistent statements must have been made before the alleged influence or motive to fabricate arose.
The central question raised by this appeal is whether Palacios had a motive to fabricate in order to curry favor with the government at the time he made his statements to Detective Gross. In order to decide this question, the trial judge heard argument outside the presence of the jury regarding whether Palacios had a motive to fabricate at the time of his statement to Detective Gross. The government said that although Palacios made the statement following arrest, it was given prior to any cooperation agreement between Palacios and the government and thus there was no motive to fabricate. The defense suggested, however, that a person inevitably has a motive to try to reduce the penalties against him through cooperation with the government immediately upon arrest. The trial judge conducted an examination during which Agent Fabregas, who was present at Palacios’s arrest and who brought him to F.B.I. headquarters, testified that the subject of cooperation was not raised with Palacios. Indeed, Detective Gross, who was present from the beginning of Palacios’s interrogation, testified that to his knowledge, there had been no discussions with Palacios regarding the possibility of cooperation with the government. Both witnesses unambiguously said that Palacios voluntarily began talking to the agents during the interrogation, and that he did not ask any questions about what benefits, if any, he might receive in exchange for his cooperation.
Based on the examination and the arguments heard regarding the relevant case law, the district court ruled that Palacios’s prior consistent statements were admissible. We agree.
The trial judge was cautious and methodical in rendering the 801(d)(1)(B) ruling. She heard legal arguments from both sides and held a hearing in limine during which several agents testified as to the events that transpired from the time of Palacios’s arrest, continuing through his interrogation. Her comments reflect thorough consideration:
I read these cases that were cited yesterday in the record. And I think that it’s been clear from the testimony that was taken that the statement clearly predated and [sic] the motive to fabricate or to obtain a better deal....
But the record is clear that he was given his Miranda rights, that is, Mr. Palacios. And then he started making statements to Agent Gross without asking anything to the extent of am I gonna get a deal or what’s in it for me, or words to that effect.
Judge Nesbitt squarely found as a matter of fact that Palacios did not have a motive to fabricate at the time of his statements to Detective Gross.
Based on a review of this record, the district court’s finding is not clearly erroneous. Therefore, the only way the district court could have abused its considerable discretion in admitting Palacios’s prior consistent statements is if we hold, as a matter of law, that any post-arrest statement is necessarily tinged with a motive to lie in order to curry favor with the government. In essence, what the defense seeks is the creation of a bright line, per se rule barring the admission of any prior consistent statements made by a witness following arrest. We decline to adopt such a rule.
Whether a motive to fabricate attaches upon arrest presents a matter of first impression in this Circuit. The only case in this Circuit to address the Supreme Court’s holding in Tome is United States v. Paradies, 98 F.3d 1266 (11th Cir.1996), cert, denied, 521 U.S. 1106, 117 S.Ct. 2483, 138 L.Ed.2d 992 (1997), which presents a very different set of facts. In Parodies, the parties conceded error where the district court, pursuant to Rule 801(d)(1)(B), admitted tape-recorded conversations that had been recorded after one of the participants had agreed to cooperate with the government. Id. at 1290. Indeed, both parties concede that a motive to fabricate would have arisen upon Palacios’s arrest if he had inquired into, or been promised leniency if he cooperated. In this case, however, the uncontroverted testimony established and the district court found that Palacios made his prior consistent statements to Detective Gross prior to any discussion of cooperation or leniency. Because of this -critical difference Parodies is inapposite.
Several courts have held that a motive to fabricate does not always and necessarily attach upon arrest, but rather that whether a statement is tinged with a motive to lie is a question of fact to be determined by the trial court according to the particular circumstances of each case. See United States v. Roach, 164 F.3d 403, 410 (8th Cir.1998), cert, denied sub nom., Tail v. United States, 528 U.S. 845, 120 S.Ct. 117, 145 L.Ed.2d 99 (1999) (affirming admission of prior consistent statements made in a post-arrest interview); United States v. Tate, 1998 WL 637422 at *3 (4th Cir.1998) (unpublished table decision) (factual finding that admission of prior consistent statements made to police — one prior to arrest, the day of arrest, and one two days after arrest — did not constitute plain error).
In United States v. Fulford, 980 F.2d 1110 (7th Cir.1992), the court affirmed the admission of prior consistent statements made by a witness under circumstances similar to those in this case. In Fulford, the witness’s prior consistent statements had to do with a coconspirator’s participation in the sale and distribution of methamphetamine. Following arrest, the witness was advised of his Miranda rights and he agreed to provide information to the arresting officers. Notably, the witness was not given any deal or other incentive to offer information, but was merely told that his cooperation would be brought to the attention of the United States Attorney. Subsequently, he pled guilty at his arraignment and only later entered into a cooperation agreement with the government. As in this case, the defense argued that the witness fabricated post-arrest statements in the hope of receiving a lighter sentence in exchange for his cooperation. The court rejected this argument on the ground that it could not “say that the district judge abused his discretion in allowing [the prior consistent statements] because reasonable minds can differ as to when [the witness] may have first possessed a motive to fabricate.” Id. at 1114. Rather than attaching automatically upon arrest, the court recognized that a judge could reasonably find that a motive to fabricate did not exist until the witness entered into the cooperation agreement with the government. And in the instant case there was no inquiry or comment about cooperation at all.
We agree that statements made after arrest are not automatically and necessarily contaminated by a motive to fabricate in order to curry favor with the government. To hold otherwise, as the defense urges us to do, would “effectively swallow[ ] the rule with respect to prior consistent statements made to government officers: by definition such statements would never be prior to the event of apprehension or investigation by the government which gave rise to a motive to falsify.” United States v. Henderson, 717 F.2d 135, 139 (4th Cir.1983).
Indeed, we recognize that a variety of motives may drive a person’s decision to disgorge the details of a crime he has committed. For one, as this Court’s predecessor recognized, a man’s conduct is often controlled by his conscience. See United States v. Pulvano, 629 F.2d 1151, 1157 n. 8 (5th Cir.1980) (“As R.L. Stevenson phrased it: ‘There’s just one thing I cannot bear, and that’s my conscience.’ ”) (quoting from Scots, XIV, My Conscience). For another, it is certainly true that “the world’s great religions teach in one form or another that confession is good for the soul and that by making confession one may be absolved.... [T]o many people telling the truth and ‘coming clean’ satisfies a basic spiritual need of one who has transgressed and provides a measure of relief.” United States ex rel. Williams v. Fay, 323 F.2d 65, 72 (2nd Cir.1963). Confession may also be an emotional response triggered by feelings of remorse and sorrow. See Bryant v. Vose, 785 F.2d 364, 368 (1st Cir.1986) (concluding that confession was triggered by sorrow and remorse rather than a desire for leniency). No doubt there are other motivators as well, including the desire to curry favor with law enforcement and obtain a more favorable outcome.
But given the complexity of the human psyche, we agree with the Fourth, Seventh, and Eighth Circuits that whether a witness had a motive to fabricate when prior consistent statements were made is plainly a question of fact to be resolved by the trial court based precisely on the particular circumstances of an individual case. Quite simply, the trial court is in the best position to make that determination and its determination deserves great deference.
We are unpersuaded by the cases the defendant cites to the contrary. Defendant directs our attention to several cases where courts have affirmed rulings that prior consistent statements made after arrest were inadmissible. The defense argues that based on these cases, we should find that motive to fabricate inevitably attaches upon arrest. These cases are for the most part distinguishable. In United States v. Awon, 135 F.3d 96, 100 (1st Cir.1998), the court held that two brothers’ statements were equally contaminated by a motive to fabricate when they first spoke with police as when they subsequently testified at trial. In that case, however, both brothers testified that they spoke with investigators only after the potential benefits of cooperation had already been discussed. Awon, 135 F.3d at 100. Here, the trial judge found that Palacios made his statements before any discussion of cooperation. The court’s holding in United States v. Albers, 93 F.3d 1469, 1483 (10th Cir.1996), is similarly distinguishable. In Albers, one witness feared that all of the other conspirators would testify against him, and the other made his statements contemporaneously with his request that the court appoint him a new lawyer and allow him to appeal his conviction. Here, in contrast, there was no evidence that Palacios either feared the testimony of the other conspirators or that he was attempting to curry favor with a trial judge.
United States v. Collicott, 92 F.3d 973, 978 (9th Cir.1996), on which Palacios also relies, actually supports the conclusion that the question of when a motive to fabricate attaches is a question of fact. In Collicott, the witness had been stopped by police in her car, which contained drugs, when she made the prior consistent statement. Under a per se rule that motive to fabricate attaches upon arrest, her statements would have been admissible because they preceded arrest. However, based on the specific facts of the case (that is, being questioned by police while in possession of drugs), the court in Collicott determined that the witness’s motive to fabricate arose before any arrest was made. Collicott thus supports a case-by-case factual inquiry into the motives of the witness at the time of the prior consistent statement.
Finally, to the extent that United States v. Moreno, 94 F.3d 1453, 1455 (10th Cir.1996), and United States v. Forrester, 60 F.3d 52, 64 (2nd Cir.1995), may be read to stand for a bright line rule that motive to fabricate necessarily and automatically attaches upon arrest, we decline to adopt such a per se rule. As we have noted, the creation of such a bright line rule would swallow whole the 801(d)(1)(B) exception. See Henderson, 717 F.2d at 139. Moreover, given the variety of motives that may influence an individual’s decision to confess, we are convinced that the adoption of a per se rule mistakenly would take all discretion from the trial judge in a fact intensive context calling for just the opposite result — an individualized and careful calibration of complex fact. We therefore hold that whether a witness had a motive to fabricate when a prior consistent statement was made is a factual question properly decided by the district court and subject to reversal only for a clear abuse of discretion. Here, the trial court’s unambiguous finding that Palacios did not have a motive to fabricate when he made his statements to Detective Gross did not abuse that broad discretion.
B. Eleventh Circuit Pattern Jury Instruction
Prieto also argues that the district court committed plain error in using the Eleventh Circuit pattern jury instruction regarding codefendants’ guilty pleas. The court instructed the jury in these terms:
In this case, the Government has called as some of its witnesses people named as codefendants in the indictment with whom the Government has entered into a plea agreement providing for the possibility of a lesser sentence than the witnesses would otherwise be exposed to. Such plea bargaining, as it is called, has been approved as lawful and proper, and it is expressly provided for in the rules of this Court. However, a witness who hopes to gain more favorable treatment may have a reason to make a false statement because the witness wants to strike a good bargain with the Government. So while a witness of this kind may be entirely truthful while testifying, you should consider such testimony with more caution than the testimony of other witnesses.
Of course, the mere fact that a witness has pled guilty to the crimes charged in the indictment is not evidence, in and of itself of the guilt of any other person.
Eleventh Circuit Pattern Jury Instruction 1.2 (emphasis added). Prieto argues that this instruction misadvised the jury that his codefendants’ guilty pleas could be used as substantive evidence of his guilt if considered in conjunction with the other evidence in the case.
Prieto did not object to the use of this instruction at trial and therefore acknowledges that our review is for plain error. See Fed.R.Crim.P. 52(b); 507 U.S. at 730-32, 113 S.Ct. 1770; United States v. Kramer, 73 F.3d 1067, 1074 (11th Cir.1996).
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14679-3889 | FINNEGAN, Circuit Judge.
Convicted upon his plea of nolo con-tendere under the first count of an indictment charging violation of 26 U.S.C. § 145(b), Steiner, defendant-appellant, was fined $10,000 and sentenced to the custody of the Attorney General for eighteen months; but that judgment entered June 1, 1954 contained this order of probation. Rule 32(b), Fed.Rules Criminal Procedure, 18 U.S.C.:
“It is Further Adjudged that prison terms be suspended and defendant placed on probation for period of two years from this date, on condition that defendant make every effort to pay tax liability to the United States. (Italics ours.)”
That was a final and appealable judgment. Korematsu v. United States, 1943, 319 U.S. 432, 63 S.Ct. 1124, 87 L.Ed. 1497; Berman v. United States, 1937, 302 U.S. 211, 58 S.Ct. 164, 82 L.Ed. 204. But the appeal now before us is from an order, dated May 31, 1956, revoking Steiner’s probation, after a hearing, and committing him “to the custody of the Attorney General for a period of eighteen months, imposed in the original judgment.”
Almost two years after he has been under the order placing him on probation, Steiner challenges the italicized condition, embodied in it, and already quoted. “Probation or suspension of sentence comes as an act of grace to one convicted of a crime * * *.” Escoe v. Zerbst, 1935, 295 U.S. 490, 492, 55 S.Ct. 818, 819, 79 L.Ed. 1566. By accepting probation on the condition, now challenged, without earlier seeking review of the 1954 order within the time, Rule 37, Federal Rules Criminal Procedure, 18 U.S.C., provided for appeals, defendant is foreclosed from attacking it. From the record it appears that Steiner was represented by two attorneys at the time sentence was imposed and probation granted, and when the district judge and defendant exchanged these remarks:
“The Court: One of the conditions under which I am placing you on probation is that you make every reasonable effort and every honest effort to satisfy your tax liability with the government. It won’t be up to the Internal Revenue Department to determine whether you are making that effort; it will be up to this court. It will be that you have to satisfy this court to make every reasonable effort—
“A. I think I can do that. I will try.
“Q. (Continuing) — to discharge this liability.
“The Clerk: Fine of $10,000; the defendant committed to custody of the Attorney General for eighteen months, and sentence be suspended and the defendant placed on probation for a period of two years, conditioned that the defendant make every effort to pay the tax liability to the U. S. Government.
“The Court: And that the court shall be the judge of whether this effort, your utmost effort—
“A. I think that’s fair, your hon- or.”
Even if Steiner’s belated attempt at eradicating the condition, “that he make every effort to pay tax liability,” is before us, by indirection at least, we refrain from disturbing the judicial discretion ordering it, and exercised under 18 U.S.C. § 3651, providing for granting probation:
“When * * * the ends of justice and the best interest of the public as well as the defendant will be served thereby * * * upon such terms and conditions as the court deems best.”
Judicial discretion is the fabric from which probation is cut and tailored. See e. g. Berra v. United States, 8 Cir., 1955, 221 F.2d 590 affirmed 1956, 351 U.S. 131, 76 S.Ct. 685. We think defendant’s argument erected on the restitution clause of § 3651 lacks persuasive force. United States v. Stoehr, 3 Cir., 1952, 196 F.2d 276, strongly pressed on us by defendant, contains a dissimilar condition of probation requiring payment of taxes within ninety days after probation commenced upon the defendant’s release from prison — he having been sentenced to imprisonment on other counts. Determination of tax liability and efforts to pay taxes are distinguishable.
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6575448-14650 | Kao, Chief Judge:
This case involves 69 appeals for reappraisement consolidated at the trial. The merchandise consists of men’s shirts exported from Hong Kong by Smart Shirts Manufacturers, Ltd., during 1961-62 and 1965-66. Merchandise sold by this maker has been the subject of litigation on two prior occasions. Bud Berman Sportswear, Inc. v. United States, 55 Cust. Ct. 574, R.D. 11056 (1965), aff’d sub nom. United States v. Bud Berman Sportswear, Inc., 57 Cust. Ct. 733, A.R.D. 211 (1966), aff’d 55 CCPA 28, C.A.D. 929 (1967), and Bud Berman Sportswear v. United States, 62 Cust. Ct. 901, R.D. 11657 (1969). The records in these cases have been incorporated herein.
The parties are in agreement that export value, as that value is defined in section 402(b) of the Tariff Act of 1930, as amended by the Customs Simplification Act of 1956, is the proper basis for determining the value of the within merchandise.
Except in appeals R64/388 and R66/27392, the invoices covering the imported shirts give the prices of f.o.b. Hong Kong and state that truckage, lighterage and handling charges in certain amounts are included in the invoice prices. The merchandise was entered at the invoiced f.o.b. Hong Kong prices less the charges which were claimed to be nondutiable. The appraisement was at the unit prices f.o.b. Hong Kong.
In reappraisement K64/388, the invoice gives the ex-factory prices and states that the charges for truckage, lighterage and handling are excluded from the invoice amount. Appraisement was made at values higher than the invoice unit values.
In reappraisement R66/27392 the invoice gives both the ex-factory and f.o.b. price. The merchandise was appraised at the f.o.b. price.
Plaintiff claims that all the merchandise was in fact freely sold or offered for sale at ex-factory prices; that the charges are no part of export value; that in view of the testimony presented, the appraise-ments are constructively separable, and that the correct dutiable values are the appraised unit values less the charges for truckage, lighterage and handling.
Export value, as defined in section 402(b) of the Tariff Act of 1930, as amended, is the price at which the merchandise is freely sold or, in the absence of sales, offered for sale in the principal markets of the country of exportation, in the usual wholesale quantities and in the ordinary course of trade, for exportation to the United States, plus the cost of packing and charges incidental to making it ready for shipment. Subsequent charges, such as the cost of inland freight, storage, or insurance, are not ordinarily part of export value. United States v. Lyons, 13 Ct. Cust. Appls. 639, T.D. 41484 (1926). However, where no sales or offers are ever made on an ex-factory basis and the merchandise is available solely at an f.o.b. price, export value includes the additional charges. United States v. Paul A. Straub & Co., Inc., 41 CCPA 209, C.A.D. 553 (1954), cert. den. 348 U.S. 823 (1954); Albert Mottola, etc. v. United States, 46 CCPA 17, C.A.D. 689 (1958).
In the Straub case the court stated (p. 215) :
In the case before us it is a fact that the freely offered price to all purchasers for the merchandise was on an f.o.b. Bremen basis. There is no showing that the goods could be purchased at the invoice price less freight. The unit prices for the merchandise in the instant case included the inland freight charges at the time of purchase in Selb-Stadt, and as the appellant states, “Such inland freight is incorporated in and bound up with the cost to the seller of material and labor, and forms an integral part of the unit value and purchase price of each item. It is inseparable therefrom and is a charge in the principal market at or prior to the time of ship ment, and does not accrue subsequent to the time of shipment to the United States.” [Emphasis omitted.]
There is evidence in the records incorporated herein that shirts manufactured by Smart Shirts were freely sold or offered for sale at ex-factory prices during the period from 1960 through 1963. This evidence is applicable to the entries in the instant case covering merchandise exported during that period, which entries are involved in the appeals listed in schedule A, attached hereto. However, the balance of the appeals, listed in schedule B, attached hereto, covers merchandise which was exported during 1965 and 1966. Evidence in an incorporated record cannot establish the value of merchandise subsequently exported although it may be relevant to show a continuous course of business. Descoware Corp. v. United States, 48 Cust. Ct. 541, Reap. Dec. 10158 (1962); Mexican-American Hat Co., by Koeller-Struss Co. et al. v. United States, 9 Cust. Ct. 681, Reap. Dec. 5756 (1942). In the instant case, however, there is nothing to show that the method of doing business in 1960-63 continued through 1965-66. The fact that merchandise was freely sold or offered for sale at ex-factory prices during one period is not evidence that the merchandise was sold or offered in the same fashion during a period two to three years later. Cf. United States v. The Heyman Co., Inc., 48 CCPA 13, C.A.D. 755 (1960); Kay Pee Import Export Co. v. United States, 56 Cust. Ct. 696, R.D. 11164 (1966).
The official papers in the appeals listed in schedule B indicate that the importer purchased at f.o.b. Hong Kong prices and there is no evidence that during the period of exportation involved the merchandise was sold or offered for sale at ex-factory prices. While the invoice in R66/27392 sets out ex-factory, as well as f.o.b. prices, there is nothing to indicate that the importer purchased on an ex-factory basis. Therefore, as to the appeals listed in schedule B, the appraised values must be sustained.
There is evidence that during the period of exportation covered by the appeals listed in schedule A, the merchandise was freely sold or offered for sale at ex-factory prices. As to those appeals, the question is whether the appraisements are separable so that plaintiff may contest the propriety of the inclusion of the charges in the appraised value, without affirmatively proving the other elements of value.
It is well settled that in a proper case, an appealing party in re-appraisement proceedings may challenge any one or more of the items entering into an appraisement while relying upon the presumption of correctness of the appraiser’s return as to the other elements. United States v. Dan Brechner et al., 38 Cust. Ct. 719, A.R.D. 71 (1957); United States v. Gehrig, Hoban & Co., Inc., 54 CCPA 129, C.A.D. 924 (1967); United States v. Chadwick-Miller Importers, Inc., et al., 54 CCPA 93, C.A.D. 914 (1967); United States v. Bud Berman Sportswear, Inc., 55 CCPA 28, C.A.D. 929 (1967).
Ail appraisement is ordinarily separable where it is at the invoiced “first cost” or per se price, pins various charges, but not where it is at a unit price, f.o.b., in the absence of proof of what the appraiser did. United States v. Bud Berman Sportswear, Inc., supra; United States v. Dan Brechner et al., supra; United States v. Supreme Merchandise Company, 48 Cust. Ct. 714, A.R.D. 145 (1962); S. S. Kresge Co. et al. v. United States, 45 Cust. Ct. 469, Reap. 9778 (1960); Valley Knitting Co., Inc., et al. v. United States, 44 Cust. Ct. 599, Reap. Dec. 9627 (1960).
There are circumstances, however, where, upon the basis of the evidence presented, constructed separation may be effected. United States v. Bud Berman Sportswear, Inc., supra; United States v. Shalom & Co., 57 Cust. Ct. 767, A.R.D. 216 (1966), appeal dismissed 55 CCPA 115 (1968); United States v. Gehrig, Hoban & Co., Inc., supra; United States v. Knit Wits (Wiley) et al., 62 Cust. Ct. 1008, A.R.D. 251, 296 P. Supp. 949 (1969); United States v. Gitkin Co., 46 Cust. Ct. 788, A.R.D. 132 (1961); Reliance International Corp. v. United States, 62 Cust. Ct. 845, R.D. 11639, 305 F. Supp. 20 (1969); Carolina Mfg. Co. v. United States, 62 Cust. Ct. 850, R.D. 11640 (1969); Shalom Baby Wear, Inc. v. United States, 62 Cust. Ct. 856, R.D. 11641 (1969); Haddad & Sons, Inc. v. United States, 62 Cust Ct. 896, R.D. 11656 (1969).
In the Bud Berman case, the merchandise was entered at the invoice unit prices, which prices were exclusive of handling and freight charges. It was appraised at f.o.b. unit prices, which were higher. The examiner testified that the appraised values were calculated by adding the inland charges, as set forth in the invoice, to the ex-factory unit prices shown therein. The court found dutiable value on the basis of the ex-facory prices exclusive of the charges.
In the Gitkin case some of the appraisements were at unit values which were stipulated to include buying commission, inland freight and other charges in at least the amounts shown on the invoices. It was held that this coinstituted a constructive separation of the elements of the appraisement which permitted the importer to limit its proof to the matter of the disputed charges.
In United States v. Shalom Co., supra, the invoice listed the ex-factory price, various charges, and a 5 percent commission. The merchandise was appraised at $9,555 each, net, packed, but the examiner testified that the appraisement included all charges, of which the item shown as a commission was one. In the Gehrig, Hoban case, the appraiser subtracted figures for what he considered nondutiable items from the total invoice price, but did not exclude an amount representing a commission or discount. In Knit Wits the evidence identified the item in dispute as a commission and the “Notice[s] of Action - Increase in Duties” showed that it was an element in the appraised value. In Reliance the examiner testified that he made the advisory recommendation and that he had taken into consideration the invoice unit price, the extended total thereof, the various charges listed and the grand total, and divided the grand total by the invoice quantity to arrive at the appraised value per dozen. In Haddad the examiner testified that he noted that the importer had entered the merchandise at the invoiced grand total less the itemized charges and that in making his appraisement, he had added back the charges which the importer had deducted. In these cases, it was held that the disputed charges or commissions which had been included in the appraised value were not properly part of the dutiable value of the merchandise.
In sum where it has been established that the merchandise was freely sold or offered for sale on an ex-factory basis and that the appraisement was made at an amount which included charges accruing subsequently, the appraisement is constructively separable and plaintiff need establish only the amount of the charges included in the appraised value and show that they are not properly a part of such value.
In view of these principles, I turn now to the testimony in the instant case insofar as it concerns the appraisements listed in schedule A.
Plaintiff called as a witness Mr. Aaron B'odner, who had been assistant appraiser of the tenth division (textiles) at the port of New York from 1960 to December 1967. He had previously been an examiner of merchandise for 15 years and had been in the customs service for a total of more than 30 years. He testified that he had examined the official papers in these cases and that, with certain exceptions hereinafter noted, the merchandise before the court was appraised under his supervision. He was shown the official papers in R62/1666 and stated that he had signed the summary sheet as assistant appraiser and that Ellie Khouri had signed as appraiser. He said that the presence of his signature coupled with the stamp of the appraiser indicated that the statement of appraisement on the invoice had been accepted as correct and that the examiner’s advisory recommendation had become the official appraised value. He stated that the summary showed the total f.o.b. Hong Kong value less charges foi truckage, lighterage and handling in the amount of $943.94; that the charges were entered as nondutiable by the importer with the notation on the invoice “3ST.I).” The examiner made a statement of appraisement on the invoice, which read “Appraised at Column X units net packed.” The column X unit, net packed, represented the f.o.b. Hong Kong value. That price included the inland charges in the amount deducted by the importer on the entry. The appraisement became the official appraisement in this case.
Similar testimony was given by Mr. Bodner as to the entries in R62/4213 and R62/7906, which appeals are listed in schedule A. He also testified that his answers would be the same as to all the other entries where he signed the summary sheet as 'assistant appraiser, that is, that the appraised value included the invoiced inland charges. Mr. Bodner’s signature as assistant appraiser appears on the summary sheets in the following additional appeals listed in schedule A: R61/24110; R61/24186; R62/1667; R62/5011; R62/5012; R62/6332, and K64/388.
Although the invoice in R64/388 was made out on an ex-factory basis, Mr. Bodner testified that the appraisement was at values higher than the unit ex-factory prices and that those values included the inland charges.
As to these appeals, since there is evidence that the merchandise was freely sold or offered for sale on an ex-factory basis and that the appraised values included subsequently accruing charges for truck-age, lighterage and handling in the amounts shown on the invoices, it follows that the dutiable export values of the merchandise are the appraised values less the charges, such charges not being dutiable where merchandise is available at ex-factory or fer se prices.
In another group of appeals, the summary sheets were signed by H. Menschenfreund as acting assistant appraiser. Mr. Bodner testified that Mr. Menschenfreund was his assistant at that time and was acting on his behalf. He said that Menschenfreund signed summary sheets when he (Bodner) was absent or because of other duties was unable to sign himself. He was aware of what the appraisements were intended to reflect, namely, the f.o.b. Hong Kong values, including the charges as invoiced.
Since Mr. Menschenfreund was Mr. Bodner’s assistant and was acting under his supervision, Mr. Bodner’s testimony is sufficient to establish, that the appraised values included the charges as invoiced. United States v. American Express Co., 44 Cust. Ct. 779, A.R.D. 120 (1960); Transcontinental Petroleum Co. v. Interocean Oil Co., 262 Fed. 278 (1919). As to these appeals also the dutiable export values are the appraised values less the charges shown on the invoices.
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3415214-23517 | EBEL, Circuit Judge.
In these consolidated direct criminal appeals, Defendants-Appellants Adam Trestyn and Crystal Herren challenge the district court proceedings that led to their guilty pleas for possession with intent to distribute MDMA and aiding and abetting: First, Herren argues that the district court denied her Sixth Amendment right to counsel of choice when it refused to continue a suppression hearing. Second, Trestyn and Herren raise ineffective assistance of counsel claims. Third, Trestyn and Herren challenge the district court’s refusal to suppress illicit drugs discovered in their minivan during a traffic stop. And fourth, Trestyn challenges the sentence imposed on him.
Having jurisdiction pursuant to 28 U.S.C. § 1291, we conclude as follows: First, the district court did not deny Herren her Sixth Amendment right to counsel of choice when it refused to continue the suppression hearing. Second, because this is a direct appeal, we dismiss Trestyn’s and Herren’s ineffective assistance of counsel claims without prejudice. Third, the district court erred in denying Trestyn’s and Herren’s motions to suppress. Based on that error, we reverse and vacate Trestyn’s and Herren’s convictions and sentences, and, thus, we need not address Trestyn’s challenge to his sentence.
I. BACKGROUND
A. Factual History
On July 1, 2009, at approximately 5:30 p.m., Wyoming Highway Patrol Trooper Nykun was patrolling a section of Interstate 80, west of Cheyenne, Wyoming. Trooper Nykun noticed a silver Honda Odyssey minivan traveling eastbound displaying a rear California license plate but no front license plate. Trooper Nykun knew that California law requires vehicles to display both front and rear license plates, see Cal. Veh.Code § 5200 (West 2003), so he initiated a traffic stop.
Trooper Nykun approached the minivan on foot and informed Trestyn, who was driving, that he stopped the vehicle for a license plate violation. Trestyn explained that he and Herren purchased the car in California and were travelling back to Ohio. Herren, seated in the passenger seat, explained that the seller did not have a front license plate for the minivan. Trestyn then provided documents related to the purchase. Trooper Nykun asked Trestyn to provide a driver’s license and to come to his patrol car. So Trestyn exited the minivan, gave Trooper Nykun a New York driver’s license, and walked to the patrol car.
At this point, Trestyn, seated in the front passenger seat of the patrol car with the door open, explained that he and Herren found the minivan on the Internet and flew to California to purchase it for $9,000. Trooper Nykun found the story unusual because of the state of Ohio’s economy at the time; specifically, he found it unusual that Trestyn and Herren would “fly all the way out to California to purchase an older van that you could probably get in Ohio for either the same price or cheaper.” (Aplt. Trestyn App., vol. Ill at 31-32.)
After Trestyn described how the two purchased the minivan, Trooper Nykun asked Trestyn for proof of insurance. Trestyn responded that it was in the minivan, so Trooper Nykun and Trestyn exited the patrol ear. Trooper Nykun approached Herren at the front passenger’s side window of the minivan. There Trooper Nykun asked Herren for proof of insurance, and she provided an insurance card with the name “Crystal K. Herren.” Herren explained, just as Trestyn did, that she and Trestyn flew from Ohio to California to purchase the minivan for $9,000. Trooper Nykun asked Herren if the minivan was in her name, and she responded that it was. At this point, Trooper Nykun asked Trestyn to go sit in the minivan, and Trooper Nykun returned to his patrol car.
At 5:38 p.m., seated back in his patrol car, Trooper Nykun radioed Trooper Ger-main and requested that Trooper Germain come to his location to perform a canine free air sniff. Trooper Germain is a certified narcotics-detection-canine handler, and his dog, Bonnie, was certified to detect the odors of marijuana, methamphetamine, cocaine, and heroin by the California Narcotic Canine Association. Trooper Ger-main responded that he would be en route to Trooper Nykun’s location in about five minutes.
Then, Trooper Nykun contacted dispatch to run a driver’s license cheek on Trestyn in Ohio, California, and New York. While waiting for the driver’s license check to be completed, Trooper Nykun began filling out the paperwork for a warning for the missing front license plate and reviewed the purchase agreement for the minivan provided by Trestyn and Herren. Shortly thereafter, dispatch asked Trooper Nykun for Trestyn’s middle name, which was not listed on his New York driver’s license but which was needed to complete the driver’s license check with Ohio. Trooper Nykun could not find Trestyn’s middle name in the paperwork that he had, so Trooper Nykun once again approached the minivan. When Trooper Nykun asked Trestyn for his middle name, he also asked Herren for her driver’s license. At this point, Herren provided an Ohio driver’s license.
At 5:41 p.m., Trooper Nykun returned to his patrol car where dispatch explained that Ohio and California reported expired identifications for Trestyn while New York reported a valid license. Trooper Nykun then asked dispatch to run a driver’s license check on Herren and a vehicle identification number (VIN) check on the minivan. Trooper Nykun waited in his patrol car for Trooper Germain to arrive as those checks were being performed.
Once Trooper Germain arrived at the scene, his canine, Bonnie, alerted at the minivan signaling to the troopers that she detected the odor of a controlled substance. Eventually, the troopers recovered four bundles of white powder wrapped in grey duct tape and dryer sheets from underneath a plastic speaker cover. The troopers arrested Trestyn and Herren, and a more thorough search of the minivan at the Cheyenne Drug Enforcement Agency/Division of Criminal Investigation office revealed four more packages of white powder. Laboratory tests confirmed that the white powder was MDMA, also known as ecstasy.
B. Procedural History
A grand jury indicted Trestyn and Herren on July 23, 2009, with two drug trafficking counts. On September 2, 2009, Trestyn filed a motion to suppress the evidence seized as a result of the search of the minivan. The district court scheduled a hearing for September 29, 2009, to consider the motion. But on September 25, 2009, Herren filed a similar motion to suppress, and so the district court rescheduled the hearing for October 2, 2009.
On October 1, 2009, the day before the suppression hearing, Herren filed two additional motions. First, Herren filed a motion and affidavit for the admission of California attorney James Bustamante pro hac vice as Herren’s counsel. Second, Herren filed a motion to continue the suppression hearing in order to give Bustamante adequate time to prepare for the hearing.
At the beginning of the suppression hearing, Herren’s counsel, Mr. Bustos, asked the district court to continue the hearing so that Bustamante, who was not present, could appear on behalf of Herren. Judge Brimmer orally denied the motion during the following exchange:
Mr. Bustos: If I may be able to address another matter first, Your Honor.
The Court: Well, with regard to your motion to continue, we just can’t do that. Mr. Bustos: Well, if I may, Your Honor, the situation is that my client, Miss Herren, she’s adamant that she wants to be represented by different counsel in this matter. It is not that she’s negative towards me, and she will say that, it is just that she prefers another attorney. The Court: We will hear that after the motion is heard.
Mr. Bustos: And with that said, then, I would then move to withdraw Miss Herren’s motion at this time, Your Honor. The Court: Well, we don’t do that. You’ve got adequate counsel at the moment. You’re in good hands and couldn’t be in better hands, and so we will go ahead with our motion.
The Defendant: Your Honor, I don’t want to go ahead with the motion. I have a right to the counsel of my choice, and I have retained Mr. James Bustamante.
The Court: I’m sorry, we’re going to go ahead with the motion. I happen to be running the court, not you, Dear.
(Aplt. Herren App., vol. II at 240-41.)
After denying the motion to continue, Judge Brimmer first heard testimony from Trooper Nykun. Trooper Nykun detailed the traffic stop of Trestyn and Herren and the subsequent discovery of the MDMA in the minivan. Then, before Bustos began cross-examining Trooper Nykun, Herren once again addressed the court to explain that she wanted Bustamante to represent her. Judge Brimmer responded as follows:
Mr. Bustos has been appointed as your attorney by the Court. Your attorney that you would like, Bustamante, isn’t here. If he were here, I would admit him and let him proceed. But he hasn’t seen fit to come. This hearing was well-known to everyone beforehand. He could have arrived and he didn’t. Please sit down. Mr. Bustos can ask questions in your behalf.
(Id. at 283.) After that, Bustos moved to withdraw as Herren’s attorney, but Judge Brimmer also denied that motion. Bustos went on to cross-examine Trooper Nykun. The Government also called Trooper Ger-main, who testified about the details of his involvement in the search of the minivan. Both Trestyn’s and Herren’s attorneys cross-examined Trooper Germain, but neither presented any witnesses or evidence.
After hearing the testimony of Troopers Nykun and Germain and receiving the Government’s exhibits, Judge Brimmer orally denied both motions to suppress. The district court also issued a written order to that effect on October 8, 2009.
On December 11, 2009, Herren, through her new counsel, Bustamante, filed a motion for reconsideration of her motion to suppress. A week later, Trestyn joined the motion. On December 21, 2009, the Government filed its response to the motion for reconsideration, and Trestyn and Herren’s case was reassigned from Judge Brimmer to Judge Johnson.
Judge Johnson held an evidentiary hearing on the motion for reconsideration on January 11, 2010. At that hearing, the eourt heard the testimony of Stephen Nicely, a narcotics-detection-dog expert for the defendants. Then, the court heard the testimony of Kenneth Wallentine, a narcotics-detection-dog expert for the Government. But Judge Johnson refused to allow Trestyn and Herren to recall Troopers Nykun or Germain at this hearing.
The district court denied the motion for reconsideration in a written order on January 21, 2010. In that order, the court rejected three arguments for reconsideration. First, Trestyn and Herren argued that, although they conceded the validity of the initial traffic stop in their motions to suppress, the initial traffic stop was not based upon any violation of Wyoming law. But the court concluded that both Trestyn and Herren waived that argument when they conceded the legality of the initial stop in their motions to suppress. Further, the district court determined that even if the issue had not been waived, the initial traffic stop was lawful because Wyoming troopers have the authority to stop a vehicle with license plates that are not properly displayed according to the laws of the state in which the vehicle is registered.
Second, Trestyn and Herren argued that Trooper Nykun did not have reasonable suspicion to prolong their detention while he completed a background check on Herren. But the district court concluded otherwise, finding that a trooper is allowed to run background checks on all occupants of a vehicle during a routine traffic stop. Further, the district court emphasized that Herren, not Trestyn, was the registered owner of the minivan, and, therefore, Trooper Nykun acted appropriately in determining the owner of the vehicle.
Finally, Trestyn and Herren argued that the testimony of Nicely proved that Bonnie was not a properly trained, reliable narcotics-detection dog. The court rejected this argument as well. The district court found that Bonnie was a reliable narcotics-detection dog based on her certification and Trooper Germain’s ongoing training with her. The court also noted that from watching the video, it noticed a change in Bonnie’s behavior during her deployment around the minivan.
After the denial of the motion for reconsideration, both Trestyn and Herren entered into conditional plea agreements and pled guilty to the second count in the indictment — possession with intent to distribute MDMA and aiding and abetting, in violation of 21 U.S.C. § 841(a)(1) and (b)(1)(C), and 18 U.S.C. § 2. The district court sentenced Trestyn to 110 months’ imprisonment and Herren to 70 months’ imprisonment. Both Trestyn and Herren timely appealed.
II. DISCUSSION
A. Sixth Amendment Right to Counsel of Choice Claim
First, Herren argues that the district court deprived her of counsel of choice, guaranteed by the Sixth Amendment, when it refused to grant her motion to continue the suppression hearing. See Wheat v. United States, 486 U.S. 153, 159, 108 S.Ct. 1692, 100 L.Ed.2d 140 (1988) (describing the Sixth Amendment right of a defendant who does not require appointed counsel to choose who will represent him). Herren bases her argument on the Supreme Court’s decision in United States v. Gonzalez-Lopez, 548 U.S. 140, 126 S.Ct. 2557, 165 L.Ed.2d 409 (2006). In Gonzalez-Lopez, the Supreme Court held that when a court wrongly denies a defendant counsel of choice, the error is structural and, thus, not subject to harmless error analysis. Id. at 150, 126 S.Ct. 2557.
As the Government explains, however, Gonzalez-Lopez does not address the particular question that Herren raises— whether the district court erred by not granting a continuance so that Bustamante could be admitted pro hoc vice to represent her. Concerning that question, this Court has offered previous guidance.
In United States v. Flanders, we observed that, in reviewing the district court’s denial of a continuance to allow the defendant to obtain new counsel, the court must “balanc[e] the defendant’s constitutional right to retain counsel of ... choice against the need to maintain the highest standards of professional responsibility, the public’s confidence in the integrity of the judicial process and the orderly administration of justice.” 491 F.3d 1197, 1216 (10th Cir.2007) (internal quotation marks omitted).
In striking that balance, we consider whether: 1) the continuance would inconvenience witnesses, the court, counsel, or the parties; 2) other continuances have been granted; 3) legitimate reasons warrant a delay; 4) the defendant’s actions contributed to the delay; 5) other competent counsel is prepared to try the case; 6) rejecting the request would materially prejudice or substantially harm the defendant’s case; 7) the case is complex; and 8) any other case-specific factors necessitate or weigh against further delay.
Id. We review the district court’s decision for an abuse of discretion. Id.
In Flanders, a defendant filed a fourth motion to continue his trial after receiving funds that would enable him to retain an attorney. Id. at 1215. The district court denied the motion for a continuance because of the “age of the case” and the “substantial likelihood that [the] Defendant would make an eleventh-hour plea for another continuance.” Id. (internal quota tion marks omitted). In concluding that the district court did not abuse its discretion, this Court explained,
Due to the scheduling burdens of the district courts, assembling the witnesses, lawyers, and jurors at the same place at the same time necessitates that broad discretion ... be granted [to] trial courts on matters of continuances; only an unreasoning and arbitrary insistence upon expeditiousness in the face of a justifiable request for delay violates the right to the assistance of counsel.
Id. at 1216 (internal quotation marks omitted).
We conclude that the district court did not abuse its discretion by denying Herreris motion for a continuance. First, Herren waited until the day before the suppression hearing to file the motion for continuance. As a result, just as in Flanders, a continuance would have inconvenienced witnesses, the court, counsel, and the parties. Second, Herren failed to establish legitimate reasons that would warrant a delay. While Herren explained that she wanted the continuance in order to retain Bustamante as her attorney, she did not offer a reason for why she waited until a day before the scheduled suppression hearing to ask for the continuance. Three months passed between the time of Herren’s arrest and the hearing, during which she could have retained Bustamante instead of waiting until one day before the suppression hearing. Finally, Bustos was prepared to represent Herren at the suppression hearing. Bustos cross-examined the Government’s witnesses at the hearing and gave a closing argument. This shows that other competent counsel was available to represent Herren.
We cannot conclude that this was an unreasoning and arbitrary insistence upon expeditiousness in the face of a justifiable request for delay. Therefore, the district court did not abuse its discretion, and the denial of Herren’s motion to continue the suppression hearing did not violate her Sixth Amendment right to counsel of choice.
B. Sixth Amendment Ineffective Assistance of Counsel Claims
Next, both Trestyn and Herren argue that their right to effective assistance of counsel was violated because of their attorneys’ failure to challenge the initial traffic stop in the suppression motions and failure to call an expert to challenge the reliability of the narcotics-detection dog during the suppression hearing. But it is well established that ineffective assistance of counsel claims should generally be brought in collateral proceedings, not on direct criminal appeal. E.g., Massaro v. United States, 538 U.S. 500, 504-05, 123 S.Ct. 1690, 155 L.Ed.2d 714 (2003); United States v. Calderon, 428 F.3d 928, 931 (10th Cir.2005). The Supreme Court explained the rationale for this rule as follows:
In light of the way our system has developed, in most cases a motion brought under § 2255 is preferable to direct appeal for deciding claims of ineffective assistance. When an ineffective-assistance claim is brought on direct appeal, appellate counsel and the court must proceed on a trial record not developed precisely for the object of litigating or preserving the claim and thus often incomplete or inadequate for this purpose.
Massaro, 538 U.S. at 504-05, 123 S.Ct. 1690. Therefore, when brought on direct appeal, ineffective assistance of counsel claims are “ ‘presumptively dismissible, and virtually all will be dismissed.’ ” Calderon, 428 F.3d at 931 (quoting United States v. Galloway, 56 F.3d 1239, 1240 (10th Cir.1995) (en banc)). We recognize a narrow exception for the “rare claims which are fully developed in the record [and allow such claims to] be brought either on direct appeal or in collateral proceedings.” Galloway, 56 F.3d at 1242.
Both Trestyn and Herren argue that the factual record has been fully developed and, therefore, this Court should reach the merits of the ineffective assistance of counsel claims on direct appeal. But this case does not resemble the few cases in which we have applied this narrow exception. Cf. United States v. Hamilton, 510 F.3d 1209, 1212-13 (10th Cir.2007) (hearing an ineffective assistance of counsel claim on direct appeal because the district court held a hearing to determine whether to withdraw a defendant’s guilty plea based on ineffective assistance of counsel); United States v. Carr, 80 F.3d 413, 416 n. 3 (10th Cir.1996) (hearing an ineffective assistance of counsel claim on direct appeal because the defendant moved below to withdraw his guilty plea based on an allegation of ineffective assistance of counsel and the district court held a lengthy hearing on the ineffective assistance issue). Neither Trestyn nor Herren asserted ineffective assistance of counsel claims in the district court. Therefore, the district court did not hold a hearing, hear testimony, or weigh the ineffective assistance question before the case arrived to us on direct criminal appeal. The district court never had an opportunity to consider those claims, much less develop a record on the issue. The record before us is insufficient to enable meaningful appellate review of these claims, and, therefore, we dismiss these claims without prejudice.
C. Fourth Amendment Claims
Trestyn and Herren next challenge the district court’s denial of their motions to suppress the evidence seized during the search of the minivan. When reviewing a denial of a motion to suppress, this Court accepts the district court’s factual findings, unless they are clearly erroneous, and views the evidence in the light most favorable to the government. United States v. Hunnicutt, 135 F.3d 1345, 1348 (10th Cir.1998). While the existence of reasonable suspicion is a factual determination, the ultimate determination of the reasonableness of a search and seizure under the Fourth Amendment is a question of law reviewed de novo. United States v. White, 584 F.3d 935, 944 (10th Cir.2009).
The Fourth Amendment protects the “right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures.” U.S. Const, amend. IV. A traffic stop is a “seizure” within the meaning of the Fourth Amendment, “even though the purpose of the stop is limited and the resulting detention quite brief.” Delaware v. Prouse, 440 U.S. 648, 653, 99 S.Ct. 1391, 59 L.Ed.2d 660 (1979). A routine traffic stop, however, is more analogous to an investigative detention than a custodial arrest. United States v. Jones, 44 F.3d 860, 871 (10th Cir.1995). We, therefore, analyze such stops under the principles developed for investigative detentions in Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968). United States v. Botero-Ospina, 71 F.3d 783, 786 (10th Cir.1995) (en banc). Thus, to determine the reasonableness of an investigative detention, we make a dual inquiry, asking first “whether the officer’s action was justified at its inception,” then second “whether it was reasonably related in scope to the circumstances which justified the interference in the first place.” Terry, 392 U.S. at 20, 88 S.Ct. 1868. Once an officer discovers that a traffic violation has not occurred, however, the law requires the officer to allow the driver to proceed without further delay. United States v. McSwain, 29 F.3d 558, 561-62 (10th Cir.1994).
a. Whether the Traffic Stop Was Justified at Its Inception
Turning first to whether this stop was justified at its inception, we conclude that Trestyn and Herren waived the argument that the traffic stop was not justified at its inception. Both Trestyn and Herren conceded in their motions to suppress that the traffic stop initiated by Trooper Nykun was justified at its inception because of the minivan’s failure to display a front license plate. (See Aplt. Trestyn App., vol. I at 29 (“The defense agrees that Trooper Nykun had reasonable cause to stop Mr. Trestyn and investigate his missing license plate.”); Aplt. Herren App., vol. I at 44 (“The defense agrees that Trooper Nykun had reasonable cause to stop the van and investigate its missing license plate.”).) Based on that concession, Judge Brimmer did not address this first part of the Terry inquiry when he denied the motions to suppress.
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7399464-27461 | MEMORANDUM OPINION
DAVIDSON, District Judge.
In the instant action Bessie Thompson has sued the Mississippi State Personnel Board asserting that the Personnel Board’s requirement that applicants for the position of Supervisor II must have a college degree or two years of college with experience violates Title VII and the Age Discrimination in Employment Act. After a trial on the merits in this action, the court is now ready to enter its findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure.
I. FINDINGS OF FACT
A. Background
The plaintiff in this action has a high school education and has taken a two-year cosmetology correspondence course. She started working for the Department of Public Welfare with the CETA Program in 1977 as an Administrator IV. Nine months later she was promoted to the program position of deputy director of the CETA program. In 1979 she was promoted to the position of Director V. Thompson held that position until 1981 when the program under which she was working was phased out. She then applied for the position of Supervisor II with the State Personnel Board. Thompson’s application was rejected because she did not meet the college education requirements for the Supervisor II position. At the time of her application the plaintiff was 59 years old.
Thompson drew unemployment for three months after being rejected for the Supervisor II position. She was then hired as a hostess at the Greenville, Mississippi Country Club and held that position for three years. Thompson then became manager of the Cleveland Country Club in Cleveland, Mississippi.
After being rejected for the position of Supervisor II, the plaintiff had a discussion with the then EEOC officer at the Department of Public Welfare, Laurie Gervin. Gervin informed the plaintiff of her right to file a complaint with the EEOC. The plaintiff filed that claim and subsequently filed the instant action. She claims that the educational requirements for the Supervisor II position discriminate against women in violation of Title VII of the Civil Rights Act of 1964 (42 U.S.C. Section 2000e et seq.) and that these requirements discriminate against persons who are 40 or older in violation of the Age Discrimination in Employment Act (29 U.S.C. Section 621 et seq.)
At the time of the plaintiffs application the State Personnel Board required that applicants for the Supervisor II position have a bachelor’s degree from an accredited four-year college or university and one year of experience in a human service agency in a position that involved the provision of services to clients, or completion of two years of college with three years of experience.
The Personnel Board has described the characteristics of the Supervisor II position as follows:
This is social work of a supervisory nature at the county or regional level. Work involves the supervision of full-time service staff with responsibility for intake work in providing services to adults, families and children, supervision and planning for the use of subprofessionals and volunteers, orientation and training of workers, and assisting the County Director with community and inter-agency activities. Incumbents in this position insure that acceptable standards for social services to adults, families, and children are maintained, that utmost use is made of community resources, that intake standards are maintained, and that all facets of the social service program are coordinated with other agency programs. Work is performed under the administrative supervision of the County Welfare Director, with technical supervision from the Supervisor III.
The responsibilities of a Supervisor II include supervision and evaluation of that supervisor’s staff; assignment of work to members of the staff; interpretation and execution of policies and procedures of the Department of Welfare; review of work by the social service staff and intake staff; conducting training programs to increase staff competence and to improve staff performance; and participation in various other administrative and developmental activities.
Barbara Rayburn, an experienced social worker, met the educational requirements for the Social Worker II position and was hired for that position. Rayburn was 42 years old at the time she was hired, pos sessed a bachelor’s degree and had completed some graduate work. Most Supervisor II positions are filled by people who have previously worked as social workers. Rayburn testified that as a Supervisor II she uses her former experience as a social worker in making judgment calls on how to handle certain cases. The social worker position has a college degree requirement.
Rayburn testified that as Supervisor II she supervises social services programs, particularly the protective services program. This program protects adults and children from abuse, neglect, and exploitation. Whenever a case of abuse, neglect, or exploitation is reported, the Supervisor II is responsible for assigning a social worker to the case and taking a direct hand in all phases of the social worker’s activities, except for routine matters.
The position of Supervisor II is very interrelated with the position of social worker. Rayburn testified that a Supervisor II may sometimes be involved directly in the investigation of a case and is required to make discretionary decisions based on the investigation. A social worker who has investigated the case prepares a written report and submits it to the Supervisor II. The Supervisor II then has final authority on whether to approve the social worker’s recommendation as to how the case should be handled or to proceed in another manner.
The position's responsibilities require that the supervisor be a skilled communicator. A Supervisor IPs responsibilities may involve having to petition the youth court for certain legal action and may require the Supervisor II to testify in court. Rayburn testified that a Supervisor II also has the authority under certain circumstances to decide whether to take a child from the child’s home without a court order. This may occur in emergency situations when there is no time to get a court order.
Rayburn stated that the position requires that the supervisor have great assessment skills and be able to make informed judgment calls. Rayburn further testified that a Supervisor II has final responsibility in the placement services that the welfare department provides. A Supervisor II has the responsibility of approving or disapproving homes in which victims may be placed. The Supervisor II also supervises services to unmarried parents.
As a Supervisor II in Washington County Rayburn supervises ten social workers, nine aids and one general service employee. Her responsibilities as Supervisor II include training social workers, introducing the social workers to the policies of the department and clarifying departmental policies. The Supervisor II also must conduct performance appraisals of the social workers who work under her and must correct errors that the social workers have made.
B. Work Force Data of Supervisor II Position
1. Impact of Educational Requirement
The following table depicts the work force composition of the Supervisor II position in 1981 and at present:
Date Total No. of No. of No. 40 or No. Younger Workers Males Females Over than 40
April 1981 22 2 20 12 10
1987 53 6 47 27 26
This information reveals that there is a substantially greater number of women who fill the position of Supervisor II than there are of men. Also, the Supervisor II position is composed of more people who are 40 years of age and older than of people who are under the age of 40. No evidence was submitted at trial that the work force composition of the Supervisor II position was due to any affirmative action program implemented by the Personnel Board. Nevertheless, the plaintiff contends that the defendant’s employment practices have an adverse impact on women and individuals 40 years of age and older.
Both parties submitted expert testimony concerning the impact that the educational requirement has on the Supervisor II work force and the job relatedness of the requirement.
The plaintiffs first expert, Dr. John Mar-cum, Jr., a demographer, stated that he studied applications for state jobs submitted in 1979 and 1980. He proceeded upon the theory that many who did not have a college degree did not apply for the position of Supervisor II because they were aware of the educational requirement and thought that the application process would be futile. Based on this assumption, he concluded that the proper pool to study was all applications for state jobs, not just those applications for the position of Supervisor II. During the two-year period that he studied, 13,000 applications were submitted for state jobs. Marcum used a sampling procedure whereby he took a representative number of the applications to analyze. Out of this sample Marcum looked at the sex, age and years of education of those applicants.
A total of 304 women and 128 men from the sample applied for state jobs. Of these, 134 women met the Supervisor II qualifications while 88 men met the qualifications. Marcum found qualification rates of 44.08 percent for women and 68.75 percent for men. These rates show that the qualification rate for men is over 22 percent higher than it is for women.
Marcum also evaluated the qualification rate for women over 40 as opposed to men over 40. Although Title VII prohibits discrimination based on sex and the ADEA prohibits discrimination based on age as to all individuals who are at least 40, neither statute recognizes the subset of women over 40 as being protected from adverse treatment as opposed to men over 40. Thus, the plaintiff’s statistical data showing the different qualification rates of women over 40 and men over 40 without any data as to men and women younger than 40 is not probative in proving age discrimination.
In applying the Vsths rule to the sample from the pool of all applications for state jobs, Marcum found that the percentage of women who qualified (44.08 percent) for the Supervisor II position divided by the percentage of men who qualified (68.75 percent) equaled 64.12 percent. Since this number is less than 80, Marcum concluded that the education requirement for the Supervisor II position has an adverse impact on women. Marcum also tested for statistical significance and found that the difference between the qualification rates for the two groups was statistically significant and therefore indicated adverse impact on women.
Marcum also calculated the qualification rate for men and women with two years of college education. The rate was 52.4 percent for women and 77.8 percent for men. Application of the /sths rule to these rates also resulted in a showing of adverse impact on women.
Next, Marcum calculated the qualification rates for men over 40 and women over 40. He did not testify concerning the qualification rates of all applicants 40 years of age and older as opposed to all applicants younger than 40. The court finds that the relevant comparison should have been between the qualification rates of all applicants 40 years of age and older and all applicants younger than 40. Consequently, Marcum’s calculations concerning the difference between men over 40 and women over 40 may not be considered as a probative of age discrimination.
Marcum additionally analyzed a 5 percent sample of people between 21 and 65 from the 1980 Mississippi census data in terms of sex and college education. He stated that the qualification rates using the %ths rule with this pool were fairly similar to the rates found with the state job applicant pool.
In evaluating the impact of the education requirement on the protected groups at issue, the expert for the defendant, Dr. David Morris, made a study of applications that were actually submitted for the Supervisor II position. Morris was of the opinion that Marcum had used inappropriate pools as the basis of his study. Morris testified that in determining whether the educational requirement has an adverse impact on certain applicants for the Supervisor II position, the proper pool to evaluate is the pool of all applicants for that position. Morris testified that the pools that Marcum used for analysis are not as reliable as actual applicant flow data for the Supervisor II position in determining adverse impact because with those pools, individuals who are not interested in the job are included in the analysis. Morris stated that the pools upon which Marcum based his study should not be used unless there is an indication that something in the minimum qualification would preclude protected groups from applying in the proportion that would otherwise have been expected. The witness referred to this barrier as a “chilling effect.” Morris stated that from viewing the pool of Supervisor II applicants there was no reason to think that the educational requirement had a “chilling effect” on women or people 40 years of age or older. In fact, many more women apply for the Supervisor II position than do men. Because of the lack of indications of a chilling effect, Morris limited his study to the actual applicants for the Supervisor II job.
Morris studied the disapproved applications for the period of January 1981 to present and studied the approved applications from November 1982 to present. Morris found a total of 231 applications for the Supervisor II position. These applicants were classified as to their age and sex. The following table indicates the make-up of this applicant pool:
_Number_%
Female 149 64.5
Male_82_35J_
Total 231 100.0
40 years and over 33 14.35
Under 40_197_85£5
Total 230 100.00
As the table indicates, substantially more women than men applied for the Supervisor II position. Substantially more people under 40 applied for the position than did people 40 years of age and older.
Thirty of the 231 applicants for the Supervisor II position did not meet the minimum educational requirements. Nineteen of these 30 were female and 11 were male. Three of the 30 were 40 years of age or older, and 27 were under the age of 40.
After conducting a chi-square contingency test on the relationship between the sex variable and meeting minimum requirements for the Supervisor II position, Dr. Morris found that the relationship is non-significant. Dr. Morris’s study indicates that there is little, if any, difference between the pattern of males and females who met and failed to meet the minimum requirements for the Supervisor II position. Morris concluded from this study that the educational requirements had no adverse impact against females or males.
The following table indicates the relationship between males and females in meeting the minimum qualifications for the Supervisor II position:
Met Minimum Qualifications Did not meet Minimum Qualifications % that did not meet Qualifications Total No. of Applicants
Male 71 11 13% 82
Female 130 19 13% 149
Total 201 30 13% 231
(Chi-squared observed = .004) P .05
As the table indicates, there is no significant difference between the percentage of women who did not meet the minimum educational qualifications and the percentage of men who did not meet these qualifications.
Dr. Morris also conducted a chi-square analysis on the relationship between age and meeting the minimum requirements for the Supervisor II position. Morris divided the age groups into two groups: those 40 years of age and older, and those under 40. A chi-square test is used to indicate whether or not either of these two age groups is favored by the minimum requirements. A significant chi-square would indicate favoritism. After doing the analysis Morris found that the chi-square was non-significant and therefore did not show favoritism based on age. The following table shows the result of Morris’ analysis.
Chi-Square Test on Relationship Between Age and Meeting Minimum Requirements
Met M.Q.’s Did not meet M.Q.’s % That Did Not Meet M.Q.’s Total
40 and above 30 33
Under 40 170 27 14% 197
Total 200 30 13% 230
(Chi-squared observed = .202) P .05
As the table indicates, the educational requirement actually had a greater impact on those applicants younger than 40 than it had on the applicants who were 40 or older.
Morris also conducted what is known as the “%ths rule” or the 80 percent rule. This test is used as a guide to determine whether a job requirement may have an adverse impact upon a certain group. The 80 percent rule is used by first determining the number of men and woman who met the minimum educational qualifications and then dividing the larger number into the smaller number. The resulting ratio is then multiplied by 100. If the result is 80 percent or larger, no adverse impact is indicated. If use of the 4/6ths rule results in a number under 80, adverse impact is indicated. The results of the 4/sths rule to the applicants for the Supervisor II position are indicated as follows:
80% Rule Test on Minimum Requirements and Sex of Applicant
130 passed applicants Pass rate for females = 135 total applicants = .872
71 passed applicants Pass rate for males “82 total applicants = .866
.866 80 percent rule = .872 x 100 = 99%
After conducting this test Morris concluded that the 80 percent rule calculation indicates that there is no adverse impact to women by requiring a college education for the Supervisor II position.
A 4<4ths rule calculation was also done as to individuals 40 years of age and older and as to those younger than 40. The following table shows the result of that calculation:
80% Rule Test on Minimum Requirements and Age of Applicant
Pass rate for 40 30 passed applicants years and older = 33 total applicants = .909
Pass rate for under 170 passed applicants 40 years = 157 total applicants = .863
.863 80 percent rule = .909 x 100 = 95%
A higher percentage of applicants 40 years of age and older met the minimum qualifications than did applicants under 40. The 4/cths rule calculations indicated no adverse impact as to applicants who were 40 years of age and older.
Dr. Morris’ conclusion from the study was that there was no adverse impact caused by the educational requirements on females or on those aged 40 or older.
2. Job Relatedness
Dr. Eric Prien, an industrial psychologist, testified concerning the job-relatedness of the college education requirement to the Supervisor II position. Prien had not studied the Supervisor II position or interviewed any individuals holding that position, but had seen a narrative description of the job. Based on this job description, Prien was of the opinion that the college education requirement does not validly relate to the needs of the Supervisor II position but is simply a barrier so that fewer people will apply for the job. Prien was of the opinion that alternative qualifications to the college education requirement could be used as a better measure of an applicant’s achievement. Prien based his opinion in part upon the fact that the field of study for the college education required for the Supervisor II position is not specified. Prien reasoned that if the college field of study were specified, the attainment requirement would be connected to the achievement that is necessary for the job.
Prien was further of the opinion that the potential dangers of hiring an unqualified person for the Supervisor II position were not critical.
Dr. Morris also testified concerning the job-relatedness of the educational requirements. He testified that he is personally familiar with the Supervisor II position. In 1977 his firm conducted a validity study at the Department of Public Welfare as to social workers and eligibility workers. These workers are supervised by the Supervisor II and the Supervisor II actually participates in much of the work that these employees do. After receiving the results of a position analysis questionnaire and doing a task analysis study on the social workers and eligibility workers, Morris concluded that a college degree is necessary for the position of Supervisor II and enhances the professionalism of that position.
Morris found from his study that the duties of the Supervisor II include assigning work, evaluating performance of social workers, training personnel, resolving complaints, monitoring and certifying the type of aid to be given, classification of clients, and interpretation of policy to workers. Morris testified that in order for Supervisor II to be able to accomplish all of these tasks and actually to participate in the activities of the social worker, the Supervisor II needs at least the knowledge, skills and abilities that a social worker has. Morris stated that the demands of the Supervisor II position include that the Supervisor II have a strong reading comprehension, a broad base of knowledge, oral and written communication skills, ability to identify problems, and ability to take in and digest large amounts of information quickly. Morris stated that college training enables one to develop these skills. He stated that college training broadens one’s knowledge base and requires one to read material that is more complex than that that is read in high school. Morris stated that if the educational requirements were eliminated, the number of individuals who could not perform the required work (false positives) would increase and the degree of professionalism would decrease.
Morris was of the opinion that a substantial risk of critical consequences would exist if the educational requirement for the Supervisor II position were reduced. He based this opinion on his familiarity with the Supervisor II position and on particular factual situations of which he was aware. After evaluating the Supervisor II position, Morris concluded that college training is a sound requirement for the job.
C. Court’s Factual Findings as to Work Force Data
1. Proper Pool and Impact on Women
In looking at the actual applicant pool for the Supervisor II position, the court notes that the percentage of female applicants for the position (64.5%) is substantially higher than the percentage of male applicants (35.5%). There is no evidence in the record upon which the court may rely in inferring that otherwise qualified women were discouraged from applying for the Supervisor II position because of a self-recognized inability to meet the educational requirement. Indeed, the high percentage of female applicants for the position indicates that the educational requirement did not discourage otherwise qualified women from applying. Compare Dothard v. Rawlinson, 433 U.S. 321, 330, 97 S.Ct. 2720, 2727, 53 L.Ed.2d 786, 798 (1977); cf. Williams v. Owens-Illinois, Inc., 665 F.2d 918, 925 (9th Cir.1982) (actual applicant flow suggested as being accurate indicator of relevant markets, “at least where there is no evidence of systematic discouragement of minority applicants”). The court finds that the pool of actual applicants for the Supervisor II position is a more accurate indicator of the impact on the employer’s work force of the education requirement than is the pool of all applicants for all state jobs. The pool of all applicants for all state jobs does not include applicants for public school teaching positions and does not take into account whether those who applied for the various state jobs would have been interested in the Supervisor II position. Also, even if the college education requirement did not exist for the Supervisor II position, applicants would still have to have at least one year of human service experience. The pool of applicants for all state jobs does not take into account whether those individuals met that requirement. These deficiences make the plaintiff’s statistical proof unacceptable for determining disparate impact in this case.
Based on the number and percentage of women applicants for the Supervisor II position and on the equal percentage of mqn and women applicants who met the minimum educational qualifications for the Supervisor II position (see table, supra at 206), the court finds as a matter of fact that the college education requirement does not adversely affect women.
2. Proper Pool and Impact on Individuals 40 Years of Age and Older
The applicants for the Supervisor II position who were 40 years of age and older were substantially out-numbered by the applicants who were younger than 40. Only 33 of the 230 applicants were older than 39. This disparity could be some evidence that otherwise qualified individuals who were over 39 may have been discouraged from applying for the Supervisor II position because of the education requirement. Even if this were so, the court finds that the defendant’s statistics concerning the actual applicant pool are more reliable in determining the impact of the educational requirement on individuals 40 years of age and older than are the plaintiff’s statistics. The plaintiff submitted statistical data from the pool of applicants for all state jobs concerning the different rates at which women over 40 and men over 40 meet the college education requirement. The plaintiff did not submit statistical evidence from the state jobs pool concerning the different rates at which all individuals over 40 meet the educational requirement as opposed to all individuals younger than 40. Thus, the court finds that the plaintiff has not submitted evidence that the education requirement has an adverse impact on individuals who are 40 years of age and older. A comparison of women and men over 40 does not support an age discrimination claim.
The court further notes that although substantially fewer individuals over 39 applied for the Supervisor II position, the percentage of these individuals that met the educational requirement was higher than the percentage of individuals younger than 40 that met the requirement.
Based on this evidence, the court finds as a matter of fact that the college education requirement for the Supervisor II position does not adversely impact individuals 40 years of age and older.
II. CONCLUSIONS OF LAW
The plaintiff’s Title VII and ADEA claims against the defendant are based upon a disparate impact theory. To establish a prima facie case of disparate impact, a plaintiff must identify a facially neutral employment practice or requirement that has the effect of disqualifying a disproportionate number of members of a protected class from employment opportunities. Connecticut v. Teal, 457 U.S. 440, 446, 102 S.Ct. 2525, 2530, 73 L.Ed.2d 130 (1982); Bunch v. Bullard, 795 F.2d 384, 392 (5th Cir.1986). Once a plaintiff has made out a prima facie case, the burden then shifts to the employer to prove that the challenged employment practice that operates to exclude a larger portion of a protected class is related to job performance. Walls v. Mississippi State Department of Public Welfare, 730 F.2d 306, 315 (5th Cir.1984); Carpenter v. Stephen F. Austin State University, 706 F.2d 608, 621 (5th Cir.1983). If the employer proves that the employment barrier is job-related, the plaintiff then may still be able to show that the barrier is “a mere pretext for discrimination.” Bunch, 795 F.2d at 393. The plaintiff may show that other adequate selection devices are available that do not have a discriminatory effect against a protected class. Albemarle Paper Co. v. Moody, 422 U.S. 405, 95 S.Ct. 2362, 2375, 45 L.Ed.2d 280 (1975).
1. Prima Facie Case
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4341592-27528 | OPINION
WILLIAM J. MARTINI, UNITED STATES DISTRICT JUDGE.
Plaintiffs are urethane purchasers who accuse Defendant Dow Chemical Company (“Dow”) of conspiring with others to fix the prices of urethanes. At trial, Plaintiffs intend to call a damages expert, Dr. Leslie Marx, who plans to testify regarding econometric regression models developed for this litigation. According to Plaintiffs, the regression models show what urethane prices would have been had there been no conspiracy. The difference between the actual and “but for” prices represents the measure of Plaintiffs’ damages.
Dow now moves to exclude Dr. Marx’s testimony pursuant to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Phanns., Inc., 509 U.S. 579, 589, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). In connection with Dow’s motion, the Court held a Daubert hearing on January 13, 2016. For the reasons that follow, Dow’s motion is DENIED, subject to the Court reserving on whether Dr. Marx will be permitted to opine that the variances detected in her models are attributable to the alleged conspiracy or are otherwise consistent with the evidence of the conspiracy as a whole.
I. BACKGROUND
Plaintiffs accuse Dow of conspiring with others to issue simultaneous price announcements in order to artificially inflate urethane prices. At issue in this opinion is the proposed testimony of Plaintiffs’ expert, Dr. Marx. Initially, Plaintiffs enlisted a different expert — Dr. Matthew Raiff — to testify in connection with this lawsuit. However, intervening circumstances required Plaintiffs to substitute Dr. Marx for Dr. Raiff. On August 13, 2013, the MDL Court issued an order stating that “Dr. Marx, the new expert, will not be permitted to develop her own opinions or methodologies, but must endorse and- defend Dr. Raiffs opinions.” Mem. & Order, Aug. 13, 2013, at 2, 04-md-1616 (D.Kansas), ECF No. 2974. Accordingly, on September 20, 2013, Dr. Marx filed an expert report that evaluated Dr. Raiffs methodologies and ultimately concluded that his methodologies were sound. In her report, Dr. Marx furthér indicated that she is “readily able to sponsor and defend Dr. Raiffs methodologies, opinions, and conclusions at trial.” Marx Rpt. at ¶ 12.
Dr. Marx intends to provide testimony regarding a regression analysis Dr. Raiff performed in connection with this case. Generally, the regression analysis purports to show what the prices of three types of polyether polyol products “PPPs” (MDI, polyol, and TDI 80/20) would have been but for the price-fixing conspiracy. Therefore, there are separate regression models for MDI, polyols, and TDI 80/20. See Rev. Raiff Reply, at ¶ 1. In connection with this analysis, Dr. Raiff, and later Dr. Marx, were instructed to assume the existence of a conspiracy. Marx Dep. at 217:1-19.
Dr. Raiffs regression models can be characterized as “forecasting” models or models that are predictive in nature. The models initially base themselves off data derived from a period when there was no conspiracy, known as the “benchmark period.” Next, the models are run across the conspiracy period in order to show what PPP prices would have been had there been no conspiracy. The difference between the “but for” prices and actual prices during the conspiracy measures the extent of Plaintiffs’ damages. See Pis. Opp’n at 10-14.
As stated above, the first step in conducting a regression analysis is to formulate a pricing model based on a non-eollu-sive benchmark period. The non-collusive period serves as the benchmark because it captures normal supply, demand, and cost factors untainted by any conspiracy. In other words, it serves as the control group in Dr. Raiffs regression analysis. Pis. Opp’n at 17.
When formulating his forecasting models, Dr. Raiff was required to select explanatory variables to incorporate into the applicable regression equations. Rev. Raiff Rpt. ¶ 245. Those variables included, among other things, treasury rates, wages, and costs of various chemicals. Id., Fig. 44. Dr. Raiff selected variables after “studying the urethanes industry” and identifying “key economic factors for predicting urethanes prices.” Rev. Raiff Reply at 61. According to Dr. Raiff, the variables are based on “economic judgment and well-established econometric criteria.” Rev. Raiff Rpt. at ¶ 274. Dr. Raiff also supplemented his variable selection process with other statistical modeling tools that the Court will address later in this opinion. See Rev. Raiff Reply, at ¶ 62.
Next, Dr. Raiff was required to assign an appropriate coefficient to each selected variable. According to Dr. Raiff and Dr. Marx, the coefficients for each variable are harmonized in a manner so that the models show how the variables collectively impact PPP prices. Rev. Raiff Reply at ¶¶ 92, 93; Marx Rpt. ¶ 66. Therefore, when selecting coefficients, Dr. Raiff assessed how all of the selected variables operated as a whole. See id.
Once Dr. Raiff was confident that his regression models could accurately predict PPP prices during a given time period, his next task was to apply the models to the conspiracy period, January 1994 through December 2003. See, e.g., Rev. Raiff Rpt. at ¶273. Dr. Raiff accomplished this by inputting both the actual values for his December 1993 cost and demand variables along with the actual December 1993 price of the relevant PPP. This step generated the predicted PPP price for January 1994. Id. at ¶ 280. Dr. Raiff then repeated this process in order to obtain the predicted price for February 1994, but used the predicted January 1994 price instead of the actual January 1994 price. Id. He then ran this process along the entirety of the conspiracy period, and then through the post conspiracy period of January 2004 to December 2008. In other words, actual PPP prices for December 2003 were used to get the model off and running-after that, prices were forecasted based on how the model was constructed. See id.
After running the models along the conspiracy period, Dr. Raiff compared the predicted prices with the actual prices. The difference between the two represents what prices would have been in a normal, conspiracy-free environment. Where actual prices exceed but for prices, there is an overcharge. See Marx Rule 26 Disclosure at ¶¶ 41.
Dr. Raiffs regression analysis takes another step by seeking to predict prices for every urethanes transaction between Plaintiffs and Defendants. Rev. Raiff Rpt. ¶¶ 283-288. These “transaction-level models” seek to calculate damages for each individual Plaintiff by analyzing individual transactions. Id. at 283. Unlike the market-wide models, the transaction-level models seek to take into account “idiosyncratic factors” unique to the individual Plaintiffs. Id. at 287. “Such factors include (but are not necessarily limited to) the identity of the customer and the nature of the relationship (and contract, if any) between the customer and the vendor.” Id. The calculated overcharges from these models represent the extent of each Plaintiffs damages. See id.
II. DISCUSSION
Federal Rule of Evidence 702 governs the admissibility of expert testimony. It provides the following:
If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.
Therefore, under Federal Rule of Evidence 702, expert testimony will be admissible only if it is both relevant and reliable. Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). The Supreme Court has held that when determining whether expert testimony is reliable, courts may consider (1) whether a theory or technique “can be (and has been) tested;” (2) “whether the theory or technique has been subject to peer review or publication;” (3) “the known potential rate of error;” and (4) whether there is “general acceptance” in the methodology in the relevant scientific community. Daubert, 509 U.S. at 593-94, 113 S.Ct. 2786. However, “[t]he factors drawn from Daubert ... are neither exhaustive nor applicable in every case.” Pineda v. Ford Motor Co., 520 F.3d 237, 248 (3d Cir.2008) (citations and quotations omitted).
In serving the “gatekeeper function” and assessing the reliability of an expert’s methodology, the Court must be mindful that in order to be admissible, a scientific method need not be the “best” method or one that is demonstrably correct. “Rather, the test is whether the ‘particular opinion is based on valid reasoning and reliable methodology.’ ” Oddi v. Ford Motor Co., 234 F.3d 136, 145-46 (3d Cir.2000) (citing Kannankeril v. Terminix International Inc., 128 F.3d 802, 806 (3d Cir.1997)); see also Daubert, 509 U.S. at 588, 113 S.Ct. 2786 (Rule 702 embraces the “liberal thrust” of the Federal Rules of Evidence). Accordingly, “[vigorous cross-examination, presentation of contrary evidence, and careful instruction on the burden of proof are traditional and appropriate means of attacking shaky but admissible evidence.” Daubert, 509 U.S. at 596, 113 S.Ct. 2786. The proponent of expert evidence must demonstrate its admissibility by a preponderance of the evidence. Id. at 593 n. 10.
Dow does not appear to challenge Dr. Marx’s qualifications as an expert. Pis.’ Opp’n at 1. Instead, Dow argues that Dr. Marx must be excluded because (1) her regression models are unreliable and (2) her testimony does not fit to the facts of this case.
A. Reliability
Dow attacks of the reliability of the models on multiple fronts. Before addressing those arguments, however, the Court will first decide whether the type of regression model at issue here is generally reliable. As Plaintiffs correctly note, there are an abundance of judicial decisions supporting the premise that regression models can be a reliable tool for measuring damages in an antitrust case. See, e.g., Sun Microsystems Inc. v. Hynix Semiconductor, Inc., 608 F.Supp.2d 1166 (N.D.Cal.2009); In re LinerBoard Antitrust Litig., 497 F.Supp.2d 666, 681 (E.D.Pa.2007); In re Vitamins Antitrust Litig., No. 99-MC-00179, MDL No. 1285 (D.D.C. Mar. 20-21, 2003). However, Dow argues that Plaintiffs’ regression models are unreliable because they are “predictive” rather than “structural.” In other words, Dow argues the models are unreliable because they do not explain how the independent or explanatory variables impact the dependent variable. Dow Mot. at 18-19. The fact that Plaintiffs’ models are predictive rather than structural, however, does not render Dr. Marx’s testimony inadmissible. First, as explained above, predictive models have withstood Daubert challenges in the past. Second, Dow offers nothing to rebut Dr. Marx’s testimony that the scientific community has accepted the type of predictive regression used in this case. See Daubert Hr’g, January 13, 2016, at 66:1-4. Finally, even if Dow were correct that a structural model may be preferable to the predictive or “reduced form” model used by Dr. Marx, exclusion would still not be warranted. See Lentz v. Mason, 32 F.Supp.2d 733, 746 (D.N.J.1999) (“For [expert] testimony to be reliable, and thus, admissible under Daubert, [the expert] need not have used the best method available, only a - reasonable one.”). Here, the type of predictive models used by Dr. Marx are generally reliable.
However, as Dow correctly points out, “the devil is in the details.” No two antitrust cases are the same, and no two regression models are the same. Accordingly, Dr. Marx’s regression models must stand on their own two feet. Dow asserts several reasons for why the specific models at issue here are unreliable. The Court now addresses those arguments.
i. Ovetfit
Dow argues that the models in this case were able to accurately match prices during the benchmark period not because they are reliable, but because they are “overfit.” A regression model is overfit where it relies on nuances that exist only during the sample benchmark period such that it fails to “accurately captur[e] the underlying economic forces that actually drive prices across all time periods.” Dow Mot. at 26. In other words, Dow argues that Dr. Raiffs regression models are so finely tuned to the benchmark period that they are unable to capture underlying economic realities that impacted prices during the conspiracy period. See id.
Dow argues that the models are overfit because they use variables that are applied exclusively to post-conspiracy years. Dow further argues that the models are fatally flawed because they fail to properly account for capacity and capacity utilization issues that impacted urethane prices during the conspiracy period. In further support of its argument regarding overfit, Dow points out that Dr. Raiff failed to conduct a “hold-out test” on his regression models. Id. at 27. For the reasons stated below, the Court rejects Dow’s position.
First, while Dow’s argument regarding overfit may go to the weight of Dr. Marx’s testimony, it does not render the testimony inadmissible under Daubert. The Court concludes that Dr. Raiff took adequate steps to improve the models’ predictive ability outside the benchmark period. Specifically, Dr. Raiff sought to avoid overfit by using the Akaike Information Criterion (“AIC”), a statistical modeling measure designed “to improve predictions, while at the same time avoiding the problem of ‘overfitting’ the model to the data.... ” Rev. Raiff Reply at ¶¶ 62-63. Here, these objective AIC variables supplemented the variables chosen by Dr. Raiff so that the model could more reliably predict out of sample data. See id. Other economists have endorsed this approach as a means to avoiding overfit. See Halbert White et al., The Measurement of Economic Damages in Antitrust Litigation, 6 ABA Antitrust L. Eeon. Committee Newsl. 17, 21 (Spring 2006) (“Objective statistical criteria are used to determine the inclusion or exclusion of legitimate predictors .... [and] to improve the forecast accuracy of the econometric model during the benchmark period.”)
Second, the decision to exclude capacity variables from the model is not grounds for exclusion. The fact that Dr. Raiff did not include a specific capacity variable does not mean that capacity was unaccounted for in his regression models. Dr. Marx explains that other variables present in the regression model — namely, supply and demand factors — indirectly capture capacity decisions and their role in urethane pricing. See, e.g., Marx Rpt. at ¶ 54. Dr. Marx also explains that capacity and capacity utilization are excluded as express variables because they are factors that Dow and other PPP suppliers may have manipulated in furtherance of the alleged conspiracy.
Q. Let’s talk briefly about capacity. Why was capacity not included?
A. Dr. Raiff explained this in his report, and it’s commonly understood. In trying to develop a model that’s going to tell you what prices would have been in the absence of the conspiracy, you wouldn’t want to include variables that were manipulated by or affected by the conspiracy. You wouldn’t be able to get an estimate of what prices would be in the absence of the conspiracy if you’re including things that were manipulated by the conspiracy.
See Daubert Hr’g, January 13, 2016, at 74:16-25. For the reasons explained by Dr. Marx, other courts have declined to fault a regression model for excluding variables that could have been manipulated by a defendant in furtherance of an antitrust conspiracy. See Resco Prods., Inc. v. Bosai Minerals Grp., Civ.A. No. 06-235, 2015 WL 5521768, *8 (W.D.Pa. Sept. 18, 2015); In re LinerBoard Antitrust Litig., 497 F.Supp.2d at 681. The Court therefore rejects the position that an express capacity variable is a prerequisite for admissibility under Daubert.
Third, the models’ use of dummy variables for the post-conspiracy period does not render Dr. Marx’s testimony inadmissible. The dummy variables Dr. Raiff included in his regression models are narrowly tailored to account for three extraordinary events that' occurred during that time frame: Hurricane Rita; Hurricane Katrina, and consolidation in the TDI industry. See Raiff Report ¶¶ 262, 265. Dow admits that these were significant events in the context of the urethanes industry, see Dow Mot. at 29, and common sense would dictate that such seismic events would necessitate the use of unique variables to capture effects on pricing. Moreover, Dow does little to explain why the presence of dummy variables in the post-conspiracy period impacts the models’ predictive ability during the conspiracy period. Dow also fails to point out any events of similar magnitude taking place during the conspiracy period that would similarly require the implementation of unique variables. The Court therefore rejects the notion that the models’ use of dummy variables renders Dr. Marx’s testimony inadmissible.
Finally, and contrary to Dow’s position, Plaintiffs were not required to conduct a holdout test on their models in order for Dr. Marx’s testimony to be admissible. According to Dow, a hold-out test involves “holding] out a portion of the data when the model is being specified and estimated, and then run[ning] the model to see if it can predict the data that was held out.” Id. at 27. If the model can accurately predict the held out data, it may be reliable. See id. Dow’s own expert contends that Plaintiffs’ models are unreliable because, they repeatedly flunked the above-described hold-out tests. See id. at 33. One factor considered when applying Daubert is whether an expert’s hypothesis “can be (and has been) tested.” In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 742 (3d Cir.1994) (citing Daubert, 509 U.S. at 593, 113 S.Ct. 2786). While it is true that Dr. Raiff did not perform the type of holdout test described by Dow, the models were nonetheless subjected to different tests designed to measure predicative ability. Specifically, Dr. Raiff continued to run the model as the alleged conspiracy period ended and the post-conspiracy period began. Dr. Raiff notes that as the models continue to run, they accurately predict prices during the conspiracy period, thereby proving the models’ reliability. See Rev. Raiff Reply at ¶ 38. This approach is consistent with econometric principles regarding price-fixing conspiracies. See White, The Measurement of Economic Damages in Antitrust Litigation, 6 ABA Antitrust L. Econ. Committee Newsl. at 21 (“After the cartel ceases operations ... we would expect an accurate dynamic forecast to align with what actually occurred, even though there is nothing anchoring the prediction to the actual price level.”) And for the reasons explained in the foregoing paragraph, the post-conspiracy period’s use of dummy variables to account for extraordinary circumstances does not render Dr. Raiff s testing methods unreliable. To be sure, Dow is entitled to explain to a jury why it believes the hold-out test is superior to Dr. Raiff s approach. However, Daubert does not hold that a proposed methodology must be the “best” approach in order to be admissible-it instead requires only that the methodology be reliable and based on valid reasoning. See Oddi, 234 F.3d at 145-46; see also In re Urethane Antitrust Litig., No. 04-1616-JWL, 2012 WL 6681783, *6 (D.Kan. Dec. 21, 2012) (failure to utilize particular reliability test “does not provide a basis for exclusion of testimony supported by a [different] test that is admittedly well-accepted in this field.”) Accordingly, the Court rejects Dow’s arguments regarding overfit.
ii. Variable Selection
Dow argues that the models are unreliable because Dr. Raiff did not use objective criteria when selecting variables. Dow Mot. at 28. This argument holds no water because not only did Dr. Raiff select variables based on key economic factors for identifying urethane prices, he also based his selection on the objective AIC process described in Section II.A.Í of this Opinion. Moreover, it should come as no surprise that Dr. Raiff used his expertise to select variables that, in his opinion, impact PPP prices. See, e.g., Resco Products v. Bosai Minerals Grp., 2015 WL 5521768, at *10-11 (admitting expert testimony on pricing regression analysis where expert selected variables based on his knowledge of the relevant industry); In re Urethane Antitrust Litig., 2012 WL 668178, *7 (same); In re Linerboard Antitrust Litig., 497 F.Supp.2d at 671 (same).
Hi. Assigning of Coefficients
Dow also argues that Dr. Raiff s models are unreliable because they use “nonsensical” coefficients that run contrary to basic economic principles. Dow Reply at 5, 50. In one example, Dow explains that Dr. Raiff assigned a negative coefficient to a variable that serves as a proxy for demand. Because basic economic principles hold that prices should increase with demand, Dow contends that the variable in question should have been assigned a positive coefficient. Dow’s argument ignores the fact that the coefficients are not intended to measure variables in isolation. See In re High-Tech Employee Antitrust Litig. (High-Tech Employee), No 11-CV-02509-LHK, 2014 WL 1351040, *21 (N.D.Cal. Apr. 4, 2014) (admitting expert testimony based on regression model where at least one coefficient, in isolation, was counterintuitive). Instead, the variables and their assigned coefficients are designed to measure “the overall impact of all the independent variables on X on the dependent variable Y.” Rev. Raiff Reply at ¶ 92 (emphasis in original). As another econometrician explained in a different case involving similar regression models, “[i]t is not appropriate to isolate attention on any one particular variable, it’s like listening only to the oboe player when in fact what you care about is the ensemble.” Daubert Hr’g on Proposed Test, of Halbert White, In re Linerboard (No. MDL 1261), July 2, 2007. See also Rev. Raiff Reply at ¶ 95 (providing illustrative example on how a variable can serve as a predictive proxy for both supply and demand conditions). Consequently, Dow’s objections to Dr. Raiffs coefficient assignments do not warrant exclusion under Daubert.
iv. Statistical Significance
Dow asserts that Dr. Marx’s testimony is inadmissible because the MDI and polyols models do not produce statistically significant results and thus fail to detect any variance between actual and predicted prices. Dow Mot. at 42. When assessing a Daubert challenge, courts may consider the known or potential rate of error. Daubert, 509 U.S. at 594, 113 S.Ct. 2786 (citations omitted). Dow argues that in order for the models to be admissible, there must be less than a 5% chance that the predicted overcharges are merely false positives. See Dow Mot. at 44-48; Dow Reply at 34 n. 24. Taking a step back, when deciding whether results are statistically significant, statisticians will attempt to set an X% significance level at which a null hypothesis can be rejected. The null hypothesis is essentially a strawman which typically posits that a particular relationship demonstrated by a model is due to random chance. If there is less than a 5 in 100 chance that the model’s result occurred randomly, the null hypothesis can be rejected at the 5% significance level. See High-Tech Employee, 2014 WL 1351040 at *8 (citing White v. City of San Diego, 605 F.2d 455, 460 (9th Cir.1979)).
Here, the probability that Dr. Raiffs estimated overcharges are false positives is 19.2% for MDI and 7.2% for polyols. Therefore, the models for those product categories do not meet the 5% statistical significance level that Dow characterizes as a bare minimum requirement for admissibility. While Dow argues that the statistical significance associated with those models should be grounds for exclusion, the Court rejects such an approach as overly rigid. In High-Tech Employee, the district court admitted a regression analysis that failed to meet statistical significance levels that are easily met by the models at issue here. 2014 WL 1351040, at *14 (admitting regression model based on a 50% significance level). In doing so, the court noted that many statisticians caution against overemphasizing statistical significance as a proxy for reliability. See id. at *15 (citing sources). The court also cited to other decisions admitting expert testimony that failed to meet the challenging party’s asserted threshold of statistical significance. See id. (citing Kadas v. MCI Systemhouse Corp., 255 F.3d 359, 362 (7th Cir.2001) and Cook v. Rockwell Int’l Corp., 580 F.Supp.2d 1071, 1082 (D.Colo.2006)). See also, Magistrini v. One Hour Martinizing Dry Cleaning, 180 F.Supp.2d 584, 605 n. 26 (D.N.J.2002) (“Both Drs. Ozonoff and Greenland caution against using statistical significance rigidly, as it is a somewhat arbitrary measure of the import of a particular study, which provides little information about the value of the study.”)
If Dr. Raiffs models were premised on a questionable methodology, the statistical significance issues raised by Dow may be a cause for concern. However, for reasons largely explained already, the Court finds that the models are based on a methodology that is both sound and widely accepted in the econometric community. See High-Tech Employee, 2014 WL 1351040, at *14 (taking overall reliability into account when addressing statistical significance issues). See also DeLuca by DeLuca v. Merrell Dow Pharmaceuticals, Inc., 911 F.2d 941, 955 (3d Cir.1990) (“We stress at the outset that the confidence level or ‘significance’ of a statistical analysis is but a part of a meaningful evaluation of its reliability”) (citing J. Monahan & L. Walker, Social SCIENCE in Law: Cases and Materials 33-75 (1990)). Consequently, the Court concludes that the statistical significance issues go to the weight of the models, not their admissibility. Cf. Sanford Weisberg, Applied Linear Regression 31 (3d ed. 2005) (“Accept-reject rules ... are generally unnecessary for reasonable scientific inquiry. Simply reporting p-values and allowing readers to decide on significance seems a better approach.”)
v. Ability to Account for Differences Among Purchasers and Market Conditions
The Court also rejects Dow’s argument for exclusion on the grounds that the models fail to account for idiosyncrasies amongst different urethane purchasers or the differences in market conditions in general. First, Dr. Raiffs two-step analysis seeks to arrive at “transaction-specific overcharges for the Direct Action Plaintiffs.” Rev. Raiff Reply at ¶ 95. In doing so, the models work to capture the idiosyncrasies and differences among individual Plaintiffs and different urethane products. See id. at ¶ 83. In the context of admissibility under Daubert, the transaction-level approach sufficiently addresses variations that may impact different individual plaintiffs, such as negotiating leverage and bargaining skill. See id. at ¶ 43. Second, the models account for changes in market conditions more generally by using supply and demand variables that account for “booms” and “busts” in the urethanes market. See Marx Dep. 374:5-20, 436:18-438:9. Dow’s argument for exclusion on this basis is therefore unavailing.
vi. Excluding 2001 from the Conspiracy Period
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489283-24939 | TUTTLE, Circuit Judge:
Russell Weiss, the manager of a nightclub in Atlanta, Georgia, was considered a “small fish in an ocean of whales” in the alleged involvement of organized crime with the Atlanta nightclub industry. This case concerns efforts by the Atlanta offices of the Justice Department’s Organized Crime Strike Force (Strike Force) and the Federal Bureau of Investigation to catch Weiss and in turn use him as bait for the whales. Weiss protests that the government’s tactics in hooking him and reeling him in warrant reversal of his convictions for unlawfully receiving a firearm as a convicted felon, bribing a police officer to influence his testimony before a federal grand jury, and obstructing justice by soliciting false testimony before a federal grand jury.
Specifically, Weiss presents three contentions: that the government breached a promise not to prosecute him for these offenses in return for his cooperation in the government’s investigation of the Atlanta nightclub industry; that Strike Force attorneys and FBI agents violated his right to counsel during questioning about the nightclub industry by deterring him from having counsel present; and that the government’s conduct throughout its dealings with him was so flagrant as to violate due process. We affirm his convictions.
I.
The evidence underlying the charges in this case is not in dispute. To the extent that the parties do differ, we view the evidence in the light most favorable to the government.
On May 17, 1977, a shooting incident occurred at the “Club Stripper” where appellant Weiss was employed as manager. An Atlanta police officer, John Woodward, pursued and arrested the shooting suspects and seized from them a Colt .45 handgun. When Woodward took the suspects and the handgun back to the nightclub for identification, Weiss identified the gun as his. He repeated this identification at the assailants’ preliminary hearing and state grand jury inquest.
Subsequent investigation by the Atlanta police revealed that the weapon had been stolen in Georgia in 1976. Two months later, on July 27, Woodward sought a warrant for Weiss’ arrest, charging him with receipt of stolen property in violation of Georgia law.
During the initial investigation, Woodward also contacted FBI Special Agent William Whitley about the possibility that Weiss, previously convicted in Minnesota of theft by check, a felony in that state, had violated federal firearms law.
On September 8, while receipt of stolen property charges against Weiss were still pending in state court, but with the likelihood of prosecution uncertain, Weiss approached Woodward at another nightclub late one night and told him “it would be worth $500 for me not to be indicted.” During this conversation, Weiss mentioned that he had previously bribed another Atlanta policeman.
The following morning, Woodward reported this conversation to his superior. He also reported it to Agent Whitley of the FBI. At a meeting with FBI agents, Woodward agreed to cooperate with them in an investigation and executed a form consenting to ■ wear a “body bug.” Later that day he was served with a subpoena to testify before a federal grand jury about Weiss’ possession of the handgun and his mention of police bribes, and he was outfitted with the recording equipment. Wearing the body transmitter and accompanied at a distance by FBI agents conducting surveillance, Woodward went looking for Weiss. In the early morning of the following day, he located him, and Weiss gave Woodward $500 to sabotage the state case.
Three nights later, again wearing the body transmitter and under surveillance, Woodward sought out Weiss and showed him the subpoena he had received to testify before the federal grand jury. In response, Weiss offered Woodward $750 if Woodward would prevent him from being prosecuted on federal firearms violations. Two days later, Woodward sought out Weiss once more. The latter told him he did not have the money and to come back later. Woodward was unable to find Weiss later in the evening. Finally, four nights later, the two met and, in a dark parking lot, Weiss handed Woodward $750. This transaction, as well as the previous payment of $500 and several intervening conversations were all recorded on tapes which were introduced at trial. The FBI also took surveillance photographs which included photos of the meeting in the parking lot.
Once Weiss was caught in this web of evidence, the FBI and the Strike Force proceeded to make use of their catch. What followed was the basis of motions by Weiss to dismiss the indictments against him. The motions were the subject of two hearings before a magistrate and a de novo evidentiary hearing before the trial judge. The district court found that, after their investigation of Weiss, FBI agents Whitley and Fred Ruhlman met with Strike Force attorneys James Deichert and William L. McCulley and agreed on a plan to obtain Weiss’ cooperation in the Strike Force investigation of Atlanta nightclubs. Nine days before an indictment of the firearms charge was handed down by the federal grand jury, Whitley and Ruhlman called on Weiss at his home. Whitley told Weiss “I’m going to play a hand of poker with you, but in this instance I’m going to lay my cards on the table.” Then he laid out a series of FBI surveillance photographs taken of Weiss and offered to play cassette tapes of Weiss’ meetings with Woodward. Whitley cautioned Weiss that they were not there to question him on anything concerning his dealings with Woodward and did not want him to volunteer any statements. The agents explained that they had been investigating the nightclub industry and thought Weiss could be very helpful in this investigation, could “blow the lid off this town.” They were instructed to ask his cooperation in this investigation; specifically, they invited him to meet with the Strike Force. The court found Whitley and Ruhl-man told Weiss that, although only Strike Force attorneys had authority to promise him anything and they themselves had none, if he did cooperate he might even “walk away scot free.”
If he wished to cooperate, Whitley and Ruhlman told Weiss, he should contact them before 4:00 p. m. the next day. In the meantime, he could consult with an attorney if he wished. The agents said they knew he had used an attorney, Ernest Brook-ins, in his state proceedings; the court found they advised him that although he could consult with Brookins, it might not be in his best interest to do so.
Weiss accepted their offer the next day, and the day following that he was escorted to the Strike Force office. There he met with Strike Force attorney Deichert. The district court found it undisputed that Dei-chert told Weiss at the outset that the Strike Force had enough evidence to indict him on the charges at issue here and fully intended to go forward with the case. Weiss testified that, at some later point in the discussion, Deichert told him he might go “scot free.” Shortly afterward, while Deichert and other attorneys were out of the room, FBI Agent Ruhlman told Weiss that if he cooperated “100 percent,” Ruhlman would speak with Strike Force attorney McCulley about the “possibility” of no indictment.
During their discussion, Deichert reiterated the agents’ statement that the government sought no further information on charges against Weiss and did not want any statements from him. Instead, Deichert sought Weiss’ cooperation in the investigation of the Atlanta nightclub industry and Atlanta Police Department. The district court found that Deichert told Weiss any cooperation he gave would bear on the charges against him at the time of sentencing; the prosecution would tell the sentencing judge of his cooperation, its extent, and its value.
Deichert also told Weiss he could have an attorney present, including Ernest Brookins if he so chose. However, Deichert told Weiss he believed it would be in Weiss’ “best interests” to be represented by someone other than Brookins. Asked if he wanted counsel present, Weiss said no.
Deichert then proceeded to question Weiss about the Atlanta nightclub industry. At the end of the questioning, Deichert told Weiss he was not satisfied that Weiss was being completely truthful, and offered the opportunity to respond to further questioning. Two days later, Weiss met with Strike Force attorneys a second time. Again, Deichert was not satisfied, and Weiss’ role as an informant ended.
Based on these findings, the district court ruled that there was no actual plea bargain or immunity agreement between Weiss and the Strike Force, nor did Weiss justifiably rely on any apparent agreement. In addition, the court ruled, Weiss had not been denied the presence of counsel, and any interference with his attorney-client relationship with Ernest Brookins had not prejudiced him.
II.
Several questions arise in considering Weiss’ contention that the government promised him he would not be prosecuted on the firearms, bribery, and obstruction of justice charges in return for his cooperation in the Strike Force investigation. First, we are presented with the question whether such a promise would require dismissal of the indictment against Weiss or reversal of his convictions. Second, we must review the district court’s determination that no promise was made to Weiss. Branching off from this second question is the question of the appropriate inquiry for determining whether an agreement not to prosecute in return for cooperation exists.
We note at the outset that there is some doubt whether a promise not to prosecute on certain charges in return for cooperation in obtaining evidence against others on unrelated offenses is a defense to prosecution of the one cooperating. See The Whiskey Cases, 99 U.S. 594, 598-606, 25 L.Ed. 399 (1878). Of course, such cooperation may be the basis of formal grant of statutory immunity at the initiative of the prosecutor. 18 U.S.C. §§ 2514, 6001, 6002. In this case, however, there is no evidence or contention that there was a formal grant of immunity to Weiss in return for evidence concerning the Atlanta nightclub industry. Nor did Weiss give any self-incriminating testimony in the course of discussions with the Strike Force which was relevant to and introduced in this case.
The only court to confront this issue directly, the Ninth Circuit in United States v. Hunter, 405 F.2d 1187, 1189 (9th Cir. 1969), held that in the absence of a formal grant of immunity or a waiver of constitutional rights, such a promise is not a defense. In United States v. Calimano, 576 F.2d 637 (5th Cir. 1978), this court dealt with the issue obliquely. The court considered whether an agreement not to prosecute was made, apparently assuming that if one had been made it must be enforced. The court nevertheless cast doubt on this assumption by noting that, regardless of the existence of an agreement, the defendant had sustained no prejudice from discussions in which he gave evidence against others, because he had made no plea and no self-incriminating statements or any statements concerning the charges of which he was convicted.
We do not have occasion to decide whether or on what basis a prosecutor’s promise not to prosecute Weiss in return for his cooperation in obtaining evidence concerning corruption in the Atlanta nightclub industry would require reversal of his convictions. The district court found that no such promise was made. We affirm that finding, obviating the need to consider what effect such a promise should have.
United States v. Calimano, supra, is closely on point and frames our inquiry. The defendant was convicted of perjury before a grand jury. He asserted as a defense that the United States Attorney’s office made a promise “to dismiss the indictment against Calimano if Calimano would provide information about illegal activities in the home health care industry.” 576 F.2d at 639. There had been discussions of such an agreement between Calimano’s counsel and the United States Attorney’s office. His counsel had asserted that these discussions had resulted in an agreement, the United States Attorney’s office that they had not and that any leniency was conditioned on the extent of Calimano’s cooperation. The district court ruled that there was no agreement because there had been no meeting of the minds and the defendant failed to show “a firm promise or commitment to dismiss the indictment.” Id. at 640. Thus, the court looked only to the existence of an actual agreement. On appeal, this court treated the district court’s finding as one of fact and declined to hold it clearly erroneous. Id.
We reach the same conclusion on the similar facts in this case. We do not find that the court’s finding of no actual promise not to prosecute appellate Weiss on the firearms, bribery, and obstruction charges is clearly erroneous. There was evidence, and the district court found, that agents Whitley and Ruhlman each told him that there was a “possibility” he might not be indicted or might “walk out scot free.” Whitley did so when they first approached Weiss at home to invite him to cooperate with the Strike Force; Ruhlman did so after Weiss had already begun to cooperate. However, the court also found, and the appellant does not contest, that Whitley and Ruhlman advised Weiss that only Strike Force attorneys could make any deals with him. It is further uncontested that one of these attorneys, Deichert, told Weiss in no uncertain terms at the outset of his interview with the Strike Force that he would be indicted and prosecuted on all the charges. Although he does not contest that he received these warnings, Weiss testified that at some point Deichert told him if he cooperated, he would go free. The district court, however, was in a better position than we are to weigh the credibility of this testimony in the face of the other evidence that the government made no firm promise or commitment to Weiss. See United States for the Use and Benefit of Micro-King Co. v. Community Science Technology, Inc., 574 F.2d 1292, 1295-96 (5th Cir. 1978). We conclude that the district court’s finding of fact that there was no agreement is amply supported in the record.
Weiss contends that the proper inquiry in this case is not whether there was in fact a firm promise or commitment not to prosecute him but whether, when he cooperated with the Strike Force, he had a reasonable subjective expectation that he would not be prosecuted. The argument is drawn from our decision in United States v. Robertson, 582 F.2d 1356 (5th Cir. 1978) (en banc), in which we considered the proper standard for determining whether statements made by a defendant were made “in connection with” plea negotiations, cf. Fed.R.Crim.P. 11(e)(6) (statements made “in connection with, and relevant to” plea negotiations not admissible in evidence); Fed.R.Evid. 410 (same). The court established a two-step analysis which focuses on the defendant’s subjective expectation that plea negotiations were taking place when he made the statements sought to be admitted against him.
This analysis is out of context in this case. Robertson treated the question whether an agreement for some form of prosecutorial leniency exists in its most common context: where a plea bargain, confession or admission is alleged to have been made in response to such an agreement. See, e. g., Santobello v. New York, 404 U.S. 257, 262, 92 S.Ct. 495, 30 L.Ed.2d 427 (1972); United States v. Geders, 585 F.2d 1303 (5th Cir. 1978) (en bane); United States v. Herman, 544 F.2d 791 (5th Cir. 1977). In that context, the guiding concern is the protection of the defendant’s fifth amendment privilege against the compulsion of self-incriminating testimony. Thus, a confession founded on a violated plea bargain or promise of immunity is not considered voluntary. Shotwell Manufacturing Co. v. United States, 371 U.S. 341, 83 S.Ct. 448, 9 L.Ed.2d 357 (1963) (immunity agreement); see Brady v. United States, 397 U.S. 742, 90 S.Ct. 1463, 25 L.Ed.2d 747 (1970) (plea bargain must be voluntary and intelligent). Conversely, the basic purpose of a grant of immunity is to permit the compulsion of testimony which otherwise would be privileged by the fifth amendment. See 18 U.S.C. §§ 2514, 6001; United States v. Tramunti, 500 F.2d 1334 (2d Cir.), cert. denied, 419 U.S. 1079, 95 S.Ct. 667, 42 L.Ed.2d 673 (1974).
To protect the voluntariness of a waiver of fifth amendment rights, where a plea, confession, or admission is based on a promise of a plea bargain or immunity, the government must keep its promise. Santobello v. New York, supra, 404 U.S. at 262, 92 S.Ct. 495; Shotwell Manufacturing, supra, 371 U.S. at 347, 83 S.Ct. 448. Alternatively, a defendant whose plea bargain is breached is entitled to the opportunity to withdraw his plea, Santobello, supra, 404 U.S. at 263, 92 S.Ct. 495, and the defendant who gives testimony under a promise of immunity is entitled to the exclusion of any use of that testimony against him, Kastigar v. United States, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212 (1972). Fed.R.Crim.P. 11(e)(6) and Fed.R.Evid. 410 make the same rule applicable to evidence of statements made “in connection with and relevant” to plea bargaining negotiations.
Our decision in Robertson dealt with the admissibility of statements which a defendant made at the time of his arrest in an effort to secure the release of his wife and his codefendant’s girlfriend. Consequently, it considered the existence of a plea bargain agreement in the general context of concern for protection of the right against self-incriminating admissions and the specific context of admissibility under Fed.R.Crim.P. 11(e)(6) and Fed.R.Evid. 410.
In this case, neither context is presented. Questioning of Weiss following his agreement to cooperate did not address the charges for which he was convicted, and no statements he made to the Strike Force were introduced at his trial. Weiss did not agree to plead guilty on any charges, or even discuss doing so, in exchange for prosecutorial leniency on other charges. Accordingly, this case does not involve a “plea bargain” as such. Nor does it prevent the admissibility of statements “in connection with” plea negotiations under Fed.R.Crim.P. 11(e)(6) or Fed.R.Evid. 410, since there is no “plea bargain” and no evidence against Weiss in this case obtained as a result of his cooperation. For the latter reason, the case also does not present us with the use of testimony given despite the privilege against self-incrimination. As a result, the fundamental policies of Robertson and its kindred are not affected: Weiss’ fifth amendment privilege is untouched by his prosecution and convictions in this case. Notwithstanding his cooperation with the Strike Force there is no prejudice to Weiss in this case as a result of any reliance on an agreement. The only prejudice which could result from breach of an agreement is simply that Weiss was prosecuted. In this light, the appropriate analysis is not whether Weiss subjectively expected not to be prosecuted but whether there was a promise held out to which the government, as a matter of fair conduct, might be bound.
Although the government may have used the hope of no prosecution on the firearms, bribery, and obstruction charges as bait to draw Weiss to the Strike Force office in the first place, the agents’ warning to Weiss coupled with Attorney Deichert’s explicit statement to Weiss that he would be prosecuted indicate that, once he was there, the government did not continue holding out this hope to secure his cooperation.
III.
Weiss contends that his discussions with the Strike Force took place in violation of his sixth amendment right to counsel because he had no counsel present. His contention is based on the principle established in Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed.2d 246 (1964), that an individual has a right to have counsel present at interrogation once “adversary proceedings against him have begun.” Brewer v. Williams, 430 U.S. 387, 401, 97 S.Ct. 1232, 51 L.Ed.2d 424 (1977). This principle was violated, Weiss says, by the government’s warnings to him that it would not be “in his best interests” to have his attorney Ernest Brookins present during their discussions.
We reject this argument because we find Massiah and Brewer v. Williams inapplicable to Weiss’ situation. First, his discussions with the Strike Force did not amount to interrogation or “adversary proceedings” concerning the present case. When they first contacted Weiss, agents Whitley and Ruhlman cautioned him that they did not want to discuss anything to do with the firearms, bribery, and obstruction charges and did not want him to volunteer any statements. Attorney Deichert issued a similar warning before beginning their discussions. There is no evidence that anything in those discussions dealt with any of the charges in this case. Thus, it does not appear that the discussions between Weiss and the Strike Force focused on Weiss as a suspect of crimes to which he asserts his sixth amendment rights as a defense. Second, no evidence introduced against Weiss in this case was derived from his meetings with the Strike Force. Even if Weiss’ right to counsel were applicable to his meetings with the Strike Force, therefore, we are not presented with the issue raised in Massiah and Brewer v. Williams, the admissibility of statements obtained in violation of the right to counsel. The remedy for such a violation is the exclusion of the statements. Any violation of his right to counsel at the meetings was accordingly harmless. Hyler v. United States, 402 F.2d 558, 561-62 (5th Cir. 1968), cert. denied, 394 U.S. 908, 89 S.Ct. 1018, 22 L.Ed.2d 219 (1969).
Of course, the government was treading a narrow line between the merely investigatory and the accusatory in conducting discussions with Weiss while he was about to be indicted on the firearms, bribery and obstruction charges, a line it trod precipitously throughout its close contact with Weiss from the time it identified him as the target of federal firearms charges. But even if the discussions did take place at an accusatory stage, we would have difficulty in finding any actual denial of Weiss’ right to counsel. Deichert as well as Whitley and Ruhlman told Weiss he could have counsel present, including Ernest Brookins, and when Deichert specifically asked Weiss if he wished to have counsel present, Weiss replied no. The only evidence that Weiss’ decision not to have counsel present was not voluntary was the evidence that both Whitley and Deichert told him it would not be “in his best interest” to consult Brookins, although he could do so if he wished. In the context of the government’s hardball game, with Weiss hoping for some favorable treatment, reference to Weiss’ “best interests” might have appeared menacing and conceivably could have deterred him from consulting counsel. The district court found, however, that Whitley, when he first discussed Brookins with Weiss, told him that Brookins was a target of the Strike Force investigation and might have a conflict of interest. Whitley’s statements were accurate; the court also found that Brook-ins was in fact a target and did have a conflict of interest in his representation of Weiss. Thus, Weiss had reason to know what was behind Whitley’s and Deichert’s warnings about Brookins, and there is no reason to expect that their warnings should have coerced him or misled him in his decision not to have counsel present.
Weiss further argues that even if the government’s warnings did not operate to deny him his right to counsel, they were part of an unethical effort to communicate with him without notifying his attorney. As such, he maintains, they form part of a pattern of unethical conduct by the government which demands reversal of his convictions.
Standard 47 of the Canons of Ethics of the State Bar of Georgia provides:
During the course of his representation of a client, a lawyer shall not communicate or cause another to communicate on the subject of the representation with a party he knows to be represented by a lawyer in that matter unless he has prior written consent of the lawyer representing such other party or is authorized by law to do so. A violation of this standard may be punished by public reprimand.
See also ABA Code of Professional Responsibility DR 7-104(A)(l). Weiss contends that the Strike Force attorneys violated this standard by contacting him directly without notice to or permission of Ernest Brookins, whom they knew to have been representing him in his criminal matters up to that point. He would have us find that they did so in bad faith in order to gain the maximum advantage over Weiss in their discussions with him and to be able to lead him on with the false promise not to prosecute him on the firearms, bribery, and obstruction charges.
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3767259-21499 | FINDINGS OF FACT AND CONCLUSIONS OF LAW FOLLOWING DEFAULT
JACK B. SCHMETTERER, Bankruptcy Judge.
This Adversary proceeding is related to the case filed by debtors Hans and Kimberly Liebl under Chapter 7 of the Bankruptcy Code. Creditor Martin Wallner filed the Adversary Complaint on his own behalf and also derivatively on behalf of The Original Brat Hans, LLC (“the LLC”).
Hans Liebl (“Liebl”) has worked in the food marketing industry for over twenty years, selling and/or distributing food products, Kimberly Liebl is asserted to be an artist, and Wallner is a chef with over twenty years of experience. (Second Am. Compl. [Docket No. 49] ¶¶ 6-8.) The creditor-plaintiffs seek to bar dischargeability of an asserted debt, and for a money judgment of $137,500 as to that debt. The Complaint is pleaded in eight counts. Wallner individually brings Count I against Liebl under 11 U.S.C. § 523(a)(2) on the asserted basis that Liebl fraudulently induced Wallner to invest in the LLC. Wallner also brings Count II on his own behalf against both the Liebls under §§ 523(a)(2) and (6) on grounds that they conspired to defraud Wallner of his capital investment. Counts III and IV seek recovery from Liebl under § 523(a)(4), alleging that Liebl committed fraud while acting in a fiduciary capacity. Wallner brings Count III on his own behalf and Count IV derivatively on behalf of the LLC. Counts V and VI seek recovery under § 523(a)(4) on grounds that Liebl embezzled funds. Wallner brings Count V on his own behalf and Count VI derivatively on behalf of the LLC. Counts VII and VIII seek recovery under §§ 523(a)(4) and (6) on grounds that both the Liebls conspired to embezzle. Wallner brings Count VII directly and Count VIII on behalf of the LLC.
Summons was properly served on the defendant-debtors, who failed to appear or plead. The plaintiff-creditors thereafter moved on notice for entry of a default order. The default order was entered, and therefore the Complaint’s allegations were taken as confessed against the defendants. By way of supplementing allegations of the Complaint as prove up on Motion for Default Judgment, the plaintiffs also filed an affidavit by Wallner [Docket No. 19 ex. 10] and a copy of the deposition of Robert Salgena taken in this proceeding and appended to the plaintiffs’ Supplemental Memorandum [Docket No. 65 ex.]. Based on the foregoing, the following Findings of Fact and Conclusions of Law are made and are to be entered.
FINDINGS OF FACT
In February 2007, Liebl approached Wallner with a written proposal to invest in Liebl’s new food company. (Second Am. Compl. ¶ 10.) As part of the proposal, Liebl represented that he had already developed a line of sausages, that the product line was approved for sale to Whole Foods, and that he had contracted with a Whole Foods — approved plant to produce the sausages. (Id. at ¶¶ 10-11.) Wallner also represented that his “conservative” expected sales figures for 2007 exceeded $600,000, increasing to at least $25,000,000 by 2017. (Id. at ¶ 11, ex. A.) He also “verbally misrepresented” that his company had $10,000 a week in existing sales. (Id. at ¶¶ 11-12, ex. A.) Liebl did not then disclose that he and his wife had financial liabilities, lawsuits, and judgments against themselves personally and against other limited liability companies with which they were affiliated. (Id. at ¶ 48; Wallner Aff. [Docket No. 19 ex. 10], at ¶¶ 6-7.)
After negotiations, Liebl set up the LLC and Wallner received a 40% interest in it in return for his investment of $100,000. (Second Am. Compl. ¶¶ 15-17.) Subsequently, Wallner obtained another 10% interest in exchange for more money. (Id. at ¶¶ 27-28.) Thus, for a total investment of $137,500, Wallner obtained a 50% ownership interest. Wallner deposited these funds in a business checking account opened by Wallner and Liebl. (Id. at ¶¶ 24, 31.) Both had authorization to write checks, use a business debit card, and make withdrawals from the account. (Wallner Aff. ¶ 19.)
Although Wallner was a manager and a member of the LLC, Liebl and Wallner agreed that Liebl would “largely control” the business management. (Second Am. Compl. ¶¶ 18-20.) Liebl’s exact, formal corporate role in the LLC is unclear. He was the sole member and manager at the time of the LLC’s organization. (Id. at ¶ 17.) Under the LLC’s Operating Agreement, however, the initial members were Wallner and Kimberly Liebl, while Liebl is only a manager and not a member. (Id. at ex. E 6, 37.) The Operating Agreement provided that all its powers would be exercised by or under authority of the Management Committee, consisting of Hans Liebl, Kimberly Liebl, Martin Wallner, and Susan Wallner; that the Management Committee had authority to sell or otherwise dispose of all, or substantially all, of the LLC’s assets; and that unless authorized by the Operating Agreement or the Management Committee, no agent of the LLC had authority to bind it. (Id. at ¶ 18, ex. E.)
Beginning in March 2007 and without authorization, Liebl used funds held in the LLC’s checking account in order to pay his personal expenses and creditors, creditors of his three other defunct limited liability companies, and creditors of Kimberly Liebl. (Id. at ¶¶ 33-35; Wallner Aff. ¶¶ 14-15.) These transactions included, inter alia, checks made payable to Liebl or payable to “cash” totaling $12,750.00; ATM withdrawals totaling $5,376.90, including withdrawals made while on vacation to Puerto Vallarta, Mexico and Door County, Wisconsin; and $14,850 for artwork purchased from Kimberly Liebl with LLC funds (Second Am. Compl. ¶¶ 33, 35, 36.) There are other allegations of unauthorized appropriations by Liebl, but the exact dollar amounts of those are not documented. (See id.)
In March 2007, Liebl designed a logo and retail label on behalf of the LLC for “The Original Brat Hans” brand of sausage. (Id. at ¶22.) The label featured caricatures of both Liebl and Wallner, and was approved by the Federal Drug Administration in July 2007. (Id. at ¶¶ 22, 30, ex. B.) By November 2007, the LLC was selling approximately 10,000 pounds of sausage per month bearing the “The Original Brat Hans” retail label. (Wallner Aff. at ¶ 13.)
In October 2007, the LLC received a cease and desist letter from Coleman Natural Foods (“Coleman”), informing the LLC that it must cease its operations due to an alleged trademark infringement. (Second Am. Compl. ¶ 37.) Following receipt of the letter, Liebl offered all, or substantially all, of the “assets, intellectual property, and trade secrets” of the LLC to Coleman. (Id. at ¶ 38.) In December 2007, Liebl also informed Wallner that the LLC had ceased operations. (Wallner Aff. ¶ 17.) Coleman’s response to Liebls’ offer is unknown, but in February 2008, Coleman hired Liebl and began marketing a line of sausage that was also called “The Original Brat Hans” under a label strikingly similar to the one previously used by the LLC. (Id. at ¶¶ 40-41.) One notable difference between the LLC’s and Coleman’s label is the absence of Wallner’s signature and caricature. (Salegna Dep. [Docket No. 65 ex.] 97:9-104:22; Second Am. Compl. ex. C.) Coleman’s line of The Original Brat Hans sausage is still being sold. (Second Am. Compl. ¶ 42; Wallner Aff. ¶ 18.) Liebl received a salary of $150,000, and Coleman agreed to assume $100,000 of debts incurred by way of Liebl’s association with the LLC as a “signing bonus.” (Salenga Dep. 38:13-38:21, 46:7-46:25, 139:22-139:25,143:1-143:5.)
On June 6, 2008, Liebl and Kimberly Liebl jointly filed their voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On August 27, 2008 Wallner filed this Adversary Complaint, seeking money damages and to bar the discharge of the Liebls’ debt to him on grounds arising from various provisions of 11 U.S.C. § 523(a). Wallner properly served a summons on the Liebls [Docket Nos. 2, 5]. Following several efforts by plaintiffs in this proceeding that are not pertinent here, the present Motion for Default Judgment was presented.
CONCLUSIONS OF LAW
I. JURISDICTION
Subject matter jurisdiction lies under 28 U.S.C. § 1334. It is before the Court pursuant to 28 U.S.C. § 157 and is referred here by District Court Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. Venue lies under 28 U.S.C. §§ 1408 and 1409. This Adversary proceeding constitutes a core proceeding under 28 U.S.C. § 157(b)(2)®.
II. DEFAULT PROCEDURES
“Upon default, all well-pled facts in the complaint are deemed admitted.” In re Smith, 280 B.R. 436, 441 (Bankr.N.D.Ill.2002) (citing Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir.1977)). But entry of a default judgment does not automatically result after default. Id. (citing Bermudez v. Reid, 733 F.2d 18, 21 (2d Cir.1984)). The grant of a motion for entry of a default judgment lies within the sound discretion of the trial court. Merrill Lynch Mortgage Corp. v. Narayan, 908 F.2d 246, 252 (7th Cir.1990). “In the bankruptcy context, where a debtor has a presumptive right to a discharge, default judgment motions should not be granted unless the movant shows that its debt is nondischargeable as a matter of law.” In re Zecevic, 344 B.R. 572, 576 (Bankr.N.D.Ill.2006). Thus, a plaintiff must show at least prima facie facts meeting the legal requirements to except a debt from discharge. See id.
III. EXCEPTION FROM DISCHARGE
The main purpose of a discharge in bankruptcy is to give a debtor a fresh start. See Vill. of San Jose v. McWilliams, 284 F.3d 785, 790 (7th Cir.2002). However, an individual debtor is not discharged from any debt for, inter alia, fraud, fraud incurred while acting in a fiduciary capacity, or embezzlement. 11 U.S.C. § 523(a)(2)(A) and (a)(4). The party seeking to establish an exception to discharge bears the burden of proof. In re Harasymiw, 895 F.2d 1170, 1172 (7th Cir.1990). A discharge exception must be established by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
In addition to finding a finding a debt nondischargeable, a bankruptcy judge has the authority to determine the amount of that debt, and enter a dollar judgment on that finding. In re Hallaban, 936 F.2d 1496, 1508 (7th Cir.1991).
Wallner brings eight separate counts, some direct and some derivative, each seeking an exception to discharge under 11 U.S.C. § 523(a)(2), (4), and (6). For reasons discussed below, Wallner is entitled to judgment on Counts VI and VIII, but not on the other Counts.
A. Wallner Is Entitled to Judgment on Behalf of the LLC for Embezzlement under 11 U.S.C. § 523(a)(4) (Count VI)
A plaintiff may maintain a derivative action on behalf of a limited liability company “unless members or managers with authority to do so have refused to bring the action or unless an effort to cause those members or managers to bring the action is not likely to succeed.” 805 Ill. Comp. Stat. 180/40-1. In this case, the Management Committee of the LLC was made up of Hans and Kimberly Liebl and Martin and Susan Wallner. An effort to cause the Management Committee of the LLC to bring an action against Liebl would certainly fail because the Wallners would not be able to get a majority vote. Therefore, Wallner, as a member of the LLC, may assert derivative claims on behalf if the LLC against Liebl.
A debt for embezzlement is excepted from discharge in bankruptcy. 11 U.S.C. § 523(a)(4). Embezzlement is the “fraudulent appropriation of property by a person to whom such property has been entrusted or into whose hands it has lawfully come.” In re Weber, 892 F.2d 534, 538-39 (7th Cir.1989), abrogated on other grounds by Grogan v. Garner, 498 U.S. 279, 291, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). In order to prove embezzlement, a creditor must show that the debtor (1) appropriated property for her own benefit; and (2) that she did so with fraudulent intent or deceit. Id. Thus, it is not sufficient that the debtor act without authority, but she must also have fraudulent intent.
Wallner brings Count VI as a derivative claim on behalf of the LLC, claiming that Liebl embezzled funds, intellectual property, and trade secrets from the LLC. Here, the facts clearly demonstrate that Liebl’s appropriation of the LLC’s funds and property was not authorized. Did he have fraudulent intent? The answer must be yes. On this record, Liebl was aware of the Operating Agreement requirement that all actions must be directed by the Management Committee. The Committee did not authorize his use of the LLC’s funds for his own private use, nor did it authorize his transfer of the LLC’s property to Coleman. His disregard of the LLC’s rules and use of his day-to-day authority and opportunity to profit himself and his wife at the LLC’s expense indicates the fraudulent intent. Even stronger evidence of that intent comes from Liebl informing Wallner that the LLC was shut down, but then taking employment with another company selling a similar product and receiving a substantial salary with substantial signing bonus.
Since Hans Liebl appropriated the LLC’s property and did so with fraudulent intent, he embezzled from the LLC, and judgment will be entered accordingly as for all funds and property, tangible and intangible taken for his personal use and benefit. This includes checks made payable to Liebl or payable to “cash,” totaling $12,750.00; ATM withdrawals totaling $5,376.90, including withdrawals made while on vacation to Puerto Vallarta, Mexico and Door County, Wisconsin; and $14,850.00 for artwork purchased from Kimberly Liebl with LLC funds. The total of $32,976.90 will be declared nondis-chargeable under 11 U.S.C. § 523(a)(4) by separate order.
Additionally, there were misappropriations of intellectual property and trade secrets. See generally In re Sullivan, 305 B.R. 809, 826-27 (Bankr.W.D.Mich.2004) (finding that under federal law, intangible property can be embezzled). However, Wallner did not offer any proof of the value of those properties. He generally alleged that additional funds were embez zled, but he did not establish the details as to amounts and circumstances. Wallner did claim that he and the LLC are owed a total of $137,500, but that was the amount he invested in the LLC, not an amount that he proved that Liebl took without authorization. Since Wallner did not establish the value of the intellectual property and trade secrets Liebl took for the benefit of himself and his wife, no dollar judgment can be entered thereon. However, it can be declared that if Wallner and the LLC can trace the value and location of those properties in non-bankruptcy litigation, the recovery of such value and debt therefrom will be nondischargeable.
B. Wallner Is Entitled to Judgment on Behalf of the LLC for Civil Conspiracy to Embezzle under 11 U.S.C. § 523(a)(4) (Count VIII)
A conspiracy exists when there is: (a) an agreement between two or more persons, (b) for the purpose of accomplishing, by some concerted action, either an unlawful purpose or a lawful purpose by unlawful means, (c) in furtherance of which one of the conspirators committed an overt tortious or unlawful act. In re Rest Dev. Group, Inc., 397 B.R. 891, 896-97 (Bankr.N.D.Ill.2008). Co-conspirators are jointly and severally liable for each other’s actions. PaineWebber, Inc. v. Ras, 767 F.Supp. 930, 933-34 (N.D.Ill.1991).
In Count VIII, Wallner alleges that Kimberly and Hans conspired and entered into a scheme to embezzle from the LLC. Following from the above ruling on Count VI, Kimberly Liebl is jointly and severally liable for embezzlement as Liebl’s co-conspirator. Evidence of the conspiracy agreement comes from the facts established, that the two were married, that both had official roles within the LLC that they both profited from, and that they used appropriated funds for both their benefits. Wallner also established the other two elements, since the purpose of the Liebls’ agreement was to enrich themselves at the LLC’s expense and Wallner alleges numerous overt acts. Indeed, each unauthorized transfer of funds or property was such an act. Since Liebl embezzled from the LLC and Kimberly Liebl conspired with him, they are both jointly and severally liable for the embezzlement. The scope of the judgment on this Count will be subject to the same restrictions as in Count VI. That is, judgment for $32,976.90 will be entered and declared nondischargeable and any recovery later of the value that may be established for the intangible property of the LLC will also be declared nondischargeable.
C. Wallner Is Not Entitled to Judgment for Fraud under 11 U.S.C. § 523(a)(2)(A) (Count I)
A debt for money is not dis-chargeable to the extent the debtor obtained that money by false pretenses, a false representation, or actual fraud. 11 U.S.C. § 523(a)(2)(A). Fraud is a generic term that encompasses ‘“all surprise, trick, cunning, dissembling, and any unfair way by which another is cheated.’ ” McClellan v. Cantrell, 217 F.3d 890, 893 (7th Cir.2000) (quoting Stapleton v. Holt, 207 Okla. 443, 250 P.2d 451, 453-54 (1952)). In order to except a debt from discharge under the actual fraud prong, the creditor must show that (1) a fraud occurred, (2) the debtor intended to defraud, and (3) the fraud created the debt. Id. at 893-94. Under the false pretenses or false representation prong, the creditor must show that (1) the debtor obtained funds through representations that the debtor knew to be false (2) the debtor intended to deceive the creditor, and (3) the creditor justifiably relied on the statement to his detriment. See In re Jairath, 259 B.R. 308, 314 (Bankr.N.D.Ill.2001).
In Count I, Wallner claims under § 523(a)(2)(A) that Liebl fraudulently induced him to invest in the LLC. Accordingly, Wallner must show that Liebl engaged in some fraud or made false representations in inducing Wallner to invest. Wallner failed to show any false representations made by Liebl, or any deceit, artifice, trick, or design that Liebl used to induce him to invest. In fact, Wallner has shown that the business operated for several months after his initial investment. The fact that Liebl actually operated the business and made sales is not logically consistent with Wallner’s claim in this Count.
Wallner did allege that Liebl made several misrepresentations. (See Wallner Aff. [Docket No. 9 ex. 10].) Even taken as true, these allegations do not contain sufficient facts to except the debt from discharge on this Count, nor were they supplemented by prove-ups after default. Wallner alleges that (1) Liebl misrepresented that the LLC had pending orders and sales and (2) the future sales potential of the LLC, (3) failed to mention his, his wife’s, and his previous business’s debts and liabilities, and (4) failed to mention his offer to sell the LLC to a third party.
As for the first allegation, Wallner has not shown Liebl’s alleged claims of orders and sales to be false.
Regarding the second allegation, the projected sales figures, even if they were not reached, were nothing more than puf-fery. See, e.g., Corley v. Rosewood Care Ctr., Inc. of Peoria, 388 F.3d 990, 1009 (7th Cir.2004) (fraud occurs only when a person of ordinary prudence and comprehension would rely on specific misrepresentations.) The claimed sales figures come from a business proposal rife with spelling and typographical errors. (Second Am. Compl. ex. A.) The proposal anticipated sales in the first year of $600,000 to $1,000,000, increasing to “$25,000,000 to ??????????? [sic]” in ten years. (Id.) These projected sales figures appear as optimistic attempt at a sales pitch of sorts, which no one would reasonably rely on. Moreover, Wallner has failed to show that the business was not on track to complete such sales.
As for Liebl’s failure to reveal his and his wife’s debts, there was no reason for Liebl to have mentioned his or his wife’s outside debts. If Wallner was concerned about them, he could have asked or checked the Liebls’ credit. Finally, Liebl’s neglecting to mention his offer to sell the LLC does not show fraudulent inducement. Liebl’s offer to sell the LLC came months after Wallner’s investment, and therefore bears no relationship to any alleged fraud at the time the investment was made.
For all these reasons, Wallner has not shown Liebl fraudulently induced him to invest in the LLC.
D. Wallner Is Not Entitled to Judgment for Civil Conspiracy to Commit Fraud under 11 U.S.C. § 523(a)(2)(A) (Count II)
In Count II, Wallner alleges that a civil conspiracy existed between Hans and Kimberly Liebl, which they entered into to defraud Wallner. A conspiracy exists when there is: (a) an agreement between two or more persons, (b) for the purpose of accomplishing, by some concerted action, either an unlawful purpose or a lawful purpose by unlawful means, (c) in furtherance of which one of the conspirators committed an overt tortious or unlawful act. In re Rest. Dev. Group, Inc., 397 B.R. 891, 896-97 (Bankr.N.D.Ill.2008). In this case, Wallner did not show that there was any such agreement with an unlawful purpose. As stated above, the LLC actually operated for several months, and there are no facts established to show that the Liebls intended to defraud Wall-ner at the inception of the enterprise. Therefore, there was no conspiracy to commit fraud as alleged in this Count.
E. Wallner Is Not Entitled to Judgment for Fraud While Acting in a Fiduciary Capacity under 11 U.S.C. § 523(a)(4) (Count III)
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4236353-30370 | OPINION
McKEE, Chief Judge.
I.
A. Factual Background
Since we write primarily for the parties, who are familiar with the background of this case, we discuss the events leading to this appeal only briefly. In April 2010, law enforcement officials in West Chester, Pennsylvania obtained authorization to conduct a wiretap on a cell phone used by Vincent Marchant. The investigation revealed that Marchant was actively selling powder and crack cocaine and that his stock was being supplied by Appellant Adam Scott.
Marchant was arrested on June 2, 2010 and thereafter confirmed that Scott was supplying him with illegal drugs. On May 18, 2010, law enforcement officials obtained authorization to conduct a wiretap oh two cell phones used by Scott. As the wiretap investigation continued, law enforcement officials began to conduct physical surveillance, including following Scott’s car. However, Scott appeared to notice that he was being followed and took measures to evade the surveillance. He also destroyed five of his cell phones, and thus all communications from the two cell phones that law enforcement officials had been monitoring ceased.
Law enforcement officials were subsequently able to reestablish physical surveillance outside the home of Trinity Jennings, where Scott had previously been seen. Investigators also began to rely on Darryl Naylor. His conversations with Scott had been intercepted on the Scott wiretaps, and Naylor thereafter agreed to cooperate with law enforcement. Naylor identified Scott’s Everhart Road apartment, where investigators also set up physical surveillance. Scott was seen coming and going from this apartment building several times.
On September 15, 2010, investigators were alerted by another police department that Scott was operating a car registered to Monique Herndon. West Chester police officers eventually stopped Scott for a traffic code violation and obtained his consent to search the car. A drug detection dog was brought to the scene and alerted to the presence of narcotics, but none were found in the brief search. However, the officers did find what appeared to be an electronically controlled trigger for a hidden compartment under the dashboard and, therefore, seized the car. Police discovered a hidden compartment used to ■transport drugs while searching that car pursuant to a search warrant.
After being stopped, Scott reportedly called Naylor and expressed concern that the officers had found the hidden compartment in the car. Scott also told Naylor that he was going back to his apartment to clean up, as he was concerned that the officers knew where he lived. He also told Naylor that he would subsequently be going to the Spare Rib bar in West Chester. Naylor conveyed this information to law enforcement.
Late that night, Scott was arrested at the Spare Rib bar, where officers recovered $985 in cash, cell phones, and a key to the Everhart Road apartment. A subsequent search of the Everhart Road apartment pursuant to a search warrant disclosed crack cocaine, marijuana, a loaded .32 caliber Keltec handgun, eleven cell phones, over $15,000 worth of jewelry, and $29,689 in rubber-banded stacks of cash. Police also recovered paraphernalia associated with drug distribution and sales as well as plastic bags containing crack and marijuana.
B. District Court Proceedings
Thereafter, a federal grand jury returned an indictment charging Scótt on five of the eleven counts:
• Count One charged Scott with conspiracy to distribute five kilograms or more of cocaine and 280 grams or more of cocaine base (“crack”), in violation of 21 U.S.C. § 846;
• Count Seven charged Scott with distribution of 28 grams or more of cocaine base (“crack”), in violation of 21 U.S.C. § 841(a) and (b)(1)(B);
• Count Nine charged Scott with possession with intent to distribute cocaine base (“crack”), in violation of 21 U.S.C. § 841(a) and (b)(1)(C);
• Count Ten charged Scott with possession of a firearm in furtherance of a drug trafficking offense, in violation of 18 U.S.C. § 924(c)(1);-and'
• Count Eleven charged Scott as a convicted felon in possession of a firearm, in violation of 18 U.S.C. § 922(g)(1).
A jury subsequently convicted Scott on each of the counts in which he was named, and Scott was ultimately sentenced to a total of 300 months incarceration followed by a period of supervised release. This appeal followed.
II.
We address each of Scott’s claims of error in turn.
A. Whether there exists a variance between the indictment and the proof.
1. Standard of Review
“We exercise plenary review over properly preserved claims of ... variance.” United States v. Vosburgh, 602 F.3d 512, 531 (3d Cir.2010) (citing United States v. Daraio, 445 F.3d 253, 259 (3d Cir.2006)). However, where such a claim is raised for the first time in a post-trial motion, we review for plain error. Id. (citing United States v. Tiller, 302 F.3d 98, 105 (3d Cir.2002)).
Plain error review requires a four-step inquiry, as follows:
First, there must be an error or defect — some sort of deviation from a legal rule.... Second, the legal error must be clear or obvious, rather than subject to reasonable 'dispute. Third, the error must have affected the appellant’s substantial rights, which in the ordinary case means he must demonstrate that it affected the outcome of the district court proceedings. Fourth and finally, if the above three prongs are satisfied, the court of appeals has the discretion to remedy the error — discretion which ought to be exercised only if the error seriously affects the fairness, integrity, or public reputation of judicial proceedings.
Puckett v. United States, 556 U.S. 129, 135, 129 S.Ct. 1423, 173 L.Ed.2d 266 (2009) (quoting United States v. Olano, 507 U.S. 725, 732-36, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)) (internal quotation marks, citations, and alterations omitted). “[T]he plain-error exception to the contemporaneous-objection rule is to be used sparingly, solely in those circumstances in which a miscarriage of justice would otherwise result.” United States v. Young, 470 U.S. 1, 15, 105 S.Ct. 1038, 84 L.Ed.2d 1 (1985) (quoting United States v. Fraday, 456 U.S. 152, 163 n. 14, 102 S.Ct. 1584, 71 L.Ed.2d 816 (1982)) (internal quotation marks omitted).
2. Discussion
Scott contends that his conviction for conspiracy to distribute 500 grams or more of cocaine and 280 grams or more of crack should be reversed because of the existence of a prejudicial variance between the indictment and the proof. He claims that “Naylor’s testimony failed to support a single conspiracy.... Instead, it tended to show the existence of two distinct conspiracies, thus resulting in a fatal variance from the Indictment.” (Appellant Br. 26.)
A variance exists “where the charging terms [of the Indictment] are unchanged, but the evidence at trial proves facts materially different from those alleged in the indictment.” United States v. Castro, 776 F.2d 1118, 1121 (3d Cir.1985) (citing United States v. Somers, 496 F.2d 723, 743 n. 38 (3d Cir.1974)). “To prevail ... [the appellant] must show (1) that there was a variance between the indictment and the proof adduced at trial and (2) that the variance prejudiced some substantial right.” United States v. Balter, 91 F.3d 427, 441 (3d Cir.1996) (citing United States v. Adams, 759 F.2d 1099, 1109 (3d Cir.1985)).
“Where a single conspiracy is alleged in the indictment, there is a variance if the evidence at trial proves only the existence of multiple conspiracies.” United States v. Kelly, 892 F.2d 255, 258 (3d Cir.1989) (citing United States v. Smith, 789 F.2d 196, 200 (3d Cir.1986)). “We will sustain the jury’s verdict if there is substantial evidence, viewed in the light most favorable to the Government, to support a finding of a single conspiracy.” United States v. Perez, 280 F.3d 318, 345 (3d Cir.2002) (citing Smith, 789 F.2d at 200).
“To prove a conspiracy, the government must establish a unity of purpose between the alleged conspirators, an intent to achieve a common goal, and an agreement to work together toward that goal.” United States v. Gibbs, 190 F.3d 188, 197 (3d Cir.1999) (citing United States v. Robin son, 167 F.3d 824, 829 (3d Cir.1999)). In determining whether there is a single conspiracy or multiple conspiracies, we consider three factors: “(1) whether there was a common'goal among the conspirators; (2) whether the agreement contemplated bringing to pass a continuous result that will not continue without the continuous cooperation of the conspirators; and (3) the extent to which the participants overlap in the various dealings.” United States v. Kemp, 500 F.3d 257, 287 (3d Cir.2007) (quoting Kelly, 892 F.2d at 259) (internal quotation marks omitted).
“The government need not prove that each defendant knew all of the conspiracy’s details, goals, or other participants.” Gibbs, 190 F.3d at 197 (citing United States v. Theodoropoulos, 866 F.2d 587, 593 (3d Cir.1989), overruled on other grounds by United States v. Price, 13 F.3d 711, 727 (3d Cir.1994)).
“[A] simple buyer-seller relationship, without any prior or contemporaneous understanding beyond the sales agreement itself, is insufficient to establish that the buyer was a member of the seller’s conspiracy.” Id. (citing United States v. McGlory, 968 F.2d 309, 324-25 (3d Cir.1992)). However, “even an occasional supplier (and by implication an occasional buyer for redistribution) can be shown to be a member of the conspiracy by evidence, direct or inferential, of knowledge that she or he was part of a larger operation.” Price, 13 F.3d at 728 (citing Theodoropou-los, 866 F.2d at 594).
[W]here [an alleged eoconspirator]’s only involvement in the conspiracy appears to be drug purchases, courts have looked to the surrounding circumstances to determine whether the defendant is a mere buyer who had such limited dealings with the conspiracy that he cannot be held to be a conspirator, or whether he has knowledge of the conspiracy to the extent that his drug purchases are circumstantial evidence of his intent to join that conspiracy.
Gibbs, 190 F.3d at 199.
Scott contends that “the evidence showed two distinct conspiracies with the appellant, Scott, as the main supplier or hub of the conspiracy, and Marchant and Naylor as separate spokes in the conspiracy” with no “rim” connecting the separate spokes. (Appellant Br. 27-28.) However, the evidence supports the inference that there was, in fact, a single conspiracy.
The conspiracy between Scott and Nay-lor was more than just a relationship between a buyer and seller. Naylor was a principal and trusted associate of Scott. Scott and Naylor had been friends for years, had attempted to start legitimate business ventures together, and found their way into drug- dealing together. Naylor helped Scott cook cocaine into crack and to package these drugs for sale. (App.735-36.) Naylor also generally helped Scott with his drag customers. (App.736-37.)
The extent of Marchant’s participation in the conspiracy is more than enough evidence of his intent to join the conspiracy between Scott and Naylor. A substantial amount of drugs was moved by Mar-chant. He had a standing order with Scott, and he had previously purchased drugs on credit. Scott and Naylor’s drug scheme was also substantially dependent on Marchant. Marchant was Scott’s “horse,” meaning that he moved a majority of the drugs. (App.758-59.) Likewise, Marchant got most of his drugs from Scott. (App.529-30.)
Not only was Naylor aware of Mar-chant’s identity as Scott’s customer, but he had delivered the drugs to Marchant on Scott’s behalf. (App.759-60.) Significantly, Marchant called Naylor, not Scott, to set up that particular deal. (App.760.)
When Marchant was arrested, Scott was “pretty shook” and told Naylor that he “lost [his] arm,” which Naylor interpreted as “he lost a major part of what he was doing.” (App.764-65.) The relationship between Scott and Naylor was such that since Marchant was a major part of what Scott was doing, he was also a major part of what Naylor was doing. Thus, the evidence is more than sufficient to show that Scott, Naylor, and Marchant were participants in a single conspiracy.
The common goal here is clear: to distribute crack and cocaine. Scott’s remarks following Marchant’s arrest indicate that Scott and Naylor’s operation was largely dependent on Marchant moving their drugs: he was “a major part” of what they were doing. There was overlap both in time and in action between Naylor and Marchant. Scott and Naylor were involved in the conspiracy from 2008 until Scott’s arrest in 2010. Marchant joined this conspiracy in January 2009, ending with his arrest in June 2010. Naylor and Marchant were aware of each other’s role in the conspiracy and had met before to complete a drug transaction.
Accordingly, there is no variance and Scott’s conviction on Count One is affirmed.
B. Whether there was sufficient evidence for the jury to determine that Scott conspired to distribute or possess with the intent to distribute five. kilograms or more of cocaine and 280 grams or more of crack.
1. Standard of Review
Where sufficiency of the evidence is challenged, “we examine the totality of the evidence, both direct and circumstantial, and must credit all available inferences in favor of the government.” United States v. Sparrow, 371 F.3d 851, 852 (3d Cir.2004) (quoting United States v. Gambone, 314 F.3d 163, 170 (3d Cir.2003)) (internal quotation marks omitted).
“We review the record in the light most favorable to the prosecution to determine whether any rational trier of fact could have found proof of guilt beyond a reasonable doubt.” United States v. Caraballo-Rodriguez, 726 F.3d 418, 430 (3d Cir.2013) (en banc) (quoting United States v. Brodie, 403 F.3d 123, 133 (3d Cir.2005)) (internal quotation marks and alterations omitted). Thus, this is a “particularly deferential standard,” where we “must be ever vigilant not to usurp the role of the jury by ... assigning weight to the evidence, or by ■ substituting our judgment for that of the jury.” Id. (quoting Brodie, 403 F.3d at 133) (internal quotation marks and alterations omitted).
2. Discussion
The evidence clearly supports the jury’s finding that Scott conspired to distribute or possess with the intent to distribute five kilograms or more of cocaine and 280 grams or more of crack. Mar-chant’s testimony alone supports this conclusion.
Marchant began dealing with Scott in February 2009 and continued until his arrest on June 2, 2010. The last known sale was on May 7, 2010. Marchant testified that at his first meeting with Scott, he purchased 62 grams of powder cocaine and 62 grams of crack. (App.520.) After this initial sale, Marchant testified that he regularly purchased drugs from Scott once a week.. (App.524-25.) Marchant stated that it was “pretty much guaranteé[d]” that he would meet with Scott for a drug transaction on a weekly basis. (App.526.) For these transactions, Marchant would purchase his standing order of 126 grams of powder cocaine and 62 grains of crack. (App.525.) Based on their weeldy schedule, a rational juror could infer that there were approximately 66 subsequent purchases in this time period between Scott and Marchant. Following this inference, a rational jury could conclude that Scott sold Marchant 66 orders of 126 grams of powder cocaine and 62 grams of crack following their initial transaction, which amounts to 8,316 grams of powder cocaine and 4,092 grams of crack — well over the jury’s requisite finding for conviction of five kilograms (5000 grams) of cocaine and 280 grams of crack.
While we recognize that Marchant testified that there were times when he would go a week without seeing Scott and that sometimes his order varied, we reiterate that we view the record in the light most favorable to the government under a particularly deferential standard: as long as the jury’s conclusion passes the bare rationality test, i.e., it is not completely irrational, we must uphold the jury’s verdict. The jury’s verdict clearly passed this threshold here. Accordingly, we will again affirm the verdict as to Count One.
C. Whether there was sufficient evidence to prove that Scott , possessed a firearm in furtherance of a drug trafficking activity.
1. Standard of Review
We exercise the same standard of review as exercised under Section B supra.
2. Discussion
Scott alleges that the evidence is insufficient to establish that the firearm recovered from the Everhart Road apartment was possessed in furtherance of a drug trafficking offense. It is Scott’s contention that the conviction in Count Ten was based solely on facts showing that Scott was merely a drug dealer in possession of a firearm and that there was no evidence demonstrating that the firearm was used to advance or promote his drug dealing activities. We disagree.
We do, however, agree that, under 18 U.S.C. § 924(c), the “mere presence” of a gun is insufficient to sustain a conviction. Sparrow, 371 F.3d at 853. Instead, “the evidence must demonstrate that possession of the firearm advanced or helped forward a drug trafficking crime.” Id. (citing United States v. Lomax, 293 F.3d 701, 705 (4th Cir.2002)). Courts are to consider the following factors in determining whether a firearm advanced a drug trafficking crime:
[T]he type of drug activity that is being conducted, accessibility of the firearm, the type of the weapon, whether the weapon is stolen, the status of the possession (legitimate or illegal), whether the gun is loaded, proximity to drugs or drug profits, and the time and circumstances under which the gun is found.
Id. (quoting United States v. Ceballos-Torres, 218 F.3d 409, 414-15 (5th Cir.2000)).
This case is strikingly similar to United States v. Sparrow, in which the appellant also challenged the sufficiency of the evidence. Id. at 852. There, as here, we rejected that challenge. See id. at 852, 854. In Sparrow, the appellant sold marijuana out of a convenience store. Id. at 851. After conducting surveillance of the store, the police obtained a search warrant and found “a concealed compartment under the floor tiles behind the counter.” Id. Concealed in the compartment were “nine large Ziploc bags of marijuana, $140 in cash and a loaded Jennings .22 caliber pistol.” Id. at 851-52. The appellant did not deny possession of the gun. Id. at 852.
We held that the evidence was sufficient to sustain possession of a firearm in furtherance of a drug-related activity pre dominantly because: (1) the appellant illegally possessed the firearm, as a prior felon; (2) the firearm was loaded; (3) the firearm was “kept in the same floor compartment as nine large Ziploc bags of marijuana and $140 in cash”; and (4) while not necessarily easily accessible, the firearm was “strategically located.” Id. at 854.
Scott is also a prior felon and kept the loaded gun in a dresser with a substantial amount of crack and marijuana, jewelry, and $29,689 in cash. Specifically, the firearm was found in the space underneath the bottom drawer of the dresser where the jewelry and much of the cash was found. In Sparroiu, we found that the firearm “was placed so that it would be immediately available for [the appellant’s] protection whenever he retrieved drugs or money, from the floor compartment. Therefore, it [was] reasonable to assume the firearm was placed in the floor compartment for that purpose and was possessed in furtherance of [the appellant’s] drug activities.” Id. The same reasoning applies here. Accordingly, the District Court did not err in finding that Scott possessed a firearm in furtherance of a drug trafficking activity.
D. Whether the District Court erred in admitting into evidence wiretap tapes, which were allegedly sealed in an untimely fashion absent a sufficient excuse to justify the delay.
1. Factual and Procedural Background
The government used wiretap recordings of thirteen phone calls between Scott and Marchant from the wiretaps authorized for two of Scott’s phones.
Prior to trial, Scott’s attorney requested that the government produce all documentation regarding the Title III wiretaps. (App.51.) In response, the government provided additional discovery and stated that all Title III documentation regarding the wiretaps had been produced, with the exception of inventory notices. (App.57.) Subsequently, the District Court conducted a hearing on the admissibility of the wiretaps, but ultimately allowed that evidence to be admitted.
After the trial, Scott informed his newly appointed lawyer of his unfulfilled discovery requests, which included the sealing orders for the wiretaps. Significantly, Scott concedes that he did not file a pretrial motion to suppress the wiretaps.
Proceeding pro se, Scott filed a post-trial motion to compel discovery and requested an evidentiary hearing oh that motion. He argued that “the wiretap sealing orders had never been disclosed and that the [District [C]ourt erred in admitting the wiretap recordings without knowing if they were properly sealed.” (Appellant Br. 54.) In response, the government conceded a discovery violation because it had not produced the wiretap sealing orders as requested. However, the government contended that Scott suffered no prejudice from this violation because the wiretap disks were, in fact, properly sealed.
On July 2, 2013, the government sent the sealing orders to Scott’s standby counsel by e-mail. However, on August 2, 2013, the government learned that-standby counsel was unable to forward the e-mail to Scott because Scott was then in custody at the Federal Detention Center. Consequently, the information was hand-delivered to Scott. Thus, prior to sentencing on August 8, 2013, Scott had possession of the sealing orders for about a week. However, he did not file a motion to suppress the wiretaps before sentencing or make an oral motion to suppress at sentencing.
After a post-trial hearing, the District Court denied Scott’s motion for further discovery and for an evidentiary hearing on the wiretap sealing issue. Scott now appears to make two distinct claims of error pertaining to that issue. First, Scott contends that the District Court erred because the “wiretaps and all evidence derived therefrom should have been suppressed.” (Appellant Br. 59.) Second, it is Scott’s contention on appeal that “the [District [C]ourt erred by not conducting a full evidentiary hearing on the sealing issue where such a hearing would have revealed that the wiretaps were sealed in an untimely fashion with no sufficient excuse to justify the delay.” (Appellant Br. 55.)
2. Waiver
The government correctly argues that any claim of error arising from the failure to timely pursue suppression of this evidence has been waived.
Fed. R.Crim. Pro. 12(b)(8)(C) provides that a motion to suppress evidence “must be raised by pretrial motion if the basis for the motion is then reasonably available .... ” This Court has held that, under Fed. R.Crim. Pro. 12(b)(8)(C), “a suppression argument raised for the first time on appeal is waived ... absent good cause.” United States v. Rose, 538 F.3d 175, 182 (3d Cir.2008). “This rule applies not only when defendants altogether fail to raise any suppression arguments in the District Court, but also when defendants fail to raise particular arguments later advanced on appeal.” United States v. Joseph, 730 F.3d 336, 338 (3d Cir.2013).
As previously noted, Scott was not sent the sealing orders until after trial and after his conviction.- On May 17, 2013, when Scott filed a motion for new trial, Scott defended his failure to file a motion to suppress, stating: “How could the defense file a motion to suppress Scott[’]s [wiretaps] on sealing and inventory grounds if the prosecution has never turned over proof of the actual seal or the inventory letters/notices[?] Or at least a written explanation of [their] absence[?]” (Suppl-.App.2.) As Scott did not have the sealing orders in his possession before trial, the basis for the motion was not “reasonably available” to him, and we find good cause for Scott not making a pre-trial motion to suppress.
However, Scott received the sealing orders approximately a week prior to his sentencing on August 8, 2013. It is uncontested that Scott did not file a motion to suppress the wiretaps between receiving them and his sentencing, nor did he make an oral motion to suppress the wiretaps at sentencing. Thus, we must determine whether there is good cause for Scott’s failure to file a motion to suppress the wiretaps once the sealing orders were in his possession.
On the' motions hearing on August 8, 2013, while a motion to suppress was not filed, Scott did raise a suppression argument, thus making the District Court aware of the suppression issue. Scott argued:
[I]f my wiretaps were suppressed, it would have had an effect on the trial. It would have an effect on the evidence seized from the apartment ... if these wiretaps were suppressed and there was never any motion to file suppressing the wiretaps. Now that I have the sealing orders, there is discrepancy issues in the sealing orders and if the wiretaps were suppressed it would have had a determination on the guilt or innocence for the trial.
(App.1341.)
In response, the District Court stated: “You can make the motion, but there’s more than just the fact that they weren’t sealed that would reflect upon whether or not they would have been suppressed. So your argument at this point is merely speculative.” (App.1342) (emphasis added). Scott thus replied: “The reason this is speculative is that I didn’t have it before trial to file a motion to suppress on it.” (App.1344.) Further, he stated: “If I would have had the evidence when I requested it, your Honor, your Honor could have made the decision before trial when it was requested to grant or deny the suppression of the wiretaps. There was never a motion to file.” (Id.)
The District Court explicitly told Scott that he “c[ould] make the motion.” Nonetheless, Scott never made the motion to suppress. Thus, with the District Court’s prompting to make the motion and his possession of the sealing orders, Scott has not shown good cause for not making the motion to suppress. Thus, we will not consider whether the wiretaps and all evidence derived from them should have been suppressed.
Further, we will not consider whether an evidentiary hearing should have been held on the motion to suppress.
“We review for abuse of discretion a district court’s denial of an evidentiary hearing on a motion to suppress.” United States v. Hines, 628 F.3d 101, 104 (3d Cir.2010). “Such rulings are ordinarily committed to a district court’s sound discretion, which we reverse only in rare circumstances.” Id. at 105.
Rule 12(b)(3)(C) of the Federal Rules of Criminal Procedure permits defendants to file ‘motions to suppress evidence’ before trial, but evidentiary hearings on such motions are not granted as a matter of course. To require a hearing, a suppression motion must raise issues of fact material to the resolution of the defendant’s constitutional claim. A motion to suppress requires an evidentiary hearing only if the motion is sufficiently specific, non-conjeetural, and detailed to enable the court to conclude that (1) the defendant has presented a colorable constitutional claim, and (2) there are disputed issues of material fact that will affect the outcome of the motion to suppress.
Id. (internal quotation marks and citations omitted). Accordingly,' since Scott never actually moved to suppress — despite being prompted to do so by the court — we do not find that the District Court abused its discretion in failing to provide an eviden-tiary hearing.
E. Whether the government’s failure to provide Scott with the complete criminal history of one of its primary witnesses, Darryl Naylor, constituted a due process violation under Brady v. Maryland, 373 U.S. 83 (1963).
1. Standard of Review
“Because, a Brady claim presents questions of law as well as questions of fact, we [ ] conduct a de novo review of the district court’s conclusions of law as well as a ‘clearly erroneous’ review of any findings of fact where appropriate.” United States v. Perdomo, 929 F.2d 967, 969 (3d Cir. 1991) (citing Carter v. Rafferty, 826 F.2d 1299, 1306 (3d Cir.1987)).
2. Discussion
Naylor was a key witness for the government at trial. The following impeachment evidence for Naylor was available to the defense prior to, or before the end of trial:
• Three prior drug trafficking convictions
• Three prior drug convictions, two for distribution and one for possession
• Two arrests for selling drugs to a confidential informant
• Pending federal drug charges
• A theft conviction
• A recent DUI conviction
• Recent possession of cocaine (never charged)
At trial, Naylor also disclosed that he was a drug addict, had served time in prison, had problems with alcohol abuse, and other evidence that certainly allowed Scott to. impeach his testimony.
After trial, the government received Naylor’s PSR and learned that Naylor had a more extensive criminal record than had been disclosed at or before trial. The . following impeaching information about Naylor was thus only discovered after trial:
• Four drug trafficking charges, rather than three
• Three possession charges, rather than one
• Two theft convictions, rather than one
• Two DUI convictions, rather than one
• A burglary conviction
• Three conspiracy charges
Scott “contends that Naylor’s undisclosed criminal history was material to his defense and that its non-disclosure prejudiced his trial by limiting trial counsel’s ability to adequately cross-examine Nay-lor.” (Appellant Br. 61.) However, at sentencing, while Scott was proceeding pro se, he stated:
There were other issues I wanted to raise, but I didn’t feel that — well, I was advised that in posttrial motions that it would not be proper to raise, some of it was arguments, so I didn’t file the issue about Darryl Naylor’s criminal history not being turned over or a lot of other things, ineffective assistance or things like that, so more or less these are my post trial motions....
(App.1365.) The government accordingly argues that, “[bjecause Scott explicitly waived any issue relating to the late disclosure of parts of Naylor’s criminal history, his Brady claim is not reviewable.... ” (Appellee Br. 54.)
|
8974773-23932 | CANBY, Circuit Judge:
Emiliano Santiago, a sergeant in the Army National Guard facing immediate deployment to Afghanistan, appeals from the district court’s denial of his petition for a writ of habeas corpus. Santiago’s eight-year enlistment in the Guard was due to expire on June 27, 2004, but shortly before that date his enlistment was extended by a “stop-loss” order when his unit was alerted prior to being ordered to active service. Santiago challenges this application of the government’s “stop-loss” policy on the ground that it violates his enlistment contract and is unauthorized by statute. He also asserts a due process claim. We affirm the district court’s denial of the petition because we conclude that the stop-loss order was authorized by 10 U.S.C. § 12305(a), and that it neither violated Santiago’s enlistment agreement nor his right to due process of law.
I. Factual Background
Santiago enlisted in the Army National Guard on June 28, 1996, when he was eighteen years old. He enlisted for a term of eight years. After his enlistment, Santiago completed basic training and advanced individual training, after which he was released from active duty. Since that time, Santiago has been participating in monthly weekend training activities as part of his commitment to the Army National Guard. Santiago currently serves as a sergeant in his Pendleton, Oregon, unit.
Santiago is an Aircraft Petroleum Specialist — a refueler. He tests petroleum products for safety and then refuels Army aviation equipment. On the civilian side, Santiago lives with his wife in Pasco, Washington, where he works as an electronic technician at Pacific Northwest National Laboratory (which is operated by Battelle Memorial Institute for the Department of Energy).
On April 17, 2004, the Oregon National Guard received a “mobilization alert order” from the Army National Guard. The order directed the unit stationed in Pen-dleton to “prepare for a mobilization into federal active service,” but specified that “[t]his is an alert order only” and “[t]he official mobilization order may mobilize less than authorized strength.” In May 2004, the commander of Santiago’s company “announced to the soldiers that the unit was going to deploy, and that the entire unit was under stop loss.”
In June 2004, when Santiago’s eight-year term was due to expire, Santiago attended a weekend training session. Santiago “assumed that the weekend training that he attended ... was his last weekend duty.” On June 11, however, Santiago learned that his enlistment would not end on June 27 — the original termination date of Ms contract — because he was subject to the stop-loss order.
In October 2004, Santiago’s unit received an order to mobilize for active duty. Pursuant to the mobilization order, Santiago and his unit were instructed to mobilize on January 2, 2005, and depart for Fort Sill, Oklahoma, shortly thereafter for six weeks of training, followed by deployment to Afghanistan for one year in support of “Operation Enduring Freedom.”
Santiago retained counsel to challenge the involuntary extension of his enlistment under the stop-loss policy. Santiago’s attorney wrote a letter to Santiago’s unit commander requesting that Santiago be released from further service on the ground that he had fulfilled his contractual obligations. Santiago’s lawyer explained that if no “confirmation of Sgt. Santiago’s discharge [is received] within two weeks ... this letter constitutes Sgt. Santiago’s attempt to exhaust administrative remedies prior to filing suit to enforce his rights.”
The Oregon Military Department replied by letter to Santiago’s lawyer, stating that “[a]s a result of the umt alert, your client’s ETS [estimated termination of service] date was changed to 24 December 2031 and it is scheduled to remain so until his unit is removed from alert status or until demobilization is completed.” The letter also directed that “[r]equests for waivers/exceptions to reserve component unit stop loss should be forwarded through the chain of command.” After learning about the waiver policy, Santiago concluded that it would be futile to seek a waiver or exception. Santiago testified by declaration that his civilian supervisor was “not willing to request an exception to my deployment based upon a ‘negative national security impact’ on my employment.” He also concluded that he could not make a claim of personal hardship beyond that which other members of his unit were forced to endure.
In January 2005, Santiago reported to Fort Sill to begin his six weeks of training in preparation for deployment to Afghanistan.
II. Procedural History
In November 2004, Santiago filed a petition for writs of habeas corpus and mandamus, and for declaratory relief, in the United States District Court for the District of Oregon. He moved for a temporary restraining order and preliminary injunction. The parties stipulated that the hearing on the preliminary injunction was to serve as a bench trial on the permanent injunction, to expedite appellate review. The district court dismissed the petition for writ of habeas corpus and entered judgment for the federal defendants denying all relief. Santiago promptly appealed.
III. Discussion
A. Justiciability and Exhaustion
The district court assumed for purposes of its decision that Santiago’s claims met the requirements for reviewability of military decisions under Wenger v. Monroe, 282 F.3d 1068, 1072 (9th Cir.2002) (applying the rule of Mindes v. Seaman, 453 F.2d 197 (5th Cir.1971)). The district court also assumed for purposes of decision that Santiago had sufficiently exhausted his administrative remedies. The government suggests that we make the same assumptions for purposes of this appeal, and we follow that suggestion. Wenger and Mindes set forth a prudential rule, not a limitation on our subject-matter jurisdic tion. See Winck v. England, 327 F.3d 1296, 1299 (11th Cir.2003). Exhaustion of administrative remedies, when not made mandatory by statute, is similarly a prudential doctrine. See Acevedo-Carranza v. Ashcroft, 371 F.3d 539, 541 (9th Cir.2004). We therefore proceed to the merits.
B. Enlistment Contract
Enlistment contracts, with exceptions not relevant here, are enforceable under the traditional principles of contract law. See Jablon v. United States, 657 F.2d 1064, 1066 & n. 3 (9th Cir.1981) (noting that contract principles apply when an enlistee seeks release from the military because of an alleged misrepresentation in the enlistment contract); Johnson v. Chafee, 469 F.2d 1216, 1219-20 (9th Cir.1972) (enforcing an agreement to extend an enlistment period based on contract principles); Taylor v. United States, 711 F.2d 1199, 1205 (3d Cir.1983) (noting that “enlistee status does not invalidate the contractual obligation of either party or prevent the contract from being upheld, under proper circumstances, by a court of law”) (citation and alteration omitted).
Santiago relies on the provision of his contract specifying an eight-year term and contends that it requires his separation at the end of that period. He acknowledges that the contract spells out some instances in which his enlistment can be extended (for example, during a declared war), but insists that the extension under the present circumstances, in an alert during an emergency declared by the President, is not among them. He relies on the interpretive doctrine of expressio unius est ex-clusio alterius to support his view that the failure to include a provision for a particular contingency, after specifying others, implies a negative. See, e.g., Barnes v. Indep. Auto. Dealers Ass’n of Cal. Health & Welfare Benefit Plan, 64 F.3d 1389, 1393 (9th Cir.1995).
It is inappropriate, however, to imply an intent to exclude when the contract itself specifies that unlisted contingencies may cause an alteration in the agreed-upon terms. See United States v. Crane, 979 F.2d 687, 690 (9th Cir.1992) (“[T]he maxim expressio unius is a product of logic and common sense and is properly applied only when the result is itself logical and sensible”). Santiago’s enlistment contract states that rights and obligations may be affected by federal law, and the contract provides notice that changes in federal law — even if inconsistent with the written terms of the contract — would apply to Santiago once he enlisted:
Laws and regulations that govern military personnel may change without notice to me. Such changes may affect my status, pay, allowances, benefits, and responsibilities as a member of the Armed Forces REGARDLESS of the provisions of this enlistment/ reenlistment document.
Enlistment Doc. § C, ¶ 9(b). This clause is broad enough to encompass the stop-loss order that Santiago challenges. Santiago argues that the statute under which the President acted, 10 U.S.C. § 12305(a), was in effect prior to his enlistment and therefore cannot qualify as a “change” in the law. The stop-loss regulation, however, was not promulgated until November 21, 2002, see MILPER MESSAGE NO: 03-040, TAPC-PDT-PM (hereinafter “MIL-PER 03-040”), and it therefore qualifies as a change in regulations within the meaning of the quoted clause of the enlistment contract.
In any event, the enlistment contract clearly contemplates that the terms of enlistment are subject to existing federal laws and regulations that may not be spelled out in the contract. The clause quoted above appears under the general heading “PARTIAL STATEMENT OF EXISTING UNITED STATES LAWS” and is introduced by a passage stating:
Many laws, regulations, and military customs will govern my conduct and require me' to do things a civilian does not have to do. The following statements are not promises or guarantees of any kind. They explain some of the present laws affecting the Armed Forces which I cannot change but which Congress can change at any time.
Enlistment Doc. § C, ¶ 9. There is no question, therefore, that the parties to the contract understood and intended that many laws and regulations not set forth in the contract would govern Santiago’s service, and the reference to changes in the law simply made clear that even subsequently enacted, as well as pre-existing, law would apply. In so providing, the contract was reflecting well-established rules of law applicable to enlistment contracts. See Winters v. United States, 412 F.2d 140, 144 & n. 6 (9th Cir.1969) (holding that a statute applies to preexisting enlistment contracts notwithstanding contrary language in the contract and noting unanimity of courts on the issue); Antonuk v. United States, 445 F.2d 592, 598-99 (6th Cir.1971) (holding that a federal statute, enacted subsequent to enlistment, trumped the contrary terms of an enlistment contract).
Consequently, we conclude that the military stop-loss policy does not violate the terms of Santiago’s enlistment contract. The next question we must address is whether the stop-loss regulation as applied to Santiago was authorized by statute.
C. Section 12305
Article I, section 8, clause 14 of the Constitution grants Congress the power to “make Rules for the Government and Regulation of the land and naval Forces.” Congress exercised this power, and the laws applying to the various segments of the armed forces are now codified in Title 10 of the United States Code. We conclude that, under the circumstances of this case, the military’s stop-loss policy does not exceed the statutory authority conferred on the President by 10 U.S.C. § 12305(a).
The parties do not dispute that the purpose of reserve components “is to provide trained units and qualified persons available for active duty in the armed forces.” 10 U.S.C. § 10102. Nor do they dispute that “[i]n time of national emergency declared by the President .., or when otherwise authorized by law, an authority designated by the Secretary concerned may, without the consent of the persons concerned, order any unit, and any member not assigned to a unit organized to serve as a unit, in the Ready Reserve ... to active duty for not more than 24 consecu tive months.” 10 U.S.C. § 12302(a). The President declared a national emergency on September 14, 2001, in response to the terrorist attacks in Pennsylvania, at the World Trade Center, and on the Pentagon. See Proclamation No. 7463, 66 Fed.Reg. 48,199 (Sept. 14, 2001). The President simultaneously delegated to the secretaries of the armed services the authority to order reserves to active duty. See Exec. Order No. 13223, 66 Fed.Reg. 48,201-48,-202 (Sept. 14, 2001).
We must resolve a narrow question: whether Congress has delegated to the President the authority to apply the stop-loss policy to an individual whose enlistment contract expires after a mobilization alert but prior to a call to active duty. We conclude that the stop-loss policy is authorized by the plain language of section 12305. See Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997) (“Our first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning....”).
Section 12305 authorizes the executive branch to implement a stop-loss policy in order to prevent retirement or separation of reserve members who are essential to national security:
Notwithstanding any other provision of law, during any period members of a reserve component are serving on active duty pursuant to an order to active duty under authority of section 12301, 12302, or 12304 of this title, the President may suspend any provision of law relating to promotion, retirement, or separation applicable to any member of the armed forces who the President determines is essential to the national security of the United States.
10 U.S.C. § 12305(a) (emphasis added). Pursuant to this statutory authority, the Army implemented a stop-loss policy for Army National Guard units on November 21, 2002. The stop-loss policy provides the following:
Generally, all enlistments, reenlistments, extensions, and periods of service for [Army National Guard] soldiers who are members of units alerted or ordered to active duty ... are extended until further notice.... This applies to [Reserve Component] units that are mobilized or have been alerted, but not yet mobilized, at the time this message is published, and to [Reserve Component] units that are alerted or mobil[iz]ed after this message is published.
MILPER 03-040, ¶ 5 (emphasis added). Because his National Guard unit was alerted prior to his scheduled separation date, the stop-loss policy clearly applies to Santiago. The question is whether the policy is authorized by section 12305(a)'.
Santiago’s central contention is that section 12305(a) authorizes the President to delay separation only of members of the reserve components who are on active duty. Because his enlistment would have expired during the period of alert but before his unit was ordered to active duty, Santiago contends that the statute does not authorize application of the stop-loss order to him.
Santiago’s interpretation of section 12305(a) is not supported by the statute’s plain words. The limiting clause, “during any period members of a reserve component are serving on active duty pursuant to an order to active duty under authority of section 12301, 12302, or 12304 of this title,” refers only to the period of time during which the President may exercise the power conferred by section 12305(a). That condition is met because the President declared a national emergency in September 2001 and invoked his authority to order reserve units to active duty under section 12302. See Proclamation No. 7463, 66 Fed.Reg. 48,199. The district court found that members of the Army National Guard have been serving on active duty pursuant to this authority since October 2001. The temporal condition for exercise of the President’s power under section 12305(a) accordingly has been met.
The actual operative power conferred on the President by section 12305(a) — the power to suspend the laws governing promotion, retirement or separation — may be exercised with regard to “any member of the armed forces who the President determines is essential to the national security,” not merely those who are on active duty. Had Congress intended to limit the President’s power under section 12305(a) so that he could suspend the laws relating only to those members of the armed forces on active duty, it would have been a simple matter for Congress to say so in the statute. It did not.
Section 12305(a) is not irrational when read according to its plain meaning. As the government points out, the temporal limitation to a period when reserves have been called to active duty under sections 12301, 12302 or 12304 makes sense because call-up of reserve units under those three statutes ordinarily requires formal declarations or specified conditions of national emergency. In times of national emergency resulting in the activation of reserve units, it is rational to authorize the President to take special measures to ensure the services of other members of the armed forces whom he deems to be essential to national security. That is what Congress has done in the plain words of section 12305(a).
Legislative history does not compel a contrary interpretation of the statute’s plain language. The Senate Report’s brief reference to the new legislation enacting section 12305(a) says that “the President would be authorized to extend the enlistment or appointment of essential regular and reserve personnel serving on active duty....” S. REP. NO. 98-174 (1983), reprinted in 1983 U.S.C.C.A.N. 1081, 1099. The House of Representatives adopted the Senate provision, describing it as follows in its Conference Report:
The Senate bill contained a provision [ ] that would authorize the President, during a time of crisis or national emergency, to extend the enlistment or appointment of essential regular and reserve personnel serving on active duty regard less of the normal separation dates for those individuals.
H.R. CONF. REP. NO. 98-352, reprinted in 1983 U.S.C.C.A.N. 1160, 1176. It is true that these references say nothing about extending periods of enlistment of members of units that have been alerted for mobilization, but not yet ordered to active duty. There is no reason, however, to construe these minimal references of congressional history as demonstrating a clear intent contrary to the plain words of section 12305(a). The congressional committee statements are accurate as far as they go: section 12305(a) does authorize the President to extend the enlistments of those on active duty. The committee reports do not express an intent to make that authority exclusive, .precluding the President from extending enlistments of members of the reserve alerted for, but not yet ordered to, active duty. We do not read the congressional history as sufficient to demonstrate a clear congressional intent contrary to the plain words of section 12305(a). We conclude, therefore, that section 12305(a) authorized the application of the stop-loss order to Santiago at a time when his enlistment had not yet expired and his unit was alerted for, but had not yet been ordered to, active duty.
D. Due Process
Santiago next argues that his constitutional right to due process of law has been violated by the government’s failure to provide adequate notice that his enlistment could be extended involuntarily for reasons not specified in his enlistment contract. As our earlier discussion of Santiago’s contractual claim makes clear, however, Santiago’s enlistment contract provided notice that subsequently enacted laws and. regulations would affect the terms of his contract. Santiago signed an enlistment contract that said “[l]aws and regulations that govern military personnel may change without notice to me.” Enlistment Doc. § C, ¶ 9(b). The contract also states that Santiago “may at any time be ordered to active duty involuntarily ... under any other conditions authorized by law in effect at the time of my enlistment or which may hereafter be enacted into law.” Id., Statement of Understanding at ¶ 11. If Santiago’s rights under his enlistment contract have not been violated, it is difficult to see how his constitutional claim — which is essentially a variation of his breach of contract claim — can prevail. Under these circumstances, the govern ment’s failure to notify Santiago in his enlistment contract of each specific reason that his service might be extended involuntarily does not violate Santiago’s due process rights.
Nor does Santiago’s “indefinite extension” violate his due process rights. Santiago’s new ETS date is December 25, 2031, but this date was entered for administrative convenience. The stop-loss policy makes clear that soldiers “will generally be mobilized for an initial period of 12 months, but may be extended for a cumulative period up to, but not to exceed, 24 months.”
Accordingly, we reject Santiago’s claims that his right to due process of law was violated.
TV. Conclusion
We do not minimize the disruption, hardship and risk that extension of his enlistment is causing Santiago to endure. We also accept the fact that his claim not to be subject to the stop-loss order has been brought in complete good faith. For the reasons we have set forth, however, we conclude that the application of the stop-loss order did not breach his enlistment contract or deprive him of due process of law. We also conclude that it was authorized by 10 U.S.C. § 12305(a). The judgment of the district court is accordingly
AFFIRMED.
. Amicus curiae John Doe attempts to assert statutoiy and constitutional arguments not raised by Santiago or the government. We follow our general rule in declining to address these arguments not raised by the parties. See, e.g., Artichoke Joe’s Cal. Grand Casino v. Norton, 353 F.3d 712, 719 n. 10 (9th Cir.2003) ("In the absence of exceptional circumstances, which are not present here, we do not address issues raised only in an amicus brief.”). We'note that Doe is currently pursuing his own federal suit challenging the stop-loss policy. See Doe v. Rumsfeld, No. 05-15680, appeal from CIV-S-04-2080-FCD-KJM (E.D.Calif.).
. The government asserts that the 2031 date is purely for administrative convenience and bears no relation to Santiago’s actual separation date.
. The district court's interpretation of a written contract presents a question of law that we review de novo. See, e.g., Flores v. Am. Seafoods Co., 335 F.3d 904, 910 (9th Cir.2003).
. Exceptions have been created for issues related to military pay or benefits due to the unique nature and characteristics of military service. See Borschowa v. Claytor, 568 F.2d 616, 617 (9th Cir.1977) (holding that habeas relief is unavailable for breach of an enlistment contract when the “breach consists wholly of the non-payment of money”); cf. Bell v. United States, 366 U.S. 393, 401, 81 S.Ct. 1230, 6 L.Ed.2d 365 (1961) (holding that "common-law rules governing private contracts have no place in the area of military pay”).
. We review de novo the district court’s interpretations of statutes and regulations. See United States v. Ani, 138 F.3d 390, 391 (9th Cir.1998).
. There is no dispute that the declaration of national emergency has been renewed each year since 2001, most recently on September 10, 2004. See 69 Fed.Reg. 55,313.
. Santiago does not challenge, ñor do we presume to review, the President's discretionary determination that Santiago and the members of his unit are essential to the national security of the United States. See 10 U.S.C. § 12305(a). Apart from any such challenge, Santiago does assert that, as a practical matter, his duties could easily be performed by others. Santiago’s commander, however, submitted a declaration that Santiago's services were critical because his unit was already short on refuelers, and Santiago's absence would impose duty overloads on the other refuelers.
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229650-6315 | WOODBURY, Chief Judge.
This petition to review a decision of the Tax Court of the United States presents the question whether payments of $7,000 each year for the years 1952 to 1955, inclusive, made by the petitioner to the holders of its twenty year seven percent debenture bonds were deductible payments of interest or non-deductible distributions of dividends.
The petitioner was organized as a corporation under the laws of Massachusetts in November 1938 to engage in the City of Gloucester in the business of manufac turing and selling ice and providing freezing and cold storage service primarily to the fishing fleet. Its authorized capital consisted of 10,000 shares of no par value common stock and 1,000 shares of $100 par value cumulative preferred stock.
Upon its organization the petitioner through the efforts of its president, John Ryan, obtained a lease for approximately 11 years renewable for 20 years of a new, fully equipped and ready to operate cold storage warehouse and freezing plant built during the depression under the WPA program for the benefit of the fishing industry of the City of Gloucester at a cost of $1,050,000. All of the petitioner’s common stock, which had an attributed value of 10 cents a share, was originally issued to John Ryan in consideration for his services in obtaining the lease, but he immediately donated 3,-000 shares to the petitioner which it held as treasury stock. The petitioner commenced operations on January 1, 1939, and thereafter from time to time up to November 14, 1940, it issued 500 shares of its cumulative preferred stock giving each subscriber as a bonus 3 shares of common out of its treasury for each share of preferred.
At a meeting in September 1943 the petitioner’s directors voted to call its outstanding preferred stock for redemption at par plus accrued interest, to issue twenty year 7 % debenture bonds in the face amount of $100,000, and to acquire a majority of the outstanding stock of a competitor, Cape Pond Ice Company, a Massachusetts corporation organized in 1902, which was engaged in the business of harvesting, storing, crushing and selling natural ice to the Gloucester fishing fleet. In chronological order the votes in material detail were (1) to issue the bonds described above and to establish a sinking fund to provide for their retirement at maturity, (2) to call all outstanding preferred stock for redemption giving each holder thereof the privilege of taking in payment debentures of equal face value, the privilege to be exercised on or before October 15, 1943, and to sell any debentures unsold on that date for not less than par, (4) to purchase a majority of the shares of Cape Pond Ice Company and (5) to authorize the treasurer to borrow enough money to consummate the purchase. All of the authorized debenture bonds were issued, of which $16,000 in face value (16%), were sold to individuals who had not previously owned preferred stock, and the proceeds of the sale of the debentures plus the proceeds of a $65,000 bank loan (which was fully paid within a year), were used to purchase 366 of the 382 outstanding shares of the common stock of the Cape Pond Ice Company for $136,350.50. The petitioner has consistently paid 7% per annum on its debenture bonds. As of November 30, 1959, the sinking fund established for their retirement contained a balance of $68,181.40.
In each of the taxable years involved the petitioner deducted the $7,000 .it paid to the holders of its debenture bonds as a payment of interest on indebtedness under § 23 of the Internal Revenue Code of 1939, 26 U.S.C.A. § 23 and § 163 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 163. The Commissioner disallowed the deductions on the ground that, the payments constituted dividends within the meaning of § 115 and § 316(a) of the respective Codes. The Tax Court, agreed with the Commissioner. It conceded that the bonds “satisfied all of the formal requirements to make the instruments effective as debt obligations,” and that the “record establishes they were treated as debt obligations with interest payments made when due and appropriate accruals to a sinking fund to provide for their retirement at maturity.” Nevertheless, purporting to look through form to substance, it held that the debenture holders had placed their money at the risk of the business, and therefore in effect were stockholders so that the payments to them were dividends, because (1) the bonds were held in approximate proportion to the shares of stock, (2) the proceeds of the debenture issue were used to purchase a fixed asset, 1. e., a majority of the stock of Cape Pond Ice Company, (3) the bonds were issued simultaneously with the call of the preferred stock for redemption and (4) the debt-to-equity ratio was disproportionately high, being 15 to 1. We do not agree with the Tax Court.
The debenture bonds certainly are evidences of debt in form as the Tax Court found. They are also clear evidence of debt in their substantive provisions as well, for by their terms they impose an unqualified obligation to pay interest quarterly on fixed dates at a fixed rate, they impose an unqualified obligation to pay a fixed principal amount on a day certain and within a reasonable time, and they confer upon their holders no voting rights or voice in the management of the obligor under any circumstances whatever. Neither is there any evidence, or indeed any suggestion, of some soto voce understanding that interest would be paid on the bonds only out of income or that the principal amount would not or would not be likely to be paid at maturity as in Brake & Electric Sales Corp. v. United States, 287 F.2d 426 (C.A. 1, 1961). Moreover, there is no evidence that the petitioner was in such a shaky financial condition or that its business prospects were so dark that in reason the parties to the transaction could not have expected the petitioner to meet its obligations on its bonds as they fell due. On the contrary, after a loss in round figures of $11,500 for the first year of its operations, the petitioner showed a profit before federal taxes of approximately $4,000 in 1940 and of approximately the same amount in 1941, a profit of approximately $18,000 in 1942, and in 1943, the year the bonds were issued, a profit of nearly $28,000.
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10544084-20184 | ROSS, Senior Circuit Judge.
Appellee William F. Hagerman brought this action against David C. Tjosvold and appellant Yukon Energy Corporation for breach of contract, alleging that defendants failed to honor a stock option agreement between the parties. The district court entered summary judgment on behalf of Hagerman and awarded him $290,-317 in damages. Yukon appeals. For the reasons set forth below, we affirm the judgment of the district court.
Background
Yukon manufactures furnaces for residential and commercial use. In 1983, Yukon purchased for $100,000 certain technology regarding the development of fuel efficient furnaces. Yukon and Hagerman subsequently negotiated an agreement for the funding of the technology. Pursuant to the agreement, which was drafted by Yukon’s attorney, Hagerman purchased the technology from Yukon for $150,000. Hagerman then licensed the technology back to Yukon in exchange for royalties, subject to a minimum and maximum annual payment. Under the agreement, Yukon was given the option to repurchase the technology from Hagerman within ten years for $175,000. Additionally, in the event of a public offering of Yukon stock within ten years of the agreement, Hager-man was given the option to purchase at book value shares of Yukon stock in an amount equal to 5% of the shares owned by Yukon’s president, David Tjosvold.
In October, 1984, Yukon exercised its option to repurchase the technology from Hagerman. On October 23, 1984, Tjosvold delivered to Hagerman a check for $175,-000, the repurchase price, and a check for $18,000 for one year’s royalties. On that same day, Hagerman gave Yukon written notice of his intent to exercise his stock option in the event of a public offering of Yukon stock.
In November, 1984, Yukon filed registration statements for a public offering of common stock with the Securities and Exchange Commission and the Minnesota Department of Commerce. Although the public offering was made in early 1985, Yukon never transferred shares to Hagerman. Hagerman brought this action seeking damages or specific performance of the parties’ 1983 agreement.
A hearing was held on Hagerman’s motion for summary judgment in April, 1986. Yukon opposed the motion by arguing that the parties had orally modified their agreement, eliminating Hagerman’s stock option. Yukon further argued that in accordance with the modification, Yukon’s tender of the two checks to Hagerman fulfilled all of Yukon’s obligations under the agreement. After the summary judgment hearing, the district court ordered the parties to submit supplemental briefs on the issue of damages. The district court subsequently entered judgment for Hagerman.
As to Yukon’s liability for breach of the stock option, the district court found that Yukon raised no genuine issue of material fact as to whether the parties orally modified the technology agreement. The district court found that Yukon’s actions subsequent to the alleged modification indicated that the agreement was not actually modified. The district court determined Hagerman’s damages by figuring the difference between the contract price of the stock, as the court determined was set forth in the technology agreement, and the fair market value as of the first day of the public offering, and awarded Hagerman $290,317.
Yukon filed a motion to alter or amend judgment, and a hearing was held. The district court denied the motion without an opinion. On appeal, Yukon argues that the district court erred in granting summary judgment because Yukon raised genuine fact issues as to whether it breached the stock option provision and as to the remedy to be awarded Hagerman.
Standard of Review
In reviewing a district court’s grant of summary judgment, this court is to apply the same standard that the district court was to have applied. Stark v. St. Cloud State Univ., 802 F.2d 1046, 1048 (8th Cir.1986). The Supreme Court recently stated that:
[A]t the summary judgment stage the judge’s function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial....
[Tjhere is no issue for trial unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986) (citations omitted.)
In determining whether summary judgment should lie, the district court is to view the evidence in the light most favorable to the nonmoving party and give to that party the benefit of all inferences which reasonably may be drawn. AgriStor Leading v. Farrow, 826 F.2d 732, 734 (8th Cir.1987). Breach of Contract
Yukon argues that it raised a genuine issue of material fact as to whether it breached the technology agreement, such that summary judgment should have been precluded. In particular, Yukon contends that the stock option was terminated by an accord and satisfaction when Hagerman accepted the two checks from Yukon in full satisfaction of Yukon’s obligations under the technology agreement. As evidence of the accord and satisfaction, Yukon presented Tjosvold’s deposition testimony in which he stated that Yukon repurchased the technology from Hagerman at Hagerman’s insistence. When Tjosvold gave Hagerman the two checks, Tjosvold told him “I understand that this ends our agreement, here is your money like you wanted, like you requested before. I suppose that’s it.” Hag-erman did not reply at the time, but negotiated the two checks. Yukon now argues that an accord and satisfaction was accomplished because Yukon made clear that the checks were in full settlement of all of Yukon’s obligations, and Hagerman accepted the checks without contradiction. Consequently, Yukon asserts, the stock option was terminated.
Yukon accurately states the Minnesota law of accord and satisfaction:
If there is an honest dispute between the parties, a tender with the explicit understanding of both parties that it is in full payment of all demands, and an acceptance by the creditor with the understanding that the tender is accepted in full payment results in accord and satisfaction. When a payment is made by cheek “which is offered in full satisfaction of the debt, retention and negotiation by the creditor, with knowledge of all the facts, constitutes an acceptance of the offer to settle the indebtedness * * * »
Acton Constr. Co., Inc. v. State, 363 N.W. 2d 130, 133-34 (Minn.App.1985) (quoting Butch Levy Plumbing & Heating, Inc. v. Sallblad, 267 Minn. 283, 290, 126 N.W.2d 380, 385 (1964) (emphasis in original) (citation omitted)).
The agreement constituting the accord and satisfaction need not be express, but may be “ ‘implied from circumstances which clearly and unequivocally indicate the intention of the parties.’ ” Id. at 133 (quoting Roaderick v. Lull Eng’g Co., Inc., 296 Minn. 385, 389, 208 N.W.2d 761, 764 (1973)). In the absence of proof of an express agreement, the court is to consider the conduct of the parties. Becker v. F & H Restaurant Group, Inc., 413 N.W.2d 202, 205 (Minn.App.1987). “The supreme court has not held that an accord and satisfaction has been reached in any case where mutual agreement was lacking.” Acton, supra, 363 N.W.2d at 133.
The district court determined, and we agree, that Yukon failed to raise a genuine issue of material fact as to whether the parties mutually agreed to terminate Hagerman’s stock option. In making its determination, the district court looked to the conduct of the parties and determined that, except for Yukon’s breach, the parties’ conduct indicated that there was not an oral modification of the contract or an accord and satisfaction. The district court found determinative certain statements made by Yukon in the prospectus and stock registration statements in which Yukon affirmed the validity of Hagerman’s option.
The prospectus prepared by Yukon’s attorneys and dated February 14, 1985, detailed the technology agreement between Yukon and Hagerman. The prospectus stated that Yukon had repurchased the technology and that Hagerman had informed Yukon of his intention to exercise his stock option. The prospectus continued: “Accordingly, the Company will issue up to 164,021 shares of its Common Stock to such individual at approximately $.23 per share upon receipt of payment therefor.” Hagerman’s stock option is mentioned four other times in the prospectus. Nowhere in the prospectus is there any mention that Yukon disputed Hagerman’s option or that Yukon had any defenses to the exercise of the option. The prospectus was incorporated into the registration statements filed with the Securities and Exchange Commission and the Minnesota Department of Commerce. Additionally, the parties’ technology agreement was listed as an exhibit to the registration statement, again without qualification and without repudiation of the validity of Hagerman’s stock option.
In order to explain the statements regarding Hagerman’s option, Yukon offered the affidavit of one of the attorneys who prepared the prospectus. The attorney stated that shortly before February 15, 1985 (the date of the final prospectus), Tjosvold told the attorney that he disputed the validity of Hagerman’s option because of certain conversations between Hager-man and Tjosvold. However, the prospectus was written as if no dispute existed because those preparing it thought that it would be “safest” to take a “worst case” position.
Yukon objects to the district court’s determination that Yukon was “estopped from denying the truth of its own statements” in the prospectus and to the district court’s statement that the prospectus statements “must be taken as true.” In making such determinations, the district court noted that both the Securities Act of 1933, see 15 U.S.C. §§ 77k, 77Z and 77x (1982), and the Minnesota Uniform Securities Act, see Minn.Stat.Ann. §§ 80A.17 and 80A.22-23 (West 1986 & Supp.1988), provide substantial penalties for the making of false statements in a prospectus which accompanies a registration statement. We agree with Yukon that the statements in the prospectus and registration statements are not conclusive admissions. See Enquip, Inc. v. Smith-McDonald Corp., 655 F.2d 115, 118 (7th Cir.1981) (pleadings from another case are admissible as admissions, although they are not conclusive); Brown & Root, Inc. v. American Home Assurance Co., 353 F.2d 113, 116 (5th Cir.1965) cert. denied, 384 U.S. 943, 86 S.Ct. 1465, 16 L.Ed.2d 541 (1966) (holding that “except for those specialized, rare assertions characterized as judicial admissions, a party is entitled to explain an admission and even to retract it.”) However, the statements may be considered as evidence of whether there was in fact an oral modification of the parties’ agreement or an accord and satisfaction.
Even considering the statements in Yukon’s prospectus to be evidentiary rather than conclusive admissions, we agree with the district court that Yukon failed to establish the existence of a genuine factual issue as to whether the parties mutually agreed to terminate Hagerman’s option. As noted previously, in the absence of an express agreement, a court is to look to the conduct of the parties. In this case, the evidence of the parties’ conduct following the alleged accord and satisfaction consisted of Hagerman’s attempt to exercise the option and Yukon’s preparation of the stock prospectus in which it unequivocally affirmed the validity of Hagerman’s stock option. Such conduct belies Tjosvold’s assertion of a mutual agreement. Yukon presents no other evidence of conduct on its own part or by Hagerman which indicates that the parties reached a mutual agreement to terminate the written stock option. For example, Yukon presents no evidence that when Hagerman gave written notice of his intent to exercise the stock option, Yukon gave written response that it no longer considered the option to be in effect. We find that Yukon failed to create a genuine issue of material fact as to whether there was an oral modification or an accord and satisfaction. Therefore, summary judgment was appropriate.
Yukon next argues that it raised a fact question as to whether Hagerman was es-topped from enforcing the stock provision by his own failure to perform an oral agreement between the parties. According to Yukon, at the time the technology agreement was entered, the parties also orally agreed that if Yukon ever had a public offering of stock of $5,000,000, Hagerman would fund it up to $2,000,000. Because Hagerman did not fund Yukon’s actual stock offering, Yukon contends that he is estopped by his own breach from enforcing the stock option.
In support of its argument, Yukon presented Tjosvold’s deposition testimony that Hagerman and he had the following conversation:
[Hagerman] said say you have a $5,000,-000 stock underwriting, how about if I put up two million of the $5,000,000 for the underwriting. I said, well, that sounds pretty good. He said, “Well, that’s what I can do. If you need up to $2,000,000 to make sure it gets done, I have got it.”
Again, because there is no express evidence of this agreement, we look to the conduct of the parties. Yukon presented no evidence that Yukon ever approached Hagerman about funding part of Yukon’s actual public offering. Additionally, as noted, the prospectus for Yukon’s stock unequivocally affirmed the validity of Hagerman’s option, without mentioning that Yukon disputed the option for any reason. Yukon failed to raise a genuine issue of material fact as to the question of estoppel, and therefore we affirm the order of the district court as to Yukon’s breach for failing to honor Hagerman’s stock option.
Remedy
As correctly stated by the district court, the appropriate measure of recovery to compensate Hagerman for Yukon’s breach would be to place Hagerman in the same position he would have occupied absent the breach. See Desnick v. Mast, 311 Minn. 356, 364, 249 N.W.2d 878, 883 (1976). The district court determined that this remedy should be damages, measured by the difference between the contract price of the stock which Hagerman should have received and its fair market value.
In figuring Hagerman’s damages, the district court found the contract price to be set out in the technology agreement, which gave Hagerman the “option to purchase shares of Yukon equal to 5% of the share [sic] owned by David C. Tjosvold, President, at book value as determined by the accounting firm of Peat, Marwick & Mitchell.” In the prospectus, Yukon stated that 5% of Tjosvold’s shares equalled 164,021 shares, and that Peat, Marwick & Mitchell had determined the book value as of the date Hagerman exercised his option to be approximately $.23 per share. See note 4, supra. Therefore, the district court figured the contract price to be 164,021 shares multiplied by $.23 per share, for a sum of $37,725.
In figuring the fair market value of the stock, the district court determined that the breach occurred on the first day Yukon stock was offered to the public, March 28, 1985. On that day, the market price for Yukon stock was $2.00 per share. Therefore, the fair market value of the 164,021 shares to be issued Hagerman was $328,-042. Calculating the fair market value less the contract price, the district court determined Hagerman’s damages to be $290,-317.
Yukon contends that summary judgment was improperly granted with regard to Hagerman’s remedy for two primary reasons. First, Yukon argues that specific performance rather than damages was the appropriate remedy in this case because Hagerman’s monetary damages were too speculative. Second, Yukon contends that even if damages were the preferred remedy, the amount of Hagerman’s damages should have been a jury question because of the many variables present in assessing the market value of the shares Hagerman was to have received. Central to both of these arguments is Yukon’s contention that Hagerman was to have received unregistered rather than registered shares of Yu kon stock. Yukon presented evidence that because of restrictions on transferability of unregistered shares, Hagerman's shares would have had a market value considerably less than the $2.00 per share awarded by the district court.
In support of its argument that Hager-man’s shares were to be unregistered, Yukon submitted the affidavit of John Elling-boe, one of the attorneys who helped prepare Yukon’s stock prospectus. Ellingboe stated that in his opinion, Hagerman was to receive unregistered stock under the technology agreement. Yukon also submitted the affidavits of two securities experts who stated that the value of the shares Hagerman was to receive should be subtantially discounted because they were unregistered.
However, a review of the record indicates that Yukon failed to raise the issue of whether Hagerman’s shares were to be registered until its motion to alter or amend judgment, made after the district court granted summary judgment for Hag-erman. Therefore, we consider whether the district court erred in granting Hager-man’s motion for summary judgment based on the record before the district court at the time it ruled on the summary judgment motion.
At no time prior to the district court’s grant of summary judgment did Yukon raise the issue that Hagerman’s damages should be discounted because his shares were to be unregistered. In fact, at the summary judgment hearing, instead of arguing that Hagerman’s shares were to be unregistered, Yukon’s attorney informed the district court to the contrary:
The Court: Were the shares under the agreement to have been lettered[ ] in any regard?
[Yukon’s attorney]: No, Your Honor. The Court: So, they would have been freely disposable at that time?
[Yukon’s attorney]: Yes, Your Honor.
Subsequent to the summary judgment hearing, the parties filed supplemental memoranda regarding the issue of damages at the court’s direction. Again, Yukon failed to contend that the shares were to be unregistered.
The district court issued its order granting summary judgment for Yukon on October 22, 1986. On October 31, 1986, Yukon filed its notice of motion to alter or amend judgment, in which it contended for the first time that Hagerman’s shares were to be unregistered. At this time Yukon also presented to the district court for the first time the Ellingboe affidavit and the two affidavits of the securities experts regarding the valuation of unregistered shares. The district court denied Yukon’s motion to alter or amend judgment.
Therefore, at the time it ruled on Hager-man’s motion for summary judgment, the district court had before it only evidence of the fair market value of the shares Hager-man was to receive had they been registered. Yukon had failed to raise a genuine fact issue that the shares were to be unregistered. Therefore, the district court properly granted summary judgment for Hagerman with damages based on the value of registered shares.
The next question that arises, then, is whether the district court erred in failing to grant Yukon’s motion to alter or amend judgment based on Yukon’s new argument that the shares were to be unregistered. A district court has broad discretion in determining whether to grant a motion to alter or amend judgment, and this court will not reverse absent a clear abuse of discretion by the district court. See Harris v. Arkansas Dept. of Human Serv., 771 F.2d 414, 416-17 (8th Cir.1985). We find no such abuse of discretion in this case.
As the Seventh Circuit recently stated:
“Motions for reconsideration serve a limited function: to correct manifest errors of law or fact or to present newly discovered evidence. Such motions cannot in any case be employed as a vehicle to introduce new evidence that could have been adduced during pendency of the summary judgment motion. The nonmovant has an affirmative duty to come forward to meet a properly supported motion for summary judg-ment_ Nor should a motion for reconsideration serve as the occasion to tender new legal theories for the first time.”
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1730494-6277 | SNEED, Circuit Judge:
James R. .Cato, a California state prisoner at the time of this suit, appeals the district court’s summary judgment in favor of Ruth Rushen, Director of California’s Department of Corrections, and fourteen other defendants employed at San Quentin state prison. Cato’s suit, brought under 42 U.S.C. § 1983, alleged that his placement in administrative segregation violated his procedural due process rights because it was based on uncorroborated hearsay statements of a confidential informant. We reverse and remand.
I.
FACTS AND PROCEEDINGS BELOW
On March 9, 1981, a confidential informant told Correctional Captain Arthur Calderon of a plan to take hostages to effect escape from the San Quentin state prison. Cato, Johnson, and five other inmates were implicated by the informant in the plot. The informant, who worked in the prison laboratory, said that Johnson asked him to make seven knives out of metal stock to be provided by appellant Cato, who worked in the industries area. The informant asserted that Johnson did not specifically tell him that Cato knew of the plot; Johnson, the informant asserted, merely identified Cato as the source of the metal stock. Cato and Johnson were immediately placed in administrative segregation.
At that point Cato was told of the pending investigation and certain polygraph tests were initiated. The confidential informant submitted to a polygraph test, which was inconclusive with respect to Cato’s involvement. Johnson, who denied any knowledge of the plan, in his polygraph test tested deceptive with respect to his denial of his involvement in the plot, and inconclusive with respect to his denial of knowledge of Cato’s involvement. Cato’s requests for a polygraph test were denied. His request for an investigative employee to assist him in defending the charges was similarly denied.
On April 3, 1981, Program Administrator Martin conducted the plaintiff’s disciplinary hearing. Cato was found guilty of an attempt to take hostages, and this finding was upheld on administrative appeal. Martinez, Assistant Director of Appeals Services, subsequently rescinded this disciplinary action and granted Cato a rehearing based on the failure to assign the plaintiff an investigative employee. On August 28, 1981, Cato’s disciplinary rehearing was held before Program Administrator O’Shaughnessy, Correctional Counselor Kernan, and Correctional Counselor Feh-renkamp. The plaintiff was once again found guilty.
The tide turned after Cato filed a petition for a writ of habeas corpus in state court. At that point it was stipulated that the disciplinary action would be vacated and that correctional officers could refile the charges if Cato were permitted to take a polygraph examination. Pursuant to the stipulation Cato submitted to a polygraph test, which supported his claim that he was not involved in the plot to take hostages. On the basis of the test results, Cato was released into the general population on February 23, 1982.
Cato brought this 42 U.S.C. § 1983 action, alleging a deprivation of liberty without procedural due process. On November 17, 1985, the defendants filed a motion for summary judgment, which was granted on February 4, 1986. The court ruled, inter alia, that the disciplinary committee’s finding that the plaintiff had violated a disciplinary rule was supported by a sufficient quantum of evidence. Excerpt of Record at 356. The plaintiff timely filed a notice of appeal.
II.
DISCUSSION
In Superintendent v. Hill, 472 U.S. 445, 105 S.Ct. 2768, 86 L.Ed.2d 356 (1985), the Supreme Court held that the findings of a prison disciplinary board that result in the loss of a protected liberty interest must be supported by “some evidence in the record.” Id. at 454, 105 S.Ct. at 2773. The defendants concede that the State of California has created a liberty interest, in not being subject to administrative segrega tion, of which Cato was deprived. See Tomsaint v. McCarthy, 801 F.2d 1080, 1098 (9th Cir.1986), cert. denied, — U.S. -, 107 S.Ct. 2462, 95 L.Ed.2d 871 (1987). The State, in depriving the plaintiff of that liberty interest, must do so on the basis of “some evidence in the record.” Otherwise procedural due process under the circumstances of this case is not satisfied. Hill, 472 U.S. at 455, 105 S.Ct. at 2774. Cato argues that the “some evidence” standard requires evidence possessing some indication of reliability, which he contends was not present in this case.
Before addressing this contention, we wish to point out that at oral argument, Cato’s counsel conceded that the initial confinement of a prisoner to administrative segregation need not meet the Hill standard. The reason is obvious. As the Court in Hill recognized, the prison atmosphere is highly charged, and prison officials must be able to act swiftly on the basis of little information to avert dangerous situations. Id. at 456, 105 S.Ct. at 2774. Thus, it is not unreasonable for prison administrators to confine inmates to greater security regions on the basis of a rumor pending an investigation into the accuracy of the rumor. However, after prison officials have had an opportunity to investigate the matter, they forthwith must conduct a disciplinary hearing and adjudicate the disciplinary charges against the inmate. It is the final determination of guilt that must be supported by “some evidence.” In this case the point at which “some evidence” must exist was August 28, 1981, the date of the final adjudication of Cato’s disciplinary charges. The issue now is whether the findings of the disciplinary board were supported by “some evidence.”
The Hill standard is minimally stringent. The Court stated that “the relevant question is whether there is any evidence in the record that could support the conclusion reached by the disciplinary board.” Id. at 455-56, 105 S.Ct. at 2774-75 (emphasis added). Although characterizing the evidence in Hill as meager, the Court found the record “not so devoid of evidence that the findings of the disciplinary board were without support or otherwise arbitrary.” Id. at 457, 105 S.Ct. at 2775. In examining the record, the court is not to make its own assessment of the credibility of witnesses or reweigh the evidence. Id. at 455, 105 S.Ct. at 2774.
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7655662-11230 | MEMORANDUM OPINION
MICHAEL, Senior District Judge.
On July 5, 1996, United States Magistrate Judge B. Waugh Crigler issued a Report and Recommendation in which he recommended this court grant in part and deny in part the motion for summary judgment filed by Defendants Kmart Corporation (“Kmart”), Hal Lewis, and Mark Kuhlman pursuant to Fed. R.Civ.P. 56. Plaintiff Paula Edna Johnson and defendants have filed objections to the Magistrate’s Report; therefore this court must undertake de novo review of the case. Orpiano v. Johnson, 687 F.2d 44, 48 (4th Cir.1982). For the reasons stated below, the court adopts the Magistrate’s Report insofar as it grants defendants’ motion for summary judgment on the issue of individual .liability, and overrules the Report insofar as it denies defendants’ motion for summary judgment on the issue of Kmart’s liability. Defendants are entitled to summary judgment on plaintiffs claims against Lewis, Kuhlman, and Kmart. Defendants’ requests for costs and attorneys’ fees is denied.
I.
The source of this litigation arose in April 1994, when Kmart initiated a new policy to eliminate “sweetheart schedules” — schedules which require no weekend work — in its stores. This policy required plaintiff (and all other employees, see Pl.’s Compl. at ¶ 3), who at the time held the position of Personnel and Training Manager at Kmart, to work one Sunday per month, whereas previously she was able never to work on Sundays. Because work on Sunday interfered with plaintiffs religious beliefs, she resigned from her position on November 5, 1994. Plaintiff told Kmart in her exit interview that she was “[fjorced to choose between church on Sunday and Kmart.” Lewis and Kuhlman, two Kmart managers, offered plaintiff an aeeom-modation — she could work either before or after church on Sundays, but plaintiff refused this offer. Plaintiff proposed a counter-offer; she requested a job in Kmart’s pharmacy which was closed Sundays. Kmart declined to give plaintiff this job because of costs it would have to incur in training plaintiff and paying plaintiff wages and benefits as a full-time employee in the pharmacy. Kmart preferred to hire two part-time employees, because it would be less costly to do so, and it would give Kmart more scheduling flexibility. On September 1, 1995, plaintiff filed a suit claiming that defendants had discriminated against her based on her religious beliefs in violation of Title VII, 42 U.S.C. § 2000e et seq. (“Title VII”). Defendants moved for summary judgment pursuant to Fed.R.Civ.P. 56(c). The Magistrate found that Defendants Lewis and Kuhlman could not be held individually liable under Title VII, and, accordingly, he granted defendants’ motion for summary judgment insofar as these defendants were concerned. However, relying on Benton v. Carded Graphics, Inc., 28 F.3d 1208, 1994 WL 249221 (4th Cir.1994) (per curiam) (unpublished opinion), the Magistrate concluded that summary judgment should not issue in favor of Kmart, reasoning that a finder of fact could conclude that Kmart had violated Title VII by failing to reasonably accommodate plaintiff’s religious beliefs. Defendants have objected to the Magistrate’s Report on two grounds: first, they contend that the accommodation offered plaintiff was sufficient as a matter of law, and no further accommodation was required; second, they maintain that no adverse employment decision was taken against plaintiff— she resigned of her own free will, defendants claim. Plaintiff objects to the Magistrate’s conclusion that the individual defendants in this case cannot be held individually hable under Title VII.
II.
Summary judgment is appropriate only when there are no genuine issues of material fact in dispute, and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Miller v. Leathers, 913 F.2d 1085, 1087 (4th Cir.1990) (en banc). The initial burden is on the moving party to demonstrate that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). Once the movant meets this burden, the nonmoving party must come forward with affidavits, depositions, or other admissible evidence, to .show that material facts remain in dispute. Catawba Indian Tribe v. South Carolina, 978 F.2d 1334, 1339 (4th Cir.1992). The facts, and the inferences therefrom, must be viewed in a light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Nguyen v. CNA Corp., 44 F.3d 234, 237 (4th Cir.1995). However, a “mere ... scintilla of evidence” will not defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the nonmóvant “fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial,” summary judgment must issue. Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552-53.
III.
Section 2000e-2(a) of Title VII prohibits covered employers from taking adverse employment decisions against employees based on their religious views. 42 U.S.C. § 2000e-2(a). Most courts of appeals dealing with claims of religious discrimination have adopted a burden-shifting scheme similar to that in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). First, the plaintiff must establish a prima facie case of discrimination by showing that (1) she has a bona fide religious belief conflicting with an employment requirement; (2) she has informed the employer of this belief; and (3) she suffered an adverse employment decision due to her failure to satisfy the conflicting employment requirement. See Cary v. Carmichael, 908 F.Supp. 1334, 1342-43 (E.D.Va.1995) (citing cases). After the employee has made out a prima facie case, an employer may avoid liability for making decisions that effectively discriminate on the basis of religion if the employer “demonstrates that he is unable to reasonably accommodate to an employee’s or prospective employee’s religious observance or practice without undue hardship on the conduct of the employer’s business.” 42 U.S.C. 2000e(j); Trans World Airlines, Inc. v. Hardison, 432 U.S. 63, 74, 97 S.Ct. 2264, 2271-72, 53 L.Ed.2d 113 (1977). In Hardison, the Supreme Court defined “undue hardship” to mean any accommodation that results in “more than a de minimus cost” to the employer. Id. at 84, 97 S.Ct. at 2277.
IV.
Defendants argue (1) that Kmart offered plaintiff a reasonable accommodation as a matter of law; or, alternatively, (2) that an accommodation would have imposed an undue hardship on Kmart as a matter of law. The validity of these arguments need not be addressed by the court. This is because plaintiffs case falters at a more fundamental stage: plaintiff has failed to produce any evidence that Kmart took any adverse employment action against her, an indispensable requirement under Title VII. See Cary, 908 F.Supp. at 1342-43. Plaintiff essentially concedes that the only possible discriminatory action taken against her relates to her resignation from Kmart. Hence, plaintiffs allegation is that she was constructively discharged.
To demonstrate constructive discharge, plaintiff must (1) show that defendants created intolerable working conditions; and (2) that they did so deliberately, in an effort to force plaintiff to leave their employ. Amirmokri v. Baltimore Gas & Elec. Co., 60 F.3d 1126, 1132 (4th Cir.1995) (quoting Martin v. Cavalier Hotel Corp., 48 F.3d 1343, 1354 (4th Cir.1995)).. “Intolerability is ‘assessed by the objective standard of whether a “reasonable person” in the employee’s position would have felt compelled to resign.’” EEOC v. Clay Printing Co., 955 F.2d 936, 944 (4th Cir.1992) (citations omitted). “Deliberateness exists only if the actions com plained of Vere intended by the employer as an effort to force the employee to quit.’ ” Id. (citations omitted). Fourth Circuit precedent “require[s] proof of the employer’s specific intent to force an employee to leave.” Bristow v. Daily Press, Inc., 770 F.2d 1251, 1255 (4th Cir.1985) (citations omitted). “Where ... all employees are treated identically, no particular employee can claim that difficult working conditions signify that employer’s intent to force that individual to resign.” Id. (citations omitted); Johnson v. Shalala, 991 F.2d 126, 131 (4th Cir.1993) (quoting Johnson v. Bunny Bread Co., 646 F.2d 1250, 1256 (8th Cir.1981) (stating that “fact that employees were treated identically rebuts any inference” of constructive discharge)).
Although the Fourth Circuit has recognized that this categorical rule might not work in situations where unequal treatment is required, or, in other words, where reasonable accommodation must be offered, see Shalala, 991 F.2d at 131-32, the Fourth Circuit has cautioned courts not to find constructive discharge in every instance where the employer has failed to reasonably accommodate the employee. Id. (stating that a failure to accommodate in violation of the Rehabilitation Act, 29 U.S.C. § 701 et seq. does not necessarily translate into constructive discharge). To permit an employee to quit and to claim constructive discharge immediately after an employer has violated an employment anti-discrimination law, the Fourth Circuit explained, would be to foreclose the possibility of mediation and resolution of the problem without resort to litigation; further, it would reduce the chance that the employment relationship could be salvaged. Id. Thus, the Fourth Circuit has held that while “complete failure to accommodate, in the face of repeated requests” might establish “deliberateness,” generally “plaintiff must present some evidence that the employer intentionally sought to drive her from her position.” Id. at 132.
Even assuming that working conditions for plaintiff were intolerable because her religious belief prohibited her from working on Sundays, plaintiff simply cannot show that Kmart deliberately adopted the requirement that plaintiff work one Sunday per month to induce her to quit her job. By plaintiffs own account, all employees were subject to this requirement. Moreover, defendants attempted to accommodate plaintiffs religious beliefs — they offered her the opportunity to attend services on Sundays so long as she worked before or after church. It may very well be that this accommodation was insufficient under Title VII, see EEOC v. Ithaca Indus., Inc., 849 F.2d 116 (4th Cir.1988), but this attempted “partial or imperfect accommodation,” Shalala, 991 F.2d at 132, constitutes evidence that defendants had no wish to see plaintiff leave. Meanwhile, aside from assertions that she was “forced” to leave, plaintiff has produced not an iota of evidence from which a reasonable fact-finder could infer that defendants wanted plaintiff to quit her job. Because plaintiff cannot show constructive discharge and, consequently, cannot establish a prima facie case of religious discrimination under Title VII, Defendants Kmart, Lewis, and Kuhlman are entitled to summary judgment under Fed.R.Civ.P. 56(c).
V.
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9319613-26821 | KEARSE, Circuit Judge.
Plaintiff Ronald E. Veino, Sr., who was found by the Social Security Administration (“SSA”) to have a disability in 1973 that continued to exist in 1982, entitling him to Social Security Disability Insurance (“SSDI”), appeals from a judgment of the United States District Court for the District of Vermont, Jerome J. Niedermeier, Magistrate Judge, dismissing his complaint alleging that defendant Commissioner of Social Security (the “Commissioner”) improperly terminated his benefits in January 1998 without proving that his condition had so improved that he was no longer disabled. The magistrate judge, before whom the parties had consented to proceed for all purposes, granted summary judgment in favor of the Commissioner, ruling that there was substantial evidence to support the Commissioner’s findings that Veino’s condition had improved, that Veino was now capable of performing a number of jobs in the national economy, and that he was therefore no longer disabled within the meaning of the Social Security Act, 42 U.S.C. §§ 401-432 (1994 & Supp. V 1999) (the “Act”). Veino challenges that ruling on appeal, contending principally that the Commissioner failed to present substantial evidence that his medical condition had improved since 1982 because she failed to produce the medical evidence as to his condition in 1982, when the SSA last found him to be disabled. For the reasons that follow, we agree, and we vacate and remand for further proceedings.
I. BACKGROUND
Veino first qualified for SSDI benefits in 1973, following his service in the Vietnam War. He suffered from a combination of post traumatic stress disorder, anxiety, and substance abuse disorder. In 1982, the SSA conducted a continuing-disability review and found that he continued to be disabled. He has not engaged in any substantial gainful activity since 1973.
A. The Termination of Veino’s Benefits
In 1996, Congress amended the Act to preclude a finding of disability, and an entitlement to benefits, “if alcoholism or drug addiction would (but for this subpara-graph) be a contributing factor material to the Commissioner’s determination that the individual is disabled.” 42 U.S.C. § 423(d)(2)(C). In 1997, the SSA commenced another continuing-disability review with respect to Veino. In connection with that review, Veino completed a questionnaire and stated, inter alia, that his condition had not changed, that he did not feel that he was able to work, that he performed no household chores and had no social contacts, that he was being treated for nerves and combat fatigue, and that his doctor had not told him he was able to work.
In a letter dated November 17,1997, the SSA informed Veino that, “[ajfter reviewing all of the information carefully, we’ve decided that your health has improved since we last reviewed your case,” and that his benefits would therefore cease. (SSA Letter to Veino dated November 17, 1997 (“SSA November 1997 Letter” or “Letter”), at 1.) The Letter stated, in part, as follows:
HOW WE MADE THE DECISION
The following reports were used at the time of our original decision to determine that you were disabled:
Steven Goldstein, Ph.D. report of 6/72
University Associates in Neurology, Inc. records of 9/72
VA records of 12/72 to 5/79
University Associates in Psychiatry, Inc. report of 1/75 to 1/81
Franklin Ryan, Ph.D. report of 10/77
Wm. Floyd, Jr. M.D. report of 11/77
Betty Jo Morwood, M.D. report of 9/82
The medical information showed that you were having emotional problems that made it difficult for you to complete a normal workweek.
We are reviewing your case now because that [sic] it was possible your condition would improve.
We used the following reports to decide if you continue to be disabled under our rules:
VA Hospital records of 2/97 to 4/97
Paul Candido, Ph.D. consultative exam dated 9/97
You said that you are still disabled because that [sic] you have problems with your nerves and you have combat fatigue. The new evidence shows that your condition has improved since you were last evaluated. You are able to remember, understand and carry out normal daily activities. You can do a wide range of non stressful work.
(SSA November 1997 Letter at 1.) The SSA concluded: “You are no longer disabled as of Nov. 30, 1997. You will get checks for that month and the next two months. Your last check will be for January 1998.” (Id. at 2.) The Letter informed Veino that he had the right to seek reconsideration of that determination from a disability hearing officer.
B. The Decisions of the DHO and the ALJ
Veino sought reconsideration. The disability hearing officer (“DHO”), in a decision dated April 28, 1998, concluded that Veino was not disabled (“DHO Decision”). The DHO stated that the issues to be determined were whether Veino was disabled and “whether DAA [ie., drug or alcohol addiction] is a contributing factor material to the finding of disability.” (DHO Decision at 1.) The DHO made the following findings:
The hearing officer has reviewed the medical, vocational and other information in the claimant’s claims folder pertaining to the issue(s) described above. The hearing officer has also reviewed the testimony and any additional documentary evidence submitted at the disability hearing. After careful consideration of all evidence, the hearing officer makes the following findings:
Claimant was found eligible for continued benefits effective 05/15/73 in the comparison point decision[ ](CPD) of 10/05/92 [sic] due to an anxiety disorder, paranoid personality and alcoholism of a severity to meet Listing 12.04A7bB. His benefits were ceased effective 11/97. It was determined that his condition had improved since the comparison point decision! ](CPD) of 10/05/82 and that he could perform simple low stress work.
At the CPD, evidence shows the claimant was very tense and suspicious. He was agitated with an enormous amount of intense rage and anger just below the surface. His expressed attitude was paranoid in nature, feeling he was being “ripped off’ by the world. He was not psychotic and had no delusions or hallucinations. He complained of “combat fatigue” from his tour in Vietnam.! ] He said he shook a lot in that he trembled constantly. He was ob served to have hand tremors at rest on clinical psychological exam. He was oriented to time, place and person. Memory and concentration were intact. He was able to repeat five digits forward and three in reverse. He gave up on serial 7’s. He was depressed with insomnia, suicidal and homicidal ideation but no plan. He had migraine headaches occasionally, with some lasting 18 days and not helped by pain medication. He was a loner, would not go into a public place by himself and had little contact with the community. He did have a few friends and one would come to his home to visit. He did no shopping and his wife managed their money. He rarely did household chores. His days were spent mainly watching TV. He did leave the home for his doctor appointments and to cash his check. He had a history of abusing alcohol. On 9/17/92 he denied abuse of alcohol to his treating psychiatrist and admitted use of eight cans of beer a day to a consulting psychologist he saw once....
Currently, claimant continues to complain of combat fatigue with the shakes, not associating with people and feeling uncomfortable leaving the home. He says his condition has essentially not changed in the past 20 years. He has not been in therapy or been on medication for five to six years. There are no symptoms or signs of anxiety on psychological exams. No shaking or tremors are observed. Claimant does report symptoms of agitation and insomnia at night. He will wake up in a cold sweat because of nightmares and will pace the floor. He has suicidal thoughts recently but no plan. He has never attempted suicide. There continues to be no thought disorder, delusions or hallucinations. He is alert and oriented to time, place and person. Concentration and memory are intact. He is able to repeat six digits forward and four in reverse. He was unable to do serial 7’s on minimal effort. Claimant is alcohol and marijuana dependent. He smokes an ounce of marijuana a month and drinks up to a 12 pack of beer a day.
.... He seldom leaves the house except for appointments. Once in a while friends will come visit him. He does not drive. He has lost his license due to DWI’s....
An analysis of the total evidence establishes that when the claimant is not abusing alcohol and drugs, he would be capable of understanding, remembering and carrying out simple job tasks where contact with others would be minimal in a routine work situation on a sustained basis. He would be able to meet all the basic mental demands necessary to do low stress unskilled work. When abusing drugs and alcohol he is unable to attend work and perform the tasks necessary for simple unskilled work on a sustained basis. Thus he would not be able to meet all the basic mental demands for even unskilled work....
(DHO Decision at 3-4.)
The DHO concluded that “there [had] been medical improvement of [Veino’s] impairment(s) since the comparison point decision,” stating that
[a]t the comparison point decision[ ](CPD) claimant had severe anxiety such that he trembled constantly and had visible hand tremors. He was very tense, suspicious, and agitated. He was fully oriented. He could remember five digits forward and three in reverse. He was a loner but did have some friends who visited him. He rarely did any household chores. He drank eight cans of beer a day. Currently, claimant reports the shakes and is agitated at night. He exhibits no symptoms or signs of anxiety on exam. There is no shaking or tremors. He is still fully oriented. He can remember six digits forward and four in reverse. He continues to be a loner and friends still visit him occasionally. He does most of the household chores. He drinks up to a twelve pack of beer a day. Since the symptoms, signs and lab findings show a decrease in the medical severity of the impairment, it is concluded that the claimant’s impairment has improved since the CPD.
(Id. at 6.) Finding that “[a]t the time of the comparison point decision[ ](CPD), [Vei-no’s] impairment met Listing 12.04,” see 20 C.F.R. Pt. 404, Subpt. P, App. 1, and that his “impairment no longer meets that Listing,” the DHO “concluded that [Veino’s] medical improvement is related to the ability to work.” (DHO Decision at 7.)
The DHO also found that Veino’s “alcohol and drug condition results in restrictions in concentration, persistence and pace,” and that “[s]inee these are work related activities, it is concluded that the claimant has a severe impairment.” (Id.) The DHO concluded that
the jobs [Veino] could do are severely reduced by his drug and alcohol abuse. He is unable to attend and concentrate and complete a normal work day or workweek on a sustained basis. Thus he would not be able to meet all the basic mental demands necessary to do even unskilled work.
Claimant’s substance abuse is a contributing factor material to the determination of disability. In the absence of substance abuse, he would be capable of performing a wide variety of unskilled work at all exertional levels.
The claimant is found to be: NOT DISABLED!.]
(Id. at 10-11.)
Veino sought review of the DHO’s Decision; accordingly, a hearing was held before an administrative law judge (“ALJ”) in December 1998. Veino, represented by counsel, testified and called his wife as a witness. The ALJ marked as exhibits various documents, including reports from an SSA consultative psychologist and two SSA nonexamining reviewers, and called a vocational expert to testify as to the existence of jobs in the regional and national economy that a person with Veino’s characteristics could perform. The ALJ also stated, “[w]e also have the records upon which the determination of disability was made at a prior time” (Hearing Transcript, December 3, 1998 (“Tr.”), at 2), but the transcript does not indicate that those pri- or records were marked as exhibits.
Following the hearing, Veino submitted evidence from his physician, Dr. John Frederick King, M.D. According to Dr. King, who had been Veino’s treating psychiatrist since approximately November 1997, Veino suffered from post traumatic stress disorder, anxiety disorder, and repeated intrusive recollections of past traumatic experiences; in addition, Veino probably had a paranoid personality and experienced panic. In response to interrogatories, Dr. King opined, inter alia, that Veino’s mental condition would interfere with “his ability to carry on normal daily aetivities[,] ... his ability to interact appropriately with other individuals (such as family members, friends, neighbors) or to interact and cooperate with others (such as supervisors at work, co-workers, and members of the public)[, and] ... his ability to concentrate or maintain a persistent pace in completing tasks either at work or in his personal life.” (Answers to Interrogatories 6-8.) Dr. King concluded that “Veino’s mental disorders and their symptoms as described above exist independent of any use of alcohol or illegal drugs” (Answer to Interrogatory 10), and that if “Vei-no were to entirely stop using alcohol or illegal drugs,” it was “likely that his mental disorders would persist substantially as described above” (Answer to Interrogatory 11).
In a decision dated May 28, 1999, the ALJ determined that Veino’s medical condition had so improved that he was no longer disabled (“ALJ Decision”).
Medical improvement is defined as any decrease in the medical severity of the impairment which was present at the time of the most recent favorable medical decision that the individual was disabled or continued to be disabled. The medical improvement must be related to an ability to work.
At the time of the comparison decision dated October 5,1982 the claimant trembled and had migraines. He did not like being around people and had intense anger. He heard voices and was homicidal. He was oriented and his memory was intact. He was withdrawn, tense and suspicious.
(ALJ Decision at 2, 3.) The ALJ found, however, that those conditions had changed:
The evidence reveals that the claimant did not require treatment or medication for six years. During a consultative examination his attention and concentration were adequate. He did not demonstrate any unusual motor behavior and had no tremors or shaking. There were no symptoms of post traumatic stress disorder, no symptoms of apprehension or anxiety.... The medical evidence shows clear improvement in the claimant’s condition. In examinations conducted by Dr. King the claimant was focused on retaining his Social Security benefits. Dr. King described the claimant as stable on Effexor and Inderol. He is able to function on a daily basis. His condition clearly improved.
(Id. at 5.)
The ALJ discounted the other opinions proffered by Dr. King, noting that he had been Veino’s treating physician only since November 1997, that his opinions appeared to be based only on statements by Veino rather than on any clinical evidence or any “detailed longitudinal picture of [Veino’s] mental condition” (id. at 4), and that Dr. King’s views were in conflict with those of the SSA’s consultative expert. The ALJ found that the statements of Veino himself were “not entirely credible” because he was focused on the loss of his disability benefits. (Id. at 5.)
The ALJ found that Veino “continue[d] to have some restrictions and he would be limited from working a jobs [sic ] involving too much interpersonal contact with the general public, co-workers and supervisors.” (Id.; see also id. at 7 (“Mr. Veino would be limited to only minimal contact with the general public, co-workers and supervisors.”)) The ALJ credited, however, the testimony of the vocational expert, who had “assum[ed] Mr. Veino’s specific work restrictions” (id.) and had opined that Veino could perform the job of surveillance systems monitor, of which there were 60 in Vermont and New Hampshire, and 8,000 nationally; the job of companion, of which there were 576 in Vermont and New Hampshire, and 80,000 nationally; and the job of night watchman, of which there were 1,620 in Vermont and New Hampshire, and 800,000 nationally.
The ALJ concluded that Veino’s medical condition had improved and that Veino could perform the above jobs, although her findings as to the date on which Veino’s disability ceased seem inconsistent. The ALJ’s findings include the following:
9. The claimant’s ability to perform a full range of medium work is reduced by his inability to have more than limited interactions with the general public, coworkers and supervisors....
14. Beginning November 30, 1997 the claimant had the residual functional capacity to perform a full range of medium work, which was reduced by his inability to have more than limited interactions with the general public, co-workers and supervisors....
15. For the period November 30, 1997 to May, 1998 the claimant abused alcohol and marijuana. While drinking he had decreased concentration, persistence and pace, which would have compromised any job base. Therefore, alcohol was a factor material to disability. Absent the alcohol and marijuana abuse his limitations would be consistent with those outlined above, as such the medical evidence establishes that the claimant would not be disabled if he stopped using alcohol and drugs. Therefore in accordance with Section 105 of Pub.L. 104-121, enacted on March 29, 1996, the claimant was ineligible for disability benefits under Title II of the Act.
16. Beginning May, 1998 the claimant’s alcohol and drug addiction was in remission and he was able to perform a range of work as outlined above.... [Tjhere are a significant number of jobs in the national economy which the claimant could perform. Therefore, the claimant is no longer disabled.
17. Alcohol abuse was a contributing factor material to the claimant’s disability from November 30, 1997 to May 1, 1998 and he was therefore ineligible for disability benefits.
17. [sic ] Beginning May 1, 1998 [sic] the claimant[ ]’s disability ceased.
DECISION
It is the decision of the Administrative Law Judge that the claimant’s entitle- - ment to ... Disability Insurance Benefits ... ended effective January 31, 1998 the end of the second calendar month after the month in which the disability ceased.
(ALJ Decision at 9-11.)
The SSA Appeals Council denied Veino’s request for further review, and the ALJ’s decision became the final decision of the Commissioner.
C. The Present Action
Veino commenced the present action, seeking review of the Commissioner’s decision. The Commissioner answered, and both sides moved for summary judgment.
The district court noted that, in order to terminate a recipient’s disability benefits, the Commissioner is required to show that there has been a medical improvement in the recipient’s condition relevant to his ability to work, that the recipient’s current condition does not meet the statutory definition of disability, and that the claimant is currently able to engage in substantial gainful activity. The court found that medical reports in the record provided substantial evidence to support the Commissioner’s findings concerning Veino’s current condition and that the Commissioner had thus adequately shown an improvement in his medical condition. The court granted the Commissioner’s motion, denied Veino’s motion, and entered judgment in favor of the Commissioner.
This appeal followed.
II. DISCUSSION
On appeal,'Veino argues principally that the Commissioner failed to prove that his medical condition had improved since 1982 because the record contains no medical evidence as to his condition in 1982. We agree and remand for supplementation of the record and for further consideration.
A. The Challenge to the Record, as to Medical Improvement
The district court’s review of the Commissioner’s decision regarding disability is limited to a determination of whether the decision is supported by “substantial evidence” in the record as a whole. See 42 U.S.C. § 405(g); Mathews v. Eldridge, 424 U.S. 319, 339 n. 21, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976); Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28 L.Ed.2d 842 (1971). “Substantial evidence” means “ ‘such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ ” Id. (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938)). Our statutory mandate as an appellate court is the same as that of the district court. See, e.g., Valente v. Secretary of Health and Human Services, 733 F.2d 1037, 1041 (2d Cir.1984). We conduct a plenary review of the administrative record to determine whether, considering the record as a whole, the Commissioner’s decision is supported by substantial evidence. See, e.g., Shaw v. Chater, 221 F.3d 126, 131 (2d Cir.2000). Where the Commissioner’s decision rests on adequate findings supported by evidence having rational probative force, we will not substitute our judgment for that of the Commissioner.
The Act provides that an individual may be found disabled, and hence entitled to disability benefits, if he has an impairment of such severity as to cause him, for at least 12 months, to be unable to engage in any substantial gainful activity. See 42 U.S.C. § 423(d). After an individual has been found entitled to such benefits, his entitlement is to be periodically reviewed, see 42 U.S.C. § 421(i), and his benefits may be terminated if there is substantial evidence that the impairment has improved to such an extent that he is now able to work.
A recipient of benefits ... based on the disability of any individual may be determined not to be entitled to such benefits on the basis of a finding that the physical or mental impairment on the basis of which such benefits are provided has ceased ... only if such finding is supported by—
(l) substantial evidence which demonstrates that—
(A) there has been any medical improvement in the individual’s impairment or combination of impairments (other than medical improvement which is not related to the individual’s ability to work), and
(B) the individual is now able to engage in substantial gainful activity....
42 U.S.C. § 423(f)(1). SSA Regulations provide that a
[m]edical improvement is any decrease in the medical severity of your impairment(s) which was present at the time of the most recent favorable medical decision that you were disabled or continued to be disabled. A determination that there has been a decrease in medical severity must be based on changes (improvement) in the symptoms, signs and/or laboratory findings associated with your impairment(s)....
20 C.F.R. § 404.1594(b)(1). Thus, in order to “determin[e] whether medical improvement has occurred,” the SSA must compare “the current medical severity of th[e] impairment[ ] ... to the medical severity of that impairment! ] at th[e] time” of the most recent favorable medical decision. Id. § 404.1594(b)(7).
In the present case, the ALJ received substantial medical evidence as to the current state of Veino’s impairments, including current reports from Veino’s treating psychiatrist, from one examining consultant, and from two nonexamining reviewers; and the Commissioner has submitted to this Court a lengthy administrative appendix of supporting documents comprising principally the SSA November 1997 Letter, the DHO’s 1998 decision, the transcript of, the December 1998 hearing before the ALJ, and a score of exhibits received by the ALJ with respect to the review that was commenced in 1997 and Veino’s condition in 1998.
However, the record submitted by the Commissioner contains none of the medical evidence with respect to Veino’s impairments as they existed when he was found still to be disabled in 1982. Despite the statement by the ALJ at the start of the 1998 hearing, that she “ha[d] the records upon which the determination of disability was made at a prior time” (Tr. 2), she did not mark as a hearing exhibit, or cite in her decision, any medical record that existed at the time of the 1982 decision, and none of those early records are before us. In the absence of the early medical records, the administrative record lacks a foundation for a reasoned assessment of whether there is substantial evidence to support the Commissioner’s finding that Veino’s 1997-1998 condition represents an “improvement.”
The Commissioner argues, relying on 20 C.F.R. § 404.1594(c)(3)(i), that the simple facts that Veino once qualified for a particular impairment in the Listing of Impairments in 20 C.F.R. Pt. 404, Subpt. P, App. 1, and that he is now found not to qualify for that Listing, proves his medical improvement. We disagree. Section 404.1594(c)(3)(i) itself, which follows a section headed “Determining if medical improvement is related to ability to work,” id. § 404.1594(c)(2), presupposes medical improvement. It addresses the proper assessment of a recipient’s residual functional capacity and the relationship to a given impairment listing “[i]f medical improvement has occurred.” 20 C.F.R. § 404.1594(c)(3)(i) (emphasis added). This section does not provide a basis for finding improvement.
The Commissioner also argues that the record before us is adequate because the 1982 medical evidence was summarized in the Hearing Officer’s decision. (See, e.g., Commissioner’s brief on appeal at 16 (“The ALJ ... had before her ... a detailed description of Mr. Veino’s mental disorder in 1982.”).) And in a May 13, 2002 letter submitted to this Court in response to questioning at oral argument of this appeal, the Commissioner relies on the decisions of the DHO and the ALJ as evidence of Veino’s medical condition in 1982. The difficulty with the Commissioner’s position is that these decisions are not evidence. The ALJ did not cite or include in the record the 1982 medical evidence itself but only the DHO’s summary; and without any of the 1982 medical evidence in the record before us, this Court cannot make a reasoned determination as to whether the DHO’s summary is accurate or adequate. Accordingly, the matter will be remanded to the Commissioner for supplementation of the record and for further consideration.
B. Other Arguments
Veino also contends that the decision terminating his benefits should be overturned because (1) the Commissioner failed to give proper weight to the opinions of Dr. King, his treating physician, and (2) the vocational evidence did not establish that he was capable of substantial gainful activity. Although, in light of our remand for supplementation of the record and reconsideration, we need not resolve these issues now, we note that the second of them is somewhat more persuasive than the first.
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366104-27117 | THORNBERRY, Senior Circuit Judge:
Plaintiff-appellant Henry Clay brought suit against three insurance companies and a credit reporting agency alleging defamation and violations of the Fair Credit Reporting Act (FCRA). 15 U.S.C. § 1681 et seq. The district court granted summary judgment in favor of all the defendants but did not state its reasons for doing so. Because we find that all of Clay’s claims are either groundless or barred by the applicable statutes of limitation, we affirm.
FACTS
During 1977 Clay, an attorney, applied for and received disability insurance from each of the defendant appellee insurance companies, Paul Revere Life Insurance Company (Paul Revere), National Union Fire Insurance Company (National Union), and Nationwide Mutual Insurance Company (Nationwide). Later in that year Clay discovered that he had cataracts and filed claims for benefits with the insurance companies. Subsequently, the insurance companies requested that defendant-appellee Equifax, a credit reporting agency, investigate Clay and his claims for disability benefits. In March 1978 Equifax submitted investigative reports to National Union and Nationwide. In July 1978 Equifax submitted an additional report to National Un ion. Finally, in February 1979 Equifax submitted a report to Paul Revere. The reports stated inter alia that Clay was a suspected drug dealer and homosexual. They stated also that Clay was a “lazy attorney” who had wrongfully withheld his clients’ money.
Clay testified in deposition and by a subsequent affidavit that sometime during 1978 he telephoned Equifax and asked the receptionist if Equifax was investigating him. Although Clay’s deposition and affidavit are somewhat contradictory on this point, it appears that the receptionist told Clay that she did not know whether Equifax was investigating him, but would have someone at Equifax return his call. Equifax never returned the call. In 1979, however, Clay testified by deposition in a state court action that he knew that Nationwide had hired Equifax to investigate him.
On May 15, 1981, pursuant to Nationwide’s request Equifax mailed to Nationwide copies of reports that it had submitted previously to Nationwide and the other insurance companies.
On February 24, 1983, Clay brought this action in the Circuit Court of Mobile County, Alabama, alleging defamation and violations of the FCRA. On motion of the defendants the case was removed to federal district court. On March 13, 1984, the district court granted summary judgment in favor of all the defendants, but gave no statement of reasons nor did it state the material undisputed issues of fact on which the decision was based or the conclusions of law that were applied. On appeal Clay contends (1) that genuine issues of material fact remain, and therefore summary judgment was inappropriate, and (2) that we should require the district court to state specifically its reasons for granting summary judgment. Because upon examining the record and considering the appellate briefs we find that all of Clay’s claims are either groundless or barred by the applicable statutes of limitation, we affirm the district court’s order awarding summary judgment.
I. Opaque and Unilluminating Summary Judgment Order
In granting the defendants’ motion for summary judgment the district court stated no reasons, did not identify material disputed facts, and gave no hint of its conclusions of law. The court’s order merely recites that no genuine issue of material fact remains, and we can find in the record no other statement, however informal, of the court’s rationale. Clay contends that we should remand the case for the district court to issue findings of fact and conclusions of law in support of its judgment.
The Federal Rules of Civil Procedure do not require a district court acting on a motion for summary judgment to identify the materials it has considered in rendering its decision, its reasons for decision, the material and undisputed matters of fact on which the decision turns (if applicable), or the principles of law relied upon (if applicable). Consequently, in the hands of an appellate court the order appealed from may be an enigma.
Frequently the material that a district court has considered is not identified unless the court’s order identifies it. The district court may consider pleadings, depositions, answers to interrogatories, admissions on file, affidavits, oral testimony, matters subject to judicial notice, stipulations and concessions, and other materials admissible in evidence or otherwise usable at trial. 6 Moore Federal Practice § 56.-15[7]. The court may draw legal presumptions as well. Id. Moreover, some district courts provide by local rule for factual statements by moving counsel, not sworn to, that are accepted if not controverted.
Review may be clouded by uncertainty concerning depositions. Procedures vary as to whether depositions must be filed with the clerk, and when, and whether they must be formally tendered to the court for its consideration. Similar questions may exist for transcripts of hearings. Consequently the appellate court may not know, and at times counsel are uncertain or in disagreement, as to what the court considered. Not infrequently briefs refer to matter that cannot be found in the record.
Secondly, both counsel and appellate court may be in the dark as to the district court’s reason for decision. Reasons may be predicated on fact or law or both. The phrase “findings of fact” is often loosely used in connection with Rule 56. It is, however, a phrase singularly inappropriate because a premise of Rule 56 is that there is no genuine issue as to material facts, and the court is not required to find the facts specially and state its conclusions of law thereon as required in Rule 52(a). What is important in the summary judgment context is that the court, where relevant, identifies the undisputed facts on which its decision is based and identifies its conclusions of law as well. This can be done informally and even dictated to the court reporter.
When reviewing an unrevealing order granting or denying summary judgment, the appellate court is faced with several possibilities. The district court may have concluded that there is no genuine issue as to any material fact. Or it may have found that there is a genuine issue of fact but that the fact in question is not material. Under either of these alternatives, with fact issues out of the way, the court may have decided the case on a substantive legal ground. But, on the other hand, it may have concluded that there are material issues of fact and thus it may never have reached the substantive legal question at all. In some cases there will be more than one legal issue, with one a prerequisite for consideration of the other; for instance, there may be a choice of law issue and the court may have been required to choose the governing law and then apply the governing law. The reviewing court may be at a loss to know whether the district court based its decision on choice of law or on application of the law chosen.
There are numerous possible permutations. The appellate court, searching the summary judgment record and at times unsure of what that record is, must identify every possible ground that will support affirmance of the decision below and consider it, and if it rejects one ground then it must move to the next. Aerolineas Dominicanas S.A. v. Brown Aviation Services, Inc., 598 F.2d 416 (5th Cir.1979) demonstrates the confusion that can arise.
At the pretrial conference, Aerolineas’s counsel conceded that the damages requested in Counts II and III were excessive. Apparently for this reason alone, the district court granted summary judgment for the defendants on those two counts. This was error. Although Aerolineas’s counsel was lamentably confused about the amount of damages his client had sustained, he maintained throughout that Aerolineas had indeed been wronged and damaged. Under these circumstances the district court should at least have allowed Aerolíneas to amend its complaint.
On the record before us there are no other justifications for summary judgment. To judge from the depositions and documents in the record, there is a genuine factual dispute about the truth of Aerolineas’s assertions. The appellees argue that Aerolineas’s claim is barred by the judgment rendered in another litigation, in Florida state court; but the district court seemed not to rest its grant of summary judgment on this ground, and the record does not disclose enough about the nature of the Florida proceeding to permit us to decide the question. On remand, the district court will have the full record before it and will be able to obtain other documentary evidence. It may or may not find sufficient reasons for granting summary judgment again.
Id. at 417 (footnotes omitted).
In the final analysis appellate review of what the district court did is largely an error-correcting function. Ordinarily the appellate court is given the tools to determine if the trial court acted correctly. The unexplained summary judgment order not only denies to the appellate court the tools of review but conceals what the court did and why and leaves the appeals court, like the proverbial blind hog, scrambling through the record in search of an acorn. This is antithetical to proper performance of the review function.
In a number of cases the Fifth Circuit has urged the district court to state the reason for its decision and the underlying predicate. United States v. Hardeman, 320 F.2d 115 (5th Cir.1963); Melancon v. Insurance Company of North America, 482 F.2d 1057 (5th Cir.1973) (“findings of fact” and “conclusions of law” are desirable and minimize duplication of judicial effort; material issue of fact identified, judgment reversed and remanded for trial on the merits); Huckeby v. Frozen Food Express, 555 F.2d 542, 545 (5th Cir.1977) (order did not reveal basis for district court’s decision; court concluded that case was dismissed for want of jurisdiction; “a concise statement by the district court of the grounds for its decision is desirable”); Erco Industries, Ltd. v. Seaboard Coastline Railroad Co., 644 F.2d 424 (5th Cir.1981) (recognizes that Rule 52(a) requirements of findings and conclusions are not applicable but reiterates that “the parties are entitled to know the reasons upon which the summary judgment was based in order to facilitate appellate review”); Farbwerke Hoeschst A. G. v. M/V “Don Nicky, ” 589 F.2d 795, 798 (5th Cir.1979) (“If there was some rationalization or explanation which would have eliminated the apparent conflict in the affidavits here, an outline of the court’s underlying reasoning could have prevented the necessity for reversal”); Cooper v. General Motors Corp., 651 F.2d 249, 250 n. 1 (5th Cir.1981) (“We note once again that it is difficult to fathom unspoken reasons, and that district courts would render better service to the litigants and facilitate the review of their actions if they would at least dictate into the record the reasons for their rendition of a summary judgment.”); Jot-Em-Down Store, Inc. v. Cotter & Co., 651 F.2d 245, 247 (5th Cir.1981) (“While the Federal Rules of Civil Procedure do not require a statement of reasons by a trial judge granting ... a summary judgment ... we have often stated that a reasoned statement is helpful not only to counsel but also to the appellate court [citations omitted]. In all but the simplest case such a statement usually proves not only helpful, but essential.”)
The Supreme Court has vacated and remanded where the district court’s order was “opaque and unilluminating as to either the relevant facts or the law.” Carter v. Stanton, 405 U.S. 669, 672, 92 S.Ct. 1232, 1234, 31 L.Ed.2d 569 (1972).
The Fifth Circuit has vacated and remanded to the district court for it to unravel the Gordian knot and enter an order permitting rational and orderly review. Montgomery v. Otis Elevator Company, 472 F.2d 243 (5th Cir.1973) (court had no way of knowing whether trial judge misapprehended the state of the facts or adopted a view of state law; since the state law was unclear, summary judgment vacated so that the case could be considered in the first instance by a federal judge from the state whose law applied and whose expertise would be entitled to deference); Steed v. Central of Georgia Railway Co., 477 F.2d 1303 (5th Cir.1973) (district court provided no key as to the important facts nor did it state its rationale for granting summary judgment; many complex and difficult questions of fact and law were left unsettled; ease remanded for merits trial); Hanson v. Aetna Life & Casualty, 625 F.2d 573, 575 (5th Cir.1980), (court noted that prior admonitions calling for statements of reasons had been precatory in character but that nevertheless “we have in practice insisted that district courts record — however informally — their reasons for entering summary judgment, at least where their underlying holdings would otherwise be ambiguous or inascertainable.” The court found that to be the situation before it and vacated and remanded); Mosley v. Ogden Marine, Inc., 480 F.2d 1226 (5th Cir.1973) (court unable to ascertain which of several theories formed the basis for the entry of summary judgment; vacated and remanded for entry of reasons in support of the court’s order).
Nonetheless, the paramount concern in determining whether to remand a summary judgment for entry of an order susceptible of better review is judicial economy. In this case — though not without difficulty — we have determined from an examination of the record and the briefs that summary judgment was proper. We therefore, do not direct a remand.
II. FCRA Statute of Limitations
The statute of limitations for actions under the FCRA is contained in 15 U.S.C. § 1681p:
An action to enforce any liability created under this subchapter may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within two years from the date on which the liability arises, except that where a defendant has materially and willfully misrepresented any information required under this subchapter to be disclosed to an individual and the information so misrepresented is material to the establishment of the defendant’s liability to that individual under this subchapter, the action may be brought at any time within two years after discovery by the individual of the misrepresentation.
Under the statute an action is timely if filed within two years from the date on which the liability arose or within two years from the plaintiff’s discovery of a material and willful misrepresentation on the part of the defendant. Accordingly, for the purposes of the FCRA statute of limitations, Clay’s claims may be divided into two groups — claims arising from Equifax’s 1981 mailing and claims arising from other prior acts of the defendants. Of the wrongs that Clay alleges the defendants committed, only the 1981 mailing occurred within two years of his filing suit. For all other claims, therefore, Clay must show a material and willful misrepresentation on the part of the defendants. We will consider separately each group of claims.
A. The 1981 Mailing
On May 15, 1981, Equifax sent to Clay copies of certain reports it had prepared over the previous two and one-half years. Equifax’s transmittal letter to Nationwide stated:
This confirms telephone conversation the morning of 5-14-81 where Mr. Clark [of Nationwide] requested a clearer copy of our interview with Mr. Clay. The carbon on our handwritten responses was dim in places for us to see, so it was necessary for us to overprint and this is to a true copy. Possibly another machine could get a better copy, but this is the best ours could do.
In addition, we have photocopies of the investigation we submitted to other customers since last reporting to you, as per your request, and these are attached.
Clay contends that by this 1981 mailing Equifax violated sections 1681e (failure to maintain reasonable compliance procedures), 16811 (failure to verify adverse information), and 1681r (unauthorized disclosure by officer or employee of a credit reporting agency) of the FCRA. Accordingly, he argues that, at least as to these claims, summary judgment was inappropriate. Clay contends also that in requesting and receiving the 1981 mailing Nationwide violated section 1681q (obtaining information under false pretenses). Viewing the record in the light most favorable to Clay, we conclude that all of these claims are either groundless or waived.
Section 1681e of the FCRA provides:
(a) Every consumer reporting agency shall maintain reasonable procedures designed to avoid violations of section 1681c of this title and to limit the furnishing of consumer reports to the purposes listed under section 1681b of this title. These procedures shall require that prospective users of the information identify themselves, certify the purposes for which the information is sought, and certify that the information will be used for no other purpose____
(b) Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.
Clay contends that Equifax violated this provision when it mailed to Nationwide copies of the old reports. However, no facts alleged in the complaint or otherwise stated in the record can be viewed as establishing such a claim. In his complaint Clay makes merely a broad, conclusory allegation that Equifax failed to maintain reasonable compliance procedures. Such an allegation without more is not sufficient to withstand a motion for summary judgment.
Moreover, we note that section 1681e(b) requires that consumer reporting agencies maintain reasonable compliance procedures when preparing reports. In 1981 Equifax prepared no new reports on Clay; it merely mailed copies of previously prepared reports. The 1981 mailing, therefore, could not be a violation of section 1681e(b).
Clay contends also that by its 1981 mailing Equifax violated section 16811. That statute provides:
Whenever a consumer reporting agency prepares an investigative consumer report, no adverse information in the consumer report ... may be included in a subsequent consumer report unless such" adverse information has been verified in the process of making such subsequent consumer report, or the adverse information was received within the three-month period preceding the date the subsequent consumer report is furnished.
It is clear that this provision is not applicable to the facts of this case. Again, Equifax prepared no new or “subsequent” report in 1981; it merely mailed copies of previously prepared reports. Section 1681 l prohibits the inclusion of stale and unverified information in new consumer reports. It does not address, however, the reproduction of existing reports. The copies that Equifax sent to Nationwide each indicated the date and circumstances of the reports and could not be confused as providing new or fresh information.
Clay’s contentions regarding section 1681r, which prohibits an officer or employee of a credit reporting agency from making any unauthorized disclosures, are likewise meritless. Clay failed to plead or argue any section 1681r claims in the district court. Moreover, no Equifax officer or employee has been named as a defendant in this action.
Finally, Clay contends that Nationwide violated section 1681q when it requested and received the 1981 mailing. Section 1681q provides:
Any person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined not more than $5,000 or imprisoned not more than one year, or both.
We are at a loss, however, to find where Clay raised this issue prior to appeal. In his supplemental brief Clay states that his complaint fails to mention the 1981 mailing because he was unaware of it at the time he brought suit. He asserts that he became aware of the mailing during discovery. Although it would have been a simple matter for Clay to amend his pleadings to conform with this new information, he failed to do so before the district court entered summary judgment. Furthermore, we find nothing in the record that would raise a significant question concerning Nationwide’s pretenses in obtaining the report copies.
B. Other Claims
The remainder of Clay’s FCRA claims are based on acts of the defendants that occurred more than two years prior to Clay filing suit. The two-year FCRA statute of limitations may be tolled only “where a defendant has materially and willfully misrepresented any information required under this subchapter to be disclosed to an individual and the information so misrepresented is material to the establishment of the defendant’s liability to that individual under this subchapter.” 15 U.S.C. § 1681p. Since Clay has failed to establish, and the record does not show, any willful misrepresentation on the part of any of the defendants, we find that the remainder of Clay’s FCRA claims are barred. We address briefly Clay’s arguments to the contrary.
Clay contends that Equifax failed to comply with the disclosure requirements of section 1681g and that such failure constituted a material and willful misrepresentation within the meaning of section 1681p. Section 1681g provides in pertinent part:
Every consumer reporting agency shall, upon request and proper identification of any consumer, clearly and accurately disclose to the consumer: the nature and substance of all information ... in its files on the consumer at the time of the request.
(emphasis ours). Clay contends that his phone conversation with Equifax’s receptionist constituted a request for disclosure within the meaning of section 1681g. In deposition Clay described his phone call to the receptionist at Equifax:
Also, at the time, seeing this person [Equifax investigator] out around my house when I called Equifax, I just called and talked to the receptionist over there and I wanted to find out what was going on. And she said she didn’t have any way of knowing, but she would have somebody get in touch with me. So, you know, that might have been a request to find out about it, but nobody ever called me back.
We hold that Clay’s phone conversation does not constitute a request for disclosure within the meaning of section 1681g. We emphasize that a disclosure under section 1681g is required only “upon proper request and identification” of the consumer. Moreover, section 1681h(b) provides in pertinent part: Clearly, Clay did not comply with the prerequisites for telephone disclosure. His casual and undocumented “request” was not sufficient to trigger section 1681g.
The disclosures required under section 1681g of this title shall be made to the consumer — ... by telephone if he has made a written request, with proper identification, for telephone disclosure and the toll charge, if any, for the telephone call is prepaid by or charged directly to the consumer.
Clay also contends that his cause of action did not accrue until he knew of the alleged failure of Equifax to follow the requirements of the FCRA and the causal relationship between such failure and the subsequent injury. We find this argument wholly unpersuasive. Clay would have us interpret section 1681p to mean that even in the absence of any willful misrepresentation on the part of the defendant liability does not arise under the FCRA until the plaintiff has discovered the defendant’s violation. That we will not do.
Finally, Clay contends that because the insurance companies had a special duty to him as their insured, the statute of limitations would not begin to run until Clay discovered they had violated the FCRA. Section 1681p, however, leaves no room for such an interpretation.
III. Defamation
In his complaint Clay alleged that the defendants had libeled him by preparing, publishing, or circulating defamatory credit reports. In Alabama an action for libel must be commenced within one year from the date of publication. Ala.Code 1975, § 6-2-39(a)(4); Hams v. Winter, 379 So.2d 588 (Ala.1980). The statute may be tolled, however, where the defendant has a duty by virtue of a confidential relationship with the plaintiff to disclose the libelous matter. Holdbrooks v. Central Bank of Alabama, 435 So.2d 1250 (Ala.1983). This rule is derived from the application of Ala. Code 1975, § 6-2-3. That statute provides:
In actions seeking relief on the ground of fraud where the statute has created a bar, the claim must not be considered as having accrued until the discovery by the aggrieved party of the fact constituting the fraud.
See Holdbrooks, 435 So.2d at 1251.
Since the latest possible publication in this case, the 1981 mailing, occurred more than one year prior to Clay filing suit, Clay must rely on the section 6-2-3 fraudulent concealment theory to bring his action within the one-year statute. Moreover, “[a] plaintiff using section 6-2-3 to toll the statute of limitations bears the burden of proving fraudulent concealment, [citations] A plaintiff using the tolling statute must allege, or on summary judgment establish, prima facie facts which show that the defendant fraudulently prevented discovery of the wrongful act upon which the action is based.” Sellers v. A.H. Robins Co., Inc., 715 F.2d 1559 (11th Cir.1983) (emphasis, ours). Clay, however, failed to establish facts which would show that the defendants fraudulently concealed the reports, and, therefore, did not meet his burden at summary judgment.
Clay contends, nevertheless, that the relationship of insurer to insured is of such a confidential nature as to impose a duty on the insurance companies to disclose the libelous matters to him. He argues that the insurance companies’ failure to disclose amounts to fraudulent concealment and therefore tolled the statute. We do not agree that the relationship between insurer and insured satisfies the requisite test of confidentially. In a case relied on by Clay, the Supreme Court of Alabama held that “[t]o establish fraud by silence, facts should be averred from which a duty to speak arises — it should appear that the parties were not dealing at arms length.” Tonsmeire v. Tonsmeire, 285 Ala. 454, 233 So.2d 465, 468 (1970). Although we recognize that insurers owe a duty of good faith to their insureds, we do not believe that duty is equivalent to the confidential relationship envisioned by the Alabama courts in these circumstances. Finally, we note that there is ample evidence that Clay knew of the allegedly defamatory publications more than one year before he brought suit.
For the aforementioned reasons we AFFIRM.
. We use "Equifax” as a shorthand for Equifax, Inc., Equifax Services, Inc., and Equifax Services, Ltd. Although each of these entities is named as a defendant in this case, there is no reason to maintain the formal distinctions on appeal.
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360560-6014 | ROSS, District Judge.
The collection of lawful taxes must not be frustrated by the claims of private individuals whose rights are junior in point of time, and inferior in point of rank, to those of the sovereign.
In the instant case, the plaintiff’s tax lien notice was filed months before the deceased taxpayer or his successors in interest acquired any right or title to the two-ton truck that constitutes the res in this in rem proceeding.
Both on reason and authority, the claims of the plaintiff are superior to those of the successors in interest of the deceased truck owner.
1. The Stipulated Facts.
The parties have stipulated the facts in this case, as follows:
On February 19, 1955, Arthur D. Harris, doing business as “Modern Builders”, purchased from Casady’s Garage, in Austin, Nevada, on a conditional sales contract, an “International” two-ton truck.
On January 9, 1957, Harris died, owing $314.87 on the conditional sales contract. On or about February 17, 1957, at a time when payments were delinquent under the terms of the sales contract to the extent of two months and thirteen days, the Nevada Bank of Commerce, to which Casady had assigned the sales contract, repossessed the truck.
On the same day, following repossession, the Bank sold the truck, at a private sale, to H. B. Clare, one of the defendants, for $321.07, which was the amount outstanding on the truck under the sales contract, plus the cost of repossession. At the time of this latter sale, the fair market value of the truck was $1,250.
Clare, the new purchaser, improved the condition and the appearance of the truck so as to make it more attractive to purchasers and to increase the potential sales price of the machine.
On June 21, 1957, pursuant to a stipulation among the parties to this action, "Clare sold the truck for $1,800. All of this money was received by the defendants herein, who, pursuant to notice, paid Clare $321.07 from that fund, and the balance — $1,478.93—is being held by the defendants Summerfield and Heward in a “trust account,” subject to the order of this Court.
At the time of the two sales of this truck, and at the time of repossession of the truck by the Bank, there was on file in the office of the County Recorder of Washoe County, Nevada, a notice of Federal tax lien covering four tax assessments made by the Commissioner of Internal Revenue in 1952, 1953, and 1954, the total unpaid balances of which far exceed the above “trust account,” supra, held by the defendants Summer-field and Heward.
Attached to the defendants’ “Memorandum for Pretrial Conference,” is a copy of a “Notice of Sale”, dated February 28, 1957, and executed by V. W. Evans, District Director of Internal Revenue at Reno, Nevada. The noticed sale of the “International” truck therein referred to was not held.
In addition to paying the purchase price of $314.87, Clare had a garage keeper’s lien of $636.93, by reason of services rendered and supplies sold to Harris in connection with the truck. No part of that sum has been paid to Clare.
The services and supplies were furnished between February 19, 1955, and February 18, 1957, or long after the filing of the notice of the Federal tax lien covering the assessments hereinbefore set forth.
2. The Two Questions of Law.
It is agreed that only two questions of law are presented in this case. Those questions, cognate in character, are the following:
“1. Do the rights of the Government rise any higher than those of the taxpayer?
“2. Were the rights of the taxpayer and of the Government terminated on or about February 17, 1957, at which time the taxpayer was in default upon the conditional sales contract for a period of two months and thirteen days, and at which time the Nevada Bank of Commerce repossessed the truck, and on the same day following repossession, sold the truck to H. B. Clare?”
3. The Federal Tax Lien, Prior in Time, Is Also Prior in Right as Against the Claims of the Decedent’s Successors in Interest.
Section 6321, Lien for Taxes, provides as follows:
Section 6321. Lien for taxes.
“If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.” (Emphasis supplied.) 26 U.S.C.A. § 6321.
As we have seen, Harris purchased the truck on February 19, 1955. On that date, the plaintiff’s lien, notice of which had been filed in the Office of the County Recorder of Washoe County, at Reno, Nevada, on December 10, 1954, became fastened upon the res, and continued to be so fastened until the truck was sold by Clare for $1,800. It is stipulated that from that sales price there should be deducted the sum of $321.07, representing the full amount outstanding on the conditional sales contract plus costs of repossession. That leaves a balance of $1,478.93 that is subject to the plaintiff’s lien.
It is stipulated that the notice of Federal tax liens represented the sum of $2,451.82. That amount more than absorbed the entire balance of $1,478.93 subject to the plaintiff’s lien. As we shall see in a moment, this left nothing for Clare’s gasoline bill of $636.93, junior in rank to that of the plaintiff’s tax claim.
In the leading ease of Forbes v. Gracey, 1877, 94 U.S. 762, 767, 24 L.Ed. 313, which dealt with a Nevada tax imposed upon the property of the Consolidated Virginia Mining Company, the Supreme Court said:
“This (mining) claim may be sold, transferred, mortgaged, and inherited, without infringing the title of the United States. Why may it not also be made subject to a lien for taxes, and the claim, such as it is, recognized by statute, be sold to enforce the lien? We see nothing in principle or in any interest which the United States has in the land to prevent it.” (Emphasis supplied)
4. Conclusion.
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11684497-19928 | MEMORANDUM AND ORDER
GERSHON, District Judge.
Plaintiffs, three chiropractors licensed to practice in New York, bring this antitrust action pursuant to the Sherman Act, 15 U.S.C. § 1, and its New York counterpart, the Donnelly Act, N.Y.Gen.Bus.Law § 340(1), alleging that defendants, twelve Health Maintenance Organizations (“HMOs”) licensed to operate in New York, engaged in unlawful conspiracies and combinations to exclude chiropractors from providing health care services to HMO enrollees. All defendants seek summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure dismissing plaintiffs’ Fourth Amended Complaint. Plaintiffs seek leave to file a Fifth Amended Complaint.
FACTS
Unless otherwise indicated, the following facts are undisputed. Plaintiffs are three chiropractors, licensed to practice in New York pursuant to N.Y.Edue.L. § 6554, who maintain their businesses in Suffolk County, NY. By statute, the practice of chiropractic is defined as:
detecting and correcting by manual or mechanical means structural imbalance, distortion, or subluxations in the human body for the purpose of removing nerve interference and the effects thereof, where such interference is the result of or related to distortion, misalignment or subluxation of or in the vertebral column.
N.Y.Edue.L. § 6551(1).
Defendants are twelve HMOs licensed to operate in New York pursuant to Article 44 of New York Public Health Law. N.Y.Pub. Health L. §§ 4400, et seq. Two of the defendants, Health Insurance Plan of Greater New York, Inc. (“HIP”) and Managed Health, Inc. (“Managed Health”), operate group-model HMOs. This means that they contract with groups of physicians in the localities they serve to provide health care services to their enrollees. HIP contracts with six main constituent groups, and Managed Health contracts predominantly with Community Health Program of Queens-Nassau (“CHP”). The remaining defendants— Sanus Health Plan of Greater New York, Inc., now known as NYLCare Health Plans of New York, Inc. (“NYLCare”), CIGNA Healthplan of New York, Inc. (“CIGNA”), Empire Blue Cross and Blue Shield (“Empire”), Travelers Health Network of New York, Inc., (“THN of NY”), Oxford Health Plans (New York), Inc. (“Oxford”), Choice-Care Long Island, Inc, now known as VY-TRA Healthcare (“VYTRA”), Aetna Health Plans of New York, Inc. (“AHPNY”), U.S. Healthcare, Inc. (“U.S.Healthcare”), The Prudential Health Care Plan of New York, Inc. (“Prucare”), MetLife Healthcare Network of New York, Inc. (“MetLife”) — operate independent practice association (“IPA”) model HMOs. As IPA-model HMOs, they contract directly with independent physicians or practice groups for the. provision of health care services to their members.
Under New York law, each HMO is required to provide comprehensive health services to its enrollees. N.Y.Pub.Health L. § 4403(l)(a). The HMOs are also obligated to provide each HMO enrollee with a primary care practitioner (“PCP”). 10 N.Y.C.R.R. § 98.13(b). A PCP is “a physician or other licensed provider who supervises, coordinates and provides initial and basic care to enrollees and maintains continuity of care for enrollees.” 10 N.Y.C.R.R. § 98.2(t). With regard to referrals, the HMO or the PCP on behalf of the HMO is responsible for the “identification and selection of an appropriate provider of care in each individual instance where services are determined to be necessary for the enrollee.” 10 N.Y.C.R.R. § 98.13(c).
Defendants offer varying levels of coverage for chiropractic services. Five défen-dants, AHPNY, THN of NY, CIGNA, Met-Life and Prucare, offer chiropractic coverage as part of their basic plan. Three defendants, NYLCare, U.S. Healthcare and Empire offer chiropractic-related services through an optional rider to employers who desire additional coverage. And four defendants, HIP, Managed Health, Oxford and VYTRA, do not offer chiropractic coverage at all.
The Complaint
This action arises out of the alleged exclusion of chiropractic doctors from providing health care services to HMO enrollees in the five counties of New York City, and Nassau and Suffolk counties on Long Island. The plaintiffs complain that, even where chiropractors are the most cost-effective providers of treatment for “mechanical-structural disorders of the back'and neck,” HMOs have failed to “authorize” chiropractors as providers for their enrollees.
The Fourth Amended Complaint makes three claims under the Sherman Act and under New York’s Donnelly Act. One claim is that “[i]n each and every one .of the HMOs, two or more persons in power — -whose identities are well known within each said HMO ... have formed one or more conspiracies [to] boycott ... chiropractic doctors.” The intra-HMO conspiracies are alleged to set policies for the coverage levels of chiropractic care that “withhold[ ] treatment options from patients and ... promulgate] restrictions on chiropractic services.” It is also alleged that, within each intra-HMO conspiracy, “MDs [are] agreeing among themselves to under-refer enrollees to chiropractic doctors in order to bolster overall MD income.” According to the complaint, each of the conspirators within each HMO “is excessively driven by objectives that are disparate from those of the HMO — by an impermissible personal stake” in the outcome. A second claim is that the failure of each HMO to “authorize” chiropractors in such situations renders each HMO “by itself’ a “combination in restraint of trade.” A third claim alleges the existence of an inter-HMO conspiracy in which “[r]ep-resentatives of some or all of the HMOs have conspired with each other to tolerate the aforesaid intra-HMO conspiracies.”
Procedural History
Plaintiffs amended their eomplaint three times before their allegations were tested on a motion to dismiss. In- an order of June 16, 1995, Judge Spatt denied defendants’ motion to dismiss plaintiffs’ Section 1 claims, concluding that “the complaint barely pleads a cause of action under Section 1 of the Sherman Act against the defendant HMOs.” When plaintiffs sought to amend their complaint again before defendants filed a motion for summary judgment, Judge Spatt adopted the report and recommendation of the Honorable E. Thomas Boyle, Magistrate Judge, in an order dated May 21, 1996, and granted plaintiffs’ motion for leave to file the Fourth Amended Complaint on the following conditions:
1) no further amendment will be permitted to the complaint except upon a showing of good cause and upon facts that are not known, or with reasonable diligence could not have been known at the time of the filing of the Fourth Amended Complaint.
2) No Enlargement of Phase I discovery based on any new allegations in the Fourth Amended Complaint.
3) Discovery with respect to the putative class and any motion for class certification is stayed pending the outcome of HMO Defendants’ motion for summary judgment; and
4) Withdrawal with prejudice of the monopoly cause of action pursuant to Section 2 of the Sherman Act (third cause of action of the third Amended Complaint.)
Discovery had been divided into two phases. Phase I of discovery, which involved the coverage and referral policies of the HMO defendants regarding chiropractic care, has been completed. Plaintiffs have received all the computerized data regarding each defendant’s coverage and referral practices with regard to chiropractic. Plaintiffs have also conducted the depositions of at least one representative of each of the defendants. Phase II of discovery was designated to include materials regarding the cost-effectiveness of chiropractic care as compared to care by medical doctors. Because of this division of discovery, plaintiffs did not have full discovery regarding the cost-effectiveness of chiropractic versus medical care prior to the motion for summary judgment. Therefore, solely for purposes of the motion for summary judgment, defendants do not argue that plaintiffs cannot present an issue of fact as to whether care by chiropractors is more cost-effective than care by medical doctors.
DISCUSSION
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
Summary Judgment Standards
Pursuant to Federal Rule of Civil Procedure 56(c), summary judgment should be granted 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.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). It is the movant’s burden to demonstrate the absence of any genuine issue of material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 175, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). A material fact is one whose resolution would “affect the outcome of the suit under governing law,” and a dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The non-moving party, however, “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Summary judgment is proper “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex, 4770 U.S. at 322, 106 S.Ct. 2548.
Even in factually complex eases, such as antitrust cases, summary judgment is not disfavored. Rather, “summary judgment [is] a vital procedural tool to avoid wasteful trials and may be particularly important in antitrust litigation to prevent lengthy and drawn-out litigation.” Capital Imaging Associates v. Mohawk Valley Medical Associates, 996 F.2d 537, 541 (2d Cir.1993) (citing Matsushita, 475 U.S. at 585-88, 106 S.Ct. 1348).
Intra-HMO Conspiracies
Under Section 1 of the Sherman Act, “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States ... is declared to be illegal.” 15 U.S.C. § 1. To establish a claim under Section 1, plaintiffs must first demonstrate “some form of concerted action between at least two legally distinct economic entities” and then demonstrate that the agreement constituted an unreasonable restraint of trade. Capital Imaging, 996 F.2d at 541. Defendants seek summary judgment on the ground that plaintiffs cannot establish a genuine issue of material fact as to the existence of concerted action.
A showing of concerted action requires “evidence that tends to exclude the possibility that [the alleged conspirators] were acting independently.” Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). That is, plaintiffs must demonstrate that there was “a conscious commitment to a common scheme designed to achieve an unlawful objective.” Id. (quotations omitted).
The requirement of concerted action between separate entities means that “wholly unilateral” conduct is not actionable under Section 1. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984) (citation omitted). Also, officers, agents or employees of a single entity are legally incapable of conspiring together for purposes of Section 1. Id. at 771, 104 S.Ct. 2731. In discussing the “intra-enterprise conspiracy doctrine” the Supreme Court explained:
[I]t is perfectly plain that an internal “agreement” to implement a single, unitary firm’s policies does not raise the antitrust dangers that § 1 was designed to police. The officers of a single firm are not separate actors pursuing separate economic interests, so agreements among them do not suddenly bring together economic power that was previously pursuing divergent goals.... For these reasons, officers or employees of the same firm do not provide the plurality of actors imperative for a § 1 conspiracy.
Id. at 769, 104 S.Ct. 2731.
An exception to the intra-enterprise conspiracy doctrine applies to individuals within a single entity when they are pursuing economic interests separate from the entity. Capital Imaging, 996 F.2d at 544-45. These individuals, whose personal economic interests are furthered by the objectives of the alleged conspiracy, are legally capable of conspiring for purposes of Section 1. Id. In Capital Imaging, the Court of Appeals found that member physicians of an independent practice association that contracted with an HMO to provide medical services for HMO patients were legally capable of conspiring with one another to deny a competing group of radiologists access to HMO patients. Id. at 544. These physicians had the requisite personal interest in the outcome of the conspiracy because they “[we]re not staff physicians employed by the HMO on a salaried basis, that is, they [we]re not agents of the HMO. Instead, these health care professionals [we]re independent practitioners with separate economic interests.” Id.
According to plaintiffs, there are intra-HMO conspiracies operating within each defendant to accomplish two objectives. First, they contend that there are intra-HMO conspiracies to establish coverage policies that exclude or restrict chiropractic services. Second, they assert that there are intra-HMO conspiracies, consisting of primary care practitioners (“PCPs”) conspiring with each other, to under-refer HMO enrollees to chiropractors. Defendants contend that plaintiffs have failed to demonstrate any evidence of intra-HMO conspiracies of either variety.
As “wholly unilateral” conduct is not actionable under Section 1, Copperweld, 467 U.S. at 768, 104 S.Ct. 2731, plaintiffs’ claim of intra-HMO conspiracies to establish coverage policies that exclude or restrict chiropractic services fails absent a showing that the alleged policymakers had a personal stake in the outcome of their policy decisions. Plaintiffs, however, have offered no explanation of how policymakers at any of the defendant HMOs could personally benefit from making-policy decisions to restrict chiropractic options. Moreover, plaintiffs’ claim is unsupported by any evidence of a conspiracy. Plaintiffs have not identified any individuals who made any decisions regarding coverage policies on chiropractic services, nor demonstrated that any of those individuals conspired with one another. For this reason as well, plaintiffs’ claim of intra-HMO conspiracies to establish coverage policies fails. See Maric v. St. Agnes Hospital Corp., 65 F.3d 310, 313 (2d Cir.1995).
Plaintiffs seek to bring their claim of intra-HMO conspiracies to under-refer HMO patients to chiropractors within the exception to the Copperweld doctrine by arguing that the PCPs had personal interests in the outcome of the alleged conspiracy. But they have offered no evidence in support of the exception. Plaintiffs have not explained how a PCP might profit personally from referring an HMO patient needing treatment for a mechanical-structural disorder of the back or neck, for example, to a medical doctor rather than to a chiropractor. In contrast, in Capital Imaging, the physicians of an independent practice association were capable of conspiring for purposes of Section 1 because, as they were in direct competition with other groups of physicians, they had a direct personal stake in denying a group of radiologists access to their HMO patients. 996 F.2d at 544. Here, plaintiffs have not explained how, using referrals to other doctors, the PCPs have a personal interest in the outcome. Plaintiffs do not demonstrate, for example, that the PCPs agreed to refer HMO patients to one another in order to boost their personal incomes. Since there has been no showing that the PCPs had a personal interest in the intra-HMO conspiracies, the PCPs are incapable of conspiring for the purpose of under-referring patients to chiropractors.
Even if it were shown that the PCPs had personal interests in the outcome of the alleged conspiracy, plaintiffs have nevertheless failed to explain how those personal interests differ from the interests of their respective HMOs. A recent decision of another district court, facing the same issue in a case brought by other chiropractors, concluded that the interests of the PCPs did not diverge from those of the HMOs. Day v. Fallon Community Health Plan, 917 F.Supp. 72 (D.Mass.1996). The Fallon court persuasively reasoned:
If the conspirators have agreed to under-refer enrollees to chiropractors, they either 1) over-refer enrollees to medical doctors to compensate for such under-referrals, or 2) simply under-refer to chiropractors, without a corresponding increase in referrals to medical doctors. Under the first alternative, the total number of referrals remains the same, the conspirators do not increase their income and the alleged divergent financial incentive of the conspirators to under-refer enrollees to chiropractors does not exist. Under the second alternative, the total number of referrals decreases and both the conspirators and the HMOs increase their income under the alleged incentive system. The financial interests of the conspirators, in the latter case, do not diverge from those of the HMOs. In neither event, does the plaintiffs’ allegation of divergent interests between the conspirators and their HMOs make any sense.
Id. at 77-78. In sum, the personal interests of the PCPs do not diverge from the interests of the HMOs; the PCPs are therefore legally incapable of conspiring for the purpose of under-referring HMO patients to chiropractors.
Finally, even if the PCPs within each HMO had the capacity to conspire to under-refer, plaintiffs failed to produce any evidence that they actually did conspire with each other. In Capital Imaging, the court explained the plaintiffs’ burden to show an antitrust conspiracy at the summary judgment stage:
The mere opportunity to conspire does not by itself support the inference that such an illegal combination actually occurred. A plaintiff must prove that the defendants illegally conspired.... [T]his means that a plaintiff—to withstand defendants’ summary judgment motion—must present evidence that casts doubt on inferences of independent (not combined) action or proper conduct by defendants.
996 F.2d at 545 (citations omitted).
Plaintiffs have failed to identify a single PCP from any HMO who actually conspired with another PCP to under-refer HMO en-rollees to chiropractors. Plaintiffs instead ask the court to infer a conspiracy, relying on the defendants’ concession, for purposes of this motion, regarding the cost-effectiveness of chiropractic care. Their contention is that, as chiropractors are more cost-effective for the work they do than medical doctors, each referral to a medical doctor necessarily constitutes an under-referral. And as “cost-effectiveness is to be expected in HMOs,” plaintiffs argue that the existence of under-referrals alone “bears witness to concerted action.” PI. Br. at 27. Plaintiffs’ argument that all referrals to medical doctors represent under-referrals—even if true—would nevertheless be insufficient to “cast doubt on inferences of independent (not combined) action or proper conduct by defendants.” Capital Imaging, 996 F.2d at 545. “In the context of antitrust litigation the range of inferences that may be drawn from ambiguous evidence is limited; the non-moving party must set forth facts that tend to preclude an inference of permissible conduct.” Id. at 542. Plaintiffs’ showing fails to establish a conspiracy because they have offered nothing to suggest that the referral decisions, even if they were all under-referrals, were motivated by impermissible conduct, as opposed to independent action of the PCPs.
Intra-HMO Combinations
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703223-10117 | FOLEY, District Judge.
The complaint alleges that plaintiff applied for a permit to graze 2500 sheep and 200 head of cattle on Federal Range within Nevada Grazing District No. 4, Ely, Nevada, from July 1, 1947, to June 30, 1948. Plaintiff’s application was granted in part only, that is, he was given a permit to graze 1,000 sheep and 57 cattle instead of 2500 sheep and 200 cattle. It is plaintiff’s contention that such action was arbitrary, capricious and an abuse of discretion and in excess of statutory authority; and in support of such contention he alleges that the “Range Manager” failed and refused to give the proper consideration and allowance for plaintiff’s prior water and water rights as base property in computing the quantity of his legal grazing privileges; and contrary to law did arbitrarily, capriciously and in abuse of discretion, adopt a formula whereby the plaintiff was allowed credit for his prior water and prior water rights only to the extent of one-third of his total operating capacity, whereas in truth and in fact the base property upon which* the operation of plaintiff’s livestock business is computed under the aforesaid grazing statute is dependent almost entirely upon prior water and prior water -rights. He prays that the Range Manager be restrained from reducing his herds on said public domain to 1,000 sheep and 57 cattle, and for declaratory judgment; that the Range Manager be required to consider plaintiff’s prior water and prior water rights together with his land base in determining the base propei cy of plaintiff, thus entitling plaintiff the privilege of grazing on said public lands the total of 2500 sheep and 200 head of cattle.
The defendant Jesse Kirk, as Range-Manager, moves the Court to dismiss plaintiff’s complaint. In support of his motion-the defendant urges: (1) That plaintiff has-no right to judicial review because under the Administrative Procedure Act, 5 U.S. C.A. § 1009, there may -be no judicial review of activities committed to agency discretion; and (2) the Government contends, that the Secretary of the Interior is an indispensable party.
The affidavit of E. R. Greenslet, Regional’ Chief, Division of Range Management,. Bureau of Land Management, Department of Interior, was, on the hearing of defendant’s motion, accepted in evidence in support thereof. From that affidavit it appears, that administrative hearings were had and' that plaintiff was given opportunities to-present his views. It may be said that plaintiff has exhausted his administrative-remedies.
T-he gravamen of plaintiff’s complaint is-the adoption and application of the formula, that formula being the subject matter of a. resolution of the Advisory Board of the district. The resolution is as follows: “A proper factual showing of its necessity having been made by the regional grazier and it having been found that local conditions in Nevada Grazing District No. 4 make necessary the application of a special rule for the classification of base properties in order better to achieve an administration consistent with the purposes of the-act, either land or water only, or a combination of land and water, m-ay be classified as base property for a single livestock operation in that district. In instances in which a combination of land and water is. so recognized, the following further classification will be made:
“Class 1. Land dependent by use and full-time prior water.
“Class 2. Land dependent by location and full-time water.”
Nevada Grazing District No. 4 in the vicinity of Ely, White Pine County, Nevada, is characterized in the decision of the Department of the Interior, dated June 15, 1950, as a “transitional area, that is, an area lying between one which requires a land base for livestock operations and one which requires a water base for such operations”; said decision being attached to and made a part of the above mentioned affidavit of E. R. Greenslet.
It' appears that such resolution on February 21, 1945, was in substance adopted as a special rule for Nevada Grazing District No. 4 (defendant’s Ex. #2) pursuant to authority vested in the Secretary of the Interior by statute, 43 U.S.C.A. § 315 et seq., and in accordance with the provisions of 43 C.F.R. § 161.15. Sec. 315a, 43 U.S.C. A., provides: “The Secretary of the Interior shall make provision for the protection, administration, regulation, and improvement of such grazing districts as may be created under the authority of section 315 of this title, and he shall make such rules and regulations and establish such service, enter into such cooperative agreements, and do any and all things necessary to accomplish the purposes of sections 315-315m, 315n, 315o and 315o-l of this title and to insure the objects of such grazing districts, namely, to regulate their occupancy and use, to preserve the land and its resources from destruction or unnecessary injury, to provide for the orderly use, improvement, and development of the range; * *
Pursuant to the authority granted to him by 43 U.S.C.A. § 315a, the Secretary of the Interior promulgated regulations, “The Federal Range Code for Grazing Districts,” and of such regulations the following are pertinent here:
Ҥ 161.4 Classification of base properties. For the purpose of determining the proper use of the base properties of all applicants and their relative dependence upon the Federal range, land and water conditions and other factors affecting livestock operations in the area will be considered and determined according to customary use and best practices for good range management. Base properties will be classified as land or water and fitrther in the following manner:
“Class 1. Land dependent by use, or full-time prior water.
“Class 2. Land dependent by location, or full-time water.”
“§ 161.15 Special rules for grazing districts. Whenever it appears to a regional administrator that local conditions in any district in his region make necessary the application of a special rule on any of the matters, in the Federal Range Code for Grazing Districts in order better to achieve an administration consistent with the purposes of the act, he may recommend such a rule, supported by a factual showing of its necessity, to the Secretary of the Interior for approval.”
This is not a case where an application for a permit has been rejected in favor of an applicant not possessing the same faculties for economic and beneficial use of the range as was the case of Red Canyon Sheep Co. v. Ickes, 69 App.D.C. 27, 98 F.2d 308. Unlike Oman v. United States, 10 Cir., 179 F.2d 738, neither the Secretary of the Interior nor any of his subordinates are here charged with inducing or permitting third persons to interfere with rights or privileges granted to plaintiff or to which he may be entitled. Here plaintiff seeks a judicial review of determinations made by the Secretary of the Interior or his subordinates under the provisions of the Taylor Grazing Act and regulations made pursuant thereto. The agency action complained of here did not result in taking of property without due process of law as contended by plaintiff. The record here shows effort by the grazing officials and the Secretary of the Interior to arrive at a fair and reasonable conclusion. It shows that conferences and hearings were had and that plaintiff was given opportunities to present his views and did present his views.
Oman v. United States, 10 Cir., 179 F.2d 738, 741: “[6-8] * * * The Taylor Act provides that the ‘issuance of a permit pursuant to the provisions of such sections shall not create any right, title, interest, or estate in or to the lands.’ 43 U.S.C.A. § 315b. In Osborne v. United States, 9 Cir., 145 F.2d 892, 896, it was indicated that grazing permits are only a privilege ‘with-drawable at any time for any use by the sovereign without the payment of compensation.’ * * *”
If the sovereign may withdraw a grazing permit, it would follow that the sovereign could limit and define the extent of such a privilege. The action of the Secretary of the Interior in approving the 'rule recommended by the Advisory Board of Nevada Grazing District No. 4 was based upon substantial evidence and is consistent with the authority granted by Congress. Said rule was not adopted and put into effect solely for the purpose of restricting or limiting plaintiff’s grazing privileges. The rule affects not only plaintiff but all similarly situated who may apply for and be permitted grazing privileges in said Nevada Grazing District No. 4. The adoption and the application of this special rule (defendant’s Ex. #2) “was agency action committed by law to agency discretion.”
The following quotations from the opinion of Circuit Judge Duffy in Lansden v. Hart, 7 Cir., 180 F.2d 679, 683, illustrate the situation here:
“[7] * * * The complaint in the case at bar shows extraordinary effort by the agency to arrive at a fair and reasoned conclusion. It shows that many conferences and hearings were had, and that plaintiffs, * * *, were given an opportunity to present their views.”
“[8, 9] * * * Jurisdiction of the subject matter of this action under the Administrative Procedure Act, although alleged in the complaint, does not exist in fact or law.”
The Secretary of the Interior is an indispensable party. In Williams v. Fanning, 332 U.S. 490, 68 S.Ct. 188, 189, 92 L.Ed. 95, the Supreme Court of the United States held that the superior officer is not an indispensable party if the decree which is entered would effectively grant the relief desired by expending itself on the subordinate official who is before the court. In that case after reviewing Webster v. Fall, 266 U.S. 507, 45 S.Ct. 148, 69 L.Ed. 411; Warner Valley Stock Co. v. Smith, 165 U.S. 28, 17 S.Ct. 225, 41 L.Ed. 621; and Gnerich v. Rutter, 265 U.S. 388, 44 S.Ct. 532, 68 L.Ed. 1068, the Court said: “These cases evolved the principle that the superior officer is an indispensable party if the decree granting the relief sought will require him to take action, either by exercising directly a power lodged in him or by having a subordinate exercise if for him.”
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3859870-29416 | GORSUCH, Circuit Judge.
This diversity action implicates a contract between C.W. Mining (“CWM”) and Aquila, Inc. (“Aquila”), pursuant to which CWM supplied Aquila, a public utility that produces electrical power, periodic shipments of coal from CWM’s Utah mine. At trial, Aquila claimed that CWM breached the parties’ contract by failing to perform as promised and that, as a result, it had to purchase coal from other sources at prices higher than those specified in the contract. CWM conceded its failure to perform, but argued that its nonperformance was excused by virtue of a labor dispute that amounted to a force majeure event under the terms of the contract. The district court disagreed with the factual premise underlying this defense, finding that geological, not labor, problems were the primary force inhibiting CWM’s performance. The district court further rejected CWM’s alternative theory that the geological difficulties themselves qualified as force majeure events because Aquila had actual notice of them that substituted for the written notice required under the contract; instead, the court found that Aquila never received adequate notice that CWM considered its geological difficulties to constitute force majeure events. Finally, the district court found that Aquila properly mitigated its losses and that it was entitled to approximately $24 million in damages. CWM appeals each of these determinations. Because we agree with the district court’s legal conclusions and find no clear error in its factual findings, we affirm.
I
A
On September 16, 2003, the parties signed an agreement obliging CWM to provide Aquila with a total of 1,550,000 tons of coal during the years 2004-2006, with an option for Aquila to extend the contract through 2008. Pertinent for our purposes, the contract also contained a force majeure provision providing in relevant part as follows:
Section 13 Force Majeure
(A) Defined
The term “Force Majeure” as used herein shall mean any and all causes beyond the reasonable control of the party failing to perform, including but not limited to acts of God; ... labor disputes; boycotts; lockouts; labor and material shortages; ...; breakdowns of or damage to plants, equipment, or facilities; ... or other causes of a similar nature which wholly or partly prevent or make unreasonably costly (i) the mining, delivering, or loading of the coal by Seller; or (ii) the receiving, transporting, accepting, or utilizing of the coal by Buyer at the Station. To be considered unreasonable such increased costs must be substantial and sustained so that mining is no longer possible. This Section shall not be construed to require either party to prevent, settle or otherwise avoid or terminate a strike, work slowdown, or other similar labor action.
(B) Effect Hereunder
If, because of any Force Majeure, either party hereto is unable to fulfill any of its obligations under this Agreement, and if such party shall promptly give to the other party concerned written notice of such Force Majeure, then the obligation of the party giving such notice shall be suspended to the extent made necessary by such Force Majeure and during its continuance, and the obligations of the party receiving the notice shall be equally suspended; provided, however, that the party giving such notice shall use its best efforts to eliminate such Force Maj- eure insofar as reasonable, with a minimum of delay. Any deficiencies in deliveries or acceptance of coal hereunder caused by Force Majeure shall not be made up except by mutual consent. If a Force Majeure continues for more than six (6) months then either party may terminate this Agreement by giving written notice to the other party without penalty or cost. During an event of partial Force Majeure by either party, a fair and reasonable allocation of deliveries of coal or the ability to consume coal shall be made to mitigate the impact on each party.
Aplt-App. at 129-30 (Section 13 of the contract).
The contract further included a choice of law clause specifying that Missouri law was to control the parties’ agreement, id. at 132 (Section 18), as well as a nonwaiver clause indicating that
[t]he failure of either party hereto to insist in any one (1) or more instances upon strict performance of any provision of this Agreement by the other party hereto, or to take advantage of any of its rights hereunder, shall not be construed as a waiver by it of any such provisions, or of the obligation to comply with such provisions in the future and the same shall continue and remain in full force and effect.
Id. at 131 (Section 16(A)).
Less than a week after signing the contract, a labor strike hit CWM, and between 50 and 70 of its 120 employees walked off the job. Because CWM believed its collective bargaining agreement with the International Association of United Worker’s Union prohibited its employees from striking, the company anticipated that the strike would be quickly resolved. As it happened, however, the labor dispute lingered unresolved for over two years.
Fall.of 2003 also represented the beginning of other hardships for CWM. Several roof collapses that season culminated in the Federal Mine Safety and Health Administration (“MSHA”) ordering CWM to seal its mine number one in January 2004. At that time, CWM anticipated it could still meet its contractual obligations to Aquila with coal from its mines three and four, but CWM soon encountered a slew of geological problems in mine three. These included roof collapses, muddy conditions, and “hot spots” of coal (essentially areas of extremely high temperatures). According to CWM’s mining supervisor, Mr. Defa, the muddy conditions and the hot coal were the worst of those problems he had seen in thirty-eight years of mining. SuppApp. at 126, 128. Because of the muddy conditions in mine three, according to Mr. Defa active mining in that mine “almost stopped.” SuppApp. at 131 (Testimony of Mr. Defa). And as to the “hot spots” of coal, they “slowed the mining way down. It stopped [CWM] from mining that area.” Id. at 132. When the problems first erupted in mine three, mine four was not yet ready for coal production.
In December 2003, just before CWM’s delivery obligations to Aquila were slated to begin, CWM notified Aquila in writing that it considered its labor dispute a force majeure event, as defined by the parties’ contract, and that its coal shipments would be reduced as a result. Over the course of the following months, CWM sent several more letters to Aquila confirming the labor dispute’s status as a force majeure event, and updating Aquila on the progress of its labor negotiations. For its part, Aquila accepted the coal CWM did deliver, but informed CWM by letter on August 25, 2004, that “[f|or the avoidance of doubt, Aquila does not, with this letter and the requests contained herein, waive any rights it has or excuse [CWM] from any obligations it has under the Agreement.” SuppApp. at 148.
While CWM invoked the force majeure clause with respect to its labor problems, the geological difficulties it experienced were another matter. In March 2004, a coal purchasing agent for Aquila, Phil Rogers, visited CWM’s mines and was shown maps of mines three and four, escorted through mine three, and told that mine number one had been closed by order of MSHA. Some months later Mr. Rogers again visited the mines, was escorted through both mines three and four, and was told of the geological problems CWM continued to face. At no point, however, was Mr. Rogers or anyone else at Aquila notified, in writing or otherwise, that CWM considered these geological problems force majeure events. To the contrary, CWM downplayed its geological problems and represented that they would be overcome shortly.
In April 2005, CWM informed Aquila of its intent to cancel the contract entirely, citing the parties’ force majeure provision. Until CWM cancelled the contract, Aquila accepted CWM’s partial deliveries of coal and bought the remainder of its required coal on the spot market. Once CWM can-celled the contract, Aquila entered into a new long-term contract with Consolidated Coal Company (“Consolidated”) on terms less favorable to Aquila than those contained in the CWM contract. In particular, the price of coal Aquila had to pay was higher, and the coal it received had a higher sulfur content, necessitating the purchase of sulfur emission credits before the coal could be burned.
B
In due course, Aquila brought suit against CWM in the United States District Court of Utah to recoup the damages it sustained as a result of CWM’s impaired performance under — and eventual cancellation of — the contract. As its chief defense, CWM asserted that its labor dispute and geological problems, of which it argued Aquila had written notice of the former and actual notice of the latter, excused its deficient performance under the contract as force majeure events. CWM also asked the court to find that Aquila had waived its claim that CWM breached the contract by continuing to accept coal shipments from CWM, and that, if nothing else, Aquila had failed to mitigate its damages.
After a three-day bench trial, the district court rejected each of CWM’s defenses and awarded over $24 million in damages to Aquila. In doing so, the court found (1) CWM failed to prove that its performance was excused by virtue of a force majeure labor dispute; (2) CWM did not inform Aquila in writing that it considered geological problems to be force maj-eure events, and neither did Aquila have actual notice to that effect; (3) CWM did not prove Aquila had waived its right to sue for breach of contract; and (4) CWM did not prove that Aquila failed to mitigate its damages. CWM timely appealed these holdings, and we review each in turn.
II
In aid of its first argument — that the district court “erred in concluding that the labor dispute at CWM was not a force majeure that excused performance,” Aplt. Br. at 20 — CWM appears to offer two distinct theories. First, it asserts that the district court’s decision rests on a factual error; then, and alternatively, it assigns legal error to the court’s conclusion.
A
As a factual matter, CWM contends that its labor dispute caused all of its coal production problems and, thus, as a force majeure event of which Aquila had written notice, the labor dispute excused all of its deficient performance under the contract. In CWM’s view, the geological problems it suffered affected coal production only because the company lacked sufficient workers to overcome them; its geological troubles were thus merely symptoms of the labor dispute, not an independent malady. As CWM puts it, “[h]ad CWM not lost its labor force, it would have been able to overcome the geological problems and would have fully performed under the contract, despite the problems.” Aplt. Br. at 23-24.
Reviewing the district court’s factual finding that CWM’s geological problems were the primary cause of its production difficulties and arose independently from its labor dispute, we may reverse only in the presence of clear error — that is, only if the court’s finding “is without factual support in the record or if, after reviewing all the evidence, we are left with a definite and firm conviction that a mistake has been made.” Keys Youth Servs., Inc. v. City of Olathe, 248 F.3d 1267, 1274 (10th Cir.2001) (quotation marks omitted). After a careful review of the record, we have no such conviction.
Copious evidence supports the district court’s finding that CWM’s geological problems were the primary cause of its inability to perform as promised in the parties’ contract. Indeed, testimony from CWM’s own top-level employees supports the district court’s factual finding on this score. See, e.g., Supp.App. at 132 (Mr. Defa, CWM’s mining supervisor, testified that the hot spots CWM encountered “slowed the mining down. It stopped us from mining that area [of mine three].”); id. at 131 (Mr. Defa testified that due to the muddy conditions in mine three mining there “almost stopped.”); id. at 112 (CWM’s president, Mr. Reynolds, testified that “in March of 2005, as we were developing [mine three], we again encountered the burn area, only in this area the temperatures were gone ahead of us but so was the coal. It had already been burned, and there was no coal there.”); id. at 113 (Mr. Reynolds testified that “we knew we were not going to fill ... the production levels because of that burnout and because of the hot zone there, that the reserves we thought we had were not there.”).
The question remains whether its geological problems arose independently, as the district court found, or whether they affected production only because CWM lacked sufficient personnel to address them, as CWM contends. The record before us reveals that CWM prepared a list of job openings on April 1, 2004, showing only three openings on that date. Supp. App. 184-86 (CWM’s list); see also Dist. Ct. Op. at 5. This fact — -that CWM professed to need only three additional workers at a time when it was suffering mightily from its geological difficulties — tends to undercut its position. If CWM’s geological difficulties could be cured simply by additional employees, why seek only three more employees? Making matters worse, CWM’s own president testified that “the reason for the list being short at that time was we had encountered that hot spot in the one section, and we were working on the rock tunnel in the other section, and we had no other areas to put the employees to work at that time.” Dist. Ct. Op. at 5 (quoting testimony from Mr. Reynolds). Given such evidence, we cannot help but conclude that the district court’s factual finding that geological, not labor, problems formed not just the primary but also an independent cause of CWM’s difficulties is entirely plausible, if not inescapable. Accordingly, we see no reversible clear error.
B
Even accepting the district court’s factual finding that geological problems were the primary and independent cause of its production difficulties, CWM contends that the district court’s decision nonetheless rests on a legal error. CWM suggests that its labor dispute — which indisputably inhibited its performance to some degree and was a declared force majeure event — excused the entirety of its deficient performance. That is, even if the labor dispute was not solely or even primarily responsible for its deficient performance, CWM contends that it remains, under the parties’ contract, a force majeure event sufficient to excuse CWM from its failure to perform. We of course review assignments of legal error, including allegations of contractual misconstruction, de novo. See Holdeman v. Devine, 474 F.3d 770, 775 (10th Cir.2007).
Even under that standard, however, we ultimately find CWM’s argument unavailing. To be sure, we agree with the initial premise of CWM’s argument: the plain language of the parties’ agreement defines a force majeure as including difficulties that prevent performance “wholly or partly.” A force majeure event thus need not be something that precludes a party from performing at all. At the same time, we cannot accept CWM’s subsequent assertion that a partial force majeure could excuse it from performance difficulties arising from what the district court fairly found to be other, entirely independent causes. The parties’ agreement expressly indicates that a party’s obligations will be suspended by the force majeure, but only to “the extent made necessary by such Force Majeure,” at least until such time as the contract is properly terminated. That is, under the terms of the agreement, the district court could lawfully excuse CWM’s deficient performance during the life of the contract only to the extent that the partial force majeure — here, the labor dispute— caused the deficiency.
Under this contractual scheme, CWM was free to prove at trial the extent to which the labor dispute force majeure, as opposed to independent geological problems, caused its nonperformance, and to be excused from damages caused by the labor dispute. Under Missouri law, much as elsewhere, however, it was CWM’s burden to come forward with proof from which the district court could determine the impact of the force majeure labor strike. See ASi Indus. GmbH v. MEMC Elec. Materials, Inc., 2008 WL 413819, at *4 (E.D.Mo.2008) (invoking force majeure in response to a claim of breach is affirmative defense); Gennari v. Prudential Ins. Co. of Am., 335 S.W.2d 55, 60 (Mo.1960) (“The burden o[f] proof on all affirmative defenses rests upon the defendant as the asserting party.”). The difficulty in this case is that CWM declined to offer the district court any evidentiary basis from which the court could have assessed what part of Aquila’s losses were attributable to labor problems versus geological problems. Perhaps a reflection of the persistent optimism of miners throughout the history of the American West, CWM instead adopted an “all or nothing” trial strategy, asserting that all of its nonperformance should be excused under its labor-short age-as-source-of-all-problems theory. See, e.g., Aplt. Br. at 23-24, 28. In doing so, CWM declined to offer a back-up theory, tailored to the possibility that the court might find that geological problems posed an independent obstacle to CWM’s performance, that identified which part of its nonperformance might be fairly attributable solely to its labor difficulties.
The district court recognized CWM’s tactical decision and noted that, without some evidence about the extent to which labor problems caused CWM’s failure to perform, it was simply unable to reduce Aquila’s damages without resorting to (impermissible) speculation: “[although the labor problems had some impact on CWM’s coal production, how much impact is not clear.” Dist. Ct. at 10 (emphasis added). Far from erroneously interpreting the contract, therefore, the district court’s opinion reflects a correct interpretation and an evidentiary deficiency of CWM’s making. Of course, parties routinely, and for many good tactical reasons, decline to pursue back-up defense theories that involve undesirable concessions to an opponent’s theory of the case. But these are tactical decisions that must be abided when they fail, not just admired when they succeed. CWM thus cannot be heard to complain about an evidentiary gap it had the opportunity, and bore the responsibility, to fill. See Grand River Enter. Six Nations, Ltd. v. Pryor, 481 F.3d 60, 68 (2d Cir.2007) (“To the extent that there was a dearth of evidence, [the party bearing the burden of proof] is to blame. Consequently, [that party] should not now be allowed to complain that the district court relied on the limited evidence that was provided.”); Sure-Trip, Inc. v. Westinghouse Eng’g, 47 F.3d 526, 533 (2d Cir.1995); Filippini v. United States, 318 F.2d 841, 845 (9th Cir. 1963).
Ill
Even assuming the district court correctly found that its problems arose primarily and independently from geological difficulties, CWM submits that reversal is still required. Though the contract required the parties to provide written notice of any force majeure in order to avoid damages for nonperformance, CWM submits that Aquila had actual notice of its geological difficulties. And, CWM contends, under Missouri law, and most particularly Gateway Frontier Properties, Inc. v. Seiner, Glaser, Komen, Berger & Galganski, P.C., 974 S.W.2d 566 (Mo.Ct. App.1998), actual notice can substitute for written notice required by contract so long as the receiving party is not prejudiced by the substituted form of notice, see Aplt. Br. at 32-37.
It is unclear whether Missouri law goes quite as far as CWM suggests. In Blue Ridge Bank & Trust Co. v. Trosen, 221 S.W.3d 451, 458-460 (Mo.Ct.App.2007), the Missouri Court of Appeals recently questioned whether actual notice can substitute for written notice, at least in the context of private party contracts. Id. at 460. The Blue Ridge court noted that Gateway relied entirely on cases pertaining to statutory notice, and then proceeded to hold that cases involving private party contracts— like that between Aquila and CWM — are different in kind from statutory notice cases. Id. It did so reasoning that in the arena of private contracts, the “cardinal rule ... is that the parties’ intentions must be ascertained and given effect.... Unless the contractual provisions are ambiguous, the contract language alone is used to determine the parties’ intent.” Id. at 459. When private parties clearly intend to require written notice, the Blue Ridge court explained, that intention should be respected. See id.
Even accepting for argument’s sake CWM’s contention that Missouri does not enforce contract provisions requiring written notice of a force majeure when actual notice of a force majeure exists, these circumstances simply do not pertain here. To be sure, Aquila had notice that CWM was experiencing geological problems. But, the district court expressly found that Aquila did not have actual notice that CWM considered its geological problems a force majeure event. Dist. Ct. at 31. CWM points us to no piece of evidence in the record to suggest this finding was in clear error, and neither could it do so: CWM repeatedly downplayed the significance of its geological problems, promising Aquila that they would be resolved quickly. See supra n. 1. On this basis alone, CWM’s argument before us must fail.
Neither could we accept CWM’s apparent belief that the difference between notice of an event and notice that a party considers that event to be a force maj-eure is inconsequential or, in Gateway’s, terminology, non-prejudicial. After all, classifying an event as a force majeure has powerful ramifications — at the very least, receiving notice that an event is considered a force majeure allows a party to evaluate the validity of a claimed force majeure event and permits it to make other arrangements to mitigate its damages if it suspects the event is serious and will persist. CWM’s notice was not calculated to meet these objectives. Far from alerting Aquila that its geological problems might rise to the level of a force majeure, a “eause[ ] beyond the reasonable control of the party failing to perform,” ApltApp. at 129 (Section 13(A) of the contract), CWM strung Aquila along with assurances that its geological problems would be easily and quickly surmountable. Simply put, notice that a party to a contract has some soon-to-be rectified problem is materially and consequentially different from notice that a party has a serious and potentially enduring problem qualifying as a force majeure event.
IV
Whatever the success of its other liability arguments, CWM argues that Aquila waived its claim for breach of contract because Aquila “continued to accept deliveries of coal less in quantity and lower in quality than the contract required for a year and a half [after notice of the labor dispute as force majeure] and never declared a breach.” Aplt. Br. at 30. As CWM sees it, Aquila’s acceptance of defective performance amounted to a waiver of Aquila’s right to sue for breach; in CWM’s view, the proper course, and only means Aquila had to preserve its right to sue, was to “demand[ ] full performance or declaret ] a breach and eommence[ ] litigation within a reasonable time.” M
We approach the question of waiver cognizant that, under Missouri law, “[w]aiver is a question of intention, and is based upon knowledge of the circumstances.” Purington Paving Brick Co. v. Metro. Paving Co., 4 F.2d 676, 680 (8th Cir.1925). It is “an intentional relinquishment of a known right. To rise to the level of waiver, the conduct must be so manifestly consistent with and indicative of an intention to renounce a particular right or benefit that no other reasonable explanation of the conduct is possible.” Austin v. Pickett, 87 S.W.3d 343, 348 (Mo.Ct.App. 2002) (citations omitted). The dispositive question before us, then, is whether Aquila intended to renounce its right to sue.
We think the answer to this question is clearly no, and we are influenced by three facts in reaching this conclusion. First, the parties included a non-waiver clause in their contract expressly stating that the failure of one party to insist upon strict performance from the other ought not be construed as a waiver. ApltApp. at 131 (Section 16(A)). Second, rather than represent a waiver of a right to full performance, Aquila’s acceptance of partial performance was contemplated and perhaps even required by the parties’ force maj-eure clause. Under the terms of the parties’ force majeure provision, Aquila’s obligation to accept coal was suspended only to the extent that CWM’s obligation to supply coal was suspended by the force majeure, id. at 130 (Section 13(B)); had Aquila declined to accept CWM’s deficient shipments of coal, it may well have faced a suit for its own breach of contract. Third, to avoid any possible later confusion, Aquila wrote CWM a letter specifically stating that, “[f]or the avoidance of any doubt, Aquila does not, with this letter and the requests contained herein, waive any rights it has or excuse [CWM] Mining from any obligations it has under the Agreement, including, but not limited to, [CWM] Mining’s obligation to deliver coal to Aquila in the quantity and quality provided for under the Agreement.” Supp. App. at 148. CWM makes no effort to explain why the confluence of this letter and the explicit language in the contract contemplating and perhaps even requiring — but never penalizing — Aquila’s acceptance of partial coal shipments fails to resolve the waiver question definitively in Aquila’s favor.
V
Finally, CWM contends that Aquila failed to mitigate its damages by failing to negotiate its April 2005 contract with Consolidated on better terms. For example, CWM argues that market data revealed the spot price of coal in April 2005 to be $28 per ton, see Aplt. Br. at 41, while the Aquila-Consolidated contract provided for a price of $38.06 per ton, Supp.App. at 161.
We have difficulty evaluating CWM’s argument, however, because CWM provides no citation in the voluminous record before us to support its claim about the price of coal in April 2005. When a party’s brief fails to provide citations in support of its factual assertions, we are left to scan volumes aimlessly for asserted facts. But reading a record should not be like a game of Where’s Waldo? See Martin Handford, Where’s Waldo?: The Great Picture Hunt (2006). And it is within our power as a court to refuse to consider an argument in these circumstances. See MacArthur v. San Juan County, 495 F.3d 1157, 1161 (10th Cir.2007) (“It is indisputably within our power as a court to dismiss an appeal when the appellant has failed to abide by the rules of appellate procedure.”); Fed. R.App. P. 28(a)(9)(A) (appellant’s argument must contain “appellant’s contentions and the reasons for them, with citations to the authorities and parts of the record on which appellant relies”).
Even bypassing this defect and reaching the merits of CWM’s argument, however, there is plainly “factual support in the record” to support the district court’s finding that Aquila reasonably mitigated its damages. Keys Youth Servs., 248 F.3d at 1274. Not only was there evidence that the price of coal in the Consolidated contract was well within the range of market prices at the time, see Supp.App. at 143-44, but Abby Herl, Aquila’s director of coal procurement, testified that, for a variety of reasons, the Consolidated contract was the “best selection” among the options available to Aquila at the time, see Supp.App. at 79. The district court explicitly credited and relied on Ms. Herl’s testimony to conclude Aquila properly considered its options and took an appropriate course under the circumstances. Dist. Ct. Op. at 12-13. The Supreme Court has cautioned that “when a trial judge’s finding is based on his decision to credit the testimony of one of two or more witnesses, each of whom has told a coherent and facially plausible story that is not contradicted by extrinsic evidence, that finding, if not internally inconsistent, can virtually never be clear error.” Anderson v. City of Bessemer City, 470 U.S. 564, 575, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). Finding Ms. Herl’s testimony “coherent and facially plausible” and not “contradicted by extrinsic evidence,” we are in no position to disturb the district court’s factual finding.
The judgment of the district court is
Affirmed.
. See, e.g., Supp. App at 109 (CWM’s president testifying that after showing Mr. Rogers some of the geological problems he "didn’t seem too concerned because we did show him the reserves we had in the number three mine that we were developing toward”); Id. at 111 ("We [CWM] mentioned to them [Aquila] that with that hot coal that we had encountered, there was going to be some delay until we could mine around it and find a way around it and determine just how much it was going to affect the reserves. And then — but we did mention to them that we were getting ready to start the full production in the number four mine, and that was going to give us another section that would help that production.”)
. See, e.g., Frederick Jackson Turner, The Frontier in American History (2007 ed.); George F. Willison, Here They Dug the Gold (1950 ed.).
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1733441-22271 | GAJARSA, Circuit Judge.
DECISION
View Engineering, Inc. (“View”) appeals the July 1, 1998 decision of the United States District Court for the Central District of California, Docket 96-CV-2288, finding that View had infringed U.S. Patent No. 5,465,152 (“the ’152 patent”), issued to the Robotic Vision Systems, Inc. (“RVSI”), and holding the patent to be not invalid for obviousness under 35 U.S.C. § 103. Because the trial court did not err in its determinations, we affirm.
BACKGROUND
Robotic Vision Systems, Inc. (“RVSI”) manufactures and sells machines to perform inspections of integrated circuit devices. Until June 1998, View Engineering, Inc. (“View”) also manufactured and sold inspection equipment, in particular, its Model 880 inspection machine. Although RVSI and View do not manufacture chips themselves, they sell equipment for use by device manufacturers.
United States Patent No. 5,465,152 issued to RVSI on November 7, 1995. The patent is directed to a “Method for Copla-narity Inspection of Package or Substrate Warpage for Ball Grid Arrays, Column Arrays, and Similar Structures.” Ball grid arrays (“BGAs”) are integrated circuit devices that have an array of solder balls on one face. Each ball sits on a metal pad, known as a “signal pad,” which in turn sits on a “substrate” and connects the ball to the internal integrated circuitry. “Coplanarity” refers to the degree to which a set of points are in the same plane, i.e., how “flat” something is. At the time of the invention, ball-top coplanarity measurements were known in the prior art because it is important for device manufacturers to know the coplanarity of the solder balls to make sure that the BGA devices will mate properly with other devices.
The 152 patent discloses a method for using incident laser radiation to measure the coplanarity of a substrate. The measurements are not done on the substrate directly or on the ball-tops, but are done by using “index pads” on the substrate as targets to perform the measurements. According to the written description, these index pads can be separately manufactured pads used only to measure substrate coplanarity, or the index pads can be selected from signal pads that may or may not eventually be used as BGA sites. The only independent claim in the 152 patent is claim 1, which reads as follows:
1. A method for determining coplanarity of substrates for ball grid array, column grid array, and similar surface mount integrated circuit chips, using 3-D optical sensing means, comprising the steps of:
[1] providing opaque fiducials as index pads
[2] where the heights of said index pads are correlated with signal pad heights in a neighborhood about said index pads;
[3] said index pads being opaque to incident radiation from said 3-D optical sensing means;
[4] reflecting by said index pads sufficient radiation allow height measurement by said 3-D optical sensing means;
[5] disposing said index pads in a prearranged pattern over a domain of array signal pads;
[6] restricting said index pads to a predetermined range of heights;
[7] measuring the heights of each of at least three said index pads at said index pad coordinate locations;
[8] suitably fitting a preselected surface shape to the index pad height and coordinate location data;
[9] and calculating the difference in height between each index pad and the preselected surface shape evaluated at the index pad location.
(paragraphing and emphasis added). Dependent claims 3 and 12 are also at issue. They read as follows:
3. A method as defined in claim 1, wherein said index pads are metallic and opaque.
12. A method as described in claim 1, in which the index pads are identical with the signal pads rather than separately fabricated elements intended solely for use as fiducial pads, which index pads are located at signal pad sites occupied by array elements such as bga balls, columns or other; and determining coplanarity prior to deposition of grid array elements.
The written description of the 152 patent discloses three examples as preferred embodiments of the claimed method:
There must be a close correlation between the heights of the index pads and the signal pads since the objective of having the index pads is to provide a means of inferring the heights of the signal pads. This can be accomplished by properly designing the fabrication process. One means of accomplishing this is to use unused signal pads as index pads. A second means is to construct index pads by plating additional material on existing signal pads using photoresist masking techniques to avoid plating signal pads which are not dedicated to indexing. ...
There are innumerable ways of creating and disposing the index pads over the substrate only several of which will be detailed here. However, other embodiments which generally follow the concepts outlined here are considered to be covered by this disclosure.
Three approaches serve to illustrate the method. In the first two cases, the index pads are selected from the totality of pad on the substrate. In third case, the index pads are fabricated separately from the signal pads. In case one, the index pads are selected from the total number of available pads and dedicated for measurement purposes. That is, they are empty signal pads. They are distributed over the substrate surface so that their height provides a measure of the variations in signal pad coplanarity.
T52 Patent, col. 5,11. 80-57 (emphasis added). Therefore, the written description discloses the use of signal pads as index pads, and index pads that are separately fabricated.
RVSI filed suit against View alleging that View infringed the method claims of the ’152 patent through the View Model 880 inspection machine. The 880 machine measures BGA coplanarity by using bare signal pads as laser targets. View moved for summary judgment of noninfringement, arguing that properly interpreted, the claim required the manufacture or fabrication of the index pads along with their measurement. The court, on summary judgment, rejected this argument and held that the language of claim 1 - specifically the terms “providing,” “correlating,” “disposing,” and “restricting” - did not require separate manufacture of the index pads, and encompassed the selection of pre-existing signal pads as index pads for measurement purposes. A bench trial followed; the court reiterated its summary judgment claim construction and found the View Model 880 accused device to infringe claims 1, 3, and 12.
In its opinion, the court stated that: Properly interpreted, the T52 patent requires that index pads, disposed in a particular arrangement, be provided for measurement, and that the heights of these index pads should be correlated with that of signal pads and restricted to a specific range of heights. The selection of index pads for measurement can satisfy these requirements. Claim 12 requires identical signal and index pads; Claim 1 permits either separate index pads and signal pads or identical signal pads/index pads.
Slip op. at 8.
The court based this interpretation on the claim language and on the examples disclosed in the written description, which described embodiments of the claimed method using both separately manufactured index pads and index pads that were chosen from pre-existing signal pads. Based on this interpretation, the court found the Model 880 device to infringe the ’152 patent.
The court also addressed View’s obviousness defense, which it rejected. The court found that one of ordinary skill in the art would be either: (1) a person with a B.S. degree in engineering, mathematics, or a technical discipline; (2) an applications engineer; or (3) a person with knowledge based on experience equivalent to (1) or (2). The court further found that the date of the invention was no later than January 31, 1994. Based on its factual findings, including those concerning objective evidence of nonobviousness, the court held that the invention of the T52 patent would not have been obvious to one of ordinary skill in the art. View now appeals the court’s finding of infringement and its holding of non-obviousness.
DISCUSSION
I. Claim Construction and Infringement
Determining whether a patent claim has been infringed involves two steps: (1) claim construction to determine the scope and meaning of the claims asserted to be infringed, followed by (2) a determination of whether the properly construed claim encompasses the accused method. See Markman v. Westview Instruments, Inc., 52 F.3d 967, 976, 34 USPQ2d 1321, 1326 (Fed.Cir.1995) (en banc), aff'd, 517 U.S. 370, 116 S.Ct. 1384, 134 L.Ed.2d 577 (1996). Claim construction is a matter of law that we review de novo. See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1455, 46 USPQ2d 1169, 1173 (Fed.Cir.1998) (en banc). Whether a claim encompasses an accused method, either literally or under the doctrine of equivalents, is a question of fact that we review for clear error when tried to the court. See SRI Int’l v. Matsushita Elec. Corp. of Am., 775 F.2d 1107, 1125, 227 USPQ 577, 589 (Fed.Cir.1985) (en banc).
View does not dispute that it performs the measuring steps of the method recited in claim 1 of the ’152 patent - elements 7, 8 and 9 - however, View argues that it does not perform what it calls the fabrication or manufacturing steps of the claim - elements 1 through 6. View states that its Model 880 machine does not “provide,” “correlate,” “dispose” or “restrict” the pads- in any way, it merely selects device signal pads as measurement targets. View contends, therefore, that the accused method cannot infringe the 152 patent because the accused method does not perform all the necessary steps. View argues that the district court erred in its claim construction because the court did not base its claim construction on the language of the claims. View contends that the district court ignored the ordinary and customary meanings of terms “provide,” “correlate,” “dispose,” “restrict,” and “select” and instead the court looked to the examples provided in the written description of the 152 patent to interpret the claim. View asserts that the district court’s reliance on all three examples disclosed in the written description to interpret claim 1 is incorrect. View argues that example 3, in which the index pads are separately manufactured, is actually the preferred embodiment of the claimed invention and the first two examples, in which index pads are selected from the signal pads, are not embodiments of the invention disclosed in claim 1.
View further contends that as construed by the district court, the providing, correlating, disposing and restricting steps have been read out of claim 1. The “providing” element was read out of the claim by interpreting this limitation to cover selecting signal pads for measurement. The correlating step was also eliminated by the district court; correlation, according to View, requires comparing two separate things with each other whereas the district court’s interpretation allows something to be correlated with itself. View also claims that the “disposing” step has also been reduced to a non-limitation by the district court.
Finally, View argues that the plain language of claim 12 also indicates that claim 1 was not meant to cover an embodiment in which the index pads were not separately manufactured. Claim 12 reads as follows: “[a] method as described in claim 1, in which the index pads are identical with the signal pads rather than separately fabricated elements intended solely for use as fiducial pads.... ” View contends that the use of the phrase “rather than” indicates that claim 12 is to be distinguished from claim 1, in which the index pads are “separately fabricated elements intended solely for use as fiducial pads.” Therefore, claim 1 cannot encompass the method in which index pads are chosen from signal pads.
RVSI argues that based on the intrinsic evidence - the claims themselves, the writ ten description in the ’152 patent, and the prosecution history - the district court correctly construed the claims at issue. RVSI points out that the written description provides examples of the invention in which the claim elements may be satisfied by selecting a pre-existing signal pad as an index pad. RVSI also argues that the plain language of dependent claims 11 and 12 specifically requires that the index pads be selected from the signal pads, as disclosed in examples 1 and 2; therefore the limitations in claims 11 and 12, as dependent claims of claim 1, must be included in claim 1 as well.
Next, RVSI argues that the prosecution history of the ’152 patent supports the court’s claim construction. As filed, claim 1 did not contain elements 7, 8, and 9 - the explicit measurement steps. The examiner rejected claim 1 as
being indefinite for failing to particularly point out and distinctly claim the subject matter which applicant regards as the invention.... Claim 1 does not clearly and definitely set forth the actual measurement of the ball grid array signal pads and the index pads, although the claim does appear to intend to claim this measurement and appears to require such measurement.
RVSI contends that this indicates that the examiner realized that it was the measurement method that was the claimed invention, not some sort of fabrication or manufacturing process as View claims.
Finally, RVSI asserts that View’s dictionary definitions of the disputed terms, as extrinsic evidence, are not relevant if the context of the patent uses them differently. In this case, RVSI contends that the district court correctly decided not to interpret claim 1 of the T52 patent in light of the dictionary definitions because the intrinsic evidence adequately defined the terms. The court explicitly recognized that it was construing the disputed terms “in the context of the ’152 patent.” As a result, RVSI argues that the court correctly found that View’s device infringes the ’152 patent because contrary to View’s arguments, the claims at issue do not require a specific manufacturing step.
When construing a claim, a court should first look to the intrinsic evidence, i.e., the patent itself, including the claims, the written description, and the prosecution history, if in evidence. See Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582, 39 USPQ2d 1573, 1576 (Fed.Cir.1996). Often, the intrinsic evidence alone will resolve any ambiguity in a disputed claim term, and in such instances, reliance on extrinsic evidence is improper. See id. at 1583, 90 F.3d 1576, 39 USPQ2d at 1577. All claim interpretation begins with the language of the claims. See Johnson Worldwide Assoc., Inc. v. Zebco Corp., 175 F.3d 985, 989, 50 USPQ2d 1607, 1609 (Fed. Cir.1999); Bell Communications Research, Inc. v. Vitalink Communications Corp., 55 F.3d 615, 619-20, 34 USPQ2d 1816, 1819 (Fed.Cir.1995). View argues that by using, the terms “providing ... fiducials,” “correlated ... heights,” “disposing ... in a prearranged pattern,” and “restricting ... to a predetermined range of heights,” claim 1 of the ’152 patent is limited to the separate fabrication of index pads and does not encompass the use of signal pads as index pads. It is not clear to us that claim 1 is meant to be read this way, even using the ordinary and accustomed meaning of the disputed terms. We turn to the written description for clarification of these terms. See Johnson, 175 F.3d at 990, 50 USPQ2d at 1610 (stating that a court may look to a written description for meaning of terms at variance with the ordinary and accustomed meaning of terms if “the term or terms chosen by the patentee so deprive the claim of clarity that there is no means by which the scope of the claim may be ascertained from the language used.”). The written description clearly discloses embodiments of the patent, consistent with the language used in claim 1, in which index pads are unused signal pads (which may or may not be used later), and in which index pads are separately manufactured.
Furthermore, beyond the language of claim 1, the plain language of claims 4, 11, and 12 support such a reading of claim 1. Claim 4 reads as follows:
A method as defined in claim 1, wherein said index pads are produced separately from the signal pads.
and claims 11 and 12 both begin with the following:
A method as described in claim 1, in which the index pads are identical with the signal pads rather than separately fabricated elements intended solely for use as fiducial-pads....
View argues that the clause “rather than” in claims 11 and 12 seeks to distinguish those two claims, in which the index pads are identical with the signal pads, from claim 1 in which the index pads are separately fabricated elements. This is, however, clearly an incorrect way of reading claims 11 and 12. Claims 11 and 12 are dependent claims of claim 1 and are to be construed to incorporate by reference all the limitations of claim 1. See 35 U.S.C. § 112 (1994). View’s construction incorrectly attributes the requirement of separately fabricated index pads to an independent claim when it is clear that a claim that depends from that independent claim does not incorporate that limitation.
Similarly, the only further limitation to claim 1 disclosed by dependent claim 4 is the limitation “wherein said index pads are produced separately from the signal pads.” If claim 1 were limited to separate fabrication of index pads, claim 4 would necessarily be redundant and would add no additional limitations. This would again be an absurd construction of claim 4 as a dependent claim of claim 1.
Therefore, we hold that the district court’s interpretation of the T52 patent, construing claim 1 to encompass a measurement method in which the index pads can be separately fabricated or simply selected from existing signal pads, is correct. Claim 3 adds the additional limitation to claim 1 that the index pads be metallic and opaque. Claim 12 adds the limitation to claim 1 that the index pads be identical to the signal pads, and that the coplanarity measurements are performed before grid array elements are deposited on the substrate. View makes no argument that the district court incorrectly applied its claim construction to the accused method practiced by View’s Model 880 machine. We find no reversible error in the district court’s application of the claims at issue to the accused method, and therefore affirm the district court’s finding of infringement of claims 1, 3 and 12 of the ’152 patent.
II. Obviousness
The second issue on appeal is the district court’s holding that the T52 patent is not invalid for obviousness under 35 U.S.C. § 103. A claimed invention is unpatentable if the differences between it and the prior art “are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art.” 35 U.S.C. § 103(a) (1994); see Graham v. John Deere Co., 383 U.S. 1, 13-14, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966). On appeal from a bench trial, the ultimate determination of whether an invention would have been obvious under 35 U.S.C. § 103 is a legal conclusion that we review de novo. See Gentry Gallery v. Berkline Corp., 134 F.3d 1473, 1478, 45 USPQ2d 1498, 1502 (Fed.Cir.1998). An obviousness determination is based on underlying factual inquiries including: (1) the scope and content of the prior art; (2) the level of ordinary skill in the art; (3) the differences between the claimed invention and the prior art; and (4) objective evidence of nonobviousness. See Graham, 383 U.S. at 17-18, 86 S.Ct. 684; Miles Labs., Inc. v. Shandon Inc., 997 F.2d 870, 877, 27 USPQ2d 1123, 1128 (Fed.Cir.1993). The underlying factual determinations on which the legal conclusion of non-obviousness is based are reviewed for clear error. See Gentry Gallery, 134 F.3d at 1478, 45 USPQ2d at 1502. ‘“A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.’ ” In re Graves, 69 F.3d 1147, 1151, 36 USPQ2d 1697, 1700 (Fed.Cir.1995) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)). There is a strong presumption of validity for issued patents, see 35 U.S.C. § 282 (1994), therefore an accused infringer who raises patent invalidity as a defense bears the burden of showing invalidity by facts supported by clear and convincing evidence. See Monarch Knitting Mach. v. Sulzer Morat Gmbh, 139 F.3d 877, 881, 45 USPQ2d 1977, 1981 (Fed.Cir.1998).
View’s main argument on appeal is that if the claims are to be construed as broadly as the district court interpreted them to be (i.e., not requiring the separate manufacture of index pads) then the claimed invention would have been obvious in light of the prior art ball top coplanarity measurement methods combined with a clear suggestion by Mr. Don Banks in his December 14, 1993 letter to Steve Bilodeau, the inventor of the ’152 patent, requesting that RVSI perform bottom surface metallization (“BSM”) measurements on certain substrates. View argues that this letter indicates that Banks requested RVSI to use signal pads, rather than ball tops, as targets to measure substrate war-page. View contends that one of ordinary skill in the art would have found it obvious, given this instruction, to then substitute signal pads for ball tops, using the ball-top coplanarity measurement method. View asserts that the only difference between the coplanarity measurement method disclosed in the T52 patent and that known in the prior art is the selection of a target.
RVSI argues that in concluding that the method claimed in the T52 patent would not have been obvious, the district court made factual findings that the prior art does not teach the claimed methods and that those of ordinary skill in the art had failed to practice the claimed invention. The court also found that View’s proposed combination of prior art fails to teach or suggest the claimed invention. RVSI also contends that View misinterprets the contents of the Banks letter and that the letter makes no suggestion to use signal pads for coplanarity measurements.
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5680342-8537 | ORDER
RUSSELL G. CLARK, Chief Judge.
Plaintiff commenced this action under the provisions of 42 U.S.C. § 405(g) seeking review of defendant’s denial of social security insurance benefits and supplemental security income under the Social Security Act. The action now is pending before this Court on cross motions for summary judgment. For the following reasons the ALJ’s decision will be vacated and the cause will be remanded.
The form and scope of judicial review of the defendant’s decision is statutorily defined and limited. Under 42 U.S.C. § 405(g), the Secretary’s decision is conclusive if supported by substantial evidence. Alexander v. Weinberger, 536 F.2d 779, 784 (8th Cir. 1976); Yawitz v. Weinberger, 498 F.2d 956, 957 (8th Cir. 1974). Substantial evidence is defined to be such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Russell v. Secretary of HEW, 540 F.2d 353, 356 (8th Cir. 1976).
The claimant has the initial burden of establishing the existence of a disability as defined by 42 U.S.C. § 423(d)(1). In order to meet this burden, the claimant must show (1) a medically determinable physical or mental impairment that will last for at least twelve months, and (2) that this inability results from his impairment. Timmerman v. Weinberger, 510 F.2d 439, 442 (8th Cir. 1975). Once a claimant demonstrates that his impairment is so severe as to preclude him from engaging in his former occupation, however, the burden shifts to the Secretary to prove some alternative form of substantial gainful employment that the claimant could perform. Johnson v. Califano, 572 F.2d 186, 187 (8th Cir. 1978).
There are two methods by which the Secretary can meet his burden of proving that the claimant can perform substantial gainful employment. The time honored method, of course, is the hearing examiner’s production of a vocational expert who expresses an opinion on whether the claimant can perform alternative employment which is available in the national economy. Garrett v. Richardson, 471 F.2d 598, 603-604 (8th Cir. 1972) (“[T]he burden of producing [a vocational expert] must rest with the hearing examiner and in the absence of substantial evidence from other sources bearing directly on the issues of ‘substantial gainful activity,’ the testimony of a vocational counselor is essential for the affirmance of an [ALJ’s] findings.”) In the instant case, the Secretary chose not to produce a vocational expert (Tr. 10, 13-16).
The Eighth Circuit Court of Appeals, nevertheless, has recently approved another method by which the Secretary can meet his burden of proving that the claimant can perform alternative employment. In McCoy v. Schweiker, 683 F.2d 1138 (8th Cir. 1982) (hereinafter “McCoy”), the Court, en banc, approved the Secretary’s use of Appendices 1 and 2 to Subpart P, Medical-Vocational Guidelines, 20 C.F.R. §§ 404.1501 et seq. (1981) (“Grids”) in a limited number of cases. Should the claimant’s particular characteristics of residual functional capacity (“RFC”), age, education and work experience, as developed by the record, match the characteristics set forth in the Grid, the Secretary may apply the Grid which directs a finding of disabled or not disabled without the use of a vocational expert. In its opinion, however, the Court was careful to point out that the Grids are not a panacea. McCoy, p. 1149 (“A large measure of individualized adjudication remains a necessary condition precedent to the ‘grids’ application, and our case law remains fully vital in those many cases where, for one reason or another, the ‘grid’ does not apply.”). The Secretary may use the Grid, rather than a vocational expert, only if: (1) the claimant is given pre-hearing notice of the “application and contents of the Guidelines...” McCoy, p. 1147, (2) the claimant’s impairment is exertional rather than non-exertional, McCoy, p. 1148, and (3) the claimant’s particular combination of RFC, age, education and work experience as developed by the record coincide exactly with the criteria set forth in the Grid, McCoy, p. 1146 (“If a claimant’s relevant characteristics differ in any material respect from those of the grid, the Guidelines cannot be applied, and all the pre-existing requirements of case law, including the customary insistence on the use of vocational experts, retain their full vigor”). The court further explained that a claimant must have a RFC to perform a full and wide range of work on a sustained basis in any given Grid category of exertional capacity, and the findings on the age, education and work experience criteria are not to be mechanical, but rather “the inquiry will be more or less involved depending on the unique facts of each individual case.” McCoy, pp. 1147-1148. Turning to the case at bar, the Secretary’s decision must be vacated because (1) under the Secretary’s own rules, the Grid is inapplicable and (2) the ALJ’s findings concerning the plaintiff’s RFC and that the plaintiff’s complaints of pain were incredible are not supported by substantial evidence based on the record as a whole.
Under the Secretary’s own rules, the Grid should not have been applied in this case. In his decision, the Administrative Law Judge (“ALJ”) found that the record established that claimant “has a status post-operative total right hip replacement arthroplasty, a status post fracture of the pelvis.... ” (Tr. 15). In effect, plaintiff’s right hip joint was replaced with a plastic substitute. The ALJ also found that the “claimant is unable to perform his past work. . . . ” (Tr. 15). At this point, the burden shifted. McCoy, p. 1147. Based on a RFC report submitted by Evelyn Griffin, M.D., finding plaintiff capable of perform ing certain tasks, the ALJ also found plaintiff able to perform sedentary work (Tr. 15, 112). Applying this RFC along with plaintiff’s age, education and experience, the ALJ determined that Rule 201.24 of the Sedentary Grid directed that claimant be found “not disabled.”
Unfortunately, the footnote to Rule 201.24 expressly provides that the Grid should not be applied in this case. That footnote refers the reader to Rule 201.00(h) which states:
However, a finding of disabled is not precluded for those individuals under age 45 who do not meet all the criteria of the specific rule and who do not have the ability to perform a full range of sedentary work. The following examples are illustrative: Example 1: An individual under age 45 with a high school education can no longer do past work and is restricted to unskilled sedentary jobs because of a severe medically determinable cardiovascular impairment (which does not meet or equal the listings in Appendix 1). A permanent injury of the right hand limits the individual to sedentary jobs which do not require bilateral manual dexterity. None of the rules in Appendix 2 are applicable to this particular set of facts, because this individual cannot perform the full range of work defined as sedentary. Since the inability to perform jobs requiring bilateral manual dexterity significantly compromises the only range of work for which the individual is otherwise qualified (i.e., sedentary), a finding of disabled would be appropriate.
The above example is truly illustrative of the plaintiff’s case. Based on the record, the ALJ found that the claimant had recently undergone a total right hip replacement. However, the ALJ and Dr. Griffin, who submitted plaintiff’s RFC report, overlooked evidence that plaintiff has limited use of his right hand. Plaintiff testified that he injured his hand when he was a painter, and due to lack of proper medical attention, the right middle finger became infected and gangrenous (Tr. 45-46). Plaintiff stated that hoses were medically inserted between his hand and fingers to drain the infection (Tr. 45-46). Plaintiff claims to have no use of his right middle finger (Tr. 38-39, 46). Plaintiff also testified that at a prior job he could not perform certain work because his right hand lacked the dexterity to manipulate small screws (Tr. 37-38). In his decision, the ALJ did not consider or mention this evidence. Furthermore, Dr. Griffin found that there was no restriction on plaintiff’s use of his right hand when, in fact, the only evidence in the record was that the hand was restricted (Tr. 112). Since the injury to plaintiff’s right hand precludes him from performing a full range of sedentary work, “[njone of the rules in Appendix 2 are applicable to this particular set of facts.. . . ” Rule 201.00(h).
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3776362-21487 | KANNE, Circuit Judge.
This consolidated appeal arises from a foiled bank robbery. The robber, Jorge Quintero, and his getaway driver and girlfriend, Claudia Martinez, challenge their sentences. Quintero pled guilty to all four counts in the indictment against him. Despite his plea agreement, the government declined to recommend a three-point reduction for acceptance of responsibility because he perjured himself and obstructed justice. Quintero argues, however, that a provision in his plea agreement required the government to recommend the reduction. Martinez was indicted on three counts and her case proceeded to trial. She contends that an erroneous jury instruction and an inaccurate computation of the Sentencing Guidelines made her sentence unreasonable. We dismiss Quintero’s appeal on waiver -grounds and affirm Martinez’s conviction and sentence.
I. Background
On March 1, 2008, Martinez drove Quintero to the Fifth Third Bank in Lafayette, Indiana. Martinez claims that Quintero merely requested a ride to the bank to make a withdrawal- — which was accurate in one respect, but a substantial understatement of what actually ensued. Instead of parking at the bank like a typical customer, Martinez parked her van in a Target store parking lot adjacent to the bank. Quintero entered the bank wearing a mask, announced that he was robbing the bank, ordered the bank tellers to load money into his bag, and discharged his handgun. After grabbing more than $20,000 in cash, he fled the bank and jumped into the backseat of Martinez’s van — carrying his mask, gun, and the bag of cash. Shortly thereafter, Lafayette police officers spotted the vehicle and twice attempted to pull it over before Martinez led the officers on a high-speed chase. After crashing the van, Martinez attempted to flee but was apprehended.
In the van, police officers found the stolen cash, the mask worn during the robbery, and the gun fired in the bank. On the front passenger seat, next to where Martinez had been sitting, the officers also found a second ski mask, a woman’s wig in a purse, and a loaded semi-automatic handgun. Martinez was also dressed in an insulated jumpsuit, which appeared highly unusual given the warm weather that day. Nevertheless, Martinez claims that she was no Bonnie to Quintero’s Clyde; rather, she asserts that she was completely unaware of the bank robbery until after the fact, and that she fled because Quintero convinced her that the police were pursuing her for cocaine possession.
On July 2, 2008, a grand jury indicted both Quintero and Martinez. The indictment set forth the following counts: (1) bank robbery by force, violence, or intimidation in violation of 18 U.S.C. §§ 2113(a) and 2; (2) discharge of a firearm in relation to a crime of violence in violation of 18 U.S.C. §§ 924(c)(1), 2113(a), and 2; (3) knowing possession of a firearm and ammunition as an illegal alien in violation of 18 U.S.C. §§ 922(g)(5)(A), 924(a)(2), and 2. The indictment also individually charged Quintero and Martinez, counts 4 and 5 respectively, with unlawful entering and remaining in the United States in violation of 8 U.S.C. § 1325(a). Quintero was indicted on the first four counts; Martinez was indicted on counts one, two, and five.
Quintero entered into a plea agreement on December 9, 2009, agreeing to plead guilty to all counts. The initial pre-sentence investigation report (PSR) provided a base offense level of 20 for counts one and three. The report also added two points because property was taken from a financial institution, one point because the loss exceeded $10,000, and two points because Quintero recklessly created a substantial risk of death or serious bodily injury to another person when he fled from officers. It deducted three points for acceptance of responsibility, resulting in a total offense level of 22 with a criminal history category of I. The report recommended a guidelines range of 41 to 51 months’ imprisonment for counts one and three.
The probation office, however, revised the PSR on April 26, 2009, following Mar tinez’s trial. The amended report added two points to Quintero’s base offense level for obstruction of justice because Quintero had perjured himself at Martinez’s trial, and the revised PSR removed the three-point reduction for acceptance of responsibility. The revised PSR calculated Quintero’s total offense level at 27, which resulted in a recommended guidelines range of 70 to 87 months’ imprisonment. Count two remained the same.
On June 23, 2009, the district court sentenced Quintero. He was sentenced to 70 months’ imprisonment on each of counts one and three, and a term of six months on count four, all to run concurrently. Because count four was a misdemeanor, the court determined that the sentencing guidelines did not apply. See U.S.S.G. § 1B1.9. The court also sentenced Quintero to 120 months’ imprisonment on count two, to run consecutively with the sentence imposed for the other counts.
At the conclusion of Martinez’s three-day trial and prior to submission of the case to the jury, Martinez objected to the district court’s jury instruction regarding accomplice liability. Martinez claimed that the instruction presented an erroneous statement of law and, read in conjunction with all of the final instructions, misled the jury and prejudiced her. The district court overruled the objection. The jury found Martinez guilty of bank robbery and unlawfully remaining in the United States, but not guilty of discharging a firearm.
The probation office then prepared a PSR. Martinez objected to the report’s calculation of the guidelines sentence because it included a seven-level enhancement for discharge of a firearm even though she had been acquitted of that charge. The district court sentenced Martinez in accordance with the recommendation in the PSR. The court gave Martinez the lowest-end sentence for count one— 121 months — and six months’ imprisonment for count four.
II. Analysis
A. Quintero
On appeal, Quintero argues that the government breached the terms of the plea agreement by refusing to recommend a reduction in his sentence for acceptance of responsibility and by recommending a two-point enhancement to the base offense level for obstruction of justice. The district court therefore erred, he argues, by accepting the government’s position. He also argues that the district court erred by failing to hold an evidentiary hearing to determine if a substantial breach of his plea agreement occurred. In response, the government argues that Quintero waived his right to appeal in accordance with the plea agreement and, in any event, it did not breach the agreement.
As an initial matter, we address the government’s argument that Quintero waived his statutory right to appeal. If we find that the waiver is enforceable, we need not proceed further. We review de novo whether a waiver of appellate review contained in a plea agreement should be enforced as a matter of law. United States v. Chapa, 602 F.3d 865, 868 (7th Cir.2010); Jones v. United States, 167 F.3d 1142, 1144 (7th Cir.1999). “It is well-settled that appellate waivers in plea agreements are generally enforceable.” Chapa, 602 F.3d at 868; United States v. Woods, 581 F.3d 531, 534 (7th Cir.2009). However, this is not an absolute rule, Chapa, 602 F.3d at 868 (citing United States v. Mason, 343 F.3d 893, 894 (7th Cir.2003)); we will enforce a waiver only if the disputed appeal falls within the general ambit of the waiver, id. (citing United States v. Vega, 241 F.3d 910, 912 (7th Cir.2001) (per curiam)).
A plea agreement is a contract and is therefore governed by ordinary contract law principles. United States v. Patterson, 576 F.3d 431, 438 (7th Cir.2009). Accordingly, an appellate waiver is generally valid if it is made knowingly and voluntarily, see United States v. Cole, 569 F.3d 774, 776 (7th Cir.2009); United States v. Jemison, 237 F.3d 911, 917 (7th Cir.2001); Jones, 167 F.3d at 1144, and if the language of the waiver is express and unambiguous, Chapa, 602 F.3d at 868. On appeal, “[w]e interpret the terms of the agreement according to the parties’ reasonable expectations” and construe any ambiguities in the light most favorable to Quintero. Woods, 581 F.3d at 534 (citing Vega, 241 F.3d at 912).
We turn first to the plain language of the plea agreement. In pertinent part the agreement states:
I [Quintero] understand that the law gives a convicted person the right to appeal the conviction and the sentence imposed; I also understand that no one can predict the precise sentence that will be imposed.... I expressly waive my right to appeal or to contest my conviction and my sentence ... to any Court on any ground....
(Quintero’s App. at 11.) It is clear that Quintero expressly waived his right to appeal, and there is nothing on the face of the agreement that appears ambiguous in such a way as to indicate that Quintero did not understand the terms to which he agreed.
We also look to the plea colloquy to determine if the district court judge properly informed the defendant that the waiver may preclude his right to appeal. Woods, 581 F.3d at 534 (citing United States v. Woolley, 123 F.3d 627, 632 (7th Cir.1997)). In Quintero’s case, the district court made it clear that the plea agreement contained the appellate waiver and that the waiver potentially barred his rights to an appeal. The district court explained, “[I]f you wish to file an appeal ... for the most part you have waived the rights to an appeal by plea agreement.... Do you understand?” (Quintero’s Short App. at 26.) After Quintero responded in the affirmative, the court then addressed Quintero’s counsel and emphasized the importance of the waiver: “I would suggest to you strongly that you ... explain to the defendant his rights of appeal ... and what he has waived....” (Id.) We find that the plea agreement and plea colloquy demonstrate that Quintero knew and understood the plea agreement. Accordingly, Quintero made a knowing and voluntary waiver of his right to appeal.
Quintero charges, however, that because the government breached a mandatory provision of the plea agreement, his right to appeal was revived and he is entitled to specific performance of that provision. But Quintero fails to recognize that it was he who breached the plea agreement.
Although there must generally be a “meeting of the minds” on the essential elements of a plea agreement, see United States v. Barnes, 83 F.3d 934, 938 (7th Cir.1996), a prosecutor is not necessarily bound to recommend a reduction in the sentence for acceptance of responsibility, see United States v. Whitlow, 287 F.3d 638, 640 (7th Cir.2002) (holding that the appellate waiver was not abrogated by defendant’s claim that the government failed to recommend a reduction in his sentence). Although the government did walk away from its recommendation of a sentence reduction, Quintero’s argument turns the sequence of events on its head.
It was Quintero who first broke the terms of the plea agreement when he perjured himself in Martinez’s trial and obstructed justice. An obstruction of justice charge almost always necessarily militates against an acceptance of responsibility recommendation by the government and a sentence reduction by the district court. Whitlow, 287 F.3d at 639. Further, the plea agreement specifically stated that “the government is not obligated to recommend ... [an] acceptance of responsibility adjustment if [Quintero] ... engage[s] in additional criminal conduct....” (Quintero’s App. at 10-11.) Quintero’s own conduct caused the district court to remove the three-point reduction for acceptance of responsibility and to enhance Quintero’s sentence by two points for obstruction of justice.
“A waiver of appeal does not authorize a prosecutor to dishonor his promises .... ” Whitlow, 287 F.3d at 640. But “[u]nless a prosecutor’s transgression is so serious that it entitles the defendant to cancel the whole plea agreement, a waiver of appeal must be enforced.” Id. While we are acutely aware of the limitations of waivers of appeal, id. at 642 (Wood, J., concurring) (“[W]e have ... taken care to respect the limits on [appeal] waivers.”), “[o]nly arguments that would nullify the plea itself survive,” United States v. Behrman, 235 F.3d 1049, 1052 (7th Cir.2000). In other words, “a waiver stands or falls with the plea bargain of which it is a part.” Nunez v. United States, 546 F.3d 450, 454 (7th Cir.2008) (concluding that if the guilty plea stands, so does the waiver of appeal); see also United States v. Hare, 269 F.3d 859, 861 (7th Cir.2001).
As noted earlier, Quintero knowingly and voluntarily waived his right to appeal. The district court properly addressed the waiver and confirmed Quintero’s understanding of his rights during the plea colloquy. The fact that the prosecution declined to recommend a reduction following Quintero’s perjury in his co-defendant’s trial does not negate the entire plea agreement nor the waiver provision. See Hare, 269 F.3d at 862 (“Although [the appellant] contends that the prosecutor broke his promise to recommend a lower sentence, the waiver prevents us from considering that contention.... ”). It would be an absurdity to allow a defendant who obstructs justice to gain the benefit of a plea bargain while escaping the detriment of an appellate waiver. As we said in United States v. Wenger, “[e]mpty promises are worthless promises.... Defendants must take the bitter with the sweet.” 58 F.3d 280, 282, 283 (7th Cir.1995). This particular point was addressed in Hare:
If the defendant does not keep his promises, the prosecutor is not bound either. This is established for broken agreements to cooperate. A defendant who promises as part of his plea agreement to provide truthful information or testify in some other case, and who does not carry through, forfeits the benefits of the agreement, and the United States is free to reinstate dismissed charges and continue the prosecution.
269 F.3d at 862. Quintero made his own bed by choosing to commit perjury, no matter his alleged intentions, and now he must lie in it. His right to appeal was properly waived.
We pause to note that even assuming arguendo that Quintero’s right to appeal was revived, his claim nonetheless fails. Quintero lost any hope of an entitlement to a reduction for acceptance of responsibility when he committed perjury. Quintero argues that although he committed perjury in Martinez’s trial, it was because he was attempting to take all the blame for the robbery and shield his girlfriend from any liability. He therefore claims that his perjury was an acceptance of responsibility and did not violate the terms of the plea agreement. Quintero misunderstands what it means to accept responsibility. Testifying falsely to exculpate Martinez is detrimental to the justice process and constitutes obstruction of justice. United States v. Arambula, 238 F.3d 865, 870 (7th Cir.2001). Quintero is therefore presumed under the sentencing guidelines to have denied responsibility. U.S.S.G. § 3E1.1, Application Note 4; United States v. Larsen, 909 F.2d 1047, 1049 (7th Cir.1990). Accordingly, the district court did not err when it found that Quintero was not entitled to a reduction for acceptance of responsibility and was eligible for a two-point enhancement for obstruction of justice.
The district court also did not err when it refused to hold an evidentiary hearing because it was not necessary. The district court had all the evidence before it: the written plea agreement, the transcript of the oral plea agreement, Martinez’s trial transcript, and the PSR. The district court had sufficient evidence to conclude that Quintero, not the government, breached the agreement by perjuring himself at Martinez’s trial, and his enhancement for obstruction of justice was therefore justified.
B. Martinez
Martinez’s primary argument on appeal is that on the issue of accomplice liability the district court erred by providing instruction number twenty to the jury over Martinez’s objection. Martinez argues that this instruction conflicted with jury instruction number nineteen, and therefore, it was an erroneous statement of the law, it misled the jury, and it ultimately prejudiced her.
We review de novo whether jury instructions “fairly and accurately summarize the law,” and we will reverse only if the instructions, when viewed in their entirety, so misguided the jury that they led to appellant’s prejudice. United States v. Webber, 536 F.3d 584, 599 (7th Cir.2008) (internal quotation marks and alterations omitted).
We begin by looking to the plain language of the two jury instructions regarding accomplice liability. In pertinent part, instruction nineteen provides:
Any person who knowingly aids ... the commission of an offense may be found guilty of that offense. That person must knowingly associate with the criminal activity, participate in the activity, and try to make it succeed.... A defendant’s guilt may be established without proof that the defendant personally performed every act constituting the crime charged.
(Government’s Br. at 11, quoting Final Instruction 19.) Jury instruction nineteen represents a typical aiding and abetting jury instruction.
Martinez argues, however, that instruction nineteen was contradicted by instruction twenty, which states:
If a person knowingly assists in the escape phase of a bank robbery, he or she is Guilty of aiding and abetting bank robbery. This is true even if that person is unaware of the bank robbery until he or she begins assisting in the escape phase of the bank robbery. Driving a get away car is participating in the escape phase of a bank robbery.
(Id., quoting Final Instruction 20.) Despite an absence of case law to support her argument, Martinez claims that it is an incorrect statement of the law that a person is culpable for a bank robbery when she was not aware of the robbery until the “escape phase,” and that a person participates in the “escape phase” of the robbery by driving the getaway car without any proof of the person’s knowledge that a robbery had, in fact, taken place. In essence, Martinez argues that instruction twenty is in conflict with instruction nineteen, which exculpates a person that provides assistance but has no knowledge of the crime.
Although Martinez’s argument that instruction twenty clouded instruction nineteen appears logical when each is read in isolation, the skies clear when the instructions are read as a whole. While instruction nineteen represents a model aiding and abetting instruction, instruction twenty presents the well-established legal proposition that the escape phase of a bank robbery is in fact part of the robbery itself. See United States v. Wilkins, 659 F.2d 769, 773 (7th Cir.1981).
Martinez argues, however, that instruction twenty permitted the jury to convict her without requiring the government to prove that she knowingly assisted in the bank robbery. We agree, however, with the government that the jury instructions were correct statements of the law. Instruction twenty explicitly provided that to be found guilty of aiding and abetting, Martinez must have “knowingly assisted] in the escape phase of a bank robbery.” Because the escape phase is part and parcel of a bank robbery, knowledge of the bank robbery that comes into being after the robbery but in connection with the getaway is knowledge of the ongoing criminal conduct itself. Therefore, any person that knowingly participates in the escape phase of a bank robbery becomes a principal actor in the robbery. Wilkins, 659 F.2d at 773; see also United States v. Moore, 936 F.2d 1508, 1526 (7th Cir.1991).
Jury instruction twenty was thus a correct statement of the law, and it did not conflict with instruction nineteen. Because Martinez knowingly and willfully participated in the escape phase of the bank robbery by driving the car in an obvious “getaway” fashion, and thereby becoming, if she was not already, a principal in the crime, the district court did not err by giving instruction twenty to the jury.
We also note that based on the numerous incriminating facts of this particular case, common sense must prevail as to whether the jury could actually have been misguided by these two instructions when read together. Martinez drove Quintero to the bank in her van. Instead of parking in the bank parking lot, she parked in a lot adjacent to the bank’s lot. When Quintero got out of her van to go into the bank, he carried with him a gun, a mask, and a bag he later used to collect cash. In the front seat of the van next to Martinez, the police found a woman’s wig in a purse, a second ski mask, and a second loaded gun. Martinez also wore a jumpsuit in an apparent effort to disguise herself.
After Quintero ran out of the bank and jumped into the van, obviously carrying property obtained from inside the bank, Martinez led the police on a high-speed chase. If Martinez implausibly failed to understand that a robbery was about to occur when Quintero exited the van and went into the bank carrying a gun and wearing a ski mask, she had to know that a robbery had been committed when she elected to drive the getaway car evasively and at high speeds in an attempt to elude police officers. Her participation in the escape phase of the bank robbery was therefore sufficient to convict her of being an accomplice in accordance with jury instructions nineteen and twenty.
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9379579-20264 | ORDER
LOZANO, District Judge.
This matter is before the Court on Defendant’s Memorandum of Law In Support of Motion to Sever, filed September 13, 2001 (“Motion to Sever”). After reviewing the written submissions of Defendant and the Government, and after considering the issues during hearings on March 7, 2002, and May 8, 2002, for the reasons set forth below, Defendant’s Motion to Sever is GRANTED.
BACKGROUND
The superseding indictment charges Defendant with nine separate counts, including, importantly, a violation of 18 U.S.C. section 924(j): firearms murder in furtherance of a drug trafficking crime (Count 10). The Government has announced that it will seek the death penalty upon securing a conviction under Count 10. See Notice of Intent to Seek the Death Penalty, filed October 10, 2001. As such, this is now a capital case under 18 U.S.C. section 3591 et. seq. In addition to the capital count, the superseding indictment charges Defendant with being a felon in possession of a firearm on the day of the murder (Count 11); conspiracy to possess and distribute crack and marijuana over a 25-month period (Count 1); maintaining three different crack houses (Counts 6, 7, 8, and 9); and possessing crack with the intent to distribute it (Counts 2 and 3). This matter is set for a 2-week jury trial on July 15, 2002.
Citing Rules 8(a) and 14 of the Federal Rules of Criminal Procedure, Defendant asks this Court to sever the drug-related counts (1, 2, 3, 6, 7, 8, and 9) from the murder-related counts (10 and 11). Through his pleadings and during arguments before the Court, Defendant makes three main arguments in support of his severance request. First, Defendant asserts that the drug and murder-related charges are improperly joined in one indictment because the two sets of charges are neither the “same in character” nor “based on the same acts or transactions.” Def.’s Mem. in Supp. of Mot. to Sever at 2-3 (relying on portions of Fed.R.Crim.P. 8(a)). Second, Defendant maintains that the two sets of charges should be severed pursuant to Rule 14’s prohibition on prejudicial join-der. In the absence of severance, Defendant notes that he will be unable to testify regarding the murder-related counts while remaining silent and putting the Government to its proof on the drug-related counts. Def.’s Mem. at 4-5. Defendant points to his Alibi Defense, filed July 5, 2001, to demonstrate that he has important testimony to give regarding the murder-related counts. Def.’s Reply In Supp. of Mot. to Sever at 4. Specifically, Defendant plans to testify that, at the time of the murder, he was at a Gary-area hospital with Yoshida Carter and his son, Jaylon Carter. Def.’s Reply at 4. With respect to the drug counts, Defendant anticipates “voluminous, contradictory, and confusing” testimony from Government witnesses, many of whom, he asserts, “have made deals and entered into pleas.” Def.’s Reply at 3. Defendant believes that by remaining silent on those charges he will avoid “adding to the confusion” and may escape conviction. Def.’s Reply at 4. Third, Defendant argues that any evidence of his guilt on the drug-related charges may “spillover” onto the murder-related charges during the jury’s deliberations. Def.’s Reply at 4.
Not surprisingly, the Government opposes Defendant’s attempt to split this case in two. Initially, the Government notes that Defendant’s analysis of joinder under Rule 8(a) fails to acknowledge that Rule 8(a) also provides that charges which are “based ... on two or more acts or transactions connected together or constituting parts of a common scheme or plan” may be properly joined in one indictment. Gov’t Resp. at 2. Noting that proof of a drug trafficking crime is an offense element for a conviction under 18 U.S.C. section 924(j), the Government contends that the face of the indictment, alone, demonstrates that the drug and murder-related counts are properly joined under Rule 8(a). Gov’t Resp. at 3. Next, the Government argues that severance under Rule 14 is not required every time a defendant seeks to testify as to one set of charges and remain silent as to others. Gov’t Resp. at 3. The Government notes that Defendant’s Motion to Sever failed to set forth any specific, exculpatory testimony that would satisfy the Seventh Circuit’s test for severance in the context of a conflict between a defendant’s desire to testify to some counts but not others. Gov’t Resp. at 4. However, Defendant’s reply brief summarized Defendant’s anticipated alibi testimony and addressed other shortcomings identified by the Government in its response brief. In response to Defendant’s strengthened arguments, at the March 7, 2002, hearing on this matter, the Government noted that Defendant’s alibi might be established without his testimony— through hospital records and/or the testimony of other witnesses. Finally, the Government asserts that even if the Court were to grant the requested severance, during his trial on the murder-related charges, Defendant will still be subject to cross-examination on the drug conspiracy charge because proof of a drug trafficking crime is an offense element necessary for conviction under 18 U.S.C. section 924(j). Gov’t Resp. at 4-5. Thus, the Government concludes, Defendant “would therefore gain little by testifying in a separate trial” on the murder-related counts. Gov’t Resp. at 5.
After advising the parties at the May 8, 2002, hearing that the Court was seriously considering granting Defendant’s Motion to Sever, the Court asked the parties to address whether the requested severance might eventually intrude upon the double jeopardy protections afforded by the Fifth Amendment. Specifically, the Court was concerned that because proof of a drug trafficking crime is an offense element under 18 U.S.C. section 924(j), if Defendant were first tried and convicted on the drug distribution conspiracy charged in Count 1, the Government might seek to rely on that conviction by asserting its collateral estop-pel effect in Defendant’s second trial on the 18 U.S.C. section 924(j) charge in Count 10 (firearms murder in furtherance of a drug trafficking crime). Such a scenario might run afoul of the Double Jeopardy Clause’s bar on subsequent prosecutions that seek to “ ‘establish an essential element of an offense charged ... [by] proving] conduct that constitutes an offense for which [the] defendant has already been prosecuted.’ ” United States v. Cyprian, 23 F.3d 1189, 1197-98 (7th Cir.1994) (alterations added) (quoting Grady v. Corbin, 495 U.S. 508, 521, 110 S.Ct. 2084, 109 L.Ed.2d 548 (1990)).
In response to the Court’s concerns, Defendant and the Government each submitted additional pleadings addressing Defendant’s Motion to Sever. In its new pleadings, the Government agreed that, if it first secures a conviction on the drug distribution conspiracy count, it “will not seek to prove the same conspiracy count [in a second trial on the 18 U.S.C. § 924(j) charge] by or through documents pursuant to a collateral estoppel theory,” Gov’t Second Supp. Resp. to Def.’s Mot. to Sever at 1. Indeed, the Government’s use of collateral estoppel against a criminal defendant has met with disdain on at least one occasion. See United States v. Pelullo, 14 F.3d 881, 897 (3d Cir.1994) (finding district court erred by applying collateral estoppel effect of defendant’s prior conviction of racketeering act by allowing conviction to be used as proof of predicate act on a RICO charge in subsequent trial). Even in the absence of the Government’s agreement not to attempt to employ collateral estoppel in any second trial in this matter, the Court would not likely permit it.
Significantly, in his new pleadings, Defendant has expressly advised the Court that double jeopardy problems will not arise even if the Government secures a conviction on the drug distribution conspiracy charged in Count 1 and then, through a conventional presentation of evidence (i.e., not by relying on collateral estoppel principles), pursues the murder-related charges in a second trial. Defs Second Supp. to Defs Mot. to Sever at 1-2; cf. United States v. Hubbard, 61 F.3d 1261, 1276 (7th Cir.1995) (rejecting double jeopardy claim where evidence of firearms violation upon which defendant had been convicted in first trial was offered, for other purposes, in second trial on other charges). Although the Court is satisfied that separate trials of the two sets of charges will not violate Defendant’s Double Jeopardy Clause rights, United States v. Powell, 894 F.2d 895, 900 (7th Cir.1990) (convictions on charges of carrying a firearm in connection with a drug trafficking crime and participating in drug distribution conspiracy do not violate Fifth Amendment’s prohibitions on multiple punishments for same offense because Congress specifically authorized cumulative punishments for such crimes), Defendant’s continuing request for severance constitutes a waiver of any resulting double jeopardy problems. Cyprian, 23 F.3d at 1198 (defendant “waived the right to challenge [c]ount ... on double jeopardy grounds because his trial counsel did not object when the trial judge severed [that] [c]ount ... from the remaining counts”); United States v. Andrews, 754 F.Supp. 1206, 1209 (N.D.Ill.1990) (Aspen, J.) (severing counts and noting that absence of objection indicated that “defendants are apparently willing to accept the potential but remote double jeopardy risk created by our plan in return for the comparative advantage of the trials as severed”). In the end, “a constitutional right may be forfeited in criminal as well as civil cases by the failure to make a timely assertion of the right before a tribunal having jurisdiction to determine it.” Yakus v. United States, 321 U.S. 414, 444, 64 S.Ct. 660, 88 L.Ed. 834 (1944). With those issues resolved, the Court will now consider the merits of Defendant’s motion.
DISCUSSION
A defendant bears a heavy burden of showing prejudice from the joinder of two or more counts. United States v. Berardi, 675 F.2d 894, 899-900 (7th Cir.1982); United States v. Martin, 18 F.3d 1515, 1518 (10th Cir.1994). In order to justify severance of counts, a defendant must “demonstrate that the alleged prejudice he [will] suffer[] outweigh[s] the expense and inconvenience of separate trials.” Martin, 18 F.3d at 1518 (quoting United States v. Parra, 2 F.3d 1058, 1063 (10th Cir.1993)); United States v. Donaldson, 978 F.2d 381, 391 (7th Cir.1992) (“trial court is to balance the cost of conducting separate trials against the possible prejudice inherent in a single trial”). In assessing the potential prejudice arising from the joinder of counts, this Court has broad, “virtually unlimited,” discretion. United States v. Zackson, 6 F.3d 911, 922 (2d Cir.1993); see also United States v. Freland, 141 F.3d 1223, 1226-27 (7th Cir.1998). In exercising its discretion, this Court “should balance the interests of the defendant against the needs of judicial economy.” United States v. Tedesco, 726 F.2d 1216 (7th Cir.1984).
Rule 8 permits the joinder of two or more offenses if the crimes are: (1) of the same or similar character; (2) based on the same act or transaction; or (3) based on two or more acts or transactions connected together or constituting a common scheme or plan. Fed.R.Crim.P. 8(a); United States v. Archer, 843 F.2d 1019, 1021 (7th Cir.1988). The Seventh Circuit has instructed district courts to “construe Rule 8 broadly to allow joinder to enhance the efficiency of the judicial system ... and to avoid expensive and duplicative trials, if judicial economy outweighs any prejudice to the defendant.” Archer, 843 F.2d at 1021 (citations omitted); see also Freland, 141 F.3d at 1226; United States v. Alexander, 135 F.3d 470, 476 (7th Cir.1998).
The Seventh Circuit has formulated two slightly different tests for analyzing whether the joinder of charges is proper under Rule 8. First, our appellate court has stated that in order to assess the propriety of joinder under Rule 8, it looks “solely to the face of the [Glovernment’s indictment and not to any evidence ultimately presented at the defendant’s trial.” Alexander, 135 F.3d at 476. Second, the court of appeals has stated that “[i]n determining whether the connection between the acts charged is sufficient to meet the requirements of joinder under Rule 8(a), the court should be guided by the extent of evidentiary overlap.” Berardi, 675 F.2d at 899-900 (finding joinder proper where there was “substantial overlap in the evidence” used to prove defendant’s guilt on extortion, mail fraud and obstruction of justice counts); see also Donaldson, 978 F.2d at 391 (“offenses may be joined if they occur within a relatively short period of time, and the evidence of the several counts overlaps”).
Here, under either test, joinder of the drug and murder-related charges is proper because the alleged murder was part of “a common scheme or plan” — the alleged drug distribution conspiracy. The face of the superseding indictment reveals that joinder is proper under Rule 8 because proof of the drug trafficking conspiracy alleged in Count 1 (a charge which itself is supported, in part, by the separate offenses charged in Counts 2, 3, 6, 7, 8, and 9) is incorporated as an offense element of the firearms-murder-in-furtheranee-of-adrug-trafficking-crime charge in Count 10. Quite simply, because Count 10 incorporates Count 1 as a predicate offense, the drug-related charges are properly joined with the murder-related charges. Similarly, because Count 10 incorporates Count 1 as a predicate offense, the evidence presented in support of the Government’s charges on those counts will necessarily overlap. As such, the Government has properly joined the drug and murder-related charges in the superseding indictment. Rule 8(a)’s protections have not been violated.
Once Rule 8(a)’s requirements are met by the allegations in the indictment, severance is controlled by Rule 14. United States v. Balzano, 916 F.2d 1273, 1280 (7th Cir.1990). Even though distinct offenses have been joined properly under Rule 8(a), a court may grant severance under Rule 14 if it appears that the. defendant will be prejudiced by the joinder. Berardi, 675 F.2d at 900; see also United States v. Buchanan, 930 F.Supp. 657, 667-68 (D.Mass.1996) (distinguishing between defendant’s burden to show Rule 14 violation on appeal versus “lighter” burden when presenting Rule 14 motion to district court). Rule 14 specifically authorizes a court to prevent prejudice by ordering, among other things, “separate trials of counts” or “whatever other relief justice requires.” Fed.R.Crim.P. 14.
The joinder of multiple counts arising from separate occurrences exposes a defendant to potential difficulty in presenting distinct defenses. For instance, “a defendant may be willing to take the stand and testify as to one count but might prefer to remain silent and put the government to its proof on another count.” United States v. Lewis, 547 F.2d 1030, 1033 (8th Cir.1976). “The risk of exposing himself to cross-examination on one count in order to testify as to the other presents a dilemma which obviously contains the seeds of prejudice.” Id. Although the Seventh Circuit holds that severance is not mandatory every time a defendant wishes to testify as to one charge but to remain silent on another, it recognizes that a need for severance arises when a defendant “makes a convincing showing that he has both important testimony to give concerning one count and a strong need to refrain from testifying on the other count.” Archer, 843 F.2d at 1022 (citing Baker v. United States, 401 F.2d 958, 977 (D.C.Cir.1968)); see also Freland, 141 F.3d at 1227; Alexander, 135 F.3d at 476.
Here, Defendant meets both prongs of the Archer court’s test for severance in the context of conflicting testimonial imperatives. Under the first prong, the Court agrees that Defendant’s previously asserted alibi defense to the murder-related counts (i.e., that he was at a hospital with his son and others at the time of the murder) constitutes “important testimony.” Indeed, given that Defendant is facing the death penalty if convicted on Count 10, his alibi testimony on this count may be critically important if the jury accepts it and, by so doing, eliminates any chance of Defendant receiving the death penalty. Admittedly, Defendant could assert his alibi defense without taking the stand — by adducing documentary evidence and witness testimony in an attempt to demonstrate that he was elsewhere during the murder. However, “a defendant’s testimony ‘in his own trial is unique and inherently significant.’ ” Rodriguez v. United States, 286 F.3d 972, 985 (7th Cir.2002) (quoting Nichols v. Butler, 953 F.2d 1550, 1553 (11th Cir.1992)).
With respect to the second prong, Defendant raises the same argument as the defendant in Archer: that his best hope for acquittal is to remain silent on the drug-related counts and force the Government to prove its case without the benefit of his testimony. Cf. Lewis, 547 F.2d at 1033-34 (noting that defendants may prefer to remain silent and put Government to its proof on certain counts, but concluding that district court did not abuse its discretion in denying severance motion because defendant did not even contend he would have testified if district court had severed counts). In essence, Defendant’s avowed reasons for not wanting to testify on the drug-related charges may simply come down to the fact that Defendant does “not wish to help” the Government prove the drug conspiracy charge. United States v. Alosa, 14 F.3d 693, 695 (1st Cir.1994) (affirming district court’s denial of motion to sever drug conspiracy and use-of-a-firearm-in-furtheranee-of-a-drug-traffieking-crime charges). The limited case law on severance motions arising from conflicting testimonial imperatives does not “greatly illuminate” what “kind of ‘strong’ reasons explain the need not to testify on other counts.” Id. Although Archer, 843 F.2d at 1022, suggests that a defendant’s simple desire to put the Government to its proof is a sufficiently strong reason not to testify as to some counts, another Seventh Circuit case rejected a defendant’s more detailed reasons for seeking not to testify to certain counts. United States v. Ely, 910 F.2d 455 (7th Cir.1990). In the absence of clear guidance from the Seventh Circuit on this issue, the Court is satisfied that Defendant’s desire to put the Government to its proof on the drug-related counts is a sufficiently strong reason, under the conflicting testimonial imperatives test set forth in Archer, for Defendant not to testify regarding the drug-related charges.
Importantly, the calculation of whether the possible prejudice Defendant will suffer in the absence of severance outweighs the cost of conducting separate trials is different in this case for two reasons. First, because this is a death penalty case and Defendant’s alibi testimony goes to the count that carries the death penalty, the possible prejudice that would result if Defendant is deterred from testifying on that count by the cross-examination he would face on the drug-related charges adds to the prejudice side of the ledger. Second, the fact that the drug distribution conspiracy charge in Count 1 is an offense element for the murder-related ehai-ge in Count 10 means that Defendant’s acquittal on Count 1 in a first trial will almost certainly prevent the Government from pursuing Count 10 in a second trial. See, e.g., Ashe v. Swenson, 397 U.S. 436, 90 S.Ct. 1189, 25 L.Ed.2d 469 (1970); but see United States v. Anderson, 59 F.3d 1323, 1326 (D.C.Cir.1995) (“We, therefore, hold to our previous view that a § 924(c)(1) conviction stands on its own even if the defendant is acquitted of the underlying offense or the underlying offense is not charged, so long as the government presents sufficient evidence to prove the predicate offense as an element of the § 924(c)(1) violation.”) Thus, the Court’s assessment of the costs associated with a second trial on the murder-related charges is informed by the prospect that Defendant’s acquittal on the drug distribution conspiracy charge at the first trial will likely eliminate the need for a second trial.
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6468813-10003 | MEMORANDUM AND ORDER
EARL E. O’CONNOR, District Judge.
This matter is before the court on defendant’s post-trial renewal of his motion for judgment of acquittal (Doc. # 55). For the reasons set forth below, defendant’s motion will be denied.
Defendant was charged in a thirteen count superseding indictment with three counts of bankruptcy fraud, in violation of 18 U.S.C. §§ 152 and 2, and ten counts of money laundering in violation of 18 U.S.C. §§ 1956(a)(1)(A)®, 1956(a)(1)(B)®, 1957 and 18 U.S.C. § 2. Following a three-day trial, the jury convicted defendant of all counts. Defendant timely filed the instant motion renewing his earlier motion for judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29(e), claiming that the government’s evidence was insufficient to sustain his conviction on Counts 3, 4-12, and 13. Defendant also challenges the court’s refusal to give defendant’s proposed jury instruction on the advice of counsel defense.
In deciding defendant’s motion for judgment of acquittal, we must view all evidence “in the light most favorable to the government, ‘reeogniz[ing] the right of the jury to determine credibility and to find the facts.’ ” United States v. Fleming, 19 F.3d 1325, 1328 (10th Cir.1994) (citing United States v. White, 673 F.2d 299, 301 (10th Cir.1982)). Judgment of acquittal is only proper if “the evidence that the defendant committed the crimes alleged is so meager that ‘no reasonable jury could find guilt beyond a reasonable doubt.’ ” Id.
The abbreviated pertinent facts are as follows. On November 12,1991, defendant filed a voluntary Chapter 11 bankruptcy petition, stating that it was filed on an emergency basis because he was to be evicted from his office on November 14, 1991. In connection with the bankruptcy proceedings, defendant filed a Schedule of Assets and Liabilities and a Statement of Financial Affairs with the bankruptcy court on January 7,1992.
On January 21,1992, the bankruptcy court ordered defendant to furnish the bankruptcy trustee with required financial information on a monthly basis. Defendant did not file the required monthly reports for the months of November 1991, December 1991, January 1992, and February 1992 until April 13,1992. Defendant filed the March 1992 report on July 1,1992.
On March 20, 1992, the United States Attorney for the District of Kansas filed a Motion to Determine Secured Status and for Turnover of Security in defendant’s bankruptcy ease. The motion specifically referred to the attorney’s fee defendant was soon to receive for his representation of the plaintiff in the Pilcher v. Board of Wyandotte County Commissioners, No. 88C641 case.
On March 24, 1992, the Wyandotte County District Court of Kansas City, Kansas, issued a check payable to the order of Wanda Pil-cher and Michael R. McIntosh in the amount of $256,163.20. On March 26, 1992, the defendant and Wanda Pilcher negotiated the check at .the Brotherhood Bank in Kansas City, Kansas, and used the proceeds to purchase seven cashier’s checks. Five checks totalling $125,000 were made out to Wanda Pilcher. Defendant received two checks: one for $57,500 made out to McIntosh, Chartered, and one for $68,000 made out to Michael R. McIntosh.
That same day, defendant negotiated the $68,000 cashier’s check at Commerce Bank in Kansas City, Missouri. Defendant conducted the following transactions with the proceeds: (1) received $4,500 in cash; (2) deposited $22,684.19 into an account in the name of Fortex Industries (“Fortex”); and (3) purchased $46,664.81 in cashier’s checks made out to various individuals and entities. None of the payees of the cashier’s checks were listed as creditors in defendant’s bankruptcy filings. One of the cashier’s checks purchased, in the amount of $6,000, was payable to defendant’s ex-wife for a property settlement and alimony. Defendant purchased another cashier’s check for $14,465.81 made payable to Citizen’s Bank and used it to pay off a loan on residential property in his father’s name.
On April 13, 1992, defendant disclosed in his brief in response to the government’s Motion for Turnover of Security that he had received $57,500 of the $125,500 Pilcher fee. On June 2, 1992, defendant tendered copies of the Pilcher contingency fee contract and the $57,500 check to the bankruptcy court. There was no evidence at trial that the $68,-000 fee check, made payable to McIntosh personally, was ever disclosed to the bankruptcy court.
At the heart of defendant’s motion to dismiss is his argument that he could not be convicted of bankruptcy fraud for failing to disclose any of the attorney’s fee received in connection with his representation in Pil-cher, because the fee was not material to the bankruptcy proceeding. Although not expressly included in the statute, case law has engrafted materiality as a required element of the crime of bankruptcy fraud. United States v. Grey, 56 F.3d 1219, 1223 (10th Cir.1995). Thus, the jury was instructed that to prove that the defendant committed bankruptcy fraud, the government was required to prove the following elements of an offense under 18 U.S.C. § 152: (1) that a proceeding in bankruptcy under Title 11 existed; (2) that the defendant concealed property which belonged to him in connection with that proceeding; (3) that the concealment concerned a material fact; and (4) that the defendant did so knowingly and fraudulently, with the intent to defeat the provisions of Title 11 of the Bankruptcy Code.
At trial, defendant offered the testimony of Professor Ron Griffen, who opined that because the fee was an executory contract, and also because it was a personal service contract, it was excludable from the bankruptcy estate. Based on that testimony and Turner v. Avery, 947 F.2d 772 (5th Cir.1991), Matter of Tonry, 724 F.2d 467 (5th Cir.1984), and U.S. v. Key, 859 F.2d 1257 (7th Cir.1988), defendant argues that the Pilcher fee was not material, as a matter of law, because it was excludable from the bankruptcy estate. Defendant acknowledges that materiality is a factual question for the jury. See United States v. Gaudin, — U.S. -, -, 115 S.Ct. 2310, 2320, 132 L.Ed.2d 444 (1995) (materiality is a jury question in a 18 U.S.C. § 1005 case). However, defendant argues that he is entitled to a judgment of acquittal because the government did not offer any evidence to controvert Professor Griffen’s testimony regarding the excludable nature of the Pilcher fee as an executory personal service contract.
Quite to the contrary, Mr. Wieland, the bankruptcy trustee, testified that disclosure of the Pilcher fee was important to the bankruptcy proceedings for two reasons: (1) if the fee was determined to be pre-petition earnings, it would be included in the bankruptcy estate; and (2) if the fee was determined to be post-petition earnings, it would be relevant to whether the defendant, as a debtor-in-possession, could fund his Chapter 11 bankruptcy plan. Either way, construing the evidence in the light most favorable to the government, the court finds that the evidence was sufficient to sustain the jury’s verdict. The jury clearly had evidence before it from which it could determine that the defendant’s concealment of the Pilcher fee concerned a material fact.
In his pretrial motion to dismiss the money laundering counts in the indictment based on temporal impossibility, defendant raised a related argument. We rendered a summary ruling denying the motion and reserved the right to render a more complete opinion on this issue in the future. To clarify the basis of our ruling, we believe that some further discussion of this issue is necessary.
Defendant argued that he had no duty to disclose the Pilcher fee, if at all, until after he actually received the money in March 1992, and filed the report for that month in July 1, 1992. Defendant, therefore, maintained that he could not be convicted of money laundering because the predicate act of bankruptcy fraud, as charged in Count 3, was not complete prior to the alleged acts of money laundering on March 26, 1992. See United States v. Johnson, 971 F.2d 562, 570 (10th Cir.1992).
We acknowledge that to commit money laundering by an act involving proceeds from illegal activity, the predicate act which generated the proceeds must be completed prior to the alleged act of money laundering. See id. However, under the evidence presented at trial, we disagree that the alleged bankruptcy fraud could not have occurred until July 1, 1992, when defendant filed the false monthly report for March 1992.
18 U.S.C. § 152 imposes criminal sanctions for concealment of property from the bankruptcy estate. This includes property with an unknown status in the bankruptcy. In United States v. Cherek, 734 F.2d 1248, 1254 (7th Cir.1984), the court stated:
It is a reasonable reading of 18 U.S.C. § 152 to conclude that the statute requires a bankrupt to disclose the existence of assets whose immediate status in bankruptcy is uncertain. Even if the asset is not ultimately determined to be property of the estate under the technical rules of the Federal Bankruptcy Code, Section 152 properly imposes sanctions on those who preempt a court’s determination by failing to report the asset.
Although in different contexts, numerous other courts have held that a person filing a voluntary bankruptcy petition has a duty to disclose the existence of assets, even if the status of those assets in relation to the bankruptcy estate are uncertain. See, e.g., In re Dreyer, 127 B.R. 587, 597 (Bankr.N.D.Tex.1991) (denying discharge for fraudulent concealment of potential assets); In re Calder, 93 B.R. 734, 738 (Bankr.D.Utah 1988) (same).
We do not find In the Matter of Tonry, 724 F.2d 467 (5th Cir.1984), persuasive as authority in this case. Tonry, 724 F.2d at 468-69, simply stands for the proposition that, under the civil bankruptcy statutes in a Chapter 7 bankruptcy, a wholly executory contract is not part of a bankruptcy estate, but is post-petition income.
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8970902-20571 | OPINION AND ORDER
WILLIAM C. CONNER, Senior District Judge.
Plaintiffs Steven Frisone and David Roberts commenced this action against de fendants Pepsico, Inc. (“Pepsico”) and South Beach Beverage Company, Inc. (“SoBe”), (collectively, the “defendants”) alleging: (1) fraud; (2) fraudulent inducement; (3) breach of contract; and (4) breach of a covenant of good faith and fair dealing. Plaintiffs also request an accounting. Plaintiffs assert that this Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332, because diversity of citizenship exists between the parties and the amount in controversy exceeds $75,000, exclusive of interests and costs. Defendants now move pursuant to Fed. R. Civ. P. 12(b)(1) to dismiss the Complaint for lack of subject matter jurisdiction and, alternatively, pursuant to Fed. R. Crv. P. 56 for summary judgment. For the reasons stated hereinafter, defendants’ motion to dismiss is granted.
BACKGROUND
I. Undisputed Factual Information
Plaintiffs Steven Frisone and David Roberts are residents of Connecticut and were residents of Connecticut at the time this action was commenced. (Defs. Rule 56.1 Stmt. ¶ 1.) SoBe is a Delaware corporation with an office in Norwalk, Connecticut, both currently and at the time this action was commenced. (Id. ¶ 2.) Pepsico is a corporation with a principal place of business in New York. (Compita 3.)
On or about January 5, 2001, Pepsico purchased the assets of South Beach Beverage Company, LLC and formed defendant SoBe. (Defs. Rule 56.1 Stmt. ¶ 8.) Frisone and Roberts were employed by SoBe at all times relevant to this action as Treasurer and Controller, respectively. (Id. ¶ 9.) Neither plaintiff had any ownership interest in SoBe. (Id. ¶ 10.) Plaintiffs worked for Janet Banker, the Chief Financial Officer of SoBe from January of 2001 to September of 2003. (Id.) In approximately April of 2001, Banker met with plaintiffs individually to discuss the SoBe Long-Term Incentive Plan (“SoBe LTIP”). (Id. ¶ 11.) Banker used a nine-page written presentation to explain the SoBe LTIP and copies of this presentation were given to plaintiffs. (Id. ¶ 12.)
The SoBe LTIP had a three-year vesting .period and a payout based on the appreciation of the value of SoBe at the end of the three years. (Id. ¶ 14.) Under the SoBe LTIP, certain key employees were awarded Stock Appreciation Rights (“SARs”) which were calculated based upon a multiplier of their salary in 2001. (Id. ¶ 17.) The SoBe LTIP set forth the specific formula that would be used to measure the appreciation of the value of SoBe, which would then be used to calculate the payments made to eligible employees based upon their SARs award. (Id. ¶ 18.) The SoBe LTIP provided that the voluntary or involuntary termination of employment prior to the end of the three-year period would result in the forfeiture of all SARs. (Id. ¶ 19.)
On approximately March 19, 2002, Banker informed Frisone that his position at SoBe may be eliminated, but that she would try to find him a position within the Pepsico organization. (Id. ¶ 20.) In approximately April of 2002, Frisone’s job responsibilities were reduced because a major portion of the accounts receivable function was taken over by Pepsi Bottling Group Shared Services. (Id. ¶21.)- In July 2002, Frisone voluntarily left his employment with SoBe to accept a position with another company. (Id. ¶ 22.)
In approximately October 2002, Roberts was offered and accepted a position as Group Manager, Co-Pack Accounting at Pepsi-Cola North America (“PCNA”). (Id. ¶ 23.) Regarding Roberts’s SARs award, the SoBe LTIP provided that any potential payment would be pro-rated be cause of his transfer to PCNA. (Id. ¶ 24.) On June 6, 2003, Roberts resigned :from his employment with PCNA to accept a position with Honeywell. (Id. ¶¶26, 27.)
Pursuant to the terms of the SoBe LTIP, in approximately February of 2004, three years after the formation of SoBe, participants that were still working for SoBe, PCNA or Pepsico received payments representing the increases in value of their SARs during that three-year period. (Id. ¶ 28.) According to the formula set forth in the SoBe LTIP, the net gain in the value of SoBe at the end of the three years was approximately $970.00 per SAR. (Id. ¶29.) Plaintiffs did not receive any payments under the SoBe LTIP because they were not employed at that time by SoBe, PCNA or Pepsico. (Id. ¶ 30.) If Frisone and Roberts had remained employed by either SoBe, PCNA or Pepsico in February of 2004 they may have received payments no greater than $37,000 and $32,000, respectively. (Id. ¶ 31.) Plaintiffs admit that they do not believe anyone at SoBe intentionally made statements that were known to be false when made. (Id. ¶ 32.)
II. The Parties ’ Factual Allegations
A. Jurisdiction
1. Defendants ’ Factual Allegations
Defendants maintain that SoBe’s executive management have always worked in the Norwalk, Connecticut office and continue to do so today. (Defs. Rule 56.1 Stmt. ¶ 3.) Defendants also maintain that SoBe’s marketing efforts, product development, public relations and general business operations are conducted primarily out of the Norwalk offices. (Id. ¶ 3, 4.) According to defendants, at the time this action was commenced, approximately seventy-five percent of SoBe’s employees worked in the Norwalk office, including, inter alia, most of the senior employees; such as marketing managers, sales managers, a brand director, the senior operations manager and the national quality manager. (Id. ¶ 5.) Defendants maintain that as of the end of 2003,- any SoBe employees working outside of the-Norwalk office were located “in multiple states across the country,” and the only two employees who worked in New York at that time were “lower level employees,” a sales analyst and a merchandiser. (Id.)
Defendants maintain that the Norwalk office is SoBe’s principal point of contact for dealing with the public. (Id. ¶ 6.) For example, defendants maintain that: (i) SoBe’s website directs inquiries regarding employment and sponsorship opportunities to the Norwalk office; and (2) press releases regarding SoBe’s business developments and sponsorships are issued from the Norwalk office. (Id.)
2. Plaintiffs’ Factual Allegations
According to plaintiffs, following the acquisition of SoBe by Pepsico many of SoBe’s business functions were taken over by Pepsico. (Pis. Rule 56.1 Stmt., Defs. Stmts. Denied ¶ 3.) Plaintiffs assert that the following activities all take place outside of the Norwalk, Connecticut office: (1) the functions of sales, operations, customer service, finance, tax, quality control, legal, human resources, accounts management, MIS and executive were transferred to Pepsico’s New York locations; (2) the credit and collection function was transferred to Pepsico’s North Carolina location; (3)‘ portions of the finance function were transferred to Pepsico’s Arizona location; (4) all customer calls for product orders were placed to Pepsico’s New York locations; (5) all internet orders for products were received by Pepsico’s New York location; (5) all copackers , which are lo cated throughout the United States and Canada, are selected by operational management in Pepsico’s New York locations; (6) all functions related to copackers are performed by Pepsico management out of the New York locations; (7) all of the purchasing of SoBe ingredients is performed by Pepsico out of the New York locations; (8) most of the quality control functions are performed by Pepsico employees; (9) all information systems are run by Pepsico employees out of the New York locations; (10) control of the management operations of SoBe was controlled by Pepsico management in New York; (11) only recruiting agencies selected by Pepsi-co’s Human Resource department could recruit job candidates; (12) SoBe press releases are published to the Pepsico corporate website; (13) all benefits administration, risk management function and payroll processing were performed by Pepsico employees out of the New York locations; and (14) SoBe’s principal point of contact for employees, vendors, customers, banks, and regulatory agencies is through Pepsico in New York. (Id.)
According to plaintiffs, only a minimal amount of SoBe’s marketing functions remained in Connecticut. (Id. ¶¶ 3, 4, 5.) Plaintiffs maintain that the senior operations manager in the Norwalk office, had “no supervision over the customer service, purchasing, product procurement, manufacturing, logistics or quality control functions” and provided only a “minimal level of support to the Operations function run out of New York.” (Id.) Plaintiffs maintain that there is only one quality control position functioning out of the Norwalk office. (Id.) Plaintiffs maintain that at the time of Banker’s departure, in September of 2003, there was only one staff level accountant working in Norwalk because most of the financial functions had been transferred to Pepsico in 2002. (Id.)
B. Merits
According to defendants, the SoBe LTIP was designed to provide an incentive to key employees by giving them a stake in the growth of SoBe. (Defs. Rule 56.1 Stmt. ¶ 13.) Defendants maintain that the meetings during which Banker presented the SoBe LTIP to plaintiffs took place in the Norwalk office, and that this written presentation is the only document that describes the terms of the plan. (Id. ¶¶ 15, 16.)
Plaintiffs deny that the SoBe LTIP was “truly intended to provide an incentive to key employees.” (Pis. Rule 56.1 Stmt., Defs. Stmts. Denied ¶ 13.) Plaintiffs deny any knowledge of the meetings held in Norwalk, and also deny that the written presentation described by defendants is the only written description of the terms of the SoBe LTIP. (Id. ¶¶ 15,16.)
According to plaintiffs, senior management at Pepsico made several representations that after the acquisition SoBe would “run autonomously” and “remain an independent operating entity of Pepsi.” (Pis. Rule 56.1 Stmt. ¶¶ 1, 3.) However, plaintiffs maintain that in reality “employees at Pepsi had decided prior to the date of the acquisition to immediately dismantle the operations of SoBe, LLC and merge the operations into the Pepsico organizational structure,” and in about April of 2001 Pepsi management decided to fully integrate the operations of SoBe into Pepsico’s operations. (Id. ¶¶ 2, 4.)
Plaintiffs further maintain that following the acquisition of SoBe, various key employees began to leave and did not pursue positions at Pepsico. (Id. ¶¶ 6, 8.) According to plaintiffs, as a result of this attrition they were encouraged to maintain their employment with SoBe. (Id. ¶ 9.) Plaintiffs state that they were provided assurances that SoBe would be “run autonomously and middle management would be provided with a stock incentive plan.” (Id. ¶ 10.) Plaintiffs maintain that under the terms of the Asset Purchase Agreement, “Pepsi was obligated to create a[sie] LTIP that would provide for the payout of $11,000,000 over a five-year performance period commencing immediately after the closing date of the Asset Purchase Agreement to certain key employees of the company.” (Id. ¶ 11.)
According to plaintiffs, following the acquisition, Pepsico management made numerous operational mistakes and decisions which resulted in a drop in profitability and substantial losses for 2001. (Id. ¶ 19.) Plaintiffs maintain that the LTIP was offered to them at this time, and was therefore of no value to them. (Id. ¶ 7.) Plaintiffs also maintain that in the fourth quarter of 2001, Pepsico began the absorption of SoBe’s sales force, operations, finance and systems which resulted in the elimination of many of the SoBe positions that were intended to be benefitted by the LTIP, just three months after the formal presentation of the LTIP. (Id. ¶ 9.) According to plaintiffs, both of their positions were eliminated due to a system conversion that began around December of 2001. (Id.) Plaintiffs maintain that they both received favorable reviews and awards during their employment with SoBe. (Id. ¶ 10.)
DISCUSSION
I. Standard on Motion to Dismiss Pursuant to Rule 12(b)(1)
Under Fed. R. Civ. P. 12(b)(1), “a facially sufficient complaint may be dismissed for lack of subject matter jurisdiction if the asserted basis for jurisdiction is not sufficient.” Augienello v. Fed. Deposit Ins. Corp., 310 F.Supp.2d 582, 587 (S.D.N.Y.2004) (citing Peterson v. Continental Airlines Inc., 970 F.Supp. 246 (S.D.N.Y.1997)). “The party asserting subject matter jurisdiction has the burden of proving, by a preponderance of the evidence,” that it exists. Augienello, 310 F.Supp.2d at 587-88 (citing Malik v. Meissner, 82 F.3d 560, 562 (2d Cir.1996); Gallo v. United States, 950 F.Supp. 1246, 1248 (S.D.N.Y.1997) (citing Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir.1994))).
When considering a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), the court may properly refer to evidence beyond the pleadings to resolve disputed jurisdictional facts. See Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000). Accordingly, the court may decide whether subject matter jurisdiction exists “on the basis of affidavits or other evidence, and ‘no presumptive truthfulness attaches to the complaint’s jurisdictional allegations.’ ” Augienello, 310 F.Supp.2d at 588 (citing Guadagno v. Wallack Ader Levithan Assoc., 932 F.Supp. 94, 95 (S.D.N.Y.1996)); accord Integrated Utils. Inc. v. United States, No. 96 Civ. 8983, 1997 WL 529007, at *3 (S.D.N.Y. Aug. 26, 1997) (“Argumentative inferences favorable to the party asserting jurisdiction should not be drawn.”).
II. Diversity Jurisdiction
Under 28 U.S.C. § 1332(a)(1), “[f]ederal district courts have original subject matter jurisdiction over civil actions where the amount in controversy exceeds $75,000 and the action is between citizens of different states.” Peters v. Timespan Comm., Inc., No. 97 Civ. 8750, 1999 WL 135231, at *3 (S.D.N.Y. Mar. 12, 1999). It is well-established that diversity jurisdiction under 28 U.S.C. § 1332 requires complete diversity between all plaintiffs and defendants in the action. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373-74, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978); see also Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 68 (2d Cir.1990). Therefore, the court lacks diversity jurisdiction “if any plaintiff is a citizen of the same state as any defendant.” Peters, 1999 WL 135231, at *3. “Whether federal diversity jurisdiction exists is determined by examining the citizenship [of the parties] at the time the action is commenced.” Krauth v. Executive Telecard, Ltd., 887 F.Supp. 641, 646 (S.D.N.Y.1995) (quoting Chaeles A. Wright & Arthur R. Miller § 3607).
For purposes of diversity jurisdiction, 28 U.S.C. § 1332(c) provides that a corporation “is a citizen of any State by which it has been incorporated and of the State where it has its principal place of business ....” 28 U.S.C. § 1332(c). The parties here do not dispute that SoBe is a citizen of Delaware, its state of incorporation. However, they do dispute the proper location of SoBe’s principal place of business.
In the case at bar, defendants contend that plaintiffs’ claims should be dismissed pursuant to Rule 12(b)(1) because plaintiffs are citizens of Connecticut and SoBe’s principal place of business is also Connecticut, destroying diversity under 28 U.S.C. § 1332. (Defs. Mem. Supp. Mot. Dismiss at 1, 6.) Plaintiffs maintain that SoBe’s principal place of business is New York. (Pis. Mem. Opp. Mot. Dismiss at 8.)
The Second Circuit recognizes two different tests for determining the location of a corporation’s principal place of business: (1) the “nerve center” test; and (2) the “public impact” or “place of operations” test. See R.G. Barry Corp., 612 F.2d at 655; see also Krauth, 887 F.Supp. at 646. Which test should be applied in a particular case depends upon the structure and nature of the corporation. Augienello, 310 F.Supp.2d at 590.
Where a corporation’s activities are decentralized and spread across many different states, courts apply the “nerve center” test to determine a corporation’s principal place of business. Id. Under the “nerve center” test, “courts focus on those factors that identify the place where the corporation’s overall policy originates.” Id. (citing R.G. Barry Corp., 612 F.2d at 655; Scot Typewriter Co. v. Underwood Corp., 170 F.Supp. 862, 865 (S.D.N.Y.1959) (noting that when a corporation is involved in “far-flung ... activities ... carried out in different states, its principal place of business is the nerve center from which it radiates out to its constituent parts and from which its officers direct, control and coordinate all activities ..., in the furtherance of the corporate objective.”)) (citations omitted). “In other words, the ‘nerve center’ test places the principal place of business at the location of a company’s headquarters.” Peters, 1999 WL 135231, at *6 (citing Compucon Distrib. of New England, Inc. v. Cooper, 685 F.Supp. 424, 425 (S.D.N.Y.1988)). Plaintiffs contend that the “nerve center” test is the appropriate test to determine SoBe’s citizenship. (Pls. Mem. Opp. Mot. Dismiss at 4.)
On the other hand, where a corporation is more centralized, courts apply the “place of operations” or “public impact” test to determine the corporation’s principal place of business. See Augienello, 310 F.Supp.2d at 591. Under this test, a corporation’s principal place of business is located in the state with which the corporation has its most extensive contacts with, or its greatest impact on the general public. See R.G. Barry Corp., 612 F.2d at 655; see also Krauth, 887 F.Supp. at 647; see also Center for Radio Info., Inc. v. Herbst, 876 F.Supp. 523, 525 (S.D.N.Y.1995).
After careful consideration we conclude that the appropriate test to determine SoBe’s principal place of business is the “public impact” test. At the time this action was commenced SoBe’s offices were located in Norwalk, Connecticut, and they are still there. (Defs. Rule 56.1 Stmt. ¶2; Pis. Rule 56.1 Stmt., Defs. Stmts. Denied ¶2.) Therefore, although certain functions take may place outside of Connecticut, we are unable to conclude that SoBe’s operations are “far-flung” or spread across numerous states, so that the “nerve center” test is appropriate. See Peters, 1999 WL 135231, at *6 (holding that' the “public. impact” test was most applicable because the defendant had only two offices in two different states and was therefore a “centralized” as opposed to a “far-flung and varied” operation); see also Compucon, 685 F.Supp. at 425 (holding that application of the “nerve center” test was inappropriate because the corporation at issue conducted business from only two locations); but see Augienello, 310 F.Supp.2d at 591 (holding that the “nerve center” test was applicable because the defendant corporation had eighteen offices in twelve different states). Applying the “public impact” test to the facts of this case, we determine that SoBe’s principal place of business is Connecticut.
We begin by reiterating that the burden of establishing subject matter jurisdiction rests upon the party seeking ex ercise of that jurisdiction, in this case plaintiffs. See Delalande, 545 F.Supp. at 271 (citing Thomson v. Gaskill, 315 U.S. 442, 446, 62 S.Ct. 673, 86 L.Ed. 951 (1942)). Plaintiffs, however, have failed to submit any evidence to show that SoBe maintained any offices in New York or had any employees working in New York. To the contrary, plaintiffs acknowledge that SoBe’s office is located in Norwalk, Connecticut (Pis. Rule 56.1 Stmt., Defs. Stmts. Denied ¶ 2), but then argue that because many of SoBe’s business activities were taken over by Pepsico and conducted out of the various Pepsico New York locations, SoBe’s principal place of business is New York, rather than Connecticut. (Pis. Mem. Opp. Mot. Dismiss at 2-8.) The only evidence plaintiffs provide to support their argument that diversity jurisdiction exists is the Declaration of plaintiff Roberts which contains a list of functions that, based on his personal knowledge as Controller of SoBe, he maintains were taken over by Pepsico following the acquisition. (Roberts Deck ¶¶ 32-36.) Defendants offer the following evidence in support of their position that subject matter jurisdiction does not exist: (1) a Declaration of Banker; and (2) a Declaration of Scott Moffitt, SoBe’s current General Manager and former Vice President of Marketing (from January of 2003 through January of 2004).
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11503989-22714 | ORDER AND REASONS
VANCE, District Judge.
Plaintiffs, Roselyn Lionhart, David Leonard, Scott Kirby, Anthony Lacen, David Glen Andrews, Anthony Bennett, Cherice Harrison Nelson, individually and on behalf of her minor son Brian Nelson, and Pat Bryant, on behalf of themselves and all those similarly situated, move to enjoin enforcement of La.Rev.Stat. § 14:103.2, a Louisiana anti-noise statute which took effect on August 15, 1999. The Court issued a temporary restraining order against the enforcement of this statute on September 17,1999 and set the case for a consolidated hearing on the preliminary injunction and trial on the merits. Because the statute is unconstitutionally vague and overbroad in violation of the First and Fourteenth Amendments to the United States Constitution, the Court hereby GRANTS plaintiffs’ motion for preliminary and permanent injunctive relief.
I. BACKGROUND
Plaintiffs are street musicians, brass brand musicians, Mardi Gras Indians, Mardi Gras and Second Line parade participants, and a political/civil rights activist. The street musicians sing and play musical instruments in the public streets and areas encompassing Jackson Square in New Orleans. They perform while church services are being conducted at St. Louis Cathedral, which is located in Jackson Square. Plaintiffs’ activities must conform to New Orleans City Ordinance 66-208, which permits street musicians to perform as long as their music does not exceed 78 decibels measured at 50 feet from the sound source during posted services inside the cathedral. The city ordinance also provides that, if the music exceeds the 78 decibel level, the musicians will receive a warning before any enforcement action is taken. The other plaintiffs participate and perform in parades and political activities in the public streets of New Orleans.
The statute at issue was designed to create “quiet zones” in public places around hospitals and places of religious worship. See La.Rev.Stat. § 14:103.2. It carries criminal penalties and regulates producing sound in public places in excess of 55 decibels, as measured within ten feet of the entrance to hospitals and places of worship. The statute provides:
A. No person shall operate or play any sound producing device or sound amplification device in a public street, public park or other public place in a manner likely to disturb, inconvenience, or annoy a person of ordinary sensibilities, if the sound produced is in excess of fifty-five decibels as measured within ten feet of the entrance to:
(1) Hospitals.
(2) Churches, synagogues, temples or other houses of religious worship, while the building is occupied and services are being performed, provided that a sign is posted within ten feet of the front door when services are being performed.
B. Whoever violates any of the provisions of this Section shall be imprisoned for not more than thirty days.
1999 La. Sess. Law Serv. Act 1227 (West).
Plaintiffs seek to enjoin the enforcement of the anti-noise provision on" two grounds: (1) it constitutes an impermissible burden on the exercise of their constitutional rights of free speech, expression, and association under the First and Fourteenth Amendments; and (2) it unconstitutionally delegates to religious authorities the power to control and suppress free speech, in violation of the First Amendment’s Establishment Clause. Plaintiffs allege that they will suffer irreparable injury if this statute is enforced because they and those similarly situated face a substantial and immediate threat of detention, arrest, prosecution, and imprisonment.
II. ANALYSIS
A. Legal Standard
The standard for obtaining a permanent injunction is essentially the same as for a preliminary injunction. See Calmes v. United States, 926 F.Supp. 582, 591 (N.D.Tex.1996). In both cases, the moving party must show a substantial threat of irreparable injury if the injunction is not granted; the threatened injury to the moving party outweighs any potential harm to the non-movant; and the injunction will not disserve the public interest. See id. (citing United States v. The Rainbow Family, 695 F.Supp. 314 (E.D.Tex.1988)). See also Valley v. Rapides Parish Sch. Bd., 118 F.3d 1047, 1051 (5th Cir.1997); Cherokee Pump & Equip. Inc. v. Aurora Pump, 38 F.3d 246, 249 (5th Cir.1994); Mississippi Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th Cir.1985). However, the plaintiff seeking a permanent injunction must demonstrate actual success on the merits, rather than a substantial likelihood of success. See Calmes, 926 F.Supp. at 591-92 (citing Amoco Production Co. v. Village of Gambell, Alaska, 480 U.S. 531, 546 n. 12, 107 S.Ct. 1396, 1404 n. 12, 94 L.Ed.2d 542 (1987)). The Fifth Circuit has held that “[ijnjunctive relief is an extraordinary and drastic remedy, not to be granted routinely, but only when the mov-ant, by a clear showing, carries the burden of persuasion.” Holland America Ins. Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir.1985).
B. Actual Success on the Merits
1. Freedoms of Speech, Expression and Association
a. Overbreadth
Plaintiffs argue that the statute at issue is unconstitutionally overbroad on its face. A statute is overbroad if it reaches more broadly than is reasonably necessary to protect legitimate state interests at the expense of First Amendment freedoms. See Grayned v. City of Rockford, 408 U.S. 104, 114, 92 S.Ct. 2294, 2302, 33 L.Ed.2d 222 (1972); Reeves v. McConn, 631 F.2d 377, 383 (5th Cir.1980).
Music is protected under the First Amendment as a form of expression and communication. See Ward v. Rock Against Racism, 491 U.S. 781, 790, 109 S.Ct. 2746, 2753, 105 L.Ed.2d 661 (1989). The First Amendment also protects the use of sound amplification equipment. See Saia v.. People of New York, 334 U.S. 558, 68 S.Ct. 1148, 92 L.Ed. 1574 (1948); Beckerman v. City of Tupelo, 664 F.2d 502, 515 (5th Cir.1981). Nevertheless, it is well established that governmental entities have a substantial interest in protecting citizens from excessive noise in traditional public fora such as city streets and parks. See Ward, 491 U.S. at 796-97, 109 S.Ct. at 2756 (citations omitted); Kovacs v. Cooper, 336 U.S. 77, 86-86, 69 S.Ct. 448, 453-54, 93 L.Ed. 513 (1949). Governments may impose reasonable time, place and manner restrictions to further their legitimate interests. See Grayned, 408 U.S. at 116, 92 S.Ct. at 2303. They are not required to adopt the least restrictive or least intrusive means of regulating protected speech. See Ward, 491 U.S. at 798, 109 S.Ct. at 2757-58.
Nevertheless, regulations restricting speech must be content neutral, narrowly tailored to serve a significant governmental interest and must leave open ample alternative channels of communication. See id. The main issue in determining content neutrality is whether the government has adopted the regulation because of “disagreement with the message it conveys.” Id. at 791, 109 S.Ct. at 2754. As long as the regulation is “justified without reference to the content of the regulated speech,” the regulation is content neutral. Id. (quoting Clark v. Community for Creative Non-Violence, 468 U.S. 288, 293, 104 S.Ct. 3065, 3069, 82 L.Ed.2d 221 (1984)). The Court finds that the statute at issue here is content neutral. The stated purpose of the statute is to create “quiet zones” around hospitals and churches, and the operation of the statute does not hinge on the content of the regulated speech. See id. at 791-92, 109 S.Ct. at 2754; United States v. Doe, 968 F.2d 86, 88 (D.C.Cir.1992). Plaintiffs do not even suggest that the statute is designed to regulate speech of any specific content.
The Court’s inquiry will therefore focus on whether the statute is “narrowly tailored” to further a legitimate state interest. The Court must consider the nature of the place where speech is regulated and the “pattern of ... normal activities” there to determine whether the regulation is reasonable. See Grayned, 408 U.S. at 116, 92 S.Ct. at 2303. In analyzing whether the state’s regulation is narrowly tailored, “[t]he crucial question” is whether the regulated expression is “basically incompatible with the normal activity of a particular place at a particular time.” Id. When First Amendment freedoms are implicated, the Court must place these freedoms in a preferred position. See id.; accord Reeves, 631 F.2d at 383. The government bears the burden of justifying its regulation as narrowly tailored. See Doe, 968 F.2d at 90.
The state’s asserted interest in preserving the tranquility of the community against excessive noise is clearly legitimate. See Ward, 491 U.S. at 796, 109 S.Ct. at 2756; Kovacs, 336 U.S. at 87-88, 69 S.Ct. at 453-54; Reeves, 631 F.2d at 384. However, the importance of First Amendment freedoms necessitates that the state regulate in this area only with narrow specificity.
When the government chooses to prohibit sound levels in public places that are not demonstrably disturbing, the courts will reject the regulation as overly broad. For example, in Reeves v. McConn, the Fifth Circuit invalidated a Houston ordinance prohibiting the operation of sound amplifying equipment in excess of 20 watts within 100 yards of any hospital, school, church, or courthouse. 631 F.2d at 381 n. 1. The court noted that “there is probably no more appropriate place for reasonably amplified speech than the streets and sidewalks of a downtown business district.” Id. at 384. See also Beckerman v. City of Tupelo, 664 F.2d at 516 (“Because this ordinance extends its total and non-discretionary prohibition to areas which have not been shown to be incompatible with sound equipment, it is unconstitutionally over-broad.”). The court stated that, in addition to the “narrowly tailored” requirement, the number of watts chosen as the point of regulation must also be reasonable. See Reeves, 631 F.2d at 387. The city could not broadly prohibit reasonably amplified speech simply because it feared that disruption might sometimes result. See id. at 388. Relying on the plaintiffs uncontroverted expert testimony that sound amplification in excess of 20 watts could be non-disruptive, the court held the ordinance unconstitutionally overbroad to the extent that it limited the sound level to 20 watts. See id. at 387-88. The Fifth Circuit stated that “there is no valid state interest in prohibiting amplified sound that does not actually cause, or imminently threaten to cause, material disruption at these [schools, churches, courthouses] locations.” Id. at 385.
On similar facts, the District of Columbia Circuit struck down a federal regulation which prohibited the playing of musical instruments at a level higher than “60 decibels measured on the A-weighted scale at 50 feet.” Doe, 968 F.2d at 89-90. Defendants there were arrested under the regulation for chanting and beating drums in Lafayette Park across from the White House during a war protest. See id. at 87. The court observed that “ ‘excessive’ noise by definition means something above and beyond the ordinary noises associated with the appropriate and customary uses of the park.” Id. at 89. The defendant proffered evidence that loud conversations exceed 60 decibels, and the government offered nothing to show that the chosen decibel level prohibited only disturbing or excessive speech activity. See id. at 90-91 (“Where constitutionally protected activity is implicated, we cannot simply defer to the Park Service’s unexplained judgment.”). The court therefore found that the government failed to carry its burden of showing that the regulation was narrow ly tailored to further its interest in preventing excessive noise in a traditional public forum. See id. See also U.S. Labor Party v. Pomerleau, 557 F.2d 410, 413 (4th Cir.1977) (invalidating city anti-noise ordinance when decibel level prohibited noise no greater than person speaking slightly louder than normal); Maldonado v. County of Monterey, 330 F.Supp. 1282, 1286 (N.D.Cal.1971) (finding unconstitutional county ordinance prohibiting any amplification of human voice above normal speaking level from all public highways).
Here, La.Rev.Stat. § 14:103.2 regulates the production of sound in excess of 55 decibels within 10 feet of hospitals or churches during posted services. Unlike the cited cases, however, the Louisiana statute does not flatly prohibit the production of sound in excess of the stated decibel level. Rather, producing sound above this level in these locations can be prosecuted if one does so “in a manner likely to disturb, inconvenience, or annoy a person of ordinary sensibilities.” La.Rev.Stat. § 14:103.2. The Court concludes, however, that because the 55 decibel level threshold is so unreasonably overbroad in the context of normal activities on public streets and in public parks, the added requirement that the sound be made in a manner that is likely to annoy or disturb someone does not save it.
Plaintiffs presented uncontroverted evidence that 55 decibels includes the sound of the human voice in normal conversation, as well as passing automobile traffic. {See Pis.’ Ex. 11, Expert Audiologist’s Report.) The regulation at issue applies to public streets and parks in New Orleans, the very heart of a city favored by citizens and tourists alike for a culture grounded in live music and outdoor celebration. Hospitals and churches exist all over the city in areas saturated in the sounds of urban life. Various Mardi Gras and other holiday parades take place on public streets, pass within 10 feet of many hospitals and churches, and produce sounds well in excess of the human voice in normal conversation. As in Reeves and Doe, the state has not offered any evidence to rebut plaintiffs’ assertion that the 55 decibel level reaches sound that is not actually disturbing or excessive. Because the Louisiana statute exposes citizens to criminal prosecution for making sounds well within the normal range for city streets and in city parks, the added requirement that the sound be likely to annoy, disturb or inconvenience someone does not prevent it from being overly broad. The Court reaches this conclusion because the “likely to ... annoy ...” standard, in the context of this statute, is vague. See discussion infra. By using this amorphous concept as a basis for prosecuting the making of sound on a public street at the level of a normal human conversation, which simply is not disturbing, the statute invites prosecution based on subjective factors or worse, distaste for the content of the sound and not its decibel level. See Dupres v. City of Newport, 978 F.Supp. 429, 435 (D.R.I.1997). For this reason, the Court concludes that the statute is not narrowly tailored to serve the state’s legitimate interest. Accordingly, the Court finds the statute unconstitutionally overbroad.
b. Vagueness
An ordinance is void for vagueness under the due process clause of the Four teenth Amendment unless it provides fair warning of prohibited conduct and explicit standards for enforcement. See Reeves, 631 F.2d at 383; Pomerleau, 557 F.2d at 413. Vague laws violate the principle that the law give a person of ordinary intelligence a reasonable opportunity to know what is prohibited so that he may act accordingly. See Grayned, 408 U.S. at 108, 92 S.Ct. at 2298-99. The void-for-vagueness doctrine also aims at arbitrary and discriminatory enforcement. See Kramer v. Price, 712 F.2d 174, 176 (5th Cir.1983) (quoting Kolender v. Lawson, 461 U.S. 352, 361, 103 S.Ct. 1855, 1858-59, 75 L.Ed.2d 903 (1983)). As the Supreme Court stated in Grayned, supra, “if arbitrary and discriminatory enforcement is to be prevented,” the law must provide “explicit standards” for those who enforce it. 408 U.S. at 108, 92 S.Ct. at 2299. In the First Amendment area, a vague criminal statute operates to inhibit the exercise of protected activities because citizens will inevitably steer a wider course around the unlawful zone when they cannot clearly discern where illegality begins and ends. See id. at 109, 92 S.Ct. at 2299 (citations omitted).
Here, plaintiffs first assert that the statute is unconstitutionally vague because a person of common intelligence must guess at its meaning and therefore is not placed on notice as to its application. See Reeves, 631 F.2d at 383 (citation omitted). In particular, plaintiffs challenge the use of the terms “in a manner likely to disturb, inconvenience, or annoy,” “a person of ordinary sensibilities,” “other houses of religious worship,” “services,” “sign,” and “occupied.” At the outset, the Court confirms that “[p]erfect clarity and precise guidance have never been required even of regulations that restrict expressive activity.” Ward, 491 U.S. at 794, 109 S.Ct. at 2755 (citations omitted). See also Grayned, 408 U.S. at 110, 92 S.Ct. at 2300 (“Condemned to the use of words, we can never expect mathematical certainty in our language”). Nevertheless, for the following reasons, the Court finds the language “in a manner likely to ... annoy” in the context of this statute to be unconstitutionally vague.
In Coates v. City of Cincinnati, 402 U.S. 611, 91 S.Ct. 1686, 29 L.Ed.2d 214 (1971), the United States Supreme Court struck a criminal statute that used the word “annoy.” Coates involved an Ohio law that made it a crime for three or more individuals to assemble on public sidewalks and to conduct themselves in a manner annoying to passersby. See id. at 612 n. 1, 91 S.Ct. at 1687 n. 1. The Court found the word “annoy” inherently vague. See id. at 614, 91 S.Ct. at 1688.
Conduct that annoys some people does not annoy others. Thus, the ordinance is vague, not in the sense that it requires a person to conform his conduct to an imprecise but comprehensive normative standard, but rather in the sense that no standard of conduct is specified at all. As a result, “men of common intelligence must necessarily guess at its meaning.”
Id. (quoting Connally v. General Constr. Co., 269 U.S. 385, 391, 46 S.Ct. 126, 127, 70 L.Ed. 322 (1926)). The Court also criticized the statute because it did not specify upon whose sensitivity a violation depends — “the judge or jury, the sensitivity of the arresting officer, or the sensitivity of a hypothetical reasonable man.” Id. at 613, 91 S.Ct. at 1688. Finally, the Court found the statute constitutionally infirm because the State cannot make criminal the exercise of First Amendment rights simply because the “exercise may be ‘annoying’ to some people.” Id. at 615, 91 S.Ct. at 1689.
If this were not the rule, the right of the people to gather in public places for social or political purposes would be continually subject to summary suspension through the good-faith enforcement of a prohibition against annoying conduct. And such a prohibition, in addition, contains an obvious invitation to discriminatory enforcement against those whose association together is ‘annoying’ because their ideas, their lifestyle, or their physical appearance is resented by the majority of their fellow citizens.
Id. at 615-16, 91 S.Ct. at 1689.
This Court finds Coates ’ rationale applicable here. Like Coates, the statute at issue uses the inherently vague word “annoy.” It is true that the statute determines what is annoying from the vantage point of the person of ordinary sensibilities, a feature notably absent in Coates. However, this language does not add clarity because the 55 decibel level threshold includes sound levels that the average person would assume are not annoying or disturbing, so that the statute does not provide fair notice as to what would transform normal sound levels into criminal conduct. There is simply no objective way to determine when sound at a level that is ordinarily not annoying becomes criminally annoying.
The Court is mindful that use of the cited language in a criminal statute proscribing a different kind of behavior in a different context might be constitutionally permissible. See Kramer, 712 F.2d at 177 & 177 n. 6 (invalidating Texas anti-harassment statute which prohibited obscene phone calls or writings that “annoy or alarm recipient” but suggesting statute could be saved if it prohibited annoying “hypothetical reasonable person”). The difference here is that the language is not used in the context of a statute with an intent element or involving one-on-one misconduct, like making obscene phone calls, which limits the vagueness of the word “annoy.” Rather, the Louisiana statute deals with making sounds on a public street or in a public park near a church or hospital. When combined with the demonstrably overbroad 55-decibel threshold, there is nothing about this context that suggests what it would take to make sound at the level of a normal human conversation criminally annoying. The Court therefore concludes that the statute is unconstitutionally vague.
The Court finds unpersuasive, however, plaintiffs’ arguments that a person of ordinary intelligence would not understand the statute’s reference to “houses of religious worship,” “services,” and “occupied” when used in context with “churches, synagogues, [and] temples.” Finally, plaintiffs argue that the statute is unconstitutionally vague as it would permit churches to post any kind of “sign.” The Court disagrees and finds that, given the statutory context of church services held while the building is occupied, it is reasonable to expect that an enforcement official would interpret “sign” objectively to mean a sign indicating that services are ongoing.
Plaintiffs also argue that the statute invites discriminatory enforcement because it does not specify the standards to be used to measure sound levels. Plaintiffs produced evidence, which was not contradicted, that at least six different weighting scales are available and that the selection of any one scale over another may result in a significant variation in measurements. (See Pls.’ Ex. 11, ¶ 9.) However, plaintiffs cite no authority, and the Court has found none, holding that the absence of a specified measurement standard would invalidate an otherwise reasonable decibel limitation. While the Court believes that it is preferable to state the decibel measurement standard in the statute, it does not find that a failure to do so alone renders the statute unconstitutionally vague. See generally Jim Crockett Promotion, Inc. v. City of Charlotte, 706 F.2d 486 (4th Cir.1983) (upholding city anti-noise ordinance prohibiting sound volume exceeding certain decibel levels, as measured by sound level meter in accordance with American National Standards Institute guidelines); Dupres, 978 F.Supp. at 433 (provision measuring decibel level by “A-scale” not void for vagueness).
2. Establishment Clause
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10813218-4961 | In this case, which is before the court on cross-motions for summary judgment, plaintiff challenges her release from extended active duty in the Air Force Nurse Corps in 1973, following her being passed over for promotion to the temporary rank of major by two selection boards.
Plaintiff, a nurse who had been on extended active duty as a reserve captain, twice was relieved from active duty as a result of two passovers to major. On the first occasion, she was passed over by selection boards in April 1969 and December 1970. The Air Force Board for the Correction of Military Records ("Correction Board”) held in October 1971 that three of the Officer Effectiveness Reports ("OERs”) in plaintiffs records before the selection boards were erroneous and ordered them expunged, voided her two passovers and her release from active duty, and directed that all references to her prior consideration for promotion to temporary major be removed from her records.
Following plaintiffs restoration to active duty, selection boards in November 1971 and August 1972 again passed her over for promotion to the temporary rank of major. She was released from extended active duty in July 1973. Plaintiff then filed an application with the Correction Board, seeking invalidation and removal of three other OERs, correction of another OER or its removal, voiding of her passovers in 1971 and 1972, reinstatement on active duty, and promotion to major. The Correction Board denied all relief.
In her suit in this court, the plaintiff seeks the invalidation and removal from her record of the four OERs, the voiding of her two passovers, reinstatement to active duty, and back pay. Her briefs in this court, of more than 300 pages, challenge the decision of the Correction Board on a multitude of grounds, none of which requires extensive discussion.
1. Plaintiff contends that the four OERs were erroneous and should be removed from her records because they did not accurately reflect her performance. She relies primarily upon statements by officers who rated her, made long after their initial evaluation, that those evaluations did not correctly reflect her performance. She also charges that her evaluations were lower than they should have been because the rating officers were members of a nurses’ clique of which she was not a member. The Correction Board considered these contentions, but found them insufficient to warrant invalidation of the OERs. Here, as in Tanaka v. United States, 210 Ct. Cl. 712, 713 (1976), cert. denied, 430 U.S. 955 (1977), we cannot say that the Correction Board abused its discretion in "attach[ing] more weight to an original OER than to a subsequent attempt by its writer to modify it as to matters of opinion only.” See also Savio v. United States, 213 Ct. Cl. 737, 740 (1977); Reid v. United States, ante at 864.
2. Plaintiff asserts that the Correction Board committed legal error by failing to grant her a hearing. Plaintiff submitted two lengthy briefs to the Board, totaling more than 80 pages, and she has not shown that the procedures the Board followed denied her the opportunity to present any facts or argument. The Board was not required to hold a hearing. Flute v. United States, 210 Ct. Cl. 34, 40-41, 535 F.2d 624, 627-28 (1976).
3. Plaintiff next contends that the Correction Board had improper ex parte contacts with the Officer Personnel Record Review Board ("Review Board”). This contention relates to the request of the Correction Board that the Review Board furnish it with additional information and recommendations regarding the plaintiff, which the Review Board did. The seeking of such information was authorized by the Correction Board’s regulations, which permit that board to "obtain such further information as it may consider essential to a complete and impartial determination of the facts and issues.” A.F.R. 31-3, ¶ 17(b). Plaintiff had the opportunity to review the Review Board’s comments, and she submitted a lengthy reply to the Correction Board. There was nothing improper in the Correction Board’s seeking and the Review Board’s submitting this material. Cf. Flute v. United States, supra; Weiss v. United States, 187 Ct. Cl. 1, 408 F.2d 416 (1969); Proper v. United States, 139 Ct. Cl. 511, 154 F. Supp. 317 (1957).
4. As previously noted, when the Correction Board in 1971 invalidated three of plaintiffs OERs and set aside her passovers in 1969 and 1970, it directed that all references to her prior consideration for promotion to temporary major be removed from her records. The government concedes that this directive was not fully complied with, since the Air Force failed to remove a notation in plaintiffs record indicating that a selection board had considered her for promotion in December 1970, and that this failure constituted "error.” It argues, however, that plaintiffs failure to raise this point before the Correction Board precludes her from urging it before the court. We agree.
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11935342-23422 | ORDER OF ABSTENTION
SUTTLE, Senior District Judge.
Pending is the motion for abstention and remand filed by the debtor, Vincent Russell Chiodo d/b/a Chiodo Farms, and the report and recommendation of the Bankruptcy Judge with regard thereto. Being unopposed, the report and recommendation are hereby adopted by the Court pursuant to Bankruptcy Rule 9033.
The Court finds that:
(1) This Court has jurisdiction under 28 U.S.C. § 1334(b);
2. Although this proceeding was properly removed under 28 U.S.C. § 1452(a), mandatory abstention under 28 U.S.C. § 1334(c)(2) may apply to this proceeding;
3. Abstention under 28 U.S.C. § 1334(c)(2) does apply to this proceeding; and
4. Remand under 28 U.S.C. § 1452(b) is appropriate.
IT IS THEREFORE ORDERED this this Court will ABSTAIN from hearing this adversary proceeding. It is further ORDERED that this proceeding is REMANDED to the 288th Judicial District Court, Bexar County, Texas.
ORDER DENYING MOTION TO RESCIND ORDER OF ABSTENTION
The Court has considered the motion under Fed.R.Civ.P. 60(a) filed by NBC Bank— San Antonio, N.A. (“NBC”), as well as the response of Vincent Russell Chiodo, d/b/a Chiodo Farms. After such consideration, the Court hereby denies the motion of NBC to rescind the Order of Abstention filed May 12, 1988.
APPENDIX
United States Bankruptcy Court
Western District of Texas
San Antonio Division
April 7, 1988.
REPORT AND RECOMMENDATION FOR DISPOSITION OF “MOTION FOR ABSTENTION AND REMAND”
R. GLEN AYERS, Jr., Bankruptcy Judge.
Pending before the Court is the Plaintiffs’ Motion for Abstention and to Remand and the Defendant’s Response to the motion. Both parties have filed briefs. Pursuant to Bankruptcy Rules 5011(c) and 9027(e), the Court makes the following report and recommendation. For the reasons set out below, this Court recommends that the District Judge abstain from hearing this proceeding and remand it back to the 288th Judicial District, Bexar County, Texas.
I.
On February 20, 1987, Vincent Chiodo d/b/a Chiodo Farms (the “Debtor”) filed his bankruptcy petition. On June 30, 1987, the Debtor filed a petition in the District Court for Bexar County, Texas. That petition is a “lender liability” suit in which the Debtor seeks actual and punitive damages under the Texas Deceptive Trade Practices —Consumer Protection Act. The acts the Debtor complains of are all pre-petition acts. On July 17, 1987, defendant NBC Bank — Brooks Field (the “Bank”) filed its Application for Removal of Civil Action pursuant to 28 U.S.C. sec. 1452(a). The Bank then filed its answer, various affirmative defenses and counterclaimed to recover the amount due under a real estate lien note, attorneys fees and costs. The Bank is now proceeding under its Second Amended Answer and Second Amended Counterclaim. The Bank’s pleadings now seek foreclosure of liens on real and personal property that secure the real estate lien note.
In September 1987, the Bank filed a motion to compel the joinder of Cleo Chiodo as a plaintiff and a motion for leave to add Cleo Chiodo as a third-party defendant. Cleo Chiodo is co-maker of the real estate lien note. Both motions were subsequently granted on October 8, 1987. The Debtor and Cleo Chiodo (hereinafter “the Plaintiffs”) filed a joint First Amended Complaint in which Cleo Chiodo makes a jury demand. Cleo Chiodo also made a jury demand in her answer to the third-party complaint.
II.
The Court has jurisdiction of this proceeding under 28 U.S.C. sec. 1334(b). The test for jurisdiction is “whether the outcome could conceivably have any effect on the estate being administered in bankruptcy.” Matter of Wood, 825 F.2d 90, 93 (5th Cir.1987). The outcome of this proceeding will obviously affect this estate as the Bank holds one of the largest claims against this estate and holds liens on much of the property of the estate. If the Plaintiffs prevail, the note will be satisfied and the encumbered property will then be available to pay other creditors or to support the Debtor’s reorganization efforts.
Next, the Court must determine the nature of its authority over this proceeding —i.e. it must determine whether this is a core proceeding or an otherwise related proceeding under 28 U.S.C. 157. In re Cemetery Development Corp., 59 B.R. 115, 118 (Bankr.M.D.La.1986). The Fifth Circuit has held that “a proceeding is core under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankrupctcy case.” Wood, 825 F.2d at 97. The Plaintiffs’ complaint does not invoke any rights provided by title 11, but asserts only rights under Texas law. The complaint alleges that the Bank’s actions resulted in the Debtor’s bankruptcy petition, but the Bank’s actions were all pre-petition actions. Thus, it cannot be said that this proceeding could only rise in the context of a bankruptcy case.
The test to determine whether a proceeding is a related proceeding, but not a core proceeding, may also be stated in other terms. “ ‘Related proceedings’ are those which (1) involve causes of action owned by the debtor that became property of the estate under section 541, and (2) suits between third parties which in one way or another affect the administration of the estate.” 1 Collier on Bankruptcy P. 3.01 at 3-25 (15th ed. 1987). This proceeding contains both of the two different grounds by which a proceeding may be classified as related. The facts that the Debtor alleges were all pre-petition acts, and thus the cause of action was a prepetition cause of action. See Smart v. Texas American Bank/Galleria, 680 S.W.2d 896, 898 (Tex.Civ.App.—Houston [1st Dist.], 1984, no writ); Bauman v. Centex Corp., 611 F.2d 1115, 1118 (5th Cir.1980) (cause of action accrues when acts committed). The cause of action is an legal interest owned by the debtor which became property of the estate under section 541(a)(1). This proceeding is also one between two third parties — Cleo Chiodo and the Bank — that affects the administration of the estate.
Nevertheless, the Bank contends that this is a core proceeding because it has filed a Proof of Claim for the amounts due under the real estate lien note that is the basis for the Bank’s counterclaim. In determining core or related status, this Court must look to the substance as well as the form of the proceeding. Wood, 825 F.2d at 97. A review of the bankruptcy case docket sheet shows that the Debtor has not filed an objection to the Bank’s proof of claim. Additionally, the Plaintiffs’ answers to the counterclaim state that the nothing is due under the note because, pursuant to the complaint, the Bank is liable for sums in excess of the amount of the note. The Court interprets these pleadings as not disputing the validity of the Bank’s claim under the note; the Debtor here asserts that a successful conclusion of this proceeding will offset the amount due under the note. Thus, the Court concludes that this proceeding is not a proceeding to allow or disallow a claim against the estate as that phrase is used in 28 U.S.C. sec. 157(b)(2)(B). The Court concludes that this is an otherwise related proceeding governed by section 157(c)(1).
III.
The Debtor asserts that the Court must mandatorily abstain from hearing this proceeding under 28 U.S.C. sec. 1334(c)(2). The Bank takes the position that section 1334(c)(2) does not apply to actions removed under 28 U.S.C. sec. 1452, but rather is applicable only to cases commenced originally in bankruptcy court. The Bank relies on an unpublished opinion by this Court which primarily relied on In re 666 Associates, 57 B.R. 8 (Bankr.S.D.N.Y.1985). Although not at issue here, the Court notes that other decisions interpreting section 1334(c)(2) have stated that it does not apply to proceedings which were originally brought in bankruptcy courts. Those decisions interpret the phrase “is commenced” as meaning that a State court proceeding had to have been previously filed. When the above two interpretations on the applicability of section 1334(c)(2) are put together, the section disappears. On the one hand, section 1334(c)(2) does not apply if the action was originally brought in State court and removed to bankruptcy court; on the other hand, section 1334(c)(2) does not apply if the action is originally brought in bankruptcy court. After this analysis, the only conclusion to be reached is that one or the other of these limits on the applicability of section 1334(c)(2) must be wrong. See United States v. Menasche, 348 U.S. 528, 538-539, 75 S.Ct. 513, 519-520, 99 L.Ed. 615 (1955) (“It is our duty to give effect, if possible, to every clause and word of a statute, rather than to emasculate an entire section.”)
As the Debtor had previously commenced a State court action, only the interplay between sections 1334 and 1452, 28 U.S.C. secs. 1334, 1452, will be addressed. Section 1452, in pertinent part, provides:
“(a) A party may remove any claim or cause of action in a civil action ... to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.
(b) The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground_” 28 U.S.C. sec. 1452.
The court, in In re 666 Associates, concluded that section 1334(c)(2) did not apply to actions removed under section 1452(a), stating:
“If Congress had intended that in considering whether to remand a removed action, the court should look to 1334(c)(2) it would have been a simple matter to insert the appropriate cross-reference to 1452(b), just as a cross-reference to 1334 was added in 1452(a). The absence of such a cross-reference is striking since removed actions would principally be state court actions and presumably be based on state law.” 57 B.R. at 12.
This reasoning reads subsection (c)(2) out of section 1334. The plain meaning of the jurisdictional reference in section 1452(a) is that section 1334 applies in its entirety. The cross-reference does not state that actions may be removed if the district court has jurisdiction under section 1334(b) but that is the effect of the 666 Associates reasoning. Under section 1334, Congress grants jurisdiction over bankruptcy matters to the district courts, but Congress has also specifically directed district courts to abstain in certain instances provided for in section 1334(c)(2). Mandatory abstention is an integral limitation to the grant of jurisdiction; courts are not allowed to pick and choose which subsections of a statute they wish to apply when Congress has directed that, an entire section shall apply in a given situation. The lack of a cross-reference in section 1452(b) is not important because section 1334(c)(2) is incorporated by section 1452(a) along with the rest of section 1334. See State Bank of Lombard v. Chart House, 46 B.R. 468, 471-472 (N.D.Ill.1985).
Additionally, the 666 Associates reasoning fails to distinguish between abstention and remand. Any time a court remands a case, it is also abstaining from hearing that case. See In re Adams, 809 F.2d 1187, 1188 (5th Cir.1987). Abstention only means that the federal court will not hear the proceeding. At least three courses of action are open to a federal court once it has decided to abstain. First, the court can retain jurisdiction, but abstain from a deciding the case while the parties obtained a state court determination on the state law issues. Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941). The other options after abstention are to dismiss the proceeding or to remand the case to state court. Carnegie-Mellon University v. Cohill, 484 U.S. -, 108 S.Ct. 614, 98 L.Ed.2d 720, (1988).
In Carnegie-Mellon, the Supreme Court held that a federal court had inherent power to remand a properly removed state law claim even though not specifically authorized by statute. Justice White, dissenting in Carnegie-Mellon, stated that the statute, 28 U.S.C. sec. 1447(c), only allowed remand if the case was removed without jurisdiction, and that remand was not authorized if the case had been properly removed. This Court finds that the structure and relationship between sections 1334 and 1452 prevent the Carnegie-Mellon debate about a court’s power to remand a removed, bankruptcy related proceeding. In doing so effect is given to “every clause and word of the statute.”
A bankruptcy related proceeding may be properly removed if the district court has jurisdiction under section 1334(b). Such a proceeding must have been properly removed, and thus section 1447(c) would not apply. If the court does not have jurisdiction under section 1334(b), abstention under section 1334(c) cannot arise. Removal does not require action by the court, and abstention under section 1334(c) cannot be determined until after the court has jurisdiction. If a district court finds that it should abstain, it must then decide which of the three possible courses of action to take. Section 1452(b) gives specific statutory approval to the use of the inherent power to remand a proceeding as the Supreme Court only recently stated in Carnegie-Mellon.
A proceeding may be remanded under section 1452(b) for any equitable reason. Courts have ennumerated a list of the equitable considerations that are relevant to a decision to remand. In re Baren, 47 B.R. 39, 42-43 (Bankr.N.D.Ill.1984). To that list, this Court would add that remand may be appropriate when abstention is mandated by section 1334(c)(2). The Baren court has already recognized that the “exercise [of] discretionary abstention, provided for in section 1334(c)(1), would essentially consist of an examination of the same equitable considerations addressed by the Court by motions to remand.” Id. at 44. This Court finds that abstention and remand of bankruptcy related cases go hand-in-hand, whether the court abstains under sections 1334(c)(1) or (c)(2). This Court finds that all provisions of sections 1334 and 1452 may be harmonized without limiting the plain language of either section. In light of the foregoing discussion, this Court now recants its prior decision and its reliance on 666 Associates.
IV.
Having decided that mandatory abstention may apply, the Court must decide whether it does apply to this proceeding. Section 1334(c)(2), in pertinent part, states:
“Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction.” 28 U.S.C. sec. 1334(c)(2).
Each of the separate requirements will be discussed sequentially.
A. Timely Motion
The Plaintiffs’ Motion for Abstention and to Remand was filed on November 10, 1987. The Bank alleges this motion is not timely as this proceeding was originally removed in July 1987. While a motion to abstain may have to be filed with the initial pleading of a party, the timeliness of the motion must be determined under the individual facts of each case. Both the Debtor and Cleo Chiodo joined in the Motion for Abstention. The Court’s orders requiring the joinder of Cleo Chiodo as plaintiff and allowing a third-party complaint against Cleo Chiodo were not entered until October 9, 1987. The Motion for Abstention was filed one month after she was made a party to this proceeding; the Motion was the first pleading filed by Cleo Chiodo. Section 1334(c)(2) only requires a “timely motion of a party.” The Court finds that under the facts of this proceeding, this motion is timely. While it is true that the motion was filed some four months after the proceeding was removed, that fact would call for a different result only if the Debtor was still the only plaintiff. Cleo Chiodo was added to this proceeding at the insistence of the Bank. The Bank cannot now be heard to complain that Cleo Chiodo has moved to abstain and remand this proceeding.
B. State Law Issues
The complaint, answer and counterclaim, as each has been amended, assert only State law claims. The complaint asserts a cause of action under the Texas Deceptive Trade Practices — Consumer Protection Act. Tex.Bus. & Comm. Code Ann. sec. 17.41 et seq. (Vernon Supp.1988). The Bank’s counterclaim is an action on a note and to foreclose on a lien. It is also based only on State law. As noted in the discussion supra, the Court does not find that this suit is properly categorized as a suit to allow or disallow a claim in the bankruptcy case. The Court finds that this requirement is met.
C. Related But Not Core Proceeding
The next requirement is that the proceeding be “related to a case under title 11, but not arising under title 11 or arising in a case under title 11.” In one sense, all proceedings whether “core” or only “otherwise related” to a bankruptcy case are related proceedings. In re Cemetery Development Corp., 59 B.R. 115, 123 (Bankr.M.D.La.1986). The requirement of a “related” proceeding, but one that does not "arise under” or “arise in”, means that section 1334(c)(2) applies to those cases that are “otherwise related” cases under 28 U.S.C. sec. 157(c)(1). See generally Wood, 825 F.2d at 97. The Court has made the finding that this is an “otherwise related” proceeding, supra.
D. Lack of Independant Jurisdiction; Action Commenced
This proceeding could not have been commenced in a federal court but for the filing of bankruptcy. As noted above, those proceedings does not involve any federal question. There is no diversity of citizenship. This action was removed from a State court, and the requirement that an action “is commenced” is also satisfied.
E.Timely Adjudication
This requirement is the most difficult of the requirements for this proceeding to meet, and a brief side-track is required. Plaintiff, Cleo Chiodo, has made a jury demand. If this cause of action had remained in State court, she would be entitled to a jury as of right. See generally Jim Walter Homes v. Castillo, 616 S.W.2d 630 (Tex.Civ.App.—Corpus Christi 1981, no writ). As this proceeding is a “related proceeding”, any decision rendered in the bankruptcy court is subject to de novo review in district court. 28 U.S.C. sec. 157(c)(1). There is much confusion as to whether a bankruptcy judge may hold a jury trial, and cases on both side of the issue may be found. Under the facts as presented here, this Court agrees with In re Smith-Douglass, 43 B.R. 616 (Bankr.E.D.N.C.1984). That opinion states:
“There is no direct prohibition under the Bankruptcy Amendments and Federal Judgeship Act of 1984 against jury trials being conducted by the bankruptcy court, but the inability of bankruptcy judges to enter final judgments, absent consent of the parties, in noncore proceedings makes jury trials in such proceedings impractical. A party entitled to a jury trial should receive one, not an advisory jury trial in which proposed findings are submitted to the district court. 28 U.S.C. sec. 157(c)(1).” Id. at 618.
However, a jury trial is more than “impractical.” The Fifth Circuit has held, when interpreting the Magistrate’s Act, that jury trials which are subject to de novo review cannot be conducted because that review violates the seventh amendment prohibition on review of jury findings. Ford v. Estelle, 740 F.2d 374, 380 (5th Cir.1984). This Court concludes that jury trials may only be conducted by the bankruptcy judges in related proceedings when the parties agree to a final determination under 28 U.S.C.' sec. 157(c)(2). The jury demand in this proceeding, where the parties have not consented to determination in the bankruptcy court, effectively ousts this Court of the power to hear this proceeding.
The only question is whether this case be heard in state court or in the district court. For this proceeding to go forward in the district court, the District Judge would have to withdraw the reference of this proceeding, pursuant to 28 U.S.C. sec. 157(d), for cause shown. No motion to withdraw the reference has been filed. Therefore, the only option remaining is for the District Court to abstain from hearing this proceeding so that it may go forward in the State court.
Although not addressed by these parties, the Court takes notice that other litigants before this Court have stipulated that a resolution of a jury case is more rapid in the local State court than in the federal district court, in this district at this time. This district is short one United States District Judge, and it has a large criminal docket. Mandatory abstention is supported by the fact that the state court can hear this case more rapidly than the U.S. District Court.
y.
Having determined that mandatory abstention applies, the District Court must decide which of the possible dispositions it should order. The Bank, in its Second Amended Answer, has asserted that the Plaintiffs’ causes of action are barred by the statute of limitations. Without deciding whether or not the Bank’s assertion is correct, this Court believes dismissal would be inappropriate. A “remand generally will be preferable to dismissal when the statute of limitations on the plaintiff’s state-law claims has expired before the federal court has determined that it should relinquish jurisdiction over the case.” Carnegie-Mellon, 484 U.S. at -, 108 S.Ct. at 619, 98 L.Ed.2d at 731. The timeliness of the Plaintiffs’ suit should be determined by the date of the original state court petition. A removed proceeding may be remanded on any equitable ground. 28 U.S.C. sec. 1452(b). Given the fact that this proceeding may be barred by limitation, it is equitable that the Debtor should be allowed to keep his original filing date, rather than give the defendant the benefit of the additional lapse of time.
CONCLUSION
In conclusion, this Court recommends to the United States District Court that it find that abstention is mandatory under 28 U.S. C. sec. 1334(c)(2). This Court further recommends that this proceeding be remanded back to the 288th Judicial District, Bexar County, Texas, the court from which this proceeding was removed, for a trial on the merits.
This Court recommends that the District Judge make the following findings in support of the recommended action:
1. The district court has jurisdiction over this proceeding under 28 U.S.C. sec. 1334(b);
2. Although this proceeding was properly removed under 28 U.S.C. sec. 1452(a), 28 U.S.C. sec. 1334(c)(2) mandatory abstention may apply to this proceeding;
3. Abstention under 28 U.S.C. sec. 1334(c)(2) does apply to this proceeding; and
4. Remand under 28 U.S.C. sec. 1452(b) is appropriate.
. The Debtor had made a jury demand on September 9, 1988 in its answer to the counterclaim. The Debtor had not fully complied with Tex.R.Civ.P. 216 which requires a jury fee be paid. This proceeding was removed prior to the 1987 amendments to the Bankruptcy Rules. Bankruptcy Rule 9027(i), as it existed prior to the amendments, required a jury demand within 10 days of notice of the application for removal. The Debtor did not make a timely jury demand.
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3529475-32338 | MEMORANDUM OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR DISCLOSURE AND MOTION TO SUPPRESS
JOHN R. TUNHEIM, District Judge.
Defendant Mohamed Abdullah Warsame (“Warsame”) is charged with conspiracy to provide and providing material support and resources to a designated Foreign Terrorist Organization, in violation of 18 U.S.C. § 2339B, and with making false statements in violation of 18 U.S.C. § 1001(a)(2). Warsame has filed a motion for disclosure of applications for electronic surveillance under the Foreign Intelligence Surveillance Act of 1978 (“FISA”), and a motion to suppress evidence resulting from surveillance conducted pursuant to FISA. For the reasons discussed below, the Court denies these motions.
BACKGROUND
The Federal Bureau of Investigation (“FBI”) began investigating Warsame in July 2003 in connection with an international terrorism investigation. As part of that investigation, the FBI obtained orders from the United States Foreign Intelligence Surveillance Court authorizing electronic surveillance and searches of War-same, including a wiretap of Warsame’s telephone and a physical search of his apartment. These orders were obtained pursuant to the certification procedures required under the Foreign Intelligence Surveillance Act, or FISA. 50 U.S.C. §§ 1801 et seq.
The FBI continued its surveillance activities until December 8, 2003, when agents approached Warsame for the first time at his home to discuss his background and travel experiences. Warsame agreed to accompany the agents to an undisclosed location, which turned out to be Camp Ripley, an Army National Guard military base in Little Falls, Minnesota. There, the questioning continued over the course of two days. During these interviews, Warsame described some of his overseas experiences, including attending terrorist training camps in Afghanistan, receiving military training in an al Qaeda camp, and meeting Osama Bin Laden. Following these interviews, the agents drove War- same back to the FBI office in Minneapolis, where he was arrested.
Warsame was subsequently charged with two counts of providing or conspiring to provide material support or resources to a foreign terrorist organization, and three counts of making false statements. The prosecution has notified Warsame that it intends to offer at trial evidence obtained and derived from the surveillance authorized by the Foreign Intelligence Surveillance Court. In response, Warsame filed a motion for disclosure of the FISA applications and related materials, arguing that disclosure of the FISA applications and orders is necessary for him to fully support his motion to suppress the evidence obtained from the surveillance and searches. Warsame has also filed a motion to suppress the fruits of the FISA surveillance, arguing that the surveillance applications fail to meet FISA’s statutory certification requirements, and that FISA as amended by the Patriot Act violates the Fourth Amendment.
ANALYSIS
1. FOREIGN INTELLIGENCE SURVEILLANCE ACT
In 1978, Congress enacted the Foreign Intelligence Surveillance Act (“FISA”), which established detailed procedures governing the Executive Branch’s ability to collect foreign intelligence information. FISA was a congressional response to the Supreme Court’s decision in United States v. United States District Court (Keith), 407 U.S. 297, 321-22, 92 S.Ct. 2125, 32 L.Ed.2d 752 (1972), which expressly declined to decide whether the Fourth Amendment limits the President’s power to conduct electronic surveillance to obtain foreign intelligence information for national security purposes. Through FISA, Congress sought to resolve “doubts about the constitutionality of warrantless, foreign security surveillance and yet protect the interests of the United States in obtaining vital intelligence about foreign powers.” ACLU Found, of S. Cal. v. Barr, 952 F.2d 457, 461 (D.C.Cir.1991).
FISA establishes a “secure framework” that seeks to balance the President’s power to conduct surveillance for foreign intelligence purposes with the individual rights guaranteed by the United States Constitution. Id. To obtain an order authorizing electronic surveillance or physical searches of an agent of a foreign power, FISA requires the government to file under seal an ex parte application with the United States Foreign Intelligence Surveillance Court (the “FISC”). 50 U.S.C. §§ 1804, 1823. The application must be approved by the Attorney General and must include certain specified information. See 50 U.S.C. §§ 1804(a), 1823(a). After review of the application, a single judge of the FISC enters an ex parte order granting the government’s application for electronic surveillance or a physical search of an agent of a foreign power, provided the judge makes certain specific findings. 50 U.S.C. §§ 1805(a), 1824(a). Applications for a renewal of the order must generally be made upon the same basis as the original application and require the same findings by the FISC. 50 U.S.C. §§ 1805(e)(2), 1824(d)(2).
As originally enacted, FISA also required the applications to contain a certification by a high-ranking Executive Official that “the purpose” of the surveillance was to obtain foreign intelligence information. 50 U.S.C. §§ 1804(a)(7)(B), 1823(a)(7)(B) (2000). In 2001, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“Patriot Act”), which amended FISA to require only that “a significant purpose” of the surveillance or search is to obtain foreign intelligence information. 50 U.S.C. § 1804(a)(7)(B), 1823(a)(7)(B) (2006). By changing FISA’s purpose requirement, “Congress was keenly aware that this amendment relaxed a requirement that the government show that its primary purpose was other than criminal prosecution.” In re Sealed Case, 310 F.3d 717, 732 (Foreign Int.Surv.Ct.Rev.2002).
In addition to imposing specific requirements on the Executive Branch, FISA allows the use of evidence derived from FISA surveillance and searches in criminal prosecutions. 50 U.S.C. §§ 1806(a), 1825(a). In this case, the prosecution has indicated that it intends to offer against Warsame certain evidence obtained and derived from electronic surveillance and physical searches authorized by the FISC. As required by FISA, the Attorney General has authorized the use of this FISA information in all phases of the prosecution of Warsame. See 50 U.S.C. §§ 1806(b), 1825(c). The prosecution has also provided defendant with the required written notice of its intent to use the FISA information. See 50 U.S.C. §§ 1806(c), 1825(d).
FISA also authorizes “an aggrieved person” to seek to suppress any evidence derived from FISA surveillance or searches on grounds that (1) the evidence was unlawfully acquired, or (2) the electronic surveillance or physical search was not conducted in conformity with the order of authorization or approval. 50 U.S.C. §§ 1806(e), 1825(f). Upon receiving notice of the prosecution’s intent to use FISA information in his case, Warsame filed a motion for disclosure of the FISA applications and related materials. Warsame has also filed a motion to suppress information obtained pursuant to the FISC-authorized surveillance, arguing in part that the Patriot Act amendment to FISA violates his rights under the Fourth Amendment. For the reasons discussed below, the Court denies these motions.
II. MOTION TO DISCLOSE FISA MATERIALS
Warsame moves for the disclosure of all FISA applications, orders, and related documents as an “aggrieved person” under the Act. See 50 U.S.C. §§ 1806(e), 1825(f). Warsame asserts that disclosure of the FISA applications and orders is necessary for him to fully support his motion to suppress the evidence obtained from the surveillance and searches. Warsame contends that meaningful review cannot be accomplished through an in camera, ex parte review of the documents. Warsame further asserts that denial of disclosure would violate his right to due process.
In response to Warsame’s request for disclosure, former Attorney General Alber to Gonzales filed an affidavit stating under oath that disclosure of such materials would harm national security. See 50 U.S.C. §§ 1806(f), 1825(g). In support of its claim of privilege, the United States submitted to the Court the sealed, classified declaration of John E. Lewis, Acting Assistant Director, Counterterrorism Division, Federal Bureau of Investigation. Under FISA, the filing of an Attorney General affidavit triggers an in camera, ex parte procedure to determine whether the surveillance of the aggrieved person was lawfully authorized and conducted. 50 U.S.C. §§ 1806(f), 1825(g). The Court’s careful review of the sealed, classified materials fully supports the Attorney General’s sworn assertion that the sealed materials filed with the Court contain
sensitive and classified information concerning United States intelligence sources and methods and other information relating to efforts of the United States to conduct counterintelligence investigations, including the manner and means by which those investigations are carried out; [and that] to reveal such information reasonably could be expected to cause serious and exceptionally grave damage to the national security of the United States.
(Declaration and Claim of Privilege of the Attorney General of the United States, at 3.)
Once the in camera, ex parte procedure is triggered, the reviewing court may disclose such materials “only where such disclosure is necessary to make an accurate determination of the legality of the surveillance.” 50 U.S.C. § 1806(f); see also 50 U.S.C. § 1825(g). The legislative history explains that such disclosure is “necessary” only where the court’s initial review indicates that the question of legality may be complicated by factors such as
indications of possible misrepresentation of fact, vague identification of the persons to be surveilled, or surveillance records which include a significant amount of nonforeign intelligence information, calling into question compliance with the minimization standards contained in the order.
United States v. Belfield, 692 F.2d 141,147 (D.C.Cir.1982) (quoting S.Rep. No. 95-701, 95th Cong., 2d Sess. 64 (1978), U.S.Code Cong. & Admin.News 3973, 4032-33).
No United States District Court or Court of Appeals has ever determined that disclosure to the defense of such materials was necessary to determine the lawfulness of surveillance or searches under FISA. See United States v. Rosen, 447 F.Supp.2d 538, 546 (D.Va.2006) (collecting cases). Warsame attempts to distinguish these cases by pointing to recent government admissions that numerous FISA applications have included misstatements and critical omissions. See In re All Matters Submitted to the Foreign Intelligence Surveillance Court, 218 F.Supp.2d 611, 620-21 (Foreign Int. Surv. Ct.2002) (discussing errors discovered in more than 75 FISA applications). Warsame further argues that the consistency of these case holdings demonstrates that the FISA process is a “sham,” and that adversarial proceedings are particularly important here because of the complexity of the issues presented to the Court.
The Court is receptive to War-same’s concerns about the one-sided nature of the FISA process, and has engaged in a comprehensive and careful review of the FISA applications, orders, and other related materials. However, the Court has found that the issues presented by the FISA applications are straightforward and uncontroversial, and present none of the concerns that might warrant disclosure. The fact that the government has included misstatements and critical omissions in other FISA applications not at issue here cannot justify disclosure in this case. Without some indication that the congressionally mandated FISA procedures were not followed here, the government’s legitimate national security interest in maintaining the secrecy of the information contained in the FISA applications bars disclosure of the materials to Warsame.
The Court further concludes that the ex parte procedure complies with due process. Warsame argues that Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), provides the appropriate analytical framework for determining whether due process requires disclosure. Mathews held that courts should consider three factors when determining whether a practice violates the right to procedural due process:
First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.
Id. at 335, 96 S.Ct. 893. The prosecution disputes that the Mathews framework is appropriate for assessing the validity of FISA procedures in the context of criminal cases, noting that no federal court that has examined the constitutionality of FISA’s in camera, ex parte procedure has even considered Mathews. Indeed, the Supreme Court has held that the Mathews balancing test is generally inappropriate in criminal cases. See Medina v. California, 505 U.S. 437, 444-45, 112 S.Ct. 2572, 120 L.Ed.2d 353 (1992). As the Medina Court explained, the Bill of Rights itself is the source of constitutional guarantees required in criminal proceedings. Id. at 443, 112 S.Ct. 2572. “[T]he expansion of those constitutional guarantees under the open-ended rubric of the Due Process Clause invites undue interference with both considered legislative judgments and the careful balance that the Constitution strikes between liberty and order.” Id.; see also Krimstock v. Kelly, 464 F.3d 246, 254 (2d Cir.2006) (noting that the Mathews framework is inappropriate for resolving challenges to the process afforded in criminal proceedings). The Court is therefore not convinced that the Mathews balancing test supplies an appropriate framework for evaluating FISA procedures in this case.
Even applying the Mathews framework, however, the Court finds that due process does not mandate disclosure of the FISA materials to Warsame. There is no doubt that Warsame has important privacy and liberty interests at stake, and the Court recognizes the difficulty faced by defense counsel in this situation. The defense must argue for the suppression of information gained from FISA surveillance without ever seeing the basis for the court orders authorizing the surveillance. Nevertheless, the Court does not think that disclosure of the FISA materials to War-same is the appropriate response to this concern. FISA attempts to protect the rights of individuals not through mandatory disclosure but through “in-depth over sight of FISA surveillance by all three branches of government and by a statutory scheme that to a large degree centers on an expanded conception of minimization that differs from that which governs law-enforcement surveillance.” Belfield, 692 F.2d at 148. Given these protections, and based on the Court’s careful review of the FISA materials in this case, the Court believes that the probable value of disclosure, as well as the risk of nondisclosure, of the FISA materials to the defense is low. Finally, the government has a substantial national security interest in preventing the disclosure of these materials, which was persuasively articulated in a sealed affidavit of the Attorney General.
In sum, the Court concludes that disclosure of FISA materials to Warsame is not necessary for an accurate determination of the legality of the surveillance, and not necessary to adequately safeguard War-same’s due process rights. Warsame’s motion for disclosure is therefore denied.
III. MOTION TO SUPPRESS FOR FAILURE TO SATISFY FISA’S STATUTORY REQUIREMENTS
Warsame next argues that evidence resulting from FISA surveillance and searches in this case should be suppressed because the government’s FISA applications failed to satisfy FISA’s statutory requirements. Under § 1806(f), if an aggrieved person moves to suppress FISA evidence, the Court must review ex parte and in camera the government’s applications, as well as the Foreign Intelligence Surveillance Court orders authorizing the surveillance, to determine whether the surveillance was lawfully authorized and conducted. In making this determination, the Court must find that:
(1) the President has authorized the Attorney General to approve applications for electronic surveillance for foreign intelligence information;
(2) the application has been made by a Federal officer and approved by the Attorney General;
(3) on the basis of the facts submitted by the applicant there is probable cause to believe that—
(A) the target of the electronic surveillance is a foreign power or an agent of a foreign power: Provided, That no United States person may be considered a foreign power or an agent of a foreign power solely upon the basis of activities protected by the first amendment to the Constitution of the United States; and
(B) each of the facilities or places at which the electronic surveillance is directed is being used, or is about to be used, by a foreign power or an agent of a foreign power;
(4) the proposed minimization procedures meet the definition of minimization procedures under section 1801(h) of this title; and
(5) the application which has been filed contains all statements and certifications required by section 1804 of this title and, if the target is a United States person, the certification or certifications are not clearly erroneous on the basis of the statement made under section 1804(a)(7)(E) of this title and any other information furnished under section 1804(d) of this title.
50 U.S.C. § 1805(a).
The Court has carefully reviewed the relevant FISA certifications, minimization procedures, and probable cause determinations, pursuant to 50 U.S.C. § 1805(a) and as set forth below. Because the FISA review is ex parte, the Court rejects the prosecution’s contention that the FISC’s probable cause determinations are entitled to “substantial deference.” See Rosen, 447 F.Supp.2d at 545 (stating that review is de novo, “especially given that the review is ex parte and thus unaided by the adversarial process.”); United States v. Squillacote, 221 F.3d 542, 554 (4th Cir.2000) (same). As such, the FISA materials in this case were reviewed de novo with no deference accorded to the FISC’s probable cause determinations, but with a presumption of validity accorded to the certifications. See 50 U.S.C. § 1805(a)(5) (applying “clearly erroneous” standard to factual averments contained in certifications when the target is a United States person); Rosen, 447 F.Supp.2d at 545.
A. Certifications
A careful review of the relevant FISA materials in this case reveals that the applications and the resulting FISC orders satisfy the statutory requirements under 50 U.S.C. § 1805(a). The President authorized the Attorney General to approve the applications to the FISC, and each of the applications was made by a federal officer and approved by the Attorney General or his authorized designate. See 50 U.S.C. § 1805(a)(1), (2). The Court further finds that the applications contain all required statements and certifications, and that the certifications are not clearly erroneous based on statements made under § 1804(a)(7)(E). See 50 U.S.C. § 1805(a)(5).
B. Minimization Procedures
The proposed minimization procedures contained in the applications and FISA orders also must meet the statutory requirements of 50 U.S.C. § 1801(h). See 50 U.S.C. § 1805(a)(4). These minimization procedures are “designed to protect, as far as reasonable, against the acquisition, retention, and dissemination of nonpublic information which is not foreign intelligence information.” In re Sealed Case, 310 F.3d at 731. However, in enacting FISA, “Congress recognized that ‘no electronic surveillance can be so conducted that innocent conversations can be totally eliminated.’ ” United States v. Hammond, 381 F.3d 316, 334 (4th Cir.2004) (quoting S.Rep. No. 95-701, at 39 (1978)), vacated on other grounds, 543 U.S. 1097, 125 S.Ct. 1051, 160 L.Ed.2d 997 (2005).
The minimization procedures require the government to make a good faith effort to minimize the acquisition and retention of irrelevant information. Id. Based on a careful and searching review of the FISA warrant applications and orders in this case, the Court finds that the proposed minimization procedures contained in these materials satisfy the statutory requirements of § 1801(h).
C. Probable Cause
Before authorizing surveillance, a FISA judge must also determine that there is probable cause to believe that “the target of the electronic surveillance is ... an agent of a foreign power,” and that “each of the facilities or places at which the electronic surveillance is directed is being used, or is about to be used, by ... an agent of a foreign power.” 50 U.S.C. § 1805(a)(3). A “foreign power” includes “a group engaged in international terrorism or activities in preparation therefor.” § 1801(a)(4). As it relates to United States citizens or aliens lawfully admitted for permanent residence, “agent of a foreign power” includes:
[A]ny person who—
(C) knowingly engages in sabotage or international terrorism, or activities that are in preparation therefor, for or on behalf of a foreign power; [or]
(E) knowingly aids or abets any person in the conduct of activities described in subparagraph ... (C) or knowingly conspires with any person to engage in activities described in subparagraph ... (C).
50 U.S.C. § 1801(b)(2).
Probable cause is a “fluid concept — turning on the assessment of probabilities in particular factual contexts — not readily, or even usefully, reduced to a neat set of legal rules.” Illinois v. Gates, 462 U.S. 213, 232, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983). In evaluating whether probable cause exists in a given case, the issuing judge must “make a practical, commonsense decision whether, given all the circumstances set forth in the affidavit ..., there is a fair probability” that the search will be fruitful. Id. at 238, 103 S.Ct. 2317; United States v. Grant, 490 F.3d 627, 631-32 (8th Cir.2007). Further, in making probable cause determinations under FISA, a reviewing judge may “consider past activities of the target, as well as facts •and circumstances relating to current or future activities of the target.” 50 U.S.C. § 1805(b).
The Court has carefully reviewed the materials submitted to the FISC in support of the FISA applications in this case. Based on a review of those materials, the Court finds that probable cause existed to believe that Warsame was an agent of a foreign power, namely, al Qaeda, in accordance with FISA’s statutory requirements. The Court further finds there was probable cause to believe that each of the places to be searched, and the places where surveillance was to be conducted, was being used, or was about to be used, by War-same.
In sum, the Court concludes that the FISA applications, including the relevant certifications, minimization procedures, and probable cause determinations, are in compliance with the statutory requirements under §§ 1805(a) and 1824(a). Accordingly, the Court denies Warsame’s motion to suppress to the extent it is based on a violation of FISA’s statutory requirements.
IV. MOTION TO SUPPRESS BASED ON FOURTH AMENDMENT VIOLATIONS
Warsame argues that FISA search and surveillance orders violate the Fourth Amendment because FISA does not require a sufficient showing of probable cause or particularity. Warsame further argues that FISA’s “significant pur-, pose” requirement, as amended by the Patriot Act, violates his rights under the Fourth Amendment. The Court addresses each argument in turn.
A. The Fourth Amendment Requirements of Probable Cause and Particularity
As discussed above, FISA requires a showing of probable cause to believe that the target of the electronic surveillance or search is a foreign power or an agent of a foreign power. 50 U.S.C. §§ 1805(a)(3)(A), 1824(a)(3)(A). FISA also requires probable cause to believe that each of the facilities or places at which surveillance is directed is being used, or is about to be used, by a foreign power or an agent of a foreign power, and that the premises or property to be searched is owned, used, or possessed by a foreign power or an agent of a foreign power. 50 U.S.C. §§ 1805(a)(3)(B), 1824(a)(3)(B). Warsame argues that FISA’s probable cause requirements do not satisfy the Fourth Amendment because they do not require a showing that the foreign power or its agent has, is, or is about to commit a terrorist activity or crime, or that the facilities or places to be searched will contain or produce evidence of terrorist or criminal activity. Warsame further argues that FISA does not require any showing of particularity with respect to the area to be searched or the items to be seized.
In United States v. United States District Court (Keith), 407 U.S. 297, 299, 92 S.Ct. 2125, 32 L.Ed.2d 752 (1972), the Supreme Court addressed the “delicate question of the President’s power, acting through the Attorney General, to authorize electronic surveillance in internal security matters without prior judicial approval.” The Court held that such judicial approval is necessary to satisfy the Fourth Amendment in conducting domestic security surveillance, but it specifically declined to address the scope of the President’s surveillance power with respect to foreign intelligence. Id. at 323-24, 92 S.Ct. 2125. However, Keith took care to explain that the specific statutory requirements for electronic surveillance of “ordinary crime” under Title III — including the require ment of probable cause to believe an individual has, is, or is about to commit a crime — were not constitutionally mandated in the context of domestic security surveillance for national security purposes. Id. at 322, 92 S.Ct. 2125. Noting that domestic security surveillance involves different policy and practical considerations from surveillance of “ordinary crime,” Keith stated that “the focus of domestic surveillance may be less precise than that directed against more conventional types of crime.” Id. Thus, the appropriate Fourth Amendment inquiry is one of reasonableness: “Different standards may be compatible with the Fourth Amendment if they are reasonable both in relation to the legitimate need of Government for intelligence information and the protected rights of our citizens.” Id. at 322-23, 92 S.Ct. 2125.
The Supreme Court’s decision in Keith makes clear that the probable cause required by the Fourth Amendment is not necessarily probable cause to believe that a crime was committed, is being committed, or is about to be committed. See id.; see also United States v. Ning Wen, 477 F.3d 896, 898 (7th Cir.2007) (“[T]he probable cause of which the fourth amendment speaks is not necessarily probable cause to believe that any law is being violated”). Rather, the appropriate inquiry here is whether the probable cause and particularity that FISA does require satisfy the Fourth Amendment’s reasonableness requirement. United States v. Cavanagh, 807 F.2d 787, 790 (9th Cir.1987); United States v. Duggan, 743 F.2d 59, 72 (2d Cir.1984) (stating that the implication of Keith is that “the warrant requirement is flexible and that different standards may be compatible with the Fourth Amendment in light of the different purposes and practical considerations of domestic national security surveillances”). The question whether FISA violates the Fourth Amendment is an issue of first impression in this circuit. The Court notes, however, that prior to the amendment of FISA in 2001, every court to have considered this issue has upheld FISA on constitutional grounds. See, e.g., United States v. Johnson, 952 F.2d 565, 573 (1st Cir.1991); United States v. Pelton, 835 F.2d 1067, 1075 (4th Cir.1987); Duggan, 743 F.2d at 73; Global Relief Found., Inc. v. O’Neill, 207 F.Supp.2d 779, 807 (N.D.Ill.2002).
The Court agrees with the unanimous holdings of these courts and finds that, where the primary purpose of the government’s surveillance is foreign intelligence gathering, FISA’s probable cause and particularity requirements satisfy the reasonableness requirement of the Fourth Amendment. As to the government’s interest, there can be little question that foreign intelligence gathering is of the utmost importance in protecting the national security interests of the United States. See, e.g., Pelton, 835 F.2d at 1075 (stating that the governmental interest in gathering foreign intelligence is of “paramount importance” to national security interests). Similar to the domestic security surveillance discussed in Keith, foreign intelligence gathering involves different policy considerations from the surveillance of ordinary criminal activity. FISA’s probable cause and particularity requirements reflect the inherent difficulties in detecting national security threats and the government’s increased emphasis on prevention and preparedness in the national security context. Cf. Keith, 407 U.S. at 322, 92 S.Ct. 2125 (discussing similar considerations in the context of domestic security surveillance).
At the same time, FISA provides safeguards that are designed to protect individual rights guaranteed by the Fourth Amendment. The Fourth Amendment protects individuals against “unreasonable searches and seizures,” including unreasonable surveillance that intrudes upon individual privacy and free expression, and requires that warrants be supported by probable cause and particularly describe the places to be searched and the persons or things to be seized. U.S. Const, amend. IV; Keith, 407 U.S. at 315-16, 92 S.Ct. 2125. FISA requires probable cause to believe that the target is acting “for or on behalf of a foreign power,” 50 U.S.C. § 1801(b)(2), and thus applies “only to certain carefully delineated, and particularly serious, foreign threats to national security.” In re Sealed Case, 310 F.3d at 739; Duggan, 743 F.2d at 73. As to particularity, FISA requires probable cause to believe that each of the facilities or places at which the surveillance is directed is being used, or is about to be used, by a foreign power or its agent. See 50 U.S.C. §§ 1805(a)(3)(B), 1824(a)(3)(B); In re Sealed Case, 310 F.3d at 740 (“[F]ISA requires less of a nexus between the facility and the pertinent communications than Title III, but more of a nexus between the target and the pertinent communications.”). Like Title III, FISA requires a finding that the information sought cannot reasonably be obtained through normal investigative techniques. Compare 50 U.S.C. § 1804(a)(7)(E)(ii), with 18 U.S.C. § 2518(3)(c). And while FISA orders may last up to 90 days, instead of the 30-day limit of Title III, this difference reflects the reality that national security surveillance is “often long range and involves the interrelation of various sources and types of information.” Keith, 407 U.S. at 322, 92 S.Ct. 2125; In re Sealed Case, 310 F.3d at 740.
In sum, the Court finds that, where the primary purpose of the government’s surveillance is foreign intelligence gathering, FISA’s requirements strike a reasonable balance between the government’s interest in national security and individual privacy interests under the Fourth Amendment. The Court therefore concludes that FISA complies with the probable cause and particularity requirements of the Fourth Amendment, and denies Warsame’s motion to suppress on this basis.
B. FISA’s “Significant Purpose” Requirement
Warsame also argues that FISA’s “significant purpose” requirement, as amended by the Patriot Act, violates the Fourth Amendment. Prior to the enactment of the Patriot Act, FISA required executive branch officials to certify to a FISA judge “that the purpose of the sur veillance is to obtain foreign intelligence information.” 50 U.S.C. § 1804(a)(7)(B) (2000). Courts interpreted FISA’s “the purpose” language to require a showing that “the primary purpose” of the surveillance is to obtain foreign intelligence. See, e.g., Duggan, 743 F.2d at 77; Johnson, 952 F.2d at 572.
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10545021-6012 | ALARCON, Circuit Judge:
Appellant William F. McQuade appeals from the district court order dismissing his negligence claim under the Federal Tort Claims Act (FTCA), 28 U.S.C. §§ 2671-2680 (1982), for lack of subject matter jurisdiction. We affirm.
I
In 1976, the government brought an action against McQuade and his wife to foreclose tax liens on real property owned by them. In that matter, the McQuades represented themselves in propria persona after the district court refused to hear their request for court-appointed counsel. The government prevailed, and judgment was entered against the McQuades for $14,-236.94. On appeal, we vacated the judgment and instructed the district court to hear the McQuades’ motion for appointment of counsel. United States v. McQuade, 579 F.2d 1180, 1181 (9th Cir.1978).
On remand, the district court heard and denied the McQuades’ motion for a court-appointed counsel because the McQuades refused to disclose any specific information about their financial status. The district court entered judgment against the McQuades for $14,236.94. On appeal, we affirmed the district court’s denial of the motion for appointment of counsel. United States v. McQuade, 647 F.2d 938, 939-40 (9th Cir.1981) (per curiam), cert. denied, 455 U.S. 958, 102 S.Ct. 1470, 71 L.Ed.2d 677 (1982).
The government then began efforts to collect the taxes due under the judgment. The government obtained an order requiring McQuade to appear before a magistrate for questioning with regard to his financial ability to pay the debt. He failed to appear.
McQuade was ordered to appear before the district court on June 21, 1982. He appeared but refused to answer any questions about his finances. The court found McQuade in contempt and remanded him to the custody of the United States Marshal’s office. The court informed McQuade, “[y]ou will be committed until such time as you are ready to answer the questions. ...” The court ordered the Marshal to hold McQuade until he responded.
The Marshal transferred custody of McQuade to the Federal Bureau of Prisons (Bureau). Pursuant to orders from the district court, the Bureau returned McQuade to court for questioning on no less than five occasions. On each appearance he refused to answer any questions about his finances.
On February 5, 1985, over two years and nine months after he was committed for contempt, McQuade filed a petition with the district court requesting release from custody on the ground that he had been incarcerated for more than eighteen months, the maximum time allowable for contempt citations under 28 U.S.C. § 1826 (1982). The court granted McQuade’s petition and released him.
Thereafter, McQuade brought this action against the United States pursuant to the FTCA. He claims that he was illegally incarcerated due to the negligence of the Marshal and the Bureau. The district court dismissed McQuade’s claim for lack of subject matter jurisdiction. The court concluded, inter alia, that the United States was immune from liability under 28 U.S.C. § 2680(a) (1982).
The district court held that the United States was immune because the Marshal and the Bureau were required by separate regulations to hold McQuade until the court ordered him released. Section 2680(a) provides the United States is immune from liability for “[a]ny claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid....” It also held that the district judge is not an employee of the United States for purposes of the FTCA and, therefore, the United States is not, under the statute, liable for his acts.
II
McQuade claims the district court erred in dismissing his complaint for lack of subject matter jurisdiction. The existence of “[sjubject matter jurisdiction presents a question of law, reviewable de novo by this court.” Peter Starr Production Co. v. Twin Continental Films, 783 F.2d 1440, 1442 (9th Cir.1986); accord Charley’s Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc., 810 F.2d 869, 873 (9th Cir.1987).
III
It is settled law that the United States may not be sued except when it waives its sovereign immunity. West v. FAA, 830 F.2d 1044, 1046 (9th Cir.1987); Morris v. United States, 521 F.2d 872, 874 (9th Cir.1975). While the United States “generally has waived its immunity from tort claims,” Jablonski by Pahls v. United States, 712 F.2d 391, 394 (9th Cir.1983), rev’d on other grounds, In re McLinn, 739 F.2d 1395, 1397 (9th Cir.1984) (en banc), this waiver “is subject to several exceptions spelled out in 28 U.S.C. § 2680. If a plaintiff’s claim falls within one of those exceptions, the court lacks subject matter jurisdiction.” Wright v. United States, 719 F.2d 1032, 1034 (9th Cir.1983); accord Monaco v. United States, 661 F.2d 129, 131 (9th Cir.1981), cert. denied, 456 U.S. 989, 102 S.Ct. 2269, 73 L.Ed.2d 1284 (1982); Morris, 521 F.2d at 874.
IV
The complaint shows that the Marshal and the Bureau were acting pursuant to a court order throughout the time McQuade was incarcerated. Under Section 2680(a), the United States has not waived its sovereign immunity over McQuade's claim if the Marshal and the Bureau were acting pursuant to a regulation in detaining McQuade more than 18 months. The . Marshal was under a duty pursuant to 28 C.F.R. § 0.111(k) (1987) to hold McQuade until the court ordered his release. Section 0.111(k) provides that the Marshal must hold prisoners “from the time of ... their remand to a marshal by the court, until the prisoner is ... otherwise released from custody by the court_” (Emphasis added).
The Bureau was required to hold McQuade pursuant to 28 C.F.R. § 522.10 (1986) until the court ordered his release. Section 522.10 provides that the Bureau shall hold civil contemptors until it “re ceives notification from the court that the reason for the contempt commitment has ended or that the inmate is to be released for any other reason.” (Emphasis added).
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3911236-27276 | PROCEEDINGS: (1) ORDER GRANTING PLAINTIFF’S MOTION FOR MONETARY AND PRECLUSION SANCTIONS AGAINST DEFENDANT BEVERLLY JEWELLERY COMPANY LIMITED; AND (2) ORDER DENYING PLAINTIFF’S MOTION FOR SANCTIONS AGAINST DEFENDANT PINK DIAMOND
ROSALYN N. CHAPMAN, United States Magistrate Judge.
On August 26, 2008, plaintiff filed notices of motions and motions for monetary and preclusion sanctions against both Beverlly Jewellery Company Limited (“Beverlly”) and Pink Diamond, joint stipulations, and the supporting declarations of Steven E. Lauridsen and Howard A. Kroll, with exhibits, and defendants filed the opposing declarations of Oscar Ramirez, Allen Felahy, with exhibits, and Julia A. Mercado, with exhibits. On September 3, 2008, plaintiff filed its supplemental memorandum, and on September 5, 2008, Beverlly tardily filed a supplemental memorandum and the supplemental declara tion of Julia A. Mercado. Oral argument was held on September 17, 2008.
BACKGROUND
On July 14, 2008, this Court granted plaintiffs motion to compel the continued Rule 30(b)(6) deposition of Beverlly (through Beverll/s person most knowledgeable (“PMK”), Theresa Lee) and plaintiffs motion for sanctions. In so doing, this Court made the following pertinent findings of fact:
On or about February 27, 2008, plaintiff “noticed the [Rule] 30(b)(6) deposition of defendant Beverlly ... for April 3, 2008.” The deposition notice set forth 22 topics, and “[a]s part of the deposition notice, Tacori requested that Beverlly produce documents and tangible things at the deposition[,]” including samples of some jewelry. On April 3, 2008, Theresa Lee, a director of defendant’s, appeared for the Rule 30(b)(6) deposition. “Since Ms. Theresa Lee, the [Rule] 30(b)(6) witness for Beverlly claim[ed] that she does not speak or understand English, an interpreter was provided at ... [the] deposition[ ].” “The questions to Ms. Lee were translated from English to Cantonese. Ms. Lee’s responses were translated from Cantonese to English.” [11] ... The deposition began at 11:02 a.m. and concluded at 5:01 p.m. However, the actual examination time amounted to approximately 3.5 hours due to numerous breaks taken at the request of defendant’s counsel [Oscar Ramirez]. Further, throughout the deposition, defendant’s counsel objected to almost each and every question asked of Ms. Lee, making objections such as “calls for a narrative”; “misstates the client’s [sic] testimony”; “argumentative, asked and answered”; “vague”; “ambiguous”; “compound”; and the like. In addition, many of defendant’s
counsel’s objections were “speaking objections,” giving direction to Ms. Lee____[11] At approximately 5:00, defendant’s counsel ended the deposition____ [11] The plaintiff acquiesced in the termination of the deposition since “Beverlly agreed to continue its deposition on May 30, 2008.” [11] On May 30, 2008, the Rule 30(b)(6) deposition resumed at 10:13 a.m. and concluded at 11:48 a.m., with approximately 1.5 hours of actual examination time. Once again, a Cantonese interpreter assisted Ms. Lee. During the resumed deposition, defendant’s counsel [Mr. Ramirez] again made numerous speaking objections.... [IT] At 11:48 a.m., defendant’s counsel terminated the deposition, stating:
MR. RAMIREZ: ... I’ve explained to Mr. Kroll that my client has a pressing business requirement that obligates her to be in Las Vegas this evening. She’s driving to Las Vegas this evening and has indicated that she’s willing to stay here as long as it takes within a reasonable time to complete her deposition. [K] However, my client needs to leave as soon as possible. And if leaving sooner rather than later would mean that she go without a break, then she’s willing to do so because of the critical importance of her business in Las Vegas this weekend which Mr. Kroll is aware of. [11] And so my client is offering to go straight through to have the deposition finished. [IT] She’s already had her deposition taken for an entire full day already, Volume I. This is the second volume of the deposition. [U] I will note for the record that numerous questions have been asked and answered multiple times, and it’s an unnecessary delay and frankly abuse of my client[ ] and if we continue having these kind of questions, then I understand why Mr. Kroll would want to take to 5:00 to finish the deposition. [H] Frankly, this is a deposition that can be and should be wrapped up within two hours. But I’m not taking the deposition. ...
* * *
... It’s my understanding that under the Federal Rules of Civil Procedure ... Mr. Kroll is only entitled to depose my client for eight hours, [f] The last time Ms. Lee was here for six hours and we’ve already been here for approximately two hours. So that’s eight hours. [11] I’m willing to make Ms. Lee available to you for half an hour more and then we’re leaving....
July 14, 2008 Order at 2-6 (citations omitted). This Court, in granting plaintiffs motion, also discussed the requirements of Rules 30(b) and (c) regarding counsel’s conduct during a deposition, and further determined that:
[Defendant’s counsel, by making speaking objections during the Rule 30(b)(6) deposition, both interfered with plaintiffs examination of Ms. Lee, and unduly prolonged the deposition examination. Moreover, defendant’s counsel also improperly terminated the resumed deposition on May 30, 2008, before the expiration of seven hours of actual examination and before plaintiff had completed its examination.
Id. at 9. In light of the above findings, as well as Ms. Lee’s need for an interpreter, this Court ordered that Beverlly’s Rule 30(b)(6) deposition “shall resume for four (4) hours, no later than August 8, 2008.” Id. at 11. Since Beverlly had improperly terminated the May 30, 2008 deposition, this Court also ordered Beverlly to “reimburse plaintiff the costs of the court reporter and Cantonese interpreter used at the resumed deposition, no later than twenty (20) days after completion of the deposition.” Id.
After this Court issued its Order, plaintiff “renoticed Beverlly’s Rule 30(b)(6) deposition for August 5, 2008” and “procured a court reporter and a Cantonese interpreter for the deposition.” Declaration of Howard A. Kroll (“Kroll Deck”) 11115-6. However,
[t]he morning the deposition was scheduled to take place, ... Allen Felahy, counsel for Defendants, arrived at the deposition location with his own court reporter and interpreter. ... Mr. Felahy made no prior in-diction that he intended to hire or bring to the deposition a court reporter or an interpreter____Mr. Felahy informed [plaintiffs counsel] that he would not permit the deposition to go forward if [plaintiff] used its court reporter and interpreter____ Mr. Felahy claimed that the Court Order required Defendants to pay for and provide the court reporter and interpreter.
Id. at HH7-9; Declaration of Allen Felahy (“Felahy Deck”) 111119-20. “When Mr. Felahy continued to refuse to go forward with the deposition, [plaintiffs counsel] informed Mr. Felahy that [plaintiff] would seek ex parte relief and told Mr. Felahy that he could leave.” Kroll Deck H16; Felahy Deck 1123.
Both plaintiff and Beverlly filed ex parte applications regarding what occurred on August 5, 2008. Plaintiffs ex parte application sought reimbursement of the court reporter’s fees, the interpreter’s fees and the attorney’s fees attendant to the aborted deposition, payment of the attorney’s fees this Court awarded to plaintiff on July 14, 2008, and an order precluding Beverlly and Pink Diamond “from introducing matters into evidence that are related to Beverlly’s design, dates of design, sales, and dates of sales of any ring sold by Beverlly that contained crescents in the side of the shank of the ring ...or alternatively, rescheduling Beverlly’s Rule 30(b)(6) deposition. This Court, on August 7, 2008, denied plaintiffs ex parte application without prejudice to plaintiff renewing its request in a noticed motion. Since the discovery cut-off date was August 12, 2008, this Court authorized plaintiff to file a noticed motion after the discovery cut-off date, provided the hearing on the motion was scheduled no later than September 17, 2008.
Beverlly’s ex parte application sought to compel the use of Kusar Court Reporting Services, and not the court reporter selected by plaintiff—Yeritext—for the Rule 30(b)(6) deposition and sanctions. This Court, on August 7, 2008, denied Beverlly’s ex parte appli cation, noting that “[t]he clear inference from [the Court’s Order of July 14, 2008,] is that plaintiff selects the court reporter and the Cantonese interpreter—not defendant.” August 7, 2008 Order. Further, this Court stated: “Defendant is advised that the Order of July 14, 2008, requiring the Rule 30(b)(6) deposition take place no later than August 8, 2008 remains in effect.” Id. (emphasis in original).
After the Court issued its Orders of August 7, 2008, plaintiff “procured an interpreter and a court reporter in order to take the Rule 30(b)(6) deposition of Beverlly on August 8[, 2008] at 1:30 p.m[,]” and plaintiffs counsel “called Defendants’ counsel to confirm that Beverlly ... was available on August 8 for the renewed deposition.” Kroll Decl. ¶¶ 20-21; Declaration of Steven E. Lauridsen (“Lauridsen Decl.”) ¶¶ 2-3. Plaintiffs counsel also “sent an email to Defendants’ counsel at approximately 4:00 p.m. asking them to confirm Beverlly’s attendance at the deposition on August 8.” Kroll Decl. ¶ 24; Lauridsen Decl. ¶ 7; Felahy Decl. ¶ 26. However, despite this Court’s clear direction to the parties, the continued Rule 30(b)(6) deposition of Ms. Lee did not take place on August 8, 2008. Kroll Decl. ¶ 25-26; Felahy Decl. ¶ 27. This occurred because Beverlly’s counsel, Mr. Felahy, the night before the deposition, advised plaintiffs counsel that “Ms. Lee is no longer able to attend the deposition [on August 8, 2008] at 1:30 p.m.” Felahy Decl. ¶27 (internal quotation mark omitted); Kroll Decl. ¶ 25, Exh. D. Accordingly, plaintiff cancelled the court reporter and interpreter scheduled for August 8, 2008. Kroll Decl. ¶ 26.
DISCUSSION
Rule 37(b)(2)(A) provides for the following sanctions when a party fails to comply with a discovery order:
If a party ... or a witness designated under Rule 30(b)(6) ... fails to obey an order to provide or permit discovery, ... the court where the action is pending may issue further just orders. They may include the following: [¶] (i) directing that the matters embraced in the order or other designated facts be taken as established ...; [¶] (ii) prohibiting the disobedient party from supporting or opposing designated claims or defenses or from introducing designated matters in evidence; [¶] (iii) striking pleadings in whole or in part; [¶] (iv) staying further proceedings until the order is obeyed; [¶] (v) dismissing the action or proceeding in whole or in part; [¶] (vi) rendering a default judgment against the disobedient party; or [¶] (vii) treating as contempt of court the failure to obey any order except an order to submit to a physical or mental examination.
Fed.R.Civ.P. 37(b)(2)(A). Further, “[i]nstead of or in addition to the orders above, the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.” Fed.R.Civ.P. 37(b)(2)(C).
“Sanctions may be warranted under Federal Rule of Civil Procedure 37(b)(2) for failure to obey a discovery order as long as the established issue bears a reasonable relationship to the subject of discovery that was frustrated by sanctionable conduct.” Navellier v. Sletten, 262 F.3d 923, 947 (9th Cir.2001), cert. denied sub nom., McLachlan v. Simon, 536 U.S. 941, 122 S.Ct. 2623, 153 L.Ed.2d 806 (2002); Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707, 102 S.Ct. 2099, 2107, 72 L.Ed.2d 492 (1982). Such sanctions “are appropriate only in ‘extreme circumstances’ and where the violation is ‘due to willfulness, bad faith, or fault of the party.’ ” Fair Housing of Marin v. Combs, 285 F.3d 899, 905 (9th Cir.), cert. denied, 537 U.S. 1018, 123 S.Ct. 536, 154 L.Ed.2d 425 (2002) (citations omitted); Computer Task Group, Inc. v. Brotby, 364 F.3d 1112, 1115 (9th Cir. 2004) (per curiam). “Disobedient conduct not shown to be outside the litigant’s control meets this standard.” In re Phenylpropanolamine (PPA) Products Liability Litig., 460 F.3d 1217,1233 (9th Cir.2006) (citations omitted); Jorgensen v. Cassiday, 320 F.3d 906, 912 (9th Cir.2003).
The plaintiff, in its notices of motions, seeks the following sanctions against Beverlly and Pink Diamond based on Beverlly’s disobedience of this Court’s Order of July 14, 2008:
(1) Reimbursement of court reporter and Cantonese interpreter fees totaling $1,173.75 for the aborted deposition on August 5, 2008;
(2) reimbursement of the Cantonese interpreter fee in the amount of $450.00 for the cancelled deposition on August 8, 2008;
(3) attorney’s fees in the amount of $12,672.50 “in preparing for and attending the aborted August 5, 2008 deposition, for preparing [plaintiffs] ex parte application and for preparing this motion”; and
(4) an order precluding defendants:
from introducing matters into evidence related to Beverlly’s design, dates of design, sales, and dates of sales of any ring containing crescents in the side of the shank, that was purportedly designed or sold by Beverlly before 2000; or, in the alternative, [f] [an order] compelling] the [Rule] 30(b)(6) deposition of Beverlly and (a) ... reimbursing] Tacori for the costs of the court reporter and the Cantonese interpreter for that deposition, (b) [allowing] the deposition [to] resume for four hours of actual deposition time, and (c) [appointing] a discovery referee ... to attend the resumed deposition and ... [requiring] Defendants and their counsel [to] pay for the costs ... of that discovery referee.
Motions at 2:11-3.5.
The Court may, in deciding whether to grant a motion for sanctions, “properly consider all of a party’s discovery misconduct ..., including conduct which has been the subject of earlier sanctions.” Payne v. Exxon Corp., 121 F.3d 503, 508 (9th Cir.1997); Adriana Int’l Corp. v. Thoeren, 913 F.2d 1406, 1412 (9th Cir.1990), cert. denied sub nom., Lewis & Co. v. Thoeren, 498 U.S. 1109, 111 S.Ct. 1019, 112 L.Ed.2d 1100 (1991). Further, in deciding whether to grant a motion for sanctions under Rule 37(b)(2)(A) for noncompliance with discovery, the Court should consider five factors: “(1) the public’s interest in expeditious resolution of litigation; (2) the court’s need to manage its docket; (3) the risk of prejudice to [the party seeking sanctions]; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.” Rio Props., Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1022 (9th Cir.2002); Computer Task Group, Inc., 364 F.3d at 1115. “Where a court order is violated, the first two factors support sanctions and the fourth factor cuts against a default. Therefore, it is the third and fifth factors that are decisive.” Payne, 121 F.3d at 507; Computer Task Group, Inc., 364 F.3d at 1115.
Here, Beverlly has willfully failed to comply with the Court’s Order of July 14, 2008, by not timely reimbursing plaintiff for court reporter and interpreter fees totaling $1,173.75 and by failing to produce Ms. Lee for the Rule 30(b)(6) deposition no later than August 8, 2008, and the latter failure clearly prejudices plaintiff by preventing it from preparing its case. See, e.g., Adriana Int’l Corp., 913 F.2d at 1412 (“A [party] suffers prejudice if the [opposing party’s] actions impair the [party’s] ability to go to trial or threaten to interfere with the rightful decision of the case.”); G-K Props. v. Redevelopment Agency of the City of San Jose, 577 F.2d 645, 647 (9th Cir.1978) (“Litigants who are willful in halting the discovery process act in opposition to the authority of the court and cause impermissible prejudice to their opponents. It is even more important to note, in this era of crowded dockets, that they also deprive other litigants of an opportunity to use the courts as a serious dispute-settlement mechanism.”). This is especially true here, considering the discovery cut-off date has passed and the pretrial conference is set for September 22, 2008—next week. See Payne, 121 F.3d at 508 (“Many of the discovery responses eventually tendered by the plaintiffs came only as the discovery period was drawing to a close, or after it had already closed. [Defendants] were therefore deprived of any meaningful opportunity to follow up on that information, or to incorporate it into their litigation strategy.”).
Moreover, this Court has tried less drastic monetary sanctions against Beverlly, including awarding attorney’s fees to plaintiff and ordering Beverlly to reimburse plaintiff for deposition costs, see Henry, 983 F.2d at 948 (affirming dismissal after district court tried monetary sanctions, which failed to curb plaintiffs discovery abuses); Adriana Int’l Corp., 913 F.2d at 1413 (court satisfied consideration of alternatives requirement when it first imposed monetary sanctions and subsequently dismissed the case when the monetary sanctions proved ineffective to prevent plaintiffs “wilful disruption of the discovery process”); however, Beverlly has willfully failed to pay plaintiff some of the monetary sanctions awarded against it, i.e., the costs of the court reporter and interpreter. Thus, the efficacy of less drastic sanctions is in doubt. Coane v. Ferrara Pan Candy Co., 898 F.2d 1030, 1033 (5th Cir. 1990) (cited with approval in Payne, 121 F.3d at 508). Additionally, in its July 14, 2008 Order, the Court specifically warned Beverlly that its “[fjailure to comply with this Order may lead to further sanctions [,]” and on August 7, 2008, this Court again warned Beverlly that “the Order of July 14, 2008, ... remains in effect.” See In re Phenylpropanolamine (PPA) Products Liability Litig., 460 F.3d at 1229 (“Warning that failure to obey a court order will result in dismissal can itself meet the ‘consideration of alternatives’ requirement.”); Rio Prop., Inc., 284 F.3d at 1022 (district court specifically considered lesser sanctions when it “expressly warned [defendant] that failure to comply with its discovery order would lead to [severe sanctions]”). Considering that four of the foregoing factors have been met, and three of the factors strongly support the imposition of sanctions, Pagtalunan v. Galaza, 291 F.3d 639, 643 (9th Cir.2002), cert. denied, 538 U.S. 909, 123 S.Ct. 1481, 155 L.Ed.2d 230 (2003); Ferdik v. Bonzelet, 963 F.2d 1258, 1263 (9th Cir.), cert. denied, 506 U.S. 915, 113 S.Ct. 321, 121 L.Ed.2d 242 (1992), and in light of Beverlly’s abuse of the discovery process so far, the Court finds evidentiary sanctions under Rule 37(b)(2)(A) are appropriate.
The Court, having reviewed the parties’ declarations, and being familiar with the case, finds Beverlly willfully failed to produce Ms. Lee for the Rule 30(b)(6) deposition on August 5, 2008, when Beverlly’s counsel demanded the deposition take place only with its chosen court reporting service, and again on August 8, 2008, when Beverlly’s counsel did not produce Ms. Lee for examination. The Court is stunned by Beverlly’s counsel’s lack of comprehension of their obligations to comply with an Order of the Court. See, e.g., Felahy Decl. 112 (“I along with my client agreed to comply with this Court’s order.”). Parties in litigation must comply with court orders, and even if they appeal those orders, compliance is required within the time limits the order sets forth unless a stay is granted or time extended, see Local Rule 72-2.2 (“Regardless of whether a motion for review has been filed, the Magistrate Judge’s ruling remains in effect unless the ruling is stayed or modified by the Magistrate Judge or the District Judge.”); In re Heritage Bond Litig., 223 F.R.D. 527, 532 (C.D.Cal.2004) (“[S]ince Judge Tevrizian did not stay this Court’s Order until after production was required, Kasirer defendants cannot rely on the stay to justify their failure to timely comply with this Court’s Order.”), neither of which occurred here. Yet, Beverlly’s counsel did nothing to ensure full compliance with this Court’s Order. To the contrary, as the Court previously found. Beverlly’s counsel intentionally and willfully interfered with the Rule 30(b)(6) deposition of Ms. Lee when it took place on April 3 and May 30, 2008, and now has failed to properly produce Ms. Lee for the continued Rule 30(b)(6) deposition despite this Court Order requiring her to appear on or before August 8, 2008.
The Rule 30(b)(6) deposition notice plaintiff served on Beverlly set forth 22 topics to be covered, and “four of the twenty-two subject matters upon which Beverlly would be deposed included the design, dates of design, sales, and dates of sales of any ring sold by Beverlly (including those sold before 2000) that contained crescents in the side of the shank of the ring.” Kroll Decl. H 31, Exh. I. Because of Beverlly’s willful misconduct, plaintiff was not able to fully examine Beverlly’s PMK about these four topics prior to the discovery deadline in this case. See Jt. Stip. at 40:7-41:2. Thus, an appropriate sanction, reasonably related to the subject of the discovery that was frustrated by sanctionable conduct, would be to preclude Beverlly from presenting evidence regarding these four topics. See, e.g., Adriana Int'l Corp., 913 F.2d at 1412-13 (Plaintiff “should not have been surprised that [its] repeated failure to appear for a deposition [in violation of a court order] would result [in severe sanctions against it].”); Johnson v. J.B. Hunt Transp., Inc., 280 F.3d 1125, 1131-32 (7th Cir.2002) (affirming district court’s order precluding defendant from calling two witnesses when defendant corporation failed to make those individuals available for deposition); Nike, Inc. v. Wolverine World Wide, Inc., 43 F.3d 644, 647-49 (Fed.Cir.1994) (applying Ninth Circuit law and affirming court order precluding plaintiff from presenting evidence regarding one theory of liability when, despite a court order, plaintiff did not provide discovery on the issue); Oklahoma Federated Gold & Numismatics, Inc. v. Blodgett, 24 F.3d 136, 139-40 (10th Cir.1994) (affirming discovery sanction precluding defendant from presenting any evidence when defendant violated court order to make himself available for deposition).
In addition to failing to produce Ms. Lee for the continued Rule 30(b)(6) deposition, Beverlly also failed to comply with this Court’s Order of July 14, 2008, by not timely reimbursing plaintiff $1,173.75 for its court reporter ($320.00) and Cantonese interpreter ($853.75) fees for the aborted August 5, 2008 deposition. Kroll Deck If If 35, 40, Exhs. K, P; Felahy Deck H 2; Ramirez Deck 112.
Finally, plaintiff seeks reimbursement of $450.00 for costs incurred in hiring and cancelling a Cantonese interpreter for the August 8, 2008 deposition, Kroll Deck K 36, Exh. L, as well as an award of attorney’s fees in the amount of $12,672.50 for plaintiffs counsel’s time spent attending the aborted August 5, 2008 deposition, and reviewing, revising and finalizing plaintiffs ex parte application and the documents supporting the pending motion, including the joint stipulation, and the declarations of Messrs. Kroll and Lauridsen support these requests. Since the Court denied plaintiffs ex parte application without prejudice, the time spent by plaintiffs counsel on the ex parte application is not properly recoverable; however, plaintiffs counsel’s time regarding the pending motion, on which plaintiff has prevailed, is recoverable. Fed.R.Civ.P. 37(b)(2)(C). Thus, the Court finds Mr. Kroll and Mr. Lauridsen each worked 7.5 hours, including Mr. Kroll’s time attending the hearing on this motion, which at their hourly rates of $555.00 per hour and $265.00 per hour, totals $6,150.00. Kroll Decl. H 34; Lauridsen Decl. H 8, and plaintiff is awarded this amount against Beverlly.
ORDER
1. Plaintiffs motion for monetary and preclusion sanctions against defendant Beverlly Jewellery Company Limited IS GRANTED, as follows:
a. Defendant Beverlly shall reimburse plaintiff in the amount of $1,173.75, within 48 hours;
b. Defendant Beverlly shall pay plaintiff $450.00 for the costs of the cancelled deposition on August 8, 2008, within 48 hours;
e. Defendant Beverlly, and Beverlly’s counsel, jointly and separately, shall pay plaintiff attorney’s fees in the amount of $6,150.00, within five (5) days of the date of this Order; and
d. Defendant Beverlly shall be precluded from presenting evidence regarding the design, dates of design, sales, and dates of sales of any ring designed or sold by Beverlly before 2000 that contained crescents in the side of the shank of the ring.
2. Plaintiffs motion for preclusion sanctions against Pink Diamond IS DENIED AS MOOT, and plaintiffs request for monetary sanctions against Pink Diamond is denied.
. Although these documents are untimely, see Local Rule 37-2.3, the Court, out of an abundance of caution, has nevertheless considered them in addressing plaintiff's motion.
. Counsel for defendants failed to appear at the hearing before the Court.
. The Court granted plaintiffs motion for sanctions under Rules 30(d)(3)(C) and 37(a)(5)(A), and awarded plaintiff reasonable attorney's fees in the amount of $4,825.00, rather than the amount plaintiff requested—$9,650.00—after determining the requested amount was not reasonable, and ordered Beverlly to pay plaintiff those attorney's fees no later than twenty (20) days from the date of the Order. July 14, 2008 Order at 10-11. Although plaintiff complains Beverlly did not pay the sanctions on time, the July 14, 2008 award of attorney’s fees is not part of the pending motions to compel.
. In this regard, the Court notes Beverlly has presented absolutely no objective evidence to support its claim that the Veritext reporting service plaintiff uses is untrustworthy. For instance, Beverlly has not shown that Veritext in any manner improperly transcribed any portion of Ms. Lee’s prior depositions, see Felahy Decl. ¶ 15 (noting "Veritext recorded volumes 1 and 2 of Ms. Lee’s deposition”), or that there was any problem with the Cantonese interpreter plaintiff provided. Moreover, Beverlly's objection to Veritext’s services had apparently dissipated a week later when Veritext transcribed Pink Diamond’s continued Rule 30(b)(6) deposition on August 12, 2008. Kroll Decl. ¶ 12. Thus, in refusing to allow Ms. Lee’s deposition to proceed on August 5, 2008, with the court reporter and Cantonese translator plaintiff provided, Beverlly's counsel engaged in inappropriate gamesmanship with the clear intent to improperly disrupt or prevent the deposition.
. Although plaintiff seeks $1,163.75, Mr. Kroll’s declaration and the attached documentation show plaintiff incurred court reporter and translator fees in the amount of $1,173.75 with regard to the aborted deposition on August 5, 2008. See Kroll Deck 1135, Exh. K.
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999115-14797 | WIDENER, Circuit Judge:
This diversity case is an appeal from a jury verdict on a counterclaim against Burger Chef and the dismissal of Burger Chef’s declaratory judgment action. It concerns the construction of a lease under the law of North Carolina. We affirm in large part, but reverse as to one item.
Melfred Company (Melfred) owns some land in Forsyth County, North Carolina. On November 8,1968, it entered into a lease (later amended) with Burger Chef Systems, Inc. (Burger Chef), which is a subsidiary of General Foods Corporation (General Foods). Under the terms of the lease, Melfred was to erect a building on the land and lease it to Burger Chef for a term of twenty years, with Burger Chef having the right to ex tend the lease for an additional ten years. The plans and specifications for the building were furnished by Burger Chef. General Foods guaranteed payment of the rent of $15,700 per year, or $1,308.33 per month.
Under the provisions of the lease, Burger Chef agreed to insure all improvements with fire and extended coverage insurance equal to their replacement value and to furnish to Melfred a certificate of renewal of the fire insurance policies twenty days prior to their expiration. The lease provided that “the lessor shall be solely entitled to any insurance proceeds received by reason of said destruction or damage [by fire], and the improvements shall be restored to its [sic] prior condition by the lessor with all reasonable diligence. The lessor shall make the entire proceeds of the insurance policies available for the restoration of the improvements and shall keep said proceeds in a separate trust account for that purpose.” In the same paragraph of the lease, rent was waived for such period of time following a fire loss as the premises were not usable for business purposes.
The lease agreement further provided that the lessee had the right to sublet the premises and for the allowance of attorneys’ fees to the prevailing party in a suit over the terms of the lease.
Burger Chef, which is in the self service food business, took possession of the premises September 1,1969. On January 17,1972, it sent to Melfred the certificate of insurance which is involved here. It was issued by Allendale Insurance Company to General Foods, naming Burger Chef as an additional named insured in the amount of $200,000, and provided that any loss “shall be adjusted with Burger Chef Systems, Inc., and payable to Burger Chef Systems, Inc., and the additional interests as outlined below:
The Melfred Company-lessor Volunteer State Life Insurance Company-mortgagee.”
The policy of insurance, however, turned out to have a $100,000 deductible clause, and, to make matters worse, it provided that Burger Chef would repay, within 30 days, 100% of the first $100,000 of any loss paid by the insurance company. Thus, in at least one light, Burger Chef was self insured for the first $100,000 of a loss.
On September 25, 1972, the building was substantially destroyed by fire, rendering it unusable for the purposes contemplated in the lease.
Burger Chef and Melfred immediately engaged in discussions with the insurance company, trying to settle the loss. At no time during the long series of settlement negotiations, offers, and gathering and submission of bids does the record show that Melfred ever did any act inconsistent with the lease agreement. It took the position from the first, as it now takes, that it was entitled to the proceeds of the fire loss and upon receipt of the proceeds was obligated to reconstruct the building.
Burger Chef, on the other hand, from the very outset, and even until argument in this court, insists that it has the authority to adjust the fire loss and at least a joint right to payment of the proceeds. Its insistence on these points all through the negotiations prevented any consummation of them, prevented any settlement of Melfred’s claim, prevented the rebuilding of the building, and brought about the present difficulty between the parties. When it is considered that the first estimates submitted following the fire were in the neighborhood of $60,000 and were procured by Burger Chef, the reason is apparent for Burger Chef’s insistence that it have the right to make the adjustment of and receive the fire insurance proceeds: it would have saved some $40,000.
We do not put any such strained construction on the terms of the lease. We do not even resort to the rule that the lease should be construed against the party preparing it, Coulter v. Capital Finance Co., 266 N.C. 214, 146 S.E.2d 97 (1966). The lease provided that all of the insurance proceeds were to go to Melfred. It further provided that Melfred was to hold the funds in a trust account and to reconstruct the building. To engraft onto this the right of Burger Chef to adjust the loss and to re ceive the proceeds, so as to place Melfred in the position of having to reconstruct a building according to plans furnished by Burger Chef while Burger Chef had a direct financial interest in keeping any insurance payment as far below $100,000 as possible, is so beyond the bounds of credulity that we, as did the district court, refuse so to construe the language of the lease in the absence of some explicit provision which is not present.
After negotiations between the insurance company, Melfred, and Burger Chef had been going on for more than seven months without result, Burger Chef sued Melfred in the district court, seeking a declaratory judgment. It asked the court to declare that the lease was in full force and effect, that Burger Chef had the right under the terms of the lease to restore and repair the premises and sublease such property for the remainder of the term, and that Burger Chef had the right under the terms of the lease to convert the proceeds of the insurance coverage to its own use and apply those proceeds solely for the repair and restoration of the leased premises.
The district court, quite properly, granted summary judgment to Melfred on the ground that there was no ambiguity in the lease because “The language of the lease . fully define[d] the duties of the parties in the event of a casualty loss.” It recited that Burger Chef had not turned over the insurance proceeds to Melfred, which would be a condition precedent to Melfred’s duty to restore the premises. As to subleasing, the court noted that the provision in the lease as to subleasing was without restriction, and that any question of subleasing was premature since the premises had not been restored.
Melfred had filed a counterclaim, in which it contended that Burger Chef had not insured the premises as agreed upon in the lease; that its statement that it had insurance was false and known to be false when made; that it had failed and refused to cooperate in the adjustment of the policy, even on its own terms; that the declaratory judgment action was instituted for the purpose of delay; that Burger Chef had otherwise intentionally delayed the settlement claim; that the building was further deteriorating; and that Melfred had been damaged in the amount of the replacement value, loss of marketability of the property, incidental damage in attempting to secure performance of the lease, causing Melfred to be without funds to meet its mortgage payments, and for attorneys’ fees and punitive damages.
The counterclaim was tried and went to the jury, which arrived at the following special verdict, upon which judgment was entered:
“1. Did the plaintiff breach the Lease Agreement with the defendant in failing to provide insurance proceeds for the replacement value of the fire damaged building?
ANSWER: “Yes.”
“2. What is the replacement value of the fire damaged building which defendant is entitled to recover of Plaintiff?
ANSWER: “$173,742.00.”
“3. What amount, if any, is the defendant entitled to recover of plaintiff in compensatory damages for loss of time and expense incurred because of the delay?
ANSWER: “$500.00.”
“4. Did the plaintiff breach the Lease Agreement by failing to pay rent from February 1, 1974 to present?
ANSWER: “Yes.”
“5. If so, what amount is defendant entitled to recover for unpaid rent?
ANSWER: “$15,615.43.”
“6. Did plaintiff commit fraud in assuring the defendant that it was fully insured under Lease Agreement for replacement value of the building?
ANSWER: “Yes.”
“7. What amount, if any, is the defendant entitled to recover in punitive damages?
ANSWER: “$200,000.00.”
Burger Chef complains of all of the judgment, the principal claims, of course, relating to the answers to questions 2 and 7.
Although technically, just after the fire, Melfred may have 'been able to sue the insurance company on account of the loss, and that is quite doubtful because of Burger Chefs self imposed right to adjust the loss and claim a joint interest in the proceeds, and a clause in the policy providing for no liability for losses less than the deductible amount, whatever opportunity there may have been was brought to an end by Burger Chef’s filing its suit against Melfred, in which suit it claimed the right to all the insurance proceeds. Melfred’s counterclaim at that point was quite justified.
We think there is no doubt there is ample evidence for a finding that Burger Chef breached the terms of the lease agreement when it procured a policy of insurance with a $100,000 deductible cause which it had to pay, and in further providing, contrary to the plain terms of the lease, that it had the right to adjust the loss and jointly receive the proceeds. As we have before stated, its financial interest in holding the adjustment down, while at the same time being able to require the replacement of the premises, places too great a strain on our imagination to accept the proposition.
That this is self-evident probably accounts for Burger Chef’s emphasis on the measure of compensatory damages as to the replacement value of the property, rather than as to their award in any event. Burger Chef’s claim of error as to the compensatory award of $178,742 is that the district court erred in instructing the jury that it could also consider any damage to Melfred in the marketability of the property because its loss should be limited to the replacement value. The part of the instruction objected to is here quoted: “The defendant further says that it has been damaged in the marketability of its property by the plaintiff’s failure to provide funds to restore the building, and that you should accept the testimony of Dixon that it will cost $178,742 to now restore the building by reason of the deterioration due to the elements since the fire. . . . ”
We do not think that the instruction of the district court was erroneous. Although the use of the word “marketability” may have been unfortunate, there is no doubt that the question which was put to the jury was whether the damage was $178,742, as shown by Melfred’s testimony, or various lesser sums contended for by Burger Chef. The district judge later charged the jury, “Now, the amount of the actual damages under the breach of contract period that you should award the Defendant is whatever amount you feel is necessary to place the Defendant as near as can be done in money to the same position it would have occupied if the contract had been performed.” No one disputes the correctness of this latter proposition, and upon consideration of the charge as a whole, we are of opinion it is free from reversible error. McClure v. Price, 300 F.2d 538 (4th Cir. 1962). It is also clear to us that the contention of Burger Chef that the court allowed the jury to consider the loss of use of the property is not supported by the instructions given.
The essence of Burger Chef’s argument as to punitive damages is that the evidence does not support the verdict. It relies on the North Carolina law that as a general rule, exemplary damages are not recoverable in action for breach of contract. Swinton v. Savoy Realty Co., 236 N.C. 723, 73 S.E.2d 785, 787 (1953), and argues that, because the controversy arose out of a dispute over the lease, the rule against exemplary damages for breach of contract should serve to exonerate it. The district court, however, charged the jury as to fraud, not breach of contract, so that theory here is abstract argument.
The parties are agreed that in North Carolina aggravated fraud is necessary to sustain awards of punitive damages in such cases as here. See Swinton, 73 S.E.2d at 787; King v. Insurance Company, 273 N.C. 396, 159 S.E.2d 891 (1968). In such cases it is said there must be some element of asocial behavior which goes beyond the facts necessary to create a case of simple fraud. Swinton, 73 S.E.2d at 787. There must have been shown additional elements of insult, indignity, malice, oppression or bad motive. Poplin v. Ledbetter, 6 N.C.App. 170, 169 S.E.2d 527 (1969). A reading of the North Carolina cases causes us to be of opinion that exemplary damages go on a case by case basis, and the rule applied though infrequently expressed is found in Swinton as follows: . . we think the rule is that the facts in each case must determine whether the fraudulent representations alleged were accompanied by such acts and conduct as to subject the wrongdoer to an assessment of additional damages, for the purpose of punishing him for what has been called his ‘outrageous conduct.’ ” 73 S.E.2d at 787. See also Hardy v. Toler, 288 N.C. 303, 218 S.E.2d 342, 344 (1975); Clouse v. Chairtown Motors, Inc., 17 N.C.App. 669, 195 S.E.2d 327, 328-9 (1973).
Applying this rule to the case before us, we think that the obstinacy of Burger Chef, high-handed as it was, does not amount to the degree of reprehensibility required by the North Carolina courts to award punitive damages when the dispute grows out of a breach of contract, although the facts may indicate elements of a tort independent of the contractual dispute.
In Swinton an aged, uneducated couple had been sold a lot upon which it was falsely represented their home stood; this was held to be insufficient and an award of punitive damages was set aside. In King a liability insurance company refused to defend a claim against its insured. The court held that an allegation that the breach of contract was “willful,” “intentional,” in “wanton disregard of the rights of the plaintiff” and “calculated ... to hamper, prevent and impair the plaintiff’s legal position” in a pending suit did not “give rise to a cause of action sounding in tort.” 159 S.E.2d at 893. Of like effect is Girard Trust Bank v. Easton, 3 N.C.App. 414, 165 S.E.2d 252 (1965), where, in a dispute over a financing agreement, allegations that acts in connection with a breach of contract were “wilful, intentional, malicious, and done with the intent of injuring” were held insufficient.
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11547947-18222 | ANDERSON, Chief Judge:
Appellant, Linda Denno as parent and next friend for Wayne Denno (“Denno”), filed this complaint against Volusia County School Board (“Board”) and Assistant Principals Dennis Roberts and Robert Wallace (“individual defendants”) alleging deprivation of First Amendment rights in violation of 42 U.S.C. § 1983. With respect to the § 1983 claim against the individual defendants, the district court dismissed the complaint pursuant to Fed. R.Civ.P. 12(b)(6) on the basis of qualified immunity. With respect to the § 1983 claim against the Board, the district court granted summary judgment in favor of the Board. Denno appeals.
We address two discrete issues on appeal. First, Denno contends that the district court erred in dismissing the § 1983 claim as to the individual defendants pursuant to Fed.R.Civ.P. 12(b)(6) on the basis of qualified immunity. Second, Denno argues that the district court erred in granting summary judgment in favor of the Board on the § 1983 claim. We address each issue in turn.
I. QUALIFIED IMMUNITY FOR THE INDIVIDUAL DEFENDANTS
Qualified immunity shields government officials from both suit and liability if their conduct violates no clearly established right of which a reasonable person would have known. Santamorena v. Georgia Military College, 147 F.3d 1337, 1339-40 (11th Cir.1998)(citing Williams v. Alabama State Univ., 102 F.3d 1179, 1182 (11th Cir.1997)). Whether the complaint alleges the violation of such a right is a question of law subject to de novo review. Id. The district court dismissed Denno’s claim against the individual defendants pursuant to Fed. R.Civ.P. 12(b)(6) based on qualified immunity. In the posture of this case, we are required to assume all reasonable inferences from the complaint in favor of Den-no. Id. We briefly summarize the facts alleged in the complaint that are relevant to this issue.
At the time of the events giving rise to the instant case, Wayne Denno was a minor and a student at Pine Ridge High School. Dennis Roberts and Robert Wallace were assistant principals at that school. As a hobby, Wayne Denno had cultivated a keen interest in Civil War history. In his free time, Denno participated in Civil War reenactments and living histories. His hobby led him to join a reenactment group known as the Florida Light Artillery, Battery B, with which he participated in Civil War reenactments and living histories both within Florida and elsewhere in the South.
On December 13, 1995, during an outdoor lunch break at school, Wayne Denno was quietly conversing with a small group of friends, discussing his avocation of Civil War history and his hobby as a Civil War reenactor. As part of this discussion, Wayne Denno displayed to his Mends a 4” x 4” Confederate battle flag as he discussed historical issues of Southern heritage. Without any provocation or disruption, defendant Roberts approached the small group of Denno’s Mends, noticed that Denno was holding the 4” x 4” Confederate flag, and ordered Denno to put the flag away. When Denno tried to explain the historical significance of the flag, Roberts ordered Denno to accompany him to an administrative office and on the way there advised Denno that he was suspended from school. Denno alleges that his suspension constituted an unconstitutional deprivation of his First Amendment rights.
The law relevant to this issue begins with Tinker v. Des Moines Independent Community School District, 393 U.S. 503, 89 S.Ct. 733, 21 L.Ed.2d 731 (1969). In Tinker, several Iowa high school and junior-high school students were suspended for wearing black armbands to school in protest of the Vietnam War. The Supreme Court found that the students “merely went about their ordained rounds in school” and “neither interrupted school activities nor sought to intrude in the school affairs or lives of others” by their wearing of the black cloth. Id. at 514, 89 S.Ct at 740. The Court held that a student has a First Amendment right to display at school a symbol, such as the one at issue in the instant case, notwithstanding the school officials’ fear that display of the symbol would create a disturbance, so long as there was no more than an “undifferentiated fear or apprehension of disturbance.” Id. at 508, 89 S.Ct. at 737. On the other hand, the Court in Tinker indicated that:
To justify prohibition of a particular expression of opinion, it [the state in the person of the school official] must be able to show that its action was caused by something more than a mere desire to avoid the discomfort and unpleasantness that always accompany an unpopular viewpoint. Certainly, where there is no finding and no showing that engaging in the forbidden conduct would “materially and substantially interfere with the requirements of appropriate discipline in the operation of the school” the prohibition cannot be sustained
Id. at 509, 89 S.Ct. at 738. (quoting Burnside v. Byars, 363 F.2d 744, 749 (5th Cir.1966)). Therefore, Tinker clearly establishes the law: a student has a right to display a symbol which, although it might reflect an unpopular viewpoint and evoke discomfort and unpleasantness, reasonably gives rise to nothing greater than an undifferentiated fear or apprehension of disturbance. On the other hand, we construe Tinker to indicate that school officials could appropriately prohibit the display of a symbol in circumstances that warrant a reasonable fear on the part of the school officials that the display would appreciably disrupt the appropriate discipline in the school. Id. at 514, 89 S.Ct. at 740 (“[T]he record does not demonstrate any facts which might have reasonably led school authorities to forecast substantial disruption of or material interference with school activities.... ”).
In applying the foregoing law to the instant case, we emphasize the posture in which this case comes to us: a dismissal of the complaint pursuant to Fed.R.Civ.P. 12(b)(6). In such posture, we of course assume all reasonable inferences in favor of Denno. See Santamorena, 147 F.3d at 1340. From the specific facts pled in the complaint, and summarized above, and the reasonable inferences therefrom, we construe the complaint as alleging that as of the time that Defendant Roberts interrupted Denno’s small group discussion: Denno was displaying the flag in a quiet, unobtrusive manner to a small circle of friends during a lunch break in the school courtyard while discussing his avocation as a Civil War reenactor; he neither attempted to parade nor brandish the flag in a provocative manner; there had been no disruption in the school attributable to Denno’s actions or similar occurrences; and there had been no history of racial tension or disorder at Pine Ridge High School.
Given the alleged context of Denno’s small group discussion-a small, quiet and confined discussion amongst Denno and his friends of Civil War history and Den-no’s hobby as a Civil War reenactor-and given the alleged absence of any disruption or racial tension at the school, we conclude that Denno’s complaint, if its allegations and its reasonable inferences are accepted as true, adequately alleges that there would have been no reasonable fear of disruption on the part of the school officials. We therefore conclude that Denno’s complaint describes actions with respect to which Tinker has clearly established a student’s First Amendment right. Considering only the allegations of Denno’s complaint and the reasonable inferences therefrom in favor of Denno, we conclude that Denno has alleged a violation of the very First Amendment right that Tinker clearly established.
In holding to the contrary, the district court relied principally on two eases, Augustus v. School Bd. of Escambia County, Fla., 507 F.2d 152, 155 (5th Cir.1975), and Melton v. Young, 465 F.2d 1332, 1334 (6th Cir.1972), which, in the words of the court below, had “affirmed district court findings that the display of a Confederate flag was a focal point of racial irritation, offensive to a racial minority, and contributed to violence and the disruption of the school.” Denno v. School Bd. of Volusia County, 959 F.Supp. 1481, 1487 (M.D.Fla.1997). However, in both Augustus and Melton, integration was in its early stages and the records before the courts revealed many substantial racial disturbances; indeed, each school had to be closed on more than one occasion to avoid racial violence. See Augustus, 507 F.2d at 155; Melton, 465 F.2d at 1333. In short, both cases fell within the Tinker ruling that school officials could prohibit the display of a symbol in circumstances that warrant a reasonable fear on the part of school officials that the display would substantially disrupt discipline in the school.
In stark contrast to Augustus and Melton, the facts that we must assume in the present posture of the instant case place it clearly within the actual Tinker holding recognizing a student’s First Amendment right to display a symbol. This case comes to us in a Rule 12(b)(6) posture where we take the allegations of the plaintiff as true. Thus, we must accept as true Denno’s allegation that the context was a small group discussion, involving no disruption either actual or likely, and similarly accept the allegation that there had been no disruption attributable to similar occurrences. We must also take as true Denno’s assertions that there had been no history of racial tension or disorder at Pine Ridge High School. Assuming these facts, and noting the absence of any facts in the complaint that would suggest a reasonable fear of disruption, we conclude that Denno has alleged a violation of the very First Amendment right that Tinker clearly established. The instant case involves facts materially similar to those in Tinker, and Tinker “truly compels” the conclusion that Denno’s federal right was violated. Santamorena, 147 F.3d at 1340 (citing and quoting Ensley v. Soper, 142 F.3d 1402, 1406 (11th Cir.1998), and Lassiter v. Alabama A&M Univ., 28 F.3d 1146, 1150 (11th Cir.1994) (en banc)). Accordingly, we reverse the district court’s Rule 12(b)(6) dismissal of Denno’s § 1983 claim against the individual defendants.
II. LIABILITY OF THE BOARD
Monell v. Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978), holds that local governments (and branches thereof) may not be held hable for constitutional deprivations on the theory of respondeat superior. Rather, they may be held liable only if such constitutional torts result from an official government policy, the actions of an official fairly deemed to represent government policy, or a custom or practice so pervasive and well-settled that it assumes the force of law. Id. at 694, 98 S.Ct. at 2037-38; Sewell v. Town of Lake Hamilton, 117 F.3d 488, 489 (11th Cir.1997); Church v. City of Huntsville, 30 F.3d 1332, 1343 (11th Cir.1994). In order for the actions of a government official to be deemed representative of the municipality, the acting official must be imbued with final policymaking authority. Pembaur v. City of Cincinnati, 475 U.S. 469, 481, 106 S.Ct. 1292, 1299, 89 L.Ed.2d 452 (1986). Unlike the qualified immunity issue discussed above, the district court permitted the § 1983 claims against the Board to proceed beyond the pleadings stage; however, the district court granted summary judgment in favor of the Board.
Because Denno does not argue that the Board maintained any official policy prohibiting Confederate symbols, our resolution of this claim hinges on two issues: 1) whether the Pine Ridge High School administrators were officials vested with final policymaking authority, and 2) whether a custom or practice banning Confederate symbols existed. The district court answered both queries in the negative and accordingly granted summary judgment in favor of the Board. We agree with that assessment for the following reasons.
A. Final Policymaking Authority
Scala v. City of Winter Park, 116 F.3d 1396 (11th Cir.1997), serves as our compass in the area of determining whether officials act with final policymak-ing authority so as to trigger entity liability under Monell. In Scala, drawing on City of St. Louis v. Praprotnik, 485 U.S. 112, 108 S.Ct. 915, 99 L.Ed.2d 107 (1988)(plurality opinion), we squarely held that “[fjinal policymaking authority over a particular subject area does not vest in an official whose decisions in the area are subject to meaningful administrative review.” Scala, 116 F.3d at 1401. With this “embedded” principle in mind, id., we find Denno’s argument that the school administrators possessed final policymaking authority unpersuasive.
Policy 208 of the Volusia County School Board, entitled “Code of Student Conduct and Discipline,” sets forth a successive three-step grievance procedure for the resolution of “complaints filed by a student or parent/guardian with regard to their respective rights under school board policy, school rule, state or federal law.” Step 1 involves meeting with the school principal informally; Step 2 involves review by the area assistant superintendent; and Step 3 permits a student to request a hearing if dissatisfied with the previous two steps. Policy 208 at 14-15. In order to trigger review by the area assistant superintendent, the grievant is required to file a copy of the grievance form with the area assistant superintendent within 7 days of the meeting with the principal outlined in Step 1. Policy 208 at 14.
The district court concluded that Policy 208, the “Code of Student Conduct and Discipline,” provided for meaningful review of the school officials’ disciplinary decisions, but concluded that Denno did not timely comply with the requirements for seeking review under Step 2. The court relied on Policy 208 itself and on a letter dated April 22, 1996, from Area Assistant Superintendent Lee Britton, stating that Denno had failed to pursue the appeal of his suspension in timely fashion and had therefore waived the opportunity to request the hearing mentioned in Step 3 of the grievance procedure. Indeed, it appears that Denno did not pursue an appeal in timely fashion and never filed a copy of the grievance form necessary to proceed with Step 2 of the review procedure.
As a matter of law, we agree with the district court that the “Code of Student Conduct and Discipline” allowed for meaningful review of Denno’s suspension. The fact that Denno had to file an appeal with the area assistant superintendent before his suspension could be reviewed does not make the school administrators final policymakers. Scala clearly states that this circuit equates meaningful review with the opportunity for meaningful review. Scala, 116 F.3d at 1402. (“It is clear that [officials] do not become policymakers for § 1983 purposes simply because persons who disagree with their decisions have to file an appeal in order to have those decisions reviewed.”) In other words, automatic review need not be made available when the opportunity for meaningful review is present. The express review mechanisms set into place by the grievance procedures detailed in the “Code of Student Conduct and Discipline” satisfy us that such opportunity existed in the instant case. Therefore, given the availability of this review, we agree with the district court that the Pine Ridge High School administrators were not final policymakers so as to make the Board hable under Mo-nell.
B. Custom or Practice
In order for the Board to be held liable under the custom or practice prong of Monell, Denno must demonstrate that a custom or practice of banning the Confederate flag at high schools within the school district is so well-settled and pervasive that it assumes the force of law. See Sewell v. Town of Lake Hamilton, 117 F.3d 488, 489 (11th Cir.1997). Put another way, Denno must show a “persistent and widespread practice” of prohibiting the Confederate emblem about which the Board knew or of which practice it had constructive knowledge, because “[n]ormally random acts or isolated incidents are insufficient to establish a custom....” Church v. City of Huntsville, 30 F.3d 1332, 1345 (11th Cir.1994)(quoting Depew v. City of St. Marys, 787 F.2d 1496, 1499 (11th Cir.1986)).
The district court held that a custom of prohibiting the Confederate flag from being displayed on school grounds could not be attributed to the Board. While Denno correctly points out that three other students were disciplined for similar displays of the flag in December 1995, these incidents transpired in the immediate aftermath of Denno’s suspension in an effort to maintain discipline amongst the students and did not represent a persistent and widespread practice of the Board. Indeed, Wayne Denno’s own testimony undermines his argument that there was a custom or practice of banning the flag. Denno stated in his deposition that he had previously displayed the Confederate flag on school grounds and had not been disciplined and had witnessed others do so without consequence. In fact, Denno could not recall any student, prior to his suspension, suffering punishment for the display of the Confederate flag at Pine Ridge High School. Nor did Denno adduce evidence of similar suspensions at other schools within the school district governed by .the Board. Given the lack of evidence with respect to the prohibition of the Confederate flag at Pine Ridge or at other schools within the district, we agree with the district court that Denno failed to adduce evidence creating a genuine issue of fact as to a pervasive and well-settled custom of banning the Confederate flag so as to make the Board potentially liable under Monell.
For the foregoing reasons, we agree with the district court that, under Monell and its progeny, the Board cannot be held liable. Thus, we affirm the district court’s grant of summary judgment in favor of the Board.
III. CONCLUSION
We affirm the district court’s grant of summary judgment in favor of the Board; however, we reverse the court’s Rule 12(b)(6) dismissal of Denno’s § 1983 claims against the individual defendants and remand for further proceedings.
AFFIRMED IN PART, REVERSED IN PART, and REMANDED.
. We reject Denno’s other arguments on appeal without need for discussion.
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11132672-10007 | MEMORANDUM ORDER
STANLEY S. HARRIS, District Judge.
Before the Court are petitioner’s (1) motion to vacate, set aside, or correct sentence pursuant to 28 U.S.C. § 2225, (2) motion for leave to amend § 2255 motion, (3) motion requesting post-offense rehabilitation downward departure, and (4) motion requesting the Court to consider the motion regarding post-offense rehabilitation simultaneous to the § 2255 motion. The Court also considers the Government’s opposition to the § 2255 motion and petitioner’s reply thereto. The Court grants petitioner’s motion for leave to amend his § 2255 motion and petitioner’s motion to consider the downward departure motion simultaneous to the § 2255 motion. Upon consideration of the entire record, the Court denies petitioner’s § 2255 motion and motion requesting a post-offense downward departure. Because the motion and the files and records of the case conclusively show that petitioner is entitled to no relief, the Court finds that a hearing is not necessary.
I. Background
On February 28, 1994, petitioner was convicted of one count of unlawful possession with intent to distribute 50 grams or more of cocaine base in violation of 21 U.S.C. § 841(a)(1) and 841(b)(l)(A)(iii). On July 5, 1994, petitioner was sentenced to 240 months’ imprisonment. The Court of Appeals affirmed his conviction and sentence on September 13, 1995. United States v. Cook, 70 F.3d 638 (D.C.Cir.1985) (per curiam), published at 1985 WL 281326.
III. § 2255 Motion
Petitioner’s § 2255 motion asserts several allegations of ineffective assistance of counsel by Alan C. Drew, his attorney at trial and on appeal: (1) failure to object to the prosecutor’s alleged vouching for a prosecution witness; (2) failure to appeal an objection to an expert witness’ testimony regarding a hypothetical situation that mirrored the facts of the case; (3) failure to object to being sentenced for crack cocaine without proof of crack cocaine; (4) failure to object to a crack cocaine sentence where crack cocaine is not scheduled as a controlled substance; and (5) failure to object to the use of co-defendant Dwayne Short’s alleged perjury.
A. Legal Standard
A collateral attack under § 2255 is not a second chance at appeal, nor is it a substitute for direct appeal; a defendant is required to show “a good deal more than would be sufficient on direct appeal” to gain collateral relief. United States v. Pollard, 959 F.2d 1011, 1020 (D.C.Cir.), cert. denied, 506 U.S. 915, 113 S.Ct. 322, 121 L.Ed.2d 242 (1992). To obtain relief based on a trial error that is raised for the first time on collateral attack, the defendant typically must show “cause” for his failure to raise the issue at trial and on direct appeal, and he must show “actual prejudice” resulting from the errors of which he complains. United States v. Frady, 456 U.S. 152, 102 S.Ct. 1584, 1594-95, 71 L.Ed.2d 816 (1982). In extraordinary instances, a petitioner may overcome a procedural default where “a fundamental miscarriage of justice” has occurred. McCleskey v. Zant, 499 U.S. 467, 494, 111 S.Ct. 1454, 113 L.Ed.2d 517 (1991); Coleman v. Thompson, 501 U.S. 722, 753, 111 S.Ct. 2546, 115 L.Ed.2d 640 (1991). However, the Supreme Court has explicitly tied this exception to the petitioner’s innocence. See Schlup v. Delo, 513 U.S. 298, 321, 115 S.Ct. 851, 130 L.Ed.2d 808 (1995). Where a petitioner raises claims of ineffective assistance of counsel in a § 2255 motion, he need not show “cause and prejudice” for not having raised such claims on direct appeal, .as these claims may properly be raised for the first time in a § 2255 motion. See United States v. Johnson, 1999 WL 414237 at *1 (D.C.Cir., May 28, 1999) (unpublished opinion).
To prevail on an ineffective assistance of counsel claim, a defendant must show two things. First, the defendant must show that counsel’s performance was deficient, falling below an objective standard of reasonableness. See Strickland v. Washington, 466 U.S. 668, 687-88, 104 S.Ct. 2052, 80 L.Ed.2d 674 (1984). To prove deficient performance, a defendant must show that “counsel made errors so serious that counsel was not functioning as the ‘counsel’ guaranteed the defendant by the Sixth Amendment.” Id. at 687, 104 S.Ct. 2052. In evaluating counsel’s performance, “the court should recognize that counsel is strongly presumed to have rendered adequate assistance and made all significant decisions in the exercise of reasonable professional judgment.” Id. at 690, 104 S.Ct. 2052. Second, the defendant must show that the deficient performance had a prejudicial effect. To prove prejudice, a defendant must show that “counsel’s errors were so serious as to deprive the defendant of a fair trial, a trial whose result is reliable.” Id.
B. Analysis
Petitioner’s allegations do not demonstrate that Drew’s performance fell below an objective standard of reasonableness. The Court’s independent recollection of the trial also leads it to conclude that petitioner’s representation was of a high professional quality. The Court briefly addresses each of petitioner’s claims.
1. Vouching
Petitioner claims that Drew was ineffective for failing to object to the Government’s alleged bolstering of key.witness Dwayne Short. Petitioner contends that the Government repeatedly referred to the provision in Short’s plea agreement that requires that he testify truthfully, thereby bolstering Short’s credibility.
The Court finds no ineffective assistance of counsel. Applying the reasoning of United States v. Spriggs, 996 F.2d 320 (D.C.Cir.1993), the Court sees “no good reason to believe that the allegedly bolstering provisions of the agreement are likely to enhance the witness’s credibility in the eyes of the jury.” Id. at 324. Furthermore, because the alleged “bolstering” occurred only after the defense counsel first attacked the witness’s credibility using portions of the plea agreement, the Court sees no error in the Government’s manner of rehabilitation.
2. Expert testimony
At trial, the Government elicited testimony from Detective Tyrone R. Thomas, a police expert witness, as to whether possession of a certain quantity of drugs indicated an intent to distribute those drugs. Drew objected, alleging that the expert impermissibly testified to petitioner’s intent, as opposed to a general observation, because the Government’s hypothetical question mirrored the facts of the case. The Court overruled Drew’s objection. Drew did not raise the issue on appeal, which petitioner claims constituted ineffective assistance of counsel.
Federal Rule of Evidence 704(b) provides that an expert witness may not .testify to a defendant’s mental state or condition constituting an element of the crime charged, as these are ultimate issues for the trier of the fact to determine. In earlier cases, this Circuit stated that “Rule 704(b) allows an expert to state that certain conduct fits a specific role in a criminal enterprise — even though the conduct described exactly parallels conduct that other evidence explicitly links to a defendant,” United States v. Mitchell, 996 F.2d 419, 422 (D.C.Cir.1993), although such testimony can be “awkward,” United States v. Williams, 980 F.2d 1463, 1466 (D.C.Cir.1992). Not until May 30, 1995, in United States v. Boyd, 55 F.3d 667, 671 (D.C.Cir.1995), did this Circuit prohibit the use of “mirroring hypotheticals,” stating that the Government may not recite hypothetical facts that mirror the case at hand and ask the expert to opine whether such facts prove an intent to distribute.
The Court concludes that defense counsel Drew was not deficient for not appealing the Court’s ruling. At the time Drew appealed the case on July 26, 1994, and filed a brief on behalf of petitioner on April 10, 1995, the Boyd case had not been decided yet. Thus, the Court’s ruling was sufficiently supported by the prevailing law, and Drew therefore cannot be found deficient for not appealing the ruling, particularly where the Court’s ruling would have been reviewed only for abuse of discretion. See United States v. Smart, 98 F.3d 1379, 1386 (D.C.Cir.1996) (trial judge’s admission of evidence reviewed for abuse of discretion). Even if Drew’s performance was deficient, petitioner has not presented sufficient evidence that the outcome would have been different had Detective Brown refrained from answering the question about petitioner’s intent.
3. Proof of crack cocaine.
Petitioner contends that although he was sentenced under the crack cocaine statute, at no tune did the Government present evidence to prove that the drug at issue was crack cocaine. Petitioner therefore alleges that Drew was ineffective because he did not familiarize himself sufficiently with the crack cocaine statute, did not inform petitioner about the alternatives to the crack cocaine enhancement, did not object to the application of the crack cocaine guideline, and did not present any evidence that could have mitigated his sentence under the crack cocaine guideline.
The Court rejects petitioner’s contention. The transcript of the trial reveals numerous references to crack cocaine. Two police officers testified that the “loose white rock” field-tested positive for crack cocaine, see Tr. 2/25/94 at 39 and 156, and one police officer testified that the DEA laboratory chemist determined that the drugs were cocaine base, commonly known as crack cocaine. See Tr. 2/25/94 at 204. Dwayne Short also testified that he saw petitioner “break a piece off’ of an eighth of a “key,” and hand the confidential police informant “the rock.” “Rock-like substances” which are analyzed to contain cocaine base are descriptions that fit “crack.” See United States v. Prailow, 1998 WL 939502 at *1 (D.C.Cir.1998) (unpublished decision); United States v. Washington, 115 F.3d 1008, 1011 (D.C.Cir.1997) (“the government tells us without contradiction from defendant that it knows ‘of no rock-like form'%f cocaine base that is not crack’ ”).
4. Application of crack cocaine although not scheduled
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6534803-5647 | MEMORANDUM OPINION AND ORDER ON CREDITOR’S MOTION TO LIFT STAY
LEWIS M. KILLIAN, Jr., Bankruptcy Judge.
THIS MATTER came on to be heard upon the motion of Craig Hall and Hall & Hall, P.A. (Hall) for relief from the automatic stay of Section 362 of the Bankruptcy Code. Hall seeks relief in order to commence state court litigation against the debtor Kaufman. Hall alleges that on January 13, 1983, Betty Boyette, as guardian for her son, Jonathan R. Boyette, entered into an employment contract with the law firm of the debtor Mark Jay Kaufman, P.A. The Kaufman firm was to represent the Boyettes in a personal injury action. The employment contract provided that the client agreed that associate counsel could be employed at the discretion and expense of the firm. Pursuant to this agreement, the Kaufman firm employed the movant Craig E. Hall of Hall & Hall, P.A. to assist it in handling the Boyette case. Hall represented the interests of Boyette from approximately January 20, 1983, until February 15, 1984, and was to participate in the division of any contingency fee realized under the contractual arrangement based upon a percentage of any recovery made. Hall alleges that sometime between October 1, 1983, and February 15, 1984, Kaufman sought to have Boyette discharge Hall from further representation. He asserts that these actions by the debtor constituted the intentional interference with an advantageous business contractual relationship that Hall had established with Boyette which resulted in Kaufman’s liability to Hall for both compensatory and punitive damages. Hall has previously filed an un-liquidated claim in this Chapter 11 estate for the attorney fees that allegedly would have been earned by him but for such tortious interference by the debtor. The debtor has filed an objection to this claim. Hall’s motion to lift stay seeks authority to liquidate this claim in state court before a jury. Upon this record, argument, and memoranda of counsel, the Court makes the following findings of fact and conclusions of law.
The threshold issue presented to this Court is whether the automatic stay of § 362 is applicable. Hall contends that although the business/contractual relationship was entered into pre-petition, and the purported tortious interference occurred pre-petition, actual damages did not accrue giving rise to the cause of action until post-petition. He asserts that § 362 is therefore inapplicable to this post-petition claim. Yet, § 101(4) defines claim as including contingent, unliquidated rights to payment. All acts giving rise to Hall’s claim occurred pre-petition even though specific damages may not have been ascertainable until post-petition. Upon these purported facts this Court concludes that the instant claim is pre-petition and state court proceedings thereon are thus subject to the automatic stay of § 362. See, In re Peltz, 55 B.R. 336 (Bkrtcy.M.D.FL 1985).
The Court must now determine whether to grant Hall relief from stay to pursue the claim liquidation in a state court jury trial seeking both compensatory and punitive damages. The debtor Kaufman vigorously opposes Hall’s motion on several grounds. Kaufman asserts that Hall subjected himself to the jurisdiction of this Court by filing a proof of claim; that the proof of claim and objection thereto constitute a contested matter over which this Court has complete jurisdiction; that, as this matter involves the allowance or disallowance of a claim, it is a core proceeding upon which the Bankruptcy Court can enter a final order; that this Court is statutorily authorized to rule on these matters and should exercise its jurisdiction regardless of whether the creditor may file a lawsuit in state court for tortious interference; and that although a matter may involve issues of state law, that does not deprive this Court of its power to hear and resolve such disputes.
Hall argues that the tortious interference suit which he desires to file in state court is a “non-core” or “related” proceeding. As such, he contends that this Court has no jurisdiction to issue a final order. He asserts that the filing of his proof of claim was a procedural necessity which can not convert this matter from non-core to core. Hall further re-asserts his constitutional right to a jury trial in state court.
This Court deems the parties’ emphasis on the characterization of this matter as core or non-core of little moment in the context of this case. This Court has the “jurisdiction”, “authority”, and “power” to hear proceedings as to allowance or disallowance of all claims. Title 28 U.S.C. § 157(a). The Court has discretion to exercise this power or not. (See, In re Continental Airlines Corp., 64 B.R. 865 (Bkrtcy.S.D.TX 1986)).
Further, as to whether a jury trial of this issue is permissible, this Court recognizes the cases holding that regardless of the characterization of a proceeding as core or non-core, this Court is not prohibited from conducting a jury trial of its own, a solution which Hall would find agreeable. In In re Morse Electric Company, Inc., 47 B.R. 234, 12 B.C.D. 957 (Bkrtcy.N.D.IN 1985), the Court quoted bankruptcy commentator Stanley Bernstein:
... As it now stands, § 1411 is merely declaratory of the right to jury trial or (sic) a limited class of contingent tort claims.... Those claims can only be tried before the district court. One could draw the inference that the Seventh Amendment applied to all legal issues regarding money damages, and that a bankruptcy judge has the implied power to conduct jury trials in all instances except the expressly excluded limited class of contingent tort claims.
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3775414-19229 | BOUDIN, Chief Judge.
On March 31, 2002, Deepak Jahagirdar was seated next to D.S., a 22-year-old woman, on a commercial airline flight from Dallas to Boston. D.S. later testified that she awoke from a nap to find Jahagirdar’s hand inside her underpants. D.S. cursed at Jahagirdar, pushed her way to the aisle, and immediately told a flight attendant that “[t]he guy next to me had his hand down my pants.”
Upon landing, Jahagirdar was arrested. D.S. was asked to remain onboard the airplane after the other passengers had exited, and was interviewed by Massachusetts State Trooper Kevin Hogaboom. After disembarking, D.S. was interviewed again and made a written statement. D.S. was then taken to the hospital for a rape examination.
A grand jury indicted Jahagirdar on February 11, 2004, charging him (so far as is relevant to this case) with sexual abuse and attempted sexual abuse, 18 U.S.C. § 2242(2) (2000), within the special aircraft jurisdiction of the United States, 49 U.S.C. § 46506 (2000). Sexual abuse includes, subject to other conditions, “the penetration, however slight, of the ... genital opening of another by a hand or finger or by any object.” 18 U.S.C. § 2246(2)(C).
At trial, D.S. testified that Jahagirdar’s fingers were “underneath the lip area of the vagina” and that his fingers were “[u]nderneath the outer lips [labia majora] and the inner lips [labia minora]” of her genitals; and she made corresponding marks on an anatomical diagram to illustrate her testimony.
On cross-examination of D.S., Jahagirdar sought to impeach her by suggesting that she had not told the doctor or nurse at the hospital that she had been penetrated, and that she had in fact denied having been penetrated when asked by the doctor. Jahagirdar also implied that she had settled on her description of the alleged assault after consulting a lawyer and after concluding that Jahagirdar was an attractive target for a civil suit.
The government was then allowed to offer evidence from the trooper who had interviewed D.S. at the scene. He testified that, when he asked D.S. whether she had been penetrated, she stated that she had been, and that, on the basis of her response, he recommended that Jahagirdar be charged with rape.
There was also testimony from flight attendants and secret service agents who were on board the plane as to D.S.’s visible emotional distress, and expert testimony that a large quantity of D.S.’s DNA was found on Jahagirdar’s hands, consistent with his fingers having come into contact with her vaginal secretions. However, the expert agreed that it was also possible that Jahagirdar could have picked up skin cells from the waistband of D.S.’s pants, so this forensic evidence did not incontrovertibly establish just where Jahagirdar had placed his hand.
Jahagirdar testified in his own defense. He admitted that he had placed his hand in D.S.’s pants, but claimed that D.S. had begun and encouraged a sexual encounter, that his hand touched only her “pubic hair area,” and that he withdrew his hand when he began to feel guilty about betraying his wife’s trust.
The jury convicted Jahagirdar of sexual abuse. The district judge sentenced Jahagirdar to 87 months’ imprisonment, a term of supervised release, and a $25,000 fine. Jahagirdar now appeals, challenging the critical jury instruction as to the scope of the statute, the admission of D.S.’s statements to the trooper, and certain of the district court’s sentencing determinations.
Jahagirdar’s first argument on appeal is that the district court erroneously instructed the jury as to an element of the offense. Section 2242(2) criminalizes “knowingly, engaging] in a sexual act with another person if that other person is ... physically incapable of declining participation in, or communicating unwillingness to engage in, that sexual act.” Section 2246(2) in turn defines “sexual act” (we underscore the most pertinent language) as
(A) contact between the penis and the vulva or the penis and the anus, and for purposes of this subparagraph contact involving the penis occurs upon penetration, however slight;
(B) contact between the mouth and the penis, the mouth and the vulva, or the mouth and the anus;
(C) the penetration, however slight, of the anal or genital opening of another by hand or finger or by any object, with an intent to abuse, humiliate, harass, degrade, or arouse or gratify the sexual desire of any person; or
(D) the intentional touching, not through the clothing, of the genitalia of another person who has not attained the age of 16 years with an intent to abuse, humiliate, harass, degrade, or arouse or gratify the sexual desire of any person (emphasis added).
Jahagirdar requested that the court instruct the jury that “penetration of the ... genital opening” in section 2246(2)(C) refers to the penetration of the “vaginal orifice.” The government requested an instruction stating that “genital opening ... includes not only the vagina itself, but also the anterior parts known as the vulva and labia,” so that “penetration of the labia majora, or outer lips, of the vulva is sufficient” to find Jahagirdar guilty of violating section 2242.
The district court chose a middle ground, instructing the jury that the government had to prove beyond a reasonable doubt that Jahagirdar “placed his finger or hand beyond Ms. DS’s labia majora to at least the labia minora or inner lips.... The government is not required to prove that he penetrated her vaginal or[i]fice.” Jahagirdar objected. On appeal, Jahagirdar continues to press his argument that “genital opening” means “vaginal orifice.”
The term “genital opening” is not itself a medical term of art. The term “genitalia” refers to the “external and internal” organs of reproduction, Stedman’s Medical Dictionary 738 (27th ed.2000), but “especially] the external organs,” Random House Dictionary 797 (2d ed. unabridged). For women, the “external genitalia” include the mons pubis, the labia majora, the labia minora, the clitoris, and the vaginal orifice. Gray’s Anatomy 1876 (38th ed.1995). “The term ... vulva includes all these parts.” Id.
Taken by itself, the term “genital opening” could conceivable refer to any of at least three successive openings in the female genitalia: (1) the exterior opening bounded by the outer lips or labia majora, (2) the interior opening bounded by the contained inner lips or labia minora, and (3) the opening, yet further along the same channel, called the vaginal orifice.
The most straightforward reading of “genital opening” is that the term encompasses all three orifices including the outermost—a reading given support by the statutory phrase “penetration, however slight.” Nor is it clear why Congress would have sought to distinguish among them, treating more leniently the deliberate insertion of a finger into the outermost orifice—given that the perpetrator must be acting without consent and for the mostly malign purposes described in the statute.
The literal reading becomes almost conclusive when one comes to understand that, under state law, the definition of “rape”—whether penile rape or the variant digital rape with which Jahagirdar was charged—is almost always satisfied under state law by penetration of the labia majora, regardless of whether the statute refers to the “genital opening” (as some do), the “female sex organ” (as others do), or even (in a few cases) the “vagina.” Un der this rule, known as the “least penetration doctrine,” rape laws are “designed to punish the fact, not the degree, of penetration,” State v. Albert, 252 Conn. 795, 750 A.2d 1037, 1047 (Conn.2000).
“[WJhere Congress borrows terms of art in which are accumulated the legal tradition and meaning of centuries of practice, it presumably knows and adopts the cluster of ideas that were attached to each borrowed word.... ” Morissette v. United States, 342 U.S. 246, 263, 72 S.Ct. 240, 96 L.Ed. 288 (1952). Here, no single term is used in all of the state statutes, but the cluster of terms has been given the same meaning by construction and the rationale of Morissette strongly supports the straightforward reading of the statute that we adopt.
Jahagirdar’s textual response is to point to use of the term “vulva” in subsections (A) and (B) of the definitional statute, section 2246(2), and argue that Congress must have meant to distinguish between “vulva” and “genital opening” or else it would simply have repeated the prior, more specific term in subsection (C). But if Congress had deliberately intended to depart from the common-law approach, the obvious way would been to say “vaginal orifice” instead of “genital opening.”
Although Congress’ purpose in using “genital opening” rather than repeating “vulva” cannot be known for sure, one plausible explanation exists and gives Jahagirdar no help. In subsection (A), Congress’ concern was with penetration by the penis, and in subsection (B), with “contact” between the mouth and either “penis,” “vulva,” or “anus”; in both cases, the use of the female-specific term “vulva” makes sense. By contrast, in subsection (C), use of the gender neutral term “genital opening” may well have been intended to encompass the insertion of “any object” into the penis as well as the vulva.
Jahagirdar also relies upon the rule of lenity, namely, that ambiguities in criminal statutes are to be resolved in favor of the defendant; but that rule requires real uncertainty and applies only when “after seizing everything from which aid can be derived, [a court] can make no more than a guess as to what Congress intended.” United States v. Councilman, 418 F.3d 67, 83 (1st Cir.2005) (quoting Reno v. Koray, 515 U.S. 50, 65, 115 S.Ct. 2021, 132 L.Ed.2d 46 (1995)). In this case, language, policy, and tradition make this a case in which there is no real uncertainty.
There is nothing whatever to Jahagirdar’s suggestion that the statute fails to give constitutionally adequate notice that such digital penetration of the labia majora constitutes sexual abuse. A criminal statute fails to give adequate notice “if a person of ordinary intelligence examining [only] the language of the statute would be in some way surprised that it prohibited the conduct in question.” Sabetti v. Dipaolo, 16 F.3d 16, 17 (1st Cir.) (alteration in original) (citations omitted) (quoting United States v. Harriss, 347 U.S. 612, 617, 74 S.Ct. 808, 98 L.Ed. 989 (1954); United States v. Colon-Ortiz, 866 F.2d 6, 9 (1st Cir.1989)) (internal quotation marks omitted), cert. denied, 513 U.S. 916, 115 S.Ct. 293, 130 L.Ed.2d 207 (1994).
Here, on a common sense reading, the labia majora frame a genital opening, even if there were other openings that might also qualify. Indulging the acceptable fiction that perpetrators closely read statutes before acting, this statute gave Jahagirdar ample warning that he was courting violation. Moreover, this is far from the more troubling case of an ill-defined malum prohibitum violation; given the lack of consent, Jahagirdar had to know that his conduct was criminal. Sabetti, 16 F.3d at 18.
The only close circuit precedent called to our attention expressly rejects Jahagirdar’s contention that “genital opening” refers only to the “vaginal orifice.” United States v. Norman T., 129 F.3d 1099, 1104 (10th Cir.1997), cert. denied 523 U.S. 1031, 118 S.Ct. 1322, 140 L.Ed.2d 485 (1998) (“[The defendant] reads [‘genital opening’] to require vaginal penetration, but that is simply not the requirement found in the statute.”). Instead, Norman T. holds that “penetration deep enough to cause injury to the labia minora is sufficient to violate” the statute. M
In our case, the district court’s instruction seemingly required that penetration be at least within the labia minora. This was an understandably conservative approach not objected to by the government, which had the necessary evidence. But Norman T. did not require this limitation—it held only that penetration of the labia minora was suffi dent to violate the statute. For the sake of future litigation, we hold explicitly that penetration of the labia majora is sufficient for conviction.
Turning to a different subject, Jahagirdar argues that the trial court erred in admitting testimony concerning statements made by D.S. during her interview with Trooper Hogaboom. At trial, D.S. was permitted to testify — over defense counsel’s hearsay objection — that she had told Hogaboom that Jahagirdar’s “hand was inside the vagina.” Hogaboom was permitted to testify — again, over defense counsel’s objection — that he had asked D.S. “if there was penetration, and she stated yes,” that she told him that Jahagirdar’s “hand penetrated her vagina,” and that, on this basis, he had recommended a charge of rape in his report.
The court admitted D.S.’s out-of-court statements under two theories — as prior consistent statements to rebut a charge of recent fabrication, Fed.R.Evid. 801(d)(1)(B), and as excited utterances, Fed.R.Evid. 803(2). Both are arguably close calls; we think the former a stronger ground than the latter and sufficient to support admission of the evidence.
The excited utterance ruling is not without some foundation. D.S. and others offered detailed testimony that D.S. remained upset for the duration of the flight and through her interview with the trooper, which occurred 90 to 120 minutes after the incident. Although “[t]he time lapse in most excited utterance cases is usually a few seconds, or a few minutes,” United States v. Taverns, 380 F.3d 532, 537 (1st Cir.2004) (citations omitted), there are exceptions stretching into hours.
But these cases involve facts arguably more extreme than those in the present case — including continuing physical pain after beatings or shootings, Webb v. Lane, 922 F.2d 390, 393 (7th Cir.1991); United States v. Scarpa, 913 F.2d 993, 1017 (2d Cir.1990), involve continued or renewed insecurity, United States v. Cruz, 156 F.3d 22, 30 (1st Cir.1998), cert. denied, 526 U.S. 1124, 119 S.Ct. 1781, 143 L.Ed.2d 809 (1999); Scarpa, 913 F.2d at 1017, or involve young children who were sexually abused, Morgan v. Foretich, 846 F.2d 941 (4th Cir.1988); Gross v. Greer, 773 F.2d 116 (7th Cir.1985). Having noted our doubts, we need not resolve them, given Rule 801(d)(1)(B).
Rule 801(d)(1)(B) permits the admission of a prior statement by a witness when (1) the declarant testifies at trial and is subject to cross-examination; (2) the prior statement is consistent with the declarant’s trial testimony; and (3) the prior statement is offered “to rebut an express or implied charge against the declarant of recent fabrication or improper influence or motive.” Fed.R.Evid. 801(d)(1)(B) (emphasis added). The “prior statement” must be made “before the charged recent fabrication or improper influence or motive.” Tome v. United States, 513 U.S. 150, 167, 115 S.Ct. 696, 130 L.Ed.2d 574 (1995) (emphasis added).
Jahagirdar says that the prior statements to the trooper were not consistent with D.S.’s in-court testimony. In court, D.S. testified that Jahagirdar touched her labia minora; but Hogaboom was permitted to testify that D.S. told him that Jahagirdar’s hand “penetrated her vagina.” The inconsistency is probably superficial (see note 5, above), and anyhow both statements are consistent in including pen etration of the labia minora — which was the central point of D.S.’s testimony.
Jahagirdar also says that he never charged fabrication, but the cross examination of D.S. plainly implies fabrication. One example will do:
Q: You did in fact consult with a man named Jeffrey Newman, is that correct?
A: Yes.
Q: And Mr. Newman contacted lawyers on your behalf who represented Mr. Jahagirdar, saying that he had been retained by you, is that correct? A: Yes.
Q: And he also contacted lawyers who represented Mr. Jahagirdar, asking them if they would settle a claim against him?
A: Yes.
Jahagirdar’s best objection is that D.S.’s statements to the trooper did not predate her motive to fabricate, as Tome (and the “recent” fabrication language of the rule) require. Such a motive could have existed from the time of the assault; and the exception would not apply if D.S. was equally conscious, or perhaps just significantly conscious, of the possibility of profit both before and after her statements to the trooper.
In admitting the testimony, the judge implicitly ruled that the alleged motive to fabricate arose or became substantial after D.S.’s statements to the trooper rather than before. To the extent that this ruling involved finding of facts, we review for clear error; to the extent that it reflects a judgment call about the application of the rule to the facts, we review for abuse of discretion. United States v. Young, 105 F.3d 1, 8 (1st Cir.1997). In either case, we affirm. There is no indication that D.S. had a civil suit in mind when interviewed by the trooper not long after the incident itself. Nor, if she had such a suit in mind, would she likely have failed — as Jahagirdar brought out for his own purposes — -to mention penetration to the nurse and doctor who examined her.
Even if the trial judge had erred in admitting D.S.’s out-of-court statements, any error would likely have been harmless. United States v. Piper, 298 F.3d 47, 56 (1st Cir.2002). This is so partly, but not exclusively, because the direct evidence against Jahagirdar was quite strong, comprising D.S.’s unqualified court testimony bolstered by forensic DNA evidence and the independent testimony of the flight attendants and secret service agents that she was visibly upset at the time.
What is equally important is the improbability of Jahagirdar’s own testimony. See United States v. Jimenez-Perez, 869 F.2d 9, 11 (1st Cir.1989). Believing Jahagirdar depended upon believing that D.S., a relatively young woman who said she was thoroughly scared of flying and had taken a sedative prior to boarding (thus her nap), had invited a sexual encounter in the open cabin of the aircraft. It is not surprising that the jury deemed Jahagirdar’s story not to be credible — as did the judge in imposing his own perjury enhancement at sentencing.
Finally, Jahagirdar makes two objections to his sentence of 87 months. This is the bottom end of the applicable guideline range, given the base offense level of 27 plus a two-level perjury enhancement. U.S.S.G. §§ 2A3.1, 3C1.1 (2001). The first objection is that the district court used the term “presumptive” (“presumptively reasonable” and “presumptively appropriate”) in referring to the guideline range; the second is that, in Jahagirdar’s view, the sentence was unreasonable under the post -Booker advisory guideline scheme.
Unlike many other circuits, we have avoided the term “presumptive” in describing the guideline range. United States v. Jiménez-Beltre, 440 F.3d 514, 518 (1st Cir. 2006) (en banc), petition for cert. filed, No. 06-5727 (U.S. Aug. 7, 2006). Instead, we specified in functional terms that the guidelines are a starting point, that they deserve substantial weight, and that the party seeking a variance — upward or downward- — needs to specify and establish the supporting circumstances. Id. The gap is perhaps not large but we thought our formulation more helpful to judges.
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5742464-15076 | GRUENDER, Circuit Judge.
The Equal Employment Opportunity Commission (“EEOC”) filed suit against Southwestern Bell Telephone, L.P., doing business as AT & T Southwest and SBC Communications (“AT & T”), for terminating the employment of Jose Gonzalez and Glenn Owen in violation of Title VII. AT & T filed a motion for summary judgment, which the district court denied. After the EEOC presented its evidence at trial, AT & T filed a motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(a), which the district court also denied. AT & T renewed the Rule 50(a) motion at the end of its presentation of evidence. The jury returned a verdict in favor of the EEOC. AT & T failed to renew its motion for judgment as a matter of law after the entry of judgment pursuant to Rule 50(b). AT & T appeals the denial of its motion for summary judgment and its Rule 50(a) motion for judgment as a matter of law. We conclude that we cannot consider the merits of AT & T’s appeal.
I. BACKGROUND
Gonzalez and Owen are Jehovah’s Witnesses who were employed by AT & T as customer service technicians (“CSTs”). CSTs install new telephone and high-speed internet lines and respond to customer complaints about telephone outages. Under the collective bargaining agreement, AT & T assigns vacation time by seniority and allows it only if the workload permits. While Jehovah’s Witnesses do not celebrate holidays, every year they hold three-day conventions throughout the country. Jehovah’s Witnesses are encouraged to attend the convention with their congregations, but no one takes attendance and no doctrine requires attendance.
After the CSTs signed up for vacation time for the 2005 calendar year, Gonzalez and Owen learned that their convention would be held Friday, July 15, through Sunday, July 17. Their supervisor allowed them to switch workdays with other CSTs so that they could both attend the convention on Saturday, July 16, but both were still scheduled to work on Friday, July 15. After many discussions, their supervisor continued to refuse to allow Gonzalez and Owen to take a vacation day on July 15 and ultimately issued a “work directive” ordering them to report to work on July 15. Gonzalez and Owen failed to report to work on July 15 because they were attending the conference, and AT & T ultimately fired them for “misconduct; job abandonment; insubordination; and failure to follow a work directive.”
Gonzalez and Owen filed charges of discrimination with the EEOC alleging that AT & T terminated their employment in violation of 42 U.S.C. § 2000e-2(a), which prohibits an employer from “dischargfing] any individual ... because of such individual’s ... religion.” The EEOC investigated the charges and found probable cause that AT & T failed to reasonably accommodate Gonzalez and Owen’s religious beliefs. The EEOC then filed this suit on behalf of Gonzalez and Owen, claiming that AT & T engaged in unlawful employment practices by denying them a reasonable accommodation of them sincerely held religious beliefs and terminating their employment because of their religious beliefs. The EEOC sought a permanent injunction enjoining AT & T from violating Title VII, as well as reinstatement, back pay, front pay and compensatory damages for Gonzalez and Owen.
AT & T moved for summary judgment, arguing that, as a matter of law, Gonzalez and Owen’s absence from work on July 15 caused AT & T an undue hardship, and, therefore, allowing them to take a vacation day was not a reasonable accommodation. Because Gonzalez and Owen were not at work, AT & T had to “close the clock,” or stop scheduling maintenance and repairs for the same day, at 10:00 a.m., long before the preferred 2:00 p.m. closing time, and it also had to pay extra overtime to the employees working that day. The district court denied AT & T’s motion for summary judgment, declaring that AT & T “failed to show that there is no genuine issue of material fact as to whether accommodating Owen’s and Gonzalez’s religious beliefs would have caused it to suffer more than a de minimis hardship.” The case proceeded to trial.
At the close of the EEOC’s evidence, AT & T moved for judgment as a matter of law under Rule 50(a), claiming that it was entitled to judgment in its favor on the issue of undue hardship and relying on the same argument that it made in its motion for summary judgment. The district court rejected AT & T’s argument, concluding that it had “already ruled on that on summary judgment, and [it was] going to stick with the ruling [it] made on the summary judgment.” In the alternative, AT & T argued that no reasonable jury could conclude that Gonzalez and Owen mitigated their damages. The district court also rejected this argument. Finally, AT & T argued that Gonzalez and Owen did not have a sincerely held religious belief that required attendance at the conference on July 15. The district court rejected that argument as well and denied AT & T’s Rule 50(a) motion. At the end of AT & T’s presentation of evidence, before the case went to the jury, AT & T renewed its motion for judgment as a matter of law, saying “I would assume since we recently discussed those, the Court doesn’t want to hear me reiterate those [arguments].” The district court denied AT & T’s motion saying:
I don’t want to hear any more argument on it. We did discuss it recently and I remember very vividly all of your arguments, and, for the most part, they’re things that we studied fairly recently in the motion for summary judgment. So for my purposes, I don’t need them, and I don’t think you need to do that to preserve your record. I think it’s as well preserved as it can be. And I’m denying your motion again.
The jury found in favor of the EEOC, awarding Gonzalez $396,000 and Owen $390,000 in damages based on their lost wages, benefits and compensatory damages. The district court then ordered AT & T to reinstate Gonzalez and Owen and awarded them front pay until the date of reinstatement. AT & T failed to renew its motion for judgment as a matter of law under Rule 50(b) within ten days of the entry of judgment.
AT & T now appeals the denials of its motion for summary judgment and its Rule 50(a) motion for judgment as a matter of law. AT & T argues that, as a matter of law, Gonzalez and Owen did not hold a sincere religious belief requiring attendance at the conference on July 15-17, that the award of back pay and front pay should be reversed based on Gonzalez and Owen’s failure to mitigate their damages, and that the accommodation of allowing Gonzalez and Owen to take a vacation day constituted an undue burden. The EEOC, however, argues that we cannot consider AT & T’s arguments on appeal because AT & T failed to renew its motion for judgment as a matter of law after the entry of judgment pursuant to Rule 50(b).
II. DISCUSSION
AT & T first appeals the district court’s denial of its motion for summary judgment. We will not review a district court’s denial of a motion for summary judgment after a trial on the merits. See Eaddy v. Yancey, 317 F.3d 914, 916 (8th Cir.2003) (“Even a cursory review of precedent in this Circuit reveals that we do not review a denial of a summary judgment motion after a full trial on the merits.”); see also Metro. Life Ins. Co. v. Golden Triangle, 121 F.3d 351, 354 (8th Cir.1997) (“[W]e are unable to review the denied summary judgment motion because Met Life had a full and fair opportunity to litigate its position before a jury.”). Therefore, because the parties had a full trial on the merits, we will not review the district court’s decision to deny AT & T’s motion for summary judgment.
AT & T next appeals the denials of its motion for judgment as a matter or law made at the close of the EEOC’s case-in-chief and renewed prior to submitting the case to the jury. Rule 50(a)(1) states:
[i]f a party has been fully heard on an issue during a jury trial and the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue, the court may: (A) resolve the issue against the party; and (B) grant a motion for judgment as a matter of law against the party on a claim or defense that, under the controlling law, can be maintained or defeated only with a favorable finding on that issue.
According to Rule 50(b), if the district court does not grant the motion for judgment as a matter of law under Rule 50(a):
the court is considered to have submitted the action to the jury subject to the court’s later deciding the legal questions raised by the motion. No later than 10 days after the entry of judgment ... the movant may file a renewed motion for judgment as a matter of law....
It is undisputed that AT & T never filed a renewed motion for judgment as a matter of law after the entry of judgment pursuant to Rule 50(b). The Supreme Court has held that when a party fails to file a motion under Rule 50(b), “there [is] no basis for review of [the party’s] sufficiency of the evidence challenge in the Court of Appeals.” Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 407, 126 S.Ct. 980, 163 L.Ed.2d 974 (2006).
In Unitherm, Unitherm filed suit against Swift-Eekrich, doing business as ConAgra, regarding a ConAgra patent. Id. at 397, 126 S.Ct. 980. Before the case was submitted to the jury, ConAgra filed a Rule 50(a) motion, arguing the evidence was insufficient, which the district court denied. Id. at 398, 126 S.Ct. 980. The jury returned a verdict in favor of Unit-herm, and ConAgra failed to renew its motion for judgment as a matter of law under Rule 50(b) after the entry of judgment. Id. On appeal, ConAgra argued that there was insufficient evidence to sustain the jury’s verdict. Id. The Supreme Court concluded that because ConAgra failed to file a Rule 50(b) motion, “there was no basis for review of [the] sufficiency of the evidence challenge in the Court of Appeals.” Id. at 407,126 S.Ct. 980.
The procedural posture of Unit-herm is virtually identical to that presented here. However, AT & T emphasizes that Unitherm only precludes our review of sufficiency of the evidence challenges. On appeal, AT & T raises the same three arguments for judgment as a matter of law that it raised to the district court in its Rule 50(a) motions. Initially, we note that Rule 50(a) allows a district court to grant a motion for judgment as a matter of law only when “the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.” Fed.R.Civ.P. 50(a) (emphasis added). We conclude that each of the arguments made in AT & T’s Rule 50(a) motion is a sufficiency of the evidence argument and that Unitherm precludes our review of all three.
At oral argument, AT & T conceded that its argument that Gonzalez and Owen did not hold a sincere religious belief requiring their attendance at the conference amounted to a challenge to the sufficiency of the evidence. We agree and conclude that Unitherm applies and precludes us from reviewing this argument.
AT & T next argues that it should be granted judgment as a matter of law on the award of back pay and front pay to Gonzalez and Owen because they failed to mitigate their damages. However, AT & T bases its argument solely on the lack of evidentiary support for the EEOC’s claim that Gonzalez and Owen mitigated their damages. Once again, we conclude that this argument, raised in its Rule 50(a) motion but not renewed under Rule 50(b), is a challenge to the sufficiency of the evidence, that Unitherm applies, and that we cannot review it.
In its third argument, AT & T claims that the district court should have granted judgment as a matter of law on the issue of undue hardship because “the jury’s verdict was against the clear and undisputed evidence presented at trial.” In its motion for summary judgment, its argument before the district court on its Rule 50(a) motion, and its brief on appeal, AT & T argued that the evidence uniformly supported its claim that the requested accommodation created an undue hardship. AT & T asks us to review the sufficiency of the evidence and decide that it is entitled to judgment as a matter of law on the reasonable accommodation issue. Because this argument is also a sufficiency of the evidence argument, we conclude that Unit-herm again precludes our review.
In its reply brief, AT & T also argues that “in a religious discrimination case, an employer is entitled to a complete affirmative defense when it meets its burden of proving that a requested accommodation would have resulted in an undue hardship” and that “Unitherm and its progeny are distinguishable ... as those cases address challenges to the sufficiency of the plaintiffs proof in support of a verdict in the plaintiffs favor.” In other words, AT & T argues that Unitherm does not apply to a motion for judgment as a matter of law based on an affirmative defense. AT & T cites no authority to support this proposition, and we have found none. To the contrary, Rule 50(a) explicitly states that the district court may grant judgment as a matter of law “on a claim or defense.” Fed.R.Civ.P. 50(a)(1)(B) (emphasis added). Thus, Rule 50(a) allows a district court to grant judgment as a matter of law on both claims and defenses, see, e.g., Arabian Agric. Servs. Co. v. Chief Indus., Inc., 309 F.3d 479, 483 (8th Cir.2002) (affirming the district court’s grant of judgment as a matter of law under Rule 50(a) on an affirmative defense), and “a Rule 50(b) motion is a renewal of a prior Rule 50(a) motion,” Hinz v. Neuroscience, Inc., 538 F.3d 979, 983 (8th Cir.2008). Moreover, filing a Rule 50(b) motion is a prerequisite for appealing the denial of a Rule 50(a) motion because it allows the district court, which has “first-hand knowledge of witnesses, testimony, and issues,” an opportunity after the verdict to review the legal sufficiency of the evidence. See Unitherm, 546 U.S. at 401 n. 3, 126 S.Ct. 980. This reasoning applies with equal force to both claims and defenses that challenge the sufficiency of the evidence. Accordingly, we conclude that Unitherm’& requirement of a Rule 50(b) motion applies to motions for judgment as a matter of law based on the sufficiency of the evidence with regard to an affirmative defense.
Finally, AT & T argues that it was not required to file a Rule 50(b) motion after the entry of judgment because when it renewed its Rule 50(a) motion at the close of the evidence the district court stated that it did not want to hear any more argument and that the issue was preserved. However, the district court did not direct AT & T not to file a Rule 50(b) motion after the entry of judgment. Instead, we read the court’s direction to suggest that it was unnecessary for AT & T to repeat its arguments made in support of its motion for summary judgment and its initial motion for judgment as a matter of law made at the close of the EEOC’s case because the arguments were sufficiently preserved to allow AT & T to file a Rule 50(b) motion after the entry of judgment.
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2251140-18599 | ENOCH, Senior Circuit Judge.
Defendant-appellant Shelton Peterson also known as Shelby Johnson and one Lenelve Warren Whitelaw were indicted on a charge of violation, in Count I, of Title 26 U.S.C. § 4705(a), (unlawful sale of narcotics), and, in Count II, of Title 21 U.S.C. § 174 (receiving, concealing, buying, selling; facilitating transportation, concealment and sale of narcotics, etc.). Judgment was entered on a jury verdict of guilty, and defendant was sentenced to serve a term of 5 years, to run concurrently with a prior sentence of-4 to 8 years imposed by the Circuit Court of Cook County, Illinois.
Defendant appealed from denial of his motions for judgment of acquittal and for a new and separate trial. Defendant presents the following issues for review:
“1. Did the trial court err in its refusal to instruct the jury as to the law applicable to missing witnesses where the government did not call an informer who could have resolved the issue of the identity of the defendant?
“2. Did the court err in admitting in evidence the post-arrest confession of a co-defendant?
“3. Should defendant’s motion for a judgment of acquittal on Count I have been granted because the government failed to prove the lack of a written order form?
“4. Did the court’s instructions that possession is sufficient to authorize conviction unless defendant explains his possession to the satisfaction of the jury violate defendant’s Fifth Amendment right not to be called as a witness against himself?
“5. Did the court’s instruction that if possession of heroin is shown the government need not prove importation of knowledge thereof invade the province of the jury and reduce the offense to one of mere possession?”
At the trial Federal Bureau of Narcotics Agent Carroll Gibson testified that he was with an informant, Nathaniel Farrell, whom he had searched to cheek whether he had money or narcotics on his person, on the evening of September 22, 1965, when they spoke to a number of persons at different locations and when Mr. Farrell made a telephone call in a pool room on Garfield Boulevard, (5500 South in Chicago) after which Agent Gibson gave him $125.00 of government-advanced funds, and both men stepped outside.
After a short time they were joined by the defendant whom Agent Gibson knew as Shelby Johnson.
Agent Gibson on cross examination testified that he had seen the defendant prior to September 22, 1965, sometime that same year, but not since September 22, 1965, until the time of the trial. Although he had never been introduced to defendant as “Shelby Johnson” or heard him say “I am Shelby Johnson,” he knew of his own personal knowledge that defendant used that name. He also described defendant at the time of the offense as weighing about 170 pounds, but considered him to weigh only 160 or 165 pounds at the time of the trial in January 1968.
Agent Gibson testified that he overheard Mr. Farrell ask defendant if he could get some “jive,” which Agent Gibson said was slang for heroin. Defendant said he could, and Mr. Farrell gave the $125.00 to defendant who told him to wait at 55th Place parallel to an empty lot, “off of Indiana.” About 20 minutes after they had driven there Agent Gibson and Mr. Farrell were joined by defendant and his co-defendant, known to Agent Gibson as “Tootie.” Mr. Farrell got out of the car. Agent Gibson heard his request for the “jive,” defendant’s reply that he would get it, and defendant’s statement to the co-defendant that defendant had the money. Defendant then said to wait at 55th (Garfield Boulevard) and Indiana, and Agent Gibson drove there. Federal Bureau of Narcotics Agent Robert A. Janet testified that in conducting surveillance he drove by and saw the meeting at Agent Gibson’s car on 55th Place. He identified the two defendants as the two men talking to Mr. Farrell. When he drove by again the car had gone. He saw it again in its new location and he parked across from the car of Federal Bureau of Narcotics Agent Charles E. Hill at the Southeast corner of Indiana and Garfield from where he could watch Agent Gibson’s car.
Agent Hill testified that he was also observing Agent Gibson’s car at 55th Place and he saw both defendants approach it and engage in conversation with Mr. Farrell. He observed the two defendants walking back toward Indiana, north on Indiana, west on Garfield Boulevard and out of view. Agent Hill parked on the Southwest corner of Garfield and Indiana. He saw Agent Gibson’s car on Indiana Avenue, north of Garfield Boulevard. He also had radio communication with Agent Janet. Meanwhile Agent Gibson had parked his car near the northeast corner of 55th (Garfield Boulevard) and Indiana, facing north. He saw the co-defendant come from a gangway between buildings on the west side of Indiana and come to the car window where he engaged in a conversation not admitted into evidence as to this defendant and walk north on Indiana Avenue. The co-defendant was quoted as saying that everything was “okay,” that defendant had the “jive” and would be coming along shortly.
Over objection, Agent Janet testified to a post-arrest conversation with the co-defendant (admitted solely as to the co-defendant) wherein the co-defendant, after being told that Mr. Farrell was an informant and that the sale had been observed by agents, said that he did not sell to the agents and “well, I guess you got me. I guess I got a case on me.” Actually he had spoken in the plural, using “we” and “us” but pursuant to instruction at a side bar conference, Agent Janet limited the statement in accordance with the ruling on its limited admissibility. The co-defendant denied making that statement.
About 5 minutes later defendant came out of the same gangway and up to the car. Mr. Farrell stepped out, and Agent Gibson saw him receive a small tinfoil package from defendant which was promptly given to Agent Gibson. When Mr. Farrell got back into the car, Agent Gibson drove to Washington Park where he met Agents Janet and Hill, turned over the package to Agent Hill and again searched Mr. Farrell for money and narcotics.
Agent Janet saw both defendants come to the car. He saw Mr. Farrell talking to this defendant, return to the car, and then drive off to Washington Park, as he followed Agent Gibson’s car. Defendant makes a point of the fact that Agent Janet had not seen defendant prior to September 22, 1965 when he observed the man at Agent Gibson’s car while driving by in conducting his surveillance. Agent Hill who was equipped with binoculars testified that about 7:30 p. m. he observed the co-defendant, and then, a few minutes later, the defendant, come to the car and each converse with Mr. Farrell. When the latter returned to the car and drove off, Agent Hill followed to Washington Park, where Agent Gibson gave him an aluminum foil package containing white powder. He observed Agent Gibson search Mr. Farrell and noted he had neither money nor narcotics. A Marquis reagent field test showed that the white powder contained an opium derivative. Agent Gibson observed the field test and its positive result. The following day the substance was turned over to the United States Chemist in Chicago. It was stipulated that Ferris Van Sickle employed as a chemist by the United States Treasury Department, Alcohol and Tobacco Tax Unit, at Chicago, would testify if called that his tests showed that the substance contained heroin.
The co-defendant testified that he was a heroin addict. Although he knew the defendant, as “Shelby” and was in his company in the vicinity and at the time of the incident described, he denied taking any part in the sale charged or having any conversations with Agent Gibson. On cross examination he testified that he met the defendant while on the way to a restaurant with a friend, that he sent her on ahead while he walked down 56th Street with defendant, that it was dark, that two men in a car called defendant over, that he waited but did not hear the conversation and that when he returned alone the men called him “Tootie” which was his nickname, asked him where “Shelby” had gone, to which he replied he did not know, continuing on his way to the restaurant; that he had come from the friend’s home, 57th and Normal, by bus, getting off at 55th (Garfield Boulevard) and Indiana, that he walked east on Garfield toward the lake turning to go to 55th Place (y2 block south of Garfield) when he saw defendant with whom he walked to 56th and Prairie, returning alone, but that he himself never approached the ear at which defendant had stopped mid-way to the corner. He testified that he was arrested March 31, 1966, and all his clothing taken away from him to be searched, that the arresting officer, stipulated to be Federal Narcotic Agent Frank J. Boyles, came in wearing fur lined leather gloves, said “You’re a boxer,” punched him several times (although at one point in his testimony he said the agent did not hurt him) but found nothing on the co-defendant and brought his clothing back to him. Agent Boyles testified that he arrested the co-defendant, removed and took away his clothing for search, and did not see him again for several months. He denied striking him at any time, said he did not know whether the co-defendant was or had ever been a boxer, denied ever giving him any money to purchase drugs to build a case and stated that no force was necessary in making the arrest.
The co-defendant testified that he had been convicted of committing felonies in the past. He said that Agent Janet told him without details that he had three cases against the co-defendant, including taking money under false pretences (which he understood to refer to taking money from a “stool pigeon” and failing to deliver narcotics) as well as a sale and that the co-defendant could help himself by helping the agents. The co-defendant said that in October or November 1965 he had indirectly received money from Agent Boyles with which to get heroin but had not done so. The co-defendant testified on cross-examination that he knew of Federal Bureau of Narcotic Agent Carl Jackson prior to the time of his post-arrest interview by Agent Jackson, but he denied having made a sale of narcotics to him on October 28, 1965, and denied all the details of this alleged transaction. Agent Jackson testified that he was introduced to the co-defendant, in an undercover capacity, on October 28, 1965, by one Paul Young, an informant. Agent Jackson did not know the whereabouts of Paul Young who had been the informant of Agent Robert J. DeFours who was in Marseilles, France, at the time of the trial. Over objection Agent Jackson was allowed to testify, solely for purposes of impeachment, to the details of a sale of narcotics by the co-defendant. He testified that he next met the co-defendant in the office of the Federal Bureau of Narcotics on March 21, 1966, in a room to which he was led by Agent Janet who then returned to the co-defendant the clothing which had previously been removed for search. When introduced, the co-defendant had stated he already knew Agent Jackson. There was no complaint of any physical abuse by Agent Boyles. In the hearing on motion to suppress, the co-defendant indicated that he had made no complaint of any physical abuse by Agent Boyles. In that hearing the co-defendant indicated that he had made no complaint of physical abuse when he appeared before the U.S. Commissioner later that afternoon, in letters he later wrote the United States Attorney and Agent Jackson or to the United States Marshal when in his custody the day of arrest. The Trial Judge in the course of the hearing on motion to suppress the co-defendant’s statement (during which most of the above detail concerning the co-defendant’s statement was elicited) implied that he did not credit the co-defendant’s testimony respecting alleged physical abuse. Agent Jackson testified that the co-defendant did deny making any sales to an agent but had said “I sold to Nathaniel Farrell.”
The defendant denied that he had ever been known as “Shelby Johnson;” denied knowing Nathaniel Farrell; stated he did not recall where he was September 22, 1965, but could have been on 55th Street where he spent a lot of time, passing almost daily in the ordinary course of business. He testified that he was using narcotics sometime in 1964 through to 1966 but that he had never sold narcotics to anyone. He testified to two past felony convictions for robbery on pleas of guilty. He denied knowing by name or sight any federal narcotics agents. He testified on cross-examination that his addiction during the months of August, September and October 1965 cost him about $15 a day; that he was living with his mother, working part time earning about $40 per week, drawing unemployment compensation of about the same amount.
Defendant’s view is that the central point at the trial was the failure to produce Nathaniel Farrell who alone, defendant asserts, could testify with authority as to the true identity of “Shelby Johnson.”
After the first witness (Agent Gibson) had been examined, prior to cross-examination, in a side bar conference requested by counsel for the co-defendant, the latter asked whether the government was going to call the informant. Government counsel stated that he did not intend to call the informant, whose whereabouts he did not know, that the government had looked for him in vain, that it was believed a warrant of arrest had been issued for the informant and that he was rumored to be in Wisconsin.
Subsequently when Agent Hill testified, he stated that (as Agent Gibson had previously said) Mr. Farrell was “his” informant. He was asked about prior sales and prosecution concerning the informant, but neither he nor Agent Janet was asked about the present whereabouts of the informant. Agent Gibson testified each agent in the Bureau had his “own” informants and that Mr. Farrell was Agent Hill’s informant.
Counsel for defendant tendered several instructions, which were rejected, on the failure to produce the informant, arguing that at least the standard instruction from the LaBuy, Manual on Jury Instructions in Federal Criminal Cases, West Publishing Co., 1965, § 6.17 “Missing Witness,” should have been given:
If it is peculiarly within the power of either the prosecution or the defense to produce a witness who could give material testimony on an issue in the case, failure to call that witness creates the presumption that his testimony would be unfavorable to such party. However, no such presumption should be drawn by the jury where the witness is equally available to both parties, or where the witness’s testimony would be merely cumulative.
However on the record before us it does not appear it was peculiarly in the power of the government to produce Nathaniel Farrell. It was apparent that the government agents did not know his whereabouts and that efforts to locate him had failed.
The cases on which defendant relies do not seem to help us. Graves v. United States, 1893, 150 U.S. 118, 14 S.Ct. 40, 37 L.Ed. 1021, concerned error in permitting the prosecutor in closing argument, over objection, to comment on the absence of the defendant’s wife which prevented government witnesses from seeing and identifying her as the woman said to have been with the defendant in Indian country, camping near the scene of the murder with which the defendant was charged. Mr. Justice Brown, speaking for the majority, did say that had the wife been a competent witness, comments on her absence would have been less objectionable, and went on to quote the rule embodied in the above quoted instruction with which no issue as to accuracy is taken. The question is whether the record justifies its use as part of the charge to the jury here.
In McClanahan v. United States, 5 Cir., 1956, 230 F.2d 919, there was a charge of fraudulent procurement of home loan guaranties from the Veteran’s Administration. In argument to the jury, government counsel referred to defendant’s failure to call as a witness the attorney on whose advice he said he acted. The 5th Circuit held (p. 925) that although the attorney was physically available equally to both parties, he was or had been defendant’s attorney and that therefore he was not really as “available” to the prosecution as to the defense. The Court then said (p. 926):
It has been well said that “the availability of a witness is not to be determined from his mere physical presence at the trial or his accessibility for the service of a subpoena upon him. On the contrary, his availability may well depend, among other things, upon his relationship to one or the other of the parties, and the nature of the testimony that he might be expected to give in the light of his previous statements or declarations about the facts of the case”. Deaver v. St. Louis Public Service Co., Mo.App., 199 S.W.2d 83, 85.
The Court then went on to discuss waiver of the attorney-client privilege by the testimony of the defendant and concluded that the comment did not constitute error. On the basis of this case and a statement quoted in United States v. Jackson, 3 Cir., 1958, 257 F.2d 41, 44, from 1 Wigmore, Evidence § 288, 3rd Ed. 1940, Supp. 1957, indicating that the term “available” is not to be construed merely as accessibility for service of process, the defense tendered three instructions, as alternatives, construing “availability”, one of which read:
Equal availability is not to be determined by the mere physical accessibility of a particular witness to service of process, but by the testimony which he might ordinarily be expected to give, based upon his relationship to the prosecution and the defense and other attendant facts and circumstances.
Jackson involved an issue of entrapment. The Third Circuit held that the informant was an important part of the building up of the case and that it was error to sustain objection to any comment by defense counsel in summation to the jury on the fact that the infor mant was not called as a witness. The record did not disclose why he was not called. The Trial Judge had concluded he was equally available to both sides, having even been present in the courtroom for part of the trial.
None of these cases involved instructions; in each case the witness was physically available. In the case before us the testimony adduced at the trial indicated that the whereabouts of the informant was not known to the government witness of whom inquiry was made. Out of the presence of the jury, it was made clear to the defense that efforts to locate him had failed.
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11534302-19708 | MEMORANDUM AND ORDER
VanBEBBER, District Judge.
Plaintiff Michaela Watson brings this action against defendant Lucent Technologies, Inc., alleging racial discrimination, harassment, constructive discharge, and retaliation in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (“Title YII”), 42 U.S.C. § 1981 (“Section 1981”), and the Kansas Act Against Discrimination, K.S.A. § 44-1001 et seq. (“KAAD”). Plaintiff, who is African-American, contends that defendant discriminated against her by treating her differently from non-minority employees and harassing her with unwarranted disciplinary actions and racist comments, and retaliated against her for filing complaints of discrimination both within the corporation and with the Equal Employment Opportunity Commission (“EEOC”) and the Kansas Human Rights Commission (“KHRC”). The case is before the court on defendant’s motion for summary judgment (Doc. 52). For the reasons set forth below, the motion is granted. In accordance with the court’s decision on defendant’s motion for summary judgment and with the court’s conclusions of law as set forth in this order, the court denies plaintiffs motion to compel discovery (Doc. 51), and denies as moot defendant’s motions for protective order (Doc. 40) and to strike affidavits (Doc. 60).
I. Factual Background
The following facts are either uneontro-verted or are taken from depositions, affidavits, interrogatories, and other documents from the discovery record that were submitted in summary judgment papers, and viewed in a light most favorable to plaintiff. Immaterial facts and facts not properly supported by the record are omitted.
Plaintiff was employed by AT & T Corporation in 1988. Her business unit became a part of defendant’s business in 1995. That year, plaintiff began working in defendant’s Purchasing Group as a “Buying Associate,” stationed at the Merriam, Kansas facility.
Plaintiff worked at the Merriam facility with an individual who was not part of the Purchasing Group named Ed Cronin. Plaintiff testified in deposition that Cronin complained about her to her supervisors from 1996 until her resignation. She claims that Cronin treated non-minority employees more favorably than he treated plaintiff, by being more critical of plaintiff than of non-minority employees, by ignoring her or speaking with her supervisor instead of her, and by not inviting plaintiff to meetings that non-minority employees were invited to. She also claims that Cronin promoted non-minority employees without testing while requiring testing for African-American employees.
In June 1996, one of plaintiffs supervisors informed her that he had received complaints concerning plaintiffs interaction with others at the Merriam facility. In July 1996, plaintiff wrote a memoran- • dum to her supervisors memorializing a meeting in which one of her supervisors, Scott Searls, promised to recommend her for a promotion. Searls sent a copy of the memorandum to another of plaintiffs supervisors and noted that “it continues to be disappointing that M. Watson believes this appropriate. Please document ‘all’ conversations with her including her behavior and our (you, me & Stan) continued insistence that her attitude toward other members of the Merriam team improve and her acknowledgment that she in fact agrees.” Plaintiff was promoted at the end of that month.
Beginning in March 1997, plaintiff reported to Ronda London, whose office was in Denver, Colorado, and her second-level supervisor was M.O. Brinkley, whose office was in Atlanta, Georgia. During March and April 1997, London and Brinkley received complaints from nine Lucent employees regarding plaintiffs negative interaction with those employees. The employees complained that plaintiff was abrasive, rude, or unhelpful, that they felt uncomfortable asking plaintiff questions, and that plaintiff was difficult to deal with.
On April 17, 1997, London and Brinkley met with plaintiff at the Merriam facility. Plaintiff testified in deposition that prior to the meeting, plaintiff asked Brinkley, “Do you take your coffee black or with cream?” and he responded, “Black, because black is beautiful.” During the meeting, London and Brinkley discussed their expectations with her, informed her that several employees had difficulty dealing with her, and told her to improve her relations with her co-workers. Plaintiff told London and Brinkley that she thought the Merriam facility was known for its racial issues, and “that that facility was forced to take minorities in the ’60’s.” Plaintiff testified in deposition that Brinkley responded, “That could possibly be an issue here.” Plaintiff also testified in deposition that after the meeting, Brinkley came to her cubicle and “started a discussion about his son” in which he inferred that black athletes took his son’s athletic scholarship. He also asked plaintiff if she knew “why black people were black and white people were white.” Plaintiff replied, “The only reason why I know is because of the Bible,” and he said, “No, it’s because black people live closer to the equator.” The meeting and subsequent conversation greatly upset plaintiff.
On May 8, 1997, in the middle of a conversation with London, plaintiff said “whatever” and walked away. One week later, on May 15, 1997, plaintiff had a telephone conversation with Brinkley in which he criticized her performance and upbraided her for sending what he interpreted as a disrespectful e-mail to London. According to plaintiffs notes, the conversation was quite contentious. At one point, plaintiff told Brinkley that “the conversation [was] over,” and that she was tiring of his and London’s harassment. Brinkley responded that if she was experiencing harassment she should hire an attorney. When plaintiff replied that she already had an attorney, Brinkley said, “ ‘Well if you’ve contacted an attorney then the conversation is over.’” The next day, London forwarded plaintiff two surveys completed by clients of the Purchasing Group, one of which gave plaintiff unfavorable ratings on “flexibility,” “ease of doing business with [the Purchasing Group],” “awareness of [client’s] concerns,” and “value added of [Purchasing Group] service”; the other survey reported “some friction” between the client and the group.
Around the beginning of June 1997, plaintiff filed an internal discrimination complaint with defendant as well as the EEOC and the KHRC.
On June 12, 1997, London met with plaintiff and informed her that she considered plaintiffs performance over the previous month to be negative and insubordinate, and issued her an official warning in which London cautioned that further incidents of negative or insubordinate action would result in “disciplinary action including but not limited to termination.” During the meeting, London also informed plaintiff that she had received complaints from other employees at the Merriam facility that plaintiff had left early on several occasions. Plaintiff disputed the accuracy of the information and requested that she be given an opportunity to respond. When plaintiff asked to see a document to which London was referring during the meeting, London refused on “advice of counsel.”
Shortly afterward, London requested that corporate security investigate plaintiffs attendance record. Defendant’s designated corporate representative, Barbara Ehlmann, testified in deposition that “corporate security certainly could be called upon” as one of several options for investigating employee absences. Apparently, the investigation revealed one erroneous time entry, and the result of the investigation was that London informed plaintiff in an e-mail message that she was required to adhere to standard business hours. Plaintiff replied to the message, “You still don’t get it. I hope you plan to pass this message along to everyone else.” Plaintiff also testified in deposition that London told other employees at the Merriam facility to monitor plaintiffs attendance and to report any discrepancies.
Plaintiff contends that these events caused her intolerable stress and forced her to resign from her employment with defendant, which she did on August 1, 1997.
After plaintiffs resignation, Brian Webster took over her job responsibilities. He was not promoted to the same level that plaintiff had achieved at the time of her resignation until after he had satisfied a “prove-in” period of nine months. Webster was promoted to plaintiffs level in April 1998.
II. Analysis
A. Defendant’s Motion for Summary Judgment
Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R.Civ.P. 56(c). The requirement of a “genuine” issue of fact means that the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Essentially, the 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.” Id. at 251-52, 106 S.Ct. 2505.
The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. This burden may be met by showing that there is a lack of evidence to support the nonmoving party’s case. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has properly supported its motion for summary judgment, the burden shifts to the nonmoving party to show that there is a genuine issue of material fact left for trial. See Anderson, 477 U.S. at 256, 106 S.Ct. 2505. “A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial.” Id. Therefore, the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. See id. The court must consider the record in the light most favorable to the nonmoving party. See Bee v. Greaves, 744 F.2d 1387, 1396 (10th Cir.1984).
1. Harassment
Plaintiff claims that she was subjected to a racially hostile work environment in violation of Title VII. “To constitute actionable harassment, the conduct must be ‘sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive work environment.’ ” Bolden v. PRC, Inc., 43 F.3d 545, 550-51 (10th Cir.1994) (quoting Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 67, 106 S.Ct. 2399, 91 L.Ed.2d 49 (1986) (further citation omitted)). For plaintiffs claims to survive summary judgment, her facts must support the inference of a racially hostile environment by demonstrating
that under the totality of the circumstances (1) the harassment was pervasive or severe enough to alter the terms, conditions, or privilege of employment, and (2) the harassment was racial or stemmed from racial animus. General harassment if not racial or sexual is not actionable. The plaintiff must show ‘more than a few isolated incidents of racial enmity.’ Instead of sporadic racial slurs, there must be a steady barrage of opprobrious racial comments.
Id. at 551 (quoting Meritor, 477 U.S. at 67, 106 S.Ct. 2399, and Hicks v. Gates Rubber Co., 833 F.2d 1406, 1412-13 (10th Cir.1987) (further citation omitted)). The court must also look at “the totality of the circumstances, including ‘the context in which the alleged incidents occurred’ ... because conduct which is not [racej-based may form a part of the context or environment in which the discriminatory conduct is alleged to have occurred.” O’Shea v. Yellow Tech. Servs., 185 F.3d 1093, 1096 (10th Cir.1999) (quoting Penry v. Federal Home Loan Bank of Topeka, 155 F.3d 1257, 1262 (10th Cir.1998) (further citation omitted)).
Plaintiff argues that, in addition to being subjected to Brinkley’s remarks, she “was subjected to baseless investigations and disciplinary proceedings, most of which sprang directly from Mr. Cronin and Mr. Brinkley, both of whom had demonstrated racial animus toward Ms. Watson,” and she was monitored by co-employees at London’s behest.
The only arguably racist remarks that plaintiff experienced during her entire tenure as an employee of defendant were those made by Brinkley on April 17, 1997. Viewing the facts in a light most favorable to plaintiff, a reasonable trier of fact could infer from those remarks that Brinkley’s behavior was motivated by racial animus.
Plaintiffs assertions about Cronin are more problematic. Plaintiff claims that Cronin exhibited racial animus by requiring that minority employees at the Merriam facility be tested before promotion while promoting similarly situated non-minority employees without testing. Plaintiff also claims that she was not invited to meetings even though other similarly situated non-minority employees were invited, and that Cronin treated her with hostility while treating non-minority employees cordially. Each of plaintiffs allegations about Cronin are so vague, conclusory, and bereft of particularity, however, that they are virtually useless to the court. Plaintiff does not specify how often such instances occurred, how they effected plaintiffs ability to perform her job, or which similarly situated non-minority employees were treated preferentially. Furthermore, plaintiff does not dispute London’s testimony in deposition that Cronin preferred to interact with a similarly situated African-American colleague of plaintiff rather than interact with plaintiff. The record indicates clearly that plaintiff and Cronin had problems interacting, but it does not indicate that such problems stemmed from any racial animus.
Plaintiffs argument that the disciplinary actions were without merit is undercut by uncontroverted evidence in the record that plaintiff displayed insubordination of the type to which a reasonable employer would respond with disciplinary action. Plaintiff does not controvert, for example, that in the weeks prior to the April 17, 1997 meeting, defendant received complaints about plaintiffs behavior from no less than nine employees at the Merriam facility; nor does plaintiff claim that the complaints were false or motivated by racial animus.
Even if the court were to conclude that the meetings, the attendance investigation, Brinkley’s remarks, and Cronin’s behavior were unfounded and that they were motivated by racial animus, the court concludes that these events were not so severe as to create a racially hostile work environment. The events did not prevent plaintiff from doing her job; nor did they create a work environment “permeated with ‘discriminatory intimidation, ridicule, and insult.’ ” Harris v. Forklift Systems, Inc., 510 U.S. 17, 21, 114 S.Ct. 367, 126 L.Ed.2d 295 (1993) (quoting Meritor Savings Bank, FSB v. Vinson, 477 U.S. 57, 65, 106 S.Ct. 2399, 91 L.Ed.2d 49 (1986)). Plaintiff testified in deposition that she resigned because she thought that defendant intended to terminate her, not because the environment was so permeated with racial hatred that she was unable to perform her job. The court grants summary judgment with respect to plaintiffs racial harassment claim.
2. Discrimination
Plaintiff argues that defendant violated Title VII, Section 1981, and the KAAD by unfairly disciplining her and by constructively discharging her when similarly situated non-minority employees were not disciplined or discharged. In order to establish a prima facie case, plaintiff must show that (1) she is a member of a racial minority, (2) she suffered an adverse employment action, and (3) similarly situated non-minority employees were treated differently. See Trujillo v. University of Colo. Health Sciences Ctr., 157 F.3d 1211, 1215 (10th Cir.1998) (citing McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973)). If plaintiff presents a prima facie case, defendant must provide evidence suggesting a legitimate, non-discriminatory reason for plaintiffs termination, and plaintiff must provide evidence suggesting that defendant’s reason is pre-textual. See id. Plaintiff has not established a prima facie case because she has demonstrated neither that she suffered an adverse employment action nor that similarly situated non-minority employees were treated differently.
The Tenth Circuit defines the phrase “adverse employment action” liberally, and examines each claim for adverse employment action individually. See Sanchez v. Denver Pub. Sch., 164 F.3d 527, 532 (10th Cir.1998). Although actions resulting in monetary losses, termination, and demotion clearly constitute adverse employment actions, “ ‘a mere inconvenience or an alteration of job responsibilities’ ” does not. Id. (quoting Crady v. Liberty Nat’l Bank & Trust Co., 993 F.2d 132, 136 (7th Cir.1993)). Rather, “conduct is an adverse employment action if it ‘constitutes a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.’ ” Id. (quoting Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 760, 118 S.Ct. 2257, 141 L.Ed.2d 633 (1998)). Before plaintiffs resignation, defendant had not reduced plaintiffs responsibilities, benefits, or privileges—only plaintiffs claim of constructive discharge rises to the level of an adverse employment action.
“Constructive discharge occurs when the employer by its illegal discriminatory acts has made working conditions so difficult that a reasonable person in the employee’s position would feel compelled to resign.... The conditions of employment must be objectively intolerable; the plaintiffs subjective views of the situation are irrelevant.” Id. Plaintiff may have subjectively felt that she had no choice but to resign. However, as the court discussed in its analysis of plaintiffs harassment claim, she has not presented evidence from which a reasonable trier of fact could conclude that, objectively, plaintiff had no choice but to resign due to illegal discriminatory actions by defendant.
Neither has plaintiff demonstrated that similarly situated employees were treated differently. Plaintiff claims that “other employees who were considered difficult to deal with were not disciplined, but instead were left alone,” but she does not name any employees, or even state whether or not they were non-minority employees. Plaintiff claims that Brian Webster was invited to meetings from which plaintiff was excluded, but plaintiff does not establish that he was similarly situated. Neither does she controvert defendant’s contention that, although Webster replaced plaintiff, he was not promoted to her position for nine months after she resigned. Finally, plaintiff claims that “employees who confronted their supervisors and walked away from conversations with them were not subject to discipline.” Plaintiff specifies only one such instance, however, which occurred several years earlier, at a different facility, and under different circumstances. In order to survive summary judgment, plaintiff must “set forth specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e). With respect to her disparate treatment discrimination claim, she has not done so. The court grants summary judgment with respect to plaintiffs discrimination claim.
8. Retaliation
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11237217-9044 | OPINION
DUGGAN, District Judge.
On July 28, 1999, Petitioner Gregory Dean Childers, a state prisoner presently on parole, filed a pro se petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254. Petitioner asserts that his trial and conviction in Oakland County Circuit Court following a previous military court-martial and conviction for the same conduct violated both the Due Process and Double Jeopardy Clauses of the United States Constitution. For the reasons stated below, the petition shall be denied.
Background
In April 1992, Petitioner, then a gunnery sergeant in the United States Marine Corps stationed at Camp Pendleton, California, was court-martialed for allegedly raping and sodomizing his minor daughter at various locations throughout the United States, including Michigan. Petitioner was charged with four counts of rape, 10 U.S.C. § 920, four counts of sodomy, 10 U.S.C. § 925, and two counts of indecent liberties, 10 U.S.C. § 934. The charges against Petitioner included charges stemming from conduct that allegedly occurred in Michigan sometime between May and September 1989, and in August 1990. Petitioner pled guilty to seven of the ten counts, including the rape and sodomy charges stemming from his alleged conduct in Michigan during August of 1990, and was sentenced to twenty-four months confinement. The rape and sodomy charges stemming from his alleged conduct in Michigan between May and September 1989, however, were apparently withdrawn.
In July 1993, Petitioner was extradited to Michigan where he was charged in Oakland County Circuit Court with four counts of first-degree criminal sexual conduct, MICH. COMP.' LAWS § 750.520, stemming from the same conduct upon which his military charges were based. Petitioner, reserving the right to appeal the issue of double jeopardy, pled nolo contendere to all four counts and received four sentences of two to twenty years to be served concurrent with his military sentence.
On appeal, the Michigan Court of Appeals affirmed Petitioner’s convictions stemming from his alleged conduct between May and September 1989. According to the court of appeals, Petitioner’s subsequent state court convictions for these counts did not subject Petitioner to double jeopardy because they were predicated upon acts for which Petitioner’s military charges had been withdrawn. The court of appeals, however, reversed Petitioner’s convictions stemming from his alleged conduct in August 1990 as duplica-tive of his prior military convictions in violation of Michigan’s constitutional bar against double jeopardy. People v. Childers, 218 Mich.App. 431, 554 N.W.2d 336 (1996). Subsequently, the Michigan Supreme Court reversed the court of appeals and reinstated all of Petitioner’s convictions, finding that Petitioner’s convictions did not violate the Double Jeopardy Clause of the Michigan constitution. People v. Childers, 459 Mich. 216, 223, 587 N.W.2d 17 (1998).
On habeas review, Petitioner asserts that his state prosecution and convictions (1) violated the United States Constitution’s prohibition against double jeopardy and (2) denied Petitioner due process, including the right to a fair and impartial trial.
Discussion
This matter is governed by the Antiter-rorism and Effective Death Penalty Act of 1996, Pub.L. No. 104-132, 110 Stat. 1214 (1996) (“AEDPA”). See Lindh v. Murphy, 521 U.S. 320, 117 S.Ct. 2059, 138 L.Ed.2d 481 (1997) (holding that the AEDPA applies to all habeas cases filed after the AEDPA’s effective date of April 24, 1996). As amended, 28 U.S.C. § 2254(d) provides:
An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that 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.
Recently, the United States Supreme Court summarized the proper standard of review under § 2254(d) as follows:
Under § 2254(d)(1), the writ may issue only if one of the following two conditions is satisfied — the state-court adjudication resulted in a decision that (1) “was contrary to ... clearly established Federal law, as determined by the Supreme Court of the United States,” or (2) “involved an unreasonable application of ... clearly established Federal law, as determined by the Supreme Court of the United States.” Under the “contrary to” clause, a federal habeas court may grant the writ if the state court arrives at a conclusion opposite to that reached by this Court on a question of law or if the state court decides a case differently than this Court has on a set of materially indistinguishable facts. Under the “unreasonable application” clause, a federal habeas court may grant the writ if the state court identifies the correct governing legal principle from this Court’s decisions but unreasonably applies that principle to the facts of the prisoner’s case.
Williams v. Taylor, 529 U.S. 362, 120 S.Ct. 1495,1523,146 L.Ed.2d 389 (2000).
Under the “unreasonable application” prong of § 2254(d), the Court must determine “whether the state court’s application of clearly established federal law was dbjectively unreasonable.” Id. at 1521 (emphasis added). “[A] federal habeas court may not issue the writ simply because that court concludes in its independent judgment that the relevant state-court decision applied clearly established federal law erroneously or incorrectly. Rather, that application must also be unreasonable.” Id. at 1521-22.
I. Double Jeopardy
Petitioner asserts that his convictions in the Oakland County Circuit Court violated the Double Jeopardy Clause of the United States Constitution. The Fifth Amendment provides that no person “shall be subject for the same offense to be twice put in jeopardy of life or limb.” U.S. CONST, amend. V. The United States Supreme Court has explained that the Double Jeopardy Clause of the Fifth Amendment protects against (1) a second prosecution for the same offense after acquittal, (2) a second prosecution for the same offense after conviction, and (3) multiple punishments for a single offense. North Carolina v. Pearce, 395 U.S. 711, 717, 89 S.Ct. 2072, 2076, 23 L.Ed.2d 656 (1969), overruled on other grounds by Alabama v. Smith, 490 U.S. 794, 109 S.Ct. 2201, 104 L.Ed.2d 865 (1989).
It is undisputed that Petitioner’s military and Michigan convictions were based upon the same alleged conduct. However, there is no Fifth Amendment violation where a defendant is prosecuted for the same act by both state and federal entities. See Bartkus v. Illinois, 359 U.S. 121, 79 S.Ct. 676, 3 L.Ed.2d 684 (1959). Under the dual sovereignty doctrine, one act may be considered two distinct offenses; “an act denounced as a crime by both national and state sovereignties is an offense against the peace and dignity of both and may be punished by each.” United States v. Lanza, 260 U.S. 377, 382, 43 S.Ct. 141, 142, 67 L.Ed. 314 (1922). The critical issue “is whether the two entities that seek successively to prosecute a defendant for the same course of conduct can be termed separate sovereigns. This determination turns on whether the two entities draw their authority to punish the offender from distinct sources of power.” Heath v. Alabama, 474 U.S. 82, 88, 106 S.Ct. 433, 437, 88 L.Ed.2d 387 (1985).
A military prosecution is a federal proceeding for purposes of double jeopardy analysis. See United States v. Talbot, 825 F.2d 991 (6th Cir.1987). Moreover, the United States Supreme Court has “uniformly held that the States are separate sovereigns with respect to the Federal Government because each State’s power to prosecute is derived from its own ‘inherent sovereignty,’ not from the Federal Government.” Heath, 474 U.S. at 89, 106 S.Ct. at 437.
Accordingly, Petitioner has failed to demonstrate that he was exposed to double jeopardy under the United States Constitution. Petitioner’s military and subsequent state proceedings constituted two prosecutions by two separate sovereigns for two distinct sets of offenses. Therefore, this Court is satisfied that Michigan’s adjudication resulted in a decision that was neither contrary to, nor involved an unreasonable application of, clearly established federal law.
II. Due Process
Petitioner also contends that he was deprived of the right to a fair trial and denied due process under the Fourteenth Amendment to the United States Constitution because the Michigan Supreme Court misapplied Michigan law. According to Petitioner, the Michigan Supreme Court deliberately “us[ed] false, invalid and presumptuous statements and opinions, as well as incorrect statements of law” in order to sustain Petitioner’s convictions. (Pet’r Br. at 2).
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6543824-17406 | FINDINGS OF FACT, CONCLUSIONS OF LAW, AND FINAL JUDGMENT AGAIN DENYING PLAINTIFFS’ COMPLAINT
DENNIS J. STEWART, Chief Judge.
This court formerly entered its final judgment denying the complaint of the chapter 13 debtors to recover their foreclosed residence as a fraudulent transfer within the meaning of section 548(a)(2) of the Bankruptcy Code and Matter of Hulm, 738 F.2d 323 (8th Cir.1984), and Durrett v. Washington Nat. Ins. Co., 621 F.2d 201 (5th Cir.1980). It was the finding of this court, on denying the complaint for recovery, that there was no evidence of balance-sheet insolvency, as is a prerequisite to recovery under section 548(a)(2), supra.
The district court, on appeal, reversed the above described decision of this court and remanded the action to this court for further findings. It seemed to be the sense of the district court, in issuing the order of reversal and remand, that a bankruptcy court should always take judicial notice of the court file if a party fails to prove an element of its claim or defense which might have been proven by resort to the court file. Such a rule might well impose a nearly impossible burden on bankruptcy judges and would seem to cause unfair and unnecessary intrusion of the judiciary in the conduct of the trial of cases by counsel for the respective parties.
On close reading of the district court decision, however, this court does not believe that the district court intended to impose on bankruptcy judges the omnipresent risk of reversal on appeal unless they see that the parties’ counsel offer the evidence which fully supports their respective claims or defenses. The authorities cited by the district court do not support that proposition. The result in such an instance could offend due process standards, when, as in this case, the plaintiffs have testified and have made no mention of any fact concerning solvency or insolvency, or have not testified at all. In such instances, they would not have made themselves available for cross-examination. (“Cross-examination should be limited to the subject matter of the direct examination and matters affecting the credibility of the witness.” Rule 611(b), Federal Rules of Evidence. ) And, it is an affront to due process and the confrontation clause if a prior statement is regarded as admissible and “cannot be tested by cross-examination.” Bruton v. United States, 391 U.S. 123, 136, 88 S.Ct. 1620, 1628, 20 L.Ed.2d 476 (1968). When these considerations come into focus, it is imperative that this court give the district court order a construction which makes it lawful and sensible rather than an unlawful directive.
This court therefore concludes that it was the intention of the district court, in remanding this action, to require this court to consider taking judicial notice of the files and records in this case on the issue of insolvency. Again, to compel this court to take judicial notice of the schedules on the issue of insolvency and hold, as the district court appears to hold, that such creates a prima facie case of insolvency, would be to violate the rules governing admissibility of evidence. Under the Federal Rules of Evidence, prior statements of parties are admissible in evidence only if they are classified as non-hearsay or if they come within some exception to the rule excluding hearsay. Generally, they are classified as non-hearsay and are thus admissible only if (1) they are prior inconsistent statements made under oath; (2) they are prior consistent statements offered to rebut an express or implied charge against the witness of recent fabrication or improper influence or motive; or (3) they are statements of identification of a person. Rule 801(d)(1), Federal Rules of Evidence. “The position taken by the Advisory Committee in formulating this part of the rule is founded upon an unwillingness to countenance the general use of prior prepared statements as substantive evidence.” Notes of Advisory Committee under Rule 801, Federal Rules of Evidence. Thus, statements in schedules respecting the issue of solvency vel non are frequently admitted as admissions of an alleged debt- or in hearings in which they are resisting being declared insolvent. But to admit such statements in this action, in which the declarant is the party asserting insolvency, would patently violate the governing rules of evidence. These rules would have applied so as to compel exclusion of the schedules from evidence on this issue, even had they been explicitly offered in evidence by debtors’ counsel. The schedules’ admissibility on this issue is even more certainly foredoomed under the doctrine of judicial notice, under which a court generally may not take judicial notice of adjudicative, as opposed to legislative, facts. If a fact is in issue in the trial of a case, a court is not permitted judicially to notice it unless it is so manifestly common knowledge or so accurately and readily ascertainable that no reasonable mind could fail to believe it. Under this standard, the bankruptcy court could take judicial notice that the debtors had made certain contentions in the schedules, but that is far from saying that the contentions themselves may be judicially noticed as proof of their truth. And judicially to notice the schedules simply to observe that the debtors had once made certain contentions as to solvency would not be probative to any issue in the case and would accordingly constitute a futile and useless effort. This court should not and will not conclude that the district court intended for this court to carry out, in pursuance of its order of remand, a wholly futile and useless effort. Accordingly, this court declines to take judicial notice of the schedules on this issue. In this manner, this court performs its duty under the district court’s order of remand by considering taking judicial notice and declining to do so.
II
The same principles do not admit of the court’s taking judicial notice of the schedules to conclude that they in fact constitute an admission of the debtor to the effect that they were solvent on the date of bank ruptcy. Counsel for the bank did not offer the schedules for that purpose during the trial of this action and, as observed above, a court is prohibited from taking notice of adjudicative facts.
But the court’s review of the schedules shows that, if they were admitted in evidence, they would demonstrate solvency rather than insolvency. Thus, this court will re-enter the judgment denying the plaintiffs’ complaint for this separate and independent reason.
And it must be observed that, even if the schedules were admissible and did demonstrate insolvency as of the date of bankruptcy, that would be insufficient, without more, to demonstrate insolvency as of the date of the foreclosure, as is required by section 548(a)(2), supra.
Ill
In brief summary, the only way that plaintiff could have a reasonable chance of overturning this court’s prior judgment is if the district court order of remand were construed simply to the effect that plaintiffs must now be permitted to offer evidence on the issue of insolvency at the time of transfer. But for this court so to construe the order of remand would be to ignore the rule that parties may offer additional evidence after trial has been completed and after judgment only if they demonstrate, on a timely served motion for new trial, that they have discovered new and material evidence which, in the exercise of due diligence, they could not have discovered in time for use at trial. It is true that the plaintiffs may have a sympathetic case — the property repossessed by the bank was, after all, their modest home in which they had lived for many years and in which they had a not inconsiderable equity. But, even so, under the most cherished traditions of American law, we eschew the granting of judgments or verdicts on the basis of sympathy alone, always insisting that they be based upon evidence, admitted in accordance with longstanding legal principles, which proves a statutorily or otherwise defined entitlement to relief. Our democratic legal principles continue correctly to refuse to predicate relief solely upon a litigant’s economic circumstances or his or her social or economic class. To do so, we believe, is consistent only with systems of justice which are alien to our own, under which economic plight or social or economic class may well be the sole determinant of judicial dispositions. We accordingly oppose those systems as constituting no justice at all, but rather an according of awards according to one’s station in life, a brushing aside of jurisprudential principle under the highly dubious rubric that the end justifies the means.
Yet, even the end or result seems almost always to be impeached, morally as well as legally, when appropriate process is ignored or squelched. In this case, for instance, the debtors’ having continued to reside in the subject property during the pendency of the appeal and remand without making adequate protection — and perhaps rent — payments has likely worked a detriment equally to themselves and to the defendant bank. For, not only has the bank been deprived, without compensation, of its collateral, but the debtors may also have built up such an arrearage of payments due to the bank that it would be impossible now to enter into any compromise under which they would recover their property and otherwise defray a chapter 13 plan.
Thus, for the foregoing reasons, and each and all of them separately and independently, it is hereby
ORDERED, ADJUDGED AND DECREED that plaintiffs’ within complaint for recovery of an alleged fraudulent transfer under section 548(a)(2) of the Bankruptcy Code be, and it is hereby, denied. Plaintiffs shall have and recover the sum of $1,815.82 from the defendant First State Bank of Joplin.
. In its written findings of fact and conclusions of law of July 10, 1986, this court pertinently stated as follows: “The trouble with plaintiff claim ... is that no evidence of insolvency has been shown. The plaintiffs did not even advert to the schedules in this regard. (The schedules, further, tend to reflect solvency rather than insolvency.) It seems an unfortunate result under the circumstances, but this court, as any other court, can decide cases only on the basis of the evidence properly submitted to it. And there being no evidence of insolvency, the transfer cannot be regarded as fraudulent within the meaning of section 548(a)(2) of the Bankruptcy Code. Insofar as the complaint requests avoidance of the transfer itself, accordingly, it must be denied."
. In its order of remand of March 30, 1987, the district court concluded as follows: "I have no doubt that the bankruptcy court, like any other court, has authority to take judicial notice of its own files and records, but given that the items contained in these records are often not the ordinary fare of judicial notice subject matter, see F.R.Evid. 201(b), I believe it only reasonable that the disadvantaged party be afforded notice and an opportunity to respond. This approach represents a middle ground ... in that the full panoply of information available to the bankruptcy judge may be brought to bear on a contested issue and at the same time, accommodates the due process concerns ... it was not unreasonable for appellants to assume that the entire record of their bankruptcy action would be reviewed in reaching a decision. The bankruptcy court did consider the schedules filed with the Chapter 13 proceeding in performing its ‘reasonably equivalent value’ analysis. It appears from the limited record before me that the schedules were not introduced at trial, nor was the issue of judicial notice raised by the court or the parties. Under the circumstances, I believe the appropriate course of action would have been for the court to advise the parties that it was contemplating taking judicial notice of specific documents and allowing them to show cause why it should not do so.” It must be mentioned, however, that the district court was in error in assuming that the portion of the schedules relating to the value of the property was judicially noticed. That was offered in evidence by the plaintiffs and not objected to by the defendants. Further, it was independently admissible, when testified to by the plaintiffs, which it was, as the owner’s present opinion of the value of the property.
. Even if it is admittedly true that the subject matter of the judicial notice is not that which can be judicially noticed under the Federal Rules of Evidence. See note 2, supra.
. It seems to be the district court's view that this burden of assessing every case and undertaking to supply evidence from the files and records in the court’s possession is required by certain case authority. The case decisions which are cited by the district court and said to support the proposition that judicial notice should be taken of the files and records, regardless of the admissibility therein, do not support that proposition. In all those decisions, "judicial notice," as it was perhaps improperly termed (rather than simply the admission of admissible evidence), was taken of the files and records which would have been independently admissible in evidence, as non-hearsay admissions of the debtor, or as non-hearsay to prove the fact or timing of certain filings, when those matters were in issue in the case. The district court cites In re Saco Development Corp., 30 B.R. 862, 865 (Bkrtcy.D.Me.1983), for the proposition that the bankruptcy judge should take judicial notice of the entire file in every case. In that case, however, despite its general — and erroneous — proclamations to the contrary, the court carefully restricted its use of "judicial notice" to those portions of the file which bore on the issue of whether an alleged preferential transfer would enable the transferee to receive more than it would have received in straight liquidation. In such an instance, the contents of the file — who filed claims, when, for how much, and whether they have been allowed — would be determinative of the "receive more” issue. They are the acts to be evidenced. Accordingly, those contents are not hearsay. "If the making of the utterance is the ultimate thing sought to be proven in the case, rather than a device for proving the thing, the suspicion of hearsay attaches the least. So it is that the topic of utterances as operative conduct is one of the simplest application under the hearsay rule. No question of possible testimonial or narrative use can arise when the speaking of the words determines the rights being litigated. Thus it is that such typical examples as the making of a promise, the speaking of a slander, the printing of a libel, the speaking of marriage vows are all species of extra-judicial utterances provable despite the hearsay rule because they are the operative conduct of the speaker. For them there is no possible question of the trustworthiness of the utterance ...” Strahorn, A Reconsideration of the Hearsay Rule and Admissions, 85 U.Pa.L.Rev. 484, 490 (1937). The same is true of this court’s prior decision in Matter of Abernathy, 38 B.R. 768 (Bkrtcy.W.D.Mo.1983), affirmed, 38 B.R. 769, (W.D.Mo.1984)—which the district court mis-cited a "In re Love, 38 B.R. 771 (W.D.Mo.1984).” In that case, the files of the court were conclusive on the crucial fact that the case was a no-asset case in which no claims were filed or were invited to be filed. Of the same type of "judicial notice” was In re Hollander, 25 B.R. 905, 911 (Bkrtcy.W.D.Mo.1982)—simply of what claims had been filed and their nature when that appeared to be an issue. And in Matter of Gervich, 570 F.2d 247, 253 (8th Cir. 1978), it was only held that "judicial notice” may properly be taken of schedules to demonstrate that certain debts in fact existed when that would have been an admission by the debt- or. To a similar effect is In re Leach, 35 B.R. 100, 102 (Brktcy.W.D.Ky.1983), in which the schedules were “noticed” to demonstrate the, debtor’s knowledge that he had not reported several liabilities in his credit application with a bank. And, when the issue is whether there has been substantial delay in a reorganization proceeding, the flies and records in the case may be non-hearsay, reflecting the extent of the delay. In re Ponn Realty, 4 B.R. 226 (Bkrtcy.Mass.1980). But none of these cases, or any of the multitudes cited in their respective texts, stands for the proposition that inadmissible hearsay may be bootstrapped in evidence by employing the practice of "taking judicial notice of the files.” In assuming that the judicial notice which might be taken in this case would be of evidence which is admissible, the district court simply begs the question, which is most crucially, as observed above, of the admissibility of the evidence. Despite the excursis in the district court opinion on the issue of whether a judge must grant notice to the parties in taking judicial notice sua sponte, there can be no issue in that regard. Rule 201(e) of the Federal Rules of Evidence requires the giving of such notice. And there is no indication in any of the decisions cited that such notice was not given.
. It is too fundamental to require citation of authority that a judge should not be a witness in a case over which he presides.
. See note 4, supra
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7624032-19268 | ALTIMARI, Circuit Judge:
Plaintiffs-appellants International Dairy Foods Association, Milk Industry Foundation (MIF), International Ice Cream Association, National Cheese Institute, Grocery Manufacturers of America, Inc. and National Food Processors Association (collectively “appellants” or “dairy manufacturers”) appeal from a decision of the district court (Murtha, C.J.), denying their motion for a preliminary injunction. 898 F.Supp. 246 (D.Vt.1995). The dairy manufacturers challenged the constitutionality of Vt. Stat. Ann. tit. 6, § 2754(c) which requires dairy manufacturers to identify products which were, or might have been, derived from dairy cows treated with a synthetic growth hormone used to increase milk production. The dairy manufacturers alleged that the statute violated the United States Constitution’s First Amendment and Commerce Clause.
Because we find that the district court abused its discretion in failing to grant preliminary injunctive relief to the dairy manufacturers on First Amendment grounds, we reverse and remand.
Background
The factual background to this case is capably described in the district court’s opinion, see 898 F.Supp. 246 (D.Vt.1995). We therefore summarize only those facts necessary to an understanding of bur disposition.
In 1993, the federal Food and Drug Administration (“FDA”) approved the use of recombinant Bovine Somatotropin (“rBST”) (also known as recombinant Bovine Growth Hormone (“rGBH”)), a synthetic growth hormone that increases milk production by cows. It is undisputed that the dairy products derived from herds treated with rBST are indistinguishable from products derived from untreated herds; consequently, the FDA declined to require the labeling of products derived from cows receiving the supplemental hormone.
In April 1994, defendant-appellee the State of Vermont (“Vermont”) enacted a statute requiring that “[i]f rBST has been used in the production of milk or a milk product for retail sale in this state, the retail milk or milk product shall be labeled as such.” Vt. Stat. Ann. tit. 6, § 2754(c). The State of Vermont’s Commissioner of Agriculture (“Commissioner”) subsequently promulgated regulations giving those dairy manufacturers who use rBST four labeling options, among them the posting of a sign to the following effect in any store selling dairy products:
rBST Information
THE PRODUCTS IN THIS CASE THAT CONTAIN OR MAY CONTAIN MILK FROM rBST-TREATED COWS EITHER (1) STATE ON THE PACKAGE THAT rBST HAS BEEN OR MAY HAVE BEEN USED, OR (2) ÁRE IDENTIFIED BY A BLUE SHELF LABEL LIKE THIS
[BLUE RECTANGLE]
• OR (3) A BLUE STICKER ON THE PACKAGE LIKE THIS. [BLUE DOT]
The United States Food and Drug Administration has determined that there is no significant difference between milk from treated and untreated cows. It is the law of Vermont that products made from the milk of rBST-treated cows be labeled to help consumers make informed shopping decisions.
(6 V.S.A. Section 2754)
Adopted Rules (rBST Notification and Labeling Regulations Relating to Milk and Milk Products) of Vermont Dep’t of Agriculture, Food and Markets, § 3.1b (“Vt.Regs.”). Failure to comply with the statute and companion regulations subjects manufacturers to civil, see Vt. Stat. Ann. tit. 9, ch. 63 (Consumer Fraud Act), § 2451 et seq. [Add. to Blue Br. 12-13], as well as criminal, see Vt. Stat. Ann. tit. 6, ch. 151 (Supervision, Inspection and Licensing of Dairy Operations), § 2671 et seq., penalties.
Appellants filed suit in April 1994, asserting that the statute was unconstitutional. In June 1995, the dairy manufacturers moved for preliminary injunctive relief, seeking to enjoin enforcement of the statute. The dairy manufacturers alleged that the Vermont statute (1) infringed their protected rights under the First Amendment to the Constitution and (2) violated the Constitution’s Commerce Clause, U.S. Const., Art. 1, § 8. Following an extensive hearing, the United States District Court for the District of Vermont (Mur-tha, C.J.), denied appellants’ motion. See 898 F.Supp. at 254. The dairy manufacturers now appeal.
Because we find that the dairy manufacturers are entitled to an injunction on First Amendment grounds, we do not reach their claims made pursuant to the Commerce Clause.
Discussion
Generally, preliminary injunctive relief is appropriate when the movant shows “(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.” Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979) (per curiam); see also Union Carbide Agr. Prods. Co. v. Costle, 632 F.2d 1014, 1017 (2d Cir.1980) (“Before a preliminary injunction will be granted in this Circuit, it must pass one of two tests. Both require a showing of irreparable harm.”), cert. denied, 450 U.S. 996, 101 S.Ct. 1698, 68 L.Ed.2d 196 (1981). However, because the injunction at issue stays “government action taken in the public interest pursuant to a statutory ... scheme,” this Court has determined that the movant must satisfy the more rigorous “likelihood of success prong.” Able v. United States, 44 F.3d 128, 131-32 (2d Cir.1995); see Plaza Health Laboratories, Inc. v. Perales, 878 F.2d 577, 580 (2d Cir.1989).
We review the district court’s denial of a preliminary injunction for an abuse of discretion, see Coca-Cola Co. v. Tropicana Prods., Inc., 690 F.2d 312, 315 (2d Cir.1982), and will reverse the district court only if it relied on clearly erroneous findings of fact, misapprehended the law, or erred in formulating the injunction, see Blum v. Schlegel, 18 F.3d 1005, 1010 (2d Cir.1994).
1. Irreparable Harm
Focusing principally on the economic impact of the labeling regulation, the district court found that appellants had not demonstrated irreparable harm to any right pro tected by the First Amendment. We disagree.
Irreparable harm is “injury for which a monetary award cannot be adequate compensation.” See Jackson Dairy, Inc., 596 F.2d at 72. It is established that “[t]he loss of First Amendment freedoms, for even minimal periods of time, unquestionably constitutes irreparable injury.” Elrod v. Bums, 427 U.S. 347, 373, 96 S.Ct. 2673, 2690, 49 L.Ed.2d 547 (1976); see Paulsen v. County of Nassau, 925 F.2d 65, 68 (2d Cir.1991) (“[sjince prohibitions on leafletting and dissemination of religious views contravene core First Amendment values” irreparable harm necessarily established); Deeper Life Christian Fellowship, Inc. v. Board of Ed., 852 F.2d 676, 679 (2d Cir.1988) (depriving church of location for religious services for substantial period of time constituted irreparable harm). Because the statute at issue requires appellants to make an involuntary statement whenever they offer their products for sale, we find that the statute causes the dairy manufacturers irreparable harm.
Quoting Hohe v. Casey, 868 F.2d 69, 72-73 (3d Cir.), cert. denied, 493 U.S. 848, 110 S.Ct. 144, 107 L.Ed.2d 102 (1989), the district court rejected this claim, stating that:
“the assertion of First Amendment rights does not automatically require a finding of irreparable injury, thus entitling a plaintiff to a preliminary injunction if he shows a likelihood of success on the merits.” 868 F.2d at 72-73.
Ordinarily, it is the purposeful suppression of speech which constitutes irreparable harm. Compliance with the Vermont Labeling Law does not prohibit the plaintiffs from disseminating a message. Instead, it requires the plaintiffs to truthfully disclose the method used in producing their product. Under these circumstances, the Court does not find that the plaintiffs’ assertion of a First Amendment violation leads ineluctably to the conclusion that they will suffer irreparable harm.
898 F.Supp. at 251-52 (citations omitted).
We conclude, however, that the manufacturers have carried their burden of establishing irreparable harm. The wrong done by the labeling law to the dairy manufacturers’ constitutional right not to speak is a serious one that was not given proper weight by the district court. See Wooley v. Maynard, 430 U.S. 705, 714, 97 S.Ct. 1428, 1435, 51 L.Ed.2d 752 (1977) (“We begin with the proposition that the right of freedom of thought protected by the First Amendment against state action includes both the right to speak freely and the right to refrain from speaking at all.”); West Virginia State Bd. of Ed. v. Barnette, 319 U.S. 624, 633, 63 S.Ct. 1178, 1183, 87 L.Ed. 1628 (1943) (“involuntary affirmation could be commanded only on even more immediate and urgent grounds than silence”); see also Harper & Row, Publishers, Inc. v. Nation Enter., 471 U.S. 539, 559, 105 S.Ct. 2218, 2230, 85 L.Ed.2d 588 (1985) (recognizing, along with freedom to express one’s views publicly, “‘concomitant freedom not to speak publicly’ ”) (quoting Estate of Hemingway v. Random House, Inc., 23 N.Y.2d 341, 348, 296 N.Y.S.2d 771, 778, 244 N.E.2d 250, 255 (1968)).
The right not to speak inheres in political and commercial speech alike, see Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651, 105 S.Ct. 2265, 2281-82, 85 L.Ed.2d 652 (1985); cf. National Comm’n on Egg Nutrition v. Federal Trade Comm’n, 570 F.2d 157, 160 (7th Cir.1977), cert. denied, 439 U.S. 821, 99 S.Ct. 86, 58 L.Ed.2d 113 (1978), and extends to statements of fact as well as statements of opinion, see Riley v. National Federation of the Blind, 487 U.S. 781, 797-98, 108 S.Ct. 2667, 2677-78, 101 L.Ed.2d 669 (1988). If, however, as Vermont maintains, its labeling law compels appellants to engage in purely commercial speech, the statute must meet a less rigorous test. See Central Hudson Gas & Elec. Corp. v. Public Serv. Commission, 447 U.S. 557, 562-63, 100 S.Ct. 2343, 2350, 65 L.Ed.2d 341 (1980) (“The Constitution ... accords a lesser protection to commercial speech than to other constitutionally guaranteed expression.”). The dairy manufacturers insist that the speech is not purely commercial because it compels them “to convey a message regarding the significance of rBST use that is ‘expressly contrary to’ their views.” [Blue br. at 21] (quoting Pacific Gas & Elec. Co. v. Public Utilities Comm’n, 475 U.S. 1, 16 n. 12, 106 S.Ct. 903, 911 n. 12, 89 L.Ed.2d 1 (1986) (plurality)). Agreeing with Vermont, the district court found that the speech was commercial in nature. See 898 F.Supp. at 253.
We need not resolve this controversy at this point; even assuming that the compelled disclosure is purely commercial speech, appellants have amply demonstrated that the First Amendment is sufficiently implicated to cause irreparable harm. See, e.g., Cal-Almond, Inc. v. United States Dep’t of Agriculture, 14 F.3d 429, 434, (9th Cir.1993) (First Amendment implicated by mandatory assessment on almond handlers to fund almond marketing program); United States v. Frame, 885 F.2d 1119, 1132-33 (3d Cir.1989) (federal Beef Promotion & Research Act implicated beef producer’s right to refrain from speaking because it required that producer help fund commercial message to which producer did not necessarily subscribe), cert. denied, 493 U.S. 1094, 110 S.Ct. 1168, 107 L.Ed.2d 1070 (1990). Cf. National Comm’n on Egg Nutrition, 570 F.2d at 164 (modifying remedial order provision that required egg producers “to argue the other side of the controversy, thus interfering unnecessarily with the effective presentation of the pro-egg position.”). The dairy manufacturers have clearly done more than simply “assert” their First Amendment rights: The statute in question indisputably requires them to speak when they would rather not. See 898 F.Supp. at 251-52. Because compelled speech “eontravene[s] core First Amendment values,” appellants have “satisfied the initial requirement for securing injunctive relief.” Paulsen, 925 F.2d at 68.
In our view, Hohe v. Casey, 868 F.2d 69, 69 (3d Cir.), cert. denied, 493 U.S. 848, 110 S.Ct. 144, 107 L.Ed.2d 102 (1989), relied on by the district court, is not to the contrary. There, the Third Circuit held that the collection of fair share fees from non-Union members did not constitute irreparable harm. 868 F.2d at 73. However, the constitutional injury alleged in Hohe bears little resemblance to the compelled speech at issue here; the nonUnion members alleged that the deduction of fees from their compensation deprived them “of money they might use to support their own political, ideological, or other purposes.” Id. As the Third Circuit found, monetary damages or restitution could remedy that ill. Id. More importantly, Hohe is distinct from the case at hand in that the Vermont statute certainly results in “the ‘direct penalization, as opposed to incidental inhibition, of First Amendment rights [which] constitutes irreparable injury.’ ” Hohe, 868 F.2d at 73 (quoting Cate v. Oldham, 707 F.2d 1176, 1188 (11th Cir.1983)).
Because the statute at hand unquestionably implicates the dairy manufacturers’ speech rights, we reject the district court’s conclusion that the disclosure compelled by Vt. Stat. Ann. tit. 6, § 2754(c), is not a “loss of First Amendment freedoms,” Elrod, 427 U.S. at 373, 96 S.Ct. at 2690, amounting to irreparable harm.
2. Likelihood of Success on the Merits
It is not enough for appellants to show, as they have, that they were irreparably harmed by the statute; because the dairy manufacturers challenge government action taken in the public interest, they must also show a likelihood of success on the merits. We find that such success is likely.
In Central Hudson, the Supreme Court articulated a four-part analysis for determining whether a government restriction on commercial speech is permissible. 447 U.S. at 566, 100 S.Ct. at 2351. We need not address the controversy concerning the nature of the speech in question — commercial or political — because we find that Vermont fails to meet the less stringent constitutional requirements applicable to compelled commercial speech.
Under Central Hudson, we must determine: (1) whether the expression concerns lawful activity and is not misleading; (2) whether the government’s interest is substantial; (3) whether the labeling law directly serves the asserted interest; and (4) whether the labeling law is no more extensive than necessary. See id.; see also Edenfield v. Fane, 507 U.S. 761, 766-67, 113 S.Ct. 1792, 1798, 123 L.Ed.2d 543 (1993). Furthermore, the State of Vermont bears the burden of justifying its labeling law. See Edenfield, 507 U.S. at 770-71, 113 S.Ct. at 1800; Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 71 n. 20, 103 S.Ct. 2875, 2882 n. 20, 77 L.Ed.2d 469 (1983). As the Supreme Court has made clear, “[t]his burden is not satisfied by mere speculation or conjecture; rather, a governmental body seeking to sustain a restriction on commercial speech must demonstrate that the harms it recites are real and that its restriction will in fact alleviate them to a material degree.” Edenfield, 507 U.S. at 770-71, 113 S.Ct. at 1800; see also Ibanez v. Florida Dep’t of Business and Prof. Reg., Board of Accountancy, 512 U.S. 136, -, 114 S.Ct. 2084, 2089, 129 L.Ed.2d 118 (1994) (“State’s burden is not slight”).
In our view, Vermont has failed to establish the second prong of the Central Hudson test, namely that its interest is substantial. In making this determination, we rely only upon those interests set forth by Vermont before the district court. See Edenfield, 507 U.S. at 766-67, 113 S.Ct. at 1798 (“[T]he Central Hudson standard does not permit us to supplant the precise interests put forward by the State with other suppositions.”). As the district court made clear, Vermont “does not claim that health or safety concerns prompted the passage of the Vermont Labeling Law,” but instead defends the statute on the basis of “strong consumer interest and the public’s ‘right to know’....” 898 F.Supp. at 249. These interests are insufficient to justify compromising protected constitutional rights.
Vermont’s failure to defend its constitutional intrusion on the ground that it negatively impacts public health is easily understood. After exhaustive studies, the FDA has “concluded that rBST has no appreciable effect on the composition of milk produced by treated cows, and that there are no human safety or health concerns associated with food products derived from cows treated with rBST.” 898 F.Supp. at 248. Because bovine somatotropin (“BST”) appears naturally in cows, and because there are no BST receptors in a cow’s mammary glands, only trace amounts of BST can be detected in milk, whether or not the cows received the supplement. Id. Moreover, it is undisputed that neither consumers nor scientists can distinguish rBST-derived milk from milk produced by an untreated cow. Id. at 248-49. Indeed, the already extensive record in this case contains no scientific evidence from which an objective observer could conclude that rBST has any impact at all on dairy products. It is thus plain that Vermont could not justify the statute on the basis of “real” harms. See Edenfield, 507 U.S. at 770-71, 113 S.Ct. at 1800.
We do not doubt that Vermont’s asserted interest, the demand of its citizenry for such information, is genuine; reluctantly, however, we conclude that it is inadequate. We are aware of no case in which consumer interest alone was sufficient to justify requiring a product’s manufacturers to publish the functional equivalent of a warning about a production method that has no discernable impact on a final product. See, e.g., Ibanez, 512 U.S. at -, 114 S.Ct. at 2090 (invalidating state requirement that Certified Financial Planner (“CFP”) disclose in advertisement that CFP status was conferred by unofficial private organization despite unsubstantiated claim that public might otherwise be misled by CFP’s advertisement). Cf. Riley, 487 U.S. at 797-98, 108 S.Ct. at 2677-78 (holding unconstitutional state requirement that professional fundraisers disclose to prospective donors factual information concerning the percentage of contributions actually passed on to charities notwithstanding the fact that prospective donors might find the truthful information relevant and persuasive).
Although the Court is sympathetic to the Vermont consumers who wish to know which products may derive from rBST-treated herds, their desire is insufficient to permit the State of Vermont to compel the dairy manufacturers to speak against their will. Were consumer interest alone sufficient, there is no end to the information that states could require manufacturers to disclose about their production methods. For instance, with respect to cattle, consumers might reasonably evince an interest in knowing which grains herds were fed, with which medicines they were treated, or the age at which they were slaughtered. Absent, however, some indication that this information bears on a reasonable concern for human health or safety or some other sufficiently substantial governmental concern, the manufacturers cannot be compelled to disclose it. Instead, those consumers interested in such information should exercise the power of their purses by buying products from manufacturers who voluntarily reveal it.
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11775823-20528 | COFFIN, Senior Circuit Judge.
Plaintiff-appellant Rhoda Tang (“Tang”), an Asian-American employee of the Rhode Island Department of Elderly Affairs (“Department”), filed a complaint against the Department alleging racial and gender discrimination, harassment and retaliation. During the course of litigation, the district court excluded certain evidence, granted judgment as a matter of law for the Department, and granted attorney’s fees to the Department. Tang appeals each of these decisions. Because she has failed to show that the district court’s rulings on evidence and judgment as a matter of law were erroneous, we affirm. We, however, remand the attorney’s fee decision for clarification.
I. Background
During the decade preceding this litigation, Tang, individually and in her role as president of the local union, filed a series of grievances against the Department. One such grievance, filed in 1989 after the Department discharged her, went to an arbitration hearing in May 1991. During that hearing, the parties agreed to settle the grievance by reinstating Tang and had the stipulated settlement entered as the arbitrator’s award.
Several years later, Tang filed another grievance, this time claiming racial and gender discrimination as well as retaliation for actions occurring before the 1991 hearing date. The Department moved to dismiss the complaint based on the res judicata effect of the stipulated arbitration award. Judge Pet-tine found that he could not decide the issue on the basis of the record at the time, and consequently denied the motion. During the course of that opinion, the court noted that at a recent conference the parties had discussed the admissibility of evidence underlying the 1989 grievance. Although the parties had not briefed the evidentiary issue, Judge Pet-tine stated that “evidence of [Tang’s 1989] discharge will be admissible at trial” whether or not Tang’s claim could be based on the earlier termination.
Defendants subsequently filed an interlocutory appeal on grounds not relevant here. By the time the action was remanded to the district, court, Judge Pettine had retired, and the case had been assigned to Judge Torres.
Based on the statement in Judge Pettine’s opinion, Tang sought to introduce evidence underlying her 1989 discharge at trial. Judge Torres found that the existence of the grievance was relevant to Tang’s retaliation claim, but the facts underlying it were not because it had been resolved. Judge Torres therefore ruled that Tang could introduce the fact that she had filed a grievance but not the details of it.
After the close of the plaintiffs ease, Judge Torres granted judgment as a matter of law in favor of the Department. He ruled that Tang had presented no evidence that would support her claims, and, in fact, the evidence contradicted her allegations.
The Department then filed a motion for attorney’s fees under 42 U.S.C. § 1988. Reiterating that the complaint was based on “a number of minor perceived slights” and that there was “absolutely no evidence” that the slights were race or gender-based, Judge Torres granted the Department’s motion for fees.
II. Discussion
A. Admission of Pre-1991 Evidence
Tang claims that Judge Torres erred in excluding the pre-1991 evidence because Judge Pettine’s ruling that the evi dence would be admissible was the law of the case. Whether the law of the case doctrine bars subsequent litigation of a claim is an issue of law subject to plenary review by this court. See Dopp v. Pritzker, 38 F.3d 1239, 1245 (1st Cir.1994).
Tang’s reliance on the law of the case doctrine is misplaced. As we recently said, that doctrine both prevents a party from relitigating an issue decided by a lower court and unchallenged on appeal, and requires a lower court to comply with a superi- or court’s instructions on remand. See Field v. Mans, 157 F.3d 35, 40-41 (1st Cir.1998). The doctrine does not preclude all reconsideration of an issue already settled. See Bethlehem Steel Export Corp. v. Redondo Constr. Corp., 140 F.3d 319, 321 (1st Cir.1998). “Interlocutory orders, including denials of motions to dismiss, remain open to trial court reconsideration, and do not constitute the law of the case.” Perez-Ruiz v. Crespo-Guillen, 25 F.3d 40, 42 (1st Cir.1994).
At the time of Judge Pettine’s comments, the parties had not briefed whether the evidence was admissible; the Department had made a motion to dismiss the complaint. Even if Judge Pettine’s comments constituted a ruling on admissibility, that ruling was interlocutory and subject to reconsideration. The fact that the issue was reconsidered by Judge Torres, rather than Judge Pettine, is of no moment. See United States v. O’Keefe, 128 F.3d 885, 891 (5th Cir.1997) (“[A] successor judge has the same discretion to reconsider an order as would the first judge.”). The law of the case is simply not implicated in Judge Torres’s ruling on the admissibility of evidence.
B. Judgment as a Matter of Law
Tang also alleges that the district court erroneously granted judgment as a matter of law in favor of the Department on her First Amendment freedom of speech claim. We review the district court’s decision de novo, taking the facts in the light most favorable to Tang. See Russo v. Baxter Healthcare Corp., 140 F.3d 6, 7-8 (1st Cir.1998). We may affirm the judgment only if there “is no legally sufficient evidentiary basis for a reasonable jury to find for [her].” Fed.R.Civ.P. 50(a). Tang must provide “more than a mere scintilla of evidence and may not rely on conjecture or speculation to justify the submission of an issue to the jury.” Russo, 140 F.3d at 7-8 (internal quotation marks omitted).
Tang claims the Department violated her First Amendment free speech rights by retaliating against her for filing union grievances, both on her own behalf and in her role as president of the union.
The First Amendment guarantees every citizen the right “to petition the Government for a redress of grievances.” U.S. Const, amend. I. Tang does not lose this right because she has been employed by the government. See Connick v. Myers, 461 U.S. 138, 140, 103 S.Ct. 1684, 75 L.Ed.2d 708 (1983). Nevertheless, absolute First Amendment protection is not accorded to any grievance a public employee files against an employer, without regard to content. If it did, anything she said in the Department “would plant the seed of a constitutional case.” Id. at 149,103 S.Ct. 1684.
Instead, we employ a three part test to determine whether Tang has an actionable First Amendment freedom of speech claim. First, the court must determine whether Tang made her statements “as a citizen upon matters of public concern.” Id. at 147, 103 S.Ct. 1684. If the speech involved matters not of public concern, “but instead ... of personal interest, absent the most unusual circumstances, a federal court is not the appropriate forum in which to review the wisdom of a personnel decision taken by a public agency allegedly in reaction to the employee’s behavior.” Id. Second, the court must weigh the strength of the employee’s and the public’s First Amendment interests against the government’s interest in the efficient performance of the workplace. See Pickering v. Board of Educ., 391 U.S. 563, 568, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968). Third, if the employee’s and the public’s First Amendment interests outweigh a legitimate governmental interest in curbing the employee’s speech, Tang must show that the protected expression was a substantial or motivating factor in an adverse employment action. See O’Connor v. Steeves, 994 F.2d 905, 913 (1st Cir.1993).
Tang’s claims fail at the first step because she has not demonstrated that her speech involved any public interest. In assessing whether Tang’s speech implicates public concerns, we analyze “the content, form, and context of [the speech], as revealed by the whole record.” Connick, 461 U.S. at 147-48, 103 S.Ct. 1684.
Having done so, we agree with the district court that Tang has failed to develop a viable First Amendment claim. Tang’s brief on appeal notes that she filed many grievances regarding employment practices, but fails to provide any explicit description of their content, form, or context. Nor does a review of the record below shed any further light on the nature and circumstances of the several dozen grievances Tang filed.
The record, at best, permits speculation that the grievances underlying her First Amendment claim were similar to the six alleged acts of harassment and retaliation, none of which, individually or together, involved public concerns. The first such act occurred on March 4, 1994, when Tang was informed that her position was to be abolished due to budget cuts. She was placed on administrative leave with pay, and informed that she had the right to “bump” another union employee with less seniority. Several days later, the government realized that Tang’s position could not be abolished, rescinded the March 4 notice, and reinstated Tang to her previous position. In essence, then, Tang’s first complaint involves the fact that she was erroneously placed on administrative leave with pay for a few days. The second instance involved relocating her workspace from the third floor to the first floor, and sometime later to the second. Third, she complained that a filing cabinet was moved to a different floor from her workspace and placed alongside other filing cabinets. Fourth, she alleges that she was instructed to take her phone calls at her own desk, not elsewhere in the department. Fifth, she claims she was harassed and retaliated against when her coworker repeatedly asked her when she would no longer need a computer they shared. Finally, the sixth alleged act of harassment and retaliation involved the placement of a photocopier near the shared computer.
None of these matters constitutes an issue of public concern; they are all individual personal complaints about working conditions. The Department retains the power to fashion an appropriate response to these issues in the workplace, “[T]he First Amendment does not require a public office to be run as a roundtable for employee complaints over internal office affairs.” Connick, 461 U.S. at 149, 103 S.Ct. 1684. The district court appropriately granted judgment as a matter of law on Tang’s First Amendment claim.
C. Attorney’s Fees
Title VII and § 1988 provide the court with the power to award attorney’s fees to prevailing parties in employment discrimination and civil rights actions, respectively. See 42 U.S.C. § 2000e-5(k); 42 U.S.C. § 1988. Although courts are most often faced with motions for attorney’s fees by prevailing plaintiffs, the statutes empower courts to grant fee requests by whichever party prevails. While decisions to grant defendants their fees are, and should be, rare, “a district court may in its discretion award attorney’s fees to a prevailing defendant ... upon a finding that the plaintiffs action was frivolous, unreasonable, or without foundation, even though not brought in subjective bad faith.” Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978). In determining whether this standard has been met, the court must assess the claim at the time the complaint was filed, and must avoid the post-hoe reasoning that, because the plaintiff did not ultimately prevail, the claim must have been frivolous, unreasonable or without foundation. See Andrade v. Jamestown Hous. Auth, 82 F.3d 1179, 1192 (1st Cir.1996) (citing Christiansburg, 434 U.S. at 421-22, 98 5.Ct. 694).
After considerable deliberation, the district court reluctantly granted the Department’s motion for attorney’s fees on the ground that the action was frivolous. We review its decision for abuse of discretion. See Casa Marie Hogar Geriatrico, Inc. v. Riveras-Santos, 38 F.3d 615, 618 (1st Cir.1994). Under this standard, we may not simply substitute our judgment for that of the district court; we will reverse only if we are left with “a definite and firm conviction that the court below committed a clear error of judgment.” Schubert v. Nissan Motor Corp. in U.S.A., 148 F.3d 25, 30 (1st Cir.1998).
Our review of the trial transcript and other record materials persuades us that the district court’s finding that the action was frivolous was defensible. As the court correctly concluded, there were two hurdles Tang was unable to surmount, namely an actual injury, and causation between that injury and race, gender or retaliation. Our discussion above demonstrates that Tang’s supposed injury amounts to no more than personal displeasure with minor changes or inconveniences in her working situation. Individually and collectively, any allegation that Tang was injured by these incidents, much less suffered the adverse employment action required for Title VII liability, is frivolous, unreasonable and groundless.
Similarly, there was no evidence that any of the alleged actions were based on her race or gender or were done in retaliation for filing union grievances. For instance, when her position was mistakenly abolished, three other employees’ positions also were eliminated. Two were white males and one was a white female. Similarly, a number of the incidents involved interactions with other union .employees. A claim that other union employees retaliated against Tang for her filing grievances on behalf of the union is transparently meritless.
Rather than focusing on the strength of her claims, Tang argues that she should be insulated from paying the Department’s attorney’s fees for two reasons: 1) she relied on her lawyer to determine how to pursue the claim; and 2) on an earlier occasion she had received a letter from the Rhode Island Commission for Human Rights (“RICHR”) suggesting “probable cause” to find discrimination had occurred. Neither of these arguments undermines the district court’s decision. As a sister circuit has succinctly stated:
The proper test for [an attorney’s fee award to a defendant] is whether the claim itself is clearly meritless.... [I]f a claim is groundless, the mere fact that the plaintiff relies on his attorney’s erroneous contrary advice does not relieve him of liability.
Davidson v. Keenan, 740 F.2d 129, 133 (2d Cir.1984). Whether or not Tang’s reliance on- her attorney’s judgment was misplaced, she is legally responsible for the filing of the action. See Prate v. Freedman, 583 F.2d 42, 48 (2d Cir.1978). See also Baker v. Alderman, 158 F.3d 516, 526-27 (11th Cir.1998) (“In deciding whether to assess attorney’s fees against a Title VII plaintiff, a court should not consider the plaintiffs counsel’s role in filing or maintenance of a frivolous, groundless, or unreasonable claim, or the plaintiffs apparent lack of personal fault.”).
Tang also relies on the fact that on an earlier occasion she received a letter from the RICHR finding “probable cause” to believe discrimination had occurred. However, that letter involved the 1989 discharge, and Tang’s- own complaint admitted that, as a result of the 1991 stipulated arbitration award, she voluntarily withdrew her charge of discrimination regarding that discharge. The fact that the RICHR had found probable cause in a charge she subsequently agreed to withdraw is irrelevant to determining whether the current action was frivolous, unreasonable, or without foundation.
In essence, Tang’s argument is that she filed the claim in good faith. Although finding bad faith makes a fee award to the defendant more likely, it is not a prerequisite. See Local 285, Service Employees Int’l Union v. Nonotuck Resource Assoc., Inc., 64 F.3d 735, 737 (1st Cir.1995). Nor is good faith a defense to such a claim. See Independent Federation of Flight Attendants v. Zipes, 491 U.S. 754, 759, 109 S.Ct. 2732, 105 L.Ed.2d 639 (1989) (“the prevailing defendant could be awarded fees ... against the plaintiff whose suit was brought in good faith, but only ‘upon a finding that the plaintiffs action was frivolous, unreasonable, or without foundation.’ ”).
Although we have found that the district court’s determination that the action was frivolous is supported, our inquiry is not over. The transcript of the argument on the attorney’s fee motion indicates that the district court was troubled with the prospect of awarding defendants their fees, and found the decision to do so “distasteful.” Nevertheless, the court said the defendants were “entitled” to attorney’s fees because the action was frivolous.
Because the district court quoted the same language in a prior similar case, see Pontarelli v. Stone, 781 F.Supp. 114, 126 (D.R.I.1992), we believe that the term “entitled” comes from our own opinion in Cloutier v. Town of Epping, 714 F.2d 1184, 1193 (1st Cir.1983), in which we said “[d]efendants are entitled to attorneys’ fees under section 1988 only when a court finds that the plaintiffs claim was frivolous, unreasonable, or groundless.” (internal quotations omitted and em phasis added). The word “entitle” embraces both the acknowledgment of a right and the affording of a basis for making a claim. See Random House Dictionary 649 (2d ed. unabridged 1987). See also Webster’s Third New International Dictionary 758 (1981) (“to give a right or legal title to” and “furnish with proper grounds for seeking or claiming something”). The latter meaning is the pertinent one here. In using “entitled,” we did not intend to require district courts to grant fee requests once frivolity has been established. Rather, we intended to state that the finding of frivolity was a necessary prerequisite. Notwithstanding such a finding, the district court still retains discretion to deny or reduce fee requests after considering all the nuances of a particular case. See Andrade, 82 F.3d at 1193 (having “calculated the lodestar for a prevailing defendant, the district court may deny or reduce that amount after considering the plaintiffs financial condition.”).
It is not clear to us whether the district court recognized its continued discretion. The transcript of the attorney’s fee motion hearing contains a number of ambiguous comments by both parties and the court that could be interpreted to the contrary. The Department argued that the issue was an “all or nothing proposition”; the court could award the specific amount requested, or nothing at all. Tang’s attorney parroted the Department’s standard, and did not highlight the district court’s wide discretion even if the action were frivolous. In granting the Department’s fee request, the court noted it was troubled by the fact that it was “required to pass on a request for attorney’s fees by a large institution such as a state, and the plaintiff is, as usually is the case, just a working person.” In going on to describe its duty the court said that the task was simple: to determine whether the action was frivolous.
Although the record permits the decision made by the district court, we are not sure whether the court actually exercised its discretion in so ruling. The fact that it said the defendants were “entitled” to the award, as “distasteful” as it might have been, suggests that the court believed no discretion was permitted. Because the court had a wide range of options available, we remand to ensure that the court has the opportunity to utilize its discretion fully. We leave to the district court’s discretion as well what steps to take in issuing a new judgment, noting-only the Supreme Court’s warning that attorney’s fee motions “should not result in a second major litigation.” Hensley v. Eckerhart, 461 U.S. 424, 437, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983).
Accordingly, the judgment of the district court is affirmed in part, vacated in part, and remanded for further action consistent with this opinion. Appellee may receive half its costs.
. The complaint named three defendants: the Department, Maureen Maigret and Susan Sweet, who are the Director and Associate Director of the Department, respectively. Because there is no need to distinguish between the defendants, we will refer to all three as the Department.
. We note that Tang failed to argue that, even if not barred by the law of the case, the decision constituted an abuse of discretion. Because it was neither argued nor briefed, such a claim has been waived. See Rivera-Rosario v. United States Dept. of Agriculture, 151 F.3d 34, 37 (1st Cir.1998).
. Tang does not appeal the district court's decision to grant judgment as a matter of law on her racial or gender discrimination and harassment claims.
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12270066-8668 | PER CURIAM:
Julio Cesar Novoa appeals from the bankruptcy court’s denial of a motion to reopen his Chapter 7 bankruptcy case. No-voa moved to reopen the bankruptcy proceeding so that he could file a motion to vacate a prior order as void under Federal Rule of Civil Procedure 60(b)(4). Because the bankruptcy court’s order is not void, we affirm.
I.
Novoa, a physician, was facing medical malpractice suits from six patients, He filed for Chapter 7 bankruptcy, which resulted in the issuance of an automatic stay of the lawsuits pending against him. See 11 U.S.C. § 362(a); Campbell v. Countrywide Home Loans, Inc., 646 F.3d 348, 363 (5th Cir, 2008). The patients moved for relief from the stay, seeking to recover from Novoa’s liability insurance carriers. The Chapter 7 trustee and the patients had agreed to allow the patients to settle with the insurance providers without Novoa’s consent. Novoa did not timely respond to the patients’ motion for relief from the stay. The bankruptcy court thus issued an “agreed order” lifting the stay. The order included a provision stating that Novoa’s “insurance carriers are authorized to settle the claims of [the patients] without the consent of [Novoa].” Novoa now contends this provision circumvented a restriction in Novoa’s insurance contract which prohibited settlement without Novoa’s consent.
Novoa moved to vacate the order, claiming that his failure to respond was “due to a clerical omission” by his counsel. He argued that allowing the patients to settle with the insurance providers without his consent was prejudicial to him because settlements could affect his medical license. At a hearing on the motion, Novoa’s attorney stated that he could not present evidence of this possibility, and the bankruptcy court denied the motion to vacate.
Novoa appealed the agreed order to lift the automatic stay to the district court. The district court decided that Novoa failed to show he had a pecuniary interest in appealing the order and, thus, dismissed the appeal for lack of standing. Novoa did not appeal the dismissal to this court, and the bankruptcy case closed.
Nearly a year after the bankruptcy court filed the agreed order, Novoa, represented by new counsel, moved to reopen the bankruptcy proceeding so that he could file a motion to vacate the order as void under Rule 60(b)(4). The bankruptcy court denied the motion. Novoa filed a motion to reconsider the order denying the motion to reopen, elaborating on his argument. He claimed that the agreed order was void because the bankruptcy court exceeded its statutory powers when it “destroyed a covenant” in his insurance policy. The bankruptcy court denied the motion to reconsider.
Novoa unsuccessfully appealed to the district court. He now appeals to this court, arguing that the bankruptcy court’s agreed order is void under Rule 60(b)(4).
II;
Ordinarily, “‘the finality of [a] Bankruptcy Court’s orders following the conclusion of direct review’ would ‘stan[d] in the way of challenging [their] enforceability.’ ” United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 269, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010) (quoting Travelers Indem. Co. v. Bailey, 557 U.S. 137, 140, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009)). But Rule 60(b) provides an exception to finality. Id. Rule 60(b)(4) allows a court to relieve a party from a final judgment if “the judgment is void.” Fed. R. Civ. P. 60(b)(4). A void judgment is a legal nullity. Espinosa, 559 U.S. at 270, 130 S.Ct. 1367. And “absent extraordinary circumstances ... the mere passage of time cannot convert an absolutely void judgment into a valid one.” Jackson v. FIE Corp., 302 F.3d 515, 523 (5th Cir. 2002). Thus, “there is no time limit on Rule 60(b)(4) motions, and ... the doctrine of laches has no effect.” Id.
We generally review the denial of a Rule 60(b) motion for abuse of discretion. FDIC v. SLE, Inc., 722 F.3d 264, 267 (5th Cir. 2013). But when the motion is based on a void judgment under rule 60(b)(4), “the district court has no discretion—the judgment is either void or it is not.” Jackson, 302 F.3d at 522 (internal quotation marks and citation omitted). “If the judgment is void, the district court must set it aside.” Id. (internal quotation marks and citation omitted). Our review of a denial of a Rule 60(b)(4) motion thus is effectively de novo. SLE, Inc., 722 F.3d at 267.
A void judgment is “one so affécted by a fundamental infirmity that the infirmity may be raised even after the judgment becomes final.” Espinosa, 559 U.S. at 270, 130 S.Ct. 1367. “The list of such infirmities is exceedingly short.” Id. Rule 60(b)(4) applies “only in the rare instance where a judgment is premised either on a certain type of jurisdictional error or on a violation of due process that deprives a party of notice or the opportunity to be heard.” Id. at 271, 130 S.Ct. 1367. We have found jurisdictional errors warrant relief under Rule 60(b)(4) when “the initial court lacked subject matter or personal jurisdiction.” Callon Petroleum Co. v. Frontier Ins., 351 F.3d 204, 208 (5th Cir. 2003). A judgment is not void simply because it is or may have been erroneous. Espinosa, 559 U.S. at 270, 130 S.Ct. 1367. That, of course, is always the argument of a party seeking to overturn a judgment, so reading Rule 60(b)(4) that broadly would undermine the interest in finality.
Novoa does not invoke one of the limited categories of Rule 60(b)(4) relief in arguing that the bankruptcy court lacked subject matter or personal jurisdiction or that it violated due process. Instead, he argues judgments are also void if they are a clear “usurpation of power.” He alleges the agreed order was such a usurpation because Congress did not grant the bankruptcy court authority to “extinguish” part of his insurance contract. Although Novoa frames his arguments in terms of the bankruptcy court’s power under the Bankruptcy Code, he points to no statement from Congress indicating that the Code’s limitations regarding contract reformation are jurisdictional; instead he says the bankruptcy court did not adhere to the Code’s requirements, including by not complying with required procedures. See Arbaugh v. Y&H Corp., 546 U.S. 500, 515-16, 126 S.Ct 1235, 163 L.Ed.2d 1097 (2006) (“[W]hen Congress does not rank a statutory limitation ... as jurisdictional, courts should treat the restriction as nonjurisdic-tional in character.”); Espinosa, 569 U.S. at 271, 130 S.Ct. 1367 (holding that a statutory precondition to issuing a particular type of order is not a limitation on a bankruptcy court’s jurisdiction).
Novoa quotes Espinosa for the proposition that, regardless of the issuing court’s jurisdiction, orders are void if they are a “clear usurpation of power.” He misunderstands the significance of that phrase in Espinosa. Espinosa used the phrase to describe a court usurping its jurisdictional power, not an independent reason for voidness. 559 U.S. at 271, 130 S.Ct. 1367 (“[Tjotal want of jurisdiction must be distinguished from an error in the exercise of jurisdiction, and ... only rare instances of a clear usurpation of power will render a judgment void.”) (quoting United States v. Boch Oldsmobile, Inc., 909 F.2d 657, 661-62 (1st Cir. 1990)); see also Boch Oldsmobile, Inc., 909 F.2d at 661-62 (considering only whether there was a total want of subject matter or personal jurisdiction or a violation of due process, and rejecting an argument “that run[ning] afoul of the applicable statutes lead[s] to” a void judgment).
Espinosa went on to reject an argument that an order a bankruptcy court issued without “statutory authority” was void. 559 U.S. at 273, 130 S.Ct. 1367. There, the petitioner was unable to demonstrate a jurisdictional error or a due process violation and thus urged the Court “to expand the universe of judgment defects that support Rule 60(b)(4) relief.” Id. The Bankruptcy Code mandated that a bankruptcy court find undue hardship before discharging student loan debt, yet the bankruptcy court had discharged student loan debt without making such a finding. Id. The Court rejected the contention “that the Bankruptcy Court’s confirmation order [wa]s void because the court lacked statutory authority to confirm [Respondent’s] plan absent a finding of undue hardship.” Id. The Court was not persuaded that the statutory violation—a “legal error”—was “on par with the jurisdictional and notice failings that define void judgments that qualify for relief under Rule 60(b)(4).” Id. at 273, 275, 130 S.Ct. 1367. Like the Court in Espinosa, we are not persuaded that the statutory violation Novoa alleges is the kind of fundamental infirmity that makes judgments void.
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7387276-21464 | ORDER
TERRENCE WILLIAM BOYLE, District Judge.
This case is before the court on the parties’ cross-motions for summary judgment. The court previously dismissed plaintiff’s complaint for failure to state a claim. That decision was reversed on' appeal to the Fourth Circuit, which remanded the case for further proceedings. 829 F.2d 36. For the reasons stated herein, defendants’ motion for summary judgment is granted and plaintiff’s motion for summary judgment is denied.
I. UNDISPUTED FACTS
The court has before it the depositions of defendants Caldwell, Mann and McCrorie, the affidavit and deposition of plaintiff McCauley, and the affidavit of John W. Parker. The court finds the following undisputed facts on the basis of these documents and the allegations in the complaint which defendants have admitted:
The City of Jacksonville issued McCauley a building permit for construction of a 37-unit apartment complex on his property in the Mill Creek Basin of Jacksonville. At that time the property was zoned RA-6, a classification which permitted both single and multi-family construction.
Sewage overflow problems had been occurring in the Mill Creek Basin area of Jacksonville — the location of plaintiff’s property — during periods of heavy or extended rainfall since the early 1980’s. Caldwell Dep. at 41.
[T]he sewage volume was such that the collection system just could not handle it. And so we were getting overflows at that manhole, at Indian Drive and Gary , Court. And it was spilling onto the street, and we were getting grease, and toilet paper, and feces, and rags and whatever on the pavement in that area. It then, went down behind the Cardinal Village Apartments, and there was an area there that overflowed onto the ground behind the Cardinal Village Apartments. It flowed on down then ■ along Henderson Drive and the North-woods Recreation Center. It would overflow back into the Northwoods Recreation Center, and there was a line back of that that overflowed, and it overflowed onto the grounds in behind that recreation center. And, of course, there was a school next door, and we were concerned — or there was some concern about thé school kids come over and playing, and we would have sewage all over the ground back there. And then it overflowed further downstream in that same — this is the same system that’s coming on downstream, down in the neighborhood of the fire station on Barnes Street, near Jarman, and the water would just — the sewage would just squirt up out of the manholes. And we had essentially the same situation over on River Street, in that any time both pumps came on in the Onslow Mall, or in the Onslow Mall pumping station, that the sewer manhole on River Street would start overflowing. And the customers there, because the line was running completely full — it really wasn’t a health hazard, per se, I guess. But the people could not flush their commodes, or they had difficulty flushing their commodes, because the line was full and it really didn’t have anywhere to go. It did not come back into their house, but it was, I guess at the least, an inconvenience for them.
McCrorie Dep. at 12-13. As a result of fish kills from the sewer overflows, the North Carolina Department of Environmental Management issued a notice of violation to the City for discharging waste without a permit. Id. at 14. The City was required to take necessary action to prevent further overflows and to monitor Mill Creek three times a week. Id. at 16. An engineering study was conducted of the Mill Creek Basin to determine potential solutions. Id. at 19. The possibility of a moratorium on sewer connections was discussed among the public utilities staff considerably before April 1985, when McCau-ley’s building permit was issued. Id. at 19. The staff outlined options to the Water and Sewer Advisory Board, which made recommendations to the City Council. Id. at 20-21. One of the recommendations was a moratorium on new sewer service. Id. at 21. The City gave the sewage' problem a high priority status and contracted to build a larger sewage line and new pumping stations. Id. at 17.
On May 21, 1985, the City Council issued a moratorium on future building permits until its next meeting on June 4. At that meeting the Council continued the moratorium through July 16 and decided that no new sewer connections would be permitted in the Mill Creek Basin. The moratorium contained an exception for building permits issued prior to May 21, 1985.
On June 20 the Chief City Inspector issued a stop order on McCauley’s project upon the instruction of defendant James Caldwell, the Acting City Manager. Caldwell had discussed with defendant A.F. McCrorie, the City’s Utility Director, the availability of séwer service for McCauley’s project. McCrorie advised him that it could not be properly served without extending the sewer main. McCrorie Dep. at 32. No city sewer system can be extended without approval of the North Carolina Division of Environmental Management. Caldwell Dep. at 42. Since the state was aware that the sewer lines which would serve McCau-ley’s project were already at capacity for peak flows, id. at 41, approval could not have been obtained for any extension of the sewer main. Id. at 3, 26, 32, 35, 42-43. In a letter to McCauley dated June 25, 1985, five days after the stop order, Caldwell stated in part:
The City’s past practice and policy is to require the extension of at least an 8" sewer line within a project of this size. As you know, the City Council has placed in effect a moratorium on all extensions of sanitary sewer mains in the Mill Creek basin; therefore I have no choice but to deny application for the 6" sewer connection to service this project.
PI. Exhibit 5. The day after receiving this letter, McCauley’s attorney notified Caldwell that he had already spent a substantial amount of money in reliance on the building permit. McCauley Aff., H 7. McCau-ley’s request to have the matter placed on the agenda for the next City Council meeting, was denied. Id.
On July 9, 1985 the City Council replaced the June 4 moratorium policy with an official “Policy for Limiting Sewer Service in the Mill Creek Sewer Basin,” which incorporated the recommendations of the Water and Sewer Advisory Board (McCrorie Dep. at 23, 26):
The following policy and moratorium is adopted by the City Council in view of the limited capacity of the sewer collector lines as evidenced by City records of overflows during heavy wet weather periods; and in view of the N.C. Division of Environmental Management’s notification of State-imposed restrictions. Consequently, the purpose of this policy is to allocate the limited remaining sewer capacity by rationing service until such time as the Mill Creek Interceptor is constructed. It is the intent of the City of Jacksonville to restrict development to single family residential along existing sewer lines and to honor contractual obligations for sewer service, existing on May 21, 1985, when the City Council initially adopted a moratorium. The City has been advised by the Director that the State Environmental Management Commission will issue a “Special Order by Consent” restricting sewer extensions and connections in the Mill Creek Basin pursuant to N.C. General Statutes 143-215.67.
The policy and moratorium contains the following provisions:
I. Sewer Main Extensions
There shall be no extensions of mains connecting to the City sewer system within designated portions of the Mill Creek Basin to serve new development.
II. Sewer Connections
There shall be no additional connections to the City public sewer system within the designated portions of the Mill Creek sewer basin except where a proper connection can be made:
A. to an existing sewer main which is contiguous to a lot of record as of May 21,1985 and such lot is to be developed for single-family, detached occupancy or the equivalent commercial occupancy, not requiring more than a four inch (4") tap; or
B. where a general subdivision plan has been approved by the City Council and the sewer mains have been installed or were under construction on May 21, 1985, and were approved for service to single-family residential lot development.
PI. Exhibit 1.
The North Carolina Department of Insurance refused McCauley’s July 15 appeal of the stop order on the ground that it had jurisdiction only over stop orders issued for alleged violations of the state building code. On September 3,1985 the City Council redefined the RA-6 zoning classification to exclude multi-family units. This change would not prevent McCauley’s project from going forward as a non-conforming use once sewer service becomes available. Mann Dep. at 41, 45. However, McCauley states that he cannot obtain financing for a non-conforming use, and therefore “the combined actions of the City have effectively destroyed my possibility of constructing the project as planned.” McCauley Aff., 1112.
II. CLAIMS FOR RELIEF
The Fourth Circuit summarized McCau-ley’s claims for relief as follows:
... McCauley’s complaint alleged that his planned apartment complex would have supplied low-income housing in Jacksonville and would have been racially integrated, alleviating in part the racial segregation of housing in the city. He alleged that the actions of city officials in imposing the stop order, denying the sewer connections, and rezoning had both the purpose and the effect of denying housing opportunities on the basis of race. He also alleged that the city’s actions were “arbitrary, capricious, irrational, pretextual, premised upon trivial reasons, and were not necessary to serve any legitimate or compelling governmental interest.” He claimed that these actions violated the fifth and fourteenth amendments, the Fair Housing Act, 42 U.S.C. §§ 3604, 3608, and 3617, and the Civil Rights Acts of 1866 and 1871, 42 U.S.C. §§ 1981, 1982, and 1983. He also asserted state pendent claims for breach of contract, interference with contractual relations, and negligence.
McCauley v. City of Jacksonville [829 F.2d 36 (table)] (4th Cir.1987).
A. Racial Discrimination Claims
A prima facie case of racial discrimination under Title VIII (the Fair Housing Act) is established by showing either (1) that the act or practice complained of was racially motivated or (2) that it has a racially discriminatory impact. Betsey v. Turtle Creek Associates, 736 F.2d 983, 986 (4th Cir.1984).
(1) Racial Motivation
In support of a showing of racially discriminatory intent, McCauley states in his affidavit that he provides housing to minorities through other projects and that “I believe that this had some influence on the pattern of actions which the City took in regard to my planned apartment project; in fact, I have been informed that Councilman Grady stated that he didn’t like ‘my kind of construction.’ ” McCauley Aff., ¶ 13. Viewed in the light most favorable to McCauley, one can infer from this hearsay testimony, unobjected to by defendants, that Councilman Grady more likely than not opposed the project for racial reasons. However, it does not follow that one can also infer that the actions of the City Council were racially motivated. As the Supreme Court has noted: “Inquiries into congressional motives or purposes are a hazardous matter.... What motivates one legislator to make a speech about a statute is not necessarily what motivates scores of others to enact it, and the stakes are sufficiently high to eschew guesswork." United States v. O’Brien, 391 U.S. 367, 383-84, 88 S.Ct. 1673, 1682-83, 20 L.Ed.2d 672 (1967). Eschewing guesswork here, the court finds that McCauley has failed to establish a prima facie case of discriminatory intent.
Even if the court found otherwise, defendants would still be entitled to summary judgment on this claim, since they may overcome a prima facie showing of discriminatory intent by articulating some “legitimate, non-discriminatory reason for the challenged practice.” Betsey, 736 F.2d at 988 (quoting McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973)). The City Council’s stated purpose of “allocating] the limited remaining sewer capacity by rationing service” constitutes a legitimate, non-discriminatory reason for preventing further multi-family development in the Mill Creek Basin via the sewer moratorium policy and changes in permitted use.
(2) Racial Impact
McCauley also argues that “[wjhether the City of Jacksonville intended explicitly to prevent housing opportunities for minorities, the City’s actions which, in combination, have prevented the construction of my project, have had the effect of denying housing opportunities to moderate to low-income families, including a higher percentage of minority families, which I had anticipated having as tenants.” McCauley Aff., 1113. McCauley expected to rent his units for $345 a month plus utilities, or $245 a month plus utilities if the North Carolina Housing Finance Agency granted his application for a loan subsidy. McCauley Dep. at 28. He intended to build the complex with or without the subsidy. Id. at 34. If he received the subsidy, then he would have been required to rent 80 percent of the units to “moderate to low-income” families, defined as anyone with an income up to $31,500. Id. at 28, 51-52. He admitted that this would include most of the people in Jacksonville. Id. at 52, 65. In fact, he stated that “[jjust about anybody around here ... wouldn’t have any problem qualifying to rent one of them.” Id. at 56.
The undisputed evidence thus reveals that most of the local population, black and white, would have qualified to rent the 80 percent of the units limited to low and medium-income families under the subsidy restriction, assuming McCauley would have received the subsidy to begin with. There is no evidence in the record from which one could infer that a significantly higher percentage of these families would have been black. The court therefore finds that McCauley has failed to establish a prima facie case of disparate racial impact. Again, defendants would be entitled to summary judgment even if the court found otherwise, since they are able to prove a business necessity sufficiently compelling to justify the challenged practice. See Betsey, 736 F.2d at 988.
B. Due Process Claims
McCauley claims that the defendants’ actions in suspending his building permit and denying sewer service deprived him of procedural and substantive due process. Before considering these claims on the merits, it must initially be determined whether state law afforded McCauley a protectable property interest in the permit sufficient to trigger federal due process guarantees. Scott v. Greenville County, 716 F.2d 1409, 1418 (4th Cir.1983). The rule in North Carolina is that the issuance of a building permit creates a vested right to build where the permittee, acting in good faith, has made substantial expenditures in reliance upon the permit at a time when they did not violate declared public policy. Keiger v. Board of Adjustment, 281 N.C. 715, 719, 190 S.E.2d 175 (1972). The undisputed evidence shows that McCauley did make substantial expenditures in good faith reliance upon his permit before the stop order was issued. He therefore held a cognizable property interest to which federal due process protection extended.
(1) Procedural Due Process
McCauley contends that he “was denied procedural due process when his building permit was suspended by Defendants’ stop order without an opportunity for a hearing for Plaintiff to contest the suspension and subsequent denial of his application for sewer connections.” He maintains that his only redress was to the Jacksonville City Council, since the Department of Insurance refused his appeal. In response to defendants’ assertion that he could have sought review from the Board of Adjustment, McCauley argues that the Board only has jurisdiction over zoning matters. However, the Board is specifically authorized “[t]o hear and decide appeals where it is alleged that there is error in any order, requirement, decision, or determination made by the building inspector.” Jacksonville City Code § 25.24(C)(1). The stop order on McCauley’s project was issued by R.L. Davis, the Chief City Inspector, and therefore subject to the Board’s power of review as set forth in this provision. Although McCauley states that he was told by the city staff that the Board of Adjustment was not the proper body to appeal to, McCauley Aff., II10, this hearsay does not create a disputed issue of material fact, since the extent of the Board’s jurisdiction is a matter of law. It is entirely possible that the Board, for whatever reason, may have declined to hear McCauley's appeal, in which ease his due process claim would have much greater weight. However, McCauley did not attempt to utilize this avenue of review, and therefore the court finds that he was not denied procedural due process.
(2) Substantive Due Process and Equal Protection
McCauley also contends that “Defendants’ actions in denying sewer service to his planned apartment project were arbitrary, capricious, irrational, premised upon trivial reasons and not necessary to serve any legitimate or compelling government interest, and thus amount to a violation of his Fourteenth Amendment right to substantive due process.” He submits evidence disputing the determination of defendant A.F. McCrorie, the City’s Utilities Director, that an extension of the eight-inch sewer main was necessary to service his project. According to John Parker, who prepared the preliminary plot plan, the three six-inch connections to the sewer main indicated in the plan would have been sufficient to provide adequate sewer service, and an extension of the main was unnecessary. Parker Aff., 116. Parker states that he was unaware of any policy which would require a sewer-main extension to serve a project such as McCauley’s and that he would not have prepared the plan with three six-inch connections if he had reason to believe that such a policy existed. Id., ¶ 8. Parker also states that he is aware of three multi-unit projects equivalent in size to McCauley’s and one that is larger in the City of Jacksonville which were not required to have sewer main extensions. Id., ¶¶ 9, 10.
The Fourth Circuit has recognized that arbitrariness, abuse of discretion, caprice or unfairness may give rise to a constitutional claim in official permit processing actions. See Scott v. Greenville County, 716 F.2d 1409, 1419-21 (4th Cir.1983). Parker’s testimony does create a disputed issue of whether the determination that McCauley’s project could not be serviced by sewer connections and instead required a sewer main extension was arbitrary. However, this issue is immaterial to McCauley’s substantive due process claims, because in addition to halting sewer extensions, the July 9 sewer moratorium policy also disallowed sewer connections for multi-unit construction, regardless of whether a building permit had been issued. In other words, McCauley would have been denied sewer service under the July 9 policy even if there had been no determination that an extension was necessary, so the alleged arbitrariness of that determination is irrelevant.
The undisputed evidence clearly shows that the moratorium policy’s distinction between single and multi-family development had a rational basis. There was limited capacity for sewer service in the Mill Creek Basin, and the City had a legitimate interest in rationing the available access among as many property owners as possible by limiting sewer service to single-family development. There is no evidence that McCauley’s project was singled out for special treatment. Indeed, the evidence is to the contrary, since the stop order on McCauley’s project was one of three stop orders issued under the moratorium policy. McCrorie Dep. at 31.
The most that McCauley can show is that the stop order had no rational basis from June 20, when it was issued, to July 9, when the City adopted the official sewer moratorium policy. Although he was deprived of his vested right to build during these 19 days, he was not damaged thereby, since he obviously could not have completed the project. While the stop order may have been issued prematurely, this actually worked in McCauley’s favor, since he would have spent even more money on the project had the City waited until July 9 to stop it. The court finds that defendants are therefore entitled to summary judgment on McCauley’s substantive due process and equal protection claims.
C. Takings Claim
Since McCauley has failed to allege the absence or inadequacy of state procedures to award him just compensation for the allegedly unlawful taking of his permit, this claim will be dismissed without prejudice. See Op. at 282.
D. Pendent State Claims
Because the court finds that summary judgment should be entered in favor of defendants on all federal claims, the pendent state claims should be dismissed as well. United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966).
III. CONCLUSION
In accordance with the above, defendants’ motion for summary judgment is hereby GRANTED, and plaintiff’s motion for summary judgment is hereby DENIED.
SO ORDERED.
. Phase I of the "Mill Creek Interceptor” project was completed in early 1988, and the completion of Phase II (expected in October 1988) will eliminate the sewage problem. Id. at 17-18.
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3838833-12519 | MEMORANDUM OPINION AND ORDER
JOINER, District Judge.
Plaintiff Samuel Bricker has filed this action for injunctive relief and damages pursuant to 42 U.S.C. §§ 1983, 1985, and 1988 against the Michigan Board of Parole, the individual board members, and one parole officer. He claims: (1) that a parole restriction, i. e., that he not work for Central Sanitation Services (CSS) in any capacity, inhibits his right to seek gainful employment, subjects him to financial hardship, and restricts his fundamental rights of liberty; (2) that the Board wrongfully revoked his parole on September 4, 1975, in that it relied on insufficient evidence to justify revocation, thus subjecting plaintiff to re-incarceration, loss of his freedom, and loss of income; (3) that parole officer John Clarke conspired with various unknown individuals to harass plaintiff by imposing unnecessary and onerous conditions of parole on him and subjecting him to a closer supervision than that accorded most parolees; (4) that the Board of Parole is not validly constituted. The respondent has filed a motion to dismiss or in the alternative for summary judgment.
These motions present four issues for resolution: (1) Whether the Michigan Board of Parole is subject to suit under § 1983; (2) Whether the parole condition that plaintiff not work for CSS in any capacity violates plaintiff’s constitutional rights, thus giving rise to a suit for damages and injunctive relief under § 1983; (3) Whether the individual members of the Board of Parole are immune from suit for damages under § 1983; (4) Whether the complaint states a claim regarding the alleged conspiracy of Parole Officer John Clarke.
On October 30, 1973, Samuel Bricker began serving a sentence of six months to four years following a state conviction for conspiracy to commit abortion. After exhausting all appellate remedies in the state courts, the Michigan Board of Parole placed him on parole in June, 1974, and subsequently amended his conditions of parole to restrict him from employment at CSS. Between June 24, 1975 and October 24, 1975, Bricker was reincarcerated for allegedly violating this condition. On October 24, 1975, Bricker was re-released on parole with the same condition of parole. The Board also declined to permit him to be self-employed as a broker for waste removal services because of the difficulties involved in supervising such employment.
The § 1988 Action Against the Board of Parole
The Board of Parole is not a person within the meaning of section 1983 on both claims for damages and injunctive relief for the reasons given by the Supreme Court in Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961), and City of Kenosha v. Bruno, 412 U.S. 507, 93 S.Ct. 2222, 37 L.Ed.2d 109 (1973). Madden v. New Jersey State Board of Parole, 438 F.2d 1189, 1190 (3d Cir. 1971); Paige v. Pennsylvania State Board of Parole, 311 F.Supp. 940, 941 (E.D.Pa.1970); Glancy v. Parole Board of the Michigan Department of Corrections, 287 F.Supp. 34, 36 (W.D.Mich.1968). Therefore, this action cannot be maintained against the Board.
Conditions of Parole Allegedly Giving Rise to § 1983 Claims
Federal courts are loathe to interfere in the administration of state prisons absent a violation of a federal constitutional right, Holt v. Sarver, 442 F.2d 304, 307 (8th Cir. 1971); Burke v. Levi, 391 F.Supp. 186, 189 (E.D.Va.1975). The parole system is a part of the state correctional system in that parole is a form of custody whereby the prisoner leaves his place of incarceration while remaining in the legal custody and control of the Board of Parole until termination of his sentence. Jones v. Cunningham, 371 U.S. 236, 242, 83 S.Ct. 373, 9 L.Ed.2d 285 (1963). That the release of prisoners on parole has become an integral part of the penological system was made clear in Morrissey v. Brewer, 408 U.S. 471, 477, 92 S.Ct. 2593, 2598, 33 L.Ed.2d 484 (1972), when the court stated, “The essence of parole is release from prison, before the completion of sentence, on the condition that the prisoner abide by certain rules during the balance of the sentence.” The Morrissey court recognized that conditions of parole restrict a prisoner’s activities substantially beyond the ordinary restric-r tions imposed by law on the average citizen; thus, a prisoner on parole could be restricted to a particular community, job, or home at the direction of his parole officer. Id. at 478, 92 S.Ct. 2593; Marrero v. Warden, 483 F.2d 656, 661 (3d Cir. 1973), rev’d on other grounds, 417 U.S. 653, 94 S.Ct. 2532, 41 L.Ed.2d 383 (1974).
A state is not constitutionally required to provide for parole. Rose v. Haskins, 388 F.2d 91, 93 (6th Cir. 1968). If the state does provide for parole, it may stipulate its terms and conditions as well as the status of the parolee. Hamilton v. Ford, 362 F.Supp. 739, 742 (E.D. Ky.1973); Singleton v. Shaffer, 313 F.Supp. 1094, 1096 (E.D.Pa.1970). Reasonable conditions restricting state prisoners on parole may be imposed. Forrester v. California Adult Authority, 510 F.2d 58, 61 (8th Cir. 1975).
In Birzon v. King, 469 F.2d 1241, 1243 (2d Cir. 1972), in a habeas corpus proceeding a prisoner whose parole had been revoked argued that a restriction imposed by the parole board preventing him from associating with individuals having criminal records violated his First Amendment freedom of association. The court stated:
“It has been properly held that the Government can infringe the first amendment, rights of prisoners so long as the restrictions are reasonably and necessarily related to the advancement of some justifiable purpose of imprisonment ... By the same token, when a convict is conditionally released on parole, the Government retains a substantial interest in insuring that its rehabilitative goal is not frustrated and that the public is protected from further criminal acts by the parolee.”
The court then found that the challenged restriction was reasonably and necessarily related to the government’s interest in supervising the prisoner’s activities during the term of his sentence and thus did not violate the prisoner’s First Amendment rights.
The court holds that the restriction against working for CSS was shown by the record to be reasonably related to the purpose of the plaintiff’s parole and that the difficulties of supervising a self-employed broker for waste removal services are reasonable grounds for imposing the condition that he not be self-employed.
Although the restrictions may result in diminished income during the remainder of the sentence, there is no indication that plaintiff will be deprived thereby of the right to work at other acceptable employment at a higher salary. Since parole is an extension of confinement, a limitation resulting in diminished income during parole does not constitute a constitutional violation. Had plaintiff remained incarcerated for the entire period of his sentence, his income from prison employment would have been negligible.
This court will not second guess the Michigan Parole Board in its determination that these conditions were necessary to petitioner’s rehabilitation because they would constitute interference with the state penal system without a showing of a violation of federal rights. A federal court will not superimpose its own judgment on the exercise of the parole board’s discretion.
Plaintiff alleges that the Board of Parole members acted wrongfully in ordering that he be closely supervised while on parole. Michigan law provides that the Board of Parole shall specifically state conditions of parole and provide for proper supervision of the parolee in accordance with board rules and pursuant to its discretion. M.C.L.A. § 791.236. Thus, the Board of Parole had discretion to order a “tight parole” with regard to Bricker. In Oyler v. Boles, 368 U.S. 448, 82 S.Ct. 501, 7 L.Ed.2d 446 (1962), the Supreme Court held that a conscious exercise of selective enforcement of criminal statutes is not in itself a federal constitutional violation unless the selection is based on an unjustifiable standard such as race or religion. Bricker cannot prevail on his claim that he was more rigorously supervised than other parolees absent an allegation that such supervision resulted from the use of an unjustifiable standard.
The court will dismiss Brick-er’s claim that the Parole Board relied on insufficient evidence in its findings that Bricker violated his parole. There is no allegation that the required Morrissey hearings were not held. In addition the court will not examine the factual basis for the parole board’s determination that a parole violation had occurred. Since plaintiff is attacking his reincarceration in a state prison, it would appear that he cannot cast this claim as a civil rights claim. Preiser v. Rodriguez, 411 U.S. 475, 93 S.Ct. 1827, 36 L.Ed.2d 439 (1973). The plaintiff raised the identical issue in a prior habeas petition, dismissed by this court on September 5, 1975, for failure to exhaust state remedies, In Re Bricker, Civil Action No. 5-71644 (E.D.Mich.). By clothing this claim in civil rights raiment plaintiff hopes to circumvent the exhaustion requirement. For the purpose of this motion the court accepts the allegation that the Parole Board’s determination that plaintiff had violated parole might have been erroneous, but the Board’s errors should be corrected through the state appellate process.
Immunity
Defendants argue that Parole Board members are immune from a suit for damages under § 1983 for the same reason that judges are immune from such suits. Pierson v. Ray, 386 U.S. 547, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967). Plaintiff responds citing Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), and Wood v. Strickland, 420 U.S. 308, 95 S.Ct. 992, 43 L.Ed.2d 214 (1975). In Pierson, supra, the Supreme Court held that judges are immune from liability under § 1983:
“This immunity applies even when the judge is accused of acting maliciously and corruptly, and it ‘is not for the protection or benefit of a malicious or corrupt judge, but for the benefit of the public, whose interest it is that the judges should be at liberty to exercise their functions with independence and without fear of consequences.’ [citations omitted.] It is a judge’s duty to decide all cases within his jurisdiction that are brought before him, including controversial cases that arouse the most intense feelings in the litigants. His errors may be corrected on appeal, but he should not have to fear that unsatisfied litigants may hound him with litigation charging malice or corruption. Imposing such a burden on judges would contribute not to principled and fearless decision-making but to intimidation.”
Id., 386 U.S. at 554, 87 S.Ct. at 1218.
Scheuer v. Rhodes, supra, holds that officials of a state executive government enjoy only a qualified immunity from § 1983 lawsuits. Scheuer held that state executive officers are not absolutely immune from suit under § 1983 and that a “qualified immunity is available to officers of the executive branch of Government,” the degree of immunity varying with the scope of responsibility, the discretion of the office, and all the circumstances as they reasonably appeared at the time of the acts in question. The court stated that officers with a broad scope of duties and authority must often act swiftly and firmly at the risk that action deferred will be futile and that officials, like legislators and judges, should be able to rely on their customary sources for the factual information on which they make decisions and act. 416 U.S. at 246, 94 S.Ct. 1683. In Wood v. Strickland, supra, the court held that school board members are entitled to a good faith immunity from suit for damages under § 1983. Thus, if the school board members knew or reasonably should have known that their actions would violate a student’s constitutional rights or if they acted with a malicious intention of depriving students of their constitutional rights or otherwise doing them injury, they would be liable for damages under § 1983.
The court does not believe that the qualified immunity described in Scheuer and Wood applies to Parole Board members because Parole Board members are not like executive government officials or school board members. In deciding to grant, deny, or revoke parole, they act in a quasi-judicial capacity, as an arm of the sentencing judge, just as prosecuting attorneys act in a quasi-judicial capacity in bringing criminal actions.
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832037-17228 | PHILLIPS, Chief Judge.
This appeal involves yet another effort to make a federal case out of litigation which belongs in the State courts. Ohio Inns v. Nye, 542 F.2d 673, 676 (6th Cir. 1976), cert. denied, 430 U.S. 946, 97 S.Ct. 1583, 51 L.Ed.2d 794 (1977).
Appellants Charles F. Studen, his wife Berta Studen, and their wholly owned corporation, Donray Products Company, filed this action alleging denial of their civil rights in violation of 42 U.S.C. §§ 1983 and 1985. The complaint alleges that appellees, present or former officials of Mayfield Village, Ohio, conspired to deprive plaintiffs-appellants of equal protection of the laws and denied them due process and equal protection. Appellants assert their constitutional rights were violated by: (1) the enactment of Mayfield Ordinance No. 72-2, which rezoned substantial acreage within the Village, including the property of appellants, from three tiered zoning to single family residential use; and (2) the failure of the Village to grant a 1973 building permit requested by Donray Products for expansion of existing production and distribution facilities on the property in question.
The district court dismissed the complaint, sua sponte, holding there was no federal jurisdiction. On appeal this court vacated the judgment of dismissal and remanded the action in the following order:
On receipt and consideration of the briefs and records in the above-styled case; and
Noting that plaintiffs’ complaint alleges in part:
32. (c) By reason of this 1973 Zoning amendment, the defendants have rezoned an open area, existing between the industrial use and Interstate Highway 271, at a place where no public sewer or water is available, and at a place where the ground water supply has been seriously questioned, and at a place where the texture of the soil is such that any disposal systems would be considered unlikely, thus rendering plaintiffs’ property, not only useless for its present use but useless for the purpose of the intended ordinance.
(d) The Zoning ordinance as applies to the subject property has the effect of, and has in fact, constituted a taking of the plaintiffs’ property, rights and privileges without due process of law and has in fact denied plaintiff equal protection of the law.
And further believing that these allegations (as well as others alleging a conspiracy to deprive plaintiffs of equal protection of the laws) do serve to assert a claim of federal constitutional deprivation which we are required to accept at face value, since this case was dismissed sua sponte without answer or hearing; and
Further being unable to perceive any basis for abstention, either under the Pullman doctrine (Railroad Commission v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941); Harman v. Forssenius, 380 U.S. 528, 85 S.Ct. 1177, 14 L.Ed.2d 50 (1965); Lake Carriers’ Assn. v. MacMullan, 406 U.S. 498, 92 S.Ct. 1749, 32 L.Ed.2d 257 (1972)), or the Alabama Power doctrine (Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943); Alabama Public Service Commission v. Southern Ry., 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (1951));
The judgment of the District Court is vacated and the case is remanded to the District Court for further proceedings.
After a trial on the merits, Senior District Judge Ben C. Green entered detailed findings of fact and conclusions of law and again dismissed the action on the ground that plaintiffs had failed to demonstrate any deprivation of federally protected civil rights.
We affirm.
I
In 1935, Mayfield Village promulgated a comprehensive zoning plan by Ordinance No. 159. The 7.8 acre parcel of land which is the subject of this appeal, and contiguous land totaling some 350 acres, were zoned initially for single family residential use only.
The zoning plan was amended in 1962 by Mayfield Village Ordinance Nos. 763 and 764, which created a three tiered zoning plan providing for residential, office-laboratory (hereinafter commercial) and production-distribution (hereinafter industrial) districts.
In 1967, appellants purchased 7.8 acres of land which was subject to the three tier zoning. The first 350 feet depth of this property was zoned for residential use and the balance for commercial use, except for a small triangular portion located in the northeast corner which was zoned for industrial use. Appellants acquired the land with the intention of converting an existing structure located thereon into a manufacturing plant.
The district court found that Village officials, in the course of reviewing appellants’ application for a building permit, examined a surveyor’s drawing of the property which had been prepared by the previous owner. That document erroneously depicted the existing building as being bisected by the zoning demarcation line separating commercial and industrial districts.
Pursuant to appellants’ application, a building permit was issued, but under a mistake of fact. Contrary to the surveyor’s drawing, the building was located entirely within the commercial district. Under the provisions of the 1962 zoning ordinances, the building could not be used for industrial purposes. It is unclear where the fault lay for this surveying error. Village officials say they relied on the survey furnished by appellants. Appellants assert that both their survey and a Village survey were referred to in ascertaining the location of the building.
The facts concerning the correct location of appellants’ building were not discovered by Village officials until 1973 and were not disclosed to appellants until 1976. In the meantime, appellants had remodeled the building and, in 1970, commenced fabrication of plastic foam products on the premises.
In 1971, the Village zoning plan again was amended by Ordinance No. 72-2. Approximately 200 acres, including the 7.8 acres owned by appellants, were rezoned to their 1935 residential status. Appellants contend the 1971 ordinance was politically motivated and enacted as a result of anti-industrial animus on the part of Village officials.
Commencing in March 1973, appellants made a series of contacts with the Village Planning and Zoning Commission in an effort to obtain a permit to expand the Don-ray plant. The minutes of the Commission meeting, held May 14, 1973, indicate that appellants’ representatives were informed of certain deficiencies in their proposed expansion plans and were specifically told by the Village Solicitor that a zoning variance would be necessary before the proposed addition could be permitted. Appellants advised Village officials that approval of an expansion plan had already been granted by the Village in 1967, when the initial remodeling permit was issued.
Appellants were invited to attend the July 9, 1973, meeting of the Planning and Zoning Commission and to bring with them any documentation which would support this representation. After hearing evidence, the Commission took the matter under advisement and thereafter referred the questions to the Village Solicitor for determination. Subsequently, there appears to have been a breakdown in communication between the parties. The district court found as follows:
It does not appear that the Village Solicitor had any further communications with plaintiffs or their counsel on the subject of Donray Products’ right to expand.
On August 31, 1973 plaintiffs’ attorney sent a letter to defendant Bordonaro, Secretary of the Planning and Zoning Commission, which requested the village to either grant plaintiffs a permit for a nonconforming use or deny the request and state the reasons for the denial. That letter further stated that should no response be received by September 15, 1973 plaintiffs would “assume that no permit will be granted,” and would “take whatever action we deem appropriate.” The village took no action in response to the letter of August 31, 1973 and on November 1, 1973 plaintiffs filed the instant lawsuit.
II
We consider first appellants’ claim under § 1985. In Griffin v. Breckenridge, 403 U.S. 88, 102-03, 91 S.Ct. 1790, 1798-99, 29 L.Ed.2d 338 (1971), the Supreme Court defined the elements of a claim under § 1985(3) as follows:
To come within the legislation a complaint must allege that the defendants did (1) “conspire ...” (2) “for the purpose of depriving, either directly or indirectly, any person or class of persons of the equal protection of the laws, or of equal privileges and immunities under the laws.” It must then assert that one or more of the conspirators (3) did, or caused to be done, “any act in furtherance of the object of [the] conspiracy,” whereby another was (4a) “injured in his person or property” or (4b) “deprived of having and exercising any right or privilege of a citizen of the United States.”
In the same opinion, the Supreme Court said:
The language requiring intent to deprive of equal protection, or equal privileges and immunities, means that there must be some racial, or perhaps otherwise class-based, invidiously discriminatory animus behind the conspirators’ action. The conspiracy, in other words, must aim at a deprivation of the equal enjoyment of rights secured by the law to all. (Footnotes omitted.) 403 U.S. at 102, 91 S.Ct. at 1798.
To like effect, see Ohio Inns, supra, 542 F.2d at 678-79; Cameron v. Brock, 473 F.2d 608, 610 (6th Cir. 1973); Hopkins v. Wasson, 329 F.2d 67 (6th Cir.), cert. denied, 379 U.S. 854, 85 S.Ct. 102, 13 L.Ed.2d 57 (1964).
We agree with the holding of the district court that there was a total failure of evidence on this issue. The record is devoid of any evidence suggesting the existence of a conspiracy, or any acts on the part of Village officials, directed at appellants because of their membership in a defined class. See Ellentuck v. Klein, 570 F.2d 414, 426 (2d Cir. 1978); Atkins v. Lanning, 556 F.2d 485, 489 (10th Cir. 1977); Elmwood Properties, Inc. v. Conzelman, 418 F.2d 1025, 1027-28 (7th Cir. 1969), cert. denied, 397 U.S. 1063, 90 S.Ct. 1498, 25 L.Ed.2d 684 (1970).
Ordinance No. 72-2 affected substantial acreage in addition to the tract owned by appellants. The rezoning had an impact on a number of property owners with diverse existing uses. Further, there is no evidence that denial of the building permit by Village officials was based on any factor other than location of the Donray plant in a nonindustrial district.
The district court found as follows:
In regard to plaintiffs’ argument that Ordinance No. 72-2 was politically motivated, there is no question that defendants Beebe and Bordonaro campaigned for office on a platform which promoted the retention of the basically residential nature for Mayfield Village, and that the introduction of Ordinance No. 72-2 was consistent with that position. However, the Court finds that in passing Ordinance No. 72-2 the village officials were simply responsive to the desire of their constituency to maintain the basically residential character of the Village of Mayfield. The mood of the village with respect to industrial development in the period preceding this lawsuit is exemplified by the formation of the Mayfield Civic League, an association of citizens which was organized for the stated purpose of promoting and protecting the interests of homeowners within the village. A further indication of the desires of defendants’ constituency is found in the fact that in 1967, by a two-thirds majority, an initiative and referendum was passed which vitiated Ordinance No. 7001, which had rezoned a large tract of land in the northwesterly section of the village from single-family residential to production-distribution use. Having taken the preceding factors into account it appears to the Court that defendants in fulfilling their campaign promises were simply honoring the desires of the majority of village residents. The Court finds nothing unlawful in defendants keeping their campaign promises, provided that 72-2 was not specifically aimed at plaintiffs for the purpose of driving their business from the village.
With respect to the contention that Ordinance No. 72-2 was aimed at plaintiffs’ operation, the Court finds a failure of proof on this issue. Numerous other landowners were affected by the enactment of Ordinance No. 72-2. While plaintiffs had the only functioning industrial use at the time 72-2 was enacted, in fact all landowners in the area subject to the rezoning were deprived of the right to use their property for any purpose other than single-family residence use.
* * * * * *
With respect to plaintiffs’ conspiracy claim, the Court finds a complete lack of evidence to support the allegation of a conspiracy to deprive plaintiffs of equal protection of the laws in violation of 42 U.S.C. § 1985. Upon being questioned at trial as to what action had been taken by each of the named defendants in order to deprive him of his civil rights, Mr. Studen stated that he did not know. The record is virtually devoid of evidence of acts by defendants other than Bordonaro and Beebe relating to the enactment of 72-2 or the events pertaining to plaintiffs which transpired thereafter. Therefore, the Court must conclude that plaintiffs’ theory of conspiracy was based on the fact that the named defendants other than Messrs. Bordonaro and Beebe held village offices, and that they may have voted in favor of the passage of Ordinance No. 72-2. Such conduct does not constitute evidence of an unlawful conspiracy.
Ill
Appellants’ § 1983 claim is grounded on the contention that they were denied due process and equal protection. In ruling on these contentions, the district court held:
In regard to plaintiffs’ assertion that defendants’ preference for residential development over industrial use in the enactment of Ordinance No. 72-2 constituted a denial of plaintiff’s right to equal protection, the mere fact that the May-field zoning plan favored residential use does not make out a case for denial of equal protection of the laws. All zoning plans have inherent within them a discrimination between the various land uses permitted thereunder. Under the facts of this case there is no distinction in treatment between plaintiffs and any similarly situated property owners. Consequently, the classification to which plaintiffs have been subjected is that which permeates all zoning, and does not amount to a denial of equal protection.
Plaintiffs have attempted to mount an equal protection argument on the basis that at the time of the enactment of Ordinance No. 72-2 defendants knew that plaintiffs would be unable to develop their land for single-family residence use, and that such development could only be carried out in combination with other tracts. The Court finds this allegation not to be well supported by the record, in that evidence was presented at trial which indicated that single-family residential development might be feasible on plaintiffs’ property, given proper planning. Furthermore, it appears to the Court that such considerations go to the question of whether the zoning is constitutionally impermissible under the standards of Euclid v. Ambler Realty Co., 272 U.S. 365, 395 [47 S.Ct. 114, 71 L.Ed. 303] (1926) as being “clearly arbitrary and unreasonable, having no substantial relation to the public health, safety, morals or general welfare.” The Supreme Court has recently indicated, as has been the generally accepted view, that such a conventional attack on the validity of zoning is a matter to be resolved in state court. City of Eastlake v. Forest City Enterprises, 426 U.S. 668 [676-677, 96 S.Ct. 2358, 2363-2364], 49 L.Ed.2d 132, 139 (1976).
We agree with the district court that appellants failed to establish a denial of equal protection. See Village of Belle Terre v. Borass, 416 U.S. 1, 5-8, 94 S.Ct. 1536, 39 L.Ed.2d 797 (1974); Trustees of Mortgage Trust of America v. Holland, 554 F.2d 237, 238 (5th Cir. 1977); Construction Industry Association of Sonoma County v. City of Petaluma, 522 F.2d 897, 905-07 (9th Cir. 1975), cert. denied, 424 U.S. 934, 96 S.Ct. 1148, 47 L.Ed.2d 342 (1976); City of Highland Park v. Train, 519 F.2d 681, 696-97 (7th Cir. 1975), cert. denied, 424 U.S. 927, 96 S.Ct. 1141, 47 L.Ed.2d 337 (1976).
Appellants complain that because they were not advised promptly by Village officials of the true location of their facility, they were denied due process. We agree with the district court:
Plaintiffs, as owner of the subject property, are legally charged with knowing the true location of any structures thereon. The fact that both plaintiffs and . Village officials previously relied upon an inaccurate plat provided by a third party does not alter that fact.
Nor, in our opinion, does the delay amount to a denial of due process.
Appellants further assert they were deprived of procedural due process because Village officials acted without giving appellants benefit of notice, the right of cross-examination, or the right to offer rebutting evidence. This charge is without merit. Appellants have failed to establish a right to more procedural due process than has been accorded on the record in this case. See, South Gwinnett Venture v. Pruitt, 491 F.2d 5, 6-7 (5th Cir. en banc), cert. denied, 419 U.S. 837, 95 S.Ct. 66, 42 L.Ed.2d 64 (1974).
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3855764-18345 | MEMORANDUM DECISION
Before CRAVEN, Circuit Judge, BUTLER, Senior District Judge, and DUPREE, District Judge.
CRAVEN, Circuit Judge:
This is a suit brought pursuant to 42 U.S.C. § 1983 to redress the deprivation of constitutional rights by officers of the state acting under color of state law. The plaintiff’s corporate name is said by its counsel to be a misnomer. Permission to operate as a true “labor union” is not sought. The labor-management relations laws of the United States are thus irrelevant and are not invoked. But it is duly incorporated as an eleemosynary institution under the laws of the State of North Carolina. Its members and officers are inmates of the North Carolina Department of Correction. Its stated purposes are to work legally and peacefully to alter or eliminate practices of the Department of Correction which are thought to be in conflict with the just, constitutional and social interests of all persons.
The defendants are sued in their official capacities, Mr. Jones as Secretary of the North Carolina Department of Correction, and Mr. Edwards as Commissioner of the North Carolina Department of Correction.
The complaint asks for a permanent injunction against all acts of the defendants declared to be unconstitutional, the award of $100,000 in damages, reasonable attorneys’ fees, as well as the usual prayers for the taxation of costs and for such other and further relief as to the court may seem just and proper. We may put some of these prayers to one side.
Damages. Because they are not sued individually, see Burt v. Board of Trustees, 521 F.2d 1201 (4th Cir. 1975), any recovery obtained against these officers of the state would have to be paid out of the state treasury. The eleventh amendment bars such an award against the state, and a § 1983 action against officers of the state falls within the bar of the amendment whenever the monetary impact is upon the state treasury. Edelman v. Jordan, 415 U.S. 651, 662-663, 94 S.Ct. 1347, 1355-1356, 39 L.Ed.2d 662, 672 (1974).
Attorneys’ Fees. 42 U.S.C. § 1983 contains no section authorizing the award of attorneys’ fees to counsel. . Nor does any other act of Congress authorize such an award on the facts of this case. . As will appear below, the rights of the Union and its inmate members are so narrow and the resistance of the defendants so limited it cannot be said that defendants’ conduct amounts to obdurate obstinancy. See Bradley v. School Board, 472 F.2d 318 (4th Cir. 1972), vacated on other grounds, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476 (1974). Since such an award is authorized neither by statute nor federal common law, it must be denied. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L. Ed.2d 141 (1975).
I.
Coming to the question of injunctive relief, what we do not decide in this case is far more important than what we do decide. The most important question is whether prisoners of the state have a constitutional right to join a corporate association of inmates. The Union insists that the first amendment right of
the people peaceably to assemble, and to petition the government for redress of grievances, extends to prisoners and that application of that principle validates the Union and the right of inmates to join it.
The defendants do not counter with a flat denial. Instead they take the moderate position that the right of the prisoners to assemble under the first amendment must be balanced against the need of the state to maintain order, and that the state’s need is great and that of the inmates relatively minor because there are already established procedures for the channeling of grievances, including the legislatively established Inmate Grievance Commission. If we understand the defendants’ position correctly, it is that they fear the possibility of concerted group action but are not gravely concerned with mere association of inmates in the Union. Thus the plaintiff’s contention that the Constitution protects the right of an inmate to join an inmate association is blunted by defendants’ response that it may lawfully regulate such association as to time, manner and place. Instead of being asked by the defendants to hold that plaintiff has no right to exist in the prison system, we are asked instead “to arrive at a balance between the interest of the prisoners in associating together with a prison unit and the interest of the state in maintaining internal security within the prison.” Page 3, Defendants’ Memorandum.
We think the broader question urged by plaintiff is not so sharply presented that we should undertake to decide it. Since the parties agree that the defendants permit inmates to join the Union, our undertaking to decide whether they may do so would be advisory. Indeed, we would lack jurisdiction to do so, but for the peripheral, and much less important questions, that may be said to constitute a case or controversy. See Muskrat v. United States, 219 U.S. 346, 31 S.Ct. 250, 55 L.Ed. 246 (1911).
II.
The lesser questions we do decide are presented us in the following fact context:
1. Inmates are permitted to join a union and have been and are being permitted to join the North Carolina Prisoners’ Labor Union, Inc. Some 2,000 prisoners have already joined. There are no membership dues although dues are authorized by the by-laws. The Union is an organization of inmates associated together for the purpose of working for prison reform.
2. Although permitting membership, the defendants oppose the solicitation of other inmates to join and have made solicitation an infraction of its general disciplinary rules.
3. Not only is personal solicitation by inmate to inmate forbidden but so also is solicitation by correspondence or by newsletter or magazine. Indeed, solicitation by anyone by any means is prohibited.
4. Some newsletters addressed to certain inmates have been returned as non- deliverable. Because of the apprehension that such publications may contain articles slanted to encourage membership the defendants enforce their general rule forbidding the receipt of bulk mail. They will not permit an inmate to receive a bundle to be redistributed by him to other inmates.
5. Union meetings are forbidden. Employees of the Department of Correction are forbidden to negotiate with any person acting as a representative of any union, and no outsider will be admitted into a prison unit for the purpose of soliciting union membership.
6. Disparate treatment is accorded other organizations. Bundles of newsletters are allowed to be received from the Junior Chamber of Commerce, and redistribution to individual inmates is permitted.
7. Inmate members of the JC’s are allowed to hold meetings in the prison units, and those meetings may be attended by outside speakers, outside JC members and friends from free society. The same is true of Alcoholics Anonymous, and in one institution a troop of the Boy Scouts of America has been permitted to operate. Prisoners are permitted to assemble for religious services.
8. Due sometimes to mistake, sometimes to gaps in the formulation of policy and its execution, and especially due to the very nature of this lawsuit, there have been a number of recent incidents amounting to a denial of the sixth amendment right of a prisoner to legal representation. Most of the incidents have involved the utilization of paralegals and the suspicion of lower echelon prison administrators that the paralegals were engaged in soliciting membership rather than in the implementation of this lawsuit or other court proceedings. At no time have the defendants themselves countenanced the denial of legal representation, and it is established policy that the use of paralegals is permitted.
Both plaintiff and defendants propose detailed findings of fact that would enable us to infer whether, as a matter of penology, an inmate union is good or bad. The state has offered in evidence a book by Peter Remick titled In Constant Fear as related to James B. Schuman, a freelance writer. Mr. Remick is an inmate at a Massachusetts prison located at Walpole. His conclusion is that attempts to liberalize traditional prison regulations and to reform Walpole have resulted in chaos and increasing violence. The plaintiff counters with a book, also received in evidence, by Paul W. Keve entitled Prison Life and Human Worth. Mr. Keve has far better credentials than does Mr. Remick, but conversely, he is not so deeply immersed in the subject matter. He has served as Commissioner of Corrections for Minnesota and is now Director of Adult Corrections for the State of Delaware. Generally, he seems to favor more lines of communication between inmate and correctional officer, and to achieve it, favors permitting what he calls inmate councils or organizations of prisoners such as the Union in this case. We have also been furnished depositions and affidavits of other experts and persons experienced in penology including those of the defendants.
There is no consensus. The defendants sincerely believe that the very existence of the Union will increase the burdens of administration and constitute a threat of essential discipline and control. They are apprehensive that inmates may use the Union to establish a power bloc within the inmate population which could be utilized to cause work slowdowns or stoppages or other undesirable concerted activity. Other experts and institution administrators discount these apprehensions. Fred Morrison, Jr., Executive Director of the North Carolina Inmate Grievance Commission and a member of the Legislative Commission on Sentencing, Criminal Punishment, and Rehabilitation, stated in an affidavit filed in this case:
I have read the Constitution and Bylaws of the North Carolina Prisoners’ Labor Union, Inc. and on Christmas Day, 1974, I met personally with several inmate organizers and officers of the Prisoners’ Union (NCPLU) to discuss with them the philosophy and plans of the Union. On this basis, it is my considered opinion that the North Carolina Prisoners’ Labor Union, Inc. does not pose a danger to the North Carolina Department of Correction or the orderly administration thereof. I foresee no threat to rehabilitation or other prison programs, nor do I believe that the Prisoners’ Union poses any threat to the jurisdiction or operation of the Inmate Grievance Commission.
Warden James W. Mullen of the Rhode Island Adult Correctional Institution has permitted the National Prisoners’ Reform Association, to which 99 percent of the inmate population belong, to function in his penitentiary for some four years. He continues to permit it, and while not enthusiastically for it, concludes that it is going in a positive direction and on balance is more helpful than harmful. Director Keve of Delaware points out that work stoppages have occurred at Walpole in Massachusetts and at Jersey State Prison at Lees-burg at a time when neither institution had a union. In his own institution there is a union by the name of Prisoner Action Committee which Keve thinks has in no way endangered the security of the correction system and has sometimes helped management of the prison materially.
On conflicting expert opinion evidence we are left with no firm conviction that an association of inmates is necessarily good or bad, and we decline to make the characterization. It is not necessary that we do so in order to decide the narrow issues remaining in the case.
III.
In a penal system that permits inmates to belong to a corporate union or organization, what are the rights of the prisoners and the union under the first amendment and the equal protection clause of the fourteenth amendment?
We start with the familiar proposition that “[ljawful incarceration brings about the necessary withdrawal or limitation of many privileges and rights, a retraction justified by the considerations underlying our penal system.” Price v. Johnston, 334 U.S. 266, 285 [68 S.Ct. 1049, 1060, 92 L.Ed. 1356] (1948). See also Cruz v. Beto, 405 U.S. 319, 321 [92 S.Ct. 1079, 1081, 31 L.Ed.2d 263] (1972). In the First Amendment context a corollary of this principle is that a prison inmate retains those First Amendment rights that are not inconsistent with his status as a prisoner or with the legitimate penological objectives of the corrections system. Thus, challenges to prison restrictions that are asserted to inhibit First Amendment interests must be analyzed in terms of the legitimate policies and goals of the corrections system, to whose custody and care the prisoner has been committed in accordance with due process of law.
Pell v. Procunier, 417 U.S. 817, 822, 94 S.Ct. 2800, 2804, 41 L.Ed.2d 495, 501 (1974).
We think Pell means that prisoners have a first amendment right to talk about any subject of interest to them that does not conflict with legitimate penological objectives of the institution. In a system that permits membership in a union, we are unable to perceive any substantial governmental interest in suppressing expression on the subject— whether for or against. To permit an inmate to join a union and forbid his inviting others to join borders on the irrational.
The substantial interests of the state in its penal system are the maintenance of “security, order and rehabilitation.” Procunier v. Martinez, 416 U.S. 396, 413, 94 S.Ct. 1800, 1811, 40 L.Ed.2d 224, 240 (1974). “[T]he limitation of First Amendment freedoms must be no greater than is necessary or essential to the protection of the particular governmental interest involved.” Id. We are unable to perceive why it is necessary or essential to security and order in the prisons to forbid solicitation of membership in a union permitted by the authorities. This is not a case of riot. There is not one scintilla of evidence to suggest that the Union has been utilized to disrupt the operation of the penal institutions.
Nor is there any evidence tending to show that the inmates intend to operate it to hamper and interfere with the proper interests of government. Defendants’ apprehension of misuse is not shared by other prison administrators of equal expertise and experience. Although the Union is said to have been active for many months and to number some 2,000 members, the record is bare of any suggestion of concerted activity. If the day should ever come that inmates threaten concerted action to force compliance with their demands and to disrupt prison discipline, the Secretary and the Commissioner are fully empowered to not only stop further solicitation of membership but to put down the Union and its adherents to whatever extent may be necessary to restore and protect security and order.
All that we hold is that the defendants, having permitted membership in a union committed to peaceful means to effect change and reform, may not at the same time forbid solicitation of membership. The same considerations, of course, apply to literature. The defendants may not refuse receipt of the Union’s publications on the ground that they are calculated to encourage membership in the organization or solicit joining.
Nothing we have said is meant to suggest that freedom of speech in the prison context is without limitation. Indeed it is not without limitation elsewhere, e. g., pornography. See Miller v. California, 413 U.S. 15, 93 S.Ct. 2607, 37 L.Ed.2d 419 (1973). Although difficult of enforcement, we doubt not that the administrators could lawfully forbid any discussion of means of escape, and certainly forbid the receipt of literature on the subject. But escape is per se a breach of security. The defendants’ own hypothesis in this case is that the existence of the Union and membership in it are not dangerous, for otherwise they would surely have undertaken to forbid membership.
The other questions presented — whether the Union may mail its literature in bulk at the cheaper rate and whether inmate members may meet together — are soluble, we think, by application of the equal protection clause of the fourteenth amendment. We need not decide these questions in a vacuum because the record is clear that organizations other than the plaintiff union are permitted the bulk mailing privilege and that the administrators allow the JC’s and others to meet within the institutions. In a free society, outside the walls, it is clear that government may not pick and choose depending upon its approval or disapproval of the message or purpose of the group. United States v. Crowthers, 456 F.2d 1074 (4th Cir. 1972).
The question is more difficult in the prison context, but we are inclined to think that the same principle applies except where the activity proscribed is shown to be detrimental to proper penological objectives, subversive to good discipline, or otherwise harmful. We do not mean to suggest that prison administrators must await the convening of a court to decide whether a given activity is likely to engender unrest and disruption or pose a threat to the security of the institution. Instead, we recognize that they must act quickly and upon their best judgment in appraising potential danger. But whether or not this particular union will prove to be in the long run harmful or beneficial, there is nothing in this record to support a finding of present danger to security and order. Absent such an indication, we hold that the defendants must accord to the Union and the inmate members the same privileges accorded other organizations of inmates — neither more nor less. In so holding we think it appropriate, for purposes of clarity, to affirm these propositions:
1. Whatever right of association, if any, prisoners derive from the first amendment, they have no right to form or belong to a labor union for the purpose of taking concerted action to force their demands upon prison administrators.
2. With or without the utilization of a union, inmates may not lawfully band together to resist prison discipline.
3. Prison administrators may lawfully refuse to negotiate requests or demands from any group of prison inmates whether or not organized as a union or association of prisoners.
4. Prison administrators may refuse to contract with any group or union of inmates; moreover, any such contract is void under the law of North Carolina and of no effect whatsoever. Adkins v. City of Charlotte, 296 F.Supp. 1068 (W.D.N.C.1969).
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6892112-8645 | OPINION
KOZINSKI, Circuit Judge:
In bankruptcy, it’s the trustee’s job to manage the estate. Often, this means liquidating all the estate’s assets and distributing the proceeds to creditors, shareholders and other interested parties. Some of the proceeds are awarded to the trustee as compensation, which is calculated based on the value of the assets he disburses. We address whether the trustee’s compensation may reflect the value of what is known as a “credit bid.”
FACTS
Hokulani Square, Inc., filed for bankruptcy in May 2007. Bradley Tamm was appointed as the chapter 7 trustee. One of Hokulani’s principal assets was a set of condominiums that exposed the estate to serious liabilities. Recognizing the risks of owning the condominiums, Tamm moved to auction them off. Two groups of secured creditors, both of which had liens on the condominiums, jointly submitted the winning bid at $1.5 million.
To pay, the secured creditors exercised their right to credit bid under 11 U.S.C. § 368(k). This means that they used the money the estate owed them, rather than cash, in making their bid. In such a transaction, the creditors get the property, and the estate’s debt is reduced by the amount of the bid.
Tamm petitioned the bankruptcy court for compensation in the amount of $109,293. He came up with this number by including the $1.5 million credit bid in his calculations. The United States Trustee objected on the ground that including the value of the credit bid was not authorized by 11 U.S.C. § 326(a). Excluding the credit bid would reduce Tamm’s fee by approximately $40,000.
The bankruptcy court awarded Tamm the full $109,293, but the Ninth Circuit Bankruptcy Appellate Panel (BAP) reversed. Tamm appeals. We have jurisdiction under 28 U.S.C. § 158(d) and review the BAP’s interpretation of section 326(a) de novo. See In re Sasson, 424 F.3d 864, 867 (9th Cir.2005).
DISCUSSION
1. The bankruptcy court has discretion to award a trustee fees up to a cap that is calculated as a percentage of “all moneys disbursed or turned over in the ease by the trustee to parties in interest.” 11 U.S.C. § 326(a) (emphasis added). Because “moneys disbursed or turned over” isn’t defined in the Code, it retains its ordinary meaning. See Ransom v. FIA Card Servs., N.A., 562 U.S. 61, 131 S.Ct. 716, 724, 178 L.Ed.2d 603 (2011). There are numerous ways to define “moneys,” but dictionaries mostly agree that the term refers to a generally accepted medium of exchange. See, e.g., Third New Int’l Dictionary 1458 (2002) (“something generally accepted as a medium of exchange, measure of value, or a means of payment”); Black’s Law Dictionary 1158 (10th ed. 2014) (“The medium of exchange authorized or adopted by a government as part of its currency; esp. domestic currency”); Oxford English Dictionary 992 (2d ed.1989) (“[cjurrent coin ... in pieces of portable form as a medium of exchange and measure of value”). It’s also clear that “disburse” means to “pay out,” Black’s Law Dictionary 561 (10th ed.2014), and “turn over” means to “deliver” or “surrender,” Webster’s New Collegiate Dictionary 1262 (8th ed.1977). Taken together, this language seems to say that the trustee may collect fees only on those transactions for which he pays interested parties (in this ease, secured creditors) in some form of generally accepted medium of exchange.
In a credit bid transaction, the trustee turns property over to the creditor, and the creditor reduces the amount the estate owes him by the value of his bid. The only thing “disbursed or turned over” by the trustee is the underlying property, in this case, a set of condominiums. However broadly we define “moneys,” the term can’t be expansive enough to encompass real estate, which is about as far from a “medium of exchange” as one can get. See, e.g., Ping Cheng, et al., Illiquidity and Portfolio Risk of Thinly Traded Assets, 36 J. Portfolio Mgmt. 126, 126 (2010) (categorizing real estate as a highly illiquid asset). Congress elected to restrict the trustee’s maximum compensation using the narrow term “moneys,” as opposed to a broader term such as “property” or “assets,” and we must “assume that the legislative purpose is expressed by the ordinary meaning of the words used.” INS v. Phinpathya, 464 U.S. 183, 189, 104 S.Ct. 584, 78 L.Ed.2d 401 (1984) (internal quotation marks omitted).
The statute’s legislative history confirms this view. A report of the House Judiciary Committee says that section 326(a) covers “the situation where the trustee liquidates property subject to a lien and distributes the proceeds.” H.R.Rep. No. 95-595, at 327 (1977), 1978 U.S.C.C.A.N. 5963. The report is careful to note that section 326(a) “does not cover cases in which the trustee simply turns over the property to the secured creditor, nor where the trustee abandons the property and the secured creditor is permitted to foreclose.” Id. This passage suggests that Congress considered the possibility of paying trustees for turning over property to creditors, and worded section 326(a) so as to preclude it.
Looking at the same legislative history, two of our sister circuits have also concluded that section 326(a) permits no pay for property disbursements in satisfaction for creditors’ claims. The Fifth Circuit decided that section 326(a) doesn’t allow a trustee to collect on the value of property given to creditors in exchange for a reduction in the amount they’re owed. In re England, 153 F.3d 232, 235 (5th Cir.1998). It reasoned that “[t]he plain language of § 326(a) indicates that the statute caps a trustee’s compensation based upon only the moneys disbursed, without any allowance for the property disbursed.” Id. And the Third Circuit held that “Congress did not intend to include credit bids in the trustee’s compensation” because in a credit bid transaction “the secured creditor receives [] property in satisfaction of its secured claim.” In re Lan Assocs. XI, L.P., 192 F.3d 109, 117-18 (3d Cir.1999).
2. Tamm and amicus ask us to interpret section 326(a) to align with bankruptcy practice prior to the 1978 Bankruptcy Act. While it’s true that we typically “will not read the Bankruptcy Code to erode past bankruptcy practice,” Pa. Dept. of Pub. Welfare v. Davenport, 495 U.S. 552, 563, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990), even the most well-established pre-Code practice can’t overcome language of the Code that “leaves no room for clarification,” Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 11, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000). And, as noted, section 326(a) leaves little to the imagination. Given Congress’s clear statement that trustees may be compensated for nothing but “moneys disbursed,” historical practice is beside the point.
Even if we did seek guidance from past practices, it would make no difference. Tamm and amicus cite a few preCode lower court cases that allowed fees on transactions where the trustee returned property to a lienholder in satisfaction of a secured claim. Interpreting section 326(a)’s predecessor, these cases reasoned that the trustee constructively disbursed moneys to creditors, even if he never paid the creditors in cash. See, e.g., In re Columbia Cotton Oil & Provision Corp., 210 F. 824, 827-28 (4th Cir.1913). But a mere handful of lower court decisions, without more, does not demonstrate a “widely accepted and established” practice. See Hartford Underwriters, 530 U.S. at 9-10, 120 S.Ct. 1942 (internal quotation marks omitted) (concluding that “a number of lower court cases” were insufficient to show a clearly established pre-Code practice); cf. In re Bonner Mall P’ship, 2 F.3d 899, 912 (9th Cir.1993) (deferring to a preCode practice that “several Supreme Court cases had mentioned” and where there was direct evidence Congress had knowledge of the practice).
Furthermore, Tamm and amicus overlook pre-Code cases concluding that section 326(a)’s predecessor was “plain and unambiguous” in providing that “it is the moneys disbursed or turned over, and not property, that forms the basis for” the trustee’s fee. In re Morris Bros., 8 F.2d 629, 630 (D.Or.1925); see also, e.g., In re Brigantine Beach Hotel Corp., 197 F.2d 296, 299 (3d Cir.1952) (“It is clear that the word ‘moneys’ in the clause ‘ ... upon all moneys disbursed or turned over ... ’ is not the equivalent of property.”). Considering the sparse and conflicting evidence of any historical practice of compensating trustees for credit bids, we doubt that this was “the type of rule that ... Congress was aware of when enacting the Code.” Hartford Underwriters, 530 U.S. at 10, 120 S.Ct. 1942 (internal quotation marks omitted).
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3783584-20620 | OPINION
MICHAEL B. KAPLAN, Bankruptcy Judge.
I. INTRODUCTION
This matter comes before the Court by way of the Chapter 7 Trustee’s (“Trustee”) Motion to Reconsider the Court’s Approval of the Settlement Agreement between Defendant, the Defendant-Debtor, Suzanne Perez (“Debtor” or “Defendant”) and Plaintiff, E53 Federal Credit Union (“the Credit Union”). The Trustee requests that the Court vacate its prior Order approving the Motion to Approve the Settlement Agreement and Vacating the Automatic Stay. The principal issues before the Court are: (1) whether the Credit Union has a perfected security interest in the Debtor’s certificate of deposit pledged to secure a loan with the Credit Union; (2) whether the Federal Credit Union Act preempts Defendant’s Uniform Commercial Code (“UCC”) claims; and, (3) whether the Credit Union has a contractual and/or common law right of setoff against the Defendant’s certificate of deposit.
For the reasons set forth below, the Court finds that the Plaintiff, the Credit Union, has a properly perfected lien against the certificate of deposit, both under the relevant UCC provisions and the Federal Credit Union Act. The Court further finds that this lien was perfected before the Defendant’s Chapter 7 Bankruptcy proceeding commenced. Therefore, the Trustee may not avoid the lien. The Court does not determine whether the Credit Union has a contractual and/or common law right of setoff against the Debtor’s certificate of deposit inasmuch as the prior two grounds are clear. Accordingly, the Trustee’s Motion for Reconsideration is denied.
II. PROCEDURAL HISTORY/FACTS
On February 17, 2010, the Credit Union instituted this action against Defendant-Debtor Suzanne Perez. The Credit Union is a federally chartered credit union organized under the laws of the United States, having its principal offices located in Linden, New Jersey. The Credit Union is the successor in interest to Four-Sixteen Federal Credit Union, having merged on July 1, 2009, and is now known as Motion Federal Credit Union. Under the terms of the merger, all of the assets and liabilities of the Four-Sixteen Federal Credit Union were assumed by the Credit Union. The Four-Sixteen Federal Credit Union was a small, federally chartered credit union. At no time did its assets exceed fifteen million dollars. The Credit Union normally had three to four employees and a volunteer Board of Directors. One of the Credit Union’s employees was the Defendant, Suzanne Perez, who was employed by the Credit Union as head teller. See Pls.’ Compl. 2, Feb. 17, 2010.
On or about February 7, 2002, the Defendant, while still working at Four-Sixteen Federal Credit Union, obtained a Line of Credit loan under Account no. xx883-07. Id. The loan was originally in the amount of $7,500.00, but was subsequently increased to $160,000.00. Id. The loan was secured by a pledge of Certificate of Deposit (“CD”) in the name of Suzanne Perez (Account no. xx883) and a pledge of CD in the name of Marie Ragusa, Suzanne Perez’s grandmother, and Laura Hagin, Suzanne Perez’s sister (Account no. xx083). Id. The Ragusa/Hagin CD was in the amount of approximately $80,000.00. Id. The CD form contains the following in bold typeface: “NON-NEGOTIABLE + NON-TRANSFERABLE.” Jim Patton, Loan Manager at the Motion Federal Credit Union, certified that this is the only form used by the Four-Sixteen Federal Credit Union. Dkt. ¶ 10.
On March 31, 2009, Suzanne Perez filed a Chapter 7 Bankruptcy Petition. On July 21, 2009, Suzanne Perez received a Chapter 7 discharge. Suzanne Perez has made all required payments on Account no. xx883.
In the Fall of 2009, Laura Hagin and Marie Ragusa contacted the Credit Union and demanded information concerning their CD at the Credit Union. They were advised that their CD had been pledged as collateral for the loan of Suzanne Perez. Both women denied that they had ever authorized Suzanne Perez to pledge their CD as collateral for her loan.
The Credit Union was able to locate two Loanliner Open-End Disbursement security agreements for Suzanne Perez’s Account no. xx883. Both security agreements, dated March 12, 2007 and February 8, 2008, respectively, indicate that the loan is secured by Account no. xx083, the Ragu-sa/Hagin CD. The security agreements are signed only by Suzanne Perez, and not Hagin or Ragusa, the actual owners of the account.
Based on the absence of a documented pledge of the Ragusa/Hagin CD, the Credit Union released the Ragusa/Hagin CD, in the approximate amount of $80,000.00, leaving the Credit Union inadequately protected under § 362 of the Code. To remedy this problem, pursuant to a negotiated settlement agreement with Ms. Perez, Defendant agreed that the Plaintiff, with the Court’s permission, could apply the proceeds of her previously pledged CD, Account no. xx883, in the approximate amount of $71,350.17, to the balance of her loan with the Credit Union.
On June 15, 2010, the Credit Union submitted a Motion to Approve the Settlement Agreement between the Credit Union and Defendant, Suzanne Perez. Dkt. ¶ 4. The parties additionally sought a Court Order Vacating the Automatic Stay to permit the Plaintiff to apply the proceeds of the Defendant’s CD to the balance due on the loan. Id. On July 22, 2010, this Court entered an Order approving the Motion to Approve the Settlement Agreement and Vacating the Automatic Stay. Dkt. 116.
The Trustee has moved the Court to reconsider and vacate the Order. Oral argument on the motion was held on November 22, 2010. At the conclusion of the hearing, the Court took the matter under advisement and reserved decision. After reviewing the parties’ submissions and applicable law, the Court is prepared to rule.
III. JURISDICTION
The Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(b) and the Standing Order of the United States District Court dated July 10, 1984, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), (G) and (K). Venue is proper in this Court pursuant to 28 U.S.C. § 1409(a). The following constitutes the Court’s findings of fact and conclusions of law as required by Fed. R. Bankr.P. 7052.
IV. DISCUSSION
A. Perfection under the Uniform Commercial Code
The issue before the Court is whether the CD should be characterized under the Uniform Commercial Code (“UCC”) as a deposit account or an instrument. Plaintiff alleges that the CD should be characterized as a deposit account and the Trustee claims that it is an instrument. If the CD is a deposit account, it need be perfected only by control. N. J.S.A. 12A:9-314. In contrast, if the CD is deemed an instrument, the general rule is that for a party’s interest in the collateral to be perfected, it must either file a financing statement or be in possession of the instrument. N.J.S.A. 12A:9-308(a); N.J.S.A. 12A:9-313. The Court concludes that this nonnegotiable and non-transferable CD is a deposit account and that the Credit Union holds a perfected security interest therein because the Credit Union maintains control of the account.
The New Jersey code defines a deposit account as a “demand, time, savings, passbook, or similar account maintained with a bank.” N.J.S.A. 12A:9-102(a)(29). N.J.S.A. 12A:9-314 provides that a “security interest in ... deposit accounts ... may be perfected by control of the collateral under 12A:9-104 ...” N.J.S.A. 12A:9-104 outlines the requirements for control and provides that “a secured party has control of a deposit account if the secured party is the bank with which the deposit account is maintained.” N.J.S.A. 12A:9-104(a)(l).
A “certificate of deposit” means “an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money.” N.J.S.A. 12A:3-104(j). A certificate of deposit is essentially a note of the bank. Id. An “instrument” is defined as “a negotiable instrument or other writing that evidences a right to the payment of a monetary obligation, ... and is of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment.” N.J.S.A. 12A:9-102(a)(47) (emphasis added). The official comment to this section includes the following clarification:
“Under the definition, an uncertificated certificate of deposit would be a deposit account (assuming there is no writing evidencing the bank’s obligation to pay). Whereas a non-negotiable certificate of deposit would be a deposit account only if it is not ‘an instrument’ as defined in this section (a question that turns on whether the non-negotiable certificate of deposit is ‘of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment.’).”
Id. The Court concludes that the CD is not “of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment.” Id. The CD offered by Four-Sixteen Federal Credit Union is a nonnegotiable and non-transferable CD. Michael Greenwood, President and Chief Executive Officer of the Credit Union, has been employed in three different credit unions over the past fifteen years. Greenwood Aff. 1. Mr. Greenwood certified that the nontransferable/nonnegotiable language on the Credit Union’s CD form is standard in the credit union industry with regard to share certificate accounts. Id. Moreover, Mr. Greenwood points the Court’s attention to the Motion Federal Credit Union Disclosures governing credit union accounts and membership. Specifically, Page 10 of the Disclosures deals with share certificate accounts and states: “N ontransferable/N onnegotiable — Your account is nontransferable and nonnegotiable.” Id. The Court takes further guidance from the reasoning of Judge Morgen-stern-Clarren in In re Verus Investment Management, LLC, 344 B.R. 536 (Bankr.N.D.Oh.2006), wherein the Court reasoned that a CD was a deposit account where there was an account “agreement [that] prohibited] the debtor from transferring or assigning the account without the bank’s written consent and only permitted] the debtor to withdraw or transfer funds from the account using forms approved by the bank.”
Furthermore, as a policy matter, while the CD is technically certificated, the Court believes this is a matter of form over substance. The official comment to N.J.S.A. 12A:9-102(a)(47) expressly differentiates between a certificated and uncer- tificated CD. This distinction implies that the certificate itself is of value. In this case, however, the CD has no value and explicitly states that it is non-negotiable and non-transferable. This CD neither functions like an instrument, nor possesses the attributes ordinarily associated with an instrument. Indeed, as a non-negotiable CD, possession is not required in order to enforce the underlying obligation. N.J.S.A. 12A:3-201(a); See In re Federal-Mogul Global, Inc., 319 B.R. 363, 367 (Bankr.D.Del.2005). Accordingly, any benefit of certification—allowing parties to trade in confidence or putting a third party on notice of the CD’s existence—is mooted if the certificate itself is without value. See U.S. v. Thomas, 315 F.3d 190 (3d Cir.2002) (citing Manor Bldg. Corp. v. Manor Complex Associates, Ltd., 435 Pa.Super. 246, 645 A.2d 843, 846 (1994)).
Having determined that the CD should be characterized as a deposit account, the Court must determine whether the Credit Union has control over the account as required by N.J.S.A. 12A:9-104. The Credit Union is a bank and is holding the funds represented by the share certificate. Accordingly, the deposit account is maintained at the bank, the Credit Union satisfies the 12A:9-104 control requirement, and is a perfected secured creditor in the deposit accounts of Defendant, Suzanne Perez.
B. Perfection under the Federal Credit Union Act
In the alternative, Plaintiff argues that the statutory lien created under the Federal Credit Union Act statutory lien, 12 U.S.C. § 1751, 12 C.F.R. 701.39, preempts state law and is perfected at the time the loan is made. Dkt. ¶ 23. In response, the Trustee argues that, notwithstanding the federal statute, the Trustee may avoid the lien pursuant to 11 U.S.C. § 545. Hr’g, Nov. 22, 2010. The Court agrees with Plaintiff and finds that the Credit Union has a perfected federal statutory lien against Suzanne Perez’s share certificate which was perfected prior to the commencement of the Defendant’s Chapter 7 bankruptcy proceeding.
The Federal Credit Union Act grants federally chartered credit unions a floating lien on all shares on deposit in credit union accounts. See In re Cabrera, 2009 WL 4666460 (Bankr.S.D.Fla.2009); National Credit Union Administration Interpretive Ruling and Policy Statement 82-5, December 22, 1982 (“NCU Ruling”). Specifically, 12 U.S.C. § 1757(11) provides that a federal credit union shall have the power “to impress and enforce a lien upon the shares and dividends of any member, to the extent of any loan made to him and any dues or charges payable to him.” Id. 12 U.S.C. § 1752(5) defines “member account” as:
“[a] share, share certificate, or share draft account of a member of a credit union of a type approved by the Board which evidences money or its equivalent received or held by a credit union in the usual course of business and for which it has given or is obligated to give credit to the account of the member ...”
Id. The Act defines “statutory lien” as “the right granted by ... 12 U.S.C. 1757(11), to a federal credit union to establish a right in or claim to a member’s shares and dividends equal to the amount of that member’s outstanding financial obligation to the credit union, as that amount varies from time to time.” 12 C.F.R. 701.39(a)(5). The NCU Ruling establishes that a credit union’s lien on a member’s account vests at the time the loan is granted. NCUA I.R.P.S. 82-5 (12/22/82).
The Federal Credit Union Act preempts state law, namely, any UCC provisions that conflict with the Act. Pursuant to the preemption doctrine, federal law will preempt state law if “the state law and the federal law are in actual conflict such that compliance with both is physically impossible or the state law obstructs the accomplishment of the full objectives of Congress.” U.S. Const. art. VI, cl. 2; Stepan Co. v. Callahan Co., 568 F.Supp.2d 546, 555 (D.N.J.2008); In re Aylward, 208 B.R. 565, 567 (Bankr.M.D.Fla.1997) (holding that “[w]here the statutory lien is created by federal law, federal law governs.”). See also In re Gifford, 174 B.R. 231 (Bankr.W.D.Ky.1994) (holding that the Federal Credit Union Act displaces contrary Article 9 UCC provisions).
Accordingly, it is possible for the Credit Union to have a properly perfected security interest in the collateral without complying with the perfection process outlined in Article 9. The Court holds that the account held by the Credit Union fits squarely within the above definition of “member account.” Suzanne Perez’s deposit account was offered as a share certificate, was approved by the Credit Union Board, and the Credit Union was obligated thereunder to give credit to the Perez account. 12 U.S.C. § 1752(5). Moreover, the security agreement the Defendant had signed contains all the necessary criteria detailing the security interest in the share certificate as collateral for the loan. Therefore, perfection of the statutory lien on the “member account” occurred automatically at the moment the loan was originated.
The Trustee nonetheless argues that he may avoid the fixing of this statutory lien pursuant to his avoidance powers. Generally, the Bankruptcy Code provides that a Trustee may avoid the fixing of certain statutory liens in property of the debtor. 11 U.S.C. § 545. However, § 545(1)(A) provides that a Trustee’s avoidance powers are only triggered if the lien “first became effective against the debtor when a case under this title concerning the debtor is commenced.” Id. Alternatively, § 545(2) provides that a statutory lien may be avoided to the extent “it is not perfected or enforceable at the time of the commencement of the case against a bona fide purchaser ...” Id. In this case, the statutory lien against the CD vested at the time the loan had been originated, on February 7, 2002, well before the Defendant’s bankruptcy case commenced. Therefore, § 545 has no application and the Trustee may not avoid the fixing of the statutory lien. See In re Pohrman, 146 B.R. 570 (Bankr.D.Or.1992).
C. Common Law and Contractual Right of Set-off
Lastly, the Credit Union argues that it also has a contractual and common law right of setoff against the Defendant’s share certificate. Plaintiff argues that its right of setoff against the depositor’s accounts extends to the depositor’s certificate of deposit. FDIC v. Pioneer, 155 N.J.Super. 381, 382 A.2d 958 (Law Div.1977). The Trustee argues that, without proof of the terms and conditions of the certificate, the Credit Union cannot claim a right of setoff since “the right of setoff is based on the contractual relationship between the parties.” Hudson United Bank v. House of Supreme, Inc., 149 N.J.Super. 153, 160, 373 A.2d 438 (Ch.Div.1977). The Court declines to address the merits of either party’s arguments inasmuch as it is sufficiently persuaded to find for the Plaintiff on the above discussed two grounds. Accordingly, the Court does not decide whether Plaintiff can establish a claim of setoff.
Y. CONCLUSION
For the foregoing reasons, this Court rules E53 Federal Credit Union has a perfected lien in Suzanne Perez’s certificate of deposit under the UCC and the Federal Credit Union Act. Furthermore, this lien was properly perfected before the Defendant’s bankruptcy proceeding was commenced. Thus, the Trustee may not avoid the lien. Accordingly, the Court denies the Trustee’s Motion to Reconsider the Court’s Approval of the Settlement Agreement. Plaintiff is directed to submit a form of order.
. It is uncontested that the Trustee was not served with the initial Motion to Approve Settlement. Accordingly, E53 Federal Credit Union does not contest, and the Court need not analyze, whether the Trustee has satisfied the standards for reconsideration under Fed. R. Bankr.P. 9023.
. No party has been able to produce either an original or copy of the CD in the name of Suzanne Perez. The Court accepts the un-contradicted sworn representation of Jim Patton, a Loan Manager employed by the Credit Union, that the Debtor’s pledged CD included the same "Non-Negotiable + Non-Transferable” language thereon.
. To the extent that any of the findings of fact might constitute conclusions of law, they are adopted as such. Conversely, to the extent that any conclusions of law constitute findings of fact, they are adopted as such.
. Under the terms of the Federal Credit Union Act, 12 U.S.C. § 1757(6), a credit union can offer several types of deposit accounts including share and share certificate accounts. Credit Unions, as cooperative, member-owned, not for profit organizations, refer to depositors as "members” since all credit unions actually have an ownership interest in the cooperative. Deposits at federally chartered credit unions are referred to as "shares” and deposit accounts can be offered as share accounts (“savings accounts”), share draft accounts ("checking accounts”) and share certificates ("Certificates of Deposit”). Id. See Dkt. ¶ 10.
.This can be contrasted with the definition of "instrument” provided under Article 3. Article 3 defines "instrument” simply as “negotiable instrument.” N.J.S.A. 12A:3-102(b) explicitly provides that "[i]f there is a conflict between [chapter 3] and chapter 9, chapter 9 governs.” Id. Therefore, the Court will use the more expansive Article 9 definition of '‘instrument” in its analysis which embraces both the "negotiable-instrument” concept and the "other-writing” concept. See Morgan v. Farmers & Merchants Bank, 856 So.2d 811, 818 (Ala., 2003).
. In determining that the CD is not "of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment,” the Court limits its holding to usage of trade in the industry— i.e. the credit union industry. N.J.S.A. 12A:1~ 205 provides that "a usage of trade is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage are to be proved as facts.” Id.
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733614-7490 | CHOY, Circuit Judge:
Appellant Sam Andrews’ Sons, a partnership, grows lettuce and melons in the Imperial Valley, California. Ninety-five per cent of its work force consists of aliens who commute daily from their homes in Mexico, entering the United States on the authority of “green cards,” Form 1-151, issued pursuant to 8 C.F.R. § 211.1(b) (l). This regulation, issued by the Attorney General pursuant to the rule-making authority vested in him by 8 U.S.C. § 1103(a), also provides that the green cards may not be used to secure entry into the United States when an immigrant alien reenters the United States with the intention of accepting or continuing employment at a place of business where the Secretary of Labor has determined that a labor dispute exists.
On June 26, 1970, the Secretary of Labor certified that a labor dispute was in progress at appellant’s place of business. Subsequently, officers of the Border Patrol visited appellant’s fields and interviewed its employees with the apparent purpose of determining which, if any, of them were using their green cards contrary to the regulation. Those found in violation of the regulation were warned that their green cards would be revoked if they were again detected working in appellant’s fields. Since these visitations, many of appellant’s employees have quit, and appellant has been forced to hire less experienced and more costly personnel.
Appellant then brought this action seeking a declaratory judgment that the regulation was invalid and a preliminary and permanent injunction against its enforcement. The District Court held that appellant has standing to prosecute this action, a determination which is not contested on appeal. The District Court then upheld the validity of the regulation, holding that while resident aliens and commuter aliens have a coincidence of status, “[rjesident aliens in addition to status have established a presence in the country. . . . Not only does such residence carry with it a constitutional standing that the commuter does not possess, but the lack of actual residence serves as a differentiating factor upon which the Attorney General, in exercising his discretion, may rationally rely in more stringently controlling the use to which commuters may put their green cards.” 326 F.Supp. 35, 39 (S.D., Calif., 1971) (emphasis in original).
Sam Andrews’ Sons appealed. We need not decide whether the regulation violates the Constitution, for we hold that it is invalid as an abuse of the dis- eretion committed to the Attorney General.
We last considered 8 C.F.R. § 211.-1(b) (1) in Gooch v. Clark, 433 F.2d 74 (9th Cir., 1970), cert. denied, Gooch v. Mitchell, 402 U.S. 995, 91 S.Ct. 2170, 29 L.Ed.2d 160 (1971), where we found that the green card system is authorized by the Immigration and Naturalization Act, and that an alien commuter is within the class of persons described by 8 U.S.C. § 1101(a) (27) (B): “an immigrant, lawfully admitted for permanent residence, who is returning from a temporary visit abroad.” Such a special immigrant is admissible under the informal documentation requirements authorized by 8 U.S.C. § 1181(b), and exempt from the labor . certification provisions of 8 U.S.C. § 1182(a) (14). We did not, ' however, specifically rule upon the labor dispute regulation now before us.
The Attorney General has been granted discretionary power to make rules to administer the Immigration and Naturalization Act. His regulations must be upheld if they are founded “on considerations rationally related to the statute he is administering.” Fook Hong Mak v. Immigration and Naturalization Service, 435 F.2d 728, 730 (2nd Cir.,1970). See Boske v. Comingore, 177 U.S. 459, 470, 20 S.Ct. 701, 44 L.Ed. 846 (1900). However, this labor dispute regulation and the Government’s interpretation and application of it creates two distinctions: first and primarily, the distinction between the commuter who works for a certified employer and the commuter who does not; and second, the distinction between the commuter and otherwise similar § 1101(a) (27) (B) immigrants who permanently reside in the United States. Neither of these distinctions is rationally related to the administration of the Immigration and Naturalization Act.
Neither distinction can be justified by 8 U.S.C. § 1182(a) (14), which provides that alien workers may not enter the United States unless the Secretary of Labor has certified that their presence will not adversely affect the United States labor market. This statutory provision is not applicable to § 1101(a) (27) (B) special immigrant. In addition, it applies only to initial entry into the United States, not to reentry. Nothing in the statute or its legislative history supports continuing regulation of alien laborers by the Secretary of Labor or by the Attorney General. Cermeno-Cerna v. Farrell, 291 F.Supp. 521, 528 (C.D., Cal., 1968). Congress empowered the Secretary and the Attorney General to regulate the initial entry of an alien into the United States, but once a commuter has been lawfully admitted, he may “make regular entrances into the United States as an immigrant ‘lawfully admitted for permanent residence, who is returning from a temporary visit abroad.’ ” Gooch, supra, 433 F.2d at 81.
There is nothing in the statute or its legislative history intimating that Congress intended the green card system to be used as a means of Government intervention in domestic labor disputes. And yet this regulation enables the Secretary of Labor to certify that a labor dispute is in progress and thus effectively eliminate an employer’s entire commuter work force. The regulation provides no procedure for obtaining a certification, no hearings for either union, employer, or employees, no standards to guide the Secretary in issuing certification.
Although the regulation purports to apply to reentering green card holders at the border, as actually applied, it is operative only when a commuter has reentered the United States and is on the job. If he is working for an uncertified employer, he may use his green card and is unmolested. If he is working for a certified employer, however, he is warned to quit his job or face the loss of his green card. There is nothing in the statute authorizing the Secretary or the Attorney General to determine where a commuter may or may not work.
Nor may either distinction be justified as a valid exercise of the Attorney General’s discretion. There is no rational basis to distinguish between commuters and resident § 1101(a) (27) (B) immigrants. As the District Court recognized, the commuter and the resident alien have the same immigration status. They are both § 1101(a) (27) (B) immigrants. Gooch, supra. Nevertheless, the District Court held that the actual presence of the resident alien in the United States provides a rational basis for distinguishing the two classes. 326 F.Supp., supra, at 39. See also Cermeno-Cerna, supra, 291 F.Supp. at 529. But in Gooch, supra, 433 F.2d at 79, we found that “ [c] ommuters have been accorded the privilege of residing permanently in the United States, for each of them at one time received a valid immigration visa. Their disinclination to exercise that privilege is of no moment.” (emphasis supplied). Both commuters and noncommuters have the same immigration status. Both may continue to reside in the United States if they so desire. We see no reason to place legal significance upon the commuter’s decision not to live here now.
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7843462-10171 | ORDER GRANTING MOTIONS FOR SUMMARY JUDGMENT BY CLAIMANTS DANIEL S. GAHAGAN AND MICHAEL J. GAHAGAN
CLELAND, District Judge.
I. Introduction
Now pending before the court is Claimant Daniel S. Gahagan’s Cross-Motion for Summary Judgment, filed on December 5, 1994, in which Claimant Michael J. Gahagan con curs. (D.559). The motion argues, inter alia, that this civil forfeiture action is barred by the Double Jeopardy Clause of the Fifth Amendment to the United States Constitution. It now appears to the court that the claimants’ double jeopardy argument is correct and that the plaintiffs case must be dismissed.
II. Background
This civil forfeiture action has been vigorously litigated by the government and Daniel and Michael Gahagan (“Claimants”) for nearly eight years, during which time the law of forfeiture has changed considerably. A review of the extensive history of this litigation is unnecessary. However, the timing of events in this case is important for analyzing the claimant’s Double Jeopardy Clause claim.
On September 12, 1986, the government executed a search warrant of Claimants’ property. An indictment was filed on May 21, 1987, and, on August 4, 1987, Claimants pleaded guilty to a charge of possessing hashish with intent to distribute. Claimants were sentenced on October 2, 1987. The following month, on November 12, 1987, the government filed this civil forfeiture action. The defendant properties were seized pursuant to court order on December 12, 1987; they have been in the custody of the United States Marshal Service ever since.
III. Standard
To grant a motion for summary judgment, the court must find that the pleadings, together with the depositions, interrogatories and affidavits on file, establish that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. A party seeking summary judgment bears the initial burdens of specifying the basis upon which it contends judgment should be granted and of identifying that portion of the record which, in its opinion, demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Thus, “the burden on the moving party may be discharged by ‘showing’ — that is, pointing out to the district court — that there is an absence of evidence to support the nonmoving party’s case.” Id. at 325, 106 S.Ct. at 2554. The nonmoving party must thereafter produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505, 2509-2510, 91 L.Ed.2d 202 (1986).
IY. Discussion
This court’s opinion is informed by the Sixth Circuit’s recent decision in United States v. Ursery, 59 F.3d 568 (6th Cir.1995), holding that a criminal prosecution instituted after a civil forfeiture action violated the Double Jeopardy Clause. In reversing the district court, the Sixth Circuit determined that civil forfeiture constitutes “punishment” for double jeopardy purposes; civil forfeiture and criminal prosecution are punishment for the same offense; and the civil forfeiture of Ursery’s property and his criminal prosecution were separate proceedings. The Ursery mandate has been stayed pending the United States Supreme Court’s determination on the government’s petition for certiorari. Nevertheless, this court sees no reason to further delay consideration of Claimants’ motion because the forfeiture of their property violates the Double Jeopardy Clause under the analysis employed by either the Ursery majority or the dissent.
Ursery determined that a civil forfeiture is punishment within the meaning of the Dou ble Jeopardy Clause, and that a civil drug forfeiture is punishment for the underlying criminal offense; this court agrees. “[Cinder [United States v.] Halper [, 490 U.S. 435, 109 S.Ct. 1892, 104 L.Ed.2d 487 (1989) ] and Austin [v. United States, — U.S. -, 113 S.Ct. 2801, 125 L.Ed.2d 488 (1993) ], any eM forfeiture under 21 U.S.C. § 881(a)(7) constitutes punishment for double jeopardy purposes.” Ursery, 59 F.3d at 573. “[T]he forfeiture and conviction are punishment for the same offense because the forfeiture necessarily requires proof of the criminal offense.” Ursery, at 574.
Ursery also noted that the United States Supreme Court has made it clear that the government may “seek[] and obtain[] both the full civil penalty and the full range of statutorily authorized criminal penalties in the same proceeding.” Ursery, at 574 (quoting Halper, 490 U.S. at 450, 109 S.Ct. at 1902). The majority and dissent disagreed, however, over whether the civil forfeiture and the criminal prosecution in Ursery constituted the same proceeding. The Ursery majority held that the Double Jeopardy Clause may be violated even where the second action was commenced before the first was concluded; however, the majority did not articulate a clear test for determining when the criminal prosecution and civil forfeiture constitute separate proceedings. This court adopts the analysis articulated by the Ursery dissent, which focused on the timing of the civil and criminal proceedings in concluding that Ursery’s conviction did not offend the Double Jeopardy Clause: “I believe that the timing of the civil and criminal proceedings and the potential for government abuse of those proceedings are the central factors in assessing the double jeopardy concerns in this ease.” Ursery, at 577 (Milburn, dissenting). “[T]he Double Jeopardy Clause offers protection when the government has already imposed a penalty, either civil or criminal, and seeks to impose further punishment out of dissatisfaction with the earlier result.” Id. at 576 (quoting United States v. Halper, 490 U.S. 435, 451 n. 10, 109 S.Ct. 1892, 1903 n. 10, 104 L.Ed.2d 487 (1989)). This court is persuaded by Judge Milburn’s analysis and concludes that the timing of the actions should be the central factor in determining whether the Double Jeopardy Clause has been offended. Judge Milbum’s test obviates the need for case-by-case, fact-bound analysis of Double Jeopardy Claims and allows the government to determine with certainty whether a subsequent action is barred by the Double Jeopardy Clause; if the first action has concluded, a second action is barred. . Judge Milburn’s test also, in this court’s view, upholds the rights secured by the Double Jeopardy Clause while still allowing the government to seek and obtain all Congressionally-autho-rized penalties.
In Ursery, the government filed its forfeiture complaint against Ursery’s property on September 30, 1992. On February 5, 1993, while the forfeiture action was still pending, Ursery was indicted. He settled the forfeiture suit on May 24, 1993, while his criminal case was still pending. On July 2, 1993, Ursery was convicted after a jury trial; he was sentenced on January 19, 1994. In the case at bar, the second proceeding was instituted only after the first proceeding was concluded; the government filed the civil forfeiture action after Claimants had been convicted and sentenced. Accordingly, the case at bar is precisely the type of case in which Judge Milburn believed the Double Jeopardy Clause should bar the second action. There can be little doubt that under the majority ruling in Ursery, as well as under the analysis articulated by the dissent, Claimants’ motion for summary judgment must be granted.
The court also notes that, although there is a circuit split on the interpretation of the Double Jeopardy Clause, all three other circuits that have addressed the issue would find a violation of the Double Jeopardy Clause where, as here, the civil forfeiture proceeding was not instituted until after conviction and imposition of sentence in the criminal case. In the most recent of these, United States v. $405,089.23 U.S. Currency, 33 F.3d 1210 (9th Cir.1994), the Ninth Circuit ruled that a criminal prosecution and civil forfeiture action based on the same offense must be brought in the same indictment. In that case, the government instituted a civil forfeiture action five days after the grand jury issued a superseding indictment in the parallel criminal ease, and the district court effectively stayed the civil forfeiture action pending the completion of the criminal case. The Ninth Circuit reversed the district court’s entry of summary judgment in favor of the government, stating, “A forfeiture ease and a criminal prosecution would constitute the same proceeding only if they were brought in the same indictment and tried at the same time.” Id. at 1216. While this court disagrees with the Ninth Circuit’s rather stringent interpretation of the Double Jeopardy Clause, there can be no doubt that the case at bar would be barred by double jeopardy under that court’s opinion in $405,089.23 U.S. Currency.
In United States v. One Single Family Residence, 13 F.3d 1493 (11th Cir.1994), the Eleventh Circuit held that the Double Jeopardy Clause did not bar the civil forfeiture action where the forfeiture proceeding was instituted prior to the indictment but concluded after the conviction. The Eleventh Circuit found the timing of the actions dis-positive, stating that, because both actions were commenced before either was concluded, there was no indication that “the government acted abusively by seeking a second punishment because of dissatisfaction with the punishment levied in the first action.” Id. at 1499. Of course, there is such a problem in the case at bar, where the government sought civil forfeiture only after sentencing for the criminal offense. This court does not hold that the government sought civil forfeiture in the case at bar “because of dissatisfaction with the punishment levied in the first action”; there is no evidence of that and, even if there were, no such finding could be made on a summary judgment motion. However, where, as here, the second action is instituted only after the conclusion of the first, Claimants should not be required to show that the government acted with improper motive. The timing alone is sufficient to cast a fatal shadow over the government’s actions.
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4265820-10601 | OPINION AND ORDER DENYING NON-PARTY RESPONDENT’S “MOTION FOR PROTECTIVE ORDER AND REMISSION”
ROBERT H. CLELAND, District Judge.
This matter, being a bit of satellite litigation revolving around a lawsuit pending in the District of Columbia, was ordered closed coincident with the court’s order granting, in part, Plaintiffs “Motion to Compel ...” [Dkt. # 27]. The parties now return to court with non-party respondent David Ashenfelter’s “Motion for Protective Order and Remission.” Plaintiff Richard G. Convertino has filed a response in opposition. The court concludes that, at the threshold, remission is not an appropriate procedure in this instance, and that, because the further substance of Respondent’s motion raises only the same arguments as were already presented in his response to Plaintiffs motion to compel, Respondent’s request for a protective order is denied.
I. BACKGROUND
On August 28, 2008, the court granted in part Plaintiffs “Motion to Compel Production from Non-Party Reporter David Ashenfelter and Non-Party Corporation Detroit Free Press.” (8/28/08 Order at 22, 2008 WL 4104347 at *10.) Specifically, the court granted the motion to compel with respect to Ashenfelter and denied it as to Detroit Free Press. (Id.) Following the court’s order, Respondent raised no objection nor filed any motion to reconsider and the parties simply agreed to depose him on October 16, 2008. (Ashenfelter’s Mot. at 5; Pl.’s Resp. at 1.) Respondent did not file a motion to stay the deposition, (Pl.’s Resp. at 2), but instead filed the current motion on October 13, 2008, three days before his scheduled deposition. (Ashenfelter’s Mot. at 5.) Respondent did not appear for his scheduled deposition and has not provided the compelled testimony. (Pl.’s Mot. at 1-2.)
II. DISCUSSION
A. Remission
Respondent first asks this court to remit the decision on a protective order to the D.C. district court, where both the underlying lawsuit and a similar motion are pending. (Ashenfelter’s Mot. at 7-9.) A non-party deponent may seek “a protective order in the court where the action is pending — or as an alternative on matters relating to a deposition, in the court for the district where the deposition will be taken.” Fed.R.Civ.P. 26(e). If, as here, the deponent resides in a different district than the district in which the lawsuit is pending, the Federal Rules specifically contemplate a “foreign” district issuing a protective order. Id.; In re Orthopedic Bone Screw Prods. Liab. Litig., 79 F.3d 46, 48 (7th Cir.1996). The Federal Rules also specifically contemplate the “foreign” district court’s discretion in deciding whether to remit the decision on a protective order, under Federal Rule of Civil Procedure 26, to the district where the lawsuit is pending. Fed.R.Civ.P. 26 advisory committee’s note (1970) (“The court in the district where the deposition is being taken may, and frequently will, remit the deponent or party to the court where the action is pending.”) (emphasis added); In re Digital Equip. Corp., 949 F.2d 228, 231 (8th Cir.1991) (“While the Oregon district court initially has exclusive jurisdiction to rule on the objections, it may in its discretion remit the matter to the court in which the action is pending.”). Thus, while “foreign” district courts “frequently will” remit the deponent’s motion for a protective order to the district where the action is pending for resolution, any determination is firmly within a court’s discretion. Digital Equipment, 949 F.2d at 231.
The typical purpose of remission, in the context of a protective order, is to place complicated factual disputes before a single court which may be most familiar with all the facts in a case. Socialist Workers Party v. Attorney Gen. of the United States, 73 F.R.D. 699, 700 (D.Md.1977). No such purpose would be served here, as this court became sufficiently familiar with the relevant facts over the course of a year of pre-hearing jostling, negotiation and delay, ultimately to resolve the satellite discovery issue at the heart of Respondent’s present motion through the August 28 order compelling production. Perhaps recognizing that remission could not meet its usual goals here, Respondent proposes a different basis for the court to remit the protective order determination to the D.C. district court. He reads a footnote in the court’s August 28, 2008 order to mean that this court determined that it could not properly resolve a protective order without delving into the merits of the underlying action. He then offers that only the D.C. district court can accomplish this task. (Ash- enfelter’s Mot. at 6.) The court’s order, after assessing Respondent’s interests in limiting the discovery sought, concluded that any “concerns are overbalanced by [Plaintiffs] countervailing interests.” (8/28/08 Order at 20, 2008 WL 4104347 at *9.) As a footnote at that point, the court noted that under an alternative analysis, which Respondent had proposed the court adopt, he would still likely fail. (Id. at n. 16, “This case-specific balancing of interests is likely to yield the same results under the third factor in the South-well privilege analysis ....”) The court went on to note that Respondent’s view of that analysis — requiring some delving into the merits of the underlying matter — was completely without legal support. (Id., “There is no known authority for this court, having jurisdiction over the underlying suit, to deny a motion to compel based upon a proposed cart-before-horse determination that the merits of the claims are weak or lacking.”) Respondent seizes this brief discussion, a footnote of mere observational dicta amongst twenty-two pages of the court’s order, and purports that it was “dispositive of the motion to compel, since it left [Plaintiff] free to contest the merits of Ashenfelter’s arguments, but deprived Ashenfelter of the reciprocal ability to question [Plaintiffs] premises.” (Ashenfelter’s Mot. at 1.) The court firmly disagrees.
This court certainly did not rely on the analysis discussed in the footnote for its decision. To the contrary, the court explicitly rejected Respondent’s choice of an analytical framework: “Southwell sided with the majority of circuit courts ... Ashenfelter urges this court to do the same ... [h]owever, this court cannot agree .... ” (8/28/08 Order at 11, 2008 WL 4104347 at *5.) The later footnote merely noted that the court’s final decision would remain unchanged under the Southwell analysis, but did not rely on its rejected approach to reach the decision. Further, the court’s footnote does not “de-privet] Ashenfelter of the reciprocal ability to question [Plaintiffs] premises.” (Ashen-felter’s Mot. at 1.) The response to Plaintiffs motion to compel contested Plaintiffs premises, which the court fully considered but rejected in resolving the motion. After the court’s order, Respondent remained free to contest the merits of Plaintiffs arguments, or the court’s decision, through an appropriate motion but did not. Respondent’s asserted basis for this court to remit the protective order to the D.C. district court is without merit.
B. Protective Order
Respondent argues that the D.C. district court would agree with the approach advanced in his response to Plaintiffs motion to compel. He may be right. (8/28/08 Order at 12, 2008 WL 4104347 at *6, noting the Sixth Circuit’s non-recognition of a qualified privilege for reporters is binding, even if it means the Sixth Circuit is a “minority of one.”) Respondent, however, had an opportunity to, and did, raise this argument in his response to Plaintiffs motion to compel. (Ashenfelter’s Resp. at 9-16.) Likewise, Respondent had an opportunity to, but did not, file a motion for a protective order either as a part of his response to Plaintiffs motion oías a separate motion. (Pl.’s Resp. at 2.) In choosing not to file a motion for a protective order before the motion to compel was decided, Respondent put this court in a position to determine “whether discovery [might] be had, and its scope, since it is the only court with the power to order enforcement.” In re Sealed Case, 141 F.3d 337, 342 (D.C.Cir.1998) (holding that the ruling court was required to shape discovery where the non-party deponent did not “take the bait and move for a protective order in the trial court” before the subpoena-issuing court ruled on a motion to compel). Thus, Respondent’s actions — or inaction — placed this court in a position which required shaping discovery by ruling only on Plaintiffs motion to compel. The court considered and rejected a qualified reporter’s privilege as incongruent with established Sixth Circuit precedent. (8/28/08 Order at 12-13, 2008 WL 4104347 at *6-7.) Respondent’s current motion therefore becomes little more than a motion for reconsideration, offering the same arguments in support of a qualified reporter’s privilege that he advanced in his response to Plaintiffs motion to compel. A motion for reconsideration must be filed within ten days after the entry of an order. E.D. Mich. LR 7.1(g)(1). Respondent waited at least forty-six days to file his current motion. Even construing the request for a protective order as a motion to reconsider, therefore, does not deflect from the court’s decision to reject it.
There are strong reasons favoring simultaneously bringing a motion for protective order and a motion to compel, or bringing a motion for a protective order before any other discovery motions. Litigants, or non-parties, must realize that a motion to compel will likely resolve discovery issues with finality. If a court were to shape discovery, then face a later motion for protective order on the same subject matter, it would force the court to revisit issues already ruled upon. This legally and procedurally awkward position is what Respondent’s tardy motion for protective order has now created.
Finally, at least one court has found that bringing a motion for a protective order after the court has addressed the same grounds in a prior motion to compel demonstrates actual bad faith on the party of the movant. Albert v. Starbucks Coffee Co., Inc., 213 Fed.Appx. 1, 2 (D.C.Cir.2007) (affirming the district court’s holding that movant’s choice to “not file his motion for a protective order ... until ... after the court had issued its order compelling attendance at the deposition” amounted to willful and bad faith conduct). It bears mentioning, also, that the act of filing a motion does not excuse a movant from prior obligations to the court. Pioche Mines Consolidated, Inc. v. Dolman, 333 F.2d 257, 269
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1656037-19008 | EDWARD S. SMITH, Circuit Judge.
The final decision of the Patent and Trademark Office (PTO) Board of Patent Appeals and Interferences (board), Interference No. 100,988, awarding priority of invention to Janos Kollonitsch and Arthur A. Patchett (Kollonitsch) over Philippe Bey and Michel Jung (Bey), is reversed.
Issue
The issue is whether the board erred in holding that Bey had not established diligence based on his attorney’s work on related applications during the 41-day critical period from before June 1, 1977, to July 11, 1977.
Background
A. Interference Proceedings
Kollonitsch’s patent application has the effective filing date of June 1,1977. Bey’s patent application has the effective filing date of July 11, 1977. The interference count is for certain irreversible enzyme inhibitors (for pharmaceutical use), including the monofluoromethyl derivatives of ornith-ine, lysine, and arginine. Bey presented testimony and exhibits in support of his claim to priority; Kollonitsch chose to rely solely on his filing date.
Bey made two arguments before the board. First, he argued that Kollonitsch was not entitled to make his claim correspond to the interference count because Kollonitsch’s application did not sufficiently disclose the utility of the invention under 35 U.S.C. §§ 101, 112. Second, Bey argued that he was entitled to priority because he had prior conception of the invention coupled with reasonable diligence in reducing it to practice. The board held against Bey on both issues, and Bey appealed both issues to this court. We hold that Bey was entitled to priority on the basis of prior conception coupled with diligence; thus, we need not reach the issue whether Kollonitsch’s application made a sufficient disclosure.
B. Bey’s Conception and Diligence
The board set forth the following standard for priority which Bey had to establish:
In order to prevail in this interference, Bey must establish by a preponderance of the evidence a conception of the invention defined by the count prior to June 1, 1977, the effective filing date of Kollon-itsch, coupled with diligence from just prior to that date up to July 11,1977, the filing date of his parent application. * *
The board found that Bey satisfied the first part of the test for priority because he established conception of the invention by at least March 10, 1977, prior to the effective filing date relied upon by Kollonitsch.
Bey claimed constructive reduction to practice, based on the filing of his patent application, on July 11, 1977. Thus, Bey had to show that he was reasonably diligent during the 41-day continuous critical period from May 31, 1977, a date just prior to the June 1, 1977, filing date of Kollon-itsch’s parent application, to July 11, 1977, the filing date of Bey’s parent application.
Bey’s case for diligence hinged on whether his patent attorney, Ruth Hattan (Hat-tan), had been reasonably diligent in preparing and filing the patent application during the 41-day critical period. During the critical period, Hattan worked on a group of 22 patent applications relating to irreversible enzyme inhibitors, including the parent to the present application. Bey argued to the board that Hattan’s work on the closely related applications contributed substantially to the preparation of the present application. Thus, Bey argued that work on the related applications should be considered in determining whether Bey was reasonably diligent in filing the present application.
The irreversible enzyme inhibitors were invented by a small group of researchers at Richardson-Merrell, Inc., in Strasbourg, France. Bey presented unrebutted evi dence that the irreversible enzyme inhibitors are interrelated in their chemistry, structure, and utility because they are similar derivatives of amino acids.
The supervisor of Richardson-Merrell’s patent law department in Cincinnati, Ohio, selected Ruth Hattan, an experienced pharmaceutical patent attorney, to prepare the resulting patent applications. The supervisor testified that he chose to have one attorney handle the applications because of the closely related technology, the small number of inventors, and the required travel to the Strasbourg, France, location.
Hattan went to Strasbourg in January 1976, to obtain the necessary disclosure from the inventors. She returned to the United States and she subsequently prepared 22 patent applications, listing only four inventors with considerable overlap of inventorship.
A status report dated May 31, 1977, at the beginning of the critical period, showed that the 22 applications were in various stages of completion with expected filing dates between June 15 and August 15, 1977. Bey presented evidence that Hattan worked on the applications from this group on almost every working date in the critical period. There was no evidence that priority was given to any applications docketed after the group of 22 applications. Hattan traveled to Strasbourg again on June 25, 1977, for a conference with the inventors. In Strasbourg, she completed 16 of the patent applications, including the parent to the present application, and she mailed them from Strasbourg directly to the PTO, resulting in the filing date of July 11,1977, for the present application.
In the present interference decision, the board found that Bey had failed to show diligence because Hattan had not documented sufficient specific activity on the present application, and Hattan could not show that the applications were taken up in chronological order. The board rejected Bey’s argument that work on the related applications should be considered as diligence with respect to the present application. The board found that Bey failed to show that the irreversible enzyme inhibitor applications were sufficiently related, notwithstanding the unrebutted, corroborated evidence of the relationships between the applications. Thus, the board found that Bey had not exercised reasonable diligence, holding that Bey could not rely on his attorney’s work on the other applications involving irreversible enzyme inhibitors.
The board noted that its decision was consistent with its decision in a previous interference between the same parties, where the board considered the same testimony and found that these applications were not sufficiently related. Bey did not appeal from the previous interference decision, and we do not rule on that decision here. We note that neither the board nor the parties treated the previous decision on the “related case” issue as binding in the present case. Therefore, we must review the board’s present decision for errors of law or clearly erroneous findings of fact on the basis of the record now before us.
Attorney Diligence
A. Work on the Application in Question
Clearly, reasonable diligence can be shown if it is established that the attorney worked reasonably hard on the particular application in question during the continuous critical period. With respect to the Bey application in this interference, it was established only that the application was “to be typed” as of May 31, 1977, and that the application was mailed to the PTO from Strasbourg on July 5, 1977. Bey argued that the 40-45 page application had to be typed, revised, proofread and/or finalized, mailed to the inventors in France for final review, and the formal documents signed and mailed to the PTO. Bey admitted, however, that Hattan’s records did not show the exact days when activity specific to this application occurred. Thus, we cannot say that the board clearly erred in finding that “the documented activities with regard to [the present application] are insufficient by themselves to prove diligence.”
B. Work on Applications in Chronological Order
Of course, it may not be possible for a patent attorney to begin working on an application at the moment the inventor makes the disclosure, because the attorney may already have a backlog of other cases demanding his attention. Thus, the courts have recognized that reasonable diligence is all that is required of the attorney:
[I]t is not necessary that an inventor or his attorney should drop all other work and concentrate on the particular invention involved; and if the attorney has a reasonable backlog of work which he takes up in chronological order and carries out expeditiously, that is sufficient.
Generally, the patent attorney must show that unrelated cases are taken up in chronological order, thus, the attorney has the burden of keeping good records of the dates when cases are docketed as well as the dates when specific work is done on the applications.
In the present case, Hattan did not assign docket numbers to the cases in consecutive order, and she could not state the specific dates when the cases were docketed. Thus, the board was correct in finding that Bey failed to show that the cases were taken up in chronological order.
C. Work on Related Cases
Frequently, an inventor or group of inventors may file more than one patent application involving closely related subject matter. In this type of situation, the “exact lines of demarcation between the cases [may not be] clear in all respects at the start.”
In Ginos v. Nedelec, Ginos worked during a period of 150 days on the development of several pharmaceutical compounds closely related in structure and utility. The board treated the compounds as one “generic invention,” and it credited Ginos’ work on the closely related compounds as diligence with respect to the particular compound claimed in the application in question.
In Ginos, the several compounds originally were claimed in one “grandparent” application, which was subsequently divided into several applications claiming individual compounds. Presumably, the same finding of diligence would obtain if Ginos had originally filed a separate application for each compound, instead of one grandparent application.
Treating a generic invention and the resulting group of related applications as a whole, there may be significant overall savings in time and expense by having one attorney prepare the applications together as a group. In Bey’s case, Hattan and her supervisor testified that the applications were assigned to one attorney because of the interrelationships in chemistry, structure, utility, and inventorship, as well as the distance between the patent law department in Cincinnati, Ohio, and the inventors’ location in Strasbourg, France. Hattan’s supervisor testified that “while in theory [the applications] could have been distributed amongst several patent attorneys, in practice it would mean duplication of work unnecessarily and, ultimately, delay in preparation of the cases.”
In priority determinations, the inventor should not be penalized because his attorney reasonably prepared the closely related applications together, thereby expediting the filing of the applications and the prompt disclosure to the public of the closely related inventions contained therein.
The question is under what circumstances may work on a related case be credited as diligence with respect to the instant application. We hold that work on the related case is to be credited toward reasonable diligence if the work on the related case “contribute[s] substantially to the ultimate preparation of the involved application.”
Here, it appears that the board failed to apply the correct rule of law in determining whether Hattan’s work on the related applications constituted diligence with respect to the present application. The board erroneously required Bey “to show that all the cases in the alleged ‘package’ were docketed at the same time” and to show that none of the related applications was filed before the present application. Here, the board seems to have blurred the test for related cases with the requirement that unrelated cases must be taken up in chronological order.
Hattan’s unrebutted testimony, as corroborated by documentary evidence and by her supervisor’s testimony, clearly shows that she took up the applications simultaneously as a group, well before the start of the critical period, and that the applications were filed within a few days of each other. This evidence would appear to support, rather than to negate, the applicability of the related cases doctrine.
The board also erred in requiring Bey to show that the cases “had to be worked on as an integrated whole” (emphasis supplied). The board stated that “[t]he sheer number of cases involved makes it even more difficult to ascribe any unifying characteristics to the group as a whole.” While there are a large number of cases involved, the number alone is not determinative as to whether the cases were sufficiently related.
The board’s finding, that Bey failed to show that the cases were worked on as a group, is clearly erroneous on the basis of this record. Hattan testified that she worked on the “whole enzyme inhibitor series of cases * * * simultaneously as a package.” She explained the relationships between the applications as follows:
They’re related in their basic mechanism of action. The whole enzyme inhibitor area is based on irreversible inhibition of various enzymes, and the utility form in various of these cases is the same. The chemistry involved in preparing many of these cases is the same across the board, with just a change of starting material. The inventorship is not the same on every case but there are common inventors involved on all of these cases, but the chemistry and utility are very closely interrelated in these cases.
Hattan continued her testimony in greater detail concerning the relationships in technology, utility, and inventorship:
The relationships are many. All of the compounds involved in that series of patent applications operate through the same basic mechanism of action; that is, irreversible inhibition of enzymes.
The series of compounds involved also are related structurally, the basic structure being that of the natural occurring amino acids with the compound including derivatives thereof, and all involve substitution at the alpha position of the amino acids or derivatives thereof with various functional groups.
Within any one group of amino acids the cases are further related insofar as utility is concerned that, for example, many of the cases have the same utility, the difference between cases having the same utility being generally the nature of the substituent at the alpha position, which also involves different chemical procedure for obtaining those compounds as the nature of the substituent at the alpha position varies within any one group of compounds involving the same amino acid, the only difference being within that series of compounds the nature of the substituent at the alpha position.
There is a cross-over from case to case of utility, and in preparing one application, for example, just to illustrate, in the preparation of Case — I believe the case number is MI-906, which is directed to alpha acetylenic and alpha vanillin histi-dine decarboxylase inhibitors and related compounds.
The utility statements in that application are essentially identical to those in Case MI-884, and in many instances in preparing the patent applications it was possible to take out large segments of one application and use it in the preparation of another application with very minor modifications. [Emphasis supplied.]
The patent applications are also interrelated on the basis of chemistry in many instances, and also on inventorship, there being a common inventor — namely, Dr. Jung — on all of the applications, the other inventors being Dr. Metcalf and Dr. Bey, and on two of the applications I believe Dr. Casara is also an inventor.
It is clear from Hattan’s unrebutted testimony that the applications were treated as a group because of the closely related technology, even to the extent that the applications contained a common set of information:
The package was worked on as a group. All of these cases were treated as a group and worked on at the same time because there was such a common set of information that could be transferred from one case to another; and the reason they were worked on together as a package was to expedite the filing of the cases. By transferring information from case to case, it made the preparation much faster and the filing.
Hattan’s testimony was corroborated by documentary evidence, including abstracts of the patent applications, as well as by the testimony of her supervisor. It does not appear that Bey introduced into evidence the 22 complete patent applications; however, Bey introduced sufficient evidence to establish a prima facie case that the applications were closely related, and Kollonitsch failed to introduce any evidence in rebuttal. The board itself acknowledged that all of the applications relied upon by Bey involved “irreversible enzyme inhibitors.” On this record, the board clearly erred in finding that the applications were not related. We hold that Hattan’s work on the related cases must be credited toward reasonable diligence on the instant application, because Bey established that work on the related cases “contributed substantially to the ultimate preparation of the involved application.”
The record of Hattan's work on the related cases during the 41-day critical period contains unrebutted evidence of reasonable diligence. There is corroborated evidence of specific work performed on the related applications on almost every working day in the critical period to support Hattan’s testimony that she worked continuously on the applications during this period. The record shows that 16 related patent applications, including the instant application (each containing 40-50 typewritten pages), were written, revised, proofread and/or finalized, mailed to the inventors in France for final review, and executed and mailed from Strasbourg by July 5, 1977. The PTO received the parent to the present application on July 11, 1977, the last day of the critical period. On this record of unrebutted, corroborated evidence, we hold that Bey established reasonable diligence during the continuous 41-day critical period, and that the board’s finding to the contrary was clearly erroneous.
Conclusion
Bey, having established prior conception coupled with reasonable diligence for the continuous critical period, was entitled to priority. The board’s decision, awarding priority to Kollonitsch, is reversed.
REVERSED.
. The interference count is defined as follows:
"A compound of the formula
wherein
Z is gamma-guanidinopropyl or H2N(CH2)n-wherein n is 3 or 4;
Y is FCH2- or C1CH2-:
R is hydroxy or or (Cj-Cj8) alkoxy;
and the pharmaceutically acceptable salts and individual optical isomers thereof."
. This testimony was adduced by Bey in prior Interference Nos. 99,934, 100,008, 100,010, and 100,340, which interferences are not at issue in this appeal.
. Citing Gould v. Schawlow, 363 F.2d 908, 150 USPQ 634 (CCPA 1966). See Paulik v. Rizkalla, 760 F.2d 1270, 226 USPQ 224 (Fed.Cir.1985).
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4207133-27591 | COLLOTON, Circuit Judge.
Appellant Kevin Chambers brought this action against three law enforcement officers pursuant to 42 U.S.C. § 1983. He alleged that the officers violated his rights under the Fourth Amendment by using excessive force against him during and shortly after his arrest. The district court concluded that Chambers’s failure to show greater than de minimis injury was fatal to his claim and dismissed the complaint. We now conclude that a citizen may prove an unreasonable seizure based on an excessive use of force without necessarily showing more than de minimis injury, but we hold that the officers here are entitled to qualified immunity, because their alleged actions did not violate clearly established law. Accordingly, we affirm the district court’s grant of summary judgment.
I.
On the afternoon of August 4, 2005, a team of police officers from St. Louis County executed a warrant to search for evidence of illegal drug activity at the apartment of Chambers’s stepdaughter. Chambers was visiting when police arrived, and he was quickly placed under arrest. All three defendants participated in the search of the apartment. Bradley Kelling, a sergeant with the St. Louis County Police Department and a member of its Tactical Response Team, entered the apartment and observed Chambers until he was arrested and handcuffed. Andria Van Mierlo, a detective with the St. Louis County Police Department, and Michael Pennycook, an officer with the City of Maplewood, Missouri, Police Department, entered the apartment only after the Tactical Response Team had arrested and handcuffed Chambers.
At his deposition, Chambers testified that members of the Tactical Response Team held him on the floor, handcuffed him, and jammed guns into his back while Kelling asked him what he was doing at the apartment. According to Chambers, when he told Kelling that he was at the apartment to visit his stepdaughter, Kelling called him a liar, cursed at him, kicked him several times on both sides of his body, and pressed his foot down on Chambers’s back. Chambers stated that the officers then brought him outside. According to Chambers, Kelling later emerged from the apartment, announced that he was going to search Chambers again, and planted a glass pipe in Chambers’s pocket. Kelling was the only member of the Tactical Response Team whom Chambers identified by name.
Following Chambers’s arrest, he was transported to the St. Louis County Police Department, and then to the county jail. Chambers repeatedly complained of back pain, and shortly after his arrival at the jail, Pennycook and Van Mierlo transported him in an unmarked police car to St. Mary’s Health Center for an evaluation. Van Mierlo drove while Chambers sat in the passenger seat, and Pennycook sat in the seat immediately behind Chambers. Chambers was handcuffed behind his back and his seatbelt was fastened.
Chambers testified at his deposition that Van Mierlo and Pennycook adjusted his seat so that it was leaning as far forward as possible, with Chambers’s head almost touching the dashboard. The officers complained that Chambers was wasting their time by requiring a ride to the hospital. According to Chambers, Van Mierlo began to drive erratically, accelerating and braking suddenly so that Chambers would be jerked back and forth in his seat. Chambers testified that Pennycook, meanwhile, forcefully kicked the back of his seat and used his arm to choke Chambers from behind, while complaining that Chambers was wasting their time. In Chambers’s account, the trip lasted approximately twenty minutes because Van Mierlo chose to drive in circles rather than go straight to the hospital. Chambers also testified that after they arrived at St. Mary’s, Van Mierlo and Pennycook roughly jerked him around by his handcuffs during the walk from the car to the building’s front doors.
Once Chambers arrived at the hospital, he was evaluated by Dr. Randall Speck. Chambers testified that he told Speck that he was suffering from back and neck pain, which was so severe that Chambers was crying and had difficulty concentrating. Chambers stated that Speck had told him that his back showed signs of redness and bruising.
According to a note that Speck signed, Chambers told the hospital personnel that he had pain in his upper back caused by the officers who initially arrested him, although he said he was unsure whether the officers actually struck him or just fell on him. The note said that Chambers denied any head or neck injury, arm or leg pain, or shortness of breath. Speck signed another note describing Chambers’s final diagnosis as a “back contusion,” while noting that there was no bruising or swelling on Chambers’s spinal area, that Chambers showed no acute distress, and that Chambers had full range of motion in his arms and legs without discomfort. The note also stated that x-rays of Chambers’s spine and ribs showed no evidence of acute fractures. Speck declared Chambers fit for confinement and recommended that he “take either Tylenol or Ultram [a pain medication] ... as needed for pain.” The State prosecuted Chambers in connection with his arrest, and he eventually pleaded guilty to a felony drug charge pursuant to North Carolina v. Alford, 400 U.S. 25, 91 S.Ct. 160, 27 L.Ed.2d 162 (1970).
On September 12, 2005, Chambers commenced this action against St. Louis County, the St. Louis County Drug Task Force, and the three officers in their official and personal capacities, alleging that the defendants had violated his rights under the Fourth, Fifth, Eighth, and Fourteenth Amendments. In the same action, Chambers brought an assault and battery claim under Missouri law. He sought damages and declaratory and injunctive relief. The district court granted the defendants’ motions to dismiss all of Chambers’s claims. Chambers v. St. Louis Cnty., No. 4:05-cv-01469-SNL, slip op. at 4, 2006 WL 1026664 (E.D. Mo. April 18, 2006). Chambers appealed, and a panel of this court affirmed the dismissal of the claims against St. Louis County and the St. Louis County Drug Task Force, reversed the dismissal of the claims against Kelling, Pennycook, and Van Mierlo in their individual capacities, and remanded to the district court for further proceedings. Chambers v. St. Louis Cnty., 247 Fed.Appx. 846 (8th Cir. 2007) (per curiam).
On May 11, 2009, the district court granted summary judgment in favor of the remaining defendants. The court reasoned that Chambers had presented no evidence that he had suffered anything more than de minimis injuries, and “[s]inee plaintiff has failed to produce evidence of any serious or permanent injuries, his claim for excessive force in violation of the Fourth Amendment fails.” Chambers v. St. Louis Cnty., No. 4:05-cv-01469-SNLJ, slip op. at 10-11 (E.D.Mo. May 11, 2009). The district court also dismissed the state law assault and battery claims without prejudice, declining to exercise supplemental jurisdiction over those claims after it determined that all the federal claims should be dismissed. Having found no constitutional violation, the district court did not address the officers’ claims of qualified immunity.
Chambers again appealed to this court, arguing that the district court lacked jurisdiction and that the court erred by dismissing his claim for damages against the officers in their individual capacities, refusing his requests for appointed counsel, and failing to reprimand the defendants and their counsel for “deceitful and unethical tactics.” On February 28, 2010, we affirmed the judgment of the district court. Chambers v. Pennycook, 366 Fed.Appx. 707 (8th Cir.2010) (per curiam). Chambers filed a petition for rehearing, arguing that our decision conflicted with the Supreme Court’s holding in Wilkins v. Gaddy, — U.S. -, 130 S.Ct. 1175, 175 L.Ed.2d 995 (2010), which was decided on the day before we issued our opinion. We granted the petition for rehearing, vacated our opinion and judgment of February 23, 2010, and appointed counsel to represent Chambers. We also directed the parties to file supplemental briefs concerning the question whether a plaintiff must show some minimum level of injury in order to state a valid Fourth Amendment excessive force claim under § 1983, and, if not, whether the officers here are entitled to qualified immunity.
II.
A.
Chambers first argues that the district court lacked jurisdiction to rule on the officers’ motions for summary judgment while his interlocutory appeal of the district court’s denial of his motion for appointment of counsel was still pending. Generally, “[t]he filing of a notice of appeal ... confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved, in the appeal.” Griggs v. Provident Consumer Disc. Co., 459 U.S. 56, 58, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982) (per curiam) (emphasis added); see Ahlberg v. Chrysler Corp., 481 F.3d 630, 638 (8th Cir.2007). Because the defendants’ motions for summary judgment were not “aspects of the case involved in the appeal” of the district court’s denial of Chambers’s motion for appointment of counsel, the court retained jurisdiction to rule on the dispositive motions.
B.
We review the district court’s grant of summary judgment de novo, viewing the record in the light most favorable to the nonmoving party and drawing all reasonable inferences in that party’s favor. Johnson v. Blaukat, 453 F.3d 1108, 1112 (8th Cir.2006). Although the district court did not reach the qualified immunity issue, “[w]e may uphold a grant of summary judgment for any reason supported by the record, even if different from the reasons given by the district court.” Johnson v. Outboard Marine Corp., 172 F.3d 531, 535 (8th Cir.1999). Qualified immunity shields a government official from liability and the burdens of litigation in a § 1983 action for damages unless the official’s conduct violated a clearly established constitutional or statutory right of which a reasonable official would have known. Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982). When a defendant asserts qualified immunity at the summary judgment stage, the plaintiff must produce evidence sufficient to create a genuine issue of fact regarding whether the defendant violated clearly established law. Johnson v. Fankell, 520 U.S. 911, 915, 117 S.Ct. 1800, 138 L.Ed.2d 108 (1997).
To defeat a claim of qualified immunity, a plaintiff alleging excessive use of force must present sufficient facts to show that the officer’s conduct violated a constitutional right, and he also must establish that the constitutional right was clearly established. While we have discretion to decide which question should be addressed first, Pearson v. Callahan, 555 U.S. 223, 129 S.Ct. 808, 818, 172 L.Ed.2d 565 (2009), we think it best in this case to start with the constitutional question. This court has said several times, over the course of more than fifteen years, that “[i]t remains an open question in this circuit whether an excessive force claim requires some minimum level of injury.” Copeland v. Locke, 613 F.3d 875, 881 (8th Cir.2010) (alteration in original) (internal quotation omitted); see also Cook v. City of Bella Villa, 582 F.3d 840, 850 (8th Cir.2009); Cavataio v. City of Bella Villa, 570 F.3d 1015, 1019-20 (8th Cir.2009); Andrews v. Fuoss, 417 F.3d 813, 818 (8th Cir.2005); Hunter v. Namanny, 219 F.3d 825, 831 (8th Cir.2000); Dawkins v. Graham, 50 F.3d 532, 535 (8th Cir.1995). Continued postponement of that question has resulted in uncertainty about the rights of citizens and the responsibilities of law enforcement officers under the Fourth Amendment.
One aspect of the recurring “open question” is squarely presented in this case: whether a plaintiff must demonstrate greater than de minimis injury to establish a use of excessive force that violates the Fourth Amendment. Resolution of that issue will give guidance to officials about how to comply with legal requirements and will allow an avenue of redress for wronged citizens in appropriate circumstances. The question is unlikely to be resolved in the context of a criminal case or in litigation over municipal liability. See Cnty. of Sacramento v. Lewis, 523 U.S. 833, 841 n. 5, 118 S.Ct. 1708, 140 L.Ed.2d 1043 (1998). And none of the factors that typically counsel against a decision on the constitutional question are present here. See Pearson, 129 S.Ct. at 818-20. Having thought hard twice about how to exercise our discretion, see Camreta v. Greene, — U.S.-, 131 S.Ct. 2020, 2031-32, 179 L.Ed.2d 1118 (2011), and having ordered supplemental briefing and devoted substantial resources to considering the constitutional question in this case, we will proceed to decide it.
C.
We begin by asking whether Chambers has presented evidence sufficient to make out the deprivation of a constitutional right. Pearson, 129 S.Ct. at 815-16. Chambers complains that the officers’ alleged use of force violated his rights under the Fourth, Fifth, and Eighth Amendments (as incorporated against the States through the Fourteenth Amendment), but we think the only provision properly invoked is the Fourth Amendment. “Where, as here, the excessive force claim arises in the context of an arrest or investigatory stop of a free citizen, it is most properly characterized as one invoking the protections of the Fourth Amendment....” Graham v. Connor, 490 U.S. 386, 394, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989); see Brown v. City of Golden Valley, 574 F.3d 491, 496 (8th Cir.2009).
At oral argument, counsel for two of the officers asserted that Chambers’s claim against them does not arise under the Fourth Amendment, because the Fourth Amendment applies only up to the point of arrest. We have noted the existence of a “legal twilight zone” between arrest and sentencing, where it is unclear whether excessive force claims are governed by the Fourth Amendment or cases decided based on the Fourteenth Amendment and substantive due process. Wilson v. Spain, 209 F.3d 713, 715 (8th Cir. 2000). This court has ruled, however, that it is appropriate to use a Fourth Amendment framework to analyze excessive force claims arising out of incidents occurring shortly after arrest, apparently because those incidents still occur “in [the] course of’ a seizure of a free citizen. See Moore v. Novak, 146 F.3d 531, 535 (8th Cir.1998). In particular, we have applied Fourth Amendment excessive force standards to incidents occurring during the transportation, booking, and initial detention of recently arrested persons. See Wilson, 209 F.3d at 715-16; Moore, 146 F.3d at 535; Mayard v. Hopwood, 105 F.3d 1226, 1228 (8th Cir.1997). The alleged excessive force here occurred during and shortly after Chambers’s arrest, while he was on the floor of the apartment where police encountered him and while he was transported to the hospital for a medical evaluation as part of the detainee intake process. Our cases therefore dictate that the claims against the officers are governed by the Fourth Amendment.
In Graham v. Connor, the Supreme Court mandated the application of an objective “reasonableness” standard when evaluating claims that government agents used excessive force in violation of the Fourth Amendment. 490 U.S. at 396, 109 S.Ct. 1865. It is well-established that “the right to make an arrest or investigatory stop necessarily carries with it the right to use some degree of physical coercion or threat thereof to effect it.” Id. An officer’s use of force violates the Fourth Amendment when it is objectively unrea sonable, given the facts and circumstances of the particular case, as “judged from the perspective of a reasonable officer on the scene, rather than with the 20/20 vision of hindsight.” Id. at 396-97, 109 S.Ct. 1865. The determination whether the force used to effect a seizure was reasonable ultimately requires a case-specific balancing of “‘the nature and quality of the intrusion on the individual’s Fourth Amendment interests’ against the countervailing governmental interests at stake.” Id. at 396, 109 S.Ct. 1865 (quoting Tennessee v. Garner, 471 U.S. 1, 8, 105 S.Ct. 1694, 85 L.Ed.2d 1 (1985)).
The officers here assert that Chambers has failed to show the violation of a constitutional right, because he offered no evidence that he suffered greater than de minimis injuries as a result of the alleged excessive force. This court has concluded that “relatively minor scrapes and bruises” and a “less-than-permanent aggravation of a prior shoulder condition” are to be considered de minimis injuries, Wertish v. Krueger, 433 F.3d 1062, 1067 (8th Cir. 2006), and we agree that Chambers has not offered evidence to show that he suffered any greater injury.
We are not convinced, however, that evidence of only de minimis injury necessarily forecloses a claim of excessive force under the Fourth Amendment. The appropriate inquiry is “whether the force used to effect a particular seizure is ‘reasonable.’ ” Graham, 490 U.S. at 396, 109 S.Ct. 1865 (emphasis added). A de minimis use of force is insufficient to support a claim, see Hunter, 219 F.3d at 832; Curd v. City Court, 141 F.3d 839, 841 (8th Cir. 1998), and it may well be that most plaintiffs showing only de minimis injury can show only a corresponding de minimis use of force. The degree of injury is certainly relevant insofar as it tends to show the amount and type of force used. See Cavataio, 570 F.3d at 1020; Cook, 582 F.3d at 850; Wertish, 433 F.3d at 1067; Curd, 141 F.3d at 841; Greiner v. City of Champlin, 27 F.3d 1346, 1355 (8th Cir.1994); Foster v. Metro. AirpoHs Comm’n, 914 F.2d 1076, 1082 (8th Cir.1990). But it is logically possible to prove an excessive use of force that caused only a minor injury, and a rale that forecloses a constitutional claim in that circumstance focuses on the wrong question.
The degree of injury should not be dispositive, because the nature of the force applied cannot be correlated perfectly with the type of injury inflicted. Some plaintiffs will be thicker-skinned than others, and the same application of force will have different effects on different people. A greater than de minimis injury requirement under the Fourth Amendment would mean that the same quantum of force, in the same circumstances, could be unconstitutional when applied to a citizen with a latent weakness and constitutional when applied to a hardier person. The governing rule should not turn on such unpredictable and fortuitous consequences of an officer’s use of force. See Lee v. Ferraro, 284 F.3d 1188, 1200 (11th Cir.2002). The rale should focus instead on whether the force applied is reasonable from the perspective of a reasonable officer on the scene at the time the force is used. See Graham, 490 U.S. at 396, 109 S.Ct. 1865.
Our cases concerning excessive force claims arising from handcuffing do include language that might support the position of the officers here. We said in Hanig v. Lee, 415 F.3d 822 (8th Cir.2005), that “[fjor the application of handcuffs to amount to excessive force, there must be something beyond minor injuries.” Id. at 824; accord Crumley v. City of St. Paul, 324 F.3d 1003, 1008 (8th Cir.2003). Those decisions, however, should not be read to establish a general rule equating quantum of injury with quantum of force under the Fourth Amendment. “Handcuffing inevitably involves some use of force,” Wertish, 433 F.3d at 1067, and it almost inevitably will result in some irritation, minor injury, or discomfort where the handcuffs are applied. See Rodriguez v. Farrell, 280 F.3d 1341, 1351 (11th Cir.2002). To prove that the force applied was excessive in that context, therefore, a plaintiff must demonstrate something more. See Fisher v. City of Las Cruces, 584 F.3d 888, 898 (10th Cir.2009). As a general proposition, however, there is no uniform requirement that a plaintiff show more than de minimis injury to establish an application of excessive force. See Lambert v. City of Dumas, 187 F.3d 931, 936 (8th Cir.1999) (holding that “[a] single small cut of the lateral right eyelid and small scrapes of the right posterior knee and upper calf’ were sufficient to support an excessive force claim).
The officers here contend that if greater than de minimis injury is not required in order to state a Fourth Amendment excessive force claim, then police officers will be reluctant to use any force when making a seizure, for fear of causing some slight harm that violates a detainee’s constitutional rights. We appreciate the concerns of the officers, but we think they are misplaced. Nothing in our opinion today lightens the significant burden that a plaintiff must carry in a § 1983 suit based on a Fourth Amendment excessive force claim. Police officers undoubtedly have a right to use some degree of physical force, or threat thereof, to effect a lawful seizure, Graham, 490 U.S. at 396, 109 S.Ct. 1865, and reasonable applications of force may well cause pain or minor injuries with some frequency. It remains firmly established that “[n]ot every push or shove, even if it may later seem unnecessary in the peace of a judge’s chambers, violates the Fourth Amendment.” Id. (internal citation and quotation omitted). The dispositive question is whether the officer’s conduct was objectively reasonable under the circumstances, as judged from the perspective of a reasonable officer on the scene at the time the force was applied. See id.; Cook, 582 F.3d at 849.
The facts of the incident in this case are hotly disputed, but taking them in the light most favorable to Chambers, we conclude that the alleged conduct of the officers was not objectively reasonable. According to Chambers’s testimony, Kelling kicked him several times on both sides of his body, although he was restrained on the ground and offering no resistance. Chambers also testified that Pennycook repeatedly choked and kicked him during the trip to the hospital, and that Van Mierlo extended the journey by taking a roundabout route and intentionally driving so erratically that Chambers was jerked roughly back and forth in his car seat while his head was positioned adjacent to the dashboard. While the absence of significant injury surely would be one factor that a jury would consider in determining whether to credit the plaintiffs account, Chambers has presented sufficient evidence, if believed, to establish a violation of the Fourth Amendment. The gratuitous use of force alleged by Chambers was not reasonable under the circumstances.
D.
The second step in the qualified immunity analysis is to determine whether the right that was violated was “clearly established” at the time of the defendant’s alleged misconduct. Pearson, 129 S.Ct. at 816. For a right to be clearly established, “[t]he contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right.” Anderson v. Creighton, 483 U.S. 635, 640, 107 S.Ct. 3034, 97 L.Ed.2d 523 (1987). A plaintiff need not show that the “very action in question ha[d] previously been held unlawful,” but he must establish that the unlawfulness was apparent in light of preexisting law. Id. In other words, we must ask whether the law at the time of the events in question gave the officers “fair warning” that their conduct was unconstitutional. Hope v. Pelzer, 536 U.S. 730, 741, 122 S.Ct. 2508, 153 L.Ed.2d 666 (2002).
Generally speaking, of course, it was clearly established in August 2005 that an arrestee had a right to be free from the use of excessive force. See, e.g., Kukla v. Hulm, 310 F.3d 1046, 1050 (8th Cir.2002). It was not clearly established, however, that an officer violated the rights of an arrestee by applying force that caused only de minimis injury. Just three days before the events giving rise to this case, we filed an opinion reiterating that “[i]t remains an open question in this circuit whether an excessive force claim requires some minimum level of injury.” Andrews, 417 F.3d at 818 (alteration in original) (internal quotation omitted). The Andrews opinion suggested that “de minimis injuries” may “preclude a claim for excessive force,” id. (emphasis added), and also noted that “the lack, or minor degree, of any injury is also relevant in determining the reasonableness of the force used to effect an arrest.” Id. (emphasis added) (citing Greiner, 27 F.3d at 1355). The court ultimately resolved that case based on qualified immunity. Id. at 819.
Given the state of the law in August 2005, a reasonable officer could have believed that as long as he did not cause more than de minimis injury to an arrestee, his actions would not run afoul of the Fourth Amendment. A reasonable officer was permitted to assume that legal conclusion when determining how to proceed, and he is entitled to have his conduct judged according to that standard for purposes of qualified immunity. See Dunn v. Denk, 79 F.3d 401, 403 (5th Cir.1996) (en banc); Harper v. Harris Cnty., 21 F.3d 597, 601 (5th Cir.1994) (per curiam).
According to the testimony given by Chambers, the officers used a degree of force that was excessive. Under the law in August 2005, the officers ran the risk of liability if that force caused significant injury. But the converse is also true. The officers knew there was some chance that their actions would cause only de minimis injury, and it was reasonable for the officers to believe that they remained within constitutional bounds if that was the result. As it turned out, the force did not cause more than de minimis injury. We reject in this decision a constitutional rule that turns on the arrestee’s degree of injury, but given the law prevailing at the time of the incident, we conclude that the officers are entitled to qualified immunity.
III.
Chambers raises two other points on appeal. First, he contends that the district court erred in failing to grant his request to sanction appellees and their counsel under Federal Rule of Civil Procedure 11 for “deceitful and unethical tactics.” The district court’s on-the-scene judgment in sanctions matters is entitled to substantial deference, Teamsters Nat’l Freight Indus. Negotiating Comm. v. MME, Inc., 116 F.3d 1241, 1242 (8th Cir. 1997) (per curiam), and after a careful review of the record, we see no abuse of discretion.
Second, Chambers asserts that the district court erred in denying his request for appointment of counsel. Chambers had no constitutional or statutory right to appointed counsel, Phillips v. Jasper Cnty. Jail, 437 F.3d 791, 794 (8th Cir.2006), but the district court has authority to recruit counsel for an indigent person in appropriate circumstances. See 28 U.S.C. § 1915(e)(1). The court has a good deal of discretion to determine whether representation is warranted given the nature of the case and the litigants. Phillips, 437 F.3d at 794. We think the district court reasonably determined that recruitment of counsel was not necessary in view of the relatively straightforward questions of fact that the court thought dispositive under the prevailing law. We later appointed counsel on appeal to assist with our consideration of more complex legal issues, and Chambers thus suffered no prejudice from any deficiency of his legal acumen in the district court.
The court appreciates the efforts of appointed counsel in presenting the case for Mr. Chambers on rehearing.
The judgment of the district court is affirmed.
. The Honorable Stephen N. Limbaugh, Jr., United States District Judge for the Eastern District of Missouri.
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644111-20749 | E. GRADY JOLLY, Circuit Judge:
This case is before the court upon the petition of the union filed pursuant to section 10(f) of the NLRA to review and set aside an order of the National Labor Relations Board (Board) issued against the un ion on February 29, 1984, and reported at 268 NLRB No. 195. The Board has filed a cross-application for enforcement of its order. We enforce the order of the Board without prejudice to the union to challenge the compliance procedures or individual awards.
I.
Local 198 (the union) has approximately 4,000 members who are plumbers and other related tradesmen. The union’s hiring hall in Baton Rouge, Louisiana, is recognized as the exclusive' referral system in various collective bargaining agreements to which the union or its parent international is signatory. The rules governing the operation of the hiring hall are codified by the union in “Working Rules, By-laws” (the rules); the rules are not determined by the collective bargaining agreements.
The rules provide that there shall be nondiscriminatory selection for all applicants for referral, that applicants must sign and date the appropriate out-of-work list according to their trade classifications, that applicants will retain their places on. the list until dispatched, and that “all applicants must be present when a referral is made.” The rules also establish four refer- ■ ral lists, but for the purposes of this case only Group “A” and Group “B” are relevant. Group “A” consists of all qualified journeymen who have been employed for at least four out of the past five years by an employer abiding by an agreement with the union or have been under training in a formally approved program and who have lived for at least five years within the local construction labor market. Group “B” consists of all qualified journeymen who have been employed for at least four out of the past five years by designated employers. All persons in the “B” group are required to sign the appropriate list each day in order to be eligible for referral. Applicants in Group “A” are to be referred under the rules, and when this group is exhausted, applicants from Group “B” are to be referred. In fact, however, the Board found that the union has ignored the rules defining the Group “A” and Group “B” referral classes, and that Group “A” essentially consists of Local 198 members and Group “B” of all remaining applicants, travelers and nonmembers.
Robert Anderson, the union’s assistant business agent, testified that the “A” list is restricted to union members; that in giving referrals to “A” applicants, the union first clears the auditorium where jobs are awarded of travelers and nonmembers, in conformity with a sign posted outside the entrance to the auditorium that reads, “198 Members Only”; and that “B” applicants receive referrals only after the union exhausts the “A” list.
Anderson testified that he knew of no instances where an individual who had become a member of the union had been removed from the “A” list because of failure to continue to meet the prerequisite employment requirement. A substantial number of the union’s members who had not worked through the union hall during the previous two years were maintained on the “A” list, in derogation of the rules.
To meet emergency situations, the union maintains an emergency list from which it calls the first listed qualified individuals, even if not in the union hall at the time. During the six months before the hearing, the union received approximately twelve calls for emergency referrals, all of which went to the union’s members, the only job applicants whose addresses are on file with the union.
As a result of a subpoena enforcement proceeding brought by the General Counsel to require the production of certain of the union’s work referral system records, it was learned that the “B” registration book had been suspended and access to that book denied to work referral applicants from October 1, 1981 through February 8, 1982, and again from September 30, 1982, to the time of the hearing. During those periods, no records of “B” registrants were kept and none was permitted to register. Thus, respondents kept no Group “B” referral records for approximately ten months of the fourteen-month period covered by the subpoena.
J.C. Hicks, the union’s business manager, and Anderson explained that the use of the “B” book had been suspended during the two indicated periods for opposite reasons. The “B” register was discontinued during the first period because that had been an interval of peak employment. There had been no need for “B” applicants to sign the register as there was work for all. On the other hand, the “B” book had been suspended since September 30 because there was hardly any work, and, according to Hicks, almost 1,900 “A” members were idle at the time of the hearing. To have put out the “B” book in the circumstances would merely have served to provide potential “B” applicants with false encouragement.
“B” applicant Wilbur Thomas, corroborated by traveler Frederick Everson, testified that, under the union’s hiring-hall policy, he was prevented from registering in the “A” book, from being in the auditorium when “A” members received work referrals, and was consigned, with other “B” applicants, to whatever work remained. Thomas had not received work through the respondent’s hall since April 22, 1982, although he had signed the “B” book twenty-five to thirty times. Everson registered at the hall four or five times without referral after his March 30 lay-off from his last union-referred job, after which he gave up.
Thomas and Everson had both previously filed charges against the union for discriminatory practices. These charges had been voluntarily withdrawn. All of the registrations by Thomas and Everson noted above post-date the termination of the previous claims. Thomas and Everson were both permitted to give testimony as to matters occurring both before and after the settlement of their previous claims. Their testimonies partially corroborated Anderson’s testimony.
The General Counsel introduced various statistics which he claims support his position. Only 11.8 percent of all referrals were Group “B” referrals in the period from October 19,1981, through October 27, 1982, although there is no indication of what percentage of the total applicant pool consisted of individuals prohibited from signing the “A” book. During the period the “B” book was suspended, over 1,600 fitters and welders were referred for work, but only a few travelers and nonmembers were referred. From February 19 through September 30, there were sixty-three additional days when travelers and nonmembers who were journeymen fitters and welders were not referred, while members in those categories received work. Between April 22 and September 30, the respondent referred 894 member pipefitters and 492 member welders in comparison to the 5 pipefitters and 127 welders referred from Group B. The union disputes the probative value of these statistics, an issue we address below..
The union argues that these statistics show that rather than having discriminated against nonmembers and travelers, it followed a practice of referring them for work, curtailed only because of severe unemployment which developed in the industry. The union justifies its requiring Group “B” job applicants to sign their out-of-work list daily while member applicants need register only once to be referred, on the ground that nonmembers and travelers, unlike members, are not a stable part of the area work force with established addresses.
The union further explains that any propensity to favor members over nonmembers and travelers merely reflects its view that members, because of their training and experience, are more qualified. The union argues that its members generally have received formal apprenticeship training.
The overwhelming majority of travelers and nonmembers who signed the “B” book on or after April 22 did. so from one to three times. A number, however, registered repeatedly. Everson claimed he had signed four or five times, and Thomas registered for work twenty-nine times. Neither was referred following these registrations. Other frequent “B” book registrants were not referred, including men who signed over twenty times in a four-month period.
Testimony by Anderson, Hicks and others indicated that James Brewer, who filed the original charge, had been denied work repeatedly because of his failure to pay an internal union fine even though he was a nonmember. This was determined by the Board to be an independent violation of the Act, a determination the union is not contesting. Brewer frequently signed the “B” book. The union contests the Board’s finding that Brewer has been discriminated against in referrals because he is a nonmember. Brewer had in the past received referrals from the union hall.
II.
The complaint in this case is pursuant to charges filed by James Brewer, acting as an individual in his own behalf, and a complaint issued by the Board on June 3, 1982. The complaint, as amended at the hearing, alleges that the union violated section 8(b)(1)(A) of the National Labor Relations Act by informing Brewer that the union was filing internal union charges against him for working for a nonunion contractor, by threatening to refuse to refer him for employment because he was considered a “habitual offender” who had not paid union fines previously imposed by the union, and by informing Brewer that he had been denied referral for employment because he did not pay such fines. The complaint further alleges that the respondent has violated section 8(b)(1)(A) and (2) of the Act by refusing to refer Brewer for employment because he had not paid an outstanding union fine; by discriminating against Brewer and other travelers and nonmembers in the making of work-referrals because of lack of membership in the union; by failing or refusing to make its hiring-hall-work rules available to all applicants; and by failing to use objective standards in referring nonmember and traveler work applicants.
Following a hearing at which testimony was taken and other evidence introduced, the administrative law judge (ALJ) entered an order requiring the union to cease and desist from various unfair practices and requiring certain affirmative action necessary to effectuate the policies of the Act. The portion of the order to which the union most vigorously objects is the affirmative requirement that the union make whole all nonmember and traveler applicants for referral for any loss of earnings suffered because of the discrimination against them, leaving the identity of the discriminatees to be determined in the compliance stage of the proceeding. The union also maintains that the record does not support a finding of discriminatory operation of the hall, that the administrative law judge improperly relied upon evidence associated with the informally settled unfair-labor-practice charges of Messrs. Everson and Thomas, that due process was denied the union by failure to give reasonable notice of an identifiable or recognizable group of alleged discriminatees, that newspaper publication of the Board’s order would be unfair, and that there was no independent evidence that Messrs. Everson and Thomas were discriminated against after the settlement of their previous charges, or that Brewer was discriminated against because of his nonmember status.
The Board accepted, with only slight modification, the ALJ’s findings and order.
III.
The union disputes the Board’s finding that it discriminated against travelers and nonmembers in the operation of its hiring hall. This finding is conclusive if supported by substantial evidence in the record as a whole; a court will not displace an adequately supported Board determination even if it would prefer a different choice if the matter were before it de novo. Universal Camera v. NLRB, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951); Sturgis Newport Business Forms v. NLRB, 563 F.2d 1252 (5th Cir.1977). A review of the record here indicates that there is substantial evidence supporting the Board’s finding that Local 198 operated its hall in a discriminatory fashion in violation of section 8(b)(2) and (1)(A) of the National Labor Relations Act (the -Act), 29 U.S.C. § 158(b)(2) and (1)(A).
First, Robert Anderson, Local 198 Assistant Business Agent, admitted that the “A” list was restricted to union members; that in giving referrals to “A” applicants, the union first cleared the auditorium where jobs are awarded of nonmembers in conformity with a sign posted outside the entrance to the auditorium reading “198 members only,” and that “B” applicants received referrals only after the union exhausted the “A” book.
Anderson’s testimony was corroborated in part by Wilbur Thomas, Frederick J. Everson, Jr., James L. Brewer, and J.C. Hicks, the union business manager. The ALJ expressly found Anderson and Hicks to be credible witnesses.
Second, the union admits that only “B” book applicants were required to sign in every day. Since all applicants had to be present in the hall to accept work, this requirement was not adequately explained by the union’s need to keep track of available applicants. The requirement was simply a burden on nonmembers and travelers, as was found by the ALJ.
Third, the union admits that the “B” book was discontinued for many months at a time in violation of its own procedures. The union’s explanations for these lapses are not convincing of innocence. The union claims the “B” book was discontinued at one point because of a general business slowdown, but a reduction in business does not excuse discrimination against nonmembers.
Fourth, the union resisted producing “B” book records in defiance of a subpoena, only relenting when contempt proceedings for noncompliance were instituted. The union then admitted that no “B” records had been kept for extended periods of time.
Fifth, only members were given emergency work for six months before the hearing.
Sixth, the General Counsel produced statistical evidence consistent with the Board’s finding of discrimination. The union disputes the probative value of these statistics. We agree with the union that these statistics should not be given much weight since they omit important data. For example, the statistics indicate that 11.8 percent of all referrals were Group “B” referrals from October 19, 1981 through October 27, 1982, but do not indicate what percentage of all applicants were in Group “B” during this period. Nevertheless, the statistics are entitled, perhaps, to some slight weight because they are at least suggestive of discrimination, the union pointed out no specific flaw in the evidence at trial, and presented no evidence indicating that the statistics were misleading. We are also mindful of the fact that the union’s failure to maintain reasonable records, including the suspension of the “B” book, may have rendered the collection of accurate statistics difficult. We emphasize that we do not place any determinative reliance on these statistics.
The factors above substantially support the Board’s finding that Local 198 intentionally operated its hiring hall according to discriminatory procedures.
The union urges that evidence associated with the informally settled unfair labor practice charges of Everson and Thomas should be barred" as not providing a basis for a finding of “proclivity to violate the Act.” The evidence in this case is sufficient to support the Board’s finding of present discriminatory operation without any recourse to first finding Local 198 had a “proclivity to violate the Act” in the past. Anderson’s testimony and other evidence is much more dispositive of the issue than is the testimony of Thomas and Everson concerning their previous claims. The union further urges that the doctrine of collateral estoppel applies here to bar evidence associated with the previous claims, citing Gulf States Manufacturing v. NLRB, 598 F.2d 896 (5th Cir.1979). We do not agree; the prior complaints were voluntarily withdrawn and so lack finality, there is little privity between the prior complainants and the present class of discriminatees, and the present action involves more than discrimination against the two prior complainants. See generally Parklane Hosiery v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979).
Since the record as a whole substantially supports the Board’s finding, we affirm the determination of discriminatory operation of the hiring hall.
IV.
The union maintains that the Board’s award of make-whole relief to all nonmembers and traveler applicants injured by the discriminatory operation of the union hall is not consistent with precedent, citing International Longshoremen’s Ass’n, AFL-CIO (West Gulf Maritime Ass’n), 194 NLRB 1027 (1972) (refusing administrative judge’s request for make-whole relief for all but named discriminatees on the grounds that there was no evidence that anyone other than the named discriminatees had been injured). In rebuttal, the Board principally relies on Boilermakers Local Union No. 154, AFL-CIO (Western Pennsylvania Service Contractors Ass’n), 253 NLRB 747 (1980), enfd. 676 F.2d 687 (3d Cir.1982) (table) (granting make-whole relief to all applicants to discriminatorily operated union hiring hall who suffered loss, and leaving the determination of the discriminatees to the compliance stage). Western Pennsylvania distinguished West Coast Gulf, on the grounds that in West Coast Gulf there was no evidence that any unnamed individuals were damaged; in Western Pennsylvania, the General Counsel introduced specific evidence (including the “out-of-work book” involved in the discrimination and reports of payments made to employees out of contractual benefit funds) that established a class of unnamed injured discriminatees. Western Pennsylvania at 748 n. 4. In the present case, the General Counsel has produced the hall’s “A” and “B” books together with testimony by Anderson and others supporting the conclusion of actual discrimination against a class of individuals.
The union challenges the reliability of a statistical analysis that the General Counsel used to buttress his case, pointing out that the statistical analysis used in Western Pennsylvania was much more sophisticated and revealing. Even though we agree with this contention, Anderson’s testimony concerning the actual assignment of jobs, the fact that emergency work was actually given to few nonmembers or travelers, and circumstantial evidence such as the signs on the wall and the “out-of-work” books all substantially support a finding of the existence of an injured class. The Board was correct in holding that West Coast Gulf is inapposite and that Western Pennsylvania is controlling.
V.
The union contends it was denied due process because it was not provided with reasonable notice of an identifiable or recognizable group of alleged discriminatees for whom redress was sought. We do not agree.
Paragraph 13 of the original complaint alleges that the union:
has given preference to its members in referrals to employers within its geographical jurisdiction with whom it has collective-bargaining agreements containing exclusive referral provisions, thereby discriminating against non-member applicants for employment based upon union membership and/or arbitrary, invidious or irrelevant considerations and causing and/or attempting to cause said employers to discriminate against such nonmember applicants for employment in violation of Section 8(a)(3) of the Act [29 U.S.C. 158(a)(3)].
This paragraph alleges broad discrimination in the operation of the hiring hall in general, not just with respect to the named parties.
The principles of offensive collateral estoppel also weigh against the union’s position on this issue. If the finding of general discriminatory operation of the union hall were upheld but redress given only to the named individuals, the union might nevertheless be barred from relitigating the discrimination issue by collateral estoppel. Parklane Hosiery v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979). Such collateral estoppel effect is often appropriate in an administrative setting and none of the Parklane Hosiery policies seems to weigh against it here. Mosher Steel Co. v. NLRB, 568 F.2d 436 (5th Cir.1978). The procedure proposed by the Board of relegating the determination of the discriminatees to the compliance stage amounts to little more than permitting collateral estoppel effect to the finding of discriminatory operation of the union hall in that stage. The union may still contest individual awards and compliance procedures.
VI.
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3064618-8714 | MEMORANDUM
JOHN W. LORD, Jr., Chief Judge.
A brief summary of the rather complicated factual history of this ease may be helpful.
Relator, Michael Miller, was found guilty during February Term, 1961 in Montgomery County on three indictments charging burglary, larceny, and receiving stolen goods. The charges arose from the theft of coins from jukeboxes and cigarette machines in three restaurants in communities in central Montgomery County. Some coins kept in a cigar box containing payments of Pennsylvania Sales Tax were missing from one of the restaurants as well. Part of the evidence introduced against relator at trial consisted of bags of coins found in the trunk of relator’s car after a search. The money contained in these bags totaled almost exactly the amount missing from the three restaurants. Relator was sentenced to a total term of 2 to 10 years on November 3, 1961 on the three indictments upon which he was convicted. He did not appeal.
In November Sessions, 1963, relator was convicted on three new indictments charging burglary, armed robbery and conspiracy to commit armed robbery. On January 28, 1966, relator was sentenced to imprisonment for three to twenty years on these charges, this sentence to commence at the expiration of the two to ten year sentence relator was then serving as the result of the 1961 convictions.
On July 28, 1965, relator filed a Petition for a Writ of Habeas Corpus in the Court of Common Pleas of Montgomery County challenging the 1961 convictions on the grounds that the above-described search of his automobile amounted to an unconstitutional search and seizure. Relator relied on Mapp v. Ohio, 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081, 84 A.L.R.2d 933 (1961), decided two days before the start of relator’s trial. The petition was denied on August 31, 1965 without an evidentiary hearing by President Judge Forrest, primarily on the ground that illegal search and seizure was not a proper subject for collateral attack in Pennsylvania but rather one for post-trial motions or direct appeal. On February 1, 1966, the Superior Court of Pennsylvania affirmed this denial and subsequently the Supreme Court of Pennsylvania refused allocatur.
On April 4, 1966, relator filed a petition for Writ of Habeas Corpus in this Court alleging unreasonable search and seizure and raising indirectly, denial of his right to appeal. This action was docketed under the number of Miscellaneous No. 3280. On May 27, 1966, this Court denied the petition on the ground that because of relator’s 1963 convictions, discussed above, petitioner would not be entitled to immediate release even if the petition with respect to the 1961 convictions were granted. Relator appealed this decision to the Third Circuit Court of Appeals. Before the disposition by that Court, the United States Supreme Court, on March 11, 1968, decided the case of Walker v. Wainwright, 390 U.S. 335, 88 S.Ct. 962, 19 L.Ed.2d 1215 (1968). In the Walker case, the Supreme Court held that the fact that a favorable decision would not entitle a prisoner to immediate release could no longer be made a bar to a habeas corpus suit. Thereafter, on May 19, 1968, the Third Circuit Court of Appeals reversed the above decision of this Court, which was inconsistent with this recent Supreme Court decision.
Meanwhile, on January 25, 1968, relator had filed a Post-Conviction Petition in the Quarter Sessions Court of Montgomery County alleging denial of his right to appeal from his 1961 convictions. Because petitioner alleged in his habeas corpus petition in this Court that he was unaware at the time of trial of his right to appeal, this court dismissed relator’s petition for habeas corpus on August 7, 1968, for failure to exhaust state remedies during the pendency of a similar claim in the state courts. Actually, Judge Smillie had dismissed relator’s Post-Conviction Petition on June 25, 1968, but the Commonwealth was unaware of this decision and had consequently informed the Court that no decision had been handed down. On February 7, 1969, the Superior Court of Pennsylvania affirmed this dismissal and subsequently the Supreme Court of Pennsylvania refused allocatur.
Subsequent to the conclusion of these proceedings in the state court, relator re-instituted his Federal habeas corpus action, which has been docketed as Misc. No. 69-460. This action is now before the Court for determination. Relator’s sentence on his 1961 convictions expired on September 1, 1969.
The Commonwealth first contends that where the sentence of a defendant expires during the pendency of his habeas corpus action, he can no longer challenge the conviction on which that sentence is based. The Commonwealth states that while relator may have been serving the sentence he now seeks to attack at the time he filed his petition, he is no longer serving that sentence but instead is serving the sentence on his 1963 convictions. The Commonwealth therefore says that relator’s action must be dismissed as moot or for want of jurisdiction under the Federal Habeas Corpus provisions, relying on the cases of Thompson v. Cavell, 158 F.Supp. 19 (W.D.Pa.1957), and Hunter v. Smyth, 249 F.2d 651 (4th Cir. 1957). Even assuming that these cases support the propositions urged by the Commonwealth, the Court cannot accept the Commonwealth’s argument. For even assuming that the Commonwealth’s position was correct in 1957 when these cases were decided, it is clear that the proposition urged by the Commonwealth no longer reflects the law on this point. In 1968, the Supreme Court of the United States specifically held in Carafas v. LaVallee, 391 U.S. 234, 88 S.Ct. 1556, 20 L.Ed.2d 554 (1968), that if a habeas corpus action is instituted in the Federal courts prior to the expiration of sentence, the subsequent expiration of that sentence would neither render the case moot nor deprive the Court of jurisdiction under the Federal habeas corpus statute for persons in “custody” pursuant to a state judgment. The Supreme Court laid particular stress on the fact that relator’s underlying claims were not new, but that his path in litigating the case was long, partly because of the inevitable delays in court processes and partly because of the requirement of exhaustion of state remedies. Id. at 239-240, 88 S.Ct. 1556. As is evident from the above summary of the facts, the same can be said here. In light of the above Supreme Court decision, it is evident that this argument of the Commonwealth must be rejected even though the sentence on the conviction relator is attacking has indeed expired.
However this case presents a somewhat more complicated but related question. While relator prepared the papers for the present habeas corpus action and had them notarized on August 19, 1969, the actual filing date in the Clerk’s Office of this Court was September 10, 1969. Therefore it could be argued that relator had not instituted, his habeas corpus action by the date of expiration of his sentence on the 1961 convictions, September 1, 1969, and therefore that the Court is without jurisdiction. The Court does not, however, find this argument persuasive, in light of the Supreme Court’s reasoning in Carafas, supra. Relator in the instant case first instituted a federal habeas corpus action raising his present claims on April 4, 1966. Subsequently the case was twice dismissed, once erroneously and once for failure to exhaust state remedies. Court processes here as in Carafas have extended over a considerable period of time, and, here as there, action has been postponed in this Court until relator could exhaust state remedies. The Court does not believe that it would be in keeping with the rationale of the Supreme Court decision in Carafas to dismiss relator’s claim at this time because the suit was treated as a new action when reinstituted, when relator originally raised the same claims in this Court some three and a half years prior to the expiration of his sentence on the conviction under attack.
This conclusion brings the Court to the merits of relator’s claims. Once again relator does not appear to raise directly the issue of denial of his right to appeal, though he does allege that he was unaware of his right to appeal at the time of trial. In any event, this Court is in full agreement with the very thorough and carefully considered opinion of Judge Smillie denying relator’s petition on this issue prepared after a full evidentiary hearing. The Court therefore holds that relator has no claim to relief based on denial of his right to appeal, and it will not be necessary to hold a hearing on this issue. 28 U.S.C.A. § 2254(d); Townsend v. Sain, 372 U.S. 293, 83 S.Ct. 745, 9 L.Ed.2d 770 (1963).
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3984902-12721 | OPINION OF THE COURT
STAPLETON, Circuit Judge:
Nicholas Fera appeals from the District Court’s orders (1) granting summary judgment in this 42 U.S.C. § 1983 action in favor of the Borough of Baldwin, Baldwin Chief of Police Christopher Kelly, and Baldwin Council members John Conley, David Depretis, Michael Ducker, Michael Fetsko, Jr., John Ferris, Jr., and Francis Scott, and (2) denying Fera’s motion for reconsideration. We will affirm the judgment of the District Court.
I.
In November 2001, Appellant Nicholas Fera was elected to the Baldwin Borough Council (“the Council”) in Pittsburgh. In October 2004, the Council and a few other Borough officials held a budget workshop, during which they discussed, inter alia, unlicensed gaming devices. One of the Council’s members noted that his barber told him that Edward Albert, the owner of a local establishment called the “Haf Mart,” owned seven gaming devices but had licenses for only four of these devices. Although the Council discussed the possibility of investigating all proprietors who owned gaming devices, it does not appear that the Council made any firm decisions at the workshop.
The day after the workshop, Fera went to the Haf Mart, purportedly to buy a lottery ticket. While he waited in line, he saw Albert and motioned him to the rear of the store. When the two of them gathered at the rear of the store, Fera whispered to Albert that he should get the additional licenses for his gaming machines. According to Fera, he did not tell Albert to hide the unlicensed gaming machines or warn Albert that the police might be investigating him.
The next day, Baldwin Chief of Police Christopher Kelly called Fera and asked him to come to the police station. When Fera arrived at the station, Chief Kelly explained that a Haf Mart employee had reported that Fera had told Albert to hide the unlicensed gaming devices. Chief Kelly noted that Fera might be subject to criminal liability for hindering an investigation, and that there could be negative publicity against Fera and his family. Chief Kelly then either told or advised Fera to resign from the Council. After Fera refused, Chief Kelly asked him if he wanted to call anyone to discuss the matter. Fera asked Chief Kelly to call Sam McPherson, a former mayor of Baldwin Borough. At the end of the phone call, McPherson advised Fera to resign.
After the phone call, Chief Kelly allegedly told Fera that he had ten minutes to make a decision and that, if he decided not to resign, Chief Kelly would have to prepare a police report. Fera then agreed to resign. Chief Kelly volunteered to type the resignation letter and asked Fera how he wanted the letter to read. Fera replied that he did not care what it said, so Chief Kelly composed a letter stating that Fera was resigning due to “an unexpected family emergency.” Fera signed the letter upon its completion. Although Chief Kelly did ultimately prepare a police report about the incident, no criminal charges were ever brought against Fera.
At some point thereafter, Gale Dobson Miscush, the Borough’s Tax Collector, allegedly disseminated a series of “letters” to the public that portrayed Fera in a negative light by alluding to, inter alia, the incident at the Haf Mart. It appears that Fera tendered only one of these “letters” to the District Court. That document, titled “The Truth & Nothing But the Truth,” was published in the “Taxpayer Gazette” shortly before a local election. This document stated in pertinent part:
Did you know the reason former Councilman Nick Fera resigned from council was because he had taken information from an executive council meeting & told a local business owner that he was under investigation. He hindered a police investigation, a criminal act, and violated the state ethics laws. Police reports are public information. His resignation & police report were filed on 10/27/04.
In October 2006, Fera commenced the instant action in the Allegheny County Court of Common Pleas against Baldwin Borough, the Baldwin Borough Police Department, Chief Kelly, and Council members John Conley, David Depretis, Michael Ducker, Michael Fetsko, Jr., John Ferris, Jr., and Francis Scott. In January 2007, Defendants removed the case to the Western District of Pennsylvania. A few weeks later, Fera filed an amended complaint, naming all of the original defendants except the Baldwin Police Department. The amended complaint raised the following claims: (1) the defendants unlawfully seized Fera at the police station and violated his due process and equal protection rights; (2) the defendants engaged in a civil conspiracy in an attempt to force Fera to resign from the Council; (8) the published material was defamatory and had been provided to the author by the defendants; and (4) Fera was entitled to attorneys’ fees and costs pursuant to 42 U.S.C. § 1988.
After the close of discovery, the defendants moved for summary judgment. In September 2007, the District Court granted these motions as to all of Fera’s claims. In doing so, the court concluded that
[cjonspicuously absent from [Fera’s] statement of facts are any averments, let alone references to evidence of record, of the manner in which any defendant somehow disseminated any information to the citizen who defamed Plaintiff in a series of public letters, any proof of any conspiracy or agreement to support his conclusory allegations of conspiracy and agreement to force him to resign, or that he was at any time restrained or detained or otherwise had his freedom of movement curtailed by Chief Kelly.
(Sept. 20, 2007, Memorandum Opinion at 9, 2007 WL 2769698.) Fera subsequently moved the court to alter or amend that judgment. The court denied the motion with respect to Fera’s federal claims, concluding that the motion “simply rehashes the arguments he previously made in opposition to summary judgment....” (Oct. 18, 2007, Memorandum Order at 3, 2007 WL 3053263.) The court granted the motion, however, as to Fera’s state law defamation claim, stating that it “agree[d] with Plaintiff and deems it a more appropriate exercise of discretion to follow its usual practice and decline to exercise its discretion to entertain the common law defamation claim pursuant to its supplemental jurisdiction.... ” (Id. at 4.) Accordingly, the court remanded the defamation claim to the Allegheny County Court of Common Pleas.
Fera initially pursued this appeal without representation. In February 2008, he filed a pro se informal brief. Fera subsequently retained Arnold Y. Steinberg, Esquire, who filed a reply brief on Fera’s behalf in May 2008. Fera’s opening brief argues (1) that the District Court “did not have all of the facts,” and that he “was not represented right” by counsel in the District Court proceeding; (2) that the defendants did not attend two court-scheduled settlement conferences; and (3) that the District Court did not give him enough time to conduct discovery.
Fera presents two additional arguments in his reply brief. Although somewhat difficult to discern, it appears that his first argument is that the District Court erred in granting summary judgment as to Fera’s due process claim because he sufficiently demonstrated an injury to his reputation. The second argument is that the District Court erred in granting summary judgment as to his Fourth Amendment claim because, contrary to its conclusion, his encounter with Chief Kelly constituted an unlawful seizure.
II.
The preliminary task in this appeal is determining which issues are before this Court. An appellant is “required to set forth the issues raised on appeal and to present an argument in support of those issues in [his] opening brief.” Kost v. Kozakiewicz, 1 F.3d 176, 182 (3d Cir.1993); see Fed. R.App. P. 28(a)(5), (9). Although “[i]t is well settled that an appellant’s failure to identify or argue an issue in his opening brief constitutes waiver of that issue on appeal,” United States v. Pelullo, 399 F.3d 197, 222 (3d Cir.2005), this Court has not held in a precedential opinion that this rule applies with equal force to pro se litigants. Other Courts of Appeals, however, have concluded that a pro se litigant’s failure to raise an issue in his opening brief constitutes a waiver of that issue in the absence of exceptional circumstances. See Timson v. Sampson, 518 F.3d 870, 874 (11th Cir.2008) (per curiam) (“While we read briefs filed by pro se litigants liberally, issues not briefed on appeal by a pro se litigant are deemed abandoned. Moreover, we do not address arguments raised for the first time in a pro se litigant’s reply brief.” (internal citations omitted)); Anderson v. Hardman, 241 F.3d 544, 545 (7th Cir.2001) (“Rule 28 applies equally to pro se litigants, and when a pro se litigant fails to comply with that rule, we cannot fill the void by crafting arguments and performing the necessary legal research .... ”); Al-Ra’Id v. Ingle, 69 F.3d 28, 31 (5th Cir.1995) (“An appellant’s brief must contain an argument on the issues that are raised____There is no exemption for pro se litigants, though we construe their briefs liberally.”).
We agree with these courts that in fairness to the opposing side it is not asking too much of pro se litigants to require at least an identification in the first brief of the issues they are asking the appeals court to resolve. Fera has tendered no satisfactory explanation for his failure to identify his reply brief arguments in his opening brief, and we hold that those arguments have been waived. Our ultimate conclusion would be no different, however, if we held to the contrary. Both of those arguments are without merit.
III.
Fera’s opening brief does not identify any facts that were overlooked by the District Court, let alone explain how such facts warrant a different outcome in this case. As for the defendants’ alleged failure to attend the two settlement conferences, even if this allegation is true, Fera does not indicate what relief he seeks or otherwise explain how defendants’ failure to attend those conferences impacted the disposition of this case.
Finally, Fera’s argument regarding his ability to conduct discovery is unpersuasive. This suit was originally filed in October 2006. In June 2007, Fera’s original attorney successfully withdrew as counsel. On July 9, 2007, two weeks before the close of discovery, Fera’s new attorney entered his appearance and filed an unopposed motion to extend the discovery deadline by thirty days. The District Court denied the motion without prejudice and held that the parties could file a renewed joint motion to extend the discovery period so long as the proposed discovery deadline did not affect the August 17, 2007, deadline for filing summary judgment motions.
Although Fera never renewed his discovery motion, he now seems to claim that the District Court did not give him enough time to conduct discovery. He does not indicate, however, what additional discovery he intended to conduct or how that discovery might have affected the disposition of his claims. Moreover, a review of the District Court docket provides no indication that the parties had insufficient time to undertake discovery or otherwise prepare for summary judgment. Accordingly, the District Court did not abuse its discretion in overseeing the discovery in this case.
IV.
“[T]o make out a due process claim for deprivation of a liberty interest in reputation, a plaintiff must show a stigma to his reputation plus deprivation of some additional right or interest.” Hill v. Borough of Kutztown, 455 F.3d 225, 236 (3d Cir.2006). A plaintiff satisfies the stigma prong of this test by showing that the allegedly stigmatizing statements were made publicly and were false. Id.
Fera cannot satisfy the stigma prong, for he fails to demonstrate that any of the Appellees made the public state- merits of which he complains. Although he contends that the Borough’s Tax Collector, who is not a party to this suit, authored those statements, he fails to establish that any of the Appellees facilitated the statements’ publication. Moreover, that the Borough’s Tax Collector may have published these statements does not render the Borough susceptible to liability here, for Fera has not shown that the allegedly stigmatizing statements reflected the Borough’s policy or custom. See Monell v. Dep’t of Soc. Servs., 436 U.S. 658, 694, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978) (concluding that a municipality’s liability under 42 U.S.C. § 1983 for the acts or omissions of its employees or agents is limited to circumstances where the execution of the municipality’s custom or policy caused the constitutional violation). Accordingly, Fera’s first reply brief argument lacks merit.
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11579723-24819 | T.G. NELSON, Circuit Judge:
The issue presented for review in this case is whether the district court erred in denying the Nevada Board of Medical Examiners’ motion to dismiss for failure to state a claim based on the grounds of absolute immunity. We hold that while the Board is entitled to absolute immunity for its quasi-judicial acts, such protection does not extend to its ministerial acts. Because each of Dr. Mishler’s claims in his complaint relies upon both the quasi-judicial acts and ministerial acts, it was not error for the district court to deny the Board’s motion. We, therefore, affirm.
I. FACTS AND PROCEDURAL HISTORY
This litigation has been ongoing for more than twelve years, and this is the fourth time this case has come up on appeal to the Ninth Circuit. From 1981 to 1985, Dr. Mishler practiced medicine as a neurosurgeon in Nevada. He spoke out against and reported certain improper conduct and practices of other doctors while practicing in Nevada. In 1985, he sought employment in Ohio. In April 1985, the Ohio Board of Medical Examiners (“Ohio Board”) contacted the Nevada State Board of Medical Examiners (“Nevada Board”) for a letter of verification regarding Mish-ler’s standing to practice medicine in Nevada. At that time there were no disciplinary charges pending against Mishler. The Nevada Board did not respond until September 1985, when it sent a letter stating that Mishler was under investigation in Nevada. As a result, the Ohio Board denied Mishler the opportunity to practice medicine in Ohio.
A year later, in September 1986, the Nevada Board filed charges against Mish-ler to revoke his license. During the disciplinary proceedings, material evidence was withheld and destroyed by the Nevada Board and hearings were conducted without affording Mishler an opportunity to confront witnesses against him. After the final decision of the board, Mishler pursued administrative remedies in state court. In 1993, the state court proceedings ended when the Nevada Supreme Court reversed all adverse findings against Mishler and dismissed all of the disciplinary charges against him. See Mishler v. State Bd. of Med. Exam’rs, 109 Nev. 287, 849 P.2d 291, 297 (1993).
In addition to pursuing administrative remedies, Mishler filed a § 1983 action in federal court against the State of Nevada, the Nevada Board and its members (“Board Members”) in their official and individual capacities. After various appeals and twelve years of litigation, the only defendants remaining in this suit are the Board Members in their individual capacities. Mishler’s second amended complaint' alleges that the Board Members engaged in allegedly unconstitutional and unlawful conduct when performing the following actions: failing to respond to the Ohio Board verification inquiry; filing false disciplinary charges against him; conducting an “abusive witch hunt”; withholding and concealing evidence; disseminating confidential materials to other doctors; conducting hearings on a partial record and without allowing him the opportunity to confront witnesses; and revoking his license. Based on this conduct, Mishler’s second amended complaint asserts seven claims for relief: (1) violation of the right to free speech— § 1983 claim; (2) violation of the right to petition the government— § 1983 claim; (3) civil malicious prosecution— § 1983 claim; (4) violation of procedural due process— § 1983 claim; (5) restraint of trade — federal and state law claim; (6) intentional interference with contractual relations — state law claim; and (7) conspiracy — state law claim.
At that point in the litigation, Dr. Clift, one of the Board Members, obtained separate • counsel. Dr. Clift and the Board Members filed motions to dismiss the second amended complaint for failure to state a claim based on absolute immunity. The district court denied their motions indicating that it was unable to discern the difference between the claim to absolute immunity and the prior claim of qualified immunity on which the Ninth Circuit had already ruled. See Mishler III, 94 F.3d 652. The Board Members moved for reconsideration. The district court granted the motion for reconsideration, acknowledging that it had made a mistake of law regarding its statement on immunity. However, the district court still concluded that it would not dismiss Mishler’s complaint because it could not determine, pri- or to discovery, whether all of the acts of the Board Members were quasi-judicial. In addition, the court noted that the defendants “moved to dismiss the entire [complaint] on the ground of absolute immunity” and concluded that “it would be inappropriate to grant such relief if it were to include dismissal of [Mishler’s] ‘ministerial act’ claims.” Both the Board Members and Dr. Clift appeal the district court’s denial of their motions to dismiss for failure to state a claim.
II. STANDARD OF REVIEW
“We review de novo the district court’s refusal to grant immunity at the pleading stage in a § 1983 action.” Motley v. Walker, 175 F.3d 756, 759 (9th Cir.1999). All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. See id. The burden of showing that immunity is available is upon the official who seeks it. See id. A complaint should not be dismissed unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief. See id.
III. ANALYSIS
State and federal executive branch officials charged with constitutional or statutory violations are entitled to absolute immunity under certain limited circumstances. See Buckley v. Fitzsimmons, 509 U.S. 259, 268, 113 S.Ct. 2606, 125 L.Ed.2d 209 (1993). A functional approach is used to determine whether an official is entitled to absolute immunity. See id. at 269, 113 S.Ct. 2606. Essentially, the court examines the function performed by the official and determines whether it is similar to a function that would have been entitled to absolute immunity when Congress enacted § 1983. See id. at 268-69, 113 S.Ct. 2606. It is the “nature of the function performed, not the identity of the actor who performed it,” that is critical to this inquiry. See id. at 269, 113 S.Ct. 2606. “Even when [the court] can identify a common-law tradition of absolute immunity for a given function, [the court should] eonsider[ ] ‘whether § 1983’s history or purposes nonetheless counsel against recognizing the same immunity in § 1983 actions.’” Id. (quoting Tower v. Glover, 467 U.S. 914, 920, 104 S.Ct. 2820, 81 L.Ed.2d 758 (1984)).
It is well settled that judges and prosecutors are entitled to absolute immunity. See Stump v. Sparkman, 435 U.s. 349, 355, 98 S.Ct. 1099, 55 L.Ed.2d 331 (1978) (judicial immunity); Imbler v. Pachtman, 424 U.S. 409, 430-31, 96 5.Ct. 984, 47 L.Ed.2d 128 (1976) (prosecutorial immunity). Immunity for judges has been an entrenched principle in our legal system for more than a century. See Bradley v. Fisher, 80 U.S. (13 Wall.) 335, 347, 20 L.Ed. 646 (1871). The essential rationale is that, without protection from retaliatory suits, a judge would lose "that independence without which no judiciary can be either respectable or useful." Id. A prosecutor's entitlement to absolute immunity flows from the performance of activities that are intimately associated with the judicial process. See Imbler, 424 U.S. at 430, 96 S.Ct. 984. The Supreme Court has also held that executive branch officials," when participating in a federal administrative agency's adjudicative process, are entitled to absolute immunity because they perform functions comparable to those of judges and prosecutors. See Buts v. Economou, 438 U.S. 478, 512-13, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978).
The Board Members and Dr. Clift argue that they are entitled to absolute immunity because they perform quasi-judicial and quasi-prosecutorial functions. They argue that the function of a state medical board is analogous to a federal administrative agency’s adjudication and that, under the reasoning of Butz, the Board Members should be entitled to absolute immunity for their acts.
A. Functionally Comparable Standard
In Butz, the Supreme Court determined that the role of a hearing examiner in a federal administrative agency was “ ‘func-. tionally comparable’ to that of a judge.” Id. at 513. The Court noted that an administrative hearing officer can issue subpoenas, rule on evidence, supervise the hearings and make decisions. The Court went on to state that “[m]ore importantly, the process of agency adjudication is currently structured so as to assure that the hearing examiner exercises his independent judgment on the evidence before him, free from pressures by the parties or other officials within the agency.” Id. The Butz Court also held that agency officials performing functions analogous to those of prosecutors would be entitled to absolute immunity. The Court noted that the “decision to initiate administrative proceedings against an individual or corporation is very much like the prosecutor’s decision to initiate ... criminal prosecution.” Id. at 515. The Court concluded that executive officials participating in federal administrative agency adjudications were entitled to the. protections of absolute immunity.
In contrast, after Butz, the Supreme Court determined that members of a prison discipline committee were not entitled to absolute immunity. See Cleavinger v. Saxner, 474 U.S. 193, 206-07, 106 S.Ct. 496, 88 L.Ed.2d 507 (1985). The Court noted that B'u,tz articulated several nonexclusive factors as being characteristic of the judicial process and helpful in determining whether absolute immunity should be granted. These factors-relating to the purpose of § 1983 immunity-include:
(a) the need to assure that the individual can perform his functions without harassment or intimidation; (b) the presence of safeguards that reduce the need for private damages actions as a means of controlling unconstitutional conduct; (c) insulation from political influence; (d) the importance of precedent; (e) the adversary nature of the process; and (f) the correctabiity of error on a~peal.
Id. at 202, 106 S.Ct. 496. Applying these factors, the Court concluded that the prison discipline committee members did not perform classic adjudicatory functions because they were not independent, and procedural safeguards were not of the same measure as those considered adequate in Butz. See id. at 202-07, 106 S.Ct. 496. Specifically, the Court noted that committee members were not professional hearing officers, as were administrative law judges, but were merely prison employees whose coworkers were the ones to lodge charges against the inmates. See id. at 203-04, 106 S.Ct. 496. The Court likened these committee members to school board members, who are not entitled to absolute immunity. See id. at 204-05, 106 S.Ct. 496 (citing Wood v. Strickland, 420 U.S. 308, 95 S.Ct. 992, 43 L.Ed.2d 214 (1975)).
The Court also focused on the lack of procedural safeguards, noting that prisoners were subject to disciplinary proceedings in which they: (1) were not afforded a lawyer or independent nonstaff representative; (2) could not compel attendance of witnesses or cross-examine them; (3) could not conduct discovery; (4) were not afforded a verbatim transcript; (5) could not prevent hearsay evidence; (6) had no cognizable burden of proof; and (7) were judged by committee members that were not truly independent. See Cleavinger, 474 U.S. at 206, 106 S.Ct. 496. Given this context, the Court concluded that qualified immunity would be sufficient to allow committee members to perform their disciplinary function without harassment or intimidation. See id. at 207, 106 S.Ct. 496.
Neither the Supreme Court nor this circuit has addressed the specific issue of absolute immunity for the acts of members of a state medical board. However, three circuit courts have held that the acts of such officials are functionally comparable to the acts of judges and prosecutors and thus entitled to absolute immunity. See Wang v. New Hampshire Bd. of Registration in Med., 55 F.3d 698 (1st Cir.1995); Watts v. Burkhart, 978 F.2d 269 (6th Cir.1992) (en banc); Bettencourt v. Board of Registration in Med., 904 F.2d 772 (1st Cir.1990); Horwitz v. State Bd. of Med. Exam’rs, 822 F.2d 1508 (10th Cir.1987). Functions discussed in these cases include investigating charges, initiating charges, weighing evidence, making factual determinations, determining sanctions, and issuing written decisions. The courts held that these tasks are functionally comparable to duties performed by courts and prosecutors. See Wang, 55 F.3d at 701; Bettencourt, 904 F.2d at 783; Horwitz, 822 F.2d at 1515.
In addition, each of the courts reasoned that policy considerations counseled for granting absolute immunity. In Honwitz, the court justified absolute immunity based on the “strong need” to ensure that board members could perform their functions without harassment and on the presence of “adequate due process safeguards” to protect against unconstitutional conduct. 822 F.2d at 1515. Similarly, in Bettencourt, the court determined that because board members served three-year terms and were removable only for cause, they were free from political influence. See 904 F.2d at 783. The court also determined that the act of revoking a physician’s license was one that is likely to stimulate numerous damages actions and that enough safeguards existed to enhance the reliability of information and the impartiality of decision-making. See id.
The Sixth Circuit’s opinion in Watts provides perhaps the most comprehensive analysis of the considerations and factors weighing in favor of the grant of absolute immunity for medical board members. In Watts, after concluding that the board members performed quasi-judicial functions comparable to functions that have been historically granted absolute immunity, the court examined whether the board members were subject to restraints and safeguards comparable to those in the judicial process. See 978 F.2d at 275. Distinguishing the medical board from the prison disciplinary board in Cleavinger, the court focused on procedural protections and the independence of the board members. See id. at 276. The court first noted that Tennessee law required that the board’s disciplinary proceedings be conducted in accordance with the Tennessee Administrative Procedures Act. The court held that these procedures provided safeguards comparable to those required by federal law. See id.
The court also held that the board members were independent professionals. De-’ spite the fact that the board was composed entirely of physicians, the risk of self-interested economic regulation was not enough to deny absolute immunity. See id. at 276-77. Further, the members were independent because they were appointed by the governor for renewable four-year terms and their decisions were not reviewed by the governor. See id. at 276. The court concluded that board members were as independent as state judges who must periodically stand for re-election. See id.
B. Absolute Immunity for the Nevada Board of Medical Examiners
In the case at hand, the Board Members and Dr. Clift argue that under the precedent of Butz and the circuit court cases, they are entitled to absolute immunity for the acts they performed on the medical board.
1. Need to Ensure Performance of Functions without Harassment.
The purpose of the Board is to ensure that qualified and competent persons practice medicine in the State of Nevada. Thus, part of the Board’s function is to discipline physicians. In some cases, the Board must go as far as to revoke a physician’s license. We agree with the court in Bettencourt that disciplinary proceedings and the revocation of a physician’s license are acts that are likely to stimulate numerous damages actions. See Bettencourt, 904 F.2d at 783. In view of the public interest of ensuring quality health care, there is a “strong need” to make certain that Board Members can perform these disciplinary functions without the threat of harassment or intimidation. See Horwitz, 822 F.2d at 1515.
2. Safeguards that Reduce the Need for Private Damages Actions.
The argument that adequate procedural safeguards exist is difficult to dispute. The Nevada Board performs its duties and functions under a comprehensive umbrella of statutes and the Nevada Administrative Procedure Act. These procedures provide adequate safeguards that are comparable to those available in federal law. The umbrella of the Nevada statutory scheme “reduce[s] the need for private damages actions as a means of controlling unconstitutional conduct.” See Cleavinger, 474 U.S. at 202, 106 S.Ct. 496.
Mishler argues that, despite the existence of these comprehensive procedures, it is the actual practice of the Nevada Board and its construction of the rules that this court must consider in determining whether adequate procedural safeguards exist. However, this assertion is inconsistent with principles of immunity law. “A judge is absolutely immune from liability for his judicial acts even if his exercise of authority is flawed by the commission of grave procedural errors.” Stump, 435 U.S. at 359, 98 S.Ct. 1099. The acts of the Nevada Board are no less judicial or prosecutorial because they may have been committed in error. See id. It is the available procedures, not the manner in which they are exercised in a particular case, that is the critical inquiry for determining whether there are safeguards that reduce the need for private damages actions. Mishler’s argument that these procedures were improperly followed is irrelevant to the inquiry. The Nevada statutory scheme presents adequate safeguards that are comparable to those found in federal law.
3. Insulation from Political Influence.
Mishler’s primary argument is that the Board Members are not as independent as the federal administrative hearing officers discussed in Butz. This argument deserves some consideration. In Butz, the Court noted that, under the Administrative Procedure Act: the hearing examiners could not perform duties inconsistent with their duties as hearing examiners; the hearing examiners are not responsible to agents engaged in the performance of investigative or prosecutorial functions for the agency; the hearing officers could not consult another party regarding a fact in issue without providing notice and opportunity to participate; the hearing officers are assigned in rotation as far as is practicable; and the officers can be removed only for cause. See Butz, 438 U.S. at 514, 98 S.Ct. 2894.
Here, there is no general prohibition against board members’ performing duties that are inconsistent with their duties as hearing officers. The only specific prohibition is that members of the investigative committee cannot participate in the decision as to whether the Board should bring charges against a physician. See Nev.Rev. Stat. §§ 233B.122, 630.311. However, just as in Cleavinger, Board Members participating in the disciplinary hearings “work with the fellow [Board Members] who lodge[ ] the charge against the [licensee] upon whom they sit in judgment.” Cleavinger, 474 U.S. at 204, 106 S.Ct. 496. Thus, while there is some separation of the investigatory, prosecutorial and judging functions, the Nevada Board is not as insulated as the medical board in Watts where the investigatory and charging functions are performed by a separate state agency. See Watts, 978 F.2d at 277 (noting that the Tennessee medical board does not bring charges or conduct the investigation that led up to the issuance of the charges)..
In addition, six of the nine board members must be doctors who actually practice medicine in Nevada. See Nev.Rev.Stat. § 630.060. This circumstance raises the specter that board members may achieve personal financial gain by revoking the licenses of other doctors and presents the strong potential for conflicts of interest which would not be present with federal hearing officers. However, in Watts, the medical board was composed entirely of physicians. See Watts, 978 F.2d at 275. There, the court determined that the “risk of self interest economic regulation” was not enough to deny absolute immunity. Id. at 276. Here, the risk of Board Members’ acting out of their own self-interest is further diminished because of the presence of three non-physicians on the Board.
There is no prohibition against consulting other parties regarding the facts in issue. The regulations state only that evidence and investigation documents “may be kept confidential.” Nev.Rev.Stat. § 630.336 (emphasis added). Board Members are not prohibited from “communicating and cooperating with any other licensing board or agency or any agency which is investigating a licensee.” Id.
Board Members are appointed by the governor for four-year terms. See Nev. Rev.Stat. §§ 630.050-630.060. Board Members must be selected “without regard to their individual political beliefs” and only “may be removed by the governor for good cause.” Id. §§ 630.060-630.070. No Board Member may “serve more than two consecutive full terms, but he may be reappointed after the lapse of [four] years.” Id. § 630.050.
Thus, the Board Members lack some characteristics of independence of a judge or federal hearing officer: the investigatory, prosecutorial and judging functions of the Nevada Board are not entirely separate; two-thirds of the Board Members are themselves physicians, raising the potential for self-interested decisions; and the evidence is not fully confidential. Despite these differences, however, the structure of the Nevada Board and the procedural requirements of their decision-making process show that the Board Members are sufficiently insulated from political influence.
4. Other Butz Factors: Precedent, Adversariness, Correctability.
It is unclear from the record to what extent the Nevada Board relies on precedent in making its disciplinary decisions. However, it is clear that the disciplinary process is adversary in nature and that errors made by the Board are correctable on appeal. Physicians are entitled to representation by counsel and may present evidence at a formal disciplinary hearing. See Nev.Rev.Stat. § 233B.121. The decision of the Board must be in writing and contain the Board’s findings and any sanctions. See id. Judicial review of the Nevada Board’s decision is available. See Nev.Rev.Stat. § 630.356.
Viewing the Butz factors in their totality, we hold, that while the Board Members do not have all of the attributes of a federal hearing officer, they are functionally comparable to judges and prosecutors. Thus, the Board Members of the Nevada Board of Medical Examiners are entitled to absolute immunity for their quasi-judicial acts.
' C. Scope of Absolute Immunity for the Nevada Board of Medical Examiners
Even if the Board Members generally function in capacities comparable to those of judges and prosecutors, the protections of absolute immunity reach only those actions that are judicial or closely associated with the judicial process. See Buckley v. Fitzsimmons, 509 U.S. 259, 273, 113 S.Ct. 2606, 125 L.Ed.2d 209 (1993) (“A prosecutor’s administrative duties and those investigatory functions that do not relate to an advocate’s preparation for the initiation of a prosecution or for judicial proceedings are not entitled to absolute immunity.”); Forrester v. White, 484 U.S. 219, 229, 108 S.Ct. 538, 98 L.Ed.2d 555 (1988) (holding that a judge was not entitled to absolute immunity for firing an employee).
There is no question that acts occurring during the disciplinary hearing process fall within the scope of absolute immunity; holding hearings, taking evidence, and adjudicating are functions that are inherently judicial in nature. However, Mishler asserts that two acts of the Nevada Board are neither judicial nor closely associated with the judicial process: the failure to respond to the Ohio Board’s inquiry and Dr. Clift’s swearing to the truth of facts in the disciplinary complaint.
1. Ohio Board’s Inquiry.
The act of responding to the Ohio Board inquiry is not entitled to absolute immunity. This court has already held a claim based on the response to the Ohio Board should not be dismissed at the Rule 12(b)(6) stage on the basis of qualified immunity because it was alleged to be a ministerial act. See Mishler II, 990 F.2d 1259. This act of responding to inquiries from other medical boards would seem to be, at its essence, an administrative function entailing examination of records and sending of correspondence. This act is not closely associated with the judicial process and thus falls outside the protections of absolute immunity.
2. Disciplinary Complaint.
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1095743-19426 | JERRY E. SMITH, Circuit Judge:
Donald Guidry challenges his conviction of violating 18 U.S.C. § 922(g)(1), the felon in possession of a firearm statute. Finding no reversible error, we affirm.
I.
The conviction is based on the robbery of a barbeque restaurant during the course of which the owner was struck in the back of the head with a weapon, and the employees and customers were bound with duct tape and rope and left in the bathroom. After the robbers left, the victims freed themselves and called police. Based on the fact that the witnesses heard the robbers refer to one of their own as “D.P.,” and on the description of one of the perpetrators as having a distinctive “teardrop” tattoo by his left eye, the investigating officers believed that Guidry was involved. They immediately dispatched officers to a house where Guidry was known to be.
When the officers arrived, Guidry fled into the house but was subsequently detained. After the owner gave consent to search the house, officers discovered a shotgun, pistol, clothes matching those that the assailant called “D.P.” wore during the robbery, and a box containing one-dollar bills that had a. strong smell of barbeque smoke. Guidry and four other black male residents of the house were seized by the police and taken back to the crime scene.
Upon returning to the restaurant, the police lined up the five suspects in handcuffs, against the patrol cars outside the window of the réstaurant. Guidry was identified as an assailant by two eyewitnesses, Allyssa Plunkett and Joseph Gab-bard. Gabbard and another witness, James Lewis, identified the pistol recovered from the house as the one Guidry had used in the robbery. Guidry’s fingerprints were identified on the pieces of duct tape that had been used to bind the witnesses.
A jury convicted Guidry of violating § 922(g)(1) based on the evidence that he possessed the firearm during the course of the aforementioned robbery, a stipulation that he had previously been convicted of a qualifying felony, and evidence that the gun had been manufactured in Europe. Guidry was sentenced to 120 months’ imprisonment under the sentencing guidelines.
II.
Guidry argues that the evidence was insufficient to support a conviction. We must decide whether a rational trier of fact could have found that each element of the charged criminal offense was proven beyond a reasonable doubt. See United States v. Ortega Reyna, 148 F.3d 540, 543 (5th Cir.1998). We consider all the evidence in a light most favorable to the government, drawing all inferences and credibility choices in its favor. Id.
To establish a violation of § 922(g)(1), the government has the burden to prove three elements beyond a reasonable doubt
(1) that the defendant previously had been convicted of a felony;
(2) that he possessed a firearm; and
(3) that the firearm traveled in or affected interstate commerce.
United States v. Daugherty, 264 F.3d 513, 515 (5th Cir.2001). Guidry contests the sufficiency of the evidence only as to the second and third elements. After reviewing the evidence, we find both arguments legally untenable.
The government produced sufficient evidence from which a reasonable jury could conclude, beyond a reasonable doubt, that Guidry possessed a firearm. The government presented the testimony of two eyewitnesses who identified Guidry as a robber, one of whom identified the pistol that was recovered from Guidry’s home as the one that was used during the robbery.
Guidry asserts that we should closely scrutinize the identification of the weapon because it was made by a “frightened witness” undergoing traumatic “extreme circumstances of the robbery.” It is not our role, however, under our standard of review for sufficiency of the evidence, to second-guess the determinations of the jury as to the credibility of the evidence. See Ortega Reyna, 148 F.3d at 543. Assuming, as we must, that the eyewitness identification of the weapon was credible, there was sufficient evidence of weapon possession to prove the second element of § 922(g)(1).
Similarly, the government produced sufficient evidence from which a jury could conclude beyond a reasonable doubt that the firearm possessed by Gui-dry affected interstate commerce. The government provided evidence that the firearm was manufactured in Belgium, so it necessarily must have traveled in interstate commerce to get into Guidry’s hands in Texas. The interstate commerce element of a § 922(g)(1) charge is satisfied where the government demonstrates that the firearm was manufactured out of state.
Finally, Guidry attacks the constitutionality of his conviction under § 922(g)(1) as applied to him, arguing that the government had to prove that his possession of a firearm had a “substantial” effect on interstate commerce under United States v. Lopez, 514 U.S. 549, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995); United States v. Morrison, 529 U.S. 598, 120 S.Ct. 1740, 146 L.Ed.2d 658 (2000); and Jones v. United States, 529 U.S. 848, 120 S.Ct. 1904, 146 L.Ed.2d 902 (2000). As Guidry concedes — he notes that he merely raises the issue to preserve it for further review— this argument is foreclosed by our precedent.
III.
Guidry argues that the eyewitness identification testimony should have been suppressed because it was impermis-sibly tainted by a suggestive show-up procedure. In reviewing the denial of a suppression motion, we accept the district court’s findings of fact unless they are clearly erroneous, but we review de novo the court’s ultimate conclusion of the constitutionality of the law enforcement action. See United States v. Saucedo-Munoz, 307 F.3d 344, 351 (5th Cir.2002). Whether an identification is constitutionally admissible is a mixed question of fact and law. See United States v. Hefferon, 314 F.3d 211, 217 (5th Cir.2002).
The Due Process Clause protects against the use of evidence obtained from impermissibly suggestive identification procedures. See United States v. Rogers, 126 F.3d 655, 658 (5th Cir.1997) (citing Manson v. Brathwaite, 432 U.S. 98, 97 S.Ct. 2243, 53 L.Ed.2d 140 (1977)). The admissibility of identification evidence is governed by a two-step test: First, we determine whether the identification procedure was impermissively suggestive, and second, we ask whether the procedure posed a “very substantial likelihood of irreparable misidentification.” Rogers, 126 F.3d at 658 (citing United States v. Sanchez, 988 F.2d 1384, 1389 (5th Cir.1993)). If we answer both questions in the affirmative, the identification is inadmissible. Id.
As to the first part of the test, Guidry argues that the show-up was impermissively suggestive because he was part of a lineup outside the restaurant window, handcuffed aside a patrol car. Guidry relies on United States v. Shaw, 894 F.2d 689, 692 (5th Cir.1990), in which we found a show-up to be impermissibly suggestive where the suspect was presented for identification at the crime scene alone, handcuffed, and before an FBI vehicle. Guidry’s situation is distinguishable, however, because he was not shown alone as was the defendant in Shaw; he was displayed to the eyewitnesses together with four others who were of the same race, three of whom were of similar weight and height, and all of whom were in handcuffs and stood in front of a police car.
The eyewitnesses were only allowed to make their identifications individually and were not permitted to communicate with each other until the procedure was complete. The procedure employed was analogous to a typical station-house lineup, apart from the situs of the show-up and the fact that all the suspects were in handcuffs — differences that did not taint the procedure, given that all the suspects were similarly disabled. Under these circumstances, the procedure was not unnecessarily suggestive.
Because the procedure was not unnecessarily suggestive, we need not consider the second prong of the test, whether there was a “substantial likelihood of misidentifí-cation.” The district court properly denied Guidry’s suppression motion.
rv.
Guidry argues that the district court erred in admitting exhibits 4 and 5, because the chain of custody had been broken. We review admission of evidence for abuse of discretion. See United States v. Dixon, 132 F.3d 192, 196 (5th Cir.1997). In deciding whether to admit evidence, the district court only has the duty to determine whether the government made a sufficient prima facie showing of authenticity; the ultimate issue of authenticity is a question for the jury. See United States v. Sparks, 2 F.3d 574, 582 (5th Cir.1993).
Exhibits 4 and 5 were rolls of duct tape and rope twine — shown through expert testimony to have Guidry’s fingerprints on them — alleged to have been used by him and his cohorts to restrain the victims during the robbery. Guidry’s brief inaccurately claims that these specific pieces of evidence were recovered by Officer Ryan Janovsky at the house where he was arrested. In fact, the exhibits were found at the crime scene by Detective Scott Felts, who testified that he released them to Sells, who in turn stated that he transported them to the police department and logged them into the evidence locker.
The essence of Guidry’s argument is that the chain of custody was defective because there was insufficient documentation of the evidence’s being passed from officer to officer. A district court does not abuse its discretion, however, in admitting evidence that was not initialed or signed for as it was transferred, so long as there is testimony from the officers establishing their respective links in the chain of custody. The fact that the chain of custody was not perfectly documented was made apparent during cross-examination and was proper material for the jury to consider when deciding how much weight to give to the evidence. The district court did not abuse its discretion in admitting Exhibits 4 and 5.
V.
Guidry argues that the district court gave improper jury instructions. A properly objected-to instruction is reviewed for abuse of discretion. See United States v. Daniels, 281 F.3d 168, 183 (5th Cir.2002); see also United States v. Ho, 311 F.3d 589, 604 (5th Cir.2002). We review de novo whether an instruction misstated an element of a statutory crime. See United States v. Morales-Palacios, 369 F.3d 442, 445 (5th Cir.2004) (citing Ho, 311 F.3d at 605). We consider whether the jury instruction, taken as a whole, “is a correct statement of the law and whether it clearly instructs jurors as to the principles of the law applicable to the factual issues confronting them.” Daniels, 281 F.3d at 183 (internal citations omitted).
Guidry objects to the refusal to use the pattern jury charges for a violation of § 922(g)(1), arguing that the instruction given improperly “diluted” the government’s burden of proving the interstate nexus of the charge. Guidry requested that the district court charge the jury with Fifth Circuit Pattern Jury Instructions §§ 1.39 and 2.48, but the court gave the following instruction: “That the possession of the firearm was in and affecting commerce; that is, that before the defendant possessed the firearm, that it had traveled at some time from one state to another, or between any part of the United States and any other country.”
The only difference between the instruction given and the requested instructions is that the court added language indicating that travel between “any part of the United States and any other country” would also satisfy the interstate commerce element. The court committed no error in doing so; it was plainly following the principles of law in this circuit. See United States v. Wallace, 889 F.2d 580, 583 (5th Cir.1989). The “affecting commerce” element of § 922(g)(1) includes both interstate and foreign commerce. Id. Hence, the instruction correctly stated the law and plainly instructed the jurors on the factual issues they were facing.
VI.
Guidry contends there was a fatal variance between the facts alleged in the indictment and the evidence at trial. A defendant cannot prevail on such a claim unless he demonstrates that the variance was material and prejudiced his substantial rights. See United States v. Mikolajczyk, 137 F.3d 237, 243 (5th Cir.1998). “As long as the defendant receives notice and is not subject to the risk of double jeopardy, his substantial rights are not affected.” Id. (citing Berger v. United States, 295 U.S. 78, 83, 55 S.Ct. 629, 79 L.Ed. 1314 (1935)). Guidry points to two separate variances between the language of his indictment and the proof used to convict: that (1) although the indictment only alleged that he possessed a firearm “in and affecting commerce,” the evidence and the jury instructions referred to interstate and foreign commerce; and (2) the specific model of firearm alleged in the complaint varied from the evidence used to prove the possession element of the § 922(g)(1) charge.
First, Guidry’s argument that there was a variance because the indictment alleged that he possessed a weapon “in and affecting commerce,” but the evidence and jury instruction referred to interstate or foreign commerce, is without merit. As previously mentioned, the phrase “affecting commerce” in a § 922(g)(1) charge covers both interstate and foreign commerce. See Wallace, 889 F.2d at 583. Because the terms are legally equivalent as we have interpreted § 922(g)(1), there is no difference and thus no fatal variance on that ground.
Secondly, Guidry reasons that there was a fatal variance because the indictment charged him with possessing a “9mm Kurz,” but evidence at trial indicated that he had a “.380-caliber pistol.” Assuming arguendo that these names describe two different types of firearms, such a difference is not material enough to constitute a fatal variance; we have previously held, under almost identical circumstances, that the type of weapon possessed is not essential to a conviction under § 922(g)(1), such that a variance in the type of weapon charged in the indictment with the evidence adduced at trial is not a material constructive amendment that requires vacating a conviction.
VII.
Guidry argues that his sentence violates his Sixth Amendment right to findings by a jury, based on United States v. Booker, 543 U.S. -, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005), because the district court assessed sentencing enhancements under the then-mandatory sentencing guidelines, based on facts that were neither admitted by Guidry nor found by a jury beyond a reasonable doubt. As Gui-dry concedes, however, he did not object on this basis in the district court, so we review for plain error.
Under the plain error standard, we may not correct an error that the defendant failed to raise in the district court unless “there is (1) error, (2) that is plain, and (3) that affects substantial rights.” United States v. Cotton, 535 U.S. 625, 631, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002). “If all three conditions are met an appellate court may then exercise its discretion to notice a forfeited error but only if (4) the error seriously affects the fairness, integrity, or public reputation of judicial proceedings.” Id.
In United States v. Mares, 402 F.3d 511, 515-21, 2005 WL 503715, at *3~*10 (5th Cir. Mar. 4, 2005), we analyzed whether alleged Booker error constituted plain error. As was the situation for the defendant in Mares, Guidry is correct in asserting that his Sixth Amendment rights were violated under Booker.
Based solely on his indictment and the jury’s findings, Guidry was subject to a sentencing range of 63-78 months. At sentencing, however, the court made various factual findings that subjected him to increases in his sentencing range to 151—188 months. Because this assessment occurred before Booker was issued — when the application of these enhancements were deemed mandatory — the sentencing is constitutionally infirm under the Sixth Amendment. Mares, id. at 520, 2005 WL 503715, at *8 (“Under the mandatory Guideline system in place at the time of sentencing, [the defendant’s] sentence was enhanced based on findings made by the judge that went beyond the facts admitted by the defendant or found by the jury .... [He] has therefore established Booker error.”). Moreover, under Mares this kind of error meets the second prong of the test, because the error could not be more obvious under current law. See id. (citing Johnson v. United States, 520 U.S. 461, 468, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997)).
Although the Booker error is obvious, it fails to meet the third prong, which requires that an error affect substantial rights. For this prong to be met, it must be shown that the error prejudiced the proceedings, that it “affected the outcome of the district court proceedings.” Id. at 521, 2005 WL 503715, at *8 (citing United States v. Olano, 507 U.S. 725, 734, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)).
The defendant bears the burden of persuasion with respect to prejudice. See id. (citing Olano, 507 U.S. at 734, 113 S.Ct. 1770). “[T]he pertinent question is whether [the defendant] demonstrated that the sentencing judge — sentencing under an advisory scheme rather than a mandatory one — would have reached a significantly different result.” Id. at 521, 2005 WL 503715, at *9. Just as in Mares, the defendant here fails to meet his burden, because he cannot point to anything in the record “from the sentencing judge’s remarks or otherwise that gives us any clue as' to whether [the judge] would have reached a different conclusion.” Id. at 521, 2005 WL 503715, at *9. There is no reversible error in the sentence.
AFFIRMED.
. Guidry’s presentence report (“PSR”) established a base offense level of 20 based on the fact that the firearm was possessed in connection with another felony offense. U.S.S.G. §§ 2K2.1(b)(5), 2X1.1(a), 2B3.1(a). The PSR recommended a two-level increase because a victim sustained bodily injury. Id. § 2B3.1(b)(3)(A). Guidry was further assessed a six-level increase because he used a firearm to hit a victim in the head, and an additional two-level increase because the victims were physically restrained. Id. § 2B3.1(b)(4)(B). The total offense level was 30, and with a criminal history of V, the resulting range was 151-188 months. Guidry did not file an objection to the PSR, and the district court adopted its recommendations. Because 18 U.S.C. § 924(a)(2) provides a statutory maximum of 10 years, Guidry was sentenced to 120 months in prison.
. Guidry is correct in arguing that the fact that the weapon was found in a closet in his home is insufficient to prove constructive possession. Cf. United States v. Fields, 72 F.3d 1200, 1212 (5th Cir.1996) (holding that constructive possession may be proven under § 922(g)(1) if a firearm is found in a defendant’s residence, despite the fact that the home was jointly occupied, where the firearm was located in plain view). There was, however, sufficient evidence of actual possession.
. See Daugherty, 264 F.3d at 518; see also United States v. Kuban, 94 F.3d 971 (5th Cir.1996) (affirming a § 922(g)(1) conviction where the weapon was manufactured in Belgium and possessed in Texas).
. See United States v. Rawls, 85 F.3d 240, 242 (5th Cir.1996) ("[N]either the holding in Lopez nor the reasons given therefor constitutionally invalidate § 922(g)(1)."); see also Daugherty, 264 F.3d at 518 ("Neither Jones nor Morrison affects or undermines the constitutionality of § 922(g).”).
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4089334-28915 | OPINION
SONTCHI, Bankruptcy Judge.
INTRODUCTION
The commencement of an involuntary bankruptcy case is governed by section 303 of the Bankruptcy Code. Under section 303(b), the holder of a claim subject to a “bona fide dispute” is not eligible to file an involuntary petition for relief.
The sole petitioning creditor in this case is the holder of a judgment against the alleged debtors. Although the judgment is under appeal, it has not been stayed. The alleged debtors argue that the pendency of the appeal renders the petitioning creditor’s claim subject to a bona fide dispute and, thus, the cases must be dismissed as they were not filed by an eligible petitioner.
The Court finds that a claim based upon a judgment, in the absence of a stay, is not subject to a bona fide dispute for purposes of determining whether a petitioning creditor is eligible to commence an involuntary case. Thus, the Court will deny each of the alleged debtor’s motions to dismiss and enter orders for relief.
JURISDICTION
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. Venue of this proceeding is proper in this district pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).
PROCEDURAL AND FACTUAL BACKGROUND
Eugenia VI Venture Holdings, Ltd. (“Eugenia”) entered into the Amended and Restated Credit Agreement (“Credit Agreement”) with AMC Computer Corp. (“AMC Computer”) in early 2003. Pursuant to the Credit Agreement, Eugenia extended up to $16 million in credit, secured by AMC Computer’s working capital. AMC Investors, LLC and AMC Investors II, LLC (the “Alleged Debtors”) are limited liability companies that control AMC Computer. Each of the Alleged Debtors executed an unconditional guaranty of AMC Computer’s obligations to Eugenia under the Credit Agreement.
By May, 2005, AMC Computer was insolvent. Its board of directors voted to cease operations and approved an assignment for the benefit of creditors. In response, Eugenia notified AMC Computer that it was in default under the Credit Agreement, accelerated the outstanding obligations, and demanded immediate payment. Eugenia also demanded payment from the Alleged Debtors under their guarantees.
Eugenia filed suit against the Alleged Debtors in the New York Supreme Court to collect on the guarantees. The Alleged Debtors conceded liability but opposed the amount of damages sought by Eugenia. The trial court entered summary judgment in favor of Eugenia, awarding damages of approximately $8.3 million, consisting of principal of approximately $7.9 million, professional fees and expenses of approximately $400,000, and costs and disbursements of $590. The Alleged Debtors appealed. The New York Supreme Court— Appellate Division affirmed the entry of summary judgment on liability, but remanded for a trial on damages.
The trial court held a two-day bench trial on damages. Shortly after the conclusion of the trial, the court vacated the original judgment, and entered judgment in favor of Eugenia awarding damages of approximately $10.75 million, consisting of principal and interest of approximately $7.0 million, accounting fees of approximately $1 million, professional fees and expenses of approximately $2.75 million, and costs and disbursements of $1090 (the “Amended Judgment”). Eugenia subsequently filed a judgment lien in Florida for the amount of the Amended Judgment.
The Alleged Debtors appealed only that portion of the Amended Judgment awarding professional fees. The Amended Judgment was not stayed pending appeal. Prior to oral argument before the appellate court, Eugenia filed the involuntary petitions against the Alleged Debtors. Eugenia is the sole petitioning creditor and asserts a claim in the amount of approximately $10.7 million.
Each of the Alleged Debtors filed a motion to dismiss the involuntary petition filed against it, asserting that Eugenia is not an eligible petitioning creditor, or, in the alternative, that the Court should abstain. The issues have been fully briefed and are ripe for decision.
LEGAL DISCUSSION
The motions before the Court are brought under Federal Rule of Bankruptcy Procedure 1011(b). Rule 1011(b) provides that defenses and objections to an involuntary petition shall be presented in the matter prescribed by Rule 12 of the Federal Rules of Civil Procedure. The Alleged Debtors move for dismissal of the involuntary petitions under Rule 12(b)(1) and (6).
A. Motion to Dismiss for Lack of Subject Matter Jurisdiction
The Alleged Debtors move to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1). They argue that unless and until Eugenia shows that its claim is not subject to a bona fide dispute, this court lacks subject matter jurisdiction.
The Court disagrees. The requirements of section 303(b) “are not jurisdictional in the technical sense of subject matter jurisdiction, but are instead substantive matters which must be proved or waived for petitioning creditors to prevail in involuntary proceedings.” The requirement in section 303(b) that the claim not be subject to bona fide dispute “goes to the merits — an element that must be established to sustain an involuntary proceeding.”
Of course, district courts have “original and exclusive jurisdiction of all cases under title 11” and bankruptcy judges may hear those cases. The filing of an involuntary petition, even when the alleged debtor challenges whether the petitioning creditor’s claim is valid, creates a “case under title 11” and falls within the subject matter jurisdiction of this Court.
B. Motion to Dismiss for Failure to State a Claim
The Alleged Debtors also move to dismiss the petition under Rule 12(b)(6) for failure to state a claim.
i. Section 303 Requirements for Involuntary Petitions
Section 303 of the Bankruptcy Code governs involuntary petitions. Section 303(b) states, in relevant part:
(b) An involuntary case against a person is commenced by the filing with the bankruptcy court of a petition under chapter 7 or 11 of this title—
(1) by three or more entities, each of which is either a holder of a claim against such person that is not contingent as to liability or the subject of a bona fide dispute as to liability or amount, or an indenture trustee representing such a holder, if such non-contingent, undisputed claims aggregate at least $13,475 more than the value of any lien on property of the debtor securing such claims held by the holders of such claims;
(2) if there are fewer than 12 such holders ... by one or more of such holders that hold in the aggregate at least $13,475 of such claims.
Furthermore, section 303(h)(1) requires that where a petition is timely controverted, “the court shall order relief against the debtor in an involuntary case ... [only if] the debtor is generally not paying such debtor’s debts as such debts become due unless such debts are the subject of a bona fide dispute as to liability or amount.”
Taken together, these provisions establish a four-part test for consideration of a contested involuntary petition commenced by a sole petitioning claimholder:
(1) the petitioning claimholder’s claim is not contingent as to liability or subject to a bona fide dispute as to liability or amount;
(2) the petitioning claimholder is un-dersecured by at least $13,475;
(3) there are fewer than twelve claim-holders; and
(4) the alleged debtor is generally not paying its debts as they come due, unless such debts are the subject to a bona fide dispute as to liability or amount.
In this case, the Alleged Debtors do not contest that: (1) Eugenia holds an unsecured judgment in an amount over $13,475; (2) Eugenia is the sole creditor; and (3) the Alleged Debtors are not paying their debts as they come due. Rather, the Alleged Debtors assert that the amount of Eugenia’s claim is subject to a bona fide dispute and, as such, the petition should be dismissed because they were not filed by an eligible petitioner.
ii. Bona Fide Dispute
The Bankruptcy Code does not define “bona fide dispute.” The Third Circuit has held that a bona fide dispute exists “[i]f there is a genuine issue of a material fact that bears upon the debtor’s liability, or a meritorious contention as to the application of law to undisputed facts.” “Under this standard, the bank ruptcy court must determine whether there is an objective basis for either a factual or a legal dispute as to the validity of debt.” However, the court’s objective is to ascertain the existence of a dispute, not to actually resolve the dispute. The burden is on the petitioning creditor to first establish a prima facie case that no bona fide dispute exists. Once a prima facie case has been established, the burden shifts to the alleged debtor to demonstrate the existence of a bona fide dispute.
iii. Unstayed Judgments
Eugenia argues that, as the holder of an unstayed final judgment, it possesses a claim that is not contingent or subject to bona fide dispute. The logic behind this argument is explained in In re Drexler:
[T]he court has concluded that ... a claim based upon an unstayed judgment as to which an appeal has been taken by the debtor is not the subject of a bona fide dispute. Once entered, an un-stayed final judgment may be enforced in accordance with its terms and with applicable law or rules, even though an appeal is pending. The filing of an involuntary petition is but one of many means by which a judgment creditor may seek to attempt collection of something upon its judgment. It would be contrary to the basic principles respecting, and would effect a radical alteration of, the long-standing enforceability of unstayed final judgments to hold that the pendency of the debtor’s appeal created a “bona fide dispute” within the meaning of Code § 303.
The majority of courts examining this issue have agreed with the Drexler court, finding unstayed final judgments are not subject to bona fide dispute. In the recent case of In re Byrd, however, the Fourth Circuit disagreed, holding that the existence of an unstayed final judgment does not necessarily end the bona fide dispute inquiry.
While we recognize the general enforceability of unstayed judgments, the text of the Bankruptcy Code establishes no such hard-and-fast rule. Section 303(b) prohibits a creditor from filing an involuntary petition if the creditor’s “claim” is “the subject of a bona fide dispute.” Section 101(5) then defines a “claim” in part as a “right to payment, whether or not such right is reduced to judgment.” In other words, the Code does not make the existence of a bona fide dispute depend on whether a claim has been reduced to judgment. It permits some creditors who have not reduced their claims to judgment to file involuntary petitions, just as it prevents other creditors who have reduced their claims to judgment from filing.
After all, the purpose of the “bona fide dispute” provision is to prevent creditors from using involuntary bankruptcy to coerce a debtor to satisfy a judgment even when substantial questions may remain concerning the liability of the debtor. Yet substantial questions may remain about a debtor’s liability, notwithstanding judgments in a creditor’s favor. In the present case, [state] trial courts ruled in [the petitioning creditor’s] favor on particular factual or legal questions. These judgments go a long way toward establishing the absence of a bona fide dispute. Indeed it will be the unusual case in which a bona fide dispute exists in the face of claims reduced to state court judgments. Such judgments do not guarantee the lack of a bona fide dispute, however, especially absent rulings by [state] appellate courts or in the face of contrary rulings by other [state] trial courts. As a result, a creditor ... may not reduce a claim to judgment elsewhere and then automatically seek enforcement in bankruptcy, at least where the judgment to be enforced is pending an appeal that presents substantial factual or legal questions.
In other words, an unstayed judgment and a bona fide dispute under section 303 are not mutually exclusive concepts; it is possible for a creditor to possess an unstayed state court judgment, yet the creditor’s claim may still be subject to a bona fide dispute.
Under Byrd, a creditor makes a prima facie showing of the absence of a bona fide dispute by presenting an unstayed judgment. The burden then shifts to the alleged debtor to demonstrate the existence of a bona fide dispute. Byrd requires the court in making that determination to conduct a derivative inquiry into the likelihood of success on appeal.
This approach is unnecessarily intrusive into the trial court’s ruling and undermines the objective analysis of bona fide disputes. In effect, Byrd turns the court into an odds maker on appellate decision-making. The inherent difficulty and lack of necessity in engaging in such analysis is borne out by Byrd itself, as the court only made a cursory examination into the pending appeals, finding the alleged debtor presented no evidence to support his likelihood of success on appeal and, thus, “failed to raise any substantial factual or legal questions about the continued viability of those judgments.” The same analysis would have been reached simply by respecting the trial court’s determination of this matter on the merits and the absence of a stay pending appeal.
Moreover, the Byrd analysis is based upon a faulty premise. The definition of “claim” under the Bankruptcy Code includes a “right to payment, whether or not such right is reduced to judgment.” The Byrd court reads the phrase “whether or not such right is reduced to judgment” to mean that the definition of claim “permits some creditors who have not reduced their claims to judgment to file involuntary petitions, just as it prevents other creditors who have reduced their claims to judgment from filing While this Court agrees that the relevant language clarifies that a right of payment may exist even if it has not been reduced to judgment; it disagrees that the entry of a judgment does not create a right to payment.
Byrd renders the entry of a judgment as completely irrelevant in determining the existence of a claim. This cannot be the correct reading of the statute. As the court in Drexler correctly noted, “[o]nee entered, an unstayed final judgment may be enforced in accordance with its terms and with applicable law or rules, even though an appeal is pending.” The holder of an unstayed final judgment may utilize an array of state court enforcement procedures, including the filing of a judgment lien, as Eugenia did in this case. To hold that an unstayed final judgment is enforceable in state courts and voluntary proceedings in federal bankruptcy court, but not for involuntary cases would “effect a radical alteration of ... the long-standing enforceability of unstayed final judgments.”
Moreover, the analysis in Byrd runs counter to the Butner principle, which provides that, in the absence of a specific provision to the contrary, bankruptcy courts take non-bankruptcy rights and laws as they find them.
Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding. Uniform treatment of property interests by both state and federal courts within a State serves to reduce uncertainty, to discourage forum shopping, and to prevent a party from receiving “a windfall merely by reason of the happenstance of bankruptcy.”
Therefore, in a bankruptcy proceeding, if one party seeks an outcome that differs from the one a court would hold outside of bankruptcy, the court will require that party to identify a specific bankruptcy rule requiring that conclusion.
The Byrd court identified the purpose of the “bona fide dispute” provision as being “to prevent creditors from using involuntary bankruptcy to coerce a debtor to satisfy a judgment even when substantial questions may remain concerning the liability of the debtor.” However, the “array of state court enforcement procedures” available to judgment creditors outside of bankruptcy can and are used by those creditors to coerce payment. Nonetheless, courts allow the enforcement of unstayed judgments that are subject to appeal. There is simply no federal interest requiring a different result.
The Alleged Debtors had ample opportunity to litigate this dispute in state court, including during the proceedings leading up to the entry of the original judgment, an appeal, and a two-day trial on damages resulting in the Amended Judgment. At no point in those proceedings have the Alleged Debtors ever opposed their liability on the guaranty, they have only opposed the amount of damages. Indeed, at this point, the Alleged Debtors do not dispute the bulk of the damages awarded, i.e., approximately $6.9 million. The Amended Judgment was not stayed pending appeal. As such, it is a final, enforceable judgment.
The Court holds that the existence of a judgment by a court (other than a default judgment) that has not been stayed is, in and of itself, sufficient to establish that the claim underlying the judgment is not in bona fide dispute for purposes of determining whether a petitioning creditor is eligible to commence an involuntary case. No further inquiry is required. Accordingly, the Amended Judgment is not subject to bona fide dispute and Eugenia is the holder of a non-contingent, liquidated, undisputed claim in the amount of approximately $10.7 million, which exceeds the threshold amount of $13,475. The Alleged Debtors do not contest the allegation that they have fewer than twelve creditors or that they are generally not paying their debts as such debts become due. The requirements of section 303 have been met and the entry of orders for relief is appropriate.
C. Abstention
The Alleged Debtors also argue that abstention is warranted under section 305(a). That section provides, in pertinent part, that:
(a) The court, after notice and a hearing, may dismiss a case under this title, or may suspend all proceedings in a case under this title, at any time if—
(1) the interests of creditors and the debtor would be better served by such dismissal or suspension;
“The courts that have construed § 305(a)(1) are in general agreement that abstention in a properly filed bankruptcy case is an extraordinary remedy, and that dismissal is appropriate under § 305(a)(1) only in the situation where the court finds that both ‘creditors and the debtor’ would be ‘better served’ by a dismissal.” “Granting an abstention motion pursuant to § 305(a)(1) requires more than a simple balancing of harm to the debtor and creditors; rather, the interests of both the debtor and its creditors must be served by granting the requested relief.” The movant bears the burden to demonstrate that the interests of the debtors and creditors would benefit from dismissal.
Here, the Alleged Debtors argue the Court should abstain because the case is a two-party dispute. “Dismissal or suspension of a case may be appropriate when the bankruptcy case constitutes a two-party dispute between the debtor and a single creditor.” Courts generally abstain in two-party disputes where relief is available in a non-bankruptcy forum. Resolution of these disputes has the potential to transform the bankruptcy process into a collections device, which it is not.
Recent cases have put forward a litany of factors to gauge the overall best interests of the creditors and debtor. They include:
(1) the economy and efficiency of administration;
(2) whether another forum is available to protect the interests of both parties or there is already a pending proceeding in state court;
(3) whether federal proceedings are necessary to reach a just and equitable solution;
(4) whether there is an alternative means of achieving an equitable distribution of assets;
(5) whether the debtor and the creditors are able to work out a less expensive out-of-court arrangement which better serves all interests in the case;
(6) whether a non-federal insolvency has proceeded so far in those proceedings that it would be costly and time consuming to start afresh with the federal bankruptcy process; and
(7) the purpose for which bankruptcy jurisdiction has been sought.
While all factors are considered, they are not given equal weight in each case, nor should the Court conduct a strict balancing.
Here, Eugenia’s primary, and perhaps only reason for filing the involuntary petition is to seek the appointment of a chapter 7 trustee, who will possess the authority to investigate and, if appropriate, to pursue claims against the officers and directors of the Alleged Debtors relating to alleged fraud perpetrated against Eugenia by AMC Computer. While such a purpose for seeking bankruptcy jurisdiction may not be proper in every case, under these facts, Eugenia has a valid bankruptcy purpose. It is highly unlikely that Eugenia could pursue claims against the Alleged Debtors’ officers and directors in either a direct or derivative suit. Thus, either a bankruptcy trustee or state court receiver is necessary to pursue these potential assets, if appropriate. While receivership is certainly an option in this case, no such action has been instituted. The existing state court action (the appeal of the Amended Judgment) is not an action seeking the appointment of a receiver. No out-of-court workout between the parties is in the offing.
Furthermore, the geographic scope of the parties to this case spans state and national boundaries. The Alleged Debtors are Delaware LLC’s managed from Florida. The involuntary petition for Eugenia reflects a mailing address in London. AMC Computer operated out of New York. The state court judgment was obtained in New York and filed as a judgment lien in Florida. While a state court receiver may certainly attempt to liquidate the Alleged Debtors, it would certainly be a more cumbersome and less efficient process for the receiver to obtain recognition in various jurisdictions, rather than permitting the use of federal bankruptcy jurisdiction.
The Court finds that it is not in the best interest of Eugenia for it to abstain. Moreover, since the Alleged Debtors are insolvent, non-operating limited liability companies that hold stock in a defunct computer company, it is not clear how a bankruptcy petition is harmful. In fact, the only entities that may be harmed by entering an order for relief in this case are the officers and directors of the Alleged Debtors. While these individuals may desire to avoid the threat of lawsuits pursued by a chapter 7 trustee, their interests are not relevant in a decision to abstain under section 305(a)(1). Accordingly, the Court declines to abstain in these cases.
D. Attorney’s Fees, Costs and Punitive Damages
The Alleged Debtors also request the Court award attorney’s fees, costs, and punitive damages under 11 U.S.C. § 303(i). Section 303(i) permits a the Court to award fees and costs, as well as punitive damages if the involuntary petition was filed in bad faith. However, the Court may only award such fees if it dismisses the involuntary petition. Since orders for relief will be entered, the request for fees, costs, and punitive damages is moot.
CONCLUSION
For the foregoing reasons, the Alleged Debtors’ motions to dismiss are DENIED and the Court shall enter an ORDER FOR RELIEF against each of the Alleged Debtors.
. The basis for this conclusion is discussed more fully below.
. The essential facts of this case are undisputed.
. The Alleged Debtors also dispute two components of the amount of principal and interest awarded by the trial court. Nonetheless, approximately $6.9 million of the court’s award is undisputed.
. The filing of the involuntary petitions under section 303 stayed the state court proceedings. 11 U.S.C. § 362(a).
. It is unclear whether the motions to dismiss should be converted into motions for summary judgment, as both the Alleged Debtors and Eugenia have filed significant materials outside of the pleadings. See FED. R. CIV. P. 12(d). However, since no factual allegations in this case are disputed and the parties' disputes are questions of law, the particular procedural device used to contest the involuntary petition will not affect the outcome.
. Rubin v. Belo Broad. Corp. (In re Rubin), 769 F.2d 611, 614 n. 3 (9th Cir.1985).
. Id. at 615.
. 11 U.S.C. § 1334(a).
. 28 U.S.C. § 157(b)(1).
. But see Key Mechanical Inc. v. BDC 56 LLC (In re BDC 56 LLC), 330 F.3d 111, 118 (2d Cir.2003) ("We believe the more sound view is that the requirement [that a petitioning creditor's claim not be subject to a bona fide dispute] is subject matter jurisdictional, and now so hold.").
. 11 U.S.C. § 303(b).
. 11 U.S.C. § 303(h)(1).
. See In re Euro-American Lodging Corp., 357 B.R. 700, 712 (Bankr.S.D.N.Y.2007); In re Amanat, 321 B.R. 30, 35 (Bankr.S.D.N.Y.2005).
. B.D.W. Assocs. Inc. v. Busy Beaver Bldg. Ctrs., Inc., 865 F.2d 65, 66 (3d Cir.1989). See also, Key Mechanical Inc. v. BDC 56 LLC (In re BDC 56 LLC), 330 F.3d 111, 117 (2d Cir.2003); Liberty Tool & Mfg. v. Vortex Fishing Sys., Inc. (In re Vortex Fishing Sys., Inc.), 277 F.3d 1057, 1064-65 (9th Cir.2002); Subway Equip. Leasing Corp. v. Sims (In re Sims), 994 F.2d 210, 220-21 (5th Cir.1993), cert. denied, 510 U.S. 1049, 114 S.Ct. 702, 126 L.Ed.2d 669; Rimell v. Mark Twain Bank (In re Rimell), 946 F.2d 1363, 1365 (8th Cir.1991), cert. denied, 504 U.S. 941, 112 S.Ct. 2275, 119 L.Ed.2d 202; Bartmann v. Maverick Tube Corp., 853 F.2d 1540, 1543-44 (10th Cir.1988).
. In re Busick, 831 F.2d 745, 750 (7th Cir.1987). See also Key Mechanical, 330 F.3d at 117; Bartmann, 853 F.2d at 1544.
. Key Mechanical, 330 F.3d at 118 (citing Rimell, 946 F.2d at 1365).
. Id.
. The term "final judgment” is used here in the generic sense. However, the determination whether any particular decree constitutes a "final judgment” requires careful analysis of factual and legal concerns. In re Drexler, 56 B.R. 960, 967 n. 10 (Bankr.S.D.N.Y.1986).
. Drexler, 56 B.R. at 967 (citations omitted).
. See In re Norris, 1997 WL 256808, at *5 (5th Cir.1997) (per curiam), cert. denied, 522 U.S. 935, 118 S.Ct. 343, 139 L.Ed.2d 266; Euro-American Lodging, 357 B.R. at 712; Amanat, 321 B.R. at 37; In re Raymark Indus., 99 B.R. 298, 300 (Bankr.E.D.Pa.1989).
. Platinum Fin. Servs. Corp. v. Byrd (In re Byrd), 357 F.3d 433, 438 (4th Cir.2004).
. Id. (citations omitted).
. Id. at 439.
. Id.
. In re Graber, 319 B.R. 374, 379 (Bankr.E.D.Pa.2004) (noting Byrd requires an “in-quir[y] into the genuineness of [the alleged debtor's] appeals”).
. See Norris, 1997 WL 256808, at *5 ("To hold [that an unstayed final judgment may be subject to bona fide] would require the bankruptcy court to review the state court judgment in order to predict [the] chance of success on appeal ... and would undermine the objective standard.”)
. Byrd, 357 F.3d at 441. The only other published decision applying the Byrd analysis is In re Graber, 319 B.R. 374 (Bankr.E.D.Pa.2004). In Graber, a creditors obtained default judgments against Graber. Id. at 375-76. Graber filed petitions in state court to open and/or strike the default judgments, but be fore the matters were heard, the creditors filed an involuntary petition. Id. The bankruptcy court, following Byrd, conducted an analysis under state law to determine the likelihood that the state court would open the default judgments. Id. at 380. The bankruptcy court found it was missing some pleadings from the state court proceedings and left the record open so the parties could supplement it. Id. Thus, Grabar demonstrates the inherent difficulty in applying the Byrd analysis and the potential problems associated with predicting outcomes in state courts. However, as default judgments may present factual issues different than those in the matter before the court, the question of whether the Drexler rule applies to default judgments is left until another day.
. Ultimately, the court in Byrd concluded the alleged debtor failed to demonstrate the existence of a bona fide dispute and that the creditor "was eligible to file an involuntary petition against [the alleged debtor] not simply because [it] had reduced its claims to judgment, but because [the alleged debtor] failed to raise any substantial factual or legal questions about the continued viability of those judgments.” Id. at 441.
. 11 U.S.C. § 101(5).
. Byrd, 357 F.3d. at 438 (emphasis added).
. Drexler, 56 B.R. at 967
. Id.
. Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979)
. Douglas G. Baird, Elements Of Bankruptcy 6 (Foundation Press 2006).
. Byrd, 357 F.3d at 438.
. At the very least, the undisputed claim is approximately $6.9 million.
. 11 U.S.C. § 395(a).
. In re Eastman, 188 B.R. 621, 624 (9th Cir. BAP 1995).
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7341979-8818 | FINDINGS OF FACT AND CONCLUSIONS OF LAW
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This cause came on for trial before the Court sitting without a jury. (Because many of the witnesses were not proficient in English, it was necessary to utilize the services of several Japanese-English interpreters during the course of the trial). The Court, having reviewed the testimony of the witnesses and the documents admitted into evidence, makes the following findings of fact and conclusions of law. Any findings of fact equally applicable as a conclusion of law is hereby adopted as such and conversely any conclusion of law applicable as a finding of fact is adopted as such.
FINDINGS OF FACT
1. The Plaintiff, Kazue Numano, was first hired by Defendant Saipan Hotel Corporation on January 10, 1980 for a term of one (1) year as a "Front Desk Assistant Manager" at its Hafa Adai Beach Hotel (Hotel).
2. Plaintiff was re-hired to the same position in January 1981 for another year to expire in January 1982. (Exhibit 1)
3; A "Mr. Okamura" (Okamura) served in the capacity of General Manager of the Hotel prior to Plaintiff's employment in 1980.
4. Okamura and Plaintiff socialized with each other on occasions after working hours.
5. On or about May 3, 1981, Mr, Kazuo Kato (Kato) arrived from Japan to assume — with full authority--the position of General Manager of the Hotel. Okamura remained and shared in the management of the Hotel until the end of August 1981. Kato was responsible for decisions on major problems while Okamura was assigned responsibility over the "office, front desk and accounting."
6. Steven Mendiola, night manager who worked with Plaintiff and who had 14 years prior experience as General Manager of the Royal Taga Hotel, testified", that on one occasion he saw Plaintiff refuse to check out a customer until the NCR machine had cleared (this is so despite the possibility that information for check-out purposes could have been accomplished manually). In Mendiola's opinion: "her attitude was bad...(that) front desk must have nice personality." He went and reported this to Kato ánd upon his return to the front desk, saw the customer still sitting and waiting to be checked out.
7. Mendiola further testified that Plaintiff "di'd not treat me like a manager in front of customers" and she "refused to follow directions."
8. Koichi Zushi (Zushi) who was employed by Hotel on May 18, 1981, as Front Desk Manager and who was, therefore, Plaintiff's immediate supervisor:
(a)was told by Plaintiff, on or about June 26, 1981 that she was going to the office of a travel agent but saw her instead at Town House (department store) and Carmen Safeway (supermarket). Upon her return, Zushi asked her where she had been and she said "travel agent."
(b) experienced another incident with Plaintiff on July 5, 1981 regarding a reservation allegedly confirmed by her. Zushi attempted to discuss the problem with her but while talking to her she proceeded or continued to put make-up on her face. Zushi picked up a plastic ashtray and threw it on top of a desk to gain her attention. The ashtray broke and a piece flew against Plaintiff. "She continue to put make-up on face ignoring me... I walked towards her... she said she was not afraid. I continued shouting at her... she stood up and hit me on the face." Another employee came between them and Zushi told the Plaintiff to leave the room. '
(c) complained^ that no matter how many times he told her to do certain work and the manner in which the work was to be done she ignored him.
(d) saw her on occasions return to work 2-3 hours late; • that other employees complained to him about this and he in turn reported these complaints to the General Manager.
(e)gave up his own room on one occasion to accommodate a customer (Elias Okamura) who had been overbooked by Plaintiff.
(f) confronted Plaintiff regarding her reporting matters directly to Okamura instead of to him as her immediate supervisor and on these occasions she ignored him and whatever he had to say.
(g) that as her supervisor, he considered her work unsatisfactory.
9. Toshi Rase, Assistant General Manager, saw Plaintiff take lunch breaks in excess of one hour; that in February 1981, a tour conductor made room reservations with Plaintiff for April 1981 but there were no rooms available for the 23-25 people that came; that in his opinion she could not handle the responsibility for making room reservations for 104 rooms much less the 20 rooms that were then available. (The hotel was in the process of construction to increase its room accommodations to 104 rooms).
10. Kato testified that:
(a)In order to investigate a purported error committed by Plaintiff, he suggested (requested, instructed or told Plaintiff) that she go with him and Zushi to see Mr. Jose Tenorio (Joeten) Because she believed she was not involved in that particular incident, she refused to accompany them. Plaintiff was told twice to go. Ten minutes later, she changed her mind and went with them. (At the meeting with Joeten, it was determined that neither Joeten nor anyone else on his behalf knew anything of the incident involving the alleged room reservation.)
(b)He instructed her on two occasions to first go to her supervisor (Zushi) whenever she needed assistance or if she needed help to resolve complaints instead of going to the general manager (Okamura and himself). She nevertheless ignored this instruction.
(c) He told Plaintiff not to go or stay in rooms of employees especially Okamura's. He saw her come out of Okamura's room on May 23 and told her that if he saw her doing it again, he would terminate her. She said okay but she did go to Okamura's room again.
(d) He instructed her regarding discounts to customers emphasizing the need to first talk to the front desk manager. This instruction was not followed.
11. Prior to July 10, 1981, Kato discussed the matter of Plaintiff's employment with the President of Defendant corporation, Herman Guerrero, Director Olympio Borja and Okamura. He subsequently suggested to Plaintiff that she resign but she requested a letter of discharge.
12. On July 10, 1981, Kato wrote to Plaintiff (Exhibit 4) terminating her employment effective July 15, 1981 giving as a reason for termination the need to comply with Commonwealth laws which "provide that the resident workers shall be given first preference in employment in any industry or occupation for which resident workers are qualified and available."
13. When Kato gave Plaintiff the letter of termination, he orally told her that the real reason for her termination was due to her not listening to the managers' instructions or improving on her conduct.
14. Kato did not express the real reason for termination in Exhibit 4 because Okamura asked him not to mention anything that might harm her in the future when she .tried to get another job and out of consideration (courtesy) to her.
15. Page 7 of the Employee Handbook (Exhibit B) states under "Job Performance... Refusal to obey your supervisor or other Drooer authoritv is cause for termination."
16. Complaints against Plaintiff relative to the performance of her work and compliance with house rules during her first year of employment of which Okamura was aware of and committed prior to Kato's assumption of the position of General Manager, do not constitute grounds for good cause to support Plaintiff's termination for the reason that they were condoned by the Defendant Hotel prior to and at the time her second year of employment commenced.
17. The evidence is not conclusive that she committed the several reservation, booking, accounting and discounting errors she is alleged to have been responsible for. The evidence as found herein, however, shows other grounds sufficient to constitute good cause for her termination.
18. Plaintiff's conduct and attitude from the time a new general manager (Kato) arrived shows that she-has been insubordinate, disobedient, defiant, insolent and disrespectful of and toward her supervisor and general manager. The evidence presented and her demeanor in court lends credence to a finding also that her conduct and attitude reflects the classic example of an employee taking advantage of a prior personal relationship established with the general manager (Okamura) and continuing such conduct through the general managership of Kato.
19. Based upon the opinions of Kase and Kato, Plaintiff was not qualified to serve competently in her position for the new enlarged hotel.
CONCLUSIONS OF LAW
1. Where, as here, a contract of employment is for a definite term (one year) it may, nevertheless, be terminated for cause. Rosecrans v. Intermountain Soap & Chem. Co., 605 P.2d 963 (1980); Chiodo v. General Water Works Corp., 413 P.2d 891 (1966); Crillo v. Curtola et al., 204 P.2d 941 (1949).
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749739-12549 | DONALD RUSSELL, Circuit Judge:
The defendants appeal from a conviction both of conspiracy to violate, and of several substantive offenses, under the Dyer Act (18 U.S.C. § 2312).
We affirm.
The defendants assert three grounds of appeal. Two of these require little comment. In one the defendants complain that the Trial Court permitted the District Attorney to attempt — unsuccessfully, it may be added — to refresh the recollection of an uncertain witness for the Government by reference to a prior statement given by the witness to the FBI. The matter of refreshing a witness’ recollection and the manner used are largely within the discretion of the Trial Judge. Beaty v. United States (4th Cir. 1953) 203 F.2d 652, 655; Williams v. United States (7th Cir. 1966) 365 F.2d 21, 22, cert. den. 385 U.S. 981, 87 S.Ct. 530, 17 L.Ed.2d 443. To permit the refreshing of a witness’ recollection by reference to prior statements is within such discretion. Roberson v. United States (5th Cir. 1958) 249 F.2d 737, 742, 72 A.L.R.2d 434, cert. den. 356 U.S. 919, 78 S.Ct. 704, 2 L.Ed.2d 715. That is all the Trial Judge permitted in this case and such action was plainly within his discretion. Thomas v. United States (9th Cir. 1955) 227 F.2d 667, 671, cert, den. 350 U.S. 911, 76 S.Ct. 194, 100 L.Ed. 799.
The second complaint is that the District Attorney was allowed to cross-examine the defendant Klosterman on a statement given by him to the FBI, without showing compliance with the requirements of Miranda. That cross-examination under such circumstances is permissible for purposes of impeachment was recently declared in Harris v. New York (1971) 401 U.S. 222, 91 S.Ct. 643, 28 L.Ed.2d 1. See also, Riddell v. Rhay (1971) 404 U.S. 974, 92 S.Ct. 336, 30 L.Ed.2d 291, 1971.
The final claim of error concerns only the defendant Klosterman and relates to the procedure to be observed at trial when on-trial identification evidence is offered. It involves the testimony of the witness Connie Sisson, who gave an in-court identification of the defendant Klosterman. It is not claimed that the record establishes the inadmissibility of this identification testimony, or even provides a basis for objecting to its admissibility, under the due process principles enunciated in Simmons v. United States (1968) 390 U.S. 377, 384, 88 S.Ct. 967, 19 L.Ed.2d 1247. The argument rather is that the Trial Court erred in denying an evidentiary hearing, outside the presence of the jury, in order to permit the defendant Klosterman to inquire into whether there may have been such impropriety in any pre-trial identification procedures, particularly photographic, if any there was, used in connection with the witness’ on-trial identification so as to support an objection based on a claim of want of due process in connection with the on-trial identification.
While it is not necessary that in every situation where courtroom identification witnesses are used their testimony be “filtered or tested” by an evidentiary hearing, it is established that “where a timely and sufficient motion is made to suppress identification testimony on the ground that it has been tainted by pretrial photographic identifi cation procedures” or other improper identification procedures, an evidentiary hearing outside the jury’s presence is required. United States v. Allison (9th Cir. 1969) 414 F.2d 407, 410, cert. den. 396 U.S. 968, 90 S.Ct. 449, 24 L.Ed.2d 433; Haskins v. United States (10th Cir. 1970) 433 F.2d 836, 838; United States v. Ranciglio (8th Cir. 1970) 429 F.2d 228, 230. In order to be timely, the motion for such purpose, like all motions to suppress evidence, should normally be made prior to trial, since, “To interrupt the course of the trial for such auxiliary inquiries impedes the momentum of the main proceeding and breaks the continuity of the jury’s attention.” Nardone, supra, p. 342 of 308 U.S., p. 268 of 60 S.Ct. Of course, if the defendant can show that he was reasonably unaware either that on-trial identification would be offered or that such identification was tainted, a motion at trial should be entertained. Not only must the motion for an evidentiary hearing be timely, but it should be supported by a claim of sufficient “ ‘solidity’ * * to justify the holding of such a hearing, * * Lawn v. United States (1958) 355 U.S. 339, 347, 78 S.Ct. 311, 316, 2 L.Ed.2d 321; Cohen v. United States (9th Cir. 1967) 378 F.2d 751, 760, cert. den. 389 U.S. 897, 88 S.Ct. 217, 19 L.Ed.2d 215; Grant v. United States (2d Cir. 1960) 282 F.2d 165, 170. In ascertaining whether a motion to suppress is supported by sufficient “solidity”, it is often stated that the supporting claim for an evidentiary hearing on a motion to suppress must be “sufficiently definite, specific, detailed, and noneonjectural, to enable the court to conclude that a substantial claim (was) * * * presented”. Cohen v. United States, supra (at p. 761 of 378 F.2d). Such a strict rule of specificity of claim would seem inapplicable where identification procedures are challenged but motions seeking an eviden tiary hearing on such pre-trial procedures, especially if made at trial would require a claim rising above the level of mere hope and including some reasonable assertion of possible taint in the preliminary identification procedures. United States v. Allison, supra (at p. 410 of 414 F.2d); People of Territory of Guam v. Cruz (9th Cir. 1969) 415 F.2d 336, 338. At the very least there would have to be a statement that there has been a pre-trial photographic or lineup identification or other type of identification confrontation before the motion for an evidentiary hearing should be entertained ; in short, there should be some showing that “a Simmons issue is present.”
In determining whether the request for an evidentiary hearing should be granted “each case must be considered on its own facts” and some scope must be allowed for discretion on the part of the Trial Judge. Here, the defendant Klosterman made no pre-trial motion and on-trial has stated no ground of objection to the in-court identification. He asserts no pre-trial suggestive photographic identification. He does not claim that there was an uncounseled line-up identification. As already pointed out, it is simply his contention that, reserving all rights of objection, he should be permitted to stop the trial “in midstream” in order that he may have an evidentiary hearing outside the presence of the jury to determine whether he may have a ground which he would wish to use as an objection to the in-court identification. In support, he argues that, if forced to resort to cross-examination to explore into possible pre-trial identifications as a predicate for a motion to suppress, the Government could use such evidence of, for instance, a pre-trial photographic identification, if confirmatory of the in-court identification, to bolster the in-court identification. The answer to this argument, however, is that the Government could have done this, whether the defendant inquired into such photographic examination or not. See, United States v. Hallman (D.C.Ct.1971) 439 F.2d 603, 604. And it may be remarked that the fact that the Government did not offer such confirmatory evidence on direct examination would indicate either that there had been no pretrial photographic identifications or that such pre-trial procedures had been contradictory of the in-court identification, which, incidentally, was the situation in connection with the identification made by another witness in this case. See note 2, supra. Either circumstance, if developed on cross-examination, could not have prejudiced the defendant. If the photographic identification were different from the in-court identification, the evidence so developed would have been helpful to the defendant; if, on the other hand, there had been no photographic identification, the whole examination would have been harmless. In our opinion, a defendant who wishes to interrupt a trial and to secure an evidentiary hearing outside the presence of the jury on the admissibility of an in-court identification, assuming that such claim for an evidentiary hearing is timely, should provide some possible basis for an objection, particularly that there has been a pre-trial photographic or line-up identification, or arranged confrontation; and, if to provide such basis, it is necessary to cross-examine, to this limit ed extent, the identification witness before making demand for an evidentiary-hearing, the defendant should do so. We do not intimate that he must probe into the circumstances of the photographic or line-up identification before making his demand; what we do hold is that at a minimum he must establish that there has been pre-trial identification as a predicate for a motion for an evidentiary hearing outside the presence of the jury. Any other rule would mean that whenever courtroom identification testimony is offered the defendant could force an interruption of the trial, whether there is any justification or not and whether his motion is timely or not. Such a rule, so fraught with opportunity for needless and wasteful trial delays, cannot be countenanced.
As a matter of fact, even if there had been in this case a pre-trial photographic identification by the witness Connie Sisson that failed to meet the standards fixed by Simmons, the in-court identification by the witness would still have been admissible if it had an independent origin. See, Vance v. State of North Carolina (4th Cir. 1970) 432 F.2d 984, 987-988; United States v. Horton (D.C.Ct.1971) 440 F.2d 253, 254; Fitts v. United States (5th Cir. 1969) 406 F.2d 518, 519, cert. den. 400 U.S. 842, 91 S.Ct. 84, 27 L.Ed.2d 77; Clemons v. United States, supra, (408 F.2d at p. 1237); United States v. Butler, supra (426 F.2d at pp. 1276-1277). The testimony of the witness with reference to the basis for her identification was sufficiently trustworthy and reliable to constitute such an independent source or origin. She testified she was introduced to Klosterman under the name of “Joe” in front of a bar west of Ft. Lauderdale, Florida. Hollywood, Florida, was Klosterman’s place of residence and he conceded he was often referred to and went under the name of “Joe Mitchel”. After the introduction, Klosterman and three of the alleged confederates in the conspiracy talked for some five to ten minutes in the presence of the witness. It was daylight and the witness stood only a few feet from Klosterman. Mrs. Sisson stated she observed intently Klos-terman. Her testimony on this point was clear and definite. It was not shaken or weakened by cross-examination. This was the basis for her identification. It was supported by the testimony of her husband, who, though he could not identify Klosterman definitely, did recall meeting at the time referred to by his wife a man who went by the name of “Mitchel”. Viewed as a whole, this testimony was clearly sufficient, as an independent source, to sustain the admissibility of the witness Connie Sis-son’s in-eourt identification and rendered unnecessary an evidentiary hearing, outside the presence of the jury on the admissibility of such testimony. The issue under these circumstances became one of credibility, not of admissibility; and that, as the District Court appropriately ruled, was an issue for the jury.
Affirmed.
. Miranda v. Arizona (1966) 384 U.S. 436, 80 S.Ct. 1602, 16 L.Ed.2d 694, 10 A.L.R. 3d 974, reh. den. California v. Stewart, 385 U.S. 890, 87 S.Ct. 11, 17 L.Ed.2d 121.
. Two other witnesses identified Kloster-man. One was an alleged co-conspirator Boyce James. Klosterman offered no objection to his identification. The other was the witness Goode, to whom a stolen car had been sold. At trial, Goode, with some hesitation, identified Klosterman as the seller. It was then stipulated that, in a prior photographic identification, the witness had identified an entirely different person as the seller. This stipulation, while discrediting the witness’ on-trial testimony, actually rebutted any idea that the witness’ on-trial testimony had been tainted by any impermissible suggestions during the photographic identification within the rule in Simmons v. United States, infra (390 U.S. at p. 384, 88 S.Ct. 967).
The witness David Sisson met on two occasions, incidental to the conspiracy, an individual identified as Mitchel, which was a name by which Klosterman was known but was uncertain about making an identification of Klosterman or the man he met under the name of Mitchel.
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1560459-11361 | WIGGINS, Circuit Judge.
Randall and Judith Beisler appeal from a Tax Court decision holding that payments Randall received from the Bert Bell NFL Retirement Plan (NFL Plan) are not excludable from gross income under 26 U.S.C. § 105(c)(1982). We have jurisdiction under 26 U.S.C. § 7482 (1982), and we affirm.
I. FACTS AND PROCEEDINGS BELOW
Randall played professional football from 1966 through 1975. In'1975, he injured his neck in an NFL game while playing for the Kansas City Chiefs. The injury caused him to lose 60 to 79 percent of the use of his neck. Randall’s physicians directed him not to play professional football again and not to engage in a profession requiring strenuous labor.
After the injury, Randall applied for a “line-of-duty disability benefit” under the NFL Plan. His application was approved, and in 1979, he received a total of $47,475 in payments from the plan. The Beislers reported $10,552 of this as income for 1979.
Contributions to the NFL Plan are made entirely by the member clubs of the NFL, including the Kansas City Chiefs. Under the NFL Plan, a player may receive a monthly line-of-duty disability benefit if he incurs “a substantia] disablement” during any regular NFL game. The NFL Plan defines “substantial disablement” as a permanent disability resulting in, among other things, at least a 50 percent disability of the neck. Under the plan, a disability is deemed permanent if it persists for at least 12 months and if it causes retirement from professional football. A line-of-duty disability benefit equals 100 percent of a player’s total “benefit credits.” A player earns a specified benefit credit for each credited football season he plays. From 1966 through 1975, a player earned from $65 to $110 of benefit credits per season.
Thus, entitlement to the disability- payment requires a threshold diagnosis of a substantial, permanent injury as defined by the NFL Plan. Once this threshold is reached, the precise benefit payment is determined solely by the number of professional football seasons for which the player is given credit. The amount of the payment does not vary depending upon the nature of the injury.
The Commissioner determined a deficiency in the Beislers’ income taxes for 1979 based on inclusion in their gross income of the entire amount of disability benefits Randall received from the NFL Plan. The Tax Court upheld the Commissioner’s deficiency determination, and the Beislers appeal.
II. STANDARD OF REVIEW
The question of what constitutes income for federal tax purposes is a question of law. See First Charter Financial Corp. v. United States, 669 F.2d 1342, 1345 (9th Cir.1982). We review questions of law de novo. United States v. McConney, 728 F.2d 1195, 1202 (9th Cir.) (en banc), cert. denied, — U.S. -, 105 S.Ct. 101, 83 L.Ed.2d 46 (1984).
III. DISCUSSION
Generally, amounts an employee receives through an accident or health insurance plan are included in the employee’s gross income if those amounts “(1) are attributable to contributions by the employer which were not includable in the gross income of the employee, or (2) are paid by the employer.” 26 U.S.C. § 105(a) (1982). However, a taxpayer may exclude from gross income amounts normally includable under section 105(a) if those amounts satisfy the requirements of 26 U.S.C. § 105(c) (1982).
To exclude benefits from income under section 105(c), the taxpayer must first prove that the amount he received was paid through an accident or health insurance plan. See Caplin v. United States, 718 F.2d 544, 547 (2d Cir.1983); Wood v. United States, 590 F.2d 321, 323 (9th Cir.1979); see also Treas.Reg. § 1.105-5(a) (1964). The taxpayer must next prove that the amount “eonstitute[s] payment for the permanent loss or loss of use of a member or function of the body, or permanent disfigurement, of the taxpayer____” 26 U.S.C. § 105(c)(1) (1982). And, finally, the taxpayer must demonstrate that the amount is “computed with reference to the nature of the injury without regard to the period the taxpayer is absent from work.” 26 U.S.C. § 105(c)(2) (1982).
A. Payment Through an Accident or Health Insurance Plan
The government does not dispute that the amount Randall received from the NFL Plan was paid through an accident or health insurance plan. Although the NFL Plan is called a “retirement plan,” it clearly serves a dual purpose as both a retirement plan and an accident or health insurance plan. Benefits paid for injury or illness from such dual purpose plans are excludable from gross income if they satisfy the other requirements of section 105(c). See Caplin, 718 F.2d at 547; Wood, 590 F.2d 323.
B. Section 105(c)(1)
For purposes of this appeal, we assume without deciding that the amount Randall received from the NFL Plan was paid for permanent loss or loss of use of a member or function of his body. For a discussion of the requirements of section 105(c)(1) see Watts v. United States, 703 F.2d 346, 350-53 (9th Cir.1983).
C. Section 105(c)(2)
Section 105(c)(2) essentially contains two requirements: (1) the payments must be computed with reference to the nature of the injury, and (2) the payments must be computed without regard to the period the employee is absent from work. Amounts received from an accident or health insurance plan are excludable from gross income under section 105(c) only if both clauses of section 105(c)(2) are satisfied. See Caplin, 718 F.2d at 549; Hines v. Commissioner, 72 T.C. 715, 720 (1979).
1. Computed with Reference to the Nature of the Injury
The Tax Court determined that the amount Randall received from the NFL plan was not computed with reference to the nature of his injury. Relying on its decision in Hines v. Commissioner, 72 T.C. 715, 720 (1979), the Tax Court held that benefits satisfy the nature-of-the-injury requirement only if they vary according to the type of injury received. The court noted that all NFL players who sustain career-ending injuries and whose football careers span the same period receive the same line-of-duty disability payment regardless of the type of injury they sustain.
The Beislers contend that the Tax Court’s interpretation of the nature-of-the-injury requirement is wrong. They base their argument on our decision in Wood v. United States, 590 F.2d 321 (9th Cir.1979). The taxpayer in Wood was covered by an employer funded retirement plan. Under the terms of the plan, employees who left the company after twenty years of service received the full amount in their retirement plan accounts. If they left at any time prior to twenty years, they received a lesser percentage of their accounts based on the number of years they had worked for the company. However, if an employee left work prior to twenty years service due to total and permanent disability, that employee was entitled to receive the full amount in his account. The taxpayer left work at a time when he was entitled to 85 percent of his account. However, because his departure was due to total and permanent disability, he received 100 percent of his account.
The issue before us in Wood was whether the amount received by the taxpayer was received through an accident or health insurance plan and thus excludable under section 105(c) or whether the amount was received through a profit-sharing plan and thus taxable under 26 U.S.C. § 401. Wood, 590 F.2d at 323. We determined that the payments were made through a health plan and were therefore excludable from gross income under section 105(c). Id. We did not discuss the other requirements of section 105(c). However, a determination that all the requirements of section 105(c) were satisfied is implicit in our decision that the amount received was excludable from gross income.
Because there is no indication that the amount the taxpayer in Wood received would have been different if a different type of injury had caused his total and permanent disability, the Beislers contend that a necessary implication of our decision is that the nature-of-the-injury requirement of section 105(c)(2) is satisfied if a health plan requires an initial determination of disability before benefits are paid. In effect, the Beislers would have us read section 105(c)(2) to mean that benefits are excludable if they are paid because of the injury described in section 105(c)(1) and are not computed with reference to the period the employee is absent from work.
We reject the Beislers’ interpretation of Wood. Reading Wood as the Beislers suggest results in removal of the nature-of-the-injury requirement from section 105(c)(2). We should avoid an interpretation of the statute that renders any part of it superfluous and does not give effect to all of the words used by Congress. In re Co Petro Marketing Group, Inc., 680 F.2d 566, 569-70 (9th Cir.1982).
The Beislers’ reading of Wood is also inconsistent with the purpose of section 105 and the income tax laws. The purpose of our income tax laws generally is to provide revenue through a tax on income. This purpose is manifested in section 105(a)’s general rule that amounts received from employer funded health and accident plans are includable in gross income. Section 105(c) also serves this purpose. That section manifests an intent to exclude from gross income health and insurance payments that do not resemble income while including those that do. Section 105(c)(2) is the primary mechanism for accomplishing this purpose. It excludes from gross income accident and health insurance benefits that vary according to the nature of the taxpayer’s injury. Such payments are compensation for “the permanent loss or loss of use of a member or function of the body, or permanent disfigurement.” As such they do not resemble income. On the other hand, section 105(c)(2) includes in income amounts that vary according to the amount of time an employee is absent from work. Such amounts resemble income in that they compensate a person for lost wages.
In order to accomplish this congressional purpose, the nature-of-the-injury requirement must be read to require that benefits vary according to the type or severity of a person’s injury. Only in that situation do the benefits appear to be compensation for the injury. We therefore hold that amounts received as accident or health insurance benefits includable in gross income under section 105(a) may be excluded from gross income under section 105(c) only if the amount an employee receives from such a plan varies according to the type or severity of the injury suffered by the employee.
Our holding is not inconsistent with our decision in Wood. The taxpayer in Wood was found to be totally and permanently disabled. Wood, 509 F.2d at 322. An employee who is totally and permanently disabled will always be at the top end of the severity scale and will therefore always be entitled to the maximum benefit. Because Wood was totally and permanently disabled, he was entitled to the highest amount of disability payments. Having received that amount, his benefits were calculated with regard to the severity of his injury. See Rev.Rul. 63-181, 1963-2 C.B. 74 (amounts received by a totally and permanently disabled employee are excludable from income under section 105(c)); Rev. Rui. 74-603, 1974-2 C.B. 35 (the amount received by the taxpayer in Rev.Rul. 63-181 was calculated with reference to the nature of his injury).
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1356168-5900 | OPINION
PER CURIAM.
Debtor Kent Klingshirn appeals from a bankruptcy appellate panel decision holding that a claim asserted by the Internal Revenue Service in the debtor’s Chapter 13 bankruptcy proceeding was timely. Reversing a decision of the bankruptcy court, the appellate panel concluded that 26 U.S.C. § 6503(h) operated to suspend the running of the tax collection statute of limitations for the duration of the automatic stay in a previous bankruptcy proceeding commenced by the debtor after he and the IRS had agreed to an extension of the limitations period. We shall affirm the decision of the panel.
I
The undisputed facts are set out in In re Klingshirn, 209 B.R. 698, 700 (6th Cir. BAP 1997). During 1981 and 1983, as Klingshirn explains, the IRS issued four assessments against the debtor for unpaid taxes totaling more than $50,000. The tax collection statute of limitations then in effect (26 U.S.C. § 6502) provided, in pertinent part, as follows:
“(a) Where the assessment of any tax imposed by this title has been made within the period of limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in court, but only if the levy is made or the proceeding begun—
(1) within six years after the assessment of the tax, or
(2) prior to the expiration of any period for collection agreed upon in writing by the Secretary and the taxpayer before the expiration of such six year period[.]” 26 U.S.C.A. § 6502 (West 1989).
In June of 1986 Klingshirn and the IRS executed agreements extending the limitations period to December 31, 1992. The agreements stated that “if an offer in compromise is made by the taxpayer(s) on or before the date to which the statutory period has been extended, then the time for making any collection will be further extended beyond that date by the number of days ... the offer is pending ... plus 1 year.” Because of an offer in compromise made by Klingshirn in 1986 and remaining open until mid-1987, the parties agree, the deadline for collecting the taxes was extended to August 20, 1994.
In 1991 Klingshirn instituted bankruptcy proceedings under Chapter 7. Some three years later, on September 14, 1994, he filed for bankruptcy protection under Chapter 13. The United States filed a proof of claim for the assessed taxes in the Chapter 13 case, and Klingshirn instituted an adversary proceeding seeking a declaration that the statute of limitations had run on August 20th, thereby barring the claim. The question presented in this appeal is whether the 1991 bankruptcy operated to extend the collection period further, making the United States’ proof of claim timely.
The United States argues that the period was extended by 26 U.S.C. § 6503(h), which provides as follows:
“The running of the period of limitations provided in section 6501 or 6502 on the making of assessments or collection shall, in a ease under title 11 of the United States Code, be su ¡pended for the period during which the Secretary is prohibited by reason of such case from making the assessment or from collecting and—
(1) for assessment, 60 days thereafter, and
(2) for collection, 6 months thereafter.”
Klingshim, on the other hand, argues that the determination of the period was taken out of the statutory scheme when the parties executed the extension agreements. The agreements did not contain any express incorporation of § 6503(h).
II
The bankruptcy court took the view that the statute of limitations suspension prescribed by § 6503(h) applies only in cases where the limitations period is “computed by the passage of a defined number of days, months, or years,” as it is in § 6502(a)(1). When the parties executed the extension agreements, the bankruptcy court reasoned, they “agreed to redefine their limitation rights from the § 6502(a)(1) ‘computational’ approach to a § 6502(a)(2) ‘deadline’ approach.” Relying on United States v. Newman, 405 F.2d 189 (5th Cir.1968), the bankruptcy court concluded that, “[g]iven the terminating effect of the ‘deadline’ approach, unless that deadline came during a period when the bankruptcy was pending or on which the bankruptcy had an effect, there is nothing to be suspended.”
In reaching this conclusion, the bankruptcy court drew a distinction between a “suspension” and an “extension” of time. A deadline determined by the parties through execution of agreements such as those in question here may be extended, according to the court, but not suspended. The “suspension” language of § 6503(h) thus does not apply, in the bankruptcy court’s view, when the parties’ agreement refers to a date certain rather than a period of time computed in days, months or years.
The bankruptcy appellate panel declined to adopt the reasoning of Newman. Instead, the panel looked at the plain meaning of § 6503(h):
“A court must apply a statute in accordance with its plain meaning if the language of the statute is clear and unambiguous and where a literal interpretation of the statute would not produce a result demonstrably at odds with Congress’s in-tent____ The plain meaning of the statute indicates that 26 U.S.C. § 6503(h) explicitly applies to 26 U.S.C. § 6502, without distinguishing between 26 U.S.C. § 6502(a)(1) and 26 U.S.C. § 6502(a)(2). Nothing suggests that this result is at odds with Congress’s intent. Accordingly, the Panel rejects the application of Newman in this case.” Klingshirn, 209 B.R. at 703.
We agree with the panel. There is no reason to assume that the reference in 26 U.S.C. § 6503(h) to “section 6501 or 6502” was intended to exclude § 6502(a)(2). We therefore conclude that the running of the limitations period established by the parties through execution of the written agreements pursuant to 28 U.S.C. § 6502(a)(2) was suspended during the pendency of the automatic stay in Klingshirn’s previous bankruptcy proceeding. The United States’ proof of claim is timely.
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